What changed in this filing

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Item 9A. Controls and Procedures

2021-08-27 compared with 2020-08-31 · 830 added, 658 removed, 659 unchanged (69% of the section changed)

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Under the supervision, and with the participation, of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2021.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of June 30, 2020 because of a material weakness in our internal control over financial reporting, as further described below.

Notwithstanding the material weakness, management believes that the consolidated financial statements and related financial information included in this Annual Report on Form 10-K present fairly, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with U.S.

generally accepted accounting principles (“U.S.

Based on this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2021.

Management’s Report on Internal Control Over Financial Reporting

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In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in its Internal Control - Integrated Framework (2013) (the “COSO Framework”).

Based on this assessment, management has determined that we did not maintain effective internal control over financial reporting as of June 30, 2020 because of the material weakness described below.

A material weakness in internal controls is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Because of its inherent limitations, even appropriate internal control over financial reporting may not prevent or detect misstatements.

Information Technology (“IT”) General Controls

We identified deficiencies related to IT general controls that aggregated to a material weakness.

The following were contributing factors to the material weakness in IT general controls:

We have authorized certain IT users with broad access to all parts of our primary accounting system without adequate monitoring or recording of how they used that access.

In addition, access control deficiencies and change management deficiencies were noted on other systems relevant to financial reporting.

Some of our internally-developed systems relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

In some cases, IT general controls were not designed effectively, and in others, were designed effectively but did not operate effectively or for a sufficient period of time.

Business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information

systems to be accurate and complete, could be adversely affected, although we have identified no instances of any adverse effect due to these deficiencies.

The effectiveness of our internal control over financial reporting as of June 30, 2020 has been audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in its report that is included herein.

Remediation Plan

We have remediated the material weaknesses related to each of the five COSO components of internal control (Control Environment;

Risk Assessment;

Control Activities;

Information & Communication;

Monitoring of Controls) and revenue recognition accounting controls by completing our remediation plan, as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2019.

Our management is committed to remediating identified control deficiencies (including both those that rise to the level of a material weakness and those that do not), fostering continuous improvement in our internal controls and enhancing our overall internal controls environment.

Our management believes that the actions below will remediate the material weakness we have identified and strengthen our internal control over financial reporting.

As we continue to evaluate and work to improve our internal control over financial reporting, we may take additional or different measures to address control deficiencies with the overall objective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements through an effective system of internal control over financial reporting.

To date, we have taken the following actions related to the material weakness that, as of June 30, 2020, had not yet been fully implemented or had not been in place for a sufficient period of time to demonstrate that they were having their desired effect:

Based on this assessment, management has concluded that our internal control over financial reporting was effective as of June 30, 2021 to provide reasonable assurance regarding the reliability of financial reporting and preparation of consolidated financial statements in accordance with U.S.

The effectiveness of our internal control over financial reporting as of June 30, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, and their opinion is stated in their report which is included in this Annual Report on Form 10-K.

Remediation of Prior Year Material Weakness

We have remediated the IT general controls that aggregated to a material weakness as previously disclosed in our Annual Report on Form 10-K for the year ended June 30, 2020.

Since that time, with the oversight of our management and audit committee, we have implemented measures to remediate the material weakness.

The following actions have been implemented and performed:

• Re-designed the logical access roles associated with our primary ERP application and re-provisioned those roles to enforce segregation of duties and align user access commensurate with their business process role and job responsibilities;

• Implemented a third-party application to facilitate improved processes and controls related to provisioning privileged access roles and the monitoring of those roles;

For one of our boundary applications (fulfillment and warehouse management), implemented a new program change management control.

Our management believes that meaningful progress has been made on the remaining remediation efforts.

Management regards successful completion of our remaining remediation actions as an important priority.

The remaining remediation activities include:

Strengthening access controls related to boundary systems;

Strengthening provisioning of privileged access roles;

Monitoring instances in which individuals are granted broad access;

Implementing new change management controls related to boundary systems.

• For our boundary applications relevant to financial reporting, implemented new program change management control;

• Strengthened access and monitoring controls related to boundary systems;

• For our primary ERP application, strengthened provisioning of privileged access roles;

• Monitored instances in which individuals were granted broad access.

We believe the foregoing efforts have effectively remediated the material weakness as these procedures

have been implemented for a sufficient period of time during the fiscal year and we have completed our testing of the design and operating effectiveness of these above procedures as of June 30, 2021.

As we continue to evaluate and work to improve our internal control over financial reporting, we may execute additional measures to enhance the overall design of our internal controls.

Changes in Internal Control over Financial Reporting

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and subsidiaries (the “Company”) as of June 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, because of the effect of the material weakness identified below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of June 30, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended June 30, 2021, of the Company and our report dated August 27, 2021, expressed an unqualified opinion on those financial statements.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The following material weakness has been identified and included in management's assessment:

Information Technology (“IT”) General Controls

The Company identified deficiencies related to IT general controls that aggregated to a material weakness.

The following were contributing factors to the material weakness in IT general controls:

The Company authorized certain IT users with broad access to all parts of the primary accounting system without adequate monitoring or recording of how they used that access.

In addition, access control deficiencies and change management deficiencies were noted on other systems relevant to financial reporting.

Some of the Company’s

internally-developed systems relevant to financial reporting lack system tracking capabilities to monitor access changes or application changes.

In some cases IT general controls were not designed effectively, and in others, were designed effectively but did not operate effectively or for a sufficient period of time.

Business process controls that depend on the affected information systems, or that depend on data or financial reports generated from the affected information systems to be accurate and complete, could be adversely affected, although the Company has identified no instances of any adverse effect due to these deficiencies.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended June 30, 2020, of the Company, and this report does not affect our report on such financial statements.

/s/ Deloitte & Touche LLP

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The following table sets forth information regarding our current directors and executive officers and their ages as of July 31, 2021:

Charles Liang

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer

Chief Operating Officer

Senior Vice President of Worldwide Sales

Senior Vice President of Operations

David Weigand

Senior Vice President, Chief Compliance Officer

Co-Founder, Senior Vice President and Director

Fairfax (1)(4)

McAndrews (1)(4)

Hwei-Ming (Fred) Tsai (1)(2)(3)(4)

Saria Tseng (2)(3)(4)

Sherman Tuan (2)(3)(4)

Tally Liu (1)(4)

Name Age Position(s)

Charles Liang 63 President, Chief Executive Officer and Chairman of the Board

David Weigand 63 Senior Vice President, Chief Financial Officer and Chief Compliance Officer

Don Clegg 62 Senior Vice President of Worldwide Sales

George Kao 60 Senior Vice President of Operations

Sara Liu 59 Co-Founder, Senior Vice President and Director

Fairfax (1)(4) 65 Director

Saria Tseng (2)(3)(4) 51 Director

Sherman Tuan (2)(3)(4) 67 Director

Shiu Leung (Fred) Chan (1)(4) 73 Director

Tally Liu (1)(4) 71 Director

__________________________

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(2) Member of the Compensation Committee

(3) Member of the Nominating and Corporate Governance Committee

(3) Member of the Nominating and Corporate Governance Committee (the “Governance Committee”)

(4) Determined by the Board of Directors to be “independent”

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in Electrical Engineering from National Taiwan University of Science & Technology in Taiwan.

Our Nominating and Corporate Governance Committee (“Governance Committee”) concluded that Mr.

Our Governance Committee concluded that Mr.

Liang should serve on the Board based on his skills, experience and qualifications in managing technology businesses, his technical expertise, and his long familiarity with our company’s business.

Kevin Bauer has served as our Senior Vice President, Chief Financial Officer since January 2018 and previously served as our Senior Vice President, Corporate Development and Strategy beginning January 2017.

David Weigand has served as our Senior Vice President, Chief Financial Officer since February 2021 and as Chief Compliance Officer since May 2018.

Prior to his employment with our company, Mr.

Bauer was the Senior Vice President and Chief Financial Officer of Pericom Semiconductor Corporation, a semiconductor company, from February 2014 until its sale to Diodes, Incorporated in November 2015 and, thereafter, assisted Diodes with the integration of Pericom until November 2016.

Prior to that he was Chief Financial Officer of Exar Corporation, a semiconductor manufacturer, from June 2009 through December 2012, Corporate Controller from August 2004 to June 2009 and Operations Controller from February 2001 to August 2004.

Previously, Mr.

Bauer was Operations Controller at WaferTech LLC (a subsidiary of Taiwan Semiconductor Manufacturing Company Limited) from July 1997 to February 2001.

Prior to WaferTech, he was at VLSI Technology for ten years where he held a variety of increasingly more senior finance roles culminating in his position as Director and Group Controller.

Bauer received an M.B.A.

from Santa Clara University and a B.S.

in Business Administration from California Lutheran University.

Alex Hsu serves as our Chief Operating Officer.

Hsu has served in various positions with the Company since October 2003, including as the Chairman of Supermicro Taiwan since February 2018, Executive Director of Supermicro Technology (Beijing) Co.

since August 2009, Sr.

Chief Executive of Strategic Business from August 2009 to February 2018, Chief Sales and Marketing Officer from July 2006 to August 2009, Senior Vice President of Sales from October 2004 to July 2006 and President of European Offices and Vice President of Operations (USA) from October 2003 to October 2004.

From January 2002 to September 2003, Mr.

Hsu was President and Chief Operating Officer of Bizlink Group, an IT solutions company.

From January 2001 to January 2002, he was a private investor and consultant working with startup companies in Silicon Valley.

From August 1999 to December 2000, he was President and Chief Operating Officer at Oplink Communications, Inc., a networking solutions company.

Hsu has over 40 years of experience in the IT industry and served in various managerial and executive positions at Philips, Acer, Hewlett-Packard and Umax group.

Hsu holds an M.B.A.

in Electrical Engineering from National Chao-Tung University in Taiwan.

Weigand was a Vice President at Hewlett Packard Enterprise (HPE) from November 2016 until April 2018 and served as Vice President, Tax at Silicon Graphics International, Inc., from September 2013 until its acquisition by HPE in November 2016.

Prior to that he was Vice President, Chief Financial Officer of Renesas Electronics America, a semiconductor company formed by the merger of the semiconductor businesses of NEC Corporation, Hitachi and Mitsubishi Electric from October 2010 until April 2013, and Vice President, Controller of NEC Electronics America from October 2004 until September 2010.

Weigand holds a M.S.

degree in Taxation from the University of Hartford and a B.S.

degree in Accounting from San Jose State University and is a Certified Public Accountant in California (Inactive).

Don Clegg serves as our Senior Vice President of Worldwide Sales.

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in Electrical Engineering from California State Polytechnic University in San Luis Obispo.

David Weigand has served as our Senior Vice President, Chief Compliance Officer since May 2018.

Prior to his employment with our company, Mr.

Weigand holds a M.S.

degree in Taxation from the University of Hartford and a B.S.

degree in Accounting from San Jose State University and is a Certified Public Accountant in California (Inactive).

Sara Liu co-founded Super Micro in September 1993, has been a member of our Board of Directors since March 2007 and currently serves as our Co-Founder, Senior Vice President, and a director.

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He began his career as a consultant with the National Telecommunications Practice Group of Ernst & Young.

Fairfax currently serves on the board of directors of Energous Corporation, where he is the chair of the audit committee.

Fairfax is a certified public accountant with an inactive license in California and holds an MBA degree from The University of Chicago Booth School of

Business and a Bachelor of Arts degree, with a major in Economics, from Whitman College.

Fairfax currently serves on the board of directors of Energous Corporation, where he is both the chair of the board and chair of the audit committee.

Fairfax is a certified public accountant with an inactive license in California and holds an MBA degree from The University of Chicago Booth School of Business and a Bachelor of Arts degree, with a major in Economics, from Whitman College.

Our Governance Committee concluded that Mr.

Fairfax should serve on the Board based on his skills, experience, his financial literacy and his familiarity with technology businesses.

McAndrews has been a member of our Board of Directors since February 2015.

McAndrews has served as a Principal of Abbott, Stringham & Lynch, an accounting firm serving the Silicon Valley, since September 2013.

From June 2002 to June 2013, he served as a Partner at PricewaterhouseCoopers LLP, a multinational professional services network, where he provided tax planning and consulting services to multinational public companies, private companies and their owners and emerging businesses in a variety of industries including high-technology, manufacturing, food processing and wholesale/retail distribution.

From November 1979 to June 2002, he worked for Arthur Andersen and Company, a global professional services firm.

He served as Partner from 1993 to 2002 where he focused primarily on providing tax planning and compliance services to high technology companies ranging in size from start-ups to large multinational public companies.

McAndrews is a certified public accountant with an active license in California and holds a Bachelor of Science in Commerce, Accounting degree from Santa Clara University.

Our Governance Committee concluded that Mr.

McAndrews should serve on the Board based on his skills, experience, his financial literacy and his familiarity with technology businesses.

Hwei-Ming (Fred) Tsai has been a member of our Board of Directors since August 2006.

Tsai served as an independent director of ANZ Bank (Taiwan) Limited, a wholly owned subsidiary of Australia and New Zealand Banking Group Limited from September 2013 to April 2019.

Tsai has also served as an independent director of Dynapack International Technology Corporation, a public company in Taiwan, since June 2017.

Tsai has been an independent business consultant since January 2010.

Tsai served as Executive Vice President and Chief Financial Officer of SinoPac Bancorp, a financial holding company based in Los Angeles, California from February 2001 and August 2005, respectively, to December 2009.

He also served as Senior Executive Vice President of Far East National Bank, a commercial bank that is held by SinoPac Bancorp from December 2002 to December 2009.

Tsai holds a Master in Professional Accounting from the University of Texas at Austin and a B.A.

in Accounting from National Taiwan University in Taiwan.

Our Governance Committee concluded that Mr.

Tsai should serve on the Board based on his skills, experience and qualifications in capital finance, his financial literacy and his familiarity with our company’s business.

Saria Tseng has been a member of our Board of Directors since November 2016.

Tseng has served as Vice President of Strategic Corporate Development, General Counsel and Secretary of Monolithic Power Systems, Inc.

a fabless manufacturer of high-performance analog and mixed-signal semiconductors since 2004.

(“MPS”), a fabless manufacturer of high-performance analog and mixed-signal semiconductors since 2004.

From 2001 to 2004, Ms.

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Tuan should serve on the Board based on his skills, experience and qualifications in managing technology businesses, his technical expertise, and his familiarity with our company’s business.

Shiu Leung (Fred) Chan has been a member of our Board of Directors since October 2020.

Chan is the founder and president of KCR Development, Inc.

which has developed real estate projects in excess of $1 billion in California and Hawaii specializing in high-density residential and retail projects.

Chan also has more than three decades of experience in the high technology sector and as an entrepreneur.

He most recently served as chairman of ESS Technology, Inc., a privately held semiconductor company which he founded, from 2015 to 2019.

ESS Technology was previously a public company listed on Nasdaq from 1995 until 2008, where he had held a variety of senior executive roles, including as chairman, president and

chief executive officer, and served as a director.

Chan has also previously served as chairman of a privately-held consumer electronic company, founder and an executive officer of a VLSI chip design center providing computer aided design, engineering and other design services, and co-founder and an executive officer of a company in the business of computer aided engineering systems development.

Chan holds B.S.E.E.

degrees from the University of Hawaii.

Our Governance Committee concluded that Mr.

Chan should serve on the Board based on his skills and experience in growing companies and familiarity with technology businesses.

Tally Liu was appointed to our Board of Directors and our Audit Committee on January 30, 2019, and was appointed as the chair of the Audit Committee on June 30, 2019.

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Prior to Newegg, Mr.

Liu held various positions with Knight Ridder Inc., including Vice President, Finance & Advance Technology and Vice President of Internal Audit.

Liu held various positions with Knight Ridder Inc., including Vice President, Finance & Advanced Technology and Vice President of Internal Audit.

Liu served as President of the International Newspapers Financial Executives (INFE) for one year before it merged with other media associations.

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Liu is a member of the American Institute of Certified Public Accountants (AICPA) with retired status, and was previously a member of the Florida Institute of Certified Public Accountants (FICPA).

Liu is also a Certified Information System Auditor (CISA) and Certified Information Security

Manager (CISM), with non-practice status, with the Information Systems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA).

Liu is also a Certified Information System Auditor (CISA) and Certified Information Security Manager (CISM), with non-practice status, with the Information Systems Audit and Control Association (ISACA) and has also been certified in Control Self-assessment (CCSA) by the Institute of Internal Auditors (IIA).

After earning his BA of Commerce from National Chengchi University, Taipei, Taiwan, and MBA from Florida Atlantic University, Mr.

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Composition of the Board

Our authorized number of directors is eight.

There are currently eight directors.

Our authorized number of directors is currently seven.

There are currently seven directors.

Our Amended and Restated Certificate of Incorporation provides for a classified Board of Directors divided into three classes.

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Alternatively, the Board of Directors, at its option, may reduce the number of directors, provided that no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Directors chosen to fill newly created directorships hold office for a term expiring at the next annual meeting of stockholders to which the term of the office of the class to which they have been elected expires.

The current composition of the Board of Directors is:

Class I Directors (1)

Charles Liang

Class II Directors (2)

Hwei-Ming (Fred) Tsai

Class III Directors (3)

Class I Directors (1) Charles Liang

Class II Director (2) Sara Liu

Class III Directors (3) Daniel W.

Shiu Leung (Fred) Chan

__________________________

(1) The term of Class I directors expires at the annual meeting of stockholders following fiscal year 2022.

The term of Class II directors expires at the annual meeting of stockholders following fiscal year 2020.

(2) The term of the Class II director expires at the annual meeting of stockholders following fiscal year 2023.

(3) The term of Class III directors expires at the annual meeting of stockholders following fiscal year 2021.

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Corporate Governance Guidelines

We have adopted “Corporate Governance Guidelines” to help ensure that the Board of Directors is independent from management, appropriately performs its function as the overseer of management, and that the interests of the Board of Directors and management align with the interests of our stockholders.

The “Corporate Governance Guidelines” are available at https://ir.supermicro.com/corp-governance#governance .

and management align with the interests of our stockholders.

The “Corporate Governance Guidelines” are available at https://ir.supermicro.com/governance/governance-documents/default.aspx .

Code of Ethics

We have adopted a “Code of Business Conduct and Ethics” that is applicable to all directors, executive officers and employees and embodies our principles and practices relating to the ethical conduct of our business and our long-standing commitment to honesty, fair dealing and full compliance with all laws affecting our business.

Our “Code of Business Conduct and Ethics” is available at https://ir.supermicro.com/corp-governance#governance .

Our “Code of Business Conduct and Ethics” is available at https://ir.supermicro.com/governance/governance-documents/default.aspx .

Any substantive amendment or waiver of the Code relating to executive officers or directors will be made only after approval by our Board of Directors and will be promptly disclosed on our website within four business days.

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The Board affirmatively determines the independence of each director and nominee for election as a director in accordance with the listing requirements of The Nasdaq Stock Market.

Based on these standards, our Board of Directors has determined that six of its current eight members, Daniel W.

Fairfax, Michael S.

McAndrews, Hwei-Ming (Fred) Tsai, Saria Tseng, Sherman Tuan and Tally Liu, are "independent directors" under the applicable rules and regulations of the SEC and the listing requirements and rules of The Nasdaq Stock Market.

Based on these standards, our Board of Directors has determined that five of its current seven members, Daniel W.

Fairfax, Saria Tseng, Sherman Tuan Shiu Leung (Fred) Chan and Tally Liu, are "independent directors" under the applicable rules and regulations of the SEC and the listing requirements and rules of The Nasdaq Stock Market.

Executive Sessions

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We encourage, but do not require, each Board member to attend our annual meeting of stockholders.

We held an annual meeting of stockholders on June 5, 2020 for our fiscal year 2019.

The Board held 15 meetings during fiscal year 2020, four of which were regularly scheduled meetings and 11 of which were special meetings.

We held an annual meeting of stockholders on May 28, 2021 for our fiscal year 2020.

Board held nine meetings during fiscal year 2021, four of which were regularly scheduled meetings and five of which were special meetings.

All directors attended at least 75% of the meetings of the Board and the committees on which they served during the time they were members of the Board or such committees during fiscal year 2021.

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Our Chairman, Charles Liang, is also our Chief Executive Officer.

The Board and our Nominating and Corporate Governance Committee (the "Governance Committee") believe that it is appropriate for Mr.

The Board and our Governance Committee believe that it is appropriate for Mr.

Liang to serve as both the Chief Executive Officer and Chairman due to the relatively small size of our Board, and the fact that Mr.

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The Board oversees our risk management activities, requesting and receiving reports from management.

The Board exercises this oversight responsibility directly and through its committees.

The Board conducts this oversight directly and through its committees.

Our Board has delegated primary responsibility for oversight of risks relating to financial controls and reporting to our Audit Committee, which in turn reports to the full Board on such matters as appropriate.

The Audit Committee also assists the Board in oversight of certain risks, particularly in the areas of internal controls over financial reporting, financial reporting and review of related party transactions.

Our management, with oversight from our Compensation Committee, has reviewed its compensation policies and practices with respect to risk-taking incentives and risk management and does not believe that potential risks arising from our compensation polices or practices are reasonably likely to have a material adverse effect on our company

Our management, with oversight from our Compensation Committee, has reviewed our compensation policies and practices with respect to risk-taking incentives and risk management and does not believe that potential risks arising from our compensation polices or practices are reasonably likely to have a material adverse effect on our company

Committees of the Board of Directors

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In accordance with applicable listing requirements of The Nasdaq Stock Market, each of these committees is comprised solely of non-employee, independent directors.

The charter for each committee is available at https://ir.supermicro.com/corp-governance#governance .

In January 2019, the Board of Directors approved amendments to the charters for each of the Audit Committee, the Compensation Committee and the Governance Committee, which amendments are reflected in the descriptions contained herein.

The charter for each committee is available at https://ir.supermicro.com/governance/governance-documents/default.aspx .

In October 2020, the Board of Directors approved amendments to the charters for each of the Audit Committee and the Compensation Committee, and, in January 2021, the Board of Directors approved amendments to the Governance Committee charter, which amendments are all reflected in the descriptions contained herein.

The charter of each committee also is available in print to any stockholder who requests it.

The following table sets forth the current members of each of the standing Board committees.

Audit Committee

Compensation Committee

Governance Committee

Tally Liu (1)

Sherman Tuan (1)

Hwei-Ming (Fred) Tsai (1)

Hwei-Ming (Fred) Tsai

Audit Committee Compensation Committee Governance Committee (2)

Tally Liu (1) Sherman Tuan (1) Saria Tseng

Fairfax Saria Tseng Sherman Tuan

Shiu Leung (Fred) Chan

__________________________

(1) Committee Chairperson

(2) The Governance Committee does not currently have a designated chairperson.

Audit Committee

The Audit Committee has four members.

The Audit Committee has three members currently.

The Audit Committee met 21 times in fiscal year 2021, four of which were regularly scheduled meetings and 17 of which were special meetings.

The Board has determined that each member of our Audit Committee meets the requirements for independence under the applicable listing requirements of The Nasdaq Stock Market and the rules of the SEC.

The Board has also determined that each member of our Audit Committee is an “audit committee financial expert” as defined under applicable SEC rules.

The Board has also determined that our Audit Committee has the required number of “audit committee financial experts” as defined under applicable SEC rules.

As outlined more specifically in the Audit Committee charter, the Audit Committee has, among other duties, the following responsibilities:

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• Oversees the independent auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them;

Discusses with the independent auditors any audit problems, difficulties and management’s response to them, and all matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;

• Reviews and discusses with the independent auditors any audit problems, or difficulties and management’s response to them, and all matters that the Public Company Accounting Oversight Board and the SEC require to be discussed with the committee;

• Reviews and discusses with management press releases regarding our financial results, as well as financial information and earnings guidance provided to securities analysts and rating agencies;

• Reviews and approves the planned scope of our annual audit;

Monitors the rotation of partners of the independent auditors on our engagement team as required by law;

• Monitors the rotation of partners of the independent auditors on their engagement team as required by law;

• Reviews our financial statements and discusses with management and the independent auditors the results of the annual audit and the review of our quarterly financial statements;

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• Oversees the adequacy of our financial controls;

Periodically reviews with management and the independent auditors our disclosure controls and procedures and our internal control over financial reporting;

Reviews and approves the internal audit function’s (i) audit plan, (ii) all major changes to the internal audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function

Reviews and approves all related party transactions;

• Periodically reviews and discusses with management and the independent auditors our disclosure controls and procedures and our internal control over financial reporting;

• Reviews, discusses and approves the internal audit function’s (i) internal audit plan, (ii) all major changes to the internal audit plan, (iii) the scope, progress and results of executing the internal audit plan, and (iv) the annual performance of the internal audit function

• Reviews, approves and oversees all related party transactions;

• Establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls or auditing matters and oversees enforcement, compliance and remedial measures under our Code of Business Conduct and Ethics;

Initiates investigations and hire legal, accounting and other outside advisors or experts to assist the Audit Committee, as it deems necessary to fulfill its duties;

Periodically discusses with management our major financial risk exposures and steps management has taken to monitor and control the exposures, including our risk assessment and risk management guidelines and policies;

• Initiates investigations and hires legal, accounting and other outside advisors or experts to assist the Audit Committee, as it deems necessary to fulfill its duties;

• Periodically reviews and discusses with management our major financial risk exposures and steps management has taken to monitor and control the exposures, including our risk assessment and risk management guidelines and policies;

• Reviews and evaluates, at least annually, the adequacy of the Audit Committee charter and recommends any proposed changes to the Board for approval.

Compensation Committee

The Compensation Committee has three members.

The Compensation Committee met nine times in fiscal year 2020, four of which were regularly scheduled meetings and five of which were special meetings.

The Compensation Committee has two members currently.

The Compensation Committee charter provides that the Compensation Committee shall be comprised of no fewer than two members.

The Compensation Committee met eight times in fiscal year 2021, four of which were regularly scheduled meetings and four of which were special meetings.

The Compensation Committee is comprised solely of non-employee directors.

The Board has determined that each member of our Compensation Committee meets the requirements for independence under the listing requirements of The Nasdaq Stock Market.

The Board has determined that each member of our Compensation Committee meets the requirements for independence under the applicable listing requirements of The Nasdaq Stock Market.

As outlined more specifically in the Compensation Committee charter, the Compensation Committee has, among other duties, the following responsibilities:

Periodically reviews and advises the Board concerning our overall compensation philosophy, policies and plans, including a review and approval of a group of companies for general executive compensation competitive comparisons, approval of target pay and performance objectives against this group, and monitoring of our executive compensation levels and their performance relative to this group;

• Periodically reviews and advises the Board concerning our overall compensation philosophy, policies and plans, including a review and approval of a group of companies for general executive compensation competitive comparisons, approval of target pay and performance objectives against this group (and broader industry reference), and monitoring of our executive compensation levels and their performance relative to this group;

• Reviews and approves corporate goals and objectives relevant to compensation of the Chief Executive Officer and other executive officers;

Evaluates the performance of the Chief Executive Officer and other executive officers in light of those goals and objectives, including generally against the overall performance of executive officers at comparable companies, all while taking into account our risk management policies and practices;

Reviews and approves the compensation of the Chief Executive Officer and other executive officers;

• Evaluates the performance of the Chief Executive Officer and other executive officers in light of those goals and objectives, including generally against the overall performance of executive officers at comparable companies, all while taking into account our risk management policies and practices, and any other factors the Compensation Committee deems appropriate;

• Reviews and approves the compensation of the Chief Executive Officer and other executive officers and other key employees;

• Reviews and approves our incentive compensation plans and equity compensation plans;

• Monitors and assesses risks associated with our compensation policies, including whether such policies could lead to unnecessary risk-taking behavior, and consults with management regarding such risks;

Administers the issuance of restricted stock grants, stock options and other equity awards to executive officers, directors and other eligible individuals under our equity compensation plans;

• Administers the issuance of restricted stock grants, stock options and other equity awards to executive officers, directors and other eligible individuals under our equity compensation plans , provided that the Compensation Committee may delegate the approval of grants of options and equity awards to participants other than certain individuals subject to Section 16 of the Exchange Act as provided in the applicable plan;

• Reviews and evaluates, at least annually, the performance of the Compensation Committee, including compliance of the Compensation Committee with its charter and the adequacy of the Compensation Committee charter.

In general, the Compensation Committee discharges the Board's responsibilities regarding the determination of executive compensation, and reviews and makes recommendations to the full Board in the determination of non-employee director compensation.

The Compensation Committee also makes recommendations to the full Board regarding non-ordinary course executive compensation matters, including with respect to new or amended employment contracts, severance or change-in-control plans or arrangements.

The Compensation Committee may delegate its responsibilities to subcommittees comprised of one or more Compensation Committee members, subject to requirements of our bylaws and applicable laws, regulations and the terms of our executive compensation plans.

The Compensation Committee may delegate its responsibilities, along with the authority to take action in relation to such responsibilities, to subcommittees comprised of one or more Compensation Committee members, subject to requirements of our bylaws and applicable laws, regulations and the terms of our executive compensation plans.

Additional information about the Compensation Committee's processes for determining executive and non-employee director compensation, including the role of the Compensation Committee's compensation consultant and our executive officers, can be found in the "Executive Compensation" and "2021 Director Compensation" sections of this Annual Report.

Nominating and Corporate Governance Committee

The Governance Committee has three members.

The Governance Committee met six times in fiscal year 2020, four of which were regularly scheduled meetings and two of which were special meetings.

The Governance Committee has two members currently.

The Governance Committee charter provides that the Governance Committee shall be comprised of no fewer than two members.

The Governance Committee met seven times in fiscal year 2021, four of which were regularly scheduled meetings and three of which were special meetings.

The Governance Committee is comprised solely of non-employee directors.

The Board has determined that each member of our Governance Committee meets the requirements for independence under the listing requirements of The Nasdaq Stock Market.

The Board has determined that each member of our Governance Committee meets the requirements for independence under the applicable listing requirements of The Nasdaq Stock Market.

As outlined more specifically in the Governance Committee charter, the Governance Committee has, among other duties, the following responsibilities:

• Reviews and makes recommendations to the Board regarding the size of the Board;

• Identifies individuals qualified to become directors;

• Evaluates and selects, or recommends to the Board, director nominees for each election of directors;

Develops and recommends to the Board criteria for selecting qualified director candidates in the context of the current make-up of the Board;

• Develops and recommends to the Board criteria any other factors that the Governance Committee deems relevant, including those that promote diversity, for selecting qualified director candidates in the context of the current make-up of the Board;

• Considers any nominations of director candidates validly made by our stockholders;

• Conducts an annual evaluation of director independence according to Nasdaq rules, applicable law and our Corporate Governance Guidelines to enable the Board to make a determination of each director’s independence;

• Reviews committee structures and compositions and recommends to the Board concerning qualifications, appointment and removal of committee members;

Develops, recommends for approval by the Board and reviews on an ongoing basis the adequacy of the corporate governance principles applicable us;

Develops and recommends to the Board our Corporate Governance Guidelines;

• Develops, recommends for approval by the Board and reviews on an ongoing basis the adequacy of the corporate governance principles applicable to us;

• Reviews, on a periodic basis, the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to the Board;

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• Assists the Board in the evaluation of the Board and each committee;

• Periodically reviews succession planning for executive officers;

• Periodically reviews and discusses with management our practices with respect to environmental, social and corporate governance issues;

• Periodically reviews the scope of responsibilities of the Governance Committee and the committee's performance of its duties.

The Governance Committee may delegate its responsibilities, along with the authority to take action in relation to such responsibilities, to subcommittees comprised of one or more Governance Committee members, subject to requirements of our bylaws, applicable laws and regulations.

In accordance with our bylaws, our Board establishes additional committees for specific delegated purposes, roles and responsibilities that are temporary in nature.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act, requires our directors, executive officers, and holders of more than 10% of our common stock to file reports regarding their ownership and changes in ownership of our securities with the SEC, and to furnish us with copies of all Section 16(a) reports that they file.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us and certain written representations provided to us, we believe that during the fiscal year ended June 30, 2021, our directors, executive officers, and greater than 10% stockholders complied with all applicable Section 16(a) filing requirements, except that one late Form 4 was filed on September 15, 2020 for each of Ms.

Sara Liu, Mr.

Charles Liang (as the spouse of Ms.

Sara Liu), Mr.

David Weigand, and Mr.

Don Clegg to reflect equity awards made to Ms.

Weigand, and Mr.

Clegg on August 4, 2020.

Executive Compensation

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

In this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer, Chief Financial Officer and other three most highly compensated executive officers who were serving as executive officers at the end of our fiscal year 2020 (collectively referred to as our “named executive officers”).

Our named executive officers and their positions during fiscal year 2020 were:

Charles Liang

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer

Senior Vice President, Worldwide Sales

Compensation Discussion and Analysis (“CD&A”)

In this section we provide an explanation and analysis of the material elements of the compensation provided to our Chief Executive Officer, persons who served as Chief Financial Officer during fiscal year 2021, and our other three most highly compensated executive officers who were serving as executive officers at the end of our fiscal year 2021 (collectively referred to as our “named executive officers”).

Our named executive officers and their positions at the end of fiscal year 2021 were:

Charles Liang President, Chief Executive Officer (“CEO”) and Chairman of the Board

David Weigand (1)

Senior Vice President, Chief Compliance Officer

Senior Vice President, Chief Operating Officer

Senior Vice President, Chief Financial Officer and Chief Compliance Officer

Don Clegg Senior Vice President, Worldwide Sales

George Kao Senior Vice President, Operations

Senior Chief Executive, Strategic Business

Kevin Bauer (1)

Former Senior Vice President, Chief Financial Officer

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Weigand (whose previous title was Senior Vice President, Chief Compliance Officer) assumed the role of Senior Vice President, Chief Financial Officer and Chief Compliance Officer following the resignation of Mr.

Bauer in January 2021.

However, information for Mr.

Bauer is still presented in this Executive Compensation section as Mr.

Bauer served as Chief Financial Officer during a portion of fiscal year 2021.

Hsu served as Senior Vice President, Chief Operating Officer until March 2021.

In March 2021, Mr.

Hsu transitioned to the role of Senior Chief Executive, Strategic Business.

Overview of Compensation

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(1) The chart presents the percentage compensation by compensation component received by the five presented non-CEO named executive officers together (aggregate compensation) as a group, as well as the split between cash and equity compensation for all such persons received in aggregate as a group.

Compensation Philosophy and Objectives—Our Move Toward Performance-Based Compensation Arrangements

Our executive compensation philosophy is to link compensation to corporate performance, particularly the compensation of Mr.

Liang, our CEO.

Starting in fiscal year 2018 (beginning July 1, 2017), we have moved toward an explicit linking of Mr.

Liang’s compensation to performance goals.

This movement began in August 2017, when approximately half of Mr.

Liang’s equity awards for fiscal year 2018 were in the form of performance-based restricted stock units (“PRSUs”).

trend was interrupted during the time when we were not current in filing our periodic reports with the SEC (September 2017 to January 2020).

See our Annual Reports on Form 10-K for fiscal years 2019 and 2020 on file with the SEC for a description of the circumstances that led to us not being able to file our periodic reports during that time.

After we returned to being current in our SEC filings in December 2019, we continued to link more of Mr.

Liang’s compensation to corporate performance, through granting him a special cash award opportunity in March 2020 tied to stock price and other metrics, and a short-term incentive award opportunity in May 2020 tied to corporate performance metrics for fiscal year 2020.

This movement culminated in March 2021, when we changed Mr.

Liang’s compensation to be almost completely performance-based.

As discussed in more detail below, in March 2021, we converted nearly 100% of Mr.

Liang’s compensation to performance-based compensation through the issuance of options (the “2021 CEO Performance Award”) to purchase 1,000,000 shares of our common stock at 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, which vest 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, all as described in greater detail below.

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.

In summary, as of the end of fiscal year 2021, almost all of Mr.

Liang’s compensation for the next five years is based upon us achieving the revenue goals described below and the market price of our common stock meeting the price targets described below.

To fully achieve those goals and targets, our revenue must increase from $3.6 billion for fiscal year 2021 to $8 billion, and the market price of our common stock must reach $120, an increase of 252% from the market price on the day the stock options were awarded.

See below for more details about the 2021 CEO Performance Award.

Through fiscal year 2021, we have utilized explicit linking of compensation to performance metrics less with our other NEOs than we have with Mr.

The extent of such linking is described in greater detail below.

During fiscal year 2022, the Compensation Committee intends to continue exploring (with Mr.

Liang) the appropriate balance between performance-based equity awards like PRSUs and our traditional use of stock options and restricted stock units (“RSUs”) with time-based vesting for future long-term equity programs for other named executive officers.

While PRSUs provide the recipient the opportunity to earn a defined number of shares of our common stock if we and/or the recipient achieve pre-set performance goals over time and have become increasingly common in compensation arrangements in the technology industry generally, we believe that our traditional approach to equity awards has served us well, both historically and in fiscal year 2021.

Process Overview

The Compensation Committee of the Board discharges the Board’s responsibilities relating to compensation of all of our executive officers.

During fiscal year 2020 , the Compensation Committee was comprised of three non-employee directors, all of whom are independent pursuant to the applicable listing rules of NASDAQ and Rule 16b-3 under the Exchange Act.

The agenda for meetings is determined by the Chair of the Compensation Committee with the assistance of our Chief Financial Officer.

During fiscal year 2021, the Compensation Committee was comprised of three non-employee directors through May 28, 2021 and two non-employee directors for the remainder of the fiscal year through June 30, 2021 following the expiration of the term of office of Mr.

Hwei-Ming (Fred) Chan as a director.

All of the non-employee directors who served on the Compensation Committee during fiscal year 2021 were independent pursuant to the applicable listing rules of NASDAQ and Rule 16b-3 under the Exchange Act.

The agenda for meetings is determined by the Chair of the Compensation Committee with the assistance of our Chief Financial Officer and General Counsel.

Committee meetings are regularly attended by our Chief Financial Officer and our General Counsel.

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Our Chief Financial Officer and General Counsel support the Compensation Committee in its work by providing information relating to our financial plans and certain personnel-related data.

the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities.

In addition, the Compensation Committee has the authority under its charter to hire, terminate and approve fees for advisors, consultants and agents as it deems necessary to assist in the fulfillment of its responsibilities.

As part of making an overall assessment of each named executive officer’s role and performance, and structuring our compensation programs for fiscal year 2021, the Compensation Committee reviewed recommendations of our Chief Executive Officer, as well as publicly available peer group compensation data and data compiled by our independent compensation consultant.

Compensation Philosophy and Objectives

Our executive compensation philosophy is to link the named executive officers’ compensation to, and reward, corporate performance.

Commencing in fiscal year 2018, in order to better link executive pay to performance, our Compensation Committee decided that a significant portion of our Chief Executive Officer’s periodic long-term equity awards should be in the form of performance-based restricted stock units (“PRSUs”).

In general, PRSUs represent an opportunity to earn a defined number of shares of our common stock if we and/or the recipient achieve pre-set performance goals over time.

PRSUs generally encourage long-term commitment to the Company and commitment to performance that is designed to boost long-term Company results.

In June 2020, our stockholders approved our 2020 Equity and Incentive Compensation Plan (the “2020 Plan”), and the Compensation Committee currently plans to expand its use of performance-based equity awards like PRSUs in future long-term equity programs for named executive officers in order to more tightly link the investment interests of our stockholders to the compensation interests of our senior executive leaders.

The Compensation Committee considers various sources of comparative data when determining executive compensation levels, including compensation data assembled for the Compensation Committee by Radford, an Aon Hewitt company ("Radford"), from a sample of public companies selected by us.

For fiscal year 2020 compensation decisions, the sample consisted of the following companies:

Ciena Corporation

Infinera Corporation

During fiscal year 2021, the Compensation Committee considered various sources of information and comparative data when structuring the compensation awards issued and determining executive compensation levels, including information and compensation data assembled for the Compensation Committee by Radford, an Aon Hewitt company ("Radford"), from a sample of public companies selected by us.

For the 2021 CEO Performance Award, the Compensation Committee considered similar awards issued by technology companies consisting of Tesla, Axon Enterprise, RH Technologies, Dish Networks, Oracle, and Sorento Therapeutics.

The Compensation Committee engaged Radford in designing, modeling, drafting and reviewing the 2021 CEO Performance Award.

In addition, for other fiscal year 2021 compensation decisions, the sample consisted of the following companies (1) :

Ciena Corporation Infinera Corporation

Juniper Networks, Inc.

Diebold Nixdorf, Incorporated

Diebold Nixdorf, Incorporated NetApp, Inc.

Extreme Networks, Inc.

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The same sample companies were used for fiscal year 2019 and 2020 compensation decisions.

Although Cray Inc.

was acquired by Hewlett Packard Enterprise Company in 2019, it remained included in the information regarding the sample public companies that was used for fiscal year 2020 compensation decisions.

(1) The same sample companies were used for fiscal year 2019, 2020 and 2021.

In selecting the companies for inclusion in the sample, we considered whether the company may compete against us for executive talent.

For fiscal year 2020, the Compensation Committee utilized the independent consultant report developed for fiscal year 2019 as it believed the report continued to be relevant.

(2) Although Cray Inc.

was acquired by Hewlett Packard Enterprise Company in 2019, it remained included in the information regarding the sample public companies that was used for fiscal year 2021 purposes.

Other than with respect to the 2021 CEO Performance Award for which the independent consultant prepared a report in March 2021 at the request of the Compensation Committee, the Compensation Committee utilized for fiscal year 2021 the independent consultant report developed for fiscal year 2019 as it believed the report continued to be relevant.

Recognizing that over-reliance on external comparisons can be of concern, the Compensation Committee used external comparisons as only one point of reference and is mindful of the value and limitations of comparative data.

Key Fiscal Year 2021 Executive Compensation Decisions and Actions

At the beginning of fiscal year 2020, the Compensation Committee decided that it would generally not implement any increases in base salary or annual cash incentive opportunities for, or grant any equity awards to, any of our named executive officers for so long as the Company was not current in filing its periodic reports with the SEC (please refer to our Annual Report on Form 10-K for fiscal year 2019 for background on why we were not current in those filings).

After we became current in our filings with the SEC and our stock was re-listed on the Nasdaq Global Select Market in December 2019, the Compensation Committee reviewed the compensation arrangements for our named executive officers.

As a result of that review, in the fourth quarter of fiscal year 2020 the Compensation Committee increased the base salaries of our named executive officers (to the extent not already increased during the fiscal year) and implemented a short-term cash incentive program that incorporated certain financial metrics and individual goals as performance conditions.

In addition, in March 2020 the Board, upon the recommendation of the Compensation Committee, approved special performance-based cash incentive award opportunities to certain long-term employees.

For many employees, these awards were granted to reward them for their valuable contributions and loyal service to the Company, particularly through the period of time when we were not current in our SEC filings.

In the case of Mr.

Liang and Mr.

Clegg, who were the named executive officers who received such award opportunities, their incentives were specifically linked to Company stock price performance.

The Board selected this design specifically to take into consideration the views expressed by multiple stockholders in connection with the Company’s stockholder outreach program, particularly a desire for the Company to use cash rather than shares for such awards and the character of the performance metrics that must be achieved to earn these awards, thus further aligning Mr.

Liang and Mr.

Clegg’s interests with those of our stockholders.

Clegg’s award, for a target payment of $114,000, was conditioned on the price of our common stock equaling or exceeding $25.80 (a 12% premium over the closing price on the date the Board granted the award opportunity) for any period of 20 consecutive trading days prior to September 30, 2022.

The award condition was satisfied during the fourth quarter of fiscal 2020, and Mr.

Clegg received his target payout of $114,000 in satisfaction of this award.

Liang’s award, for a cash incentive opportunity of up to $8,076,701 (the “Maximum Value”), is subject to the following conditions:

50% of the Maximum Value will be paid to Mr.

Liang only if the average closing price for the Company’s common stock equals or exceeds $31.61 (representing a 15% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding the Board’s decision) for any period of 20 consecutive trading days prior to September 30, 2021, provided that Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved;

provided further that this payment shall be subject to reduction (including possibly a reduction to zero) at the sole discretion of the Board to the extent the Company has not made, in the Board’s determination, adequate progress in remediating its internal weaknesses in its internal control over financial reporting;

50% of the Maximum Value will be paid to Mr.

Liang only if the average closing price for the Company’s common stock equals or exceeds $32.99 (representing a 20% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding the Board’s decision) for any period of 20 consecutive trading days prior to June 30, 2022, provided that Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved.

Regarding Mr.

Liang's award, the relevant stock price goals were not met during fiscal year 2020, and no portion of these amounts were paid to Mr.

Liang during fiscal year 2020, although the award opportunity remains available going forward.

While PRSUs were issued to our Chief Executive Officer, Mr.

Liang, during fiscal year 2018, the Compensation Committee did not grant PRSUs to Mr.

Liang in either fiscal year 2019 or fiscal year 2020, in part because we had only a limited number of shares available under our 2016 Equity Incentive Plan and in part because we were not current in our periodic filings with the SEC until December 2019.

Following the re-listing of our stock on the Nasdaq Global Select Market in January 2020, the Compensation Committee began considering special bonuses to certain of our employees who were most deeply involved in the effort over the prior two years to restate our prior financial statements, bring us current in our SEC filings and re-list our common stock.

After several months of review and consideration, the Compensation Committee determined in May 2020 to make special cash bonus payments to certain of our employees, including $342,784 for Mr.

Bauer and $147,107 for Mr.

For fiscal 2020, the Compensation Committee established a short-term incentive cash program in which each of our named executive officers participated, as described in further detail below under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation.”

During fiscal years 2019 and 2020, the Compensation Committee generally refrained from compensation adjustments for named executive officers until after such time as we became current in our filings with the SEC (which occurred in December 2019) and our stock was re-listed on the Nasdaq Global Select Market (which occurred in January 2020), except in connection with out of the ordinary circumstances, such as a transition in executive officers.

At the beginning of fiscal year 2021 (which began July 1, 2020), the Compensation Committee decided that, in light of (1) the recent increase during the fourth quarter of fiscal year 2020 in the base salaries of named executive officers, (2) the fiscal year 2020 incentive cash program tied to specific performance goals adopted during the fourth quarter of fiscal year 2020 in which each of our named executive officers participated, (3) approval during the third quarter of fiscal year 2020 of special performance-based cash incentive award opportunities linked to stock price to certain long-term employees (which included some of the named executive officers), and (4) special cash bonus payments made to certain of our employees (which included some of the named executive officers), all of which were discussed in the CD&A for fiscal year 2020 included in our most recent proxy statement (the “Prior Year CD&A”), it would generally not implement increases in base salaries or annual cash incentive opportunities for named executive officers, except in connection with out of the ordinary circumstances, such as a transition in executive officers.

In order to further incentivize Mr.

Liang’s continued long-term performance as Chief Executive Officer, the Compensation Committee designed the 2021 CEO Performance Award to be a challenging long-term incentive for future performance.

In connection with the issuance of such award in March 2021, the Compensation Committee noted in particular that the performance thresholds adopted were challenging and could take years to achieve.

In addition, the Compensation Committee sought to help ensure that the 2021 CEO Performance Award would further align Mr.

Liang’s interests with those of the Company’s stockholders over the long-term.

In connection with the grant of the 2021 CEO Performance Award, it was also determined that Mr.

Liang would receive a de minimis salary of $1 per annum (or such other non-waivable minimum wage requirement, if deemed advisable) and no cash bonuses through June 30, 2026.

Liang must also remain as the Company’s Chief Executive Officer (or such other position with the Company as Mr.

Liang and the Board may agree) at the time each goal set forth in the 2021 CEO Performance Award is met in order for the corresponding tranche to vest.

This helps ensure Mr.

Liang’s active leadership of the Company over the long-term.

As a result of our becoming current in our filings with the SEC in December 2019 and stockholder approval of the 2020 Equity and Incentive Compensation Plan at the annual meeting of stockholders held on June 5, 2020, we were in position to also re-commence the grant of equity incentives to our employees during fiscal year 2021, including our named executive officers.

In addition to the special grant to Mr.

Liang of the 2021 CEO Performance Award, during fiscal year 2021, we made grants under the 2020 Equity and Incentive Compensation Plan of equity incentives to each of Mr.

Clegg and Mr.

Kao, which grants were consistent with our historical practice prior to the time we had ceased being current in our periodic filings with the SEC in 2017, all as discussed further below.

Additional Information on the Compensation Committee's Compensation Consultant

For fiscal year 2021, the Compensation Committee utilized information from Radford in making certain named executive officer compensation decisions.

Previously, in fiscal year 2019, Radford had advised the Compensation Committee regarding executive officer compensation decisions and our management had commissioned Radford to provide additional services to management for similar compensation studies to evaluate certain components of total compensation for our employees generally.

Previously, in fiscal year 2019, Radford had advised the Compensation Committee regarding executive officer compensation decisions and our management had commissioned Radford to provide additional services to management for similar compensation studies to evaluate components of total compensation for our employees generally.

In making the adjustments to base salaries for our named executive officers in the fourth quarter of fiscal year 2020, the Compensation Committee relied on information that Radford had provided in both fiscal year 2020 and in fiscal year 2019.

In addition, in connection with evaluating the 2021 CEO Performance Award in fiscal year 2021, the Compensation Committee considered information Radford had provided in March 2021 related to peer group chief executive officer compensation and pay-for-performance analyses, as described above.

In fiscal year 2019, before receiving Radford’s information and assistance, the Compensation Committee assessed the independence of Radford in the light of all relevant factors, including the additional services and other factors required by the SEC, that could give rise to a potential conflict of interest with respect to Radford.

Based on these reviews and assessments, the Compensation Committee did not identify any conflicts of interest raised by the work performed by Radford.

In fiscal year 2020, the Compensation Committee updated its assessment of Radford’s independence and did not identify any conflicts of interest raised by additional work performed by Radford in fiscal year 2020.

In each of fiscal years 2020 and 2021, the Compensation Committee updated its assessment of Radford’s independence and did not identify any conflicts of interest raised by additional work performed by Radford in such fiscal years.

The Role of the Most Recent Stockholder Say-on-Pay Vote

The Compensation Committee, with the entire Board, and our management value the opinions of our stockholders.

At our last annual meeting of stockholders, which was held on June 5, 2020 (the "Fiscal Year 2019 Annual Meeting"), we provided our stockholders the opportunity to vote to approve, on an annual advisory basis, the compensation of our named executive officers as disclosed in the proxy statement for such meeting.

At the meeting, stockholders representing over 91% of the stock present and entitled to vote on this “say-on-pay” proposal approved the compensation of our named executive officers.

Although the say-on-pay vote was non-binding, the Compensation Committee has considered, and expects to continue to consider, the outcome of the vote when making future compensation decisions for our named executive officers.

In addition, while the Fiscal Year 2019 Annual Meeting and therefore the say-on-pay vote were held late in fiscal year 2020, outreach had been made to several significant stockholders prior to the meeting to discuss (among other things) matters related to executive compensation.

Feedback received from such stockholders included a desire that a more significant portion of executive compensation (including future equity awards made following the adoption of the 2020 Plan) be tied to performance based upon the achievement of pre-established goals.

The Compensation Committee currently intends to take this feedback into account when instituting future compensation plans for our executive officers.

As discussed in the Prior Year CD&A, feedback received from stockholders has included a desire that a more significant portion of executive compensation (including future equity awards made following the adoption of the 2020 Equity and Incentive Compensation Plan) be tied to performance based upon the achievement of pre-established goals.

For fiscal year 2021, the Compensation Committee took such prior feedback into consideration when it developed, designed, and granted the 2021 CEO Performance Award.

In addition, prior to granting such award in March 2021, the Compensation Committee (through management) solicited the views of several of our largest stockholders regarding the grants of large, long-term performance based equity incentives, including compensation philosophy embodied by these types of awards, potential size, appropriate performance metrics, the time periods within which such metrics should be achieved, and other terms.

Our last annual meeting of stockholders was held on May 28, 2021 (the "Fiscal Year 2020 Annual Meeting"), and we provided our stockholders the annual opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in the proxy statement for such meeting.

At the meeting, stockholders representing approximately 78% of the stock present and entitled to vote on this “say-on-pay” proposal approved the compensation of our named executive officers.

Although the Fiscal Year 2020 Annual Meeting was held during the latter part of fiscal year 2021 when significant decisions affecting compensation matters for fiscal year 2021 for the named executives had already been made by the Compensation Committee and the say-on-pay vote was non-binding, the Compensation Committee expects to continue to consider the outcome of the vote when making future compensation decisions for our named executive officers.

Role of Executive Officers in the Compensation Process

Each year, management provides recommendations to the Compensation Committee regarding compensation program design and evaluations of executive and Company performance.

In particular, in fiscal year 2020 our Chief Executive Officer and Chief Financial Officer provided the Compensation Committee with their views on the appropriate Company performance considerations for use in our short-term incentive programs.

Management's input was provided based on its view of investor expectations, our operating plans and financial goals, and consideration of the limited availability of shares remaining available for grant under our 2016 Equity Incentive Plan.

In particular, in fiscal year 2021, our Chief Executive Officer provided the Compensation Committee with his views on the merits of large, long-term performance based equity incentives while minimizing other typical compensation components, such as base salary and short-term cash and equity incentives.

Liang was very willing to change his compensation arrangements so that almost all of his compensation for the next five years will depend on whether we achieve the difficult performance metrics embedded in the 2021 CEO Performance Award.

Liang has expressed his view that this change in his compensation arrangements is evidence of his commitment to our Company and his confidence in our future.

Following stockholder approval of the 2020 Equity and Incentive Compensation Plan in June 2020 that had (among other things) refreshed the pool of equity awards available for grant, our Chief Executive Officer and Chief Financial Officer provided the Compensation Committee with their views on non-CEO named executive officer equity grants based on their view of investor expectations and our operating plans and financial goals.

At the end of fiscal year 2021, our Chief Executive Officer provided the Compensation Committee with his views of the nature and extent of our performance against expectations.

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While the Compensation Committee carefully considers all recommendations made by members of management, ultimate authority for all compensation decisions regarding our named executive officers rests with the Compensation Committee and the Board.

Fiscal Year 2020 Named Executive Officer Compensation Components

For fiscal year 2020 , the principal components of compensation for our named executive officers were:

Short-term incentive cash compensation.

In addition, certain of our named executive officers also received some or all of the following additional compensation components, as further described below:

Other short-term discretionary bonuses or one-time cash incentive awards;

Equity-based incentive compensation consisting of grants of stock options and/or PRSUs.

2021 CEO Performance Award Granted in March 2021

Terms of the 2021 CEO Performance Award

On March 2, 2021, the Compensation Committed granted to our Chief Executive Officer, Mr.

Liang, a long-term performance-based option award to purchase up to 1,000,000 shares of the Company’s common stock which may vest in five equal tranches.

Each of the five tranches vests if a specified revenue goal (each, a “Revenue Goal”) and a specified stock price goal (each, a “Stock Price Goal”) is achieved.

Revenue Goals must be achieved by June 30, 2026 (the “Revenue Performance Period”) and Stock Price Goals must be achieved by September 30, 2026 (the “Stock Price Performance Period”).

The 2021 CEO Performance Award was granted with an exercise price equal to $45.00 (the “Exercise Price”), representing a premium of approximately 32% to the closing stock price of $34.08 reported on NASDAQ on March 2, 2021.

The 2021 CEO Performance Award will generally expire on March 2, 2031 and includes, among other terms and conditions, a restriction on the sale of any shares issued upon exercise of the 2021 CEO Performance Award until March 2, 2024, the third anniversary of the date of grant.

The Compensation Committee designed the 2021 CEO Performance Award to be a challenging long-term incentive for future performance, and the Compensation Committee noted in particular that the performance thresholds could take many years to achieve, if they can be achieved at all.

In addition, the Compensation Committee intended that the 2021 CEO Performance Award would further align Mr.

Liang’s interests with those of the Company’s stockholders over the long term.

In connection with the grant of the 2021 CEO Performance Award, Mr.

Liang will receive a de minimis salary of $1 per annum (or such other non-waivable minimum wage requirement, if deemed advisable) and no cash bonuses through June 30, 2026.

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.

This helps ensure Mr.

Liang’s active leadership of the Company over the long term.

The following table sets forth the Revenue Goals which must be achieved by the end of the Revenue Performance Period of June 30, 2026:

Revenue Goals (1)

Absolute Change From Revenue Reported for the Fiscal Year Ended June 30, 2020 (2)

$4.0 billion 20%

$4.8 billion 44%

$5.8 billion 74%

$6.8 billion 104%

$8.0 billion 140%

__________________________

(1) Revenue means the Company’s total revenues, as reported by the Company in its financial statements on Forms 10-Q and 10-K filed with the SEC (but without giving effect to any rounding used in reporting the amounts in Form 10-Q and Form 10-K), for the previous four consecutive fiscal quarters of the Company.

(2) Revenue reported in the Company’s Form 10-K for the fiscal year ended June 30, 2020 was $3,339.3 million.

Revenue reported in this report for the fiscal year ended June 30, 2021 was $3,557.4 million.

The following table sets forth the Stock Price Goals which must be achieved by September 30, 2026:

Stock Price Goals (1)

Absolute Change in Stock Price from Grant Date Stock Price (2)

Absolute Change in Stock Price From $45 Exercise Price

$95 179% 111%

$120 252% 167%

__________________________

(1) Sustained stock price performance is required for each Stock Price Goal to be met, other than in connection with a change in control.

For each Stock Price Goal to be met, the sixty trading day average stock price must equal or exceed the Stock Price Goal.

(2) Utilizes closing stock price on March 2, 2021 of $34.08 per share.

The June 30, 2021 closing stock price was $35.18 per share.

Each of the five tranches vests only when both the applicable Revenue Goal and Stock Price Goal for such tranche are certified by the Compensation Committee as having been met.

A Revenue Goal and a Stock Price Goal that are matched together can be achieved at different points in time and vesting will occur at the later of the achievement certification dates for such Revenue Goal and Stock Price Goal.

Subject to any applicable clawback provisions, policies or other forfeiture terms described in the 2021 CEO Performance Award, once a goal is achieved, it is forever deemed achieved for determining the vesting of a tranche.

There is no automatic acceleration of vesting of the 2021 CEO Performance Award upon a future “change in control”, but any tranches that are unvested as of the date of the change in control will vest upon the change in control if the Stock Price Goal related to that tranche is achieved (the Revenue Goals will be disregarded).

For purposes of determining whether any Stock Price Goal has been achieved, the stock price shall equal the greater of (1) the most recent closing price per share immediately prior to the effective time of such change in control, or (2) the per share common stock price (plus the per share of common stock value of any other consideration) received by our stockholders in the change in control.

To the extent any tranche of the 2021 CEO Performance Award has not vested prior to the change in control, and does not vest in connection with the change of control based on attainment of the relevant Stock Price Goal, as described above, such tranche under the 2021 CEO Performance Award will terminate as of the effective date of the change in control.

Reasons for the 2021 CEO Performance Award

The Compensation Committee’s primary objective in designing the 2021 CEO Performance Award was to help the Company continue to grow and achieve its mission, which would facilitate the creation of significant stockholder value.

Liang has been critical to fulfilling the Company’s mission to be the leading innovator in high-performance, high-efficiency server and storage technology while being committed to protect the environment through, and provide customers with, the most energy-efficient, environmentally-friendly solutions available on the market.

Liang co-founded the Company, has been our Chief Executive Officer and Chairman since our inception, leads the overall management of the Company, and sets our strategic direction.

His experience in running our business, and his continued personal involvement in key relationships with suppliers, customers and strategic partners and directing product innovations, will be extremely valuable to the Company as the Company looks to re-accelerate its growth and meet its bold vision to achieve the Revenue Goals and Stock Price Goals embedded in the 2021 CEO Performance Award.

Liang remains the Company's largest stockholder, and the Compensation Committee believes the 2021 CEO Performance Award helps ensure his commitment and focus on delivering on a long-term vision that can increase stockholder value.

Fiscal Year 2021 Named Executive Officer Compensation Components, Other than the 2021 CEO Performance Award

For fiscal year 2021, the principal components of compensation for our named executive officers (including for the Chief Executive Officer during fiscal year 2021 prior to the grant of the 2021 CEO Performance Award in March 2021) were some or all of the following:

• Base salary;

• Short-term bonuses, some of which are discretionary and some of which are guaranteed;

• Equity-based incentive compensation consisting of grants of stock options and/or RSUs.

We pay base salaries to our named executive officers to provide them with a base level of fixed income for services rendered to us.

Base salary rates for our named executive officers other than the Chief Executive Officer are determined annually by the Compensation Committee based upon recommendations by our Chief Executive Officer, typically taking into account factors such as salary norms in comparable companies and publicly available data regarding compensation increases in our industry, subjective assessments of the nature of the officers' positions and an annual review of the contribution and experience of each named executive officer.

For the Chief Executive Officer, the Compensation Committee considers substantially the same type of information, as well as our overall size in terms of annual revenue, scale and number of employees and the Chief Executive Officer’s overall stock ownership.

The Compensation Committee held base salaries at the same annual rates as were in effect at the end of fiscal 2019 until after we had again become current in filing our periodic reports with the SEC (which occurred in December 2019) and our common stock was relisted on the Nasdaq Global Select Market (which occurred in January 2020).

In the fourth quarter of fiscal year 2020, the Compensation Committee approved increases in base salary rates for the named executive officers, which ranged from approximately 8% to 43%, as disclosed below.

In determining increased base salary rates for fiscal year 2020, the Compensation Committee considered the salary factors discussed in the paragraph above, the contributions the named executive officers made during fiscal year 2020 to regain compliance with our public Company disclosure requirements and achieve a relisting of our shares on the Nasdaq Global Select Market, and the fact that base salary rates during fiscal year 2019 had been maintained at the same levels as in fiscal year 2018 for all named executive officers.

Principal Position During Fiscal Year 2020

Fiscal Year 2019

For the Chief Executive Officer, prior to the grant of the 2021 CEO Performance Award in March 2021, the Compensation Committee had considered substantially the same type of information, as well as our overall size in terms of annual revenue, scale and number of employees and the Chief Executive Officer’s overall stock ownership.

In connection with the grant of the 2021 CEO Performance Award, Mr.

Liang will receive a de minimis salary of $1 per annum (or such other non-waivable minimum wage requirement, if deemed advisable) and no cash bonuses through June 30, 2026.

Other than as discussed in the paragraphs above and below, the Compensation Committee held base salaries at the same annual rates as were in effect at the end of fiscal year 2020.

As had been discussed in the Prior Year CD&A, in the fourth quarter of fiscal year 2020, the Compensation Committee had approved increases in base salary rates for the named executive officers, which ranged from approximately 8% to 43%, after we had again become current in filing our periodic reports with the SEC and our common stock was relisted on the Nasdaq Global Select Market.

In addition, following the assumption of the role of Senior Vice President, Chief Financial Officer and Chief Compliance Officer in February 2021 by Mr.

Weigand, the Compensation Committee approved an adjustment to his base salary to $380,000 per annum, which was substantially identical to the annual base salary of his predecessor.

Hsu’s base salary was also adjusted following a transition in his role (and a decrease in his responsibilities) as discussed in the table below.

Principal Position During Fiscal Year 2021 Fiscal Year 2020

Base Salary Rate

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Base Salary Rate (1)

Charles Liang

President, Chief Executive Officer and Chairman of the Board

Senior Vice President, Chief Financial Officer

Senior Vice President, Worldwide Sales

David Weigand

Senior Vice President, Chief Compliance Officer

Senior Vice President.

Chief Operating Officer

Charles Liang President, Chief Executive Officer and Chairman of the Board $ 522,236 $ 1 (100) %

David Weigand Senior Vice President, Chief Financial Officer and Chief Compliance Officer

$ 337,716 $ 380,000 13 %

Don Clegg Senior Vice President, Worldwide Sales $ 352,000 $ 352,000 — %

George Kao Senior Vice President, Operations $ 325,728 $ 325,728 — %

Alex Hsu Senior Chief Executive, Strategic Business $ 378,000 $ 160,000 (58) %

Kevin Bauer Former Senior Vice President, Chief Financial Officer $ 379,040 $ 379,040 — %

____________________

(1) The base salary amounts actually paid to each named executive officer for fiscal year 2020 and 2021 are disclosed in the Summary Compensation Table.

The fiscal year 2020 salary amounts disclosed in the Summary Compensation Table for each named executive officer are less than the amounts disclosed in the table above because each named executive officer was receiving his fiscal year 2019 base salary rate for a portion of fiscal year 2020.

Effective April 1, 2019.

Liang, the fiscal year 2021 salary amount disclosed in the Summary Compensation Table is higher than the amount disclosed in the table above because Mr.

Liang commenced receiving his $1 de minimis base salary following the grant of the 2021 CEO Performance Award in March 2021;

Weigand, the fiscal year 2021 salary amount disclosed in the Summary Compensation Table is lower than the amount disclosed in the table above because Mr.

Weigand only commenced receiving the amount set forth in the table following his appointment in February 2021 as Senior Vice President, Chief Financial Officer and Chief Compliance Officer;

Hsu, the fiscal year 2021 salary amount disclosed in the Summary Compensation Table is higher than the amount disclosed in the table above because for most of fiscal year 2021 Mr.

Hsu served in the role of Chief Operating Officer at his fiscal year 2020 base salary rate.

In March 2021, Mr.

Hsu transitioned to the role of Senior Chief Executive, Strategic Business, a part-time position, from his prior role as Senior Vice President, Chief Operating Officer and ceased being an executive officer, and his base salary rate was adjusted to the fiscal year 2021 base salary rate in the table above.

Such amount was determined primarily through discussions with the Chief Executive Officer;

Bauer, the fiscal year 2021 salary amount disclosed in the Summary Compensation Table is lower than the amount disclosed in the table above because Mr.

Bauer resigned as Senior Vice President, Chief Financial Officer in January 2021.

Short-Term Incentive Cash Compensation .

As part of its review of executive compensation following the re-listing of our common stock on the Nasdaq Global Select Market, the Compensation Committee implemented a short-term incentive, or “STI,” cash compensation program for fiscal year 2020.

This program was instituted in the fourth quarter of fiscal 2020, at the same time that the Compensation Committee adjusted base salary rates for most of our named executive officers.

The general goal of our STI program for our named executive officers is to support our overall business objectives by aligning short-term Company performance with the interests of investors and focusing attention on key measures of success.

Our STI program accomplishes this goal by providing the opportunity for additional cash rewards when pre-established Company and individual performance goals are achieved.

The Compensation Committee established two financial performance metrics that would determine the STI amount each named executive officer would receive under the STI program.

These two metrics were annual revenue for fiscal year 2020 (determined as reflected in the Company’s audited financial statements) and non-GAAP operating margin for the fourth quarter of fiscal year 2020 (as reported by the Company in its press release announcing fiscal year-end results).

These two metrics were evenly weighted, so that each was to contribute 50% of the STI award payout to be received by each named executive officer.

The Compensation Committee established for each metric a “base” performance goal, a “target” performance goal and a “high” performance goal.

If the Company did not achieve at least the base goal for a performance metric, none of the STI award opportunity associated with that metric could be earned.

For each named executive officer, the Compensation Committee established a target STI award payout opportunity that would be earned if the Company performed exactly at the target goals on both of the two metrics.

As disclosed in the table below, the target STI award opportunity ranged from 20% to 40% of the fiscal year 2020 base salary rate for each named executive officer, except that for Mr.

Liang, his target STI award payout opportunity was set at 100% of his fiscal year 2020 base salary rate.

At the base level of performance for a performance metric, each named executive officer could earn 80% of his target STI award payout opportunity for that performance metric.

At the high level of performance for a performance metric, each named executive officer other than Mr.

Liang could earn either 125% or 135% of his target STI award payout opportunity for that performance metric, and Mr.

Liang could earn 200% of his target STI award payout opportunity for that performance metric.

For actual performance between base, target and high levels, straight-line mathematical interpolation between the applicable payout opportunities would determine the achieved payout level for a performance metric.

The named executive officers’ STI award payout opportunities were determined by the Compensation Committee generally based on factors substantially similar to those described above for base salary determinations.

Two named executive officers, Messrs.

Clegg and Hsu, were provided the opportunity to further increase their STI award payout up to 150% for the annual revenue performance metric if actual performance for that performance metric met or exceeded an additional “stretch” goal above the “high” goal.

This additional opportunity was provided to Messrs.

Clegg and Hsu as they are the named executive officers, other than Mr.

Liang, whose work has the greatest impact on the Company’s annual revenue growth.

The Compensation Committee also assigned each of the named executive officers an individual performance goal to be completed during the fourth quarter of fiscal year 2020 (other than Mr.

Liang, whose STI award payout was determined solely based on the Company financial performance metrics).

Any named executive officer who did not achieve his assigned goal would not be eligible for a STI award payout above his target STI award opportunity, even if the Company’s actual financial performance exceeded the target goal on one or both of the financial performance metrics.

The fiscal 2020 target STI award opportunities for the named executive officers are shown in the following chart:

Named Executive Officer

Fiscal 2020 Target STI Award Amount

Target STI Award as a % of Base Salary Rate

Charles Liang

David Weigand

The Company performance metrics consisted of the following metrics for fiscal 2020:

Fiscal year 2020 revenue - weighted 50%;

Fourth quarter fiscal year 2020 non-GAAP operating margin, generally defined as non-GAAP income from operations as a percentage of net sales (for these purposes, non-GAAP income from operations excludes stock-based compensation expense, legal settlement costs, one-time employee performance bonuses, controls remediation and other expenses from GAAP income from operations) - weighted 50%.

The goals for each Company financial performance metric established for the fiscal 2020 STI awards, and actual results, were as follows (dollars in millions):

Company Performance Metrics, Goals and Actual Achievement

Company Performance Metric

Base Goal (80% of Target Payout)

Target Goal (100% of Target Payout)

High Goal (200%, 125% or 135% of Target Payout)

Stretch Goal (150% of Target Payout)

Actual Result

Percent of Target Goal Earned

FY 2020 Revenue

Q4 2020 Non-GAAP Operating Margin

In terms of the individual goals for the named executive officers (other than Mr.

Liang, whose STI award payout opportunity was based solely on the Company’s performance against the financial performance metrics described above):

Bauer’s goals primarily related to developing both a new corporate-wide budgeting system and the 2021 annual operating plan.

Clegg and Hsu’s goal primarily related to developing customers to support future years’ revenue achievement;

Weigand’s goal primarily related to the Company response to the coronavirus pandemic.

The Compensation Committee, after considering the recommendations of Mr.

Liang (as well as input from the Chairman of the Audit Committee regarding Mr.

Bauer’s performance), and taking into account the degree of achievement of the individual goals, determined each named executive officer's STI award payout.

Each named executive officer’s fiscal year 2020 target STI award opportunity, and actual payout result, were as follows:

Named Executive Officer

Fiscal 2020 Target STI Award Amount

Fiscal 2020 STI Award Payout ($)

Fiscal 2020 STI Award Payout (%)

Charles Liang

David Weigand

In fiscal year 2021, the Compensation Committee did not utilize a uniform short-term incentive cash compensation program for the named executive officers.

As discussed in the Prior Year CD&A, in the fourth quarter of fiscal year 2020 the Compensation Committee had implemented a short-term incentive cash compensation program for fiscal year 2020 with performance goals as part of its review of executive compensation following the re-listing of our common stock on the Nasdaq Global Select Market (which had occurred in January 2020) in order to support our overall business objectives by aligning short-term Company performance with the interests of investors and focusing attention on key measures of success.

Following the completion of such short-term incentive cash program, the Compensation Committee did not believe it was necessary to renew a similar program for fiscal year 2021.

Other Short-Term Bonuses .

We have had individualized short-term cash bonus arrangements with various officers of the Company, including three of our named executives officers.

In some cases, these arrangements pre-date the time that these individuals became executive officers, and in other cases, the arrangements were negotiated at the time the individual was hired or was designated as an executive officer.

In some cases, these arrangements provide for fixed bonus payments and in other cases these arrangements provide for variable bonus payments or a hybrid thereof.

We award these short-term bonuses to certain named executive officers for their continued achievements and contributions to the Company.

The table below summarizes the fiscal year 2020 arrangements for Messrs.

Clegg, Bauer and Weigand.

The arrangements with Mr.

Clegg and Mr.

Bauer terminated as of July 31, 2020, and the arrangement with Mr.

Weigand terminated as of June 30, 2020.”

Fixed bonus, paid monthly, initially at a rate of $80,000 per year, then increased to a rate of $120,000 per year in September 2019.

Bauer is also eligible for less than $2,000 per year in a variable bonus tied to Company performance.

Fixed bonus, paid monthly, at a rate of $84,000 per year, plus $8,242 per year in a variable bonus tied to Company performance and $16,728 per year in a sales bonus based upon achieving certain quarterly sales goals.

David Weigand

Fixed bonus, paid quarterly, at a rate of $75,000 per year.

This bonus was a continuation in fiscal year 2020 of an arrangement agreed at the time of Mr.

Weigand’s initial employment in May 2018.

The Company awarded certain special one-time cash incentive opportunities or made certain special one-time cash payments to Messrs.

Liang, Bauer, Clegg and/or Weigand, as described above under “Key Fiscal Year 2020 Executive Compensation Decisions and Actions.”

During fiscal year 2021, we instead utilized individualized short-term cash bonus arrangements with various officers of the Company, including all of our named executive officers.

In some cases these arrangements pre-date the time that these individuals became executive officers, in other cases the arrangements were negotiated at the time the individual was hired or was designated as an executive officer, and in still other cases the arrangements were new short-term bonus opportunities implemented for fiscal year 2021.

These arrangements provide for fixed bonus payments, variable bonus payments, or a hybrid program.

We award these short-term bonuses to the named executive officers for their continued achievements and contributions to the Company, as further described below.

The table below summarizes the fiscal year 2021 arrangements for the named executive officers.

Charles Liang For a portion of fiscal year 2021, and spurred by the COVID-19 pandemic, we provided employees additional per day compensation for coming into the workplace.

In the United States, both exempt and non-exempt employees were generally eligible for this program based upon the number of days on which they worked on-site, based on a standard rate for each of the exempt and non-exempt employees (the “Workplace Incentive”).

Under the Workplace Incentive, Mr.

Liang received $3,360.

David Weigand In connection with his appointment as Senior Vice President, Chief Financial Officer and Chief Compliance Officer in February 2021, Mr.

Weigand received a fixed bonus, paid quarterly, at a rate of $80,000 per year.

Due to the commencement of the award in February 2021, Mr.

Weigand received only half of the annual amount for fiscal year 2021 ($40,000).

This bonus amount is similar in both structure and amount to what was provided to Mr.

Weigand’s predecessor upon his initial appointment to the position.

Under the Workplace Incentive, Mr.

Weigand received $3,360.

Don Clegg Mr.

Clegg received a fixed bonus, paid monthly, at a rate of $84,000 per year.

Due to the termination of this program after July 2020, however, Mr.

Clegg received only 1/12th of the annual amount for fiscal year 2021 ($7,000).

Under the Workplace Incentive, Mr.

Clegg received $2,990.

George Kao Under the Workplace Incentive, Mr.

Kao received $3,168.

Alex Hsu Under the Workplace Incentive, Mr.

Hsu received $768.

Kevin Bauer Mr.

Bauer received a fixed bonus, paid monthly, initially at a rate of $80,000 per year, then increased to a rate of $120,000 per year in September 2019.

Due to the termination of this program after July 2020, however, Mr.

Bauer received only 1/12th of the annual amount for fiscal year 2021 ($10,000).

Under the Workplace Incentive, Mr.

Bauer received $3,408.

Equity-Based Incentive Compensation .

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They also provide named executive officers a significant, long-term interest in our success and help retain key named executive officers in a competitive market for executive talent.

The 2016 Equity Incentive Plan authorized the Compensation Committee to grant stock options and other equity-based awards to eligible named executive officers.

The number of shares owned by, or subject to equity-based awards held by, each named executive officer is periodically reviewed and additional awards are considered based upon a generalized assessment of past performance, expected future performance and the relative holdings of other executive officers.

The 2020 Equity and Incentive Compensation Plan authorized the Compensation Committee to grant stock options and other equity-based awards to eligible named executive officers.

The number of shares owned by, or subject to equity-based awards held by, each

named executive officer is periodically reviewed and additional awards are considered based upon a generalized assessment of past performance, expected future performance and the relative holdings of other executive officers.

The Compensation Committee has historically granted equity awards to employees on a two-year cycle.

Stockholders approved the 2020 Plan at the Fiscal Year 2019 Annual Meeting.

As a result, while outstanding awards issued under the 2016 Equity Incentive Plan will continue to be governed by that plan, no new grants are permitted to be made under the 2016 Equity Incentive Plan and we expect to make all future equity awards out of the 2020 Plan.

Due to the fact that we failed to file our 2017 10-K by its due date, the effectiveness of our registration statement on Form S-8 covering equity awards under our 2016 Equity Incentive Plan was suspended.

Due to the fact that we failed to file our 2017 Form 10-K by its due date, the effectiveness of our registration statement on Form S-8 covering equity awards under our prior 2016 Equity Incentive Plan was suspended.

It remained suspended until December 20, 2019, the date on which we had completed filing all of our delinquent quarterly and annual reports with the SEC.

The effectiveness of our registration statement on Form S-8 for the 2016 Equity Incentive Plan was then revived.

The Compensation Committee did not make equity awards to our named executive officers during the period of time when our registration statement on Form S-8 for the 2016 Equity Incentive Plan was not effective.

With the adoption of the 2020 Plan, and the effectiveness of a Form S-8 registration statement for that plan and awards granted under it, our Compensation Committee expects that it will grant additional equity awards to our named executive officers that will reflect the lack of equity

awards for a period of time after the effectiveness of our registration statement on Form S-8 for our prior 2016 Equity Incentive Plan was suspended.

For fiscal year 2020, the Compensation Committee determined to provide the awards of stock options and PRSUs as outlined in the table below.

The equity grants to Mr.

Hsu were made during the last quarter of fiscal year 2020 in connection with his promotion to Chief Operating Officer (or COO).

Type of Award

Quantity (at Target) of Award

Rationale for Providing

(or Not Providing) the Award

Charles Liang

· Registration statement on Form S-8 not effective

The effectiveness of our registration statement on Form S-8 for the prior 2016 Equity Incentive Plan was then revived.

With the adoption of the 2020 Equity and Incentive Compensation Plan, and the effectiveness of a Form S-8 registration statement for that plan and awards granted under it on June 16, 2020, our Compensation Committee has granted, and expects that it will continue to grant, additional equity awards to our named executive officers that will reflect the lack of equity awards for the period of time during which the effectiveness of our registration statement on Form S-8 for our prior 2016 Equity Incentive Plan was suspended.

We expect to make all future equity awards out of the 2020 Equity and Incentive Compensation Plan.

For fiscal year 2021, which commenced July 1, 2020, the Compensation Committee determined to provide the awards of performance-based stock options, service-based stock options and RSUs to named executive officers as outlined in the table below.

Type of Award Quantity (at Target) of Award Rationale for Providing the Award

Charles Liang Performance options 1,000,000 Long-term incentive (1)

David Weigand (2)

· Registration statement on Form S-8 not effective

· Stock options

· Granted in connection with promotion to COO

Stock options 8,000 Refresh grant

RSUs 3,600 Refresh grant

Don Clegg Stock options 7,500 Refresh grant

RSUs 3,380 Refresh grant

George Kao Stock options 5,410 Refresh grant

RSUs 2,430 Refresh grant

__________________________

(1) See “2021 CEO Performance Award Granted in March 2021” above for additional information.

Weigand assumed the role of Senior Vice President, Chief Financial Officer and Chief Compliance Officer following the resignation of Mr.

Bauer in January 2021.

Hsu served as Senior Vice President, Chief Operating Officer until March 2021.

In March 2021, Mr.

Hsu transitioned to the role of Senior Chief Executive, Strategic Business.

Hsu did not receive any new grants of equity awards during fiscal year 2021, the original vesting schedules for his awards outstanding as of February 28, 2021 were continued despite his reduction in responsibilities effective March 1, 2021, and his awards were deemed modified for accounting purposes.

For more information about modification fair value for Mr.

Hsu’s awards relating to his transition, please see the “Fiscal Year 2021 Summary Compensation Table” and “Fiscal Year 2021 Grants of Plan-Based Awards Table” below.

Stock Options .

In general, the Compensation Committee uses stock options to directly align the compensation interests of participating named executive officers with the investment interests of our stockholders.

See “2021 CEO Performance Award Granted in March 2021” for additional information regarding the grant of the long-term performance-based option award to Mr.

The stock options described above for each of Messrs.

Weigand and Clegg were granted on August 4, 2020 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($30.33 per share).

Subject to the continued service of such named executive officers, these stock options vest and become exercisable at the rate of 25% of the shares on May 1, 2021, and 1/16th at the end of each successive calendar quarter thereafter.

The Compensation Committee had approved utilizing May 1, 2021 as the first vesting date because (if not for the delay in the Company’s ability to issue equity incentive awards because it did not have an effective registration statement on Form S-8 covering equity awards under its equity incentive plans) such awards otherwise would have been made for these named executive officers on or prior to May 1, 2020 as part of their two-year award cycle.

The stock options described above for Mr.

Hsu were granted on March 27, 2020 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($20.37 per share).

These stock options vest at a rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

Liang first discussed Mr.

Hsu assuming the role of COO in March 2019 and discussed an equity grant with a two-year vesting period.

The particular size of the stock option grant was determined based upon negotiation with Mr.

Hsu and the recommendation of Mr.

Hsu’s formal appointment as COO did not occur until September 6, 2019 and the grant of the equity award that had been discussed was delayed until after our common stock had been re-listed on the Nasdaq Global Select Market.

This equity award was granted under the 2016 Equity Incentive Plan, which required a minimum vesting period of one year.

When the first vesting date of March 27, 2021 occurs, seven quarters will have elapsed since Mr.

Liang first discussed the change in Mr.

Hsu’s role, and the vesting of 7/8ths of the stock option award reflects that history.

In general, PRSUs represent the right to receive a defined number of shares of our common stock subject to the achievement of pre-established goals.

The PRSUs described above for Mr.

Hsu were granted on March 27, 2020.

The Compensation Committee determined the particular size of the PRSU grant to Mr.

Hsu based on similar sized grants in prior years to other executives and upon the recommendation of Mr.

In general, a total of 30,000 units will vest based on service conditions only, with the first tranche of 15,000 vesting in May 2021 and 15,000 vesting in November 2021.

Additional units can be earned for each tranche if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

With respect to the first tranche, if the Company’s revenue for fiscal year 2020 exceeded its revenue for fiscal year 2019, then a number of additional units would have been earned for the first tranche.

Kao were granted on October 27, 2020 with a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($23.74 per share).

Subject to the continued service of such named executive officer, the grant is generally exercisable at the rate of 25% of the options granted on October 27, 2021, and then 1/16th at the end of each successive calendar quarter thereafter.

The particular size of the stock option grants to each of these named executive officers was determined based upon the recommendation of Mr.

Liang which was reviewed and approved by the Compensation Committee.

In general, RSUs represent the right to receive a defined number of shares of our common stock subject to the continued employment through the vesting date.

The RSUs described above for each of Messrs.

Weigand and Clegg were granted on August 4, 2020.

Subject to the continued service of such named executive officers, these RSUs vest at the rate of 25% of the total number of units on May 10, 2021, and 1/16th at the end of each successive calendar quarter thereafter.

The Compensation Committee had approved utilizing May 10, 2021 as the first vesting date because (if not for the delay in the Company’s ability to issue equity incentive awards because it did not have an effective registration statement on Form S-8 covering equity awards under its equity incentive plans) such awards otherwise would have been made for these named executive officers on or prior to May 10, 2020 as part of their two-year award cycle.

The RSUs described above for Mr.

Kao were granted on October 27, 2020.

Subject to the continued service of such named executive officer, these RSUs vest at the rate of 25% of the total number of units on November 10, 2021, and 1/16th at the end of each successive calendar quarter thereafter.

The particular size of the RSU grants to each of these named executive officers was determined based upon the recommendation of Mr.

Liang which was reviewed and approved by the Compensation Committee.

PRSUs represent the right to receive a defined number of shares of our common stock subject to the achievement of pre-established goals.

Hsu received a grant of 30,000 in target PRSUs on March 27, 2020.

In general, a total of 30,000 units were to vest based on service conditions only, with the first tranche of 15,000 vesting in May 2021 and 15,000 vesting in November 2021.

Additional units could have been earned for each tranche if the Company’s revenue increased year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

With respect to the first tranche, the Company’s revenue for fiscal year 2020 ($3,339 million) did not exceed revenue for fiscal 2019 ($3,500 million), so no additional units were earned for the first tranche.

With respect to the second tranche, if the Company’s revenue for fiscal year 2021 exceeded its revenue for fiscal year 2020, then a number of additional units would have been earned for the second tranche.

The number of additional units was to be determined by multiplying the percentage growth in revenue by three, which amount would have then been a multiplier of the base number of 15,000 units.

For example, if the Company’s growth rate from fiscal 2019 to fiscal 2020 had been 10%, the number of additional units would have been 4,500 (30% of 15,000 units).

The Company’s revenue for fiscal year 2020 ($3,339 million) did not exceed revenue for fiscal 2019 ($3,500 million), however, so no additional units were earned for the first tranche.

Similarly, with respect to the second tranche, if the Company’s revenue for fiscal year 2021 exceeds its revenue for fiscal year 2020, then a number of additional units will be earned for the second tranche.

The number of additional units will again be determined by multiplying the percentage growth in revenue by three, which amount will be a multiplier of the base number of 15,000 units.

Based upon the Company’s revenue for fiscal year 2021 ($3,557 million) increased from revenue for fiscal year 2020, management has calculated that for the second tranche, approximately 2,939 additional units were earned, such that a total of 17,939 units will vest in November 2021.

Such amount remains subject to final certification by the Compensation Committee.

Update on Special Performance-Based Cash Incentive Award Granted in March 2020

As discussed in the Prior Year CD&A, in March 2020, the Board, upon the recommendation of the Compensation Committee, approved special performance-based cash incentive award opportunities to certain long-term employees, including Mr.

Liang, our Chief Executive Officer.

This incentive for Mr.

Liang was specifically linked to Company stock price performance.

Liang’s award, for a cash incentive opportunity of up to $8,076,701 (the “Maximum Value”), was subject to the following conditions:

• 50% of the Maximum Value will be paid to Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved;

• 50% of the Maximum Value will be paid to Mr.

Liang only if the average closing price for the Company’s common stock equals or exceeds $32.99 (representing a 20% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding the Board’s decision) (the “Second Price Target”) for any period of 20 consecutive trading days prior to June 30, 2022, provided that Mr.

Liang remains employed with the Company through the date that such common stock price goal is achieved.

The relevant stock price goals under Mr.

Liang’s award were not met during fiscal year 2020, and no portion of these amounts were paid to Mr.

Liang during fiscal year 2020.

During fiscal year 2021, the First Price Target was achieved based upon stock price performance from December 22, 2020 through January 21, 2021.

As of August 27, 2021, the Board has not yet determined whether to exercise any negative discretion with respect to the first 50% of the Maximum Value earned by Mr.

Liang (as described in the first bullet point above), and no portion of the first 50% of the Maximum Value has yet been paid to Mr.

Liang through such date.

The Board is expected to make a final determination whether to exercise any negative discretion by October 31, 2021.

However, due to the fact that we currently expect that the Board will determine that the Company has made adequate progress in remediating the Company’s material weaknesses in its internal control over financial reporting, we have chosen to disclose the first 50% of the Maximum Value as having been earned by Mr.

Liang for fiscal year 2021, and are

disclosing it as an earned amount in the Summary Compensation Table below, all in advance of formal Board determination.

Also during fiscal year 2021, the Second Price Target was achieved based upon stock price performance from February 8, 2021 through March 8, 2021.

Payment of the 50% of the Maximum Value relating to the Second Price Target was made to Mr.

Liang during the fourth quarter of fiscal year 2021.

As a result of these activities and achievements, we currently consider 100% of the Maximum Value to have been earned by Mr.

Liang for fiscal year 2021.

Former CFO Consulting Arrangement

Prior to ceasing employment with the Company as Chief Financial Officer, in February 2021 Mr.

Bauer entered into a consulting arrangement with the Company related to reinforcing a smooth transition of his prior duties, and providing general consultation and advice services.

The term of the arrangement is for one year with a monthly fee of $13,334 for services.

As a result of the consulting service provided for in the consulting arrangement, Mr.

Bauer's outstanding equity awards generally will continue to vest during the consulting period in accordance with their terms and the period Mr.

Bauer was permitted to exercise his awards was extended until May 25, 2022.

Assuming a stock price equal to $32.50 (our closing stock price on February 25, 2021, Mr.

Bauer’s last day of employment), the intrinsic value of the unvested awards subject to such continued vesting was approximately $40,500 in stock options and $0 in RSUs.

On April 27, 2021, Mr.

Bauer was also granted 10,000 stock options to compensate his consulting efforts in a smooth transition of his prior duties, and his provision of general consultation and advice services.

Such stock options have a 10-year term and an exercise price equal to the closing market price of our common stock on the grant date ($38.50 per share).

Subject to the continued provision of consulting services, these stock options vest and become exercisable at the rate of 100% of the shares on February 25, 2022.

The number of shares subject to these stock options was determined primarily through discussions with the Chief Executive Officer.

Stock Ownership Guidelines

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The Compensation Committee is satisfied that stock and option holdings among our directors and named executive officers have historically been sufficient to provide motivation and to align this group’s interests with those of our stockholders.

Our insider trading policy prohibits any of our directors, executive

officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and other derivative securities, including any hedging or similar transaction, with respect to our common stock.

Our insider trading policy prohibits any of our directors, executive officers, employees or contractors from engaging in any transactions in publicly-traded options, such as puts and calls, and other derivative securities, including any hedging or similar transaction, with respect to our common stock.

Stock Retention Policy

We have adopted a stock retention policy which requires that our Chief Executive Officer hold a significant portion of the shares of our common stock acquired under our equity incentive plans for at least 36 months.

Under the policy, the Chief Executive Officer must retain at least 50% of all “net” shares received (“net” shares means those shares remaining after the sale or withholding of shares in payment of the exercise price, if applicable, and withholding taxes) for at least 36 months following the date on which an equity award is vested, settled or exercised, as applicable.

Generally, under the policy, the Chief Executive Officer must retain at least 50% of all “net” shares received (“net” shares means those shares remaining after the sale or withholding of shares in payment of the exercise price, if applicable, and withholding taxes) for at least 36 months following the date on which an equity award is vested, settled or exercised, as applicable.

In addition, in connection with the 2021 CEO Performance Award granted to our Chief Executive Officer in March 2021, the Board required a restriction on the sale of any shares issued upon the exercise of the options associated with such award until March 2, 2024, the third anniversary of the grant date.

See “2021 CEO Performance Award Granted in March 2021.”

Recoupment Policy

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Employment Arrangements, Severance and Change of Control Benefits.

We have not entered into employment agreements with any of our named executive officers.

We have not entered into employment agreements with any of our named executive officers (we have entered into a consulting agreement with Mr.

Bauer, which is further described above under “- Former CFO Consulting Arrangement”).

Each of Messrs.

Bauer, Clegg, Weigand, and Hsu currently has a signed offer letter which provides for at-will employment.

Clegg, Hsu, Kao and Weigand currently has a signed offer letter which provides for at-will employment.

Each such offer letter provides for an initial base salary rate, an initial stock option grant and rights to participate in our employee benefit plans as described above.

Prior to his departure in February 2021, Mr.

Bauer had a substantially similar offer letter.

We do not have any written employment arrangements with Mr.

We do not have any arrangements with any of our named executive officers that provide for any severance or other benefits in the event of termination or change of control of our Company.

Tax and Accounting Treatment of Compensation.

Other than as described in the following sentence, we do not have any arrangements with any of our named executive officers that provide for any severance or other benefits in the event of termination or change of control of our Company.

See also “- Fiscal Year 2021 Potential Payments Upon Termination or Change of Control.” The 2021 CEO Performance Award has certain provisions related to the treatment of such award in the event of a change of control of our Company.

See “2021 CEO Performance Award Granted in March 2021.”

Tax and Accounting Considerations.

In our review and establishment of named executive officer compensation programs and payments, we consider, but do not place substantial emphasis on, the anticipated accounting and tax treatment of our compensation programs to us and our named executive officers.

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Internal Revenue Code of 1986, as amended (the “Code”), generally limits a Company’s ability to deduct for tax purposes compensation in excess of $1.0 million paid in any single tax year to certain executive officers (and, beginning in 2018, certain former executive officers).

Prior to 2017 tax reform legislation, compensation deemed to be performance-based in accordance with Section 162(m) could be exempt from this $1.0 million limitation, and compensation paid to the Chief Financial Officer was not subject to the deductibility limitation of Section 162(m).

After the 2017 tax reform legislation, this performance-based exception no longer applies, except for the performance-based compensation that is grandfathered;

and compensation paid to the Chief Financial Officer is subject to the deductibility limitation of Section 162(m).

This legislation change did not have material impact to the Company for fiscal year 2020.

We continue to evaluate the impact of the 2017 tax reform legislation and related guidance and regulations for their potential impact on our Company.

of that impact, however, we will continue to design and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes.

In addition, because of the uncertainties associated with the application and interpretation of Section 162(m) and the regulations issued thereunder, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m), as in effect prior to 2018, will in fact be deductible.

We expect to continue to design and maintain executive compensation arrangements that we believe will attract and retain the executive talent that we need to compete successfully, even if in certain cases such compensation is not deductible for federal income tax purposes.

In addition, there can be no assurance that compensation intended to satisfy the requirements for deductibility under Section 162(m) will in fact be deductible.

We account for equity compensation paid to our employees in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Stock-Compensation (“ASC Topic 718”), which requires us to estimate and record expenses for each award of equity compensation over the service period of the award.

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Sherman Tuan, Chair

Hwei-Ming (Fred) Tsai

Fiscal Year 2021 Summary Compensation Table

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Name and Principal

Position Year Salary

Charles Liang 2021 421,785 3,360 — 11,616,000 8,076,701 — 20,117,846

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and Chairman of the Board 2020 423,346 — — — 875,635 — 1,298,981

Senior Vice President, Chief Financial Officer

Senior Vice President, Worldwide Sales

2019 386,212 — — — — — 386,212

David Weigand 2021 367,709 43,360 109,188 113,280 — — 633,537

Senior Vice President, Chief Compliance Officer

Senior Vice President, Chief Operating Officer

Senior Vice President, Chief Financial Officer and Chief Compliance Officer

2020 300,347 222,107 — — 78,970 — 601,424

2019 270,000 48,921 221,000 215,600 — — 755,521

Don Clegg 2021 362,140 9,990 102,515 106,200 — — 580,845

Senior Vice President, Worldwide Sales 2020 348,459 108,970 — — 290,581 — 748,010

2019 336,910 146,419 132,600 215,600 — — 831,529

George Kao 2021 333,858 6,273 57,688 60,213 — — 458,032

Senior Vice President, Operations 2020 324,807 4,524 68,851 15,288 152,333 — 565,803

2019 305,060 4,262 — 39,323 — — 348,645

2021 305,333 768 452,964 475,592 — — 1,234,657

Senior Chief Executive, Strategic Business 2020 374,845 5,048 611,100 372,400 189,624 — 1,553,017

2019 206,340 2,623 60,112 172,480 — — 441,555

Kevin Bauer (7)

2021 294,575 13,408 — 426,500 — 53,336 787,819

Former Senior Vice President, Chief Financial Officer 2020 363,954 460,967 — — 164,441 — 989,362

2019 340,356 80,004 — — — — 420,360

__________________________

(1) Amounts disclosed under "Salary" for fiscal year 2021 include leave pay earned by the named executive officers.

Amounts disclosed under “Bonus” for fiscal year 2020 reflect both (a) short-term bonuses for Messrs.

Bauer, Clegg and Weigand as described above in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Other Short-Term Bonuses” and (b) for Mr.

Bauer and Mr.

Weigand, additional bonuses paid in fiscal year 2020 in the amounts of $342,784 and $147,107, respectively (as described above in “Compensation Discussion and Analysis”).

The amount disclosed for fiscal year 2020 represents the grant date fair value of the PRSU award granted during the fiscal year calculated in accordance with ASC Topic 718 and is based on the probable outcome of the performance conditions on the date of grant.

(2) Amounts disclosed under “Bonus” for fiscal year 2021 reflect short-term bonuses earned by each of the named executive officers.

See discussion under “Compensation Discussion and Analysis” for more information about these individualized programs.

(3) The amount disclosed for fiscal year 2021 represents the grant date fair value of the RSU award granted during the fiscal year to the named executive officer calculated in accordance with ASC Topic 718 (plus, for Mr.

Hsu, the modification fair value for the continuation of the original vesting schedules for his awards outstanding as of February 28, 2021 despite his reduction in responsibilities effective March 1, 2021 (based on a deemed modification for accounting purposes)), in each case as further described in the Fiscal Year 2021 Grants of Plan-Based Awards table below.

Assumptions used in the calculation of this amount are included in Part II, Item 8, “Financial Statement and Supplementary Data”, and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2021 included in this Annual Report on Form 10-K.

There is no maximum grant date fair value for Mr.

Hsu’s fiscal year 2020 PRSU award because the award does not specify a maximum amount of PRSUs that may be earned (there is no cap on the maximum performance achievement for the revenue growth performance metric).

The amount disclosed for fiscal year 2020 represents the grant date fair value of the stock option award calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model.

Assumptions used in the calculation of this amount are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2020 included in this Annual Report on Form 10-K.

Amounts disclosed in this column for fiscal year 2020 represent:

(a) for each named executive officer, the fiscal 2020 STI payout as described above in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation”;

and (b) for Mr.

Clegg, the special one-time cash payment of $114,000 that was earned in fiscal year 2020 based on the achievement of the specified stock price condition (as described above in the “Compensation Discussion and Analysis”).

(4) The amount disclosed for fiscal year 2021 represents the grant date fair value of the stock option award for each named executive officer calculated in accordance with ASC Topic 718, using the Black Scholes option-pricing model (plus (A) for Mr.

Bauer, the modification fair value for a modification of the post-employment termination exercise period for 70,000 in vested stock options held by Mr.

Bauer as of February 25, 2021, and (B) for Mr.

Hsu the modification fair value for the continuation of the original vesting schedules for his awards outstanding as of February 28, 2021 despite his reduction in responsibilities effective March 1, 2021 (based on a deemed modification for accounting purposes)), in each case as further described in the Fiscal Year 2021 Grants of Plan-Based Awards table below.

The amount set forth in the table above with respect to Mr.

Liang’s award represents our determination of probable outcome of the performance conditions embedded in the 2021 CEO Performance Award as of the date of

If the maximum level of performance is achieved with respect to this award (in other words, if we achieve the $8.0 billion revenue target and our common stock reaches the $120.00 per share price target, the grant date fair value of the award will be $13,882,000.

These amounts do not necessarily correspond to the actual values that may be realized by the named executive officers, which depend, among other things, on the market value of our common stock appreciating from that on the grant dates of the options.

This award was designed to be entirely an incentive for future performance that could take many years, if at all, to be achieved.

Further, each of the stock price targets (starting at $45.00 and rising to $120.00) and revenue targets (starting at $4.0 billion and rising to $8.0 billion) was selected to be very difficult to achieve.

If any options have not vested by the end of the term of the option award, they will be forfeited and Mr.

Liang will not realize any value from such options.

As of the date of this filing, none of the revenue or stock price goals has been achieved.

Furthermore, the exercise price of $45.00 per share is 32% higher than the closing price of our common stock on the date the 2021 CEO Performance Award was granted AND exceeds the highest price at which our common stock has ever traded as of the date of this filing.

Even if we achieve the first revenue goal of $4.0 billion and the first stock price goal of $45.00 is also met, so that the first tranche of the 2021 CEO Performance Award vests, Mr.

Liang will realize no gain on the shares covered by the first tranche unless he exercises the option for the first tranche of shares and thereafter our common stock trades at a price higher than $45.00 per share.

Assumptions used in the calculation of these amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2021 included in this Annual Report on Form 10-K.

(5) The amount disclosed in this column for fiscal year 2021 represents for Mr.

Liang $8,076,701 in Maximum Value deemed earned under a special performance-based cash incentive award opportunity granted to Mr.

Liang in March 2020.

See “Update on Special Performance-Based Cash Incentive Award Granted in March 2020” above for more information about this award.

Hsu served as Senior Vice President, Chief Operating Officer until March 2021.

In March 2021, Mr.

Hsu transitioned to the role of Senior Chief Executive, Strategic Business.

Bauer resigned as our Chief Financial Officer in January 2021, and Mr.

Weigand has assumed such role.

Bauer served as consultant after his resignation from the Company and earned $53,336 in consulting fees for fiscal year 2021.

Fiscal Year 2021 Grants of Plan-Based Awards

The following table provides information concerning all plan-based awards granted during fiscal year 2020 to each of our named executive officers, which grants were made under the 2016 Equity Incentive Plan.

The following table provides information concerning all plan-based awards granted during fiscal year 2021 to each of our named executive officers, which grants were made under the 2020 Equity and Incentive Compensation Plan.

FISCAL YEAR 2021 GRANTS OF PLAN-BASED AWARDS TABLE

Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)

Estimated Future Payouts Under Equity Incentive Plan Awards

Exercise or Base Price of

Estimated Future Payouts Under Equity Incentive Plan Awards All Other

Units (#) All Other

Options (#) Exercise or Base Price of

Option Awards

Threshold ($)

Threshold (#)

Name Grant Date Threshold (#) Target

(#) Maximum (#)

Charles Liang (2)

3/2/2021 200,000 1,000,000 1,000,000 — — $ 45.00 $ 11,616,000 (6)

David Weigand 8/4/2020 — — — — 8,000 30.33 113,280

8/4/2020 — — — 3,600 — — 109,188

Amounts in the first row reflect the STI award opportunities established for the named executive officers.

The amounts actually earned by the named executive officers for these awards are included in the “Non-Equity Incentive Plan Compensation” column of the 2020 Summary Compensation Table above.

These STI awards are described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Short-Term Incentive Cash Compensation.” The second row of amounts for Mr.

Liang and Mr.

Clegg reflect special cash incentive award opportunities.

These awards are described in further detail in the “Compensation Discussion and Analysis” under “Key Fiscal Year 2020 Executive Compensation Decisions and Actions.”

Amounts disclosed in this column represent the fair value of the PRSU and stock option award as of the date of grant (for the PRSU award, based upon the probable outcome of performance conditions), computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures.

The performance-based portion of Mr.

Hsu’s PRSU grant (reported in the “Estimated Future Payouts Under Equity Incentive Plan Awards” columns of this table) is in addition to the service-based portion of his PRSU grant (reported in the “All Other Stock Awards:

Number of Shares of Stock or Units” column of this table).

Under the performance-based portion, units can be earned for each of two tranches if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

For each tranche, the number of additional units is (or was to be) determined by multiplying the percentage growth in revenue by three, which amount would then be a multiplier of the base number of 15,000 units.

For example, if the Company’s growth rate from fiscal 2019 to fiscal 2020 had been 10%, the number of additional units would have been 4,500 (30% of 15,000 units).

The threshold, target, and maximum columns do not include specific values because Mr.

Hsu’s award does not provide for a threshold, target or maximum number of units that may be earned.

Of the PRSUs to be earned based on performance in fiscal 2020, 100% were to vest in May 2021, and of the PRSUs to be earned based on performance in fiscal 2021, 100% will vest in November 2021.

The Company’s performance for fiscal 2020 resulted in no PRSUs being earned under the first tranche of this award.

Under the service-based portion of Mr.

Hsu’s PRSU grant, in general a total of 30,000 units will vest based on service conditions only, with the first tranche of 15,000 vesting in May 2021 and 15,000 vesting in November 2021.

This PRSU award is described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Equity-Based Incentive Compensation.”

This stock option grant vests at a rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

Don Clegg 8/4/2020 — — — — 7,500 30.33 106,200

8/4/2020 — — — 3,380 — — 102,515

George Kao 10/27/2020 — — — — 5,410 23.74 60,213

10/27/2020 — — — 2,430 — — 57,688

Alex Hsu 3/1/2021 — (3)

3/1/2021 — — — — (4)

Kevin Bauer 4/27/2021 — — — — 10,000 38.50 183,600

2/25/2021 — — — — (5)

_________________________

(1) Amounts disclosed in this column represent the fair value of the RSU and stock option awards as of the date of grant (for Mr.

Liang’s stock option award, based upon the probable outcome of the performance conditions), computed in accordance with ASC Topic 718, excluding the effect of estimated forfeitures.

(2) These stock options are performance-based and shall vest and become exercisable depending upon the degree of satisfaction of both the Stock Price Goals and Revenue Goals discussed above in CD&A.

The Stock Price Goals must be achieved on or prior to September 30, 2026 and the Revenue Goals must be achieved on or prior to June 30, 2026.

The options may vest in tranches of 200,000 shares each only when coordinating Stock Price Goals and Revenue Goals, respectively, of $45.00 sixty-trading-day-average stock price and $4.0 billion in four-consecutive-fiscal-quarter revenue, $60.00 sixty-trading-day-average stock price and $4.8 billion four-consecutive-fiscal-quarter revenue, $75.00 sixty-trading-day-average stock price and $5.8 billion four-consecutive-fiscal-quarter revenue, $95.00 sixty-trading-day-average stock price and $6.8 billion four-consecutive-fiscal-quarter revenue, and $120.00 sixty-trading-day-average stock price and $8.0 billion four-consecutive-fiscal-quarter revenue, are achieved.

amount of these stock options (threshold) that can be earned based on performance is vested stock options for 200,000 shares for achieving a Stock Price Goal of $45.00 sixty-trading-day-average stock price and a Revenue Goal of $4.0 billion in four-consecutive-fiscal-quarter revenue.

However, even if those goals are achieved, if the Company’s stock price remained at $45.00 per share, based on the $45.00 exercise price for these stock options, there would be no appreciation value in those stock options for Mr.

For more information about the operation of this award, see “2021 CEO Performance Award Granted in March 2021” above.

(3) In connection with his change in role with us effective March 1, 2021, the remaining PRSUs and unvested RSUs held by Mr.

Hsu as of March 1, 2021 were deemed modified for accounting purposes.

The value disclosed in this row reflects the modification fair value for the modification of Mr.

Hsu’s remaining PRSUs and unvested RSUs.

(4) In connection with his change in role with us effective March 1, 2021, the unvested stock options held by Mr.

Hsu as of March 1, 2021 were deemed modified for accounting purposes.

The value disclosed in this row reflects the modification fair value for the modification of Mr.

Hsu’s unvested stock options.

(5) In connection with his termination of employment and consulting arrangement with us, the post-employment termination exercise period for 70,000 in vested stock options held by Mr.

Bauer as of February 25, 2021 was extended to expire within three months of the end of his consulting period (which is currently expected to occur on February 25, 2022).

These vested stock options consisted of 8,030 stock options, 21,970 stock options, 6,400 stock options and 33,600 stock options, each at an exercise price of $28.45 per share to expire on January 25, 2027.

The value disclosed in this row reflects the modification fair value for the modification of the post-employment termination exercise period for Mr.

Bauer’s stock options.

(6) Reflects the grant date fair value of the 2021 CEO Performance Award, calculated in accordance with ASC Topic 718, as described in footnote one.

This amount does not necessarily correspond to the actual value that may be realized by Mr.

The 2021 CEO Performance Award is intended to compensate Mr.

Liang over its 10-year maximum term and will become vested as to all shares subject to it only if the market price of our common stock increases to $120.00 per share (determined on a sixty-trading-day average) and our revenue increases to $8.0 billion over four consecutive fiscal quarters, in each case during the applicable performance period.

This award was designed to be entirely an incentive for future performance that could take many years, if at all, to be achieved.

If any options have not vested by the end of the term of the option award, they will be forfeited and Mr.

Liang will not realize any value from such options.

As of the date of this filing, none of the revenue or stock price goals has been achieved.

Even if we achieve the first revenue goal of $4.0 billion and the first stock price goal of $45.00 is also met, so that the first tranche of the 2021 CEO Performance Award vests, Mr.

See “ Executive Compensation—Compensation Discussion and Analysis (“CD&A”)— Compensation Philosophy and Objectives—Our Move Toward Performance-Based Compensation Arrangements ” and “ Executive Compensation—Compensation Discussion and Analysis (“CD&A”)—2021 CEO Performance Award Granted in March 2021 ” above and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2021 included in this Annual Report on Form 10-K.

Grants made in fiscal year 2021 are described more fully in the "Compensation Discussion and Analysis" section of this Annual Report.

More information concerning the terms of the employment arrangements, if applicable, in effect with our named executive officers during fiscal year 2020 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" under the “Compensation Discussion and Analysis”.

More information concerning the terms of the employment or consulting arrangements, if applicable, in effect with our named executive officers during fiscal year 2021 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" under the “Compensation Discussion and Analysis”.

Outstanding Equity Awards at 2021 Fiscal Year-End

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OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END TABLE

Option Awards

Option Awards Stock Awards

Name Number of

Unexercised Options (#)

Unexercisable

Number of Shares or Units of Stock That Have

Exercisable Number of

Unexercisable Equity Incentive Plan Awards:

Number of Securities Underlying Unexercised Unearned Options (#)

Date Number of Shares or Units of Stock That Have

(#) Market Value

Units of Stock

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Charles Liang 231,260 20.70 1/21/2023

166,750 35.07 1/19/2025

130,000 26.95 8/2/2027

— — 1,000,000 (2)

45.00 3/2/2031

David Weigand 11,310 4,762 (3)

22.10 7/31/2028

Represents the closing stock price per share of our common stock as of June 30, 2020 ($28.39) multiplied by the number of shares underlying RSUs that had not vested as of June 30, 2020.

These nonqualified stock options vested at the rate of 12.5% on August 2, 2017 and generally vested (or will vest) at a rate of 1/36th per month thereafter, such that the granted options fully vested on August 2, 2020.

These RSUs were originally granted as PRSUs and were earned based on performance during fiscal year 2018 at a rate of 200% of the target number of PRSUs (a total of 120,000 PRSUs for this award).

50% of the earned PRSUs (60,000)

vested on June 30, 2018 and the remainder of the earned PRSUs (60,000) were to vest ratably over the following ten fiscal quarters based on Mr.

Liang’s continued employment with the Company.

As of June 30, 2020, an additional 48,000 PRSUs had vested, leaving 12,000 unvested PRSUs.

These incentive stock options vested at the rate of 25% on January 11, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

These nonqualified stock options vested at the rate of 25% on January 11, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on January 11, 2021.

These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

These RSUs vested at the rate of 25% on February 16, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on February 16, 2021.

These incentive stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

These nonqualified stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

3,690 238 (3)

22.10 7/31/2028

30.33 8/4/2030

2,000 1,525 (4)

30.33 8/4/2030

Don Clegg 6,800 — 12.50 8/6/2022

6,000 — 26.75 8/4/2024

4,000 — 20.54 8/3/2026

9,917 4,762 (7)

22.10 7/31/2028

5,083 238 (7)

22.10 7/31/2028

30.33 8/4/2030

1,875 1,337 (4)

30.33 8/4/2030

George Kao 14,840 — 26.95 8/2/2027

5,160 — 26.95 8/2/2027

744 2,228 (8)

13.00 10/30/2028

2,968 — 13.00 10/30/2028

20.37 3/27/2030

23.74 10/27/2030

Alex Hsu 3,500 — 17.96 1/20/2024

2,500 — 27.28 1/27/2026

2,082 298 (13)

22.80 1/24/2028

9,005 3,956 (7)

22.10 7/31/2028

38,000 — 20.37 3/27/2030

Kevin Bauer 400 1,200 (17)

28.45 1/25/2027

2,100 6,300 (17)

28.45 1/25/2027

— 10,000 (18)

38.50 4/27/2031

__________________________

(1) Represents the closing stock price per share of our common stock as of June 30, 2021 ($35.18) multiplied by the number of shares underlying RSUs that had not vested as of June 30, 2021 (or, for Mr.

Hsu, PRSUs that had been earned based on performance through June 30, 2021 but that had not vested as of June 30, 2021).

(2) These stock options are performance-based and shall vest and become exercisable depending upon the degree of satisfaction of both the Stock Price Goals and Revenue Goals discussed above in CD&A.

The Stock Price Goals must be achieved on or prior to September 30, 2026 and the Revenue Goals must be achieved on or prior to June 30, 2026.

The smallest amount of these stock options (threshold) that can be earned based on performance is vested stock options for 200,000 shares for achieving a Stock Price Goal of $45.00 sixty-trading-day-average stock price and a Revenue Goal of $4.0 billion in four-consecutive-fiscal-quarter revenue.

However, even if those goals are achieved, if the Company’s stock price remained at $45.00 per

share, based on the $45.00 exercise price for these stock options, there would be no appreciation value in those stock options for Mr.

For more information about the operation of this award, see “2021 CEO Performance Award Granted in March 2021” above.

(3) These incentive and nonqualified stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

(4) These incentive and nonqualified stock options vested at the rate of 25% on May 1, 2021 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2024.

(5) These RSUs vested at the rate of 25% on May 16, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 16, 2022.

These incentive stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

These nonqualified stock options vested at the rate of 25% on April 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on April 30, 2022.

(6) These RSUs vested at the rate of 25% on May 10, 2021 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on May 10, 2024.

(7) These incentive and nonqualified stock options vested at the rate of 25% on May 1, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on May 1, 2022.

(8) These incentive and nonqualified stock options vested at the rate of 25% on October 30, 2019 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 30, 2022.

(9) These nonqualified stock options vested at the rate of 56% on March 27, 2021 and vested (or generally will vest) at a rate of 6% per quarter thereafter, such that the granted options will be fully vested on December 27, 2022.

(10) These incentive stock options shall vest at the rate of 25% on October 27, 2021 and generally will vest at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 27, 2024.

(11) These RSUs vested at the rate of 63% on May 10, 2021 and vested (or generally will vest) at a rate of 6% per quarter thereafter, such that the RSUs will be fully vested on November 10, 2022.

(12) These RSUs shall vest at the rate of 25% on November 10, 2021 and generally will vest at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on November 10, 2024.

(13) These incentive stock options vested at the rate of 25% on October 22, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the granted options will be fully vested on October 22, 2021.

These nonqualified stock options will vest at the rate of 88% on March 27, 2021 and 12% one quarter thereafter, such that the granted options will be fully vested on June 27, 2021.

(14) These RSUs vested at the rate of 25% on November 16, 2018 and vested (or generally will vest) at a rate of 1/16th per quarter thereafter, such that the RSUs will be fully vested on November 16, 2021.

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(16) This amount reflects the service-based portion of the March 2020 PRSU grant to Mr.

Hsu, as described in further detail in the “Compensation Discussion and Analysis” under “Fiscal Year 2020 Named Executive Officer Compensation Components - Equity-Based Incentive Compensation.” Mr.

Hsu may earn 30,000 PRSUs in two separate tranches if he remains employed through the applicable vesting dates (May 2021 for 15,000 units, and November 2021 for an additional 15,000 units).

This note indicates that there is also a variable performance-based portion of the March 2020 PRSU grant to Mr.

Hsu was eligible to earn additional PRSUs for each of two tranches if the Company’s revenue increases year-over-year (fiscal year 2020 compared to fiscal year 2019 for the first tranche and fiscal year 2021 compared to fiscal year 2020 for the second tranche).

As of the end of fiscal year 2020, no PRSUs were earned under the first tranche of this award and Mr.

Hsu remained eligible at the end of fiscal year 2020 to earn additional units for only the second tranche of this award.

No quantitative amounts are reportable in these columns because Mr.

Hsu’s award does not provide for a threshold, target or maximum number of units that may be earned under the award.

In addition, the Company cannot estimate amounts to report in these columns based on last fiscal year’s performance because no PRSUs were earned for the revenue growth results between fiscal year 2019 and fiscal year 2020.

As a result, as of the end of fiscal year 2020, the Company is unable to determine the number of units (if any) that Mr.

Hsu was on track to earn under the second tranche of this award.

If, however, any units are earned under the second tranche of this award, their value as of June 30, 2020 would have been $28.39 per unit.

Hsu (15,000 units).

In addition to the 15,000 units, based upon the Company’s revenue for fiscal year 2021 ($3,557 million), which increased from revenue for fiscal year 2020, management has calculated that 2,939 additional units were earned, such that a total of 17,939 units will vest in November 2021.

Such amount remains subject to final certification by the Compensation Committee.

(17) These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022.

(18) These nonqualified stock options shall vest at the rate of 100% on February 25, 2022.

Fiscal Year 2021 Option Exercises and Stock Vested

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FISCAL YEAR 2021 OPTION EXERCISES AND STOCK VESTED TABLE

Option Awards

Number of Shares

Acquired on Exercise (#)

Value Realized on

Option Awards Stock Awards

Name Number of Shares

Acquired on Exercise (#) Value Realized on

Exercise ($) (1)

Number of Shares

Acquired on Vesting (#)

Value Realized on

Acquired on Vesting (#) Value Realized on

Vesting ($) (2)

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David Weigand — — 3,400 109,016

Don Clegg — — 2,345 76,136

George Kao — — 2,862 95,125

Alex Hsu — — 15,948 557,412

Kevin Bauer 70,000 640,821 2,813 82,064

__________________________

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Fiscal Year 2021 Potential Payments Upon Termination or Change of Control

We do not currently, and did not during fiscal year 2020 have, any arrangements with any of our named executive officers that provide for any additional or enhanced severance or other compensation or benefits in the event of termination or change of control of our Company.

Other than as set forth below or described elsewhere in this Item 11, “Executive Compensation,” we do not currently, and did not during fiscal year 2021 have, any arrangements with any of our named executive officers that provide for any additional or enhanced severance or other compensation or benefits in the event of termination or change of control of our Company.

Other than with respect to the 2021 CEO Performance Award, the Company’s stock option agreements generally provide for three months of exercise of vested options after termination of service, one year of exercise after disability, and one year of exercise after death.

The 2021 CEO Performance Award has certain provisions related to the treatment of such award in the event of a change of control of our Company.

See “2021 CEO Performance Award Granted in March 2021.” None of the tranches under the 2021 CEO Performance Award would have been earned thereunder for a change in control occurring on June 30, 2021 (based on the closing stock price of $35.18 on such date, plus a reasonable assumption that any aggregate consideration per share in a hypothetical change of control occurring on such date would have been less than $45), and therefore there is no change in control value attributed to the award for a hypothetical change of control situation.

Prior to ceasing employment with the Company as Chief Financial Officer, in February 2021 Mr.

Bauer entered into a consulting arrangement with the Company, and the Company provided certain provisions with respect to his equity awards following the termination of his employment relationship with the Company.

See “- Former CFO Consulting Arrangement.”

Fiscal Year 2021 Chief Executive Officer Pay Ratio

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For purposes of this pay ratio disclosure, 2021 CEO Compensation was determined to be $20,127,913, which represents the total compensation reported for Mr.

Liang under the “Fiscal Year 2020 Summary Compensation Table,” plus the Company’s contribution to group health and welfare benefits provided to Mr.

2020 Median Annual Compensation for the identified median employee was determined to be $92,135, also including the Company’s contribution to group health and welfare benefits provided to the median employee.

Liang under the “Fiscal Year 2021 Summary Compensation Table,” plus the Company’s contribution to certain non-discriminatory group health and welfare benefits provided to Mr.

2021 Median Annual Compensation for the identified median employee was determined to be $75,171, also including the Company’s contribution to the same non-discriminatory group health and welfare benefits provided to the median employee.

Due to our permitted use of reasonable estimates and assumptions in preparing this pay ratio disclosure, the disclosure may involve a degree of imprecision, and thus this pay ratio disclosure is a reasonable estimate.

In calculating our Chief Executive Officer pay ratio for fiscal year 2020, we used the same median employee as was used to calculate the Chief Executive Officer pay ratio for each of fiscal year 2018 and fiscal year 2019.

This is because we believe that there has been no change in our employee population or employee compensation arrangements during fiscal year 2020 that would result in a significant change to our Chief Executive Officer pay ratio disclosure for fiscal year 2020.

To identify the median employee, we had examined our total employee population as of June 30, 2018 (the “Determination Date”).

We had included all 2,090 U.S.

To identify the median employee, we examined our total employee population as of June 30, 2021 (the “Determination Date”).

We included all 2,367 U.S.

full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries.

We had also included all 1,115 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in The Netherlands and Taiwan.

We had excluded independent contractors and “leased” workers.

We had also excluded all our employees in China (47 individuals) and Japan (14 individuals), which together

had then represented approximately 1.9% of our total employees worldwide (3,266 individuals).

We also included all 1,665 full-time, part-time, seasonal and temporary employees of the Company and our consolidated subsidiaries in The Netherlands and Taiwan.

We excluded independent contractors and “leased” workers.

We also excluded all our employees in European countries, which together represented approximately 1% of our total employees worldwide (4,155 individuals), which countries consisted of France (8 individuals), Germany (13 individuals), Italy (5 individuals), Spain (1 individual) and United Kingdom (15 individuals).

We also excluded all our employees in China (46 individuals), Japan (30 individuals), and South Korea (5 individuals), which together represented an additional approximately 2% of our total employees worldwide.

Our analysis identified 4,032 individuals who were not excluded.

To determine the median of the annual total compensation of all of such employees, other than Mr.

Liang, we had generally reviewed compensation for the period beginning on July 1, 2017 and ending on the Determination Date.

We had totaled, for each included employee other than Mr.

Liang, we generally reviewed compensation for the period beginning on July 1, 2020 and ending on the Determination Date.

We totaled, for each included employee other than Mr.

Liang, base earnings (salary, hourly wages and overtime, as applicable) and cash bonuses paid during the measurement period, plus the Company’s contribution to group health and welfare benefits.

We did not use any statistical sampling or cost-of-living adjustments for those purposes.

A portion of our employee workforce (full-time and part-time) had worked for less than the full fiscal year (due to mid-measurement period start dates, disability status or similar factors, etc.).

In determining the median employee, we had generally annualized the total compensation for such individuals other than temporary or seasonal employees (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee compensation program.

A portion of our employee workforce (full-time and part-time) worked for less than the full fiscal year (due to mid-measurement period start dates, disability status or similar factors, etc.).

In determining the median employee, we generally annualized the total compensation for such individuals other than temporary or seasonal employees (but avoided creating full-time equivalencies) based on reasonable assumptions and estimates relating to our employee compensation program.

Compensation Program Risk Assessment

We have assessed our compensation programs for fiscal year 2021 and have concluded that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

We concluded that our compensation policies and practices do not encourage excessive or inappropriate risk-taking.

We believe our programs are appropriately designed to encourage our employees to make decisions that result in positive short-term and long-term results for our business and our stockholders.

DIRECTOR COMPENSATION

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Under our director compensation policy, we reimburse non-employee directors for reasonable expenses in connection with attendance at Board and committee meetings.

Sara Liu, one of our directors, is an executive officer of the Company, but is not serving as a named executive officer, and she does not receive any additional compensation from us specifically for her service as a director.

Charles 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.

For their service during fiscal year 2021, our non-employee directors received an annual retainer of $60,000, payable quarterly in cash.

In addition, the Chairperson of our Audit Committee received an additional annual retainer of $30,000 and the Chairperson of each of our Compensation Committee and our Nominating and Corporate Governance Committee received an additional annual retainer of $20,000 and $15,000, respectively, payable quarterly in cash.

Each director serving in a non-chairperson capacity on our Audit Committee received an additional annual retainer of $15,000, each director serving in a non-chairperson capacity on our Compensation Committee received an additional annual retainer of $10,000 and each director serving in a non-chairperson capacity on our Nominating and Corporate Governance Committee received an additional annual retainer of $7,500, payable quarterly in cash.

Finally, non-employee directors were entitled to $2,000 per meeting for each meeting attended in excess of (1) the regular meetings of the Board and (2) up to 10 additional meetings beyond such regular meetings, provided that notice of the meeting was properly given, a quorum was present and the meeting was recorded.

In addition, following the recommendation of the Compensation Committee, in June 2020, the Board approved an additional cash fee of $120,000 for Mr.

Tally Liu for fiscal year 2020 for, among other matters, the extraordinary efforts he contributed in his capacity as a non-employee director in providing guidance and other assistance to management in connection with the restatement of our financial statements and remediation work on internal controls.

Additionally, in March 2020, the Board provided special performance-based cash incentive award opportunities to two non-employee directors, Mr.

In addition, the Chairperson of our Audit Committee received an additional annual retainer of $30,000 and the Chairperson of each of our Compensation Committee and our Governance Committee received an additional annual retainer of $20,000 and $15,000, respectively, in each case payable quarterly in cash.

Each director serving in a non-chairperson capacity on our Audit Committee received an additional annual retainer of $15,000, each director serving in a non-chairperson capacity on our Compensation Committee received an additional annual retainer of $10,000 and each director serving in a non-chairperson capacity on our Governance Committee received an additional annual retainer of $7,500, in each case payable quarterly in cash.

During fiscal year 2021, Mr.

Fairfax attended 14 Excess Meetings, Mr.

Tsai attended 14 Excess Meetings, Mr.

McAndrews attended 11 Excess Meetings, Ms.

Tseng attended three Excess Meetings, and Mr.

Liu attended 15 Excess Meetings.

Chan did not attend any Excess Meetings during fiscal year 2021.

As disclosed in our prior Annual Report on Form 10-K for the fiscal year ended June 30, 2020, in March 2020, the Board provided special performance-based cash incentive award opportunities to two non-employee directors, Mr.

Sherman Tuan and Mr.

These awards provide a cash incentive opportunity of up to $194,150 and $103,095, respectively, subject to the following conditions:

(1) 50% of the opportunity will be earned if the average closing price for the Company’s common stock equals or exceeds $31.61 (representing a 15% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding March 4, 2020) for any period of 20 consecutive trading days prior to September 30, 2021;

and (2) an additional 50% of the opportunity will be earned if the average closing price for the Company’s common stock equals or exceeds $32.99 (representing a 20% premium over the average closing price of the Company’s common stock for the 20 consecutive trading days preceding March 4, 2020) for any period of 20 consecutive trading days prior to June 30, 2022.

These awards provided a cash incentive opportunity of up to $194,150 and $103,095, respectively, subject to the following conditions:

The relevant stock price goals were not met during fiscal year 2020, and no portion of these amounts were paid to Mr.

Tsai during fiscal year 2020, although the award opportunities remain available going forward.

Non-employee directors also were eligible to receive equity grants under our 2016 Equity Incentive Plan for fiscal year 2020 service (following adoption of our 2020 Plan by stockholders, our non-employee directors will receive future equity grants under our 2020 Plan).

Under our director compensation policy for fiscal year 2020, non-employee directors were entitled to receive an annual grant of RSUs equal in value to $220,000 for their service during fiscal year 2020.

Initial RSU grants upon election as a director are intended to be prorated based on the grant date relative to our annual stockholders' meeting.

Generally, RSUs granted to non-employee directors will vest on the earlier of the day prior to our next annual stockholders' meeting and the one-year anniversary of the grant date.

The vesting date for the RSUs granted to the non-employee directors in fiscal year 2020 is expected to be May 10, 2021.

Going forward, we expect that our director compensation policy will provide for annual RSU grants to the non-employee directors with a value equal to $220,000, with the ultimate number of RSUs granted based on our closing stock price on the date of grant.

Because the effectiveness of our registration statement on Form S-8 for the 2016 Equity Incentive Plan was suspended when we became delinquent in filing our 2017 10-K, none of the equity grants designed to be made to our non-employee directors for their respective service for fiscal years 2018 or 2019 were actually granted during the suspension.

After we became current in our SEC filings and the effectiveness of the registration statement on Form S-8 for the 2016 Equity Incentive Plan was revived, the Board acted in March 2020 to make certain additional grants to the non-employee directors under the 2016 Equity Incentive Plan, which grants were intended to provide the value that was not delivered for their service during fiscal years 2018 or 2019.

These grants, as reflected in the table below, consisted of:

no additional grants, due to his joining the Board in fiscal year 2020;

(1) $220,000 in RSUs, for his fiscal year 2019 service (10,800 RSUs);

and (2) stock options to purchase 5,000 shares at an exercise price of $20.37 per share, for his fiscal year 2018 service (4,500 shares) and Board committee chair service (500 shares);

McAndrews and Ms.

(1) $220,000 in RSUs, for his and her fiscal year 2019 service (10,800 RSUs);

and (2) stock options to purchase 4,500 shares at an exercise price of $20.37 per share, for his and her fiscal year 2018 service;

4,500 RSUs, pro-rated for his fiscal year 2019 service.

Each of these stock option grants will generally vest in full on March 27, 2021.

Tsai during fiscal year 2020, However, during fiscal year 2021, the First Price Target was achieved based upon stock price performance from December 22, 2020 through January 21, 2021, and the Second Price Target was achieved based upon stock price performance from February 8, 2021 through March 8, 2021.

As a result, payment of the full amount of the cash incentive opportunities were made to each of Mr.

Tsai during fiscal year 2021.

Our director compensation policy also provides for annual RSU grants to the non-employee directors with a value equal to $220,000, with the ultimate number of RSUs granted based on our closing stock price on the date of grant.

For fiscal year 2021, we made such grants for non-employee director service under our 2020 Equity and Incentive Compensation Plan on August 21, 2020 to such persons serving on such date, which grants had a vesting date of June 30, 2021.

Two non-employee directors, Mr.

Michael McAndrews and Mr.

Fred Tsai, who served during fiscal year 2021 and received such grants, were not nominated for re-election at our annual general meeting of stockholders held on May 28, 2021 and ceased being directors on such date.

Prior to the end of their service, the Compensation Committee exercised discretion to accelerate the vesting date of the awards granted to Mr.

McAndrews and Mr.

Tsai to May 28, 2021.

Awards granted to the other non-employee directors vested on June 30, 2021.

Shiu Leung (Fred) Chan was appointed as a non-employee director on October 28, 2020.

In connection with his appointment, Mr.

Chan received during fiscal year 2021 a pro-rated portion of the annual non-employee director retainer and, on November 5, 2020, an RSU grant with a value equal to a pro-rated portion of $220,000 with a vesting date of June 30, 2021.

The following table shows for fiscal year 2021 certain information with respect to the compensation of all of our non-employee directors who served in such capacities during fiscal year 2021:

FISCAL YEAR 2021 DIRECTOR COMPENSATION

Non-Equity Incentive Plan Compensation

Daniel Fairfax $ 103,000 $ 219,990 $ — $ 322,990

Hwei-Ming (Fred) Tsai (1)

118,934 287,960 103,095 509,989

Michael McAndrews (1)

90,201 287,960 — 378,161

This column consists of annual director fees, non-employee committee chairman fees, other committee member fees, and, for Mr.

Liu, an additional cash fee for the substantial amount of work he had completed in assisting in his capacity as a non-employee director with the restatement of our financial statements and remediation work on internal controls, in each case earned for fiscal year 2020.

Saria Tseng 83,500 219,990 — 303,490

Sherman Tuan 87,500 219,990 194,150 501,640

Shiu Leung (Fred) Chan (2)

40,435 148,270 — 188,705

Tally Liu 120,000 219,990 — 339,990

__________________________

(1) Each of Mr.

Hwei-Ming (Fred) Tsai and Mr.

Michael McAndrews served as a director until May 28, 2021.

Shiu Leung (Fred) Chan was appointed to the Board in October 2020.

(3) This column consists of annual director fees, non-employee committee chairman fees, and other committee member fees, in each case earned for fiscal year 2021.

(4) The dollar amounts in this column represent the aggregate grant date fair values of the RSU awards granted during fiscal year 2021 calculated in accordance with ASC Topic 718.

Assumptions used in the calculation of the grant date fair value amounts are included in Part II, Item 8, "Financial Statements and Supplementary Data", and Item II, Part 8, Note 14, “Stock-based Compensation and Stockholders’ Equity” to our consolidated financial statements for fiscal year 2021 included in this Annual Report on Form 10-K.

Each grant of 10,800 RSUs had a grant date fair value of $219,996, and Mr.

Liu’s grant of 4,500 RSUs had a grant date fair value of $91,665.

Only $219,996 of the amount reflected in this column for each director represent director compensation for fiscal year 2020 service.

The dollar amounts in this column represent the aggregate grant date fair value of option awards granted during fiscal year 2020 calculated in accordance with ASC Topic 718.

year 2020 included in this Annual Report on Form 10-K.

Each grant of 4,500 stock options had a grant date fair value of $44,100, and each grant of 500 stock options had a grant date fair value of $4,900.

None of the amounts reflected in this column represent director compensation for fiscal year 2020 service.

As discussed above, for the non-employee directors other than Mr.

Fairfax, the total compensation amounts include awards granted for service for fiscal years 2018 and/or 2019.

Calculating just the amounts paid to the non-employee directors for their fiscal year 2020 service, total amounts would be:

Fairfax, $316,996;

Tsai, $349,996;

McAndrews, $314,996;

Tseng, $307,496;

Tuan, $317,496;

Liu, $451,996.

Each grant of 8,289 RSUs to each of the directors other than Mr.

Chan had a grant date fair value of $26.54 per share, and Mr.

Chan’s grant of 5,168 RSUs had a grant date fair value of $28.69 per share.

(5) The value disclosed in this row under the “Stock Awards” column also reflects, for each of Messrs.

Tsai and McAndrews, the modification fair value ($67,970) for the acceleration of the vesting date of his fiscal year 2021 RSU grant from June 30, 2021 to May 28, 2021.

This acceleration was approved because each of these non-employee directors was not nominated for re-election at our annual general meeting of stockholders held on May 28, 2021 and ceased being directors on such date, as further described above.

(6) This column consists of, for Mr.

Tuan, amounts earned during fiscal year 2021 from special performance-based cash incentive award opportunities granted in March 2020 following the achievement of the performance conditions.

Please see the discussion above for more information about these awards.

The table below sets forth the aggregate number of shares underlying stock and option awards held by our non-employee directors as of June 30, 2021.

Option Awards

Name Stock Awards Option Awards

Daniel Fairfax 8,289 —

Hwei-Ming (Fred) Tsai

Michael McAndrews

Saria Tseng 8,289 —

Sherman Tuan 8,289 —

Shiu Leung (Fred) Chan 5,168 —

Tally Liu 8,289 —

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is a current or former officer or employee of our Company or had any relationship with our Company requiring disclosure, except for Saria Tseng, who serves as Vice President of Strategic Corporate Development, General Counsel and Secretary of Monolithic Power Systems, Inc., a fabless manufacturer of high-performance analog and mixed-signal semiconductors (“MPS”), with which we have engaged in certain transactions.

None of the members of the Compensation Committee is a current or former officer or employee of our Company or had any relationship with our Company requiring disclosure, except for Saria Tseng, who serves as Vice President of Strategic Corporate Development, General Counsel and Secretary of MPS, with which we have engaged in certain transactions.

See “Part III.

Certain Relationships and Related Transactions and Director Independence-Transactions with Monolithic Power Systems.” In addition, during fiscal year 2021, none of our executive officers served as a member of the compensation committee of the board of directors of any other entity that has one or more executive officers who served on our Compensation Committee of the Board.

Hwei-Ming (Fred) Tsai, Saria Tseng and Sherman Tuan served on the Compensation Committee during fiscal year 2020.

Compensation Program Risk Assessment

We have assessed our compensation programs for fiscal year 2020 and have concluded that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on us.

We concluded that our compensation policies and practices do not encourage excessive or inappropriate risk-taking.

We believe our programs are appropriately designed to encourage our employees to make decisions that result in positive short-term and long-term results for our business and our stockholders.

Hwei-Ming (Fred) Tsai, Saria Tseng and Sherman Tuan served on the Compensation Committee during fiscal year 2021, with Mr.

Tsai’s service on such committee ending on May 28, 2021.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

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• All directors and executive officers as a group;

All person known to us beneficially own 5% or more of our outstanding common stock.

• All persons known to us who beneficially own 5% or more of our outstanding common stock.

Name and Address of Beneficial Owner (1)

3 unchanged sentences

Charles Liang (4)

Kevin Bauer (5)

7,441,827 14.5 %

Don Clegg (5)

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David Weigand (8)

McAndrews (10)

Hwei-Ming (Fred) Tsai (11)

Saria Tseng (9)

1 unchanged sentence

Sara Liu (11)

7,441,827 14.5 %

Tally Liu 23,589 *

Daniel Fairfax 11,263 *

Shiu Leung (Fred) Chan 5,168 *

Kevin Bauer (12)

All directors and executive officers as a group (12 persons) (13)

7,778,322 15.1 %

5% Holders Not Listed Above:

Oaktree Capital Management LP (16)

Empyrean Capital Overseas Master Fund, Ltd.

3,000,459 5.9 %

Disciplined Growth Investors Inc.

3,645,912 7.2 %

BlackRock Inc.

3,146,769 6.2 %

The Vanguard Group (17)

3,999,148 7.9 %

Total executives, directors & 5% or more stockholders 42.4 %

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Liang and Sara Liu, his spouse, 144,412 shares held directly by Ms.

Liu and 61,000 options exercisable within 60 days after July 31, 2020.

Liu and 63,625 options exercisable and 197 RSU shares issuable within 60 days after July 31, 2021.

See footnote 11.

Includes 61,249 shares issuable upon exercise of stock options and 938 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 28,050 options exercisable and 375 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 16,636 shares issuable upon the exercise of options and 237 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 21,348 shares issuable upon the exercise of options and 375 RSUs subject to vesting, both within 60 days after July 31, 2020.

Includes 11,250 shares issuable upon the exercise of options and 625 RSUs subject to vesting within 60 days after July 31, 2020.

Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 35,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

Includes 21,375 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2020.

(5) Includes 35,393 options exercisable and 586 RSU shares issuable within 60 days after July 31,2021.

(6) Includes 25,155 options exercisable and 211 RSU shares issuable within 60 days after July 31, 2021.

(7) Includes 59,231 options exercisable and 237 RSU shares issuable within 60 days after July 31, 2021.

Hsu served as Senior Vice President, Chief Operating Officer until March 2021.

In March 2021, Mr.

Hsu transitioned to the role of Senior Chief Executive, Strategic Business.

(8) Includes 18,750 options exercisable and 850 RSU share issuable within 60 days after July 31, 2021.

(9) Includes 27,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2021.

(10) Includes 25,000 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2021.

(11) Includes 63,625 options exercisable and 197 RSU shares issuable within 60 days after July 31, 2021.

Also includes 2,663,752 shares jointly held by Ms.

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See footnote 4.

Bauer resigned as our Chief Financial Officer in January 2021, and Mr.

Weigand has assumed such role.

(13) Includes 789,245 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2021.

The information is based solely on the Schedule 13D filed on March 19, 2020 by (i) Oaktree Value Equity Fund, L.P., a Cayman Islands exempted limited partnership (“VEF”), in its capacity as the direct owner of 2,667,482 shares of common stock;

(ii) Oaktree Value Equity Fund GP, L.P., a Cayman Islands exempted limited partnership (“VEF GP”), in its capacity as the general partner of VEF;

(iii) Oaktree Value Equity Fund GP Ltd., a Cayman Islands exempted company (“VEF Ltd.”), in its capacity as the general partner of VEF GP;

(iv) Oaktree Capital Management, L.P., a Delaware limited partnership (“Management”), in its capacity as the sole director of VEF Ltd.;

(v) Oaktree Capital Management GP, LLC, a Delaware limited liability company (“Management GP”), in its capacity as the general partner of Management;

(vi) Atlas OCM Holdings, LLC, a Delaware limited liability company (“Atlas”), in its capacity as the sole managing member of Management GP;

(vii) Oaktree Fund GP I, L.P., a Delaware limited partnership (“GP I”), in its capacity as sole shareholder of VEF Ltd.;

(viii) Oaktree Capital I, L.P., a Delaware limited partnership (“Capital I”), in its capacity as the general partner of GP I;

(ix) OCM Holdings I, LLC, a Delaware limited liability company (“Holdings I”), in its capacity as the general partner of Capital I;

(x) Oaktree Holdings, LLC, a Delaware limited liability company (“Holdings”) in its capacity as the managing member of Holdings I;

(xi) Oaktree Capital Group, LLC, a Delaware limited liability company (“OCG”), in its capacity as the managing member of Holdings;

(xii) Oaktree Capital Group Holdings GP, LLC, a Delaware limited liability company (“OCGH”), in its capacity as the indirect owner of the class B units of each of OCG and Atlas;

(xiii) Brookfield Asset Management Inc., a Canadian corporation (“BAM”), in its capacity as the indirect owner of the class A units of each of OCG and Atlas;

and (xiv) Partners Limited, a Canadian corporation (“Partners”), in its capacity as the sole owner of Class B Limited Voting Shares of BAM.

Except as set forth in Schedule A to the Scheudle 13D, the address of the business office of each of the reporting persons and covered persons is c/o Oaktree Capital Management, L.P., 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071.

The information is based solely on the Schedule 13G filed on January 3, 2020 by (i) Empyrean Capital Overseas Master Fund, Ltd.

("ECOMF"), a Cayman Islands exempted company, with respect to the common stock directly held by it, and has shared voting and dispositive power over 2,679,893 shares of common stock;

(ii) P EMP Ltd.

("P EMP" and collectively with ECOMF, the "Empyrean Clients"), a British Virgin Islands business company, with respect to the common stock directly held by it, and has shared voting and dispositive power over 79,928 shares of common stock;

(iii) Empyrean Capital Partners, LP ("ECP"), a Delaware limited partnership, which serves as investment manager to the Empyrean Clients with respect to the common stock directly held by the Empyrean Clients, and has shared voting and dispositive power over 2,759,821 shares of common stock;

Amos Meron, who serves as the managing member of Empyrean Capital, LLC, the general partner of ECP, with respect to the common stock directly held by the Empyrean Clients, and has shared voting and dispositive power over 2,759,821 shares of common stock.

(14) The information is based solely on the Schedule 13G filed on February 11, 2021 by (i) Empyrean Capital Overseas Master Fund, Ltd.

(“ECOMF”), which has shared voting power and dispositive power over 3,000,459 shares of common stock, (ii) Empyrean Capital Partners, LP (“ECP”), which has shared voting power and dispositive power over 3,000,459 shares of common stock, and (iii) Amos Meron, who has shared voting power and dispositive power over 3,000,459 shares of common stock.

ECP serves as investment manager to ECOMF with respect to the common stock directly held by ECOMF.

Amos serves as the managing member of Empyrean Capital, LLC, the general partner of ECP, with respect to the common stock directly held by ECOMF.

The address of the business office of each of the reporting persons is c/o Empyrean Capital Partners, LP, 10250 Constellation Boulevard, Suite 2950, Los Angeles, CA 90067.

The information is based solely on the Schedule 13-F filed on August 14, 2020.

(15) The information is based solely on the Schedule 13-F filed on May 17, 2021.

The address for the reporting person is 150 S.

Suite 2550, Minneapolis, MN 55402.

(16) The information is based solely on the Schedule 13G filed on February 2, 2021.

The address for the reporting person is 55 East 52nd Street, New York, New York 10055.

(17) The information is based solely on the Schedule 13G filed on February 10, 2021.

The Vanguard Group has shared voting power over 64,744 shares of common stock, sole dispositive power over 3,900,105 shares of common stock and shared dispositive power over 99,043 shares of common stock.

The address for the reporting person is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

Equity Compensation Plan Information

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We no longer grant any equity-based awards under the 2006 Equity Incentive Plan or the 2016 Equity Incentive Plan.

The following table sets forth information regarding

outstanding options, RSUs, and PRSUs and shares reserved and remaining available for future issuance under the foregoing plans as of June 30, 2020 :

Plan Category

Number of securities to be issued upon

The following table sets forth information regarding outstanding options, RSUs, and PRSUs and shares reserved and remaining available for future issuance under the foregoing plans as of June 30, 2021:

Plan Category Number of securities to be issued upon

outstanding options,

warrants and rights

Weighted-average

(a)(1) Weighted-average

exercise price of

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warrants and rights

Number of securities

(b)(2)(3) Number of securities

remaining available

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Equity compensation plans not approved by security holders — —

Total 7,045,510 2,730,277

__________________________

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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.

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 approves only those transactions that, in light of known circumstances are not inconsistent with our best interests, as the Audit Committee determines in the good faith exercise of its discretion.

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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.

Liu received a total compensation of approximately $851,000 in fiscal year 2020.

Liu received total compensation of approximately $426,054 in fiscal year 2021.

The total compensation includes salary, bonus and equity awards.

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Kao reports through the finance and accounting organization, which reports to Mr.

Bauer, our Chief Financial Officer.

Weigand, our Chief Financial Officer.

Sara Liu, who is Charles Liang's spouse and is related to Mr.

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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, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of the Board of Directors.

Ablecom’s Chief Executive Officer, Steve Liang, is the brother of Charles Liang, our President, Chief Executive Officer and Chairman of the Board.

Steve Liang and his family members owned approximately 28.8% of Ablecom’s stock and Charles Liang and his spouse, Sara Liu, who is also an officer and director of our company, collectively owned approximately 10.5% of Ablecom’s capital stock as of June 30, 2021.

Certain family members of Yih-Shyan (Wally) Liaw, who until January 2018 was the Senior Vice President of International Sales and a director of the Company, owned approximately 11.7% of Ablecom’s capital stock as of June 30, 2020 .

Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom.

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Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware.

Charles Liang or Sara Liu do not own any capital stock of Compuware and we do not own any of Ablecom or Compuware's capital stock.

Neither Charles Liang nor Sara Liu own any capital stock of Compuware and the Company does not own any of Ablecom or Compuware's capital stock.

We have entered into a series of agreements with Ablecom, including multiple product development, production and service agreements, product manufacturing agreements, manufacturing services agreements and lease agreements for warehouse space.

Under these 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.

Ablecom agrees to design products according to our

specifications.

Additionally, Ablecom agrees to build the tools needed to manufacture the products.

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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.

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.

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In October 2018, our Chief Executive Officer, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang.

The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to to 0.25% effective March 1, 2020.

The loan is unsecured, has no maturity date and bore interest at 0.8% per month for the first six months, increased to 0.85% per month through February 28, 2020, and reduced to 0.25% effective March 1,

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 the company's common stock that he held.

The lenders called the loans in October 2018, following the suspension of the company's common stock from trading on NASDAQ in August 2018 and the decline in the market price of the company's common stock in October 2018.

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 market price of our common stock in October 2018.

As of June 30, 2021, the amount due on the unsecured loan (including principal and accrued interest) was approximately $15.3 million.

Transactions with Monolithic Power Systems

Monolithic Power Systems, Inc., a fabless manufacturer of high-performance analog and mixed-signal semiconductors (“MPS”), is a supplier that provides high-performance analog and mixed signal semiconductors for use in our products.

MPS is a supplier that provides high-performance analog and mixed signal semiconductors for use in our products.

Saria Tseng, who serves as a member on the Board of Directors, also serves as Vice President of Strategic Corporate Development, General Counsel and Secretary of MPS.

We purchased approximately $0.5 million and $0.3 million of products from MPS for the years ended June 30, 2020 and 2019 , respectively, for use in the manufacturing of our products.

Amount owed to MPS by us as of June 30, 2020 was $0.1 million.

We did not owe any amounts to MPS as of June 30, 2019 .

We purchased $3.9 million, $5.2 million and $3.7 million of semiconductor products from MPS for use in our manufacturing process during the years ended June 30, 2021, 2020 and 2019, respectively.

The amounts due to MPS as of June 30, 2021 and 2020 were not material.

Principal Accounting Fees and Services

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The Audit Committee has considered the scope and fee arrangements for all services provided by Deloitte, taking into account whether the provision of non-audit services is compatible with maintaining Deloitte’s independence, and has pre-approved the services described below.

Amounts in '000s

June 30, 2020

June 30, 2019

Amounts in '000s June 30, 2021 June 30, 2020

Audit Fees (1)

$ 4,405 $ 8,633

Audit-Related Fees — —

Tax Fees 225 383

All Other Fees 2 2

Total $ 4,632 $ 9,018

__________________________

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EXHIBIT INDEX

Number Description

3.3 Amended and Restated Certificate of Incorporation of Super Micro Computer, Inc.(1)

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10.5* Offer Letter for Alex Hsu( 22 )

Director Compensation Policy through March 1, 2019(24)

10.6* Product Manufacturing Agreement dated January 8, 2007 between Super Micro Computer, Inc.

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dated May 12, 2020, by and among Super Micro Computer, Inc., the lenders party thereto and Bank of America, N.A., as administrative agent for the lenders( 17 )

Summary of Credit Facilities, dated June 26, 2019 between Super Micro Computer Inc.

Taiwan and CTBC Bank

10.26 Summary of Terms & Conditions 10-Year Term Loan Facility, dated May 6, 2020, between Super Micro Computer Inc.

Taiwan and CTBC Bank(31)

Extension of Credit Facilities with CTBC Bank dated June 30, 2020

Extension of Credit Facilities with CTBC Bank dated August 24, 2020

10.27* Form of Notice of Grant of Stock Option under 2020 Equity and Incentive Compensation Plan( 32 )

3 unchanged sentences

10.31* Form of Restricted Stock Units Agreement under 2020 Equity and Incentive Compensation Plan( 36 )

10.32 General Credit Agreement dated as of December 2, 2020 between Super Micro Computer, Inc.

Taiwan and E.SUN Bank(24)

10.33 Notification and Confirmation of Conditions for Import Loan, dated as of December 2, 2020 between Super Micro Computer, Inc.

Taiwan and E.SUN Bank(25)

10.34* Form of Notice of Grant of Performance Based Stock Option to Mr.

Charles Liang dated March 2, 2021(26)

10.35* Nonqualified Stock Option Award Agreement associated with the Notice of Grant of Performance Based Stock Option to Mr.

Charles Liang dated March 2, 2021(27)

10.36 Fourth Amendment to Loan and Security Agreement with Bank of America, N.A.

dated to be effective as of June 28, 2021 by and among Super Micro Computer, Inc., the lenders party thereto, and Bank of America, N.A., as administrative agent for the lenders(28)

10.37 General Agreement for Omnibus Credit Lines dated as of July 20, 2021 between Super Micro Computer, Inc.

Taiwan and CTBC Bank Co., Ltd.(29)

10.38+ Agreement for Individually Negotiated Terms and Conditions dated as of July 20, 2021 between Super Micro Computer, Inc.

Taiwan and CTBC Bank Co., Ltd.

(corrected version of previously filed exhibit)

10.39 Summary of Short-Term Credit Facilities and 75 Month Term Loan Facility from CTBC Bank Co., Ltd.

dated as of July 7, 2021.(30)

14.1+ Code of Business Conduct and Ethics

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31.1+ Certification of Charles Liang, President and CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Kevin Bauer, CFO and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2+ Certification of David Weigand , CFO and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1+ Certification of Charles Liang, President and CEO Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002( 8 )

Certification of Kevin Bauer, CFO and Secretary Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(9)

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

32.2+ Certification of David Weigand , CFO and Secretary Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002( 8 )

101.INS+ XBRL Instance Document

101.SCH+ XBRL Taxonomy Extension Schema Document

101.CAL+ XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF+ XBRL Taxonomy Extension Definition Linkbase Document

101.LAB+ XBRL Taxonomy Extension Label Linkbase Document

101.PRE+ XBRL Taxonomy Extension Presentation Linkbase Document

__________________________

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001-33383) filed with the Securities and Exchange Commission on September 12, 2018.

Incorporated by reference to Exhibit 14.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on February 5, 2019.

(8) The certifications attached as Exhibit 32.1 and 32.2 accompany the Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by Super Micro Computer, Inc.

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333-138370), declared effective by the Securities and Exchange Commission on March 28, 2007.

Incorporated by reference to Exhibit 10.24 from the Company’s Registration Statement on Form S-1 (Registration No.

333-138370), declared effective by the Securities and Exchange Commission on March 28, 2007.

(24) Incorporated by reference to Exhibit 10.41 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 4, 2020.

(25) Incorporated by reference to Exhibit 10.2 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on December 4, 2020

(26) Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on March 1, 2021

(27) Incorporated by reference to Exhibit 10.2 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on March 1, 2021

(28) Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on June 29, 2021

(29) Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on July 26, 2021

(30) Incorporated by reference to Exhibit 10.3 from the Company’s Current Report on 8-K (Commission File No.

001-33383) filed with the Securities and Exchange Commission on July 26, 2021

(31) Incorporated by reference to Exhibit 10.28 from the Company’s Annual Report on Form 10-K (Commission File No.