DEF 14A 1 keysightproxy2017_wordfinal.htm DEF 14A Document

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. )
 
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Preliminary Proxy Statement
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Definitive Proxy Statement
 
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Definitive Additional Materials
 
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Soliciting Material Pursuant to §240.14a-12

KEYSIGHT TECHNOLOGIES, INC
(Name of Registrant as Specified in Its Charter)
 
(Name of Persons(s) Filing Proxy Statement, If Other Than the Registrant)

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Keysight Technologies, Inc.
1400 Fountaingrove Parkway
Santa Rosa, California 95403

Ronald S. Nersesian
President and Chief Executive Officer
February 2017
To Our Stockholders:
I am pleased to invite you to attend our Annual Meeting of stockholders of Keysight Technologies, Inc. (“Keysight” or “Company”) to be held on Thursday, March 16, 2017 at 8:00 a.m., Pacific Standard Time, at Keysight’s headquarters located at 1400 Fountaingrove Parkway, Santa Rosa, California 95403 (U.S.A.). Details regarding admission to the Annual Meeting and the business to be conducted are more fully described in the accompanying Notice of Annual Meeting and Proxy Statement.
If you are unable to attend the Annual Meeting in person, you may listen through the Internet or by telephone. To listen to the live webcast, log on at www.investor.keysight.com and select the link for the webcast. To listen by telephone, please call (877) 201-0168 (international callers should dial +1 (647) 788-4901). The meeting pass code is 34219786. The webcast will begin at 8:00 a.m. and a recording of the webcast will remain on Keysight’s website for one year. You cannot record your vote or ask questions on this website or at this phone number.
We have elected to take advantage of Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe that the rules will allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting.
Your vote is important. Whether or not you plan to attend the Annual Meeting, I hope that you will vote as soon as possible. Please review the instructions on each of your voting options described in the Proxy Statement and the Notice of Internet Availability of Proxy Materials you received in the mail.
Thank you for your ongoing support of, and continued interest in, Keysight.
Sincerely,
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Admission to the Annual Meeting will be limited to stockholders and their proxies. You are entitled to attend the Annual Meeting only if you are a stockholder of record as of the close of business on January 17, 2017, the record date, or hold a valid proxy for the meeting. In order to be admitted to the Annual Meeting, you must present proof of ownership of Keysight stock as of the record date. This can be a brokerage statement or letter from a bank or broker indicating ownership on January 17, 2017, the Notice of Internet Availability of Proxy Materials, a proxy card, or legal proxy or voting instruction card provided by your broker, bank or nominee. Any holder of a proxy from a stockholder must present the proxy card, properly executed, and a copy of the proof of ownership. Stockholders and proxyholders may also be asked to present a form of photo identification such as a driver’s license or passport. Backpacks, cameras, cell phones with cameras, recording equipment and other electronic recording devices will not be permitted at the Annual Meeting. Keysight reserves the right to inspect any persons or proposals prior to their admission to the Annual Meeting. Failure to follow the meeting rules or permit inspection will be grounds for exclusion from the Annual Meeting.




KEYSIGHT TECHNOLOGIES, INC.
1400 Fountaingrove Parkway
Santa Rosa, California 95403
(707) 577-6915
Notice of Annual Meeting of Stockholders
 
 
TIME
8:00 a.m., Pacific Standard Time, on Thursday, March 16, 2017
 
 
PLACE
Keysight Technologies, Inc.
1400 Fountaingrove Parkway
Santa Rosa, California 95403 (U.S.A.)
 
 
ITEMS OF BUSINESS
(1) To elect two directors to a 3-year term. At the Annual Meeting, the Board of Directors (the “Board”) intends to present the following nominees for election as directors:
 
 
 
• Paul N. Clark
 
• Richard Hamada
 
 
 
(2) To ratify the Audit and Finance Committee’s appointment of PricewaterhouseCoopers LLP as Keysight’s independent registered public accounting firm.
 
 
 
(3) To approve, on a non-binding advisory basis, the compensation of Keysight’s named executive officers.
 
 
 
(4) To consider such other business as may properly come before the Annual Meeting.
 
 
RECORD DATE
You are entitled to vote at the Annual Meeting and at any adjournments or postponements thereof if you were a stockholder at the close of business on January 17, 2017.
 
 
ANNUAL MEETING ADMISSION
To be admitted to the Annual Meeting, you must present proof of ownership of Keysight stock as of the record date. This can be a brokerage statement or letter from a bank or broker indicating ownership on January 17, 2017, the Notice of Internet Availability of Proxy Materials, a proxy card, or legal proxy or voting or voting instruction card provided by your broker, bank or nominee. You may also be asked to present a form of photo identification such as a driver’s license or passport. The Annual Meeting will begin promptly at 8:00 a.m. Limited seating is available on a first come, first served basis.
 
 
VOTING
For instructions on voting, please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail or, if you received a hard copy of the Proxy Statement, on your enclosed proxy card.

 
By Order of the Board,
 
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Stephen D. Williams
 
Senior Vice President, General Counsel and Secretary
This Proxy Statement and the accompanying proxy card are being sent or made available on or about February 3, 2017.






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SUMMARY INFORMATION
PROXY SUMMARY
The following is a summary which highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you are urged to read the entire Proxy Statement carefully before voting.
Voting Matters and Vote Recommendations
There are three items of business which Keysight currently expects to be considered at the 2017 Annual Meeting. The following table lists those items of business and the Keysight Board’s vote recommendation.
 
 
PROPOSAL
BOARD VOTE RECOMMENDATION
Election of Directors
For each director nominee
Ratification of the Independent Registered Public Accounting Firm
For
Advisory Vote to Approve Named Executive Officer Compensation
For
Director Nominees
Keysight’s Board of Directors is divided into three classes serving staggered three-year terms. The following table provides summary information about each of the director nominees who are being voted on at the Annual Meeting.
 
 
 
 
 
 
 
 
 
 
COMMITTEE
 
 
 
DIRECTOR
 
MEMBERSHIPS
OTHER PUBLIC
NAME
AGE (1)
SINCE
INDEPENDENT
AC
CC
NCG
EC
BOARDS
Paul N. Clark
69
2014
Yes
M
 
C
C
• Agilent Technologies, Inc.
 
 
 
 
 
 
 
 
• Biolase, Inc.
Richard Hamada
58
2014
Yes
 
M
M
 
 
Key: AC: Audit and Finance Committee; CC: Compensation Committee; NCG: Nominating and Corporate Governance Committee;   EC: Executive Committee; C: Chairperson; M: Member
(1) Age as of December 31, 2016.

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SUMMARY INFORMATION
Independent Registered Public Accounting Firm
We ask our stockholders to ratify the selection of PricewaterhouseCoopers LLP (“PwC”) as Keysight’s independent registered public accounting firm for fiscal year 2017.
The following table presents fees for professional audit services rendered to Keysight by PwC for the year ended October 31, 2016.
Fee Category:
 
Fiscal
2016
($)
 
% of
Total
(%)
 
Fiscal
2015
($)
 
% of
Total
(%)
 
Audit Fees   
 

$3,757,000

 
79.9
 

$3,600,000

 
85.1
 
Audit-Related Fees   
 
337,000

 
7.1
 
442,000

 
10.4
 
Tax Fees:
 
 
 
 
 
 
 
 
 
Tax compliance/preparation   
 
71,000

 
1.5
 
59,000

 
1.4
 
Other tax services   
 
0

 
0
 
0

 
0
 
Total Tax Fees   
 
71,000

 
1.5
 
59,000

 
1.4
 
All Other Fees   
 
540,000

 
11.5
 
130,000

 
3.1
 
Total Fees   
 

$4,705,000

 
100.0
 

$4,231,000

 
100.0
 
Executive Compensation Matters
The proxy statement contains information about Keysight’s executive compensation programs. In particular, you will find detailed information in the Compensation Discussion and Analysis starting on page 31 and the Executive Compensation tables starting on page 52.
Our executive officers are compensated in a manner consistent with Keysight’s business strategy, competitive practice, sound compensation governance principles, and stockholder interests and concerns. Our compensation policies and decisions are focused on pay-for-performance. We believe that our programs are well aligned with the interests of our stockholders and are instrumental to achieving our business strategy.
We are requesting your non-binding vote to approve the compensation of the Company’s named executive officers as described on pages 31 to 67, including the Summary Compensation Table and subsequent tables on pages 52 to 67 of the proxy statement.

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TABLE OF CONTENTS
2017 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
 
Page
PROPOSAL 1 – ELECTION OF DIRECTORS
7
Director Nomination Criteria: Qualifications and Experience
7
Current Director Terms   
8
Director Nominees for Election to New Three-Year Terms That Will Expire in 2020   
8
Continuing Directors Not Being Considered for Election at this Annual Meeting   
9
Directors Whose Terms Will Expire in 2018   
9
Directors Whose Terms Will Expire in 2019   
10
CORPORATE GOVERNANCE MATTERS   
12
Corporate Governance Guidelines   
12
Communicating with the Board   
12
Director Qualification Standards   
12
Board Leadership Structure   
13
Board’s Role in Risk Oversight   
13
Majority Voting for Directors   
13
Policies on Business Ethics   
14
Director Independence   
14
Compensation Committee Member Independence   
15
COMMITTEES OF THE BOARD OF DIRECTORS   
16
Audit and Finance Committee   
16
Compensation Committee   
17
Nominating and Corporate Governance Committee   
18
Executive Committee   
19
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION   
19
RELATED PERSON TRANSACTIONS POLICY AND PROCEDURES   
19
Transaction with Related Persons   
21
PROPOSAL 2 – RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   
22
Fees Paid to PricewaterhouseCoopers LLP   
22
Policy on Audit and Finance Committee Preapproval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm   
23
AUDIT AND FINANCE COMMITTEE REPORT   
24
COMMON STOCK OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT   
25
Beneficial Ownership Tables   
25
Section 16(a) Beneficial Ownership Reporting Compliance   
26
COMPENSATION OF NON-EMPLOYEE DIRECTORS   
27
Summary of Non-Employee Director Annual Compensation   
27
Non-Employee Director Compensation for Fiscal Year 2016   
28
Non-Employee Director Reimbursement Practice for Fiscal Year 2016   
28
Non-Employee Director Stock Ownership Guidelines   
28
PROPOSAL 3 – NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF KEYSIGHT’S NAMED EXECUTIVE OFFICERS   
29
COMPENSATION DISCUSSION AND ANALYSIS   
31


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TABLE OF CONTENTS
2017 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTS
 
 
 
Page
Executive Summary   
31
Pay for Performance Alignment   
32
Compensation Policies and Practices   
33
Process for Determining Compensation   
34
Keysight’s Peer Groups   
34
Named Executive Officers   
36
The Elements of 2016 Compensation   
36
Base Salary   
37
Short-Term Incentives   
37
Long-Term Incentives   
43
Results of 2015 Stockholder Advisory Vote on Executive Compensation   
46
Policies for Compensation Risk Mitigation   
46
Other Compensation Practices and Policies   
48
Compensation Committee Report   
51
EXECUTIVE COMPENSATION   
52
Fiscal Year 2016 Summary Compensation Table   
52
Fiscal Year 2016 Grants of Plan-Based Awards in Last Fiscal Year   
54
Outstanding Equity Awards at Fiscal Year-End   
55
Fiscal Year 2016 Option Exercises and Stock Vested at Fiscal Year-End   
57
Pension Benefits   
57
Retirement Plan   
58
Non-Qualified Deferred Compensation in Last Fiscal Year   
59
Termination Arrangements   
61
FREQUENTLY ASKED QUESTIONS   
68
DIRECTIONS TO KEYSIGHT TECHNOLOGIES, INC.    
76


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ELECTION OF DIRECTORS
PROPOSAL 1 – ELECTION OF DIRECTORS

Director Nomination Criteria: Qualifications and Experience
The Nominating and Corporate Governance Committee performs an assessment of the skills and the experience needed to properly oversee the interests of the Company. Generally, the Nominating and Corporate Governance Committee reviews both the short and long term strategies of the Company to determine what current and future skills and experience are required of the Board in exercising its oversight function. The Nominating and Corporate Governance Committee then compares those skills to the skills of the current directors and potential director candidates. The Nominating and Corporate Governance Committee conducts targeted efforts to identify and recruit individuals who have the qualifications identified through this process. The Nominating and Corporate Governance Committee looks for its current and potential directors collectively to have a mix of skills and qualifications, some of which are described below:
a reputation for personal and professional integrity and ethics;
executive or similar policy-making experience in relevant business or technology areas or national prominence in an academic, government or other relevant fields;
breadth of experience;
soundness of judgment;
the ability to make independent, analytical inquiries;
the willingness and ability to devote the time required to perform Board activities adequately;
the ability to represent the total corporate interests of Keysight; and
the ability to represent the long-term interests of stockholders as a whole.
In addition to these minimum requirements, the Nominating and Corporate Governance Committee will also consider whether the candidate’s skills are complementary to the existing Board members’ skills; the diversity of the Board in factors such as age, experience in technology, manufacturing, finance and marketing, international experience and culture; and the Board’s needs for specific operational, management or other expertise. The Nominating and Corporate Governance Committee from time to time reviews the appropriate skills and characteristics required of Board members, including factors that it seeks in Board members such as diversity of business experience, viewpoints and, personal background, and diversity of skills in technology, finance, marketing, international business, financial reporting and other areas that are expected to contribute to an effective Board. In evaluating potential candidates for the Board, the Nominating and Corporate Governance Committee considers these factors in the light of the specific needs of the Board at that time.

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ELECTION OF DIRECTORS
Current Director Terms
Keysight’s Board is divided into three classes serving staggered three-year terms. Directors for each class are elected at the annual meeting of stockholders held in the year in which the term for their class expires. Keysight’s Bylaws, as amended, allow the Board to fix the number of directors by resolution. Our Board currently consists of eight directors divided into three classes. The terms of the two current director nominees will expire at this Annual Meeting. The current composition of the Board and the term expiration dates for each director is as follows:
Class
Directors
Term Expires
I
Ronald S. Nersesian, Charles J. Dockendorff and Robert A. Rango
2018
II
James G. Cullen, Jean M. Halloran and Mark Templeton
2019
III
Paul N. Clark and Richard Hamada
2017
Directors elected at the 2017 Annual Meeting will hold office for a three-year term expiring at the annual meeting in 2020 (or until their respective successors are elected and qualified, or until their earlier death, resignation or removal). All of the nominees are currently directors of Keysight. Information regarding each of the nominees is provided below as of December 31, 2016. There are no family relationships among Keysight’s executive officers and directors.
Director Nominees for Election to New Three-Year Terms that Will Expire in 2020
PAUL N. CLARK
Age: 69
Keysight Committees:
Public Directorships:
 
 
 
Director Since:
• Audit and Finance
• Agilent Technologies, Inc.
October 2014
• Nominating and Corporate
Governance (Chair)
• Biolase, Inc.
Chairman of the Board
• Executive (Chair)
Former Public Directorships Held During the Past Five Years:
 
 
 
 
 
• Catalent Pharma Solutions, Inc.
Mr. Clark was a Strategic Advisory Board member of Genstar Capital, LLC from August 2007 to December 2016 and was an Operating Partner from August 2007 to January 2013. Genstar Capital LLC is a middle market private equity firm that focuses on investments in selected segments of life sciences and healthcare services, industrial technology, business services and software. Prior to that, Mr. Clark was the Chief Executive Officer and President of ICOS Corporation, a biotherapeutics company, from June 1999 to January 2007, and the Chairman of the Board of Directors of ICOS from February 2000 to January 2007. From 1984 to December 1998, Mr. Clark worked in various capacities for Abbott Laboratories, a health care products manufacturer, retiring from Abbott Laboratories as Executive Vice President and a board member. His previous experience included senior positions with Marion Laboratories, a pharmaceutical company, and Sandoz Pharmaceuticals (now Novartis Corporation), a pharmaceutical company. Mr. Clark has significant experience with Keysight and its businesses, having been a director of Keysight’s predecessor, Agilent, since May 2006. He additionally brings extensive management experience from numerous senior management positions and considerable public company director experience.

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ELECTION OF DIRECTORS

RICHARD HAMADA
Age: 58
Keysight Committees:
Public Directorships:
Director Since:
• Compensation
   None
October 2014
• Nominating and Corporate Governance
Former Public Directorships Held During the Past Five Years:
 
 
• Avnet, Inc.
Mr. Hamada served as the Chief Executive Officer of Avnet, Inc. from July 2011 until July 2016 and as a member of the Avnet board of directors from February 2011 until July 2016. He first joined Avnet in 1983 and has served in many capacities including President from May 2010 until July 2011 and Chief Operating Officer from July 2006 until July 2011, as President of Avnet’s Technology Solutions operating group from July 2003 until July 2006, and as President of its Computer Marketing business unit from January 2002 until July 2003. Mr. Hamada holds a Bachelor of Science degree in Finance from San Diego State University where, in June 2009, he was named as a member of the College of Business Administration Advisory Board. As a result of Mr. Hamada’s broad background in the technology and electronics industries, spanning his career, Mr. Hamada provides the Keysight Board with extensive sales, marketing and management knowledge.
Keysight’s Board recommends a vote FOR the election to the Board of each of the foregoing nominees.

Continuing Directors Not Being Considered for Election at this Annual Meeting
The Keysight directors whose terms are not expiring this year are listed below. They will continue to serve as directors for the remainder of their terms or such other date, in accordance with Keysight’s Bylaws. Information regarding each of such directors is provided below.
Directors Whose Terms Will Expire in 2018
RONALD S. NERSESIAN
Age: 57
Keysight Committees:
Public Directorships:
Director Since:
• Executive Committee
• Trimble Inc.
December 2013
 
 
 
 
Former Public Directorships Held During the Past Five Years:
President and CEO
 
   None
Mr. Nersesian has served as President and Chief Executive Officer of Keysight since December 2013 and, prior to the separation, served as Executive Vice President of Agilent. Mr. Nersesian served as President of Agilent from November 2012 to September 2013 and as Chief Operating Officer, Agilent from November 2011 to September 2013. From November 2011 to November 2012, Mr. Nersesian served as Agilent’s Executive Vice President and Chief Operating Officer. He served as Senior Vice President, Agilent, and President, Electronic Measurement Group from March 2009 to November 2011, as Agilent’s Vice President and General Manager of the Wireless Business Unit of the Electronics Measurement Group from F ebruary 2005 to February 2009, and as Agilent’s Vice President and General Manager of the Design Validation Division from May 2002 to February 2005. Prior to joining Agilent, Mr. Nersesian served in management positions with LeCroy Corporation from 1996 to 2002. From 1984 through 1996, Mr. Nersesian served in various roles with HP, Inc. Mr. Nersesian serves on the Board of Directors of Trimble Inc.

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ELECTION OF DIRECTORS

CHARLES J. DOCKENDORFF
Age: 62
Keysight Committees:
Public Directorships:
 
 
 
Director Since:
• Audit and Finance (Chair)
• Boston Scientific Corporation
October 2014
• Nominating and Corporate Governance
• Haemonetics Corporation
 
 
Former Public Directorships Held During the Past Five Years:
 
 
   None
Mr. Dockendorff served as the Executive Vice President and Chief Financial Officer of Covidien plc from 2006 until his retirement in March 2015, and as Vice President and Chief Financial Officer from 1995 to 2006. Mr. Dockendorff is a Certified Public Accountant and holds a Bachelor’s degree in Business Administration and Accounting from the University of Massachusetts and a Master of Science degree in Finance from Bentley College. As a result of Mr. Dockendorff’s significant financial experience, Mr. Dockendorff provides the Keysight Board with extensive accounting, tax, treasury, financial planning, and audit knowledge.
ROBERT A. RANGO
Age: 58
Keysight Committees:
Public Directorships:
Director Since:
• Audit and Finance
• Integrated Device Technology
November 2015
• Nominating and Corporate Governance
• KLA Tencor Corporation
 
 
Former Public Directorships Held During the Past Five Years:
 
 
   None
Mr. Rango has served as the President and Chief Executive Officer of privately held Enevate Corporation since June 2016. Mr. Rango served from 2002 to 2014 as an executive at Broadcom Corporation. From 2010 to 2014, he served as Executive Vice President and General Manager of Broadcom’s Mobile and Wireless Group. During his tenure at Broadcom, Mr. Rango held many senior management positions in the company’s Network Infrastructure Business Unit, Mobile and Wireless Group and Wireless Connectivity Group. Mr. Rango received his Bachelor of Engineering degree in Electrical Engineering from State University of New York and his Master of Engineering in Electrical Engineering from Cornell University. Mr. Rango possesses significant operating and leadership skills, including extensive experience in global semiconductor product marketing, development and sales. His mobile, wireless, semiconductor, optical, software and technology management expertise makes him a valuable member of the Keysight Board.
Directors Whose Terms Will Expire in 2019
JAMES G. CULLEN
Age: 74
Keysight Committees:
Public Directorships:
Director Since:
• Compensation (Chair)
• Agilent Technologies, Inc.
October 2014
• Nominating and Corporate Governance
• Avinger, Inc.
 
• Neustar, Inc.
 
 
• Prudential Financial, Inc.
 
 
Former Public Directorships Held During the Past Five Years:
 
 
   None

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ELECTION OF DIRECTORS
Mr. Cullen was President and Chief Operating Officer of Bell Atlantic Corporation (now known as Verizon) from 1997 to June 2000 and a member of the office of chairman from 1993 to June 2000. Prior to this appointment, Mr. Cullen was the President and Chief Executive Officer of the Telecom Group of Bell Atlantic from 1995 to 1997. Prior to the creation of Bell Atlantic on January 1, 1984, Mr. Cullen held management positions with New Jersey Bell from 1966 to 1981 and AT&T from 1981 to 1983. Mr. Cullen has considerable managerial and operational experience and expertise from his senior leadership position with Bell Atlantic and its predecessors. In addition, Mr. Cullen brings significant public company director experience and perspective on public company management and governance. Mr. Cullen has a strong understanding of Keysight’s business having served on the board of Agilent for over 10 years, including more than five years as the non-executive chairman.
JEAN M. HALLORAN
Age: 64
Keysight Committees:
Public Directorships:
Director Since:
None
None
October 2014
 
Former Public Directorships Held During the Past Five Years:
 
 
None
Ms. Halloran served as Senior Vice President of Human Resources for Agilent Technologies from August 1999 through October 2014. She directed all aspects of Agilent’s talent and rewards management, leadership development and culture. Ms. Halloran has extensive experience in Human Resources, extending back to when she joined Hewlett Packard’s Medical Products Group in 1980. Within that group, she held various positions in Manufacturing, Quality and Strategic Planning as well as Human Resources. In 1993, Ms. Halloran headed Human Resources for HP’s Measurement Systems Organization and, in 1997, was appointed Director of Education for the company. Ms. Halloran received her BA from Princeton University and an MBA from Harvard University. Ms. Halloran has served as a director of several schools and non-profit organizations. Ms. Halloran has in-depth knowledge of Keysight and its businesses, having been a leader at Keysight’s predecessors, Agilent and HP, for over 30 years. Over the course of her career, she developed considerable expertise in Keysight’s businesses, policies and practices. This perspective provides valuable insight on the Keysight Board.
MARK B. TEMPLETON
Age: 64
Keysight Committees:
Public Directorships:
Director Since:
• Compensation
• Equifax, Inc.
December 2015
• Nominating and Corporate Governance
Former Public Directorships Held During the Past Five Years:
 
 
 
 
 
• Citrix Systems, Inc.
Mr. Templeton served from June 2001 until his retirement in October 2015 as the President and CEO of Citrix Systems, Inc., a leading global provider of virtualization, mobility management, networking and software as service solutions. Mr. Templeton received his Bachelor’s degree in Product Design from North Carolina State University and an MBA from the Darden School of Business at the University of Virginia. Mr. Templeton’s operating experience, leadership and perspective in business strategy and operations and his insight in technology opportunities, particularly in the development and global marketing of advanced technology opportunities, makes him a valuable member of the Keysight Board.

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CORPORATE GOVERNANCE
Corporate Governance Matters

Corporate Governance Guidelines
The Board has adopted a set of Corporate Governance Guidelines to assist it in guiding Keysight’s governance practices. We have reviewed internally and with the Board the provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), the rules of the SEC and the NYSE’s corporate governance listing standards regarding corporate governance policies and processes and are in compliance with the rules and listing standards. These practices will be regularly reevaluated by the Nominating and Corporate Governance Committee in light of changing circumstances in order to continue serving the Company’s best interests and the best interests of its stockholders. A copy of our Corporate Governance Guidelines is located in the Investor Relations section of our website and can be accessed by clicking on “Governance Policies” in the “Corporate Governance” section of our web page at http://investor.keysight.com.
Communicating with the Board
Stockholders and other interested parties may communicate with the Board and Keysight’s Chairman of the Board by filling out the form at “Contact Chairman” under “Corporate Governance” at http:// investor.keysight.com or by writing to Paul N. Clark, c/o Keysight Technologies, Inc., General Counsel, 1400 Fountaingrove Parkway, Santa Rosa, CA 95403. The General Counsel will perform a legal review in the normal discharge of his duties to ensure that communications forwarded to the Chairman of the Board preserve the integrity of the process. For example, items that are unrelated to the duties and responsibilities of the Board such as spam, junk mail and mass mailings, product complaints, personal employee complaints, product inquiries, new product suggestions, resumes and other forms of job inquiries, surveys, business solicitations or advertisements (“Unrelated Items”) will not be forwarded to the Chairman of the Board. In addition, unrelated items include material that is unduly hostile, threatening, illegal or similarly unsuitable, and will not be forwarded to the Chairman of the Board. Any communication that is relevant to the conduct of Keysight’s business and is not forwarded will be retained for one year (other than Unrelated Items) and made available to the Chairman of the Board and any other independent director upon request. The independent directors grant the general counsel discretion to decide what correspondence will be shared with Keysight’s management and specifically instruct that any personal employee complaints be forwarded to Keysight’s Human Resources Department.
Director Qualification Standards
Keysight’s Corporate Governance Guidelines provide that the Nominating and Corporate Governance Committee is responsible for reviewing with Keysight’s Board the appropriate skills and characteristics required of Board members in the context of the makeup of the Board and developing criteria for identifying and evaluating Board candidates.
The process that this Committee uses to identify a nominee to serve as a member of the Board depends on the qualities being sought. From time to time, Keysight may engage an executive search firm to assist the Nominating and Corporate Governance Committee in identifying individuals qualified to be Board members. The Nominating and Corporate Governance Committee considers the knowledge, experience, diversity and personal and professional integrity of potential directors, as well as their willingness to devote the time necessary to effectively carry out the duties and responsibilities of Board membership. The Nominating and

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CORPORATE GOVERNANCE
Corporate Governance Committee may reevaluate the relevant criteria for Board membership from time to time in response to changing business factors or regulatory requirements. The Board is responsible for selecting candidates for election as directors based on the recommendation of the Nominating and Corporate Governance Committee.
Board Leadership Structure
Keysight separates the positions of Chief Executive Officer and Chairman of the Board. Mr. Clark, one of Keysight’s independent directors, serves as Keysight’s Chairman of the Board. The responsibilities of the Chairman of the Board include setting the agenda for each Board meeting, in consultation with the Chief Executive Officer; chairing the meetings of independent directors; and facilitating and conducting, with the Nominating and Corporate Governance Committee, the annual self-assessments by the Board and each standing Committee of the Board, which may periodically include performance reviews of individual directors.
Separating the positions of Chief Executive Officer and Chairman of the Board allows the Chief Executive Officer to focus on Keysight’s day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to, and independent oversight of, management. The Board believes that having an independent director serve as Chairman of the Board is the appropriate leadership structure for Keysight at this time. However, in the future the Board may wish to consider alternative structures, subject to the requirements under Keysight’s amended and restated Bylaws.
Board’s Role in Risk Oversight
The Board executes its risk management responsibility directly and through its Committees. The Audit and Finance Committee has primary responsibility for overseeing Keysight’s enterprise risk management process. The Audit and Finance Committee receives updates and discusses individual and overall risk areas during its meetings, including Keysight’s financial risk assessments, risk management policies and major financial risk exposures and the steps management has taken to monitor and control such exposures. The Compensation Committee oversees risks associated with Keysight’s compensation policies and practices with respect to both executive compensation and compensation generally. The Compensation Committee receives reports and discusses whether Keysight’s compensation policies and practices create risks that are reasonably likely to have a material adverse effect on the Company.
The Board is kept abreast of its Committees’ risk oversight and other activities via reports of the Committee chairpersons to the full Board during Board meetings.
We have adopted charters of our Compensation Committee, Audit and Finance Committee, Nominating and Corporate Governance Committee and Executive Committee consistent with the applicable rules and standards. Our Committee charters are located in the Investor Relations Section of our website and can be accessed by clinking on “Governance policies” in the “Corporate Governance” section of our web page at http:// investor.keysight.com.
Majority Voting for Directors
Our Bylaws provide for majority voting of directors regarding director elections. In an uncontested election, any nominee for director shall be elected by the vote of a majority of the votes cast with respect to the director. A “majority of the votes cast” means that the number of shares voted “FOR” a director must exceed 50% of the votes cast with respect to that director. The “votes” cast with respect to that director shall include votes to withhold authority and exclude votes to “ABSTAIN” with respect to that director’s election.

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If a director is not elected due to a failure to receive a majority of the votes cast and his or her successor is not otherwise elected and qualified, the director shall promptly tender his or her resignation following certification of the stockholder vote.
The Nominating and Corporate Governance Committee will consider the tendered resignation and recommend to the Board whether to accept or reject it, or whether other action should be taken. The Board will act on the Nominating and Corporate Governance Committee’s recommendation within 90 days following certification of the stockholder vote. Thereafter the Board will promptly disclose their decision and the rationale behind it in a press release to be disseminated in the same manner as Company press releases typically are distributed. Any director who tenders his or her resignation pursuant to this provision shall not participate in the Nominating and Corporate Governance Committee recommendation or Board action regarding whether to accept the resignation offer.
Policies on Business Ethics
Keysight has adopted a Standards of Business Conduct that requires all its business activities to be conducted in compliance with laws, regulations and ethical principles and values. All officers and employees of Keysight is required to read, understand and abide by the requirements of the Standards of Business Conduct. Keysight has also adopted a Director Code of Ethics applicable to Keysight’s directors.
These documents are accessible on the Company’s website at http://investor.keysight.com. Any waiver of these codes for directors or executive officers may be made only by the Audit and Finance Committee. Keysight will disclose any amendment to, or waiver from, a provision of the Standards of Business Conduct for the principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on the Company’s website within four business days following the date of the amendment or waiver. In addition, Keysight will disclose any waiver from these codes for the other executive officers and for directors on the website.
Director Independence
A majority of Keysight’s Board of directors are “independent” as defined by the rules of the NYSE and the Corporate Governance Guidelines adopted by the Board. The criteria adopted by Keysight’s Board to assist it in making determinations regarding the independence of its members, summarized below, are consistent with the NYSE listing standards regarding director independence. To be considered independent, the Board has to determine that a director does not have a material relationship with Keysight or its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with Keysight or its subsidiaries). In assessing independence, the Board considers all relevant facts and circumstances. In particular, when assessing the materiality of a director’s relationship with Keysight or its subsidiaries, the Board considers the issue not just from the standpoint of the director, but also from that of the persons or organizations with which the director has an affiliation. A director is not considered independent if:
the director is, or has been within the last three years, an employee of Keysight or its subsidiaries, or an immediate family member is, or has been within the last three years, an executive officer of Keysight or its subsidiaries;
the director has received, or has an immediate family member who has received, during any 12-month period within the last three years, more than $120,000 in direct compensation

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from Keysight or its subsidiaries, other than director and Committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), and other than amounts received by an immediate family member for service as an employee (other than an executive officer);
(i) the director or an immediate family member is a current partner of a firm that is Keysight’s internal or external auditor; (ii) the director is a current employee of such a firm; (iii) the director has an immediate family member who is a current employee of such a firm and personally works on Keysight’s or its subsidiaries’ audit; or (iv) the director or an immediate family member was within the last three years a partner or employee of such a firm and personally worked on Keysight’s or its subsidiaries’ audit within that time;
the director or an immediate family member is, or has been within the last three years, employed as an executive officer of another company where any of the present executive officers of Keysight or its subsidiaries at the same time serves or served on that company’s compensation committee; or
the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from, Keysight or its subsidiaries for property or services in an amount that, in any of the last three fiscal years, exceeds the greater of $1 million, or two percent of such other company’s consolidated gross revenues.
Keysight’s Board assesses on a regular basis, and at least annually, the independence of directors and, based on the recommendation of the Nominating and Corporate Governance Committee, make a determination as to which members are independent. The terms “immediate family member” and “executive officer” above have the same meanings specified for such terms in the NYSE listing standards.
Compensation Committee Member Independence
Keysight has adopted standards for Compensation Committee member independence in compliance with the NYSE corporate governance listing standards. In affirmatively determining the independence of any director who will serve on the Compensation Committee, the Board must consider all factors specifically relevant to determining whether such director has a relationship to Keysight or any of its subsidiaries which is material to such director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including, but not limited to:
the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by Keysight to such director; and
whether such director is affiliated with Keysight, a subsidiary of Keysight or an affiliate of a subsidiary of Keysight.

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COMMITTEES OF THE BOARD OF DIRECTORS

The Board has four standing Committees as set forth in the table below. The Board held six meetings during fiscal year 2016. Each director attended at least 75% of the Board meetings held when the director was serving on the Board.
Director
Board
Audit and
Finance
Compensation
Nominating and
Corporate
Governance
Executive
Paul N. Clark
CHAIR
ü
 
CHAIR
CHAIR
James G. Cullen
ü
 
CHAIR
ü
 
Charles J. Dockendorff
ü
CHAIR
 
ü
 
Jean M. Halloran
ü
 
 
 
 
Richard Hamada
ü
 
ü
ü
 
Ronald S. Nersesian
ü
 
 
 
ü
Robert A. Rango
ü
ü
 
ü
 
Mark B. Templeton
ü
 
ü
ü
 
Keysight encourages, but does not require, its Board members to attend the annual stockholders meeting. In 2016, all of Keysight’s then-sitting directors attended the annual stockholders meeting.
Audit and Finance Committee
The Audit and Finance Committee is responsible for the oversight of the quality and integrity of Keysight’s consolidated financial statements, its compliance with legal and regulatory requirements, the qualifications and independence of its independent registered public accounting firm, the performance of its internal audit function and independent registered public accounting firm and other significant financial matters. In discharging its duties, the Audit and Finance Committee is expected to:
have the sole authority to appoint, retain, compensate, oversee, evaluate and replace the independent registered public accounting firm;
review and approve the scope of the annual internal and external audits;
review and pre-approve the engagement of Keysight’s independent registered public accounting firm to perform audit and non-audit services and the related fees;
meet independently with Keysight’s internal auditing staff, independent registered public accounting firm and senior management;
review the adequacy and effectiveness of the system of internal control over financial reporting and any significant changes in internal control over financial reporting;
review Keysight’s consolidated financial statements and disclosures including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s reports on Form 10-K or Form 10-Q;

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establish and oversee procedures for (a) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (b) the confidential anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
monitor compliance with Keysight’s Standards of Business Conduct; and
review disclosures from Keysight’s independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independence of accountant’s communications with the Audit and Finance Committee.
During fiscal year 2016, the Audit and Finance Committee held eleven meetings. Each Committee member attended at least 75% of the meetings held while the member served on the Committee.
Compensation Committee
The Compensation Committee is responsible for compensation of Keysight’s CEO and other executive officers as well as Keysight’s compensation plans, policies and programs as they affect the CEO and other executive officers. In addition, the Compensation Committee:
reviews and evaluates the performance of the CEO and other executive officers;
supervises and oversees the administration of Keysight’s incentive compensation, variable pay and stock programs and arrangements, including the impact of such programs and arrangements on Company risk;
establishes comparator peer group and compensation targets based on this peer group for the Company’s named executive officers; and
has sole authority to retain and terminate executive compensation consultants.
For more information on the responsibilities and activities of the Compensation Committee, including the Committee’s processes for determining executive compensation, see “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Executive Compensation,” and the Compensation Committee’s charter.
The Compensation Committee also helps determine compensation for non-employee directors. The process the Compensation Committee undertakes for setting non-employee director compensation is similar to that of setting executive officer compensation. The Compensation Committee is aided by an independent consultant, currently Frederic W. Cook & Co., Inc. (“F. W. Cook”), who is selected and retained by the Compensation Committee. The role of the independent consultant is to measure and benchmark our non-employee director compensation against a certain peer group of companies with respect to appropriate compensation levels for positions comparable in the market. The independent consultant recommends appropriate retainers, committee chair retainers, grant values and stock ownership guidelines to the Compensation Committee. This information is reviewed, discussed and finalized at a Compensation Committee meeting and a recommendation is made to the full Board. The full Board makes the final determination on non-employee director compensation.

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During fiscal year 2016, the Compensation Committee held six meetings. Each Committee member attended at least 75% of the meetings held while the member served on the Committee.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee proposes a slate of directors for election by Keysight’s stockholders at each annual meeting and recommends to the Board candidates to fill any vacancies on the Board. It is also responsible for reviewing management succession plans, recommending to the Board the appropriate Board size and Committee structure and developing and reviewing corporate governance principles applicable to Keysight.
The Nominating and Corporate Governance Committee will consider director candidates recommended for nomination by stockholders, provided that the recommendations are made in accordance with the procedures described in the section entitled “General Information about the Meeting” located at the end of this Proxy Statement. Candidates recommended for nomination by stockholders that comply with these procedures will receive the same consideration as other candidates recommended by the Nominating and Corporate Governance Committee.
Keysight typically hires a third party executive search firm to help identify and facilitate the screening and interview process for director candidates. To be considered by the Nominating and Corporate Governance Committee, a director nominee must have:
a reputation for personal and professional integrity and ethics;
executive or similar policy-making experience in relevant business or technology areas or national prominence in an academic, government or other relevant field;
breadth of experience;
soundness of judgment;
the ability to make independent, analytical inquiries;
the willingness and ability to devote the time required to perform Board activities adequately;
the ability to represent the total corporate interests of Keysight; and
•    the ability to represent the long-term interests of stockholders as a whole.
In addition to these minimum requirements, the Nominating and Corporate Governance Committee will also consider whether the candidate’s skills are complementary to the existing Board members’ skills; the diversity of the Board in factors such as age, experience in technology, manufacturing, finance and marketing, international experience and culture; and the Board’s needs for specific operational, management or other expertise. The Nominating and Corporate Governance Committee from time to time reviews the appropriate skills and characteristics required of Board members, including factors that it seeks in Board members such as diversity of business experience, viewpoints and, personal background, and diversity of skills in technology, finance, marketing, international business, financial reporting and other areas that are expected to contribute to an effective Board. In evaluating potential candidates for the Board, the Nominating and Corporate Governance Committee considers these factors in the light of the specific needs of

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the Board at that time. The executive search firm screens the candidates, does reference checks, prepares a biography for each candidate for the Nominating and Corporate Governance Committee to review and helps set up interviews. The Nominating and Corporate Governance Committee and Keysight’s Chief Executive Officer interview candidates that meet the criteria, and the Nominating and Corporate Governance Committee selects candidates that best suit the Board’s needs. We do not use a third party to evaluate current Board members.
The Nominating and Corporate Governance Committee also administers Keysight’s Related Person Transactions Policy and Procedures. See “Related Person Transactions Policy and Procedures” for more information.
During fiscal year 2016, the Nominating and Corporate Governance Committee held two meetings. Each member attended at least 75% of the meetings held while the member served on the Committee.
Executive Committee
The Executive Committee meets or takes written action when the Board is not otherwise meeting. The Committee has full authority to act on behalf of the Board, except that it cannot amend Keysight’s Bylaws, recommend any action that requires the approval of the stockholders, fill vacancies on the Board or any Board Committee, fix director compensation, amend or repeal any non-amendable or non-repealable resolution of the Board, declare a distribution to the stockholders except at rates determined by the Board, appoint other Committees or take any action not permitted under Delaware law to be delegated to a committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee are set forth in the table on page 16. No Keysight executive officer served on the Compensation Committee (or equivalent), or the Board, of another entity whose executive officer(s) served on Keysight’s Compensation Committee.
Each of the members of the Compensation Committee is considered independent under the Company’s Board and Compensation Committee Independence Standards as set forth in the Company’s Amended and Restated Corporate Governance Guidelines.
RELATED PERSON TRANSACTIONS POLICY AND PROCEDURES

The Company’s Standards of Business Conduct and Director Code of Ethics require that all employees and directors avoid conflicts of interests that interfere with the performance of their duties or the best interests of the Company. In addition, the Company has adopted a written Related Person Transactions Policy and Procedures (the “Related Person Transactions Policy”) that prohibits any of the Company’s executive officers, directors or any of their immediate family members from entering into a transaction with the Company, except in accordance with the policy. For purposes of the policy, a “related person transaction” includes any transaction (within the meaning of Item 404(a) of the Securities and Exchange Commission’s Regulation S-K) involving the Company and any related person that would be required to be disclosed pursuant to Item 404(a) of the Securities and Exchange Commission’s Regulation S-K.

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Under our Related Person Transactions Policy, the General Counsel must advise the Nominating and Corporate Governance Committee of any related person transaction of which he becomes aware. The Nominating and Corporate Governance Committee must then either approve or reject the transaction in accordance with the terms of the policy. In the course of making this determination, the Nominating and Corporate Governance Committee shall consider all relevant information available to it and, as appropriate, must take into consideration the following:
the size of the transaction and the amount payable to the related person;
the nature of the interest of the related person in the transaction;
whether the transaction may involve a conflict of interest; and
whether the transaction involved the provision of goods or services to the Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to the Company as would be available in comparable transactions with or involving unaffiliated third parties.
Under the Related Person Transactions Policy, Company management screens for any potential related person transactions, primarily through the annual circulation of a Directors and Officers Questionnaire (“D&O Questionnaire”) to each member of the Board and each officer of the Company that is a reporting person under Section 16 of the Securities Exchange Act of 1934. The D&O Questionnaire contains questions intended to identify related persons and transactions between the Company and related persons. If a related person transaction is identified, such transaction is brought to the attention of the Nominating and Corporate Governance Committee for its approval, ratification, revision, or rejection in consideration of all of the relevant facts and circumstances.
The Nominating and Corporate Governance Committee must approve or ratify each related person transaction in accordance with the policy. Absent this approval or ratification, no such transaction may be entered into by the Company with any related person.
In October 2014, the Board adopted the Related Person Transactions Policy to provide for standing pre-approval of limited transactions with related persons. Pre-approved transactions include:
Any transaction with another company at which a related person’s only relationship is as an employee (other than an executive officer or an equivalent), director or beneficial owner of less than 10% of that company’s shares, if the aggregate amount involved does not exceed the greater of (i) $1,000,000, or (ii) 2% of that company’s total annual revenues.
Any charitable contribution, grant or endowment by the Company to a charitable organization, foundation or university at which a related person’s only relationship is as an employee (other than an executive officer or an equivalent), a director or a trustee, if the aggregate amount involved does not exceed the lesser of $500,000, or 2% of the charitable organization’s total annual receipts.
Keysight will disclose the terms of related person transactions in its filings with the SEC to the extent required.

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CORPORATE GOVERNANCE
Transactions with Related Persons
We purchase services, supplies, and equipment in the normal course of business from many suppliers and sell or lease products and services to many customers. In some instances, these transactions occur with companies with which members of our management or Board have relationships as directors or executive officers. For transactions entered into during fiscal year 2016, none exceeded or fell outside of the pre-approved thresholds set forth in our Related Party Transaction Policy.
During fiscal year 2016, we did not enter into any financial transaction, arrangement or relationship in which a related person had or will have direct or indirect material interest, in an amount exceeding $120,000, except for the following:
Avnet, Inc., where Mr. Hamada, a Keysight director, served as Avnet’s CEO and director until July 2016. From November 1, 2015 until Mr. Hamada stepped down as the CEO of Avnet, Avnet, Inc., or its affiliates, purchased from Keysight an aggregate of approximately $1.9 million of products and/or services and Keysight purchased from Avnet an aggregate of approximately $1.9 million in products and/or services. The transactions with Avnet fell within Keysight’s pre-approved transactions.
BlackRock, Inc. holds 7.9% of Keysight’s total outstanding equity pursuant to information contained in a Schedule 13G filed with the SEC on January 26, 2016. During fiscal year 2016, Keysight purchased from BlackRock Advisors (UK) Ltd., a subsidiary of BlackRock, Inc. approximately $635,000 of products and/or services. The transactions with BlackRock Advisors (UK) Ltd. fell within Keysight’s pre-approved transactions.

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RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PROPOSAL 2 – RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit and Finance Committee of the Board has appointed PricewaterhouseCoopers LLP (“PwC”) as Keysight’s independent registered public accounting firm to audit its consolidated financial statements for the 2017 fiscal year. During the 2016 fiscal year, PwC served as Keysight’s independent registered public accounting firm and also provided certain tax and other non-audit services. Although Keysight is not required to seek stockholder approval of this appointment, the Board believes it to be sound corporate governance to do so. If the appointment is not ratified, the Audit and Finance Committee will investigate the reasons for stockholder rejection and will reconsider the appointment.
Representatives of PwC are expected to attend the Annual Meeting where they will be available to respond to questions and, if they desire, to make a statement.
Keysight’s Board recommends a vote FOR the ratification of the Audit and Finance Committee’s appointment of PricewaterhouseCoopers LLP as Keysight’s Independent Registered Public Accounting Firm.

Fees Paid to PricewaterhouseCoopers LLP
The following table presents fees for professional audit services rendered to Keysight by PwC for the years ended October 31, 2016 and 2015.

 Fee Category:
Fiscal 2016
($)
% of
Total
(%)
Fiscal 2015
($)
% of
Total
(%)
 Audit Fees

$3,757,000

79.9

$3,600,000

85.1
 Audit-Related Fees
337,000

7.1
442,000

10.4
 Tax Fees:
 
 
 
 
Tax compliance/preparation
71,000

1.5
59,000

1.4
Other tax services
0

0
0

0
Total Tax Fees
71,000

1.5
59,000

1.4
 All Other Fees
540,000

11.5
130,000

3.1
 Total Fees

$4,705,000

100.0

$4,231,000

100.0
Audit Fees: Consists of fees billed for professional services rendered for the integrated audit of Keysight’s consolidated financial statements and its internal control over financial reporting and review of the interim condensed consolidated financial statements included in quarterly reports. Fiscal 2016 and 2015 fees also consist of fees billed for services that are normally provided by PwC in connection with statutory reporting and regulatory filings or engagements, and attest services, except those not required by statute or regulation.
Audit-Related Fees: Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Keysight’s consolidated financial statements and are not reported under “Audit Fees.” These services include employee benefit plan

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RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
audits, accounting consultations in connection with acquisitions and divestitures, attest services that are not required by statute or regulation, and consultations concerning financial accounting.
Tax Fees: Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audits and appeals, customs and duties, mergers and acquisitions and international tax planning.
All Other Fees: Consists of fees for all other services other than those reported above. These services include a license for specialized accounting research software. Keysight’s intent is to minimize services in this category.
In making its recommendation to ratify the appointment of PwC as Keysight’s independent registered public accounting firm for the fiscal year ending October 31, 2017, the Audit and Finance Committee has considered whether services other than audit and audit-related services provided by PwC are compatible with maintaining the independence of PwC.
Policy on Audit and Finance Committee Preapproval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
The Audit and Finance Committee’s policy is to preapprove all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Preapproval is generally provided for up to one year and any preapproval is detailed as to the particular service or category of services and is subject to a specific budget.

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AUDIT AND FINANCE COMMITTEE REPORT
Audit and Finance Committee Report

The Audit and Finance Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates the Audit and Finance Committee Report by reference therein.
January 2017
The Audit and Finance Committee of the Board reviewed the quality and integrity of Keysight’s consolidated financial statements contained in the 2016 Annual Report on Form 10-K, its compliance with legal and regulatory requirements, the qualifications and independence of its independent registered public accounting firm, the performance of its internal audit function and independent registered public accounting firm and other significant financial matters. Each of the Audit and Finance Committee members satisfies the definition of independent director and is financially literate as established in the New York Stock Exchange Listing Standards. In accordance with section 407 of the Sarbanes-Oxley Act of 2002, the Board has identified Charles J. Dockendorff as the Audit and Finance Committee’s “Financial Expert.” Keysight operates with a November 1 to October 31 fiscal year. The Audit and Finance Committee met eleven times during the 2016 fiscal year.
The Audit and Finance Committee’s work is guided by a written charter that the Board has approved. The Audit and Finance Committee regularly reviews its charter to ensure that it is meeting all relevant audit committee policy requirements of the U.S. Securities and Exchange Commission, the Public Company Accounting Oversight Board and the New York Stock Exchange. You can access the latest Audit and Finance Committee charter by clicking on “Governance Policies” in the “Corporate Governance” section of the Web page at www.investor.keysight.com or by writing to us at Keysight Technologies, Inc., 1400 Fountaingrove Parkway, Santa Rosa, California 95403, Attention: Investor Relations.
The Audit and Finance Committee has reviewed and discussed with management and PricewaterhouseCoopers LLP, Keysight’s independent registered public accounting firm, Keysight’s audited consolidated financial statements and Keysight’s internal control over financial reporting. The Audit and Finance Committee has discussed with PricewaterhouseCoopers LLP, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (Communication with Audit Committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit and Finance Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit and Finance Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence from Keysight. Based on the review and discussions noted above, the Audit and Finance Committee recommended to the Board that Keysight’s audited consolidated financial statements be included in Keysight’s Annual Report on Form 10-K for the fiscal year ended October 31, 2016, and be filed with the U.S. Securities and Exchange Commission.
Submitted by:
Audit and Finance Committee
Charles J. Dockendorff, Chairperson
Paul N. Clark
Robert A. Rango

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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Stock Ownership of Certain Beneficial Owners
The following table sets forth information, as of December 31, 2016, concerning each person or group known by Keysight, based on filings pursuant to Section 13(d) or (g) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to own beneficially more than 5% of the outstanding shares of our Common Stock.

Name and Address of Beneficial Owner
Amount and Nature
 
Percent of Class
T. Rowe Price Associates, Inc.
 
 
 
100 E. Pratt Street
 
 
 
Baltimore, MD 21202
22,037,856 (1)
 
12.8%
BlackRock, Inc.
 
 
 
55 East 52nd Street
 
 
 
New York, NY 10022
13,455,115 (2)
 
7.9%
The Vanguard Group - 23-1945930
 
 
 
100 Vanguard Blvd.
 
 
 
Malvern, PA 19355
11,730,460 (3)
 
6.86%

(1)
Based solely on information contained in a Schedule 13G/A filed with the SEC on February 11, 2016, by T. Rowe Price Associates, Inc. The Schedule 13G indicates that T. Rowe Price Associates, Inc. has sole voting power with respect to 6,472,344 shares and sole dispositive power with respect to 22,037,856 shares.
(2)
Based solely on information contained in a Schedule 13G/A filed with the SEC on January 26, 2016, by BlackRock, Inc. The Schedule 13G indicates that BlackRock, Inc. has sole voting power with respect to 12,233,135 shares and sole dispositive power with respect to 13,455,115 shares.
(3)
Based solely on information contained in a Schedule 13G/A filed with the SEC on February 10, 2016 by The Vanguard Group. The Schedule 13G/A indicates that the Vanguard Group has sole voting power with respect to 124,485 shares, sole dispositive power with respect to 11,607,175 shares and shares dispositive power with respect to 123,285 shares.
Stock Ownership of Directors and Officers
The following table sets forth, as of December 31, 2016, the beneficial ownership of Keysight’s common stock by each director and each of the named executive officers included in the “Summary Compensation Table” on page 52 and the beneficial ownership of Keysight’s common stock by all directors and executive officers as a group.
The number of shares beneficially owned by each entity, person, director or executive officer is determined under the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has the sole or shared voting power or investment power and also any shares that the individual has the right to acquire as of March 1, 2017, 60 days after December 31, 2016, through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole investment and voting power, or shares such powers with his or her spouse, with respect to the shares set forth in the following table. As of December 31, 2016, there were 171,462,049 shares of common stock outstanding.

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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Name of Beneficial Owners
Number of
Shares of
Common
Stock
Number of
Share Subject
to Exercisable
Options
(1)
Deferred
Stock
(2)
Total Shares
Beneficially Owned
Percentage
of Class
Ronald S. Nersesian
137,213

 
634,635

 
132,007

 
903,856
 
*

Jay Alexander
17,696

 
51,564

 
2,151

 
71,411
 
*

Paul N. Clark
382

 

 
41,337

 
41,719
 
*

James G. Cullen
20,104

 

 
10,522

 
30,626
 
*

Charles J. Dockendorff

 

 
30,854

 
30,854
 
*

Neil Dougherty
27,074

 
63,284

 
18,493

 
108,851
 
*

Soon Chai Gooi
134,038

 
197,837

 

 
331,875
 
*

Jean M. Halloran
29,832

 

 

 
29,832
 
*

Richard Hamada

 

 
25,707

 
25,707
 
*

Robert A. Rango

 

 
8,525

 
8,525
 
*

Guy Séné
41,436

 
203,372

 

 
244,808
 
*

Mark B. Templeton

 

 
8,126

 
8,126
 
*

All directors and executive
 
 
 
 
 
 
 
 
 
officers as a group (17 persons)
495,803

 
1,337,762

 
282,893

 
2,116,457
 
1.23
%
*
Less than one percent.
(1)
“Exercisable Options” means options that may be exercised as of March 1, 2017.
(2)
Represents the number of deferred shares or share equivalents held by Fidelity Management Trust Company under the Deferred Compensation Plan or similar arrangement to which voting or investment power exists.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act, requires Keysight’s directors, executive officers and holders of more than 10% of Keysight common stock to file reports with the SEC regarding their ownership and changes in ownership of Keysight stock. Keysight believes that during the 2016 fiscal year, its executive officers, directors and holders of 10% or more of our common stock complied with all Section 16(a) filing requirements.
In making these statements, Keysight has relied upon examination of copies of Forms 3, 4 and 5 provided to Keysight and the written representations of its directors and officers.

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COMPENSATION OF NON-EMPLOYEE DIRECTORS
COMPENSATION OF NON-EMPLOYEE DIRECTORS

Keysight’s director compensation program is designed to attract and retain highly qualified non-employee directors and to address the time, effort, expertise, and accountability required of active board membership. Our Compensation Committee believes that annual compensation for non-employee directors should consist of both cash to compensate members for their services on the Board of Directors and its committees, and equity to align the interest of directors and stockholders. The non-employee director’s compensation plan year begins on March 1 of each year and ends on the end of February of the following calendar year (the “Plan Year”).
Decisions regarding our non-employee director compensation program are approved by the full Board based on recommendations by the Compensation Committee. In making such recommendations, the Compensation Committee takes into consideration the director compensation practices of peer companies and whether such recommendation align with the interested our stockholders. Like compensation for our executive officers, the Compensation Committee reviews the total compensation of our non-employee directors and each element of our director compensation program annually. At the direction of the Compensation Committee, F.W. Cook, the Compensation Committee’s independent consultant, annually analyzes the competitive position of the Company’s director compensation program against the peer group used for executive compensation purposes (see page 34 for more information about the peer group).
F.W. Cook’s analysis in September 2015 showed that overall compensation for non-employee directors was slightly above the peer group median. As a result, our Compensation Committee recommended, and our Board of Directors approved, that no changes be made to our director compensation program for fiscal year 2016.
The compensation to our non-employee directors is set forth below:
Summary of Non-Employee Director Annual Compensation
 
Cash Retainer (1)
Equity Grant (2)
Committee Chair Premium (3)
Audit and
Finance Committee
Member Premium (4)
Non-Employee Director
$90,000
$180,000 in value of a stock grant
$15,000
$10,000
Non-Executive Chairman
$245,000
$180,000 in value of a stock grant
Not eligible
$10,000
(1)
Each non-employee director may elect to defer all or part of the cash compensation to the Deferred Compensation Plan for Non-Employee Directors. Any deferred cash compensation is converted into shares of Keysight common stock.
(2)
The stock will be granted on the later of (i) March 1 or (ii) the first trading day after each Annual Meeting of Stockholders. The number of shares underlying the stock grant is determined by dividing $180,000 by the average fair market value of Keysight’s common stock over 20 consecutive trading days up to and including the day prior to the grant date. The stock grant vests immediately upon grant. Each non-employee director may elect to defer all or part of the equity grant to the Deferred Compensation Plan for Non-Employee Directors.
(3)
Non-employee directors (excluding the Non-Executive Chairman) who serve as the chairperson of a Board Committee receive a “Committee chair premium” of $15,000 in cash, paid at the beginning of each Plan Year.
(4)
Non-employee directors (including the Non-Executive Chairman) who serve as the chairperson or a member of the Audit and Finance Committee receive an additional $10,000 in cash, paid at the beginning of each Plan Year.

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COMPENSATION OF NON-EMPLOYEE DIRECTORS
Non-Employee Director Compensation Earned During Fiscal Year 2016
The table below sets forth information regarding the regular compensation earned by each of our non-employee directors during the fiscal year ended October 31, 2016:
Name
Cash Retainer
($)
Committee
Fees ($)
Stock Awards
($)
(1)
Total ($)
Paul N. Clark

$245,000

 

$10,000

 
$188,788
     $443,019.21 (2)
James G. Cullen

$90,000

 

$15,000

 
$188,788
$293,788.00
Charles J. Dockendorff

$90,000

 

$25,000

 
$188,788
$303,788.00
Jean M. Halloran

$90,000

 

 
$188,788
$278,788.00
Richard Hamada

$90,000

 

 
$188,788
$278,788.00
Robert A. Rango

$90,000

 

$10,000

 
$188,788
$288,788.00
Mark B. Templeton

$90,000

 

 
$188,788
$278,788.00
(1)
Reflects the grant date fair value for stock awards granted in fiscal year 2016 calculated in accordance with FASB ASC Topic 718.
(2)
Figure includes compensation for Board meeting travel expenses in the amount of $231.21
Non-Employee Director Reimbursement Practice for Fiscal Year 2016
Non-employee directors are reimbursed for travel and other out-of-pocket expenses in connection with attendance at Board of Directors and committee meetings.
Non-Employee Director Stock Ownership Guidelines
In 2014, the Company adopted the guidelines to require each non-employee director to own Keysight shares having a value of at least five times the director’s annual cash retainer of $90,000, based on the recommendation of the Committee’s independent compensation consultant, F.W. Cook. The shares counted toward the ownership guidelines include shares owned outright and the shares of Keysight stock in the non-employee director’s deferred compensation account. These ownership levels must be attained within five years from the date of their initial election or appointment to the Board. As of October 31, 2016, all of our incumbent non-employee directors had achieved the recommended ownership level except for: (1) Mr. Rango who was appointed to the Board in November 2015 and has until November 2020 to meet the ownership requirement and (2) Mr. Templeton who was appointed to the Board in December 2015 and has until December 2020 to meet the ownership requirement.

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ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
PROPOSAL 3 – NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF KEYSIGHT’S NAMED EXECUTIVE OFFICERS

The stockholders of Keysight are entitled to cast an advisory vote at the Annual Meeting to approve the compensation of the Company’s named executive officers, as disclosed in this proxy statement. The stockholder vote is an annual advisory vote only and is not binding on Keysight or its Board. Although the vote is non-binding, the Compensation Committee and the Board value your opinions and will consider the outcome of the vote in establishing compensation philosophy and making future compensation decisions.
As described more fully in the “Compensation Discussion & Analysis” on pages 31 to 51 and in the Summary Compensation Table and subsequent tables on pages 52 to 67, the Company’s named executive officers, as identified on page 36 are compensated in a manner consistent with our business strategy, competitive practice, sound compensation governance principles, and stockholder interests and concerns. We structure our compensation to support our business objectives with appropriate rewards for short-term operating results and long-term stockholder value creation.
In fiscal year 2016, Keysight made significant progress in executing our multi-year strategy to develop a sustainable platform for growth. We continued to focus on positioning the Company as a solutions leader in key next-generation technologies in order to drive above-market growth in the long-term and create value for customers and stockholders. We also changed our organizational structure to align our business segments with our customers’ end markets to develop better solutions to customer needs. For fiscal year 2016, approximately 55% of our CEO’s and about 49% on average of our NEO’s target total direct compensation consisted of long-term incentives and was “at-risk” – which means that the component would vary year to year depending on our stock price and TSR versus Keysight’s peers. For fiscal year 2015, our CEO’s total direct compensation was $13,668,630, which included the one-time inaugural grant valued at $6,173,168. For fiscal year 2016, our CEOs total direct compensation was $8,441,612.
Keysight also has several compensation governance programs in place as described on pages 33 and 46 to 50 to manage compensation risk and align Keysight’s executive compensation with long-term stockholder interests. These programs include:
a compensation recoupment policy;
an independent compensation committee and compensation consultant;
a hedging and insider trading policy;
stock ownership guidelines; and
an annual risk assessment.
We are requesting your non-binding vote to approve the compensation of the Company’s named executive officers as described on pages 31 to 67, including the Summary Compensation Table and subsequent tables on pages 52 to 67 of the proxy statement.

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ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
Vote Required
The affirmative vote of a majority of the shares of Keysight common stock present or represented by proxy and voting at the Annual Meeting, together with the affirmative vote of a majority of the required quorum, is required for approval of this proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal.
Keysight’s Board recommends a vote FOR the approval of the compensation of Keysight’s named executive officers for fiscal year 2016.

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COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary

Keysight Technologies, Inc. is a measurement company providing electronic design and test solutions to communications and electronics industries. We provide services and deliver solutions that allow customers to bring breakthrough electronic products to market faster and at lower cost in more than 100 countries. We create customer satisfaction and earn customer loyalty by providing products and services of the highest quality and greatest value.
In fiscal year 2016, we made significant progress in executing our multi-year strategy to develop a sustainable platform for growth. We continued to focus on positioning the Company as a solutions leader in key next-generation technologies in order to drive above-market growth in the long-term and create value for customers and stockholders. We also changed our organizational structure to align our business segments with our customers’ end markets to develop and deliver better solutions for customer needs.
Despite the macro market factor challenges that caused customers to reduce their capital investments, we made measurable progress on our growth initiatives in 5G wireless, modular solutions, services, and software. We also grew inorganically through acquisitions of businesses aligned with us strategically and increased our R&D investments by 11% while delivering industry-leading non-GAAP operating margin. Our Non-GAAP earnings per share (“Non-GAAP EPS”) for fiscal year 2016 was $2.43, which was slightly below our approved incentive plan target. The slightly below target result was reflected in our compensation payments for fiscal year 2016 and demonstrated our commitment to pay for performance.
We have strengthened our market position and created new business opportunities. Investing in innovation regardless of short-term market challenges is a critical element to our future success as a company. We believe these accomplishments speak to the focus, discipline and commitment of our management team to transform our Company for growth and to create value for our customers and stockholders. Looking forward, we will continue to execute our growth initiatives and to deploy our capital effectively to grow our business through acquisitions and R&D investments.
Select Business Highlights for Fiscal Year 2016
In our 5G segment, we grew orders by 205%, introduced several new industry leading products that are driving demand, and expanded our strategic partnerships with key 5G innovators. We now have over 50 5G customers around the globe.
In our modular segment, we achieved 13% order growth and 13% revenue growth for our PXI and AXIe modular solutions and introduced 30 new solutions. We have a strong position in this market and are expanding our modular footprint with both new and existing customers.
In our services segment, revenue growth was flat and excluding the impact of the three-year warranty program, revenue for this segment grew by 6%, driven by our expanded multi-vendor calibration services and used equipment sales.

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COMPENSATION DISCUSSION AND ANALYSIS
In our software segment, we achieved 18% order growth and 13% revenue growth driven by our acquisition of Anite and our market leading design and simulation solutions. We successfully completed the acquisition of Anite, which significantly enhanced our software portfolio and was accretive to gross margin and earnings. Additionally, we broke ground on a new software development center in collaboration with the Georgia Institute of Technology in Atlanta.
In inorganic growth, we completed multiple strategic acquisitions aligned with our key growth initiatives, including Anite, which contributed to our software growth initiative and added 4.6% to our total revenue growth.
Pay for Performance Alignment

Our executive compensation program is designed to align the interests of our executive officers with the interests of our stockholders. For this reason, a significant portion of our executive officers’ target total direct compensation opportunity is variable in nature and at risk, subject to company and individual performance measured against achievement of certain financial and strategic objectives, including relative total shareholder return (“TSR”). Our variable incentives demonstrate a strong linkage between pay and performance and encourage our executive officers to hold a significant stake in Keysight. Our compensation for fiscal year 2016 reflected our performance which was slightly below our targets. The manner in which our incentive compensation plans operated relative to our performance is described below.
Short-Term Incentives
Our short-term incentive awards are payable in cash and/or equity. For fiscal year 2016, our Performance-Based Compensation Plan was directly linked to the achievement of pre-established semi-annual financial objectives and/or annual strategic objectives. The use of both semi-annual and annual objectives is to address the cyclical nature of our business. These awards were paid in cash and designed to reward achievement of critical short-term financial and strategic goals. The financial and strategic objectives are described in more detail beginning on page 37.
We achieved 89% of the target Non-GAAP EPS and 92% of the target orders for the first half of fiscal year 2016.
For the second half of fiscal year 2016, we achieved 94% of the target Non-GAAP EPS and 98% of the target orders.
For fiscal year 2016, our strategic objectives achievement resulted in payouts up to 200%.
These results, combined with an evaluation of individual performance, determined the annual short-term incentive payout for the majority of our executive officers, including NEOs. Our executive officers, depending on their individual performance evaluation, received short-term cash incentives payouts ranging from 71% to 146% of their target award opportunities.
We also granted equity awards to our executive officers in the form of restricted stock units (“RSUs”) vesting on the first anniversary of the grant to encourage and motivate them to implement our new organizational structure and to focus on enhancing the customer experience.

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COMPENSATION DISCUSSION AND ANALYSIS
Long-Term Incentives
The awards for our executive officers under our Long-Term Performance Program (the “LTP Program”) consist of performance stock units (“PSUs”) and RSUs. PSUs are directly linked to achievement of pre-established objective performance thresholds while RSUs are time based. The PSUs settle at the end of a three-year performance period and are granted to reward multi-year stockholder value creation through the performance of our stock as measured against the stockholder return of our peers. RSUs vest annually over four years. Long-term incentives are described in more detail beginning on page 43.
The PSUs granted in fiscal year 2016 were based on Keysight’s relative total stockholder return (“TSR”).
As a result of our anticipated separation from Agilent Technologies, Inc. in fiscal year 2014, our expected executive officers were not granted any PSUs by Agilent during that year. Instead, they were granted RSUs. Accordingly, no PSUs were settled in fiscal year 2016.
Compensation Policies and Practices

Our executive compensation and corporate governance programs are designed to link pay with operational performance and increases in long-term stockholder value while striking a responsible balance between risk and reward. To help us accomplish these important objectives, we have adopted the following policies and practices over time:
Compensation Policies and Practices
 
 
 
 
An independent Compensation Committee
 
An independent compensation consultant to the Compensation Committee, F.W. Cook
 
Stock ownership guidelines for our executive officers and the non-employee members of our Board of Directors
 
Prohibitions on executive officers engaging in hedging transactions or pledging our securities as collateral for loans
 
A compensation recoupment (“Clawback”) policy that applies to our executive officers
 
Use of “double trigger” change of control agreements and a prohibition on excise tax gross-ups
 
An annual review and assessment of potential compensation-related risks, conducted independently for the Compensation Committee by F.W. Cook, which for fiscal year 2016 concluded that our compensation programs (including all incentive and commission arrangements at all levels) do not encourage behaviors that are reasonably likely to have a material adverse effect on the Company

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COMPENSATION DISCUSSION AND ANALYSIS
Process for Determining Compensation

Each November, the Compensation Committee, with the assistance of F.W. Cook, and our management team, determines the target total direct compensation opportunities for all of our executive officers, including our NEOs, based on a thorough review of their individual performance and the following additional factors (collectively, “Compensation Factors”):
Compensation Factors
 
Responsibilities and capabilities of each executive officer
 
Competitive market data provided by F.W. Cook
 
“Tally sheets” describing the total compensation received by each executive officer
 
Each executive officer’s self-evaluation and evaluation by the CEO and Senior Vice President of Human Resource as presented to the Compensation Committee
 
Qualitative evaluation of each executive officer’s overall and corporate performance by the Compensation Committee or the independent members of our Board of Directors
 
Objective assessment of each executive officer’s actual performance against pre-established goals and financial targets
The CEO and Senior Vice President of Human Resources do not provide recommendations to the Compensation Committee for his/her own compensation. Our CEO’s target total direct compensation opportunity is reviewed annually by the Compensation Committee, which then presents its recommendation to the independent members of our Board of Directors for discussion. The Compensation Committee then makes the final determination on the target total direct compensation for our CEO.
Keysight’s Peer Groups

As part of its compensation deliberations, the Compensation Committee conducts an annual review of the compensation practices of the competitive market using one or more groups of peer companies. The Compensation Committee annually reviews our peer groups to ensure the companies continue to be suitable peers for compensation benchmarking purposes. At the beginning of fiscal year 2016, the Compensation Committee, with the assistance of F.W. Cook, approved a compensation peer group based on the following criteria:
Peer Group Determining Criteria for Fiscal Year 2016
 
Revenues between approximately $1.5 billion and $7.5 billion, which were approximately 0.5 times and 2.5 times our projected fiscal year 2016 revenue
 
A market capitalization between approximately $2.5 billion and $22 billion, which were approximately 0.33 times and 3 times our projected fiscal year 2016 market capitalization
 
A market capitalization to revenue ratio greater than 1.0, our projected fiscal year 2016 ratio


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COMPENSATION DISCUSSION AND ANALYSIS
 
These criteria resulted in the selection of 32 companies, all members of the Russell 3000 Information Sector, including four new companies. The selected companies compete with us either in the same business and capital markets or in the executive talent arena or similarly operate complex business operations with significant global reach. The Compensation Committee used compensation data drawn from the compensation peer group as one of the Compensation Factors in setting the compensation of our executive officers.
Keysight’s Peer Group for Fiscal Year 2016
Acuity Brands
 
CommScope*
 
JDS Uniphase
 
NCR
 
SanDisk
AMETEK
 
EchoStar
 
Juniper Networks
 
NetApp
 
SunEdison
ARRIS Group
 
EnerSys
 
KLA-Tencor
 
Nuance Communications
 
Synopsys
Autodesk
 
F5 Networks
 
Lam Research
 
Regal Beloit
 
Teradyne
Brocade Communications
 
FLIR Systems*
 
Motorola Solutions
 
Rockwell Automation
 
Trimble Navigation
Cadence Design Sys*
 
Harris
 
National Instruments
 
Roper Industries
 
Zebra Technologies*
Citrix Systems
 
Hubbell
 
 
 
 
 
 
*
Companies added to the fiscal year 2016 compensation peer group based on the selection criteria.
Competitive Positioning to Peer Group
At the time of its approval, we were approximately at the median of our compensation peer group based on revenue, market capitalization, and number of employees.

 
 
Revenues as of each
company’s most
recent four quarters
ended on 9/30/2015
(in millions)
($)
 
Market
Capitalization on
9/30/2015
(in millions)
($)
 
Employees
as of
9/30/2015
(#)
 
25th Percentile
 
 
$2,228
 
 
$3,910
 
 
 
6,520
 
 
Median
 
 
$3,022
 
 
$5,866
 
 
 
8,751
 
 
75th Percentile
 
 
$4,659
 
 
$9,909
 
 
 
13,250
 
 
Keysight Technologies, Inc. (1)
 
 
$3,100
 
 
$5,226
 
 
 
9,600
 
 
(1) 
Fiscal Year 2016 Estimates.
Peer Group for the Long-Term Incentives Program
The Compensation Committee believes that an expanded peer group is more appropriate for determining relative TSR under Keysight’s LTP Program, as an appropriate peer group provides a broader index for comparison and better alignment with stockholder investment choices. Accordingly, the Compensation Committee selected the companies in the S&P 500 Information Technology and Industrials sectors (approximately 134 companies) for determining relative TSR as the performance criteria for LTP Program awards granted for the three-year performance period ending October 31, 2018. Only companies that are included in one of these sectors at the beginning

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COMPENSATION DISCUSSION AND ANALYSIS
 
of the performance period and which have three years of stock price performance at the end of the performance period are included in the final calculation of results. The S&P 500 constituent list is maintained by the S&P Index Committee, which is available at www.standardandpoors.com/ indices/main/en/us. Any change in the expanded peer group is solely due to Standard & Poor’s criteria for inclusion in the index.
Named Executive Officers
In this Compensation Discussion and Analysis, we discuss our compensation philosophy and executive compensation program, as well as describe and analyze the compensation actions and decisions for our Principal Executive Officer, our Principal Financial Officer and the next three most highly-compensated executive officers of the company during fiscal year 2016 (collectively, the “Named Executive Officers” or “NEOs”). For the fiscal year ended October 31, 2016, our NEOs and their designated titles are as follows:
Ronald S. Nersesian
President and Chief Executive Officer
Neil Dougherty
Senior Vice President and Chief Financial Officer
Jay Alexander
Senior Vice President and Chief Technology Officer
Soon Chai Gooi
Senior Vice President, President of Electronic Industrial Solutions Group
Guy Séné (1)
Senior Vice President, Worldwide Sales
(1)
Mr. Séné stepped down from his position of SVP, Worldwide Sales on November 1, 2016.
Elements of 2016 Compensation
This section describes the elements of our executive officers, including NEOs, for fiscal year 2016 compensation, which consists of the following:
Direct Compensation
Indirect Compensation
Base Salary
Other Employee Benefits
Short-Term Incentives
 
 
Long-Term Incentives
 
 
Our NEOs’ target total compensation for fiscal year 2016 varied between the 28th percentile and 61th percentile of our peer group for each position. Actual earned variable compensation relative to target depended on the performance as discussed below.
In fiscal year 2016, approximately 55% of our CEO’s and about 49% on average of our NEO’s target total direct compensation consisted of long-term incentives and was “at-risk” – which means that the component would vary year to year depending on our stock price and TSR versus our peers. For fiscal year 2015, our CEO’s total direct compensation was $13,662,678, which included the one-time inaugural grant valued at $6,173,168. In fiscal year 2016, our CEO’s total direct compensation was $8,482,612.

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COMPENSATION DISCUSSION AND ANALYSIS
 
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Base Salary
The Compensation Committee regularly reviews base salaries for our executive officers and may adjust them, if needed, to reflect changes in market conditions or other factors, including changing responsibilities as our executive officers’ positions evolve. As a relatively new independent company, we target base salaries for our executive officers with the goal of bringing salaries closer to market of our peers over time. The base salary provides a competitive level relative to market data of our peers and each executive officer’s position, performance, skills and experience in order to attract and retain the best talent.
The base salaries of our NEOs are set annually by the Compensation Committee, who considers the Compensation Factors for each NEO and the Company’s expected operating budget. Base salary is a fixed component of our NEOs’ compensation and does not vary with Company performance. The Compensation Committee approved the following adjustments to base salaries, effective December 1, 2015:

NEO
Base Salary Adjustment
Ronald S. Nersesian
Increased from $900,000 to $975,000
Neil Dougherty
Increased from $475,000 to $500,000
Jay Alexander
Increased from $390,000 to $450,000
Soon Chai Gooi(1)
Increased from $352,900 to $392,812
Guy Séné
No change
(1)
Mr. Gooi is paid in Malaysian Ringgit, and was converted to US dollars using the exchange rate as of October 31, 2016.

Short-Term Incentives
The Performance-Based Compensation Plan for our NEOs and others in executive and senior manager roles provides cash awards every six months depending on Company performance. The awards are directly linked to the achievement of semi-annual financial objectives and/or annual strategic objectives established by the Compensation Committee at the beginning of each performance period, based on the financial and strategic plan approved by the Board for that year. In addition, the Compensation Committee reviews and approves the short-term incentive plan threshold and maximum tied to each objective, benchmarking our internal historical

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COMPENSATION DISCUSSION AND ANALYSIS
 
achievement against external market data to ensure alignment with the external market and the latest compensation practices. The short term cash incentives are tied to the financial and strategic objectives with each objective weighted depending on each executive’s roles and responsibilities. Depending upon the Company’s performance, the payout ranges from 0% to 200%. The Compensation Committee may exercise negative discretion to determine the final strategic award payout.
At the end of each performance period, the Compensation Committee certifies our actual performance against the objectives and to the extent earned, the cash incentive awards are paid. Performance measures and target performance goals cannot be changed after they are established by the Compensation Committee.
Financial Objectives for Fiscal Year 2016
Non-GAAP EPS was the most appropriate financial measure for most participants for the following specific reasons:
Strengthen line of sight with stockholders
Drive leadership behavior to focus on the enterprise rather than at a division level
Create value through growth and cost efficiency priorities (Non-GAAP EPS)
The Compensation Committee believes that the non-GAAP EPS is a transparent, operations-based measure, which is computed on the basis of non-GAAP earnings and diluted shares. Non-GAAP earnings are calculated by excluding the impact of share-based compensation, restructuring costs, separation costs, transformational costs, acquisition and integration costs, asset impairments and non-cash intangible amortization. We also exclude any tax benefits or expenses that are not directly related to ongoing operations and which are either isolated or which could not be expected to occur again with any regularity or predictability. All of these GAAP exclusions are objectively predetermined by our Compensation Committee in accordance with Section 162(m) of the Internal Revenue Code (the “Code”). Non-GAAP EPS is the same metric that we use for our quarterly earnings announcements. Non-GAAP EPS targets are determined by our semi-annual financial planning process. Management prepares a financial plan which is then reviewed and approved by the Board of Directors. The non-GAAP targets are directly tied to the approved financial plan and do not change during the performance period. The threshold and maximum are designed to account for the cyclical nature and volatility of our markets. Diluted shares are defined as the total number of shares that would be outstanding if all possible sources of conversion are exercised. For Fiscal Year 2016, non-GAAP EPS is the financial objective applied as the financial metric for four out of our five NEOs, namely, Ronald Nersesian, Neil Dougherty, Jay Alexander and Soon Chai Gooi.
While we believe Non-GAAP EPS is the best financial measure for our overall performance, the Compensation Committee wanted to implement an alternate measure to increase our top line growth. As a result, the Compensation Committee implemented the Worldwide Quota (“WWQ”) as a metric for our sales participants. WWQ is based on orders, which are calculated pursuant to a Company policy that defines how purchase commitments are accepted. For our sales organizations we believe the best indication of performance is achievement of quota, therefore for Fiscal Year 2016, WWQ was the financial objective applied as the financial metric for our Senior Vice President of Worldwide Sales, Guy Séné.

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COMPENSATION DISCUSSION AND ANALYSIS
 
Strategic Objectives for Fiscal Year 2016
For fiscal year 2016, the Compensation Committee added a number of strategic objectives to our Performance-Based Compensation Plan measures to ensure that our NEOs were focused on our key business initiatives for the fiscal year. These strategic objectives accounted for 25%–50% of the total target annual cash bonus opportunity for each NEO based on his specific strategic objectives. The actual percentages of total target annual cash bonus for each NEO is disclosed in the Weight Allocation of Financial and Strategic Objectives table on page 42.
The strategic objectives were created to help assess progress on our publicly-announced business strategies, with one strategic objective tied to each of our four announced growth initiatives and one reflecting acquisition progress at the Company level. These objectives were incorporated into the compensation plans of our executive officers most responsible for driving progress on each element of the strategy. Each strategic objective and its related measurement level are as follows:
2016 Strategic Objectives
Objective Measures
5G Wireless Orders Growth
Commercial communications represents one of our largest end markets, and 5G (fifth-generation) is a set of new technologies and applications that will drive the next wave of ecosystem investment and opportunity. Sales into leading-edge 5G applications are an important early indicator for our success in the evolving communications market. A target level for orders was set well beyond 100% growth from the fiscal year 2015 level, reflecting our intent to rapidly establish a strong and early position.
Modular Orders Growth
Modular products and solutions are an important part of our overall solution offering, augmenting traditional benchtop form factors and hand-held products. Our strategy is to offer solutions in the form factor best suited to each customer’s needs, and we intend to become the leader in modular solutions over time. As a measure, the order level for modular products helps bring attention and focus to this objective, with the target level set for growth significantly beyond the fiscal year 2015 level and multiple times greater than our overall rate of growth.
Services Core Revenue Growth
Services is a critical part of our strategy to transform from a hardware-centric products company to a software-centric solutions company, where our solutions increasingly include a services component. Our announced goal is to grow our annual services revenue from $400M to $600M over the next five years. The target measure for this strategic objective ties directly to this goal, and as with the other growth initiatives, represents growth well beyond our overall rate of growth.

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COMPENSATION DISCUSSION AND ANALYSIS
 

2016 Strategic Objectives
Objective Measures
Software Development Milestones
Software development milestones have been established to help us gauge progress on the development of new types of software that are required to accomplish our transformation to a software-centric solutions company. Program checkpoints are used to measure development progress to schedule on the most important of these new, multi-year software development efforts.
Inorganic Revenue Growth
Inorganic growth refers to the growth that is delivered by companies newly acquired by us. This objective measures the effectiveness of our acquisition process, where first year revenue is tracked according to specific goals established at the time of acquisition.
The Compensation Committee identified the strategic objectives and established the threshold, target and maximum levels for each objective at the beginning of the fiscal year. No payouts would be made under a strategic objectives portion of the Performance-Based Compensation Plan unless the thresholds for such strategic objective was met. Performance at the threshold level would result in a 50% payout with a maximum payout of 200%. Each executive officer may have a single or a mix of any objectives based on his areas of responsibility. The strategic objective mix for each of our NEOs is disclosed in the table below. The CEO’s performance was measured on all five objectives.
Weight Allocation of Strategic Objectives
 
 
5G Wireless
Orders
Growth
 
Modular
Orders
Growth
 
Services
Core
Revenue
Growth
 
Software
Development
Milestones
 
Inorganic
Revenue
Growth
 
Weight of
Total
Short-Term
Incentives
Ronald S. Nersesian
 
20%
 
20%
 
20%
 
20%
 
20%
 
25%
Neil Dougherty
 
20%
 
20%
 
20%
 
20%
 
20%
 
25%
Jay Alexander
 
N/A
 
N/A
 
N/A
 
100%
 
N/A
 
50%
Soon Chai Gooi
 
20%
 
20%
 
20%
 
20%
 
20%
 
25%
Guy Séné
 
N/A
 
N/A
 
N/A
 
N/A
 
100%
 
25%
For fiscal year 2016, the CEO achieved 105% payout of his target strategic objectives. The threshold, target and maximum for each strategic objective and the actual results and achievement percentage for each objective are disclosed in the Achievement of Strategic Objectives table on page 41 and the actual awards and achievement percentages for each NEO are disclosed in the Fiscal Year 2016 Short-Term Cash Incentive Payouts Table on page 43.
Short-Term Cash Incentive Awards Calculations and Awards Measures
For fiscal year 2016, the award payouts under the Performance-Based Compensation Plan were calculated by multiplying the individual’s base salary for the performance period by the individual’s target award bonus percentage, financial or strategic target bonus percentage, and actual performance attainment.

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COMPENSATION DISCUSSION AND ANALYSIS
 
Financial Objectives

First Half
 
Annual
Salary/2
 
Individual
Target Bonus
(% varies by
Individual)
 
Financial Target
Bonus
(50%-75%)
 
Attainment %
(Based on actual
performance)
Financial
 
 
 
 
Objectives
 
 
 
 
 
 
×
×
×
Second Half
 
 
 
 
Financial
 
 
 
 
Objectives
 
 
 
 
The following tables describe the threshold, target and maximum financial measures for the financial objectives (Non-GAAP EPS and WWQ) and reports the actual results and achievement percentage.
Non-GAAP EPS
First Half Fiscal Year 2016
 
Second Half Fiscal Year 2016
Threshold $
Target $
Max $
Results $
Achievement %
 
Threshold $
Target $
Max $
Results $
Achievement %
$0.66
$1.31
$1.97
$1.16
89%
 
$0.68
$1.35
$2.03
$1.27
94%
 
 
 
 
 
 
 
 
 
 
 
WWQ
First Half Fiscal Year 2016
 
Second Half Fiscal Year 2016
Threshold $
Target $
Max $
Results $
Achievement
 
Threshold $
Target $
Max $
Results $
Achievement %
$1,403
$1,559
$1,715
$1,440
92%
 
$1,390
$1,544
$1,699
$1,507
98%
Strategic Objectives
 
 
 
 
Individual
Target Bonus
(% varies
 by
individual)
 
 
 
 
Fiscal Year
Strategic
Objective
 
Annual
Salary
 
 
Strategic Target
Bonus
(25%-50%)
 
Attainment %
(Based on actual
performance)
 
×
×
×
 
 
 
 
 
 
 
 
 
 
 
 
The following table describes the threshold, target and maximum for each strategic objective measures and reports the actual results and achievement percentage for each.
Achievement of Strategic Objectives (1) 
Strategic Objective
 
Threshold
 
Target
 
Maximum
 
2016 Results
 
Achievement%
5G Wireless Orders Growth
 
$38.8 million
 
$40.4 million
 
(2)
 
$66.2 million
 
200% (3)
Modular Orders Growth
 
$169.9 million
 
$177.5 million
 
(2)
 
$172 million
 
69%
Services Core Revenue Growth
 
$394.3 million
 
$409.5 million
 
$424.7 million
 
$396.9 million
 
58.8%
Software Milestones (2)
 
Achieve 2 out of 6 milestones on schedule
 
Achieve 4 out of 6 milestones on schedule
 
Achieve 6 out of 6 milestones on schedule
 
Achieved 6 out of 6 milestones on schedule
 
200% (1)
 
 
 
 
 
 
 
Inorganic Revenue Growth
 
$177 million
 
$197 million
 
$217 million
 
$162.5 million
 
0% (4)
(1)
The amounts described for each growth measure represent total amounts rather than year over year amounts.
(2)
We believe disclosing the maximum of each of our orders growth objectives and providing more detailed information regarding our software milestones would result in competitive harm because none of this information is publicly available and it is highly confidential, and disclosure of this information would inform our competitors of our strategic objectives, without the Company having equivalent information relating to our competitors. In addition, we do not believe disclosure of this information is material to investors given the other information that we disclose regarding these objectives.

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COMPENSATION DISCUSSION AND ANALYSIS
 
(3)
Achievement percentages for award payouts are capped at 200%.
(4)
Did not meet threshold level therefore the achievement level and award payout was 0%.
The following table sets forth the financial objectives and strategic objectives mix and weight as applied to calculating the short-term cash incentive for each of our NEO:
Weight Allocation of Financial and Strategic Objectives
 
Financial
Objective Weight
 
Strategic
Objective Weight
Ronald S. Nersesian
75%
 
25%
Neil Dougherty
75%
 
25%
Jay Alexander
50%
 
50%
Soon Chai Gooi
75%
 
25%
Guy Séné
75%
 
25%
Short-Term Cash Incentive for Each NEO
The Compensation Committee set the fiscal year 2016 target short-term cash incentive award opportunities as a percentage of base salary for each NEO. Each NEO’s target short-term cash incentive for fiscal year 2016 was set between 75% and 135% of base salary, as follows:
Fiscal Year 2016 Target Short-Term Cash Incentive Award Opportunities
(Expressed as a Percentage of Base Salary)
Name
First Half
Financial
Target Award
Second Half
Financial
Target Award
Strategic
Target Award
Total Target
Short-Term
Cash Incentives
Ronald S. Nersesian
50.6%
50.6%
33.8%
135.0%
Neil Dougherty
30.0%
30.0%
20.0%
80.0%
Jay Alexander
18.8%
18.8%
37.4%
75.0%
Soon Chai Gooi
30.0%
30.0%
20.0%
80.0%
Guy Séné
30.0%
30.0%
20.0%
80.0%


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COMPENSATION DISCUSSION AND ANALYSIS
Fiscal Year 2016 Short-Term Cash Incentive Payouts Table
The payouts under the Performance-Based Compensation Plan for fiscal year 2016 are provided in the table below and in the “Non-Equity Incentive Plan Compensation” column in the “Summary Compensation Table”. The Compensation Committee determined that the awards earned based on actual performance results for fiscal year 2016 fairly reflected the performances of our executive officers and did not exercise negative discretion with respect to the awards.
 
 
First Half Financial
 
Second Half Financial
 
Annual Strategic
 
 
 
 
 
 
 
Target
Incentive
($)
 
Actual
Award
($)
 
Actual
Award
(%)
 
Target
Incentive
($)
 
Actual
Award
($)
 
Actual
Award
(%)
 
Target
Incentive
($)
 
Actual
Award
($)
 
Actual
Award
(%)
 
Total Actual
Short-Term Cash
Incentives
 
Name
 
 
 
 
 
 
 
 
 
($)
 
(%)*
 
Ronald S. Nersesian
 
$
493,594
 
$
439,298
 
89%
 
$
493,594
 
$
463,978
 
94%
 
$
329,063
 
$
344,068
 
105%
 
$
1,247,344
 
95
%
 
Neil Dougherty
 
$
150,000
 
$
133,500
 
89%
 
$
150,000
 
$
141,000
 
94%
 
$
100,000
 
$
104,560
 
105%
 
$
379,060
 
95
%
 
Jay Alexander
 
$
84,375
 
$
75,094
 
89%
 
$
84,375
 
$
79,313
 
94%
 
$
168,750
 
$
337,500
 
200%
 
$
491,907
 
146
%
 
Soon Chai Gooi**
 
$
127,295
 
$
113,293
 
89%
 
$
117,816
 
$
110,747
 
94%
 
$
78,544
 
$
82,125
 
105%
 
$
306,165
 
97
%
 
Guy Séné
 
$
165,000
 
$
151,800
 
92%
 
$
165,000
 
$
161,700
 
98%
 
$
110,000
 
$
0
 
0%
 
$
313,500
 
71
%
 
*
Reflected as a percentage of target award.
**
Mr. Gooi is normally paid in Malaysian Ringgit. His payout for the first half of fiscal year 2016 was converted to US dollars based on the currency exchange rate as of April 30, 2016. His payout for the second half of fiscal year 2016 was converted to US dollars based on the currency exchange rate as of October 31, 2016.
In addition to the payouts described above, we granted a short-term equity award to our executive officers in the form of RSUs fully vesting at the first anniversary of grant, to motivate and encourage the successful completion of critical goals and milestones for fiscal year 2016, as well as to focus on enhancing the customer experience in order to grow our market share. The grant details are described in the “Grants of Plan-Based Awards in Fiscal Year 2016” table.
Long-Term Incentives

2016 Long-Term Incentive Award Mix
We use the following long-term incentive vehicles to ensure that our LTP Program remains balanced, sustainable and supportive of its objectives over a multi-year period:
PSUs support the objectives of linking realized value to the achievement of critical performance objectives and stockholder alignment. Shares of our common stock earned under our LTP Program are based on long-term returns to stockholders as measured by relative TSR against our long-term incentives peer group.
RSUs are used to keep our executive officers focused on the absolute performance of the Company’s stock price. We believe RSUs encourage behavior and initiatives that support sustained long-term stock price increase, which benefits all stockholders. In addition, RSUs are becoming more prevalent in our peer group as have they have greater retentive value.

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COMPENSATION DISCUSSION AND ANALYSIS
The mix of long-term incentives awards for our NEOs for fiscal year 2016 is shown in the following chart:
keysightproxy2017wordimage6a.gif
PSU Performance Measure
The Compensation Committee has established rolling three-year performance periods for PSU awards under our LTP Program and for fiscal year 2016 used relative TSR as the performance measure for the performance period ending October 31, 2018.
Relative TSR reflects (1) the aggregate change in the 90-day average closing price of our stock versus each of the companies in our LTP Program peer group, each measured at the beginning and end of the three-year performance period. The beginning average is the 90-day period prior to the performance period and the ending average will be the final 90-day period of the performance period, plus (2) the value (if any) returned to stockholders in the form of dividends or similar distributions, assumed to be reinvested on distribution date on a pre-tax basis to purchase additional shares of the issuing company.
Long-Term Incentives Granted in Fiscal Year 2016
The target value of the long-term incentive awards granted is determined by the Compensation Committee at the beginning of the then-current fiscal year for each of our NEOs after considering the Compensation Factors. Grant values were determined as follows:
To determine the number of PSUs, we divided the target award amount by the product of the 20-trading day average stock price multiplied by a Monte-Carlo valuation.
The remaining value of the long-term awards were in the form of RSUs calculated by using a 20-day trailing average closing price of our common stock prior to the date of grant.
The following table shows the long-term incentive awards granted in fiscal year 2016 to each of our NEOs:
Name
Performance
Stock Units
(#)
Restricted
Stock Units
(#)
Total Target
Value of Long-Term
Incentive Awards
($)
Ronald S. Nersesian
71,530
61,996
$
4,486,607
 
Neil Dougherty
15,736
13,639
$
987,028
 
Jay Alexander
11,616
10,068
$
728,603
 
Soon Chai Gooi
18,597
16,119
$
1,166,490
 
Guy Séné
14,449
12,523
$
906,287
 


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COMPENSATION DISCUSSION AND ANALYSIS
Performance Stock Units Granted in Fiscal Year 2016
The PSUs granted in fiscal year 2016 will be measured and paid out based on our relative TSR versus all companies in our peer group for the fiscal year 2016 through fiscal year 2018 performance period. The peer group was selected at the beginning of the performance period to be the S&P 500 IT & Industrials Sectors Index. The Compensation Committee also determined that, to be included in the calculation, each company in this index must have three full years of stock price data to be used in the final relative TSR calculation. The Compensation Committee did not establish an absolute TSR target as it believed that performance would be best measured on a relative basis against our selected peer group. The performance schedule determined by the Compensation Committee was:
 
Payout as a
% of Target
Below 25th Percentile Rank (threshold)
0
%
 
25th Percentile Rank
25
%
 
50th Percentile Rank (target)
100
%
 
75th Percentile Rank and Above
200
%
 
The PSUs will be settled linearly for each level of performance as illustrated below:
keysightproxy2017wordimage7a.gif

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COMPENSATION DISCUSSION AND ANALYSIS
The PSUs are wholly “at risk” compensation as our performance must be at or above the 25th percentile of the comparator group for the award recipients to earn any of the shares of our common stock subject to their awards.
Results of 2015 Shareholder Advisory Vote on Executive Compensation

Our executive compensation program is well aligned with the interests of our stockholders and is instrumental to achieving our business strategy. In setting executive compensation for fiscal year 2016, which was completed in November 2015, the Compensation Committee considered the stockholder support (93% approval of votes cast) that our “Say-on-Pay” proposal received at its March 19, 2015 Annual Meeting of Stockholders. The Compensation Committee believes that the results of this vote confirm the philosophy and objective of linking our executive compensation to our operating and strategic objectives and the enhancement of stockholder value.
During the last Annual Stockholders’ Meeting on March 17, 2016, our “Say-on-Pay” proposal received 87% approval of votes cast, which was taken into consideration by the Compensation Committee in determining our executive compensation for fiscal year 2017.
Policies for Compensation Risk Mitigation

Recoupment Policy
Our Executive Compensation Recoupment Policy applies to all of our executive officer’s subject to Section 16 of the Securities Exchange Act. Under this Policy, in the event of (A) a material restatement of financial results (wherein results were incorrect at the time published due to mistake, fraud or other misconduct), or (B) fraud or misconduct by an executive officer, the Compensation Committee will, in the case of a restatement, review all short-term and long-term incentive compensation awards that were paid or awarded to the executive officers for performance periods beginning after October 31, 2014 that occurred, in whole or in part, during the restatement period. In the case of fraud or misconduct, the Compensation Committee will consider actions to remedy the fraud or misconduct, prevent its recurrence, and impose discipline on the wrongdoers, in each case, as it deems appropriate.
These actions may include without limitation, to the extent permitted by governing law, requiring reimbursement of compensation, causing the cancellation of outstanding restricted stock or deferred stock awards, stock options, and other equity incentive awards, limiting future awards or compensation, and requiring the disgorgement of profits realized from the sale of shares of our common stock to the extent such profit was, in part or in whole, resulting from fraud or misconduct.
The Compensation Committee will amend the Policy, as necessary, to comply with the final SEC rules regarding the recoupment policy required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

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COMPENSATION DISCUSSION AND ANALYSIS
Hedging and Insider Trading Policy
Our Insider Trading Policy expressly bars ownership of financial instruments or participation in investment strategies that hedge the economic risk of owning our equity securities. We also prohibit our executive officers and the members of our Board from pledging our equity securities as collateral for loans. In addition, we prohibit our executive officers, directors and employees from purchasing or selling our securities while in possession of material, non-public information, or otherwise using such information for their personal benefit and maintain a quarterly black-out window where applicable individuals may not trade.
Our executive officers and members of our Board are permitted to enter into trading plans that are intended to comply with the requirements of Exchange Act Rule 10b5-1 so that they can prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates.
Indemnification Agreements
These agreements indemnify our executive officers and the members of our Board of Directors, as well as those who act as directors and officers of other entities at our request, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to us and our subsidiaries.
A Culture of Ownership
Our stock ownership guidelines are designed to encourage our executive officers, including our NEOs, to achieve and maintain a significant equity stake in the Company and more closely align their interests with those of our stockholders. The guidelines provide that our CEO should accumulate and hold, within five years from election to his position, an investment level in our common stock equal to a multiple of six times his annual base salary. The guidelines further provide that our CFO, COO, and other executive officers should accumulate and hold, within five years from appointment to their respective executive officer positions, an investment level in our common stock equal to the lesser of either (1) a multiple of three times their annual base salary or (2) direct ownership of a certain level of shares of our common stock (40,000 or 80,000 shares).
The investment level as a multiple of annual base salary or direct ownership guidelines are as follows:
Level
Investment Level =
Multiple of Annual
Base Salary
Direct Ownership
of Common Stock
(# of Shares)
CEO
6X
N/A
CFO/COO
3X
80,000
All other executive Officers
3X
40,000
The Compensation Committee conducts an annual review to assess compliance with the guidelines. At the end of fiscal year 2016, each of our NEOs had either met or were on track to reach his stock ownership guideline requirement within the applicable timeframe.

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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Risk Assessment
F.W. Cook conducts an annual review of our compensation related risks. The risk assessment conducted during fiscal year 2016 concluded that our executive compensation program is well designed to encourage behaviors aligned with the long-term interests of our stockholders. F.W. Cook also found an appropriate balance in fixed versus variable pay, cash and equity, and appropriate mix of financial metrics. Finally, it was determined that there are appropriate policies in place to mitigate compensation-related risk, including stock ownership guidelines, insider-trading prohibitions, the Executive Compensation Recoupment Policy, and independent Compensation Committee oversight of our executive compensation programs.
Other Compensation Practices and Policies

Benefits and Limited Perquisites
Our global benefits philosophy is to provide our executive officers, including our NEOs, with protection and security through health and welfare, retirement, disability insurance and life insurance programs. Generally, the Compensation Committee’s philosophy is to provide only perquisites and other personal benefits that we provide to all employees.
In addition to these Company-wide benefits, our NEOs are offered Company-paid financial counseling through a third-party service to assist with their personal finances. Providing this service gives our NEOs a better understanding of their compensation and benefits, allowing them to concentrate on their responsibilities and our future success. Our executive officers, including our NEOs, are also offered physical examinations, for which we cover the costs that are not otherwise covered under each of our NEOs’ chosen health plan. We believe that the executive physical is a prudent measure to help ensure the health of our executive officers. Both the financial counseling and the executive physicals are benefits generally provided by our peers and are available to us at a reasonable group cost.
Our NEOs are offered Company paid relocation services, mortgage subsidies and tax assistance. Our executive officers also had access to Company drivers to transport them and their families to the airport for personal travel, as are other Company executives.
Deferred Compensation
Our NEOs are eligible to voluntarily defer base salary, short-term cash incentives, and stock awards under the LTP Program. The deferrals are made through the Keysight Technologies, Inc. 2014 Deferred Compensation Plan (the “Deferred Compensation Plan”).
Deferred compensation is distributed to eligible participants in January of the year following termination of their employment, if termination occurs during the first six months of the calendar year. Otherwise, payouts are distributed to participants in July of the year following termination of employment. No early distributions or withdrawals are allowed. If an election is made to defer performance shares earned under the LTP Program, shares are deferred and released to the participants as indicated above.

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COMPENSATION DISCUSSION AND ANALYSIS
The specific benefits and an additional description of plan features are set forth in the section entitled “Non-Qualified Deferred Compensation in Last Fiscal Year” below.
Pension Plans
The Keysight Technologies, Inc. Retirement Plan (the “Retirement Plan”), the Keysight Technologies, Inc. Supplemental Benefit Retirement Plan (the “Supplemental Benefit Retirement Plan), the Keysight Technologies, Inc. Deferred Profit-Sharing Plan (the “Deferred Profit-Sharing Plan”) and the Keysight Technologies, Inc. 401(k) Plan (the “401(k) Plan”) are designed for long-term employment retention as well as to support the career-employment strategy and to provide employee retirement savings.
The Retirement Plan is a U.S. tax qualified defined benefit plan. The Retirement Plan was closed to new entrants on August 1, 2015.
The Supplemental Benefit Retirement Plan is an unfunded, non-qualified plan that pays amounts upon retirement that would be due under the regular Retirement Plan benefit formula, but are limited under the tax-qualified Retirement Plan by the Code.
The Deferred Profit-Sharing Plan provides certain amounts to our NEOs and other employees who provided services to Agilent prior to August 1, 2014 and to Agilent’s predecessor company, Hewlett Packard Company, prior to November 1, 1993. It is a closed and frozen, defined contribution plan. The Deferred Profit-Sharing Plan is used as a floor offset for the Retirement Plan for service prior to November 1, 1993. There have been no contributions into the plan since October 31, 1993.
The 401(k) Plan is a U.S. defined contribution plan. The 401(k) Plan provides eligible employees with an opportunity to defer eligible covered compensation under section 401(k) of the Internal Revenue Code. The Company provides a matching contribution up to 5% of deferred compensation for legacy participants and up to 8% of deferred compensation for participants hired on or after August 1, 2015. The 401(k) Plan also permits a discretionary employer contribution up to 2% of covered compensation for participants hired on or after August 1, 2015.
Additional information on the Retirement benefits for which the NEOs are eligible is set forth in the “Fiscal Year 2016 Pension Benefits Table”.
Policy Regarding Deduction Limit
Section 162(m) of the Code generally disallows a tax deduction for compensation in excess of $1 million paid to the CEO and the three other most highly compensated NEOs (excluding the CFO) employed at the end of the year. Certain compensation is specifically exempt from the deduction limit to the extent that it is “performance based” as defined in Section 162(m) of the Code.
The Compensation Committee considers the impact of Section 162(m) of the Code in setting and determining executive compensation because it is concerned with the net cost of executive compensation to the Company (i.e., taking into account the tax treatment of the compensation), and its ability to effectively administer executive compensation in the long-term interests of stockholders.

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COMPENSATION DISCUSSION AND ANALYSIS
Generally, our short-term cash incentives and long-term performance stock units are intended to comply with the exception for “performance-based” compensation under Section 162(m) of the Code. To maintain flexibility in rewarding individual performance and contributions, the Compensation Committee may decide to award compensation that does not comply with the exception for “performance-based” compensation and, thus, may not be deductible for purposes of Section 162(m). In addition, because of the fact-based nature of the “performance-based” compensation exception and the limited amount of binding-related guidance, we cannot guarantee that compensation that is intended to comply with the “performance-based” compensation exception under Section 162(m) of the Code will, in fact, qualify.
Accounting Considerations
We follow Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC Topic 718, for our stock-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
Termination –Severance Plan and Change of Control Agreements
Consistent with the practice of many of our peers, the Compensation Committee has adopted an Officer and Executive Severance Plan (the “Severance Plan”) for our U.S. based officers and executives, which provide specified severance payments and benefits in cases where our management decides to replace or make significant changes to the officer’s duties. A more detailed description of the Severance Plan is provided in the “Officer and Executive Severance Plan” section below.
In addition, we have entered into Change-of-Control Agreements (“Change of Control Agreement”) with our officers designed to provide protection to the officers so they are not distracted by their personal, professional and financial situations at a time when we need them to remain focused on their responsibilities, the Company’s best interests and those of our stockholders. These agreements provide for “double-trigger” payments and benefits, which means that they are eligible to receive such payments and benefits only in the event of a change in control of the Company and a termination of employment or a shift into a position that represents a material change in responsibilities within a limited period of time after the transaction (these agreements do not become operative unless both events occur).
The potential payments that would be received by our NEOs under the Severance Plan and the Change-of-Control Agreements are disclosed in the “Termination and Change of Control Table” below.

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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Committee Report

The information contained in this report shall not be deemed to be “soliciting material,” to be “filed” with the SEC, or to be subject to Regulation 14A or Regulation 14C (other than as provided in Item 407 of Regulation S-K) or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference in future filings with the SEC except to the extent that Keysight specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934.
November 15, 2016
Our executive compensation program is administered by the Compensation Committee of the Board of Directors (the “Compensation Committee”). The Compensation Committee, which is composed entirely of independent, non-employee directors, is responsible for approving and reporting to our Board of Directors on all elements of compensation for our executive officers. In this regard, the Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” section of this Proxy Statement with management. Based on this review and discussion, the Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” section be included in this Proxy Statement and incorporated by reference into our 2016 Annual Report on Form 10-K.
Submitted by:
Compensation Committee
James G. Cullen, Chairperson
Richard Hamada
Mark B. Templeton

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EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
Fiscal Year 2016 Summary Compensation Table
 
Name and
Principal Position
 
Year
 
Salary
 
Bonus 
(1)
 
Stock
Awards
 
(2)(3)(5)
 
Option
Awards
 
(2)(4)(5)
 
Non-Equity
Incentive Plan
Compensation
 
(6)
 
Change in
Pension
Value and
Non-qualified
Deferred
Compensation
Earnings
 
(7)
 
All Other
Compensation
 
(8)
 
Total
 
Ronald S. Nersesian
President and Chief Executive Officer
 
2016
 
$
968,750
 
 
 
$0
 
$
6,027,107
 
$
0
 
$
1,247,344
 
 
$
206,037
 
 
$
33,373
 
 
$
8,482,612
 
 
2015
 
$
891,667
 
 
 
$0
 
$
8,718,704
 
$
2,609,233
 
$
1,248,750
 
 
$
160,539
 
 
$
33,784
 
 
$
13,662,678
 
 
2014
 
$
795,833
 
 
 
$0
 
$
2,109,864
 
$
2,257,639
 
$
917,151
 
 
$
162,202
 
 
$
30,998
 
 
$
6,273,686
 
Neil Dougherty
Senior Vice President and Chief Financial Officer
 
2016
 
$
497,917
 
 
 
$0
 
$
1,106,988
 
$
0
 
$
379,060
 
 
$
90,620
 
 
$
32,705
 
 
$
2,107,290
 
 
2015
 
$
468,750
 
 
 
$0
 
$
1,927,705
 
$
469,398
 
$
421,800
 
 
$
57,905
 
 
$
43,898
 
 
$
3,389,456
 
 
2014
 
$
387,083
 
 
 
$0
 
$
276,244
 
$
295,634
 
$
340,368
 
 
$
61,649
 
 
$
270,208
 
 
$
1,631,187
 
Jay Alexander
Senior Vice President and Chief Technology Officer
 
2016
 
$
445,000
 
 
 
$0
 
$
848,563
 
$
0
 
$
491,907
 
 
$
106,030
 
 
$
12,901
 
 
$
1,904,401
 
 
2015
 
$
384,583
 
 
 
$0
 
$
686,228
 
$
304,190
 
$
259,740
 
 
$
70,146
 
 
$
26,822
 
 
$
1,731,709
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Soon Chai Gooi (9)
Senior Vice President,
President-Electronic Industrial Solutions Group
 
2016
 
$
389,742
 
 
 
$0
 
$
1,346,430
 
$
0
 
$
306,165
 
 
$
0
 
 
$
517,256
 
 
$
2,559,594
 
 
2015
 
$
318,923
 
 
 
$0
 
$
1,494,430
 
$
477,264
 
$
338,167
 
 
$
0
 
 
$
365,856
 
 
$
2,994,640
 
 
2014
 
$
447,623
 
 
 
$0
 
$
351,635
 
$
376,267
 
$
415,511
 
 
$
0
 
 
$
118,824
 
 
$
1,709,861
 
Guy Séné (10)
Senior Vice President,
Woldwide Sales
 
2016
 
$
550,000
 
 
 
$0
 
$
1,086,227
 
$
0
 
$
313,500
 
 
$
115,505
 
 
$
28,979
 
 
$
2,094,211
 
 
2015
 
$
550,000
 
 
 
$0
 
$
3,438,730
 
$
812,924
 
$
488,400
 
 
$
101,130
 
 
$
27,955
 
 
$
5,419,139
 
 
2014
 
$
550,000
 
 
 
$0
 
$
778,610
 
$
833,166
 
$
403,547
 
 
$
117,143
 
 
$
36,628
 
 
$
2,719,094
 
(1)
None of our NEOs received any service awards or cash bonuses for fiscal year 2016.
(2)
Reflects the aggregate grant date fair values of the stock and option awards, computed in accordance with Financial Accounting Standards Board, Accounting Standards Codification, Topic 718, and Stock Compensation (“FASB ASC Topic 718”). The assumptions used in calculating the expense are provided in additional detail in the tables below.
(3)
Amounts consist of expenses relating to performance share awards that are outstanding for each of our NEOs under the LTP Program. Also the amounts consist of expenses related to restricted stock units granted in fiscal year 2016 as well as discretionary awards granted by the Compensation Committee.
(4)
Amounts consist of expenses relating to option awards granted under the Keysight Technologies, Inc. 2014 Equity and Incentive Compensation Plan (“Stock Plan”) granted at an exercise price equal to the closing price of Keysight or Agilent common stock on the date of grant.
(5)
The expenses disclosed in these columns include expenses for stock awards and options awarded in accordance with the Stock Plan, as shown in the table below.
(6)
Amounts consist of incentive awards earned by our NEOs during fiscal year 2016 under the Performance-Based Compensation Plan for covered employees.
(7)
Amounts represent the change in pension value for the Retirement Plan and Supplemental Benefit Retirement Plan. The amount for fiscal year 2014 and 2015 previously disclosed were overstated due to an inadvertent calculation error and current disclosure reflect the corrected amounts.
(8)
Amounts reflect (i) employer contributions of $10,600 to Mr. Nersesian, Mr. Dougherty, Mr. Alexander, and Mr. Séné’s accounts with Keysight Technologies, Inc. 401(k) Plan in fiscal year 2016, as well as $99,962 to Mr. Gooi for the Malaysia defined contribution plan, (ii) $20,979 for Mr. Nersesian, $16,860 for Mr. Dougherty and $17,001 for Mr. Séné for services incurred from The Ayco Company, LP, financial counseling provider, (iii) travel expenses of $894 for Mr. Nersesian, $4,345 for Mr. Dougherty, $1,651 for Mr. Alexander, and $478 for Mr. Séné for use of Keysight drivers and vehicles for personal travel, as well as $29,305 for Mr. Gooi as an annual car and gasoline allowance, (iv) relocation services of $387,762 to Mr. Gooi for his main office relocation from Malaysia to Singapore, (v) Club Membership fees of $227 for Mr. Gooi, and (vii) $900 for Mr. Nersesian, Mr. Dougherty, and Mr. Séné, as well as $650 for Mr. Alexander for employer contribution to a health savings account.
(9)
Amounts included for Mr. Gooi, with the exception of stock awards and option awards, are shown in U.S. Dollars but were paid to him in Malaysian Ringgit. To convert the amounts paid to U.S. Dollars, we used exchange rate as of the last business day of the applicable fiscal year (for fiscal year 2016 amounts, an exchange rate of 4.2020002410 Malaysian Ringgits per U.S. Dollar).
(10)
Mr. Séné stepped down from his position of SVP, Worldwide Sales on November 1, 2016.

52



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EXECUTIVE COMPENSATION
The following table itemizes the full grant date fair value of equity awards granted to our NEOs during fiscal year 2016 in accordance with FASB ASC Topic 718 for the “Stock Awards” and “Option Awards” columns of the “Summary Compensation Table”.
Long-Term Incentive Awards
 
 
Total FY16 Expense
 
Total FY15 Expense
 
Total FY14 Expense
 
Name
 
Stock
Awards
 
Option
Awards
 
Restricted
Stock
Unit
Awards
 
Stock
Awards
 
Option
Awards
 
Restricted
Stock
Unit
Awards
 
Stock
Awards
 
Option
Awards
 
Restricted
Stock
Unit
Awards
 
Ronald S. Nersesian
 
$
2,576,288
 
$0
 
$
3,450,597
 
$
2,545,536
 
$
2,609,247
 
$
6,173,168
 
$0
 
$
2,257,639
 
$
2,109,864
 
Neil Dougherty
 
$
566,762
 
$0
 
$
540,178
 
$
457,908
 
$
469,401
 
$
1,469,796
 
$0
 
$
295,634
 
$
276,244
 
Jay Alexander
 
$
418,372
 
$0
 
$
430,155
 
$
296,755
 
$
304,191
 
$
389,473
 
$0
 
$
153,698
 
$
144,348
 
Soon Chai Gooi
 
$
669,806
 
$0
 
$
676,566
 
$
465,594
 
$
477,266
 
$
1,028,836
 
$0
 
$
376,267
 
$
351,635
 
Guy Séné
 
$
520,408
 
$0
 
$
565,774
 
$
793,091
 
$
812,928
 
$
2,645,639
 
$0
 
$
833,166
 
$
778,610
 
FASB ASC Topic 718 Assumptions
The following table sets forth the weighted average FASB ASC Topic 718 assumptions used in 2016 in the calculation of the stock awards and option awards presented in the “Summary Compensation Table” and in the tables above. For all periods presented, the fair values of share-based awards for employee stock options were estimated using the Black-Scholes option pricing model, while awards granted under the LTP Program were valued using a Monte Carlo simulation. The estimated fair values of restricted stock unit awards were determined based on the closing price of Keysight’s common stock on the date of grant. Prior to separation, the fair value of awards was determined based on the market price of Agilent’s common stock on the date of grant, adjusted for expected dividend yield.
 
 
Years Ended October 31,
 
 
2016
 
2015
 
2014
Stock Option Plans:
 
 
 
 
 
 
Weighted average risk-free interest rate
 
 
1.60%
 
1.69%
Dividend yield
 
 
 
1%
Weighted average volatility
 
 
31%
 
39%
Expected life
 
 
4.9 yrs
 
5.8 yrs
LTPP:
 
 
 
 
 
 
Volatility of Keysight shares
 
25%
 
26%
 
Volatility of selected peer-company shares
 
14%-54%
 
17%-67%
 
Price-wise correlation with selected peers
 
38%
 
38%
 

53



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EXECUTIVE COMPENSATION
Fiscal Year 2016 Grants of Plan-Based Awards in Last Fiscal Year
The following table sets forth certain information regarding grants of plan-based awards to each of our NEOs during fiscal year 2016. For more information, please refer to the “Compensation Discussion and Analysis” above.
Grants of Plan-Based Awards in Fiscal Year 2016
 
 
 
 
 
 
Estimated Payouts Under Equity
Incentive Plan Awards (2)
 
All Other Option Awards:
Number of Securities Underlying Options
(#)
 
All Other Stock Awards
(#)
 
Exercise or Base Price of Option Awards
($/Sh)
 
Grant Date Fair Value of Stock and Option Awards
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
($)
 
Target
($)
 
Maximum
($)
 
 
 
 
 
Name
 
Grant Date
 
 
 
 
 
 
 
 
 
 
 
Ronald S.
 
11/17/2015
 
$
246,797
 
 
$
493,594
 
$
987,188