DEF 14A 1 d539718ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2

RAMBUS INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11

(Set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

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Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

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LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 26, 2018

To our stockholders:

You are cordially invited to attend the 2018 Annual Meeting of Stockholders of Rambus Inc. The Annual Meeting will be held on:

 

  Date: Thursday, April 26, 2018

 

  Time: 9:00 a.m., Pacific Time

 

  Place: Attend the annual meeting online at www.virtualshareholdermeeting.com/RMBS2018.

The following matters will be voted on at the Annual Meeting:

 

  1. Election of three Class I directors;

 

  2. Advisory vote to approve named executive officer compensation;

 

  3. Approval of an amendment to the Rambus 2015 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 5,500,000;

 

  4. Approval of an amendment to the Rambus 2015 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 2,000,000;

 

  5. Ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm; and

 

  6. Such other business as may properly come before the Annual Meeting or any adjournment or postponement of the meeting.

We are not aware of any other business to come before the meeting.

These items of business are more fully described in the Proxy Statement which is available at www.proxyvote.com. This notice, the Notice of Internet Availability, the 2017 Annual Report and our Proxy Statement for our 2018 annual stockholder meeting and form of proxy are being made available to stockholders on March 9, 2018.

Only stockholders of record as of February 28, 2018, may vote at the Annual Meeting. Whether or not you plan to attend the meeting, please vote at www.proxyvote.com, call 1-800-690-6903 or complete, sign, date and return the proxy card. Returning the proxy card does NOT deprive you of your right to attend the meeting and to vote your shares at the meeting. The Proxy Statement explains proxy voting and the matters to be voted on in more detail. Please read our Proxy Statement carefully. We look forward to your attendance at the Annual Meeting.

 

By Order of the Board of Directors,

 

/s/ Jae Kim

Jae Kim
Senior Vice President, General Counsel and Secretary

Sunnyvale, California

March 9, 2018

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE AT WWW.PROXYVOTE.COM, AS INSTRUCTED ON THE PROXY CARD OR THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, CALL 1-800-690-6903, OR COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD AS PROMPTLY AS POSSIBLE

 


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RAMBUS INC.

PROXY STATEMENT

FOR

2018 ANNUAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

 

     Page  

General Information about the Meeting

     1  

Proposal One: Election of Directors

     7  

Nominees

     7  

Vote Required

     7  

Information About Nominees and Other Directors

     7  

Board of Directors Meetings and Committees

     11  

Director Independence

     11  

Director Qualifications

     12  

Corporate Governance Principles

     12  

Section 16(a) Beneficial Reporting Compliance

     13  

Executive Sessions of the Independent Directors

     13  

Committees of the Board of Directors

     13  

Audit Committee

     13  

Compensation Committee

     14  

Compensation Committee Interlocks and Insider Participation

     15  

Corporate Governance & Nominating Committee

     15  

Identifying and Evaluating Nominees For Directors

     16  

Consideration of Stockholder Nominees to the Board

     16  

Board Leadership Structure and Role in Risk Oversight

     17  

Transactions with Related Persons

     17  

Review, Approval or Ratification of Transactions with Related Persons

     17  

Corporate Development Committee

     18  

Proposal Two: Advisory Vote to Approve Named Executive Officer Compensation

     19  

Proposal Three: Approval of an Amendment to the Rambus 2015 Equity Incentive Plan to Increase the Number of Shares Reserved for Issuance Thereunder by 5,500,000

     20  

Key Features of the Amended 2015 Equity Incentive Plan and Our Compensation Practices

     20  

Vote Required; Recommendation of the Board of Directors

     21  

Considerations of the Board of Directors in Making its Recommendation

     21  

Summary of the 2015 Equity Incentive Plan

     23  

Eligibility

     23  

Shares Available

     23  

Administration

     24  

Limitations

     25  

Options

     26  

Stock Appreciation Rights

     27  

Restricted Stock

     27  

Restricted Stock Units

     28  

Performance Units and Performance Shares

     28  

Dividend Equivalents

     29  

Transferability of Awards

     29  

Change of Control

     29  

Amendment and Termination

     30  

Number of Awards Granted

     30  

Federal Tax Aspects

     31  

 

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Proposal Four: Approval of an Amendment to the Rambus 2015 Employee Stock Purchase Plan to Increase the Number of Shares Reserved for Issuance Thereunder by 2,000,000

     33  

Vote Required; Board Recommendation

     33  

Considerations of the Board in Making its Recommendation

     33  

Summary of the 2015 Employee Stock Purchase Plan

     34  

General

     34  

Shares available for issuance

     34  

Administration

     34  

Eligibility

     34  

Offering Period

     35  

Purchase Price

     35  

Payment of Purchase Price; Payroll Deductions

     35  

Withdrawal

     36  

Termination of Employment

     36  

Adjustments upon Changes in Capitalization, Dissolution, Liquidation, or Change of Control

     36  

Amendment or Termination

     37  

Number of Shares Purchased by Certain Individuals and Groups

     37  

Federal Tax Aspects

     37  

Proposal Five: Ratification of Appointment of Independent Registered Public Accounting Firm

     39  

Our History with PricewaterhouseCoopers

     39  

Principal Accountant Fees and Services

     39  

Policy on Audit Committee Pre-Approval of Audit and the Permissible Non-Audit Services of Independent Registered Public Accounting Firm

     40  

Independence of PricewaterhouseCoopers LLP

     40  

Vote Required

     40  

Equity Compensation Plan Information

     41  

Security Ownership of Certain Beneficial Owners and Management

     42  

Executive Officers of the Company

     44  

Executive Compensation — Compensation Discussion and Analysis

     46  

Executive Summary

     46  

2017 Advisory Vote on Executive Compensation and Other Stockholder Engagement

     48  

Our Compensation Philosophy — Pay for Performance

     49  

NEO Compensation Process

     50  

Components of NEO Compensation

     53  

Other Policies and Elements of NEO Compensation

     59  

Compensation Committee Report

     61  

Executive Compensation Tables

     62  

Summary Compensation Table

     62  

Grants of Plan Based Awards

     63  

Outstanding Equity Awards at Fiscal Year-End

     64  

Option Exercises and Stock Vested

     66  

Potential Payments Upon Termination or Change of Control

     67  

Compensation of Directors

     69  

Summary of Director Plan

     70  

Audit Committee Report

     71  

Report of the Audit Committee

     71  

Review with Management

     71  

Review and Discussions with the Independent Registered Public Accounting Firm

     71  

Conclusion

     71  

Other Matters

     72  

 

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RAMBUS INC.

PROXY STATEMENT

FOR

2018 ANNUAL MEETING OF STOCKHOLDERS

The Board of Directors of Rambus Inc. (“Rambus,” “we,” “us” or the “Company”) is providing these proxy materials to you for use at our 2018 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, April 26, 2018 at 9:00 a.m. Pacific Time, and at any postponement or adjournment of the meeting. The purpose of the Annual Meeting is described in the Notice of Annual Meeting of Stockholders.

The Annual Meeting will be held virtually via the Internet at www.virtualshareholdermeeting.com/RMBS2018. You will be able to vote during the meeting.

Our principal executive offices are located at 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089; our telephone number is (408) 462-8000. The Notice of Internet Availability (the “Internet Notice”) was first mailed on or about March 9, 2018 to stockholders of record as of February 28, 2018 and these proxy solicitation materials combined with the Annual Report for the fiscal year ended December 31, 2017, including our Annual Report on Form 10-K for the year ended December 31, 2017 (the “Form 10-K”) were first made available to you on the Internet, on or about March 9, 2018. We maintain a website at www.rambus.com. The information on our website is not a part of this Proxy Statement.

GENERAL INFORMATION ABOUT THE MEETING

 

Who May Attend

  

You may attend the Annual Meeting if you owned your shares, either as a stockholder of record or as a beneficial owner as described below, as of the close of business on February 28, 2018 (the “Record Date”).

 

Stockholders of Record. If your shares are registered directly in your name, then you are considered to be the stockholder of record with respect to those shares, and we are sending these proxy materials directly to you. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/RMBS2018. Stockholders may vote while attending the meeting on the Internet.

 

Beneficial Owners. If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and your broker or nominee is forwarding these proxy materials to you. Your broker or nominee is considered to be the stockholder of record with respect to those shares.

Internet Notice   

Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we have provided access to our proxy materials over the Internet. Accordingly, the Internet Notice has been sent to our stockholders of record and beneficial owners as of the Record Date. Instructions on how to access the proxy materials over the Internet or to request a printed copy by mail may be found on the Internet Notice. In addition, the Internet Notice provides information on how stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.

By accessing the proxy materials on the Internet or choosing to receive your future proxy materials by email, you will save us the cost of

 

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   printing and mailing documents to you and will reduce the impact of our annual stockholders’ meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. If you choose to receive future proxy materials by mail, you will receive a paper copy of those materials, including a form of proxy. Your election to receive proxy materials by mail or email will remain in effect until you notify us that you are changing or terminating your request.
Who May Vote   

You may vote at the Annual Meeting if you owned your shares, either as a stockholder of record or as a beneficial owner, as of the close of business on the Record Date. As of that date, we had a total of 110,533,605 shares of common stock outstanding, which were held of record by approximately 489 stockholders. You are entitled to one vote for each share of our common stock that you own.

 

As of the Record Date, we had no shares of preferred stock outstanding.

Voting Your Proxy   

Stockholders of Record. If you hold your shares in your own name as a holder of record, you may instruct the proxy holders how to vote your common stock by:

 

•  voting via the internet at www.proxyvote.com;

 

•  voting by telephone at 1-800-690-6903; or

 

•  voting by mail (if you requested printed copies of the proxy materials to be mailed to you), by completing, signing, dating and mailing the proxy card in the postage-paid envelope provided.

 

Even if you vote your shares by proxy, you may also choose to attend the Annual Meeting and vote your shares in person. If you provide instructions in your completed proxy card, the proxy holders will vote your shares in accordance with those instructions. If you sign and return a proxy card without giving specific voting instructions, your shares will be voted “FOR” all of the proposals described herein.

 

Beneficial Owners. If you are the beneficial owner of shares held in street name, you have the right to direct your broker how to vote. Your broker or nominee has enclosed with these materials or provided voting instructions for you to use in directing the broker or nominee how to vote your shares.

Discretionary Voting Power; Matters to be Presented   

We are not aware of any matters to be presented at the Annual Meeting other than those described in this Proxy Statement. If any matters not described in this Proxy Statement are properly presented at the meeting, the proxy holders will use their own judgment to determine how to vote your shares. If the meeting is adjourned or postponed, the proxy holders can vote your shares on the new meeting date as well, unless you have subsequently revoked your proxy.

 

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Changing Your Vote   

Stockholders of Record. If you would like to change your vote you can do so in the following ways:

 

•  deliver written notice of your revocation to our Corporate Secretary prior to the Annual Meeting;

 

•  deliver a properly executed, later dated proxy prior to the Annual Meeting;

 

•  vote again on a later date on the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted); or

 

•  attend the Annual Meeting and vote at the meeting.

 

Please note that your attendance at the meeting in and of itself is not enough to revoke your proxy.

 

Beneficial Owners. If you instructed a broker or nominee to vote your shares following the directions originally included with these materials or provided to you, you can change your vote only by following your broker or nominee’s directions for doing so.

Cost of this Proxy Solicitation    We will bear the cost of this proxy solicitation. In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies in person or by telephone. None of these individuals will receive any additional or special compensation for doing this, but they may be reimbursed for reasonable out-of-pocket expenses. We have also hired Alliance Advisors LLC to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Alliance Advisors a fee of up to approximately $10,000 for its services, and we will reimburse certain out-of-pocket expenses.
Meeting Quorum    The Annual Meeting will be held if a majority of our outstanding shares of common stock entitled to vote are represented at the meeting or by proxy.
Our Voting Recommendations   

When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the directions of the stockholder. However, if no specific instructions are given, the shares will be voted in accordance with the following recommendations of our Board of Directors:

 

•  “FOR” the election of E. Thomas Fisher, Charles Kissner and David Shrigley as Class I directors;

 

•  “FOR” the advisory vote to approve named executive officer compensation, as disclosed in this Proxy Statement;

 

•  “FOR” the approval of an amendment to the Rambus 2015 Equity Incentive Plan to increase the number of shares reserved for issuance thereunder by 5,500,000;

 

•  “FOR” the approval of an amendment to the Rambus 2015 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 2,000,000; and

 

•  “FOR” the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

 

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Abstentions and Broker
Non-Votes
  

We treat shares that are voted “ABSTAIN” in person or by proxy as being:

 

•  present for purposes of determining whether or not a quorum is present at the Annual Meeting; and

 

•  entitled to vote on a particular subject matter at the Annual Meeting.

 

In the election of directors, any vote you make that is “ABSTAIN” for any nominee will not impact the election of that nominee. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted.

 

For the other proposals, an “ABSTAIN” vote is the same as voting against the proposal.

 

If you hold your common stock through a broker, the broker may be prevented from voting shares held in your brokerage account on some proposals (a “broker non-vote”) unless you have given the broker voting instructions. Thus, if you hold your common stock through a broker, it is critical that you cast your vote if you want it to count. If you hold your common stock through a broker and you do not instruct your broker how to vote on Proposals One, Two, Three and Four, it will be considered a broker non-vote and no votes will be cast on your behalf with respect to such Proposals. Shares that are subject to a broker non-vote are counted for purposes of determining whether a quorum exists but do not count for or against any particular proposal.

 

Your broker will continue to have discretion to vote any uninstructed shares on Proposal Five, the Ratification of the Appointment of the Company’s Independent Registered Public Accounting Firm.

Procedure for Submitting Stockholder Proposals   

Stockholders may present proposals for action at a future annual meeting only if they comply with the requirements of our bylaws and the proxy rules established by the SEC.

 

Stockholder proposals, including nominations for the election of directors, which are intended to be presented by such stockholders at our 2019 Annual Meeting of Stockholders must be received by us no later than November 9, 2018 to be considered for inclusion in the proxy statement and proxy card relating to that meeting.

 

In addition to the SEC rules, our bylaws establish an advance notice procedure for proposals that a stockholder wants to have included in our proxy statement relating to a meeting or to have brought before the meeting. To be timely, a stockholder proposal must be received by the Company’s Secretary/General Counsel at the principal executive offices of the Company not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. However, if no annual meeting was held in the

 

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previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then notice must be received no earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting, or the tenth day following the day on which public announcement of the date of such annual meeting is first made.

 

Moreover, your notice must contain specific information concerning the matters to be brought before the meeting. We urge you to read our bylaws in full in order to understand the requirements of bringing a proposal or nomination.

 

A copy of the full text of the bylaw provision relating to our advance notice procedure may be obtained by writing to our Corporate Secretary or by accessing a copy of our bylaws, which are publicly available at http://www.sec.gov. All notices of proposals by stockholders, whether or not included in proxy materials, should be sent to Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089, Attention: Secretary/General Counsel.

Communication With the Board of Directors   

Our Board of Directors may be contacted by writing to them via regular mail at Board of Directors, Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089. If you wish to contact our Board of Directors or any member of the Audit Committee to report questionable accounting or auditing matters you may do so anonymously by using this mailing address and designating the communication as “confidential.”

 

Our process for handling communications to our Board of Directors is as follows:

 

Any stockholder communications that our Board of Directors receives will first go to our Secretary/General Counsel, who will log the date of receipt of the communication as well as (for non-confidential communications) the identity of the correspondent in our stockholder communications log.

 

Unless the communication is marked “confidential,” our Secretary/General Counsel will review, summarize and, if appropriate, draft a response to the communication. The summary and response will become part of the stockholder communications log that our Secretary/General Counsel maintains with respect to all stockholder communications.

 

Our Secretary/General Counsel will then forward the stockholder communication to the member(s) of our Board of Directors (or committee chair if the communication is addressed to a committee) for review.

 

Any stockholder communication marked “confidential” will be logged by our Secretary/General Counsel as “received” but will not be reviewed, opened or otherwise held by our Secretary/General Counsel. Such confidential correspondence will be forwarded to the addressee(s).

 

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Annual Meeting Attendance    Members of our Board of Directors are invited but not required to attend the Annual Meeting of Stockholders. The 2017 Annual Meeting of Stockholders was attended by all members of our Board of Directors who were members at the time of the meeting.
“Householding” of
Proxy Materials
  

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy. If your proxy statement is being householded and you would like to receive separate copies, or if you are receiving multiple copies and would like to receive a single copy, please contact Investor Relations at Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089, Attention: Secretary, or ir@rambus.com, or place a collect call to the Company, at (408) 462-8000, and direct the call to the Investor Relations Department.
Delivery of Proxy Materials    To receive current and future proxy materials, such as annual reports, proxy statements and proxy cards, in either paper or electronic form, please contact Investor Relations at ir@rambus.com or http://investor.rambus.com, or place a collect call to the Company, at (408) 462-8000, and direct the call to the Investor Relations Department.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 26, 2018

The Notice and Proxy Statement, Annual Report to Stockholders and Form 10-K Combo document are available at www.proxyvote.com. You are encouraged to access and review all of the important information contained in the proxy materials before voting.

 

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PROPOSAL ONE:

ELECTION OF DIRECTORS

As of the date of this proxy statement, our Board of Directors is composed of eight members who are divided into two classes with overlapping two-year terms. As of the date of this proxy statement, we have four Class I directors and four Class II directors. At each annual meeting of stockholders, a class of directors is elected for a term of two years to succeed those directors whose terms expire on the annual meeting date. A director serves in office until his or her respective successor is duly elected and qualified or until his or her death or resignation. Any additional directorships resulting from an increase in the number of directors will be distributed among the two classes so that, as nearly as possible, each class will consist of an equal number of directors. Any vacancy occurring mid-term will be filled by a majority of the other current members of the Board of Directors. There is no family relationship between any of our directors.

Immediately following our 2018 annual meeting, the number of authorized directors will be reduced from eight to seven directors, as Mr. Bentley, a Class I director, is not standing for re-election and will no longer serve on our Board of Directors. We thank Mr. Bentley for his service to the Company and our Board of Directors.

 

Nominees

  

Three Class I directors are to be elected at the Annual Meeting for a two-year term ending in 2020. Based upon the recommendation of our Corporate Governance/Nominating Committee, our Board has nominated: E. Thomas Fisher, Charles Kissner and David Shrigley for election as Class I directors.

 

If any of these nominees is unable or declines to serve as a director at the time of the Annual Meeting, proxies will be voted for a substitute nominee or nominees designated by the Board of Directors.

Vote Required

   The Company’s bylaws require that each director be elected by the majority of votes cast with respect to such director in uncontested elections. The Board of Directors, after taking into consideration the recommendation of the Corporate Governance/Nominating Committee of the Board, will determine whether or not to accept the pre-tendered resignation of any nominee for director, in an uncontested election, who receives a greater number of votes “AGAINST” his or her election than votes “FOR” such election. There are no cumulative voting rights in the election of directors. Stockholders as of the Record Date may vote their shares for or against some, all or none of the Class I nominees.
Information About Nominees and Other Directors   

 

The members of our Board of Directors have deep executive and board leadership experience derived from their respective tenures as executives and directors of technology companies of various sizes. The following table contains information regarding the Class I nominees and other directors as of March 9, 2018. This information includes the specific experience, qualifications, attributes and skills that led to our Board of Directors’ conclusion that the person should serve as a director.

 

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Incumbent Nominees for Class I Directors

 

Name

  Age     

Principal Occupation and Business Experience

E. Thomas Fisher

    63      Mr. Fisher has served as a director since January 2015. He is currently senior vice president and chief technology officer of MapR Technologies. From June 2011 to February 2017, Mr. Fisher served as senior vice president and chief information officer (“CIO”) of Global Commercial Cloud Services at Oracle Corporation. Prior to joining Oracle, Mr. Fisher served as CIO and vice president of Cloud Computing at SuccessFactors, Inc., now SAP, from April 2009 to June 2011. Prior to joining SuccessFactors, Mr. Fisher spent seven years at Qualcomm where he served as CIO of CDMA Technologies. Before Qualcomm, he was vice president and acting chief technology officer at eBay Inc. Mr. Fisher holds a bachelor of arts degree from the University of North Carolina in Charlotte.
     Mr. Fisher’s experience as a technology officer of high technology companies, his experience with cloud-based products and services as well as his business and leadership experience allow him to provide strategic guidance to the Board and the Company, which led the Board of Directors to conclude that he should serve as a director.

Charles Kissner

    70     

Mr. Kissner has served as a director since July 2012. From April 2013 to September 2017, Mr. Kissner served as Chairman of the Board of ShoreTel Inc., a business communications systems company acquired by Mitel Networks Corporation. He joined ShoreTel as a director in April 2006. From January 2007 to February 2015, he was Chairman of Aviat Networks and from June 2010 to July 2011, Mr. Kissner was Chairman and CEO. From 2010 to 2015, he served on the board of Meru Networks, a technology leader in the enterprise wireless systems market. From 1995 to 2006, he served as Chairman and CEO of Stratex Networks, a global provider of wireless transmission solutions. Mr. Kissner previously was Vice President and General Manager of M/A-COM, Inc., a manufacturer of radio and microwave communications products, President and CEO of Aristacom International, a communications software company, Executive Vice President of Fujitsu Network Switching, Inc., and held a number of executive positions at AT&T (now Alcatel-Lucent). He has also served on a number of other public and private boards, as well as not-for-profit boards such as the NPR Foundation and Angel Flight, Inc. He currently serves as Chairman of non-profit KQED Public Media. Mr. Kissner holds a Bachelor of Science degree from California State Polytechnic University and a Master of Business Administration degree from Santa Clara University.

 

Mr. Kissner’s experience as a director and executive of wireless technology and networking companies and his years of business and leadership experience led the Board of Directors to conclude that he should serve as a director.

David Shrigley

    69      Mr. Shrigley has served as a director since October 2006. He was most recently the Executive Chairman of Soil and Topography Information, Inc. Mr. Shrigley was a member of the board of Wolfson Microelectronics plc, a supplier of mixed-signal chips for the digital market from November 2006

 

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Name

  Age     

Principal Occupation and Business Experience

     to December 2008, and was its chief executive officer from March 2007. He served as a general partner at Sevin Rosen Funds, a venture capital firm, from 1999 to 2005. Prior to that, Mr. Shrigley held the position of executive vice president, Marketing, Sales and Service at Bay Networks, a network hardware company. Mr. Shrigley served in various executive positions at Intel Corporation, including vice president and general manager of Asia Pacific sales and marketing operations based in Hong Kong, and vice president and general manager, corporate marketing. Mr. Shrigley holds a B.S. in Business Administration from Franklin University.
     Mr. Shrigley’s experience as a director and executive officer of high technology companies, his experience in the venture capital industry and his years of international business and leadership experience led the Board of Directors to conclude that he should serve as a director.

The Board unanimously recommends that you vote “FOR” the election to the Board of Directors of each of the nominees proposed above.

Class I Director Not Standing for Re-election

 

J. Thomas Bentley

  68    Mr. Bentley has served as a director since March 2005, and served as Chairman of the Board from June 2011 to March 2013. He served as a managing director at SVB Alliant (formerly Alliant Partners), a mergers and acquisitions firm, since he co-founded the firm in 1990 until October 2005. Mr. Bentley holds a B.A. in Economics from Vanderbilt University and an M.S. in Management from the Massachusetts Institute of Technology. Mr. Bentley currently serves on the board of Nanometrics, Inc. Mr. Bentley is not standing for re-election to the Company’s Board of Directors.

Incumbent Class II Directors Whose Terms Expire in 2019

 

Name

  Age     

Principal Occupation and Business Experience

Ronald Black, Ph.D.

    54      Dr. Black has served as our chief executive officer and president since June 2012 and as a director since July 2012. Dr. Black was previously the Managing Director of R.D. Black & Company, a consulting firm, since August 2011. From September 2010 to August 2011, Dr. Black was the Chief Executive Officer of MobiWire, formerly Sagem Wireless, a privately-held mobile handset company headquartered near Paris, France that offers products and services to original equipment manufacturers and mobile network operators in the mobile phone marketplace. From June 2009 to October 2010, Dr. Black served as Chairman and CEO of UPEK, Inc. Dr. Black currently serves as a board member of Energy Focus, Inc, a publicly held LED lighting technology developer, VeriFone Systems, Inc., a publicly held provider of technology for electronic payment transactions, Microfabrica Inc., a privately held high precision metal parts fabricator, and FlexEnable Limited, a privately held producer of flexible electronics manufacturing platforms. Dr. Black served on the board of Ultratech, Inc., a publicly held company that designs, builds and markets manufacturing systems of the global technology industry from July 2016 until its acquisition in May 2017. From 2012 to March 2015, Dr. Black served on the board of EnOcean GmbH, a German-based company that manufactures

 

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Name

  Age     

Principal Occupation and Business Experience

     and markets energy harvesting technology, sensors, and radio frequency communication. From September 2010 to November 2012, he served as a board member of AuthenTec, Inc., which he joined following the AuthenTec-UPEK merger in September 2010 and from 2007 to 2013, he served as a board member of Inside Contactless, a France-based company engaged in the semiconductors and information technology industry. From September 2004 to June 2009, he was chief executive officer of Wavecom S.A., a publicly traded French wireless solutions company. Dr. Black holds a Bachelor of Science, a Master of Science, and a Ph.D. in materials science and engineering from Cornell University.
     Dr. Black’s status as our chief executive officer, his record as a leader of various technology companies, both domestic and foreign, and his deep technical expertise led the Board of Directors to conclude that he should serve as a director.

Penelope Herscher

    57     

Ms. Herscher has served as a director since July 2006. She served as president and chief executive officer of FirstRain, Inc., a custom-configured, on-demand intelligence services firm, from 2004 to 2015, and as Executive Chairman until its acquisition in August 2017. Previously, Ms. Herscher served as executive vice president and chief marketing officer at Cadence Design Systems from 2002 to 2003, and executive vice president and general manager, Design and Verification Business during the second half of 2003. From 1996 to 2002, Ms. Herscher was president and chief executive officer of Simplex Solutions, which was acquired by Cadence in 2002. Before Simplex, she was an executive at Synopsys for eight years and started her career as an R&D engineer with Texas Instruments. Ms. Herscher serves on the boards of Faurecia SA, Lumentum Holdings LLC, PROS Holdings, Inc., and Verint Systems Inc. She has also served on the board of Savonix and JDS Uniphase Corporation, which split into two companies Lumentum Holdings and Viavi Solutions and several non-profit institutions. She holds a B.A. with honors, M.A. in Mathematics from Cambridge University in England.

 

Ms. Herscher’s experience as chief executive officer of technology companies, the successful sale of a company under her leadership to a larger technology company and her years of business and leadership experience led the Board of Directors to conclude that she should serve as a director.

Emiko Higashi

    60      Ms. Higashi has served as a director since May 2017. She founded Tomon Partners, LLC, a mergers and acquisitions and strategy consulting firm, and has served as a managing director since 2003. Prior to Tomon Partners, she was a co-founder and chief executive officer of Gilo Ventures, a technology-focused venture capital firm. Other executive and management roles include various roles with investment bank Lehman Brothers, being a founding member of Wasserstein Parella including the technology head for their M&A business, and serving as a managing director of Merrill Lynch’s global technology M&A practice. Prior to her investment banking career, Ms. Higashi spent two years as a consultant at McKinsey & Co. in Tokyo, Japan. Ms. Higashi currently serves on the boards of KLA-Tencor

 

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Name

  Age     

Principal Occupation and Business Experience

    

Corporation, Zeptor, MetLife Insurance K.K., a subsidiary of MetLife, Inc. and Takeda Pharmaceutical Company Ltd. From October 2014 to May 2017, she served on the board of Invensense, Inc., a publicly traded motion sensing hardware and motion processing technology company. She previously served as a director on the boards of private companies. Ms. Higashi is also a senior advisor to several private consulting firms. She holds a B.A. from International Christian University and an M.B.A. from Harvard Business School.

 

Ms. Higashi’s experience in investment banking and finance, as a director of several publicly traded companies, and as a founder and partner of a venture capital firm, led the Board of Directors to conclude that she should serve as a director.

Eric Stang

    58     

Mr. Stang has served as a director since July 2008 and has served as Chairman of the Board since March 2013. Mr. Stang currently serves as chairman, president and chief executive officer of Ooma, Inc., a cloud-based communications and connected services company that went public in July 2015. He has held the position of Chairman since December 2014 and the positions of president, chief executive officer and director since January 2009. Prior to joining Ooma, Mr. Stang served as a director, chief executive officer and president of Reliant Technologies, Inc., a developer of medical technology solutions for aesthetic applications, from 2006 to 2008. Mr. Stang previously served as chief executive officer and president of Lexar Media, Inc., a provider of solid state memory products from 2001 to 2006 and chairman from 2004 to 2006. From September 2013 until May 2017, he served on the board of Invensense, Inc. Mr. Stang also serves on the boards of private companies. Mr. Stang holds an A.B. in Economics from Stanford University and M.B.A. from the Harvard Business School.

 

Mr. Stang’s experience as chief executive officer of high technology companies, his prior experience in the memory products market and his years of business and leadership experience led the Board of Directors to conclude that he should serve as a director.

Board of Directors Meetings and Committees      Our Board of Directors held a total of 12 meetings during 2017. During 2017, each member of our Board of Directors attended 75% or more of the meetings of the Board of Directors and of the committees, if any, of which she or he was a member.
Director Independence      Our Board of Directors has determined that each of the following directors, constituting a majority of our Board of Directors, has no material relationship with us (either directly as a partner, stockholder or officer of an organization that has a relationship with us) and is “independent” under the applicable NASDAQ and SEC rules: J. Thomas Bentley, E. Thomas Fisher, Penelope Herscher, Emiko Higashi, Charles Kissner, David Shrigley and Eric Stang.

 

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   Currently, each of the committees of our Board of Directors is composed of independent directors as follows:
   Audit Committee:          

Charles Kissner (Chair)

J. Thomas Bentley*

Emiko Higashi

David Shrigley

  

Compensation

Committee:

 

David Shrigley (Chair)

Emiko Higashi

Charles Kissner

  

Corporate Governance/

Nominating Committee:        

 

Eric Stang (Chair)

E. Thomas Fisher

Penelope Herscher

  

Corporate Development

Committee:

 

Penelope Herscher (Chair)

Emiko Higashi

E. Thomas Fisher

 

Director Qualifications    Except as may be required by rules promulgated by NASDAQ or the SEC, there are currently no specific, minimum qualifications that must be met by each candidate for our Board of Directors, nor are there any specific qualities or skills that are necessary for one or more of the members of our Board of Directors to possess. The Corporate Governance/Nominating Committee considers a number of factors in its assessment of the appropriate skills and characteristics of members of the Board of Directors, as well as the composition of the Board of Directors as a whole. These factors include the members’ qualification as independent, as well as consideration of judgment, character, integrity, diversity, skills, and experience in such areas as operations, technology, finance, and the general needs of the Board of Directors and such other factors as the Corporate Governance/ Nominating Committee may consider appropriate. The Corporate Governance/ Nominating Committee does not have a formal policy with respect to diversity. However, the Board of Directors and the Corporate Governance/Nominating Committee believe that it is essential that the members of the Board of Directors represent diverse viewpoints. In considering candidates for the Board of Directors, the Board of Directors and the Corporate Governance/Nominating Committee consider the entirety of each candidate’s credentials in the context of the factors mentioned above.
Corporate Governance Principles   

We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders’ interests and maintaining our integrity in the marketplace. We have adopted a code of business conduct and ethics for directors, officers and employees known as the Code of Business Conduct and Ethics, which is available on our website at http://investor.rambus.com/corporate-governance.cfm.

 

* Mr. Bentley will serve on the Audit Committee until the completion of the 2018 Annual Meeting.

 

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Section 16(a) Beneficial Reporting Compliance   

Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”) requires our executive officers, directors and ten percent stockholders to file reports of ownership and changes in ownership with the SEC. The same persons are required to furnish us with copies of all Section 16(a) forms they file. Based on our review of these forms, we believe that during fiscal year 2017 all of our executive officers, directors and ten percent stockholders complied with the applicable filing requirements.
Executive Sessions of the Independent Directors   

It is the policy of the Board of Directors to have executive sessions of the independent directors at which only independent directors are present, typically in conjunction with the regularly scheduled meetings of the Board of Directors.
Committees of the Board of Directors   

 

During 2017, our Board of Directors had four standing committees:

 

•  an Audit Committee,

 

•  a Compensation Committee,

 

•  a Corporate Governance/Nominating Committee, and

 

•  a Corporate Development Committee.

 

During 2017, our Board of Directors also had an ad hoc Finance Committee which held two meetings.

 

The following describes each standing committee, its function, its membership, and the number of meetings held during 2017.

 

Each of the committees operates under a written charter adopted by our Board of Directors. All of the current committee charters are available on our website at http://investor.rambus.com/corporate-governance.cfm.

Audit Committee   

Currently, the Audit Committee is composed of J. Thomas Bentley (until the completion of the 2018 Annual Meeting), Emiko Higashi, Charles Kissner and David Shrigley, with Mr. Kissner serving as Chair. During fiscal year 2017, the Audit Committee was composed of J. Thomas Bentley, Emiko Higashi, Charles Kissner and David Shrigley, with Mr. Bentley serving as Chair. The Audit Committee oversees our corporate accounting and financial reporting processes and internal control over financial reporting, as well as our internal and external audits. The Audit Committee held eight meetings during 2017. Its duties include:

 

•  Reviewing our accounting and financial reporting processes and internal control over financial reporting;

 

•  Providing oversight and review at least annually of our risk management policies, including our investment policy;

 

•  Retaining the independent registered public accounting firm, approving their fees, and providing oversight of communication with them;

 

•  Reviewing the plans, findings and performance of our internal auditors;

 

•  Reviewing our annual and quarterly financial statements and related disclosure documents; and

 

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•  Overseeing special investigations into financial and other matters, as necessary.

 

Our Board of Directors has determined that Mr. Kissner is an Audit Committee “financial expert” and that Mr. Kissner, together with each of Ms. Higashi and Messrs. Bentley and Shrigley, has no material relationship with us (either directly as a partner, stockholder or officer of an organization that has a relationship with us) and is an “independent director” under the applicable NASDAQ and SEC rules.

 

The Audit Committee’s role is detailed in the Audit Committee Charter, which is available on our website at http://investor.rambus.com/corporate-governance.cfm.

Compensation Committee   

Currently, the Compensation Committee is composed of Emiko Higashi, Charles Kissner and David Shrigley, with Mr. Shrigley serving as Chair. During fiscal year 2017 and until March 8, 2018, the Compensation Committee was composed of E. Thomas Fisher, Charles Kissner and David Shrigley, with Mr. Kissner serving as Chair. Our Board of Directors has determined that each of Ms. Higashi and Messrs. Kissner and Shrigley are independent under the rules for compensation committee independence under the applicable NASDAQ and SEC rules. The Compensation Committee reviews and determines all forms of compensation to be provided to our executive officers, including the named executive officers and directors of Rambus, including base compensation, bonuses, and stock compensation. The Compensation Committee held 16 meetings during 2017. Its duties include:

 

•  Annually reviewing and approving the Chief Executive Officer (“CEO”) and other executive officers’ compensation in the context of their performance, which includes reviewing and approving their annual base salary, annual incentive bonus, including the specific goals, targets, and amounts, equity compensation, and any employment agreements, and any other benefits, compensation or arrangements, as applicable;

 

•  Administering our stock option and equity incentive plans pursuant to the terms of such plans and the authority delegated by our Board of Directors, including: granting stock options, performance units, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) or other equity compensation to individuals eligible for such grants and amend such awards following their grant; amending the plans; and delegating to appropriate executive officers of the Company the ability to grant awards to non-executive officer employees of the Company pursuant to specific guidelines;

 

•  Adopting, amending and overseeing the administration of our significant employee benefits programs;

 

•  Reviewing external surveys to establish appropriate ranges of compensation;

 

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•  Retaining and terminating any compensation consultant to assist in the evaluation of CEO or executive officer or director compensation, and approving the consultant’s fees and other terms of service, as well as obtaining advice and assistance from internal or external legal, accounting or other advisors; and

 

•  Conducting an annual assessment of the Company’s engagement with compensation consultants retained by the Board and/or management, as applicable, including the nature and extent of services provided, the amount of fees paid and who made or recommended the decision to retain the compensation consultants.

  

The Compensation Committee uses Semler Brossy Consulting Group, LLC (“SBCG”) to assist in evaluating executive and director compensation, and has determined that SBCG is an independent consultant under applicable NASDAQ rules.

 

A detailed description of the processes and procedures of the Compensation Committee for considering and determining executive and director compensation, including the role of SBCG, is provided in the “Executive Compensation” section of this proxy statement.

 

The Compensation Committee’s role is detailed in the Compensation Committee Charter, which is available on our website at http://investor.rambus.com/corporate-governance.cfm.

Compensation Committee Interlocks and Insider Participation   

 

 

During 2017, there were no interlock relationships by our Compensation Committee members. Please see the Compensation Discussion and Analysis section of this Proxy Statement for further discussion.

Corporate Governance & Nominating Committee   

Currently, the Corporate Governance/Nominating Committee is composed of E. Thomas Fisher, Penelope Herscher and Eric Stang, with Mr. Stang serving as Chair. During fiscal year 2017 and until March 8, 2018, the Corporate Governance/Nominating Committee was composed of Eric Stang and Penelope Herscher, with Mr. Stang serving as Chair. Our Board of Directors has determined that each of Ms. Herscher and Messrs. Fisher and Stang are “independent” under applicable NASDAQ and SEC rules. The Corporate Governance/Nominating Committee held five meetings during 2017.

 

The Corporate Governance/Nominating Committee recommends and approves Rambus’ Corporate Governance Guidelines. Its duties include:

 

•  Evaluating and making recommendations to the Board of Directors concerning the appointment of directors to committees of the Board of Directors and the selection of committee chairs;

 

•  Identifying best practices and recommending corporate governance principles;

 

•  Overseeing the evaluation of the Board of Directors; and

 

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•  Proposing the slate of nominees for election to the Board of Directors.

 

The Corporate Governance/Nominating Committee’s role is detailed in the Corporate Governance/Nominating Committee Charter which is available on our website at http://investor.rambus.com/corporate-governance.cfm.

Identifying and Evaluating Nominees For Directors   

The Corporate Governance/Nominating Committee utilizes a variety of methods for identifying and evaluating nominees for director, including those discussed in the “Director Qualifications” section of this proxy statement. In the event that vacancies on the Board of Directors are anticipated, or otherwise arise, the committee will consider various potential candidates for director. Candidates may come to the attention of the committee through current members of the Board of Directors, professional search firms, stockholders or other persons. The Corporate Governance/Nominating Committee has from time to time retained third parties to whom a fee is paid to assist it in identifying or evaluating potential director nominees.

 

Stockholders may propose director candidates for general consideration by the Corporate Governance/Nominating Committee by submitting in proper written form the individual’s name, qualifications, and the other information set forth below in “Consideration of Stockholder Nominees to the Board” to the Secretary/General Counsel of the Company. The Corporate Governance/Nominating Committee will evaluate any candidates recommended by stockholders against the same criteria and pursuant to the same policies and procedures applicable to the evaluation of candidates proposed by directors or management.

Consideration of Stockholder Nominees to the Board   

Stockholders may nominate directors for election at an annual meeting or at a special meeting at which directors are to be elected or re-elected, provided that the advance notice requirements for director nominations set forth in the Company’s bylaws have been met. As summarized below, this advance notice provision requires a stockholder to give timely notice of a director nomination in proper written form to Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, CA 94089, Attention: Secretary/General Counsel.

 

In order for a stockholder to give timely notice of a director nomination for an annual meeting, the notice must be received by the Secretary/General Counsel at the Company’s principal executive offices not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date the Company’s proxy statement was released to stockholders in connection with the previous year’s annual meeting. However, if no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, then notice must be received no earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting, or the

 

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tenth day following the day on which public announcement of the date of such annual meeting is first made.

 

In order for a stockholder to give timely notice of a director nomination for a special meeting at which directors are to be elected or re-elected, the notice must be received by the Secretary/General Counsel at the Company’s principal executive offices not later than the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected or re-elected at such meeting.

 

To be in proper written form, a stockholder’s notice to the Secretary/General Counsel of the Company must set forth the information required by our bylaws, which we urge you to read in full in order to understand the requirements for making a director nomination.

Board Leadership Structure and Role in Risk Oversight   

Our Corporate Governance Guidelines require that the Chairperson of the Board not be the CEO of the Company. In addition, while the Chairperson works closely with the CEO and other members of our management, the Chairperson is not part of management and does not have an operating or external role or responsibility. The Board of Directors considers it useful and appropriate to designate a Chairperson to act as the presiding director at Board of Directors meetings, to call and organize such meetings and manage the agenda thereof, and to manage the affairs of the Board of Directors, including ensuring that the Board of Directors is organized properly, functions effectively, and meets its obligations and responsibilities. The Chairperson also acts as the principal contact for the CEO and other members of the Board of Directors and management, as appropriate, for matters requiring the attention of the full Board of Directors. We believe that this leadership structure is appropriate given the attention, time, effort, and energy that the CEO is required to dedicate to his position in the current business environment, and the high level of commitment required to serve as our Chairperson.

 

The Board of Directors plays an integral role in our risk oversight processes. The Board of Directors meets regularly to receive reports from its committees, as well as from management with respect to areas of material risk to the Company, including legal, operational, financial and strategic risks. In addition, the Audit Committee oversees and reviews at least annually our risk management policies, including our investment policies.

Transactions with Related Persons   

None.

Review, Approval or Ratification of Transactions with Related Persons   

 

Our directors and executive officers are subject to our Code of Business Conduct and Ethics, and our directors are guided in their duties by our Corporate Governance Guidelines. Our Code of Business Conduct and Ethics requires that our directors and executive officers avoid situations where a conflict of interest might occur or appear to occur. In general, our

 

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directors and executive officers should not have a pecuniary interest in transactions involving us or a customer, licensee, or supplier of the Company, unless such interest is solely a result of routine investments made by the individual in publicly traded companies.

 

In the event that a director or executive officer is going to enter into a related party transaction with a relative or significant other, or with a business in which a relative or significant other is associated in any significant role, the director or executive officer must fully disclose the nature of the related party transaction to our Chief Financial Officer. For directors and executive officers, such related party transaction then must be reviewed and approved in advance by the Audit Committee. For other conflicts of interest that may arise, the Code of Business Conduct and Ethics advises our directors and executive officers to consult with our General Counsel.

 

In addition, each director and officer is required to complete a Director and Officer Questionnaire on an annual basis and upon any new appointment, and provide quarterly updates, which requires disclosure of any related-party transactions pertaining to the director or executive officer. Our Board of Directors will consider such information in its determinations of independence with respect to our directors under applicable NASDAQ and SEC rules.

Corporate Development Committee   

Currently, the Corporate Development Committee is composed of E. Thomas Fisher, Penelope Herscher, Emiko Higashi and Michael Farmwald in his capacity as a board member emeritus, with Ms. Herscher serving as Chair. During fiscal year 2017 and until March 8, 2018, the Corporate Development Committee was composed of E. Thomas Fisher, Penelope Herscher and David Shrigley. The Corporate Development Committee held three meetings during 2017.

 

The duties of the Corporate Development Committee are to:

 

•  work with management to review and consider potential strategic transactions that are consistent with our growth strategy;

 

•  review and advise management with respect to our growth strategy; and

 

•  act as the liaison to the Board of Directors in connection with the Committee’s and management’s activities in this regard.

 

The Corporate Development Committee’s role is detailed in the Corporate Development Committee Charter which is available on our website at http://investor.rambus.com/corporate-governance.cfm.

 

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PROPOSAL TWO:

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

We are asking our stockholders to provide an advisory vote to approve the compensation of our named executive officers, including the Compensation Discussion and Analysis, the compensation tables and narrative disclosures as described in this Proxy Statement. The Company currently holds such an advisory vote annually, and this proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers.

Please see the Compensation Discussion and Analysis section of this Proxy Statement, the compensation tables and the narrative disclosures that accompany the compensation tables for greater detail about our executive compensation programs, including information about the fiscal year 2017 compensation of our named executive officers.

We believe that our overall compensation program and philosophy support and help drive the Company’s long-term value creation, business strategy and operating performance objectives. We are again asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement by voting “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.”

While this say-on-pay vote is advisory and does not bind the Company to any particular action, the Board of Directors and the Compensation Committee value your opinion. Accordingly, the Board of Directors and the Compensation Committee will consider the outcome of this vote when making future compensation decisions for the Company’s named executive officers.

Approval of this resolution requires the affirmative vote of the holders of a majority of the votes cast in person or by proxy at the Annual Meeting.

The Board unanimously recommends a vote “FOR” the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement.

 

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PROPOSAL THREE:

APPROVAL OF AN AMENDMENT TO THE RAMBUS 2015 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 5,500,000

The 2015 Equity Incentive Plan (the “2015 Plan”) was originally adopted by the Board and approved by our stockholders in 2015. We are asking our stockholders to approve an amendment to the 2015 Plan to increase the number of shares of our Common Stock reserved for issuance thereunder by 5,500,000 shares, so that we can continue to use it to achieve our goals.

Our named executive officers and directors have an interest in this proposal as they are eligible to receive equity awards under the 2015 Plan.

We have historically provided stock options, restricted stock units and other types of equity awards as an incentive to our employees, directors and consultants to promote increased stockholder value. The Board of Directors and management believe that stock options, restricted stock units and other types of equity awards are one of the primary ways to attract and retain key personnel responsible for the continued development and growth of our business, and to motivate all employees to increase stockholder value. In addition, stock options, restricted stock units and other types of equity awards are considered a competitive necessity in the high technology sector in which we compete. Given the highly competitive labor market for employee talent, our Board of Directors and management believe that the ability to continue to grant equity awards will be critical to the future success of Rambus.

Our Board of Directors believes that approval of the amended 2015 Plan will enable us to continue to use the 2015 Plan to achieve employee performance, recruiting, retention and incentive goals. In particular, our Board of Directors believes that our employees are our most valuable assets and that awards granted under the 2015 Plan are vital to our ability to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which we compete. Such awards also are crucial to our ability to motivate employees to achieve our goals.

Key Features of the Amended 2015 Equity Incentive Plan and Our Compensation Practices:

 

   

Reserves an additional 5,500,000 shares of our Common Stock for issuance under the amended 2015 Plan.

 

   

The 2015 Plan has a 1.5:1 conversion ratio for full-value awards.

 

   

A committee of independent directors administers the 2015 Plan.

 

   

The 2015 Plan prohibits us from implementing a program to increase or reduce the exercise price of outstanding awards or surrender or cancel outstanding awards for new awards and/or cash.

 

   

The 2015 Plan does not provide for automatic vesting of equity awards based solely on the occurrence of a change in control unless awards are not assumed or substituted for in connection with the change in control.

 

   

Although the 2015 Plan permits a number of types of equity and cash long-term incentives, we intend to continue to have a long-term incentive program with a strong focus on our performance, including the grant of performance units to our executives which only vest if certain Company performance targets are met.

 

   

Non-employee members of the Board of Directors may not be granted, in any fiscal year, awards in excess of limits contained in the 2015 Plan.

 

   

We have stock ownership guidelines for our executive officers and Board of Directors.

 

   

All employees are prohibited from hedging transactions involving Rambus stock.

 

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Our executive officers are not entitled to any perquisites that are not generally available to employees.

 

   

The amended 2015 Plan provides that Awards granted under the 2015 Plan will vest no earlier than the one-year anniversary of the Award’s date of grant, subject to the terms of the 2015 Plan.

 

   

The amended 2015 Plan provides that dividends and other distributions payable with respect to shares subject to Awards (including dividend equivalents) will not be paid before the underlying shares vest.

 

   

The amended 2015 Plan provides that in the event of a merger or change in control where the successor corporation refuses to assume or substitute for an Award, with respect to Awards with performance-based vesting, all performance goals will be deemed achieved at target levels as to a prorated portion of such Award based on the portion of the applicable performance period that has lapsed through the date of the merger or change in control.

 

Vote Required; Recommendation of the Board of Directors   

The Board has approved the amendment to the 2015 Plan to increase the number of shares reserved for issuance thereunder by 5,500,000 shares, subject to the approval of our stockholders at the Annual Meeting. The affirmative vote of the holders of a majority of the shares of stock present in person or represented by Proxy and entitled to vote at the Annual Meeting will be required to approve this proposal.

 

Our Board of Directors recommends that you vote “FOR” the approval of an amendment to our 2015 Equity Incentive Plan to increase the number of authorized shares reserved for issuance under the 2015 Plan by 5,500,000 shares.

Considerations of the Board of Directors in Making its Recommendation   

 

 

In determining and recommending the increase to the share reserve under the 2015 Plan, the Compensation Committee and the Company’s Board considered a number of factors, including the following:

 

   Historical Grant Practices. The Compensation Committee and Board considered the historical numbers of equity awards that Rambus has granted in the past three years. The annual share usage, or burn rate, under our equity compensation program for the last three years was as follows:

 

Annual Share Usage

  Fiscal
Year 2017
    Fiscal
Year 2016
    Fiscal
Year 2015
    Three-Year
Average
 

Stock Options Granted

    558,426       500,000       362,335       473,587  

Restricted Stock Units Granted

    2,548,925       2,944,444       2,547,238       2,680,202  

Performance Units Granted

    526,471       400,004       318,640       415,038  

Total Options, RSUs and Performance Units Granted

    3,633,822       3,844,448       3,228,213       3,568,828  

Basic Weighted Average Common Shares Outstanding

    110,198,000       110,162,000       114,814,000       111,724,667  

Annual Share Usage

    3.3     3.5     2.8     3.2

 

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   Our three-year burn rate, which we define as the number of shares subject to equity awards granted in a year divided by the weighted average common shares outstanding for that fiscal year, is below industry guidelines recommended by Institutional Shareholder Services (“ISS”). Our senior management, Compensation Committee and Semler Brossy Consulting Group, LLC, the independent consultants to the Compensation Committee, reviewed our burn rate as compared to our industry peer companies and indexes provided by two different third-party data providers. Our Board ultimately approved the reservation of an additional 5,500,000 shares for issuance under the amended 2015 Plan.
  

Forecasted Grant Practices. We currently forecast granting options and full-value awards (in the form of restricted stock units and performance units) covering approximately 10,800,000 shares over the next three-year period, which is equal to 9.8% of our approximately 110,198,000 shares of Common Stock outstanding as of December 31, 2017. We also estimate cancellation of options and forfeitures of restricted stock unit and performance unit awards of approximately 3,900,000 shares over this period, based on our historic rates. If our expectation for cancellations is accurate, our net grants (grants less cancellations) over the next three-year period would be approximately 6,900,000 shares, or approximately 6.3% of our Common Stock outstanding as of December 31, 2017. We believe, and our Board considered, that the requested additional shares to the share reserve in light of this expected forecast will allow us to make equity awards for the purpose of our expected new hires, focal awards, any special retention needs and employee growth through any opportunistic acquisitions or hiring for approximately the next two to three years. However, circumstances could alter this projection, such as a change in business conditions, our stock price, competitive pressures for attracting and retaining employees, or our company strategy.

 

Awards Outstanding Under Existing Grants and Dilutive Impact. We have outstanding, as of December 31, 2017, stock options covering approximately 4,310,361 shares with a weighted average remaining contract life of 5.5 years and weighted average exercise price of $9.78, and approximately 5,861,349 unvested restricted stock units and performance units with a weighted average grant date fair value of $12.68. Accordingly, the approximately 10,171,710 shares subject to outstanding awards (commonly referred to as the “overhang”) represent approximately 9.2% of our fully diluted outstanding shares and the dilutive impact of all 5,500,000 shares that would be available for issuance under the 2015 Plan if Proposal Three is approved would increase the overhang percentage by an additional 5% to approximately 14.2%, each based on our fully diluted outstanding shares as of December 31, 2017.

 

Modeling Analysis. We considered various stockholder models that considered what would be expected to be an allowable cap as compared to that we are seeking in Proposal Three, and we have concluded that our request is below such cap. While the modeling we used only represented

 

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   one analysis subject to a number of assumptions, we and our Board considered the model as a useful benchmark in how we approached the request for an additional 5,500,000 shares reserved for issuance under this Proposal Three. We only considered this modeling benchmarking information in relation to the other empirical data provided by at least two other third-party data providers.
Summary of the 2015 Equity Incentive Plan   

The following is a summary of the principal features of the 2015 Plan, as amended, and its operation. The summary is qualified in its entirety by reference to the 2015 Plan, as amended, set forth in Appendix A.

 

The purposes of the 2015 Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide incentives to individuals who perform services to the Company, and to promote the success of the Company’s business.

  

The 2015 Plan provides for the grant of the following types of incentive awards:

 

•  stock options

 

•  stock appreciation rights

 

•  restricted stock

 

•  restricted stock units

 

•  performance shares and performance units

 

•  other stock or cash awards

 

Each of these is referred to individually as an “Award.”

Eligibility

   Those who are eligible for Awards under the 2015 Plan include employees, directors and consultants who provide services to the Company and its affiliates. Incentive stock options may be granted only to employees, who, as of the time of grant, are employees of the Company and its affiliates. As of December 31, 2017, 791 employees, directors and consultants would be eligible to participate in the 2015 Plan.

Shares Available

   As of December 31, 2017, the 2015 Plan had 35,400,000 shares reserved for issuance thereunder. As of that same date, 5,051,147 shares remained available for future issuance under the 2015 Plan. Upon stockholder approval of the amended 2015 Plan, the 2015 Plan reserve would stand at 40,900,000, with 10,551,147 shares available for future issuance under the 2015 Plan as of December 31, 2017. Under the 2015 Plan, no more than 10,000,000 shares may be granted pursuant to options intended to qualify as incentive stock options. The shares may be authorized, but unissued, or reacquired Common Stock. The Board expects that the number of shares reserved for issuance under the amended 2015 Plan will be sufficient to operate the plan for two to three years without having to request additional shares. The Board (or its designated committee) will periodically review actual share consumption under the 2015 Plan and may make a request for additional shares earlier or later than this period as needed.

 

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   Shares subject to Awards granted with an exercise price less than the fair market value of our Common Stock on the date of grant, including Awards of restricted stock, restricted stock units, performance shares and performance units (“full-value awards”) count against the share reserve as 1.5 shares for every one share subject to such an Award. To the extent that a share that was subject to an Award that counted as 1.5 shares against the 2015 Plan reserve pursuant to the preceding sentence is forfeited or repurchased by us and otherwise would return to the 2015 Plan, the 2015 Plan reserve will be credited with 1.5 shares that will thereafter be available for issuance under the 2015 Plan.
   If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to full-value awards, is forfeited to or repurchased by the Company, the unpurchased (or forfeited or repurchased, as applicable) shares that were subject to the Award will become available for future grant or sale under the 2015 Plan (unless the 2015 Plan has terminated). Upon exercise of a stock appreciation right, all of the shares covered by the Award (that is, shares actually issued pursuant to the stock appreciation right, as well as shares that represent the payment of the exercise price) will cease to be available under the 2015 Plan. Shares that have been issued under the 2015 Plan under any Award will not be returned to or become available for future distribution under the 2015 Plan; provided, however, that if unvested shares of any full-value awards are repurchased by the Company or are forfeited to the Company, those shares will become available for future grant under the 2015 Plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the 2015 Plan. To the extent an Award is paid out in cash rather than shares, such cash payments will not reduce the number of shares available for issuance under the 2015 Plan.
  

In the event that any dividend or other distribution (whether in the form of cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities of the Company, or other change in the corporate structure affecting the Company’s Common Stock occurs, the administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the 2015 Plan will adjust:

 

•  the number and class of shares that may be delivered under the 2015 Plan

 

•  the number, class and price of shares subject to outstanding Awards

 

•  the numerical share limits in the 2015 Plan

Administration

   A committee or committees of independent, non-employee directors satisfying applicable laws and appointed by our Board of Directors administers the 2015 Plan (referred to herein as the “administrator”). To make grants to certain of our officers and key employees, the members of the committee(s) must qualify as “non-employee directors” under

 

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   Rule 16b-3 of the Securities Exchange Act. Subject to the terms of the 2015 Plan, the administrator has the sole discretion to select the employees, consultants, and directors who will receive Awards, to determine the terms and conditions of Awards, to modify or amend each Award (subject to the restrictions of the 2015 Plan), and to interpret the provisions of the 2015 Plan and outstanding Awards. The administrator may allow a participant to defer the receipt of payment of cash or delivery of shares that otherwise would be due to such participant. The administrator may make rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws and may make all other determinations deemed necessary or advisable for administering the 2015 Plan.

Limitations

  

Incentive Stock Options. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options which first become exercisable by any participant during any calendar year may not exceed $100,000. The exercise price of an incentive stock option granted to any employee who owns stock representing more than 10% of the voting power of all classes of our stock or the stock of any affiliate must be at least 110% of the fair market value of our Common Stock on the grant date. Further, with respect to any employee who owns stock representing more than 10% of the voting power of all classes of our outstanding stock or the stock of any affiliate, the term of an incentive stock option may not exceed five years.

 

Share Limitations. Subject to the terms of the 2015 Plan, including any adjustment provisions, the following limitations apply to Awards granted under the 2015 Plan:

 

•  During any fiscal year, no participant will be granted options covering more than 1,000,000 shares; provided, however, that in connection with a participant’s initial service as an employee, an employee may be granted options covering up to an additional 1,000,000 shares

 

•  During any fiscal year, no participant will receive more than an aggregate of 300,000 shares of restricted stock; provided, however, that in connection with a participant’s initial service as an employee, an employee may be granted an aggregate of up to an additional 300,000 shares of restricted stock

 

•  During any fiscal year, no participant will receive more than an aggregate of 300,000 restricted stock units; provided, however, that in connection with a participant’s initial service as an employee, an employee may be granted an aggregate of up to an additional 300,000 restricted stock units

 

•  During any fiscal year, no participant will be granted stock appreciation rights covering more than 1,000,000 shares; provided, however, that in connection with a participant’s initial service as an employee, an employee may be granted stock appreciation rights covering up to an additional 1,000,000 shares

 

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•  During any fiscal year, no participant will receive (1) performance units having an initial value greater than $3,000,000, and (2) more than 300,000 performance shares; provided, however, that in connection with a participant’s initial service as an employee, an employee may be granted up to an additional 300,000 performance shares

 

Exchange Program. The administrator may not institute a program under which (i) outstanding Awards are surrendered or cancelled in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash, (ii) participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the administrator, and/or (iii) the exercise price of an outstanding Award is increased or reduced.

 

Grants to Non-Employee Directors. No non-employee member of the Board of Directors may be granted, in any fiscal year, Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than $300,000, increased to $500,000 in the fiscal year of his or her initial service as a non-employee director. Any Awards granted to an individual while he or she was an employee, or while he or she was a consultant but not a non-employee director, will not count for purposes of these limits.

 

Vesting Limits. Awards granted under the 2015 Plan will vest no earlier than the one-year anniversary of the Award’s date of grant, provided that the administrator, in its sole discretion, may provide an Award may accelerate vesting by reason of the participant’s death, disability or retirement, or upon our major capital change (including, without limitation, a merger or change in control) and provided further, that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the 2015 Plan may be granted to service providers, or outstanding Awards modified, without regard to such minimum vesting, exercisability and distribution provisions.

 

Dividend Payments. Dividends and other distributions payable with respect to shares subject to Awards (including dividend equivalents) will not be paid before the underlying shares vest.

Options

   Subject to the terms and conditions of the 2015 plan, options may be granted to service providers at any time and from time to time as will be determined by the administrator, in its sole discretion. The administrator is able to grant nonstatutory stock options and incentive stock options under the 2015 Plan. Subject to the limitations contained in the 2015 Plan, the administrator has complete discretion to determine the number of shares subject to options granted to any participant.
   The administrator determines the exercise price of options granted under the 2015 Plan, provided the exercise price must be at least equal to the fair market value of our Common Stock on the date of grant, and subject

 

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to the limitations contained in the 2015 Plan relating to incentive stock options.

 

The administrator will determine the term of each option in its sole discretion. Subject to the limitations contained in the 2015 Plan relating to incentive stock options, the term of an option may not exceed ten years from the date of grant.

 

The administrator will determine the acceptable form(s) of consideration for exercising an option, including the method of payment, to the extent permitted by applicable laws. After termination of service with us, a participant will be able to exercise the vested portion of his or her option for the period of time stated in the Award agreement. If no such period of time is stated in the participant’s Award agreement, the participant will generally be able to exercise his or her option for (i) three months following his or her termination for reasons other than death or disability, and (ii) twelve months following his or her termination due to death or disability. In no event may an option be exercised later than the expiration of its term.

Stock Appreciation Rights

   The administrator is able to grant stock appreciation rights, which are the rights to receive the appreciation in the fair market value of Common Stock between the exercise date and the date of grant. We can pay the appreciation in either cash, shares of Common Stock, or in some combination thereof. Stock appreciation rights become exercisable at the times and on the terms established by the administrator, subject to the terms of the 2015 Plan. The administrator, subject to the terms of the 2015 Plan, has complete discretion to determine the terms and conditions of stock appreciation rights granted under the 2015 Plan, provided, however, that the exercise price may not be less than 100% of the fair market value of a share on the date of grant. The term of a stock appreciation right may not exceed ten years. Subject to the limitations contained in the 2015 Plan, the administrator will have complete discretion to determine the number of stock appreciation rights granted to any participant.
   After termination of service with us, a participant will be able to exercise the vested portion of his or her stock appreciation right for the period of time stated in the Award agreement. If no such period of time is stated in a participant’s Award agreement, a participant will generally be able to exercise his or her stock appreciation right for (i) three months following his or her termination for reasons other than death or disability, and (ii) twelve months following his or her termination due to death or disability. In no event will a stock appreciation right be exercised later than the expiration of its term.

Restricted Stock

   Awards of restricted stock are rights to acquire or purchase shares of our Common Stock, which vest in accordance with the terms and conditions established by the administrator in its sole discretion. Subject to the vesting limitations contained in the 2015 Plan, the administrator, in its sole discretion, may provide at the time of or following the date of grant for accelerated vesting for an Award of restricted stock.

 

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   The Award agreement generally will grant us a right to repurchase or reacquire the shares upon the termination of the participant’s service with us for any reason (including death or disability). Unless the administrator provides otherwise, participants holding shares of restricted stock will have the right to vote the shares and receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions on transferability and forfeitability as the original award. Subject to the limitations contained in the 2015 Plan, the administrator will determine the number of shares granted pursuant to an Award of restricted stock.

Restricted Stock Units

  

Awards of restricted stock units result in a payment to a participant only if the vesting criteria the administrator establishes is satisfied. The administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws or any other basis determined by the administrator in its discretion. Upon satisfying the applicable vesting criteria, the participant will be entitled to the payout specified in the Award agreement. Subject to the vesting limitations contained in the 2015 Plan, at any time after the grant of restricted stock units, the administrator may reduce or waive any vesting criteria that must be met to receive a payout.

 

The administrator, in its sole discretion, may pay earned restricted stock units in cash, shares, or a combination thereof. Restricted stock units that are fully paid in cash will not reduce the number of shares available for grant under the 2015 Plan. On the date set forth in the Award agreement, all unearned restricted stock units will be forfeited to us. Subject to the limitations contained in the 2015 Plan, the administrator determines the number of restricted stock units granted to any participant.

Performance Units and Performance Shares   

The administrator is able to grant performance units and performance shares, which are Awards that result in a payment to a participant only if the performance goals or other vesting criteria the administrator establishes are achieved or the Awards otherwise vest. The administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws, or any other basis determined by the administrator in its discretion.

The administrator establishes performance or other vesting criteria in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. Notwithstanding the foregoing and subject to the vesting limitations contained in the 2015 Plan, after the grant of performance units or shares, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares. Subject to the limitations contained in the 2015 Plan, the administrator, in its sole discretion, will determine the number of performance units or

 

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   performance shares granted to a participant. Performance units will have an initial dollar value established by the administrator on or before the date of grant. Performance shares will have an initial value equal to the fair market value of a share of our Common Stock on the grant date.

Dividend Equivalents

   The administrator, in its discretion, may provide in the Award agreement evidencing any Award that the participant will be entitled to receive dividend equivalents with respect to the payment of cash dividends on shares having a record date prior to the date on which the Awards are settled or forfeited. Subject to the limitations contained in the 2015 Plan, the dividend equivalents, if any, will be credited to an Award in such manner and subject to such terms and conditions as determined by the administrator in its sole discretion. Dividend equivalents will be subject to the fiscal year limits applicable to the underlying Award as set forth in the 2015 Plan.

Transferability of Awards

   Unless determined otherwise by the administrator, Awards granted under the 2015 Plan are generally not transferable, and all rights with respect to an Award granted to a participant generally will be available during a participant’s lifetime only to the participant or such participant’s estate.

Change of Control

  

In the event of our change in control and subject to the terms of the 2015 Plan and any vesting acceleration provisions in any agreement, each outstanding Award will be treated in the manner provided in the agreement relating to the change in control, including, without limitation, that Awards may be assumed or an equivalent option or right substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event that the successor corporation, or the parent or subsidiary of the successor corporation, refuses to assume or substitute for the Award (and for the avoidance of doubt, notwithstanding the vesting limitations in the 2015 Plan), the participant will fully vest in and have the right to exercise all of his or her outstanding options or stock appreciation rights, including shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to Awards with performance-based vesting, all performance goals will be deemed achieved at target levels as to a prorated portion of such Award based on the portion of the applicable performance period that has lapsed through the date of the merger or change in control, and all other vesting criteria will be deemed achieved as to such prorated portion of such Award. In addition, if an option or stock appreciation right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change in control, the administrator will notify the participant in writing or electronically that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the administrator in its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.

 

With respect to Awards granted to non-employee directors that are assumed or substituted for, if on the date of or following such assumption or substitution, the participant’s status as a director (or a director of the successor corporation, as applicable) is terminated other than upon a

 

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   voluntary resignation by the participant, then the participant will fully vest in and have the right to exercise all of his or her outstanding options or stock appreciation rights, including shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to Awards with performance-based vesting, all performance goals will be deemed achieved at target levels as to a prorated portion of such Award based on the portion of the applicable performance period that has lapsed through the date of the merger or change in control, and all other vesting criteria will be deemed achieved as to such prorated portion of such Award.

Amendment and Termination

   The Board of Directors or the administrator will have the authority to amend, alter, suspend or terminate the 2015 Plan at any time, except that stockholder approval will be required for any amendment to the 2015 Plan to the extent necessary and desirable to comply with applicable law. No amendment, alteration, suspension or termination of the 2015 Plan will impair the rights of any participant, unless mutually agreed otherwise between the participant and the administrator and which agreement must be in writing and signed by the participant and us. The 2015 Plan will terminate in 2025, unless terminated earlier.

Number of Awards Granted

   The number of Awards that an employee, director or consultant may receive under the 2015 Plan is in the discretion of the administrator and therefore cannot be determined in advance.
   The following table sets forth (i) the aggregate number of shares of our Common Stock subject to options granted under the 2015 Plan during the last fiscal year, (ii) the average per share exercise price of such options, (iii) the aggregate number of shares issued pursuant to awards of restricted stock units and performance units granted under the 2015 Plan during the last fiscal year, and (iv) the dollar value of such shares based on the closing price per share on the grant dates.

 

Name of Individual or Group

   Number of
Options
Granted
     Average Per
Share Exercise
Price
     Number of
Restricted
Stock Units /
Performance
Units
     Value of
Restricted
Stock Units and
Performance
Units (1)
 

Named Executive Officers:

           

Ronald Black, Chief Executive Officer and President

     197,753      $ 12.80        617,062      $ 7,992,844  

Rahul Mathur, Senior Vice President, Finance and Chief Financial Officer

     29,213      $ 12.80        37,296      $ 477,389  

Laura Stark, Senior Vice President, GM, Emerging Solutions Division

     38,202      $ 12.80        51,602      $ 659,121  

Jae Kim, Senior Vice President, General Counsel and Secretary

     29,213      $ 12.80        39,194      $ 500,753  

All executive officers, as a group

     294,381      $ 12.80        745,154      $ 9,630,107  

All directors who are not executive officers, as a group

     40,000      $ 12.04        82,544      $ 1,120,122  

All employees who are not executive officers, as a group

     224,045      $ 13.30        2,294,096      $ 29,850,148  

 

(1) The value of a restricted stock unit or performance unit award is based on the fair market value as of the grant date of such award determined pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718.

 

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Federal Tax Aspects

   The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and Awards granted under the 2015 Plan by us. Tax consequences for any particular individual may be different. This summary does not purport to be complete, and does not discuss the tax consequences of a participant’s death or the income tax laws of any state or foreign country in which the participant may reside.

Nonstatutory Stock Options

   No taxable income is reportable when a nonstatutory stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the option. Any taxable income recognized in connection with an option exercise by an employee is subject to tax withholding by us. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Incentive Stock Options

   No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for nonstatutory stock options). If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

Stock Appreciation Rights

   No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares   

 

 

A participant generally will not have taxable income at the time an Award of restricted stock, restricted stock units, performance shares or performance units are granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the Award becomes either (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock Award may elect to recognize income at the time he or she receives the Award in an amount equal to the fair market value of the shares underlying the Award (less any cash paid for the shares) on the date the Award is granted.

 

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Tax Effect for Rambus

   We generally will be entitled to a tax deduction in connection with an Award under the 2015 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of certain compensation paid to our Chief Executive Officer and other “covered employees”. As a result of the Tax Cuts and Jobs Act, and except for certain grandfathered arrangements, under Section 162(m) of the Code, any compensation over $1,000,000 paid to the covered employees is not deductible by the Company. In light of these changes, we have modified the 2015 Plan to remove certain provisions that related to the granting, administration and terms of awards intended to qualify as “performance-based compensation” under Section 162(m) as previously in effect, including regarding administration by a committee composed to meet prior requirements related to “performance-based compensation”, the detailing of specific performance goals that could be applied to awards intended to qualify as “performance-based compensation” and specific terms, conditions and requirements related to such awards.

Section 409A

   Section 409A of the Code (“Section 409A”) provides certain new requirements on non-qualified deferred compensation arrangements. These include new requirements with respect to an individual’s election to defer compensation and the individual’s selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, or the individual’s death). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are officers, Section 409A requires that such individual’s distribution commence no earlier than six months after such officer’s separation from service.
   Awards granted under the 2015 Plan with a deferral feature will be subject to the requirements of Section 409A. If an Award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. In addition, certain states such as California have adopted similar provisions.

 

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PROPOSAL FOUR:

APPROVAL OF AN AMENDMENT TO THE RAMBUS 2015 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 2,000,000

Stockholders are being asked to approve an amendment to the 2015 Employee Stock Purchase Plan (the “Purchase Plan”) to increase the number of shares of our Common Stock reserved for issuance thereunder by 2,000,000. The Board expects that the additional number of shares reserved for issuance under the Purchase Plan will be sufficient to operate the Purchase Plan between three to four years without having to request additional shares. The Board will periodically review actual share consumption under the Purchase Plan and may make an additional request for shares under the Purchase Plan earlier or later than this period as needed.

Our named executive officers have an interest in this proposal as they are eligible to receive options to purchase shares under the Purchase Plan.

Our Board of Directors believes that approval of the amendment to the Purchase Plan to increase the number of shares reserved for issuance thereunder is essential to our continued success, as the Purchase Plan will continue to enable us to achieve employee performance, recruiting, retention and incentive goals. In particular, our Board of Directors believes that our employees are our most valuable assets and that the awards permitted under the Purchase Plan are vital to our ability to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which we compete. Such awards also are crucial to our ability to motivate employees to achieve our goals.

 

Vote Required; Board Recommendation   

Approval of the amendment to the Purchase Plan to increase the number of shares reserved for issuance thereunder by 2,000,000 shares requires the affirmative vote of a majority of the shares of our Common Stock that are present in person or proxy and entitled to vote at the Annual Meeting.

 

Our Board of Directors recommends that you vote “FOR” the approval of the amendment to our 2015 Employee Stock Purchase Plan to increase the number of shares reserved for issuance thereunder by 2,000,000 shares.

Considerations of the Board in Making its Recommendation   

Our Board approved the amendment to the Purchase Plan to increase the number of shares of our Common Stock reserved for issuance thereunder by 2,000,000 shares following substantial review of, and deliberation concerning, historical grant practices, forecasted grant practices, awards outstanding under existing grants, and the dilutive impact of the requested share reserve. Our Board subsequently approved the amendment to the Purchase Plan, subject to approval by our stockholders. In determining the additional number of shares reserved for issuance under the Purchase Plan, our Board considered a number of factors, including:

 

•  Historical Usage. In fiscal years 2015, 2016 and 2017, the number of shares purchased under the Purchase Plan (or its predecessor) was 544,391 shares, 548,357 shares and 615,370 shares, respectively.

  

•  Forecasted Usage and Dilutive Impact. We currently forecast that the additional 2,000,000 shares, if approved, to be reserved under the Purchase Plan will cover purchases over the next three to four years. The requested increase of 2,000,000 shares represents

 

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approximately 1.8% of our 109,847,582 shares of common stock outstanding as of January 31, 2018 and the 4,000,000 total number of shares reserved for issuance under the Purchase Plan (assuming the amendment is approved) would be approximately 3.6% of our Common Stock outstanding as of January 31, 2018. As of January 31, 2018, we have 836,273 authorized shares remaining under the Purchase Plan. Assuming the amendment to the Purchase Plan is approved, our shares reserved for future issuance under the Purchase Plan would be 2,836,273 shares.

 

•  Shares Purchased Under the Purchase Plan. Our employees have purchased an aggregate of 1,708,118 shares under the Purchase Plan over the past three years, representing approximately 1.6% of our outstanding shares as of January 31, 2018.

 

•  Other Considerations. Without stockholder approval of the amendment to the Purchase Plan to increase the number of shares reserved thereunder, we believe our ability to attract and retain the individuals necessary to increase long-term stockholder value will be limited. We believe that the approval of the amendment to the Purchase Plan is important to our continued success. If stockholders do not approve the amendment to the Purchase Plan, our goals of recruiting, retaining and motivating talented employees will be more difficult to meet.

Summary of the 2015 Employee Stock Purchase Plan   

 

 

The following is a summary of the principal features of the Purchase Plan and its operation. The summary is qualified in its entirety by reference to the Purchase Plan, set forth in Appendix B.

General    The Purchase Plan was originally adopted by the Board of Directors in March 2015 and approved by our stockholders at the 2015 Annual Meeting. The purpose of the Purchase Plan is to provide employees with an opportunity to purchase shares of our Common Stock through payroll deductions.
Shares available for issuance    If our stockholders approve this proposal, a total of 4,000,000 shares of our Common Stock will be reserved for issuance under the Purchase Plan.
Administration    The Board of Directors or a committee appointed by the Board of Directors administers the Purchase Plan. All questions of interpretation or application of the Purchase Plan are determined by the administrator and its decisions are final, conclusive and binding upon all participants.
Eligibility    Each of our employees or the employees of our designated subsidiaries who is a common law employee and whose customary employment with us or one of our designated subsidiaries is at least twenty hours per week and more than five months in a calendar year is eligible to participate in the Purchase Plan subject to the laws in which our designated subsidiaries operate; except that no employee shall be granted an option under the Purchase Plan (i) to the extent that, immediately after the grant, such employee would own 5% or more of the total combined voting power of all classes of our capital stock or the capital stock of any parent or subsidiary, or (ii) to the extent that his or her rights to purchase stock under all of our

 

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   employee stock purchase plans or those of our parent corporation or any of our subsidiaries accrues at a rate which exceeds $25,000 worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year. As of December 31, 2017, 580 employees were eligible to participate in the Purchase Plan.
Offering Period    Until the administrator determines otherwise, offering periods under the Purchase Plan are approximately six months and commence on the first trading day on or after May 1 and November 1 of each year and end on the first trading day on or after the May 1 or November 1 offering period commencement date approximately six months later. To participate in the Purchase Plan, an eligible employee must authorize payroll deductions pursuant to the Purchase Plan. Such payroll deductions may not be less than 1% and may not exceed 15% of a participant’s compensation during the offering period. Once an employee becomes a participant in the Purchase Plan, the employee automatically will participate in each successive offering period until the employee withdraws from the Purchase Plan or the employee’s employment with us or the designated subsidiaries terminates. At the beginning of each offering period, each participant automatically is granted an option to purchase shares of our Common Stock. The option expires at the end of the offering period or upon termination of employment, whichever is earlier, but is exercised at the end of each offering period to the extent of the payroll deductions accumulated during such offering period unless the participant has withdrawn from the Purchase Plan.
Purchase Price    Shares of our Common Stock may be purchased under the Purchase Plan at a purchase price not less than 85% of the lesser of the fair market value of the common stock on (i) the first day of the offering period, or (ii) the last day of the offering period. The fair market value of our Common Stock on any relevant date will be the closing price per share as reported on the Nasdaq Global Select Market (NASDAQ), or the mean of the closing bid and asked prices, if no sales were reported, as quoted on such exchange or reported in The Wall Street Journal.
Payment of Purchase Price; Payroll Deductions   

The purchase price of the shares is accumulated by payroll deductions throughout each offering period. The number of shares of our Common Stock that a participant may purchase in each offering period will be determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during that offering period by the purchase price; provided, however, that a participant may not purchase more than 5,000 shares each offering period. During the offering period, a participant may discontinue his or her participation in the Purchase Plan, and may decrease or increase the rate of payroll deductions in an offering period within limits set by the administrator; provided, however, that unless the administrator determines otherwise, a participant may reduce, but not increase his or her contributions during an offering period.

 

All payroll deductions made for a participant are credited to the participant’s account under the Purchase Plan, are withheld in whole percentages only and are included with our general funds. Funds received by us pursuant to exercises under the Purchase Plan are also used for

 

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   general corporate purposes. A participant may not make any additional payments into his or her account.
Withdrawal    Generally, a participant may withdraw from an offering period at any time by written or electronic notice without affecting his or her eligibility to participate in future offering periods. However, once a participant withdraws from a particular offering period, that participant may not participate again in the same offering period. To participate in a subsequent offering period, the participant must deliver to us a new subscription agreement.
Termination of Employment    Upon termination of a participant’s employment for any reason, including disability or death, he or she will be deemed to have elected to withdraw from the plan and the payroll deductions credited to the participant’s account (to the extent not used to make a purchase of our Common Stock) will be returned to him or her or, in the case of death, to the person or persons entitled thereto as provided in the Purchase Plan, and such participant’s option will automatically be terminated.
Adjustments upon Changes in Capitalization, Dissolution, Liquidation, or Change of Control   
Changes in Capitalization    Subject to any required action by our stockholders, the number and class of shares reserved under the Purchase Plan, the maximum number of shares that may be purchased during any offering period, as well as the number and price per share of Common Stock covered by each option under the Purchase Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange.
Dissolution or Liquidation    In the event of our proposed dissolution or liquidation, the administrator shall shorten any offering periods then in progress by setting a new exercise date and any offering periods shall end on the new exercise date. The new exercise date shall be prior to the dissolution or liquidation. If the administrator shortens any offering periods then in progress, the administrator shall notify each participant in writing or electronically prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.
Change of Control    In the event of any merger or “change of control,” as defined in the Purchase Plan, each outstanding option under the Purchase Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. In the event the successor corporation refuses to assume or substitute for the options, the administrator shall shorten any offering periods then in progress by setting a new exercise date and any offering periods shall end on the new exercise date. The new exercise date shall be prior to the merger

 

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   or change of control. If the administrator shortens any offering periods then in progress, the administrator shall notify each participant in writing or electronically prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.
Amendment or Termination    Our administrator may at any time terminate or amend the Purchase Plan including the term of any offering period then outstanding. Generally, no such termination can adversely affect options previously granted.
Number of Shares Purchased by Certain Individuals and Groups   

 

 

Given that the number of shares that may be purchased under the Purchase Plan is determined, in part, based on the Common Stock’s market value at the beginning and end of each offering period and given that participation in the Purchase Plan is voluntary on the part of employees, the actual number of shares that may be purchased by any individual is not determinable.

 

For illustrative purposes, the following table sets forth (a) the number of shares of Common Stock that were purchased under the Purchase Plan during 2017 by our named executive officers, our executive officers as a group, and by all employees, and (b) the weighted average per share purchase price paid for such shares by each such group.

 

Name of Individual Group

   Number of
Purchased
Shares
     Weighted
Average
Purchase
Price ($)
 

Named Executive Officers:

     

Ronald Black, Chief Executive Officer and President

     2,057        10.33  

Rahul Mathur, Senior Vice President, Finance and Chief Financial Officer

     4,060        10.47  

Laura Stark, Senior Vice President, GM, Emerging Solutions Division

     —          —    

Jae Kim, Senior Vice President, General Counsel and Secretary

     —          —    

All executive officers, as a group

     6,117        10.42  

All employees who are not executive officers, as a group

     609,253        10.47  

 

Federal Tax Aspects    The following summary of the effect of federal income taxation upon the participant and us with respect to the shares purchased under the Purchase Plan does not purport to be complete, and does not discuss the tax consequences of a participant’s death or the income tax laws of any state or foreign country in which the participant may reside. The Purchase Plan, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. Under these provisions, no income will be taxable to a participant until the shares purchased under the Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon the holding period. If the shares are sold or otherwise disposed of more than two years from the first day of the applicable offering period and one year from the applicable date of purchase, the participant will recognize ordinary income measured as the lesser of (i) the excess of the fair market value of the shares at the time of

 

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   such sale or disposition over the purchase price, or (ii) an amount equal to 15% of the fair market value of the shares as of the first day of the applicable offering period. Any additional gain will be treated as long-term capital gain. If the shares are sold or otherwise disposed of before the expiration of these holding periods, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares have been held from the date of purchase. We generally are not entitled to a deduction for amounts taxed as ordinary income or capital gain to a participant except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding periods described above.

 

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PROPOSAL FIVE:

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to Rambus to audit our consolidated financial statements for the fiscal year ending December 31, 2018.

Although ratification by stockholders is not required by law, the Audit Committee has conditioned its appointment of the independent registered public accounting firm upon the receipt of the affirmative vote of a majority of the votes duly cast at the Annual Meeting.

Notwithstanding its selection, the Audit Committee, in its discretion, may hire a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interest of Rambus and its stockholders.

 

Our History with PricewaterhouseCoopers   

PricewaterhouseCoopers LLP (or its predecessor, Coopers & Lybrand L.L.P.) has audited our financial statements since 1991. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement if they so desire.

Principal Accountant Fees and Services   

The aggregate fees billed for professional accounting services by PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2017 and December 31, 2016 are as follows:

 

     Fiscal Year
Ended
December 31,
2017
     Fiscal Year
Ended
December 31,
2016
 

Audit Fees (1)

   $ 1,913,430      $ 1,930,325  

Audit-Related Fees (2)

   $ 436,300      $ —    

Tax Fees (3)

   $ 52,339      $ 91,190  

All Other Fees (4)

   $ 3,300      $ 3,300  
  

 

 

    

 

 

 

Total Fees

   $ 2,405,369      $ 2,024,815  
  

 

 

    

 

 

 

 

  (1) Audit Fees consist of fees for PricewaterhouseCoopers LLP’s professional services rendered for the audit of the Company’s consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports. Fees relating to professional services rendered for the audits of the effectiveness of internal control over financial reporting and statutory audits in fiscal 2017 and 2016 are included under “Audit Fees.”
  (2) Audit-Related Fees consist of fees related to work performed around the new revenue recognition standard and providing the comfort letter related to the issuance of the 1.375% senior convertible notes.
  (3) Tax Fees primarily relate to tax compliance, tax study, and technical tax advice in both years presented.
  (4) All Other Fees consist of fees for products and services other than the services described above. During fiscal 2017 and fiscal 2016, these fees related to license PricewaterhouseCoopers LLP’s online accounting and auditing research tool and disclosure checklist.

 

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Policy on Audit Committee Pre-Approval of Audit and the Permissible Non-Audit Services of Independent Registered Public Accounting Firm   

 

 

 

 

The Audit Committee’s policy is to pre-approve 100% of 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. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

Independence of PricewaterhouseCoopers LLP   

 

The Audit Committee has determined that the accounting advice and tax services provided by PricewaterhouseCoopers LLP are compatible with maintaining PricewaterhouseCoopers LLP’s independence.

Vote Required

  

The affirmative vote of a majority of the shares present and entitled to vote at the Annual Meeting will be required to ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm.

 

The Board unanimously recommends that you vote “FOR” the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

 

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EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2017 with respect to the shares of our common stock that may be issued under our existing equity compensation plans.

 

Plan Category

   (a)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Awards,
Options,
Warrants and
Rights
     (b)
Weighted-
Average
Exercise Price
of Outstanding
Awards,
Options,
Warrants and
Rights
     (c)
Number of
Securities
Remaining
Available for
Future
Issuance under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column a)
 

Equity Compensation Plans Approved by Security Holders (1) (2)

     10,171,710      $ 9.78        5,887,450  
  

 

 

       

 

 

 

Total

     10,171,710      $ 9.78        5,887,450  

 

(1) Data reflects our 2006 Equity Incentive Plan (the “2006 Plan”), our 2015 Equity Incentive Plan (the “2015 Plan”) and our 2015 Employee Stock Purchase Plan (the “2015 ESPP”).
(2) Our 2006 Plan was replaced by our approved 2015 Plan, but will continue to govern awards previously granted under the 2006 Plan. Any shares forfeited, cancelled, exchanged, surrendered or terminated under the terms of the 2006 Plan will become available for grant under the 2015 Equity Incentive Plan.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of February 28, 2018 for:

 

   

each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our common stock;

 

   

each of our named executive officers;

 

   

each of our directors; and

 

   

all of our executive officers and directors as a group.

We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares of our common stock that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership is based on 110,533,605 shares of our common stock outstanding as of February 28, 2018. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares of our common stock subject to options held by the person that are currently exercisable or exercisable within 60 days of February 28, 2018. However, we did not deem such shares of our common stock outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089. The information provided in the table is based on our records, information filed with the SEC and information provided to us, except where otherwise noted.

 

Name or Group of Beneficial Owners

   Number of
Shares
Beneficially
Owned
     Options
Exercisable
in
60 days
     Percentage
of Shares
Beneficially
Owned %
 

BlackRock, Inc (1)

     13,678,773        —          12.4  

Waddell & Reed Financial (2)

     10,924,506        —          9.9  

The Vanguard Group (3)

     10,247,860        —          9.3  

Ronald Black

     976,371        1,279,245        2.0  

Rahul Mathur

     137,800        28,071        *  

Laura Stark

     235,590        193,447        *  

Jae Kim

     126,387        19,158        *  

J. Thomas Bentley (4)

     171,928        —          *  

E. Thomas Fisher

     26,740        31,666        *  

Penelope Herscher (5)

     50,811        —          *  

Emiko Higashi

     11,792        8,333        *  

Charles Kissner (6)

     59,411        40,000        *  

David Shrigley (7)

     52,345        —          *  

Eric Stang (8)

     74,227        40,000        *  

All current directors and executive officers as a group (11 persons)

     1,923,402        1,639,920        3.2  

 

* (Less than 1%)
(1)

Based on information reported by BlackRock, Inc. on Schedule 13G/A filed with the SEC on February 8, 2018, BlackRock, Inc., in its capacity as a parent holding company, has sole voting power with respect to 13,441,735 shares and sole investment power with respect to 13,678,773 shares reported as beneficially owned. The address for BlackRock is 55 East 52nd Street, New York, New York 10055.

 

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(2) Based on information reported by Waddell & Reed Financial, Inc. on Schedule 13G/A filed with the SEC on February 14, 2018, the shares are beneficially owned by one or more open-end investment companies or other managed accounts which are advised or sub-advised by Ivy Investment Management Company (“IICO”), an investment advisory subsidiary of Waddell & Reed Financial, Inc. (“WDR”) or Waddell & Reed Investment Management Company (“WRIMCO”), an investment advisory subsidiary of Waddell & Reed, Inc. (“WRI”). WRI is a broker-dealer and underwriting subsidiary of Waddell & Reed Financial Services, Inc., a parent holding company (“WRFSI”). In turn, WRFSI is a subsidiary of WDR, a publicly traded company. WDR has shared voting and investment power with respect to 10,924,506 shares reported as beneficially owned. The address for these entities is 6300 Lamar Avenue, Overland Park, Kansas 66202.
(3) Based on information reported by The Vanguard Group on Schedule 13G/A filed with the SEC on February 12, 2018, The Vanguard Group, in its capacity as investment advisor, has sole voting power with respect to 143,800 shares, shared voting power with respect to 14,800 shares, sole investment power with respect to 10,097,960 shares and shared investment power with respect to 149,900 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(4) Includes 140,136 shares held in trust for which Mr. Bentley serves as a trustee and 20,000 shares held in a partnership for which Mr. Bentley serves as a partner.
(5) Includes 39,019 shares held in trust for which Ms. Herscher serves as a trustee.
(6) Includes 47,619 shares held under an LLC for which Mr. Kissner serves as owner.
(7) Includes 4,300 shares gifted to a foundation for which Mr. Shrigley serves as principal.
(8) Includes 62,435 shares held in trust for which Mr. Stang serves as a trustee.

 

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EXECUTIVE OFFICERS OF THE COMPANY

Information regarding our executive officers and their ages and positions as of February 28, 2018, is contained in the table below. Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There is no family relationship between any of our executive officers.

 

Ronald Black, Ph.D.

   54    Dr. Black has served as our chief executive officer and president since June 2012 and as a director since July 2012. Dr. Black was previously the Managing Director of R.D. Black & Company, a consulting firm, since August 2011. From September 2010 to August 2011, Dr. Black was the Chief Executive Officer of MobiWire, formerly Sagem Wireless, a privately-held mobile handset company headquartered near Paris, France that offers products and services to original equipment manufacturers and mobile network operators in the mobile phone marketplace. From June 2009 to October 2010, Dr. Black served as Chairman and CEO of UPEK, Inc. Dr. Black currently serves as a board member of Energy Focus, Inc, a publicly held LED lighting technology developer, VeriFone Systems, Inc., a publicly held provider of technology for electronic payment transactions, Microfabrica Inc., a privately held high precision metal parts fabricator, and FlexEnable Limited, a privately held producer of flexible electronics manufacturing platforms. From July 2016 until May 2017, Dr. Black served on the board of Ultratech, Inc., a publicly held company that designs, builds and markets manufacturing systems of the global technology industry. From 2012 to March 2015, Dr. Black served on the board of EnOcean GmbH, a German-based company that manufactures and markets energy harvesting technology, sensors, and radio frequency communication. From September 2010 to November 2012, he served as a board member of AuthenTec, Inc., which he joined following the AuthenTec-UPEK merger in September 2010 and from 2007 to 2013, he served as a board member of Inside Contactless, a France-based company engaged in the semiconductors and information technology industry. From September 2004 to June 2009, he was chief executive officer of Wavecom S.A., a publicly traded French wireless solutions company. Dr. Black holds a Bachelor of Science, a Master of Science, and a Ph.D. in materials science and engineering from Cornell University.

Rahul Mathur

   44    Senior Vice President, Finance and Chief Financial Officer. Mr. Mathur joined us in his current position in October 2016. Prior to joining us, Mr. Mathur served as senior vice president of finance at Cypress Semiconductor Corp., a provider of embedded memory, microcontroller, and analog semiconductor system solutions, from March 2015 to September 2016, where he was responsible for financial planning and investor relations. From August 2012 to March 2015, Mr. Mathur served as vice president of finance at Spansion, Inc. (later acquired by Cypress Semiconductor Corp.). Mr. Mathur served as vice president of finance at Picaboo Corporation from January 2012 to August 2012 and vice president of finance at CDNetworks Inc. from January 2011 to December 2011. Prior to January 2011, Mr. Mathur held senior finance positions at Telesis Technologies, Inc., NetSuite Inc. and KLA-Tencor Corporation. Mr. Mathur holds a Bachelor of Arts in applied mathematics from Dartmouth College and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.

 

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Laura Stark

   49    Senior Vice President, GM, Emerging Solutions Division. Ms. Stark has served in her current position since July 2014. In addition to leading the efforts of overall strategy, including M&A activities, Ms. Stark leads our platform development efforts and long-range research and development as well as oversees our information technology function. From August 2012 to July 2014, she served as our Senior Vice President, Corporate Strategy and M&A. From April 2008 to August 2012, Ms. Stark served as Senior Vice President, Corporate Development, from February 2005 to April 2008 as Senior Vice President, Platform Solutions and from October 2002 to February 2005 as vice president, Memory Interface Division. Ms. Stark held various business and management positions before becoming vice president, Memory Interface Division in October 2002. Prior to joining us, Ms. Stark held various positions in the semiconductor products division of Motorola, a communications equipment company, during a six-year tenure, including technical sales engineer for the Apple sales team and field application engineer for the Sun and SGI sales teams. Ms. Stark holds a B.S. in Electrical Engineering from the Massachusetts Institute of Technology.

Jae Kim

   47    Senior Vice President, General Counsel and Secretary. Mr. Kim has served as the senior vice president, general counsel and secretary since February 2013 and as our vice president, corporate legal since July 2010. In addition, in December 2016, Mr. Kim assumed responsibility for our human resources and facilities functions. Prior to his tenure at Rambus, Mr. Kim held senior legal positions at Aricent Inc., a privately-held communications technology company and Electronics for Imaging Inc., a digital printing technology company. Mr. Kim has also had significant experience in private practice with the law firm of Wilson Sonsini Goodrich & Rosati, P.C., where he advised high technology and emerging growth companies on mergers and acquisitions, private financings, public offerings, securities compliance, public company reporting and corporate governance. Mr. Kim began his legal career as an attorney with the United States Securities and Exchange Commission, Division of Corporation Finance, in Washington, D.C. Mr. Kim is a member of both the California State Bar and New York State Bar, and received a J.D. from the American University, Washington College of Law, and his bachelor’s degree from Boston University.

 

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Our Compensation Discussion and Analysis (“CD&A”) is designed to provide our stockholders with an understanding of our compensation program in effect for our named executive officers (“NEOs”) who consist of the following executive officers:

 

   

Ronald Black, Chief Executive Officer and President;

 

   

Rahul Mathur, Senior Vice President, Finance and Chief Financial Officer;

 

   

Laura Stark, Senior Vice President, GM, Emerging Solutions Division; and

 

   

Jae Kim, Senior Vice President, General Counsel and Secretary.

Our CD&A is organized as follows: (i) Executive Summary, (ii) 2017 Advisory Vote on Executive Compensation and Other Stockholder Engagement, (iii) Our Compensation Philosophy — Pay for Performance, (iv) NEO Compensation Process, (v) Components of NEO Compensation, and (vi) Other Policies and Elements of NEO Compensation.

EXECUTIVE SUMMARY

Business Performance

Over the past several years, Rambus has transitioned from a pure IP licensing model to one that delivers increasing value to the market through chips, customizable IP cores, and software and services. In line with our growth strategy, we acquired four businesses in 2016 in the fields of mobile payments, smart ticketing, memory buffer chips and SerDes IP cores, and continued to integrate those businesses in fiscal year 2017. We also continued to execute on our traditional patent licensing business by signing key license agreements with AMD, Xilinx, and others, demonstrating our ability to extend our partnerships beyond the DRAM industry.

The table below summarizes our financial progress from 2012 (when Dr. Black became our CEO) to 2017. Our revenue has grown at a compound annual growth rate of 11% over those five years, while EBITDA and pro forma operating income have grown at 19% and 23%, respectively.1

 

$ in millions

   2012     2013      2014      2015     2016     2017     CAGR  

Revenue

     234       272        297        296       337       393       11

Pro forma EBITDA

     57       107        133        128       122       137       19

Pro forma Oper. Inc.

     44       92        119        115       109       124       23

Cash 12/31

     203       388        300        288       172       329    

Share Repurchase

             (100       (50  

Acquisitions

     (48             (226    

Debt 12/31

     173       311        138        138       138       254    

Key 2017 financial results included:

 

   

$393 million in annual revenue;

 

   

$124 million in pro-forma operating income;

 

   

$117 million in net cash provided by operating activities;

 

   

31.5% operating margin; and

 

   

3% share price increase in 2017 and a 28% share price increase over the last three years.

 

1  To supplement our Consolidated Financial Statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, including pro forma EBITDA, pro forma operating income and operating margin. For a reconciliation of these non-GAPP measures used in this CD&A, please see our fourth quarter and fiscal year 2017 financial results release dated January 29, 2018.

 

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Executive Compensation Highlights

 

   

Our compensation mix favors performance-based compensation. Approximately 90% of our CEO’s and on average approximately 75% of our NEOs’ total target compensation was subject to our financial and/or share price performance in 2017.

 

   

Our annual incentive compensation program is funded based on the achievement of an objective performance target of pro-forma operating income. For 2017, annual incentive compensation under our Corporate Incentive Plan (“CIP”) was funded at 106% of target as the Company’s 2017 performance exceeded target.

 

   

To further align executive compensation with stockholder interests, approximately 60% of our CEO’s (not including the Strategic Growth Award granted to Dr. Black in 2017 and discussed below) and 40% of our NEO’s 2017 long-term equity incentive awards consisted of performance units, which become eligible for time-based vesting based on the achievement of an objective performance goal of one-year operating margin. Based on our 2017 operating margin performance, which exceeded target, 112.5% of the target number of performance units granted in 2017 became eligible for time-based vesting.

 

   

We awarded Dr. Black a Strategic Growth Award on August 1, 2017 (the “Strategic Growth Award”). The Strategic Growth Award, which is 50% performance-based, has rigorous performance hurdles, focused on revenue growth and share price appreciation. The Strategic Growth Award further incentivizes the retention of a leader whom the Board believes is vital to the future of Rambus.

 

   

We made significant changes to our 2018 compensation programs to better align with best practices and respond to stockholder feedback, explained below.

 

   

We maintained high governance standards in our executive compensation practices, including best practices with respect to minimum equity ownership guidelines, perquisites, compensation recovery, independent compensation committee advisors and insider trading. See “Other Policies and Elements of NEO Compensation” below.

Compensation and Corporate Governance Practices

 

 

What We Do

 

  

What We Don’t Do

 

  Align pay and performance: Through the use of performance units and at-risk compensation elements

 

  

×   All employees and directors prohibited from engaging in hedging transactions in Rambus shares

  Actively engage with shareholders: During fiscal year 2017, we spoke to stockholders representing approximately 66% of our total shares outstanding

 

  

×   No excessive benefits or perquisites

  Maintain robust stock ownership guidelines, with 50% after-tax share retention until requirements met

 

  

×   We do not provide tax gross ups related to a change in control

  Right to reduce or withhold future compensation based on required restatement or adjustment, and to determine extent to which recovery of prior compensation may be pursued in event of fraud

 

  

×   No repricing of underwater stock options

  Outstanding equity awards may vest upon “double-trigger” termination in event of a change in control, designed to promote stability and retention of senior management

 

    

 

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2017 ADVISORY VOTE ON EXECUTIVE COMPENSATION AND OTHER STOCKHOLDER ENGAGEMENT

The advisory vote on executive compensation at our 2017 annual meeting was approved by approximately 77% of the votes cast. This result was well below our desired level and sent a strong message to the Company. During the past 12 months, we have engaged in significant stockholder outreach and made meaningful changes to our executive compensation programs to better align our compensation practices with leading market practices. Since October 2017, we have held ongoing discussions with stockholders representing approximately 66% of our total shares outstanding. Following our discussions with stockholders, we were able to implement several compensation design changes. The majority of these changes took effect for fiscal year 2018. The table below shows the most important feedback that we heard from our stockholders and how we have responded. We will hold say-on-pay votes annually, as approved by our stockholders in a non-binding advisory vote at our 2017 annual meeting. We will hold the next say-on-pay vote at the 2018 annual meeting.

We continue to take stockholder feedback seriously, and acknowledge our long-term commitment to continually improving our pay programs to align pay and performance, and support the Company’s strategic efforts.

 

 

Shareholder Feedback

 

  

What We have Done

 

Performance Units: Recommended a performance period longer than 1-year, with multiple metrics, including TSR   

Fiscal Year 2017

☑   Increased the performance unit weighting from 50% to 60% (of the total target LTI mix) for our CEO

   
In addition, the program should include a relative component and be made more distinct from the CIP annual plan   

Fiscal Year 2018

☑   Introduced a 3-year performance unit program, based on Customer Licensing Income Growth with a +/-25% relative TSR modifier. The first award with this structure was granted to our executive team in February 2018

   

Shareholders also recommended we increase the weighting of our performance units (as a percentage of the overall LTI program)

 

    
   
CEO Pay: Suggested additional disclosure around our CEO’s target compensation levels and better alignment of pay and performance   

Fiscal Year 2018

☑   Committed to position the CEO’s target compensation at the 75th percentile of the competitive market. For fiscal year 2018 this meant reducing the CEO’s target annual incentive from 130% of salary to 120% and reducing the CEO’s target annual equity award from approximately $4.4M to approximately $4.2M

 

   
Goal Setting: Requested additional disclosure around how goals are set and the rigor of these goals   

Fiscal Year 2017

☑   Added disclosure showing how the Company’s pro-forma operating income performance led to the CIP payout level

☑   Added language comparing the 2017 CIP and PSU goals to 2016 target and actual performance levels

☑   Provided illustrative examples of how the fiscal year 2018 CIP and PSU designs will work and how actual performance will impact payouts

 

 

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Shareholder Feedback

 

  

What We have Done

 

    

 

Fiscal Year 2018

☑   Have planned additional disclosure around how the CIP goal is set, and how the new metric compares to the fiscal year 2017 measure

☑   For fiscal year 2018 we will move to a 3-year PSU program; we will enhance disclosure to include how the goals were set, and the rigor of these goals versus historical performance

 

In addition to the changes presented above, the Company continues to ensure that our executive compensation policies and practices align with leading corporate governance policies.

OUR COMPENSATION PHILOSOPHY — PAY FOR PERFORMANCE

Pay Mix

Our compensation programs are designed to align compensation with business objectives and Company financial performance. The objectives of our executive compensation program are to attract, retain, motivate, and reward executives in order to enhance the long-term profitability of the Company, foster stockholder value creation, and align executives’ interests with those of our stockholders. The principal components of our annual executive compensation program in 2017 were base salary, annual cash incentive awards and long-term equity incentive awards.

A substantial portion of our executives’ total compensation is variable and dependent on Company and individual performance. In 2017, approximately 90% of our CEO’s and on average approximately 75% of our NEOs’ total target compensation was subject to stock price performance.

FY2017 Target Pay Mix

(% of target total compensation)

 

LOGO

 

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NEO COMPENSATION PROCESS

The Role of the Compensation Committee

The Compensation Committee is responsible for determining and approving CEO compensation, approving compensation recommendations for NEOs, recommending to the Board changes to the non-employee director compensation program, approving the overall levels of equity to be granted each year, and determining the amount of funding that will be available for CIP, among other duties expressed in its charter. The compensation decisions are based on numerous inputs and independent advice, as laid out below.

 

 

 

LOGO

In performing these duties, the Compensation Committee evaluates the performance of the CEO, and reviews and evaluates the existing NEO compensation programs. The Compensation Committee has the authority to obtain advice and assistance from internal or external compensation consultants, attorneys, accountants and other advisers. The Board of Directors annually evaluates the independence of its members and has determined that each non-executive member of the Board of Directors satisfies the relevant criteria for independence.

The Compensation Committee considers multiple factors to ensure that compensation packages are consistent with our pay for performance philosophy and that we remain competitive in the market for talent. Important factors considered in these decision-making processes included Company performance, individual leadership and performance assessments, market compensation levels, job scope, individual skills and experience, the relative importance of the individual’s role, internal pay equity, historical pay levels, and equity holdings.

The Board of Directors completed an annual comprehensive performance assessment of the NEOs and conducted a review of the CEO’s performance. This assessment included an evaluation of pre-established strategic objectives and review of direct feedback from managers, peers and subordinates. The Compensation Committee also held an annual joint meeting with the full Board of Directors to review and discuss Company leadership development, performance objectives and emergency and long-term succession planning.

The Role of the Independent Compensation Consultant

In 2017, the Compensation Committee continued to retain Semler Brossy Consulting Group, LLC (“SBCG”) to assist in evaluating executive and director compensation. In addition, SBCG prepared materials and analyses for the Compensation Committee on CEO compensation, including the terms of Dr. Black’s new employment agreement and Dr. Black’s Strategic Growth Award (discussed below). The Compensation Committee reviewed and approved CEO compensation, and the CEO was not present for any voting or deliberations regarding CEO compensation. SBCG reports directly to the Compensation Committee, and works collaboratively with management and the Compensation Committee. Pursuant to SEC rules, the Compensation Committee has assessed the independence of SBCG, and concluded that no conflict of interest exists that would prevent SBCG from independently representing the Compensation Committee. SBCG does not perform other services for the Company, and will not do so without the prior consent of the Compensation Committee. SBCG regularly meets with the Compensation Committee outside the presence of management.

The Role of Management

Each year, the CEO and the head of Human Resources present to the Compensation Committee annual performance reviews and compensation recommendations for the then-current NEOs, excluding the CEO. Evaluation of CEO performance and compensation is determined by the Compensation Committee without the presence or consultation of the CEO. Management personnel work with SBCG to prepare compensation information and assessments for the Compensation Committee’s consideration.

 

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In addition, once the Compensation Committee determines the amount of funding available for our CIP, the CEO allocates this funding to each operating or business unit of the Company based on a measurement of each unit’s achievement levels against the unit’s specific performance milestones in relation to the Company’s overall performance targets, and recommends a specific CIP award for each NEO other than himself. The Compensation Committee reviews and assesses the CEO’s proposed CIP award for each NEO.

Peer Group Comparisons

Each year, SBCG, together with senior members of our Human Resources department, defines and assesses the appropriateness of a group of similarly situated companies, referred to as the Compensation Peer Group, for purposes of assisting the Compensation Committee to determine whether the total compensation opportunity available to our NEOs is appropriate and competitive.

As Rambus has refocused to deliver value in high growth markets through innovative product portfolios and supporting IP development, it has become increasingly difficult to select suitable peer comparators. Rambus’ addition of data center and mobile edge business, and expansion into new areas, such as Internet of Things (IoT), device security and smart transport make it an increasingly unique company.

The Compensation Committee reviews the Company’s peer group annually to ensure that the group remains appropriate, by size and business fit. The Compensation Peer Group for fiscal year 2017 compensation was approved by the Compensation Committee in July 2016 and consisted of 15 companies selected based on a number of key attributes, including revenue, technological complexity, industry and business characteristics, market capitalization and number of employees. Appearing below is the Company’s fiscal year 2017 peer group as determined by the Compensation Committee.

2017 Peers

 

Applied Micro Circuits Corporation   Integrated Device Technology, Inc.   Monolithic Power Systems
Cavium, Inc.   InterDigital, Inc.   Power Integrations Inc.
DSP Group, Inc.   Lattice Semiconductor Corporation   Semtech Corporation
FormFactor Inc.   M/A-Com Technology Solutions   Silicon Laboratories Inc.
Inphi Corporation   MaxLinear, Inc.   Tessera Technologies

For fiscal year 2018, the Compensation Committee made further changes to the peer group in an effort to cover more of the markets where Rambus’ evolving businesses compete, aiming to diversify away from more pure-play semiconductor peers. Dolby Laboratories, Bottomline Technologies, and Universal Display Corp. were added to the peer group. Applied Micro Circuits, Cavium, DSP Group, and FormFactor were removed for the fiscal year 2018 peer group.

 

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The fiscal year 2018 peer group spans system software, semiconductor products, technology licensing and patent licensing sectors, as shown below:

 

 

LOGO

In addition, the Compensation Committee reviews Radford survey data, including a broad range of industry competitors to supplement the peer group information. The survey was selected to represent pay levels for positions of comparable responsibility within companies of comparable size to Rambus.

 

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COMPONENTS OF NEO COMPENSATION

The Company’s fiscal year 2017 executive compensation program consisted of the following components:

 

         

Element

 

 

Weighting

(% of target pay)

 

 

Purpose

 

 

Design

 

 

Fiscal Year 2018 Design

 

Fixed Pay

 

 

Annual

 

  Salary  

CEO      10%

NEOs    25%

 

Attract and retain top talent, capable of delivering superior performance

 

  Fixed compensation, payable in cash   No design changes
Variable Pay    

Annual Incentive

(CIP)

 

CEO      12%

NEOs    21%

  Motivate and reward NEOs for achieving annual financial and business objectives   Short-term cash incentive compensation based on pro-
forma operating income; payouts range from 0% to 200%
 

Metric changed to Operating Income adjusted by Licensing Billings (to account for recent changes to accounting rules for revenue recognition); payouts range from 0% to 200%

 

  Long-Term   Stock Options  

CEO      15%

NEOs    11%

  Encourage the achievement of superior results over the long- term  

Six-month cliff vesting followed by ratable vesting over the remaining four years

 

  No design changes
    Restricted Stock Units  

CEO      16%

NEOs    22%

   

Four-year ratable vesting

 

  No design changes
    Performance Units  

CEO      47%

NEOs    21%

   

One-year performance period with two-
year additional time-based vesting, based on operating margin; payouts range from 0% to 150%

 

  Three-year performance period, based on Customer Licensing Income, with +/-25% relative TSR modifier; payouts range from 0% to 200%

Annual Base Salary

For 2017, the Compensation Committee approved increases in base salary for Dr. Black to reflect individual performance and a review of market compensation levels. Ms. Stark and Mr. Kim also received increases to their base salaries to reflect individual performance, increased responsibilities and a review of market compensation levels. Mr. Mathur did not receive an increase in his base salary level for 2017, given his hire in October 2016. The following shows the NEOs base salary amounts for 2017:

 

Executive

   2017 Base
Salary
     2016 Base
Salary
     % of Base
Salary
Increase
from 2016
 

Ronald Black

   $ 555,000      $ 515,000        7.8

Rahul Mathur

   $ 330,000      $ 330,000        0

Laura Stark

   $ 325,000      $ 300,000        8.3

Jae Kim

   $ 330,000      $ 300,000        10

 

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Annual Cash Incentive Compensation — Corporate Incentive Plan

2017 CIP

For 2017, the Compensation Committee approved an increase in CIP targets for Dr. Black, Ms. Stark and Mr. Kim based on the Compensation Committee’s assessment of individual performance, responsibilities and market compensation levels. Mr. Mathur did not receive an increase in his CIP target for 2017, given his hire in October 2016. The following shows the 2017 CIP targets relative to 2016 CIP targets:

 

     2017 CIP Target     2016 CIP Target  

Executive

   2017
CIP Target
     % of Base
Salary
    2016
CIP Target
     % of Base
Salary
 

Ronald Black

   $ 721,500        130   $ 618,000        120

Rahul Mathur

   $ 270,000        82   $ 270,000        82

Laura Stark

   $ 310,000        95   $ 300,000        100

Jae Kim

   $ 270,000        82   $ 230,000        77

Consistent with previous years, annual cash incentive bonuses with respect to 2017 performance were based on the achievement of an objective performance goal of pro-forma operating income. This measure provides a meaningful measure of core financial performance and supports our short-term business objectives, which complements the measure of operating margin that we use for our performance unit awards (discussed later under “Long Term Equity Incentive Compensation”) that promotes growth and cost discipline.

Pro-forma operating income is a non-GAAP measure that consists of GAAP operating income, excluding stock-based compensation expense, amortization expense, certain acquisition related expenses, retention bonuses, restructuring expenses, impairment charges, non-cash interest expense and certain other one-time or extraordinary expenses or credits. Other one-time or extraordinary expense or income items may be excluded from pro-forma operating income as determined by the Compensation Committee.

To align payouts with Company performance, CIP funding can range from 0% to 200% of target. In accordance with the plan, our 2017 CIP was measured at mid-year based on estimated expectations of the full year’s achievement against the performance target. The measurement may result in a progress payment toward the full year target payment. Final payments for fiscal 2017 reflected actual Company performance in 2017, net of any mid-year progress performance payment. The 2017 performance targets and results of pro-forma operating income were as follows:

 

Target

  

Actual

Performance

  

CIP Funding

$117M

   $124M    106%

Despite a more challenging CIP performance target of $117M, relative to the 2016 goal of $103M and actual performance of $109M, the Company achieved pro forma operating income of $124M, resulting in a 106% CIP pool funding.

Individual CIP payouts for NEOs may vary based on an assessment of individual performance and the performance of his or her division, business unit or other area of responsibility. In 2017, our NEOs participated in the 2017 CIP for their annual cash incentive compensation on the same terms as other participants, and payouts to our NEOs were based on the same percentage of CIP pool funding (106%).

 

     2017 CIP Target     2017 CIP Payouts  

Executive

   2017
CIP Target
     % of
Base  Salary
    Total 2017
CIP Payout
     % of Total
Target  CIP
 

Ronald Black

   $ 721,500        130   $ 764,790        106

Rahul Mathur

   $ 270,000        82   $ 286,200        106

Laura Stark

   $ 310,000        95   $ 328,600        106

Jae Kim

   $ 270,000        82   $ 286,200        106

 

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Additionally, the Compensation Committee gave Dr. Black discretion to increase CIP payouts to each of Messrs. Mathur and Kim and Ms. Stark by up to 2%; and in February 2018, based on achievement of individual performance metrics, each of those NEOs were awarded such increase.

Long Term Equity Incentive Compensation

Our equity incentives encourage the achievement of superior results over time and align the interests of our executive officers and stockholders because the value of the equity incentives is based on the price of the Company’s stock. Our equity awards are subject to vesting provisions to encourage executive officers to remain employed with us. To determine annual equity awards with respect to a completed fiscal year, the Compensation Committee reviews each then-current NEO’s performance and contribution during such year, as well as current market information, external competitive circumstances, overall ownership and vesting schedules of existing equity held by the NEO.

2017 Equity Awards

NEO annual equity awards granted in February 2017 represented a mix of stock options, RSUs and performance units as an incentive for share price growth and financial performance as shown below.

 

     Performance Units     Restricted Stock Units     Stock Options  

CEO

     60     20     20

NEOs

     40     40     20

The program was designed such that 80% of the value of the equity awards (options and performance units) granted to our Chief Executive Officer in 2017 (other than Dr. Black’s Strategic Growth Award) was subject to both the risk of the Company’s financial and stock performance and 60% of the value of the equity awards (options and performance units) granted to our other NEOs in 2017 was subject to both the risk of the Company’s financial and stock performance.

With respect to performance unit awards, a target number of shares of our common stock subject to such units was awarded to each of our NEOs and such units became eligible for time-based vesting based on the Company’s operating margin for the fiscal year period in which the performance unit was awarded. Operating margin is a key measure of both growth and cost discipline, which complements our annual CIP bonus plan’s measure of pro-forma operating income.

The ultimate number of shares that become eligible for time-based vesting can range from 0% to 150% of target depending on performance relative to target over the applicable period. Time-based vesting takes place after the performance level is achieved and determined to provide additional retention value. All earned shares that become subject to time-based vesting, vest on the third anniversary of the date of grant, subject to continued service. The performance units are designed to reward performance by linking grants to an objective Company performance measure while promoting employee retention through subsequent time-based vesting.

In 2017, the Company granted the following performance units:

 

Executive

   Threshold
(50% of
Target)
     Target      Maximum
(150%
Target)
 

Ronald Black (1)

     94,692        189,384        284,076  

Rahul Mathur

     9,324        18,648        27,972  

Laura Stark

     12,194        24,388        36,582  

Jae Kim

     9,324        18,648        27,972  

 

(1) Such awards do not include the Strategic Growth Award (discussed below), which was granted outside of the Company’s usual executive compensation review cycle.

 

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In 2016, we achieved an operating margin of 32%, versus 30% target, resulting in a 116.7% payout. The operating margin target for 2017 was again set at 30%, given the Company’s continuing transition from patent licensing to products and services. The 2017 performance unit targets and results of operating margin were as follows:

 

Target

  

Actual Performance

  

Achievement

30%

   31.5%    112.5%

As a result of these performance unit achievements, individual NEOs became eligible for time-based vesting in the following share amounts:

 

Executive

   PSU Shares  

Ronald Black

     213,057  

Rahul Mathur

     20,979  

Laura Stark

     27,436  

Jae Kim

     20,979  

CEO Special Equity Award

Dr. Black received a one-time special equity award of RSUs with an initial estimated value of $4,400,000 on August 1, 2017, in connection with the renewal of his employment agreement (the “Strategic Growth Award”). The Strategic Growth Award has both a performance-based component (the “Performance RSUs”) and a time-based component (the “Time-Based RSUs”) with 50% of the Performance RSUs (assuming target level of performance) eligible to vest only upon achievement of performance goals, and 50% of the Time-Based RSUs scheduled to vest subject to Dr. Black’s continuing service to the Company.

Under Dr. Black’s leadership, the Company continues to transition from a pure IP licensing model to one that delivers increasing value to the market through chips, customizable IP cores, software and services. The Company is now positioned to move toward a true growth strategy, actively pursuing profitable growth, organically and inorganically. In order to further support this transition and align with our current performance imperatives of long-term revenue growth and increased shareholder value, the Compensation Committee awarded Dr. Black the Strategic Growth Award.

The Strategic Growth Award, which is 50% performance-based, has rigorous performance hurdles, focused on revenue growth and share price appreciation. The award further incentivizes the retention of a leader whom the Board believes is vital to the future of Rambus. Finally, the Board believes it is appropriate to provide Dr. Black with the opportunity to participate in the shareholder value created if Rambus is able to meet these aggressive revenue growth goals.

 

 

Element

 

  

Design

 

Award Form

  

50% Performance RSUs, measured over a three-year period ending December 31, 2019

50% Time-Based RSUs, vesting annually over three years

 

   

Award Size

  

$4.4M—equal to Dr. Black’s 2017 target annual long-term incentive award

 

   

Metric and Leverage

  

Compounded average annual revenue growth (“CAARG”) from 2017 through 2019. Every 1% of CAARG will result in 10% of the target number of Performance RSUs becoming eligible for vesting, up to a maximum of 150% at 15% CAARG. If the CAARG is zero or is negative, no Performance RSUs will vest.

 

 

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Element

 

  

Design

 

    

 

In addition, if the Company’s average stock price for the consecutive 20-day trading period ending on December 31, 2019 exceeds 130% of the stock price on the award’s date, 50% of the target number of Performance RSUs will vest.

 

CAARG (range 0%-150%) + Stock Price Goal (range 0% or 50%) = Performance RSUs eligible to vest (subject to maximum of 150% of target)

 

In no event will more than 150% of the target Performance RSUs be eligible to be earned. For instance, if CAARG is achieved at 15% and the Stock Price Goal is achieved, 150% of the target Performance RSUs will be eligible to be earned. On the other hand, if CAARG is achieved at 5% resulting in 50% of the target Performance RSUs being earned and the Stock Price Goal is achieved, then only 100% of the target Performance RSUs would be eligible to be earned. If the CAARG is zero or is negative, no Performance RSUs will vest and the Performance RSUs will be forfeited.

 

   

Grant Timing

  

Awarded in June 2017 to coincide with Dr. Black’s updated employment agreement.

Further, the Board opted to allow a sufficient period of time between the Company’s second quarter 2017 earnings release and the grant date of the award.

 

When considering the Strategic Growth Award, the Board and the Compensation Committee, with advice and input from SBCG, considered Dr. Black’s critical role in leading the Company through a large-scale transformation during his tenure as CEO. Since Dr. Black joined the Company in 2012, the Company has recognized significant increases in revenue, market value and total shareholder return. As Dr. Black is vital to the continued success of the Company, the Board and the Compensation Committee felt it appropriate to grant the Strategic Growth Award as an incentive to Dr. Black to remain with the Company and to provide Dr. Black an opportunity to participate in stockholder value creation if the Company is able to meet aggressive performance goals. The Strategic Growth Award was designed to motivate and incentivize Dr. Black to drive the long-term growth of the Company and to align his financial interests with those of our stockholders.

When determining the size of the Strategic Growth Award, the Board and the Compensation Committee considered a number of factors. In December 2015, the Company granted retention oriented equity awards to its executives, but did not award a retention award to Dr. Black. Dr. Black did not receive a retention award in December 2015 because the December 2015 awards vested solely based on continued service and the Board and the Compensation Committee wanted any potential award to Dr. Black to also include meaningful performance requirements. Additionally, at the time of the 2015 grants, Dr. Black had existing performance-based option awards and the Board and the Compensation Committee did not want overlap with the performance-based option awards. In July 2017, despite outstanding Company performance, Dr. Black forfeited 595,000 shares of performance-based option awards because the Company did not achieve the extremely aggressive stock price hurdles associated with such awards ranging from $15.00 to $20.00 per share. The Board and the Compensation Committee considered the fact that Dr. Black did not receive a retention grant in December 2015 and the expiration of the performance-based option awards when calculating the number of shares subject to the Strategic Growth Award.

The Performance RSUs that become eligible to vest following the satisfaction of the performance criteria (the “Eligible RSUs”) will vest on December 31, 2019 (or earlier upon a change of control of the Company or upon a

 

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qualifying termination of Dr. Black’s employment). If the performance goals are not achieved, Dr. Black will not vest in any of the Performance RSUs. Dr. Black must remain employed through the end of the performance period in order to vest in the Eligible RSUs. If the Company undergoes a change of control or Dr. Black’s employment is terminated without cause, a pro-rata portion of the Eligible RSUs will vest upon the closing of the change of control or qualifying termination, as applicable, based upon the number of completed months between January 1, 2017 and the closing of the change of control or termination date, as applicable. In the event of a change of control, any remaining Eligible RSUs will be scheduled to vest on each December 31 remaining in the performance period, subject to any accelerated vesting provisions set forth in the Agreement. In the event of a qualifying termination of employment outside of the context of a change of control, pursuant to the terms of the Agreement, Dr. Black will receive 12 months additional vesting of any Eligible RSUs.

2018 CEO Compensation

Based on stockholder feedback, the Company has committed to reducing the CEO’s ongoing annual target compensation levels to the 75th percentile of the compensation peer group, and maintaining this relative positioning in the future. For fiscal year 2018, the CEO’s target annual CIP opportunity was reduced from 130% of base salary to 120%. Further, the target annual equity award was reduced by approximately $224,000. We exclude the Strategic Growth Award, granted during fiscal year 2017 from the target compensation calculations below, as the award is not a component of the CEO’s ongoing target annual compensation.

The fiscal year 2018 CEO target annual equity award mix is 60% performance shares, 20% restricted stock units and 20% stock options, consistent with the fiscal year 2017 award.

 

    

Fiscal Year 2017

  

Fiscal Year 2018

Base Salary

   $555,000    $555,000

Annual CIP Target

   $721,000 (130% of salary)    $666,000 (120% of salary)

Target Annual Equity Award

   $4,400,000    $4,176,000

Target Total Compensation

   $5,676,000    $5,397,000

2018 CIP and Long-Term Incentives

Due to stockholder feedback, the continued planned evolution of our compensation programs and changes in accounting rules, we have made material design changes to our fiscal year 2018 CIP and fiscal year 2018 performance unit program.

2018 CIP

Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers in Accounting Standards Codification Topic 606 (“ASC 606”), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”). While the Company expects the adoption of ASC 606 to materially impact the timing of revenue recognition for its fixed-fee intellectual property licensing arrangements, the Company does not expect to have a material impact on its cashflow from operations or the underlying financial position of the Company. The Company is still assessing the impact that the adoption of ASC 606 will have on its other revenue streams. Under the new accounting rules, while it is likely that the Company’s reported revenue will become more volatile, the Company does not expect changes to the timing of billings or cash collection from its licensing arrangements.

To compensate for these changes in accounting rules, the fiscal year 2018 CIP achievement metric will be changed to Customer Licensing Income (“CLI”). CLI represents the Company’s reported financial results adjusted for licensing billings. Licensing billings is an operational metric that reflects amounts invoiced to the Company’s patent and technology licensing customers during the period. For example, for fiscal year 2017, licensing billings was consistent with the royalties revenue amount reported under ASC 605, though there were timing differences on a quarterly basis. As the adoption of ASC 606 will materially impact the timing of revenue

 

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recognition for the Company’s fixed-fee intellectual property and minimum guarantee licensing arrangements, implementing the use of the licensing billings metric as a substitute for royalty revenue in the Company’s fiscal year 2018 CIP and performance unit programs, will provide a measure comparable to prior periods that more closely matches the Company’s cash from operations, and provides meaningful profitability metrics.

We are confident that CLI provides a measurement consistent with prior years that will allow Company executives to remain focused on company performance, without being impacted by accounting changes.

2018 Performance Units

In fiscal year 2018, the Company will grant to its NEOs performance units with a three-year performance period that vest in full upon the completion of the performance period. The performance units will vest based upon the achievement of Customer Licensing Income (“CLI”) annual growth over the performance period. The initial payout will then be modified +/-25% based on the Company’s TSR ranking relative to our compensation peer group.

 

LOGO

Annual CLI growth of 5% results in 50% of target payout. Each additional 1% growth results in 10% of the target number of performance units vesting, up to a maximum of 160% of target performance units at 16% growth. If annual CLI growth is below 5%, the performance units are forfeited.

At the end of the performance period, if Rambus’ TSR is in the top third of the peer group, the payout number of shares will be multiplied by 125%; middle third performance will have no additional impact on payout, and bottom third performance will have a negative 25% impact. Please see the chart below for an illustrative example.

 

CLI Annual

Growth Rate

 

CLI Payout

Result

 

Range of Potential Payouts
after Relative TSR Modifier

<5%   0%   0%
5%   50%   38%-63%
10%   100%   75%-125%
16%   160%   120%-200%
>16%   160%   120%-200%

The performance units will be weighted at 60% of our long-term incentives for Dr. Black, (increased from 50% for fiscal year 2016), and 40% of our long-term incentives for our NEOs.

OTHER POLICIES AND ELEMENTS OF NEO COMPENSATION

Benefits

We do not provide any perquisites to NEOs that are not generally available to the broad employee population with the exception of termination benefits and travel reimbursements to Dr. Black pursuant to his employment agreement and termination benefits to the other NEOs based on change of control severance agreements. Our NEOs are eligible to participate in our 401(k) plan, our health and welfare benefits, our Employee Stock Purchase Plan and our User-Owned Personal Computing Devices reimbursement program on the same terms as other eligible employees.

Stock Ownership Guidelines

Our executives are required to hold 50% of after-tax shares realized upon vesting or exercise of equity awards on an after-tax basis until they reach the required levels of 5x base salary for the CEO and 3x base salary for the other executive officers. Our executives are required to achieve the required levels within five years of the date

 

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such officer assumes their position. For purposes of these guidelines, ownership includes shares owned outright, unvested restricted stock and restricted stock units, and the value of vested and unexercised stock options. As of December 31, 2017, all of our NEOs were in compliance with this policy.

Hedging

As stated in our Code of Business Conduct and Ethics, all of our employees and directors are prohibited from engaging in hedging transactions in Rambus shares, including short sales and purchases of put options.

Equity Grant Policy

Annual equity awards to then-current NEOs are granted on February 1st of each year or the first trading day thereafter. Currently, awards granted consist of stock options, RSUs and performance units. Stock options are priced at the fair market value on the date that the grant becomes effective while RSUs and performance units are full value awards. The number of shares and key terms of the awards are approved by the Compensation Committee prior to the scheduled award date, February 1st or the first trading day thereafter. On occasion, the Compensation Committee approves other equity awards during the year in addition to the annual equity awards, including, for example, Dr. Black’s Strategic Growth Award.

Compensation Recovery

The Compensation Committee reserves the right to reduce or withhold future compensation based on any required restatement or adjustment, and to determine the extent to which recovery of prior compensation may be pursued in the event of future adjustments caused by fraud on the part of an executive of Rambus. The Compensation Committee will adopt a policy that complies with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act when such rules are promulgated.

CEO Employment Agreement

On July 17, 2017, in connection with the expiration of the five-year term of Dr. Black’s employment agreement, the Company entered into a new employment agreement with Dr. Black. The new employment agreement will remain in effect through June 26, 2022. We believe having an employment agreement with the CEO promotes transparency, stability and retention. Dr. Black’s original employment agreement expired in 2017, and Rambus has traditionally maintained employment agreements with our CEOs in the past. The employment agreement executed in July 2017 set the Company on the path for continued success by ensuring Dr. Black’s strategic focus and leadership of the Company’s growth. The Board of Directors is confident in Dr. Black’s leadership and recognizes the critical role he plays in the Company’s transition from heavily focusing on maintaining and growing licensing revenue in 2012 to its product growth imperative in 2017.

As part of Dr. Black’s employment agreement, the Compensation Committee agreed to reimburse Dr. Black for up to $200,000 in relocation related expenses as a result of Dr. Black relocating his European residence from Paris to Rotterdam. Having Dr. Black relocate to, and spend periods of time in Rotterdam will not only improve the Company’s operations in Rotterdam, but also strengthen the Company’s chances of receiving a favorable ‘Dutch Innovation Box’ tax ruling related to Dr. Black’s service as a Bell ID director. Bell ID was acquired by Rambus in 2016. The Dutch Innovation Box is a special corporation tax rate which allows for eligible income to be taxed at an effective rate of 5% rather than the top rate of 25%. This in turn enables profit exemption for up to 80% to be obtained. The Dutch Innovation Box has previously yielded substantial income tax benefits for the Company. The proposed Dutch tax structure aligns the use and future development of recently acquired IP within Rambus’ global operating model and business objectives.

Change of Control Payments

Outstanding equity awards for our NEOs, including our CEO, may vest upon a “double-trigger” termination in the event of a change of control pursuant to change of control severance agreements with our executive officers

 

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and our CEO’s employment agreement that governs certain change of control severance obligations applicable to him. These agreements are designed to promote stability and retention of senior management prior to and following a change of control and to align executive and stockholder interests by enabling executives to consider corporate transactions that are in the best interests of the stockholders and other constituents of the Company without undue concern over whether the transactions may jeopardize the executives’ own employment.

As discussed above, the Company entered into a new employment agreement with Dr. Black which sets forth the terms and provisions governing Dr. Black’s employment. Dr. Black’s employment agreement with the Company includes, among other terms, certain payments for Dr. Black in the event of his termination, a change of control of the Company, or both. The Compensation Committee believed that retaining these provisions in Dr. Black’s employment agreement was appropriate given the context of Dr. Black’s lengthy tenure with the Company and his continued leadership at the Company.

See “Executive Compensation Tables — Potential Payments Upon Termination or Change of Control” below for a discussion of potential payments to our NEOs including our CEO.

Tax Considerations

Prior to January 1, 2018, under Section 162(m), a corporation cannot deduct compensation it pays to its Chief Executive Officer and certain other executive officers in excess of $1 million unless such compensation is considered “qualified performance-based compensation” as defined in Section 162(m). Compensation that qualifies as “performance-based” generally must meet the requirement that it is payable only upon attainment of pre-established, objective performance goals under a plan that has been approved by the corporation’s stockholders. In 2017, the Compensation Committee considered the potential future effects of Section 162(m) when determining NEO compensation. As a result of the Tax Cuts and Jobs Act that became law in late 2017, the number of individuals covered by Section 162(m) has been expanded to include the Company’s principle financial officer and the exception for performance-based compensation has been eliminated. For 2018 and beyond, the Compensation Committee is expected to consider the potential future effects of Section 162(m) when determining NEO compensation.

Compensation Program Risk Evaluation

The Compensation Committee annually reviews the elements of NEO compensation to determine whether any portion of the overall program encourages excessive risk taking. The Compensation Committee’s current assessment is that although the majority of compensation provided to our NEOs is performance-based, our compensation programs do not encourage excessive or unnecessary risk taking. The Compensation Committee believes that the design of these compensation programs encourages our NEOs to remain focused on both short-term and long-term strategic goals.

COMPENSATION COMMITTEE REPORT

Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this report.

 

  

THE COMPENSATION COMMITTEE

 

David Shrigley (Chair)

E. Thomas Fisher*

Emiko Higashi*

Charles Kissner

 

* Mr. Fisher served on the Compensation Committee until March 8, 2018 and Ms. Higashi joined the Compensation Committee March 8, 2018.

 

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

The following table shows NEO compensation information for 2015, 2016 and 2017.

 

                            Non-Equity              
                Stock     Option     Incentive Plan     All Other        
          Salary     Awards(1)     Awards(1)     Compensation     Compensation(4)     Total  

Name and Title

  Year     ($)     ($)     ($)     (2)(3)($)     ($)     ($)  

Ronald Black

    2017       551,667       7,992,844       819,488       764,790       215,367 (5)      10,344,156  

President and Chief Executive

    2016       515,000       3,808,145       1,026,080       653,844       12,634       6,015,703  

Officer

    2015       515,000       2,456,752       550,656       610,000       63,325       4,195,733  

Rahul Mathur(6)

    2017       330,000       477,389       121,059       291,600       10,740       1,230,788  

Senior Vice President, Finance

    2016       81,442       972,000       242,142       71,415       50,480       1,417,479  

and Chief Financial Officer

             

Laura Stark

    2017       322,917       659,121       158,309       334,800       10,740       1,485,887  

Senior Vice President, GM,

Emerging Solutions Division

    2016       300,000       611,102       124,995       396,360       9,870       1,442,327  
    2015       299,167       1,021,254       80,304       322,838       47,350       1,770,913  

Jae Kim

    2017       327,500       500,753       121,059       291,600       10,740       1,251,652  

Senior Vice President,

    2016       300,000       412,025       83,952       379,546       9,870       1,185,393  

General Counsel and Secretary

    2015       299,167       828,262       64,243       217,140       35,589       1,444,401  

 

(1) Amounts shown do not reflect compensation actually received by the NEO. Instead, the amounts shown are the aggregate grant date fair value computed in accordance with the provisions of FASB ASC Topic 718. The assumptions used to calculate the value of stock and stock option awards are set forth under Note 12 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
(2) Amounts for fiscal year 2017 consist of compensation earned for services rendered in fiscal year 2017 and are based upon the achievement of certain targets under the 2017 Corporate Incentive Plan. The target and achievement results were reviewed and approved by the Compensation Committee. The plan is further described under “Compensation Discussion & Analysis — Components of NEO Compensation.”
(3) The Compensation Committee gave Dr. Black discretion to increase CIP payouts to each of Messrs. Mathur and Kim and Ms. Stark by up to 2%; and in February 2018, based on achievement of individual performance metrics, each of those NEOs were awarded such increase.
(4) The details of “All Other Compensation” for NEOs for 2017 are described in this Proxy Statement under “Compensation Disclosure and Analysis” — “Other Policies and Elements of NEO Compensation.”
(5) Dr. Black’s Other Compensation includes $192,277 in expenses related to the relocation of Dr. Black’s European residence, $12,350 in reimbursement for attorney’s fees related to renegotiation of his employment agreement, $8,100 in 401K match, $1,920 for bring your own device stipend and $720 in Company paid premiums for health and welfare insurance.
(6) Mr. Mathur was appointed as Senior Vice President, Finance and Chief Financial Officer on October 3, 2016.

 

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Grants of Plan Based Awards

The following table shows all plan-based awards granted to the NEOs during 2017. The option awards and the unvested portion of the stock awards identified in the table below are also reported in the Outstanding Equity Awards at 2017 Year End table that follows.

 

                                                          All Other              
                                                    All Other     Option              
                                                    Stock     Awards:           Grant Date  
                                                    Awards:     Number of     Exercise     Fair Value  
                                                    Number of     Securities     or Base     of  
                                                    Shares of     Underlying     Price of     Stock and  
                                                    Stock or     Options     Option     Option  
                Estimated Future Payouts Under     Estimated Future Payments Under     Units(2)     (2)     Awards     Awards(3)  
                Non-Equity Incentive Plan Awards(1)     Equity Incentive Plan Awards     (#)     (#)     ($/Sh)     ($)  

Name

  Grant
Date
    Approval
Date
    Threshold
($)
    Target
($)
    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
   

 

   

 

   

 

   

 

 
Ronald Black     2/1/2017       1/18/2017       N/A       721,500       1,443,000       —         —         —         —         197,753       12.80       819,488  
    2/1/2017       1/18/2017                   63,128         —         808,038  
    2/1/2017       1/18/2017             50     100     150     189,384         —         2,424,115  
    8/1/2017       6/22/2017                   170,675         —         2,200,001  
    8/1/2017       6/22/2017             50     100     150     170,675         —         2,275,098  
Rahul Mathur     2/1/2017       1/18/2017       N/A       270,000       540,000       —         —         —         —         29,213       12.80       121,059  
    2/1/2017       1/18/2017                   18,648         —         238,694  
    2/1/2017       1/18/2017             50     100     150     18,648         —         238,694  
Laura Stark     2/1/2017       1/18/2017       N/A       310,000       620,000       —         —         —         —         38,202       12.80       158,309  
    2/1/2017       1/18/2017                   24,388         —         312,166  
    2/1/2017       1/18/2017             50     100     150     24,388         —         312,166  
Jae Kim     2/1/2017       1/18/2017       N/A       270,000       540,000       —         —         —         —         29,213       12.80       121,059  
    2/1/2017       1/18/2017                   18,648         —         238,694  
    2/1/2017       1/18/2017             50     100     150     18,648         —         238,694  

 

(1) Amounts shown are estimated payouts for fiscal year 2017 to NEOs based on the 2017 bonus targets under the plan discussed under “Compensation Discussion & Analysis — Components of NEO Compensation.” Actual bonuses received by these named executive officers for fiscal year 2017 are reported in the Summary Compensation for Fiscal Year 2017 table under the column entitled “Non-Equity Incentive Plan Compensation” and described under “Compensation Discussion & Analysis — Executive Compensation Components.”
(2) The stock options, restricted stock units and performance units granted on February 1, 2017 were granted as part of the Company’s regular performance review process. The stock options and restricted stock units will vest based on the executive’s continued service to the Company through the applicable vesting dates. The performance unit grants will become earned based upon the performance level achieved tied to the Company’s operating margin for the fiscal year in which the performance unit was awarded and the executive’s continued service to the Company through the applicable vesting date on the third anniversary of the date of grant.
(3) The value of a stock option, restricted stock unit or performance unit grant is based on the fair market value as of the grant date of such award determined pursuant to FASB ASC Topic 718. The exercise price for all options granted to the named executive officer is 100% of the fair market value of the shares on the grant date. The restricted stock unit and performance unit grants are full value awards and do not have an exercise price.

 

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Outstanding Equity Awards at Fiscal Year-End

The following table shows all outstanding equity awards held by the NEOs as of December 31, 2017. Unvested stock awards reported in the Grants of Plan Based Awards table above are also included in the table below.

 

    Option Awards     Stock Awards     Equity Incentive Plan Awards  
     Number of Securities
Underlying Unexercised
Options
    Option
Exercise
Price
($)
    Option
Expiration
Date
    Number of
Shares of
Stock That
Have Not
Vested (#)
    Market Value
of Shares of
Stock That
Have Not
Vested ($)(1)
    Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested(#)
    Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)(1)
 

Name

  Exercisable
(#)
    Unexercisable
(#)
             

Ronald Black

    36,725       161,028 (2)      12.80       2/1/2027       —         —         —         —    
    —         —         —         —         170,675 (3)      2,426,999       —         —    
    —         —         —         —         —         —         170,675 (4)      2,426,999  
    —         —         —         —         63,128 (5)      897,680       —         —    
    —         —         —         —         —         —         189,384 (6)      2,693,040  
    97,428       122,572 (7)      12.31       2/1/2026       —         —         —         —    
    —         —         —         —         75,000 (8)      1,066,500       —         —    
    —         —         —         —         233,400 (9)      3,318,948       —         —    
    84,000       36,000 (10)      11.26       2/2/2025       —         —         —         —    
    —         —         —         —         27,272 (11)      387,808       —         —    
    —         —         —         —         173,866 (12)      2,472,375       —         —    
    220,142       9,858 (13)      8.76       2/3/2024       —         —         —         —    
    190,000       (14)      5.46       2/1/2023       —         —         —         —    
    595,000       (14)      5.76       7/2/2022       —         —         —         —    

Rahul Mathur

    5,425       23,788 (2)      12.80       2/1/2027       —         —         —         —    
    —         —         —         —         18,648 (5)      265,175       —         —    
    —         —         —         —         —         —         18,648 (6)      265,175  
    15,000       45,000 (15)      12.15       11/1/2026       —         —         —         —    
    —         —         —         —         60,000 (16)      853,200       —         —    

Laura Stark

    7,094       31,108 (2)      12.80       2/1/2027       —         —         —         —    
    —         —         —         —         24,388 (5)      346,797       —         —    
    —         —         —         —         —         —         24,388 (6)      346,797  
    11,868       14,932 (7)      12.31       2/1/2026       —         —         —         —    
    —         —         —         —         18,273 (8)      259,842       —         —    
    —         —         —         —         28,432 (9)      404,303       —         —    
    —         —         —         —         27,516 (17)      391,278       —         —    
    12,250       5,250 (10)      11.26       2/2/2025       —         —         —         —    
    —         —         —         —         8,000 (11)      113,760       —         —    
    —         —         —         —         17,000 (12)      241,740       —         —    
    34,820       2,143 (13)      8.76       2/3/2024       —         —         —         —    
    29,142       (14)      5.46       2/1/2023       —         —         —         —    
    21,000       (14)      7.31       2/1/2022       —         —         —         —    
    30,000       (14)      20.93       2/1/2021       —         —         —         —    
    30,000       (14)      22.72       2/1/2020       —         —         —         —    
    13,935       (14)      8.55       2/2/2019       —         —         —         —    

Jae Kim

    5,425       23,788 (2)      12.80       2/1/2027       —         —         —         —    
    —         —         —         —         18,648 (5)      265,175       —         —    
    —         —         —         —         —         —         18,648 (6)      265,175  
    1,543       10,029 (7)      12.31       2/1/2026       —         —         —         —    
    —         —         —         —         12,273 (8)      174,522       —         —    
    —         —         —         —         19,096 (9)      271,545       —         —    
    —         —         —         —         22,294 (17)      317,021       —         —    
    1,200       4,200 (10)      11.26       2/2/2025       —         —         —         —    
    —         —         —         —         6,500 (11)      92,430       —         —    
    —         —         —         —         13,812 (12)      196,407       —         —    
    3,814       1,929 (13)      8.76       2/3/2024       —         —         —         —    

 

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(1) The market value is calculated using the closing price of our common stock of $14.22 on December 29, 2017 (the last trading day of 2017), as reported on The Nasdaq Global Select Market (NASDAQ), multiplied by the unvested stock amount.
(2) The option was granted on February 1, 2017. Options representing 1/10th of the total shares granted vested six months from the grant date and the remaining shares vest in equal monthly installments until fully vested on February 1, 2021.
(3) The restricted stock units were granted on August 1, 2017 and vest in three equal annual installments beginning on August 1, 2018.
(4) The performance stock units were granted on August 1, 2017. The number of shares earned will range between 0% to 150% of target shares granted. Vesting occurs after the performance level is achieved and determined, measured relative to compounded average annual revenue growth and average stock price appreciation ending December 31, 2019, and service is completed through that period.
(5) The restricted stock units were granted on February 1, 2017 and vest in four equal annual installments beginning on February 1, 2018.
(6) The performance stock units were granted on February 1, 2017. The number of shares earned will range between 0% to 150% of target shares granted. Vesting occurs after the performance level is achieved and determined relative to pro forma operating margin for fiscal year 2017 and service is completed through the third anniversary of the date of grant.
(7) The option was granted on February 1, 2016. Options representing 1/10th of the total shares granted vested six months from the grant date and the remaining shares vest in equal monthly installments until fully vested on February 1, 2020.
(8) The restricted stock units, which represent the remaining portion of restricted stock units granted on February 1, 2016, vest in three equal annual installments beginning on February 1, 2018.
(9) The performance stock units were granted on February 1, 2016. The number of shares earned was 116.7% of the target shares granted. Vesting occurs on the third anniversary of the date of grant upon continued service through the applicable vest date.
(10) The option was granted on February 2, 2015. Options representing 1/10th of the total shares granted vested six months from the grant date and the remaining shares vest in equal monthly installments until fully vested on February 2, 2019.
(11) The restricted stock units, which represent the remaining portion of restricted stock units granted on February 2, 2015, vest in two equal annual installments beginning on February 2, 2018.
(12) The performance restricted stock units were granted on February 2, 2015. The number of shares earned was 106.25% of the target shares granted. Vesting occurs on the third anniversary of the grant date upon continued service through the applicable vest date.
(13) The option was granted on February 3, 2014. Options representing 1/10th of the total shares granted vested six months from the grant date and the remaining shares vest in equal monthly installments until fully vested on February 3, 2018.
(14) Shares subject to the option are fully vested and immediately exercisable.
(15) The option was granted on November 1, 2016. Options representing 1/10th of the total shares granted vested six months from the grant date and the remaining shares vest in equal monthly installments until they are fully vested on November 1, 2020.
(16) The restricted stock units, which represent the remaining portion of restricted stock units granted on November 1, 2016, vest in three equal annual installments beginning on November 1, 2018.
(17) The restricted stock units, which represent the remaining portion of restricted stock units granted on December 1, 2015, vest in two equal annual installments beginning on December 1, 2018.

Each of the options and other equity awards reflected on the table above were issued under the 2006 Plan or the 2015 Plan, which are plans that were or are available to all of our employees.

 

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Option Exercises and Stock Vested

The following table shows all stock options exercised and value realized upon exercise, and all stock awards vested and value realized upon vesting, by the NEOs during 2017.

 

     Option Awards      Stock Awards  

Name

   Number of
Shares
Acquired on
Exercise (#)
     Value Realized
on Exercise ($)
     Number of
Shares
Acquired on
Vesting (#)
     Value Realized
on Vesting (1)($)
 

Ronald Black

     —          —          38,636        492,768  

Rahul Mathur

     —          —          20,000        293,200  

Laura Stark

     33,408        194,814        23,849        332,951  

Jae Kim

     35,704        133,976        19,738        275,075  

 

(1) The value realized equals the market value of our common stock on the vesting date multiplied by the number of shares that vested.

CEO Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Dr. Ronald Black, our CEO:

For fiscal year 2017, our last completed fiscal year:

 

   

the median of the annual total compensation of all employees of our company (other than our CEO), was $135,117; and

 

   

the annual total compensation of our CEO, as reported in the Summary Compensation Table presented elsewhere in this proxy statement, was $10,344,156.

Based on this information, for fiscal year 2017, the ratio of the annual total compensation of Dr. Black, our CEO, to the median of the annual total compensation of employees was approximately 77 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions, adjustments, and estimates that we used were as follows:

 

   

We selected December 31, 2017, which is the last day of our fiscal year, as the date upon which we would identify the median employee.

 

   

As of December 31, 2017, our employee population consisted of approximately 819 individuals, including employees in the United States, Australia, Canada, China, Finland, France, India, Japan, the Netherlands, Singapore, South Korea, Taiwan and the United Kingdom. Of these employees, 402 were located in the United States and 417 were located outside of the United States.

 

   

When determining our median employee, we excluded all employees from China and Taiwan. The number of employees excluded from China was 2 and the number of employees excluded from Taiwan was 2.

 

   

To identify the “median employee” from our employee population we used payroll and equity plan records for January 1, 2017 through December 31, 2017 (the “compensation measure”).

 

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The compensation measure included the following: base salary, employer cost of benefits, employer retirement plan contributions, including 401(k) matching, bonus payments, grant date fair value of stock options and restricted stock units, employee stock purchase plan discounts and sales commissions.

 

   

For countries other than the United States and Canada, the employer cost of benefits was calculated based on the average employer cost per country.

 

   

For countries in the European Union, Australia and Singapore, the employer cost of benefits includes the cost of holidays.

 

   

We annualized the base salary and employer cost of benefits of all permanent employees who were hired in fiscal year 2017 but did not work for us or our subsidiaries for the entire fiscal year.

 

   

Amounts paid in foreign currency were converted into United States dollars using exchange rates in effect as of December 31, 2017.

 

   

With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of such employee’s compensation for fiscal year 2017 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $135,117.

 

   

With respect to the annual total compensation for the CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table.

Potential Payments Upon Termination or Change of Control

Equity Acceleration

In the event of a “change in control” or “merger” of the Company, as defined in the plans, each outstanding option or equity award will be assumed or an equivalent option or right substituted by the successor company. In the event that the successor company refuses to assume or substitute for the option or equity award, the participant will fully vest in and have the right to exercise all of his or her options or stock appreciation rights, including shares as to which such awards would not otherwise be vested or exercisable, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares and performance units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an option or stock appreciation right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the administrator of the plan will notify the participant that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the administrator, and the option or stock appreciation right will terminate upon the expiration of such period.

The form of option agreement for the 2015 Plan and the 2006 Plan, provide that if a successor company assumes outstanding options or awards or substitutes for options or awards with an equivalent award, then if following such assumption or substitution the participant’s status as an employee or employee of the successor company, as applicable, is terminated by the successor company as a result of an “Involuntary Termination” other than for “Cause” within 12 months following the change in control, the option or award will immediately vest and become exercisable as to 100% of the shares subject to the option or award.

Change of Control Severance Agreements

We have entered into change of control severance agreements with our executive officers, except our CEO who has an employment agreement that governs certain change of control severance obligations applicable to him. These agreements are designed to promote stability and retention of senior management prior to and following a change of control and to align executive and stockholder interests by enabling executives to consider corporate transactions that are in the best interests of the stockholders and other constituents of the company without undue concern over whether the transactions may jeopardize the executives’ own employment.

 

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Each agreement has an initial term of three years and will renew automatically for additional one-year terms unless either party to the agreement provides the other with written notice of non-renewal at least 90 days prior to the date of automatic renewal. If we terminate the executive’s employment without “Cause” or the executive terminates his employment for “Good Reason”, and in each case, such termination occurs during a period beginning three months before a change of control and ending 12 months following a change of control, then subject to the executive signing and not revoking a separation agreement and release of claims and the executive’s continued compliance with the terms of the At Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreement entered into between the executive and the Company, the executive will receive: (i) a lump sum payment (less applicable withholding taxes) equal to 100% of the executive’s annual base salary as in effect immediately prior to the executive’s termination date or, if greater, at the level in effect immediately prior to the change of control; (ii) a lump sum payment (less applicable withholding taxes) equal to 100% of the executive’s full bonus and commission for the year of termination at target level as in effect immediately prior to the executive’s termination date, or, if greater, at the level in effect immediately prior to the change of control; (iii) 100% of the executive’s then-outstanding and unvested equity awards will become vested in full (and if the amount of the award to vest is determined based on the achievement of performance criteria, then the equity awards will vest based on achievement at target levels for the relevant performance period(s)); and (iv) if the executive elects continuation coverage pursuant to COBRA for executive and his or her eligible dependents, the Company will reimburse the executive for the COBRA premiums for a maximum period of 12 months.

CEO Employment Agreement

Dr. Black’s employment agreement with the Company provides that in the event the Company terminates Dr. Black’s employment with the Company without “Cause” and such termination does not occur within the three months prior to or 12 months following a change of control of the Company, Dr. Black will receive: (i) continued payment (over 12 months) of one year of base salary and 100% of his target bonus, (ii) a monthly $3,000 payment (in lieu of continued employee benefits) for a period of 12 months, and (iii) 12 months additional vesting of all equity awards with a service based component, including all equity awards with a mixture of performance-based vesting provisions as to which the performance metric has been achieved by the termination date, but not as to any such awards as to which the performance metric has not been achieved. In the event the Company terminates Dr. Black’s employment with the Company without “Cause” or Dr. Black voluntarily terminates his employment for “Good Reason”, and in either event, such termination occurs within three months prior to or 12 months following a change of control of the Company, Dr. Black will receive: (i) continued payment (over 12 months) of 18 months of base salary and 150% of his target bonus, (ii) a monthly $3,000 payment (in lieu of continued employee benefits) for a period of 18 months, and (iii) 100% vesting of all equity awards with a service based component, including all equity awards with a mixture of performance-based vesting provisions as to which the performance metric has been achieved by the termination date, but not as to any such awards as to which the performance metric has not been achieved. If equity awards are not assumed by the successor company in a change of control transaction, the awards will be treated as described under “Equity Acceleration” above.

Potential Change of Control Payments

The value of the benefits that would be payable to Dr. Black assuming a qualifying termination of employment on December 31, 2017 is included in the chart below.

 

     Salary      Bonus      Equity      Benefits      Total  

No Change of Control

   $ 555,000      $ 721,500      $ 7,699,573      $ 36,000      $ 9,012,073  

Change of Control

   $ 832,500      $ 1,082,250      $ 16,168,091      $ 54,000      $ 18,136,841  

 

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The value of the benefits that would be payable to our NEOs, except for our CEO, assuming a qualifying termination of employment on December 31, 2017 is included in the chart below.

 

     Salary      Bonus      Equity      Benefits      Total  

Rahul Mathur

   $ 330,000      $ 270,000      $ 1,510,478      $ 25,122      $ 2,135,600  

Laura Stark

   $ 325,000      $ 310,000      $ 2,132,385      $ 21,224      $ 2,788,609  

Jae Kim

   $ 330,000      $ 270,000      $ 1,607,777      $ 33,254      $ 2,241,031  

Compensation of Directors

The following table shows compensation information for our non-employee directors for 2017.

 

Name

   Fees Earned
or Paid in
Cash ($)
     Stock
Awards
(1)($)
    Total ($)  

J. Thomas Bentley

     65,000        160,017 (2)      225,017  

E. Thomas Fisher

     40,000        160,017 (3)      200,017  

Penelope Herscher

     55,625        160,017 (4)      215,642  

Emiko Higashi

     23,516        313,705 (5)      337,221  

Charles Kissner

     59,375        160,017 (6)      219,392  

David Shrigley

     40,000        160,017 (7)      200,017  

Eric Stang

     75,000        160,017 (8)      235,017  

 

(1) Amounts shown do not reflect compensation actually received by the non-employee directors. Instead, the amounts shown are the aggregate grant date fair value computed in accordance with the provisions of FASB ASC Topic 718. The assumptions used to calculate the value of stock and stock option awards are set forth under Note 12 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2017.
(2) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Mr. Bentley holds no options to purchase common stock as of December 31, 2017.
(3) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Mr. Fisher holds options to purchase an aggregate of 40,000 shares of common stock as of December 31, 2017.
(4) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Ms. Herscher holds no options to purchase common stock as of December 31, 2017.
(5) Reflects the compensation costs to be recognized associated with an option grant to purchase 40,000 shares at an exercise price of $12.04 per share, the fair market value on the date of grant, disregarding forfeiture assumptions and a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Ms. Higashi holds no additional securities as of December 31, 2017.
(6) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Mr. Kissner holds options to purchase an aggregate of 40,000 shares of common stock as of December 31, 2017.
(7) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Mr. Shrigley holds no options to purchase common stock as of December 31, 2017.

 

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(8) Reflects the compensation costs to be recognized associated with a restricted stock unit award of 11,792 shares of common stock made on October 2, 2017 with a fair value as of the grant date of $13.57 per share disregarding forfeiture assumptions. Mr. Stang holds options to purchase an aggregate of 40,000 shares of common stock as of December 31, 2017.

Summary of Director Compensation Plan

Annual Retainer. Each independent director receives an annual retainer of $40,000 in cash. The Chairpersons of the Board and Audit Committee each receive an additional annual retainer of $25,000. The Chairperson of the Compensation Committee receives an additional annual retainer of $20,000. The Chairperson of the Corporate Development Committee, which oversees the Company’s acquisition and divestiture activity, receives an additional annual retainer of $15,000. The Chairperson of the Corporate Governance and Nominating Committee receives an additional annual retainer of $10,000. Each annual retainer is paid in quarterly installments. The annual retainers were not increased for 2017.

Annual Equity Grant. Each independent director receives an annual equity grant of such number of RSUs with an approximate fair market value equal to $160,000 at the time of grant. The RSU grants vest in full at the end of a one-year period, subject to the independent director continuing to serve through each applicable vesting date. If the director discontinues service prior to the vesting of any RSU grant, the Compensation Committee may, in its discretion, permit such grant to vest pro rata for the portion of the year during which such director served.

Initial Equity Grant. Any newly elected independent director joining our Board of Directors will receive an initial option to purchase 40,000 shares of common stock when he or she is first elected as a member of the Board. The term of such options will not exceed ten years. The option grants vest over a four-year period, with one-eighth of shares subject to the option vesting six months after the date of grant and the remaining shares vesting ratably each month thereafter, subject to the independent director continuing to serve through each applicable vesting date.

Each of the options granted to our independent directors was issued under the 2006 Plan or the 2015 Plan, which are plans that are available to all of our employees. As described under “Outstanding Equity Awards at Fiscal Year End — Potential Payments Upon Termination or Change in Control,” the 2006 Plan and the 2015 Plan provide for certain acceleration upon a “change in control” of the Company, as defined under such plans. In addition, with respect to options and any other equity awards granted to non-employee directors that are assumed or substituted for upon a change of control under the 2006 Plan or the 2015 Plan, if the non-employee director is terminated other than upon a voluntary resignation, the options and other equity awards granted to such non-employee director will fully vest and be exercisable with respect to 100% of the shares subject to such options and other equity awards.

Pursuant to stock ownership guidelines adopted by the Board in October 2006 and most recently updated in January 2015, each independent director is expected to accumulate and hold an equivalent value of our common stock of three times their annual total cash compensation and to achieve this by five years from the date that the director joined the Board. Directors are expected to maintain this minimum amount of stock ownership throughout their tenure on the Board. As of December 31, 2017, all of our directors met their ownership requirements.

 

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AUDIT COMMITTEE REPORT

This section shall not be deemed to be “soliciting material,” or to be “filed” with the SEC, is not subject to the liabilities of Section 18 of the Securities Exchange Act and is not to be incorporated by reference into any filing of Rambus under the Securities Act of 1933, as amended, or the Securities Exchange Act, regardless of date or any other general incorporation language in such filing.

Report of the Audit Committee

The following is the report of the Audit Committee of our Board of Directors with respect to our audited financial statements for the fiscal year ended December 31, 2017, which include our consolidated balance sheets as of December 31, 2017 and 2016 and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the fiscal years ended December 31, 2017, 2016 and 2015, and the notes thereto.

 

Review with Management    The Audit Committee has reviewed and discussed our audited financial statements and management’s report on internal control over financial reporting with management.
Review and Discussions with the Independent Registered Public Accounting Firm   



The Audit Committee has discussed with PricewaterhouseCoopers LLP, our independent registered public accounting firm, the matters required to be discussed by Auditing Standards No. 1301, “Communications with Audit Committees” issued by the Public Accounting Oversight Board (“PCAOB”). The Audit Committee has also received written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of PCAOB regarding the independent auditor’s communications with us concerning independence, as may be modified or supplemented, and has discussed with PricewaterhouseCoopers LLP its independence from us.
Conclusion    Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 for filing with the SEC.
Respectfully submitted by:   

THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

Charles Kissner (Chair)

J. Thomas Bentley*

Emiko Higashi

David Shrigley

 

* Mr. Bentley will serve on the Audit Committee until the completion of the 2018 Annual Meeting.

 

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OTHER MATTERS

The Board does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented or otherwise allowed to be considered at the Annual Meeting, the persons named in the enclosed proxy will have discretion to vote shares they represent in accordance with their own judgment on such matters.

It is important that your shares be represented at the meeting, regardless of the number of shares which you hold. You are, therefore, urged to execute and return, at your earliest convenience, the accompanying proxy card in the envelope which has been enclosed.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ Jae Kim

Jae Kim

Senior Vice President, General Counsel and Secretary

Sunnyvale, California

March 9, 2018

 

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Appendix A

RAMBUS INC.

2015 EQUITY INCENTIVE PLAN

(as amended March 8, 2018)

1. Purposes of the Plan. The purposes of this Plan are:

 

   

to attract and retain the best available personnel for positions of substantial responsibility,

 

   

to provide incentives to individuals who perform services to the Company, and

 

   

to promote the success of the Company’s business.

The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.

2. Definitions. As used herein, the following definitions will apply:

(a) “Administrator” means the Board or any of its Committees that will be administering the Plan in accordance with Section 4 of the Plan.

(b) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(c) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and other stock or cash awards as the Administrator may determine.

(d) “Award Agreement” means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.

(e) “Board” means the Board of Directors of the Company.

(f) “Change in Control” means the occurrence of any of the following events:

(i) A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company; provided, however, that for purposes of this subsection, the acquisition of additional stock by any one Person, who is considered to own more than 50% of the total voting power of the stock of the Company will not be considered a Change in Control; provided, however, that for purposes of this clause (i), (1) the acquisition of beneficial ownership of additional stock by any one Person who is considered to beneficially own more than 50% of the total voting power of the stock of the Company will not be considered a Change in Control; and (2) if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of

 

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50% or more of the total voting power of the stock of the Company or of the ultimate parent entity of the Company, such event shall not be considered a Change in Control under this clause (i). For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or

(ii) A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or

(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

Notwithstanding the foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.

Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change the state of the Company’s incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transaction.

(g) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(h) “Committee” means a committee of independent, Outside Directors appointed by the Board in accordance with Section 4 hereof.

(i) “Common Stock” means the common stock of the Company.

(j) “Company” means Rambus Inc., a Delaware corporation, or any successor thereto.

 

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(k) “Consultant” means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render bona fide services to such entity, provided the services: (i) are not in connection with the offer or sale of securities in a capital-raising transaction, and (ii) do not directly promote or maintain a market for the Company’s securities, in each case, within the meaning of Form S-8 promulgated under the Securities Act, and provided, further, that a Consultant will include only those persons to whom the issuance of Shares may be registered under Form S-8 promulgated under the Securities Act.

(l) “Director” means a member of the Board.

(m) “Disability” means total and permanent disability as defined in Section 22(e) (3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator from time to time.

(n) “Dividend Equivalent” means a credit, payable in cash or Shares, made at the discretion of the Administrator or as otherwise provided by the Plan, to the account of a Participant in an amount equal to the cash dividends paid on one Share for each Share represented by an Award held by such Participant. Subject to the provisions of Section 6, Dividend Equivalents may be subject to the same vesting restrictions as the related Shares subject to an Award, at the discretion of the Administrator.

(o) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.

(p) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(q) “Exchange Program” means a program under which (i) outstanding Awards are surrendered or cancelled in exchange for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is increased or reduced. The Administrator may not implement an Exchange Program.

(r) “Fair Market Value” means, as of any date, the value of Common Stock as the Administrator may determine in good faith by reference to the price of such stock on any established stock exchange or a national market system on the day of determination if the Common Stock is so listed on any established stock exchange or a national market system. If the Common Stock is not listed on any established stock exchange or a national market system, the value of the Common Stock as the Administrator may determine in good faith.

(s) “Fiscal Year” means the fiscal year of the Company.

(t) “Incentive Stock Option” means an Option that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(u) “Inside Director” means a Director who is an Employee.

(v) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(w) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

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(x) “Option” means a stock option granted pursuant to the Plan.

(y) “Outside Director” means a Director who is not an Employee.

(z) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(aa) “Participant” means the holder of an outstanding Award.

(bb) “Performance Period” means any Fiscal Year of the Company or such other period as determined by the Administrator in its sole discretion.

(cc) “Performance Share” means an Award denominated in Shares which may be earned in whole or in part upon attainment of performance objectives or other vesting criteria as the Administrator may determine pursuant to Section 11.

(dd) “Performance Unit” means an Award which may be earned in whole or in part upon attainment of performance objectives or other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 11.

(ee) “Period of Restriction” means the period during which the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator.

(ff) “Plan” means this 2015 Equity Incentive Plan.

(gg) “Restricted Stock” means Shares issued pursuant to a Restricted Stock award under Section 8 of the Plan, or issued pursuant to the early exercise of an Option.

(hh) “Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 9. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

(ii) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(jj) “Section 16(b)” means Section 16(b) of the Exchange Act.

(kk) “Service Provider” means an Employee, Director or Consultant.

(ll) “Share” means a share of the Common Stock, as adjusted in accordance with Section 16 of the Plan.

(mm) “Stock Appreciation Right” means an Award, granted alone or in connection with an Option, that pursuant to Section 10 is designated as a Stock Appreciation Right.

(nn) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

 

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(oo) “Successor Corporation” has the meaning given to such term in Section 16(c) of the Plan.

3. Stock Subject to the Plan.

(a) Stock Subject to the Plan. Subject to the provisions of Section 16 of the Plan, the maximum aggregate number of Shares that may be awarded and sold under the Plan is 9,500,000 Shares, plus (i) 8,158,396, which represents the number of Shares that remained available for grant under the Company’s 2006 Equity Incentive Plan (the “Existing Plan”) on the date this Plan became effective, plus (ii) the number of Shares that are subject to awards under the Existing Plan that, on or after the date this Plan became effective, are forfeited, cancelled, exchanged or surrendered or terminate under the Existing Plan. The Shares may be authorized, but unissued, or reacquired Common Stock. In addition, no more than 10,000,000 Shares may be granted pursuant to Options intended to qualify as Incentive Stock Options.

(b) Full Value Awards. Any Shares subject to Awards granted with an exercise price less than the Fair Market Value on the date of grant of such Awards will be counted against the numerical limits of this Section 3 as 1.5 Shares for every one Share subject thereto. Further, if Shares acquired pursuant to any such Award are forfeited or repurchased by the Company and would otherwise return to the Plan pursuant to Section 3(c), 1.5 times the number of Shares so forfeited or repurchased will return to the Plan and will again become available for issuance.

(c) Lapsed Awards. If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, is forfeited to or repurchased by the Company, the unpurchased Shares (or for Awards other than Options and Stock Appreciation Rights, the forfeited or repurchased Shares) which were subject thereto will become available for future grant or sale under the Plan (unless the Plan has terminated). With respect to Stock Appreciation Rights, all of the Shares covered by the Award (that is, Shares actually issued pursuant to a Stock Appreciation Right, as well as the Shares that represent payment of the exercise price) shall cease to be available under the Plan. However, Shares that have actually been issued under the Plan under any Award will not be returned to the Plan and will not become available for future distribution under the Plan; provided, however, that if unvested Shares of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company, such Shares will become available for future grant under the Plan. Shares used to pay the tax and exercise price of an Award will not become available for future grant or sale under the Plan. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment provided in Section 16, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code, any Shares that become available for issuance under the Plan under this Section 3(c).

(d) Share Reserve. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) General Administration; Multiple Administrative Bodies. The Plan will be administered by a Committee or Committees as determined by the Board, which will be constituted to satisfy Applicable Laws. Different Committees with respect to different groups of Service Providers may administer the Plan.

(ii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.

 

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(iii) Delegation of Authority for Day-to-Day Administration. Except to the extent prohibited by Applicable Law, the Administrator may delegate to one or more individuals the day-to-day administration of the Plan and any of the functions assigned to it in this Plan. Such delegation may be revoked at any time.

(b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom Awards may be granted hereunder;

(iii) to determine the number of Shares to be covered by each Award granted hereunder;

(iv) to approve forms of Award Agreements for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;

(vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;

(viii) to modify or amend each Award (subject to Section 6 and Section 21(c) of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(a)(ii) of the Plan regarding Incentive Stock Options);

(ix) to allow Participants to satisfy tax withholding obligations in such manner as prescribed in Section 17 of the Plan;

(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xi) to determine whether Awards (other than Options or SARs) will be adjusted for Dividend Equivalents;

(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award pursuant to such procedures as the Administrator may determine;

(xiii) to impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by a Participant or other subsequent transfers by the Participant of any Shares issued as a result of or under an Award, including without limitation, (A) restrictions under an insider trading policy, and (B) restrictions as to the use of a specified brokerage firm for such resales or other transfers;

 

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(xiv) to require that the Participant’s rights, payments and benefits with respect to an Award (including amounts received upon the settlement or exercise of an Award) will be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award, as may be specified in an Award Agreement at the time of the Award, or later if (A) Applicable Laws require the Company to adopt a policy requiring such reduction, cancellation, forfeiture or recoupment, or (B) pursuant to an amendment of an outstanding Award; and

(xv) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards.

5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares and such other cash or stock awards as the Administrator determines may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.

6. Limitations.

(a) Incentive Stock Options.

(i) $100,000 Limitation. Notwithstanding any designation of an Option as an Incentive Stock Option, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a)(i), Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

(ii) Maximum Option Term. In the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.

(iii) Option Exercise Price. In the case of an Incentive Stock Option granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant.

(b) Share Limitations. Subject to Section 16, the following limitations shall apply to Awards under the Plan:

(i) Options. During any Fiscal Year, no Participant will be granted Options covering more than 1,000,000 Shares; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted Options covering up to an additional 1,000,000 Shares;

(ii) Restricted Stock. During any Fiscal Year, no Participant will receive more than an aggregate of 300,000 Shares of Restricted Stock; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an additional 300,000 Shares of Restricted Stock;

 

 

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(iii) Restricted Stock Units. During any Fiscal Year, no Participant will receive more than an aggregate of 300,000 Restricted Stock Units; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an additional 300,000 Restricted Stock Units;

(iv) Stock Appreciation Rights. During any Fiscal Year, no Participant will be granted Stock Appreciation Rights covering more than 1,000,000 Shares; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted Stock Appreciation Rights covering up to an additional 1,000,000 Shares; and

(v) Performance Units / Performance Shares. During any Fiscal Year, no Participant will receive (1) Performance Units having an initial value greater than $3,000,000, and (2) more than 300,000 Performance Shares; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted up to an additional 300,000 Performance Shares.

(c) Exchange Program. The Administrator may not institute an Exchange Program.

(d) Outside Director Limitations. No Outside Director may be granted, in any Fiscal Year, Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than $300,000, increased to $500,000 in the Fiscal Year of his or her initial service as an Outside Director. Any Awards granted to an individual while he or she was an Employee, or while he or she was a Consultant but not an Outside Director, will not count for purposes of the limitations under this Section 6.

(e) Vesting Limits. Awards granted under the Plan shall vest no earlier than the one (1) year anniversary of the Award’s date of grant, provided that the Administrator, in its sole discretion, may provide an Award may accelerate vesting by reason of the Participant’s death, Disability or retirement, or upon a major capital change of the Company (including without limitation upon the occurrence of a Change in Control, merger of the Company with or into another corporation or entity, or similar transaction), and provided further, that, notwithstanding the foregoing in this sentence, Awards that result in the issuance of an aggregate of up to 5% of the Shares reserved for issuance under Section 3(a) may be granted to Service Providers, or outstanding Awards modified, without regard to such minimum vesting, exercisability and distribution provisions.

(f) Dividend Payments. Dividends and other distributions payable with respect to Shares subject to Awards (including Dividend Equivalents) will not be paid before the underlying Shares vest.

7. Stock Options.

(a) Grant of Options. Subject to the terms and conditions of the Plan, Options may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.

(b) Number of Shares. Subject to the limitations contained in Section 6, the Administrator will have complete discretion to determine the number of Shares subject to Options granted to any Participant.

(c) Term of Option. The Administrator will determine the term of each Option in its sole discretion; provided, however, that the term will be no more than ten (10) years from the date of grant thereof, subject to the provisions of Section 6.

(d) Option Exercise Price and Consideration.

(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the date of grant, subject to the provisions of Section 6.

 

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(ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator will fix the period within which the Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.

(iii) Form of Consideration. The Administrator will determine the acceptable form(s) of consideration for exercising an Option, including the method of payment, to the extent permitted by Applicable Laws.

(e) Exercise of Option.

(i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.

An Option will be deemed exercised when the Company receives: (i) notice of exercise (in such form as the Administrator may specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with an applicable withholding taxes). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 16 of the Plan.

(ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

(iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.

 

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8. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.

(b) Restricted Stock Agreement. Subject to the limitations contained in Section 6, each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction (if any), the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on such Shares have lapsed.

(c) Transferability. Except as provided in this Section 8, Shares of Restricted Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.

(d) Other Restrictions. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted Stock as it may deem advisable or appropriate.

(e) Removal of Restrictions. Except as otherwise provided in this Section 8, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. Subject to the vesting limitations contained in Section 6, the Administrator, in its discretion, may accelerate the time at which any restrictions will lapse or be removed.

(f) Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.

(g) Dividends and Other Distributions. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.

(h) Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.

9. Restricted Stock Units.

(a) Grant. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Subject to the limitations contained in Section 6, each Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 9(d), may be left to the discretion of the Administrator.

(b) Vesting Criteria and Other Terms. The Administrator will set vesting criteria in its discretion, which, depending on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. Each Award of Restricted Stock Units will be evidenced by an Award Agreement that will specify the vesting criteria, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

 

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(c) Earning Restricted Stock Units. Upon meeting the applicable vesting criteria, the Participant will be entitled to receive a payout as specified in the Award Agreement. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit, or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws or any other basis determined by the Administrator in its discretion. Subject to the vesting limitations contained in Section 6, after the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any vesting criteria that must be met to receive a payout.

(d) Form and Timing of Payment. Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.

(e) Cancellation. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the Company.

10. Stock Appreciation Rights.

(a) Grant of Stock Appreciation Rights. Subject to the terms and conditions of the Plan, a Stock Appreciation Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.

(b) Number of Shares. Subject to the limitations contained in Section 6, the Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted to any Participant.

(c) Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant.

(d) Stock Appreciation Right Agreement. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.

(e) Expiration of Stock Appreciation Rights. A Stock Appreciation Right granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than ten (10) years from the date of grant thereof. Notwithstanding the foregoing, the rules of Section 7(e) also will apply to Stock Appreciation Rights.

(f) Payment of Stock Appreciation Right Amount. Upon exercise of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:

(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.

At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of equivalent value, or in some combination thereof.

11. Performance Units and Performance Shares.

(a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. Subject to the limitations contained in Section 6, the Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant.

 

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(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant.

(c) Performance Objectives and Other Terms. The Administrator will set performance objectives or other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid out to the Participant. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws, or any other basis determined by the Administrator in its discretion.

(d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. Subject to the vesting limitations contained in Section 6, after the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share.

(e) Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.

(f) Cancellation of Performance Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.

12. Dividend Equivalents. The Administrator, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant will be entitled to receive Dividend Equivalents with respect to the payment of cash dividends on Shares having a record date prior to the date on which the Awards are settled or forfeited. Subject to the limitations contained in Section 6, the Dividend Equivalents, if any, will be credited to an Award in such manner and subject to such terms and conditions as determined by the Administrator in its sole discretion. In the event of a dividend or distribution paid in Shares or any other adjustment made upon a change in the capital structure of the Company as described in Section 16, appropriate adjustments will be made to the Participant’s Award of Performance Units so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant would be entitled by reason of the consideration issuable upon settlement of the Award, and all such new, substituted or additional securities or other property will be immediately subject to the same vesting and settlement conditions as are applicable to the Award. Dividend Equivalents will be subject to the Fiscal Year limits applicable to the underlying Restricted Stock Unit, Performance Share or Performance Unit Award as set forth in Section 6, as applicable, hereof.

13. [RESERVED]

14. Leaves of Absence. Unless the Administrator provides otherwise, or except as otherwise required by Applicable Laws, vesting of Awards granted hereunder will be suspended starting on the 30th consecutive day of any unpaid leave of absence approved by the Company, with such suspension of vesting terminating upon the

 

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Participant’s resumption of service with the Company. A Service Provider will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.

15. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.

16. Adjustments; Dissolution or Liquidation; Merger or Change in Control.

(a) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3 and 6.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.

(c) Change in Control.

(i) In the event of a Change in Control, subject to Section 16(c)(ii) and any vesting acceleration provisions in an Award or other agreement, outstanding Awards shall be treated in the manner provided in the agreement relating to the Change in Control (including as the same may be amended), including, without limitation:

(1) the continuation of the outstanding Award by the Company, if the Company is a surviving corporation;

(2) the assumption of the outstanding Awards, or substitution of equivalent Awards, by the acquiring or succeeding corporation (or an affiliate thereof) (the “Successor Corporation”) with appropriate adjustments as to the number and kind of shares and prices;

(3) that outstanding Awards will vest and become exercisable (and for the avoidance of doubt, notwithstanding the vesting limitations in Section 6), realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such Change in Control, and, to the extent the Administrator determines, terminate upon or immediately prior to the effectiveness of such merger or Change in Control;

(4) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Award or realization of the Participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good faith that no amount would have

 

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been attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other rights or property selected by the Administrator in its sole discretion; or

(5) any combination of the foregoing.

Such agreement shall not be required to treat all Awards or individual types of Awards similarly in the Change in Control.

(ii) In the event that the Successor Corporation refuses to assume, continue or substitute for the Award (and for the avoidance of doubt, notwithstanding the vesting limitations in Section 6), the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals will be deemed achieved at target levels as to a prorated portion of such Award based on the portion of the applicable performance period that has lapsed through the date of the merger or Change in Control, and all other vesting criteria will be deemed achieved as to such prorated portion of such Award. In addition, if an Option or Stock Appreciation Right is not assumed or substituted for in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.

With respect to Awards granted to Outside Directors that are assumed or substituted for, if on the date of or following such assumption or substitution the Participant’s status as a Director or a director of the Successor Corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant, then the Participant will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares subject thereto, including Shares as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals will be deemed achieved at target levels as to a prorated portion of such Award based on the portion of the applicable performance period that has lapsed through the date of the merger or Change in Control, and all other vesting criteria will be deemed achieved as to such prorated portion of such Award.

For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Share or Performance Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the merger or Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the Successor Corporation, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Share or Performance Unit, for each Share subject to such Award (or in the case of Performance Units denominated in dollars, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the Successor Corporation equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.

 

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Notwithstanding anything in this Section 16(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the Successor Corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.

Notwithstanding anything in this Section 16(c) to the contrary, if a payment under an Award Agreement is subject to Code Section 409A and if the change in control definition contained in the Award Agreement does not comply with the definition of “change of control” for purposes of a distribution under Code Section 409A, then any payment of an amount that is otherwise accelerated under this Section will be delayed until the earliest time that such payment would be permissible under Code Section 409A without triggering any penalties applicable under Code Section 409A.

17. Tax Withholding

(a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld with respect to such Award (or exercise thereof).

(b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (a) paying cash (or cash equivalent), (b) electing to have the Company withhold otherwise deliverable cash or Shares having a fair market value equal to the minimum statutory amount required to be withheld or such greater amount as the Administrator may determine if such amount would not have adverse accounting consequences, as the Administrator determines in its sole discretion, (c) delivering to the Company already-owned Shares having a fair market value equal to the minimum statutory amount required to be withheld, or such greater amount as the Administrator may determine if such amount would not have adverse accounting consequences, as the Administrator determines in its sole discretion, or (d) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The fair market value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.

(c) Compliance With Code Section 409A. Awards will be designed and operated in such a manner that they are either exempt from the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A, except as otherwise determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A, the Award will be granted, paid, settled or deferred in a manner that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A.

18. No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws.

19. Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant.

 

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20. Term of Plan. Subject to Section 25 of the Plan, the Plan will become effective upon its adoption by the Board. It will continue in effect for a term of ten (10) years unless terminated earlier under Section 21 of the Plan.

21. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board or the Administrator may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

22. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.

(b) Investment Representations. As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

23. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or foreign law or under the rules and regulations of the Securities and Exchange Commission, the stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Company’s counsel to be necessary or advisable for the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been obtained.

24. Forfeiture Events. The Administrator may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but will not be limited to, fraud, breach of a fiduciary duty, restatement of financial statements as a result of fraud or willful errors or omissions, termination of employment for cause, violation of material Company and/or Subsidiary policies, breach of non-competition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Subsidiaries. The Administrator may also require the application of this Section with respect to any Award previously granted to a Participant even without any specified terms being included in any applicable Award Agreement to the extent required under Applicable Laws.

25.