tm223398-1_def14a - none - 14.3906829s
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.   )
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
APPLIED OPTOELECTRONICS, 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 paid previously with preliminary materials.

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

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[MISSING IMAGE: lg_appliedoptinc-pn.jpg]
April 22, 2022
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of the Stockholders of Applied Optoelectronics, Inc. (the “Company”), on Thursday, June 2, 2022, at 9:30 a.m. Central Time. We plan to hold the meeting at our principal office located at 13139 Jess Pirtle Blvd., Sugar Land, TX 77478.
The items of business are listed in the following Notice of Annual Meeting of Stockholders and are more fully addressed in the Proxy Statement. At this meeting you are being asked to elect the three Class III directors named in the Proxy Statement to hold office for three-year terms, to ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year, to approve, on an advisory basis, our executive compensation and approve an amendment to increase the number of shares reserved for issuance under the Company’s 2021 Equity Incentive Plan.
Please read the Proxy Statement, which presents important information about the Company and each of the items being presented for stockholder vote. Whether or not you intend to be present in person, your vote is very important. Please vote promptly by telephone or internet or by marking, signing and returning your proxy card (if you have received one) so that your shares will be represented. If you attend the meeting you will, of course, 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 your brokerage firm, bank or other nominee to vote your shares.
We hope that you will be able to attend the meeting in person. We look forward to seeing you there.
Sincerely yours,
[MISSING IMAGE: sg_chihhsiangthompson-bw.jpg]
Chih-Hsiang (Thompson) Lin
Chairman and Chief Executive Officer
 

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NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 2, 2022
The 2022 annual meeting of stockholders (“Annual Meeting”) of Applied Optoelectronics, Inc., a Delaware corporation (the “Company”) will be held on Thursday, June 2, 2022, at 9:30 a.m. Central Time, at our principal offices at 13139 Jess Pirtle Blvd., Sugar Land, TX 77478, for the following purposes:
1.   To elect the three Class III directors named in the Proxy Statement to hold office for three-year terms until the 2025 annual meeting of stockholders and until their respective successors are elected and qualified, which we refer to as Proposal No. 1.
2.   To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022, which we refer to as Proposal No. 2.
3.   To approve, on an advisory basis, our executive compensation, which we refer to as Proposal No. 3 or the “say-on-pay” vote.
4.   To approve an amendment (the “Share Reserve Amendment”) to increase the number of shares reserved for issuance under the Applied Optoelectronics, Inc. 2021 Equity Incentive Plan, which we refer to as Proposal No. 4.
5.   To transact such other business as may properly come before the meeting or any adjournment or postponement of the meeting.
Our Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4. Stockholders of record at the close of business on April 8, 2022 are entitled to notice of, and to vote at, the meeting and any adjournment or postponement thereof. For ten days prior to the meeting, a complete list of stockholders entitled to vote at the meeting will be available for examination by any stockholder, for any purpose relating to the meeting, during ordinary business hours at our principal offices and during the Annual Meeting. The list of stockholders will also be made available for examination by any stockholder during the Annual Meeting.
Securities and Exchange Commission (“SEC”) rules permit us to furnish proxy materials to stockholders over the Internet. We will be mailing to our stockholders a Notice of Internet Availability of Proxy Materials, which indicates how to access our proxy materials on the Internet. We are constantly focused on improving the ways people connect with information, and believe that providing our proxy materials over the Internet increases the ease and ability of our stockholders to connect with the information they need while reducing the environmental impact of our Annual Meeting. If you would prefer to receive a paper copy of the proxy materials, you may request them by following the procedures set forth in the Notice of Internet Availability of Proxy Materials.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. If you are a stockholder of record, you may vote your shares over the Internet at www.proxyvote.com, telephonically by dialing 1-800-690-6903 or if you requested to receive printed proxy materials, via your enclosed proxy card. If the shares you own are held in “street name” by a bank or brokerage firm, your bank or brokerage firm will provide a Notice of Availability of Proxy Materials, or, if requested, a printed set of proxy materials together with a voting instruction form, which you may use to direct how your shares will be voted.
You are cordially invited to join us at the Annual Meeting. However, to ensure your representation, we request that you vote at your earliest convenience, whether or not you plan to attend the Annual Meeting. You
 

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may revoke your proxy at any time prior to the Annual Meeting by following the instructions in the Proxy Statement or by attending the Annual Meeting and voting in person.
We look forward to seeing you at the Annual Meeting.
By order of the Board of Directors,
[MISSING IMAGE: sg_davidkuo-bw.jpg]
David Kuo
General Counsel, Chief Compliance Officer and Corporate Secretary
April 22, 2022
 

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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 2, 2022: The Notice of 2022 Annual Meeting of Stockholders, Proxy Statement and the 2021 Annual Report on Form 10-K are available at www.proxyvote.com.
Attending the Meeting
The meeting will be held at 13139 Jess Pirtle Blvd., Sugar Land, TX 77478.

Doors open at 9:00 a.m. Central Time.

Meeting starts at 9:30 a.m. Central Time.

Attendance at the Annual Meeting is limited to our stockholders, their proxyholders and guests of the Company. Proof of Company stock ownership and photo identification is required to attend the Annual Meeting.

The use of cameras or other audio or video recording devices is not allowed.
Questions
For Questions Regarding:
Contact:
Annual meeting
Applied Optoelectronics, Inc. Investor Relations
David Kuo at david_kuo@ao-inc.com
Stock ownership for registered holders
Continental Stock Transfer & Trust Company (800) 509-5586
(within the U.S. and Canada) or (212) 509-4000 (worldwide)
or cstmail@continentalstock.com
Stock ownership for beneficial holders
Please contact your broker, bank or other nominee
Voting for registered holders
Applied Optoelectronics, Inc. Investor Relations
David Kuo at david_kuo@ao-inc.com
Voting for beneficial holders
Please contact your broker, bank or other nominee
 

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Applied Optoelectronics, Inc.
Table of Contents
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Notice of 2021 Annual Meeting of Stockholders
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APPLIED OPTOELECTRONICS, INC.
13139 Jess Pirtle Blvd., Sugar Land, TX 77478
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 2, 2022
The Board of Directors (the “Board”) of Applied Optoelectronics, Inc. (the “Company”) is soliciting your proxy for the 2022 Annual Meeting of Stockholders to be held on June 2, 2022, or any adjournment or postponement thereof, 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 beginning on April 22, 2022. A Notice of Internet Availability of Proxy Materials indicating how to access our proxy materials over the Internet will be sent, or given, to stockholders beginning on April 22, 2022. References in this Proxy Statement to the “Company,” “we,” “our,” “us” and “Applied Optoelectronics” are to Applied Optoelectronics, Inc. and its consolidated subsidiaries, and references to the “Annual Meeting” are to the 2022 Annual Meeting of Stockholders. This Proxy Statement covers our 2021 fiscal year, which was from January 1, 2021 through December 31, 2021 (“fiscal 2021”). Certain information contained in this Proxy Statement is incorporated by reference into Part III of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on February 24, 2022.
SOLICITATION AND VOTING
Record Date
Only stockholders of record at the close of business on April 8, 2022 will be entitled to notice of and to vote at the meeting and any adjournment thereof. As of this record date there were 27,530,543 shares of common stock outstanding and entitled to vote.
Quorum
A majority of the shares of common stock issued and outstanding as of the record date must be represented at the meeting, either in person or by proxy, to constitute a quorum for the transaction of business at the meeting. Your shares will be counted towards the quorum if you submit a valid proxy (or one is submitted on your behalf by your broker or bank) or if you vote in person at the meeting. In addition, shares present in person, but not voting, shares for which we receive signed proxies, but for which holders have abstained from voting, and shares represented by proxies returned by a bank, broker, or other nominee holding shares will each be counted as present for purposes of determining the presence of a quorum.
Vote Required to Adopt Proposals
Each share of our common stock outstanding on the record date is entitled to one vote on each of the three director nominees under Proposal No. 1. Each share of our common stock outstanding on the record date is entitled to one vote on each other proposal.
Proposal No. 1.   For the election of directors, the three director nominees to serve as Class III directors will be elected by a plurality of the votes cast by the stockholders entitled to vote at the election so that three nominees who receive the highest number of “For” votes will be elected as Class III directors. You may vote “For” or “Withhold” with respect to each director nominee.
Proposal No. 2.   Approval of Proposal No. 2 to ratify our independent registered public accounting firm requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. Abstentions will have no effect on the outcome of the proposal, and there should be no broker “non-votes” on the proposal because brokers have discretion to vote on this proposal, as described in more detail below.
Proposal No. 3.   Approval of Proposal No. 3 requires the affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting. However, the say-on-pay vote is only advisory in nature and has no binding effect on us or the Board. Nevertheless, the Board will consider the result of the say-on-pay vote when
 
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making future compensation decisions regarding our named executive officers. Abstentions and “broker non-votes” will have no effect on the outcome of the proposal.
Proposal No. 4.   Approval of Proposal No. 4 requires the affirmative vote of a majority of the shares cast on the proposal at the Annual Meeting. Abstentions will have the same effect as a vote against the proposal, but “broker non-votes” will have no effect on the outcome of the proposal.
Effect of Abstentions and Broker Non-Votes
Shares not present at the meeting and shares voted “Withhold” will have no effect on the election of directors. With respect to all proposals, shares will not be voted in favor of the matter if they either (1) abstain from voting on a particular matter or (2) are “broker non-votes.” For Proposal No. 4, an abstention will have the same effect as a vote against such proposal. If your shares are held in an account at a bank or brokerage firm, that bank or brokerage firm may vote your shares on Proposal No. 2, but will not be permitted to vote your shares of common stock with respect to Proposals No. 1, 3, and 4 unless you provide instructions as to how your shares should be voted (where no instructions are provided, this is a “broker non-vote”). If an executed proxy card is returned by a bank or broker holding shares which indicates that the bank or broker has not received voting instructions to vote on Proposals No. 1, 3 and 4, the shares will not be considered to have been voted with respect to such matters, but will be considered present for the purposes of establishing quorum for the Annual Meeting. Your bank or broker will vote your shares of common stock on Proposals No. 1, 3 and 4, only if you provide instructions on how to vote by following the instructions they provide to you. Accordingly, we encourage you to vote promptly, even if you plan to attend the Annual Meeting.
Voting Instructions
If you vote promptly by telephone or internet or by marking, signing and returning your proxy card (if you have received one) or otherwise appropriately complete and submit your voting instructions, the persons named as proxies will follow your voting instructions. If no choice is indicated on the proxy card, but the proxy card is signed, the shares will be voted as the Board recommends on each proposal. Many banks and brokerage firms have a process for their beneficial owners to provide instructions via telephone or the Internet. The voting form that you receive from your bank or broker will contain instructions for voting.
Depending on how you hold your shares, you may vote in one of the following ways:
Stockholders of Record:   You may vote by proxy or over the internet or by telephone. Please follow the instructions provided on the proxy card if you received one, or available at proxyvote.com. You may also vote by signing and returning your proxy card, if you received one, in the prepaid envelope, or by attending the Annual Meeting and voting in person.
Beneficial Stockholders:   Your bank, broker or other holder of record will provide you with a voting instruction card for you to use to instruct them on how to vote your shares. Check the instructions provided by your bank, broker or other holder of record to see which options are available to you. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your bank, broker or other agent.
Votes submitted by telephone or via the Internet must be received by 11:59 p.m. Eastern Time on June 1, 2022. 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 in person.
If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting by returning a later-dated proxy card, by voting again by Internet or telephone as more fully detailed on your proxy card, by delivering written instructions to the Corporate Secretary before the Annual Meeting, or by voting again at the Annual Meeting. Attendance at the Annual Meeting will not in and of itself cause your previously voted proxy to be revoked unless you specifically so request or vote again at the Annual Meeting. If your shares are held in an account at a bank, brokerage firm or other agent, you may change your vote by submitting new voting instructions to your bank, brokerage firm or other agent or if you have obtained a legal proxy from your bank, brokerage firm or other agent giving you the right to vote your shares, by attending the Annual Meeting and voting in person.
 
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Electronic Availability of Proxy Statement and 2021 Annual Report
As permitted by SEC rules, we are making this Proxy Statement and our 2021 Annual Report available to stockholders electronically via the internet at www.proxyvote.com. On April 22, 2022, we will begin mailing to our stockholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access this proxy statement and our 2021 Annual Report and how to vote online. If you received that notice, you will not receive a printed copy of the proxy materials unless you request it by following the instructions for requesting such materials contained in the notice. We are constantly focused on improving the ways people connect with information, and believe that providing our proxy materials over the internet increases the ease and ability of our stockholders to connect with the information they need while reducing the environmental impact of our Annual Meeting.
Solicitation of Proxies
We will bear the 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, out-of-pocket costs for forwarding proxy and solicitation material to the beneficial owners of common stock. We may use the services of our officers, directors and employees to solicit proxies, personally or by telephone, without additional compensation.
Voting Results
We will announce preliminary voting results at the Annual Meeting. We will report final results in a Form 8-K report filed with the SEC.
 
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
We have a classified Board consisting of two Class I directors, two Class II directors and three Class III directors. At each annual meeting of stockholders, directors are elected for a term of three years to succeed those directors whose terms expire at the annual meeting date.
The term of the Class III directors, Chih-Hsiang (Thompson) Lin, Richard B. Black and Min-Chu (Mike) Chen, will expire on the date of the upcoming Annual Meeting. Accordingly, three persons are to be elected to serve as Class III directors of the Board at the meeting. The Board’s nominees for election by the stockholders to those three positions are the current Class III members of the Board, Chih-Hsiang (Thompson) Lin, Richard B. Black and Min-Chu (Mike) Chen. If elected, each nominee will serve as a director until our annual meeting of stockholders in 2025 and until their respective successors are elected and qualified. If any of the nominees declines to serve or becomes unavailable for any reason (although we know of no reason to anticipate that this will occur), or if a vacancy occurs before the election, the proxies may be voted for such substitute nominees as we may designate. The proxies cannot vote for more than three persons.
The three nominees for Class III director receiving the highest number of FOR votes will be elected as Class III directors.
We believe that each of our directors has demonstrated business acumen, ethical integrity and an ability to exercise sound judgment as well as a commitment of service to us and our Board.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF CHIH-HSIANG (THOMPSON) LIN, RICHARD B. BLACK AND MIN-CHU (MIKE) CHEN AS CLASS III DIRECTORS.
Biographical information concerning each of our directors, including the nominees, is set forth below. Also set forth below are the specific experience, qualifications, attributes or skills that led our nominating and corporate governance committee to conclude that each person should serve as a director.
Name
Non-Employee Director
Age
Director
Since
Class I Directors Whose Terms Expire at the 2023 Annual Meeting of Stockholders:
Che-Wei Lin
X
58
2014
Elizabeth Loboa
X
55
2020
Class II Directors Whose Terms Expire at the 2024 Annual Meeting of Stockholders:
William H. Yeh
X
69
2000
Cynthia (Cindy) DeLaney
X
56
2021
Class III Directors Whose Terms Expire at the 2022 Annual Meeting of Stockholders:
Chih-Hsiang (Thompson) Lin
59
1997
Richard B. Black
X
88
2001
Min-Chu (Mike) Chen
X
72
2013
 
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The following table discloses diversity information concerning our directors as required by Nasdaq listing rules. The information is provided in aggregate form based on voluntary self-identification by each director collected in advance of the date of this proxy statement.
Board Diversity Matrix (As of April 22, 2022)
Total Number of Directors
7
Female
Male
Number of Directors based on gender identity
2
5
Number of Directors who identify in any of the categories below:
African American or Black
Alaskan Native or Native American
Asian
4
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
1
1
Two or More Races or Ethnicities
1
LGBTQ+
Did not Disclose Demographic Background
Nominees for Election to a Three Year Term Expiring at the 2025 Annual Meeting of Stockholders
Chih-Hsiang (Thompson) Lin, Ph.D., founded Applied Optoelectronics, Inc. in February 1997 and has served as President and Chief Executive Officer since our inception. He currently serves as the Chairman of our Board, a position he has held since January 2014. He has served as a director on our Board since 1997, and he served as Chairman of our Board from May 2000 through September 2002, and again from June 2008 through October 2009. Since May 2015, Dr. Lin has served on the University of Missouri’s Chancellor’s Advisory Group and since November 2016 he has served as a chair on the University of Missouri’s Industrial Advisory Board for the College of Engineering. Dr. Lin also served as a research associate professor from 1998 to 2000 and as a senior research scientist from 1994 to 1998 at the University of Houston. Dr. Lin holds a BS degree in Nuclear Engineering from National Tsing Hua University in Taiwan and a MS degree and a Ph.D. in Electrical and Computer Engineering from University of Missouri — Columbia. The Board believes that Dr. Lin is qualified to serve as a director based on his extensive background in business management, technological expertise, his role as founder, President and Chief Executive Officer and his years of service on our Board.
Richard B. Black has served as a director on our Board since August 2001. He served as the Chairman and Chief Executive Officer of ECRM, Incorporated, a worldwide supplier of laser based imaging equipment from 1983 until the company was acquired by Eastman KODAK Corp. in 2021. From 2014 to 2017, he also served as President and Chief Executive Officer and a director of CRON-ECRM LLC, a worldwide supplier of laser based imaging equipment. Mr. Black served as a director and Chairman of the audit committee of Alliance Fiber Optics Products, Inc. (Nasdaq: AFOP) from 2002 until its acquisition by Corning in 2016. He serves as a director of TREX Enterprises, Inc., a defense technology company, a position he has held since 2000. Mr. Black has served as trustee of the Institute for Advanced Study at Princeton since 1990, and became its Vice Chairman in 2006, and Trustee Emeritus since 2012. He has served as a trustee of the American Indian College Fund, Beloit College, and Bard College. At the University of Chicago, he serves on the Dean’s Council for the Physical Sciences Division and on the Board of Governors of the University’s Smart Museum of Art. Mr. Black received a BS degree in Engineering from Texas A&M University, an MBA from Harvard University and an honorary Ph.D. from Beloit College. The Board believes that Mr. Black is qualified to serve as a director based on his extensive business and financial management and leadership experience, and his service on other private company and publicly-held company’s boards of directors as both a chief executive officer and chairman of the audit committee. He brings to the Board expertise in the fields of accounting and internal controls.
 
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Min-Chu (Mike) Chen, Ph.D., has served as a director on our Board since February 2013. Since 2001, he has been a partner and member of the board of directors of EverRich Capital Inc., a financial consulting company. Since 2003, he has served as a director of Seth Nanotechnology Inc., a nanotechnology patent portfolio company owning more than 10 patents in fullerene derivatives and related application technologies. Since May 2010, he has served as executive director of C&C International Services, Inc., a petrochemical equipment services and marketing company. Since November 2011, he has served as the Asia Pacific Director for U.S. Flow Control Group Pte. Ltd., a petroleum equipment manufacturer and services company. Since January 2012, he has served as an executive director of FGel Nanotek, Inc., a food and beverage additive company based on nanotechnology. Since April 2014, he has served as a director of Harbin NeoTek Medical Devices Co., Ltd. Since September 2016, he has served as Vice Chairman of the board of directors of Shandong SicerKline Advanced Material Co., Ltd., a surface-etched silicon carbide and alumina mini-whisker manufacturing plant for ceramic applications. Since 2018, he has served as executive director of EABO Information Technology (Shanghai), Co. Ltd. From September 2008 to April 2010, Dr. Chen served as the Chief Executive Officer of SilverPAC, Inc., a consumer electronics business, and from March 1994 to June 2002, Dr. Chen served as a board member of PCTEL, Inc. (Nasdaq: PCTI). Dr. Chen received a Ph.D. in Ocean Engineering from Oregon State University. The Board believes that Dr. Chen is qualified to serve as a director based on his business management experience, his service on other private company boards of directors and his prior service on the board of a publicly-held company.
Directors Continuing in Office until the 2023 Annual Meeting of Stockholders
Che-Wei Lin has served as a director on our Board since January 2014, and previously served as a director on our Board from December 2006 to October 2009. Since November 2007, Mr. Lin has served as the President of ASMedia Technology Inc., a chipset manufacturer. Since November 2009, Mr. Lin has also served as the Corporate Vice President of the Motherboard Business Unit of the Open Platform Business Group of ASUSTek Computer Inc., a computer hardware and electronics company. Mr. Lin was employed at VIA Technologies, Inc., a manufacturer of integrated circuits and motherboard chipsets, from 1993 to 2007 in various positions, including President of the Desktop Platform Business Unit, Vice President of the System Platform Division and Vice President of OEM and Chipset Product Marketing. Mr. Lin received a BS in Electrical Engineering from Fu Jen University in Taiwan and a MS in Electrical Engineering from the University of Missouri. The Board believes that Mr. Lin is qualified to serve as a director based on his business and financial management and leadership experience and his years of service on our Board.
Elizabeth Loboa, Ph.D., has served on our Board since June 2020. Since 2020, Dr. Loboa has served as the Provost and Vice President for Academic Affairs at Southern Methodist University. From 2018 to 2020, Dr. Loboa served the University of Missouri System and the University of Missouri as Vice Chancellor for Strategic Partnerships, Dean and Ketcham Professor of the College of Engineering, University of Missouri System Review Committee for Excellence in Research and Creative Works, Council of Leaders, MU Engagement Council, Translational Precision Medicine Complex (TPMC, now called Next Gen Precision Health Institute) Academic and Research Programming Group, University of Missouri System Taskforce for Innovation, and served on the Board of Directors for the Missouri Innovation Center. She also held various leadership and service roles related to her profession. In 2018, she served as Coordinator of the Precision Medicine Summit for the University of Missouri System. In 2017, she served as Co-Chair of the University of Missouri Chancellor Search Committee. Since 2015, Dr. Loboa has also served as adjunct professor in the Department of Biomedical Engineering at University of North Carolina-Chapel Hill and North Carolina State University. From 2003 to 2015, she served as Director of the Cell Mechanics Laboratory, Joint Department of Biomedical Engineering at University of North Carolina-Chapel Hill and North Carolina State University. From 2014 to 2015, she served as adjunct professor in the Departments of Biotechnology, Physiology and Fiber and Polymer Science at North Carolina State University and in the Department of Orthopaedics and Curriculum in Oral Biology at University of North Carolina-Chapel Hill. From 2014 to 2015, she served as Professor of the Joint Department of Biomedical Engineering at University of North Carolina-Chapel Hill and North Carolina State University and the Department of Materials Science and Engineering at North Carolina State University. She also served as Associate Chair of the Joint Department of Biomedical Engineering at University of North Carolina-Chapel Hill and North Carolina State University from 2013 to 2015. Dr. Loboa received a B.S. in Mechanical Engineering from the University of California, Davis, an M.S.E in Biomechanical Engineering from Stanford University, and a Ph.D. in Mechanical
 
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Engineering from Stanford University. The Board believes Dr. Loboa is qualified to serve as a director based on her leadership experience, extensive experience in academia and broad knowledge in biomedical engineering.
Directors Continuing in Office until the 2024 Annual Meeting of Stockholders
William H. Yeh has served as a director on our Board since May 2000. Since 1997, he has served as the Chief Executive Officer and President of Golden Star Management, Inc., a real estate investment and management company. Since 2005, he has served as President of Pearlyeh Investments Inc., a real estate development and investment company. Since 2014, he has served as president of Stonemetal Capital, LLC, an equity financial company and as president of Pearl Yeh Charitable Foundation LLC, a charitable foundation focused on cultural exchange and education programs. He served as the Vice Chairman of Central Bancorp, Inc. (the holding company of United Central Bank, now Hanmi Bank) from 1997 to 2014. He served as an Advisor of Hanmi Bank for the Texas region from 2014 to 2019. Mr. Yeh received a BS degree from National Cheng Kung University in Taiwan and a MS degree from University of Houston — Clear Lake. The Board believes that Mr. Yeh is qualified to serve as a director based on his business and financial management and leadership experience and his years of service on our Board.
Cynthia (Cindy) DeLaney has served as a director on our Board since June 2021. Since January 2014, Ms. DeLaney has served as the Global Fuel Oil commodity trading manager for Shell Trading. In this role she manages Shell’s global Fuel Oil trading activities with primary trading offices in Singapore, Rotterdam and Houston, covering Asia, Europe, and the Americas, and other offices in cities such as Calgary, Dubai and Moscow. For the previous nine years (2005-2013), she managed the Americas Fuel Oil Trading team. Before her position as the Americas Trading Manager, Ms. DeLaney was a trader in fuel oil, VGO, gasoline and gasoline components (1999-2005). She has over 25 years’ experience as a trader and in technical aspects of the petrochemical/refining industry. In her role as the Global Trading Manager of Fuel Oil, Ms. DeLaney has increased the profitability of Shell’s global fuel oil trading business which grew steadily over her tenure. Since October 2016, Ms. DeLaney has served as a director and Vice President of Shell Trading US Company (STUSCo). She is also a member of the Executive group of the Houston Chapter of the Women’s Energy Network (WEN) which works to promote and develop women’s careers in Energy and STEM fields. Ms. DeLaney started her working career in 1991 as an Electrical Engineer at Arco Chemical Company (now Lyondell) in Houston. She moved from technical to commercial activities at Arco, eventually trading MTBE and gasoline components from Arco’s Newtown Square, Pennsylvania headquarters. In 1998, she moved to Koch Industries, in Houston, to trade MTBE before being hired in 1999 by Shell to trade gasoline, and then Fuel Oil and VGO. Ms. DeLaney has a B.S. in Electrical Engineering from Louisiana State University. The Board believes Ms. DeLaney is qualified to serve as a director based on her leadership experience and extensive experience in business.
 
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CORPORATE GOVERNANCE
Director Independence
In February 2022, the Board determined that, other than Dr. Chih-Hsiang (Thompson) Lin, our President and Chief Executive Officer, each of the current members of the Board is an “independent director” for purposes of the Nasdaq Listing Rules and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as the term relates to membership on the Board. The definition of independence under the Nasdaq Listing Rules includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his or her family members, has engaged in various types of business dealings with us. In addition, as further required by the Nasdaq Listing Rules, our Board has made a subjective determination as to each independent director that no material relationships exist that, in the opinion of our Board, would interfere with his exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our Board reviewed and discussed information provided by the directors in questionnaires with questions tailored to the Nasdaq Listing Rules with regard to each director’s business and personal activities as they may relate to us and our management.
Board Leadership Structure
Our Board is currently chaired by our President and Chief Executive Officer, Dr. Chih-Hsiang (Thompson) Lin. The Board believes that combining the positions of Chief Executive Officer and Chairman of the Board, or Chairman, helps to ensure that the Board and management act with a common purpose, providing a single, clear chain of command to execute our strategic initiatives and business plans. In addition, the Board believes that a combined Chief Executive Officer and Chairman is better positioned to act as a bridge between management and the Board, facilitating the regular flow of information. In light of our Chief Executive Officer’s extensive history with and knowledge of our Company, the Board believes that it is advantageous for the Company to combine the positions of Chief Executive Officer and Chairman.
Our Board appointed William H. Yeh as lead independent director of our Board in April 2018. As our lead independent director, Mr. Yeh (i) serves as chair of executive sessions of the independent members of the Board; (ii) serves as chair of meetings of the Board if the Chairman of the Board is absent; (iii) serves as the designated liaison between the independent members of the Board, the full Board and the management of the Company; (iv) approves information sent to the Board; (v) approves meeting agendas of the Board; (vi) approves meeting schedules to assure there is sufficient time for discussion of all agenda items; (vii) has the authority to call meetings of the independent directors; and (viii) if requested by major stockholders, ensures that he is available for consultation and direct communication.
Risk Management
One of the key functions of the Board is informed oversight of our various processes for managing risk. The Board administers this oversight function directly through the Board as a whole, as well as through the standing committees of the Board that address risks associated with their respective areas of oversight. In particular, our Board is responsible for monitoring and assessing risk exposure in our strategic plans, development programs, corporate goals and operating plans. Our audit committee has the responsibility to consider and discuss our major exposures to financial risk and the steps our management takes to monitor and control these exposures, including guidelines, policies and processes. The audit committee also monitors our compliance with various legal and regulatory requirements, including cybersecurity risks, monitors our whistleblower system, and oversees the performance of our internal audit function. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance guidelines and policies. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. In addition, the Board meets with certain members of our executive team, including the heads of our different organizational functions, who discuss the risks and exposures involved in their respective areas of responsibility as well as any developments that could impact our risk profile or other aspects of our business. The Board considers the Company’s risk profile and other aspects of our business in assessing the leadership structure of the Board from time to time.
 
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In 2021, the Board also focused on overseeing the risks that the COVID-19 pandemic presented to the Company. The Board received regular updates during meetings regarding steps taken by management to mitigate the impact of the pandemic.
Executive Sessions
Non-management directors generally meet in executive session without management present. The Board’s policy is to hold executive sessions without the presence of management, including the Chief Executive Officer, who is the only non-independent director.
Meetings of the Board of Directors and Committees
The Board held six meetings during the fiscal year ended December 31, 2021. The Board has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. During the last fiscal year, each of our directors attended at least 75% of the total number of meetings of the Board and all of the committees of the Board on which such director served during that period.
The following table sets forth the standing committees of the Board and the members of each committee as of the date that this Proxy Statement was first made available to our stockholders:
Name of Director
Audit
Compensation
Nominating and
Corporate
Governance
Richard B. Black
Chair
X
Min-Chu (Mike) Chen
X
Chair
William H. Yeh
Chair
X
Che-Wei Lin
X
Elizabeth Loboa
X
Cynthia (Cindy) DeLaney
X
Audit Committee
Our audit committee currently consists of Richard B. Black, Elizabeth Loboa and Min-Chu (Mike) Chen. Our Board has determined that Mr. Black, Dr. Loboa and Dr. Chen each satisfy the independence and financial literacy requirements under the applicable rules and regulations of the SEC and Nasdaq. Mr. Black serves as the chairman of this committee, and our Board has determined that he qualifies as an “audit committee financial expert” as that term is defined in the rules and regulations established by the SEC and has the requisite financial sophistication as defined under the applicable Nasdaq rules. Our audit committee acts pursuant to a written charter that has been adopted by the Board. A copy of the charter is available on the investor relations portion of the Company’s website at www.ao-inc.com. Under its charter, the audit committee’s responsibilities include, but are not limited to:

overseeing management’s implementation and maintenance of a system of internal controls over accounting and financial reporting systems to support the integrity, accuracy, completeness, and timeliness of financial statements and related public filings and disclosures;

overseeing the adoption and implementation of guidelines and policies with respect to risk management, including discussing with the Board significant financial risk exposures and actions taken by Board committees to oversee the policies addressing the risks associated with their respective areas of oversight;

overseeing the establishing and maintenance of the Corporation’s anonymous compliance hotline and website portal, ensuring all non-retaliation policies described in the Code of Business Conduct and Ethics are strictly complied with;

meeting with our independent auditors and with internal financial personnel regarding these matters;

appointing, compensating, retaining and overseeing the work of our independent auditors;
 
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pre-approving audit and non-audit services of our independent auditors;

reviewing our audited financial statements and reports and discussing the statements and reports with our management, including any significant adjustments, management judgments and estimates, new accounting policies and disagreements with management;

establishing procedures for the receipt, retention and treatment of complaints we receive regarding accounting, internal accounting controls or auditing matters, as well as for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters;

reviewing the independence and quality control procedures of the independent auditor and the experience and qualifications of the independent auditor’s senior personnel that are providing us audit services;

reviewing all related-party transactions for approval;

reviewing and reassessing the adequacy of the audit committee’s charter at least annually and recommending any changes to our Board; and

reviewing and evaluating the audit committee’s own performance.
Both our independent auditors and internal financial personnel regularly meet privately with our audit committee and have unrestricted access to this committee.
The audit committee held five meetings during the fiscal year ended December 31, 2021. Additional information regarding the audit committee is set forth in the Report of the Audit Committee immediately following Proposal No. 2.
Compensation Committee
Our compensation committee currently consists of William H. Yeh, Che-Wei Lin and Cynthia (Cindy) DeLaney, each of whom is not an employee and is “independent” as that term is defined in the applicable rules of the SEC and Nasdaq. Mr. Yeh serves as the chairman of this committee. Our compensation committee acts pursuant to a written charter that has been adopted by the Board. A copy of the charter is available on the investor relations portion of the Company’s website at www.ao-inc.com. Pursuant to its charter, our compensation committee has responsibility for developing, implementing and overseeing our executive and incentive compensation policies and programs. Under its current charter, the compensation committee’s responsibilities include, but are not limited to:

reviewing and approving all compensation for the Chief Executive Officer, including incentive-based and equity-based compensation;

reviewing and approving annual performance objectives and goals relevant to compensation for the Chief Executive Officer and evaluating the performance of the Chief Executive Officer;

reviewing and approving incentive-based or equity-based compensation plans in which our executive officers participate;

reviewing and approving all compensation for executive officers, including incentive-based and equity-based compensation, and overseeing the evaluation of management;

considering an executive officer’s performance as it relates to both legal compliance and compliance with internal policies and procedures when determining, setting or approving compensation arrangements;

approving all employment, severance, or change-in-control agreements, special or supplemental benefits, or provisions including the same, applicable to executive officers;

periodically reviewing and advising our Board concerning both regional and industry-wide compensation practices and trends in order to assess the adequacy and competitiveness of our compensation programs for executive officers relative to comparable companies in our industry;

reviewing and reassessing the adequacy of the compensation committee charter and recommending any changes to our Board on an annual basis;
 
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reviewing and evaluating the compensation committee’s own performance;

reviewing the compensation paid to non-employee directors and make recommendations to the Board for any adjustments; and

receiving and reviewing an annual report of all reported transactions in equity securities of the Company of any officer or director who is subject to the reporting and short-swing liability provisions of the Section 16 of the Securities Exchange Act of 1934, as amended.
The compensation committee may delegate its authority to a subcommittee to make grants of compensatory equity awards to executive officers and other employees, provided that these grants are made within established guidelines. In addition, the compensation committee may obtain advice or assistance from compensation consultants, legal counsel or other advisors to perform its duties, provided that the compensation committee shall periodically assess the independence of any such compensation consultant as required by Nasdaq rules and applicable law.
In 2020 the compensation committee retained Radford, which is part of the Reward Solutions practice at Aon plc, as its new compensation consultant for executive officer and director compensation. Radford reports directly to the compensation committee and to the compensation committee chair. While Radford coordinates with our management for data collection, including for obtaining the job descriptions for our executive officers, Radford does not provide any other services to us. The compensation committee has evaluated Radford’s independence pursuant to the listing standards of Nasdaq and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by Radford.
The compensation committee held four meetings during the fiscal year ended December 31, 2021.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee currently consists of Min-Chu (Mike) Chen, William H. Yeh and Richard B. Black, each of whom is not an employee and is otherwise “independent” as that term is defined in the applicable rules of the SEC and Nasdaq. Dr. Chen serves as the chairman of this committee. Our nominating and corporate governance committee oversees and advises the Board with respect to corporate governance matters, assists the Board in identifying and recommending qualified candidates for nomination to the Board, makes recommendations to the Board with respect to assignments to committees of the Board and oversees the evaluation of the Board. The nominating and corporate governance committee acts pursuant to a written charter that has been adopted by the Board. A copy of the charter is available on the investor relations portion of the Company’s website at www.ao-inc.com. Under its current charter, the nominating and corporate governance committee’s responsibilities include, but are not limited to:

identifying, evaluating and recruiting individuals to become Board members and review with the Board from time to time the appropriate skills and characteristics required of Board members in the context of the Company’s business and strategy at the time and the current make-up of the Board; this assessment of Board skills, experience, and background includes, among numerous diverse factors, such as independence; understanding of and experience in manufacturing, technology, finance, and marketing; senior leadership experience; international experience; age; and diversity with respect to race, ethnicity, gender, and geography, which includes its commitment to actively seek women and minority candidates for the pool from which board candidates are chosen;

considering director candidates submitted by stockholders and determining the procedure to be followed by stockholders in submitting such recommendations;

recommending Board committee structure and responsibilities to be included in the charter of each committee of the Board to be submitted to the full Board for consideration;

recommending directors to serve on each Board committee and suggesting rotations for chairpersons of the Board committees as the nominating and corporate governance committee deems appropriate;

recommending corporate governance standards to the Board;

evaluating and recommending any revisions to Board and Board committee meeting policies;

developing principles of corporate governance and recommend such principles to the Board;
 
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working with the Audit Committee of the Company in fulfilling its duties related to corporate governance and oversight of the Company’s compliance with applicable laws and regulations;

reviewing the effectiveness of the operation of the Board and Board committees, including the corporate governance and operating practices;

reviewing and reassessing the adequacy of the nominating and corporate governance committee charter and recommending any changes to the Board; and

reviewing and evaluating the nominating and corporate governance committee’s own performance.
The nominating and corporate governance committee held one meeting during the fiscal year ended December 31, 2021.
Director Nominations
Our nominating and corporate governance committee is responsible for, among other things, assisting our Board in identifying qualified director nominees and recommending nominees for each annual meeting of stockholders. The nominating and corporate governance committee’s goal is to assemble a Board that brings to our Company a diversity of experience in areas that are relevant to our business and that complies with the Nasdaq Listing Rules and applicable SEC rules and regulations. The nominating and corporate governance committee generally considers the diversity of nominees in terms of knowledge, experience, background, skills, expertise and other demographic factors, as well as with respect to gender, racial and ethnic diversity. When considering nominees for election as directors, the nominating and corporate governance committee reviews the needs of the Board for various skills, background, experience and expected contributions and the qualification standards established from time to time by the nominating and corporate governance committee. The nominating and corporate governance committee believes that directors must also have an inquisitive and objective outlook and mature judgment. Director candidates must have sufficient time available in the judgment of the nominating and corporate governance committee to perform all Board and committee responsibilities. Members of the Board are expected to rigorously prepare for, attend and participate in all meetings of the Board and applicable committee meetings. Other than the foregoing and the applicable rules regarding director qualification, there are no stated minimum criteria for director nominees.
The nominating and corporate governance committee evaluates annually the current members of the Board whose terms are expiring and who are willing to continue in service against the criteria set forth above in determining whether to recommend these directors for election. The nominating and corporate governance committee assesses regularly the optimum size of the Board and its committees and the needs of the Board for various skills, background and business experience in determining if the Board requires additional candidates for nomination.
Candidates for director nominations come to our attention from time to time through incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of the nominating and corporate governance committee at any point during the year. Such candidates are to be evaluated against the criteria set forth above. If the nominating and corporate governance committee believes at any time that it is desirable that the Board consider additional candidates for nomination, the committee may poll directors and management for suggestions or conduct research to identify possible candidates and may engage, if the nominating and corporate governance committee believes it is appropriate, a third party search firm to assist in identifying qualified candidates.
Our bylaws permit stockholders to nominate directors for consideration at an annual meeting. The nominating and corporate governance committee will consider director candidates validly recommended by stockholders. The process for evaluating stockholder-recommended nominees is no different than the process for evaluating nominees identified by the nominating and corporate governance committee. For more information regarding the requirements for stockholders to validly submit a nomination for director, see “Stockholder Proposals or Nominations to Be Presented at Next Annual Meeting” elsewhere in this Proxy Statement. In addition, our “Procedure for Submitting Stockholder Nominations to the Board of Directors” is available on the investor relations section of our website at www.ao-inc.com.
 
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Communications with the Board
Any matter intended for the Board, or for any individual member or members of our Board, should be directed to our General Counsel at 13139 Jess Pirtle Blvd., Sugar Land, TX 77478, with a request to forward the communication to the intended recipient or recipients. In general, any stockholder communication delivered to our General Counsel for forwarding to our Board or specified Board member or members will be forwarded in accordance with the stockholder’s instructions. However, our General Counsel reserves the right not to forward to Board members any abusive, threatening or otherwise inappropriate materials.
Stockholder Engagement
Historically, our management team has interacted with stockholders primarily in connection with industry conferences, investor updates, and fundraising activity. In light of our continued growth as a company and our commitment to long-term investor value creation, in 2020 we engaged in additional stockholder outreach efforts. In doing so, we intended to seek stockholders’ perspective on our compensation programs, our ongoing efforts to improve diversity on our Board, and our Board structure generally. We reached out to our top stockholders representing approximately 45% of our outstanding shares and engaged with stockholders representing approximately 15% of outstanding shares on these matters.
Our Board has identified gender diversity as an area of focus for our nominating and corporate governance committee, in part based on stockholder input. As a result, in the past two years, we have nominated and the stockholders have approved two female Board members.
We heard that some stockholders may be interested in: more disclosure regarding succession planning; reducing the thresholds to propose charter and bylaws amendments; other changes viewed as good governance practices to improve stockholder access.
In addition, our Board recognizes that stockholders may have differing opinions with respect to classified, or staggered, boards of directors. Our Board has maintained its classified structure that was established prior to our initial public offering because a staggered board can enhance stability and continuity by ensuring that each director possesses the experience and background to understand our complex business, including our management’s strategy for growth. A classified board also encourages directors to have a long-term perspective and reduces vulnerability to invasive and coercive takeover tactics that do not benefit stockholders and may divert valuable management resources.
We value our stockholders’ perspective on these matters and others and look forward to the information that we will be able to gather through additional stockholder engagement.
Director Attendance at Annual Meetings
We do not have a formal policy regarding Board members attendance at annual meetings, but all members of our Board are encouraged to attend each annual meeting of stockholders. We attempt to schedule our annual meeting of stockholders at a time and date to accommodate attendance by members of our Board taking into account the directors’ schedules. Three of our directors attended our 2021 Annual Meeting of Stockholders.
Code of Business Conduct and Ethics and Committee Charters
We have a Code of Business Conduct and Ethics (the “Code”), that applies to all of our employees, officers and directors. The Code is available on the investor relations portion of our website at www.ao-inc.com. A printed copy of the Code may also be obtained by any stockholder free of charge upon request to the Corporate Secretary, Applied Optoelectronics, Inc., 13139 Jess Pirtle Blvd., Sugar Land, TX 77478. Any substantive amendment to or waiver of any provision of the Code may be made only by the Board, and will be disclosed on our website to the extent required.
Each of the audit committee, the compensation committee and the nominating and corporate governance committee have a written charter. Each committee charter is available on the investor relations portion of our website at www.ao-inc.com.
 
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Compensation Committee Interlocks and Insider Participation
None of our employees, executive officers, or former executive officers serve as a member of our compensation committee, and none of our executive officers serve on any other committee serving an equivalent function for any other entity that has one or more of its executive officers serving as a member of our Board or compensation committee.
Risk Assessment of Compensation Programs
We do not believe that our compensation programs create risks that are reasonably likely to have a material adverse effect on our Company. We believe that the combination of different types of compensation as well as the structure and overall amount of compensation, together with our internal controls and oversight by the Board, mitigates potential risks. We also provide a base level of equity compensation through our equity incentive program, helping to smooth out the impact of unexpected challenges to our operating plan.
 
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DELINQUENT SECTION 16(a) REPORTS
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers, and persons who own more than 10% of our common stock to file reports of their ownership and changes in ownership of our common stock with the SEC. Based solely on our review of the reports filed during 2021 and questionnaires from our directors and executive officers, we determined that no director, executive officer, or beneficial owner of more than 10% of our common stock failed to file a report on a timely basis during 2021, except for one late Form 4 filing for each of Dr. Chih-Hsiang (Thompson) Lin, Dr. Stefan Murry, Dr. Fred Chang, Mr. Joshua Yeh and Mr. David Kuo to report one transaction.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The audit committee of our Board has selected Grant Thornton LLP (“Grant Thornton”) to serve as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2022. Grant Thornton has served as our auditor since 2008. A representative of Grant Thornton is expected to be present at the Annual Meeting to be available to provide a statement if they desire to do so and respond to appropriate questions.
Fees Billed by Grant Thornton
The following table sets forth the aggregate fees billed by Grant Thornton for services provided in the fiscal years ended December 31, 2021 and 2020:
Fiscal 2021
Fiscal 2020
Audit fees(1)
$ 1,087,525 $ 1,150,725
Audit-related fees(2)
$ $
Tax fees(3)
$ 29,836 $ 53,012
All other fees(4)
$ $ 6,350
Total
$ 1,117,361 $ 1,210,087
(1)
Audit fees consist of fees billed for professional services rendered in connection with the audit of our consolidated annual financial statements, audit of internal control over financial reporting, and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements, consultations concerning financial reporting in connection with acquisitions and issuances of auditor consents and comfort letters in connection with SEC registration statements and related SEC registered securities offerings.
(2)
No audit-related fees were billed for services provided in the fiscal years ended December 31, 2021 and 2020.
(3)
All tax fees billed for services provided in the fiscal years ended December 31, 2021 and 2020 relate to the Texas Enterprise Credit program.
(4)
All other fees consist of fees for access to the auditor’s accounting research portal.
Policy on Audit Committee Pre-approval of Audit and Non-audit Services Performed by Independent Registered Public Accounting Firm
The audit committee has determined that all services performed by Grant Thornton for the fiscal years ended December 31, 2021 and 2020 were compatible with maintaining the independence of Grant Thornton. While the audit committee does not have a written policy with respect to the pre-approval of audit and non-audit services, in practice, it is the consistent policy of the audit committee to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. These services
 
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may include audit services, audit-related services, tax services and other services. Unless the specific service has been pre-approved with respect to that year, the audit committee must approve the permitted service before the independent registered public accounting firm is engaged to perform it. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval process.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting is required for approval of this proposal. Abstentions and broker non-votes are not treated as votes cast, and therefore will have no effect on the advisory vote. Because your vote is advisory, it will not be binding on the Board or the Company. Your bank or broker will have discretion to vote any uninstructed shares on this proposal. If the stockholders do not approve the ratification of Grant Thornton as our independent registered public accounting firm, the audit committee will review its future selection in light of the vote result, but may still appoint Grant Thornton in the future. Even if the selection is ratified, the audit committee in its discretion may appoint a different registered public accounting firm at any time during the year if the committee determines that such change would be appropriate.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.
 
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REPORT OF THE AUDIT COMMITTEE
The audit committee oversees the Company’s financial reporting process on behalf of the Board. The audit committee is responsible for retaining the Company’s independent registered public accounting firm, evaluating its independence, qualifications and performance, and approving in advance the engagement of the independent registered public accounting firm for all audit and non-audit services. The audit committee’s specific responsibilities are set forth in its charter. The audit committee reviews its charter at least annually.
Management has the primary responsibility for the financial statements and the financial reporting process, including internal control systems, and procedures designed to ensure compliance with applicable laws and regulations. The Company’s independent registered public accounting firm, Grant Thornton, is responsible for expressing an opinion as to the conformity of our audited financial statements with generally accepted accounting principles.
The audit committee has reviewed and discussed with management the Company’s audited financial statements. The audit committee has discussed with the independent registered public accounting firm the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) and the SEC. In addition, the audit committee has met with the independent registered public accounting firm, with and without management present, to discuss the overall scope of the independent registered public accounting firm’s audit, the results of its examinations, its evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
The audit committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the audit committee concerning independence and has discussed with the independent registered public accounting firm its independence.
Based on the review and discussions referred to above, the audit committee recommended to the Company’s Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Respectfully submitted,
AUDIT COMMITTEE
Richard B. Black, Chairman
Elizabeth Loboa
Min-Chu (Mike) Chen
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the below section titled “Compensation Discussion and Analysis” with management. Based on such review and discussion, the compensation committee has recommended to the Board that the section titled “Compensation Discussion and Analysis” be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Respectfully submitted,
COMPENSATION COMMITTEE
William H. Yeh, Chairman
Che-Wei Lin
Cynthia (Cindy) DeLaney
 
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PROPOSAL NO. 3
ADVISORY VOTE ON OUR EXECUTIVE COMPENSATION
In accordance with Section 14A of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, and related rules of the SEC, we are providing stockholders an advisory vote, or say-on-pay vote, on the compensation of our named executive officers as described in this Proxy Statement.
At our 2021 annual meeting of stockholders, 84% of votes cast voted in favor of our executive compensation program, and as described in our Compensation Discussion and Analysis, our compensation committee made significant changes to our cash and equity incentive programs in response to this vote. We plan to hold annual say-on-pay votes until our next say-on-frequency vote at our 2024 annual meeting of stockholders.
The say-on-pay vote is a non-binding vote on the compensation of our named executive officers as described in this Proxy Statement in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation and accompanying narrative disclosure. The say-on-pay vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement.
In connection with this proposal, you are encouraged to carefully review the Compensation Discussion and Analysis section as well as the information contained in the compensation tables and accompanying narrative disclosure contained in this Proxy Statement. As described more fully in the Compensation Discussion and Analysis section, our compensation philosophy, policies and practices seek to pay for performance and align stockholder and executive interests. Consistent with that philosophy, the compensation committee of the Board believes our executive compensation program is reasonable and aligned with stockholder interests.
The Board recommends that you vote in favor of the following advisory resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed in the Proxy Statement for this Annual Meeting pursuant to Rule 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and accompanying narrative disclosure, is hereby approved.”
The vote on this proposal is advisory and nonbinding on the Company. However, the Board and the compensation committee will consider the outcome of the vote when making future compensation decisions regarding our named executive officers.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes cast on the proposal at the Annual Meeting is required to approve this Proposal No. 3.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF OUR EXECUTIVE COMPENSATION AS DESCRIBED IN THIS PROXY STATEMENT.
 
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EXECUTIVE OFFICERS
The following table sets forth certain information regarding our executive officers.
Name
Age
Position(s)
Chih-Hsiang (Thompson) Lin
59
President, Chief Executive Officer and Chairman of the Board of Directors
Stefan J. Murry
49
Chief Financial Officer and Chief Strategy Officer
Hung-Lun (Fred) Chang
58
Senior Vice President and North America General Manager
Shu-Hua (Joshua) Yeh
56
Senior Vice President and Asia General Manager
David C. Kuo
39
Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
Dr. Chih-Hsiang (Thompson) Lin’s biography can be found on page 5 of this Proxy Statement with the biographies of the other members of the Board. Biographies for our other executive officers, including our other named executive officers, are below.
Stefan J. Murry, Ph.D., has served as our Chief Financial Officer since August 2014. Previously, Dr. Murry served as our Chief Strategy Officer from December 2012, our Vice President of Sales and Marketing from June 2004 until December 2012, our Director of Sales and Marketing from January 2000 to June 2004 and as a Senior Engineer of Device Packaging from February 1997 to January 2000. He also previously served as Research Associate from 1991 to 1999 and Mission Control Specialist from 1992 to 1997 with the Space Vacuum Epitaxy Center in Houston, Texas. Dr. Murry has been issued multiple patents in the optoelectronics industry, as well as in various related and complimentary industries. Dr. Murry received BS and MS degrees in Physics and a Ph.D. in Electrical Engineering from the University of Houston.
Hung-Lun (Fred) Chang, Ph.D., has served as our North America General Manager and Senior Vice President of Optical Component Business Unit since October 2012. Previously, Dr. Chang served as Vice President of our Optical Module Division from March 2005 until October 2012, our Director of Manufacturing from June 2002 to March 2004, and as our Deputy Packaging Manager from April 2001 to May 2002. Dr. Chang has held numerous positions in the optoelectronics industry throughout his career. His most recent position prior to joining us was Deputy Manager from 2000 to 2001 of the Optical Active Component Group at Hon-Hai Precision Industry Co., Ltd., which is based in Taiwan. He was also a researcher and project manager of the Optoelectronic Module Technology group at Chunghwa Telecom Co., Ltd. from 1996 to 2000. Dr. Chang received a BS degree in Electrophysics and a Ph.D. in Electro-Optical Engineering from National Chiao Tung University in Taiwan.
Shu-Hua (Joshua) Yeh has served as our Asia General Manager since February 2015 and as Senior Vice President of our Network Equipment Module Business Unit since November 2012. Previously, Mr. Yeh served as our General Manager of our Video Equipment Division of Global Technology Inc., our China subsidiary, since its acquisition by us in March 2006 and had served as its President and Chief Executive Officer from April 2002 until the acquisition. From May 1995 to April 2002, Mr. Yeh served as a Vice President of Sales and Marketing of Twoway CATV Technology Inc. Mr. Yeh received a BS degree in Mechanical Engineering and an MS in Automatic Control Science from National Chung Shing University in Taiwan.
David C. Kuo has served as our Vice President, General Counsel and Chief Compliance Officer since August 2013 and as our Corporate Secretary since November 2012. Previously, Mr. Kuo served as our Assistant General Counsel from May 2009 until August 2013, and as our Asia Legal Manager from January 2011 until August 2013. Mr. Kuo holds a JD from South Texas College of Law and a BBA degree in Real Estate from Baylor University.
Our executive officers are elected by, and serve, at the discretion of our Board. There are no family relationships among any of our directors or executive officers.
 
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COMPENSATION OF NAMED EXECUTIVE OFFICERS AND DIRECTORS
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the compensation program for our named executive officers. For 2021, these individuals were:

Chih-Hsiang (Thompson) Lin, our President and Chief Executive Officer (our “CEO”);

Stefan J. Murry, our Chief Financial Officer and Chief Strategy Officer (our “CFO”);

Hung-Lun (Fred) Chang, our Senior Vice President and North America General Manager;

Shu-Hua (Joshua) Yeh, our Senior Vice President and Asia General Manager; and

David C. Kuo, our Vice President, General Counsel, Chief Compliance Officer and Secretary.
This Compensation Discussion and Analysis provides an overview of our executive compensation philosophy and objectives and describes the decisions made regarding the material elements of our executive compensation program during 2021.
Executive Summary
Background on Our 2021
We are a leading, vertically integrated provider of fiber optic networking products, primarily for four networking end markets: internet data center, cable television (“CATV”), telecommunications, and fiber to the home. We design and manufacture a range of optical communications products at varying levels of integration, from components, subassemblies and modules to complete turn key equipment.
Our 2021 largely continued the trends we experienced beginning in late 2020, with declining revenues in our datacenter business due to customers reducing investments in older 40G technology, while making only targeted investments in 100G technology. Towards the end of the year, however we received our first orders for our state of the art 400G products, which we expect to grow in terms of revenue in 2022. In our CATV business, the trend of increasing revenue that began mid-way through 2020 also continued through 2021, which was a record year for the Company in terms of CATV revenue. Supply chain challenges negatively impacted gross margins and revenue, especially later in the year as shortages of semiconductor materials and other key components increased costs and reduced our ability to supply product relative to customer expectations.
At this time last year, we identified three key business goals:
1.
Mitigate the effects of COVID-19 and resulting supply chain issues;
2.
Grow our CATV revenue; and
3.
Retain our key leadership team.
Due to the severe and unanticipated shortage of semiconductor materials and other electronic components, we were unable to completely mitigate all supply chain challenges in the year, however we believe that we took appropriate measures to minimize the impact as much as possible. Specifically, we increased our inventory of key raw materials early as the supply of components began to become strained, we also initiated engineering projects to add additional alternative suppliers for many components and where possible to redesign products that used single-source components that we knew or anticipated would have supply challenges. As noted above, we were successful in increasing our CATV revenue, which increased 148% compared to 2020. Finally, we did not experience a loss of any of our key leadership team.
2021 Executive Compensation Highlights
The compensation committee took the following key actions with respect to the compensation of our named executive officers for 2021, mindful of the need to balance rigorous pay-for-performance with the need to retain our critical talent:
 
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Base Salary—No adjustments, except a 5% increase to our General Counsel who is at the 25th percentile compared to our peers.

Annual Cash Bonuses—Continued the four-tier performance goal structure implemented in 2019, with performance goals based on the Company’s operating plan for the year.

Long-Term Incentive Compensation—Established performance based and time-based equity grants. The performance based awards have a minimum, reduced, target and maximum award sizes for each of our executive officers based on a dollar value with performance goals based on stock price hurdle and total stockholder return over a three year period compared to the Company’s peer group.
The compensation committee set the total target pay mix set for our CEO and our other named executive officers as follows:
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Say-on-Pay Vote and Stockholder Engagement on Compensation
Say-on-Pay Vote
Our say-on-pay resolution received 84% approval at our 2021 annual meeting of stockholders. Starting in 2020, we implemented a stockholder outreach program with a focus on understanding stockholder concerns regarding our executive compensation.
Through these engagements, which included our chief financial officer, general counsel, and human resources manager and a member of our compensation committee and were conducted during our fiscal year ended February 2021, we received important feedback that led our compensation committee to adopt several changes to our executive compensation program for fiscal 2021. These changes are responsive to what we heard from stockholder, as summarized in the chart below. For more details on our stockholder engagement program see the “Stockholder Engagement” section above.
What We Heard
How We Responded
Stockholders want to see clear explanation of how compensation committee looks at goals, targets, plans to see why the metric and target was set and how those translate to payouts. We enhanced our explanation included in these materials for how the compensation committee determined metrics and targets for performance and how actual performance translated to payouts.
Long-term incentive should be 50% performance based. All our long-term incentives are awarded in the form of restricted stock units based on a fixed value that is split with 50% vesting based solely on continued service over time and 50% vesting based on achievement of pre-determined performance goals for a three-year period that involve a combination of total shareholder return, or TSR, and stock price appreciation metrics.
Performance goals should not just automatically be tied to stock price; need to clearly explain priorities and how measuring success. For 2021 the compensation committee worked with Radford to determine appropriate performance goals, which for 2021 include stock price, relative
 
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What We Heard
How We Responded
TSR and financial metrics tied to the Company’s operating plan.
Stockholders want to see clear disclosure and explanation of any discretion taken by the compensation committee. Starting in 2021, the compensation committee has eliminated discretionary payments from our executive officer compensation program.
Stockholders want to see 3-year time frame for performance metrics. The compensation committee implemented a 3-year time frame for its performance-vesting restricted stock units.
Stockholders want to see high level explanation of stockholder engagement and what actions were taken after the engagement. This section and the “Stockholder Engagement” section above outline our stockholder engagement activities and the actions we have taken in response.
Executive Compensation Policies and Practices
At the start of 2021, we were just seven years out from our initial public offering and continued our transition toward the compensation governance practices adopted by our more established peers. The following summarizes our current policies and practices:
What We Do
What We Don’t Do

Maintain an Independent Compensation Committee. The compensation committee consists solely of independent directors.

No Generous Perquisites. We provide only limited perquisites or personal benefits to our executive officers.

Retain an Independent Compensation Advisor. The compensation committee engages its own compensation advisor to provide information and analysis regarding our executive and equity incentive compensation programs.

No Exclusive Executive Retirement Plans. We do not offer defined benefit pension arrangements and we do not provide retirement plans to our executive officers that are different from or in addition to those offered to our other employees.

Annual Executive Compensation Review. The compensation committee annually reviews our compensation programs and compensation-related risks to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.

No Special Health or Welfare Benefits. Our executive officers participate in broad-based Company-sponsored health and welfare benefits programs on the same basis as our other full-time, salaried employees.

Compensation At-Risk. Our executive compensation program is designed so that a significant portion of compensation is “at risk” based on our performance to align the interests of our executive officers and stockholders.

No Hedging or Pledging of our Equity Securities. Our insider trading policy prohibits our executive officers, members of the Board and other employees from hedging or pledging our equity securities.

Succession Planning. We review the risks associated with our key executive officer position to ensure adequate succession plans are in place.

No Dividends or Dividend Equivalents Payable on Unvested Equity Awards. We do not pay dividends or dividend equivalents on unvested restricted stock unit awards.
Executive Compensation Philosophy
We have designed our executive compensation program to achieve the following primary objectives:

Provide compensation and benefit levels that will attract, retain, motivate, and reward a highly-talented team of executive officers within the context of responsible cost management;
 
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Establish a direct link between our financial and operational results and strategic objectives and the compensation of our executive officers; and

Align the interests and objectives of our executive officers with those of our stockholders by linking the long-term incentive compensation opportunities to stockholder value creation and their cash incentives to our annual performance.
Primary Program Elements
We structure the annual compensation of our executive officers, including the named executive officers, using three principal elements: base salary, annual performance-based cash bonus opportunities, and time-based equity and performance based-equity opportunities. The compensation committee retains the flexibility to change the proportions as between these elements each year, to allow us to take into account the varying importance of our primary compensation objectives based on facts and circumstances each year.
Governance of Executive Compensation Program
Role of the Compensation Committee
The compensation committee has the primary responsibility of developing, implementing and overseeing our executive and incentive compensation policies and programs. While the compensation committee reports its decisions to and takes into account the feedback of the Board, the compensation committee generally makes the final decisions regarding the compensation of our named executive officers.
Compensation-Setting Process
The compensation committee determines the target total direct compensation opportunities for our executive officers, including our named executive officers. In any given year, the compensation committee considers some or all of the following factors:

the financial and operational objectives established by the Board for the year at issue;

the anticipated role that officer will play in the coming year in achieving those objectives and the cost and difficulty of replacing that individual;

internal pay equity among our executive officers;

each individual executive officer’s skills, experience, qualifications and role relative to other similarly-situated executives at the companies in our compensation peer group;

the annual performance review for each executive officer, including contributions to our overall performance, demonstrated leadership and significant individual achievements;

our financial performance relative to our peers;

the compensation practices of our compensation peer group and the positioning of each executive officer’s compensation as compared to our peer group; and

the recommendations provided by our CEO with respect to the compensation of our other executive officers.
These factors provide a framework, with no single factor being determinative in setting pay levels.
Role of Our Officers
The compensation committee relies on the observations and information provided by our executive officers. Our Chief Executive Officer provides evaluations of the performance of the other executive officers and makes recommendations regarding changes to executive officer compensation (other than for himself), the broader Company-wide cash incentive plan, and budgets for equity awards. Our Chief Financial Officer provides information and recommendations regarding our annual corporate operating budget and the related performance goals for our equity and cash incentive programs. Our in-house legal team, including our General Counsel, provides additional guidance as requested by the compensation committee. Finally, the benefits
 
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committee, consisting of members of our human resources, legal, and accounting departments, provides guidance to the compensation committee on broad-based health, welfare and retirement benefit plans and proposed changes to those plans. Our officers recuse themselves from discussions and recommendations regarding their own compensation.
Role of Compensation Consultant
In 2020 the compensation committee retained Radford, which is part of the Reward Solutions practice at Aon plc, as its new compensation consultant to assist with establishing an updated peer group for 2021 and to perform benchmarking for executive officer and director compensation. Radford reports directly to the compensation committee and to the compensation committee chair. While Radford coordinates with our management for data collection, including for obtaining the job descriptions for our executive officers, Radford does not provide any other services to us. The compensation committee has evaluated Radford’s independence pursuant to the listing standards of Nasdaq and the relevant SEC rules and has determined that no conflict of interest has arisen as a result of the work performed by Radford.
Competitive Positioning
For purposes of comparing our executive compensation against the competitive market, the compensation committee reviews and considers the compensation levels and practices of a group of peer companies. This compensation peer group consists of companies within the industry with a similar size profile in terms of revenue and market capitalization.
With respect to 2021 compensation decisions, the compensation committee used the following compensation peer group to assist with the determination of compensation for our executive officers:
ADTRAN DSP Group
Alpha and Omega Semiconductor EMCORE
Aviat networks Harmonic
Axcelis Technologies Inseego
CalAmp KVH Industries
Calix NeoPhotonics
Casa Systems Photronics
Cohu Ribbon Communications
Digi Xperi
2021 Compensation Decisions
2021 Base Salary
Base salary represents the fixed portion of the target direct compensation for our executive officers and serves to attract and retain highly-talented individuals. The compensation committee determines adjustments to base salaries on an annual basis as well as in the event of a promotion or significant change in responsibilities.
In February 2021, in considering base salary adjustments, the compensation committee focused on the need to control cash costs given 2020 revenue performance as well as the need to retain our leadership to continue steering the Company through the unexpected operational challenges. The compensation committee believes that, under normal performance situations, targeting base salary at the median as compared to our peer group companies is appropriate and has historically provided for base salary adjustments that ranged from 3%-10%. However, given the need to conserve cash, the compensation committee benchmarked our executive compensation to the median base salary of our peers and limited base salary increases to 5% for only one of our executive officers who was well below the median.
 
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Named Executive Officer
2020 Base Salary
2021 Base Salary
% Change
Chih-Hsiang (Thompson) Lin $ 539,259 $ 539,259 0%
Stefan J. Murry $ 355,391 $ 355,391 0%
Hung-Lun (Fred) Chang $ 326,017 $ 326,017 0%
Shu-Hua (Joshua) Yeh $ 338,582 $ 354,057 0%
David C. Kuo $ 222,416 $ 233,537 5%
The preceding table shows the base salary changes that went into effect on March 1, 2021. Amounts for Mr. Yeh are paid in NTD (New Taiwan dollar) and RMB (Chinese Yuan Renminbi) but are reported in USD (United States dollar). The actual base salary amounts paid to our named executive officers in 2021 are set forth in the “2021 Summary Compensation Table” below.
2021 Annual Cash Bonuses
We use annual cash incentive opportunities to attract and retain our executive officers consistent with market practice, to reward our executive officers for achievement of our corporate objectives, and to recognize outstanding individual contributions. The compensation committee has also determined to eliminate discretionary cash bonuses from our executive officer compensation program.
2021 Target Annual Cash Bonus Opportunities
In establishing the target annual cash bonus opportunities for 2021, the compensation committee considered the information provided by Radford as well as the significant reduction in the target annual cash bonus opportunities implemented by the compensation committee for 2020, which had represented a 30% decrease as compared to 2019, in order to allow the Company to conserve cash while still providing an adequate incentive to retain our critical leadership. In light of these considerations and recommendations from Radford, the compensation committee set the target percentages for the 2021 annual cash bonus consistent with the 50th percentile as compared to our peer group to provide our executive officers with an appropriate level of reward for achievement of target performance of our critical corporate objectives described below.
Named Executive Officer
2020 Target
(% of base salary)
2021 Target
(% of base salary)
Chih-Hsiang (Thompson) Lin 51.33% 100%
Stefan J. Murry 28.0% 50.0%
Hung-Lun (Fred) Chang 28.0% 50.0%
Shu-Hua (Joshua) Yeh 28.0% 50.0%
David C. Kuo 23.33% 50.0%
The bonus opportunity is determined via linear interpolation, based on corporate performance, between the following pre-established amounts (expressed as a percentage of base salary):
Named Executive Officer
Performance Below
Minimum Level
Reduced
Performance
Target
Performance
Performance At or
Above Maximum Level
Chih-Hsiang (Thompson) Lin 0 50% 100% 125.0%
Stefan J. Murry 0 25.0% 50.0% 62.5%
Hung-Lun (Fred) Chang 0 25.0% 50.0% 62.5%
Shu-Hua (Joshua) Yeh 0 25.0% 50.0% 62.5%
David C. Kuo 0 25.0% 50.0% 62.5%
2021 Corporate Performance Objectives
Since 2019, the compensation committee has focused solely on quantitative performance metrics for the annual cash bonus. Consistent with recent years, for 2021 the compensation committee decided to use GAAP
 
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revenue and non-GAAP operating income (loss), weighted equally, as the principal measures for the annual cash incentive program for our named executive officers. These metrics are the primary metrics the Company uses for our annual operating plan. For this purpose, non-GAAP operating income (loss) means operating loss as defined under generally accepted accounting principles, excluding amortization of intangible assets, stock-based compensation expense, non-recurring expenses, unrealized foreign exchange gain (loss), losses from the disposal of idle assets, if any, non-recurring tax expenses (benefits), and expenses associated with discontinued products, if any, from our GAAP net income (loss), plus the amount accrued for cash bonuses. The compensation committee set the performance goals for 2021 based on increasing revenue year-over-year and reducing non-GAAP loss to align the incentive compensation with the key performance needed for the Company to achieve its annual operating plan. The compensation committee set the minimum, reduced, target, and maximum performance levels for the corporate performance measures at levels that are more rigorous as compared to 2020, and that are consistent with the goals for projected performance for the Company for the year under our annual operating plan as follows:
Performance Measure
Minimum
Performance Level
Reduced
Performance Level
Target
Performance Level
Maximum
Performance Level
Revenue ≤$ 194,300,000 $ 218,600,000 $ 242,900,000 ≥$ 255,000,000
Non-GAAP Operating Income (Loss)
≥$ (31,900,000) $ (25,800,000) $ (19,800,000) ≤$ (16,700,000)
The compensation committee determined that no annual cash incentive would be earned with respect to a metric for performance below the minimum level set forth above. Performance between these points would be determined using straight-line interpolation. The compensation committee would then take the average performance level (given the equal weighting) and multiply the result by the target opportunity to determine the amount actually earned.
2021 Actual Performance and Resulting Payments
In February 2022, the compensation committee determined that for 2021 we generated GAAP revenue of $211.6 million and non-GAAP operating loss of $29.6 million, resulting in payments at approximately 27% of the target awards.
The dollar amounts for the target cash bonus opportunity as compared to the amounts earned are as follows:
Named Executive Officer
Target Cash Bonus
Opportunity
Actual Cash Bonus
Earned
Actual as
Percentage of Target
Chih-Hsiang (Thompson) Lin $ 539,259 $ 146,987 27.26%
Stefan J. Murry $ 177,696 $ 48,438 27.26%
Hung-Lun (Fred) Chang $ 163,009 $ 44,432 27.26%
Shu-Hua (Joshua) Yeh $ 169,291 $ 44,501 27.29%(1)
David C. Kuo $ 116,769 $ 31,827 27.26%
(1)
Amounts for Mr. Yeh are paid in NTD and RMD. Conversion rates create slight difference in percentage.
Equity Incentive Compensation
We use equity incentive compensation to attract and retain our talent, to motivate them to achieve our corporate goals and to align their financial incentives with stockholder returns.
Awards for 2021 Performance
In 2021 the compensation committee granted awards of restricted stock units to the named executive officers, 50% of which vest quarterly over 4-year period based on continued service and the remaining 50% are earned with respect to a variable number of shares (between 0 and 200% of the target number of shares) based on the Company’s achievement of preset performance goals. The performance-vesting restricted stock units granted in 2021 will vest 50% based on achievement of specified levels of total stockholder return, or TSR,
 
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and 50% based on acheivement of specified stock price appreciation for a three-year performance period ending December 31, 2023.
In April 2021 the compensation committee approved the amounts for awards of restricted stock units to be granted to the named executive officers pursuant to this new approach as follows:
Named Executive Officer
Time-Vesting
Restricted Stock Units*
Target Amount
Performance-Vesting
Restricted Stock Units*
Total Value at
Target Performance
Chih-Hsiang (Thompson) Lin $ 1,000,000 $ 1,000,000 $ 2,000,000
Stefan J. Murry $ 350,000 $ 350,000 $ 700,000
Hung-Lun (Fred) Chang $ 320,000 $ 320,000 $ 640,000
Shu-Hua (Joshua) Yeh $ 320,000 $ 320,000 $ 640,000
David C. Kuo $ 200,000 $ 200,000 $ 400,000
* Value was converted to number of shares based on average closing price for prior 30 trading-days.
The compensation committee granted these restricted stock units to the named executive officers under the new 2021 Equity Incentive Plan immediately following stockholder approval of the 2021 Equity Incentive Plan. The number of shares and grant date fair values for these awards are disclosed in the Summary Compensation table and 2021 Grant of Plan-Based Awards table on pages 30 to 32.
Welfare and Health Benefits
Our named executive officers are eligible to participate in our broad based health and welfare programs on the same terms as our non-executive employees. These benefits include medical, vision and dental benefits, life insurance benefits, and short-term and long-term disability insurance. Our executive officers are eligible to participate in the same life insurance program as is offered to our employees at or above the level of deputy director. In addition, we maintain a Section 401(k) savings plan that permits our employees, including our executive officers, with the opportunity to save for retirement on a tax-advantaged basis. All participant interests in their contributions are fully vested when contributed. In structuring these benefit programs, we seek to provide an aggregate level of benefits that are comparable to those provided by similar companies.
Perquisites and Other Personal Benefits
We generally do not provide perquisites to our executive officers, except where we believe it is appropriate to assist an individual in the performance of his or her duties, to make our executive officers more efficient and effective and for recruitment and retention purposes. During 2021, we provided our CEO, Dr. Lin, with the use of a company-leased automobile and we provided Mr. Yeh with a housing allowance for an apartment in Ningbo, China, given his responsibilities for managing operations in both China and Taiwan.
Employment Agreements & Post-Employment Compensation
We have entered into written agreements providing for at will employment with our CEO and each of our other named executive officers. These employment agreements provided for their initial base salary and target bonus opportunity, as well as severance eligibility in the event of qualifying terminations of employment, including a termination of employment following a change of control of the Company (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change of control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction.
We believe that having in place reasonable severance rights, particularly for terminations in connection with a change of control, allow us to attract and retain highly-qualified executive officers, permit those officers to focus on the best interests of the Company without undue concern for their own financial position in a change of control, and reduce conflict at the time of a termination through a pre-negotiated package conditioned on signing a release of claims.
 
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For detailed descriptions of the post-employment compensation arrangements we maintained with our named executive officers for 2021, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Potential Payments Upon Termination or Change of Control” below.
Other Compensation Policies and Practices
Policies on Hedging and Pledging
Our insider trading policy prohibits hedging and pledging of our equity securities by our employees, including our executive officer, and the non-employee members of the Board, including specifically as follows:

Short-sales of our equity securities, as well as transactions in puts, calls, or other derivative securities involving our common stock, on an exchange or in any other organized market, by our employees, including our executive officers, and the non-employee members of the Board are prohibited;

Hedging or monetization transactions involving our equity securities, such as zero-cost collars and forward sale contracts, by our employees, including our executive officers, and the non-employee members of the Board are prohibited; and

Holding our equity securities in a margin account or pledging our securities as collateral for a loan by our employees, including our executive officers, and the non-employee members of the Board are prohibited.
Clawback Policy
We endeavor to make a substantial portion of our executive officers’ compensation dependent on our overall financial performance. We have a clawback policy in which we may seek the recovery or forfeiture of incentive compensation paid by us, including cash, equity or equity-based compensation in the event we restate our financial statements under certain circumstances. The clawback policy applies to our Section 16 officers, any employee who was eligible to receive incentive compensation and whose conduct contributed to the need for a restatement and any other former Section 16 officer or other employee who contributed to the need for a restatement.
Stock Ownership Guidelines
To further align the interests of senior management and stockholders, we adopted stock ownership guidelines in 2019 that require our executive officers and non-employee directors to own minimum amounts of the Company’s common stock. The minimum levels of stock ownership for our executive officers are as follows:
Officer Level
Ownership Guideline
Chief Executive Officer
5x annual base salary
Chief Financial Officer
2x annual base salary
Senior Vice President
2x annual base salary
Vice President
1x annual base salary
Directors who are not also executive officers of the Company are required to hold shares of the Company’s common stock with a value equal to three times the amount of the annual retainer paid to directors. Stock ownership levels must be achieved by each executive officer and director within five years of the adoption of the guidelines or within five years of the individual’s first appointment as an executive officer or director, as applicable, whichever is later. Until the applicable stock ownership guideline is achieved, individuals are encouraged to retain an amount equal to 50% of the net shares obtained through the Company’s stock incentive plans. Stock that counts toward satisfaction of the guidelines includes: (i) shares of common stock owned directly by the executive officer or director; (ii) shares of common stock owned indirectly by the executive officer or director (e.g., by a spouse or other immediate family member residing in the same household or a trust for the benefit of the executive officer or director or his or her family), whether held individually or jointly; (iii) shares of common stock held under the Company’s employee stock purchase plan; (iv) shares granted under the Company’s long-term incentive plans; (v) shares represented by amounts invested
 
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in the Company’s 401(k) plan; and (vi) shares purchased in the open market. As of the date of this filing all of our executive officers and directors are still within the five year transition period for the guidelines.
Tax and Accounting Considerations
Deductibility of Executive Compensation.   Section 162(m) of the IR Code places restrictions on the deductibility of executive compensation paid by public companies. In 2021, the tax deductibility of our executive compensation was not a material factor in our compensation committee’s deliberations.
Accounting for Stock-Based Compensation.   We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) for our stock-based compensation awards. In 2021, the accounting consequences of our executive compensation was not a material factor in our compensation committee’s deliberations.
 
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2021 Summary Compensation Table
The following table presents summary information regarding the total compensation awarded to, earned by, and paid to our named executive officers for services rendered during the fiscal years ended December 31, 2021, 2020 and 2019, as applicable for the years that the individuals were deemed to be named executive officers.
Name and Principal Position
Year
Salary(1)
Bonus(2)
Stock
Awards(3)
Non-Equity
Incentive Plan
Compensation(4)
All Other
Compensation(5)
Total
Chih-Hsiang (Thompson) Lin
President and Chief
Executive Officer
2021 $ 539,259 $ 2,915,291 $ 146,987 $ 26,359 $ 3,627,897
2020 $ 535,986 $ 1,595,332 $ 282,356 $ 27,358 $ 2,441,032
2019 $ 520,375 $ 3,172,800 $ 397,376 $ 23,931 $ 4,114,482
Stefan J. Murry
Chief Financial Officer
and Chief Strategy Officer
2021 $ 355,391 $ 1,020,336 $ 48,438 $ 11,414 $ 1,435,578
2020 $ 353,234 $ 526,459 $ 101,494 $ 10,505 $ 991,692
2019 $ 341,617 $ 892,551 $ 142,846 $ 13,115 $ 1,390,129
Hung-Lun (Fred) Chang
Senior Vice President and North America
General Manager
2021 $ 326,017 $ 932,892 $ 44,432 $ 11,109 $ 1,314,450
2020 $ 324,039 $ 2,793 $ 525,818 $ 93,111 $ 10,213 $ 955,974
2019 $ 314,601 $ 844,437 $ 131,040 $ 12,799 $ 1,302,877
Shu-Hua (Joshua) Yeh(6)
Senior Vice President and
Asia General Manager
2021 $ 354,057 $ 932,892 $ 44,501 $ 19,537 $ 1,350,987
2020 $ 338,582 $ 5,891 $ 541,130 $ 98,178 $ 19,162 $ 1,002,943
2019 $ 314,234 $ 7,792 $ 858,217 $ 129,871 $ 18,850 $ 1,329,619
David C. Kuo
Vice President, General
Counsel, Chief Compliance
Officer and Secretary
2021 $ 233,537 $ 583,049 $ 31,827 $ 10,615 $ 856,711
2020 $ 221,067 $ 1,588 $ 328,632 $ 52,935 $ 9,741 $ 613,962
2019 $ 213,391 $ 2,235 $ 524,903 $ 74,499 $ 12,288 $ 827,316
(1)
Includes amounts earned but deferred at the election of the named executive officers under our 401(k) plan established under Section 401(k) of the Internal Revenue Code of 1986, as amended.
(2)
Amounts in this column reflect discretionary cash bonuses awarded by the compensation committee following its performance review of each named executive officer, which, for 2019 and 2020, are in addition to the amounts earned pursuant to the annual cash incentive plan.
(3)
Amounts for 2021 consist of the aggregate grant date fair value of the time-based restricted stock units plus the performance-based restricted stock units assuming target performance, both as granted by the compensation committee in June 2021 (aggregate grant date fair value assuming maximum performance: Dr. Lin — $4,719,333; Dr. Murry — $1,651,755; Dr. Chang — $1,510,185; Mr. Yeh — $1,510,185; and Mr. Kuo — $943,852). Amounts for 2020 consist of the grant date fair value of restricted stock units granted by the compensation committee in June 2021 in settlement of the long-term incentive awards approved by the compensation committee in June 2020 that were denominated in dollars, but settled in restricted stock units following achievement of the annual performance goals (grant date fair value assuming maximum performance: Dr. Lin — $1,955,063; Dr. Murry — $645,168; Dr. Chang —  $625,619; Mr. Yeh — $625,619; and Mr. Kuo — $391,006). Amounts for 2019 consist of the target value of dollar-denominated awards approved by the compensation committee in March 2019 that were settled in restricted stock units in February 2020 following achievement of the annual performance goals (value at maximum performance: Dr. Lin — $2,400,000; Dr. Murry — $800,000; Dr. Chang — $760,000; Mr. Yeh — $760,000; and Mr. Kuo — $480,000), and the grant date fair value of the restricted stock units granted by the compensation committee in March 2019 to reward achievement of the annual performance goals that were approved by the compensation committee in March 2018, but without any approval of specific award amounts to the named executive officers. The amounts included for restricted stock units granted in 2021, 2020 and 2019 represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, disregarding the estimate of time-based forfeitures. The assumptions used in calculating the grant date fair value of the restricted stock units are reported in Note B to the consolidated
 
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financial statements included in our Annual Report for 2021. The amounts reported in this column do not correspond to the actual economic value that may be received by the named executive officers for the restricted stock units. See the “Grants of Plan-Based Awards” table below for additional information.
(4)
Amounts in this column for 2021, 2020 and 2019 reflect amounts earned pursuant to our annual cash incentive plan based on the Company’s achievement of performance metrics and targets established by the compensation committee. The performance metrics and targets for these awards are described in the section titled “Compensation Discussion and Analysis” above.
(5)
Includes life insurance premiums paid by us for the benefit of the named executive officers and the Company’s 401(k) matching contributions and mandatory foreign pension contribution made by the Company on behalf of the executive officers. The 401(k) matching contributions for each executive in the 2021 year were as follows: for each of Dr. Lin, Dr. Murry, Dr. Chang and Mr. Kuo $8,550. The foreign pension contribution made by the Company on behalf of Mr. Yeh was $3,888. In addition, the cost of personal use of a Company provided car is included for Dr. Lin, with the amount determined based on the cost of the lease of the corporate car related to the proportion of mileage the car was driven for non-business trips, which for 2021 was $13,800. Mr. Yeh also received housing in Ningbo, China worth $12,241 during 2021.
(6)
The amounts shown for Mr. Yeh for 2021 have been converted from NTD (New Taiwan dollars) and RMB (Chinese Yuan Renminbi), as applicable, to USD (United States dollars), using the exchange rate on December 31, 2021, which was 27.72 NTD = $1 USD and 6.36 RMB = $1 USD, respectively. The amounts shown for Mr. Yeh for 2020 have been converted from NTD (New Taiwan dollars) and RMB (Chinese Yuan Renminbi), as applicable, to USD (United States dollars), using the exchange rate on December 31, 2020, which was 28.09 NTD = $1 USD and 6.53 RMB = $1 USD, respectively. The amounts shown for Mr. Yeh for 2019 have been converted from NTD (New Taiwan dollars) and RMB (Chinese Yuan Renminbi), as applicable, to USD (United States dollars), using the exchange rate on December 31, 2019, which was 29.91 NTD = $1 USD and 6.96 RMB = $1 USD, respectively.
 
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2021 Grants of Plan-Based Awards
The following table presents information about grants of plan-based awards made to our named executive officers during the year ended December 31, 2021:
Named Executive Officer
Grant Date
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards(1)(2)
Estimated Possible Payouts Under
Equity Incentive Plan Awards(3)
All Other
Stock Awards:
Number of
Shares of
Stock or
Units
(#)
Grant Date
Fair Value
of Stock and
Option
Awards
($)(4)
Minimum
($)
Reduced
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
Chih-Hsiang (Thompson) Lin
0 269,630 539,259 674,074
June 11,2021 181,494(5) $ 1,595,332
June 11,2021 31,605 126,422 252,844 $ 1,804,042
June 11,2021 126,422(6) $ 1,111,249
Stefan J. Murry
0 88,848 177,696 222,119
June 11,2021 59,893(5) $ 526,459
June 11,2021 11,061 44,247 88,495 $ 631,405
June 11,2021 44,247(6) $ 388,931
Hung-Lun (Fred) Chang
0 81,804 163,009 203,761
June 11,2021 59,820(5) $ 525,818
June 11,2021 10,113 40,455 80,910 $ 577,293
June 11,2021 40,455(6) $ 355,599
Shu-Hua (Joshua) Yeh
0 82,639 163,270 206,597
June 11,2021 61,562(5) $ 541,130
June 11,2021 10,113 40,455 80,910 $ 577,293
June 11,2021 40,455(6) $ 355,599
David C. Kuo
0 58,384 116,769 145,961
June 11,2021 37,387(5) $ 328,632
June 11,2021 6,321 25,284 50,568 $ 360,803
June 11,2021 25,284(6) $ 222,246
(1)
Amounts in these columns reflect cash bonus amounts that each named executive officer could have potentially earned under the 2021 Cash Incentive Plan for performance in 2021, based on the Company’s achievement of corporate performance metrics established by the compensation committee. For a description of the 2021 Cash Incentive Plan, see the section titled “Compensation Discussion and Analysis” above, and for a description of the cash bonus amounts that were earned and awarded under the 2021 Cash Incentive Plan, see the “Summary Compensation Table” above.
(2)
The compensation committee selected GAAP revenue and non-GAAP operating loss as the performance metrics for purposes of the cash incentive plan. See the section titled “Compensation Discussion and Analysis” above for how these metrics are defined.
(3)
Amounts reflect awards of performance-based restricted stock units that will vest following the end of a three-year performance period based on achievement of stock price appreciation and relative TSR performance goals.
(4)
Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718, disregarding the estimate of time-based forfeitures. The grant date fair value of the performance-based restricted stock units is based on the target number of shares.
(5)
Amounts reflect awards of restricted stock units that were granted to our named executive officers in in settlement of cash-denominated awards that vested based on achievement of performance goals for 2020, with such restricted stock units vesting one-sixteenth every three months from a vesting commencement date of January 21, 2021.
(6)
Amounts reflect awards of time-based restricted stock units that will vest quarterly over a 4-year period commencing on July 21, 2021.
 
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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table
For a more detailed discussion of the compensation included in the Summary Compensation Table and the Grants of Plan-Based Awards table, please see the section titled “Compensation Discussion and Analysis” above.
Cash Bonuses
Each named executive officer is eligible to earn an annual performance-based cash incentive based on achievement of Company goals, determined by our compensation committee at the beginning of each year. See the section entitled “Compensation Discussion and Analysis” above for the material terms of the 2021 program.
Equity-based compensation
Restricted stock units granted in 2021 were granted pursuant to the Company’s 2021 Equity Incentive Plan, while restricted stock units granted in 2019 were granted under the Company’s 2013 Equity Incentive Plan. Each restricted stock unit represents the right to receive one share of common stock upon vesting. Such restricted stock units may be subject to acceleration in the event of our change of control (if not assumed or replaced) or the executive officer’s termination without cause, resignation for good reason, death or disability.
 
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Outstanding Equity Awards at 2021 Fiscal Year-End
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2021.
Name
Grant Year
Option Awards
Stock Awards
Number of Shares
Underlying Unexercised
Options
Option
Exercise
Price
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)(3)
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(4)
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)(5)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(4)
Exercisable
Unexercisable
Chih-Hsiang (Thompson) Lin
2013 135,348(2) $ 9.96
9/26/2023
2014 30,000(2) $ 13.84
1/28/2024
2018
7,125 $ 36,623
2019
25,000 $ 128,500
2020
105,029 $ 539,849
2021
147,464 $ 757,965
2021
118,521 $ 609,198
2021
126,422 $ 649,809
Stefan J. Murry
2013 11,000(2) $ 9.96
9/26/2023
2014 5,000(2) $ 13.84
1/28/2024
2018
1,370 $ 7,042
2019
4,794 $ 24,641
2020
36,760 $ 188,946
2021
48,664 $ 250,133
2021
41,482 $ 213,217
2021
44,247 $ 227,429
Hung-Lun (Fred) Chang
2013 1,125(2) $ 9.96
9/26/2023
2014 1,100(2) $ 13.84
1/28/2024
2018
1,433 $ 7,366
2019
4,500 $ 23,130
2020
33,259 $ 170,951
2021
48,604 $ 249,825
2021
37,927 $ 194,945
2021
40,455 $ 207,938
Shu-Hua (Joshua) Yeh
2013 5,000(1) $ 7.50
1/18/2023
2013 12,000(2) $ 9.96
9/26/2023
2014 5,000(2) $ 13.84
1/28/2024
2018
1,495 $ 7,684
2019
4,794 $ 24,641
2020
35,255 $ 181,211
2021
50,020 $ 257,103
2021
37,927 $ 194,945
2021
40,455 $ 207,938
 
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Name
Grant Year
Option Awards
Stock Awards
Number of Shares
Underlying Unexercised
Options
Option
Exercise
Price
Option
Expiration
Date
Number
of Shares
or Units
of Stock
That Have
Not Vested
(#)(3)
Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($)(4)
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
(#)(5)
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)(4)
Exercisable
Unexercisable
David C. Kuo
2018
798 $ 4,102
2019
2,663 $ 13,688
2020
21,636 $ 111,209
2021
30,377 $ 156,138
2021
23,704 $ 121,839
2021
25,284 $ 129,959
(1)
The amounts reported reflect shares of common stock underlying stock options granted in the specified calendar year under our 2006 Incentive Share Plan. The stock options vested over a four-year period.
(2)
The amounts reported reflect shares of common stock underlying stock options granted in the specified calendar year under our 2013 Plan. The stock options vested over a four-year period.
(3)
The amounts reported reflect restricted stock units granted in the specified calendar year under our 2013 Plan through 2020, and under our 2021 Plan starting in 2021, including restricted stock units granted in 2019, 2020 and 2021 in settlement of the awards approved by the compensation committee in the prior year that were denominated in dollars and to be settled in restricted stock units following achievement of the annual performance goals. The restricted stock units vest in substantially equal installments each quarter over a four-year period commencing in January of the specified calendar year, subject to continued service through each applicable vesting date.
(4)
The market value of the stock awards was calculated using the closing price of our common stock on December 31, 2021 (the last trading day of 2021) of $5.14.
(5)
The amounts reported reflect performance-vesting restricted stock units granted in the specified calendar year under our 2021 Plan based on achieving target performance goals, which would result in 100% of the subject shares vesting.
2021 Option Exercises and Stock Vested
The following table sets forth information regarding stock awards that vested for each of our named executive officers during 2021. No stock options were exercised during 2021.
Named Executive Officer
Stock Awards
Number of
Shares
Acquired on
Vesting (#)
Value
Realized on
Vesting ($)(1)
Chih-Hsiang (Thompson) Lin 144,610 $ 1,201,145
Stefan J. Murry 41,210 $ 339,580
Hung-Lun (Fred) Chang 39,483 $ 325,404
Shu-Hua (Joshua) Yeh 41,304 $ 340,754
David C. Kuo 24,466 $ 201,445
(1)
The value realized on vesting of stock awards was calculated using the closing price of our common stock on the applicable vesting date for each award.
Pension Benefits
We do not currently sponsor or maintain any defined benefit plans or supplemental executive retirement plans, for our named executive officers.
 
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Nonqualified Deferred Compensation
We do not currently sponsor or maintain any non-qualified deferred compensation plans for our named executive officers.
Potential Payments Upon Termination and Change of Control
The following discussion reflects the payments and benefits that each of the named executive officers would have been eligible to receive in the event of certain terminations, assuming that each such termination occurred on December 31, 2021.
Employment Agreements
We maintain employment agreements with Dr. Lin, Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo. The employment agreement with Dr. Lin provides that, if our Board terminates his employment for any reason other than Cause or if he resigns for Good Reason outside of the Change of Control Period, each as defined below, he will be entitled to receive (i) a payment equal to one year’s base salary as in effect immediately prior to termination, (ii) a payment equal to his full target bonus as in effect immediately prior to termination and (iii) $15,000, (which may be used for benefit continuation under COBRA or for any other purpose), which amounts will be paid periodically in installments over the 12 months following his separation from service. The employment agreements with Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo, each provide that, if our Board terminates his employment for any reason other than Cause or if he resigns for Good Reason outside of the Change of Control Period (as defined below), he will be entitled to receive (i) a payment equal fifty percent (50%) of base salary as in effect immediately prior to termination, (ii) a payment equal to fifty percent (50%) of his full target bonus as in effect immediately prior to termination and (iii) $15,000, (which may be used for benefit continuation under COBRA or for any other purpose). The severance benefits that may arise as a result of a termination prior to a Change of Control will be paid in a lump sum.
Dr. Lin, Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo, each have provisions in their employment agreements that provide for “double-trigger” severance. Specifically, if, within the Change of Control Period, the executive’s employment is terminated by the executive for Good Reason or by our Company other than for Cause, then in lieu of the severance benefits described in the preceding paragraph, the executive will be entitled to receive the following: (i) a lump sum payment equal to one year’s base salary as in effect immediately prior to termination; (ii) a lump sum payment equal to his full target bonus as in effect immediately prior to termination; (iii) $10,000 ($15,000 for Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo) which may be used for benefit continuation under COBRA or for any other purpose and (iv) accelerated vesting of the executive’s awards granted under any incentive share plan or equity incentive plan of the Company, with all vested options becoming exercisable for an extended period following termination of employment. For Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo, the severance benefits that may arise as a result of termination during the Change of Control Period will be paid in a lump sum. For Dr. Lin, the severance benefits that may arise as a result of termination within one year following a Change of Control will be paid in a lump sum. Additionally, Dr. Lin’s employment agreement provides him with a potential tax gross-up payment to make him whole for any excise taxes that he would owe resulting from the application of the excise tax provisions under Section 280G of the Internal Revenue Code of 1986. None of the other employment agreements with our executive officers provide any right to a tax gross-up.
To receive the severance benefits described above, each executive must execute a release agreement in favor of the Company and its affiliates, which will include a reasonable agreement to cooperate for a period of six months following the employment termination date and a mutual non-disparagement clause. In consideration of the severance benefits described above, each executive has also agreed to be subject to a non-compete provision for a period of 12 months following his separation from service and to maintain the confidentiality of Company information.
Each employment agreement generally defines “Cause” as, following written notice to the executive and the executive’s failure to cure such occurrence(s): (i) conviction or plea of nolo contendre to any felony offense or to a crime of moral turpitude; (ii) commission of willful misconduct or violation of law in connection with the performance of his duties, including (a) misappropriation of funds or property, (b) attempting to secure personally any profit in connection with any transaction entered into on behalf of our Company, or (c) making
 
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any material misrepresentation to our Board, our Company or its affiliates; (iii) material violation or failure to comply with our Company policy; (iv) material breach of the employment agreement; or (v) the willful and continued failure or neglect to substantially perform his duties with our Company. “Good Reason” is defined to include: (i) the executive’s assignment to duties inconsistent with his position or title; (ii) reduction in his base compensation, except as part of an overall cost reduction program that affects all senior executives and does not disproportionately affect the executive; (iii) any purported termination of the executive by our Company other than for disability or Cause or a voluntary resignation initiated by the executive, except for a voluntary termination for Good Reason; (iv) failure of any successor entity to our Company to expressly assume the employment agreement; and (v) material breach by our Company of the agreement.
Each employment agreement generally provides that a “Change of Control” is deemed to occur if: (i) individuals who constitute the Board of our Company on the date of the employment agreement (“Incumbent Directors”) cease to constitute at least a majority of our Board; provided, that any individual whose election or nomination for election by the stockholders was approved by a majority of the then Incumbent Directors shall be considered an Incumbent Director, with certain exceptions; or (ii) the stockholders of our Company approve (1) any merger, consolidation or recapitalization of our Company or any sale of substantially all of its assets where (a) the stockholders of our Company prior to the transaction do not, immediately thereafter, own at least 51% of both the equity and voting power of the surviving entity or (b) the Incumbent Directors at the time of the approval of the transaction would not immediately thereafter constitute a majority of the Board of the surviving entity, or (2) any plan of liquidation or dissolution of our Company.
Under the employment agreements, the “Change of Control Period” means: with respect to Dr. Lin, one year after a Change of Control and with respect to Dr. Murry, Dr. Chang, Mr. Yeh and Mr. Kuo, within six months prior to a Change of Control or within one year after a Change of Control.
Restricted Stock Unit Awards
The time-based restricted stock unit awards we have granted to our named executive officers provide for full acceleration upon a named executive officer’s termination of employment due to death or disability, as well as on a termination without cause or resignation for good cause during the Change of Control Period. In addition, if the acquiring entity in a Change of Control refuses to assume or replace outstanding time-based awards of any plan participant, that participant’s awards will become fully vested.
The performance-based restricted stock unit awards we have granted to our named executive officers provide for different acceleration treatment based on the applicable performance goal. The portion of the awards that vests based on achievement of the relative TSR goal: upon termination of employment due to death or disability, will vest in full at the target level; for termination of employment in connection with a change of control, will vest following the end of the performance period with respect to the greater of actual or target performance (based on unreduced performance goals); for retirement, will vest following the end of the performance period with respect to a pro-rated amount based on actual performance; and upon other termination of employment, will be forfeited. The portion of the award that vests based on achievement of the stock price goal: upon termination of employment due to death or disability, will vest in full to the extent already earned; for termination of employment in connection with a change of control, will vest immediately to the extent already earned, and will vest following the end of the performance period to the extent earned at that time; for retirement, will vest following the end of the performance period to the extent earned; and upon other termination of employment, will be forfeited.
The following table reflects the payments and benefits that each of the named executive officers would have been eligible to receive in the event of certain terminations or a Change of Control, assuming that each such event occurred on December 31, 2021. The acceleration of equity awards was calculated using the closing price of our common stock on December 31, 2021 (the last trading day of 2021) of $5.14. Amounts that could actually become due upon any termination cannot be known with certainty until the event occurs.
 
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Name and Principal Position
Termination Without
Cause or Resignation
For Good Reason,
Outside of the Change
of Control Period
($)(1)
Termination Without
Cause or Resignation
For Good Reason,
Within the Change
of Control Period
($)(2)
Termination Due to
Retirement, Death
or Disability ($)(3)
Change of
Control -
Awards Not
Assumed
($)(4)
Chih-Hsiang (Thompson) Lin
Salary and Bonus
$ 686,246 $ 686,246
Other Cash Payments
$ 15,000 $ 10,000
Accelerated Equity
$ 3,246,928 $ 3,246,928 $ 2,922,023
Tax Gross-Up
$ 782,129
Total
$ 701,246 $ 4,731,808 $ 3,246,928 $ 2,922,023
Stefan J. Murry
Salary and Bonus
$ 201,914 $ 403,829
Other Cash Payments
$ 15,000 $ 15,000
Accelerated Equity
$ 879,935 $ 879,935 $ 766,220