Super Micro Computer, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures 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 effective at a reasonable assurance level as of June 30, 2021. Management’s Report on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with U.S. GAAP. Management’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are appropriately recorded to permit preparation of financial statements in accordance with U.S. GAAP and that our receipts and expenditures are made only in accordance with authorizations of management, acting under authority delegated to them by the Board, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Management, including our CEO and CFO, assessed our internal control over financial reporting as of June 30, 2021. 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 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. GAAP. 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 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; and • Monitored instances in which individuals were granted broad access. We believe the foregoing efforts have effectively remediated the material weakness as these procedures 91 Table of Contents 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 Other than the remediation efforts described above, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 92 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Super Micro Computer, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Super Micro Computer, Inc. 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, 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. /s/ Deloitte & Touche LLP San Jose, California August 27, 2021 Item 9B. Other Information None. 93 Table of Contents PART III Item 10. Directors, Executive Officers, and Corporate Governance Executive Officers and Directors The following table sets forth information regarding our current directors and executive officers and their ages as of July 31, 2021: 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 Daniel W. 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 __________________________ (1) Member of the Audit Committee (2) Member of the Compensation Committee (3) Member of the Nominating and Corporate Governance Committee (the “Governance Committee”) (4) Determined by the Board of Directors to be “independent” Executive Officers and Management Directors Charles Liang founded Super Micro and has served as our President, Chief Executive Officer and Chairman of the Board since our inception in September 1993. Mr. Liang has been developing server and storage system architectures and technologies for the past three decades. From July 1991 to August 1993, Mr. Liang was President and Chief Design Engineer of Micro Center Computer Inc., a high-end motherboard design and manufacturing company. From January 1988 to April 1991, Mr. Liang was Senior Design Engineer and Project Leader for Chips & Technologies, Inc., a chipset technology company, and Suntek Information International Group, a system and software development company. Mr. Liang has been granted many server technology patents. Mr. Liang holds an M.S. in Electrical Engineering from the University of Texas at Arlington and a B.S. in Electrical Engineering from National Taiwan University of Science & Technology in Taiwan. 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. 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. 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. 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). Don Clegg serves as our Senior Vice President of Worldwide Sales. He previously served as our Vice President of Marketing and Worldwide Business Development. Mr. Clegg has been an employee since April 2006 and has held various senior sales and marketing roles with the Company during that time. Mr. Clegg started his career as a Design Engineer and evolved from Engineer to Vice President of Sales and Marketing working at several established and startup Silicon Valley system and semiconductor companies. Mr. Clegg graduated with high honors from Brigham Young University, where he earned a B.S. in Electrical Engineering. 94 Table of Contents George Kao serves as our Senior Vice President of Operations and previously served as our Vice President of Operations. Mr. Kao joined the Company in October 2016. Mr. Kao was Vice President of Operations of Pericom Semiconductor Corp. from October 2006 to September 2016. Mr. Kao served as a Chief Operating Officer of Orient Semiconductor Electronics Philippines, Inc., a subsidiary of Orient Semiconductor Electronics Ltd., from July 2003 to March 2006. Mr. Kao joined Orient Semiconductor Electronics Philippines, Inc. from Santa Clara-based Foveon after a 20-year career in technology in the United States that began at National Semiconductor. Mr. Kao holds a B.S. in Electrical Engineering from California State Polytechnic University in San Luis Obispo. 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. She has held a variety of positions with the Company, including Treasurer from inception to May 2019, Senior Vice President of Operations from May 2014 to February 2018, and Chief Administrative Officer from October 1993 to May 2019. From 1985 to 1993, Ms. Liu held accounting and operational positions for several companies, including Micro Center Computer Inc. Ms. Liu holds a B.S. in Accounting from Providence University in Taiwan. Ms. Liu is married to Mr. Charles Liang, our Chairman, President and Chief Executive Officer. Our Governance Committee concluded that Ms. Liu should serve on the Board based on her skills, experience, her general expertise in business and operations and her long familiarity with our company’s business. Non-Management Directors Daniel W. Fairfax has been a member of our Board of Directors since July 2019. Mr. Fairfax served as Senior Vice President and Chief Financial Officer of Brocade Communications, a networking equipment company ("Brocade") from June 2011 to November 2017. Brocade was acquired by Broadcom in November 2017. Mr. Fairfax previously served as Brocade's Vice President of Global Services from August 2009 to June 2011 and Brocade's Vice President of Business Operations from January 2009 to August 2009. Prior to Brocade, Mr. Fairfax served as Chief Financial Officer of Foundry Networks, Inc., from January 2007 until December 2008. Foundry Networks was acquired by Brocade in December 2008. Earlier in his career Mr. Fairfax served in executive financial management and/or general management positions at GoRemote Internet Communications, Ironside Technologies, Acta Technology, NeoVista Software, Siemens and Spectra-Physics. He began his career as a consultant with the National Telecommunications Practice Group of Ernst & Young. Mr. 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. Mr. 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. Saria Tseng has been a member of our Board of Directors since November 2016. Ms. Tseng has served as Vice President of Strategic Corporate Development, General Counsel and Secretary of Monolithic Power Systems, Inc. (“MPS”), a fabless manufacturer of high-performance analog and mixed-signal semiconductors since 2004. From 2001 to 2004, Ms. Tseng served as Vice President, General Counsel and Corporate Secretary of MaXXan Systems, an enterprise class storage network system. Previously, Ms. Tseng was an attorney at Gray Cary (now DLA Piper) and Jones Day. Ms. Tseng is a member of the state bar in both California and New York and is a member of the bar association of the Republic of China, Taiwan. She holds Master of Law degrees from the University of California at Berkeley and the Chinese Culture University in Taipei. Our Governance Committee concluded that Ms. Tseng should serve on the Board based on her skills, experience and qualifications in business and corporate law, her legal expertise and her familiarity with technology business. Sherman Tuan has been a member of our Board of Directors since February 2007. Mr. Tuan is founder of PurpleComm, Inc. (doing business as 9x9.tv), a platform for connected TV, where he has served as Chief Executive Officer since January 2005 and Chairman of the Board since June 2003. From September 1999 to May 2002, he was director of Metromedia Fiber Network, Inc., a fiber optical networking infrastructure provider. Mr. Tuan was co-founder of AboveNet Communications, Inc., an internet connectivity solutions provider, where he served as President from March 1996 to January 1998, Chief Executive Officer from March 1996 to May 2002 and director from March 1996 to September 1999. Mr. Tuan holds a degree in Electrical Engineering from Feng-Chia University in Taiwan. Our Governance Committee concluded that Mr. 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. Mr. 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. Mr. 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 95 Table of Contents chief executive officer, and served as a director. Mr. 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. Mr. Chan holds B.S.E.E. and M.S.C. 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. Mr. Liu has been retired since 2015. Prior to his retirement, Mr. Liu was Chief Executive Officer of Wintec Industries, a supply chain solutions company for high-tech manufacturers, from 2012 to 2015. Prior to Wintec, Mr. Liu served as Chairman of the Board and Chief Executive Officer of Newegg, Inc., an internet consumer technology retailer, from 2008 to 2010, and as President of Newegg in 2008. Prior to Newegg, Mr. Liu held various positions with Knight Ridder Inc., including Vice President, Finance & Advanced Technology and Vice President of Internal Audit. Mr. Liu served as President of the International Newspapers Financial Executives (INFE) for one year before it merged with other media associations. A Certified Public Accountant from 1982-2007, Mr. 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). Mr. 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. Liu received executive leadership training at the Stanford Advanced Finance Program in 1986 and at Harvard Business School in the Advanced Management Program (AMP) in 1998. Mr. Liu is not related to any member of our Board of Directors or any of our officers. Our Governance Committee concluded that Mr. Liu should serve on the Board based on his skills, experience, his financial literacy and his familiarity with technology businesses. Except for Mr. Charles Liang and Ms. Sara Liu who are married, there are no other family relationships among any of our directors or executive officers. Composition of the Board 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. The members of each class are elected to serve a three-year term with the term of office for each class ending in consecutive years. Vacancies may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. 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 Sherman Tuan Tally Liu Class II Director (2) Sara Liu Class III Directors (3) Daniel W. Fairfax Saria Tseng Shiu Leung (Fred) Chan __________________________ (1) The term of Class I directors expires at the annual meeting of stockholders following fiscal year 2022. (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. CORPORATE GOVERNANCE 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 96 Table of Contents 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/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. Director Independence The listing requirements of The Nasdaq Stock Market generally require that a majority of the members of a listed company's board of directors be independent. In addition, the listing rules generally require that, subject to specified exceptions, each member of a listed company's audit committee, compensation committee, and nominating and corporate governance committees be independent. Audit Committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listing requirements of The Nasdaq Stock Market. In addition, compensation committee members must satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act and the listing requirements of The Nasdaq Stock Market. 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 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 Non-management directors meet in executive session without management present each time the Board holds its regularly scheduled meetings. Communications with the Board of Directors The Board of Directors welcomes the submission of any comments or concerns from stockholders or other interested parties. If you wish to send any communications to the Board of Directors, you may use one of the following methods: • Write to the Board at the following address: Board of Directors Super Micro Computer, Inc. c/o General Counsel 980 Rock Avenue San Jose, California 95131 • E-mail the Board of Directors at BODInquiries@supermicro.com Communications that are intended specifically for the independent directors or non-management directors should be sent to the e-mail address or street address noted above, to the attention of the "Independent Directors." MEETINGS AND COMMITTEES OF THE BOARD Board Meetings Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board and committee meetings. We encourage, but do not require, each Board member to attend our annual meeting of stockholders. We held an annual meeting of stockholders on May 28, 2021 for our fiscal year 2020. The 97 Table of Contents 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. Board Leadership Structure Our Chairman, Charles Liang, is also our Chief Executive Officer. 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. Liang is the founder of our company with extensive experience in our industry. We do not currently have a lead independent director. Board Role in the Oversight of Risk The Board oversees our risk management activities, requesting and receiving reports from management. 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 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 The Board has three standing committees to facilitate and assist the Board in discharging its responsibilities: the Audit Committee, the Compensation Committee and the Governance Committee. 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/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 (2) Tally Liu (1) Sherman Tuan (1) Saria Tseng Daniel W. 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 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 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: • Appoints, retains and approves the compensation of our independent auditors, and reviews and evaluates the auditors’ qualifications, independence and performance; • Oversees the independent auditors’ audit work and reviews and pre-approves all audit and non-audit services that may be performed by them; 98 Table of Contents • 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 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; • Reviews our critical accounting policies and estimates; • Oversees the adequacy of our financial controls; • 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 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; and • 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 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 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 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, 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 , 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; and 99 Table of Contents • 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, and may adopt, amend and terminate such agreements, arrangements or 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 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 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 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 to us; • Reviews, on a periodic basis, the adequacy of our Corporate Governance Guidelines and recommends any proposed changes to the Board; • Oversees compliance with our Corporate Governance Guidelines and reports on such compliance to the Board; • 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; and • 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 100 Table of Contents 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. Liu, Mr. Weigand, and Mr. Clegg on August 4, 2020. 101 Table of Contents Item 11. Executive Compensation EXECUTIVE COMPENSATION 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 Financial Officer and Chief Compliance Officer Don Clegg Senior Vice President, Worldwide Sales George Kao Senior Vice President, Operations Alex Hsu (2) Senior Chief Executive, Strategic Business Kevin Bauer (1) Former Senior Vice President, Chief Financial Officer __________________________ (1) Mr. 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. (2) Mr. 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 _____________________________ (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”). This 102 Table of Contents 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. Liang. 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 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. However, neither our Chief Financial Officer nor our General Counsel attends the portion of meetings during which his own performance or compensation is being discussed. 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. 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. 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. 103 Table of Contents 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 Cray Inc. (2) Juniper Networks, Inc. Diebold Nixdorf, Incorporated NetApp, Inc. Extreme Networks, Inc. NETGEAR, Inc. F5 Networks, Inc. Plexus Corp. __________________________ (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. (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 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. Mr. 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. Weigand, 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 104 Table of Contents 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 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 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. 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 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. Mr. 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. Mr. 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. Finally, our Chief Executive Officer also provided the Compensation Committee with regular performance evaluations of the other named executive officers, including his views as to their impact on strategic initiatives and organizational goals, as well as their functional expertise and leadership. 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. 2021 CEO Performance Award Granted in March 2021 105 Table of Contents 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. Mr. Liang must also remain as the Company’s CEO (or such other position with the Company as Mr. Liang and the Board may agree) at the time each goal is met in order for the corresponding tranche to vest. 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 $45 32% 0% $60 76% 33% $75 120% 67% $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. 106 Table of Contents 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. Mr. 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. Mr. 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. Mr. 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. 107 Table of Contents 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; and • Equity-based incentive compensation consisting of grants of stock options and/or RSUs. Base Salary. 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, 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. Mr. 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 Fiscal Year 2021 Base Salary Rate (1) Base Salary % Change 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. In addition: • For Mr. 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; • For Mr. 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; 108 Table of Contents • For Mr. 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; and • For Mr. 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 . 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 . 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 . Stock options and other equity-based awards are also an important component of the total compensation of our named executive officers. We believe that equity-based awards also align the interests of each named executive officer with those of our stockholders. 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 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 109 Table of Contents 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. 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 prior 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, except to persons who became named executive officers during this period. 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) 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 Alex Hsu (3) N/A N/A N/A __________________________ (1) See “2021 CEO Performance Award Granted in March 2021” above for additional information. (2) Mr. Weigand assumed the role of Senior Vice President, Chief Financial Officer and Chief Compliance Officer following the resignation of Mr. Bauer in January 2021. (3) Mr. 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. Although Mr. 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. Liang. 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. 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. 110 Table of Contents RSUs . 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 . PRSUs represent the right to receive a defined number of shares of our common stock subject to the achievement of pre-established goals. Mr. 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. 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. Mr. 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 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 (the “First Price Target”), 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; and • 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 111 Table of Contents 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 Other than as discussed below under “Stock Retention Policy,” we currently do not require our directors or executive officers to own a particular amount of our common stock. 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. 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. 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 We established a recoupment policy that is applicable to our named executive officers (the “Recoupment Policy”). Under the Recoupment Policy, if we are required to prepare an accounting restatement due to material noncompliance with the financial reporting requirements under United States securities laws, the Compensation Committee shall be entitled to recover from any current or former executive officer any excess incentive-based compensation received by such person during the three-year period prior to the date on which we are required to prepare the restatement. This Recoupment Policy applies to both equity-based and cash-based incentive compensation awards. The “excess incentive-based compensation” is the difference between the actual amount that was paid, and the amount that would have been paid under the restated financial results. Other Benefits 112 Table of Contents Health and Welfare Benefits. Our named executive officers receive the same health and welfare benefits as are offered to our other employees, including medical, dental, vision, life, accidental death and dismemberment and disability insurance coverage, flexible spending account participation and holiday pay. The same contribution amounts, percentages and plan design provisions are applicable to all employees. We offer these health and welfare benefits generally to help provide a competitive compensation package to employees to assist with the attraction, hiring and retention of employees. Retirement Program. Our named executive officers may participate in the same tax-qualified, employee-funded 401(k) plan that is offered to all our other employees. We do not maintain a supplemental executive retirement plan, nor do we offer any defined benefit retirement plans or other defined contribution plans to our named executive officers. We offer these retirement program benefits generally to help provide a competitive compensation package to employees to assist with the attraction, hiring and retention of employees. Perquisites. We do not provide perquisites or personal benefits to any of our named executive officers. Employment Arrangements, Severance and Change of Control Benefits. 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. 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. Liang. 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. Among other factors that receive greater consideration are the net costs to us and our ability to effectively administer executive compensation in the short and long-term interests of stockholders. Section 162(m) of the U.S. 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). 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. We intend that our plans, arrangements and agreements will be structured and administered in a manner that complies with (or is exempt from) the requirements of Section 409A of the Code. Participation in, and compensation paid under, our plans, arrangements and agreements may, in certain instances, result in the deferral of compensation that is subject to the requirements of Section 409A. If our plans, arrangements and agreements as administered fail to meet certain requirements under or exemptions from Section 409A, compensation earned thereunder may be subject to immediate taxation and tax penalties. Summary The Compensation Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns our named executive officers’ interests with those of our stockholders. The Compensation Committee also believes that the compensation of our named executive officers is both appropriate and responsive to the goal of building stockholder value. Compensation Committee Report 113 Table of Contents The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) with our management. Based on this review and these discussions, the Compensation Committee recommended to the Board that the CD&A be included in this Annual Report. This report has been furnished by the Compensation Committee. Sherman Tuan, Chair Saria Tseng 114 Table of Contents Fiscal Year 2021 Summary Compensation Table The following table sets forth information concerning the reportable compensation for our named executive officers for the fiscal years ended 2021, 2020 and 2019, as applicable. FISCAL YEAR 2021 SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) (1) Bonus ($) (2) Stock Awards ($) (3) Option Awards ($) (4) Non-Equity Incentive Plan Compensation ($) (5) All Other Compensation ($) Total ($) Charles Liang 2021 421,785 3,360 — 11,616,000 8,076,701 — 20,117,846 President, Chief Executive Officer and Chairman of the Board 2020 423,346 — — — 875,635 — 1,298,981 2019 386,212 — — — — — 386,212 David Weigand 2021 367,709 43,360 109,188 113,280 — — 633,537 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 Alex Hsu (6) 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. (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. (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 115 Table of Contents grant. 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. (6) Mr. 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. (7) Mr. Bauer resigned as our Chief Financial Officer in January 2021, and Mr. Weigand has assumed such role. Mr. Bauer served as consultant after his resignation from the Company and earned $53,336 in consulting fees for fiscal year 2021. Fiscal Year 2021 Grants of Plan-Based Awards The following table provides information concerning all plan-based awards granted during fiscal year 2021 to each of our named executive officers, which grants were made under the 2020 Equity and Incentive Compensation Plan. FISCAL YEAR 2021 GRANTS OF PLAN-BASED AWARDS TABLE Estimated Future Payouts Under Equity Incentive Plan Awards All Other Stock Awards: Number of Shares of Stock or Units (#) All Other Option Awards: Number of Securities Underlying Options (#) Exercise or Base Price of Option Awards ($/Sh) Grant Date Fair Value of Stock and Option Awards ($) (1) 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 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) — — 452,964 3/1/2021 — — — — (4) (4) 475,592 Kevin Bauer 4/27/2021 — — — — 10,000 38.50 183,600 2/25/2021 — — — — (5) (5) 242,900 _________________________ (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. The smallest 116 Table of Contents 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. Liang. 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. Liang. 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. 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 $45.00 per share. See “ Executive Compensation—Compensation Discussion and Analysis (“CD&A”)— Compensation Philosophy and Objectives—Our Move Toward Performance-Based Compensation Arrangements ” and “ Executive Compensation—Compensation Discussion and Analysis (“CD&A”)—2021 CEO Performance Award Granted in March 2021 ” above and Part II, Item 8, Note 14 “Stock-based Compensation and Stockholders’ Equity”, to our consolidated financial statements for fiscal year 2021 included in this Annual Report on Form 10-K. Grants made in fiscal year 2021 are described more fully in the "Compensation Discussion and Analysis" section of this Annual Report. More information concerning the terms of the employment or consulting arrangements, if applicable, in effect with our named executive officers during fiscal year 2021 is provided under the "Employment Arrangements, Severance and Change of Control Benefits" under the “Compensation Discussion and Analysis”. Outstanding Equity Awards at 2021 Fiscal Year-End The following table provides information concerning the outstanding equity-based awards as of June 30, 2021, held by our named executive officers. OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END TABLE Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) (1) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) Charles Liang 231,260 20.70 1/21/2023 117 Table of Contents 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 3,690 238 (3) 22.10 7/31/2028 — 4,475 (4) 30.33 8/4/2030 2,000 1,525 (4) 30.33 8/4/2030 2,500 (5) 87,950 2,700 (6) 94,986 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 — 4,288 (4) 30.33 8/4/2030 1,875 1,337 (4) 30.33 8/4/2030 1,500 (5) 52,770 2,535 (6) 89,181 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 974 586 (9) 20.37 3/27/2030 — 5,410 (10) 23.74 10/27/2030 1,268 (11) 44,608 2,430 (12) 85,487 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 2,995 44 (7) 22.10 7/31/2028 38,000 — 20.37 3/27/2030 134 (14) 4,714 680 (15) 23,922 17,939 (16) 631,094 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 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. 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 118 Table of Contents share, based on the $45.00 exercise price for these stock options, there would be no appreciation value in those stock options for Mr. Liang. 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. (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. (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. (15) These RSUs vested at the rate of 25% on May 10, 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 10, 2022. (16) This amount reflects the service-based portion of the March 2020 PRSU grant to Mr. Hsu (15,000 units). In addition to the 15,000 units, based upon the Company’s revenue for fiscal year 2021 ($3,557 million), which increased from revenue for fiscal year 2020, management has calculated that 2,939 additional units were earned, such that a total of 17,939 units will vest in November 2021. Such amount remains subject to final certification by the Compensation Committee. (17) These nonqualified stock options vested at the rate of 20% on January 11, 2018 and vested (or generally will vest) at a rate of 1/20th per quarter thereafter, such that the granted options will be fully vested on January 11, 2022. (18) These nonqualified stock options shall vest at the rate of 100% on February 25, 2022. Fiscal Year 2021 Option Exercises and Stock Vested The following table sets forth the dollar amounts realized by each of our named executive officers pursuant to the exercise or vesting of equity-based awards during fiscal year 2021. FISCAL YEAR 2021 OPTION EXERCISES AND STOCK VESTED TABLE Option Awards Stock Awards Name Number of Shares Acquired on Exercise (#) Value Realized on Exercise ($) (1) Number of Shares Acquired on Vesting (#) Value Realized on Vesting ($) (2) Charles Liang 132,000 $ 2,601,009 12,000 348,360 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 __________________________ (1) The value disclosed in this column is based on the difference between the price of our common stock at the time of exercise and the exercise price. (2) The values disclosed in this column are based on the closing price of our common stock on the date of vesting, multiplied by the gross number of shares vested. Fiscal Year 2021 Pension Benefits and Nonqualified Deferred Compensation 119 Table of Contents We do not provide any nonqualified deferred compensation arrangements or pension plans. As such, the Pension Benefits disclosure and Nonqualified Deferred Compensation disclosure for fiscal year 2021 are omitted from this Annual Report. Fiscal Year 2021 Potential Payments Upon Termination or Change of Control 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 For fiscal year 2021, the ratio of the annual total compensation of Mr. Liang, our Chief Executive Officer (“2021 CEO Compensation”), to the median of the annual total compensation of all of our employees and those of our consolidated subsidiaries other than Mr. Liang (“2021 Median Annual Compensation”), was 268 to 1. 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 2021 Summary Compensation Table,” plus the Company’s contribution to certain non-discriminatory group health and welfare benefits provided to Mr. Liang. 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. 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 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 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) 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. 120 Table of Contents 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 2021 Director Compensation Under our director compensation policy, we reimburse non-employee directors for reasonable expenses in connection with attendance at Board and committee meetings. 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 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. 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 (“Excess Meetings”). 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. Mr. Tuan and Mr. 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. Fred Tsai. These awards provided 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 (the “First Price Target”); 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 (the “Second Price Target”). The relevant stock price goals were not met during fiscal year 2020, and no portion of these amounts were paid to Mr. Tuan or Mr. 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. Tuan and 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. Mr. 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 $220,000 with a vesting date of June 30, 2021. 121 Table of Contents The following table shows for fiscal year 2021 certain information with respect to the compensation of all of our non-employee directors who served in such capacities during fiscal year 2021: FISCAL YEAR 2021 DIRECTOR COMPENSATION Name Fees Earned or Paid in Cash ($) (3) Stock Awards ($) (4)(5) Non-Equity Incentive Plan Compensation ($) (6) Total ($) 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 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. (2) Mr. 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 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. Tsai and 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. Name Stock Awards Option Awards Daniel Fairfax 8,289 — 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 MPS, with which we have engaged in certain transactions. See “Part III. Item 13. 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 2021, with Mr. Tsai’s service on such committee ending on May 28, 2021. 122 Table of Contents 123 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of July 31, 2021 by: • Each of the named executive officers during fiscal year 2021; • Each of our directors; • All directors and executive officers as a group; and • All persons known to us who beneficially own 5% or more of our outstanding common stock. Name and Address of Beneficial Owner (1) Amount and Nature of Beneficial Ownership (2) Percent of Common Stock Outstanding (3) Executive Officers and Directors: Charles Liang (4) 7,441,827 14.5 % Don Clegg (5) 43,999 * George Kao (6) 32,445 * Alex Hsu (7) 66,137 * David Weigand (8) 25,022 * Saria Tseng (9) 56,889 * Sherman Tuan (10) 57,586 * 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) 14,397 * All directors and executive officers as a group (12 persons) (13) 7,778,322 15.1 % 5% Holders Not Listed Above: Empyrean Capital Overseas Master Fund, Ltd. (14) 3,000,459 5.9 % Disciplined Growth Investors Inc. (15) 3,645,912 7.2 % BlackRock Inc. (16) 3,146,769 6.2 % The Vanguard Group (17) 3,999,148 7.9 % Total executives, directors & 5% or more stockholders 42.4 % __________________________ * Represents beneficial ownership of less than one percent of the outstanding shares of common stock (1) Except as otherwise indicated, to our knowledge the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws applicable and to the information contained in the footnotes to this table. Except as otherwise provided, the address of each stockholder listed in the table is 980 Rock Avenue, San Jose, CA 95131. (2) Under the SEC rules, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options or RSUs subject to vesting. (3) Calculated on the basis of 50,590,466 shares of common stock outstanding as of July 31, 2021, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after July 31, 2021 are deemed to be outstanding for the purposes of calculating that stockholder’s percentage of beneficial ownership. (4) Includes 528,010 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2021. Also includes 2,663,752 shares jointly held by Mr. Liang and Sara Liu, his spouse, 144,412 shares held directly by Ms. Liu and 63,625 options exercisable and 197 RSU shares issuable within 60 days after July 31, 2021. See footnote 11. (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. Mr. 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. 124 Table of Contents (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. Liu and Mr. Liang, her spouse, 4,035,177 shares held by Charles Liang, and 528,010 shares issuable upon the exercise of options exercisable within 60 days after July 31, 2021. See footnote 4. (12) Mr. 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. (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. Mr. 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. (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. Fifth St. 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 We currently maintain three compensation plans that provide for the issuance of our Common Stock to officers and other employees, directors and consultants. These consist of the 2006 Equity Incentive Plan, the 2016 Equity Incentive Plan and the 2020 Plan. All three of these plans have been approved by our stockholders. 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, 2021: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) Weighted-average exercise price of outstanding options, warrants and rights (b)(2)(3) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(c) Equity compensation plans approved by security holders 7,045,510 $ 26.17 2,730,277 Equity compensation plans not approved by security holders — — Total 7,045,510 2,730,277 __________________________ (1) This number includes 5,175,554 shares subject to outstanding options, 1,854,956 shares subject to outstanding RSU awards, and 15,000 shares subject to outstanding PRSU awards. (2) The weighted average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs and PRSUs, which have no exercise price. (3) The weighted-average remaining contractual term of our outstanding options as of June 30, 2021 was 5.36 years. Item 13. Certain Relationships and Related Transactions and Director Independence CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Procedures for Approval of Related Person Transactions Pursuant to our Audit Committee charter, the Audit Committee has the responsibility for the review and approval of any related person transactions; provided that if the matter or transaction involves employment or compensation terms for services to our company, including retention or payment provisions relating to expert services, then it is presented to the Compensation Committee. In approving or rejecting a proposed transaction, or a relationship that encompasses many similar 125 Table of Contents 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. In addition, we annually require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions as such term is defined by SEC rules and regulations. These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer. Transactions with Related Parties, Promoters and Certain Control Persons Director and Officer Indemnification We have entered into agreements to indemnify our directors and executive officers to the fullest extent permitted under Delaware law. In addition, our certificate of incorporation contains provisions limiting the liability of our directors and our bylaws contain provisions requiring us to indemnify our officers and directors. Equity-Based Awards Please see the “Grants of Plan-Based Awards” table and the “Director Compensation” table above for information on stock option and restricted stock unit grants to our directors and named executive officers in fiscal year 2021. Employment Relationships Hung-Fan (Albert) Liu, who is a brother of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our operations organization in San Jose, California. Mr. Liu received total compensation of approximately $426,054 in fiscal year 2021. The total compensation includes salary, bonus and equity awards. Mr. Albert Liu reports to Mr. Kao, our Senior Vice President of Operations. Mr. Liu also received options and RSU awards in fiscal year 2021 totaling $148,776. Shao Fen (Carly) Kao, who is a sister-in-law of Sara Liu, our Co-Founder and Senior Vice President and a director, is employed in our finance and accounting organization in San Jose, California. Ms. Kao received total compensation of approximately $140,315 in fiscal year 2021. The total compensation includes salary, bonus and equity awards. Ms. Kao reports through the finance and accounting organization, which reports to Mr. Weigand, our Chief Financial Officer. Sara Liu, who is Charles Liang's spouse and is related to Mr. Liu and Ms. Kao as outlined above, is a Co-Founder, Senior Vice President, and director of the Company, and received total compensation of approximately $415,110 in fiscal year 2021. Transactions with Ablecom and Compuware We have entered into a series of agreements with Ablecom Technology Inc. ("Ablecom"), a Taiwan corporation, and one of its affiliates, Compuware Technology, Inc ("Compuware"). 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. 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. Bill Liang, a brother of both Charles Liang and Steve Liang, is a member of the Board of Directors of Ablecom. Bill Liang is also the Chief Executive Officer of Compuware, a member of Compuware’s Board of Directors and a holder of a significant equity interest in Compuware. Steve Liang is also a member of Compuware’s Board of Directors and is an equity holder of Compuware. Neither Charles Liang nor Sara Liu own 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 126 Table of Contents specifications. Additionally, Ablecom agrees to build the tools needed to manufacture the products. We have agreed to pay for the cost of chassis and related product tooling and engineering services and will pay for those items when the work has been completed. We entered into a distribution agreement with Compuware, under which we appointed Compuware as a non-exclusive distributor of our products in Taiwan, China and Australia. We believe that the pricing and terms under the distribution agreement are similar to the pricing and terms of distribution arrangements we have with similar third-party distributors. We have also entered into a series of agreements with Compuware, including a multiple product development, production and service agreements, product manufacturing agreements, and lease agreements for office space. Under these agreements, we outsource to Compuware a portion of our design activities and a significant part of our manufacturing of components, particularly power supplies. With respect to design activities, Compuware generally agrees to design certain agreed-upon products according to our specifications, and further agrees to build the tools needed to manufacture the products. We pay Compuware for the design and engineering services, and further agree to pay Compuware for the tooling. We retain full ownership of any intellectual property resulting from the design of these products and tooling. With respect to the manufacturing aspects of the relationship, Compuware purchases most of materials needed to manufacture the power supplies from outside markets and uses these materials to manufacture the products and then sell to us. We review and frequently negotiate with Compuware the prices of the power supplies that we purchase from Compuware. Compuware also manufactures motherboards, backplanes and other components used on our printed circuit boards. We sell to Compuware most of the components needed to manufacture the above products. Compuware uses these components to manufacture and then sells back the products to us at a purchase price equal to the price at which we sold the components to Compuware, plus a “manufacturing value added” fee and other miscellaneous material charges and costs. We frequently review and negotiate with Compuware the amount of the “manufacturing value added” fee that will be included in the price of the products we purchase from Compuware. Ablecom’s sales to us comprise a substantial majority of Ablecom’s net sales. For fiscal years ended June 30, 2021, 2020 and 2019, we purchased products from Ablecom totaling $122.2 million, $152.5 million and $137.9 million, respectively. Amounts owed to Ablecom by us as of June 30, 2021 and 2020, were $41.2 million and $40.1 million, respectively. For the fiscal years ended June 30, 2021, 2020 and 2019, we paid Ablecom $8.6 million, $7.6 million and $7.4 million, respectively, for design services, tooling assets and miscellaneous costs. Compuware’s sales of our products to others comprise a majority of Compuware’s net sales. For fiscal years ended June 30, 2021, 2020 and 2019, we sold products to Compuware totaling $27.9 million, $23.9 million and $17.7 million, respectively. Amounts owed to us by Compuware as of June 30, 2021 and 2020, were $18.4 million and $14.3 million, respectively. The price at which Compuware purchases the products from us is at a discount from our standard price for purchasers who purchase specified volumes from us. In exchange for this discount, Compuware assumes the responsibility to install our products at the site of the end customer and administers first-level customer support. For the fiscal years ended June 30, 2021, 2020 and 2019, we purchased products from Compuware totaling $113.4 million, $130.6 million and $138.9 million, respectively. Amounts we owed to Compuware as of June 30, 2021 and 2020, were $46.4 million and $46.5 million, respectively. For the fiscal years ended June 30, 2021, 2020 and 2019, we paid Compuware $1.8 million, $1.2 million and $0.7 million, respectively, for design services, tooling assets and miscellaneous costs. Our exposure to financial loss as a result of our involvement with Ablecom is limited to potential losses on our purchase orders in the event of an unforeseen decline in the market price and/or demand for our products such that we incur a loss on the sale or cannot sell the products. Our outstanding purchase orders to Ablecom were $40.2 million and $23.2 million at June 30, 2021 and 2020, respectively, representing the maximum exposure to financial loss. We do not directly or indirectly guarantee any obligations of Ablecom, or any losses that the equity holders of Ablecom may suffer. Our exposure to financial loss as a result of our involvement with Compuware is limited to potential losses on our purchase orders in the event of an unforeseen decline in the market price and/or demand for our products such that we incur a loss on the sale or cannot sell the products. Our outstanding purchase orders to Compuware were $71.0 million and $45.7 million at June 30, 2021 and 2020, respectively, representing the maximum exposure to financial loss. We do not directly or indirectly guarantee any obligations of Compuware, or any losses that the equity holders of Compuware may suffer. Loans 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 0.25% effective March 1, 127 Table of Contents 2020. The loan was originally made at Mr. Liang's request to provide funds to repay margin loans to two financial institutions, which loans had been secured by shares of our common stock that he held. The lenders called the loans in October 2018, following the suspension of our common stock from trading on NASDAQ in August 2018 and the decline in the 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 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 $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. 128 Table of Contents Item 14. Principal Accounting Fees and Services The Audit Committee appointed Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year 2021. Independent Registered Public Accounting Firm Fees and Services The following table sets forth the aggregate audit fees billed to us by our independent registered public accounting firm, Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, “Deloitte”), and fees paid to Deloitte for services in the fee categories indicated below for fiscal years 2021 and 2020. 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. Years Ended 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 __________________________ (1) Audit fees consist of the aggregate fees for professional services rendered for the audit of our consolidated financial statements, review of interim condensed consolidated financial statements and certain statutory audits. Audit Committee Pre-Approval Policies and Procedures The Audit Committee has determined that all services performed by Deloitte & Touche LLP are compatible with maintaining the independence of Deloitte & Touche LLP. The Audit Committee’s policy on approval of services performed by the independent registered public accounting firm is to pre-approve all audit and permissible non-audit services to be provided by the independent registered public accounting firm during the fiscal year. The Audit Committee reviews each non-audit service to be provided and assesses the impact of the service on the firm’s independence. PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements See Index to consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K, which is incorporated herein by reference. 2. Financial Statement Schedules All financial statement schedules have been omitted because they are either not applicable or the required information is shown in the consolidated financial statements or notes thereto. 3. Exhibits See the Exhibit Index which precedes the signature page of this Annual Report, which is incorporated herein by reference. (b) Exhibits See Item 15(a)(3) above. (c) Financial Statement Schedules 129 Table of Contents See Item 15(a)(2) above. EXHIBIT INDEX Exhibit Number Description 3.3 Amended and Restated Certificate of Incorporation of Super Micro Computer, Inc.(1) 3.4 Amended and Restated Bylaws of Super Micro Computer, Inc.(1) 4.1 Specimen Stock Certificate for Shares of Common Stock of Super Micro Computer, Inc.(1) 4.5 Description of Securities(1 0 ) 10.1* Form of Restricted Stock Agreement under Super Micro Computer, Inc. 2006 Equity Incentive Plan(1 8 ) 10.2* Form of Restricted Stock Unit Agreement under Super Micro Computer, Inc. 2006 Equity Incentive Plan( 19 ) 10.3* Form of Directors’ and Officers’ Indemnity Agreement( 20 ) 10.4* Offer Letter for Sara Liu( 21 ) 10.5* Offer Letter for Alex Hsu( 22 ) 10.6* Product Manufacturing Agreement dated January 8, 2007 between Super Micro Computer, Inc. and Ablecom Technology Inc.( 24 ) 10.7* Form of Notice of Grant of Stock Option under 2006 Equity Incentive Plan(2) 10.8* Form of Notice of Grant of Restricted Stock under 2006 Equity Incentive Plan(2) 10.9* Form of Notice of Grant of Restricted Stock Unit under 2006 Equity Incentive Plan(2) 10.10* 2006 Equity Incentive Plan, as amended(3) 10.11* 2016 Equity Incentive Plan(4) 10.12* Form of Notice of Grant of Stock Option under 2016 Equity Incentive Plan(5) 10.13* Form of Stock Option Agreement under 2016 Equity Incentive Plan(5) 10.14* Form of Notice of Grant of Restricted Stock Units under 2016 Equity Incentive Plan(5) 10.15* Form of Restricted Stock Units Agreement under 2016 Equity Incentive Plan(5) 10.16 Loan and Security Agreement with Bank of America, N.A., dated April 19, 2018(6) 10.17 Extension of Loan and Security Agreement with Bank of America, N.A., dated September 7, 2018(7) 10.18 Second Amendment to Loan and Security Agreement, dated as of June 27, 2019( 9 ) 10.19* ‡ Offer Letter for Kevin Bauer(1 1 ) 10.20* ‡ Offer Letter for Don Clegg(1 2 ) 10.21* ‡ Offer Letter for George Kao(1 3 ) 10.22* ‡ Offer Letter for David Weigand(1 4 ) 10.23 Letter Agreement with Bank of America, N.A., dated October 28, 2019( 15 ) 10.24* Super Micro Computer, Inc. 2020 Equity and Incentive Compensation Plan( 16 ) 10.25 Third Amendment to Loan and Security Agreement with Bank of America, N.A. 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 ) 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) 10.27* Form of Notice of Grant of Stock Option under 2020 Equity and Incentive Compensation Plan( 32 ) 10.28* Form of Notice of Incentive Stock Option Agreement under 2020 Equity and Incentive Compensation Plan(33) 10.29* Form of Nonqualified Stock Option Agreement under 2020 Equity and Incentive Compensation Plan(34) 10.30* Form of Notice of Grant of Restricted Stock Units under 2020 Equity and Incentive Compensation Plan( 35 ) 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) 130 Table of Contents 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 21.1+ Subsidiaries of Super Micro Computer, Inc. 23.1+ Consent of Independent Registered Public Accounting Firm 24.1+ Power of Attorney (included in signature pages) 31.1+ Certification of Charles Liang, President and CEO 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 ) 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 __________________________ + Filed herewith (1) Incorporated by reference to the same number exhibit filed with the Registrant’s Registration Statement on Form S-1 (Registration No. 333-138370), declared effective by the Securities and Exchange Commission on March 28, 2007. (2) Incorporated by reference to the Company’s registration statement on Form S-8 (Commission File No. 333-142404) filed with the Securities and Exchange Commission on April 27, 2007. (3) Incorporated by reference to Appendix A from the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No. 001-33383) filed with the Securities and Exchange Commission on January 18, 2011. (4) Incorporated by reference to the Company's Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on March 14, 2016. (5) Incorporated by reference to the Company's registration statement on Form S-8 (Commission File No.333-210881) filed with the Securities and Exchange Commission on April 22, 2016. (6) Incorporated by reference to Exhibit 10.51 from the Company's Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 17, 2019. (7) 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 September 12, 2018. (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. for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. (9) 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 2, 2019. (10) Incorporated by reference to Exhibit 4.5 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. (11) Incorporated by reference to Exhibit 10.55 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. (12) Incorporated by reference to Exhibit 10.56 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. Table of Contents (13) Incorporated by reference to Exhibit 10.57 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. (14) Incorporated by reference to Exhibit 10.58 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. (15) Incorporated by reference to Exhibit 10.59 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on December 19, 2019. (16) Incorporated by reference to Appendix A in the Company’s Definitive Proxy Statement on Schedule 14A (Commission File No. 001-33383) filed with the Securities and Exchange Commission on April 21, 2020. (17) Incorporated by reference to Exhibit 10.1 from the Company’s Current Report on Form 8-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on May 13, 2020. (18) Incorporated by reference to Exhibit 10.7 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. (19) Incorporated by reference to Exhibit 10.8 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. (20) Incorporated by reference to Exhibit 10.9 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. (21) Incorporated by reference to Exhibit 10.20 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. (22) Incorporated by reference to Exhibit 10.21 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. (23) 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. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 (32) Incorporated by reference to Exhibit 10.31 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 (33) Incorporated by reference to Exhibit 10.32 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 (34) Incorporated by reference to Exhibit 10.33 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 (35) Incorporated by reference to Exhibit 10.34 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 (36) Incorporated by reference to Exhibit 10.35 from the Company’s Annual Report on Form 10-K (Commission File No. 001-33383) filed with the Securities and Exchange Commission on August 31, 2020 * Management contract, or compensatory plan or arrangement ‡ Certain portions of this document, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy, have been redacted in accordance with Regulation S-K Item 606(a)(6). Item 16. Form 10-K Summary None. Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUPER MICRO COMPUTER, INC. Date: August 27, 2021 /s/ C HARLES L IANG Charles Liang President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) 133 Table of Contents POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles Liang and David Weigand, jointly and severally, his or her attorney-in-fact, each with the full power of substitution, for such person, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might do or could do in person hereby ratifying and confirming all that each of said attorneys-in-fact and agents, or his or her substitute, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the dates indicated. Signature Title Date /s/ CHARLES LIANG President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) August 27, 2021 Charles Liang /s/ DAVID WEIGAND Senior Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) August 27, 2021 David Weigand /s/ SARA LIU Director August 27, 2021 Sara Liu /s/ DANIEL W. FAIRFAX Director August 27, 2021 Daniel W. Fairfax /s/ SARIA TSENG Director August 27, 2021 Saria Tseng /s/ SHERMAN TUAN Director August 27, 2021 Sherman Tuan /s/ SHIU LEUNG (FRED) CHAN Director August 27, 2021 Shiu Leung (Fred) Chan /s/ TALLY LIU Director August 27, 2021 Tally Liu 134