extr-pre14a_20211105.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant                               Filed by a Party other than the Registrant  

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

 

Definitive Proxy Statement

 

 

Definitive Additional Materials

 

 

Soliciting Material under § 240.14a-12.

 

Extreme Networks, Inc.

 

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

 

No fee required

 

 

Fee computed on table below per Exchange Act Rules 14-a-6(i)(4) and 0-11.

 

 

 

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

 

 

(5)

Total fee paid:

 

 

 

 

Fee paid previously with preliminary materials.

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

 

 

(1)

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(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

 

 

(3)

Filing Party:

 

 

 

(4)

Date Filed:

 


 


 

 

 

 

September 21, 2021

 

 Dear Stockholder:

 You are cordially invited to attend the 2021 Annual Meeting of Stockholders of Extreme Networks, Inc. to be held on Thursday, November 4, 2021 at 8:00 am Eastern Time.  This year’s Annual Meeting of Stockholders will be a virtual, live audio meeting of stockholders.  All references herein to our “Annual Meeting of Stockholders” or “Annual Meeting” refers to our virtual Annual Meeting of Stockholders.

 Details of business to be conducted at the Annual Meeting are described in the Notice of Annual Meeting of Stockholders and Proxy Statement. Accompanying this Proxy Statement is the Company’s 2021 Annual Report to Stockholders.

 We are pleased to take advantage of Securities and Exchange Commission rules that allow companies to furnish proxy materials to stockholders over the Internet. We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and, more importantly, reducing the environmental impact of the Annual Meeting. On or about September 21, 2021, you were provided with a Notice of Internet Availability of Proxy Materials (“Notice”) and provided access to our proxy materials over the Internet. The Notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail.

 Whether or not you plan to attend our Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone, by Internet or, if you have received a paper copy of your proxy materials by mail, by completing, signing, dating and returning your proxy card in the envelope provided.

 If you have any further questions concerning the Annual Meeting or any of the proposals, please contact Stan Kovler, our Vice President of Corporate Strategy and Investor Relations, at (919) 595-4196. We look forward to your attendance at the Annual Meeting.

 

Yours Truly,

 

Edward B. Meyercord

President and Chief Executive Officer

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting of Stockholders, we urge you to vote and submit your proxy by telephone, the Internet or by mail to ensure the presence of a quorum. If you attend the meeting and do not hold your shares through an account with a brokerage firm, bank or other nominee, you will have the right to revoke the proxy and vote your shares in person. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares and revoke your vote, if necessary.

 


 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 To Be Held November 4, 2021

 TO THE STOCKHOLDERS:  

Notice is hereby given that the 2021 Annual Meeting of Stockholders of Extreme Networks, Inc. will be held on Thursday, November 4, 2021 at 8:00 a.m. Eastern Time. This year’s Annual Meeting of Stockholders will be a virtual, live audio meeting of stockholders.  In order to participate online you must register before the meeting at www.proxyvote.com, or during the meeting at http://www.virtualshareholdermeeting.com/EXTR2021, with the 16-digit code printed in the box marked by the arrow on your proxy materials and follow the on-screen instructions. Once registered, you will be able to attend the meeting online where you will be able to listen to the meeting live and vote.

 

1.

Elect seven directors to the Board of Directors for a one-year term;

 

2.

Hold an advisory vote to approve our named executive officers’ compensation;

 

3.

Ratify the appointment of Ernst & Young LLP as our independent auditors for our fiscal year ending June 30, 2022;

 

4.

Approve our Amended and Restated Tax Benefit Preservation Plan;

 

5.

Approve of an amendment and restatement of our 2014 Employee Stock Purchase Plan;

 

6.

Approve of an amendment and restatement of our Equity Incentive Plan to, among other things, add 7,900,000 shares of our common stock to those reserved for issuance under the plan;

 

7.

Hold a vote on a stockholder proposal regarding simple majority voting, if properly presented at the 2021 Annual Meeting; and

 

8.

Transact such other business as may properly come before the meeting or any adjournments or postponements thereof.

Our Board of Directors recommends a vote “FOR” each of the nominees in Item 1, “FOR” Items 2, 3, 4, 5, and 6 and “AGAINST” Item 7. Stockholders of record at the close of business on September 13, 2021 are entitled to notice of, and to vote at, this meeting and any adjournment or postponement thereof. Commencing ten days prior to the meeting, a complete list of stockholders entitled to attend and vote at the meeting will be available for review by any stockholder during normal business hours at our offices located at 2121 RDU Center Drive, Suite 300, Morrisville, North Carolina 27560.

 

BY ORDER OF THE BOARD OF DIRECTORS,

 

Katayoun (“Katy”) Motiey

Chief Administrative and Sustainability Officer and Corporate Secretary

Morrisville, North Carolina

September 21, 2021

YOUR VOTE IS IMPORTANT: Please vote your shares via telephone or the Internet, as described in the accompanying materials, to assure that your shares are represented at the meeting, or, if you received a paper copy of the proxy card by mail, you may mark, sign and date the proxy card and return it in the enclosed postage-paid envelope. If you attend the meeting, you may choose to vote online at the virtual meeting even if you have previously voted your shares.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 4, 2021: This Proxy Statement and the financial and other information concerning Extreme Networks contained in our Annual Report to Stockholders for the fiscal year ended June 30, 2021 are available on the Internet and may be viewed at www.proxyvote.com, where you may also cast your vote.

 

 


 

 

TABLE OF CONTENTS

 

INFORMATION CONCERNING SOLICITATION AND VOTING

1

General

1

Who May Vote, Record Date, Admission to Meeting

1

Broker Non-Votes

1

Quorum

1

“Notice and Access” Model

2

Vote Required to Adopt Proposals

2

Effect of Abstentions and Broker Non-Votes

2

Voting Instructions

3

Solicitation of Proxies

3

Voting Results

4

PROPOSAL ONE: ELECTION OF DIRECTORS

5

Vote Required and Board of Directors’ Recommendation

5

BOARD OF DIRECTORS

6

Nominees For Election At 2021 Annual Meeting

6

Arrangements Regarding Appointment of Directors

9

CORPORATE GOVERNANCE

10

Board and Leadership Structure

10

Board’s Role in Risk Oversight

10

Meetings of the Board of Directors

11

Director Attendance at Annual Meetings

11

Executive Sessions

11

Committees of the Board of Directors

11

Compensation Committee Interlocks and Insider Participation

13

Director Nominations

13

Board Member Resignation Policy

14

Communications with Directors

15

Section 16(a) Beneficial Ownership Reporting Compliance

15

Code of Ethics and Corporate Governance Materials

15

Environmental, Social and Governance

15

DIRECTOR COMPENSATION

17

Cash Compensation

17

Equity Compensation

17

Changes for Fiscal 2022

17

Stock Ownership Guidelines

17

2021 Director Compensation

18

PROPOSAL TWO: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

19

Background

19

Vote Required and Board of Directors’ Recommendation

19

PROPOSAL THREE: RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2022

20

Change of Independent Registered Public Accounting Firm

20

Audit Committee Pre-Approval Policies

20

Principal Accounting Fees and Services

20

2021 PROXY STATEMENTi


 

Vote Required and Board of Directors’ Recommendation

21

PROPOSAL FOUR: APPROVE THE COMPANY’S AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN

22

Background

22

Description of the Restated Tax Plan

22

Certain Factors Stockholders Should Consider

24

Vote Required and Board of Directors’ Recommendation

25

PROPOSAL FIVE: APPROVAL OF AMENDMENT AND RESTATEMENT OF THE AMENDED 2014 EMPLOYEE STOCK PURCHASE PLAN

26

General

26

Summary of the Amended Purchase Plan

26

Plan Benefits

28

Vote Required and Board of Directors’ Recommendation

29

PROPOSAL SIX: APPROVAL OF AMENDMENT AND RESTATEMENT OF THE EXTREME NETWORKS, INC. AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN

30

Overview

30

Proposed Amendments to the Current Equity Plan

31

Why the Company Stockholders Should Vote for the Amended Equity Plan

31

New Plan Benefits

34

Summary Description of the Amended Equity Plan

34

Vote Required and Board of Directors Recommendation

40

PROPOSAL SEVEN: SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTING

42

Vote Required and Board of Directors Recommendation

43

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

45

EXECUTIVE COMPENSATION AND OTHER MATTERS

47

Executive Officers

47

Fiscal 2021 Compensation Decisions

47

COMPENSATION DISCUSSION AND ANALYSIS

48

Executive Summary

48

Fiscal 2021 Compensation Was Closely Aligned With Performance

49

Compensation Philosophy and Objectives

50

Compensation Best Practices

51

2020 “Say on Pay” Advisory Vote on Executive Compensation

52

Compensation-Setting Process

52

Compensation Consultant

52

Peer Group Selection and Review

52

Compensation Program Elements

53

Fiscal 2021 Summary Compensation Table

59

Grants of Plan-Based Awards

60

Summary of Employment and Other Agreements

61

Outstanding Equity Awards at Fiscal Year-End

64

Option Exercises and Stock Vested During Last Fiscal Year

65

Estimated Payments Upon Termination or Upon Change in Control

65

CEO Pay Ratio

67

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

69

EQUITY COMPENSATION PLAN INFORMATION

70

NON-GAAP MEASURES OF FINANCIAL PERFORMANCE

71

2021 PROXY STATEMENTii


 

REPORT OF THE COMPENSATION COMMITTEE

75

REPORT OF THE AUDIT COMMITTEE

76

STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING

77

Transaction of Other Business

77

Delivery to Stockholders Sharing the Same Last Name and Address

77

COMMUNICATING WITH EXTREME NETWORKS

78

EXHIBIT A: AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN

A-1

EXHIBIT B: AMENDED AND RESTATED 2014 EMPLOYEE STOCK PURCHASE PLAN

B-1

EXHIBIT C: AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN

C-1

 

 

 

 

2021 PROXY STATEMENTiii


 

 

 

 

 

PROXY STATEMENT

 

 

INFORMATION CONCERNING SOLICITATION AND VOTING

General

Our Board of Directors, or our Board, is soliciting your proxy for the 2021 Annual Meeting of Stockholders to be held on Thursday November 4, 2021, or at any postponements or adjournments of the meeting, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This proxy statement and related materials are first being made available to stockholders on or about September 21, 2021. References in this proxy statement to the “Company,” “we,” “our,” “us” and “Extreme Networks” are to Extreme Networks, Inc., and references to the “Annual Meeting” are to the 2021 Annual Meeting of Stockholders. When we refer to the Company’s fiscal year, we mean the annual period ending on June 30. This proxy statement covers our 2021 fiscal year, which was from July 1, 2020 through June 30, 2021 (“fiscal 2021”).

Who May Vote, Record Date, Admission to Meeting

Only holders of record of the Company’s common stock at the close of business on September 13, 2021 (the “Record Date”) will be entitled to notice of, and to vote at, the meeting and any adjournment thereof. As of the Record Date, _______ shares of common stock were outstanding and entitled to vote. You are entitled to one vote for each share you hold.

You are entitled to attend the Annual Meeting if you were a stockholder of record or a beneficial owner of our common stock as of the Record Date, or if you hold a valid legal proxy for the Annual Meeting. To request a legal proxy, please follow the instructions at www.proxyvote.com or request a paper copy of the materials, which will contain the appropriate instructions.

If your shares are registered in the name of a broker, bank or other nominee, you may be asked to provide proof of beneficial ownership as of the Record Date, such as a brokerage account statement or voting instruction form provided by your record holder, or other similar evidence of ownership, as well as picture identification, for admission. If you wish to be able to vote in person (virtually) at the Annual Meeting, you must obtain a legal proxy from your broker, bank or other nominee and present it to the inspector of elections together with your ballot at the Annual Meeting. You may vote online at the 2020 Annual Meeting by attending the 2020 Annual Meeting online. To attend the 2020 Annual Meeting online, you must register before the meeting at www.proxyvote.com, or during the meeting at http://www.virtualshareholdermeeting.com/EXTR2021, with the 16-digit code printed in the box marked by the arrow on your proxy materials and follow the on-screen instructions. You can vote by mail by requesting a paper copy of the proxy materials, which will include a proxy card.

Broker Non-Votes

A broker non-vote occurs when a broker submits a proxy card with respect to shares held in a fiduciary capacity (typically referred to as being held in “street name”) but cannot vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to such shares, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the ratification of selection of auditors. Non-routine matters include the election of directors and amendments to or the adoption of stock plans.

Quorum

Our bylaws provide that a majority of the shares of our common stock issued and outstanding and entitled to vote at the meeting as of the Record Date must be represented at the meeting, either in person (virtually) or by proxy, to constitute a quorum for the transaction of business at the meeting, except to the extent that the presence of a larger number may be required by law. Your shares will be counted towards the quorum only if you submit a valid proxy, if your broker, banker or other nominee submits a proxy

1

 


 

on your behalf, or if you vote in person (virtually) at the virtual meeting. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum.

“Notice and Access” Model

The SEC’s proxy rules set forth how companies must provide proxy materials. These rules are often referred to as “notice and access.” Under the notice and access model, a company may select either of the following options for making proxy materials available to stockholders: (i) the full set delivery option; or (ii) the notice only option. A company may use a single method for all its stockholders or use the full set delivery option for some stockholders and the notice only option for others.

Under the full set delivery option, a company delivers all proxy materials to its stockholders by mail or, if a stockholder has previously agreed, electronically. In addition to delivering proxy materials to stockholders, the company must post all proxy materials on a publicly accessible web site (other than the SEC’s web site) and provide information to stockholders about how to access that web site and the hosted materials. Under the notice only option, instead of delivering its proxy materials to stockholders, the company delivers a “Notice of Internet Availability of Proxy Materials” that outlines (i) information regarding the date and time of the meeting of stockholders, as well as the items to be considered at the meeting; (ii) information regarding the web site where the proxy materials are posted; and (iii) various means by which a stockholder can request printed or emailed copies of the proxy materials.

In connection with our 2021 Annual Meeting, we have elected to use the notice only option. Accordingly, you should have received a notice by mail, unless you requested a full set of materials from prior mailings, instructing you how to access proxy materials at www.proxyvote.com and providing you with a control number you can use to vote your shares. You may request that the Company also deliver to you printed or emailed copies of the proxy materials.

All shares represented by a valid proxy, timely submitted to the Company, will be voted. Where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted in favor of the proposal. If your shares are registered under your own name, you may revoke your proxy at any time before the Annual Meeting by (i) delivering to the Corporate Secretary at the Company’s headquarters either a written instrument revoking the proxy or a duly executed proxy with a later date, or (ii) attending the Annual Meeting and voting online. If you hold shares in street name, through a broker, bank or other nominee, you must contact the broker, bank or other nominee to revoke your proxy.

Vote Required to Adopt Proposals

The holder of each share of the Company’s common stock outstanding on the Record Date is entitled to one vote on each of the director nominees and one vote on each other matter. The director nominees who receive the highest number of “For” votes will be elected as directors. The advisory vote to approve our named officers’ compensation, the ratification of the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending June 30, 2022, the approval of the amendment and restatement of our 2014 Employee Stock Purchase Plan, the approval of the amendment and restatement of our 2013 Equity Incentive Plan, or the stockholder proposal regarding simple majority voting, if properly presented, shall be determined by a majority of the votes cast affirmatively or negatively on the matter.  The approval of our Amended and Restated Tax Benefit Preservation Plan shall be determined by the affirmative vote of the holders of a majority of the voting power of our outstanding shares that are present or represented by proxy and entitled to vote on the matter.

Effect of Abstentions and Broker Non-Votes

Votes withheld from any nominee, abstentions and “broker non-votes” (i.e., where a broker has not received voting instructions from the beneficial owner and for which the broker does not have discretionary power to vote on a particular matter) are counted as present for purposes of determining the presence of a quorum. Shares voting “withheld” have no effect on the election of directors. Abstentions have no effect on the advisory vote to approve our named executive officers’ compensation, the ratification of the appointment of Ernst & Young LLP as our independent auditors for the fiscal year ending June 30, 2022, the approval of the amendment and restatement of our 2014 Employee Stock Purchase Plan, the approval of the amendment and restatement of our 2013 Equity Incentive Plan, or the stockholder proposal regarding simple majority voting, if properly presented.  Abstentions will have the same effect as votes against the approval of our Amended and Restated Tax Benefit Preservation Plan.

If you are a beneficial owner and hold your shares in “street name,” it is critical that you cast your vote if you want it to count in the election of directors and with respect to the other proposals included in this proxy. The rules governing brokers, banks and other nominees who are voting with respect to shares held in street name provide such nominees the discretion to vote on routine matters, but not on non-routine matters. Routine matters to be addressed at the Annual Meeting include the ratification of auditors.

2

 


 

Non-routine matters include the election of directors, the advisory vote to approve our named executive officers’ compensation, the ratification of our Amended and Restated Tax Benefit Preservation Plan, the approval of the amendment and restatement of our 2014 Employee Stock Purchase Plan, the approval of the amendment and restatement of our 2013 Equity Incentive Plan, and the stockholder proposal regarding simple majority voting, if properly presented. Banks and brokers may not vote on these non-routine matters if you do not provide specific voting instructions. Accordingly, we encourage you to vote promptly, even if you plan to attend the Annual Meeting.

Voting Instructions

If you complete and submit your proxy card or the voting instruction card provided by your broker, bank or other nominee, the persons named as proxies will follow your instructions. If you do not direct how to vote on a proposal, the persons named as proxies will vote as the Board recommends on that proposal. Depending on how you hold your shares, you may vote in one of the following ways:

Stockholders of Record - You may vote by proxy, over the Internet or by telephone. Please follow the instructions provided in the Notice of Internet Availability of Proxy Materials or on the proxy card you received. You may also vote online at the Annual Meeting by attending the Annual Meeting online. To attend the Annual Meeting online, you must register online at www.proxyvote.com, or during the meeting at http://www.virtualshareholdermeeting.com/EXTR2021, with the 16-digit code printed in the box marked by the arrow on your proxy materials and follow the on-screen instructions.

Beneficial Stockholders - Your broker, bank or other nominee will provide you with a voting instruction card for your use in instructing it how to vote your shares. Since you are not the stockholder of record, you may not vote your shares online at the virtual Annual Meeting unless you request and obtain a valid proxy from your broker, bank or other nominee, or by requesting one on www.proxyvote.com.

Votes submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on November 3, 2021. Submitting your proxy by telephone or via the Internet will not affect your right to vote in person should you decide to attend the Annual Meeting.

If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the polls close by returning a later-dated proxy card, by voting again by Internet or telephone as more fully detailed on your proxy card, or by delivering written instructions to the Corporate Secretary at the Company’s headquarters before the Annual Meeting. Attendance at the virtual Annual Meeting will not cause your previously voted proxy to be revoked unless you specifically request revocation or vote online at the virtual Annual Meeting. If your shares are held by a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee in accordance with the nominees directions, or, if you have obtained a legal proxy from your broker, bank or other nominee giving you the right to vote your shares, by attending the Annual Meeting and voting online.

If you return a signed and dated proxy card without marking any voting selections, your shares will be voted as follows:

 

“FOR” the election of each nominee for director;

 

“FOR” the approval of our named executive officers’ compensation;  

 

“FOR” the ratification of the appointment of Ernst & Young LLP as our independent auditors for our fiscal year ending June 30, 2022;

 

“FOR” the approval of our Amended and Restated Tax Benefit Preservation Plan;

 

“FOR” the approval of the amendment and restatement of our 2014 Employee Stock Purchase Plan;

 

“FOR” the approval of the amendment and restatement of our 2013 Equity Incentive Plan; and

 

“AGAINST” the stockholder proposal regarding simple majority voting

If any other matter is properly presented at the Annual Meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares in his or her discretion.

Solicitation of Proxies

We will bear the entire cost of soliciting proxies. In addition to soliciting stockholders by mail, we will request banks, brokers and other intermediaries holding shares of our common stock beneficially owned by others to obtain proxies from the beneficial owners and will reimburse them for their reasonable expenses in so doing. We may use the services of our officers, directors and other employees to solicit proxies, personally or by telephone, without additional compensation. The Company has engaged Okapi Partners

3

 


 

to assist in the solicitation of proxies and provide related advice, informational support, and outreach for a services fee and the reimbursement of customary disbursements that are not expected to exceed $26,000 in the aggregate.

Voting Results

We will announce preliminary voting results at the Annual Meeting. We will report final results in a Current Report on Form 8-K filed with the SEC within four business days of the Annual Meeting.


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PROPOSAL ONE:

ELECTION OF DIRECTORS

The terms of our current directors expire upon the election and qualification of the directors to be elected at the 2021 Annual Meeting. The Board has nominated seven persons for election at the Annual Meeting to serve until the 2022 Annual Meeting of Stockholders and until their successors are duly elected and qualified. Our Board’s nominees for election at the 2021 Annual Meeting are Edward B. Meyercord, Ingrid J. Burton, Charles P. Carinalli, Kathleen M. Holmgren, Raj Khanna, Edward H. Kennedy, and John C. Shoemaker, all of whom are presently directors of Extreme Networks.

Please see below under the heading “Board of Directors” for information concerning the nominees. If elected, each nominee will serve as a director until the Annual Meeting of stockholders in 2022 and until his or her successor is elected and qualified, or until his or her earlier resignation or removal.

Each nominee has indicated to us that he or she will serve if elected. As of the date of this Proxy Statement, the Board is not aware of any nominee who is unable or who will decline to serve as a director. However, if a nominee declines to serve or becomes unavailable for any reason, the proxies may be voted for a substitute nominee designated by the Nominating, Governance and Social Responsibility Committee or our Board.

Vote Required and Board of Directors’ Recommendation

The persons receiving the highest number of votes represented by outstanding shares of common stock present or represented by proxy and entitled to vote at the 2021 Annual Meeting will be elected to the Board, provided a quorum is present. Votes “For”, votes to “Withhold” authority, and “broker non-votes” will each be counted as present for purposes of determining the presence of a quorum, but votes “withheld” and broker non-votes will have no effect on the outcome of the election. If you sign and return a proxy card without giving specific voting instructions as to the election of any director, your shares will be voted in favor of the nominees recommended by our Board.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NOMINEES NAMED ABOVE.


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BOARD OF DIRECTORS

The following table provides biographical information for each nominee to our Board of Directors.

Name

 

Age

 

Director Since

John C. Shoemaker, Director and Chair of the Board

 

78

 

2007

Edward B. Meyercord, Director, President, and Chief Executive Officer

 

56

 

2009

Ingrid J. Burton, Director

 

59

 

2019

Charles P. Carinalli, Director

 

73

 

1996

Kathleen M. Holmgren, Director

 

63

 

2015

Edward H. Kennedy, Director

 

66

 

2011

Raj Khanna, Director

 

75

 

2014

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

The biography of each of our director nominees below contains information regarding the person’s service as a director, business experience, other director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, and the experiences, qualifications, attributes or skills that caused the Nominating, Corporate Governance and Social Responsibility Committee and our Board to determine that the person should serve as a director.

Nominees For Election At 2021 Annual Meeting

EDWARD B. MEYERCORD - Mr. Meyercord has served as our Chief Executive Officer and President and as a member of our board since April 2015. Mr. Meyercord joined our Board of Directors as an independent director in October 2009 and served as Chair from March 2011 until August 2015. Prior to assuming his operating role at Extreme Networks in April 2015, Mr. Meyercord was Chief Executive Officer and Director at Critical Alert Systems, LLC, a privately held software-driven, healthcare information technology company that he co-founded in July 2010. Prior to that, Mr. Meyercord served as Chief Executive Officer, President and Director of Cavalier Telephone, LLC, a privately held voice, video and data services company from 2006 to 2009. He served as Chief Executive Officer, President and Director of Talk America Holdings, Inc., a publicly traded company that provided phone and internet services to consumers and small businesses throughout the United States. Earlier in his career, Mr. Meyercord served as a Vice President in the investment banking division of Salomon Brothers Inc. (now part of Citigroup, Inc.), a Wall Street investment bank from 1993 to 1996. From August 2009 to May 2011, he also served on the board of Tollgrade Communications, Inc., a then-publicly traded telecommunications company. Mr. Meyercord holds a Bachelor of Arts degree in economics from Trinity College in Hartford, CT, and a Master of Business Administration degree from the Stern School of Business at New York University.

Mr. Meyercord brings to the Board his extensive executive experience in leadership, executive management, mergers and acquisitions, corporate strategy and corporate finance. His background in the healthcare and telecommunications industries provides our Board with valuable industry expertise in several of our key markets. Also, the Board believes it is valuable to have the Company’s Chief Executive Officer serve on the Board to bring in-depth perspective on the Company’s current operations, strategy, financial condition and competitive position.

INGRID J. BURTON - Ms. Burton has served as one of our directors since August 22, 2019. Since November 2020, Ms. Burton has served as the Chief Marketing Officer for Quantcast. Prior to this, from February 2018 through August 2020, Ms. Burton was the Chief Marketing Officer of H20.ai, a leader in open source in artificial intelligence and machine learning. Ms. Burton was the Chief Marketing Officer at Hortonworks, a data software company, from July 2015 to March 2017. Ms. Burton was the Senior Vice President, Technology and Innovation Marketing at SAP, a global software company, from January 2013 to May 2015. Prior to joining SAP, Ms. Burton held chief marketing officer positions with Silver Spring Networks, a provider of smart grid products, and Plantronics, an electronics company providing audio communications equipment for businesses and consumers. She held various senior executive management positions with Sun Microsystems for more than 20 years, including serving as head of marketing and driving the company and Java brand, global citizenship, championing open source initiative and leading product and strategic marketing teams. She has advised various Silicon Valley startups, driving strategies for market and technology trends, SaaS, cloud computing, open source, internet of things, community engagement and big data. Ms. Burton has been a board advisor to Drivescale, a privately held data center infrastructure company, since October 2016 as well as a member of the Strategic Advisory Board to Paxata, a self-service data preparation company from 2017 to 2019. She also serves as a marketing advisor

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to Dataiku, an Enterprise AI company, starting in June of 2021, and she served on the Board of Directors of Aerohive Networks, Inc. from March 2019 to August 2019, at which time it was acquired by Extreme Networks. Ms. Burton holds a Bachelor of Arts degree in math with a concentration in computer science from San Jose State University.

Ms. Burton brings to the Board extensive marketing and management expertise as well as experience in building brands, creating demand and growing businesses for both established technology innovators and industry pioneers.

CHARLES P. CARINALLIMr. Carinalli has served as one of our directors since October 1996. Mr. Carinalli has been a Principal of Carinalli Ventures since January 2002. From 1999 to May 2002, Mr. Carinalli was Chief Executive Officer and a director of Adaptive Silicon, Inc., a privately held developer of semiconductor products. From November 2000 to November 2001, Mr. Carinalli served as Chair of Clearwater Communications, Inc., a privately held telecommunications company. From December 1996 to July 1999, Mr. Carinalli served as President, Chief Executive Officer and a director of WaveSpan Corporation, a developer of wireless broadband access systems until the company was acquired by Proxim, Inc., a broadband wireless networking systems company. From 1970 to 1996, Mr. Carinalli served in various positions at National Semiconductor Corporation, a publicly traded semiconductor company that developed and sold analog-based semiconductor and integrated communication products, most recently serving as Senior Vice President and Chief Technical Officer. Mr. Carinalli served on the Board of Directors of Fairchild Semiconductor International, Inc., a publicly traded semiconductor company beginning in February 2002 until its acquisition by ON Semiconductor, a publicly traded semiconductor company, in September 2016. Mr. Carinalli formerly served on the Board of Directors of Atmel Corporation, a publicly traded semiconductor company, from February 2008 until its acquisition by Microchip Technology in April 2016. He also is a member of the Board of Directors of the privately held companies Algorithmic Intuition, Inc., a medical electronics company, and Dhaani Systems, an IT-energy management company. Mr. Carinalli holds a Bachelor of Science degree in electrical engineering from the University of California, Berkeley and a Master of Science degree in electrical engineering from Santa Clara University.

Mr. Carinalli brings to the Board extensive engineering and engineering management expertise, as well as general management expertise and technology expertise, which aids our Board in understanding product development, engineering management and strategic planning, as well as risk assessment and planning.

KATHLEEN M. HOLMGREN - Ms. Holmgren has served as one of our directors since November 2015. Ms. Holmgren currently serves on the Board of Directors and previously served until March 2018 as the Chief Officer of Future Workforce at Automation Anywhere, Inc., a privately held developer of robotic process automation and testing software, which she joined as Chief Operating Officer in 2013. She has served as a director of Automation Anywhere, Inc. since 2013 and currently serves as on the Audit Committee. Since 2008, Ms. Holmgren has served as a Principal at Sage Advice Partners, a management consulting firm specializing in the high-tech and green-tech markets. From October 2009 to December 2016, she served as a director at the Alliance of Chief Executives, LLC, an organization for chief executive officers. Ms. Holmgren served as President and Chief Executive Officer of Mendocino Software, a privately held enterprise-class application data developer, from November 2007 to March 2008. Prior to November 2007, Ms. Holmgren spent over 20 years at Sun Microsystems, Inc., a publicly held enterprise software company acquired by Oracle Corporation in 2010, where she held increasingly senior roles, culminating in Senior Vice President, Storage Systems. She joined the board of Calavo Growers, Inc., a publicly traded food and distribution company, in January 2017. From May 2017 to January 2021, she served on the Board of Directors of Fresh Realm, LLC, a privately held delivery and business platform for the perishable food industry, representing Calavo Growers’ interests. Ms. Holmgren served on the Board of Group Delphi, a private design and media production company, from July 2014 through December 2019. Ms. Holmgren holds a Bachelor of Science degree in industrial engineering from California Polytechnic State University, where she served as a member of the Dean’s Advisory Board from 1994 through May 2020, and a Master of Business Administration degree from the Stanford Graduate School of Business.

Ms. Holmgren brings to the Board her knowledge and expertise in executive leadership in the storage, computer systems, enterprise software and management consulting industries, and provides expertise in operations, strategic planning and risk assessment and planning.

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EDWARD H. KENNEDY - Mr. Kennedy has served as one of our directors since April 2011. From June 2017 to September 2018, Mr. Kennedy served as the president and Chief Executive Officer of Cenx, Inc., a carrier network assurance software company, which was subsequently acquired by Ericsson. From June 2010 to April 2017, Mr. Kennedy served as the Chief Executive Officer and President of Tollgrade Communications, Inc., which was subsequently acquired by Enghouse Systems, a Canadian-based, publicly traded software and services company, in April 2017. Mr. Kennedy previously served as the Chief Executive Officer and President of Rivulet Communications, Inc., a medical video networking company, from 2007 until it was acquired by NDS Surgical Imaging, LLC, a medical imaging and informatics systems company, in 2010. He also previously served as President of Tellabs North American Operations, an optical network technology company, and as Executive Vice President of Tellabs, Inc. from 2002 to 2004. Mr. Kennedy co-founded Ocular Networks, Inc., a provider of optical networking technologies, in 1999 and served as its Chief Executive Officer and President until it was sold to Tellabs, Inc. in 2002. He has also held various executive positions at several telecommunication equipment companies, including Alcatel-Lucent S.A. (previously Alcatel Data Network), a publicly traded French global telecommunications equipment company, and Newbridge Networks Corporation, a then-publicly traded Canadian digital networking equipment company. Mr. Kennedy was also a Venture Partner at Columbia Capital, a private equity investment firm, from 2005 to 2007, where he advised regarding investments into new and existing portfolio companies. Mr. Kennedy served as a director for Avizia, a privately held telemedicine platform company, from 2014 until its merger with American Well in July 2018. Between the period of 2007 through 2010, he served as director of privately held Imagine Communications Corporation, until its acquisition by Harris Broadcast. From 2005 through 2011, Mr. Kennedy was a director of privately held high-bandwidth equipment provider Hatteras Networks, which was acquired by Overture in 2011. He also previously served as a director of Visual Networks, Inc., a publicly traded network and performance management solutions provider, from 2002 until it was acquired by Fluke Electronic Corporation, an electronic test tools and software company, in 2006. He served on the Board of Trustees of Flint Hill School from 2011 to 2020 and currently serves on the Executive Parent Board of Villanova University. Mr. Kennedy holds a Bachelor of Science degree in electrical engineering from Virginia Polytechnic Institute and State University.

Mr. Kennedy brings to the Board his extensive financial and executive leadership experience in technology companies, including networking companies, and provides management and financial expertise to our Board.

RAJ KHANNA - Mr. Khanna has served as one of our directors since December 2014. Since 2012, Mr. Khanna has served as an independent consultant, assisting companies with finance and internal audit issues. From 2004 to 2011, Mr. Khanna served as Vice President of Corporate Audit at Qualcomm, Inc., a publicly traded semiconductor company. Prior to Qualcomm, Mr. Khanna held various finance roles at Sun Microsystems, Inc., from 1991 to 2004, including International Controller, Vice President Finance for Global Services Business and Senior Director of Finance for Strategic Business Units, and at Xerox Corporation, a provider of document management technology and services, from 1974 to 1991. Mr. Khanna holds a Bachelor of Technology degree in mechanical engineering from the Indian Institute of Technology and a Master of Business Administration degree from the University of Rochester, New York.

Mr. Khanna brings to the Board his extensive experience leading finance and internal audit teams, including the establishment of financial controls and processes, delivering financial investment and M&A guidance, and providing strategic advice and direction regarding business model changes.

JOHN C. SHOEMAKER - Mr. Shoemaker has served as one of our directors since October 2007. He currently serves as a consultant to the high technology industry and also serves as a mentor to corporate executives. From 1990 to June 2004, Mr. Shoemaker held various executive management positions at Sun Microsystems, Inc., including serving as Executive Vice President, Worldwide Operations Organizations and as Executive Vice President, and General Manager for its Computer Systems Division. Mr. Shoemaker previously served in a number of senior executive positions with the Xerox Corporation, a provider of document management technology and services, including as Senior Vice President, World Wide Marketing. Since 2017, he has been an advisor to Nyriad Limited, a privately held software development company, and from 2017 through 2019, he was an advisor to GoodSocial, a privately held SaaS and mobile platform connecting volunteers and non-profits. Mr. Shoemaker served as a director of Altera Corporation, a publicly traded provider of programmable logic solutions, from 2007 until it was acquired by Intel Corporation, a publicly traded semiconductor company, in December 2015. Mr. Shoemaker served as a director of SonicWall, Inc., a provider of IT security and data backup and recovery solutions, from 2004 to 2010 and as Chair of the Board of Directors from 2006 to 2010. Mr. Shoemaker holds a Bachelor of Arts degree in political science and business administration from Hanover College, where he currently is a Trustee Emeritus, and a Master of Business Administration degree from Indiana University’s Kelley School of Business, where he is a member of the School of Business Dean’s Advisory Council, the School of Informatics, Computer

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Science and Engineering Dean’s Advisory Council, and the Johnson Center for Entrepreneurship Board. In 2019, he was awarded an Honorary Doctorate of Humane Letters by Indiana University and was named Entrepreneur of the Year by the Kelley School of Business.

Mr. Shoemaker brings to the Board his extensive executive experience in senior level management positions in the technology industry, particularly in hardware systems, and provides strong operational, management and financial expertise to our Board.

Arrangements Regarding Appointment of Directors

None of our directors are appointed pursuant to any arrangement with the Company. Pursuant to the offer letter between the Company and Mr. Meyercord respecting his employment, Mr. Meyercord must immediately resign as a director of the Board when his employment with the Company terminates.  

 

 


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CORPORATE GOVERNANCE

Our Board currently consists of seven directors. Our Board has reviewed the criteria for determining the independence of the Company’s directors under Nasdaq Rule 5605, Item 407(a) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). It has affirmatively determined that, other than Mr. Meyercord, each member of our Board is independent under such criteria. The Board has determined that as of the date of this Proxy Statement the Board is comprised of a majority of directors who qualify under the rules adopted by the SEC and Nasdaq.

Directors to be elected at the 2021 Annual Meeting are to hold office until the 2022 Annual Meeting and until their respective successors are elected and qualified.

Board and Leadership Structure

Our current leadership structure separates the roles of the Chief Executive Officer and the Chair of our Board. Mr. Shoemaker has served as the Independent Chair of our Board since February 2017. While our bylaws and Corporate Governance Guidelines do not require that the Chair of our Board and Chief Executive Officer positions be separate, our Board believes that separating these positions is the appropriate leadership structure for us at this time and results in an effective balancing of responsibilities, experience and independent perspective to meet the current corporate governance needs and oversight responsibilities of our Board. Separating these positions allows our Chief Executive Officer to focus on setting our strategic direction and overseeing our day-to-day leadership and performance, while allowing the Chair of our Board to lead our Board in its fundamental role of providing advice to, and independent oversight of, management.

Mr. Shoemaker’s duties as Independent Chair include:

 

chairing executive sessions of the independent directors;

 

ensuring that independent directors have adequate opportunities to meet without management present;

 

serving as designated contact for communication to independent directors, including being available for consultation and direct communication with major stockholders;

 

ensuring that the independent directors have an opportunity to provide input on the agenda for meetings of our Board;

 

assuring that there is sufficient time for discussion of all agenda items; and

 

being identified as the recipient of communications with stockholders in the annual meeting proxy statement.

Our Board appoints our President and Chief Executive Officer, Chief Financial Officer, Corporate Secretary and all executive officers. All executive officers serve at the discretion of our Board. Each of our executive officers devotes his or her full time to our affairs. Our directors devote time to our affairs as is necessary to discharge their duties. In addition, our Board has the authority to retain its own advisers, at the Company’s expense, to assist it in the discharge of its duties.

Board’s Role in Risk Oversight

Our Board has an active role in overseeing management of the risks we face. This role is one of informed oversight rather than direct management of risk. Our Board regularly reviews and consults with management on the Company’s strategic direction and the challenges and risks we face. Our Board also reviews and discusses with management on a quarterly basis its financial results and forecasts. The Audit Committee of our Board oversees management of the Company’s financial risks, and oversees and reviews our risk management policies, including the Company’s investment policies and anti-fraud program. The Compensation Committee of our Board oversees our management of risks relating to and arising from our compensation plans and arrangements. These committees periodically report on these matters to the full Board.

Management is tasked with the direct management and oversight of legal, financial and commercial compliance matters, which includes identification and mitigation of associated areas of risk. Our Chief Administrative and Sustainability Officer provides regular reports of legal risks and developments to the Audit Committee and to our full Board. Our Chief Financial Officer, Corporate Controller and Senior Director of Internal Audit provide regular reports to the Audit Committee concerning financial, tax and audit related risks. In addition, the Audit Committee receives periodic reports from management on our compliance programs and efforts, our investment policies and practices, and the results of various internal audit projects. The Compensation Committee’s compensation consultant, together with our Vice President of Talent and Head of Diversity and other members of management, provides analysis of risks related to our compensation programs and practices to the Compensation Committee.

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Meetings of the Board of Directors

Our Board held nine meetings during the fiscal year ended June 30, 2021. No director attended fewer than 75 percent of the aggregate of the meetings of our Board held during the period for which he or she has been a director during fiscal 2021 and the meetings of the committees on which he or she served which were held during the periods in fiscal 2021 that he or she served on such committees.

Director Attendance at Annual Meetings

We encourage director attendance at the Annual Meeting and we use reasonable efforts to schedule our Annual Meeting of stockholders at a time and date to maximize attendance by directors, taking into account our directors’ schedules. All of our current directors attended our 2020 Annual Meeting of Stockholders.  

Executive Sessions

The independent members of our Board meet regularly in executive session (without the presence or participation of non-independent directors), generally before or after a regularly scheduled Board meeting or at such other times as determined by our independent directors or our Chair. Executive sessions of the independent directors are chaired by our Chair. The executive sessions include discussions regarding guidance to be provided to the Chief Executive Officer and such other topics as the independent directors determine.

Committees of the Board of Directors

In fiscal 2021, our Board had the following three standing committees: Audit Committee; Compensation Committee; and Nominating, Governance and Social Responsibility Committee. Our Board has adopted a written charter for each of these committees, which are available on the Corporate Governance section of the Investor Relations page of our website at investor.ExtremeNetworks.com.  

Fiscal 2021 Committee Membership

The members and Chairs of our standing committees as of June 30, 2021 were as follows:

 Name

 

Audit Committee

 

Compensation

Committee

 

Nominating,

Governance and

Social Responsibility Committee

Ingrid J. Burton

 

 

 

 

 

Member

Charles P. Carinalli

 

 

 

Chairman

 

Member

Kathleen M. Holmgren

 

Member

 

 

 

Member

Edward H. Kennedy

 

Member

 

Member

 

 

Raj Khanna

 

Chairman

 

 

 

 

John C. Shoemaker

 

 

 

Member

 

Chairman

Audit Committee - The current members of the Audit Committee are Messrs. Khanna and Kennedy and Ms. Holmgren. Mr. Khanna serves as Chair. Our Board has determined that each member of the Audit Committee (i) is independent as defined in applicable Nasdaq rules; (ii) meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act; (iii) has not participated in the preparation of financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (iv) is able to read and understand fundamental financial statements, including a company’s balance sheet, income statement and cash flow statement. Our Board further has determined that Mr. Khanna and Mr. Kennedy are “audit committee financial experts,” as defined by Item 407(d)(5) of Regulation S-K of the Exchange Act. Additionally, our Board has determined that Mr. Khanna and Mr. Kennedy have past employment experience in finance or accounting, requisite professional certification in accounting or other comparable experience or background that results in their financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

The Audit Committee reviews and reports to the Board on financial reports and financial information we disclose and our compliance with legal and regulatory requirements; reviews the qualifications, independence and performance, and approves the terms of engagement, of our independent auditors; and reviews the performance of the Company’s internal audit function:. In this regard, the Audit Committee retains our independent auditors; approves the terms of engagement of the independent auditors for audit services and non-audit services; regularly communicates with the independent auditors, financial and senior management of the

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Company; and regularly reports to the Board. The Audit Committee is also responsible for establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting or internal auditing controls, including anonymous submission by our employees of concerns regarding accounting or auditing matters that may be submitted through our Whistleblower Hotline. In addition, the Audit Committee our critical accounting policies and procedures and policies with respect to our internal accounting and financial controls. The Audit Committee also assists our Board in fulfilling its oversight responsibilities with respect to financial risks, including risk management in the areas of financial reporting, internal controls, investments and compliance with legal and regulatory requirements. The Audit Committee annually reviews and reassesses the adequacy of its Audit Committee Charter. The Audit Committee held thirteen meetings during fiscal 2021.

Compensation Committee - The current members of the Compensation Committee are Messrs. Carinalli, Kennedy, and Shoemaker. Mr. Carinalli serves as Chair. All members of the Compensation Committee are independent for purposes of the Nasdaq Marketplace Rules, and are “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act and “outside directors” for purposes of Section 162(m) of the Internal Revenue Code. The Compensation Committee is responsible for discharging our Board’s responsibilities relating to compensation and benefits of our executive officers and evaluates and reports to our Board on matters concerning management performance, officer compensation and benefits plans and programs. In carrying out its responsibilities, the Compensation Committee reviews all components of executive officer compensation for consistency with our compensation philosophy. The Compensation Committee also administers our stock option plans and stock incentive plans. The Compensation Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. Our President and Chief Executive Officer and our VP of Talent and Head of Diversity assist the Compensation Committee in its deliberations with respect to the compensation of our executive officers, provided, however, neither individual participates in the Compensation Committee’s deliberations or voting regarding his or her own compensation. In connection with the Company’s annual compensation review, each executive officer discusses his or her individual performance with our Chief Executive Officer, who addresses such performance with the Compensation Committee, and the Chief Executive Officer discusses his individual performance directly with the Compensation Committee. The Compensation Committee annually reviews and reassesses the adequacy of its Compensation Committee Charter. The Compensation Committee held eight meetings during fiscal 2021.

As permitted by its Charter, and subject to the provisions of Section 152 of the Delaware General Corporation Law, the Compensation Committee delegated to management the ability to award time-based restricted stock units (“RSUs”)under the Company’s 2013 Equity Incentive Plan to employees of the Company at the level of Vice President and below. The delegation provided for limitations on the number of shares covered by the individual and aggregate awards, vesting over three years, and quarterly reporting to the Compensation Committee. . The Company’s Chief Executive Officer presently approves such awards, with additional approval by the Company’s Chief Financial Officer, Chief Administrative and Sustainability Officer, and VP of Talent and Head of Diversity given before the effective date of grant.

The Compensation Committee may retain, at the Company’s expense, one or more independent compensation consultants. As described under the heading “Executive Compensation and Other Matters—Compensation Discussion and Analysis,” the Compensation Committee was advised by Compensia, Inc., a national compensation consulting firm, with respect to various compensation matters during fiscal 2021. Compensia has served as the Compensation Committee’s compensation consultant since fiscal year 2013. The Compensation Committee has reviewed and is satisfied with the qualifications, performance and independence of Compensia. Compensia provides no services to the Company, other than services for the Compensation Committee.

For more information about the Compensation Committee’s role and practices regarding executive compensation, see the discussion below under the heading “Executive Compensation and Other Matters.”

Nominating, Governance and Social Responsibility Committee - The current members of the Nominating, Governance and Social Responsibility Committee are Messrs. Shoemaker and Carinalli and Mses. Burton and Holmgren. Mr. Shoemaker serves as Chair. Each member of the Nominating, Governance and Social Responsibility Committee is independent. The Nominating, Governance and Social Responsibility Committee develops and recommends to the Board criteria for selecting qualified director candidates; identifies, reviews, and evaluates candidates to serve on our Board; considers committee member qualifications, appointment, and removal; recommends corporate governance principles, codes of conduct and compliance mechanisms applicable to us, including our Corporate Governance Guidelines; reviews, assesses and oversees matters related to corporate social responsibility, including diversity and inclusion goals, environmental matters, and philanthropic initiatives; assists our Board in its annual reviews of the performance of our Board, each committee of the Board, and management; and assists the Board in the administration of our Amended and Restated Tax Benefit Preservation Plan. The Nominating, Governance and Social Responsibility Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate

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governance. The Nominating, Governance and Social Responsibility Committee periodically reviews and reassesses the adequacy of its Nominating, Governance and Social Responsibility Committee Charter. The Nominating, Governance and Social Responsibility Committee held four meetings during fiscal 2021.

Compensation Committee Interlocks and Insider Participation

None of our executive officers has served on the Board of Directors or compensation committee of any other entity that has, or has had, one or more executive officers who served as a member of our Board or Compensation Committee during fiscal 2021. No member of the Compensation Committee was, during fiscal 2021 or any prior period, an officer or employee of the Company.

Director Nominations

Director Qualifications - In fulfilling its responsibilities, the Nominating, Governance and Social Responsibility Committee considers numerous factors in reviewing possible candidates for nomination as director, including:

 

the appropriate size of our Board and its committees;

 

the perceived needs of our Board for particular skills, industry expertise, background and business experience;

 

the skills, background, reputation, and business experience of nominees and the skills, background, reputation, and business experience already possessed by other members of our Board;

 

the nominees’ independence from management;

 

the nominees’ experience with accounting rules and practices;

 

the nominees’ background with regard to executive compensation;

 

the applicable regulatory and listing requirements, including independence requirements and legal considerations, such as antitrust compliance;

 

the benefits of a constructive working relationship among directors; and

 

the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

While we do not have a formal diversity policy for membership on the Board, the Nominating, Governance and Social Responsibility Committee considers many factors, including character, judgment, independence, age, education, expertise, diversity of experience, length of service, other commitments and ability to serve on committees of our Board, in evaluating potential candidates. It also considers individual attributes that contribute to board heterogeneity, including race, gender, and national origin. The Nominating, Governance and Social Responsibility Committee does not assign any particular weighting or priority to any of these factors or attributes.

There are no stated minimum criteria for director nominees, although the factors and attributes discussed above will play a material role in the recommendation of a candidate by the Nominating, Governance and Social Responsibility Committee. The Nominating, Governance and Social Responsibility Committee also believes it appropriate for one or more key members of management to participate as members of our Board.

Identifying and Evaluating Candidates for Nomination as Director - The Nominating, Governance and Social Responsibility Committee annually evaluates the current members of our Board who are willing to continue in service to determine whether to recommend to the full Board that these directors be submitted to the stockholders for re-election.

Candidates for nomination as director come to the attention of the Nominating, Governance and Social Responsibility Committee from time to time through incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of the Nominating, Governance and Social Responsibility Committee at any point during the year. Additionally, the Nominating, Governance and Social Responsibility Committee may poll directors and management for suggestions or conduct research to identify possible candidates if it believes that our Board requires additional members or nominees, or should add additional skills or experience. The Nominating, Governance and Social Responsibility Committee may engage a third-party search firm to assist in identifying qualified candidates, as it deems appropriate.

The Nominating, Governance and Social Responsibility Committee will consider candidates for directors proposed by its stockholders. To be evaluated in connection with the Nominating, Governance and Social Responsibility Committee’s established procedures for evaluating potential director nominees, any recommendation for director nominee submitted by a stockholder must be sent in writing to the Corporate Secretary at our corporate headquarters and must be received at our principal executive offices not earlier than the close of business 120 days prior to the one-year anniversary of the preceding year’s annual meeting and not later than the close of business 90 days prior to such one-year anniversary, except that if the date of the annual meeting is more than 30

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days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be delivered, or mailed and received, not later than the 90th day prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting is first made. For purposes of the foregoing, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed or furnished by us with the SEC. The recommendation for director nominee submitted by a stockholder must contain the information required by our bylaws. You may contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates. Candidates recommended by our stockholders will be evaluated against the same factors as are applicable to candidates proposed by directors or management.

All directors and director nominees must submit a completed directors’ and officers’ questionnaire as part of the nominating process. The evaluation process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating, Governance and Social Responsibility Committee.

Board Diversity Matrix – The members of our board of directors have provided the diversity information below. Each of the categories listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f).

 

Board Diversity Matrix (As of June 30, 2021)

Total Number of Directors

7

 

Female

Male

Non-Binary

Did not Disclose Gender

Part I:  Gender Identity

Directors

2

5

-

-

Part II:  Demographic Background

African American or Black

-

-

-

-

Alaskan Native or Native American

-

-

-

-

Asian

-

1

-

-

Hispanic or Latinx

-

-

-

-

Native Hawaiian or Pacific Islander

-

-

-

-

White

2

4

-

-

Two or More Races or Ethnicities

-

-

-

-

LGBTQ+

-

Did not Disclose Demographic Background

-

 

Our directors have a long history of supporting women’s opportunities and ethnic diversity throughout their careers.  Some are involved with programs and groups supporting international and diverse students from preschool to college.  Our female directors have participated in events with our Women’s Council employee resource group.  The Company’s management regularly reports to the Nominating, Governance and Social Responsibility Committee of the Board on the Company’s progress toward gender and diversity goals.

Board Member Resignation Policy

In the event one or more incumbent directors fails to receive the affirmative vote of a majority of the votes cast at an election that is not a contested election, that director shall promptly tender his or her irrevocable resignation to the Board. The Nominating, Governance and Social Responsibility Committee shall recommend to the Board whether to accept or reject the resignation of such incumbent director or whether other action should be taken. The Board shall act on the resignation, taking into account the recommendation of the Nominating, Governance and Social Responsibility Committee, and within ninety (90) days after the date of certification of the election results, the Board shall disclose its decision and the rationale regarding whether to accept the resignation (or the reasons for rejecting the resignation, if applicable) in a press release, a filing with the SEC or by other public announcement. The director whose resignation is under consideration may not participate in any deliberation or vote of the Nominating, Governance and Social Responsibility Committee or the Board regarding his or her resignation. The Nominating, Governance and Social Responsibility Committee and the Board may consider any factors and other information they deem appropriate and relevant in deciding whether to accept a director’s resignation. If an incumbent director fails to receive the required vote for re-election in an election that is not a contested election and such director’s resignation is not accepted by the Board, such director will continue to serve until his or her successor is duly elected and qualified or until his or her death, resignation or removal. If such director’s

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resignation is accepted by the Board, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board may fill any resulting vacancy pursuant to the terms of the Company’s bylaws.

Communications with Directors

John Shoemaker, our Independent Chair, is responsible for receiving, distributing and arranging responses to communications from our stockholders to our Board. Stockholders may communicate with our Board by transmitting correspondence by mail addressed as follows:

 

Chair of the Board (or individually named director(s))

Extreme Networks, Inc.

2121 RDU Center Drive, Suite 300

Morrisville, North Carolina 27560

The Chair transmits each communication as soon as practicable to the identified director addressee(s), unless (i) there are safety or security concerns that mitigate against further transmission of the communication; or (ii) the communication contains commercial matters not related to the stockholder’s stock ownership, as determined by the Chair in consultation with legal counsel. Our Board or individual directors are advised of any communication withheld for safety or security reasons as soon as practicable. Our directors have requested that the Chair not forward to them advertisements, solicitations for periodicals or other subscriptions, and other similar communications.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and persons who beneficially own more than 10 percent of our common stock to file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such person. Based solely on our review of the forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and persons who beneficially own more than 10 percent of our common stock were complied with in the fiscal year ended June 30, 2021, other than the inadvertent late filing of one Form 3 on July 7, 2020 for Joe Vitalone.  On September 2, 2021, a Form 4/A was filed for Edward Meyercord to correct two Forms 4 filed on April 23, 2019 and August 19, 2019.

Code of Ethics and Corporate Governance Materials

Our Board has adopted charters for its Audit, Compensation, and Nominating, Governance and Social Responsibility Committees, which are available on the Corporate Governance section of our Investor Relations page of our website at investor.ExtremeNetworks.com. Our Board has also adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. The Code of Business Conduct and Ethics can be found on our website on the Corporate Governance section of our Investor Relations page of our website at investor.ExtremeNetworks.com. We intend to satisfy the disclosure requirements under the Exchange Act regarding an amendment to or waiver from a provision of our Code of Business Conduct and Ethics by posting such information on our website.

Environmental, Social and Governance

Since 2020, when our Board amended the charter of our Nominating and Corporate Governance Committee to include social responsibility within the committee’s mandate, and re-named the committee as the Nominating, Governance and Social Responsibility Committee, the Company has been striving to incorporate social responsibility into our business strategy. We published our inaugural Corporate Social Responsibility (“CSR”) Report in November 2020, and expect to publish an updated report in November 2021.  Our CSR Council is led by a cross-functional group of Extreme employees.

 

 

 


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Our CSR model can be divided into three categories – People, Product and Corporate Responsibility.  Within each of these broad areas, we have focused on one or more subsets where we can direct our resources most effectively.

People

Human Capital

Diversity, Equity & Inclusion

Employee Health & Safety

Products

Data Privacy & Security

Sustainable Product Management

Sustainable Supply Chain

Labor & Human Rights

Corporate Responsibility

Corporate Governance & Business Practices

Responsible Resource Consumption

Climate Change

Philanthropy

To find out more about our corporate social responsibility and find links to our Corporate Social Responsibility Report, Corporate Social Responsibility Policy, Conflict Minerals Policy, Code of Conduct, and Supplier Code of Conduct, please visit the Corporate Social Responsibility section of our website at https://www.extremenetworks.com/company/csr/. Our Corporate Social Responsibility Report for fiscal 2021 will be published on this page as well.


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DIRECTOR COMPENSATION

We maintain a non-employee director compensation program, pursuant to which cash fees and equity awards are paid to our non-employee directors in exchange for their service on our Board and its committees. For fiscal 2021, the compensation paid to our non-employee directors was as set forth below. Mr. Meyercord, who serves as our President and Chief Executive Officer, does not receive any additional compensation for his service on our Board.

Cash Compensation

During fiscal year 2021, non-employee directors received (a) $60,000 in cash compensation annually for Board service; and (b) the applicable compensation set forth below for serving either as a chair or as a member of one or more of the committees of our Board. Fees payable to directors who join the Board during the fiscal year, or who change Board assignments, are prorated to reflect the period of service. Each director further received reimbursement of expenses related to attendance of meetings of our Board and its committees, but no separate meeting fees are paid.

 

Fees for Fiscal Year 2021:

 

Annual Committee Member Compensation

 

 

 

 

Audit Committee

 

$

12,500

 

Compensation Committee

 

 

10,000

 

Nominating, Governance and Social Responsibility Committee

 

 

5,000

 

 

 

 

 

 

Annual Chair or Committee Chair Compensation

 

 

 

 

Audit Committee Chair

 

$

30,000

 

Compensation Committee Chair

 

 

20,000

 

Nominating, Governance and Social Responsibility Committee Chair

 

 

12,000

 

Board Chair

 

 

70,000

 

 The amounts set forth above reflect the following amendments from the 2020 program: (i) the Board Chair retainer was increased from $50,000 to $70,000; (ii) the Nominating, Governance and Social Responsibility Committee chair retainer was increased from $11,000 to $12,000. Such amendments were approved following consultation with Compensia and were intended to position our director compensation program at the median of our peers.  

Equity Compensation

On the date of each annual meeting of our stockholders, each non-employee director continuing service with the Company after the meeting is granted an annual award of RSUs. The number of RSUs for fiscal year 2021 was determined by dividing $190,000 by the price of the Company’s common stock at the close of business on the Nasdaq Global Select Market on the date of the annual meeting, rounded down to the nearest whole RSU. RSU grants provided to directors who join the Board after the annual meeting of our stockholders are prorated to reflect the period of service. Each RSU represents the right to receive one share of our common stock upon vesting and settlement. On the date of the annual meeting of stockholders of the Company held on November 5 2020, each non-employee director was granted 42,505 RSUs, which will vest upon the earliest of November 5, 2021 or a change in control of our Company, in each case, subject to the director’s continued service with the Company through such date.

Changes for Fiscal 2022

The Compensation Committee periodically reviews the director compensation program with Compensia, its compensation consultant. In May 2021, following consultation with Compensia, our Compensation Committee decided to make no changes to the cash fees or equity compensation under our director compensation program for fiscal 2022.

Stock Ownership Guidelines

Our Corporate Governance Guidelines provide that each non-employee director should own a minimum of the lesser of: 15,000 shares or shares valued at three times (3x) the Company’s annual Board service retainer. Each non-employee director has five years from his or her respective date of appointment to attain the minimum ownership level. All of our non-employee directors have

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met the minimum requirements of the share ownership guidelines or are not yet required to be in compliance with the requirements of the guidelines as they have not yet served for five years. 

2021 Director Compensation

The compensation information for our non-employee directors who served during fiscal 2021 is set forth below:

 

Name

 

Director Fees

Earned or

Paid in

Cash $

 

 

Stock

Awards

$ (1) (2)

 

 

Total ($)

 

Charles P. Carinalli

 

$

85,000

 

 

$

190,000

 

 

$

275,000

 

Edward H. Kennedy

 

 

82,500

 

 

 

190,000

 

 

 

272,500

 

Raj Khanna

 

 

90,000

 

 

 

190,000

 

 

 

280,000

 

Ingrid J. Burton

 

 

65,000

 

 

 

190,000

 

 

 

255,000

 

John C. Shoemaker

 

 

152,000

 

 

 

190,000

 

 

 

342,000

 

Kathleen M. Holmgren

 

 

77,500

 

 

 

190,000

 

 

 

267,500

 

(1)

Represents the aggregate grant date fair value computed in accordance with Accounting Standards Codification, or ASC, Topic 718 and does not reflect whether the director has actually realized a financial benefit from the award. For information on the assumptions used to calculate the value of the awards, refer to Note 12 to our consolidated financial statements in our Form 10-K for the fiscal year ended June 30, 2021.  

(2)

The following table shows the aggregate number of stock awards (RSUs) and stock option awards held as of June 30, 2021 by each of our non-employee directors who served during fiscal year 2021:

 

Name

 

Stock Awards (#)

 

 

Option Awards (#)

 

Charles P. Carinalli

 

 

42,505

 

 

 

 

Edward H. Kennedy

 

 

42,505

 

 

 

 

Raj Khanna

 

 

42,505

 

 

 

 

Ingrid Burton

 

 

42,505

 

 

 

 

John C. Shoemaker

 

 

42,505

 

 

 

 

Kathleen M. Holmgren

 

 

42,505

 

 

 

 

 


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PROPOSAL TWO:

ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Background

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and as required under Section 14A of the Exchange Act, our stockholders are entitled to vote to approve, on an advisory non-binding basis, the compensation of our named executive officers (“NEOs”) as disclosed in this proxy statement in accordance with SEC rules. This is frequently referred to as a “Say on Pay” vote. This vote is intended to address the overall compensation of the Company’s NEOs and the philosophy, policies and practices described in this proxy statement with respect to their compensation, and not any specific item of compensation.

The Compensation Committee believes that our 2021 executive compensation program has been appropriately designed to advance stockholder interests through effective performance-based incentives with multi-year retention features. The last stockholder advisory vote on executive compensation was held in November 2020, and approximately 96 percent of votes cast were voted in favor of the Company’s compensation for its NEOs.

As described in further detail under the heading “Executive Compensation and Other Matters— Compensation Discussion and Analysis,” our executive compensation philosophy is designed to attract high quality candidates for senior leadership positions, to retain these employees, and to establish a total compensation program that motivates and rewards individual and team performance in a highly competitive industry. Our compensation programs are designed to align our executive officers’ performance with our goals and to create stockholder value.

We are asking our stockholders to indicate their support for our compensation arrangements with our NEOs as described in this proxy statement.

Vote Required and Board of Directors’ Recommendation

Approval of this proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the Annual Meeting, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the vote on this proposal.

This “Say on Pay” vote is advisory, and therefore is not binding on us, the Compensation Committee or our Board. However, our Board and our Compensation Committee value the opinions of our stockholders in their vote on this proposal, and will consider the outcome of this vote when making future decisions regarding the compensation of our NEOs. We currently expect to conduct the next advisory vote on executive compensation at our 2022 annual meeting of Stockholders.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT.

 

 

 

 

 

 


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PROPOSAL THREE:

RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2022

The Audit Committee has appointed Ernst &Young LLP (“EY”) as the Company’s independent registered public accounting firm for our fiscal year ending June 30, 2022. EY has served as the Company’s independent registered public accounting firm since September 2020. A representative from EY is expected to be present at the Annual Meeting, will have an opportunity to make a statement if desired, and will be available to respond to appropriate questions from stockholders.  We do not expect a representative from KPMG LLP to be present at the Annual Meeting.

Change of Independent Registered Public Accounting Firm

On September 4, 2020, following an evaluation of audit fees and costs and a competitive process, the Audit Committee dismissed KPMG LLP (“KPMG”), which was then serving as our independent registered public accounting firm.

Audit Committee Pre-Approval Policies

Representatives of our independent auditors normally attend most meetings of the Audit Committee. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent auditors. These services may include audit services, audit-related services, tax services and other services. Any pre-approval is detailed as to the particular service or category of services. Our independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by our independent auditors in accordance with this pre-approval policy. In addition, the charter provides that the Audit Committee may delegate to one or more members of the Audit Committee the authority to grant pre-approvals of permitted non-audit services that would otherwise be required to be pre-approved by the Audit Committee. Any pre-approvals granted under such delegation of authority are to be reported to the Audit Committee at the next regularly scheduled meeting. The Audit Committee has delegated authority to the Chair of the Audit Committee to pre-approve fees up to $250,000 for permitted audit and non-audit services to be provided to the Company by its independent auditors. For fiscal 2020 and 2021, all fees paid to our independent auditors were pre-approved in accordance with our pre-approval policy.

The Audit Committee on an annual basis reviews the services performed by the independent registered public accounting firm, and reviews and approves the fees charged by the accounting firm. As such, all services provided by the accounting firm as set forth in the table below under Principal Accounting Fees and Services were approved by the Audit Committee. The Audit Committee has considered the role of the independent registered public accounting firm in providing tax and other non-audit services to us and has concluded that these services are compatible with the accounting firm’s independence as our independent auditors.

Principal Accounting Fees and Services

The following table sets forth the fees paid to KPMG, the auditor that served as our independent registered public accounting firm for the fiscal years ended June 30, 2020.

 

 

2020

 

Audit fees(1)

 

$

3,680,828

 

Audit related fees

 

 

 

Tax Fees

 

 

 

Total

 

$

3,680,828

 

 

(1)

Audit fees relate to professional services rendered in connection with the audit of our annual financial statements and internal control over financial reporting, quarterly review of financial statements included in our Quarterly Reports on Form 10-Q and audit services provided in connection with other statutory and regulatory filings, as well as fees associated with consents for registration statement filings. The fees for fiscal 2020 also includes work done in connection with the acquisition of Aerohive Networks, Inc.

 

 

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The following table sets forth the fees accrued or paid to EY, the auditor that served as our independent registered public accounting firm for the fiscal year ended June 30, 2021.

 

 

2021

 

Audit fees(1)

 

$

1,732,115

 

Audit related fees(2)

 

 

 

Tax Fees(3)

 

 

311,580

 

Other(4)

 

 

 

Total

 

$

2,043,695

 

 

(1)

Audit fees relate to professional services rendered in connection with the audit of our annual financial statements and internal control over financial reporting, quarterly review of financial statements included in our Quarterly Reports on Form 10-Q and audit services provided in connection with other statutory and regulatory filings.

(2)

Audit-related fees relate to fees for professional services for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.

(3)

Tax fees relate to professional services rendered in connection with tax audits, international tax compliance, and international tax consulting and planning services.

(4)

Other fees related to fees and expenses for permitted services rendered other than those that meet the criteria above.

Vote Required and Board of Directors’ Recommendation

Stockholder ratification of the appointment of EY as our independent registered public accounting firm is not required by our bylaws or otherwise by law. Our Board, however, is submitting the appointment of EY to stockholders for ratification as a matter of good corporate practice. If stockholders fail to ratify the appointment, the Audit Committee will reconsider the selection. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

Approval of this proposal requires the affirmative vote of a majority of the votes cast for or against the proposal, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy.  Abstentions and non-votes will be counted as present for purposes of determining the presence of a quorum, but will not have any effect on the outcome of the vote on this proposal. If you sign and return a proxy card without giving specific voting instructions on this proposal, your shares will be voted in favor of the proposal.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2022.


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PROPOSAL FOUR:

APPROVE THE COMPANY’S AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN

We are asking our stockholders to approve the Amended and Restated Tax Benefit Preservation Plan, between the Company and Computershare Inc., as Rights Agent (the “Restated Tax Plan”), as disclosed in this Proxy Statement and in Exhibit A to this Proxy Statement. The Restated Tax Plan is currently in effect.

Please read the Restated Tax Plan in its entirety as the discussion below is only a summary.

Background

On May 17, 2021 the Board approved and the Company entered into the Restated Tax Plan. The Restated Tax Plan amends and restates in its entirety the Company’s existing rights agreement (as previously amended, the “Rights Agreement”) and governs the terms of each right (“Right”) that has been issued with respect to each share of common stock of the Company. Among other things, the Restated Tax Plan (i) extends the expiration date of the Rights, (ii) adjusts the purchase price for the Rights, and (iii) provides procedures and logistics for seeking exemptions.  

By adopting the Restated Tax Plan, the Board intends to continue to help preserve the value of certain deferred tax benefits, including those generated by net operating losses and certain other tax attributes (collectively, the “Tax Benefits”). As of June 30, 2021, the Company had net operating loss carry-forwards for U.S. federal and state tax purposes of $242 million and $156.2 million, respectively. The U.S. federal net operating loss carry-forwards of $242 million will begin to expire in the fiscal year ending June 30, 2033 and state net operating losses of $156.2 million began to partially expire in the fiscal year ended June 30, 2021.

The ability to use these Tax Benefits would be substantially limited if it were to experience an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). In general, an ownership change would occur if there is a greater than fifty-percentage point change in ownership of securities by stockholders owning (or deemed to own under Section 382 of the Code) five-percent or more of a corporation’s securities over a rolling three-year period. The Restated Tax Plan reduces the likelihood that changes in the Company’s investor base have the unintended effect of limiting the use of the Company’s Tax Benefits. The Board believes it is in the best interest of the Company and its stockholders that the Company provide for the continued protection of the Tax Benefits by adopting the Restated Tax Plan.  

The Restated Tax Plan is intended to act as a deterrent to any person acquiring shares of the Company’s securities equal to or exceeding the Trigger Amount (as defined below) without the approval of the Board. This would protect the Tax Benefits because changes in ownership by a person owning less than 4.95% of the Company’s stock are not included in the calculation of “ownership change” for purposes of Section 382 of the Code. There is no guarantee, however, that the Restated Tax Plan will prevent us from experiencing an ownership change. The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Restated Tax Plan if the Board determines that doing so would not limit or impair the availability of the Tax Benefits or is otherwise in the best interests of the Company.

Pursuant to the Restated Tax Plan, the Rights will expire, unless redeemed or exchanged earlier by the Company or terminated, the Rights will expire upon the earliest to occur of (i) the close of business on May 17, 2024, (ii) the close of business on May 17, 2022, if stockholder approval of the Restated Tax Plan has not been obtained by that date, (iii) the close of business on the effective date of the repeal of Section 382 of the Code if the Board determines that the Restated Tax Plan is no longer necessary or desirable for the preservation of the Tax Benefits or (iv) the time at which the Board determines that the Tax Benefits are fully utilized or no longer available under Section 382 of the Code or that an ownership change under Section 382 of the Code would not adversely impact in any material respect the time period in which the Company could use the Tax Benefits, or materially impair the amount of the Tax Benefits that could be used by the Company in any particular time period, for applicable tax purposes.

Description of the Restated Tax Plan

The following summary of the Restated Tax Plan does not purport to be complete and is qualified in its entirety by the full text of the Restated Tax Plan, a copy of which is attached as an exhibit to this Proxy Statement and is incorporated herein by reference.

Dividend of Preferred Stock Purchase Rights - In connection with its adoption of the Rights Agreement, on April 27, 2001, the Board declared a dividend distribution of one Preferred Stock Purchase Right (each a “Right” and collectively the “Rights”) for each outstanding share of common stock, par value $0.001, of the Company (the “Common Stock”). The distribution was

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paid as of May 14, 2001 (the “Record Date”), to stockholders of record on that date. As long as the Rights are attached to the Common Stock, the Company will issue one Right (subject to adjustment) with each new share of the Common Stock so that all such shares will have attached Rights. When exercisable, each Right will entitle the registered holder to purchase from the Company one one-thousandth of a share of the Company’s Series A Preferred Stock, $0.001 par value (the “Series A Preferred”), at a price of $70 per Right, subject to adjustment (the “Purchase Price”).

Transfer, “Flip In” and Exercise of the Rights - The Rights detach from the Common Stock and become exercisable if: (i) at the close of business on the tenth business day following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of 4.95% or more of the Common Stock (each such person, an “Acquiring Person”) or (ii) at the close of business on the tenth business day (or such later date as may be determined by action of the Board prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement or announcement of an intention to make a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of affiliated or associated persons of shares of Common Stock equal to or exceeding 4.95% of the outstanding Common Stock (the earlier of (i) and (ii) being called the “Distribution Date”). The Board may postpone the Distribution Date of the rights under certain circumstances.

The Restated Tax Plan provides that any person who beneficially owned shares of Common Stock equal to or exceeding 4.95% of the outstanding Common Stock prior, including immediately prior, to the first public announcement of the adoption of the Restated Tax Plan, together with any affiliates and associates of that person (each, an “Existing Holder”), shall not be deemed to be an “Acquiring Person” for purposes of the Restated Tax Plan unless the Existing Holder becomes the beneficial owner of one or more additional shares of Common Stock (other than pursuant to (a) a dividend or distribution paid or made by the Company on the outstanding Common Stock in Common Stock or (b) a split or subdivision of the outstanding Common Stock. However, if upon acquiring beneficial ownership of one or more additional shares of Common Stock, the Existing Holder does not beneficially own shares of Common Stock equal to or exceeding 4.95% of the Common Stock outstanding, the Existing Holder shall not be deemed to be an “Acquiring Person” for purposes of the Restated Tax Plan.  

The Rights will be transferred only with the Common Stock until the Distribution Date (or earlier redemption, exchange, termination or expiration of the Rights). After the Distribution Date, separate rights certificates will be issued evidencing the Rights and become separately transferable apart from the Common Stock.

Rights and Preferences of Preferred Stock - Each share of Series A Preferred purchasable upon exercise of the Rights will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment of $3,750.00 per share or, if greater, an aggregate dividend of 1,000 times the dividend, if any, declared per share of Common Stock. In the event of liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred will be entitled to a minimum preferential liquidation payment of $150,000.00 per share (plus any accrued but unpaid dividends), provided that such holders of the Series A Preferred will be entitled to an aggregate payment of 1,000 times the payment made per share of Common Stock. Each share of Series A Preferred will have 1,000 votes and will vote together with the Common Stock. Finally, in the event of any merger, consolidation or other transaction in which shares of the Common Stock are exchanged, each share of Series A Preferred will be entitled to receive 1,000 times the amount received per share of Common Stock. The Series A Preferred will not be redeemable. These rights are protected by customary antidilution provisions. Because of the nature of the Series A Preferred’s dividend, liquidation and voting rights, the value of one one-thousandth of a share of Series A Preferred purchasable upon exercise of each Right should approximate the value of one share of Common Stock.

The Purchase Price payable, and the number of shares of Series A Preferred or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Preferred, (ii) upon the grant to holders of the Series A Preferred of certain rights or warrants to subscribe for or purchase Series A Preferred or convertible securities at less than the then current market price of the Series A Preferred or (iii) upon the distribution to holders of the Series A Preferred of evidences of indebtedness, cash, securities or assets (excluding regular periodic cash dividends at a rate not in excess of 125% of the rate of the last regular periodic cash dividend theretofore paid or, in case regular periodic cash dividends have not theretofore been paid, at a rate not in excess of 50% of the average net income per share of the Company for the four quarters ended immediately prior to the payment of such dividend, or dividends payable in shares of Series A Preferred (which dividends will be subject to the adjustment described in clause (i) above)) or of subscription rights or warrants (other than those referred to above).

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company beyond those as an existing stockholder, including, without limitation, the right to vote or to receive dividends.

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Merger, Exchange or Redemption of the Rights - In the event that a Person becomes an Acquiring Person or if the Company were the surviving corporation in a merger with an Acquiring Person or any affiliate or associate of an Acquiring Person and shares of the Common Stock were not changed or exchanged, each holder of a Right, other than Rights that are or were acquired or beneficially owned by the Acquiring Person (which Rights will thereafter be null and void), will thereafter have the right to receive upon exercise that number of shares of Common Stock having a market value of two times the then current Purchase Price of the Right. In the event that, after a Person has become an Acquiring Person, the Company were acquired in a merger or other business combination transaction or more than 50% of its assets or earning power were sold, proper provision shall be made so that each holder of a Right shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price of the Right, that number of shares of common stock of the acquiring company which at the time of such transaction would have a market value of two times the then current Purchase Price of the Right.

At any time after a Person becomes an Acquiring Person and prior to the earlier of one of the events described in the last sentence of the previous paragraph or the acquisition by such Acquiring Person of 50% or more of the then outstanding Common Stock, the Board of Directors may cause the Company to exchange the Rights (other than Rights owned by an Acquiring Person which will have become null and void), in whole or in part, for shares of Common Stock at an exchange rate of one share of Common Stock per Right (subject to adjustment).

The Rights may be redeemed in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”) by the Board of Directors at any time prior to the time that an Acquiring Person has become such. The redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Amendment of Tax Benefit Preservation Plan - Any of the provisions of the Restated Tax Plan may be amended by the Board of Directors, or a duly authorized committee thereof, for so long as the Rights are then redeemable, and after the Rights are no longer redeemable, the Company may amend or supplement the Restated Tax Plan in any manner that does not adversely affect the interests of the holders of the Rights (other than an Acquiring Person or any affiliate or associate of an Acquiring Person).  

Certain Factors Stockholders Should Consider

Our Board believes that approval by our stockholders of the Restated Tax Plan is in our and our stockholders’ best interests. However, in addition to the risk factors listed in our Annual Report on Form 10-K, please consider the items discussed below when voting on this proposal.

The Internal Revenue Service could challenge the amount of our Tax Benefits or claim we experienced an ownership change, which could significantly reduce the amount of our Tax Benefits that we can use or eliminate our ability to use them altogether - The Internal Revenue Service (“IRS”) has not audited or otherwise validated the amount of our Tax Benefits. The IRS could challenge the amount of our Tax Benefits, which could limit our ability to use our Tax Benefits to reduce our future taxable income. In addition, the complexity of the relevant rules under the Code governing the use of Tax Benefits and the limited knowledge that any public company has about the ownership of its publicly traded common stock, may make it difficult to determine whether an ownership change has occurred. As such, even if the Restated Tax Plan remains in effect, the IRS could claim that we experienced an ownership change and attempt to reduce or eliminate the amount of our Tax Benefits.

Continued Risk of Ownership Change - As discussed above, although the Restated Tax Plan is intended to reduce the likelihood of an ownership change, we cannot assure you that it would prevent all transfers of our common stock that could result in an ownership change.

Potential Impact on the Price of Our Common Stock - The Restated Tax Plan, which is currently in effect, discourages future stockholders from becoming 4.95% or greater stockholders of our common stock and existing 4.95% or greater stockholders from acquiring additional shares of our common stock. Certain investors may not be comfortable holding our common stock subject to the terms of the Restated Tax Plan. As such, approving this proposal to keep the Restated Tax Plan in place could continue the risk that the Restated Tax Plan may depress the price of our common stock, including in an amount that could more than offset the value preserved by protecting our Tax Benefits through the Restated Tax Plan.

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Potential Anti-Takeover Impact - Our Board approved the Restated Tax Plan in order to preserve the long-term value of our Tax Benefits. The Restated Tax Plan is not intended to prevent a takeover of our company, was not executed as the result of any potential takeover transaction known to us and is not part of a plan by us to adopt a series of anti-takeover measures. However, the Restated Tax Plan could be deemed to have or actually have an anti-takeover effect because an Acquiring Person may be diluted under certain circumstances under the Restated Tax Plan.

Vote Required and Board of Directors’ Recommendation

Approval of this proposal requires the affirmative vote of a majority of the voting power of our outstanding shares that are present or represented by proxy at the Annual Meeting and entitled to vote on this proposal. Abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this vote. Our stockholders may vote “for” or “against” or “abstain” from voting.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPANY’S AMENDED AND RESTATED TAX BENEFIT PRESERVATION PLAN.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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PROPOSAL FIVE:

APPROVAL OF AMENDMENT AND RESTATEMENT OF THE AMENDED 2014 EMPLOYEE STOCK PURCHASE PLAN

General

Our Amended 2014 Employee Stock Purchase Plan (the “Purchase Plan”) is designed to provide our eligible employees and those of our participating subsidiaries with the opportunity to purchase shares of our common stock on periodic purchase dates through their accumulated payroll deductions. The Purchase Plan was originally adopted on November 19, 2014, and was subsequently amended and restated effective November 8, 2018. On September 6, 2021, our Board approved the Amended Purchase Plan, the amendment and restatement of the Purchase Plan, subject to stockholder approval.

The Company expects that each offering under the Amended Purchase Plan will be for a period of six months and will consist of consecutive offering periods of approximately six months in length. Offering periods begin on February 16 and August 16, or if such date is not a “trading day” (as defined in the Amended Purchase Plan), the next trading day. Each participant in the Amended Purchase Plan will be granted an option on the first day of the offering period and the option will be automatically exercised on the last day of the applicable offering period using the contributions the participant has made for this purpose. The purchase price for the common stock purchased under the Amended Purchase Plan is 85% of the lesser of the fair market value of the common stock on the first trading day of the applicable offering period or on the last trading day of the applicable offering period. The Amended Purchase Plan administrator (as described below) has the power to change the duration of the offering periods.

We believe our success is due to our highly talented employee base and that future success depends on the ability to attract and retain high caliber personnel. The Amended Purchase Plan is designed to more closely align the interests of our employees with those of our stockholders by encouraging employees to invest in our common stock, and to help our employees share in the Company’s success through the appreciation in value of such purchased stock. The Amended Purchase Plan, together with our equity plan, are important employee retention and recruitment vehicles.

Approximately 2,500 individuals are eligible to participate in the Amended Purchase Plan.

We are seeking stockholder approval of an amendment to the Purchase Plan that increases the maximum number of shares that will be made available for sale thereunder by 7,500,000 shares.

The Purchase Plan had a maximum number of shares available for sale of 19,500,000 shares of common stock. As of September 1, 2021, an aggregate of 3,424,371 shares of common stock remained available for future issuance under the Purchase Plan. We estimate that, with an increase of 7,500,000 shares, we will have a sufficient number of shares of common stock to cover purchases under the Amended Purchase Plan through February 2025. Consequently, we have, subject to stockholder approval, increased the aggregate number of shares that may be sold under the Purchase Plan by 7,500,000 shares of common stock. Our Board believes it is in the best interests of the Company and our stockholders to continue to provide our employees with the opportunity to acquire an ownership interest in the Company through their participation in the Amended Purchase Plan, encouraging them to remain in our employ and more closely aligning their interests with those of our stockholders.

Summary of the Amended Purchase Plan

The following summary of the Amended Purchase Plan is qualified in its entirety by the specific language of the Amended Purchase Plan, which is attached as Exhibit B to this Proxy Statement.

General – The Amended Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code but also permits us to include our non-United States employees in offerings not intended to qualify under Section 423. Each participant in the Amended Purchase Plan is granted at the beginning of each offering under the Purchase Plan (an “Offering”) the right to purchase (a “Purchase Right”) through accumulated post-tax payroll deductions up to a number of shares of the common stock of the Company determined on the first day of the Offering. The Purchase Right is automatically exercised on each purchase date during the Offering, unless the participant has withdrawn from participation in the Amended Purchase Plan prior to such date.

Shares Subject to the Amended Purchase Plan – The Amended Purchase Plan currently authorizes the sale of an aggregate of19,500,000 shares of the Company’s common stock. If any Purchase Right expires, terminates or is canceled, the shares allocable to the unexercised portion of such Purchase Right will again be available for issuance under the Amended Purchase Plan. To prevent dilution or enlargement of the rights of participants under the Amended Purchase Plan, appropriate and proportionate adjustments to the number of shares subject to the Amended Purchase Plan will be made if any change is made to the outstanding

26

 


 

common stock by reason of merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or any similar change in the capital structure of the Company not involving the receipt of consideration by the Company.

Administration – The Amended Purchase Plan is administered by the Compensation Committee or other committee or subcommittee duly appointed by our Board of Directors to administer the Amended Purchase Plan. Subject to the provisions of the Amended Purchase Plan, the Compensation Committee determines the terms and conditions of Purchase Rights granted under the Amended Purchase Plan. The Compensation Committee will interpret the Amended Purchase Plan and the Purchase Rights granted, and all determinations of the Compensation Committee will be final and binding on all persons having an interest in the Amended Purchase Plan or any Purchase Right.

Eligibility – Generally, any employee of the Company or any present or future parent or subsidiary corporation of the Company designated by the Compensation Committee for inclusion in the Purchase Plan is eligible to participate in an Offering under the Amended Purchase Plan, so long as the employee is customarily employed for more than 20 hours per week and more than five months in any year. If any local laws applicable to any of our non-United States employees require that participation in the Purchase Plan be extended to additional classes of employees or otherwise impose different terms or restrictions on their participation, those requirements may be satisfied through separate Offerings under the Amended Purchase Plan not intended to qualify under Section 423 of the Code, and such separate Offerings will be treated part of a “Non-423 Plan” component of the Amended Purchase Plan. Employees in certain jurisdictions having unfavorable laws regarding stock purchase plans may be excluded from participating in the Amended Purchase Plan. In any event, no employee who owns or holds options to purchase, or who, as a result of participation in the Amended 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 is eligible to participate in the Amended Purchase Plan.

Offerings – Generally, each Offering under the Amended Purchase Plan will be for a period of 6 months (an “Offering Period”), with new Offering Periods commencing on the 16th day of February and August of each year. The Compensation Committee may establish a different term for one or more Offerings, not to exceed 27 months, or different beginning or ending dates for any Offering Period.

Participation and Purchase of Shares – Participation in an Offering under the Amended Purchase Plan is limited to eligible employees who deliver a properly completed subscription agreement and, with the exception of non-United States employees for whom local law does not permit such deductions, who authorize payroll deduction contributions under the Amended Purchase Plan prior to the first day of the Offering Period (the “Offering Date”). Payroll deductions may not exceed 15% (or such other rate as the Compensation Committee determines) of an employee’s compensation on any payday during the Offering Period. The Compensation Committee will specify alternative means for funding share purchases under the Amended Purchase Plan by non-United States employees in jurisdictions where local law does not permit payroll deduction contributions. An employee who becomes a participant in the Amended Purchase Plan will automatically participate in each subsequent Offering Period beginning immediately after the last day of the Offering Period in which he or she is a participant until the employee withdraws from the Amended Purchase Plan, becomes ineligible to participate, or terminates employment.

Subject to any uniform limitations or notice requirements imposed by the Company, a participant may decrease his or her rate of payroll deductions or withdraw from the Amended Purchase Plan at any time during an Offering. Upon withdrawal, the Company will refund without interest the participant’s accumulated payroll deductions not previously applied to purchase shares. Once a participant withdraws from an Offering, that participant may not again participate in the same Offering.

Subject to certain limitations and unless different terms are specified by the Compensation Committee, each participant in an Offering is granted a Purchase Right to of up to a maximum of $15,000 based on the purchase price as detailed in the following paragraph. In any event, no participant may be granted a Purchase Right that would allow the participant to purchase shares under the Amended Purchase Plan or any other employee stock purchase plan of the Company or any of our subsidiaries having a fair market value (measured on the first day of the Offering Period in which the shares are purchased) exceeding $25,000 for each calendar year in which the Purchase Right is outstanding at any time. Further, the Amended Purchase Plan provides that the maximum number of shares of common stock that may be purchased by all participants may not exceed 1.5 million shares on any purchase date during an Offering Period, unless the Compensation Committee establishes a different limit prior to the Offering Date. Purchase Rights are nontransferable and may only be exercised by the participant.

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On each purchase date, the Company issues to each participant in the Offering the number of shares of common stock determined by dividing the amount of payroll deductions (or other funds that may have been contributed by certain non-United States participants) accumulated for the participant during the Offering Period by the purchase price, limited in any case by the number of shares subject to the participant’s Purchase Right for that Offering. The price at which shares are sold under the Amended Purchase Plan is established by the Compensation Committee but may not be less than 85% of the fair market value per share of common stock on the Offering Date or the purchase date, whichever is less. The fair market value of the common stock on any relevant date generally will be the closing price per share as reported on the Nasdaq Global Select Market. Any amounts credited to a participant’s plan account not applied to purchase shares will be returned to the participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share of common stock, in which case the remaining amount may be applied to the next Offering Period, or will be refunded in the event the employee chooses not to participate in the Amended Purchase Plan during such Offering Period.

Change in Control of the Company – The Amended Purchase Plan provides that a “Change in Control” occurs upon (a) a person or entity (with certain exceptions described in the Amended Purchase Plan) becoming the direct or indirect beneficial owner of more than 50% of the Company’s voting stock; (b) stockholder approval of a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the Company’s voting stock entitled to vote in the election of directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company). If a Change in Control occurs, then, unless the surviving or acquiring corporation assumes or continues the outstanding Purchase Rights or substitutes equivalent rights for such corporation’s shares, the Amended Purchase Plan participants’ accumulated payroll deductions will be applied to purchase shares of the common stock in the current Offerings on a date before the Change in Control specified by the Compensation Committee.

Termination or Amendment – The Amended Purchase Plan will continue until terminated by the Compensation Committee. The Compensation Committee may at any time amend, suspend or terminate the Amended Purchase Plan, except that the approval of the Company’s stockholders is required within twelve months of the adoption of any amendment that either increases the number of shares authorized for issuance under the Amended Purchase Plan or changes the definition of the corporations whose employees may participate in the Purchase Plan. Furthermore, no such amendment, suspension or termination of the Amended Purchase plan shall adversely affect previously granted Purchase Rights without the consent of a participant in the Amended Purchase Plan other than as may be permitted by the Amended Purchase Plan or necessary to qualify the Amended Purchase Plan as an employee stock purchase plan pursuant to Section 423 of the Code or to comply with applicable law.

Plan Benefits

Given that the number of shares of common stock that may be purchased under the Purchase Plan is determined, in part, on the market value of our common stock on the first and last day of the Offering Period and that participation is voluntary on the part of employees, the actual number of shares that may be purchased by any individual is not determinable. For illustrative purposes, the following table sets forth (a) the number of shares that were purchased since the inception of the plan until August 15, 2021 under the Purchase Plan, and (b) the average per share purchase price paid for such shares:

 

 

 

 

(a)

 

 

(b)

 

 

Name

 

Position

 

Number of

Shares

Purchased

 

 

Average Per

Share

Exercise Price

 

 

Edward B. Meyercord

 

President, Chief Executive Officer, and Director

 

 

37,703

 

 

$

3.24

 

 

Remi Thomas

 

Chief Financial Officer

 

 

1,857

 

 

$

8.08

 

 

Joe Vitalone

 

Chief Revenue Officer

 

 

4,753

 

 

$

5.58

 

 

Executive Group (1)

 

 

 

 

44,313

 

 

$

3.98

 

 

Non-Executive Director Group (2)

 

 

 

 

 

 

$

 

 

Non-Executive Officer Employee Group (3)

 

 

 

 

16,030,956

 

 

$

4.57

 

(4)

(1)

The Executive Group is composed of the three executive officers listed above.

(2)

The Non-Executive Director Group is composed of Board members except Edward B. Meyercord. Directors who are not employees of the Company are not eligible to participate in the Purchase Plan.

(3)

The Non-Executive Officer Employee Group is composed of all our employees worldwide minus the Executive Group.

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(4)

The Non-Executive Officer Employee Group average per share exercise price is calculated as a weighted average.

Vote Required and Board of Directors’ Recommendation

Approval of this proposal requires the affirmative vote of a majority of votes cast for or against the proposal, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy.  Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the vote on this proposal.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE PURCHASE PLAN.


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PROPOSAL SIX:

APPROVAL OF AMENDMENT AND RESTATEMENT OF THE EXTREME NETWORKS, INC. AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN

The Company’s stockholders are being asked to approve the amendment and restatement of the Extreme Networks, Inc. 2013 Amended and Restated Equity Incentive Plan (which we refer to in this Proposal as the Amended Equity Plan), which would increase the number of shares issuable under the current 2013 Plan (which we refer to in this Proposal as the “Current Equity Plan”) by 7,900,000 shares, which, if granted only in the form of RSUs or other full value awards, would allow for the issuance of only up to approximately 5,266,667 shares. On November 20, 2013, the Board first adopted the Extreme Networks, Inc. 2013 Equity Incentive Plan, which was subsequently amended and restated effective November 9, 2017 and then again November 7, 2019. On September 6, 2021, our Board approved the Amended Equity Plan, the amendment and restatement of the Current Equity Plan, subject to stockholder approval.

As of September 1, 2021, the Current Equity Plan had approximately 7,108,113 shares remaining available for issuance pursuant to awards granted under the plan. We consider the addition of 7,900,000 shares to the Amended Equity Plan to be very important to the future of the Company. We believe that the current share reserve in the Current Equity Plan will not be sufficient to provide meaningful equity incentives to our employees so that we may continue to compete successfully for talent and to achieve our corporate goals.

Our Board is requesting this vote by the stockholders to approve the increase of 7,900,000 shares available for issuance under the Amended Equity Plan. In addition, we are asking you to approve other amendments to the Current Equity Plan as described in more detail below. If the stockholders do not approve the Amended Equity Plan, the Amended Equity Plan will not become effective, the Current Equity Plan will continue in effect pursuant to its current terms and conditions, and we may continue to grant awards under the Current Equity Plan, subject to its terms, conditions and limitations. Stockholders should carefully read this proxy statement in its entirety for more detailed information concerning the proposal to approve the Amended Equity Plan. Additionally, stockholders are directed to the full Amended Equity Plan, which is attached as Exhibit C to this proxy statement. Any summary of the Amended Equity Plan is qualified in its entirety by reference to the Amended Equity Plan.

Overview

We operate in a challenging marketplace in which our success depends to a great extent on our ability to attract and retain employees, directors and other service providers of the highest caliber. One of the tools our Board regards as essential in addressing these challenges is a competitive equity incentive program. Our stock incentive program provides a range of incentive tools and sufficient flexibility to permit the Compensation Committee of the Board to implement them in ways that will make the most effective use of the shares our stockholders authorize for incentive purposes. We intend to use these incentives to attract new key employees and to continue to retain existing key employees, directors and other service providers for the long-term benefit of the Company and its stockholders.

The Current Equity Plan allows the Company to grant equity compensation awards to employees (including officers), consultants and non-employee directors of the Company and the employees and consultants of its parent or subsidiaries. The Current Equity Plan permits the Company to grant service-based awards and performance-based awards. The Current Equity Plan provides that 33,300,000 shares may be issued under the plan (which includes 6,628,643 shares under the Predecessor Plan (as defined in the Current Equity Plan)), and the plan includes a fungible share reserve whereby each share subject to a full value award granted under the Current Equity Plan results in decreasing the Current Equity Plan share reserve by 1.5 shares. Full value awards are equity awards other than options, stock appreciation rights (“SARs”) or stock purchase rights (or other awards under which the Company receives the fair market value of the shares subject to the award), and include restricted stock and RSUs.

As of September 1, 2021, the Current Equity Plan had approximately 7,108,113 shares remaining available for issuance pursuant to awards granted under the plan. The Company is asking its stockholders to approve adding 7,900,000 shares of our common stock to those reserved for issuance under the Amended Equity Plan, which would be reduced to 5,266,667shares of our common stock if all were issued pursuant to full-value awards.

If the Company’s stockholders do not approve this proposal, the Company may not be able to continue to offer competitive equity packages to retain current employees and employees hired in fiscal year 2022 and later. We would also lose a major tool in aligning the interests of our executives and employees with those of the Company’s stockholders. In the event the Company’s

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stockholders do not approve the Amended Equity Plan to increase the share reserve, the proposed amendment will not take effect and the Current Equity Plan will continue to be administered in its current form without any increase in the Current Equity Plan’s share reserve and without implementation of the other terms described above.

Proposed Amendments to the Current Equity Plan

The Amended Equity Plan implements the following changes to the Current Equity Plan:

 

 

 

Adds 7,900,000 shares of our common stock to those reserved for issuance under the Current Equity Plan, which would be reduced to 5,266,667 shares of our common stock if all were issued pursuant to full-value awards;

 

 

Makes certain clarifying changes, including to the Current Equity Plan’s one-year minimum vesting provisions, and updates the Current Equity Plan’s provisions relating to “qualified performance-based compensation” as previously defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) in light of the Tax Cuts and Jobs Act of 2017.

 

Why the Company Stockholders Should Vote for the Amended Equity Plan

The following summarizes some of the reasons why we believe the Company’s stockholders should approve this proposal.

Equity Compensation Awards Allow the Company to Implement its Philosophy of Pay for Performance - The Company uses a mix of service-based awards and performance-based awards for its executive officers and other employees as discussed in more detail in the Compensation Discussion and Analysis. The performance-based awards are eligible to vest only if certain performance milestones are achieved. If the Company’s stockholders approve the Amended Equity Plan, the Company will be able to continue to use equity awards to emphasize the achievement of important business objectives of the Company and, consistent with its pay-for-performance compensation philosophy, directly link executive pay with performance.

We believe that our employees are the Company’s most valuable asset. Accordingly, the approval of the Amended Equity Plan is in the best interest of our stockholders, as equity awards granted under the Amended Equity Plan will help the Company to:

 

 

 

attract, motivate, and retain talented employees, consultants and non-employee directors;

 

 

 

align employee and stockholder interests;

 

 

 

link employee compensation with company performance; and

 

 

 

maintain a culture based on employee stock ownership.

If the Company’s stockholders do not approve the Amended Equity Plan, the Company’s growth could be significantly hampered and its ability to operate its business could be adversely affected. If we do not have sufficient shares in the plan to provide meaningful equity incentives, the Company may be compelled to instead offer additional cash-based incentives to compete for talent, which could have a significant effect upon its quarterly results of operations, its cash flow, and its balance sheet. Moreover, this would not be competitive with most other technology companies where equity compensation is an integral part of the compensation offered by these firms. The Company’s success over the next few years will depend heavily on its ability to attract and retain high caliber employees, consultants and board members. The ability to grant equity awards is a necessary and powerful recruiting and retention tool for the Company to hire and motivate the quality personnel it needs to move its business forward.

If we do not increase the shares available for issuance under our equity plan, we would expect to, based on historical usage rates of shares under our Current Equity Plan, exhaust the share limit under the Current Equity Plan by in or around August 2022, at which time we would lose an important compensation tool aligned with stockholder interests to attract, motivate and retain highly qualified talent.

Based on historical usage, we estimate that the shares reserved for issuance under the Amended Equity Plan would be sufficient for approximately 2 years of awards, assuming we continue to grant awards consistent with our historical usage and current practices, as reflected in our three-year average burn rate, and noting that future circumstances may require us to change our current equity grant practices. Based on the foregoing, we expect that we would require an additional increase to the share reserve under the Amended Equity Plan in approximately 2 years, noting that we may require an increase to the share reserve under the Amended Equity Plan earlier or later than2 years depending on factors such as our future equity grant practices, the future price of our shares and our hiring activity during the next few years, which we cannot predict with any degree of certainty at this time.

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The total aggregate equity value of the additional authorized shares being requested under the Amended Equity Plan (above the shares remaining available for issuance under the Current Equity Plan), based on the closing price for one common share on September 1, 2021 is $85,478,000.

We Manage Our Equity Incentive Program Thoughtfully - We manage our long-term stockholder dilution by limiting the number of equity awards granted annually and limiting what we grant to what we believe is an appropriate amount of equity necessary to attract, reward and retain employees.

As of September 1, 2021, equity awards outstanding under all of the Company’s equity plans (including the Current Equity Plan) were approximately 1,644,702 stock options, no unvested shares of restricted stock, 8,077,780 RSUs and 1,644,788 performance based restricted stock units (“PSUs”). As of September 1, 2021, we had 129,684,927 shares outstanding. Accordingly, our approximately 9,121,528 outstanding awards (not including awards under our employee stock purchase plan) plus 2,597,475 shares available for future grant under the Company’s equity plans (not including under our employee stock purchase plan) as of September 1, 2021 represented approximately 11.07% of our common stock outstanding (commonly referred to as the “overhang”).

As of September 1, 2021, the average weighted per share exercise price of all outstanding stock options (whether granted under the Current Equity Plan, under equity plans assumed in connection with corporate transactions or under our previous equity plans) was $5.24 and the weighted average remaining contractual term was 3.55 years.

The table below sets forth additional historical overhang and burn rate metrics, with the burn rates below reflecting a three-year simple average burn rate of 7.77% and a three-year simple average net burn rate of 4.58% over fiscal years 2019, 2020 and 2021.

 

FY2019

 

FY2020

 

FY2021

 

Overhang (1)

 

15.5

%

 

19.5

%

 

13.8

%

Burn Rate (2)

 

5.61

%

 

9.55

%

 

8.14

%

Net Burn Rate (3)

 

5.17

%

 

4.94

%

 

3.63

%

 

(1)

Overhang is calculated by dividing the total shares underlying all outstanding equity awards (and shares available for grant but not outstanding) as of the end of each fiscal year by the Company’s total number of shares outstanding as of the end of each fiscal year. This calculation includes all outstanding options (whether or not “in the money”) and full value awards that may or may not vest because they are not yet earned or because performance criteria may not be achieved.

(2)

Burn rate is calculated by dividing the number of shares subject to equity awards granted during the fiscal year by the weighted average ordinary shares outstanding during the applicable year.

(3)

Burn rate is calculated by dividing the number of shares subject to equity awards granted during the fiscal year by the weighted average ordinary shares outstanding during the applicable year. Net burn rate also adjusts for cancellations and forfeitures.

 

Performance-Based Full Value Award Activity(1)

 

 

FY2019

 

 

FY2020

 

 

FY2021

 

Granted (2)

 

 

635

 

 

 

0

 

 

 

475

 

Earned (3)

 

342

 

 

 

 

 

 

 

 

0

 

Earned and Released

 

342

 

 

 

0

 

 

 

0

 

Earned and Unreleased

 

0

 

 

 

 

 

 

 

 

0

 

Earned and Cancelled/Forfeited

 

25

 

 

 

 

1,571

 

 

 

484

 

Net (4)

 

317

 

 

 

 

-1,571

 

 

 

-9

 

 

(1)

In thousands.

(2)

Represents performance-based restricted stock units granted in the relevant fiscal year.

(3)

For purposes of this table shares are earned when the performance criteria are satisfied. Earned shares may be subject to additional service-based vesting requirements.

(4)

For purposes of this table, the net shares is the difference between the shares earned in a fiscal year and the shares cancelled/forfeited in a fiscal year.

 

 

 

 

 

 

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Performance-Based Option Award Activity(1)

 

 

FY2019

 

FY2020

 

 

FY2021

 

Granted (2)

 

852

 

 

0

 

 

 

0

 

Earned (3)

 

0

 

 

0

 

 

 

0

 

Cancelled/Forfeited

 

0

 

 

 

177

 

 

 

53

 

Net (4)

 

852

 

 

-177

 

 

 

-53

 

 

(1)

In thousands.

(2)

Represents performance-based option awards granted in the relevant fiscal year.

(3)

For purposes of this table, options are earned when the performance criteria are satisfied. Earned options may be subject to additional service-based vesting requirements.

(4)

For purposes of this table, the net options is the difference between the options earned in a fiscal year and the options cancelled/forfeited in a fiscal year.

Service-Based Full Value Award Activity(1)

 

 

FY2019

 

 

FY2020

 

 

FY2021

 

Granted (2)

 

 

4,069

 

 

 

 

7,128

 

 

 

 

5,892

 

Cancelled/Forfeited

 

831

 

 

 

 

1,890

 

 

 

731

 

Net (3)

 

 

3,238

 

 

 

 

5,238

 

 

 

 

5,161

 

 

(1)

In thousands.

(2)

Represents service-based RSUs granted in the relevant fiscal year and does not include PSUs.

(3)

For purposes of this table, the net shares is the difference between the shares granted in a fiscal year and the shares cancelled/forfeited in a fiscal year.

Service-Based Option Award Activity(1)

 

 

FY2019

 

FY2020

 

FY2021

Granted (2)

 

0

 

 

637

 

 

0

Cancelled/Forfeited

 

86

 

 

40

 

 

603

Net (3)

 

-86

 

 

597

 

 

-603

 

(1)

In thousands.

(2)

Represents service-based option awards granted in the relevant fiscal year and does not include performance-based options.

(3)

For purposes of this table, the net options are the difference between the options granted in a fiscal year and the options cancelled/forfeited in a fiscal year.

The Amended Equity Plan Reflects Compensation and Governance Best Practices - The Amended Equity Plan continues a broad range of compensation and governance best practices as under the Current Equity Plan, with some of the key features as follows:

 

 

 

No Increase to Shares Available for Issuance without Stockholder Approval. The total number of shares of common stock that may be issued under the plan (other than in connection with adjustments in connection with certain corporate reorganizations and other events) may not be increased without stockholder approval.

 

 

 

No Single-Trigger Vesting of Awards. Other than with respect to awards held by non-employee directors, the Amended Equity Plan does not provide for single-trigger accelerated vesting provisions for changes in control unless awards are not assumed or continued by the surviving entity.

 

 

 

No Repricing of Options and Stock Appreciation Rights. Where the exercise price of an option or stock appreciation right is greater than the fair market value of a share of our common stock, such award may not be repriced, replaced or regranted through cancellation or modification to reduce the applicable exercise price without stockholder approval.

 

 

 

Limitations on Dividend Payments on Performance Awards. Dividends and dividend equivalents are subject to the same vesting conditions as the shares subject to the underlying award and are not paid unless and until such conditions are met.

 

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No In-the-Money Option or Stock Appreciation Right Grants. Options and SARs may not be granted with an exercise or base price less than 100% of the fair market value of our common stock on the date of grant.

 

 

 

Limitations on Share Recycling. Upon the exercise of a stock appreciation right or net exercise of an option, the number of shares available under the Amended Equity Plan will be reduced by the gross number of shares for which the award is exercised. In addition, shares tendered or withheld by the Company to satisfy any tax withholding obligation with respect to options or SARs may not be added back to the share reserve, as would considered “liberal share counting” practices as defined by Institutional Shareholder Services.

 

 

 

No Evergreen Feature. The Amended Equity Plan does not provide for an annual automatic increase in the share reserve.

 

 

 

Independent Administration. The Compensation Committee of our board of directors, which consists of two or more non-employee independent directors, generally will administer the Amended Equity Plan if it is approved by stockholders.

New Plan Benefits

Except as provided under the Company’s director compensation program with respect to annual RSU grants to our non-employee directors, the actual number of awards (if any) that an executive officer, employee or consultant of the Company or its parent or subsidiaries or a non-employee director of the Company may receive under the Amended Equity Plan is at the discretion of the Compensation Committee and therefore cannot be determined in advance.

The following table sets forth the awards to be received under the Amended Equity Plan, to the extent currently determinable:

Name and Position

Dollar Value ($)

 

 

Number of Shares

 

 

 

 

Underlying Restricted

 

 

 

 

Stock Unit Grants

Edward B. Meyercord, President, Chief Executive Officer and Director

 

 

 

 

Remi Thomas, Executive Vice President and Chief Financial Officer

 

 

 

 

Joe Vitalone, Chief Revenue Officer

 

 

 

 

Executive Group

 

 

 

 

All Directors Who Are Not Executive Officers as a Group

 

 

1,140,000

 

 

 

(1)

Non-Executive Officer Employees as a Group

 

 

 

 

(1)

Under the Company’s director compensation program, on the date of the 2019 Annual Meeting of our stockholders, each non-employee director continuing service with the Company after the meeting is granted an annual award of restricted stock units, or RSUs, determined by dividing $190,000 by the price of the Company’s common stock at the close of business on the Nasdaq Global Select Market on the date of the Annual Meeting, rounded down to the nearest whole RSU.

Summary Description of the Amended Equity Plan

The following summary of the Amended Equity Plan is qualified in its entirety by the specific language of the Amended Equity Plan, a copy of which is attached to this proxy statement as Exhibit C.

General - The purpose of the Amended Equity Plan is to advance the interests of the Company and its stockholders by providing an incentive program that will enable the Company to attract and retain employees, consultants and directors and to provide them with an equity interest in the growth and profitability of the Company. These incentives may be provided through the grant of stock options, SARs, restricted stock purchase rights, restricted stock bonuses, RSUs, performance shares, PSUs, and other share-based awards and cash-based awards.

Authorized Shares - The maximum aggregate number of shares authorized for issuance under the Amended Equity Plan is the sum of 41,200,000 shares plus up to 6,628,643 additional shares, comprised of the number of shares remaining available for grant under the Company’s 2005 Equity Incentive Plan immediately prior to its termination and the number of shares subject to any option or other award outstanding under the Company’s 2005 Equity Incentive Plan or the Enterasys Inc. 2013 Stock Plan that expires or is forfeited for any reason after November 20, 2013, the date the plan was originally established. In addition, to comply with applicable tax rules, the Amended Equity Plan also limits to 41,200,000 the number of shares that may be issued upon the exercise of incentive stock options granted under the Amended Equity Plan.

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Share Counting - Each share subject to a stock option, stock appreciation right, or other award that requires the participant to purchase shares for their fair market value determined at the time of grant will reduce the number of shares remaining available for grant under the Amended Equity Plan by one share. However, each share subject to a “full value” award (i.e., an award settled in stock, other than an option, stock appreciation right, or other award that requires the participant to purchase shares for their fair market value determined at grant) will reduce the number of shares remaining available for grant under the Amended Equity Plan by 1.5 shares.

If any award granted under the Amended Equity Plan expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company for not more than the participant’s purchase price, any such shares reacquired or subject to a terminated award will again become available for issuance under the Amended Equity Plan.

Shares will not be treated as having been issued under the Amended Equity Plan and will therefore not reduce the number of shares available for issuance to the extent an award is settled in cash. Shares that are withheld or reacquired by the Company in satisfaction of a tax withholding obligation in connection with an option or a stock appreciation right or that are tendered in payment of the exercise price of an option will not be made available for new awards under the Amended Equity Plan. Upon the exercise of a stock appreciation right or net-exercise of an option, the number of shares available under the Amended Equity Plan will be reduced by the gross number of shares for which the award is exercised.

Adjustments for Capital Structure Changes - Appropriate and proportionate adjustments will be made to the number of shares authorized under the Amended Equity Plan and to outstanding awards in the event of any change in our common stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock (excluding regular, periodic cash dividends) that has a material effect on the fair market value of our common stock. In such circumstances, the Compensation Committee also has the discretion under the Amended Equity Plan to adjust other terms of outstanding awards as it deems appropriate.

Nonemployee Director Award Limits - The sum of the grant date fair value of all equity-based awards and any cash compensation provided to a service provider as compensation for services as a non-employee director may not exceed $750,000 for each calendar year.

Administration - The Amended Equity Plan generally will be administered by the Compensation Committee, although the Board retains the right to appoint another of its committees to administer the Amended Equity Plan or to administer the Amended Equity Plan directly. For purposes of this summary, the term “Compensation Committee” will refer to either such duly appointed committee or the Board of Directors. Subject to the provisions of the Amended Equity Plan, the Compensation Committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of awards, and all of their terms and conditions. The Compensation Committee may, except as provided by the Amended Equity Plan, amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award.

The Amended Equity Plan provides, subject to certain limitations, for indemnification by the Company of any director, officer or employee against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the Amended Equity Plan. All awards granted under the Amended Equity Plan will be evidenced by a written or digitally signed agreement between the Company and the participant specifying the terms and conditions of the award, consistent with the requirements of the Amended Equity Plan. The Compensation Committee will interpret the Amended Equity Plan and awards granted under it, and all determinations of the Compensation Committee generally will be final and binding on all persons having an interest in the Amended Equity Plan or any award.

Prohibition of Option and SAR Repricing - The Amended Equity Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our stockholders, the Compensation Committee may not provide for any of the following with respect to underwater options or stock appreciation rights: (1) either the cancellation of such outstanding options or stock appreciation rights in exchange for the grant of new options or stock appreciation rights at a lower exercise price or the amendment of outstanding options or stock appreciation rights to reduce the exercise price, (2) the issuance of new full value awards in exchange for the cancellation of such outstanding options or stock appreciation rights, or (3) the cancellation of such outstanding options or stock appreciation rights in exchange for payments in cash.

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Eligibility - Awards may be granted to employees, directors and consultants of the Company or any present or future parent or subsidiary corporation or other affiliated entity of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of September 1, 2021, we had approximately 2,741 employees worldwide (including three current executive officers), 140 consultants and six non-employee directors who would be eligible to receive awards under the Amended Equity Plan.

Vesting - Awards under the Amended Equity Plan granted on or after November 9, 2017 (excluding any substitute grants made in connection with a merger or other corporate transaction) will vest no earlier than the first anniversary of the date the award is granted. However, the Compensation Committee may provide that such vesting restrictions lapse or are waived upon the participant’s death, disability, termination of service or the consummation of a change of control. In addition, the Compensation Committee may grant awards that will result in the issuance of up to 5% of the shares reserved for issuance under the Amended Equity Plan without regard to the minimum vesting provisions and awards to non-employee directors may vest on the earlier of the first anniversary of the date of grant or the next annual meeting of stockholders (provided that such vesting period may not be less than 50 weeks after grant).

Stock Options - The Compensation Committee may grant non-statutory stock options, incentive stock options within the meaning of Section 422 of the Code, or any combination of these. The exercise price of each option may not be less than 100% of the fair market value of a share of our common stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a “10% Stockholder”) must have an exercise price equal to at least 110% of the fair market value of a share of common stock on the date of grant.

The Amended Equity Plan provides that the option exercise price may be paid in cash, by check, or cash equivalent, or if permitted by the Compensation Committee, by means of a broker-assisted cashless exercise; by means of a net-exercise procedure; to the extent legally permitted, by tender to the Company of shares of common stock owned by the participant having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Compensation Committee; or by any combination of these. Nevertheless, the Compensation Committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the participant has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the participant’s surrender of a portion of the option shares to the Company.

Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Compensation Committee. The maximum term of any option granted under the Amended Equity Plan is seven years, provided that an incentive stock option granted to a 10% Stockholder must have a term not exceeding five years. Unless otherwise permitted by the Compensation Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date, and provided further that an option will terminate immediately upon a participant’s termination for cause (as defined by the Amended Equity Plan) or if the participant engages in any act constituting cause after termination, during any period in which any option otherwise would remain exercisable.

Options are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant. However, an option may be assigned or transferred to the extent permitted by the Compensation Committee and set forth in the applicable award agreement. In the case of an incentive stock option, such assignment or transfer is only permitted to the extent that the transfer will not terminate its tax qualification.

Stock Appreciation Rights - The Compensation Committee may grant stock appreciation rights either in tandem with a related option (a “Tandem SAR”) or independently of any option (a “Freestanding SAR”). A Tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender of the option and the exercise of the related stock appreciation right. A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Compensation Committee. The exercise price of each stock appreciation right may not be less than 100% of the fair market value of a share of our common stock on the date of grant.

Upon the exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares. Payment of this amount upon the exercise of a Tandem SAR may be made only in shares of common stock whose fair

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market value on the exercise date equals the payment amount. At the Compensation Committee’s discretion, payment of this amount upon the exercise of a Freestanding SAR may be made in cash or shares of common stock. The maximum term of any stock appreciation right granted under the Amended Equity Plan is seven years.

Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant. If permitted by the Compensation Committee, a Tandem SAR related to a non-statutory stock option and a Freestanding SAR may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Compensation Committee and set forth in the applicable award agreement. Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.

Restricted Stock Awards - The Compensation Committee may grant restricted stock awards under the Amended Equity Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, in which stock is issued in consideration for services to the Company rendered by the participant. The Compensation Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Compensation Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Shares acquired pursuant to a restricted stock award may not be transferred by the participant until vested. Unless otherwise provided by the Compensation Committee, (i) a participant will forfeit any shares of restricted stock acquired from a restricted stock bonus as to which the vesting restrictions have not lapsed prior to the participant’s termination of service and (ii) the Company will have the right to repurchase from the participant, for the purchase price paid by the participant, any restricted stock acquired by the participant pursuant to a restricted stock purchase right as to which the vesting restrictions have not lapsed prior to the participant’s termination of service. Unless otherwise determined by the Compensation Committee, participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends may not be paid until the applicable restricted stock vests.

Restricted Stock Units - The Compensation Committee may grant RSUs under the Amended Equity Plan, which represent rights to receive shares of our common stock at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of RSUs or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant’s services to the Company. The Compensation Committee may grant RSU awards subject to vesting conditions based on such service or performance criteria as the Compensation Committee specifies and as set forth the in the applicable award agreement. Unless otherwise provided by the Compensation Committee, a participant will forfeit any RSUs which have not vested prior to the participant’s termination of service. Participants have no voting rights or rights to receive cash dividends with respect to RSU awards until shares of common stock are issued in settlement of such awards. However, the Compensation Committee may grant RSUs that entitle their holders to dividend equivalent rights, which are rights to receive cash or additional RSUs whose value is equal to any cash dividends the Company pays. Dividend equivalents may accrue on RSUs, but shall not be payable unless and until the applicable award vests.

Performance Awards - The Compensation Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Compensation Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units, which consist of unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock in the case of performance shares and a monetary value established by the Compensation Committee at the time of grant in the case of performance units. Each performance award agreement will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of restricted stock that are subject to additional vesting) or any combination of these.

The Compensation Committee, in its discretion, may base performance goals on one or more of the following measures (or such other measure established by the Compensation Committee): revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: share-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; total stockholder return, employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expense; completion of an identified special project; completion of a joint venture or other corporate transaction and new customer acquisition.

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The target levels with respect to these performance measures may be expressed on an absolute basis or relative to an index, budget or other standard specified by the Compensation Committee. The degree of attainment of performance measures will be calculated prior to the accrual or payment of any performance award for the same performance period, in accordance with generally accepted accounting principles (GAAP), if applicable, or any other methodology established by the Committee prior to the grant of the performance award, , excluding the effect (whether positive or negative) of changes in accounting standards or any extraordinary, unusual or nonrecurring item occurring after the establishment of the performance goals applicable to a performance award.

In its discretion, the Compensation Committee may provide for a participant awarded performance shares to receive dividend equivalent rights with respect to cash dividends paid on our common stock to the extent of the performance shares that are earned and become nonforfeitable. The Compensation Committee may provide for performance award payments in lump sums or installments.

No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.

Under the Amended Equity Plan, all provisions governing an award granted prior to November 2, 2017 and outstanding as of the effective date of the Amended Equity Plan that satisfies the requirements of Section 162(m) of the Code for certain performance-based compensation paid to “covered employees” will continue in effect, notwithstanding any elimination from the Amended Equity Plan.

Cash-Based Awards and Other Stock-Based Awards - The Compensation Committee may grant cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Compensation Committee determines. Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a number of shares or units based on shares or other equity-related awards. Such awards may be subject to vesting conditions based on continued performance of service or subject to the attainment of one or more performance goals similar to those described above in connection with performance awards. Settlement of awards may be in cash, other property or shares of common stock, as determined by the Compensation Committee. A participant will have no voting rights with respect to any such award unless and until shares are issued pursuant to the award. The Compensation Committee may grant dividend equivalent rights with respect to other stock-based awards. Dividend equivalents may accrue on stock-based awards, but shall not be payable unless and until the applicable award vests. Dividend equivalents are not payable with respect to options or SARs. The effect on such awards of the participant’s termination of service will be determined by the Compensation Committee and set forth in the participant’s award agreement.

Change in Control - Unless otherwise defined in a participant’s award or other agreement with the Company, the Amended Equity Plan provides that a “Change in Control” generally occurs upon (a) a person or entity (with certain exceptions described in the Amended Equity Plan) becoming the direct or indirect beneficial owner of more than 50% by voting power or fair market value of the Company’s voting stock; (b) stockholder approval of a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the combined voting power of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the combined voting power of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).

The Amended Equity Plan does not provide for any automatic single trigger acceleration upon a Change in Control, other than with respect to awards held by non-employee directors. Instead, if a Change in Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. If so determined by the Compensation Committee, stock-based awards will be deemed assumed if, for each share subject to the award prior to the Change in Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change in Control. Any awards which are not assumed or continued in connection with a Change in Control will vest in full effective immediately prior to the Change in Control, and, except as otherwise provided in an award agreement, for each such award that vests subject to the attainment of one or more performance goals, the applicable performance goals will be deemed achieved at the greater of target or actual performance (with the performance goals equitably adjusted to reflect a shortened performance period ending as of the Change in Control). The Compensation Committee may also provide in the grant of any award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement of each or any outstanding award or portion thereof and shares acquired pursuant thereto upon the termination of a participant’s service in connection with a Change in Control. Under the CiC Plan (as defined below), upon the occurrence of a Change in Control, equity awards held by the named executive officers that are not assumed or

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otherwise continued by an acquirer will accelerate in full immediately prior to the Change in Control, with each performance-based equity award deemed achieved at the greater of target or actual achievement (with performance goals equitably adjusted if necessary to reflect a truncated performance period) unless otherwise provided in an applicable award agreement. The vesting of all awards held by non-employee directors will be accelerated in full upon a Change in Control pursuant to our director compensation program.

Awards Subject to Section 409A of the Code - Certain awards granted under the Amended Equity Plan may be deemed to constitute “deferred compensation” within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and the regulations and other administrative guidance issued pursuant to Section 409A. Any such awards will be required to comply with the requirements of Section 409A. Notwithstanding any provision of the Amended Equity Plan to the contrary, the Compensation Committee is authorized, in its sole discretion and without the consent of any participant, to amend the Amended Equity Plan or any award agreement as it deems necessary or advisable to comply with Section 409A.

Amendment, Suspension or Termination - The Amended Equity Plan will continue in effect until its termination by the Compensation Committee, provided that no awards may be granted under the Amended Equity Plan following the tenth anniversary of the Amended Equity Plan’s effective date, which will be the date on which it is approved by the stockholders. The Compensation Committee may amend, suspend or terminate the Amended Equity Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the Amended Equity Plan, change the class of persons eligible to receive incentive stock options or require stockholder approval under any applicable law. No amendment, suspension or termination of the Amended Equity Plan may affect any outstanding award unless expressly provided by the Compensation Committee, and, in any event, may not have a materially adverse effect on an outstanding award without the consent of the participant unless necessary to comply with any applicable law, regulation or rule, including, but not limited to, Section 409A of the Code.

Withholding - As a condition to the issuance or delivery of stock or payment of other compensation pursuant to the exercise or lapse of restrictions on any award, the Company requires participants to discharge all applicable withholding tax obligations. Shares held by or to be issued to a participant may be used to discharge statutory tax withholding obligations at up to the applicable maximum statutory tax withholding rate.

Summary of U.S. Federal Income Tax Consequences - The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Amended Equity Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.

Incentive Stock Options - A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If a participant satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes. If a participant disposes of shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.

In general, the difference between the option exercise price and the fair market value of the shares on the date of exercise of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.

Non-statutory Stock Options - Options not designated or qualifying as incentive stock options are non-statutory stock options having no special tax status. A participant generally recognizes no taxable income upon receipt of such an option. Upon exercising a non-statutory stock option, the participant normally recognizes ordinary income equal to the difference between the

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exercise price paid and the fair market value of the shares on the date when the option is exercised. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a non-statutory stock option, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the exercise date, will be taxed as capital gain or loss. We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a non-statutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.

Stock Appreciation Rights - A Participant recognizes no taxable income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock - A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of the fair market value of the shares on the “determination date” over the price paid, if any, for such shares. The “determination date” is the date on which the participant acquires the shares unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture (e.g., when they become vested). If the determination date follows the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to designate the date of acquisition as the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based AwardsA participant generally will recognize no income upon the grant of an RSU, performance share, PSU, cash-based or other stock-based award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of the shares received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Any further gain or loss will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

Section 162(m) of the Code - In general, under Section 162(m) of the Code, publicly-held corporations like the Company may only take income tax deductions in respect of total compensation (including base salary, annual bonus, stock option exercises and non-qualified benefits) paid to certain executive officers of up to $1.0 million in any taxable year of the corporation. Prior to the Tax Cuts and Jobs Act of 2017, the deduction limit did not apply to certain “qualified performance-based compensation.” However, following the effectiveness of the new rules, which generally apply to taxable years beginning after December 31, 2017, such “qualified performance-based compensation” exception is no longer applicable unless provided pursuant to a written binding contract in effect on November 2, 2017 that is not modified in any material respect after that date, which may include certain equity grants made under the Current Equity Plan.

Tax Consequences to the CompanyIn general, the Company should be entitled to a deduction when a participant recognizes compensation income; however, any such deduction will be subject to the limitations of Section 162(m) of the Code as described above.

Vote Required and Board of Directors Recommendation

Approval of this proposal requires the affirmative vote of a majority of the votes cast for or against this proposal, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the 2021 Annual Meeting, present in person or represented by proxy. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the vote on this proposal.

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The Board believes that the proposed adoption of the Amended Equity Plan is in the best interests of the Company and its stockholders for the reasons stated above.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDED AND RESTATED EXTREME NETWORKS, INC. 2013 EQUITY INCENTIVE PLAN.

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PROPOSAL SEVEN:

SHAREHOLDER PROPOSAL REGARDING SIMPLE MAJORITY VOTING

The Company has been advised that a stockholder, Kenneth Steiner, 14 Stoner Ave., 2M, Great Neck, New York  11021, the beneficial owner of no fewer than 500 shares of the Company’s common stock since January 1, 2020, intends to present the following stockholder proposal at the Annual Meeting through his designee, John Chevedden of 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278.  If the stockholder (or his “qualified representative”) is present at the Annual Meeting and properly submits the proposal for a vote, then the stockholder proposal will be voted upon at the Annual Meeting.  In accordance with federal securities laws, the stockholder proposal is presented below as submitted by the stockholder and is quoted verbatim.  The Company disclaims all responsibility for the content of the proposal and the supporting statement, including other sources referenced in the supporting statement:

Proposal 7 – Simple Majority Vote

RESOLVED, Shareholders request that our board take each step necessary so that each shareholder voting requirement in our charter and bylaws (that is explicit or implicit due to default to state law) that calls for a greater than simple majority vote be eliminated, and replaced by a requirement for a majority of the votes cast for and against applicable proposals, or a simple majority in compliance with applicable laws. If necessary this means the closest standard to a majority of the votes cast for and against such proposals consistent with applicable laws.

Shareholders are willing to pay a premium for shares of companies that have excellent corporate governance.  Supermajority voting requirements have been found to be one of 6 entrenching mechanisms that are negatively related to company performance according to “What Matters in Corporate Governance” by Lucien Bebchuk, Alma Cohen and Allen Ferrell of the Harvard Law School.  Supermajority requirements are used to block initiatives supported by most shareowners but opposed by status quo management.

This proposal topic won from 74% to 88% support at Weyerhaeuser, Alcoa, Waste Management, Goldman Sachs, FirstEnergy, and Macy’s. These votes would have been higher than 74% to 88% if more shareholders had access to independent proxy voting advice.  The proponents of these proposals included Ray T. Chevedden and William Steiner.  This proposal topic also received overwhelming 99%-support at the 2019 Fortive annual meeting.

This proposal topic is more important after shareholder support of management in 2019 showed weakness.  The Amendment and Restatement of the Company’s 2013 Equity Incentive Plan was rejected by 30% of shares.  The say on management pay proposal was rejected by 11% of shares when many companies have a rejection rate of 5%

Currently a 2%-minority can frustrate the will of our 66%-shareholder majority in an election with 67% of shares casting ballots.  In other words a 2%-minority could have the power to prevent shareholders from improving the governance of our company.  Also a 67% supermajority can amount to an 85% supermajority of the shares that normally cast ballots at the annual meeting.  A competitive management has no need to hide behind an 85% supermajority vote barrier.

Currently the role of shareholders is downsized because management can simply ignore an overwhelming 66%-vote of shareholders.

In anticipation of overwhelming shareholder support for this proposal topic the Governance Committee Chair could expedite adoption of this proposal topic by giving shareholders an opportunity to vote on a binding management proposal on this topic at our 2021 annual meeting.  Hence adoption could take place in 2021 instead of 2022.

 

Please vote yes:

Simple Majority Vote – Proposal 7

 

 


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Vote Required and Board of Directors Recommendation

Approval of Proposal No. 7 requires the requires the affirmative vote of a majority of the votes cast for or against the proposal at the Annual Meeting, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the proposal.

The Board has carefully considered this proposal and concluded that its adoption is unnecessary and not in the best interests of our stockholders.  Accordingly, the Board unanimously recommends a vote AGAINST this proposal for the reasons outlined below.

Extreme Network has an Excellent Corporate Governance Structure - Our Board is firmly committed to excellence in corporate governance and has adopted a wide range of practices and procedures that promote effective Board oversight. Our Board believes that the corporate governance concerns raised by the proponent are misplaced. Some of the Company’s progressive governance rules and programs include the following:

 

 

 

directors are elected annually;

 

 

 

we have adopted a director resignation policy.  Pursuant to our Corporate Governance Guidelines, if an incumbent director fails to receive the affirmative vote of a majority of the votes cast at an election that is not a contested election, he or she shall tender his or her resignation to the Board;

 

 

 

six of our seven directors, or 86%, are “independent” under the standards adopted by the Securities and Exchange Commission and NASDAQ Rule 5605;

 

 

 

our current leadership structure separates the roles of the Chair of our Board and Chief Executive Officer;

 

 

 

the Board’s Audit Committee, Compensation Committee and Nominating, Governance and Social Responsibility Committee are each comprised solely of independent directors;

 

 

 

the Board’s Independent Chair chairs executive sessions of the independent directors, ensures that independent directors have adequate opportunities to meet without management present and ensures that independent directors have an opportunity to provide input on the agenda for meetings of the Board; and

 

 

 

the Board’s Nominating, Governance and Social Responsibility Committee regularly identifies, reviews, evaluates and nominates candidates to serve on the Board and assists the Board in its annual reviews of the performance of the Board and its committees.

 Benefit to Stockholders of Supermajority Provisions - Under a simple majority voting standard, where only a “majority of the votes cast for and against” is required, a few large stockholders could approve certain key actions and significantly alter the governance of the Company. For example, if a simple majority voting standard were adopted as proposed, and only 50.1% of the Company’s outstanding voting power is voted at a stockholder meeting, holders of just 25.1% of the Company’s outstanding voting power could approve fundamental changes to the Company’s corporate governance structure that could negatively impact the interests of all stockholders. As a result, a very small group of stockholders may act in their own self-interests, to the detriment of the Company’s other stockholders. Our Board of Directors believes that the few heightened voting standards currently established by the Governance Documents (as defined below) protect our stockholders against the self-interested actions of a few stockholders.

 Voting Thresholds - A majority of votes cast is already the voting standard for most matters voted upon by our stockholders under the Company’s Restated Certificate of Incorporation (the “Certificate”) and Amended and Restated Bylaws (the “Bylaws” and, together with the Certificate, the “Governance Documents”). Pursuant to the Bylaws, all matters shall be determined by a majority of the votes cast affirmatively or negatively on the matter, except where a different voting standard is required by law or the Governance Documents. A stricter voting standard is required only for the three matters outlined below:

 

 

 

The removal of directors. The removal of a director, with or without cause, requires the affirmative vote of a majority of the shares of our common stock issued and outstanding and entitled to vote at the meeting (the “Company’s outstanding voting power”);

 

 

 

Bylaws. The adoption, amendment or repeal of the Bylaws by the stockholders requires the affirmative vote of at least 66-2/3% of the Company’s outstanding voting power; and

 

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Certificate. The amendment or repeal of certain provisions of the Certificate requires the affirmative vote of at least 66-2/3% of the Company’s outstanding voting power.

 These voting standards are intended to comply with applicable law, to maximize long-term value for all stockholders and to provide protection for all stockholders against self-interested actions of one or a few large stockholders. Our Board of Directors believes that in these limited circumstances, the higher voting requirements are appropriate because certain fundamental matters should require the support of a broad consensus of the Company’s stockholders, rather than a simple majority of the votes cast at a meeting.  

Fiduciary Duty - The Board is subject to fiduciary duties under the law to act in a manner that it believes to be in the best interests of the Company and its stockholders. Stockholders, on the other hand, do not have the same fiduciary duty as the Company’s directors. As a result, a group of short-term stockholders may act in their own self-interests to the detriment of other stockholders. We believe that the few supermajority voting standards in our Governance Documents described above help to safeguard the long-term interests of the Company and its stockholders.

Protection Against Certain Takeovers - The supermajority voting provisions included in the Governance Documents further protect the Company’s stockholders by encouraging persons or firms making unsolicited takeover bids to negotiate directly with the Board. As noted above, the Board has a fiduciary duty under the law to act in a manner that it believes to be in the best interests of the Company and its stockholders. In addition, more than 80% of the Company’s Board members are independent under the standards adopted by Nasdaq. Supermajority voting requirements encourage potential acquirers to deal directly with the Board, which in turn enhances the Board’s ability to consider the long-term interests of all stockholders. The Company believes that its independent Board is in the best position to evaluate proposed offers, to consider alternatives, to protect stockholders against abusive tactics during a potential takeover process, and as appropriate, to negotiate the best possible return for all stockholders. Elimination of these supermajority provisions would make it more difficult for the Company’s independent, stockholder-elected Board to preserve and maximize value for all stockholders in the event of an unsolicited takeover bid.

Consistent with its current practice, our Board will continue to evaluate the future implementation of appropriate corporate governance measures. However, for the reasons discussed above, the Board of Directors does not believe that it is in the best interests of stockholders or the Company to implement the proposal’s request for the lowest possible voting thresholds on all matters on which stockholders vote.

OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “AGAINST” THE STOCKHOLDER PROPOSAL TO IMPLEMENT A SIMPLE MAJORITY VOTE.

 


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

 

The following table sets forth, as of September 13, 2021, certain information with respect to the beneficial ownership of our common stock by: (i) each stockholder known by us to be the beneficial owner of more than five percent of our common stock, (ii) each named executive officer, (iii) each of our directors and director nominees, and (iv) all executive officers and directors as a group.

Except as otherwise indicated, the address of each beneficial owner is c/o Extreme Networks, Inc., at 2121 RDU Center Drive, Suite 300 Morrisville, North Carolina 27560.

Name(1)

 

Amount of

Beneficial

Ownership(2)

 

 

Percent of Class (3)

 

Non-Employee Directors:

 

 

 

 

 

 

 

 

Charles P. Carinalli, Director(4)

 

 

415,831

 

 

*

 

Edward H. Kennedy, Director(4)

 

 

616,729

 

 

*

 

Raj Khanna, Director(4)

 

 

250,746

 

 

*

 

John C. Shoemaker, Director(4)

 

 

530,429

 

 

*

 

Kathleen M. Holmgren, Director(4)

 

 

179,143

 

 

*

 

Ingrid J. Burton, Director(4)

 

 

75,722

 

 

*

 

Named Executive Officers:

 

 

 

 

 

 

 

 

Edward B. Meyercord, President, Chief Executive Officer, and Director(5)

 

 

1,742,428

 

 

 

1.33

%

Remi Thomas, Executive Vice President, Chief Financial Officer

 

 

117,405

 

 

*

 

Joe Vitalone, Former Chief Revenue Officer (6)

 

 

91,957

 

 

*

 

All Executive Officers and Directors as a Group (9 persons)

 

 

4,020,390

 

 

 

3.07

%

 

 

 

 

 

 

 

 

 

5% Owners:

 

 

 

 

 

 

 

 

BlackRock Inc.(7)

 

 

17,612,593

 

 

 

13.47

%

55 East 52nd Street

 

 

 

 

 

 

 

 

New York, NY 10055

 

 

 

 

 

 

 

 

The Vanguard Group(8)

 

 

8,722,142

 

 

 

6.67

%

100 Vanguard Blvd.

 

 

 

 

 

 

 

 

Malvern, PA 19355

 

 

 

 

 

 

 

 

 

*

Less than 1 percent.

(1)

Except as otherwise indicated, 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 where applicable and to the information contained in the footnotes to this table.

(2)

Under the rules of the SEC, a person is deemed to be the beneficial owner of securities that can be acquired by the person within 60 days of September 13, 2021.

(3)

Calculated on the basis of 130,800,526 shares of common stock outstanding as of September 13, 2021, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days of September 13, 2021 are deemed to be outstanding for purposes of calculating that stockholder’s percentage of beneficial ownership. These shares are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person.

(4)

Includes 42,505 RSUs vesting with 60 days of September 13, 2021.

(5)

Includes 1,023,622 shares issuable pursuant to options exercisable within 60 days of September 13, 2021.

(6)

Includes 33,350 RSUs vesting with 60 days of September 13, 2021.

(7)

Based on information supplied by BlackRock, Inc. in a Schedule 13G/A filed with the SEC on January 26, 2021. BlackRock, Inc. is deemed to have sole voting power for 17,353,148 of these shares, shared voting power of 0 of these shares, sole dispositive power for 17,612,593 of these shares, and shared dispositive power of 0 of these shares. BlackRock Fund Advisors may beneficially own 5% or greater of the Company’s outstanding shares.

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(8)

Based on information supplied by The Vanguard Group in a Schedule 13G/A filed with the SEC on February 10, 2021. The Vanguard Group is deemed to have sole voting power for 0 of these shares, shared voting power for 283,420 of these shares, sole dispositive power for 8,340,703 of these shares, and shared dispositive power for 381,439 of these shares.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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EXECUTIVE COMPENSATION AND OTHER MATTERS

Executive Officers

Set forth below are the name, age, position of and biographical information about each of the Company’s executive officers, as of the date of this proxy statement.

 EDWARD B. MEYERCORD

Mr. Meyercord’s biography is included with the other members of the Board of Directors above.

RÉMI THOMAS

Mr. Thomas, age 53, was appointed Executive Vice President and Chief Financial Officer on November 26, 2018. He most recently was the Senior Vice President, Corporate Controller at CA Technologies from April 2017 until November 2018. Prior to that, from August 2015 until March 2017, he was the Vice President, Finance, Software at Hewlett Packard Enterprise. Prior to that, from January 2008 until August 2015, he held various positions at Alcatel-Lucent including Head of M&A and Corporate Development; Head of Result Delivery Office; Chief Financial Officer, Wireless Networks; Chief Financial Officer, Asia-Pacific; Chief Financial Officer, Enterprise Networks; and Senior Vice President, Investor Relations. Mr. Thomas has a Bachelor of Arts in Business Administration from the Toulouse Business School, France, and a Master of Business Administration from Warwick University, United Kingdom.

JOE VITALONE

Mr. Vitalone, age 59, joined the Company as Chief Revenue Officer on June 22, 2020. Recently, he served as Chief Sales and Marketing Officer Worldwide for Evolon from July 2019 through June 2020. From February 2016 through June 2018, he held the position of Chief Sales and Marketing Officer at Razberi Technologies. Prior to this, Mr. Vitalone served as Chief Marketing Officer for Arrow Systems Integration (now ConvergeOne) from May 2016 through December 2016. His experience from 1998 through 2015 includes senior sales management roles at Mitel, ShoreTel, LifeSize Communications (now Logitech), CoVi Technologies, and PictureTel (now Polycom). Mr. Vitalone holds a Bachelor of Arts degree in Public Relations from Western Kentucky University in Bowling Green, Kentucky.

Fiscal 2021 Compensation Decisions

For the fiscal year ended June 30, 2021, our named executive officers, or NEOs, and their respective titles were as follows:

Name

 

Title

Edward B. Meyercord

 

President, Chief Executive Officer, and Director

Remi Thomas

 

Executive Vice President and Chief Financial Officer

Joe Vitalone

 

Chief Revenue Officer

 


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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary  

This Compensation Discussion and Analysis explains the objectives and operation of the Company’s executive compensation program in fiscal 2021, particularly with respect to the Company’s NEOs. The Compensation Committee oversees the Company’s compensation programs and has the sole authority to establish the compensation paid to the Company’s NEOs.

Fiscal 2021 Business Performance Highlights

Fiscal 2021 was a strong year for the Company with record setting revenue of over $1 billion for the year and generated strong cash flow from operations. The Company continued to face some challenges as a result of the global COVID-19 pandemic which caused supply constraints, along with additional logistics related challenges in certain countries. However the strong demand for our wired and wireless portfolio and our new cloud offerings contributed to the revenue growth in the fiscal 2021 and with continued tightening on discretionary spending and working capital resulted in the Company being profitable for fiscal 2021.

In response to the challenges caused by COVID-19, we implemented actions to manage and reduce operating costs by taking reduction-in-force actions in certain areas primarily research and development and sales, implementing a set of temporary cost reduction measures and continued restriction on all discretionary expenses, including postponing marketing programs and non-strategic capital expenditure plans, which helped the Company to navigate through challenges in fiscal 2020 and set the Company for success in fiscal 2021.

Despite the ongoing challenges from COVID-19, we remain focused on executing our operational priorities, while preserving liquidity. The Company generated cash flows from operations during all four quarters of fiscal 2021 despite the business challenges resulting from the COVID-19 pandemic. Our financial performance during fiscal 2021 was as follows:  

 

Net revenue of $1,009.4 million, increased 6.5% from fiscal 2020 net revenues of $948.0 million;

 

Total gross margin of 58.0% of net revenues in fiscal 2021, compared to 54.6% in fiscal 2020;

 

Total Non-GAAP Gross Margin of 60.8% of net revenue in fiscal 2021, compared to 59.1% in fiscal 2020;

 

Operating income of $34.4 million, compared to operating loss of $98.9 million in fiscal 2020;

 

Non-GAAP Operating Income of $110.3 million, compared to $40.6 million in fiscal 2020;

 

Net income of $1.9 million in fiscal 2021, or $0.02 per share, compared to a net loss of $126.9 million or ($1.06) per share in fiscal 2020;

 

Non-GAAP net income of $72.2 million, or $0.57 per share, compared to a net income of $14.1 million or $0.12 per share in fiscal 2020; and

 

Cash flow provided by operating activities of $144.5 million, compared to cash flow provided by operating activities of $35.9 million in fiscal 2020, an increase of $108.6 million. Cash was $246.9 million as of June 30, 2021, an increase of $53.0 million compared to the end of fiscal 2020. 

A GAAP to non-GAAP reconciliation for non-GAAP performance measures is provided in this proxy statement under the section “Non-GAAP Measures of Financial Performance – GAAP to Non-GAAP Reconciliation.”


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The following charts depict our Total Shareholder Return (“TSR”) for the one-, three-, and five-year periods ending June 30, 2021 on a compounded annual growth rate and absolute basis.

      

 

 

Fiscal 2021 Compensation Was Closely Aligned With Performance  

Our executive compensation programs are designed to deliver pay in accordance with corporate and individual performance. For fiscal 2021, our performance was reflected in the compensation of our NEOs in a number of ways:  

 

Short-term Cash Incentive Payouts Were Above Target. Overall payouts under the Extreme Incentive Plan, our short-term cash incentive plan, for fiscal 2021 were approximately 106% of target. This reflected payouts at 106% of target for the first half of fiscal 2021, and payouts at 106.7% of target for the second half of fiscal 2021, in each case based on the Company’s achievement of applicable goals.

 

 

Long-term Incentive Earnouts Reflect Strong Company Performance. Three sets of grants of performance-based equity awards were subject to on-going performance periods during fiscal 2021, as summarized below:

 

Grant

Performance Criteria

Outcome

August 2018 PSUs

Aggregate GAAP earnings per share (excluding stock based earnings charge) over two consecutive fiscal quarters during a three-year performance period

 

Earned as of June 30, 2021

August 2018 performance-based options

 

Exceeding stock price hurdle for 30 consecutive days during a three-year performance period

Earned as of June 30, 2021

 

August 2020 PSUs

Total Shareholder Return relative to the Russell 2000 Index over an overall three-year performance period

Not earned as of June 30,2021 but earned at 100% of target for the first tranche as of 8/15/21

 

 

Long-term Incentive Awards Were Reasonable and Appropriate. For fiscal 2021, half of the annual awards for Messrs. Meyercord and Thomas (on a per share basis) were awarded in the form of PSUs that may be earned, if at all, based on the Company’s TSR relative to the Russell 2000 Index over a three-year performance period.  

In fiscal 2021, the Compensation Committee also granted time-based RSUs to Messrs. Meyercord and Thomas that vest based on continued service over three years, to encourage retention and to tie realizable compensation from such equity awards to the Company’s long-term stock price. Mr. Vitalone received only RSUs in July 2020 that vest based on continued service over three years as part of his new hire agreement.  

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CEO Target Compensation vs Estimated Realizable Compensation

The strong link between pay and performance is further illustrated by the chart below, which shows that our CEO’s estimated realizable pay for fiscal 2019, 2020 and 2021 was on average 143% of his target direct compensation. While the Summary Compensation Table reflects a measure of total compensation that includes the grant date fair value for equity awards, we believe a better assessment of actual amounts earned can be made by considering the CEO’s estimated realizable pay, which is based on the value of equity awards at vesting or exercise (or fiscal year end if not yet vested or exercised). The following graph illustrates our performance-based compensation programs on the total compensation of our CEO and compares his targeted compensation to estimated realizable pay as of June 30, 2021.  

(1)Target Compensation: Target compensation for each year reflects actual salary paid during the year, target bonus for the year, and the grant date target value of long-term incentive grants awarded in that year.

(2)Estimated Realizable Compensation: Estimated realizable compensation for each year reflects (a) actual salary paid during the year; (b) actual bonus paid for the year’s performance; (c) the value of the RSUs granted that year as of vesting date or June 30, 2021, if outstanding; (d) the in-the-money value of the stock options granted that year as of exercise date or June 30, 2021, if outstanding; (e) the value of the performance stock units granted that year based on performance through June 30, 2021; and, (f) the in-the-money value of the performance-based stock options (“PSOs”) granted that year based on performance through June 30, 2021.

Compensation Philosophy and Objectives  

Our guiding principle in establishing executive compensation is to align compensation with the creation of stockholder value while achieving the Company’s strategic objectives and financial goals. Consistent with this principle, we seek to provide a competitive total compensation package that allows us to attract high quality candidates for senior leadership positions, to retain these employees, and to establish a total compensation program which motivates and rewards individual and team performance in alignment with our short- and long-term business strategies and objectives. Our compensation program is designed to provide accountability at both the individual and team level with respect to both absolute and relative competitive performance. We also align the interests of our executives and our stockholders by providing variable compensation to our executives that is directly linked to the performance of the Company and to our stock price. As illustrated below, a substantial portion of our NEOs’ fiscal 2021 compensation was directly tied to Company and stock price performance. The table below consists of base salary, bonuses, actual short-term cash incentives and the grant-date value of equity awards granted during fiscal 2021.

 

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Annual compensation for a given executive is determined with reference to competitive market data, as well as the individual’s experience, knowledge, skills, and performance.   

As noted above, a significant portion of fiscal 2021 compensation to our CEO was at risk, specifically his short-term cash incentive, as well as his PSU award. The at risk pay for Other NEO Pay Mix (per chart above) would be 51% if Mr. Vitalone’s new hire grant was excluded.

 Compensation Best Practices  

The Company’s executive compensation program includes a number of features intended to reflect best practices and to help ensure that the program aligns with stockholder interests:  

 

Incentive Plan Payouts Tied to Company Performance - In fiscal 2021, the Extreme Incentive Plan for the first and second half of fiscal 2021, July 1 to December 31, 2020, and January 1 to June 30, 2021, respectively provided for cash bonuses directly tied to the achievement of key Company financial objectives approved by the Compensation Committee.

 

No Compensation Guarantees - The Company does not guarantee to our NEOs continued employment or salary increases, bonuses, pension arrangements, equity awards or deferred compensation arrangements.

 

Limited Perquisites - The Company provides minimal perquisites to our NEOs. Generally, Company benefits (such as medical and dental insurance, the employee stock purchase plan and the Section 401(k) plan matching Company contributions) are available to all full-time U.S. employees. All perquisites, if any, are approved by the Compensation Committee and are intended to attract and retain our executives or to facilitate their focus on their duties to the Company. In fiscal 2021, our NEOs did not receive any material perquisites other than a disability insurance top-up to Mr. Meyercord.

 

Reasonable Severance Benefits - Our NEOs are eligible to receive certain severance benefits and payments upon qualifying termination, including in connection with a change in control. This provides consistency and predictability in the Company’s treatment of such executive officers upon termination of employment and encourages our executives to continue to serve the Company through a potential change in control transaction.

 

Mitigation of Compensation-Related Risk - The Company has adopted policies, including an insider trading policy, which policies are subject to oversight by independent Committees of the Board, to mitigate compensation-related risk.

 

No Hedging or Speculative Transactions of Securities - In accordance with our insider trading policy, all executive officers and directors, are prohibited from engaging in speculative transactions in Company securities, including engaging in short sales, engaging in transactions with respect to put options, call options or other derivative securities, or engaging in any other forms of hedging transactions.

 

Recoupment or Claw-Back Policy - The Company has adopted a recoupment policy, sometimes called a “claw-back” policy, which allows the Company to recover incentive-based compensation paid to any current or former executive officer under certain specified circumstances.

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Stock Ownership Guidelines - Since February 7, 2018, we have required that each officer, other than our Chief Executive Officer, own a minimum of the lesser of: 77,700 shares, or shares valued at two times (2x) their annual salary, and that our Chief Executive Officer own a minimum of the lesser of: 187,500 shares, or shares valued at three times (3x) his annual salary. Each officer has five years to attain the minimum ownership level. 

2020 “Say on Pay” Advisory Vote on Executive Compensation  

The Company provided stockholders with an advisory vote on NEO compensation at the 2020 annual meeting of Stockholders. During that meeting, approximately 96% of the votes cast in the “say on pay” advisory vote were “FOR” approval of the compensation of our NEOs. Votes cast consist of votes “FOR” and “AGAINST” the proposal and exclude abstentions and broker non-votes. The votes cast in favor indicate substantial support for the Company’s compensation programs, measures and elements for our NEOs. The Compensation Committee considered the results of our 2019 advisory vote (the most recent vote at the time when decisions were made) when making executive compensation decisions for fiscal 2021.  

Compensation-Setting Process

 Our Compensation Committee, in consultation with the Board and the Company’s human resources department, designs and oversees the Company’s compensation programs and compensation philosophy. Throughout the year, the Chair of our Compensation Committee meets with human resources leadership and legal departments to monitor issues relating to executive compensation. At the end of the fiscal year, our Chief Executive Officer conducts a qualitative and quantitative assessment of each senior officer’s (which includes our NEOs’) performance for the past fiscal year based upon the officer’s individual and corporate goals and objectives, and reports to the Compensation Committee regarding his proposals regarding compensation adjustments for the NEOs (other than with respect to himself). The Compensation Committee independently assesses the performance and compensation of our Chief Executive Officer, and our Chief Executive Officer is not present in meetings when his compensation is discussed. As set forth in additional detail below, in connection with its compensation oversight and approvals, the Compensation Committee reviews:  

 

the compensation paid to similarly situated executives in comparable companies in our peer group;

 

our competitive position relative to comparable companies in our industry;

 

The individual’s experience, knowledge, skills, and performance; and

 

the total compensation budget for the Company.  

Additional details regarding the operation and duties of the Compensation Committee are also set forth in the “Compensation Committee” section above.  

Compensation Consultant

 In connection with our desire to make our executive compensation competitive, to more closely tie future compensation to performance, and to further align executive compensation with the creation of stockholder value, the Compensation Committee engaged Compensia, Inc., a national compensation consulting firm with expertise in the technology sector, to assist it in the performance of its duties and to advise it with respect to compensation matters for fiscal 2021. In its role as independent compensation consultant and at the request of the Compensation Committee, Compensia participated in Compensation Committee meetings and provided compensation advice to the Compensation Committee on:  

 

the competitiveness of NEO compensation levels as compared to market (as represented by our peer group);

 

revisions and additions to the Company’s peer group, goal metrics and bonus design;

 

the compensation mix between cash and equity; and   

 

developments in legislation and regulation affecting executive compensation.

 Although the Company pays Compensia’s fees for its engagement by the Compensation Committee, the Compensation Committee has sole discretion with respect to Compensia’s continued engagement and assignments. Further, the Compensation Committee has reviewed Compensia’s independence and determined that its work does not give rise to any conflicts of interest. Additional details regarding the Compensation Committee’s relationship and review of Compensia are also set forth in the “Compensation Committee” section above.

Peer Group Selection and Review  

The Compensation Committee considers a variety of factors when setting the compensation of our NEOs, including competitive market data, as well as the individual’s experience, knowledge, skills, performance and need for retention. The Compensation

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Committee evaluates pay competitiveness on an element-by-element basis, as well as on a total compensation basis. The peer group data reviewed includes a range of pay levels including the 25th, 50th and 75th percentile of the members of the peer group to reflect the range of pay to be considered when determining individual pay elements. While the Compensation Committee does not establish compensation levels by benchmarking to our peer group, the Compensation Committee reviews the practices of members of the peer group to better understand and assess the competitiveness of the compensation that the Company pays to its executives, both with respect to each compensation element and the overall compensation package.  

On February 5, 2020, following consultation with Compensia, the Compensation Committee approved our peer group for fiscal year 2021 compensation decisions. The peer group included the following companies:

 

 

 

 

ADTRAN, Inc.

Infinera Corporation

Super Micro Computer

Calix

Lumentum Holdings