Cautionary Statement Regarding Forward-Looking Statements
This proxy statement contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact may be forward-looking statements. You can identify these and other forward-looking statements by the use of words such as “may,” “will,” “could,” “would,” “should,” “expects,” “plans,” “anticipates,” “relies,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continues,” “thinks,” “seeks,” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements. Forward-looking statements are based on current expectations and assumptions, which are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements, including unexpected delays, difficulties, and expenses in executing against our environmental, climate, diversity and inclusion or other Environmental, Social, and Governance (ESG) targets, goals and commitments outlined in this document, including, but not limited to, our efforts to reduce our greenhouse gas emissions, as well as changes in laws or regulations affecting us, such as changes in cybersecurity, data privacy, environmental, safety and health laws, and other risks as disclosed in our most recent annual report on Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”). You are cautioned not to place undue reliance on these forward-looking statements, and we expressly assume no obligation and do not intend to update the forward-looking statements in this report after the date hereof. In addition, some of the statements contained in this proxy statement may rely on third-party information and projections that management believes to be reputable; however, we do not independently verify or audit this information, and any inaccuracies or deviations in such information and projections may materially impact our ability to execute on our strategy, achieve our goals, or otherwise adversely impact our business.
This proxy statement contains ESG-related statements based on hypothetical scenarios and assumptions as well as estimates that are subject to a high level of uncertainty, and these statements should not necessarily be viewed as being representative of current or actual risk or performance, or forecasts of expected risk or performance. In addition, historical, current, and forward-looking environmental and social-related statements may be based on standards for measuring progress that are still developing, and internal controls and processes that continue to evolve. Forward-looking and other statements in this report may also address our corporate responsibility and sustainability progress, plans, and goals, and the inclusion of such statements is not an indication that these matters are necessarily material for the purposes of complying with or reporting pursuant to the U.S. federal securities laws and regulations, even if we use the word “material” or “materiality” in this report. Certain of our disclosures are informed by various third-party frameworks, in addition to stakeholder expectations. However, we cannot guarantee strict adherence to framework recommendations, and our disclosures based on these frameworks may change due to revisions in framework requirements, availability of information, changes in our business or applicable governmental policy, or other factors, some of which may be beyond our control. In addition, non-financial information, such as that included in parts of this proxy statement, is subject to greater potential limitations than financial information, given the methods used for calculating or estimating such information. Historical, current, and forward-looking environmental and social-related statements are also based on standards and metrics, as well as standards for the preparation of any underlying data for those metrics, that are still developing and internal controls and processes that continue to evolve. For example, we note that standards and expectations regarding greenhouse gas (GHG) accounting and the processes for measuring and counting GHG emissions and GHG emission reductions are evolving, and it is possible that our approaches both to measuring our emissions and to reducing emissions and measuring those reductions may be, either currently by some stakeholders or at some point future, considered inconsistent with common or best practices with respect to measuring and accounting for such matters, and reducing overall emissions. While these are based on expectations and assumptions believed to be reasonable at the time of preparation, they should not be considered guarantees. If our approaches to such matters are perceived fall out of step with common or best practice, we may be subject to additional scrutiny, criticism, regulatory and investor engagement or litigation, any of which may adversely impact our business, financial condition, or results of operations. Separately, the standards and performance metrics used, and the expectations and assumptions they are based on, have not, unless otherwise expressly specified, been verified by us or any third party.
Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by reference into this document.
| 2023 Proxy Statement
6
| Information about the Board of Directors and its Committees
management’s appetite for risk and its determination of what constitutes an appropriate level of risk for KLA. In addition, the Board periodically conducts a comprehensive review of our overall risk environment and risk management efforts. The Board and its committees also regularly receive updates from management (including representatives of our legal and internal audit teams) regarding certain risks that we face, including industry, business, macroeconomic, litigation, cybersecurity and other operating risks.
While our Board is ultimately responsible for risk oversight, our Board has delegated to the Audit Committee the primary responsibility for the active oversight of our enterprise risk management activities. Our Audit Committee is not only responsible for overseeing risk management of financial matters, the adequacy of our risk-related internal controls, financial reporting and internal investigations, and cybersecurity, but its charter also provides that the Audit Committee will discuss at least annually KLA’s risk assessment, enterprise risk management processes and major financial risk exposures, as well as the steps our management has taken to monitor and control those exposures. Our Audit Committee reports its findings and activities to the Board at each quarterly Board meeting.
In addition, our other Board committees each oversee certain aspects of risk management. Our Compensation and Talent Committee oversees risks related to our compensation and human capital policies and practices, and our Nominating and Governance Committee oversees governance-related risks, such as Board independence, environmental, social and governance (“ESG”) matters, conflicts of interest and management and director succession planning. The Committees report their findings and activities to the Board.
While the Board is responsible for risk oversight, management is responsible for risk management. KLA maintains an effective internal controls environment and has processes to identify and manage risk, including an executive risk council comprised of representatives from our legal, human resources, finance, global operations, internal audit, procurement, and risk and compliance teams. This council reports to our Chief Executive Officer and has oversight of the various risk assessment, monitoring and controls processes across the Company.
The ten nominees currently serve on the committees of the Board indicated in the following table:
|
|
|
|
|
|
|
Director |
|
Audit |
|
Compensation and Talent |
|
Nominating and Governance |
|
|
|
|
Robert Calderoni |
|
|
|
✓ |
|
Chair |
|
|
|
|
Jeneanne Hanley |
|
|
|
✓ |
|
|
|
|
|
|
Emiko Higashi |
|
✓ |
|
|
|
|
|
|
|
|
Kevin Kennedy |
|
✓ |
|
|
|
✓ |
|
|
|
|
Michael McMullen |
|
|
|
✓ |
|
|
|
|
|
|
Gary Moore |
|
|
|
Chair |
|
✓ |
|
|
|
|
Marie Myers |
|
Chair |
|
|
|
✓ |
|
|
|
|
Victor Peng |
|
|
|
✓ |
|
|
|
|
|
|
Robert Rango |
|
✓ |
|
|
|
|
|
|
|
|
Richard Wallace |
|
|
|
|
|
|
AUDIT COMMITTEE
Current Members: Kevin Kennedy, Marie Myers (Chair), Kiran Patel and Robert Rango.
Meetings Held During Fiscal Year 2023: 8
Primary Responsibilities: The Audit Committee is responsible for appointing and overseeing the work of our independent registered public accounting firm, reviewing cybersecurity initiatives, approving the services performed by our independent registered public accounting firm, and reviewing and evaluating our accounting principles and system of internal accounting controls. In addition, the head of our Internal Audit function, who is supervised by our Chief Financial Officer, formally reports to the Audit Committee and provides updates at each quarterly meeting.
Independence: The Board has determined that each of the members of the Audit Committee meets the independence requirements (including the heightened requirements for Audit Committee members) of NASDAQ and under the rules and regulations of the SEC, and has no material relationship with KLA (including any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a director) outside of their service on the Board and its committees.
| 2023 Proxy Statement
8
| Information about the Board of Directors and its Committees
NOMINATING AND GOVERNANCE COMMITTEE
Current Members: Robert Calderoni (Chair), Kevin Kennedy, Gary Moore, Marie Myers and Kiran Patel.
Meetings Held During Fiscal Year 2023: 4
Primary Responsibilities: The Nominating and Governance Committee is primarily responsible for identifying and evaluating the qualifications of all candidates for election to the Board, as well as reviewing corporate governance policies and procedures and assessing stockholder proposals related to governance matters. The Nominating and Governance Committee assesses the appropriate size and composition of the Board, the effectiveness of its leadership structure, and whether any vacancies on the Board are expected, and monitors our ESG initiatives.
Independence: The Board has determined that each of the members of the Nominating and Governance Committee meets the independence requirements of NASDAQ, and has no material relationship with KLA (including any relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment as a director) outside of their service on the Board and its committees.
Following the Annual Meeting, Mr. Calderoni will remain the Nominating and Governance Committee Chair.
Evaluation of Director Candidates
In the event that vacancies are anticipated, or otherwise arise, the Nominating and Governance Committee considers potential candidates that may come to its attention through current members of the Board, professional search firms, management, stockholders or other persons. In evaluating properly submitted stockholder recommendations, the Nominating and Governance Committee uses the evaluation standards discussed in further detail below and seeks to achieve a balance of knowledge, background, diversity, experience and capability on the Board.
It is the Nominating and Governance Committee’s policy to consider candidates for the Board recommended by, among other persons, stockholders who have owned at least one percent of our outstanding shares for at least one year and who state that they have an intent to continue as a substantial stockholder for the long term. Stockholders wishing to nominate candidates for the Board must notify our Corporate Secretary in writing of their intent to do so and provide us with certain information set forth in Article II, Section Eleven of our bylaws and all other information regarding nominees that is required to be provided pursuant to Regulation 14A of the Securities Exchange Act of 1934 (the “Exchange Act”), or as otherwise requested by the Nominating and Governance Committee.
Majority Vote Policy
We maintain a governance policy applicable to uncontested director elections (elections in which the number of nominees does not exceed the number of directors to be elected) requiring that directors receive majority support in such elections. Under our bylaws, in any uncontested director election, any nominee who receives a greater number of votes cast “FOR” his or her election than votes cast “AGAINST” his or her election will be elected. In accordance with our bylaws, the Nominating and Governance Committee has established procedures under which any director who is not elected shall offer to tender his or her resignation to the Board following certification of the stockholder vote. The Nominating and Governance Committee, composed entirely of independent directors, will consider the offer of resignation and recommend to the Board the action to be taken. The Board will take action on the recommendation, and we will publicly disclose the Board’s decision and the rationale behind it, within 90 days following certification of the stockholder vote. In making their respective decisions, the Nominating and Governance Committee and Board will take into consideration all factors they deem relevant. The director who tenders his or her resignation will not participate in the decisions of the Nominating and Governance Committee or the Board regarding his or her resignation.
Director Qualifications and Diversity
The Board believes that the skill set, backgrounds and qualifications of our directors, considered as a group, should provide a significant composite mix of diversity in experience, knowledge and abilities that will allow the Board to fulfill its responsibilities. In addition, the Board believes that there are certain attributes that every director should possess, such as demonstrated business or academic achievements, the highest ethical standards and a strong sense of professionalism. Accordingly, the Board and the Nominating and Governance Committee consider the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and KLA’s current and future needs.
In considering candidates for director nomination, including evaluating any recommendations from stockholders as set forth above, the Nominating and Governance Committee considers candidates who have demonstrated executive
| 2023 Proxy Statement
24
| Our Corporate Governance Practices
STANDARDS OF BUSINESS CONDUCT; WHISTLEBLOWER HOTLINE AND WEBSITE
The Board has adopted Standards of Business Conduct for all of our employees and directors, including our principal executive and senior financial officers, and we have prepared and made available versions of our Standards of Business Conduct translated into Chinese (Simplified and Traditional), Dutch, French, German, Hebrew, Italian, Japanese and Korean in an effort to maximize the accessibility and understandability of these important guidelines to our employees. You can obtain a copy of our Standards of Business Conduct via our website at http://ir.KLA.com, or by making a written request to us at KLA Corporation, Attention: Investor Relations, One Technology Drive, Milpitas, California 95035. We will make any required disclosures regarding amendments to, or waivers from, the Standards of Business Conduct on our website at the same address.
In addition, we have established a hotline and website for use by employees, as well as third parties such as vendors and customers, to report actual or suspected wrongdoing and to answer questions about business conduct. The hotline and website are both operated by an independent third party, which provides tools to enable individuals to submit reports in a number of different languages and, where permitted by law, on an anonymous basis.
ENSURING AUDITOR INDEPENDENCE
We have taken a number of steps to ensure the continued independence of our outside auditors. Our independent registered public accounting firm reports directly to the Audit Committee, which also has the ability to pre-approve or reject any non-audit services proposed to be conducted by the firm.
COMPENSATION AND TALENT COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During all or a portion of fiscal year 2023, Messrs. Barnholt, Calderoni, Moore and Peng and Mses. Hanley and Higashi served on the Compensation and Talent Committee. None of these individuals was an officer or employee of KLA at any time during fiscal year 2023 or at any other time. During fiscal year 2023, there was no instance in which an executive officer of KLA served as a member of the board of directors or compensation committee of any entity and an executive officer of that same entity served on our Board or Compensation and Talent Committee.
STOCKHOLDER NOMINATIONS TO THE BOARD
Please see “INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES—Nominating and Governance Committee.”
MAJORITY VOTE POLICY
Please see “INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES—Nominating and Governance Committee—Majority Vote Policy.”
STOCKHOLDER OUTREACH
During the year, we engage with our stockholders to better understand their views on matters they consider important, which varies by stockholder, but usually includes topics such as: agenda items for the annual meeting of stockholders; Board composition; business performance and strategy; corporate governance; and environmental, social and human capital management. We typically commence our outreach activities following the filing of our proxy statement. Stockholder outreach is led by our investor relations team, but often includes members of management, our legal and compliance team and occasionally one or more members of our Board. Stockholder concerns expressed in this outreach are summarized and communicated to the Board or one of its committees. Similar to previous years, during outreach sessions, certain stockholders generally expressed a desire to see more disclosure on our website regarding ESG matters. In 2023, we published our third global impact report covering our ESG strategy and the foundation of that strategy.
INSIDER TRADING POLICY
We have adopted a policy on insider trading and unauthorized disclosures that govern the purchase, sale, and other dispositions of our securities by our directors, officers, and employees that are reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the listing standards of the NASDAQ Stock Market. Our policy on insider trading and unauthorized disclosures is filed as Exhibit 19.1 to our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
| 2023 Proxy Statement
38
| Security Ownership of Certain Beneficial Owners and Management
DIRECTORS AND MANAGEMENT
The following table sets forth the beneficial ownership of our Common Stock as of September 8, 2023, by all current directors, each of the NEOs (as defined on page 42 of this Proxy Statement) set forth in the Summary Compensation Table, and all current directors and executive officers as a group. Unless otherwise indicated, the address of each person is c/o KLA Corporation, One Technology Drive, Milpitas, California 95035. Unless otherwise indicated, shares that, as of September 8, 2023, have not yet been issued under outstanding RSUs due to applicable performance or service-vesting requirements that have not yet been satisfied are not included in the table below:
|
|
|
|
|
|
|
|
|
Name |
|
Number of Shares Beneficially Owned |
|
|
Percent of Shares Beneficially Owned(1) |
|
|
|
|
Richard Wallace(2) |
|
|
37,519.392 |
|
|
|
* |
|
|
|
|
Robert Calderoni(3) |
|
|
13,921.527 |
|
|
|
* |
|
|
|
|
Jeneanne Hanley(4) |
|
|
3,054 |
|
|
|
* |
|
|
|
|
Emiko Higashi(4) |
|
|
13,923 |
|
|
|
* |
|
|
|
|
Kevin Kennedy(5) |
|
|
6,989 |
|
|
|
* |
|
|
|
|
Michael McMullen(6) |
|
|
132 |
|
|
|
* |
|
|
|
|
Gary Moore(4) |
|
|
14,185 |
|
|
|
* |
|
|
|
|
Marie Myers(4) |
|
|
3,037 |
|
|
|
* |
|
|
|
|
Kiran Patel(7) |
|
|
13,156 |
|
|
|
* |
|
|
|
|
Victor Peng(8) |
|
|
4,769 |
|
|
|
* |
|
|
|
|
Robert Rango(4) |
|
|
14,119 |
|
|
|
* |
|
|
|
|
Oreste Donzella |
|
|
8,231.392 |
|
|
|
* |
|
|
|
|
Bren Higgins |
|
|
12,572.392 |
|
|
|
* |
|
|
|
|
Ahmad Khan |
|
|
8,836.392 |
|
|
|
* |
|
|
|
|
Brian Lorig |
|
|
4,103.392 |
|
|
|
* |
|
|
|
|
All current directors and executive officers as a group (17 persons)(9) |
|
|
159,275.879 |
|
|
|
* |
|
* Less than 1%.
(1) Based on 136,322,340 outstanding shares of our Common Stock as of September 8, 2023. In addition, shares of our Common Stock subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023, are deemed to be outstanding for the purpose of computing the percentage ownership of the applicable person or entity in this table, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or entity.
(2) Includes 9,182 outstanding shares of our Common Stock that are held by the Wallace Living Trust u/a/d dated 3/27/01, as amended, of which Mr. Wallace is a trustee and beneficiary.
(3) Includes (a) 928 shares subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023, and (b) 11,529.527 outstanding shares of our Common Stock that are held by The 2019 Calderoni Family Trust.
(4) Includes 704 shares subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023.
(5) Includes (a) 704 shares subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023, and (b) 4,821 outstanding shares of our Common Stock that are held by the Kennedy Family Trust u/a/d 11/19/98, of which Mr. Kennedy is a trustee and beneficiary.
(6) Includes 132 shares subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023. Mr. McMullen received the 132 shares upon his election to the Board of Directors on July 24, 2023, as a prorated grant of restricted stock units pursuant to the Company’s 2004 Equity Incentive Plan for his service on the Board through the next annual meeting of stockholders (November 1, 2023).
(7) Includes (a) 704 shares subject to RSUs that will vest and become deliverable within 60 days after September 8, 2023, and (b) 11,894 outstanding shares of our Common Stock that are held by The Kiran Patel Trust dated August 28, 2018, of which Mr. Patel is a trustee and beneficiary.
(8) Includes (a) 704 shares subject to RSUs that will vest and become deliverable within 60 days of September 8, 2023, and (b) 4,065 shares of our Common Stock held by the Peng Family Trust, of which Mr. Peng is a trustee and beneficiary.
(9) Includes 6,692 shares subject to RSUs held by Outside Directors and 5,521 shares subject to RSUs held by executive officers that will vest and become deliverable within 60 days after September 8, 2023, together with the other shares set forth in footnotes (2) through (8).
| 2023 Proxy Statement
43
Advisor to the Compensation and Talent Committee
The Compensation and Talent Committee retains Semler Brossy Consulting Group, LLC (“Semler Brossy”), an independent compensation consultant, to provide the Compensation and Talent Committee with independent, objective analysis and advice on executive officer and director compensation matters. Semler Brossy reports directly to the Chair of the Compensation and Talent Committee and, aside from its support of the Compensation and Talent Committee, performed no other work for the Company during fiscal year 2023.
Semler Brossy generally attends all meetings of the Compensation and Talent Committee in which evaluations of the effectiveness of overall executive compensation programs are conducted or in which compensation for executive officers is analyzed or approved. During fiscal year 2023, Semler Brossy’s duties included providing the Compensation and Talent Committee with relevant market and industry data and analysis, as well as preparing and reviewing materials for the Compensation and Talent Committee’s meetings. In fulfilling these duties, Semler Brossy met, as needed and at the direction of the Compensation and Talent Committee, with our Chief Executive Officer, Chief Human Resources Officer and other executive officers and members of our Human Resources department.
The Compensation and Talent Committee, in conducting its annual assessment in fiscal year 2023, determined that Semler Brossy was independent and did not have any conflicts of interest.
Approval Procedures
During multiple meetings (both with and without management present) and with the assistance of Semler Brossy, the Compensation and Talent Committee engaged in extensive deliberation in developing the fiscal year 2023 executive compensation program, seeking to establish compensation packages and target performance levels aimed at rewarding strong financial performance and our long-term success. The Compensation and Talent Committee’s deliberations for all executive officers looked at a broad range of market data (described below), individual performance reviews and total compensation reports for each officer, the historically cyclical nature of our business, internally appropriate levels and targets relative to the officer’s role, and initial package recommendations from management informed by market data provided by Semler Brossy. With regard to our 2022 Executive Incentive Plan (“2022 Bonus Plan”) and the fiscal year 2023 PRSUs granted to our NEOs (including the EPS Awards), the proposed financial metrics and payout percentage recommendations were developed by management and approved by the Compensation and Talent Committee, with review and guidance from Semler Brossy.
With respect to the compensation of our Chief Executive Officer (Mr. Wallace), the Compensation and Talent Committee considered recommendations prepared by Semler Brossy. Following extensive deliberation, the Compensation and Talent Committee recommended Mr. Wallace’s proposed fiscal year 2023 target compensation opportunities and RSU and PRSU grants for approval by the Outside Directors. The Outside Directors then discussed and, in August 2022, approved Mr. Wallace’s fiscal year 2023 target compensation opportunities and PRSU and RSU grants as recommended. Mr. Wallace was not present and did not participate in the discussions regarding his own compensation.
For the other NEOs, the Compensation and Talent Committee, after considering the performance reviews and recommendations of Mr. Wallace, as well as extensive comparative compensation data provided by Semler Brossy, approved the fiscal year 2023 target compensation opportunities and PRSU and RSU grants for the other NEOs in August 2022.
In each case, when establishing each element of compensation and the overall target compensation opportunities for the NEOs, the Compensation and Talent Committee and the Outside Directors exercised their judgment based upon the data provided, and no specific formula was applied to determine the weight of each data point.
Market Data
Our ability to continue to attract and retain outstanding contributors, including our core executive team, is essential to our continuing success. Therefore, the Compensation and Talent Committee reviews several different data sources (including Radford survey data for our industry peer group as well as the broader technology market) to assess whether we are offering compensation opportunities that are competitive with those offered by other employers seeking to attract the same talented individuals.
The industry peer group is comprised of U.S. publicly traded companies primarily in the semiconductor and semiconductor equipment industries that had at least 0.33x the Company’s trailing four-quarter revenues and at least 0.2x the Company’s 200-day average market capitalization value. Additionally, the peer group is reviewed to remove companies that we feel are too large to provide meaningful comparison.
| 2023 Proxy Statement
56
| Executive Compensation and Other Matters
employee benefit plans (including the Executive Retiree Medical Benefits (as defined and described below)) sponsored by us on the same terms and conditions that are generally available to other eligible employees.
Other than the benefits described above, we did not provide any other perquisites to our NEOs in fiscal year 2023.
Severance Benefits and Change of Control Agreements
We currently maintain two executive severance plans that provide certain compensation and benefits to our employees, including certain of our NEOs, if a participant’s employment with the Company terminates under certain specified circumstances: (i) our Amended and Restated Executive Severance Plan, adopted in 2006 (the “Original Severance Plan”), and (ii) our Amended and Restated 2010 Executive Severance Plan (the “2010 Severance Plan” and, together with the Original Severance Plan, the “Severance Plans”).
During fiscal year 2023, Mr. Wallace was a participant under the Original Severance Plan, and Messrs. Higgins, Khan, Lorig and Donzella were participants under the 2010 Severance Plan.
These severance benefits and arrangements are described below in more detail under the title “Potential Payments upon Termination or Change in Control.”
We believe the Original Severance Plan and the 2010 Severance Plan are important for the long-term retention of our senior executives and enhance their commitment to the attainment of our strategic objectives. These severance benefits allow the participating executives to continue to focus their attention on our business operations and strategic plans without undue concern over their own financial situation during periods when substantial disruptions and distractions might otherwise prevail. We believe that these severance benefits are fair and reasonable in light of the level of dedication and commitment the participating executive officers have rendered the Company, the contribution they have made to our growth and financial success, and the value we expect to receive from retaining their services, including during challenging transition periods in connection with a change of control.
Deferred Compensation
We maintain an Executive Deferred Savings Plan, a nonqualified deferred compensation plan, which enables eligible employees, including our NEOs, and directors to defer all or a portion of certain components of their compensation, with no Company match. For further information, please see the section of this Proxy Statement entitled “Nonqualified Deferred Compensation.” We do not provide any pension benefits or any other retirement benefits to our NEOs, other than the 401(k) plan generally available to employees and the Executive Retiree Medical Benefits, described below.
Executive Retiree Medical Program
We have established a retiree medical program to offer continued health benefits to certain current domestic senior executive officers (including certain of our NEOs). To be eligible, an executive must be at least 55 years old with 10 years of service with the Company and must be in good standing with us at the time of retirement. Eligible executives are entitled to participate until age 65 and must pay the full cost of the premium. Participation in this program is limited to the Company’s executive officers who were subject to Section 16(a) reporting as of February 2011. The benefits described above shall be referred to herein as the “Executive Retiree Medical Benefits.” As of June 30, 2023, the only NEO eligible to participate in this program was Mr. Wallace.
Stock Ownership Guidelines; Policy Regarding Hedging
There are stock ownership guidelines applicable to our executive officers (including our NEOs) and Outside Directors. Under those guidelines, our executives are expected to own KLA Common Stock having a minimum value, denominated as a multiple of their annual base salaries, as follows:
|
|
|
Title |
|
Shares |
|
|
Chief Executive Officer |
|
Value of at least four times annual base salary |
|
|
Executive Vice President/Senior Vice President |
|
Value of at least two times annual base salary |
Unearned PRSUs do not count for purposes of measuring compliance with the ownership guidelines. The value of outstanding RSUs and PRSUs for which the performance-based vesting criteria (if any) have been achieved but for which the service-based vesting criteria have not yet been satisfied is included in measuring compliance. Each executive officer, once he or she has served in a position listed above for at least four years, is expected to comply with these guidelines. With respect to our NEOs, the Compensation and Talent Committee conducts an annual review to assess compliance with the guidelines.
| 2023 Proxy Statement
60
| Executive Compensation Tables
(4) The amounts presented in column (g) consist of the following for fiscal year ended June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Company Matching Contribution to 401(k) Plan ($) |
|
|
Company-Paid Financial Plan- ning and Tax Preparation Costs ($) |
|
|
Term Life Insurance Premium ($) |
|
|
Expatriate Payments ($) |
|
|
Total ($) |
|
|
|
|
|
|
|
Richard Wallace |
|
|
9,600 |
|
|
|
16,910 |
|
|
|
1,548 |
|
|
|
— |
|
|
|
28,058 |
|
|
|
|
|
|
|
Bren Higgins |
|
|
9,750 |
|
|
|
16,910 |
|
|
|
1,000 |
|
|
|
— |
|
|
|
27,660 |
|
|
|
|
|
|
|
Ahmad Khan |
|
|
8,937 |
|
|
|
16,910 |
|
|
|
1,006 |
|
|
|
— |
|
|
|
26,853 |
|
|
|
|
|
|
|
Oreste Donzella |
|
|
9,283 |
|
|
|
16,910 |
|
|
|
— |
|
|
|
938,933 |
|
|
|
965,126 |
|
|
|
|
|
|
|
Brian Lorig |
|
|
9,807 |
|
|
|
— |
|
|
|
771 |
|
|
|
— |
|
|
|
10,578 |
|
(a) Represents dividend equivalent rights paid in respect of PRSUs and RSUs during fiscal year 2023. These dividend equivalent rights entitle the recipient to receive credits, payable in cash or additional shares of our Common Stock, in an amount equal to the cash dividends that would have been received on the shares of our Common Stock underlying the PRSUs and RSUs, had the shares been issued and outstanding on the dividend record date. Dividend equivalents are only paid to the recipient upon vesting or settlement of the underlying award (including satisfaction of any performance-vesting criteria associated with PRSUs).
(5) A portion of this amount reflects the estimated fair value of annual PRSUs granted to our NEOs based on the probable outcome (determined as of the grant date) of the performance-based conditions applicable to the awards, which is target level performance and the closing fair market value of our Common Stock on the grant date. The number of shares issuable under the fiscal year 2023 annual PRSUs will be determined by the Company’s Relative Free Cash Flow Margin over the three-year period ending June 30, 2025, relative to our industry peer group. The fiscal year 2023 annual PRSUs are structured so that 100% of the target number of shares underlying the award will be earned upon achievement by KLA of a target Relative Free Cash Flow Margin performance among this peer group (the 55th percentile), and up to 150% of that target number of shares could be earned for performance at or above the 75th percentile. Because the Company’s relative performance over the three-year performance period was undeterminable as of the grant date of the annual PRSUs, the probable outcome of the performance-based conditions applicable to the awards as of the grant date, for purposes of the calculations set forth in this table, has been determined to be equal to 100% of the target number of shares underlying the applicable award. Accordingly, the amounts included in the table above attributable to annual PRSUs granted during fiscal year 2023 are as follows: (a) for Mr. Wallace, $9,595,620; (b) for Mr. Higgins, $2,369,299; (c) for Mr. Khan, $2,487,724; (d) for Mr. Donzella, $1,007,012; and (e) for Mr. Lorig, $1,184,649. The grant date fair value of the fiscal year 2022 annual PRSUs, if earned at their maximum, would be as follows: (a) for Mr. Wallace, $14,393,430; (b) for Mr. Higgins, $3,553,949; (c) for Mr. Khan, $3,731,586; (d) for Mr. Donzella, $1,510,518; and (e) for Mr. Lorig, $1,776,974. The Company’s achievement of the performance-based conditions applicable to the fiscal year 2023 annual PRSUs (and therefore the number of shares issuable under the fiscal year 2023 annual PRSUs) will be determined by the Compensation and Talent Committee (and, with respect to Mr. Wallace, the Outside Directors) following the completion of fiscal year 2025.
A portion of this amount also reflects the estimated fair value of EPS Awards granted to our NEOs during fiscal year 2023 based on the probable outcome (determined as of the grant date) of the performance-based conditions applicable to the EPS Awards, which is target level performance and the closing fair market value of our Common Stock on the grant date. The number of shares issuable under the EPS Awards will be determined based on our non-GAAP EPS attained for each fiscal year during the applicable performance periods. Because our EPS in fiscal years 2023 through 2026 was undeterminable as of the grant date of the EPS Awards, the probable outcome of the performance-based conditions applicable to the awards as of the date of grant, for purposes of the calculations set forth in this table, has been determined to be equal to 100% of the target number of shares underlying the applicable award. Accordingly, the amounts included in the above table attributable to the EPS Awards granted during fiscal year 2023 are as follows: (a) for Mr. Wallace, $7,499,733; (b) for Mr. Higgins, $4,999,689; (c) for Mr. Khan, $4,999,689; (d) for Mr. Donzella, $1,999,717; and (e) for Mr. Lorig, $1,999,717. The grant date fair value of the EPS Awards if earned at their maximum would be as follows: (a) for Mr. Wallace, $18,749,333; (b) for Mr. Higgins, $12,499,223; (c) for Mr. Khan, $12,499,223; (d) for Mr. Donzella, $4,999,293; and (e) for Mr. Lorig, $4,999,293.
| 2023 Proxy Statement
68
| Executive Compensation Tables
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
In January 2006, our Board adopted the Original Severance Plan, which was amended and restated on October 20, 2016. In November 2010, our Compensation and Talent Committee adopted the 2010 Severance Plan. The 2010 Severance Plan exists in parallel with the Original Severance Plan, which remains in full force and effect for existing participants under that plan until terminated or modified in accordance with its terms. No participant under the 2010 Severance Plan is eligible to simultaneously participate under the Original Severance Plan, and no participant under the Original Severance Plan is eligible to simultaneously participate under the 2010 Severance Plan.
The Original Severance Plan and the 2010 Severance Plan each provide certain compensation and benefits if a participant’s employment with us terminates under certain defined circumstances. In exchange for receiving benefits under either plan, the participant must agree to a release of claims in favor of the Company and certain non-solicitation restrictions for the period of time co-terminous with the period for which he or she will receive continued compensation and benefits under the applicable Severance Plan. All of our NEOs participated in either the Original Severance Plan or the 2010 Severance Plan during fiscal year 2023, as described in more detail below.
Original Severance Plan
Mr. Wallace participated during fiscal year 2023 and currently participates in the Original Severance Plan.
Under the terms of the Original Severance Plan, if Mr. Wallace is terminated other than for cause, or voluntarily resigns for good reason, prior to or more than two years after a change of control of our Company, then he will receive (i) an amount equal to two years of his base salary, payable in a lump sum, (ii) a pro-rated annual incentive payment for the fiscal year of his termination or resignation (calculated based on his annual incentive bonus for the then-most recently completed calendar year and the proportion of the then-current fiscal year served through the date of termination or resignation), (iii) pro-rated vesting of all of his outstanding equity awards through the date of his termination or resignation (rounded up to the next whole month and disregarding any “cliff-vesting” provisions applicable to the award), and (iv) the extension of the post-termination exercise period of each stock option or stock appreciation right granted after January 1, 2006, so that the option or right will remain exercisable for 12 months following the date of termination or resignation, but in no event beyond the original term of the award. The calculation in clause (iii) of this paragraph with respect to any performance-based equity awards for which the achievement of the applicable performance criteria has not yet been determined as of the participant’s termination date will be delayed until the extent of the achievement of those criteria (and thus the maximum number of shares issuable under the applicable award) has been finally determined in accordance with the terms of the applicable award.
If Mr. Wallace is terminated other than for cause, or voluntarily resigns for good reason, within two years following a change of control of our Company, then he will receive (i) an amount equal to three years of his base salary payable in a lump sum, (ii) an amount equal to three times his average annual bonus for the preceding three completed years, payable in a lump sum, (iii) a pro-rated annual incentive payment for the fiscal year of his termination or resignation (calculated as described in clause (ii) of the preceding paragraph), (iv) 100% vesting acceleration of all of his outstanding equity awards, (v) an additional $2,000 per month for the three-year severance period payable in a lump sum, and (vi) the extension of the post-termination exercise period of each stock option or stock appreciation right granted after January 1, 2006, so that the option or right will remain exercisable for 12 months following the date of termination or resignation, but in no event beyond the original term of the award. As of June 30, 2023, the calculation in clause (iv) of this paragraph with respect to any performance-based equity awards for which the achievement of the applicable performance criteria had not yet been determined as of the participant’s termination date would have been calculated, pursuant to the terms of the applicable awards, based on a shortened performance period, which would have been deemed to have ended as of the most recent fiscal quarter end preceding the closing date of the change of control.
Mr. Wallace is also eligible for the Executive Retiree Medical Benefits in accordance with the terms described above.
The RSUs, PRSUs and TSR Awards granted to Mr. Wallace were issued with dividend equivalent rights. These dividend equivalent rights entitle Mr. Wallace to receive credits, payable in cash or additional shares of our Common Stock, equal to the cash dividends that would have been received on the shares of our Common Stock had the shares been issued and outstanding on the dividend record date. The dividend equivalents will only be paid to Mr. Wallace upon vesting or settlement of the underlying award (including satisfaction of any performance-vesting criteria associated with any performance-based awards). Accordingly, in connection with an acceleration of vesting of certain outstanding equity awards held by Mr. Wallace, he would be entitled to receive accrued dividend equivalents attributable to his accelerated equity awards.
| 2023 Proxy Statement
69
The Original Severance Plan provides that, if a payment under the Original Severance Plan would (together with any other payments) constitute a “parachute payment” and would therefore be subject to Code Section 4999 excise tax, then such payments will be reduced to either (a) the largest portion of the payment that would result in no portion of the payment being subject to the excise tax, or (b) the largest portion, up to and including the total, of the payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes and the excise tax (all computed at the highest applicable marginal rate), results in the participant’s receipt, on an after-tax basis, of the greater amount of the payment, notwithstanding that all or some portion of the payment may be subject to the excise tax.
2010 Severance Plan
Messrs. Higgins, Khan, Donzella and Lorig participated during fiscal year 2023 and currently participate in the 2010 Severance Plan, pursuant to which they each have the right to receive benefits under that plan solely in connection with a termination of their employment under certain circumstances within one year following a change of control of the Company.
Under the 2010 Severance Plan, if Messrs. Higgins, Khan, Donzella or Lorig is terminated other than for cause, or voluntarily resigns for good reason, within one year following a change of control, then such officer will receive (i) an amount equal to 18 months of base salary payable in a lump sum, (ii) a pro-rated annual incentive payment for the fiscal year of his or her termination or resignation (calculated based on such officer’s annual incentive bonus for the then-most recently completed year and the proportion of the then-current fiscal year served through the date of termination or resignation), (iii) 100% vesting acceleration of all of his or her outstanding equity awards, and (iv) the extension of the post-termination exercise period of each stock option or stock appreciation right granted after January 1, 2006, so that the option or right will remain exercisable for 12 months following the date of termination or resignation, but in no event beyond the original term of the award. As of June 30, 2023, the calculation in clause (iii) of this paragraph with respect to any performance-based equity awards for which the achievement of the applicable performance criteria had not yet been determined as of the participant’s termination date would have been calculated, pursuant to the terms of the applicable awards, based on a shortened performance period, which would have been deemed to have ended as of the most recent fiscal quarter end preceding the closing date of the change of control.
The RSUs and PRSUs granted to Messrs. Higgins, Khan, Donzella or Lorig were issued with dividend equivalent rights. These dividend equivalent rights entitle the recipient to receive credits, payable in cash or additional shares of our Common Stock, equal to the cash dividends that would have been received on the shares of our Common Stock had the shares been issued and outstanding on the dividend record date. The dividend equivalents will only be paid to the recipient upon vesting or settlement of the underlying award (including satisfaction of any performance-vesting criteria associated with any performance-based awards). Accordingly, in connection with an acceleration of vesting of certain outstanding equity awards held by Messrs. Higgins, Khan, Donzella, or Lorig, such officer would be entitled to receive accrued dividend equivalents attributable to his or her accelerated equity awards.
The 2010 Severance Plan provides that, if a payment under the 2010 Severance Plan (together with any other payments) would constitute such a “parachute payment” and would therefore be subject to Code Section 4999 excise tax, then the payment will be reduced to either (a) the largest portion of the payment that would result in no portion of the payment being subject to the excise tax, or (b) the largest portion, up to and including the total, of the payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes and the excise tax (all computed at the highest applicable marginal rate), results in the participant’s receipt, on an after-tax basis, of the greater amount of the payment, notwithstanding that all or some portion of the payment may be subject to the excise tax.
| 2023 Proxy Statement
72
| Executive Compensation Tables
The number of shares that may be earned under the fiscal year 2022 annual PRSUs is based on the Company’s achieved level of Relative Free Cash Flow Margin over the three-year period ending June 30, 2024. Under the terms of the fiscal year 2022 annual PRSUs, however, in the event of a Change of Control of the Company during the three-year performance period, the performance period will be shortened, so that it ends as of the most recent fiscal quarter end preceding the closing date of the Change of Control. Using that methodology, the fiscal year 2022 annual PRSUs have been included for purposes of this table at 150% of the target number of shares underlying the awards.
The number of shares earnable under the fiscal year 2021 annual PRSUs is based on the Company’s achieved level of Relative Free Cash Flow Margin over the three-year period ending June 30, 2023. Under the terms of the fiscal year 2021 annual PRSUs, however, in the event of a Change of Control of the Company during the three-year performance period, the performance period will be shortened, so that it ends as of the most recent fiscal quarter end preceding the closing date of the Change of Control. Using that methodology, the fiscal year 2021 annual PRSUs have been included for purposes of this table at 150% of the target number of shares underlying the awards.
(2) The RSUs, PRSUs, EPS Awards and TSR Awards granted to the NEOs were issued with dividend equivalent rights. These dividend equivalent rights entitle the recipient to receive credits, payable in cash or additional shares of our Common Stock, equal to the cash dividends that would have been received on the shares of our Common Stock had the shares been issued and outstanding on the dividend record date. The dividend equivalents would only be paid to the recipient upon vesting or settlement of the underlying award (including satisfaction of any performance-vesting criteria associated with any performance-based awards). Accordingly, this table includes the aggregate dividend equivalents payable in connection with the accelerated vesting of RSUs, PRSUs, EPS Awards and TSR Awards that would apply in connection with the applicable NEO’s qualifying termination of employment.
(3) For purposes of the Original Severance Plan and the 2010 Severance Plan, “Cause” means (A) outside of the applicable period following a Change of Control (two years for the Original Severance Plan; one year for the 2010 Severance Plan), the occurrence of any of the following events: (i) the participant’s conviction of, or plea of nolo contendre to, a felony; (ii) the participant’s gross misconduct; (iii) any material act of personal dishonesty taken by the participant in connection with his or her responsibilities as an employee of the Company; or (iv) the participant’s willful and continued failure to perform the duties and responsibilities of his or her position after there has been delivered to the participant a written demand for performance from the Board which describes the basis for the Board’s belief that the participant has not substantially performed his or her duties and provides the participant with thirty (30) days to take corrective action, and (B) within the applicable period following a Change of Control, the occurrence of any of the following events: (i) the participant’s conviction of, or plea of nolo contendre to, a felony that the Board reasonably believes has had or will have a material detrimental effect on our reputation or business; (ii) the participant’s willful gross misconduct with regard to the Company that is materially injurious to us; (iii) any act of personal dishonesty taken by the participant in connection with his or her responsibilities as an employee of the Company with the intention or reasonable expectation that such action may result in substantial personal enrichment of the participant; or (iv) the participant’s willful and continued failure to perform the duties and responsibilities of his or her position after there has been delivered to the participant a written demand for performance from the Board which describes the basis for the Board’s belief that the participant has not substantially performed his or her duties and provides the participant with thirty (30) days to take corrective action.
For purposes of the Original Severance Plan and the 2010 Severance Plan, “Good Reason” means the occurrence of any of the following events without the participant’s written consent: (i) a material change in the participant’s reporting requirements such that the participant is required to report to a person whose duties, responsibilities and authority are materially less than those of the person to whom the participant was reporting immediately prior to such change; (ii) a material reduction of the participant’s duties, authority or responsibilities; (iii) a material reduction in the participant’s base salary, other than a reduction that applies to other executives generally; (iv) a material reduction in the aggregate level of the participant’s overall compensation, other than a reduction that applies to other executives generally; or (v) a material relocation of the participant’s office, with a relocation of more than fifty (50) miles from its then present location to be deemed material, unless such relocated office is closer to the participant’s then principal residence; provided however, that in no event shall Good Reason exist unless (a) the participant provides us, within ninety (90) days after the occurrence of the event or transaction, written notice specifying in detail the grounds for a purported Good Reason resignation; (b) we fail to cure the purported grounds for the Good Reason within thirty (30) days following the receipt of such notice; and (c) the participant resigns within sixty (60) days after we fail to take such timely curative action, but in no event more than one hundred eighty (180) days after the occurrence of the event or transaction identified in the notice to us as the grounds for the Good Reason resignation.
(4) The vesting schedules for the RSUs and PRSUs outstanding as of June 30, 2023, are listed in the footnotes to the table entitled “Outstanding Equity Awards at Fiscal Year End.” The amounts marked by this footnote (4) reflect the pro-rated vesting of the applicable NEO’s outstanding equity awards through the date of his or her termination or resignation, without giving effect to the “cliff-vesting” provisions applicable to the awards and considering the maximum potential payout for the performance-based awards.
(5) For purposes of the Original Severance Plan and the 2010 Severance Plan, a “Change of Control” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities representing 50% or more of the total voting power represented by our then outstanding voting securities; (ii) the sale or disposition by us of all or substantially all of our assets; (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in our voting securities outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) a change in the composition of our Board, as a result of which fewer than a majority of the directors are Incumbent Directors (where “Incumbent Directors” means directors who either (A) were directors of the Company as of a specified date (February 16, 2006 for the Original Severance Plan; November 3, 2010 for the 2010 Severance Plan), or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors whose election or nomination was not in connection with any transactions described in subsections (i), (ii) or (iii), or in connection with an actual or threatened proxy contest relating to the election of directors of the Company).
(6) The amounts marked by this footnote (6) reflect both (a) the pro-rated vesting of the applicable officer’s outstanding equity awards through the date of his or her termination or resignation, without giving effect to the “cliff-vesting” provisions applicable to the awards, and (b) the accelerated vesting of the applicable officer’s outstanding equity awards for service periods after the date of his or her termination or resignation. The following table provides the breakdown for each such reported amount:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name |
|
Value of Pro-Rated Vesting Through Date of Termination/ Resignation ($) |
|
|
Value of Accelerated Vesting for Service Period After Date of Termination/ Resignation ($) |
|
|
Total Value Reported ($) |
|
|
|
|
|
Richard Wallace |
|
|
57,951,160 |
|
|
|
59,903,365 |
|
|
|
117,854,525 |
|
|
|
|
|
Bren Higgins |
|
|
20,362,595 |
|
|
|
20,398,486 |
|
|
|
40,761,081 |
|
|
|
|
|
Ahmad Khan |
|
|
22,960,847 |
|
|
|
21,881,192 |
|
|
|
44,842,039 |
|
|
|
|
|
Oreste Donzella |
|
|
8,984,511 |
|
|
|
8,763,341 |
|
|
|
17,747,852 |
|
|
|
|
|
Brian Lorig |
|
|
9,378,347 |
|
|
|
9,316,749 |
|
|
|
18,695,096 |
|
| 2023 Proxy Statement
82
| Proposal Five: Approval of our 2023 Incentive Award Plan
plan administrator also has full authority to determine who may receive awards under the 2023 Plan, the type, terms, and conditions of an award, the number of shares of Common Stock subject to the award or to which an award relates, and to make any other determination and take any other action that the plan administrator deems necessary or desirable for the administration of the 2023 Plan.
Share Reserve. The aggregate number of shares of Common Stock that may be issued pursuant to awards granted under the 2023 Plan (the “Share Limit”) will be the sum of: (a) 3,250,000 shares of Common Stock; (b) any shares of Common Stock which remain available for issuance under the 2004 Plan as of the Effective Date; and (c) any shares of Common Stock which are subject to awards under the 2004 Plan as of the Effective Date which, following such date, become available for issuance under the 2023 Plan pursuant to the 2023 Plan. The Share Limit will be reduced (A) by one share of Common Stock for each share issued upon the exercise of an option or stock appreciation right (“SAR”), and (B) by two shares of Common Stock for every share issued in settlement of any award other than (i) an option, (ii) a SAR or (iii) any other award for which the participant pays the intrinsic value existing as of the date of grant (whether directly or by forgoing a right to receive a payment from the Company or any of its subsidiaries) (each of (i), (ii) and (iii), a “Full Value Award”). The maximum number of shares that may be issued pursuant to the exercise of ISOs, under the 2023 Plan will be 25,000,000 shares of Common Stock.
If an award (or part of an award) under the 2023 Plan (or, as applicable, the 2004 Plan) is forfeited, expires, lapses or is terminated, is exchanged for or settled for cash, surrendered, repurchased or cancelled, without having been fully exercised/settled or forfeited, in any case, in a manner that results in the Company acquiring the shares covered by the award (at a price no greater than the price paid by the participant for such shares) or that results in the Company not issuing shares under the award, any unused shares subject to such award will, as applicable, become or again be available for new grants under the 2023 Plan. Any such unused shares covered by (i) an award (other than an option or SAR) that was granted under the 2004 Plan on or after November 6, 2013 or a Full Value Award will be added or added back (as applicable) to the Share Limit as two shares of Common Stock for each such unused share, and (ii) an option or SAR that was granted under the 2004 Plan on or after November 6, 2013 or an option or SAR granted under the Plan will be added or added back (as applicable) to the Share Limit as one share of Common Stock for each such unused share. The payment of dividends or dividend equivalents in cash in conjunction with any awards under the 2023 Plan will not reduce the shares available for grant under the 2023 Plan. However, the following shares may not be used again for grant under the 2023 Plan: (i) shares subject to SARs, that are not issued in connection with the stock settlement of the SAR on exercise; (ii) shares purchased on the open market with the cash proceeds from the exercise of options; (iii) shares tendered or withheld to satisfy the exercise or purchase price of an award; and (iv) shares tendered or withheld to satisfy tax withholding obligations associated with an award.
Awards granted under the 2023 Plan in substitution for any equity or equity-based awards granted by an entity before such entity’s merger or consolidation with the Company or the Company’s acquisition of such entity’s property or equity securities will not reduce the shares available for grant under the 2023 Plan but will count against the maximum number of shares that may be issued upon the exercise of ISOs.
The 2023 Plan provides that the sum of any cash compensation and the aggregate grant date fair value (determined as of the date of the grant under Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all awards granted to a non-employee director as compensation for services as a non-employee director during any fiscal year may not exceed $1,000,000.
Eligibility. The Company’s directors, employees and consultants, and employees and consultants of the Company’s subsidiaries, will be eligible to receive awards under the 2023 Plan; however, ISOs may only be granted to employees of the Company or the Company’s parent or subsidiary corporations. As of August 1, 2023, there were 11 directors, and approximately 15,000 employees and consultants eligible to receive awards under the 2023 Plan.
Types of Awards. The 2023 Plan allows for the grant of awards in the form of: (i) ISOs; (ii) non-qualified stock options (“NSOs”); (iii) SARs; (iv) restricted stock; (v) RSUs; (vi) dividend equivalents; and (vii) other stock and cash based awards.
|
|
|
|
|
Stock Options and SARs. The plan administrator may determine the number of shares to be covered by each option and/or SAR, the exercise price and such other terms, conditions, and limitations, including the vesting, exercise, term and forfeiture provisions, applicable to each option and/or SAR as it deems necessary or advisable. Stock options provide for the purchase of shares of Common Stock in the future at an exercise price set on the grant date. Options granted under the 2023 Plan may be either ISOs or NSOs. ISOs, in contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are met. SARs entitle their holder, upon exercise, to receive from the Company an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The exercise price of an option or SAR is determined by the plan administrator at the time of grant but shall not be less than 100% of the fair market value of the |
| 2023 Proxy Statement
84
| Proposal Five: Approval of our 2023 Incentive Award Plan
required for any 2023 Plan amendment (i) to the provisions of the 2023 Plan prohibiting the repricing of stock options and SARs without stockholder approval; (ii) to increase the aggregate number of shares of Common Stock that may be issued under the 2023 Plan (other than due to adjustments as a result of share dividends, reclassifications, share splits, consolidations or other similar corporate transactions), to the extent necessary to comply with applicable laws and (iii) to increase the limitation on the sum of cash compensation and the aggregate fair value of awards granted to a non-employee director during any fiscal year. An ISO may not be granted under the 2023 Plan after ten (10) years from the earlier of the date the Board adopted the 2023 Plan or the date on which our stockholders approve the 2023 Plan.
Foreign Participants, Clawback Provisions and Transferability. The plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards granted under the 2023 Plan will be subject to any Company clawback policy as set forth in such clawback policy or the applicable award agreement. Awards under the 2023 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant.
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the 2023 Plan. This summary deals with the general United States federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Non-Qualified Stock Options. If an optionee is granted an NSO under the 2023 Plan, the optionee should not have taxable income on the grant of the option. Generally, the optionee should recognize ordinary income at the time of exercise in an amount equal to the fair market value of the shares acquired on the date of exercise, less the exercise price paid for the shares. The optionee’s basis in Common Stock for purposes of determining gain or loss on a subsequent sale or disposition of such shares generally will be the fair market value of Common Stock on the date the optionee exercises such option. Any subsequent gain or loss should be taxable as a long-term or short-term capital gain or loss. The Company or its subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the optionee recognizes ordinary income, subject to Code limitations.
Incentive Stock Options. A participant receiving ISOs should not recognize taxable income upon grant or at the time of exercise. However, the excess of the fair market value of the shares of Common Stock received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an ISO is held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfies the ISO requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the stock should be treated as a long-term capital gain or loss, and the Company should not be entitled to any deduction. If the holding period requirements are not met, the ISO should be treated as one that does not meet the requirements of the Code for ISOs and the participant should recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the shares on the date the ISO is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. The Company and its subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an ISO or upon disposition of the shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the shares, subject to Code limitations.
Restricted Stock Units. A participant generally will not recognize taxable income upon grant of restricted stock units. When cash or shares of Common Stock are delivered under the terms of the award, the participant should recognize ordinary income equal to the cash payment or the fair market value of the shares delivered, as the case may be, less any amount (if any) paid by the participant for such shares, and the Company and its subsidiaries or affiliates generally should be entitled to a corresponding deduction at that time, subject to Code limitations.
Other Awards. The current federal income tax consequences of other awards authorized under the 2023 Plan generally follow certain basic patterns: SARs are taxed and deductible in substantially the same manner as NSOs; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Code Section 83(b) election); and dividend equivalents and other stock or cash based
| 2023 Proxy Statement
86
| Questions and Answers
Questions and Answers
PROXY MATERIALS
1. Why Am I Receiving Copies of These Materials?
The Board of KLA is providing these proxy materials to you in connection with KLA’s Annual Meeting of Stockholders to be held on Wednesday, November 1, 2023, at 12:00 p.m. PDT (the “Annual Meeting”). As a stockholder, you are invited to attend the Annual Meeting, which will be held in the Plus Building of our Milpitas headquarters, located at One Technology Drive, Milpitas, California 95035. The purposes of the Annual Meeting are set forth in the accompanying Notice of Annual Meeting of Stockholders and this Proxy Statement.
These proxy solicitation materials, together with our Annual Report for fiscal year 2023, were first made available electronically and mailed to those stockholders requesting hard copies on or about September 21, 2023 to all stockholders entitled to vote at the Annual Meeting. Our principal executive offices are located at One Technology Drive, Milpitas, California 95035, and our telephone number is (408) 875-3000.
2. How May I Obtain KLA’s Annual Report on Form 10-K?
A copy of our Annual Report on Form 10-K for fiscal year 2023 is available free of charge on the Internet from the website of the SEC at http://www.sec.gov, as well as on our website at http://ir.KLA.com.
3. Why Did I Receive a Notice in the Mail Regarding the Internet Availability of the Proxy Materials Instead of a Paper Copy of the Proxy Materials?
We are again mailing to our stockholders a notice regarding the Internet availability of the proxy materials instead of a paper copy of the proxy materials. All stockholders will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found in the notice. In addition, the notice contains instructions on how you may request access to proxy materials in printed form by mail or electronically on an ongoing basis.
4. How Can I Access the Proxy Materials Over the Internet?
Your notice regarding the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on how to:
Access and view our proxy materials for the Annual Meeting on the Internet; and
Instruct us to send our future proxy materials to you electronically by e-mail.
Our proxy materials are also available on our website at the following address: http://ir.kla.com/financial-information/annual-reports.
Your notice regarding the Internet availability of the proxy materials, proxy card or voting instruction card will contain instructions on how you may request access to proxy materials electronically on an ongoing basis. Choosing to access your future proxy materials electronically will help us conserve natural resources and reduce the costs of printing and distributing our proxy materials. If you choose to access future proxy materials electronically, you will receive an e-mail with instructions containing a link to the website where those materials are available and a link to the proxy voting website. Your election to access proxy materials by e-mail will remain in effect until you terminate it.
5. How May I Obtain a Paper Copy of the Proxy Materials?
Stockholders receiving a notice regarding the Internet availability of the proxy materials will find instructions in that notice about how to obtain a paper copy of the proxy materials free of charge. Stockholders who have previously submitted a standing request to receive paper copies of our proxy materials will receive a paper copy of the proxy materials by mail.
| 2023 Proxy Statement
89
14. Can My Broker Vote My Shares if I Do Not Instruct Him or Her How I Would Like My Shares Voted?
Yes, but only on limited types of proposals. 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 these proxy materials are being forwarded to you by your broker, bank or other nominee along with a voting instruction card. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares, and your broker, bank or other nominee is required to vote your shares in accordance with your instructions.
A broker, bank or other nominee is entitled to vote shares held for a beneficial owner on routine matters, such as the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm, without instructions from the beneficial owner of those shares. However, brokers, banks or other nominees do not have discretion to vote your shares on Proposal One, Proposal Three, Proposal Four or Proposal Five, in each case in the absence of specific instructions from you (the beneficial owner). Therefore, if you do not give instructions to your broker, bank or other nominee, the broker, bank or other nominee will only be entitled to vote your shares in its discretion on Proposal Two. Broker non-votes occur when shares held in “street name” for a beneficial owner are voted on at least one proposal at a meeting but are not voted with respect to other proposals because the broker, bank or other nominee (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares.
15. Are Abstentions and Broker Non-Votes Counted?
Shares that are voted “FOR,” “AGAINST,” or “ABSTAIN” are treated as being present for purposes of determining the presence of a quorum, and broker non-votes also count for purposes of determining whether a quorum is present.
Proposals One through Five each require a majority of the votes cast to be approved.
For each proposal, you may vote your shares “FOR,” “AGAINST” or “ABSTAIN.” Shares that are voted without giving specific voting instructions will be voted as described in the answer to Question 10. Abstentions and broker non-votes are not considered votes cast and will have no effect on the outcome of Proposals One through Five.
Proposals Two through Four are non-binding advisory votes, for which our Board and its committees will give careful consideration to the voting results.
16. How Does the Board Recommend That I Vote?
The Board recommends that stockholders vote as follows:
|
|
|
|
|
“FOR” the election of each of the ten candidates nominated by the Board to serve as directors: Robert Calderoni, Jeneanne Hanley, Emiko Higashi, Kevin Kennedy, Michael McMullen, Gary Moore, Marie Myers, Victor Peng, Robert Rango and Richard Wallace; |
|
|
|
|
“FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2024; |
|
|
|
|
“FOR” the approval of our named executive officer compensation; |
|
|
|
|
”FOR” “ONE YEAR” as the recommended frequency of future stockholder votes to approve our named executive officer compensation; and |
|
|
|
|
”FOR” the approval of our 2023 Incentive Award Plan. |
17. Will Any Other Business Be Transacted at the Annual Meeting?
We are not aware of any matters to be presented other than those described in this Proxy Statement. In the unlikely event that any matters not described in this Proxy Statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote.
18. What Happens if the Annual Meeting is Adjourned or Postponed?
If the Annual Meeting is adjourned or postponed, the proxy holders can vote your shares on the new meeting date as well, unless you have properly revoked your proxy instructions.
19. Where Can I Find the Voting Results of the Annual Meeting?
We intend to announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K to be filed with the SEC within four business days following the Annual Meeting.
| 2023 Proxy Statement
90
| Questions and Answers
STOCKHOLDER PROPOSALS, DIRECTOR NOMINATIONS BY STOCKHOLDERS AND RELATED BYLAW PROVISIONS
20. Can I Present Other Business to Be Transacted from the Floor at the Annual Meeting?
A stockholder may only present a matter from the floor of a meeting of stockholders for consideration at that meeting if certain procedures set forth in our bylaws are followed, including delivery of advance notice by such stockholder to us. We have not received any timely notice with respect to the Annual Meeting regarding the presentation by a stockholder of business from the floor of the meeting. Accordingly, we do not expect to acknowledge any other business presented from the floor at the Annual Meeting.
21. What is the Deadline to Propose Actions for Consideration at Next Year’s Annual Meeting of Stockholders?
You may submit proposals for consideration at future stockholder meetings. For a stockholder proposal to be considered for inclusion in our proxy statement for next year’s annual meeting of stockholders, our Corporate Secretary must receive the written proposal at our principal executive offices no later than May 24, 2024. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Corporate Secretary
KLA Corporation
One Technology Drive
Milpitas, California 95035
Fax: (408) 875-4266
For a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8, the stockholder must provide the information required by our bylaws and give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary:
No earlier than the close of business on July 4, 2024; and
No later than the close of business on August 3, 2024.
If the date of the stockholders’ meeting is moved more than 30 days before or 60 days after November 1, 2024, then notice of a stockholder proposal that is not intended to be included in our proxy statement under Rule 14a-8 must be received no earlier than the close of business 120 days prior to the meeting and no later than the close of business on the later of the following two dates:
90 days prior to the meeting; and
10 days after public announcement of the meeting date.
In addition to satisfying the requirements under our bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to the Company that sets forth the information required by Rule 14a-19 under the Exchange Act.
22. How May I Recommend or Nominate Individuals to Serve as Directors?
You may propose director candidates for consideration by the Board’s Nominating and Governance Committee. Any such recommendations should include the nominee’s name and qualifications for Board membership and should be directed to our Corporate Secretary at the address of our principal executive offices set forth in Question 21 above.
In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must deliver the information required by our bylaws and a statement by the nominee acknowledging that he or she will owe a fiduciary obligation to KLA and its stockholders.
23. What is the Deadline to Propose or Nominate Individuals to Serve as Directors?
A stockholder may send a proposed director candidate’s name and information to the Board at any time. Generally, such proposed candidates are considered at the first or second Nominating and Governance Committee meeting prior to the annual meeting of stockholders.
| 2023 Proxy Statement
A-
3
5.2 Exercise Price. The Administrator will establish the exercise price of each Option and Stock Appreciation Right and specify the exercise price in the Award Agreement. Unless otherwise determined by the Administrator, the exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option (subject to Section 5.6) or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or a Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Sections 424 and 409A of the Code.
5.3 Duration. Each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that, subject to Section 5.6, the term of an Option or Stock Appreciation Right will not exceed ten years. Notwithstanding the foregoing and unless determined otherwise by the Company, in the event that on the last business day of the term of an Option or Stock Appreciation Right (other than an Incentive Stock Option) (i) the exercise of the Option or Stock Appreciation Right is prohibited by Applicable Law, as determined by the Company, or (ii) Shares may not be purchased or sold by the applicable Participant due to any Company insider trading policy (including blackout periods) or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term of the Option or Stock Appreciation Right shall be automatically extended until the date that is 30 days after the end of the legal prohibition, black-out period or lock-up agreement, as determined by the Company; provided, however, in no event shall the extension last beyond the ten year term (or any shorter maximum, if applicable) of the applicable Option or Stock Appreciation Right.
5.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company (or its Agent) a written notice of exercise, in a form approved by the Administrator (which may be electronic and provided through the online platform maintained by an Agent), signed or submitted by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full (i) as specified in Section 5.5 for the number of Shares for which the Award is exercised and (ii) as specified in Section 9.5 for any applicable taxes. Unless the Administrator otherwise determines, an Option or Stock Appreciation Right may not be exercised for a fraction of a Share.
5.5 Payment Upon Exercise. Subject to Section 10.8, any Company insider trading policy (including blackout periods) and Applicable Laws, the exercise price of an Option must be paid by online payment through the Agent’s electronic platform or by wire transfer of immediately available funds to the Agent (or, in each case, if the Company has no Agent accepting payment, by wire transfer of immediately available funds to the Company) or, solely to the extent set forth in the applicable Award Agreement or otherwise with the consent of the Administrator (in its discretion), by:
(a) cash, wire transfer of immediately available funds or check payable to the order of the Company, provided that the Administrator may limit the use of one of the foregoing payment forms if one or more of the payment forms below is permitted;
(b) if there is a public market for Shares at the time of exercise, unless the Administrator otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Administrator) of an irrevocable and unconditional undertaking by a broker acceptable to the Administrator to deliver promptly to the Company sufficient funds to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Administrator to deliver promptly to the Company cash or a check sufficient to pay the exercise price; provided that such amount is paid to the Company at such time as may be required by the Administrator;
(c) delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value;
(d) surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(e) other than for Participants subject to Section 13(k) of the Exchange Act with respect to the Company or its Subsidiaries, delivery of a promissory note, in a form determined by or acceptable to the Administrator, or any other property that the Administrator determines is good and valuable consideration; or
(f) any combination of the above payment forms approved by the Administrator.
5.6 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option,
| 2023 Proxy Statement
A-
5
ARTICLE VII.
OTHER STOCK OR CASH BASED AWARDS; DIVIDEND EQUIVALENTS
7.1 Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive Shares to be delivered in the future and including annual or other periodic or long-term cash bonus awards (whether based on specified Performance Criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, or any combination of the foregoing, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal(s) (which may be based on the Performance Criteria), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement. In addition, the Company may adopt subplans or programs under the Plan pursuant to which it makes Awards available in a manner consistent with the terms and conditions of the Plan.
7.2 Dividend Equivalents. A grant of Restricted Stock Units or Other Stock or Cash Based Award may provide a Participant with the right to receive Dividend Equivalents, and no dividends or Dividend Equivalents shall be payable with respect to Options or Stock Appreciation Rights. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with respect to which the Dividend Equivalents are paid and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, Dividend Equivalents with respect to an Award shall only be paid out to the Participant to the extent that the vesting conditions applicable to the underlying Award are satisfied. All such Dividend Equivalent payments will be made no later than March 15 of the calendar year following calendar year in which the right to the Dividend Equivalent payment becomes nonforfeitable in accordance with the foregoing, unless otherwise determined by the Administrator or unless deferred in a manner intended to comply with Section 409A.
ARTICLE VIII.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS
8.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article VIII, the Administrator will equitably adjust each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include adjusting the number and type of securities subject to each outstanding Award and/or the Award’s exercise price or grant price (if applicable), granting new Awards to Participants, and/or making a cash payment to Participants. The adjustments provided under this Section 8.1 will be nondiscretionary and final and binding on the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
8.2 Corporate Transactions. Subject to Section 8.3, in the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change), is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Laws or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;
(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
| 2023 Proxy Statement
A-
6
| Annex A
(c) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and/or applicable exercise or purchase price, in all cases, as determined by the Administrator;
(d) To make adjustments in the number and type of Shares (or other securities or property) subject to outstanding Awards and/or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article IV hereof on the maximum number and kind of shares which may be issued and adjustments of the manner in which Shares subject to Full Value Awards will be counted) and/or in the terms and conditions of (including the grant or exercise price or applicable performance goals), and the criteria included in, outstanding Awards;
(e) To replace such Award with other rights or property selected by the Administrator; and/or
(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
8.3 Effect of Non-Assumption in a Change in Control. Notwithstanding the provisions of Section 8.2, unless otherwise determined by the Administrator, if a Change in Control occurs, any outstanding Award that is not continued, converted, assumed, or replaced with an award (which may include, without limitation, a cash-based award) with substantially the same value, and vesting terms that are no less favorable than those applicable to the underlying Award, in each case, as of immediately prior to the Change in Control by (a) the Company, or (b) a successor entity or its parent or subsidiary (an “Assumption”), and provided that such Participant has not had a Termination of Service prior to such Change in Control, then effective immediately prior to the Change in Control, such Award shall become fully vested, exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on such Award shall lapse; provided, that with respect to any Award that, as of immediately prior to such Change in Control, is subject to performance-based vesting, any specified performance goals shall be deemed to be satisfied to the extent set forth in the applicable Award Agreement, and such Award shall be canceled upon the consummation of the Change in Control in exchange for the right to receive the Change in Control consideration payable to other holders of Common Stock (i) which may be on such terms and conditions as apply generally to holders of Common Stock under the Change in Control documents (including, without limitation, any escrow, earn-out or other deferred consideration provisions) or such other terms and conditions as the Administrator may provide, and (ii) determined by reference to the number of Shares subject to such Award and net of any applicable exercise price; provided that to the extent that any Award constitutes “nonqualified deferred compensation” that may not be paid upon the Change in Control under Section 409A (to the extent applicable to such Award) without the imposition of taxes thereon under Section 409A, the timing of such payments shall be governed by the applicable Award Agreement (subject to any deferred consideration provisions applicable under the Change in Control documents); and provided, further, that if the amount to which the Participant would be entitled upon the settlement or exercise of such Award at the time of the Change in Control is equal to or less than zero, then such Award may be terminated without payment. The Administrator shall determine whether an Assumption of an Award has occurred in connection with a Change in Control.
8.4 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock, including any Equity Restructuring or any securities offering or other similar transaction, for administrative convenience, the Administrator may refuse to permit the exercise of any Award for up to 60 days before or after such transaction.
8.5 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 8.1 or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares. The Administrator may treat Participants and Awards (or portions thereof) differently under this Article VIII.
| 2023 Proxy Statement
A-
7
ARTICLE IX.
GENERAL PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability. Except as the Administrator may determine or provide in an Award Agreement or otherwise for Awards other than Incentive Stock Options, Awards may not be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except for certain beneficiary designations, by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, and, during the life of the Participant, will be exercisable only by the Participant. Any permitted transfer of an Award hereunder shall be without consideration, except as required by Applicable Law. References to a Participant, to the extent relevant in the context, will include references to a Participant’s authorized transferee that the Administrator specifically approves.
9.2 Documentation. Each Award will be evidenced in an Award Agreement, which may be written or electronic, as the Administrator determines. The Award Agreement will contain the terms and conditions applicable to an Award. Each Award may contain terms and conditions in addition to those set forth in the Plan.
9.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
9.4 Termination of Status. The Administrator will determine (and may provide in the applicable Award Agreement) how a Participant’s Disability, death, retirement, authorized leave of absence, transition from full-time to part-time service or any other change or purported change in a Participant’s Service Provider status affects an Award (including whether and when a Termination of Service has occurred) and the extent to which, and the period during which the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
9.5 Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by Applicable Law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company or one of its Subsidiaries may deduct an amount sufficient to satisfy such tax obligations based on the applicable statutory withholding rates (or such other rate as may be determined by the Administrator after considering any accounting consequences or costs) from any payment of any kind otherwise due to a Participant. Subject to Section 10.8 and any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations through the Agent’s electronic platform or by wire transfer of immediately available funds to the Agent (or, in each case, if the Company has no Agent accepting payment, by wire transfer of immediately available funds to the Company) or, solely with the consent of the Administrator, by (i) cash, wire transfer of immediately available funds or check made payable to the order of the Company, provided that the Administrator may limit the use of the foregoing payment forms in its discretion, (ii) to the extent permitted by the Administrator, delivery of Shares (in whole or in part), including Shares delivered by attestation and Shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery, (iii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Administrator otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Administrator) of an irrevocable and unconditional undertaking by a broker acceptable to the Administrator to deliver promptly to the Company sufficient funds to satisfy the tax obligations, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Administrator to deliver promptly to the Company cash or a check sufficient to satisfy the tax withholding; provided that such amount is paid to the Company at such time as may be required by the Administrator, or (iv) to the extent permitted by the Administrator, any combination of the foregoing payment forms approved by the Administrator. Notwithstanding any other provision of the Plan, the number of Shares which may be so delivered or retained pursuant to clause (ii) of the immediately preceding sentence shall be no greater than the number of Shares which have a Fair Market Value on the date of delivery or retention no greater than the aggregate amount of such liabilities based on the maximum individual statutory tax rate in the applicable jurisdiction at the time of such withholding (or based on such other rate as may be required to avoid the liability classification of the applicable award under generally accepted accounting principles in the United States of America or as otherwise may be set forth in the applicable Award Agreement or determined by the Administrator), and for clarity, may be less than such maximum individual statutory tax rate if so determined by the Administrator. If any tax withholding obligation will be satisfied under clause (ii) above by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.
| 2023 Proxy Statement
A-
8
| Annex A
9.6 Amendment of Award. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permitted under Article VIII or pursuant to Section 10.6.
9.7 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy any Applicable Laws. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.
9.8 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
9.9 Cash Settlement. Without limiting the generality of any other provision of the Plan, the Administrator may provide, in an Award Agreement or subsequent to the grant of an Award, in its discretion, that any Award may be settled in cash, Shares or a combination thereof.
9.10 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 9.5: (i) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (ii) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (iii) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company and its Subsidiaries harmless from any losses, costs, damages, or expenses relating to any such sale; (iv) to the extent the Company, its Subsidiaries or their designee receives proceeds of such sale that exceed the amount owed, the Company or its Subsidiary will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (v) the Company, its Subsidiaries and their designees are under no obligation to arrange for such sale at any particular price; and (vi) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company, its Subsidiaries or their designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.
9.11 Prohibition on Repricing. Except pursuant to Article VIII, the Administrator shall not, without the approval of the Company’s shareholders, (a) reduce, whether through amendment or otherwise, the exercise price of any outstanding Option or Stock Appreciation Right, or (b) grant any new Award or make any payment of cash in substitution for or upon the cancellation of Options and/or Stock Appreciation Rights previously granted when the exercise price of such Option or Stock Appreciation Right exceeds the Fair Market Value of the underlying Shares.
ARTICLE X.
MISCELLANEOUS
10.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continued employment or any other relationship with the Company or any of its Subsidiaries. The Company and its Subsidiaries expressly reserve the right at any time to dismiss or otherwise terminate their respective relationships with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or in the Plan.
10.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Laws require, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan that the Administrator deems necessary or appropriate to comply with Applicable Laws.
| 2023 Proxy Statement
A-
9
10.3 Effective Date and Term of Plan. Unless earlier terminated by the Board, the Plan will become effective on the date on which the Company’s stockholders approve the Plan (the “Effective Date”) and will remain in effect until the tenth anniversary of the Effective Date, but Awards previously granted may extend beyond that date in accordance with the Plan. Notwithstanding anything to the contrary in the Plan, an Incentive Stock Option may not be granted under the Plan after 10 years from the earlier of (i) the date the Board adopted the Plan or (ii) the date the Company’s stockholders approved the Plan. If the Plan is not approved by the Company’s stockholders, the Plan will not become effective, no Awards will be granted under the Plan and the Prior Plan will continue in full force and effect in accordance with their terms.
10.4 Amendment of Plan. The Board may amend, suspend or terminate the Plan at any time; provided that no amendment, other than (a) as permitted by the applicable Award Agreement, (b) as provided under Sections 10.6 and 10.15, or (c) an amendment to increase the Overall Share Limit, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after the Plan’s termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment (i) to increase the Non-Employee Director Limit, (ii) to Section 9.11 of the Plan, or (iii) or to the extent necessary to comply with Applicable Laws.
10.5 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
10.6 Section 409A.
(a) General. To the extent that the Administrator determines that any Award granted under the Plan is subject to Section 409A, the Award Agreement evidencing such Award shall incorporate the terms and conditions required by Section 409A. To the extent applicable, the Plan and the Award Agreements shall be interpreted in accordance with Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 10.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A. Notwithstanding any contrary provision of the Plan or any Award Agreement, any payment of “nonqualified deferred compensation” under the Plan that may be made in installments shall be treated as a right to receive a series of separate and distinct payments.
(b) Separation from Service. If an Award is subject to and constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a termination of a Participant’s Service Provider relationship will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the termination of the Participant’s Service Provider relationship. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award subject to Section 409A to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
10.7 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award,
| 2023 Proxy Statement
A-
10
| Annex A
and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his, her or its capacity as an Administrator, director, officer, other employee or agent of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith.
10.8 Lock-Up Period. The Company may, at the request of any underwriter representative or otherwise, in connection with registering the offering of any Company securities under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any Shares or other Company securities during a period of up to 180 days following the effective date of a Company registration statement filed under the Securities Act, or such longer period as determined by the underwriter.
10.9 Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security number, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company and its Subsidiaries hold regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents provided for in this Section 10.9 in writing, without cost, by contacting the local human resources representative. If the Participant refuses or withdraws the consents provided for in this Section 10.9, the Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.
10.10 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
10.11 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary) that the Administrator has approved, the Plan will govern, unless it is expressly specified in such Award Agreement or other written document that the specific provision of the Plan will not apply. For clarity, the foregoing sentence shall not limit the applicability of any additive language contained in an Award Agreement or other written agreement which provides supplemental or additional terms not inconsistent with the Plan.
10.12 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding any state’s choice-of-law principles requiring the application of a jurisdiction’s laws other than the State of Delaware.
10.13 Claw-back Provisions. All Awards (including, without limitation, any proceeds, gains or other economic benefit actually or constructively received by a Participant upon any receipt or exercise of any Award or upon the receipt or resale of any Shares underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with Applicable Laws (including NASDAQ (or other applicable stock exchange) listing standards, the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder) as and to the extent set forth in such claw-back policy or the Award Agreement.
| 2023 Proxy Statement
A-
11
10.14 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
10.15 Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Laws. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in conformance with Applicable Laws. To the extent Applicable Laws permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Laws.
10.16 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
10.17 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary except as expressly provided in writing in such other plan or an agreement thereunder.
ARTICLE XI.
DEFINITIONS
As used in the Plan, the following words and phrases will have the following meanings:
11.1 “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee. Notwithstanding anything herein to the contrary, the Board shall conduct the general administration of the Plan with respect to Awards granted to non-employee Directors and, with respect to such Awards, the term “Administrator” as used in the Plan shall mean and refer to the Board.
11.2 “Agent” means the brokerage firm, bank or other financial institution, entity or person(s), if any, engaged, retained, appointed or authorized to act as the agent of the Company or a Participant with regard to the Plan.
11.3 “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted.
11.4 “Award” means, individually or collectively, a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Dividend Equivalents, or Other Stock or Cash Based Awards.
11.5 “Award Agreement” means a written agreement evidencing an Award, which may be electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
11.6 “Board” means the Board of Directors of the Company.
11.7 “Cause” means, in respect of a Participant, either (i) the definition of “Cause” contained in the Participant’s Award Agreement or an effective, written service or employment agreement between the Participant and the Company or a Subsidiary of the Company; or (ii) if no such agreement exists or such agreement does not define Cause, then Cause shall mean (A) the Participant’s unauthorized use or disclosure of confidential information or trade secrets of the Company or any of its Subsidiaries or any material breach of a written agreement between the Participant and the Company or any of its Subsidiaries, including without limitation a material breach of any employment, confidentiality, non-compete, non-solicit or similar agreement; (B) the Participant’s commission of, indictment for or the entry of a plea of guilty or nolo contendere by the Participant to, a felony under the laws of the United States or any state thereof or any crime involving dishonesty or moral turpitude (or any similar crime in any jurisdiction outside the United States); (C) the Participant’s negligence or willful misconduct in the performance of the Participant’s duties or the Participant’s willful or repeated failure or refusal to substantially perform assigned duties; (D) any act of fraud, embezzlement, material misappropriation or dishonesty committed by the Participant against the Company or any of its Subsidiaries; or (E) any acts, omissions or statements by a Participant which the Company determines to be materially detrimental or damaging to the reputation, operations, prospects or business relations of the Company or any of its Subsidiaries. The findings and decision of the Administrator with respect to any Cause determination will be final and binding for all purposes.
11.8 “Change in Control” means the occurrence of any of the following events, in one or a series of related transactions:
(a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company, a Subsidiary of the Company or a Company employee benefit plan, including any trustee of such plan acting as trustee, is or
| 2023 Proxy Statement
A-
12
| Annex A
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; or
(b) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total combined voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or
(c) the consummation of the sale or disposition by the Company of all or substantially all the Company’s assets; or
(d) a change in the composition of the Board, as a result of which fewer than a majority of the Directors are Incumbent Directors. “Incumbent Directors” shall mean Directors who either (x) are Directors as of the date this Plan is approved by the Company’s shareholders, or (y) are subsequently elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the then-current Directors and whose election or nomination was not in connection with any transaction described in (a) or (b) above or in connection with an actual or threatened proxy contest relating to the election of Directors.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or portion of any Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Administrator shall have full and final authority, which shall be exercised in its discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
11.9 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
11.10 “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent Applicable Laws permit. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
11.11 “Common Stock” means the common stock of the Company.
11.12 “Company” means KLA Corporation, a Delaware corporation, or any successor.
11.13 “Consultant” means any consultant or advisor engaged by the Company or any of its Subsidiaries to render services to such entity that qualifies as a consultant or advisor under the applicable rules of Form S-8 Registration Statements.
11.14 “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Administrator determines, to receive amounts due or exercise the Participant’s rights if the Participant dies or becomes incapacitated. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.
11.15 “Director” means a Board member.
11.16 “Disability” means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.
11.17 “Dividend Equivalents” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares.
11.18 “Employee” means any employee of the Company or its Subsidiaries.
11.19 “Equity Restructuring” means, as determined by the Administrator, a non-reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring
| 2023 Proxy Statement
A-
13
cash dividend, or other large, nonrecurring cash dividend, that affects the number or kind of Shares (or other securities of the Company) or the share price of Common Stock (or other securities of the Company) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
11.20 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
11.21 “Fair Market Value” means, as of any date, the value of a Share determined as follows: (a) if the Common Stock is listed on any established stock exchange, its Fair Market Value will be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (b) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the closing sales price on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (c) without an established market for the Common Stock, the Administrator will determine the Fair Market Value in its discretion.
11.22 “Full Value Award” means any Award that is settled in Shares other than: (a) an Option, (b) a Stock Appreciation Right or (c) any other Award for which the Participant pays the intrinsic value existing as of the date of grant (whether directly or by forgoing a right to receive a payment from the Company or any Subsidiary).
11.23 “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or its parent or subsidiary corporation, as defined in Section 424(e) and (f) of the Code, respectively.
11.24 “Incentive Stock Option” means an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code.
11.25 “Non-Qualified Stock Option” means an Option, or portion thereof, not intended or not qualifying as an Incentive Stock Option.
11.26 “Option” means an option to purchase Shares, which will either be an Incentive Stock Option or a Non-Qualified Stock Option.
11.27 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property awarded to a Participant under Article VII.
11.28 “Overall Share Limit” means the sum of (a) 3,250,000 Shares; (b) any Shares which remain available for issuance under the Prior Plan as of the Effective Date; and (c) any Shares which are subject to Prior Plan Awards as of the Effective Date which, following the Effective Date, become available for issuance under the Plan pursuant to Article IV.
11.29 “Participant” means a Service Provider who has been granted an Award.
11.30 “Performance Criteria” means the criteria (and adjustments) that the Administrator may select for an Award to establish performance goals for a performance period, which may include (but is not limited to) the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); earnings or net income per share; gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes), net income or operating income; adjusted net income or operating income (either before or after taxes); earnings before interest, taxes, amortization and/or stock-based compensation costs; operating income before depreciation and amortization; profits (including but not limited to gross profits, net profits, profit growth, profit margin, net operation profit or economic profit), profit return ratios or operating margin; operating efficiency; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital) or cash position; return on assets, return on equity or return on sales; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; return on operating revenue; costs, reductions in costs and cost control measures; balance sheet metrics; expenses and expense targets; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; brand recognition/acceptance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; churn or other metrics related to subscriptions/subscribers; market share; cost reduction goals; economic value or economic value added models; formation of joint ventures, research and development collaborations, or marketing or customer service collaborations; division, group or corporate financial goals; productivity; customer satisfaction/growth; customer service; employee satisfaction; recruitment and retention/maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships, collaborations and transactions; financial ratios (including those measuring
| 2023 Proxy Statement
A-
14
| Annex A
liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; annual revenue targets; budget comparisons; implementation or completion of projects or processes strategic or critical to the Company’s business operations; financing and other capital raising transactions; cash on hand; acquisition, licensing or divestiture activity; investment sourcing activity; marketing initiatives; and the completion of other corporate transactions intended to enhance the Company’s revenue or profitability or expand its customer base, any of which may be combined and/or measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be (i) based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company or a Subsidiary, (ii) based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies, (iii) based on GAAP or non-GAAP metrics, and/or (iv) adjusted by reflect the impact of unusual or non-recurring transactions, extraordinary events or otherwise as determined by the Administrator (including, without limitation, restructurings, discontinued operations, asset write-downs, acquisitions or divestitures, reorganizations, events not directly related to the operations of the Company, Subsidiary, division, business segment or business unit and/or not within the reasonable control of the Company, foreign exchange gains and losses, the refinancing or repurchase of bank loans or debt securities or changes in Applicable Laws or tax or accounting principles).
11.31 “Plan” means this 2023 Incentive Award Plan.
11.32 “Prior Plan” means the KLA-Tencor Corporation 2004 Equity Incentive Plan, as amended and restated on November 7, 2018.
11.33 “Prior Plan Award” means an award outstanding under the Prior Plan as of the Effective Date.
11.34 “Restricted Stock” means Shares awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
11.35 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date awarded to a Participant under Article VI subject to certain vesting conditions and other restrictions.
11.36 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.
11.37 “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
11.38 “Securities Act” means the Securities Act of 1933, as amended.
11.39 “Service Provider” means an Employee, Consultant or Director.
11.40 “Shares” means shares of Common Stock.
11.41 “Stock Appreciation Right” means a stock appreciation right granted under Article V.
11.42 “Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
11.43 “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
11.44 “Termination of Service” means the date the Participant ceases to be a Service Provider.
* * * * *
| 2023 Proxy Statement
Pay vs Performance Disclosure
|
12 Months Ended |
Jun. 30, 2023
USD ($)
|
Jun. 30, 2022
USD ($)
|
Jun. 30, 2021
USD ($)
|
Pay vs Performance Disclosure |
|
|
|
Pay vs Performance Disclosure, Table |
PAY VERSUS PERFORMANCE TABLE The following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended June 30, 2021, 2022 and 2023 and our financial performance for such fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table Total for PEO (1) |
|
Compensation Actually Paid to PEO (1)(3) |
|
Average Summary Compensation Table for Non- PEO Named Executive Officers (2) |
|
Average Compensation Actually Paid to Non-PEO Named Executive Officers (2)(3) |
|
Value of Initial Fixed $100 Investment Based On: |
|
|
|
|
|
Total Shareholder Return (4) |
|
Total Shareholder Return (5) |
|
|
|
|
|
|
|
|
|
|
|
$26,644,359 |
|
$66,578,359 |
|
$8,534,115 |
|
$22,630,489 |
|
$256.08 |
|
$183.98 |
|
$3,387,351 |
|
31.7% |
|
|
|
|
|
|
|
|
|
|
|
$20,568,625 |
|
$30,398,207 |
|
$5,380,793 |
|
$7,397,584 |
|
$168.08 |
|
$128.04 |
|
$3,322,060 |
|
32.6% |
|
|
|
|
|
|
|
|
|
|
|
$13,710,388 |
|
$60,709,229 |
|
$4,396,808 |
|
$15,328,288 |
|
$168.56 |
|
$167.56 |
|
$2,077,353 |
|
28.2% | (1) Amounts reported are for Richard Wallace, who served as our Chief Executive Officer during each of the applicable fiscal years . (2) Our non-PEO named executive officers (our “Non-PEO Named Executive Officers”) were (a) Bren Higgins, Ahmad Khan, Oreste Donzella and Brian Lorig, for fiscal year 2023, (b) Bren Higgins, Ahmad Khan, Oreste Donzella and Mary Beth Wilkinson, for fiscal year 2022, and (c) Bren Higgins, Ahmad Khan, Brian Lorig and Mary Beth Wilkinson, for fiscal year 2021. (3) Amounts in these columns show the “Compensation Actually Paid”, as calculated in accordance with the specific methodology prescribed by the SEC. The table below provides the adjustments to the Summary Compensation Table total compensation to arrive at the Compensation Actually Paid to our CEO and the average Compensation Actually Paid to our Non-PEO Named Executive Officers for each of the required fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reported Summary Compensation Table Total for CEO and Non-PEO Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table total amount for applicable fiscal year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract the amounts reported under the Stock Awards column in the Summary Compensation Table for the applicable fiscal year |
|
|
$23,492,301 |
|
|
|
$ 7,023,747 |
|
|
|
$15,296,189 |
|
|
|
$3,427,362 |
|
|
|
$ 9,338,877 |
|
|
|
$ 2,947,277 |
|
|
|
|
|
|
|
|
Add year-end ASC 718 fair value of equity awards granted during the applicable fiscal year that remain unvested as of applicable fiscal year end determined as of applicable fiscal year end |
|
|
$34,527,604 |
|
|
|
$ 9,647,715 |
|
|
|
$17,938,199 |
|
|
|
$3,545,418 |
|
|
|
$17,727,271 |
|
|
|
$ 5,409,000 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that remain outstanding and unvested as of applicable fiscal year end |
|
|
$24,635,303 |
|
|
|
$ 8,777,513 |
|
|
|
($18,828,402 |
) |
|
|
($4,115,578 |
) |
|
|
$41,160,831 |
|
|
|
$ 7,885,372 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that vested in the applicable fiscal year |
|
|
$ 4,263,394 |
|
|
|
$ 2,694,893 |
|
|
|
$26,015,974 |
|
|
|
$6,014,313 |
|
|
|
($ 2,550,384 |
) |
|
|
$ 584,385 |
|
|
|
|
|
|
|
|
|
|
|
$39,934,000 |
|
|
|
$14,096,374 |
|
|
|
$ 9,829,582 |
|
|
|
$2,016,791 |
|
|
|
$46,998,841 |
|
|
|
$10,931,480 |
|
|
|
|
|
|
|
|
Compensation Actually Paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For purposes of the foregoing adjustments, the fair value or change in fair value (as applicable) of equity awards was determined as follows: (i) for RSUs, the closing price of our Common Stock on the applicable fiscal year-end date, or, in the case of vesting dates, the closing price of our Common Stock on the applicable vesting date, in each case multiplied by the number of shares of our Common Stock underlying the award; and (ii) for unvested PRSUs (including EPS Awards), the same valuation methodology as the RSUs above, except that the year-end values are multiplied by the probability of achievement of the applicable performance objectives as of the applicable date. (4) In accordance with Item 201(e) of Regulation S-K, our total shareholder return is calculated, for each fiscal year shown in the table above, as the cumulative total shareholder return on our Common Stock from June 30, 2020 (i.e., the last trading day of our 2020 fiscal year), through and including the last day of the applicable fiscal year, assuming a fixed investment of $100. (5) Our peer group is comprised of the component companies of the Philadelphia Semiconductor Index (the “Peer Index”). Amounts reported in this column represent the cumulative total shareholder return of the Peer Index. (6) Free cash flow margin equals our free cash flow divided by total revenues. Free cash flow equals net cash provided by operating activities less capital expenditures. Free cash flow margin over the applicable three-year period relative to our industry peer group for that same three-year period is used in determining the level at which the performance criteria under our annual PRSUs are satisfied, between 0%-150% of the target shares granted.
|
|
|
Company Selected Measure Name |
Free cash flow margin
|
|
|
Named Executive Officers, Footnote |
Our non-PEO named executive officers (our “Non-PEO Named Executive Officers”) were (a) Bren Higgins, Ahmad Khan, Oreste Donzella and Brian Lorig, for fiscal year 2023, (b) Bren Higgins, Ahmad Khan, Oreste Donzella and Mary Beth Wilkinson, for fiscal year 2022, and (c) Bren Higgins, Ahmad Khan, Brian Lorig and Mary Beth Wilkinson, for fiscal year 2021.
|
|
|
Peer Group Issuers, Footnote |
Our peer group is comprised of the component companies of the Philadelphia Semiconductor Index (the “Peer Index”). Amounts reported in this column represent the cumulative total shareholder return of the Peer Index.
|
|
|
PEO Total Compensation Amount |
$ 26,644,359
|
$ 20,568,625
|
$ 13,710,388
|
PEO Actually Paid Compensation Amount |
$ 66,578,359
|
30,398,207
|
60,709,229
|
Adjustment To PEO Compensation, Footnote |
(3) Amounts in these columns show the “Compensation Actually Paid”, as calculated in accordance with the specific methodology prescribed by the SEC. The table below provides the adjustments to the Summary Compensation Table total compensation to arrive at the Compensation Actually Paid to our CEO and the average Compensation Actually Paid to our Non-PEO Named Executive Officers for each of the required fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reported Summary Compensation Table Total for CEO and Non-PEO Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table total amount for applicable fiscal year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract the amounts reported under the Stock Awards column in the Summary Compensation Table for the applicable fiscal year |
|
|
$23,492,301 |
|
|
|
$ 7,023,747 |
|
|
|
$15,296,189 |
|
|
|
$3,427,362 |
|
|
|
$ 9,338,877 |
|
|
|
$ 2,947,277 |
|
|
|
|
|
|
|
|
Add year-end ASC 718 fair value of equity awards granted during the applicable fiscal year that remain unvested as of applicable fiscal year end determined as of applicable fiscal year end |
|
|
$34,527,604 |
|
|
|
$ 9,647,715 |
|
|
|
$17,938,199 |
|
|
|
$3,545,418 |
|
|
|
$17,727,271 |
|
|
|
$ 5,409,000 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that remain outstanding and unvested as of applicable fiscal year end |
|
|
$24,635,303 |
|
|
|
$ 8,777,513 |
|
|
|
($18,828,402 |
) |
|
|
($4,115,578 |
) |
|
|
$41,160,831 |
|
|
|
$ 7,885,372 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that vested in the applicable fiscal year |
|
|
$ 4,263,394 |
|
|
|
$ 2,694,893 |
|
|
|
$26,015,974 |
|
|
|
$6,014,313 |
|
|
|
($ 2,550,384 |
) |
|
|
$ 584,385 |
|
|
|
|
|
|
|
|
|
|
|
$39,934,000 |
|
|
|
$14,096,374 |
|
|
|
$ 9,829,582 |
|
|
|
$2,016,791 |
|
|
|
$46,998,841 |
|
|
|
$10,931,480 |
|
|
|
|
|
|
|
|
Compensation Actually Paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For purposes of the foregoing adjustments, the fair value or change in fair value (as applicable) of equity awards was determined as follows: (i) for RSUs, the closing price of our Common Stock on the applicable fiscal year-end date, or, in the case of vesting dates, the closing price of our Common Stock on the applicable vesting date, in each case multiplied by the number of shares of our Common Stock underlying the award; and (ii) for unvested PRSUs (including EPS Awards), the same valuation methodology as the RSUs above, except that the year-end values are multiplied by the probability of achievement of the applicable performance objectives as of the applicable date.
|
|
|
Non-PEO NEO Average Total Compensation Amount |
$ 8,534,115
|
5,380,793
|
4,396,808
|
Non-PEO NEO Average Compensation Actually Paid Amount |
$ 22,630,489
|
7,397,584
|
15,328,288
|
Adjustment to Non-PEO NEO Compensation Footnote |
(3) Amounts in these columns show the “Compensation Actually Paid”, as calculated in accordance with the specific methodology prescribed by the SEC. The table below provides the adjustments to the Summary Compensation Table total compensation to arrive at the Compensation Actually Paid to our CEO and the average Compensation Actually Paid to our Non-PEO Named Executive Officers for each of the required fiscal years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to Reported Summary Compensation Table Total for CEO and Non-PEO Named Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Compensation Table total amount for applicable fiscal year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtract the amounts reported under the Stock Awards column in the Summary Compensation Table for the applicable fiscal year |
|
|
$23,492,301 |
|
|
|
$ 7,023,747 |
|
|
|
$15,296,189 |
|
|
|
$3,427,362 |
|
|
|
$ 9,338,877 |
|
|
|
$ 2,947,277 |
|
|
|
|
|
|
|
|
Add year-end ASC 718 fair value of equity awards granted during the applicable fiscal year that remain unvested as of applicable fiscal year end determined as of applicable fiscal year end |
|
|
$34,527,604 |
|
|
|
$ 9,647,715 |
|
|
|
$17,938,199 |
|
|
|
$3,545,418 |
|
|
|
$17,727,271 |
|
|
|
$ 5,409,000 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that remain outstanding and unvested as of applicable fiscal year end |
|
|
$24,635,303 |
|
|
|
$ 8,777,513 |
|
|
|
($18,828,402 |
) |
|
|
($4,115,578 |
) |
|
|
$41,160,831 |
|
|
|
$ 7,885,372 |
|
|
|
|
|
|
|
|
Add (subtract) year over year change in ASC 718 fair value of equity awards granted in prior years that vested in the applicable fiscal year |
|
|
$ 4,263,394 |
|
|
|
$ 2,694,893 |
|
|
|
$26,015,974 |
|
|
|
$6,014,313 |
|
|
|
($ 2,550,384 |
) |
|
|
$ 584,385 |
|
|
|
|
|
|
|
|
|
|
|
$39,934,000 |
|
|
|
$14,096,374 |
|
|
|
$ 9,829,582 |
|
|
|
$2,016,791 |
|
|
|
$46,998,841 |
|
|
|
$10,931,480 |
|
|
|
|
|
|
|
|
Compensation Actually Paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For purposes of the foregoing adjustments, the fair value or change in fair value (as applicable) of equity awards was determined as follows: (i) for RSUs, the closing price of our Common Stock on the applicable fiscal year-end date, or, in the case of vesting dates, the closing price of our Common Stock on the applicable vesting date, in each case multiplied by the number of shares of our Common Stock underlying the award; and (ii) for unvested PRSUs (including EPS Awards), the same valuation methodology as the RSUs above, except that the year-end values are multiplied by the probability of achievement of the applicable performance objectives as of the applicable date.
|
|
|
Compensation Actually Paid vs. Total Shareholder Return |
|
|
|
Compensation Actually Paid vs. Net Income |
|
|
|
Compensation Actually Paid vs. Company Selected Measure |
|
|
|
Total Shareholder Return Vs Peer Group |
|
|
|
Tabular List, Table |
Tabular List – Relevant Financial Performance Measures For fiscal year 2023, the following financial performance measures represented the three most important financial performance measures used by us to link Company performance to the compensation actually paid to our NEOs:
|
|
Financial Performance Measures |
|
|
|
Non-GAAP operating margin dollars |
|
|
|
|
|
Total Shareholder Return Amount |
$ 256.08
|
168.08
|
168.56
|
Peer Group Total Shareholder Return Amount |
183.98
|
128.04
|
167.56
|
Net Income (Loss) |
$ 3,387,351,000
|
$ 3,322,060,000
|
$ 2,077,353,000
|
Company Selected Measure Amount |
0.317
|
0.326
|
0.282
|
PEO Name |
Richard Wallace
|
|
|
Measure:: 1 |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Name |
Free cash flow margin
|
|
|
Measure:: 2 |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Name |
Non-GAAP operating margin dollars
|
|
|
Measure:: 3 |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Name |
Total shareholder return
|
|
|
PEO | Amounts Reported Under The Stock Awards [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
$ 23,492,301
|
$ 15,296,189
|
$ 9,338,877
|
PEO | Year End Fair Value Of Equity Awards Granted During The Applicable Fiscal Year That Remain Unvested [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
34,527,604
|
17,938,199
|
17,727,271
|
PEO | Year Over Year Change In Fair Value Of Equity Awards Granted In Prior Years That Remain Outstanding And Unvested [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
24,635,303
|
(18,828,402)
|
41,160,831
|
PEO | Year Over Year Change In Fair Value Of Equity Awards Granted In Prior Years That Vested In The Applicable Fiscal Year [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
4,263,394
|
26,015,974
|
(2,550,384)
|
PEO | Adjustments [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
39,934,000
|
9,829,582
|
46,998,841
|
Non-PEO NEO | Amounts Reported Under The Stock Awards [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
7,023,747
|
3,427,362
|
2,947,277
|
Non-PEO NEO | Year End Fair Value Of Equity Awards Granted During The Applicable Fiscal Year That Remain Unvested [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
9,647,715
|
3,545,418
|
5,409,000
|
Non-PEO NEO | Year Over Year Change In Fair Value Of Equity Awards Granted In Prior Years That Remain Outstanding And Unvested [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
8,777,513
|
(4,115,578)
|
7,885,372
|
Non-PEO NEO | Year Over Year Change In Fair Value Of Equity Awards Granted In Prior Years That Vested In The Applicable Fiscal Year [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
2,694,893
|
6,014,313
|
584,385
|
Non-PEO NEO | Adjustments [Member] |
|
|
|
Pay vs Performance Disclosure |
|
|
|
Adjustment to Compensation, Amount |
$ 14,096,374
|
$ 2,016,791
|
$ 10,931,480
|