Under our director compensation policy, we reimburse non-employee directors for reasonable expenses in connection with attendance at boardBoard and committee meetings. OurCharles Liang and Sara Liu, who are employees and also serve as directors, do not receive any additional compensation from us specifically for their service as directors.
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(1) | This number includes 8,960,867 shares subject to outstanding options and 926,983 shares subject to outstanding RSU awards. |
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(2) | The weighted average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs, which have no exercise price. |
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(3) | The weighted-average remaining contractual term of our outstanding options as of June 30, 2016 was 5.20 years. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Procedures for Approval of Related Person Transactions
Pursuant to our Audit Committee charter, the Audit Committee has the responsibility for the review orand approval of any related person transactions.transactions; provided that if the matter or transaction involves employment or compensation terms for services to our company, including retention or payment provisions relating to expert services, then it is presented to the Compensation Committee. In approving or rejecting a proposed transaction, or a relationship that encompasses many similar transactions, our Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including but not limited to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable, the impact on a director’s independence. Our Audit Committee shall approveapproves only those transactions that, in light of known circumstances are not inconsistent with the Company’sour best interests, as the Audit Committee determines in the good faith exercise of its discretion. In addition, we annually require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions as such term is defined by SEC rules and regulations. These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
Transactions with Related Parties, Promoters and Certain Control Persons
Director and Officer Indemnification
We have entered into agreements to indemnify our directors and executive officers to the fullest extent permitted under Delaware law. In addition, our certificate of incorporation contains provisions limiting the liability of our directors and our bylaws contain provisions requiring us to indemnify our officers and directors.
Equity-Based Awards
Please see the “Grants of Plan-Based Awards” table and the “Director Compensation” table above for information on stock option and restricted stock unit grants to our directors and named executive officers in fiscal year 2016.2023.
Employment Relationships
As of June 30, 2023, Hung-Fan (Albert) Liu, who is a brother of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our operations organization in San Jose, California. Mr. Liu received total compensation of $557,452 in fiscal year 2023. The total compensation includes salary, bonus and equity awards.
As of June 30, 2023, Shao Fen (Carly) Kao, who is a sister-in-law of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our information systems organization in San Jose, California. Ms. Kao received total compensation of $321,944 in fiscal year 2023. The total compensation includes salary, bonus and equity awards.
As of June 30, 2023,Mien-Hsia (Michelle) Hung, who is a sister-in-law of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our marketing organization in Taiwan. Ms. Hung received total compensation of $139,953 in fiscal year 2023. The total compensation includes salary, bonus and equity awards.
As of June 30, 2023, Sara Liu, who is Charles Liang's spouse and is related to Mr. Liu, Ms. Kao and Ms. Hung as outlined above, is a Co-Founder, Senior Vice President, and director of the Company, and received total compensation of $9,353,127 in fiscal year 2023. The total compensation includes equity gain of $8,811,517 (principally from the exercise of stock options), in addition to salary and bonus.
Mr. Yih-Shyan (Wally) Liaw was appointed to our Board as a Class II director in December 2023. Prior to his appointment as a director, he had returned to our company as a consultant in May 2021, advising with respect to business development matters. In August 2022, Mr. Liaw returned to full-time employment with our company as Senior Vice President, Business Development. See “Proposal 1 Election of Directors – Class II Directors – Nominees for Term Expiring at the Annual Meeting of Stockholders Following Fiscal Year 2026” for additional information with respect to Mr. Liaw’s background. As an employee, Mr. Liaw received total compensation of $496,341 in fiscal year 2023. The total compensation includes salary, bonus and equity awards. In addition, during the period during Mr. Liaw’s service as a consultant from May 2021 to August 2022, Mr. Liaw had received $569,511 in cash for such service, of which $95,691 was earned in fiscal year 2023 prior to his transition to an employee.
Transactions with Ablecom Technology Inc.and Compuware
We have entered into a series of agreements with Ablecom Technology Inc.—Ablecom, ("Ablecom"), a Taiwan corporation, together withand one of its subsidiaries,affiliates, Compuware (collectively “Ablecom”Technology, Inc ("Compuware"), is one of our major contract manufacturers.. Ablecom’s ownership of Compuware is below 50% but Compuware remains a related party as Ablecom still has significant influence over the operations. Ablecom’s chief executive officer,Chief Executive Officer, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of the boardBoard. Steve Liang and his family members owned approximately 28.8% of directors,Ablecom’s stock and owns approximately 0.3% of our common stock. Charles Liang served as a Director of Ablecom during our fiscal 2006, but is no longer serving in such capacity. In addition, Charles Liang and his wife,spouse, Sara Liu, who is also an officer and director of ours,our company, collectively ownowned approximately 10.5% of Ablecom, whileAblecom’s capital stock as of June 30, 2023. Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom. Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and other family membersa holder of a significant equity interest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. Neither Charles Liang nor Sara Liu own approximately 36.0%any capital stock of Compuware and 36.0%the Company does not own any of Ablecom at June 30, 2016or Compuware's capital stock. In addition, a sibling of Yih-Shyan (Wally) Liaw, who is our Senior Vice President, Business Development and 2015, respectively.a director, owns approximately 11.7% of Ablecom’s capital stock and 8.7% of Compuware’s capital stock.
We have entered into a series of agreements with Ablecom, including multiple product designdevelopment, production and service agreements, product manufacturing agreements, manufacturing services agreements (“product design and manufacturing agreements”) and a distribution agreement (“distribution agreement”) with Ablecom.lease agreements for warehouse space.
Under the product design and manufacturingthese agreements, we outsource a portion of our design activities and a significant part of our server chassis manufacturing of components such as server chassis to Ablecom. Ablecom agrees to design products according to our specifications. Additionally, Ablecom agrees to build the tools needed to manufacture the products. We have agreed to pay for the cost of chassis and related product tooling and engineering services and will pay for those items when the work has been completed.
Under the
We entered into a distribution agreement Ablecom purchases serverwith Compuware, under which we appointed Compuware as a non-exclusive distributor of our products from us for distribution in Taiwan.Taiwan, China and Australia. We believe that the pricing and terms under the distribution agreement are similar to the pricing and terms of distribution arrangements we have with similar third partythird-party distributors.
We have also entered into a series of agreements with Compuware, including a multiple product development, production and service agreements, product manufacturing agreements, and lease agreements for office space. Under these agreements, we outsource to Compuware a portion of our design activities and a significant part of our manufacturing of components, particularly power supplies. With respect to design activities, Compuware generally agrees to design certain agreed-upon products according to our specifications, and further agrees to build the tools needed to manufacture the products. We pay Compuware for the design and engineering services, and further agree to pay Compuware for the tooling.
We retain full ownership of any intellectual property resulting from the design of these products and tooling. With respect to the manufacturing aspects of the relationship, Compuware purchases most of materials needed to manufacture the power supplies from outside markets and uses these materials to manufacture the products and then sell to us. We review and frequently negotiate with Compuware the prices of the power supplies that we purchase from Compuware. Compuware also manufactures motherboards, backplanes and other components used on our printed circuit boards. We sell to Compuware most of the components needed to manufacture the above products. Compuware uses these components to manufacture and then sells back the products to us at a purchase price equal to the price at which we sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs. We frequently review and negotiate with Compuware the amount of the “manufacturing value added” fee that will be included in the price of the products we purchase from Compuware.
Ablecom’s net sales to us and its net sales of our products to others comprise a substantial majority of Ablecom’s net sales. For fiscal year 2016, 2015years ended June 30, 2023, 2022 and 2014,2021, we purchased products from Ablecom totaling $241,836,000, $227,562,000$167.8 million, $192.4 million and $201,848,000, respectively. For fiscal year 2016, 2015 and 2014, we sold products to Ablecom totaling $19,453,000, $58,013,000 and $14,576,000, respectively.
Amounts owed to us by Ablecom as of June 30, 2016 and 2015, were $4,678,000 and $13,186,000,$122.2 million, respectively. Amounts owed to Ablecom by us as of June 30, 20162023, 2022 and 2015,2021, were $39,152,000$36.9 million, $46.0 million and $59,015,000,$41.2 million, respectively. In fiscal year 2016, we
have paid Ablecom the majority of invoiced dollars between 48 and 90 days of invoice. For the fiscal years ended June 30, 2016, 20152023, 2022 and 2014,2021, we paid $9,085,000, $5,851,000Ablecom $12.1 million, $8.3 million and $6,906,000,$8.6 million, respectively, for design services, tooling assets and miscellaneous costscosts.
Compuware’s sales of our products to Ablecom.others comprise a majority of Compuware’s net sales. For fiscal years ended June 30, 2023, 2022 and 2021, we sold products to Compuware totaling $36.3 million, $26.1 million and $27.9 million, respectively. Amounts owed to us by Compuware as of June 30, 2023, 2022 and 2021, were $24.9 million, $19.6 million and $18.2 million, respectively. The price at which Compuware purchases the products from us is at a discount from our standard price for purchasers who purchase specified volumes from us. In exchange for this discount, Compuware assumes the responsibility to install our products at the site of the end customer and administers first-level customer support. For the fiscal years ended June 30, 2023, 2022 and 2021, we purchased products from Compuware totaling $217.0 million, $170.3 million and $113.4 million, respectively. Amounts we owed to Compuware as of June 30, 2023, 2022 and 2021 were $66.2 million, $60.0 million and $46.4 million, respectively. For the fiscal years ended June 30, 2023, 2022 and 2021, we paid Compuware $2.0 million, $1.5 million and $1.8 million, respectively, for design services, tooling assets and miscellaneous costs.
Our exposure to financial loss as a result of our involvement with Ablecom is limited to (a) potential losses on our purchase orders in the event of an unforeseen decline in the market price and/or demand offor our products such that we incur a loss on the sale or cannot sell the productsproducts. Our outstanding purchase orders to Ablecom were $23.7 million, $36.0 million and (b)$40.2 million at June 30, 2023, 2022 and 2021, respectively, representing the maximum exposure to financial loss. We do not directly or indirectly guarantee any obligations of Ablecom, or any losses that the equity holders of Ablecom may suffer.
Our exposure to financial loss as a result of our involvement with Compuware is limited to potential losses on outstanding accounts receivable from Ablecomour purchase orders in the event of an unforeseen deteriorationdecline in the financial condition of Ablecommarket price and/or demand for our products such that Ablecom defaultswe incur a loss on its payable to us. Outstandingthe sale or cannot sell the products. Our outstanding purchase orders with Ablecomto Compuware were $62,782,000$46.8 million, $44.3 million and $67,261,000$71.0 million at June 30, 20162023, 2022 and 2015,2021, respectively, representing the maximum exposure to loss relating to (a) above.financial loss. We do not havedirectly or indirectly guarantee any directobligations of Compuware, or indirect guaranteesany losses that the equity holders of losses of Ablecom.Compuware may suffer.
In May 2012, we
Super Micro Asia Science and Technology Park, Inc. We and Ablecom jointly established Super Micro Asia Science and Technology Park, Inc. ("Management(the "Management Company") in Taiwan to manage the common areas shared by us and Ablecom for theirits separately constructed manufacturing facilities. Each companyIn fiscal year 2012, each party contributed $168,000 and own$0.2 million for a 50% ownership interest of the Management Company. Although the operationsCertain affiliates of the Management Company are independent of us, through governance rights, we have the ability to direct the Management Company's business strategies. Therefore, we have concluded that the Management Company is a variable interest entity of usAblecom serve as we are the primary beneficiarydirectors of the Management Company. The accountsSee Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for additional information regarding the Management Company.
Tripartite Agreement. On November 8, 2021, Super Micro Computer Inc., Taiwan (the “Subsidiary”), a Taiwan corporation and wholly-owned subsidiary of the Management Company, are consolidatedentered into a Tripartite Agreement (the “Agreement”) with Ablecom and Compuware related to a three-way purchase of land. Ablecom has advised that its underlying agreements to acquire land from the accountsthird-party landowners in proximity to the Company’s campus in Bade, Taiwan have been terminated, and during the quarter ended December 31, 2022, the Agreement was terminated.
Loans
In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of us,Steve Liang. The loan is unsecured, has no maturity date and a noncontrollingbore interest has been recordedat 0.8% per month for the Ablecom's interestsfirst six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1, 2020. The loan was originally made at Mr. Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of our common stock that he held. The lenders called the loans in October 2018, following the suspension of our common stock from trading on NASDAQ in August 2018 and the decline in the net assets and operationsmarket price of the Management Company. The Management Company had no business operations asour common stock in October 2018. As of June 30, 2012. In fiscal year 2016, 20152023 the amount due on the unsecured loan (including principal and 2014, $20,000, $(11,000) and $(6,000) of net income (loss) attributable to Ablecom's interestaccrued interest) was included in the Company's general and administrative expenses in the consolidated statements of operations.
approximately$16.0 million.
PROPOSAL 2
NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Wall Street Reform and Consumer Protection Act, of 2010, or the Dodd-Frank Act, requiresand Section 14A of the Securities Exchange Act of 1934, as amended, require that our stockholders have the opportunity to cast a non-binding, advisory vote on the compensation of our named executive officers, commonly referred to as a “say-on-pay” vote. At our 2011 Annual Meeting of Stockholders, our stockholders voted in favor of holding future “say-on-pay” votes once every three years. Our board of directors subsequently determined that such advisory votes shall be held once every three years at the annual meeting of stockholders. At the 2016 Annual Meeting, as further described in Proposal 3, we will again ask our stockholders to vote on the frequency of future “say-on-pay” votes. Because this “say-on-pay” vote is advisory, it is not binding on the Company, the Compensation Committee or our board of directorsBoard in any way. However, our board of directorsBoard and our Compensation Committee value the opinions of our stockholders, and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we willexpect to consider our stockholders’ concerns and the Compensation Committee willexpects to evaluate whether any actions are appropriate to address those concerns.
At the 2013 Annual Meeting, approximately 98.1% of the stockholders who voted on the “say-on-pay” proposal approved the compensation of our named executive officers, while only approximately 1.4% voted against (with approximately 0.4% abstaining). As a result of this positive shareholder feedback, our Compensation Committee has adopted compensation packages having similar basic structures in subsequent years.
As described in detail under the heading “Executive Compensation - Compensation—Compensation Discussion and Analysis,” our executive compensation philosophy and programs are designed to foster a performance-oriented culture that aligns our named executive officers’ interests with those of our stockholders. ForWith respect to our CEO, Mr. Liang, fiscal year 2016,2023 was the principal componentssecond year of evaluating and monitoring the results of performance-based compensation arrangements made with Mr. Liang in fiscal year 2021. In March 2021, we had changed Mr. Liang’s compensation to be almost completely performance-based. Mr. Liang’s compensation for fiscal year 2023 was based entirely upon the 2021 CEO Performance Award and related agreements. Mr. Liang received a base salary of $1 during fiscal year 2023. With respect to our other named executive officers were(other than our CEO), for fiscal year 2023, , the Compensation Committee continued to refine the link between compensation and corporate performance which culminated in the adoption of a new fiscal year 2023 compensation program for Messrs. Wiegand and Clegg in January 2023 (the“FY2023 Performance Program for Other Named Executive Officers”). In addition to base salary and equity-basedfixed bonus components, the program included a performance-based annual incentive compensation.award (similar to the prior year), but which contained carefully re-evaluated and specified objective metrics (“key performance indicators” or “KPI”s). Most of the performance-based annual incentive award continued to be payable in the form of service-based restricted stock units (“RSUs”) that generally vest over an extended period of four years. Please read the “Compensation Discussion and Analysis” beginning on page 12above and the related compensation tables, footnotes and narratives for additional details about our named executive officer compensation programs, including information about the fiscal year 20162023 compensation of our named executive officers.
We are asking our stockholders to indicate their support for the compensation arrangements with our named executive officers as described in this proxy statement.Proxy Statement. This proposal gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This advisory vote on executive compensation is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement.Proxy Statement. Furthermore, because this non-binding, advisory resolution primarily relates to the compensation of our named executive officers that has already been paid or contractually committed, there is generally no opportunity for us to revisit these decisions.
Accordingly, we are asking our stockholders to vote “FOR” the following resolution to be presented at the Annual Meeting:
“RESOLVED, that the Company’s stockholders of Super Micro Computer, Inc. approve, on an advisory basis, the compensation of the Company’s named executive officers, for the fiscal year ended June 30, 2016, as disclosed in the Company’s Proxy Statement for the 2016 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the related narrative discussion.”
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE FOREGOING RESOLUTION.
This say-on-pay vote is currently scheduled to be conducted every one year. The next say-on-pay vote is expected to take place at our annual meeting of stockholders following the completion of fiscal year 2024.
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| THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE FOREGOING RESOLUTION. |
PROPOSAL 3
ADVISORY VOTE ON THE FREQUENCY OF
FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The Dodd-Frank Act also provides for our stockholders to take an advisory vote to indicate how frequently we should seek future, further advisory votes on the compensation of our named executive officers, as disclosed pursuant to the SEC’s compensation disclosure rules, such as Proposal 2 included on page 25 of this proxy statement. By voting on this Proposal 3, stockholders may indicate whether they would prefer that our future advisory voting on our compensation of named executive officers occur once every one, two, or three years.
After careful consideration of this Proposal, our Board has determined that an advisory vote on named executive officer compensation that occurs once every three years is the most appropriate alternative for Supermicro, and therefore our board of directors recommends that you vote for a three-year interval for the future advisory votes on compensation of named executive officers.
In formulating its recommendation, our Board considered that given the nature of our compensation programs, a triennial vote would be sufficient for our stockholders to provide us with their input on our compensation philosophy, policies and practices. We understand that our stockholders may have different views as to what is the best approach, and we look forward to hearing from our stockholders on this Proposal.
At 2011 Annual Meeting of Stockholders, the most recent meeting where our stockholders provided an advisory vote on the frequency future advisory votes on the compensation of named executive officers, our stockholders voted in favor of holding future “say-on-pay” votes once every three years.
You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting when you vote in response to this proposal.
The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory votes on compensation of named executive officers that has been selected by stockholders. However, because this vote is advisory and not binding on the board of directors or Supermicro in any way, our board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE OPTION OF ONCE EVERY THREE YEARS AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE ASKED IN THE FUTURE TO PROVIDE AN ADVISORY VOTE ON EXECUTIVE COMPENSATION, AS DISCLOSED PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed DeloitteErnst & ToucheYoung LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2017. Deloitte2024. This is the first fiscal year that Ernst & ToucheYoung LLP has actedis acting in such capacity since its appointment in fiscal year 2003.capacity.
While we are not required to do so, we are submitting the appointment of DeloitteErnst & ToucheYoung LLP to serve as our independent registered public accounting firm for the fiscal year ending June 30, 2017,2024, for ratification in order to ascertain the views of our stockholders on this appointment. If the appointment is not ratified, the Audit Committee may reconsider its selection. Even if the selection is ratified, the Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during the year for such fiscal year if it determines that such a change would be in the best interests of the Company and its stockholders.
Representatives of DeloitteErnst & ToucheYoung LLP are expected to be present at the Annual Meeting, have the opportunity to make a statement if they desire to do so, and are expected to be available to answer stockholder questions. We do not expect representatives of Deloitte & Touche LLP, our former independent registered public accounting firm, to be present at the Annual Meeting and, therefore, they will not make a statement or address questions.
Independent Registered Public Accounting Firm Fees and Services
Deloitte & Touche LLP served as our independent registered public accounting firm for the fiscal year ending June 30, 2023, and was dismissed effective upon completion of the audit of the financial statements for such fiscal year.
The following table sets forth the aggregate audit fees billed to us by our prior independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”), and fees paid to Deloitte for services in the fee categories indicated below during thefor fiscal years 20162023 and 2015.2022. The Audit Committee hashad considered the scope and fee arrangements for all services provided by Deloitte, taking into account whether the provision of non-audit services iswas compatible with maintaining Deloitte’s independence, and hashad pre-approved 100% of the services described below.
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| | | | | | | |
| Fiscal Year Ended |
| June 30, 2016 | | June 30, 2015 |
Audit Fees(1) | $ | 2,427,000 |
| | $ | 1,797,000 |
|
Audit-Related Fees | — |
| | — |
|
Tax Fees | — |
| | — |
|
All Other Fees | — |
| | — |
|
Total | $ | 2,427,000 |
| | $ | 1,797,000 |
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(1) | Audit fees consist of the aggregate fees for professional services rendered for the audit of our fiscal years 2016 and 2015 consolidated financial statements, review of interim consolidated financial statements and certain statutory audits. |
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| Years Ended |
Amounts in '000s | June 30, 2023 | | June 30, 2022 |
Audit Fees(1) | $ | 4,756 | | | $ | 4,488 | |
Audit-Related Fees | — | | | — | |
Tax Fees | 445 | | | 276 | |
All Other Fees | 2 | | | 2 | |
Total | $ | 4,766 | | | $ | 4,632 | |
(1)Audit fees consist of the aggregate fees for professional services rendered for the audit of our consolidated financial statements, review of interim condensed consolidated financial statements and certain statutory audits.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has determined that all services performed by Deloitte & Touche LLP are compatible with maintaining the independence of Deloitte & Touche LLP. The Audit Committee’s policy on approval of services performed by the independent registered public accounting firm is to pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm during the fiscal year. The Audit Committee reviews each non-audit service to be provided and assesses the impact of the service on the firm’s independence.
Changes in Independent Registered Public Accounting Firm
On March 9, 2023, the Audit Committee approved the engagement of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending June 30, 2024 and dismissed Deloitte & Touche LLP as our independent registered public accounting firm, effective upon completion of the audit of the financial statements for fiscal year 2023. The dismissal was not related to any disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
Deloitte & Touche LLP’s reports on our consolidated financial statements as of and for the fiscal years ended June 30, 2022 and 2021 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended June 30, 2022 and 2021, and the subsequent interim periods through March 9, 2023, there were: (i) no “disagreements” within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions between us and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make reference thereto in their reports; and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
We previously provided Deloitte & Touche LLP with a copy of the above disclosures as included in our Form 8-K filed with the SEC on March 15, 2023, and requested Deloitte & Touche LLP to furnish us with a letter addressed to the SEC stating whether Deloitte & Touche LLP agreed with the statements made by us in response to Item 304(a) of Regulation S-K and, if not, stating the respects in which it does not agree. A copy of Deloitte & Touche LLP’s letter, dated March 14, 2023, is attached as Exhibit 16.1 to that Form 8-K, and is incorporated herein by reference.
During the fiscal years ended June 30, 2022 and 2021 and the subsequent interim periods through March 9, 2023, neither us nor anyone on our behalf has consulted with Ernst & Young LLP regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that Ernst & Young LLP concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a “disagreement” within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions; or (iii) any “reportable event” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
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| THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2024. PROXIES WILL BE VOTED FOR THE RATIFICATION OF THIS APPOINTMENT UNLESS OTHERWISE SPECIFIED. |
PROPOSAL 4
APPROVAL OF THE APPOINTMENTFURTHER AMENDMENT AND RESTATEMENT OF DELOITTE & TOUCHE AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE
SUPER MICRO COMPUTER, INC. 2020 EQUITY AND INCENTIVE COMPENSATION PLAN
In this proposal, we refer to the original Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan as the “Original 2020 Plan,” we refer to the amendment and restatement of the Original 2020 Plan approved by our stockholders in May 2022 as the “Current 2020 Plan,” and we refer to the proposed amendment and restatement of the Current 2020 Plan that we are asking stockholders to consider in this proposal as the “Amended Plan.” In addition, the Super Micro Computer, Inc. 2016 Equity Incentive Plan, as amended or amended and restated, and the Super Micro Computer, Inc. 2006 Equity Incentive Plan, as amended or amended and restated, are referred to as the “2016 Equity Incentive Plan” and “2006 Equity Incentive Plan,” respectively, and, together, as the “Predecessor Plans.”
Request of Stockholders
On November 30, 2017. PROXIES WILL BE VOTED FOR THE RATIFICATION OF THIS APPOINTMENT UNLESS OTHERWISE SPECIFIED.2023, upon recommendation by the Compensation Committee, the Board of Directors approved and adopted, subject to the approval of the Company’s stockholders at the Annual Meeting, a further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan in the form of the Amended Plan attached to this proxy statement.
Stockholders previously approved the Original 2020 Plan and the Current 2020 Plan, which affords the Compensation Committee the ability to design compensatory awards that are responsive to the Company’s needs and authorizes a variety of award types designed to advance the interests and long-term success of the Company by encouraging stock ownership among non-employee directors of the Company and employees (including officers) and certain consultants or other service providers of the Company and its subsidiaries. You are being asked to approve the Amended Plan.
Stockholder approval of the Amended Plan would make available for awards under the Amended 2020 Plan an additional 1,500,000 shares of Common Stock, par value of $0.001 per share, of the Company (“Common Stock”), as described below and in the Amended Plan, with such amount subject to adjustment, including under the Amended Plan’s share counting rules.
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Our Board and our management team believe that stockholder approval of the Amended Plan is critical to our future success. Without the additional shares of Common Stock available for award under the Amended Plan, we believe the current shares available for award under the Current 2020 Plan will be fully utilized by January 2024. |
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We operate in an intensely competitive labor market both in Silicon Valley and in our other locations worldwide. Talented employees generally expect that equity awards will be a part of their compensation package, and the ability to offer equity awards is essential to our ability to attract these employees. The substantial majority of the employers with whom we compete for talent offer equity awards as part of their compensation packages. Our ability to attract and retain high-caliber employees has been, and is expected to continue to be, a critical contributor to our success. We have historically used equity awards, both options and full value awards, to attract and retain talented employees and to align their interests with the interests of our long-term stockholders. . |
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The Company believes the following performance highlights and grant practice highlights (as well as the additional performance highlights and grant practice highlights discussed below under “- New Plan Benefits”) (together the “Performance Highlights” and the “Grant Practice Highlights,” respectively) help to demonstrate the effective implementation of the Company’s equity plan philosophy, as well as the appropriate and judicious use of equity incentives:
–Between fiscal year 2022 (“FY2022”) and fiscal year 2023 (“FY2023”), the Company’s revenues increased from $5,196.1 to $7,123.5 million, up 37.1%;
–FY2023 net income was $640.0 million, an improvement of 124.4% from FY2022;
–Between May 18, 2022 (the date stockholder approved the Current Plan) and October 31, 2023, the Company’s market capitalization increased approximately 374.1% from approximately $2.7 billion to $12.8 billion; and
–During the period between stockholder approval of the Current 2020 Plan on May 18, 2022 and October 31, 2023 (but inclusive of the 2023 CEO Performance Award made in November 2023, as described further in the “Executive Compensation” section of this Proxy Statement), an aggregate of 3,237 unique persons received awards under the Current 2020 Plan. As of June 30, 2023, we employed 5,126 employees. Furthermore, approximately 80.7% of the aggregate shares issued as awards during that period were made to persons who were not named executive officers or directors of the Company (but 95.0% exclusive of the 2023 CEO Performance Award). This demonstrates the breadth of distribution of equity incentives across the enterprise, and the belief that the Company’s success depends upon contributions at all levels. Equity awards are not limited to only executive level personnel.
We believe that awards which have been granted under the Current 2020 Plan have helped keep employees focused on their individual contributions to the Company’s long-term performance, and contributed to the achievement of the Performance Highlights. Stockholders have realized tremendous stockholder value as a result of the Performance Highlights and Grant Practice Highlights described above. We would be at a severe competitive disadvantage if we could not use stock-based awards to continue to recruit and compensate our employees, officers and directors. An inability to retain and motivate our high-quality employees, officers and directors presents risks that we may not be able to implement our business strategy and could seriously harm our business, which could adversely affect stockholder value. |
The Board recommends that you vote to approve the Amended Plan. If the Amended Plan is approved by stockholders at the Annual Meeting, it will be effective as of the day of the Annual Meeting, and future grants will be made on or after such date under the Amended Plan. If the Amended Plan is not approved by our stockholders, then it will not become effective, no awards will be granted under the Amended Plan, and the Current 2020 Plan will continue in accordance with its terms as previously approved by our stockholders.
The actual text of the Amended Plan is attached to this proxy statement as Appendix A. The following description of the Amended Plan is only a summary of its principal terms and provisions and is qualified by reference to the actual text as set forth in Appendix A.
Equity Plan Philosophy
Equity incentive awards are an important part of our compensation policy. The Amended Plan continues to authorize the Compensation Committee to provide cash awards and equity-based compensation in the form of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, Common Stock, for the purpose of providing incentives and rewards for service and/or performance to our non-employee directors, officers and other employees of the Company and its subsidiaries, and certain consultants and other service providers to the Company and its subsidiaries. Some of the key features of the Amended Plan that reflect our commitment to effective management of equity and incentive compensation are set forth below.
We believe our future success depends in part on our ability to attract, motivate and retain high quality employees and directors and that the ability to provide equity-based and incentive-based awards under the Amended Plan is critical to achieving this success. We believe that equity-based awards are highly valued by Company employees, and these awards help keep employees focused on their individual contributions to the Company’s long-term performance. We would be at a severe competitive disadvantage if we could not use stock-based awards to recruit and compensate our employees and directors. The use of Common Stock as part of our compensation program is important because equity-based awards are an essential component of our compensation program for key employees, as they help link compensation with long-term stockholder value creation and reward participants based on service and/or performance.
In June 2020, the Company’s stockholders approved 5,000,000 shares of Common Stock to be used for awards under the Original 2020 Plan. Subsequently, in May 2022, the Company’s stockholders approved the Current 2020 Plan in which (among other things) 2,000,000 additional shares were added to the available share pool and could be used for awards thereunder. Under the Original 2020 Plan and the Current 2020 Plan share counting rules, an additional 392,270 shares have been subsequently added to the available shares under the Current 2020 Plan (due to forfeitures or unearned shares under the Original 2020 Plan, 2016 Equity Incentive Plan and the 2006 Equity Incentive Plan). As of October 31, 2023 but inclusive of the 2023 CEO Performance Award granted in November 2023, 473,116 shares of Common Stock remained available for awards under the Current 2020 Plan (which amounts included the additional 392,270 shares mentioned in the prior sentence). If the Amended Plan is not approved, we may be compelled to increase significantly the cash component of our employee and director compensation after the utilization of the remaining shares under the Current 2020 Plan. This approach may not necessarily align employee and director compensation interests with the investment interests of our stockholders. Replacing equity awards with cash also would increase cash compensation expense and use cash that could be better utilized in other ways.
The Board is very sensitive to the costs associated with equity compensation and the potential for equity compensation awards to dilute stockholders’ equity. We believe that we have demonstrated a commitment to sound equity compensation practices in recent years and since prior stockholder approval of the Current 2020 Plan, as demonstrated through the Grant Practice Highlights discussed below. We recognize that equity compensation awards dilute stockholders’ equity, so we have carefully managed our equity incentive compensation in efforts to maximize stockholder value. Our equity compensation practices are intended to be competitive and consistent with market practices, and have been increasingly performance based. We believe our historical share usage has been responsible and mindful of stockholder interests, as described above and below.
In evaluating this proposal, stockholders should consider all of the information in this proposal.
Material Changes in the Amended Plan
The Amended Plan (1) increases the number of shares of Common Stock available for awards under the Current 2020 Plan by 1,500,000 shares, (2) correspondingly increases the limit on shares that may be issued or transferred upon the exercise of incentive stock options granted under the Current 2020 Plan, during its duration (as described below), by 1,500,000 shares of Common Stock, (3) extends the term of the Current 2020 Plan until the tenth anniversary of the date of stockholder approval of the Amended Plan, (4) allows for dividend equivalents to be paid from the Amended Plan on either awards granted under the Amended Plan or prior awards, (but only if permitted by such awards’ actual terms), and (5) revises the clawback provisions from the Current 2020 Plan in light of Nasdaq’s new clawback policy requirements. The Amended Plan also makes certain other conforming, clarifying or non-substantive changes to the terms of the Current 2020 Plan to implement the Amended Plan.
We are not seeking to make any other material changes to the terms of the Current 2020 Plan in the Amended Plan.
Amended Plan Highlights
Reasonable Amended Plan limits
Generally, awards under the Amended Plan are limited to 8,500,000 shares ofCommon Stock (an aggregate of 7,000,000 of which were originally approved by stockholders at the prior June 5, 2020 and May 18, 2022 annual meetings of stockholders, and 1,500,000 of which are newly provided for under the Amended Plan), plus Common Stock subject to any forfeitures (or similar events) that occur under the Predecessor Plans or the Original 2020 Plan, Current 2020 Plan or Amended Plan after June 5, 2020. These shares may be shares of original issuance or treasury shares, or a combination of the two. Regarding this share pool, as of October 31, 2023, 690,063 additional shares of Common Stock have become available under the Current 2020 Plan as a result of forfeitures (or similar events) as described above.
The Amended Plan also provides that:
(1)the aggregate number of shares of Common Stock actually issued or transferred upon the exercise of incentive stock options (as defined below) will not exceed 8,500,000 shares ofCommon Stock; and
(2)non-employee directors will be subject to a calendar-year limit on compensation for such service equal to an aggregate maximum value of $700,000 per director (measured at the date of grant as applicable, and calculating the value of any awards based on the grant date fair value for financial reporting purposes).
These limits remain subject to the adjustment provisions and the applicable Common Stock counting provisions of the Amended Plan, as further described in the Amended Plan document.
Limited share recycling provisions
Subject to certain exceptions described in the Amended Plan, if any award granted under the Amended Plan (in whole or in part) is canceled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, will again be available under the Amended Plan. Additionally, if after June 5, 2020, any Common Stock subject to an award granted under the Predecessor Plans or the Original 2020 Plan or the Current 2020 Plan is forfeited, or an award granted under the Predecessor Plans or the Original 2020 Plan or the Current 2020 Plan (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the Amended Plan. The following Common Stock will not be added (or added back, as applicable) to the aggregate share limit under the Amended Plan: (1) Common Stock withheld by us, tendered or otherwise used in payment of the exercise price of a stock option granted under the Original 2020 Plan, the Current 2020 Plan or the Amended Plan; and (2) Common Stock reacquired by us on the open market or otherwise using cash proceeds from the exercise of stock options granted under the Original 2020 Plan, the Current 2020 Plan or the Amended Plan. Further, Common Stock covered by share-settled SARs that are exercised and settled in shares, but that is not actually issued to the participant upon exercise, will not be added (or added back, as applicable) to the aggregate number of shares available under the Amended Plan. In addition, Common Stock withheld by us, tendered or otherwise used to satisfy tax withholding will not be added (or added back, as applicable) to the aggregate share limit under the Amended Plan. If a participant elects to give up the right to receive compensation in exchange for Common Stock based on fair market value, such Common Stock will not count against the aggregate number of shares available under the Amended Plan.
No repricing without stockholder approval
Outside of certain corporate transactions or adjustment events described in the Amended Plan or in connection with a “change in control,” the exercise or base price of stock options and SARs cannot be reduced, and “underwater” stock options or SARs cannot be cancelled in exchange for cash or replaced with other awards with a lower exercise or base price, without stockholder approval under the Amended Plan.
Change in control definition
The Amended Plan includes a non-liberal definition of “change in control,” which is described below.
Exercise or base price limitation
The Amended Plan also provides that, except with respect to certain converted, assumed or substituted awards as described in the Amended Plan, no stock options or SARs will be granted with an exercise or base price less than the fair market value of a share of Common Stock on the date of grant.
No minimum vesting periods
The Amended Plan does not provide for any minimum vesting periods.
Dilution and Historical Share Usage
The following includes aggregated information regarding our view of the overhang and dilution associated with the Predecessor Plans and Original 2020 Plan and Current 2020 Plan, and the potential dilution associated with the Amended Plan, on an actual share (as opposed to fungible share) basis. This information is as of October 31, 2023 but is inclusive of the 2023 CEO Performance Award granted in November 2023 (unless otherwise indicated). As of that date, there were approximately 53,313,542 shares of Common Stock outstanding.
Shares of Common Stock subject to outstanding awards and available for future awards under the Predecessor Plans and Original 2020 Plan and Current 2020 Plan:
(1)Total number of shares of Common Stock under the Predecessor Plans and Original 2020 Plan and Current 2020 Plan subject to outstanding full-value awards (including restricted stock units and performance-based restricted stock units based on maximum performance): 2,433,210 shares (approximately 4.6% of our outstanding Common Stock).
(2)Total number of shares of Common Stock under the Predecessor Plans and Original 2020 Plan and Current 2020 Plan subject to outstanding stock options: 3,933,639 shares (approximately 7.4% of our outstanding Common Stock) (outstanding stock options have a weighted average exercise price of $117.07 and a weighted average remaining term of 7.1 years). Such numbers exclusive of the 2023 CEO Performance Award granted in November 2023, are instead 3,433,639 shares (approximately 6.4% of our outstanding Common Stock) (outstanding stock options have a weighted average exercise price of $68.58 and a weighted average remaining term of 6.7 years).
(3)Total number of shares of Common Stock remaining in the share pool under the Current 2020 Plan: 473,116 (0.9% of our outstanding Common Stock).
(4)In summary, the total number of shares of Common Stock subject to outstanding awards (6,366,849 shares), plus the total number of shares of Common Stock remaining in the share pool under the Current 2020 Plan as described above (473,116 shares), represents a current overhang percentage of approximately 12.8% (in other words, the potential dilution of our stockholders represented by the Predecessor Plans and Original 2020 Plan and Current 2020 Plan).
Proposed shares of Common Stock available for awards under the Amended Plan:
(1)1,500,000 new shares (approximately 2.8% of our outstanding Common Stock, which percentage reflects the simple dilution of our stockholders that would occur if the Amended Plan is approved), subject to adjustment, including under the share counting rules of the Amended Plan.
(2)The total number of shares of Common Stock subject to outstanding awards as of October 31, 2023 but inclusive of the 2023 CEO Performance Award granted in November 2023 (6,366,849 shares), plus the total number of shares of Common Stock available for future awards under the Current 2020 Plan (473,116 shares), plus the proposed additional shares of Common Stock available for future awards under the Amended Plan (1,500,000shares), represent a total overhang of 8,339,965 shares 15.6% under the Amended Plan.
Based on the closing price on the Nasdaq Stock Market for our Common Stock on October 31, 2023 of $239.47 per share, the aggregate market value as of October 31, 2023 of the new 1,500,000 shares ofCommon Stock requested under the Amended Plan was approximately $359.2 million.
In fiscal years 2021, 2022, and 2023, we granted awards (including incentive stock options, non-statutory stock options, restricted stock units and performance-based restricted stock units) under the Original 2020 Plan and Current 2020 Plan, as applicable, covering an actual amount of 2,851,528 shares, 1,611,391 shares, and 1,761,307 shares (2,261,307 shares for fiscal year 2023 if inclusive of the 2023 CEO Performance Award granted in November 2023), respectively. Based on our basic weighted average shares of Common Stock outstanding for those three fiscal years of 51,157,273, 51,478,497, and 52,924,860, respectively, for the three-fiscal-year period 2021-2023, our average burn rate, not taking into account forfeitures, on this basis was 4.0% (4.3% if inclusive of the 2023 CEO Performance Award granted in November 2023). Our individual years’ burn rates on this basis were 5.6% for fiscal 2021, 3.1% for fiscal 2022 and 3.3% for fiscal 2023 (4.3% for fiscal 2023 if inclusive of the 2023 CEO Performance Award granted in November 2023).
Excluding the 2021 CEO Performance Award, which was issued on March 2, 2021, for the three-fiscal-year period 2021-2023, our average burn rate, not taking into account forfeitures, on this basis was 3.4%. Such percentage also excludes the 2023 CEO Performance Award granted in November 2023). Our individual years’ burn rates on this basis (excluding the 2021 CEO Performance Award granted in March 2021 and the 2023 CEO Performance Award granted in November 2023) were 3.6% for fiscal 2021, 3.1% for fiscal 2022 and 3.3% for fiscal 2023).
In determining the number of shares to request for approval under the Amended Plan, our management team worked with the Compensation Committee to evaluate a number of factors, including our recent and expected share usage and criteria expected to be utilized by institutional proxy advisory firms in evaluating our proposal for the Amended Plan.
If the Amended Plan is approved, we intend to utilize the shares authorized under the Amended Plan to continue our practice of incentivizing key individuals through equity grants. We currently anticipate that the shares requested in connection with the approval of the Amended Plan will last for about approximately one to two years, including based on our historic grant rates, new hiring, the approximate current share price, and our intention to adjust grant rates based upon recent increases in our stock price, but could last for a different period of time if actual practice does not match recent rates or our share price changes materially. As noted below, our Compensation Committee retains full discretion under the Amended Plan to determine the number and amount of awards to be granted under the Amended Plan, subject to the terms of the Amended Plan. Future benefits that may be received by participants under the Amended Plan are not determinable at this time.
New Plan Benefits
It is not possible to determine the specific amounts and types of awards that may be awarded in the future under the Amended Plan because the grant and actual settlement of awards under the Amended Plan are subject to the discretion of the plan administrator.
The following table shows, as to each named executive officer and the various indicated groups, the aggregate number of RSUs, stock options and performance-based RSUs (“PRSUs”) (at target) granted under the Original 2020 Plan and Current 2020 Plan from inception through October 31, 2023 but inclusive of the 2023 CEO Performance Award granted in November 2023.
Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan (as amended and restated) | | | | | | | | | | | | | | | | | | | | |
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Name | | Number of Shares Covered by Stock Options | | Number of Shares Covered by RSUs | | Number of Shares Covered by PRSUs (at target) |
Named Executive Officers: | | | | | | |
Charles Liang, President, Chief Executive Officer and Chairman of the Board | | 1,500,000(1)(2) | | | | — |
David Weigand, Senior Vice President, Chief Financial Officer and Chief Compliance Officer | | 62,500 | | 24,798 | | — |
Don Clegg, Senior Vice President, Worldwide Sales | | 11,130 | | 10,779 | | — |
George Kao, Senior Vice President, Operations | | 11,910 | | 7,860 | | — |
All current executive officers a group | | 1,585,540(2) | | 43,437 | | — |
All current non-employee directors as a group(3) | | 6,842 | | 109,192 | | — |
All current employee directors as a group | | 52,890(4) | | 30,259(4) | | — |
Each other person who received at least 5% of all awards granted | | — | | | | — |
All employees, excluding current executive officers | | 1,684,437 | | 4,263,341 | | — |
(1)Such stock options are subject to performance conditions. See “Executive Compensation – Compensation Discussion and Analysis (“CD&A”) – Fiscal Year 2023 CEO Compensation.”
(2)Inclusive of the 2023 CEO Performance Award granted in November 2023.
(3)Also includes grants made to each of Mr. Hwei-Ming (Fred) Tsai and Mr. Michael McAndrews who served as directors until May 28, 2021 and Ms. Saria Tseng who served as a director until May 18, 2022.
(4)Includes Ms. Sara Liu who is the spouse of Mr. Charles Liang, and Mr. Wally Liaw.
Stockholders had previously approved the Current 2020 Plan on May 18, 2022, shortly before the completion of the Company’s fiscal year 2022 which ended on June 30, 2022. The Company notes the following Performance Highlights to provide additional context with respect to this proposal to approve the Amended Plan and increase the number of shares of Common Stock available for award thereunder:
–Between fiscal year 2022 (“FY2022”) and fiscal year 2023 (“FY2023”), the Company’s revenues increased from $5,196.1 to $7,123.5 million, up 37.1%;
◦FY2023 represented record revenues for the Company;
–FY2023 gross margin was 18.0%, and improvement from 15.4% from FY2022;
–FY2023 net income was $640.0 million, an improvement of 124.4% from FY2022;
◦FY2023 represented record net income for the Company;
–Diluted net income per common share was $11.43, up 114.8% from FY2022;
◦FY2023 represented record diluted net income per common share for the Company;
–Between May 18, 2022 and October 31, 2023, the Company’s stock price increased 357.3% from $52.37 per share to $239.47 per share, respectively;
–Between May 18, 2022 and October 31, 2023, the Company’s market capitalization increased approximately 374.1%% from approximately $2.7 billion to $12.8 billion; and
–During the period from May 18, 2022 to October 31, 2023, our closing stock price reached a high of $353.29 on August 7, 2023.
In addition, the Company notes the following Grant Practice Highlights with respect to its equity grant practices between stockholder approval of the Current 2020 Plan on May 18, 2022 (which increased the number of shares of Common Stock available for awards under the Current 2020 Plan by 2,000,000 shares) and October 31, 2023 (but inclusive of the 2023 CEO Performance Award granted in November 2023) (the “Period”):
–An aggregate of 3,329,597 shares had been issued as awards (excluding forfeitures);
–The Company’s named executive officers (other than the CEO) received an aggregate of 49,617 shares as awards, representing approximately only 1.5% of the shares issued as awards during the Period;
–Approximately 20.2% of the shares issued as awards to the Company’s named executive officers (other than the CEO) were performance-based subject to satisfaction of performance conditions and vest in tranches over a period of time that spans multiple years; and
–An aggregate of 3,237 unique persons received awards. As of June 30, 2023, we employed 5,126 employees. Furthermore, approximately 57.8% of the aggregate shares issued as awards were made to persons who had job titles of general manager (lower level) or below. Such percentage exclusive of the 2023 Performance Award granted in November 2023 was 68.0%. These highlights demonstrate the breadth of distribution of equity incentives across the enterprise, and the belief that the Company’s success depends upon contributions at all levels. Equity awards are not limited to only executive level personnel.
The Company believes the Performance Highlights and Grant Practice Highlights help to demonstrate the effective implementation of the Company’s equity plan philosophy, as well as the appropriate and judicious use of equity incentives. Tremendous stockholder value has been created since the adoption of the Current 2020 Plan.
In addition, while not issued during the Period, we note the following with respect to the 2021 CEO Performance Award that was issued in March 2021 under the Original 2020 Plan and 2023 CEO Performance Award that was issued in November 2023 under the Current 2020 Plan:
•But for the issuance of the 2021 CEO Performance Award and 2023 CEO Performance Award, the Company would have had an additional 1,500,000 shares available for award under the Current 2020 Plan which, based upon our historic grant rates, new hiring and the approximate current share price, the Company estimates would have allowed the Company not to fully utilize the shares available for award under the Current 2020 Plan until approximately the second quarter of FY2025, which would be approximately an additional 3.7 quarters beyond when we believe the current shares available for award under the Current 2020 Plan will be fully utilized.
•As discussed further in this Proxy Statement under “Executive Compensation – Compensation Discussion and Analysis – Fiscal Year 2023 CEO Compensation,” the 2021 CEO Performance Award is a long-term performance based-option award that is earned based upon challenging revenue goals and stock price goals. The 2021 CEO Performance Award has an exercise price of $45.00 per share, which was 32% higher than the market price of our Common Stock on the date of the award ($34.08). The option is comprised of five tranches, each of which vests only if the market price of our Common Stock reaches various prices (ranging from $45.00 to $120.00 per share) and we achieve certain specified revenue goals. In connection with the 2021 CEO Performance Award, Mr. Liang’s base salary was reduced to $1.00 per year (or, if required by law, the statutory minimum wage applicable in San Jose, California) and Mr. Liang agreed that he would not be eligible for any increase in base salary, or any other cash compensation, until June 30, 2026. Mr. Liang must also remain as the Company’s CEO (or such other position with the Company as Mr. Liang and the Board may agree) at the time each goal is met in order for the corresponding tranche to vest, which helps ensure Mr. Liang’s active leadership of the Company over the long term.
•Since the grant of the 2021 CEO Performance Award, tremendous stockholder value has been created as the Company’s stock price has increased to $239.47 as of October 31, 2023, representing an approximately 602.7% increase from the stock price on the date of the 2021 CEO Performance Award.
•As discussed further in this Proxy Statement under “Executive Compensation – Subsequent Event – CEO Performance Award Granted in Fiscal Year 2024,” the 2023 CEO Performance Award granted in November 2023 is also a long-term performance based-option award that is earned based upon challenging revenue goals and stock price goals, and would continue to represent nearly 100% of Mr. Liang’s compensation. The 2021 CEO Performance Award and 2023 CEO Performance Award together currently represent nearly 100% of Mr. Liang’s compensation. The 2023 CEO Performance Award has an exercise price of $450.00 per share, which was 53% higher than the market price of our Common Stock on the date of the award ($293.87). The option is comprised of five tranches, each of which vests only if the market price of our Common Stock reaches various prices (ranging from $450.00 to $1,100.00 per share) and we achieve certain specified revenue goals (ranging from $13 billion to $21 billion). In connection with the 2023 CEO Performance Award, Mr. Liang’s base salary will continue to be $1.00 per year (or, if required by law, the statutory minimum wage applicable in San Jose, California) and Mr. Liang continues to agree that he would not be eligible for any increase in base salary, or any other cash compensation, until the earlier of (1) the date all of the tranches under the 2023 CEO Performance Award shall have vested and (2) March 31, 2029. Mr. Liang must also continue to remain as the Company’s CEO (or such other position with the Company as Mr. Liang and the Board may agree) at the time each goal is met in order for the corresponding tranche to vest, which helps continue to ensure Mr. Liang’s active leadership of the Company over the long term.
In connection with the previous adoption of the Current 2020 Plan, the Company had indicated in its April 2022 proxy statement that it anticipated that the 2,000,000 additional shares requested in connection with the approval of the Current 2020 Plan would last for approximately two years, based on historic grant rates, new hiring and the approximate current share price, but could last for a different period of time if actual practice does not match recent rates or the share price changed materially. Inclusive of forfeitures, the Company issued approximately 2,593,559 shares as awards under the Current 2020 Plan between the date stockholders approved the Current 2020 Plan (May 18, 2022) and October 31, 2023 (and exclusive of the 2023 CEO Performance Award granted in November 2023) by which time the Compensation Committee had substantially completed the grant of equity awards under the Current 2020 Plan related to FY2023 performance. In November 2023, 500,000 shares under the Current 2020 Plan were also utilized for the 2023 CEO Performance Award which vests only if the market price of our Common Stock reaches various prices (ranging from $450.00 to $1,100.00 per share) and we achieve certain specified revenue
goals (ranging from $13 billion to $21 billion). Tremendous stockholder value would be created in the event such goals under the 2023 CEO Performance Award were achieved. This period of approximately 1.45 years between May 18, 2022 and October 31, 2023 when 2,593,559 shares were issued as awards (exclusive of the 2023 CEO Performance Award granted in November 2023) was less than the anticipated approximately two-year period indicated in the April 2022 proxy statement, but (as noted in such proxy statement) various factors could have, and in actual practice did, affect the period of time anticipated. Between June 30, 2022 and June 30, 2023, the number of full-time and part-time employees increased approximately 11.3% from 4,607 employees to 5,126 employees, respectively. The contributions from such 11.3% increase in the number of full-time employees, together with the contributions of our previously hired employees, helped to support the Performance Highlights discussed above, which included the 37.1% increase in revenues between FY2022 and FY2023, the 124.4% increase in net income between FY2022 and FY2023, and the 374.1% increase in the Company’s market capitalization between May 18, 2022 and October 31, 2023.
In summary, we reiterate that we believe our future success depends in part on our ability to attract, motivate and retain high quality employees and directors, and that the ability to provide equity-based and incentive-based awards under the Amended Plan is critical to achieving this success. We believe that these awards which have been granted under the Current 2020 Plan have helped keep employees focused on their individual contributions to the Company’s long-term performance, and contributed to the achievement of the Performance Highlights. Stockholders have realized tremendous stockholder value as a result of the Performance Highlights and Grant Practice Highlights described above. We would be at a severe competitive disadvantage if we could not use stock-based awards to continue to recruit and compensate our employees and directors. An inability to retain and motivate our high-quality employees and directors presents risks that we may not be able to implement our business strategy and could seriously harm our business, which could adversely affect stockholder value.
Summary of Other Material Terms of the Amended Plan
Administration
The Amended Plan will generally be administered by the Compensation Committee (or its successor), or any other committee of the Board designated by the Board to administer the Amended Plan; provided, however, that notwithstanding anything in the Amended Plan to the contrary, the Board may grant awards under the Amended Plan to non-employee directors and administer the Amended Plan with respect to such awards. References to the “Committee” in this proposal generally refer to the Compensation Committee or such other committee designated by the Board, or the Board, as applicable. The Committee may from time to time delegate all or any part of its authority under the Amended Plan to a subcommittee. Any interpretation, construction and determination by the Committee of any provision of the Amended Plan, or of any agreement, notification or document evidencing the grant of awards under the Amended Plan, will be final and conclusive. To the extent permitted by applicable law, the Committee may delegate to one or more of its members or to one or more officers, or to one or more agents or advisors, such administrative duties or powers as it deems advisable, and the Committee, the subcommittee, or any other such person to whom duties or powers have been delegated, may employ persons to render advice with respect to a responsibility of the Committee, subcommittee, or other such person. In addition, to the extent permitted by applicable law and in compliance with legal requirements, the Committee may by resolution, subject to certain restrictions set forth in the Amended Plan, authorize one or more officers of the Company to authorize the granting or sale of awards under the Amended Plan on the same basis as the Committee. The Committee may not, however, delegate such responsibilities to officers for awards granted to non-employee directors or certain officers who are subject to the reporting requirements of Section 16 of the Exchange Act. The Committee is authorized to take appropriate action under the Amended Plan subject to the express limitations contained in the Amended Plan.
Eligibility
Any person who is selected by the Committee to receive benefits under the Amended Plan and who is at that time an officer or other employee of the Company or any of its subsidiaries (including a person who has agreed to commence serving in such capacity within 90 days of the date of grant) is eligible to participate in the Amended Plan. In addition, non-employee directors of the Company and certain persons (including consultants) who provide services to the Company or any of its subsidiaries that are equivalent to those typically provided by an employee (provided that such persons satisfy the Form S-8 definition of “employee”), may also be selected by the Committee to participate in the Amended Plan. As of October 31, 2023, there were approximately 5,206 employees of the Company and its subsidiaries, 96 consultants to the Company and its subsidiaries and 6 non-employee directors of the Company, which persons would be eligible to participate in the Amended Plan. The basis for participation in the Amended Plan by eligible persons is the selection of such persons for participation by the Committee (or its proper delegate) in its discretion.
Shares available for awards under the Amended Plan
Subject to adjustment as described in the Amended Plan and the Amended Plan share counting rules, the number of shares of Common Stock available under the Amended Plan for awards of:
•stock options or SARs;
•restricted stock;
•RSUs;
•performance shares or performance units;
•other stock-based awards under the Amended Plan; or
•dividend equivalents;
will not exceed, in the aggregate, 8,500,000 shares of Common Stock (consisting of 5,000,000 shares that were originally approved by stockholders at the June 5, 2020 annual meeting of stockholders, 2,000,000 additional shares that were approved by stockholders at the May 18, 2022 annual meeting of stockholders, and 1,500,000 shares that will be newly provided for under the Amended Plan), plus, as of June 5, 2020, the total number of shares of Common Stock remaining available for awards under the 2016 Equity Incentive Plan as of the effective date of the Original 2020 Plan (zero), plus Common Stock that becomes available under the Amended Plan as a result of forfeiture, cancellation, expiration, cash settlement or less-than-maximum earning of Amended Plan awards and Current 2020 Plan awards (or, as described, awards under the Predecessor Plans), after June 5, 2020.
Share counting
Generally, the aggregate number of shares of Common Stock available under the Amended Plan will be reduced by one share of Common Stock for every one share of Common Stock subject to an award granted under the Amended Plan.
Types of awards under the Amended Plan
Pursuant to the Amended Plan, the Company may grant cash awards and stock options (including stock options intended to be “incentive stock options” as defined in Section 422 of the Code, SARs, restricted stock, RSUs, performance shares, performance units, and certain other awards based on or related to our Common Stock.
Generally, each grant of an award under the Amended Plan will be evidenced by an award agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee (an “Evidence of Award”), which will contain such terms and provisions as the Committee may determine, consistent with the Amended Plan. A brief description of the types of awards which may be granted under the Amended Plan is set forth below.
Stock options
A stock option is a right to purchase Common Stock upon exercise of the stock option. Stock options granted to an employee under the Amended Plan may consist of either an incentive stock option, a non-qualified stock option that is not intended to be an “incentive stock option” under Section 422 of the Code, or a combination of both. Incentive stock options may only be granted to employees of the Company or certain of our related corporations. Except with respect to awards issued in substitution for, in conversion of, or in connection with an assumption of stock options held by awardees of an entity engaging in a corporate acquisition or merger with us or any of our subsidiaries, stock options must have an exercise price per share of Common Stock that is not less than the fair market value of a share of Common Stock on the date of grant. The term of a stock option may not extend more than 10 years from the date of grant. The Committee may provide in an Evidence of Award for the automatic exercise of a stock option.
Each grant of a stock option will specify the applicable terms of the stock option, including the number of shares of Common Stock subject to the stock option and the required period or periods of the participant’s continuous service, if any, before any stock option or portion of a stock option will become exercisable. Stock options may provide for continued vesting or the earlier exercise of the stock options, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control.
Any grant of stock options may specify management objectives regarding the vesting of the stock options. Each grant will specify whether the consideration to be paid in satisfaction of the exercise price will be payable: (1) in cash, by check acceptable to the Company, or by wire transfer of immediately available funds; (2) by the actual or constructive transfer to the Company of Common Stock owned by the participant with a value at the time of exercise that is equal to the total exercise price; (3) subject to any conditions or limitations established by the Committee, by a net exercise arrangement pursuant to which the Company will withhold Common Stock otherwise issuable upon exercise of a stock option; (4) by a combination of the foregoing methods; or (5) by such other methods as may be approved by the Committee. To the extent permitted by law, any grant may provide for deferred payment of the exercise price from the proceeds of a sale through a bank or broker of some or all of the shares to which the exercise relates. Stock options granted under the Amended Plan may not provide for dividends or dividend equivalents.
SARs
The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of SARs. A SAR is a right to receive from us an amount equal to 100%, or such lesser percentage as the Committee may determine, of the spread between the base price and the fair market value of a share of Common Stock on the date of exercise.
Each grant of SARs will specify the period or periods of continuous service, if any, by the participant with the Company or any subsidiary that is necessary before the SARs or installments of such SARs will become exercisable. SARs may provide for continued vesting or earlier exercise, including in the case of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. Any grant of SARs may specify management objectives regarding the vesting of such SARs. A SAR may be paid in cash, Common Stock or any combination of the two.
Except with respect to awards issued in substitution for, in conversion of, or in connection with an assumption of SARs held by awardees of an entity engaging in a corporate acquisition or merger with us or any of our subsidiaries, the base price of a SAR may not be less than the fair market value of a share of Common Stock on the date of grant. The term of a SAR may not extend more than 10 years from the date of grant. The Committee may provide in an Evidence of Award for the automatic exercise of a SAR. SARs granted under the Amended Plan may not provide for dividends or dividend equivalents.
Restricted Stock
Restricted stock constitutes an immediate transfer of the ownership of Common Stock to the participant in consideration of the performance of services, entitling such participant to voting, dividend and other ownership rights (subject in particular to certain dividend provisions in the Amended Plan, as described below), subject to the substantial risk of forfeiture and restrictions on transfer determined by the Committee for a period of time determined by the Committee or until certain management objectives specified by the Committee are achieved. Each such grant or sale of restricted stock may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per share of Common Stock on the date of grant.
Any grant of restricted stock may specify management objectives regarding the vesting of the restricted stock. Any grant of restricted stock may require that any and all dividends or other distributions paid on restricted stock that remains subject to a substantial risk of forfeiture be automatically deferred and/or reinvested in additional restricted stock, which will be subject to the same restrictions as the underlying restricted stock, but any such dividends or other distributions on restricted stock must be deferred until, and paid contingent upon, the vesting of such restricted stock. Restricted shares may provide for continued vesting or the earlier vesting of such restricted stock, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. Each grant of restricted stock will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to the Amended Plan and will contain such terms and provisions, consistent with the Amended Plan, as the Committee may approve.
RSUs
RSUs awarded under the Amended Plan constitute an agreement by the Company to deliver Common Stock, cash, or a combination of the two, to the participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include achievement regarding management objectives) during the restriction period as the Committee may specify. Each grant or sale of RSUs may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per share of Common Stock on the date of grant.
RSUs may provide for continued vesting or the earlier lapse or other modification of the restriction period, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. During the restriction period applicable to RSUs, the participant will have no right to transfer any rights under the award and will have no rights of ownership in the Common Stock deliverable upon payment of the RSUs and no right to vote them. Rights to dividend equivalents may be extended to and made part of any RSU award at the discretion of the Committee, on a deferred and contingent basis, based upon the vesting of such RSUs. Each grant or sale of RSUs will specify the time and manner of payment of the RSUs that have been earned. An RSU may be paid in cash, Common Stock or any combination of the two.
Performance shares, performance units and cash incentive awards
Performance shares, performance units and cash incentive awards may also be granted to participants under the Amended Plan. A performance share is a bookkeeping entry that records the equivalent of one share of Common Stock, and a performance unit is a bookkeeping entry that records a unit equivalent to $1.00 or such other value as determined by the Committee. Each grant will specify the number or amount of performance shares or performance units, or the amount payable with respect to a cash incentive award being awarded, which number or amount may be subject to adjustment to reflect changes in compensation or other factors.
Each grant of a cash incentive award, performance shares or performance units will specify management objectives regarding the earning of the award. Each grant will specify the time and manner of payment of performance shares, performance units or a cash incentive award that have been earned.
At the discretion of the Committee, any grant of performance shares or performance units may provide for the payment of dividend equivalents in cash or in additional Common Stock, which dividend equivalents will be subject to deferral and payment on a contingent basis based on the participant’s earning and vesting of the performance shares or performance units, as applicable, with respect to which such dividend equivalents are paid.
The performance period with respect to each grant of performance shares or performance units or cash incentive award will be a period of time determined by the Committee and within which the management objectives relating to such award are to be achieved. The performance period may be subject to continued vesting or earlier lapse or modification, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control.
Other awards
Subject to applicable law and applicable share limits under the Amended Plan, the Committee may grant to any participant Common Stock or such other awards (“Other Awards”) that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Common Stock or factors that may influence the value of such Common Stock, including, without limitation, convertible or exchangeable debt securities; other rights convertible or exchangeable into Common Stock; purchase rights for Common Stock; awards with value and payment contingent upon performance of the Company or specified subsidiaries, affiliates or other business units or any other factors designated by the Committee; and awards valued by reference to the book value of the Common Stock or the value of securities of, or the performance of, the subsidiaries, affiliates or other business units of the Company. The terms and conditions of any such awards will be determined by the Committee. Common Stock delivered under such an award in the nature of a purchase right granted under the Amended Plan will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Common Stock, other awards, notes or other property, as the Committee determines.
In addition, the Committee may grant cash awards, as an element of or supplement to any other awards granted under the Amended Plan. The Committee may also authorize the grant of Common Stock as a bonus or may authorize the grant of Other Awards in lieu of obligations of the Company or a subsidiary to pay cash or deliver other property under the Amended Plan or under other plans or compensatory arrangements, subject to terms determined by the Committee in a manner that complies with Section 409A of the Code.
Other Awards may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award, including in the event of the retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. The Committee may provide for the payment of dividends or dividend equivalents on Other Awards on a deferred and contingent basis, in cash or in additional Common Stock, based upon the earning and vesting of such awards.
Change in control
The Amended Plan includes a definition of “change in control.” In general, except as may be otherwise prescribed by the Committee in an Evidence of Award, a change in control shall be deemed to have occurred upon the occurrence of any of the following events (subject to certain exceptions and limitations and as further described in the Amended Plan): (1) any individual, entity or group is or becomes the beneficial owner of 30% or more of the then-outstanding Common Stock or the combined voting power of the then-outstanding Common Stock or voting shares of the Company (subject to certain exceptions); (2) a majority of the Board ceases to be comprised of incumbent directors; (3) a consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company, as described in the Amended Plan (subject to certain exceptions); or (4) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Management objectives
The Amended Plan generally provides that any of the awards set forth above may be granted subject to the achievement of specified management objectives. Management objectives are defined as the measurable performance objective or objectives established pursuant to the Amended Plan for participants who have received grants of performance shares, performance units or cash incentive awards or, when so determined by the Committee, stock options, SARs, restricted stock, RSUs, dividend equivalents or Other Awards.
Additionally, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the management objectives unsuitable, the Committee may in its discretion modify such management objectives or the goals or actual levels of achievement, in whole or in part, as the Committee deems appropriate and equitable.
Transferability of awards
Except as otherwise provided by the Committee, and subject to the terms of the Amended Plan with respect to Section 409A of the Code, no stock option, SAR, restricted stock, RSU, performance share, performance unit, cash incentive award, Other Award or dividend equivalents paid with respect to awards made under the Amended Plan will be transferrable by a participant except by will or the laws of descent and distribution.In no event will any such award granted under the Amended Plan be transferred for value. Except as otherwise determined by the Committee, stock options and SARs will be exercisable during the participant’s lifetime only by him or her or, in the event of the participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the participant in a fiduciary capacity under state law or court supervision.
The Committee may specify on the grant date that all or part of certain types of the Common Stock that is subject to awards under the Amended Plan will be subject to further restrictions on transfer.
Adjustments
The Committee will make or provide for such adjustments in: (1) the number and kind of shares of Common Stock covered by outstanding stock options, SARs, restricted stock, RSUs, performance shares and performance units granted under the Amended Plan; (2) if applicable, the number and kind of shares of Common Stock covered by Other Awards granted pursuant to the Amended Plan; (3) the exercise price or base price provided in outstanding stock options and SARs, respectively; (4) cash incentive awards; and (5) other award terms, as the Committee in its sole discretion, exercised in good faith, determines to be equitably required in order to prevent dilution or enlargement of the rights of participants that otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company; (b) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities; or (c) any other corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, or in the event of a change in control of the Company, the Committee may provide in substitution for any or all outstanding awards under the Amended Plan such alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the circumstances and will require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each stock option or SAR with an exercise price or base price, respectively, greater than the consideration offered in connection with any
such transaction or event or change in control of the Company, the Committee may in its discretion elect to cancel such stock option or SAR without any payment to the person holding such stock option or SAR. The Committee will make or provide for such adjustments to the numbers of shares of Common Stock available under the Amended Plan and the share limits of the Amended Plan as the Committee in its sole discretion may in good faith determine to be appropriate to reflect such transaction or event. Any adjustment to the limit on the number of shares of Common Stock that may be issued upon exercise of incentive stock options, however, will be made only if and to the extent such adjustment would not cause any stock option intended to qualify as an incentive stock option to fail to so qualify.
Prohibition on repricing
Except in connection with certain corporate transactions or changes in the capital structure of the Company or in connection with a change in control, the terms of outstanding awards may not be amended to (1) reduce the exercise price or base price of outstanding stock options or SARs, respectively, or (2) cancel outstanding “underwater” stock options or SARs in exchange for cash, other awards or stock options or SARs with an exercise price or base price, as applicable, that is less than the exercise price or base price of the original stock options or SARs, as applicable, without stockholder approval. The Amended Plan specifically provides that this provision is intended to prohibit the repricing of “underwater” stock options and SARs and that it may not be amended without approval by our stockholders.
Detrimental activity and recapture
Awards granted under the Amended Plan are subject to the terms and conditions of the Company’s clawback provisions, policy or policies as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Common Stock at any point may be traded).We refer to all of these provisions and policies as the Compensation Recovery Policy.Applicable sections of any award documentation to which the Amended Plan is applicable or any related documents shall be interpreted consistently with (or deemed superseded by and/or subject to, as applicable) the terms and conditions of the Compensation Recovery Policy.Further, by accepting any award under the Amended Plan, each participant agrees to fully cooperate with and assist the Company in connection with any of the Participant’s obligations to the Company pursuant to the Compensation Recovery Policy, and agrees that the Company may enforce its rights under the Compensation Recovery Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Compensation Recovery Policy after its effective date.This cooperation and assistance will include executing, completing and submitting any documentation necessary to facilitate the recovery or recoupment by the Company from a participant of compensation or other amounts, including from a participants’ accounts or from any other compensation, to the extent permissible under Section 409A of the Code. Otherwise, any Evidence of Award (or part) may provide for the cancellation or forfeiture of an award or forfeiture and repayment to us of any gain related to an award, or other provisions intended to have a similar effect, including upon such terms and conditions as may be determined by the Board or the Committee from time to time in accordance with the Compensation Recovery Policy, or any applicable clawback laws, rules, regulations or requirements.
Accommodations for participants of different nationalities
In order to facilitate the making of any grant or combination of grants under the Amended Plan, the Committee may provide for such special terms for awards to participants as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom given that participants are expected to be nationals of both the United States and other countries, or to be employed by us or one of our subsidiaries both within and outside of the United States. The Committee may approve such supplements to, or amendments, restatements or alternative versions of, the Amended Plan (including sub-plans) (to be considered part of the Amended Plan) as it may consider necessary or appropriate for such purposes, provided that no such special terms, supplements, amendments or restatements will include any provisions that are inconsistent with the terms of the Amended Plan as then in effect unless the Amended Plan could have been amended to eliminate such inconsistency without further approval by our stockholders.
Withholding
To the extent the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by a participant or other person under the Amended Plan, and the amounts available to us for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld, which arrangements, in the discretion of the Committee, may include relinquishment of a portion of such benefit. If a participant’s benefit is to be received in the form of Common Stock, and such participant fails to make arrangements for the payment of taxes or other amounts, then, unless otherwise determined by the Committee, we will withhold Common Stock having a value equal to the amount required to be withheld. When a participant is required to pay the Company an amount required to be withheld under applicable income, employment, tax or other laws, the participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the shares required to be delivered to the participant, Common Stock having a value equal to the amount required to be withheld or by delivering to us other shares of Common Stock held by such participant. The Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value of such Common Stock on the date the benefit is to be included in the participant’s income.In no event will the fair market value of the Common Stock to be withheld and delivered pursuant to the Amended Plan exceed the minimum amount required to be withheld, unless (1) an additional amount can be withheld and not result in adverse accounting consequences, (2) such additional withholding amount is authorized by the Committee, and (3) the total amount withheld does not exceed the participant’s estimated tax obligations attributable to the applicable transaction. Participants will also make such arrangements as the Company may require for the payment of any withholding tax or other obligation that may arise in connection with the disposition of Common Stock acquired upon the exercise of stock options.
No right to continued employment
The Amended Plan does not confer upon any participant any right with respect to continuance of employment or service with the Company or any of its subsidiaries.
Effective date of the Amended Plan
The Original 2020 Plan became effective on June 5, 2020 and the Current 2020 Plan became effective on May 18, 2022. The Amended Plan will become effective on the date it is approved by the Company’s stockholders.
Amendment and termination of the Amended Plan
The Board generally may amend the Amended Plan from time to time in whole or in part. If any amendment, however, for purposes of applicable stock exchange rules (and except as permitted under the adjustment provisions of the Amended Plan) (1) would materially increase the benefits accruing to participants under the Amended Plan, (2) would materially increase the number of securities which may be issued under the Amended Plan, (3) would materially modify the requirements for participation in the Amended Plan or (4) must otherwise be approved by our stockholders in order to comply with applicable law or the rules of the Nasdaq Stock Market, or, if the Common Stock is not traded on the Nasdaq Stock Market, the principal national securities exchange upon which the Common Stock is traded or quoted, all as determined by the Board, then such amendment will be subject to stockholder approval and will not be effective unless and until such approval has been obtained.
Further, subject to the Amended Plan’s prohibition on repricing, the Committee generally may amend the terms of any award prospectively or retroactively. Except in the case of certain adjustments permitted under the Amended Plan, no such amendment may be made that would materially impair the rights of any participant without his or her consent. If permitted by Section 409A of the Code and subject to certain other limitations set forth in the Amended Plan, including in the case of termination of employment or service, or in the case of unforeseeable emergency or other circumstances or in the event of a change in control, the Committee may provide for continued vesting or accelerate the vesting of certain awards granted under the Amended Plan or waive any other limitation or requirement under any such award.
The Board may, in its discretion, terminate the Amended Plan at any time. Termination of the Amended Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the date of termination. No grant will be made under the Amended Plan on or after the tenth anniversary of the effective date of the Amended Plan, but all grants made prior to such date will continue in effect thereafter subject to their terms and the terms of the Amended Plan.
Allowances for conversion awards and assumed plans
Common Stock issued or transferred under awards granted under the Amended Plan in substitution for or conversion of, or in connection with an assumption of, stock options, SARs, restricted stock, RSUs, or other stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with us or any of our subsidiaries will not count against (or be added to) the aggregate share limit or other Amended Plan limits described above. Additionally, shares available under certain plans that we or our subsidiaries may assume in connection with corporate transactions from another entity may be available for certain awards under the Amended Plan, under circumstances further described in the Amended Plan, but will not count against the aggregate share limit or other Amended Plan limits described above.
U.S. federal income tax consequences
The following is a brief summary of certain of the federal income tax consequences of certain transactions under the Amended Plan based on United States federal income tax laws in effect. This summary, which is presented for the information of stockholders considering how to vote on this proposal and not for Amended Plan participants, is not intended to be complete, does not describe United States federal taxes other than income taxes (such as Medicare and social security taxes), and does not describe tax consequences arising from state or local taxes in the United States or from taxes in any jurisdiction outside the United States.
Tax consequences to participants
Restricted shares: The recipient of restricted stock generally will be subject to tax at ordinary income rates on the fair market value of the restricted stock (reduced by any amount paid by the recipient for such restricted stock) at such time as the restricted stock are no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (“Restrictions”). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that are subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the recipient.
Performance shares, performance units and cash incentive awards: No income generally will be recognized upon the grant of performance shares, performance units or cash incentive awards. Upon payment in respect of the earn-out of performance shares, performance units or cash incentive awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted Common Stock received.
Nonqualified stock options: In general:
(1)no income will be recognized by an optionee at the time a non-qualified stock option is granted;
(2)at the time of exercise of a non-qualified stock option, ordinary income will be recognized by the optionee in an amount equal to the difference between the option price paid for the shares and the fair market value of the shares, if unrestricted, on the date of exercise; and
(3)at the time of sale of shares acquired pursuant to the exercise of a non-qualified stock option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Incentive stock options:No income generally will be recognized by an optionee upon the grant or exercise of an “incentive stock option” as defined in Section 422 of the Code. If Common Stock is issued to the optionee pursuant to the exercise of an incentive stock option, and if no disqualifying disposition of such shares is made by such optionee within two years after the date of grant or within one year after the transfer of such shares to the optionee, then upon sale of such shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss.
If Common Stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the
disposition of such shares if a sale or exchange) over the exercise price paid for such shares. Any further gain (or loss) realized by the participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.
SARs:No income will be recognized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any unrestricted shares of Common Stock received on the exercise.
RSUs:No income generally will be recognized upon the award of RSUs. The recipient of an RSU award generally will be subject to tax at ordinary income rates on the fair market value of unrestricted shares of Common Stock on the date that such shares are transferred to the participant under the award (reduced by any amount paid by the participant for such RSUs), and the capital gains/loss holding period for such shares will also commence on such date.
Tax consequences to the Company or its subsidiaries
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction from any applicable federal income tax, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1.0 million limitation on certain executive compensation under Section 162(m) of the Code.
Registration With the SEC
We intend to file a Registration Statement on Form S-8 relating to the issuance of additional shares of Common Stock under the Amended Plan with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, as soon as practicable after approval of the Amended Plan by our stockholders.
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| THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 4 TO APPROVE THE FURTHER AMENDMENT AND RESTATEMENT OF THE SUPER MICRO COMPUTER, INC. 2020 EQUITY AND INCENTIVE COMPENSATION PLAN. |
AUDIT COMMITTEE REPORT
Review of Audited Financial Statements
The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ended June 30, 20162023 with both our management and our independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (PCAOB). Management has represented to the Audit Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
The Audit Committee also has received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding independent registered public accounting firm'sfirm’s communications with the Audit Committee concerning independence, and has discussed with independent registered public accounting firm its independence from Super Micro.Supermicro. The Audit Committee has also received written material addressing the independent registered public accounting firm'sfirm’s internal quality control procedures and other matters, as required by applicable NASDAQ listing standards.requirements of The Nasdaq Stock Market. The Audit Committee has considered the effect of non-audit fees on the independence of the independent registered public accounting firm and has concluded that such non-audit services are compatible with the independence of the independent public accounting firm.
Based on these reviews and discussions, the Audit Committee recommended to the board of directorsBoard that the financial statements be included in the Company’s Annual Report on Form 10-K for filing with the SEC.
This report has been furnished by the members of the Audit Committee.Committee at the time the Annual Report was approved for filing with the SEC.
Laura Black,
Tally Liu, Chair
Michael S. McAndrewsDaniel Fairfax
Hwei-Ming (Fred) TsaiFred Chan
ANNUAL REPORT TO STOCKHOLDERS ON FORM 10-K
Our 2016 Annual Report, to Stockholders, including financial statements for the year ended June 30, 2016,2023, and this Proxy Statement are available on our website at http:https://ir.supermicro.com/financials.cfm..
QUESTIONS AND ANSWERS
Why am I receiving these proxy materials?
Our Board has mailed these proxy materials to you in connection with the solicitation of proxies for use at the Annual Meeting to be held on Monday, January 22, 2024 at 2:00 p.m. Pacific time, and at any adjournment or postponement thereof, for the purpose of considering and acting upon the matters set forth in this Proxy Statement. These proxy materials are being made available or distributed to you on or about December 8, 2023. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business (Eastern Time) on November 27, 2023 (the “record date”) will be entitled to vote at the Annual Meeting. At the close of business on the record date, we had 53,538,116 shares of our common stock outstanding, all of which are entitled to vote with respect to all matters to be acted upon at the Annual Meeting. Each share of common stock is entitled to one vote on each matter presented.
What should I do if I receive more than one set of proxy materials?
You may receive more than one set of proxy materials, including multiple copies of proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card or voting instruction card that you receive to ensure that all your shares are voted.
How do I participate in the Annual Meeting?
The Annual Meeting will be a completely virtual meeting. There will be no physical meeting location. The Annual Meeting will only be conducted via live webcast.
Instructions on how to participate in the Annual Meeting and demonstrate proof of stock ownership are posted at www.proxyvote.com.
You will be able to access, participate in, and vote at the Annual Meeting at www.virtualshareholdermeeting.com/SMCI2024 by using the 16-digit control number included on the proxy card and voting instruction form. Stockholders admitted to the virtual meeting using their control number may submit questions, vote or view our list of stockholders during the Annual Meeting by following the instructions that will be available on the meeting website. Stockholders may log into the meeting platform beginning at 1:45 p.m. Pacific Time on January 22, 2024. To submit a question during the meeting, visit www.virtualshareholdermeeting.com/SMCI2024, enter your 16-digit control number, type your question into the “Ask a Question” field and click “Submit.” Questions pertinent to meeting matters will be answered during the Annual Meeting, subject to time constraints. The Annual Meeting is not to be used as a forum to present personal matters, or general economic, political or other views that are not directly related to the business of the Company and the matters properly before the Annual Meeting, and therefore questions on such matters will not be answered. Any questions pertinent to meeting matters that cannot be answered during the Annual Meeting due to time constraints will be posted online and answered at https://ir.supermicro.com. The questions and answers will be available as soon as practical after the Annual Meeting and will remain available until one week after posting.
You may begin to log into the meeting platform at www.virtualshareholdermeeting.com/SMCI2024 beginning at 1:45 p.m. Pacific Time on January 22, 2024. The meeting will begin promptly at 2:00 p.m. Pacific Time on January 22, 2024.
If you encounter any technical difficulties with the virtual meeting platform on the meeting day, please utilize the technical support number listed in the login page for the virtual meeting, available 15 minutes before the meeting.
How do I vote my shares?
If you are a stockholder of record as of the record date, you can give a proxy to be voted at the Annual Meeting in any of the following ways:
•Over the telephone by calling a toll-free number;
•Electronically, using the Internet; or
•By completing, signing and mailing the proxy card.
The telephone and Internet voting procedures have been set up for your convenience. We encourage you to save corporate expense by submitting your vote by telephone or Internet. The procedures have been designed to authenticate your identity, to allow you to give voting instructions, and to confirm that those instructions have been recorded properly. If you are a stockholder of record and you would like to submit your proxy by telephone or Internet, please refer to the specific instructions provided on the enclosed proxy card. If you wish to submit your proxy by mail, please return your signed proxy card to us before the Annual Meeting.
To vote at the Annual Meeting, attend the Annual Meeting online and follow the instructions posted at www.virtualshareholdermeeting.com/SMCI2024.
If you hold your shares in “street name,” you must vote your shares in the manner prescribed by your broker or other nominee. Your broker or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker or nominee how to vote your shares. Telephone and Internet voting also is encouraged for stockholders who hold their shares in street name.
Can I vote my shares in person (virtually) at the Annual Meeting?
If you are a stockholder of record, you may vote your shares at the Annual Meeting by following the instructions posted at www.virtualshareholdermeeting.com/SMCI2024. Even if you currently plan to virtually attend the Annual Meeting, we recommend that you also submit your vote as described in these proxy materials so that your vote will be counted if you later decide not to attend the Annual Meeting. If you attend the Annual Meeting, any votes you cast at the Annual Meeting will supersede your proxy.
If you are a street name holder, you may vote your shares at the Annual Meeting only if you obtain a “legal proxy” from your broker, bank, trust or other nominee that holds your shares giving you the right to vote the shares at the Annual Meeting.
What is the difference between a stockholder of record and a “street name” holder?
If your shares are registered directly in your name with our transfer agent, Computershare, you are considered the stockholder of record with respect to those shares and the proxy materials have been sent directly to you. As the stockholder of record, you have the right to grant your voting proxy directly to us or to a third party, or to vote at the Annual Meeting.
If your shares are held in a stock brokerage account or by a bank, trust or other nominee, then the broker, bank, trust or other nominee is considered to be the stockholder of record with respect to those shares and the proxy materials have been forwarded to you by your bank, trust or other nominee. However, you still are considered the beneficial owner of those shares, and your shares are said to be held in “street name.” As a beneficial owner, you have the right to direct your bank, trust or other nominee how to vote your shares. You are also invited to attend the Annual Meeting. However, because a beneficial owner is not the stockholder of record, you may not vote your shares at the Annual Meeting unless you obtain a “legal proxy” from the bank, trust or other nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting.
How many shares must be present or represented by proxy to conduct business at the Annual Meeting?
The presence at the meeting, in person (virtually) or by proxy, of the holders of a majority of the shares of common stock outstanding and entitled to vote on the record date will constitute a quorum for the transaction of business at the meeting. Shares that are voted “FOR,” or “AGAINST” a proposal or marked “ABSTAIN” are treated as being present at the Annual Meeting for purposes of establishing a quorum and are also treated as shares entitled to vote at the Annual Meeting with respect to such proposal. “Broker non-votes” are also included for purposes of determining whether a quorum of shares is present at a meeting. A “broker non-vote” occurs when a nominee holding shares for the beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner.
What proposals will be voted on at the Annual Meeting?
The proposals scheduled to be voted on at the Annual Meeting are:
1. The election of three Class II directors to hold office until the annual meeting of stockholders following fiscal year 2026 or until their successors are duly elected and qualified.
2. The approval of, on a non-binding advisory basis, the compensation of our named executive officers (known as “Say on Pay”).
3. The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for our fiscal year ending June 30, 2024.
4. The approval of the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan.
What vote is required for the approval each of the proposals?
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Proposal | | Vote Required | | Broker Discretionary Voting Allowed |
Proposal No. 1 — Election of Class II Directors | | Plurality of the votes cast by the holders of shares of common stock present or represented by proxy and voting at the Annual Meeting. | | No |
Proposal No. 2 — Say on Pay Advisory Vote | | Affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote. | | No |
Proposal No. 3 — Ratification of Appointment of Independent Registered Public Accounting Firm | | Affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote. | | Yes |
Proposal No. 4 — Approval of the Further Amendment and Restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan | | Affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote. | | No |
How are votes counted?
All valid proxies received before the Annual Meeting, including proxies granted over the Internet or by telephone submitted prior to midnight the night before the Annual Meeting, will be exercised. All shares represented by a proxy will be voted, and where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted FOR each nominee and FOR each other proposal.
You may either vote “FOR” or “WITHHOLD” authority to vote for each Class II director nominee for the Board (Proposal No. 1). You may vote “FOR,” “AGAINST” or “ABSTAIN” on the advisory vote on named executive officer compensation (Proposal No. 2), on the proposal to ratify the appointment of our independent registered public accounting firm (Proposal No.
3), and on the proposal to approve the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan (Proposal No. 4).
If you submit your proxy but abstain from voting or withhold authority to vote on one or more matters, your shares will be counted as present at the Annual Meeting for the purpose of determining a quorum. Your shares also will be counted as present at the Annual Meeting for the purpose of calculating the vote on the particular matter with respect to which you abstained from voting or withheld authority to vote.
Shares not present at the Annual Meeting and shares voted “WITHHOLD” will have no effect on the election of Class II directors. If you abstain from voting on a proposal other than the election of Class II directors, your abstention has the same effect as a vote against that proposal.
If you hold your shares in street name and do not provide voting instructions to your broker or other nominee, your shares will be considered to be “broker non-votes” and will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. Shares that constitute broker non-votes will be counted as present at the Annual Meeting for the purpose of determining a quorum, but will only be considered entitled to vote on the proposal to ratify the selection of our independent public accounting firm.
Your broker or other nominee has discretionary authority to vote your shares on the ratification of our independent registered public accounting firm, even if your broker or other nominee does not receive voting instructions from you. However, your broker or other nominee does not have discretionary authority to vote your shares on non-routine proposals, such as the election of Class II directors, the advisory vote on executive compensation, and the vote to approve the further amendment and restatement of the Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan, and may not vote on these proposals if you do not provide specific voting instructions. Accordingly, if you want your vote to count in the non-routine proposals, we encourage you to vote promptly, even if you plan to attend (virtually) the Annual Meeting.
Can I change my vote after I have mailed in my proxy card?
If you are the stockholder of record, you may revoke your proxy by signing a later-dated proxy card and submitting it so that it is received prior to the Annual Meeting in accordance with the instructions included in the proxy card, or by attending the Annual Meeting and voting your shares in person (virtually). Attending the Annual Meeting without voting in person (virtually) will not revoke your proxy unless you specifically request it.
If you are a beneficial owner of shares held in street name, you may change your vote, subject to any rules your bank, broker or other nominee may have, at any time before your proxy is voted at the Annual Meeting, (1) by submitting new voting instructions to your bank, broker or other nominee or (2) if you have obtained a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote your shares, by virtually attending the Annual Meeting and voting in person.
Who will count the vote?
Representatives of Broadridge Financial Solutions will tabulate votes and will act as our independent inspectors of election.
What happens if additional matters are presented at the Annual Meeting?
If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxy holders, Charles Liang and David Weigand, or either of them, will have discretion to vote on those matters in accordance with their best judgment. Other than the matters described in this proxy statement, we do not currently know of any other matters that will be raised at the Annual Meeting.
What happens if a quorum is not present at the Annual Meeting?
If a quorum is not present to transact business at the Annual Meeting or if we do not receive sufficient votes in favor of the proposals by the date of the Annual Meeting, the persons named as proxies may propose one or more adjournments of the Annual Meeting to permit further solicitation of proxies. Any adjournment would require the affirmative vote of a majority of the shares present in person (virtually) or represented by proxy at the Annual Meeting.
Who will bear the cost of soliciting votes for the Annual Meeting?
We will bear the cost of soliciting proxies relating to the Annual Meeting. In addition to solicitation by the use of mail, certain of our directors, officers and regular employees may solicit proxies by telephone or personal interview, and we may request brokerage firms and custodians, nominees and other record holders to forward soliciting materials to the beneficial owners of our stock and will reimburse them for their reasonable out-of-pocket expenses in forwarding these materials. We have engaged Laurel Hill Advisory Group, LLC (“Laurel Hill”) to aid in the solicitation of proxies. We will pay Laurel Hill a fee of $6,000 as compensation for its services and potential additional fees for telephone solicitations made, and will reimburse Laurel Hill for its reasonable out-of-pocket expenses.
If you choose to access the proxy materials and/or vote over the Internet, you are responsible for any Internet access charges you may incur.
Where can I find the voting results of the Annual Meeting?
We intend to announce preliminary voting results at the Annual Meeting and will publish final results in a Current Report on Form 8-K, which will be filed with the SEC within four (4) business days following the Annual Meeting.
What are the deadlines for submitting stockholder proposals?
In order for a stockholder proposal to be considered for inclusion in our proxy statement for the annual meeting of stockholders following fiscal year 2024, the written proposal must be received at our principal executive offices at 980 Rock Avenue, San Jose, California 95131, Attention: Corporate Secretary, on or before August 10, 2024 and must otherwise comply with Rule 14a-8 under the Exchange Act; however, to the extent that the date of our annual meeting of stockholders for fiscal year 2024 changes by more than 30 days from the one-year anniversary of the date of the Annual Meeting, the deadline is a reasonable time before we begin to print and send our proxy materials. The proposal must comply with the SEC regulations regarding the inclusion of stockholder proposals in Company-sponsored proxy materials.
Our bylaws provide that a stockholder may nominate a director for election at the annual meeting or may present from the floor a proposal that is not included in the proxy statement if proper written notice is received by the Corporate Secretary of the Company at our principal executive offices in San Jose, California, at least 120 days in advance of the one year anniversary of the date that our proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders. For the annual meeting of stockholders following fiscal year 2024, written notice of director nominations and stockholder proposals must be received on or before August 10, 2024. Our bylaws also provide that if the date of the annual meeting of stockholders for fiscal year 2024 is more than 30 days earlier than the date contemplated at the time of this proxy statement (which is typically the one-year anniversary of the date of the annual general meeting), notice by the stockholders to be timely must be received not later than the close of business on the 10th day following the day on which the date of the annual meeting of stockholders following fiscal year 2024 is publicly announced.The nomination or proposal must contain the specific information required by our bylaws. You may request a copy of our bylaws by contacting our Corporate Secretary, Super Micro Computer, Inc., telephone (408) 503-8000. Stockholder proposals that are received by us after the applicable deadline, will not be eligible to be presented at the annual meeting of stockholders following fiscal year 2024.
In addition to satisfying the requirements under our bylaws, stockholders who intend to solicit proxies in support of director nominees other than our nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act to comply with the universal proxy rules, which notice must be postmarked or transmitted electronically to us at our principal executive offices no later than November 23, 2024. However, if the date of the annual meeting of stockholders following fiscal year 2024 is changed by more than 30 calendar days from such anniversary date, then notice must be provided by the later of 60 calendar days prior to the date of such annual meeting or the 10th calendar day following the day on which public announcement of the date of such annual meeting is first made.
Internet Availability of Proxy Materials
Our Proxy Statement and our Annual Report are also available on our website at https://ir.supermicro.com/.
“HOUSEHOLDING” OF PROXY MATERIALS
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. Although we do not household for our registered stockholders, some brokers household Supermicro proxy materials and annual reports, delivering a single proxy statement and annual report to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement or annual report, or if you are receiving multiple copies of either document and wish to receive only one, please notify your broker. We will deliver promptly upon written or oral request a separate copy of our annual report and/or proxy statement to a stockholder at a shared address to which a single copy of either document was delivered. For copies of either or both documents, stockholders should write to Investor Relations, Super Micro Computer, Inc., 980 Rock Avenue, San Jose, CA 95131, or call (408) 503-8000.
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STOCKHOLDER PROPOSALS FOR 2017 MEETING
If any stockholder intends to present a proposal to be considered for inclusion in the Company’s proxy material in connection with the 2017 annual meeting of stockholders, the proposal must be in proper form (per SEC Regulation 14A, Rule 14a-8—Stockholder Proposals) and received by the Corporate Secretary of the Company on or before September 20, 2017. Stockholder proposals to be presented at the 2017 annual meeting of stockholders which are not to be included in the Company’s proxy materials must be received by the Company by September 20, 2017, in accordance with the procedures in the Company’s bylaws.
OTHER MATTERS
We do not know of any other matters that may be presented for consideration at the Annual Meeting. If any other business does properly come before the Annual Meeting, the persons named as proxies on the enclosed proxy card will vote as they deem in the best interests of Super Micro.Supermicro.
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| David E. Weigand |
/s/ Yih-Shyan (Wally) Liaw | |
Senior Vice President, Chief Financial Officer, Corporate Secretary | |
Fiscal 2016 Annual Meeting
APPENDIX A
SUPER MICRO COMPUTER, INC.
AMENDED AND RESTATED
2020 EQUITY AND INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this Planis to permit award grants to non-employee Directors, officers and other employees of the Company and its Subsidiaries, and certain consultants to the Company and its Subsidiaries, and to provide to such persons incentives and rewards for service and/or performance.
2. Definitions. As used in this Plan:
(a) “Appreciation Right” means a right granted pursuant to Section 5 of this Plan.
(b) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of an Appreciation Right.
(c) “Board” means the Board of Directors of the Company.
(d) “Cash Incentive Award” means a cash award granted pursuant to Section 8 of this Plan.
(e) “Change in Control” has the meaning set forth in Section 12 of this Plan.
(f) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder, as such law and regulations may be amended from time to time.
(g) “Committee” means the Compensation Committeeof the Board (or its successor(s)), or any other committee of the Board designated by the Board to administer this Plan pursuant to Section 10 of this Plan.
(h) “Common Stock” means the common stock, par value $0.001 per share, of the Company or any security into which such common stock may be changed by reason of any transaction or event of the type referred to in Section 11 of this Plan.
(i) “Company” means Super Micro Computer, Inc., a Delaware corporation, and its successors.
(j) “Date of Grant” means the date provided for by the Committee on which a grant of Option Rights, Appreciation Rights, Performance Shares, Performance Units, Cash Incentive Awards, or other awards contemplated by Section 9 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock Units, or other awards contemplated by Section 9 of this Plan, will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto).
(k) “Director” means a member of the Board.
(l) “Effective Date” means June 5, 2020.
(m) “Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the awards granted under this Plan. An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of the Company and, unless otherwise determined by the Committee, need not be signed by a representative of the Company or a Participant.
(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.
(o) “Incentive Stock Option” means an Option Right that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.
(p) “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares, Performance Units or Cash Incentive Awards or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, dividend equivalents or other awards pursuant to this Plan. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the goals or actual levels of achievement regarding the Management Objectives, in whole or in part, as the Committee deems appropriate and equitable.
(q) “Market Value per Share” means, as of any particular date, the closing price of a share of Common Stock as reported for that date on the Nasdaq Stock Market or, if the Common Stock is not then listed on the Nasdaq Stock Market, on any other national securities exchange on which the Common Stock is listed, or if there are no sales on such date, on the next preceding trading day during which a sale occurred. If there is no regular public trading market for the Common Stock, then the Market Value per Share shall be the fair market value as determined in good faith by the Committee. The Committee is authorized to adopt another fair market value pricing method provided such method is stated in the applicable Evidence of Award and is in compliance with the fair market value pricing rules set forth in Section 409A of the Code.
(r) “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding Option Right.
(s) “Option Price” means the purchase price payable on exercise of an Option Right.
(t) “Option Right” means the right to purchase Common Stock upon exercise of an award granted pursuant to Section 4 of this Plan.
(u) “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at the time (i) a non-employee Director, (ii) an officer or other employee of the Company or any Subsidiary, including a person who has agreed to commence serving in such capacity within 90 days of the Date of Grant, or (iii) a person, including a consultant, who provides services to the Company or any Subsidiary that are equivalent to those typically provided by an employee (provided that such person satisfies the Form S-8 definition of an “employee”).
(v) “Performance Period” means, in respect of a Cash Incentive Award, Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Cash Incentive Award, Performance Share or Performance Unit are to be achieved.
(w) “Performance Share” means a bookkeeping entry that records the equivalent of one share of Common Stock awarded pursuant to Section 8 of this Plan.
(x) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 8 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee.
(y) “Plan” means this Super Micro Computer, Inc. Stockholders2020 Equity and Incentive Compensation Plan, as may be amended or amended and restated from time to time. This Plan was last amended and restated effective January 22, 2024.
MARCH 1, 2017, 11:00 a.m. Local Time
Principal Office
980 Rock Ave, San Jose, CA 95131
Driving directions to 980 Rock Ave, San Jose, CA 95131:
From San Jose, CA
1. Take I-880N
2. Take(z) “Predecessor Plans” means the Brokaw Road exit
3. Turn right onto E Brokaw Rd
4. Turn left onto Oakland Rd
5. Turn left onto Rock Ave
From Oakland, CA
1. Take I-880S
2. Take the Montague Expwy exit and bear left
3. Turn right onto Oakland Rd
4. Turn right onto Rock Ave
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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Proxy — Super Micro Computer, Inc. |
Notice of Fiscal 2016 Annual Meeting of Stockholders
980 Rock Ave, San Jose, CA 95131
Proxy Solicited by Board of Directors for Annual Meeting - March 1, 2017
Charles Liang, Howard Hideshima and Robert Aeschliman, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Stockholders of Super Micro Computer, Inc. 2006 Equity Incentive Plan, as amended or amended and restated from time to time, and the Super Micro Computer, Inc. 2016 Equity Incentive Plan, as amended or amended and restated from time to time.
(aa) “Restricted Stock” means Common Stock granted or sold pursuant to Section 6 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.
(bb) “Restricted Stock Units” means an award made pursuant to Section 7 of this Plan of the right to receive Common Stock, cash or a combination thereof at the end of the applicable Restriction Period.
(cc) “Restriction Period” means the period of time during which Restricted Stock Units are subject to restrictions, as provided in Section 7 of this Plan.
(dd) “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised over the Base Price provided for with respect to the Appreciation Right.
(ee) “Stockholder” means an individual or entity that owns one or more shares of Common Stock.
(ff) “Subsidiary” means a corporation, company or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture, limited liability company, unincorporated association or other similar entity), but more than 50% of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company; provided, however, that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which the Company at the time owns or controls, directly or indirectly, more than 50% of the total combined Voting Power represented by all classes of stock issued by such corporation.
(gg) “Voting Power” means, at any time, the combined voting power of the then-outstanding securities entitled to vote generally in the election of Directors in the case of the Company or members of the board of directors or similar body in the case of another entity.
3. Shares Available Under this Plan.
(a) Maximum Shares Available Under this Plan.
(i) Subject to adjustment as provided in Section 11 of this Plan and the share counting rules set forth in Section 3(b) of this Plan, the number of shares of Common Stock available under this Plan for awards of (A) Option Rights or Appreciation Rights, (B) Restricted Stock, (C) Restricted Stock Units, (D) Performance Shares or Performance Units, (E) awards contemplated by Section 9 of this Plan, or (F) dividend equivalents will not exceed in the aggregate (x) 8,500,000 shares of Common Stock (consisting of 5,000,000 shares of Common Stock that were approved by the Stockholders in 2020, 2,000,000 shares of Common Stock that were approved by the Stockholders in 2022, and 1,500,000 shares of Common Stock to be approved by the Stockholders in 2024), plus (y) the total number of shares remaining available for awards under the Super Micro Computer, Inc. 2016 Equity Incentive Plan, as amended or amended and restated from time to time, as of the Effective Date (zero), plus (z) the Common Stock that is subject to awards granted under this Plan or the Predecessor Plans that is added (or added back, as applicable) to the aggregate number of shares of Common Stock available under this Section 3(a)(i) pursuant to the share counting rules of this Plan. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing.
(ii) Subject to the share counting rules set forth in Section 3(b) of this Plan, the aggregate number of shares of Common Stock available under Section 3(a)(i) of this Plan will be reduced by one share of Common Stock for every one share of Common Stock subject to an award granted under this Plan.
(b) Share Counting Rules.
(i) Except as provided in Section 22 of this Plan, if any award granted under this Plan (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, again be available under Section 3(a)(i) above.
(ii) If, after the Effective Date, any Common Stock subject to an award granted under the Predecessor Plans is forfeited, or an award granted under the Predecessor Plans (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under this Plan.
(iii) Notwithstanding anything to the contrary contained in this Plan: (A) Common Stock withheld by the Company, tendered or otherwise used in payment of the Option Price of an Option Right will not be added (or added back, as applicable) to the aggregate
number of shares of Common Stock available under Section 3(a)(i) of this Plan; (B) Common Stock withheld by the Company, tendered or otherwise used to satisfy tax withholding will not be added (or added back, as applicable) to the aggregate number of shares of Common Stock available under Section 3(a)(i) of this Plan; (C) Common Stock subject to a share-settled Appreciation Right that is not actually issued in connection with the settlement of such Appreciation Right on the exercise thereof will not be added (or added back, as applicable) to the aggregate number of shares of Common Stock available under Section 3(a)(i) of this Plan; and (D) Common Stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Option Rights will not be added (or added back, as applicable) to the aggregate number of shares of Common Stock available under Section 3(a)(i) of this Plan.
(iv) If, under this Plan, a Participant has elected to give up the right to receive compensation in exchange for Common Stock based on fair market value, such Common Stock will not count against the aggregate limit under Section 3(a)(i) of this Plan.
(c) Limit on Incentive Stock Options. Notwithstanding anything to the contrary contained in this Plan, and subject to adjustment as provided in Section 11 of this Plan, the aggregate number of shares of Common Stock actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not exceed 8,500,000 shares of Common Stock.
(d) Non-Employee Director Compensation Limit. Notwithstanding anything to the contrary contained in this Plan, in no event will any non-employee Director in any one calendar year be granted compensation for such service having an aggregate maximum value (measured at the Date of Grant as applicable, and calculating the value of any awards based on the grant date fair value for financial reporting purposes) in excess of $700,000.
4. Option Rights. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of Option Rights. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number of shares of Common Stock to which it pertains subject to the limitations set forth in Section 3 of this Plan.
(b) Each grant will specify an Option Price per share of Common Stock, which Option Price (except with respect to awards under Section 22 of this Plan) may not be less than the Market Value per Share on the Date of Grant.
(c) Each grant will specify whether the Option Price will be payable (i) in cash, by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of Common Stock owned by the Optionee having a value at the time of exercise equal to the total Option Price, (iii) subject to any conditions or limitations established by the Committee, by the Company’s withholding of Common Stock otherwise issuable upon exercise of an Option Right pursuant to a “net exercise” arrangement (it being understood that, solely for purposes of determining the number of treasury shares held by the Company, the Common Stock so withheld will not be treated as issued and
acquired by the Company upon such exercise), (iv) by a combination of such methods of payment, or (v) by such other methods as may be approved by the Committee.
(d) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on March 1, 2017a date satisfactory to the Company of some or all of the Common Stock to which such exercise relates.
(e) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary, if any, that is necessary before any Option Rights or installments thereof will vest. Option Rights may provide for continued vesting or the earlier vesting of such Option Rights, including in the event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
(f) Any grant of Option Rights may specify Management Objectives regarding the vesting of such rights.
(g) Option Rights granted under this Plan may be (i) options, including Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended to so qualify, or (iii) combinations of the foregoing. Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code.
(h) No Option Right will be exercisable more than 10 years from the Date of Grant. The Committee may provide in any Evidence of Award for the automatic exercise of an Option Right upon such terms and conditions as established by the Committee.
(i) Option Rights granted under this Plan may not provide for any dividends or dividend equivalents thereon.
(j) Each grant of Option Rights will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
5. Appreciation Rights.
(a) The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to any Participant of Appreciation Rights. An Appreciation Right will be the right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any postponement or adjournmentall of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(i) Each grant may specify that the amount payable on exercise of an Appreciation Right will be paid by the Company in cash, Common Stock or any combination thereof.
(ii) Each grant will specify the period or periods of continuous service by the Participant with the Company or any Subsidiary, if any, that is necessary before the Appreciation Rights or installments thereof will vest. Appreciation Rights may provide for continued vesting or the earlier vesting of such Appreciation Rights, including in the
event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
(iii) Any grant of Appreciation Rights may specify Management Objectives regarding the vesting of such Appreciation Rights.
(iv) Appreciation Rights granted under this proxyPlan may not provide for any dividends or dividend equivalents thereon.
(v) Each grant of Appreciation Rights will be votedevidenced by an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
(c) Also, regarding Appreciation Rights:
(i) Each grant will specify in respect of each Appreciation Right a Base Price, which (except with respect to awards under Section 22 of this Plan) may not be less than the Market Value per Share on the Date of Grant; and
(ii) No Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant. The Committee may provide in any Evidence of Award for the automatic exercise of an Appreciation Right upon such terms and conditions as established by the stockholder. If noCommittee.
6. Restricted Stock. The Committee may, from time to time and upon such directions are indicated,terms and conditions as it may determine, authorize the Proxiesgrant or sale of Restricted Stock to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each such grant or sale will constitute an immediate transfer of the ownership of Common Stock to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights (subject in particular to Section 6(g) of this Plan), but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter described.
(b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share on the Date of Grant.
(c) Each such grant or sale will provide that the Restricted Stock covered by such grant or sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period to be determined by the Committee on the Date of Grant or until achievement of Management Objectives referred to in Section 6(e) of this Plan.
(d) Each such grant or sale will provide that during or after the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the manner and to the extent prescribed by the Committee on the Date of Grant (which restrictions may include rights of repurchase or first refusal of the Company or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture while held by any transferee).
(e) Any grant of Restricted Stock may specify Management Objectives regarding the vesting of such Restricted Stock.
(f) Notwithstanding anything to the contrary contained in this Plan, Restricted Stock may provide for continued vesting or the earlier vesting of such Restricted Stock, including in the event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
(g) Any such grant or sale of Restricted Stock may require that any and all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and/or reinvested in additional Restricted Stock, which will be subject to the same restrictions as the underlying award. For the avoidance of doubt, any such dividends or other distributions on Restricted Stock will be deferred until, and paid contingent upon, the vesting of such Restricted Stock.
(h) Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, (i) all certificates representing Restricted Stock will be held in custody by the Company until all restrictions thereon will have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares or (ii) all Restricted Stock will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Restricted Stock.
7. Restricted Stock Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting or sale of Restricted Stock Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each such grant or sale will constitute the agreement by the Company to deliver Common Stock or cash, or a combination thereof, to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include achievement regarding Management Objectives) during the Restriction Period as the Committee may specify.
(b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share on the Date of Grant.
(c) Notwithstanding anything to the contrary contained in this Plan, Restricted Stock Units may provide for continued vesting or the earlier lapse or other modification of the Restriction Period, including in the event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
(d) During the Restriction Period, the Participant will have no right to transfer any rights under his or her award and will have no rights of ownership in the Common Stock deliverable upon payment of the Restricted Stock Units and will have no right to vote them, but the Committee may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Restricted Stock Units on a deferred and contingent basis, either in cash or in additional Common Stock; provided, however, that dividend equivalents or other distributions on Common Stock underlying Restricted Stock Units shall be deferred until and paid contingent upon the vesting of such Restricted Stock Units.
(e) Each grant or sale of Restricted Stock Units will specify the time and manner of payment of the Restricted Stock Units that have been earned. Each grant or sale will specify that the amount payable with respect thereto will be paid by the Company in Common Stock or cash, or a combination thereof.
(f) Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
8. Cash Incentive Awards, Performance Shares and Performance Units. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Cash Incentive Awards, Performance Shares and Performance Units. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:
(a) Each grant will specify the number or amount of Performance Shares or Performance Units, or amount payable with respect to a Cash Incentive Award, to which it pertains, which number or amount may be subject to adjustment to reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Cash Incentive Award or grant of Performance Shares or Performance Units will be such period of time as will be determined by the Committee, which may be subject to continued vesting or earlier lapse or other modification, including in the event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
(c) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will specify Management Objectives regarding the earning of the award.
(d) Each grant will specify the time and manner of payment of a Cash Incentive Award, Performance Shares or Performance Units that have been earned.
(e) The Committee may, on the Date of Grant of Performance Shares or Performance Units, provide for the payment of dividend equivalents to the holder thereof either in cash or in additional Common Stock, which dividend equivalents will be subject to deferral and payment on a contingent basis based on the Participant’s earning and vesting of the Performance Shares or Performance Units, as applicable, with respect to which such dividend equivalents are paid.
(f) Each grant of a Cash Incentive Award, Performance Shares or Performance Units will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.
9. Other Awards.
(a) Subject to applicable law and the applicable limits set forth in Section 3 of this Plan, the Committee may authorize the grant to any Participant of Common Stock or such other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Common Stock or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Common Stock, purchase rights for Common Stock, awards with value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates or other business units thereof or any other factors designated by the
Committee, and awards valued by reference to the book value of the Common Stock or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of the Company. The Committee will determine the terms and conditions of such awards. Common Stock delivered pursuant to an award in the nature of a purchase right granted under this Section 9 will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Common Stock, other awards, notes or other property, as the Committee determines.
(b) Cash awards, as an element of or supplement to any other award granted under this Plan, may also be granted pursuant to this Section 9.
(c) The Committee may authorize the grant of Common Stock as a bonus, or may authorize the grant of other awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as will be determined by the Committee in a manner that complies with Section 409A of the Code.
(d) The Committee may, at or after the Date of Grant, authorize the payment of dividends or dividend equivalents on awards granted under this Section 9 on a deferred and contingent basis, either in cash or in additional Common Stock, based upon the earning and vesting of such awards.
(e) Each grant of an award under this Section 9 will be evidenced by an Evidence of Award. Each such Evidence of Award will be subject to this Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve, and will specify the time and terms of delivery of the applicable award.
(f) Notwithstanding anything to the contrary contained in this Plan, awards under this Section 9 may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award, including in the event of the retirement, death, disability or termination of employment or service of a Participant or in the event of a Change in Control.
10. Administration of this Plan.
(a) This Plan will be administered by the Committee; provided, however, that notwithstanding anything in this Plan to the contrary, the Board may grant awards under this Plan to non-employee Directors and administer this Plan with respect to such awards. The Committee may from time to time delegate all or any part of its authority under this Plan to a subcommittee thereof. To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee.
(b) The interpretation and construction by the Committee of any provision of this Plan or of any Evidence of Award (or related documents) and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive. No member of the Committee shall be liable for any such action or determination made in good faith. In addition, the Committee is authorized to take any action it determines in its sole discretion to be appropriate subject only to the express limitations contained in this Plan, and no authorization in any Plan section or other provision of this Plan is intended or may be deemed to constitute a limitation on the authority of the Committee.
(c) To the extent permitted by law, the Committee may delegate to one or more of its members, to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may
employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under this Plan. To the extent permitted by law, and in compliance with any applicable legal requirements, the Committee may, by resolution, authorize one or more officers of the Company to authorize the granting or sale of awards under this Plan on the same basis as the Committee; provided, however, that: (i) the Committee will not delegate such authority to any such officer(s) for awards granted to an employee who is an officer, Director, or more than 10% “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act) of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined in accordance with Section 16 of the Exchange Act; (ii) the resolution providing for such authorization shall set forth the total number of shares of Common Stock such officer(s) may grant; and (iii) the officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated.
11. Adjustments. The Committee shall make or provide for such adjustments in the number of and kind of shares of Common Stock covered by outstanding Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of and kind of shares of Common Stock covered by other awards granted pursuant to Section 9 of this Plan, in the Option Price and Base Price provided in outstanding Option Rights and Appreciation Rights, respectively, in Cash Incentive Awards, and in other award terms, as the Committee, in its sole discretion, exercised in good faith, determines is equitably required to prevent dilution or enlargement of the rights of Participants that otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event or in the event of a Change in Control, the Committee may provide in substitution for any or all outstanding awards under this Plan such alternative consideration (including cash), if any, as it, in good faith, may determine to be equitable in the circumstances and shallrequire in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each Option Right or Appreciation Right with an Option Price or Base Price, respectively, greater than the consideration offered in connection with any such transaction or event or Change in Control, the Committee may in its discretion elect to cancel such Option Right or Appreciation Right without any payment to the person holding such Option Right or Appreciation Right. The Committee shall also make or provide for such adjustments in the number of shares of Common Stock specified in Section 3 of this Plan as the Committee in its sole discretion, exercised in good faith, determines is appropriate to reflect any transaction or event described in this Section 11; provided, however, that any such adjustment to the number specified in Section 3(c) of this Plan will be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail to so qualify.
12. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Committee in an Evidence of Award made under this Plan, a “Change in Control” will be deemed to have occurred upon the occurrence (after the Effective Date) of any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either: (i) the then-outstanding Common Stock; or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote FORgenerally in the election of directors (“Voting
Shares”); provided, however, that for purposes of this subsection (a), the two nominees, FORfollowing acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company; (B) any acquisition by the Company; (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its Subsidiaries; or (D) any acquisition by any Person pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c);
(b) Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a Director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote or the approval of at least a majority of the advisory (non-binding) resolution relating to named executive compensation, FORDirectors then comprising the advisory (non-binding)Incumbent Board (either by a specific vote or written action or by approval of future triennial advisorythe proxy statement of the Company in which such person is named as a nominee for Director, without objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Common Stock and Voting Shares immediately prior to such Business Combination beneficially own, directly or indirectly, more than 66-2/3% of, respectively, the then-outstanding common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Common Stock and Voting Shares of the Company, as the case may be, (ii) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding common stock of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
13. Detrimental Activity and Recapture Provisions.
(a) Awards granted under this Plan are subject to the terms and conditions of the Company’s clawback provisions, policy or policies (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act, and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on our executivewhich the Common Shares at any point may be traded) (the “Compensation Recovery Policy”), and applicable sections of any Evidence of Award to which
this Plan is applicable or any related documents shall be interpreted consistently with (or deemed superseded by and/or subject to, as applicable) the terms and conditions of the Compensation Recovery Policy. Further, by accepting any award under the Plan, each Participant agrees (or has agreed) to fully cooperate with and assist the Company in connection with any of such Participant’s obligations to the Company pursuant to the Compensation Recovery Policy, and agrees (or has agreed) that the Company may enforce its rights under the Compensation Recovery Policy through any and all reasonable means permitted under applicable law as it deems necessary or desirable under the Compensation Recovery Policy, in each case from and after the effective dates thereof.Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation necessary to facilitate the recovery or recoupment by the Company from such Participant of any such amounts, including from such Participants’ accounts or from any other compensation, to the extent permissible under Section 409A of the Code.
(b) Otherwise, any Evidence of Award (or any part thereof) may provide for the cancellation or forfeiture of an award or the forfeiture and FOR ratificationrepayment to the Company of appointmentany gain or earnings related to an award (or other provisions intended to have similar effects), including upon such terms and conditions as may be determined by the Board or the Committee in accordance with the Compensation Recovery Policy or any applicable laws, rules, regulations or requirements that impose mandatory clawback or recoupment requirements under the circumstances set forth in such laws, rules, regulations or requirements in effect from time to time (including as may operate to create additional rights for the Company with respect to such awards and the recovery of Deloitte & Touche LLPamounts or benefits relating thereto).
14. Accommodations for Participants of Different Nationalities. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for awards to Participants as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom given that Participants are expected to be nationals of both the United States of America and other countries, or to be employed by the Company or any Subsidiary both within and outside of the United States of America. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan (including sub-plans) (to be considered part of this Plan) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the Stockholders.
15. Transferability.
(a) Except as otherwise determined by the Committee, and subject to compliance with Section 17(b) of this Plan and Section 409A of the Code, no Option Right, Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Unit, Cash Incentive Award, award contemplated by Section 9 of this Plan or dividend equivalents paid with respect to awards made under this Plan will be transferable by the Participant except by will or the laws of descent and distribution. In no event will any such award granted under this Plan be transferred for value. Where transfer is permitted, references to “Participant” shall be construed, as the Committee deems appropriate, to include any permitted transferee to whom such award is transferred. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or
her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law or court supervision.
(b) The Committee may specify on the Date of Grant that part or all of the Common Stock that is (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, will be subject to further restrictions on transfer, including minimum holding periods.
16. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit. If a Participant’s benefit is to be received in the form of Common Stock, and such Participant fails to make arrangements for the payment of taxes or other amounts, then, unless otherwise determined by the Committee, the Company will withhold Common Stock having a value equal to the amount required to be withheld. Notwithstanding the foregoing, when a Participant is required to pay the Company an amount required to be withheld under applicable income, employment, tax or other laws, the Participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the Common Stock required to be delivered to the Participant, Common Stock having a value equal to the amount required to be withheld or by delivering to the Company other shares of Common Stock held by such Participant. The Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value of such Common Stock on the date the benefit is to be included in Participant’s income. In no event will the fair market value of the Common Stock to be withheld and delivered pursuant to this Section 16 exceed the minimum amount required to be withheld, unless (i) an additional amount can be withheld and not result in adverse accounting consequences, and (ii) such additional withholding amount is authorized by the Committee. Participants will also make such arrangements as the Company may require for the payment of any withholding tax or other obligation that may arise in connection with the disposition of Common Stock acquired upon the exercise of Option Rights.
17. Compliance with Section 409A of the Code.
(a) To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such section by the U.S. Department of the Treasury or the Internal Revenue Service.
(b) Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan
and grants hereunder may not be reduced by, or offset against, any amount owed by a Participant to the Company or any of its Subsidiaries.
(c) If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the tenth business day of the seventh month after such separation from service.
(d) Solely with respect to any award that constitutes nonqualified deferred compensation subject to Section 409A of the Code and that is payable on account of a Change in Control (including any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only if such event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time and form of payment that complies with Section 409A of the Code, without altering the definition of Change in Control for any purpose in respect of such award.
(e) Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.
18. Amendments.
(a) The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that if an amendment to this Plan, for purposes of applicable stock exchange rules and except as permitted under Section 11 of this Plan, (i) would materially increase the benefits accruing to Participants under this Plan, (ii) would materially increase the number of securities which may be issued under this Plan, (iii) would materially modify the requirements for participation in this Plan, or (iv) must otherwise be approved by the Stockholders in order to comply with applicable law or the rules of the Nasdaq Stock Market or, if the Common Stock is not traded on the Nasdaq Stock Market, the principal national securities exchange upon which the Common Stock is traded or quoted, all as determined by the Board, then, such amendment will be subject to Stockholder approval and will not be effective unless and until such approval has been obtained.
(b) Except in connection with a corporate transaction or event described in Section 11 of this Plan or in connection with a Change in Control, the terms of outstanding awards may not be amended to reduce the Option Price of outstanding Option Rights or the Base Price of outstanding Appreciation Rights, or cancel outstanding “underwater” Option Rights or Appreciation Rights (including following a Participant’s voluntary surrender of “underwater”
Option Rights or Appreciation Rights) in exchange for cash, other awards or Option Rights or Appreciation Rights with an Option Price or Base Price, as applicable, that is less than the Option Price of the original Option Rights or Base Price of the original Appreciation Rights, as applicable, without Stockholder approval. This Section 18(b) is intended to prohibit the repricing of “underwater” Option Rights and Appreciation Rights and will not be construed to prohibit the adjustments provided for in Section 11 of this Plan. Notwithstanding any provision of this Plan to the contrary, this Section 18(b) may not be amended without approval by the Stockholders.
(c) If permitted by Section 409A of the Code, but subject to Section 18(d), including in the case of termination of employment or service, or in the case of unforeseeable emergency or other circumstances or in the event of a Change in Control, to the extent a Participant holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Stock as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Cash Incentive Awards, Performance Shares or Performance Units which have not been fully earned, or any dividend equivalents or other awards made pursuant to Section 9 of this Plan subject to any vesting schedule or transfer restriction, or who holds Common Stock subject to any transfer restriction imposed pursuant to Section 15(b) of this Plan, the Committee may, in its sole discretion, provide for continued vesting or accelerate the time at which such Option Right, Appreciation Right or other award may vest or be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time at which such Cash Incentive Awards, Performance Shares or Performance Units will be deemed to have been earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.
(d) Subject to Section 18(b) of this Plan, the Committee may amend the terms of any award theretofore granted under this Plan prospectively or retroactively. Except for adjustments made pursuant to Section 11 of this Plan, no such amendment will materially impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any awards outstanding hereunder and not exercised in full on the date of termination.
19. Governing Law. This Plan and all grants and awards and actions taken hereunder will be governed by and construed in accordance with the internal substantive laws of the State of Delaware.
20. Effective Date/Termination. The Super Micro Computer, Inc.’s independent registered public accounting firm 2020 Equity and Incentive Compensation Plan was effective as of the Effective Date, and amended and restated as of May 18, 2022. This 2024 amendment and restatement of the amended and restated Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan will be effective as of the date on which such amendment and restatement is approved by the Stockholders (the “Amendment and Restatement Date”). No grants will be made on or after the Effective Date under the Predecessor Plans, provided that outstanding awards granted under the Predecessor Plans continued following the Effective Date. No grant will be made under this Plan on or after the tenth anniversary of the Amendment and Restatement Date, but all grants made prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan. For clarification purposes, the terms and conditions of this Plan shall not apply to or otherwise impact previously granted and outstanding awards under the Predecessor Plans, as applicable (except for purposes of providing for shares of Common Stock under such awards to be added to the aggregate number of shares of Common Stock available under Section 3(a)(i) of this Plan pursuant to the share counting rules of this Plan).
21. Miscellaneous Provisions.
(a) The Company will not be required to issue any fractional Common Stock pursuant to this Plan. The Committee may provide for the fiscal year ending June 30, 2017.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting.
(Items to be voted appear on reverse side.)
Important notice regarding the Internet availabilityelimination of proxy materialsfractions or for the Annual Meetingsettlement of stockholders. The Proxy Statementfractions in cash.
(b) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.
(c) Except with respect to Section 21(e) of this Plan, to the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights and there will be no further effect on any provision of this Plan.
(d) No award under this Plan may be exercised by the holder thereof if such exercise, and the 2016 Annual Reportreceipt of cash or shares thereunder, would be, in the opinion of counsel selected by the Company, contrary to Stockholderslaw or the regulations of any duly constituted authority having jurisdiction over this Plan.
(e) Absence on leave approved by a duly constituted officer of the Company or any of its Subsidiaries will not be considered interruption or termination of service of any employee for any purposes of this Plan or awards granted hereunder.
(f) No Participant will have any rights as a Stockholder with respect to any Common Stock subject to awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such Common Stock upon the share records of the Company.
(g) The Committee may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.
(h) Except with respect to Option Rights and Appreciation Rights, the Committee may permit Participants to elect to defer the issuance of Common Stock under this Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan and which are available at http://ir.supermicro.com/financials.cfm.intended to comply with the requirements of Section 409A of the Code. The Committee also may provide that deferred issuances and settlements include the crediting of dividend equivalents or interest on the deferral amounts.
(i) If any provision of this Plan is or becomes invalid or unenforceable in any jurisdiction, or would disqualify this Plan or any award under any law deemed applicable by the Committee, such provision will be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it will be stricken and the remainder of this Plan will remain in full force and effect. Notwithstanding anything in this Plan or an Evidence of Award to the contrary, nothing in this Plan or in an Evidence of Award prevents a Participant from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations, and for purpose of clarity a Participant is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Exchange Act.
22. Share-Based Awards in Substitution for Awards Granted by Another Company. Notwithstanding anything in this Plan to the contrary:
(a) Awards may be granted under this Plan in substitution for or in conversion of, or in connection with an assumption of, stock options, stock appreciation rights, restricted stock, restricted stock units or other share or share-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with the Company or any Subsidiary. Any conversion, substitution or assumption will be effective as of the close of the merger or acquisition, and, to the extent applicable, will be conducted in a manner that complies with Section 409A of the Code. The awards so granted may reflect the original terms of the awards being assumed or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Common Stock substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the original awards, adjusted to account for differences in stock prices in connection with the transaction.
(b) In the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary merges has shares available under a pre-existing plan previously approved by stockholders and not adopted in contemplation of such acquisition or merger, the shares available for grant pursuant to the terms of such plan (as adjusted, to the extent appropriate, to reflect such acquisition or merger) may be used for awards made after such acquisition or merger under this Plan; provided, however, that awards using such available shares may not be made after the date awards or grants could have been made under the terms of the pre-existing plan absent the acquisition or merger, and may only be made to individuals who were not employees or directors of the Company or any Subsidiary prior to such acquisition or merger.
(c) Any Common Stock that is issued or transferred by, or that are subject to any awards that are granted by, or become obligations of, the Company under Sections 22(a) or 22(b) of this Plan will not reduce the Common Stock available for issuance or transfer under this Plan or otherwise count against the limits contained in Section 3 of this Plan. In addition, no Common Stock subject to an award that is granted by, or becomes an obligation of, the Company under Sections 22(a) or 22(b) of this Plan will be added to the aggregate limit contained in Section 3(a)(i) of this Plan.