DEF 14A
Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934 (Amendment No.    )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
 
 
Preliminary Proxy Statement
 
  
Confidential, for Use of the Commission
 
Definitive Proxy Statement
    
Only (as permitted by Rule
14a-6(e)(2))
 
Definitive Additional Materials
    
 
Soliciting Material under
§240.14a-12
    
 
LOGO
SYNAPTICS INCORPORATED
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, If Other Than the Registrant)
  Payment of Filing Fee (Check all boxes that apply):
      No fee required
      Fee paid previously with preliminary materials
      Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules
14a-6(i)(1)
and
0-11
 
 


Table of Contents

LOGO

 

 

NOTICE OF ANNUAL MEETING

OF STOCKHOLDERS

 

Date and Time:

  

Tuesday, October 24, 2023, at 9:00 a.m. local (Pacific) time

Place:

  

Live interactive webcast on the Internet at www.virtualshareholdermeeting.com/syna2023. You will not be able to attend the 2023 annual meeting of stockholders (the “Annual Meeting”) in person.

Items of

Business:

   1.         

Elect the two nominees named in the attached Proxy Statement to the Board of Directors, each to serve for a three-year term expiring in 2026.

   2.   

Approve, on an advisory basis, the compensation of our named executive officers.

   3.   

Vote, on an advisory basis, on the frequency of future advisory votes on the compensation of our named executive officers.

   4.   

Ratify the appointment of KPMG LLP as our independent auditor for the year ending June 29, 2024.

   5.   

Approve our amended and restated 2019 Equity and Incentive Compensation Plan.

   6.   

Approve the amendment and restatement of our certificate of incorporation to provide for the declassification of our Board of Directors over a three-year period, beginning with our 2024 annual meeting of stockholders, and make certain other changes.

Record Date:

  

The Board of Directors has fixed the close of business on August 30, 2023, as the record date for determining the stockholders entitled to receive notice of and to vote at the Annual Meeting, or any adjournment(s) or postponement(s) thereof.

Proxy Voting:

  

Your vote is very important to us. Whether or not you plan to participate in the Annual Meeting, we urge you to submit your proxy or voting instructions as soon as possible to ensure your shares are represented at the Annual Meeting. If you participate in and vote at the Annual Meeting, your proxy or voting instructions will not be used.

 

  

By Order of the Board of Directors,

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

 

The Notice of Annual Meeting, Proxy Statement and our 2023 Annual Report on Form 10-K are first being made available to stockholders at www.proxyvote.com on or about September 5, 2023. You are encouraged to access and review all of the important information contained in our proxy materials before voting.

  

 

LOGO

 

Michael Hurlston

President and Chief Executive Officer

September 5, 2023: San Jose, California

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   1


Table of Contents

CONTENTS

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

   1

PROXY SUMMARY

   4

Business and Financial Highlights

   4

Stockholder Engagement and Responsiveness

   5

Compensation Highlights

   6

Board of Directors Snapshot and Board Diversity Matrix

   7

Corporate Governance Highlights

   8

VOTING INFORMATION

   9

Voting Matters and Board Recommendations

   9

How to Cast Your Vote

   9

PROPOSAL 1 – ELECTION OF DIRECTORS

   10

General

   10

Board Composition

   10

Class 3 Director Nominees

   12

Continuing Directors

   14

Vote Required

   17

Recommendation

   17

PROPOSAL 2 – ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

   18

Our Compensation Objectives

   18

Fiscal 2023 Compensation Highlights

   19

Advisory Resolution

   19

Vote Required

   20

Recommendation

   20

PROPOSAL 3 – ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

   21

Vote Required

   21

Recommendation

   21

PROPOSAL 4 – RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITOR

   22

Vote Required

   22

Recommendation

   22

PROPOSAL 5 – APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

   23

Vote Required

   33

Recommendation

   33

PROPOSAL 6 – APPROVAL OF THE AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD AND MAKE CERTAIN OTHER CHANGES

   34

Vote Required

   35

Recommendation

   35

CORPORATE GOVERNANCE

   36

Board Composition and Governance

   36

Board Committees

   41

Director Selection, Evaluation and Communications

   44

DIRECTOR COMPENSATION

   46

Cash Compensation

   46

Equity Compensation

   46

Director Compensation Limits

   46

Stock Ownership Guidelines

   46

Director Compensation Table — Fiscal 2023

   47

AUDIT AND NON-AUDIT FEES

   48

Audit Committee Pre-Approval Policies

   48

Principal Accountant Fees and Services

   48

AUDIT COMMITTEE REPORT

   49

COMPENSATION DISCUSSION AND ANALYSIS

   50

Executive Summary

   50

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   2


Table of Contents

How We Make Compensation Decisions

     54  

Governance and Pay Policies and Practices

     55  

Compensation Philosophy and Objectives

     56  

Fiscal 2023 Named Executive Officer Compensation

     56  

Severance and Change of Control Arrangements

     62  

Other Compensation Policies

     63  

Tax Considerations

     64  

COMPENSATION COMMITTEE MATTERS

     65  

Compensation Committee Report

     65  

Compensation Committee Interlocks and Insider Participation

     65  

NAMED EXECUTIVE OFFICER COMPENSATION TABLES

     66  

Summary Compensation Table — Fiscal Years 2021, 2022, and 2023

     66  

Grants of Plan-Based Awards — Fiscal 2023

     69  

Description of Plan-Based Awards

     70  

Outstanding Equity Awards at Fiscal 2023 Year End

     71  

Option Exercises and Stock Vested — Fiscal 2023

     74  

Potential Payments Upon Termination or Change of Control

     74  

Estimated Severance and Change of Control Benefits

     76  

CEO PAY-RATIO DISCLOSURE

     78  

PAY VS. PERFORMANCE DISCLOSURE

     79  

EQUITY COMPENSATION PLAN INFORMATION

     84  

BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS

     85  

DELINQUENT SECTION 16(A) REPORTS

     86  

OTHER MATTERS

     87  

Certain Relationships and Related Transactions

     87  

Proposals and Nominations for 2024 Annual Meeting of Stockholders

     87  

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING PROCEDURES

     88  

GENERAL INFORMATION

     92  

Proxy Solicitation Expenses

     92  

Available Information

     92  

Other Matters

     92  

APPENDIX A – DEFINITIONS AND RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

     A-1  

APPENDIX B – AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

     B-1  

APPENDIX C – AMENDMENT TO CERTIFICATE OF INCORPORATION

     C-1  

Forward-Looking Statements

This Proxy Statement contains forward-looking statements that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business, and can be identified by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements may include words such as “expect,” “anticipate,” “intend,” “believe,” “estimate,” “plan,” “target,” “strategy,” “continue,” “may,” “will,” “should,” variations of such words, or other words and terms of similar meaning. All forward-looking statements reflect our best judgment and are based on several factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Such factors include, but are not limited to, the risks as identified in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business” sections of our most recent Annual Report on Form 10-K and other risks as identified from time to time in our Securities and Exchange Commission reports. Forward-looking statements are based on information available to us on the date hereof, and we do not have, and expressly disclaim, any obligation to publicly release any updates or any changes in our expectations, or any change in events, conditions, or circumstances on which any forward-looking statement is based. Our actual results and the timing of certain events could differ materially from the forward-looking statements. These forward-looking statements do not reflect the potential impact of any mergers, acquisitions, or other business combinations that had not been completed as of the date of this Proxy Statement.

Fiscal Year Information

Our fiscal year is the 52- or 53-week period ending on the last Saturday in June. The fiscal periods presented in this proxy statement were the 52-week periods for the fiscal years ended June 24, 2023 (“Fiscal 2023”), June 25, 2022 (“Fiscal 2022”), and June 26, 2021 (“Fiscal 2021”). Our principal executive offices are located at 1109 McKay Drive, San Jose, California 95131.

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   3


Table of Contents

PROXY SUMMARY

This section highlights information about Synaptics Incorporated (“we,” “our,” “us” or the “Company”) and our Board of Directors (the “Board”) that is contained elsewhere in this Proxy Statement. This section does not contain all of the information that you should consider, and you should read the entire Proxy Statement before voting.

BUSINESS AND FINANCIAL HIGHLIGHTS

In the face of a challenging macro-economic backdrop, we maintained our financial discipline during Fiscal 2023, delivering continued profitability for our stockholders. Many customers reduced their forecasts in response to accumulated inventory positions, resulting in consolidated revenue of $1.35 billion, a decline of 22% compared to Fiscal 2022. Despite a decline in topline sales, we remained focused on our core strategy to drive growth in the Internet of Things (“IoT”) market, for which the decline in revenue was only 14% compared to Fiscal 2022. Our IoT sales mix continued to improve, reaching 70% of sales in Fiscal 2023 from just 25% in Fiscal 2020. We introduced several new and exciting products to our customers, including “Navarro,” a first of its kind wireless docking platform based on our new device. Our WiFi engineering teams taped out several new devices which are now in final qualification stages, and we won significant new designs with large mobile and PC customers which we expect to contribute to future growth in those areas. We are excited about our future as we continue to pursue growth in the IoT market.

During Fiscal 2023, our leadership team led the Company to the following notable financial achievements:

 

   

Revenue of $1.35 billion for Fiscal 2023

 

   

IoT product revenue of $946 million, representing 70% of total sales

 

   

GAAP earnings per share of $1.83 and non-GAAP earnings per share of $8.12

 

   

GAAP gross margin of 52.8% and non-GAAP gross margin of 60.1%

 

   

Cash flow from operations of $332 million

 

   

Repurchased approximately two million shares or about 5% of shares outstanding

 

LOGO

(1) A reconciliation of GAAP to Non-GAAP gross margin, Non-GAAP operating margin, and Non-GAAP EPS can be found in Appendix A to this Proxy Statement.

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   4


Table of Contents

STOCKHOLDER ENGAGEMENT AND RESPONSIVENESS

We believe regular and transparent communications with our stockholders is essential to our long-term success. Our management team, including our Chief Executive Officer and Chief Financial Officer, regularly participates at various investor conferences around the world and have received valuable feedback from our stockholders who have provided important external perspectives on the strategy of the Company. Feedback from our stockholders is shared with our Board regularly.

 

 Fiscal 2023 Stockholder Outreach

 

  ·   

In Fiscal 2023, we contacted our top 16 institutional stockholders representing an aggregate ownership of approximately 70% of our then-outstanding shares to discuss corporate governance and executive compensation.

  ·   

Management ultimately had discussions with stockholders representing 35% of our then outstanding shares.

  ·   

Stockholders representing 35% of our then outstanding shares did not require a meeting, had no concerns or did not respond.

LOGO

 What We Heard

 

  ·   

Stockholders wanted us to declassify the Board, and some expressed a desire to see us commit to a phased-in approach to declassify the Board.

  ·   

Stockholders wanted to see less dilution of shares outstanding. Stockholders wanted cash bonuses and equity compensation to be tied to revenue and profitability-based financial targets.

  ·   

Stockholders wanted to maintain current levels of regular outreach from and engagement with us.

  ·   

In terms of the environmental, social and governance (“ESG”) metrics, stockholders wanted the company to focus more on social metrics. One investment firm stockholder is looking at these metrics differently for every company and sector, and for companies in the technology sector, they believe governance and social goals are more important than environmental targets and goals.

  ·   

Stockholders expressed concerns about the high average tenure of the directors serving on the Board.

LOGO

 What We Have Done in Response

 

  ·   

The Board approved, subject to approval of Proposal 6 by our stockholders, an amendment and restatement of our Certificate of Incorporation to declassify the Board beginning with the 2024 annual meeting of stockholders. This change would provide for the annual election of all directors, phased-in over a three-year period.

  ·   

The Board has increased our share repurchase authorization by $500 million. During Fiscal 2023, the Company repurchased approximately 5% of the shares outstanding at the beginning of the year.

  ·   

We have continued to maintain our outreach program to regularly interact with our stockholders on matters regarding corporate governance and executive compensation.

  ·   

Effective Fiscal 2020 and continuing into Fiscal 2023, our annual performance-based cash bonus plan was modified from prior practice and redesigned to base award payments as measured against three objective financial performance metrics – revenue, non-GAAP gross margin, and non-GAAP operating profit.

LOGO

 Continuing Engagement Process

 

  ·   

We are committed to maintaining active stockholder engagement through participation at stockholder conferences and targeted stockholder marketing events. In Fiscal 2023, we presented at 16 such conferences and six such marketing events, which was similar to the number of such events we had attended in Fiscal 2022.

  ·   

We reach out to our top 15 institutional stockholders on a regular basis.

  ·   

We discuss the feedback we receive from stockholder calls and the activities outlined above at each of our Board meetings.

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   5


Table of Contents

COMPENSATION HIGHLIGHTS

The Compensation Committee approved the Fiscal 2023 compensation arrangements for our NEOs. Below are highlights from the Compensation Discussion and Analysis (the “CD&A”) section of this Proxy Statement:

Compensation Framework

 

Annual Cash Bonuses Based

on Performance

  

Determined based on a rigorous performance measurement framework that measures the Company’s actual performance against multiple pre-established financial goals – which include revenue, non-GAAP gross margin, and non-GAAP operating profit goals – and each NEO’s contribution to that performance.

Majority of Target Total

Direct Compensation is “At Risk”

  

Approximately 75% of our Chief Executive Officer’s target total direct compensation and approximately 71% of our other NEOs’ target total direct compensation was tied directly to the performance of the Company and/or the Company’s stock price (as reflected in the pay mix charts below).

Majority of Target Total

Direct Compensation is in the Form

of Long-Term Incentives

  

The most significant component of each NEO’s target total direct compensation opportunity is in the form of equity awards that each vest or are earned over a multi-year (three- or four-year) period. In Fiscal 2023, approximately 92% of our Chief Executive Officer’s, and approximately 85% of our other NEOs’, target total direct compensation was annual long-term incentive compensation in the form of equity awards.

Majority of Target TDC Long-Term

Incentives are Performance

-Based

  

Approximately 76% of our Chief Executive Officer’s and all other NEOs’ annual long-term incentive compensation for Fiscal 2023 is subject to performance-based vesting requirements.

Pay Mix for Fiscal 2023

CEO - Michael Hurlston

 

LOGO

All other NEOs

 

LOGO

 

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   6


Table of Contents

BOARD OF DIRECTORS SNAPSHOT AND BOARD DIVERSITY MATRIX

 

Name        Age       

  Director  

Since

       Independent        Primary Occupation   

Committee

Membership*

Nelson Chan

   62    2007    Yes    Chair of the Board of Synaptics    AC, EC (Chair), NCGC

Jeffrey Buchanan

   67    2005    Yes    Consultant    AC (Chair), EC, NCGC

Keith Geeslin

   70    1986    Yes    General Partner of Francisco Partners    CC (Chair), EC

Susan Hardman

   62    2020    Yes    Former Executive    AC, CC

Michael Hurlston

   56    2019    No    President and Chief Executive Officer of Synaptics   

Patricia Kummrow

   53    2021    Yes    Vice President, Data Center Group and General Manager, Ethernet Division at Intel    EC, NCGC (Chair)

Vivie Lee

   56    2022    Yes    Consultant    AC, CC

James Whims

   68    2007    Yes    Partner at Alsop Louie Partners    CC, NCGC

* AC = Audit Committee; CC = Compensation Committee; EC = Executive Committee; NCGC = Nominations and Corporate Governance Committee

The matrix below summarizes the self-identified gender and demographic background of our two director nominees and six continuing directors as of September 5, 2023.

Board Diversity Matrix (As of September 5, 2023)

 

   

Total Number of Directors

   8
     Female    Male    Non-Binary
     

Directors

   3    5    -

Number of Directors who Self-Identify with Any of the Categories Below:

     

African American or Black

   -    -    -
     

Alaskan Native or Native American

   -    -    -
     

Asian

   1    1    -
     

Hispanic or Latinx

   -    -    -
     

Native Hawaiian or Pacific Islander

   -    -    -
     

White

   2    4    -
     

Two or More Races or Ethnicities

   -    -    -
     

LGBTQ+

   1    -    -

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   7


Table of Contents

CORPORATE GOVERNANCE HIGHLIGHTS

The Company is committed to good corporate governance, which promotes the long-term interests of our stockholders, strengthens accountability of the Board and helps build public trust in the Company. Highlights include the following:

 

 

Independent Board Leadership and Practices

 

    Independent Chair of the Board with a well-defined role and robust responsibilities

 

    All directors are independent except our Chief Executive Officer (7 out of 8 directors)

 

    All Board committees are composed solely of independent directors

 

    Commitment to include women and individuals from minority groups in the qualified pool from which new director candidates are selected

 

    Comprehensive risk oversight practices, including oversight of environmental and cybersecurity risk, with quarterly updates from management on risks we face

 

    Regular strategic updates from our Chief Executive Officer

 

    Regular executive sessions of independent directors led by our independent Chair of the Board

 

    Annual Board and committee self-evaluations

 

    Nominations and Corporate Governance Committee makes regular reports on succession planning efforts

 

    Directors may only serve on the board of directors of four other public companies, unless the Board member is also a CEO, in which case the director may only serve on one other public board, in each case absent approval from the Chair of the Board or the Nominations and Corporate Governance Committee

 

Stockholder Rights

 

    Majority voting for directors

 

    Annual Say-on-Pay voting

 

    No stockholder rights plan

 

    Subject to the approval of Proposal No. 6 and the proposed phase-in, annual election of directors

 

 

 

 

Best Compensation and Governance Practices

 

    Independent compensation consultant

 

    Robust stock ownership guidelines for executive officers and non-employee directors

 

    Stock holding requirement for our directors and executive officers

 

    Anti-hedging policy

 

    Anti-pledging policy

 

    Compensation recovery (“clawback”) policy

 

    No “single trigger” change of control provisions

 

    No excise tax gross-ups

 

    No repricing of underwater stock options without stockholder approval

 

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   8


Table of Contents

VOTING INFORMATION

VOTING MATTERS AND BOARD RECOMMENDATIONS

Our Board is soliciting your proxy to vote on the following matters at our Annual Meeting to be held at 9:00 a.m. local (Pacific) time on Tuesday, October 24, 2023, via live interactive webcast on the Internet at www.virtualshareholdermeeting.com/syna2023, where you will also have the opportunity to submit questions to the Company during the Annual Meeting:

 

      Vote Required    Vote Required   

Board

Recommendation

   Page

Proposal No. 1

   Election of Two Director Nominees    Majority of Votes Cast    For    10

Proposal No. 2

  

Advisory Approval of the Compensation

of our Named Executive Officers

   Majority of Votes Cast    For    18

Proposal No. 3

   Advisory Vote on the Frequency of Future Advisory Votes on the Compensation of our Named Executive Officers    Choice that receives the most votes    1 Year    21

Proposal No. 4

   Ratification of the Appointment of KPMG LLP as Independent Auditor for fiscal year 2024 (“Fiscal 2024”)    Majority of Votes Cast    For    22

Proposal No. 5

   Approval of the Amended and Restated 2019 Equity and Incentive Compensation Plan    Majority of Votes Cast    For    23

Proposal No. 6

   Approval of the Amendment and Restatement of our Certificate of Incorporation to Declassify our Board   

66 2/3% of the

Outstanding Stock

   For    34

HOW TO CAST YOUR VOTE

 

INTERNET

  

PHONE

  

MAIL

  

AT THE ANNUAL MEETING

Follow the instructions provided in the notice or separate proxy card or voting instruction form you received.    Follow the instructions provided in the separate proxy card or voting instruction form you received.    Send your completed and signed proxy card or voting instruction form to the address on your proxy card or voting instruction form.   

Vote during the meeting via the Internet at

www.virtualshareholdermeeting.com/

syna2023

LOGO    LOGO    LOGO   

 

On September 5, 2023, the proxy materials for our Annual Meeting, including this Proxy Statement and our 2023 Annual Report on Form 10-K (the “2023 Annual Report”), were first sent or made available to our stockholders entitled to vote at the Annual Meeting.

 

SYNAPTICS INCORPORATED   PROXY STATEMENT   9


Table of Contents

PROPOSAL 1 –

ELECTION OF DIRECTORS

GENERAL

Our Board currently consists of eight directors and is divided into three classes, with one class standing for election each year for a three-year term, as follows:

 

Class 3 directors with terms

expiring at the Annual Meeting

  

Class 1 directors with terms

expiring at the 2024 annual

meeting of stockholders

  

Class 2 directors with terms

expiring at the 2025 annual meeting

of stockholders

Nelson Chan

   Jeffrey Buchanan    Michael Hurlston

Susan Hardman

   Keith Geeslin    Patricia Kummrow
   James Whims    Vivie Lee

On the recommendation of the Nominations and Corporate Governance Committee (the “Nominations Committee”), the Board has nominated Nelson Chan and Susan Hardman for re-election as Class 3 directors. If elected, the Class 3 directors will serve for three-year terms expiring at the 2026 annual meeting of stockholders or until their respective successors are duly elected and qualified.

Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” the election of each of Nelson Chan and Susan Hardman. Mr. Chan and Ms. Hardman are currently directors of the Company and have been previously elected to serve on the Board by our stockholders. Mr. Chan and Ms. Hardman have each consented to being named in this Proxy Statement and to serve as a director if elected. We have no reason to believe that either Mr. Chan or Ms. Hardman will be unable or unwilling for good cause to serve if elected. In the event Mr. Chan or Ms. Hardman is unable for any reason or unwilling for good cause to serve at the time of the Annual Meeting, the persons who are designated as proxy holders may exercise discretionary authority to vote for a substitute nominee selected by our Board or our Board may reduce the number of directors on the Board.

BOARD COMPOSITION

Board Snapshot

The following provides a snapshot of our two director nominees and six continuing directors:

 

 

LOGO

 

 

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Director Skills, Experience and Background

We believe each of our two director nominees and six continuing directors possess the professional and personal qualifications necessary for effective service as a director. In addition to each director’s specific experience, qualifications and skills, we believe that each director has individual character and integrity; business experience and leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to the Company. We believe all directors have a commitment to the Company and to building long-term stockholder value. The following chart shows a summary of the skills and core competencies of our two director nominees and six continuing directors:

 

LOGO

 

 

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CLASS 3 DIRECTOR NOMINEES

 

LOGO

 

Nelson C. Chan

 

Chair of the

Board and Independent Director

 

Age: 62

 

Director Since 2007

 

Committees: Executive (Chair), Audit and Nominations

  

Nelson C. Chan has been the Chair of our Board since October 2018 and a director of the Company since February 2007.

 

From December 2006 until August 2008, Mr. Chan served as the Chief Executive Officer of Magellan Corporation, a leader in the consumer, survey, GIS, and OEM GPS navigation and positioning markets. From 1992 through 2006, Mr. Chan served in various senior management positions with SanDisk Corporation, a global leader in flash memory cards, including as Executive Vice President and General Manager, Consumer Business. From 1983 to 1992, Mr. Chan held marketing and engineering positions at Chips and Technologies, Signetics, and Delco Electronics.

 

Mr. Chan is a member of the board of directors, the Audit Committee, and the Nominating and Governance Committee of Deckers Outdoor Corporation, a NYSE-listed company, which is a footwear, apparel and accessories designer and distributor, and a member of the board of directors, the Audit Committee, and the Nominating and Governance Committee of Twist Bioscience, a Nasdaq-listed company, which manufactures synthetic DNA. Mr. Chan also currently serves on the Boards of Directors of several private companies.

 

Previously, Mr. Chan was Chair of the board of directors, Chair of the Compensation Committee, member of the Audit Committee and member of the Nominating and Corporate Governance Committee of Adesto Technologies, a Nasdaq-listed company, from 2010 to June 2020, prior to its acquisition by Dialog Semiconductor plc, a member of the board of directors, Chair of the Compensation Committee and member of the Nominating and Corporate Governance committee of Socket Mobile, a Nasdaq-listed company, from 2016 to 2019, a member of the board of directors of Silicon Laboratories, Inc., a Nasdaq-listed company, from 2007 to 2010, a member of the board of directors, Chair of the Audit Committee and member of the Compensation Committee of Affymetrix, from 2010 to 2016, prior to its acquisition by Thermo Fisher, and a member of the board of directors and Chair of the board of directors from June 2013 to September 2016 of Outerwall, a Nasdaq-listed company, prior to its acquisition by Apollo Global Management, a private equity firm. Mr. Chan holds a Bachelor of Science degree in Electrical and Computer Engineering from the University of California at Santa Barbara and a Master’s degree in Business Administration from Santa Clara University.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe that Mr. Chan’s experience as the former Chief Executive Officer of Magellan, his previous senior management positions with other leading companies, and his service as a director of multiple companies provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board.

 

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LOGO

 

Susan J. Hardman

 

Independent Director

 

Age: 62

 

Director Since 2020

 

Committees: Audit and Compensation

  

Susan J. Hardman has been a director of the Company since May 2020.

 

In April 2015, Ms. Hardman retired from her full-time senior executive role. From 2010 to 2015, she was an advisory board member for Santa Clara University’s School of Electrical Engineering. From August 2013 to January 2015, Ms. Hardman served as senior vice president of the Specialty products group for Intersil Corporation (subsequently acquired by Renesas), a company that was a leading global provider of analog semiconductor solutions for the computing, consumer, industrial and communications markets. From September 2008 to July 2013, she served as senior vice president of Intersil’s Analog and Mixed Signal product group. Additionally, while employed by Intersil, Ms. Hardman held roles of vice president and general manager of the Automotive and Specialty products group and vice president of Corporate Marketing. She joined Intersil from Exar Corporation (subsequently acquired by MaxLinear Inc.), where she was vice president and general manager of Exar’s Interface products division. Prior to that, she served as vice president of Corporate Marketing and director of Product Marketing for Exar. From 1983 to 1999, Ms. Hardman held roles in marketing, product design, applications, and product testing with VLSI Technology and Motorola. Ms. Hardman holds a Bachelor of Science degree in Chemical Engineering from Purdue University and a Master’s of Business Administration degree from the University of Phoenix.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe that Ms. Hardman’s previous senior management positions with other semiconductor companies, her extensive knowledge of the semiconductor industry, her engineering background, and her knowledge and experience in the consumer and automotive technology sectors, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board.

 

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CONTINUING DIRECTORS

 

LOGO

 

Jeffrey D. Buchanan

 

Independent Director

 

Age: 67

 

Director Since 2005

 

Committees: Audit (Chair), Nominations and Executive

  

Jeffrey D. Buchanan has been a director of the Company since September 2005.

 

In August 2020, Mr. Buchanan retired from his full-time senior executive role and is presently an independent consultant in the technology industry. Mr. Buchanan was the Executive Vice President, Chief Financial Officer, and Treasurer of Smith & Wesson Brands, Inc. (formerly American Outdoor Brands Corporation), a Nasdaq-listed company that is a U.S.-based leader in firearm manufacturing and design, from January 2011 to August 2020. Mr. Buchanan also served as the Chief Administrative Officer of Smith & Wesson Brand, Inc. from May 2015 until August 2020, as Secretary of Smith & Wesson Brands, Inc. from January 2011 until April 2012, and as a member of the board of directors and as the Chair of the Audit Committee of Smith & Wesson Brands, Inc. from November 2004 until December 2010. He was Of Counsel to the law firm of Ballard Spahr LLP from May 2010 until December 2010. Mr. Buchanan served as a Senior Managing Director of CKS Securities, LLC, a registered broker-dealer, from August 2009 until May 2010 and as a Senior Managing Director of Alare Capital Securities, L.L.C., a registered broker-dealer, from November 2006 until July 2009. From 2005 to 2006, Mr. Buchanan was principal of Echo Advisors, Inc., a corporate consulting and advisory firm focusing on mergers, acquisitions, and strategic planning. Mr. Buchanan served in various positions for Three-Five Systems, Inc., a publicly traded electronic manufacturing services company, including as Executive Vice President, Chief Financial Officer, and Treasurer, from May 1996 until February 2005. Mr. Buchanan was a business attorney for the law firm of O’Connor, Cavanagh, Anderson, Killingsworth & Beshears from 1986 until 1996 and for the law firm of Davis Wright Tremaine LLP from 1984 until 1986. He was a senior staff person at Deloitte & Touche LLP from 1982 to 1984. Mr. Buchanan holds a Bachelor of Science degree in Accounting from Arizona State University, a Juris Doctor degree from the University of Arizona, and a Master of Laws degree in Tax from the University of Florida.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe Mr. Buchanan’s legal, accounting, and investment banking background, his prior roles as the chief financial officer and treasurer of public companies, and his public company board service provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board.

 

LOGO

 

Keith B. Geeslin

 

Independent Director

 

Age: 70

 

Director Since 1986

 

Committees: Compensation

(Chair) and Executive

  

Keith B. Geeslin has been a director of the Company since 1986.

 

Mr. Geeslin has been a General Partner of Francisco Partners, a firm specializing in structured investments in technology companies undergoing strategic, technological, and operational inflection points, since January 2004. From 2001 until October 2003, Mr. Geeslin served as Managing General Partner of the Sprout Group, a venture capital firm, with which he became associated in 1984. In addition, Mr. Geeslin served as a general or limited partner in a series of investment funds associated with the Sprout Group, a division of DLJ Capital Corporation, which is a subsidiary of Credit Suisse (USA), Inc.

 

Mr. Geeslin is currently a member of the board of directors and Chair of the Compensation Committee of CommVault Systems, Inc., a public company that provides data management software. Mr. Geeslin holds a Bachelor of Science degree in Electrical Engineering, a Master’s of Science degree in Engineering and Economic Systems from Stanford University, and a Master of Arts degree in Philosophy, Politics, and Economics from Oxford University.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe Mr. Geeslin’s long career at leading private equity and venture capital firms with a focus on investments in high-technology companies, his service on multiple boards of directors, and his engineering background provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board.

 

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LOGO

 

Michael E. Hurlston

 

President, Chief Executive Officer and Director

 

Age: 56

 

Director Since 2019

 

Committees: None

  

Michael E. Hurlston has been a director and the President and Chief Executive Officer of the Company since August 2019.

 

Prior to joining the Company, Mr. Hurlston served as the Chief Executive Officer and a member of the board of directors of Finisar Corporation from January 2018 to August 2019. Prior to joining Finisar, he served as Senior Vice President and General Manager of the Mobile Connectivity Products/Wireless Communications and Connectivity Division and held senior leadership positions in sales, marketing and general management at Broadcom Limited and its predecessor corporation from November 2001 through October 2017. Prior to joining Broadcom in 2001, Mr. Hurlston held senior marketing and engineering positions at Oren Semiconductor, Inc., Avasem, Integrated Circuit Systems, Micro Power Systems, Exar and IC Works from 1991 until 2001.

 

Mr. Hurlston is a member of the board of directors and the Audit Committee of Flextronics International, Ltd., a Nasdaq Global Select Market (“Nasdaq”)-listed company. From August 2016 to August 2020, Mr. Hurlston was a member of the board of directors and the Compensation, Audit and Nominating and Governance Committees of Ubiquiti Networks, Inc., an New York Stock Exchange (“NYSE”)-listed company. Mr. Hurlston serves on the Board of Executive Trustees of the UC Davis Foundation and on the Dean’s Executive Committee for the College of Engineering and the Dean’s Advisory Counsel for the Graduate School of Management at the University of California, Davis. Mr. Hurlston holds a Bachelor of Science and a Master of Science degree in Electrical Engineering and a Master’s degree in Business Administration from the University of California, Davis.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe Mr. Hurlston’s position as Chief Executive Officer of the Company, and his successful career at major companies before joining our Company provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board.

 

LOGO

 

Patricia Kummrow

 

Independent Director

 

Age: 53

 

Director Since 2021

 

Committees: Executive and Nominations (Chair)

  

Patricia Kummrow has been a director of the Company since July 2021.

 

Ms. Kummrow has served as the Vice President, Network and Edge Group, and General Manager, Ethernet Division, at Intel Corporation (“Intel”) since March 2017. She served as the Vice President, Platform Engineering Group, at Intel from January 2016 to March 2017, and in other senior engineering leadership roles at Intel from 2005 to 2016. Earlier in her career, Ms. Kummrow served in engineering and engineering management roles at Hewlett-Packard. Ms. Kummrow holds a Bachelor of Science degree in Electrical Engineering with a minor in Mathematics from the University of Texas at El Paso, and Master’s of Science degree in the Management of Technology from Walden University.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe that Ms. Kummrow’s senior management positions with other semiconductor companies, her extensive knowledge of the semiconductor industry, her engineering background, and her understanding of embedded hardware and software, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board.

 

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LOGO

 

Vivie “YY” Lee

 

Independent Director

 

Age: 56

 

Director Since 2022

 

Committees: Audit and Compensation

  

Vivie “YY” Lee has been a director of the Company since January 2022.

 

Beginning in October 2021, Ms. Lee retired from her full-time senior executive role and has acted as an independent consultant in the technology industry. Ms. Lee served as Chief Strategy Officer of Anaplan from 2018 until October 2021, leading performance planning across corporate functions and incubating strategic internal initiatives and market collaborations during the period through and following the company’s IPO. Previously, she was chief executive officer of FirstRain Inc., an enterprise SaaS data science company, from 2015 until its acquisition by Ignite Technologies in August 2017, and was the company’s chief operating officer, responsible for engineering, analytics and data science since 2005. Prior to FirstRain, Ms. Lee served as the general manager of Worldwide Services at Cadence Design Systems, a global advanced technology division of the company. She previously co-founded the software company Aqueduct Software, an automated enterprise application profiling and analysis solution, and led this company through bootstrapping, venture financing, commercial growth, and acquisition by NetManage in 2000. Ms. Lee began her career at Bell Labs and has held various product leadership roles at Synopsys and 8x8 (formerly Integrated Information Technology Inc.). Ms. Lee is a member of the boards of CommVault Systems, Inc., a public company that provides data management software applications, and Belden Inc., a public company designing, manufacturing and marketing networking, connectivity, and cable products and solutions for industrial automation, smart buildings, and broadcast markets. She holds a Bachelor of Science degree in Mathematics from Harvard University.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe that Ms. Lee’s board experience, her previous senior management positions with other technology companies, her mathematics background, and her deep understanding of software and software applications, provide the requisite qualifications, skills, perspectives, and experiences that make her well qualified to serve on our Board.

 

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LOGO

 

James L. Whims

 

Independent Director

 

Age: 68

 

Director Since 2007

 

Committees: Compensation and Nominations

  

James L. Whims has been a director of the Company since October 2007.

 

Mr. Whims has been a partner at Alsop-Louie Partners, a venture capital firm focused on identifying promising entrepreneurs, since February 2010. From 1996 to 2007, Mr. Whims was a Managing Director of Techfund Capital l, LP and Techfund Capital II, LP and since 2001, a Managing Director and Venture Partner at Techfund Capital Europe, which are venture capital firms concentrating on high-technology enterprises. Mr. Whims was Executive Vice President of Sony Computer Entertainment of America from 1994 to 1996, where he was responsible for the North American launch of the Playstation and was the winner of the Brandweek/Ad Week marketing executive of the year. From 1990 to 1994, Mr. Whims was Executive Vice President of Software Toolworks. Mr. Whims co-founded Worlds of Wonder, an American toy company that launched Teddy Ruxpin, Lazer Tag and the United States launch of Nintendo, where he was an executive from 1985 to 1988.

 

Mr. Whims is currently a member of the board of directors and a member of the Audit Committee and Compensation Committee of the private company DigiLens Inc., a diffractive waveguide optical company, and a member of the board of directors and Compensation Committee at each of private companies Kuprion, Inc. a nano-copper materials company, and Phizzle, an engagement automation software company.

 

Previously, Mr. Whims was a member of the board of directors of THQ, Inc., Portal Player, and 3DFX, all of which were Nasdaq-listed companies, and of Twitch TV, which was a private company. Mr. Whims holds a Bachelor of Science degree in Economics and Communications from Northwestern University and a Master of Business Administration degree in Finance and Marketing from the University of Arizona.

 

Specific Qualifications, Attributes, Skills and Experience:

 

We believe Mr. Whims’ prior senior executive positions with major companies, his experience as an investor in high-technology companies, his service as a director of multiple companies, and his expertise in e-communications and marketing provide the requisite qualifications, skills, perspectives, and experiences that make him well qualified to serve on our Board.

VOTE REQUIRED

Each director nominee will be elected at the Annual Meeting if such nominee receives a majority of the votes cast with respect to such nominee’s election (that is, the number of votes cast “FOR” the nominee must exceed the number of votes cast “AGAINST” the nominee). Proxies cannot be voted for a greater number of persons than the two director nominees named in Proposal 1.

An incumbent candidate for director who does not receive the required votes for re-election is expected to tender their resignation to our Board. Our Board, or another duly authorized committee of our Board, will make a determination as to whether to accept or reject the tendered resignation generally within 90 days after certification of the election results of the stockholder vote. If applicable, we will publicly disclose the decision regarding any tendered resignation and the rationale behind the decision in a filing of a Current Report on Form 8-K with the Securities and Exchange Commission (the “SEC”).

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE DIRECTOR NOMINEES.

 

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PROPOSAL 2 –

ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Section 14A of the Exchange Act requires that we provide our stockholders an opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC’s rules. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific NEO, but rather the overall compensation of all of our NEOs and the philosophy, policies and practices described in this Proxy Statement.

We are asking our stockholders to approve the compensation of our NEOs (as identified in the CD&A) as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this Proxy Statement (including in the CD&A, the compensation tables, and the narratives accompanying those tables).

OUR COMPENSATION OBJECTIVES

 

   

To align executive compensation with the Company’s corporate strategies, business objectives and the creation of long-term value for our stockholders without encouraging unnecessary or excessive risk-taking;

 

   

To provide an incentive to achieve key strategic and financial performance measures by linking short-term incentive award opportunities and a substantial portion of long-term incentive award opportunities to the achievement of corporate and operational performance objectives in these areas;

 

   

To offer total compensation opportunities to our executive officers that are competitive and fair;

 

   

To align the interests of our executive officers with those of our stockholders by linking our executive officers’ long-term incentive compensation opportunities to stockholder value creation and their cash incentives to our annual performance; and

 

   

To provide compensation and benefit levels that will attract, motivate, reward, and retain a highly-talented team of executive officers within the context of responsible cost management.

The Compensation Committee values input from our stockholders regarding the Company’s executive compensation program.

 

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FISCAL 2023 COMPENSATION HIGHLIGHTS

 

Annual Cash Bonuses are Based on Achievement of Quantifiable Performance Goals   

Determined based on a rigorous performance measurement framework that measures the Company’s actual performance against multiple pre-established financial goals – which include revenue, non-GAAP gross margin, and non-GAAP operating profit goals – and each NEO’s contribution to that performance.

 

See “Fiscal 2023 Named Executive Officer Compensation — Annual Performance-Based Cash Bonuses” on pages 57-59 for more information about how the financial goals are set and the Company’s actual performance for Fiscal 2023.

 

Majority of Target Total Direct Compensation is “At Risk”   

Approximately 75% of our Chief Executive Officer’s target total direct compensation (“TDC”)1 and approximately 71% of our other NEOs’ target TDC was tied directly to the performance of the Company and/or the Company’s stock price, as shown in the pay mix charts on page 51.

 

Majority of Target Total Direct

Compensation is in the Form of

Long-Term Incentives

  

The most significant component of each NEO’s target total direct compensation opportunity is in the form of performance stock unit (“PSU”) awards, market stock unit (“MSU”) awards, and restricted stock unit (“RSU”) awards that each vest or are earned over a multi-year (three- or four-year) period.

 

In Fiscal 2023, approximately 92% of our Chief Executive Officer’s, and approximately 85% of our other NEOs’, target TDC was annual long-term incentive compensation in the form of equity awards. We believe equity compensation directly align the interests of our NEOs and our stockholders.

 

Majority of Target TDC Long-Term

Incentives are

Performance-Based

  

Approximately 76% of our Chief Executive Officer’s and all other NEOs’ annual long-term incentive compensation for Fiscal 2023 is subject to performance-based vesting requirements.

 

Vesting for the Fiscal 2023 annual equity awards with performance-based vesting requirements was contingent on our relative TSR performance compared to the TSR of each company in the Russell 2000 Index over a multi-year period in the case of the MSU awards and on our non-GAAP earnings per share (“EPS”) performance over a one-year performance period and a multi-year time-based vesting requirement in the case of the PSU awards.

 

 

1 As used in this Proxy Statement, “target total direct compensation” means the NEO’s base salary, target annual cash bonus opportunity and grant date fair value (based on the value approved by the Compensation Committee and used to determine the number of shares subject to the award) of annual long-term incentive compensation awards granted to the NEOs in Fiscal 2023.

ADVISORY RESOLUTION

In accordance with the requirements of Section 14A of the Exchange Act, and the related rules of the SEC, our Board requests your advisory Say-on-Pay vote to approve the following resolution at our Annual Meeting:

RESOLVED, that the compensation paid to the Company’s NEOs, as disclosed in this Proxy Statement pursuant to the Securities and Exchange Commission’s executive compensation disclosure rules (which disclosure includes the “Compensation Discussion and Analysis” section, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.

This vote is an advisory vote only and will not be binding on the Company, our Board or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Company, our Board or the Compensation Committee. However, our Board and the Compensation Committee will consider the outcome of this vote when making future compensation decisions for our NEOs.

The Company’s current policy is to provide our stockholders with an advisory Say-on-Pay vote to approve the compensation of our NEOs each year at the annual meeting of stockholders. It is expected that the next advisory Say-on-Pay vote will be held at the 2024 annual meeting of stockholders.

 

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VOTE REQUIRED

The compensation of our NEOs will be approved, on an advisory basis, if a majority of the votes cast on Proposal 2 at the Annual Meeting are cast in favor of the proposal. Abstentions and broker non-votes are not counted as votes cast and, accordingly, will have no effect on the outcome of this proposal.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

 

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PROPOSAL 3 –

ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Section 14A of the Exchange Act requires that we provide our stockholders an opportunity to indicate their preference on how frequently we should solicit an advisory vote to approve the compensation of our NEOs. This proposal is commonly known as a “say on frequency” proposal. Stockholders may indicate whether they would prefer an advisory vote every one, two, or three years. Alternatively, stockholders may abstain from casting a vote.

We have historically solicited an advisory vote on executive compensation every year, and the Board believes that continuing to hold such a vote every year is advisable for a number of reasons, including the following:

 

   

an annual advisory vote enables our stockholders to provide the Company with input regarding the compensation of our NEOs on a timely basis; and

 

   

an annual advisory vote on compensation of our NEOs is consistent with our policy of seeking regular input from our stockholders on corporate governance matters and our compensation philosophy, policies and practices for our NEOs.

Stockholders are not voting to approve or disapprove the Board’s recommendation. Instead, you may cast your vote on your preferred voting frequency by choosing any of the following four options with respect to this proposal: “1 Year,” “2 Years,” “3 Years,” or “Abstain.” For the reasons discussed above, we are asking our stockholders to vote for a frequency of “1 Year.”

The say-on-frequency vote is advisory and therefore not binding on the Company, the Board, or the Compensation Committee. The Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of this vote in considering the frequency with which the advisory vote on compensation of our NEOs will be held in the future.

VOTE REQUIRED

Because this proposal has four choices, it is possible that no choice will receive an affirmative vote of a majority of the votes cast on Proposal 3 at the Annual Meeting. The Board and the Compensation Committee value the opinions of the stockholders in this matter, and the Board intends to consider the alternative that receives the most stockholder support, even if that alternative does not receive the support of a majority of the votes cast on this proposal. However, the results of the vote will not be construed to create or imply any change to the fiduciary duties of our Board, and our Board may decide that it is in the best interests of our stockholders and the Company to hold a non-binding advisory vote on the compensation of our named executive officers more or less frequently than the choice that receives the most stockholder support. Abstentions and broker non-votes are not counted as votes cast and, accordingly, will have no effect on the outcome of this proposal.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR “1 YEAR.”

 

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PROPOSAL 4 –

RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITOR

We are seeking stockholder ratification of our appointment of KPMG LLP (“KPMG”) as our independent auditor for the fiscal year ending June 29, 2024. KPMG has served as our independent auditor since 2003. In August 2023, the Audit Committee re-appointed KPMG as our independent auditor for the fiscal year ending June 29, 2024. The Audit Committee has considered whether the provision of non-audit services by KPMG is compatible with maintaining KPMG’s independence.

Additional information about KPMG, including the fees we paid to KPMG in Fiscal 2023 and 2022, can be found in this Proxy Statement under the caption “Audit and Non-Audit Fees.” The report of the Audit Committee included in this Proxy Statement under the caption “Audit Committee Report” also contains information about the role of KPMG with respect to the audit of the Company’s annual financial statements.

A representative of KPMG is expected to be present at our Annual Meeting, be available to respond to appropriate questions and will have the opportunity to make a statement, if desired.

Stockholder ratification of the appointment of KPMG as our independent auditor is not required by our Amended and Restated Bylaws (the “Bylaws”) or otherwise. However, the Board is submitting the appointment of KPMG to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the appointment, the Audit Committee may reconsider whether or not to retain KPMG. Even if the appointment is ratified, the Audit Committee, in its discretion, may appoint a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders.

VOTE REQUIRED

Ratification of the appointment of KPMG as our independent auditor will be approved if a majority of the votes cast on Proposal 4 at the Annual Meeting are cast in favor of the proposal. Abstentions are not counted as votes cast.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING JUNE 29, 2024.

 

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PROPOSAL 5 –

APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN

General

At the Annual Meeting, our stockholders will be asked to approve an amended and restated version, adopted by our Board on July 25, 2023 (the “Amended Version”) of our 2019 Equity and Incentive Compensation Plan (the “2019 Incentive Plan”). The purpose of the amendment and restatement of the 2019 Incentive Plan is to increase the share limit of the plan, subject to stockholder approval, by an additional 900,000 shares, so that the new aggregate share limit for the 2019 Incentive Plan, before taking into account share transfers from the 2010 Incentive Compensation Plan (the “2010 Plan” or the “Predecessor Plan”), would be 6,188,000 shares. If stockholders do not approve the Amended Version of the 2019 Incentive Plan (the “2019 Incentive Plan Proposal”), the share limits and terms of the 2019 Incentive Plan in effect prior to the July 25, 2023, amendment and restatement of the 2019 Incentive Plan approved by the Board will continue in effect.

Why We Believe You Should Vote for Proposal 5

In evaluating our request to approve the 2019 Incentive Plan Proposal, we ask that you consider the following:

 

   

Incentive to Attract and Retain Talent. We believe that our future success depends in part on our ability to attract, hire, motivate and retain high quality employees, directors and consultants and that the ability to provide equity awards under the 2019 Incentive Plan is critical to achieving this success. We would be at a severe disadvantage if we could not use equity-based awards covering a meaningful number of shares to recruit and secure or retain key talent in the current competitive market for highly skilled and qualified employees.

 

   

Alignment of Interests. We believe that our future success depends on our ability to align the interests of our employees, directors and consultants with those of our stockholders, and that equity compensation is a key tool used to foster this alignment.

 

   

Significant Focus on Performance-Based Vesting Equity Awards. Approximately two-thirds of the annual equity awards granted to our NEOs in Fiscal 2023 are subject to performance-based vesting requirements, with the vesting of the awards based on our TSR compared to the TSR of each of the other companies in the Russell 2000 Index (“Russell 2000 Index TSR”) and the Company’s non-GAAP EPS. The foregoing percentages are based on the grant date fair value of the awards granted in Fiscal 2023.

 

   

Limiting Cash Compensation Expense. Equity compensation limits the cash cost of our compensation programs and can preserve cash for other uses in growing our business or returning value to our stockholders. If the 2019 Incentive Plan Proposal is not approved, we may need to replace the lost compensation value with larger cash awards, which would increase our cash compensation expense. That cash might be better utilized if reinvested in our business or returned to our stockholders.

 

   

Responsible Share Request Size. We believe that we are asking for enough shares to be able to continue to grant equity awards under the Amended Version of the 2019 Incentive Plan for approximately two to two and a half years (as discussed in more detail below). We want our stockholders to have the ability to regularly validate their support of our approach to equity awards.

 

   

Responsible Plan Features. Our 2019 Incentive Plan (including the Amended Version) includes restrictive minimum vesting requirements, and a holding period requirement for awards granted to our CEO, executive officers, and board members.

To help our stockholders better understand our historical equity compensation practices, currently anticipated needs, and an estimate of the potential cost of dilution from our request for additional shares, we note that, as of August 21, 2023:

 

   

We have 39,033,441 shares of our common stock issued and outstanding;

 

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We have 2,743,336 shares (7.0% of our issued and outstanding common stock) subject to outstanding unvested full value awards (i.e., awards other than options and stock appreciation rights (“SARs”)) (2,687,920 of which were outstanding under the 2019 Incentive Plan, 5,129 of which were outstanding under the 2019 Inducement Equity Plan (the “2019 Inducement Plan”), 8,804 of which were outstanding under the DSP Replacement Award Plan (the “DSP Plan”), and 41,483 of which were outstanding under the Predecessor Plan);

 

   

We have 2,900 shares (0.0% of our issued and outstanding common stock) subject to outstanding stock options (all of which were granted under the 2010 Plan), representing one outstanding stock option grant expiring October 28, 2023 with an exercise price of $52.57 per share;

 

   

We have 1,528,246 shares available for future grants under the 2019 Incentive Plan. No new awards may be granted under the 2010 Plan, the DSP Plan, or the 2019 Inducement Plan;

 

   

The total number of shares of common stock subject to outstanding awards under the 2019 Incentive Plan, the 2010 Plan, the DSP Plan, and the 2019 Inducement Plan (2,746,236 shares in total), plus the total number of shares available for future awards under the 2019 Incentive Plan (1,528,246 shares in total), represents a current overhang percentage of 11.0% (in other words, the potential dilution of our stockholders represented by these plans when viewed against our shares of common stock currently issued and outstanding);

 

   

We are asking for an additional 900,000 shares of common stock available for awards under the 2019 Incentive Plan Proposal – this represents 2.3% of our issued and outstanding common stock as of August 21, 2023, which percentage reflects the simple dilution of our stockholders that would occur if the 2019 Incentive Plan Proposal is approved, and all such shares were delivered in respect of awards granted under the plan; and

 

   

Based on the closing price of our common stock on Nasdaq on August 21, 2023, of $88.22 per share, the aggregate market value as of that date of the additional 900,000 shares of common stock requested for issuance under the 2019 Incentive Plan Proposal was $79,398,000.

We recognize that our stockholders want to know about our recent grant practices, including our recent “burn rate,” when considering how to vote on our 2019 Incentive Plan Proposal. Burn rate or run rate (measuring a company’s annual usage of shares) is generally calculated as the number of shares granted divided by the weighted average number of shares outstanding and is used to demonstrate how quickly a company uses available shares. The table below provides our average burn rate under the 2019 Incentive Plan (with performance-based awards being included for the year in which they are earned based on the number of shares earned).

 

Fiscal Year   Options
Granted
 

Restricted Stock

Awards/Units Granted
(excluding Performance-
Based)

 

Performance-Based

Restricted Stock

Awards/Units Earned

 

Total Shares

Granted

  

Weighted Average

Shares at End of

Fiscal Year

   Burn Rate
2023     808,153   583,772   1,391,925    39,600,000    3.51%
2022     641,690(2)   411,906   1,053,596    39,000,000    2.70%
2021     803,721(1)   410,110   1,213,831    34,800,000    3.49%
Average Three-Year Burn Rate (Fiscal 2021-2023)    3.23%

 

  (1)

Includes 187,139 replacement awards issued in connection with the acquisition of the Broadcom, Inc. Wireless Connectivity Business and 17,216 replacement awards issued in connection with the acquisition of DisplayLink Corp.

 

  (2)

Includes 58,851 replacement awards issued in connection with the acquisition of DSP Group, Inc.

We currently anticipate that the shares requested, when combined with reserves currently available under the 2019 Incentive Plan, will provide flexibility for us to make grants in the ordinary course of business for approximately one to two years. However, this is only an estimate, in our judgment, based on current circumstances. The total number of shares that are subject to our award grants in any one year or from year-to-year may change based on a number of variables, including, without limitation, the value of our common stock (since higher share prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant, and how we choose to balance total compensation between cash and equity-based awards.

Responsible Plan Features

Our Board believes the use of stock-based incentive awards promotes best practices in corporate governance by incentivizing the creation of stockholder value. By providing participants in the 2019 Incentive Plan with a stake in our success, the interests of participants are

 

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further aligned with those of our stockholders. Specific features of the 2019 Incentive Plan that we believe are consistent with good corporate governance practices include:

 

   

General administrative authority for the 2019 Incentive Plan has been delegated to the Compensation Committee of the Board, consisting entirely of directors the Board has determined are independent;

 

   

Except for substitute awards granted in connection with a corporate transaction such as an acquisition, stock options and SARs under the 2019 Incentive Plan may not be granted with exercise or base prices lower than the fair market value of the underlying shares on the grant date;

 

   

Except for customary adjustments in connection with a corporate transaction (such as a stock split) or change of control, the 2019 Incentive Plan prohibits the repricing of stock options and SARs without stockholder approval, including the cancellation and replacement of any outstanding option or SAR with a new option, SAR, other award or cash and any amendment or modification that reduces the exercise price of an option or base price of a SAR;

 

   

The 2019 Incentive Plan prohibits the grant of dividend equivalents with respect to stock options and SARs and subjects all dividends and dividend equivalents paid with respect to other awards to the same vesting conditions as the underlying shares subject to the awards;

 

   

The 2019 Incentive Plan prohibits “liberal share recycling,” meaning that shares used to pay the exercise price or withholding taxes relating to an award under the 2019 Incentive Plan will not be recycled back into the 2019 Incentive Plan for future grants;

 

   

As noted above and as described in more detail below, the amendment and restatement of the 2019 Incentive Plan includes more restrictive minimum vesting requirements, and a holding period requirement for awards granted to our Chief Executive Officer;

 

   

The 2019 Incentive Plan does not contain an “evergreen” feature;

 

   

The 2019 Incentive Plan does not contain a liberal change of control definition, meaning that an acquisition of the Company would need to be consummated to constitute a change of control; and

 

   

Non-employee directors may not be awarded compensation for services as a director in any calendar year that exceeds $750,000.

Plan Summary

The principal terms of the 2019 Incentive Plan are summarized below. The following summary is qualified in its entirety by the full text of the Amended Version of the 2019 Incentive Plan, which appears as Appendix B to this Proxy Statement.

Purpose

The purpose of the 2019 Incentive Plan is to provide a means through which the Company may attract and retain key non-employee directors, officers, employees and certain consultants of the Company and its subsidiaries, and to provide to such persons incentives and rewards for service and/or performance.

Eligibility

Non-employee directors, officers, employees, and consultants of the Company and its subsidiaries are eligible for awards, as selected by the Compensation Committee or such other committee designated by the Board to administer the plan; provided, that, incentive stock options may be granted only to employees. As of August 21, 2023, 1,903 employees and seven non-employee directors were considered eligible to participate in the 2019 Incentive Plan.

Share Limits

An aggregate of 6,278,489 shares of common stock (1,230,000 shares approved by stockholders on October 29, 2019, 1,360,000 shares approved by stockholders on October 27, 2020, 2,000,000 shares approved by stockholders on October 26, 2021, 698,000 shares approved by stockholders on October 25, 2022, and 990,489 shares transferred from the Predecessor Plan after October 29, 2019 through August 21, 2023) may be issued pursuant to awards of options, SARs, restricted stock, RSUs, performance shares or performance units, dividend equivalents, or other awards granted under the 2019 Incentive Plan. If stockholders approve this 2019 Incentive Plan Proposal, this share limit will be increased to 7,178,489 shares (an increase in the share limit, before taking into account share transfers from the Predecessor Plan, from 5,288,000 shares to 6,188,000 shares, and including the 990,489 shares that have transferred from the Predecessor Plan as of August 21, 2023). In addition, if stockholders approve this 2019 Incentive Plan Proposal the plan’s limit on the number of shares of common stock that may be delivered pursuant to “incentive stock options” under the plan will be increased from 5,288,000 shares to 6,188,000 shares (with, for purposes of clarity, any such shares to also count against the aggregate share limit for the plan).

If any award granted under the 2019 Incentive Plan expires unexercised, is canceled, forfeited, settled in cash or unearned (in whole or in part), shares of our common stock subject to such award will again be made available for future grants under the 2019 Incentive Plan.

 

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Further, if any award granted under the Predecessor Plan expires unexercised, is canceled, forfeited, settled in cash or unearned (in whole or in part), shares of our common stock subject to such award will again be made available for future grants under the 2019 Incentive Plan. As of August 21, 2023, a total of 990,489 shares had become available for award grants under the 2019 Incentive Plan as a result of the expiration, cancellation, forfeiture or settlement of awards under the Predecessor Plan, and a total of 44,383 shares were then subject to outstanding awards under the Predecessor Plan. Shares of our common stock that are used to pay the required exercise price of options granted under the 2019 Incentive Plan or to satisfy tax withholding with respect to awards granted under the 2019 Incentive Plan, as well as any shares reacquired by the Company on the open market (whether by using cash proceeds from the exercise of an option or otherwise), will not be available again for other awards under the 2019 Incentive Plan. If a participant elects to give up the right to receive compensation in exchange for shares of common stock based on fair market value, such shares of common stock will not count against the aggregate share limit authorized under the 2019 Incentive Plan.

Minimum Vesting Requirements; Minimum Holding Requirement for CEO Awards

No award granted under the 2019 Incentive Plan may vest earlier than after a one-year vesting period or a one-year performance period, as applicable, unless in connection with the award recipient’s death or disability or in connection with a change of control of the Company. However, up to 5% of the sum of (i) the aggregate number of shares available for issuance under the 2019 Incentive Plan as described above, and (ii) the number of shares returned to the 2019 Incentive Plan as a result of awards originally granted under the Predecessor Plan that are cancelled or forfeited, settled in cash, or unearned, may be granted in the form of awards that do not meet such minimum vesting requirements.

Any award granted under the 2019 Incentive Plan to an individual who, at the time of grant of the award, is the Company’s chief executive officer must include a provision for any net shares acquired with respect to the award (the total number of shares acquired pursuant to the award less any shares used to pay the exercise or purchase price of the award and any shares used to satisfy any tax and tax withholding obligations with respect to the award) to be held for at least a one year period, or until the award recipient is no longer employed by the Company or one of its subsidiaries, before such shares may be sold or transferred (except for certain transfers to a family member for estate or tax planning purposes and where the holding period requirement continues in effect as to the shares, or in connection with or following a Change in Control).

Individual Director Limit

Non-employee directors may not be granted compensation (including cash compensation) having an aggregate maximum value at the date of grant that exceeds $750,000 per calendar year.

Administration

The Compensation Committee administers the 2019 Incentive Plan. Among other responsibilities, the Compensation Committee selects participants and determines the type of awards granted to participants, the number of shares of common stock covered by awards and the terms and conditions of awards, interprets the 2019 Incentive Plan and awards granted thereunder, and makes any other determinations and takes any other actions that it may deem necessary or desirable to administer the 2019 Incentive Plan. The Compensation Committee may delegate to a subcommittee of its members, officers of the Company, agents or advisors, such administrative duties or powers as the Compensation Committee deems advisable, and the Compensation Committee, the subcommittee or any other person to whom duties or powers have been delegated, may employ persons to render advice with respect to a responsibility of the Compensation Committee. The Compensation Committee may also, by resolution, authorize officers of the Company to designate employees to be recipients of awards and to determine the size of such awards; provided, however, that (A) the Compensation Committee may not delegate such responsibilities to any such officer for awards granted to an employee who is an officer, director, or more than 10% “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Compensation Committee in accordance with Section 16 of the Exchange Act; (B) the resolution providing for such authorization must set forth the total number of common shares the officer may grant; and (C) the officer(s) must periodically report to the Compensation Committee regarding the nature and scope of such awards granted. The Board may also assume administration of the 2019 Incentive Plan or certain aspects of the plan.

Amendment or Termination

Unless earlier terminated, the expiration date of the 2019 Incentive Plan will be July 29, 2029; provided, however, that such expiration will not affect awards then outstanding, and the terms and conditions of the 2019 Incentive Plan will continue to apply to such awards. The Board may amend or terminate the 2019 Incentive Plan at any time. Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the Board. Further, any such amendment that would impair the rights of any participant, holder or beneficiary of any award granted under the 2019 Incentive Plan will not be effective without the consent of the affected participant, holder or beneficiary.

No Repricing

Except for customary adjustments in connection with a corporate transaction (such as a stock split) or change of control, none of the following actions may be taken under the 2019 Incentive Plan without approval of our stockholders: (i) an amendment or modification to

 

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reduce the exercise price of any option or the base price of any SAR; (ii) the cancellation of any outstanding option or SAR and replacement of such option or SAR with a new option, SAR, other award or cash for the purpose of repricing the award; or (iii) any other action that is considered a “repricing” for purposes of Nasdaq stockholder approval rules.

Options

The Compensation Committee may, in its discretion, grant incentive stock options and nonqualified stock options to participants. Non-employee directors, officers, employees, and consultants of the Company and its subsidiaries may be granted nonqualified stock options, but only employees of the Company and its subsidiaries may be granted incentive stock options. The Compensation Committee determines the exercise price of options granted under the 2019 Incentive Plan. Subject to certain exceptions in connection with a corporate transaction such as an acquisition, the exercise price of an incentive or nonqualified stock option must be at least 100% of the fair market value of the common stock subject to the option on the date the option is granted. The Compensation Committee determines, in its sole discretion, the terms of each option. Options may not be exercisable for more than ten years from the date they are granted and may not provide for any dividends or dividend equivalents thereon. Acceptable consideration for the purchase of the common stock issued upon the exercise of an option is specified in the award agreement and may include cash, check, cash equivalents, shares of common stock, a reduction in the number of shares deliverable upon exercise, or such other forms of consideration that the Compensation Committee may accept.

SARs

The Compensation Committee may, in its discretion, grant SARs to participants in the 2019 Incentive Plan. Generally, SARs permit a participant to exercise the right and receive a payment equal to the value of the common stock’s appreciation over a period of time in excess of the fair market value (the “base price”) of a share of the common stock on the date of grant. Subject to certain exceptions in connection with a corporate transaction such as an acquisition, the base price of a SAR must be at least 100% of the fair market value of the common stock subject to the award on the date the SAR is granted. The Company may settle such amount in cash, in shares of our common stock valued at fair market value, or in any combination thereof, as determined by the Compensation Committee and specified in the award agreement. SARs granted under the 2019 Incentive Plan become exercisable and expire in such manner and on such date(s) as determined by the Compensation Committee, with the term of the SAR not to exceed ten years from the grant date. The Compensation Committee determines, in its sole discretion, the terms of each SAR. SARs granted under the 2019 Incentive Plan may not provide for any dividends or dividend equivalents thereon.

Restricted Stock

The Compensation Committee may, in its discretion, grant restricted stock to participants in the 2019 Incentive Plan. The Compensation Committee determines, in its sole discretion, the terms of each grant of restricted stock. Subject to the terms of the award, a recipient of restricted stock generally has the rights and privileges of a stockholder with respect to the restricted stock, including the right to vote the stock, on the grant date. Dividends, if any, paid by the Company with respect to awards of restricted stock prior to the time all restrictions and vesting conditions on the restricted stock have lapsed are withheld by the Compensation Committee and distributed to the participant in cash or shares of common stock upon, and subject to, the release of the restrictions applicable to the underlying shares of restricted stock.

RSUs

The Compensation Committee may, in its discretion, grant RSUs to participants. An RSU is the right to receive shares of our common stock (or to the extent provided in the award agreement, cash or a combination of cash and common stock) following achievement of all vesting conditions and the lapse of all restrictions. The Compensation Committee determines, in its sole discretion, the terms of each award of RSUs. Recipients of RSUs do not have the rights and privileges of a stockholder with respect to the common stock underlying such RSUs, including the right to vote the stock or receive dividends on the stock, until common stock in respect of the RSUs is actually issued to the recipient following satisfaction of all vesting conditions. If dividends are paid by the Company with respect to common stock underlying an award of RSUs prior to the time all vesting conditions on the RSU have been satisfied, an RSU award may provide that the recipient will be credited with dividend equivalents with respect to the RSUs. Any such dividend equivalents will be subject to the same vesting and payment terms that apply to the RSUs as to which the dividend equivalents were credited. RSUs may be settled in shares of our common stock, cash or a combination thereof in the discretion of the Compensation Committee.

Other Stock-Based Awards

The Compensation Committee, in its discretion, may award unrestricted shares of our common stock, or other awards denominated in shares of our common stock, to participants either alone or in tandem with other awards granted under the 2019 Incentive Plan. The Compensation Committee determines, in its sole discretion, the terms of each other stock-based award.

Cash Incentive Awards, Performance Shares, and Performance Units

The Compensation Committee may, in its discretion, also grant performance shares, performance units or cash incentive awards to participants under the 2019 Incentive Plan. Each grant specifies the number or amount of performance shares or performance units, or the amount payable with respect to cash incentive awards, which number or amount may be subject to adjustment to reflect changes in compensation or other factors. These awards, when granted under the 2019 Incentive Plan, become payable to participants upon the

 

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achievement of specified management objectives and upon such terms and conditions as the Compensation Committee determines at the time of grant. Each grant may specify, with respect to the management objectives, a minimum acceptable level of achievement and may set forth a formula for determining the number of performance shares or performance units, or the amount payable with respect to cash incentive awards, that will be earned if performance is at or above the minimum or threshold level or is at or above the target level but falls short of maximum achievement. If the Compensation Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, the manner in which it conducts its business, or other events or circumstances render the management objectives unsuitable or an adjustment thereto is appropriate, the Compensation Committee may in its discretion modify such management objectives or the acceptable levels of achievement, in whole or in part, as the Compensation Committee deems appropriate. Each grant specifies the time and manner of payment of cash incentive awards, performance shares or performance units that have been earned, and any grant may further specify that any such amount may be paid or settled in cash, shares of common stock, restricted stock, restricted stock units or any combination thereof. Any grant of performance shares may provide for the payment of dividend equivalents in cash or in additional shares of common stock, subject to deferral and payment on a contingent basis based on the participant’s earning of the performance shares with respect to which such dividend equivalents are paid. Each grant of performance shares, performance units or cash incentive awards is evidenced by an award agreement which specifies the applicable terms and conditions of such award, including any vesting and forfeiture provisions. The performance period with respect to a cash incentive award, performance share, or performance unit is a period of time determined by the Compensation Committee on the grant date. The performance period may be subject to earlier lapse or modification, including in the event of retirement, death or disability of the participant.

Adjustments in Capitalization

In general, in the event of (1) any extraordinary cash dividend, stock dividend, stock split, combination of common stock, recapitalization or other change in the capital structure of the Company, (2) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities or (3) any other corporate transaction or event having an effect similar to any of the foregoing, equitable adjustments (as determined by the Compensation Committee) will be made to the number of shares of common stock or other securities of the Company (or number and kind of other securities, consideration or other property) that may be delivered in respect of awards or with respect to which awards may be granted under the 2019 Incentive Plan, as well as adjustments to the exercise price of options and base price of SARs granted under the 2019 Incentive Plan. In addition, in the event of a Change in Control (as defined within the 2019 Incentive Plan), the Compensation Committee may provide in substitution for any or all awards outstanding under the 2019 Incentive Plan such alternative consideration (including cash), if any, it in good faith may determine to be equitable in the circumstances and shall require in connection therewith the surrender of all awards so replaced. In connection with any of the foregoing events, the Compensation Committee may in its sole discretion elect to cancel outstanding options or SARs with an exercise price or base price that is equal to or less than the then current fair market value of our common stock without any consideration to the participant therefor.

Change in Control

A Change in Control is defined in the 2019 Incentive Plan as the occurrence of any of the following events:

 

   

A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act;

 

   

The following individuals no longer constitute a majority of the members of the Board: (1) the individuals who, as of October 29, 2019, constituted the Board (the “Current Directors”); (2) the individuals who thereafter were elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of a majority of all of the Current Directors then still in office (such directors becoming “Additional Directors” immediately following their election); and (3) the individuals who were elected to the Board and whose election, or nomination for election, to the Board was approved by a vote of a majority of all of the Current Directors and Additional Directors then still in office;

 

   

A tender offer or exchange offer is made whereby the effect of such offer is to take over and control the Company, and such offer is consummated for the equity securities of the Company representing more than 50% of the combined voting power of the Company’ then outstanding voting securities;

 

   

Following approval by the stockholders of the Company, the Company closes a reorganization, merger, consolidation or recapitalization of the Company, a reverse stock split of outstanding voting securities, or consummation of any such transaction if stockholder approval is not obtained, other than any such transaction that would result in more than 50% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being beneficially owned by the holders of outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction;

 

   

The consummation of a transaction approved by our stockholders of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company’s assets to another person, which is not a wholly owned subsidiary of the Company; or

 

   

Any “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly of more than 50% of the total voting power represented by the Company’s then outstanding voting securities.

 

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In the event of a Change in Control and except as the Compensation Committee may otherwise provide as to a particular award: (i) unvested options and SARs will immediately vest, except to the extent that replacement awards (as such term is defined within the 2019 Incentive Plan) are provided; (ii) any restrictions, deferral of settlement and forfeiture conditions applicable to restricted stock, RSUs, or other awards that vest solely based on continued service (and not based on the achievement of management objectives) will lapse and be deemed fully vested, except to the extent that replacement awards are provided; (iii) with respect to cash incentive awards, performance shares, performance units, and other awards that are subject to the achievement of management objectives (other than with respect to awards described as “Market Stock Units”), the management objectives will be deemed satisfied at target, the applicable performance periods will be deemed completed, and if no replacement awards are provided, remaining restrictions, deferral of settlement and forfeiture conditions will lapse and the awards will be deemed fully vested; and (iv) with respect to RSUs with management objectives described as “Market Stock Units,” a prorated portion of such units will vest based on the actual performance of the management objectives through the date of the Change in Control, while the remainder of the Market Stock Units will vest in accordance with their regular vesting schedules if replacement awards are provided, or if not, the remaining restrictions, deferral of settlement and forfeiture conditions will lapse and the Market Stock Units will be deemed fully vested.

Clawback/Repayment

All awards granted under the 2019 Incentive Plan and held by the Company’s executive officers are subject to clawback, recoupment or forfeiture (i) to the extent that an executive officer engages in fraud or intentional illegal conduct that resulted in the Company materially not complying with applicable financial reporting requirements and resulted in a financial restatement; or (ii) to the extent required by applicable laws, rules, regulations or listing requirements. Additionally, all awards granted under the 2019 Incentive Plan are subject to recoupment to the extent necessary to comply with any clawback policy that the Company is required to adopt pursuant to applicable law or the listing standards of the applicable national securities exchange.

Transferability

Awards under the 2019 Incentive Plan are generally not transferable except by will or the laws of descent and distribution or as otherwise determined by the Compensation Committee.

No Right to Continued Employment

The 2019 Incentive Plan does not give participants any right to be retained in the employ or service of the Company or any of its subsidiaries.

No Limit on Other Authority

The 2019 Incentive Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without reference to the common stock, under any other plan or authority.

U.S. Federal Income Tax Consequences

The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2019 Incentive Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2019 Incentive Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2019 Incentive Plan.

Incentive Stock Options

A participant who is granted an incentive stock option will not have federal income tax liability upon the grant of an incentive stock option and will not recognize regular taxable income when the incentive stock option is exercised. However, the participant will recognize alternative minimum taxable income equal to the excess of the fair market value of the purchased shares at the time of exercise over the exercise price paid for those shares, if the participant is subject to the alternative minimum tax in the taxable year of the exercise. A participant generally will recognize income in the year in which the participant disposes of the shares purchased under such incentive stock option. If the participant makes a “qualifying disposition,” the participant will recognize a long-term capital gain equal to the excess of (i) the amount realized upon the sale or disposition over (ii) the exercise price paid for the shares and the Company cannot take an income tax deduction with respect to those shares. A qualifying disposition occurs when the participant’s sale or other disposition of the shares takes place (a) more than two (2) years after the grant date of the incentive stock option and (b) more than one (1) year after the date the option was exercised for the particular shares involved in the disposition. In contrast, a “disqualifying disposition” is any sale or other disposition of the shares made before both of these minimum holding periods are satisfied. Normally, when shares purchased under an incentive stock option are subject to a disqualifying disposition, the participant will recognize ordinary income at the time of the disposition in an amount equal to the excess of (x) the lesser of (1) the amount realized upon that disposition and (2) the excess of the fair market value of the shares on the exercise date over (y) the exercise price paid for those shares. the Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes in connection with the disposition, subject to any applicable limitations under Section 162(m) of the Internal Revenue Code (“Code”).

 

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Nonqualified Stock Options

A participant who is granted a nonqualified stock option will not have federal income tax liability upon the grant of the nonqualified stock option but will recognize ordinary income in the year in which the participant exercises the option in an amount equal to the excess of (i) the fair market value of the purchased shares on the exercise date over (ii) the exercise price paid for those shares. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code. A participant will later also recognize a capital gain to the extent that the amount realized from the subsequent sale of the shares exceeds the participant’s basis in the shares.

Appreciation Rights (SARs)

A participant who is granted a SAR will not have federal income tax liability upon the grant of the SAR but will recognize ordinary income in the year in which the participant exercises the SAR in an amount equal to the amount of the cash or the value of the stock that is transferred to the participant upon exercise of the SAR. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.

Restricted Stock

A participant who is granted an award of restricted stock will recognize taxable income when the substantial risk of forfeiture of the shares lapses, i.e., at the time of “vesting,” unless the participant makes an election to be taxed at the time of grant. Assuming such an election is not made, the taxable income will be equal to the fair market value of the shares of restricted stock when they vest over the amount, if any, paid for those shares and the Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code. The participant may elect under Section 83(b) of the Code to include as ordinary income in the year of the award an amount equal to the fair market value of the shares on the transfer date, less the amount, if any, paid for those shares. If the participant makes a Section 83(b) election, the participant will not recognize any additional income when the shares vest. If a Section 83(b) election is made, any appreciation in the value of the shares of restricted stock after the award is granted is not taxed as compensation but instead is taxed as a capital gain when the restricted shares are later sold or transferred. If the participant makes a Section 83(b) election and the restricted stock is later forfeited, the participant is not entitled to a tax deduction or a refund of the tax already paid. The Section 83(b) election must be filed with the Internal Revenue Service within thirty (30) days after the shares are awarded to the participant.

Restricted Stock Units (RSUs)

A participant who is granted a RSU generally will not recognize income when the RSU is granted or vested, but only when the RSU is settled. The participant will recognize ordinary income equal to the amount of the cash or the fair market value of the stock that the participant receives on settlement. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.

Cash Incentive Awards, Performance Shares and Performance Units

Generally, no income is recognized upon the grant of cash incentive awards, performance shares or performance units. Upon payment or settlement of cash incentive awards, performance shares or performance units, the recipient is generally required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any non-restricted shares of common stock received. The Company will be entitled to an income tax deduction equal to the amount of ordinary income that the participant recognizes, subject to any applicable limitations under Section 162(m) of the Code.

Section 162(m)

Section 162(m) of the Code generally limits a public company’s ability to deduct aggregate compensation paid in excess of $1 million during any taxable year to current or former NEOs (including amounts attributable to equity-based and other incentive awards).

Withholding Taxes

To the extent the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a participant or other person under the 2019 Incentive Plan, it is a condition to the receipt of such payment or the realization of such benefit that the participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements, in the discretion of the Compensation Committee, may include relinquishment of a portion of such benefit. If a participant’s benefits are to be received in the form of shares of common stock, then, unless otherwise determined by the Compensation Committee, the Company will withhold, from the shares required to be delivered to the participant, shares of our common stock having a value equal to the amount required to be withheld under applicable law. In no event will the market value of the shares of our common stock withheld or delivered to the Company in order to satisfy applicable withholding taxes exceed the minimum amount of taxes required to be withheld unless: (i) an additional amount can be withheld and not result in adverse accounting consequences; (ii) such additional withholding amount is authorized by the Compensation Committee; and (iii) the total amount withheld does not exceed the participant’s estimated tax obligations attributable to the applicable transaction. The shares used for tax withholding will be valued at an amount equal to the market value of our common stock on the date the benefit is to be included in the participant’s income.

 

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New Plan Benefits

The Company has not approved any awards that are conditioned upon stockholder approval of the 2019 Incentive Plan Proposal. The Company is not currently considering any other specific award grants under the 2019 Incentive Plan, except for the annual grants of RSUs to non-employee directors described below. If the proposed plan amendments subject to the 2019 Incentive Plan Proposal had been in effect in Fiscal 2023, the Company expects that its award grants for Fiscal 2023 would not have been substantially different from those actually made in that year under the current version of the 2019 Incentive Plan. For information regarding stock-based awards granted to the NEOs during Fiscal 2023, see the material under the heading “Compensation Discussion and Analysis” below.

As described under the heading “Director Compensation” below, our current practice is to make grants of RSUs with a value of approximately $200,000 to non-employee directors each year after our Annual Meeting of Stockholders. The number of RSUs subject to each grant is based on the average closing price of our common stock on Nasdaq during the month of October in the applicable year. Assuming, for illustrative purposes only, that the price of our common stock used for the conversion of the $200,000 grant value into RSUs is $88.22 (which was the closing price of our common stock on Nasdaq on August 21, 2023), the total number of RSUs that would be granted to our seven continuing non-employee directors who are nominees for re-election at, or will continue in office after, the Annual Meeting, as a group, for Fiscal 2024 through fiscal year 2028 (the five remaining years in the term of the 2019 Incentive Plan) would be approximately 79,345 RSUs. This calculation assumes, among other future variables, that there are no new eligible directors, the directors eligible to receive these awards continue to serve on the Board through the scheduled grant date and there are no changes to the awards granted under the director equity grant program.

 

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Aggregate Past Grants Under the 2019 Incentive Plan

As of August 21, 2023, awards covering 4,978,401 shares of our common stock had been granted under the 2019 Incentive Plan, all of which were granted as PSU, RSU or MSU awards. This number of shares includes shares subject to awards granted under the 2019 Incentive Plan that expired or terminated without having been exercised or issued and became available for new award grants under the 2019 Incentive Plan. In the following table, performance-based vesting awards that were outstanding at the time the performance period was complete have been adjusted to reflect the actual performance level (which was greater than the targeted level as to those performance periods). The following table shows information regarding the distribution of all awards granted under the 2019 Incentive Plan among the persons and groups identified below, stock units vesting prior to that date, and unvested stock unit holdings as of that date.

 

        Stock Units    
Name and Position       

Number of        

Shares/Units        

Subject to        

Past Awards        

 

Number of        

Shares/Units        

Vested as of        

August 21,        

2023        

 

Number of        

Shares/Units        

Outstanding        

and Unvested        

as of August 21,        

2023

    

Michael Hurlston

    533,089   371,164   268,040  

President and Chief Executive Officer

                   

Dean Butler

    127,856   52,572   84,210  

Senior Vice President and

Chief Financial Officer

                   

Saleel Awsare

    111,858   97,173   44,623  

Senior Vice President and

General Manager, PC and Peripherals Division

                   

John McFarland

    138,897   104,387   66,765  

Senior Vice President,

General Counsel and Secretary

                   

Craig Stein(1)

    51,549   29,365   25,257  

Senior Vice President and

General Manager, Mobile and IoT Division

                   

Total for All Current Executive Officers as a Group (5 persons):

 

      993,485

 

  625,296

 

  540,235

 

   

Nelson Chan

      10,042   9,502   540    

Jeffrey Buchanan

      10,042   9,502   540    

Keith Geeslin

      10,042   9,502   540    

Susan Hardman

      7,612   7,072   540    

Patricia Kummrow

      3,610   3,070   540    

Vivie Lee

      2,730   2,190   540    

James Whims

      10,042   9,502   540    

Total for All Current Non-Executive Directors as a Group (7 persons):

      54,120   50,340   3,780    

Each associate of any such directors, executive officers or nominees:

      -   -   -    

Each other person who has

received 5% or more of the options, warrants or rights:

      -   -   -    

All employees, including all

current officers who are

not executive officers or

directors, as a group:

      3,922,915   1,451,963   2,172,610    

Total

      4,978,401   2,135,480   2,716,625    

 

(1)

On July 31, 2023, Mr. Stein voluntarily resigned from his position as our Senior Vice President and General Manager, Mobile and IoT Division, effective as of September 23, 2023.

Mr. Chan and Ms. Hardman are each nominees for re-election as a director at the Annual Meeting. As of August 21, 2023, no stock options have been granted under the 2019 Incentive Plan.

 

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Equity Compensation Plan Information

For additional information on our equity compensation plans, including information about shares of our common stock that may be issued on exercise of options and warrants under all of our equity compensation plans as of June 24, 2023, please refer to the “Equity Compensation Plan Information” section of this Proxy Statement.

VOTE REQUIRED

The Amended Version of 2019 Incentive Plan will be approved if a majority of the votes cast at the Annual Meeting are cast in favor of the proposal. Abstentions and broker non-votes are not counted as votes cast and, accordingly, will have no effect on the outcome of this proposal.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY AND INCENTIVE COMPENSATION PLAN.

The Board believes that the adoption of the 2019 Incentive Plan Proposal will promote the interests of the Company and its stockholders and will help the Company and its subsidiaries continue to be able to attract, retain and reward persons important to its success.

All members of the Board and all of our executive officers are eligible for awards under the 2019 Incentive Plan and thus have a personal interest in the approval of the 2019 Incentive Plan Proposal.

 

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PROPOSAL 6 –

APPROVAL OF THE AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD AND MAKE CERTAIN OTHER CHANGES

Article SIXTH of our Certificate of Incorporation, divides our board of directors into three classes, as nearly equal in number as possible, designated Class I, Class II, and Class III. One class is elected at each annual meeting of stockholders, to hold office for a three-year term and until the election and qualification of their respective successors in office.

Our Nominations Committee and Board regularly review our corporate governance practices and policies, and they, along with management, regularly receive feedback from our stockholders with respect to these practices and policies. In connection with this review, our Nominations Committee and Board have regularly considered the advantages of maintaining the classified board structure, believing that it has helped promote a continuity and stability that is aligned with our Board’s and management’s philosophy of focusing on long-term stockholder value.

Nonetheless, we have received feedback from certain stockholders and other constituents that prefer annually elected boards based on a perception that this approach provides increased accountability and responsiveness of directors to a company’s stockholders. While we believe that our classified board structure is well-aligned with our long-term perspective, after evaluating various considerations regarding our classified board structure, including the viewpoints of certain institutional investors and other constituents, the Board, upon the unanimous recommendation of the Nominations Committee, has unanimously declared it advisable and has approved, subject to approval of this Proposal 6 by our stockholders, to amend and restate our Certificate of Incorporation (the “Amended and Restated Certificate”) to declassify the Board beginning with the 2024 annual meeting of stockholders. This change would provide for the annual election of all directors, phased-in over a three-year period. If this proposal is approved, directors elected at our 2024 annual meeting of stockholders and at each subsequent annual meeting will be elected to one-year terms (until the first annual meeting of stockholders next following the director’s election and until the director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification, or removal). As a result, if this proposal is approved, our Board would be fully declassified following our 2026 annual meeting of stockholders, with each director on our Board being elected annually for one-year terms beginning at the 2025 annual meeting of stockholders.

The Amended and Restated Certificate would not change the current number of directors or the Board’s authority to fill any Board vacancies on account of newly created directorships resulting from any increase in the number of directors or resulting from a director’s death, resignation, disqualification, or removal. Directors who currently have multiple-year terms will continue to serve those terms until they expire and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification, or removal. Any director elected by the Board to fill a vacant or new directorship would serve until the first annual meeting of stockholders next following such director’s election and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification, or removal.

The Amended and Restated Certificate would become effective upon its filing with the Secretary of State of the State of Delaware, which we would file following the Annual Meeting if our stockholders approve Proposal 6. If the Amended and Restated Certificate is approved

 

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by our stockholders, the Board retains discretion not to implement it under Delaware law. If the Board exercises this discretion after stockholder approval, we expect to publicly disclose that fact and the reason for its determination.

If the Amended and Restated Certificate is not approved by the requisite vote, then the Amended and Restated Certificate will not be filed with the Secretary of State of the State of Delaware and our board of directors will remain classified.

The Amended and Restated Certificate is attached to this Proxy Statement as Appendix C, with deleted text shown in strikethrough and added text shown as double underline.

The Amended and Restated Certificate, as reflected in Appendix C, also includes certain technical and other administrative changes that do not substantively affect stockholder rights, including removing the original incorporator, eliminating the reference to the Board’s ability to remove directors for cause, renumbering the articles and other immaterial changes.

VOTE REQUIRED

The approval of the amendment and restated of our Certificate of Incorporation to declassify our board of directors requires the affirmative vote of not less than sixty-six and two-thirds percent (66-2/3%) of the voting power of our Common Stock outstanding on the Record Date. Abstentions and broker non-votes (if any) will have the effect of a vote “AGAINST” this proposal.

THE FULL TEXT OF THE AMENDED AND RESTATED CERTIFICATE IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX C AND THE FOREGOING DISCUSSION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH TEXT.

RECOMMENDATION

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD OF DIRECTORS AND MAKE CERTAIN OTHER CHANGES AS SET FORTH IN APPENDIX C TO THIS PROXY STATEMENT.

 

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CORPORATE GOVERNANCE

BOARD COMPOSITION AND GOVERNANCE

Director Attendance

During Fiscal 2023, the Board held six meetings. All directors who served on the Board during Fiscal 2023 attended at least 75% of the total number of meetings of the Board and meetings of the Board committees on which each director served that were held during the period of the director’s service during the fiscal year. We encourage our directors to attend each annual meeting of stockholders. To that end, and to the extent reasonably practicable, we generally schedule a meeting of our Board on the same day as our annual meeting of stockholders. All of our directors then serving on the Board attended our 2023 annual meeting of stockholders.

Independent Directors

Under the corporate governance rules of Nasdaq, a majority of the members of the Board must satisfy Nasdaq’s criteria for “independence.” No director qualifies as independent unless the Board affirmatively determines that the director has no relationship which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The Board has determined that each of Mses. Hardman, Kummrow, and Lee and Messrs. Buchanan, Chan, Geeslin, and Whims is independent under the current listing standards of Nasdaq. Mr. Hurlston is not considered an independent director due to his current position as our Chief Executive Officer. There are no family relationships among any of our directors and director nominees or executive officers. In this Proxy Statement, we refer to each of Mses. Hardman, Kummrow and Lee and Messrs. Buchanan, Chan, Geeslin, and Whims as our “Independent Directors.”

Executive Sessions and Independent Director Meetings

We regularly schedule executive sessions of our Board at which non-management directors meet without the presence or participation of management. The Chair of our Board presides at such executive sessions. The Independent Directors also meet in regularly scheduled executive sessions, generally in connection with regularly scheduled Board meetings.

Corporate Governance Guidelines

Our Board has adopted Corporate Governance Guidelines, which provide the framework for the governance of our Company and represent the Board’s current views with respect to selected corporate governance issues considered to be of significance to our stockholders. The Corporate Governance Guidelines direct our Board’s actions with respect to, among other things, director qualifications, establishment of the Board’s standing committees, succession planning and the Board’s annual performance evaluation. A current copy of the Corporate Governance Guidelines is available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.

Board Leadership Structure

The Board has no policy with respect to the separation of the offices of Chair and the Chief Executive Officer. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination when it elects a Chief Executive Officer. We currently maintain separate roles between the Chief Executive Officer and the Chair of the Board in recognition of the differences between the two responsibilities, but it is possible that this structure could change under different circumstances. Our Chief Executive Officer is responsible for setting our strategic direction and for day-to-day leadership and performance of our company. Our Chair of the Board provides input to the Chief Executive Officer, sets the agenda for Board meetings, and presides over meetings of the full Board as well as executive sessions of the Board.

 

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Board Oversight of Risk

Our Board believes that effective risk management involves our entire corporate governance framework. As is the case in virtually all businesses, we face a number of risks, including operational, economic, environmental, financial, legal, regulatory, cybersecurity and competitive risks. Our management is responsible for the day-to-day management of the risks we face, while our Board, as a whole and through its committees, has responsibility for the oversight of risk management.

Cybersecurity Risk Oversight. Our Chief Information Security Officer (our “CISO”) is responsible for monitoring the prevention, mitigation, detection, and remediation of cybersecurity incidents and reports the same to the Audit Committee of the Board each quarter. Our CISO has 28 years of experience as an information technology professional and reports to the Senior Vice President, Information Technology and Chief Information Officer.

 

Board Responsibilities

   Overall oversight of the risk management process

 

   Receives at least quarterly updates from senior management and periodically from outside advisors regarding risks facing the Company

 

   Regularly reviews the risks facing the Company and identified in the Company’s filings with the SEC

 

   Regularly reviews risks relating to various developments, including acquisitions, stock repurchases, debt and equity placements and product introductions

 

     

Audit Committee

 

   Oversees the assessment and management of financial risk

 

   Oversees the financial reporting process

 

   Responsible for the quality and integrity of financial statements

 

   Oversees internal controls over financial reporting and disclosure controls and procedures

 

   Oversees our compliance with legal and regulatory matters

 

   Responsible for the performance and independence of the independent auditor

 

   Assists the Board in fulfilling its oversight responsibilities regarding cybersecurity risk

 

 

 

  

Compensation Committee

 

   Oversees the assessment and management of risks related to compensation plans and policies

 

   Oversees compensation policies and programs, including appropriate incentives and controls

 

   Oversees human capital management, including hiring and attrition

  

Nominations Committee

 

   Oversees Board processes and corporate governance-related risks

 

   Responsible for risks related to director independence and conflicts of interest

 

   Oversees risks relating to management succession planning

 

   Oversees corporate social responsibility, environmental risk and sustainability, governance risk, and the Company’s ESG program

Management Responsibilities

 

   Ensures that information with respect to material risks is transmitted to our Board

 

   Identifies material risks and implements appropriate risk management strategies

 

   Integrates risk management into our decision-making process

 

   Attends committee meetings and reports on matters that may not be otherwise addressed at these meetings

Our Board believes that the process it has established to administer the Board’s risk oversight function would be effective under a variety of leadership frameworks and, therefore, does not have a material effect on our choice of the Board’s leadership structure described above under “Board Leadership Structure.”

Code of Ethics

We have adopted a Code of Ethics that applies to our Chief Executive Officer and all senior financial officers, including the Chief Financial Officer and Principal Accounting Officer. The “Code of Ethics for the CEO and Senior Financial Officers” is available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.

 

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We intend to satisfy the disclosure requirement under Item 5.05(c) of Form 8-K regarding any amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, at the address and location specified above to the extent required by applicable SEC rules and Nasdaq listing standards.

Succession Planning

Pursuant to our Corporate Governance Guidelines, the Nominations Committee makes an annual report to the Board on succession planning. As appropriate, the entire Board works with the Nominations Committee to nominate and evaluate potential successors to the Chief Executive Officer. In addition, the Chief Executive Officer at all times makes available his recommendations and evaluations of potential successors for both himself and other key executives, along with a review of any development plans recommended for such individuals. In the event of an emergency, the independent Chair of the Board or, if the Chair is unavailable, the Chief Financial Officer, will serve as interim Chief Executive Officer.

Prohibition on Derivatives Trading, Hedging, Margining, and Pledging

Our Insider Trading Policy prohibits the members of our Board, executive officers, employees, and any family member residing in the same household of such persons from engaging in derivatives trading and hedging involving our securities, holding our securities in margin accounts, and pledging our securities as collateral for a loan.

Corporate Social Responsibility and Sustainability

We believe that sustainable corporate practices and consistent attention to social and governance priorities will help enhance long-term value for stockholders. In addition, our Board recognizes the importance of our environmental sustainability initiatives and the need to provide effective oversight of those initiatives. The Corporate Social Responsibility section of our company website provides a central portal for information on our Corporate Social Responsibility and ESG initiatives. This site is the foundation for stockholders to obtain information on the various programs we are implementing, targets we have set, and the progress we are making. We have adopted a set of policies that address concerns such as human rights and climate change – a summary of these policies is provided below. Copies of the policies are available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.

Our Values:

 

Corporate Social Responsibility

   Synaptics strives to be a leading corporate citizen

   We uphold the most ethical standards in our business practices and policies, and we believe that sustainable corporate practices and consistent attention to social and governance priorities will help enhance long-term value for our stockholders

   Our management team applies an integrated methodology to financial matters, corporate governance, and corporate responsibility, leading to increased accountability, better decision making and ultimately creating better long-term value

   Our focus on ESG influences everything we do

 

 

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Environmental

   We have implemented internal green programs and initiatives to reinforce our commitment to minimizing natural resource consumption, improving sustainability, disposing of end-of-life products in an environmentally safe manner, reducing waste, and increasing reuse and recycling programs company-wide

  

Social

   Our employees and communities are the heart of the company, and we take pride in our social responsibility to them as well becoming better global citizens

   We support our local communities through charitable causes and events, and we have numerous programs in place around the world that promote our commitments to diversity, equality of opportunity, non-discrimination, and the highest standards of human rights

   We are committed to the use of a socially responsible supply chain and require employees to understand the signs of human trafficking and modern slavery and what to do if they suspect it is taking place in our supply chain

   Our efforts include maintaining a supplier policy that bars the use of forced or child labor and governs the use and distribution of conflict minerals

   Our compensation practices allow all employees, not just senior management, to participate in the long-term success of the Company through long-term equity incentives

  

Governance

   We are dedicated to supporting leading corporate governance and board practices to ensure oversight accountability and transparency in our business practices

   We place a high value on ethical actions, individual integrity and fair dealing in every aspect of what we do

 

Accountability

 

   Our Board and management are strongly committed to our corporate responsibility policies and will continue to regularly evaluate these policies to ensure an effective outcome and strict adherence by our employees, suppliers, vendors, and partners

   We actively monitor and audit our internal compliance with our Code of Conduct and other corporate social responsibility policies and programs

Environmental Targets: Synaptics has established goals in the following key environmental aspects and is taking proactive actions to achieve these targets.

 

 

LOGO

 

Reduce Greenhouse Gas Emissions

 

Reduce our absolute Scope 1 & 2 GHG emissions by 15%, relative to our 2019 baseline year, by 2024.

  

 

LOGO

 

Reduce Waste Generation

 

95% of waste diverted from landfill by 2020, zero waste to landfill by 2024.

 

 

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LOGO

 

Adoption of Renewable Energy

 

Increase our renewable energy consumption to 50% globally by 2024.

 

  

LOGO

 

Climate Change Management

 

Improve education, awareness-raising and employee and company capacity on climate change mitigation, adaptation, impact reduction through on-going education and support of employee environmental initiatives.

 

Our Policies:

 

Environmental Policy

 

   Manage and minimize the consumption of energy, water, paper, and other resources

 

   Reuse and recycle materials

 

   Dispose of end-of-life products in an environmentally safe manner

 

   Develop, manufacture, and market products that are efficient in their use of energy, and that can be reused, recycled or disposed of safely

     

Anti-Corruption and Anti-Bribery Policy

 

   Strict prohibition against all forms of bribery and kickbacks

 

   Strict prohibition against the participation in, or facilitation of, corrupt activities of any kind

 

   Such prohibitions apply to all third parties such as our suppliers, agents, contractors, consultants, and distributors

  

Labor and Human Rights Policy

 

   Prohibition against the use of forced labor of any kind

 

   Prohibition against the use of child labor and young workers

 

   Commitment to diversity, equality of opportunity and non-discrimination

 

   Prohibition against harsh or inhumane treatment of workers, including sexual harassment

 

   Commitment to providing a fair and living wage and legally mandated benefits

 

   Recognition of the right of freedom of association and collective bargaining

 

  

Supplier and Vendor Code of Conduct

 

   Contractual obligation on our supply chain to comply with the Responsible Business Alliance Code of Conduct

 

   Requires our suppliers to uphold the highest standards of human rights, as detailed in our Labor and Human Rights Policy

 

   Requires our suppliers to adhere to the highest standards of ethics

 

   Requires our suppliers to implement and maintain management systems to conform to this Supplier and Vendor Code of Conduct

Conflict Minerals and Cobalt Sourcing Policy

 

   No direct sourcing of conflict minerals or cobalt

 

   Requires our suppliers to have in place conflict minerals and cobalt sourcing policies consistent with our own

 

   Requires our suppliers to comply with the Responsible Business Alliance Code of Conduct and the Responsible Minerals Initiative

 

 

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BOARD COMMITTEES

Our Board has four standing committees: (i) the Audit Committee, (ii) the Compensation Committee, (iii) the Nominations and Corporate Governance Committee and (iv) the Executive Committee. All members of the Audit Committee, Compensation Committee, Nominations Committee and Executive Committee are Independent Directors. Our Committees each operate under a written charter adopted by our Board, which is available in the Investor Relations — Corporate Governance — Overview section of our website at http://www.synaptics.com.

 

   Director Name

   Independent    Audit    Compensation    Nominations    Executive

Nelson Chan «

   Yes               C

Jeffrey Buchanan

   Yes    C           

Keith Geeslin

   Yes         C        

Susan Hardman

   Yes                

Michael Hurlston

   No                    

Patricia Kummrow

   Yes              C   

Vivie Lee

   Yes                

James Whims

   Yes                

« Chair of the Board                 Committee Member                C Committee Chair                F Financial Expert                

Audit Committee

Meetings Held in Fiscal 2023: 5

Primary Responsibilities: The primary responsibilities of the Audit Committee include:

 

   

Overseeing our accounting and financial reporting processes and the audits of our financial statements.

 

   

Assisting the Board in fulfilling its oversight responsibilities regarding:

 

  o

the integrity of our financial statements;

 

  o

our compliance with legal and regulatory matters;

 

  o

the independent auditor’s qualifications and independence; and

 

  o

the performance of our independent auditor;

 

   

Assisting the Board in fulfilling its oversight responsibilities regarding cybersecurity risk, which it discusses at least semi-annually;

 

   

Preparing the Audit Committee report that SEC rules require to be included in our annual proxy statement;

 

   

Selecting the independent auditor to conduct the annual audit of our financial statements and reviewing the proposed scope of such audit;

 

   

Reviewing our accounting and financial controls with the independent auditor and our financial accounting staff; and

 

   

Reviewing and approving any related party transactions between us and our directors, executive officers, and their affiliates.

Independence: Our Board has determined that each member of the Audit Committee satisfies the enhanced independence standards applicable to audit committees pursuant to Rule 10A-3(b)(1)(i) under the Exchange Act and Nasdaq listing standards. In addition, each member of the Audit Committee is financially literate, and Mr. Buchanan has been designated as an “audit committee financial expert” as that term is defined by the SEC.

 

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Compensation Committee

Meetings Held in Fiscal 2023: 4

Primary Responsibilities: The primary responsibilities of the Compensation Committee include:

 

   

Determining, or recommending to our Board for determination, the compensation of our Chief Executive Officer and our other executive officers;

 

   

Discharging the responsibilities of our Board relating to our compensation programs;

 

   

Preparing the Compensation Committee report that SEC rules require to be included in our annual proxy statement and our Annual Report on Form 10-K;

 

   

Establishing and reviewing our overall compensation philosophy;

 

   

Reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and our other executive officers, evaluating the performance of our Chief Executive Officer and our other executive officers in light of those goals and objectives, and determining and approving our Chief Executive Officer and our other executive officers’ compensation levels based on such evaluation;

 

   

Reviewing and recommending to the Board the compensation of our non-employee directors; and

 

   

Reviewing and making recommendations to the full Board with respect to, or approving, our incentive compensation plans and equity-based plans, including reviewing and overseeing the activities of the individuals responsible for administering those plans.

In fulfilling its responsibilities, the Compensation Committee may delegate any or all of its responsibilities to a subcommittee of the Compensation Committee.

In accordance with the Compensation Committee’s charter, the Compensation Committee may retain independent compensation advisors and other management consultants. In Fiscal 2023, the Compensation Committee retained Compensia, Inc. (“Compensia”) to assist in reviewing our executive compensation program and analyzing the competitive market for executive talent. As discussed under “Compensation Discussion and Analysis — How We Make Compensation Decisions” below, the Compensation Committee has assessed the independence of Compensia and has concluded that its engagement of Compensia does not raise any conflict of interest. The services provided by Compensia in Fiscal 2023 are also discussed in that section.

At the request of the Compensation Committee, our Chief Executive Officer aids the Compensation Committee in reviewing and analyzing the performance of, and our goals and objectives for, our other executive officers. These services are discussed under “Compensation Discussion and Analysis — How We Make Compensation Decisions — Role of the CEO” below.

Independence: Our Board has determined that each member of the Compensation Committee satisfies the additional independence requirements specific to compensation committee membership under Nasdaq listing standards. In making this determination, the Board considered whether the director has a relationship with the Company that is material to the director’s ability to be independent from management in connection with the duties of a member of the Compensation Committee.

 

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Nominations and Corporate Governance Committee

Meetings Held in Fiscal 2023: 4

Primary Responsibilities: The primary responsibilities of the Nominations Committee include:

 

   

Identify, evaluate, and recommend candidates qualified to become Board members or nominees for members of the Board consistent with criteria approved by the Board;

 

   

 

   

Evaluate and recommend Board members to serve as members and chairs of Board committees;

 

   

Assess the performance of the Board and its committees on an annual basis;

 

   

Develop and maintain the Company’s governance policies and periodically review those policies and recommend any changes, and oversee the Company’s governance practices and procedures;

 

   

Oversee and approve management succession and continuity planning and risks; and

 

   

Oversee the corporate social responsibility of the Company, including environmental, social, and governance practices.

Independence: Our Board has determined that each member of the Nominations Committee is independent under Nasdaq listing standards.

Executive Committee

Meetings Held in Fiscal 2023: None

Primary Responsibilities: The primary responsibility of the Executive Committee is exercising from time to time, and to the fullest extent permitted by law, all powers of the Board in the management of our business and affairs.

Independence: Our Board has determined that each member of the Executive Committee is independent under Nasdaq listing standards.

 

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DIRECTOR SELECTION, EVALUATION AND COMMUNICATIONS

Qualifications of Director Nominees

The Nominations Committee is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics required for new Board members as well as the composition of the Board as a whole. In evaluating director candidates, including directors eligible for re-election, the Nominations Committee will consider the following factors:

 

   

Experience at a strategic or policymaking level in a business, government, non-profit or academic organization of high standing and the ability to exercise sound business judgment;

 

   

Background and accomplishments in the candidate’s respective field;

 

   

Personal qualities and characteristics, accomplishments, and reputation in the business community;

 

   

Understanding of the fiduciary responsibilities of a director;

 

   

Commitment to devote sufficient time and availability to the affairs of the Company, particularly in light of the number of boards on which such candidate may serve;

 

   

Knowledge and contacts in the communities in which the Company conducts business and in the Company’s business industry or other industries relevant to the Company’s business;

 

   

Knowledge and expertise in various fields deemed appropriate by the Board, such as engineering, marketing, production, distribution, technology, accounting, finance, and law;

 

   

Fit of the candidate’s skills, experience, and personality with those of other directors in maintaining an effective, collegial, and responsive Board;

 

   

To the extent a candidate serves or has previously served on other boards, the candidate shall have a demonstrated history of actively contributing at board meetings;

 

   

Whether a candidate’s background contributes to a mix of Board members that represents a diversity of background and experience, including gender diversity and representation of underrepresented groups, as may be required by applicable law or the Nasdaq listing standards;

 

   

Length of service;

 

   

Independence and conflicts of interest; and

 

   

Any other factors the Nominations Committee considers appropriate.

The Nominations Committee need not assign any particular weight or priority to any one factor. In making its selection of director candidates, the Nominations Committee bears in mind that the foremost responsibility of a director is to represent the interests of our stockholders as a whole. Directors are expected to exemplify the highest standards of personal and professional integrity, and to constructively challenge management through their active participation and questioning.

Nominees are not to be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law. The assessment of directors is made in the context of the perceived needs of our Board from time to time.

Process for Identifying Nominees for Director; Stockholder-Recommended Director Candidates

At any appropriate time prior to each annual meeting of stockholders at which directors are to be elected, and whenever there is otherwise a vacancy on the Board, the Nominations Committee will assess the qualifications and effectiveness of the current Board members and, to the extent there is a need, will seek other individuals qualified and available to serve as potential Board members. The Nominations Committee will review each potential candidate’s qualifications in light of the criteria described above under “Qualifications of Director Nominees” and any additional criteria (such as experience, qualifications, attributes and skills) desired for directors and director candidates as may be determined from time to time by the Board. In reviewing each potential candidate, the Nominations Committee also considers the results of the annual Board evaluations for purposes of assessing the suitability of each Board member for continued service on the Board. See “Annual Board Evaluations” below for additional information regarding the annual Board evaluation process. The Nominations Committee will select the candidate or candidates it believes are the most qualified to recommend to the Board for selection as a director nominee.

The Nominations Committee will also consider persons recommended by our stockholders for inclusion as nominees for election to our Board if the information as required by our Bylaws is submitted in writing in a timely manner and addressed and delivered to our Corporate Secretary at our principal executive offices set forth in this Proxy Statement. In addition to persons recommended by stockholders for inclusion as nominees for election to our Board, the Nominations Committee may also identify director candidates that come to its attention through incumbent directors, management or third parties, and may, if it deems appropriate under the circumstances, engage a third-

 

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party search firm to assist in identifying qualified candidates. The Nominations Committee evaluates nominees for director in the same manner, regardless of whether the nominee is recommended by a stockholder or other person or entity. The Nominations Committee may from time to time engage third-party search firms to assist in identifying potential nominees to our Board.

Annual Board Evaluations

The Board conducts an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominations Committee receives comments from all directors and report annually to the Board with an assessment of the Board’s performance. The assessments focus on the effectiveness and composition of the Board and each Board committee, the Board’s interaction with Company management, the Board’s standards of conduct, and the performance of each individual director. In Fiscal 2023, the self-evaluations revealed that Board members desired deeper engagement on the Company’s strategy and more time for the independent directors to hold closed discussions. The Board has taken steps to address the feedback, including focusing more on strategic issues at the Board meetings and reserving additional time for closed sessions.

Communications with the Board

Interested parties may communicate with our Board or specific members of our Board, including our Independent Directors and the members of the various committees of our Board, by submitting a letter addressed to the Board of Synaptics Incorporated, c/o any specified individual director or directors at our executive offices: 1109 McKay Drive, San Jose, California 95131. Any such letters will be forwarded to the indicated directors.

All communications will be received, processed, and then forwarded to the appropriate member(s) of our Board, except that, certain items unrelated to the Board’s duties and responsibilities, such as spam, junk mail, mass mailings, solicitations, resumes and employment inquiries and similar items will not be forwarded. Board members receiving communications will respond as such directors deem appropriate, including the possibility of referring the matter to management of our Company, to the full Board or to an appropriate committee of the Board.

 

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DIRECTOR COMPENSATION

For their service on the Board, our non-employee directors receive cash compensation and an annual equity award. Our executive officers who also serve as directors are not paid any additional compensation for their service as a director.

The Board may change the terms of our non-employee director compensation program from time to time.

CASH COMPENSATION

Under our non-employee director compensation program in effect for Fiscal 2023, each non-employee director received an annual cash retainer of $60,000. The non-executive Chair of our Board received an additional annual cash retainer of $70,000. We also pay our non-employee directors an additional annual retainer for committee service, in cash or shares of our common stock at the director’s election, as follows:

 

      Committee Chair    Committee Member  

Audit Committee

   $25,000    $10,000  

Compensation Committee

   $20,000    $9,000  

Nominations and Corporate Governance Committee

   $10,000    $5,000  

Annual retainers for service on our Board and committees are paid in quarterly installments in advance.

Non-employee directors are reimbursed for reasonable expenses incurred to attend Board and committee meetings and incident to their service as a director.

EQUITY COMPENSATION

Under our non-employee director compensation program in effect for Fiscal 2023, each non-employee director may receive their annual cash retainer in cash or vested shares of our common stock at the director’s election. For directors electing to receive shares of our common stock in lieu of a cash retainer, the number of shares issued is determined by taking the cash retainer amount otherwise due to such director and converting it to a number of shares using the closing price of our common stock on Nasdaq on the date the shares are to be delivered to that director. In addition, non-employee directors also receive an annual grant of RSUs with a total grant value of approximately $200,000 in connection with our annual meeting of stockholders. The total grant value for the award granted in Fiscal 2023 was converted to a number of RSUs using the average closing price of our common stock on Nasdaq for the month ended October 31, 2022, and differs from the accounting value which is based on the grant date fair value determined in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, Compensation — Stock Compensation. The annual grant of RSUs vests in four quarterly installments through the first anniversary of the grant date (or, for a non-employee director not standing for re-election, immediately prior to the Company’s next annual meeting of stockholders). Subject to our Board’s discretion, a non-employee director appointed to our Board at any time other than in connection with an annual meeting may receive a pro-rated grant of RSUs valued on the same basis as the latest annual non-employee director grants that vests on the same schedule as the grants made to non-employee directors at the most recent annual meeting.

DIRECTOR COMPENSATION LIMITS

Per the terms of our 2019 Incentive Plan, our non-employee directors are not eligible to receive, individually, compensation exceeding an aggregate maximum value of $750,000 in any fiscal year, including both cash and equity awards. The value of equity awards is based on the grant date fair value of the awards, as such grant date fair value is determined for our financial reporting purposes.

STOCK OWNERSHIP GUIDELINES

We maintain stock ownership guidelines for our non-employee directors. Under these guidelines, each non-employee director is to own or to acquire, within five years of first becoming a director, shares of our common stock having a market value at least equal to five times the director’s annual retainer. As of June 24, 2023, all of our non-employee directors met the ownership requirement or were within the five-year period since first becoming a director to acquire the applicable level of ownership. We believe that these guidelines promote the alignment of the long-term interests of the members of our Board with our stockholders.

 

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DIRECTOR COMPENSATION TABLE — FISCAL 2023

The following table sets forth summary information regarding compensation for each of our non-employee directors for Fiscal 2023. The compensation paid to Mr. Hurlston is presented in our executive compensation disclosure below. Mr. Hurlston is not entitled to receive additional compensation for his service as a director.

 

Name      Fees Earned
or Paid in
cash (1) ($)
     Stock
Awards(2) ($)
     Total ($)    

                        (a)

     (b)      (c)      (d)    

Nelson Chan

     $145,000      $194,598      $339,598    

Jeffrey Buchanan

     $90,000      $194,598      $284,598    

Keith Geeslin

     $80,000      $194,598      $274,598    

Susan Hardman

     $79,000      $194,598      $273,598    

Patricia Kummrow

     $67,500      $194,598      $262,098    

Vivie Lee

     $74,000      $194,598      $268,598    

James Whims

     $77,000      $194,598      $271,598    

 

(1)

The Board reconstituted the members of each of our Board committees, effective as of October 25, 2022. The amounts reported in column (b) of the table above reflect pro rata payments to certain directors based on the number of quarters each director served on the board or on the committee to which they were appointed prior to October 25, 2022, and on and after October 25, 2022.

(2)

Each non-employee director was granted 2,161 RSUs on November 1, 2022. The amounts reported in column (c) of the table above reflect the aggregate grant date fair value of the RSUs granted to the non-employee directors during Fiscal 2023 computed in accordance with FASB ASC Topic 718 (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes and excluding the effect of estimated forfeitures). For information on the assumptions used in the grant date fair value computations, refer to Note 12 “— Share-Based Compensation” in the Notes to Consolidated Financial Statements in the Company’s 2023 Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 24, 2023. The amounts included in the Director Compensation Table above may be different from the value that will be realized by the non-employee directors upon vesting and settlement of the RSUs.

The aggregate number of unvested RSUs outstanding as of June 24, 2023, held by each of our non-employee directors then in office are as set forth below. None of our non-employee directors held any outstanding stock options as of that date.

 

Director   

Unvested  

Stock Awards  

Nelson Chan

   1,080  

Jeffrey Buchanan

   1,080  

Keith Geeslin

   1,080  

Susan Hardman

   1,080  

Patricia Kummrow

   1,080  

Vivie Lee

   1,080  

James Whims

   1,080  

 

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AUDIT AND NON-AUDIT FEES

KPMG has served as the Company’s independent auditor since 2003. In August 2023, the Audit Committee re-appointed KPMG as our independent auditor for the year ending June 29, 2024. The Audit Committee of the Board has determined that KPMG is independent with regard to the Company within the meaning of the Exchange Act and the applicable published rules and regulations thereunder and by the Public Company Accounting Oversight Board (the “PCAOB”).

AUDIT COMMITTEE PRE-APPROVAL POLICIES

The charter of our Audit Committee provides that the duties and responsibilities of our Audit Committee include the pre-approval of all audit, audit-related, tax, and other services permitted by law or applicable SEC regulations (including fee and cost ranges) to be performed by our independent auditor. Any pre-approved services that will involve fees or costs exceeding pre-approved levels will also require specific pre-approval by the Audit Committee. Unless otherwise required by law or applicable SEC regulations, any pre-approval shall be effective until the respective service is complete to the satisfaction of the Audit Committee under the terms of the engagement with the independent auditor or until such date as the Audit Committee designates. The Audit Committee will not approve any non-audit services prohibited by applicable SEC regulations or any services in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Code and related regulations.

To the extent deemed appropriate, the Audit Committee may delegate pre-approval authority to the Chair of the Audit Committee or any one or more other members of the Audit Committee, provided that any member of the Audit Committee who has exercised any such delegation must report any such pre-approval decision to the Audit Committee at its next scheduled meeting. The Audit Committee will not delegate to management the pre-approval of services to be performed by the independent auditor.

Our Audit Committee requires that our independent auditor, in conjunction with our Chief Financial Officer, be responsible for seeking pre-approval for providing services to us and that any request for pre-approval must provide information to the Audit Committee about each service to be provided, and the details of such service.

All of the services provided by KPMG in Fiscal 2023 and Fiscal 2022 described below under the captions “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were approved by our Audit Committee pursuant to the foregoing pre-approval policies.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The aggregate fees billed to the Company by KPMG for professional services rendered in fiscal years 2023 and 2022 are as follows:

 

    Fees    2023    2022    

Audit Fees

   $2,909,000    $2,606,000    

Audit-Related Fees

      —    

Tax Fees(1)

   $1,864,000    $1,838,915    

All Other Fees

      —    

Total Fees

   $4,773,000    $4,444,915    

 

  (1)

Includes fees for professional services rendered by KPMG with respect to tax preparation and compliance, and tax due diligence for acquisition and tax consultation. The fees for tax consultation services were $1,369,000 and $1,355,611 for Fiscal 2023 and 2022, respectively.

 

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AUDIT COMMITTEE REPORT

Our Board has appointed an Audit Committee consisting of four directors. The current members of the Audit Committee are Nelson Chan, Jeffrey Buchanan, Susan Hardman, and Vivie Lee. Each of the Audit Committee members is “independent” of our company and management, as that term is defined under applicable Nasdaq listing standards and SEC rules.

The primary responsibility of the committee is to assist our Board in fulfilling its responsibility to oversee management’s conduct of our Company’s financial reporting process, including overseeing the financial reports and other financial information provided by our Company to governmental or regulatory bodies (such as the SEC), the public, and other users thereof; our Company’s systems of internal accounting and financial controls; and the annual independent audit of our Company’s financial statements.

Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The independent auditor is responsible for auditing the financial statements and expressing an opinion on the conformity of those audited financial statements with GAAP.

In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements with management and the independent auditor. The Audit Committee discussed with the independent auditor the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee received from the independent auditor written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent auditor’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with the independent auditor the firm’s independence from management and our Company, including the matters covered by the written disclosures and letter provided by the independent auditor, and considered the compatibility of non-audit services with KPMG’s independence.

The Audit Committee discussed with the independent auditor the overall scope and plans for its audits. The Audit Committee met with the independent auditor, with and without management present, to discuss the results of its audit, its consideration of our Company’s internal controls, and the overall quality of the financial reporting. The Audit Committee held five meetings with management of our Company, all of which were attended by our independent auditor, with respect to our Company’s financial statements and audit or quarterly review procedures.

Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board, and our Board approved that the audited financial statements be included in our Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2023, for filing with the SEC. The Committee also has appointed KPMG as our Company’s independent auditor.

This report has been furnished by the Audit Committee of the Board.

Audit Committee

Jeffrey Buchanan, Chair

Nelson Chan

Susan Hardman

Vivie Lee

The foregoing report of the Audit Committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information with respect to the following persons who, pursuant to SEC rules, constitute our named executive officers (“NEOs”) for Fiscal 2023:

 

 

Michael Hurlston, our President and Chief Executive Officer (our “CEO”);

 

 

Dean Butler, our Senior Vice President and Chief Financial Officer (our “CFO”);

 

 

Saleel Awsare, our Senior Vice President and General Manager, PC and Peripherals Division;

 

 

John McFarland, our Senior Vice President, General Counsel and Secretary; and

 

 

Craig Stein, our Senior Vice President and General Manager, Mobile and IoT Division.(1)

 

  (1)

On July 31, Mr. Stein voluntarily resigned from his position as our Senior Vice President and General Manager, Mobile and IoT Division, effective as of September 23, 2023.

This Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each element of compensation that we provide. In addition, we explain how and why the Compensation Committee arrived at the specific compensation policies and decisions involving our executive officers during Fiscal 2023.

EXECUTIVE SUMMARY

Fiscal 2023 Business Highlights

In the face of a challenging macro-economic backdrop, we maintained our financial discipline during Fiscal 2023, delivering continued profitability for our stockholders. Many customers reduced their forecasts in response to accumulated inventory positions, resulting in consolidated revenue of $1.35 billion, a decline of 22% compared to Fiscal 2022. Despite a decline in topline sales, we remained focused on our core strategy to drive growth in the Internet of Things (“IoT”) market, for which the decline in revenue was only 14% compared to Fiscal 2022. Our IoT sales mix continued to improve, reaching 70% of sales in Fiscal 2023 from just 25% in Fiscal 2020. We introduced several new and exciting products to our customers, including “Navarro,” a first of its kind wireless docking platform based on our new device. Our WiFi engineering teams taped out several new devices which are now in final qualification stages, and we won significant new designs with large mobile and PC customers which we expect to contribute to future growth in those areas. We are excited about our future as we continue to pursue growth in the IoT market.

During Fiscal 2023, our leadership team led the Company to the following notable financial achievements:

 

 

Revenue of $1,355 million for Fiscal 2023

 

 

IoT product revenue of $946 million, representing 70% of total sales

 

 

GAAP earnings per share of $1.83 and non-GAAP earnings per share of $8.12

 

 

GAAP gross margin of 52.8% and record non-GAAP gross margin of 60.1%

 

 

Cash flow from operations of $332 million

 

 

Repurchased approximately two million shares or about 5% of shares outstanding

 

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LOGO

 

  (1) 

A reconciliation of GAAP to Non-GAAP gross margin, Non-GAAP operating margin, and Non-GAAP ESP can be found in Appendix A to this Proxy statement.

We view our executive compensation program as an important part of our success, as our annual performance-based cash bonus plan, coupled with our long-term incentive plans, provide us with effective tools for incentivizing our senior executive team, and rewarding them for their accomplishments. We believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our executive officers and that it helps provide us with a solid foundation for the future as we continue to motivate our executive officers to grow and expand our business on behalf of our stockholders.

Fiscal 2023 Executive Compensation Highlights

Our executive compensation program is designed to promote a long-term focus, thereby aligning the interests of our NEOs with the interests of our stockholders. For this reason, the compensation of our NEOs is largely variable in nature. at-risk, and subject to Company performance measured against specific financial objectives that are key for driving our success. Accordingly, our NEOs are incentivized to drive our business forward and return long-term value to our stockholders.

Target Total Direct Compensation – Pay Mix

The target total direct compensation of our CEO and of our other NEOs includes a significant portion of equity incentives that are based on our financial performance and/or stock price growth.

Pay Mix for Fiscal 2023

CEO - Michael Hurlston

 

LOGO

All other NEOs

 

LOGO

 

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Our Compensation Program Emphasizes Performance-Based and At-Risk Pay

Approximately 75% of our Chief Executive Officer’s target total direct compensation and approximately 71% of our other NEOs’ target total direct compensation for Fiscal 2023 was not guaranteed but rather was tied directly to the performance of the Company and the Company’s stock price.

Short-Term Incentive Compensation

Historically, we have used annual performance-based cash bonuses to incentivize and reward the achievement of our annual financial and operational objectives as set forth in our annual operating plan. For Fiscal 2023, the Compensation Committee based cash bonuses on the achievement of three objective financial performance metrics as reflected in our annual operating plan. The metrics under our Fiscal 2023 annual performance-based cash bonus plan were as follows:

 

 

Revenue

 

 

Non-GAAP gross margin percentage

 

 

Non-GAAP operating profit

Long-Term Incentive Compensation

We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use these awards to incentivize and reward our NEOs for performance that leads to long-term success and stockholder value creation, and to promote retention of critical executive officers to remain with us in an environment where competition for talent is fierce. In Fiscal 2023, we used three equity award vehicles – MSU awards, PSU awards, and RSU awards – to provide long-term incentive compensation opportunities to our NEOs as part of our annual equity compensation program.

Fiscal 2023 Long-Term Incentive Compensation Mix and Metrics

CEO and All Other NEOs

 

                         LOGO

 

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  MSU Metrics (CEO and All Other NEOs)

 

 

Relative TSR

 

 

Compared to the peer companies in the Russell 2000 Index

 

 

Measured over one-, two-, and three-year performance periods

 

 

Target shares allocated equally over three performance periods

 

 

The one- and two-year payouts are subject to a cap of 300% (maximum number of shares earned overall is 300% of target)

 

 

Payouts for the one- and two-year performance periods will be trued up at the end of the full three-year performance period based on overachievement during the cumulative three-year performance period, subject to an aggregate cap of 300%

 

 

Starting measurement period is 90-day period ending June 30, 2022, and ending measurement periods will be 90-day periods ending June 30, 2023, June 30, 2024, and June 30, 2025, for the three performance periods

 

 

Payout for each performance period requires continued employment through the end of that period

 

  PSU Metrics (CEO and All Other NEOs)

 

 

Non-GAAP EPS

 

 

One-year performance period (Fiscal 2023)

 

 

Earned shares vest over three years, with 1/3 vesting on the first anniversary of the award grant date, and the remainder vesting in equal quarterly tranches, subject to continued employment through the applicable vesting date

 

 

Maximum number of shares earned overall is 200% of target

 

 

Targets may be adjusted by the Compensation Committee for merger and acquisition activity

 

  RSU Metrics (CEO and All Other NEOs)

 

 

Time-based and vest over three years, with 1/3 vesting on the first anniversary of the award grant date, and the remainder vesting in equal quarterly tranches, subject to continued employment through the applicable vesting date

 

 

For new executive officers, initial RSU awards vest over four years, with 1/4 vesting on the first anniversary of the award grant date, and the remainder vesting in equal quarterly tranches, subject to continued employment through the applicable vesting date

 

 

Beginning in fiscal year 2024, initial RSU awards will vest over three years, with 1/3 vesting on the first Anniversary of the award grant date, and the remainder vesting in equal quarterly tranches, subject to continued employment through the applicable vesting date

 

Stockholder Engagement and Fiscal 2022 Say-on-Pay Vote

At our 2022 annual meeting of stockholders, approximately 98% of the votes cast on our Say-on-Pay proposal were voted in favor of the Fiscal 2022 compensation of our NEOs. During the lead-up to the 2022 annual meeting of stockholders, members of our senior management contacted many of our largest institutional stockholders representing approximately 70% of our outstanding shares of common stock to solicit feedback on such topics as our compensation practices, proxy statement disclosure, and corporate governance policies, and to understand any stockholder concerns. This feedback was discussed with our management and shared with our full Board and the Compensation Committee.

Our Board recognizes that there is always room for improvement. We are dedicated to increased transparency in our Compensation Discussion and Analysis and continued proactive stockholder engagement in the future. The Compensation Committee will continue to consider our stockholders’ views when making future decisions regarding our pay practices, proxy statement disclosure, and corporate governance policies.

 

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Fiscal 2023 Key Compensation Decisions

 

 

Annual Performance-Based Cash Bonus Plan Payments Reflected Fiscal 2023 Company Performance. Based upon our achievement of a funding score of 53.4% under our annual performance-based cash bonus plan for Fiscal 2023, our NEOs (other than our CEO) received bonus payments in amounts ranging from $159,694 to $174,994, with a bonus payment for our CEO in the amount of $503,295 (representing 50.1% - 54.9% of each of their Fiscal 2023 target annual cash bonus opportunities, as discussed under “Fiscal 2023 Bonus Decisions,” below).

 

 

Named Executive Officer Equity Awards. As part of our annual equity compensation program, we granted a combination of MSU awards, PSU awards, and RSU awards to our NEOs on August 17, 2022, subject to our TSR performance over a multi-year period in the case of the MSU awards, our non-GAAP EPS performance over a one-year performance period and a multi-year time-based vesting requirement in the case of the PSU awards, and a time-based vesting requirement in the case of the RSU awards.

HOW WE MAKE COMPENSATION DECISIONS

 

Role of the

Compensation Committee

  

Role of our

CEO

  

Role of the

Compensation Consultant

Discharges the responsibilities of our Board relating to the compensation of our executive officers.

 

Periodically reviews and makes recommendations to our Board regarding the compensation of the non-employee members of our Board.

 

Oversees our compensation and benefits policies generally.

 

Oversees and evaluates the compensation plans, policies, and practices applicable to our executive officers.

 

Reviews and approves the performance criteria and targets for our short-term and long-term incentive compensation programs.

 

Administers our equity compensation plans.

 

Evaluates the performance of our CEO for the fiscal year and determines our CEO’s compensation in light of our goals and objectives for that year.

 

Considers our CEO’s recommendations in evaluating the performance of our other executive officers for the fiscal year and determining the compensation of our other executive officers.

  

Attends the meetings of the Compensation Committee to review and discuss the corporate and individual goals and objectives that he/she regards as important to our overall success and other related matters.

 

Assesses the performance of, and our goals and objectives for, our other executive officers.

 

Makes recommendations for each element of the compensation for our other executive officers based on his/her evaluation of their performance.

  

Conducts an analysis of the competitive market and the compensation practices of the companies in the compensation peer group and determines our compensation positioning relative to the market and our compensation peer group.

 

Develops market-based guidelines for the structure of our executive compensation program and reviews the overall compensation packages of our executive officers.

 

Conducts a review of the overall compensation program for the non-employee members of our Board.

 

Reviews market practices in performance share plan design.

 

Provides the Compensation Committee with information regarding executive compensation trends generally, as well as industry specific compensation trends.

 

Answers questions that may be posed by the Compensation Committee regarding compensation issues.

Compensation Consultant

During Fiscal 2023, the Compensation Committee engaged Compensia, a national compensation consulting firm, to serve as its compensation consultant to assist it in connection with its review of our Fiscal 2023 executive compensation program and its analysis of the competitive market for executive talent. The Compensation Committee assessed the independence of Compensia pursuant to the six independence factors set forth in the SEC rules and Nasdaq listing standards and has concluded that Compensia is independent, and that its work for the Compensation Committee does not raise any conflict of interest. Compensia did not provide any additional services or products to us during Fiscal 2023 beyond the services provided to the Compensation Committee.

 

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Compensation Peer Group and Market Review

In determining the compensation of our executive officers, the Compensation Committee considers data gathered from a self-constructed group of peer companies, and published survey data for technology companies. During January 2022, after consultation with Compensia, the Compensation Committee developed and approved a compensation peer group for use in its executive compensation decisions for Fiscal 2023 based on the following selection criteria:

 

LOGO

The companies included in the compensation peer group approved by the Compensation Committee for Fiscal 2023 were as follows:

 

Fiscal 2023 Compensation Peer Group(1)
    Ambarella, Inc.   Marvell Technology, Inc.    Semtech Corporation
    Cirrus Logic Inc.   MaxLinear, Inc.    Universal Display Corporation
    Diodes Incorporated   Monolithic Power Systems Inc.    Wolfspeed, Inc.
    Lattice Semiconductor Corporation   ON Semiconductor Corporation    Xilinx, Inc.
    Lumentum Holdings Inc.   Power Integrations, Inc.     
    MACOM Technology Solutions Holdings, Inc.   Qorvo, Inc     

(1) Monolithic Power Systems Inc., Universal Display Corporation and Xilinx, Inc. were each added to the compensation peer group for Fiscal 2023 based on the selection criteria above.

(2) Xilinx, Inc. was originally included in the compensation peer group for Fiscal 2023, but has since been acquired by Advanced Micro Devices, Inc.

The Compensation Committee used data gathered by Compensia from the public filings of the companies in our compensation peer group, as well as data from a custom peer data cut (only one peer company was not included) drawn from the Radford Global Technology Survey database for purposes of providing additional perspective in the case of executive positions where the compensation peer group offered a limited number of relevant data points. In reviewing survey data, the Compensation Committee does not focus on any particular company in the survey (other than the peer companies listed above). In general, the Compensation Committee uses the data provided by Compensia as background information for its compensation decisions and does not “benchmark” aggregate compensation at any particular level relative to the peer companies. Except as otherwise noted in this Compensation Discussion and Analysis, decisions by the Compensation Committee are qualitative and the result of the Compensation Committee’s business judgment, which is informed by the experience of the members of the Compensation Committee as well as input from our CEO and Compensia.

GOVERNANCE AND PAY POLICIES AND PRACTICES

We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. Below is a summary of what we believe to be best practices that we have implemented and practices that we avoid because we believe they are not in the best interests of the Company or our stockholders.

 

What We Do    What We Don’t Do

LOGO  Maintain an independent compensation committee

  

LOGO    No executive retirement plans

LOGO  Engage an independent compensation consultant to support the Compensation Committee

  

LOGO    No excessive perquisites

LOGO  Conduct an annual executive compensation review

  

LOGO    No tax reimbursements on perquisites

LOGO  Use a “pay-for-performance” compensation philosophy

  

LOGO    No hedging or pledging of our equity securities

LOGO  Use multiple financial metrics under our annual bonus plan

  

LOGO    No guaranteed bonuses

LOGO  Use performance-based MSUs and PSUs in our long-term incentive compensation program

  

LOGO    No special health or welfare benefit programs for our executive officers

LOGO  Maintain stock ownership guidelines for our NEOs and a mandatory holding period for our CEO

  

LOGO    No post-employment excise tax “gross-up” payment or other reimbursement

 

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What We Do    What We Don’t Do

LOGO  Maintain a compensation recovery (“clawback”) policy for misconduct in the event of a financial restatement

  

LOGO    No stock option repricing (without stockholder approval)

LOGO  Conduct an annual stockholder advisory vote on NEO compensation

    

LOGO  Evaluate succession planning on a regular basis

    

LOGO  Require “double-trigger” change of control provisions

    

LOGO  Impose caps on maximum incentive award payouts

    

COMPENSATION PHILOSOPHY AND OBJECTIVES

Our executive compensation program is guided by our overarching philosophy of paying for demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:

 

 

Align executive compensation with the Company’s corporate strategies, business objectives, and the creation of long-term value for our stockholders without encouraging unnecessary or excessive risk-taking;

 

 

Provide an incentive to achieve key strategic and financial performance measures by linking short-term incentive award opportunities and a substantial portion of long-term incentive award opportunities to the achievement of corporate and operational performance objectives in these areas;

 

 

Offer total compensation opportunities to our executive officers that are competitive and fair;

 

 

Align the interests of our executive officers with those of our stockholders by linking our executive officers’ long-term incentive compensation opportunities to stockholder value and their cash incentives to our annual performance; and

 

 

Provide compensation and benefit levels that will attract, motivate, reward, and retain a highly-talented team of executive officers within the context of responsible cost management.

FISCAL 2023 NAMED EXECUTIVE OFFICER COMPENSATION

Our executive compensation program has five principal elements:

 

LOGO

Base Salary

We use base salaries to compensate our executive officers for performing their day-to-day duties and responsibilities. In determining base salary, the Compensation Committee exercises its judgment and primarily considers each individual’s performance, experience level, role and responsibilities during the year, the competitive market for the position as reflected by peer group and relevant survey data, and the recommendations of our CEO (except with respect to his own base salary). Consistent with our compensation philosophy, the Compensation Committee sets base salaries that are at or below the market median to reinforce our desire that our annual performance-based cash bonuses and long-term incentive compensation represent the majority of our executive officers’ target total direct compensation each year. For purposes of ascertaining the competitive market, the Compensation Committee reviews compensation data compiled from our compensation peer group as well as from a custom peer data cut drawn from the Radford Global Technology Survey database.

 

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For Fiscal 2023, the Compensation Committee adjusted the base salary of our NEOs upon considering that Messrs. Hurlston, Butler, and McFarland had not received pay increases for Fiscal 2022, and the base salaries of all of the NEOs were well below the 25th percentile compared to the competitive market. The annual base salaries of our NEOs for Fiscal 2022 and 2023 were as follows:

 

    Named Executive Officer   Fiscal 2022 Base Salary   Fiscal 2023 Base Salary   Percentage Change

    Mr. Hurlston

  $700,000   $725,000   3.6%

    Mr. Butler

  $400,000   $435,000   8.7%

    Mr. Awsare

  $380,000   $425,000   11.8%

    Mr. McFarland

  $390,000   $410,000   5.1%

    Mr. Stein

  $380,000   $425,000   11.8%

Annual Performance-Based Cash Bonuses

We use annual performance-based cash bonuses to motivate our NEOs to achieve our annual financial objectives as set forth in our annual operating plan, while making progress towards and supporting our longer-term strategic and growth goals. For Fiscal 2023, the design of our annual performance-based cash bonus plan (the “Fiscal 2023 Cash Bonus Plan”) linked the funding of the annual bonus pool entirely to the achievement of objective financial performance measures as selected by our Board and reflected in our annual operating plan. The annual target cash bonus pool is established by the Compensation Committee based on the aggregate target annual cash bonus opportunities for all of our employees, including our executive officers.

At the beginning of each fiscal year, our Board approves our annual operating plan, which forms the basis for the corporate performance measures for our annual performance-based cash bonuses. Further, the Compensation Committee reviews and sets the framework for the annual performance-based cash bonuses for the fiscal year, including confirming the plan participants, establishing a target annual cash bonus opportunity for each participating executive officer, and selecting the corporate performance measures and related target levels for the fiscal year.

The earned cash incentive amount is paid after the end of the fiscal year.

Target Annual Cash Bonus Opportunities

As in prior years, the Compensation Committee determined that the target annual cash bonus opportunities for each of our executive officers for Fiscal 2023 should be based on a percentage of such executive officer’s base salary. In setting these target annual cash bonus opportunities, the Compensation Committee exercised its judgment and primarily considered our overall financial and operational results for the prior fiscal year, each individual’s performance, experience level, role and responsibilities during the year, the competitive market for the position as reflected by peer group and relevant survey data, and the recommendations of our CEO (except with respect to his own target annual cash bonus opportunity).

For Fiscal 2023, the Compensation Committee determined not to adjust the target annual cash bonus opportunities of any of our NEOs. Mr. Hurlston’s Fiscal 2023 target annual cash bonus opportunity was 130% of his annual base salary, and each of our other NEOs had a Fiscal 2023 target annual cash bonus opportunity of 75% of their annual base salaries.

The following formula was used to calculate the actual annual cash bonus payments for participants in the Fiscal 2023 Cash Bonus Plan:

 

LOGO

Corporate Performance Metrics

For purposes of the Fiscal 2023 Cash Bonus Plan, the Compensation Committee used multiple objective financial performance metrics as reflected in our annual operating plan rather than a single financial metric. For Fiscal 2023, the Compensation Committee selected three equally weighted corporate financial metrics as the performance measures for the Fiscal 2023 Cash Bonus Plan – revenue, non-GAAP gross margin percentage, and non-GAAP operating profit. The Compensation Committee believed these performance metrics were appropriate because, in its view, they represent key elements necessary to drive the successful execution of our Fiscal 2023 annual operating plan. In addition, they provided a strong emphasis on growth while managing expenses, which the Compensation Committee believed would most directly influence the creation of sustainable long-term stockholder value.

Our Board set our annual operating plan at the start of Fiscal 2023. Consistent with past practices, the financial performance metrics were set at the close of the prior fiscal year which incorporated any known risks/opportunities and customer engagements which management forecasted for the Company. Our Board viewed the Fiscal 2023 Cash Bonus Plan financial performance metrics as realistic and difficult to achieve at the time they were set.

For purposes of the Fiscal 2023 Cash Bonus Plan:

 

   

“non-GAAP gross margin percentage” was calculated as GAAP gross margin, excluding acquisition related costs and share-based compensation; and

 

   

“non-GAAP operating profit” was calculated as GAAP operating profit excluding share-based compensation, acquisition and transaction/integration-related costs, prepaid development costs, and vendor settlement accrual.

 

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The Compensation Committee established target achievement levels for each of these performance metrics for Fiscal 2023 as follows:

 

            Corporate Performance Metric    Weighting   Target Achievement Level    

Revenue

   33.3%   $1,841 million

Non-GAAP gross margin percentage

   33.3%   59.5%

Non-GAAP operating profit

   33.3%   $650 million

The actual achievement level for each corporate performance metric was determined based on the percentage by which we exceeded or failed to achieve the target achievement level for that metric. The actual achievement levels were equally weighted to calculate an aggregate weighted achievement score for our corporate performance for purposes of the Fiscal 2023 Cash Bonus Plan. There was a threshold level of achievement for each performance metric, below which the weighed achievement score for that metric was 0%.

Funding of the bonus pool was capped at a maximum weighted achievement score of 200%.

After the end of Fiscal 2023, the Compensation Committee evaluated our performance with respect to the corporate performance metrics. The Fiscal 2023 Cash Bonus Plan opportunities for our NEOs with corporate responsibilities (including Messrs. Hurlston, Butler, and McFarland) were based entirely on the performance of the foregoing metrics at the corporate level. In the case of a NEO with business unit responsibilities (including Messrs. Awsare and Stein), 50% of the NEO’s annual performance-based cash bonus opportunity was based on our corporate performance and the remaining 50% was based on revenue, non-GAAP gross margin percentage, and non-GAAP operating profit calculated at the business unit level.

Fiscal 2023 Bonus Decisions

Our revenue was $1,355 million, our non-GAAP gross margin percentage was 60.1%, and our non-GAAP operating profit was $419 million. Based on these results, in July 2023, the Compensation Committee determined that we had achieved 0% of the target performance level for revenue, 150% of the target performance level for non-GAAP gross margin percentage, and 10% of the target performance level for non-GAAP operating profit. Applying the weighting factor for each corporate performance metric, this resulted in an aggregate weighted achievement score of 53.4% at the corporate level.

The aggregate weighted achievement score resulted in an annual cash bonus payment percentage of 53.4%, as set forth in the following table:

 

Corporate Performance Metric   

Threshold

Performance

Level

(0%)

   

Target Performance

Level

(100%)

 

Maximum

Performance

Level

(200%)

  Weight  

Actual

Results

 

Achievement

Level

 

Revenue (in millions)

     $1,473     $1,841   $2,117   33.33%   $1,355.1     0%  

Non-GAAP gross margin percentage

     56.5%     59.5%   61.0%   33.33%   60.1%     150%  

Non-GAAP operating profit (in millions)

     $383     $650   $826   33.33%   $419     10%  

Aggregate Weighted Achievement Score

                 53.4

Cash Bonus Payment Percentage

                 53.4

Based on the foregoing, the Compensation Committee approved the following annual performance-based cash bonus payments for our NEOs for Fiscal 2023:

 

Named

Executive

Officer

  

Actual

Fiscal 2023

Base Salary

    

Target

Annual Cash

Bonus

Opportunity

    

Target Annual

Cash Bonus

Opportunity

(as a

percentage of

base salary)

    

Actual

Cash Bonus

Payment

    

Actual

Cash Bonus

Payment (as

a percentage

of base

salary)

    

Actual

Cash Bonus

Payment (as a

percentage of

the Fiscal 2023    

target annual

cash bonus

opportunity)

 

Mr. Hurlston

     $725,000        $942,500        130%            $503,295        69.4%            53.4%        

Mr. Butler

     $435,000        $326,250        75%             $174,218        40.1%            53.4%        

Mr. Awsare(1)

     $425,000        $318,750        75%             $174,994        41.2%            54.9%        

Mr. McFarland

     $410,000        $307,500        75%             $164,205        40.1%            53.4%        

Mr. Stein(2)

     $425,000        $318,750        75%             $159,694        37.6%            50.1%        

 

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  (1)

As our Senior Vice President and General Manager, PC and Peripherals Division, Mr. Awsare’s annual performance-based cash bonus payment was based 50% on the cash bonus payment percentage at the corporate level (53.4%) and 50% on the cash bonus payment percentage as determined for his business unit based on the same three performance metrics used at the corporate level (56.0%) resulting in an actual cash bonus payment percentage of 54.9%. We are not presenting the target achievement levels for Mr. Awsare’s performance metrics at the business unit level because we do not publicly disclose financial performance for that business unit and believe that such disclosure would result in competitive harm to the Company.

  (2)

As our Senior Vice President and General Manager, Mobile and IoT Division, Mr. Stein’s annual performance-based cash bonus payment was based 50% on the cash bonus payment percentage at the corporate level (53.4%) and 50% on the cash bonus payment percentage as determined for his business unit based on the same three performance metrics used at the corporate level (47.0%) resulting in an actual cash bonus payment percentage of 50.1%. We are not presenting the target achievement levels for Mr. Stein’s performance metrics at the business unit level because we do not publicly disclose financial performance for that business unit and believe that such disclosure would result in competitive harm to the Company.

Long-Term Incentive Compensation

We use long-term incentive compensation in the form of equity awards to incentivize our executive officers for long-term corporate performance based on the potential for increases in the value of our common stock and thereby, further align their interests with the interests of our stockholders. In July 2022, the Compensation Committee determined that the annual equity awards for our NEOs would consist of a combination of MSU awards, PSU awards, and RSU awards. The actual grant date fair values of the awards granted to our NEOs as reflected in the Fiscal 2023 Summary Compensation Table varies from the target mix due to the accounting valuation methodology for MSU awards.

The size of these equity awards was determined by the Compensation Committee based on its assessment of our financial results for Fiscal 2022, its evaluation of each executive officer’s performance or expected contributions, as applicable, an assessment of the equity award practices of the companies in our compensation peer group, and an assessment of the outstanding equity awards then-held by each executive officer. In making its award decisions, the Compensation Committee exercised its judgment to set the size of each award at a level it considered appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value and, in the case of PSUs, the achievement of financial goals we believed would contribute to the long-term success of the Company.

The annual equity awards granted to our NEOs in Fiscal 2023 were as follows:

 

Named

Executive

Officer

  

MSU Award

(target

number of

shares)

    

PSU Award

(target

number of

shares)

    

RSU Award

(number of

shares)

    

Aggregate

Grant Date    

Fair Value

Mr. Hurlston

     31,465            31,465            31,475          $18,339,934    

Mr. Butler

     9,701            9,701            9,704          $5,654,284     

Mr. Awsare

     7,079            7,079            7,081          $4,125,975     

Mr. McFarland

     6,293            6,293            6,295          $3,667,873     

Mr. Stein

     7,079            7,079            7,081          $4,125,975     

MSU Awards

MSU awards are earned based on our TSR performance relative to the TSR of each company in the Russell 2000 Index for awards granted to our executive officers beginning in Fiscal 2021, and compared to the TSR of the S&P Semiconductors Select Industry (“SPSISC”) Index TSR for awards granted to our executive officers prior to Fiscal 2021, over one-, two-, and three-year performance periods (as determined on September 30, 2020, September 30, 2021, and September 30, 2022, respectively, for the awards granted in Fiscal 2020, as determined on June 30, 2021, June 30, 2022, and June 30, 2023, respectively, for the awards granted in Fiscal 2021, as determined on June 30, 2022, June 30, 2023, and June 30, 2024, respectively, for the awards granted in Fiscal 2022, and as determined on June 30, 2023, June 30, 2024, and June 30, 2025, respectively, for the awards granted in Fiscal 2023).

Our TSR percentile ranking within the Russell 2000 Index during Fiscal 2023 for the Fiscal 2021 MSU awards ranged from the 53rd percentile to the 84th percentile, for the Fiscal 2022 MSU awards ranged from 37th percentile to the 80th percentile, and for the Fiscal 2023 MSU awards ranged from the 15th percentile to the 31st percentile.

The ranges of our TSR compared to that of the SPSISC Index TSR during Fiscal 2023 for the Fiscal 2020 (CEO) MSU awards were as follows:

 

Fiscal Year of MSU Award    Range of Our TSR Compared to SPSISC Index TSR
Fiscal 2020 (CEO)    24.0 – 235.6 percentage points

 

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The features of the Fiscal 2023 MSU awards granted in August 2022 are as follows:

 

    MSU Award Feature    Description

Payout Range

 

  

Three-year program with payout range of 0% to 300% of target shares

 

Performance Measure

 

  

Based on our TSR performance relative to the peer companies in the Russell 2000 Index TSR

 

Performance Scaling

  

Six and two thirds-to-one ratio for above and a four-to-one ratio for below target performance, with no payout if our TSR is equal to or below the 25th percentile of the TSR of each company in the Russell 2000 Index for each performance period, and a cumulative payout of 300% of target shares if our TSR is equal to or above the 80th percentile of the TSR of each company in the Russell 2000 Index for the one-, two-, and three-year performance periods. Performance payouts between the 25th and 50th percentiles will be determined on a linear basis and payouts between the 50th and 80th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target.

 

Payout Frequency

 

  

One-third of target shares eligible for payout after each of years one, two, and three

 

Payouts in Years One & Two

 

  

Capped at 300% of target shares allocated to the performance period

 

Payout in Year Three

  

The payouts for the one- and two-year performance periods are trued up based on final achievement in the three-year performance period:

 

   Based on shares actually earned using the performance scaling ratios for the three-year performance period, subject to a cap of 300% of target shares if our TSR is equal to or above the 80th percentile of the TSR of each company in the Russell 2000 Index

 

   If performance for full three-year performance period results in a payout that is less than the combined payout for the one-year and two-year performance periods, we do not clawback shares delivered in earlier performance periods

 

Any shares earned under an MSU award will vest and be delivered within 30 days of the end of the one-, two-, and three-year performance periods.

In Fiscal 2023, certain of our NEOs received the following payouts in connection with their previously granted MSU awards:

 

MSU Grant   Tranche Ending Fiscal 2023   Payout (Percentage of Target)

Fiscal 2020

  Third Performance Period   200%

Fiscal 2020 (CEO)

  Third Performance Period   100%

Fiscal 2021

  Second Performance Period   200%

Fiscal 2022

  First Performance Period   200%

 

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As of the record date, the following chart represents MSU awards earned and vested (or expected to vest) in fiscal year 2024 by our CEO for MSUs granted in Fiscal 2020 and for all of our NEOs for MSUs granted in Fiscal 2021, 2022 and 2023.

 

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PSU Awards

PSU awards are earned over a one-year performance period based on the achievement of a pre-established non-GAAP EPS target. For fiscal 2023 “non-GAAP EPS” was calculated as GAAP EPS, excluding acquisition and transaction/integration-related costs, amortization of prepaid development costs, share-based compensation, vendor settlement accrual, and amortization of debt issuance costs. See Appendix A for the full definition of Non-GAAP EPS and a reconciliation of Non-GAAP EPS to GAAP EPS.

The potential payout ranges from 0% to 200% of the target number of shares subject to the PSU award and is determined on a linear basis with a maximum payout of 200% of the target number of shares. Earned PSUs vest in three equal tranches over three one-year service periods with the final service period ending approximately three years from the grant date, subject to the NEO’s continued employment with us through each relevant vesting date.

For Fiscal 2023, our non-GAAP EPS target was $12.47, while our actual non-GAAP EPS was $8.12, which resulted in a payout percentage of 0.458%. Because the payout percentage is less than 1.0%, in July 2023 the Compensation Committee approved a payment of cash in lieu of shares of common stock after the end of the performance period and the acceleration of the service-based vesting periods that would have applied if the PSUs were paid in shares, as follows:

 

Named Executive

Officer

   PSU Award
(target number of shares)
  

PSU Award
(earned number of

shares)

  

Total Cash Paid In Lieu

of Shares on the

Vesting Date

Mr. Hurlston

   31,465    144    $12,874

Mr. Butler

   9,701    44    $3,934

Mr. Awsare

   7,079    32    $2,861

Mr. McFarland

   6,293    28    $2,503

Mr. Stein

   7,079    32    $2,861

 

  (1)

The amount of cash paid in lieu of shares of common stock was calculated by multiplying the earned number of shares by $89.40 (the Company’s closing stock price on Nasdaq on July 24, 2023, the date the Compensation Committee approved the decision to pay cash in lieu of shares).

 

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The following chart represents the PSU awards granted in Fiscal 2021, Fiscal 2022, and Fiscal 2023 and the corresponding shares earned as a percentage of target.

 

LOGO

RSU Awards

Each RSU award generally vests over three years, with one-third of the total number of shares of our common stock subject to the award vesting on the first anniversary of the grant date and the remainder vesting in equal quarterly tranches until fully vested, subject to the NEO’s continued employment with us through each relevant vesting date. Prior to April 2023, RSU awards granted to newly-hired executive officers vested over four years, with one-quarter of the total number of shares of our common stock subject to the award vesting on the first anniversary of the executive officer’s employment start date, and the remainder vesting in equal quarterly tranches until fully vested, subject to the executive officer’s continued employment with us through each relevant vesting date. Now, RSU awards granted to newly-hired executive officers vest over three years, with one-third of the total number of shares of our common stock subject to the award vesting on the first anniversary of the executive officer’s employment start date, and the remainder vesting in equal quarterly tranches until fully vested, subject to the executive officer’s continued employment with us through each relevant vesting date.

Health, Welfare, and Retirement Benefits

Our executive officers are eligible to participate in the same standard health and welfare benefit plans, and on the same terms and conditions, as all other regular full-time employees. These benefits include medical, dental, vision, life and disability insurance benefits, and participation in our employee stock purchase plan.

We maintain a tax-qualified Section 401(k) retirement savings plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. Under this plan, participants may elect to make pre-tax contributions of up to 50% of their current compensation, not to exceed the applicable statutory income tax limitation. In Fiscal 2023, we made matching contributions of up to 25% of the contributions made by participants in the plan during the fiscal year, including our NEOs, up to the maximum set by the Internal Revenue Service for any calendar year, which for the 2023 calendar year is $5,625 per participant. We intend for the plan to qualify under Section 401(a) of the Code, so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.

Perquisites and Other Personal Benefits

We do not view perquisites or other personal benefits as a significant element of our executive compensation program. Accordingly, we do not provide perquisites or other personal benefits to our executive officers except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of the executive officer’s duties, to make the executive officer more efficient and effective, and for recruitment, motivation, or retention purposes. During Fiscal 2023, none of our NEOs received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.

SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS

We believe that severance and change of control arrangements are important parts of the overall compensation program for our executive officers. Severance arrangements provide a stable work environment and are used primarily to attract, motivate, and retain individuals with the requisite experience and ability to drive our success. The provision of enhanced severance payments and benefits for an involuntary termination of the executive officer’s employment in connection with a change of control of the Company helps to secure the continued employment and dedication of our executive officers, to reduce any concern that they might have regarding their own continued employment prior to or following a change of control, and to promote continuity of management during a corporate transaction. We do not provide for tax gross-up payments for any excise taxes imposed pursuant to Sections 280G and 4999 of the Code.

 

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Severance Policy for Principal Executive Officers

We maintain the Severance Policy for Principal Executive Officers (the “Severance Policy”), which applies to those executive officers who have been designated by our Board as a “Covered Executive” under such policy. All of our NEOs are covered by the Severance Policy. Under the Severance Policy, we will pay certain specified amounts to a designated executive officer following a termination of employment by us without “good cause” or by the executive officer for “good reason” (as such terms are defined in the policy), for a period of 12 months in the case of our CEO and six months in the case of our other designated executive officers, contingent upon the executive officer executing and not revoking a general release of all claims in favor of the Company.

Change of Control Severance Policy for Principal Executive Officers

We also maintain the Change of Control Severance Policy for Principal Executive Officers (the “Change of Control Severance Policy”), which applies to those executive officers who have been designated by our Board as an “Executive” under such policy. All of our NEOs are covered by the Change of Control Severance Policy. Under the Change of Control Severance Policy, we will pay certain specified amounts and provide certain specified benefits (including accelerated vesting of all outstanding and unvested equity awards granted by the Company on or after June 28, 2019 (excluding MSU awards)) to a designated executive officer following a termination of employment by us without “good cause” or by the executive officer for “good reason,” in each case within three months prior to, or 18 months following, a “change of control” (as such terms are defined in the policy), for a period of 18 months, contingent upon the executive officer executing and not revoking a general release of all claims in favor of the Company.

For a summary of the material terms and conditions of the arrangements under the Severance Policy and the Change of Control Severance Policy, as well as an estimate of the potential payments and benefits payable to our NEOs, see “Potential Payments upon Termination or Change of Control” below.

Outstanding Equity Awards

For a discussion of the treatment of outstanding equity awards held by our NEOs in the event of a change of control of the Company or certain involuntary terminations of an NEO’s employment with us, see “Potential Payments upon Termination or Change of Control – Equity Awards” below.

OTHER COMPENSATION POLICIES

Equity Grant Policy

The Compensation Committee approves annual equity awards to our executive officers at a regularly scheduled meeting in the first half of each year. However, the Compensation Committee may also approve grants of equity awards at other times of the year such as in connection with the hiring of a new executive officer or in such other circumstances as the Compensation Committee may determine appropriate.

Stock Ownership Guidelines

We maintain stock ownership guidelines for our executive officers to promote the alignment of the long-term interests of the members of our Board and senior executive officers with our stockholders.

 

 

  Requirement

 

 

Chief Executive Officer: 6.0x base salary

 

 

Other Executive Officers: 2.0x base salary

 

  Measurement

 

 

Measured at fiscal year-end using 90 trading-day average stock price

 

 

Ownership includes shares owned outright, vested in-the-money stock options, and unvested RSUs (unvested PSUs and MSUs do not count), however, none of our executive officers hold any stock options

 

  Compliance

 

 

Grace period of five years from when participant becomes subject to guidelines

 

 

If participant falls below target ownership, participant must meet target within two years

 

 

Management annually notifies participants and the Compensation Committee of compliance and progress towards ownership requirement

 

 

As of June 24, 2023, all participants either met the requirements or were within the five-year grace period

 

 

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Stock Holding Requirements

Under our 2019 Incentive Plan, any award of equity to an individual who, at the time of grant of the award, is our CEO must include a provision for any net shares acquired with respect to the award (the total number of shares acquired pursuant to the award less any shares used to pay the exercise or purchase price of the award and any shares used to satisfy any tax and tax withholding obligations with respect to the award) must be held for at least a one year period, or until the award recipient is no longer employed by the Company or one of its subsidiaries, before such shares may be sold or transferred (except for certain transfers to a family member for estate or tax planning purposes and where the holding period requirement continues in effect as to the shares, or in connection with or following a change of control of the Company).

Compensation Recovery (“Clawback”) Policy

Our 2010 Plan, our 2019 Inducement Plan and our 2019 Incentive Plan each contain a compensation recovery (“clawback”) provision that applies to all awards held by our executive officers. Pursuant to these plans, all awards (cash and equity) held by an executive officer will be subject to clawback, recoupment or forfeiture to the extent that such executive officer is determined to have engaged in fraud or intentional illegal conduct that caused a material non-compliance with any applicable financial reporting requirements and resulted in a financial restatement, the result of which is that the amount received from such award would have been lower had it been calculated on the basis of such restated results, or as required by applicable laws, rules, regulations or listing requirements. While we have robust clawback measures in place, we intend to adopt a new clawback policy that will comply with Exchange Act Rule 10D-1 and the applicable Nasdaq listing standards by the end of the 60-day compliance phase-in period, once the Nasdaq listing standards are effective.

TAX CONSIDERATIONS

Deductibility of Executive Compensation

Section 162(m) of the Code generally disallows a publicly-held corporation a deduction for federal income tax purposes of remuneration in excess of $1 million paid in any taxable year to certain “covered employees,” which include any individuals who served as the principal executive officer or principal financial officer at any time during the taxable year, each of the three other most highly-compensated executive officers whose compensation may be required to be disclosed to our stockholders under the Exchange Act in the taxable year, and each person who was a covered employee for any taxable year beginning after December 31, 2016. Further, as a result of the enactment of the Tax Cuts and Jobs Act of 2017, “qualified performance-based compensation” is exempt from this $1 million deduction limitation only if payable pursuant to a written binding contract in effect on November 2, 2017 (and that has not subsequently been materially modified).

While the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation in order to structure a program that we consider to be the most effective in attracting, motivating and retaining our executive officers, and the Compensation Committee may grant compensation that is not deductible for purposes of Section 162(m) of the Code.

 

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COMPENSATION COMMITTEE

MATTERS

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed our Compensation Discussion and Analysis section with management and, based on the review and discussions, recommended to the Board that the Compensation Discussion and Analysis section be included in this Proxy Statement on Schedule 14A.

Compensation Committee

Keith Geeslin, Chair

Susan Hardman

Vivie Lee

James L. Whims

The foregoing report of the Compensation Committee is not soliciting material, is not deemed filed with the SEC and is not incorporated by reference in any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date of this Proxy Statement and irrespective of any general incorporation language in such filing.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mses. Hardman and Lee and Mr. Geeslin were members of the Compensation Committee during all of Fiscal 2023, and Mr. Whims served on the Compensation Committee for a portion of Fiscal 2023. No one who served on the Compensation Committee at any time during Fiscal 2023 is or has been an executive officer of the Company or had any relationships requiring disclosure by the Company under the rules of the SEC requiring disclosure of certain relationships and related party transactions. None of our executive officers who served as a director of the Company or as a member of the Compensation Committee during Fiscal 2023 served as a director or a member of a compensation committee (or other committee serving an equivalent function) for any other entity.

 

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NAMED EXECUTIVE OFFICER COMPENSATION TABLES

The Summary Compensation Table quantifies the value of the different forms of compensation earned by or awarded to our NEOs for Fiscal 2021, 2022, and 2023. The primary elements of each NEO’s total compensation reported in the table are base salary, a short-term incentive (annual cash bonus) and long-term incentive equity awards. Our NEOs also received the other benefits listed in column (i) of the Summary Compensation Table, as further described in the footnotes to the table.

The Summary Compensation Table should be read in conjunction with the tables and narrative descriptions that follow. A description of the material terms of employment offer letters for Messrs. Hurlston, Butler, and Stein regarding base salary and short-term incentive amounts in the periods presented is provided immediately following the Summary Compensation Table. The Grants of Plan-Based Awards table, and the accompanying disclosure following that table, provide information regarding the cash and equity awards granted to our NEOs in Fiscal 2023. The Outstanding Equity Awards at Fiscal Year End table and Option Exercises and Stock Vested table provide further information on the NEOs’ potential realizable value and actual value realized with respect to their equity awards.

SUMMARY COMPENSATION TABLE — FISCAL YEARS 2021, 2022 AND 2023

The following table sets forth summary information regarding compensation for each of our NEOs for all services rendered to us in all capacities in Fiscal 2021, 2022 and 2023.

 

Name and Principal Positions    Fiscal Year   Salary   Bonus   Stock Awards   Non-Equity   All Other   Total
         ($)(1)   ($)   ($)(2)   Incentive Plan   Compensation   ($)
                     Compensation   ($)(4)    
                          ($)(3)          

(a)

   (b)   (c)   (d)   (e)   (g)   (i)   (j)

Michael Hurlston

   2023   $725,000   -   $18,339,934   $503,295   $9,405   $19,577,634

President and Chief Executive

   2022   $700,000   -   $11,997,489   $1,456,000   $7,447   $14,160,936

Officer

   2021   $700,000   -   $9,723,998   $1,274,000   $6,657   $11,704,655

Dean Butler

   2023   $435,000   -   $5,654,284   $174,218   $6,311   $6,269,813

Senior Vice President and Chief

   2022   $400,000   -   $4,093,109   $480,000   $5,388   $4,978,497

Financial Officer

   2021   $400,000   -   $2,463,362   $420,000   $5,361   $3,288,723

Saleel Awsare

   2023   $425,000   -   $4,125,975   $174,994   $8,571   $4,734,540

Senior Vice President and

   2022   $377,500   -   $2,963,893   $453,000   $8,239   $3,802,632

General Manager, PC & Peripherals Division

   2021   $350,000   $512,164(5)   $2,171,449   $350,438   $7,108   $3,391,159

John McFarland

   2023   $410,000   -   $3,667,873   $164,205   $9,242   $4,251,320

Senior Vice President,

   2022   $390,000   -   $2,681,434   $468,000   $8,172   $3,547,606

General Counsel and Secretary

   2021   $390,000   $586,661(5)   $2,203,811   $409,500   $3,366   $3,593,338

Craig Stein

   2023   $425,000   -   $4,125,975   $159,694   $9,961   $4,720,630

Senior Vice President and

   2022   $377,500   $100,000(6)   $2,963,893   $453,000   $7,465   $3,901,858

General Manager, Mobile & IoT Division

   -   -   -   -   -   -   -

 

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  (1)

All base salaries reported represent actual base salaries paid for the twelve-month periods ended June 24, 2023, June 25, 2022, and June 26, 2021.

 

  (2)

The amounts reported in column (e) of the table above for each year reflect the aggregate grant date fair value of PSUs, MSUs and RSUs awarded in the applicable year as computed in accordance with FASB ASC Topic 718 (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes and excluding the effect of estimated forfeitures). For information on the assumptions used in the grant date fair value computations, refer to Note 12 “— Share-Based Compensation” in the Notes to Consolidated Financial Statements in the Company’s 2023 Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 24, 2023 (or, for awards granted prior to Fiscal 2023, the corresponding note in the Company’s Annual Report on Form 10-K for the applicable fiscal year). The amounts included in the Summary Compensation Table above, and in the tables below in this footnote, may not be indicative of the realized value of the awards if they vest.

As discussed in the CD&A, in Fiscal 2021, 2022, and 2023, the Company granted annual long-term incentive awards of PSUs and MSUs to our NEOs, the vesting of which is subject, in part, to the Company’s performance. As required by applicable SEC rules, the grant date fair value of the PSUs and MSUs awarded in these years was determined based on the probable outcome (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes) of the performance-based conditions applicable to the awards.

For these purposes, as of the date of grant of the awards, we determined that the “target” level of performance for the PSU awards was the probable outcome of the applicable performance-based conditions. Accordingly, for these PSU awards, the grant date fair value is included for the NEOs in the “Stock Awards” column for the year in which the award was granted based on the “target” number of shares subject to the awards. For the MSU awards, the grant date fair value was included for the NEOs in the “Stock Awards” column for the year in which the award was granted based on a Monte Carlo simulation pricing model (which probability weights multiple potential outcomes) as of the date of grant of the awards. Under the terms of the PSU and MSU awards, between 0% and 200% of the target number of shares subject to the awards can be earned and vest based on performance and the other vesting conditions applicable to the awards. The following tables present the grant date fair value (determined as described above as of the date of grant of the awards) of the PSUs and MSUs awarded to the NEOs in Fiscal 2021, 2022, and 2023 under two sets of assumptions: (a) assuming performance would be achieved at the level which we originally judged to be the probable outcome as described above (or in the case of MSUs, based on the Monte Carlo simulation pricing model), and (b) assuming that the highest level of performance for each such award would be achieved.

 

     Aggregate Grant Date Fair Value of Annual PSU Awards
     Fiscal Year 2021    Fiscal Year 2022    Fiscal Year 2023
  

 

                               
     Based on         Based on         Based on     
     Probable    Based on    Probable    Based on    Probable    Based on
     Outcome as of    Maximum    Outcome as of    Maximum    Outcome as of    Maximum
Name    the Date of Grant    Performance    the Date of Grant    Performance    the Date of Grant    Performance        

Michael Hurlston

   $2,603,548    $5,207,096    $3,141,770    $6,283,540    $4,345,946    $8,691,892

Dean Butler

   $659,552    $1,319,104    $1,071,859    $2,143,718    $1,339,902    $2,679,804

Saleel Awsare

   $581,398    $1,162,796    $776,133    $1,552,266    $977,751    $1,955,503

John McFarland

   $590,063    $1,180,126    $702,160    $1,404,320    $869,189    $1,738,378

Craig Stein

   -    -    $776,133    $1,552,266    $977,751    $1,955,503

 

     Aggregate Grant Date Fair Value of Annual MSU Awards
     Fiscal Year 2021    Fiscal Year 2022    Fiscal Year 2023
  

 

     Based on Monte         Based on Monte         Based on Monte     
     Carlo Simulation         Carlo Simulation         Carlo Simulation     
     Pricing Model as    Based on    Pricing Model as    Based on    Pricing Model as    Based on
     of the Date of    Maximum    of the Date of    Maximum    of the Date of    Maximum
Name    Grant    Performance    Grant    Performance    Grant    Performance

Michael Hurlston

   $4,516,902    $5,207,096    $5,712,942    $6,283,520    $9,646,661    $13,037,837

Dean Butler

   $1,144,258    $1,319,104    $1,949,056    $2,143,718    $2,974,066    $4,019,706

Saleel Awsare

   $1,008,653    $1,162,796    $1,411,292    $1,552,266    $2,170,195    $2,933,254

John McFarland

   $1,023,685    $1,180,126    $1,276,779    $1,404,320    $1,929,218    $2,607,567

Craig Stein

   -    -    $1,411,292    $1,552,266    $2,170,195    $2,933,254

 

  (3)

The amounts reported in column (g) of the table above constitute amounts earned under our annual performance-based cash bonus plan during the applicable fiscal year, which amounts are generally paid early in the next fiscal year.

 

  (4)

The following table identifies the items reported in the “All Other Compensation” column of the table for each NEO in Fiscal 2023:

 

Executive Officers  

Company
Contributions to

401(k)

 

Group Term

Life

  Total Benefits

Michael Hurlston

  $5,438   $3,967   $9,405

Dean Butler

  $5,388   $923   $6,311

Saleel Awsare

  $4,604   $3,967   $8,571

John McFarland

  $5,275   $3,967   $9,242

Craig Stein

  $5,994   $3,967   $9,961

 

  (5)

Reflects retention bonuses paid to Messrs. Awsare and McFarland in Fiscal 2021.

 

  (6)

In connection with his acceptance of our offer to join the Company, Mr. Stein received a signing bonus of $100,000 on the first anniversary of his employment start date.

 

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Employment Agreements

Mr. Hurlston

Mr. Hurlston entered into an employment offer letter with the Company effective August 19, 2019. The letter provides for “at will” employment. The letter provides that Mr. Hurlston will receive an initial annual base salary of $700,000 and that his annual cash bonus target will be set at 130% of his base salary, with the Compensation Committee to determine Mr. Hurlston’s actual bonus award amounts each year. The letter also provides for Mr. Hurlston to participate in the Company’s long-term incentive compensation program. In addition, the letter provides for Mr. Hurlston to participate in the Company’s severance plans for its executive officers as described below under “Potential Payments Upon Termination or Change of Control.”

Mr. Butler

Mr. Butler entered into an employment offer letter with the Company effective October 21, 2019. The letter provides for “at will” employment. The letter provides that Mr. Butler will receive an initial annual base salary of $400,000 and that his annual cash bonus target will be set at 75% of his base salary, with the Compensation Committee to determine Mr. Butler’s actual bonus award amounts each year. Mr. Butler also received a cash signing bonus of $150,000 that he would have been required to repay to the Company on a pro rata basis had he voluntarily terminated his employment within two years of his employment start date. The letter also provides for Mr. Butler to participate in the Company’s long-term incentive compensation program. In addition, the letter provides for Mr. Butler to participate in the Company’s severance plans for its executive officers as described below under “Potential Payments Upon Termination or Change of Control.”

Mr. Stein

When Mr. Stein joined the Company, and prior to becoming an NEO, Mr. Stein entered into an employment offer letter with the Company effective August 26, 2020. The letter provides for “at will” employment. The letter provides that Mr. Stein will receive an annual base salary of $330,000, and that his annual cash bonus target will be set at 60% of his base salary. Mr. Stein also received a cash signing bonus of $250,000 in January 2021, prior to becoming an NEO, that he would’ve been required to repay to the Company had he voluntarily terminated his employment or been terminated for cause within two years of his employment start date. In addition, on the first anniversary of his start date, Mr. Stein received an additional signing bonus of $100,000 that he would have been required to repay to the Company had he voluntarily terminated his employment or been terminated for cause within one year of receiving the second signing bonus. The letter also provides for Mr. Stein to participate in the Company’s long-term incentive compensation program. In addition, the letter provides for Mr. Stein to participate in the Company’s severance plans for its executive officers as described below under “Potential Payments Upon Termination or Change of Control.”

 

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GRANTS OF PLAN-BASED AWARDS — FISCAL 2023

The following table sets forth summary information regarding the plan-based awards granted to our NEOs during Fiscal 2023.

 

 

                

 Estimated Future Payouts

 Under Non-Equity

 Incentive Plan Awards(2)

     

Estimated Future Payouts

Under Equity

Incentive Plan Awards

                   
        

 

       
Name   

Type of

Award

  Grant Date  

Approval Date

(1)

 

 Threshold

($)

  Target ($)  

Maximum

($)

 

Threshold

(#)

  Target (#)   Maximum (#)      

All Other

Stock

Awards:

Number of

Shares of

Stock or Units

(#)

 

All Other

Options

Awards;

Number of

Securities

Underlying

Options (#)

 

Exercise of

Base Price

of Option
Awards

($/Sh)

 

Grant Date

Fair Value of

Stock and

Option

Awards ($)(3)

              (a)

   (b)   (c)   (d)   (e)   (f)   (g)   (h)   (i)   (j)   (k)   (I)   (m)   (n)

    Michael Hurlston

   Bonus   -   -   -   $942,500   $1,885,000   -   -   -   -   -   -   -
   MSU   08/17/22   07/25/22   -   -   -   -   31,465   94,395   -   -   -   $9,646,661
   PSU   08/17/22   07/25/22   -   -   -   -   31,465   62,930   -   -   -   $4,345,946
     RSU   08/17/22   07/25/22   -   -   -   -   -   -   31,475   -   -   $4,347,327

    Dean Butler

   Bonus   -   -   -   $326,250   $652,500   -   -   -   -   -   -   -
   MSU   08/17/22   07/25/22   -   -   -   -   9,701   29,103   -   -   -   $2,974,066
   PSU   08/17/22   07/25/22   -   -   -   -   9,701   19,402   -   -   -   $1,339,902
     RSU   08/17/22   07/25/22   -   -   -   -   -   -   9,704   -   -   $1,340,316

    Saleel Awsare

   Bonus   -   -   -   $318,750   $637,500   -   -   -   -   -   -   -
   MSU   08/17/22   07/25/22   -   -   -   -   7,079   21,237   -   -   -   $2,170,195
   PSU   08/17/22   07/25/22   -   -   -   -   7,079   14,158   -   -   -   $977,751
     RSU   08/17/22   07/25/22   -   -   -   -   -   -   7,081   -   -   $978,028

    John McFarland

   Bonus   -   -   -   $307,500   $615,000   -   -   -   -   -   -   -
   MSU   08/17/22   07/25/22   -   -   -   -   6,293   18,879   -   -   -   $1,929,218
   PSU   08/17/22   07/25/22   -   -   -   -   6,293   12,586   -   -   -   $869,189
     RSU   08/17/22   07/25/22   -   -   -   -   -   -   6,295   -   -   $869,465

    Craig Stein

   Bonus   -   -   -   $318,750   $637,500   -   -   -   -   -   -   -
   MSU   08/17/22   07/25/22   -   -   -   -   7,079   21,237   -   -   -   $2,170,195
   PSU   08/17/22   07/25/22   -   -   -   -   7,079   14,158   -   -   -   $977,751
     RSU   08/17/22   07/25/22   -   -   -   -   -   -   7,081   -   -   $978,028

 

  (1)

The “Approval Date” refers to the date on which the Compensation Committee or the Board approved the award. See “Compensation Discussion and Analysis – Equity Award Grant Policy.”

 

  (2)

Our Fiscal 2023 annual cash bonus plan had no payout at the threshold achievement level and the payout at the maximum achievement level was capped at 200% of the applicable target annual cash bonus opportunity. The reported amounts reflect the applicable threshold, target and maximum annual cash bonus opportunities for our NEOs under our Fiscal 2023 annual performance-based cash bonus plan. All such awards have been paid, and the actual amounts paid are set forth under “Non-Equity Incentive Plan Compensation” in the Fiscal 2023 Summary Compensation Table. Our Fiscal 2023 annual cash bonus plan is discussed under “Compensation Discussion and Analysis — Annual Performance-Based Cash Bonuses.”

 

  (3)

These amounts present the aggregate grant date fair value of the equity awards computed in accordance with FASB ASC Topic 718 (determined as of the date of grant of the awards, as the date of grant is determined for accounting purposes). For information on the assumptions used in the grant date fair value computations, refer to Note 12 “— Share-Based Compensation” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended June 24, 2023. Also see footnote (2) to the Summary Compensation Table above.

 

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DESCRIPTION OF PLAN-BASED AWARDS

The non-equity incentive plan awards reported in the Grants of Plan-Based Awards table above represent the annual cash bonus opportunities for our NEOs for Fiscal 2023. The amounts actually paid to our NEOs pursuant to these awards are presented in the Summary Compensation Table under the heading “Non-Equity Incentive Plan Compensation.” See the “Fiscal 2023 Named Executive Officer Compensation – Annual Performance-Based Cash Bonuses” section of the CD&A for a discussion of our performance measurement framework and the Fiscal 2023 annual performance-based cash bonus awards for our NEOs.

Each of the equity awards reported in the above table was granted under, and is subject to, the terms of the 2019 Incentive Plan. The Compensation Committee has authority to interpret the provisions of each of these plans and to make all required determinations under the plans. Awards granted under the plans are generally only transferable by the NEO by will or the laws of descent and distribution.

Each NEO may be entitled to accelerated vesting of his outstanding equity awards upon certain terminations of employment with the Company in connection with a change of control of the Company. Outstanding awards under our equity plans will also generally vest on a change of control to the extent replacement awards are not provided by the acquiring or successor entity. The terms of this accelerated vesting are described in this section and below under “Potential Payments Upon Termination or Change of Control.”

Each RSU, MSU, and PSU subject to the awards described below represents a contractual right to receive one share of our common stock. Payment will generally be made as the equity award vests. Until delivery of the shares, the NEO has no rights as a stockholder with respect to any shares of our common stock underlying the award, although the award may provide for dividend equivalents to accrue while the award is outstanding and be paid upon and subject to vesting of the underlying units. Subject to the NEO’s award agreement evidencing the RSUs, MSUs or PSUs, if a NEO’s employment terminates for any reason during the vesting period, any units that have not previously vested will terminate.

Time-Based RSUs

Awards of RSUs granted to our NEOs in Fiscal 2023 vest based solely on the NEO’s continued employment or service with the Company. Each of the annual RSU awards granted to the NEOs in Fiscal 2023 is subject to a three-year vesting schedule, with one-third of the award vesting on the first anniversary of the date of grant, and the remaining award vesting thereafter in eight equal quarterly installments.

Performance-Based MSUs

As described more fully above under “Compensation Discussion and Analysis — Fiscal 2023 Named Executive Officer Compensation,” the percentage of the performance-based MSU awards granted to each of the NEOs in Fiscal 2023 that become eligible to vest range from 0% to 300% of the total number of MSUs subject to the award depending on the Company’s TSR compared to that of the Russell 2000 Index TSR over a one-, a two-, and a three-year performance period (with such performance periods ending on June 30, 2023, June 30, 2024, and June 30, 2025, respectively).

Performance-Based PSUs

As described more fully above under “Compensation Discussion and Analysis — Fiscal 2023 Named Executive Officer Compensation,” the percentage of the performance-based PSU awards granted to each of the NEOs in Fiscal 2023 that become eligible to vest range from 0% to 200% of the PSUs subject to the award depending on the Company’s non-GAAP EPS during Fiscal 2023. To the extent earned based on performance, PSUs are typically subject to a three-year vesting schedule, with one-third of the award vesting on the first anniversary of the date of grant, and the remaining award vesting thereafter in eight equal quarterly installments. However, as described above under “Compensation Discussion and Analysis — Fiscal 2023 Named Executive Officer Compensation,” since the Fiscal 2023 PSUs were ultimately earned at only 0.458% of target, the Compensation Committee decided to pay cash in lieu of stock at the end of the performance period and accelerate the service-based vesting periods that would have applied if the PSUs were paid in shares.

 

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OUTSTANDING EQUITY AWARDS AT FISCAL 2023 YEAR END

The following table sets forth summary information regarding the outstanding equity awards held by each of our NEOs as of June 24, 2023, including the vesting dates for the portions of these awards that had not vested as of that date.

 

          Stock Awards
     

 

Name    Grant Date   

  Number of

  Shares or

  Units of Stock

  That Have Not

  Vested (#)

  

Market Value

of Shares or

Units of Stock

That Have Not

Vested ($) (1)

  

Equity

Incentive Plan

Awards:

Number of

Unearned

Shares, Units

or Other

Rights That

Have Not

Vested (#)

  

Equity

Incentive Plan                

Awards:

Market or

Payout Value

of Unearned

Shares, Units

or Other

Rights That

Have Not

Vested ($) (1)

(a)    (b)    (c)    (d)    (e)    (f)

  Michael Hurlston

   08/19/19(2)    14,943    $1,212,774    -    -
   08/19/19(3)    -    -    193,731    $15,723,208
   09/24/19(4)    32,810    $2,662,860    -    -
   09/24/19(5)    -    -    38,746    $3,144,625
   08/17/20(6)    10,214    $828,968    -    -
   08/17/20(7)    -    -    20,432    $1,658,261
   08/17/20(8)    14,251    $1,156,611    -    -
   08/17/21(9)    7,810    $633,860    -    -
   08/17/21(10)    -    -    24,972    $2,026,728
   08/17/21(11)    15,608    $1,266,745    -    -
   08/17/22(12)    31,475    $2,554,511    -    -
   08/17/22(13)    -    -    31,465    $2,553,699
     08/17/22(14)    144    $11,687    -    -

  Dean Butler

   10/31/19(15)    5,129    $416,270    -    -
   08/17/20(6)    2,587    $209,961    -    -
   08/17/20(7)    -    -    5,176    $420,084
   08/17/20(8)    3,610    $292,988    -    -
   08/17/21(9)    2,665    $216,291    -    -
   08/17/21(10)    -    -    8,520    $691,483
   08/17/21(11)    5,322    $431,934    -    -
   08/17/22(12)    9,704    $787,577    -    -
   08/17/22(13)    -    -    9,701    $787,333
     08/17/22(14)    44    $3,571    -    -

  Saleel Awsare

   08/17/20(6)    2,281    $185,126    -    -
   08/17/20(7)    -    -    4,562    $370,252
   08/17/20(8)    3,181    $258,170    -    -
   08/17/21(9)    1,930    $156,639    -    -
   08/17/21(10)    -    -    6,168    $500,595
   08/17/21(11)    3,854    $312,791    -    -
   08/17/22(12)    7,081    $574,694    -    -
   08/17/22(13)    -    -    7,079    $574,532
     08/17/22(14)    32    $2,597    -    -

  John McFarland

   08/17/20(6)    2,315    $187,885    -    -
   08/17/20(7)    -    -    4,630    $375,771
   08/17/20(8)    3,229    $262,066    -    -
   08/17/21(9)    1,746    $141,705    -    -
   08/17/21(10)    -    -    5,580    $452,873
   08/17/21(11)    3,488    $283,086    -    -
   08/17/22(12)    6,295    $510,902    -    -
   08/17/22(13)    -    -    6,293    $510,740
     08/17/22(14)    28    $2,272    -    -

  Craig Stein

   09/17/20(16)    4,928    $399,956    -    -
   09/17/20(17)    3,055    $247,944    -    -
   08/17/21(9)    1,930    $156,639    -    -
   08/17/21(10)    -    -    6,168    $500,595
   08/17/21(11)    3,854    $312,791    -    -
   08/17/22(12)    7,081    $574,694    -    -
   08/17/22(13)    -    -    7,079    $574,532
     08/17/22(14)    32    $2,597    -    -

 

  (1)

The dollar amounts shown in columns (d) and (f) are determined by multiplying the number of shares or units reported in columns (c) and (e), respectively, by $81.16 per share (the Company’s closing stock price on Nasdaq on June 23, 2023, the last trading day of Fiscal 2023).

 

  (2)

This unvested portion of the RSU award vested on August 19, 2023.

 

  (3)

This is the unvested portion of the performance-based MSUs granted to Mr. Hurlston in August 2019, which vested on August 19, 2023. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index

 

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TSR over a one-, a two-, a three-, and a four-year performance period (as determined on August 19, 2020, August 19, 2021, August 19, 2022, and August 19, 2023). Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one-, two-, and three-year performance periods with any additional payout deferred until delivery of shares based on our performance over the four-year performance period, where Mr. Hurlston will receive the number of shares of our common stock earned using a two-to-one ratio for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods (subject to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the maximum number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 24, 2023.

 

  (4)

This unvested portion of the RSU award will vest in one remaining installment on September 24, 2023.

 

  (5)

This is the unvested portion of the performance-based MSUs granted to Mr. Hurlston in September 2019, which vests in one remaining installment on September 24, 2023. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR compared to that of the SPSISC Index TSR over a one-, a two-, a three-, and a four-year performance period (as determined on August 18, 2021, August 18, 2022, and August 18, 2023). Payouts are scaled such that below-target performance will result in a reduction in the number of shares of our common stock earned using a two-to-one ratio. Above-target performance will result in a payout of 100% of the target number of shares for the one-, two-, and three-year performance periods with any additional payout deferred until delivery of shares based on our performance over the four-year performance period, where Mr. Hurlston will receive the number of shares of our common stock earned using a two-to-one ratio for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods (subject to a cap of 200% of the target number of shares subject to the MSU awards if our TSR is 50 percentage points or more above the SPSISC Index TSR). If the shares determined for the four-year performance period less any shares that were delivered for the one-, two-, and three-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the maximum number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 24, 2023.

 

  (6)

This unvested portion of the RSU award vested on August 17, 2023.

 

  (7)

This is the unvested portion of the performance-based MSUs granted to our NEOs, which vested on August 17, 2023. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR relative to the TSR of each company in the Russell 2000 Index over a one-, a two-, and a three-year performance period, with each such period beginning on July 1 of the fiscal year in which the award was granted and ending on June 30 at the end of the applicable period. The vesting of any earned MSUs is subject to the NEO’s continued employment through the end of the applicable performance period. No payout will occur if our TSR performance falls below the 25th percentile of the TSR of each company in the Russell 2000 Index, and a 200% payout will occur if our TSR performance exceeds the 75th percentile of the TSR of each company in the Russell 2000 Index. Performance payouts between the 25th and 75th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target. The one- and the two-year performance periods payout up to 200% of the target number of shares, and the payout for the three-year performance period will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the one- and two-year performance periods. If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the maximum number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 24, 2023.

 

  (8)

This is the unvested portion of the performance-based PSUs granted to the NEOs on August 17, 2020, which vested on August 17, 2023. The shares of common stock represent a 139.5% payout of the target quantity based on design win revenue (33%), non-GAAP gross margin (33%), and non-GAAP operating expense (33%) during the one-year performance period ended on June 26, 2021.

 

  (9)

This unvested portion of the RSU award vested in part on August 17, 2023, and the remainder will vest on August 17, 2024.

 

  (10)

This is the unvested portion of the performance-based MSUs granted to our NEOs on August 17, 2021, which vested in part on August 17, 2023, and the remainder of which will vest on August 17, 2024. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR relative to the TSR of each company in the Russell 2000 Index over a one-, a two-, and a three-year performance period, with each such period beginning on July 1 of the fiscal year in which the award was granted and ending on June 30 at the end of the applicable period. The vesting of any earned MSUs is subject to the NEO’s continued employment through the end of the applicable performance period. No payout will occur if our TSR performance falls below the 25th percentile of the TSR of each company in the Russell 2000 Index, and a 200% payout will occur if our TSR performance exceeds the 75th percentile of the TSR of each company in the Russell 2000 Index. Performance payouts between the 25th and 75th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target. The one- and the two-year performance periods payout up to 200% of the target number of shares, and the payout for the three-year performance period will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the one- and two-year performance periods. If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the maximum number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 24, 2023.

 

  (11)

This is the unvested portion of the performance-based PSUs granted to the NEOs on August 17, 2021, which vested in part on August 17, 2023, and the remainder of which will vest on August 17, 2024. The shares of common stock represent a 200% payout of the target quantity based on non-GAAP EPS during the two-year performance period ended on June 24, 2023.

 

  (12)

This unvested portion of the RSU award vested in part on August 17, 2023, and the remainder will vest in two installments on August 17, 2024, and August 17, 2025.

 

  (13)

This is the unvested portion of the performance-based MSUs granted to our NEOs on August 17, 2022, which vested in part on August 17, 2023, and the remainder of which will vest in two installments on August 17, 2024, and August 17, 2025. The number of performance-based MSUs that may be earned will vary based on over- or under-performance of our TSR relative to the TSR of each company in the Russell 2000 Index over a one-, a two-, and a three-year performance period, with each such period beginning on July 1 of the fiscal year in which the award was granted and ending on June 30 at the end of the applicable period. The vesting of any earned MSUs is subject to the NEO’s continued employment through the end of the applicable performance period. No payout will occur if our TSR performance falls at or below the 25th percentile of the TSR of each company in the Russell 2000 Index, and a 300% payout will occur if our TSR performance equals or exceeds the 80th percentile of the TSR of

 

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each company in the Russell 2000 Index. Performance payouts between the 25th and 80th percentiles will be determined on a linear basis with performance at the 50th percentile equal to 100% of target. The one- and the two-year performance periods payout up to 300% of the target number of shares, and the payout for the three-year performance period will be calculated based on the total target quantity for the entire grant multiplied by the payout factor, based on performance for the three-year performance period, less shares issued for the one- and two-year performance periods. If the shares determined for the three-year performance period less any shares that were delivered for the one- and two-year performance periods is negative, no claw-back applies. The number of shares reported in the table above reflects the target number of shares subject to the award that were allocated to each of the performance periods that were still in progress as of June 24, 2023.

 

  (14)

This is the unvested portion of the performance-based PSUs granted to the NEOs on August 17, 2022. The shares of common stock represent a 0.458% payout of the target quantity based on non-GAAP EPS during the one-year performance period ended on June 24, 2023. In July 2023, the Compensation Committee approved a payment of cash in lieu of shares of common stock at a price of $89.40 per share (the Company’s closing stock price on Nasdaq on July 24, 2023, the day of the Compensation Committee’s approval) and the acceleration of the service-based vesting periods that would have applied if the PSUs were paid in shares.

 

  (15)

This unvested portion of the RSU award will vest in one remaining installment on October 21, 2023.

 

  (16)

This unvested portion of the RSU award will vest in two remaining installments on September 17, 2023, and September 17, 2024.

 

  (17)

This is the unvested portion of the performance-based PSUs granted to Mr. Stein in September 2020, which vested on August 17, 2023. The shares of common stock represent a 139.5% payout of the target quantity based on design win revenue (33%), non-GAAP gross margin (33%), and non-GAAP operating expense (33%) during the one-year performance period ended on June 27, 2020.

 

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OPTION EXERCISES AND STOCK VESTED — FISCAL 2023