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AMCC » Topics » Equity Incentives

This excerpt taken from the AMCC DEF 14A filed Jul 7, 2009.
Equity Incentives
 
We maintain equity award programs for executives to foster retention and reward performance. In our equity award programs, we grant stock options and restricted stock unit awards. All stock options granted by the Committee have exercise prices equal to or greater than the fair market value of our common stock on the date of grant.
 
In fiscal 2007, the Committee granted options that would have vested only if we had achieved in a fiscal quarter prior to April 2009 an increase in net revenues of 20% over the same quarter in the prior year and a non-GAAP pretax profit of at least 20% for that quarter. We referred to this as the “20/20 Plan.” None of the 20/20 Plan options vested, and all of them expired on March 31, 2009.


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In fiscal 2008, equity awards to executives were set so that they would approximate the 50th percentile of market compensation but would have the opportunity to increase to the 75th percentile if we were to achieve certain performance goals.
 
  •  A “performance” grant consisting of stock options that vest in equal monthly installments over four years following the date of grant but, in the event we achieved the stretch level of non-GAAP pre-tax profits under the Annual Operating Plan, vesting would have accelerated over the second year of the grant such that the grant would be fully vested 24 months after the date of grant. Because we did not achieve the stretch level of non-GAAP pre-tax profits in fiscal 2008, these options will vest on the four-year schedule described above.
 
  •  A “special” grant consisting of stock options that would vest only if we were to achieve an overall company performance at or above the 75th percentile relative to our peer companies. The overall company performance was measured on year-over-year revenue growth, three-year revenue growth, gross margin, year-over-year operating margin change, and return on invested capital; each objective was weighted equally in determining overall company performance. If AppliedMicro’s overall performance in fiscal 2008 were to rank at or above the 75th percentile relative to the peers, the options would vest 100%; if AppliedMicro’s overall performance were to rank at or above the 621/2th percentile relative to the peers, the options would vest 50%; otherwise the options would expire unvested. Since we did not achieve a ranking at or above the 621/2th percentile, the options expired unvested.
 
For fiscal 2009, the Committee modified executive officer awards to emphasize retention in the face of challenging conditions. Based on our recent attrition experience and observations by Compensia, the Committee decided to award RSUs instead of stock options for fiscal 2009 and to do so with a 3-year annual vesting schedule.
 
In keeping with our performance-based philosophy, the Committee also awarded performance-based vesting RSUs, the “Fiscal 2009 Performance RSUs”, covering a total of 83,900 shares of common stock, to executive officers effective on May 15, 2008. After one year, these awards would have vested 50% if we had achieved overall company performance at the 621/2th percentile relative to our peer companies and 100% if we had achieved overall company performance at the 75th percentile relative to the peers. As the actual achievement was below 621/2th percentile, the fiscal 2009 Performance RSUs expired unvested.
 
For fiscal 2010 the Committee took an approach designed to further tie executive equity compensation to executive performance. The awards were set large enough to bring total target compensation to market average levels, so that the sum of each executive’s reduced base salary, short-term target cash incentive and equity award would approximate market-based total direct compensation. There is no cash bonus program approved for fiscal 2010.
 
The Committee issued three-year grants, or “EBITDA Grants”, for fiscal 2010. Vesting for the EBITDA Grants is subject to (i) AppliedMicro’s performance as measured by earnings before interest, taxes, depreciation and amortization, and (ii) individual performance, measured by the accomplishment of goals and objectives. In keeping with our performance philosophy, company performance “at plan” will allow a pool of 25% awarded shares for the year to vest, subject to individual performance, 75% to vest for “stretch” performance and 100% percent to vest to recognize extraordinary performance.
 
Dr. Gopi, as incoming CEO, was also awarded promotional shares in the amount of 260,000 options and 50,000 restricted stock units which, in combination with base salary and EBITDA Grants, bring his targeted total direct compensation to mid-way between the 50th and 75th percentiles. As additional incentive and to assure strong alignment with shareholder interests, Dr. Gopi was awarded 300,000 stock options for “Extraordinary Accomplishment.” These options will vest only if Company performance milestones are satisfied; otherwise they will expire unvested. The milestone schedule is as follows:
 
     
Shares
  Performance Vesting Metric
 
75,000
  Annual revenue equal to or greater than $270 million for any fiscal year from fiscal 2010 to and including fiscal 2013
75,000
  Annual revenue equal to or greater than $310 million for any fiscal year from fiscal 2010 to and including fiscal 2013 or annual revenue equal to or greater than $350 million for fiscal 2014
150,000
  Annual operating margin by fiscal 2013 equal to or greater than 13.5% of annual revenue


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This excerpt taken from the AMCC DEF 14A filed Jul 8, 2008.
Equity Incentives
 
We maintain equity award programs for executives to foster retention and reward performance. In our equity award programs, we grant stock options and restricted stock unit awards. All stock options granted by the Committee have exercise prices equal to or greater than the fair market value of our common stock on the date of grant.
 
In fiscal 2007, the Committee granted options that will vest only if, prior to fiscal 2010, we achieve in a fiscal quarter an increase in net revenues of 20% over the same quarter in the prior year and a non-GAAP pretax profit of at


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least 20% for that quarter. We refer to this as the “20/20 Plan.” None of the 20/20 Plan options have vested and all of them will expire without vesting at the end of fiscal 2009 unless we achieve both performance metrics in the same quarter.
 
Similar to fiscal 2007, fiscal 2008 equity awards to executives were set so that they would approximate the 50th percentile of market compensation but would have the opportunity to increase to the 75th percentile if we were to achieve the stretch level of non-GAAP pretax profits under our Annual Operating Plan for fiscal 2008 and overall company performance of 75th percentile relative to our peer companies.
 
To achieve this compensation objective, the Committee granted three different “layers” of equity awards in fiscal 2008:
 
  •  A “regular” grant consisting of stock options that vest in equal monthly installments over four years following the date of grant. The Committee gave executive officers the ability to elect to receive restricted stock units (“RSUs”) in lieu of the regular grant of stock options at the rate of one RSU for every three stock options. Three executive officers elected to receive RSUs in lieu of such options and five executive officers elected to receive stock options. For fiscal 2008, this layer represented approximately 36.6% of the value of all equity awards granted to executives.
 
  •  A “performance” grant consisting of stock options that vest in equal monthly installments over four years following the date of grant but, in the event we achieved the stretch level of non-GAAP pre-tax profits under the Annual Operating Plan, vesting would have accelerated over the second year of the grant such that the grant would be fully vested 24 months after the date of grant. For fiscal 2008, this layer represented approximately 36.6% of the value of all equity awards granted to executives. Because we did not achieve the stretch level of non-GAAP pre-tax profits in fiscal 2008, these options will vest on the four-year schedule described above.
 
  •  A “special” grant consisting of stock options that would vest only if we were to achieve an overall company performance at or above the 75th percentile relative to our peer companies. The overall company performance was measured on year-over-year revenue growth, three-year revenue growth, gross margin, year-over-year operating margin change, and return on invested capital; each objective was weighted equally in determining overall company performance. If AMCC’s overall performance in fiscal 2008 were to rank at or above the 75th percentile relative to the peers, the options would vest 100%; if AMCC’s overall performance were to rank at or above the 621/2th percentile relative to the peers, the options would vest 50%; otherwise the options would expire unvested. For fiscal 2008, this layer represented approximately 26.8% of the value of all equity awards granted to executives. As a result of our performance in fiscal 2008, these special options expired without vesting.
 
For fiscal 2009, the Committee modified executive officer awards to emphasize retention in the face of challenging conditions. Based on the company’s recent attrition experience and a specific finding by Compensia, the Committee decided to award RSUs instead of stock options for fiscal 2009, and to do so with a faster vesting schedule. On April 29, 2008, the Committee approved time-based vesting RSUs, covering 319,500 shares to executive officers effective on May 15, 2008. These awards will vest in three equal annual installments beginning May 15, 2009.
 
In keeping with the company’s performance-based philosophy, the Committee also awarded performance-based vesting RSUs, covering 83,900 shares to executive officers effective on May 15, 2008. After one year, these awards will vest 50% if the company has achieved overall company performance at the 621/2 percentile relative to the peer companies and 100% if the company has achieved overall company performance at the 75th percentile relative to the peers. Otherwise, these RSUs will expire after one year without vesting.
 
The amounts for each executive were derived by considering a cash value upon grant that would be sufficiently meaningful for each executive so as to strongly encourage each to remain with the company. At approval, the annual vesting value of the time-based vesting RSU awards for eligible executives as a group represented 63% of their annual base salaries. If the performance-based vesting RSUs vest in full, the first-year vesting value of all RSU awards for eligible executives as a group would represent 101% of their annual base salaries at the time of approval.


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This excerpt taken from the AMCC DEF 14A filed Jul 2, 2007.

Equity Incentives

We maintain an equity award program for executives. In determining the size of the equity awards, the objective of the Committee is to foster retention and reward performance.

For fiscal 2007, equity awards to executives were determined such that they would approximate the 50th percentile of market compensation at the Annual Operating Plan commit level of non-GAAP pre-tax profits, increasing to the 75th percentile of market compensation if we were to achieve stretch level financial results for fiscal 2007 as well as achieve other operational objectives in any quarter before fiscal 2010. This percentile range is intended to provide a foundation for attracting executive talent plus a premium for improving our performance relative to that of our peers.

To achieve the percentile of market compensation goals, the Committee granted different “layers” of equity awards in fiscal 2007:

 

  •  

A “regular” grant consisting of stock options that vest in equal monthly installments over four years following the date of grant and were priced at 100% of fair market value on the date of grant. The Committee gave executive officers the ability to elect to receive restricted stock units in lieu of the “regular” grant of stock options at the rate of one restricted stock unit for every three stock options. One executive officer elected to receive restricted stock units in lieu of such options.

 

  •  

A “performance” grant consisting of stock options that vest in equal monthly installments over four years following the date of grant but, in the event the stretch level of non-GAAP pre-tax profits under the Annual Operating Plan was achieved, vesting would have accelerated over the second year of the

 

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grant such that the grant would be fully vested 24 months after the date of grant. 50% of this award was priced at 100% of fair market value on the date of grant and 50% of this award was priced at 110% of fair market value on the date of grant. Because the stretch level of non-GAAP pre-tax profits was not realized in fiscal 2007, these options will vest on the four-year schedule described above.

 

  •  

A “special” grant that would vest only if we were to achieve, prior to fiscal year 2010, financial results demonstrating 20% growth and 20% profitability in the same quarter. The growth metric refers to an increase in net revenues of 20% over the same quarter in the prior year. The profitability metric refers to non-GAAP pretax profitability of at least 20% of net revenues for the applicable quarter. We refer to this as the “20/20 Plan”. This award was priced at 100% of fair market value on the date of grant.

In addition, during fiscal 2007 the Committee approved additional “catch-up” stock option grants to two executives whose previous grants were deemed by the Committee to be below market levels and to one executive who was promoted to the executive officer level. 50% of each of these awards were priced at 100% of fair market value on the date of grant and 50% of each of these awards were priced at 110% of fair market value on the date of grant.

EXCERPTS ON THIS PAGE:

DEF 14A
Jul 7, 2009
DEF 14A
Jul 8, 2008
DEF 14A
Jul 2, 2007

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