Rambus Inc.
RAMBUS INC (Form: DEF 14A, Received: 03/15/2012 16:36:05)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

RAMBUS INC.

(Name of Registrant as Specified In Its Charter)

 

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

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

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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 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
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    (4)   Date Filed:
        
 

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GRAPHIC

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 2012

To our stockholders:

        You are cordially invited to attend the 2012 Annual Meeting of Stockholders of Rambus Inc. The Annual Meeting will be held on:

Date:   Thursday, April 26, 2012
Time:   9:00 a.m., local time
Place:   Santa Clara Marriott
2700 Mission College Boulevard
Santa Clara, California 95054

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

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

        These items of business are more fully described in the Proxy Statement which accompanies this Notice of Annual Meeting.

        Only stockholders of record as of March 1, 2012, may vote at the Annual Meeting. Whether or not you plan to attend the meeting, please vote at www.proxyvote.com , call 1-800-690-6903 or complete, sign, date and return the accompanying proxy card in the enclosed postage-paid envelope. Returning the proxy card does NOT deprive you of your right to attend the meeting and to vote your shares in person. The Proxy Statement explains proxy voting and the matters to be voted on in more detail. Please read this Proxy Statement carefully. We look forward to seeing you at the Annual Meeting.

    By Order of the Board of Directors

 

 

Thomas R. Lavelle
    Sr. Vice President, General Counsel and Secretary

Sunnyvale, California
March 15, 2012

 

 

YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE AT
WWW.PROXYVOTE.COM , CALL 1-800-690-6903, OR COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE


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RAMBUS INC.
PROXY STATEMENT
FOR
2012 ANNUAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

 
  Page  

Information Concerning Solicitation and Voting

    1  

General Information About The Meeting

    1  

Proposal One: Election of Directors

    7  

Nominees

    7  

Vote Required

    7  

Information About Nominees and Other Directors

    7  

Board of Directors Meetings and Committees

    12  

Director Independence

    12  

Director Qualifications

    12  

Corporate Governance Principles

    13  

Section 16(a) Beneficial Ownership Reporting Compliance

    13  

Executive Sessions of the Independent Directors

    13  

Committees of the Board of Directors

    13  

Audit Committee

    13  

Compensation Committee

    14  

Compensation Committee Interlocks and Insider Participation

    15  

Corporate Governance/Nominating Committee

    16  

Identifying and Evaluating Nominees For Directors

    16  

Consideration of Stockholder Nominees to the Board

    16  

Board Leadership Structure and Role in Risk Oversight

    17  

Transactions with Related Persons

    18  

Proposal Two: Advisory Vote on Executive Compensation

    19  

Proposal Three: 2006 Equity Incentive Plan Amendment for a Share Increase

    20  

Proposal Four: 2006 Employee Stock Purchase Plan Amendment for a Share Increase

    32  

Proposal Five: One-time Stock Option Exchange

    38  

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

    47  

Our History with PricewaterhouseCoopers

    47  

Principal Accountant Fees and Services

    47  

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

    48  

Independence of PricewaterhouseCoopers LLP

    48  

Vote Required

    48  

Equity Compensation Plan Information

    49  

Security Ownership of Certain Beneficial Owners and Management

    50  

Executive Officers of the Company

    52  

Executive Compensation

    55  

Executive Compensation Tables

    69  

Summary Compensation Table

    69  

Grants of Plan Based Awards

    70  

Outstanding Equity Awards at Fiscal Year-End

    71  

Option Exercises and Stock Vested

    75  

Potential Payments Upon Termination or Change-in-Control

    75  

Compensation of Directors

    76  

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  Page  

Overview of Compensation and Procedures

    77  

Summary of Director Plan

    77  

Audit Committee Report

    79  

Report of the Audit Committee

    79  

Review with Management

    79  

Review and Discussions with the Independent Registered Public Accounting Firm

    79  

Conclusion

    79  

Performance Graph

    80  

Other Matters

    81  

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RAMBUS INC.
PROXY STATEMENT
FOR
2012 ANNUAL MEETING OF STOCKHOLDERS

INFORMATION CONCERNING SOLICITATION AND VOTING

        The enclosed proxy is solicited on behalf of the Board of Directors of Rambus Inc. ("Rambus" or "we," "us" or the "Company") for use at our 2012 Annual Meeting of Stockholders (the "Annual Meeting") to be held on Thursday, April 26, 2012 at 9:00 a.m. local time, and at any postponement or adjournment of the meeting. The purpose of the Annual Meeting is described in the accompanying Notice of Annual Meeting of Stockholders.

        The Annual Meeting will be held at the Santa Clara Marriott located at 2700 Mission College Boulevard, Santa Clara, California 95054.

        Our principal executive offices are located at 1050 Enterprise Way, Suite 700, Sunnyvale, California 94089; our telephone number is (408) 462-8000; and our internet address is www.rambus.com .

        These proxy solicitation materials and the enclosed Annual Report for the fiscal year ended December 31, 2011, including our Annual Report on Form 10-K for the year ended December 31, 2011 (the "Form 10-K") were first mailed on or about March 15, 2012, to all stockholders entitled to vote at the meeting.


GENERAL INFORMATION ABOUT THE MEETING

Who May Attend

  You may attend the Annual Meeting if you owned your shares, either as a stockholder of record or as a beneficial owner as described below, as of the close of business on March 1, 2012 (the "Record Date").

 

Stockholders of Record

 

If your shares are registered directly in your name, then you are considered to be the stockholder of record with respect to those shares, and we are sending these proxy materials directly to you. To attend the meeting as a stockholder of record, please bring proper identification.

 

Beneficial Owners

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in "street name," and your broker or nominee is forwarding these proxy materials to you. Your broker or nominee is considered to be the stockholder of record with respect to those shares. To attend the meeting as a beneficial owner, please bring proper identification and a statement from the broker, bank or other nominee holding your shares that confirms your beneficial ownership of the shares as of the Record Date.

   

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Who May Vote

 

You may vote at the Annual Meeting if you owned your shares, either as a stockholder of record or as a beneficial owner, as of the close of business on the Record Date. As of that date, we had a total of 110,402,025 shares of common stock outstanding, which were held of record by approximately 689 stockholders. You are entitled to one vote for each share of our common stock that you own.

 

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

Voting Your Proxy

 

Stockholders of Record

 

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

 

voting via the internet at www.proxyvote.com ;

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

signing, dating and mailing the proxy card in the postage-paid envelope that we have provided.

 

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

 

Beneficial Owners

 

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

 

You are invited to attend the meeting and vote your shares in person at the meeting. However, since you are not the stockholder of record, you must obtain and bring with you to the meeting a "legal proxy" from the broker, bank or other nominee holding your shares that confirms your beneficial ownership of the shares and gives you the right to vote your shares at the meeting.

Discretionary Voting Power; Matters to be Presented

 

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

   

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Changing Your Vote

 

Stockholders of Record

 

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

 

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

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

attend the Annual Meeting and vote in person.

 

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

 

Beneficial Owners

 

If you instructed a broker or nominee to vote your shares following the directions originally included with these materials or provided to you, you can change your vote only by following your broker or nominee's directions for doing so. You can only change your vote at the Annual Meeting if you have obtained a "legal proxy" from the broker, bank or other nominee holding your shares that confirms your beneficial ownership of the shares and gives you the right to vote your shares at the meeting.

Cost of this Proxy Solicitation

 

We will bear the cost of this proxy solicitation. In addition to soliciting proxies by mail, our directors, officers and employees may solicit proxies in person or by telephone. None of these individuals will receive any additional or special compensation for doing this, but they may be reimbursed for reasonable out-of-pocket expenses. We have also hired Morrow & Co., LLC to help us solicit proxies from brokers, bank nominees and other institutional owners. We expect to pay Morrow & Co., LLC a fee of up to approximately $28,500 for its services, and we will reimburse certain out-of-pocket expenses.

Meeting Quorum

 

The Annual Meeting will be held if a majority of our outstanding shares of common stock entitled to vote at the meeting are represented in person or by proxy.

Our Voting Recommendations

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

"FOR" the election of J. Thomas Bentley, Sunlin Chou, Ph.D., Harold Hughes and Abraham D. Sofaer as Class I directors;

"FOR" the approval of named executive officer compensation, as disclosed in this Proxy Statement;

 

"FOR" the amendment to our 2006 Equity Incentive Plan to increase the number of shares of common stock reserved for issuance under such plan by 6,500,000 shares;

   

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"FOR" the amendment to our 2006 Employee Stock Purchase Plan to increase the number of shares of common stock reserved for issuance under such plan by 1,500,000 shares;

"FOR" the approval of a one-time stock option exchange program; and

"FOR" the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012.

Abstentions, Withheld, and Broker Non-Votes

  We treat shares that are voted "WITHHELD" or "ABSTAIN" in person or by proxy as being:

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

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

 

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

 

For the other proposals, a "WITHHELD" or "ABSTAIN" vote is the same as voting against the proposal.

 

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

 

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

Deadline for Receipt of Stockholder Proposals

 

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

   

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Stockholder proposals, including nominations for the election of directors, which are intended to be presented by such stockholders at our 2013 Annual Meeting of Stockholders must be received by us no later than November 18, 2012 to be considered for inclusion in the proxy statement and proxy card relating to that meeting.

 

In addition to the SEC rules, our bylaws establish an advance notice procedure for proposals that a stockholder wants to have included in our proxy statement relating to a meeting or to have brought before the meeting. Generally for these proposals, including the nomination of a person for director, a stockholder must provide written notice to our corporate Secretary at least 90 days in advance of the meeting. However, in the event that less than 100 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made.

 

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

 

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

Communication With the Board of Directors

 

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

 

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

 

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

 

Unless the communication is marked "confidential," our Secretary/General Counsel will review, summarize and, if appropriate, draft a response to the communication in a timely manner. The

   

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summary and response will be in the form of a memo, which will become part of the stockholder communications log that our Secretary/General Counsel maintains with respect to all stockholder communications.

 

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

 

Any stockholder communication marked "confidential" will be logged by our Secretary/General Counsel as "received" but will not be reviewed, opened or otherwise held by our Secretary/General Counsel. Such confidential correspondence will be immediately forwarded to the addressee(s) without a memo or any other comment by our Secretary/General Counsel.

Annual Meeting Attendance

 

Members of our Board of Directors are invited but not required to attend the Annual Meeting of Stockholders. The 2011 Annual Meeting of Stockholders was attended by the following members of our Board of Directors: Ms. Herscher and Messrs. Chou, Dunlevie, Hughes, Shrigley, Sofaer and Stang.

"Householding" of Proxy Materials

 

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

Delivery of Proxy Materials

 

To receive current and future proxy materials, such as annual reports, proxy statements and proxy cards, in either paper or electronic form, please contact Investor Relations at ir@rambus.com or http://investor.rambus.com , or place a collect call to the Company, at (408) 462-8000, and direct the call to the Investor Relations Department.


IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 26, 2012

The Notice and Proxy Statement, Annual Report to Shareholders and 10-K Combo
document are available at
www.proxyvote.com .

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PROPOSAL ONE:
ELECTION OF DIRECTORS

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

Nominees

  Four Class I directors are to be elected at the Annual Meeting for a two-year term ending in 2014. Based upon the recommendation of our Corporate Governance/Nominating Committee, our Board has nominated: J. Thomas Bentley, Sunlin Chou, Ph.D., Harold Hughes and Abraham D. Sofaer for election as Class I directors.

 

If any of J. Thomas Bentley, Sunlin Chou, Ph.D., Harold Hughes or Abraham D. Sofaer is unable or declines to serve as a director at the time of the Annual Meeting, proxies will be voted for a substitute nominee or nominees designated by the Board of Directors.

 

Mr. Bentley was previously a Class II director. Due to the departure of two directors in 2011, Mr. Bentley and the Board of Directors have decided that effective the date of the filing of this proxy statement, Mr. Bentley will become a Class I director and will stand for reelection at the Annual Meeting.

Vote Required

 

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

Information About Nominees and Other Directors

 

The members of our Board of Directors have deep executive and board leadership experience derived from their respective tenures as executives and directors of technology companies of various sizes. The following table contains information regarding the Class I nominees and other directors as of March 1, 2012. This information includes the specific experience, qualifications, attributes and skills that led to the Board of Directors' conclusion that the person should serve as a director.

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Nominees for Class I Directors

Name
  Age   Principal Occupation and Business Experience

J. Thomas Bentley

    62   Mr. Bentley has served as a director since March 2005, and has served as Chairperson of the Board since June 2011. He served as a managing director at SVB Alliant (formerly Alliant Partners), a mergers and acquisitions firm, since he co-founded the firm in 1990 until October 2005. Mr. Bentley holds a B.A. in Economics from Vanderbilt University and an M.S. in Management from the Massachusetts Institute of Technology. Mr. Bentley currently serves on the board of Nanometrics, Inc. and various private companies and non-profit institutions.

       

Mr. Bentley's financial expertise and years of business and leadership experience, including fifteen years as a co-founder of a financial advisory firm, allow him to provide strategic guidance to us and led the Board of Directors to conclude that he should serve as a director. In addition, our Board of Directors' determination that Mr. Bentley is the Audit Committee "financial expert" lends further support to his financial acumen and qualifications for serving on our Board of Directors.

Sunlin Chou, Ph.D. 

   
65
 

Dr. Chou was appointed to the Board of Directors in March 2006. Dr. Chou served for 34 years at Intel Corporation, before retiring in 2005 as a senior vice president. He was co-general manager of the Technology and Manufacturing Group from 1998 to 2005. Dr. Chou holds a B.S., M.S. and E.E. in Electrical Engineering from Massachusetts Institute of Technology and received a Ph.D. in Electrical Engineering from Stanford University. Dr. Chou serves on the board of several non-profit institutions.

       

During his career, Dr. Chou organized and led research and development teams to innovate rapidly and continuously in order to maintain technological leadership. Dr. Chou's understanding of the technical, organizational and strategic business aspects of the semiconductor integrated circuit industry led the Board of Directors to conclude that he should serve as a director.

Harold Hughes

   
66
 

Mr. Hughes has served as our chief executive officer and president since January 2005 and as a director since June 2003. He served as a United States Army Officer from 1969 to 1972 before starting his private sector career at Intel Corporation. Mr. Hughes held a variety of positions within Intel Corporation from 1974 to 1997, including treasurer, vice president of Intel Capital, chief financial officer, and vice president of Planning and Logistics. Following his tenure at Intel, Mr. Hughes was the chairman and chief executive officer of Pandesic, LLC. He holds a B.A. from the University of Wisconsin and an M.B.A. from the University of Michigan. In the past five years, he has served as a director of Berkeley Technology, Ltd. and a private company.

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Name
  Age   Principal Occupation and Business Experience

       

Mr. Hughes' seven-year tenure as our Chief Executive Officer, his prior leadership experience at Intel Corporation and his ability to provide deep and valuable operational and strategic insight to the Board of Directors led the Board of Directors to conclude that he should serve as a director. The Company has begun a search for a successor to Mr. Hughes who is planning to retire from his current position; however, Mr. Hughes will continue in his position as chief executive officer until a successor is named.

Abraham D. Sofaer

   
73
 

Mr. Sofaer has served as a director since May 2005. He has been the George P. Shultz Distinguished Scholar and Senior Fellow at the Hoover Institution at Stanford University since 1994. Mr. Sofaer has a long and distinguished career in the legal profession. Prior to assuming his current roles, he served in private practice as a partner at Hughes, Hubbard & Reed in Washington, D.C. and as the chief legal adviser to the U.S. Department of State. From 1979 to 1985, Mr. Sofaer served as a U.S. District Judge for the Southern District of New York. He was a professor at the Columbia University School of Law from 1969 to 1979, and from 1967 to 1969 was an Assistant U.S. Attorney in the Southern District of New York. Mr. Sofaer graduated magna cum laude with a B.A. in History from Yeshiva College and received his law degree from the New York University School of Law where he was editor-in-chief of the NYU Law Review. He clerked for Hon. J. Skelly Wright on the U.S. Court of Appeals for the District of Columbia Circuit and for Justice William J. Brennan, Jr. on the U.S. Supreme Court. In the past five years, Mr. Sofaer has served as a director of Gen-Probe, Inc. and several private companies and non-profit institutions.

       

Mr. Sofaer's extensive and varied experience in legal affairs allows him to assist us with the complex legal challenges we face and led the Board of Directors to conclude that he should serve as a director. He has brought a unique legal and strategic perspective to us and rendered specific contributions by serving on the Special Litigation Committee that helped us deal with the options backdating matter, and by leading the settlement negotiation of the shareholder action stemming from the same affair. Until the appointment of our present General Counsel, he served as the Chair of the Committee on Legal Affairs, which helped formulate policy and strategy in defense of legal challenges. In addition, his experience in government and public policy has enabled him to serve as a valuable member of our Audit Committee and Corporate Governance/Nominating Committee.

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

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Incumbent Class II Directors Whose Terms Expire in 2013

Name
  Age   Principal Occupation and Business Experience

P. Michael Farmwald, Ph.D. 

    57   Dr. Farmwald has served as a director since our founding in March 1990 and has served as senior technical advisor since October 2006. In his role as senior technical advisory, Dr. Farmwald provides certain limited advisory services, but has little or no operating involvement with the day-to-day activities of the Company. In addition, he served as vice president and chief scientist from March 1990 to November 1993. Dr. Farmwald founded Skymoon Ventures, a venture capital firm, in 2000. In addition, Dr. Farmwald has co-founded other semiconductor companies, including Matrix Semiconductor, Inc. in 1997. Dr. Farmwald holds a B.S. in Mathematics from Purdue University and a Ph.D. in Computer Science from Stanford University.

       

Dr. Farmwald's status as one of our founders and an inventor of the Farmwald/Horowitz patents, his twenty-year tenure on our Board of Directors and his deep technical expertise led the Board of Directors to conclude that he should serve as a director.

Penelope A. Herscher

   
51
 

Ms. Herscher has served as a director since July 2006. She currently holds the position of president and chief executive officer of FirstRain, Inc., a custom-configured, on-demand intelligence services firm, which she joined in 2005. Ms. Herscher previously held the position of executive vice president and chief marketing officer at Cadence Design Systems from 2002 to 2003, and executive vice president and general manager, Design and Verification Business during the second half of 2003. From 1996 to 2002, Ms. Herscher was president and chief executive officer of Simplex Solutions, which was acquired by Cadence in 2002. Before Simplex, she was an executive at Synopsys for eight years and started her career as an R&D engineer with Texas Instruments. She holds a M.A. with honors in Mathematics from Cambridge University in England. Ms. Herscher serves on the boards of FirstRain, JDS Uniphase, Inc. and several non-profit institutions.

       

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

David Shrigley

   
63
 

Mr. Shrigley has served as a director since October 2006. He is currently the Executive Chairman of Soil and Topography Information, Inc. Mr. Shrigley was a member of the board of Wolfson Microelectronics plc, a supplier of mixed-signal chips for the digital market from November 2006 to December 2008, and was its chief executive officer from March 2007. He

         

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Name
  Age   Principal Occupation and Business Experience

       

served as a general partner at Sevin Rosen Funds, a venture capital firm, from 1999 to 2005. Prior to that, Mr. Shrigley held the position of executive vice president, Marketing, Sales and Service at Bay Networks. Mr. Shrigley served in various executive positions at Intel, including vice president and general manager of Asia Pacific sales and marketing operations based in Hong Kong, and vice president and general manager, corporate marketing. Mr. Shrigley holds a B.S. in Business Administration from Franklin University. In the past five years, Mr. Shrigley has served on the board of Wolfson Microelectronics plc, and currently serves on the board of a private company.

       

Mr. Shrigley's experience as a director and executive officer of high technology companies, his experience in the venture capital industry and his years of international business and leadership experience led the Board of Directors to conclude that he should serve as a director.

Eric Stang

   
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Mr. Stang has served as a director since July 2008. Mr. Stang currently serves as a director, president and chief executive officer of Ooma, Inc., a provider of broadband telephony products, a position he has held since January 2009. Prior to joining Ooma, Mr. Stang served as a director, chief executive officer and president of Reliant Technologies,  Inc., a developer of medical technology solutions for aesthetic applications, from 2006 to 2008. Mr. Stang previously served as chief executive officer and president of Lexar Media, Inc., a provider of solid state memory products from 2001 to 2006 and Chairman from 2004 to 2006. Mr. Stang received his A.B. from Stanford University and M.B.A. from the Harvard Business School. Mr. Stang also serves on the boards of Solta Medical and several private companies.

       

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

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Board of Directors Meetings and Committees

  Our Board of Directors held a total of nine meetings during 2011. During 2011, each member of our Board of Directors attended 75% or more of the meetings of the Board of Directors and of the committees, if any, of which she or he was a member.

Director Independence

 

Our Board of Directors has determined that each of the following directors, constituting a majority of our Board of Directors, has no material relationship with us (either directly as a partner, stockholder or officer of an organization that has a relationship with us) and is "independent" as defined under Nasdaq Rule 5605 and the applicable rules promulgated by the SEC: J. Thomas Bentley, Sunlin Chou, P. Michael Farmwald, Penelope A. Herscher, David Shrigley, Abraham D. Sofaer and Eric Stang.

 

  Each of the committees of our Board of Directors is composed of independent directors as follows:

 

Audit Committee:

 

Eric Stang (Chair)

      J. Thomas Bentley

      P. Michael Farmwald

 

Compensation

 

Penelope A. Herscher (Chair)

  Committee:   David Shrigley

      Abraham D. Sofaer

 

Corporate Governance/

 

Sunlin Chou (Chair)

  Nominating   David Shrigley

  Committee:   Abraham D. Sofaer

 

Director Qualifications

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

   

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  Directors, the Board of Directors and the Corporate Governance/Nominating Committee consider the entirety of each candidate's credentials in the context of the factors mentioned above.

 

Corporate Governance Principles

  We are committed to maintaining the highest standards of business conduct and corporate governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity in the marketplace. We have adopted a code of business conduct and ethics for directors, officers, and employees known as the Code of Business Conduct and Ethics, which is available on our website at
http://investor.rambus.com/documentdisplay.cfm?DocumentID=5115 .

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act requires our executive officers, directors and ten percent stockholders to file reports of ownership and changes in ownership with the SEC. The same persons are required to furnish us with copies of all Section 16(a) forms they file. Based on our review of these forms, we believe that during fiscal 2011 all of our executive officers, directors and ten percent stockholders complied with the applicable filing requirements.

Executive Sessions of the Independent Directors

 

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

Committees of the Board of Directors

 

During 2011, our Board of Directors had three standing committees:

 

an Audit Committee,

 

a Compensation Committee and

 

a Corporate Governance/Nominating Committee.

 

The following describes each committee, its function, its membership, and the number of meetings held during 2011.

 

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

Audit Committee

 

Currently, the Audit Committee is composed of Eric Stang, J. Thomas Bentley and P. Michael Farmwald, with Mr. Stang serving as Chair. The Audit Committee oversees our corporate accounting and financial reporting processes and internal control over financial reporting, as well as our internal and

   

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external audits. The Audit Committee held eight meetings during 2011. Its duties include:

 

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

 

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

 

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

 

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

 

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

 

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

 

Our Board of Directors has determined that Mr. Bentley is the Audit Committee "financial expert" and that Mr. Bentley, together with each of Mr. Stang and Dr. Farmwald, has no material relationship with us (either directly as a partner, stockholder or officer of an organization that has a relationship with us) and is an "independent director" as defined under Nasdaq Rule 5605 and the applicable rules promulgated by the SEC.

 

The Audit Committee's role is detailed in the Audit Committee Charter and is available on our website at
http://investor.rambus.com/documentdisplay.cfm?DocumentID=5108 .

Compensation Committee

 

Currently, the Compensation Committee is composed of Penelope A. Herscher, David Shrigley and Abraham D. Sofaer, with Ms. Herscher serving as Chair. All members of the Compensation Committee are non-employee, outside directors. The Compensation Committee reviews and determines all forms of compensation to be provided to our executive officers, including the named executive officers and directors of Rambus, including base compensation, bonuses, and stock compensation. The Compensation Committee held nine meetings during 2011. Its duties include:

 

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

   

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

Adopt, amend and oversee the administration of our significant employee benefits programs;

Review external surveys to establish appropriate ranges of compensation;

Retain and terminate any compensation consultant to assist in the evaluation of CEO or executive officer or director compensation, and approve the consultant's fees and other ter ms of service, as well as obtain advice and assistance from internal or external legal, accounting or other advisors; and

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

 

The Compensation Committee uses Semler Brossy Consulting Group, LLC (SBCG) to assist in evaluating executive and director compensation.

 

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

 

The Compensation Committee's role is detailed in the Compensation Committee Charter, which is available on our website at
http://investor.rambus.com/documentdisplay.cfm?DocumentID=5109 .

Compensation Committee Interlocks and Insider Participation

 

During 2011, there were no interlocking relationships. Please see the Compensation Discussion and Analysis section of this Proxy Statement for further discussion.

   

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Corporate Governance/Nominating Committee

 

Currently, the Corporate Governance/Nominating Committee is composed of Sunlin Chou, David Shrigley and Abraham D. Sofaer, with Dr. Chou serving as Chair. The Corporate Governance/Nominating Committee held six meetings during 2011.

 

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

 

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

Identifying best practices and recommending corporate governance principles;

Overseeing the evaluation of the Board of Directors; and

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

 

The Corporate Governance/Nominating Committee's role is detailed in the Corporate Governance/Nominating Committee Charter which is available on our website at
http://investor.rambus.com/documentdisplay.cfm?DocumentID=5110.

Identifying and Evaluating Nominees For Directors

 

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

Consideration of Stockholder Nominees to the Board

 

It is the policy of the Corporate Governance/Nominating Committee to consider nominees recommended by stockholders for election to our Board of Directors. Stockholder recommendations for candidates to our Board of Directors must be directed in writing to Rambus Inc., 1050 Enterprise Way, Suite 700, Sunnyvale, CA 94089 Attention: Secretary, and must include: the candidate's name, age, business address and residence address; the candidate's principal occupation or employment; the number of shares of the Company which are beneficially owned by such candidate;

   

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a description of all arrangements or understandings between the stockholder making such nomination and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder; detailed biographical data and qualifications; information regarding any relationships between the candidate and the Company within the last three years; any other information relating to such nominee that is required to be disclosed in solicitations of proxies for elections of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. A stockholder's recommendation to the Secretary must also set forth: the name and address, as they appear on the Company's books, of the stockholder making such recommendation; the class and number of shares of the Company which are beneficially owned by the stockholder and the date such shares were acquired by the stockholder; any material interest of the stockholder in such nomination; any other information that is required to be provided by the stockholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, in his capacity as a proponent to a stockholder proposal; and a statement from the recommending stockholder in support of the candidate, references for the candidate, and an indication of the candidate's willingness to serve, if elected.

Board Leadership Structure and Role in Risk Oversight

 

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

 

The Board of Directors plays an integral role in our risk oversight processes. The Board of Directors meets regularly to receive reports from its committees, as well as from management with respect to areas of material risk to the

   

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Company, including legal, operational, financial and strategic risks. In addition, the Audit Committee oversees and reviews at least annually our risk management policies, including our investment policies.

Transactions with Related Persons

 

None.

Review, Approval or Ratification of Transactions with Related Persons

 

Our directors and executive officers are subject to our Code of Business Conduct and Ethics, and our directors are guided in their duties by our Corporate Governance Guidelines. Our Code of Business Conduct and Ethics requires that our directors and executive officers avoid situations where a conflict of interest might occur or appear to occur. In general, our directors and executive officers should not have a pecuniary interest in transactions involving us or a customer, licensee, or supplier of us, unless such interest is solely a result of routine investments made by the individual in publicly traded companies.

 

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

 

In addition, each director and officer is required to complete a Director and Officer Questionnaire on an annual basis and upon any new appointment, which requires disclosure of any related-party transactions pertaining to the director or executive officer. Our Board of Directors will consider such information in its determinations of independence with respect to our directors under Nasdaq Rule 5605 and the applicable rules promulgated by the SEC.

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PROPOSAL TWO:
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

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

        Please see the Compensation Discussion and Analysis section of this Proxy Statement on page 57, the compensation tables and the narrative disclosures that accompany the compensation tables for greater detail about our executive compensation programs, including information about the fiscal year 2011 compensation of our named executive officers.


Recommendation

        We believe that our overall compensation program and philosophy support and help drive the Company's long-term value creation, business strategy and operating performance objectives. We ask you to indicate your support for the compensation of our named executive officers as described in the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures set forth in this Proxy Statement.

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

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

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PROPOSAL THREE:
APPROVAL OF THE AMENDMENT TO THE 2006 EQUITY INCENTIVE PLAN

        The stockholders are being asked to approve an amendment to our 2006 Equity Incentive Plan (the "Incentive Plan") to add 6,500,000 shares to the total number of shares reserved for issuance under the Incentive Plan. Our Board of Directors has approved the increase in the number of shares reserved for issuance under the Incentive Plan, subject to approval from stockholders at the Annual Meeting. If stockholders do not approve the amendment to the Incentive Plan, no shares will be added to the total number of shares reserved for issuance under the Incentive Plan.

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

        Our Board of Directors believes that long-term incentive compensation programs align the interests of management, employees and the stockholders to create long-term stockholder value. Our Board of Directors believes that plans such as the Incentive Plan increase our ability to achieve this objective, especially, in the case of the Incentive Plan, by allowing for several different forms of long-term incentive awards, which our Board of Directors believes is critical for us to recruit, reward, motivate and retain talented personnel. Given the highly competitive labor market for employee talent, our Board of Directors and management believe that the ability to continue to grant equity awards will be critical to the future success of Rambus.

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


Key Features of the Amended 2006 Equity Incentive Plan and Compensation Practices:

Vote Required; Recommendation of the Board of Directors

  Approval of the Amendment to the Incentive Plan requires the affirmative vote of a majority of the shares of our Common Stock that are present in person or proxy and entitled to vote at the Annual Meeting.

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Our Board of Directors recommends that you vote "FOR" the Amendment to the 2006 Equity Incentive Plan and the increase to the number of shares reserved for issuance thereunder.

Summary of the 2006 Equity Incentive Plan

 

The following is a summary of the principal features of the Incentive Plan and its operation. The summary is qualified in its entirety by reference to the Incentive Plan, as amended giving effect to this Proposal Three, set forth in Appendix A.

 

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

 

stock options

 

stock appreciation rights

 

restricted stock

 

restricted stock units

 

performance shares and performance units

 

other stock or cash awards

 

Each of these is referred to individually as an "Award." Those who are eligible for Awards under the Incentive Plan include employees, directors and consultants who provide services to the Company and its affiliates. As of March 1, 2012, approximately 500 employees, directors and consultants would be eligible to participate in the Incentive Plan.

Number of Shares of Common Stock Available Under the Incentive Plan

 

If stockholders approve Proposal 3, an additional 6,500,000 shares of the Company's Common Stock will be reserved for issuance under the Incentive Plan. As of March 1, 2012, 10.9 million shares were subject to outstanding options granted under the Incentive Plan, with a weighted average exercise price of $16.38 per share and weighted average remaining term of 7.48 years, and 1.0 million shares were subject to outstanding RSUs granted and unvested under the Incentive Plan. 0.3 million shares remained available for any new Awards to be granted in the future. Shares subject to Awards (excluding stock options) granted with an exercise price less than the fair market value on the date of grant count against the share reserve as 1.5 shares for every one share subject to such an Award. To the extent that a share that was subject to an Award that counted as 1.5 shares against the Incentive Plan reserve pursuant to the preceding sentence is returned to the Incentive Plan, the Incentive Plan reserve will be credited with 1.5 shares that will thereafter be available for issuance under the Incentive Plan.

 

If an Award expires or becomes unexercisable without having been exercised in full, or, with respect to full value awards, is

   

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forfeited to or repurchased by the Company, the unpurchased (or forfeited or repurchased, as applicable) shares that were subject to the Award will become available for future grant or sale under the Incentive Plan. Upon exercise of a stock appreciation right settled in shares, the gross number of shares covered by the portion of the Award that is exercised will cease to be available under the Incentive Plan. Shares that have been issued under the Incentive Plan under any Award will not be returned to or become available for future distribution under the Incentive Plan; provided, however, that if unvested shares of any full value awards are repurchased by the Company or are forfeited to the Company, those shares will become available for future grant under the Incentive Plan. Shares used to pay the exercise or purchase price of an Award and/or to satisfy the tax withholding obligations related to an Award will not become available for future grant or sale under the Incentive Plan. To the extent an Award is paid out in cash rather than Shares, such cash payments will not reduce the number of Shares available for issuance under the Incentive Plan.

 

If we declare a stock dividend or engage in a reorganization or other change in our capital structure, including a merger, our Board of Directors will have the discretion to adjust the number of shares:

 

available for issuance under the Incentive Plan

 

subject to outstanding Awards

 

specified as per-person limits on Awards, as appropriate to reflect the change

Administration of the Incentive Plan

 

A committee or committees of independent, non-employee directors satisfying applicable laws and appointed by our Board of Directors administers the Incentive Plan. To make grants to certain of our officers and key employees, the members of the committee(s) must qualify as "non-employee directors" under Rule 16b-3 of the Securities Exchange Act of 1934, and as "outside directors" under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") so that we can receive a federal tax deduction for certain compensation paid under the Incentive Plan. Subject to the terms of the Incentive Plan, the administrator has the sole discretion to select the employees, consultants, and directors who will receive Awards, determine the terms and conditions of Awards, and to interpret the provisions of the Incentive Plan and outstanding Awards. Notwithstanding the foregoing, without the consent of the Company's stockholders and the applicable Award holder, the administrator may not modify or amend an option or stock appreciation right to reduce the exercise price of that Award after it has been granted or to cancel any outstanding option or stock appreciation right and

   

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replace it with a new option or stock appreciation right with a lower exercise price.

Options

 

The administrator is able to grant nonstatutory stock options and incentive stock options under the Incentive Plan. The administrator determines the number of shares subject to each option, although the Incentive Plan provides that a participant may not receive options for more than 1,000,000 shares in any fiscal year, except in connection with his or her initial service as an employee with us, in which case he or she may be granted an option to purchase up to an additional 1,000,000 shares.

 

The administrator determines the exercise price of options granted under the Incentive Plan, provided the exercise price must be at least equal to the fair market value of our Common Stock on the date of grant. In addition, the exercise price of an incentive stock option granted to any participant who owns more than 10% of the total voting power of all classes of our outstanding stock must be at least 110% of the fair market value of our Common Stock on the grant date.

 

The term of an option may not exceed ten years, except that, with respect to any participant who owns 10% of the voting power of all classes of our outstanding capital stock, the term of an incentive stock option may not exceed five years.

 

After termination of service with us, a participant will be able to exercise the vested portion of his or her option for the period of time stated in the Award agreement. If no such period of time is stated in the participant's Award agreement, the participant will generally be able to exercise his or her option for (i) three months following his or her termination for reasons other than death or disability, and (ii) twelve months following his or her termination due to death or disability. In no event may an option be exercised later than the expiration of its term.

Stock Appreciation Rights

 

The administrator is able to grant stock appreciation rights, which are the rights to receive the appreciation in fair market value of common stock between the exercise date and the date of grant. We can pay the appreciation in either cash or shares of common stock. Stock appreciation rights become exercisable at the times and on the terms established by the administrator, subject to the terms of the Incentive Plan. The administrator, subject to the terms of the Incentive Plan, has complete discretion to determine the terms and conditions of stock appreciation rights granted under the Incentive Plan, provided, however, that the exercise price may not be less than 100% of the fair market value of a share on the date of grant. The term of a stock appreciation right may not exceed ten years. No participant will be granted stock appreciation rights covering more than 1,000,000 shares during any fiscal

   

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year, except that a participant may be granted stock appreciation rights covering up to an additional 1,000,000 shares in connection with his or her initial service as an employee with us. Shares retained by the Company to pay withholding taxes in connection with the grant of a stock appreciation right do not become available for issuance as future awards under the Incentive Plan.

 

After termination of service with us, a participant will be able to exercise the vested portion of his or her stock appreciation right for the period of time stated in the Award agreement. If no such period of time is stated in a participant's Award agreement, a participant will generally be able to exercise his or her stock appreciation right for (i) three months following his or her termination for reasons other than death or disability, and (ii) twelve months following his or her termination due to death or disability. In no event will a stock appreciation right be exercised later than the expiration of its term.

Restricted Stock

 

Awards of restricted stock are rights to acquire or purchase shares of our Common Stock, which vest in accordance with the terms and conditions established by the administrator in its sole discretion provided, however, that, an Award of restricted stock will not vest more rapidly than one-third (1/3rd) of the total number of shares of restricted stock each year from the date of grant, unless the administrator determines that the Award of restricted stock is to vest upon on the achievement of performance criteria and the period for measuring such performance will cover at least twelve (12) months; provided, further, that the administrator may grant Awards of restricted stock, restricted stock units, and performance units/shares covering up to 5% of the total number of shares reserved for issuance under the Plan that do not satisfy the forgoing vesting requirements.

 

The administrator, in its sole discretion, may provide at the time of or following the date of grant for accelerated vesting for an Award of restricted stock (except that the number of shares subject or issuable pursuant to Awards of restricted stock, restricted stock units, and performance units/shares eligible for such accelerated vesting shall not exceed 5% of the total number of shares reserved for issuance under the Plan) or for accelerated vesting upon or in connection with a change in control or upon or in connection with a participant's termination of service due to death, disability or retirement.

 

The Award agreement generally will grant us a right to repurchase or reacquire the shares upon the termination of the participant's service with us for any reason (including death or disability). The administrator will determine the number of shares granted pursuant to an Award of restricted stock, but no participant will be granted a right to purchase or

   

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acquire more than 200,000 shares of restricted stock during any fiscal year, except that a participant may be granted up to an additional 300,000 shares of restricted stock in connection with his or her initial employment with us.

Restricted Stock Units

 

Awards of restricted stock units result in a payment to a participant only if the vesting criteria the administrator establishes is satisfied, provided, however, that, an Award of restricted stock units will not vest more rapidly than one-third (1/3rd) of the total number of restricted stock units each year from the date of grant, unless the administrator determines that the restricted stock units are to vest upon the achievement of performance criteria and the period for measuring such performance will cover at least twelve (12) months; provided, further, that the administrator may grant Awards of restricted stock, restricted stock units, and performance units/shares covering up to 5% of the total number of shares reserved for issuance under the Plan that do not satisfy the forgoing vesting requirements. Upon satisfying the applicable vesting criteria, the participant will be entitled to the payout specified in the Award agreement.

 

Notwithstanding the foregoing and subject to any restrictions otherwise provided herein, at any time after the grant of restricted stock units, the administrator may reduce or waive any vesting criteria that must be met to receive a payout.

 

Further, the administrator, in its sole discretion, may provide at the time of or following the date of grant for accelerated vesting for an Award of restricted stock (except that the number of shares subject or issuable pursuant to Awards of restricted stock, restricted stock units, and performance units/shares eligible for such accelerated vesting shall not exceed 5% of the total number of shares reserved for issuance under the Plan) or for accelerated vesting upon or in connection with a change in control or upon or in connection with a participant's termination of service due to death, disability or retirement.

 

The administrator, in its sole discretion, may pay earned restricted stock units in cash, shares, or a combination thereof. Restricted stock units that are fully paid in cash will not reduce the number of shares available for grant under the Incentive Plan. On the date set forth in the Award agreement, all unearned restricted stock units will be forfeited to us. The administrator determines the number of restricted stock units granted to any participant, but during any fiscal year, no participant may be granted more than 200,000 restricted stock units, except that the participant may be granted up to an additional 300,000 restricted stock units in connection with his or her initial employment with us.

   

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Performance Units and Performance Shares

 

The administrator is able to grant performance units and performance shares, which are Awards that result in a payment to a participant only if the performance goals or other vesting criteria the administrator establishes are achieved or the Awards otherwise vest, provided, however, that, Awards of performance units and performance shares will not vest more rapidly than one-third (1/3rd) of the total number of performance units and performance shares each year from the date of grant, unless the administrator determines that the performance units and performance shares are to vest upon the achievement of performance criteria and the period for measuring such performance will cover at least twelve (12) months; provided, further, that the administrator may grant Awards of restricted stock, restricted stock units, and performance units/shares covering up to 5% of the total number of shares reserved for issuance under the Plan that do not satisfy the forgoing vesting requirements.

 

The administrator, in its sole discretion, may provide at the time of or following the date of grant for accelerated vesting for an Award of performance units and performance shares (except that the number of shares subject or issuable pursuant to awards of restricted stock, restricted stock units, and performance units/shares eligible for such accelerated vesting shall not exceed 5% of the total number of shares reserved for issuance under the Plan) or for accelerated vesting upon or in connection with a change in control or upon or in connection with a participant's termination of service due to death, disability or retirement.

 

The administrator establishes performance or other vesting criteria in its discretion, which, depending on the extent to which they are met, will determine the number and/or the value of performance units and performance shares to be paid out to participants. Notwithstanding the foregoing, after the grant of performance units or shares, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance units or shares. During any fiscal year, no participant will receive more than 200,000 performance shares and no participant will receive performance units having an initial value greater than $2,000,000, except that a participant may be granted performance shares covering up to an additional 300,000 shares in connection with his or her initial employment with us. Performance units will have an initial dollar value established by the administrator on or before the date of grant. Performance shares will have an initial value equal to the fair market value of a share of our Common Stock on the grant date.

   

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Performance Goals

 

Awards of restricted stock, restricted stock units, performance shares, performance units and other incentives under the Incentive Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code and may provide for a targeted level or levels of achievement including: cash flow; cash position; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; economic profit; economic value added; equity or stockholder's equity; market share; net income; net profit; net sales; operating earnings; operating income; profit before tax; ratio of debt to debt plus equity; ratio of operating earnings to capital spending; sales growth; return on net assets; or total return to stockholders. The performance goals may differ from participant to participant and from Award to Award and may be used to measure the performance of our business as a whole or one of our business units and may be measured relative to a peer group or index.

Grants to Non-Employee Directors

 

The Incentive Plan provides for automatic, nondiscretionary awards to non-employee directors. The automatic grants do not limit the ability of the administrator to grant other discretionary awards to non-employee directors under the Incentive Plan and the administrator has the discretion to change the terms of the automatic grants prospectively.

Initial Equity Grant

 

Each non-employee director will be automatically granted a nonstatutory stock option to purchase 40,000 shares when he or she first becomes a member of our Board of Directors. The term of such options shall not exceed ten years. The option grants vest over a four-year period, with one-eighth of shares subject to the option vesting six months after the date of grant and the remaining shares vesting ratably each month thereafter, subject to the non-employee director continuing to serve through each applicable vesting date.

Annual Equity Grant

 

Each non-employee director shall automatically receive an annual award of restricted stock units on October 1 of each year. The number of restricted stock units subject to the award will be determined in the sole discretion of our Board of Directors on or prior to the award becoming effective on the applicable October 1 grant date. For a description of the current non-employee director annual equity grants, see "Executive Compensation—Compensation of Directors." The restricted stock unit grants vest in full at the end of a one-year period, subject to the non-employee director continuing to serve through each applicable vesting date. If the non-employee discontinues service prior to the vesting of any restricted stock unit grant, the administrator may, in its discretion, permit such grant to vest pro rata for the portion of the year during which such director served.

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  The automatic grants do not limit the ability of the administrator to grant other discretionary awards to non-employee directors under the Incentive Plan and the administrator has the discretion to change the terms of the automatic grants prospectively.

Transferability of Awards

 

Awards granted under the Incentive Plan are generally not transferable, and all rights with respect to an Award granted to a participant generally will be available during a participant's lifetime only to the participant or such participant's estate.

Change of Control

 

The terms of the Incentive Plan provide that all outstanding equity awards may vest upon a "double-trigger" termination in the event of a change of control, as described under the "Executive Compensation—Outstanding Equity Awards at Fiscal 2011 Year-End" table.

Amendment and Termination of the Incentive Plan

 

The administrator will have the authority to amend, alter, suspend or terminate the Incentive Plan, except that stockholder approval will be required for any amendment to the Incentive Plan to the extent required by any applicable laws. No amendment, alteration, suspension or termination of the Incentive Plan will impair the rights of any participant, unless mutually agreed otherwise between the participant and the administrator and which agreement must be in writing and signed by the participant and us. The Incentive Plan will terminate in March 2016, unless our Board of Directors terminates it earlier.

Number of Awards Granted to Employees, Consultants, and Directors

 

The number of Awards that an employee, director or consultant may receive under the Incentive Plan is in the discretion of the administrator and therefore cannot be determined in advance.

 

The following table sets forth (i) the aggregate number of shares of common stock subject to options granted under the Incentive Plan during the last fiscal year, (ii) the average per share exercise price of such options, (iii) the aggregate number of shares issued pursuant to awards of restricted stock granted under the Incentive Plan during the last fiscal year, and (iv) the dollar value of such shares based on the closing price per share on the grant dates.

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Name of Individual or Group
  Number of
Options
Granted
  Average
Per Share
Exercise
Price
  Number of
Shares of
Restricted
Stock
  Dollar Value
of Shares of
Restricted
Stock(1)
 

Named Executive Officers:

                         

Harold Hughes

    130,000   $ 20.93     32,000   $ 669,760  

Satish Rishi

    35,000   $ 20.93     8,000   $ 167,440  

Thomas R. Lavelle

    35,000   $ 20.93     8,000   $ 167,440  

Sharon E. Holt

    40,000   $ 20.93     10,000   $ 209,300  

Martin Scott

    40,000   $ 20.93     10,000   $ 209,300  

All executive officers, as a group

    321,000   $ 20.93     97,888   $ 2,048,796  

All directors who are not executive officers, as a group

            81,284   $ 1,120,094  

All employees who are not executive officers, as a group

    2,036,001   $ 18.50     195,666   $ 3,525,090  

(1)
The value of a restricted stock unit award is based on the fair market value as of the grant date of such award determined pursuant to FASB ASC Topic 718.

Federal Tax Aspects

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

Nonstatutory Stock Options

 

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

Incentive Stock Options

 

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

   

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Stock Appreciation Rights

 

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

Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares

 

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

Tax Effect for Rambus

 

We generally will be entitled to a tax deduction in connection with an Award under the Incentive Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock option). Special rules limit the deductibility of certain compensation paid to our Chief Executive Officer, Chief Financial Officer and to each of our three highest compensated officers. Under Section 162(m) of the Internal Revenue Code, no deduction is allowed for certain compensation with respect to any of these specified executives only to the extent that the amount for the taxable year for such executive exceeds $1,000,000. However, the deductibility of such compensation in excess of $1,000,000 may not be limited under Section 162(m) and the applicable treasury regulations if such compensation qualifies as performance based.

Section 409A

 

Section 409A of the Code provides certain new requirements on non-qualified deferred compensation arrangements. These include new requirements with respect to an individual's election to defer compensation and the individual's selection of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions must be made on or following the occurrence of certain events (e.g., the individual's separation from service, a predetermined date, or the individual's death). Section 409A imposes restrictions on an individual's ability to change his or her distribution timing or form after the compensation has

   

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been deferred. For certain individuals who are officers, Section 409A requires that such individual's distribution commence no earlier than six months after such officer's separation from service.

 

Awards granted under the Incentive Plan with a deferral feature will be subject to the requirements of Section 409A. If an Award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the Award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an Award that is subject to Section 409A fails to comply with Section 409A's provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. In addition, certain states such as California have adopted similar provisions.

 

The foregoing is only a summary of the effect of federal income taxation upon participants and us with respect to the grant and exercise of awards under the Incentive Plan. It does not purport to be complete, and does not discuss the tax consequences of a participant's death or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside.

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PROPOSAL FOUR:
APPROVAL OF THE AMENDMENT TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN

        The stockholders are being asked to approve an amendment to our 2006 Employee Stock Plan, as amended and restated on February 21, 2007 (the "Purchase Plan") to add 1,500,000 shares to the total number of shares reserved for issuance under the Purchase Plan. Our Board of Directors has approved the increase in the number of shares reserved for issuance under the Purchase Plan, subject to approval from stockholders at the Annual Meeting. If stockholders do not approve the amendment to the Purchase Plan, no shares will be added to the total number of shares reserved for issuance under the Purchase Plan.

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

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

Vote Required; Recommendation of the Board of Directors

  Approval of the Amendment to the Purchase Plan requires the affirmative vote of a majority of the shares of our Common Stock that are present in person or proxy and entitled to vote at the Annual Meeting.

 

Our Board of Directors recommends that you vote "FOR" the Amendment to the 2006 Employee Stock Purchase Plan and the increase to the number of shares reserved for issuance thereunder.

Summary of the 2006 Employee Stock Purchase Plan

 

The following is a summary of the principal features of the Purchase Plan and its operation. The summary is qualified in its entirety by reference to the Purchase Plan, as amended giving effect to this Proposal Four, set forth in Appendix B.

General

 

The Purchase Plan was adopted by the Board of Directors in March 2006, and approved by our stockholders at the 2006 Annual Meeting. The purpose of the Purchase Plan is to provide employees with an opportunity to purchase shares of our Common Stock through payroll deductions.

Administration

 

The Board of Directors or a committee appointed by the Board of the Directors administers the Purchase Plan. All questions of interpretation or application of the Purchase Plan are determined by the administrator and its decisions are final, conclusive and binding upon all participants.

Eligibility

 

Each of our employees or the employees of our designated subsidiaries who is a common law employee and whose customary employment with us or one of our designated subsidiaries is at least twenty hours per week and more than

   

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five months in a calendar year is eligible to participate in the Purchase Plan subject to the laws in which our designated subsidiaries operate; except that no employee shall be granted an option under the Purchase Plan (i) to the extent that, immediately after the grant, such employee would own 5% or more of the total combined voting power of all classes of our capital stock or the capital stock of one of the designated subsidiaries, or (ii) to the extent that his or her rights to purchase stock under all of our employee stock purchase plans accrues at a rate which exceeds $25,000 worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year.

Offering Period

 

Each offering period under the Purchase Plan will expire on the earliest to occur of (i) the completion of the purchase of shares on the last exercise date occurring within twenty-four months of the offering date of such option, (ii) such shorter option period as may be determined by the administrator, or (iii) the date on which an eligible employee ceases to be a participant under the Purchase Plan. Each offering period will generally consist of a number of purchase periods after which shares will be purchased. Until the administrator determines otherwise, a purchase period will be approximately six months and run from May 1 to November 1 and November 1 to May 1. To participate in the Purchase Plan, an eligible employee must authorize payroll deductions pursuant to the Purchase Plan. Such payroll deductions may not be less than 1% and may not exceed 15% of a participant's compensation during the offering period. Once an employee becomes a participant in the Purchase Plan, the employee automatically will participate in each successive offering period until the employee withdraws from the Purchase Plan or the employee's employment with us or the designated subsidiaries terminates. At the beginning of each offering period, each participant automatically is granted an option to purchase shares of our Common Stock. The option expires at the end of the offering period or upon termination of employment, whichever is earlier, but is exercised at the end of each purchase period to the extent of the payroll deductions accumulated during such purchase period.

Purchase Price

 

Shares of our Common Stock may be purchased under the Purchase Plan at a purchase price not less than 85% of the lesser of the fair market value of the common stock on (i) the first day of the offering period, or (ii) the last day of the purchase period. The fair market value of our Common Stock on any relevant date will be the closing price per share as reported on the Nasdaq Stock Market, or the mean of the closing bid and asked prices, if no sales were reported, as quoted on such exchange or reported in The Wall Street Journal .

   

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Payment of Purchase Price; Payroll Deductions

 

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

 

All payroll deductions made for a participant are credited to the participant's account under the Purchase Plan, are withheld in whole percentages only and are included with our general funds. Funds received by us pursuant to exercises under the Purchase Plan are also used for general corporate purposes. A participant may not make any additional payments into his or her account.

Withdrawal

 

Generally, a participant may withdraw from an offering period at any time by written or electronic notice without affecting his or her eligibility to participate in future offering periods. However, once a participant withdraws from a particular offering period, that participant may not participate again in the same offering period. To participate in a subsequent offering period, the participant must deliver to us a new subscription agreement.

Termination of Employment

 

Upon termination of a participant's employment for any reason, including disability or death, he or she will be deemed to have elected to withdraw from the plan and the payroll deductions credited to the participant's account (to the extent not used to make a purchase of our Common Stock) will be returned to him or her or, in the case of death, to the person or persons entitled thereto as provided in the Purchase Plan, and such participant's option will automatically be terminated.

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

   

Changes in Capitalization

 

Subject to any required action by our stockholders, the number of shares reserved under the Purchase Plan, the maximum number of shares that may be purchased during any purchase period, as well as the price per share of common stock covered by each option under the Purchase Plan which

   

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has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of common stock resulting from any dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange.

Dissolution or Liquidation

 

In the event of our proposed dissolution or liquidation, the administrator shall shorten any purchase periods and offering periods then in progress by setting a new exercise date and any offering periods shall end on the new exercise date. The new exercise date shall be prior to the dissolution or liquidation. If the administrator shortens any purchase periods and offering periods then in progress, the administrator shall notify each participant in writing, at least ten business days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.

Change of Control

 

In the event of any "change of control," as defined in the Purchase Plan, each option under the Purchase Plan shall be assumed or an equivalent option shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation. In the event the successor corporation refuses to assume or substitute for the options, the administrator shall shorten any purchase periods and offering periods then in progress by setting a new exercise date and any offering periods shall end on the new exercise date. The new exercise date shall be prior to the merger or change of control. If the administrator shortens any purchase periods and offering periods then in progress, the administrator shall notify each participant in writing, at least ten business days prior to the new exercise date, that the exercise date has been changed to the new exercise date and that the option will be exercised automatically on the new exercise date, unless the participant has already withdrawn from the offering period.

Amendment or Termination

 

Our administrator may at any time terminate or amend the Purchase Plan including the term of any offering period then outstanding. Generally, no such termination can adversely affect options previously granted.

Number of Shares Purchased by Certain Individuals and Groups

 

Given that the number of shares that may be purchased under the Purchase Plan is determined, in part, based on the Common Stock's market value at the beginning and end of each Offering Period (or upon a purchase date within an Offering Period) and given that participation in the Purchase Plan is voluntary on the part of employees, the actual number of shares that may be purchased by any individual is not determinable.

   

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For illustrative purposes, the following table sets forth (a) the number of shares of Common Stock that were purchased under the Purchase Plan during 2011 by our named executive officers, our executive officers as a group, and by all employees, and (b) the weighted average per share purchase price paid for such shares by each such group.

Name of Individual or Group
  Number of
Purchased
Shares
  Weighted
Average
Purchase Price
 

Named Executive Officers:

             

Harold Hughes

    1,268   $ 16.50  

Satish Rishi

    1,269   $ 16.50  

Thomas R. Lavelle

      $  

Sharon E. Holt

    208   $ 15.48  

Martin Scott

      $  

All executive officers, as a group

    4,014   $ 16.45  

All employees who are not executive officers, as a group

    267,790   $ 15.61  

 

Federal Tax Aspects

  The following summary of the effect of federal income taxation upon the participant and us with respect to the shares purchased under the Purchase Plan does not purport to be complete, and does not discuss the tax consequences of a participant's death or the income tax laws of any state or foreign country in which the participant may reside.

 

The Purchase Plan, and the right of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. Under these provisions, no income will be taxable to a participant until the shares purchased under the Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition of the shares, the participant will generally be subject to tax in an amount that depends upon the holding period. If the shares are sold or otherwise disposed of more than two years from the first day of the applicable offering period and one year from the applicable date of purchase, the participant will recognize ordinary income measured as the lesser of (i) the excess of the fair market value of the shares at the time of such sale or disposition over the purchase price, or (ii) an amount equal to 15% of the fair market value of the shares as of the first day of the applicable offering period. Any additional gain will be treated as long-term capital gain. If the shares are sold or otherwise disposed of before the expiration of these holding periods, the participant will recognize ordinary income generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on how long the shares have been held from the date of purchase. We generally are not entitled to a deduction for amounts taxed as ordinary income

   

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or capital gain to a participant except to the extent of ordinary income recognized by participants upon a sale or disposition of shares prior to the expiration of the holding periods described above.

 

The foregoing is only a summary of the effect of federal income taxation upon participants and us with respect to the grant and exercise of awards under the Purchase Plan. It does not purport to be complete, and does not discuss the tax consequences of a participant's death or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside.

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PROPOSAL FIVE:
APPROVAL OF THE OPTION EXCHANGE PROGRAM

        The stockholders are being asked to approve a one-time stock option exchange program for eligible employee stock option holders (the "Exchange Program"). The proposed Exchange Program would enable our eligible stock option holders to surrender certain "underwater" stock options that have an exercise price above $14.50 per share of our common stock for cancellation in exchange for new options to be granted under our Incentive Plan to purchase a reduced number of shares based on a specified exchange ratio.

        We historically have granted stock options to our employees to encourage them to act as owners of the Company, which helps align their interests with those of our stockholders and reward performance that enhances stockholder value.

        2011 was a mixed year for Rambus. While our recurring revenues and pace of signing licensees improved during the year, the adverse decisions by the Court of Appeals for the Federal Circuit in May 2011 and in the San Francisco Superior Court of the State of California in November 2011 caused our share price to drop significantly. As a result, approximately 97% of stock options are underwater (meaning the exercise price of each of those stock options is greater than the per share fair market value of the Company's common stock) as of March 1, 2012. This means that the majority of these stock options are no longer effective incentives to motivate and retain employees. These underwater options are perceived as having little or no value by our employees. In addition, although these stock options are not likely to be exercised as long as our stock price is lower than the applicable exercise price, we will continue to record stock-based compensation expense for these unvested options against our earnings. Further, they will remain on our books with the potential to dilute stockholders' interests for up to the full term of the options, while delivering little or no retention or incentive value, unless they are surrendered or cancelled.

        On February 23, 2012, our Board of Directors authorized, subject to stockholder approval, the proposed Exchange Program that will permit our eligible employees (other than our named executive officers, all senior vice presidents and members of our Board of Directors) to exchange certain outstanding stock options (the stock options eligible for the Exchange Program are referred to here as "Eligible Options") that were granted with an exercise price greater than or equal to $14.50 for new options to purchase fewer shares subject to a specified exchange ratio. Our intent in using this threshold is to ensure that only outstanding stock options that are substantially underwater are eligible for the Exchange Program.

         The Exchange Program will take place if and only if the Exchange Program is approved by our stockholders. If our stockholders do not approve the Exchange Program, Eligible Options would remain outstanding and in effect in accordance with their existing terms. We would continue to recognize compensation expense for these eligible options even though the stock options may have little or no retention or incentive value for employees.

        If approved by stockholders, the Exchange Program will begin within 12 months of the date stockholders approve the program. Within this timeframe, the actual start date will be determined at the discretion of our Board of Directors. Eligible employees then will be offered the opportunity to participate in the Exchange Program under an offer statement to be filed with the SEC and distributed to all eligible employees. Eligible employees would be given at least twenty business days to decide whether to accept the offer of the new options in exchange for the surrender of their Eligible Options. The surrendered Eligible Options would be cancelled on the day that the Exchange Program closes and the shares subject to surrendered Eligible Options will not be available for reissuance under the Incentive Plan. The new options would be granted on the date of cancellation of the old Eligible Options and such new options would have an exercise price equal to the fair market value of our Common Stock on the date of the new grant.

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Key Features of the Option Exchange Program:

If approved, the Exchange Program will begin within 12 months of the date stockholders approve the program.

Voting Required; Recommendation of the Board of Directors

  The affirmative vote of a majority of the outstanding shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the Exchange Program.

 

Our Board of Directors recommends that you vote "FOR" the approval of the Exchange Program for our employees.

Reasons for the Exchange Program

 

Our Board of Directors believes the Exchange Program is an important component in our strategy to align employee and stockholder interests through our equity compensation practices because it will permit us to:

 

provide renewed incentives for the employees who participate in the Exchange Program by issuing them new stock options that will vest over a period of time following the exchange date if they remain employed with us. Providing renewed incentives to our employees is the primary purpose of the Exchange Program and we believe the Exchange Program will enable us to enhance long-term stockholder value by aligning the interests of our employees more fully with the interests of our stockholders;

 

meaningfully reduce our total number of shares subject to outstanding equity awards, or "overhang," represented by outstanding stock options that have high exercise prices and may no longer incentivize their holders to remain as our employees. Keeping these stock options outstanding does not serve the interests of our stockholders and does not provide the benefits intended by our equity compensation program. By replacing the surrendered Eligible Options with a lesser number of new options, our overhang will be decreased. The overhang represented by the sstock options issued pursuant to the Exchange Program will reflect an appropriate balance between the goals for our equity compensation program and our interest in minimizing our overhang and the dilution of our stockholders' interests; and

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recapture value from compensation costs that we already are incurring with respect to outstanding stock options. These stock options were granted at the then fair market value of our common stock. Under applicable accounting rules, we will have to recognize approximately $189.0 million in stock-based compensation expense related to these stock options, of which $153.2 million has already been expensed as of December 31, 2011 and $35.8 million will continue to be obligated to expense, even if these stock options are never exercised because the majority remain underwater. As of March 1, 2012, the fair value associated with outstanding Eligible Options was approximately $100.0 million. We believe it is not an efficient use of our resources to recognize compensation expense on equity awards that do not provide value to our employees. By replacing stock options that have little or no retention or incentive value with equity awards that will provide both retention and incentive value, we will be making efficient use of our resources.

Eligibility of Stock Options for the Exchange Program

 

Generally, stock options will be eligible for exchange in the Exchange Program if:

 

the stock option's exercise price exceeds $14.50 (measured as of the start date of the Exchange Program).

 

Our intent in using this eligibility threshold is to ensure that only outstanding stock options that are appropriately underwater are eligible for the Exchange Program.

 

As of March 1, 2012, stock options to purchase approximately 16.4 million shares of our common stock were outstanding under the Plan. For example, if we were to start the Exchange Program on March 1, 2012, our common stock closed at $7.06 on March 1, 2012 and all stock options with an exercise price of $14.50 or above would be eligible for the Exchange Program. On March 1, 2012, the number of shares underlying eligible options with an exercise price of $14.50 or higher was 7.4 million shares.

 

In considering how best to continue to motivate, retain and reward our employees who have stock options that are underwater, we evaluated several alternatives, including the following:

 

Increase Cash Compensation .    To replace the intended benefits of equity incentives, we would need to substantially increase long term retention-based cash compensation. These increases would substantially increase our compensation expense and reduce our cash position and cash flow from operations. In addition, these increases would not reduce our overhang.

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Grant Additional Equity Awards .    We also considered granting employees additional equity awards at current market prices. However, these additional grants would substantially increase our equity award overhang and the potential dilution to our stockholders and would increase our compensation expense accordingly.

Eligible Option Holders

 

The Exchange Program will be open to any stock option holder who:

 

holds Eligible Options;

 

is not a named executive officer, senior vice president, or member of our Board of Directors at the start of the Exchange Program; and

 

at the start of the Exchange Program:

 

is an employee in our U.S. locations; or

 

is employed by or provides services to us or our subsidiaries, but only to the extent such stock option holders' participation is permitted by local laws.

 

We may, however, exclude otherwise eligible stock option holders in certain non-U.S. jurisdictions if local tax or securities laws or other considerations would make their participation illegal, infeasible or impractical. Any eligible employee who elects to participate in the Exchange Program but whose employment terminates for any reason prior to the grant of the new options will retain his or her Eligible Options subject to their existing terms and will not receive a new stock option under the Exchange Program.

Exchange Ratios

 

The Exchange Program will not be a one-for-one exchange. We intend to set the exchange ratios for our eligible employees so that the exchange will approximate a value-for-value exchange and so that any additional stock-based compensation charge we will incur will be minimized.

 

Eligible employees who participate in the Exchange Program, will receive a receive a new stock option for a lesser number of shares equal to (a) the number of shares underlying the stock option exchanged multiplied by (b) an exchange ratio set at a ratio to approximate a value-for-value exchange. The exact exchange ratio will be set by our Board of Directors prior to the start date of the Exchange Program.

 

The exchange ratios of surrendered Eligible Options to newly issued stock options for eligible employees will be established by grouping together Eligible Options with similar grant dates and assigning an appropriate exchange ratio to each grouping. The exchange ratios will be determined so that the total fair value of all newly issued options within each group will be equal to or slightly less than the total fair value of current option holdings.

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We will compute the exchange ratios on an accounting value-for-value basis pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock Compensation ("ASC 718") using the Black-Scholes valuation model. The calculation of fair value using the Black-Scholes model takes into account several variables, such as the volatility of our stock and the expected term of an award. As a result, the exchange ratios do not necessarily increase as the exercise price of the stock option increases. Setting the exchange ratios in this manner is intended to result in the issuance of new stock options that have a fair value approximately equal to the fair value of the surrendered eligible stock options that they replace. This approach will minimize any additional compensation cost that we must recognize on the stock options, other than immaterial compensation expense that might result from fluctuations in our stock price after the exchange ratios have been set but before the exchange is made.

 

Although the exchange ratios cannot be determined now, we can provide an example if we make certain assumptions regarding the start date of the offer, the fair value of the eligible stock options, and the fair market value of our Common Stock. For example, if we began the Exchange Program March 1, 2012, which would allow us to include in the Exchange Program a substantial percentage of our outstanding underwater stock options with an exercise price above $14.50 per share.

 

If, at the time we set the exchange ratios, the fair market value of our Common Stock was $8.00 per share, then based on the above method of determining the exchange ratio, the following exchange ratios would apply:

 

 
If the Grant Date of an Eligible Stock Option Is:
  The Exchange Ratio of
Stock Options to
New Stock Options
Would Be:
 

April 1, 2003 to May 31, 2003

  15 for 1
 

June 1, 2003 to October 31, 2003

  9.5 for 1
 

November 1, 2003 to April 30, 2004

  20.5 for 1
 

May 1, 2004 to January 31, 2005

  6.5 for 1
 

February 1, 2005 to February 14, 2006

  3.75 for 1
 

February 15, 2006 to May 31, 2006

  7.25 for 1
 

June 1, 2006 to January 31, 2009

  2.75 for 1
 

September 1, 2009 through now

  2 for 1

 

  The total number of new stock options a participating employee will receive with respect to a surrendered Eligible Option will be determined by converting the number of shares underlying the surrendered Eligible Option according to the applicable exchange ratio and rounding down to the nearest whole share. The exchange ratios will be applied in groupings of grants based on price.

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For purposes of example only, if a participating employee exchanged an Eligible Option for 1,000 shares with an exercise price of $14.75 per share granted on June 7, 2005 and the exchange ratio was one new stock option for every 3.75 shares covered by the surrendered Eligible Option, he or she would receive 266 new stock options in exchange for the surrendered stock option (1,000 divided by 3.75). If the participating employee also exchanged another Eligible Option for 2,000 shares with an exercise price of $20.16 per share granted on December 1, 2010 and the exchange ratio was one new stock option for every 2 shares covered by the surrendered Eligible Option, he or she would receive 1,000 new stock options in exchange for the surrendered eligible award (2,000 divided by 2).

 

Continuing this example, if we assume that all currently eligible stock options remain outstanding and the stock option holders remain eligible to participate, the following table summarizes information regarding the eligible stock options that would be granted in the exchange:

 

 
Grant Dates of Eligible Stock Options
  Number of
Shares
Underlying
Eligible
Options
  Weighted
Average
Exercise
Price of
Eligible
Options
  Weighted
Average
Remaining
Life of
Eligible
Options
(Years)*
  Exchange
Ratio
  Maximum
Number of
New Awards
That May Be
Granted
 
 

Apr 1, 2003 to May 31, 2003

    226,617   $ 17.85     0.96     15 for 1     15,107  
 

Jun 1, 2003 to Oct 31, 2003

    42,984     16.54     1.18     9.5 for 1     4,524  
 

Nov 1, 2003 to Apr 30, 2004

    521,800     29.45     1.50     20.5 for 1     25,453  
 

May 1, 2004 to Jan 31, 2005

    485,734     22.37     2.35     6.5 for 1     74,728  
 

Feb 1, 2005 to Feb 14, 2006

    1,049,052     16.78     3.19     3.75 for 1     279,747  
 

Feb 15, 2006 to May 31, 2006

    239,600     40.25     3.83     7.25 for 1     33,048  
 

Jun 1, 2006 to Jan 31, 2009

    2,068,978     19.19     5.17     2.75 for 1     752,355  
 

Sep 1, 2009 through now

    2,776,179     20.51     8.32     2 for 1     1,388,089  
                               
 

Total

    7,410,944                       2,573,051  

                    *
                    For purposes of this example, the remaining weighted average life of the eligible options is based on a June 1, 2012 start date.


Participation in the Exchange Program

  Eligible employees will not be required to participate in the Exchange Program. Participation in the Exchange Program is strictly voluntary.

 

Eligible employees will have an election period of at least 20 business days from the start of the Exchange Program in which to determine whether they wish to participate.

 

Because the decision whether to participate in the Exchange Program is completely voluntary, we are not able to predict which or how many employees will elect to participate, how many Eligible Options will be surrendered for exchange, and therefore how many new stock options may be issued.

 

As indicated above, executive officers and members of our Board of Directors are not eligible to participate in the Exchange Program.

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Election to Exchange Underwater Options

 

Eligible employees may decide to participate in the Exchange Program on a grant-by-grant basis. This means that eligible employees may elect to tender any or all of their Eligible Options. However, if an eligible employee elects to tender any shares subject to a particular Eligible Option in the Exchange Program, then the eligible employee must tender all shares subject to that particular Eligible Option.

Term and Vesting of New Options

 

None of the new stock options issued in the Exchange Program will be vested on the date of grant, but will become vested on the basis of the participating employee's continued services with us or any or our subsidiaries. All new stock options will be subject to a three year vesting schedule. The rate at which the new stock options will vest be as follows:

 

1/3 of the new stock option will vest on the one year anniversary of the exchange date; and

 

2/3 of the new stock option will vest over the next two years in equal monthly installments thereafter on the monthly anniversary of the exchange date.

 

Each new stock option will have a new term equal to the longer of five years or the original term of the Eligible Option it replaces, subject to earlier termination in the event of the employee's termination of employment with us or one of our subsidiaries.

Terms of New Options

 

Each new stock option issued in the Exchange Program will represent a right to purchase shares of our Common Stock on a specified future date at the fair market value of our Common Stock on the date of issuance. All new options granted pursuant to the Exchange Program will retain the status as the Eligible Option it replaces to the extent permissible under the law (e.g., if an Eligible Option was intended to be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, then the new option will be an incentive stock option to the extent permissible under the law). Except for the different exercise price, the vesting schedule described above, and the new term described above, all other terms and conditions of the new stock options issued in the Exchange Program will be substantially the same as those that apply to Eligible Options granted previously, except that prior grants made from equity plans other the Incentive Plan, if any, will now be governed by the terms and conditions of the Incentive Plan.

Terms of the Exchange Program

 

While the terms of the Exchange Program are expected to be materially similar to the terms described in this proposal, we may find it necessary or appropriate to change the terms of the exchange program to take into account our administrative needs, local law requirements, accounting rules, company

   

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policy decisions that make it appropriate to change the exchange program and the like. For instance, although we will not allow stock options below an exercise price which is at least $14.50, we may decide to exclude stock options granted below a higher price-point. As another example, we may alter the method of determining exchange ratios if we decide that there is a more efficient and appropriate way to set the ratios while still continuing to limit incremental compensation expense.

 

It is also possible that certain terms of the Exchange Program may need to be modified in countries outside the United States in order to comply with local requirements, or for tax, accounting or administrative reasons and/or that the exchange program may not be implemented in certain jurisdictions outside the United States if local law, expense, complexity, administrative burden or similar considerations would make it illegal, infeasible or impractical to do so. Additionally, we may decide not to implement the Exchange Program even if stockholder approval of the exchange program is obtained or may amend or terminate the exchange program once it is in progress if our stock price increases significantly or other factors that may render the Exchange Program detrimental to the Company and the long term interests of the stockholders. The final terms of the Exchange Program will be described in an offer to exchange that will be filed with the SEC. Although we do not anticipate that the staff of the SEC will require us to materially modify the terms of the exchange program, it is possible that we may need to alter the terms of the Exchange Program to comply with comments from the staff.

U.S. Tax Consequences

 

The following is a summary of the anticipated material United States federal income tax consequences of participating in the Exchange Program. A more detailed summary of the applicable tax considerations to participants will be provided in the offer to exchange. The tax consequences of the program are not entirely certain, however, and the Internal Revenue Service is not precluded from adopting a contrary position, and the law and regulations themselves are subject to change. We believe the exchange of Eligible Options for new options pursuant to the program should be treated as a non-taxable exchange and neither we nor any of our eligible employees should recognize any income for U.S. federal income tax purposes upon the surrender of eligible options and the grant of new options. If the option Exchange Program is open for 30 days or more, Eligible Options that were intended to be incentive stock options will be considered "modified," which will result in a deemed re-grant of the Eligible Option, whether or not they were exchanged. This would mean that for purposes of the incentive stock option rules the holding period measured from the date of grant would restart and the

   

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option holder would not receive any credit for the time from the original grant date of the eligible option.

Financial Accounting Consequences

 

We account for stock-based compensation in accordance with ASC 718. Under ASC 718, to the extent the fair value of each award of stock options granted pursuant to the option exchange program exceeds the fair value of the surrendered options at the modification date, such excess is considered incremental compensation. This excess, in addition to any remaining unrecognized expense for the Eligible Options surrendered in exchange for the new options, will be recognized by us as an expense for compensation. This expense will be recognized ratably over the vesting period of the new options in accordance with the requirements of ASC 718. In the event that any awards of new options are forfeited prior to their vesting due to termination of an employee's service, the compensation cost related to the forfeited stock options will not be recognized.

Impact of Exchange Program on our Stockholders

 

We are unable to predict the precise impact of the Exchange Program on our stockholders because we are unable to predict how many or which employees will exchange their Eligible Options. The Exchange Program is intended to restore competitive and appropriate equity incentives for our eligible employees, reduce our existing overhang and recapture value for compensation expense already being incurred.

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PROPOSAL SIX:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

        The Audit Committee has appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to Rambus to audit our consolidated financial statements for the fiscal year ending December 31, 2012.

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

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

Our History with PricewaterhouseCoopers

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

Principal Accountant Fees and Services

 

The aggregate fees billed for professional accounting services by PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2011, and December 31, 2010 are as follows:

 

   
  Fiscal Year Ended
December 31, 2011
  Fiscal Year Ended
December 31, 2010
 
 

Audit Fees(1)

  $ 1,287,153   $ 1,123,581  
 

Audit-Related Fees(2)

  $ 567,900   $  
 

Tax Fees(3)

  $ 71,116   $ 49,507  
 

All Other Fees(4)

  $ 2,807   $ 3,000  
             
 

Total Fees

  $ 1,928,976   $ 1,176,088  
             

                  (1)
                  Audit Fees consist of fees for PricewaterhouseCoopers LLP's professional services rendered for the audit of the Company's consolidated annual financial statements and review of the interim consolidated financial statements included in quarterly reports. Fees relating to professional services rendered for the audits of the effectiveness of internal control over financial reporting in fiscal 2011 and 2010 are included under "Audit Fees."

                  (2)
                  Audit-Related Fees consist of fees related to financial accounting and reporting standards related to acquisitions and work related to eXtensible Business Reporting Language ("XBRL").

                  (3)
                  Tax Fees primarily relate to tax studies, statutory tax compliance and technical tax advice in both years presented.

                  (4)
                  All Other Fees consist of fees for products and services other than the services described above. During fiscal 2011 and fiscal 2010, these fees related to a license to PricewaterhouseCoopers LLP's online accounting and auditing research tool and disclosure checklist.

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

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

Independence of PricewaterhouseCoopers LLP

 

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

Vote Required

 

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

 

The Board unanimously recommends that you vote "FOR" the ratification of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2012.

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EQUITY COMPENSATION PLAN INFORMATION

        The following table provides information as of December 31, 2011 with respect to the shares of our Common Stock that may be issued under our existing equity compensation plans.

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

Equity Compensation Plans Approved by Security Holders(1)

    14,815,755   $ 18.37     3,126,840  

Equity Compensation Plans Not Approved by Security Holders(2)

    535,351   $ 29.00      
                 

Total

    15,351,106   $ 18.75     3,126,840  

(1)
Data reflects our 1997 Stock Plan (the "1997 Plan"), Incentive Plan and Purchase Plan.

Our Incentive Plan was approved by our stockholders at our 2006 annual meeting, an increase to the 2006 Plan was approved at our 2009 annual meeting and we have submitted a further increase to the Incentive Plan in connection with this annual meeting. Under the Incentive Plan as approved, a total of 14,900,000 shares of our Common Stock were reserved for issuance prior to this meeting. The Purchase Plan was approved by our stockholders at our 2006 annual meeting and we have submitted a further increase to the Purchase Plan in connection with this annual meeting. Under the Purchase Plan as approved, a total of 1,600,000 shares of our Common Stock were reserved for purchase prior to this meeting.

As a result of the stockholder approval of our 2006 Plan, we terminated the 1997 Plan so that, as of the date of termination, no further awards have been or will be made thereunder, but the plan will continue to govern outstanding awards granted under that plan.

(2)
Data reflects our 1999 Nonstatutory Stock Option Plan described below.


1999 Nonstatutory Stock Option Plan

        The 1999 Nonstatutory Stock Option Plan is our only equity compensation plan that was not approved by our stockholders. As a result of the stockholder approval of our 2006 Plan, we terminated the 1999 Nonstatutory Stock Option Plan so that, as of the date of termination, no further awards have been or will be made thereunder, but the plan will continue to govern outstanding awards granted under that plan.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        Under the proxy rules of the SEC, a person who directly or indirectly has or shares voting power or investment power with respect to a security is considered a beneficial owner of the security. Voting power is the power to vote or direct the voting of shares, and investment power is the power to dispose of or direct the disposition of shares. Shares as to which voting power or investment power may be acquired within 60 days are also considered as beneficially owned under the proxy rules.

        The following table sets forth certain information as of March 1, 2012, regarding beneficial ownership of our Common Stock by: (i) each person who is known to us to own beneficially more than five percent of our Common Stock; (ii) each of our current directors; (iii) each of the named executive officers in the Summary Compensation Table of this annual report; and (iv) the total for our current directors and current executive officers as a group. The information on beneficial ownership in the table and the footnotes is based upon our records and the most recent Schedule 13D or 13G filed by each such person or entity and information supplied to us by such person or entity. Unless otherwise indicated, each person has sole voting power and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares subject to options which are exercisable within 60 days of March 1, 2012 are deemed to be outstanding and to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not deemed to be outstanding and to be beneficially owned for the purpose of computing the percentage ownership of any other person.

Name or Group of Beneficial Owners
  Number of
Shares
Beneficially
Owned
  Options
Exercisable
in 60 days
  Percentage of
Shares
Beneficially
Owned(1)
 

FMR LLC(2)

    14,892,500         13.5 %

82 Devonshire Street

                   

Boston, MA 02109

                   

PRIMECAP Manangement Company(3)

    10,600,762         9.6 %

225 South Lake Ave., #400

                   

Pasadena, CA 91101

                   

Harold Hughes

    1,158,321     1,014,108     1.0 %

Satish Rishi(4)

    521,715     400,942     *  

Thomas Lavelle

    295,235     275,578     *  

Sharon E. Holt

    513,702     469,976     *  

Martin Scott

    316,900     273,776     *  

J. Thomas Bentley(5)

    140,001     92,917     *  

Sunlin Chou(6)

    110,001     80,000     *  

P. Michael Farmwald(7)

    2,458,237     100,000     2.2 %

Penelope A. Herscher(8)

    74,187     60,000     *  

David Shrigley

    90,001     60,000     *  

Abraham Sofaer

    123,763     80,000     *  

Eric Stang(9)

    59,501     37,500     *  

All current directors and executive officers as a group (14 persons)

    6,238,791     3,302,560     5.5 %

Shares Outstanding as of March 1, 2012

                110,402,025  

*
(Less than 1%)

(1)
Percentage of shares beneficially owned is based on 110,402,025 shares outstanding as of March 1, 2012.

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(2)
As reported on Schedule 13G/A on February 14, 2012. The Schedule 13G/A was filed jointly on behalf of FMR LLC, Edward C. Johnson 3d, Fidelity Management & Research Company and Fidelity Growth Company Fund in connection with the beneficial ownership of the Common Stock of Rambus Incorporated.

(3)
As reported on Schedule 13G/A on February 13, 2012.

(4)
Includes 1,400 shares held in custodial accounts for which Mr. Rishi serves as custodian.

(5)
Includes 40,001 shares held in trust for which Mr. Bentley serves as a trustee.

(6)
Includes 30,001 shares held in trust for which Dr. Chou serves as a trustee.

(7)
Includes 2,204,327 shares pledged as collateral on a margin account with a brokerage firm.

(8)
Includes 14,187 shares held in trust for which Ms. Herscher serves as a trustee.

(9)
Includes 22,001 shares held in trust for which Mr. Stang serves as a trustee.

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EXECUTIVE OFFICERS OF THE COMPANY

        Information regarding our executive officers and their ages and positions as of March 1, 2012, is contained in the table below. Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There is no family relationship between any of our executive officers.

Sharon E. Holt

   
47
 

Senior Vice President, GM Semiconductor Business Group. Ms. Holt has served as our Senior Vice President, GM Semiconductor Business Group (formerly titled Senior Vice President, Licensing and Marketing and Senior Vice President, Worldwide Sales, Licensing and Marketing) since joining us in August 2004. From November 1999 to July 2004, Ms. Holt held various positions at Agilent Technologies, Inc., an electronics instruments and controls company, most recently as vice president and general manager, Americas Field Operations, Semiconductor Products Group. Prior to Agilent Technologies, Inc., Ms. Holt held various engineering, marketing, and sales management positions at Hewlett-Packard Company, a hardware manufacturer. Ms. Holt holds a B.S. in Electrical Engineering, with a minor in Mathematics, from the Virginia Polytechnic Institute and State University.

Harold Hughes

   
66
 

Chief Executive Officer and President. Mr. Hughes has served as our chief executive officer and president since January 2005 and as a director since June 2003. He served as a United States Army Officer from 1969 to 1972 before starting his private sector career with Intel Corporation. Mr. Hughes held a variety of positions within Intel Corporation from 1974 to 1997, including treasurer, vice president of Intel Capital, chief financial officer, and vice president of Planning and Logistics. Following his tenure at Intel, Mr. Hughes was the chairman and chief executive officer of Pandesic, LLC. He holds a B.A. from the University of Wisconsin and an M.B.A. from the University of Michigan. He also serves as a director of Berkeley Technology, Ltd. and a private company.

Thomas R. Lavelle

   
61
 

Senior Vice President and General Counsel. Mr. Lavelle has served in his current position since December 2006. Previous to that, Mr. Lavelle served as vice president and general counsel at Xilinx, one of the world's leading suppliers of programmable chips. Mr. Lavelle joined Xilinx in 1999 after spending more than 15 years at Intel Corporation where he held various positions in the legal department. Mr. Lavelle earned a J.D. from Santa Clara University School of Law and a B.A. from the University of California at Los Angeles.

Christopher M. Pickett

   
45
 

Senior Vice President, Licensing. Mr. Pickett has served in his current position since September 2010. Previous to that, Mr. Pickett served as our senior vice president, Licensing, Lighting Technology since joining us in December 2009. Prior to Rambus, he was the president of the Licensing Division and general counsel at Global Lighting Technologies, Inc. where he

         

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helped to launch the strategy and develop the business plan for separating R&D/IP assets from Global Lighting Technologies, Inc.'s manufacturing company. Prior to Global Lighting Technologies, Mr. Pickett worked for almost 13 years at Tessera Technologies, Inc. where he defined and implemented its licensing business. His last position at Tessera was executive vice president of Licensing and, earlier on, he served as general counsel. Prior to Tessera, Mr. Pickett worked at several San Jose based patent law firms. Mr. Pickett is a member of the California Bar and the U.S. Patent Bar. He received a bachelor of science degree in Electrical Engineering from California Polytechnic State University, San Luis Obispo and a J.D. from the University of San Francisco.

Satish Rishi

   
52
 

Senior Vice President, Finance and Chief Financial Officer. Mr. Rishi joined us in his current position in April 2006. Prior to joining us, Mr. Rishi held the position of executive vice president of Finance and chief financial officer of Toppan Photomasks, Inc., (formerly DuPont Photomasks, Inc.) one of the world's leading photomask providers, from November 2001 to April 2006. During his 25-year career, Mr. Rishi has held senior financial management positions at semiconductor and electronic manufacturing companies. He served as vice president and assistant treasurer at Dell Inc. Prior to Dell, Mr. Rishi spent 13 years at Intel Corporation, where he held financial management positions both in the United States and overseas, including assistant treasurer. Mr. Rishi holds a B.S. with honors in Mechanical Engineering from Delhi University in Delhi, India and an M.B.A. from the University of California at Berkeley's Haas School of Business. He also serves as a director of Measurement Specialties, Inc.

Michael Schroeder

   
52
 

Senior Vice President, Human Resources. Mr. Schroeder has served as our senior vice president, Human Resources since January 2011 and as our vice president, Human Resources since joining us in June 2004. From April 2003 to May 2004, Mr. Schroeder was vice president, Human Resources at DigitalThink, Inc., an online service company. From August 2000 to August 2002, Mr. Schroeder served as vice president, Human Resources at Alphablox Corporation, a software company. From August 1992 to August 2000, Mr. Schroeder held various positions at Synopsys, Inc., a software and programming company, including vice president, California Site Human Resources, group director Human Resources, director Human Resources and employment manager. Mr. Schroeder attended the University of Wisconsin, Milwaukee and studied Russian.

Martin Scott, Ph.D. 

   
56
 

Senior Vice President, GM New Business Group. Dr. Scott has served in his current position (formerly titled Senior Vice President, Research and Technology Development) since December 2006. Dr. Scott joined us from PMC-Sierra, Inc., a

         

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provider of broadband communications and storage integrated circuits, where he was most recently vice president and general manager of its Microprocessor Products Division from March 2006. Dr. Scott was the vice president and general manager for the I/O Solutions Division (which was purchased by PMC-Sierra) of Avago Technologies Limited, an analog and mixed signal semiconductor components and subsystem company, from October 2005 to March 2006. Dr. Scott held various positions at Agilent Technologies, including as vice president and general manager for the I/O Solutions division from October 2004 to October 2005, when the division was purchased by Avago Technologies, vice president and general manager of the ASSP Division from March 2002 until October 2004, and, before that, Network Products operation manager. Dr. Scott started his career in 1981 as a member of the technical staff at Hewlett Packard Laboratories and held various management positions at Hewlett Packard and was appointed ASIC business unit manager in 1998. He earned a B.S. from Rice University and holds both an M.S. and Ph.D. from Stanford University.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION & ANALYSIS

        This Compensation Discussion and Analysis describes our compensation policies, programs, and pay actions for our Named Executive Officers ("NEOs") as identified in the Summary Compensation Table.

        We have organized this report as follows:

    1.
    Executive summary that includes discussion our business performance and the key factors in our 2011 NEO compensation, which are described in more detail in this report

    2.
    Assessment of pay-for-performance

    3.
    NEO compensation process

    4.
    Tools used in the compensation-setting process

    5.
    Components of NEO compensation

    6.
    Other policies and elements of NEO compensation


EXECUTIVE SUMMARY

    2011 Business Performance

        2011 was a mixed year for Rambus. The continued execution of our diversification strategy and strong results in ongoing business initiatives were offset by adverse decisions by the Court of Appeals for the Federal Circuit in May 2011 and in the San Francisco Superior Court of the State of California in November 2011. While our recurring revenues and pace of signing licensees improved during the year, the adverse verdict in the price-fixing case caused our share price to drop significantly. Going forward, our intent is to continue to sign meaningful licenses and to increase the number of and pace at which we sign them. We expect to see results from our diversification strategy, with new licensees in newer areas, and exhibit continued positive momentum in fulfilling our mission of licensing our world-class patent portfolio and providing technology solutions that enrich the end-user experience of electronic systems.

        Our 2011 business highlights included:

    $312.4 million in annual revenue.

    Semiconductors:   We signed or re-signed a number of key patent license agreements during the year, including Toshiba, Panasonic, Freescale and Broadcom.

    Lighting and Display:   GE Lighting demonstrated prototypes of energy-efficient fixtures based on our lighting innovations.

    Cryptography:   We acquired Cryptography Research Inc., (CRI) in June 2011. Our CRI team signed license agreements with a major smartphone and tablet manufacturer, Verimatrix, CPU Tech and Mikron, and partnership agreements with INVIA and Keirex.

    We grew our patent portfolio by more than 20%. At year-end, we had 1,386 patents and 1,059 pending applications.

    2011 NEO Compensation Highlights

    We believe that our NEO compensation is appropriately sensitive to company financial performance, individual performance and long-term shareholder returns. A more complete discussion of pay and performance alignment begins after this Executive Summary.

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    2011 total NEO compensation declined 48% for our CEO, and 39%-41% for the other NEOs from 2010. These declines are calculated on a grant date fair value basis, and do not align with the Summary Compensation Table due to the timing of year-end equity awards and the disclosure requirements.

    Annual incentive compensation was earned at approximately 170% of target, based on exceeding our Adjusted EBITDA (AEBITDA) target as defined below.

    The grant date value of 2011 NEO equity awards was more than 55% lower than 2010 awards. These awards were granted in February 2012.

    The realizable value of cumulative equity awards made to our CEO in the 5-year period since 2007 declined by $3.6 million in 2011. Since 2007, our CEO has received option, performance share unit, and restricted share unit awards with a cumulative grant-date fair value of $10.2 million. As of December 31, 2011, the realizable value of these awards was $0.9 million.

    2011 Say-on-Pay Vote

        The advisory vote on NEO compensation at our 2011 annual meeting received 86% favorable votes from our shareholders. The Compensation Committee believes that this result generally affirmed shareholder support of the Company's approach to NEO compensation.

        The Compensation Committee is committed to ensuring that the compensation programs for which they are responsible are consistent with the company's pay for performance policy, and delivers appropriate results given performance and business conditions. Shareholder feedback through this advisory vote will remain an important input into the Compensation Committee's work on compensation design and disclosure.

    Changes to Compensation Programs in 2011

        Several changes were made to NEO compensation programs based on the business highlights noted above and feedback around specific elements to the compensation program from shareholders and their advisory groups.

    All employees, including the NEOs, were eligible for special payouts in addition to the regular annual cash incentive opportunity. Such a payout was earned in 2010 but not in 2011. The maximum annual incentive award in 2011 is 200% of each NEOs target amount.

    We clarified the manner in which we use competitive market information for NEO benchmarking. Previously, we had a stated policy of targeting median for base salary and 75 th  percentile for target cash compensation and long-term incentives. Upon further analysis, the Compensation Committee concluded that this rigid policy does not reflect how the information is actually used.

    A stated percentile positioning does not reflect differences in individual NEO responsibilities at Rambus compared to available benchmarks and does not reflect how equity award decisions are made.

    Benchmarking information at the median and 75 th  percentile is still considered by the Compensation Committee, but actual decisions about total compensation, particularly equity compensation, are based on a complete assessment, including individual and company performance.

    In 2011, annual cash compensation (salary plus annual cash incentive) was closer to the market 75 th  percentile, and equity incentive awards granted in February 2012 resulted in

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        (reflecting 2011 total compensation) were well below the 75 th  percentile market reference points.

    We enhanced our proxy disclosure to increase transparency and ensure a comprehensive understanding of our compensation programs.

    Compensation-Related Shareholder Proposals (See specific proposals for additional details)

    2006 Equity Incentive Plan Amendment (Proposal 3):   We are requesting that our shareholders authorize an additional 6,500,000 shares to be used for equity awards to employees and directors. This is a regularly-scheduled request based on our practice of granting equity as a portion of annual compensation to eligible employees. Our annual dilution from equity awards is well below peer median levels. (See Historical Annual Burn Rate on page 69). We will continue to use the equity authorized for compensation purposes in a responsible manner.

    Option Exchange Program (Proposal 5):   We believe that our market value has been recalibrated with the removal of speculative activity in our stock based on certain litigation outcomes in the past year. A significant majority of employee options outstanding have exercise prices well above the current market price of our common stock, and provide little retention or incentive value. As a technology company that relies on innovations, employees are our single biggest asset and retaining and attracting employees is key to the long term success of our Company. We are proposing an option exchange program to replace existing far-out-of-the-money options with a much lower number of at-the-money options to provide incentives to maintain and continue our current business momentum. We have proposed a program that we believe is fair to shareholders as well as beneficial to our employees.

        Under the proposed program:

    NEOs, senior executives, and Board of Directors are not eligible to participate.

    In aggregate, the fair value of the exchanged options will be approximately equal to the fair value of the new options (i.e., "value for value"), resulting in fewer options outstanding.

    Only options with a strike price higher than $14.50 will be eligible for exchange.

    New options will vest over three years, encouraging retention.

    Options tendered in the exchange will be canceled and will not be reissued.

    Compensation and Governance Practices

    The Compensation Committee reviews compensation programs annually to determine whether or not they encourage excessive or unnecessary risk-taking. Their current assessment is that our compensation programs do not encourage excessive or unnecessary risk taking.

    We do not provide cash payments upon termination or change-in-control to our NEOs. Outstanding equity awards may vest upon a "double-trigger" termination in the event of a change-in-control.

    We do not provide perquisites or tax gross-ups to any of our executive officers.

    We have stock ownership guidelines for VPs and above. All of our NEOs meet these guidelines as of December 31, 2011.

    We have no employment agreements or multi-year compensation guarantees for any of our NEOs.

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    Our annual dilution from equity compensation has been below the 25th percentile of our Compensation Peer Group in each of the last four years.

    All employees are prohibited from engaging in hedging transactions in Rambus shares.

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


PAY-FOR-PERFORMANCE OVERVIEW

        Our NEO compensation program closely links compensation to company financial performance and individual performance through annual cash incentives, and the creation of long-term stockholder value through option and restricted stock unit ("RSU") awards. More than 60% of total compensation for our NEOs during 2011 was subject to future performance by the Company and the individual NEO based on the alternative executive compensation approach discussed below. Additional information about the NEO compensation-setting process and the components of NEO pay are addressed in later sections of the CD&A.

    Total Compensation: Opportunity Aligned with Shareholder Experience

        We grant equity awards in February of each year that are based on prior year company and individual performance. For example, equity awarded in February 2012 is considered a piece of 2011 total compensation by the Compensation Committee. Summary Compensation Table reporting requires that awards are reported in the fiscal year in which grants are made. For example, equity awarded in February 2012 as part of the 2011 compensation decision does not show up in the proxy tables until the following year. As such, any assessments of the pay for performance relationship based on values disclosed in the Summary Compensation Table are inconsistent with factors influencing Compensation Committee decisions.

        The table below provides an alternative to the Summary Compensation Table, and is consistent with how decisions are made by the Compensation Committee. Specifically, long-term incentive awards in February of each year are attributed to the prior fiscal year. When presented on this basis, the correlation between pay and performance for NEOs is apparent.

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Annual Executive Compensation—Alternative Approach

 
   
   
   
  Grant Value(2)    
 
 
   
  Base
Salary
  Cash
Bonus(1)
  Alternative
Total
Compensation
 
Executive
  Year   RSUs   Options  

Harold Hughes

    2011   $ 498   $ 857   $ 241   $ 547   $ 2,143  

    2010   $ 480   $ 1,578   $ 670   $ 1,408   $ 4,136  

    2009   $ 477   $ 143   $ 636   $ 1,482   $ 2,738  

    2008   $ 440   $ 242   $ 291   $ 837   $ 1,810  

    2007   $ 416   $ 168   $ 1,430   $ 362   $ 2,376  

Satish Rishi

    2011   $ 325   $ 458   $ 44   $ 184   $ 1,011  

    2010   $ 325   $ 789   $ 167   $ 379   $ 1,660  

    2009   $ 324   $ 72   $ 182   $ 420   $ 998  

Thomas R. Lavelle

    2011   $ 325   $ 510   $ 44   $ 184   $ 1,063  

    2010   $ 325   $ 904   $ 167   $ 379   $ 1,775  

    2009   $ 324   $ 83   $ 227   $ 459   $ 1,093  

Sharon E. Holt

    2011   $ 325   $ 516   $ 51   $ 204   $ 1,096  

    2010   $ 320   $ 904   $ 209   $ 433   $ 1,866  

    2009   $ 319   $ 80   $ 227   $ 446   $ 1,072  

Martin Scott

    2011   $ 325   $ 464   $ 51   $ 204   $ 1,044  

    2010   $ 320   $ 789   $ 209   $ 433   $ 1,751  

    2009   $ 318   $ 72   $ 182   $ 420   $ 992  


CEO Pay for Performance
Alternative Total Compensation

GRAPHIC


(1)
Cash incentive earned for fiscal year performance under the Corporate Incentive Plan (CIP).

(2)
Reflects RSUs and options granted in the February following the fiscal year for which the awards are representative. Equity awards are valued on a fair value basis using the closing share price on the date of grant. Option values for 2011 are estimates. Actual 2011 option values may be different.

        Based on the above table, 2011 total NEO compensation declined 48% for our CEO, and 39%-41% for the other NEOs from 2010.

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    Annual Incentive Payouts: Aligned with Financial Performance

        We measure our annual financial performance using Adjusted EBITDA (described in more detail in the "NEO Compensation Components" section), a non-GAAP measure that we think is the best indicator of success in our core businesses and our ability to continue to drive long-term value creation and continued growth in the future.

        2011 NEO annual incentive payouts were approximately 170% of target. Over the past 5 years, we observe that the annual cash incentive payouts have been well-aligned with our GAAP revenue and GAAP operating income. The chart below illustrates the alignment of annual GAAP performance and annual incentive payouts for our CEO from 2007-2011.


Alignment of Annual Bonus Payouts with Performance 2007 - 2011

GRAPHIC

    Realizable Value of Equity: Aligned with Shareholder Experience

        Our stock price declined substantially in 2011, despite strong momentum and performance in our ongoing business. We believe that our compensation program for senior executives, including our NEOs, is appropriately sensitive to these results. NEO equity awards for 2011 (granted in February 2012) were over 55% lower than 2010 awards (granted in February 2011).

        Since the pay mix for our NEOs is heavily weighted towards equity, our NEOs experience similar changes in the realizable value of their awards as the share price changes. Realizable value is defined as the value of equity awards as of a given date after grant, rather than the value on the date of grant. Thus, to the extent we do not perform for our shareholders, our executives do not benefit from their equity compensation.

        Because of the decline in our share price in 2011, the realizable value of equity awards made to our CEO in the 5-year period since 2007 declined by $3.6 million during 2011. Since 2007, our CEO has received option, performance share unit, and restricted share unit awards with a cumulative

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grant-date fair value of $10.2 million. As of December 31, 2011, the realizable value of these awards was $0.9 million.

CEO 2007-2011 Equity Awards
Grant Date and Realizable Values
  CEO 2011 Equity Awards
Change in Realizable Value


GRAPHIC

 


GRAPHIC


NEO COMPENSATION PROCESS

    The Role of the Compensation Committee

        The Compensation Committee is responsible for determining and approving CEO compensation, approving compensation recommendations for executive officers and other senior executives, recommending to the board changes to the non-employee director compensation program, and approving the overall levels of equity to be granted each year, among other duties expressed it its charter. In performing these duties, the Compensation Committee evaluates the performance of the CEO and other senior executives, and reviews and evaluates the existing compensation programs. The Compensation Committee does not delegate authority to management for executive compensation decisions.

    The Use of Independent Compensation Consultants

        The Compensation Committee has the authority to obtain advice and assistance from internal or external compensation consultant, attorney, accountant, or other advisers. The Compensation Committee has the authority to retain and terminate any adviser, as well as the authority to approve the fees, terms and conditions of any such engagement.

        The Compensation Committee uses Semler Brossy Consulting Group, LLC (SBCG) to assist in evaluating executive and director compensation. SBCG reports directly to the Compensation Committee, and works collaboratively with management and the Chairperson of the Compensation Committee. The Compensation Committee has directed SBCG to regularly provide independent advice on a number of topics, including current trends in executive compensation design, overall levels of compensation, the merits of using particular forms of compensation, the relative weighting of different compensation elements, and the value of particular performance measures on which to base compensation for all the NEOs. SBCG also prepares specific material and analyses for the Compensation Committee on CEO compensation. SBCG has not performed, and does not currently have any other consulting engagements with management, or the Company. The Compensation Committee evaluates the services provided by SBCG on an annual basis.

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    The Role of Management

        The CEO and Senior Vice President of Human Resources present annual performance reviews and compensation recommendations for the senior executives (excluding the CEO) for which the Compensation Committee has responsibility. Management personnel also provides support and assistance to the Compensation Committee by working with the Compensation Committee's independent consultant, compiling third party reports on compensation data, analyzing peer group data and providing other related compensation information and assessments.


TOOLS USED IN THE COMPENSATION-SETTING PROCESS

    Peer Group Comparisons

        The Compensation Committee analyzes market compensation levels of executives at comparable companies to determine whether the total compensation opportunity available to our NEOs is appropriate and competitive, and consistent with the Company's compensation philosophy and objectives. Each year, SBCG, together with senior members of our Human Resources department, defines and assesses the appropriateness of a group of similarly situated companies for purposes of this comparison, referred to as the Compensation Peer Group. The Compensation Committee reviews the Compensation Peer Group as recommended by management and SBCG, and then approves this group for use in the evaluation of NEO compensation as discussed below.

        The 2011 Compensation Peer Group consisted of 18 companies selected based on a number of key attributes, including revenue, technological complexity, industry and business characteristics, market capitalization and number of employees.

Altera Corporation   FormFactor, Inc.   RF Micro Devices, Inc.
Applied Micro Circuits Corporation   Integrated Device Technology, Inc.   Semtech Corporation
Cavium Networks, Inc.   InterDigital, Inc.   Silicon Image, Inc.
Cree, Inc.   MIPS Technologies, Inc.   Silicon Laboratories Inc.
Cymer, Inc.   OmniVision Technologies, Inc.   Synopsys, Inc.
DSP Group, Inc.   PMC-Sierra, Inc.   Tessera Technologies, Inc.

    External Compensation Data

        The Compensation Committee also reviewed data from the Radford Select Executive Compensation Report to supplement the publicly available Compensation Peer Group data. The Compensation Committee considered the information available in the Radford Select Executive Compensation Report to assist in establishing NEO compensation by considering industry and general best practices, benchmarks and marketplace trends and developments, but without reference to any specific compensation information for any individual company included in this report.

    Individual Leadership and Performance Assessments

        The Compensation Committee reviews comprehensive performance assessments of the senior executive team, and conducts a review of the CEO performance. This assessment includes pre-established strategic objectives and review of direct feedback from managers, peers and subordinates. The Compensation Committee also holds an annual joint meeting with the Corporate Governance/Nominating Committee to review and discuss Company leadership development, performance objectives and emergency and long-term succession planning.

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    Benchmarking Process

        The Compensation Committee considers several external and internal factors to ensure that compensation packages are in line with our pay for performance philosophy and competitive in the market for talent. Market compensation levels and individual leadership and performance assessments as discussed in this section are important inputs into the decision-making process. Additional factors considered include job scope, individual skills/experience, relative importance of the individual's role, internal pay equity, historical pay levels and equity holdings, and recent company performance.

        The Compensation Committee reviews median and 75 th  percentile data as a meaningful input into the compensation setting process. We have historically had a stated policy of targeting median for base salary and 75 th  percentile for target cash compensation and long-term incentives. Upon further analysis of how this information is actually used, the Compensation Committee has determined to not promote a rigid policy about pay positioning for several reasons:

    A stated percentile positioning does not reflect differences in individual NEO responsibilities at Rambus compared to available benchmarks and does not reflect how equity award decisions are made.

    Actual decisions about equity compensation are based on a complete assessment of individual and company performance rather than benchmarking results.

        For 2011, this resulted in annual cash compensation (salary plus annual cash incentive) that was closer to the market 75 th  percentile, and equity incentive awards granted in February 2012 (reflecting 2011 total compensation) were well below the 75 th  percentile market reference points for the NEOs. The Compensation Committee believes this result is appropriate.


NEO COMPENSATION COMPONENTS

    Annual Base Salary

        The Compensation Committee evaluates base salaries for the NEOs on an annual basis. The Compensation Committee considers a number of factors, including the NEO's salary history, current compensation levels, responsibilities, experience, individual and Company performance, and market information when determining and approving NEO salary increases.

        In 2011, the Compensation Committee approved increases in the base salaries for Mr. Hughes, Ms. Holt and Dr. Scott. These increases were made to reflect strong individual performance as well as recent market trends.

        2012 salary changes are outlined in the table below.

    Annual Variable Cash Compensation—Corporate Incentive Plan (CIP)

        The CIP provides cash incentives to NEOs based upon the achievement of specific levels of Company and individual performance. The CIP is used for all incentive-eligible employees at the Company. Target opportunity for NEOs under the 2011 CIP was based 70% on Company financial performance and 30% on specific predefined individual objectives, commonly referred to as MBOs.

        The Compensation Committee approved increases in target annual cash incentives for all NEOs in 2011. These increases were made to reflect strong individual performance and recent market trends. Changing target annual cash incentives and leaving salary largely unchanged reflects the commitment to using performance-based compensation more heavily.

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Changes in Target Cash Compensation

 
  Base Salary   Total CIP Target  
Executive
  2010   2011   2012   2012 vs
2011%
Change
  2010   2011   2012   2012 vs
2011%
Change
 

Harold Hughes

  $ 480,000   $ 500,000   $ 500,000     0.0 % $ 480,000   $ 500,000   $ 500,000     0.0 %

Satish Rishi

  $ 325,000   $ 325,000   $ 325,000     0.0 % $ 240,000   $ 270,000   $ 280,000     +3.7 %

Thomas R. Lavelle

  $ 325,000   $ 325,000   $ 325,000     0.0 % $ 275,000   $ 300,000   $ 310,000     +3.3 %

Sharon E. Holt

  $ 320,000   $ 325,000   $ 335,000     +3.1 % $ 275,000   $ 300,000   $ 320,000     +6.7 %

Martin Scott

  $ 320,000   $ 325,000   $ 335,000     +3.1 % $ 240,000   $ 270,000   $ 310,000     +14.8 %

    Company Performance Component—70%

        We used Adjusted EBITDA (AEBITDA) for the Company performance component of the 2011 CIP(1). AEBITDA is a non-GAAP measure that consists of GAAP EBITDA, excluding litigation expenses, stock-based compensation expense, previous stock-based compensation restatement and related legal expenses, retention bonuses and any CIP related expenses. One-time or extraordinary expense or income items may be excluded at the Compensation Committee's discretion. The Company believes that AEBITDA provides a meaningful measure of core financial performance and supports our short-term and long-term business objectives. 2011 threshold, target, and maximum AEBITDA for the CIP were as follows:


2011 Adjusted EBITDA Goals ($ in millions)

 
  Threshold   Target   Maximum  

Adjusted EBITDA

  $ 112.7   $ 141.7   $ 192.7  

Pay out as % of Target

    50 %   100 %   200 %

    Individual Performance Component—30%

        Each NEO must also achieve certain pre-determined strategic business goals in order to earn the MBO component of the CIP. MBOs ensure that our NEOs continue to deliver on individual operational objectives. MBOs are proposed by senior management personnel and approved annually by the Compensation Committee. The individual MBOs are measured on a quarterly basis.

        The MBO component of the CIP is earned upon achievement and paid quarterly. Up to 125% of the MBO component can be earned regardless of financial performance. Above 125%, to a maximum of 200%, may be earned if AEBITDA performance exceeds target.

        Individual MBOs tie directly to our overall operating plan objectives as approved by the Board of Directors annually. 2011 MBOs for NEOs were tied to one or more of the following strategic business objectives:

    1.
    Continue to advance our memory technology and expand overall semiconductor position

   


(1)
For 2010, the Company's performance component was measured and paid based on the achievement of adjusted pre-tax income ("APTI"). APTI consists of GAAP pre-tax income adjusted to exclude litigation expenses, certain acquisition related expenses, stock-based compensation expense, previous stock-based compensation restatement and related legal expenses, and any CIP related expenses. One time or any extraordinary expense or income items may also be excluded at the Compensation Committee's discretion.

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    2.
    Secure past and generate future revenue related to Dynamic Random Access Memory

    3.
    Bring first general lighting customer to market and sign at least one other key brand

    4.
    Maximize the quality and quantity of our inventions

    5.
    Optimize licensing opportunities especially in areas with multiple Rambus technology innovations

    6.
    Diversify into one or two major businesses beyond semiconductor and lighting and display

    7.
    Develop organization and our people for rapid change and increasing complexity

    2011 CIP Payouts

        2011 AEBITDA was $177.4 million, above the annual target of $141.7 million. Resulting CIP payouts were approximately 170% of target for the NEOs, including the impact of individual MBO performance.


2011 CIP Payouts

 
   
  Corporate Component   MBO Component    
   
 
 
  Total
CIP Target
  Actual Total
Bonus Paid
  % of
CIP Target
 
Executive
  Target   Achievement   Target   Achievement  

Harold Hughes

  $ 500,000   $ 350,000   $ 595,000   $ 150,000   $ 261,693   $ 856,693     171.3 %

Satish Rishi

  $ 270,000   $ 189,000   $ 321,300   $ 81,000   $ 137,113   $ 458,413     169.8 %

Thomas R. Lavelle

  $ 300,000   $ 210,000   $ 357,000   $ 90,000   $ 153,000   $ 510,000     170.0 %

Sharon E. Holt

  $ 300,000   $ 210,000   $ 357,000   $ 90,000   $ 158,670   $ 515,670     171.9 %

Martin Scott

  $ 270,000   $ 189,000   $ 321,300   $ 81,000   $ 142,894   $ 464,194     171.9 %

    Additional CIP Opportunity—Strategic Objectives

        Additional cash opportunity was available to all employees in 2011 based on the achievement of pre-determined strategic objectives, with payout levels and objectives approved by the Compensation Committee. The goals under this plan were not achieved in 2011 and no payouts were made. The Compensation Committee eliminated this plan for 2012.

        We believe that the disclosure of the specific strategic objectives could result in significant competitive harm by revealing key elements of our business strategy. The objectives were based on the achievement of objective and quantifiable financial results. Each special strategic goal was tied to a defined event that was expected to significantly strengthen the Company's operating results and financial performance, positioning for future performance, and the ability to execute successfully on the licensing platform and business model.

        For each of the two strategic goals, there were threshold, target, and maximum performance objectives that would have yielded 50%, 100%, and 200% of each NEO's annual CIP target, respectively. Payment of awards under this special strategic component of the 2011 CIP for our NEOs would have been made in equal installments in the two annual periods following achievement of the objectives.

    Equity Compensation

        The Compensation Committee reviews market information, external competitive circumstances, overall ownership and vesting schedules of existing equity held by the NEO, and each NEO's performance and contribution during the completed fiscal year to determine annual equity awards.

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        The Compensation Committee evaluates annually the structure of the equity compensation program, including the vehicles used and the allocation of stock options and restricted stock units to ensure that grants appropriately support our strategic and financial objectives.

        NEO equity awards granted in February 2011 consisted of 75% in stock options and 25% in RSUs. The Compensation Committee believes this allocation appropriately balances incentives for growth in share price versus the retention encouraged by RSUs. Options granted in 2011 vest over 5 years and options granted in 2012 vest over 4 years. RSUs granted in 2011 and 2012 vest ratably over 4 years.

        The Compensation Committee maintained the 75% option / 25% RSU allocation for the total value of the equity awards made in February 2012 for 2011 performance. 2012 grants reflected a decrease in grant-date fair value of over 55% versus 2011. In determining these grants, the Compensation Committee considered a number of factors, consistent with the approach described above, including particular focus on the recent stock price decrease.

 
  February 2011 Equity Grants   February 2012 Equity Grants    
 
Executive
  Number of
Options
  Number of
RSUs
  Grant-Date
Fair Value
  Number of
Options
  Number of
RSUs
  Grant-Date
Fair Value
  % Change in
Grant Date
Fair Value
 

Harold Hughes

    130,000     32,000   $ 2,077,621     134,000     33,000   $ 787,950     (62.1 )%

Satish Rishi

    35,000     8,000   $ 546,480     45,000     6,000   $ 227,460     (58.4 )%

Thomas R. Lavelle

    35,000     8,000   $ 546,480     45,000     6,000   $ 227,460     (58.4 )%

Sharon E. Holt

    40,000     10,000   $ 642,488     50,000     7,000   $ 255,170     (60.3 )%

Martin Scott

    40,000     10,000   $ 642,488     50,000     7,000   $ 255,170     (60.3 )%

    Aggregate Equity Usage

        Our total equity usage rate(2) from compensation grants has been below the 25th percentile of our Compensation Peer Group in each of the last four years.


Historical Annual Burn Rate
(as a % of total shares outstanding)

 
  2008   2009   2010   2011  

Rambus

    2.8 %   1.6 %   2.2 %   2.6 %

Compensation Peer Group Median

    4.6 %   4.7 %   4.3 %   N/A  


OTHER POLICIES AND ELEMENTS OF NEO COMPENSATION

    Benefits

        We do not provide any perquisites to NEOs that are not generally available to the broad employee population. This includes supplemental pension arrangements, post-retirement health coverage, or private aircraft benefits. Our NEOs are eligible to participate in our 401(k) plan, our health and welfare benefits, and our Employee Stock Purchase Plan on the same terms as other participating employees.

   


(2)
Equity usage rate is calculated by dividing (a) the sum of all equity awards granted and equity awards assumed (without taking into account cancellations) by (b) the total outstanding shares of common stock on the measurement date. A conversion factor of 1.5x is used for any full value awards, which would include any restricted stock awards or restricted stock units, when determining the sum of all equity awards granted for purposes of the calculation.

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    Stock Ownership Guidelines

        Our senior executives are expected to accumulate and hold a minimum level of common stock throughout their tenure at Rambus. The required levels are 5x base salary for the CEO and 3x base salary for the other NEOs(3). Executives have five years to achieve their required level of ownership from the date that they become covered by the policy. Elements that qualify towards ownership goals include shares owned outright, unvested restricted stock and restricted stock units, the intrinsic value of vested and unexercised stock options, and shares acquired under our Employee Stock Purchase Plan. As of December 31, 2011, all of our NEOs had met their ownership requirements.

    Hedging

        All employees are prohibited from engaging in hedging transactions in Rambus shares.

    Equity Grant Policy

        Annual equity awards are granted on February 1st of each year. If February 1st is not a trading day, the grants become effective and are priced as of the next trading day. The number of shares and key award terms of awards to Section 16 officers are approved by the Compensation Committee prior to the February 1st award date.

    Compensation Recovery

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

    Tax Considerations

        The Compensation Committee considers the potential future effects of Section 162(m) of the Internal Revenue Code of 1986, as amended, when determining NEO compensation. All of the stock options granted to our NEOs are intended to qualify under Section 162(m) as performance-based compensation. However, earned restricted stock units and annual variable cash awards paid to our NEOs under our current annual incentive plan may not be deductible as these awards may not qualify as "performance-based compensation" for purposes of Section 162(m). The Compensation Committee intends to continue evaluating all of our executive compensation and will qualify such compensation as performance based compensation under Section 162(m) to the extent applicable, and so long as the Compensation Committee determines that doing so is in the Company's best interests.

    Compensation Program Risk Evaluation

        The Compensation Committee reviewed the elements of named executive compensation to determine whether any portion of the overall program encouraged excessive risk taking. Following this assessment, the Compensation Committee believes that, although the majority of compensation provided to our named executive officers is performance-based, our compensation programs do not encourage excessive or unnecessary risk taking. We believe that the design of these compensation programs encourage our named executive officers to remain focused on both short-term and long-term strategic goals.

   


(3)
Elements that will qualify towards ownership goals will include: the value of vested and unvested restricted stock and restricted stock units, vested and unexercised stock options, shares acquired under our Employee Stock Purchase Plan and any other shares of common stock owned outright.

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COMPENSATION COMMITTEE REPORT

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

    THE COMPENSATION COMMITTEE

 

 

Penelope A. Herscher (Chairperson)
David Shrigley
Abraham D. Sofaer

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EXECUTIVE COMPENSATION TABLES

Summary Compensation Table

        The following table shows compensation information for 2009, 2010 and 2011 for the named executive officers.


Summary Compensation
For Fiscal Years 2009, 2010 and 2011

Name and Title
  Year   Salary
($)
  Stock
Awards(1)
($)
  Option
Awards(1)
($)
  Non-Equity
Incentive Plan
Compensation(2)
($)
  All Other
Compensation(3)
($)
  Total
($)
 
Harold Hughes     2011     498,333     669,760     1,407,861     856,693     29,474     3,462,121  

Chief Executive Officer and

    2010     480,000     636,160     1,481,916     1,577,796     28,387     4,204,259  

President

    2009     476,667     290,700     837,236     143,399     26,007     1,774,009  

Satish Rishi

 

 

2011

 

 

325,000

 

 

167,440

 

 

379,040

 

 

458,413

 

 

29,528

 

 

1,359,421

 

Senior Vice President, Finance

    2010     325,000     181,760     419,658     788,898     28,387     1,743,703  

and Chief Financial Officer

    2009     324,437     88,031     256,150     72,000     24,348     764,966  

Thomas R. Lavelle

 

 

2011

 

 

325,000

 

 

167,440

 

 

379,040

 

 

510,000

 

 

22,393

 

 

1,403,873

 

Senior Vice President and

    2010     325,000     227,200     459,001     903,946     47,045     1,962,192  

General Counsel

    2009     323,917     88,031     256,150     82,500     20,068     770,666  

Sharon E. Holt

 

 

2011

 

 

324,583

 

 

209,300

 

 

433,188

 

 

515,670

 

 

30,122

 

 

1,512,863

 

Senior Vice President, GM

    2010     320,000     227,200     445,886     903,946     53,993     1,951,025  

Semiconductor Business Group

    2009     319,333     88,031     256,150     80,438     18,241     762,193  

Martin Scott

 

 

2011

 

 

324,583

 

 

209,300

 

 

433,188

 

 

464,194

 

 

30,122

 

 

1,461,387

 

Senior Vice President, GM

    2010     320,000     181,760     419,658     788,898     29,035     1,739,351  

New Business Group

    2009     318,467     88,031     256,150     72,000     24,996     759,644  

(1)
Amounts shown do not reflect compensation actually received by the named executive officer. Instead, the amounts shown are the aggregate grant date fair value computed in accordance with the provisions of FASB ASC Topic 718. The assumptions used to calculate the value of stock and stock option awards are set forth under Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.

(2)
Amounts for fiscal year 2011 consist of compensation earned for services rendered in fiscal year 2011 and are based upon the achievement of certain targets under the 2011 Corporate Incentive Plan targets. The target and achievement results were reviewed and approved by the Compensation Committee. The plan is further described under "Compensation Discussion & Analysis—Executive Compensation Components."

(3)
In addition to any specific other compensation disclosed with respect to individual named executive officers, amounts reported in the "All Other Compensation" column for 2011 and previous years consist of matching contributions to the named executive officers' 401(k) accounts and premiums paid for health and welfare insurance policies.

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Grants of Plan Based Awards

        The following table shows all plan-based awards granted to the named executive officers during fiscal year 2011. The option awards and the unvested portion of the stock awards identified in the table below are also reported in the Outstanding Equity Awards at Fiscal 2011 Year-End Table that follows.

Grants of Plan Based Awards

 
   
   
  Estimated Future
Payouts Under
Non-Equity Incentive
Plan Awards(1)
  Estimated Future
Payments Under
Equity Incentive
Plan Awards
  All Other
Stock
Awards;
Number of
Shares or
Stock
Units(2)
(#)
  All Other
Option
Awards;
Number of
Securities
Underlying
Options(3)
(#)
   
   
 
 
   
   
  Exercise
or Base
Price of
Option
Awards
($/Sh)
  Grant Date
Fair Value of
Stock &
Options
Awards(4)
($)
 
Name
  Grant
Date
  Approval
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)
  Maximum
(#)
 

Harold Hughes

    02/01/2011     01/20/2011                             32,000         0.00     669,760  

    02/01/2011     01/20/2011                                 130,000     20.93     1,407,861  

        01/20/2011     250,000     500,000     3,000,000                                            

Satish Rishi

   
02/01/2011
   
01/20/2011
   
   
   
   
   
   
   
8,000
   
   
0.00
   
167,440
 

    02/01/2011     01/20/2011                                 35,000     20.93     379,040  

        01/20/2011     135,000     270,000     1,620,000                                            

Thomas R. Lavelle

   
02/01/2011
   
01/20/2011
   
   
   
   
   
   
   
8,000
   
   
0.00
   
167,440
 

    02/01/2011     01/20/2011                                 35,000     20.93     379,040  

        01/20/2011     150,000     300,000     1,800,000                                            

Sharon E. Holt

   
02/01/2011
   
01/20/2011
   
   
   
   
   
   
   
10,000
   
   
0.00
   
209,300
 

    02/01/2011     01/20/2011                                 40,000     20.93     433,188  

        01/20/2011     150,000     300,000     1,800,000                                            

Martin Scott

   
02/01/2011
   
01/20/2011
   
   
   
   
   
   
   
10,000
   
   
0.00
   
209,300
 

    02/01/2011     01/20/2011                                 40,000     20.93     433,188  

        01/20/2011     135,000     270,000     1,620,000                                            

(1)
Amounts shown are estimated payouts for fiscal year 2011 to the named executive officers based on the 2011 bonus targets under the plan discussed under "Compensation Discussion & Analysis—Executive Compensation Components." Actual bonuses received by these named executive officers for fiscal 2011 are reported in the Summary Compensation for Fiscal Year 2011 table under the column entitled "Non-Equity Incentive Plan Compensation" and described under "Compensation Discussion & Analysis—Executive Compensation Components"

(2)
Restricted stock units granted to all named executives on February 1, 2011.

(3)
The stock options were granted as part of the Company's regular performance review process and vest based on the executive continuing to provide services to the company through the applicable vesting dates. See the "Compensation Discussion and Analysis" and "Outstanding Equity Awards at Fiscal Year-End" for additional information with respect to these stock option grants.

(4)
The value of a stock award or stock option award is based on the fair market value as of the grant date of such award determined pursuant to FASB ASC Topic 718. Stock awards consist of restricted stock unit awards. The exercise price for all options granted to the named executive officers is 100% of the fair market value of the shares on the grant date. The option exercise price has not been deducted from the amounts indicated above. Regardless of the value placed on a stock option on the grant date, the actual value of the option will depend on the market value of our Common Stock at such date in the future when the option is exercised exceeds the exercise price.

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Outstanding Equity Awards at Fiscal Year-End

        The following table shows all outstanding equity awards held by the named executive officers as of December 31, 2011. Unvested stock awards reported in the Grants of Plan-Based Awards table on the previous page are also included in the table below.


Outstanding Equity Awards at Fiscal 2011 Year-End

 
  Option Awards   Stock Awards  
Name
  # of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  # of Securities
Underlying
Unexercised
Options (#)
Unexercisable
  Equity
Incentive Plan
Awards: # of
Securities
Underlying
Unexercised
Unearned
Options (#)
  Option
Exercise
Price ($)
  Option
Expiration
Date
  # of Shares
or Units of
Stock That
Have Not
Vested (#)
  Market Value
of Shares, or
Units of Stock
That Have
Not
Vested(1)($)
  Equity
Incentive Plan
Awards: # 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 ($)
 

Harold Hughes

    21,666 (2)   108,334         20.93     2/1/2021                  

                        32,000 (3)   241,600          

    41,433 (4)   71,567         22.72     2/1/2020                  

                        21,000 (5)   158,550          

    74,800 (6)   57,200         8.55     2/2/2019                  

                        17,000 (7)   128,350          

    24,533 (8)   7,467         19.86     2/1/2018                  

                        6,000 (9)   45,300          

    241,666 (10)   8,334         18.69     2/1/2017                  

    270,000 (11)           22.94     1/6/2016                  

    250,000 (12)           21.51     1/10/2015                  

    14,543 (13)           16.07     10/1/2014                  

    40,000 (14)           17.51     6/2/2013                  

Satish Rishi

    5,833 (15)   29,167         20.93     2/1/2021                  

                        8,000 (16)   60,400          

    11,733 (17)   20,267         22.72     2/1/2020                  

                        6,000 (18)   45,300          

    22,885 (19)   17,500         8.55     2/2/2019                  

                        5,148 (20)   38,867          

    30,666 (21)   9,334         19.86     2/1/2018                  

                        3,000 (22)   22,650          

    96,666 (23)   3,334         18.69     2/1/2017                  

    220,000 (24)           40.80     4/11/2016                  

Thomas R. Lavelle

    5,833 (25)   29,167         20.93     2/1/2021                  

                        8,000 (26)   60,400          

    12,833 (27)   22,167         22.72     2/1/2020                  

                        7,500 (28)   56,625          

    16,221 (29)   17,500         8.55     2/2/2019                  

                        5,148 (30)   38,867          

                        5,000 (31)   37,750          

    30,666 (32)   9,334         19.86     2/1/2018                  

                        3,000 (33)   22,650          

    196,666 (34)   3,334         19.16     1/3/2017                  

Sharon E. Holt

    6,666 (35)   33,334         20.93     2/1/2021                  

                        10,000 (36)   75,500          

    12,466 (37)   21,534         22.72     2/1/2020                  

                        7,500 (38)   56,625          

    22,885 (39)   17,500         8.55     2/2/2019                  

                        5,148 (40)   38,867          

                        5,000 (41)   37,750          

    30,666 (42)   9,334         19.86     2/1/2018                  

                        3,000 (43)   22,650          

    77,333 (44)   2,667         18.69     2/1/2017                  

    75,000 (45)           22.94     1/6/2016                  

    32,000 (46)           24.04     12/3/2014                  

    200,000 (47)           16.76     8/2/2014                  

Martin Scott

    6,666 (48)   33,334         20.93     2/1/2021                  

                        10,000 (49)   75,500          

    11,733 (50)   20,267         22.72     2/1/2020                  

                        6,000 (51)   45,300          

    22,885 (52)   17,500         8.55     2/2/2019                  

                        5,148 (53)   38,867          

                        5,000 (54)   37,750          

    23,000 (55)   7,000         19.86     2/1/2018                  

                        2,500 (56)   18,875          

    196,666 (57)   3,334         19.16     1/3/2017                  

(1)
The market value is calculated using the closing price of our Common Stock of $7.55 on December 30, 2011 (the last trading day of 2011), as reported on The Nasdaq Global Select Market, multiplied by the unvested stock amount.

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(2)
The option was granted on February 1, 2011. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2016.

(3)
The restricted stock unit was granted on February 1, 2011. The grant shall vest in equal installments of 8,000 shares on each anniversary of the grant date until one-hundred percent vested.

(4)
The option was granted on February 1, 2010. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2015.

(5)
The restricted stock unit was granted on February 1, 2010. The grant shall vest in equal installments of 7,000 shares on each anniversary of the grant date until one-hundred percent vested.

(6)
The option was granted on February 2, 2009. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 2, 2014.

(7)
The restricted stock unit was granted on February 2, 2009. The grant shall vest in equal installments of 8,500 shares on each anniversary of the grant date until one-hundred percent vested.

(8)
The option was granted on February 1, 2008. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2013.

(9)
The restricted stock unit was granted on February 1, 2008. The grant shall vest in equal installments of 6,000 shares on each anniversary of the grant date until one-hundred percent vested.

(10)
The option was granted on February 1, 2007. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2012.

(11)
The option was granted on January 6, 2006. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vested in equal monthly installments until they were fully vested on January 6, 2011.

(12)
The option was granted on January 10, 2005. Options representing 1/48th of the shares vested monthly during the four year period following the grant date until they were fully vested on January 10, 2009.

(13)
The option was granted on October 1, 2004. Options representing 1/48th of the shares vested monthly over the four year period following the grant date until they were fully vested on October 1, 2008.

(14)
The option was granted on June 2, 2003. Options representing 5,000 shares vested on December 2, 2003, and the remaining options vested in equal monthly installments until they were fully vested on June 2, 2007.

(15)
The option was granted on February 1, 2011. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2016.

(16)
The restricted stock unit was granted on February 1, 2011. The grant shall vest in equal installments of 2,000 shares on each anniversary of the grant date until one-hundred percent vested.

(17)
The option was granted on February 1, 2010. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2015.

(18)
The restricted stock unit was granted on February 1, 2010. The grant shall vest in equal installments of 2,000 shares on each anniversary of the grant date until one-hundred percent vested.

(19)
The option was granted on February 2, 2009. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 2, 2014.

(20)
The restricted stock unit was granted on February 2, 2009. The grant shall vest in equal installments of 2,574 shares on each anniversary of the grant date until one-hundred percent vested.

(21)
The option was granted on February 1, 2008. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2013.

(22)
The restricted stock unit was granted on February 1, 2008. The grant shall vest in equal installments of 3,000 shares on each anniversary of the grant date until one-hundred percent vested.

(23)
The option was granted on February 1, 2007. Options representing 1/10 th  of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2012.

(24)
The option was granted on April 11, 2006. Options representing 1/10 th  of the shares vested six months from the grant date, and the remaining shares vested in equal monthly installments until they were fully vested on April 11, 2011.

(25)
The option was granted on February 1, 2011. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2016.

(26)
The restricted stock unit was granted on February 1, 2011. The grant shall vest in equal installments of 2,000 shares on each anniversary of the rant date until one-hundred percent vested.

(27)
The option was granted on February 1, 2010. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2015.

(28)
The restricted stock unit was granted on February 1, 2010. The grant shall vest in equal installments of 2,500 shares on each anniversary of the rant date until one-hundred percent vested.

(29)
The option was granted on February 2, 2009. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 2, 2014.

(30)
The restricted stock unit was granted on February 2, 2009. The grant shall vest in equal installments of 2,574 shares on each anniversary of the grant date until one-hundred percent vested.

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(31)
The restricted stock unit was granted on August 28, 2008. The grant shall vest in equal installments of 5,000 shares on each anniversary of the grant date until one-hundred percent vested.

(32)
The option was granted on February 1, 2008. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2013.

(33)
The restricted stock unit was granted on February 1, 2008. The grant shall vest in equal installments of 3,000 shares on each anniversary of the grant date until one-hundred percent vested.

(34)
The option was granted on January 3, 2007. Options representing 1/10 th  of the shares vested six months from the grant date, and the remaining shares vested in equal monthly installments until they were fully vested on January 3, 2012.

(35)
The option was granted on February 1, 2011. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2016.

(36)
The restricted stock unit was granted on February 1, 2011. The grant shall vest in equal installments of 2,500 shares on each anniversary of the grant date until one-hundred percent vested.

(37)
The option was granted on February 1, 2010. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2015.

(38)
The restricted stock unit was granted on February 1, 2010. The grant shall vest in equal installments of 2,500 shares on each anniversary of the grant date until one-hundred percent vested.

(39)
The option was granted on February 2, 2009. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 2, 2014.

(40)
The restricted stock unit was granted on February 2, 2009. The grant shall vest in equal installments of 2,574 shares on each anniversary of the grant date until one-hundred percent vested.

(41)
The restricted stock unit was granted on August 28, 2008. The grant shall vest in equal installments of 5,000 shares on each anniversary of the grant date until one-hundred percent vested.

(42)
The option was granted on February 1, 2008. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2013.

(43)
The restricted stock unit was granted on February 1, 2008. The grant shall vest in equal installments of 3,000 shares on each anniversary of the grant date until one-hundred percent vested.

(44)
The option was granted on February 1, 2007. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2012.

(45)
The option was granted on January 6, 2006. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vested in equal monthly installments until they were fully vested on January 6, 2011.

(46)
The option was granted on December 3, 2004. Options representing 1/12th of the total grant vested in monthly installments on January 31, 2009 until they were fully vested on December 31, 2009.

(47)
The option was granted on August 2, 2004. Options representing 1/10th of the shares vested six months from the grant date and the remaining shares vested in equal monthly installments until they were fully vested on August 2, 2009.

(48)
The option was granted on February 1, 2011. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2016.

(49)
The restricted stock unit was granted on February 1, 2011. The grant shall vest in equal installments of 2,500 shares on each anniversary of the grant date until one-hundred percent vested.

(50)
The option was granted on February 1, 2010. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2015.

(51)
The restricted stock unit was granted on February 1, 2010. The grant shall vest in equal installments of 2,000 shares on each anniversary of the grant date until one-hundred percent vested.

(52)
The option was granted on February 2, 2009. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 2, 2014.

(53)
The restricted stock unit was granted on February 2, 2009. The grant shall vest in equal installments of 2,574 shares on each anniversary of the grant date until one-hundred percent vested.

(54)
The restricted stock unit was granted on August 28, 2008. The grant shall vest in equal installments of 5,000 shares on each anniversary of the grant date until one-hundred percent vested.

(55)
The option was granted on February 1, 2008. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vest in equal monthly installments until they are fully vested on February 1, 2013.

(56)
The restricted stock unit was granted on February 1, 2008. The grant shall vest in equal installments of 2,500 shares on each anniversary of the grant date until one-hundred percent vested.

(57)
The option was granted on January 3, 2007. Options representing 1/10th of the shares vested six months from the grant date, and the remaining shares vested in equal monthly installments until they were fully vested on January 3, 2012.

        Each of the options and other equity awards reflected on the table above were issued under the 1997 Plan, the 1999 Plan or the 2006 Plan, which are plans that were or are available to all of our employees.

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        In the case of the 1997 Plan and the 1999 Plan, if a "merger" of the Company occurs, as defined in the relevant plan, each outstanding option or equity award will be assumed or an equivalent option or right substituted by the successor company. Following such assumption or substitution, if the participant's status as a service provider is terminated by the successor corporation as a result of an "involuntary termination" other than for "cause," each as defined in the relevant plan, within twelve months following the merger, then the participant will fully vest and have the right to exercise all of his or her options and will convert any other equity awards into shares of Common Stock (commonly referred to as a "double-trigger" termination). In the event that the successor company refuses to assume or substitute for the equity award the participant will fully vest in and have the right to exercise all of his or her options or stock appreciation rights, including shares as to which such awards would not otherwise be vested or exercisable, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares and performance units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met immediately prior to the merger.

        In the case of the 2006 Plan, in the event of a "change of control" of the Company, as defined in the plan, each outstanding option or equity award will be assumed or an equivalent option or right substituted by the successor company. In the event that the successor company refuses to assume or substitute for the option or equity award, the participant will fully vest in and have the right to exercise all of his or her options or stock appreciation rights, including shares as to which such awards would not otherwise be vested or exercisable, all restrictions on restricted stock will lapse, and, with respect to restricted stock units, performance shares and performance units, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an option or stock appreciation right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a change of control, the administrator of the 2006 Plan will notify the participant that the option or stock appreciation right will be fully vested and exercisable for a period of time determined by the administrator, and the option or stock appreciation right will terminate upon the expiration of such period.

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

        For purposes of the 2006 Plan form option agreement, "Cause" will mean (i) any act of personal dishonesty taken by the participant in connection with his or her responsibilities as an employee and intended to result in substantial personal enrichment of the participant, (ii) the participant's conviction of a felony, (iii) a willful act by the participant which constitutes gross misconduct and which is injurious to the successor company, and (iv) following delivery to the participant of a written demand for performance from the successor company which describes the basis for the successor company's belief that the participant has not substantially performed his or her duties, continued violations by the participant of the participant 's obligations to the successor company which are demonstrably willful and deliberate on the participant's part.

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        For purposes of the 2006 Plan form option agreement, any of the following events shall constitute an "Involuntary Termination": (i) without the participant's express written consent, a significant reduction of the participant's duties, authority or responsibilities, relative to the participant's duties, authority or responsibilities as in effect immediately prior to the change in control, or the assignment to the participant of such reduced duties, authority or responsibilities; (ii) without the participant's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the participant immediately prior to the change in control; (iii) a reduction by the successor company in the base salary of the participant as in effect immediately prior to the change in control; (iv) a material reduction by the successor company in the kind or level of employee benefits, including bonuses, to which the participant was entitled immediately prior to the change in control with the result that the participant's overall benefits package is significantly reduced; (v) the relocation of the participant to a facility or a location more than fifty miles from the participant's then present location, without the participant's express written consent; (vi) any purported termination of the participant by the successor company which is not effected for disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) any act or set of facts or circumstances which would, under California case law or statute constitute a constructive termination of the Participant.


Option Exercises and Stock Vested

        The following table shows all stock options exercised and value realized upon exercise, and all stock awards vested and value realized upon vesting, by the named executive officers during fiscal year 2011.

 
  Option Awards   Stock Awards  
Name
  Number of
Shares
Acquired on
Exercise (#)
  Value Realized
on Exercise ($)
  Number of
Shares
Acquired on
Vesting (#)
  Value Realized
on Vesting(1)($)
 

Harold Hughes

            21,500     450,845  

Satish Rishi

            32,574     682,031  

Thomas R. Lavelle

    6,664     60,784     23,074     430,146  

Sharon E. Holt

            13,074     225,146  

Martin Scott

            17,074     285,016  

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


Potential Payments Upon Termination or Change-in-Control

        We have no contractual arrangements with our named executive officers that would provide payments upon termination or change-in-control. Outstanding equity awards may vest upon a "double-trigger" termination in the event of a change-in-control, as provided under the applicable equity plan and as described under the "Outstanding Equity Awards at Fiscal 2011 Year-End" table. This accelerated vesting applies to all awards made under the plans and is not specific to awards made to our named executive officers. The following table summarizes the value of the potential accelerated

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vesting to each named executive officer based on the closing price of our common stock of $7.55 on December 30, 2011 (the last trading day of 2011) as reported on the Nasdaq Global Select Market.

Name
  Value of
Acelerated
Stock Options
($)
  Value of
Acelerated
Stock Awards
($)
  Total Value of
Accelerated
Options and
Stock Awards
($)
 

Harold Hughes

        573,800     573,800  

Satish Rishi

        167,217     167,217  

Thomas R. Lavelle

        216,292     216,292  

Sharon E. Holt

        231,392     231,392  

Martin Scott

        216,292     216,292  


Compensation of Directors

        The following table shows compensation information for our non-employee directors for 2011.


Director Compensation
For Fiscal Year 2011

Name
  Fees
Earned
or Paid
in Cash
($)
  Stock
Awards(1)
($)
  Option
Awards
($)
  Non-Equity
Incentive Plan
Compensation
($)
  Change in
Pension and
Value and
Non-Qualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
  Total
($)
 

J. Thomas Bentley

    65,000     160,013 (2)                   225,013  

Sunlin Chou

    50,000     160,013 (3)                   210,013  

Bruce Dunlevie

    28,929 (4)                       28,929  

P. Michael Farmwald

    40,000     160,013 (5)                   200,013  

Penelope A. Herscher

    60,000     160,013 (6)                   220,013  

David Shrigley

    40,000     160,013 (7)                   200,013  

Abraham Sofaer

    40,010 (8)   160,013 (9)                   200,023  

Eric Stang

    52,500     160,013 (10)                   212,513  

(1)
Amounts shown do not reflect compensation actually received by the non-employee directors. Instead, the amounts shown are the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. The assumptions used to calculate the value of stock option awards are set forth under Note 9 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2011.

(2)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Mr. Bentley also had options to purchase an aggregate of 92,917 shares outstanding as of December 31, 2011.

(3)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Dr. Chou also had options to purchase an aggregate of 80,000 shares outstanding as of December 31, 2011.

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(4)
Reflects the fees paid to Mr. Dunlevie until his resignation from the Board on June 10, 2011. Mr. Dunlevie had options to purchase an aggregate of 138,333 shares outstanding as of June 10, 2011.

(5)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Dr. Farmwald also had options to purchase an aggregate of 100,000 shares outstanding as of December 31, 2011.

(6)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Ms. Herscher also had options to purchase an aggregate of 60,000 shares outstanding as of December 31, 2011.

(7)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Mr. Shrigley also had options to purchase an aggregate of 60,000 shares outstanding as of December 31, 2011.

(8)
Mr. Sofaer elected to receive 3,227 shares of Common Stock in lieu of board fees for fiscal year 2011. The respective closing values to determine the amount of shares issued were $19.75 on March 31, 2011; $14.68 on June 30, 2011; $14.00 on September 30, 2011; and $7.55 on December 30, 2011.

(9)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Mr. Sofaer also had options to purchase an aggregate of 80,000 shares outstanding as of December 31, 2011.

(10)
Reflects the compensation costs recognized in 2011 associated with a restricted stock unit award of 11,612 shares of Common stock made on October 3, 2011 with a fair value as of the grant date of $13.78 per share disregarding forfeiture assumptions. Mr. Stang also had options to purchase an aggregate of 40,000 shares outstanding as of December 31, 2011.


Overview of Compensation and Procedures

        No changes were made to our Board pay practices in 2011.

        In 2008, as a result of our annual review of Rambus Board pay practices and competitive positioning, changes were recommended and adopted to our Board pay practices. The Compensation Committee reviewed materials from SBCG detailing benchmark and competitive pay practices both within our peer group and across public companies in general. A decision was made to discontinue the annual equity stock option grant and replace this award with an annual RSU equity grant with an approximate fair market value equal to $160,000 at the time of grant. Our decision to denominate the annual RSU grant in terms of value instead of number of shares will help address year-over-year volatility and provides consistent alignment with our Compensation Peer Group. This revision to the director plan acknowledges their commitment of time and consultation and will continue to be benchmarked to industry and peer group compensation practices.


Summary of Director Plan

        Annual Retainer.     Each independent director receives an annual retainer of $40,000 in cash. The Chairpersons of the Board and Audit Committee each receive an additional annual retainer of $25,000. The Chairperson of the Compensation Committee receives an additional annual retainer of $20,000. The Chairperson of the Corporate Governance and Nominating Committee receives an additional

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annual retainer of $10,000. Each annual retainer is paid in quarterly installments. The annual retainers were not increased for 2011.

        Annual Equity Grant.     Each independent director receives an annual equity grant of such number of RSUs with an approximate fair market value equal to $160,000 at the time of grant. This annual equity grant represents a change from the annual equity grant of an option to purchase 20,000 shares of Common Stock which the independent directors previously received in 2008. This change was made after reviewing the market data of our competitors and to reflect the time commitments our independent directors are asked to make to the Company. The RSU grants vest in full at the end of a one-year period, subject to the independent director continuing to serve through each applicable vesting date. If the director discontinues service prior to the vesting of any RSU grant, the Compensation Committee may, in its discretion, permit such grant to vest pro rata for the portion of the year during which such director served.

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

        Awards granted to the independent directors under the 2006 Plan are generally not transferable, and all rights with respect to an award granted to a director or participant generally will be available during a director or participant's lifetime only to the director or participant.

        Each of the options granted to our independent directors was issued under the 1997 Plan or the 2006 Plan, which are plans that are available to all of our employees. As described under "Outstanding Equity Awards at Fiscal Year-End," the 1997 Plan provides for certain acceleration upon a "merger" of the Company, as defined under the 1997 Plan, and the 2006 Plan provides for certain acceleration upon a "change of control" of the Company, as defined under the 2006 Plan. In addition, with respect to options and any other equity awards granted to non-employee directors that are assumed or substituted for upon a change of control under the 2006 Plan, if the non-employee director is terminated other than upon a voluntary resignation, the options and other equity awards granted to such non-employee director will fully vest and be exercisable with respect to 100% of the shares subject to such options and other equity awards.

        Pursuant to stock ownership guidelines adopted by the Board in October 2006 and updated in February 2011, each independent director will be expected to accumulate and hold an equivalent value of our Common Stock of three times their annual total cash compensation and to achieve this by January 1, 2012 or five years from the date that the director joined the Board, whichever is later. Directors are expected to maintain this minimum amount of stock ownership throughout their tenure on the Board. As of December 31, 2011, all of our directors met their ownership requirements.

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AUDIT COMMITTEE REPORT

        This section shall not be deemed to be "soliciting material," or to be "filed" with the SEC, is not subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of Rambus under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, regardless of date or any other general incorporation language in such filing.

Report of the Audit Committee

  The following is the report of the Audit Committee of our Board of Directors with respect to our audited financial statements for the fiscal year ended December 31, 2011, which include our consolidated balance sheets as of December 31, 2011 and 2010 and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the fiscal years ended December 31, 2011, 2010 and 2009, and the notes thereto.

Review with Management

 

The Audit Committee has reviewed and discussed our audited financial statements and management's report on internal control over financial reporting with management.

Review and Discussions with the Independent Registered Public Accounting Firm

 

The Audit Committee has discussed with PricewaterhouseCoopers LLP, our independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has also received written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor's communications with us concerning independence, as may be modified or supplemented, and has discussed with PricewaterhouseCoopers LLP its independence from us.

Conclusion

 

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 for filing with the SEC.

Respectfully submitted by:

 

THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

 

Eric Stang (Chair)
J. Thomas Bentley
P. Michael Farmwald

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PERFORMANCE GRAPH

        The following graph compares the cumulative 5-year total return attained by stockholders on Rambus Inc.'s common stock relative to the cumulative total returns of the NASDAQ Composite index and the RDG Semiconductor Composite index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from December 31, 2006 to December 31, 2011. No dividends have been declared or paid on our common stock. Historic stock price performance is not necessarily indicative of future stock price performance.


COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Rambus Inc., the NASDAQ Composite Index, and
the RDG Semiconductor Composite Index

GRAPHIC


*
$100 invested on 12/31/06 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

 
  12/06   12/07   12/08   12/09   12/10   12/11  

Rambus Inc. 

    100.00     110.62     84.10     128.90     108.19     39.88  

NASDAQ Composite

    100.00     110.26     65.65     95.19     112.10     110.81  

RDG Semiconductor Composite

    100.00     108.66     55.09     92.66     107.41     101.03  

         The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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OTHER MATTERS

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

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

Sunnyvale, California
March 15, 2012

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Appendix A


RAMBUS INC.

2006 EQUITY INCENTIVE PLAN

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

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

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