______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
______________________________________________________________________________________
. To request a printed copy of our proxy
and Annual Report, which we will provide to you free of charge, either: write to 8x8's Investor Relations Department at 8x8, Inc., 2125 O'Nel Drive, San Jose, CA 95131; call us
at (866) 587-8516; or email us at 2017@8x8.com.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE 2017 ANNUAL MEETING
Q: What information is contained in this proxy statement?
A:
The information in this proxy statement relates to the proposals to be voted on at the 2017 Annual Meeting, the voting process, our corporate governance, the compensation of our
directors and named executive officers in fiscal 2017, and other required information.
Q: What shares can I vote?
A:
Each share of 8x8 common stock issued and outstanding as of the Record Date is entitled to vote on all proposals presented at the 2017 Annual Meeting. You may vote all shares
owned by you as of the Record Date, including (1) shares held directly in your name as the stockholder of record
and (2) shares held for you as the beneficial owner in street
name
.
Q: How many votes am I entitled to per share?
A:
Each holder of shares of common stock is entitled to one vote for each share of common stock held as of the Record Date.
Q: Can I attend the 2017 Annual Meeting?
A:
You are entitled to attend the 2017 Annual Meeting only if you were an 8x8 stockholder or joint holder as of the Record Date, or if you hold a valid proxy for the 2017 Annual
Meeting. You should be prepared to present government-issued photo identification (such as a driver's license or passport) for admittance. If you are not a stockholder of record but hold shares in
street name through a broker, trustee or nominee, you should be prepared to provide proof of beneficial ownership as of the Record Date, such as your most recent account statement prior to
June 16, 2017, a copy of the voting instruction card provided by your bank, broker, trustee or nominee, or other similar evidence of ownership.
The meeting will begin promptly at 10:00 a.m., local time. Check-in will begin at 9:30 a.m., local time, and you should allow ample time for the check-in procedures.
Q: How can I vote my shares in person at the 2017 Annual Meeting?
A:
Shares held in your name as the stockholder of record may be voted by you in person at the 2017 Annual Meeting. Shares held beneficially in street name may be voted by you in
person at the 2017 Annual Meeting only if you obtain a valid proxy, or "legal proxy," from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you
plan to attend the 2017 Annual Meeting, we recommend that you also submit your voting instructions prior to the meeting to ensure your vote will be counted if you later decide not to attend the
meeting.
Q: How can I vote my shares without attending the 2017 Annual Meeting?
A:
If you hold shares directly as the stockholder of record, you may direct how your shares are voted without attending the 2017 Annual Meeting in accordance with the instructions
included in the proxy statement and proxy card. Our Chief Executive Officer and our Chief Financial Officer have been designated by the Board to be the proxy holders for the 2017 Annual Meeting.
They will cast votes on Proposal Nos. One, Two, Three, Four, Five, and Six at the meeting in accordance with the direction provided in the proxy.
Q: Can I change my vote?
A:
Your proxy is revocable and you may change your vote at any time prior to the vote at the 2017 Annual Meeting. If you are the stockholder of record, you may change your vote by
granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), by
providing a written notice of revocation to 8x8, Inc., Attn: Secretary, 2125 O'Nel Drive, San Jose, CA 95131, prior to your shares being voted, or by attending the 2017 Annual Meeting and voting in
person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares you hold beneficially in street name, you may change
your vote by submitting new voting instructions to your broker, trustee or nominee following the instructions they provided or, if you have obtained a legal proxy from your broker or nominee giving
you the right to vote your shares, by attending the meeting and voting in person.
Q: How many shares must be present or represented to conduct business at the 2017 Annual Meeting?
A:
The quorum requirement for holding and transacting business at the 2017 Annual Meeting is that holders of a majority of the voting power of the issued and outstanding shares of
our common stock must be present in person or represented by proxy. Both abstentions and broker non-votes are counted for the purpose of determining the presence of a quorum.
Q: What is the voting requirement to approve each of the proposals?
A:
The voting requirements for the proposals that we will consider at the Annual Meeting are:
-
|
Proposal No. 1 - Election of Directors.
The seven nominees receiving the most votes cast "FOR" their election shall be elected as directors, provided that pursuant to a
policy adopted by the Board, any director nominee who fails to receive more votes cast "FOR" his election than "WITHHELD" is expected to tender his resignation to the Governance and
Nominating Committee of the Board, which is authorized to consider each resignation tendered under the policy and recommend to the Board whether or not to accept the resignation.
|
-
|
Proposal No. 2 - Ratification of Appointment of Moss Adams LLP as Independent Registered Public Accounting Firm.
An affirmative vote of the holders of a majority of
the shares present or represented by proxy and entitled to vote on this proposal at the Annual Meeting is necessary for approval of this proposal.
|
-
|
Proposal No. 3 - Approval of the Second Amended and Restated 1996 Employee Stock Purchase Plan.
An affirmative vote of the holders of a
majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting will constitute approval of this proposal.
|
-
|
Proposal No. 4 - Approval of the Material Terms of the Performance Goals under the Company's Amended and Restated 2012 Equity Incentive Plan, Solely for Purposes of
Section 162(m) of the Internal Revenue Service Code.
An affirmative vote of the holders of a majority of the shares present or represented by proxy and entitled to vote at the Annual Meeting
will constitute approval of this proposal.
|
-
|
Proposal No. 5 - Advisory Vote to Approve Executive Compensation.
An affirmative vote of the holders of a majority of the shares present or represented by proxy
and entitled to vote on this proposal at the Annual Meeting will constitute approval of this proposal.
Neither we nor the Board will not be bound or otherwise obligated by the results of the vote on this proposal.
|
-
|
Proposal No.6 - Advisory Vote on Frequency of Votes to Approve Executive Compensation.
The plurality of votes cast for the alternative frequency periods (one, two, or three years)
will be considered by the Board to represent the preference of stockholders for the frequency of non-binding advisory votes on executive compensation.
Neither we nor the Board will not be bound or otherwise obligated by the results of the vote on this proposal.
|
Q: What happens if additional matters are presented at the 2017 Annual Meeting?
A:
Other than the items of business described in this proxy statement, we are not aware of any additional business to be acted upon at the 2017 Annual Meeting. If you grant a proxy,
the named proxy holders, Vikram Verma and Mary Ellen Genovese, in addition to voting your shares in accordance with the Board's recommendations, will have the discretion to vote your shares
on certain additional matters properly presented for a vote at the meeting except with respect to broker non-votes, as explained below. If, for any reason, any of our nominees is not available as a
candidate for director, the named proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.
Q: How will votes be counted at the 2017 Annual Meeting?
A:
An automated system administered by Broadridge Financial Solutions, Inc. ("Broadridge") will tabulate stockholder votes by proxy instructions submitted by beneficial owners over
the Internet, by telephone, or by proxy cards mailed to Broadridge. Broadridge will also tabulate stockholder votes submitted by proxies submitted by stockholders of record other than beneficial
owners. The inspector of the election will tabulate votes cast in person at the 2017 Annual Meeting.
Q: How are "broker non-votes" and abstentions treated?
A:
Brokers holding shares in street name for customers have discretionary authority to vote on some matters when they have not received instructions from the beneficial owners of
shares. Under the Delaware General Corporation Law, an abstaining vote and a broker "non-vote" are counted as present and are, therefore, included for purposes of determining whether a
quorum of shares is present at the Annual Meeting. A broker "non-vote" occurs when a broker or other nominee holding shares for a beneficial owner signs and returns a proxy with respect to
shares of common stock held in a fiduciary capacity (typically referred to as being held in "street name") but does not vote on a particular matter due to a lack of discretionary voting power and
instructions from the beneficial owner. Under listing rules governing voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters but not on
non-routine matters. At the Annual Meeting, all proposals other than Proposal No. 2 (the ratification of appointment of Moss Adams LLP as our independent registered public accounting firm for the
fiscal 2017 audit) are considered non-routine matters.
Broker non-votes are considered present but not entitled to vote at the meeting. They will not affect the outcome of the vote on any of the proposals at the Annual Meeting because broker
non-votes are excluded from the tabulation of votes cast on each proposal. Abstentions are counted as present and entitled to vote for purposes of establishing a quorum. An abstention will have no
effect on the election of directors under Proposal No. 1, the Advisory Vote to Approve Executive Compensation under Proposal No. 5, or the Advisory Vote on the Frequency of Votes to Approve
Executive Compensation, Proposal No. 6, all of which are subject to a plurality vote. However, an abstention will have the same effect as a vote "against" the ratification of the appointment by the
Audit Committee of Moss Adams LLP as our independent registered public accounting firm for the fiscal 2017 audit under Proposal No. 2, the Approval of the Second Amended and Restated 1996
Employee Stock Purchase Plan, and the approval of the Material Terms of the Performance Goals under the Company's Amended and Restated 2012
Equity Incentive Plan Solely for Purposes of Internal Revenue Code Section 162(m) under Proposal No. 4, because a vote in favor of each of these proposals from
a majority of the shares present in person or by proxy and entitled to vote is needed for approval.
Q: Who will serve as inspector of elections?
A:
The inspector of elections will be a representative from the Company.
Q: What should I do if I receive more than one set of voting materials?
A:
You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards. For example, if you hold your shares in more than
one brokerage account, you may receive a separate proxy card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more
than one name, you will receive more than one proxy card. Please vote using each control number and proxy card that you receive.
Q: Who will bear the cost of soliciting votes for the 2017 Annual Meeting?
A:
We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. If you choose to
access the proxy materials or vote over the Internet, you are responsible for any Internet access charges you may incur. If you choose to vote by telephone, you are responsible for any telephone
charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors,
officers and employees, who will not receive any additional compensation for such solicitation activities.
PROPOSAL NO. ONE:
ELECTION OF DIRECTORS
Nominees
The Board currently consists of seven directors, all of whom have been nominated for re-election at the 2017 Annual Meeting and have agreed to serve if elected.
Proxies cannot be voted for a greater number of individuals than the number of nominees named. Each of the directors elected at the 2017 Annual Meeting will hold office until the 2018
Annual Meeting of Stockholders or until his successor has been duly elected and qualified. Unless otherwise instructed, the proxy holders will vote the proxies received by them for each of our
seven nominees named below, all of whom are directors currently serving on the Board. In the event that any of our nominees becomes unable or declines to serve as a director at the time of the
2017 Annual Meeting, the proxy holders will vote the proxies for any substitute nominee who is designated by the current Board to fill the vacancy. It is not expected that any nominee listed below
will be unable or will decline to serve as a director. The names of the nominees and certain information about each of them are set forth below.
Name
|
|
Age
|
|
Principal Occupation
|
|
Director Since
|
Bryan R. Martin
|
|
49
|
|
Chairman of the Board and Chief Technology Officer, 8x8, Inc.
|
|
2001
|
Guy L. Hecker, Jr. (1)(2)(3)(4)
|
|
85
|
|
Major General, USAF, Retired
|
|
1997
|
Vikram Verma
|
|
52
|
|
Chief Executive Officer, 8x8, Inc.
|
|
2012
|
Eric Salzman (1)(3)(4)
|
|
50
|
|
Managing Member, SarniHaan Capital Partners LLC
|
|
2012
|
Ian Potter (1)(3)
|
|
53
|
|
Managing Partner of Lion City Capital Partners
|
|
2013
|
Jaswinder Pal Singh(1)
|
|
51
|
|
Professor of Computer Science at Princeton University and
|
|
2013
|
|
|
|
|
Chairman and Co-Founder of Gwynnie Bee, Inc.
|
|
|
Vladimir Jacimovic
|
|
53
|
|
Managing Partner, Continuum Capital Partners
|
|
2014
|
__________
(1) Member of the Audit Committee
(2) Lead director
(3) Member of the Compensation Committee
(4) Member of the Governance and Nominating Committee
Except as indicated below, each nominee or incumbent director has been engaged in the principal occupation set forth above during the past five years. There are no family relationships
between any of our directors or executive officers. There are also no arrangements or understandings between any director, nominee or executive officer and any other person pursuant to which
he or she has been or will be selected as a director and/or executive officer.
Bryan R. Martin
has served as our Chairman of the Board since December 2003, our Chief Technology Officer since September 2013, and as a director since February 2001. From
February 2002 to September 2013, he served as our Chief Executive Officer. From March 2007 to November 2008, and again from April 2011 to December 2011, he served as President.
From February 2001 to February 2002, he served as President and Chief Operating Officer. He served as Senior Vice President, Engineering Operations from July 2000 to February 2001 and as
the Company's Chief Technical Officer from August 1995 to August 2000. He also served as a director from January 1998 to July 1999. In addition, Mr. Martin served in various technical roles for
the Company from April 1990 to August 1995. He received a B.S. and a M.S. in Electrical Engineering from Stanford University. We believe Mr. Martin's qualifications to serve as a director include
his tenure as our Chief Executive Officer and as a member of our Board, his more than 25 years of service to us with extensive experience in the development and sale of communications
technologies and services and the 55 United States patents issued to him in the fields of semiconductors, computer architecture, video processing algorithms, videophones and
communications.
Major General Guy L. Hecker, Jr.
has served as a director since August 1997 and lead director since January 2010. He was the founder of Stafford, Burke and Hecker, Inc., a consulting
firm based in Alexandria, Virginia, and served as its President from 1982 to 2008. Prior to his retirement from the United States Air Force in 1982, Major General Hecker's duties included serving
as Director of the Air Force Office of Legislative Liaison and an appointment in the Office of the Deputy Chief of Staff, Research, Development and Acquisition for the Air Force. Earlier, he served
as a pilot and commander in both fighter and bomber aircraft units, including command of a bomber wing and an air division. During his Air Force career, Major General Hecker was awarded a
number of military decorations, including the Air Force Distinguished Service Medal, the Silver Star, the Legion of Merit (awarded twice) and the Distinguished Flying Cross. He currently serves on
the board of directors of NavCom Defense Electronics. Major General Hecker received a B.A. from The Citadel, an M.A. in International Relations from George Washington University, an honorary
Ph.D. in military science from The Citadel and completed the management development program at Harvard Business School. He is also a graduate of the National War College.
We believe that Major General Hecker's qualifications to serve on
the Board include his extensive business and investing experience, including the founding of a successful business at Stafford, Burke and Hecker after retiring from the Air Force and his
involvement in venture capital investing including being an initial investor in Micron Computer, a subsidiary of Micron Technology, Inc., prior to its initial public offering and a director and principal
shareholder of NavCom Defense Electronics since its founding in 1984.
Vikram Verma
has served as our Chief Executive Officer since September 2013 and as a director since January 2012. From October 2008 to August 2013, Mr. Verma was
President of Strategic Venture Development at Lockheed Martin with responsibility for monetizing existing Lockheed Martin technologies in new global commercial markets through
technology incubators, intellectual property licensing and international strategic partnerships. From 2006 to 2008, Mr. Verma was President of IS&GS Savi Group, a Lockheed
Martin technology and information services division providing real-time supply chain management and security solutions for government and commercial markets worldwide. Prior to that, he
was Chairman and Chief Executive Officer of Savi Technology, Inc., a leader in RFID-based tracking and security solutions and a pioneer in using RFID tags to track cargo containers and
their content globally via public and private clouds. Savi was acquired by Lockheed Martin in 2006. Mr. Verma holds a B.S.E.E. degree from the Florida Institute of Technology,
a M.S.E degree from University of Michigan and the graduate degree of Engineer in electrical engineering from Stanford University. He has also attended executive management programs at the
Harvard Business School, Stanford Graduate School of Business and the University of California at Berkeley Haas School of Business. He has been granted eight patents and has won numerous
other accolades including being named a "Technology Pioneer" by the World Economic Forum in Davos, Switzerland and a Tau Beta Pi - Williams Fellow. We believe Mr. Verma's qualifications to
serve as a director, in addition to being our Chief Executive Officer, include his experience leading Savi Technology, Inc. through its growth and eventual sale to Lockheed Martin and his expertise
bringing advanced technology-based solutions to new domestic and international markets, all of which are critical components for our business success.
Eric Salzman
has served as a director since February 2012. Mr. Salzman has nearly 20 years of experience investing in and advising technology companies with a focus on the
communications and software sectors. Mr. Salzman has extensive M&A, capital markets, private equity and board experience having served as a board member or board observer at
15 companies and is currently a director at three private equity owned technology companies. Since 2011, Mr. Salzman has been the Managing Member of SarniHaan Capital Partners
LLC, a boutique consulting firm that provides high impact strategic advice to public and private technology companies and maintains an investment banking affiliation with Monarch Capital Group,
LLC. Prior to establishing SarniHaan Capital Partners LLC, Mr. Salzman was employed by Lehman Brothers Holdings as a Managing Director in the Private Equity and Principal
Investing Group as well as in the Global Trading Strategies Division. Prior to Lehman Brothers, Mr. Salzman was a senior research analyst covering the technology and communications
sectors in the hedge fund industry and was a senior private equity investment professional at two communications-focused private equity funds. Mr. Salzman began his career in the
M&A Group at CS First Boston. Mr. Salzman has a B.A. Honors from the University of Michigan and a MBA from Harvard University. We believe Mr. Salzman's qualifications to serve
as director include his 20 years in investing and advising technology companies that are similar to our business.
Ian Potter
has served as a director since September 2013. Mr. Potter is currently a Distinguished Fellow with INSEAD's Global Private Equity Initiative, a Founding Partner of Lion City
Applied Science and the Managing Partner of Lion City Capital Partners. Lion City Capital Partners is a privately held investment holding company in Singapore that seeks to make direct
investments in technology and natural resources companies. From 1994 until his retirement in 2014, he worked for Morgan Stanley in Asia where he supervised all aspects of the firm's commodity
business while serving on a number of internal and external private company boards. During this time, he opened the group's New Delhi, Shanghai, and Tokyo offices and was responsible for
developing the group's capacity across the region and expanding its product offerings. Mr. Potter began his career in finance in London and New York working for Chase Manhattan Bank N.A.
where he contributed to the development of the bank's interest rate and currency derivatives business. He holds an MBA from INSEAD in France and a BA from Queen's University in Canada. We
believe Mr. Potter's qualifications to serve as a director include his 25 years in international business development, management, and operational experience.
Jaswinder Pal Singh
has served as a director since October 2013. Dr. Singh is currently a Full Professor of Computer Science at Princeton University, where he has
served on the faculty for over 20 years. He is also a director of Gwynnie Bee, Inc., an Internet technology company in the retail space.
Dr. Singh also served as an advisor to Right Media, Inc., a SaaS online advertising exchange that was acquired by Yahoo in
2007, and later led the development of Yahoo's innovative next-generation advertising marketplace. Dr. Singh has a BSE degree from Princeton University and obtained his MS and PhD
degrees from Stanford University. We believe Dr. Singh's qualifications to serve as a director include his qualification as a leading authority on scalable computing systems, infrastructure and
applications and his service to several technology companies. He also is a co-author of Parallel Computer Architecture: A Hardware-Software Approach, the leading textbook in parallel
computing, an inventor under several patents, and an author of over 75 published research papers.
Vladimir Jacimovic
has served as a director since March 2014. Mr. Jacimovic is the Founder and Managing Partner of Continuum Capital Partners, an investment firm that specializes in
crossover investments targeting private and public technology companies. Previously, Mr. Jacimovic was a Partner at New Enterprise Associates (NEA), a leading global venture capital firm
focused on helping entrepreneurs build transformational businesses across multiple stages, sectors and geographies, and a Managing Director at Crosslink Capital, a leading stage-independent
venture capital firm. Since beginning his venture career in 1996, Mr. Jacimovic has been involved in more than 30 investments in software, communications, and technology enabled services. We
believe Mr. Jacimovic's qualifications to serve as director include his 25 years of investing and operating experience with high growth companies in the technology and services industry with
specific expertise in the SaaS, big data and security segments.
Vote Required and Recommendation
The seven nominees receiving the most votes cast "FOR" his selection shall be elected as directors at the Annual Meeting. However, the Board has adopted a policy requiring each
director nominee to agree that, if the nominee fails to receive more votes cast "FOR" his selection than "WITHHELD," the nominee shall tender his resignation to the Governance and Nominating
Committee of the Board, which is authorized to consider each resignation tendered under the policy and recommend to the Board whether or not to accept the resignation. Each nominee for
director has agreed to abide by this policy.
The Board unanimously recommends that the stockholders vote "FOR" the election of the nominees set forth above.
PROPOSAL NO. TWO:
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board is directly responsible for the appointment of our independent registered public accounting firm. The Audit Committee has appointed Moss Adams LLP,
Independent Registered Accounting Firm, to audit our financial statements for the fiscal year ending March 31, 2017. The Board proposes that the stockholders ratify this appointment. The Audit
Committee understands the need for Moss Adams LLP to maintain objectivity and independence in its audits of our financial statements.
The Audit Committee retained Moss Adams LLP to audit our consolidated financial statements for fiscal 2018 and also to provide other auditing and non-auditing services in fiscal 2018. The
Audit Committee has reviewed all non-audit services provided by Moss Adams LLP and has concluded that the provision of such services was compatible with maintaining Moss Adams LLP's
independence in the conduct of its auditing functions.
To help ensure the independence of the independent registered public accounting firm, the Audit Committee has adopted a policy for the pre-approval of all audit and non-audit services to be
performed for us by our independent registered public accounting firm. The Audit Committee may delegate to one or more of its members the authority to grant the required approvals, provided
that any exercise of such authority is presented to the full Audit Committee at its next regularly scheduled meeting.
The following table sets forth the aggregate fees billed to us by Moss Adams LLP for the fiscal years ended March 31, 2017 and 2016:
Service Categories
|
|
|
Fiscal 2017
|
|
|
Fiscal 2016
|
|
Audit fees (1)
|
|
$
|
866,000
|
|
$
|
732,500
|
(5)
|
Audit-related fees (2)
|
|
|
16,500
|
|
|
14,000
|
|
Tax fees (3)
|
|
|
-
|
|
|
-
|
|
All other fees (4)
|
|
|
12,500
|
|
|
2,500
|
|
Total
|
|
$
|
895,000
|
|
$
|
749,000
|
|
(1)
|
Audit fees consist of fees for professional services provided in connection with (i) the audit of our financial statements; (ii) audit of our internal control over financial reporting;
(iii) reviews of our quarterly financial statements; and (iv) filing Form S-8 registration statements with the SEC.
|
(2)
|
Audit-related fees consist of fees for professional services provided in conjunction with the audit of our employee benefit plan.
|
(3)
|
Tax fees consist of fees billed for professional services rendered for tax consultations.
|
(4)
|
All other fees include fees for an online accounting research tool and/or general accounting assistance.
|
(5)
|
Amounts updated to reflect final fiscal 2016 audit fees.
|
Vote Required and Recommendation
The ratification of the selection of Moss Adams LLP as our independent registered public accounting firm for fiscal 2018 will require the affirmative vote of holders of a majority of the
shares entitled to vote on this matter. Abstentions will be counted for purposes of determining the presence or absence of a quorum, but are not counted as affirmative votes. In the event that
stockholders fail to ratify the appointment, the Audit Committee may reconsider its selection. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a
different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in our best interests.
Representatives of Moss Adams LLP are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available
to respond to appropriate questions.
The Board unanimously recommends that the stockholders vote "FOR" the proposal to ratify our Audit Committee's appointment of Moss Adams LLP to serve as our independent
registered public accounting firm for the fiscal year ending March 31, 2018.
PROPOSAL NO. THREE:
APPROVAL OF THE SECOND AMENDED AND RESTATED 1996 EMPLOYEE STOCK PURCHASE PLAN OF
8X8, INC.
At the Annual Meeting, the stockholders will be asked to approve and ratify an amendment and restatement of the 1996 Employee Stock Purchase Plan (the "
Purchase Plan
")
adopted by the Board to (i) reserve 500,000 shares of common stock for issuance under the Purchase Plan, (ii) change the existing "evergreen provision" so that the number of
shares of common stock then reserved for issuance under the Purchase Plan shall be increased annually on the first day of each the Company's fiscal years for a period of not more than ten years,
beginning on April 1, 2018, by an amount equal to the lesser of (A) 500,000 shares and (B) any lesser number of shares determined by the Board, and (iii) eliminate the expiration
date of the Purchase Plan.
Extension of Purchase Plan
The Purchase Plan was approved by the stockholders in June 1996, and became effective in July 1997 upon our initial public offering. The Purchase Plan had a life of ten years from the
date it became effective, but in May 2006 the Board approved an amendment to the Purchase Plan, subsequently approved by the stockholders at the 2006 Annual Meeting, to extend the life of
the Purchase Plan by ten years, such that it would expire in July 2017. To enable participants to continue to participate in the Purchase Plan without interruption, in May 2017 the Board approved
the Second Amended and Restated Employee Stock Purchase Plan (the "
Restated Purchase Plan
")
eliminated the Purchase Plan expiration date effective at that time, and resolved to submit the Restated Purchase Plan for approval and ratification by the stockholders at the Annual Meeting.
Shares Subject to Purchase Plan
Under the Purchase Plan, 500,000 shares of common stock are available for issuance during each fiscal year. As of May 31, 2017, prior to the purchase of shares on the purchase date
at the end of July 2017, an aggregate of 204,069 shares remained available for issuance under the Purchase Plan. Subject to and effective upon approval by the stockholders at the Annual
Meeting, the Board approved 500,000 as the number of shares available for issuance under the Restated Purchase Plan and approved an "evergreen" formula pursuant to which up to
an additional 500,000 shares will be reserved for issuance under the Restated Purchase Plan each fiscal year from 2018 through and including 2027, unless the Board timely acts to reduce or
eliminate such annual increase. For example, if it determined after three years that the number of shares then available under the plan was adequate to cover anticipated purchases for the
coming fiscal year, the Board could affirmatively resolve at its first meeting for that fiscal year to reduce the number of shares otherwise automatically added to the plan for that year from 500,000
to zero.
Summary of the Restated Purchase Plan
The following summary of the Restated Purchase Plan is qualified in its entirety by the specific language of the Restated Purchase Plan, a copy of which is attached as Appendix A.
General
. The Restated Purchase Plan is intended to qualify as an "employee stock purchase plan" under section 423 of the Internal Revenue Code (the "
Code
"). Each
participant will be granted upon entry into an offering period under the Restated Purchase Plan the right to purchase (a "
Purchase Right
") through accumulated payroll deductions up to a
number of shares determined in accordance with the Restated Purchase Plan. A participant's Purchase Right will be automatically exercised on each successive purchase date during the offering
period unless the Purchase Right has terminated prior to such date.
Shares Subject to Plan
. Subject to stockholder approval at the Annual Meeting, the Restated Purchase Plan will have 500,000 of our authorized but unissued or reacquired shares of
common stock reserved for issuance under the plan, plus an additional 500,000 shares (or any lesser number of shares determined by the Board) to be reserved annually on the first day of each
fiscal year for a period of not more than ten years, beginning on April 1, 2018, subject to appropriate adjustment in the event of any stock dividend, stock split, reverse stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the outstanding common stock as a class without the receipt of consideration by the Company. If any Purchase Right expires
or terminates, the shares subject to the unexercised portion of such Purchase Right will again be available for issuance under the Restated Purchase Plan.
Administration
. The Restated Purchase Plan may be administered by the Board or the Compensation Committee (the "
Plan Administrator
"). Subject to the provisions of the
Restated Purchase Plan, the Plan Administrator determines the terms and conditions of Purchase Rights granted under the plan. The Plan Administrator may adopt such rules, policies,
procedures, limitations or guidelines as it deems advisable for proper administration of the plan, consistent with the requirements of section 423 of the Code. The Plan Administrator will interpret
the Restated Purchase Plan, and decisions of the Plan Administrator are final and binding on all parties having an interest in the plan.
Eligibility
. All of our employees and the employees of any parent or subsidiary corporation of the Company designated by the Plan Administrator for inclusion in the Restated Purchase
Plan are eligible to participate in the plan. However, no employee who owns or holds options to purchase, or who, as a result of being granted a Purchase Right under the Restated Purchase
Plan, would own or hold options to purchase, five percent or more of the total combined voting power or value of all classes of stock of the Company or of any parent or subsidiary corporation of
the Company may be granted a Purchase Right under the Restated Purchase Plan.
Offering Periods
. Shares of our common stock are offered under the Restated Purchase Plan through a series of successive offering periods having a duration established by the Plan
Administrator not exceeding 27 months. Generally, as the Purchase Plan is currently administered, offering periods have had durations of 12 months and have been comprised of a
series of two six-month purchase intervals commencing on the first business days of February and August of each year.
Purchases occur on the last day of each purchase interval. Should the fair market value per share of our common stock on any purchase date during an offering period (other than the final
purchase date of any offering period) be less than the fair market value per share at the start of the offering period, then that offering period will automatically terminate immediately following the
purchase of shares and a new offering period will commence on the next business day following the purchase date.
Participation
. Eligible employees may commence participation in the Restated Purchase Plan at the beginning of an offering period. These entry dates will generally occur on the first
business days of February and August of each year. To enroll in the plan, an eligible employee must authorize payroll deductions prior to the applicable entry date. Payroll deductions may not
exceed 10% of a participant's base compensation (as defined by the Restated Purchase Plan) during each purchase interval within an offering period, unless a different limit is established by the
Plan Administrator. A participant's authorized payroll deductions will continue throughout the offering period, unless (i) the participant makes an election to increase or decrease the rate of or to
stop his or her payroll deductions, (ii) the participant voluntarily terminates his or her Purchase Right, or (iii) the participant ceases to be eligible to participate in the Restated Purchase Plan. Upon
termination of a participant's Purchase Right, we will refund without interest the participant's accumulated payroll deductions not previously applied to the purchase of shares. Once a participant's
Purchase Right in an offering period has terminated, the participant may not resume participation in the same offering period and may only resume participation by enrolling in a subsequent
offering period.
Grant of Purchase Rights
. Subject to certain limitations, each participant in an offering period will be granted on his or her entry date a Purchase Right exercisable for the number of
whole shares determined by dividing the participant's payroll deductions accumulated during the purchase interval ending on the purchase date by the applicable purchase price. However, in no
event will a participant be permitted to purchase during any purchase interval more than a number of shares determined by dividing $25,000 by the fair market value of a share of our common
stock on the entry date, or such lower limit as may be established from time to time by the Plan Administrator. In addition, under applicable tax rules governing qualified employee stock purchase
plans, no participant may be granted a Purchase Right that would permit the participant to purchase shares of our common stock under the Restated Purchase Plan or any other employee stock
purchase plan of the Company or of any parent or subsidiary corporation of the Company having a fair market value exceeding $25,000 per calendar year in which the Purchase Right is
outstanding at any time. Purchase Rights are nontransferable and may only be exercised by the participant.
Purchase of Shares
. As soon as practicable after the last business day of each purchase interval during an offering period, we will issue to each participant in the offering period the
number of shares determined by dividing the amount of payroll deductions accumulated for the participant during the purchase interval by the purchase price, subject to the limitations described
above. The price at which shares are sold under the Restated Purchase Plan will be established by the Plan Administrator but may not be less than 85% of the lesser of the fair market value per
share on the participant's entry date into the offering period or on the purchase date. Fair market value means the closing price of a share on any given date. On June 30, 2017, the closing price
of our common stock on the Nasdaq Global Select Market was $14.55 per share. Any payroll deductions under the Restated Purchase Plan not applied to the purchase of shares on any purchase
date will be returned to the participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share, in which case the remaining amount may be
applied to purchase shares on the next purchase date.
Change in Control
. In the event of a merger or consolidation to which we are a party or a sale of all or substantially all of our assets, each outstanding Purchase Right will be exercised
on a date prior to the effective date of such transaction specified by the Plan Administrator.
International Stock Purchase Rights
. To provide us with greater flexibility in structuring our equity compensation programs for our non-U.S. employees, the Restated Purchase Plan
also permits us to grant employees of our non-U.S. subsidiary entities rights to purchase shares of our common stock pursuant to rules or sub-plans adopted by the Plan Administrator in order to
achieve tax, securities law or other compliance objectives ("
International Awards
"). While the Restated Purchase Plan is intended to be a qualified "employee stock
purchase plan" within the meaning of section 423 of the Code, these International Awards are not intended to qualify under section 423. Please refer to "Summary of Certain United
States Federal Income Tax Consequences" below for a discussion of tax consequences under section 423.
Termination or Amendment
. The Restated Purchase Plan will continue in effect until terminated by the Board. The Board may at any time amend or terminate the Restated Purchase
Plan, except that the approval of the stockholders is required within twelve months of the adoption of any amendment increasing the number of shares authorized for issuance under the Restated
Purchase Plan.
Summary of Certain United States Federal Income Tax Consequences
. The following summary is intended only as a general guide as to certain United States federal income tax
consequences under current law of participation in the Restated Purchase Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax
consequences based on particular circumstances, including the effect of tax laws of any municipality, state or foreign country in which the participant may reside. Participants should consult their
own tax advisors with respect to the tax consequences of participation in the Restated Purchase Plan.
The Restated Purchase Plan is intended to qualify as an "employee stock purchase plan" within the meaning of section 423 of the Code. Provided that the Restated Purchase Plan so
qualifies, there are generally no tax consequences to an employee of either being granted a Purchase Right or purchasing shares.
The tax consequences of a disposition of shares acquired under the Restated Purchase Plan vary depending on the period such stock is held before its disposition. If a participant disposes of
shares within two years after his or her entry date into the offering period in which the shares are acquired or within one year after the purchase date on which the shares are acquired (a
"
disqualifying disposition
"), the participant recognizes ordinary income in the year of disposition in an amount equal to the difference between the fair market value of the shares on the
purchase date and the purchase price. Such income is not currently subject to income tax withholding. Any additional gain or resulting loss recognized by the participant from the disposition of the
shares is a capital gain or loss.
If the participant disposes of shares more than two years after his or her entry date into the offering period in which the shares are acquired and more than one year after the purchase date on
which the shares are acquired, the participant recognizes ordinary income in the year of disposition in an amount equal to the lesser of (i) the difference between the fair market value of the shares
on the date of disposition and the purchase price or (ii) 15% of the fair market value of the shares on the entry date. Any additional gain recognized by the participant on the disposition of the
shares is a capital gain. If the fair market value of the shares on the date of disposition is less than the purchase price, there is no ordinary income, and the loss recognized is a capital loss.
If the participant still owns the purchased shares at the time of death, the lesser of the amount by which the fair market value of the shares on the date of death exceeds the purchase price or
15% of the fair market value of the shares on the entry date of the offering period during which those shares were purchased will constitute ordinary income in the year of death.
If the participant disposes of the shares in a disqualifying disposition, we should be entitled to a deduction equal to the amount of ordinary income recognized by the participant as a result of
the disposition, except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder. In all other cases, no deduction is allowed the Company.
New Plan Benefits
. Because benefits under the Restated Purchase Plan will depend on employees' elections to participate and to purchase shares under the Restated Purchase Plan
at various future dates, it is not possible to determine the benefits that will be received by executive officers and other employees. Non-employee directors are not eligible to participate in the
Restated Purchase Plan.
Vote Required and Board of Directors' Recommendation
. The proposal to approve the Restated Purchase Plan will require approval by a majority of the shares of common stock
present in person or represented by proxy at the Annual Meeting and entitled to vote on such proposal.
The Board believes that the opportunity to purchase shares under the Restated Purchase Plan is an important factor in motivating and maintaining the morale of the Company's valuable
employees. The Board believes equity-based reward programs such as the Restated Purchase Plan are valuable tools to retain the Company's valued employees and to closely align their
interests with those of our stockholders. Consequently, the Board believes that it is in the best interests of our stockholders to approve the Second Amended and Restated Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE SECOND AMENDED AND RESTATED 1996 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NO. FOUR:
APPROVE THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER THE 8X8, INC. AMENDED AND
RESTATED 2012 EQUITY INCENTIVE PLAN SOLELY FOR PURPOSES OF INTERNAL REVENUE SERVICE CODE SECTION 162(m)
We are asking our stockholders to approve the material terms of the performance goals under our Amended and Restated 2012 Equity Incentive Plan (which we refer to as the "2012 Plan"),
solely to preserve corporate income tax deductions that may otherwise be disallowed pursuant to Internal Revenue Code Section 162(m). We are not proposing an increase in the share
reserve or any other amendment to the terms of the 2012 Plan at this time.
The 2012 Plan was adopted by our Board in June 2012 and was thereafter approved by our stockholders at an annual meeting held in July 2012. The 2012 Plan was subsequently amended
and restated on two occasions in 2014 and 2016, respectively, each such amendment having been adopted by our Board in June of that year and approved by our stockholders in the annual
meeting held in July of that year.
Section 162(m) of the Code generally disallows the corporate tax deduction for certain compensation paid in excess of $1,000,000 annually to each of the chief executive officer and the three
other most highly paid executive officers (other than the chief financial officer) of publicly-held companies, unless compensation is performance-based or satisfies other conditions. To satisfy the
performance-based exception among other requirements, Section 162(m) of the Code generally requires that the material terms of the performance goals be approved by stockholders every five
years. Although our stockholders were asked to approve certain amendments to the 2012 Plan at our annual meetings in 2014 and 2016 and the material terms of the 2012 Plan were set forth in
the proxy statements for those meetings, our Board has determined to seek stockholder approval specifically for the purpose of Section 162(m) at the annual meeting, which pursuant to
applicable Treasury Regulations must be obtained every five years to preserve the benefits of the section.
FOR AVOIDANCE OF DOUBT, BY VOTING "FOR" THIS PROPOSAL NO. 4, A STOCKHOLDER VOTES FOR THE APPROVAL OF THESE PERFORMANCE GOALS:
We are asking you to approve the material terms of the performance goals under the 2012 Plan, including the class of eligible employees, the types of business criteria on which the payouts or
vesting for performance-based awards are based, and the maximum amounts of cash or shares that can be provided during a specified period to any employee for performance-based awards
under the 2012 Plan as described below.
Eligibility
. Awards may be granted to any employee of or consultant to us or our affiliates or to nonemployee members of the Board or of the board of directors (or similar governing
authority) of any affiliate of ours.
Performance Goals:
The Compensation Committee may grant Qualified Performance-Based Awards, which are intended to qualify as "performance-based compensation,"
in the form of Restricted Stock, Restricted Stock Units or Performance Units that
are
subject to satisfaction of one or more of the performance criteria goals set forth in the table below,
either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or affiliate, either individually, alternatively, or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to a designated comparison group, in each
case as specified by the Compensation Committee in the award:
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earnings per share (including, without limitation, earnings before interest, taxes, depreciation and/or amortization)
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return on capital (including without limitation return on total capital or return on invested capital)
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return on assets or net assets
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income, pre-tax income or net income
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operating income or pre-tax profit
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operating profit or net operating profit
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gross margin, operating margin or profit margin
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return on operating revenue or operating assets
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cash flow from operations
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general and administrative expenses
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debt leverage (debt to capital)
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The Compensation Committee will objectively define the manner of calculating the performance goals it selects to use for a performance period, including whether or to what
extent there shall not be taken into account any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) any extraordinary,
unusual, non-recurring or non-comparable items (A) as described in Accounting Standard Codification Section 225-20 (or its successor provisions), (B) as described in management's discussion
and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for the applicable year, or (C) publicly announced by the Company in a press
release or conference call relating to the Company's results of operations or financial condition for a completed quarterly or annual fiscal period.
Maximum Number of Shares.
In no event will the number of shares of common stock covered or referenced by either Stock Options or Stock Appreciation Rights, or other awards
which are granted as Qualified Performance-Based Awards, to any one person in any one calendar year, exceed 750,000 shares of common stock.
The sections below under the headings "Summary of 2012 Plan" constitute a summary of material terms of the 2012 Plan. All statements below in this Proposal No. 4 are intended
only to summarize the 2012 Plan and are qualified in their entirety by reference to the 2012 Plan itself. For the complete set of terms and conditions applicable to the 2012 Plan, you should read
the full text of the 2012 Plan which is set forth in Appendix B.
Summary of the 2012 Plan
Purpose
. The 2012 Plan is intended to encourage ownership of our common stock by our employees, consultants and directors and to provide additional incentive for them to
promote the success of our business through the grant of awards of or relating to our common stock.
Administration
. The 2012 Plan may be administered by the Board or the Compensation Committee. To date, the Compensation Committee has been administering the 2012 Plan.
Subject to the provisions of the 2012 Plan, the Compensation Committee has discretion to determine the employee, consultant or director to receive an award, and the form of award. Further, the
Compensation Committee has complete authority to interpret the 2012 Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the
respective award agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the 2012 Plan.
Term of Plan
. Unless the 2012 Plan is terminated earlier by the Board, awards may be made under the 2012 Plan until the tenth anniversary of its adoption by the Board, or June 22, 2022.
Shares Subject to Plan
. The shares issued or to be issued under the 2012 Plan are authorized but unissued shares of our common stock. The maximum number of shares of common
stock which may be issued or made subject to awards under the 2012 Plan is 15,400,000 (this number includes shares which have already been issued under the 2012 Plan and are outstanding
as of the date of this proxy statement).
Types of Awards
. Awards under the 2012 Plan may include Incentive Stock Options, Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Units, Qualified Performance-Based Awards and Stock Grants. Each award will be evidenced by an instrument in such form as the Compensation Committee may prescribe, setting
forth applicable terms such as the exercise price and term of any option or applicable forfeiture conditions or performance requirements for any Restricted Stock or Restricted Stock Units. Except
as noted below, all relevant terms of any award will be set by the Compensation Committee in its discretion.
Effect of Termination of Employment or Association
. Unless the Board or the Compensation Committee determines otherwise in connection with any particular award under the 2012
Plan, Stock Options and SARs will generally terminate six months following the recipient's termination of employment or other association with us due to death or disability and three months
following the recipient's termination of employment or other association with us for any other reason. The effect of termination on other awards will depend on the terms of those awards.
Transferability
. In general, no award under the 2012 Plan may be transferred by the recipient and during the life of the recipient all rights under an award may be exercised only by the
recipient or his or her legal representative. However, the Board or the Compensation Committee may approve the transfer, without consideration, of an award of a Nonstatutory Option or
Restricted Stock to a family member.
Adjustments upon Changes in Capitalization
. In the event of any change in the outstanding shares of common stock through any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or other distribution with respect to such shares of common stock, our Board will make an appropriate adjustment to the following: (i) the maximum
numbers and kinds of shares subject to the 2012 Plan and the 2012 Plan limits, (ii) the numbers and kinds of shares or other securities subject to the then outstanding awards, (iii) the exercise or
hurdle price for each share or other unit of any other securities subject to then outstanding Stock Options or SARs (without change in the aggregate purchase or hurdle price as to which Stock
Options or SARs remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a risk of forfeiture in the form of a Company repurchase right.
Fundamental Transaction, Liquidation or Dissolution
. In the event that we (1) merge or consolidate with or into another entity as a result of which our common stock is converted into or
exchanged for the right to receive cash, securities or other property or is cancelled, (2) sell or exchange all of our common stock for cash, securities or other property, (3) sell, transfer or otherwise
dispose of all or substantially all of our assets to one or more other persons in a single transaction or series of related transactions or (4) undertake a liquidation or dissolution (each, a "Corporate
Transaction"), our Board or the Compensation Committee may take any one or more of the following actions with respect to all or any portion of our outstanding awards:
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Provide for their assumption, or the issuance of substantially equivalent awards in substitution therefor, by the acquiring or succeeding entity;
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Provide for the termination of any or all outstanding awards (and the forfeit or repurchase, as applicable, of any shares subject to such awards) to the extent unvested (and unexercised, in the
case of Stock Options and SARs) immediately prior to the consummation of the Corporate Transaction;
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Provide for partial or complete acceleration of vesting of the unvested portions of any outstanding awards, such that Stock Options and SARs become exercisable, and risks of forfeiture
applicable to Restricted Stock Units and Restricted Stock lapse, in whole or in part prior to or upon consummation of the Corporate Transaction;
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Provide that all outstanding awards of Restricted Stock and Restricted Stock Units conditioned on the achievement of performance goals or other business objectives and the target payout
opportunities attainable under any or all Performance Units will be deemed to have been satisfied as to all, none or a pro rata number of shares covered by the award based on the assumed
achievement of all relevant performance goals or other business objectives and the length of time that has elapsed within the performance period before the consummation of the Corporate
Transaction;
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In the case of Stock Options and SARs, provide for cash payments, net of applicable tax withholdings, to be made to holders equal to the excess, if any, of (A) the acquisition price times the
number of shares subject to a Stock Option or SAR (to the extent the exercise price does not exceed the acquisition price) over (B) the aggregate exercise price for all such shares subject to the
Stock Option or SAR, in exchange for the termination of such Stock Option or SAR; and/or
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In the case of Stock Options and SARs, provide that, in connection with a liquidation or dissolution of the Company, Stock Options and SARs shall convert into the right to receive liquidation
proceeds net of the exercise price thereof and any applicable tax withholdings.
No Buy-Back of Awards
. Neither the Board nor Composition Committee may offer to buy back an award or authorize the recipient of an award to elect to cash out an award, unless, in
each case, the stockholders have approved the buy-back or cash-out.
Amendments to the 2012 Plan
. The Board may amend or modify the 2012 Plan at any time subject to the rights of holders of outstanding awards on the date of amendment or
modification. However, that the Board may not, without the approval of stockholders, re-price outstanding stock options in stock appreciation rights or exchange such awards for new awards with
a lower (or no) purchase price or for cash.
Summary of Tax Consequences.
The following is a brief and general discussion of the United States federal income tax consequences to recipients of awards granted under the
2012 Plan. This summary is not comprehensive and is based upon laws and regulations in effect on June 30, 2017. Such laws and regulations are subject to change. This summary is intended for
the information of stockholders considering how to vote and not as tax guidance to participants in the 2012 Plan. Participants in the 2012 Plan should consult their own tax advisors as to the tax
consequences of participation.
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Nonstatutory Stock Options
. Generally, there are no federal income tax consequences to the participants upon grant of Nonstatutory Stock Options. Upon the exercise of such an
Option, the participant will recognize ordinary income in an amount equal to the amount by which the fair market value of the common stock acquired upon the exercise of such Option exceeds the
exercise price, if any. A sale of common stock so acquired will give rise to a capital gain or loss equal to the difference between the fair market value of the common stock on the exercise and sale
dates.
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Incentive Stock Options
. Except as noted at the end of this paragraph, there are no federal income tax consequences to the participant upon grant or exercise of an Incentive Stock
Option. If the participant holds shares of common stock purchased pursuant to the exercise of an Incentive Stock Option for at least two years after the date the Option was granted and at least
one year after the exercise of the Option, the subsequent sale of common stock will give rise to a long-term capital gain or loss to the participant and no deduction will be available to us. If the
participant sells the shares of common stock within two years after the date an Incentive Stock Option is granted or within one year after the exercise of an Option, the participant will recognize
ordinary income in an amount equal to the difference between the fair market value at the exercise date and the Option exercise price, and any additional gain or loss will be a capital gain or loss.
Some participants may have to pay alternative minimum tax in connection with exercise of an Incentive Stock Option, however.
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Restricted Stock
. A participant will generally recognize ordinary income on receipt of an award of Restricted Stock when his or her rights in that award become substantially vested, in
an amount equal to the amount by which the then fair market value of the common stock acquired exceeds the price he or she has paid for it, if any. Recipients of Restricted Stock may, however,
within 30 days of receiving an award of Restricted Stock, choose to have any applicable risk of forfeiture disregarded for tax purposes by making an "83(b) election." If the participant makes an
83(b) election, he or she will have to report compensation income equal to the difference between the value of the shares and the price paid for the shares, if any, at the time of the transfer of the
Restricted Stock.
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Stock Appreciation Rights
. A participant will generally recognize ordinary income on receipt of cash or other property pursuant to the exercise of an award of SARs.
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Restricted Stock Units, Performance Units and Stock Grants
. A participant will generally recognize ordinary income on receipt of any shares of common stock, cash or other property in
satisfaction of any of these awards under the 2012 Plan.
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Potential Deferred Compensation
. For purposes of the foregoing summary of federal income tax consequences, we assumed that no award under the 2012 Plan will be considered
"deferred compensation" as that term is defined for purposes of recent federal tax legislation governing nonqualified deferred compensation arrangements, Section 409A of the Code, or, if any
award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of
payment). For example, the award of an option at less than 100% of the market value of our common stock, would constitute deferred compensation. If an award includes deferred compensation,
and its terms do not comply with the requirements of the legislation, then such award will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a
20% additional tax.
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Section 162(m) Limitations on the Company's Tax Deduction
. In general, whenever a recipient is required to recognize ordinary income in connection with an award, we will be entitled
to a corresponding tax deduction. However, we will not be entitled to deductions in connection with awards under the 2012 Plan to certain senior executive officers to the extent that the amount of
deductible income in a year to any such officer, together with his or her other compensation from us exceeds the $1 million-dollar limitation of Section 162(m) of the Code. Compensation which
qualifies as "performance-based" for purposes of Section 162(m) of the Code may remain deductible by us without limitation under Section 162(m).
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New Plan Benefits
. The benefits or amounts that will be received under the 2012 Plan by or allocated to each of (1) the named executive officers, (2) each of the nominees for election
as a director, (3) all directors who are not executive officers of the company as a group, (4) all present executive officers as a group, and (5) all employees, including all other current officers, as a
group are not determinable.
Vote Required
. This Proposal No. 4 will require approval by a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to
vote on such proposal.
The Board of Directors Recommends a Vote "FOR" approval of the 2012 Amended and Restated Equity Incentive Plan solely for purposes of Code 162(m) of the Internal Revenue Code.
PROPOSAL NO. FIVE:
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
We are providing stockholders with an advisory vote on executive compensation as required by Section 14A of the Exchange Act. Section 14A
was added to the Exchange Act by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
This vote is advisory, and, therefore, not binding on us, the Board, or the Compensation Committee. However, the Board and the Compensation Committee value the opinions of our
stockholders and to the extent there is any significant vote against the compensation of our named executive officers, as disclosed in this Proxy Statement, we will consider our stockholders'
concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
As discussed in the Compensation Discussion and Analysis, we have designed our executive compensation program to develop, motivate and retain high quality executive officers, align
executive compensation with our strategies and business objectives and the long-term creation of stockholder value, and provide meaningful equity ownership by our executive officers.
Accordingly, the Board encourages you to review carefully the Compensation Discussion and Analysis and the tabular and other disclosures on compensation under Executive Compensation,
and cast a vote to approve our executive compensation programs and the following resolution:
"RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Proxy Statement for the 2017 Annual
Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the fiscal year 2017
Summary Compensation Table and the other related tables and disclosure."
The Board unanimously recommends that the stockholders vote "FOR" approval of the foregoing resolution.
PROPOSAL NO. SIX:
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISOR VOTES ON EXECUTIVE COMPENSATION
As explained in Proposal No. 5 above, our stockholders are given the opportunity to cast an advisory vote on the compensation of our named executive officers at the 2017 annual
meeting. This vote is commonly referred to as "say-on-pay." This Proposal No. 6 gives our stockholders the opportunity to cast an advisory vote on how frequently we should conduct
future say-on-pay votes, which we have historically held once every three years.
Stockholders may vote to have the say-on-pay vote conducted once every year, every two years or every three years, or may abstain from voting.
After careful consideration, it is the opinion of the Board of Directors that the frequency of the say-on-pay vote should be once every year. The Board recommends a frequency of once per
year because an annual vote will allow stockholders to provide feedback on our compensation policies and practices, and the compensation for the relevant named executive officers, each time
we disclose this information to our stockholders along with a discussion and analysis from our compensation committee in connection with our annual meetings - i.e., once per year. An annual
stockholder vote gives our stockholders the opportunity to provide more timely feedback on any compensation decisions we may have made during the period covered by the proxy statement,
whereas a vote every two or three years might require a lag between a change in policy and an opportunity for stockholder feedback in the form of the advisory vote.
While the Board recommends an annual vote, stockholders are not voting to approve or disapprove of the Board's recommendation. Rather, stockholders have the opportunity to cast an
advisory vote on whether the frequency should be every one year, every two years or every three years. A plurality of the votes cast for one of the three frequency options presented by this
Proposal No. 6 will determine the stockholders' preferred frequency for the say-on-pay advisory vote.
Although the vote is advisory and non-binding, and although our Board has recommended a frequency of once per year, our Board and Compensation Committee value the opinions of our
stockholders and will consider the outcome of the vote, along with other relevant factors, when making future decisions regarding the frequency of conducting a say-on-pay vote.
Stockholders may vote "1 Year," "2 Years," or "3 Years," or "Abstain."
The Board of Directors Recommends that Stockholders Vote on an Advisory Basis for the Frequency of the Say-on-Pay Vote To Be "1 Year."
CORPORATE GOVERNANCE
Information Regarding the Board and its Committees
The Board held a total of eight meetings during fiscal 2017. The non-employee members of the Board also met four times in regularly scheduled executive sessions without management
present. Every director attended all of the meetings of the Board and committees of the Board during the time and upon which such directors served during fiscal 2017. The Board acted three
times by written consent during fiscal 2017.
The Board has an Audit Committee, a Compensation Committee, and a Governance and Nominating Committee. The Board has adopted charters for each of these committees that are
available on our website under "Corporate Governance" which can be found at