Lam Research Corporation
LAM RESEARCH CORP (Form: DEF 14A, Received: 09/21/2015 16:07:28)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

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the Securities Exchange Act of 1934

 

 

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LAM RESEARCH CORPORATION

(Name of Registrant as Specified In Its Charter)

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

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LOGO

September 21, 2015

Dear Lam Research Stockholders,

We cordially invite you to attend, in person or by proxy, the Lam Research Corporation 2015 Annual Meeting of Stockholders. The annual meeting will be held on Wednesday, November 4, 2015, at 9:30 a.m. Pacific Standard Time in the Building CA1 Auditorium at the principal executive offices of Lam Research Corporation, which is located at 4650 Cushing Parkway, Fremont, California 94538.

At this year’s annual meeting, stockholders will be asked to elect the nine nominees named in the attached proxy statement as directors to serve for the ensuing year, and until their respective successors are elected and qualified; to cast an advisory vote to approve the compensation of our named executive officers, or “Say on Pay”; to approve the Lam 2004 Executive Incentive Plan, as amended and restated; to approve the adoption of the Lam 2015 Stock Incentive Plan; and to ratify the appointment of the independent registered public accounting firm for fiscal year 2016. The Board of Directors recommends that you vote in favor of all five proposals. Management will not provide a business update during this meeting; please refer to our latest quarterly earnings report for our current outlook.

Please refer to the proxy statement for detailed information about the annual meeting and each of the proposals, as well as voting instructions. Your vote is important, and we strongly urge you to cast your vote by the internet, phone or mail even if you plan to attend the meeting in person.

Sincerely yours,

Lam Research Corporation

 

LOGO

Stephen G. Newberry

Chairman of the Board

 

 


    

 

Notice of 2015 Annual Meeting

of Stockholders

 

 

LOGO

4650 Cushing Parkway

Fremont, California 94538

Telephone: 510-572-0200

 

Date and Time    Wednesday, November 4, 2015
   9:30 a.m. Pacific Standard Time
Place    Lam Research Corporation
   Building CA1 Auditorium
   4650 Cushing Parkway
   Fremont, California 94538

Items of Business

 

  1. Election of nine directors to serve for the ensuing year, and until their respective successors are elected and qualified
  2. Advisory vote to approve the compensation of our named executive officers, or “Say on Pay”
  3. Approval of the Lam 2004 Executive Incentive Plan, as amended and restated
  4. Approval of the adoption of the Lam 2015 Stock Incentive Plan
  5. Ratification of the appointment of independent registered public accounting firm for fiscal year 2016
  6. Transact such other business that may properly come before the annual meeting (including any adjournment or postponement thereof)

Record Date

Only stockholders of record at the close of business on September 8, 2015, the “Record Date,” are entitled to notice of and to vote at the annual meeting.

Voting

Please vote as soon as possible, even if you plan to attend the annual meeting in person. You have three options for submitting your vote before the annual meeting: by the internet, phone or mail. The proxy statement and the accompanying proxy card provide detailed voting instructions.

Internet Availability of Proxy Materials

Our Notice of 2015 Annual Meeting of Stockholders, Proxy Statement and Annual Report to Stockholders are available on the Lam Research website at http://investor.lamresearch.com and at www.proxyvote.com .

By Order of the Board of Directors

 

LOGO

Sarah A. O’Dowd

Secretary

This proxy statement is first being made available and/or mailed to our stockholders on or about September 21, 2015.

 

 


LAM RESEARCH CORPORATION

Proxy Statement for 2015 Annual Meeting of Stockholders

TABLE OF CONTENTS

 

Proxy Statement Summary     1   

Figure 1. Proposals and Voting Recommendations

    1   

Figure 2. Summary Information Regarding Director Nominees

    1   

Figure 3. Corporate Governance Highlights

    2   

Figure 4. Executive Compensation Highlights

    3   

Figure 5. 2015 Stock Incentive Plan Highlights

    4   
Stock Ownership     5   

Security Ownership of Certain Beneficial Owners and Management

    5   

Section 16(a) Beneficial Ownership Reporting Compliance

    7   
Governance Matters     8   

Corporate Governance

    8   

Corporate Governance Policies

    8   

Board Nomination Policies and Procedures

    8   

Director Independence Policies

    9   

Leadership Structure of the Board

    10   

Other Governance Practices

    10   

Meeting Attendance

    10   

Board Committees

    11   

Board’s Role in Risk Oversight

    12   

Director Compensation

    12   
Compensation Matters     15   

Executive Compensation and Other Information

    15   

Compensation Discussion and Analysis

    15   

I.    Overview of Executive Compensation

    15   

II.   Executive Compensation Governance and Procedures

    19   

III.   Primary Components of Named Executive Officer Compensation; Calendar Year 2014 Compensation Payouts; Calendar Year 2015 Compensation Targets and Metrics

    21   

IV. Tax and Accounting Considerations

    29   

Compensation Committee Report

    30   

Compensation Committee Interlocks and Insider Participation

    30   

Executive Compensation Tables

    31   

Securities Authorized for Issuance under Equity Compensation Plans

    40   
Audit Matters     42   

Audit Committee Report

    42   

Relationship with Independent Registered Public Accounting Firm

    42   

Annual Evaluation and Selection of Independent Registered Public Accounting Firm

    42   

Fees Billed by EY

    43   

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services

    44   

Certain Relationships and Related Party Transactions

    44   
Voting Proposals     45   

Proposal No. 1: Election of Directors

    45   

2015 Nominees for Director

    46   

Proposal No. 2: Advisory Vote to Approve the Compensation of Our Named Executive Officers, or “Say on  Pay”

    52   

Proposal No. 3: Approval of the Lam 2004 Executive Incentive Plan, as Amended and Restated

    52   

Proposal No. 4: Approval of the Adoption of the Lam 2015 Stock Incentive Plan

    55   

Proposal No. 5: Ratification of the Appointment of the Independent Registered Public Accounting Firm for Fiscal Year 2016

    62   

Other Voting Matters

    62   
Voting and Meeting Information     63   

Information Concerning Solicitation and Voting

    63   

Other Meeting Information

    64   
Appendices  

Appendix A – Lam 2004 Executive Incentive Plan, as Amended and Restated

    A-1   

Appendix B – Lam 2015 Stock Incentive Plan

    B-1   


    

 

Proxy Statement Summary

 

 

To assist you in reviewing the proposals to be acted upon at the annual meeting we call your attention to the following information about the proposals and voting recommendations, the Company’s director nominees and highlights of the Company’s corporate governance, executive compensation and 2015 Stock Incentive Plan. The following description is only a summary. For more complete information about these topics, please review the complete proxy statement.

We use the terms “Lam Research,” “Lam,” the “Company,” “we,” “our,” and “us” in this proxy statement to refer to Lam Research Corporation, a Delaware corporation.

Figure 1. Proposals and Voting Recommendations

 

Voting Matters  

Board Vote

Recommendation

 
Proposal 1 – Election of Nine Nominees Named Herein as Directors     FOR each nominee   
Proposal 2 – Advisory Vote to Approve the Compensation of Our Named Executive Officers, or “Say on Pay”     FOR   
Proposal 3 – Approval of the Lam 2004 Executive Incentive Plan, as Amended and Restated     FOR   
Proposal 4 – Approval of the Adoption of the Lam 2015 Stock Incentive Plan     FOR   
Proposal 5 – Ratification of the Appointment of the Independent Registered Public Accounting Firm for Fiscal Year 2016     FOR   

Figure 2. Summary Information Regarding Director Nominees

You are being asked to vote on the election of these nine directors. The following table provides summary information about each director nominee as of September 2015, and their biographical information is contained in the “ Voting Proposals – Proposal No. 1: Election of Directors – 2015 Nominees for Director ” section below.

 

     Director    Committee
Membership
   Other Current Public
Boards
Name   Age    Since   Independent  (1)    AC    CC    NGC   
Martin B. Anstice   48    2012   No                    
Eric K. Brandt   53    2010   Yes    C/FE              Dentsply International
Michael R. Cannon   62    2011   Yes    M         M    Adobe Systems, Seagate Technology, Dialog Semiconductor
Youssef A. El-Mansy   70    2012   Yes         M          
Christine A. Heckart   49    2011   Yes    M               
Catherine P. Lego   58    2006   Yes         C    M    SanDisk, Fairchild Semiconductor International
Stephen G. Newberry   61    2005   No                   Splunk
Krishna C. Saraswat   68    2012   Yes                    
Abhijit Y. Talwalkar   51    2011  

Yes

(Lead Independent Director)

        M    C     

 

(1)      Independence determined based on NASDAQ rules.

AC  – Audit committee   

C – Chairperson

CC  – Compensation committee   

M – Member

NGC  – Nominating and governance committee   

FE – Audit committee financial expert (as determined based on SEC rules)

 

Continues on next page   u

 

Lam Research Corporation 2015 Proxy Statement   1


Figure 3. Corporate Governance Highlights

 

Board and Other Governance Information  (1)   As of September 2015  
Size of Board as Nominated     9   
Average Age of Director Nominees     57.8   
Average Tenure of Director Nominees     5.4   
Number of Independent Nominated Directors     7   
Number of Nominated Directors Who Attended ³ 75% of Meetings     8 (2)  
Number of Nominated Directors on More Than Four Public Company Boards     0   
Directors Subject to Stock Ownership Guidelines     Yes   
Annual Election of Directors     Yes   
Voting Standard     Majority   
Plurality Voting Carveout for Contested Elections     Yes   
Separate Chairman and CEO     Yes   
Lead Independent Director     Yes   
Independent Directors Meet Without Management Present     Yes   
Board (Including Individual Director) and Committee Self-Evaluations     Yes   
Annual Independent Director Evaluation of CEO     Yes   
Risk Oversight by Full Board and Committees     Yes   
Commitment to Board Refreshment and Diversity     Yes   
Robust Director Nomination Process     Yes   
Board Orientation/Education Program     Yes   
Code of Ethics Applicable to Directors     Yes   
Stockholder Ability to Act by Written Consent     Yes   
Poison Pill     No   
Publication of Corporate Social Responsibility Report on Our Website     Yes   

 

(1)   The nine directors to be elected is fewer than the eleven members as of the proxy statement filing date, and the board has reduced the size of the board to nine, effective immediately prior to the time of this year’s annual meeting of stockholders.

 

(2)   For additional information regarding meeting attendance see “ Governance Matters – Corporate Governance – Meeting Attendance ” below.

 

2


Figure 4. Executive Compensation Highlights

 

What We Do
Pay for Performance (Pages 15-18, 21, 24-25) – Our executive compensation program is designed to pay for performance with 100% of the short-term incentive program tied to company financial, strategic and operational performance metrics, 50% of the long-term incentive program tied to total shareholder return, or “TSR,” performance, and 50% of the long-term incentive program awarded in stock options and restricted stock units, or “RSUs.”
Three-Year Performance Period for Our 2015 Long-Term Incentive Program (Pages 24-26) – Our current long-term incentive program is designed to pay for performance over a period of three years.
Absolute and Relative Performance Metrics (Pages 21-23, 24-26) – Our annual and long-term incentive programs for executive officers include the use of absolute and relative performance factors.
Balance of Annual and Long-Term Incentives – Our incentive programs provide a balance of annual and longer-term incentives.
Different Performance Metrics for Annual and Long-Term Incentive Programs (Pages 21-23, 24-26) – Our annual and long-term incentive programs use different performance metrics.
Capped Amounts (Pages 21-22, 25-26) – Amounts that can be earned under the annual and long-term incentive programs are capped.
Compensation Recovery/Clawback Policy (Page 18) – We have a policy in which we can recover the excess amount of cash incentive-based compensation granted and paid to our officers who are covered by Section 16 of the Exchange Act.
Prohibit Option Repricing – Our stock incentive plans prohibit option repricing without stockholder approval (excluding adjustments due to specified corporate transactions and changes in capitalization).
Hedging and Pledging Policy (Page 8) – We have a policy applicable to our Named Executive Officers, or “NEOs,” and directors that prohibits pledging and hedging.
Stock Ownership Guidelines (Page 18) – We have stock ownership guidelines for each of our executive officers and certain other senior executives; each of our NEOs has met his or her individual ownership level under the current program or has a period of time remaining under the guidelines to do so.
Independent Compensation Advisor (Page 19) – The compensation committee benefits from its utilization of an independent compensation advisor retained directly by the committee that provides no other services to the Company.

Stockholder Engagement – We engage with stockholders and stockholder advisory firms to obtain feedback concerning our compensation program.

 

What We Don’t Do
Tax “Gross-Ups” for Perquisites, for Other Benefits or upon a Change in Control (Pages 29-32, 36-38) – Our executive officers do not receive tax “gross-ups” for perquisites, for other benefits or upon a change in control. (1)
Single-Trigger Change in Control Provisions (Pages 28, 36-38) – None of our executive officers have single-trigger change in control agreements.

 

(1)   Our executive officers may receive tax gross-ups in connection with relocation benefits that are widely available to all of our employees.

 

Continues on next page   u

 

Lam Research Corporation 2015 Proxy Statement   3


Figure 5. 2015 Stock Incentive Plan Highlights

 

What The Plan Includes
Share Reserve (Page 58) – 18 million shares shall be available for issuance under the 2015 Stock Incentive Plan, or the “2015 Plan.” In addition, the shares that remain available for grants under the 2007 Stock Incentive Plan, or the “2007 Plan,” as of the date of the 2015 Annual Meeting of Stockholders and any shares that would otherwise return to the 2007 Plan as a result of the forfeiture, termination or expiration of awards previously granted under the 2007 Plan shall also be available for issuance under the 2015 Plan in addition to the 18 million shares.
Award Type Flexibility (Page 57) – The 2015 Plan provides for incentive stock options, non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, or “SARs,” and other awards (including, but not limited to, purchase rights for shares, bonus shares, deferred shares, performance shares and phantom shares).
Fungible Share Ratio (Page 58) – Awards other than stock options and SARs count against the share reserve at a 2:1 ratio (i.e., will count as two shares against the share reserve for every one share subject to such award).
Grant Limits (Page 58) – Grantees may not be granted more than 1,000,000 stock options and SARs during a fiscal year (2,000,000 for new hires). Restricted stock, restricted stock units and other awards intended to be performance-based compensation are limited at 600,000 shares during a fiscal year. Non-employee director awards are limited to 80,000 shares regardless of award type.
Minimum Vesting Periods (Page 59) – Awards may not vest sooner than the one year anniversary of the date of grant (except with respect to 5% of the maximum number of shares that may be issued under the 2015 Plan). Awards may provide for earlier vesting in certain circumstances (e.g., death, disability and in certain corporate transactions).
Recoupment/Clawback (Page 60) – Awards under the 2015 Plan are subject to any applicable recoupment provision that we may adopt with respect to equity awards made after such adoption.
Plan Term (Page 59) – The 2015 Plan terminates 10 years from its effective date, though awards granted before termination will survive in accordance with their terms.

Shares Available for Awards Provisions (Page 59) –

 Shares covered by an award which is forfeited, canceled or which expires before the shares are issued shall be available for future issuance under the 2015 Plan.

 Shares that have been issued (e.g., restricted stock) shall not be returned to the 2015 Plan except where unvested shares are forfeited or repurchased by the Company at the lower of their original purchase price or their fair market value.

 Shares tendered or withheld in payment of an option or SAR exercise price or withheld to pay any option or SAR tax withholding obligation shall not be returned to the 2015 Plan.

 Shares tendered or withheld in payment of any tax withholding obligation for an award other than an option or SAR shall be returned to the 2015 Plan and available for future issuance.

 

What The Plan Does Not Include
Repricing Without Stockholder Approval (Page 59) – Stockholder approval must be obtained prior to the reduction of the exercise price of any option or SAR or the cancellation of an option or SAR when its exercise price exceeds the fair market value of the shares in exchange for cash, another award, or an option or SAR with a lower exercise price (excluding adjustments due to specified corporate transactions and changes in capitalization).

 

4


    

 

Stock Ownership

 

 

Security Ownership of Certain Beneficial Owners and Management

 

The table below sets forth the beneficial ownership of shares of Lam common stock by: (i) each person or entity who we believe based on our review of filings made with the United States Securities and Exchange Commission, or the “SEC,” beneficially owned as of September 8, 2015, more than 5% of Lam’s common stock on the date set forth below; (ii) each current director of the Company; (iii) each NEO identified below in the “ Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis ” section; and (iv) all current directors and current

executive officers as a group. With the exception of 5% owners, and unless otherwise noted, the information below reflects holdings as of September 8, 2015, which is the Record Date for the 2015 annual meeting and the most recent practicable date for determining ownership. For 5% owners, holdings are as of the dates of their most recent ownership reports filed with the SEC, which are the most practicable dates for determining their holdings. The percentage of the class owned is calculated using 158,498,813 as the number of shares of Lam common stock outstanding on September 8, 2015.

 

 

Figure 6. Beneficial Ownership Table

 

Name of Person or Identity of Group   Shares Beneficially Owned
(#)  (1)
     Percentage
of Class
 
5% Stockholders                 

JPMorgan Chase & Co.

270 Park Avenue

New York, NY 10017

    20,041,020 (2)        12.6 %

Ameriprise Financial, Inc.

145 Ameriprise Financial Center

Minneapolis, MN 55474

 

Columbia Management Investment Advisers, LLC

225 Franklin St.

Boston, MA 02110

    14,784,854 (3)        9.3 %

The Vanguard Group, Inc.

100 Vanguard Boulevard

Malvern, PA 19355

    12,200,295 (4)        7.7 %

BlackRock Inc.

55 East 52nd Street

New York, NY 10022

    9,099,499 (5)        5.7 %
Directors                 

Martin B. Anstice (also a Named Executive Officer)

    53,261        *   

Eric K. Brandt

    24,230        *   

Michael R. Cannon

    20,530        *   

Youssef A. El-Mansy

    22,133        *   

Christine A. Heckart

    15,030        *   

Grant M. Inman

    90,038        *   

Catherine P. Lego

    46,038        *   

Stephen G. Newberry

    32,640        *   

Krishna C. Saraswat

    23,696        *   

William R. Spivey

    62,416        *   

Abhijit Y. Talwalkar

    21,130        *   
Named Executive Officers (“NEOs”)                 

Timothy M. Archer

    139,556 (6)        *   

Douglas R. Bettinger

    10,811        *   

Richard A. Gottscho

    67,191        *   

Sarah A. O’Dowd

    49,797        *   
All current directors and executive officers as a group (15 people)     678,497 (6)      *   

 

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Lam Research Corporation 2015 Proxy Statement   5


* Less than 1%.

 

(1)   Includes shares subject to outstanding stock options that are now exercisable or will become exercisable within 60 days after September 8, 2015, as well as restricted stock units, or “RSUs,” that will vest within that time period, as follows:

 

     Shares  
Martin B. Anstice     —     
Eric K. Brandt     2,400   
Michael R. Cannon     2,400   
Youssef A. El-Mansy     2,400   
Christine A. Heckart     2,400   
Grant M. Inman     2,400   
Catherine P. Lego     2,400   
Stephen G. Newberry     2,400   
Krishna C. Saraswat     2,400   
William R. Spivey     2,400   
Abhijit Y. Talwalkar     2,400   
Timothy M. Archer     —     
Douglas R. Bettinger     —     
Richard A. Gottscho     —     
Sarah A. O’Dowd     —     
All current directors and executive officers as a group (15 people)     24,000   

 

     As discussed in “ Director Compensation ” below, the non-employee directors receive an annual equity grant as part of their compensation. These grants generally vest on October 31, 2015, subject to continued service on the board as of that date, with immediate delivery of the shares upon vesting. For 2015, Drs. El-Mansy, Saraswat and Spivey; Messrs. Brandt, Cannon, Inman, Newberry and Talwalkar; and Mses. Heckart and Lego each received grants of 2,400 RSUs. These RSUs are included in the tables above.

 

(2)   All information regarding JPMorgan Chase & Co., or “JPMorgan Chase,” is based solely on information disclosed in amendment number six to Schedule 13G filed by JPMorgan Chase with the SEC on January 15, 2015 as a parent holding company on behalf of JPMorgan Chase and its wholly-owned subsidiaries: JPMorgan Chase Bank, National Association; J.P. Morgan Investment Management Inc.; JPMorgan Asset Management (UK) Ltd.; J.P. Morgan Trust Company of Delaware; and JPMorgan Asset Management (Canada) Inc. According to the Schedule 13G/A filing, of the 20,041,020 shares of Lam common stock reported as beneficially owned by JPMorgan Chase as of December 31, 2014, JPMorgan Chase had sole voting power with respect to 17,836,175 shares, had shared voting power with respect to 257,237 shares, had sole dispositive power with respect to 19,726,354 shares and shared dispositive power with respect to 313,701 shares of Lam common stock reported as beneficially owned by JPMorgan Chase as of that date.

 

(3)   All information regarding Ameriprise Financial, Inc., or “Ameriprise,” and Columbia Management Investment Advisers, LLC, or “Columbia,” is based solely on information disclosed in amendment number two to Schedule 13G filed by Ameriprise and Columbia with the SEC on February 17, 2015. According to the Schedule 13G filing, of the 14,784,854 shares of Lam common stock reported as beneficially owned by Ameriprise and Columbia as of December 31, 2014, Ameriprise and Columbia did not have sole voting power with respect to any shares, and had shared voting power with respect to 1,262,004 shares, did not have sole dispositive power with respect to any other shares and shared dispositive power with respect to 14,784,854 shares of Lam common stock reported as beneficially owned by Ameriprise and Columbia as of that date. According to the Schedule 13G filing, Ameriprise, as the parent company of Columbia, may be deemed to beneficially own the shares reported by Columbia in the Schedule 13G filing. Accordingly, the shares reported by Ameriprise in the Schedule 13G filing include those shares separately reported therein by Columbia.

 

(4)   All information regarding The Vanguard Group, Inc., or “Vanguard,” is based solely on information disclosed in amendment number two to Schedule 13G filed by Vanguard with the SEC on February 10, 2015. According to the Schedule 13G filing, of the 12,200,295 shares of Lam common stock reported as beneficially owned by Vanguard as of December 31, 2014, Vanguard had sole voting power with respect to 267,722 shares, did not have shared voting power with respect to any other shares, had sole dispositive power with respect to 11,938,873 shares and shared dispositive power with respect to 261,422 shares of Lam common stock reported as beneficially owned by Vanguard as of that date. The 12,200,295 shares of Lam common stock reported as beneficially owned by Vanguard include 217,422 shares beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of Vanguard, as a result of it serving as investment manager of collective trust accounts, and 103,300 shares beneficially owned by Vanguard Investments Australia, Ltd., a wholly–owned subsidiary of Vanguard, as a result of it serving as investment manager of Australian investment offerings.

 

(5)  

All information regarding BlackRock Inc., or “BlackRock,” is based solely on information disclosed in amendment number seven to Schedule 13G filed by BlackRock with the SEC on February 2, 2015 on behalf of BlackRock and its subsidiaries: BlackRock (Luxembourg) S.A.; BlackRock (Netherlands) B.V.; BlackRock Advisors (UK) Limited; BlackRock Advisors, LLC; BlackRock Asset Management Canada Limited; BlackRock Asset Management Deutschland AG; BlackRock Asset Management Ireland Limited; BlackRock Asset Management North Asia Limited; BlackRock Financial Management, Inc.; BlackRock Fund Management Ireland Limited; BlackRock Fund Managers Ltd; BlackRock Institutional Trust Company, N.A.; BlackRock International Limited; BlackRock Investment Management (Australia) Limited; BlackRock Investment Management (UK) Ltd; BlackRock Investment Management, LLC; BlackRock Japan Co Ltd; and BlackRock Life Limited. According to the Schedule 13G filing, of the 9,099,499 shares of Lam common stock reported as beneficially owned by BlackRock as of December 31, 2014, BlackRock had sole voting power with respect to 7,649,071 shares, did not have shared voting power with respect to any other shares,

 

6


  had sole dispositive power with respect to 9,099,499 shares and did not have shared dispositive power with respect to any other shares of Lam common stock reported as beneficially owned by BlackRock as of that date.

 

(6)   Includes 4,284 shares of common stock held indirectly in a 401(k) plan and 506 shares of common stock held by Mr. Archer’s spouse in her 401(k) plan over which he may be deemed to have beneficial ownership.

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our executive officers, directors, and people who own more than 10% of a registered class of our equity securities to file an initial report of ownership (on a Form 3) and reports on subsequent changes in ownership (on Forms 4 or 5) with the SEC by specified due dates. Our executive officers, directors, and greater-than-10% stockholders are also required by SEC rules

to furnish us with copies of all Section 16(a) forms they file. We are required to disclose in this proxy statement any failure to file any of these reports on a timely basis. Based solely on our review of the copies of the forms that we received from the filers, and on written representations from certain reporting persons, we believe that all of these requirements were satisfied during fiscal year 2015.

 

 

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Lam Research Corporation 2015 Proxy Statement   7


    

 

Governance Matters

 

 

Corporate Governance

 

Our board of directors and members of management are committed to responsible corporate governance to manage the Company for the long-term benefit of its stockholders. To that end, the board and management periodically review and update, as appropriate, the Company’s corporate governance policies and practices. As part of that process, the board and management consider the requirements of federal and state law, including rules and regulations of the SEC; the listing standards for the NASDAQ Global Select Market, or “NASDAQ;” published guidelines and recommendations of proxy advisory firms; published guidelines of other selected public companies; and any feedback we receive from our stockholders. A list of key corporate governance practices is provided in the “ Proxy Statement Summary ” above.

Corporate Governance Policies

We have instituted a variety of policies and procedures to foster and maintain responsible corporate governance, including the following:

Board committee charters. Each of the board’s audit, compensation and nominating and governance committees has a written charter adopted by the board that establishes practices and procedures for the committee in accordance with applicable corporate governance rules and regulations. Each committee reviews its charter annually and recommends changes to the board, as appropriate. Each committee charter is available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm . Also refer to “ Board Committees ” below, for additional information regarding these board committees.

Corporate governance guidelines. We adhere to written corporate governance guidelines, adopted by the board and reviewed annually by the nominating and governance committee and the board. Selected provisions of the guidelines are discussed below, including in the “ Board Nomination Policies and Procedures, ” “ Director Independence Policies ” and “ Other Governance Practices ” sections below. The corporate governance guidelines are available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm .

Corporate code of ethics. We maintain a code of ethics that applies to all employees, officers, and members of the board. The code of ethics establishes standards reasonably necessary to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, and full, fair, accurate, timely, and understandable disclosure in the periodic

reports we file with the SEC and in other public communications. We will promptly disclose to the public any amendments to, or waivers from, any provision of the code of ethics to the extent required by applicable laws. We intend to make this public disclosure by posting the relevant material on our web site, to the extent permitted by applicable laws. A copy of the code of ethics is available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm .

Global standards of business conduct policy. We maintain written standards of appropriate conduct in a variety of business situations that apply to our worldwide workforce. Among other things, these global standards of business conduct address relationships with one another, relationships with Lam (including conflicts of interest, safeguarding of Company assets and protection of confidential information) and relationships with other companies and stakeholders (including anti-corruption).

Insider trading policy. Our insider trading policy restricts the trading of Company stock by our directors, officers, and employees, and includes provisions addressing insider blackout periods and prohibiting hedges and pledges of Company stock.

Board Nomination Policies and Procedures

Board membership criteria. Under our corporate governance guidelines, the nominating and governance committee is responsible for assessing the appropriate balance of experience, skills and characteristics required for the board and for recommending director nominees to the independent directors.

The guidelines direct the committee to consider all factors it considers appropriate. The committee need not consider all of the same factors for every candidate. Factors to be considered may include, but are not limited to: experience; business acumen; wisdom; integrity; judgment; the ability to make independent analytical inquiries; the ability to understand the Company’s business environment; the candidate’s willingness and ability to devote adequate time to board duties; specific skills, background or experience considered necessary or desirable for board or committee service; specific experiences with other businesses or organizations that may be relevant to the Company or its industry; diversity with respect to any attribute(s) the board considers appropriate, including geographic, gender, age and ethnic diversity; and the interplay of a candidate’s experiences and skills with those of other board members.

 

 

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The board and the nominating and governance committee regard board refreshment as important, and strive to maintain an appropriate balance of tenure, turnover, diversity and skills on the board. The board believes that new perspectives and ideas are important to a forward-looking and strategic board as is the ability to benefit from the valuable experience and familiarity of longer-serving directors.

Prior to recommending that an incumbent non-employee director be nominated for reelection to the board, the committee reviews the experiences, skills and qualifications of the directors to assess the continuing relevance of the directors’ experiences, skills and qualifications to those considered necessary or desirable for the board at that time. Board members may not serve on more than four boards of public companies (including service on the Company’s board).

To be nominated, a new or incumbent candidate must provide an irrevocable conditional resignation that will be effective upon (i) the director’s failure to receive the required majority vote at an annual meeting at which the nominee faces re-election and (ii) the board’s acceptance of such resignation. In addition, no director, after having attained the age of 75 years, may be nominated for re-election or reappointment to the board.

Nomination procedure. The nominating and governance committee identifies, screens, evaluates and recommends qualified candidates for appointment or election to the board based on the board’s needs and desires at that time as developed through their self-evaluation process. The committee considers recommendations from a variety of sources, including search firms, board members, executive officers and stockholders. Nominations for election by the stockholders are made by the independent members of the board.

Certain provisions of our bylaws apply to the nomination or recommendation of candidates by a stockholder. Information regarding the nomination procedure is provided in the “ Voting and Meeting Information – Other Meeting Information – Stockholder-Initiated Proposals and Nominations for 2015 Annual Meeting ” section below.

Director Independence Policies

Board independence requirements. Our corporate governance guidelines require that at least a majority of the board members be independent. No director will qualify as “independent” unless the board affirmatively determines that the director qualifies as independent under the NASDAQ rules and has no relationship that would interfere with the exercise of independent judgment as a director. In addition, no non-employee director may serve as a consultant or service provider to the Company without the approval of a majority of the independent directors (and any such director’s independence must be reassessed by the full board following such approval).

Board member independence. The board has determined that all current directors, other than Messrs. Anstice and Newberry, are independent in accordance with NASDAQ criteria for director independence.

Board committee independence. All members of the board’s audit, compensation, and nominating and governance committees must be non-employee or outside directors and independent in accordance with applicable NASDAQ criteria as well as, in the case of the compensation committee, applicable rules under section 162(m) of the Internal Revenue Code of 1986, as amended, or the “Code,” and Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act.” See “ Board Committees ” below for additional information regarding these board committees.

Lead independent director. Our corporate governance guidelines authorize the board to designate a lead independent director from among the independent board members. The lead independent director is responsible for coordinating the activities of the independent directors; consulting with the chairman regarding matters such as schedules of and agendas for board meetings; the quality, quantity and timeliness of the flow of information from management; the retention of consultants who report directly to the board; and developing the agenda for and moderating executive sessions of the board’s independent directors. Mr. Talwalkar was appointed the lead independent director, effective August 27, 2015, succeeding Mr. Inman, who is retiring effective as of November 2, 2015 and had served as the lead independent director from his reelection at the 2012 annual meeting through August 26, 2015.

Executive sessions of independent directors. The board and its audit, compensation, and nominating and governance committees hold meetings of the independent directors and committee members, without management present, as part of each regularly scheduled meeting and at any other time at the discretion of the board or committee, as applicable.

Board access to independent advisors. The board as a whole, and each of the board standing committees separately, has the complete authority to retain, at the Company’s expense, and terminate, in their discretion, any independent consultants, counselors, or advisors as they deem necessary or appropriate to fulfill their responsibilities.

Board education program. Our corporate governance guidelines provide that directors are expected to participate in educational activities sufficient to maintain their understanding of their duties as directors and to enhance their ability to fulfill their responsibilities. In addition to any external educations that the directors find useful, the Company and the board leadership are expected to facilitate such participation by arranging for appropriate educational content to be incorporated into regular meetings of the board and committees.

 

 

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Lam Research Corporation 2015 Proxy Statement   9


Leadership Structure of the Board

The current leadership structure of the board consists of a chairman and a lead independent director. The chairman, Mr. Newberry, served as chief executive officer of the Company from June 2005 to January 2012. The board believes that this is the appropriate board leadership structure at this time. Lam and its stockholders benefit from having Mr. Newberry as its chairman, as he brings to bear his experience as CEO as well as his other qualifications in carrying out his responsibilities as chairman, which include (i) preparing the agenda for the board meetings; (ii) upon invitation, attending meetings of any of the board committees on which he is not a member; (iii) if not also the CEO, conveying to the CEO, together with the chair of the compensation committee, the results of the CEO’s performance evaluation; (iv) reviewing proposals submitted by stockholders for action at meetings of stockholders and, depending on the subject matter, determining the appropriate body, among the board or any of the board committees, to evaluate each proposal and making recommendations to the board regarding action to be taken in response to such proposal; (v) performing such other duties as the board may reasonably request from time to time; and (vi) performing such duties as the CEO may reasonably request from time to time for the purpose of enhancing the chairman’s familiarity with the Company and its executives, such as attending the annual Executive Strategic Planning Conference as a representative of the board, and by meeting with the members of management at the request of the CEO or COO. The Company and its stockholders also benefit from having a lead independent director to provide independent board leadership. See “ Director Independence Policies – Lead Independent Director ” for additional information regarding the responsibilities of the lead independent director.

Other Governance Practices

In addition to the principal policies and procedures described above, we have established a variety of other practices to enhance our corporate governance, including the following:

Board and committee assessments. At least once every two years, the board conducts a self-evaluation of the board, its committees, and the individual directors, overseen by the nominating and governance committee.

Director resignation or notification of change in executive officer status. Under our corporate governance guidelines, any director who is also an executive officer of the Company must offer to submit his or her resignation as a director to the board if the director ceases to be an executive officer of the Company. The board may accept or decline the offer, in its discretion. The corporate governance guidelines also require a non-employee director to notify the nominating and governance committee if the director changes or retires from his or her executive position at another company. The nominating and governance committee reviews the appropriateness of the director’s continuing board membership under the circumstances, and the director is expected to act in accordance with

the nominating and governance committee’s recommendations.

Director and executive stock ownership. Under the corporate governance guidelines, each director is expected to own at least the lesser of five times the value of the annual cash retainer (not including any committee chair or other supplemental retainers for directors) or 5,000 shares of Lam common stock, by the fifth anniversary of his or her initial election to the board. Guidelines for stock ownership by designated members of the executive management team are described below under “ Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis .” All of our directors and designated members of our executive management team were in compliance with the Company’s applicable stock ownership guidelines at the end of fiscal year 2015 or have a period of time remaining under the program to do so.

Communications with board members. Any stockholder who wishes to communicate directly with the board of directors, with any board committee or with any individual director regarding the Company may write to the board, the committee or the director c/o Secretary, Lam Research Corporation, 4650 Cushing Parkway, Fremont, California 94538. The secretary will forward all such communications to the appropriate director(s).

Any stockholder, employee, or other person may communicate any complaint regarding any accounting, internal accounting control, or audit matter to the attention of the board’s audit committee by sending written correspondence by mail (to Lam Research Corporation, Attention: Board Audit Committee, P.O. Box 5010, Fremont, California 94537-5010) or by phone (855-208-8578) or internet (through the Company’s third party provider web site at www.lamhelpline.ethicspoint.com) . The audit committee has established procedures to ensure that employee complaints or concerns regarding audit or accounting matters will be received and treated anonymously (if the complaint or concern is submitted anonymously and permitted under applicable law).

Meeting Attendance

All of the directors attended at least 75% of the aggregate number of board meetings and meetings of board committees on which they served during their board tenure in fiscal year 2015, with the exception of Dr. El-Mansy, who attended 100% of all such meetings in all prior years of service and 70% in fiscal year 2015. Dr. El-Mansy was unable to attend one board and two compensation committee meetings scheduled within a two week period in fiscal year 2015 due to a serious family medical situation. Our board of directors held a total of five meetings during fiscal year 2015.

We expect our directors to attend the annual meeting of stockholders each year. All individuals who were directors as of the 2014 annual meeting of stockholders attended the 2014 annual meeting of stockholders.

 

 

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Board Committees

The board of directors has three standing committees: an audit committee, a compensation committee, and a nominating and governance committee. The purpose, membership and charter of each are described below.

Figure 7. Committee Membership

 

Current Committee Memberships
Name   Audit   Compensation   Nominating
and
Governance
Eric K. Brandt   Chair        
Michael R. Cannon   x       x
Youssef A. El-Mansy       x    
Christine A. Heckart         x  (1)        
Grant M. Inman       x         x  (2)
Catherine P. Lego       Chair  (3)   x
William R. Spivey   x        
Abhijit Y. Talwalkar             x  (4)   Chair  (5)
Total Number of Meetings Held in FY2015   8   5   4

 

(1)   Ms. Heckart was appointed as a member of the audit committee effective August 27, 2015. Until that time, she served as a member of the compensation committee.

 

(2)   Mr. Inman served as chair of the nominating and governance committee through August 26, 2015, remaining thereafter as a member of the committee.

 

(3)   Ms. Lego was appointed as chair of the compensation committee effective August 27, 2015. Until that time, she served as a member of the audit committee.

 

(4)   Mr. Talwalkar served as chair of the compensation committee through August 26, 2015, remaining thereafter as a member of the committee.

 

(5)   Mr. Talwalkar was appointed as a member of the nominating and governance committee effective May 14, 2015 and as chair of the nominating and governance committee effective August 27, 2015.

Audit committee. The purpose of the audit committee is to oversee the Company’s accounting and financial reporting processes and the audits of our financial statements, including the system of internal controls. As part of its responsibilities, the audit committee reviews and oversees potential conflict of interest situations, transactions required to be disclosed pursuant to Item 404 of Regulation S-K of the SEC and any other transaction involving an executive or board member. A copy of the audit committee charter is available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm .

The board concluded that all audit committee members are non-employee directors who are independent in accordance with the NASDAQ listing standards and SEC rules for audit committee member independence and that each audit committee member is able to read and understand fundamental financial statements as required by the NASDAQ listing standards. The board also determined that Mr. Brandt, the chair of the committee, is an “audit committee financial expert” as defined in the SEC rules.

Compensation committee. The purpose of the compensation committee is to discharge certain responsibilities of the board relating to executive compensation; to oversee incentive, equity-based plans and other compensatory plans in which the Company’s executive officers and/or directors participate; and to produce an annual report on executive compensation for inclusion as required in the Company’s annual proxy statement. The compensation committee is authorized to perform the responsibilities of the committee referenced above and described in the charter. A copy of the compensation committee charter is available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm .

The board concluded that all members of the compensation committee are non-employee directors who are independent in accordance with Rule 16b-3 of the Exchange Act and the NASDAQ criteria for director and compensation committee member independence and who are outside directors for purposes of section 162(m) of the Code.

Nominating and governance committee. The purpose of the nominating and governance committee is to identify individuals qualified to serve as members of the board of the Company, to recommend nominees for election as directors of the Company, to oversee self-evaluations of the board’s performance, to develop and recommend corporate governance guidelines to the board, and to provide oversight with respect to corporate governance. A copy of the nominating and governance committee charter is available on the investors’ page of our web site at http://investor.lamresearch.com/corporate-governance.cfm .

The board concluded that all nominating and governance committee members are non-employee directors who are independent in accordance with the NASDAQ criteria for director independence.

 

 

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Lam Research Corporation 2015 Proxy Statement   11


The nominating and governance committee will consider for nomination persons properly nominated by stockholders in accordance with the Company’s bylaws and other procedures described in the “ Voting and Meeting Information – Other Meeting Information – Stockholder-Initiated Proposals and Nominations for 2015 Annual Meeting ” section below. Subject to then-applicable law, stockholder nominations for director will be evaluated by the Company’s nominating and governance committee in accordance with the same criteria as is applied to candidates identified by the nominating and governance committee or other sources.

Board’s Role in Risk Oversight

The board is actively engaged in risk oversight. Management regularly reports to the board on its risk assessments and risk mitigation strategies for the major risks of our business. Generally the board exercises its oversight responsibility

directly; however, in specific cases, such responsibility has been delegated to board committees. Committees that have been charged with risk oversight regularly report to the board on those risk matters within their areas of responsibility. Risk oversight responsibility has been delegated to board committees as follows:

 

    Our audit committee oversees risks related to the Company’s accounting and financial reporting, internal controls, and the auditing of our annual financial statements. The audit committee also oversees risks related to our independent registered public accounting firm and our internal audit function.
    Our compensation committee oversees risks related to the Company’s equity, and executive compensation programs and plans.
    Our nominating and governance committee oversees risks related to director independence, board and board committee composition and CEO succession planning.
 

 

 

Director Compensation

 

Our director compensation is designed to attract and retain high caliber directors and to align director interests with those of stockholders. Director compensation is reviewed and determined annually by the board (in the case of Messrs. Newberry and Anstice, by the independent members of the board), upon recommendation from the compensation committee. Non-employee director compensation (including the compensation of Mr. Newberry, who is currently our non-employee chairman and was previously an employee chairman for a portion of fiscal year 2015) is described below. Mr. Anstice, whose compensation as CEO is described below under “ Compensation Matters – Executive Compensation and Other Information – Compensation Discussion and Analysis, ” does not receive additional compensation for his service on the board.

Non-employee director compensation. Non-employee directors receive annual cash retainers and equity awards. The chairman of the board, committee chairs, the lead independent director and committee members receive additional cash retainers. Non-employee directors who join the board or a committee midyear receive prorated cash retainers and equity awards, as applicable. Our non-employee director compensation plans are based on service during the calendar year; however, SEC rules require us to report compensation in this proxy statement on a fiscal-year basis. Cash compensation paid to non-employee directors for the fiscal year ended June 28, 2015 is shown in the table below, together with the annual cash compensation program components in effect for calendar years 2014 and 2015.

Figure 8. Director Annual Retainers

 

Annual Retainers   Calendar
Year 2015
($)
    Calendar
Year 2014
($)
    Fiscal
Year 2015
($)
 
Non-employee Director     60,000        60,000        60,000   
Lead Independent Director     20,000        20,000        20,000   
Chairman  (1)     280,000        —          280,000   
Audit Committee – Chair     25,000        25,000        25,000   
Audit Committee – Member     12,500        12,500        12,500   
Compensation Committee – Chair     20,000        20,000        20,000   
Compensation Committee – Member     10,000        10,000        10,000   
Nominating and Governance Committee – Chair     10,000        10,000        10,000   
Nominating and Governance Committee – Member     5,000        5,000        5,000   

 

(1)   The supplemental retainer for the chairman of the board became effective as of January 1, 2015 and was paid in its entirety in February 2015. The amount and timing of cash received by the chairman in calendar year 2014 to supplement the amount of his cash retainer paid on the same terms as the annual cash retainer for all non-employee directors is described below under “ Chairman compensation .”
 

 

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Each non-employee director also receives an annual equity grant on the first Friday following the annual meeting (or, if the designated date falls within a blackout window under applicable Company policies, on the first business day such grant is permissible under those policies) with a targeted grant date value equal to $190,000 (the number of RSUs subject to the award is determined by dividing $190,000 by the closing price of a share of Company common stock as of the date of grant, rounded down to the nearest 10 shares). These grants generally vest on October 31 in the year following the grant and are subject to the terms and conditions of the Company’s 2007 Stock Incentive Plan, as amended, or the “2007 Plan,” and the applicable award agreements. These grants immediately vest in full: (i) if a non-employee director dies or becomes subject to a “disability” (as determined pursuant to the 2007 Plan), (ii) upon the occurrence of a “Change in Control” (as defined in the 2007 Plan), or (iii) on the date of the annual meeting if the annual meeting during the year in which the award was expected to vest occurs prior to the vest date and the non-employee director is not re-elected or retires or resigns effective immediately prior to the annual meeting. Non-employee directors who commence service after the annual award has been granted receive a pro-rated grant based on the number of regular board meetings remaining in the year as of the date of the director’s election.

On November 7, 2014, each director other than Mr. Anstice received a grant of 2,400 RSUs for services during calendar year 2015. Unless there is an acceleration event, these RSUs will vest in full on October 31, 2015, subject to the director’s continued service on the board.

Chairman compensation. Mr. Newberry, who served as vice-chairman from December 7, 2010 until November 1, 2012 and since such date has served as chairman, has a chairman’s agreement documenting his responsibilities, described above under “ Governance Matters – Corporate Governance – Leadership Structure of the Board,” and compensation. Mr. Newberry entered into a chairman’s agreement with the Company commencing on January 1, 2015 and expiring on December 31, 2015, subject to the right of earlier termination in certain circumstances and a one year extension upon mutual written agreement of the parties. The agreement provides that Mr. Newberry will serve as chairman (and not as an employee or officer) and in addition to his regular compensation as a non-employee director, he receives an additional cash retainer of $280,000.

Prior to January 1, 2015, Mr. Newberry had an employment agreement with the Company that commenced on January 1, 2012 and expired on December 31, 2014. The agreement provided for annual compensation of $500,000, subject to adjustment at the discretion of the independent members of the board. His annual compensation was adjusted to $530,000 effective March 31, 2014. His annual compensation for calendar year 2014 was paid partly in equity and partly in cash as follows: he received an RSU grant with a targeted grant

date value of $190,000 and a $60,000 cash retainer on the same terms as non-employee directors’ annual equity grants and cash retainers, and he received the remaining $280,000 of his annual compensation in cash. Mr. Newberry was eligible to participate in 2014 in the Company’s Elective Deferred Compensation Plan that is generally applicable to executives of the Company, subject to the general terms and conditions of such plan. He continues to maintain a balance in the plan until he no longer performs service for the Company as a director but is no longer eligible to defer any compensation into the plan.

The following table shows compensation for fiscal year 2015 for directors other than Mr. Anstice:

Figure 9. FY2015 Director Compensation

 

Director Compensation for Fiscal Year 2015  
    Fees
Earned
or Paid
in Cash
($)
    Stock
Awards
($)  (1)(2)
    All Other
Compen-
sation
($)  (3)
    Total
($)
 
Stephen G. Newberry     483,231 (4)       187,728       11,487       682,446  
Eric K. Brandt     85,000 (5)       187,728       —          272,728  
Michael R. Cannon     77,500 (6)       187,728       —          265,228  
Youssef A. El-Mansy     70,000 (7)       187,728       22,432       280,160  
Christine A. Heckart     70,000 (8)       187,728       —          257,728  
Grant M. Inman     100,000 (9)       187,728       22,432       310,160  
Catherine P. Lego     77,500 (10)       187,728       21,279       286,507  
Krishna C. Saraswat     60,000 (11)       187,728       —          247,728  
William R. Spivey     72,500 (12)       187,728       22,432       282,660  
Abhijit Y. Talwalkar     80,000 (13)       187,728       —          267,728  

 

(1)   The amounts shown in this column represent the grant date fair value of unvested RSU awards granted during fiscal year 2015 in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Compensation – Stock Compensation, or “ASC 718.” However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs in fiscal year 2015 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2015.

 

(2)   On November 7, 2014, each director who was on the board received an annual grant of 2,400 RSUs based on the $78.93 closing price of Lam’s common stock and the target value of $190,000, rounded down to the nearest 10 shares.

 

(3)   Represents the portion of medical, dental, and vision premiums paid by the Company.

 

(4)   Mr. Newberry received $483,231, representing his $280,000 chairman retainer and $60,000 annual retainer as a director and the remainder of his annual cash compensation under his employment agreement ended December 31, 2014.

 

(5)   Mr. Brandt received $85,000, representing his $60,000 annual retainer and $25,000 as the chair of the audit committee.

 

(6)   Mr. Cannon received $77,500, representing his $60,000 annual retainer, $12,500 as a member of the audit committee, and $5,000 as a member of the nominating and governance committee.
 

 

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Lam Research Corporation 2015 Proxy Statement   13


(7)   Dr. El-Mansy received $70,000, representing his $60,000 annual retainer and $10,000 as a member of the compensation committee.

 

(8)   Ms. Heckart received $70,000, representing her $60,000 annual retainer and $10,000 as a member of the compensation committee.

 

(9)   Mr. Inman received $100,000, representing his $60,000 annual retainer, $20,000 as lead independent director, $10,000 as the chair of the nominating and governance committee, and $10,000 as a member of the compensation committee.

 

(10)   Ms. Lego received $77,500, representing her $60,000 annual retainer, $12,500 as a member of the audit committee, and $5,000 as a member of the nominating and governance committee.

 

(11)   Dr. Saraswat received $60,000, representing his $60,000 annual retainer.

 

(12)   Dr. Spivey received $72,500, representing his $60,000 annual retainer and $12,500 as a member of the audit committee.

 

(13)   Mr. Talwalkar received $80,000, representing his $60,000 annual retainer and $20,000 as chair of the compensation committee.

Other benefits. Any members of the board enrolled in the Company’s health plans as of or prior to December 31, 2012 can participate after retirement from the board in the Company’s Retiree Health Plans. The board eliminated this benefit for any person who became a director after December 31, 2012. The most recent valuation of the Company’s accumulated post-retirement benefit obligation under Accounting Standards Codification 715, Compensation – Retirement Benefits , or “ASC 715,” as of

June 28, 2015, for eligible former directors and the current directors who may become eligible is shown below. Factors affecting the amount of post-retirement benefit obligation include age at enrollment, age at retirement, coverage tier (e.g., single, plus spouse, plus family), interest rate, and length of service.

Figure 10. FY2015 Accumulated Post-Retirement Benefit Obligations

 

Director Compensation for Fiscal Year 2015  
Name   Accumulated
Post-Retirement
Benefit Obligation,
as of June 28,  2015
($)
 
Stephen G. Newberry     767,000   
Eric K. Brandt     —     
Michael R. Cannon     —     
Youssef A. El-Mansy     500,000   
Christine A. Heckart     —     
Grant M. Inman     391,000   
Catherine P. Lego     435,000   
Krishna C. Saraswat     —     
William R. Spivey     704,000   
Abhijit Y. Talwalkar     —     
 

 

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Compensation Matters

 

 

Executive Compensation and Other Information

Compensation Discussion and Analysis

This Compensation Discussion and Analysis, or “CD&A,” describes our executive compensation program. It is organized into the following four sections:

 

I.   Overview of Executive Compensation (Including Our Philosophy and Program Design)
II.   Executive Compensation Governance and Procedures
III.   Primary Components of Named Executive Officer Compensation; Calendar Year 2014 Compensation Payouts; Calendar Year 2015 Compensation Targets and Metrics
IV.   Tax and Accounting Considerations

Our CD&A discusses compensation earned by our fiscal year 2015 “Named Executive Officers,” or “NEOs,” who are as follows:

Figure 11. FY2015 NEOs

 

Named Executive Officer    Position(s)
Martin B. Anstice    President and Chief Executive Officer
Timothy M. Archer    Executive Vice President and Chief Operating Officer
Douglas R. Bettinger    Executive Vice President and Chief Financial Officer
Richard A. Gottscho    Executive Vice President, Global Products
Sarah A. O’Dowd    Senior Vice President, Chief Legal Officer and Secretary

I. OVERVIEW OF EXECUTIVE COMPENSATION

To align with stockholders’ interests, our executive compensation program is designed to foster a pay-for-performance culture and achieve the executive compensation objectives set forth in “ Executive Compensation Philosophy and Program Design – Executive Compensation Philosophy ” below. We have structured our compensation program and payouts to reflect these goals. Our CEO’s compensation in relation to our revenue and net income is shown in Figure 12 below.

Figure 12. FY2010-FY2015 CEO Pay for Performance

 

LOGO

 

 

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Lam Research Corporation 2015 Proxy Statement   15


(1)   “CEO Total Compensation” consists of base salary, annual incentive payments, accrued values of the cash payments under the long-term incentive program and grant date fair values of equity-based awards under the long-term incentive program, and all other compensation as reported in the “ Summary Compensation Table ” below.

 

(2)   The CEO Total Compensation for fiscal year 2012 reflects Mr. Anstice’s succession of Mr. Newberry as our President and CEO as of January 1, 2012.

 

(3)   The CEO Total Compensation for fiscal years 2015 and 2014 reflects awards covering a three-year performance period as compared to the two-year period in all other prior fiscal years. The one-time 2014 Gap Year Award, with a value of $3,074,271 is reflected in the “ Summary Compensation Table ” below, is not included in fiscal year 2014 CEO Total Compensation in order to allow readers to more easily compare compensation in prior and subsequent periods and better reflect the compensation payable in any fiscal year following the transition. See “ Long-Term Incentive Program – Design ” for additional information regarding the impact of the Gap Year Award.

To understand our executive compensation program fully, we feel it is important to understand:

 

    Our business, our industry environment and our financial performance; and
    Our executive compensation philosophy and program design.

Our Business, Our Industry Environment and Our Financial Performance

 

 

Lam Research has been an innovative supplier of wafer fabrication equipment and services to the semiconductor industry for more than 35 years. Our customers include semiconductor manufacturers that make memory, microprocessors, and other logic integrated circuits for a wide

range of electronics; including cell phones, computers, tablets, storage devices, and networking equipment.

Our market-leading products are designed to help our customers build the smaller, faster and more powerful devices that are necessary to power the capabilities required by end users. The process of integrated circuits fabrication consists of a complex series of process and preparation steps, and our product offerings in deposition, etch and clean address a number of the most critical steps in the fabrication process. We leverage our expertise in semiconductor processing to develop technology and/or productivity solutions that typically benefit our customers through lower defect rates, enhanced yields, faster processing time, and reduced cost as well as by facilitating their ability to meet more stringent performance and design standards.

The semiconductor capital equipment industry has been highly competitive and characterized by rapid changes in demand. Figure 13 below shows year-over-year changes in revenue growth for each of the electronics industry, the semiconductor industry, and the wafer fabrication equipment segment of the semiconductor equipment industry from 2001 to the present. The semiconductor industry has historically been a highly cyclical industry, with fluctuations responding to changes in the demand for semiconductor devices. The wafer fabrication equipment segment in which we participate has historically exhibited more extreme volatility during these demand cycles as illustrated by the graph below. More recently with consolidation in the customer base, the cyclical behavior in the industry appears to have diminished somewhat. With a reduced number of customers, the volatility in the industry has lessened but our results are more dependent on the spending of any individual customer over certain periods.

 

 

Figure 13. Revenue Growth by Industry

 

LOGO

Sources: SEMI; World Semiconductor Trade Statistics, Inc. (WSTS); Gartner, Inc.; Lam Research Corporation

 

16


Although we have a June fiscal year end, our executive compensation program is generally designed and oriented on a calendar-year basis to correspond with our calendar-year-based business planning. This CD&A generally reflects a calendar-year orientation rather than a fiscal year orientation, as shown in Figure 14 below. The Executive Compensation Tables at the end of this CD&A are based on our fiscal year, as required by SEC regulations.

Figure 14. Executive Compensation Calendar-Year Orientation

 

LOGO

In calendar year 2014, demand for semiconductor equipment improved relative to calendar year 2013, as device manufacturers invested in leading edge production capacity to support healthy demand for mobile electronics. Against this backdrop, Lam delivered record financial performance.

Highlights for calendar year 2014:

 

    Achieved record revenues of approximately $4.9 billion for the calendar year, representing a 23% increase over calendar year 2013;
    Generated operating cash flow of $838.5 million, which represents approximately 17% of revenues;
    Repurchased approximately 6.2 million shares of common stock under the board of directors-approved $250 million and $850 million authorizations, returning approximately $427 million to stockholders; and
    Paid approximately $58.6 million in dividends to stockholders.

Investments for wafer fabrication equipment spending have remained solid in the first half of calendar year 2015 as customers transition to next generation technology nodes, which are increasingly complex and more costly to produce.

Lam has continued to generate solid operating income and cash generation with revenues of $2.9 billion and cash flows from operations of $483 million earned from the March and June 2015 quarters combined. In May 2015, we announced an increase in our quarterly dividend to $0.30 per share (with

future dividend payments subject to board review and approval), reflecting the Board’s confidence in future cash generation and Lam’s commitment to enhancing stockholder value.

Executive Compensation Philosophy and Program Design

 

 

Executive Compensation Philosophy

The philosophy of our compensation committee that guided this year’s awards and payout decisions is that our executive compensation program should:

 

    provide competitive compensation to attract and retain top talent;
    provide total compensation packages that are fair to employees and reward corporate, organizational and individual performance;
    align pay with business objectives while driving exceptional performance throughout fluctuating business cycles;
    optimize value to employees while maintaining cost-effectiveness to the Company;
    create stockholder value over the long term;
    align annual program to short-term performance and long-term program to longer-term performance;
    recognize that a long-term, high-quality management team is a competitive differentiator for Lam, enhancing customer trust/market share and, therefore, stockholder value; and
    provide rewards when results have been demonstrated.

Our compensation committee’s executive compensation objectives are to motivate:

 

    performance that creates long-term stockholder value;
    outstanding performance at the corporate, organization and individual levels; and
    retention of a long-term, high-quality management team.

Program Design

Our program design uses a mix of short- and long-term components, and a mix of cash and equity components. Our executive compensation program includes base salary, an annual incentive program, or “AIP,” and a long-term incentive program, or “LTIP,” as well as stock ownership guidelines and a compensation recovery policy. As illustrated in Figure 15 below, our program design is weighted towards performance and stockholder value. The performance-based program components include AIP cash payouts and market-based equity and stock option awards under the LTIP.

 

 

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Lam Research Corporation 2015 Proxy Statement   17


Figure 15. NEO Compensation Target Pay Mix Averages   (1)

 

LOGO

 

(1)   Data in Figure 15 for the calendar year 2015, 2014 and 2013 charts is for the then-applicable NEOs (i.e., fiscal year 2013 NEOs are represented in the calendar year 2013 chart, etc.).

 

(2)   In 2014, the Company issued one-time Gap Year Awards to bridge the transition from a two- to three-year LTIP design. The one-time 2014 Gap Year Awards are not included in 2014 target pay in order to allow readers to more easily compare pay mixes relative to prior periods. See “Long-Term Incentive Program – Design” below for additional information regarding the impact of the Gap Year Award.

 

(3)   For purposes of this illustration, we include performance-based RSUs and stock options as performance-based, but do not classify service-based RSUs as performance-based.

 

Our stock ownership guidelines for our NEOs are shown in Figure 16 below. The requirements are specified in the alternative of shares or dollars to allow for stock price volatility. Ownership levels as shown below must be achieved within five years of appointment to one of the below positions. Increased requirements due to promotions or an increase in

the ownership guideline must be achieved within five years of promotion or a change in the guidelines. At the end of fiscal year 2015, all of the then-employed NEOs were in compliance with our stock ownership guidelines or have a period of time remaining under the guidelines to meet the required ownership level.

 

 

Figure 16. Executive Stock Ownership Guidelines

 

Position    Guidelines (lesser of)
Chief Executive Officer    5x base salary or 65,000 shares
Executive Vice Presidents    2x base salary or 20,000 shares
Senior Vice Presidents    1x base salary or 10,000 shares

 

Compensation Recovery, or “Clawback” Policy

 

 

Our executive officers covered by Section 16 of the Exchange Act are subject to the Company’s compensation recovery, or “clawback,” policy. The clawback policy was adopted in August 2014 and will enable us to recover the excess amount of cash incentive-based compensation issued starting in calendar year 2015 to covered individuals when a material restatement of financial results is required within 36 months of the issuance of the original financial statements. A covered individual’s fraud must have materially contributed to the need to issue restated financial statements in order for the clawback

policy to apply to that individual. The recovery of compensation is not the exclusive remedy available in the event that the clawback policy is triggered.

Highlights of Preferred Compensation-Related Policies, Practices and Provisions

 

 

We maintain preferred policies, practices and provisions related to or in our compensation program, which include those highlighted in “ Proxy Statement Summary – Figure 4. Executive Compensation Highlights .”

 

 

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II. EXECUTIVE COMPENSATION GOVERNANCE AND PROCEDURES

 

Role of the Compensation Committee

 

 

Our board of directors has delegated certain responsibilities to the compensation committee, or the “committee,” through a formal charter. The committee  (1) oversees the compensation programs in which our chief executive officer and his direct executive reports (including all other NEOs) participate. The independent members of our board of directors approve the compensation packages and payouts for our CEO. The CEO is not present for any decisions regarding his compensation packages and payouts.

Committee responsibilities include, but are not limited to: reviewing and approving the Company’s executive compensation philosophy, objectives and strategies; reviewing and approving the appropriate peer group companies for purposes of evaluating the Company’s compensation competitiveness; causing the board of directors to perform a periodic performance evaluation of the CEO; recommending to the independent members of the board of directors (as determined under both NASDAQ’s listing standards and Section 162(m) of the Internal Revenue Code of 1986, as amended) corporate goals and objectives under the Company’s compensation plans, compensation packages (e.g., annual base salary level, annual cash incentive award, long-term incentive award and any employment agreement, severance arrangement, change-in-control arrangement, equity grant, or special or supplemental benefits, and any material amendment to any of the foregoing) as applicable to the CEO and compensation payouts for the CEO; annually reviewing with the CEO the performance of the Company’s other executive officers in light of the Company’s executive compensation goals and objectives and approving the compensation packages and compensation payouts for such individuals; reviewing and recommending for appropriate board action all cash, equity-based and other compensation packages and compensation payouts applicable to the chairman, vice-chairman and other members of the board; and reviewing, and approving where appropriate, equity-based compensation plans.

The committee is authorized to delegate such of its authority and responsibilities as the committee deems proper and consistent with legal requirements to members of the committee, any other committee of the board and one or more officers of the Company in accordance with the provisions of the Delaware General Corporation Law. For additional information on the committee’s responsibilities and authorities, see “ Governance Matters – Corporate Governance – Board Committees – Compensation Committee ” above.

 

In order to carry out these responsibilities, the committee receives and reviews information, analysis and proposals prepared by our management and by the committee’s compensation consultant (see “ Role of Committee Advisors ” below).

Role of Committee Advisors

 

 

The committee is authorized to engage its own independent advisors to assist in carrying out its responsibilities. The committee has engaged the services of Compensia, Inc., or “Compensia,” a national compensation consulting firm, as the committee’s compensation consultant. Compensia provides the committee with independent and objective guidance regarding the amount and types of compensation for our chairman and executive officers and how these amounts and types of compensation compare to other companies’ compensation practices, as well as guidance on market trends, evolving regulatory requirements, compensation of our independent directors, peer group composition and other matters as requested by the committee.

Representatives of Compensia regularly attend committee meetings (including executive sessions without management present), communicate with the committee chair outside of meetings, and assist the committee with the preparation of metrics and goals. Compensia reports to the committee, not to management. At the committee’s request, Compensia meets with members of management to gather and discuss information that is relevant to advising the committee. The committee may replace Compensia or hire additional advisors at any time. Compensia has not provided any other services to the committee or to our management and has received no compensation from us other than with respect to the services described above. The committee assessed the independence of Compensia pursuant to SEC rules and NASDAQ listing standards, including the following factors: (1) the absence of other services provided by it to the Company; (2) the fees paid to it by the Company as a percentage of its total revenue; (3) its policies and procedures to prevent conflicts of interest; (4) the absence of any business or personal relationships with committee members; (5) the fact that it does not own any Lam common stock; and (6) the absence of any business or personal relationships with our executive officers. The committee assessed this information and concluded that the work of Compensia had not raised any conflict of interest.

 

 

(1)   For purposes of this CD&A, a reference to a compensation action or decision by the committee with respect to our chairman and our president and chief executive officer, means an action or decision by the independent members of our board of directors upon the recommendation of the committee and, in the case of all other NEOs, an action or decision by the compensation committee.
 

 

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Lam Research Corporation 2015 Proxy Statement   19


Role of Management

 

 

Our CEO, with support from our human resources and finance organizations, develops recommendations for the compensation of our other executive officers. Typically, these recommendations cover base salaries, annual incentive program target award opportunities, long-term incentive program target award opportunities and the criteria upon which these award opportunities may be earned, as well as actual payout amounts under the annual and long-term incentive programs.

The committee considers the CEO’s recommendations within the context of competitive compensation data, the Company’s compensation philosophy and objectives, current business conditions, the advice of Compensia, and any other factors it considers relevant. At the request of the committee, our chairman also provides input to the committee.

Our CEO attends committee meetings at the request of the committee, but leaves the meeting for any deliberations related to and decisions regarding his own compensation, when the committee meets in executive session, and at any other time requested by the committee.

Peer Group Practices and Survey Data

 

 

In establishing the total compensation levels of our executive officers as well as the mix and weighting of individual compensation elements, the committee monitors compensation data from a group of comparably sized companies in the technology industry, or the “Peer Group,” which may differ from peer groups used by stockholder advisory firms. The committee selects the companies constituting our Peer Group based on their comparability to our lines of business and industry, annual revenue, and market capitalization, and our belief that we are likely to compete with them for executive talent. Our Peer Group is focused on U.S. based, public semiconductor, semiconductor equipment and materials companies, and similarly sized high-technology equipment and hardware companies with a global presence and a significant investment in research and development. Figure 17 below summarizes how the Peer Group companies compare to the Company:

Figure 17. 2015 Peer Group Revenue and Market Capitalization

 

Metric   Lam
Research
($M)
    Target for
Peer Group
  Peer
Group
Median
($M)
 
Revenue (last completed four quarters as of June 5, 2014)     4,345      0.5 to
2 times Lam
    4,780   
Market Capitalization (30-day average as of June 5, 2014)     9,571      0.33 to
3 times Lam
    11,775   

Based on these criteria, the Peer Group and targets may be modified from time to time. Our Peer Group was reviewed in

August 2014 for calendar year 2015 compensation decisions and based on the criteria identified above, we added one new peer (Freescale Semiconductor, Inc.) and removed two former peers (LSI Corporation, which was acquired by Avago Technologies, and Micron Technology). Our Peer Group consists of the companies listed in Figure 18 below.

Figure 18. CY2015 Peer Group Companies

 

Advanced Micro Devices, Inc.   KLA-Tencor Corporation
Agilent Technologies, Inc.   Marvell Technology Group Ltd
Analog Devices, Inc.   Maxim Integrated Products, Inc.
Applied Materials, Inc.   NetApp, Inc.
Avago Technologies   NVIDIA Corporation
Broadcom Corporation   ON Semiconductor Corporation
Corning Incorporated   SanDisk Corporation
Freescale Semiconductor   Xilinx, Inc.
Juniper Networks, Inc.    

We derive revenue, market capitalization and NEO compensation data from public filings made by our Peer Group companies with the SEC and other publicly available sources. Radford Technology Survey data may be used to supplement compensation data from public filings as needed. The committee reviews compensation practices and selected data on base salary, bonus targets, total cash compensation, equity awards, and total compensation drawn from the Peer Group companies and/or Radford Technology Survey primarily as a reference to ensure compensation packages are consistent with market norms.

Base pay levels for each executive officer are generally set with reference to the middle of the market range (40th-60th percentile), variable pay target award opportunities and total direct compensation for each executive officer are generally designed to deliver at or above market median (50th-75th percentile) compensation for target performance. For those executive officers new to their roles, compensation arrangements may be designed to deliver below market compensation. However, the committee does not “target” pay at any specific percentile. Rather, individual pay positioning depends on a variety of factors, such as prior job performance, job scope and responsibilities, skill set, prior experience, time in position, internal comparisons of pay levels for similar skill levels or positions, our goals to attract and retain executive talent, Company performance and general market conditions.

Assessment of Compensation Risk

 

 

Management, with the assistance of Compensia, the committee’s independent compensation consultant, conducted a compensation risk assessment in 2015 and concluded that the Company’s current employee compensation programs are not reasonably likely to have a material adverse effect on the Company’s business.

 

 

20


2014 Say on Pay Voting Results; Company Response

 

 

We evaluate our executive compensation program annually. Among other things, we consider the outcome of our most recent Say on Pay vote and any input we receive from our stockholders. In 2014, the committee made changes to our executive compensation program to further strengthen our pay for performance alignment and to bring certain aspects of our long-term incentive program more in line with evolving market

practices. In 2014, our stockholders approved our 2014 advisory vote on executive compensation, with 96.4% of the votes cast in favor of the advisory proposal. Our most recent Say on Pay vote signifies our stockholders’ approval of those changes. We have not made any material changes to our programs and practices in 2015. Additionally, we continue to further enhance our disclosure regarding our compensation program and practices.

 

 

III. PRIMARY COMPONENTS OF NAMED EXECUTIVE OFFICER COMPENSATION; CALENDAR YEAR 2014 COMPENSATION PAYOUTS; CALENDAR YEAR 2015 COMPENSATION TARGETS AND METRICS

 

This section describes the components of our executive compensation program. It also describes, for each component, the payouts to our NEOs for calendar year 2014 and the forward-looking actions taken with respect to our NEOs in calendar year 2015.

Base Salary

 

 

We believe the purpose of base salary is to provide competitive compensation to attract and retain top talent and to provide compensation to employees, including our NEOs, with a fixed and fair amount of compensation for the jobs they perform. Accordingly, we seek to ensure that our base salary levels are competitive in reference to Peer Group practice and market survey data. Adjustments to base salary are generally considered by the committee each year in February.

For calendar years 2015 and 2014, base salaries for NEOs other than our CEO in 2014 were determined by the committee in February of each year and became effective on March 31 of that year, based on the factors described above. For 2015, the base salaries for all the NEOs, including Mr. Anstice, were increased by 3% in order to remain competitive against our Peer Group. The base salaries of the NEOs for calendar years 2015 and 2014 are as follows:

Figure 19. NEO Annual Base Salaries

 

Named Executive Officer   Annual Base
Salary as of
March 31, 2015
($)
    Annual Base
Salary as of
March 31, 2014
($)
 
Martin B. Anstice     927,000        900,000   
Timothy M. Archer     618,000        600,000   
Douglas R. Bettinger     540,000        525,000   
Richard A. Gottscho     540,000        525,000   
Sarah A. O’Dowd     427,500        415,000   

 

Annual Incentive Program

 

 

Design

Our annual incentive program is designed to provide short-term, performance-based compensation that: (i) is based on the achievement of pre-set annual financial, strategic and operational objectives aligned with outstanding performance throughout fluctuating business cycles, and (ii) will allow us to attract and retain top talent, while maintaining cost-effectiveness to the Company. The committee establishes individual target award opportunities for each NEO as a percentage of base salary. Specific target award opportunities are determined based on job scope and responsibilities, as well as an assessment of Peer Group data. Awards have a maximum payment amount defined as a multiple of the target award opportunity. The maximum award for 2014 and 2015 was set at 2.25 times target, consistent with prior years.

Annual incentive program components

Annual incentive program components, each of which plays a role in determining actual payments made, include:

 

    a Funding Factor,
    a Corporate Performance Factor, and
    various Individual Performance Factors (formerly known as Organization/Individual Performance Factors).

The Funding Factor is set by the committee to create a maximum payout amount from which annual incentive program payouts may be made. The committee may exercise negative (but not positive) discretion against the Funding Factor result, and generally the entire funded amount is not paid out. Achievement of a minimum level of performance against the Funding Factor goals is required to fund any program payments. In February 2014, for calendar year 2014, the committee set non-GAAP operating income as a percentage of revenue as the metric for the Funding Factor, with the following goals:

 

    a minimum achievement of 5% non-GAAP operating income as a percentage of revenue was required to fund any program payments, and
 

 

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Lam Research Corporation 2015 Proxy Statement   21


    achieving non-GAAP operating income (as a percentage of revenue) greater than or equal to 20% would result in the maximum payout potential of 225% of target, with actual funding levels interpolated between those points.

The committee selected non-GAAP operating income because it believes that operating income is the performance metric that best reflects core operating results. (2) Non-GAAP operating income is considered useful to investors for analyzing business trends and comparing performance to prior periods. By excluding certain costs and expenses that are not indicative of core results, non-GAAP results are more useful for analyzing business trends over multiple periods.

As a guide for using negative discretion against the Funding Factor results and for making payout decisions, the committee primarily tracks the results of the following two components that are weighted equally in making payout decisions, and against which discretion may be applied in a positive or negative direction, provided the Funding Factor result is not exceeded:

 

    the Corporate Performance Factor, which is based on corporate-wide metrics and stretch goals that apply to all NEOs; and
    the Individual Performance Factors, which are based on organization-specific metrics and stretch goals and individual performance that apply to each individual NEO.

The specific metrics and goals, and their relative weightings, for the Corporate Performance Factor are determined by the committee based upon the recommendation of our CEO, and the Individual Performance Factors are determined by our CEO, or in the case of the CEO, by the committee.

The metrics and goals for the Corporate and Individual Performance Factors are set annually. Goals are set depending on the business environment, to ensure that they are stretch goals regardless of changes in the business environment. Accordingly, as business conditions improve, goals are set to require better performance, and as business conditions deteriorate, goals are set to require stretch performance under more difficult conditions.

We believe that, over time, outstanding business results create stockholder value. Consistent with this belief, multiple performance-based metrics (non-GAAP operating income, product market share, and strategic operational and organizational metrics) are established for our NEOs as part of the Corporate and Individual Performance Factors.

We believe the metrics and goals set under this program, together with the exercise of discretion by the committee as described above, have been effective to motivate our NEOs and the organizations they lead and to achieve pay-for-performance results.

 

(2)   Non-GAAP results are designed to provide information about performance without the impact of certain non-recurring and other non-operating line items. Non-GAAP operating income is derived from GAAP results, with charges and credits in the following line items excluded from GAAP results for applicable quarters during fiscal years 2015 and 2014, restructuring charges, integration-related costs, costs associated with rationalization of certain product configurations, amortization related to intangible assets acquired in the Novellus transaction, acquisition-related inventory fair value impact, expenses associated with the synthetic lease impairment, impairment of a long-lived asset, costs associated with the disposition of business, and impairment of goodwill.
 

 

Figure 20. Annual Incentive Program Payouts

 

Calendar
Year
   Average NEO’s
Annual Incentive
Payout as % of Target
Award  Opportunity
     Business Environment
2014      127       Strong operating performance supported by stable economic conditions and healthy demand for semiconductor equipment; Company growth in various growing industry technology inflections
2013      105       Healthy demand for semiconductor equipment with stable economic conditions and favorable supply demand conditions; delivered on annualized cost savings targets defined in integration plans
2012      93       Demand for semiconductor equipment declined slightly year-over-year as global economic conditions remained weak; positive execution against integration objectives

 

 

Calendar year 2014 annual incentive program parameters and payout decisions

In February 2014, the committee set the calendar year 2014 target award opportunity, the metrics and goals for the Funding Factor, the metrics and annual goals for the Corporate Performance Factor, and the metrics and goals for the Organization/Individual Performance Factors for each NEO were established. In February 2015, the committee considered the actual results under these factors and made

payout decisions for the calendar year 2014 program, all as described below.

2014 Annual Incentive Program Target Award Opportunities. The annual incentive program target award opportunities for calendar year 2014 for each NEO were as set forth in Figure 21 below in accordance with the principles set forth above under “ Peer Group Practices and Survey Data .”

 

 

22


2014 Annual Incentive Program Corporate Performance Factor. In February 2014, the committee set non-GAAP operating income as a percentage of revenue as the metric for the calendar year 2014 Corporate Performance Factor, and set:

 

    a goal of 18% of revenue for the year, which was designed to be a stretch goal, and which would result in a Corporate Performance Factor of 1.00;
    a minimum Corporate Performance Factor of 0.20 for any payout; and
    a maximum Corporate Performance Factor of 1.50 for the maximum payout.

These goals were designed to be stretch goals. Actual non-GAAP operating income percentage was 19.4% of revenue for calendar year 2014. This performance resulted in a total Corporate Performance Factor for calendar year 2014 of 1.14.

2014 Annual Incentive Program Organization/Individual Performance Factor. For 2014, the organization-specific performance metrics and goals for each NEO’s Organization/Individual Performance Factor were set on an annual basis, and were designed to be stretch goals. The Organization/Individual Performance Factor for Mr. Anstice for calendar year 2014 was based on the average of the Organization/Individual Performance Factors of all of the organizations reporting to him. For all other NEOs, their respective Organization/Individual Performance Factors were based on market share and/or strategic, operational and organizational performance goals specific to the organizations they managed, as described in more detail below.

The accomplishments of actual organizational/individual performance against the established goals described below during 2014 were considered.

 

    Mr. Archer’s Organization/Individual Performance Factor for calendar year 2014 was based on the accomplishment of market share, strategic, operational and organizational development goals for the global sales organization, the customer support business group and global operations.
    Mr. Bettinger’s Organization/Individual Performance Factor for calendar year 2014 was based on the accomplishment of strategic, operational and organizational development goals for finance, global information systems and investor relations.
    Dr. Gottscho’s Organization/Individual Performance Factor for calendar year 2014 was based on the accomplishment of market share, strategic, operational and organizational development goals for the product groups for which he had responsibility, deposition, etch, and clean.
    Ms. O’Dowd’s Organization/Individual Performance Factor for calendar year 2014 was based on the accomplishment of strategic, operational and organizational development goals for the legal department.

In consideration of the above accomplishments, as well as the teamwork demonstrated to deliver the overall strong company performance in 2014, the committee exercised discretion such that each NEO received an Organization/Individual Performance Factor of 1.11 for the 2014 calendar year.

2014 Annual Incentive Program Payout Decisions. In February 2015, in light of the Funding Factor results and based on the above results and decisions, the committee approved the following payouts for the calendar year 2014 annual incentive program for each NEO, which were substantially less than the maximum payout available under the Funding Factor:

 

 

Figure 21. CY2014 Annual Incentive Program Payouts

 

Named Executive Officer    Target Award
Opportunity
(% of Base Salary)
     Target Award
Opportunity
($)  (1)
     Maximum Payout under
Funding Factor (219.6% of
Target Award  Opportunity)
($)  (2)
     Actual
Payouts
($)
 
Martin B. Anstice      150         1,350,000         2,964,600         1,708,290  
Timothy M. Archer      110         660,000         1,449,360         835,164  
Douglas R. Bettinger      90         472,500         1,037,610         597,902  
Richard A. Gottscho      90         472,500         1,037,610         597,902  
Sarah A. O’Dowd      80         332,000         729,072         420,113  

 

(1)   Calculated by multiplying each NEO’s annual base salary for the calendar year 2014 by his or her respective target award opportunity percentage.

 

(2)   The Funding Factor resulted in a potential payout of up to 219.6% of target award opportunity for the calendar year (based on the actual non-GAAP operating income percentage results detailed under “ 2014 Annual Incentive Program Corporate Performance Factor ” above and the specific goals set forth in the second paragraph under “ Annual incentive program components ” above).

 

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Lam Research Corporation 2015 Proxy Statement   23


Calendar year 2015 annual incentive program parameters

In February 2015, the committee set the target award opportunity for each NEO as a percentage of base salary, and consistent with prior years set a cap on payments equal to 2.25 times the target award opportunity. The target award opportunity for each NEO is shown in Figure 22 below.

Figure 22. CY2015 Annual Incentive Program Target Award Opportunities

 

Named Executive Officer   Target Award
Opportunity
(% of Base Salary)
 
Martin B. Anstice     150   
Timothy M. Archer     110   
Douglas R. Bettinger     90   
Richard A. Gottscho     90   
Sarah A. O’Dowd     80   

The committee also approved the annual metric for the Funding Factor and for the Corporate Performance Factor as non-GAAP operating income as a percentage of revenue, and set the annual goals for the Funding Factor and also the Corporate Performance Factor. Consistent with the program design, the Corporate Performance Factor goal is more difficult to achieve than the Funding Factor goal. Individual Performance Factor metrics and goals were also established for each NEO. These include strategic and operational performance goals specific to individuals and their business organization. As a result, each NEO has multiple performance metrics and goals under this program. All goals were designed to be stretch goals.

Long-Term Incentive Program

 

 

Design

Our long-term incentive program, or “LTIP,” is designed to attract and retain top talent, provide competitive levels of compensation, align pay with achievement of business objectives and with stock performance over a multi-year period, reward our NEOs for outstanding Company performance and create stockholder value over the long term. Our LTIP was redesigned in February 2014 to further those objectives by: (i) establishing a program entirely composed of equity, (ii) introducing a new LTIP vehicle, a Market-Based PRSU, designed to reward eligible participants based on our stock price performance relative to the Philadelphia Semiconductor Sector Index (SOX), or “SOX index,” (iii) differentiating the metric in our LTIP from the absolute operational performance metrics used for the annual incentive program, and (iv) extending the performance period for the LTIP from two to three years.

As a result, the LTIP now operates on overlapping three-year cycles, whereas prior to 2014, it operated on overlapping two-

year cycles. In 2014, this change would have left participants with a gap in long-term incentive vesting opportunity in 2016. To ensure that participants received a long-term award that vests in 2016, the committee also awarded in 2014 a one-time gap year award with a two-year performance period, or the “Gap Year Award.” The target amount awarded under the Gap Year Award was equal to 50% of the target award opportunity under the regular three-year LTIP award. While the impact on the employee from the extended performance period and the Gap Year Award, assuming performance and target opportunities are the same year after year, was to normalize the received compensation in any year, the accounting impact on the Company from such normalization (visible in “ Figure 32. Summary Compensation Table ” and “ Figure 35. FYE2015 Outstanding Equity Awards ” below), was a higher grant-based compensation expense in fiscal year 2014. This is in addition to the continuing impact on the total compensation figures in the Company’s “ Summary Compensation Table ” in fiscal years 2014 and 2015 from the long-term cash awards, which ceased in fiscal year 2015, under the previously designed programs for our performance during the relevant periods.

As shown in the chart below, because each performance period for the Market-Based PRSUs and stock options during fiscal year 2015 covers performance in two or three years, three performance cycles affect compensation during each fiscal year (including the Gap Year Award).

Figure 23. FY2015 LTIP Programs

 

LOGO

“$V” Reflects timing of cash payment and/or vesting of equity awards.

 

(1)   See Figure 26 below for additional information regarding the performance period for each program.

 

(2)   Gap-Year Awards with cliff vesting of equity awards as in 2014/2016 LTIP but over two-year performance periods are excluded.

 

(3)   Market-Based PRSUs cliff vest at the end of the performance periods.

 

(4)   RSUs and Stock Options vest on an annual basis over three years.

Under the current long-term incentive program, at the beginning of each multi-year performance period, target award opportunities (expressed as a U.S. dollar value) and performance metrics are established for the program. Of the total target award opportunity, 50% is awarded in Market-Based Performance Restricted Stock Units, or “Market-Based PRSUs,” and the remaining 50% is awarded in a combination of stock options and service-based RSUs with at least 10% of

 

 

24


the award in each of these two vehicles. The specific percentage of service-based RSUs and stock options are reviewed annually to determine whether service-based RSUs or stock options are the more appropriate form for the major part of the award based on criteria such as the current business environment and the potential value to motivate and retain the executives. We consider performance-based RSUs

and stock options as performance-based, but do not classify service-based RSUs as performance-based. This means that if options constitute 10% of the total target award opportunity, the long-term incentive program will be 60% performance-based. If options constitute 40% of the total target award opportunity, the long-term incentive program will be 90% performance-based.

 

 

Equity Vehicles

The equity vehicles used in our 2015/2017 long-term incentive program are the following:

Figure 24. 2015/2017 LTIP Program Equity Vehicles

 

Equity
Vehicles
   % of Target
Award
Opportunity
     Terms
Market-Based PRSUs      50      

  Awards cliff vest three years from the February 11, 2015 grant date, or “Grant Date,” subject to satisfaction of minimal performance requirement and continued employment. Cliff, rather than annual, vesting provides for both retention and for aligning NEOs with longer-term stockholder interests.

 

  The performance period for Market-Based PRSUs is three years from the first business day in February (February 2, 2015).

 

  The number of shares represented by the Market-Based PRSUs that can be earned over the performance periods is based on our stock price performance compared to the market price performance of the Philadelphia Semiconductor Sector Index (SOX), subject to the below-referenced ceiling. The stock price performance or market price performance is measured using the closing price for the 50 trading days prior to the dates the performance period begins and ends. The target number of shares represented by the Market-Based PRSUs is increased by 2% of target for each 1% that Lam’s stock price performance exceeds the market price performance of the SOX index; similarly, the target number of shares represented by the Market-Based PRSUs is decreased by 2% of target for each 1% that Lam’s stock price performance trails the market price performance of the SOX index. The result of the vesting formula is rounded down to the nearest whole number. A table reflecting the potential payouts depending on various comparative results is reflected in Figure 25 below.

 

  The final award cannot exceed 150% of target (requiring a percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or greater than positive 25 percentage points) and can be as little as 0% of target (requiring a percentage change in the Company’s stock price performance compared to that of the market price performance of the SOX index equal to or lesser than negative 50 points).

 

  The number of Market-Based PRSUs granted was determined by dividing 50% of the target opportunity by the closing price of our common stock on the Grant Date, $80.60, rounded down to the nearest share.

 

  Awards that vest at the end of the performance period are distributed in shares of our common stock.

Stock Options      10     

  Awards vest one-third on the first, second and third anniversaries of the February 11, 2015 grant date, or “Grant Date,” subject to continued employment.

 

  The number of stock options granted is determined by dividing 10% of the target opportunity by the closing price of our common stock on the Grant Date, $80.60, rounded down to the nearest share and multiplying the result by three. The ratio of three options for every RSU is based on a Black Scholes fair value accounting analysis.

 

  Awards are exercisable upon vesting.

 

  Expiration is on the seventh anniversary of the Grant Date.

RSUs      40      

  Awards vest one-third on the first, second and third anniversaries of the February 11, 2015 grant date, or “Grant Date,” subject to continued employment.

 

  The number of RSUs granted is determined by dividing 40% of the target opportunity by the closing price of our common stock on the Grant Date, $80.60, rounded down to the nearest share.

 

  Awards are distributed in shares of our common stock upon vesting.

 

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Lam Research Corporation 2015 Proxy Statement   25


Figure 25. Market-Based PRSU Vesting Summary

 

% Change in Lam’s Stock Price
Performance Compared to % Change in
SOX Index Market Price Performance
  Market-Based PRSUs
That Can Be Earned
(% of Target)  (1)
 
+ 25% or more     150  
10%     120  
0% (equal to index)     100  
- 10%     80  
- 25%     50  
- 50% or less     0  

 

(1)   As set forth in the third bullet of the first row of Figure 24, the results of the vesting formula (reflecting the number of Market-Based PRSUs that can be earned) are linearly interpolated between the stated percentages using the described formula.

Target Award Opportunity

Under the long-term incentive program, the committee sets a target award opportunity for each participant based on the NEO’s position and responsibilities and an assessment of competitive compensation data. The target award opportunities for each participant are expressed in a U.S. dollar value. The target amounts for each NEO under the program cycles affecting fiscal year 2015 are as follows:

Figure 26. LTIP Target Award Opportunities

 

Named Executive Officer   Long-
Term
Incentive
Program
     Target Award
Opportunity
($)
 
    2015/2017 (1)        6,750,000  
Martin B. Anstice     2014/2016 (2)        6,500,000  
      2013/2014 (3)        5,000,000  
    2015/2017 (1)        3,500,000  
Timothy M. Archer     2014/2016 (2)        3,000,000  
      2013/2014 (3)        3,000,000  
    2015/2017 (1)        2,500,000  
Douglas R. Bettinger     2014/2016 (2)        2,500,000  
      2013/2014 (3)        2,000,000  
    2015/2017 (1)        3,000,000  
Richard A. Gottscho     2014/2016 (2)        2,500,000  
      2013/2014 (3)        2,075,000  
    2015/2017 (1)        1,300,000  
Sarah A. O’Dowd     2014/2016 (2)        1,300,000  
      2013/2014 (3)        1,258,000  

 

(1)   The three-year performance period for the 2015/2017 LTIP begins on February 2, 2015 and ends on February 1, 2018.

 

(2)   The three-year performance period for the 2014/2016 LTIP began on February 18, 2014 and ends on February 17, 2017. The 2014 Gap Year Award (with a performance period beginning on February 18, 2014 and ending on February 17, 2016, and target award opportunities for each participant of 50% of his or her 2014/2016 LTIP target award opportunity) is not included.

 

(3)   The 2013/2014 LTIP had a two calendar-year performance period.

CY2015 Awards

Calendar year 2015 decisions for the 2015/2017 long-term incentive program. On February 11, 2015, the committee made a grant under the 2015/2017 long-term incentive program, of Market-Based PRSUs, stock options and RSUs on the terms set forth in Figure 24 above with a combined value equal to the NEO’s total target award opportunity, as shown in Figure 27 below.

Figure 27. 2015/2017 LTIP Awards

 

Named Executive Officer   Target
Award
Opportunity
($)
    Market-
Based
PRSUs
Award  (1)
(#)
    Stock
Options
Award
(#)
    Service-
Based
RSUs
Award
(#)
 
Martin B. Anstice     6,750,000        41,873        25,122        33,498  
Timothy M. Archer     3,500,000        21,712        13,026        17,369  
Douglas R. Bettinger     2,500,000        15,508        9,303        12,406  
Richard A. Gottscho     3,000,000        18,610        11,166        14,888  
Sarah A. O’Dowd     1,300,000        8,064        4,836        6,451  

 

(1)   The number of Market-Based PRSUs awarded is reflected at target. The final number of shares that may be earned will be 0 to 150% of target.

2013/2014 LTIP Payouts

The 2013/2014 LTIP payouts were awarded, and the 2013/2014 grants were made, pursuant to the previous design of the long-term incentive program.

Historic LTIP Design

 

 

The long-term incentive programs prior to 2014 had two components:

 

    Cash Incentive Component
    Equity Incentive Component

Of such prior long-term incentive programs, 50% were expressed in performance-based cash awards and the other 50% were awarded in equity. Such programs were designed to be 75% performance-based and 25% service-based (i.e., 50% of the equity component was performance-based and 50% was service-based). The cash incentive component of the programs was entirely performance-based, and the equity incentive component had typically been half performance-based (including stock options) and half service-based. As referenced above, we consider goal-based RSUs and stock options as performance-based, but do not classify service-based RSUs as performance-based.

Cash Incentive Component

The cash component of the prior programs was 100% performance-based and was designed to:

 

    motivate outstanding performance at the corporate levels and to create long-term stockholder value,
    attract and retain top talent, and
    optimize value to employees while maintaining cost-effectiveness to the Company.
 

 

26


The committee set performance metrics under each two-year performance period on an annual basis. Goals against the metrics were set on a six month basis for 2013 and on an annual basis for 2014 to allow the committee to react to changes in the external business environment. When business conditions improved, goals were set to require stronger performance, and when business conditions deteriorated, goals were set to ensure stretch performance under more difficult conditions. We believed this flexibility motivated exceptional performance and delivered stockholder value throughout the applicable fluctuating business cycles we experienced.

Results determined based on performance against the pre-set goals were adjusted to reflect stock price appreciation occurring during the performance period, aligning results under the program with results realized by our stockholders. The adjustment was made quarterly referencing a ratio of (x) the market price of our common stock over a 50-trading-day period to (y) the market price of our common stock over a

200-trading-day period, if the ratio was greater than one. Thus the final payout amount was determined by achievement against the performance goals adjusted by this stock price appreciation metric, and subject to the cap the committee set and any negative discretion the committee chose to exercise.

For each two-year performance period, the awards were subject to cliff vesting and payouts were made following the end of the second year to those participants who remained employed on the award determination date. The cliff vesting, rather than annual vesting, assisted with both retention and aligning NEOs with longer-term stockholder interests.

We believed this program had been effective in achieving pay-for-performance results in the face of high volatility across business cycles (as shown in Figure 28 below); however, as noted above, the compensation committee made the decision to move to a long-term program entirely composed of equity effective with the 2014/2016 LTIP.

 

Figure 28. 2013/2014 Long-Term Cash Payouts

 

Long-Term
Cash Cycle
   Average Long-
Term Cash Payout
as % of Target
Award Opportunity
     Business Environment
2013/2014      231      

2014 : Strong operating performance supported by stable economic conditions and healthy demand for semiconductor equipment; Company growth in various growing industry technology inflections

 

2013 : Healthy demand for semiconductor equipment with stable economic conditions and favorable supply demand discipline; delivered on annualized cost savings targets defined in integration plans

2012/2013      109      

2013 : Healthy demand for semiconductor equipment with stable economic conditions and favorable supply demand discipline; delivered on annualized cost savings targets defined in integration plans

 

2012 : Demand for semiconductor equipment declined slightly year-over-year as global economic conditions remained weak; positive execution against integration objectives

2011/2012      84      

2012 : Demand for semiconductor equipment declined slightly year-over-year as global economic conditions remained weak; positive execution against integration objectives

 

2011 : Healthy semiconductor demand under weakening economic conditions; business conditions deteriorated in the second half of calendar year 2011

 

Payout decisions under the 2013/2014 long-term cash program. In February 2015, the committee determined payouts for the 2013/2014 performance cycle. The starting price for determination of the stock price appreciation metric for 2013 and 2014 was $36.93, which was based on a 200-day moving average as of December 21, 2012. The performance metric for both years of the program was non-GAAP operating income as a percentage of revenue. Specific goals against the non-GAAP operating income metric were set in February 2013 for the first half of 2013, in August 2013 for the second half of 2013, and in February 2014 on an annual basis for 2014. During the performance period, the goal was

15% per quarter, reflecting the Company’s executive compensation program objective to motivate retention of a long-term, high quality management team under then-prevailing business conditions. Actual quarterly performance of non-GAAP operating income during all eight quarters ranged from 69% to 156% of target. Without regard to stock price appreciation, the resulting payout would have been 124% of target for the entire period. However, the stock price appreciation metric served to increase the payouts to 231% of target. Payouts for the eligible NEOs were awarded at 231% of target, as shown in Figure 29 below.

 

 

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Lam Research Corporation 2015 Proxy Statement   27


Figure 29. 2013/2014 Long-Term Cash Payouts

 

Named Executive Officer   Cash
Target Award
Opportunity
($)
    Cash
Payout
($)
 
Martin B. Anstice     2,500,000        5,772,974   
Timothy M. Archer     1,500,000        3,463,784   
Douglas R. Bettinger     1,000,000        2,309,190   
Richard A. Gottscho     1,037,500        2,395,784   
Sarah A. O’Dowd     629,000        1,452,480   

Equity Incentive Component

Similar to the current program, the long-term equity incentive component was historically designed to attract and retain top talent, provide competitive levels of compensation and to reward our NEOs for outstanding Company performance and long-term stock price appreciation. Historically, half of the equity award (25% of the total long-term incentive award opportunity) had been performance-based, delivered in either performance-vested RSUs or stock options. The remaining half of the equity award (25% of the total long-term incentive award opportunity) had been delivered through service-vested RSUs. The performance-based equity component of the long-term program was reviewed annually to determine whether performance-based RSUs or stock options were the most appropriate form for the award based on criteria such as the current business environment and the perceived potential value to motivate and retain the NEOs. Awards cliff vested two years after the grant date, depending on continued employment and, in the case of performance-based RSUs, on performance against specified metrics and goals. The cliff vesting, rather than annual vesting, provided for both retention and for aligning NEOs with longer-term stockholder interests.

Vesting and performance results under the 2013/2014 long-term equity program. Under the 2013/2014 long-term equity program, the committee made a grant to each NEO with a grant date of February 8, 2013 (other than Mr. Bettinger, who was not then an employee of the Company) of stock options and service–based RSUs with a combined value equal to 50% of the NEO’s total target award opportunity. The committee made a comparable grant for Mr. Bettinger effective as of March 11, 2013, the date he joined the Company. The number of shares of our common stock into which the stock options were exercisable, determined based on a Black Scholes value analysis, was three times the number of the RSUs granted. The options had a term of seven years and cliff vested on February 8, 2015, subject to continued employment. To determine the number of RSUs, 50% of the NEO’s long-term equity target dollar amount was divided by $42.61, the closing price of our common stock on February 8, 2013, for all NEOs other than Mr. Bettinger, and $42.41, the closing price of our common stock on March 11, 2013, for Mr. Bettinger. The number of shares underlying the stock options issued for the

other 50% of the target dollar amount was determined as described above. The RSUs also cliff vested on February 8, 2015, subject to continued employment. On the vest dates, the stock option and service-based RSUs vested due to the passage of time.

Figure 30. 2013/2014 Long-Term Equity Awards

 

Named Executive
Officer
 

Equity
Target
Award
Opportunity

($)

   

Service-Based
Restricted
Stock
Units Award

(#)

   

Stock
Options
Award

(#)

 
Martin B. Anstice     2,500,000        29,335        88,005   
Timothy M. Archer     1,500,000        17,601        52,803   
Douglas R. Bettinger     1,000,000        11,789        35,367   
Richard A. Gottscho     1,037,500        12,174        36,522   
Sarah A. O’Dowd     629,000        7,380        22,140   

Employment/Change in Control Arrangements

 

 

The Company enters into employment/change in control agreements to help attract and retain our NEOs and believes that these agreements facilitate a smooth transaction and transition planning in connection with change in control events. During the 2015 fiscal year, the Company entered into new employment agreements with Messrs. Anstice, Archer and Bettinger and Dr. Gottscho, and a new change in control agreement with Ms. O’Dowd, because Mr. Anstice’s prior agreement terminated in December 2014 and the committee decided to align the terms and dates of all of these agreements. The employment agreements generally provide for designated payments in the event of an involuntary termination of employment, death or disability, as such terms are defined in the applicable agreements. The employment agreements, and also the change in control agreements, generally provide for designated payments in the case of a change in control when coupled with an involuntary termination (i.e., a double trigger is required before payment is made due to a change in control), as such terms are defined in the applicable agreements.

For additional information about these arrangements and detail about post-termination payments under these arrangements, see the “ Potential Payments upon Termination or Change in Control ” section below.

Other Benefits Not Available to All Employees

 

 

Elective Deferred Compensation Plan

The Company maintains an elective deferred compensation plan that allows eligible employees (including all of the NEOs) to voluntarily defer receipt of all or a portion of base salary and certain incentive compensation payments until a date or dates elected by the participating employee. This allows the

 

 

28


employee to defer taxes on designated compensation amounts. In addition, the Company provides a limited Company contribution to the plan for all eligible employees.

Supplemental Health and Welfare

We provide certain health and welfare benefits not generally available to other employees, including the payment of premiums for supplemental long-term disability insurance and Company-provided coverage in the amount of $1 million for both life and accidental death and dismemberment insurance for all NEOs. Until January 1, 2013, the Company also provided an executive medical, dental, and vision reimbursement program that reimbursed NEOs’ cost of medical, dental, and vision expenses in excess of the regular employee plans through the end of 2012.

We also provide post-retirement medical and dental insurance coverage for eligible former executive officers under our Retiree Health Plans, subject to certain eligibility requirements. The program was closed to executive officers who joined the Company or became executive officers through

promotion effective on or after January 1, 2013. We have an independent actuarial valuation of post-retirement benefits for eligible NEOs conducted annually in accordance with generally accepted accounting principles. The most recent valuation was conducted in June 2015 and reflected the following retirement benefit obligation for the NEOs:

Figure 31. NEO Post-Retirement Benefit Obligations

 

Named Executive Officer   As of
June 28, 2015
($)
 
Martin B. Anstice     383,000   
Timothy M. Archer     431,000   
Douglas R. Bettinger (1)     —     
Richard A. Gottscho     533,000   
Sarah A. O’Dowd     439,000   

 

(1)   Mr. Bettinger was not eligible to participate because he was not an employee of the Company prior to the termination of the program.
 

 

IV. TAX AND ACCOUNTING CONSIDERATIONS

 

Deductibility of Executive Compensation

 

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, or the “Code,” imposes limitations on the deductibility for federal income tax purposes of compensation in excess of $1 million paid to our chief executive officer, and any of our three other most highly compensated executive officers (other than our chief financial officer) in a single tax year. Generally, compensation in excess of $1 million may only be deducted if it is qualified as “performance-based compensation” within the meaning of the Code.

The committee monitors the application of section 162(m) and the associated Treasury regulations and considers the advisability of qualifying our executive compensation for deductibility of such compensation. The committee’s policy is to qualify our executive compensation for deductibility under applicable tax laws to the extent practicable and where the committee believes it is in the best interests of the Company and the Company’s stockholders.

When we design our executive compensation programs, we take into account whether a particular form of compensation will qualify as “performance-based” for purposes of section 162(m).

To facilitate the deductibility of compensation payments under section 162(m), in fiscal year 2004, we initially adopted the Executive Incentive Plan, or “EIP,” and obtained stockholder approval for the EIP at that time. We most recently amended this plan (subject to stockholder approval) in fiscal year 2015 and are seeking stockholder approval for the amended plan at

the 2015 annual meeting. Both the AIP and the LTIP are administered under the EIP. The annual program awards and the long-term cash awards to our NEOs generally qualify for deductibility under section 162(m) to the extent practicable.

Consistent with the EIP and the regulations under section 162(m), compensation income realized upon the exercise of stock options granted under our LTIP generally will be deductible because the awards are granted by a committee whose members are outside directors and the other conditions of the EIP are satisfied. However, compensation associated with RSUs granted under the LTIP may not be deductible unless vesting is based on specific performance goals and the other conditions of the EIP are satisfied. Therefore, compensation income realized upon the vesting of service-based RSUs or upon the vesting of equity awards not meeting the conditions required by the EIP is not deductible to the Company to the extent that the threshold is exceeded.

Taxation of “Parachute” Payments

 

 

Sections 280G and 4999 of the Code provide that “disqualified individuals” within the meaning of the Code (which generally includes certain officers, directors and employees of the Company) may be subject to additional taxes if they receive payments or benefits in connection with a change in control of the Company that exceed certain prescribed limits. The Company or its successor may also forfeit a deduction on the amounts subject to this additional tax.

We did not provide any of our executive officers, any director, or any other service provider with a “gross-up” or other

 

 

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Lam Research Corporation 2015 Proxy Statement   29


reimbursement payment for any tax liability that the individual might owe as a result of the application of sections 280G or 4999 during fiscal year 2015, and we have not agreed and are not otherwise obligated to provide any individual with such a “gross-up” or other reimbursement as a result of the application of sections 280G and 4999.

Internal Revenue Code Section 409A

 

 

Section 409A of the Code imposes significant additional taxes on an executive officer, director, or service provider that receives non-compliant “deferred compensation” that is within the scope of section 409A. Among other things, section 409A potentially applies to the cash awards under the LTIP, the Elective Deferred Compensation Plan, certain equity awards, and severance arrangements.

To assist our employees in avoiding additional taxes under section 409A, we have structured the LTIP, the Elective Deferred Compensation Plan, and our equity awards in a manner intended to qualify them for exclusion from, or compliance with, section 409A.

Accounting for Stock-Based Compensation

 

 

We follow Financial Accounting Standards Board Accounting Standards Codification Topic 718, or “ASC 718,” for accounting for our stock options and other stock-based awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock option grants and other equity awards using a variety of assumptions. This calculation is performed for accounting purposes. ASC 718 also requires companies to recognize the compensation cost of stock option grants and other stock-based awards in their income

statements over the period that an employee is required to render service in exchange for the option or other equity award.

Compensation Committee Report

The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K. Based on this review and discussion, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K.

This Compensation Committee Report shall not be deemed “filed” with the SEC for purposes of federal securities law, and it shall not, under any circumstances, be incorporated by reference into any of the Company’s past or future SEC filings. The report shall not be deemed soliciting material.

MEMBERS OF THE COMPENSATION COMMITTEE

Youssef A. El-Mansy

Christine A. Heckart

Grant M. Inman

Abhijit Y. Talwalkar (Chair)

Compensation Committee Interlocks and Insider Participation

None of the compensation committee members has ever been an officer or employee of Lam Research. No interlocking relationship exists as of the date of this proxy statement or existed during fiscal year 2015 between any member of our compensation committee and any member of any other company’s board of directors or compensation committee.

 

 

30


Executive Compensation Tables

The following tables (Figures 32-37) show compensation information for our named executive officers:

Figure 32. Summary Compensation Table

 

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

Martin B. Anstice

President and

Chief Executive Officer

    2015        906,646       —          5,849,027       558,635        3,839,904 (12)       10,527        11,164,739   
    2014        803,846       —          8,298,569       897,137        4,978,689 (13)       30,977        15,009,218   
    2013        776,904 (6)       —          1,249,964       1,150,947        2,376,731 (14)       17,106        5,571,653   

Timothy M. Archer

Executive Vice President and Chief Operating Officer

    2015        604,431       —          3,032,808       289,658        2,114,132 (15)       10,543        6,051,572   
    2014        580,769        1,000,000 (7)       3,830,003       414,012        3,034,681 (16)       30,521        8,889,985   
    2013        574,313 (6)       —          1,999,961 (10)       690,568        1,738,388 (17)       124,204        5,127,434   

Douglas R. Bettinger

Executive Vice President and Chief Financial Officer   (5)

    2015        528,692       —          2,166,214       206,870        1,450,547 (18)       8,017        4,360,340   
    2014        494,231       —          3,191,636       344,994        1,484,487 (19)       22,961        5,538,309   
    2013        149,231       —          2,499,942 (11)       459,159        272,269 (20)       2,529        3,383,130   

Richard A. Gottscho

Executive Vice President, Global Products

    2015        528,692       5,867 (8)       2,599,550       312,531        1,482,521 (21)       9,398        4,938,559   
    2014        475,000       —          3,191,636       441,128        2,109,623 (22)       23,059        6,240,446   
    2013        487,735 (6)       500 (9)       518,734       613,299        1,098,839 (23)       15,786        2,734,893   

Sarah A. O’Dowd

Senior Vice President, Chief Legal Officer and Secretary

    2015        418,077       —          1,126,410       135,357        956,427 (24)       7,551        2,643,822   
    2014        408,077       —          1,659,629       229,365        1,371,075 (25)       26,364        3,694,509   
    2013        432,782 (6)       —          314,462       371,788        808,050 (26)       12,427        1,939,509   

 

(1)   The amounts shown in this column represent the value of RSU awards, under the LTIP (for fiscal year 2014, this includes the 2014/2016 LTIP award and the Gap Year Award (a one-time award discussed in further detail in the “ Long-Term Incentive Program – Design ” section above)) except as described in footnotes 10 and 11 below, granted in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the RSUs in fiscal year 2015 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2015. For additional details regarding the grants see “ Grants of Plan-Based Awards for Fiscal Year 2015 ” table below.

 

(2)   The amounts shown in this column represent the value of the stock option awards granted, under the LTIP (for fiscal year 2014, this includes the 2014/2016 LTIP award and the Gap Year Award (a one-time award discussed in further detail in the “ Long-Term Incentive Program – Design ” section above)), in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumption used to calculate the fair value of stock options in fiscal year 2015 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2015. For additional details regarding the grants see “ Grants of Plan-Based Awards for Fiscal Year 2015 ” table below.

 

(3)   Includes the long-term cash awards, which ceased in calendar year 2015 (as discussed in further detail in the “ Long-Term Incentive Program – Design ” section above), under the previously designed long-term incentive programs for our performance during the relevant periods.

 

(4)   Please refer to “ All Other Compensation Table For Fiscal Year 2015 ” which immediately follows this table, for additional information.

 

(5)   Mr. Bettinger was appointed Executive Vice President and Chief Financial Officer on March 11, 2013.

 

(6)   Includes non-recurring, one-time vacation payouts at the end of the program, in which all vice presidents were entitled to accrue paid vacation time, of $71,615 for Mr. Anstice; $7,485 for Mr. Archer; $36,005 for Dr. Gottscho; and $34,167 for Ms. O’Dowd.

 

(7)   Represents a retention bonus pursuant to the terms of his employment agreement (effective June 4, 2012), or “ Archer Employment Agreement ,” entered into in connection with the acquisition of Novellus.

 

(8)   Represents patent awards.

 

(9)   Represents a patent award.

 

(10)   Represents grants of service-based RSUs: under the 2012/2013 equity portion of the Long-Term Incentive Program, or “LTIP-Equity,” granted August 3, 2012 in accordance with the terms of the Archer Employment Agreement ; and under the 2013/2014 LTIP-Equity, granted February 8, 2013.

 

(11)   Represents a grant of service-based RSUs under the 2013/2014 LTIP-Equity and a new hire grant of service-based RSUs with a dollar value equal to $2,000,000 in accordance with the terms of his employment agreement.

 

(12)   Represents $1,708,290 earned by and subsequently paid to Mr. Anstice under the calendar year 2014 Annual Incentive Program, or “AIP,” and $2,131,614 accrued on his behalf for the performance during fiscal year 2015 under the 2013/2014 Long-Term Incentive Program, or “LTIP-Cash.” Mr. Anstice has received the amounts accrued under the 2013/2014 LTIP-Cash.

 

(13)   Represents $1,155,041 earned by and subsequently paid to Mr. Anstice under the calendar year 2013 AIP, $857,186 accrued on his behalf for the performance during fiscal year 2014 under the 2012/2013 LTIP-Cash, and $2,966,462 accrued on his behalf for the performance during fiscal year 2014 under the 2013/2014 LTIP-Cash. Mr. Anstice has received the amount accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs.

 

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Lam Research Corporation 2015 Proxy Statement   31


(14)   Represents $771,640 earned by and subsequently paid to Mr. Anstice under the calendar year 2012 AIP, $183,446 accrued on his behalf for the performance during fiscal year 2013 under the 2011/2012 LTIP-Cash, $740,974 accrued on his behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and $680,671 accrued on his behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Anstice has received the amounts accrued under the 2011/2012, 2012/2013, and 2013/2014 LTIP-Cash programs.

 

(15)   Represents $835,164 earned by and subsequently paid to Mr. Archer under the calendar year 2014 AIP and $1,278,968 accrued on his behalf for the performance during fiscal year 2015 under the 2013/2014 LTIP-Cash. Mr. Archer has received the amount accrued under the 2013/2014 LTIP-Cash.

 

(16)   Represents $642,528 earned by and subsequently paid to Mr. Archer under the calendar year 2013 AIP, $612,276 accrued on his behalf for the performance during fiscal year 2014 under the 2012/2013 LTIP-Cash, and $1,779,877 accrued on his behalf for the performance during fiscal year 2014 under the 2013/2014 LTIP-Cash. Mr. Archer has received the amount accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs.

 

(17)   Represents $263,492 earned by and subsequently paid to Mr. Archer under the calendar year 2012 AIP, $360,804 earned by and subsequently paid to him in accordance with the terms of his employment agreement under the 2012 Novellus Executive Bonus Program for performance during the second half of fiscal year 2012, $705,689 accrued on his behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and $408,403 accrued on his behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Archer has received the amount accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs.

 

(18)   Represents $597,902 earned by and subsequently paid to Mr. Bettinger under the calendar year 2014 AIP and $852,645 accrued on his behalf for the performance during fiscal year 2015 under the 2013/2014 LTIP-Cash. Mr. Bettinger has received the amount accrued under the 2013/2014 LTIP-Cash.

 

(19)   Represents $297,902 earned by and subsequently paid to Mr. Bettinger under the calendar year 2013 AIP, and $1,186,585 accrued on his behalf for the performance during fiscal year 2014 under the 2013/2014 LTIP-Cash. Mr. Bettinger has received the amounts accrued under the 2013/2014 LTIP-Cash program.

 

(20)   Represents $272,269 accrued on Mr. Bettinger’s behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Mr. Bettinger has received the amounts accrued under the 2013/2014 LTIP-Cash program.

 

(21)   Represents $597,902 earned by and subsequently paid to Dr. Gottscho under the calendar year 2014 AIP and $884,619 accrued on his behalf for the performance during fiscal year 2015 under the 2013/2014 LTIP-Cash. Dr. Gottscho has received the amount accrued under the 2013/2014 LTIP-Cash.

 

(22)   Represents $486,685 earned by and subsequently paid to Dr. Gottscho under the calendar year 2013 AIP, $391,857 accrued on his behalf for the performance during fiscal year 2014 under the 2012/2013 LTIP-Cash, and $1,231,082 accrued on his behalf for the performance during fiscal year 2014 under the 2013/2014 LTIP-Cash. Dr. Gottscho has received the amount accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs.

 

(23)   Represents $355,332 earned by and subsequently paid to Dr. Gottscho under the calendar year 2012 AIP, $122,297 accrued on his behalf for the performance during fiscal year 2013 under the 2011/2012 LTIP-Cash, $338,731 accrued on his behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and $282,479 accrued on his behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Dr. Gottscho has received the amounts accrued under the 2011/2012, 2012/2013, and 2013/2014 LTIP-Cash programs.

 

(24)   Represents $420,113 earned by and subsequently paid to Ms. O’Dowd under the calendar year 2014 AIP and $536,314 accrued on her behalf for the performance during fiscal year 2015 under the 2013/2014 LTIP-Cash. Ms. O’Dowd has received the amount accrued under the 2013/2014 LTIP-Cash.

 

(25)   Represents $318,575 earned by and subsequently paid to Ms. O’Dowd under the calendar year 2013 AIP, $306,138 accrued on her behalf for the performance during fiscal year 2014 under the 2012/2013 LTIP-Cash, and $746,362 accrued on her behalf for the performance during fiscal year 2014 under the 2013/2014 LTIP-Cash. Ms. O’Dowd has received the amount accrued under the 2012/2013 and 2013/2014 LTIP-Cash programs.

 

(26)   Represents $276,615 earned by and subsequently paid to Ms. O’Dowd under the calendar year 2012 AIP, $95,545 accrued on her behalf for the performance during fiscal year 2013 under the 2011/2012 LTIP-Cash, $264,633 accrued on her behalf for the performance during fiscal year 2013 under the 2012/2013 LTIP-Cash, and $171,257 accrued on her behalf for the performance during fiscal year 2013 under the 2013/2014 LTIP-Cash. Ms. O’Dowd has received the amounts accrued under the 2011/2012, 2012/2013, and 2013/2014 LTIP-Cash programs.

Figure 33. FY2015 All Other Compensation Table

 

All Other Compensation Table for Fiscal Year 2015  
   

Company Matching
Contribution to

the Company’s
Section 401(k) Plan
($)

   

Company
Paid Long-Term
Disability Insurance
Premiums  (1)

($)

    Company
Paid Life
Insurance
Premiums  (2)
($)
    Company
Contribution to the
Elective Deferred
Compensation Plan
($)
    Total
($)
 
Martin B. Anstice     8,027        —          —          2,500        10,527   
Timothy M. Archer     8,043        —          —          2,500        10,543   
Douglas R. Bettinger     8,017        —          —          —          8,017   
Richard A. Gottscho     8,224        1,174        —          —          9,398   
Sarah A. O’Dowd     4,823        —          228        2,500        7,551   

 

(1)   Represents the portion of supplemental long-term disability insurance premiums paid by Lam.

 

 

32


(2)   Represents the portion of life insurance premiums paid by Lam in excess of the non-discriminatory life insurance benefits provided to all Company employees.

Figure 34. FY2015 Grants of Plan-Based Awards

 

Grants of Plan-Based Awards for Fiscal Year 2015  
                Estimated Future
Payouts Under Non-
Equity Incentive
Plan Awards
    Estimated Future
Payouts Under
Equity Incentive
Plan Awards
    All Other
Stock
Awards:
Number
of Shares
of Stock
    All Other
Option
Awards:
Number of
Securities
Underlying
    Exercise
or Base
Price of
Option
    Grant
Date Fair
Value of
Stock
and
Option
 
Name  

Award

Type

  Grant
Date
  Approved
Date
  Target
($)  (1)
    Maximum
($)  (1)
    Target
(#)  (2)
    Maximum
(#)  (2)
   

or Units

(#)

    Options
(#)
    Awards
($/sh)
    Awards
($)  (3)
 
Martin B. Anstice   Annual Incentive Program   N/A   2/10/15     1,390,500        3,128,625        —          —          —          —          —          —     
  LTIP-Equity                                                                        
 

Market-Based PRSUs

  2/11/15   2/10/15     —          —          41,873 (4)       62,809 (4)       —          —          —          3,219,196   
 

Service-Based RSUs

  2/11/15   2/10/15     —          —          —          —          33,498 (5)       —          —          2,629,830   
 

Stock Options

  2/11/15   2/10/15     —          —          —          —          —          25,122 (6)       80.60        558,635   
Timothy M. Archer   Annual Incentive Program   N/A   2/9/15     679,800        1,529,550        —          —          —          —          —          —     
  LTIP-Equity                                                                        
 

Market-Based PRSUs

  2/11/15   2/9/15     —          —          21,712 (4)       32,568 (4)       —          —          —          1,669,219   
 

Service-Based RSUs

  2/11/15   2/9/15     —          —          —          —          17,369 (5)       —          —          1,363,590   
 

Stock Options

  2/11/15   2/9/15     —          —          —          —          —          13,026 (6)       80.60        289,658   
Douglas R. Bettinger   Annual Incentive Program   N/A   2/9/15     486,000        1,093,500        —          —          —          —          —          —     
  LTIP-Equity                                                                        
 

Market-Based PRSUs

  2/11/15   2/9/15     —          —          15,508 (4)       23,262 (4)       —          —          —          1,192,255   
 

Service-Based RSUs

  2/11/15   2/9/15     —          —          —          —          12,406 (5)       —          —          973,959   
 

Stock Options

  2/11/15   2/9/15     —          —          —          —          —          9,303 (6)       80.60        206,870   
Richard A. Gottscho   Annual Incentive Program   N/A   2/9/15     486,000        1,093,500        —          —          —          —          —          —     
  LTIP-Equity                                                                        
 

Market-Based PRSUs

  2/11/15   2/9/15     —          —          18,610 (4)       27,915 (4)       —          —          —          1,430,737   
 

Service-Based RSUs

  2/11/15   2/9/15     —          —          —          —          14,888 (5)       —          —          1,168,813   
 

Stock Options

  2/11/15   2/9/15     —          —          —          —          —          11,166 (6)       80.60        312,531   
Sarah A. O’Dowd   Annual Incentive Program   N/A   2/9/15     342,000        769,500        —          —          —          —          —          —     
  LTIP-Equity                                                                        
 

Market-Based PRSUs

  2/11/15   2/9/15     —          —          8,064 (4)       12,096 (4)       —          —          —          619,960   
 

Service-Based RSUs

  2/11/15   2/9/15     —          —          —          —          6,451 (5)       —          —          506,449   
 

Stock Options

  2/11/15   2/9/15     —          —          —          —          —          4,836 (6)       80.60        135,357   

 

(1)   The AIP target and maximum estimated future payouts reflected in this table were calculated using the base salary approved in February 2015, effective as of April 2015.

 

(2)   The amounts reported in the Estimated Future Payouts Under Equity Incentive Plan Awards columns represent the target and maximum number (150% of target) of Market-Based PRSUs that may be paid out to the NEOs on the terms described in the “ Executive Compensation and Other Information – Compensation Discussion and Analysis ” above.

 

(3)   The amounts shown in this column represent the value of service-based and market-based performance RSU and stock option awards granted during fiscal year 2015 in accordance with ASC 718. However, pursuant to SEC rules, these values are not reduced by an estimate for the probability of forfeiture. The assumptions used to calculate the fair value of the service-based or market-based performance RSU in fiscal year 2015 are set forth in Note 5 to the Consolidated Financial Statements of the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2015.

 

(4)   The Market-Based PRSUs vest on February 11, 2018, subject to continued employment.

 

(5)   The service-based RSUs vest 33.3% on February 11, 2016, 33.3% on February 11, 2017 and 33.3% on February 11, 2018, subject to continued employment.

 

(6)   Represents stock options with a seven-year term, of which 33.3% vest on February 11, 2016, 33.3% vest on February 11, 2017 and 33.3% vest on February 11, 2018, subject to continued employment.

 

 

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Lam Research Corporation 2015 Proxy Statement   33


Figure 35. FYE2015 Outstanding Equity Awards

 

Outstanding Equity Awards at 2015 Fiscal Year-End  
    Option Awards      Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
   

Option
Exercise
Price

($)

     Option
Expiration
Date
    

Number of
Shares or
Units of
Stock That
Have Not
Vested

(#)

    Market
Value
of Shares or
Units of
Stock
That Have
Not
Vested
($)  (1)
    

Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested

(#)

    Equity
Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested ($)  (1)
 
Martin B. Anstice                                                        41,873 (2)       3,469,597   
            25,122 (3)       80.60         2/11/22                                     
                                      33,498 (4)       2,775,644                    
                                                       62,789 (5)       5,202,697   
            25,114 (6)       51.76         2/18/21                                     
                                      33,488 (7)       2,774,816                    
                                                       31,394 (8)       2,601,307   
            18,834 (9)       51.76         2/18/21                                     
                                      25,115 (10)       2,081,029                    
Timothy M. Archer                                                        21,712 (2)       1,799,056   
            13,026 (3)       80.60         2/11/22                                     
                                      17,369 (4)       1,439,195                    
                                                       28,979 (5)       2,401,200   
    5,795 (6)       11,590 (6)       51.76         2/18/21                                     
                                      15,456 (7)       1,280,684                    
                                                       14,489 (8)       1,200,559   
            8,691 (9)       51.76         2/18/21                                     
                                      11,591 (10)       960,430                    
    52,803 (11)               42.61         2/8/20                                     
    40,500 (12)               29.34         12/16/20                                     
Douglas R. Bettinger                                                        15,508 (2)       1,284,993   
            9,303 (3)       80.60         2/11/22                                     
                                      12,406 (4)       1,027,961                    
                                                       24,149 (5)       2,000,986   
            9,658 (6)       51.76         2/18/21                                     
                                      12,880 (7)       1,067,237                    
                                                       12,074 (8)       1,000,452   
            7,242 (9)       51.76         2/18/21                                     
                                      9,659 (10)       800,345                    
Richard A. Gottscho                                                        18,610 (2)       1,542,025   
            11,166 (3)       80.60         2/11/22                                     
                                      14,888 (4)       1,233,620                    
                                                       24,149 (5)       2,000,986   
    4,829 (6)       9,658 (6)       51.76         2/18/21                                     
                                      12,880 (7)       1,067,237                    
                                                       12,074 (8)       1,000,452   
            7,242 (9)       51.76         2/18/21                                     
                                      9,659 (10)       800,345                    
    36,522 (11)               42.61         2/8/20                                     
Sarah A. O’Dowd                                                        8,064 (2)       668,183   
            4,836 (3)       80.60         2/11/22                                     
                                      6,451 (4)       534,530                    
                                                       12,557 (5)       1,040,473   
    2,511 (6)       5,022 (6)       51.76         2/18/21                                     
                                      6,698 (7)       554,996                    
                                                       6,278 (8)       520,195   
            3,765 (9)       51.76         2/18/21                                     
                                      5,023 (10)       416,206                    
    22,140 (11)               42.61         2/8/20                                     

 

34


(1)   Calculated by multiplying the number of unvested shares by $82.86, the closing price per share of our common stock on June 26, 2015.

 

(2)   Market-Based PRSUs are shown at their target amount. The actual conversion of the Market-Based PRSUs into shares of Lam common stock following the conclusion of the three-year performance period will range from 0% to 150% of that target amount, depending upon Lam’s stock price performance compared to the market price performance of the SOX index over the applicable three-year performance period. The Market-Based PRSUs were granted on February 11, 2015. On February 11, 2018, the Market-Based PRSUs will vest, subject to continued employment.

 

(3)   Stock options were granted on February 11, 2015. On February 11, 2016, February 11, 2017 and February 11, 2018, 33.3% of the stock options will become exercisable, subject to continued employment.

 

(4)   RSUs were granted on February 11, 2015. On February 11, 2016, February 11, 2017 and February 11, 2018, the RSUs (33.3% on each date) will vest, subject to continued employment.

 

(5)   Market-Based PRSUs are shown at their target amount. The actual conversion of the Market-Based PRSUs into shares of Lam common stock following the conclusion of the three-year performance period will range from 0% to 150% of that target amount, depending upon Lam’s stock price performance compared to the market price performance of the SOX index over the applicable three-year performance period. The Market-Based PRSUs were granted on February 18, 2014. On February 18, 2017, the Market-Based PRSUs will vest, subject to continued employment.

 

(6)   Stock options were granted on February 18 2014. As of the 2015 fiscal year-end, 33% of the stock options granted on February 18, 2014 had become exercisable. On February 18, 2016 and February 18, 2017, the remaining unvested stock options (33% on each date) will become exercisable, subject to continued employment.

 

(7)   RSUs were granted on February 18, 2014. As of the 2015 fiscal year-end, 33.3% of the RSUs granted on February 18, 2014 had vested. On February 18, 2016 and February 18, 2017, the remaining RSUs (33.3% on each date) will vest, subject to continued employment.

 

(8)   Market-Based PRSUs are shown at their target amount. The actual conversion of the Market-Based PRSUs into shares of Lam common stock following the conclusion of the two-year performance period will range from 0% to 150% of that target amount, depending upon Lam’s stock price performance compared to the market price performance of the SOX index over the applicable two-year performance period. The Market-Based PRSUs were granted as part of the Gap Year Award on February 18, 2014. On February 18, 2016, the Market-Based PRSUs will vest, subject to continued employment.

 

(9)   Stock options were granted as part of the Gap Year Award on February 18, 2014. On February 18, 2016, 100% of the stock options will become exercisable, subject to continued employment.

 

(10)   RSUs were granted as part of the Gap Year Award on February 18, 2014. On February 18, 2016, 100% of the RSUs will vest, subject to continued employment.

 

(11)   Stock options were granted on February 8, 2013. As of the 2015 fiscal year-end, 100% of the stock options granted on February 8, 2013 had become exercisable.

 

(12)   Stock options were granted on December 16, 2010. As of the 2015 fiscal year-end, 100% of the stock options granted on December 16, 2010 had become exercisable.

Figure 36. FY2015 Option Exercises and Stock Vested

 

Option Exercises and Stock Vested for Fiscal Year 2015  (1)  
    Option Awards     Stock Awards  
Name   Number of
Shares
Acquired on
Exercise
(#)
    Value
Realized on
Exercise
($)
    Number of
Shares
Acquired on
Vesting
(#)
    Value
Realized on
Vesting
($)
 
Martin B. Anstice     100,562        3,830,053        46,078        3,663,823   
Timothy M. Archer     —          —          25,328        2,008,338   
Douglas R. Bettinger     40,196        1,536,950        18,228        1,448,675   
Richard A. Gottscho     —          —          18,613        1,478,759   
Sarah A. O’Dowd     —          —          10,728        850,941   

 

(1)   The table shows all stock options exercised and the value realized upon exercise, and all stock awards vested and the value realized upon vesting, by the NEOs during fiscal year 2015, which ended on June 28, 2015.

 

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Lam Research Corporation 2015 Proxy Statement   35


Figure 37. FY2015 Non-Qualified Deferred Compensation

 

Non-Qualified Deferred Compensation for Fiscal Year 2015  
Name   Executive
Contributions
in FY 2015
($)  (1)
    Registrant
Contributions
in FY 2015
($)  (2)
    Aggregate
Earnings in
FY 2015
($)  (3)
   

Aggregate
Balance at

FYE 2015
($)  (4)

 
Martin B. Anstice     85,925        2,500        115,966        4,618,543   
Timothy M. Archer     2,091,607        2,500        123,128        3,642,690   
Douglas R. Bettinger     1,403,284        —          38,401        1,544,768   
Richard A. Gottscho     —          —          100,969        1,901,479   
Sarah A. O’Dowd     2,079,073        2,500        165,249        5,977,247   

 

(1)   The entire amount of each executive’s contributions in fiscal year 2015 is reported in each respective NEO’s compensation in our fiscal year 2015 “ Summary Compensation Table .”

 

(2)   Represents the amount that Lam credited to the Elective Deferred Compensation Plan, the “EDCP,” which is 3% of Executive Salary Contribution during calendar year 2014, to a maximum benefit of $2,500. These amounts are included in the “ Summary Compensation Table ” and “ All Other Compensation Table For Fiscal Year 2015 .”

 

(3)   The NEOs did not receive above-market or preferential earnings in fiscal year 2015.

 

(4)   The fiscal year-end balance includes $4,414,152 for Mr. Anstice, $1,425,455 for Mr. Archer, $103,083 for Mr. Bettinger, $1,800,510 for Dr. Gottscho, and $3,730,425 for Ms. O’Dowd that were previously reported in our “ Summary Compensation Table ” in prior years’ proxy statements.

 

Potential Payments upon Termination or Change in Control

 

 

The following is a summary of the employment agreements of our named executive officers.

Executive Employment Agreements

Martin B. Anstice. The Company and Mr. Anstice entered into an employment agreement, or the “new agreement,” effective January 1, 2015, for a term ending on December 31, 2017, subject to the right of the Company or Mr. Anstice, under certain circumstances, to terminate the new agreement prior to such time. This new agreement replaced the prior agreement, effective January 1, 2012 and amended on January 30, 2014, whose term ended on December 31, 2014.

Under the terms of the new agreement, Mr. Anstice receives a base salary, which is reviewed annually and potentially adjusted. It was initially set at the beginning of the term of the agreement at $900,000. Mr. Anstice is also entitled to participate in any short-term or long-term variable compensation programs offered by the Company to its executive officers generally, subject to the applicable terms and conditions of those programs and the approval of the independent members of the board, and to participate in the Company’s Elective Deferred Compensation Plan. Mr. Anstice receives other benefits, such as health insurance, paid time off (as his schedule permits), and benefits under other plans and programs generally applicable to executive officers of the Company.

If an Involuntary Termination (as defined in Mr. Anstice’s new agreement) of Mr. Anstice’s employment occurs, other than in connection with a Change in Control (as defined in

Mr. Anstice’s new agreement), Mr. Anstice will be entitled to: (1) a lump-sum cash payment equal to 18 months of his then-current base salary, plus an amount equal to the average of the last five annual payments made to Mr. Anstice under the short term variable compensation or any predecessor or successor programs (the “Short Term Program,” and such average, the “Five Year Average Amount”), plus an amount equal to the pro-rata amount he would have earned under the Short Term Program for the calendar year in which his employment is terminated had his employment continued until the end of such calendar year, such pro-rata portion to be calculated based on the performance results achieved under the Short Term program and the number of full months elapsed prior to the termination date; (2) payment of any amounts accrued as of the date of termination under any long-term, cash-based variable-compensation programs of the Company (the “Long Term Cash Programs”); (3) certain medical benefits; (4) a cash payment equal to a product of (x) a pro rata portion (based on time of service as of the date of termination) of the unvested Market-Based PRSU/performance-based RSU awards granted to Mr. Anstice as adjusted for the Company’s performance (calculated as set forth in the award agreements) over the time of service and (y) the closing stock price on the date of termination; and (5) vesting, as of the date of termination, of a pro rata portion of the unvested stock option or RSU awards that are not performance based granted to Mr. Anstice at least 12 months prior to the termination date.

If a Change in Control of the Company (as defined in Mr. Anstice’s new agreement) occurs during the period of Mr. Anstice’s employment, and if there is an Involuntary Termination of Mr. Anstice’s employment either in contemplation of or within the 18 months following the Change

 

 

36


in Control, Mr. Anstice will be entitled to: a lump-sum cash payment equal to 24 months of Mr. Anstice’s then-current base salary, plus an amount equal to two times the Five Year Average Amount, plus an additional amount equal to a pro rata amount (based on the number of full months worked during the calendar year during which the termination occurs) of the Five Year Average Amount; certain medical benefits; conversion of any Market-Based PRSUs/performance-based RSUs outstanding as of the Change in Control into a cash award payable at time of termination equal to the sum of: (x) a pro rata portion (based on time of service as of the date of termination) of the unvested Market-Based PRSU/performance-based RSU awards granted to Mr. Anstice as adjusted for the Company’s performance (calculated as set forth in the award agreements) over the time of service and (y) the remainder of the pro-rata portion of unvested Market-Based PRSU/performance-based RSU awards at target; vesting, as of the date of termination, of the unvested stock option or RSU awards that are not performance-based granted to Mr. Anstice prior to the Change in Control; and payment of any amounts accrued as of the Change in Control under the Long Term Cash Programs, plus an amount equal to the remaining target amount under the Long Term Cash Programs.

If Mr. Anstice’s employment is terminated due to disability or in the event of his death, Mr. Anstice (or his estate) will be entitled to: (1) the pro rata amount he would have earned under the Short Term Program for the calendar year in which his employment is terminated had his employment continued until the end of such calendar year, such pro rata portion to be calculated based on the performance results achieved under the Short Term Program and the number of full months elapsed prior to the termination date; (2) payment of any amounts accrued as of the date of termination under the Long Term Cash Programs; (3) certain medical benefits; (4) vesting, as of the date of termination, of 50% of the unvested stock option, and RSU awards, which are not performance based, granted to Mr. Anstice prior to the date of termination (or a pro rata amount, based on period of service, if greater than 50%); and (5) vesting, as of the date of termination, of 50% of the Market-Based PRSU/performance-based RSU awards (or a pro rata amount, based on period of service, if greater than 50%) as adjusted for the Company’s performance during the service period (in either case) granted to Mr. Anstice prior to the date of termination.

If Mr. Anstice voluntarily resigns, he will be entitled to no additional benefits (except as he may be eligible for under the Company’s Retiree Health Plans); stock options, RSUs and Market-Based PRSUs/performance-based RSUs will cease to vest on the termination date; and stock options will be cancelled unless they are exercised within 90 days after the termination date. All RSUs and Market-Based PRSUs/performance-based RSUs will be cancelled on the termination date.

 

Mr. Anstice’s new agreement also subjects Mr. Anstice to customary confidentiality and non-competition obligations during the term of the agreement, the application of the Company’s compensation recovery or clawback policy to any compensation, and non-solicitation obligations for a period of six months following the termination of his employment. The new agreement also requires Mr. Anstice to execute a release in favor of the Company to receive the payments described above.

Timothy M. Archer. The Company and Mr. Archer entered into a new employment agreement, or the “new agreement,” effective January 1, 2015, for a term ending on December 31, 2017, subject to the right of the Company or Mr. Archer, under certain circumstances, to terminate the new agreement prior to such time. The new agreement replaced the employment agreement between the parties that was effective on June 4, 2012 and amended on January 30, 2014. The terms of Mr. Archer’s new agreement are substantively similar to those of Mr. Anstice’s new agreement, except that Mr. Archer’s initial base salary at the beginning of the term of the new agreement was set at $600,000.

The severance terms of Mr. Archer’s new agreement are generally similar to those of Mr. Anstice’s new agreement, provided that (1) Mr. Archer will receive 12-months base salary instead of 18 months in the event of his Involuntary Termination; and (2) instead of a payment of the Five Year Average Amount, he will receive a payment of 50% of the Five Year Average Amount. The Change in Control terms of Mr. Archer’s new agreement are generally similar to those of Mr. Anstice’s new agreement, provided that Mr. Archer will receive 18-months base salary instead of 24 months in the event of his Involuntary Termination.

Douglas R. Bettinger. The Company and Mr. Bettinger entered into a new employment agreement, or the “new agreement,” with a term commencing on January 1, 2015 and ending on December 31, 2017, subject to the right of the Company or Mr. Bettinger, under certain circumstances, to terminate the agreement prior to such time. The new agreement replaced the employment agreement between the parties that was effective on March 11, 2013 and amended on January 30, 2014. The terms of Mr. Bettinger’s new agreement are substantively similar to those of Mr. Archer’s new agreement, with the following material differences: Mr. Bettinger’s initial base salary at the beginning of the term of the new agreement was set at $525,000 and his new agreement references the previously received special bonus grant of RSUs with a dollar value (as of such date) equal to $2,000,000 that vested in equal tranches on a quarterly basis over the year following the effective date of the immediately preceding agreement.

Had Mr. Bettinger’s employment terminated due to a “voluntary resignation” (as defined in his new agreement) prior to March 11, 2015, he would have been required to repay to

 

 

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Lam Research Corporation 2015 Proxy Statement   37


the Company (in cash or vested RSU shares) a pro rata portion of the shares granted as part of the special bonus.

The severance terms of Mr. Bettinger’s new agreement are generally similar to those of Mr. Archer’s new agreement, provided that in computing the Five Year Average Amount any partial year short-term plan payments in any year shall be annualized, and if employed for less than five years, then computed based on such fewer number of years. The Change in Control terms of Mr. Bettinger’s new agreement are generally similar to those of Mr. Archer’s new agreement.

Richard A. Gottscho. The Company and Dr. Gottscho entered into an employment agreement, or the “new agreement,” effective January 1, 2015, for a term ending on December 31, 2017, subject to the right of the Company or Dr. Gottscho, under certain circumstances, to terminate the new agreement prior to such time. The new agreement replaced the employment agreement between the parties that was effective on July 18, 2012 and amended on January 30, 2014. The terms of Dr. Gottscho’s new agreement are substantively similar to those of Mr. Archer’s new agreement with the following material difference: under Dr. Gottscho’s new agreement, his initial base salary at the beginning of the term of the new agreement was set at $525,000. The severance and Change in Control terms of Dr. Gottscho’s new agreement are also generally similar to those of Mr. Archer’s new agreement.

Other Executive Agreements

The Company entered into a new change in control agreement with Ms. O’Dowd effective January 1, 2015, or the “new agreement,” for a term ending on December 31, 2017, subject to the right of the Company or Ms. O’Dowd, under certain circumstances, to terminate the agreement prior to such time. The new agreement replaced a change in control agreement between the parties that was effective on July 18, 2012 and amended on January 30, 2014. The new agreement provides that if a change in control (as defined in Ms. O’Dowd’s new agreement) of the Company occurs during the period of her employment under the new agreement, and there is an Involuntary Termination (as defined in her new agreement) of her employment, Ms. O’Dowd will be entitled to

payments and benefits substantively similar to those contained in the change in control provisions of Mr. Archer’s new agreement.

The change in control agreements contain confidentiality, non-competition, and non-solicitation terms that are substantively similar to those of Mr. Anstice’s, Mr. Archer’s, Mr. Bettinger’s and Dr. Gottscho’s new agreements, and require Ms. O’Dowd to execute a release in favor of the Company to receive the payments described in the previous paragraph.

Equity Plans

In addition to the above, certain of our stock plans provide for accelerated benefits after certain events. While the applicable triggers under each plan vary, these events generally include: (i) a merger or consolidation in which the Company is not the surviving entity, (ii) a sale of substantially all of the Company’s assets, including a liquidation or dissolution of the Company, or (iii) a change in the ownership of more than 50% of our outstanding securities by tender offer or similar transaction. After a designated event, the vesting of some or all of awards granted under these plans may be immediately accelerated in full, or certain awards may be assumed, substituted, replaced or settled in cash by a surviving corporation or its parent. The specific treatment of awards in a particular transaction will be determined by the board and/or the terms of the applicable transaction documents.

Potential Payments to Named Executive Officers upon Termination or Change in Control

The tables below summarize the potential payments to our NEOs, assuming a change in control of the Company as of the end of fiscal year 2015. These amounts are calculated assuming that the employment termination or change in control occurs on the last day of fiscal year 2015, June 28, 2015. The closing price per share of our common stock on June 26, 2015, which was the last trading day of fiscal year 2015, was $82.86. The short-term incentive program pro-rata amounts are calculated by multiplying the applicable pro-rata percentage by the target. Actual performance will not be known until the end of calendar year 2015.

 

 

38


Figures 38 – 42. Potential Payments to NEOs upon Termination or Change in Control as of FYE2015

 

Potential Payments to Mr. Anstice upon Termination or Change in Control as of June 28, 2015  
          Involuntary Termination  
    Voluntary
Termination
($)
    Disability
or Death
($)
    For
Cause
($)
    Not for
Cause
($)
    Change in
Control
($)
 

Compensation

                                       
Severance     —          —          —          1,390,500        1,854,000   
Short-term Incentive (5-year average)     —          —          —          957,076        1,914,152   
Short-term Incentive (pro rata)     —          695,250        —          695,250        478,538   
Stock Options (Unvested and Accelerated)     —          809,402        —          737,623        1,423,559   
Service-Based Restricted Stock Units (Unvested and Accelerated)     —          4,162,583        —          2,620,604        7,631,489   
Performance-Based Restricted Stock Units (Unvested and Accelerated)     —          7,311,359        —          5,823,381        12,549,624   

Benefits and Perquisites

                                       
Health Benefit Continuation/COBRA Benefit     —          24,071        —          24,071        24,071   

Total

    —          13,002,665        —          12,248,505        25,875,433   

 

Potential Payments to Mr. Archer upon Termination or Change in Control as of June 28, 2015  
          Involuntary Termination  
    Voluntary
Termination
($)
    Disability
or Death
($)
    For
Cause
($)
    Not for
Cause
($)
    Change in
Control
($)
 

Compensation

                                       
Severance     —          —          —          618,000        927,000   
Short-term Incentive (5-year average)     —          —          —          358,402        1,075,207   
Short-term Incentive (pro rata)     —          339,900        —          339,900        358,402   
Stock Options (Unvested and Accelerated)     —          375,137        —          340,393        660,178   
Service-Based Restricted Stock Units (Unvested and Accelerated)     —          2,000,227        —          1,209,480        3,680,310   
Performance-Based Restricted Stock Units (Unvested and Accelerated)     —          3,462,184        —          2,709,593        5,986,965   

Benefits and Perquisites

                                       
Health Benefit Continuation/COBRA Benefit     —          36,107        —          36,107        36,107   

Total

    —          6,213,555        —          5,611,875        12,724,169   

 

Potential Payments to Mr. Bettinger upon Termination or Change in Control as of June 28, 2015  
          Involuntary Termination  
    Voluntary
Termination
($)
    Disability
or Death
($)
    For
Cause
($)
    Not for
Cause
($)
    Change in
Control
($)
 

Compensation

                                       
Severance     —          —          —          540,000        810,000   
Short-term Incentive (5-year average)     —          —          —          234,468        703,404   
Short-term Incentive (pro rata)     —          243,000        —          243,000        234,468   
Stock Options (Unvested and Accelerated)     —          310,845        —          283,646        546,615   
Service-Based Restricted Stock Units (Unvested and Accelerated)     —          1,581,162        —          1,007,891        2,895,543   
Performance-Based Restricted Stock Units (Unvested and Accelerated)     —          2,790,018        —          2,234,195        4,777,883   

Benefits and Perquisites

                                       
Health Benefit Continuation/COBRA Benefit     —          24,071        —          24,071        24,071   

Total

    —          4,949,096        —          4,567,271        9,991,984   

 

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Lam Research Corporation 2015 Proxy Statement   39


Potential Payments to Dr. Gottscho upon Termination or Change in Control as of June 28, 2015  
          Involuntary Termination  
    Voluntary
Termination
($)
    Disability
or Death
($)
    For
Cause
($)
    Not for
Cause
($)
    Change in
Control
($)
 

Compensation

                                       
Severance     —          —          —          540,000        810,000   
Short-term Incentive (5-year average)     —          —          —          228,710        686,129   
Short-term Incentive (pro rata)     —          243,000        —          243,000        228,710   
Stock Options (Unvested and Accelerated)     —          312,950        —          283,646        550,825   
Service-Based Restricted Stock Units (Unvested and Accelerated)     —          1,683,991        —          1,007,891        3,101,201   
Performance-Based Restricted Stock Units (Unvested and Accelerated)     —          2,904,140        —          2,262,725        5,031,316   

Benefits and Perquisites

                                       
Health Benefit Continuation/COBRA Benefit     533,000        533,000        533,000        533,000        533,000   

Total

    533,000        5,677,081        533,000        5,098,972        10,941,181   

 

Potential Payments to Ms. O’Dowd upon Termination or Change in Control as of June 28, 2015  
          Involuntary Termination  
    Voluntary
Termination
($)
    Disability
or Death
($)
    For
Cause
($)
    Not for
Cause
($)
    Change in
Control
($)
 

Compensation

                                       
Severance     —          —          —          —          641,250   
Short-term Incentive (5-year average)     —          —          —          —          527,901   
Short-term Incentive (pro rata)     —          —          —          —          175,967   
Stock Options (Unvested and Accelerated)     —          —          —          —          284,205   
Service-Based Restricted Stock Units (Unvested and Accelerated)     —          —          —          —          1,505,732   
Performance-Based Restricted Stock Units (Unvested and Accelerated)     —          —          —          —          2,484,392   

Benefits and Perquisites

                                       
Health Benefit Continuation/COBRA Benefit     439,000        439,000        439,000        439,000        439,000   

Total

    439,000        439,000        439,000        439,000        6,058,447   

 

 

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information as of June 28, 2015, regarding securities authorized for issuance under the Company’s equity compensation plans. The equity compensation plans of the Company include the 1999 Employee Stock Purchase Plan, the 2007 Stock Incentive Plan, and the 2011 Stock Incentive Plan, each as amended and as may be amended.

Figure 43. FYE2015 Securities Authorized for Issuance under Equity Compensation Plans

 

Plan Category  

Number of

Securities to be

Issued Upon

Exercise of
Outstanding Options,

Warrants, and Rights

(a)

   

Weighted-Average
Exercise Price of
Outstanding

Options,

Warrants, and
Rights  (1)

($) (b)

   

Number of Securities

Remaining Available for

Future Issuance Under

Equity Compensation Plans

(excluding securities

reflected in column (a))

(c)

 
Equity compensation plans approved by security holders     3,453,709 (2)       51.92        8,719,394 (3)  
Equity compensation plans not approved by security holders     2,336,211 (4)       28.19        5,287,479 (5)  
Total     5,789,920          37.44        14,006,873   

 

(1)   Does not include RSUs.

 

(2)  

Includes 3,453,709 shares issuable upon RSU vesting or stock option exercises under the Company’s 2007 Stock Incentive Plan, as amended, or the “2007 Plan.” The 2007 Plan was adopted by the board in August 2006, approved by Lam’s stockholders in November 2006, and

 

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  amended by the board in November 2006 and May 2013. The term of the 2007 Plan is 10 years from the last date of any approval, amendment, or restatement of the Plan by the Company’s stockholders. The 2007 Plan reserves for issuance up to 15,000,000 shares of the Company’s common stock.

 

(3)   Includes 1,284,871 shares available for future issuance under the 2007 Plan and 7,434,523 shares available for future issuance under the 1999 Employee Stock Purchase Plan, as amended, or the “1999 ESPP.” The 1999 ESPP was adopted by the board in September 1998, approved by Lam’s stockholders in November 1998, amended by stockholder approval in November 2003, and most recently amended by the board in November 2012. The term of the 1999 ESPP is 20 years from its effective date of September 30, 1998, unless otherwise terminated or extended in accordance with its terms.

 

(4)   Includes 2,336,211 shares issuable upon RSU vesting or stock option exercises under the Company’s 2011 Stock Incentive Plan, as amended, or the “2011 Plan.” As part of the acquisition of Novellus, Lam assumed the Novellus Systems, Inc. 2011 Stock Incentive Plan. The 2011 Plan was approved by Novellus shareholders before the merger but has not been approved by a separate vote of Lam stockholders. The 2011 Plan was amended by the board in July 2012. The term of the 2011 Plan is 10 years from its effective date of May 10, 2011, unless otherwise terminated or extended in accordance with its terms.

 

(5)   Includes 5,287,479 shares available for future issuance under the 2011 Plan.

 

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