Micron Technology, Inc.
MICRON TECHNOLOGY INC (Form: DEF 14A, Received: 12/07/2017 13:00:01)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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the Securities Exchange Act of 1934 (Amendment No.    )

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December 7, 2017


Fellow Micron Shareholders,

Fiscal 2017 was a remarkable year for Micron. Intense focus and execution enabled us to harness industry tailwinds and achieve unprecedented results. For the first time in our nearly 40-year history, we surpassed $20 billion in revenue, grew net income to a record $5.1 billion, and generated a record $3.3 billion in free cash flow.

Micron's business is more diversified than ever. We realized double-digit revenue growth in each of our four business units: Compute & Networking, Embedded, Mobile, and Storage. Our performance reflects the breadth of both our solutions and our end markets. Demand for memory and storage extends well beyond personal computers and mobile phones. Our technologies play a critical role in enabling some of today's most advanced applications, including artificial intelligence, autonomous driving, and virtual reality.

In this letter, I will recap our fiscal 2017 achievements, share our perspectives on the current industry dynamics, and highlight how our priorities for fiscal 2018 position us to capitalize on opportunities created by the evolving industry environment.

Executing Against our Strategy

Micron achieved several key objectives in fiscal 2017, which significantly improved our position across multiple aspects of the business. We successfully ramped 20nm DRAM and 32-layer 3D NAND technologies into volume production, enabling us to improve our relative cost competitiveness. We continued to execute our technology roadmap by introducing next-generation 1X DRAM and 64-layer 3D NAND, and we made substantial progress in follow-on DRAM and NAND technologies.

We furthered our efforts to increase the percentage of our revenue going to high-value solutions. This was particularly true for our NAND flash portfolio. Sales of solid state drives ("SSDs") were more than double what we achieved the year prior. Sales of managed NAND solutions, which are NAND devices packaged with controller technology, nearly doubled year-over-year.

We made meaningful improvements in manufacturing scale and efficiency. We completed the acquisition of Inotera Memories, driving improved margins and free cash flow, and enhancing our operational efficiency through greater scale. We also established a DRAM Center of Excellence in Taiwan, which will co-locate back-end test, assembly and packaging alongside our existing front-end DRAM fabrication facilities. This strategy mirrors our NAND Center of Excellence in Singapore and will drive further operational cost efficiencies across our global manufacturing footprint.

Finally, we strengthened our balance sheet in fiscal 2017, growing cash, marketable investments, and restricted cash to $6.2 billion, while retiring $1.5 billion in high-yield debt. We have continued to make progress towards being net cash positive by the end of fiscal 2018, retiring additional high-yield debt in November. This progress provides a healthier financial foundation upon which to grow revenues and profits.

Industry Environment and Fiscal 2018 Objectives

Today, memory and storage technologies play a more critical role in networking, storage and computing architectures than they have at any time in the past. There is an unprecedented amount of data being created, stored, and processed in a wide range of end-market applications and these applications are made possible with memory and storage solutions like those Micron develops. This trend creates opportunities for Micron to build more strategic relationships with our key customers and help them extract the most value from our technologies. We believe these opportunities will continue to grow as rapid advances in data analytics lead to new use cases and applications that improve our everyday lives.






These broad demand drivers have positively contributed to the current business climate. We have seen an increase in unit demand and average memory content across nearly every end market - from smartphones to servers to vehicles. We also saw a healthy balance between demand and industry supply throughout fiscal 2017. We expect industry supply growth to remain measured for both memory and storage technologies, largely balancing with demand throughout fiscal 2018.

We have identified four key areas of focus for fiscal 2018, which we consider instrumental to our future success. The entire Micron team is committed to excel against these objectives:

Cost Effectiveness - While market diversification and advanced solutions are introducing new opportunities for high-value solutions, base technology costs remain fundamental to profitability in this business. We are focused on accelerating new technology development and ramping quickly and efficiently into volume production, while also reducing back-end costs, cycle time and inventory.

Product Execution - Bringing the right solution at the right time ensures we can deliver the most value to our customers. Our engineering teams are adopting new methodologies to achieve the shortest possible customer qualification of our newest technology solutions.

Portfolio Management - To prioritize revenue growth, profits and ROI, we will orient our product portfolio towards differentiated, high-value solutions. Doing so will also enable us to better respond to customer requirements and market trends.

Culture - Hiring and keeping the industry's best talent will be a critical part of executing our strategy. We are implementing programs that promote a culture of achievement and success, which I believe will make Micron a global leader in competitive talent markets.

Our technologies are having a profound impact on the world around us. I trust that you share my enthusiasm for the significant opportunities that lie ahead for Micron, which are embodied in our vision statement: transforming how the world uses information to enrich life. Our efforts to positively impact the lives of people across the globe extend beyond the technologies we create. For example, through The Micron Foundation, we are enriching the communities in which we operate by partnering with educators in science, technology, engineering and math (STEM) to nurture tomorrow's technology pioneers. We published our second annual Sustainability Report in fiscal 2017, which reflects our commitment to supporting our global community as well as driving ethical and sustainable business practices.

As I close my first shareholder letter as Micron's CEO, I would like to acknowledge my predecessor, Mark Durcan. Micron is poised for great success in the years ahead, due in large part to his efforts to successfully position the Company through years of industry consolidation. I am proud to be leading this iconic company, particularly during a time when technology promises to create such dramatic change in each of our lives. Thank you for your continued support as a Micron shareholder. I look forward to sharing our progress with you over the year ahead.

Sincerely,
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Sanjay Mehrotra
President and CEO







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Notice of Fiscal 2017 Annual Meeting of Shareholders
January 17, 2018
To the Shareholders:

N OTICE I S H EREBY G IVEN that the Fiscal 2017 Annual Meeting of Shareholders of Micron Technology, Inc., a Delaware corporation, will be held on January 17, 2018 , at 9:00 a.m., Mountain Standard Time, at our headquarters located at 8000 South Federal Way, Boise, Idaho 83716-9632, for the purposes listed below. As used herein "we," "our," "us," "the Company" and similar terms refer to Micron Technology, Inc., unless the context indicates otherwise.

1.
To elect directors to serve for the ensuing year and until their successors are elected and qualified;
2.
To approve our Employee Stock Purchase Plan with 33 million shares reserved for issuance thereunder;
3.
To approve the material terms of the performance goals under our Executive Officer Performance Incentive Plan;
4.
To ratify the appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for the fiscal year ending August 30, 2018;
5.
To approve a non-binding resolution to approve the compensation of our Named Executive Officers as described in the proxy statement;
6.
To approve, in a non-binding vote, the frequency (every one, two or three years) with which our shareholders will be entitled to have an advisory vote on the compensation of our Named Executive Officers as described in the proxy statement; and
7.
To transact such other business as may properly come before the meeting or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

Only shareholders of record at the close of business on November 20, 2017 , are entitled to receive notice of and to vote at the meeting and any postponements or adjournments of the meeting. A complete list of shareholders entitled to vote at the meeting will be open to the examination of any shareholder, for any purpose germane to the business to be transacted at the meeting, during ordinary business hours for the ten-day period immediately preceding the date of the meeting, at our headquarters at 8000 South Federal Way, Boise, Idaho 83716-9632.

The Securities and Exchange Commission permits proxy materials to be furnished over the Internet rather than in paper form. Accordingly, we are sending most of our shareholders a notice regarding the availability of this proxy statement, our Annual Report on Form 10-K for fiscal 2017 and other proxy materials via the Internet (the "Notice"). This electronic process gives you fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. The Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report. The Notice also instructs you on how you may submit your vote over the Internet. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice.

Attendance at the Annual Meeting will be limited to shareholders and our guests. Shareholders may be asked to furnish proof of ownership of our Common Stock before being admitted to the meeting.

To ensure your representation at the meeting, you are urged to vote. You may vote by telephone or electronically via the Internet. Alternatively, if you received a paper copy, you may sign, date and return the proxy card in the postage-prepaid envelope enclosed for that purpose. Please refer to the instructions included with the proxy card for additional details. Shareholders attending the meeting may vote in person even if they have already submitted their proxy, and any previous votes that were submitted by the shareholder, whether by Internet, telephone or mail, will be superseded by the vote that such shareholder casts at the meeting.
 
 
By Order of the Board of Directors
Boise, Idaho
December 7, 2017
 
Joel L. Poppen
Senior Vice President, Legal Affairs, General Counsel and Corporate Secretary
YOUR VOTE IS IMPORTANT. PLEASE SUBMIT YOUR PROXY PROMPTLY.




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8000 South Federal Way
Boise, Idaho 83716-9632
____________________________

PROXY STATEMENT
FISCAL 2017 ANNUAL MEETING OF SHAREHOLDERS

January 17, 2018
9:00 a.m. Mountain Standard Time
____________________________

INFORMATION CONCERNING SOLICITATION AND VOTING

General

The proxy is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of Micron Technology, Inc., for use at the Fiscal 2017 Annual Meeting of Shareholders to be held on January 17, 2018 , at 9:00 a.m., Mountain Standard Time, or at any adjournment or postponement thereof (the "Annual Meeting"). The purpose of the Annual Meeting is set forth herein and in the accompanying Notice of Fiscal 2017 Annual Meeting of Shareholders. The Annual Meeting will be held at our headquarters located at 8000 South Federal Way, Boise, Idaho 83716-9632. Our telephone number is (208) 368-4000.

This Proxy Statement and related proxy card are first being distributed on or about December 7, 2017, to all shareholders entitled to vote at the meeting.

Shareholders can vote their shares using one of the following methods:

Vote through the Internet at www.proxypush.com/MU using the instructions included in the notice regarding the Internet availability of proxy materials, the proxy card or voting instruction card;

Vote by telephone using the instructions on the proxy card or voting instruction card if you received a paper copy of the proxy materials;

Complete and return a written proxy or voting instruction card using the proxy card or voting instruction card if you received a paper copy of the proxy materials; or

Attend and vote at the meeting.

Internet and telephone voting are available 24 hours a day, and if you use one of those methods, you do not need to return a paper proxy or voting instruction card. If you have questions on how to vote, you can call us at (866) 586-3108. Unless you are planning to vote at the meeting, your vote must be received by 11:59 p.m., Eastern Standard Time, on January 16, 2018.

Record Date

Shareholders of record at the close of business on November 20, 2017 , (the "Record Date"), are entitled to receive notice of and to vote at the meeting.

Revocability of Proxy

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its use by attending the Annual Meeting and voting in person or by delivering to us a written notice of revocation or another duly executed proxy bearing a date later than the earlier given proxy but prior to the date of the Annual Meeting.


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Solicitation

We will bear the cost of solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may be solicited by our directors, officers and employees, without additional compensation, personally or by telephone or Internet. We intend to use the services of D.F. King & Co., a proxy solicitation firm, in connection with the solicitation of proxies. Although the exact cost of the solicitation services is not known at this time, it is anticipated that the fees paid by us for these services will be approximately $12,500.

Outstanding Shares

We have one class of stock outstanding, common stock, $0.10 par value per share (the "Common Stock"). As of the Record Date, 1,157,279,535 shares of Common Stock were issued and outstanding and entitled to vote.

Voting Rights and Required Vote

Under the Delaware General Corporation Law and our Restated Certificate of Incorporation and our Amended and Restated Bylaws ("Bylaws"), each shareholder will be entitled to one vote for each share of Common Stock held at the Record Date for all matters. The required quorum for the transaction of business at the Annual Meeting is a majority of the votes eligible to be cast by holders of shares of our Common Stock issued and outstanding on the Record Date. Shares that are voted "FOR," "AGAINST" or "ABSTAIN" are treated as being present at the Annual Meeting for the purposes of establishing a quorum and are tallied to determine the shareholders' decision with respect to the matter voted upon (the "Votes Cast"). Abstentions will have the same effect as voting against a proposal. Broker non-votes will be considered present and entitled to vote for purposes of determining the presence or absence of a quorum for the transaction of business, but such non-votes are not deemed to be Votes Cast and, therefore, will not be included in the tabulation of the voting results with respect to voting results for the election of directors or issues requiring the approval of a majority of Votes Cast.

Shares held in a brokerage account or by another nominee are considered held in "street name" by the shareholder or "beneficial owner." A broker or nominee holding shares for a beneficial owner may not vote on matters relating to the election of directors or advisory votes unless the broker or nominee receives specific voting instructions from the beneficial owner of the shares. As a result, absent specific instructions, brokers or nominees may not vote a beneficial owner's shares on Proposals 1, 2, 3, 5, 6 and 7 and such shares will be considered "broker non-votes" for such proposals.

Directors will be elected if the number of votes "FOR" a particular director exceeds the number of votes "AGAINST" that same director. With respect to all other items of business, the "FOR" vote of a majority of the Votes Cast is required in order for such matter to be considered approved by the shareholders.

Voting of Proxies

The shares of Common Stock represented by all properly executed proxies received in time for the meeting will be voted in accordance with the directions given by the shareholders. If no instructions are given with respect to a properly executed proxy timely received by us, the shares of Common Stock represented thereby will be voted (i)  FOR each of the nominees named herein as directors, or their respective substitutes as may be appointed by the Board of Directors, (ii) FOR the approval of our Employee Stock Purchase Plan with 33 million shares reserved thereunder; (iii) FOR the approval of the material terms of the performance goals under our Executive Officer Performance Incentive Plan; (iv) FOR ratification of the appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for the fiscal year ending August 30, 2018 , (v)  FOR a non-binding resolution to approve the compensation of our Named Executive Officers as described in this proxy statement; (vi) FOR a non-binding vote on the frequency of an advisory vote to be every year whereby shareholders will be entitled to approve the compensation of our Named Executive Officers as described in this proxy statement; and (vii) in the discretion of the proxy holders for such business which may properly come before the Annual Meeting.




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PROPOSAL 1 – ELECTION OF DIRECTORS

Nominees

A board of seven directors is to be elected at the Annual Meeting, all of whom have been recommended for nomination by a majority of the independent directors of the Board of Directors and all of whom are currently serving as directors. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the seven management nominees named below. If any management nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. It is not expected that any nominee listed below will be unable or will decline to serve as a director. The term of office of each person elected as a director will continue until the next Annual Meeting of Shareholders or until such person's successor has been elected and qualified, except in the case of earlier resignation or removal. Executive officers are appointed annually by the Board of Directors and serve until their successors are duly appointed and qualified, except in the case of earlier resignation or removal. The names of the nominees and certain information about them are set forth below:

 
 
 
 
 
 
Director Since
 
Board Committees
Name of Nominee
 
Age
 
Principal Occupation
 
 
Audit
 
Compensation
 
Finance
 
Governance and Sustainability
Robert L. Bailey
 
60
 
Chief Executive Officer of Blue Willow Systems, Inc.
 
2007
 
ü
 
 
 
 
 
ü
Richard M. Beyer
 
69
 
Former Chairman and Chief Executive Officer of Freescale Semiconductor, Inc.
 
2013
 
 
 
ü
 
 
 
 
Patrick J. Byrne
 
57
 
Senior Vice President of Fortive Corporation
 
2011
 
 
 
ü
 
 
 
ü
Mercedes Johnson
 
63
 
Former Chief Financial Officer of Avago Technologies Limited
 
2005
 
Chair
 
 
 
Chair
 
 
Sanjay Mehrotra

 
59
 
President and Chief Executive Officer
 
2017
 
 
 
 
 
ü
 
 
Lawrence N. Mondry
 
57
 
President and Chief Executive Officer of Stream Gas & Electric, Ltd.
 
2005
 
 
 
Chair
 
ü
 
Chair
Robert E. Switz
 
71
 
Chairman of the Board
 
2006
 
ü
 
 
 
 
 
 

Set forth below are the principal occupations of the nominees for at least the past five years:

Robert L. Bailey has served as Chief Executive Officer of Blue Willow Systems, Inc. since August 2017 and as Blue Willow's Chairman since March 2015. Blue Willow is a software as a service resident safety platform for senior living facilities. Mr. Bailey was the Chairman of the Board of Directors of PMC-Sierra, Inc. from 2005 until May 2011 and also served as PMC's Chairman from February 2000 until February 2003. Mr. Bailey served as a director of PMC from October 1996 to May 2011. He also served as the Chief Executive Officer of PMC from July 1997 until May 2008. Within the past five years, Mr. Bailey also served on the Board of Directors of Entropic Communications. Mr. Bailey holds a BS in Electrical Engineering from the University of Bridgeport and an MBA from the University of Dallas.

Mr. Bailey's experience as Chief Executive Officer and Chairman of a leading technology company has given him expertise in the technology industry as well business operations, finance, corporate development, corporate governance and management.

Richard M. Beyer was Chairman and Chief Executive Officer of Freescale Semiconductor, Inc. from 2008 through June 2012 and served as a director with Freescale until April 2013. Prior to Freescale, Mr. Beyer was President, Chief Executive Officer and a director of Intersil Corporation from 2002 to 2008. He has also previously served in executive management roles at FVC.com, VLSI Technology, and National Semiconductor Corporation. Within the past five years, Mr. Beyer served on the Board of Directors of Analog Devices, Inc. and Freescale. He currently serves on the Board of Directors of Dialog Semiconductor and Microsemi Corporation. Mr. Beyer served three years as an officer in the United States Marine Corps. He holds a BA and an MA in Russian from Georgetown University and an MBA in Marketing and International Business from Columbia University Graduate School of Business.



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Mr. Beyer's experience as the Chief Executive Officer and a director at leading technology companies has given him expertise in the technology industry as well business operations, finance, corporate development, corporate governance and management.

Patrick J. Byrne has served as Senior Vice President of Fortive Corporation since July 2016, when Danaher Corporation completed the separation of its Test & Measurement and Industrial Technologies segments. Mr. Byrne was President of Tektronix, a subsidiary of Danaher, from July 2014 to July 2016. Previously, he was Vice President of Strategy and Business Development and Chief Technical Officer of Danaher from November 2012 to July 2014. Danaher designs, manufactures, and markets innovative products and services to professional, medical, industrial, and commercial customers. Mr. Byrne served as Director, President and Chief Executive Officer of Intermec, Inc. from 2007 to May 2012. Within the past five years, Mr. Byrne served on the Board of Directors of Flow International and Intermec, Inc. Mr. Byrne holds a BS in Electrical Engineering from the University of California, Berkeley and an MS in Electrical Engineering from Stanford University.

Mr. Byrne's experience in executive management at public companies has given him expertise in the technology industry as well as business operations, finance, corporate development, corporate governance and management.

Mercedes Johnson was the Senior Vice President and Chief Financial Officer of Avago Technologies Limited, a supplier of analog interface components for communications, industrial, and consumer applications, from December 2005 to August 2008. She also served as the Senior Vice President, Finance of Lam Research Corporation from June 2004 to January 2005 and as Lam's Chief Financial Officer from May 1997 to May 2004. Ms. Johnson holds a degree in Accounting from the University of Buenos Aires and currently serves on the Board of Directors for Juniper Networks, Inc., Teradyne, Inc., and Synopsys, Inc. She also served on the Board of Directors for Intersil Corporation from August 2005 to February 2017. Ms. Johnson is the Chair of the Board of Directors' Audit Committee and Finance Committee.

Ms. Johnson's experience as the Chief Financial Officer of several technology companies has given her expertise in finance, corporate development, corporate governance, management and operations.

Sanjay Mehrotra joined us in May 2017 as our President, Chief Executive Officer, and Director. Mr. Mehrotra co-founded and led SanDisk Corporation as a start-up in 1988 until its eventual sale in May 2016, serving as its President and Chief Executive Officer from January 2011 to May 2016, and as a member of its Board of Directors from July 2010 to May 2016. Mr. Mehrotra currently serves on the Board of Directors of Cavium, Inc. Mr. Mehrotra served as a member of the Board of Directors for Western Digital Corp. from May 2016 to February 2017. Mr. Mehrotra holds a BS and an MS in Electrical Engineering and Computer Science from the University of California, Berkeley and is a graduate of the Stanford Graduate School of Business Executive Program.

Mr. Mehrotra's has over 35 years of experience in the semiconductor memory industry. As a co-founder of SanDisk he offers a unique perspective on the industry and has significant senior leadership and technological expertise. He also has expertise in finance, corporate development, corporate governance and business strategy.

Lawrence N. Mondry has been the President and Chief Executive Officer of Stream Gas & Electric, Ltd., a provider of energy, mobile and protective services, since February 2016. Mr. Mondry was the Chief Executive Officer of Apollo Brands, a consumer products portfolio company, from February 2014 to February 2015. Mr. Mondry was the Chief Executive Officer of Flexi Compras Corporation, a rent-to-own retailer, from June 2013 to February 2014. Mr. Mondry was the President and Chief Executive Officer of CSK Auto Corporation, a specialty retailer of automotive aftermarket parts, from August 2007 to July 2008. Prior to his appointment at CSK, Mr. Mondry served as the Chief Executive Officer of CompUSA Inc. from November 2003 to May 2006. Mr. Mondry is the Chair of the Board of Directors' Compensation Committee and Governance and Sustainability Committee.

Mr. Mondry's experience as the Chief Executive Officer of various retailers has given him expertise in operations, management, finance and corporate development. Mr. Mondry's retail expertise is especially relevant to our Crucial business.

Robert E. Switz was the Chairman, President, and Chief Executive Officer of ADC Telecommunications, Inc., a supplier of network infrastructure products and services, from August 2003 until December 2010, when Tyco Electronics Ltd. acquired ADC. Mr. Switz joined ADC in 1994 and throughout his career there held numerous leadership positions. Within the past five years, Mr. Switz served on the Board of Directors of GT Advanced Technologies Inc., Broadcom Corporation, Cyan, Inc., Pulse Electronics Corporation, and Leap Wireless International, Inc. Mr. Switz currently serves on the Board of Directors for Marvell Technology Group Ltd., Gigamon, Inc., and FireEye, Inc. Mr. Switz holds an MBA from the University of Bridgeport and a BS in Business Administration from Quinnipiac University. Mr. Switz was appointed Chairman of the Board of Directors in 2012.


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Mr. Switz's experience as Chief Executive Officer and Chairman of a leading technology company has given him expertise in the technology industry as well business operations, finance, corporate development, corporate governance and management.

There are no family relationships between any of our directors or executive officers.

The Board of Directors recommends voting "FOR" approval of the nominees listed above.


CORPORATE GOVERNANCE

Code of Business Conduct and Ethics

The Board of Directors has adopted a Code of Business Conduct and Ethics that is applicable to all our directors, officers and employees. A copy of the Micron Code of Business Conduct and Ethics is available at www.micron.com and is also available in print upon request. Any amendments or waivers of the Code of Business Conduct and Ethics will also be posted on our website within four business days of the amendment or waiver as required by applicable rules and regulations of the Securities and Exchange Commission ("SEC") and the Listing Rules of the NASDAQ Stock Market LLC ("NASDAQ").

Sustainability

We believe that a commitment to corporate sustainability and supporting our global community is a critical part of our mission to deliver innovative solutions that accelerate our customers' success. Our Board of Directors considers sustainability issues an integral part of its business oversight, and has encouraged a proactive approach toward mitigating our impact on the environment, supporting our team members and the communities in which they live, driving transparency and accountability in our supply chain, and developing products that support a sustainable future, and we report annually on our progress.  

Director Independence

The Board of Directors has determined that directors Bailey, Beyer, Byrne, Johnson, Mondry and Switz qualify as independent directors. In determining the independence of our directors, the Board of Directors has adopted independence standards that mirror the criteria specified by applicable laws and regulations of the SEC and the Listing Rules of NASDAQ. None of these directors have a relationship with us, other than any relationship that is categorically not material under the guidelines referenced above. See "Certain Relationships and Related Transactions."

Board of Directors Leadership Structure

Mr. Switz has served as our Chairman of the Board of Directors since February 2012. We do not have a fixed policy on whether the roles of Chairman and Chief Executive Officer should be separate or combined. The decision is based on our and our shareholders' best interests under the circumstances existing at the time. In his role as Chairman, Mr. Switz oversees meetings of the independent directors and acts as a liaison between the independent directors and Chief Executive Officer.

Risk Assessment Role

The Board of Directors is responsible for overseeing the major risks we face and reviewing management's proposals for their mitigation. In addition, the Board of Directors has delegated oversight of certain categories of risk to the Audit, Compensation, Finance and Governance and Sustainability Committees. The Audit Committee reviews and discusses with management significant financial and nonfinancial risk exposures, including cyber security, and the steps management has taken to monitor, control, and report such exposures. The Compensation Committee oversees management of risks relating to our compensation plans and programs. The Finance Committee oversees the Company's strategies for management of significant financial risks and contingent liabilities. The Governance and Sustainability Committee manages risks associated with Board of Directors' governance and director independence. The Audit, Compensation, Finance and Governance and Sustainability Committees report to the Board of Directors regularly on matters relating to the specific areas of risk the committees oversee.



5



Compensation Risks

We have assessed our compensation programs and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. We assessed our compensation programs to determine if the programs' provisions and operations create undesired or unintentional risk of a material nature. We also reviewed the results of our findings with our outside compensation consultant. This risk assessment process included a review of program policies and practices; program analysis to identify risk and risk-control related to the programs; and determinations as to the sufficiency of risk identification, the balance of potential risk-to-potential-reward and risk-control. Although we reviewed all compensation programs, we focused on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout. In most cases, our compensation policies and practices are centrally designed and administered and are substantially the same across the Company. Certain internal groups have different or supplemental compensation programs tailored to their specific operations and goals, and programs may differ by country due to variations in local laws and customs.

Compensation Consultant

The Compensation Committee annually engages a compensation consultant to provide a comprehensive review of executive compensation matters. Our compensation consultant provided the Compensation Committee with information for our officers on cash and non-cash compensation elements and historical and trend payment data.

The Compensation Committee has established procedures that it considers adequate to ensure that our compensation consultant's advice to the Compensation Committee remains objective and is not influenced by our management. These procedures include: a direct reporting relationship to the Compensation Committee; a provision in the Compensation Committee's engagement letter with the compensation consultant specifying what information, data, and recommendations can be shared with management; and an annual update to the Compensation Committee on the compensation consultant's relationship with us, including a summary of the work performed for us during the preceding 12 months. For fiscal 2017, the specific activities undertaken by the compensation consultants for us included:

review non-employee director compensation;

review the Compensation Peer Group (as defined in the Compensation Discussion and Analysis) and recommend any changes to its members;

benchmark total direct compensation and its components (salary, short-term incentives and long-term incentives) of our officers using several data sources;

evaluate our historical pay-for-performance relationship;

review the metrics and targets associated with the annual short-term incentives and long-term incentive plans;

review the proposed equity grants for executives, along with vesting recommendations;

assist with a risk assessment of our compensation practices;

review a draft of the compensation discussion and analysis component of proxy disclosure; and

attend the Compensation Committee meetings in which executive compensation matters are discussed.

Mercer, LLC ("Mercer") was our compensation consultant through the end of October 2016 and Meridian Compensation Partners, LLC ("Meridian") was our compensation consultant for the remainder of fiscal 2017. We paid Mercer and Meridian a total of $478,374 and $216,571, respectively, in fiscal 2017 for services provided. Meridian's services related exclusively to the executive and non-employee director compensation consulting work performed for the Compensation Committee and Governance and Sustainability Committee. Mercer was paid $40,665 for the executive and non-employee director compensation consulting work and $437,709 for work related to our 401(k) Plan and other human resource functions. The decision to use Mercer for services other than those provided to the Compensation Committee and Governance and Sustainability Committee was made by our management and not the Compensation Committee. Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies Inc. ("MMC"). The Company paid MMC $2,438,300 in fiscal 2017 for insurance services.



6



The Compensation Committee considered the independence of our compensation consultants in light of SEC rules and the Listing Rules of NASDAQ. The Compensation Committee received a letter from each compensation consultant addressing its independence, including the following factors: (i) other services provided to us by them; (ii) fees paid by us as a percentage of their total revenue; (iii) policies or procedures maintained by them that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the individual consultants involved in the engagement and any member of the Compensation Committee; (v) whether the individual consultants involved in the engagement owned shares of our Common Stock; and (vi) any business or personal relationships between our executive officers and them or the individual consultants involved in the engagement. The Compensation Committee concluded that there were no conflicts of interest with our compensation consultants.

Board of Directors Meetings and Committees

Our Board of Directors held five meetings during fiscal 2017 . The Board of Directors met in Executive Session (meetings in which only non-employee directors are present) three times during fiscal 2017 . In fiscal 2017 , the Board of Directors had a standing Audit Committee, Compensation Committee, Finance Committee and Governance and Sustainability Committee. During fiscal 2017 , the Audit Committee met nine times, the Compensation Committee met six times, the Finance Committee met seven times, and the Governance and Sustainability Committee met four times. In addition to formal committee meetings, the chairmen of each committee engaged in regular discussions with management regarding various issues relevant to their respective committees. All incumbent directors attended 75% or more of the total number of meetings of the Board of Directors during fiscal 2017 . All incumbent directors who served on the Audit, Compensation, Finance and Governance and Sustainability Committees attended 75% or more of the total number of committee meetings during fiscal 2017 . All members of our Board of Directors were present at the Fiscal 2016 Annual Meeting of Shareholders. We encourage director attendance at the Annual Meeting of Shareholders.

The Audit, Compensation, Finance, and Governance and Sustainability Committees each have written charters that comply with SEC and NASDAQ rules relating to corporate governance matters. Copies of the committee charters as well as our Corporate Governance Guidelines are available at www.micron.com and are also available in print upon request to corporatesecretary@micron.com. The Board of Directors has determined that all the members of the Audit, Compensation, and Governance and Sustainability Committees satisfy the independence requirements of applicable SEC laws and the Listing Rules of NASDAQ for such committees.

Our Corporate Governance Guidelines specify a mandatory retirement age of 75 for members of our Board of Directors and provide that the committee chair serve for no more than five years, but give the Board of Directors the discretion in each case to waive the requirement on an annual basis. The Board of Directors has waived the five-year chair limit for Ms. Johnson on the Audit Committee and Mr. Mondry on the Compensation and Governance and Sustainability Committees.

Audit Committee

Ms. Johnson and Messrs. Bailey and Switz currently serve on the Audit Committee. Ms. Johnson has served as the Chair of the Audit Committee since October 2010. The Board of Directors has determined that Ms. Johnson and Messrs. Bailey and Switz each qualify as an "audit committee financial expert" for purposes of the rules and regulations of the SEC and that each of these members are sufficiently proficient in reading and understanding our financial statements to serve on the Audit Committee. The purpose of the Audit Committee is to assist the Board of Directors in overseeing and monitoring:

the integrity of our financial statements;

the performance of our internal audit function;

the performance of our Independent Registered Public Accounting Firm;

the qualifications and independence of our Independent Registered Public Accounting Firm; and

our compliance with legal and regulatory requirements.

The Audit Committee is also responsible for preparing the Audit Committee report that is included in our annual Proxy Statement. See "Report of the Audit Committee of the Board of Directors." The complete duties and responsibilities of the Audit Committee are set forth in its written charter, which is available at www.micron.com and is also available in print upon request to corporatesecretary@micron.com.



7



Compensation Committee

Messrs. Beyer, Byrne and Mondry currently serve on the Compensation Committee of the Board of Directors. Mr. Mondry has served as the Chair of the Compensation Committee since January 2012. The Compensation Committee is responsible for reviewing and approving the compensation of our executive officers. See the "Compensation Discussion and Analysis" and the "Compensation Committee Report" for information regarding how the Compensation Committee sets executive compensation levels. The Compensation Committee has authority to delegate any of its responsibilities to a subcommittee as it may deem appropriate in its judgment. The complete duties of the Compensation Committee are set forth in its written charter, which is available at www.micron.com and is also available in print upon request to corporatesecretary@micron.com.

Finance Committee

Ms. Johnson and Messrs. Mehrotra and Mondry currently serve on the Finance Committee. Mr. Durcan served on the Finance Committee for the portion of fiscal 2017 in which he was our CEO. Mr. Mehrotra replaced Mr. Durcan on the Finance Committee when he became our President and CEO in May 2017. Ms. Johnson has served as the Chair of the Finance Committee since October 2015. The Finance Committee represents and assists the Board of Directors in discharging its responsibilities with respect to our financial policies, financial strategies and capital structure. The complete duties of the Finance Committee are set forth in its written charter, which is available at www.micron.com and is also available in print upon request to corporatesecretary@micron.com.

Governance and Sustainability Committee

Messrs. Bailey, Byrne and Mondry currently serve on the Governance and Sustainability Committee. During fiscal 2017 Ms. Johnson and Messrs. Bailey, Beyer, Byrne, Mondry and Switz served on the Governance and Sustainability Committee. Mr. Mondry has served as Chair of the Governance and Sustainability Committee since October 2009. The responsibilities of the Governance and Sustainability Committee include assisting the Board of Directors in discharging its duties with respect to the following:

the identification and selection of nominees to our Board of Directors;

director compensation;

oversight and monitoring of the development and integration of material social and environmental strategies;

the development of our Corporate Governance Guidelines; and

the annual evaluations of the Board of Directors and its committees.

The complete duties and responsibilities of the Governance and Sustainability Committee are set forth in its written charter, which is available at www.micron.com and is also available in print upon request to corporatesecretary@micron.com.

The Governance and Sustainability Committee is responsible for identifying nominees for our Board of Directors. While we do not have a list of minimum qualifications that nominees must possess or a specific policy regarding diversity, the following factors are strongly considered by the Governance and Sustainability Committee in making its recommendations:

substantial experience in the semiconductor industry or related industries;

strong business acumen and judgment;

excellent interpersonal skills;

business relationships with key individuals in industry, government and education that may be of significant assistance to us and our operations;

familiarity with accounting rules and practices; and

"independence" as defined and required by the Listing Rules of NASDAQ and relevant rules and regulations of the SEC.


8




In the event the Board of Directors determines that it would be advisable to add additional members to the Board of Directors, the Governance and Sustainability Committee works with a third party executive search firm to assist them in the identification and evaluation of potential candidates to our Board of Directors.

The Governance and Sustainability Committee will consider director nominee recommendations from shareholders. Shareholder recommendations for directors are subject to the same criteria used to evaluate other candidates. Shareholders wishing to recommend a prospective nominee should submit the candidate's name and qualifications to our Corporate Secretary at corporatesecretary@micron.com. Our Bylaws contain the provisions that address the process by which a shareholder may nominate an individual to stand for election to our Board of Directors. A copy of our Bylaws can be found on the Corporate Governance page of our website at www.micron.com and is available in print upon request to corporatesecretary@micron.com.

Executive Sessions and Communications with the Board of Directors

Mr. Switz has been the Chairman of our Board of Directors since February 2012. As part of his duties as Chairman, Mr. Switz chairs Executive Session meetings of our Board of Directors. Shareholders and interested parties wishing to communicate with our Board of Directors may contact Mr. Switz at chairman@micron.com.




9



COMPENSATION OF DIRECTORS

The Governance and Sustainability Committee of the Board of Directors oversees the setting of compensation for our non-employee members of the Board of Directors. Each year the Governance and Sustainability Committee works with our compensation consultant to review and evaluate director compensation for the ensuing fiscal year, in light of prevailing market conditions. The compensation consultant gathers and reviews market data for non-employee directors from the same Compensation Peer Group used to evaluate officer compensation. For a discussion of peer group companies please see "Executive Compensation and Related Information – Compensation Discussion and Analysis." Upon completion of its review and evaluation, the Governance and Sustainability Committee recommended that the Board of Directors make no changes to director compensation for fiscal 2017. In October 2017, the Governance and Sustainability Committee recommended increases to the annual retainer and committee chair amounts for fiscal 2018, as noted below.

Elements of Director Compensation

Annual Retainer and Committee Chair Remuneration

Non-employee directors are entitled to receive an annual retainer of $100,000 in fiscal 2017. The annual retainer paid to non-employee directors was increased to $125,000 starting October 25, 2017. Pursuant to our 2008 Director's Compensation Plan (the "DCP"), which operates as a sub-plan of the Amended and Restated 2007 Equity Incentive Plan (the 2007 Plan"), non-employee directors may elect to take some or all of their annual retainer in the form of cash, shares of Common Stock or deferred rights to receive Common Stock upon termination as a director. Employee directors receive no additional or special remuneration for their service as directors.

Set forth below are the amounts received by directors for their service as committee chair or Chairman of the Board of Directors:

 
 
2018
 
2017
Audit Committee Chair
 
$
35,000

 
$
30,000

Compensation Committee Chair
 
30,000

 
20,000

Finance Committee Chair
 
20,000

 
15,000

Governance and Sustainability Committee Chair
 
20,000

 
15,000

Chairman of the Board of Directors
 
150,000

 
150,000


Except for the foregoing, directors do not receive any additional or special cash remuneration for their service on any of the committees established by the Board of Directors. We reimburse directors for travel and lodging expenses, if any, incurred in connection with attendance at Board of Directors' meetings.

Equity Award

Non-employee directors receive an annual equity award. Since fiscal 2007, the equity award has been exclusively in the form of restricted stock. The "targeted value" for the annual non-employee director equity award is established each year by the Board of Directors following discussions with our compensation consultant and has been set at $250,000 since fiscal 2015. The number of restricted shares awarded to each non-employee director is determined by dividing the applicable targeted value by the Fair Market Value of a share of our Common Stock, as defined under our equity plans. For purposes of our equity plans, "Fair Market Value" is the closing price of our Common Stock on the last market-trading day prior to the date of grant. The restrictions on the shares awarded in fiscal 2017 lapse for 100% of such shares on the first anniversary of the date of grant (the "Vesting Period"). Notwithstanding the foregoing, the restrictions will lapse for 100% of such shares in the event a director either reaches the mandatory retirement age or retires from the Board of Directors during the Vesting Period having achieved a minimum of three years of service with the Board of Directors prior to the effective date of their retirement.


10



Fiscal 2017 Director Compensation

The following table details the total compensation earned by our non-employee directors in fiscal 2017 .

Name
 
Fees Earned or Paid in Cash
 
Stock Awards(1)
 
Total
Robert L. Bailey
 
$
100,000

 
$
250,008

 
$
350,008

Richard M. Beyer
 
100,000

 
250,008

 
350,008

Patrick J. Byrne
 
100,000

 
250,008

 
350,008

Mercedes Johnson
 
145,000

 
250,008

 
395,008

Lawrence N. Mondry
 
135,000

 
250,008

 
385,008

Robert E. Switz
 
250,000

 
250,008

 
500,008


(1)
On October 19, 2016, each director who was not an employee was granted 14,360 shares of restricted stock with a grant date fair value of $250,008 ($17.41 per share). For information on the restrictions associated with these awards, see "Elements of Director Compensation – Equity Award" above.

Stock Ownership Guidelines

We have established stock ownership guidelines for our directors. The minimum ownership guideline for directors is to hold shares with a value equal to five times their annual retainer. The minimum ownership guideline for our CEO is to hold shares with a value equal to five times his base salary. Directors are given five years to meet the ownership guidelines. The Governance and Sustainability Committee reviews the Ownership Guidelines annually and monitors each person's progress toward, and continued compliance with, the guidelines. Stock sales restrictions may be imposed upon directors if the stock ownership guidelines are not met. All our directors are in compliance with the guidelines.

The following table shows non-employee director compliance with the guidelines as of the Record Date:
Director
 
Guideline Multiplier
 
Guideline Amount
 
Compliance with Guideline
Robert L. Bailey
 
5
 
$
625,000

 
Yes
Richard M. Beyer
 
5
 
625,000

 
Yes
Patrick J. Byrne
 
5
 
625,000

 
Yes
Mercedes Johnson
 
5
 
625,000

 
Yes
Lawrence N. Mondry
 
5
 
625,000

 
Yes
Robert E. Switz
 
5
 
625,000

 
Yes

Please refer to page 27 for information on the stock ownership guidelines for our Named Executive Officers, including Mr. Mehrotra.




11



PRINCIPAL SHAREHOLDERS

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth security beneficial ownership information of our Common Stock as of the Record Date, based on the most current information provided to us by the beneficial owners, available to us from our own records or provided in SEC filings made by the beneficial owners, for (i) persons known by us to own beneficially more than 5% of our Common Stock, (ii) each director, (iii) each Named Executive Officer listed in the "Summary Compensation Table" set forth herein, and (iv) all directors and executive officers as a group:
Name of Beneficial Owner
 
Number of
Shares Owned(1)
 
Right to Acquire(2)
 
Total
Beneficial
Ownership
 
Percent of
Class(3)
The Vanguard Group, Inc.(4)
 
82,136,863

 
 
 
82,136,863

 
7.1
%
BlackRock, Inc.(5)
 
66,396,165

 
 
 
66,396,165

 
5.7
%
PRIMECAP Management Company(6)
 
62,122,100

 
 
 
62,122,100

 
5.4
%
Robert L. Bailey
 
117,299

 
 
 
117,299

 
*

Richard M. Beyer
 
75,075

 
 
 
75,075

 
*

Patrick J. Byrne
 
129,458

 
 
 
129,458

 
*

Scott J. DeBoer
 
120,104

 
53,240

 
173,344

 
*

Mercedes Johnson
 
60,548

 
 
 
60,548

 
*

Ernest E. Maddock
 
209,887

 
117,830

 
327,717

 
*

Sanjay Mehrotra
 
352,448

 
 
 
352,448

 
*

Lawrence N. Mondry
 
183,382

 
 
 
183,382

 
*

Joel Poppen
 
196,324

 
146,401

 
342,725

 
*

Robert E. Switz
 
145,257

 
 
 
145,257

 
*

Steven L. Thorsen, Jr.
 
187,736

 
68,264

 
256,000

 
*

D. Mark Durcan(7)
 
2,098,412

 
1,128,789

 
3,227,201

 
*

Brian M. Shirley
 
213,642

 
214,276

 
427,918

 
*

All directors and executive officers as a group (16 persons)
 
4,381,016

 
1,760,026

 
6,141,042

 
*


*
Represents less than 1% of shares outstanding

(1)
Excludes shares that may be acquired through the exercise of outstanding stock options.

(2)
Represents shares that an individual has a right to acquire within 60 days of the Record Date.

(3)
For purposes of calculating the Percent of Class, shares that the person or entity had a Right to Acquire are deemed to be outstanding when calculating the Percent of Class of such person or entity.

(4)
As of December 31, 2016, The Vanguard Group, Inc. ("Vanguard") had sole voting power as to 1,626,112 shares, sole dispositive power as to 80,321,498 shares, shared voting power as to 189,277 shares, and shared dispositive power as to 1,815,365 shares. This information was taken from Schedule 13G filed on February 10, 2017. Vanguard's business address is 100 Vanguard Blvd., Malvern, PA 19355.

(5)
As of December 31, 2016, BlackRock, Inc. had sole voting power as to 57,007,298 shares and sole dispositive power as to 66,396,165 shares. This information was taken from Schedule 13G filed on January 25, 2017. BlackRock's business address is 55 East 52nd Street, New York, NY 10055.

(6)
As of December 31, 2016, PRIMECAP Management Company had sole voting power as to 16,188,900 shares and sole dispositive power as to 62,122,100 shares. This information was taken from Schedule 13G filed on February 9, 2017. PRIMECAP Management Company's business address is 177 E. Colorado Blvd., 11th Floor, Pasadena, CA 91105.

(7)
Includes 284,653 shares beneficially owned by C&E Partners L.P. and 544,527 vested stock options controlled by his ex-spouse for which Mr. Durcan has disclaimed ownership.


12



EXECUTIVE COMPENSATION AND RELATED INFORMATION

COMPENSATION DISCUSSION AND ANALYSIS


This Compensation Discussion and Analysis presents material information helpful or necessary to understand the objectives and policies of our compensation program for executive officers and the compensation reported in the tables that follow. This discussion focuses on the compensation awarded to, earned by, and paid to the following individuals:

Scott J. DeBoer, our Executive Vice President, Technology Development;

Ernest E. Maddock, our Senior Vice President and Chief Financial Officer;

Sanjay Mehrotra, our President and Chief Executive Officer;

Joel L. Poppen, our Senior Vice President, Legal Affairs, General Counsel and Corporate Secretary; and

Steven L. Thorsen, Jr., our Senior Vice President, Worldwide Sales.

In addition, we have included information for two executives who served as executive officers for a portion of fiscal 2017 : D. Mark Durcan, who served as our Chief Executive Officer until May 2017, and Brian M. Shirley, who is currently our Senior Vice President, DRAM and Emerging Memory Engineering and for a portion of fiscal 2017 served as an executive officer of the Company.

Throughout this discussion, the foregoing individuals are referred to as our "Named Executive Officers."

Executive Summary

Fiscal 2017 Highlights

We achieved record financial performance, generating $20.3 billion in revenue, $5.1 billion in GAAP net income and $8.2 billion in operating cash flow.
 
We improved our cost competitiveness by ramping 20 nm DRAM and 32-layer 3D NAND and introducing next generation 1X nm DRAM and 64-layer 3D NAND technologies into production.  We successfully executed our yield curve and production ramp plans for each of these technologies.

We increased sales of solid state drive ("SSD") and cloud server solutions by 137% and 290%, respectively.  These trends reflect our focus on expanding high value solution sales.
 
We completed the acquisition of Inotera Memories, Inc. ("Inotera"), driving improved margins and free cash flow, while also enhancing our operational efficiency through greater scale. 
 
We established a DRAM Center of Excellence in Taiwan, which centralizes front-end DRAM fabrication with back-end test, assembly and packaging.  Our DRAM Center of Excellence together with our existing NAND Center of Excellence in Singapore, enables operational cost efficiencies across our global manufacturing footprint.
 
We strengthened our balance sheet, growing cash, marketable investments, and restricted cash to $6.2 billion, while retiring $1.5 billion in debt.



13



Total Shareholder Return ("TSR")

The following chart shows our relative TSR data as compared to the median of our Compensation Peer Group.

TOTALSHAREHOLDERRETURNA07.JPG

The information presented is based on closing prices on or nearest August 31 for each period presented above and represents annualized rates of return reflecting price appreciation plus reinvestment of dividends and the compounding effect of dividends paid, if any, on reinvested dividends. This table does not include our peer, EMC Corporation, as it merged with Dell Technologies Inc. in 2016.

Objective of our Executive Compensation Program

Our primary long-term corporate objective is to create superior value for our shareholders. The objective of the executive compensation program is to attract, motivate, reward, and retain highly qualified executive officers who are able to achieve the corporate objective of superior value for our shareholders. The executive compensation program is designed to provide a foundation of fixed compensation (base salary and time-based restricted shares) and a significant portion of performance-based compensation (short-term and long-term incentive opportunities, such as cash bonuses and performance-based restricted stock units), that align the interests of executives with those of our shareholders. We also use time-based stock options, the value of which is directly tied to stock price performance.

Compensation Highlights

CEO Compensation

Mr. Mehrotra succeeded Mr. Durcan as CEO in May 2017. For fiscal 2017, Mr. Mehrotra's annual base salary was $1,200,000, his short-term incentive target was 150%, and his long-term incentive opportunity was $4,659,822. In addition, upon joining Micron, Mr. Mehrotra received a sign-on equity award valued at $9,111,590. Information on Mr. Mehrotra's compensation is included below under the heading "CEO Compensation – Mr. Mehrotra."

In fiscal 2016, Mr. Durcan requested a voluntary and temporary pay reduction to align his salary with the Company's expense reduction initiatives. As a result of Mr. Durcan's request, the Compensation Committee reduced his annual base salary by 50% to $525,000 ("Voluntary Salary Reduction") and his long-term incentive opportunity from $8,000,000 to $5,000,000 ("Voluntary LTI Reduction"). Mr. Durcan's short-term incentive target percentage did not change. For fiscal 2017 , Mr. Durcan's annual base salary and long-term incentive opportunity were restored to $1,050,000 and $8,000,000, respectively. Information on Mr. Durcan's compensation is included below under the heading "CEO Compensation – Mr. Durcan."

In October 2016 , the Compensation Committee set compensation levels and performance goals for fiscal 2017 based on a review of financial results, projections, individual contributions, strategic objectives, Market Data (as defined below), and market conditions.



14



As a result of this review, fiscal 2016 compensation levels for our Named Executive Officers (other than Mr. Mehrotra, who joined Micron in May 2017) were adjusted for fiscal 2017 as follows:

Executive Officer
 
Base Salary
 
Short-term
Incentive(1)
 
Long-term
Incentive
Scott J. DeBoer
 
Unchanged
 
Unchanged
 
Increased
Ernest E. Maddock
 
Increased
 
Unchanged
 
Increased
Joel L. Poppen
 
Increased
 
Unchanged
 
Unchanged
Steven L. Thorsen, Jr.
 
Unchanged
 
Unchanged
 
Unchanged
D. Mark Durcan
 
Increased(2)
 
Unchanged
 
Increased(2)
Brian M. Shirley
 
Unchanged
 
Unchanged
 
Unchanged

(1)
As a percentage of base salary.

(2)
See above for a discussion of Mr. Durcan's Voluntary Salary Reduction and Voluntary LTI Reduction. For fiscal 2017 , Mr. Durcan's annual base salary and long-term incentive opportunity were restored to $1,050,000 and $8,000,000, respectively.

Our Named Executive Officers are eligible to earn short-term incentive awards pursuant to our Executive Officer Performance Incentive Plan ("EIP"). The Compensation Committee selected performance goals for our Named Executive Officers due to their correlation to the creation of shareholder value and their alignment with our strategic objectives. For fiscal 2017, our corporate goals were tied to profitability, and achieving certain technology and product milestones.

The following pay mix, based on target amounts, was established for our Named Executive Officers for fiscal 2017 :

PAYMIXPERCENTAGEOFOVERA.JPG

For our fiscal 2017 long-term equity incentives, we used a mix of 25% stock options, 45% time-based restricted stock and 30% performance-based restricted stock units, other than for Mr. Mehrotra, whose initial long-term equity incentive award was comprised of a mix of 50% stock options and 50% time-based restricted stock.

The metrics for our performance-based restricted stock units include a return on assets ("ROA") metric and a relative TSR metric, both with a three-year measurement period. We believe a three-year period better measures our performance because of the volatility in our business and stock price.



15



Corporate Governance and Compensation Practices Highlights

The EIP is performance-based and we have no history of changing performance metrics mid-cycle.

We offer limited perquisites to our Named Executive Officers and, other than the Deferred Compensation Plan, we do not offer any special retirement benefits for our Named Executive Officers other than participation in our retirement plans on the same basis as other employees.

We do not have agreements with our Names Executive Officers that provide tax gross-up protection for change in control excise taxes.

Our equity incentive plans prohibit repricing of options or stock appreciation rights ("SARs") (directly or indirectly) without prior shareholder approval.

Our equity incentive plans were amended in August 2016 to replace "single-trigger" vesting provisions with "double-trigger" vesting provisions in the event of a change in control for awards granted after August 25, 2016.

Our insider trading policy prohibits our officers and directors from engaging in pledging or hedging activities involving our stock.

We have an independent Chairman of the Board of Directors.

We have a compensation recoupment ("clawback") policy that provides for recoupment of incentive compensation paid to current and former officers in the event of an accounting restatement due to material noncompliance.

Our executive officers and directors were in compliance with our stock ownership guidelines for fiscal 2017 .

Consideration of the Fiscal 2016 Advisory Vote on Executive Compensation

At the Fiscal 2016 Annual Meeting of Shareholders on January 18, 2017, in our annual advisory vote on executive compensation, over 96% of the shares voted in support of the compensation of our Named Executive Officers. The Compensation Committee appreciates and values the views of our shareholders. In considering the results of the fiscal 2016 advisory vote on executive compensation, the Compensation Committee concluded that the compensation paid to our executive officers and our overall executive pay practices have strong shareholder support and have been effective in implementing our stated compensation philosophy and objectives. The Compensation Committee recognizes that executive pay practices and notions of sound governance principles continue to evolve. Consequently, the Compensation Committee intends to continue to seek the advice and counsel of its compensation advisors. Our shareholders may communicate any concerns or opinions on executive pay directly to the Compensation Committee or the Board of Directors. Please refer to "Executive Sessions and Communications with the Board of Directors" on page 9 for information about communicating with the Board of Directors.

Oversight of the Executive Compensation Program

Our executive compensation program is administered by the Compensation Committee. The Compensation Committee assists the Board of Directors in discharging its responsibilities with respect to the compensation of our officers. The Compensation Committee has direct responsibility to review and approve corporate goals and objectives used to determine the CEO's compensation, evaluate his performance in light of such goals and objectives, and determine and approve his compensation level based on that evaluation. The Compensation Committee also reviews the evaluation process and compensation structure for our Named Executive Officers and approves their compensation.

The Compensation Committee annually engages an outside compensation consultant. The Compensation Committee also works closely with our CEO with respect to the determination of compensation of other officers. A more complete description of the Compensation Committee's responsibilities is provided in the Compensation Committee's Charter approved by the Board of Directors, which can be found on our website, www.micron.com . A more complete description of the role of the CEO and our compensation consultant in the compensation process is described later in this Compensation Discussion and Analysis. Additional information regarding our compensation consultant, the specific activities they undertake for us, and their fees can be found under "Corporate Governance – Compensation Consultant" on page 6 .



16



Guiding Principles

We believe we have the best opportunity to attract, motivate, reward and retain qualified individuals, and thus meet our overall objective of increasing shareholder value, by offering a compensation package that is "reasonable" and "competitive" with what our executives could otherwise obtain in the market, and especially from companies within our Compensation Peer Group. Our Compensation Peer Group consists of companies that we believe are especially likely to be our competitors for executive talent and is discussed further in "Market Data Defined" below. What is "reasonable" and "competitive" is gauged against the Market Data and reviewed by the Compensation Committee for each of the primary elements of compensation.

Reasonable

As an indication of reasonableness, the Compensation Committee considers the Market Data median. We believe it is important to retain flexibility in determining the compensation of our officers and, when appropriate, to deviate from the Market Data median due to factors such as:

differences in position and level of responsibility among officers, both in absolute terms and relative to our other officers and as compared to similarly situated officers within the Compensation Peer Group,

past and anticipated contributions,

technical expertise,

Company performance,

applicable business unit performance, and

length of service and/or experience both in absolute terms and relative to our other officers and as compared to officers within the Compensation Peer Group.

The semiconductor industry is highly volatile and Market Data, which is a compilation of data from many companies, may change dramatically from year to year. Market Data can change as compensation practices change, executives retire or are replaced with less experienced and lower-paid executives, goals are achieved or not achieved resulting in varying payouts, participants in proprietary surveys change, and the completeness or accuracy of compensation data improves or deteriorates. Accordingly, what may have been the "median" or within a reasonable range of competitiveness in one year, may be higher or lower for the next. For this reason, even though the Compensation Committee manages compensation in accordance with such guiding principles, officer compensation may vary, above or below the median, or a range from the median, year over year.

Competitive

Given our experience, as well as advice we have received from our compensation consultant, we believe a competitive compensation package will consider and measure compensation practices for executive positions with respect to three primary elements of compensation:

base compensation (salary),

short-term incentive compensation (cash bonus programs), and

long-term incentive compensation (stock options, time-based restricted stock and performance-based restricted stock units).

We do not require that a particular element comprise a set portion of the total compensation mix. We do believe, however, that a significant portion of the compensation should be variable (such as performance-based incentives) as compared to fixed (such as base salary and time-based restricted shares) and that such variable compensation aligns executives' interests with those of our shareholders. Additionally, although the Compensation Committee reviews total direct compensation (which is the sum of base salary, short-term incentive and long-term incentive compensation) for each of our Named Executive Officers, it does not have a fixed objective with respect to such total direct compensation.


17



Compensation-setting Process and the Determination of Compensation Levels

The Compensation Committee reviews the compensation of our executive officers on an annual basis and sets compensation levels at the beginning of each fiscal year. As part of this process, the Compensation Committee reviews our financial results for the year just ended, projections for future periods, our strategic business plan and the Market Data provided by our compensation consultant. The Compensation Committee also works with our CEO to establish performance goals that further our strategic objectives.

Our compensation consultant reviews the most recent available data and identifies the Market Data values for the 25th, 50th (i.e. median) and 75th percentile with respect to each position or rank. Our compensation consultant compares our compensation data, both as to elements and amounts to be paid or potential value to be delivered, with that of the Market Data and reports its findings to the CEO and the Compensation Committee. Our CEO works with our compensation consultant by providing our financial data with respect to the most-recently completed fiscal year. The CEO also reviews projected financial results for the current fiscal year and our strategic business plan. The CEO makes suggestions as to base salary, recommends a potential set of company-wide and/or business unit metrics and targets for the current fiscal year with respect to short-term incentives and offers suggestions as to long-term incentive compensation for the executive officers other than himself. He makes no recommendations as to his own level of compensation. The Compensation Committee reviews the Market Data, discusses the Market Data with the CEO and with the compensation consultant, discusses individual officer performance based on input from the CEO and, without the CEO present, discusses the CEO's own performance for the most-recently completed fiscal year and anticipated performance for the current year. The Compensation Committee uses the Market Data and the deliberations to determine whether our compensation is competitive and reasonable as described above and whether, and to what extent, the Compensation Committee believes it would be appropriate to deviate from the Market Data and competitive practices. Following this deliberation, the Compensation Committee exercises its business judgment to certify the payment of compensation based on the financial results for the most-recently completed fiscal year, and approves the compensation for the current fiscal year, including the metrics and targets for the current year.

Components of the Executive Compensation Program

Fiscal 2017 Base Salaries

The purpose of a competitive base salary is to compensate executives for performing their day-to-day job responsibilities. Base salaries are generally targeted to approximate the Market Data median but may be above or below depending upon an executive's contributions, experience, performance and length of service. At the completion of fiscal 2016 , the Market Data showed that the base salaries of our Named Executive Officers were below the 50th percentile for their positions or ranks. The following table shows our Named Executive Officers' fiscal 2017 salaries as compared to fiscal 2016.
Executive Officer
 
Fiscal 2017 Base Salary
 
Base Salary % Change From Fiscal 2016
Scott J. DeBoer
 
$
470,000

 
%
Ernest E. Maddock
 
620,000

 
13
%
Sanjay Mehrotra
 
1,200,000

 
N/A

Joel L. Poppen
 
525,000

 
5
%
Steven L. Thorsen, Jr.
 
485,000

 
%
D. Mark Durcan(1)
 
1,050,000

 
100
%
Brian M. Shirley
 
630,000

 
%
(1)
See page 14 for a discussion of Mr. Durcan's Voluntary Salary Reduction and Voluntary LTI Reduction.

Fiscal 2017 Short-Term Incentive Awards

With respect to short-term incentive compensation, we pay for achievement of financial, operational and strategic objectives approved by the Compensation Committee at the beginning of each fiscal year. The short-term incentive opportunities are set to be competitive with market practices but actual incentive payouts are commensurate with achievement. Thus, we have adopted a "pay for performance" approach as it relates to short-term incentives.

We provided annual short-term incentive cash awards to our executive officers pursuant to the EIP. The EIP was last approved by our shareholders in January 2015. The purpose of the EIP is to attract, retain and reward qualified executives,


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who are important to our success, by providing performance-based, incentive cash awards for outstanding performance at the individual, business-unit and/or company-wide level.

The short-term incentive "opportunity" ("Target Award") for each officer is stated in terms of a specified percentage of such officer's base salary and is designed to reward participants for the achievement of specified short-term company-wide and/or business unit financial, operational or strategic goals. The Compensation Committee believes the pre-determined goals, regardless of whether tied to company-wide or business unit performance, promote our long-term success and shareholder value.

The Compensation Committee established the following goals for fiscal 2017 :

Profitability – achieving targeted levels of net income; and

Technology and Product Milestones – achieving certain milestones related to our DRAM and NAND technology and products.

The target incentive amounts payable under the EIP for achievement of the fiscal 2017 goals are shown in the columns "Estimated Future Payouts under Non-Equity Incentive Plan Awards" of the "Grants of Plan-Based Awards in Fiscal 2017 " table. All goals were established with threshold (50%), target (100%) and maximum (200%) payout levels, with the threshold, target and maximum payouts requiring a significant level of execution and effort and no assurance of goal achievement.

The Target Awards established for fiscal 2017 for our Named Executive Officers were measured against the Market Data median. However, opportunities are not necessarily limited to the Market Data median, but are considered within the factors described under the section labeled "Reasonable" above. For fiscal 2017 , the following Target Awards were established, and were unchanged from fiscal 2016:

Executive Officer
 
% of Base Salary
Scott J. DeBoer
 
80
%
Ernest E. Maddock
 
100
%
Sanjay Mehrotra
 
150
%
Joel L. Poppen
 
80
%
Steven L. Thorsen, Jr.
 
90
%
D. Mark Durcan
 
150
%
Brian M. Shirley
 
100
%

The following table shows the Target Award weightings and levels of achievement of the EIP goals for our Named Executive Officers. The weightings reflect each Named Executive Officer's responsibilities and ability to affect the attainment of the goal.

EIP Weightings (as Percentage of Target Incentive)

Goals
 
Weighting
 
% of Target Achieved
Profitability
 
50
%
 
200
%
Technology and Product Milestones
 
50
%
 
200
%
Overall weighted-average achievement
 
 
 
200
%



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The levels of achievement were reviewed by the Compensation Committee based on fiscal 2017 results and our Named Executive Officers received bonuses in the following amounts:

Executive Officer
 
% of Target Achieved
 
Bonus Paid
Scott J. DeBoer
 
200
%
 
$
752,000

Ernest E. Maddock
 
200
%
 
1,240,000

Sanjay Mehrotra(1)
 
200
%
 
1,147,253

Joel L. Poppen
 
200
%
 
840,000

Steven L. Thorsen, Jr.
 
200
%
 
873,000

D. Mark Durcan(2)
 
200
%
 
3,000,000

Brian M. Shirley
 
200
%
 
1,260,000


(1)
Mr. Mehrotra's bonus was prorated to reflect his length of service in fiscal 2017.

(2)
Mr. Durcan's bonus was capped at $3,000,000 pursuant to the maximum award limit imposed by the EIP.

The EIP calls for certain performance goals to be modified with respect to major corporate transactions if permitted by Section 162(m) ("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"). These events are more fully described in the EIP. Additionally, the Compensation Committee has the discretion to modify performance goals with respect to Target Awards that are not intended to satisfy Section 162(m) if the Compensation Committee determines that due to changes in our business, operations, corporate or capital structure, the existing performance goals are rendered unsuitable for a given performance period. Upon the occurrence of a "change in control" (as defined in the EIP), performance periods are deemed to have ended and the Compensation Committee will determine whether performance goals were achieved. Finally, the Compensation Committee always retains the ability to exercise "negative discretion" and reduce an amount otherwise earned pursuant to the EIP.

Fiscal 2017 Long-Term Equity Incentives

We believe long-term incentive compensation should be tied to our success and increase in shareholder value. Accordingly, stock options and performance-based restricted stock unit awards are significant components of our executive compensation program. We believe these types of awards are especially aligned with shareholders' interests as their value is dependent upon stock price performance or the achievement of certain milestones. To ensure our long-term incentive program helps retain executives, we also grant time-based restricted stock awards. The Compensation Committee reviews peer data related to mix and works with our compensation consultant to determine the allocation and type of performance- and time-based awards to grant each fiscal year. In setting fiscal 2017 compensation, the Compensation Committee did not change the mix of long-term equity incentives for our Named Executive Officers from the 25% stock options, 45% time-based restricted stock and 30% performance-based restricted stock unit mix established last year. This mix did not apply to Mr. Mehrotra's long-term incentive award for fiscal 2017, however, because at the time of his hiring, Mr. Mehrotra was granted a long-term equity incentive award of 50% time-based restricted stock and 50% stock options. For information on Mr. Mehrotra's long-term equity incentive, please see the discussion below on CEO compensation.

With respect to time-based restricted stock awards for fiscal 2017 , restrictions lapse as to one-fourth of the shares on each anniversary of the grant date. With respect to stock option awards for fiscal 2017 , one-fourth of the shares vest on each anniversary of the grant date. With respect to the performance-based restricted stock unit awards for fiscal 2017 , our Named Executive Officers (other than Mr. Mehrotra, who did not receive a performance-based award for fiscal 2017 due to the fact that he started late in the fiscal year) received awards related to two different performance goals; half of the performance shares are tied to achieving a specified ROA over a three fiscal year period and the other half are tied to achieving a specified level of TSR relative to the S&P 500 over a three-fiscal year period (the three-fiscal year period for both the ROA and relative TSR goal is referred to herein as the "Share Performance Period"). The number of shares that will be received at the end of the Share Performance Period varies between 0% and 200% of the targeted share amount and is dependent upon the level of achievement. All threshold, target and maximum amounts require significant execution and effort with no assurance of achievement guaranteed. In the absence of at least the threshold ROA or relative TSR amount being achieved, the restrictions will not lapse and the shares will be forfeited.



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In determining the amount of the long-term equity incentive awards for our Named Executive Officers, the Compensation Committee reviewed the Market Data and information provided by Mr. Durcan related to the other officer's performance and his recommendation as to the amount of their awards. For information on Messrs. Mehrotra and Durcan's long-term equity incentive, please see the discussion below on CEO compensation. The following table shows our Named Executive Officers' fiscal 2017 long-term equity incentives:

Executive Officer
 
Fiscal 2017 Long-Term Equity Incentives(1)
Scott J. DeBoer
 
$
2,000,000

Ernest E. Maddock
 
3,000,000

Sanjay Mehrotra(2)
 
13,771,412

Joel L. Poppen
 
1,605,000

Steven L. Thorsen, Jr.
 
1,764,000

D. Mark Durcan
 
8,000,000

Brian M. Shirley
 
3,254,000

(1)
Reflects target grant-date fair value.

(2)
Includes both Mr. Mehrotra's fiscal 2017 award and sign-on award.

We have not and do not plan to time the granting of long-term incentive awards (or the payment of any other compensation) with the release of material, non-public information. Historically, long-term incentive awards have been made in the first quarter of the fiscal year with the exact grant date corresponding with the date of the meeting of the Compensation Committee. Historically, long-term incentive grants to the Named Executive Officers are approved by the Compensation Committee on the same day as the grants to other executive officers and the exercise price of stock options is equal to the fair market value of our Common Stock as defined by the equity plan pursuant to which the award is granted. For purposes of our equity plans, fair market value is defined as the closing price as quoted on NASDAQ for the last market-trading day prior to the date of grant.

Other Fiscal 2017 Employee Benefits

We provide a competitive level of time off, health, life, disability, and retirement benefits to substantially all employees. The Named Executive Officers participate in the same plans as our other employees. Executive perquisites, which for us are minor in scope and amount, are not considered to be material elements of compensation.



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CEO Compensation – Mr. Mehrotra

The following charts show one-year relative TSR data and CEO compensation for us and our Compensation Peer Group. The information presented in the chart below is based on closing prices of our Common Stock on August 31, 2016, and August 31, 2017, and represents the rates of return of our Common Stock reflecting price appreciation plus reinvestment of any dividends and the compounding effect of any dividends paid on reinvested dividends.

The CEO pay information presented in the charts below represents peer compensation data via proxies presented to the Compensation Committee in October 2016. The 50 th percentile presented in the charts below represents total target direct compensation (i.e. the sum of base salary, short-term incentive and long-term incentive compensation).

ONEYEARTSRFOR2017RANKEDPEERC.JPG

A2016CEOPAYCOMPARIA01.JPG

This data was considered by the Compensation Committee when establishing Mr. Mehrotra's total target direct compensation for fiscal 2017. The charts above do not include our peer, EMC Corporation, as it merged with Dell Technologies Inc in 2016.

The Compensation Committee reviewed Market Data in setting Mr. Mehrotra's compensation for fiscal 2017. Mr. Mehrotra's compensation is comprised of the following elements:

Base Salary

Mr. Mehrotra's base salary for fiscal 2017 was $1,200,000.



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Short-Term Incentive

Mr. Mehrotra's short-term incentive target was 150% of his base salary for fiscal 2017 . Market Data showed that a short-term incentive of 150% of base salar y was th e median for CEOs.

Long-Term Equity Incentive

Mr. Mehrotra joined Micron in May 2017 and his long-term equity incentive opportunity for fiscal 2017 was $4,659,822. Mr. Mehrotra also received a sign-on bonus in the form of a long-term equity award equal to $9,111,590. These equity awards were comprised of 50% time-based restricted stock and 50% stock options.

The following table sets forth the elements and amounts of Mr. Mehrotra's long-term incentive awards:

Awards
 
Number of Options/ Shares(1)
 
Grant Date Fair Value(1)
Fiscal 2017
 
 
 
 
Stock Options
 
193,539

 
$
2,329,938

Time-based Restricted Stock
 
82,620

 
2,329,884

 
 
276,159

 
4,659,822

Sign-on  
 
 
 
 
Stock Options
 
378,437

 
4,555,852

Time-based Restricted Stock
 
161,551

 
4,555,738

 
 
539,988

 
9,111,590

 
 
 
 
 
Total Long-term Incentive
 
816,147

 
$
13,771,412


(1)
Information related to Mr. Mehrotra's long-term incentive award is also included in the "Grants of Plan-Based Awards in Fiscal 2017 " table. The stock options are listed in the column "All Other Option Awards: Number of Securities Underlying Options," the time-based share amounts are listed in the column "All Other Stock Awards: Number of Shares of Stock or Units." The values included in those tables reflect the grant-date fair value under ASC 718.

Other Compensation

The Compensation Committee agreed to reimburse Mr. Mehrotra for legal fees incurred in connection with his joining the Company, commuting expenses, and federal, state and other income taxes resulting from imputed income related to his commuting expenses. See footnote 6 to the Fiscal 2017 Summary Compensation Table for additional information.


CEO Compensation – Mr. Durcan

Base Salary

In fiscal 2016, Mr. Durcan requested a voluntary and temporary pay reduction to align his salary with the Company's expense reduction initiatives. As a result of Mr. Durcan's request, the Compensation Committee reduced his annual base salary by 50% to $525,000. For fiscal 2017 , Mr. Durcan's annual base salary was restored to $1,050,000.

Short-Term Incentive

Mr. Durcan's short-term incentive target remained at 150% of his base salary for fiscal 2017 . Market Data showed that a short-term incentive of 150% of base salar y was th e median for CEOs.



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Long-Term Equity Incentive

In fiscal 2016, Mr. Durcan requested a voluntary and temporary pay reduction to align his salary with the Company's expense reduction initiatives. As a result of Mr. Durcan's request, the Compensation Committee reduced his long-term incentive opportunity from $8,000,000 to $5,000,000. For fiscal 2017 , Mr. Durcan's long-term incentive opportunity was restored to $8,000,000.

Mr. Durcan's long-term incentive was comprised of 25% stock options, 45% time-based restricted shares and 30% performance-based restricted shares. The following table sets forth the elements and aggregate amounts of Mr. Durcan's long-term incentive award for fiscal 2017:

Award Type
 
Number of Options/ Shares(1)
 
Grant Date Fair Value(1)
Stock Options
 
261,121

 
$
1,999,999

Time-based Restricted Stock
 
206,778

 
3,600,005

Performance-based Restricted Stock Units
 
113,174

 
2,400,007

 
 
581,073

 
$
8,000,011


(1)
Information related to Mr. Durcan's long-term incentive award is also included in the "Grants of Plan-Based Awards in Fiscal 2017 " table. The stock options are listed in the column "All Other Option Awards: Number of Securities Underlying Options," the time-based share amounts are listed in the column "All Other Stock Awards: Number of Shares of Stock or Units," and the performance-based share amounts are listed in the column "Estimated Future Payouts under Equity Incentive Plan Awards Target." The values included in those tables reflect the grant-date fair value under ASC 718.

Modification of Performance-based Restricted Stock Units

Mr. Durcan resigned from the Company in August 2017 after 33 years of service. In connection with his resignation, Mr. Durcan agreed to provide limited advisory services to the Company after his resignation. As consideration for these advisory services, the Compensation Committee modified Mr. Durcan’s 2017 and 2016 performance-based restricted stock unit ("PRSU") awards to provide for the continued vesting of these awards through the end of their three-year performance period, with the determination of the number of shares, to be issued, if any, at the end of each performance period being based on actual achievement of the performance condition, and prorated based on time employed during the applicable performance period. The table below reflects the impact of these modifications:

Award
 
Number of Shares Subject to Modification
 
Incremental Fair Value due to Modification
Fiscal 2017 PRSU
 
35,166
 
$
1,505,150

Fiscal 2016 PRSU
 
46,906
 
1,989,280

 
 
82,072
 
$
3,494,430



Severance and Change in Control Arrangements

Severance Agreements

President and Chief Executive Officer

At the time of his hire, we entered into an executive agreement with Mr. Mehrotra (the "Executive Agreement") providing for severance benefits. The Executive Agreement provides that if Mr. Mehrotra’s employment is terminated (i) as result of his death or "disability," (ii) by us without "cause" or (iii) as a result of Mr. Mehrotra’s resignation for "good reason," then in addition to receiving his accrued base salary, accrued vacation pay, and other earned and vested employee benefits, Mr. Mehrotra will receive the following severance benefits:



24



salary continuation equal to two times Mr. Mehrotra’s salary in effect upon the date of termination paid in installments during the one-year period following termination (or paid in a lump sum if Mr. Mehrotra’s termination of employment occurs on, or within 12 months after, a "change in control");

a pro-rated annual bonus under the EIP for the year of termination, subject to achievement of applicable performance criteria, paid in accordance with the terms of the EIP;

an additional bonus of two times Mr. Mehrotra’s target annual bonus under the EIP for the year of termination paid on the anniversary of Mr. Mehrotra’s termination;

continued vesting (and exercisability) of any options, restricted stock or other time-based, and, subject to achievement of applicable performance criteria, performance-based equity for the one-year period following Mr. Mehrotra’s termination of employment; and

a cash payment equal to the medical benefits and employer qualified plan matching contributions Mr. Mehrotra would have received had Mr. Mehrotra remained employed for an additional two years, paid in a lump sum following termination.

If Mr. Mehrotra’s severance benefits become payable on account of his "good reason" resignation prior to a "change in control," the unvested portion of his sign-on equity award will be forfeited and, in addition, if Mr. Mehrotra becomes employed within one year of his termination of employment, the unpaid portion of his salary continuation benefit will be forfeited. The Executive Agreement also includes a "cut-back" provision, which provides that Mr. Mehrotra’s benefits under the Executive Agreement will be reduced so that no excise tax will apply under Section 280G of the Code, if such reduction will result in a higher net after-tax benefit to Mr. Mehrotra; provided that we will provide no tax gross-up under the Executive Agreement. Mr. Mehrotra’s entitlement to the benefits provided under the Executive Agreement are conditioned on Mr. Mehrotra signing a release of claims in favor of Micron and on Mr. Mehrotra’s compliance with terms of our non-competition, non-solicitation, and non-disclosure agreement.

Other Named Executive Officers

With the exception of Mr. Mehrotra, each of our Named Executive Officers have a similar severance agreement in place (the "NEO Severance Agreements"). We believe severance agreements for certain of our officers are in the best interests of us and our shareholders. The NEO Severance Agreements help us attract and retain qualified executive talent, promote candid discussion among our officers, help provide for a smooth transition when there is a change in management, provide the officer with benefits in consideration of a promise not to compete with us after termination of employment, and release us, and our officers, directors, employees and agents from any and all claims.

The NEO Severance Agreements provide for severance benefits upon termination of employment. The NEO Severance Agreements provide for a "Transition Period," which begins upon a "separation of service" as defined in Section 409A of the Code, regardless of when a termination of employment or loss of officer status occurs, and ends after a period of one year. The NEO Severance Agreements were amended in November 2017 to eliminate the continued vesting of equity awards granted on or after October 24, 2017, during the Transition Period in the event of a voluntary termination or termination for cause.

Provided a Named Executive Officer complies with post-employment obligations and restrictions described below and all other terms of the Severance Agreement, the Named Executive Officer is entitled to receive compensation during the Transition Period equivalent to the compensation and benefits customarily provided to such Named Executive Officer while employed including, but not limited to, salary, executive bonus, and in the case of equity awards granted prior to October 24, 2017, continued vesting of outstanding stock options and restricted shares. With respect to cash and equity awards that are performance-based, the Named Executive Officer is entitled to receive such awards only if the goals are achieved before or during the applicable Transition Period. Such terminated Named Executive Officers are not entitled to receive any new awards under our equity plans or the EIP or to the payment of any compensation that would be deferred past the Transition Period due to payment criteria of an incentive program, as those criteria exist as of the Termination Date.

Terminated Named Executive Officers are subject to the following obligations and restrictions:

a one-year non-competition obligation,

confidentiality obligations related to our proprietary and confidential information that last indefinitely,



25



a non-disparagement and confidentiality obligation surrounding the reasons for, and circumstances of, the Named Executive Officer's termination of employment or change in officer status that lasts indefinitely. However, we may disclose such information if we determine, in our sole discretion, it is either required by law to be disclosed or necessary to be disclosed to serve a valid business purpose, and

non-solicitation and non-interference provisions relating to our employees and business partners that last at least one year.

Upon receipt of all benefits under the NEO Severance Agreement, we and the Named Executive Officer are considered to have settled, waived, and voluntarily released any and all claims each has or may have against the other, inclusive of any of our affiliates, officers, directors, employees or agents, both individually and in their official capacities, which claims are accruing prior to the end of the Transition Period.

Estimated Severance Payments

See "Executive Agreement and NEO Severance Agreements" on page 38 for a description of the (1) estimated severance amounts as of the end of fiscal 2017 for Messrs. DeBoer, Maddock, Mehrotra, Poppen, Shirley and Thorsen, and (2) severance amounts for Mr. Durcan.

Change in Control Arrangements

We do not have separate change in control agreements for our Named Executive Officers and directors. The Executive Agreement and the NEO Severance Agreements referenced above provide for transitional benefits in the event of termination of employment, including following a change in control. In addition, under the terms of our EIP and our equity compensation plans, awards may be substituted, assumed or accelerated upon a change in control, depending upon the circumstances. In August 2016, the Compensation Committee amended our equity plans to replace "single-trigger" vesting provisions with "double-trigger" vesting provisions in the event of a change in control. As a result, if awards granted after August 25, 2016, are assumed by a successor in connection with a change in control, such awards will not automatically vest and pay out solely as a result of the change in control. Instead, such awards will only vest if within one year after the effective date of the change in control, the participant’s employment is terminated without cause or, in the case of certain participants including our Named Executive Officers, if the participant resigns for good reason. Time-based awards granted prior to August 25, 2016, become fully vested or the applicable restrictions lapse upon a change in control. Performance-based awards granted prior to August 25, 2016, are treated as if all required performance goals were satisfied and are paid within 30 days on a pro-rata basis based on the amount of the performance period completed as of the date of the change in control. The compensation that Named Executive Officers could receive if a change of control occurs is intended to enable them to objectively evaluate whether a potential change in control is in the best interest of us and our shareholders. Estimated value that the Named Executive Officers could receive from our change in control provisions can be found in "Change in Control" on page 39.

Consideration of Tax Consequences when Making Compensation Decisions

Section 162(m) generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to certain of our Named Executive Officers. Qualifying performance-based compensation is not subject to the deduction limit if certain requirements are met. The key components of our long-term incentives in the form of stock option grants and performance-based restricted stock unit awards are designed to comply with the statute. Awards under the EIP also are generally designed to comply with the statute. A number of requirements must be met for particular compensation to qualify, however, there can be no assurance that such compensation will be fully deductible under all circumstances. Although the Compensation Committee believes it is important to preserve the deductibility of compensation under Section 162(m) whenever practicable, it reserves the right to grant or approve compensation or awards that may be non-deductible when it believes such compensation or awards are in our and our shareholders' best interests.

"Market Data" Defined

Compensation data is gathered by our compensation consultant from proxy statements of the Compensation Peer Group and from published compensation surveys. The relevant survey and Compensation Peer Group data for fiscal 2017 , each as discussed below, were weighted equally by the Compensation Committee and are collectively referred to throughout this discussion as the "Market Data."



26



Compensation Peer Group Data

Data is gathered from proxy statements and other documents that are filed with the SEC to develop the Compensation Peer Group data.

The compensation consultant works with the Compensation Committee and our management team, including our CEO, to identify peer companies for compensation comparison purposes. The peer companies are primarily selected based on their industry, degree of business match (i.e., semiconductor or electronics manufacturing), and comparability of revenue size. All the peer companies have a Global Industry Classification Standard economic sector classification of Information Technology and an industry classification related to semiconductor or other electronic equipment. The companies selected generally fall within a revenue range of approximately 70% to 200% of the size of Micron and have a high degree of business match. We believe our custom peer group is comprised of companies that are likely to be our competitors for executive talent.

Each year the Compensation Committee reevaluates the composition of our Compensation Peer Group to ensure that it reflects industry or economic changes that may have occurred during the fiscal year, such as changes in business strategies, operations, revenues, product lines or availability of information. For fiscal 2017 , the composition of our Compensation Peer Group did not change, and is comprised of:

Applied Materials, Inc.
 
Jabil Circuit, Inc.
Broadcom Limited
 
Medtronic Inc.
Corning Incorporated
 
QUALCOMM Incorporated
Danaher Corporation
 
Seagate Technology Plc.
Eaton Corporation, Plc.
 
TE Connectivity Ltd.
EMC Corporation
 
Texas Instruments Incorporated
Emerson Electric Co.
 
Thermo Fisher Scientific Inc.
Flextronics International
 
Western Digital Corp.

These companies are referred to in the compensation discussion and analysis as the "Compensation Peer Group."

When collecting and assessing market compensation data, we collect data based on job descriptions first. This permits the Compensation Committee to "match" positions held by our executives with those of other companies and, as described more fully below, deviate from benchmarked data based on the factors described earlier. If we are not able to match positions to a reasonable number of companies within the Compensation Peer Group, we look to the rank of the person involved and match ranks, e.g., our highest paid officer is ranked to the highest paid officer at each company within the Compensation Peer Group.

Survey Data

Survey data may vary from year to year. For fiscal 2017 , our compensation consultant used the Radford Global Technology Survey and Willis Towers Watson CDB High-Tech Executive Compensation Survey as well as information obtained from public filings by the Compensation Peer Group. We believe these surveys are particularly relevant for high-technology companies given the high level of participation by such companies in the survey.

Stock Ownership Guidelines

We have established stock ownership guidelines for our executive officers. The Compensation Committee believes that officers will more effectively manage a company in the best interests of the shareholders if they are also shareholders. The minimum ownership guideline for our CEO is to hold shares with a value equal to five times his base salary. Messrs. DeBoer, Maddock, Poppen, and Thorsen are required to hold shares with a value equal to three times their base salary. Executive officers are given five years to meet the ownership guidelines. The Governance and Sustainability Committee reviews the Ownership Guidelines annually and monitors each covered executive's progress toward, and continued compliance with, the guidelines. Stock sales restrictions may be imposed upon executive officers if the stock ownership guidelines are not met. All our executive officers are in compliance with the guidelines.



27



The following table shows compliance with the guidelines as of the Record Date:

Executive Officer(1)
 
Guideline Multiplier
 
Guideline Amount(2)
 
Compliance with Guideline
Scott J. DeBoer
 
3
 
$
1,560,000

 
Yes
Ernest E. Maddock
 
3
 
1,920,000

 
Yes
Sanjay Mehrotra
 
5
 
6,000,000

 
Yes
Joel L. Poppen
 
3
 
1,620,000

 
Yes
Steven L. Thorsen, Jr.
 
3
 
1,560,000

 
Yes
(1) This guideline no longer applies to Messrs. Durcan and Shirley.

(2) Based on current salary amounts as of the Record Date.

Please see page 11 for information on stock ownership guidelines for our directors.


COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based upon this review and our discussions, the Compensation Committee has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

 
The Compensation Committee
 
   Richard M. Beyer
 
   Patrick J. Byrne
 
   Lawrence N. Mondry

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee is or has been one of our officers or employees or an officer or employee of any of our subsidiaries during fiscal 2017. During fiscal 2017 , none of our executive officers served on the compensation committee (or equivalent) or the board of directors of another entity whose executive officer(s) served on our Compensation Committee or Board of Directors.




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FISCAL 2017 SUMMARY COMPENSATION TABLE

The following table details the total compensation earned by our Named Executive Officers in fiscal 2017, 2016 and 2015.

Name and Principal Position
 
Year
 
Salary(1)
 
Bonus(2)
 
Stock Awards
(3)(4)
 
Option Awards(5)
 
Non-Equity Incentive Plan Compensation(6)
 
All Other Compensation(7)
 
Total
Scott J. DeBoer
 
2017
 
$
470,000

 
$

 
$
1,499,986

 
$
499,998

 
$
752,000

 
$
14,500

 
$
3,236,484

Executive Vice President,
 
2016
 
470,000

 

 
1,322,985

 
440,996

 

 
14,250

 
2,248,231

Technology Development
 
2015
 
474,154

 

 
1,324,286

 
440,089

 
75,200

 
13,250

 
2,326,979

Ernest E. Maddock
 
2017
 
610,308

 

 
2,250,005

 
749,997

 
1,240,000

 
32,958

 
4,883,268

Sr. Vice President
 
2016
 
550,000

 

 
1,949,981

 
686,347

 

 
59,188

 
3,245,516

and Chief Financial Officer
 
2015
 
145,966

 
100,000

 
901,401

 
1,063,652

 
28,167

 
16,333

 
2,255,519

(Principal Financial Officer)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sanjay Mehrotra
 
2017
 
387,692

 

 
6,885,622

 
6,885,790

 
1,147,253

 
66,669

 
15,373,026

President and Chief
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joel L. Poppen
 
2017
 
521,539

 

 
1,203,744

 
401,247

 
840,000

 
13,562

 
2,980,092

Sr. Vice President, Legal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affairs, General Counsel
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
and Corporate Secretary
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steven L. Thorsen, Jr.
 
2017
 
485,000

 

 
1,322,999

 
440,998

 
873,000

 

 
3,121,997

Sr. Vice President,
 
2016
 
485,000

 

 
1,322,985

 
440,996

 

 

 
2,248,981

Worldwide Sales
 
2015
 
492,462

 

 
1,324,286

 
440,089

 
87,300

 

 
2,344,137

D. Mark Durcan
 
2017
 
912,692

 

 
9,494,442

 
1,999,999

 
3,000,000

 
294,519

 
15,701,652

Former Chief
 
2016
 
587,596

 

 
3,749,988

 
1,250,003

 

 
14,250

 
5,601,837

Executive Officer
 
2015
 
1,062,308

 

 
6,006,740

 
2,000,523

 
315,000

 
13,250

 
9,397,821

Brian M. Shirley
 
2017
 
630,000

 

 
2,440,515

 
813,500

 
1,260,000

 
15,474

 
5,159,489

Sr. Vice President, DRAM
 
2016
 
630,000

 

 
2,440,513

 
813,498

 

 
13,250

 
3,897,261

and Emerging Memory
 
2015
 
635,077

 

 
2,441,520

 
812,672

 
126,000

 
13,250

 
4,028,519

Engineering
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Mr. Mehrotra joined the Company as President and Chief Executive Officer on May 8, 2017. Mr. Mehrotra's annual base salary for fiscal 2017 was $1,200,000. Fiscal 2017 amount for Mr. Durcan represents salary earned up to his resignation from the Company in August 2017.

In fiscal 2016, Mr. Durcan requested a voluntary and temporary pay reduction to align his salary with the Company's expense reduction initiatives. As a result of Mr. Durcan's request, the Compensation Committee reduced his annual base salary by 50% to $525,000.

(2)
Mr. Maddock received a cash signing bonus upon joining the Company in fiscal 2015.



29



(3)
The grant-date fair values for the stock awards are based on the closing price on the last market-trading day prior to the date of grant. The grant date fair value of the performance-based awards granted in fiscal 2017, 2016 and 2015 was computed by multiplying (i) the target number of restricted shares or units awarded to each Named Executive Officer, which was the assumed probable outcome as of the grant date, by (ii) either (a) the closing price of our Common Stock on the last market-trading day prior to the date of grant if the performance goal had a performance condition; or (b) the use of the Monte-Carlo simulation which represents the most likely value of the award if the performance goal had a market condition. Although the assumed probable outcome as of the grant date was achievement at the target level, the terms of the awards for performance-based restricted stock unit awards granted in 2017 and 2016 also provide for achievement of up to 200% of the target amount ("maximum"). The table below presents the aggregate grant-date fair value of stock awards for the periods presented assuming achievement at the maximum level for such performance-based awards:
 
 
2017
 
2016
Executive Officer
 
Time-based Stock Award
 
Performance-based Stock Award at Maximum Level
 
Total Stock Awards
 
Time-based Stock Award
 
Performance-based Stock Award at Maximum Level
 
Total Stock Awards
Scott J. DeBoer
 
$
899,993

 
$
899,985

 
$
1,799,978

 
$
793,793

 
$
793,784

 
$
1,587,577

Ernest E. Maddock
 
1,350,006

 
1,349,995

 
2,700,001

 
1,169,992

 
1,169,987

 
2,339,979

Sanjay Mehrotra
 
6,885,622

 

 
6,885,622

 
 
 
 
 

Joel L. Poppen
 
722,254

 
722,235

 
1,444,489

 
 
 
 
 

Steven L. Thorsen, Jr.
 
793,792

 
793,804

 
1,587,596

 
793,793

 
793,784

 
1,587,577

D. Mark Durcan
 
3,600,005

 
8,630,919

 
12,230,924

 
2,249,993

 
2,249,993

 
4,499,986

Brian M. Shirley
 
1,464,303

 
1,464,319

 
2,928,622

 
1,464,308

 
1,464,302

 
2,928,610


(4)
Mr. Durcan resigned from the Company in August 2017 after 33 years of service. In connection with his resignation, Mr. Durcan agreed to provide limited advisory services to the Company after his resignation. As consideration for these advisory services, on July 24, 2017, the Compensation Committee modified Mr. Durcan’s 2017 and 2016 performance-based restricted stock unit ("PRSU") awards to provide for the continued vesting of these awards through the end of their three-year performance period; with the determination of the number of shares to be issued, if any, at the end of each performance period being based on the actual achievement of the performance condition, and prorated based on time employed during the applicable performance period. The incremental fair values of the PRSUs resulting from the modifications are included in Mr. Durcan’s fiscal 2017 Stock Awards column. Accordingly, the value included in Mr. Durcan’s fiscal 2017 Stock Awards column is significantly greater than it would have been absent the accounting charges resulting from the modifications. The table below reflects the impact of these modifications:

Award
 
Number of Shares Subject to Modification
 
Incremental Fair Value due to Modification
Fiscal 2017 PRSU
 
35,166
 
$
1,505,150

Fiscal 2016 PRSU
 
46,906
 
1,989,280

 
 
82,072
 
$
3,494,430


(5)
Assumptions used in determining the grant-date fair values of option awards are set forth in the "Equity Plans" note to the financial statements included in our annual reports on Form 10-K for fiscal years 2017, 2016 and 2015, which note is incorporated herein by reference.

(6)
Amounts shown for each of the Named Executive Officers were paid pursuant to the EIP and relate to the achievement of certain performance milestones. The EIP was suspended for fiscal 2016 and despite some performance milestones being met, no bonuses were paid.

(7)
Includes matching contributions paid by us pursuant to our 401(k) plan. For fiscal 2017, $13,500 was contributed for each of Messrs. DeBoer, Maddock, Mehrotra, Poppen, Durcan and Shirley. Mr. Thorsen did not participate in the plan. All Other Compensation for fiscal 2017 also included the following for each of the Named Executive Officers:



30



Amount for each of Messrs. DeBoer and Durcan includes $1,000 in matching contributions paid by us pursuant to our Health Savings Account.

Amount for Mr. Mehrotra includes $30,296 for reimbursement of legal fees incurred in connection with his joining the Company, and $12,048 for commuting expenses, including use of Company aircraft. Compensation for aircraft usage was determined based on the aggregate incremental cost to the Company, including fuel, landing fees, ramp/parking fees and other variable costs of operating the airplane. Since the Company's aircrafts are primarily used for business travel, fixed costs that do not change based on usage, such as pilots' salaries, depreciation of the aircraft, and the cost of general maintenance, are excluded. Also includes $10,825 for a reimbursement of federal, state and other income taxes resulting from imputed income related to his commuting expenses. Amount for Mr. Maddock includes $19,142 for commuting and other travel costs and communication services.

Amount for Mr. Durcan includes $204,788 for accumulated unused time-off and $75,231 for accrued but unpaid benefits under his severance agreement. His first severance payment will be paid in fiscal 2018, subject to his continued compliance with his severance agreement. See the "Potential Payments Upon Termination or Change in Control" table for additional information regarding Mr. Durcan's Severance Agreement, as amended.




31



GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017

The table below sets forth the plan-based award grants to our Named Executive Officers in fiscal 2017.

Name
 
Grant Date
 
Estimated Future Payouts under Non-Equity Incentive 
Plan Awards(1)
 
Estimated Future Payouts under Equity Incentive Plan Awards(2)
 
All Other Stock Awards: Number of Shares of Stock or Units(3)
All Other Option Awards: Number of Securities Underlying Options(4)
Exercise Price of Options(5)
Close Price on
Grant Date(5)
Grant Date Fair Value of Stock (or Units) and Options(6)
 
 
Threshold
Target
Max
Threshold
Target
 
Max
 
Scott J. DeBoer
 
10/19/16
 
 
 
 
 
 
 
14,147

 
28,293

 
56,586

 
 
 
 
 
 
 
 
 
$
599,993

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
51,694

 
 
 
 
 
 
 
899,993

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65,280

 
$
17.41

 
$
17.22

 
499,998

 
 
 
 
$
188,000

 
$
376,000

 
$
752,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ernest E. Maddock
 
10/19/16
 
 
 
 
 
 
 
21,220

 
42,440

 
84,880

 
 
 
 
 
 
 
 
 
899,998

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
77,542

 
 
 
 
 
 
 
1,350,006

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
97,920

 
17.41

 
17.22

 
749,997

 
 
 
 
310,000

 
620,000

1,240,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sanjay Mehrotra
 
5/8/17
 
 
 
 
 
 
 
 
 
 
 
 
 
244,171

 
 
 
 
 
 
 
6,885,622

 
 
5/8/17
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
571,976

 
28.20

 
28.06

 
6,885,790

 
 
 
 
286,813

 
573,626

1,147,253
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Joel L. Poppen
 
10/19/16
 
 
 
 
 
 
 
11,353

 
22,705

 
45,410

 
 
 
 
 
 
 
 
 
481,490

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
41,485

 
 
 
 
 
 
 
722,254

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52,387

 
17.41

 
17.22

 
401,247

 
 
 
 
210,000

 
420,000

 
840,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Steven L. Thorsen, Jr.
 
10/19/16
 
 
 
 
 
 
 
12,478

 
24,955

 
49,910

 
 
 
 
 
 
 
 
 
529,207

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
45,594

 
 
 
 
 
 
 
793,792

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57,577

 
17.41

 
17.22

 
440,998

 
 
 
 
218,250

 
436,500

 
873,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
D. Mark Durcan(7)
 
10/19/16
 
 
 
 
 
 
 
56,587

 
113,174

 
226,348

 
 
 
 
 
 
 
 
 
2,400,007

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
206,778

 
 
 
 
 
 
 
3,600,005

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
261,121

 
17.41

 
17.22

 
1,999,999

 
 
7/24/17
 
 
 
 
 
 
 
23,453

 
46,906

 
93,812

 
 
 
 
 
 
 
 
 
1,989,280

 
 
7/24/17
 
 
 
 
 
 
 
17,583

 
35,166

 
70,332

 
 
 
 
 
 
 
 
 
1,505,150

 
 
 
 
787,500

1,575,000
 
3,000,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brian M. Shirley
 
10/19/16
 
 
 
 
 
 
 
23,017

 
46,034

 
92,068

 
 
 
 
 
 
 
 
 
976,213

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
84,107

 
 
 
 
 
 
 
1,464,303

 
 
10/19/16
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106,211

 
17.41

 
17.22

 
813,500

 
 
 
 
315,000

 
630,000

1,260,000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Represents estimated payouts for fiscal 2017 under the EIP. Payment of bonuses under the EIP is dependent upon meeting specified performance goals. A description of the performance milestones associated with such bonuses is included in the "Compensation Discussion and Analysis."

(2)
Represents restricted stock units awarded in fiscal 2017 under the Amended and Restated 2004 Equity Incentive Plan (the "2004 Plan") with performance-based and market-based restrictions. Information related to the performance-based and market-based restrictions associated with these shares is contained in "Compensation Discussion and Analysis."

(3)
Represents restricted stock awarded in fiscal 2017 under the 2004 Plan with time-based restrictions. Time-based restrictions lapse in four equal installments over a four-year period from the date of the award.

(4)
Represents options awarded in fiscal 2017 under the 2004 Plan. All options vest in equal installments over a four-year period and have a term of eight years.



32



(5)
Under the 2004 Plan, options are required to have an exercise price equal to the fair market value. Fair market value is defined as the closing price on the last market-trading day prior to the date of grant.

(6)
The value shown is based on the fair value as of the date of grant. Assumptions used in determining the fair values of these option awards are set forth in the "Equity Plans" note to our financial statements included in our annual report on Form 
10-K for fiscal 2017. The value shown for performance-based awards is determined based on payout at the target level.

(7)
For information related to the modification of Mr. Durcan's performance unit awards approved by the Compensation Committee on July 24, 2017, see Footnote 4 to the Fiscal 2017 Summary Compensation Table.

Plan Information

The purpose of the 2004 Plan is to promote our success by linking the personal interests of our employees, officers and consultants to those of our shareholders, and by providing participants with an incentive for outstanding performance. Permissible awards under the 2004 Plan include: options, restricted stock, restricted stock units, stock appreciation rights, deferred stock units and dividend equivalent rights. We have issued options, restricted stock and restricted stock units under the 2004 Plan. Options granted under the 2004 Plan have an exercise price equal to the fair market value (as defined by the 2004 Plan) on the date of grant and, since March 2014, a term of eight years. For purposes of share counting, each restricted stock unit or share of restricted stock issued under the 2004 Plan reduces the number of shares available for issuance by two.

Historically, we have provided annual bonuses to our executive officers pursuant to the EIP. As discussed above, in October 2017, the Compensation Committee reviewed the goals established under the EIP for fiscal 2017 and certified achievement of results.

Lapsing of Restrictions Associated with Restricted Stock and Restricted Stock Unit Awards

The restrictions associated with the restricted stock and restricted stock units granted to the Named Executive Officers include both time-based restrictions and performance-based restrictions. Time-based restrictions lapse in four equal installments over a four-year period. The restrictions associated with performance-based awards are described below.

Issuance and Vesting of Performance-based Awards

Restricted Stock Units

Our executive officers received awards related to two different performance goals; half of the performance shares are tied to achieving a specified ROA over a three fiscal year period and the other half are tied to achieving a specified level of relative TSR over a three fiscal year period (the three fiscal year period for both the ROA and relative TSR goal is referred to herein as the "Share Performance Period"). The number of shares that will be received at the end of the Share Performance Period varies between 0% and 200% of the targeted share amount and is dependent upon the level of achievement. All threshold, target and maximum amounts require significant execution and effort with no assurance of achievement guaranteed. In the absence of at least the threshold ROA or relative TSR amount being achieved, the restrictions will not lapse and the shares will be forfeited.

Cash Awards

Bonuses were paid to the Named Executive Officers in fiscal 2017 as a result of achievement of certain goals. See the "Components of the Executive Compensation Program" section of the "Compensation Discussion and Analysis."

Stock Option Vesting

Options generally vest in four equal installments over a four-year period from the grant date. Since March 2014, options granted have a term of eight years.

Determination of Stock-based Compensation

The fair values of option awards were estimated as of the dates of grant using the Black-Scholes option valuation model in accordance with ASC 718. The Black-Scholes model requires the input of assumptions, including the expected stock-price volatility and estimated option life. The expected volatilities utilized were based on implied volatilities from traded options on our stock and on historical volatility. The expected lives of options granted were based, in part, on historical experience and on


33



the terms and conditions of the options. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at each grant date. No dividends were assumed in estimated option values.




34



OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END

The following table provides information with respect to outstanding stock options, restricted stock and restricted stock units held as of August 31, 2017 , by our Named Executive Officers.

 
 
Option Awards
 
Stock Awards
 
 
Number of Securities Underlying Unexercised Options
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(#)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(1)($)
Name
 
Exercisable
(#)
Unexercisable
(#)
Number
(#)
 
Market Value(1)($)
 
 
Scott J. DeBoer
 
29,500

 
14,750

(2)
 
$
16.92

 
10/16/2019
 
11,750

(3)
 
$
375,648

 
9,200

(4)
 
$
294,124

 
 
16,950

 
16,950

(5)
 
28.77

 
10/20/2022
 
13,800

(6)
 
441,186

 
7,400

(7)
 
236,578

 
 
13,694

 
41,084

(8)
 
18.18

 
10/14/2023
 
32,748

(9)
 
1,046,954

 
14,554

(10)
 
465,291

 
 
 
 
65,280

(11)
 
17.41

 
10/19/2024
 
51,694

(12)
 
1,652,657

 
11,127

(13)
 
355,730

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17,231

(14)
 
550,875

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,062

(15)
 
353,652

Ernest E. Maddock
 
50,150

 
50,150

(16)
 
27.79

 
6/3/2023
 
16,950

(17)
 
541,892

 
21,452

(10)
 
685,820

 
 
20,184

 
60,555

(8)
 
18.18

 
10/14/2023