UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant ¨☐
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Preliminary Proxy Statement | ||
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Definitive Proxy Statement | ||
Definitive Additional Materials | ||
Soliciting Material Pursuant to |
LAM RESEARCH CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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September 29, 201626, 2018
Dear Lam Research Stockholders,
We cordially invite you to attend, in person or by proxy, the Lam Research Corporation 20162018 Annual Meeting of Stockholders. The annual meeting will be held on Wednesday,Tuesday, November 9, 2016,6, 2018, at 9:30 a.m. Pacific Standard Time in the Building CA1 Auditorium at the principal executive offices of Lam Research Corporation, which is located at 4650 Cushing Parkway, Fremont, California 94538.
At this year’s annual meeting, stockholders will be asked to elect the nine nominees named in the attached proxy statement as directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified; to elect the two additional nominees named in the attached proxy statement in connection with the acquisition of KLA-Tencor Corporation as directors, subject to and contingent upon the acquisition being consummated prior to the 2016 annual meeting of stockholders, to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified; to cast an advisory vote to approve the compensation of our named executive officers,officer compensation, or “Say on Pay”; to approve the adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan (the “ESPP”), as amended and restated; and to ratify the appointment of the independent registered public accounting firm for fiscal year 2017.2019. The Board of Directors recommends that you vote in favor of all four proposals.each director nominee, Say on Pay, the adoption of the ESPP, as amended and restated, and the ratification of the appointment of the independent registered public accounting firm for fiscal year 2019. Management will not provide a business update during this meeting; please refer to our latest quarterly earnings report for our current outlook.
Please refer to the proxy statement for detailed information about the annual meeting and each of the proposals, as well as voting instructions.Your vote is important, and we strongly urge you to cast your vote by the internet, phonetelephone, or mail even if you plan to attend the meeting in person.
Sincerely yours,
Lam Research Corporation
Stephen G. Newberry
Chairman of the Board
Notice of of Stockholders
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4650 Cushing Parkway
Fremont, California 94538
Telephone:510-572-0200
Date and Time | ||
9:30 a.m. Pacific Standard Time | ||
Place | Lam Research Corporation | |
Building CA1 Auditorium | ||
4650 Cushing Parkway | ||
Fremont, California 94538 |
Items of Business
1. | Election of nine directors to serve until the next annual meeting of stockholders, and until their respective successors are elected and qualified |
2. | Advisory vote to |
3. | Approval of the |
4. | Ratification of the appointment of the independent registered public accounting firm for fiscal year |
5. | Transact such other business that may properly come before the annual meeting (including any adjournment or postponement thereof) |
Record Date
Only stockholders of record at the close of business on September 13, 2016,7, 2018, the “Record Date,” are entitled to notice of and to vote at the annual meeting.
Voting
Please vote as soon as possible, even if you plan to attend the annual meeting in person. You have three options for submitting your vote before the annual meeting: by the internet, phonetelephone, or mail. The proxy statement and the accompanying proxy card provide detailed voting instructions.
Internet Availability of Proxy Materials
Our Notice of 20162018 Annual Meeting of Stockholders, Proxy Statement, and Annual Report to Stockholders are available on the Lam Research website athttp:https://investor.lamresearch.comand atwww.proxyvote.com.
By Order of the Board of Directors,
Sarah A. O’Dowd
Secretary
This proxy statement is first being made available and/or mailed to our stockholders on or about September 29, 2016.26, 2018.
LAM RESEARCH CORPORATION
Proxy Statement for 20162018 Annual Meeting of Stockholders
Proxy Statement Summary | 1 | |||
1 | ||||
1 | ||||
Figure 3. | 2 | |||
2 | ||||
3 | ||||
Stock Ownership | ||||
Security Ownership of Certain Beneficial Owners and Management | ||||
6 | ||||
Governance Matters | 7 | |||
7 | ||||
7 | ||||
7 | ||||
9 | ||||
9 | ||||
10 | ||||
10 | ||||
11 | ||||
12 | ||||
12 | ||||
12 | ||||
Compensation Matters | ||||
40 | ||||
Securities Authorized for Issuance under Equity Compensation Plans | ||||
Audit Matters | ||||
Relationship with Independent Registered Public Accounting Firm | ||||
Annual Evaluation and Selection of Independent Registered Public Accounting Firm | ||||
Policy on Audit CommitteePre-Approval of Audit andNon-Audit Services | ||||
Voting Proposals | ||||
54 | ||||
Voting and Meeting Information | ||||
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To assist you in reviewing the proposals to be acted upon at the annual meeting, we call your attention to the following summarized information about the proposals and voting recommendations, the Company’s director nominees, and highlights of the director’s key qualifications and skills, board composition, the Company’s corporate governance, and executive compensation. The following description is only a summary. For more complete information about these topics, please review the complete proxy statement.
We use the terms “Lam Research,” “Lam,” the “Company,” “we,” “our,” and “us” in this proxy statement to refer to Lam Research Corporation, a Delaware corporation. We also use the term “Board” to refer to the Company’s Board of Directors.
Figure 1. Proposals and Voting Recommendations
Voting Matters | Board Vote Recommendation | |||
Proposal | FOR each nominee | |||
Proposal | ||||
FOR | ||||
Proposal No. 3: Approval of the Adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated | FOR | |||
Proposal | FOR |
Figure 2. Summary Information Regarding Director Nominees
You are being asked to vote on the election of thethese nine director nominees listed in the table below under the heading “Existing Director Nominees” and, subject to and contingent upon the acquisition of KLA-Tencor being consummated prior to this year’s annual meeting of stockholders, the two additional director nominees listed under the subsequent heading “Additional Director Nominees.”directors. The following table provides summary information about each director nominee as of September 13, 2016,2018, and their biographical information is contained in the “Voting Proposals – Proposal No. 1: Election of Existing Directors – 20162018 Nominees for Director” and “Voting Proposals – Proposal No. 2: Election of Additional Directors – 2016 Nominees for Director” sectionssection below.
Director | Committee Membership | Other Current Public Boards | Director | Committee Membership | Other Current Public Boards
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Name | Age | Since | Independent (1) | AC | CC | NGC |
Age
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Since
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Independent(1)
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AC
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CC
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NGC
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Existing Director Nominees | ||||||||||||||||||||||||||||
Martin B. Anstice | 49 | 2012 | No |
51
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2012
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No
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*
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Eric K. Brandt | 54 | 2010 | Yes | C/FE | Yahoo!, Dentsply Sirona |
56
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2010
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Yes
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C/FE
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Altaba (formerly Yahoo!), Dentsply Sirona, Macerich
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Michael R. Cannon | 63 | 2011 | Yes | M | M | Seagate Technology, Dialog Semiconductor |
65
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2011
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Yes
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M/FE
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M
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Dialog Semiconductor, Seagate Technology
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Youssef A. El-Mansy | 71 | 2012 | Yes | M |
73
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2012
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Yes
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M
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Christine A. Heckart | 50 | 2011 | Yes | M |
52
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2011
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Yes
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M
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Catherine P. Lego | 59 | 2006 | Yes | C | M | Fairchild Semiconductor, IPG Photonics |
61
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2006
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Yes
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*
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C
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M
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Cypress Semiconductor, IPG Photonics
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Stephen G. Newberry | 62 | 2005 | No | Splunk |
64
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2005
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Yes
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*
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Splunk
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Abhijit Y. Talwalkar | 52 | 2011 | Yes (Lead Independent Director) | M | C |
54
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2011
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Yes (Lead Independent Director)
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*
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M
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C
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Advanced Micro Devices, iRhythm Technologies, TE Connectivity
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Lih Shyng (Rick L.) Tsai | 65 | 2016 | Yes | NXP Semiconductors, Chunghwa Telecom |
67
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2016
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Yes
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MediaTek, USI Corporation
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Additional Director Nominees(2) | ||||||||||||||||||||||||||||
John T. Dickson | 70 | –(2) | Yes | QLogic | ||||||||||||||||||||||||
Gary B. Moore | 67 | –(2) | Yes | Finjan Holdings |
(1) Independence determined based on Nasdaq rules. |
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AC – Audit committee |
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CC – Compensation committee |
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NGC – Nominating and governance committee |
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Continues on next page u
Lam Research Corporation | 1 |
Figure 3. Director Key Qualifications and Skills Highlights
The table below summarizes the key qualifications, skills and attributes most relevant to the decision to nominate candidates to serve on our Board. Not having a mark does not mean the director does not possess that qualification or skill. Director biographies contained in the “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” section below describe each director’s background and relevant experience in more detail.
Key Skills & Experiences of Directors | ||||||||||||||||||
Industry Knowledge- Knowledge of and experience with our industry and markets, including an understanding of our customers’ markets and needs | x | x | x | x | x | x | x | x | x | |||||||||
Technology Knowledge- Deep knowledge and understanding of semiconductor and semiconductor wafer front end technologies | x | x | x | x | x | x | ||||||||||||
Marketing Experience -Extensive knowledge and experience inbusiness-to-business marketing and sales, and/or business development, preferably in a capital equipment industry | x | x | x | x | x | x | ||||||||||||
Business and Operations Leadership Experience- Experience as a current or former CEO, president and/or COO | x | x | x | x | x | x | x | |||||||||||
Finance Experience- Profit and loss (“P&L”) and financing experience as an executive responsible for financial results of a breadth and level of complexity comparable to the Company | x | x | x | x | x | x | x | |||||||||||
International Business Experience- Experience as a current or former business executive resident outside the United States and responsible for at least one business unit outside the United States | x | x | x | x | ||||||||||||||
Mergers and Acquisitions Experience (“M&A”)- M&A and integration experience (includingbuy- and sell-side and hostile M&A experience) as a public company director or officer | x | x | x | x | x | x | x | x | x | |||||||||
Board/Governance Experience- Experience with corporate governance requirements and practices | x | x | x | x | x | x | x | x | x | |||||||||
Public Relations/Investor Relations/Public Policy Experience | x | x | x | x | x | x | ||||||||||||
Cybersecurity Expertise- Understanding of and/or experience overseeing corporate cybersecurity programs, and having a history of participation in relevant cyber education | x | x |
Figure 4. Board Composition Highlights
The Board is committed to diversity and the pursuit of board refreshment and balanced tenure. The following table shows the tenure, age and gender diversity of the current board.
tenure age gender diversity
Figure 5. Corporate Governance Highlights
Board and Other Governance Information | As of September | |||
Size of Board as Nominated | 9 | |||
Number of Independent Nominated Directors | 8 | |||
Number of Nominated Directors Who Attended | 9 | |||
Number of Nominated Directors on More Than Four Public Company Boards | 0 | |||
Number of NominatedNon-Employee Directors Who Are Sitting Executives on More Than Three Public Company Boards | 0 | |||
Directors Subject to Stock Ownership Guidelines | Yes | |||
Annual Election of Directors | Yes | |||
Voting Standard | Majority | |||
Plurality Voting Carveout for Contested Elections | Yes | |||
Separate Chairman and Chief Executive Officer (“CEO”) | Yes | |||
Lead Independent Director | Yes | |||
Independent Directors Meet Without Management Present | Yes | |||
Annual Board (Including Individual Director) and Committee Self-Evaluations | Yes | |||
Annual Independent Director Evaluation of CEO | Yes | |||
Risk Oversight by Full Board and Committees | Yes | |||
Commitment to Board Refreshment and Diversity | Yes | |||
Robust Director Nomination Process | Yes | |||
Significant Board Engagement | Yes | |||
Board Orientation/Education Program | Yes | |||
Code of Ethics Applicable to Directors | Yes | |||
Stockholder Proxy Access | Yes | |||
Stockholder Ability to Act by Written Consent | Yes | |||
Stockholder Engagement Program | Yes | |||
Poison Pill | No | |||
Publication of Corporate Social Responsibility Report on Our Website | Yes |
Continues on next page u
Lam Research Corporation 2018 Proxy Statement | 3 |
Figure 4.6. Executive Compensation Highlights
What We Do |
Pay for Performance |
Three-Year Performance Period for Our |
Absolute and Relative Performance Metrics (Pages |
Balance of Annual and Long-Term Incentives– Our incentive programs provide a balance of annual and |
Different Performance Metrics for Annual and Long-Term Incentive Programs |
Capped Amounts |
Compensation Recovery/Clawback Policy |
Prohibit Option Repricing– Our stock incentive plans prohibit option repricing without stockholder |
Hedging and Pledging Policy |
Stock Ownership Guidelines (Page |
Independent Compensation Advisor (Page |
Stockholder Engagement– We engage with stockholders on an annual basis and stockholder advisory firms on an as needed basis to obtain feedback concerning our compensation program. |
What We Don’t Do |
Tax |
Single-Trigger Change in Control Provisions (Pages |
(1) | Our executive officers may receive taxgross-ups in connection with relocation benefits that are widely available to all of our employees. |
Continues on next page u
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Security Ownership of Certain Beneficial Owners and Management
The table below sets forth the beneficial ownership of shares of Lam common stock by: (i)(1) each person or entity who we believe, based on our review of filings made with the United States Securities and Exchange Commission, or the “SEC,” beneficially owned as of September 13, 2016,7, 2018, more than 5% of Lam’s common stock on the date set forth below; (ii)(2) each current director of the Company; (iii) each director nominee identified in proposal number two, (iv)(3) each NEO identified below in the “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis” section; and (v)(4) all current directors additional nominees identified in proposal number two and
current executive officers as a group. With the exception
of 5% owners, and unless otherwise noted, the information below reflects holdings as of September 13, 2016,7, 2018, which is the Record Date for the 2016 annual meeting2018 Annual Meeting of Stockholders and the most recent practicable date for determining ownership. For 5% owners, holdings are as of the dates of their most recent ownership reports filed with the SEC, which are the most practicable dates for determining their holdings. The percentage of the class owned is calculated using 161,264,422152,286,842 as the number of shares of Lam common stock outstanding on September 13, 2016.7, 2018.
Figure 5.7. Beneficial Ownership Table
Name of Person or Identity of Group | Shares Beneficially Owned (#)(1) | Percentage of Class | ||||||
5% Stockholders
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The Vanguard Group, Inc. | 14,164,985 | (2) | 9.3 | % | ||||
BlackRock, Inc. | 11,318,362 | (3) | 7.4 | % | ||||
Directors
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Martin B. Anstice (also a Named Executive Officer)
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133,648
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*
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Eric K. Brandt
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27,440
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*
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Michael R. Cannon
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14,740
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*
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Youssef A.El-Mansy
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20,826
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*
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Christine A. Heckart
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16,240
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*
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Catherine P. Lego
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49,248
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*
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Stephen G. Newberry
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8,497
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*
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Abhijit Y. Talwalkar
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24,340
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*
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Lih Shyng (Rick L.) Tsai
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3,520
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*
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Named Executive Officers (“NEOs”)
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Timothy M. Archer
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74,198
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*
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Douglas R. Bettinger
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85,563
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*
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Richard A. Gottscho
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42,897
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*
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Scott G. Meikle
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3,873
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*
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All current directors and executive officers as a group (18 people)
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675,160
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*
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* | Less than 1%. |
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(1) | Includes shares subject to outstanding stock options that are now exercisable or will become exercisable within 60 days after September |
Shares | ||||
Martin B. Anstice | 52,611 | |||
Eric K. Brandt | 960 | |||
Michael R. Cannon | 960 | |||
Youssef A.El-Mansy | 960 | |||
Christine A. | 960 | |||
Catherine P. Lego | 960 | |||
Stephen G. Newberry | 960 | |||
Abhijit Y. Talwalkar | 960 | |||
Lih Shyng (Rick L.) Tsai | 960 | |||
Timothy M. Archer | 29,780 | |||
Douglas R. Bettinger | 45,282 | |||
Richard A. Gottscho | — | |||
Scott G. Meikle | — | |||
All current directors | 184,890 |
The terms of any outstanding stock options that are now exercisable are reflected in “Figure 31. FYE201633. FYE2018 Outstanding Equity Awards,” below.except as described in the following sentence. Ms. O’Dowd and Mr. Jennings have options covering 47,984 and 1,553 shares, respectively, which are unexercised and exercisable within 60 days of September 7, 2018. The grants for Ms. O’Dowd and Mr. Jennings have terms consistent with the terms reflected in “Figure 33. FYE2018 Outstanding Equity Awards,” except for the grant to Ms. O’Dowd on February 8, 2013 of 22,140 shares, which fully vested on February 8, 2015 and will expire on February 8, 2020.
As discussed in “Governance Matters – Director Compensation” below, thenon-employee directors receive an annual equity grant as part of their compensation. These grants generally vest on October 31, 2016,2018, subject to continued service on the board as of that date, with immediate delivery of the shares upon vesting. For 2015,2018, Drs.El-Mansy and Saraswat;Tsai; Messrs. Brandt, Cannon, Newberry and Talwalkar; and Mses. Heckart and Lego each received grants of 2,600960 RSUs. These RSUs are included in the tables above. As of September 13, 2016, Dr. Tsai had not yet been granted an annual equity award and Messrs. Dickson and Moore had not yet been appointed to the board of the Company. In accordance with the Company’s non-employee director compensation program, Dr. Tsai will receive a pro-rated equity award (25% of the $200,000 targeted grant date value, with the number of RSUs determined in the same manner as an annual equity award) on the first Friday following his first attended board meeting (or, if the designated date falls within a blackout window under applicable Company policies, on the first following business day such grant is permissible under those policies).
(2) |
All information regarding The Vanguard Group, Inc., or “Vanguard,” is based solely on information disclosed in amendment number |
All information regarding BlackRock Inc., or “BlackRock,” is based solely on information disclosed in amendment number |
Continues on next page u
respect to |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers, directors, and people who own more than 10% of a registered class of our equity securities to file an initial report of ownership (on a Form 3) and reports on subsequent changes in ownership (on Forms 4 or 5) with the SEC by specified due dates. Our executive officers, directors, andgreater-than-10% stockholders are also required by SEC rules
to furnish us with copies of all section 16(a) forms they file. We are required to disclose in this proxy statement any failure to file any of these reports on a timely basis. Based solely on our review of the copies of the forms that we received from the filers, and on written representations from certain reporting persons, we believe that all of these requirements were satisfied during fiscal year 2016.2018.
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Our board of directorsBoard and members of management are committed to responsible corporate governance to manage the Company for the long-term benefit of its stockholders. To that end, the boardBoard and management periodically review and update, as appropriate, the Company’s corporate governance policies and practices. As part of that process, the boardBoard and management consider the requirements of federal and state law, including rules and regulations of the SEC; the listing standards for the Nasdaq Global Select Market, or “Nasdaq;” published guidelines and recommendations of proxy advisory firms; published guidelines of some of our top stockholders; published guidelines of other selected public companies; and any feedback we receive from our stockholders. A list of key corporate governance practices is provided in the “Proxy Statement Summary” above.
We have instituted a variety of policies and procedures to foster and maintain responsible corporate governance, including the following:
Board committee charters. Each of the board’sBoard’s audit, compensation, and nominating and governance committees has a written charter adopted by the boardBoard that establishes practices and procedures for the committee in accordance with applicable corporate governance rules and regulations. Each committee reviews its charter annually and recommends changes to the board,Board, as appropriate. Each committee charter is available on the investors’ pageInvestors section of our web sitewebsite athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate-governance. The content on any website referred to in this proxy statement is not a part of or incorporated by reference in this proxy statement unless expressly noted. Also refer toSee “Board Committees” below for additional information regarding these board committees.
Corporate governance guidelines. We adhere to written corporate governance guidelines, adopted by the boardBoard and reviewed annually by the nominating and governance committee and the board.Board. Selected provisions of the guidelines are discussed below, including in the “Board Nomination Policies and Procedures,” “Director Independence Policies,” and “Other Governance Practices” sections below. The corporate governance guidelines are available on the investors’ pageInvestors section of our web sitewebsite athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate-governance.
Corporate code of ethics. We maintain a code of ethics that applies to all employees, officers, and members of the board. Board.
The code of ethics establishes standards reasonably
necessary to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, and full, fair, accurate, timely, and understandable disclosure in the periodic reports we file with the SEC and in other public communications. We will promptly disclose to the public any amendments to, or waivers from, any provision of the code of ethics to the extent required by applicable laws. We intend to make this public disclosure by posting the relevant material on our website, to the extent permitted by applicable laws. A copy of the code of ethics is available on the investors’ pageInvestors section of our website athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate-governance.
Global standards of business conduct policy. We maintain written standards of appropriate conduct in a variety of business situations that apply to our worldwide workforce. Among other things, these global standards of business conduct address relationships with one another, relationships with Lam (including conflicts of interest, safeguarding of Company assets, and protection of confidential information), and relationships with other companies and stakeholders (including anti-corruption).
Insider trading policy. Our insider trading policy restricts the trading of Company stock by our directors, officers, and employees, and includes provisions addressing insider blackout periods and prohibiting hedges and pledges of Company stock.
Board Nomination Policies and Procedures
Board membership criteria. Under our corporate governance guidelines, the nominating and governance committee is responsible for assessingrecommending nominees to the independent directors, and the independent directors nominate the slate of directors for approval by our stockholders. In making its recommendations, whether for new or incumbent directors, the committee assesses the appropriate balance of experience, skills, and characteristics required for the board and for recommending director nominees toBoard at the independent directors.time.
The guidelines direct the committee to consider all factors it considers appropriate. The committee need not consider all of the same factors for every candidate. Factors to be considered by the nominating and governance committee may include but are not limited to: experience; business acumen; wisdom; integrity; judgment; the ability to make independent analytical inquiries; the ability to understand the Company’s business environment; the candidate’s willingness and ability to devote adequate time to board duties; specific skills, background, or experience considered necessary or desirable for board or committee service; specific experiences with other businesses or
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Lam Research Corporation | 7 |
considered necessary or desirable for board or committee service; specific experiences with other businesses or organizations that may be relevant to the Company or its industry; diversity with respect to any attribute(s) the boardBoard considers appropriate, including geographic, gender, age, and ethnic diversity; and the interplay of a candidate’s experiences and skills with those of other boardBoard members.
The specific skills, background, and experiences that are evaluated in connection with board service include:
• | Industry knowledge: knowledge of and experience with our industry and markets, including an understanding of our customers’ markets and needs; |
• | Technology knowledge: deep knowledge and understanding of semiconductor and semiconductor wafer front end technologies; |
• | Marketing experience: extensive knowledge and experience inbusiness-to-business marketing and sales, and/or business development, preferably in a capital equipment industry; |
• | Business and operations leadership experience: experience as a current or former CEO, president, and/or COO; |
• | Finance experience: profit and loss and financing experience as an executive responsible for financial results of a breadth and level of complexity comparable to the Company; |
• | International business experience: experience as a current or former business executive resident outside the United States and responsible for at least one business unit outside the United States; |
• | Mergers and acquisitions experience (“M&A”): M&A and integration experience (includingbuy- and sell-side and hostile M&A experience) as a public company director or officer; |
• | Board/governance experience: experience with corporate governance requirements and practices; |
• | Public relations/investor relations/public policy experience; and |
• | Cybersecurity expertise: understanding of and/or experience in overseeing corporate cybersecurity programs; and having a history of participation in relevant cyber education. |
Each nominee’s key qualifications, skills, and attributes most relevant to the nomination of the candidate to serve on the Board are reflected in their biographies under “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” below. For a summary of the key qualifications, skills, and attributes of the Board see “Proxy Statement Summary – Figure 3. Director Key Qualifications and Skills Highlights.” The Board and the nominating and governance committee regard board refreshment as important, and strive to maintain an appropriate balance of tenure, turnover, diversity, and skills on the board. The Board. See “ProxyStatement Summary–Figure 4. Board Composition Highlights”for additional information. In line with the Board’s pursuit of
board refreshment and balanced tenure, including consideration of any resignations, the Board has appointed seven new directors in the last six years.
For many years, the composition of the Board has reflected the Board’s commitment to diversity. For example, every year since 2016 the Board has had at least two female directors, and over the last 10 years has expanded the experiences, areas of substantive expertise and geographic diversity of the directors, as illustrated by the information provided in their biographies under “Voting Proposals – Proposal No. 1: Election of Directors – 2018 Nominees for Director” below.
Regarding tenure, the Board believes that new perspectives and ideas are important to a forward-looking and strategic board as is the ability to benefit from the valuable experience and familiarity of longer-serving directors.
Priorlonger serving directors who can bring to recommending that an incumbent non-employee director be nominated for reelection tobear their learnings from experience with the board,Company and in the committee reviewsindustry and business environment in which the experiences, skills and qualifications of the directors to assess the continuing relevance of the directors’ experiences, skills and qualifications to those considered necessary or desirable for the board at that time. Board members may not serve on more than four boards of public companies (including service on the Company’s board).Company operates.
To be nominated, a new or incumbent candidate must provide an irrevocable conditional resignation that will be effective upon (i)(1) the director’s failure to receive the required majority vote at an annual meeting at which the nominee facesre-election and (ii)(2) the board’sBoard’s acceptance of such resignation. In addition, no director, after having attained the age of 75 years, may be nominated forre-election or reappointment to the board.Board.
Nomination procedure. The nominating and governance committee identifies, screens, evaluates, and recommends qualified candidates for appointment or election to the board based on the board’s needs and desires at that time as developed through their self-evaluation process.Board. The committee considers recommendations from a variety of sources, including search firms, boardBoard members, executive officers, and stockholders. Nominations for election by the stockholders are made by the independent members of the board.Board. See “Voting Proposals – Proposal No. 1: Election of Existing Directors – 2016 Nominees for Director” and “Voting Proposals – Proposal No. 2: Election of Additional Directors – 20162018 Nominees for Director” below for additional information regarding the 20162018 candidates for election to the board.Board.
Certain provisions of our bylaws apply to the nomination or recommendation of candidates by a stockholder. For example, in February 2017, the Board amended and restated our bylaws to provide that under certain circumstances, a stockholder, or group of up to 20 stockholders, who have maintained continuous ownership of at least three percent (3%) of our common stock for at least three years may nominate and include a specified number of director nominees in our annual meeting proxy statement that cannot exceed the greater of two or 20% of the aggregate number of directors then serving on the Board (rounded down). Information regarding the nomination procedure is provided in the “Voting and Meeting Information – Other Meeting Information –Stockholder-Initiated Proposals and Nominations for 20172019 Annual Meeting” section below.
Director Independence Policies
Board independence requirements. Our corporate governance guidelines require that at least a majority of the boardBoard members be independent. No director will qualify as “independent” unless the boardBoard affirmatively determines that the director qualifies as independent under the Nasdaq rules and has no relationship that would interfere with the exercise of independent judgment as a director. In addition, nonon-employee director may serve as a consultant or service provider to the Company without the approval of a majority of the independent directors (and any such director’s independence must be reassessed by the full boardBoard following such approval).
Board member independence. The boardBoard has determined that all current directors, other than Messrs.Mr. Anstice, and Newberry, are independent in accordance with Nasdaq criteria for director independence.
Board committee independence.All members of the board’sBoard’s audit, compensation, and nominating and governance committees must benon-employee or outside directors and independent in accordance with applicable Nasdaq criteria as well as, in the case of the compensation committee, applicable rules under section 162(m) of the Internal Revenue Code of 1986, as amended, or the “Code,” and Rule16b-3 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” See “Board Committees” below for additional information regarding these board committees.
Lead independent director. Our corporate governance guidelines authorize the boardBoard to designate a lead independent director from among the independent board members. Mr. Talwalkar was appointed the lead independent director, effective August 27, 2015, succeeding Grant Inman, who retired in 2015. See “Leadership Structure of the Board” below for information regarding the responsibilities of the lead independent director.
Executive sessions of independent directors. The boardBoard and its audit, compensation, and nominating and governance committees hold meetings of the independent directors and committee members, without management present, as part of each regularly scheduled meeting and at any other time at the discretion of the boardBoard or committee, as applicable.
Board access to independent advisors. The boardBoard as a whole, and each of the board standing committeesBoard committee separately, has the complete authority to retain, at the Company’s expense, and terminate, in their discretion, any independent consultants, counselors, or advisors as they deem necessary or appropriate to fulfill their responsibilities.
Board education program. Our corporate governance guidelines provide that directors are expected to participate in educational events sufficient to maintain their understanding of their duties as directors and to enhance their ability to fulfill their responsibilities. In addition to any external educational opportunities that the directors find useful, the Company and the board leadership are expected to facilitate such
participation by arranging for appropriate educational contentpresentations from time to be incorporated into regular board and committee meetings as well as on a quarterly basis presented by board and/or committee advisors and counsel independent of any content at regular board and committee meetings.time.
Leadership Structure of the Board
The current leadership structure of the boardBoard consists of a chairman and a lead independent director. The Board has determined our chairman, Mr. Newberry, who served as chief executive officer of the Company from June 2005 to January 2012.2012, to be independent. The Board recognizes the value of having an independent chairman and a lead independent director managing the responsibilities of board believes that this is the appropriate board leadership structure at this time.leadership. Lam and its stockholders benefit from having Mr. Newberry as its chairman, as he brings to bear his experience as CEO as well as his other qualifications in carrying out his responsibilities as chairman, which include (i)(1) preparing the agenda for the boardBoard meetings with input from the CEO, the boardBoard, and the committee chairs; (ii)(2) upon invitation, attending meetings of any of the boardBoard committees on which he is not a member; (iii)(3) conveying to the CEO, together with the chair of the compensation committee, the results of the CEO’s performance evaluation; (iv)(4) reviewing proposals submitted by stockholders for action at meetings of stockholders and, depending on the subject matter, determining the appropriate body, among the boardBoard or any of the boardBoard committees, to evaluate each proposal and making recommendations to the boardBoard regarding action to be taken in response to such proposal; (v) performing such duties as the board may reasonably assign at the request of the CEO; (vi)(5) performing such other duties as the boardBoard may reasonably request from time to time; and (vii)(6) as requested by the Board, providing reports to the boardBoard on the chairman’s activities under his agreement.activities. The Company and its stockholders also benefit from having aMr. Talwalkar as its lead independent director, as he brings to provide independentbear his experience as a former CEO of a semiconductor company and a board leadership. Thechairman of another public company as well as his other qualifications in carrying out his responsibilities as lead independent director, is responsible forwhich include: (1) coordinating the activities of the independent directors; (2) consulting with the chairman regarding matters such as (a) schedules of and agendas for board meetings;Board meetings, (b) the quality, quantity, and timeliness of the flow of information from management;management, and (c) the retention of consultants who report directly to the board; andBoard; (3) developing the agenda for and moderating executive sessions of the board’sBoard’s independent directors.directors; and (4) moderating executive sessions of the full Board when the chairman is unable to be present.
In addition to the principal policies and procedures described above, we have established a variety of other practices to enhance our corporate governance, including the following:
Board and committee assessments.At least once every two years, Every year, the boardBoard conducts a self-evaluation of the board,Board, its committees, and the individual directors, overseen by the nominating and
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Lam Research Corporation 2018 Proxy Statement | 9 |
governance committee.committee and generally led by the lead independent director and the chairman of the Board. From time to time, the evaluation is facilitated by an independent third-party consultant. The evaluation solicits the opinions of the directors regarding the effectiveness of the Board, committees, and individual directors in fulfilling its/their obligations. Feedback on Board and committee effectiveness is provided to the full Board for discussion, and feedback regarding individual director performance is provided to each individual director. The Board and committees identify and hold themselves accountable for any action items stemming from the assessment. The results of the evaluations are also considered as part of the director nomination process.
Director resignation or notification of change in executive officer status. Under our corporate governance guidelines, any director who is also an executive officer of the Company must offer to submit his or her resignation as a director to the boardBoard if the director ceases to be an executive officer of the Company. The boardBoard may accept or decline the offer, in its discretion. The corporate governance guidelines also require anon-employee director to notify the nominating and governance committee if the director changes or retires from his or her executive position at another company. The nominating and governance committee reviews the appropriateness of the director’s continuing boardBoard membership under the circumstances, and the director is expected to act in accordance with the nominating and governance committee’s recommendations.
Limitations on other board and committee memberships.Board members may not serve on more than four public company boards (including service on the Company’s Board).Non-employee directors who are sitting executives may not serve on more than three public company boards (including the Company’s Board). The nominating and governance committee will review the appropriateness of continued Board membership if anon-employee director who is a sitting executive serves on more than two such boards, and the director is expected to follow the recommendation of the nominating and governance committee. In addition,non-employee directors may not serve on more than three audit committees of public company boards (including the Company’s audit committee).
Director and executive stock ownership. Under the corporate governance guidelines, each director is expected to own at least the lesser of five times the value of the annual cash retainer (not including any committee chair or other supplemental retainers for directors) or 5,0003,000 shares of Lam common stock, by the fifth anniversary of his or her initial election to the board.Board. Guidelines for stock ownership by designated members of the executive management team are described below under “Compensation Matters – Executive Compensation and OtherInformation – Compensation Discussion and Analysis.” All of our directors and designated members of our executive management team were in
compliance with the Company’s applicable stock ownership guidelines at the end of fiscal year 20162018 or have a period of time remaining under the program to do so.
Communications with board members. Any stockholder who wishes to communicate directly with the board of directors,Board, with any boardBoard committee, or with any individual director regarding the Company may write to the board,Board, the committee, or the director c/o Secretary, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538. The secretarySecretary will forward all such communications to the appropriate director(s).
Any stockholder, employee, or other person may communicate any complaint regarding any accounting, internal accounting control, or audit matter to the attention of the board’sBoard’s audit committee by sending written correspondence by mail (to Lam Research Corporation, Attention: Board Audit Committee, P.O. Box 5010, Fremont, California 94537-5010) or by phone telephone(855-208-8578) or internet (through the Company’s third partythird-party provider web sitewebsite atwww.lamhelpline.ethicspoint.com). The audit committee has established procedures to ensure that employee complaints or
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concerns regarding audit or accounting matters will be received and treated anonymously (if the complaint or concern is submitted anonymously and permitted under applicable law).
Our Board held a total of five meetings during fiscal year 2018. The number of committee meetings held is shown in Figure 8. All of the directors attended at least 75% of the aggregate number of boardBoard meetings and meetings of boardBoard committees on which they served during their board tenure in fiscal year 2016. Our board2018, with the exception of directors held a total of 13 meetings during fiscal year 2016.Young Bum (YB) Koh, Ph.D. due to medical reasons.
We expect our directors to attend the annual meeting of stockholders each year.year unless unusual circumstances make attendance impractical. All but one of the individuals who were directors as of the 20152017 annual meeting of stockholders attended the 2015 annual meeting of stockholders.that meeting.
The board of directorsBoard has three standing committees: an audit committee, a compensation committee, and a nominating and governance committee. The purpose, membership, and charter of each are described below.
Figure 6.8. Committee Membership
Current Committee Memberships | ||||||
Name | Audit | Compensation | Nominating and Governance | |||
Eric K. Brandt | Chair | |||||
Michael R. Cannon | x | x | ||||
Youssef A. El-Mansy | x | |||||
Christine A. Heckart | x (1) | |||||
Catherine P. Lego | Chair (2) | x | ||||
Abhijit Y. Talwalkar | x (3) | Chair (4) | ||||
Total Number of Meetings Held in FY2016 | 8 | 5 | 6 |
Current Committee Memberships
| ||||||
Name
| Audit
| Compensation
|
Nominating and Governance
| |||
Eric K. Brandt
|
Chair
| |||||
Michael R. Cannon
|
x
|
x
| ||||
Youssef A.El-Mansy
|
x
| |||||
Christine A. Heckart
|
x
| |||||
Catherine P. Lego
|
Chair
|
x
| ||||
Abhijit Y. Talwalkar
|
x
|
Chair
| ||||
Total Number of Meetings Held in FY2018
| 8
| 5
| 4
|
Audit committee. The purpose of the audit committee is to oversee the Company’s accounting and financial reporting processes and the audits of our financial statements, including the system of internal controls. As part of its responsibilities, the audit committee reviews and oversees the potential conflict of interest situations, transactions required to be
disclosed pursuant to Item 404 of RegulationS-K of the SEC, and any other transaction involving an executive or boardBoard member. A copy of the audit committee charter is available on the investors’ pageInvestors section of our web sitewebsite athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate-governance.
The boardBoard concluded that all audit committee members arenon-employee directors who are independent in accordance with the Nasdaq listing standards and SEC rules for audit committee member independence and that each audit committee member is able to read and understand fundamental financial statements as required by the Nasdaq listing standards. The boardBoard also determined that Mr.Messrs. Brandt the chairand Cannon (both members of the committee, iscommittee) are each, and Messrs. Anstice, Newberry, and Talwalkar and Ms. Lego (members of the Board) each qualify as, an “audit committee financial expert” as defined in the SEC rules.
Compensation committee. The purpose of the compensation committee is to discharge certain responsibilities of the boardBoard relating to executive compensation; to oversee incentive, equity-based plans, and other compensatory plans in which the Company’s executive officers and/or directors participate; and to produce an annual report on executive compensation for inclusion as required in the Company’s annual proxy statement. The compensation committee is authorized to perform the responsibilities of the committee referenced above and described in theits charter. A copy of the compensation committee charter is available on the investors’ pageInvestors section of our web sitewebsite athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate- governance.
The boardBoard concluded that all members of the compensation committee arenon-employee directors who are independent in accordance with Rule16b-3 of the Exchange Act and the Nasdaq criteria for director and compensation committee member independence and who are outside directors for purposes of section 162(m) of the Code.
Nominating and governance committee. The purpose of the nominating and governance committee is to identify individuals qualified to serve as members of the boardBoard of the Company, to recommend nominees for election as directors of the Company, to oversee self-evaluations of the board’sBoard’s performance, to develop and recommend corporate governance guidelines to the board,Board, and to provide oversight with respect to corporate governance. A copy of the nominating and governance committee charter is available on the investors’ pageInvestors section of our web sitewebsite athttp:https://investor.lamresearch.com/corporate-governance.cfmcorporate-governance.
The boardBoard concluded that all nominating and governance committee members arenon-employee directors who are independent in accordance with the Nasdaq criteria for director independence.
The nominating and governance committee will consider for nomination persons properly nominated by stockholders in accordance with the Company’s bylaws and other procedures described below under “Voting and Meeting Information –
Other Meeting Information – Stockholder-Initiated Proposals and Nominations for 2017the 2019 Annual Meeting.Meeting.” Subject to then-applicable law, stockholder nominations for director will be evaluated by the Company’s nominating and governance committee in accordance with the same criteria as is applied to candidates identified by the nominating and governance committee or other sources.
Board’s Role in Risk Oversightand Engagement
General. The Board directs and oversees the management of the business and affairs of the Company. In this oversight role, the Board serves as the ultimate decision-making body of the Company, except for those matters reserved for the stockholders.
The boardBoard and its committees have the primary responsibilities for:
° | A strategic plan is presented to the Board for discussion on an annual basis, and updates are presented at each quarterly Board meeting. |
° | An operating plan is presented to the Board for discussion on an annual basis, and updates are presented at each quarterly Board meeting. |
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Lam Research Corporation 2018 Proxy Statement | 11 |
° | Capital allocation plans and priorities are discussed on a quarterly basis. |
° | Major corporate actions are presented and discussed as part of strategic plan updates and as special agenda topics, as appropriate. |
Risk Oversight. The Board is actively engaged in risk oversight. Management regularly reports to the boardBoard on its risk assessments and risk mitigation strategies for the major risks of our business. Generally, the boardBoard exercises its oversight responsibility directly; however, in specific cases, such responsibility has been delegated to board committees.committees of the Board. Committees that have
been charged with risk oversight regularly report to the boardBoard on those risk matters within their areas of responsibility. Risk oversight responsibility has been delegated to board committees of the Board as follows:set forth below.
We believe that engagement with our stockholders is an important part of effective corporate governance. Our senior management, including our CEO, CFO and members of our Investor Relations team, maintain regular contact with a broad base of investors through quarterly earnings calls, meetings, analyst day events, industry conferences and other investor and industry events. In addition, we regularly engage with major stockholders on governance matters, including
compensation and environmental and social governance. The outreach is generally conducted outside of our proxy solicitation period and, depending on the topics, includes members of our Investor Relations, Human Resources, Environmental Health & Safety and Legal functions. During the proxy solicitation period, we may also engage with our stockholders about topics to be addressed at our annual meeting of stockholders. We share all opinions and information received from our stockholders with our board of directors. Over the last few years, we have heard from stockholders about their views on subjects such as proxy access, returning capital to stockholders, director tenure, board refreshment, director skills and experiences, board and workforce diversity, and environmental and social governance matters. Understanding the feedback shared with us, we have adopted proxy access and have enhanced our proxy statement and Corporate Social Responsibility (CSR) Report disclosures.
At our 2017 annual meeting of stockholders, an advisory stockholder proposal regarding annual disclosure ofEEO-1 data received support of approximately 40% of shares voted. As part of our stockholder engagement, some of our investors also told us they would appreciate more disclosure about inclusion and diversity. We will include in our next CSR report enhanced disclosure about our inclusion and diversity programs and demographic information about the ethnic and gender diversity of our workforce. In addition, we will update our leadership disclosure on our website to include our Office of the Chief Executive Officer (OCEO) staff rather than only our executive officers.
Corporate Social Responsibility
Our core values underpin our commitments to sustainable growth and making a positive contribution to people and the planet. We are committed to responsible business practices and continuous improvement in our own operations, in our partnerships with our customers, and across our supply chain.
Workplace. Guided by our Core Value of mutual trust and respect, we strive to provide a work environment that fosters inclusion and diversity, ensures every voice can be heard, and enables employees to achieve their full potential. We aim to maintain a collaborative, supportive, and opportunity-rich culture that enhances innovation and employee engagement.
Community. We believe that positively involving our employees and giving back to our community is central to our culture and aligned with our Core Values. Our charitable giving includes employee volunteer hours, the Lam Research Foundation grant program, and employee giving.
As a successful equipment supplier in the technology industry, we encourage students to pursue science, technology,
engineering, or math (STEM) careers, engage in activities that give young people visibility into careers in the semiconductor industry, and support those students who demonstrate excellence in the STEM fields.
Operations:Environment and Safety. Lam Research carefully monitors and manages its environmental impact across the business – from procurement to manufacturing, during R&D and product design, and throughout a product’s lifecycle.
We aim to protect the health and safety of our personnel throughout our entire operation, including our offices, manufacturing sites, R&D centers, and our field team working at customer sites.
Responsible and Accountable Global Supply Chain. All direct suppliers are expected to comply with our Global Supplier
Code of Conduct, which covers ethics, integrity, transparency, anti-corruption, and responsible business practices. Additionally, all direct material suppliers must comply with our conflict minerals and human trafficking policies.
Lam Research is a proponent of industry standards and has adopted the standard guidelines published by the Institute for Supply Management (ISM), “Principles And Standards Of Ethical Supply Management Conduct With Guidelines.” Lam Research has also adopted the Responsible Business Alliance (RBA) Code of Conduct.
For more information about our corporate social responsibility efforts, please refer to our report available on the Company’s website.
Our director compensation is designed to attract and retain high caliberhigh-caliber directors and to align director interests with those of stockholders. Director compensation is reviewed and determined annually by the boardBoard (in the case of Messrs. Newberry andMr. Anstice, by the independent members of the board),Board, and Mr. Newberry, by all other independent members of the Board) upon recommendation from the compensation committee.Non-employee director compensation (including the compensation of Mr. Newberry, who is currently ournon-employee chairman) is described below. Mr. Anstice, whose compensation as CEO is described below under “Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis,” does not receive additional compensation for his service on the board.Board.
Non-employee director compensation.Non-employee directors receive annual cash retainers and equity awards. The chairman of the board, committee chairs,Board, the lead independent director, and committee chairs and members receive additional cash retainers.Non-employee directors who join the boardBoard or a committee midyearmid-year receivepro-rated cash retainers and equity awards, as applicable. Ournon-employee director compensation program is based on service during the calendar year; however, SEC rules require us to report compensation in this proxy statement on a fiscal-year basis. Cash compensation paid tonon-employee directors for the fiscal year ended June 26, 2016 is shown in the table below,24, 2018, together with the annual cash compensation program components in effect for calendar years 20152018 and 2016.2017, is shown below.
Figure 7.9. Director Annual Retainers
Annual Retainers | Calendar Year 2016 ($) | Calendar Year 2015 ($) | Fiscal Year 2016 ($) | Calendar Year 2018 ($) | Calendar Year 2017 ($) | Fiscal Year 2018 ($) | ||||||||||||||||||
Non-employee Director | 65,000 | 60,000 | 62,500 |
|
75,000
|
|
|
65,000
|
|
|
70,000
|
| ||||||||||||
Chairman
|
|
120,000
|
|
|
160,000
|
|
|
140,000
|
| |||||||||||||||
Lead Independent Director | 22,500 | 20,000 | 21,250 |
|
27,500
|
|
|
22,500
|
|
|
25,000
|
| ||||||||||||
Chairman | 280,000 | 280,000 | 280,000 | |||||||||||||||||||||
Audit Committee – Chair | 30,000 | 25,000 | 27,500 |
|
30,000
|
|
|
30,000
|
|
|
30,000
|
| ||||||||||||
Audit Committee – Member | 12,500 | 12,500 | 12,500 |
|
12,500
|
|
|
12,500
|
|
|
12,500
|
| ||||||||||||
Compensation Committee – Chair | 20,000 | 20,000 | 20,000 |
|
20,000
|
|
|
20,000
|
|
|
20,000
|
| ||||||||||||
Compensation Committee – Member | 10,000 | 10,000 | 10,000 |
|
10,000
|
|
|
10,000
|
|
|
10,000
|
| ||||||||||||
Nominating and Governance Committee – Chair | 15,000 | 10,000 | 12,500 |
|
15,000
|
|
|
15,000
|
|
|
15,000
|
| ||||||||||||
Nominating and Governance Committee – Member | 5,000 | 5,000 | 5,000 |
|
5,500
|
|
|
5,000
|
|
|
5,250
|
|
Eachnon-employee director also receives an annual equity grant on the first Friday following the annual meeting (or, if the designated date falls within a blackout window under applicable Company policies, on the first following business day such grant is permissible under those policies) with a targeted grant date value equal to $200,000 (the number of RSUs subject to the award is determined by dividing $200,000 by the closing price of a share of Company common stock as of the date of grant, rounded down to the nearest 10 shares). These grants generally vest on October 31 in the
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year following the grant and are subject to the terms and conditions of the Company’s 2015 Stock Incentive Plan, as amended, or the “2015 Plan,” and the applicable award agreements. These grants immediately vest in full: (i)(1) if anon-employee director dies or becomes subject to a “disability” (as determined pursuant to the 2015 Plan), (ii)(2) upon the occurrence of a “Corporate Transaction” (as defined in the 2015 Plan), or (iii)
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Lam Research Corporation 2018 Proxy Statement | 13 |
(3) on the date of the annual meeting if the annual meeting during the year in which the award was expected to vest occurs prior to the vest date and thenon-employee director is notre-elected or retires or resigns effective immediately prior to the annual meeting.Non-employee directors who commence service after the annual award has been granted receive on the first Friday following the first regularly scheduled, quarterly Board meeting attended apro-rated grant based on the number of regular boardregularly scheduled, quarterly Board meetings remaining in the year as of the effective date of the director’s election.appointment. Thepro-rated grants are subject to the same vesting schedule, terms and conditions as the annual equity awards, except that if the award is granted on the first Friday following the regularly scheduled quarterly November Board meeting, the grant vests immediately.
On November 6, 2015,10, 2017, each director other than Mr. Anstice and Dr. Tsai who was not a director during fiscal year 2016, received a grant of 2,600960 RSUs for servicesservice during calendar year 2016. 2018.
Unless there is an acceleration event, these RSUs granted to each current director for service during calendar year 2018 will vest in full on October 31, 2016,2018, subject to the director’s continued service on the board.Board.
Chairman compensation. Mr. Newberry, who served as vice-chairman from December 7, 2010 until November 1, 2012 and since such date has served as chairman, has a chairman’s agreement documenting his responsibilities, described above under “Governance Matters – Corporate Governance – Leadership Structure of the Board,” and compensation. Mr. Newberry entered into a chairman’s agreement with the Company commencing on January 1, 2016 and expiring on December 31, 2016, subject to the right of earlier termination in certain circumstances and a one year extension upon mutual written agreement of the parties. The agreement provides that Mr. Newberry will serve as chairman (and not as an employee or officer) and in addition to his regular compensation as anon-employee director, he receives an additional cash retainer of $280,000$120,000 on the same date.
Mr. Newberry was eligible to participate through 2014 in the Company’s Elective Deferred Compensation Plan that is generally applicable to executives of the Company, subject to the general terms and conditions of such plan. He continues to maintain a balance in the plan until he no longer performs service for the Company as a director but is no longer eligible to defer any compensation into the plan.
The following table shows compensation for fiscal year 20162018 for persons serving as directors during fiscal 20162018 other than Mr. Anstice:
Figure 8. FY201610. FY2018 Director Compensation
Director Compensation for Fiscal Year 2016 | ||||||||||||||||||||||||||||||||
Director Compensation for Fiscal Year 2018 | Director Compensation for Fiscal Year 2018 | |||||||||||||||||||||||||||||||
Fees Earned or Paid in Cash ($) | Stock Awards ($) (1)(2) | All Other sation | Total ($) | Fees Earned or Paid in Cash ($) | Stock Awards ($) (1) | All Other Compen- sation ($)(2) | Total ($) | |||||||||||||||||||||||||
Stephen G. Newberry | 345,000 | (4) | 196,846 | 23,962 | 565,808 | 195,000 | (3) | 197,395 | (4) | 28,456 | 420,851 | |||||||||||||||||||||
Eric K. Brandt | 95,000 | (5) | 196,846 | — | 291,846 | 105,000 | (5) | 197,395 | (4) | — | 302,395 | |||||||||||||||||||||
Michael R. Cannon | 82,500 | (6) | 196,846 | — | 279,346 | 93,000 | (6) | 197,395 | (4) | — | 290,395 | |||||||||||||||||||||
Youssef A. El-Mansy | 75,000 | (7) | 196,846 | 23,962 | 295,808 | 85,000 | (7) | 197,395 | (4) | 28,456 | 310,851 | |||||||||||||||||||||
Christine A. Heckart | 78,625 | (8) | 196,846 | — | 275,471 | 87,500 | (8) | 197,395 | (4) | — | 284,895 | |||||||||||||||||||||
Grant M. Inman | — | (9) | — | 23,962 | 23,962 | |||||||||||||||||||||||||||
Young Bum (YB) Koh | 75,000 | (9) | 197,395 | (4),(10) | — | 272,395 | ||||||||||||||||||||||||||
Catherine P. Lego | 90,875 | (10) | 196,846 | 22,748 | 310,469 | 100,500 | (11) | 197,395 | (4) | 27,150 | 325,045 | |||||||||||||||||||||
Krishna C. Saraswat | 65,000 | (11) | 196,846 | — | 261,846 | |||||||||||||||||||||||||||
William R. Spivey | — | (12) | — | 23,962 | 23,962 | |||||||||||||||||||||||||||
Abhijit Y. Talwalkar | 120,500 | (13) | 196,846 | — | 317,346 | 127,500 | (12) | 197,395 | (4) | — | 324,895 | |||||||||||||||||||||
Lih Shyng (Rick L.) Tsai | 75,000 | (13) | 197,395 | (4) | — | 272,395 | ||||||||||||||||||||||||||
(1) | The amounts shown in this column represent the grant date fair value of unvested RSU awards granted during fiscal year |
(2) | Represents the portion of medical, dental, and vision premiums paid by the Company. |
(3) | Mr. Newberry received $195,000, representing his $120,000 chairman retainer and $75,000 annual retainer as a director. |
(4) | On November |
(5) | Mr. Brandt received |
(6) | Mr. Cannon received |
(7) | Dr. El-Mansy received |
(8) | Ms. Heckart received |
(9) | Dr. Koh received a $75,000 annual retainer. |
(10) | Dr. Koh resigned from his board membership effective the close of business on May 14, 2018, which resulted in the forfeiture of the 960 RSUs received as part of the annual grant. |
(11) | Ms. Lego received |
(12) |
Mr. Talwalkar received |
(13) | Dr. Tsai received a |
Other benefits.Any members of the boardBoard enrolled in the Company’s health plans on or prior to December 31, 2012, can continue to participate after retirement from the boardBoard in the Company’s Retiree Health Plans. The boardBoard eliminated this benefit for any person who became a director after December 31, 2012. The most recent valuation of the Company’s accumulated post-retirement benefit obligation under Accounting Standards Codification 715,Compensation-
Retirement Compensation-Retirement Benefits, or “ASC 715,” as of June 26, 2016,24, 2018, for eligible former directors and the current directors who may become eligible is shown below. Factors affecting the amount of post-retirement benefit obligation include current age, at enrollment, age at retirement, coverage tier (e.g., single, plus spouse, plus family), interest rate, and length of service.
Figure 9. FY201611. FY2018 Accumulated Post-Retirement Benefit Obligations
Director Compensation for Fiscal Year | ||||
Name | Accumulated Post-Retirement Benefit Obligation, as of June ($) | |||
Stephen G. Newberry | 840,000 | |||
Eric K. Brandt | — | |||
Michael R. Cannon | — | |||
Youssef A.El-Mansy | 585,000 | |||
Christine A. Heckart | — | |||
Young Bum (YB) Koh | — | |||
Catherine P. Lego | 487,000 | |||
Abhijit Y. Talwalkar | — | |||
Lih Shyng (Rick L.) Tsai | — | |||
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Lam Research Corporation |
|
Executive Compensation and Other Information
Compensation Discussion and Analysis
This Compensation Discussion and Analysis, or “CD&A,” describes our executive compensation program. It is organized into the following four sections:
I. | Overview of Executive Compensation |
II. | Executive Compensation Governance and Procedures |
III. | Primary Components of Named Executive Officer Compensation; Calendar Year |
IV. | Tax and Accounting Considerations |
Our CD&A discusses compensation earned by our fiscal year 20162018 “Named Executive Officers,” or “NEOs,” who are as follows:
Figure 10. FY201612. FY2018 NEOs
Named Executive Officer | Position(s) | |
Martin B. Anstice | ||
Timothy M. Archer | ||
Douglas R. Bettinger | Executive Vice President and Chief Financial Officer | |
Richard A. Gottscho | Executive Vice President, | |
Senior Vice President, |
I. OVERVIEW OF EXECUTIVE COMPENSATION
To align with stockholders’ interests, our executive compensation program is designed to foster apay-for-performance culture and achieve the executive compensation objectives set forth in “Executive Compensation Philosophy and Program Design – Design—Executive Compensation Philosophy” below. We have structured our compensation program and payouts to reflect these goals. Our CEO’s compensation in relation to our revenue and net income is shown below.
Figure 11. FY2011-FY201613. FY2013-FY2018 CEO Pay for Performance
CEO Pay for performance net income revenue CEO total compensation (1)(2) Total compensation (in thousands) revenue and Net Income (in thousands)
(1) | “CEO Total Compensation” consists of base salary, annual incentive payments, accrued values of the cash payments under the long-term incentive program when applicable and grant date fair values of equity-based awards under the long-term incentive program, and all other compensation as reported in the “Summary Compensation Table” below. |
(2) | The CEO Total Compensation for fiscal year |
To understand our executive compensation program fully, we feelbelieve it is important to understand:
Our Business, Our Industry Environment, and Our Financial Performance
Lam Research has been an innovativeis a global supplier of innovative wafer fabrication equipment and services to the semiconductor industry for more than 35 years. Our customers include semiconductor manufacturers that make memory, microprocessors,industry. We have built a strong global presence with core competencies in areas like nanoscale applications enablement, chemistry, plasma and other logic integrated circuits forfluidics, advanced systems engineering, and a widebroad range of electronics; including cell phones, computers, tablets, storage devices,operational disciplines. Our products and networking equipment.
Our market-leading productsservices are designed to help our customers build the smaller, faster, and more powerful better performing
devices that are necessaryused in a variety of electronic products, including mobile phones, personal computers, servers, wearables, automotive devices, storage devices, and networking equipment. Our vision is to powerrealize full value from natural technology extensions of our company.
Our customer base includes leading semiconductor memory, foundry, and integrated device manufacturers that make products such asnon-volatile memory, DRAM memory, and logic devices. We aim to increase our strategic relevance with our customers by contributing more to their continued success. Our core technical competency is integrating hardware, process, materials, software, and process control enabling results on the capabilities required by end users. The processwafer.
Semiconductor manufacturing, our customers’ business, involves the complete fabrication of multiple dies or integrated circuits fabrication consistson a wafer. This involves the repetition of a complex seriesset of core processes and can require hundreds of individual steps. Fabricating these devices requires highly sophisticated process technologies to integrate an increasing array of new materials with precise control at the atomic scale. Along with meeting technical requirements, wafer processing equipment must deliver high productivity and preparation steps,be cost-effective.
Demand from the Cloud, Internet of Things (IoT), and other markets is driving the need for increasingly powerful and cost-efficient semiconductors. At the same time, there are growing technical challenges with traditional scaling. These trends are driving significant inflections in semiconductor manufacturing, such as the increasing importance of vertical 3D scaling strategies as well as multiple patterning to enable shrinks.
We believe we are in a strong position with our product offeringsleadership and competency in deposition, etch, and clean address a numberto facilitate some of the most critical steps in the fabrication process. We leverage our expertisesignificant innovations in semiconductor processingdevice manufacturing. Several factors create opportunity for sustainable differentiation for us: (i) our focus on research and development, with severalon-going programs related to develop technology and/or productivity solutions that typically benefitsustaining engineering, product and process development, and concept and feasibility; (ii) our customers through lower defect rates, enhanced yields, faster processing time, and reduced cost as well as by facilitating their ability to meet more stringent performanceeffectively leverage cycles of learning from our broad installed base; (iii) our collaborative focus with ecosystem partners; and design standards.(iv) our focus on delivering our multi-product solutions with a goal to enhance the value of Lam’s solutions to our customers.
Although we have a June fiscal year end, our executive compensation program is generally designed and oriented on a calendar-year basis to correspond with our calendar-year-based business planning. This CD&A generally reflects a calendar-year orientation rather than a fiscal yearfiscal-year orientation, as shown below. The Executive Compensation Tables at the end of this CD&A are based on our fiscal year, as required by SEC regulations.
Figure 12. Executive Compensation Calendar-Year Orientation
In calendar year 2015, demand for semiconductor equipment increased relative to calendar year 2014, as technology inflections led to higher investments. Against this backdrop, Lam delivered record financial performance.
Highlights for calendar year 2015:
In October 2015, we announced an agreement to combine with KLA-Tencor Corporation (“KLA-Tencor”), bringing together Lam’s capabilities in deposition, etch and clean with KLA-Tencor’s portfolio of inspection and metrology solutions.
In the first half of calendar year 2016, investments for wafer fabrication equipment spending have remained solid as customers transition to next generation technology nodes, which are increasingly complex and more costly to produce.
Lam has continued to generate solid operating income and cash generation with revenues of $2.9 billion and cash flows from operations of $607 million earned from the March and June 2016 quarters combined.
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Lam Research Corporation |
Figure 14. Executive Compensation Calendar-Year Orientation
Fiscal Year 2018 Relevant for executive compensation tables Calendar Year 2017 Calendar Year 2018 Relevant for compensation program design and orientation
In calendar year 2017, demand for semiconductor equipment continued to increase relative to calendar year 2016, as technology inflections continued to lead to higher investments from our customers. Against this backdrop, Lam delivered another year of record financial performance.
Highlights for calendar year 2017:
In the first half of calendar year 2018, investments for wafer fabrication equipment spending were strong as customers transition to next-generation technology nodes, which are increasingly complex and costlier to produce.
Lam has continued to generate solid operating income and cash generation with revenues of $6.0 billion, and cash flows from operations of $1.8 billion, earned from the March and June 2018 quarters combined.
Executive Compensation Philosophy and Program Design
Executive Compensation Philosophy
The philosophy of our compensation committee that guided this year’s awards and payout decisions is that our executive compensation program should:
Our compensation committee’s executive compensation objectives are to motivate:
Program Design
Our program design uses a mix of short-annual and long-term components, and a mix of cash and equity components. Our executive compensation program includes base salary, an annual incentive program, or “AIP,” and a long-term incentive program, or “LTIP,”LTIP, as well as stock ownership guidelines and a compensation recovery policy. As illustrated below, our program design is weighted towardstoward performance and stockholder value. The performance-based program components include AIP cash payouts and market-based equity and stock option awards under the LTIP.
Figure 13.15. NEO Compensation Target Pay Mix Averages(1)
Calendar Year 2018 Average NEO Target Pay Mix 58% Performance-Based(2) Calendar Year 2017 Average NEO Target Pay Mix 58% Performance-Based(2) Calendar Year 2016 Average NEO Target Pay Mix 65% Performance-Based (2) Performance-Based Compensation(3) Non-Performance-Based Compensation
(1) | Data for |
(2) | The Company’s LTIP design |
(3) |
For purposes of this illustration, we include Market-based |
For senior vice presidents and above, we also have stock ownership guidelines that foster a long-term orientation. See next paragraph for additional information.
Our stock ownership guidelines for our NEOs and certain other senior executives are shown below. The requirements are specified in the alternative of shares or dollars to allow for stock price volatility. Ownership levels as shown below must
be achieved within five years of appointment to one of the below positions. Increased requirements due to promotions or an increase in the
ownership guideline must be achieved within five years of promotion or a change in the guidelines. At the end of fiscal year 2016,2018, all of the NEOs were in compliance with our stock ownership guidelines or have a period of time remaining under the guidelines to meet the required ownership level.
Figure 14.16. Executive Stock Ownership Guidelines
Position | Guidelines (lesser of) | |
Chief Executive Officer | 5x base salary or | |
President and Chief Operating Officer | 3x base salary or 20,000 shares | |
Executive Vice Presidents | 2x base salary or 10,000 shares | |
Senior Vice Presidents | 1x base salary or 5,000 shares |
Compensation Recovery, or “Clawback” Policy
Our executive officers covered by section 16 of the Exchange Act are subject to the Company’s compensation recovery, or “clawback,” policy. The clawback policy was adopted in August 2014 and will enable us to recover, within 36 months
of the issuance of the original financial statements, the excess amount of cash incentive-based compensation issued starting in calendar year 2015 to officers covered individualsby section 16 of the Exchange Act when a material restatement of financial results is required within 36 months of the issuance of the original financial statements.required. A covered individual’s fraud must have materially contributed to the need to issue restated financial statements
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Lam Research Corporation 2018 Proxy Statement | 19 |
in order for the clawback
policy to apply to that individual. The recovery of compensation is not the exclusive remedy available in the event that the clawback policy is triggered.
Executive Compensation Highlights of Preferred Compensation-Related Policies, Practices and Provisions
We maintain preferred policies, practices and provisions related to or inHighlights of our executive compensation program which include the material ones highlightedare listed in “Proxy “Proxy Statement Summary – Figure4. 6. Executive Compensation Highlights.” above.
II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES
Role of the Compensation Committee
Our board of directorsBoard has delegated certain responsibilities to the compensation committee, or the “committee,” through a formal charter. The committee(1) oversees the compensation programs in which our chief executive officer, president and hischief operating officer, and CEO’s direct executive and senior vice president reports participate. The independent members of our board of directorsBoard approve the compensation packages and payouts for our CEO. The CEO is not present for any decisions regarding his compensation packages and payouts.
Committee responsibilities include but are not limited to: reviewing and approving the Company’s executive compensation philosophy, objectives, and strategies; reviewing and approving the appropriate peer group companies for purposes of evaluating the Company’s compensation competitiveness; causing the board of directorsBoard to perform a periodic performance evaluation of the CEO; recommending to the independent members of the board of directorsBoard (as determined under both Nasdaq’s listing standards and section 162(m) of the Code) corporate goals and objectives under the
Company’s compensation plans, compensation packages (e.g., annual base salary level, annual cash incentive award, long-term incentive award and any employment agreement, severance arrangement,change-in-control arrangement, equity grant, or special or supplemental benefits, and any material amendment to any of the foregoing) as applicable to the CEO, and compensation payouts for the CEO; annually reviewing with the CEO the performance of the Company’s other executive officers in light of the Company’s executive compensation goals and objectives and approving the compensation packages and compensation payouts for such individuals; reviewing and recommending for appropriate boardBoard action all cash, equity-based and other compensation packages, and compensation payouts applicable to the chairman and other members of the board;Board; and reviewing, and approving where appropriate, equity- basedequity-based compensation plans.
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The committee is authorized to delegate such of its authority and responsibilities as the committeeit deems proper and consistent with legal requirements to its members, of the committee, any other committee of the boardBoard and one or more officers of the Company in accordance with the provisions of the Delaware General Corporation Law. For additional information on the committee’s responsibilities and authorities, see “Governance Matters – Matters—Corporate Governance – Governance—Board Committees – Committees—Compensation Committee” above.
In order to carry out these responsibilities, the committee receives and reviews information, analysis, and proposals prepared by our management and by the committee’s compensation consultant (see “Role of Committee Advisors” below).
Role of Committee Advisors
The committee is authorized to engage its own independent advisors to assist in carrying out its responsibilities. The committee has engaged the services of Compensia, Inc., or “Compensia,” a national compensation consulting firm, as the committee’s compensation consultant. Compensia provides the committee with independent and objective guidance regarding the amount and types of compensation for our chairman,non-employee directors, and executive officers and how these amounts and types of compensation compare to other companies’ compensation practices, as well as guidance on market trends, evolving regulatory requirements, compensation of our independent directors, peer group composition, and other matters as requested by the committee.
Representatives of Compensia regularly attend committee meetings (including executive sessions without management present), communicate with the committee chair outside of meetings, and assist the committee with the preparationits consideration of performance metrics and goals. Compensia reports to the committee, not to management. At the committee’s request, Compensia meets with members of management to gather and discuss information that is relevant to advising the committee. The committee may replace Compensia or hire additional advisors at any time. Compensia has not provided any other services to the committee or to our management, and has received no compensation from us other than with respect to the services described above. The committee assessed the independence of Compensia pursuant to SEC rules and Nasdaq listing standards, including the following factors: (1) the absence of other services provided by it to the Company; (2) the fees paid to it by the Company as a percentage of its total revenue; (3) its policies and procedures to prevent conflicts of interest; (4) the absence of any
(1) | For purposes of this CD&A, a reference to a compensation action or decision by the committee with respect to our chairman and our chief executive officer, means an action or decision by the independent members of our Board after considering the recommendation of the committee and, in the case of all other NEOs, an action or decision by the compensation committee. |
business or personal relationships with committee members; (5) the fact that it does not own any Lam common stock; and (6) the absence of any business or personal relationships with our executive officers. The committee assessed this information and concluded that the work of Compensia had not raised any conflict of interest.
Role of Management
Our CEO, with support from our human resources and finance organizations, develops recommendations for the compensation of our other executive officers. Typically, these recommendations cover base salaries, annual incentive program target award opportunities, long-term incentive program target award opportunities, and the criteria upon which these award opportunities may be earned, as well as actual payout amounts under the annual and long-term incentive programs.
The committee considers the CEO’s recommendations within the context of competitive compensation data, the Company’s compensation philosophy and objectives, current business conditions, the advice of Compensia, and any other factors it considers relevant. At the request of the committee, our chairman also provides input to the committee.
Our CEO attends committee meetings at the request of the committee, but leaves the meeting for any deliberations related to and decisions regarding his own compensation, when the committee meets in executive session, and at any other time requested by the committee.
Peer Group Practices and Survey Data
In establishing the total compensation levels of our executive officers, as well as the mix and weighting of individual compensation elements, the committee monitors compensation data from a group of comparably sized companies in the technology industry, or the “Peer Group,” which may differ from peer groups used by stockholder advisory firms. The committee selects the companies constituting our Peer Group based on their comparability to our lines of business and industry, annual revenue, and market capitalization, and our belief that we are likely to compete with them for executive talent. Our Peer
Group is focused on U.S. based,U.S.-based, public semiconductor, semiconductor equipment and materials companies, and similarly sized high-technology equipment and hardware companies with a global presence and a significant investment in research and development. The table below summarizes how the Peer Group companies compare to the Company:
Figure 15. 201617. 2018 Peer Group Revenue and Market Capitalization
Metric | Lam Research ($M) | Target for Peer Group | Peer Group Median ($M) | |||||||
Revenue (last completedfour quarters asof June 3,2015) | 5,027 | 0.5 to 2 times Lam | 4,730 | |||||||
Market Capitalization (30-day average as of June 3, 2015) | 12,492 | 0.33 to 3 times Lam | 11,682 |
Metric | Lam Research ($M) | Target for Peer Group | Peer Group Median ($M) | |||||||
Revenue (last completed four quarters as of May 5, 2017)
|
|
7,215 |
|
0.33 to
|
|
4,769 |
| |||
Market Capitalization(30-day average as of May 5, 2017)
|
|
22,258 |
|
0.33 to
|
|
17,906 |
|
Based on these criteria, the Peer Group and targets may be modified from time to time. Our Peer Group was reviewed in August 2015July 2017 for calendar year 20162018 compensation decisions and based on the criteria identified above, three companies were added to the Peer Grouppeer group (Microchip Technology Incorporated, Texas Instruments Inc. and Western Digital Corporation) and one company (SanDisk Corporation) was retained without any changes.removed. Our Peer Group consists of the companies listed below.as follows:
Figure 16. CY201618. CY2018 Peer Group Companies
Advanced Micro Devices, Inc. | ||
Maxim Integrated Products, Inc. | ||
Agilent Technologies, Inc. | Microchip Technology Incorporated | |
Analog Devices, Inc. | NetApp, Inc. | |
Applied Materials, Inc. | NVIDIA Corporation | |
Broadcom Limited | ON Semiconductor Corporation | |
Corning Incorporated | Skyworks Solutions, Inc. | |
Juniper Networks, Inc. | Texas Instruments Inc. | |
KLA-Tencor Corporation | Western Digital Corporation | |
Micron Technology, Inc. | Xilinx, Inc. |
We derive revenue, market capitalization, and NEO compensation data from public filings made by our Peer Group companies with the SEC and other publicly available sources. Radford Technology Survey data may be used to supplement compensation data from public filings as needed. The committee reviews compensation practices and selected data on base salary, bonus targets, total cash compensation, equity awards, and total compensation drawn from the Peer Group companies and/or the Radford Technology Survey primarily as a reference to help ensure compensation packages are consistent with market norms.
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Lam Research Corporation 2018 Proxy Statement | 21 |
Base pay levels for each executive officer are generally set with reference to market competitive levels and in reflection of each officer’s skills, experienceexperiences, and performance. Variable pay target award opportunities and total direct compensation for each executive officer are generally designed to deliver market competitive compensation for the achievement of stretch goals with downside risk for underperforming and upside reward for success.overperforming. For those executive officers who are new to their roles, compensation arrangements may be designed to
deliver below market compensation.compensation for a period of time. However, the committee does not “target” pay at any specific percentile. Rather, individual pay positioning depends on a variety of factors, such as prior job performance, job scope and responsibilities, skill set, prior experience, time in position, internal comparisons of pay levels for similar skill levels or positions, our goals to attract and retain executive talent, Company performance, and general market conditions.
Assessment of Compensation Risk
Management, with the assistance of Compensia, the committee’s independent compensation consultant, conducted a compensation risk assessment in 20162018 and concluded that the Company’s current employee compensation programs are not reasonably likely to have a material adverse effect on the Company’s business.
20152017 Say on Pay Voting Results; Company Response
We evaluate our executive compensation program annually. Among other things, we consider the outcome of our most recent Say on Pay vote and input we receive from our stockholders. In 2015,2017, our stockholders approved our 20152017 advisory vote on executive compensation, with 96.6%94.78% of the votes cast in favor of the advisory proposal. We believe that our most recent Say on Pay vote signifies our stockholders’ approvalsupport of the changes we made in 2014 to strengthen our pay for performance alignment.executive compensation program and practices. We did not make any material changes to our programs and practices in fiscal year 2016. Additionally, we continue to further enhance our disclosure regarding our compensation program and practices.2018.
III. PRIMARY COMPONENTS OF NAMED EXECUTIVE OFFICER COMPENSATION; CALENDAR YEAR 20152017 COMPENSATION PAYOUTS; CALENDAR YEAR 20162018 COMPENSATION TARGETS AND METRICS
This section describes the components of our executive compensation program. It also describes, for each component, the payouts to our NEOs for calendar year 20152017 and the forward-looking actions taken with respect to our NEOs in calendar year 2016.2018.
Base Salary
We believe the purpose of base salary is to provide competitive compensation to attract and retain top talent and
to provide compensation to employees, including our NEOs, with a fixed and fair amount of compensation for the jobs they perform. Accordingly, we seek to ensure that our base salary levels are competitive in reference to Peer Group practice and market survey data. Adjustments to base salary are generally considered by the committee each year in February.
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For calendar years 20162018 and 2015,2017, base salaries for NEOs were determined by the committee in February of each year and became effective on March 1 andor the first day of the pay period that included March 31, respectively,1 (if earlier), based on the factors described above. In orderThe following base salary adjustments for 2017 were made to remain competitive against our Peer Group the base salaries for 2016 forand reflect performance as follows: Mr. Archer and Dr. Gottscho were increased by 3%, for Mr. AnsticeAnstice’s was increased by 3.6%3.5%, Mr. Archer’s was increased by 3.0%, Dr. Meikle’s was increased by 2.4%, and for Mr. Bettinger and Ms. O’Dowd wereBettinger’s was increased by 5%1.5%. The base salaries of the NEOs for calendar years 20162018 and 20152017 are as follows:shown below.
Figure 17.19. NEO Annual Base Salaries
Named Executive Officer | Annual Base Salary as of March 1, 2016 ($) | Annual Base Salary as of March 31, 2015 ($) |
Annual Base
|
Annual Base
| ||||||||||||
Martin B. Anstice | 960,000 | 927,000 |
|
1,025,000 |
|
|
990,000 |
| ||||||||
Timothy M. Archer | 636,540 | 618,000 |
|
688,418 |
|
|
668,367 |
| ||||||||
Douglas R. Bettinger | 567,000 | 540,000 |
|
592,770 |
|
|
584,010 |
| ||||||||
Richard A. Gottscho | 556,200 | 540,000 |
|
567,324 |
|
|
567,324 |
| ||||||||
Sarah A. O’Dowd | 448,875 | 427,500 | ||||||||||||||
Scott G. Meikle(3) |
|
430,000 |
|
|
420,000 |
|
(1) | Effective February 26, 2018 |
(2) | Effective February 27, 2017 |
(3) | Dr. Meikle commenced employment with Lam on September 1, 2017. His base salary for calendar year 2017 was determined by the committee in July 2017. |
Annual Incentive Program
Design
Our annual incentive program is designed to provide short-term,annual, performance-based compensation that: (i)(1) is based on the achievement ofpre-set annual financial, strategic, and operational objectives aligned with outstanding performance, throughout fluctuating business cycles, and (ii)(2) will allow us to attract and retain top talent, while maintaining cost-effectiveness to the Company. The committee establishes individual target award opportunities for each NEO as a percentage of base salary. Specific target award opportunities are determined based on job scope and responsibilities, as well as an assessment of Peer Group data. Awards have a maximum payment amount defined as a
multiple of the target award opportunity. The maximum award for 20152017 and 20162018 was set at 2.25 times target, consistent with prior years.
Annual incentive program components
Annual incentive program components, each of which plays a role in determining actual payments made, include:
The Funding Factor is set by the committee to create a maximum payout amount from which annual incentive program payouts may be made. The committee may exercise negative (but not positive) discretion against the Funding Factor result, and generally the entire funded amount is not paid out. Achievement of a minimum level of performance against the Funding Factor goals is required to fund any program payments. In February 2015,2017, for calendar year 2015,
2017, the committee setnon-GAAP operating income as a percentage of revenue as the metric for the Funding Factor, with the following goals:
The committee selectednon-GAAP operating income as a percentage of revenue because it believes that operating income as a percentage of revenue is the performance metric that best reflects core operating results.(2)Non-GAAP operating income is considered useful to investors for analyzing business trends and comparing performance to prior periods. By excluding certain costs and expenses that are not indicative of core results,non-GAAP results are more useful for analyzing business trends over multiple periods.
As a guide for using negative discretion against the Funding Factor results and for making payout decisions, the committee primarily tracks the results of the following two components that are weighted equally in making payout decisions, and against which discretion may be applied in a positive or
negative direction, provided the Funding Factor result is not exceeded:
The specific metrics and goals, and their relative weightings, for the Corporate Performance Factor are determined by the committee based upon the recommendation of our CEO, and the Individual Performance Factors are determined by our CEO, or in the case of the CEO, by the committee.
The metrics and goals for the Corporate and Individual Performance Factors are set annually. Goals are set depending on the business environment, to ensureensuring that they are stretch goals regardless of changes in the business environment. Accordingly, as business conditions improve, goals are set to require better performance, and asif business conditions deteriorate, goals are set to require stretch performance under more difficult conditions.
We believe that, over time, outstanding business results create stockholder value. Consistent with this belief, multiple
performance-based metrics (non-GAAP(non-GAAP operating income, product market share, and strategic operational, and organizational metrics) are established for our NEOs as part of the Corporate and Individual Performance Factors.
We believe the metrics and goals set under this program, together with the exercise of discretion by the committee as described above, have been effective to motivate our NEOs and the organizations they lead and to achievepay-for-performance results.
(2) | Non-GAAP results are designed to provide information about performance without the impact of certain non-recurring and other non-operating line items. Non-GAAP operating income is derived from GAAP results, with charges and credits in the following line items excluded from GAAP results for applicable quarters during fiscal years 2018 and 2017: acquisition-related costs: costs associated with rationalization of certain product configurations; amortization related to intangible assets acquired through certain business combinations; costs associated with campus consolidation; litigation settlement; and costs associated with business process reengineering. |
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Lam Research Corporation 2018 Proxy Statement | 23 |
Figure 18.20. Annual Incentive Program Payouts
Calendar Year | Average NEO’s Annual Incentive Payout as % of Target Award Opportunity | Business Environment | ||||
2015 | 159 | Strong operating performance and expansion of served available markets, supported by stable economic conditions. Robust demand for semiconductor equipment driven by both capacity and technology investments. | ||||
2014 | 127 | Strong operating performance and supported by stable economic conditions and healthy demand for semiconductor equipment; Company growth in various growing industry technology inflections | ||||
2013 | 105 | Healthy demand for semiconductor equipment with stable economic conditions and favorable supply demand conditions; delivered on annualized cost savings targets defined in integration plans |
Calendar Year | Average NEO’s Annual Incentive Payout as % of Target Award Opportunity | Business Environment | ||||
2017 |
|
204 |
|
Strong operating performance and continued expansion of served available markets, supported by overall economic environment. Healthy demand for semiconductor equipment driven by capacity and technology investments.
| ||
2016 |
|
166 |
|
Strong operating performance and continued expansion of served available markets, supported by stable economic conditions. Healthy demand for semiconductor equipment driven by capacity and technology investments.
| ||
2015 |
|
159 |
|
Strong operating performance and expansion of served available markets, supported by stable economic conditions. Robust demand for semiconductor equipment driven by both capacity and technology investments.
|
Calendar year 20152017 annual incentive program parameters and payout decisions
In February 2015,2017, the committee set the calendar year 20152017 target award opportunity and established the metrics and goals for the Funding Factor, the metrics and annual goals for the Corporate Performance Factor, and the metrics and goals were established for the Individual Performance Factors for each then-employed NEO, except for Dr. Meikle whose metrics and goals for his Individual Performance Factor were established.determined in July 2017 in conjunction with the commencement of his employment. In February 2016,2018, the committee considered the actual results under these factors and made payout decisions for the calendar year 20152017 program, all as described below.
20152017 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 20152017 for each NEO were as set forth below in Figure 19 below21 in accordance with the principles set forth above under “Executive Compensation Governance and Procedures – Peer Group Practices and Survey Data.”
20152017 Annual Incentive Program Corporate Performance Factor. In February 2015,2017, the committee setnon-GAAP operating income as a percentage of revenue as the metric for the calendar year 20152017 Corporate Performance Factor, and set:
These goals were designed to be stretch goals. Actualnon-GAAP operating income as a percentage of revenue was 21.6%28.7% for calendar year 2015.2017. This performance which exceeded the maximum Corporate Performance Factor, resulted in a total Corporate Performance Factor of 1.50 for calendar year 2015 of 1.26.2017.
20152017 Annual Incentive Program Organization/Individual Performance Factor.Factors. For 2015,2017, the organization-specific performance metrics and goals for each NEO’s Individual Performance Factor were set on an annual basis and were designed to be stretch goals. The Individual Performance Factor for Mr. Anstice (as well as Mr. Archer) for calendar year 20152017 was based on the average of the Individual Performance Factors of all of the executive and senior vice presidents reporting to him.him, subject to discretion based on the Company’s performance to business, strategic, and operational objectives. For all other NEOs, their respective Individual Performance Factors were based on market share and/or strategic, operational, and organizational performance goals specific to the organizations they managed, as described in more detail below.
The accomplishments of actual individual performance against the established goals described below during 20152017 were considered.
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InThe committee’s consideration of the above accomplishments as well asresulted in the teamwork demonstrated to deliver the overall strong company
performance in 2015, the committee exercised discretion such that each NEO received anfollowing Individual Performance Factor of 1.26 (equal to the Corporate Performance Factor)Factors for the 2015 calendar year.each NEO: Mr. Anstice, 1.45; Mr. Archer, 1.45; Mr. Bettinger, 1.16; Dr. Gottscho, 1.40; and Dr. Meikle 1.35.
20152017 Annual Incentive Program Payout Decisions. In February 2016,2018, in light of the Funding Factor results and based on the above results and decisions, the committee approved the following payouts for the
calendar year 20152017 annual incentive program for each NEO, which were substantially less than the maximum payout available under the Funding Factor:Factor as shown below in Figure 21:
Figure 19. CY201521. CY2017 Annual Incentive Program Payouts
Named Executive Officer | Target Award Opportunity (% of Base Salary) | Target Award Opportunity ($) (1) | Maximum Payout under Funding Factor (225.0% of Target Award Opportunity) ($)(2) | Actual Payouts ($) | Target Award Opportunity (% of Base Salary) | Target Award Opportunity ($)(1) | Maximum Payout under Funding Factor (225.0% of Target Award Opportunity) ($)(2) | Actual Payouts ($) | ||||||||||||||||||||||||
Martin B. Anstice | 150 | 1,390,500 | 3,128,625 | 2,207,558 |
|
150 |
|
|
1,485,000 |
|
|
3,341,250 |
|
|
3,229,875 |
| ||||||||||||||||
Timothy M. Archer | 110 | 679,800 | 1,529,550 | 1,079,250 |
|
110 |
|
|
735,204 |
|
|
1,654,209 |
|
|
1,599,068 |
| ||||||||||||||||
Douglas R. Bettinger | 90 | 486,000 | 1,093,500 | 771,574 |
|
90 |
|
|
525,609 |
|
|
1,182,620 |
|
|
914,560 |
| ||||||||||||||||
Richard A. Gottscho | 90 | 486,000 | 1,093,500 | 771,574 |
|
90 |
|
|
510,592 |
|
|
1,148,832 |
|
|
1,072,242 |
| ||||||||||||||||
Sarah A. O’Dowd | 80 | 342,000 | 769,500 | 542,959 | ||||||||||||||||||||||||||||
Scott G. Meikle | 80 | 112,224 | (3) | 252,504 | 227,254 |
(1) | Calculated by multiplying each NEO’s annual base salary for |
(2) | The Funding Factor resulted in a potential payout of up to 225.0% of target award opportunity for the calendar year (based on the actualnon-GAAP operating income percentage results detailed under “ |
(3) | Dr. Meikle, having commenced employment with the Company on September 1, 2017, was an eligible participant under the annual incentive program for a portion of calendar year 2017. The prorated portion of his 2017 annual base salary eligible for incentive payouts constituted $140,280. |
Calendar year 20162018 annual incentive program parameters
In February 2016,2018, the committee set the target award opportunity for each NEO as a percentage of base salary, and consistent with prior years set a cap on payments equal to 2.25 times the target award opportunity. The target award opportunity for each NEO is shown below.
Figure 20. CY201622. CY2018 Annual Incentive Program Target Award Opportunities
Named Executive Officer | Target Award Opportunity (% of Base Salary) | |||
Martin B. Anstice | 150 | |||
Timothy M. Archer | 125 | |||
Douglas R. Bettinger | 90 | |||
Richard A. Gottscho | 90 | |||
Scott G. Meikle | 85 |
The committee also approved the annual metric for the Funding Factor and for the Corporate Performance Factor asnon-GAAP operating income as a percentage of revenue and set the annual goals for the Funding Factor and also the Corporate Performance Factor. Consistent with the program design, the Corporate Performance Factor goal is more difficult to achieve than the Funding Factor goal. Individual Performance Factor metrics and goals were also established for each NEO. These include strategic and operational performance goals specific to individuals and their business organization. As a result, each NEO has multiple performance metrics and goals under this program. All Corporate and Individual Performance Factor goals were designed to be stretch goals.
Long-Term Incentive Program
Design
Our long-term incentive program, or “LTIP,”LTIP is designed to attract and retain top talent, provide competitive levels of compensation, align pay with achievement of business objectives and with stock performance over a multi-year period, reward our NEOs for outstanding Company performance, and create stockholder value over the long term. Our LTIP was redesigned in February 2014 to further those objectives by: (i) establishing a program entirely composed of equity, (ii) introducing a new LTIP vehicle, a Market-Based Performance Restricted Stock Unit, or “Market-Based PRSU,” designed to reward eligible participants based on our stock price performance relative to the Philadelphia Semiconductor Sector Index (SOX), or “SOX index,” (iii)
differentiating the metric in our LTIP from the absolute operational performance metrics used for the annual incentive program, and (iv) extending the performance period for the LTIP from two to three years.
As a result, the LTIP now operates on overlapping three-year cycles, whereas prior to 2014, it operated on overlapping two-year cycles. In 2014, this change would have left participants with a gap in long-term incentive vesting opportunity in 2016. To ensure that participants received a long-term award that vested in 2016, the committee also awarded in 2014 a one-time gap year award with a two-year performance period, or the “Gap Year Award.” The target amount awarded under the Gap Year Award was equal to 50% of the target award opportunity under the regular three-year LTIP award. While the impact on the employee from the extended performance period and the Gap Year Award, assuming performance and target opportunities are the same year after year, was to normalize the received compensation in any year, the impact on the Company from such normalization (visible in “Figure 28. Summary Compensation Table” and “Figure 31. FYE2016 Outstanding Equity Awards” below), was a higher grant-based compensation expense in fiscal year 2014. This is in addition to the impact on the total compensation figures in the Company’s “Summary Compensation Table” in fiscal years 2014 and 2015 from the long-term cash awards, which ceased being awarded in fiscal year 2013 but were not paid out until fiscal year 2015, under the previously designed programs for our performance during the relevant periods.
Under the current long-term incentive program, at the beginning of each multi-year performance period, target award opportunities (expressed as a U.S. dollar value) and performance metrics are established for the program. Of the total target award opportunity, 50% is awarded in Market-BasedMarket-based PRSUs, and the remaining 50% is awarded in a combination of stock options and service-based RSUs with at least 10% of the award in each of these two vehicles. The specific percentage of service-based RSUs and stock options are reviewed annually to determine whether service-based RSUs or stock options are the more appropriateefficient form of equity for the majority of the award based on criteria such as the current business environment and the potential value to motivate and retain the executives. We consider performance-based RSUs and stock options as performance-based, but do not classify service-based RSUs as performance-based. This means that if options constitute 10% of the total target award opportunity, the long-term incentive program will be 60% performance-based. If options constitute 40% of the total target award opportunity, the long-term incentive program will be 90% performance-based.
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Lam Research Corporation |
Equity Vehicles
The equity vehicles used in our 2016/20182018/2020 long-term incentive program are as follows:
Figure 21. 2016/201823. 2018/2020 LTIP Program Equity Vehicles
Equity Vehicles | % of Target Award Opportunity | |||||||||
Terms | ||||||||||
Market-based PRSUs | 50 | • Awards cliff vest three years from the March 1,
• The performance period for
• The number of shares represented by the
• The final award cannot exceed 150% of target (requiring a positive percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or greater than 25 percentage points) and can be as little as 0% of target (requiring a percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or lesser than negative 50 percentage points).
• The number of
• Awards that vest at the end of the performance period are distributed in shares of our common stock. | ||||||||
Stock Options | 10 | • Awards vestone-third on the first, second, and third anniversaries of the March 1,
• The number of stock options granted is determined by dividing
• Awards are exercisable upon vesting.
• Expiration is on the seventh anniversary of the Grant Date. | ||||||||
RSUs | 40 | • Awards vestone-third on the first, second, and third anniversaries of the March 1,
• The number of RSUs granted is determined by dividing
• Awards are distributed in shares of our common stock upon vesting. |
Figure 22. Market-Based24. Market-based PRSU Vesting Summary
% Change in Lam’s Stock Price Performance Compared to % Change in SOX Index Market Price Performance | Market-Based PRSUs That Can Be Earned (% of Target) (1) |
Market-based PRSUs (% of Target) (1)
| ||||||
+ 25% or more | 150 |
|
150 |
| ||||
10% | 120 |
|
120 |
| ||||
0% (equal to index) | 100 |
|
100 |
| ||||
-10% | 80 | |||||||
-25% | 50 | |||||||
- 10% |
|
80 |
| |||||
- 25% |
|
50 |
| |||||
- 50% or less | 0 |
|
0 |
|
(1) | As set forth in the third bullet of the first row of Figure |
Target Award Opportunity
Under the long-term incentive program, the committee sets a target award opportunity for each participant based on the NEO’s position and responsibilities and an assessment of competitive compensation data. The target award opportunities for each participant are expressed in a U.S. dollar value. The target amounts for each NEO under the program cycles affecting fiscal year 20162018 are as follows:shown below.
Figure 23.25. LTIP Target Award Opportunities
Named Executive Officer | Long- | Target Award | ||||||||
Martin B. Anstice | 2018/2020 | (1) | 9,000,000 | |||||||
2017/2019 | (2) | 8,000,000 | ||||||||
2016/2018 | (3) | 7,500,000 | ||||||||
2015/2017 | (4) | 6,750,000 | ||||||||
Timothy M. Archer | 2018/2020 | (1) | 5,000,000 | |||||||
2017/2019 | (2) | 4,500,000 | ||||||||
2016/2018 | (3) | 4,000,000 | ||||||||
2015/2017 | (4) | 3,500,000 | ||||||||
Douglas R. Bettinger | 2018/2020 | (1) | 2,250,000 | |||||||
2017/2019 | (2) | 2,750,000 | ||||||||
2016/2018 | (3) | 2,750,000 | ||||||||
2015/2017 | (4) | 2,500,000 | ||||||||
Richard A. Gottscho | 2018/2020 | (1) | 2,500,000 | |||||||
2017/2019 | (2) | 3,250,000 | ||||||||
2016/2018 | (3) | 3,250,000 | ||||||||
2015/2017 | (4) | 3,000,000 | ||||||||
Scott G. Meikle(5) | 2018/2020 | (1) | 1,250,000 |
(1) | The three-year performance period for the 2018/2020 LTIP began on February 1, 2018 and ends on January 31, 2021. |
The three-year performance period for the 2017/2019 LTIP began on February 1, 2017 and ends on January 31, 2020. |
(3) | The three-year performance period for the 2016/2018 LTIP began on February 1, 2016 and ends on January 31, 2019. |
The three-year performance period for the 2015/2017 LTIP began on February 2, 2015 and |
Dr. Meikle did not participate in the |
Calendar Year 2014 Gap Year2015/2017 LTIP Award Parameters and Payouts
On February 18, 2014,11, 2015, the committee granted to each NEO as part of the one-time calendar year 2014 Gap Year Awards,2015/2017 long-term incentive program, or “Gap Year“2015/2017 LTIP Awards,” Market-BasedMarket-based PRSUs, and service-based RSUs and stock options with a combined value equal to 50% of the NEO’s total target award opportunity under the calendar year 2014/2016 long-term incentive program, as shown below. EachThe service-based RSUs and stock options vested over three years,one-third on each anniversary of these awardsthe grant date. The Market-based PRSU’s cliff vested twothree years from the grant date. These awards were made as part of the transition from two-year vesting to three-year vesting and to normalize the received compensation in any year.
Figure 24. Gap Year26. 2015/2017 LTIP Awards
Named Executive Officer | Target Award Opportunity ($) | Market- Based PRSUs Award (1) (#) | Service- RSUs Award | Stock Options Award | ||||||||||||||||||||||||||||
Named Executive Officer(1)
|
Target
|
Market-
|
Stock
|
Service-
| ||||||||||||||||||||||||||||
Martin B. Anstice | 3,250,000 | 31,394 | 25,115 | 18,834 |
|
6,750,000 |
|
|
41,873 |
|
|
25,122 |
|
|
33,498 |
| ||||||||||||||||
Timothy M. Archer | 1,500,000 | 14,489 | 11,591 | 8,691 |
|
3,500,000 |
|
|
21,712 |
|
|
13,026 |
|
|
17,369 |
| ||||||||||||||||
Douglas R. Bettinger | 1,250,000 | 12,074 | 9,659 | 7,242 |
|
2,500,000 |
|
|
15,508 |
|
|
9,303 |
|
|
12,406 |
| ||||||||||||||||
Richard A. Gottscho | 1,250,000 | 12,074 | 9,659 | 7,242 |
|
3,000,000 |
|
|
18,610 |
|
|
11,166 |
|
|
14,888 |
| ||||||||||||||||
Sarah A. O’Dowd | 650,000 | 6,278 | 5,023 | 3,765 |
(1) | Dr. Meikle did not participate in the 2015/2017 LTIP because his employment with the Company commenced September 1, 2017. |
(2) | The number of |
In February 2016,2018, the committee determined the payouts for the calendar year 2014 Gap Year2015/2017 LTIP Awards of Market-Based PRSUs awarded to the NEOs on February 18, 2014.Market-based PRSUs. The number of shares represented by the Market-BasedMarket-based PRSUs earned over the performance period was based on our stock price performance compared to the market price performance of the SOX index, subject toindex.
Based on the below-referenced ceiling. In each case, the stock / index price performance was measured using the closing price for the 50-trading days prior to the dates the performance period beganabove formula and ended. The target number of shares represented by the Market-Based PRSUs increased by 2% of target for each 1% that Lam’s stock price performance exceeded the market price performance of the SOX index; similarly, the target number of shares represented by the Market-Based PRSUs decreased by 2% of target for each 1% that Lam’s stock price performance trailed the market price performance of the SOX index. The result of the vesting formula was rounded down to the nearest whole number. There was a ceiling but no floor to the number of shares that may have been earned under the Market-Based PRSUs: the payment amount could not exceed 150% of target (which would have required a percentage changeMarket-based PRSU Vesting Summary set forth in Figures 23 and 24, the Company’s stock price performance comparedover the three-year performance period was equal to that143.56% and performance of the SOX index (based on market price) over the same three-year performance period was equal to 92.36%. While Lam’s stock price outperformed the SOX index by 51.20%, which would have resulted in a performance payout of 202.40% to target
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Lam Research Corporation |
market price performance ofunder our Market-based PRSU program, the SOX index equal to or greater than positive 25 percentage points) and could have been 0% of target (requiring a percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or lesser than negative 50 percentage points).
Based on the above formula, the Company’s stock price performance over the two-year performance period was equal to 39.18% and the market price performance of the SOX index over the same two-year performance period was equal to 18.15%. Given that Lam’s stock price outperformed the market price of the SOX index by 21.03%, theactual number of shares paid represented by the Market-BasedMarket-based PRSUs was equallimited to 142.06% (100% plus twice the 21.03%maximum payout of outperformance)150% of the target number of Market-BasedMarket-based PRSUs granted to each NEO. Based on such results, the committee made the following payouts to each NEO for the Gap Year2015/2017 LTIP Award of Market-BasedMarket-based PRSUs.
Figure 25. Gap Year Market-Based27. 2015/2017 LTIP Market-based PRSU Award Payouts
Named Executive Officer | Target Based | Maximum Based (150% of | Actual Payout of Market- Based PRSUs (142.06% of Target Award Opportunity) (#) | |||||||||||||||||
Named Executive Officer(1)
| Target
|
Actual Payout (#)
| ||||||||||||||||||
Martin B. Anstice | 31,394 | 47,091 | 44,598 |
|
41,873 |
|
|
62,809 |
| |||||||||||
Timothy M. Archer | 14,489 | 21,734 | 20,583 |
|
21,712 |
|
|
32,568 |
| |||||||||||
Douglas R. Bettinger | 12,074 | 18,111 | 17,152 |
|
15,508 |
|
|
23,262 |
| |||||||||||
Richard A. Gottscho | 12,074 | 18,111 | 17,152 |
|
18,610 |
|
|
27,915 |
| |||||||||||
Sarah A. O’Dowd | 6,278 | 9,417 | 8,918 |
(1) | Dr. Meikle did not participate in the 2015/2017 LTIP because his employment with the Company commenced September 1, 2017. |
Calendar Year 20162018 LTIP Awards
Calendar year 20162018 decisions for the 2016/20182018/2020 long-term incentive program.On March 1, 2016,2018, the committee made a grant under the 2016/20182018/2020 long-term incentive program, of Market-BasedMarket-based PRSUs, stock options, and service-based RSUs on the terms set forth in Figure 21 above23 with a combined value equal to the NEO’s total target award opportunity, as shown in the following table.below.
Figure 26. 2016/201828. 2018/2020 LTIP Awards
Named Executive Officer | Target Award Opportunity ($) | Market- Based PRSUs Award (1) (#) | Stock Options Award (#) | Service- Based RSUs Award (#) |
Target Award Opportunity ($) |
Market- based PRSUs Award (1) (#) |
Stock Options Award (#) |
Service- based RSUs Award (#) | ||||||||||||||||||||||||
Martin B. Anstice | 7,500,000 | 54,253 | 65,103 | 32,552 |
|
9,000,000 |
|
|
23,687 |
|
|
18,948 |
|
|
18,950 |
| ||||||||||||||||
Timothy M. Archer | 4,000,000 | 28,935 | 34,722 | 17,361 |
|
5,000,000 |
|
|
13,159 |
|
|
10,524 |
|
|
10,527 |
| ||||||||||||||||
Douglas R. Bettinger | 2,750,000 | 19,892 | 23,871 | 11,935 |
|
2,250,000 |
|
|
5,921 |
|
|
4,736 |
|
|
4,737 |
| ||||||||||||||||
Richard A. Gottscho | 3,250,000 | 23,509 | 28,209 | 14,105 |
|
2,500,000 |
|
|
6,579 |
|
|
5,260 |
|
|
5,263 |
| ||||||||||||||||
Sarah A. O’Dowd | 1,400,000 | 10,127 | 12,150 | 6,076 | ||||||||||||||||||||||||||||
Scott G. Meikle |
|
1,250,000 |
|
|
3,289 |
|
|
2,628 |
|
|
2,631 |
|
(1) | The number of |
Employment / Change in Control Arrangements
The Company enters into employment / change in control agreements to help attract and retain our NEOs and believes
that these agreements facilitate a smooth transaction and transition planning in connection with change in control events. Because Mr. Anstice’s prior agreement terminated in December 2014 and the committee wanted to align the terms and dates of all executive agreements, effectiveEffective January 2015,2018, the Company entered into new three-year term employment agreements with Messrs. Anstice, Archer, and Bettinger and Dr. Gottscho, and a new change in control agreement with Ms. O’Dowd.Dr. Meikle. The employment agreements generally provide for designated payments in the event of an involuntary termination of employment, death or disability, as such terms are defined in the applicable agreements. The employment agreements, and also the change in control agreements, generally provide for designated payments in the case of a change in control when coupled with an involuntary termination (i.e., a double trigger is required before payment is made due to a change in control), as such terms are defined in the applicable agreements.
For additional information about these arrangements and detail about post-termination payments under these arrangements, see the“Potential Payments upon Termination or Change in Control” section below.
Other Benefits Not Available to All Employees
Elective Deferred Compensation Plan
The Company maintains an elective deferred compensation planElective Deferred Compensation Plan that allows eligible employees (including all of the NEOs) to voluntarily defer receipt of all or a portion of base salary and certain incentive compensation payments until a date or dates elected by the participating employee. This allows the employee to defer taxes on designated compensation amounts. In addition, the Company provides a limited Company contribution to the plan for all eligible employees.
Supplemental Health and Welfare
We provide certain health and welfare benefits not generally available to other employees, including the payment of premiums for supplemental long-term disability insurance and Company-provided coverage in the amount of $1 million for both life and accidental death and dismemberment insurance for all NEOs. Until January 1, 2013, the Company also provided an executive medical, dental, and vision reimbursement program that reimbursed NEOs’ cost of medical, dental, and vision expenses in excess of the regular employee plans through the end of 2012.
We also provide post-retirement medical and dental insurance coverage for eligible former executive officers under our Retiree Health Plans, subject to certain eligibility requirements. The program was closed to executive officers who joined the Company or became executive officers through promotion effective on or after January 1, 2013. We have an independent actuarial valuation of post-retirement benefits for eligible NEOs conducted annually in accordance with
generally accepted accounting principles. The most recent valuation was conducted in June 20162018 and reflected the following retirement benefit obligation for the NEOs:NEOs as shown below.
Figure 27.29. NEO Post-Retirement Benefit Obligations
Named Executive Officer | As of | |||
Martin B. Anstice | 704,000 | |||
Timothy M. Archer | 749,000 | |||
Douglas R. Bettinger(1) | — | |||
Richard A. Gottscho | 648,000 | |||
Scott G. Meikle (1) | — |
(1) | Mr. Bettinger |
IV. TAX AND ACCOUNTING CONSIDERATIONS
Deductibility of Executive Compensation
SectionPrior to 2018, section 162(m) of the Internal Revenue Code of 1986, as amended, or the “Code,” imposesimposed limitations on the deductibility for federal income tax purposes of compensation in excess of $1 million paid to our chief executive officer, and any of our three other most highly compensated executive officers (other than our chief financial officer) in a single tax year. Generally,year unless the compensation in excess of $1 million may only be deducted if it is qualified as “performance-based compensation” within the meaning of the Code.
The committee monitorsconsiders a number of factors, including the application of section 162(m) and the associated Treasury regulations and considers the advisability of qualifying our executive compensation for deductibility of such compensation. The committee’s policy iscompensation when making compensation decisions and retains the discretion to qualify our executiveaward compensation for deductibility under applicable tax laws to the extent practicable and where the committee believeseven if it is in the best interests of the Company and the Company’s stockholders.
When we design our executive compensation programs, we take into account whether a particular form of compensation will qualify as “performance-based” for purposes of section 162(m).
To facilitate the deductibility of compensation payments under section 162(m):
The annual program awards to our NEOs are generally administrated under the AIP and intended to qualify for deductibility under section 162(m) to the extent practicable.
Consistent with the EIP or SIP and the regulations under section 162(m), compensation income realized upon the exercise of stock options generally will be deductible because the awards are granted by a committee whose members are outside directors and the other conditions of the 162(m) are satisfied. However, compensation associated with RSUs may not be deductible unless vesting is based on specific performance goals (such as with the Market-Based PRSUs) and the other conditions of the EIP or SIP (as applicable) are satisfied. Therefore, compensation income realized upon the vesting of service-based RSUs or upon the vesting of equity awards not meeting the conditions required by the EIP or SIP are not deductible to the Company to the extent that the 162(m) compensation threshold is exceeded.deductible.
Taxation of “Parachute” Payments
Sections 280G and 4999 of the Code provide that “disqualified individuals” within the meaning of the Code (which generally includes certain officers, directors and employees of the Company) may be subject to additional tax if they receive payments or benefits in connection with a change in control of the Company that exceed certain prescribed limits. The Company or its successor may also forfeit a deduction on the amounts subject to this additional tax.
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We did not provide any of our executive officers, any director, or any other service provider with a “gross-up”“gross-up” or other reimbursement payment for any tax liability that the individual might owe as a result of the application of sections 280G or 4999 during fiscal year 2016,2018, and we have not agreed and are not otherwise obligated to provide any individual with such a “gross-up”“gross-up” or other reimbursement as a result of the application of sections 280G and 4999.
Internal Revenue Code Section 409A
Section 409A of the Code imposes significant additional taxes on an executive officer, director, or service provider that receivesnon-compliant “deferred compensation” that is within the scope of section 409A. Among other things, section 409A potentially applies to the cash awards under the LTIP, the Elective Deferred Compensation Plan, certain equity awards, and severance arrangements.
To assist our employees in avoiding additional taxes under section 409A, we have structured the LTIP, the Elective Deferred Compensation Plan, and our equity awards in a manner intended to qualify them for exclusion from, or compliance with, section 409A.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standards Board Accounting Standards Codification TopicASC 718 or “ASC 718,” for accounting for our stock options and other stock-based awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock option grants and other equity awards using a variety of assumptions. This calculation is performed for accounting purposes. ASC 718 also requires companies to recognize the compensation cost of stock option
grants and other stock-based awards in their income statements over the period that an employee is required to render service in exchange for the option or other equity award.
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Lam Research Corporation 2018 Proxy Statement | 29 |
The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of SEC RegulationS-K. Based on this review and discussion, the compensation committee has recommended to the board of directorsBoard that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form10-K.
This Compensation Committee Report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The report shall not be deemed soliciting material.
MEMBERS OF THE COMPENSATION COMMITTEE
Youssef A.El-Mansy
Catherine P. Lego (Chair)
Abhijit Y. Talwalkar
Compensation Committee Interlocks and Insider Participation
None of the compensation committee members has ever been an officer or employee of Lam Research. No interlocking relationship exists as of the date of this proxy statement or existed during fiscal year 20162018 between any member of our compensation committee and any member of any other company’s board of directors or compensation committee.
The following tables (Figures 28-33)30-35) show compensation information for our named executive officers:
Figure 28.30. Summary Compensation Table
Summary Compensation Table | ||||||||||||||||||||||||||||||||
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Options Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||||||||||||||
Martin B. Anstice President and Chief Executive Officer | 2016 | 937,789 | — | 6,175,315 | 1,224,848 | 2,207,558 | (7) | 10,521 | 10,556,031 | |||||||||||||||||||||||
2015 | 906,646 | — | 5,849,027 | 558,635 | 3,839,904 | (8) | 10,527 | 11,164,739 | ||||||||||||||||||||||||
2014 | 803,846 | — | 8,298,569 | 897,137 | 4,978,689 | (9) | 30,977 | 15,009,218 | ||||||||||||||||||||||||
Timothy M. Archer Executive Vice President and | 2016 | 624,061 | — | 3,293,501 | 653,260 | 1,079,250 | (7) | 10,689 | 5,660,761 | |||||||||||||||||||||||
2015 | 604,431 | — | 3,032,808 | 289,658 | 2,114,132 | (10) | 10,543 | 6,051,572 | ||||||||||||||||||||||||
2014 | 580,769 | 1,000,000 | (5) | 3,830,003 | 414,012 | 3,034,681 | (11) | 30,521 | 8,889,985 | |||||||||||||||||||||||
Douglas R. Bettinger Executive Vice President and | 2016 | 548,827 | — | 2,264,175 | 449,109 | 771,574 | (7) | 8,080 | 4,041,765 | |||||||||||||||||||||||
2015 | 528,692 | — | 2,166,214 | 206,870 | 1,450,547 | (12) | 8,017 | 4,360,340 | ||||||||||||||||||||||||
2014 | 494,231 | — | 3,191,636 | 344,994 | 1,484,487 | (13) | 22,961 | 5,538,309 | ||||||||||||||||||||||||
Richard A. Gottscho Executive Vice President, | 2016 | 545,296 | 9,600 | (6) | 2,675,862 | 606,262 | 771,574 | (7) | 9,082 | 4,617,676 | ||||||||||||||||||||||
2015 | 528,692 | 5,867 | (6) | 2,599,550 | 312,531 | 1,482,521 | (14) | 9,398 | 4,938,559 | |||||||||||||||||||||||
2014 | 475,000 | — | 3,191,636 | 441,128 | 2,109,623 | (15) | 23,059 | 6,240,446 | ||||||||||||||||||||||||
Sarah A. O’Dowd Senior Vice President,Chief Legal Officer and Secretary | 2016 | 434,488 | — | 1,152,683 | 261,125 | 542,959 | (7) | 7,259 | 2,398,514 | |||||||||||||||||||||||
2015 | 418,077 | — | 1,126,410 | 135,357 | 956,427 | (16) | 7,551 | 2,643,822 | ||||||||||||||||||||||||
2014 | 408,077 | — | 1,659,629 | 229,365 | 1,371,075 | (17) | 26,364 | 3,694,509 |
Summary Compensation Table | ||||||||||||||||||||||||||||||||
Name and Principal Position | Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) (3) | Total ($) | ||||||||||||||||||||||||
Martin B. Anstice
| 2018 | 1,001,442 | — | 7,526,050 | 1,080,493 | 3,229,875 | (4) | 10,785 | 12,848,645 | |||||||||||||||||||||||
2017 | 969,808 | — | 7,023,914 | 758,314 | 2,396,304 | (5) | 10,541 | 11,158,881 | ||||||||||||||||||||||||
2016 | 937,789 | — | 6,175,315 | 1,224,848 | 2,207,558 | (6) | 10,521 | 10,556,031 | ||||||||||||||||||||||||
Timothy M. Archer President and Chief Operating Officer | 2018 | 674,922 | — | 4,180,920 | 600,122 | 1,599,068 | (4) | 9,856 | 7,064,888 | |||||||||||||||||||||||
2017 | 646,945 | — | 3,950,881 | 426,531 | 1,165,193 | (5) | 11,301 | 6,200,851 | ||||||||||||||||||||||||
2016 | 624,061 | — | 3,293,501 | 653,260 | 1,079,250 | (6) | 10,689 | 5,660,761 | ||||||||||||||||||||||||
Douglas R. Bettinger Chief Financial Officer | 2018 | 586,874 | — | 1,881,292 | 270,066 | 914,560 | (4) | 9,123 | 3,661,915 | |||||||||||||||||||||||
2017 | 572,561 | — | 2,414,365 | 260,640 | 849,190 | (5) | 7,983 | 4,104,739 | ||||||||||||||||||||||||
2016 | 548,827 | — | 2,264,175 | 449,109 | 771,574 | (6) | 8,080 | 4,041,765 | ||||||||||||||||||||||||
Richard A. Gottscho Executive Vice President, Corporate Chief Technology Officer | 2018 | 567,324 | 5,867 | (7) | 2,090,283 | 316,208 | 1,072,242 | (4) | 9,384 | 4,061,308 | ||||||||||||||||||||||
2017 | 559,837 | 6,171 | (7) | 2,853,402 | 362,059 | 833,015 | (5) | 9,307 | 4,623,791 | |||||||||||||||||||||||
2016 | 545,296 | 9,600 | (7) | 2,675,862 | 606,262 | 771,574 | (6) | 9,082 | 4,617,676 | |||||||||||||||||||||||
Scott G. Meikle Senior Vice President, Global Customer Operations | 2018 | 344,115 | — | 4,089,102 | (8) | 149,859 | 227,254 | (4) | 8,797 | 4,819,127 | ||||||||||||||||||||||
2017 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
2016 | — | — | — | — | — | — | — |
(1) | The amounts shown in this column represent the value of service-based and market-based |
(2) | The amounts shown in this column represent the value of the stock option awards granted, under the LTIP, |
Continues on next page u
Figure 29. FY2016 All Other Compensation Table
All Other Compensation Table for Fiscal Year 2016 | ||||||||||||||||||||
Company Matching the Company’s | Company ($) | Company Paid Life Insurance Premiums (2) ($) | Company Contribution to the Elective Deferred Compensation Plan ($) | Total ($) | ||||||||||||||||
Martin B. Anstice | 8,038 | — | — | 2,483 | 10,521 | |||||||||||||||
Timothy M. Archer | 8,189 | — | — | 2,500 | 10,689 | |||||||||||||||
Douglas R. Bettinger | 8,080 | — | — | — | 8,080 | |||||||||||||||
Richard A. Gottscho | 7,908 | 1,174 | — | — | 9,082 | |||||||||||||||
Sarah A. O’Dowd | 4,572 | — | 187 | 2,500 | 7,259 |
Figure 30. FY2016 Grants of Plan-Based Awards
Grants of Plan-Based Awards for Fiscal Year 2016 | ||||||||||||||||||||||||||||||||||||||
Estimated Future Payouts Under Non- Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||||||||||||||||||
Name | Award Type | Grant Date | Approved Date | Target ($)(1) | Maximum ($)(1) | Target (#)(2) | Maximum (#)(2) | or Units (#) | Options (#) | Awards ($/Sh) | Awards ($)(3) | |||||||||||||||||||||||||||
Martin B. Anstice | Annual Incentive Program | N/A | 2/18/16 | 1,440,000 | 3,240,000 | — | — | — | — | — | — | |||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||
Market-Based PRSUs | 3/1/16 | 2/18/16 | 54,253 | (4) | 81,379 | (4) | — | — | — | 3,829,177 | ||||||||||||||||||||||||||||
Service-Based RSUs | 3/1/16 | 2/18/16 | — | — | 32,552 | (5) | — | — | 2,346,138 | |||||||||||||||||||||||||||||
Stock Options | 3/1/16 | 2/18/16 | — | — | — | 65,103 | (6) | 75.57 | 1,224,848 | |||||||||||||||||||||||||||||
Timothy M. Archer | Annual Incentive Program | N/A | 2/17/16 | 700,194 | 1,575,437 | — | — | — | — | — | — | |||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||
Market-Based PRSUs | 3/1/16 | 2/17/16 | 28,935 | (4) | 43,402 | (4) | — | — | — | 2,042,232 | ||||||||||||||||||||||||||||
Service-Based RSUs | 3/1/16 | 2/17/16 | — | — | 17,361 | (5) | — | — | 1,251,269 | |||||||||||||||||||||||||||||
Stock Options | 3/1/16 | 2/17/16 | — | — | — | 34,722 | (6) | 75.57 | 653,260 | |||||||||||||||||||||||||||||
Douglas R. Bettinger | Annual Incentive Program | N/A | 2/17/16 | 510,300 | 1,148,175 | — | — | — | — | — | — | |||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||
Market-Based PRSUs | 3/1/16 | 2/17/16 | 19,892 | (4) | 29,838 | (4) | — | — | — | 1,403,977 | ||||||||||||||||||||||||||||
Service-Based RSUs | 3/1/16 | 2/17/16 | — | — | 11,935 | (5) | — | — | 860,198 | |||||||||||||||||||||||||||||
Stock Options | 3/1/16 | 2/17/16 | — | — | — | 23,871 | (6) | 75.57 | 449,109 | |||||||||||||||||||||||||||||
Richard A. Gottscho | Annual Incentive Program | N/A | 2/17/16 | 500,580 | 1,126,305 | — | — | — | — | — | — | |||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||
Market-Based PRSUs | 3/1/16 | 2/17/16 | 23,509 | (4) | 35,263 | (4) | — | — | — | 1,659,265 | ||||||||||||||||||||||||||||
Service-Based RSUs | 3/1/16 | 2/17/16 | — | — | 14,105 | (5) | — | — | 1,016,597 | |||||||||||||||||||||||||||||
Stock Options | 3/1/16 | 2/17/16 | — | — | — | 28,209 | (6) | 75.57 | 606,262 | |||||||||||||||||||||||||||||
Sarah A. O’Dowd | Annual Incentive Program | N/A | 2/17/16 | 359,100 | 807,975 | — | — | — | — | — | — | |||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||
Market-Based PRSUs | 3/1/16 | 2/17/16 | 10,127 | (4) | 15,190 | (4) | — | — | — | 714,764 | ||||||||||||||||||||||||||||
Service-Based RSUs | 3/1/16 | 2/17/16 | — | — | 6,076 | (5) | — | — | 437,919 | |||||||||||||||||||||||||||||
Stock Options | 3/1/16 | 2/17/16 | — | — | — | 12,150 | (6) | 75.57 | 261,125 |
(3) | Please refer to “FY2018 All Other Compensation Table” which immediately follows this table, for additional information. |
(4) | Represents the amount earned by and subsequently paid under the calendar year 2017 AIP. |
(5) | Represents the amount earned by and subsequently paid under the calendar year 2016 AIP. |
(6) | Represents the amount earned by and subsequently paid under the calendar year 2015 AIP. |
(7) | Represents patent awards. |
(8) | Represents grant of service-based RSUs and Market-based PRSUs under the LTIP and a new hire grant of service-based RSUs. |
Continues on next page u
Lam Research Corporation 2018 Proxy Statement | 31 |
Figure 31. FY2018 All Other Compensation Table
All Other Compensation Table for Fiscal Year 2018 | ||||||||||||||||||||
Company Matching Contribution to the Company’s Section 401(k) Plan ($) | Company Paid Long-Term Disability Insurance Premiums (1) ($) | Company Paid Life Insurance Premiums (2) ($) | Company Contribution to the Elective Deferred Compensation Plan ($) | Total ($) | ||||||||||||||||
Martin B. Anstice |
| 8,285 |
|
| — |
|
| — |
|
| 2,500 |
|
| 10,785 |
| |||||
Timothy M. Archer |
| 7,356 |
|
| — |
|
| — |
|
| 2,500 |
|
| 9,856 |
| |||||
Douglas R. Bettinger |
| 8,252 |
|
| — |
|
| — |
|
| 871 |
|
| 9,123 |
| |||||
Richard A. Gottscho |
| 8,250 |
|
| 1,134 |
|
| — |
| �� |
| — |
|
| 9,384 |
| ||||
Scott G. Meikle |
| 8,797 |
|
| — |
|
| — |
|
| — |
|
| 8,797 |
|
(1) | Represents the portion of supplemental long-term disability insurance premiums paid by Lam. |
(2) | Represents the portion of life insurance premiums paid by Lam in excess of thenon-discriminatory life insurance benefits provided to all Company employees. |
Figure 32. FY2018 Grants of Plan-Based Awards
Grants of Plan-Based Awards for Fiscal Year 2018 | ||||||||||||||||||||||||||||||||||||||||
Award Type | Grant |
| Approved |
Estimated Future Equity Incentive |
Estimated Future | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($) (3) | |||||||||||||||||||||||||||||||
Name | Target ($) (1) | Maximum ($)(1) | Target (#)(2) | Maximum (#)(2) | ||||||||||||||||||||||||||||||||||||
Annual Incentive Program | N/A | 2/7/18 | 1,537,500 | 3,459,375 | ||||||||||||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||||
Martin B. Anstice | Market-based PRSUs | 3/1/18 | 2/7/18 | 23,687 | (4) | 35,530 | (4) | 4,030,343 | ||||||||||||||||||||||||||||||||
Service-based RSUs | 3/1/18 | 2/7/18 | 18,950 | (5) | 3,495,707 | |||||||||||||||||||||||||||||||||||
Stock Options | 3/1/18 | 2/7/18 | 18,948 | (6) | 190.07 | 1,080,493 | ||||||||||||||||||||||||||||||||||
Annual Incentive Program | N/A | 2/6/18 | 860,523 | 1,936,177 | ||||||||||||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||||
Timothy M. Archer | Market-based PRSUs | 3/1/18 | 2/6/18 | 13,159 | (4) | 19,738 | (4) | 2,239,004 | ||||||||||||||||||||||||||||||||
Service-based RSUs | 3/1/18 | 2/6/18 | 10,527 | (5) | 1,941,916 | |||||||||||||||||||||||||||||||||||
Stock Options | 3/1/18 | 2/6/18 | 10,524 | (6) | 190.07 | 600,122 | ||||||||||||||||||||||||||||||||||
Annual Incentive Program | N/A | 2/6/18 | 533,493 | 1,200,359 | ||||||||||||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||||
Douglas R. Bettinger | Market-based PRSUs | 3/1/18 | 2/6/18 | 5,921 | (4) | 8,881 | (4) | 1,007,458 | ||||||||||||||||||||||||||||||||
Service-based RSUs | 3/1/18 | 2/6/18 | 4,737 | (5) | 873,834 | |||||||||||||||||||||||||||||||||||
Stock Options | 3/1/18 | 2/6/18 | 4,736 | (6) | 190.07 | 270,066 | ||||||||||||||||||||||||||||||||||
Annual Incentive Program | N/A | 2/6/18 | 510,592 | 1,148,832 | ||||||||||||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||||
Richard A. Gottscho | Market-based PRSUs | 3/1/18 | 2/6/18 | 6,579 | (4) | 9,868 | (4) | 1,119,417 | ||||||||||||||||||||||||||||||||
Service-based RSUs | 3/1/18 | 2/6/18 | 5,263 | (5) | 970,866 | |||||||||||||||||||||||||||||||||||
Stock Options | 3/1/18 | 2/6/18 | 5,260 | (6) | 190.07 | 316,208 | ||||||||||||||||||||||||||||||||||
Annual Incentive Program | N/A | 2/6/18 | 365,500 | 822,375 | ||||||||||||||||||||||||||||||||||||
LTIP-Equity | ||||||||||||||||||||||||||||||||||||||||
Scott G. Meikle | Market-based PRSUs | 3/1/18 | 2/6/18 | 3,289 | (4) | 4,933 | (4) | 559,623 | ||||||||||||||||||||||||||||||||
Service-based RSUs | 3/1/18 | 2/6/18 | 2,631 | (5) | 485,341 | |||||||||||||||||||||||||||||||||||
Stock Options | 3/1/18 | 2/6/18 | 2,628 | (6) | 190.07 | 149,859 | ||||||||||||||||||||||||||||||||||
New Hire | 9/1/17 | 7/31/17 | 18,827 | (7) | 3,044,138 |
(1) | The |
(2) | The amounts reported represent the target and maximum number of Market-based PRSUs that may vest on the terms described in “Executive Compensation and Other Information – Compensation Discussion and Analysis” above. The number of shares that may be earned is equal to 0% to 150% of target. |
(3) | The amounts reported represent the fair value of Market-based PRSU, service-based RSU, and stock option awards granted during fiscal year 2018 in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of awards granted during fiscal year 2018 are set forth in Note 4 to the Consolidated Financial Statements of the Company’s Annual Report on Form10-K for the fiscal year ended June 24, 2018. |
(4) | The Market-based PRSUs will vest on March 1, |
(5) | The RSUs will vest in three equal installments on March 1 of each of |
(6) | The stock options will become exercisable in three equal installments on March 1 of each of |
(7) | The RSUs will vest in three equal installments on September 1 of each of 2018, 2019, and 2020, subject to continued employment. |
Figure 33. FYE2018 Outstanding Equity Awards
Outstanding Equity Awards at 2018 FiscalYear-End | ||||||||||||||||||||||||||||||||
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 of Shares or That Have | Equity (#) | Equity Plan Awards: | ||||||||||||||||||||||||
Martin B. Anstice | 18,948 | (2) | 190.07 | 3/1/25 | ||||||||||||||||||||||||||||
18,950 | (3) | 3,310,565 | ||||||||||||||||||||||||||||||
23,687 | (4) | 4,138,119 | ||||||||||||||||||||||||||||||
9,209 | (5) | 18,419 | (5) | 119.67 | 3/1/24 | |||||||||||||||||||||||||||
18,421 | (6) | 3,218,149 | ||||||||||||||||||||||||||||||
34,539 | (7) | 6,033,963 | ||||||||||||||||||||||||||||||
43,402 | (8) | 21,701 | (8) | 75.57 | 3/1/23 | |||||||||||||||||||||||||||
10,851 | (9) | 1,895,670 | ||||||||||||||||||||||||||||||
54,253 | (10) | 9,477,999 | ||||||||||||||||||||||||||||||
Timothy M. Archer | 10,524 | (2) | 190.07 | 3/1/25 | ||||||||||||||||||||||||||||
10,527 | (3) | 1,839,067 | ||||||||||||||||||||||||||||||
13,159 | (4) | 2,298,877 | ||||||||||||||||||||||||||||||
5,180 | (5) | 10,360 | (5) | 119.67 | 3/1/24 | |||||||||||||||||||||||||||
10,362 | (6) | 1,810,241 | ||||||||||||||||||||||||||||||
19,428 | (7) | 3,394,072 | ||||||||||||||||||||||||||||||
11,574 | (8) | 11,574 | (8) | 75.57 | 3/1/23 | |||||||||||||||||||||||||||
5,787 | (9) | 1,010,989 | ||||||||||||||||||||||||||||||
28,935 | (10) | 5,054,945 | ||||||||||||||||||||||||||||||
13,026 | (11) | 80.60 | 2/11/22 | |||||||||||||||||||||||||||||
Douglas R. Bettinger | 4,736 | (2) | 190.07 | 3/1/25 | ||||||||||||||||||||||||||||
4,737 | (3) | 827,554 | ||||||||||||||||||||||||||||||
5,921 | (4) | 1,034,399 | ||||||||||||||||||||||||||||||
3,165 | (5) | 6,331 | (5) | 119.67 | 3/1/24 | |||||||||||||||||||||||||||
6,332 | (6) | 1,106,200 | ||||||||||||||||||||||||||||||
11,872 | (7) | 2,074,038 | ||||||||||||||||||||||||||||||
15,914 | (8) | 7,957 | (8) | 75.57 | 3/1/23 | |||||||||||||||||||||||||||
3,979 | (9) | 695,131 | ||||||||||||||||||||||||||||||
19,892 | (10) | 3,475,132 | ||||||||||||||||||||||||||||||
9,303 | (11) | 80.60 | 2/11/22 | |||||||||||||||||||||||||||||
9,658 | (12) | 51.76 | 2/18/21 | |||||||||||||||||||||||||||||
7,242 | (13) | 51.76 | 2/18/21 |
Continues on next page u
Lam Research Corporation |
Figure 31. FYE2016 Outstanding Equity Awards
|
| |||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Outstanding Equity Awards at 2018 FiscalYear-End | ||||||||||||||||||||||||||||||||
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 of Shares or That Have | Equity (#) | Equity Plan Awards: | ||||||||||||||||||||||||
Richard A. Gottscho | 5,260 | (2) | 190.07 | 3/1/25 | ||||||||||||||||||||||||||||
5,263 | (3) | 919,446 | ||||||||||||||||||||||||||||||
6,579 | (4) | 1,149,351 | ||||||||||||||||||||||||||||||
7,483 | (5) | 119.67 | 3/1/24 | |||||||||||||||||||||||||||||
7,484 | (6) | 1,307,455 | ||||||||||||||||||||||||||||||
14,031 | (7) | 2,451,216 | ||||||||||||||||||||||||||||||
9,403 | (8) | 75.57 | 3/1/23 | |||||||||||||||||||||||||||||
4,702 | (9) | 821,439 | ||||||||||||||||||||||||||||||
23,509 | (10) | 4,107,022 | ||||||||||||||||||||||||||||||
Scott G. Meikle | 2,628 | (2) | 190.07 | 3/1/25 | ||||||||||||||||||||||||||||
2,631 | (3) | 459,636 | ||||||||||||||||||||||||||||||
3,289 | (4) | 574,588 | ||||||||||||||||||||||||||||||
18,827 | (14) | 3,289,077 |
(1) | Calculated by multiplying the number of unvested |
(2) | The stock options were granted on March 1, |
(3) | The RSUs were granted on March 1, |
(4) | The |
(5) | The stock options were granted on |
(6) | The RSUs were granted on |
(7) | The |
(8) | The stock options were granted on |
(9) | The RSUs were granted on |
(10) | The Market-based PRSUs were granted on March 1, 2016. The Market-based PRSUs will vest on March 1, 2019, subject to continued employment. The Market-based PRSUs are shown at their target amount. The actual conversion of the |
(11) | The |
(12) | The stock options were granted on February 18, 2014. |
The stock options were granted as part of the Gap Year Award on February 18, 2014. As of the |
The RSUs were granted on |
Continues on next page u
Figure 32. FY201634. FY2018 Option Exercises and Stock Vested
Option Exercises and Stock Vested for Fiscal Year 2016(1) | ||||||||||||||||||||||||||||||||
Option Exercises and Stock Vested for Fiscal Year 2018(1) | Option Exercises and Stock Vested for Fiscal Year 2018(1) | |||||||||||||||||||||||||||||||
Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||
Martin B. Anstice | — | — | 97,623 | 6,576,160 |
| 69,070 |
|
| 10,182,365 |
|
| 94,036 |
|
| 16,083,228 |
| ||||||||||||||||
Timothy M. Archer | — | — | 45,691 | 3,075,870 |
| 37,650 |
|
| 4,961,765 |
|
| 49,325 |
|
| 8,446,939 |
| ||||||||||||||||
Douglas R. Bettinger | — | — | 37,386 | 2,518,929 |
| — |
|
| — |
|
| 34,542 |
|
| 5,902,366 |
| ||||||||||||||||
Richard A. Gottscho | — | — | 38,213 | 2,572,030 |
| 16,866 |
|
| 2,083,871 |
|
| 41,321 |
|
| 7,058,235 |
| ||||||||||||||||
Sarah A. O’Dowd | — | — | 19,440 | 1,309,795 | ||||||||||||||||||||||||||||
Scott G. Meikle |
| — |
|
| — |
|
| — |
|
| — |
|
(1) | The table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the NEOs during fiscal year |
Figure 33. FY2016 35. FY2018Non-Qualified Deferred Compensation
Non-Qualified Deferred Compensation for Fiscal Year 2016 | ||||||||||||||||||||||||||||||||
Non-Qualified Deferred Compensation for Fiscal Year 2018 | Non-Qualified Deferred Compensation for Fiscal Year 2018 | |||||||||||||||||||||||||||||||
Name | Executive Contributions in FY 2016 ($)(1) | Registrant Contributions in FY 2016 ($)(2) | Aggregate Earnings in FY 2016 ($)(3) | Aggregate Balance at FYE 2016 ($)(4) | Executive Contributions in FY 2018 ($)(1) | Registrant Contributions in FY 2018 ($)(2) | Aggregate Earnings in FY 2018 ($) (3) | Aggregate Balance at FYE 2018 ($)(4) | ||||||||||||||||||||||||
Martin B. Anstice | 84,344 | 2,483 | (92,757 | ) | 4,612,613 |
| 90,070 |
|
| 2,500 |
|
| 553,374 |
|
| 6,356,301 |
| |||||||||||||||
Timothy M. Archer | 425,922 | 2,500 | (107,946 | ) | 3,963,166 |
| 602,436 |
|
| 2,500 |
|
| 288,867 |
|
| 5,746,877 |
| |||||||||||||||
Douglas R. Bettinger | 263 | — | (113,906 | ) | 1,431,125 |
| 486,615 |
|
| 871 |
|
| 230,220 |
|
| 2,502,941 |
| |||||||||||||||
Richard A. Gottscho | — | — | 31,784 | 1,933,263 |
| — |
|
| — |
|
| 85,831 |
|
| 2,127,718 |
| ||||||||||||||||
Sarah A. O’Dowd | 791,006 | 2,500 | (8,947 | ) | 6,761,806 | |||||||||||||||||||||||||||
Scott G. Meikle |
| 42,615 |
|
| — |
|
| 143 |
|
| 42,758 |
|
(1) | The entire amount of each executive’s contributions in fiscal year |
(2) | Represents the amount that Lam credited to the Elective Deferred Compensation Plan, the “EDCP,” which is 3% of Executive Salary Contribution during calendar year |
(3) | The NEOs did not receive above-market or preferential earnings in fiscal year |
(4) | The fiscalyear-end balance includes |
Potential Payments upon Termination or Change in Control
The following is a summary of the employment agreements of our named executive officers.
Executive Employment Agreements
Martin B. Anstice. The Company and Mr. Anstice entered into an employment agreement, or the “agreement,” effective January 1, 2015,2018, for a term ending on December 31, 2017,2020, subject to the right of the Company or Mr. Anstice, under certain circumstances, to terminate the agreement prior to such time. This agreement replaced the prior agreement that ended on December 31, 2014.
Under the terms of the agreement, Mr. Anstice receives a base salary, which is reviewed annually and potentially
adjusted. It was initially set at the beginning of the term of the
agreement at $900,000.$990,000. Mr. Anstice is also entitled to participate in any short-term or long-term variable compensation programs offered by the Company to its executive officers generally, subject to the applicable terms and conditions of those programs and the approval of the independent members of the board,Board, and to participate in the Company’s Elective Deferred Compensation Plan. Mr. Anstice receives other benefits, such as health insurance, paid time off (as his schedule permits), and eligible benefits under other plans and programs generally applicable to executive officers of the Company.
If an Involuntary Termination (as defined in Mr. Anstice’s agreement) of Mr. Anstice’s employment occurs, other than in connection with a Change in Control (as defined in Mr. Anstice’s agreement), Mr. Anstice will be entitled to: (1) a
lump-sum cash payment equal to 18 months of his then-currentthen-
Continues on next page u
Lam Research Corporation 2018 Proxy Statement | 35 |
current base salary, plus an amount equal to the average of the last five annual payments made to Mr. Anstice under the short term variable compensation program or any predecessor or successor programs (the “Short Term Program,” and such average, the “Five Year“Five-Year Average Amount”), plus an amount equal to the pro-ratapro rata amount he would have earned under the Short Term Program for the calendar year in which his employment is terminated had his employment continued until the end of such calendar year, such pro-ratapro rata portion to be calculated based on the performance results achieved under the Short Term programProgram and the number of full months elapsed prior to the termination date; (2) payment of any amounts accrued as of the date of termination under any long-term, cash-based variable-compensation programs of the Company (the “Long Term Cash Programs”); (3) certain medical benefits; (4) a cash payment equal to a product of (x) a pro rata portion (based on time of service as of the date of termination) of the unvested Market-BasedMarket-based PRSU/performance-based RSU awards granted to Mr. Anstice as adjusted for the Company’s performance (calculated as set forth in the award agreements) over the time of service and (y) the closing stock price on the date of termination; and (5) vesting, as of the date of termination, of a pro rata portion of the unvested stock option or RSU awards that are not performance based granted to Mr. Anstice at least 12 months prior to the termination date.
If a Change in Control of the Company (as defined in Mr. Anstice’s agreement) occurs during the period of Mr. Anstice’s employment, and if there is an Involuntary Termination of Mr. Anstice’s employment either in contemplation of or within the 18 months following the Change in Control, Mr. Anstice will be entitled to: alump-sum cash payment equal to 24 months of Mr. Anstice’s then-current base salary, plus an amount equal to two times the Five YearFive-Year Average Amount, plus an additional amount equal to a pro rata amount (based on the number of full months worked during the calendar year during which the termination occurs) of the Five YearFive-Year Average Amount; certain medical benefits; conversion of any Market-BasedMarket-based PRSUs/performance-based RSUs outstanding as of the Change in Control into a cash award payable at time of termination equal to the sum of: (x) a pro rata portion (based on time of service as of the date of termination) of the unvested Market-BasedMarket-based PRSU/performance-based RSU awards granted to Mr. Anstice as adjusted for the Company’s performance (calculated as set forth in the award agreements) over the time of service and (y) the remainder of thepro-rata portion of unvested Market-BasedMarket-based PRSU/performance-based RSU awards at target; vesting, as of the date of termination, of the unvested stock option or RSU awards that are not performance-based granted to Mr. Anstice prior to the Change in Control; and payment of any amounts accrued as of the Change in Control under any then existingthen-existing Long Term Cash Programs, plus an amount equal to the remaining target amount under any then existingthen-existing Long Term Cash Programs.
If Mr. Anstice’s employment is terminated due to disability or in the event of his death, Mr. Anstice (or his estate) will be entitled to: (1) the pro rata amount he would have earned under the Short Term Program for the calendar year in which his employment is terminated had his employment continued until the end of such calendar year, such pro rata portion to be calculated based on the performance results achieved under the Short Term Program and the number of full months elapsed prior to the termination date; (2) payment of any amounts accrued as of the date of termination under any then existingthen-existing Long Term Cash Programs; (3) certain medical benefits; (4) vesting, as of the date of termination, of 50% of the unvested stock option, and RSU awards, which are not performance based, granted to Mr. Anstice prior to the date of termination (or a pro rata amount, based on period of service, if greater than 50%); and (5) vesting, as of the date of termination, of 50% of the Market-BasedMarket-based PRSU/performance-based RSU awards (or a pro rata amount, based on period of service, if greater than 50%) as adjusted for the Company’s performance during the service period (in either case) granted to Mr. Anstice prior to the date of termination.
If Mr. Anstice voluntarily resigns, he will be entitled to no additional benefits (except as he may be eligible for under the Company’s Retiree Health Plans); stock options, RSUs and Market-BasedMarket-based PRSUs/performance-based RSUs will cease to vest on the termination date; and stock options will be cancelled unless they are exercised within 90 days after the termination date. All RSUs and Market-BasedMarket-based PRSUs/performance-based RSUs will be cancelled on the termination date.
Mr. Anstice’s agreement also subjects Mr. Anstice to customary confidentiality andnon-competition obligations during the term of the agreement, the application of the Company’s compensation recovery, or clawback, policy to any compensation, andnon-solicitation obligations for a period of six months following the termination of his employment. The agreement also requires Mr. Anstice to execute a release in favor of the Company to receive the payments described above.
Timothy M. Archer. The Company and Mr. Archer entered into an employment agreement, or the “agreement,” effective January 1, 2015,2018, for a term ending on December 31, 2017,2020, subject to the right of the Company or Mr. Archer, under certain circumstances, to terminate the agreement prior to such time. The agreement replaced the employment agreement between the parties that was amended effective on June 4, 2012March 16, 2018 to reflect his latest position of President and amended on January 30, 2014.Chief Operating Officer. The terms of Mr. Archer’s agreement are substantively similar to those of Mr. Anstice’s agreement, except that Mr. Archer’s initial base salary at the beginning of the term of the agreement was set at $600,000.$668,367.
The severance terms of Mr. Archer’s agreement are generally similar to those of Mr. Anstice’s agreement, provided that (1)
Continues on next page u
Mr. Archer will receive12-months base salary instead of
18 months in the event of his Involuntary Termination; and (2) instead of a payment of the Five YearFive-Year Average Amount, he will receive a payment of 50% of the Five YearFive-Year Average Amount. The Change in Control terms of Mr. Archer’s agreement are generally similar to those of Mr. Anstice’s agreement, provided that Mr. Archer will receive18-months base salary instead of 24 months in the event of his Involuntary Termination.
Douglas R. Bettinger. The Company and Mr. Bettinger entered into an employment agreement, or the “agreement,” with a term commencing on January 1, 20152018 and ending on December 31, 2017,2020, subject to the right of the Company or Mr. Bettinger, under certain circumstances, to terminate the agreement prior to such time. The agreement replaced the employment agreement between the parties that was effective on March 11, 2013 and amended on January 30, 2014. The terms of Mr. Bettinger’s agreement are substantively similar to those of Mr. Archer’s agreement, with the following material difference: Mr. Bettinger’s initial base salary at the beginning of the term of the agreement was set at $525,000.$584,010.
The severance terms of Mr. Bettinger’s agreement are generally similar to those of Mr. Archer’s agreement, provided that in computing the Five YearFive-Year Average Amount any partial year short-term plan payments in any year shall be annualized, and if employed for less than five years, then computed based on such fewer number of years. The Change in Control terms of Mr. Bettinger’s agreement are generally similar to those of Mr. Archer’s agreement.
Richard A. GottschoGottscho.. The Company and Dr. Gottscho entered into an employment agreement, or the “agreement,” effective January 1, 2015,2018, for a term ending on December 31, 2017,2020, subject to the right of the Company or Dr. Gottscho, under certain circumstances, to terminate the agreement prior to such time. The agreement replaced the employment agreement between the parties that was effective on July 18, 2012 and amended on January 30, 2014. The terms of Dr. Gottscho’s agreement are substantively similar to those of Mr. Archer’s agreement with the following material difference: under Dr. Gottscho’s agreement, his initial base salary at the beginning of the term of the agreement was set at $525,000.$567,324. The severance and Change in Control terms of Dr. Gottscho’s agreement are also generally similar to those of Mr. Archer’s agreement.
Other Executive Agreements
The Company entered into a change in control agreement with Ms. O’DowdDr. Meikle effective January 1, 2015,2018, or the “agreement,” for a term ending on December 31, 2017,2020, subject to the right of the Company or Ms. O’Dowd,Dr. Meikle, under certain circumstances, to
terminate the agreement prior to such time. The agreement replaced a change in control agreement between the parties that was effective on July 18, 2012 and amended on January 30, 2014. The agreement provides that if a changeChange in controlControl (as defined in Ms. O’Dowd’sDr. Meikle’s agreement) of the Company occurs during the period of herhis employment under the agreement, and there is an Involuntary Termination (as defined in herhis agreement) of herhis employment, Ms. O’DowdDr. Meikle will be entitled to payments and benefits substantively similar to those contained in the change in control provisions of Mr. Archer’s agreement.
The change in control agreements containagreement contains confidentiality,non-competition, andnon-solicitation terms that are substantively similar to those of Mr. Anstice’s, Mr. Archer’s, Mr. Bettinger’s and Dr. Gottscho’s agreements, and require Ms. O’DowdDr. Meikle to execute a release in favor of the Company to receive the payments described in the previous paragraph.
Equity Plans
In addition to the above, certain of our stock plans provide for accelerated benefits after certain events. While the applicable triggers under each plan vary, these events generally include: (i)(1) a merger or consolidation in which the Company is not the surviving entity, (ii)(2) a sale of substantially all of the Company’s assets, including a liquidation or dissolution of the Company, or (iii)(3) a change in the ownership of more than 50% of our outstanding securities by tender offer or similar transaction. After a designated event, the vesting of some or all of awards granted under these plans may be immediately accelerated in full, or certain awards may be assumed, substituted, replaced, or settled in cash by a surviving corporation or its parent. The specific treatment of awards in a particular transaction will be determined by the boardBoard and/or the terms of the applicable transaction documents.
Potential Payments to Named Executive Officers upon Termination or Change in Control
The tables below summarize the potential payments to our NEOs, assuming a change in control of the Company as of the end of fiscal year 2016.2018. These amounts are calculated assuming that the employment termination or change in control occurs on the last day of fiscal year 2016,2018, June 26, 2016.24, 2018. The closing price per share of our common stock on June 24, 2016,22, 2018, which was the last trading day of fiscal year 2016,2018, was $82.28.$174.70. The short-term incentive program pro-ratapro rata amounts are calculated by multiplying the applicable pro-ratapro rata percentage by the target. Actual performance will not be known until the end of calendar year 2016. Our board has determined that, if consummated, the KLA-Tencor merger will be considered a change in control under our employment and change in control agreements (discussed above for our NEOs).2018.
Figures 34 – 38.
Potential Payments to NEOs upon Termination or Change in Control as of FYE2016
Potential Payments to Mr. Anstice upon Termination or Change in Control as of June 26, 2016 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance | — | — | — | 1,440,000 | 1,920,000 | |||||||||||||||
Short-term Incentive (5-year average) | — | — | — | 1,272,731 | 2,545,462 | |||||||||||||||
Short-term Incentive (pro rata) | — | 600,480 | — | 600,480 | 530,729 | |||||||||||||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) | — | 353,201 | — | 132,436 | 848,217 | |||||||||||||||
Service-Based Restricted Stock Units (Unvested and Accelerated) | — | 2,257,791 | — | 765,478 | 5,893,552 | |||||||||||||||
Performance-Based Restricted Stock Units (Unvested and Accelerated) | — | 10,001,015 | — | 8,221,339 | 15,037,967 | |||||||||||||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit | — | 21,447 | — | 21,447 | 21,447 | |||||||||||||||
Total | — | 13,233,934 | — | 12,453,911 | 26,797,374 |
Potential Payments to Mr. Archer upon Termination or Change in Control as of June 26, 2016 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance | — | — | 636,540 | 954,810 | ||||||||||||||||
Short-term Incentive (5-year average) | — | — | 400,156 | 1,200,469 | ||||||||||||||||
Short-term Incentive (pro rata) | — | 291,981 | — | 291,981 | 333,730 | |||||||||||||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) | — | 179,094 | — | 61,386 | 424,437 | |||||||||||||||
Service-Based Restricted Stock Units (Unvested and Accelerated) | — | 1,164,385 | — | 370,754 | 3,017,125 | |||||||||||||||
Performance-Based Restricted Stock Units (Unvested and Accelerated) | — | 4,877,944 | — | 3,930,520 | 7,458,941 | |||||||||||||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit | — | 32,170 | — | 32,170 | 32,170 | |||||||||||||||
Total | — | 6,545,574 | — | 5,723,507 | 13,421,682 |
Potential Payments to Mr. Bettinger upon Termination or Change in Control as of June 26, 2016 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance | — | — | 567,000 | 850,500 | ||||||||||||||||
Short-term Incentive (5-year average) | — | — | 284,908 | 873,652 | ||||||||||||||||
Short-term Incentive (pro rata) | — | 212,795 | — | 212,795 | 242,875 | |||||||||||||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) | — | 131,819 | — | 50,864 | 317,975 | |||||||||||||||
Service-Based Restricted Stock Units (Unvested and Accelerated) | — | 837,768 | — | 290,051 | 2,192,433 | |||||||||||||||
Performance-Based Restricted Stock Units (Unvested and Accelerated) | — | 3,780,898 | — | 3,127,940 | 5,654,060 | |||||||||||||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit | — | 24,212 | — | 24,212 | 24,212 | |||||||||||||||
Total | — | 4,987,492 | — | 4,557,770 | 10,155,707 |
Continues on next page u
Lam Research Corporation | 37 |
Potential Payments to Dr. Gottscho upon Termination or Change in Control as of June 26, 2016 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance | — | — | — | 556,200 | 834,300 | |||||||||||||||
Short-term Incentive (5-year average) | — | — | — | 255,053 | 765,158 | |||||||||||||||
Short-term Incentive (pro rata) | — | 208,742 | — | 208,742 | 212,714 | |||||||||||||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) | — | 146,895 | — | 51,211 | 349,169 | |||||||||||||||
Service-Based Restricted Stock Units (Unvested and Accelerated) | — | 961,085 | — | 312,746 | 2,507,154 | |||||||||||||||
Performance-Based Restricted Stock Units (Unvested and Accelerated) | — | 4,061,115 | — | 3,288,638 | 6,208,681 | |||||||||||||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/Retiree Health Plans | 627,000 | 627,000 | 627,000 | 627,000 | 627,000 | |||||||||||||||
Total | 627,000 | 6,004,837 | 627,000 | 5,299,590 | 11,504,176 |
Figures 36 – 40.
Potential Payments to NEOs upon Termination or Change in Control as of FYE2018
Potential Payments to Ms. O’Dowd upon Termination or Change in Control as of June 26, 2016 | ||||||||||||||||||||||||||||||||||||||||
Potential Payments to Mr. Anstice upon Termination or Change in Control as of June 24, 2018 | Potential Payments to Mr. Anstice upon Termination or Change in Control as of June 24, 2018 | |||||||||||||||||||||||||||||||||||||||
Involuntary Termination | Involuntary Termination | |||||||||||||||||||||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | |||||||||||||||||||||||||||||||
Compensation | ||||||||||||||||||||||||||||||||||||||||
Severance | — | — | — | — | 673,313 |
| — |
|
| — |
|
| — |
|
| 1,537,500 |
|
| 2,050,000 |
| ||||||||||||||||||||
Short-term Incentive (5-year average) | — | — | — | — | 560,139 |
| — |
|
| — |
|
| — |
|
| 2,139,414 |
|
| 4,278,828 |
| ||||||||||||||||||||
Short-term Incentive (pro rata) | — | — | — | — | 155,719 |
| — |
|
| 640,625 |
|
| — |
|
| 640,625 |
|
| 891,423 |
| ||||||||||||||||||||
Long-term Incentives: | ||||||||||||||||||||||||||||||||||||||||
Stock Options (Unvested and Accelerated) | — | — | — | — | 163,579 |
| — |
|
| 791,204 |
|
| — |
|
| 664,505 |
|
| 3,164,818 |
| ||||||||||||||||||||
Service-Based Restricted Stock Units (Unvested and Accelerated) | — | — | — | — | 1,129,375 | |||||||||||||||||||||||||||||||||||
Performance-Based Restricted Stock Units (Unvested and Accelerated) | — | — | — | — | 2,922,160 | |||||||||||||||||||||||||||||||||||
Service-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 2,933,737 |
|
| — |
|
| 876,186 |
|
| 8,424,383 |
| |||||||||||||||||||||||||
Performance-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 17,319,781 |
|
| — |
|
| 15,796,110 |
|
| 24,530,835 |
| |||||||||||||||||||||||||
Benefits and Perquisites | ||||||||||||||||||||||||||||||||||||||||
Health Benefit Continuation/Retiree Health Plans | 510,000 | 510,000 | 510,000 | 510,000 | 510,000 | |||||||||||||||||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit |
| — |
|
| 23,080 |
|
| — |
|
| 23,080 |
|
| 23,080 |
| |||||||||||||||||||||||||
Total | 510,000 | 510,000 | 510,000 | 510,000 | 6,114,285 |
| — |
|
| 21,708,427 |
|
| — |
|
| 21,677,420 |
|
| 43,363,367 |
|
Potential Payments to Mr. Archer upon Termination or Change in Control as of June 24, 2018 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance |
| — |
|
| — |
|
| — |
|
| 688,418 |
|
| 1,032,627 |
| |||||
Short-term Incentive(5-year average) |
| — |
|
| — |
|
| — |
|
| 532,121 |
|
| 1,596,362 |
| |||||
Short-term Incentive (pro rata) |
| — |
|
| 358,551 |
|
| — |
|
| 358,551 |
|
| 443,434 |
| |||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) |
| — |
|
| 429,360 |
|
| — |
|
| 358,097 |
|
| 1,717,441 |
| |||||
Service-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 1,624,841 |
|
| — |
|
| 479,027 |
|
| 4,660,297 |
| |||||
Performance-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 9,399,793 |
|
| — |
|
| 8,551,227 |
|
| 13,383,723 |
| |||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit |
| — |
|
| 34,620 |
|
| — |
|
| 34,620 |
|
| 34,620 |
| |||||
Total |
| — |
|
| 11,847,165 |
|
| — |
|
| 11,002,061 |
|
| 22,868,504 |
|
Potential Payments to Mr. Bettinger upon Termination or Change in Control as of June 24, 2018 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance |
| — |
|
| — |
|
| — |
|
| 592,770 |
|
| 889,155 |
| |||||
Short-term Incentive(5-year average) |
| — |
|
| — |
|
| — |
|
| 351,106 |
|
| 1,053,317 |
| |||||
Short-term Incentive (pro rata) |
| — |
|
| 222,289 |
|
| — |
|
| 222,289 |
|
| 292,588 |
| |||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) |
| — |
|
| 284,293 |
|
| — |
|
| 240,744 |
|
| 1,137,172 |
| |||||
Service-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 864,110 |
|
| — |
|
| 312,058 |
|
| 2,628,886 |
| |||||
Performance-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 6,058,295 |
|
| — |
|
| 5,648,981 |
|
| 8,358,149 |
| |||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit |
| — |
|
| 24,296 |
|
| — |
|
| 24,296 |
|
| 24,296 |
| |||||
Total |
| — |
|
| 7,453,283 |
|
| — |
|
| 7,392,244 |
|
| 14,383,563 |
|
Potential Payments to Dr. Gottscho upon Termination or Change in Control as of June 24, 2018 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance |
| — |
|
| — |
|
| — |
|
| 567,324 |
|
| 850,986 |
| |||||
Short-term Incentive(5-year average) |
| — |
|
| — |
|
| — |
|
| 376,142 |
|
| 1,128,426 |
| |||||
Short-term Incentive (pro rata) |
| — |
|
| 212,747 |
|
| — |
|
| 212,747 |
|
| 313,452 |
| |||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) |
| — |
|
| 335,977 |
|
| — |
|
| 284,504 |
|
| 1,343,909 |
| |||||
Service-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 991,947 |
|
| — |
|
| 368,792 |
|
| 3,048,340 |
| |||||
Performance-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| 7,130,669 |
|
| — |
|
| 6,668,493 |
|
| 9,806,776 |
| |||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/Retiree Health Plans |
| 648,000 |
|
| 648,000 |
|
| 648,000 |
|
| 648,000 |
|
| 648,000 |
| |||||
Total |
| 648,000 |
|
| 9,319,340 |
|
| 648,000 |
|
| 9,126,002 |
|
| 17,139,889 |
|
Potential Payments to Dr. Meikle upon Termination or Change in Control as of June 24, 2018 | ||||||||||||||||||||
Involuntary Termination | ||||||||||||||||||||
Voluntary Termination ($) | Disability or Death ($) | For Cause ($) | Not for Cause ($) | Change in Control ($) | ||||||||||||||||
Compensation | ||||||||||||||||||||
Severance |
| — |
|
| — |
|
| — |
|
| — |
|
| 645,000 |
| |||||
Short-term Incentive(5-year average) |
| — |
|
| — |
|
| — |
|
| — |
|
| 1,020,600 |
| |||||
Short-term Incentive (pro rata) |
| — |
|
| — |
|
| — |
|
| — |
|
| 283,500 |
| |||||
Long-term Incentives: | ||||||||||||||||||||
Stock Options (Unvested and Accelerated) |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| |||||
Service-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| — |
|
| — |
|
| — |
|
| 3,748,713 |
| |||||
Performance-based Restricted Stock Units (Unvested and Accelerated) |
| — |
|
| — |
|
| — |
|
| — |
|
| 559,490 |
| |||||
Benefits and Perquisites | ||||||||||||||||||||
Health Benefit Continuation/COBRA Benefit |
| — |
|
| 23,080 |
|
| — |
|
| 23,080 |
|
| 23,080 |
| |||||
Total |
| — |
|
| 23,080 |
|
| — |
|
| 23,080 |
|
| 6,280,383 |
|
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Lam Research Corporation 2018 Proxy Statement | 39 |
In accordance with SEC rules, we are providing the ratio of the annual total compensation of our Chief Executive Officer, or the CEO, to the median of the annual total compensation of our employees (other than the CEO). The fiscal year 2018 annual total compensation of our CEO, Mr. Anstice, was $12,848,645, the fiscal year 2018 annual total compensation of our median compensated employee (other than the CEO) was $95,770, and the ratio of these amounts was 134 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our human resources system of record and the methodology described below. Because 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 that reflect their compensation practices, 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.
For purposes of identifying our median compensated employee, we used our global employee population as of June 24, 2018, identified based on our human resources system of record. We used total direct compensation as our consistently applied compensation measure for such population. In this context, total direct compensation means the sum of the applicable annual base salary determined as of June 24, 2018, the incentive cash target amount payable for service in calendar year 2018, and the approved value of the annual equity awards granted during fiscal year 2018. We annualized the annual base salary and incentive cash target amount for all permanent employees who did not work for the entire year. Given its global population, the Company used the foreign currency exchange rates in effect at the end of fiscal year 2018 to determine the annual total direct compensation and therefore the median compensated employee. After identifying our median compensated employee, we then calculated the annual total direct compensation for our median compensated employee using the same methodology used for the Company’s CEO as set forth in the “Summary Compensation Table”of this proxy statement.
Securities Authorized for Issuance Underunder Equity Compensation Plans
The following table provides information as of June 26, 2016,24, 2018, regarding securities authorized for issuance under the Company’s equity compensation plans. The Company’s equity compensation plans of the Company include the 1999 Employee Stock Purchase Plan, the 2007 Stock Incentive Plan, the 2011 Stock Incentive Plan, and the 2015 Stock Incentive Plan, each as amended and as may be amended. Since November 4, 2015, the Company has issued awards under the 1999 Employee Stock Purchase Plan and the 2015 Stock Incentive Plan each as amended. As of August 29, 2018 the 1999 Employee Stock Purchase Plan was amended and restated by the Board subject to stockholder approval at this year’s annual meeting. Please see “Proposal No. 3: Approval of the Adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated” for additional information.
Figure 39. FYE201641. FYE2018 Securities Authorized for Issuance under Equity Compensation Plans
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average ($) (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c) | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights (1) ($) (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c) | ||||||||||||||||||
Equity compensation plans approved by security holders | 3,056,815 | (2) | 61.16 | 21,256,281 | (3) | 3,241,355 | (2) | 100.47 | 15,331,136 | (3) | ||||||||||||||
Equity compensation plans not approved by security holders | 2,080,872 | (4) | 23.15 | — | 128,387 | (4) | 40.46 | — | ||||||||||||||||
Total | 5,137,687 | 47.41 | 21,256,281 | 3,369,742 | 86.53 | 15,331,136 |
(1) | Does not include RSUs. |
(2) | Includes |
(3) | Includes |
(4) | Includes |
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Lam Research Corporation |
|
The Company’s management, audit committee, and independent registered public accounting firm (Ernst & Young LLP) have specific but different responsibilities relating to Lam’s financial reporting. Lam’s management is responsible for the financial statements and for the system of internal control and the financial reporting process. Ernst & Young LLP, or “EY,” has the responsibility to express an opinion on the financial statements and the system of internal control over financial reporting, based on the audit they conducted in accordance with the standards of the Public Company Accounting Oversight Board (U.S.). The audit committee is responsible for monitoring and overseeing these processes.
In this context and in connection with the audited financial statements contained in the Company’s Annual Report on Form10-K for the fiscal year ended June 26, 2016,24, 2018, the audit committee took the following actions:
This Audit Committee Report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The report shall not be deemed soliciting material.
MEMBERS OF THE AUDIT COMMITTEE
Eric K. Brandt (Chair)
Michael R. Cannon
Christine A. Heckart
Relationship with Independent Registered Public Accounting Firm
EY has audited the Company’s consolidated financial statements since the Company’s inception.
Annual Evaluation and Selection of Independent Registered Public Accounting Firm
The audit committee annually evaluates the performance of the Company’s independent registered public accounting firm, including the senior audit engagement team, and determines whether to reengage the current accounting firm or consider other audit firms. Factors considered by the audit committee in deciding whether to retain EY include: (i)(1) EY’s global
capabilities to handle the breadth and complexity of the Company’s global operations; (ii)(2) EY’s technical expertise and knowledge of the Company’s industry and global operations; (iii)(3) the quality and candor of EY’s communications with the audit committee and management; (iv)(4) EY’s independence; (v)(5) the quality and efficiency of the services provided by EY, including input from management on EY’s performance and how effectively EY demonstrated its independent judgment, objectivity and professional skepticism; (vi)(6) the appropriateness of EY’s fees; and (vii)(7) EY’s tenure as our independent auditor, including the benefits of that tenure, and the controls and processes in place (such as rotation of key partners) that help ensure EY’s continued independence in the facelight of such tenure.
Figure 40.42. Independent Registered Public Accounting Firm Evaluation and Selection Highlights
Independence Controls |
Audit Committee Oversight– Oversight includes regular private sessions with EY, discussions with EY about the scope of its audit and business imperatives, a comprehensive annual evaluation when determining whether to engage EY, and direct involvement by the audit committee and its chair in the selection of a new lead assurance engagement partner and new global coordinating partner in connection with the mandated rotation of these positions. |
Limits onNon-Audit Services– The audit committee preapproves audit and permissiblenon-audit services provided by EY in accordance with itspre-approval policy. |
EY’s Internal Independence Process– EY conducts periodic internal reviews of its audit and other work, assesses the adequacy of partners and other personnel working on the Company’s account and rotates the lead assurance engagement partner, the global coordinating partner, and other partners on the engagement consistent with independence and rotation requirements established by the PCAOB and SEC. |
Strong Regulatory Framework– EY, as an independent registered public accounting firm, is subject to PCAOB inspections, |
Benefits of Longer Tenure |
Enhanced Audit Quality– EY’s significant institutional knowledge and deep expertise of the Company’s semiconductor equipment industry and global business, accounting policies and practices, and internal control over financial reporting enhances audit quality. |
Competitive Fees– Because of EY’s familiarity with the Company and the industry, audit and other fees are competitive with peer independent registered public accounting firms. |
Avoid Costs Associated with New Auditor– Bringing on a new independent registered public accounting firm would be costly and require a significant time commitment, which could lead to management distractions. |
The table below shows the fees billed by EY for audit and other services provided to the Company in fiscal years 20162018 and 2015.2017.
Figure 41. FY2016/2015 EY43. FY2018/2017 Fees Billed by Ernst & Young LLP
Fiscal Year 2016 ($) | Fiscal Year 2015 ($) | Fiscal Year 2018 ($) | Fiscal Year 2017 ($) | |||||||||||||
Audit Fees(1) | 4,697,837 | 4,736,008 |
| 4,605,495 |
|
| 4,176,990 |
| ||||||||
Audit-Related Fees(2) | 373,721 | — |
| 90,500 |
|
| 135,684 |
| ||||||||
Tax Fees(3) | 265,527 | 82,634 |
| 34,888 |
|
| 71,673 |
| ||||||||
All Other Fees | — | — |
| — |
|
| — |
| ||||||||
TOTAL | 5,337,085 | 4,818,642 |
| 4,730,883 |
|
| 4,384,347 |
|
(1) | Audit Fees represent fees for professional services provided in connection with the audits of annual financial statements. Audit Fees also include reviews of quarterly financial statements, audit services related to other statutory or regulatory filings or engagements, and fees related to EY’s audit of the effectiveness of the Company’s internal control over financial reporting pursuant to section 404 of the Sarbanes-Oxley Act. |
(2) | Audit-Related Fees represent fees for assurance and related services that are reasonably related to the audit or review of the Company’s financial statements and are not reported above under “Audit Fees”. These fees principally include due diligence and accounting |
(3) | Tax Fees represent fees for professional services for tax planning, tax compliance and review services related to foreign tax compliance and assistance with tax audits and appeals. |
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Lam Research Corporation |
The audit committee reviewed summaries of the services provided by EY and the related fees during fiscal year 20162018 and has determined that the provision ofnon-audit services was compatible with maintaining the independence of EY as the Company’s independent registered public accounting firm. The audit committee or its delegate approved 100% of the services and related fee amounts for services provided by EY during fiscal year 2016.2018.
Policy on Audit CommitteePre-Approval of Audit andNon-Audit Services
It is the responsibility of the audit committee to approve, in accordance with sections 10A(h) and (i) of the Exchange Act and the rules and regulations of the SEC, all professional services, to be provided to us by our independent registered public accounting firm, provided that the audit committee shall not approve anynon-audit services proscribed by section 10A(g) of the Exchange Act in the absence of an applicable exemption.
It is our policy that the audit committeepre-approves all audit and permissiblenon-audit services provided by our independent registered public accounting firm, consistent with the criteria set forth in the audit committee charter and applicable laws and regulations. The audit committee has delegated to the chair of the audit committee the authority topre-approve such services, provided that the chair shall report any decisions topre-approve such services to the full audit committee at its next regular meeting. These services may include audit services, audit-related services, tax services, and other services. Our independent registered public accounting firm and our management are required to periodically report to the audit committee regarding the extent of services provided by our independent registered public accounting firm pursuant to any suchpre-approval.
Certain Relationships and Related Party Transactions
The audit committee is responsible for the review and oversight of all related party transactions required to be disclosed to the public under SEC rules pursuant to its written charter. In addition, the Company maintains a written code of ethics that requires all employees, officers and directors to act ethically when handling any actual or apparent conflicts of interest in personal and professional relationships and to promptly report any such issues to the Company’s legal department.
No family relationships exist as of the date of this proxy statement or existed during fiscal year 20162018 among any of our directors and executive officers. There was only one related party transaction that occurred duringsince the beginning of fiscal
year 2016.2018. The son of Stephen G. Newberry, the chairman of our board of directors,Board, Ryan Newberry, is employed by the Company as a manager of security. In addition, thedaughter-in-law of Stephen G. Newberry, Meghan Newberry, is employed by the Company as a manager of materials in the supply chain operations group. In fiscal year 2016,2018, the aggregate
compensation paid to Ryan Newberry and Meghan Newberry, including salary, incentive compensation, the grant date value of long-term incentive awards and the value of any other health and benefits contributed to or paid for by the Company, was less than $150,000.$200,000 each. The aggregate compensation for each is similar to the aggregate compensation of other employees holding equivalent positions.
|
Proposal No. 1: Election of Existing Directors
This first proposal relates to the election to our board of directorsBoard of nine nominees who are directors of the Company as of the date of this proxy statement. The second proposal relates to the election to our board of directors of two members of KLA-Tencor’s board of directors, whose nomination and election is subject to and contingent upon the acquisition of KLA-Tencor being consummated prior to this year’s annual meeting of stockholders. See “Proposal No. 2. Election of Additional Directors” for additional information. In general, the nine nominees identified in this proposal who receive the highest number of “for” votes will be elected. However, any nominee who fails to receive affirmative approval from holders of a majority of the votes cast in such nominee’s election at the annual meeting, either by proxy or in person, will not be elected to the board,Board, even if he or she is among the top nine nominees in total “for” votes. This requirement reflects the majority vote provisions implemented by the Company in November 2009. The term of office of each person elected as a director will be until the next annual meeting of stockholders, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Unless otherwise instructed, the Proxypeople named on the proxy card as proxy holders, the “Proxy Holders, (as defined in “Voting and Meeting Information – Information Concerning Solicitation and Voting – Voting Instructions” below) will vote the proxies received by them for the nine nominees named below, each of whom is currently a director of the Company. The proxies cannot be voted for more than nine nominees, whether or not there are additional nominees. If any nominee of the Company should decline or be unable to serve as a director as of the time of the annual meeting, and unless otherwise instructed, the proxies will be voted for any substitute nominee designated by the present board of directorsBoard to fill the vacancy. The Company is not aware of any nominee who will be unable, or will decline, to serve as a director.
The below nominees for election or reelection have been nominated for election to the board of directorsBoard in accordance with the criteria and procedures discussed above in “Governance Matters -Corporate Governance.”
Appointment of New Director.Information regarding each nominee. As part of the board’s self-evaluation process, the board identified the desirability of having additional representation by former executives of the Company’s major customers and from executives of global businesses, especially ones headquartered in countries where the Company conducts significant business. The board believed that the existing board members would be able to
identify qualified candidates without the involvement of a recruiting firm. Lih Shyng (Rick L.) Tsai, Ph.D. was identified as a candidate by Mr. Anstice because he met these criteria. Dr. Tsai was initially identified as a potential candidate because of his leadership positions at Taiwan Semiconductor Manufacturing Company Limited (TSMC), including as director, president and CEO, his knowledge of the semiconductor equipment business, the Company’s experience in working with him, and his excellent reputation in the semiconductor industry. See “2016 Nominees for Director” below for additional information regarding Dr. Tsai’s qualifications. Over the course of a year, Dr. Tsai met with our chairman, lead independent director (LID)/ nominating and governance committee chair and our CEO, as well as representatives of the Company’s executive team. Following those meetings the nominating and governance committee recommended Dr. Tsai to the independent directors as a nominee for election to the board. The board discussed and approved this recommendation.
Board Size. The nine directors to be elected in this proposal is fewer than the 10 members of the board as of the date of mailing. As previously disclosed in a current report on Form8-K, Dr. Saraswat is resigning from the board effective as of the close of business on November 7, 2016 just before the 2016 annual meeting, at which time the size of the board will be reduced to nine (or 11, if the acquisition of KLA-Tencor is consummated prior to this year’s annual meeting).
Information Regarding Each Nominee.In addition to the biographical information concerning each board nominee’s specific experience, attributes, positions and qualifications and age as of September 13, 2016,7, 2018, we believe that each of our nominees, while serving as a director and/or officer of the Company, has devoted adequate time to the board of directorsBoard and performed his or her duties with critical attributes such as honesty, integrity, wisdom, and an adherence to high ethical standards. Each nominee has demonstrated strong business acumen, an ability to make independent analytical inquiries, to understand the Company’s business environment and to exercise sound judgment, as well as a commitment to the Company and its core values. We believe the nominees have an appropriate diversity and interplay of viewpoints, skills, backgrounds, and experiences that will encourage a robust decision-making process for the board.Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NINE DIRECTOR NOMINEES SET FORTH BELOW.
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Lam Research Corporation |
20162018 Nominees for Director
Martin B. Anstice Director since 2012 Age |
Martin B. Anstice has served as the Company’s
The
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Eric K. Brandt Director since 2010 Age
Board Committees: • Audit ° Chair since 2014 ° Member: 2010-2014
Public company • Altaba Inc. (formerly Yahoo! Inc.) • Dentsply Sirona Inc. • The Macerich Company • Yahoo! Inc. (former) |
Eric K. Brandt is the former Executive Vice President and Chief Financial Officer of Broadcom Corporation, a global supplier of semiconductor devices, a position he held from March 2007 until its merger with Avago Technologies Limited in February 2016. From September 2005 to March 2007, Mr. Brandt served as President and Chief Executive Officer of Avanir Pharmaceuticals, Inc., a pharmaceutical company. Prior to Avanir Pharmaceuticals, Mr. Brandt was Executive Vice President-Finance and Technical Operations and Chief Financial Officer of Allergan Inc., a global specialty pharmaceutical company, where he also held a number of other senior positions following his arrival there in May 1999.
Mr. Brandt has served as a member of the board of directors of: The Macerich Company, a real estate investment trust focused on regional malls, since June 2018, where he is a member of the compensation committee; Altaba Inc. (formerly Yahoo!
He previously served on the board of directors of: MC10, Inc., a privately-held medical device Internet of Things (IoT) company, from March 2016 until February 2018, where he was chair of the compensation committee and governance committee; Yahoo! Inc., a digital information discovery company, since March 2016 to June 2017, where he was chair of the audit and finance committee; Vertex Pharmaceuticals, Inc., a pharmaceutical company, from 2002 to 2009, where he was chair of the audit committee,
Mr. Brandt
The chair; and his cybersecurity expertise. |
Michael R. Cannon Director since 2011 Age
Board Committees: • Audit ° Member since 2011 • Compensation ° Member: 2011-2013 • Nominating and Governance ° Member since 2011
Public company • Dialog Semiconductor • Seagate Technology Public Limited •
|
Michael R. Cannon is the General Partner of MRC & LBC Partners, LLC, a private management consulting company. From February 2007 until his retirement in January 2009, Mr. Cannon served as President of Global Operations of Dell Inc., a computer systems manufacturer and services provider; and from January 2009 to January 2011, he served as a consultant to Dell. Prior to joining Dell, he was President and Chief Executive Officer of Solectron Corporation, an electronic manufacturing services company, from January 2003 to February 2007. From July 1996 to January 2003, Mr. Cannon served as President and Chief Executive Officer of Maxtor Corporation, a disk drive and storage systems manufacturer. Prior to joining Maxtor, Mr. Cannon held senior management positions at International Business Machines Corp. (IBM), a global services, software and systems company.
Mr. Cannon has served as a member of the board of directors
The
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Lam Research Corporation |
Youssef Director since 2012 Age
Board Committees: • Compensation ° Member since 2012
|
Youssef A.El-Mansy is the retired Vice President, Director of Logic Technology Development, at Intel Corporation, a leading producer of microchips, computing and communications products, where he was responsible for managing technology development, the processor design center for Intel’s Technology and Manufacturing Group and two wafer manufacturing facilities.Dr. El-Mansy joined Intel in 1979 and led microprocessor technology development at Intel for 20 years.
Dr. El-Mansy previously served on the board of directors of Novellus Systems, Inc., from April 2004 until the company was acquired by Lam Research in June 2012; and Zygo Corporation, an optical system designer and manufacturer, from July 2004 to June 2009.
Dr. El-Mansy
The
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Christine A. Heckart Director since 2011 Age
Board Committees: • Audit ° Member since 2015 • Compensation ° Member: |
Christine A. Heckart
Ms. Heckart
The
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Catherine P. Lego Director since 2006 Age
Board Committees: • Audit ° Chair: 2009 – 2014 ° Member: 2006 – 2015 • Compensation ° Chair since 2015 • Nominating and Governance ° Member since 2014
Public company • • IPG Photonics Corporation • Fairchild Semiconductor International Inc. (former) • SanDisk Corporation (former) |
Catherine P. Lego is the founder of Lego Ventures LLC, a consulting services firm for early stage electronics companies, formed in 1992. From December 1999 to December 2009, she was the General Partner of The Photonics Fund, LLP, an early stage venture capital investment firm focused on investing in components, modules and systems companies for the fiber optics telecommunications market, which she founded. Ms. Lego was a general partner at Oak Investment Partners, a venture capital firm, from 1981 to 1992. Prior to Oak Investment Partners, she practiced as a Certified Public Accountant with Coopers & Lybrand, an accounting firm.
Ms. Lego has served as a member of the board of directors of Cypress Semiconductor Corp., an advanced embedded solutions company for automotive and other products, since September 2017, where she is a member of the audit and nominating and governance committees; and IPG Photonics Corporation, a high-power fiber laser and amplifier company for diverse applications, since July 2016, where she is a member of the audit committee and
She previously served on the board of directors of the following public companies: Fairchild Semiconductor International Inc., a fabricator of power management devices, from August 2013 to September 2016, where she was a member of the compensation committee and nominating and governance committee; SanDisk Corporation, a global developer of flash memory storage solutions from 1989 to 2016, where she was the chair of the audit committee; ETEC Corporation, a producer of electron beam lithography tools, from 1991 through 1997; Uniphase Corporation (presently JDS Uniphase Corporation), a designer and manufacturer of components and modules for the fiber optic based telecommunications industry and laser-based semiconductor defect examination and analysis equipment, from 1994 until 1999, when it merged with JDS Fitel; Zitel Corporation, an information technology company, from 1995 to 2000; WJ Communications, Inc., a broadband communications company, from October 2004 to May 2008; and Micro Linear Corporation, a fabless analog semiconductor company. Ms. Lego also served as a member of the board of directors of other technology companies that are privately-held.
The
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Lam Research Corporation |
Stephen G. Newberry Chairman of the Board Director since 2005 Age
Public company director- ships in last five years: • Splunk Inc. • Nanometrics Incorporated (former)
|
Stephen G. Newberry has served as the Chairman of the Company’s
Mr. Newberry has also served as a member of the board of directors of Splunk Inc., a software platform company for real-time operational intelligence, since January 2013, where he chairs the compensation committee.
Mr. Newberry
The
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Abhijit Y. Talwalkar Lead Independent Director Director since 2011 Age
Board Committees: • Compensation ° Chair: 2012 – 2015 ° Member since 2015 • Nominating and Governance ° Chair since 2015 ° Member: 2015-2015
Public company • Advanced Micro Devices Inc. • iRhythm Technologies Inc. • TE Connectivity Ltd. • LSI Corporation (former) |
Abhijit Y. Talwalkar is the former President and Chief Executive Officer of LSI Corporation, a leading provider of silicon, systems and software technologies for the storage and networking markets, a position he held from May 2005 until the completion of LSI’s merger with Avago Technologies in May 2014. From 1993 to 2005, Mr. Talwalkar was employed by Intel Corporation,
Mr. Talwalkar has served as a member of the board of directors of: Advanced Micro Devices Inc., a developer of high performance computing, graphics and visualization technologies, since June 2017, where he serves as a member of the compensation and leadership resources committee and the nominating and corporate governance committee; TE Connectivity Ltd, a connectivity and sensor solutions company, since March 2017, where he serves as a member of the audit committee; iRhythm Technologies Inc.,
He previously served as a member of the board of directors of LSI from May 2005 to May 2014 and the U.S. Semiconductor Industry Association, a semiconductor industry trade association from May 2005 to May 2014. He was additionally a member of the U.S. delegation for World Semiconductor Council proceedings.
The
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Lam Research Corporation |
Lih Shyng (Rick L.) Tsai Director since 2016 Age
Public company • • USI Corporation • Chunghwa Telecom Co, Ltd. (former) • |
Rick L. Tsai has served as the CEO of MediaTek Inc., a Taiwanese listed global fabless semiconductor company, since February 2018. He wasCo-CEO of MediaTek from June 2017 to February 2018. He is the former Chief Executive Officer of Chunghwa Telecom Co., Ltd., a Taiwanese integrated telecom service provider,
Dr. Tsai has served as a member of the board of directors
He previously served on the board of directors
Dr. Tsai
The
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Proposal No. 2: Election of Additional Directors
In addition to the nine nominees standing for election in proposal number one, two nominees from KLA-Tencor’s board of directors are also standing for election in proposal number two, subject to and contingent upon the acquisition of KLA-Tencor being consummated prior to this year’s annual meeting of stockholders. This means that the proposal to elect the two additional nominees is effective only if the acquisition is consummated before the annual meeting and the proposal is withdrawn if the acquisition is not consummated before the annual meeting.
In general, the two nominees identified in this proposal who receive the highest number of “for” votes will be elected. However, any nominee who fails to receive affirmative approval from holders of a majority of the votes cast in such nominee’s election at the annual meeting, either by proxy or in person, will not be elected to the board, even if he or she is among the top two nominees in total “for” votes. This requirement reflects the majority vote provisions implemented by the Company in November 2009. The term of office of each person elected as a director will be until the next annual meeting of stockholders, and until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Unless otherwise instructed, the Proxy Holders (as defined in “Voting and Meeting Information – Information Concerning Solicitation and Voting – Voting Instructions” below) will vote the proxies received by them for the two nominees named below. The proxies cannot be voted for more than two nominees in proposal number two, whether or not there are additional nominees. If any nominee of the Company should decline or be unable to serve as a director as of the time of the
annual meeting, and unless otherwise instructed, the proxies will be voted for any substitute nominee designated by the present board of directors to fill the vacancy. The Company is not aware of any nominee who will be unable, or will decline, to serve as a director.
The below nominees have been nominated for election to the board of directors in accordance with the criteria and procedures discussed above in “Governance Matters – Corporate Governance.” Their biographical information (including their specific experiences, and positions), attributes, qualifications and ages as of September 13, 2016 are set forth below.
Appointment of KLA-Tencor Directors. As part of the acquisition of KLA-Tencor, the Company agreed in its Agreement and Plan of Merger and Reorganization dated as October 20, 2015, to appoint two members of KLA-Tencor’s board of directors to serve as members of our board of directors beginning with the closing of the merger and continuing until our next annual stockholders meeting. The nominating and governance committee recommended that the Company pursue conversations with three members of the KLA-Tencor board, each of whom met with our chairman, the members of the nominating and governance committee and our CEO. Following these meetings, the nominating and governance committee recommended that Messrs. Dickson and Moore should be invited to join the Lam board, and the board approved this recommendation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE TWO DIRECTOR NOMINEES SET FORTH BELOW.
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Proposal No. 3: Advisory Vote to Approve the Compensation of Our Named Executive Officers,Officer Compensation, or “Say on Pay”
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 orand section 14A of the “Dodd-FrankExchange Act” enables the Company’s stockholders to vote to approve, on an advisory ornon-binding basis, the compensation of our named executive officers,officer compensation, as disclosed in this proxy statement in accordance with SEC rules. Although the vote is advisory and is not binding on us or on our board of directors,Board, our compensation committee and, as appropriate, our board,Board, will take into account the outcome of the vote when considering future executive compensation decisions and will evaluate whether any actions are necessary to address stockholder concerns.
We believe that our compensation philosophy has allowed us to attract, retain, and motivate qualified executive officers who have contributed to our success. For more information regarding the compensation of our named executive officers, our compensation philosophy, our 20152017 Say on Pay results and our response, we encourage you to read the section of this proxy statement entitled “Compensation Matters– Executive Compensation and Other Information – Compensation Discussion and Analysis,” the compensation tables, and the narrative following the compensation tables for a more detailed discussion of our compensation policies and practices.
We are asking for stockholder approval, on an advisory ornon-binding basis, of the following resolution:
‘RESOLVED, that the stockholders of Lam Research Corporation (the Company) hereby approve, on an advisory
basis, the compensation of ourthe Company’s named executive officers, as disclosed in accordance withpursuant to Item 402 of SEC rules (including section 14A ofRegulationS-K, including the Exchange Act) in the “Compensation Discussion and Analysis,” section, the compensation tables and any related narrative disclosure included in thisthe proxy statement.’
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.
We provide for annual advisory votes to approve the compensation of our named executive officers. Unless modified, the next advisory vote to approve the compensation of our named executive officersofficer compensation will be at the 20172018 annual meeting.
Stockholder approval of Proposal No. 32 requires the affirmative vote of the holders of a majority of the outstanding shares of common stock having voting power present, in person or by proxy, at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL, ON AN ADVISORY ORNON-BINDING BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.OFFICER COMPENSATION.
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Lam Research Corporation 2018 Proxy Statement | 53 |
Proposal No. 3: Approval of the Adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as Amended and Restated
Stockholders are being asked to approve the Lam Research Corporation 1999 Employee Stock Purchase Plan, or “the ESPP,” as amended and restated.
The Board originally adopted the ESPP on September 30, 1998, and stockholders originally approved the ESPP on November 5, 1998. Amendments to the ESPP were subsequently adopted by the Board and compensation committee on August 21, 2003 and September 18, 2003, respectively, and approved by stockholders on November 6, 2003. The compensation committee further amended and restated the ESPP on December 18, 2009, May 20, 2010, August 27, 2012, and November 1, 2012. Lastly, on August 29, 2018, the Board further amended and restated the ESPP (the “Revised ESPP”), subject to stockholder approval pursuant to applicable stock exchange requirements. The changes approved by the Board in August 2018 are hereinafter referred to as the “Amendment.” If the Revised ESPP is approved by stockholders, the Revised ESPP will be effective.
The principal features and purpose of the Revised ESPP are summarized below. The following summary of the Revised ESPP does not purport to be a complete description of all of the provisions of the Revised ESPP and is qualified in its entirety by reference to the complete text of the Revised ESPP, which has been filed with the SEC asAppendix A to this proxy statement. Capitalized terms used but not defined in the summary have the meaning specified in the Revised ESPP.
Immediately prior to August 29, 2018, the number of shares of common stock reserved for issuance under the ESPP was 24,309,281 shares, of which 4,995,845 remained available for issuance.
Summary of Amendment
The Amendment would (1) increase the number of shares of common stock available for issuance under the ESPP and (2) extend the term of the ESPP for an additional ten years.
Increase in Shares Available for Issuance.The Amendment to the ESPP would increase the maximum number of shares available for purchases of common stock from the remaining 4,995,845 shares to 7,550,771 shares, which is an increase of 2,554,926 shares. This increase is 1.7% of our outstanding common stock as of September 7, 2018 and the maximum number of shares remaining available for issuance under the ESPP is 5% of our outstanding common stock as of September 7, 2018. These percentages reflect the simple dilution of our stockholders that would occur if the proposed Amendment to the ESPP is approved.
Based on the closing price on Nasdaq of our common stock on September 7, 2018, of $159.58 per share, the aggregate market value as of that date of the additional 2,554,926 shares of common stock requested under the Amendment was $407,715,091.
Extension of Term.The Amendment would also extend the term of the ESPP for an additional ten years, until August 29, 2028.
Summary of the Revised ESPP
Purpose.The Revised ESPP allows the Company’s employees (including employees who are officers, Board members, or employees of designated Company subsidiaries located in or outside the United States) to use payroll deductions to purchase Company common stock on the terms described below.
All grants of purchase rights made to participants outside of the United States are deemed to be made under anon-U.S.sub-plan of the Revised ESPP unless otherwise designated at the time of grant.
Plan Administration.The Revised ESPP shall be administered by the Board, the compensation committee, and/or a committee appointed by the Board, whose administration, interpretation and application of the Revised ESPP and its terms will be final, conclusive and binding on all participants. The Board has appointed its compensation committee to administer the Revised ESPP and the compensation committee has delegated its authority for routine plan administration to the ESPP Management Committee, although the VP of Human Resources has been appointed to administer any grants of purchase rights made tonon-U.S. participants under anon-U.S.sub-plan of the Revised ESPP. The Administrator may also adopt rules, procedures orsub-plans applicable to particular subsidiaries of the Company or locations. The Revised ESPP provides that no member of the Board or committee will be liable for any action or determination taken or made in good faith with respect to the Revised ESPP, or any shares purchased or issued under the Revised ESPP.
Securities Subject to Plan.Subject to adjustment (under the Revised ESPP), up to 7,550,771 shares of Company common stock will be reserved for issuance pursuant to purchases made under the Revised ESPP.
Eligibility and Participation.Any regular Company employee customarily employed by the Company (or by any subsidiary designated for participation) for at least 20 hours per week (or
if otherwise required by local law outside the United States) is eligible to participate in the Revised ESPP. Officers and members of the Board who are eligible employees are also permitted to participate in the Revised ESPP. As of September 7, 2018, approximately 10,600 employees were eligible to participate in the Revised ESPP, including 10 officers of the Company. The Revised ESPP currently has approximately 8,200 participants.
An employee will not be eligible to participate in the Revised ESPP during an offering period to the extent that immediately after the grant of a purchase right on an offering date or interim offering date, the employee (or any other person whose stock would be attributed to the employee under section 424(d) of the Code) would own stock and/or hold outstanding purchase rights to purchase stock possessing five percent or more of the total combined voting power or value of all classes of stock of Lam or of any subsidiary.
Eligible employees become participants in the Revised ESPP by delivering to the Company fifteen days prior to the applicable offering date (including interim purchase dates) a subscription agreement authorizing payroll deductions, or at such other time as may be determined by the Administrator. An employee who becomes eligible to participate in the Revised ESPP after the commencement of an offering period may participate on an interim basis until commencement of the next offering period. At the end of each offering period, each participant in the offering period will be automatically enrolled in the next succeeding offering period at the same withholding percentage unless the participant notifies the Administrator in writing that the participant does not want to bere-enrolled.
Offering Periods and Dates.Although the Administrator may alter the duration of the offering periods to any period between three (3) and 24 months, the offering periods under the Revised ESPP have generally been 12 months in duration. Within a given12-month offering period, there are typically two dates on which Company common stock may be purchased. If, on the first business day following an exercise date (other than the last exercise date of an offering period), the fair market value of a share of Company common stock is less than the fair market value as of the first day of the offering period, the terms of the Revised ESPP provide that a new offering period will automatically begin as of that day and all eligible employees participating in the Revised ESPP will be automatically enrolled in the new offering period at the withholding percentage specified in the participant’s most recent subscription agreement (and the old offering period will be terminated). The Administrator may alter the duration of the offering periods or the number or timing of the purchase dates within the parameters of the Revised ESPP.
Payroll Deductions.The purchase price of the shares is accumulated by payroll deductions during the offering period. Each employee participating in the Revised ESPP may elect to have up to 15% of eligible base compensation (defined in the
Revised ESPP to include all regular straight-time gross earnings, exclusive of overtime, shift premium, incentive compensation or payments, or bonuses, commissions or other payments) deducted and credited to that employee’s account under the Revised ESPP. No additional payments or amounts may be credited to an employee’s account; however, an employee may change the rate of payroll deductions or withdraw entirely from the Revised ESPP during any offering period.
Amounts deducted from eligible base compensation and credited to a participating employee’s account shall be held as general funds of the Company and shall not accrue interest. To the extent that an employee’s payroll deductions exceed the amount required to purchase shares subject to purchase rights, the excess shall be carried forward to apply on the next exercise date, provided that any amounts remaining shall be refunded to the employee without interest at the termination of an offering period.
Purchase of Stock; Exercise of Purchase Right.By electing to participate in the Revised ESPP, each employee is in effect granted a right to purchase shares of Company common stock using payroll deductions accumulated as of each of the purchase dates during any offering period. However, no participant may (i) accrue rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries at a rate that exceeds $25,000 of fair market value of such stock (determined at the date of grant of those purchase rights) for each calendar year in which the purchase rights would be outstanding at any time; or (ii) purchase more than 10,000 shares of Company common stock during any offering period. The Administrator may designate an alternative shares limit (other than zero) in its sole discretion, prior to the commencement of any offering period to which the alternative limit applies. If the Administrator establishes an alternative limit, all participants shall be notified of the alternative limit prior to the commencement of the offering period to which the limit first applies. Any alternative limit set by the Administrator must continue to apply with respect to all succeeding exercise dates and offering periods unless revised by the Administrator. If the number of shares otherwise subject to purchase rights during an offering period exceeds the number of shares then available under the Revised ESPP, a pro rata allocation of the shares shall be made in as equitable a manner as is practicable. Unless an employee withdraws from participation in the Revised ESPP (see “Withdrawal.” below), or his or her participation is otherwise discontinued (see “Termination of Employment.” below), the employee’s right to purchase shares will be
exercised automatically at the end of the purchase date for the maximum number of shares at the applicable price.
Purchase Price of Company Common Stock; Taxes on the Acquisition or Disposition of Stock.On any particular purchase date under the Revised ESPP, the purchase price per share will be 85% of the lower of the fair market value of a share of common stock as of (i) the beginning of the offering period,
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Lam Research Corporation 2018 Proxy Statement | 55 |
(ii) any intervening interim offering date (if the employee becomes a participant as of that date), or (iii) the purchase date. On September 7, 2018, the closing market price of Lam common stock was $159.58, as reported by Nasdaq.
The fair market value of a share of Company common stock on a given date shall be the closing price as reported in the Wall Street Journal for such date. If there is no public trading of Company common stock on a given date, the fair market value shall be determined by the Administrator in its discretion.
The participant shall be responsible for all taxes or other withholdings required in connection with the acquisition or disposition of stock purchased under the Revised ESPP. See “U.S. Federal Income Tax Information,” below. The participant shall not have an interest or voting right in any shares covered under the Revised ESPP prior to purchase.
Ability of the Board or Administrator to Amend the Revised ESPP.The Board may terminate or amend the Revised ESPP, or any purchase right granted thereunder, at any time (except in the event of certain changes in control of Lam). However, stockholder approval is required for any amendment to (i) increase the number of shares which may be issued under the Revised ESPP, (ii) change the designation of employees (or class of employees) eligible to participate under the Revised ESPP, or (iii) materially increase the benefits which may accrue to employees participating under the Revised ESPP (if, at the time of such amendment, Lam has a class of securities registered under section 12 of the Exchange Act).
Term and Termination of Plan.If approved by stockholders, the Revised ESPP will have been deemed effective upon the adoption by the Board, and will continue in effect for a term of 10 years from August 29, 2018. However, the Board may earlier terminate the Revised ESPP at any time. If the Board terminates the Revised ESPP before an employee’s right to purchase shares has been exercised under the Revised ESPP, any funds deducted from the employee’s eligible base compensation and credited to the employee’s account under the Revised ESPP shall be refunded.
Withdrawal.An employee may terminate his or her interest in a given offering by signing and delivering to the Administrator a notice of withdrawal from the Revised ESPP. Such withdrawal may be effected at any time prior to the closing of any offering period or interim purchase date. Any withdrawal by the employee of accumulated payroll deductions for a given offering automatically terminates the employee’s interest in that offering. The Revised ESPP does not permit a partial withdrawal. An employee’s withdrawal from an offering does not affect the employee’s eligibility to participate in subsequent offerings under the Revised ESPP.
By executing a subscription agreement to participate in the Revised ESPP, an employee does not become obligated to make any actual stock purchase; rather, the subscription
agreement merely indicates the employee’s election to have eligible base compensation deducted and shares placed under right to him or her for purchase. However, unless the employee terminates his or her participation, or withdraws his or her payroll deductions, the right to purchase shares will be exercised automatically on each purchase date, and for the maximum number of full shares purchasable with the employee’s accumulated payroll deductions.
Termination of Employment.Termination of a participant’s continuous status as an employee for any reason, including retirement or death, cancels his or her participation in the Revised ESPP immediately. In such event, the payroll deductions credited to the employee’s account will be returned to the employee or, in the case of death, to the person or persons entitled thereto as specified by the employee in the subscription agreement.
Capital Changes.In the event any change is made in the capitalization of the Company, such as stock splits or stock dividends, which results in an increase or decrease in the number of shares of common stock outstanding without receipt of consideration by the Company, appropriate adjustments will be made by the Company to the shares subject to purchase and to the purchase price per share, subject to any required action by the stockholders of the Company. In the event of the liquidation or dissolution of the Company, the then-current offering period shall terminate automatically, unless otherwise provided by the Board. In the event the Company merges with another corporation (and Company stockholders own less than 50% of the surviving entity or its parent), or the Company sells all or substantially all of its assets, the Revised ESPP provides that each outstanding right to purchase shares will be assumed or an equivalent right will be substituted by the successor corporation; otherwise, the Revised ESPP provides that all outstanding purchase rights held by Company employees may be accelerated.
Nonassignability.No rights or accumulated payroll deductions of an employee under the Revised ESPP may be pledged, assigned or transferred for any reason, and any such attempt may be treated by Lam as an election to withdraw from the Revised ESPP.
Reports.Individual accounts are maintained for each participant in the Revised ESPP. Each participant receives as promptly as practicable after the end of the offering period a report of his or her account setting forth the total amount of payroll deductions accumulated, the per share purchase price, the number of shares purchased and the remaining cash balance, if any.
Compliance with Applicable Law.Shares will not be issued with respect to a purchase right unless the exercise of such purchase right and the issuance and delivery of such shares comply with all applicable provisions of law, domestic or foreign, including the Securities Act of 1933, as amended, or the “Securities Act;” the Exchange Act; the rules and regulations promulgated thereunder, and the requirements of
any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance. Also, as a condition to the exercise of a purchase right, the Company may require the person exercising the purchase right to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
U.S. Federal Income Tax Information
The Revised ESPP, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of sections 421 and 423 of the Code. Under these provisions, no income will be taxable to a participant at the time of grant of the right to purchase, or the actual purchase of, shares. However, upon the employee’s disposition of shares purchased under the Revised ESPP, the participant will generally be subject to tax. Upon disposition (including by gift), if the shares have been held by the participant for more than two years after the first day of the offering period and more than one year after the purchase date of the shares, or upon death of the participant while holding the shares, the participant will recognize taxable ordinary income equal to the lesser of (a) the excess of the fair market value of the shares at the time of the disposition over the purchase price of the shares, or (b) 15% of the fair market value of the shares on the first day of the offering period (or interim date on which the employee began to participate in the Revised ESPP, if later), and any additional taxable gain on the disposition will be treated as long-term capital gain. If the shares are disposed of before the expiration of the holding periods described above, the excess of the fair market value of the shares on the purchase date over the purchase price will be taxable as ordinary income, and any gain or loss on such disposition will be treated as a capital gain or loss. Lam is not entitled to a deduction for amounts taxable to a participant, except to the extent of ordinary income reported by the participant on disposition of shares before the expiration of the holding periods described above.
The foregoing is only a summary of the U.S. federal income tax consequences of the Revised ESPP to participants and does not purport to be complete. Reference should be made to the applicable provisions of the Code. In addition, the summary does not discuss the income tax consequences of a participant’s death or the income tax laws of any municipality, state or foreign country in which the participant may reside, and to which the participant may be subject.
Restriction on Resale
Certain officers and directors of the Company may be deemed to be “affiliates” of the Company, as that term is defined under
the Securities Act. Common stock acquired under the Revised ESPP by an affiliate may only be reoffered or resold pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act or another exemption from the registration requirements of the Securities Act.
Plan Benefits
All employees of the Company who satisfy the eligibility requirements set forth in the Revised ESPP may each year purchase up to an amount of Company common stock equal to the lesser of $25,000 or 15% of their eligible base compensation. Participation in the Revised ESPP is voluntary and each eligible employee will make his or her own decision whether and to what extent to participate. Accordingly, we cannot currently determine the benefits or number of shares that will be received in the future by individual employees or groups of employees. Ournon-employee directors are not eligible to participate.
Aggregate Past Grants Under the Revised ESPP
The following table sets forth summary information with respect to the number of shares of our common stock purchased under the ESPP to the Company’s named executive officers, all current executive officers as a group, directors, associates of such executive officer, directors and nominees, each other person who received or is to receive 5% of such options, warrants or rights and all employees (other than executive officers) as a group as of September 7, 2018. As of September 7, 2018, the closing price on Nasdaq of our common stock was $159.58 per share.
Name and Position | Number of Shares | |||
Martin B. Anstice Chief Executive Officer | 14,256 | |||
Timothy M. Archer President and Chief Operating Officer | 2,241 | |||
Douglas R. Bettinger Executive Vice President and Chief Financial Officer | 2,173 | |||
Richard A. Gottscho Executive Vice President, Corporate Chief Technology Officer | 16,350 | |||
Scott G. Meikle Senior Vice President, Global Customer Operations | — | |||
All current executive officers as a group | 65,303 | |||
All current directors who are not executive officers as a group | — | |||
Each other nominee for election as a director | — | |||
Each associate of any such director, executive officer or nominees | — | |||
Each other person who received or is to receive 5% of such awards | — | |||
All employees, including current officers who are not executive Officers as a group | 19,248,133 |
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Approval of Proposal No. 3 will require the affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and voting on the proposal at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADOPTION OF THE ESPP, AS AMENDED AND RESTATED.
Proposal No. 4: Ratification of the Appointment of the Independent Registered Public Accounting Firm for Fiscal Year 20172019
Stockholders are being asked to ratify the appointment of Ernst & Young LLP, or “EY,”EY, as the Company’s independent registered public accounting firm for fiscal year 2017.2019. Although the audit committee has the sole authority to appoint the Company’s independent registered public accounting firm, as a matter of good corporate governance, the boardBoard submits its selection to our stockholders for ratification. If the stockholders should not ratify the appointment of EY, the audit committee will contemplate whether to reconsider the appointment. EY has been the Company’s independent registered public accounting firm (independent auditor) since fiscal year 1981.
Each proxy received by the Proxy Holders will be voted “FOR” the ratification of the appointment of EY, unless the stockholder provides other instructions.
Our audit committee meets periodically with EY to review both audit andnon-audit services performed by EY, as well as the fees charged for those services. Among other things, the committee examines the effect that the performance ofnon-audit services, if any, may have upon the independence of the independent registered public accounting firm. All professional
professional services provided by EY, includingnon-audit services, if any, are subject to approval by the audit committee in accordance with applicable securities laws, rules, and regulations. For more information, see “Audit Matters – -Audit Committee Report” and “Audit Matters – Matters—Relationship with Independent Registered Public Accounting Firm” above.
A representative of EY is expected to be present at the annual meeting and will have an opportunity to make a statement if he or she so desires. The representative will also be available to respond to appropriate questions from the stockholders.
Stockholder approval of Proposal No. 4 requires the affirmative vote of the holders of a majority of the outstanding shares of common stock having voting power present, in person or by proxy, at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2017.2019.
We are not aware of any other matters to be submitted at the annual meeting. If any other matters properly come before the annual meeting, the Proxy Holders intend to vote the shares they represent as the board of directorsBoard may recommend or, if the boardBoard does not make a recommendation, as the Proxy Holders decide in their reasonable judgment.
It is important that your
stock holdings be represented at the meeting, regardless of the number of shares you hold. We urge you to complete and return the accompanying proxy card in the enclosed envelope, or vote your shares by telephone or internet, as described in the materials accompanying this proxy statement.
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Voting and Meeting Information
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Information Concerning Solicitation and Voting
Our board of directorsBoard solicits your proxy for the 20162018 Annual Meeting of Stockholders and any adjournment or postponement of the meeting, for the purposes described in the “Notice“Notice of 20162018 Annual Meeting of Stockholders.” The sections below show important details about the annual meeting and voting.
Record Date
Only stockholders of record at the close of business on September 13, 2016,7, 2018, the “Record Date,” are entitled to receive notice of and to vote at the annual meeting.
Shares Outstanding
As of the Record Date 161,264,422152,286,842 shares of common stock were outstanding.
Quorum
Stockholders who hold shares representing a majority of our shares of common stock outstanding and entitled to vote on the Record Date must be present in person or represented by proxy to constitute a quorum. A quorum is required to transact business at the annual meeting.
Inspector of Elections
The Company will appoint an inspector of elections to determine whether a quorum is present. The inspector will also tabulate the votes cast by proxy or at the annual meeting.
Effect of Abstentions and Broker Non-VotesNon- Votes
Shares voted “abstain” and brokernon-votes (shares held by brokers that do not receive voting instructions from the beneficial owner of the shares, and do not have discretionary authority to vote on a matter) will be counted as present for purposes of determining whether we have a quorum. For purposes of voting results, abstentions will not be counted with respect to the election of directors but will have the effect of “no” votes with respect to other proposals, and brokernon-votes will not be counted with respect to any proposal.
Voting by Proxy
Stockholders may vote by internet, telephone, or mail, per the instructions on the accompanying proxy card.
Voting at the Meeting
Stockholders can vote in person during the meeting. Stockholders of record will be on a list held by the inspector of elections. Each beneficial owner (an owner who is not the record holder of their shares) must obtain a proxy from the beneficial owner’s brokerage firm, bank, or the stockholder of record holding such shares for the beneficial owner, and present it to the inspector of elections with a ballot. Voting in person by a stockholder as described here will replace any previous votes of that stockholder submitted by proxy.
Changing Your Vote
Stockholders of record may change their votes by revoking their proxies at any time before the polls close by (i)(1) submitting a later-dated proxy by the internet, telephone or mail, or (ii)(2) submitting a vote in person at the annual meeting. Before the annual meeting, stockholders of record may also deliver voting instructions to: Lam Research Corporation, Attention: Secretary, 4650 Cushing Parkway, Fremont, California 94538. If a beneficial owner holds shares through a bank or brokerage firm, or another stockholder of record, the beneficial owner must contact the stockholder of record in order to revoke any prior voting instructions.
Voting Instructions
If a stockholder completes and submits proxy voting instructions, the people named on the proxy card as proxy holders, the “ProxyProxy Holders” will follow the stockholder’s instructions. If a stockholder submits proxy voting instructions but does not include voting instructions for each item, the Proxy Holders will vote as the boardBoard recommends on each item for which the stockholder did not include an instruction. The Proxy Holders will vote on any other matters properly presented at the annual meeting in accordance with their best judgment.
Voting Results
We will announce preliminary results at the annual meeting. We will report final voting results athttp:https://investor.lamresearch.com and in a Form8-K to be filed shortly after the annual meeting.
Availability of Proxy Materials
Beginning on September 29, 2016,26, 2018, this proxy statement and the accompanying proxy card and 20162018 Annual Report on Form10-K to Stockholders will be mailed to stockholders entitled to vote at
the annual meeting who have designated a
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preference for a printed copy. Stockholders who previously chose to receive proxy materials electronically were sent an email with instructions on how to access this year’s proxy materials and the proxy voting site.
We have also provided our stockholders access to our proxy materials over the internet in accordance with rules and regulations adopted by the SEC. These materials are available on our website athttp:https://investor.lamresearch.comand at www.proxyvote.com. We will furnish, without charge, a printed copy of these materials and our 20162018 Annual Report (including exhibits) on request by phone telephone(510-572-1615), by mail (to Investor Relations, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538), or by email (toinvestor.relations@lamresearch.com).
A Notice of Internet Availability of Proxy Materials will be mailed beginning on September 29, 201626, 2018 to all stockholders entitled to vote at the meeting. The notice will have instructions for stockholders on how to access our proxy materials through the internet and how to request that a printed copy of the proxy materials be mailed to them. The
notice will also have instructions on how to elect to receive all
future proxy materials electronically or in printed form. If you choose to receive future proxy materials electronically, you will receive an email each year with instructions on how to access the proxy materials and proxy voting site.
Proxy Solicitation Costs
The Company will bear the cost of all proxy solicitation activities. Our directors, officers and other employees may solicit proxies personally or by telephone, email or other communication means, without any cost to Lam Research. In addition, we have retained D.F. King & Co., Inc. to assist in obtaining proxies by mail, facsimile or email from brokers, bank nominees and other institutions for the annual meeting. The estimated cost of such services is $12,000 plusout-of-pocket expenses. D.F. King & Co, Inc. may be contacted at 48 Wall Street, New York, New York 10005. We are required to request that brokers and nominees who hold stock in their names furnish our proxy materials to the beneficial owners of the stock, and we must reimburse these brokers and nominees for the expenses of doing so in accordance with statutory fee schedules.
Annual Meeting Admission
All stockholders entitled to vote as of the Record Date are entitled to attend the annual meeting. Admission of stockholders will begin at 9:00 a.m. Pacific Standard Time on November 9, 2016.6, 2018. Any stockholders interested in attending the annual meeting should be prepared to present government-issued photo identification, such as a valid driver’s license or passport, and verification of ownership of Company common stock or proxy status as of the Record Date for admittance. For stockholders of record as of the Record Date, proof of ownership as of the Record Date will be verified prior to admittance into the annual meeting. For stockholders who were not stockholders as of the Record Date but hold shares through a bank, broker or other nominee holder, proof of beneficial ownership as of the Record Date, such as an account statement or similar evidence of ownership, will be verified prior to admittance into the annual meeting. For proxy holders, proof of valid proxy status will also be verified prior to admittance into the annual meeting. Stockholders and proxy holders will be admitted to the annual meeting if they comply with these procedures. Information on how to obtain directions to attend the annual meeting and vote in person is available on our website athttp:https://investor.lamresearch.com.
Voting on Proposals
Pursuant to ProposalsProposal No. 1, and 2, boardBoard members will be elected at the annual meeting to fill nine or eleven if the acquisition of KLA-Tencor is consummated prior to this year’s
annual meeting of stockholders, seats on the boardBoard to serve until
the next annual meeting of stockholders, and until their respective successors are elected and qualified, under a “majority vote” standard. The majority voting standard means that, even though there are elevennine nominees in total for the eleven boardnine Board seats, a nominee will be elected only if he or she receives an affirmative “for” vote from stockholders owning, as of the Record Date, at least a majority of the shares present and voted at the meeting in such nominee’s election by proxy or in person. If an incumbent fails to receive the required majority, his or her previously submitted resignation will be promptly considered by the board.Board. Each stockholder may cast one vote (“for” or “withhold”), per share held, for each of the elevennine nominees. Stockholders may not cumulate votes in the election of directors.
Each share is entitled to one vote on Proposals No. 2, 3, and 4. Votes may be cast “for,” “against” or “abstain” on those Proposals.Proposals 2, 3, and 4. Approval of Proposals No. 2, 3 and 4 requires the affirmative vote of a majority of the shares of common stock present or represented by proxy and cast at the meeting.
If a stockholder votes by means of the proxy solicited by this proxy statement and does not instruct the Proxy Holders how to vote, the Proxy Holders will vote: “FOR” all individuals nominated by the board;Board; “FOR” approval, on an advisory basis, of the compensation of our named executive officers;officer compensation; “FOR” approval of the adoption of the ESPP, as amended and restated; and “FOR” the ratification of EY as the Company’s independent registered public accounting firm for fiscal year 2017.2019.
If you choose to vote in person, you will have an opportunity to do so at the annual meeting. You may either bring your proxy
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card to the annual meeting, or if you do not bring your proxy card, the Company will pass out written ballots to anyone who was a stockholder as of the Record Date. As noted above, if you are a beneficial owner (an owner who is not the record holder of their shares), you will need to obtain a proxy from your brokerage firm, bank, or the stockholder of record holding shares on your behalf.
Voting by 401(k) Plan Participants
Participants in Lam’s Savings Plus Plan, Lam Research 401(k), or the “401(k) Plan,” who held Lam common stock in their personal 401(k) Plan accounts as of the Record Date will receive this proxy statement, so that each participant may vote, by proxy, his or her interest in Lam’s common stock as held by the 401(k) Plan. The 401(k) Plan trustee will aggregate and vote proxies in accordance with the instructions in the proxies of employee participants that it receives.
Stockholder Accounts Sharing the Same Last Name and Address; Stockholders Holding Multiple Accounts
To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding Lam Research stock but who share the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy of our proxy statement and annual report unless one of the stockholders notifies our investor relations department that one or more of them want to receive separate copies. This procedure reduces duplicate mailings and therefore saves printing and mailing costs, as well as natural resources. Stockholders who participate in householding will continue to have access to all proxy materials athttp:https://investor.lamresearch.com, as well as the ability to submit separate proxy voting instructions for each account through the internet or by phone.telephone.
Stockholders holding multiple accounts of Lam common stock may request separate copies of the proxy materials by contacting us by phone telephone(510-572-1615), by mail (to Investor Relations, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538) or by email (toinvestor.relations@lamresearch.com). Stockholders may also contact us by phone,telephone, mail or email to request consolidation of proxy materials mailed to multiple accounts at the same address.
Stockholder-Initiated Proposals and Nominations for 20172019 Annual Meeting
Proposals submitted under SEC rules for inclusion in the Company’s proxy statement. Stockholder-initiated proposals (other than director nominations) may be eligible for inclusion
in our proxy statement for next year’s 20172019 annual meeting of stockholders (in accordance with SECRule 14a-8) and for consideration at the 20172019 annual meeting.meeting of stockholders. The Company must receive a stockholder proposal no later than June 1, 2017May 29, 2019 for the proposal to be eligible for inclusion. Any stockholder interested in submitting a proposal or nomination is advised to contact legal counsel familiar with the detailed securities law requirements for submitting proposals or nominations for inclusion in a company’s proxy statement.
Proposed nominations of directors under Company bylaws for Proxy Access.Our bylaws provide for “Proxy Access.” Pursuant to the Proxy Access provisions of our bylaws, a stockholder, or a group of up to 20 stockholders, owning at least 3% of our outstanding common stock continuously for at least three years can nominate and include in our proxy materials director nominees constituting up to the greater of two individuals or 20% of the Board, provided that the stockholders and the nominees satisfy the requirements specified in our bylaws. If a stockholder or group of stockholders wishes to nominate one or more director candidates to be included in our proxy statement for the 2019 annual meeting of stockholders pursuant to Proxy Access, all of the information required by our bylaws must be received by the Secretary of the Company no earlier than April 29, 2019, and no later than May 29, 2019.
Proposals and nominations under Company bylaws.bylaws for presentation at the annual meeting but for which the proponent does not seek to include materials in our proxy statement.Stockholders may also submit proposals for consideration and nominations of director candidates for election at the annual meeting by following certain requirements set forth in our bylaws. The current applicable provisions of our bylaws are described below. ProposalsThese proposals will not be eligible for inclusion in the Company’s proxy statement for the 20172019 annual meeting of stockholders unless they are submitted in compliance with then applicable SEC rules;rules or pursuant to the Proxy Access described above; however, they will be presented for discussionconsideration at the 2019 annual meeting of stockholders if the requirements established by our bylaws for stockholder proposals and nominations have been satisfied. Under current SEC rules, stockholder nominations for directors are not eligible for inclusion in the Company’s proxy materials.
Our bylaws establish requirements for stockholder proposals and nominations not included in our proxy statement to be discussedconsidered at the annual meeting. Assuming that the 20172019 annual meeting of stockholders takes place at roughly the same date next year as the 20162018 annual meeting (and subject to any change in our bylaws – whichbylaws-which would be publicly disclosed by the Company – andCompany-and to any provisions of then-applicable SEC rules), the principal requirements for the 2017 annual meeting would be as follows:
For proposals and for nominations:
Additionally, forproposals, the notice must set forth a brief description of such business (including the text of any resolutions proposed for consideration and, if such business includes a proposal to amend the bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Stockholder and the Beneficial Owner, if any, on whose behalf the proposal is made.
Additionally, for nominations, the notice must:
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Lam Research Corporation |
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For a full description of the requirements for submitting a proposal or nomination, see the Company’s bylaws. Submissions or questions should be sent to: Secretary, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538.
By Order of the Board of Directors,
Sarah A. O’Dowd
Secretary
Fremont, California
Dated: September 29, 201626, 2018
Appendix A
LamR RESEARCH
LAM RESEARCH CORPORATIONATTN: INVESTOR RELATIONS4650 CUSHING PARKWAYFREMONT, CA 94538VOTE BY INTERNET - www.proxyvote.comUse
1999 EMPLOYEE STOCK PURCHASE PLAN
Amended and Restated Effective as of August 29, 2018
1. | Purpose. |
This Amended and Restated Lam Research Corporation 1999 Employee Stock Purchase Plan (“Plan”) is amended and restated as of August 29, 2018. The Plan is intended to provide employees of the InternetCompany and its Designated Subsidiaries with an opportunity to transmit yourpurchase Common Stock of the Company through accumulated payroll deductions. The Company’s intention is to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code (the “423(b) Plan”), although the Company makes no undertaking or representation to maintain such qualification. The provisions of the 423(b) Plan, accordingly, will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423(b) of the Code. In addition, this Plan document authorizes the grant of rights to purchase stock pursuant to rules, procedures orsub-plans adopted by the Board or Administrator that are designed to achieve tax, securities law or other Company compliance objectives in particular locations outside the United States.
All grants made to participants outside of the United States shall be deemed to be made under aNon-U.S.Sub-Plan, unless otherwise designated at the time of grant.
2. | Definitions. |
(a) “Administrator” means the Board, the Compensation Committee of the Board or any committee the Board may subsequently appoint to administer the Plan pursuant to Section 14 hereof, if one is appointed. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Board specified in the Plan shall be exercised by the Administrator. The VP of Human Resources shall administer theNon-U.S.Sub-Plans of the Plan and shall be the “Administrator” for such purposes.
(b) “Annual Increase” means the number of shares of Common Stock that, pursuant to Section 13, may annually be added to the number of shares issuable under the Plan.
(c) “Board” means the Board of Directors of the Company.
(d) “Code” means the Internal Revenue Code of 1986, as amended.
(e) “Common Stock” means the Common Stock of the Company.
(f) “Company” means Lam Research Corporation, a Delaware corporation.
(g) “Compensation” means all regular, straight-time gross earnings, exclusive of payments for overtime, shift premium, incentive compensation, incentive payments, bonuses, commissions, or other compensation.
(h) “Continuous Status as an Employee” means the absence of any interruption or termination of service as an Employee. Continuous Status as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company, provided that such leave is for a period of not more than 90 days orre-employment upon the expiration of such leave is guaranteed by contract or statute.
(i) “Designated Subsidiaries” means the Subsidiaries that have been designated by the Board or Administrator from time to time in its sole discretion as eligible to participate in this Plan.
(j) “Employee” means any person, including an officer or an employee member of the Board of Directors, who is customarily employed for at least 20 hours per week by the Company or one of its Designated Subsidiaries. For purposes of the 423(b) Plan, whether an individual qualifies as an Employee shall be determined by the Administrator, in its sole discretion, by reference to Section 3401(c) of the Code and the regulations promulgated thereunder. Unless the Administrator makes a contrary determination, the Employees of the Company shall, for all purposes of the 423(b) Plan, be those individuals who satisfy the customary employment criteria set forth above and are carried as employees by the Company or a Designated Subsidiary for regular payroll purposes. For purposes of a Non U.S.Sub-Plan, the Administrator may determine that Employees are eligible to participate even if they are employed for less than twenty (20) hours per week if, in the Administrator’s sole judgment, applicable laws require such a determination.
(k) “Exercise Date” means such business days during each Offering Period of this Plan as may be identified by the Administrator pursuant to Section 8 of this Plan.
(l) “Interim Offering Date” means the first business day following an Exercise Date other than the last Exercise Date of an Offering Period.
(m) “Maximum Share Amount” means the maximum number of shares of Common Stock that a Participant can purchase during any single Offering Period as set forth in Section 3(d)(ii) of this Plan.
(n)“Non-U.S.Sub-Plan” shall mean asub-plan of the Plan that does not necessarily meet the requirements set forth in Section 423(b) of the Code, as amended.
(o) “Offering Date” means the first business day of an Offering Period.
(p) “Offering Period” means a period established by the Administrator pursuant to Section 4 of this Plan during which payroll deductions are accumulated from Participants and applied to the purchase of Common Stock.
(q) “Participant” means an Employee who has elected to participate in this Plan pursuant to Section 5 hereof.
(r) “Plan” means this Amended and Restated Lam Research Corporation 1999 Employee Stock Purchase Plan, including both the 423(b) Plan and anyNon-U.S.Sub-Plan unless otherwise indicated.
(s) “Purchase Right” means a right to purchase Common Stock granted pursuant to Section 7 of this Plan.
(t) “Subsidiary” means a corporation, domestic or foreign, of which not less than 50% of the voting instructionsshares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.
(u)“423(b) Plan” means an employee stock purchase plan that is designed to meet the requirements set forth in Section 423(b) of the Code, as amended. The provisions of this 423(b) Plan should be construed, administered and enforced in accordance with Section 423(b) of the Code.
3. | Eligibility; Accrual and Purchase Limits. |
(a) Regular Participation. Any person who is, or will be, an Employee on the Offering Date of a given Offering Period shall be eligible to participate in this Plan during such Offering Period, subject to the requirements of Section 5(a) of this Plan.
(b) Interim Participation. Any person who becomes an Employee after the Offering Date of an Offering Period and before an Interim Offering Date shall be eligible to participate in this Plan during such Offering Period, but only on and beginning with the first Interim Offering Date on or before which such person becomes an Employee, and subject to the requirements of Section 5(a) of this Plan.
(c) Exclusion of Five Percent Stockholders. Notwithstanding paragraphs (a) and (b) of this Section 3, an Employee shall not be eligible to participate in this Plan during an Offering Period to the extent that immediately after the grant of a Purchase Right on an Offering Date or Interim Offering Date, the Employee (or any other person whose stock would be attributed to the Employee under Section 424(d) of the Code) would own stock and/or hold outstanding purchase rights to purchase stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary.
(d)Accrual andPurchase Limits.Notwithstanding any other provisions of this Plan or any subscription agreement or other offering documents, no Participant may (i) accrue rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries at a rate that exceeds $25,000 of fair market value of such stock (determined at the date of grant of those purchase rights) for electronic deliveryeach calendar year in which the purchase rights would be outstanding at any time; or (ii) purchase more than 10,000 shares of information up until 11:59 p.m. Eastern Timethe Company’s Common Stock during any Offering Period. Notwithstanding the share limit described in clause 3(d)(ii), the Administrator may designate an alternative shares limit (other than zero) in its sole discretion, prior to the commencement of any Offering Period to which the alternative limit applies. If the Administrator establishes an alternative limit, all participants shall be notified of the alternative limit prior to the commencement of the Offering Period to which the limit first applies. Any alternative limit set by the Administrator shall continue to apply with respect to all succeeding Exercise Dates and Offering Periods unless revised by the Administrator as provided in this clause 3(d)(ii).
4. | Offering Periods. |
The duration of each Offering Period shall be determined by the Administrator, provided that an Offering Period shall be no shorter than 3 months and no longer than 24 months (measured from the first business day of the first month to the last business day of
the last month) and succeeding Offering Periods shall be the same duration unless otherwise determined by the Administrator pursuant to this Section. Unless otherwise determined by the Administrator:
(a) a new Offering Period shall begin on the first business day after the last Exercise Date of an Offering Period;
(b) a new Offering Period shall begin, and the old Offering Period shall terminate, on the first business day after an Exercise Date (other than the last Exercise Date of an Offering Period) if the fair market value (as defined in Section 7(b)(i) of this Plan) of a share of Common Stock is less than the fair market value of a share of Common Stock on the Offering Date of the Offering Period; and
(c) an Offering Period shall terminate on the date that there are no Participants enrolled in it.
5. | Participation. |
(a) An Employee may become a Participant in this Plan by completing a subscription agreement, in such form or forms as the Administrator may approve from time to time, and filing it with the Company’s payroll office within 15 days before the applicable Offering Date or Interim Offering Date, unless another time for filing the subscription agreement is set by the Administrator for all Employees with respect to a given Offering Period. The subscription agreement shall authorize payroll deductions pursuant to this Plan and shall have such other terms as the Administrator may specify from time to time.
(b) At the end of an Offering Period, each Participant in the Offering Period who remains an Employee shall be automatically enrolled in the next succeeding Offering Period (a “Re-enrollment”) unless, in a manner and at a time specified by the Administrator, but in no event later than the day before the cut-offOffering Date of such succeeding Offering Period, the Participant notifies the Administrator in writing that the Participant does not wish to bere-enrolled.Re-enrollment shall be at the withholding percentage specified in the Participant’s most recent subscription agreement unless the Participant changes that percentage by timely written notice. No Participant shall be automaticallyre-enrolled whose participation has terminated by operation of Section 10 of this Plan.
(c) If an Offering Period commences pursuant to Section 4(b) of this Plan, each Employee on the Offering Date of that Offering Period shall automatically become a Participant in the commencing Offering Period. Participation shall be at the withholding percentage specified in the Participant’s most recent subscription agreement, unless the Participant notice changes that percentage by timely written notice. If the Participant has no subscription agreement on file, Participation shall be at a 0% withholding rate until changed by the Participant. No Participant shall be automaticallyre-enrolled whose participation has terminated by operation of Section 11 of this Plan.
6. | Payroll Deductions. |
(a) Each Participant shall have withheld a percentage of his or her Compensation received during an Offering Period. Withholding shall be in whole percentages, up to a maximum (not to exceed 15%) established by the Administrator from time to time, as specified by the Participant in his or her subscription agreement. Payroll deductions for a Participant during an Offering Period shall begin with the first payroll following the Offering Date or Interim Offering Date and shall end on the last Exercise Date of the Offering Period, unless sooner terminated by the Participant as provided in Section 11 of this Plan.
(b) All payroll deductions made by a Participant shall be credited to the Participant’s account under this Plan. A Participant may not make any additional payments into such account.
(c) A Participant may change the rate of his or her payroll deductions during an Offering Period by filing with the Administrator a new subscription agreement authorizing the change. The change shall take effect 15 days after the Administrator’s receipt of the new subscription agreement, except that increases in rate shall take effect on the day after the first Exercise Date on or after the 15th day.
7. | Purchase Rights. |
(a) Grant of Purchase Rights. On the Offering Date, or (if applicable) Interim Offering Date of each Offering Period, the Participant shall be granted a Purchase Right to purchase (at theper-share price) during the Offering Period up to the lesser of (a) the number of shares of Common Stock determined by dividing (i) $25,000 multiplied by the number of (whole or part) calendar years in the Offering Period by (ii) the fair market value of a share of Common Stock on the Offering Date or Interim Offering Date; or (b) the Maximum Share Amount.
(b) Terms of Purchase Rights. Except as otherwise determined by the Administrator, each Purchase Right shall have the following terms:
(i) | Theper-share price of the shares subject to a Purchase Right shall be 85% of the lower of the fair market values of a share of Common Stock on (a) the Offering Date, or Interim Offering Date, on which the Purchase Right was granted and (b) the Exercise Date. The fair market value of the Common Stock on a given date shall be the closing price as reported in the Wall Street Journal; provided, however, that if there is no public trading of the Common Stock on that date, then fair market value shall be determined by the Administrator in its discretion. |
(ii) | Payment for shares purchased by exercise of Purchase Rights shall be made only through payroll deductions in accordance with Section 6 of this Plan. |
(iii) | Upon purchase or disposition of shares acquired by exercise of a Purchase Right, the Participant shall pay, or make provision adequate to the Administrator for payment of, all tax (and similar) withholdings that the Administrator determines, in its discretion, are required due to the acquisition or disposition, including without limitation any such withholding that the Administrator determines in its discretion is necessary to allow the Company and its Subsidiaries to claim tax deductions or other benefits in connection with the acquisition or disposition. |
(iv) | During his or her lifetime, a Participant’s Purchase Right is exercisable only by the Participant. |
(v) | The Purchase Rights will in all respects be subject to the terms and conditions of this Plan, as interpreted by the Administrator from time to time. |
8. | Exercise Dates; Purchase of Shares; Refund of Excess Cash. |
(a) The Administrator shall establish one or more Exercise Dates for each Offering Period.
(b) Each Participant’s Purchase Right shall be exercised automatically on each Exercise Date during the Offering Period to purchase the maximum number of full shares up to the Maximum Share Amount at the applicable price using the Participant’s accumulated payroll deductions.
(c) The shares purchased upon exercise of a Purchase Right shall be deemed to be transferred to the Participant on the Exercise Date. A Participant will have no interest or voting right in shares covered by a Purchase Right until the Purchase Right has been exercised.
(d) Any cash remaining in a Participant’s payroll deduction account after the purchase of shares on an Exercise Date shall be carried forward in that account for application on the next Exercise Date; provided that at the termination of an Offering Period, any such cash shall be promptly refunded returned to the Participant.
9. | Limitations on Aggregate Shares to be Purchased. |
If the number of shares to be purchased on an Exercise Date by all Participants in this Plan exceeds the number of shares then available for issuance under this Plan, then the Company shall make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Administrator shall determine to be equitable. In such event, the Company shall give written notice of such reduction of the number of shares to be purchased under a participant’s option to each participant affected.
10. | Registration and Delivery of Share Certificates. |
(a) Shares purchased by a Participant under this Plan will be registered in the name of the Participant, or in the name of the Participant and his or her spouse, or in the name of the Participant and joint tenant(s) (with right of survivorship), as designated by the Participant.
(b) As soon as administratively feasible after each Exercise Date, the Company shall deliver to the Participant a certificate representing the shares purchased upon exercise of a Purchase Right. If approved by the Administrator in its discretion, the Company may instead (i) deliver a certificate (or equivalent) to a broker for crediting to the Participant’s account or (ii) make a notation in the Participant’s favor ofnon-certificated shares on the Company’s stock records.
11. | Withdrawal; Termination of Employment. |
(a) A Participant may withdraw all, but not less than all, of the payroll deductions credited to his account under this Plan at any time before an Exercise Date by giving written notice to the Administrator in a form the Administrator prescribes from time to time. The Participant’s Purchase Right will automatically terminate on the date of receipt of the notice, all payroll deductions credited to the Participant���s account will be refunded promptly thereafter, and no further payroll deductions will be made during the Offering Period.
(b) Upon termination of a Participant’s Continuous Status as an Employee for any reason, including retirement or meeting date. Have your proxy carddeath, the payroll deductions credited to the Participant’s account will be promptly refunded to the Participant or, in hand when you access the web sitecase of death, to the person or persons entitled thereto under Section 15 of this Plan, and follow the instructionsParticipant’s Purchase Right will automatically terminate.
(c) If a Participant fails to obtain your recordsremain in Continuous Status as an Employee during an Offering Period, the Participant will be deemed to have withdrawn from this Plan, the payroll deductions credited to the Participant’s account will be promptly refunded, and the Participant’s Purchase Right shall terminate.
(d) A Participant’s withdrawal from an offering will not affect the Participant’s eligibility to createparticipate in a succeeding Offering Period or in any similar plan that may be adopted by the Company.
12. | Use of Funds; No Interest. |
Amounts withheld from Participants’ Compensation under this Plan shall constitute general funds of the Company and may be used for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. No interest shall accrue on the payroll deductions of a Participant in this Plan.
13. | Number of Shares Reserved. |
Subject to adjustment as provided in Section 18, the maximum aggregate number of shares of Common Stock available for issuance under the Plan shall be 7,550,771 shares of Common Stock, which may be newly issued or treasury shares, or shares acquired on the open market, the total of which includes 4,995,845 shares of Common Stock which remain available for issuance as of August 29, 2018.
14. | Administration. |
This Plan shall be administered by the Administrator. The administration, interpretation, and application of this Plan by the Administrator shall be final, conclusive, and binding upon all persons. Neither Members of the Board nor the Administrator shall be liable for any action or determination taken or made in good faith with respect to the Plan, or any shares purchased or issued or Purchase Right exercised thereunder.The Administrator may also adopt rules, procedures orsub-plans applicable to particular Subsidiaries or locations. Any suchsub-plans may be designed to be outside the scope of Section 423(b) of the Code. The rules of suchsub-plans may take precedence over other provisions of this Plan, but unless otherwise superseded by the specific terms of suchsub-plan, the provisions of this Plan shall govern the operation of suchsub-plan. To the extent inconsistent with the requirements of Section 423(b), suchsub-plan and rights granted thereunder shall not be considered to comply with Section 423(b) of the Code.
15. | Designation of Beneficiary. |
(a) A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under this Plan in the event of the Participant’s death.
(b) A designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant, and in the absence of a beneficiary validly designated under this Plan who is living at the time of the Participant’s death, the Administrator shall deliver such shares and/or cash to the executor or administrator of the Participant’s estate, or if no such executor or administrator has been appointed (to the Administrator’s knowledge), the Administrator, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant or, if no spouse, dependent, or relative is known to the Administrator, then to such other person as the Administrator may designate.
16. | Transferability. |
Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of a Purchase Right or to receive shares under this Plan may be assigned, transferred, pledged, or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 15 hereof) by the Participant. Any such attempt at assignment, transfer, pledge, or other disposition shall be without effect, except that the Administrator may treat such act as an electronic voting instruction form.ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALSIf you would likeelection to reducewithdraw funds in accordance with Section 11 hereof.
17. | Reports. |
Individual accounts will be maintained for each Participant in this Plan. Statements of account will be given to participating Employees promptly following each Exercise Date, which statements will set forth the costs incurredamounts of payroll deductions, the per share purchase price, the number of shares purchased and the remaining cash balance, if any.
18. | Adjustments upon Changes in Capitalization. |
(a) Subject to any required action by our companythe stockholders of the Company, the number of shares of Common Stock covered by each Purchase Right under this Plan that has not yet been exercised and the number of shares of Common Stock that have been authorized for issuance under this Plan but have not yet been placed under a Purchase Right, including, but not limited to, the Annual Increase (collectively, the“Reserves”), as well as the price per share of Common Stock covered by each Purchase Right under this Plan that has not yet been exercised, shall be proportionately adjusted for any increase or decrease in mailing proxy materials, you can consentthe number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company and any repurchase of shares of Common Stock pursuant to receiving all future proxy statements, proxy cardsSection 13 herein shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determination shall be final, binding, and annual reports electronically via e-mailconclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to a Purchase Right.
(b) In the event of the proposed dissolution or liquidation of the Company, the then-current Offering Period will terminate immediately before the consummation of such proposed action, unless otherwise provided by the Board or the Internet. To sign up for electronic delivery, please followAdministrator (if the instructions above to vote usingAdministrator is not the Internet and, when prompted, indicate that youBoard). In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation (if stockholders of the Company own less than 50% of the total outstanding voting power in the surviving entity or a parent of the surviving entity after the merger), each Purchase Right under this Plan shall be assumed or an equivalent purchase right shall be substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the successor corporation does not agree to receiveassume the Purchase Right or access proxy materials electronicallyto substitute an equivalent purchase right, in future years.VOTE BY PHONE - 1-800-690-6903Usewhich case the Administrator may, in lieu of such assumption or substitution, accelerate the exercisability of Purchase Rights, and allow Purchase Rights to be exercisable (if the Board approves) as to shares as to which the Purchase Right would not otherwise be exercisable, on terms and for a period that the Administrator determines in its discretion. To the extent that the Administrator accelerates exercisability of Purchase Rights as described above, it shall promptly so notify all Participants in writing.
(c) The Administrator may, in its discretion, also make provision for adjusting the Reserves, as well as the price per share of Common Stock covered by each outstanding Purchase Right, if the Company effects one or more reorganizations, recapitalizations, rights offerings, or other increases or reductions of shares of its outstanding Common Stock, or if the Company consolidates with or merges into any touch-tone telephoneother corporation.
19. | Amendment or Termination. |
(a) The Board may at any time terminate or amend in any manner this Plan; except, however, that no amendment may be made without prior approval of the stockholders of the Company (obtained in the manner described in paragraph 21) if it would:
(i) | Increase the number of shares that may be issued under this Plan; |
(ii) | Change the designation of the employees (or class of employees) eligible for participation in this Plan; or |
(iii) | If the Company has a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), at the time of such amendment, materially increase the benefits that may accrue to Participants under this Plan. |
If any amendment requiring stockholder approval under this paragraph 19 of this Plan is made after the first registration of any class of equity securities by the Company under Section 12 of the Exchange Act, such stockholder approval shall be solicited as described in paragraph 21 of this Plan.
(b) The Board may elect to transmit your voting instructions up until 11:59 p.m. Eastern Timeterminate any or all outstanding Purchase Rights at any time, except to the dayextent that exercisability of such Purchase Rights has been accelerated pursuant to Section 18(b) hereof. If this Plan is terminated, the Board may also elect to terminate Purchase Rights upon completion of the next purchase of shares on the next Exercise Date or to permit Purchase Rights to expire in accordance with their terms (with participation to continue through such expiration dates). If Purchase Rights are terminated before expiration, any funds contributed to this Plan that have not been used to purchase shares shall be refunded to Participants as soon as administratively feasible.
20. | Notices. |
All notices or other communications by a Participant to the Company or the Administrator under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Administrator at the location, or by the person, designated by the Administrator for the receipt thereof.
21. | Stockholder Approval. |
(a) Any required approval of the stockholders of the Company pursuant to paragraph 19(a) of this Plan shall be solicited substantially in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.
(b) If any required approval by the stockholders of this Plan itself or of any amendment thereto is solicited at any time otherwise than in the manner described in Section 21(a) hereof, then the Company shall, at or before the cut-off datefirst annual meeting of stockholders held after the later of (i) the first registration of any class of equity securities of the Company under Section 12 of the Exchange Act or meeting date. Have your proxy card in hand when you call(ii) the granting of a Purchase Right hereunder to an Officer and Director after such registration, do the following:
(i) | furnish in writing to the holders entitled to vote for this Plan substantially the same information that would be required (if proxies to be voted with respect to approval or disapproval of this Plan or amendment were then being solicited) by the rules and regulations in effect under Section 14(a) of the Exchange Act at the time such information is furnished; and |
(ii) | file with, or mail for filing to, the Securities and Exchange Commission four copies of the written information referred to in subsection (i) hereof not later than the date on which such information is first sent or given to stockholders. |
22. | Conditions upon Issuance of Shares. |
(a) Shares shall not be issued with respect to a Purchase Right unless the exercise of such Purchase Right and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then followbe listed, and shall be further subject to the instructions.VOTE BY MAILMark, signapproval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of a Purchase Right, the Company may require the person exercising such Purchase Right to represent and date your proxy cardwarrant at the time of any such exercise that the shares are being purchased only for investment and return itwithout any present intention to sell or distribute such shares if, in the postage-paid envelope we have provided or return itopinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
23. | Term of Plan. |
This Plan shall continue in effect for a term of 10 years (until August 28, 2028), pursuant to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.an amendment and restatement by the Board of Directors on August 29, 2018, unless sooner terminated under Section 19 hereof.
24. | Additional Restrictions of Rule16b-3. |
The terms and conditions of Purchase Rights granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Securities Exchange Act of 1934 shall comply with the applicable provisions of Rule16b-3
of such Act. This Plan shall be deemed to contain, and such Purchase Rights shall contain, and the shares issued upon exercise thereof shall be subject to, such additional conditions and restrictions as may be required by RuleTO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:16b-3E13675-P82493-Z68577 KEEP THIS PORTION FOR YOUR RECORDS
to qualify for the maximum exemption from Section 16 of the Securities Exchange Act of 1934 with respect to Plan transactions.
LAM RESEARCH CORPORATION ATTN: INVESTOR RELATIONS 4650 CUSHING PARKWAY FREMONT, CALIFORNIA 94538 | VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
E49679-P11451-Z72863 | KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYLAM RESEARCH CORPORATIONThe Board of Directors recommends you vote FOR all eleven of the nominees listed in proposals 1 and 2:For All Withhold All For All ExceptTo withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.1. Election of DirectorsNominees:01) Martin B. Anstice02) Eric K. Brandt03) Michael R. Cannon04) Youssef A. El-Mansy05) Christine A. Heckart06) Catherine P. Lego07) Stephen G. Newberry08) Abhijit Y. Talwalkar09) Rick L. Tsai2. Election of Additional Directors, Subject to and Contingent upon the Acquisition of KLA-Tencor Corporation being Consummated Prior to the 2016 Annual Meeting of StockholdersNominees:10) John T. Dickson11) Gary B. MooreThe Board of Directors recommends you vote FOR proposals 3 and 4. For Against Abstain3. Advisory vote to approve the compensation of the named executive officers of Lam Research, or “Say on Pay.”4. Ratification of the appointment of the independent registered public accounting firm for fiscal year 2017.NOTE: Other business that may properly come before the annual meeting (including any adjournment or postponement thereof) will be voted as the proxy holders deem advisable.For address change/comments, mark here.(see reverse for instructions)Please indicate if you plan to attend this meeting.Yes NoPlease sign exactly as your name(s) appear(s) in this card. When signing as attorney, executor, administrator, or other fiduciary, please give full title. Joint owners should each sign personally. For a Corporation, an authorized officer must sign. For a partnership, an authorized person must sign.Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateV.1.1
LAM RESEARCH CORPORATION | For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | ||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR all nine of the nominees listed in proposal 1. | ||||||||||||||||||||||||||||||
1. Election of Directors | ☐ | ☐ | ☐ | |||||||||||||||||||||||||||
Nominees: 01) Martin B. Anstice 06) Catherine P. Lego | ||||||||||||||||||||||||||||||
02) Eric K. Brandt 07) Stephen G. Newberry | ||||||||||||||||||||||||||||||
03) Michael R. Cannon 08) Abhijit Y. Talwalkar | ||||||||||||||||||||||||||||||
04) Youssef A. El-Mansy 09) Lih Shyng (Rick L.) Tsai 05) Christine A. Heckart | ||||||||||||||||||||||||||||||
The Board of Directors recommends you vote FOR proposals 2, 3 and 4. | For | Against | Abstain | For | Against | Abstain | ||||||||||||||||||||||||
2. Advisory vote to approve the compensation of the named executive officers of Lam Research, or “Say on Pay.” | ☐ | ☐ | ☐ | 4. | Ratification of the appointment of the independent registered public accounting firm for fiscal year 2019. | ☐ | ☐ | ☐ | ||||||||||||||||||||||
3. Approval of the adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended and restated. | ☐ | ☐ | ☐ | NOTE:Other business that may properly come before the annual meeting (including any adjournment or postponement thereof) will be voted as the proxy holders deem advisable. | ||||||||||||||||||||||||||
For address change/comments, mark here. (see reverse for instructions) | ☐ | |||||||||||||||||||||||||||||
Please indicate if you plan to attend this meeting. | ☐ Yes | ☐ No | ||||||||||||||||||||||||||||
Please sign exactly as your name(s) appear(s) in this card. When signing as attorney, executor, administrator, or other fiduciary, please give full title. Joint owners should each sign personally. For a Corporation, an authorized officer must sign. For a partnership, an authorized person must sign. |
Signature [PLEASE SIGN WITHIN BOX] | Date | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report Combined Document are available at www.proxyvote.com.E13676-P82493-Z68577THIS PROXY IS SOLICITED ON BEHALF OF THEBOARD OF DIRECTORS OF LAM RESEARCH CORPORATIONIN CONJUNCTION WITH THE ANNUAL MEETINGOF STOCKHOLDERS TO BE HELD ON NOVEMBER 9, 2016The undersigned stockholder of LAM RESEARCH CORPORATION, a Delaware corporation (the “Company”), hereby (a) acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated September 29, 2016, and the 2016 Annual Report to Stockholders; (b) appoints Martin B. Anstice and George M. Schisler, Jr., or either of them, proxy holders and attorneys-in-fact, each with full power to designate substitutes, on behalf and in the name of the undersigned, to represent the undersigned at the 2016 Annual Meeting of Stockholders of LAM RESEARCH CORPORATION (and any adjournment(s) or postponement(s) of the Meeting) to be held on November 9, 2016 at 9:30 a.m., Pacific Standard Time, in the Building CA1 Auditorium at the principal executive offices of the Company located at 4650 Cushing Parkway, Fremont, California 94538, and (c) authorizes the proxy holders to vote all shares of Common Stock that the undersigned would be entitled to vote if personally present at the Meeting, on the matters set forth on the reverse side and, in their discretion, on any other matter(s) that may properly come before the Meeting or any adjournment(s) or postponement(s) of the Meeting.This proxy will be voted as directed. If no contrary direction is indicated, the proxy will be voted FOR all eleven of the director nominees listed in proposals 1 and 2, FOR the advisory vote to approve the compensation of the named executive officers of Lam Research, or “Say on Pay” and FOR the proposal to ratify the appointment of the independent registered public accounting firm for fiscal year 2017, and as the proxy holders deem advisable, on any other matter(s) that may properly come before the meeting.Address change/comments:(If you noted any address change/comments above, please mark corresponding box on the reverse side.)Continued and to be signed on reverse sideV.1.1www.proxyvote.com.
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E49680-P11451-Z72863
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF LAM RESEARCH CORPORATION IN CONJUNCTION WITH THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 6, 2018 The undersigned stockholder of LAM RESEARCH CORPORATION, a Delaware corporation (the “Company”), hereby (a) acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated September 26, 2018, and the 2018 Annual Report to Stockholders; (b) appoints Martin B. Anstice and George M. Schisler, Jr., or either of them, proxy holders and attorneys-in-fact, each with full power to designate substitutes, on behalf and in the name of the undersigned, to represent the undersigned at the 2018 Annual Meeting of Stockholders of LAM RESEARCH CORPORATION (and any adjournment(s) or postponement(s) of the Meeting) to be held on November 6, 2018 at 9:30 a.m., Pacific Standard Time, in the Building CA1 Auditorium at the principal executive offices of the Company located at 4650 Cushing Parkway, Fremont, California 94538, and (c) authorizes the proxy holders to vote all shares of Common Stock that the undersigned would be entitled to vote if personally present at the Meeting, on the matters set forth on the reverse side and, in their discretion, on any other matter(s) that may properly come before the Meeting or any adjournment(s) or postponement(s) of the Meeting. This proxy will be voted as directed. If no contrary direction is indicated, the proxy will be voted FOR all nine of the director nominees listed in proposal 1; FOR the advisory vote to approve the compensation of the named executive officers of Lam Research, or “Say on Pay;” FOR approval of the adoption of the Lam Research Corporation 1999 Employee Stock Purchase Plan, as amended and restated; FOR the proposal to ratify the appointment of the independent registered public accounting firm for fiscal year 2019; and as the proxy holders deem advisable, on any other matter(s) that may properly come before the meeting. | ||||||||||||||
Address change/comments: | ||||||||||||||
(If you noted any address change/comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side |