UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §
240.14a-12
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DOLBY LABORATORIES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules
14a-6(i)(1)
and
0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule
0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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(5)
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule
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and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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Dolby Laboratories, Inc.
1275 Market Street
San
Francisco, California 94103
(415)
558-0200
December 18, 2017
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of Dolby Laboratories, Inc. to be held on Tuesday, February 6, 2018,
at 10:30 a.m. Pacific Time at our principal executive offices located at 1275 Market Street, San Francisco, California 94103. We are making available the accompanying Notice of Annual Meeting, Proxy Statement and form of proxy card or voting
instruction form to you on or about December 18, 2017.
We are pleased to furnish proxy materials to stockholders primarily over the
internet. We believe that this process expedites stockholders receipt of proxy materials, lowers the costs of our Annual Meeting, and conserves natural resources. On or about December 18, 2017, we mailed to our stockholders a notice that
includes instructions on how to access our Proxy Statement and 2017 Annual Report and how to vote online. The notice also includes instructions on how you can receive a paper copy of your Annual Meeting materials, including the Notice of Annual
Meeting, Proxy Statement and proxy card or voting instruction form. If you elected to receive your Annual Meeting materials by mail, the Notice of Annual Meeting, Proxy Statement and proxy card or voting instruction form were enclosed. If you
elected to receive your Annual Meeting materials via
e-mail,
the
e-mail
contains voting instructions and links to the 2017 Annual Report and the Proxy Statement, both of
which are available at
http://investor.dolby.com/annuals-proxies.cfm
.
Details regarding admission to, and the business to be
conducted at, the Annual Meeting are described in the accompanying Notice of Annual Meeting and Proxy Statement. A copy of our 2017 Annual Report is included with the Proxy Statement for those stockholders who are receiving paper copies of the proxy
materials.
Your vote is important
. Regardless of whether you plan to attend the Annual Meeting, we hope that you will vote as soon
as possible. You may vote over the internet, by telephone or by mailing a proxy card or voting instruction form. Please review the instructions on the proxy card or voting instruction form regarding each of these voting options. Voting will ensure
your representation at the Annual Meeting regardless of whether you attend in person.
Thank you for your ongoing support of Dolby
Laboratories, Inc.
Sincerely yours,
Kevin Yeaman
President and Chief Executive Officer
Dolby Laboratories, Inc.
Notice of Annual Meeting of Stockholders
to be held on February 6, 2018
To the Stockholders of Dolby
Laboratories, Inc.:
The Annual Meeting of Stockholders of Dolby Laboratories, Inc., a Delaware corporation, will be held at our principal
executive offices located at 1275 Market Street, San Francisco, California 94103 on Tuesday, February 6, 2018, at 10:30 a.m. Pacific Time, for the following purposes:
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To elect nine directors to serve until the 2019 Annual Meeting of Stockholders or until their successors are duly elected and qualified;
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To hold an advisory vote to approve the compensation of our Named Executive Officers as described in the Proxy Statement accompanying this Notice;
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To ratify the appointment of KPMG LLP as Dolbys independent registered public accounting firm for the fiscal year ending September 28, 2018; and
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To transact such other business as may properly come before the Annual Meeting and any postponement, adjournment or continuation of the Annual Meeting.
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These items of business are more fully described in the Proxy Statement accompanying this Notice. We are not aware of any other business to
come before the Annual Meeting.
Only stockholders of record as of the close of business on December 8, 2017 and their proxies are
entitled to notice of and to vote at the Annual Meeting and any postponement, adjournment or continuation thereof.
All stockholders are
invited to attend the Annual Meeting in person. Any stockholder attending the Annual Meeting may vote in person even if the stockholder returned a proxy card. Please note, however, that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the Annual Meeting, you must obtain a legal proxy issued in your name from the record holder giving you the right to vote the shares.
You will need to bring proof of ownership to enter the Annual
Meeting.
By Order of the Board of Directors,
Andy Sherman
Secretary
December 18, 2017
Whether or not you expect to attend
the Annual Meeting, we encourage you to read the Proxy Statement accompanying this Notice and submit your proxy or voting instructions as promptly as possible in order to ensure your representation at the Annual Meeting. You may submit your proxy or
voting instructions for the Annual Meeting by completing, signing, dating and returning your proxy card or voting instruction form in the preaddressed envelope provided, or, in most cases, by using the telephone or the internet. For specific
instructions on how to vote your shares, please refer to the section entitled Additional Meeting Matters in the Proxy Statement accompanying this Notice and the instructions on the proxy card or voting instruction form. Even if you have
given your proxy, you may still vote in person if you attend the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a
legal proxy issued in your name from the record holder.
TABLE OF CONTENTS
PROXY STATEMENT SUMMARY
This summary highlights certain information contained elsewhere in this Proxy Statement. You should read the entire Proxy Statement carefully
before voting as this summary does not contain all of the information that you should consider.
2018 Annual Meeting of Stockholders
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Date and Time:
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Tuesday, February 6, 2018 at 10:30 a.m. Pacific Time
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Place:
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Dolbys principal executive offices at 1275 Market Street, San Francisco, California 94103
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Record Date:
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December 8, 2017
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Proposals to Be Voted on at Annual Meeting
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Proposal
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Board
Recommendation
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Page Number for
Additional
Information
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1.Election of Directors
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FOR
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8
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2.Advisory Vote to Approve the Compensation of our Named Executive Officers
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FOR
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64
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3.Ratification of Appointment of Independent Registered Public Accounting Firm
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FOR
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66
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Director Nominees
The nominees for election to our Board of Directors (our Board) at the 2018 Annual Meeting of Stockholders are listed below. The
ages indicated are as of the record date for the meeting.
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Committee Memberships
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Name
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Age
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Director
Since
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Principal Occupation
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Indep.
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AC
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CC
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NGC
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SPC
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TSC
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Kevin Yeaman
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51
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2009
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President and CEO
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No
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Peter Gotcher
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58
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2003
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Chairman of the Board
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Yes
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Micheline Chau
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64
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2013
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Director
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Yes
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David Dolby
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40
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2011
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Managing Director, Dolby Family Ventures
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No
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Nicholas Donatiello, Jr.
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57
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2009
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President and CEO, Odyssey Ventures, Inc.
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Yes
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N. William Jasper, Jr.
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70
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2003
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Director
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Yes
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Simon Segars
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50
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2015
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CEO, ARM Holdings plc
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Yes
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Roger Siboni
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63
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2004
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Director
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Yes
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Avadis Tevanian, Jr.
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56
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2009
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Managing Director, Elevation Partners and NextEquity Partners
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Yes
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AC = Audit Committee, CC = Compensation Committee, NGC = Nominating and Governance Committee, SPC = Stock Plan Committee,
TSC = Technology Strategy Committee
= Chairman
= Member
1
Fiscal 2017 Financial and Operational Highlights
Business Overview
We create audio and imaging technologies that transform entertainment and communications at the cinema, at home, at work, and on mobile
devices. Founded in 1965, our strengths stem from expertise in analog and digital signal processing and digital compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through
recorded media. Such technologies led to the development of our noise-reduction systems for analog tape recordings and have since evolved into multiple offerings that enable more immersive sound for cinema, digital television transmissions and
devices,
over-the-top
(OTT) video services, digital versatile disc (DVD) and
Blu-ray
discs, gaming consoles, and mobile devices.
Today, we derive the majority of our revenue from licensing our audio technologies. We also derive revenue from licensing our consumer imaging and communications technologies, as well as audio and imaging technologies for premium cinema offerings in
collaboration with exhibitors. Finally, we provide products and services for a variety of applications in the cinema, broadcast, and communications markets.
Key Financial Highlights
Our key financial highlights for fiscal 2017 were as follows:
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Fiscal 2017
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Fiscal 2016
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Percentage Change
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Total Revenue
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$1,081.5 million
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$1,025.7 million
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5.4%
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Net Income
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$201.8 million
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$185.9 million
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8.6%
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Diluted Earnings Per Share
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$1.95
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$1.81
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7.7%
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Non-GAAP
Net Income*
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$269.7 million
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$249.0 million
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8.3%
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Non-GAAP
Diluted Earnings Per Share*
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$2.61
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$2.43
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7.4%
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Stock Price Per Share (High and Low)
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$59.79 / $44.99
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$54.68 / $30.38
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Stock Price Per Share as of Fiscal
Year-End
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$57.52
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$54.29
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5.9%
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*
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A reconciliation of our
non-GAAP
to GAAP financial results is set forth in Appendix A to this Proxy Statement.
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Return of Capital to Stockholders
In fiscal 2017, we returned $157.1 million to stockholders, $100.0 million of which was in the form of stock repurchases and
$57.1 million of which was in the form of dividends.
Beginning with the introduction of our stock repurchase program in fiscal 2010
and through the end of fiscal 2017, we have returned cash of over $1.7 billion to our stockholders through stock repurchases, our quarterly dividend program, and our fiscal 2013 special dividend.
In October 2017, we announced a 14.3% increase in the per share dividend amount under our quarterly dividend program, from $0.14 to $0.16.
Key Business Highlights
In fiscal 2017, we continued to focus on expanding our leadership position in audio solutions for entertainment content, as well as delivering
dynamic new audio and imaging technologies.
2
Expanding our Leadership Position in Audio SolutionsAudio Licensing, Products and
Services
The following are select highlights of our audio solutions for fiscal 2017:
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Broadcast
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We saw the introduction of new ultra-high definition (UHD) products that incorporate our leading audio technologies, including Dolby
Atmos
®
and our next-generation digital audio coding technology,
AC-4.
For example, the first Dolby Atmos TVs started shipping from LG, and both Samsung
and LG started shipping TVs with
AC-4.
Along with these new product introductions, the availability of content in Dolby formats continued to grow in streaming and live broadcast. Dolby Atmos became available
through OTT providers including Netflix, Tencent, and iQiYi. BT delivered an entire season of Premier League soccer matches in Dolby Atmos; France Television delivered the French Open in Dolby Atmos,
AC-4,
and
Dolby Vision
TM
; and Sky Sports launched its live 4K services in Dolby Atmos. In addition, we had several live broadcast trials with Dolby Vision and Dolby Atmos in the U.K., France, Spain, and
Brazil.
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Consumer Electronics
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The number of Dolby Atmos-enabled soundbars available from partners including LG, Sony, and Samsung grew from four to thirteen during fiscal 2017. Orange, the largest telecom provider
in France, launched its Dolby Atmos service and is offering a Dolby Atmos soundbar to its subscribers. In addition, Amazon announced the new Fire TV with Dolby Atmos. These hardware offerings can be paired with a growing array of Dolby-enabled
content via OTT services and
Blu-ray
discs.
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Mobile
. Dolby Digital Plus
TM
(DD+) is incorporated in Apples iOS, and we continued to focus on adoption of our technologies across other major mobile
ecosystems, including Android, Windows, and Amazon, to facilitate delivery and enhanced consumption of Dolby-enabled content from a multitude of streaming services. In addition, our High Efficiency Advanced Audio Coding
(HE-AAC)
technology is a de facto audio standard across mobile devices. Dolby Atmos is currently featured on a number of mobile devices from partners including Amazon, Lenovo, and ZTE.
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Personal Computers
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Lenovo, Huawei, and Xiaomi launched personal computers that feature Dolby Atmos. We also partnered with Huawei on the system design to help create a more immersive audio experience.
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Other Audio
.
Microsoft launched HDMI support for Dolby Atmos on Windows and Xbox One, which enables playback on downstream Atmos devices such as soundbars and audio-video receivers. In addition, we
launched Dolby Atmos for Headphones, which allows a user to enable Dolby Atmos on their headphones by purchasing an app on the Microsoft app store. Original equipment manufacturers (OEMs) can also
pre-purchase
and bundle Dolby Atmos for Headphones into their offerings. For example, Plantronics released its RIG 800LX gaming headset that included a prepaid voucher to download Dolby Atmos for Headphones on Windows and Xbox.
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Products and Services
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As of the end of fiscal 2017, there were approximately 3,200 Dolby Atmos-enabled screens installed or committed to be installed, and approximately 780 Dolby Atmos theatrical titles
announced or released. We also introduced our most recent cinema products, which include the IMS3000, an integrated imaging and audio server with Dolby Atmos, the Dolby Multichannel Amplifier, and our
3-Axis
speaker. These products allowed us to offer a more complete Dolby Atmos offering that can also provide exhibitors with a more cost effective solution than what was previously available to them.
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Expanding into New Audio and Visual Experiences
Our new growth initiatives include imaging solutions (comprised of Dolby Vision and our new patent licensing initiatives related to
consumer imaging), Dolby Cinema, and Dolby Voice
®
. The following are select highlights of our new growth initiatives for fiscal 2017:
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Imaging Licensing.
We saw the expansion of the ecosystem of products featuring Dolby Vision technologies. Apple announced that the iPhone X, iPhone 8, 2017 iPad Pro lineup, and Apple TV 4K will all support Dolby
Vision. In addition, iTunes now has over 100 movies available in Dolby Vision content, and Netflix is streaming in Dolby Vision to these devices. We also significantly expanded the availability of Dolby Vision TVs with leading OEMs including LG,
Vizio, Sony, and TCL. Beyond TVs, Huawei (a leading global
set-top
box provider) recently announced the inclusion of Dolby Vision in its flagship Internet Protocol TV
set-top
box. Additional devices that support Dolby Vision that were released during fiscal 2017 include UHD
Blu-ray
players by Phillips, Oppo, and LG.
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The availability of entertainment content in Dolby Vision continued to grow. Lionsgate, Sony, Warner Bros., and Paramount have
all released
Blu-ray
titles in Dolby Vision and Dolby Atmos. Furthermore, Disney released its first titles in Dolby Vision and Dolby Atmos for the home. There are movie titles and original TV content available
in Dolby Vision through our OTT streaming partners, which include Netflix, iTunes, Amazon, Vudu, Tencent, and iQiYi.
We
also expanded our new patent licensing initiatives related to our HEVC (High Efficiency Video Coding) and AVC (Advanced Video Coding) consumer imaging technologies and experienced increased growth primarily in the mobile and broadcast markets.
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Dolby Cinema.
We expanded our Dolby Cinema footprint by adding exhibitor partnerships with CGV and Huayi Brothers in Asia, Reel Cinemas in the Middle East, and Les cinémas Gaumont Pathé in France
and the Netherlands. These new partners join a growing list of exhibitors who feature Dolby Cinema, including AMC in the U.S., Wanda and Jackie Chan Cinema in China, Cineplexx in Austria, and Vue in the Netherlands. In total, 112 Dolby Cinema
locations were operational as of the end of fiscal 2017 compared to 37 at the start of fiscal 2017, and we have over 360 Dolby Cinema locations open or committed around the world. In addition, in fiscal 2017, 46 theatrical titles with Dolby Vision
and Dolby Atmos were released, bringing the total number of titles announced or released to date to over 120, with participation from every major studio.
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Dolby Voice.
BlueJeans, a leading video meetings platform, most recently launched BlueJeans Room with Dolby Voice. Earlier in fiscal 2017, West, a leading global audio conferencing services provider, added Dolby
Voice to its suite of offerings. By adding these new partners in fiscal 2017, we continued to expand Dolby Voices availability to the global market for audio and video conferencing services.
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Named Executive Officers
Our named
executive officers (our NEOs) for fiscal 2017 were:
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Kevin Yeaman, our President and Chief Executive Officer;
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Lewis Chew, our Executive Vice President and Chief Financial Officer;
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Andy Sherman, our Executive Vice President, General Counsel and Corporate Secretary;
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Robert Borchers, our Senior Vice President and Chief Marketing Officer; and
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Steven Forshay, our Senior Vice President, Advanced Technology Group.
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On November 13,
2017, Robert Borchers notified us of his resignation as our Senior Vice President and Chief Marketing Officer, effective December 18, 2017.
4
Principal Elements of Executive Compensation and Fiscal 2017 Executive Compensation Highlights
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Element of Compensation
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Fiscal 2017 Highlights
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Base Salary
Comprised 11% of the target total direct compensation opportunity of our CEO, and 22% for our other NEOs (on average), in fiscal 2017.
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Base salaries increased by 7% for our CEO and 3% for each of our
other NEOs in calendar 2017.
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Annual Incentive Compensation (Cash)
Comprised 11% of the target total direct compensation opportunity of our CEO, and 14% for our other NEOs (on average), in fiscal 2017.
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NEO annual incentive compensation targetsstated as a percentage
of base salary for calendar 2017were maintained at fiscal 2016 levels (100% for our CEO and 65% for each of our other NEOs).
Annual incentive compensation payments for our NEOs under our fiscal 2017 executive
bonus plan were based on a multiplier keyed to our achievement of a combination of revenue and
non-GAAP
operating income targets. No payouts would be made under the executive bonus plan unless we achieved a
revenue gate of $972 million.
We achieved revenue of $1.08 billion (representing year-over-year revenue growth of
5.4%), and
non-GAAP
operating income of $339.4 million against a threshold requirement of $294.3 million and a target of $327 million, resulting in a multiplier of 106%. Based on these results and team
and individual performance, our NEOs other than Messrs. Sherman and Forshay received annual incentive compensation payments equal to 106% of their annual incentive compensation targets, and each of Messrs. Sherman and Forshay received a payment
equal to 132.5% of his annual incentive compensation target.
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5
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Element of Compensation
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Fiscal 2017 Highlights
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A reconciliation of our
non-GAAP
to GAAP financial results is set forth in
Appendix A to this Proxy Statement.
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Long-Term Incentive Compensation (Performance-Based Stock Options, Time-Based Stock Options and Restricted Stock Unit
Awards)
Comprised 78% of the target total direct compensation opportunity of
our CEO, and 64% for our other NEOs (on average), in fiscal 2017.
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The equity mix for the long-term incentive compensation granted to
our NEOs was approximately 20% performance-based stock options, 40% time-based stock options, and 40% restricted stock unit awards, based on grant date fair value.
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Performance-Based Stock Options
A portion of the long-term incentive compensation granted to our NEOs is in the form of performance-based stock options, pursuant to a program
adopted in fiscal 2016. The shares of our Class A Common Stock subject to such awards may be earned contingent on our achievement of
pre-established
annualized total stockholder return levels for Dolby
measured over a three-year performance period. From 0% to 125% of the shares subject to the performance-based stock options may be earned, depending on our level of achievement of these performance conditions. The Compensation Committee believes
that granting a portion of long-term incentive compensation in the form of stock options that are earned upon the achievement of specified performance conditions further aligns the interests of our executive officers with those of our stockholders.
Executive Stock Ownership Guidelines
Based on our belief that stock ownership further aligns the interests of senior management with those of our stockholders, our executive
officers are subject to our executive stock ownership guidelines, which provide that:
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Our CEO is expected to accumulate and hold an amount of qualifying Dolby equity securities equal to the lesser of the value of five times his annual base salary, or a fixed number of shares having a value equal to five
times his annual base salary on the date of adoption of the guidelines (September 22, 2015); and
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Each other executive officer is expected to accumulate and hold an amount of qualifying Dolby equity securities equal to the lesser of the value of two times his annual base salary, or a fixed number of shares having a
value equal to two times his annual base salary on the date of adoption of the guidelines.
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As of the end of fiscal 2017,
all of our executive officers were in compliance with our executive stock ownership guidelines.
Compensation Recovery
(Clawback) Policy
Our policy on the recovery of incentive compensation allows us to recover certain cash or
equity-based incentive compensation payments or awards made or granted to an executive officer in the event of misconduct that results in the need for us to prepare a material financial restatement.
Advisory Vote on the Compensation of our Named Executive Officers
We are asking our stockholders to approve, on an advisory
(non-binding)
basis, the compensation of our
NEOs as described in this Proxy Statement. At our 2017 Annual Meeting of Stockholders, approximately 99% of the voting power of the shares present and entitled to vote voted in favor of the compensation of our NEOs. For fiscal 2017, there were no
material changes to our executive compensation program. The Compensation Committee believes that our executive compensation policies and practices continue to support an executive compensation program that is closely aligned with stockholder
interests and that benefits us in the long term.
6
Dolby Laboratories, Inc.
1275 Market Street
San
Francisco, California 94103
(415)
558-0200
PROXY STATEMENT
The Board of
Directors (our Board) of Dolby Laboratories, Inc., a Delaware corporation, is soliciting proxies to be used at the Annual Meeting of Stockholders to be held at our principal executive offices located at 1275 Market Street
,
San
Francisco, California 94103 on Tuesday, February 6, 2018, at 10:30 a.m. Pacific Time and any postponement, adjournment or continuation thereof (the Annual Meeting). This Proxy Statement and the accompanying notice and form of
proxy are first being made available to stockholders on or about December 18, 2017.
INTERNET
AVAILABILITY OF PROXY MATERIALS
We are furnishing proxy materials to our stockholders primarily via the internet. On or about
December 18, 2017, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access our proxy materials, including our Proxy Statement and our 2017 Annual Report. The Notice of Internet
Availability of Proxy Materials also provides information on how to access your voting instructions to be able to vote through the internet or by telephone. Other stockholders, in accordance with their prior requests, have received
e-mail
notification of how to access our proxy materials and vote via the internet, or have been mailed paper copies of our proxy materials and a proxy card or voting instruction form.
Internet distribution of our proxy materials helps to expedite receipt by stockholders, lowers the cost of the Annual Meeting and conserves
natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Materials. If you have previously elected to receive our proxy materials
electronically, you will continue to receive these materials via
e-mail
unless you elect otherwise.
7
PROPOSAL 1
ELECTION OF DIRECTORS
Nominees
Our Board currently consists of nine members. Our Bylaws permit our Board to establish by resolution the authorized number of
directors, and nine directors are currently authorized.
Our Board proposes the election of nine directors, each to serve until the next
Annual Meeting of Stockholders or until his or her successor is duly elected and qualified. All incumbent directors are nominees for
re-election
to our Board. All of the nominees have been recommended for
nomination by the Nominating and Governance Committee, and all of them are currently serving as directors. All nominees were elected by the stockholders at last years annual meeting. Your proxy cannot be voted for a greater number of persons
than the number of nominees named in this Proxy Statement.
Each person nominated for election has agreed to serve if elected, and
management has no reason to believe that any nominee will be unavailable to serve. If any nominee is unable or declines to serve as director at the time of the Annual Meeting, an event that we do not currently anticipate, proxies will be voted for
any nominee designated by our Board to fill the vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the nominees named below.
Information Regarding the Director Nominees
Names of the nominees and certain biographical information about them as of December 8, 2017, the record date for the Annual Meeting, are
set forth below:
|
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Name
|
|
Age
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|
|
Position with the Company
|
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Director Since
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Kevin Yeaman
(1)
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|
51
|
|
|
President, Chief Executive Officer and Director
|
|
|
2009
|
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Peter Gotcher
(2)
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58
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|
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Chairman of the Board of Directors
|
|
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2003
|
|
Micheline Chau
(2)(3)
|
|
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64
|
|
|
Director
|
|
|
2013
|
|
David Dolby
(4)
|
|
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40
|
|
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Director
|
|
|
2011
|
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Nicholas Donatiello, Jr.
(1)(2)(4)(5)
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57
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Director
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2009
|
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N. William Jasper, Jr.
|
|
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70
|
|
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Director
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2003
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Simon Segars
(3)
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50
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|
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Director
|
|
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2015
|
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Roger Siboni
(3)(5)
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63
|
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Director
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2004
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Avadis Tevanian, Jr.
(2)(4)(5)
|
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56
|
|
|
Director
|
|
|
2009
|
|
(1)
|
Member of the Stock Plan Committee
|
(2)
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Member of the Nominating and Governance Committee
|
(3)
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Member of the Audit Committee
|
(4)
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Member of the Technology Strategy Committee
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(5)
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Member of the Compensation Committee
|
Kevin Yeaman
became our President and CEO in
March 2009 and has been a member of our Board since he assumed the role of CEO. He joined Dolby as Chief Financial Officer and Vice President in October 2005, was appointed Senior Vice President in November 2006 and Executive Vice President in July
2007. Prior to joining Dolby, he worked for seven years at Epiphany, Inc., a publicly traded enterprise software company, most recently as the Chief Financial Officer from August 1999 to October 2005. Previously, Mr. Yeaman also served as
Worldwide Vice President of Field Finance Operations for Informix Software, Inc., a provider of relational database software, from February 1998 to August 1998. From September 1988 to February 1998, Mr. Yeaman served in Silicon Valley and
London in various positions at KPMG LLP, an accounting firm, serving most recently as a senior manager. Mr. Yeaman is a member of the Academy of Motion Picture Arts and Sciences. He also sits on the Board of Trustees of the Academy Museum of
Motion Pictures. He holds a B.S. degree in commerce from Santa Clara University.
8
As Dolbys Chief Executive Officer and former Chief Financial Officer, Mr. Yeaman has
extensive experience in Dolbys markets and brings to our Board a deep understanding of Dolby, its finances, operations and strategy.
Peter Gotcher
has served as a director since June 2003 and as Chairman of the Board of Directors since March 2011. Mr. Gotcher
served as Executive Chairman of the Board of Directors from March 2009 until March 2011. Mr. Gotcher is an independent investor. Mr. Gotcher was a venture partner with Redpoint Ventures, a private investment firm, from September 1999 to
January 2003. Prior to joining Redpoint Ventures, Mr. Gotcher was a venture partner with Institutional Venture Partners, a private investment firm, from 1997 to September 1999. Prior to joining Institutional Venture Partners, Mr. Gotcher
founded and served as the President, Chief Executive Officer and Chairman of the Board of Digidesign from 1984 to 1995. Digidesign was acquired by Avid Technology, a media software company, in 1995 and Mr. Gotcher served as the General Manager
of Digidesign and Executive Vice President of Avid Technology from January 1995 to May 1996. Mr. Gotcher serves on the board of directors of GoPro, Inc., and served on the board of directors of Pandora Media, Inc. from September 2005 to May
2017. Mr. Gotcher also serves on the boards of directors of several private companies. Mr. Gotcher holds a B.A. degree in English literature from the University of California at Berkeley.
As the founder, former Chief Executive Officer and Chairman of Digidesign and a former venture capitalist, Mr. Gotcher has a broad
understanding of the operational, financial and strategic issues facing public companies. In addition, his service on other boards and committees, including as a member of the Audit and Compensation and Leadership Committees of GoPro, Inc., as a
former member of the Compensation Committee and member and chairperson of the Nominating and Corporate Governance Committee of Pandora Media, Inc., and his extensive experience in Dolbys markets, provide valuable perspective for our Board and
give him significant operating experience, as well as financial, accounting and corporate governance experience.
Micheline Chau
has served as a director since February 2013. Ms. Chau served as President and Chief Operating Officer of Lucasfilm Ltd., a film and entertainment company, from April 2003 to September 2012. Prior to assuming her role as President and Chief
Operating Officer, Ms. Chau served as Lucasfilms Chief Financial Officer, from 1991 to March 2003. Before that, Ms. Chau was Chief Financial/Administrative Officer for Bell Atlantic Healthcare Systems and held other executive-level
positions within various industries, including retail, restaurant, venture capital and financial services. Ms. Chau is a member of the board of directors of Las Vegas Sands Corp., a developer, owner and operator of integrated resorts in Asia
and the United States, and serves on Las Vegas Sands Compensation and Compliance Committees. Ms. Chau also sat on the board of directors of Red Hat, Inc., an open source enterprise software provider, from November 2008 to August 2012, and
also served as a member of Red Hats Compensation and Nominating and Corporate Governance Committees. In addition, Ms. Chau currently sits on the boards of directors of several private and
non-profit
entities. Ms. Chau holds an undergraduate degree in English and Asian Studies from Wellesley College and an M.B.A. from Stanford University.
As the former President, Chief Operating Officer and Chief Financial Officer of Lucasfilm, Ms. Chau brings to our Board senior leadership
and significant operating experience, as well as financial and entertainment industry expertise. In addition, as a member of the Compensation and Compliance Committees of Las Vegas Sands and a former member of the Compensation and Nominating and
Corporate Governance Committees of Red Hat, Ms. Chau brings to our Board corporate governance experience.
David Dolby
has
served as a director since February 2011. Mr. Dolby is founder and currently serves as a Managing Director of Dolby Family Ventures, an early stage venture firm unrelated to Dolby Laboratories that launched in June 2014 to invest in companies
and technologies with the potential for significant social impact. Previously, Mr. Dolby served as a consultant to our Board on technology strategy matters from February 2011 until February 2015. Mr. Dolby also served as Manager, Strategic
Partnerships of Dolby Laboratories from May 2008 until February 2011. In this role, Mr. Dolby was responsible for managing the companys strategic partnerships and technology standards for internet media encoding, delivery and playback. He
represented the
9
company in technical and business working groups at a variety of international standards groups, including Universal Serial Bus, Digital Living Network Alliance, Digital Entertainment Content
Ecosystem Ultraviolet, and
Blu-ray
Disc Association. Mr. Dolby has attended industry events with the company for a significant number of years, including Audio Engineering Society, National Association of
Broadcasters, International Consumer Electronics Show, ShoWest, Cine Expo International, IFA, and Custom Electronic Design and Installation Association. From 2006 to 2008, Mr. Dolby was a self-employed entrepreneur and investor. Mr. Dolby
attended Stanford Business School between 2004 and 2006. During that time, he served as product manager at Kaleidescape, Inc., a Silicon Valley technology firm focused on high-performance music and movie server systems. From 2003 to 2006, he owned
and operated Charter Flight LLC, a private aircraft leasing business. In addition, during 2004, Mr. Dolby was an investment banking analyst focused on technology at Perseus Group (now GCA Savvian). From 2000 to 2002, Mr. Dolby was an
employee of NetVMG, a company developing route control software for optimizing multi-homed IP network routing. Before joining NetVMG, Mr. Dolby worked for engineering firms Bechtel and Poe & Associates. Mr. Dolby serves on the
board of directors of Cogstate Limited, a cognitive assessment and training company focused on the development and commercialization of computerized tests of cognition. Mr. Dolby serves on Cogstates Audit and Compliance Committee and
Remuneration and Nomination Committee. Mr. Dolby received a B.S.E. in Civil Engineering from Duke University and an M.B.A. from Stanford University.
Mr. Dolby brings experience to our Board in home theater system technology and software technology productization, and offers a long-term
perspective on the growth of the company and its commitment to excellence in audio and video.
Nicholas Donatiello, Jr.
has served
as a director since February 2009. Mr. Donatiello has been the President and Chief Executive Officer of Odyssey Ventures, Inc. since September 1993. Prior to founding Odyssey, he was Press Secretary and Campaign Manager for U.S. Senator Bill
Bradley and a consultant at McKinsey & Company. Mr. Donatiello is a member of the board of directors of Big 5 Sporting Goods Corporation, a sporting goods retailer in the western United States, where he serves on the Nominating and
Corporate Governance Committee and the Compensation Committee. He is Chairman of the Board of Directors of three of the American Funds managed by Capital Research and Management. From time to time he also serves on the boards of directors of private
companies and since January 2010, as a member of the board of directors for the Schwab Charitable Fund. Mr. Donatiello is also a Lecturer in Accounting at the Stanford Graduate School of Business. Mr. Donatiello served on the board of
Gemstar-TV
Guide International from July 2000 to May 2008. In addition, Mr. Donatiello served as director of Classmates Media Corporation, a wholly owned subsidiary of United Online, from 2007 to 2010 and as
Chairman of the Board of KQED, Inc. from 2006 through 2008. Mr. Donatiello holds a B.S.E. degree in engineering from Princeton University and an M.B.A. degree from Stanford University.
As the founder, President and Chief Executive Officer of Odyssey Ventures, Inc., a strategy consulting and market research firm focused on
understanding consumers, media and technology, Mr. Donatiello has extensive experience in the marketing elements of Dolbys markets. In addition, through his work at McKinsey & Company and his service on the boards of a variety of
private and public companies, Mr. Donatiello has a broad understanding of the operational, financial and strategic issues facing companies.
N. William Jasper, Jr.
has served as a director since June 2003. Mr. Jasper joined Dolby in February 1979 as Chief Financial
Officer and retired as President and Chief Executive Officer in March 2009. Mr. Jasper served in a variety of positions prior to becoming President in May 1983, including as our Vice President, Finance and Administration and as our Executive
Vice President. Mr. Jasper is an
at-large
member of the Academy of Motion Picture Arts and Sciences. He holds a B.S. degree in industrial engineering from Stanford University and an M.B.A. from the
University of California at Berkeley.
With his 30 years of experience as an executive officer of Dolby, Mr. Jasper has extensive
experience in Dolbys markets and brings to our Board a deep understanding not only of the role of our Board, but also of the company and its operations.
10
Simon Segars
has served as a director since February 2015. Since 1991, Mr. Segars has
worked for ARM Holdings plc, a designer and provider of microprocessors, software development tools and related technologies that was publicly held until its acquisition by SoftBank Group Corp. in September 2016. Mr. Segars has served as
ARMs Chief Executive Officer since July 2013 and as a member of its board of directors since 2005. Mr. Segars also has served as a member of SoftBank Group Corp.s board of directors since June 2017. He served as President of ARM in
2013 before being promoted to Chief Executive Officer. Mr. Segars held the position of Executive Vice President and General Manager, Physical IP Division, from 2007 to 2012. Prior senior roles at ARM include Executive Vice President,
Engineering; Executive Vice President, Worldwide Sales; and Executive Vice President, Business Development. Mr. Segars worked on many of the early ARM CPU products and led the development of the ARM7 and ARM9 Thumb
®
families. He holds a number of patents in the field of embedded CPU architectures. Mr. Segars received his Bachelors in Electronic Engineering from the University of Sussex, and obtained a
Masters of Computer Science from the University of Manchester. In addition to serving on ARM and SoftBank Group Corp.s boards of directors, Mr. Segars currently serves on the boards of directors of the Electronic System Design Alliance,
the Global Semiconductor Alliance, and the UKs TechWorks.
As a trained and former engineer, Mr. Segars has extensive
experience in the technological elements of Dolbys business operations. In addition, with his significant experience as an executive officer of ARM, and his service on the boards of both public and private companies, Mr. Segars brings to
our Board a valuable understanding of the operational and strategic issues facing companies.
Roger Siboni
has served as a director
since July 2004. Mr. Siboni served as the Chairman of the Board of Epiphany, Inc., a provider of customer interaction software, from December 1999 until Epiphany, Inc. was acquired by SSA Global Technologies, Inc. in September 2005.
Mr. Siboni also served as President and Chief Executive Officer of Epiphany from August 1998 to July 2003. From July 1996 to August 1998, Mr. Siboni was Deputy Chairman and Chief Operating Officer of KPMG Peat Marwick LLP, a member firm of
KPMG International, an accounting and consulting firm. From July 1993 to June 1996, Mr. Siboni was Managing Partner of KPMG Peat Marwick LLPs information, communication and entertainment practice. Mr. Siboni also serves on the boards
of directors of Cadence Design Systems, a provider of software, hardware, and system design tools to enable the design and development of electronic products, Coupa Software Incorporated, a provider of spend management solutions via a cloud-based
platform, and a number of private companies. Previously, Mr. Siboni served on the board of FileNet Corporation, from December 1998 until it was acquired by IBM in October 2006; the board of infoGROUP Inc., from January 2009 until it was
acquired by CCMP Capital Advisors in July 2010; the board of ArcSight, Inc., from June 2009 until it was acquired by Hewlett-Packard Company in October 2010; the board of Classmates Media Corporation, a wholly owned subsidiary of United Online, from
2007 to 2010; and the board of Marketo, Inc., from October 2011 until it was acquired by Milestone Holdco, LLC in August 2016. Mr. Siboni holds a B.S. degree in business administration from the University of California at Berkeley.
As a former Chairman of the Board and Chief Executive Officer of Epiphany, Inc., a former Chief Operating Officer and Managing Partner of the
information, communication and entertainment practice at KPMG LLP and a director of a number of companies, including as a member of the Audit (where he also serves as Chair), Finance and Corporate Governance and Nominating Committees of Cadence
Design Systems, and as a member of the Audit (where he also serves as Chair) and Nominating and Corporate Governance Committees of Coupa Software Incorporated, Mr. Siboni has significant operating experience, as well as financial, accounting
and corporate governance experience.
Avadis Tevanian, Jr.
has served as a director since February 2009. Dr. Tevanian serves
as a Managing Director of NextEquity Partners, a firm he
co-founded
in July 2015, and Elevation Partners, a firm he joined in January 2010, making venture capital and private equity investments. Previously,
Dr. Tevanian served as the Software Chief Technology Officer of Apple Inc. from 2003 to 2006. As Software CTO, Dr. Tevanian focused on setting the company-wide software technology direction for Apple. Prior to his tenure as Software CTO,
Dr. Tevanian was Senior Vice President of Software at Apple, a role he took on when Apple acquired NeXT, Inc.
11
in 1997. As Senior Vice President of Software, Dr. Tevanian led the software engineering team responsible for the creation of macOS and worked as part of Apples executive team. Before
joining Apple, he was Vice President of Engineering at NeXT, Inc. and was responsible for managing NeXTs engineering department. Dr. Tevanian started his professional career at Carnegie Mellon University, where he was a principal designer
and engineer of the Mach operating system upon which Nextstep, and now macOS and iOS, are based. Dr. Tevanian is a former board member of Tellme Networks, Inc., an internet telecom company acquired by Microsoft. He holds a B.A. degree in
mathematics from the University of Rochester and M.S. and Ph.D. degrees in computer science from Carnegie Mellon University.
With more
than 20 years of operational and software expertise, including as Apples Chief Software Technology Officer, Dr. Tevanian brings to our Board extensive experience in consumer technology businesses and a deep understanding of the
operational and strategic issues facing companies.
There are no family relationships among any of our directors and executive officers.
See Corporate Governance Matters and Compensation of Directors for additional information regarding our Board.
Our Board of Directors recommends a vote FOR the election of each of the nominees set forth above.
12
COMPENSATION OF DIRECTORS
The following table provides information concerning the compensation paid by us to each of our
non-employee
directors for fiscal 2017. Our CEO did not receive additional compensation for his service as a director, and his compensation as an employee is presented in the Fiscal 2017 Summary Compensation
Table.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid in Cash
($)
(1)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Option
Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Micheline Chau
|
|
|
70,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
319,143
|
|
David Dolby
|
|
|
55,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
304,143
|
|
Nicholas Donatiello, Jr.
|
|
|
87,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
336,143
|
|
Peter Gotcher
|
|
|
115,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
364,143
|
|
N. William Jasper, Jr.
|
|
|
50,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
299,143
|
|
Simon Segars
|
|
|
63,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
312,143
|
|
Roger Siboni
|
|
|
90,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
339,143
|
|
Avadis Tevanian, Jr.
|
|
|
77,000
|
|
|
|
249,143
|
|
|
|
|
|
|
|
|
|
|
|
326,143
|
|
(1)
|
Consists of Board and committee annual retainers and, if applicable, Board chairman retainer and committee chairman retainers.
|
(2)
|
Stock Awards consist solely of restricted stock unit awards for shares of our Class A Common Stock. The amounts reported reflect the grant date fair value of each equity award computed in accordance with Financial
Accounting Standards Board Accounting Standards Codification Topic 718, CompensationStock Compensation (ASC Topic 718), excluding estimated forfeitures. See Note 7 to our consolidated financial statements in our 2017 Annual Report
on Form 10-K for more information. The amounts reported do not reflect the compensation actually realized by the
non-employee
directors. There can be no assurance that the restricted stock unit awards will
vest (in which case no value will be realized by the individual) or that the value on vesting will approximate the compensation expense recognized by us.
|
In fiscal 2017, our
non-employee
directors received the following restricted stock unit awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
|
Approval Date
|
|
|
Number of
Securities
Subject to
Restricted
Stock Unit
Awards
|
|
|
Grant
Date
Fair
Value
($)
|
|
Micheline Chau
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
David Dolby
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
Nicholas Donatiello, Jr.
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
Peter Gotcher
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
N. William Jasper, Jr.
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
Simon Segars
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
Roger Siboni
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
Avadis Tevanian, Jr.
|
|
|
02/07/2017
|
|
|
|
02/07/2017
|
|
|
|
5,233
|
|
|
|
249,143
|
|
13
As of September 29, 2017, the aggregate number of shares of our Class A Common Stock
subject to outstanding stock options and restricted stock unit awards held by each of our
non-employee
directors is listed in the table below.
|
|
|
|
|
|
|
|
|
Name
|
|
Aggregate Number of Shares of
Class A Common Stock
Subject to Outstanding Stock
Options at Sep. 29, 2017
|
|
|
Aggregate Number of Shares of
Class A Common Stock
Subject to Restricted Stock
Unit Awards at Sep. 29, 2017
|
|
Micheline Chau
|
|
|
|
|
|
|
5,233
|
|
David Dolby
|
|
|
3,512
|
|
|
|
5,233
|
|
Nicholas Donatiello, Jr.
|
|
|
|
|
|
|
5,233
|
|
Peter Gotcher
|
|
|
32,401
|
|
|
|
5,233
|
|
N. William Jasper, Jr.
|
|
|
83,527
|
|
|
|
5,233
|
|
Roger Siboni
|
|
|
|
|
|
|
5,233
|
|
Simon Segars
|
|
|
|
|
|
|
5,233
|
|
Avadis Tevanian, Jr.
|
|
|
|
|
|
|
5,233
|
|
Standard
Non-Employee
Director Compensation Arrangements
We use a combination of cash and equity compensation to attract and retain qualified candidates to serve on our Board. The
Nominating and Governance Committee is responsible for conducting periodic reviews of our
non-employee
director compensation and, if appropriate, recommending to our Board any changes in the type or amount of
compensation.
Cash Compensation
During fiscal 2017, the annual cash retainers for serving as a
non-employee
director on our Board or
committees of the Board were as follows:
|
|
|
|
|
|
|
|
|
Board/Committee
|
|
Member Annual
Retainer
|
|
|
Chairman Annual
Retainer
(in Addition
to Member Retainer)
|
|
Board
|
|
$
|
50,000
|
|
|
$
|
50,000
|
|
Audit
|
|
$
|
13,000
|
|
|
$
|
17,000
|
|
Compensation
|
|
$
|
10,000
|
|
|
$
|
15,000
|
|
Nominating and Governance
|
|
$
|
7,000
|
|
|
$
|
8,000
|
|
Technology Strategy
|
|
$
|
5,000
|
|
|
$
|
5,000
|
|
Members of the Stock Plan Committee receive no annual cash retainer for serving on this committee.
Equity Compensation
During fiscal 2017, a newly appointed
non-employee
director was eligible to receive an
initial restricted stock unit award, and all incumbent/continuing
non-employee
directors were eligible to receive an annual subsequent restricted stock unit award, in each case covering
that number of shares of our Class A Common Stock as determined by dividing $250,000
(pro-rated
for complete months of service in the case of an initial restricted stock unit award) by the average closing
price of our Class A Common Stock for the 30 trading days ending on (and including) the trading day immediately preceding the grant date, rounded down to the nearest whole share. Both initial and subsequent restricted stock unit awards vest in
full on the day preceding the date of the next Annual Meeting of Stockholders following the grant date of the award (or if earlier, the first anniversary of the awards grant date). All shares covered by initial or subsequent restricted stock
unit awards will become fully vested immediately prior to a change in control of Dolby.
14
Director Compensation Review
The Nominating and Governance Committee reviews our
non-employee
director compensation on an annual
basis, and if appropriate, recommends changes to our Board. During fiscal 2017, the Nominating and Governance Committee engaged Compensia, Inc. for purposes of advising on its director compensation review. The Nominating and Governance Committee
asked Compensia to provide its perspective on recent
non-employee
director compensation trends and developments, upon which Compensia concluded that our
non-employee
director compensation program remains aligned with peer practice. Following such review, the Nominating and Governance Committee concluded that no changes to director compensation were advisable for fiscal 2018.
In addition to assisting the Nominating and Governance Committee on its director compensation review, Compensia has advised the Compensation
Committee on executive officer compensation matters and has provided other services to Dolby in designing employee compensation programs. The Compensation Committee took into account the provision of these services and the compensation to Compensia
for such services in determining that its relationship with Compensia and the work of Compensia on behalf of the Compensation Committee has not raised any conflict of interest, as described in Compensation Discussion and AnalysisRoles of
the Compensation Committee, Management and Compensation ConsultantRole of Compensation Consultant.
Other Arrangements
We reimburse our
non-employee
directors for reasonable travel, lodging, and related expenses
in connection with attendance at our Board and committee meetings and company-related activities. Eligible
non-employee
directors may elect to participate in our company-wide healthcare program (which is a
program that does not discriminate in scope, terms or operation, in favor of executive officers or directors), provided that they pay the premiums associated with their (and their eligible dependents) healthcare coverage.
Non-Employee
Director Stock Ownership Guidelines
Our Board has approved stock ownership guidelines for our
non-employee
directors based on our belief
that stock ownership further aligns the interests of our
non-employee
directors with those of our stockholders. These guidelines provide that each
non-employee
director
is expected to accumulate and hold an amount of qualifying Dolby equity securities equal to the lesser of (i) the value of five times his or her annual retainer for service on our Board or (ii) a fixed number of shares having a value equal
to five times his or her annual retainer on September 22, 2015 (representing the date of the most recent amendment of the stock ownership guidelines). Compliance is measured as of the last day of each fiscal year. For purposes of our
non-employee
director stock ownership guidelines, a directors annual retainer excludes any retainer for serving as a member or as a chairman of any Board committees, or for serving as the Chairman
of the Board. Directors have five years from the date they first become a
non-employee
director to achieve the requisite level of ownership.
As of the end of fiscal 2017, all of our
non-employee
directors were in compliance with our
non-employee
director stock ownership guidelines.
15
CORPORATE GOVERNANCE MATTERS
Board Meetings and Committees
Our Board
held seven meetings during fiscal 2017. Each of our directors attended at least 75% of the aggregate number of meetings held by our Board and the committees on which he or she served during fiscal 2017.
The standing committees of our Board consist of an Audit Committee, a Compensation Committee, a Nominating and Governance Committee, and a
Stock Plan Committee, each of which has the composition and responsibilities described below. Our Board also has convened an ad hoc Technology Strategy Committee, which has the composition and responsibilities described below. Our Board may in the
future convene additional ad hoc committees of our Board as it deems necessary or advisable.
Each of the committees of our Board
described below acts pursuant to a written charter approved by our Board, each of which is available on the Corporate Governance section of the Investors page of our website at
http://investor.dolby.com/corporate-governance.cfm
.
The
non-employee
members of our Board regularly meet in executive session without management present.
In addition, the independent members of our Board also meet regularly in executive session. Peter Gotcher, our independent Chairman of the Board, serves as the Presiding Director of these executive sessions.
Audit Committee
The current members of the Audit Committee are Micheline Chau, Roger Siboni, and Simon Segars, each of whom is a
non-employee
member of our Board. Mr. Siboni is the chairman of the Audit Committee. The Audit Committee held 12 meetings during fiscal 2017. Our Board has determined that each member of the Audit
Committee meets the requirements for independence under the current requirements of the New York Stock Exchange (the NYSE) and the rules and regulations of the Securities and Exchange Commission (the SEC). Our Board also has
determined that each member of the Audit Committee meets the requirements for financial literacy under the applicable rules and regulations of the NYSE and SEC, and is an audit committee financial expert as defined in SEC rules.
The Audit Committee has established a telephone and internet whistleblower hotline for the anonymous submission of suspected violations,
including accounting, internal controls or auditing matters, harassment, fraud and policy violations.
The Audit Committee is responsible
for, among other things:
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Monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;
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Selecting and hiring our independent auditors, and approving the audit and permissible
non-audit
services to be performed by them;
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Evaluating the qualifications, performance and independence of our independent auditors;
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Evaluating the performance of our internal audit function;
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Reviewing the adequacy and effectiveness of our control policies and procedures;
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Acting as our Qualified Legal Compliance Committee to review any report made known to the committee by attorneys employed or retained by Dolby or its subsidiaries of a material violation of U.S. federal or state
securities or similar laws;
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Reviewing, approving or ratifying related person transactions;
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16
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Attending to risk management matters; and
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Preparing the Audit Committee report that the SEC requires in our annual report on Form
10-K
and in this Proxy Statement.
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Compensation Committee
The current members of the Compensation Committee are Nicholas Donatiello, Jr., Roger Siboni and Avadis Tevanian, Jr., each of whom is a
non-employee
member of our Board. Mr. Donatiello is the chairman of the Compensation Committee. The Compensation Committee held eight meetings during fiscal 2017. Our Board has determined that each member of
the Compensation Committee meets the requirements for independence under current NYSE and SEC rules and regulations. The Compensation Committee is responsible for, among other things:
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Reviewing and approving corporate goals and objectives relevant to our CEOs compensation and evaluating our CEOs performance in light of those goals and objectives;
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Reviewing and approving the following elements of compensation for our CEO and other executive officers: annual base salary; annual incentive compensation, including the specific performance goals and amounts; long-term
incentive compensation; employment agreements; severance arrangements and change in control provisions; and any other significant benefits, compensation or arrangements that are not available to employees generally;
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Administering Dolbys broad-based equity incentive plans, including granting equity awards under such plans;
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Evaluating and approving compensation plans, policies and programs for our CEO and other executive officers;
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Attending to compensation-related risk management matters;
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Overseeing our policy on the recovery (clawback) of incentive compensation and our executive stock ownership guidelines;
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Retaining and assessing the independence of any Compensation Committee advisors; and
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Reviewing the Compensation Discussion and Analysis, and preparing the Compensation Committee report, that the SEC requires in our annual report on Form
10-K
and in this Proxy
Statement.
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Nominating and Governance Committee
The current members of the Nominating and Governance Committee are Micheline Chau, Nicholas Donatiello, Jr., Peter Gotcher, and Avadis
Tevanian, Jr., each of whom is a
non-employee
member of our Board. Mr. Gotcher is the chairman of the Nominating and Governance Committee. The Nominating and Governance Committee held six meetings during
fiscal 2017. Our Board has determined that each member of the Nominating and Governance Committee meets the requirements for independence under current NYSE and SEC rules and regulations. The Nominating and Governance Committee is responsible for,
among other things:
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Assisting our Board in identifying and recommending director nominees;
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Developing and recommending corporate governance principles;
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Overseeing the evaluation of our Board, Board committees and individual directors;
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Recommending Board committee assignments;
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Making an annual report to our Board on succession planning;
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Attending to Board- and corporate governance-related risk management matters; and
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Reviewing and making recommendations to our Board regarding director compensation.
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17
Stock Plan Committee
The current members of the Stock Plan Committee are Nicholas Donatiello, Jr. and Kevin Yeaman. In fiscal 2017, the Stock Plan Committee held
one meeting and granted equity awards by written consent on 12 occasions. The Stock Plan Committee has the authority to grant stock options, stock appreciation rights and restricted stock unit awards to newly hired employees and consultants who will
not be executive officers or directors of Dolby on the date of grant, and to make performance, promotion or retention grants of equity awards to employees and consultants who are not executive officers or directors of Dolby on the date of grant.
Equity awards granted by the Stock Plan Committee are subject to the terms and conditions of the Equity-Based Award Grant and Vesting Policy described in the Compensation Discussion and Analysis below.
Technology Strategy Committee
The current members of the Technology Strategy Committee are David Dolby, Nicholas Donatiello, Jr. and Avadis Tevanian, Jr. Mr. Tevanian
is the chairman of the Technology Strategy Committee. The Technology Strategy Committee held three meetings during fiscal 2017. The Technology Strategy Committee is responsible for exploring the opportunities and issues associated with Dolbys
technology strategies and intellectual property.
Boards Role in Risk Oversight
Our Board is responsible for overseeing Dolbys risk management structure. Management is responsible for establishing our business and
operational strategies, identifying and assessing the related risks and implementing appropriate risk management practices on a
day-to-day
basis. Our Board reviews our
business and operational strategies and managements assessment of the related risk, and discusses with management the appropriate level of risk for the company. Our Board meets with management at least quarterly to review, advise and direct
management with respect to strategic business risks, operational risks, legal risks and risks related to Dolbys acquisition strategies, among others. Our Board also delegates oversight to Board committees to oversee selected elements of risk.
The Audit Committee oversees financial risk exposures, including monitoring our financial condition and investments, the integrity of our
financial statements, accounting matters, internal controls over financial reporting, the independence of Dolbys independent registered public accounting firm, KPMG, and guidelines and policies with respect to risk assessment and risk
management. The Audit Committee receives periodic internal controls and related assessments from Dolbys finance department and an annual attestation report on internal control over financial reporting from KPMG. The Audit Committee oversees
Dolbys annual enterprise business risk assessment, which is conducted by our Internal Audit Department. The annual enterprise business risk assessment reviews the primary risks facing the company and Dolbys associated risk mitigation
measures. In addition, the Audit Committee discusses other risk assessment and risk management policies of the company periodically with management.
The Compensation Committee oversees the design of executive compensation structures that create incentives that encourage behaviors and
decisions consistent with our business strategy, including a review of an annual risk assessment with respect to our compensation programs and policies.
The Nominating and Governance Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks
associated with Board organization, membership, structure and compensation, succession planning for our directors and executive officers and corporate governance policies.
Board Leadership Structure
Our Corporate
Governance Guidelines provide that our Board does not have a policy regarding the separation of the offices of the Chairman of the Board and CEO and that our Board is free to choose the Chairman of the Board in any way that it deems best for the
company at any given point in time. Our Board believes that these issues should be considered as part of our Boards broader governance responsibilities.
18
Our Board has determined that having two different individuals serve in the roles of Chairman of
the Board and CEO is in the best interest of the companys stockholders at this time. Mr. Yeaman currently serves as our CEO and Mr. Gotcher currently serves as our independent Chairman of the Board. The CEO is responsible for the
strategic direction,
day-to-day
leadership, and performance of the company, while the Chairman of the Board provides overall leadership to our Board. The Chairman of the
Board also works with the CEO and General Counsel to prepare Board meeting agendas and chairs meetings of our Board. The leadership structure allows the CEO to focus on his operational responsibilities, while keeping a measure of independence
between the oversight function of our Board and those operating decisions. Our Board believes that this leadership structure provides an appropriate allocation of roles and responsibilities at this time.
Board Independence
Our Board has
determined that Ms. Chau and Messrs. Donatiello, Gotcher, Jasper, Segars, Siboni and Dr. Tevanian do not have any material relationship with Dolby and are independent within the meaning of the standards established by the NYSE. In making
this determination, our Board considered all relevant facts and circumstances known to us, including the directors commercial, accounting, legal, banking, consulting, charitable and familial relationships. With respect to Mr. Jasper, our
Board also specifically considered that Mr. Jasper retired as President and Chief Executive Officer of Dolby in March 2009 and has not held a management position with the company for more than five years.
Succession Planning
As reflected in our
Corporate Governance Guidelines, a key responsibility of our Board is to work with the Nominating and Governance Committee on succession planning for our CEO. As part of this process, our Board works with the Nominating and Governance Committee to
identify potential successors to our CEO and the committee makes an annual report to our Board. Our Board also has adopted an emergency succession plan in the event of the death, disability, incapacity or unanticipated departure or leave of our CEO.
Policy for Director Recommendations
It is the policy of the Nominating and Governance Committee to consider recommendations for candidates to our Board from stockholders holding
at least 250,000 shares of our Common Stock continuously for at least 12 months prior to the date of the submission of the recommendation.
A stockholder that wishes to recommend a candidate for election to our Board should send the recommendation by letter to Dolby Laboratories,
Inc., 1275 Market Street, San Francisco, California 94103, Attn: General Counsel. The recommendation must include the candidates name, home and business contact information, detailed biographical data, relevant qualifications, a signed letter
from the candidate confirming willingness to serve, information regarding any relationships between the candidate and Dolby and evidence of the recommending stockholders ownership of Dolby Common Stock. Such recommendations must also include a
statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for Board membership, addressing issues of character, integrity, judgment, diversity of experience, diversity of perspective,
independence, area of expertise, corporate experience, length of service, potential conflicts of interest, other commitments and personal references.
The committee will use the following procedures to identify and evaluate any individual recommended or offered for nomination to our Board:
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The committee will consider candidates recommended by stockholders in the same manner as candidates recommended to the committee from other sources;
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In its evaluation of director candidates, including the members of our Board eligible for
re-election,
the committee will consider the following: (i) the current size and composition of our Board and the needs
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19
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of our Board, and the respective committees of our Board; (ii) without assigning any particular weighting or priority to any of these factors, such factors as character, integrity, judgment,
diversity of experience, diversity of perspective, independence, area of expertise, corporate experience, length of service, potential conflicts of interest and other commitments; and (iii) other factors that the committee may consider
appropriate;
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The committee requires the following minimum qualifications, which are the desired qualifications and characteristics for Board membership, to be satisfied by any nominee for a position on our Board: (i) the
highest personal and professional ethics and integrity; (ii) proven achievement and competence in the nominees field and the ability to exercise sound business judgment; (iii) skills that are complementary to those of the existing
Board; (iv) the ability to assist and support management and make significant contributions to Dolbys success; and (v) an understanding of the fiduciary responsibilities that are required of a member of our Board and the commitment
of time and energy necessary to diligently carry out those responsibilities;
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If the committee determines that an additional or replacement director is required, the committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including
candidate interviews, inquiry of the person or persons making the recommendation or nomination, engagement of an outside search firm to gather additional information, or reliance on the knowledge of the members of the committee, our Board or
management; and
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The committee may propose to our Board a candidate recommended or offered for nomination by a stockholder as a nominee for election to our Board.
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We do not maintain a separate policy regarding the diversity of our Board, but during the director nomination process, as described above, the
Nominating and Governance Committee considers diversity of experience and diversity of perspective.
For stockholders who wish to nominate
a candidate for election to our Board (as opposed to only recommending a candidate for consideration by the Nominating and Governance Committee as described above), see the procedures discussed in Additional Meeting Matters below.
Policies and Procedures for Communications to
Non-Employee
or Independent Directors
In cases where stockholders or interested parties wish to communicate directly with our
non-employee
or
independent directors, messages may be sent to our General Counsel, at generalcounsel@dolby.com, or to Dolby Laboratories, Inc., 1275 Market Street, San Francisco, California 94103, Attn: General Counsel. Our General Counsel monitors these
communications and will provide a summary of all received messages to our Board at each regularly scheduled meeting of our Board, or if appropriate, solely to the
non-employee
or independent directors at each
regularly scheduled executive session of
non-employee
or independent directors. Where the nature of a communication warrants, our General Counsel may obtain the more immediate attention of the appropriate
committee of our Board, of
non-employee
or independent directors, of independent advisors or of Dolby management, as our General Counsel considers appropriate. Our General Counsel may decide in the exercise of
his judgment whether a response to any stockholder or interested party communication is necessary.
Attendance at Annual Meeting of Stockholders
We encourage our directors to attend our Annual Meetings of Stockholders, and all of the members of our Board attended the 2017 Annual
Meeting.
Code of Business Conduct and Ethics
Our Board has adopted a Code of Business Conduct and Ethics, which is applicable to all of our directors and our employees, including our
principal executive officer, principal financial officer, principal accounting
20
officer or controller and persons performing similar functions. The Code of Business Conduct and Ethics is available on the Corporate Governance section of the Investors page of our website at
http://investor.dolby.com/corporate-governance.cfm. We will post any amendments or waivers to the Code of Business Conduct and Ethics that are required to be disclosed by the rules of the SEC or NYSE on this website.
Corporate Governance Guidelines
Our
Board has adopted Corporate Governance Guidelines that contain the general framework for the governance of the company. Among other things, our Corporate Governance Guidelines address:
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The size and composition of our Board and its committees;
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New director orientation and continuing education;
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Board and committee authority to retain independent advisors;
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Board meetings and process;
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Evaluation of our CEO and succession planning;
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Corporate business principles and policies applicable to our Board; and
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Communications by Board members with outside constituencies.
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The Nominating and Governance
Committee will periodically review the guidelines and report any recommended changes to our Board. The Corporate Governance Guidelines are available on the Corporate Governance section of the Investors page of our website at
http://investor.dolby.com/corporate-governance.cfm
.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Nicholas Donatiello, Jr., Roger Siboni and Avadis Tevanian, Jr. None of our executive
officers has served as a member of the board of directors or compensation committee (or other committee serving an equivalent function) of any entity that has one or more executive officers serving as a member of our Board or Compensation Committee.
Rule
10b5-1
Trading Plans
Certain of our directors and executive officers have adopted, and in the future may adopt, written trading plans that meet the requirements of
Rule
10b5-1
of the Securities Exchange Act of 1934. Rule
10b5-1
allows persons who may be considered insiders of an issuer to adopt
pre-arranged
written plans for trading specified amounts of stock. Rule
10b5-1
trading plans establish predetermined trading parameters that, among other things, do not
permit the person adopting the trading plan to exercise subsequent influence over how, when or whether to effect trades. Once a Rule
10b5-1
trading plan has been properly adopted, trades may be executed
pursuant to the terms of the trading plan at times when the person would otherwise be restricted from trading (e.g., during a closed window). Rule
10b5-1
trading plans are designed to allow
individuals to purchase or sell shares in an orderly fashion for asset diversification, liquidity, tax planning and other purposes when they might otherwise be restricted from doing so due to material,
non-public
information that they might possess at the time of the purchase or sale.
Under our
policies, directors and executive officers may enter into a new Rule
10b5-1
trading plan or amend an existing trading plan only during an open window and only if they are not in possession of any
material
non-public
information concerning Dolby at the time. In addition, trades pursuant to a new or amended Rule
21
10b5-1
trading plan may not be made until the date of the opening of the next quarterly trading window following the date of entry into, or amendment of,
such trading plan. Each Rule
10b5-1
trading plan generally must remain in effect for at least one year following its adoption and must automatically terminate within two years from the adoption date. Rule
10b5-1
trading plan terms do not generally restrict directors or executive officers from making trades outside of the trading plans, provided that any such trades occur during open windows and are
otherwise subject to our insider trading policy requirements.
Sale transactions by our directors and executive officers under Rule
10b5-1
trading plans will be disclosed publicly through filings with the SEC to the extent required. We do not undertake any obligation to report Rule
10b5-1
trading plans
that may be adopted by any of our directors or executive officers, or to report any modifications or terminations of any publicly announced plan, except to the extent required by law.
In fiscal 2017, Dagmar Dolby, as Trustee of various Dolby family trusts, adopted Rule
10b5-1
trading
plans. Sales under these trading plans were completed in August 2017, and an aggregate of 1,200,000 shares were sold under these plans in fiscal 2017.
22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of our Common Stock beneficially owned by: (i) each person who is known by
us to own beneficially more than 5% of either our Class A Common Stock or Class B Common Stock; (ii) each of our directors; (iii) each of our NEOs; and (iv) all of our directors and executive officers as a group. The
information provided in the table is as of November 24, 2017, and is based on our records, information filed with the SEC, and information furnished by the respective individuals or entities, as the case may be.
Applicable percentage ownership is based on 59,773,020 shares of our Class A Common Stock and 42,873,597 shares of our Class B
Common Stock outstanding as of November 24, 2017. In computing the number of shares of Common Stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding: (i) shares of Common Stock subject to
stock options held by that person that were exercisable on or are exercisable within 60 days of November 24, 2017; and (ii) shares of Common Stock subject to restricted stock unit awards held by that person that are subject to vest within
60 days of November 24, 2017.
Unless otherwise indicated below, the address of each beneficial owner listed in the table is c/o
Dolby Laboratories, Inc., 1275 Market Street, San Francisco, California 94103.
We have determined beneficial ownership in accordance with
the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information available or furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all
shares of Common Stock that they beneficially own, subject to applicable community property laws.
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Shares Beneficially Owned
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% Total
Voting Power
(2)
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Class A Common
Stock
(1)
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Class B Common
Stock
(1)
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Name of Beneficial Owner
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Shares
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%
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Shares
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%
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5% Stockholders:
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Ray Dolby 2002 Trust A, dated April 19,
2002
(3)
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160,592
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*
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*
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Ray Dolby 2002 Trust B, dated April 19,
2002
(4)
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463,262
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1.1
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%
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*
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Dolby Holdings II LLC
(5)
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1,040,000
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2.4
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%
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2.1
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%
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Marital Trust under the Dolby Family Trust Instrument dated May 7, 1999
(6)
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24,932,162
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58.2
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%
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51.0
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%
|
Dagmar Dolby Trust under the Dolby Family Trust Instrument dated May 7, 1999
(7)
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11,526,194
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26.9
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%
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23.6
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%
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Dagmar Dolby 2016 Trust BB, dated March 23,
2016
(8)
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2,712,400
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6.3
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%
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5.6
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%
|
Dagmar Dolby 2017 Trust BB, dated May 25,
2017
(9)
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1,937,600
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4.5
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%
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4.0
|
%
|
Dagmar Dolby
(10)
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1,692,789
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2.8
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%
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42,772,210
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99.8
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%
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87.9
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%
|
Thomas E. Dolby
(11)
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680,592
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1.6
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%
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1.4
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%
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Clearbridge Investments, LLC
(12)
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|
6,092,022
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10.2
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%
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1.2
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%
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The Vanguard Group
(13)
|
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4,262,285
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|
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7.1
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%
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*
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|
Directors and Named Executive Officers:
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Kevin Yeaman
(14)
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|
1,299,918
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|
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2.1
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%
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*
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Lewis Chew
(15)
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494,102
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|
|
*
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|
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*
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Andy Sherman
(16)
|
|
|
312,480
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|
|
|
*
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|
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*
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Robert Borchers
(17)
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|
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156,989
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|
|
|
*
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|
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|
|
|
|
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*
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|
Steven Forshay
(18)
|
|
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179,073
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
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*
|
|
Micheline Chau
|
|
|
41,366
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
David Dolby
(19)
|
|
|
57,202
|
|
|
|
*
|
|
|
|
42,091,618
|
|
|
|
98.2
|
%
|
|
|
86.2
|
%
|
Nicholas Donatiello, Jr.
(20)
|
|
|
18,295
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Peter Gotcher
(21)
|
|
|
74,384
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
N. William Jasper, Jr.
(22)
|
|
|
90,527
|
|
|
|
*
|
|
|
|
10,000
|
|
|
|
*
|
|
|
|
*
|
|
Simon Segars
|
|
|
15,334
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Roger Siboni
|
|
|
15,334
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Avadis Tevanian, Jr.
(23)
|
|
|
42,174
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
All executive officers and directors as a group (13 persons)
(24)
|
|
|
2,797,178
|
|
|
|
4.5
|
%
|
|
|
42,101,618
|
|
|
|
98.2
|
%
|
|
|
86.8
|
%
|
23
(1)
|
Each holder of Class B Common Stock is entitled to ten votes per share of Class B Common Stock and each holder of Class A Common Stock is entitled to one vote per share of Class A Common Stock on all
matters submitted to our stockholders for a vote. The Class A Common Stock and Class B Common Stock vote together as a single class on all matters submitted to a vote of our stockholders, except as may otherwise be required by law. The
Class B Common Stock is convertible at any time by the holder into shares of Class A Common Stock on a
one-for-one
share basis. The Class A Common Stock
beneficial ownership percentages shown in the Class A Common Stock column of this table are calculated based on the number of shares of Class A Common Stock that are outstanding and beneficially owned by each beneficial owner
as of November 24, 2017, and do not reflect the conversion of any shares of Class B Common Stock beneficially owned by such beneficial owner as of such date.
|
(2)
|
Percentage total voting power represents voting power with respect to all shares of our Class A Common Stock and Class B Common Stock, as a single class.
|
(3)
|
Consists of 160,592 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Ray Dolby 2002 Trust A, dated April 19, 2002 (the Ray Dolby 2002 Trust A). Thomas E. Dolby,
Dagmar Dolbys son, is the Special Trustee of the Ray Dolby 2002 Trust A. Dagmar Dolby has sole dispositive power over the shares held of record by the Ray Dolby 2002 Trust A, and Thomas E. Dolby has sole power to direct the voting of the
shares held of record by the Ray Dolby 2002 Trust A. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Ray Dolby 2002 Trust A into shares of Class A Common Stock, such converted shares would represent
beneficial ownership of less than one percent of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and Thomas E. Dolby disclaim beneficial ownership of these securities except to the extent of their
respective pecuniary interests therein.
|
(4)
|
Consists of 463,262 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Ray Dolby 2002 Trust B, dated April 19, 2002 (the Ray Dolby 2002 Trust B). David Dolby, Dagmar
Dolbys son, is the Special Trustee of the Ray Dolby 2002 Trust B. Dagmar Dolby has sole dispositive power over the shares held of record by the Ray Dolby 2002 Trust B, and David Dolby has sole power to direct the voting of the shares held of
record by the Ray Dolby 2002 Trust B. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Ray Dolby 2002 Trust B into shares of Class A Common Stock, such converted shares would represent beneficial
ownership of less than one percent of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and David Dolby disclaim beneficial ownership of these securities except to the extent of their respective pecuniary
interests therein.
|
(5)
|
Consists of 1,040,000 shares of Class B Common Stock held of record by Dolby Holdings II LLC (Dolby Holdings). Dagmar Dolby has sole dispositive power over the shares held of record by Dolby Holdings as
the Manager of Dolby Holdings. Each of Thomas E. Dolby and David Dolby has sole power to direct the voting of 50% of the shares held of record by Dolby Holdings, as Special Managers of Dolby Holdings. Assuming conversion of the shares of
Class B Common Stock beneficially owned by Dolby Holdings into shares of Class A Common Stock, such converted shares would represent beneficial ownership of 1.7% of the outstanding shares of Class A Common Stock as of
November 24, 2017. Dagmar Dolby, Thomas E. Dolby, and David Dolby disclaim beneficial ownership of these securities except to the extent of their respective pecuniary interests therein.
|
(6)
|
Consists of 24,932,162 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Marital Trust under the Dolby Family Trust Instrument dated May 7, 1999 (the Marital Trust).
David Dolby is the Special Trustee of the Marital Trust. Dagmar Dolby has sole dispositive power over the shares held of record by the Marital Trust, and Dagmar Dolby and David Dolby have shared voting power over the shares held of record by the
Marital Trust, with voting decisions requiring the unanimous vote of the Trustee and the Special Trustee. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Marital Trust into shares of Class A Common
Stock, such converted shares would represent beneficial ownership of 29.4% of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and David Dolby disclaim beneficial ownership of these securities except to
the extent of their respective pecuniary interests therein.
|
24
(7)
|
Consists of 11,526,194 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Dagmar Dolby Trust under the Dolby Family Trust Instrument dated May 7, 1999 (the Dagmar Dolby
Trust). David Dolby is the Special Trustee of the Dagmar Dolby Trust. Dagmar Dolby has sole dispositive power over the shares held of record by the Dagmar Dolby Trust, and Dagmar Dolby and David Dolby have shared voting power over the shares
held of record by the Dagmar Dolby Trust, with voting decisions requiring the unanimous vote of the Trustee and the Special Trustee. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Dagmar Dolby Trust into
shares of Class A Common Stock, such converted shares would represent beneficial ownership of 16.2% of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and David Dolby disclaim beneficial ownership
of these securities except to the extent of their respective pecuniary interests therein.
|
(8)
|
Consists of 2,712,400 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Dagmar Dolby 2016 Trust BB, dated March 23, 2016 (the Dagmar Dolby 2016 Trust BB). David Dolby
is the Special Trustee of the Dagmar Dolby 2016 Trust BB. Dagmar Dolby has sole dispositive power over the shares held of record by the Dagmar Dolby 2016 Trust BB, and David Dolby has sole power to direct the voting of the shares held of record by
the Dagmar Dolby 2016 Trust BB. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Dagmar Dolby 2016 Trust BB into shares of Class A Common Stock, such converted shares would represent beneficial ownership
of 4.3% of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and David Dolby disclaim beneficial ownership of these securities except to the extent of their respective pecuniary interests therein.
|
(9)
|
Consists of 1,937,600 shares of Class B Common Stock held of record by Dagmar Dolby, as Trustee of the Dagmar Dolby 2017 Trust BB, dated May 25, 2017 (the Dagmar Dolby 2017 Trust BB). David Dolby
is the Special Trustee of the Dagmar Dolby 2017 Trust BB. Dagmar Dolby has sole dispositive power over the shares held of record by the Dagmar Dolby 2017 Trust BB, and David Dolby has sole power to direct the voting of the shares held of record by
the Dagmar Dolby 2017 Trust BB. Assuming conversion of the shares of Class B Common Stock beneficially owned by the Dagmar Dolby 2017 Trust BB into shares of Class A Common Stock, such converted shares would represent beneficial ownership
of 3.1% of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby and David Dolby disclaim beneficial ownership of these securities except to the extent of their respective pecuniary interests therein.
|
(10)
|
Consists of (i) the shares described in Notes 3 through 9, which descriptions are incorporated herein by reference, plus (ii) 816,789 shares of Class A Common Stock held of record by the Ray and Dagmar Dolby
Family Fund, a California nonprofit public benefit corporation and a private foundation within the meaning of section 509(a) of the Internal Revenue Code (the Dolby Family Fund), plus (iii) 876,000 shares of Class A Common Stock
held of record by the Dagmar Dolby Fund, a California nonprofit public benefit corporation (the Dagmar Dolby Fund). Dagmar Dolby is the President and sole director of, and has sole dispositive and voting power over the shares held of
record by, the Dolby Family Fund. Dagmar Dolby, as one of three directors of the Dagmar Dolby Fund, has shared voting and dispositive power over all shares of Class A Common Stock held of record by the Dagmar Dolby Fund, with voting and
disposition decisions requiring the majority vote of the Dagmar Dolby Funds board of directors. All shares beneficially owned by Dagmar Dolby collectively represent 87.9% of the total voting power of the Class A Common Stock and
Class B Common Stock, and the shares over which Dagmar Dolby has sole or shared voting power collectively represent 75% of the total voting power of the Class A Common Stock and Class B Common Stock. Assuming conversion of the shares
of Class B Common Stock beneficially owned by Dagmar Dolby into shares of Class A Common Stock, such converted shares, together with the other shares of Class A Common Stock beneficially owned by Dagmar Dolby, would represent
beneficial ownership of 43.4% of the outstanding shares of Class A Common Stock as of November 24, 2017. Dagmar Dolby disclaims beneficial ownership of these securities except to the extent of her pecuniary interest therein.
|
(11)
|
Consists of all of the shares described in Note 3 and 50% of the shares described in Note 5, which descriptions
are incorporated herein by reference. Assuming conversion of the shares of Class B Common Stock beneficially owned by Thomas E. Dolby into shares of Class A Common Stock, such converted shares would represent beneficial ownership of 1.1%
of the outstanding shares of Class A Common Stock as of
|
25
|
November 24, 2017. Thomas E. Dolby disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein.
|
(12)
|
Based on a Schedule 13G/A filed with the SEC on March 10, 2017, wherein Clearbridge Investments, LLC (Clearbridge) reported beneficial ownership of 6,092,022 shares of Class A Common Stock.
Clearbridge reported sole dispositive power as to all of the shares and sole voting power as to 5,864,858 of the shares. The address for Clearbridge is 620 8
th
Avenue, New York, New York 10018.
|
(13)
|
Based on a Schedule 13G/A filed with the SEC on February 9, 2017, wherein The Vanguard Group (Vanguard) reported beneficial ownership of 4,262,285 shares of Class A Common Stock. Vanguard reported
sole dispositive power as to 4,227,005 of the shares, shared dispositive power as to 35,280 of the shares, sole voting power as to 32,334 of the shares, and shared voting power as to 5,552 of the shares. The address for Vanguard is 100 Vanguard
Blvd., Malvern, Pennsylvania 19355.
|
(14)
|
Shares held in the name of Kevin and Rachel Yeaman, Trustees of the Yeaman Family Trust dated May 14, 2009 (the Yeaman Trust). Includes stock options held in the name of the Yeaman Trust to purchase
1,173,600 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017. Includes 48,423 shares of Class A Common Stock subject to restricted stock unit awards that vest within 60 days of November 24,
2017.
|
(15)
|
Includes stock options held by Mr. Chew to purchase 435,736 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017. Includes 16,346 shares of Class A Common Stock
subject to restricted stock unit awards that vest within 60 days of November 24, 2017.
|
(16)
|
Includes stock options held by Mr. Sherman to purchase 285,057 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017. Includes 12,859 shares of Class A Common Stock
subject to restricted stock unit awards that vest within 60 days of November 24, 2017.
|
(17)
|
Includes stock options held by Mr. Borchers to purchase 125,787 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017. Includes 21,849 shares of Class A Common Stock
subject to restricted stock unit awards that vest within 60 days of November 24, 2017.
|
(18)
|
Includes stock options held by Mr. Forshay to purchase 134,818 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017. Includes 8,644 shares of Class A Common Stock
subject to restricted stock unit awards that vest within 60 days of November 24, 2017.
|
(19)
|
Consists of (i) 55,917 shares of Class A Common Stock held of record by David Dolby, plus (ii) stock options held of record by David Dolby to purchase up to 1,285 shares of Class A Common Stock that were
exercisable on or are exercisable within 60 days of November 24, 2017, plus (iii) all of the shares described in Notes 4, 6, 7, 8 and 9, which descriptions are incorporated herein by reference, plus (iv) 50% of the shares described in Note 5,
which description is incorporated herein by reference. Assuming conversion of the shares of Class B Common Stock beneficially owned by David Dolby into shares of Class A Common Stock, such converted shares, together with the other shares
of Class A Common Stock beneficially owned by David Dolby, would represent beneficial ownership of 41.4% of the outstanding shares of Class A Common Stock as of November 24, 2017. David Dolby disclaims beneficial ownership of the
securities referenced in clauses (iii) and (iv) except to the extent of his pecuniary interest therein.
|
(20)
|
Shares held in the name of Nicholas Donatiello, Jr. as Trustee of the Nicholas Donatiello, Jr. Trust u/a/d April 22, 2011.
|
(21)
|
Includes stock options held by Mr. Gotcher to purchase 32,401 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017.
|
(22)
|
Shares held in the name of N. William Jasper, Jr. as Trustee of the N. William Jasper, Jr. 2004 Trust. Includes stock options held by Mr. Jasper to purchase 83,527 shares of Class A Common Stock that are
exercisable within 60 days of November 24, 2017. Assuming conversion of the shares of Class B Common Stock beneficially owned by Mr. Jasper into shares of Class A Common Stock, such converted shares, together with the other
shares of Class A Common Stock beneficially owned by Mr. Jasper, would represent beneficial ownership of less than one percent of the outstanding shares of Class A Common Stock as of November 24, 2017.
|
(23)
|
Shares held in the name of Avadis Tevanian, Jr. and Nancy Tevanian Trust u/a/d 5/29/96.
|
26
(24)
|
Includes (i) stock options held by all executive officers and directors to purchase an aggregate of 2,272,211 shares of Class A Common Stock that are exercisable within 60 days of November 24, 2017 and
(ii) 108,121 shares of Class A Common Stock subject to restricted stock unit awards held by all executive officers and directors that vest within 60 days of November 24, 2017.
|
27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review, Approval or Ratification of Related Person Transactions
Our Board has adopted a written Related Person Transactions Policy. Pursuant to this policy, any related person transaction proposed or entered
into by Dolby must be reviewed, approved or ratified by the Audit Committee in accordance with the terms of the policy. A related person transaction is a transaction between Dolby and a related person in which the aggregate amount
involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of the policy, a related person is any person who is or was an executive officer,
director or nominee for director at any time since the beginning of the last fiscal year and such persons immediate family members, or a greater than 5% beneficial owner of any class of our voting securities at the time of the occurrence or
existence of the transaction and such owners immediate family members.
Any related person transaction proposed or entered into by
Dolby that does not fall into a specified exclusion under the policy must be reported to Dolbys General Counsel, and the Audit Committee will review, approve or ratify such transactions in accordance with the terms of the policy. In the course
of its review and approval or ratification of a related person transaction, the Audit Committee considers:
|
|
|
The approximate dollar value of the amount involved in the transaction;
|
|
|
|
The related persons interest in the transaction and the approximate dollar value of such interest without regard to any profit or loss;
|
|
|
|
Whether the transaction was undertaken in the ordinary course of business of the company;
|
|
|
|
Whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to Dolby than terms that could have been reached with an unrelated third party;
|
|
|
|
The purpose of, and the potential benefits to Dolby of, the transaction; and
|
|
|
|
Any other information regarding the transaction or the related person in the context of the transaction that would be material to investors in light of the circumstances of the particular transaction.
|
In addition, the use of certain theatres of the company by the immediate family members of Ray Dolby, to the extent that it may constitute a
related person transaction, is deemed to be
pre-approved
under the terms of the policy.
Since
October 1, 2016, we have not been a party to any related person transactions, other than the transactions described below.
Real Estate Transactions
Lease for 100 Potrero Avenue
Since 1980, we have leased approximately 70,000 square feet of office space located at 100 Potrero Avenue, San Francisco, California from
several Dolby family trusts. We also lease additional parking and warehouse space from these Dolby family trusts in connection with our lease of 100 Potrero Avenue. The leases expire on October 31, 2024 and provide us an option to renew for two
additional five year terms at a rate equal to the rent that the landlord could obtain for the applicable option term from a third party desiring to lease the premises for the option term, as determined by the landlord and agreed to by us.
Our rent expense for these facilities was $2.8 million in fiscal 2017 and the estimated rent expense over the remaining life of the
leases for these facilities is $53.3 million, assuming that we exercise our option to renew the leases for two additional five year terms beyond their October 31, 2024 expiration and assuming a rental rate equal to the rate applicable to
the month in which the leases are to expire (October 2024) (the actual rental rate
28
during the option terms is not known at this time and may be materially different from the rate used in our assumptions). The Dolby family trusts, as landlord, retain the right to sublease
approximately 1,099 square feet of office space in the premises with prior notice to us, at a rental rate equal to the then current base rent per square foot paid by us plus $14 per square foot per year (reflecting estimated costs payable by the us
for the operation and maintenance of the premises, subject to an annual increase of 1.5% per year during each year of the sublease term). We are generally responsible for operating expenses, taxes, and the condition, operation, repair, maintenance,
security and management of the premises. We have also agreed to indemnify and hold the Dolby family trusts, as landlord, harmless from and against certain liabilities, damages, claims, costs, penalties and expenses arising from our conduct related
to the premises.
Jointly-Owned Real Estate Entities
As of the end of fiscal 2017, the Dagmar Dolby Trust or Dolby Wootton Bassett, LLC (DWB), of which the Dagmar Dolby Trust is the
sole member, own a majority financial interest in four real estate entities that owned or leased commercial real property to us in fiscal 2017. We own the remaining financial interests in these real estate entities. The following table sets forth,
as of the end of fiscal 2017, for each of the four real estate entities, the entity that owns the majority financial interest in the real estate entity, the percentage interest owned, and the location of the property.
|
|
|
|
|
|
|
|
|
Real Estate Entity
|
|
Majority Owner
|
|
Majority
Ownership
Interest
|
|
|
Location of Property
|
Dolby Properties Burbank, LLC
|
|
Dagmar Dolby Trust
|
|
|
51
|
%
|
|
Burbank, California
|
Dolby Properties Brisbane, LLC
|
|
Dagmar Dolby Trust
|
|
|
51
|
%
|
|
Brisbane, California
|
Dolby Properties UK, LLC
|
|
Dagmar Dolby Trust
|
|
|
51
|
%
|
|
Wootton Bassett, England
|
Dolby Properties, LP
|
|
DWB
|
|
|
90
|
%
|
|
Wootton Bassett, England
|
Our expense recorded for rents payable to such entities was $1.3 million in fiscal 2017 and the estimated
rent expense over the remaining life of the various leases for these facilities is approximately $12.6 million, assuming the exercise of our two five-year renewal options for our offices at 3601 W. Alameda Avenue in Burbank, California (for
these purposes, assuming a rental rate equal to the rate applicable to the month in which the lease is scheduled to expire; the actual rental rate during any option term is not known at this time and may be materially different from the rate used in
our assumptions). A summary of activity in fiscal 2017 with respect to properties owned by these jointly-owned real estate entities is set forth below.
Dolby Properties UK, LLC
In November, 2016, Dolby Properties UK, LLC, a limited liability company jointly owned by the Dagmar Dolby Trust and us, as described above,
completed the sale of a plot of land it owned located in Wootton Bassett, England, to an unaffiliated third party for £700,000. 51% of the net proceeds from the sale of the property inured to the Dagmar Dolby Trust and the remainder to us.
When we negotiate new terms for any lease agreement with the Dolby family or any of the jointly-owned real estate entities, we engage
real estate brokers to provide fair market rent and lease terms based on a summary of comparable properties located in the area of the subject property. The brokers are instructed that the transaction is intended to be completed on an
arms-length
basis. We believe that all of our leases were entered into on a reasonable fair market basis.
Academy Museum Donations
In June 2014, we agreed to donate cinema products and related services to the Museum of the Academy of Motion Picture Arts and Sciences (the
Academy Museum) having a retail value of approximately $7 million, in exchange for promotional benefits over a 15 year period, including our exclusive appointment as the audio/video
29
sponsor of the Academy Museum theaters, public recognition of our donation, access to Academy Museum space for events, invitations to certain events, board membership at the Academy Foundation,
Academy Museum membership rights, and other benefits. Contemporaneously, the Dolby family agreed to donate $5 million in cash and/or marketable securities to the Academy Museum over time based on achievement of certain key project milestones,
in exchange for certain naming rights, public recognition of the Dolby familys donation, an installation at the Academy Museum dedicated to portraying Ray Dolbys story, invitations to certain events, board membership at the Academy
Foundation, Academy Museum membership rights, and other benefits.
Other Arrangements with the Dolby Family
In the past, we have allowed members of the Dolby family to use our office facilities for their personal purposes on a limited basis, and we
expect this use to continue in the future. For example, members of the Dolby family are allowed to use our conference and screening rooms for personal purposes up to ten times per year. Our Board has approved of these arrangements.
30
COMPENSATION DISCUSSION AND ANALYSIS
The discussion below is intended to:
|
|
|
Explain our fiscal 2017 executive compensation program and philosophy to assist you in evaluating the compensation of our NEOs; and
|
|
|
|
Review how the Compensation Committee of our Board of Directors (for purposes of this Compensation Discussion and Analysis, the Committee) made its executive compensation decisions for fiscal 2017.
|
Named Executive Officers
Our NEOs are the individuals whose compensation is set forth in the Summary Compensation Table and accompanying tables. For fiscal 2017, our
NEOs were:
|
|
|
Kevin Yeaman, our President and Chief Executive Officer;
|
|
|
|
Lewis Chew, our Executive Vice President and Chief Financial Officer;
|
|
|
|
Andy Sherman, our Executive Vice President, General Counsel and Corporate Secretary;
|
|
|
|
Robert Borchers, our Senior Vice President and Chief Marketing Officer; and
|
|
|
|
Steven Forshay, our Senior Vice President, Advanced Technology Group.
|
On November 13,
2017, Mr. Borchers notified us of his resignation as our Senior Vice President and Chief Marketing Officer, effective December 18, 2017.
Fiscal 2017 Financial and Operational Highlights
Business Overview
We create audio and imaging technologies that transform entertainment and communications at the cinema, at home, at work, and on mobile
devices. Founded in 1965, our strengths stem from expertise in analog and digital signal processing and digital compression technologies that have transformed the ability of artists to convey entertainment experiences to their audiences through
recorded media. Such technologies led to the development of our noise-reduction systems for analog tape recordings and have since evolved into multiple offerings that enable more immersive sound for cinema, digital television transmissions and
devices,
over-the-top
(OTT) video services, digital versatile disc (DVD) and
Blu-ray
discs, gaming consoles, and mobile devices.
Today, we derive the majority of our revenue from licensing our audio technologies. We also derive revenue from licensing our consumer imaging and communications technologies, as well as audio and imaging technologies for premium cinema offerings in
collaboration with exhibitors. Finally, we provide products and services for a variety of applications in the cinema, broadcast, and communications markets.
Key Financial Highlights
Our key financial highlights for fiscal 2017 were as follows:
|
|
|
|
|
|
|
|
|
Fiscal 2017
|
|
Fiscal 2016
|
|
Percentage
Change
|
Total Revenue
|
|
$1,081.5 million
|
|
$1,025.7 million
|
|
5.4%
|
Net Income
|
|
$201.8 million
|
|
$185.9 million
|
|
8.6%
|
Diluted Earnings Per Share
|
|
$1.95
|
|
$1.81
|
|
7.7%
|
Non-GAAP
Net Income*
|
|
$269.7 million
|
|
$249.0 million
|
|
8.3%
|
Non-GAAP
Diluted Earnings Per Share*
|
|
$2.61
|
|
$2.43
|
|
7.4%
|
Stock Price Per Share (High and Low)
|
|
$59.79 / $44.99
|
|
$54.68 / $30.38
|
|
|
Stock Price Per Share as of Fiscal
Year-End
|
|
$57.52
|
|
$54.29
|
|
5.9%
|
*
|
A reconciliation of our
non-GAAP
to GAAP financial results is set forth in Appendix A to this Proxy Statement.
|
31
Return of Capital to Stockholders
In fiscal 2017, we returned $157.1 million to stockholders, $100.0 million of which was in the form of stock repurchases and
$57.1 million of which was in the form of dividends.
Beginning with the introduction of our stock repurchase program in fiscal 2010
and through the end of fiscal 2017, we have returned cash of over $1.7 billion to our stockholders through stock repurchases, our quarterly dividend program, and our fiscal 2013 special dividend.
In October 2017, we announced a 14.3% increase in the per share dividend amount under our quarterly dividend program, from $0.14 to $0.16.
Key Business Highlights
In fiscal 2017, we continued to focus on expanding our leadership position in audio solutions for entertainment content, as well as delivering
dynamic new audio and imaging technologies.
Expanding our Leadership Position in Audio Solutions Audio Licensing, Products and
Services
The following are select highlights of our audio solutions for fiscal 2017:
|
|
|
Broadcast
.
We saw the introduction of new ultra-high definition (UHD) products that incorporate our leading audio technologies, including Dolby
Atmos
®
and our next-generation digital audio coding technology,
AC-4.
For example, the first Dolby Atmos TVs started shipping from LG, and both Samsung
and LG started shipping TVs with
AC-4.
Along with these new product introductions, the availability of content in Dolby formats continued to grow in streaming and live broadcast. Dolby Atmos became available
through OTT providers including Netflix, Tencent, and iQiYi. BT delivered an entire season of Premier League soccer matches in Dolby Atmos; France Television delivered the French Open in Dolby Atmos,
AC-4,
and
Dolby Vision
TM
; and Sky Sports launched its live 4K services in Dolby Atmos. In addition, we had several live broadcast trials with Dolby Vision and Dolby Atmos in the U.K., France, Spain, and
Brazil.
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Consumer Electronics
.
The number of Dolby Atmos-enabled soundbars available from partners including LG, Sony, and Samsung grew from four to thirteen during fiscal 2017. Orange, the largest telecom provider
in France, launched its Dolby Atmos service and is offering a Dolby Atmos soundbar to its subscribers. In addition, Amazon announced the new Fire TV with Dolby Atmos. These hardware offerings can be paired with a growing array of Dolby-enabled
content via OTT services and
Blu-ray
discs.
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Mobile
. Dolby Digital Plus
TM
(DD+) is incorporated in Apples iOS, and we continued to focus on adoption of our technologies across other major mobile
ecosystems, including Android, Windows, and Amazon, to facilitate delivery and enhanced consumption of Dolby-enabled content from a multitude of streaming services. In addition, our High Efficiency Advanced Audio Coding
(HE-AAC)
technology is a de facto audio standard across mobile devices. Dolby Atmos is currently featured on a number of mobile devices from partners including Amazon, Lenovo, and ZTE.
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Personal Computers
.
Lenovo, Huawei, and Xiaomi launched personal computers that feature Dolby Atmos. We also partnered with Huawei on the system design to help create a more immersive audio experience.
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Other Audio
.
Microsoft launched HDMI support for Dolby Atmos on Windows and Xbox One, which enables
playback on downstream Atmos devices such as soundbars and audio-video receivers. In addition, we launched Dolby Atmos for Headphones, which allows a user to enable Dolby Atmos on their headphones by purchasing an app on the Microsoft app store.
Original equipment manufacturers (OEMs) can also
pre-purchase
and bundle Dolby Atmos for Headphones into their offerings. For
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32
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example, Plantronics released its RIG 800LX gaming headset that included a prepaid voucher to download Dolby Atmos for Headphones on Windows and Xbox.
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Products and Services
.
As of the end of fiscal 2017, there were approximately 3,200 Dolby Atmos-enabled screens installed or committed to be installed, and approximately 780 Dolby Atmos theatrical titles
announced or released. We also introduced our most recent cinema products, which include the IMS3000, an integrated imaging and audio server with Dolby Atmos, the Dolby Multichannel Amplifier, and our
3-Axis
speaker. These products allowed us to offer a more complete Dolby Atmos offering that can also provide exhibitors with a more cost effective solution than what was previously available to them.
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Expanding into New Audio and Visual Experiences
Our new growth initiatives include imaging solutions (comprised of Dolby Vision and our new patent licensing initiatives related to
consumer imaging), Dolby Cinema, and Dolby Voice
®
. The following are select highlights of our new growth initiatives for fiscal 2017:
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Imaging Licensing
.
We saw the expansion of the ecosystem of products featuring Dolby Vision technologies. Apple announced that the iPhone X, iPhone 8, 2017 iPad Pro lineup, and Apple TV 4K will all support
Dolby Vision. In addition, iTunes now has over 100 movies available in Dolby Vision content, and Netflix is streaming in Dolby Vision to these devices. We also significantly expanded the availability of Dolby Vision TVs with leading OEMs including
LG, Vizio, Sony, and TCL. Beyond TVs, Huawei (a leading global
set-top
box provider) recently announced the inclusion of Dolby Vision in its flagship Internet Protocol TV
set-top
box. Additional devices that support Dolby Vision that were released during fiscal 2017 include UHD
Blu-ray
players by Phillips, Oppo, and LG.
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The availability of entertainment content in Dolby Vision continued to grow. Lionsgate, Sony, Warner Bros., and Paramount have
all released
Blu-ray
titles in Dolby Vision and Dolby Atmos. Furthermore, Disney released its first titles in Dolby Vision and Dolby Atmos for the home. There are movie titles and original TV content available
in Dolby Vision through our OTT streaming partners, which include Netflix, iTunes, Amazon, Vudu, Tencent, and iQiYi.
We
also expanded our new patent licensing initiatives related to our HEVC (High Efficiency Video Coding) and AVC (Advanced Video Coding) consumer imaging technologies and experienced increased growth primarily in the mobile and broadcast markets.
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Dolby Cinema
.
We expanded our Dolby Cinema footprint by adding exhibitor partnerships with CGV and Huayi Brothers in Asia, Reel Cinemas in the Middle East, and Les cinémas Gaumont Pathé in
France and the Netherlands. These new partners join a growing list of exhibitors who feature Dolby Cinema, including AMC in the U.S., Wanda and Jackie Chan Cinema in China, Cineplexx in Austria, and Vue in the Netherlands. In total, 112 Dolby Cinema
locations were operational as of the end of fiscal 2017 compared to 37 at the start of fiscal 2017, and we have over 360 Dolby Cinema locations open or committed around the world. In addition, in fiscal 2017, 46 theatrical titles with Dolby Vision
and Dolby Atmos were released, bringing the total number of titles announced or released to date to over 120, with participation from every major studio.
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Dolby Voice
.
BlueJeans, a leading video meetings platform, most recently launched BlueJeans Room with Dolby Voice. Earlier in fiscal 2017, West, a leading global audio conferencing services provider, added
Dolby Voice to its suite of offerings. By adding these new partners in fiscal 2017, we continued to expand Dolby Voices availability to the global market for audio and video conferencing services.
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The Committee took these accomplishments into consideration in making its executive compensation determinations for fiscal 2017.
33
Fiscal 2017 Executive Compensation Highlights
In fiscal 2017, the Committee took the following actions with respect to the compensation of our NEOs:
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Base Salary
.
The Committee increased our CEOs base salary by 7% and all other NEO base salaries by 3% for calendar 2017. These increases were consistent with merit-based increases for our U.S.
workforce, which were based on competitive merit increase survey data for technology companies. The increase in our CEOs base salary was also intended to better align his target total cash compensation with market practice relative to our
compensation peer group.
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Annual Incentive Compensation.
With respect to our annual incentive compensation plan for our executive officers, the 2017 Dolby Executive Annual Incentive Plan (the 2017 Executive Bonus Plan):
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The Committee approved annual incentive compensation targets for our NEOsstated as a percentage of base salary for calendar 2017at the same levels as in fiscal 2016 (100% for our CEO and 65% for each of our
other NEOs).
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The Committee approved annual incentive compensation payments at 106% of the annual incentive compensation targets for our NEOs other than Messrs. Sherman and Forshay, and at 132.5% of the annual incentive compensation
targets for Messrs. Sherman and Forshay, based on team and individual performance and achievement of a combination of revenue and
non-GAAP
operating income targets under the 2017 Executive Bonus Plan, as
described below.
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Long-Term Incentive Compensation
. The Committee approved the grant of performance-based stock options, time-based stock options, and restricted stock unit awards for each NEO, as reflected in the Grants of
Plan-Based Awards in Fiscal 2017 table in Executive Compensation Tables and Related Matters.
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Reinforcing our Business
Strategy through an Emphasis on Incentive Compensation
The principal elements of the target total direct compensation opportunity of
our executive officers are: long-term incentive compensation in the form of performance-based stock options, time-based stock options, and restricted stock unit awards; annual incentive compensation consisting of a cash bonus opportunity; and base
salary. These principal elements are further described below.
34
The Committee allocated a substantial portion of the target total direct compensation opportunity
of our NEOs to incentive compensation in fiscal 2017, the vast majority of which consists of long-term incentive compensation. The graphs below illustrate this emphasis on long-term incentive compensation in the target total direct compensation
opportunities of our NEOs. The majority of this long-term incentive compensation is tied to equity vehicles the value of which is driven wholly by stock price appreciation, and the realization of which is conditioned upon the satisfaction of
multi-year vesting requirements or the achievement of
pre-established
performance conditions. Because the value our NEOs could realize from their equity awards depends on the performance of our stock price,
changes in our stock price will impact the value of their equity awards, and correspondingly, the total compensation realizable by, our NEOs. This design squarely aligns the interests of our NEOs with those of our stockholders and focuses their
efforts on the successful execution of our business strategy.
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*
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The long-term incentive compensation percentage is based on the grant date fair value of the underlying equity awards (at target, in the case of performance-based stock options), computed in accordance with ASC Topic
718, and does not represent the compensation actually realized or currently realizable by our NEOs from such awards.
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Consideration of
Advisory Vote to Approve Named Executive Officer Compensation; Stockholder Engagement
At our 2017 Annual Meeting of Stockholders, we
conducted a
non-binding,
advisory vote of our stockholders to approve the compensation of our NEOs (a
Say-on-Pay
vote). At that meeting, approximately 99% of the voting power of the shares present and entitled to vote on the proposal voted to approve the compensation of our NEOs.
On an annual basis, members of our senior management contact our largest stockholders in advance of our Annual Meeting of Stockholders to
solicit their views on various governance matters, including our executive compensation policies and practices. Management reports this feedback to the Committee, which then considers it, as well as the results of our
Say-on-Pay
votes and other factors, in assessing its overall approach to executive compensation. Consistent with this feedback and as a result of its ongoing efforts to
enhance the effectiveness of our executive compensation program, in fiscal 2016, for example, the Committee added performance-based stock options to our long-term incentive compensation program and adopted a compensation recovery
(clawback) policy for executive officers.
The Committee will continue to carefully consider the results of our
Say-on-Pay
votes as well as stockholder feedback in overseeing our executive compensation program.
35
Roles of the Compensation Committee, Management and Compensation Consultant
Role of the Compensation Committee
The Committee approves and oversees the compensation program for our executive officers, including base salaries and annual and long-term
incentive compensation programs. In discharging these duties, the Committee determines these elements of compensation for our CEO, and, with the input of our CEO, determines these elements for our other executive officers. In addition, the Committee
oversees the equity incentive plans for our broad-based employee population and reviews equity grant guidelines for these employees on an annual basis.
The Committee routinely meets throughout the fiscal year in the ordinary discharge of its duties, including to determine the compensation for
our executive officers. The Committee also regularly meets in executive session without management present.
Role of Management
Our CEO and members of our Human Resources, Legal and Finance Departments (collectively, Management) assist and
support the Committee. At least annually, Management reviews our executive compensation philosophy with the Committee and, at the Committees direction, develops compensation proposals for Committee consideration. The Committee considers and
approves any proposed changes to ensure that our compensation philosophy and programs remain aligned with our business objectives and support our efforts to attract and retain key talent in a competitive environment. In this regard, Management
assesses a market review of peer company executive compensation levels and practices (Market Comparables) and provides the Committee with executive compensation information, including: historical base salary and annual incentive
compensation payouts; fiscal
year-end
levels of equity ownership; equity award holdings; unrealized value calculations of vested and unvested equity awards at various stock prices; grant date fair values of
equity award holdings (as computed for financial reporting purposes); and other relevant information.
At least annually, our CEO reviews
with the Committee the performance of our other executive officers and recommends to the Committee base salary adjustments, annual incentive compensation targets, and long-term incentive compensation awards for each of these individuals. He also
uses these individual performance assessments to make recommendations for annual incentive compensation payouts under the prior fiscal years annual incentive compensation plan. The Committee makes decisions with respect to our CEOs
compensation without him present and after considering input from our Chairman of the Board, the Chairman of the Committee, other members of our Board, and our CEOs direct reports.
Role of Compensation Consultant
The Committee engages independent advisors to assist it in carrying out its responsibilities. During fiscal 2017, the Committee engaged
Compensia, Inc. for the purpose of advising the Committee on executive compensation matters. Compensia also advised the Committee on certain matters related to our compensation programs for broad-based employees, including our equity utilization,
participation and grant guidelines relative to market practices.
The Committee provided Compensia with instructions regarding the goals
of our executive compensation program and the parameters of the competitive review of executive officer compensation packages that it was to conduct. In particular, the Committee instructed Compensia to analyze whether the compensation packages of
our executive officers were consistent with our compensation philosophy and competitive relative to the Market Comparables. The Committee further instructed Compensia to evaluate the following elements to assist the Committee in establishing fiscal
2017 compensation:
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Target and actual annual incentive compensation;
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Target and actual total cash compensation (base salary and annual incentive compensation);
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36
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Long-term incentive compensation (equity awards);
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Target and actual total direct compensation (base salary, annual incentive compensation and long-term incentive compensation); and
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Beneficial ownership of our Common Stock.
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Accordingly, Compensia performed a comparison of
the compensation for each of our executive officers against the compensation of executives with similar positions within the Market Comparables and presented its report to the Committee. In November 2016, the Committee used the analysis in the
course of its deliberations and determinations of executive compensation for fiscal 2017.
Representatives from Compensia attend most
meetings of the Committee and communicate with members of the Committee and Management outside the formal Committee meetings from time to time.
During fiscal 2017, Compensia also performed services for us relating to equity use, amendment of our 2005 Stock Plan, proxy statement
support, and general Committee meeting support. In addition, Compensia assisted the Nominating and Governance Committee on its review of the compensation of our
non-employee
directors. Compensia received
compensation for these services. Based on an assessment of the factors set forth in the NYSE listing standards and the SECs rules and regulations, and taking into account the provision of these services, the Committee does not believe that its
relationship with Compensia and the work of Compensia on behalf of the Committee has raised any conflict of interest.
Use of Market Data for
Competitive Positioning
The Committee does not benchmark compensation of our executive officers against the Market Comparables or pay
practices of our compensation peer group. The Committee uses the Market Comparables and the pay practices of our compensation peer group only as a point of reference when setting compensation levels for each of our executive officers.
To assist it in analyzing our executive compensation program for fiscal 2017, the Committee directed Compensia to review and recommend
potential changes to our compensation peer group and, thereafter, compile and analyze the executive compensation data for the companies in the peer group. Compensia also compiled and analyzed executive compensation data in published
industry-specific compensation surveys and prepared a report for the Committee on the competitive positioning of our executive compensation program.
As part of this process, the Committee instructed Compensia that, for a company to be considered as a potential compensation peer group
candidate, the company must operate in one of several designated industries (consumer electronics, technology IP licensing, entertainment technology, or software) and
have a market capitalization within the range of approximately 0.25
times to four times our
mid-calendar
year market capitalization. Once an initial group of companies that met these industry and market capitalization thresholds had been identified, with Compensias
input, the Committee evaluated them using the following additional selection criteria relative to the same criteria for Dolby:
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Market capitalization as a multiple of revenue;
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Market capitalization per employee;
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The Committee considered potential new additions only if they met at
least three of the five selection criteria above. In its evaluation, the Committee also considered whether the potential compensation peer group
37
candidates were direct competitors for executive talent, either because of their geographic proximity to us, prior recruitment history, or employment of individuals with unique skills or
expertise that are comparable to the unique skills or expertise that are either required or desirable in our business.
Using these
selection criteria, the Committee determined to add Netsuite Inc. and PTC Inc. to, and remove Informatica Corporation (due to its acquisition) from, our compensation peer group for fiscal 2017. Accordingly, our compensation peer group in fiscal 2017
comprised the following 16 companies:
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Akamai Technologies Inc.
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Cadence Design Systems, Inc.
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CommVault Systems, Inc.
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DreamWorks Animation SKG, Inc. (subsequently acquired, in August 2016)
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Netsuite Inc. (subsequently acquired, in November 2016)
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As discussed above, while the Committee uses the Market Comparables as a point
of reference when setting compensation levels for each of our executive officers, the Committee does not benchmark compensation of our executive officers against the Market Comparables or pay practices of our compensation peer group. Instead, the
Committee uses the Market Comparables as a market check to identify situations where an executive officers compensation may be an outliersubstantially below the 50
th
percentile or
substantially above the 75
th
percentile.
The Committee has carefully considered its
compensation peer group selection methodology and has consistently applied this methodology over time. However, given the unique nature of our business, selection of our peer group requires the Committee to use its judgment, in addition to the
objective criteria contained in our peer group selection methodology. The Committee from time to time considers alternative peer group selection methodologies and has determined that our current peer group selection methodology continues to be the
most appropriate methodology for us.
Overview of Executive Compensation Program
Objectives
The
objectives of our executive compensation program are to:
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Provide a competitive compensation package that enables us to attract, motivate, and retain high-caliber talent;
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38
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Provide a total compensation package, aligned with the nature and dynamics of our business, which focuses management on achieving our annual and long-term corporate objectives and strategies;
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Reward both individual and collective contributions to Dolbys success consistent with our
pay-for-performance
orientation; and
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Emphasize long-term value creation and further align the interests of management and stockholders through the use of equity-based awards.
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Consistent with these objectives, our pay positioning strategy emphasizes the total direct compensation opportunity provided to our executive
officers and places less weight on the discrete positioning of individual compensation elements. In addition, when evaluating total direct compensation, the Committee considers, as a point of reference only, compensation trends reflected by the
companies in our compensation peer group (as described above) and companies with which we compete for talent. Individual elements of compensation are designed to create incentives that are consistent with our business needs and strategic objectives.
Executive Compensation Policies
In discharging its responsibilities relating to executive compensation, the Committee, with the assistance of its compensation consultant,
monitors trends and developments in compensation policies and practices and seeks to enhance the effectiveness of our executive compensation program on an ongoing basis. As a result, our executive compensation program includes:
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Pay-for-Performance.
An effective
pay-for-performance
orientation, including the use of long-term incentive compensation, consisting of performance-based stock options, time-based stock options, and
restricted stock unit awards, which together represent the largest portion of each executive officers total compensation package;
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No
Gross-Ups
.
A practice of not providing golden parachute excise tax
gross-ups
for our executive officers;
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Double-Trigger Vesting
. Double-trigger vesting acceleration arrangements in connection with a change in control of Dolby (that is, accelerated vesting that is triggered only upon certain specified
terminations of employment following a change in control of Dolby) for equity awards granted to our executive officers, which are generally consistent with the arrangements provided to our broad-based employees as described in Severance
and Change in Control ArrangementsGeneral below;
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Limited Perquisites
.
A practice of providing our executive officers with only limited perquisites or other personal benefits that are both customary in the industry in which we operate and in furtherance
of accomplishing our business objectives;
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Compensation Survey Data
.
The use of compensation survey data, as well as publicly-available data about the compensation practices of our peers, to inform the design of our executive compensation program;
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Stock Ownership Guidelines
.
Stock ownership guidelines for our executive officers that require them to hold a minimum number of qualifying Dolby equity securities;
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Clawback Policy
.
A compensation recovery (clawback) policy that is applicable to our executive officers and provides for the recovery of certain cash or equity-based incentive compensation
payments or awards made or granted to an executive officer in the event of misconduct that results in the need for Dolby to prepare a material financial restatement;
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No Short Selling, Pledging or Hedging.
A general prohibition against short sales, pledging of stock, hedging of stock ownership positions and transactions involving derivative securities relating to shares of our
Common Stock; and
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39
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Annual Compensation Risk Assessment
.
An annual risk assessment with respect to our compensation programs and policies, including the programs and policies for
non-executive
officer employees, as described in Executive Compensation Tables and Related MattersCompensation Program Risk Assessment.
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Fiscal 2017 Compensation Determinations
Committee Considerations
The Committee considered a variety of factors in determining the compensation for our executive officers for fiscal 2017. These factors
included:
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An
evaluation of Dolbys financial and operational performance, including progress against our business strategy;
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An evaluation of the executive officers current scope of responsibility and contribution to Dolbys success, including a review of his or her achievement of strategic business objectives;
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An assessment of the executive officers potential to make future contributions to Dolby, including a review of his or her skills, experience, and past performance;
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A review of retention considerations, including the current and potential value of unvested equity awards held by the executive officer;
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A review of internal pay equity, including an analysis of how an executive officers target compensation compares to other executive officers;
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A review of the Market Comparables;
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The recommendation of our CEO with respect to his direct reports; and
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With respect to our CEO, an assessment of his performance that includes feedback from our Chairman of the Board, the Chairman of the Compensation Committee, other members of our Board, and our CEOs direct reports.
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Our CEO applied a similar list of factors when formulating compensation recommendations for his direct reports (he did not
participate in recommending or setting his own compensation). The Committee members and our CEO may have weighed these factors differently depending on the compensation element.
Base Salary
The
Committee makes base salary adjustments, if any, on a calendar year (as opposed to a fiscal year) basis. Consequently, the fiscal 2017 base salary information reported in the Summary Compensation Table reflects a blend of calendar 2016 and calendar
2017 base salaries.
In November 2016, following its review of our executive compensation program objectives for fiscal 2017, the
Committee assessed the base salaries of our executive officers in light of the factors described in Committee Considerations above. As a result of this assessment, the Committee approved an increase of 7% in the base salary of our
CEO and an increase of 3% in the base salary of each of our other NEOs for calendar 2017. These base salary increases were consistent with merit-based increases for our U.S. workforce, which members of our Human Resources Department established
based on competitive merit increase survey data for technology companies. The increase in our CEOs base salary was also intended to better align his target total cash compensation with market practice relative to our compensation peer group.
40
The annualized base salaries of our NEOs for calendar 2016 and 2017 are set forth below:
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Executive Officer
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2016 Base
Salary
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2017 Base
Salary
|
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Change
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Kevin Yeaman
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$
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716,000
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$
|
766,000
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7
|
%
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Lewis Chew
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$
|
490,000
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$
|
505,000
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3
|
%
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Andy Sherman
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$
|
441,000
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$
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454,000
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3
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%
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Robert Borchers
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$
|
424,000
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$
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437,000
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3
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%
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Steven Forshay
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$
|
417,000
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$
|
430,000
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3
|
%
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Annual Incentive Compensation
Our annual incentive compensation plan consists of performance-based compensation, which is paid in cash, and in certain cases, in the form of
restricted stock unit awards, as described in Annual Incentive CompensationForm of Payment below. Payouts under the plan are contingent on Dolbys financial performance, which ensures that our executive officers are
rewarded only to the extent that we achieve the financial objectives established under our annual operating plan.
Fiscal 2017
Executive Bonus Plan Structure
The purpose of our 2017 Executive Bonus Plan was to motivate our executive officers to achieve
specified annual financial (revenue and
non-GAAP
operating income) targets and to maintain a high level of team and individual performance.
We calculated the potential payouts under the 2017 Executive Bonus Plan for our executive officers using the following formulas, the terms of
which are described further below:
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Chief Executive Officer:
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Calendar
Year-
End 2017 Base Salary
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X
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Annual Incentive Target Percentage
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X
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Multiplier
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Subject to Downward Adjustment
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=
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Payout
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Other Executive Officers:
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Calendar Year- End 2017 Base Salary
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X
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Annual Incentive Target Percentage
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X
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Multiplier
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Subject to
Upward or Downward Adjustment
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=
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Payout
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Annual Incentive Compensation Targets
For fiscal 2017, after considering the factors described in Committee Considerations above, the Committee maintained the
NEOs fiscal 2017 annual incentive compensation targets (stated as a percentage of base salary for calendar 2017) at the same levels that were used for our fiscal 2016 annual incentive compensation plan.
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Executive Officer
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Target
Percentage of
Calendar
2017 Base
Salary
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Fiscal 2017 Annual Incentive
Compensation Target
|
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Kevin Yeaman
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100
|
%
|
|
$
|
766,000
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Lewis Chew
|
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|
65
|
%
|
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$
|
328,250
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Andy Sherman
|
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|
65
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%
|
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$
|
295,100
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Robert Borchers
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65
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%
|
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$
|
284,050
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Steven Forshay
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|
65
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%
|
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$
|
279,500
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41
An executive officer may receive an actual award payout that is larger or smaller than his annual
incentive compensation target, or may receive no award payout at all, depending on the extent to which the relevant corporate performance objectives were met and subject to any discretionary adjustments based on individual performance as described
further below.
Multiplier
In September 2016, the Committee approved a sliding scale corporate financial performance formula for determining payout levels for the 2017
Executive Bonus Plan based on our achievement of a combination of revenue and
non-GAAP
operating income targets (the multiplier). The revenue and
non-GAAP
operating income targets underlying the multiplier were consistent with our fiscal 2017 financial performance objectives. In approving these targets for fiscal 2017, the Committee set goals aimed at motivating our executive officers to achieve
strong financial, team and individual performance.
Our 2017 Executive Bonus Plan was based on revenue and profitability measures because
the Committee believed that solid performance in these areas would contribute to long-term stockholder value creation. No payouts would be made under the 2017 Executive Bonus Plan unless we achieved revenue and
non-GAAP
operating income levels as set forth in the table below, which represented 90% of the revenue and
non-GAAP
operating income target objectives under our fiscal
2017 operating plan. The maximum multiplier was 200%. For purposes of determining the multiplier,
non-GAAP
operating income was calculated by excluding expenses related to stock based compensation,
expense associated with dividend equivalents paid on restricted stock unit awards, the amortization of intangibles from business combinations, restructuring charges and the related tax impact of these items.
For fiscal 2017, we achieved revenue of $1.08 billion (representing year-over-year revenue growth of
5.4%) against a revenue gate requirement of $972 million. We also achieved
non-GAAP
operating income of $339.4 million against a threshold requirement of $294.3 million and a target
of $327 million, resulting in a multiplier of 106%. A reconciliation of our
non-GAAP
to GAAP financial results is set forth in Appendix A to this Proxy Statement.
42
Annual Incentive Compensation Form of Payment
The Committee structured the 2017 Executive Bonus Plan so that if our fiscal 2017 financial performance resulted in a multiplier equal to or
greater than 150%, then up to 125% of each executive officers annual incentive compensation award payout would be paid in cash, with any excess of 125% being paid in the form of a restricted stock unit award for shares of our Class A
Common Stock. All shares subject to any such restricted stock unit award would vest on the first anniversary of the date of grant, subject to the executive officers continued service with Dolby. Since the multiplier for fiscal 2017 was less
than 150%, no restricted stock unit awards were granted pursuant to the 2017 Executive Bonus Plan.
Potential Adjustments for
Individual Performance and Actual 2017 Executive Bonus Plan Payouts
For fiscal 2017, our CEO received 106% of his annual incentive
compensation target, based on a multiplier of 106%. The Committee had the discretion to reduce (but not increase) the calculated award payout amount for our CEO under the 2017 Executive Bonus Plan to take into account additional factors that the
Committee deemed relevant to the assessment of individual or corporate performance. In November 2017, the Committee, based on its evaluation of our CEOs performance and his contributions during the fiscal year, made no such adjustment. In
making this determination, the Committee considered our successful completion of several operational and strategic objectives for the fiscal year, including progress in expanding our leadership position in audio solutions for entertainment content,
as well as delivering new audio and imaging technologies, as described in Fiscal 2017 Financial and Operational HighlightsKey Business Highlights above.
For each of our other NEOs, our CEO had the discretion under the 2017 Executive Bonus Plan to recommend, subject to Committee approval and the
limitations set forth in the 2017 Executive Bonus Plan, increases or decreases of each such NEOs calculated award payout amount. In November 2017, the Committee, in consultation with our CEO, approved no adjustments to the calculated award
payout amounts of our NEOs (other than Messrs. Sherman and Forshay), resulting in payments at 106% of their annual incentive compensation targets. With respect to Messrs. Sherman and Forshay, the Committee, in consultation with our CEO, approved a
25% upward adjustment to each of their calculated award payout amounts, resulting in a payment at 132.5% of their annual incentive compensation targets. In making these determinations, our CEO and the Committee evaluated our executive officers
team and individual performance and their contributions during the fiscal year. Our CEO and the Committee also considered our successful completion of several operational and strategic objectives for the fiscal year, including progress in expanding
our leadership position in audio solutions for entertainment content, as well as delivering new audio and imaging technologies, as described in Fiscal 2017 Financial and Operational HighlightsKey Business Highlights above. With
respect to Mr. Shermans payout, our CEO and the Committee also considered Mr. Shermans leadership of the companys patent licensing businesses and intellectual property protection activities, and their contribution to the
companys operating results. With respect to Mr. Forshays payout, our CEO and the Committee also considered Mr. Forshays leadership in overseeing our Advanced Technology Groups function and its key initiatives in
fiscal 2017.
Accordingly, the Committee awarded the following annual incentive compensation payouts to our NEOs under the 2017 Executive
Bonus Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
Annual Incentive
Compensation Target
|
|
|
Fiscal 2017
Multiplier
|
|
|
Approved
Award Payout
|
|
|
Award Payout as Percentage
of Annual Incentive
Compensation Target
|
|
Kevin Yeaman
|
|
|
$766,000
|
|
|
|
106
|
%
|
|
$
|
811,960
|
|
|
|
106
|
%
|
Lewis Chew
|
|
|
$328,250
|
|
|
|
106
|
%
|
|
$
|
347,945
|
|
|
|
106
|
%
|
Andy Sherman
|
|
|
$295,100
|
|
|
|
106
|
%
|
|
$
|
391,008
|
|
|
|
132.5
|
%
|
Robert Borchers
|
|
|
$284,050
|
|
|
|
106
|
%
|
|
$
|
301,093
|
|
|
|
106
|
%
|
Steven Forshay
|
|
|
$279,500
|
|
|
|
106
|
%
|
|
$
|
370,338
|
|
|
|
132.5
|
%
|
43
Long-Term Incentive Compensation
The objectives of our long-term incentive compensation program are to: encourage our executive officers to focus on our long-term strategic
objectives; further align the interests of our executive officers and our stockholders; provide compensation that is market competitive; recruit, motivate, and retain top talent; and make efficient use of compensation resources.
Performance-Based Stock Options
The Committee periodically reviews the design of our long-term incentive compensation program to ensure that it continues to further the
objectives described above. In fiscal 2016, the Committee introduced performance-based stock options into our long-term incentive compensation program for our executive officers. These performance-based stock options have a seven-year term. For
fiscal 2017, the shares of our Class A Common Stock subject to such awards will be earned (if at all) on a cliff basis after a three-year performance period, contingent on both continued service and our achievement of the following annualized
total stockholder return levels for Dolby, measured at the end of such period:
|
|
|
|
|
|
|
|
|
|
|
3-Year
Annualized
Dolby TSR
|
|
|
% of
Shares
Earned*
|
|
|
|
|
<5
|
%
|
|
|
0
|
%
|
Threshold
|
|
|
5
|
%
|
|
|
50
|
%
|
Target
|
|
|
15
|
%
|
|
|
100
|
%
|
Maximum
|
|
|
³
25
|
%
|
|
|
125
|
%
|
*
|
Linear scaling between performance levels.
|
In establishing these three-year annualized total
stockholder return performance levels, the Committee, with the assistance of Compensia, reviewed the historical stock price performance of three comparator groups: the NASDAQ 100, the S&P 400 Information Technology Index and Dolbys
compensation peer group. These performance levels were intended to approximate the average annualized three-year total stockholder return levels for these three comparator groups as a whole over a three-year period, at the 25
th
(for threshold performance), the 50
th
(for target performance) and the 75
th
(for maximum
performance) percentiles.
As with time-based stock options, which are inherently performance-based because they require stock price
appreciation above the exercise price to create economic value, the Committee determined that granting a portion of long-term incentive compensation in the form of awards that are earned upon the achievement of specific performance conditions
further aligns the interests of our executive officers with those of our stockholders. In addition, our executive officers cannot realize any value from their performance-based stock options without sustained stock price growth over the
three-year performance period.
44
Equity Mix of Awards
We use a portfolio approach for the long-term incentive compensation granted to our executive officers, consisting of a combination
of performance-based stock options, time-based stock options, and restricted stock unit awards. The graph below illustrates how the Committee allocated the long-term incentive compensation granted to our NEOs among these equity vehicles in fiscal
2017, based on the aggregate grant date fair value of the awards granted to our NEOs.
Our long-term incentive compensation program was weighted more heavily towards stock options because the
Committee believes that these vehicles, which directly tie a significant portion of our executive officers target total direct compensation opportunity to increases in the market price of our Class A Common Stock, present an effective
incentive for them to make long-term decisions that sustain stock price growth and to maximize performance over the term of the award, which is generally a maximum of ten years for time-based stock options and seven years for performance-based stock
options. Because stock options provide real economic value only if the price of the underlying stock increases, our executive officers realize little to no benefit from their outstanding stock options if our stock price declines or stays flat.
Furthermore, the earning of shares subject to our performance-based stock options requires sustained stock price growth over a three-year performance period in order to achieve the
pre-established
annualized
total stockholder return levels for Dolby set by the Committee. If the market price of our Class A Common Stock does not grow or is not sustained during the performance period above the threshold level set by the Committee, no shares will be
earned under the performance-based stock options and our executive officers will not realize any value from these awards.
Restricted
stock unit awards also align the interests of our executive officers with those of our stockholders by rewarding our executive officers for increases in our stock price. Unlike stock options, however, restricted stock unit awards have real economic
value when they vest even if the stock price declines or stays flat, thus delivering more predictable value to our executive officers and furthering our retention objectives over the vesting term of the awards. In addition, because of their
full value nature, restricted stock unit awards deliver the desired grant date fair value using a lesser number of shares than we would otherwise use for stock option grants, enabling us to use our equity compensation resources more
efficiently and manage the overall number of shares granted and potential resulting dilution.
In short, we believe that providing a
portfolio of performance-based stock options, time-based stock options, and restricted stock unit awards supports the objectives of our long-term incentive compensation program by further aligning the interests of our executive officers and
stockholders, balancing performance and retention considerations, and enabling us to use our equity compensation resources more efficiently.
Award Terms
Generally,
we make an initial equity award to an executive officer when he or she joins us. Thereafter, our executive officers are eligible for additional equity awards on an annual basis. The Committee determines the size of each executive officers
equity award based on the factors described in Committee Considerations above.
45
One of the objectives of our long-term incentive compensation program is to encourage executive
officer retention by requiring that the awards be earned over a multi-year period. Accordingly, in fiscal 2017, we granted time-based stock options and restricted stock unit awards that vest over a period of four years, as well as performance-based
stock options that are subject to a three-year performance period, as follows:
|
|
|
For time-based stock options, a quarter of the total number of shares of our Class A Common Stock subject to each stock option vests on the first anniversary of the grant date and the balance of the shares subject
to the stock option vests in equal monthly installments over the next 36 months;
|
|
|
|
For restricted stock unit awards, a quarter of the total number of shares of our Class A Common Stock subject to each award vests on each of the first four anniversaries of the grant date; and
|
|
|
|
For performance-based stock options, shares of our Class A Common Stock subject to each stock option will be earned contingent on our achievement of
pre-established
annualized total stockholder return levels for Dolby measured over a three-year performance period beginning on the date of grant and ending on the third anniversary thereof. Settlement of the number of shares earned (if any) will occur following
completion of the performance period, upon certification of achievement of the performance conditions by the Committee. From 0% to 125% of the shares subject to the stock option may be earned, depending on our achievement of these performance
conditions.
|
In fiscal 2017, after considering the factors described in Committee Considerations above,
the Committee approved the following stock options and restricted stock unit awards for our NEOs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEOs
|
|
Grant Date
|
|
|
Shares
Subject to
Time-Based
Stock Options
|
|
|
Shares Subject to
Performance-
Based Stock
Options
(at Target)
|
|
|
Per Share
Exercise
Price
|
|
|
Shares
Subject to
Restricted Stock
Unit Awards
|
|
Kevin Yeaman
|
|
|
12/15/2016
|
|
|
|
194,399
|
|
|
|
97,199
|
|
|
$
|
45.50
|
|
|
|
46,551
|
|
Lewis Chew
|
|
|
12/15/2016
|
|
|
|
56,000
|
|
|
|
28,000
|
|
|
$
|
45.50
|
|
|
|
14,000
|
|
Andy Sherman
|
|
|
12/15/2016
|
|
|
|
52,000
|
|
|
|
26,000
|
|
|
$
|
45.50
|
|
|
|
13,000
|
|
Robert Borchers
|
|
|
12/15/2016
|
|
|
|
46,000
|
|
|
|
23,000
|
|
|
$
|
45.50
|
|
|
|
11,500
|
|
Steven Forshay
|
|
|
12/15/2016
|
|
|
|
40,000
|
|
|
|
20,000
|
|
|
$
|
45.50
|
|
|
|
10,000
|
|
All stock options were granted with a
per-share
exercise price equal
to the fair market value of our Class A Common Stock on the grant date.
Equity-Based Award Grant and Vesting Policy
The Committee has adopted an Equity-Based Award Grant and Vesting Policy (the Equity Policy), which applies to all equity awards
granted to any of our employees, including our executive officers. The Equity Policy provides that:
|
|
|
New hire, promotion and retention equity awards may only be granted once per month on the 15th day of the month. If the 15th day of the month falls on a weekend or holiday, awards will be granted on the first business
day immediately following the 15th day of the month.
|
|
|
|
Ongoing equity awards (i.e., other than new hire, promotion and retention awards) may only be granted on December 15th. If December 15th falls on a weekend or holiday, awards will be granted on the first business day
immediately following December 15th.
|
|
|
|
If a pricing term is applicable to a particular equity award (e.g., the exercise price for a stock option), the pricing term will be established by reference to the fair market value of our Class A Common Stock on
the award date as determined in accordance with the applicable equity plan provisions.
|
|
|
|
Equity award approvals by meeting and by unanimous written consent may precede the award date so long as the approval is effective as of the respective award date. Approvals of equity-based awards may never occur after
the award date.
|
46
|
|
|
If the Committee adopts an executive annual incentive compensation plan that permits the Committee to grant restricted stock unit awards in lieu of cash, the timing of any such restricted stock unit award grants will be
determined by the Committee at the time it adopts the applicable executive annual incentive compensation plan. When determining the timing of such awards, the Committee will consider the principles embodied in the Equity Policy.
|
Restrictions on Trading Securities (Including Hedging and Pledging)
We maintain an insider trading policy that prohibits, among other things, short sales, hedging of stock ownership positions, and transactions
involving derivative securities relating to shares of our Common Stock. Our insider trading policy also generally prohibits pledging of Dolby stock.
Executive Stock Ownership Guidelines
In
September 2015, the Committee approved stock ownership guidelines for our executive officers, based on our belief that stock ownership further aligns the interests of our executive officers with those of our stockholders. These guidelines provide
that:
|
|
|
Our CEO is expected to accumulate and hold an amount of qualifying Dolby equity securities equal to the lesser of the value of five times his annual base salary, or a fixed number of shares having a value equal to five
times his annual base salary on the date of adoption of the guidelines (i.e., September 22, 2015); and
|
|
|
|
Each other executive officer is expected to accumulate and hold an amount of qualifying Dolby equity securities equal to the lesser of the value of two times his annual base salary, or a fixed number of shares having a
value equal to two times his annual base salary on the date of adoption of the guidelines.
|
Compliance is measured as of the
last day of each fiscal year, and our executive officers are expected to achieve the applicable level of ownership by the fifth anniversary of the adoption date of the guidelines (or with respect to future executive officers, within five years of
becoming an executive officer). As of the end of fiscal 2017, all of our executive officers were in compliance with our executive stock ownership guidelines.
Compensation Recovery (Clawback) Policy
In July 2016, the Committee adopted a policy on the recovery of incentive compensation. The policy allows us to recover certain cash or
equity-based incentive compensation payments or awards made or granted to an executive officer in the event he or she is involved in fraud or misconduct that results in the need for Dolby to prepare a material financial restatement. The policy
covers cash or equity-based compensation based on the attainment of company financial reporting measures (excluding stock price or total stockholder return). Recovery under the policy applies to incentive compensation subject to the policy that is
paid, awarded or granted during the three completed fiscal years immediately preceding the date on which we are required to prepare the restatement. In addition, no recovery can be made unless the executive officer would have received a lower
payment based upon the restated financial results.
Generally Available Benefits
In fiscal 2017, our executive officers were eligible to participate in our Employee Stock Purchase Plan and the health and welfare programs
that are generally available to our other full-time employees, including medical, dental and vision plans; flexible spending accounts for healthcare and dependent care; life, accidental death and dismemberment and disability insurance; and paid time
off.
We also maintain a
tax-qualified
Section 401(k) Plan, which is broadly available to our
U.S. general employee population. Under the Section 401(k) Plan, U.S. employees are eligible to receive matching contributions and profit-sharing contributions from Dolby, which together were capped at a maximum of up to $28,740 per
participating employee in calendar 2017.
47
Severance and Change in Control Arrangements
General
Our
employee stock plans contain double-trigger vesting acceleration provisions for outstanding and unvested equity awards that may be triggered by a termination of employment by Dolby without cause or an employee resignation
with good reason within 12 months following a change in control of Dolby. The vesting of outstanding and unvested equity awards also accelerates if an equity award is not assumed by the successor entity in connection with such a change
in control. These vesting acceleration provisions are intended to secure the continued dedication of our employees, including our executive officers, notwithstanding the possibility or occurrence of a change in control of Dolby.
We do not provide golden parachute excise tax
gross-ups
for our executive officers.
Severance Agreement with Mr. Yeaman
We have entered into a severance arrangement with our CEO as described under the section entitled Executive Compensation Tables and
Related MattersPotential Payments upon Termination or Change in Control. We negotiated this arrangement to induce him to resign from his former position and accept the position of CEO in fiscal 2009. This arrangement is intended to
provide him with certain payments and benefits in the event of an involuntary termination of his employment without cause or his resignation for good reason, including following a change in control of Dolby.
No Other Severance or Change in Control Arrangements
Apart from the arrangement with Mr. Yeaman and the double-trigger vesting acceleration provisions in our 2005 Stock Plan as
described above, none of our executive officers has any severance, change in control, or similar agreements or arrangements with Dolby.
Perquisites
and Other Personal Benefits
We provide our executive officers with only limited perquisites or other personal benefits that are both
customary in the industry in which we operate and are in furtherance of accomplishing our business objectives. For example, given our role in the entertainment industry, our executive officers may be asked to attend industry events, including film
festivals, film premieres, award shows, or other similar events, where the attendance of a spouse or significant other may be expected or customary. In those cases, we may pay for or reimburse the business travel and dining expenses of an executive
officers spouse or significant other (not to exceed $8,000 per executive officer in any single fiscal year). We believe that payment or reimbursement of these expenses serves a legitimate business purpose in, among other things, advancing our
brand and business relationships within the entertainment industry.
Employment Agreement with Mr. Yeaman
In connection with the appointment of Mr. Yeaman as our President and CEO in fiscal 2009, we entered into an employment agreement with
him, which provides that, among other things, his target annual incentive compensation will be at least equal to a specified minimum percentage of his annual base salary. The agreement also provides Mr. Yeaman with certain payments and benefits
in the event of his termination of employment under specified circumstances, including following a change in control of Dolby. For a summary of the material terms and conditions of these provisions, see Executive Compensation Tables and
Related MattersPotential Payments upon Termination or Change in Control.
Accounting and Tax Considerations
The Committee generally takes into consideration the accounting and tax treatment of each element of compensation when establishing the
compensation programs, practices and packages for our executive officers.
48
Accounting for Stock-Based Compensation
We examine the accounting cost associated with equity compensation in light of the requirements under ASC Topic 718. ASC Topic 718 requires
companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and restricted stock unit awards, based on the grant date fair value of the awards. This
calculation is performed for accounting purposes, even though recipients may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income
statements (net of estimated forfeitures, which are determined based on historical experience) over the period that a recipient is required to render service in exchange for the award.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the Code) imposes limitations on the deductibility for federal income tax
purposes of compensation over $1 million paid to certain executive officers in a taxable year. Compensation in excess of $1 million may only be deducted if it is performance-based compensation within the meaning of the Code or
satisfies the conditions of another applicable exemption.
The annual incentive compensation paid to our CEO is intended to qualify as
deductible performance-based compensation within the meaning of the Code. The annual incentive compensation paid to our other executive officers does not qualify as deductible performance-based compensation within the meaning
of the Code because the Committee has discretion to increase each such executive officers annual incentive compensation amount. In addition, any stock options granted to our NEOs are also intended to be performance-based
compensation since they are granted by the Committee, which is comprised solely of outside directors, and granted subject to limitations in our employee stock plans (including the requirement that they be granted with a per share
exercise price at least equal to the fair market value of a share of our Class A Common Stock on the date of grant).
Restricted
stock unit awards granted to our NEOs with time-based vesting do not qualify as performance-based compensation under the applicable requirements of Section 162(m). In fiscal 2017, the vesting of time-based restricted stock unit
awards, when combined with other compensation that was not performance-based compensation for purposes of Section 162(m), resulted in aggregate payments that were in excess of the Codes deduction limit for our CEO and two
other NEOs. We expect that, in future years, the vesting of time-based restricted stock unit awards granted to our NEOs, when combined with other compensation that is not performance-based compensation for purposes of the Code, may
result in aggregate payments that will be in excess of the Section 162(m) deduction limit.
When it determines it to be in the best
interests of Dolby and its stockholders, the Committee reserves the right to award incentive compensation to our executive officers that is not structured to qualify for an exemption of the deduction limit of Section 162(m). Further,
(i) we do not guarantee that any compensation intended to qualify as deductible performance-based compensation so qualifies, and (ii) legislation currently being considered in the U.S. Congress would eliminate the exception
under Section 162(m) for performance-based compensation and also somewhat expand the number of individuals subject to Section 162(m).
49
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement
into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent Dolby specifically incorporates this report by reference, and shall not otherwise be deemed filed under such Acts.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with
management and, based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Nicholas Donatiello, Jr., Chairman
Roger Siboni
Avadis Tevanian, Jr.
50
EXECUTIVE COMPENSATION TABLES AND RELATED MATTERS
Fiscal 2017 Summary Compensation Table
The Summary Compensation Table and accompanying footnotes describe the total compensation of our NEOs for the past three fiscal
years, calculated in accordance with SEC rules and regulations. The total compensation presented below does not reflect the actual compensation received by, or the target compensation of, our NEOs in each fiscal year. The actual value realized by
our NEOs in fiscal 2017 from long-term incentive compensation is presented in the Option Exercises and Stock Vested at 2017 Fiscal
Year-End
table below.
The individual elements of the total compensation amount reported in the Summary Compensation Table are as follows:
Base Salary
. For fiscal 2015 and fiscal 2017, the amounts reported represent 52 weeks of base salary. For fiscal 2016,
the amounts reported represent 53 weeks of base salary. Base salary adjustments are set on a calendar year (as opposed to a fiscal year) basis. Consequently, the amounts reported in the Summary Compensation Table represent a blend of calendar year
base salaries.
Bonus
. The figures reported for Mr. Sherman in each of fiscal 2015, fiscal 2016 and fiscal
2017, and for Mr. Forshay in fiscal 2017, represent the amounts by which their calculated award payouts (based solely on meeting the applicable performance measures) under the Executive Bonus Plan for such fiscal years were adjusted upwards at
the discretion of the Compensation Committee.
Stock Awards and Option Awards
. Stock Awards consist solely of
restricted stock unit awards, and Option Awards consist of time-based stock options and performance-based stock options. Amounts reported in the Stock Awards and Option Awards columns reflect the aggregate grant date fair value of the equity awards
computed in accordance with ASC Topic 718, excluding estimated forfeitures. See Note 7 to our consolidated financial statements in our 2017 Annual Report on Form 10-K for more information about the assumptions used to calculate the value of such
awards.
Non-Equity
Incentive Plan Compensation
. The amount of
Non-Equity
Incentive Plan Compensation consists of the Executive Bonus Plan awards earned for the fiscal year. Such awards are based on our financial performance during the fiscal year and are paid in the following
fiscal year.
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option
Awards
($)
(1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Kevin Yeaman
|
|
|
2017
|
|
|
|
753,500
|
|
|
|
|
|
|
|
2,118,071
|
|
|
|
3,208,486
|
|
|
|
811,960
|
|
|
|
29,265
|
(2)
|
|
|
6,921,282
|
|
President and Chief Executive Officer
|
|
|
2016
|
|
|
|
724,346
|
|
|
|
|
|
|
|
1,543,166
|
|
|
|
2,453,195
|
|
|
|
587,120
|
|
|
|
32,206
|
(2)
|
|
|
5,340,033
|
|
|
|
2015
|
|
|
|
690,265
|
|
|
|
|
|
|
|
2,000,762
|
|
|
|
3,104,009
|
|
|
|
688,608
|
|
|
|
30,125
|
(2)
|
|
|
6,513,769
|
|
|
|
|
|
|
|
|
|
|
Lewis Chew
|
|
|
2017
|
|
|
|
495,125
|
|
|
|
|
|
|
|
637,000
|
|
|
|
924,261
|
|
|
|
347,945
|
|
|
|
29,415
|
(3)
|
|
|
2,433,746
|
|
Executive Vice President and Chief Financial Officer
|
|
|
2016
|
|
|
|
495,532
|
|
|
|
|
|
|
|
538,688
|
|
|
|
820,261
|
|
|
|
261,170
|
|
|
|
30,082
|
(3)
|
|
|
2,145,733
|
|
|
|
2015
|
|
|
|
461,552
|
|
|
|
|
|
|
|
671,863
|
|
|
|
1,042,320
|
|
|
|
305,879
|
|
|
|
28,898
|
(3)
|
|
|
2,510,512
|
|
|
|
|
|
|
|
|
|
|
Andy Sherman
|
|
|
2017
|
|
|
|
450,750
|
|
|
|
78,202
|
|
|
|
591,500
|
|
|
|
858,242
|
|
|
|
312,806
|
|
|
|
29,636
|
(4)
|
|
|
2,321,136
|
|
Executive Vice President,
General Counsel and
Corporate Secretary
|
|
|
2016
|
|
|
|
445,949
|
|
|
|
58,763
|
|
|
|
414,375
|
|
|
|
630,970
|
|
|
|
235,053
|
|
|
|
29,162
|
(4)
|
|
|
1,814,272
|
|
|
|
2015
|
|
|
|
424,435
|
|
|
|
74,780
|
|
|
|
516,061
|
|
|
|
800,618
|
|
|
|
275,220
|
|
|
|
30,542
|
(4)
|
|
|
2,121,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Borchers
|
|
|
2017
|
|
|
|
433,750
|
|
|
|
|
|
|
|
523,250
|
|
|
|
759,215
|
|
|
|
301,093
|
|
|
|
30,740
|
(5)
|
|
|
2,048,048
|
|
Senior Vice President and
Chief Marketing Officer
|
|
|
2016
|
|
|
|
428,926
|
|
|
|
|
|
|
|
455,813
|
|
|
|
694,067
|
|
|
|
225,992
|
|
|
|
35,108
|
(5)
|
|
|
1,839,906
|
|
|
|
2015
|
|
|
|
408,741
|
|
|
|
|
|
|
|
584,227
|
|
|
|
906,364
|
|
|
|
265,016
|
|
|
|
29,059
|
(5)
|
|
|
2,193,407
|
|
|
|
|
|
|
|
|
|
|
Steven Forshay
|
|
|
2017
|
|
|
|
426,750
|
|
|
|
74,068
|
|
|
|
455,000
|
|
|
|
660,187
|
|
|
|
296,270
|
|
|
|
35,015
|
(6)
|
|
|
1,947,290
|
|
Senior Vice President,
Advanced Technology Group
|
|
|
2016
|
|
|
|
421,835
|
|
|
|
|
|
|
|
381,225
|
|
|
|
580,492
|
|
|
|
222,261
|
|
|
|
41,076
|
(6)
|
|
|
1,646,889
|
|
|
|
2015
|
|
|
|
396,192
|
|
|
|
|
|
|
|
470,241
|
|
|
|
652,840
|
|
|
|
243,552
|
|
|
|
60,354
|
(6)
|
|
|
1,823,179
|
|
(1)
|
The grant date fair value of restricted stock unit awards represents their intrinsic values on the date of grant, calculated for each restricted stock unit award by multiplying the number of shares of our Class A
Common Stock subject to such award by the closing price of our Class A Common Stock on the date of grant. The grant date fair value of time-based stock options was determined using the Black-Scholes option pricing model. The grant date fair
value of performance-based stock options was determined using a Monte Carlo simulation to determine the probability of achieving the underlying performance conditions and is reported in this Summary Compensation Table at target: $1,004,493,
$289,363, $268,694, $237,691 and $206,688 for fiscal 2017, and $815,500, $272,675, $209,750, $230,725 and $192,970 for fiscal 2016, for Messrs. Yeaman, Chew, Sherman, Borchers and Forshay, respectively. The grant date fair value of these
performance-based stock options at maximum performance is: $1,255,617, $361,704, $335,868, $297,114 and $258,360 for fiscal 2017, and $1,019,368, $340,844, $262,188, $288,406 and $241,213 for fiscal 2016 for Messrs. Yeaman, Chew, Sherman, Borchers
and Forshay, respectively. See Note 7 to our consolidated financial statements in our 2017 Annual Report on Form 10-K for more information about the assumptions used to calculate the value of such awards.
|
(2)
|
In fiscal 2017, comprised of $28,590 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2016, comprised of $31,531 in employer
profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2015, comprised of $29,450 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and
$675 in life insurance premiums.
|
(3)
|
In fiscal 2017, comprised of $28,740 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2016, comprised of $29,407 in employer
profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2015, comprised of $28,223 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and
$675 in life insurance premiums.
|
(4)
|
In fiscal 2017, comprised of $28,961 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2016, comprised of $28,487 in employer
profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2015, comprised of $29,867 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and
$675 in life insurance premiums.
|
(5)
|
In fiscal 2017, comprised of $30,065 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2016, comprised of $34,433 in employer
profit-sharing and matching 401(k) plan contributions under our retirement plan and $675 in life insurance premiums. In fiscal 2015, comprised of $28,384 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan and
$675 in life insurance premiums.
|
52
(6)
|
In fiscal 2017, comprised of $28,740 in employer profit-sharing and matching 401(k) plan contributions under our retirement plan, $675 in life insurance premiums, and $5,600 in dividend equivalents paid to
Mr. Forshay in fiscal 2017, which have not been previously reported. In fiscal 2016, comprised of $28,525 employer profit-sharing and matching 401(k) plan contributions under our retirement plan, $675 in life insurance premiums, and $11,876 in
dividend equivalents paid to Mr. Forshay in fiscal 2016, which have not been previously reported. In fiscal 2015, comprised of $30,935 employer profit-sharing and matching 401(k) plan contributions under our retirement plan, $675 in life
insurance premiums, and $28,744 in dividend equivalents paid to Mr. Forshay in fiscal 2015, which have not been previously reported.
|
Grants of Plan-Based Awards in Fiscal 2017
During fiscal 2017, we granted the following plan-based awards to our NEOs:
|
1.
|
Annual incentive compensation awards under the 2017 Executive Bonus Plan,
|
|
2.
|
Time-based stock options,
|
|
3.
|
Performance-based stock options, and
|
|
4.
|
Restricted stock unit awards.
|
Information with respect to each of these awards on a
grant-by-grant
basis is set forth in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts
Under
Non-Equity
Incentive
Plan Awards
(1)
|
|
|
Estimated Possible Payouts
Under Equity Incentive Plan
Awards
(2)
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
|
|
All Other
Option
Awards:
Number of
Securities
Subject to
Options
(#)
|
|
|
Exercise or
Base Price
of Option
Awards
($/Sh)
|
|
|
Grant
Date Fair
Value
of
Stock
and
Option
Awards
($)
(3)
|
|
Name
|
|
Grant
Date
|
|
|
Approval
Date
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#)
|
|
|
|
|
|
Kevin Yeaman
|
|
|
n/a
|
|
|
|
11/15/2016
|
|
|
|
383,000
|
|
|
|
766,000
|
|
|
|
1,532,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,399
|
(4)(5)
|
|
|
45.50
|
|
|
|
2,203,993
|
|
|
|
|
12/15/2016
|
|
|
|
11/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,599
|
(5)
|
|
|
97,199
|
(5)
|
|
|
121,498
|
(5)
|
|
|
|
|
|
|
|
|
|
|
45.50
|
|
|
|
1,004,493
|
|
|
|
|
12/15/2016
|
|
|
|
11/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,551
|
(6)
|
|
|
|
|
|
|
|
|
|
|
2,118,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis Chew
|
|
|
n/a
|
|
|
|
11/14/2016
|
|
|
|
164,125
|
|
|
|
328,250
|
|
|
|
656,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,000
|
(4)
|
|
|
45.50
|
|
|
|
634,898
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
28,000
|
|
|
|
35,000
|
|
|
|
|
|
|
|
|
|
|
|
45.50
|
|
|
|
289,363
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
637,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andy Sherman
|
|
|
n/a
|
|
|
|
11/14/2016
|
|
|
|
147,550
|
|
|
|
295,100
|
|
|
|
590,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,000
|
(4)
|
|
|
45.50
|
|
|
|
589,548
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
26,000
|
|
|
|
32,500
|
|
|
|
|
|
|
|
|
|
|
|
45.50
|
|
|
|
268,694
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
591,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Borchers
|
|
|
n/a
|
|
|
|
11/14/2016
|
|
|
|
142,025
|
|
|
|
284,050
|
|
|
|
568,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,000
|
(4)
|
|
|
45.50
|
|
|
|
521,524
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,500
|
|
|
|
23,000
|
|
|
|
28,750
|
|
|
|
|
|
|
|
|
|
|
|
45.50
|
|
|
|
237,691
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,500
|
(6)
|
|
|
|
|
|
|
|
|
|
|
523,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Forshay
|
|
|
n/a
|
|
|
|
11/14/2016
|
|
|
|
139,750
|
|
|
|
279,500
|
|
|
|
559,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(4)
|
|
|
45.50
|
|
|
|
453,499
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
45.50
|
|
|
|
206,688
|
|
|
|
|
12/15/2016
|
|
|
|
11/14/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(6)
|
|
|
|
|
|
|
|
|
|
|
455,000
|
|
(1)
|
Reflects threshold, target and maximum bonus amounts for fiscal 2017 performance under the 2017 Executive Bonus Plan, as described in Compensation Discussion and AnalysisFiscal 2017 Compensation
DeterminationsAnnual Incentive Compensation. The actual bonus payouts were determined by the Compensation Committee in November 2017 and are reported in the
Non-Equity
Incentive Plan Compensation
column of the Fiscal 2017 Summary Compensation Table.
|
(2)
|
Reflects threshold, target and maximum amounts of shares that may be earned under performance-based stock options
granted in fiscal 2017 under the 2005 Stock Plan. The stock options were granted with a seven-year term and an exercise price equal to the closing price of our Class A Common Stock on the date of grant. The shares issuable under each stock
|
53
|
option will be earned contingent on our achievement of
pre-established
annualized total stockholder return levels for Dolby measured over a three-year
performance period beginning on the date of grant and ending on the third anniversary thereof. Vesting of earned shares (if any) will occur following completion of the performance period, upon certification of achievement of the performance
conditions by the Compensation Committee. From 0% to 125% of the shares subject to the stock options may be earned, depending on performance. See Potential Payments upon Termination or Change in ControlTermination and Change in
Control ArrangementsPerformance-Based Stock Options for a further description of certain terms relating to these awards.
|
(3)
|
The amounts reported do not reflect compensation actually realized by the NEO. All amounts reported reflect the grant date fair value of each equity award computed in accordance with ASC Topic 718, excluding estimated
forfeitures. The grant date fair value of time-based stock options was determined using the Black-Scholes option pricing model. The grant date fair value of performance-based stock options was determined using a Monte Carlo simulation to determine
the probability of achieving the underlying performance conditions and is reported at target. See Note 7 to our consolidated financial statements in our 2017 Annual Report on Form 10-K for more information about the assumptions used to calculate the
value of such awards.
|
(4)
|
Reflects time-based stock options granted under the 2005 Stock Plan, which were granted with a
ten-year
term and an exercise price equal to the closing price of our Class A
Common Stock on the date of grant. A quarter of the total number of shares issuable under each stock option vests on the first anniversary of the grant date and the balance of the shares subject to the stock option vests in equal monthly
installments over the subsequent 36 months. See Potential Payments upon Termination or Change in ControlTermination and Change in Control Arrangements for a further description of certain terms relating to these awards.
|
(5)
|
Stock options are held in the name of Kevin and Rachel Yeaman, Trustees of the Yeaman Family Trust dated May 14, 2009.
|
(6)
|
Reflects awards of restricted stock units granted under the 2005 Stock Plan. A quarter of the total number of shares of our Class A Common Stock subject to each restricted stock unit award vests on each of the
first four anniversaries of the grant date. See Potential Payments upon Termination or Change in ControlTermination and Change in Control Arrangements for a further description of certain terms relating to these awards.
|
Adjustment of Equity Awards in Connection with Fiscal 2013 Special Cash Dividend
On December 11, 2012, we announced that our Board had declared a
one-time
special dividend in the
amount of $4.00 per share on our Class A Common Stock and Class B Common Stock, which was paid on December 27, 2012 to the stockholders of record of as of December 21, 2012. The special dividend totaled $408.2 million based
on the number of shares of our Class A Common Stock and Class B Common Stock outstanding as of the record date for the special dividend.
In connection with this special dividend, the Compensation Committee approved adjustments to certain outstanding stock options, stock
appreciation rights and restricted stock unit awards in a manner intended to preserve the
pre-cash
dividend economic value of such awards.
Specifically, each such stock option and stock appreciation right that was outstanding as of December 22, 2012 (the day following the
record date for the special dividend), other than stock options granted on the record date, was adjusted by applying an exchange ratio established to reflect the reduction in the market price of our Class A Common Stock resulting from the
special dividend, which had the effect of increasing the number of shares subject to each such stock option or stock appreciation right, and decreasing the per share exercise price of each such stock option or stock appreciation right, as the case
may be.
In addition, each restricted stock unit award that was outstanding and unvested as of December 22, 2012 was credited with
dividend equivalent rights, payable in cash in the amount of $4.00 per share upon the vesting of the underlying shares of Class A Common Stock subject to the restricted stock unit award.
54
Unless otherwise noted, share numbers and exercise prices referenced in this Proxy Statement with
respect to stock options or stock appreciation rights granted on or prior to December 22, 2012 (other than any stock options granted on the record date of the special dividend) reflect the exchange ratio adjustment described above. In addition,
unless otherwise noted, any restricted stock unit awards referenced in this Proxy Statement that were granted on or prior to December 22, 2012 have dividend equivalent rights attached to them as described above.
No adjustments to outstanding equity awards are made in connection with our existing quarterly cash dividend program.
55
Outstanding Equity Awards at 2017 Fiscal
Year-End
The following table presents information concerning all outstanding equity awards held by each of our NEOs as of the end of fiscal 2017.
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|
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|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Grant Date
|
|
|
Number of
Securities
Subject to
Unexercised
Options (#)
Exercisable
(1)
|
|
|
Number of
Securities
Subject to
Unexercised
Options (#)
Unexercisable
(1)
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Subject to
Unexercised
Unearned
Options (at
Threshold)
(#)
(2)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Market
Value of
Unexercised
Options,
Net of
Exercise
Price ($)
(3)
|
|
|
Grant Date
|
|
|
Number
of
Shares
or Units
of
Stock
That
Have
Not
Vested
(#)
(4)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have
Not
Vested
($)
(3)
|
|
|
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
(#)
|
|
Kevin Yeaman
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
48,599
|
(a)
|
|
|
45.50
|
|
|
|
12/15/2023
|
|
|
|
584,160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
194,399
|
(a)
|
|
|
|
|
|
|
45.50
|
|
|
|
12/15/2026
|
|
|
|
2,336,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
48,599
|
(a)
|
|
|
33.15
|
|
|
|
12/15/2022
|
|
|
|
1,184,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
85,051
|
|
|
|
109,348
|
|
|
|
|
|
|
|
33.15
|
|
|
|
12/15/2025
|
|
|
|
4,737,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
200,475
|
|
|
|
91,123
|
|
|
|
|
|
|
|
42.98
|
|
|
|
12/15/2024
|
|
|
|
4,239,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
269,311
|
|
|
|
17,954
|
|
|
|
|
|
|
|
37.35
|
|
|
|
12/16/2023
|
|
|
|
5,794,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2012
|
|
|
|
234,400
|
|
|
|
|
|
|
|
|
|
|
|
30.49
|
|
|
|
12/21/2022
|
|
|
|
6,335,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2011
|
|
|
|
260,605
|
|
|
|
|
|
|
|
|
|
|
|
28.24
|
|
|
|
12/15/2021
|
|
|
|
7,630,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/16/2009
|
|
|
|
42,655
|
|
|
|
|
|
|
|
|
|
|
|
28.66
|
|
|
|
3/16/2019
|
|
|
|
1,231,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
46,551
|
|
|
|
2,677,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
34,914
|
|
|
|
2,008,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
23,276
|
|
|
|
1,338,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
13,510
|
|
|
|
777,095
|
|
|
|
|
|
|
|
|
|
Lewis Chew
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
|
|
|
45.50
|
|
|
|
12/15/2023
|
|
|
|
168,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
56,000
|
|
|
|
|
|
|
|
45.50
|
|
|
|
12/15/2026
|
|
|
|
673,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
16,250
|
|
|
|
33.15
|
|
|
|
12/15/2022
|
|
|
|
396,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
28,438
|
|
|
|
36,562
|
|
|
|
|
|
|
|
33.15
|
|
|
|
12/15/2025
|
|
|
|
1,584,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
67,319
|
|
|
|
30,599
|
|
|
|
|
|
|
|
42.98
|
|
|
|
12/15/2024
|
|
|
|
1,423,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
97,173
|
|
|
|
6,479
|
|
|
|
|
|
|
|
37.35
|
|
|
|
12/16/2023
|
|
|
|
2,090,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2012
|
|
|
|
49,400
|
|
|
|
|
|
|
|
|
|
|
|
30.49
|
|
|
|
12/21/2022
|
|
|
|
1,335,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/15/2012
|
|
|
|
175,185
|
|
|
|
|
|
|
|
|
|
|
|
37.96
|
|
|
|
6/15/2022
|
|
|
|
3,426,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
14,000
|
|
|
|
805,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
12,188
|
|
|
|
701,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
7,816
|
|
|
|
449,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
4,875
|
|
|
|
280,410
|
|
|
|
|
|
|
|
|
|
Andy Sherman
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
13,000
|
|
|
|
45.50
|
|
|
|
12/15/2023
|
|
|
|
156,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
52,000
|
|
|
|
|
|
|
|
45.50
|
|
|
|
12/15/2026
|
|
|
|
625,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
|
|
|
33.15
|
|
|
|
12/15/2022
|
|
|
|
304,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
21,875
|
|
|
|
28,125
|
|
|
|
|
|
|
|
33.15
|
|
|
|
12/15/2025
|
|
|
|
1,218,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
51,708
|
|
|
|
23,504
|
|
|
|
|
|
|
|
42.98
|
|
|
|
12/15/2024
|
|
|
|
1,093,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
69,409
|
|
|
|
4,628
|
|
|
|
|
|
|
|
37.35
|
|
|
|
12/16/2023
|
|
|
|
1,493,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2012
|
|
|
|
61,700
|
|
|
|
|
|
|
|
|
|
|
|
30.49
|
|
|
|
12/21/2022
|
|
|
|
1,667,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2011
|
|
|
|
58,219
|
|
|
|
|
|
|
|
|
|
|
|
28.24
|
|
|
|
12/15/2021
|
|
|
|
1,704,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
13,000
|
|
|
|
747,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
9,375
|
|
|
|
539,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
6,004
|
|
|
|
345,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
3,482
|
|
|
|
200,285
|
|
|
|
|
|
|
|
|
|
Robert Borchers
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
11,500
|
|
|
|
45.50
|
|
|
|
12/15/2023
|
|
|
|
138,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
46,000
|
|
|
|
|
|
|
|
45.50
|
|
|
|
12/15/2026
|
|
|
|
552,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
13,750
|
|
|
|
33.15
|
|
|
|
12/15/2022
|
|
|
|
335,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
24,062
|
|
|
|
30,938
|
|
|
|
|
|
|
|
33.15
|
|
|
|
12/15/2025
|
|
|
|
1,340,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
58,538
|
|
|
|
26,608
|
|
|
|
|
|
|
|
42.98
|
|
|
|
12/15/2024
|
|
|
|
1,238,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2014
|
|
|
|
43,656
|
|
|
|
3,969
|
|
|
|
|
|
|
|
41.31
|
|
|
|
1/15/2024
|
|
|
|
772,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2014
|
|
|
|
157,139
|
|
|
|
14,286
|
|
|
|
|
|
|
|
41.31
|
|
|
|
1/15/2024
|
|
|
|
2,778,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
11,500
|
|
|
|
661,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
10,313
|
|
|
|
593,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
6,797
|
|
|
|
390,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2014
|
|
|
|
3,569
|
|
|
|
205,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1/15/2014
|
|
|
|
8,569
|
|
|
|
492,889
|
|
|
|
|
|
|
|
|
|
Steven Forshay
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
45.50
|
|
|
|
12/15/2023
|
|
|
|
120,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
45.50
|
|
|
|
12/15/2026
|
|
|
|
480,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
|
|
|
|
|
|
|
|
11,500
|
|
|
|
33.15
|
|
|
|
12/15/2022
|
|
|
|
280,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
20,125
|
|
|
|
25,875
|
|
|
|
|
|
|
|
33.15
|
|
|
|
12/15/2025
|
|
|
|
1,121,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/17/2015
|
|
|
|
16,720
|
|
|
|
9,169
|
|
|
|
|
|
|
|
39.70
|
|
|
|
2/17/2025
|
|
|
|
461,342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
24,750
|
|
|
|
11,250
|
|
|
|
|
|
|
|
42.98
|
|
|
|
12/15/2024
|
|
|
|
523,440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
27,562
|
|
|
|
1,838
|
|
|
|
|
|
|
|
37.35
|
|
|
|
12/16/2023
|
|
|
|
592,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/21/2012
|
|
|
|
24,000
|
|
|
|
|
|
|
|
|
|
|
|
30.49
|
|
|
|
12/21/2022
|
|
|
|
648,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2011
|
|
|
|
30,069
|
|
|
|
|
|
|
|
|
|
|
|
28.24
|
|
|
|
12/15/2021
|
|
|
|
880,420
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/9/2009
|
|
|
|
9,355
|
|
|
|
|
|
|
|
|
|
|
|
28.90
|
|
|
|
2/9/2019
|
|
|
|
267,740
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2016
|
|
|
|
10,000
|
|
|
|
575,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2015
|
|
|
|
8,625
|
|
|
|
496,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/17/2015
|
|
|
|
2,025
|
|
|
|
116,478
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/15/2014
|
|
|
|
3,600
|
|
|
|
207,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/16/2013
|
|
|
|
1,469
|
|
|
|
84,497
|
|
|
|
|
|
|
|
|
|
56
(1)
|
Time-based stock options have a term of ten years and represent the right to purchase shares of our Class A Common Stock. A quarter of the total number of shares issuable under the stock option vests on the first
anniversary of the grant date and the balance of the shares vests in equal monthly installments over the next 36 months, with vesting generally dependent on continued service to the company. Vesting of the stock options is subject to acceleration
under the circumstances described under Potential Payments upon Termination or Change in ControlTermination and Change in Control Arrangements.
|
|
a.
|
Stock options are held in the name of Kevin and Rachel Yeaman, Trustees of the Yeaman Family Trust dated May 14, 2009.
|
(2)
|
Performance-based stock options have a term of seven years and represent the right to purchase shares of our Class A Common Stock. Share numbers are shown at threshold performance. The shares issuable under a
performance-based stock option will be earned contingent on our achievement of
pre-established
annualized total stockholder return levels for Dolby measured over a three-year performance period beginning on
the date of grant and ending on the third anniversary thereof. Vesting of earned shares (if any) will occur following completion of the performance period, upon certification of achievement of the performance conditions by the Compensation
Committee, with vesting generally dependent on continued service to the company through the date of such certification. From 0% to 125% of the shares subject to the stock option may be earned, depending on performance. Vesting of performance-based
stock options is subject to acceleration under the circumstances described under Potential Payments upon Termination or Change in ControlTermination and Change in Control ArrangementsPerformance-Based Stock Options.
|
|
a.
|
Stock option is held in the name of Kevin and Rachel Yeaman, Trustees of the Yeaman Family Trust dated May 14, 2009.
|
(3)
|
The amounts reported in this column are based on (i) in the case of a stock option, the excess, if any, of the closing price of our Class A Common Stock on September 29, 2017 ($57.52 per share) over the
per share exercise price of the stock option, multiplied by the number of shares (vested or unvested, and, in the case of a performance-based stock option, earned or unearned) subject to the stock option, assuming threshold performance in the case
of a performance-based stock option, and (ii) in the case of a restricted stock unit award, the closing price of our Class A Common Stock on September 29, 2017 ($57.52 per share) multiplied by the number of unvested shares subject to
the restricted stock unit award.
|
(4)
|
A quarter of the total number of shares issuable under the restricted stock unit award vests on each of the first four anniversaries of the restricted stock unit award grant date, with vesting generally dependent on
continued service to the company. Vesting of the restricted stock unit awards is subject to acceleration under the circumstances described under Potential Payments upon Termination or Change in ControlTermination and Change in
Control Arrangements.
|
Option Exercises and Stock Vested at 2017 Fiscal
Year-End
The following table presents information concerning the aggregate number of shares of our Class A Common Stock for which stock options
were exercised and which were acquired upon the vesting of restricted stock unit awards during fiscal 2017 by each of our NEOs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired
on Exercise
(#)
|
|
|
Value
Realized on
Exercise
($)
(1)
|
|
|
Number of
Shares Earned
on Vesting
(#)
|
|
|
Value
Realized
on Vesting
($)
(2)
|
|
Kevin Yeaman
(3)(4)
|
|
|
67,102
|
|
|
|
1,833,108
|
|
|
|
50,459
|
|
|
|
2,311,688
|
|
Lewis Chew
(4)(5)
|
|
|
29,300
|
|
|
|
529,250
|
|
|
|
18,594
|
|
|
|
852,382
|
|
Andy Sherman
(4)(6)
|
|
|
36,000
|
|
|
|
861,718
|
|
|
|
13,209
|
|
|
|
605,143
|
|
Robert Borchers
|
|
|
|
|
|
|
|
|
|
|
18,973
|
|
|
|
905,026
|
|
Steven Forshay
(7)
|
|
|
|
|
|
|
|
|
|
|
8,557
|
|
|
|
394,994
|
|
(1)
|
The value realized on the exercise of each stock option is equal to the difference between the market price of our Class A Common Stock on the date of exercise and the per share exercise price, multiplied by the
number of shares exercised.
|
(2)
|
The value realized on the vesting of each restricted stock unit award is based on the market price of our Class A Common Stock on the date of vesting multiplied by the number of shares vested.
|
(3)
|
In addition to the amount indicated in the Value Realized on Vesting under the Stock Awards column, in fiscal 2017, Mr. Yeaman received an aggregate of $54,700 in dividend equivalents upon the vesting
of 13,675 shares of our Class A Common Stock subject to restricted stock unit awards held by him. Each dividend equivalent was paid in cash, in the amount of $4.00 per share.
|
(4)
|
The full amount of dividend equivalents credited to unvested restricted stock unit awards held by the NEO in
connection with our fiscal 2013 special dividend was previously disclosed in the All Other Compensation column in our Fiscal 2013 Summary Compensation Table. As such, and in accordance with
|
57
|
SEC rules and regulations, the portion of those dividend equivalents that vested in fiscal 2017 are not reported in the Fiscal 2017 Summary Compensation Table of this Proxy Statement.
|
(5)
|
In addition to the amount indicated in the Value Realized on Vesting under the Stock Awards column, in fiscal 2017, Mr. Chew received an aggregate of $23,000 in dividend equivalents upon the vesting of
5,750 shares of our Class A Common Stock subject to restricted stock unit awards held by him. Each dividend equivalent was paid in cash, in the amount of $4.00 per share.
|
(6)
|
In addition to the amount indicated in the Value Realized on Vesting under the Stock Awards column, in fiscal 2017, Mr. Sherman received an aggregate of $14,400 in dividend equivalents upon the vesting
of 3,600 shares of our Class A Common Stock subject to restricted stock unit awards held by him. Each dividend equivalent was paid in cash, in the amount of $4.00 per share.
|
(7)
|
In addition to the amount indicated in the Value Realized on Vesting under the Stock Awards column, in fiscal 2017, Mr. Forshay received an aggregate of $5,600 in dividend equivalents upon the vesting
of 1,400 shares of our Class A Common Stock subject to restricted stock unit awards held by him. Each dividend equivalent was paid in cash, in the amount of $4.00 per share.
|
Pension Benefits
We did not sponsor any
defined benefit pension or other actuarial plan for our NEOs during fiscal 2017.
Nonqualified Deferred Compensation
We previously maintained a Supplemental Executive Retirement Plan, or SERP, which is a
non-qualified,
employer-funded retirement plan for certain senior executives employed in the United States. The SERP was adopted in October 2004 prior to our initial public offering and was terminated in fiscal 2005. We have not credited any new amounts to the
SERP since fiscal 2006, but amounts already credited to participants under the plan will remain subject to the terms and conditions of the SERP and will continue to be credited with gains and losses based on the gains and losses of investment funds
designated by us and selected by the participant. Distributions under the SERP will be made in the manner and at the time described below without regard to the termination of the plan.
The SERP provides benefits to participants based on amounts previously credited to the plan and the gains and losses on the investment of
those contributions. Underlying plan investments consist primarily of diversified mutual fund investments. Distributions from the SERP are made in a single lump sum, or, at a participants election, in up to ten installments. Each participant
is 100% vested in his or her interest in the SERP at all times. Upon a participants termination of service with us for any reason other than death, a participant is entitled to his or her account balance determined as of the valuation date
immediately preceding his or her termination date, which amount will be paid in a single lump sum or in up to ten installments (and in the case of the latter, the value of the participants account will fluctuate with the underlying
investments). Upon a participants death, the participants beneficiary will receive all amounts credited to the participants account as of the date of death and in a single lump sum. Funds equal to liabilities under the SERP are
held in a rabbi trust and a participants account will be credited with investment gains and losses based on investments selected by the participant. However, if a participant fails to make an investment election, the trustee of the plan may
direct such investments.
58
The following table presents information concerning our SERP for each of the NEOs for fiscal
2017. The table is comprised solely of SERP account amounts and excludes balances in 401(k) accounts held by the NEOs. The 401(k) plan is a qualified plan available to all salaried U.S. Dolby employees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEOs
|
|
Executive
Contributions
in Fiscal 2017
($)
|
|
|
Company
Contributions
in Fiscal 2017
($)
|
|
|
Aggregate
Earnings in
Fiscal 2017
(1)
($)
|
|
|
Aggregate
Withdrawals/
Distributions
in Fiscal 2017
($)
|
|
|
Aggregate
Balance at
Fiscal 2017
(2)
($)
|
|
Kevin Yeaman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis Chew
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andy Sherman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Borchers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Forshay
|
|
|
|
|
|
|
|
|
|
|
22,269
|
|
|
|
|
|
|
|
1,177,370
|
|
(1)
|
None of the earnings in this column are included in the Fiscal 2017 Summary Compensation Table because they were not preferential or above market.
|
(2)
|
None of the amount reported in this column was previously reported as compensation to Mr. Forshay in the Summary Compensation Table for previous years.
|
The table below reflects the investment options selected by participants in the SERP and their annual rates of return for fiscal 2017.
|
|
|
|
|
Name of Investment Option
|
|
Fiscal 2017 Rate of Return
(1)
|
|
Schwab Money Market Fund (SWMXX)
|
|
|
0.39
|
%
|
Fidelity Floating Rate High Income Fund (FFRHX)
|
|
|
4.70
|
%
|
Rydex NASDAQ100 Fund Inv Cl (RYOCX)
|
|
|
22.39
|
%
|
Schwab Total Stock Mkt Index (SWTSX)
|
|
|
18.63
|
%
|
Lord Abbett Short Duration Income Fund Cl I (LLDYX)
|
|
|
2.58
|
%
|
Schwab Bank Sweep for Benefit Plans
|
|
|
Various monthly yields ranging from 0.01% - 0.10
|
%
|
(1)
|
Rates of return and monthly yield information provided by administrator of the plan.
|
Potential Payments
upon Termination or Change in Control
Termination and Change in Control Arrangements
2005 Stock Plan
Our 2005
Stock Plan provides that in the event of a change in control of Dolby, the successor corporation may assume, substitute an equivalent award, or replace with a cash incentive program, each outstanding award granted under the plan. If
there is no assumption, substitution or replacement with a cash incentive program of outstanding awards, such awards will become fully vested and exercisable immediately prior to the change in control unless otherwise determined by the plan
administrator, and the administrator will provide notice to the award recipient that he or she has the right to exercise such outstanding awards for a period of 15 days from the date of the notice. The awards will terminate upon the expiration of
the
15-day
period.
In the event of assumption or substitution, awards granted to our employees
(including our executive officers) and consultants are subject to a double trigger accelerated vesting schedule that provides for one year of additional vesting for each year of service the employee or consultant provided to us, if he or
she is terminated by us or a successor to us without cause or if he or she resigns for good reason, provided that the termination or resignation occurs within the 12 months following a change in control of Dolby.
For purposes of the 2005 Stock Plan, cause means the termination by Dolby of a participants service based on such
participants: (i) refusal or failure to act in accordance with any lawful company orders, (ii) unfitness or unavailability for service or unsatisfactory performance (other than as a result of disability), (iii) the performance
or failure to perform any act in bad faith and to the detriment of the company,
59
(iv) dishonesty, intentional misconduct or material breach of any agreement with the company, or (v) commission of a crime involving dishonesty, breach of trust, or physical or
emotional harm to any person.
For purposes of the 2005 Stock Plan, good reason means the occurrence following a change in
control of Dolby of any of the following events or conditions unless consented to by the participant: (a) certain reductions in the participants base salary; or (b) requiring the participant to be based at any place outside a
50-mile
radius from the participants job location or residence prior to the change in control except for reasonably required business travel.
Performance-Based Stock Options
The form of performance-based stock option agreement approved by the Compensation Committee provides that in the event of a change in control
of Dolby, the performance period will be deemed to have ended on the closing date of such transaction, and the per share consideration for our Class A Common Stock in such transaction will be used (in lieu of the average closing price of our
Class A Common Stock for the 30 trading days ending on the last trading day of the performance period) for purposes of determining the number of shares earned against achievement of the annualized total stockholder return performance
conditions.
Further, if the successor corporation assumes, substitutes or replaces the performance-based stock option, any shares so
earned will vest on a
pro-rata
basis based on the portion of the performance period elapsed since the grant date and any unvested earned shares will vest monthly thereafter through the remainder of the
performance period (subject to any acceleration of vesting as provided in executive change in control agreements, as applicable), subject to continued service with Dolby or the successor corporation. If there is no assumption, substitution or
replacement of the stock option, then, consistent with the treatment of equity awards described in 2005 Stock Plan above, any shares earned upon deemed achievement of the performance conditions will fully vest immediately prior to
the merger or change in control.
Consistent with the treatment of equity awards described in 2005 Stock Plan,
performance-based stock options are subject to an accelerated vesting schedule that provides for one year of additional vesting for each year of service the employee or consultant provided to us, if he or she is terminated by us or a successor to us
without cause or if he or she resigns for good reason, provided that the termination or resignation occurs within the 12 months following a change in control of Dolby.
Employment Agreement with Mr. Yeaman
In connection with Mr. Yeamans appointment as our President and CEO, we entered into an employment agreement with him, which
provides, among other things, that in the event of his termination of employment without cause or his resignation for good reason other than in connection with a change in control of Dolby (as such terms are defined in the
employment agreement), and subject to his signing and not revoking a release of claims in favor of Dolby, Mr. Yeaman will receive:
|
|
|
a lumpsum payment equal to 150% of his annual base salary,
|
|
|
|
a lumpsum payment equal to a prorated amount of his annual incentive compensation target,
|
|
|
|
accelerated vesting of 50% of his outstanding and unvested equity awards, and
|
|
|
|
reimbursement for premiums paid for continued health benefits until the earlier of 18 months from the date of termination or when he becomes covered under similar plans.
|
In the event of his termination of employment without cause or his resignation for good reason in connection with a
change in control of Dolby, and subject to his signing and not revoking a release of claims in favor of Dolby, Mr. Yeaman will receive:
|
|
|
a lumpsum payment equal to 200% of his annual base salary,
|
60
|
|
|
a lump sum payment equal to 100% of his annual incentive compensation target for the year of termination,
|
|
|
|
accelerated vesting of 100% of his outstanding and unvested equity awards, and
|
|
|
|
reimbursement for premiums paid for continued health benefits until the earlier of 24 months from the date of termination or when he becomes covered under similar plans.
|
Mr. Yeamans annual base salary at the end of fiscal 2017 was $766,000.
Estimated Payments upon Termination or Change in Control
The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described
above for each of our NEOs. Payments and benefits are estimated assuming that the triggering event took place on the last day of fiscal 2017 (September 29, 2017), and the price per share of our Class A Common Stock was the closing price on the
NYSE as of that date ($57.52 per share).
These payments and benefits are in addition to benefits available generally to our salaried
employees, such as distributions under Dolbys 401(k) plan, medical benefits, disability benefits and accrued vacation pay.
There
can be no assurance that a triggering event would produce the same or similar results as those estimated below if such event occurs on any other date or at any other price, or if any other assumption used to estimate the potential payments and
benefits is different.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Potential Payments Upon:
|
|
|
|
Change in
Control
without
Assumption
of
Outstanding
Equity
Awards
($)
|
|
|
Voluntary
Termination
Not for
Good
Reason or
Termination
for Cause
($)
|
|
|
Involuntary
Termination Other
Than for Cause
|
|
|
Voluntary
Termination for Good
Reason
|
|
Name
|
|
Type of Benefit
|
|
|
|
Prior to
Change in
Control
($)
|
|
|
Within 12
Months of
Change in
Control
($)
|
|
|
Prior to
Change in
Control
($)
|
|
|
Within 12
Months of
Change in
Control
($)
|
|
Kevin Yeaman
|
|
Cash Severance Payments
|
|
|
|
|
|
|
|
|
|
|
1,912,901
|
|
|
|
2,298,000
|
|
|
|
1,912,901
|
|
|
|
2,298,000
|
|
|
|
Vesting Acceleration
(1)
|
|
|
17,564,219
|
|
|
|
|
|
|
|
8,782,049
|
|
|
|
17,564,219
|
|
|
|
8,782,049
|
|
|
|
17,564,219
|
|
|
|
Continued Coverage of Employee Benefits
(2)
|
|
|
|
|
|
|
|
|
|
|
53,721
|
|
|
|
71,628
|
|
|
|
53,721
|
|
|
|
71,628
|
|
|
|
Total Termination Benefits
|
|
|
17,564,219
|
|
|
|
|
|
|
|
10,748,671
|
|
|
|
19,933,847
|
|
|
|
10,748,671
|
|
|
|
19,933,847
|
|
|
|
|
|
|
|
|
|
Lewis Chew
|
|
Cash Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Acceleration
(1)
|
|
|
5,680,082
|
|
|
|
|
|
|
|
|
|
|
|
5,680,082
|
|
|
|
|
|
|
|
5,680,082
|
|
|
|
Total Termination Benefits
|
|
|
5,680,082
|
|
|
|
|
|
|
|
|
|
|
|
5,680,082
|
|
|
|
|
|
|
|
5,680,082
|
|
|
|
|
|
|
|
|
|
Andy Sherman
|
|
Cash Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Acceleration
(1)
|
|
|
4,638,900
|
|
|
|
|
|
|
|
|
|
|
|
4,638,900
|
|
|
|
|
|
|
|
4,638,900
|
|
|
|
Total Termination Benefits
|
|
|
4,638,900
|
|
|
|
|
|
|
|
|
|
|
|
4,638,900
|
|
|
|
|
|
|
|
4,638,900
|
|
|
|
|
|
|
|
|
|
Robert Borchers
|
|
Cash Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Acceleration
(1)
|
|
|
5,427,972
|
|
|
|
|
|
|
|
|
|
|
|
5,124,372
|
|
|
|
|
|
|
|
5,124,372
|
|
|
|
Total Termination Benefits
|
|
|
5,427,972
|
|
|
|
|
|
|
|
|
|
|
|
5,124,372
|
|
|
|
|
|
|
|
5,124,372
|
|
|
|
|
|
|
|
|
|
Steven Forshay
|
|
Cash Severance Payments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Acceleration
(1)
|
|
|
3,880,014
|
|
|
|
|
|
|
|
|
|
|
|
3,880,014
|
|
|
|
|
|
|
|
3,880,014
|
|
|
|
Total Termination Benefits
|
|
|
3,880,014
|
|
|
|
|
|
|
|
|
|
|
|
3,880,014
|
|
|
|
|
|
|
|
3,880,014
|
|
61
(1)
|
The values reported in the table are based on (i) in the case of time-based stock options, the excess of the closing price of our Class A Common Stock on September 29, 2017 ($57.52 per share) over the per
share exercise price with respect to unvested shares, multiplied by the number of shares accelerated, (ii) in the case of performance-based stock options, the excess of the closing price of our Class A Common Stock on September 29,
2017 ($57.52 per share) over the per share exercise price with respect to unvested shares, multiplied by the number of shares subject to acceleration that are deemed to be earned due to satisfaction of performance conditions, and (iii) in the
case of restricted stock unit awards, the closing price of our Class A Common Stock on September 29, 2017 ($57.52 per share) multiplied by the number of shares accelerated.
|
(2)
|
Assumes continued coverage of health coverage benefits at the same level of coverage provided for at the end of fiscal 2017.
|
Compensation Program Risk Assessment
During fiscal 2017, members of our Internal Audit Department, with the assistance of our Human Resources and Corporate Legal Departments,
conducted a risk assessment of our compensation plans and arrangements and related risk management practices to evaluate whether our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on
Dolby. Management reviewed the risk assessment findings prior to submitting the report to the Compensation and Audit Committees.
The
scope of the assessment included our annual incentive compensation plans, 2005 Stock Plan, and executive change in control arrangements. The scope of the assessment excluded compensation plans and arrangements that were not contingent on individual
or company performance (e.g., base salary and health benefits), and thus should not encourage risk-taking activities. The assessment involved reviewing the design of our plan-based and
non-plan
based
compensation programs, including purpose, eligibility, structure, performance measures, limits and measurement periods. The assessment considered how target level performance is determined (including thresholds), the frequency of payouts, the mix of
base salary and incentive compensation (both annual and long-term) and the mix of short- and long-term compensation and management oversight.
In particular, Internal Audit considered the following features of our compensation plans and policies when evaluating whether our plans and
policies encourage our executive officers and employees to take unreasonable risks:
|
|
|
The combination of base salary and incentive compensation, including annual incentive compensation and long-term incentive compensation, reduces the significance of any one particular compensation element.
|
|
|
|
The mixed equity portfolio (performance-based stock options, time-based stock options and restricted stock unit awards) creates a level of diversification to withstand market fluctuations, thereby decreasing incentives,
potentially inherent in stock option holdings, to assume excessive or inappropriate risks.
|
|
|
|
Our customary four-year equity vesting schedule encourages long-term perspectives among award recipients.
|
|
|
|
Executive compensation is weighted more towards long-term incentive compensation with the intention to discourage short-term risk taking.
|
|
|
|
The Compensation Committee oversees the design of our annual incentive and long-term incentive compensation plans.
|
|
|
|
Our use of a combination of revenue and
non-GAAP
operating income as company performance measures provides balanced objectives emphasizing both revenue generation and expense
management.
|
|
|
|
Annual incentive compensation payments are capped, and the Compensation Committee retains discretion to modify, reduce or to eliminate annual incentive compensation awards that would otherwise be payable based on actual
financial performance.
|
|
|
|
Our policy on the recovery of incentive compensation allows the company to recover certain cash or equity-based
incentive compensation payments or awards made or granted to an executive officer in
|
62
|
the event of misconduct that results in the need for the company to prepare a material financial restatement.
|
|
|
|
Our system of internal control over financial reporting and whistle-blower program, among other things, reduce the likelihood of manipulation of our financial performance to enhance payments under our annual and
long-term incentive compensation plans.
|
Based on the foregoing, we have concluded that our compensation policies and
practices do not create risks that are reasonably likely to have a material adverse effect on Dolby.
Equity Compensation Plan Information
The following table sets forth information regarding outstanding stock options and restricted stock unit awards and the shares of our Common
Stock reserved for future issuance under our equity compensation plans as of September 29, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class of
Common
Stock
|
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding
options,
warrants and
rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reported
in
column (a))
|
|
Plan Category
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans approved by security
holders
(1)
|
|
|
Class A
|
|
|
|
11,718,403
|
(2)
|
|
$
|
38.66
|
(3)
|
|
|
13,914,504
|
(4)
|
|
|
|
Class B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders
|
|
|
Class A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Class A
|
|
|
|
11,718,403
|
(2)
|
|
$
|
38.66
|
(3)
|
|
|
13,914,504
|
(4)
|
|
|
|
Class B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consists of the 2005 Stock Plan and the Employee Stock Purchase Plan.
|
(2)
|
Stock options include performance-based stock options, which are reflected at maximum performance. In addition to stock options, the amount reported includes 2,835,607 shares issuable upon the vesting of outstanding
restricted stock unit awards granted under the 2005 Stock Plan.
|
(3)
|
Restricted stock unit awards do not have an exercise price and therefore are not included in the calculation of the weighted average exercise price.
|
(4)
|
In addition to the number of shares available for issuance under the 2005 Stock Plan, the amount reported includes 1,936,447 shares available for purchase under the Employee Stock Purchase Plan.
|
63
PROPOSAL 2
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
Section 14A of the Securities Exchange Act of 1934 enables our stockholders to vote to approve, on an advisory
(non-binding)
basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with applicable SEC rules.
As described in the Compensation Discussion and Analysis contained in this Proxy Statement, our executive compensation program is designed to:
|
|
|
Provide a competitive compensation package that enables us to attract, motivate, and retain high-caliber talent;
|
|
|
|
Provide a total compensation package, aligned with the nature and dynamics of our business, which focuses management on achieving our annual and long-term corporate objectives and strategies;
|
|
|
|
Reward both individual and collective contributions to Dolbys success consistent with our
pay-for-performance
orientation; and
|
|
|
|
Emphasize long-term value creation and further align the interests of management and stockholders through the use of equity-based awards.
|
We are asking our stockholders to indicate their support for the compensation of our NEOs as described in this Proxy Statement. This proposal,
commonly known as a
say-on-pay
proposal, gives our stockholders the opportunity to express their views on the compensation of our NEOs. This vote is not
intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies, and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote FOR the
following resolution at the Annual Meeting:
RESOLVED, that the companys stockholders approve, on an advisory basis, the compensation of the
NEOs, as disclosed in the companys Proxy Statement for the 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Fiscal 2017 Summary Compensation
Table and the other related tables and disclosure.
This vote is advisory and, therefore, not binding on us, the Compensation
Committee or our Board. Our Board and the Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the compensation of our NEOs as disclosed in this Proxy Statement, we will consider our
stockholders concerns and the Compensation Committee will evaluate whether any actions are necessary in response to those concerns.
Under the rules of the NYSE, brokers are prohibited from giving proxies to vote on executive compensation matters unless the beneficial owner
of such shares has given voting instructions on the matter. This means that if your broker is the record holder of your shares, you must give voting instructions to your broker with respect to Proposal 2 if you want your broker to vote your shares
on the matter.
Our Board of Directors recommends a vote FOR the approval of the compensation of our NEOs, as described
in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.
64
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
This report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent Dolby specifically incorporates this report by reference, and shall not otherwise be deemed filed under such Acts.
The Audit Committee is comprised of three directors, each of whom qualifies as independent under the current listing requirements
of the NYSE. The current members of the Audit Committee are Micheline Chau, Simon Segars, and Roger Siboni. The Audit Committee acts pursuant to a written charter.
In performing its functions, the Audit Committee acts in an oversight capacity and relies on the work and assurances of (i) Dolbys
management, which has the primary responsibility for financial statements and reports and the companys internal controls, and (ii) Dolbys independent registered public accounting firm, KPMG LLP, which, in its report, expresses an
opinion on the conformity of the companys annual financial statements with United States generally accepted accounting principles. It is not the duty of the Audit Committee to plan or conduct audits, to determine that the companys
financial statements are complete and accurate and are in accordance with generally accepted accounting principles, or to assess the companys internal control over financial reporting.
Within this framework, the Audit Committee has reviewed and discussed with management Dolbys audited financial statements as of and for
the fiscal year ended September 29, 2017 and the companys internal control over financial reporting. The Audit Committee also has discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards
No. 114, as amended (AICPA,
Professional Standards
, Vol. 1. AU section 380) and adopted by the Public Company Accounting Oversight Board in Rule 3200T, and the Public Company Accounting Oversight Board Auditing Standard No. 1301
(
Communications with Audit Committees
). In addition, the Audit Committee has received the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLPs
communications with the Audit Committee concerning independence, and has discussed with KPMG LLP matters relating to its independence, including a review of both audit and
non-audit
fees, and has considered
whether the provision of
non-audit
services was compatible with maintaining KPMG LLPs independence.
Based upon these reviews and discussions, the Audit Committee recommended to our Board that the audited financial statements be included in
Dolbys 2017 Annual Report on Form
10-K
for fiscal 2017.
Audit
Committee
Roger Siboni, Chairman
Micheline Chau
Simon Segars
65
PROPOSAL 3
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed the firm of KPMG LLP as Dolbys independent registered public accounting firm for fiscal 2018.
Representatives of KPMG LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions.
Principal Accounting Fees and Services
The following table sets forth the aggregate fees billed or expected to be billed by KPMG LLP for audit and other services rendered.
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
2017
|
|
|
2016
|
|
Audit Fees
(1)
|
|
$
|
2,719,800
|
|
|
$
|
2,685,000
|
|
Audit-Related Fees
(2)
|
|
$
|
25,200
|
|
|
|
|
|
Tax Fees
(3)
|
|
$
|
222,815
|
|
|
$
|
87,774
|
|
All Other Fees
(4)
|
|
$
|
472,092
|
|
|
$
|
316,585
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,439,907
|
|
|
$
|
3,089,359
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents audit fees incurred for professional services rendered for the audit of our annual consolidated financial statements, the audit of the effectiveness of our internal control over financial reporting, review of
our quarterly consolidated financial statements, and foreign statutory audits and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings or engagements.
|
(2)
|
Represents fees for professional services related to evaluating the potential impact of ASC 606.
|
(3)
|
Represents fees for professional services related to tax compliance, tax advice and tax planning.
|
(4)
|
Represents all other fees billed in connection with audits of our licensees and other statutory accounting advisory services in EMEA.
|
The Audit Committee considered whether the provision of services other than audit services is compatible with maintaining KPMG LLPs
independence.
Pre-Approval
Policies and Procedures
The Audit Committee has established a policy to
pre-approve
all audit and permissible
non-audit
services provided by Dolbys independent registered public accounting firm. The Audit Committee also has delegated authority to the chairman of the Audit Committee to approve (i) permissible
non-audit
related services to be provided by the companys principal registered public accounting firm, and (ii) statutory audit services to be provided by the companys principal registered public
accounting firm or other auditors.
All services and fees provided to Dolby by KPMG LLP in fiscal 2017 and fiscal 2016 were
pre-approved
by the Audit Committee in accordance with these
pre-approval
policies and procedures.
Required Vote
Ratification of KPMG LLP
as Dolbys independent registered public accounting firm requires the affirmative vote of a majority of the voting power of the shares present and entitled to vote on Proposal 3 at the Annual Meeting in person or by proxy. Stockholder
ratification of the selection of KPMG LLP as the companys independent registered public accounting firm is not required by our Bylaws or otherwise. However, our Board is
66
submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate governance. If the stockholders fail to ratify the selection, the Audit Committee will
reconsider whether or not to retain KPMG LLP. Even if the selection is ratified, the Audit Committee, in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit
Committee determines that such a change would be in the best interests of the company and its stockholders.
Our Board of Directors
recommends a vote FOR ratification of KPMG LLP as Dolbys independent registered public accounting firm.
67
ADDITIONAL MEETING MATTERS
Additional Items of Business on the Agenda.
We do not expect any other items of business because the deadline for stockholder proposals and nominations
has already passed. Nonetheless, in case other business is brought before the Annual Meeting, the accompanying proxy gives discretionary authority to the persons named on the proxy to vote on these matters in accordance with their best judgment.
Record Date and Stockholders Entitled to Vote.
Below is the record date for the Annual Meeting and information regarding the number of shares of
Class A Common Stock and Class B Common Stock (collectively, Common Stock) outstanding as of the close of business on the record date.
|
|
|
Record date (at close of business)
|
|
December 8, 2017
|
Class A Common Stock outstanding
|
|
59,843,077 shares
|
Class B Common Stock outstanding
|
|
42,873,597 shares
|
Total votes eligible to be cast by holders of Common Stock
|
|
488,579,047 votes
|
Stockholders of record at the close of business on the record date may vote at the Annual Meeting. Each share
of Class A Common Stock is entitled to one vote, and each share of Class B Common Stock is entitled to ten votes, on all matters being considered at the Annual Meeting. The Class A Common Stock and Class B Common Stock vote as a
single class on all matters described in these proxy materials.
Quorum Requirement.
The presence at the Annual Meeting, in person or by proxy, of
the holders of a majority of the voting power of the Common Stock outstanding on the record date for the Annual Meeting will constitute a quorum. Both abstentions and broker
non-votes
(as discussed under
Votes Required to Approve Proposals below) are counted for the purpose of determining the presence of a quorum.
Difference Between Holding
Shares as a Stockholder of Record and as a Beneficial Owner.
Stockholder of Record
.
If your shares
are registered directly in your name with Dolbys transfer agent, Computershare Trust Company, N.A., you are considered the stockholder of record, with respect to those shares. Stockholders of record received this Proxy Statement
and the accompanying 2017 Annual Report and proxy card directly from us.
Beneficial Owner
.
If your
shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name. Your broker, bank or other nominee, who is considered the stockholder of record with
respect to those shares, forwarded the Notice of Internet Availability of Proxy Materials to you. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by completing the voting
instruction form.
How to Vote.
You may vote using any of the following methods:
Stockholders of record may submit proxies by completing,
signing and dating their proxy cards and mailing them in the accompanying
pre-addressed
envelopes. If you return your signed proxy but do not indicate your voting preferences, your shares will be voted on your
behalf FOR election of each of the nominated directors and each of the other Proposals specified in this Proxy Statement.
Dolby stockholders who hold shares beneficially in street name may provide voting instructions by mail by completing,
signing
and dating
the voting instruction forms provided by their brokers, banks or other nominees and mailing them in the accompanying
pre-addressed
envelopes.
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By Internet
Stockholders of record with internet access may submit proxies by following the
internet voting instructions on their proxy cards. Most Dolby stockholders who hold shares beneficially in street
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68
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name may provide voting instructions by accessing the website specified on the voting instruction forms provided by their brokers, banks or other nominees. Please check the voting instruction
form for internet voting availability.
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By Telephone
Stockholders of record who live in the United States or Canada may submit proxies by following the telephone voting instructions on their proxy cards. Most Dolby stockholders who hold
shares beneficially in street name and live in the United States or Canada may provide voting instructions by telephone by calling the number specified on the voting instruction forms provided by their brokers, banks or other nominees. Please check
the voting instruction form for telephone voting availability.
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In Person at the Annual Meeting
Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting. Shares held beneficially in street name may be voted in person only
if you obtain a legal proxy from the broker, bank or other nominee that holds your shares giving you the right to vote the shares.
Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting
instructions by mail, telephone, or the internet so that your vote will be counted if you later decide not to attend the Annual Meeting
.
|
Change of Vote and Revocation of Your Proxy.
If you are a stockholder of record, you may revoke your proxy at any time prior to the vote at the Annual
Meeting. If you submitted your proxy by mail, you must file with the Secretary of the company a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later-dated proxy. If you submitted your proxy by telephone or
the internet, you may revoke your proxy with a later telephone or internet proxy, as the case may be. Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before
the proxy is exercised or you vote by written ballot at the Annual Meeting. If you are a beneficial owner, you may change your vote by submitting new voting instructions to your broker, bank or other nominee, or, if you have obtained a legal proxy
from your broker, bank or other nominee giving you the right to vote your shares, by attending the meeting and voting in person.
Votes Required to
Approve Proposals.
The votes required for each of the Proposals specified in this Proxy Statement are as follows:
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Item
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Vote Required
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Broker
Discretionary
Voting Allowed
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Proposal 1 | Election of Directors
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Plurality of Votes Cast
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No
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Proposal 2 | Advisory Vote to Approve the Compensation of our Named Executive Officers
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Majority of the Shares Entitled to Vote and Present in Person or Represented by Proxy
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No
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Proposal 3 | Ratification of the Appointment of KPMG LLP as our Independent Registered Public
Accounting Firm for our Fiscal Year Ending September 28, 2018
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Majority of the Shares Entitled to Vote and Present in Person or Represented by Proxy
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Yes
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With respect to Proposal 1, you may vote FOR all nominees, WITHHOLD your vote as to all nominees, or vote FOR
all nominees except those specific nominees from whom you WITHHOLD your vote. The nine nominees receiving the most FOR votes will be elected. A properly executed proxy marked WITHHOLD with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated. Proxies may not be voted for more than nine directors and stockholders may not cumulate votes in the election of directors. If you abstain from voting on Proposal 1, the abstention will not
have an effect on the outcome of the vote.
69
With respect to Proposals 2 and 3, you may vote FOR, AGAINST or ABSTAIN.
If you ABSTAIN from
voting on Proposals 2 or 3, the abstention will have the same effect as an AGAINST vote.
If you hold your shares beneficially in
street name and do not provide your broker or other nominee with voting instructions, your shares may constitute broker
non-votes.
When a proposal is not a routine matter and the
brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a broker nonvote. Proposals 1 and
2 are not considered routine matters, but the ratification of the appointment of KPMG LLP as our independent registered public accounting firm (Proposal 3) is considered a routine matter. In tabulating the voting results for
any particular proposal, shares that constitute broker
non-votes
are not considered entitled to vote on that proposal. Thus, broker
non-votes
would be counted for the
purpose of determining a quorum, but will not affect the outcome of any other matter being voted on at the Annual Meeting.
No Cumulative Voting
Permitted for the Election of Directors.
Our Certificate of Incorporation and Bylaws do not permit cumulative voting at any election of directors.
Solicitation of Proxies.
The costs and expenses of soliciting proxies from stockholders will be paid by us. Our employees, officers and directors may
solicit proxies. We also have retained D.F. King & Co., Inc. to assist in soliciting proxies and we expect to pay them approximately $10,500 for such services, plus a rate of $75 per hour for any research and analysis, and reasonable
out-of-pocket
expenses. In addition, we will, upon request, reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket
expenses for forwarding proxy and solicitation materials to the beneficial owners of Common Stock.
Deadline for Submission of Stockholder Proposals for the 2018 Annual Meeting.
The deadline for submitting a stockholder proposal for inclusion in our
Proxy Statement and form of proxy for the 2019 Annual Meeting of Stockholders pursuant to Rule
14a-8
of the Securities Exchange Act of 1934, as amended (the Exchange Act), is August 20, 2018.
In addition, our Bylaws contain additional advance notice requirements for stockholders who wish to present certain matters before an
Annual Meeting of Stockholders.
Advance Notice of Director Nominations
In general, nominations for the election of
directors may be made (1) by or at the direction of our Board or (2) by any stockholder who (a) was a stockholder of record at the time of the giving of the notice provided for in our Bylaws and on the record date for the
determination of stockholders entitled to vote at the annual meeting and (b) has complied with the notice procedures set forth in the Bylaws, including the delivery of written notice in proper form to Dolbys Secretary within the Notice
Period (as defined below) containing specified information concerning the nominees and nominating stockholder. If a stockholder wishes only to recommend a candidate for consideration by the Nominating and Governance Committee as a potential nominee
for our Board, see the procedures discussed in Corporate Governance MattersPolicy for Director Recommendations.
Advance Notice of Other Business
Our Bylaws also provide that the only business that may be conducted at an annual meeting
is business that is (1) brought pursuant to Dolbys proxy materials with respect to such meeting, (2) brought before the meeting by or at the direction of our Board, or (3) a proper matter for stockholder action pursuant to the
Bylaws and under Delaware law, properly brought before the meeting by any stockholder who (a) is a stockholder of record at the time of the giving of the notice provided for in our Bylaws and on the record date for the determination of
stockholders entitled to vote at the annual meeting and (b) has complied with the notice procedures set forth in the Bylaws, including the delivery of written notice in proper form to Dolbys Secretary within the Notice Period containing
specified information concerning the matters to be brought before such meeting and concerning the stockholder proposing such matters.
70
The Notice Period is defined as that period not later than the 45
th
day nor earlier than the 75
th
day before the
one-year
anniversary of the date on which we first mailed
our proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding years annual meeting. If no annual meeting was held in the previous year or the annual meeting is advanced by more than 30 days prior
to or delayed by more than 60 days after the
one-year
anniversary of the date of the previous years annual meeting, then the stockholders notice must be received no earlier than the close of
business on the 120
th
day prior to such annual meeting and not later than the close of business on the later of (i) the 90
th
day prior to
such annual meeting or (ii) the tenth day following the day on which Public Announcement (as defined below) of the date of the meeting was first made. Public Announcement means disclosure in a press release reported by the Dow Jones
News Service, Associated Press or a comparable national news service or in a document publicly filed by Dolby with the SEC pursuant to Section 13, 14 or 15(d) of the Exchange Act. The Notice Period for the 2019 Annual Meeting of Stockholders
will start on October 4, 2018 and end on November 3, 2018.
If a stockholder who has notified us of his or her intention to
present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, Dolby need not present the proposal for vote at the meeting.
A copy of the full text of the Bylaw provisions discussed above is available on the Corporate Governance section of the Investors page of our
website at
http://investor.dolby.com/corporate-governance.cfm
, or may be obtained by writing to Dolbys Secretary. All notices of proposals by stockholders, whether or not intended to be included in our proxy materials, should be sent to
our principal executive offices at Dolby Laboratories, Inc., 1275 Market Street, San Francisco, California 94103, Attention: Corporate Secretary.
71
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Dolbys executive officers and directors and persons who beneficially own more than 10%
of our Class A Common Stock or Class B Common Stock (collectively, Reporting Persons) to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations
to furnish Dolby with copies of all Section 16(a) reports that they file. Based solely on our review of such reports received or written representations from certain Reporting Persons, we believe that during fiscal 2017 all Reporting Persons
complied with all applicable reporting requirements under Section 16(a), except for:
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A late report on Form 4 filed on March 2, 2017, to report the February 1, 2017 sale of 10,000 shares of Class A Common Stock by the Kevin and Rachel Yeaman Family Trust dated May 14, 2009, which was
filed late due to technical issues experienced by a third-party vendor.
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2017 ANNUAL REPORT
Our financial statements for fiscal 2017 are included in our 2017 Annual Report, which we are providing at the same time as this Proxy
Statement to those stockholders who are receiving paper copies of the proxy materials. If you received a Notice of Internet Availability of Proxy Materials, instructions on how to access our 2017 Annual Report are contained in the notice. Our 2017
Annual Report and this Proxy Statement are also posted on our web site at
http://investor.dolby.com/annuals-proxies.cfm
. If you have not received or do not have access to the 2017 Annual Report, as the case may be, please submit a written
request to our Investor Relations Department. The written request should be sent to: Investor Relations Department, Dolby Laboratories, Inc., 1275 Market Street, San Francisco, California 94103.
Whether you intend to be present at the Annual Meeting or not, we urge you to vote by using the internet or telephone, or signing and mailing
the enclosed proxy card promptly.
By order of the Board of Directors.
Kevin Yeaman
President and Chief Executive Officer
December 18, 2017
72
APPENDIX A
RECONCILIATION OF
NON-GAAP
TO GAAP FINANCIAL MEASURES
(In millions, except per share data)
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Net income:
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Fiscal Year Ended
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September 29,
2017
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September 30,
2016
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GAAP net income
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$
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201.8
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$
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185.9
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Stock-based compensation
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65.3
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67.0
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RSU dividend equivalent
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0.2
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1.2
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Amortization of acquired intangibles
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12.4
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15.4
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Restructuring charges, net
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12.9
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1.2
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Income tax adjustments
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(22.9
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)
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(21.7
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)
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Non-GAAP
net income
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$
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269.7
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$
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249.0
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Diluted earnings per share:
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Fiscal Year Ended
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September 29,
2017
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September 30,
2016
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GAAP diluted earnings per share
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$
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1.95
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$
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1.81
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Stock-based compensation
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0.63
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0.66
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RSU dividend equivalent
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0.01
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Amortization of acquired intangibles
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0.12
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0.15
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Restructuring charges, net
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0.13
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0.01
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Income tax adjustments
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(0.22
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)
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(0.21
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)
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Non-GAAP
diluted earnings per share
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$
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2.61
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$
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2.43
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Shares used in computing diluted earnings per share (in millions)
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103
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102
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Operating Income:
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Fiscal Year Ended
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|
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September 29,
2017
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GAAP operating income
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$
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248.6
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Stock-based compensation
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65.5
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Amortization of acquired intangibles
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12.4
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Restructuring charges, net
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12.9
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Non-GAAP
operating income
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$
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339.4
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The
non-GAAP
financial measures set forth above are adjusted to exclude amounts
related to stock-based compensation, expense associated with dividend equivalents paid on restricted stock units, the amortization of intangibles from business combinations, restructuring charges, and the related tax impact of these items. These
non-GAAP
financial measures are presented to provide an additional tool to evaluate our operating results in a manner that focuses on what our management believes to be its ongoing business operations. Our
management believes it is useful for itself and investors to review, as applicable, both GAAP and the
non-GAAP
measures that exclude such information in order to assess the performance of our business for
planning and forecasting in subsequent periods. Our management does not itself, nor does it suggest that investors should, consider such
non-GAAP
financial measures in isolation from, or as a substitute for,
financial information prepared in accordance with GAAP.
A-1
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Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the
designated areas.
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☒
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you
may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on February 6, 2018.
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Vote by Internet
Go to
www.investorvote.com/dlb
Or scan the QR code with your smartphone
Follow the steps outlined on the secure
website
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Vote by telephone
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone
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Follow the instructions provided by the recorded message
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q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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A
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Proposals The Board of Directors recommends a vote FOR the election of the nominees listed in Proposal 1
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and FOR Proposals 2 and 3.
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+
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1. Election of Directors:
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For
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Withhold
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For
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Withhold
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For
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Withhold
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01 - Kevin Yeaman
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☐
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☐
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02 - Peter Gotcher
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☐
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☐
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03 - Micheline Chau
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☐
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☐
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04 - David Dolby
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☐
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☐
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05 - Nicholas Donatiello, Jr.
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☐
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☐
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06 - N. William Jasper, Jr.
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☐
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☐
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07 - Simon Segars
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☐
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☐
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08 - Roger Siboni
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☐
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☐
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09 - Avadis Tevanian, Jr.
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☐
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☐
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For
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Against
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Abstain
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For
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Against
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Abstain
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2.
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An advisory vote to approve the compensation of the Companys Named Executive Officers.
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☐
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☐
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☐
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3. Ratification of the appointment of KPMG LLP as the Companys independent registered public
accounting firm for the fiscal year ending September 28, 2018.
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☐
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☐
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☐
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4.
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In their discretion, upon such other business as may properly come before the meeting and any postponement, adjournment or continuation
thereof.
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B
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing
as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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IF VOTING BY MAIL, YOU
MUST
COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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+
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q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND
RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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+
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Proxy Dolby Laboratories, Inc.
Proxy Solicited by Board of Directors for Annual Meeting
of Stockholders February 6, 2018
Kevin Yeaman and Andy Sherman, or either of them, each with the power of substitution, are hereby
authorized to represent as proxies and vote with respect to the proposals set forth on the reverse side and in the discretion of such proxies on all other matters that may be properly presented for action all shares of stock of Dolby Laboratories,
Inc. (the Company) the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company to be held on February 6, 2018, at 10:30 a.m., Pacific Standard Time, at the principal executive offices of the Company located
at 1275 Market Street, San Francisco, CA 94103, or any postponement, adjournment or continuation thereof, and the undersigned instructs said proxies to vote as specified on the reverse side.
Shares represented by this proxy will be voted as directed by the stockholder. If no such directions are indicated, the proxies will have the
authority to vote FOR the election of the nominees listed in Proposal 1, FOR Proposals 2 and 3, and in accordance with the discretion of the proxies on any other matters as may properly come before the annual meeting and any postponement,
adjournment or continuation thereof.
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Change of Address
Please print new address below.
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Comments
Please print your comments below.
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+
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C
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IF VOTING BY MAIL, YOU
MUST
COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD.
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