April 29, 2020May 1, 2023

Dear Stockholder:

You are invited to attend the 20202023 Annual Meeting of Stockholders of Monolithic Power Systems, Inc. to be held on Thursday, June 11, 2020,15, 2023, at 10:00 a.m., Pacific Daylight Time (the “Annual Meeting”). This year’s Annual Meeting will be a virtual meeting. You will be able to attend the Annual Meeting online, vote and submit questions during the meeting by visiting www.meetingcenter.io/227956165.www.meetnow.global/MXP2HH7. Please follow the instructions carefully on how to access and attend the virtual meeting in the “Annual Meeting Attendance”Attendance” section of this Proxy Statement.

It is important that your shares be represented and voted whether or not you plan to attend the Annual Meeting. We continue using the Securities and Exchange Commission rule that permits companies to furnish proxy materials to stockholders over the Internet. If you are viewing the Proxy Statement on the Internet, you may grant your proxy electronically over the Internet by following the instructions on the Notice Regarding the Availability of Proxy Materials previously mailed to you and the instructions listed on the Internet site. If you have received a paper copy of the Proxy Statement and proxy card, you may grant a proxy to vote your shares by completing and mailing the proxy card enclosed with the Proxy Statement, or you may grant your proxy electronically over the Internet or by telephone by following the instructions on the proxy card. If your shares are held in “street name,” which means shares held of record by a broker, bank, trust or other nominee, you should review the Notice Regarding the Availability of Proxy Materials or Proxy Statement and voting instruction form used by that firm to determine whether and how you will be able to submit your proxy by telephone or over the Internet. Submitting a proxy over the Internet, by telephone or by mailing a proxy card, will ensure your shares are represented at the Annual Meeting.

Your vote is important, regardless of the number of shares that you own.

On behalf of the Board of Directors, I thank you for your participation. We look forward to your attendance on June 11, 2020.15, 2023.

	Sincerely,
	Michael Hsing
	Chairman of the Board, President and Chief Executive Officer

MONOLITHIC POWER SYSTEMS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held on June 11, 202015, 2023

To the Stockholders of Monolithic Power Systems, Inc.:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Monolithic Power Systems, Inc., a Delaware corporation, will be held on Thursday, June 11, 2020,15, 2023, at 10:00 a.m., Pacific Daylight Time (the “Annual Meeting”). This year’s Annual Meeting will be a virtual meeting. You will be able to attend the Annual Meeting online, vote and submit questions during the meeting by visiting www.meetingcenter.io/227956165.www.meetnow.global/MXP2HH7. Please follow the instructions carefully on how to access and attend the virtual meeting in the “Annual Meeting Attendance”Attendance” section of this Proxy Statement.

At the Annual Meeting, we will conduct the following items of business:

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice of Annual Meeting. Only stockholders of record at the close of business on April 20, 20202023 are entitled to notice of and to vote at the meeting.Annual Meeting.

Your vote is important.  All stockholders are cordially invited to attend the Annual Meeting. However, to assure your representation at the meeting, we encourage you to submit your proxy as soon as possible using one of three convenient methods: (i) by accessing the Internet site described in the Notice Regarding the Availability of Proxy Materials (the “Notice”) or in the proxy card or the voting instruction form provided to you; (ii) by calling the toll-free number described in the Notice or in the proxy card or the voting instruction form provided to you;card; or (iii) by signing, dating and returning the proxy card or the instruction form provided to you.card. By submitting your proxy promptly, you will save the Companyus the expense of further proxy solicitation. Any stockholder of record attending the Annual Meeting may vote at the meeting even if he or she has already returned a proxy.

	By Order of the Board of Directors,
	Saria Tseng
	Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary General Counsel and Corporate Secretary

Kirkland, Washington

April 29, 2020May 1, 2023

MONOLITHIC POWER SYSTEMS, INC.

PROXY STATEMENT

FOR

20202023 ANNUAL MEETING OF STOCKHOLDERS

INFORMATION CONCERNING SOLICITATION AND VOTING

Index

General

This Proxy Statement is being furnished to holders of common stock, par value $0.001 per share (the “Common Stock”), of Monolithic Power Systems, Inc., a Delaware corporation (the “Company”“Company,” “MPS,” “we,” “us,” or “MPS”“our”), in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use at the Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Thursday, June 11, 202015, 2023 at 10:00 a.m., Pacific Daylight Time, and at any adjournment or postponement thereof for the purpose of considering and acting upon the matters set forth herein.  

This year’s Annual Meeting will be a virtual meeting. You will not be able to attend the meeting in person. Please follow the instructions carefully on how to access and attend the virtual meeting in the “Annual Meeting Attendance”Attendance.” section below.

Internet Availability of Proxy Materials

Pursuant to the rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials (the “Notice”) to our stockholders of record, and upon request, we will send a printed copy of the proxy materials and proxy card. Brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar notice. Stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this Proxy Statement available on the Internet at www.monolithicpower.com, and to mail the Notice or other proxy materials, as applicable, on or about May 1, 20203, 2023 to stockholders of record at the close of business on April 20, 20202023 (the “Record Date”).

Record Date;Date and Outstanding Shares

Only stockholders of record at the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting and any adjournment thereof. These stockholders are entitled to cast one vote for each share of Common Stock held as of the Record Date on all matters properly submitted for the vote of stockholders at the Annual Meeting. On the Record Date, 44,715,00047,411,000 shares of Common Stock were issued and outstanding. No shares of our Preferred Stock were issued and outstanding. For information regarding security ownership by management, directors, and beneficial owners of more than 5% of the Common Stock, see the section “Security Ownership of Certain Beneficial Owners and Management.”

Procedure for Submitting Stockholder Proposals and Director Nominations

Requirements for stockholder proposals to be considered for inclusion in our proxy materialsmaterials. . Proposals of stockholders which are to be presented by such stockholders at our 20212024 annual meeting of stockholders must meet the stockholder proposal requirements contained in Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and. Such proposals must be received by us no later than December 31, 2020January 5, 2024 in order that they mayto be included in the proxy statement and form of proxy relating to that meeting. Such stockholder proposals should be submitted to Monolithic Power Systems, Inc., 5808 Lake Washington Boulevard NE, Kirkland, Washington 98033, Attention: Corporate Secretary. No such stockholder proposals were received by us prior to the deadline for this year’s Annual Meeting.

Requirements for director nominations to be considered for inclusion in our proxy materials. Pursuant to the proxy access provisions of our Amended and Restated Bylaws (the “Bylaws”), an eligible stockholder, or a group of up to 20 stockholders, who has held at least 3% of our Common Stock continuously for at least three years may nominate one director and have that nominee included in our proxy materials. To be timely for the 2024 annual meeting of stockholders, notice of proxy access director nominations must be received by us between January 4, 2024 and February 3, 2024. In addition, the notice must set forth the information required by our Bylaws with respect to each director nomination that a stockholder intends to present at the 2024 annual meeting of stockholders.

In addition to satisfying the requirements under our Bylaws, stockholders who intend to solicit proxies in support of director nominees, other than our nominees, must provide notice that sets forth the information required by Rule 14a-19 under the 1934 Act to comply with the universal proxy rules, which notice must be postmarked or transmitted electronically to us at our principal executive offices no later than April 16, 2024. However, if the date of the 2024 annual meeting of stockholders is changed by more than 30 calendar days from the anniversary date of this year’s Annual Meeting, then notice must be provided by the later of 60 calendar days prior to the date of the 2024 annual meeting of stockholders or the 10th calendar day following the day on which public announcement of the date of the 2024 annual meeting of stockholders is first made by us.

Requirements for stockholder proposals to be brought before an annual meeting but not included in our proxy materials. If a stockholder wishes to present a proposal at our 20212024 annual meeting of stockholders, and the proposal is not intended to be included in our proxy statement relating to that meeting, the stockholder must give advance notice to us prior to the deadline for such meeting. To be timely for the 2024 annual meeting as determined in accordance with our Amended and Restated Bylaws (the “Bylaws”) (which are attached as Exhibit 3.4 to our Form S-1/A Registration Statement filed with the SEC on November 15, 2004). Under our Bylaws, in order to be deemed properly presented,of stockholders, notice of proposed business must be delivered to or mailed and received by our Corporate Secretary at our principal executive office not fewer than 90 or more than 120 calendar days before the one-year anniversary of the date on which we first mailed the proxy statement to stockholders in connection with the previous year’s annual meeting of stockholders (the “Notice Period”). As a result, the Notice Period for our 2021 annual meeting will begin on December 31, 2020us between January 4, 2024 and end on January 30, 2021.February 3, 2024. However, in the event the date of the 20212024 annual meeting of stockholders will be changed by more than 30 days from the date of this year’s meeting,Annual Meeting, notice by the stockholder to be timely must be so received not later than the close of business on the later of: (1) 90 calendar days in advance of the 20212024 annual meeting of stockholders and (2) 10 calendar days following the date on which public announcement of the date of the 20212024 annual meeting of stockholders is first made. A stockholder’sIn addition, the notice must set forth the information required by our Bylaws with respect to each proposal that a stockholder intends to present at the 2024 annual meeting of stockholders.

All proposals described above must be submitted to our Corporate Secretary shall set forth as to each matterusing the stockholder proposes to bring before the 2021 annual meeting: (a) a brief description of the business desired to be brought before the 2021 annual meeting and the reasons for conducting such business at the 2021 annual meeting, (b) the name and address, as they appear on our books, of the stockholder proposing such business, (c) the class and number of shares of Common Stock that are beneficially owned by the stockholder, (d) any material interest of the stockholdermethods outlined in such business, and (e) any other information that is required to be provided by the stockholder pursuant to Regulation 14A of the 1934 Act, in his or her capacity as a proponent to a stockholder proposal. If a stockholder gives notice of such a proposal after the Notice Period, the stockholder will not be permitted to present the proposal to the stockholders for a vote at the 2021 annual meeting.“Stockholder Communications.”

Annual Meeting Attendance

Attendance:Attendance:

After careful consideration, in light of the on-going developments related to the COVID-19 pandemic and governmental decrees that in-person gatherings be postponed or canceled, and in the best interests of public health and the health and safety of our stockholders, the Board and employees, theThe Annual Meeting will be held solely by remote communication. You will not be able to attend the meeting in person. Stockholders as of the close of business on the Record Date who duly registered to attend the Annual Meeting will be able to listen to the webcast, vote their shares and submit questions during the virtual meeting. Information to access theThe Annual Meeting is as follows:can be assessed at:

You must have your 15-digit control number to join the event. We encourage you to access the Annual Meeting ten minutes prior to the start time for the check-in.check-in and registration.

Registration Process:

Stockholders of record.If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the stockholder of record. As a stockholder of record, you are already registered for the virtual meeting and will be able to listen to the webcast, vote and submit questions during the meeting. Questions pertinent to meeting matters and that are submitted in accordance with our rules of conduct for the Annual Meeting will be answered during the meeting, subject to applicable time constraints.

Beneficial owners.owners. If you hold your shares through a broker, bank, trust or other nominee, you must register in advance in order to vote and submit questions during the virtual meeting. Alternatively, you may join the meeting as a guest and listen to the webcast without advance registration. As a guest, you will not be able to vote or submit questions during the meeting.

To register in advance, you must obtain a legal proxy from the broker, bank, trust or other nominee that holds your shares giving you the right to vote the shares. You must submit proof of the legal proxy reflecting our holdings, along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than 2:00 p.m., Pacific Time, on June 5, 2020.8, 2023. You will receive a confirmation of your registration by email after we receive your registration materials. Requests for registration can be made in the following methods:

Alternatively, you may join the meeting as a guest and listen to the webcast without advance registration. As a guest, you will not be able to vote or submit questions during the meeting.

Voting

Voting priorprior to the Annual Meeting. If you are the record holder of your stock, you have three options for submitting your votes prior to the Annual Meeting:

If you have Internet access, we encourage you to record your vote on the Internet. It is convenient, and it saves us significant postage and processing costs. In addition, when voting over the Internet or by telephone prior to the meeting date, your vote is recorded immediately, and there is no risk that postal delays will cause your vote to arrive late, and therefore not be counted. All shares entitled to vote and represented by properly executed proxy cards or properly granted proxies submitted electronically over the Internet or telephone received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions provided.  If no instructions are indicated, the shares represented by that proxy will be voted as recommended by the Board. If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxies and acting thereunder will have discretion to vote on those matters in accordance with their best judgment. We do not currently anticipate that any matters other than the proposals described herein will be raised at the Annual Meeting.  If your shares are held in a stock brokerage account or by a bank, trust or other nominee, you will receive a notice from your broker, bank, trust or other nominee that includes instructions on how to vote your shares. Your broker, bank, trust or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to submit your voting instructions by telephone.

YOUR VOTE IS IMPORTANT.  You should submit your proxy even if you plan to attend the Annual Meeting.

Voting by attendingattending the Annual Meeting. This year’sThe Annual Meeting will be a virtual meeting. Stockholders of record and beneficial owners as of the close of business on the Record Date who duly registered to attend the Annual Meeting will be able to listen to the webcast and vote their shares during the virtual meeting. Please follow the instructions carefully on how to access and attend the virtual meeting, and vote in the “Annual Meeting Attendance”Attendance.” section of this Proxy Statement.

Any previous votes that were submitted by the stockholder, whether by Internet, telephone or mail, will be superseded by the vote that such stockholder casts at the Annual MeetingMeeting.

Changing vote; Revocabilityvote; Revocability of proxy. Any proxy given by a stockholder of record pursuant to this solicitation may be revoked by the person giving it at any time before it is voted at the Annual Meeting. Proxies submitted by stockholders of record may be revoked by:

Any written notice of revocation or subsequent proxy card must be received by our Corporate Secretary prior to the taking of the vote at the Annual Meeting. Such written notice of revocation or subsequent proxy card shouldmust be hand delivered to our Corporate Secretary or should be sent so as to be delivered to Monolithic Power Systems, Inc., 5808 Lake Washington Boulevard NE, Kirkland, Washington 98033, Attention: Corporate Secretary, prior tosubmitted using the date of the Annual Meeting.methods outlined in “Stockholder Communications.”

If you hold your shares through a broker, bank, trust or other nominee, you may change your vote by submitting new voting instructions to your broker, bank, trust or other nominee.

No Right of Appraisal

Neither Delaware law nor our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) provide for appraisal or other similar rights for dissenting stockholders in connection with any of the proposals to be voted upon at the Annual Meeting. Accordingly, our stockholders will have no right to dissent and obtain payment for their shares.

Expenses of Solicitation

We will bear all expenses of this solicitation, including the cost of preparing and mailing this solicitation material. We may reimburse brokerage firms, custodians, nominees, fiduciaries and other persons representing beneficial owners of Common Stock for their reasonable expenses in forwarding solicitation material to such beneficial owners.  Our directors, officers and employees may also solicit proxies in person or by telephone, letter, e-mail or other means of communication. Such directors, officers and employees will not be additionally compensated, but they may be reimbursed for reasonable out-of-pocket expenses in connection with such solicitation. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies from certain brokers, bank nominees and other institutional owners. If we hire a professional proxy solicitation firm, we expect our costs for such services would be approximately $10,000.$25,000.

Quorum;Quorum, Required Votes; Abstentions;Votes, Abstentions and Broker Non-Votes

Holders of a majority of the outstanding shares entitled to vote must be present at the Annual Meeting in order to have the required quorum for the transaction of business.  Stockholders are counted as present at the Annual Meeting if they: (1) are duly registered to attend and vote their shares at the virtual Annual Meeting, or (2) have properly submitted a proxy card by mail or voted by telephone or by using the Internet.  If the shares present at the Annual Meeting do not constitute the required quorum, the Annual Meeting may be adjourned to a subsequent date for the purpose of obtaining a quorum.

The required votes to approve the proposals to be considered at this Annual Meeting are as follows:

Under the General Corporation Law of the State of Delaware, both abstaining votes and broker non-votes are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the Annual Meeting. An abstaining vote is not counted as a vote cast for the election of directors, but has the same effect as a vote cast against each of the other proposals requiring approval by a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the virtual Annual Meeting or represented by proxy at the Annual Meeting. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. A broker non-vote will have no effect on the outcome of the proposals. For purposes of ratifying our independent registered public accounting firm, brokers have discretionary authority to vote.

Stockholder List

A list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder for any purpose germane to the Annual Meeting during ordinary business hours at: 5808 Lake Washington Boulevard NE, Kirkland, Washington 98033 for the ten days prior to the Annual Meeting.

PROPOSAL ONE

ELECTION OF DIRECTORS

Classified Board of Directors;Directors and Nominees

The Board currently consists of sixeight members. Under our Certificate of Incorporation and Bylaws, the Board has the authority to set the number of directors from time to time by resolution. In addition, our Certificate of Incorporation provides for a classified Board consisting of three classes of directors, each serving staggered three-year terms.  As a result, a portion of the Board will be elected each year for three-year terms.

Two Class I directors are to be elected to the Board at the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Board’s nominees,, Victor K. Lee and James C. Moyer.Moyer. Mr. Lee and Mr. Moyer are standing for re-election to the Board. Each person nominated for election has agreed to serve if elected, and the Board has no reason to believe that any nominee will be unavailable or will decline to serve. In the event, however, that any nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who is designated by the current Board to fill the vacancy. The term of office of each person elected as a Class I director will continue for three years or until his or her successor has been duly elected and qualified.  If elected, the term for Mr. Lee and Mr. Moyer will expire at the 20232026 annual meeting of stockholders.

Our directors are elected by a “plurality” vote. The nominees for each of the two Board seats to be voted on at the Annual Meeting receiving the greatest number of votes cast will be elected. Abstentions and shares held by brokers that are not voted in the election of directors will have no effect. In addition, we have adopted a corporate governance policy requiring each director nominee to submit a resignation letter if more “Withheld” than “For” votes are received. See the section “Director Voting Policy” for more details on this policy.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” THE ELECTION TO THE BOARD OF EACH OF THE PROPOSED NOMINEES.

Information Regarding Nominees and Other Directors

The following table summarizes certain information regarding the nominees and other directors:

Nominees for Class I Directors Whose Terms Will Expire in 20202023

Victor K. Leehas served on our Board since September 2006. Mr. Lee was a member of the board of directors at MoSys, Inc., a fabless semiconductor company from June 2012 to June 2016. Mr. Lee served as Chief Financial Officer of Ambarella, Inc., a fabless semiconductor company, from August 2007 to March 2011. Mr. Lee holds a B.S. in Industrial Engineering and Operations Research and an M.B.A. from the University of California, Berkeley.

James C. Moyerhas served on our Board since October 1998. Mr. Moyer is a retired business executive and served as our Chief Design Engineer from September 1997 tountil his retirement in January 2016. Mr. Moyer holds a B.A.E.E. from Rice University. 

Incumbent Class II Directors Whose Term Will Expire in 20212024

Eugen Elmiger has served on our Board since October 2012. Mr. Elmiger currently serves as Chief Executive Officer of Maxon group, a leading advanced motion company, awhich position that he has held since January 2011. Mr. Elmiger currently serves on the board of directors of Kardex, a global leader in automated storage solutions and material handling systems. Mr. Elmiger holds a B.S. in Electrical Engineering from the Lucerne (Horw) University of Applied Science and Art.

Eileen Wynne has served on our Board since February 2023. Ms. Wynne has served as interim Chief Financial Officer of IDEX Biometrics ASA (“IDEX”), a provider of fingerprint identification technologies, since August 2022, and supported IDEX on a consulting basis since December 2020. From November 1999 to June 2019, Ms. Wynne held various managerial and senior roles at Analog Devices, Inc. (“ADI”), a global semiconductor company, including Vice President and Chief Accounting Officer from May 2013 to June 2019, and interim Chief Financial Officer from March 2017 to September 2017. Prior to ADI, Ms. Wynne held various positions in private and public accounting. Ms. Wynne holds a B.A. in Financial Economics from St. Anselm College and an M.S. in Accounting from Bentley University.

Jeff Zhou has served on our Board since February 2010. Dr. Zhou is a retired business executive. Before his retirement, heDr. Zhou served as Executive Vice Chairman of MiaSolé, which develops thin film solar technology, awhich position he held from 2018 to 2019. Dr. Zhou served as Chief Executive Officer of MiaSolé from 2013 to 2018. Before joining MiaSolé, Dr. Zhou was President of Hanergy Holding America, Inc., a developer and operator of solar power plants, from 2012 to 2013. Dr. Zhou also served as Executive Chairman of Alta Devices, a developer of flexible mobile power technology, from 2014 to 2015. Dr. Zhou holds a Ph.D. degree in Electrical Engineering from the University of Florida.

Incumbent Class III Directors Whose Term Will Expire in 20222025

Michael Hsing has served on our Board and as our President and Chief Executive Officer since founding MPS in August 1997. Prior to founding MPS, Mr. Hsing was a Senior Silicon Technology Developer at several analog integrated circuits (“IC”) companies, where he developed and patented key technologies, which set new standards in the power electronics industry. Mr. Hsing is an inventor on numerous patents related to the process development of bipolar mixed-signal semiconductor manufacturing. Mr. Hsing holds a B.S.E.E. from the University of Florida.

Herbert Chang has served on our Board since September 1999. SinceMr. Chang is currently the general partner of GrowStar Partners Group Limited. From March 2014 until December 2019, Mr. Chang has beenwas the general manager of Mutto Optronics Corporation, an OEM/ODM knife manufacturer listed on the Taiwan OTC. Mr. Chang was alsois a Managing Member of Growstar Associates, Ltd., which was the General Partnerventure capitalist and the Fund Manager of VCFA Growth Partners , L.P. from 2007 to 2013 and was the Chief Executive Officer of C Squared Management Corporation. Mr. Chang’s companies focusfocuses on investing in companies in the semiconductor, telecommunications, networking, software and/orand Internet industries. Mr. Chang was the President of InveStar Capital, Inc. from April 1996 until 2015 and serves on the board of directors of a number of private companies.companies and a TWSE-listed company. Mr. Chang received a B.S. in geology from National Taiwan University and an M.B.A. from National Chiao Tung University in Taiwan.

Carintia Martinez has served on our Board since May 2021. Ms. Martinez currently serves as Vice President, Chief Information Officer of Thales Alenia Space, a European aerospace manufacturer specializing in satellite systems, which position she has held since January 2018. From February 2008 to December 2017, Ms. Martinez held various senior positions, including Vice President of Renault-Nissan Alliance Quality and Vice President of Information Systems for Marketing and Sales, at Renault Group, a French automobile manufacturer. Prior to February 2008, Ms. Martinez held a variety of managerial roles in information systems and other corporate functions under different entities within Renault Group and Nissan Motor Corporation. Ms. Martinez holds a master’s degree in Architecture and City Planning from Pontificia Universidade Catolica do Parana in Brazil, a master’s degree in Project Management from Université de Technologie de Compiègne in France, and a master’s degree in Urban Planning from Université Paris XII - Val de Marne and Ecole Nationale des Ponts et Chaussées in France.

There is no family relationship among any of our executive officers, directors and nominees.

Board Diversity

The following matrix presents the Board’s diversity statistics as of May 1, 2023: 

Director Independence

At least annually, the Nominating and Governance Committee reviews the independence of each non-employee director and makes recommendations to the Board, and the Board affirmatively determines whether each director qualifies as independent. Each director must keep the Nominating and Governance Committee fully and promptly informed as to any development that may affect the director’s independence. The Board has determined that each of Herbert Chang, Eugen Elmiger, Victor K. Lee, Carintia Martinez, James C. Moyer, Eileen Wynne and Jeff Zhou are “independent” under the applicable listing standards of The NASDAQ Stock Market.

Director Skills and Qualifications

Our Board includes sixeight members who are well-qualified to serve on the Board and represent our stockholders’ best interests. Our Board consists of directors who have the following characteristics:

We believe that each of the director nominees and the rest of the directors possesspossesses these attributes. In addition, the directors bring to the Board a breadth of experience, including extensive financial and accounting expertise, public company board experience, knowledge of the semiconductor business and technology,related technologies, broad global business experience, and extensive operational and strategic planning experience, and the ability to assess and manage business risks, including risks related to cybersecurity and information security, in complex, high-growth global companies.

backgrounds of our directors provide us with a diverse range of perspectives to effectively address our evolving needs and represent the best interests of our stockholders. The tenure of some of our directors ensures that we benefit from their substantial knowledge of MPS, its business and long-term goals. Our Board is a mix of longer term directors and two directors who have joined our Board since 2021, resulting in a valuable combination of sustained knowledge of MPS and new viewpoints and perspectives.

 

The following describestable highlights the specific key qualifications, business skills, experience and perspectivesattributes that each of ourthe directors and director nominees brings to the Board, in addition to the general qualifications described above and described in their individual biographies:Board: 

 

	Michael Hsing	Herbert Chang	Eugen Elmiger	Victor K. Lee	Carintia Martinez	James C. Moyer	Eileen Wynne	Jeff Zhou
Executive leadership	●	●	●	●	●	●	●	●
Corporate governance	●	●	●	●	●	●	●	●
Global business and operations	●	●	●	●	●	●	●	●
Innovation and technologies	●	●	●	●	●	●	●	●
Risk management	●	●	●	●	●	●	●	●
Cybersecurity	●	●	●		●	●		●
Finance and accounting expertise	●	●	●	●	●		●	●
Human capital management	●	●	●	●	●	●	●	●
Diversity	●	●		●	●		●	●

Michael Hsing		Mr. Hsing, the co-founderfounder of MPS, is a visionary in power management technology as well as a strong leader, motivator and successful entrepreneur. Mr. Hsing provides the Board with valuable insight into management’s perspective with respect to our operations, and he provides the Board with the most comprehensive view of our operational history. Under his leadership, we have experienced significant revenue growth and profitability. Since our initial public offering in 2004, stockholder value measured by market capitalization has increased significantly. Having worked in the semiconductor industry for over 30 years, Mr. Hsing’s experiencevision, insight and insightexperience enable him to understand how toand expand the markets we serve, control costs effectively, assess and maximizemanage business risks, including risks related to information technology, supply chain and cybersecurity, and enhance our technology advantages for our products, which hashave helped fuel our growth and created value for our stockholders. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Hsing should serve as a director of MPS.
Herbert Chang		Mr. Chang has been a member of the Board since 1999, which gives him significant knowledge of our recent experiencesbusiness and history. We also continue to benefit from the broad experience gained by Mr. Chang through his numerous successful investments in both public and private high-technology companies. Mr. Chang has served on several boards of the companies in which he has invested, which has given him significant leadership skills, risk management, corporate governance and oversight experience. In addition, through these board and investor responsibilities, as well as his tenure on the Board, Mr. Chang has developed a deep knowledge of our industry, our operations, and the accompanying complex financial transactions and controls necessary for us to succeed. Mr. Chang’s financial expertise has also helped the Board analyze significant complex financial transactions that we have considered from time to time. Mr. Chang also has very relevantimportant international experience based on his educational background and work experience in the countries where we do business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Chang should serve as a director of MPS.
Eugen Elmiger		Mr. Elmiger is a seasoned business executive with over 30 years of experience, including extensive international marketing, sales and product management expertise, executive board experience, knowledge of high-tech component business and technology, broad global experience and operational and strategic planning experience, including the oversight of information technology and cybersecurity, in complex, high-growth global companies. This experience allows him to contribute his valuable executive leadership talent, risk management and understanding of international business to Board deliberations.deliberations and oversight duties. His industrial, medical and automotive background is a valuable asset to the Board as we expand our business in these markets. Mr. Elmiger’s appointment to the Board also allows him to bring a new perspective, new ideas and outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Elmiger should serve as a director of MPS.

 

Victor K. Lee

Mr. Lee is the audit committee financial expert on the Audit Committee of the Board. He has been the Chief Financial Officer at several public and private companies, and has worked in the semiconductor industry for over 30 years. Mr. Lee is familiar with not only the inner workings of the semiconductor industry, but also has intimate knowledge of the financial issues and business risks that semiconductor companies often face. His experience has allowed him to understand the broad issues, in particular those affecting the financial and accounting aspects of our business, that the Board must consider and to make sound recommendations to management and decisions by the Board. Mr. Lee also provides the Board with valuable insight into financial management, risk management, internal controls, disclosure issues and tax matters relevant to our business. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Lee should serve as a director of MPS.

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Carintia Martinez		Ms. Martinez brings to the Board a diverse background with more than 30 years of information systems and technology experience in high-growth, multinational companies in the aerospace and automotive industries. The Board believes that Ms. Martinez’s valuable executive leadership talent, risk management experience, including the oversight of information technology and cybersecurity, diverse background, and understanding of complex international business issues allow her to bring new perspectives, ideas and outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Ms. Martinez should serve as a director of MPS.
James C. Moyer		Mr. Moyer is a technical expert in the design of analog semiconductors. As co-founder of MPS, Mr. Moyersemiconductors and is intimately familiar with us and our products. Mr. Moyer brings insight to the Board because of his cumulative experience gained as an engineer and technical leader in the semiconductor industry. This experience gives him a highly developed understanding of the needs and requirements of the analog market for our complex products and allows him as a director to lead us in the right direction in terms ofguide our strategy and business approach. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. Moyer should serve as a director of MPS.

Eileen Wynne

Ms. Wynne brings to the Board a diverse background with finance, operational and risk management experience in high-growth, multinational companies. Ms. Wynne has been the Chief Accounting Officer at a global semiconductor company and has worked in the semiconductor industry for over 20 years. Ms. Wynne is familiar with not only the inner workings of the semiconductor industry, but also has intimate knowledge of the financial issues and business risks that semiconductor companies often face. The Board believes that Ms. Wynne’s valuable executive leadership talent, financial oversight expertise, and understanding of complex international business and manufacturing issues in the semiconductor sector allow her to bring new perspectives, ideas and outlooks to the Board. Based on the Board’s identification of these qualifications, skills and experiences, the Board has concluded that Mr. MoyerMs. Wynne should serve as a director of MPS.

Dr. Jeff Zhou		Dr. Zhou is a senior business executive with over 30 years of industry experience at large, multi-national corporations with global footprints. Dr. Zhou has an extensive background in the global manufacturing, electronics and electronicsrenewable energy industry. This experience allows him to contribute his valuable executive leadership talent, risk management skills, including the oversight of information technology and cybersecurity, and understanding of international business to Board deliberations. Dr. Zhou’s appointment todeliberations and oversight duties. Based on the Board’s identification of these qualifications, skills and experiences, the Board also allows him to bringhas concluded that Dr. Zhou should serve as a new perspective, new ideas and new outlooks to the Board. Based on the Board’s identificationdirector of these qualifications, skills and experiences, the Board has concluded that Dr. Zhou should serve as a director of MPS.

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Board Leadership Structure

 

The Board currently consists of sixeight members, fiveseven of which the Board has determined are independent. 

Leadership Structure. Our current leadership structure and governing documents permit the roles of Chairman and Chief Executive Officer to be filled by the same or different individuals. Should the Board determine that it remains in the best interests of MPS and its stockholders that the Chief Executive Officer serve as Chairman, the independent members of the Board then elect a Lead Independent Director.

The Board has currently determined that it is in the best interests of MPS and its stockholders to have Michael Hsing, our President and Chief Executive Officer, serve as Chairman, coupled with an active Lead Independent Director. As such, Mr. Hsing holds the position of Chairman, President and Chief Executive Officer, and the Board has designated one of the independent directors, Mr. Chang, as the Lead Independent Director. Our Lead Independent Director becauseis appointed by the Board on an annual basis. The Board believes our Presidentleadership structure, with its strong emphasis on Board independence, an active Lead Independent Director, and Chief Executive Officer, Mr. Hsing, also serves as the Chairman of the Board. We believe that the number of independent, experienced directors that make up ourstrong Board along with the independentand committee involvement, provides sound and robust oversight of our Lead Director, benefits usmanagement, and our stockholders by providingprovides a counterbalance to the management perspective provided by Mr. Hsing during Board deliberations. 

 

WeThe Board considers and discusses the Board leadership structure every year. As part of this evaluation process, the Board reviews its leadership structure and whether combining or separating the roles of Chairman and CEO is in the best interests of MPS and our stockholders. The Board also considers:

●

The effectiveness of the policies, practices and people in place at MPS to help ensure strong, independent Board oversight;

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●

MPS’s performance and the effect the leadership structure could have on its performance;

●

The Board’s performance and the effect the leadership structure could have on the Board’s performance;

●

The Chairman’s performance in the role;

●

The views of MPS’s stockholders; and

●

The practices at other companies and trends in governance.

While we recognize that different board leadership structures may be appropriate for different companies. Wecompanies, we believe that our current Board leadership structure is optimal for us. Our leadership structure demonstrates to our employees, suppliers, customers, stockholders and other stakeholders that we are governed by strong, balanced leadership, with a single person setting the tone and consistent message for the Board and management and having primary responsibility for managing our day-to-day operations.operations, with appropriate oversight and direction from our Lead Independent Director and other independent directors. This message is increasingly important as we continue to seek to achieve business success through new product releases and gaining market share in our industry. At the same time,We also believe that our leadership structure sends the message that we also value strong, independent oversight of our management operations and decisions in the form of our Lead Director.Independent Director and other independent directors. Further, having a single leader for both MPS and the Board eliminates the potential for strategic misalignment or duplication of efforts, and provides clear leadership for us.

 

As discussed above,Benefits of Combined Leadership Structure. The Board believes that MPS and our stockholders have been best served by having Mr. Hsing in the positionsrole of Chairman of the Board, President and Chief Executive Officer are held by Mr. Hsing, andfor the Board has appointedfollowing reasons:

●

Mr. Hsing is most familiar with our business and the unique challenges we face. Mr. Hsing’s day-to-day insight into our challenges facilitates a timely deliberation by the Board of important matters;

●

Mr. Hsing has and will continue to identify agenda items and lead effective discussions on the important matters affecting us. Mr. Hsing’s knowledge and extensive experience regarding our operations and the highly competitive semiconductor industry in which we compete position him to identify and prioritize matters for Board review and deliberation;

●

As Chairman and Chief Executive Officer, Mr. Hsing serves as an important bridge between the Board and management and provides critical leadership for carrying out our strategic initiatives and confronting our challenges. The Board believes that Mr. Hsing brings a unique, stockholder-focused insight to assist MPS to most effectively execute its strategy and business plans to maximize stockholder value;

●

The strength and effectiveness of the communications between Mr. Hsing, as our Chairman, and Mr. Chang, as our Lead Independent Director, as well as our other independent directors, result in comprehensive Board oversight of the issues, plans and prospects of MPS; and

●

This leadership structure provides the Board with more complete and timely information about MPS, a unified structure and consistent leadership direction internally and externally and provides a collaborative and collegial environment for Board decision making.

Lead Independent Director Responsibilities. As the Lead Independent Director, Mr. Chang.  Mr. Chang’s primary roles and responsibilities as the Lead Director include:

 

1. ●

Reviewing meeting agendas, schedules, and information sent to the Board;agendas;

 

●

2.

Retaining independent advisors on behalf ofReviewing schedules and information sent to the Board, or committees, as the Board may determine is necessary or appropriate;Board;

 

●

3. Retaining independent advisors on behalf of the Board, or committees, as the Board may determine is necessary or appropriate;

●

Ensuring personal availabilityAssuring that there is sufficient time for consultationdiscussion of all meeting agenda items;

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Consulting and communicationcommunicating with independent directors and with the Chief Executive Officer/Chairman of the Board, as appropriate;

 

4. ●

Performing such other functions as the independent directors may designate from time to time;

 

5. ●

Presiding at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; and

 

6.

Serving as liaison between the Chairman and independent directors;

7. ●

Calling and leading meetings of independent directors; and

8.

Ensuring that the Board is at least two-thirds independent and that key committees are independent.directors.

 

Our independent directors meet in executive session during a portion of every regularly scheduled Board meeting,meetings, and otherwise as needed. Our Lead Independent Director presides over meetings of our independent directors and we believe that these meetings help to ensure an appropriate level of independent scrutiny of the functioning of MPS and the Board. 

 

Board Meetings and Committees

The Board held a total of four meetings during 2022, and all directors, except for Mr. Moyer, attended at least 75% of the meetings of the Board and the committees upon which such director served.

During 2022, Mr. Moyer was unable to attend two Board meetings due to illness and medical issues. Subsequent to the Board meetings, Mr. Moyer held discussions with the Lead Independent Director to review the Board materials presented in those meetings. With his strong industry and technical expertise, Mr. Moyer continues to play a critical role as a Board member and contribute invaluable guidance and oversight on our long-term strategic directions.

Audit Committee. The Board has a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the 1934 Act, which currently consists of three members: Herbert Chang, Victor K. Lee and Jeff Zhou. Mr. Lee is the chairman of the Audit Committee. The primary responsibilities of the Audit Committee are to:

●

Provide oversight of our accounting and financial reporting processes and the audit of our financial statements;

●

Appoint the independent registered public accounting firm to audit our financial statements;

●

Assist the Board in the oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications, independence and performance, and our internal accounting and financial controls; and

●

Provide to the Board such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention of the Board.

The Board has determined that Mr. Lee is an “audit committee financial expert,” as defined under the rules of the SEC, and all members of the Audit Committee are “independent” in accordance with the applicable SEC regulations and the applicable listing standards of NASDAQ. The Audit Committee held four meetings during 2022. The Audit Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations”section of our website at http://www.monolithicpower.com.  

Compensation Committee. The Board has designated a Compensation Committee consisting of three members: Herbert Chang, Eugen Elmiger and Jeff Zhou. Mr. Zhou is the chairman of the Compensation Committee. The primary responsibilities of the Compensation Committee are to:

●

Provide oversight of our compensation policies, plans and benefits programs;

●

Assist the Board in the oversight of the compensation of the executive officers, and evaluation and approval of the executive officer compensation plans, policies and programs;

●

Assist the Board in administering our equity compensation plans; and

●

Provide oversight of our ESG practices and compliance efforts with respect to executive compensation policies and programs, as well as human capital management.

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All members of the Compensation Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Compensation Committee held four meetings during 2022. The Compensation Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com.

Nominating and Governance Committee. The Board has designated a Nominating and Governance Committee consisting of two members: Eugen Elmiger and Carintia Martinez. Mr. Elmiger is the chairman of the Nominating and Governance Committee. The primary responsibilities of the Nominating and Governance Committee are to:

●

Review the composition and qualifications of the Board, recommend director nominees for the selection of the Board, and evaluate director compensation;

●

Review the composition of committees of the Board and recommend persons to be members of such committees;

●

Develop overall governance guidelines and oversee the overall performance of the Board;

●

Recommend to the Board whether to accept or reject a tendered director resignation, or take other action, in circumstances where a director receives a greater number of “withhold” votes than “for” votes in an uncontested election of directors as set forth in the director voting policy adopted by the Board; and

●

Provide oversight of our overall ESG practices and compliance efforts.

All members of the Nominating and Governance Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Nominating and Governance Committee held four meetings in 2022. The Nominating and Governance Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations”section of our website at http://www.monolithicpower.com.

The information contained on our website is not intended to be part of this Proxy Statement and is not incorporated by reference into this Proxy Statement.

Board Oversight of RiskRisks

 

The Board is primarily responsible for the oversight of risks that could affect MPS. The Board believes that a fundamental part of risk management is understanding the risks that we face, monitoring these risks, and adopting appropriate controls and mitigation activities for such risks. We believe that the risk management areas that are critical to our long-term success primarily include product development, supply chain and quality, regulations and legal compliance, ESG, executive compensation programs, sales and promotions, and business development, as well as protection of our assets (financial, intellectual property and cybersecurity), all of which are managed by senior executive management reporting directly to our Chief Executive Officer. Our Board members have extensive experience in risk oversight arising from their current or prior experience as chief executive officers, chief financial officers, chief information officers, as well as other senior leadership positions or board members of other companies with responsibility for risk oversight obligations. As such, the Board believes that its members are qualified and experienced at identifying and addressing risk throughout our operations.

While the full Board has retained responsibility for general oversight of risk, the Board’s oversight is conducted principally through the committees of the Board. The Board satisfies its responsibility by requiring each committee chair to regularly report the committee’s considerations and actions, including risk oversight, as well as by requiring officers responsible for oversight of particular risks to submit regular reports. As these reports are submitted independent of review by Mr. Hsing, the Board believes that its leadership structure has no impact on the conduct of its risk oversight function other than to reinforce the involvement of the Board in ongoing management of MPS.

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The following table outlines the specific risk oversight responsibilities of each committee:

Committee		Primary Areas of Risk Oversight
Audit		●    Oversee accounting policies and internal controls and evaluate enterprise risks associated with financial reporting, accounting, auditing and tax matters. ●    Assess financial risks relating to our cash management and investment programs. ●    Evaluate exposures and risks related to cybersecurity, data privacy and information technology security and controls.
Compensation		●    Assess risks related to our compensation programs and practices. ●    Oversee risks related to human capital management.
Nominating and Governance		●    Assess risks and compliance related to corporate governance matters, including our policies and principles, our Board structure, membership and independence, and stockholder rights. ●    Assess risks arising from our ESG program, including environmental sustainability and social initiatives.

Our senior management team, which conducts our day-to-day risk management, is responsible for assisting the Board and the committees with its risk oversight function. This oversight is conducted principally through committees ofAt its regularly scheduled meetings, the Board as disclosed in the descriptions of each ofand the committees below and in the charters of each of the committees, but the full Board has retained responsibility for general oversight of risk. The Board satisfies its responsibility by requiring each committee chair to regularly report regarding the committee’s considerations and actions, as well as by requiringrequire officers responsible for oversight of particular risks within MPS to submit regular reports. As theseupdates and reports are submitted independent of review by Mr. Hsing,on business matters including operational and ESG issues, financial results, cybersecurity and information security, and business outlook and strategy. These updates enable our President, Chief Executive OfficerBoard and the Chairman of the Board, the Board believes that its conductcommittees to discuss enterprise risks with our senior management on a regular basis, including as a part of its risk oversight function has no impact on the Board’s leadership structure other than to reinforce the involvement of the Board in ongoing management of MPS.annual strategic planning process and annual budget review.

 

In addition to requiring regular reporting from committees and officers, the Board also hears from third-party advisors in order to maintain oversight of risks that could affect us, including our independent auditors, outside counsel, compensation consultants and others. These advisors are consulted on a periodic basis, and as particular issues arise, in order to provide the Board and the committees with the benefit of independent expert advice and insights on specific risk-related matters.

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At its regularly scheduled meetings, the Board also receives management updates on the business, including operational issues, financial results, and business outlook and strategy. 

Our Audit Committee also assists the full Board in its oversight of risk by discussing with management our compliance with legal and regulatory requirements, our policies with respect to risk assessment and management of risks that may affect us, and our system of disclosure control and system of controls over financial reporting.  Risks related to our company-wide compensation programs are reviewed by our Compensation Committee. For more information on the Compensation Committee’s compensation risk assessment, see the section “Named Executive Officer Compensation – Compensation Risk Management.” Our Nominating Committee provides compliance oversight and reports to the full Board on compliance and makes recommendations to our Board on corporate governance matters, including director nominees, the determination of director independence, and board and committee structure and membership.

 

We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing us and that the Board leadership structure supports this approach.

Board Meetings and Committees

The Board held a total of four meetings during 2019, and all directors attended at least 75% of the meetings of the Board and the committees upon which such director served.

Audit Committee. The Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the 1934 Act, which currently consists of three members: Herbert Chang, Victor K. Lee and Jeff Zhou. Mr. Lee is the chairman of the Audit Committee. This committee oversees our financial reporting process and procedures, is responsible for the appointment and terms of engagement of our independent registered public accounting firm, reviews our financial statements, and coordinates and approves the activities of our independent registered public accounting firm. The Board has determined that Mr. Lee is an “audit committee financial expert,” as defined under the rules of the SEC, and all members of the Audit Committee are “independent” in accordance with the applicable SEC regulations and the applicable listing standards of NASDAQ. The Audit Committee held four meetings during 2019. The Audit Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com.  

Compensation Committee. The Board has designated a Compensation Committee consisting of three members: Herbert Chang, Eugen Elmiger and Jeff Zhou. Mr. Zhou is the chairman of the Compensation Committee. This committee is responsible for providing oversight of our compensation policies, plans and benefits programs and assisting the Board in discharging its responsibilities relating to (a) oversight of the compensation of our Chief Executive Officer and other executive officers, and (b) approving and evaluating the executive officer compensation plans, policies and programs of MPS. The committee also assists the Board in administering our stock plans and employee stock purchase plan. All members of the Compensation Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Compensation Committee held four meetings during 2019. The Compensation Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com.

Nominating Committee. The Board has designated a Nominating Committee consisting of two members: Herbert Chang and Eugen Elmiger.  Mr. Elmiger is the chairman of the Nominating Committee.  This committee is responsible for the development of general criteria regarding the qualifications and selection of Board members, recommending candidates for election to the Board, developing overall governance guidelines and overseeing the overall performance of the Board. All members of the Nominating Committee are “independent” in accordance with the applicable listing standards of NASDAQ. The Nominating Committee held four meetings in 2019. The Nominating Committee acts pursuant to a written charter adopted by the Board, which is available in the “Investor Relations” section of our website at http://www.monolithicpower.com.

The information contained on our website is not intended to be part of this Proxy Statement and is not incorporated by reference into this Proxy Statement.

 

Nomination Process

 

The Board has adopted guidelines for the identification, evaluation and nomination of candidates for director. The Nominating Committee considers the suitability of each candidate, including any candidates recommended by stockholders holding at least 5% of the outstanding shares of our voting securities continuously for at least 12 months prior to the date of the submission of the recommendation for nomination. If the Nominating and Governance Committee wishes to identify new independent director candidates for Board membership, it is authorized to retain and approve fees of third partythird-party executive search firms to help identify prospective director nominees.  It is the practice of the Board that our Lead Independent Director interviews each Board candidate.

 

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In April 2018, in response to stockholders’ feedback, the Board considered and adopted an amendment to the Nominating Committee Charter (available in the “Investor Relations” section of our website at http://www.monolithicpower.com) on the evaluation of prospective candidates. In addition to the minimum qualifications the Nominating and Governance Committee has established for director nominees, the Nominating and Governance Committee will also consider whether the prospective nominee will foster a diversity of genders, races, backgrounds, skills, perspectives and experiences in the process of its evaluation of each prospective nominee. In 2022, as part of our commitment to diversity and inclusion, the Nominating and Governance Committee amended its charter (available in the “Investor Relations” section of our website at http://www.monolithicpower.com) to:

●

Clarify the definition of diversity to explicitly include gender and race; and

●

Include women and minority candidates in the initial pool from which the Nominating and Governance Committee selects prospective candidates.

The Nominating and Governance Committee also focuses on skills, expertise or background that would complement the existing Board, recognizing that our businesses and operations are diverse and global in nature. While there are no specific minimum qualifications for director nominees, the ideal candidate should (a) exhibit independence, integrity, and qualifications that will increase overall Board effectiveness, and (b) meet other requirements as may be required by applicable rules, such as financial literacy or expertise for audit committee members.

The policy of the Nominating and Governance Committee is to consider properly submitted stockholder nominations for candidates to serve on the Board. Stockholders who wish to nominate a candidate for election to the Board, including nominations using proxy access, must comply with the procedures set forth in our Bylaws. Refer to “Procedure for Submitting Stockholder Proposals and Director Nominations” for further details.

The Nominating and Governance Committee uses the same process for evaluating all nominees, regardless of the original source of the nomination.  After completing its review and evaluation of director candidates, the Nominating and Governance Committee recommends to the Board the director nominees for selection. 

 

A stockholder that desires to recommend a candidate for election to the Board should direct such recommendation in writing to Monolithic Power Systems, Inc., 5808 Lake Washington Boulevard NE, Kirkland, Washington 98033, Attention: Corporate Secretary, and must include the candidate’s name, home and business contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and us within the last three years and evidence

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Table of the nominating person’s ownership of our stock.  Such stockholder nomination must be made pursuant to the notice provisions set forth in our Bylaws and for each proposed nominee who is not an incumbent director, the stockholder’s notice must set forth all of the information regarding such nominating person and proposed nominee set forth in our Bylaws.

Contents

 

Stockholder Communications

 

The Board has approved a Stockholder Communication Policy to provide a process by which stockholders may communicate directly with the Board or one or more of its members. You may contact any of our directors by writing to them at c/o Monolithic Power Systems, Inc., 5808 Lake Washington Boulevard NE, Kirkland, Washington 98033, Attention: Corporate Secretary. using the following methods:

By e-mail:	corporate.secretary@monolithicpower.com
By mail:	Monolithic Power Systems, Inc. Attn: Corporate Secretary 5808 Lake Washington Blvd. NE Kirkland, WA 98033

Any stockholder communications thatto the Board is to receive will first go to the Corporate Secretary, who will log the date of receipt of the communication as well as the identity of the correspondent in our stockholder communications log. The Corporate Secretary will review, summarize and, if appropriate, draft a response to the communication in a timely manner. The Corporate Secretary will then forward copies of the stockholder communication to the Board member(s) (or specific Board member(s) if the communication is so addressed) for review, provided that such correspondence concerns the functions of the Board or its committees, or otherwise requires the attention of the Board or its members.

 

Attendance at Annual Meetings of Stockholders by the Board of Directors

 

We do not have a formal policy regarding attendance by members of the Board at our annual meetings of stockholders. In 2019,2022, no Board members attended the Annual Meeting.

 

Code of Ethics and Business Conduct

 

We have adopted a Code of Ethics and Business Conduct, which is applicable to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions. The Code of Ethics and Business Conduct is available in the “Investor Relations – Corporate Governance”“Investor Relations” section of our website at http://www.monolithicpower.com. We will disclose on our website any amendment to the Code of Ethics and Business Conduct, as well as any waivers of the Code of Ethics and Business Conduct, that are required to be disclosed by the rules of the SEC or NASDAQ. 

 

Policy on Hedging and Other Transactions 

We have adopted a policy that prohibits our directors, officers (including our NEOs), and other employees from engaging in hedging or monetization transactions with respect to our stock that they obtained through our plans or otherwise, without prior approval by our Chief Compliance Officer. We also prohibit our directors and officers (including our NEOs) from engaging in any short sales of our stock. In addition, our directors and officers are prohibited at all times from holding our stock in a margin account and from pledging our stock as collateral.

Director Voting Policy

 

The Board has adopted a director voting policy, which can be found in the “Investor“Investor Relations – Corporate Governance” section of our website at http://www.monolithicpower.com. The policy establishes that any director nominee who receives more “Withheld” votes than “For” votes in an uncontested election held in an annual meeting of stockholders shall promptly tender his or her resignation. The independent directors of the Board will then evaluate the relevant facts and circumstances and make a decision, within 90 days after the election, on whether to accept the tendered resignation. The Board will promptly publicly disclose its decision and, if applicable, the reasons for rejecting the tendered resignation.

 

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2019 2022 Director Compensation

 

Analysis of 20192022 Compensation Elements

 

For 2019,2022, the Board engaged Radford, an independent compensation consultant, to review theour non-employee director compensation. In its analysis, Radford gathered the market data onrelating to the size and type of compensation paid by our industry peer group for 20192022 (see the section “Named Executive Officer Compensation — Peer GroupGroup and Use of Peer Data for 2019”2022” for more information on the selection of the peer group). Based on its review of the results of this market review and recommendations by Radford, the Board did not make any changes toapproved the following compensation program for our non-employee directors for service in 2019, which is summarized as follows:2022:

 

Fee Description		Amount
Annual board retainer fee		$50,000
Lead director fee		$18,000
Compensation Committee chairperson fee		$18,000
Compensation Committee membership fee (excluding chairperson)		$8,000
Nominating Committee chairperson fee		$13,500
Nominating Committee membership fee (excluding chairperson)		$6,000
Audit Committee chairperson fee		$25,000
Audit Committee membership fee (excluding chairperson)		$10,500
Initial restricted stock unit (“RSU”) grant to new directors		Number of RSUs equal to $175,000
Annual RSU grant to incumbent directors		Number of RSUs equal to $175,000

Fee Description		FY 2022 ($)				FY 2021 ($)				Change
Annual Board retainer fee			75,000				70,000				7	%
Lead Independent Director fee			40,000				20,000				100	%
Compensation Committee chairperson fee			20,000				20,000				0	%
Compensation Committee membership fee (excluding chairperson)			10,000				10,000				0	%
Nominating and Governance Committee chairperson fee			15,000				15,000				0	%
Nominating and Governance Committee membership fee (excluding chairperson)			7,500				7,500				0	%
Audit Committee chairperson fee			30,000				30,000				0	%
Audit Committee membership fee (excluding chairperson)			15,000				15,000				0	%
Restricted stock unit (“RSU”) grant to new directors			220,000				200,000				10	%
Annual RSU grant to incumbent directors			220,000				200,000				10	%

 

The initial grant of RSUs to new directors vestvests as to 50% of the underlying shares of Common Stock on each of the first and second anniversaries of the date of grant. The annual grant of RSUs to incumbent directors vests as to 100% of the underlying shares of Common Stock on the first anniversary of the date of the grant. All awards will become fully vested in the event of a change in control.

 

All of our non-employee directors are subject to stock ownership guidelines that are described below in the section “Named Executive Officer Compensation — Compensation Discussion and Analysis — Stock Ownership Guidelines.”

 

The following table sets forth the total compensation paid tofor each non-employee director for serviceservices rendered in 2019.2022. Mr. Hsing, who is our employee, does not receive additional compensation for his services as a director. Mr. Hsing’s compensation as a named executive officer is reflected in the section “Named Executive Officer Compensation — 2019 - 2022 Summary Compensation Table.”

 

Name		Fees Earned or Paid in Cash				Stock Awards (1)				Total				Fees Earned or Paid in Cash ($)				Stock Awards ($)(1)				Total ($)
Herbert Chang		$	92,500			$	175,000			$	267,500				143,750				220,000				363,750
Eugen Elmiger		$	71,500			$	175,000			$	246,500				100,000				220,000				320,000
Victor K. Lee		$	75,000			$	175,000			$	250,000				105,000				220,000				325,000
Carintia Martinez															78,750				220,000				298,750
James C. Moyer		$	50,000			$	175,000			$	225,000				75,000				220,000				295,000
Jeff Zhou		$	78,500			$	175,000			$	253,500				110,000				220,000				330,000

 

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(1)

Reflects the aggregate grant date fair value of the awardsRSUs granted to each director in 2019,2022, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718, which was calculated using the closing price of our Common Stock on February 8, 2022, the date of grant for such awards. Assumptions used in the calculation of these amounts are included in Note 1 and Note 87 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019,2022, filed with the SEC on February 28, 2020.24, 2023.

 

The following table summarizes the number of shares of our Common Stock that are subject to unvested RSU awards held by each of the non-employee directors as of December 31, 2019:2022. There were no outstanding stock option awards as of December 31, 2022.

 

Name		Stock Awards (#)
Herbert Chang			1,339542
Eugen Elmiger			1,339542
Victor K. Lee			1,339542
Carintia Martinez			833
James C. Moyer			1,339542
Jeff Zhou			1,339542

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CORPORATE SOCIAL RESPONSIBILITY

Since MPS was founded in 1997, one of our core values has been to run a responsible and responsive business for the long term. We believe that positive ESG business practices strengthen our company and foster strong relationships with our stockholders, employees, business partners and communities where we operate. We are committed to making our workforce diverse, our business sustainable and our stakeholders engaged by maintaining strong ESG practices and policies.

ESG Oversight

We believe that effective oversight is essential to ensure our ESG practices and policies are aligned with our business strategy and serve the long-term interests of our stockholders and other stakeholders. Our Board is actively engaged on ESG matters and has the ultimate responsibility on the oversight, management and implementation of our ESG program. In its oversight role, our Board primarily focuses on:

●

Assessing ESG risks and opportunities and the impact of our strategy on our business and operations.

●

Setting measurable and rigorous goals, monitoring progress and reviewing status reports.

●

Establishing management accountability for ESG performance.

●

Reviewing our reporting processes and controls.

●

Overseeing our engagement and communications strategy with our stockholders and other stakeholders.

Our Board has assigned oversight responsibilities of our ESG compliance efforts to its committees, and receives reports and updates from each committee on a quarterly basis:

Nominating and Governance Committee	Provides oversight of overall strategy, performance and risk assessments related to our ESG program, including environmental sustainability and social initiatives, and corporate governance matters.
Compensation Committee	Establishes executive accountability through compensation policies and programs, and oversees human capital management.
Audit Committee	Oversees cybersecurity matters, reporting, internal controls and disclosure requirements pursuant to regulatory standards.

Our ESG Steering Committee is responsible for the day-to-day management of our ESG program and consists of a cross-functional group that includes two senior executives and leaders from Legal and Compliance, Information Technology, Facilities, Operations, Procurement, Quality Assurance, Product Line, Human Resources, Supply Chain Management, and Environmental, Health and Safety. Under the supervision of the Board committees, the ESG Steering Committee’s primary role is to: (a) manage the execution of our corporate strategy relating to ESG, (b) develop and implement initiatives and policies, (c) drive ESG performance, (d) oversee communications with employees, customers, suppliers, regulators and other stakeholders, and (e) monitor and assess developments and trends relating to ESG. On a quarterly basis, each Board committee receives updates from the ESG Steering Committee. These updates provide the Board committees with the opportunities to evaluate our ESG priorities, performance against our goals, and regulatory requirements.

ESG Initiative Highlights

For a complete description of our ESG priorities, initiatives and reduction goals, please refer to our Corporate Responsibility Report, which is available on our website at https://www.monolithicpower.com/en/about-mps/investor-relations/esg-report.html. The information contained in our Corporate Responsibility Report and on our website is not intended to be part of this Proxy Statement and is not incorporated by reference into this Proxy Statement.

Environmental Sustainability

Pursuant to our Environmental and Climate Change Policy, we seek to responsibly protect the environment and conserve natural resources by implementing sustainability programs and solutions, engaging partners across our value chain, and setting ambitious goals that we believe will help minimize the environmental impacts from our products and operations.

●	Carbon Footprint

We completed our Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions inventory for 2021 and 2022, covering all global operations using the operational control approach under the GHG Protocol, a set of internationally recognized standards for quantifying and reporting GHG emissions. The emissions data for both years have been verified by an independent data verification firm in accordance with its assurance standards. In addition, we are developing our value chain outreach plan to assess our Scope 3 emissions baseline and implement reduction goals.

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●	Renewable Energy

Our goal is to increase renewable energy sources as part of our GHG emissions reduction strategy. We will continue to procure reliable energy supplies, including renewable resources where available, that are cost-effective and align with our business needs and environmental objectives.

●

Waste

We continue to look for opportunities to minimize waste generation, most of which is produced at our testing facilities. In 2022, 86% of our waste from global operations was recycled, compared with 83% in 2021. We are focused on managing our hazardous waste by working closely with our vendors to identify and implement additional recycling programs.

●	Product Design

Our products play a critical role in powering data center infrastructure. In our product design, we focus on features that deliver new capabilities while improving performance and energy efficiency. As a result of increasingly intensive computing applications such as artificial intelligence, customers are looking for sustainable solutions that maximize power density in data centers. Using our proprietary power conversion technology, we are developing power modules with higher power density per rack that will decrease the physical footprint on the motherboards. This power density improvement will enable more computing power in less space, which will result in energy savings in data centers.

●	Sustainable Operations

As part of our goal to achieve sustainable, energy-efficient operations, we have implemented various green technologies in our facilities, including solar panels and electric vehicle charging stations. Globally, we have installed 33,500 square feet of solar panels, which generated close to 600 MWh of electricity, with 137 metric tons of carbon dioxide equivalent savings in 2022. We have also installed 59 electric vehicle charging stations in various locations.

●	Environmental Management System

We utilize an Environmental Management System (“EMS”) to achieve our environmental goals through consistent review, evaluation and improvement, and to address regulatory requirements and environmental performance in a systematic and cost-effective manner. Our EMS is compliant with the ISO 14001 standard.

Social

Through our social initiatives, we aim to give back to our local communities and maintain a workplace that values diverse backgrounds, a healthy and safe environment, innovative thinking and professional growth. In addition, we conduct our business in a manner that respects the rights and dignity of all people, and we expect our business partners to uphold these principles as well.

●	Diversity, Equity and Inclusion

Under our Diversity, Equity and Inclusion Policy, our mission is to create an inclusive workplace that supports all employees. We provide unconscious bias trainings for managers and human resources employees administered by independent third parties to ensure that we promote an environment of inclusivity. In our most recent pulse surveys, 94% of our employees said they were valued and treated with respect.

We file our EEO-1 report each year and publish the data publicly. In 2022, women in engineering/technical and managerial/supervisor roles totaled approximately 39% and 47%, respectively, of our worldwide workforce, and held approximately 52% of non-technical roles. In the U.S., employees belonging to minority groups accounted for 68% of our workforce. We continue to recruit new talent from a diverse candidate pool through various university recruitment programs and employment websites targeting underrepresented minority groups.

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As part of our commitment to diversity and inclusion, our Nominating and Governance Committee amended its charter in 2022 and adopted a rule that requires women and minorities to be included in the initial pool of candidates when selecting new director nominees.

●	Training and Development

We encourage our employees to learn, innovate and grow their careers by providing them with access to various learning tools and resources to develop their business skills and knowledge. As part of our efforts to invest in employee growth and development, we launched an online learning management system, Cornerstone, in 2023 that offers a comprehensive library of training courses on topics including business and leadership, career and technical skill development, ethical standards, health and safety, cybersecurity, diversity and inclusion, human rights and compliance.

●	Human Rights

Under our Code of Social Responsibility, we adhere to the standards established in the Universal Declaration of Human Rights and strictly prohibit human trafficking and the use of forced, slave or child labor in any form. We expect our employees and business partners to abide by these principles. Under our Supplier Code of Conduct, which aligns with Responsible Business Alliance’s Code of Conduct, we require our suppliers to maintain sound business ethics and labor practices that are in compliance with applicable laws and regulations. Failure by any of our suppliers to comply with our Supplier Code of Conduct may result in termination of our business relationship with such supplier.

●	Our Communities

We believe in being an active corporate citizen and making a positive impact on communities where we do business. Through the MPS Foundation, we are committed to supporting non-profit organizations that focus on academic research, performing arts, healthcare, food banks, youth programs, and educational and career opportunities for underrepresented groups with monetary contributions or investments. In 2022, we contributed $5.6 million to the MPS Foundation, which has donated to organizations including Cornell University, Healthier Kids Foundation, Seattle Symphony, Second Harvest Food Bank, Virginia Mason Foundation and Washington STEM.

Governance

Our overall governance framework is designed to promote strong oversight, create Board and management accountability, protect the rights of stockholders, and demonstrate our commitment to transparency, independence and diversity. We believe that strong corporate governance is important for our long-term success and ensures that we manage ESG risks effectively while achieving our sustainability and social priorities.​

●	Board Diversity and Refreshment

Our Board consists of members with a wide variety of skills, industry experiences and backgrounds. We believe a diverse, balanced and cohesive Board is critical in facilitating strong oversight, fostering diverse and new perspectives, as well as supporting the achievement of MPS’s long-term objectives. In February 2023, after conducting a rigorous search, the Board appointed an additional female Board member, Ms. Eileen Wynne, who brings to the Board a diverse background with more than 20 years of finance, operational and risk management experience in the semiconductor industry.

Currently, five of our eight directors are ethnically diverse, and two directors are female. In addition, 25% of our directors were first appointed within the past two years.

●	Stockholder Rights

We continue to engage with our stockholders, seek their feedback and address their concerns on corporate governance matters. In 2022, the Board amended our Bylaws to facilitate proxy access for our stockholders who meet certain eligibility requirements. Proxy access gives our stockholders the right to nominate director candidates in our proxy materials and gain representation on the Board.

Stockholder Engagement

During 2022, we continued our practice of proactive stockholder engagement regarding important matters including executive compensation, ESG and governance topics. Our management team, including our Chief Executive Officer, Chief Financial Officer and General Counsel, extended invitations to our largest institutional stockholders and had the opportunity to engage with stockholders representing approximately 45% of our total shares outstanding. Subsequent to these meetings, our management team, the Board and its committees thoughtfully evaluated information gathered from our engagement process, together with feedback and input from our independent compensation consultant, when making decisions for the next 12 months.

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The following table summarizes the changes we have implemented, based on the key issues raised by our stockholders:

What We Heard from Stockholders			How We Responded
ESG	●    Clear commitment to addressing climate risks and setting rigorous sustainability goals. ●    Greater link between executive compensation and achievement of ESG goals.		We made the following significant progress related to our ESG program: ●     We engaged our Board on at least a quarterly basis for their guidance, direction, and oversight on ESG matters. Internally, we formed an ESG Steering Committee consisting of a team of two senior executives, cross-functional managers and personnel to establish our missions and sustainability policies, and to supervise the management and execution of our ESG initiatives. ●     We hired a Sustainability Manager and an ESG Manager with strong academic backgrounds and professional experience on sustainability and ESG program management to carry out tasks set by our ESG Steering Committee, conduct analysis, engage with third-party advisors and data verification firms, and report back the progress made throughout the organization. ●     We conducted (a) extensive research and analysis of our emissions and other data, (b) evaluations of our operations in locations with the greatest impact, and (c) risk assessments on various sustainability initiative proposals. Based on our findings, we established rigorous medium- and long-term goals in key areas (including GHG emissions reductions, increased adoption of renewable energy, waste management, and product design and efficiency) that we believe will align with our long-term business strategy.  ●     We plan to report progress on our goals from time to time and as required by SEC and other applicable rules. Furthermore, the Compensation Committee plans to establish accountability by linking a portion of the equity compensation of the officers and key members of the ESG Steering Committee to the achievement of certain reduction goals in the near future.
Corporate Governance	●    Greater diversity in our Board composition.		●     We amended our Nominating and Governance Committee charter to specifically require the inclusion of women and minorities in the initial candidate pool of director nominees. ●     We appointed one additional female director. Currently, two of our eight directors are female and five are ethnically diverse.
Executive Compensation	●     More rigorous criteria in performance conditions under our long-term equity compensation program.		●     The Compensation Committee extended the performance period of the equity awards granted to our senior executives from two years to three years. ●     The Compensation Committee extended the number of trading days required to achieve each individual price target from 20 days to 90 days under the 2022 market-based equity awards to maintain a sustained level of stock price appreciation.

 

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PROPOSAL TWO

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board has appointed Ernst & Young LLP (“Ernst & Young”) as our independent registered public accounting firm for the year ending December 31, 2020.2023. Ernst & Young has served as our independent registered public accounting firm since March 18, 2019. Prior to March 18, 2019, Deloitte & Touche LLP (“Deloitte & Touche”) served as our independent registered public accounting firm.  

Representatives of Ernst & Young are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions. Although ratification by stockholders is not required by law, the Board has determined that it is desirable to request ratification by the stockholders of this selection by the stockholders.selection. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint a new independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interest of us and our stockholders. If the stockholders do not ratify the appointment of Ernst & Young, the Audit Committee may reconsider its selection. 

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THETHE YEAR ENDING DECEMBER 31, 2020.2023.

 

Audit and Other Fees

 

The following table summarizes the fees for services provided by our independent registered public accounting firmsErnst & Young for 20192022 and 20182021 (in thousands):

		FY 2019				FY 2018
		(Ernst & Young)				(Deloitte & Touche)				FY 2022				FY 2021
Audit fees		$	1,099			$	2,002			$	1,825			$	1,168
Audit-related fees			-				-				-				-
Tax fees			5				79				6				5
Total		$	1,104			$	2,081			$	1,831			$	1,173

Audit fees consist of fees billed for professional services rendered for the audit of our annual financial statements and review of the interim financial statements included in our quarterly reports and the audit of our internal control over financial reporting.

 

Audit fees also include services in connection with foreign statutory and regulatory filings, and audit and accounting matters that arise during, or as a result of, the audit or the review of interim financial statements, including the application of proposed accounting rules, statutory audits required by non-U.S. jurisdictions and the preparation of an annual “management letter” containing observations and discussions on internal control matters. 

 

Audit-related feesrepresent assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under "Audit“Audit Fees."” These services include accounting consultations in connection with attestation services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

 

Tax fees represent professional services for federal, state and international tax compliance, tax advice and tax planning.

 

Pre-Approval of Audit and Non-Audit Services

 

The charter of our Audit Committee requires that the Audit Committee pre-approve all audit and non-audit services provided to us by our independent registered public accounting firm or subsequently approve non-audit services in those circumstances where a subsequent approval is necessary and permissible. All such services for 20192022 and 20182021 were pre-approved by the Audit Committee. 

 

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Change in Independent Registered Public Accounting Firm

As previously reported in our Current Report on Form 8-K (the “Current Report”) dated March 22, 2019, following a comprehensive process, the Audit Committee dismissed Deloitte & Touche as our independent registered public accounting firm on March 18, 2019.

Deloitte & Touche’s reports on our consolidated financial statements as of and for the years ended December 31, 2018 and December 31, 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. In addition, the audit reports of Deloitte & Touche on the effectiveness of internal control over financial reporting as of December 31, 2018 and December 31, 2017 did not contain any adverse opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

During the years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through March 18, 2019, there were (i) no “disagreements” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, between us and Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Deloitte & Touche, would have caused Deloitte & Touche to make reference to the subject matter of the disagreement in their reports, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

We provided Deloitte & Touche with a copy of the disclosures made in the Current Report. In addition, we requested that Deloitte & Touche furnish a letter addressed to the SEC stating whether or not it agreed with the statements made in the Current Report. A copy of Deloitte & Touche’s letter dated March 22, 2019 was attached as Exhibit 16.1 to the Current Report.

During the fiscal years ended December 31, 2018 and December 31, 2017, and the subsequent interim period through March 18, 2019, neither we nor anyone acting on our behalf has consulted with Ernst & Young with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that Ernst & Young concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” or “reportable event” as those terms are defined in Item 304(a)(1) of Regulation S-K.

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PROPOSAL THREE

 

ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION

 

As required under Section 14A of the Securities Exchange Act of 1934, we are asking stockholders to again cast an advisory (non-binding) vote on the following resolution at the Annual Meeting:

 

RESOLVED, that, on an advisory basis, the compensation of our named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and related narratives and descriptions of this Proxy Statement for the Annual Meeting, is hereby APPROVED.

 

This advisory vote, commonly known as a “say-on-pay” vote, gives our stockholders the opportunity to express their views about the compensation we paid to our named executive officers, in the prior year, as described in this Proxy Statement.  Before stockholders vote on this proposal, they should review the Compensation Discussion and Analysis in this Proxy Statement and the tabular and narrative disclosure that follows it.  We currently conduct say-on-pay votes every year.year, and we are asking stockholders to vote, on an advisory basis, on the frequency of future say-on-pay votes in Proposal Four. The next say-on-pay vote is expected to occur at the 20212024 annual meeting of stockholders.

 

We are committed to responsible compensation practices and structures. As described more fully in the Compensation Discussion and Analysis section of this Proxy Statement, the primary goal of our executive compensation program is the same as our goal for operating MPS — to create long-term value for our stockholders. To achieve this goal, we have regularly sought out the feedback of our major stockholders over the past several years to hear their suggestions on how we can better achieve our primary compensation goal. After taking their feedback into consideration, we have continued to update our compensation program for our named executive officers, implementing those recommendations of our stockholders that the Compensation Committee believes will help us create long-term value for our stockholders. We believe these annual reviews of our programs, in coordination with our conversations with our stockholders, allow us to motivate and reward our executives for sustained financial and operating performance and leadership excellence, to align their interests with those of our stockholders, and to encourage them to remain with us for long and productive careers.

 

Stockholders may vote “ “for”for” or “ “against”against” the resolution or abstain from voting on the resolution.  The affirmative vote of a majority of the shares of stock entitled to vote thereon which are present in person via attendance at the virtual Annual Meeting or represented by proxy at the Annual Meeting is required to approve, on an advisory basis, the compensation of our named executive officers. The result of the say-on-pay vote will not be binding on us, the Board or the Compensation Committee. However, we value the views of the stockholders. The Board and the Compensation Committee will review the results of the vote and expect to take them into consideration in addressing future compensation policies and decisions.

 

FOR THESE REASONS, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR”“FOR” THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND RELATED NARRATIVES AND DESCRIPTIONS OF THIS PROXY STATEMENT FOR THE ANNUAL MEETING.

 

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PROPOSAL FOUR

ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON

NAMED EXECUTIVE OFFICER COMPENSATION

As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Securities Exchange Act of 1934, we are asking stockholders this year to cast an advisory, non-binding, vote on the frequency of future advisory votes on named executive officer compensation, commonly known as “say-on-pay” votes.  This advisory vote, commonly known as a “say-on-frequency” vote, gives stockholders the opportunity to express their views about how frequently (but at least once every three years) we should conduct future say-on-pay votes.  Stockholders may vote for future say-on-pay votes to be held “every year,” “every two years” or “every three years,” or abstain from voting on this proposal.

While our named executive officer compensation programs are designed to promote a long-term connection between pay and performance, the Board recognizes that executive compensation disclosures are made annually.  We believe that an annual say-on-pay advisory vote on executive compensation is consistent with our practice of seeking timely input from and engaging in frequent dialogue with our stockholders on corporate governance matters and our executive compensation philosophy, policies and practices.

FOR THESE REASONS, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR US TO CONDUCT ANY FUTURE STOCKHOLDER ADVISORY VOTE ON NAMED EXECUTIVE OFFICERCOMPENSATION “EVERY YEAR.”  STOCKHOLDERS ARE NOT VOTING TO APPROVE OR DISAPPROVE THE BOARD’S RECOMMENDATION.STOCKHOLDERS MAY CHOOSE AMONG THE FOUR CHOICES (EVERY YEAR, EVERY TWO YEARS, EVERY THREE YEARS OR ABSTAIN) SET FORTH ABOVE.

The results of the say-on-frequency vote will be advisory and will not be binding upon us or the Board.  However, the Board will take into account the outcome of this say-on-frequency vote when determining how frequently we will conduct future say-on-pay advisory votes, and we will disclose our frequency decision as required by the SEC. With respect to this say-on-frequency vote, if none of the frequency alternatives (every year, every two years or every three years) receives a majority vote, we will consider the frequency that receives the highest number of votes by stockholders to be the frequency that has been selected by stockholders.

We expect that our next say-on-frequency vote will occur at our 2029 annual meeting of stockholders.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of the Record Date, on April 20, 2020, information relating to the beneficial ownership of our Common Stock or securities exercisable for, or exchangeable into, our Common Stock by: (i) each person known by us to be the beneficial owner of more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director (or nominee), (iii) each of the named executive officers in the 20192022 Summary Compensation Table, and (iv) all directors and named executive officers as a group.

 

Unless otherwise indicated, the address of each beneficial owner listed below is Monolithic Power Systems, Inc. at 5808 Lake Washington Boulevard NE, Kirkland, WA 98033.

 

Name of Beneficial Owner		Number of Shares Beneficially Owned				Percent of Shares Beneficially Owned (1)				Number of Shares Beneficially Owned (#)				Percent of Shares Beneficially Owned (1)
Named Executive Officers and Directors:
Michael Hsing (2)			608,159				1	%			878,230				1.9	%
James C. Moyer (3)			400,131				1	%			48,511				*
Maurice Sciammas (4)			184,961				*				165,214				*
Deming Xiao (5)			46,658				*				143,108				*
Saria Tseng (6)			57,953				*				145,087				*
Bernie Blegen (7)			37,230				*				58,897				*
Herbert Chang (8)			11,750				*				1,823				*
Eugen Elmiger (9)			17,937				*				20,060				*
Victor K. Lee (10)			27,291				*				29,414				*
Jeff Zhou (11)			14,711				*
Total (12)			1,406,781				3	%
Carintia Martinez (11)											1,125				*
Eileen Wynne (12)											-				*
Jeff Zhou (13)											5,651				*
Total (14)											1,497,120				3.2	%
5% Stockholders:
BlackRock, Inc. (13)			4,585,196				10	%
The Vanguard Group (14)			3,838,037				9	%
BlackRock, Inc. (15)											5,455,114				11.5	%
The Vanguard Group (16)											5,118,311				10.8	%
T. Rowe Price Associates, Inc. (17)											3,651,108				7.7	%

 

* Represents beneficial ownership of less than 1%.

 

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(1)

Based on 44,715,00047,411,000 shares of our Common Stock outstanding as of the Record Date on April 20, 2020.Date. Beneficial ownership is determined in accordance with the rules of the SEC.SEC rules. In computing the number of shares beneficially owned by a person and the percentage of ownership of that person, RSUs held by that person that are subject to release within 60 days of April 20, 2020the Record Date are considered to be outstanding and beneficially owned by such person. Those shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.

 

(2)

Includes (i) 412,152687,523 shares held of record by Michael Hsing, (ii) 133,040 shares held of record by Michael Hsing, Trustee of the Michael Hsing 2004 Trust, (iii) 29,00012,825 shares held of record by Michael Hsing, Trustee of the HsingZH Family Foundation,Trust, and (iv) 33,96744,842 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

 

(3)

Includes (i) 328,3082,123 shares held of record by James C. Moyer, and (ii) 71,8233,450 shares held inof record by James C. Moyer, Trustee of the Moyer Family Revocable Trust, and (iii) 42,938 shares held of record by James C. Moyer, Trustee of the JCM Management Trust.

 

(4)

Includes (i) 160,388 shares35,649 held of record by Maurice Sciammas, (ii) 15,24623,015 shares held of record by Maurice Sciammas and Christina Sciammas, Co-Trustees of the Sciammas Family Living Trust, (iii) 19,458 shares held of record by Maurice Sciammas, Trustee of the Grantor Retained Annuity Trusts FBO of Oski Crew, (iv) 19,458 shares held of record by Christina Sciammas, Trustee of the Grantor Retained Annuity Trusts FBO of Oski Crew, (v) 14,852 shares held of record by Maurice Sciammas and (iii) 9,327Christina Sciammas, Co-Trustees of the Sciammas Family Trust, (vi) 5,100 shares held of record by Maurice Sciammas, Trustee of the 2022 Grantor Retained Annuity Trust, (vii) 5,100 shares held of record by Christina Sciammas, Trustee of the 2022 Grantor Retained Annuity Trust, (viii) 5,000 shares held of record by Maurice Sciammas, Trustee of the Clement Sciammas Family Trust, (ix) 24,247 shares held of record by Maurice Sciammas and/or Christina Sciammas, trustees for various other trusts, and (x) 13,335 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

 

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(5)

Includes (i) 36,876129,318 shares held of record by Deming Xiao, (ii) 455 shares owned by Julia Chu, Mr. Xiao’s wife, and (iii) 9,32713,335 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

 

(6)

Includes (i) 48,626131,752 shares held of record by Saria Tseng, and (ii) 9,32713,335 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

 

(7)

Includes (i) 31,73139,395 shares held of record by Bernie Blegen, (ii) 5,331 shares held of record by Bernie Blegen and (ii) 5,499Judy Blegen, Co-Trustees of the Trust FBO Sarah Blegen, (iii) 5,331 shares held of record by Bernie Blegen and Judy Blegen, Co-Trustees of the Trust FBO Theodore Blegen, and (iv) 8,840 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

 

(8)

Includes 11,7501,823 shares held of record by Herbert Chang.

 

(9)

Includes 17,93720,060 shares held of record by Eugen Elmiger.

 

(10)

Includes 27,29129,414 shares held of record by Victor K. Lee.

 

(11)

Includes 14,711(i) 834 shares held of record by Jeff Zhou.

(12)

As a group, includes 67,447Carintia Martinez, and (ii) 291 shares underlying RSUs scheduled to release within 60 days of April 20, 2020.the Record Date.

	(12)	Eileen Wynne was appointed to the Board in February 2023 and has five years from the appointment date to attain the ownership level required by our stock ownership guidelines.
	(13)	Includes 5,651 shares held of record by Jeff Zhou.

(14)

As a group, includes 93,978 shares underlying RSUs scheduled to release within 60 days of the Record Date.

(15)

Pursuant to a Schedule 13G/A filed with the SEC on January 26, 2023, BlackRock, Inc. beneficially owns 5,455,114 shares, and has sole voting power over 5,111,351 shares and sole dispositive power over 5,455,114 shares. BlackRock, Inc. lists its address as 55 East 52nd Street, New York, NY 10055.

(16)

Pursuant to a Schedule 13G/A filed with the SEC on February 4, 2020, BlackRock, Inc. beneficially owns 4,585,196 shares, and has sole voting power over 4,425,529 shares and sole dispositive power over 4,585,196 shares. BlackRock, Inc. lists its address as 55 East 52nd Street, New York, NY 10055.

	(14)	Pursuant to a Schedule 13G/A filed with the SEC on February 12, 2020,9, 2023, the Vanguard Group beneficially owns 3,838,0375,118,311 shares, and has sole voting power over 23,583 shares, shared voting power over 8,66566,172 shares, sole dispositive power over 3,810,8844,931,001 shares and shared dispositive power over 27,153187,310 shares. The Vanguard Group lists its address as 100 Vanguard Blvd., Malvern, PA 19355.
	(17)	Pursuant to a Schedule 13G filed with the SEC on February 14, 2023, T. Rowe Price Associates, Inc. beneficially owns 3,651,508 shares, and has sole voting power over 1,115,707 shares and sole dispositive power over 3,643,177 shares. T. Rowe Price Associates, Inc. lists its address as 100 E. Pratt Street, Baltimore, MD 21202.

Delinquent Section 16(a) Reports

Section 16(a) of the 1934 Act and regulations of the SEC thereunder require our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of initial ownership and changes in ownership with the SEC.  Based solely on our review of copies of such forms received by us, or on written representations from certain reporting persons that no other reports were required for such persons, we believe that, during 2019, all of the Section 16(a) filing requirements applicable to our executive officers, directors and 10% stockholders were made on a timely basis.

 

Certain Relationships and Related Transactions

 

We have a written policy on related party transactions, as defined in our Code of Ethics and Business Conduct and the Audit Committee Charter. In accordance with our Code of Ethics and Business Conduct, it is the responsibility of our employees and directors to disclose any significant financial interest in a transaction between us and a third party, including an indirect interest, through, for example, a relative or significant other. It is also the responsibility of our Audit Committee, as described in the Audit Committee Charter, to review on an ongoing basis all related party transactions and approve these transactions before they are entered into.

 

For 2019,In 2020, we did not entermade a CHF 3,000,000 equity investment (or $3,300,000 on the acquisition date) in a privately held Swiss company (the “Investee”) specializing in mobile robotics for industrial applications. The investment represents a 5% equity interest in the Investee on a fully diluted basis. In 2022, we made a CHF 2,000,000 investment (or $2,100,000 on the acquisition date) in a convertible loan that will convert into any transactionsadditional shares of the Investee. Mr. Elmiger is an executive officer of a company that has a commercial relationship with related persons that are required to be disclosed under Item 404(a)the Investee, and Mr. Hsing had personally invested CHF 2,700,000 in the Investee. In addition, Mr. Hsing currently serves on the Investee’s board of Regulation S-K.directors.

 

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NAMED EXECUTIVE OFFICER COMPENSATION

 

Compensation Discussion and Analysis

 

This Compensation Discussion and Analysis describes our compensation philosophy and programs, compensation decisions made under those programs, and factors considered in making these decisions for our “named executive officers” (“NEOs”) who, for 2019,2022, were:

 

●

Michael Hsing, Chief Executive Officer, President and Chairman of the Board;

●

Michael Hsing,Bernie Blegen, Chief Executive Officer, President and Chairman of the Board;Financial Officer;

 

●

Bernie Blegen, Chief Financial Officer;Deming Xiao, President of Asia Operations;

 

●

Deming Xiao,Maurice Sciammas, Senior Vice President, of Asia Operations;Worldwide Sales and Marketing; and

 

●

Maurice Sciammas, Senior Vice President, Worldwide Sales and Marketing; and

●

Saria Tseng, Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary.

 

For further information regarding each current NEO’s professional background, please refer to the section “Information About Executive OfficersOfficers””under Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2019,2022, filed with the SEC on February 28, 2020.24, 2023.

 

Executive Summary

 

2022 Financial and Business Performance Highlights:

The Compensation PhilosophyCommittee has focused our executives on accountability in revenue, operating income and earnings, as well as maximizing stockholder return through the structure of our executive compensation program. In 2022, despite the industrywide supply chain issues and the global economic downturn, MPS achieved record financial results for the year. We believe this performance was attributable to our consistent execution against our business strategies, and our strong relationships with customers who recognize us for our advanced technologies, product quality and customer support.

Despite the macroeconomic challenges in 2022, our revenue grew 49% from the prior year, compared with the analog industry’s 20% growth reported by the Semiconductor Industry Association (“SIA”). Our financial results are summarized as follows (in millions, except per-share amounts and percentages):

		GAAP												Non-GAAP (1)
		FY 2022 ($)				FY 2021 ($)				Change				FY 2022 ($)				FY 2021 ($)				Change
Revenue			1,794.1				1,207.8				49	%			1,794.1				1,207.8				49	%
Operating income			526.8				262.4				101	%			680.9				391.1				74	%
Net income			437.7				242.0				81	%			599.9				356.7				68	%
Diluted EPS			9.05				5.05				79	%			12.41				7.45				67	%

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(1)	The reconciliation of the GAAP financial measures to the non-GAAP financial measures and related disclosures are provided in Annexure A.

We also achieved significant success in our targeted end markets in 2022 as follows:

●

Enterprise Data sales grew 116% from the prior year, primarily due to higher sales of our power management solutions for cloud-based CPU and GPU server applications.

●

Storage and Computing sales grew 77% from the prior year, primarily driven by strong sales growth for storage applications and enterprise notebooks.

●

Communications sales grew 53% from the prior year, primarily driven by increased sales of products for both 5G and satellite communications infrastructure applications.

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●

Automotive sales grew 47% from the prior year, primarily due to increased sales of our highly integrated applications supporting automated driver assistance systems, digital cockpits and connectivity.

●

Industrial sales grew 19% from the prior year, primarily driven by higher sales in applications for smart meters and industrial automation.

●

Consumer sales grew 13% from the prior year, primarily fueled by increased sales of home appliances, gaming consoles and smart TVs.

Compensation Philosophy:

 

The primary objective in designing our compensation program for our NEOs is the same as the primary objective for operating MPS — to create long-term value for our stockholders. To achieve this goal, we have designed and implemented our compensation programs for our NEOs to:

 

●

Motivate and reward them for sustained financial and operating performance and leadership excellence;

●

Motivate and reward them for sustained financial and operating performance and leadership excellence;Align their interests with those of our stockholders;

 

●

Align their interests with those ofEncourage our stockholders;NEOs to focus on achieving both short-term goals as well as long-term developmental goals; and

 

●

Encourage our NEOs to focus on achieving both short-term goals as well as long-term developmental goals; and

●

Encourage our NEOs to remain with us for long and productive careers.

 

Each one of our executive compensation elements fulfills one or more of our performance, alignment and retention objectives. These elements primarily consist of salary, long-term equity awards and short-term cash incentive compensation, as well as severance benefits and broad-based employee benefits. In deciding on the type and amount of compensation for each executive, we focus on both current pay and the opportunity for future compensation. We believe that maintaining a balance of short-term and long-term compensation elements encourages decision-making that optimizes short-term results and, at the same time, advances our long-term goals. We combine the compensation elements for each NEO in a manner we believe optimizes the executive’s overall contribution to us and our stockholders.

 

Our Compensation Practices Are Built on Stockholder Feedback and RequestsRequests:

 

At the 20192022 Annual Meeting of Stockholders, we received approximately 99% of the votes cast by 96%72% advisory approval of our stockholders were in favor of our executive compensation program.NEOs’ compensation. At the 20182021 Annual Meeting of Stockholders, we received approximately 97% of the votes cast by 96%88% advisory approval of our stockholders were in favor of our executive compensation program.NEOs’ compensation. At the 20172020 Annual Meeting of Stockholders, we received approximately 98% of the votes cast by 95%advisory approval of our stockholders were in favor of our executive compensation program.NEOs’ compensation. While these say-on-pay votes are only advisory and not binding on us, the Compensation Committee discusses the vote results each year with our independent compensation consultant.consultant and the Board.

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Our management team continued the practice of reaching out to our most significant stockholders from time to time to discuss how those stockholders view our executive compensation program, and what kind of changes they would like to see implemented in future years. Based on the overwhelming multi-year support by the stockholders in favor of our pay-for-performance compensation structure, the Compensation Committee decided to continue to grant 100% of the equity awards to our NEOs based on achievement of performance conditions underconditions.

In addition, based on the most recent feedback we have received from our stockholders, the Compensation Committee made the following significant changes to the executive compensation program in 2019. 2022:

●

Trading Days: To demonstrate a sustained level of price appreciation, we extended the number of trading days required to achieve each individual price target from 20 days to 90 days under the market-based equity awards.

●

Performance Period: We extended the performance period of the equity compensation program from two years to three years.

Furthermore, as outlined in “Corporate Social Responsibility,” we have completed our assessments on Scope 1 and Scope 2 GHG emissions and other environmental initiatives in April 2023. The Compensation Committee plans to link a portion of the executives’ long-term equity compensation to the achievement of certain reduction targets in the near future.

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In the past several years, we have continued to improve our executive compensation policies and programs, incorporating the suggestions of our stockholders. We believe these improvements, as highlighted below, have supported our financial and strategic successes in the last several years.

 

1.

Commitment to short-term profit-based cash incentives mid-term performance-basedand long-term equity awards long-term market-based equity awards,using different performance metrics, and alignment of executive compensation with stockholder interests.the interests of our stockholders and other stakeholders.

 

A.

In 2019,2022, 100% of the bonusannual cash incentives earned by the NEOs wascontinued to be tied to specific, pre-established non-GAAP operating income metrics.   In 2019,2022, no stock awards were granted to the NEOs solely based on continued service. 100% of the total equity awards granted to our NEOs were tied to the achievement of performance conditions. We grantedIn February 2022, the Compensation Committee continued its practice of granting performance-based restricted stock unitsRSUs (“PSUs”) that would be earned based on (a) the achievement of an average revenue growth rate as measured against the analog industry’s average revenue growth rate over thea two-year performance period, of 2019 and 2020. No stock awards were granted(b) securing additional wafer capacity to support our long-term growth over a three-year performance period. In October 2022, swift changes to macroeconomic conditions resulted in wafer capacity becoming a lesser business priority for our business compared to the beginning of 2022. In addition, revenue growth performance in a volatile stock market environment does not necessarily translate into stockholder return. As a result, upon consultation with our independent compensation consultant and with the consent of our NEOs, solely based on continued service.the Compensation Committee cancelled the PSUs and instead granted market-based RSUs (“MSUs”) that require the achievement of both rigorous stock price appreciation and relative total stockholder return (“TSR”) performance over a three-year performance period to directly align with the long-term interests of our stockholders.

 

B.

OurOver the last decade, our executive compensation program is designedcontinued to evolve with the objectives to align our executives’ short-, mid- and long-term interests towith those of our stockholders. For example:

●

In 2013, we granted market-based restricted stock unitsstockholders, which included PSUs, MSUs and market and performance-based RSUs (“MSUs”MPSUs”) to our NEOs that containedcombined various operating goals and/or price hurdles requiring sustained increases in our stock price with a five-yearprice. These awards have performance period and a ten-year vesting period.

●

In 2015, we granted market and performance-based restricted stock units (“MPSUs”)periods ranging from two to our NEOs that combined operating goals and price hurdles requiring sustained increases in our stock price with a four-year performancefive years, and vesting period.

●

In 2018, we granted MSUsperiods ranging from two to our NEOs that contained price hurdles requiring sustained increases in our stock price with a five-year performance and vesting period.

●

Since 2014, we have granted PSUs to our NEOs that require significant outperformance against our peers in sustained revenue growth with a two-year performance period and a four-year vesting period.ten years.

 

We believe the significant increase in our stock price and year-over-year outperformance in revenue growth incumulative TSR performance over the past several years and year-over-year performance in revenue growth demonstrate the effectiveness of our performance-based compensation program in motivating our NEOs to build a sustainable business model and to focus on long-term value creation for our stockholders.

 

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Stock Performance:

Our one-year total stockholder return was approximately 55% and our three-year total stockholder return was approximately 124%, as shown in the graphs below in comparison to our peer group and the PHLX semiconductor sector index:

---

(1)2.

Represents our 2019 peer group approved by the Compensation Committee. See the section “Peer Group and Use of Peer Data for 2019” for further discussion.

Market Capitalization:

Our strong financial performance in the past several years has led to a significant increase in our market capitalization, surpassing $7 billion in 2019. Because a significant portion of our NEOs’ total compensation in the past several years has been in the form of market-based stock units with stock price performance components, the value of our NEOs’ compensation is closely tied to our market performance. The following table illustrates our CEO’s compensation (as reported in the 2019 Summary Compensation Table) compared to our market capitalization in the past three years:

	2.	Capping payouts under our non-equity incentive plansplans..
		Our Compensation Committee has capped maximum cash payouts under our annual non-equity incentive plans at 400% of target for all of the NEOs.

Our Compensation Committee has capped maximum payouts under our annual non-equity incentive plans at 250% of target for the CEO and the remaining NEOs.

	3.	Selection of performance goals.
		Our stockholders expressed a preference for the use of different performance metrics across plans.  In determining performance metrics, our Compensation Committee selected those that have a greater connection to stock performance. Therefore, we use non-GAAP operating income for our short-term cash incentive plan, and, to balance that metric, a mix of revenue, stock price performance and operating goals for our long-term performance equity incentive plan. By using a non-GAAP operating income metric in our short-term incentive plan and various performance and stock price appreciation metrics in our long-term incentive plan, we can reward our executives for achieving our short-term financial objectives while at the same time planning for long-term growth, without encouraging excessive risk taking.

 

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The following table shows the three-year history of our performance in revenue, GAAP operating income and non-GAAP operating income, which demonstrates a balance of our overall financial health, compared to our CEO’s total compensation (as reported in the 2022 Summary Compensation Table):

---

3.(1)

SelectionThe reconciliation of performance goals.the GAAP operating income to the non-GAAP operating income and related disclosures are provided in Annexure A.

In the past several years, our stockholders indicated a preference for the use of different performance metrics across plans, so that not all performance-based plans relied on the same metric. In addition, our stockholders told us they wanted to see a greater connection between stock price performance and executive compensation. Therefore, we use non-GAAP operating income for our short-term cash incentive plan, and, to balance that metric, a mix of revenue, stock price performance and operating goals for our long-term performance equity incentive plan. By using a non-GAAP operating income metric in our short-term incentive plan and various performance and stock price appreciation metrics in our long-term incentive plan, we can reward our executives for achieving our short-term financial objectives while at the same time planning for long-term growth, without encouraging excessive risk taking.

 

The following table shows the three-year history of our performance in revenue, GAAP operating income and non-GAAP operating income, which demonstrates a balance of our overall financial health, compared to our CEO’s total compensation:

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	(1)4.	The reconciliationClawback policy.
		We have a Compensation Recoupment Policy, which permits the Board to recoup any excess performance-based cash compensation paid to key members of our executive team if the GAAP operating incomefinancial results on which the performance-based compensation awards were based are restated due to fraud or intentional misconduct by the non-GAAP operating incomeexecutive. We expect, in 2023, to review and related disclosures are providedrevise the Compensation Recoupment Policy in Annexure A.connection with final rules regarding recovery of erroneously awarded compensation as promulgated by the SEC and NASDAQ in 2022 and 2023, respectively.

 

	4.5.	Clawback policyStock ownership guidelines..
		We have significant stock ownership guidelines for our NEOs and directors, requiring ownership levels by our officers of two to five times their base salary, and by our directors of three times their annual retainer.

In 2011, we heard investors tell us that compensation recovery policies, or clawbacks, were a best practice and should be adopted. In February 2012, we adopted our Compensation Recoupment Policy, which permits the Board to recoup any excess performance-based cash compensation paid to key members of our executive team if the financial results on which the performance-based compensation awards were based are restated due to fraud or intentional misconduct by the executive.  

 

	5.6.	Stock ownership guidelinesTax gross-ups..
		Since 2008, we have not adopted any new employment agreements (or modified any existing employment agreements) to provide for tax gross-ups to our officers.

In 2011, we heard investors tell us that board members and officers should have ownership interests that are aligned with stockholders, and encouraged us to adopt stock ownership guidelines. In 2012, we adopted significant stock ownership guidelines for our NEOs and directors, requiring ownership levels by our officers of two to five times of base salary, and by our directors of two times of annual retainer. In 2016, we amended the stock ownership guideline by increasing the required levels for our directors from two times to three times of annual retainer.

 

6.7.

Tax gross-Responsible share ownership.ups.

Since 2008, we have not adopted any new employment agreements (or modified any existing employment agreements) to provide for tax gross-ups to our officers.

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	7.	Responsible share ownership.
		We have a policy prohibiting our directors, officers (including our NEOs), and other employees from engaging in certain hedging and monetization transactions with respect to our stock that they hold without prior approval by our Chief Compliance Officer. The policy also prohibits our directors and officers (including our NEOs) from engaging in any short sales of our stock. In addition, our directors and officers are prohibited at all times from holding our stock in a margin account and from pledging our stock as collateral.

We have adopted a policy prohibiting our directors, officers (including our NEOs), and other employees from engaging in certain hedging and monetization transactions with respect to our stock that they hold without prior Board approval. The policy also prohibits our directors and officers (including our NEOs) from engaging in any short sales of our stock.

In summary, we regularlyroutinely engage with our stockholders to exchange ideas on our existing executive compensation programs and potential future programs. We listen to their feedback and carefully consider it. Our engagement with stockholders does not begin and end with the say-on-pay vote – that vote is just one part of a larger dialogue and partnership we have with our investors.

 

2019Returns to Stockholders Financial and Business Performance Highlights

 

As noted above,TSR:

Our one-year TSR performed better in comparison to the Compensation Committee has focused our executives on accountability in revenue, operating income and earnings, as well as maximizing stockholder return through the structureTSR of our executive compensation program. Despitepeer group (1) and the PHLX Semiconductor Sector Index (the “PHLX Index”). On a significant downturn experienced by the semiconductor industry in 2019,cumulative three-year basis, we achieved record results in revenuea TSR of 103%, exceeding the TSR of our peer group and other key financial metrics on a non-GAAP basis. Our financial results are summarized as follows (in millions, except per-share amounts and percentages):the PHLX Index.

 

		GAAP												Non-GAAP (1)
		FY 2019				FY 2018				Change				FY 2019				FY 2018				Change
Revenue		$	627.9			$	582.4				8	%		$	627.9			$	582.4				8	%
Operating income		$	102.6			$	113.5				(10	)%		$	185.4			$	174.3				6	%
Net income		$	108.8			$	105.3				3	%		$	177.7			$	166.8				7	%
Diluted EPS		$	2.38			$	2.36				1	%		$	3.88			$	3.74				4	%

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(1)

The reconciliationRepresents our 2022 peer group approved by the Compensation Committee. See “Peer Group and Use of the GAAP financial measures to the non-GAAP financial measures and related disclosures are provided in Annexure A.Peer Data for 2022” for further discussion.

 

Our revenue growth rate of 8% in 2019 outperformed the analog industry’s negative 8% reported by the Semiconductor Industry Association (the “SIA”). We also achieved significant success in our targeted end markets in 2019 as follows:Cash Dividends:

 

● The following table summarizes our cash dividend payments to our stockholders in the past three years (in thousands, except per-share amounts):

Automotive sales grew 13% from prior year primarily driven by increased sales of products for infotainment, safety and connectivity applications.

 

●

Computing and storage sales grew 19% from prior year primarily due to strong sales growth for cloud computing and high-end notebooks.

●

Industrial sales grew 12% from prior year primarily fueled by product sales for applications in power sources, security and industrial meters.

●

Communications sales grew 20% from prior year primarily due to initial ramping of 5G infrastructure sales.

Cash Dividends:

		FY 2022 ($)				FY 2021 ($)				FY 2020 ($)
Quarterly dividend per share			0.75				0.60				0.50
Total cash dividend payments			140,337				110,206				89,832

 

In February 2019, our2023, the Board of Directors approved an increase in our quarterly cash dividends to $0.40 per share and we paid a total of $67.3 million of dividends to our stockholders in 2019. In February 2020, our Board of Directors approved an increase in our quarterly cash dividends to $0.50$1.00 per share.

 

Market Capitalization

Our strong financial performance in the past several years has led to a significant increase in our market capitalization, surpassing $15 billion in the past three years. Because a significant portion of our NEOs’ total compensation in the past several years has been in the form of market-based stock units with stock price performance components, the value of our NEOs’ compensation is closely tied to our market performance. The following chart illustrates our CEO’s compensation (as reported in the 2022 Summary Compensation Table) compared to our market capitalization in the past three years: 

The Roles of the Compensation Committee and Our Officers in Setting Compensation

 

The Compensation Committee, which is comprised solely of independent directors, has primary responsibility for overseeing the design, development and implementation of the compensation program for our CEO and other NEOs. The Compensation Committee Charter, which is available in the “Investor“Investor Relations” section of our website at http://www.monolithicpower.com, was originally adopted on October 26,in 2007, and is updated periodically. Pursuant to the Compensation Committee Charter, the Compensation Committee reviews and approves the compensation arrangements for our NEOs, including the CEO, and administers our equity compensation plans. The Compensation Committee meets at least once a quarter.  In 2019,2022, the Compensation Committee met four times.

 

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The Compensation Committee reviews the performance of each officer taking into account the evaluations provided by the CEO for all officers other than himself. The Compensation Committee makes the final determination of performance achievement for each officer. The CEO, Chief Financial Officer and General Counsel present information to the Compensation Committee as requested from time to time, including financial results, future budget information, business operations and legal developments. The Compensation Committee regularly meets in closed sessions without the CEO or other management personnel present. Our officers also provide information to the Compensation Committee’s independent compensation consultant, if requested to do so, to help the consultant perform its duties for the Compensation Committee. Our officers are responsible for implementing the decisions made by the Compensation Committee.

 

Compensation ConsultantsConsultant

 

In 2019,2022, the Compensation Committee again engaged Radford as the compensation consultant with respect to our non-employee director and executive compensation programs. Radford did not perform any other work for us. In 2019,2022, the Compensation Committee assessed the independence of Radford pursuant to SEC rules and concluded that no conflict of interest exists that would prevent them from serving as independent consultant to the Compensation Committee for 2019.Committee.

 

In 2019,2022, the Compensation Committee requested and received the following services from Radford: (1) updates on evolving compensation trends, (2) recommendations for additions or deletions to the peer group used for 2019,2022, (3) compensation data for officers and directors (gathered from public filings for our peers and broader surveys), and (4) general advice on analyzing and responding to stockholder feedback on our compensation programs.  

 

Peer GroupGroup and Use of Peer Data for 20192022

 

In February 2019, Radford2022, the Compensation Committee reviewed the recommendation made by our independent compensation consultant and selected a peer group of companies selected by management and recommended that the industry peer group continue to be determined by reference to publicly traded companies in the semiconductor industryand similar industries with revenue primarily betweenapproximately ranging from 50% andto 300% of our revenue for the most recent four quarters. In addition, Radford took into account that the market capitalization should be in similar range of us primarily from 50% to 200%. Guided by this set of parameters, and taking into account the recommendations of Radford, management proposed the following peer group, which was reviewed and approved by the Compensation Committee.  Committee refined the criteria and selected: (a) seven large cap semiconductor companies that have a similar growth profile and are the key competitors for talent, and (b) two companies in the semiconductor and electronic component industries based on the recommendation by Institutional Shareholder Services, Inc., a proxy advisory firm.

The 2022 peer group consisted of the following companies:

 

Ambarella, Inc.	Power Integrations,Qorvo, Inc.
Cree,Cirrus Logic, Inc.	Rambus Inc.
Cypress Semiconductor CorporationCoherent, Inc.	Semtech Corporation
MACOM Technology Solutions Holdings,MKS Instruments, Inc.	Silicon Laboratories, Inc.
Mellanox Technologies, Ltd.ON Semiconductor Corporation	Teradyne, Inc.
Power Integrations, Inc.	Wolfspeed, Inc.

Companies added in 2022:

Advanced Micro Devices, Inc.	Skyworks Solutions, Inc.
Analog Devices, Inc.	Synaptics Incorporated
MKS Instruments,Applied Materials, Inc.	Teradyne, Inc.Texas Instruments Incorporated
ON SemiconductorMicron Technology, Inc.	Universal Display Corporation
XperiNVIDIA Corporation

We removed Integrated Device Technology, Inc.Xperi Corporation from the peer group for 20192022 because it was acquired duringceased to fit within the year. In addition, we added Rambus Inc. and Xperi Corporation to our peer group for 2019.desired parameters. 

 

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NEO Compensation Components

 

The table below summarizes the core elements, objectives and key features of our 20192022 compensation program for our NEOs:

 

Compensation Components		Objectives			Key Features
Base salary		Designed to reward individual effort associated with job-related		●	Paid in cash.
		duties and to attract and retain talented executive officers.		●   Paid in cash.   ●	Reviewed annually.
Short-term cash incentive compensation		Designed to encourage outstanding MPS performance by		●	Paid in cash.
compensation		motivating the NEOs to achieve short-term financial goals.		●   Paid in cash.   ●	100% of the compensation is subject to corporate performance goals.
				●   Maximum payouts	Payouts capped at 250%400% of target.
				●	Subject to clawback policy.
Long-term incentive compensation		Designed to align the interests of our executivesNEOs with the interests of the stockholders by focusing on our long-term revenue growth compared to the industry.		●	●   100% of the awards is subject to performance conditions.achievement of stock price
compensation		our stockholders by focusing on our long-term stock performance.			targets and relative TSR performance.
				●	Maximum payouts at 300%500% of target.   ●   Awards contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares.
Dividend equivalents		Designed to treat equity award holders equally with stockholders under our dividend program.		●	●   Equal to the dividend declared and paid on a share of Common
		under our dividend program.			Stock.
				●	Accumulate during the vesting period of the underlying equity awards.
				●	Subject to forfeiture if the underlying equity awards do not vest.
				●	Paid in cash.

 

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Analysis of 20192022 Compensation Elements

 

Base Salaries:

 

We provide base salary as a stable source of compensation for theour NEOs’ day-to-day duties, and seek to set base salaries at levels that will attract and retain talented executive officers. To attract and retain talent, we have to understand the levels of salary offered by our peers. Accordingly, ourThe Compensation Committee considers peer data as one key factor in reviewing base salary each year. OurThe Compensation Committee also considers each individual executive’s role and the scope of his or her responsibilities, the executive’s experience, his or her tenure with us, and size of recent salary changes. For 2019, our2022, the Compensation Committee considered all of these factors and approved the following salaries for our NEOs:  

 

Name		FY 2019				FY 2018				Change				FY 2022 ($)				FY 2021 ($)				Change
Michael Hsing		$	650,000			$	650,000				0	%			756,000				720,000				5	%
Bernie Blegen		$	320,000			$	300,000				7	%			367,500				350,000				5	%
Deming Xiao		$	340,000			$	340,000				0	%			399,000				380,000				5	%
Maurice Sciammas		$	340,000			$	340,000				0	%			399,000				380,000				5	%
Saria Tseng		$	340,000			$	340,000				0	%			399,000				380,000				5	%

 

In 2019, based on the recommendation of the compensation consultant,2022, the Compensation Committee approved ana modest increase of Mr. Blegen’sin base salarysalaries for our NEOs to better align hisaccount for inflation adjustments and reflect the pay withpractices of our peer group.

Short-Term Cash Incentive Compensation:

 

We provide a short-term cash incentive opportunity to each of our NEOs to encourage them to achieve our corporate short-term operating income goals. Consistent with 2018, theThe Compensation Committee used non-GAAP operating income as the sole corporate performance metric in 2019 for determining the short-term cash incentive (or bonus) compensation. The Compensation Committee believed that non-GAAP operating income would best reflect our short-term performance. See Annexure A for a reconciliation of the GAAP operating income to the non-GAAP operating income used in the short-term cash incentive plan.

 

100% of the short-term cash incentives were tied to a specific, pre-established non-GAAP operating income metric for all the NEOs. Our CEO’sThe target bonus for each NEO was 100%200% of his annual base salary. The remaining NEOs’ target bonus was 80% of theiror her annual base salary. For 2019,2022, our non-GAAP operating income target was $181.6$503.6 million as established in the annual operating plan approved by the Board. Achievement of 120% or more of the non-GAAP operating income target would result in a maximum 400% payout of the maximum 250%target bonus payout for each NEO, achievement of 100% of the non-GAAP operating income target would result in thea 100% target bonus payout, and performance below 80% of the non-GAAP operating income target would result in no bonus payout. For performance between the minimum, target and maximum level,levels, the percentage of payout would be determined based on a linear interpolation.

 

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For 2019,2022, we achieved non-GAAP operating income of $187.8$688.9 million (see Annexure A), which was equal toresulted in a payout of 117.1%400% of the target bonus for each NEO. The following table summarizes the 2022 bonus payout approved by the Compensation Committee for each of our NEOs:

 

		Bonus Amount																Bonus Amount
Name		Minimum				Target				Maximum				Earned				Minimum ($)				Target ($)				Maximum ($)				Earned ($)
Michael Hsing		$	-			$	650,000			$	1,625,000			$	761,269				0				1,512,000				6,048,000				6,048,000
Bernie Blegen		$	-			$	256,000			$	640,000			$	299,823				0				735,000				2,940,000				2,940,000
Deming Xiao		$	-			$	272,000			$	680,000			$	318,562				0				798,000				3,192,000				3,192,000
Maurice Sciammas		$	-			$	272,000			$	680,000			$	318,562				0				798,000				3,192,000				3,192,000
Saria Tseng		$	-			$	272,000			$	680,000			$	318,562				0				798,000				3,192,000				3,192,000

 

Long-Term Equity Incentive Compensation:

 

We provide long-term equity compensation awards to reward and retain our valued executives, to help us effectively compete for executives who can strategically position us for future growth and financial success, and to encourage our executives to focus on achieving long-term development goals for the future.

 

In determining the number of shares subject to long-term equity compensation awards granted to each of the NEOs, the Compensation Committee establishes the aggregatea value of such awards, to be granted aswhich represents a multiple of each NEO’s target cash compensation. The Compensation Committee believes these multiples properly reflect the relative position and responsibility of each NEO as well as the officer’s ability to develop the vision for the future of MPS, drive the strategy to obtain such vision, and effect certain cost savings for us.

 

Over the past several years, weWe have regularly engaged with our stockholders to take into accountfor their opinions in setting performance metrics. In response to investor feedback and to alignThe Compensation Committee believes that the NEOs’ long-term incentive compensation with our performanceshould be in the form of equity and stockholders’ interests, the Compensation Committee decided that 100% of the equity compensation awards granted to our NEOs in 2019 would2022 should vest based on the achievement of performance-based criteria. No equity awards were granted to our NEOs in 20192022 that would vest solely based on continued service.

 

In February 2019,When designing the annual executive equity compensation program, the Compensation Committee is guided by the following three key principles that promote the best interests of both MPS and its stockholders:

●

There is appropriate pay-for-performance alignment.

●

The performance goals must be rigorous.

●

The program requires substantial stockholder value creation.

Since 2016, 100% of the equity awards granted theto our NEOs a target dollar value of long-termhave been tied to rigorous performance conditions, which have included revenue goals, business operating goals and stock price targets. The Compensation Committee believes our performance-based equity compensation program motivates our NEOs to build a sustainable business model while aligning the long-term interests of our NEOs and stockholders. Each year, our three-year cumulative TSR has consistently exceeded the three-year cumulative TSR of our peer group, the PHLX Index and the S&P 500 Index (by as much as 147%, 113% and 245%, respectively), as shown in the chart below:

Since the beginning of 2016, our cumulative TSR was 490% through the end of 2022, compared with 280% for the PHLX Index and 90% for the S&P 500 Index. 

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In October 2022, in light of the rapid changes in market condition, the Compensation Committee considered the recommendations from the independent compensation consultant and input from the executives, and determined that it would align with the interests of our stockholders to cancel equity awards which included PSUs based on revenue achievement as measured againstand operating goals that were previously granted in the beginning of 2022 (“February 2022 PSUs”) and replace them with market-based equity awards based on stock price targets and relative TSR performance (the “October 2022 MSUs”). Details of both programs are discussed below.

February 2022 PSUs		October 2022 MSUs
Performance-Based Conditions: ●     Achieving two-year average revenue growth compared to the analog industry. ●     Securing additional wafer capacity to meet customer demand. ●     Two- to three-year performance period.		Market-Based Conditions: ●     Achieving five stock price targets. ●     Achieving TSR performance relative to our peers. ●     Three-year performance period.

Reasons for the analogModifications

Our business and financial performance depend significantly on worldwide economic conditions. Each year, when setting appropriate performance goals for the long-term incentive awards, the Compensation Committee considers macroeconomic conditions and their potential impact on our business needs and long-term strategy. In the beginning of 2022, the semiconductor industry continued to be negatively affected by global manufacturing capacity constraints. To help ensure MPS would have the ability to meet growing customer demand, the Compensation Committee approved performance conditions for the February 2022 PSUs that would require MPS to secure additional wafer capacity over the next three years. These performance conditions were applied in addition to the annual revenue-based goals over a two-year performance period.

In the second half of 2022, the global economy began to experience an unexpected downturn, which we believed was caused by many external factors, including inflationary pressures, higher interest rates, slowing consumer demand, and the geopolitical conflict between Russia and Ukraine. Management remained focused in driving MPS’s long-term business goals and delivering strong results in future periods. In October 2022, the Compensation Committee reexamined the February 2022 PSUs and determined that swift changes to macroeconomic conditions resulted in wafer capacity becoming a lesser business priority for our business compared to the beginning of 2022. In addition, revenue growth performance in a volatile stock market environment does not necessarily translate into stockholder return. As a result, upon consultation with our independent compensation consultant and with the consent of our NEOs, the Compensation Committee cancelled the February 2022 PSUs and instead granted the October 2022 MSUs that require the achievement of both rigorous stock price appreciation and relative TSR performance over a three-year performance period. To hold our NEOs accountable and create a direct alignment of stockholders’ long-term interests, the Compensation Committee believed that TSR metrics would be the most meaningful and impactful performance goals during these uncertain times. In order to earn the awards, the NEOs must be able to deliver strong results and translate financial success into long-term stock performance. Failure to do so would result in no earn-out for the executives. In addition, a second condition that is tied to the relative TSR performance was put in place in order for the executives to earn the awards.

Furthermore, in response to stockholders’ feedback, the Compensation Committee extended the performance period withfrom two years to three years under the October 2022 MSUs. In addition, to demonstrate a total vestingsustained level of stock price appreciation, achievement of the price targets under the October 2022 MSUs must be maintained for 90 consecutive trading days during the performance period, which is a substantial increase from the 20 consecutive trading days we had implemented in our market-based awards granted in the prior years.

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Number of Target Shares Granted

The following table summarizes the number of shares subject to the 2019 PSUs that can be earned by the NEOs at the minimum, target and maximum performance levels. The number of shares earned will be linearly interpolated for actual achievement between the minimum, target and maximum performance levels.

		Number of Shares
Name		Minimum				Target				Maximum
Michael Hsing			-				77,481				232,443
Bernie Blegen			-				13,732				41,196
Deming Xiao			-				20,062				60,186
Maurice Sciammas			-				20,062				60,186
Saria Tseng			-				20,062				60,186

The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. Shares that do not vest will not be subject to the purchase price payment to MPS. The target number of shares granted to each NEO was determined based onby the target dollar value for suchCompensation Committee under the February 2022 PSUs divided by our closing stock price onand the date of grant less the purchase price.October 2022 MSUs:

		February 2022 PSUs												October 2022 MSUs
Name		Target Number of Shares (#)				Value Per Share ($)(1)				Grant Date Fair Value ($)(3)				Target Number of Shares (#)(2)				Value Per Share ($)(1)				Grant Date Fair Value ($)(3)
Michael Hsing			37,472				370.01				13,865,090				60,584				187.02				11,330,122
Bernie Blegen			8,501				370.01				3,145,472				17,538				187.02				3,279,957
Deming Xiao			11,537				370.01				4,268,829				27,104				187.02				5,068,990
Maurice Sciammas			11,537				370.01				4,268,829				27,104				187.02				5,068,990
Saria Tseng			11,537				370.01				4,268,829				27,104				187.02				5,068,990
Total			80,584								29,817,049				159,434								29,817,049

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(1)

The calculation of the value per share for both programs was performed by a third-party valuation firm using a Monte Carlo simulation model. Assumptions used in the calculation are included in Note 1 and Note 7 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

(2)	For the October 2022 MSUs, the Compensation Committee determined the target number of shares by maintaining the same total grant date fair value as the February 2022 PSUs. However, the Compensation Committee decreased the amount for Mr. Hsing and reallocated the decreased amount to the other NEOs.

(3)	The formula contains an immaterial rounding difference of less than $1,000.

A Balanced Approach to Our Equity Compensation Program:February 2022 PSUs

 

OurThe Compensation Committee is committed to establishestablished a rigorous and balanced equity compensation program with medium-term and long-term performance periods, by overlapping a revenue-based PSU program over a two-year performance period and a long-term stock-based MSU awardan additional PSU program tied to operating goals over a longer performance period. TheTaking into account the semiconductor industry’s cyclical nature and stockholders’ feedback, the Compensation Committee determined that two years iswas the most optimal performance period for the revenue-based PSU awards because of the cyclical nature of the semiconductor industry.awards. A revenue-based performance period that iswas longer than two years iswould make it difficult for the Compensation Committee to determine the appropriate performance goals due to the volatility from macro-economicthe COVID-19 pandemic, macroeconomic and industry-specific conditions. Accordingly, for 2019, the Compensation Committee setgranted PSUs to each NEO that were subject to a two-year (2019 and 2020) revenue-based performance period to grant each NEO a target number of PSUs. The Compensation Committee did not grant a new MSU award because an MSU program based on the achievement of fiverevenue during that period. In addition, in response to the global supply chain constraints experienced by the semiconductor industry, the Compensation Committee set additional long-term, non-financial objectives to secure excess wafer capacity as performance conditions with a three-year performance period.

The following table summarizes the number of shares subject to the February 2022 PSUs that could be earned by the NEOs at the minimum, target and maximum performance levels. The number of shares earned would be linearly interpolated for actual achievement between the performance levels. 

		Number of Shares												Maximum Earn-Out Components
Name		Minimum (#)				Target (#)				Maximum (#)				Revenue Goal (300%) (#)				Capacity Goal (200%) (#)
Michael Hsing			0				37,472				187,360				112,416				74,944
Bernie Blegen			0				8,501				42,505				25,503				17,002
Deming Xiao			0				11,537				57,685				34,611				23,074
Maurice Sciammas			0				11,537				57,685				34,611				23,074
Saria Tseng			0				11,537				57,685				34,611				23,074

The PSUs contained a purchase price feature, which required the NEOs to pay MPS $30 per share upon vesting of the shares. The target number of shares granted to each NEO was determined based on the target compensation value for such PSUs, divided by our closing stock price hurdles overon the date of grant less the purchase price. This $30 purchase price requirement would be deemed satisfied and waived if the average stock price for 20 consecutive trading days at any time during 2022 and 2023 is $30 higher than our closing stock price on the date of grant. In addition, the PSUs subject to the capacity goal contain a five-year performance period was already in place in 2018.post-vesting sales restriction for one year.

 

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PSUs:First Performance Condition - Revenue Goal:

 

For 2019,2022, the number of PSUs that cancould ultimately be earned at the end of the two-year performance period on December 31, 2020 is2023 was based on theMPS’s average two-year (2022 and 2023) revenue growth rate as measured against the average two-year revenue growth rate for the analog industry published by the SIA. In selecting the minimum, target and maximum performance levels, the Compensation Committee carefully considered our historical and projected performance and the fundamentals of the analog industry at that time. The Compensation Committee took into account SIA’s projections for the anticipated revenue growth in the analog industry for the two-year performance period. Instead of benchmarking against the broad semiconductor sector, the Compensation Committee elected to focus solely on the analog industry in setting the performance objectives, which are measured against our closest and most relevant peers within the semiconductor sector. In addition, the Compensation Committee chose the revenue projections reported by SIA as a baseline because the SIA report is well-respected in the semiconductor industry and used by Wall Street financial analysts in preparing their analyses, forecasts and recommendations.

Based on the Compensation Committee's evaluation, the performance criteria and the minimum, target and maximum levels of the PSUs that can be earned are as follows:

MPS's Average Two-Year Revenue
Growth Rate Exceeds the Analog Industry by:		Percentage of PSU Earn-Out
less than 3%		0%
3%		50% of Target
5%		100% of Target
15% and above		300% of Target

The two-year performance period provides a long-term incentive for our NEOs through overlapping cycles so that each year of performance is equally critical as we work toward meeting our two-year goals. The Compensation Committee believes the revenue goals are challenging and that performance metrics measured relative to our peers will provide objectivity when setting long-term goals while minimizing uncertainties caused by external economic factors that are beyond our control.

At the end of the performance period on December 31, 2020 and upon certification of performance by the Compensation Committee, 50% of the actual award earned will become vested in February 2021, and the remaining 50% vest quarterly over the following two years thereafter, for a total vesting period of four years, subject to continued employment. The NEOs will be required to pay MPS $30 per share upon vesting of the shares.

Dividend Equivalents. In connection with our quarterly cash dividend program, all outstanding and unvested time and performance-based full value awards granted to employees, including the NEOs, have the right to receive dividend equivalents in order to maintain the economic alignment between the value of such awards and the value of a share of our Common Stock. The dividend equivalents are accumulated during the vesting periods of the shares underlying such awards and are paid in cash to employees only if and when the underlying shares vest. Dividend equivalents accrued on the underlying shares are forfeited if the employees do not fulfill their service requirement during the vesting periods. Dividend equivalents paid to the NEOs in 2019 are included in the section “2019 Option Exercises and Stock Vested” below.

Certifications of Prior-Year Performance-Based Awards

As previously disclosed in our proxy statement for the 2019 Annual Meeting of Stockholders, the Compensation Committee granted each NEO a PSU award in February 2018 that could be earned based on the average two-year (2018 and 2019) revenue growth rate as measured against the average two-year revenue growth rate for the analog industry published by the SIA. The PSU award consisted of a target award, as well as a maximum award equal to 300% of the target grant. The actual results at the end of the two-year performance period on December 31, 2019, as approved by the Compensation Committee, were as follows: 

MPS's Average Two-Year Revenue
Growth Rate Exceeds the Analog Industry by:								Percentage of
Target		Maximum		Actual Achievement				PSU Earn-Out
5%		15% and above			14.5%				296.7	%

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The following table shows the actual shares earned under the program for the NEOs: 

Name		Earned
Michael Hsing		289,250
Bernie Blegen		44,055
Deming Xiao		74,894
Maurice Sciammas		74,894
Saria Tseng		��         74,894

50% of the awards earned will vest in February 2020, with the remaining 50% vesting quarterly over the following two years through February 2022, for a total vesting period of four years, subject to continued employment. The NEOs are required to pay MPS a purchase price of $30 per share upon vesting of the actual awards earned.

In addition, as previously disclosed in our proxy statement for the 2019 Annual Meeting of Stockholders, the Compensation Committee granted each NEO an MSU award in October 2018. The MSU award opportunity consisted of a target award, as well as a maximum award equal to 500% of the target grant based on the achievement of five MPS stock price hurdles ranging from $140 to $172 during a four-year performance period. During 2019, we achieved all of the five stock price hurdles, which were approved by the Compensation Committee. The table below shows the actual shares earned under the program for the NEOs:

Name		Earned
Michael Hsing		108,000
Bernie Blegen		48,000
Deming Xiao		48,000
Maurice Sciammas		48,000
Saria Tseng		48,000

The awards will fully vest on January 1, 2024, subject to continued employment. In addition, the Compensation Committee imposed a post-vesting holding period which prohibits the sale of a portion of the vested shares for up to an additional two years.

Broad-Based Benefits

Our NEOs are eligible to participate in our broad-based employee benefit programs on the same terms offered to our employees. These benefit programs include the Employee Stock Purchase Plan, medical, dental and vision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, and health and dependent care flexible spending accounts.  We do not provide pension arrangements or post-retirement health coverage for our NEOs or other employees. In addition, we do not provide contributions on the 401(k) plan or the deferred compensation plan for our NEOs or other employees.

Severance and Change in Control Arrangements

We offer severance benefits to our NEOs, including severance in connection with a change in control of MPS. In general, severance does not exceed six to twelve months of base salary, target bonus and other benefits, and is conditioned on a release of claims and compliance with ongoing obligations. We believe these modest benefits balance the costs to MPS with the retention benefits that are commonly understood to come from offering severance and change in control benefits. For all change in control arrangements, the NEO is entitled to benefits if his or her employment is terminated without cause or if he or she leaves for good reason within one year following a change in control. This approach is commonly referred to as a “double-trigger” arrangement and is favored by many institutional investors and their advisors. We believe the size and conditions to receipt of these severance benefits are consistent with market practices. These arrangements are discussed in more detail in the section “Named Executive Officer Compensation — Potential Payments Upon Termination or Termination Upon Change in Control.”

Stock Ownership Guidelines

In February 2012, the Board established stock ownership guidelines for our NEOs and directors. These guidelines reinforce the importance of aligning the interests of our NEOs and directors with the interests of our stockholders.

For the NEOs, the guidelines are determined as a multiple of each NEO’s base salary, and then converted to a fixed number of shares. Currently, the multiple for our CEO is five times his base salary, while the multiples for other NEOs are two times each NEO’s base salary.  

Equity interests that count toward the satisfaction of the ownership guideline include shares owned directly or indirectly by the executive, including restricted or unrestricted shares or stock units (excluding restricted shares or stock units that remain subject to achievement of performance goals), and any shares owned in our savings plans, such as our 401(k), or acquired through the Employee Stock Purchase Plan. Executives have five years from the date of adoption of the guidelines or their appointment as an executive officer, as applicable, to attain these ownership levels. As of December 31, 2019, all of the NEOs met the stock ownership guidelines.

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For the non-employee directors, the stock ownership guidelines are determined as a multiple of the annual retainer paid to the non-employee director and then converted to a fixed number of shares. In February 2016, based on our compensation consultant’s best practice recommendation, we amended the stock ownership guidelines to increase the required level for our non-employee directors from two times to three times each director’s annual retainer. As of December 31, 2019, all of the directors met the stock ownership guidelines.

Policy Regarding Clawback of Incentive Compensation

In February 2012, the Board adopted a Compensation Recoupment Policy, which requires the Board to recoup any excess performance-based cash compensation paid to key members of our executive team, including the NEOs, if the financial results on which the incentive compensation awards were based are restated due to fraud or intentional misconduct by the executive, if the Board determines, in its sole discretion, that it is in the best interests of us and our stockholders for the executive to repay or forfeit all or any portion of the subject performance-based cash compensation.  

Anti-Hedging and Monetization Transactions and Short Sales

We prohibit our directors, officers (including our NEOs), and other employees from engaging in hedging or monetization transactions with respect to our stock that they obtained through our plans or otherwise, including transactions involving the use of financial instruments such as prepaid variable forwards, equity swaps, collars, forward sale contracts and exchange funds, without prior Board approval.  We also prohibit our directors and officers, including our NEOs, from engaging in any short sales of our stock.

Tax and Accounting Impacts of Equity Grants

Section 162(m) of the Internal Revenue Code (the “Code”) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees.” Prior to the 2017 Tax Cuts and Jobs Act (the “2017 Tax Act”) enacted in December 2017, covered employees consisted of our Chief Executive Officer and each of the next three highest compensated officers serving at the end of the taxable year other than our Chief Financial Officer, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As a result of the 2017 Tax Act, this exemption was, with certain limited exceptions, eliminated. In addition, the definition of covered employees was expanded to include all NEOs, including the Chief Financial Officer.

Our Compensation Committee is aware of current rules governing the taxation and accounting for cash and equity compensation as applicable to public companies. Our Compensation Committee believes that, in establishing the cash and equity incentive compensation plans and arrangements for our NEOs, the potential deductibility of the compensation payable under those plans and arrangements should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. The Compensation Committee believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.

Compensation Committee Report

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with our management. Based upon such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement for the Annual Meeting and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2019.

Members of the Compensation Committee: Jeff Zhou, Chairman Herbert Chang Eugen Elmiger

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Compensation Committee Interlocks and Insider Participation

No Compensation Committee member was at any time during 2019, or at any other time, an officer or employee of us or any of our subsidiaries.  No NEO of MPS serves on the board or compensation committee of any entity that has one or more executive officers serving on the Board or Compensation Committee. 

Compensation Risk Management

In 2019, our management, including members from our internal legal, accounting, finance and human resources departments, undertook a subjective review of our compensation policies and practices that applied to all of our employees, including the following: annual base salaries and bonuses, equity incentive awards under our equity incentive plans and the Employee Stock Purchase Plan. This review was designed to review, consider and analyze the extent to which, if any, our compensation policies and practices might create risks for us, and this review also focused on variable and incentive compensation elements, as well as policies and practices that could mitigate or balance any such incentives. After conducting this review, management determined that our compensation policies and practices for our employees do not create any risks that are reasonably likely to have a material adverse effect on us. The results of the review and management’s determination were reviewed and independently considered by the Compensation Committee, which concurred with management’s assessment.

2019 Summary Compensation Table

The following table sets forth the compensation for our Chief Executive Officer, Chief Financial Officer and three other most highly compensated executive officers serving on December 31, 2019, which officers together constitute our NEOs:

Name and Principal Position		Year		Salary				Bonus				Stock Awards (1)(2)				Non-Equity Incentive Plan Compensation (3)				All Other Compensation (4)				Total
Michael Hsing		2019		$	650,000			$	-			$	7,945,677			$	761,269			$	-			$	9,356,946
Chief Executive Officer, President		2018		$	643,846			$	-			$	9,446,868			$	1,625,000			$	-			$	11,715,714
and Chairman of the Board		2017		$	600,000			$	90,000			$	5,909,642			$	1,386,977			$	-			$	7,986,619
Bernie Blegen		2019		$	317,308			$	-			$	1,408,217			$	299,823			$	-			$	2,025,348
Chief Financial Officer		2018		$	295,308			$	-			$	1,870,950			$	600,000			$	-			$	2,766,258
		2017		$	281,692			$	34,800			$	1,020,348			$	384,149			$	-			$	1,720,989
Deming Xiao		2019		$	340,000			$	-			$	2,057,358			$	318,562			$	-			$	2,715,920
President of Asia Operations		2018		$	340,000			$	-			$	2,720,429			$	680,000			$	-			$	3,740,429
		2017		$	340,000			$	40,800			$	1,727,919			$	450,382			$	-			$	2,559,101
Maurice Sciammas		2019		$	340,000			$	-			$	2,057,358			$	318,562			$	-			$	2,715,920
Senior Vice President,		2018		$	340,000			$	-			$	2,720,429			$	680,000			$	-			$	3,740,429
Worldwide Sales and Marketing		2017		$	340,000			$	40,800			$	1,727,919			$	450,382			$	-			$	2,559,101
Saria Tseng		2019		$	340,000			$	-			$	2,057,358			$	318,562			$	-			$	2,715,920
Vice President, Strategic Corporate		2018		$	340,000			$	-			$	2,720,429			$	680,000			$	-			$	3,740,429
Development and General Counsel		2017		$	340,000			$	40,800			$	1,727,919			$	450,382			$	-			$	2,559,101

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(1)

For more information regarding the stock awards, see the section “Named Executive Officer Compensation — Compensation Discussion and Analysis.” The amounts reflect the aggregate grant date fair value of the awards calculated in accordance with ASC Topic 718, excluding the impact of estimated forfeitures.

The PSUs included in the table above contain a purchase price feature, which requires the NEOs to pay MPS a purchase price per share upon vesting of the shares. The purchase price is $30 per share for the PSUs granted in 2019. Shares that do not vest will not be subject to the purchase price payment to MPS. The grant date fair value of these PSUs was estimated using the Black-Scholes model, which factored the purchase price feature into consideration.

Assumptions used in the calculation of the 2019 stock awards are included in Note 1 and Note 8 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020.

(2)

Assuming the achievement of the highest level of performance criteria, the aggregate grant date fair value of the stock awards in 2019 would be as follows: (a) $23,837,030 for Mr. Hsing, (b) $4,224,650 for Mr. Blegen, (c) $6,172,074 for Mr. Xiao, (d) $6,172,074 for Mr. Sciammas, and (e) $6,172,074 for Ms. Tseng.

(3)

The 2019 amounts reflect the short-term cash incentive compensation earned by the NEOs under our non-equity incentive plan, as described under the section “Named Executive Officer Compensation — Compensation Discussion and Analysis.”

(4)

We did not provide other benefits or compensation for the NEOs that is required to be disclosed under Item 402(c)(2)(ix) of Regulation S-K.

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CEO Pay Ratio

For 2019, our CEO pay ratio was determined as follows:

●

The annual total compensation of our CEO was $9,356,946, as reported in the “Total” column in the 2019 Summary Compensation Table disclosed above.

●

The median of the annual total compensation of all employees (other than our CEO) was $36,848. The median employee was located in China.

●

The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 254 to 1.  This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

For purposes of calculating the amount of compensation paid to our median employee in 2019, we used the same median employee that we identified in 2017, as permitted under the SEC rules. There have been no significant changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. 

The SEC rules for identifying the median employee and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Alternative Measure:

As discussed in the Compensation Discussion and Analysis section above, more than 93% of our CEO’s annual compensation was tied to rigorous performance conditions in 2019, while the annual compensation of our median employee was not tied to performance goals. Accordingly, as an alternative measure, management believes that a more direct and meaningful pay ratio is to compare compensation that is not tied to any performance objectives. Based on this method, our alternative CEO pay ratio was determined as follows:

●

The annual total compensation of our CEO was $650,000.

●

The median of the annual total compensation of all employees (other than our CEO) was $36,848.

●

The alternative ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 18 to 1.

Grants of Plan-Based Awards for the Year Ended December 31, 2019

							Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)												Estimated Future Payouts Under Equity Incentive Plan Awards (#)(2)												Grant Date Fair Value of Stock and Option
Name			Grant Date				Threshold				Target				Maximum				Threshold				Target				Maximum				Awards (3)
Michael Hsing				-			$	-			$	650,000			$	1,625,000				-				-				-				-
			2/11/2019					-				-				-				-				77,481				232,443			$	7,945,677
Bernie Blegen				-			$	-			$	256,000			$	640,000				-				-				-				-
			2/11/2019					-				-				-				-				13,732				41,196			$	1,408,217
Deming Xiao				-			$	-			$	272,000			$	680,000				-				-				-				-
			2/11/2019					-				-				-				-				20,062				60,186			$	2,057,358
Maurice Sciammas				-			$	-			$	272,000			$	680,000				-				-				-				-
			2/11/2019					-				-				-				-				20,062				60,186			$	2,057,358
Saria Tseng				-			$	-			$	272,000			$	680,000				-				-				-				-
			2/11/2019					-				-				-				-				20,062				60,186			$	2,057,358

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(1)

The amounts reflect the threshold, target, and maximum awards under the short-term cash incentive compensation program, which is described in detail in the section “NamedExecutive Officer Compensation — Compensation Discussion and Analysis.”

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	(2)	The amounts reflect the threshold, target, and maximum number of shares of PSUs that may be earned under the long-term equity incentive compensation program, which is described in detail in the section “NamedExecutive Officer Compensation —Compensation Discussion and Analysis.”
		The 2019 PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. Shares that do not vest will not be subject to the purchase price payment to MPS. The target number of shares granted to each NEO was determined based on the equity compensation value, divided by the closing stock price on the date of grant less the purchase price.

	(3)	The amounts reflect the aggregate grant date fair value of each award based on the target level of performance and calculated in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The grant date fair value was $102.55 per share. It was calculated using the Black-Scholes model, which factored in the purchase price requirement of $30 per share.
		Assumptions used in the calculation of the stock awards are included in Note 1 and Note 8 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020.

Narrative Disclosure to 2019 Summary Compensation Table and Grants of Plan-Based Awards During the Year Ended December 31, 2019

A discussion of 2019 salaries, incentive plans and awards is set forth under the section “Named Executive Officer Compensation - Compensation Discussion and Analysis,” including a discussion of the material terms and conditions of the short-term cash incentive compensation and PSUs. For information regarding our employment agreements with the NEOs, see the section “NamedExecutive Officer Compensation – Potential Payments Upon Termination or Termination Upon Change in Control – Employment Agreements and Change in Control Arrangements.” 

Equity Incentive Grant Policies

We maintain the Monolithic Power Systems Equity Award Grant Policy, which is designed to work in concert with: (1) the administrative provisions of our amended 2014 Equity Incentive Plan (the “2014 Equity Plan”) and such other plans as we may adopt from time to time (which we refer to collectively as the Plans), (2) the requirements of the Delaware General Corporation Law, (3) the corporate governance requirements of NASDAQ, (4) applicable rules and regulations of the SEC, including those relating to Section 16 of the 1934 Act, and (5) relevant sections of the Code. Grants to our NEOs are made pursuant to this policy, must be approved by the Compensation Committee and will only be granted at specific times during the year, as described in further detail below.

Plan and Corporate Authorization

Under the Plans, the authorization to administer the grant of equity incentive awards is conferred upon the Board or any committee of the Board as properly constituted under applicable laws. The Board has delegated to the Compensation Committee the authority to serve as administrator of the Plans (including the authority to grant awards under the Plans), and has approved a charter outlining the responsibilities of this committee which also includes this express authority. The delegation of authority to the Compensation Committee is not exclusive; the Board retains the right to formally approve award grants as well. The Compensation Committee may form and delegate authority to subcommittees when appropriate.

In addition, the Board has delegated limited authority for grants of equity awards under the Plans to new employees and consultants to a committee consisting of the Chief Executive Officer (which committee we refer to as the Equity Award Committee). The authority does not extend to grants to the NEOs. The delegation of authority to the Equity Award Committee is not exclusive; the Board and Compensation Committee retain the right to formally approve award grants as well.

Equity Grants to New Hires

Grants to newly hired employees and consultants (other than Executive Officers as defined below) will generally be made on the date of the next regularly scheduled Board meeting subsequent to the employees’ start date. Management submits the employee equity award recommendations to the Compensation Committee and, if such equity awards are approved by the Compensation Committee, such equity awards will be granted effective as of the date of a meeting approving such awards as evidenced by written minutes of such meeting or the date of the last verification signature or electronic verification over email in the event of a written consent in lieu of the meeting.

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New hire grants made to “Executive Officers” (currently defined as the Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Chief Operations Officer, President, employees who are members of the Board and any other employee determined by the Board to be an Executive Officer) generally will only be granted on the date of the next regularly scheduled Board meeting subsequent to the Executive Officer’s start date and following the recommendation of such grant by the Compensation Committee.

Equity Grants to Existing Employees or Incumbent Members of the Board

Generally, annual grants of equity awards shall be made to key performers at a regularly scheduled Board meeting. Equity awards to non-employee members of the Board shall be made by the Board or pursuant to any automatic grant provisions in the Plans.

Outstanding Equity Awards at 2019 Year-End

The following table sets forth, as to the NEOs, certain information concerning their outstanding stock awards at December 31, 2019. There were no outstanding option awards held by the NEOs as of December 31, 2019.

		Stock Awards
Name		Grant Date					Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested (1)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (1)
Michael Hsing		12/14/2013		(2	)			440,000			$	80,616,800				-				-
		12/31/2015		(3	)			138,743			$	25,041,459				-				-
		2/2/2016		(4	)			20,329			$	3,282,585				-				-
		2/7/2017		(5	)			79,443			$	11,947,370				-				-
		2/7/2018		(6	)			289,250			$	43,087,822				-				-
		10/25/2018		(7	)			108,000			$	19,293,120				-				-
		2/11/2019		(8	)			-				-				77,481			$	11,592,707
Bernie Blegen		12/14/2013		(2	)			28,800			$	5,276,736				-				-
		2/2/2016		(9	)			27			$	4,925				-				-
		2/2/2016		(10	)			62			$	10,098				-				-
		7/19/2016		(4	)			5,560			$	896,911				-				-
		2/7/2017		(5	)			13,718			$	2,062,978				-				-
		2/7/2018		(6	)			44,055			$	6,562,594				-				-
		10/25/2018		(7	)			48,000			$	8,574,720				-				-
		2/11/2019		(8	)			-				-				13,732			$	2,054,582
Deming Xiao		12/14/2013		(2	)			172,800			$	31,660,416				-				-
		12/31/2015		(3	)			75,678			$	13,658,978				-				-
		2/2/2016		(4	)			6,174			$	996,996				-				-
		2/7/2017		(5	)			23,231			$	3,493,691				-				-
		2/7/2018		(6	)			74,894			$	11,156,483				-				-
		10/25/2018		(7	)			48,000			$	8,574,720				-				-
		2/11/2019		(8	)			-				-				20,062			$	3,001,676
Maurice Sciammas		12/14/2013		(2	)			172,800			$	31,660,416				-				-
		12/31/2015		(3	)			75,678			$	13,658,978				-				-
		2/2/2016		(4	)			6,174			$	996,996				-				-
		2/7/2017		(5	)			23,231			$	3,493,691				-				-
		2/7/2018		(6	)			74,894			$	11,156,483				-				-
		10/25/2018		(7	)			48,000			$	8,574,720				-				-
		2/11/2019		(8	)			-				-				20,062			$	3,001,676
Saria Tseng		12/14/2013		(2	)			172,800			$	31,660,416				-				-
		12/31/2015		(3	)			75,678			$	13,658,978				-				-
		2/2/2016		(4	)			6,174			$	996,996				-				-
		2/7/2017		(5	)			23,231			$	3,493,691				-				-
		2/7/2018		(6	)			74,894			$	11,156,483				-				-
		10/25/2018		(7	)			48,000			$	8,574,720				-				-
		2/11/2019		(8	)			-				-				20,062			$	3,001,676

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____________

	(1)	The market value of the unvested stock awards is based on the closing market price of our Common Stock of $178.02 as of December 31, 2019, less any applicable purchase price, and includes any outstanding dividend equivalents accumulated on such awards.
	(2)	These shares are MSUs granted in December 2013. The performance goals with respect to these MSUs were achieved as of December 31, 2015. The shares vest quarterly over five years from January 1, 2019 to December 31, 2023, for a total vesting period of ten years, subject to continued employment.
	(3)	These shares are MPSUs granted in December 2015. The performance goals with respect to these MPSUs were achieved as of September 30, 2019. These shares will fully vest on January 1, 2020, for a total vesting period of four years, subject to continued employment. In addition, the MPSUs contain a post-vesting sales restriction for up to an additional two years.
	(4)	These shares are PSUs granted in February or July 2016. The performance goals with respect to these PSUs were achieved as of December 31, 2017. 50% of these shares vested in February 2018, and the remaining 50% vest quarterly through February or July 2020, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $20 per share upon vesting of the shares.
	(5)	These shares are PSUs granted in February 2017. The performance goals with respect to these PSUs were achieved as of December 31, 2018. 50% of these shares vested in February 2019, and the remaining 50% vest quarterly over the following two years through February 2021, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares.
	(6)	These shares are PSUs granted in February 2018. The performance goals with respect to these PSUs were achieved as of December 31, 2019. 50% of these shares will vest in February 2020, and the remaining 50% will vest quarterly over the following two years through February 2022, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares.
	(7)	These shares are MSUs granted in October 2018. The performance goals with respect to these MSUs were achieved as of December 31, 2019. These shares will fully vest on January 1, 2024, for a total vesting period of five years and two months, subject to continued employment. In addition, the MSUs contain a post-vesting sales restriction for up to an additional two years.
	(8)	These shares are PSUs granted in February 2019 and reflect the target level of performance. Upon achievement of the pre-determined performance targets at the end of 2020, 50% of these shares will vest in February 2021, and the remaining 50% will vest quarterly over the following two years through February 2023, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires the NEOs to pay MPS $30 per share upon vesting of the shares. See the section “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion.
	(9)	These shares are time-based RSUs that vest quarterly over four years from the date of grant, subject to continued employment.
	(10)	These shares are PSUs granted in February 2016. The performance goals with respect to these PSUs were achieved as of December 31, 2017. 50% of these shares vested in February 2018, and the remaining 50% vest quarterly over the following two years through February 2020, for a total vesting period of four years, subject to continued employment. The PSUs contain a purchase price feature, which requires Mr. Blegen to pay MPS $20 per share upon vesting of the shares.

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2019 Option Exercises and Stock Vested

The following table sets forth certain information on the stock awards vested for our NEOs in 2019. There were no option exercises in 2019.

		Stock Awards
Name		Number of Shares Acquired on Vesting (#)				Value Realized on Vesting (1)
Michael Hsing			380,217			$	48,189,614
Bernie Blegen			45,399			$	5,344,019
Deming Xiao			123,279			$	15,949,006
Maurice Sciammas			123,279			$	15,949,006
Saria Tseng			123,279			$	15,949,006

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(1)

Value realized is equal to (a) the closing price of our Common Stock on the vesting date less any purchase price, multiplied by the number of shares, plus (b) accumulated dividend equivalents attributable to such shares.

2019 Non-Qualified Deferred Compensation Plan

We have a non-qualified, unfunded deferred compensation plan, which allows key employees, including our NEOs, to defer the receipt of, and taxation on, cash compensation. Investment returns on deferred balances are linked to the performance of the investment choices available in the plan. We do not make contributions to the plan or guarantee returns on the investments. The following table summarizes the non-qualified deferred compensation activity for our NEOs in 2019:

Name		Executive Contributions in Last FY (1)				Aggregate Earnings in Last FY (2)				Aggregate Balance at Last FYE (3)
Michael Hsing		$	292,500			$	596,310			$	11,053,173
Bernie Blegen		$	30,000			$	38,704			$	1,351,365
Deming Xiao		$	598,427			$	336,082			$	4,671,073
Maurice Sciammas		$	68,000			$	354,415			$	3,117,946
Saria Tseng		$	597,561			$	835,123			$	5,305,162

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(1)

All executive contributions are reported as salary or non-equity incentive plan compensation in the section “Named Executive Officer Compensation — 2019 Summary Compensation Table.”NEOs may defer up to 70% of their salary and up to 90% of their non-equity incentive plan compensation.

(2)

Represents the net amounts credited to the NEOs’ accounts as a result of the performance of their investment choices. The amounts are not included in the section “Named Executive Officer Compensation— 2019 Summary Compensation Table” because plan earnings are not “preferential or above-market” under SEC rules.

(3)

Includes the following cumulative amounts previously reported as compensation for the NEOs in prior years’ Summary Compensation Tables: Mr. Hsing, $8,944,880; Mr. Blegen, $756,811; Mr. Xiao, $3,630,513; Mr. Sciammas, $2,497,913; and Ms. Tseng, $3,568,454.

Potential Payments Upon Termination or Termination Upon Change in Control

Employment Agreements and Change in Control Arrangements

We have entered into employment agreements with each of our NEOs. The employment agreements establish the initial titles, salaries, and reporting responsibilities for the NEOs. The employment agreements also provide that each NEO may participate in our equity, bonus and benefits programs. Each of the employment agreements with Mr. Hsing, Mr. Xiao and Mr. Sciammas was amended in December 2008 to bring the agreements into compliance with Section 409A of the Internal Revenue Code.  The employment agreement with Mr. Xiao was subsequently amended in March 2011 to grant Mr. Xiao an equity interest in Hue Ming LLC, a Delaware limited liability company formed by us.

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In addition to the terms described above, the employment agreements also provide certain severance benefits upon termination without cause or for good reason, including within one year following a change in control (a “Change in Control with Termination”), as described in the following table. We have followed general market practices for senior executives in allowing limited change in control arrangements for selected officers.

NEOs	Agreement and Date	Termination without Cause or Departure for Good Reason	Change in Control with Termination
Michael Hsing	Employment Agreement dated March 10, 2008, as amended December 16, 2008.	Base salary, target annual bonus and benefits for 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for 12 months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Bernie Blegen	Employment Agreement dated July 19, 2016.	Base salary, target annual bonus and benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Deming Xiao	Employment Agreement dated March 10, 2008, as amended December 16, 2008 and March 3, 2011.	Base salary, target annual bonus and benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.  On March 3, 2011, we entered into an amendment to the employment agreement with Mr. Xiao to provide an additional benefit to him in connection with his extended stay in China due to his increased responsibilities.  Pursuant to the amendment, we would transfer ownership of a corporate apartment in Chengdu, China, that was originally owned by our wholly-owned China subsidiary, to Mr. Xiao.  In order to effect the transfer, we formed a new wholly-owned subsidiary Hue Ming LLC and granted Mr. Xiao 100% ownership in such subsidiary, subject to vesting conditions.  The equity interest became fully vested in March 2016 and Hue Ming LLC was dissolved.	Base salary, target annual bonus and benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of 100% of the executive’s unvested equity grants.(1)

 

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The performance criteria and the minimum, target and maximum levels of the PSUs that could be earned were as follows:

Maurice SciammasMPS’s Average Two-Year Revenue Growth Rate Exceeds the Analog Industry by:	Employment Agreement dated March 10, 2008, as amended December 16, 2008.	Base salary, target annual bonus and benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	Base salary, target annual bonus and benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of 100% of the executive’s unvested equity grants.(1)PSU Earn-Out
Saria TsengLess than 3%		Employment Agreement dated December 16, 2008, as amended February 9, 2010.0%
3%		Base salary, target annual bonus and benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration50% of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.Target
5%		Base salary, target annual bonus and benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company; and acceleration of vesting of 100% of the executive’s unvested equity grants.(1)Target
15% and above		300% of Target

 

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Second Performance Condition - Capacity Goal:

In light of the supply chain constraints and the challenges we were experiencing to continue to meet growing customer demand, the Compensation Committee approved a second performance condition for the February 2022 PSUs that would require the NEOs to execute strategic plans with our foundry partners and secure additional wafer capacity in excess of the capacity requirements under the annual operating plan (the “AOP”) approved by the Board for the three years from 2022 to 2024.

The performance criteria and the minimum, target and maximum levels of the PSUs that could be earned are as follows:

Annual Wafer Capacity Exceeds the Capacity Requirements under the AOP by:		PSU Earn-Out
Less than 10%		0%
10%		100% of Target
20%		200% of Target

October 2022 MSUs:

In October 2022, the Compensation Committee replaced the revenue and manufacturing capacity-based PSU program with a long-term MSU program for our NEOs. The main objective is to align their compensation with the long-term interests of our stockholders. These MSU awards can only be earned if our Common Stock trades for sustained periods of time at a series of rigorous price levels that are substantially higher than the grant date stock price. In addition, in order to earn the awards, we must achieve certain TSR performance relative to our peers in the semiconductor industry. To realize the value from the awards, our financial achievement must result in significant increases in our stock price and sustainable stockholder value creation over time.

The following table summarizes the number of shares subject to the October 2022 MSUs that can be earned by the NEOs at the minimum, target and maximum performance levels. The number of shares earned will not be linearly interpolated for actual achievement between the performance levels. 

Name		Minimum (#)				Price Hurdle #1 (Target) (#)				Price Hurdle #2 (#)				Price Hurdle #3 (#)				Price Hurdle #4 (#)				Price Hurdle #5 (#)				Total (Maximum) (#)
Michael Hsing			0				60,584				60,584				60,584				60,584				60,584				302,920
Bernie Blegen			0				17,538				17,538				17,538				17,538				17,538				87,690
Deming Xiao			0				27,104				27,104				27,104				27,104				27,104				135,520
Maurice Sciammas			0				27,104				27,104				27,104				27,104				27,104				135,520
Saria Tseng			0				27,104				27,104				27,104				27,104				27,104				135,520

First Market Condition – Stock Price Targets:

The key terms of the first market condition are as follows:

(1) ●

With respect to the PSUs that have not been earned because theThe performance period is still in progress, a pro-rata portion of such awards shall vestthree years (October 25, 2022 to the extent the applicable performance levels are achieved through the date of the change in control, provided that the date of the change in control occurs after the first calendar year of the performance period.October 24, 2025).

Each of the employment agreements with our NEOs also contains a provision whereby during the period of employment and thereafter, the executive shall not, without the prior written consent of us, disclose or use any confidential information or proprietary data other than for our interest. These employment agreements also contain a covenant not to solicit, beginning with the date of the executive’s termination and until one year thereafter.  All payments due under the severance benefits provided under the employment agreements with our NEOs are conditioned on the execution and non-revocation of a release for our benefit and the benefit of our related entities and agents. 

A “change in control” of MPS means a merger or consolidation after which our stockholders do not hold a majority of our outstanding voting securities, any transaction involving the transfer of greater than 50% of our voting power (unless otherwise provided for in an award agreement), or a sale of substantially all our assets. “Cause” generally means the NEO’s failure to perform the duties or responsibilities of his or her employment, the NEO personally engaging in illegal conduct that is detrimental to us, the NEO being convicted of or pleading nolo contendere to a felony or other crime involving moral turpitude, or the NEO committing a material act of dishonesty, fraud or misappropriation of property. “Good Reason” generally means the NEO’s termination of employment following the expiration of any cure period following the occurrence of: a material reduction in compensation (except where a substantially equivalent reduction is applied to all our officers), a material reduction in the NEO’s duties, or a material change in the location at which the NEO performs services.

 

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Estimated Payments Upon Termination or Change in Control

The following table sets forth the estimated payments required to be made to each NEO in connection with the termination of his or her employment upon specified events, assuming a stock price of $178.02 per share, the closing price as of December 31, 2019. The estimated amounts shown also assume that the termination was effective as of December 31, 2019, and include estimates of severance benefits which would be paid to the executives upon their termination. The actual amounts payable to each NEO can only be determined at the time of the termination of the executive’s employment.

		Termination without Cause or Departure for Good Reason																Change in Control with Termination
Name		Base Salary and Target Bonus				Acceleration of Vesting of Equity Awards				Other				Total Compensation				Base Salary and Target Bonus				Acceleration of Vesting of Equity Awards				Other				Total Compensation
Michael Hsing		$	1,300,000			$	86,339,237			$	19,431			$	87,658,668			$	1,300,000			$	187,929,473			$	19,431			$	189,248,904
Bernie Blegen		$	288,000			$	6,944,087			$	12,674			$	7,244,761			$	576,000			$	24,514,295			$	25,347			$	25,115,642
Deming Xiao		$	306,000			$	27,982,937			$	9,729			$	28,298,666			$	612,000			$	70,320,891			$	19,458			$	70,952,349
Maurice Sciammas		$	306,000			$	27,982,937			$	12,688			$	28,301,625			$	612,000			$	70,320,891			$	25,376			$	70,958,267
Saria Tseng		$	306,000			$	27,982,937			$	13,780			$	28,302,717			$	612,000			$	70,320,891			$	27,560			$	70,960,451

In the event the NEOs resign without good reason or we terminate their employment for cause, we will have no obligation to pay or provide any compensation or benefits as a result of the employment agreements between us and the NEOs. In the event of the NEOs’ death or disability, except as required by applicable law, we will have no obligation to pay or provide any compensation or benefits under the employment agreements between us and the NEOs.

Equity Compensation Plan Information

The following table summarizes certain information under our equity compensation plans as of December 31, 2019:

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)				Weighted-average exercise price of outstanding options, warrants and rights (b)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by stockholders (1)			4,053,000	(2)		$	29.61	(3)			6,128,000	(4)

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(1)

Our equity compensation plans approved by stockholders include the following:

(i)

2004 Equity Incentive Plan (the “2004 Equity Plan”), which expired in November 2014. We can no longer grant equity awards under the 2004 Equity Plan. However, certain equity awards granted prior to its expiration date remained unvested and outstanding.

(ii)

the 2014 Equity Plan, which became effective in November 2014 and provides for the issuance of 5.5 million shares. The 2014 Equity Plan has a ten-year term.

(iii)

2004 Employee Stock Purchase Plan (the “ESPP”), which incorporates an evergreen provision pursuant to which on January 1 of each year, the aggregate number of shares of Common Stock reserved for issuance can increase by a number of shares equal to the least of: (i) 2% of the outstanding shares of Common Stock on the first day of the year, (ii) 1.0 million shares or (iii) a lesser number of shares determined by the Board. The ESPP has a 20-year term.

(2)

Includes the following outstanding awards: 180,000 RSUs, 1,417,000 PSUs, 1,886,000 MSUs, and 570,000 MPSUs. The number of securities reported for performance awards was based on the actual number of shares that have been earned, but are subject to additional service conditions before they vest. For those performance awards that have not been earned because the performance period was still in progress, the number of securities reported was based on the probable outcome of the performance conditions.

(3)

Represents the purchase price related to the PSUs. Employees are required to pay MPS a purchase price of either $20 or $30 per share upon vesting of the shares. All other outstanding awards (RSUs, MSUs and MPSUs) have no purchase price and are excluded.

(4)

Includes 1,595,000 shares remained available for future issuance under the 2014 Equity Plan and 4,533,000 shares remained available for future issuance under the ESPP.

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Audit Committee Report

The purpose of the Audit Committee is to provide oversight of our accounting and financial reporting processes and the audit of our financial statements; appoint the independent registered public accounting firm to audit our financial statements; and assist the Board in the oversight of: (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, and (iv) our internal accounting and financial controls. In addition, the Audit Committee provides the Board with such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention of the Board.

The Audit Committee has a duly adopted charter, which it reviews on an annual basis.

The Audit Committee is responsible for recommending to the Board that our financial statements be included in its Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2019, including:

●

reviewingThe awards consist of an aggregate target number of 159,434 shares for the NEOs. The NEOs can earn up to five times of the target number if our average stock price reaches the following five price levels (the “Price Hurdles”):

Price Hurdles ($)(A)		Percentage of Stock Price Increase (B)
455.41		33%
487.18		42%
520.38		52%
555.06		62%
591.25		73%

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(A)

Each Price Hurdle was determined based on the following compound annual growth rate (“CAGR”) over the three-year performance period: 10.0% for Price Hurdle #1; 12.5% for Price Hurdle #2; 15.0% for Price Hurdle #3; 17.5% for Price Hurdle #4; and discussing the audited financial statements with our independent registered public accounting firm and management;20.0% for Price Hurdle #5.

 

(B)

The percentage represents the increase from our closing stock price of $342.16 on October 25, 2022, the date the MSU program was approved by the Compensation Committee.

●

discussing withThe average closing price of our Common Stock must equal or exceed each Price Hurdle over 90 consecutive trading days during the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; andthree-year performance period.

 

Second Market Condition – Relative TSR Performance:

The key terms of the second market conditions are as follows:

●

receivingThe performance period is the written disclosures andsame as the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accountant’s communications with the Audit Committee concerning independence, and discussing with the independent registered public accounting firm their independence. first market condition.

 

Based upon the reviews and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2019 for filing with the SEC.

Members of the Audit Committee (as of the date the actions above were taken):

Victor K. Lee, Chairman

Herbert Chang

Jeff Zhou

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PROPOSAL FOUR

APPROVAL OF THE AMENDED AND RESTATED 2014 EQUITY PLAN

For purposes of this Proposal Four, the term “Proposed 2014 Equity Plan” refers to the Amended and Restated 2014 Equity Plan.

Introduction

We currently maintain the 2014 Equity Plan, under which we may grant incentive awards relating to our Common Stock to our employees, directors and consultants. The 2014 Equity Plan was originally approved by the stockholders in June 2013 and provided for the issuance of 5,500,000 shares.

Summary of Material Changes from the 2014 Equity Plan

Under this Proposal Four, we are asking our stockholders to approve the Proposed 2014 Equity Plan for the following key changes (in addition to certain other conforming and non-substantive or immaterial changes):

	●	increase the number of shares of Common Stock available for future awards by 5,000,000 shares, and increase the number of shares of Common Stock available for incentive stock options by the same 5,000,000 shares;
	●	remove certain language, provisions and limits relatingIf a Price Hurdle is achieved, our TSR relative to the potential to qualify awards for deductibility as performance-based compensation under Section 162(m)TSR of the Code, as such deductibility will not be available for new awards granted under the Proposed 2014 Equity Plan. However, the Proposed 2014 Equity Plan will not govern awards that were granted under the 2014 Equity Plan that were intended to qualify as performance-based compensation under Section 162(m) of the Code (such awards referred to herein as “Grandfathered Awards”), and such Grandfathered Awards will continue to be governed by the applicable provisions of the 2014 Equity Plan;
	●	clarify that certain events, such as a combination of shares, recapitalization, other change in our capital structure, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction having an effect similar to the foregoing, in addition to other events previously enumeratedcompanies included in the 2014 Equity Plan, will result in an equitable adjustment to certain terms of outstanding awards asPHLX Index must also meet the administrator (as defined below) offollowing criteria over the Proposed 2014 Equity Plan may decide in accordance with its terms;three-year performance period:
	●	amend the share counting provisions to clarify that shares of Common Stock tendered for payment of an exercise price or purchase price for an award, or tendered or withheld in satisfaction of tax withholding for an award, will not be returned to the Proposed 2014 Equity Plan and will not become available for future use under the Proposed 2014 Equity Plan;
	●	provide flexibility for alternative definitions for the terms “Cause,” “Change in Control,” and “Disability” in individual award agreements;
	●	clarify that dividend equivalents may be paid out in either cash or shares of Common Stock and remove the ability to grant dividend equivalents with respect to awards of stock options and stock appreciation rights (“SARs”);
	●	require that dividends granted in connection with awards of restricted stock be subject to the same restrictions and vesting conditions applicable to the underlying restricted stock award;

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●

re-establish the outside director compensation limit at $1,000,000 and provide that it covers all compensation granted to outside directors, not just the value of equity awards granted under the Proposed 2014 Equity Plan;

 

●

permit share withholding or delivery above minimum statutory withholding levels if such additional amounts do not result in adverse accounting consequences and are authorized by the Compensation Committee;

●

provide the administrator with the ability to provide for special terms that may be necessary or appropriate to comply with applicable laws for awards granted to participants who are expected to be nationals of both the United States and other countries or to be employed both within and outside of the United States;

●

clarify that stockholder approval may also be required for purposes of applicable stock exchange rules and, except as permitted under the Proposed 2014 Equity Plan’s equitable anti-dilution adjustment provisions, expressly requires stockholder approval for certain amendments; and

●

extend the expiration date to June 11, 2030.

Upon recommendation of the Compensation Committee in April 2020, our Board unanimously approved the Proposed 2014 Equity Plan, subject to stockholder approval. If the Proposed 2014 Equity Plan is approved by our stockholders, it will become effective on June 11, 2020. Outstanding awards under the 2014 Equity Plan, however, will continue in effect in accordance with their terms. If the stockholders do not approve this proposal, the Proposed 2014 Equity Plan will not become effective and the 2014 Equity Plan will continue in its current form in full force and effect.

This proposal requires the affirmative vote of a majority of the shares of our Common Stock entitled to vote on the proposal and present in person via attendance at the virtual Annual Meeting or represented by proxy at the Annual Meeting. Abstentions have the same effect as a vote against this proposal. Broker non-votes will have no effect on the outcome of this proposal.

The Board unanimously recommends that the stockholders vote “FOR” the approval of the PROPOSED 2014 EQUITY Plan.

Why the Board is Seeking Approval of This Proposal

Competition for talent in the semiconductor industry is intense, and equity compensation is central to our recruiting and retention philosophy, especially given our rapid growth and our need to attract talented employees from large companies that offer significant equity compensation. We have a long-standing practice of granting equity incentive awards to our executives, directors, and broadly among our employees. The Board believes the Proposed 2014 Equity Plan is in the best interest of stockholders and MPS, as our equity compensation program is designed to align the interests of our NEOs and other employees to those of our stockholders. Since 2012, our Compensation Committee has implemented annual equity programs for our NEOs and other employees based on the achievement of a combination of different performance goals, including revenue, operating metrics, and stock price appreciation. We believe the significant increase in our stock price and year-over-year outperformance in revenue growth in the past several years (as outlined under the section “Named Executive Officer Compensation — Compensation Discussion and Analysis”) demonstrate the effectiveness of our performance-based equity program in motivating our NEOs and other employees to build a sustainable business model and to focus on long-term value creation for our stockholders.

The approval of the Proposed 2014 Equity Plan is essential to our ability to continue these positive practices and to remain competitive in our ability to attract, retain and incentivize highly qualified employees and other service providers in the future. If the Proposed 2014 Equity Plan is not approved, we may be compelled to increase significantly the cash component of our employee compensation, which may not necessarily align employee interests with those of stockholders as effectively as with stock-based compensation.  Replacing equity awards with cash will also increase our cash compensation expense and use cash that management believes would be better utilized in other ways, such as reinvestment in our businesses.

As of the Record Date, we had 2,021 employees (including our NEOs), five non-employee directors and 15 consultants eligible to participate in the Proposed 2014 Equity Plan. The basis for participation in the Proposed 2014 Equity Plan by eligible persons is the selection of such persons by the administrator (or its proper delegate) in its discretion.

Shares Information as of Record Date

The 2014 Equity Plan is currently our only active equity incentive plan under which we may grant new equity awards, other than the ESPP which allows employees to purchase our stock at a discount. The 2004 Equity Plan expired in November 2014; however, certain equity awards granted prior to the expiration date of the 2004 Equity Plan remained unvested and outstanding as of the Record Date.

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The following table summarizes certain share activity:

		As of Record Date
		(April 20, 2020)
Total unvested and outstanding equity awards:
Stock options			---
RSUs (including time-based RSUs, PSUs, MSUs and MPSUs)			3,328,000
Shares remained available for future issuance under the 2014 Equity Plan			1,194,000
Common Stock outstanding			44,715,000
Closing price of Common Stock		$	184.23

If our stockholders approve this proposal to increase the number of shares of Common Stock authorized for issuance by 5,000,000 shares, we expect to have an estimated total of 6,194,000 shares initially available for future issuance under the Proposed 2014 Equity Plan.

KeyEquity Metrics

In setting the number of additional shares authorized for issuance under the Proposed 2014 Equity Plan, management has reviewed a number of metrics to assess its view of the cumulative impact of our equity compensation program, particularly the burn rate and dilution.

Burn Rate

Burn rate measures our view of how rapidly the shares reserved for our equity incentive plan are utilized annually. It is equal to the total number of equity grants awarded (which includes stock options granted, time-based RSUs granted, and performance and market-based RSUs vested) during the year, divided by the weighted-average Common Stock outstanding for the year. Adjusted burn rate is calculated by applying a premium multiplier of 2.5 on the total number of equity grants awarded for each year. The following table summarizes our burn rate for the past three years:

		FY 2019				FY 2018				FY 2017				3-Year Average
Stock options granted			-				-				-
Time-based RSUs granted			52,000				133,000				81,000
Performance and market-based RSUs (including PSUs and MSUs) vested			980,000				717,000				597,000
Total			1,032,000				850,000				678,000
Weighted-average Common Stock outstanding			43,165,000				42,247,000				41,350,000
Burn rate			2.4	%			2.0	%			1.6	%			2.0	%
Adjusted burn rate			6.0	%			5.0	%			4.1	%			5.0	%

Dilution

Dilution measures our view of the potential impact of our equity compensation program on stockholder dilution. It is equal to the sum of the number of shares subject to our outstanding equity awards and the number of shares remained available for future issuance, divided by total number of shares of Common Stock outstanding at the end of the year. The following table summarizes our dilution for the past three years:

		As of December 31,
		2019				2018				2017				3-Year Average
Total unvested and outstanding equity awards:
Stock options			-				-				5,000
RSUs (including time-based RSUs, PSUs, MSUs and MPSUs)			4,053,000				4,633,000				4,144,000
Shares remained available for future issuance under the 2014 Equity Plan			1,595,000				2,000,000				3,200,000
Common Stock outstanding			43,616,000				42,505,000				41,614,000
Dilution			12.9	%			15.6	%			17.7	%			15.4	%

New Plan Benefits

Equity grants under the Proposed 2014 Equity Plan are discretionary and are not subject to set benefits or amounts. They will be determined and approved in the future at the discretion of the Compensation Committee.  Accordingly, the benefits and the amounts that will be awarded to eligible participants under the Proposed 2014 Equity Plan are not currently determinable.

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The following table sets forth the number of shares subject to stock awards granted under the 2014 Equity Plan during 2019:

Name and PositionTSR Percentile Rank (C)		Number of Shares Subject to Stock Awards (1)Payout Percentage
Michael HsingEquals or exceeds the 50th percentile			77,481	100%
Chief Executive Officer, President and Chairman ofLess than the Board50th percentile				0%
Bernie Blegen			13,732
Chief Financial Officer
Deming Xiao			20,062
President of Asia Operations
Maurice Sciammas			20,062
Senior Vice President, Worldwide Sales and Marketing
Saria Tseng			20,062
Vice President, Strategic Corporate Development and General Counsel
All current executive officers as a group			151,399
All current non-employee directors as a group			6,695
All employees as a group, excluding current executive officers			99,823

 

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(1)(C)

100%The Compensation Committee selected the PHLX Index because it includes our most relevant peers within the semiconductor sector. TSR for MPS and for each company in the PHLX Index is calculated using: (a) a beginning price, which represents the closing stock price of MPS and each company on October 25, 2022, the first trading day of the three-year performance period, and (b) an ending price, which consists of the average closing stock awards grantedprice of MPS and each company over 90 consecutive trading days immediately prior to, and including, October 24, 2025, the NEOs were PSUs in 2019. The numberlast trading day of shares in the table reflects the target level of performance. For more information regarding the PSUs, including the minimum, target and maximum level ofthree-year performance see the section “Named Executive Officer Compensation — Compensation Discussion and Analysis.”period, assuming dividend reinvestment.

 

SinceBoth the dateperformance period and the vesting period are three years. Upon certification of inceptionperformance by the Compensation Committee and no earlier than October 24, 2025, 100% of the 2014 Equity Plan through the Record Date, the aggregate numbers of shares of Common Stockactual award earned will become vested on October 24, 2025, subject to stock awards were granted to the following participants: (1) 1,503,746 shares subject to stock awards for Mr. Hsing; 230,124 shares subject to stock awards for Mr. Blegen; 473,384 shares subject to stock awards for Mr. Xiao; 473,384 shares subject to stock awards for Mr. Sciammas; and 473,384 shares subject to stock awards for Ms. Tseng; (2) 3,154,022 shares subject to stock awards for all current executive officers as a group; (3) 48,752 shares subject to stock awards for all non-employee directors as a group; and (4) 1,103,226 shares subject to stock awards for all employees as a group, excluding current executive officers. No shares subject to stock options were granted under the 2014 Equity Plan since the date of inception.

If the Proposed 2014 Equity Plan is approved, we intend to utilize the shares authorized to continue our practice of incentivizing key individualscontinued employment through equity grants. We currently anticipate that the shares requested in connection with approval of the Proposed 2014 Equity Plan will last for at least five years based on historical grant rates and practices, but could last for a different period of time if actual practices do not match historical rates.

In evaluating this Proposal Four, stockholders should consider all of the information in this proposal, including the information set forth above under the section “Summary of Material Changes from the 2014 Equity Plan.”such date.

 

Summary of Key Provisions of the Proposed 2014 Equity Plan

The following is a summary of the key provisions of the Proposed 2014 Equity Plan. This summary does not purport to be a complete description of all the provisions, and it is qualified in its entirety by reference to the full text of the Proposed 2014 Equity Plan, which is attached as Annexure B to this Proxy Statement.

Purpose

The purpose of the Proposed 2014 Equity Plan is to attract and retain the best available personnel of substantial responsibility, to provide additional incentives to our employees, directors and consultants, and to promote the success or our business. The Board believes that the Proposed 2014 Equity Plan is necessary to ensure that we maintain the ability in the future to continue to attract and retain highly qualified service providers by providing adequate incentives through the issuance of stock-based incentive awards.

Term

The effective date of the Proposed 2014 Equity Plan is June 11, 2020 (the “Effective Date”). No awards shall be granted pursuant to the Proposed 2014 Equity Plan more than ten years after the Effective Date.

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Amendment and Termination

The Proposed 2014 Equity Plan may be amended, altered, suspended or terminated by our Board at any time, provided that no amendment, altercation, suspension or termination of the Proposed 2014 Equity Plan may materially impair any rights of any participant with respect to an award under the Proposed 2014 Equity Plan without the written consent of the holder of the affected award. We will obtain stockholder approval of any plan amendment to the extent necessary and desirable to comply with applicable laws or stock exchange listing requirements, including any amendment that, for purposes of the applicable stock exchange rules, (i) would materially increase the number of securities which may be issued under the Proposed 2014 Equity Plan, or (ii) must otherwise be approved by our stockholders in order to comply with applicable laws or the stock exchange rules.

Eligibility and Participation

All employees, directors and consultants of MPS and all employees and consultants of any parent or subsidiary of MPS are eligible to be selected to receive awards under the Proposed 2014 Equity Plan, provided that only employees may be selected to receive awards that are intended to qualify as incentive stock options.  

Shares Subject to the Proposed 2014 Equity Plan

The Proposed 2014 Equity Plan provides for an additional 5,000,000 shares of our Common Stock for awards granted under the Proposed 2014 Equity Plan.  All of the shares available for issuance under the Proposed 2014 Equity Plan may be issued pursuant to awards intended to qualify as incentive stock options.

If the exercise price of a stock option is paid by net exercise or by tender to MPS, or attestation to the ownership, of shares owned by the participant, the number of shares available for issuance under the Proposed 2014 Equity Plan will be reduced by the gross number of shares for which the award is exercised, rather than reducing the number of shares available by only the number of shares issued. Shares will not be deemed to have been issued to the extent an award is settled in cash.

If an award expires or becomes unexercisable without having been exercised in full or, with respect to awards other than options or stock-settled SARs, is forfeited to or repurchased by the Company due to failure to vest, the unexercised, forfeited or repurchased shares which were subject thereto will become available for future grant again under the Proposed 2014 Equity Plan (unless the Proposed 2014 Equity Plan has terminated).  Shares tendered in payment of the exercise or purchase price of an award, or in satisfaction of tax withholding related to an award, will not be returned to the Proposed 2014 Equity Plan and will not become available for future distribution under the Proposed 2014 Equity Plan. 

Capitalization Adjustments

If, after the Effective Date, there is an equity restructuring (within the meaning of FASB ASC Topic 718) that causes the per share value of shares to change, such as any large and nonrecurring cash dividend, stock dividend, stock split, combination of shares, recapitalization, or other change in the capital structure of MPS, any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing), the administrator shall effect an equitable adjustment to: (i) the number and, if applicable, kind of shares that may be issued under the Proposed 2014 Equity Plan or pursuant to any type of award, (ii) the award limits established and approved by stockholders for purposes of Section 421 of the Code, (iii) the number and, if applicable, kind of shares subject to outstanding awards, (iv) as applicable, the exercise or purchase price of any then outstanding awards, and/or (v) any other award terms.

Limitation on Grants to Outside Directors

No non-employee director may be granted in respect of his or her service as a non-employee director, in the aggregate in any fiscal year, compensation for such service having an aggregate maximum value (measured at the date of grant as applicable, and calculating the value of any awards based on the grant date fair value for financial reporting purposes) in excess of $1,000,000.

Administration

The Proposed 2014 Equity Plan may be administered by the Board, different committees of the Board, and, as permitted by law, a committee of one or more officers, depending on the recipient of the award and type of award intended to be granted. The Compensation Committee generally serves as the administrator of the Proposed 2014 Equity Plan. No awards granted under the Proposed 2014 Equity Plan on or after the Effective Date will be designed or intended to be “performance-based compensation” for purposes of Section 162(m) of the Code. With respect to awards granted under the 2014 Equity Plan prior to the Effective Date that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code (the “Grandfathered Awards”), such Grandfathered Awards shall continue to be governed by the applicable provisions of the 2014 Equity Plan as in effect prior to the Effective Date of the Proposed 2014 Equity Plan. To be clear, stockholders are not being asked to approve the Proposed 2014 Equity Plan (or any of its provisions) for purposes of Section 162(m) of the Code or the performance-based exception.

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To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3; provided, however, that if it is later determined that such requirements were not satisfied, actions taken by the administrator shall be valid for all other purposes despite such failure to satisfy Rule 16b-3.

The administrator of the Proposed 2014 Equity Plan has broad discretion and power to administer and interpret the Proposed 2014 Equity Plan. Specifically, subject to the terms of the Proposed 2014 Equity Plan, the administrator has the authority to:

●

determine the fair market value of our shares of Common Stock;

●

select the participants eligible to receive awards and the types of awards to be granted to such participants;

●

determine the number of shares of Common Stock subject to awards and the value of performance units;

●

determine terms and conditions of awards and to approve form of award agreements, including, the exercise or purchase price, how and when awards can be exercised, the rights to receive dividends or dividend equivalents, any vesting or forfeiture restrictions, any acceleration or waiver of forfeiture provisions, and any restrictions or limitations on awards;

●

construe and interpret the terms of the Proposed 2014 Equity Plan and awards granted under the Proposed 2014 Equity Plan;

●

establish, amend and rescind rules and regulations relating to the Proposed 2014 Equity Plan;

●

modify or amend each award, including but not limited to the discretionary authority to extend the post-termination exercisability period of awards;

●

determine the manner in which participants can satisfy withholding tax obligations;

●

authorize any person to execute on behalf of MPS any instrument required to effect the grant of an award previously granted by the administrator;

●

defer or allow participants to defer the receipt of the payment of cash or the delivery of shares of Common Stock in connection with an award, and

●

make all other determinations deemed necessary or advisable for administering the Proposed 2014 Equity Plan.

Types of Awards

Awards under the Proposed 2014 Equity Plan may consist of options (nonqualified options and incentive stock options), SARs, restricted stock, restricted stock units, performance units, and dividend equivalent rights. The nature of each type of award is discussed below. Each award will be granted pursuant to an award agreement, the form and content of which will be determined by the administrator in its discretion, consistent with the provisions of the Proposed 2014 Equity Plan. The terms of award agreements for a particular type of award need not be uniform.

Stock Options. Two types of options may be granted under the Proposed 2014 Equity Plan: options intended to qualify as incentive stock options, under Section 422 of the Code, and nonqualified options, which are options that are not intended to qualify as incentive stock options. Incentive stock options are subject to additional requirements and, to the extent these requirements are satisfied (including but not limited to a $100,000 limitation for exercise in any calendar year), receive special tax treatment under U.S. federal tax laws. If all or a part of an option that is intended to be treated as an incentive stock option fails to satisfy these requirements, such option or part of the option will be treated as a nonqualified option. Both incentive stock options and nonqualified options provide the holder the right to acquire shares, by exercising the option, at a specified price over a specified period. Options are generally only exercisable after vesting conditions have been satisfied.

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SARs. A SAR is a right to receive a payment (in cash or shares) upon exercise of the award, where the payment is based on the increase in the fair market value of a share after the date of grant. Specifically, on the exercise of a SAR, the participant will receive an amount determined by multiplying the difference between the fair market value of a share on the date of exercise over the exercise price by the number of shares as to which the SAR is being exercised.

With respect to SARs that are granted in connection with a related stock option, or tandem SARs, the exercise of such tandem SARs will require forfeiture of the right to purchase an equal number of shares under the related stock option (and when a share is purchased under the related stock option, the tandem SAR will be canceled to the same extent). Affiliated SARs may be granted in connection with a related stock option and automatically will be deemed to be exercised at the same time that the related stock option is exercised. Freestanding SARs may be granted independently of any stock options.

Tandem SARs may be exercised for all or part of the shares of Common Stock subject to the related stock option upon the surrender of the right to exercise the equivalent portion of the related stock option and may only be exercised with respect to the shares for which its related stock option is then exercisable. With respect to a tandem SAR granted in connection with an incentive stock option: (1) the tandem SAR will expire no later than the expiration of the underlying incentive stock option; (2) the value of the payout with respect to the tandem SAR will be for no more than 100% of the difference between the exercise price of the underlying incentive stock option and the fair market value of the shares subject to the underlying incentive stock option at the time the tandem SAR is exercised; and (3) the tandem SAR will be exercisable only when the fair market value of the shares subject to the incentive stock option exceeds the exercise price of the incentive stock option. An Affiliated SAR will be deemed to be exercised upon the exercise of the related stock option. Freestanding SARs will be exercisable on such terms and conditions as the administrator, in its sole discretion, will determine.

Restricted Stock. The Proposed 2014 Equity Plan provides for the granting of awards of restricted stock. Restricted stock awards are shares of our common stock that are subject to forfeiture and transfer restrictions until applicable vesting conditions are satisfied. Vesting conditions may be based on service and/or satisfaction of performance goals.  The administrator may decide that a holder of restricted stock will have the right to receive all dividends and other distributions paid with respect to such shares, and shall condition such payment on the lapsing of the same forfeiture and transfer restrictions as the underlying shares.

Restricted Stock Units and Performance Units. The Proposed 2014 Equity Plan provides for the granting of restricted stock units and performance units, each of which are awards that will result in an issuance of shares or payment of cash if pre-established performance or other vesting conditions are satisfied. Each restricted stock unit has a value equal to one share of our common stock. Performance units have an initial dollar value established by the administrator on the grant date. Vesting conditions may be based on service and/or satisfaction of performance goals.

Dividend Equivalents.

In connection with our quarterly cash dividend program, all outstanding and unvested time and performance-based full value awards granted to employees, including the NEOs, have the right to receive dividend equivalents in order to maintain the economic alignment between the value of such awards and the value of a share of our Common Stock. The dividend equivalents are accumulated during the vesting periods of the shares underlying such awards and are paid in cash to employees only if and when the underlying shares vest. Dividend equivalents mayaccrued on the underlying shares are forfeited if the employees do not fulfill their service requirement during the vesting periods. Dividend equivalents paid to the NEOs in 2022 are included in “2022 Option Exercises and Stock Vested” below.

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Certifications of Achievement of Prior Performance-Based Awards

As previously disclosed in our proxy statement for the 2022 Annual Meeting of Stockholders, the Compensation Committee granted each NEO a PSU award in February 2021 (the “2021 PSUs”)  that could be earned based on MPS’s average two-year (2021 and 2022) revenue growth rate as measured against the average two-year revenue growth rate for the analog industry published by the SIA. The PSU award consisted of a target award, as well as a maximum award equal to 300% of the target grant. The actual results at the end of the two-year performance period on December 31, 2022, as approved by the Compensation Committee, were as follows:

MPS's Average Two-Year Revenue
Growth Rate Exceeds the Analog Industry by:									Percentage of
Target			Maximum		Actual Achievement				PSU Earn-Out
5%			15% and above			18.8%				300%

The following table summarizes the actual shares credited under the 2021 PSUs for the NEOs:  

Name		Credited (#)
Michael Hsing			112,839
Bernie Blegen			22,857
Deming Xiao			34,740
Maurice Sciammas			34,740
Saria Tseng			34,740

50% of the awards vested in respectFebruary 2023, with the remaining 50% to vest quarterly over the following two years through February 2025, for a total vesting period of sharesfour years, subject to restricted stock, restricted stock units or performance units, as determined by the administrator and as containedcontinued employment through such dates.

Broad-Based Benefits

Our NEOs are eligible to participate in the applicable award agreement or a separate award agreement. Dividend equivalents will be subject toour broad-based employee benefit programs on the same terms offered to our employees. These benefit programs include the employee stock purchase plan, medical, dental and conditions applicablevision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, and health and dependent care flexible spending accounts. We do not provide pension arrangements or post-retirement health coverage for our NEOs or other employees. In addition, we do not provide matching contributions to the underlying restricted stock, restricted stock units401(k) plan or performance units to which they relate, including vesting, performance conditions, forfeiture, and restrictions on transferthe deferred compensation plan for our NEOs or alienation.other employees.

 

Performance GoalsSeverance and Change in Control Arrangements

We offer severance benefits to our NEOs, including severance in connection with a change in control of MPS. In general, severance does not exceed six to twelve months of base salary, target bonus and other benefits, and is conditioned on a release of claims and compliance with ongoing obligations. We believe these modest benefits balance the costs to MPS with the retention benefits that are commonly understood to come from offering severance and change in control benefits. For all change in control arrangements, the NEO is entitled to benefits if his or her employment is terminated without cause or if he or she leaves for good reason within one year following a change in control. This approach is commonly referred to as a “double-trigger” arrangement and is favored by many institutional investors and their advisors. We believe the size and conditions to receipt of these severance benefits are consistent with market practices. These arrangements are discussed in more detail in “Named Executive Officer Compensation — Potential Payments Upon Termination or Termination Upon Change in Control.”

Stock Ownership Guidelines

We have stock ownership guidelines for our NEOs and directors. These guidelines reinforce the importance of aligning the interests of our NEOs and directors with the interests of our stockholders.

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For the NEOs, the guidelines are determined as a multiple of each NEO’s base salary, and then converted to a fixed number of shares. Currently, the multiple for our CEO is five times his base salary, while the multiples for other NEOs are two times each NEO’s base salary.  

Equity interests that count toward the satisfaction of the ownership guideline include shares owned directly or indirectly by the executive, including restricted or unrestricted shares or stock units (excluding restricted shares or stock units that remain subject to achievement of performance goals), and any shares owned in our savings plans, such as our 401(k) plan, or acquired through the employee stock purchase plan. Executives have five years from the date of adoption of the guidelines or their appointment as an executive officer, as applicable, to attain these ownership levels. As of December 31, 2022, all of the NEOs met the stock ownership guidelines.

For the non-employee directors, the stock ownership guidelines are determined as a multiple of the annual retainer paid to the non-employee director and then converted to a fixed number of shares. Currently, the required level for our non-employee directors is three times each director’s annual retainer. Directors have five years from the date of adoption of the guidelines or their initial appointment, as applicable, to attain these ownership levels. As of December 31, 2022, all of the directors met the stock ownership guidelines.

Policy Regarding Clawback of Incentive Compensation

We have a Compensation Recoupment Policy, which requires the Board to recoup any excess performance-based cash compensation paid to key members of our executive team, including the NEOs, if the financial results on which the incentive compensation awards were based are restated due to fraud or intentional misconduct by the executive, if the Board determines, in its sole discretion, that it is in the best interests of us and our stockholders for the executive to repay or forfeit all or any portion of the subject performance-based cash compensation. We expect in 2023 to review and revise the Compensation Recoupment Policy in connection with final rules regarding recovery of erroneously awarded compensation as promulgated by the SEC and NASDAQ in 2022 and 2023, respectively.

Anti-Hedging and Monetization, Short Sales and Other Transactions

We prohibit our directors, officers (including our NEOs), and other employees from engaging in hedging or monetization transactions with respect to our stock that they obtained through our plans or otherwise, including transactions involving the use of financial instruments such as prepaid variable forwards, equity swaps, collars, forward sale contracts and exchange funds, without prior approval by the Chief Compliance Officer.  We also prohibit our directors and officers (including our NEOs) from engaging in any short sales of our stock. In addition, our directors and officers are prohibited at all times from holding our stock in a margin account and from pledging our stock as collateral.

Tax and Accounting Impacts of Equity Grants

Section 162(m) of the Internal Revenue Code disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for “covered employees,” which consist of all of the NEOs, including the Chief Financial Officer.

Our Compensation Committee is aware of current rules governing the taxation and accounting for cash and equity compensation as applicable to public companies. Our Compensation Committee believes that, in establishing the cash and equity incentive compensation plans and arrangements for our NEOs, the potential deductibility of the compensation payable under those plans and arrangements should be only one of a number of relevant factors taken into consideration, and not the sole governing factor. The Compensation Committee believes it is important to maintain cash and equity incentive compensation at the requisite level to attract and retain the individuals essential to our financial success, even if all or part of that compensation may not be deductible by reason of the Section 162(m) limitation.

Compensation Committee Report

 

The administrator,Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with our management. Based upon such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in its discretion, shall set performance objectivesthe Proxy Statement for the Annual Meeting and incorporated by reference into our Annual Report on Form 10-K for the year ended December 31, 2022.

Members of the Compensation Committee: Jeff Zhou, Chairman Herbert Chang Eugen Elmiger

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Compensation Committee Interlocks and Insider Participation

No Compensation Committee member was at any time during 2022, or at any other vesting criteria which, dependingtime, an officer or employee of us or any of our subsidiaries.  No NEO of MPS serves on the board or compensation committee of any entity that has one or more executive officers serving on the Board or Compensation Committee. 

Compensation Risk Management

In 2022, our management, including members from our internal legal, accounting, finance and human resources departments, undertook a subjective review of our compensation policies and practices that applied to all of our employees, including the following: annual base salaries and bonuses, equity incentive awards under our equity incentive plans and the 2004 ESPP. This review was designed to review, consider and analyze the extent to which, theyif any, our compensation policies and practices might create risks for us, and this review also focused on variable and incentive compensation elements, as well as policies and practices that could mitigate or balance any such incentives. After conducting this review, management determined that our compensation policies and practices for our employees do not create any risks that are met, will determine the number or value of performance units that will be paid outreasonably likely to the participants. Performance objectives may also apply to restricted stock or restricted stock unit awards in the administrator’s discretion. These performance objectives may include any one or morehave a material adverse effect on us. The results of the following performance goals, either individually or in any combination, applied either to MPS as a whole or to a business group, subsidiary, or other division, either individually or in any combination,review and measured on an absolute basis or relative to a pre-established target, to previous years’ or any other period’s results, or to a designated comparison group, in each case as specified by the administrator: (i) revenue, growth in revenue or product revenue; (ii) sales or bookings targets, including product or product family sales or bookings targets; (iii) billings; (iv) market share; (v) stock price performance, including but not limited to growth in the market price of stock, total stockholder return,management’s determination were reviewed and return on stockholder equity; (vi) margin, including gross margin, net  margin or operating margin; (vii) income, including but not limited to net income, operating income, and operating income after taxes; (viii) profit, including but not limited to operating profit, net operating profit or pre-tax profit; (ix) earnings, including but not limited to earnings per share, net earnings, earnings before interest, taxes and/or  depreciation and/or amortization; (x) income, before or after taxes (including net income); (xi) return on assets, capital, operating revenue and/or investments; (xii) expense control and/or cost reductions; (xiii) capital expenditures; (xiv) economic value added; (xv) cash flow, including but not limited to operating cash flow, cash flow per share and cash management; (xvi) improvement in or attainment of working capital levels; (xvii) debt reduction or debt levels; (xviii) contract win, renewal or extension, or design win; (xix) delivery and/or design schedule; (xx) milestones in new generation of products or technologies; (xxi) completion of or milestones associated with mergers, acquisitions, strategic investments, restructurings, reorganizations (including entry into term sheets, signing of definitive agreements, closing transactions, funding of investments, and post-closing integration milestones); (xxii) litigation, including litigation outcomes, milestones or management; (xxiii) workforce diversity; (xxiv) customer satisfaction; and (xv) such other measures of performance selectedindependently considered by the Compensation Committee, which concurred with management’s assessment.

2022 Summary Compensation Table

The following table sets forth the compensation for our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers serving on December 31, 2022, which officers together constitute our NEOs:

Name and Principal Position		Year		Salary ($)				Bonus ($)				Stock Awards ($)(1)(2)				Non-Equity Incentive Plan Compensation ($)(3)				All Other Compensation ($)(4)				Total ($)
Michael Hsing		2022			751,846				-				13,865,090				6,048,000				-				20,664,936
Chief Executive Officer, President		2021			711,923				-				13,782,908				5,760,000				-				20,254,831
and Chairman of the Board		2020			650,000				-				12,395,153				1,625,000				-				14,670,153
Bernie Blegen		2022			365,481				-				3,626,424				2,940,000				-				6,931,905
Chief Financial Officer		2021			342,500				-				2,791,906				2,800,000				-				5,934,406
		2020			320,000				-				2,311,155				640,000				-				3,271,155
Deming Xiao		2022			396,808				-				5,539,193				3,192,000				-				9,128,001
President of Asia Operations		2021			375,385				-				4,243,375				3,040,000				-				7,658,760
		2020			340,000				-				3,482,786				680,000				-				4,502,786
Maurice Sciammas		2022			396,808				-				5,539,193				3,192,000				-				9,128,001
Senior Vice President,		2021			375,385				-				4,243,375				3,040,000				-				7,658,760
Worldwide Sales and Marketing		2020			340,000				-				3,482,786				680,000				-				4,502,786
Saria Tseng		2022			396,808				-				5,539,193				3,192,000				-				9,128,001
Vice President, Strategic Corporate		2021			375,385				-				4,243,375				3,040,000				-				7,658,760
Development and General Counsel		2020			340,000				-				3,482,786				680,000				-				4,502,786

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(1)

For more information regarding the 2022 stock awards, refer to “Named Executive Officer Compensation — Compensation Discussion and Analysis.” The amounts reflect the aggregate grant date fair value of the February 2022 PSUs, plus the incremental fair value on the modification date, if any, when the February 2022 PSUs were cancelled and replaced with the October 2022 MSUs, computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The calculation of the grant date fair value and the modification date fair value was performed by a third-party valuation firm using a Monte Carlo simulation model. Assumptions used in the calculation are included in Note 1 and Note 7 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

(2)

Assuming the highest level of performance for the October 2022 MSUs, the aggregate grant date fair value would be as follows: (a) $69,325,448 for Mr. Hsing, (b) $15,727,360 for Mr. Blegen, (c) $21,344,142 for Mr. Xiao, (d) $21,344,142 for Mr. Sciammas, and (e) $21,344,142 for Ms. Tseng. There is no guarantee that the highest level of performance will be achieved by the NEOs.

(3)	The 2022 amounts reflect the short-term cash incentive compensation earned by the NEOs under our non-equity incentive plan, as described under “Named Executive Officer Compensation — Compensation Discussion and Analysis.”

(4)	We did not provide other benefits or compensation for the NEOs that is required to be disclosed under Item 402(c)(2)(ix) of Regulation S-K.

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Grants of Plan-Based Awards for the Year Ended December 31, 2022

						Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)												Estimated Future Payouts Under Equity Incentive Plan Awards (2)												Grant Date Fair Value of Stock and Option
Name		Grant Date				Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)				Awards ($)(3)
Michael Hsing			-				-				1,512,000				6,048,000				-				-				-				-
		2/3/2022					-				-				-				-				37,472				187,360				13,865,090
		10/25/2022					-				-				-				-				60,584				302,920				-	(4)
Bernie Blegen			-				-				735,000				2,940,000				-				-				-				-
		2/3/2022					-				-				-				-				8,501				42,505				3,145,472
		10/25/2022					-				-				-				-				17,538				87,690				480,952
Deming Xiao			-				-				798,000				3,192,000				-				-				-				-
		2/3/2022					-				-				-				-				11,537				57,685				4,268,829
		10/25/2022					-				-				-				-				27,104				135,520				1,270,364
Maurice Sciammas			-				-				798,000				3,192,000				-				-				-				-
		2/3/2022					-				-				-				-				11,537				57,685				4,268,829
		10/25/2022					-				-				-				-				27,104				135,520				1,270,364
Saria Tseng			-				-				798,000				3,192,000				-				-				-				-
		2/3/2022					-				-				-				-				11,537				57,685				4,268,829
		10/25/2022					-				-				-				-				27,104				135,520				1,270,364

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(1)

The amounts reflect the threshold, target and maximum awards under the short-term cash incentive compensation program, which is described in detail in “NamedExecutive Officer Compensation — Compensation Discussion and Analysis.”

(2)

As described in detail in “Named Executive Officer Compensation — Compensation Discussion and Analysis,” the Compensation Committee initially granted the February 2022 PSUs, but such awards were subsequently cancelled and replaced with the October 2022 MSUs. The amounts reported in the second row of this table for each NEO reflect the threshold, target and maximum number of the cancelled February 2022 PSUs that could have been earned under the long-term equity incentive compensation program. The amounts reported in the third row of this table for each NEO reflect the threshold, target and maximum number of the October 2022 MSUs that now can be earned under the long-term equity incentive compensation program.

(3)

The amounts reported in the second row of this table for each NEO reflect the aggregate grant date fair value of the February 2022 PSUs initially granted by the Compensation Committee, computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The February 2022 PSUs were subsequently cancelled and replaced with the October 2022 MSUs. Due to the modification of the February 2022 PSUs into the October 2022 MSUs, the amounts reported in the third row of this table for each NEO reflect the incremental fair value of the October 2022 MSUs, if any, on the modification date of the awards, computed in accordance with ASC Topic 718, excluding the impact of estimated forfeitures. The amounts for both rows reflect the target level of performance. The initial grant date fair value and the modification date fair value were calculated using a Monte Carlo simulation model. Assumptions used in the calculation are included in Note 1 and Note 7 to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

(4)

For Mr. Hsing, there was no incremental fair value of the October 2022 MSUs on the modification date because the Compensation Committee decreased the grant value for his award, compared with the grant value for his February 2022 PSU award.  Refer to “NamedExecutive Officer Compensation — Compensation Discussion and Analysis” for further discussion.

Narrative Disclosure to 2022 Summary Compensation Table and Grants of Plan-Based Awards for the Year Ended December 31, 2022

A discussion of 2022 salaries, incentive plans and awards is set forth under “Named Executive Officer Compensation — Compensation Discussion and Analysis,” including a discussion of the material terms and conditions of the short-term cash incentive compensation and the long-term equity compensation. For information regarding our employment agreements with the NEOs, see “Named Executive Officer Compensation – Potential Payments Upon Termination or Termination Upon Change in its discretion.Control – Employment Agreements and Change in Control Arrangements.” 

Equity Incentive Grant Policies

We maintain the Monolithic Power Systems Equity Award Grant Policy, which is designed to work in concert with: (1) the administrative provisions of our Amended and Restated 2014 Equity Incentive Plan (the “Amended 2014 Equity Plan”) and such other plans as we may adopt from time to time (which we refer to collectively as the Plans), (2) the requirements of the Delaware General Corporation Law, (3) the corporate governance requirements of NASDAQ, (4) applicable rules and regulations of the SEC, including those relating to Section 16 of the 1934 Act, and (5) relevant sections of the Internal Revenue Code. Grants to our NEOs are made pursuant to this policy, must be approved by the Compensation Committee and will only be granted at specific times during the year, as described in further detail below.

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Plan and Corporate Authorization

Under the Plans, the authorization to administer the grant of equity incentive awards is conferred upon the Board or any committee of the Board as properly constituted under applicable laws. The Board has delegated to the Compensation Committee the authority to serve as administrator of the Plans (including the authority to grant awards under the Plans), and has approved a charter outlining the responsibilities of this committee which also includes this express authority. The delegation of authority to the Compensation Committee is not exclusive; the Board retains the right to formally approve award grants as well. The Compensation Committee may form and delegate authority to subcommittees when appropriate.

In addition, the Board has delegated limited authority for grants of equity awards under the Plans to new employees and consultants to a committee consisting of the Chief Executive Officer (which committee we refer to as the Equity Award Committee). The authority does not extend to grants to the NEOs. The delegation of authority to the Equity Award Committee is not exclusive; the Board and Compensation Committee retain the right to formally approve award grants as well.

Equity Grants to New Hires

Grants to newly hired employees and consultants (other than Executive Officers as defined below) will generally be made on the date of the next regularly scheduled Board meeting subsequent to the employees’ start date. Management submits the employee equity award recommendations to the Compensation Committee and, if such equity awards are approved by the Compensation Committee, such equity awards will be granted effective as of the date of a meeting approving such awards as evidenced by written minutes of such meeting or the date of the last verification signature or electronic verification over email in the event of a written consent in lieu of the meeting.

New hire grants made to “Executive Officers” (currently defined as the Chief Executive Officer, Chief Financial Officer, Chief Legal Officer, Chief Operations Officer, President, employees who are members of the Board and any other employee determined by the Board to be an Executive Officer) generally will only be granted on the date of the next regularly scheduled Board meeting subsequent to the Executive Officer’s start date and following the recommendation of such grant by the Compensation Committee.

Equity Grants to Existing Employees or Incumbent Members of the Board

Generally, annual grants of equity awards shall be made to key performers at a regularly scheduled Board meeting. Equity awards to non-employee members of the Board shall be made by the Board or pursuant to any automatic grant provisions in the Plans.

Outstanding Equity Awards at 2022 Year-End

The following table sets forth, as to the NEOs, certain information regarding their outstanding stock awards as of December 31, 2022. There were no outstanding option awards held by the NEOs as of December 31, 2022.

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					Stock Awards
Name		Grant Date			Number of Shares or Units of Stock That Have Not Vested (#)				Market Value of Shares or Units of Stock That Have Not Vested ($)(1)				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1)
Michael Hsing		12/14/2013	(2)			110,000				40,283,100				-				-
		10/25/2018	(3)			108,000				39,056,040				-				-
		2/11/2019	(4)			14,526				4,881,608				-				-
		2/4/2020	(5)			47,916				17,193,215				-				-
		7/21/2020	(6)			96,500				34,663,765				-				-
		2/2/2021	(7)			112,839				40,104,109				28,210				10,127,672
		10/25/2022	(8)			-				-				60,584				21,468,546
Bernie Blegen		12/14/2013	(2)			7,200				2,636,712				-				-
		10/25/2018	(3)			48,000				17,358,240				-				-
		2/11/2019	(4)			2,574				865,036				-				-
		2/4/2020	(5)			8,493				3,047,456				-				-
		7/21/2020	(6)			20,105				7,221,917				-				-
		2/2/2021	(7)			22,857				8,123,606				5,714				2,051,383
		10/25/2022	(8)			-				-				17,538				6,214,766
Deming Xiao		12/14/2013	(2)			43,200				15,820,272				-				-
		10/25/2018	(3)			48,000				17,358,240				-				-
		2/11/2019	(4)			3,759				1,263,267				-				-
		2/4/2020	(5)			12,405				4,451,162				-				-
		7/21/2020	(6)			32,165				11,553,990				-				-
		2/2/2021	(7)			34,740				12,346,943				8,685				3,118,002
		10/25/2022	(8)			-				-				27,104				9,604,573
Maurice Sciammas		12/14/2013	(2)			43,200				15,820,272				-				-
		10/25/2018	(3)			48,000				17,358,240				-				-
		2/11/2019	(4)			3,759				1,263,267				-				-
		2/4/2020	(5)			12,405				4,451,162				-				-
		7/21/2020	(6)			32,165				11,553,990				-				-
		2/2/2021	(7)			34,740				12,346,943				8,685				3,118,002
		10/25/2022	(8)			-				-				27,104				9,604,573
Saria Tseng		12/14/2013	(2)			43,200				15,820,272				-				-
		10/25/2018	(3)			48,000				17,358,240				-				-
		2/11/2019	(4)			3,759				1,263,267				-				-
		2/4/2020	(5)			12,405				4,451,162				-				-
		7/21/2020	(6)			32,165				11,553,990				-				-
		2/2/2021	(7)			34,740				12,346,943				8,685				3,118,002
		10/25/2022	(8)			-				-				27,104				9,604,573

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(1)	The market value of the unvested stock awards is based on the closing market price of our Common Stock of $353.61 as of December 31, 2022, and includes any outstanding dividend equivalents accumulated on such awards.

(2)	Reflects MSUs granted in December 2013. The performance goals with respect to the MSUs were achieved as of December 31, 2015. These MSUs vest quarterly over five years from January 1, 2019 to December 31, 2023, for a total vesting period of ten years, subject to continued employment.
(3)	Reflects MSUs granted in October 2018. The performance goals with respect to the MSUs were achieved as of December 31, 2019. These MSUs will fully vest on January 1, 2024, for a total vesting period of five years and two months, subject to continued employment. In addition, the MSUs contain a post-vesting sales restriction for up to an additional two years.

(4)	Reflects PSUs granted in February 2019. The performance goals with respect to the PSUs were achieved as of December 31, 2020. 50% of these PSUs vested in February 2021, and the remaining 50% vest quarterly over the following two years through February 2023, for a total vesting period of four years, subject to continued employment.
(5)	Reflects PSUs granted in February 2020. The performance goals with respect to these PSUs were achieved as of December 31, 2021. 50% of these PSUs vested in February 2022, and the remaining 50% vest quarterly over the following two years through February 2024, for a total vesting period of four years, subject to continued employment.
(6)	Reflects MPSUs granted in July 2020. The performance goals with respect to the MPSUs were achieved as of December 31, 2020. 75% of the MPSUs will vest in July 2023 and 25% of the MPSUs will vest in July 2024, for a total vesting period of four years, subject to continued employment.  In addition, the MPSUs contain a post-vesting sales restriction for one year.
(7)	Reflects PSUs granted in February 2021. The revenue portion of the performance goals were achieved as of December 31, 2022. 50% of these PSUs will vest in February 2023, and the remaining 50% will vest quarterly over the following two years through February 2025, for a total vesting period of four years, subject to continued employment. For the environmental goals, upon achievement of the performance goals at any time through December 31, 2023, these PSUs will fully vest immediately, for a total vesting period of up to three years, subject to continued employment. In addition, the PSUs subject to the environmental goals contain a post-vesting sales restriction for one year.
(8)	Reflects MSUs granted in October 2022 at the target level of performance. Upon achievement of the pre-determined stock price targets and the relative TSR performance during the performance period from October 25, 2022 to October 24, 2025, the shares will fully vest on October 24, 2025, for a total vesting period of three years, subject to continued employment. See “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion.

2022 Option Exercises and Stock Vested

The following table sets forth certain information on the stock awards vested for our NEOs in 2022. There were no option exercises in 2022.

		Stock Awards
Name		Number of Shares Acquired on Vesting (#)				Value Realized on Vesting ($)(1)
Michael Hsing			301,002				121,397,751
Bernie Blegen			40,842				16,421,555
Deming Xiao			93,117				37,592,669
Maurice Sciammas			93,117				37,592,669
Saria Tseng			93,117				37,592,669

The realized value for each NEO included a significant amount related to the MSUs granted in December 2013 that have a total vesting period of ten years: Mr. Hsing, $44,814,825; Mr. Blegen, $2,933,334; Mr. Xiao, $17,600,004; Mr. Sciammas, $17,600,004; and Ms. Tseng, $17,600,004. The grant date stock price was $31.73 for these MSUs, and since the grant date, our stock price has increased over 1,000% through the end of 2022.

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(1)	Value realized on vesting is equal to (a) the closing price of our Common Stock on the vesting date less any purchase price, multiplied by the number of shares that vested, plus (b) accumulated dividend equivalents attributable to such shares.

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2022 Non-Qualified Deferred Compensation Plan

We have a non-qualified, unfunded deferred compensation plan, which allows key employees, including our NEOs, to defer the receipt of, and taxation on, cash compensation. Plan participants may defer up to 70% of their salary and up to 90% of their non-equity incentive plan compensation. Plan participants may elect to receive the deferred funds either in a lump sum or in annual installments of up to ten years, and to begin receiving distributions either at retirement or at a future date not less than 24 months from the election date. Investment returns on deferred balances are linked to the performance of the investment choices available in the plan. We do not make contributions to the plan or guarantee returns on the investments. The following table summarizes the non-qualified deferred compensation activity for our NEOs in 2022:

Name		Executive Contributions in Last FY ($)(1)				Aggregate Earnings in Last FY ($)(2)				Aggregate Balance at Last FYE ($)(3)
Michael Hsing			5,425,175				(317,913	)			17,016,499
Bernie Blegen			-				723				1,380,529
Deming Xiao			2,863,288				48,646				8,827,030
Maurice Sciammas			2,863,288				(444,549	)			6,137,467
Saria Tseng			2,863,288				(1,407,262	)			9,456,789

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(1)	All executive contributions are reported as salary or non-equity incentive plan compensation in “Named Executive Officer Compensation — 2022 Summary Compensation Table.”

(2)

Represents the net amounts credited to the NEOs’ accounts as a result of the performance of their investment choices. The amounts are not included in “Named Executive Officer Compensation — 2022 Summary Compensation Table” because plan earnings are not “preferential or above-market” under the SEC rules.

(3)	Includes the following cumulative amounts reported as compensation for the NEOs in the Summary Compensation Tables for previous years: Mr. Hsing, $9,237,379; Mr. Blegen, $786,811; Mr. Xiao, $4,286,146; Mr. Sciammas, $2,565,913; and Ms. Tseng, $5,073,221.

Potential Payments Upon Termination or Termination Upon Change in Control

Employment Agreements and Change in Control Arrangements

We have entered into employment agreements with each of our NEOs. The employment agreements establish the initial titles, salaries, and reporting responsibilities for the NEOs. The employment agreements also provide that each NEO may participate in our equity, bonus and benefits programs. Each of the employment agreements with Mr. Hsing, Mr. Xiao and Mr. Sciammas was amended in December 2008 to bring the agreements into compliance with Section 409A of the Internal Revenue Code. The employment agreement with Mr. Xiao was subsequently amended in March 2011 to grant Mr. Xiao an equity interest in Hue Ming LLC, a Delaware limited liability company formed by us, in connection with an ownership transfer of a corporate apartment in Chengdu, China, to Mr. Xiao. The equity interest became fully vested in March 2016 and Hue Ming LLC was dissolved.

 

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The Compensation Committee may adjust the evaluation of the achievement of the performance goals as follows: (a) to include or exclude restructuring and/or other nonrecurring charges; (b) to include or exclude exchange rate effects, as applicable, for non-U.S. dollar denominated performance goals; (c) to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board orIn addition to the International Financial Reporting Standard (IFRS); (d) to includeterms described above, the employment agreements also provide certain severance benefits upon termination without cause or exclude the effects of any statutory adjustments to corporate tax rates; (e) to include or exclude the effects of any “extraordinary items” as determined under GAAP; (f) to include or exclude the effect of payment of bonuses under the master cash plan or any other bonus plans;  (g) to include or exclude the effect of stock based compensation and/or deferred compensation; (h) to include or exclude any unusual, non-recurring gain or loss or other extraordinary item; (i) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (j) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (k) to include or exclude the effects of divestitures, acquisitions or joint ventures; (l) to include or exclude the effects of discontinued operations that do not qualify asfor good reason, including within one year following a segment of a business unit under GAAP; (m) to assume that any business divested by us achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (n) to include or exclude the effect of any change in control (a “Change in Control with Termination”), as described in the outstanding shares of Common Stock of MPS by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporatefollowing table. We have followed general market practices for senior executives in allowing limited change or any distributions to common shareholders including cash dividends; (o) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (p) to reflect any partial or complete corporate liquidation; (q) to reflect shippable backlog; and (R) to include or exclude the amortization of purchased intangibles, technology licensecontrol arrangements and incomplete technology.for selected officers.

 

Option Exercise Prices and SAR Price

NEOs	Agreement and Date		Termination without Cause or Departure for Good Reason		Change in Control with Termination
Michael Hsing	Employment Agreement dated March 10, 2008, as amended December 16, 2008.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.
		●	Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for 12 months following the termination of employment.	●	Acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Bernie Blegen	Employment Agreement dated July 19, 2016.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.
		●	Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	●	Acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Deming Xiao	Employment Agreement dated March 10, 2008, as amended December 16, 2008 and March 3, 2011.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.
		●	Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	●	Acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Maurice Sciammas	Employment Agreement dated March 10, 2008, as amended December 16, 2008.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.
		●	Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	●	Acceleration of vesting of 100% of the executive’s unvested equity grants.(1)
Saria Tseng	Employment Agreement dated December 16, 2008, as amended February 9, 2010.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for six months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.	●	Base salary, target annual bonus and COBRA premiums for group-health plan benefits for a period of 12 months, payable in installments in accordance with our standard payroll practices as long as the executive is not employed by another company.
		●	Acceleration of vesting of equity grants equal to the number of shares that would have vested had the executive remained an employee for six months following the termination of employment.	●	Acceleration of vesting of 100% of the executive’s unvested equity grants.(1)

 

Except as permitted under the Code in connection with certain corporate transactions, the exercise price for shares covered by an option or SAR may not be less than 100% of the fair market value of such shares on the date of grant. If an incentive stock option is granted to a 10% stockholder of MPS or its subsidiaries (measured by ownership of voting power), the exercise price of the incentive stock option shall not be less than 110% of the fair market value of such shares on the date of grant.

Other Award Terms

The administrator determines when and under what conditions awards will be granted, become vested and/or become exercisable. The conditions may be based on continued service, satisfaction of performance-related goals or a combination of service and performance.

The administrator will determine the method of satisfying any exercise or purchase price and any tax obligations.  Such payments may be made in cash (including electronic wire transfer) or by check, or, subject to the approval of the administrator and subject to applicable law, by the delivery of shares of our common stock already owned by the participant, through a “cashless” or a “broker-assisted” exercise involving the immediate sale or pledge of shares with a value sufficient to pay the exercise or purchase price, by net exercise, or by any other method specified by the administrator and permitted by applicable law.

Maximum Term of Awards

No award granted under the Proposed 2014 Equity Plan will have a term of more than 10 years. Options intended to qualify as incentive stock options that are granted to 10% stockholders of MPS (measured by ownership of voting power) shall expire not later than five years from the date of grant.

No Repricings

Except in connection with an anti-dilution adjustment under the Proposed 2014 Equity Plan, we may not, without obtaining stockholder approval: (a) amend the terms of outstanding options or SARs to reduce the exercise price of such outstanding options or SARs; (b) cancel outstanding options or SARs in exchange for options or SARs with an exercise price that is less than the exercise price of the original options or SARs; or (c) cancel outstanding options or SARs with an exercise price above the current stock price in exchange for cash or other securities.

Termination of Service

The treatment of each award on the termination of service shall be determined by the administrator in its discretion and shall be set forth in the applicable award agreement. If a participant ceases to provide services to us, the participant’s options and SARs that were vested and exercisable will generally remain exercisable for a period of three months (12 months in the case of death or disability). The administrator may provide that awards will expire and revert to the Proposed 2014 Equity Plan immediately on a termination of service for cause.

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(1)

With respect to the PSUs that have not been earned because the performance period is still in progress, a pro-rata portion of such awards shall vest to the extent the applicable performance levels are achieved through the date of the change in control, in accordance with the individual grant agreements. With respect to the MSUs that have not been earned because the performance period is still in progress, such awards shall vest if the per-share price paid in the change in control is greater than the price targets. In addition, the market condition related to the relative TSR performance will be deemed satisfied, in accordance with the individual grant agreements.

 

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Certain Corporate TransactionsEach of the employment agreements with our NEOs also contains a provision whereby during the period of employment and thereafter, the executive shall not, without the prior written consent of us, disclose or use any confidential information or proprietary data other than for our interest. These employment agreements also contain a covenant not to solicit, beginning with the date of the executive’s termination and until one year thereafter.  

 

The Proposed 2014 Equity Plan provides that in the event of aA “change in control” of MPS means a merger or consolidation after which our stockholders do not hold a majority of our outstanding voting securities, any transaction involving the successor corporation or its parent or subsidiary will assume or substitute an equivalent awardtransfer of greater than 50% of our voting power (unless otherwise provided for each outstanding award. If there is no assumption or substitution of outstanding awards, the outstanding awards will immediately vest and, as applicable, become exercisable, all service-based restrictions on restricted stock and other awards will lapse, and all performance goals or other vesting requirements for performance-based awards will be deemed achieved at maximum levels. With respect to awards that are assumed or substituted for, in the event the service of an outside director is terminated on or following the date of the assumption or substitution, other than pursuant to a voluntary resignation, his or her awards will fully vest and become immediately exercisable, all service-based restrictions on restricted stock and other awards will lapse, and all performance goals or other vesting requirements for performance-based awards will be deemed achieved at maximum levels. The administrator may also provide for one or more alternatives to this treatment in an award agreement.

Unless otherwise provided in an award agreement, a “change in control” of MPS generally means the occurrence of one of the following events (subject in each case to certain exceptions described in the Proposed 2014 Equity Plan): (1) the purchase by a person or a group of our stock that gives them ownership of 50% or more of the total voting power of our stock; (2) the consummation of a sale of disposition by MPS of all or substantially all of MPS’s assets; (3)agreement), a change in the composition of the Board occurring within a two-year12-month period, as a result of which fewerless than a majority of the directors are incumbent directors who were either directors(as such term is defined in the employment agreements), or a sale of all or substantially all our assets. “Cause” generally means the NEO’s failure to perform the duties or responsibilities of his or her employment, the NEO personally engaging in illegal conduct that is detrimental to us, the NEO being convicted of or pleading nolo contendere to a felony or other crime involving moral turpitude, or the NEO committing a material act of dishonesty, fraud or misappropriation of property. “Good Reason” generally means the NEO’s termination of employment following the expiration of an applicable cure period (as designated in each employment agreement) following the occurrence of: a material reduction in compensation (except where a substantially equivalent reduction is applied to all our officers), a material, adverse reduction in the NEO’s authority, responsibilities or duties, or a material change in the location at which the NEO performs services.

Estimated Payments Upon Termination or Change in Control with Termination

The following table sets forth the estimated payments required to be made to each NEO in connection with the termination of his or her employment upon specified events, assuming a stock price of $353.61 per share, the closing price as of December 30, 2022. The estimated amounts shown also assume that the termination was effective dateas of the Proposed 2014 Equity Plan (the “Incumbent Directors”), or who are elected, or nominated for election,December 30, 2022, and include estimates of severance benefits which would be paid to the Board with the affirmative votes of at least a majority of the Incumbent Directorsexecutives upon their termination. The actual amounts payable to each NEO can only be determined at the time of such election or nomination; or (4) the consummation of a merger or consolidationtermination of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of MPS or such surviving entity or its parent outstanding immediately after such merger or consolidation.

Rights as a Stockholderexecutive’s employment.

 

		Termination without Cause or Departure for Good Reason															Change in Control with Termination
Name		Base Salary and Target Bonus ($)				Acceleration of Vesting of Equity Awards ($)				Other ($)			Total Compensation ($)				Base Salary and Target Bonus ($)				Acceleration of Vesting of Equity Awards ($)				Other ($)				Total Compensation ($)
Michael Hsing			2,268,000				110,177,181			27,661				112,472,842				2,268,000				172,755,679				27,661				175,051,340
Bernie Blegen			551,250				7,853,638			9,040				8,413,928				1,102,500				38,547,247				18,080				39,667,827
Deming Xiao			598,500				17,519,020			12,151				18,129,671				1,197,000				61,510,491				24,302				62,731,793
Maurice Sciammas			598,500				17,519,020			19,632				18,137,152				1,197,000				61,510,491				39,264				62,746,755
Saria Tseng			598,500				17,519,020			19,632				18,137,152				1,197,000				61,510,491				39,264				62,746,755

The holder of an option, SAR, restricted stock unit, performance unit and dividend equivalent right

In the event the NEOs resign without good reason or we terminate their employment for cause, we will have no rightsobligation to pay or provide any compensation or benefits as a stockholder with respectresult of the employment agreements between us and the NEOs. In the event of the NEOs’ death or disability, except as required by applicable law, we will have no obligation to shares of our Common Stock covered bypay or provide any compensation or benefits under the award untilemployment agreements between us and the date such holder becomes a holder of record of such shares. The recipient of restricted stock will generally have all the rights of a stockholder with respect to the shares of our Common Stock issued pursuant to such award, including the right to vote such shares, but any dividends and distributions with respect to such shares will generally be subject to the same vesting restrictions, if any, as the underlying shares.NEOs.

 

Transferability of Options, SARs and Other AwardsCEO Pay Ratio

 

UnlessFor 2022, our CEO pay ratio was determined otherwise by the administrator, an award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the participant, only by the participant. If the administrator makes an award transferable, such award will contain such additional terms and conditions as the administrator deems appropriate.follows:

 

Income Tax Matters

The following discussion of federal income tax consequences does not purport to be a complete analysis of all of the potential tax effects of the Proposed 2014 Equity Plan. It is based upon laws, regulations, rulings and decisions now in effect, all of which are subject to change. No information is provided with respect to persons who are not citizens or residents of the United States, or foreign, state or local tax laws, or estate and gift tax considerations. In addition, the tax consequences to a particular participant may be affected by matters not discussed above. ACCORDINGLY, EACH PARTICIPANT IS URGED TO CONSULT HIS OR HER TAX ADVISOR CONCERNING THE TAX CONSEQUENCES TO HIM OR HER OF THE PROPOSED 2014 EQUITY PLAN, INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS (INCLUDING MEDICARE AND SOCIAL SECURITY TAX LAWS) AND OF CHANGES IN THE TAX LAWS.

The Proposed 2014 Equity Plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, or ERISA, and is not qualified under Section 401(a) of the Code.

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The annual total compensation of our CEO was $20,664,936, as reported in the “Total” column in the 2022 Summary Compensation Table disclosed above.

 

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The median of the annual total compensation of all employees (other than our CEO) was $44,194. The median employee was located in China.

Non-Qualified Stock Options. Under current federal income tax law,

●

The ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 468 to 1.  This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.

To determine the grantmedian of a non-qualified stock option has no immediate tax effect on us or the participant. If the sharesannual total compensation of our common stock received onemployees, we applied the exercisefollowing methodologies and assumptions:

●

We selected December 31, 2020 as the date for purposes of establishing the employee population used in identifying the median employee.

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As of December 31, 2020, our global headcount consisted of approximately 2,200 permanent and temporary employees, with a majority of these employees located in international locations with various market wages and cost of living standards. All of these employees were included in the employee population used in identifying the median employee.

●

We used payroll and equity plan records for the twelve-month period from January 1, 2020 to December 31, 2020. The components of annual compensation included base salary, sales commissions, bonuses, the grant date fair value of stock awards and certain employee benefits.

●

Total compensation was annualized for permanent employees who commenced employment during the year. Total compensation was not annualized for temporary employees.

●

No cost-of-living or other adjustments permissible by the SEC rules were made.

For purposes of a non-qualified stock option are not subject to restrictions on transfer or substantial risk of forfeiture, the exercise of the non-qualified stock option will result in ordinary income to the participant equal to the excess of the fair market value of the shares at the time of exercise over the option price. The participant’s tax basis in the shares will be equal to the option price pluscalculating the amount of ordinary income recognized uponcompensation paid to our median employee in 2022, we used the exercisesame median employee that we identified in 2020, as permitted under the SEC rules. There have been no changes in our employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. 

The SEC rules for identifying the median employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. Therefore, the option. Upon any subsequent disposition ofpay ratio reported by other companies may not be comparable to the shares, any gain or loss recognized bypay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Alternative Measure:

As discussed in the participant will be treated as capital gain or lossCompensation Discussion and will be long-term capital gain or loss if the shares are held forAnalysis section above, more than one year after exercise. At96% of our CEO’s annual compensation was tied to rigorous performance conditions in 2022, while the timeannual compensation of recognition of ordinary income by the participant upon exercise, we will normally be allowedour median employee was not tied to takeperformance goals. Accordingly, as an alternative measure, management believes that a deduction for federal income tax purposes in an amount equalmore direct and meaningful pay ratio is to such recognized ordinary income. compare compensation that is not tied to any performance objectives. Based on this method, our alternative CEO pay ratio was determined as follows:

●

The alternative annual total compensation of our CEO was $751,846 (consisting of his cash salary for 2022).

●

The median of the annual total compensation of all employees (other than our CEO) remained $44,194.

●

The ratio of the alternative annual total compensation of our CEO to the median of the annual total compensation of all employees was 17 to 1.

Pay Versus Performance

 

IfThe following Pay Versus Performance information presents the shares received oncompensation of our NEOs disclosed in the exerciseSummary Compensation Table (“SCT”), as well as compensation actually paid (“CAP”) to our NEOs and certain performance measures prepared in accordance with Item 402(v) of a non-qualified stock option are subject to restrictions on transfer or substantial risk of forfeiture, such as a vesting condition, different rules will apply, and the tax consequences will depend on whether the participant makes an election under Section 83(b) of the Code within 30 days after exercise of the option.SEC Regulations S-K.

 

IfAs discussed further below, the participant doesCAP amounts do not make a Section 83(b) election, the participant will recognize ordinary income when the shares vest in an amount equal to the excess of the fair market value on the date of vesting over the exercise price. In that case, the participant’s basis in the shares will be the fair market value of the shares on the date of vesting, and the participant’s holding period will begin on the date of vesting. Upon any later disposition of the shares, any gainnecessarily represent actual compensation earned or loss that the participant recognizes will be capital gain or loss, and will be long-term capital gain or loss if the participant holds the shares more than one year after vesting. We will be allowed a deduction for federal income tax purposes when the shares vest equal to the amount of ordinary income the participant recognizes.

If the participant makes a Section 83(b) election, the participant will recognize ordinary income at the time of exercise equal to the excess of the fair market value on the date of exercise over the exercise price. We will be allowed a deduction for federal income tax purposes on the date of exercise equal to the amount of ordinary income he or she recognizes. The participant’s basis in the shares will generally begin on the date of exercise, and the participant’s basis in the shares will generally be the option price increasedrealized by the amount of ordinary income the participant recognized at the time of exercise. Upon any later disposition of the shares, any gain or loss that the participant recognizes will be capital gain or loss, and will be long-term capital gain or loss if the participant holds the shares more than one year after exercise. However, if the participant later forfeits the shares, the participant will recognize a capital loss equal to excess (if any) of the option price over any amount the participant receives from us on the forfeiture. In other words, if a participant makes the Section 83(b) election and thereby recognizes ordinary income on the date of exercise, the participant will receive no corresponding deduction or loss if the participant later forfeits the shares for the amount of ordinary income the participant recognized.

Incentive Stock Options. The federal income tax consequences associated with incentive stock options are generally more favorable to the participant and less favorable to us than those associated with non-qualified stock options. Under current federal income tax law, the grant of an incentive stock option does not result in income to the participant orour NEOs in a deductiongiven year. The Compensation Committee did not consider the Pay Versus Performance information in making its compensation decisions for us atour NEOs. For additional information about our performance-based pay philosophy and how the time of the grant. Generally, the exercise of an incentive stock option will not result in income for the participant if the participant does not dispose of the shares within two years after the date of grant or within one year after the date of exercise. If these requirements are met, the basis of the shares ofCompensation Committee aligns executive compensation with our common stock upon a later disposition will be the option price, any gain on the later disposition will be taxedperformance, refer to the participant as long-term capital gain,“NamedExecutive Officer Compensation — Compensation Discussion and we will not be entitled to a deduction. The excess of the fair market value on the exercise date over the option price is an adjustment to regular taxable income in determining alternative minimum taxable income, which could cause the participant to be subject to the alternative minimum tax, thereby in effect depriving the participant of the tax benefits of incentive stock option treatment. If the participant disposes of the shares before the expiration of either of the holding periods described above, referred to as a disqualifying disposition, the participant will have compensation taxable as ordinary income, and we will normally be entitled to a deduction, equal to the lesser of (a) the fair market value of the shares on the exercise date minus the option price, or (b) the amount realized on the disposition minus the option price. If the price realized in any such disqualifying disposition of the shares exceeds the fair market value of the shares on the exercise date, the excess will be treated as long-term or short-term capital gain, depending on the participant’s holding period for the shares.

SARsAnalysis.” . A participant holding a SAR will recognize ordinary income on the exercise of the SAR equal to the amount of cash or the fair market value of the shares he or she receives on the exercise. We will receive a tax deduction in the same amount. Upon disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

Restricted Stock. In general, no taxable income will be recognized by a participant at the time restricted stock is granted. Generally, on the date the restricted stock becomes vested, the participant will recognize ordinary income in an amount equal to the difference between the fair market value of the shares on the date the shares vest and the purchase price (if any), and we will receive a tax deduction for the same amount. Upon disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of vesting as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

 

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																		Value of Initial Fixed $100 Investment Based on:
Year		Summary Compensation Table Total for PEO ($)(1)				Compensation Actually Paid to PEO ($)(2)				Average Summary Compensation Table Total for Non-PEO NEOs ($)(1)				Average Compensation Actually Paid to Non-PEO NEOs ($)(2)				TSR ($)(3)				Peer Group TSR ($)(3)				Net Income   (in thousands)  ($)(4)				Company-Selected Measure: 90-Day Average Stock Price ($)(5)
2022			20,664,936				(66,596,378	)			8,578,977				(18,412,649	)			203.03				136.90				437,672				376.53
2021			20,254,831				114,053,034				7,227,671				35,989,415				281.12				213.35				242,023				504.76
2020			14,670,153				166,896,795				4,194,878				50,263,845				207.49				151.14				164,375				297.97

Alternatively,

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(1)	For each of 2022, 2021 and 2020 (each, a “Covered Year”), Mr. Hsing served as our principal executive officer (“PEO”). For each Covered Year, our non-PEO NEOs were Mr. Blegen, Mr. Xiao, Mr. Sciammas and Ms. Tseng.

(2)	The CAP amounts reflect the following adjustments to the SCT amounts for each Covered Year:

			FY 2022								FY 2021								FY 2020
Reconciliation of SCT amounts to CAP amounts (a)			PEO ($)				Average Non- PEO NEOs ($)				PEO ($)				Average Non- PEO NEOs ($)				PEO ($)				Average Non- PEO NEOs ($)
Total SCT amounts				20,664,936				8,578,977				20,254,831				7,227,671				14,670,153				4,194,878
-	“Stock Awards” amounts under the SCT			(13,865,090	)			(5,061,001	)			(13,782,908	)			(3,880,508	)			(12,395,153	)			(3,189,878	)
+	Fair value of awards granted in the Covered Year that are outstanding and unvested as of the end of the Covered Year			13,362,890				3,843,543				18,645,892				5,249,657				25,907,039				6,629,115
+	Vesting date fair value of awards granted in the Covered Year and vested in the Covered Year			-				-				-				-				-				-
+/-	Year-over-year change in fair value of awards granted in prior years that are outstanding and unvested as of the end of the Covered Year			(60,534,831	)			(19,793,194	)			73,338,316				23,214,310				118,265,198				36,946,829
+/-	Year-over-year change in fair value of awards granted in prior years that vested in the Covered Year			(26,224,283	)			(7,053,985	)			15,596,903				4,178,285				20,449,558				5,682,901
-	Fair value of awards granted in prior years that failed to vest in the Covered Year			-				-				-				-				-				-
+	Value of dividends paid on awards in the Covered Year (b)			-				-				-				-				-				-
+	Excess fair value for award modifications (c)			-				1,073,011				-				-				-				-
Total CAP amounts				(66,596,378	)			(18,412,649	)			114,053,034				35,989,415				166,896,795				50,263,845

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(a)

Our equity awards include PSUs with a purchase price condition, MSUs and MPSUs. The grant date fair value for these awards was determined using a Monte Carlo simulation model. Assumptions used in the grant date valuation are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022. For equity awards vested during the applicable Covered Year, the fair value was based on the closing stock price plus accumulated dividend equivalents at the vesting date. For outstanding equity awards for which the performance conditions have not been achieved, the year-end fair value was determined using a Monte Carlo simulation model. The increases or decreases in the year-end fair value were mainly driven by changes in our stock price. For outstanding awards for which all the performance conditions have been achieved but additional time-based service conditions are required, the year-end fair value was based on the closing stock price plus accumulated dividend equivalents.

(b)

We do not pay dividend equivalents prior to the vesting date of the underlying equity awards. Dividend equivalents accumulated during the vesting periods are reflected in the fair value of the awards.

(c)

The amount reflects the incremental fair value, if any, related to the October 2022 MSUs determined on the modification date. Refer to “Named Executive Officer Compensation - Compensation Discussion and Analysis” and “Grants of Plan-Based Awards for the Year Ended December 31, 2022” for further discussion.

(3)

For purposes of this tabular disclosure, our peer group represents the PHLX Index, which we also disclose in the stock performance graph required by Item 201(e) of Regulation S-K included in our Annual Report on Form 10-K for the year ended December 31, 2022. For each Covered Year, our TSR and our peer group’s TSR were calculated as the cumulative TSR from December 31, 2019 through the last day of the applicable Covered Year, assuming that $100 was invested on December 31, 2019.

(4)	The amounts represent GAAP net income.

(5)

In our assessment, the Company-Selected Measure is the 90-day average trading price of our Common Stock as of December 31 of each Covered Year, which represents the most important financial performance measure used by us to link CAP to our NEOs for 2022 to our performance. Refer to “Named Executive Officer Compensation — Compensation Discussion and Analysis” for further discussion.

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Relationship Between CAP and Performance Measures

Because our executive compensation program is significantly comprised of performance-based equity awards, the primary determinants of the CAP amounts, as calculated under SEC rules, are our stock price, actual payouts from awards vested during the applicable Covered Year, and the number of unvested awards based on projected and actual performance achievement. As shown in the table above, the CAP amounts include year-end revaluations of equity awards granted in the applicable Covered Year, plus the year-over-year changes in the fair value of vested and outstanding equity awards granted in multiple historical years, all of which are heavily impacted by the performance of our stock price.

Relationship Between CAP and TSR:

The following chart compares the CAP amounts to the cumulative TSR since December 31, 2019, measured as of the last day of each Covered Year.

Relationship Between CAP and Net Income:

The following chart compares the CAP amounts to our net income for each Covered Year.

Net income is not a direct performance measure in our executive compensation program. However, we use non-GAAP operating income as the performance measure in our short-term cash incentive plan. Net income and non-GAAP operating income metrics measure different levels of our profitability. The CAP amounts do not always correlate to our profitability because our executive compensation program is heavily weighted towards long-term equity awards, which could vary significantly in value with changes to our stock price.

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Relationship Between CAP and Company-Selected Measure:

The following chart compares the CAP amounts to the Company-Selected Measure for each Covered Year.

Financial Performance Measures

The following list includes the financial performance measures that, in our assessment, represent the most important financial performance measures used by us to link CAP to our NEOs for 2022 to our performance. These measures are not ranked.

1.

90-day average stock price

2.

TSR relative to the PHLX Index

3.

Non-GAAP operating income

4.

Revenue

Equity Compensation Plan Information

The following table summarizes certain information under our equity compensation plans as of December 31, 2022:

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (#)(a)				Weighted-average exercise price of outstanding options, warrants and rights ($)(b)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#)(c)
Equity compensation plans approved by stockholders (1)			2,659,000	(2)			0.42	(3)			9,073,000	(4)

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(1)	Our equity compensation plans approved by stockholders include the following:

(i)

2004 Equity Incentive Plan (the “2004 Equity Plan”), which expired in November 2014. We can no longer grant equity awards under the 2004 Equity Plan. Certain equity awards granted prior to its expiration date remained unvested and outstanding as of December 31, 2022.

(ii)

Amended 2014 Equity Plan, which became effective in June 2020 and provides for the issuance of up to 10.5 million shares. The Amended 2014 Equity Plan has a ten-year term and will expire in June 2030.

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(iii)

2004 ESPP, which incorporates an evergreen provision pursuant to which on January 1 of each year, the aggregate number of shares of Common Stock reserved for issuance can increase by a number of shares equal to the least of: (a) 2% of the outstanding shares of Common Stock on the first day of the year, (b) 1.0 million shares or (c) a lesser number of shares determined by the Board. The 2004 ESPP has a 20-year term and will expire in February 2024.

(2)

Includes the following outstanding awards: 106,000 RSUs, 527,000 PSUs, 1,805,000 MSUs, and 221,000 MPSUs. The number of securities reported for performance awards was generally based on the actual number of shares that have been earned, but are subject to additional service conditions before they vest. For those performance awards that have not been earned because the performance period was still in progress, the number of securities reported was based on the probable outcome of the performance conditions, and thus may understate eventual dilution.

(3)	RSUs, MSUs and MPSUs have no purchase price. PSUs require employees to pay MPS $30 per share upon vesting of the shares. However, beginning in 2020, this purchase price requirement for the PSUs is waived if certain price targets are met during the performance period.

(4)	Includes 4,599,000 shares that remained available for future issuance under the Amended 2014 Equity Plan (all of which may be subject to awards other than options, warrants and other rights), and 4,474,000 shares that remained available for future issuance under the 2004 ESPP.

Audit Committee Report

The purpose of the Audit Committee is to provide oversight of our accounting and financial reporting processes and the audit of our financial statements; appoint the independent registered public accounting firm to audit our financial statements; and assist the Board in the oversight of: (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, and (iv) our internal accounting and financial controls. In addition, the Audit Committee provides the Board with such information and materials as it may deem necessary to make the Board aware of financial matters requiring the attention of the Board.

The Audit Committee has a duly adopted charter, which it reviews on an annual basis.

The Audit Committee is responsible for recommending to the Board that our financial statements be included in its Annual Report on Form 10-K. The Audit Committee took a number of steps in making this recommendation for 2022, including:

●

reviewing and discussing the audited financial statements with our independent registered public accounting firm and management;

●

discussing with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; and

●

receiving the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence, and discussing with the independent registered public accounting firm their independence.

Based upon the reviews and discussions described in this report, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2022 for filing with the SEC.

Members of the Audit Committee (as of the date the actions above were taken):

Victor K. Lee, Chairman

Herbert Chang

Jeff Zhou

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PROPOSAL FIVE

APPROVAL OF THE AMENDED AND RESTATED 2004 ESPP

At the Annual Meeting, the Board is seeking stockholder approval to amend and restate our 2004 ESPP (the “Amended 2004 ESPP”). The 2004 ESPP became effective upon our initial public offering in November 2004 and will expire in February 2024. The Amended 2004 ESPP was approved by the Board on April 28, 2023. If approved by our stockholders, the Amended 2004 ESPP will become effective on August 16, 2023, and essentially succeed the 2004 ESPP after the final purchase period which will end on August 15, 2023. The Amended 2004 ESPP is intended to continue to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code and provides substantially the same benefits to employees that are offered under the 2004 ESPP. As such, stockholder approval of the Amended 2004 ESPP is also being sought for the purpose of qualifying certain shares of our Common Stock issued under the Amended 2004 ESPP for special tax treatment under Section 423 of the Internal Revenue Code.

Competition for talent in the semiconductor industry is intense, and it is essential that we continue to attract, retain and motivate highly qualified employees to support our rapid growth. The Board believes that our stockholders should approve the Amended 2004 ESPP because it will continue to be an important component of the broad-based compensation package we offer to our employees. The majority of the semiconductor companies we compete with for talent offer similar stock purchase programs. If approved, the Amended 2004 ESPP will continue to provide eligible employees with an opportunity to own shares of our Common Stock at a reasonable discount from market value and benefit from the stock price appreciation, which will further enhance the alignment of employee and stockholder interests. If stockholders do not approve the Amended 2004 ESPP, it will not be effective, and the 2004 ESPP will expire by its terms in February 2024.

The Amended 2004 ESPP contains the following key changes (in addition to certain other conforming and non-substantive or immaterial changes): 

1.

Term.  The Amended 2004 ESPP has a 15-year term and will expire on August 16, 2038.

2.

Eligible Employees.  The Amended 2004 ESPP revised the definition of employees who can participate in the plan to those individuals who are common law employees of MPS or a participating subsidiary. Consequently, all employees of MPS or a participating subsidiary who is customarily employed for 20 or fewer hours per week, or five or fewer months per calendar year will be permitted to participate in the Amended 2004 ESPP.

3.

Number of Shares Available for Issuance.  The Amended 2004 ESPP removed the evergreen provision under the 2004 ESPP and provides for the issuance of up to 4,400,000 shares of our Common Stock, which represents the total number of shares that will remain available for issuance upon expiration of the 2004 ESPP. The Board is not asking for stockholders to approve any additional shares for the Amended 2004 ESPP.

As of the Record Date, 4,400,000 shares represent approximately 9.3% of our total shares of Common Stock outstanding. Since inception, employees have purchased a total of 1,616,000 shares under the 2004 ESPP. Annual dilution, which equals shares purchased divided by total shares of our Common Stock outstanding at the end of the year, was approximately 0.1% in each of 2022, 2021 and 2020.

If the Amended 2004 ESPP is approved, it is expected that there will be sufficient shares available under the Amended 2004 ESPP to satisfy our needs under the plan for its full 15-year term.

Summary of Key Provisions of theAmended 2004 ESPP

The material terms of the Amended 2004 ESPP are summarized below. This description is qualified in its entirety by the complete text of the Amended 2004 ESPP, which is attached to this Proxy Statement as Annexure B.

Shares Available for Issuance. The maximum number of shares that will be offered under the Amended 2004 ESPP will be 4,400,000.

Administration. Our Board, or a committee of our Board, administers the Amended 2004 ESPP. Our Board or the committee has full and exclusive authority to interpret the terms of the Amended 2004 ESPP and determine eligibility.

Eligibility. Employees are eligible to participate if they are customarily employed by us or any participating subsidiary. However, an employee may not be granted an option to purchase shares of our Common Stock if such employee (i) immediately after grant owns 5% or more of the total combined voting power or value of all classes of our capital stock; or (ii) whose rights to purchase shares accrues at a rate that exceeds $25,000 worth of stock (determined at the fair market value of the shares at the time such purchase right is granted) for each calendar year in which such option is outstanding at any time. The basis for participation in the Amended 2004 ESPP is meeting eligibility requirements and electing to participate by enrolling in participation in the Amended 2004 ESPP for one of the offering periods.

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Offering Periods and Contributions. The Amended 2004 ESPP is intended to qualify under Section 423 of the Internal Revenue Code and provides for consecutive six-month offering periods. The offering periods generally start on the first trading day on or after February 16 and August 16 of each year. The administrator has the authority to adjust the timing and duration of future offering periods.

The Amended 2004 ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation which includes a participant’s base straight time gross earnings, commissions (to the extent such commissions are an integral, recurring part of compensation), overtime, and shift premium, but exclusive of payments for incentive compensation, bonuses and other compensation. A participant may purchase a maximum of 2,000 shares during an offering period. The administrator may adjust this limit prior to the commencement of subsequent offering periods.

Purchase of Shares. Amounts deducted and accumulated by the participant are used to purchase shares of our Common Stock at the end of each six-month offering period. The price is 85% of the lower of the fair market value of our Common Stock at the beginning of an offering period or end of such offering period. As of the Record Date, the closing price of our Common Stock as reported on the Nasdaq Global Select Market was $466.42 per share.

Participants may end their participation at any time during an offering period, and will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with us.

Transferability of Rights. No participant is permitted to assign, transfer, pledge, or otherwise dispose of either the payroll deductions credited to his or her account or an option or any rights granted under the Amended 2004 ESPP other than by will or the laws of descent and distribution.

Change of Control. In the event of a change of control, a successor corporation will assume or substitute each outstanding option. If the successor corporation refuses to assume or substitute for the outstanding options, the offering period then in progress will be shortened, and a new exercise date will be set.

Changes in Capitalization. In the event of certain changes in our capitalization (for instance, a stock split) and other corporate transactions affecting our Common Stock, the administrator in its discretion will adjust the number and class of Common Stock that may be delivered under the Amended 2004 ESPP, the purchase price per share and the number of shares of our Common Stock covered by each outstanding option.

Amendment or Termination. The Amended 2004 ESPP will automatically terminate on August 16, 2038, unless we terminate it sooner. Our Board has the authority to amend or terminate the Amended 2004 ESPP, except that, subject to certain exceptions described in the Amended 2004 ESPP, no such action may adversely affect any outstanding rights to purchase shares of our Common Stock.

Federal Income Tax Consequences

The following discussion is a summary of the general U.S. federal income tax rules applicable to purchases offered by MPS under the Amended 2004 ESPP. This summary is not intended to be exhaustive and does not discuss the income tax laws of any city, state, or foreign jurisdiction in which a participant may electreside.

Under the U.S. federal income tax rules, no income will be taxable to make an election under Section 83(b)a participant at the time of grant of the Code with respectoption or purchase of shares. However, a participant may become liable for tax upon dispositions of shares acquired under the Amended 2004 ESPP, and the tax consequences will depend on how long a participant has held the shares prior to unvested shares. disposition.

If a participant makes a Section 83(b) election withsells or otherwise disposes of the Internal Revenue Servicepurchased shares within 30 days fromtwo years after the beginning of the associated offering period or within one year after the purchase date, of grant,then the participant will recognize ordinary income in an amountthe year of sale or disposition equal to the difference betweenamount by which the fair market value of the shares on the purchase date of grant andexceeded the purchase price, and we will receive abe entitled to an income tax deduction, for the same amount. taxable year in which such disposition occurs, equal in amount to such excess. The participant will also recognize a capital gain to the extent the amount realized upon the sale of the shares exceeds the sum of the aggregate purchase price for those shares and the ordinary income recognized in connection with their acquisition.

If the participant makes a timely Section 83(b) election,sells or otherwise disposes of the purchased shares more than two years after the beginning of the associated offering period and more than one year after the purchase date, the participant will notgenerally recognize ordinary income whenin the shares vest. Uponyear of sale or disposition of the shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held. If the participant forfeits unvested shares, the participant will recognize a capital loss equal to the excess (if any)lesser of the purchase price over any amount the participant receives from us on the forfeiture. Generally, if the participant makes a Section 83(b) election, and thereby recognizes ordinary income on the date of grant, the participant will receive no corresponding deduction or loss for the amount of ordinary income the participant recognized if the participant later forfeits any unvested shares.

Restricted Stock Units and Performance Units. Restricted stock units and performance units result in ordinary income on the receipt of cash or shares equal to the amount of cash, or(a) the excess of the fair market value of the shares over the amount (if any) that the participant pays for the shares. We will receive a tax deduction in the same amount. Upon disposition of any shares acquired, the participant will recognize the appreciation or depreciation on the shares after the date of grant as either short-term or long-term capital gain or loss, depending on how long the shares have been held.

Section 409A Compliance. To the extent applicable, it is intended that the Proposed 2014 Equity Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the participants. The Proposed 2014 Equity Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in the Proposed 2014 Equity Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such section by the U.S. Department of the Treasury or the Internal Revenue Service.

Neither a participant nor any of a participant’s creditors or beneficiaries will have the right to subject any deferred compensation payable under the Proposed 2014 Equity Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation payable to a participant or for a participant’s benefit under the Proposed 2014 Equity Plan and grants hereunder may not be reduced by, or offset against, any amount owed by a participant to us.

If, at the time of a participant’s separation from service, (i)such sale or disposition over the participant will be a specified employee and (ii) we make a good faith determination that an amount payable hereunder constitutes deferred compensation,purchase price or (b) the paymentexcess of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then we will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the tenth business day of the seventh month after such separation from service.

Notwithstanding any provision of the Proposed 2014 Equity Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, we reserve the right to make amendments to the Proposed 2014 Equity Plan and grants hereunder as we deem necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a participant or for a participant’s account in connection with the Proposed 2014 Equity Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and we will not have any obligation to indemnify or otherwise hold a participant harmless from any or all of such taxes or penalties. 

Tax Withholding. We have retained the authority under the Proposed 2014 Equity Plan to deduct or withhold, or require a participant to remit to us, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be deducted or withheld with respect to awards granted under the Proposed 2014 Equity Plan. The administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a participant to satisfy such tax withholding obligation, in whole or in part by, without limitation (a) paying cash, (b) electing to have us withhold otherwise deliverable cash or shares having a fair market value equal to the minimum statutory amount required to be withheld, or (c) delivering to us already-owned shares having a fair market value equal to the minimum statutory amount required to be withheld. In no event will the fair market value of the awardsshares as of the beginning of the offering period over the purchase price (determined as of the beginning of the offering period). Any further gain or any loss will be taxed as a long-term capital gain or loss. We will not be entitled to be withheld or delivered exceed the minimum amount requiredan income tax deduction with respect to be withheld, unless (a) an additional amount can be withheld and not result in adverse accounting consequences and (b) such additional withholding amount is authorized by the Compensation Committee. disposition.

 

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Registration with the SEC

 

We intend to file ahave already filed Registration StatementStatements on Form S-8 relating to the issuance of the additional4.4 million shares of Common Stock that will be available under the Proposed 2014 Equity PlanAmended 2004 ESPP with the SEC pursuant to the Securities Act of 1933, as amended, as soon as practicable after approvalamended.

New Plan Benefits

The amount of future benefits that will be received by eligible employees, including our NEOs, under the Proposed 2014 Equity PlanAmended 2004 ESPP is not determinable at this time because participation is voluntary, participation levels depend on each eligible employee’s election, the level of payroll deductions is entirely within the discretion of each participant, and the per-share purchase price depends on the future value of our Common Stock.

The table below sets forth the number of shares purchased by our stockholders. the NEOs and other employees under the 2004 ESPP since its inception:

Name and Position		Shares Purchased (#)
Michael Hsing			4,757
Chief Executive Officer, President and Chairman of the Board
Bernie Blegen			5,328
Chief Financial Officer
Deming Xiao			20,101
President of Asia Operations
Maurice Sciammas			11,049
Senior Vice President, Worldwide Sales and Marketing
Saria Tseng			19,595
Vice President, Strategic Corporate Development and General Counsel
All current executive officers as a group			60,830
All current non-employee directors as a group			-
All employees as a group, excluding current executive officers			1,555,142

THE BOARD UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THEAMENDED 2004 ESPP.

 

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Other Matters

 

We know of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they represent as we may recommend.

 

Forward-Looking Statements Safe Harbor Statement This Proxy Statement contains forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts or guarantees of future performance or events, are based on current expectations, estimates, beliefs, assumptions, goals, and objectives, and involve significant known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results expressed by these statements. Readers of this Proxy Statement are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Forward-looking statements involve significant risks and uncertainties, including those identified in our SEC filings, including, but not limited to, our Annual Report on Form 10-K filed with the SEC on February 24, 2023. The forward-looking statements in this Proxy Statement represent our projections and current expectations, as of the date hereof, not predictions of actual performance.   BY ORDER OF THE BOARD OF DIRECTORS Dated: May 1, 2023 Dated: April 29, 2020 Saria Tseng Vice President, Strategic Corporate Development, General Counsel and Corporate Secretary   5460 Table of Contents   Annexure A RECONCILIATION OF GAAP TO NON-GAAP MEASURES (1) RECONCILIATION OF GAAP TO NON-GAAP MEASURES (1) (in thousands, except per-share amounts)     FY 2019     FY 2018     FY 2017     FY 2022     FY 2021     FY 2020   GAAP operating income   $ 102,562     $ 113,488     $ 77,424     $ 526,785     $ 262,417     $ 158,882   Stock-based compensation expense     78,699       60,607       52,617     160,992     123,479     85,551   Amortization of acquisition-related intangible assets     110       841       2,051     132     44     -   Deferred compensation plan (income) expense     3,995       (591 )     2,769   Deferred compensation plan expense (income)     (7,011 )     5,124       5,650   Non-GAAP operating income     185,366       174,345       134,861     680,898     391,064     250,083   Litigation expense     2,464       1,922       1,243       8,001       9,225       7,804   Non-GAAP operating income used in short-term cash incentive plan   $ 187,830     $ 176,267     $ 136,104     $ 688,899     $ 400,289     $ 257,887                             GAAP net income   $ 108,839     $ 105,268     $ 65,203     $ 437,672     $ 242,023     $ 164,375   Stock-based compensation expense     78,699       60,607       52,617     160,992     123,479     85,551   Amortization of acquisition-related intangible assets     110       841       2,051     132     44     -   Deferred compensation plan expense     189       431       238   Deferred compensation plan expense (income)   (411 )   561     1,057   Tax effect     (10,128 )     (313 )     7,402       1,559       (9,434 )     (14,229 ) Non-GAAP net income   $ 177,709     $ 166,834     $ 127,511     $ 599,944     $ 356,673     $ 236,754                             GAAP net income per share - diluted   $ 2.38     $ 2.36     $ 1.50     $ 9.05     $ 5.05     $ 3.50   Non-GAAP net income per share - diluted   $ 3.88     $ 3.74     $ 2.93     $ 12.41     $ 7.45     $ 5.04   Shares used in the calculation of diluted net income per share     45,763       44,602       43,578     48,358     47,889     47,014     (1) These non-GAAP financial measures are not prepared in accordance with GAAP and should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. MPS utilizes both GAAP and non-GAAP financial measures to assess what it believes to be its core operating performance, and to evaluate and manage its internal business and assist in making financial, operating and compensation decisions. Our Compensation Committee also evaluates non-GAAP financial measures when reviewing management’s performances and reaching compensation decisions. MPS believes that the non-GAAP financial measures, together with GAAP measures, provide investors with an alternative presentation useful to investors'their understanding of MPS’s core operating results and trends. Additionally, MPS believes that the inclusion of non-GAAP measures, together with GAAP measures, may provide investors with an additional dimension of comparability to similar companies. However, investors should be aware that non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financial measures utilized by other companies are not likely to be comparable in most cases to the non-GAAP financial measures used by MPS.   55 61 Table of Contents   ANNEXUREAnnexure B   MONOLITHIC POWER SYSTEMS, INC.   AMENDED AND RESTATED 2014 EQUITY INCENTIVE2004 EMPLOYEE STOCK PURCHASE PLAN (Amended and Restated as of August 16, 2023) 1. Purposes of the Plan. The purposes of this Plan are: ● to attract and retain the best available personnel for positions of substantial responsibility, ● to provide additional incentive to Employees, Directors and Consultants, and ● to promote the success of the Company’s business.   The following constitutes the provisions of the Amended and Restated 2004Employee Stock Purchase Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Restricted Stock Units and Dividend Equivalents.Monolithic Power Systems, Inc.   1. Purpose. The purpose of the Plan is to provide Employees with an opportunity to purchase Common Stock through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The provisions of the Plan, accordingly, will be construed so as to extend and limit Plan participation in a manner that is consistent with the requirements of that section of the Code. 2.Definitions. Definitions. As used herein, the following definitions will apply:   (a) “Administrator” means the Board or any of its Committees as will be administeringcommittee thereof designated by the Plan,Board in accordance with Section 4 of the Plan.14.   (b) “Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Securities Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition. (c)     “Affiliated SAR” means a SAR that is granted in connection with a related Option, and which automatically will be deemed to be exercised at the same time that the related Option is exercised. (d)     “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. (e)     “Award” means, individually or collectively, a grant under the Plan of Options, SARs, Restricted Stock, Performance Units, Restricted Stock Units or Dividend Equivalents. (f)     “Award Agreement” means the written or electronic agreement (or other type or form of writing or other approved evidence) setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. (g)     “Board” means the Board of Directors of the Company.   56 Table (c) “Change of Contents (h)     “CauseControl” means unless otherwise provided for in an Award Agreement, the occurrence of any one or more of the following: (i) the Participant’s commission of any felony involving fraud, dishonesty or moral turpitude; (ii) the Participant’s attempted commission of or participation in a fraud or act of dishonesty against the Company that results in (or might have reasonably resulted in) material harm to the business of the Company; (iii) the Participant’s intentional, material violation of any contract or agreement between the Participant and the Company or any statutory duty that the Participant owes to the Company; or (iv) the Participant’s conduct that constitutes gross insubordination, incompetence or habitual neglect of duties and that results in (or might have reasonably resulted in) material harm to the business of the Company. However, the action or conduct described in clauses (iii) and (iv) above will constitute “Cause” only if such action or conduct continues after the Company has provided the Participant with written notice thereof and thirty (30) days to cure the same. Notwithstanding the foregoing, the definition of Cause (or any analogous term) in an individual written agreement between the Company or any Affiliate and Participant will supersede the foregoing definition or definition set forth in an Award Agreement with respect to Awards granted hereunder. (i)     “Change in Control” means, unless otherwise provided for in an Award Agreement, the occurrence of any of the following events:   (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or   (ii) The consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or   (iii) A change in the composition of the Board occurring within a two year period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” means directors who either (A) are Directors as of the Effective Date, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iv)     The consummation of a merger or consolidation of the Company, with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company, or such surviving entity or its parent outstanding immediately after such merger or consolidation. 57 Table of Contents Notwithstanding the foregoing, to the extent payment of any Award would be accelerated due to the Change in Control and such Award constitutes “nonqualified deferred compensation” within the meaning of Section 409A of the Code, the event shall not be considered to be a Change in Control under the Plan for purposes of such Award unless such event is also a “change in ownership,” a “change in effective control”consolidation; or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.   (j)(iv) A change in the composition of the Board, as a result of which fewer than a majority of the Directors are Incumbent Directors. “Incumbent Directors” means Directors who either (A) are Directors as of the effective date of the Plan (pursuant to Section 23), or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those Directors whose election or nomination was not in connection with any transaction described in subsections (i), (ii) or (iii) or in connection with an actual or threatened proxy contest relating to the election of Directors of the Company. (d) “Code” means the Internal Revenue Code of 1986, as amended.amended, and the regulations promulgated thereunder. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.   (k)(e) “Committee” means a committee of Directors (or a subcommittee appointed by the committee of Directors) or of other individuals satisfying Applicable Laws appointed by the Board in accordance with Section 4 of the Plan. (l)     “Common Stock” means the common stock, par value $0.001 per share, of the Company.   (m)(f) “Company” means Monolithic Power Systems, Inc., a Delaware corporation, or any successor thereto.corporation.   (n)(g) “ConsultantCompensation” means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity (provided that such person (i) is a natural person and (ii) provides bona fide services to the Company that are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities). (o)     “Continuous Service” means that Participant’s service with the Company or an Affiliate as a Service Provider is not interrupted or terminated. A change in the capacity in which the Participant renders service to the Company or an Affiliate as a Service Provider or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service. If the entity for which a Participant is rendering services ceases to qualify as an Affiliate, such Participant’s Continuous Service will be considered to have terminated on the date such entity ceases to qualify as an Affiliate. ToEmployee’s base straight time gross earnings, commissions (to the extent permitted by law, the Board or the chief executive officersuch commissions are an integral, recurring part of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the casecompensation), overtime and shift premium, but exclusive of (i) any leave of absence approved by the Company, including sick leave, military leave or anypayments for incentive compensation, bonuses and other personal leave or (ii) transfers between the Company, an Affiliate, or their successors. A leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement applicable to the Participant, or as otherwise required by law. In addition, if required for exemption from or compliance with Section 409A of the Code, the determination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder). (p)     “Director” means a member of the Board.compensation.   5862 Table of Contents   (q)(h) “DisabilityDesignated Subsidiary” means unless otherwise provided for in an Award Agreement, total and permanent disability as defined in Section 22(e)(3) of the Code, providedany Subsidiary that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adoptedhas been designated by the Administrator from time to time.time in its sole discretion as eligible to participate in the Plan.   (r)(i) “Dividend EquivalentDirector” means a right to be paid in cash or Shares an amount equal to the regular cash dividends declared and paid on a Share that is subject to an unvested or otherwise outstanding Restricted Stock Unit or Performance Unit. A Dividend Equivalent will immediately expire on the issuancemember of the underlying SharesBoard. (j) “Effective Date” means August 16, 2023, which is the first day of the Offering Period following approval of the amendment and restatement of the Plan by the Board on April 28, 2023, subject to the Restricted Stock Unit or Performance Unit Awards, as well as on the expiration or other forfeitureapproval of the related Restricted Stock Unit or Performance Unit Awards.Company’s stockholders at the 2023 annual meeting of stockholders.   (s)(k) “Effective Date” has the meaning set forth in Section 18. (t)     “Employee” means any person, including Officers and Directors, employedindividual who is a common law employee of an Employer. For purposes of the Plan, the employment relationship will be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the CompanyEmployer. Where the period of leave exceeds ninety (90) days and the individual’s right to reemployment is not guaranteed either by statute or any Parentby contract, the employment relationship will be deemed to have terminated on the 91st day of such leave. The Administrator, in its discretion, from time to time may, prior to an Enrollment Date for all options to be granted on such Enrollment Date, determine (on a uniform and nondiscriminatory basis) that the definition of Employee will or Subsidiarywill not include an individual if he or she: (1) has not completed at least two years of service since his or her last hire date (or such lesser period of time as may be determined by the Administrator in its discretion), (2) customarily works not more than 20 hours per week (or such lesser period of time as may be determined by the Administrator in its discretion), (3) customarily works not more than 5 months per calendar year (or such lesser period of time as may be determined by the Administrator in its discretion), (4) is an officer or other manager, or (5) is a highly compensated employee under Section 414(q) of the Company. Neither service as a Director nor paymentCode. (l) “Employer” means any one or all of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.and its Designated Subsidiaries.   (u)(m) “Enrollment Date” means the first Trading Day of each Offering Period. (n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.amended, including the rules and regulations promulgated thereunder.   (v)(o) “Exercise Date” means the last day of each Offering Period. The first Exercise Date under the original Plan was August 15, 2005. The first Exercise Date under the amendment and restatement of the Plan shall be February 15, 2024. (p) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:   (i) If the Common Stock is listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such stockthe Common Stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the daydate of determination, as reported in The Wall Street Journalor such other source as the Administrator deems reliable;reliable, or;   (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, theits Fair Market Value of a Share will be the mean betweenof the highclosing bid and low asked prices for the Common Stock on the daydate of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; orreliable, or;   (iii) In the absence of an established market for the Common Stock, theits Fair Market Value will be determined in good faith by the Administrator.   (w) (q) “First Offering Period” means the Offering Period that started on February 15, 2005and ended on August 15, 2005. “Fiscal Year” means the fiscal year of the Company. (x) “Freestanding SAR” means a SAR that is granted independently of any Option. (y) “GAAP” means United States generally accepted accounting principles. (z) “Grandfathered Awards” has the meaning set forth in Section 4(a)(ii). (aa) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 59 Table of Contents (bb) “Inside Director” means a Director who is an Employee. (cc) “Nonstatutory Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option. (dd) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (ee) “Option” means a stock option granted pursuant to the Plan. (ff) “Optioned Stock” means the Common Stock subject to an Option. (gg) “Outside Director” means a Director who is not an Employee. (hh) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code. (ii) “Participant” means the holder of an outstanding Award.   (jj)(r) “Performance GoalsOffering Periods” shall mean any one or moremeans the periods of the following performance goals, either individually or in any combination, applied eitherapproximately six (6) months during which an option granted pursuant to the Company as a whole or to a business group, subsidiary, or other division, either individually or in any combination, and measuredPlan may be exercised, (i) commencing on an absolute basis or relative to a pre-established target, to previous years’ or any other period’s results (including results during a prior or current Performance Period), or to a designated comparison group, in each case as specified by the Administrator: (i) revenue, growth in revenue or product revenue; (ii) sales or bookings targets, including product or product family sales or bookings targets; (iii) billings; (iv) market share; (v) stock price performance, including but not limited to growth in the market price of stock, total stockholder return, and returnfirst Trading Day on stockholder equity; (vi) margin, including gross margin, net margin or operating margin; (vii) income, including but not limited to net income, operating income, and operating income after taxes; (viii) profit, including but not limited to operating profit, net operating profit or pre-tax profit; (ix) earnings, including but not limited to earnings per share, net earnings, earnings before interest, taxes and/or depreciation and/or amortization; (x) income, before or after taxes (including net income); (xi) returnFebruary 16 of each year and terminating on assets, capital, operating revenue and/the first Trading Day on or investments; (xii) expense control and/following August 15, approximately six (6) months later, and (ii) commencing on the first Trading Day on or cost reductions; (xiii) capital expenditures; (xiv) economic value added; (xv) cash flow, including but not limitedafter August 16 of each year and terminating on the first Trading Day on or following February 15, approximately six (6) months later. The duration and timing of Offering Periods may be changed pursuant to operating cash flow, cash flow per share and cash management; (xvi) improvement in or attainmentSection 4 of working capital levels; (xvii) debt reduction or debt levels; (xviii) contract win, renewal or extension or design win; (xix) delivery and/or design schedule; (xx) milestones in new generation of products or technologies; (xxi) completion of or milestones associated with mergers, acquisitions, strategic investments, restructurings, reorganizations (including entry into term sheets, signing of definitive agreements, closing transactions, funding of investments, and post-closing integration milestones); (xxii) litigation, including litigation outcomes, milestones or management; (xxiii) workforce diversity; (xxiv) customer satisfaction; and (xv) such other measures of performance selected by the Committee in its discretion.this Plan.   6063 Table of Contents   The Committee may appropriately adjust any evaluation of performance with respect to Performance Goals to exclude certain events that occur during(s) “Original Plan Effective Date” means February 27, 2004. (t) “Parent” means a Performance Period, including (A) to include“parent corporation,” whether now or exclude restructuring and/or other nonrecurring charges; (B) to include or exclude exchange rate effects,hereafter existing, as applicable, for non-U.S. dollar denominated performance goals; (C) to include or exclude the effects of changes to GAAP required by the Financial Accounting Standards Board or to the International Financial Reporting Standard (IFRS); (D) to include or exclude the effects of any statutory adjustments to corporate tax rates; (E) to include or exclude the effects of any “extraordinary items” as determined under GAAP; (F) to include or exclude the effect of payment of bonuses under the bonus plansdefined in Section 424(e) of the Company; (G) to include or exclude the effect of stock-based compensation and/or deferred compensation; (H) to include or exclude any unusual, non-recurring gain or loss or other extraordinary item; (I) to respond to, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development; (J) to respond to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions; (K) to include or exclude the effects of divestitures, acquisitions or joint ventures; (L) to include or exclude the effects of discontinued operations that do not qualify as a segment of a business unit under GAAP; (M) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (N) to include or exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common shareholders including cash dividends; (O) to reflect a corporate transaction, such as a merger, consolidation, separation (including a spinoff or other distribution of stock or property by a corporation), or reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code); (P) to reflect any partial or complete corporate liquidation; (Q) to reflect shippable backlog; and (R) to include or exclude the amortization of purchased intangibles, technology license arrangements and incomplete technology.Code.   For the avoidance of doubt, the Committee may use any of the foregoing and/or any additional or different performance goals and may make the foregoing or any other adjustments it chooses with respect to Awards (other than Grandfathered Awards). (kk)(u) “Performance PeriodPlan” means the period determined by the Committee in its sole discretion during which performance or other vesting conditions are measured. (ll)     “Performance Unit” means an Award granted to a Participant pursuant to Section 9. (mm)     “Period of Restriction” means the period during which the transfer of Shares are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the Administrator. (nn)      “Plan” means the Monolithic Power Systems, Inc. 2014 Equity Incentivethis 2004 Employee Stock Purchase Plan, as it may be amended or amended and restated from time to time.   (oo)(v) “Restricted Stock” means Shares issued pursuant to a Restricted Stock Award under Section 7 of the Plan. 61 Table of Contents (pp)     “Restricted Stock UnitPurchase Price” means an Award grantedamount equal to eighty-five percent (85%) of the Fair Market Value of a Participantshare of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Administrator pursuant to Section 10.20.   (qq)(w) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (rr)     “Section 16(b) “ means Section 16(b) of the Exchange Act. (ss)     “Securities Act” means the Securities Act of 1933, as amended. (tt)     “Service Provider” means an Employee, Director or Consultant. (uu)      “Share” means a share of the Common Stock, as adjusted in accordance with Section 14 of the Plan. (vv)     “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant to Section 8 is designated as a SAR. (ww)     “Subsidiary” means a “subsidiary corporation”,corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.   (xx)(x) “Tandem SARTrading Day” means a SAR that is granted in connection with a related Option,day on which the exercise of which will require forfeiture ofU.S. national stock exchanges and the right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same extent).Nasdaq System are open for trading.   3. Stock Subject to the Plan 3. Eligibility.   (a) Stock SubjectFirst Offering Period. Any individual who was an Employee immediately prior to the Plan. Subject to the provisions of Section 14 of the Plan, the maximum aggregate number of Shares that may be available for AwardsFirst Offering Period under the Plan is 10,500,000 Shares (consisting of 5,500,000 Shares approved by the Company’s stockholderswas automatically enrolled in 2013 and 5,000,000 Shares approved by the Company’s stockholders in 2020). The Shares may be authorized, but unissued, or reacquired Common Stock. Shares will not be deemed to have been utilized pursuant to the Plan with respect to any portion of an Award that is settled in cash. Subject to the provisions of Section 14 of the Plan, all 10,500,000 Shares available for Awards under the Plan may be issued pursuant to Incentive Stock Options. Upon payment in Shares pursuant to the exercise of a SAR, the number of Shares available for Awards under the Plan will continue to be reduced by the gross number of Shares with respect to which the SAR is being exercised, rather than reducing the number of Shares available by only the number of Shares issued. Similarly, if the exercise price of an Option is paid by net exercise or by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under the Plan will be reduced by the gross number of Shares for which the Option is exercised.such First Offering Period.   (b) Lapsed AwardsSubsequent Offering Periods. IfAny individual who is an Award expires or becomes unexercisable without having been exercised in full or, with respect to Restricted Stock, Performance Units, Restricted Stock Units or Dividend Equivalents, is forfeited to or repurchased by the Company due to failure to vest, the unexercised, forfeited or repurchased Shares (as applicable) will become available again under the Plan (unless the Plan has terminated). Shares tendered in paymentEmployee as of the exercise or purchase priceEnrollment Date of an Award, orany future Offering Period following the First Offering Period will be eligible to participate in satisfaction of tax withholding related to an Award, will not be returnedsuch Offering Period, subject to the Plan and will not become available for future distribution under the Plan. 62 Tablerequirements of Contents Section 5.   (c) Share ReserveLimitations. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan. 4. Administration of the Plan. (a)       Procedure. (i)      Multiple Administrative Bodies. Different Committees with respect to different groups of Service Providers may administer the Plan. The Board or a committee of the Board may delegate authority to grant Awards to one or more Officers of the Company in a manner that complies with Applicable Laws. (ii)     Section 162(m). No Awards granted under the Plan on or after the Effective Date will be designed or intended to be “performance-based compensation” for purposes of Section 162(m) of the Code. With respect to Awards granted under the Plan prior to the Effective Date that are intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code (the “Grandfathered Awards”), such Grandfathered Awards shall continue to be governed by the applicableAny provisions of the Plan to the contrary notwithstanding, no Employee will be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Offering Periods. The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after February 16 and August 16 of each year, or on such other date as the Administrator shall determine, and continuing thereafter until terminated in effectaccordance with Section 20. The Administrator shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced prior to the Effective Date of this amendment and restatementscheduled beginning of the Plan. (iii)     Rule 16b-3. To the extent desirablefirst Offering Period to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3; provided, however, that if it is later determined that such requirements were not satisfied, actions taken by the Administrator shall be valid for all other purposes despite such failure to satisfy Rule 16b-3. (iv)     Other Administration. Other than as provided above, the Plan will be administered by (A) the Board or (B) a Committee, which committee will be constituted to satisfy Applicable Laws. (b)      Powers of the Administrator. Subject to the provisions of the Plan,affected thereafter and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee or by a Committee to another Committee, the Administrator will have the authority, in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Awards may be granted hereunder and the type of Awards to be granted; (iii) to determine the number of Shares to be covered by, or size of, each Award granted hereunder and the value of Performance Units granted hereunder; (iv) to approve forms of Award Agreement for use under the Plan; 63 Table of Contents (v)      to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise and purchase price, the time or times when Awards may be exercised (which may be based on performance criteria), the right to receive dividends or Dividend Equivalents, any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine; (vi)     to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan; (vii)     to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; (viii)    to modify or amend each Award (subject to the terms of the Plan), including but not limited to the discretionary authority to extend the post-termination exercisability period of Awards; (ix)     to determine the manner in which Participants can satisfy withholding tax obligations; (x)      to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator; (xi)     to defer, or to allow a Participant to defer, the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award; and (xii)     to make all other determinations deemed necessary or advisable for administering the Plan. (c)     Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations will be final and binding on all Participants and any other holders of Awards. 5.           Eligibility. Nonstatutory Stock Options, Restricted Stock, Stock Appreciation Rights, Performance Units, Restricted Stock Units and Dividend Equivalents may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 6.           Stock Options. (a)      Limitations. (i)     Each Option will be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Valuelength of the SharesOffering Period does not exceed 27 months (or any other applicable length as set forth in Section 423 of the Code). 5. Participation. (a) First Offering Period. An Employee who was a participant in the First Offering Period under the Plan pursuant to Section 3(a) was entitled to continue his or her participation in such Offering Period only if he or she submitted to the Company’s payroll office (or its designee) a properly completed subscription agreement authorizing payroll deductions in the form provided by the Administrator for such purpose (i) no earlier than the effective date of the filing of the Company’s Registration Statement on Form S-8 with respect to which Incentivethe shares of Common Stock Options are exercisable forissuable under the first time byPlan in 2004 (the “Original S-8 Effective Date”) and (ii) no later than five (5) business days from the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000,Original S-8 Effective Date or such Option otherwise failsother period of time as the Administrator may have determined (the “Enrollment Window”). A participant’s failure to satisfysubmit the requirementssubscription agreement during the Enrollment Window pursuant to be Incentive Stock Options, such Option will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options will be taken into account5(a) would have resulted in the orderautomatic termination of his or her participation in which they were granted. The Fair Market Value of the Shares will be determined as ofFirst Offering Period under the time the Option with respect to such Shares is granted (or modified, as applicable).Plan.   64 Table of Contents   (ii)         The following limitations will apply(b) Subsequent Offering Periods. An Employee who is eligible to grants of Options:participate in the Plan pursuant to Section 3(b) may become a participant by submitting, on or before a date prescribed by the Administrator prior to an applicable Enrollment Date, a properly completed subscription agreement authorizing payroll deductions in an electronic form or other enrollment procedure prescribed by the Administrator.   (A)     No Service Provider6. Payroll Deductions. (a) At the time a participant enrolls in the Plan pursuant to Section 5, he or she will elect to have payroll deductions made on each payday during the Offering Period in an amount not exceeding 15% of the Compensation which he or she receives on each such payday. (b) Payroll deductions authorized by a participant will commence on the first payday following the Enrollment Date and will end on the last payday in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10; provided, however, that for the First Offering Period under the Plan, payroll deductions commenced on the first payday on or following the end of the Enrollment Window. (c) All payroll deductions made for a participant will be granted, in any Fiscal Year, Optionscredited to purchase more than 1,000,000 Shares. (B)     In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,250,000 Shares, which will not count againstaccount under the limit set forth in Section 6(a)(ii)(A) above. (C)     The foregoing limitations will be adjusted proportionately in connection with any changePlan (initially in the Company’s capitalization as described in Section 14. (D)     If an Option is cancelled in the same Fiscal Yearcurrency in which it was granted (other than in connection with a transaction described in Section 14), the cancelled Option will be counted against the limits set forth in subsections (A) and (B) above. (b)       Term of Option. The term of each Option will be stated in the Award Agreement. The term will be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock ofpaid by the Company or any Parent orDesignated Subsidiary, the term of the Incentive Stock Optionas applicable) and will be five (5) years fromwithheld in whole percentages only. A participant may not make any additional payments into such account. Any payroll deductions initially credited in a currency other than U.S. Dollars will be converted into U.S. Dollars so that all purchases of Common Stock under the date of grantPlan are made with U.S. Dollars. The Company may, at its discretion, convert the payroll deductions to U.S. Dollars at any time during an Offering Period. Any changes or such shorter term as may be providedfluctuations in the Award Agreement. (c)       Option Exercise Price and Consideration. (i)      Exercise Price. The per share exercise price forexchange rate at which the Shares topayroll deductions collected on a participant's behalf are converted into U.S. Dollars shall be issued pursuant toborne solely by the exercise of an Option will beparticipant, with the applicable exchange rate determined by the Administrator subjectin its sole discretion. (d) A participant may discontinue his or her participation in the Plan as provided in Section 10, or may change the rate of his or her payroll deductions during the Offering Period by (i) properly completing and submitting to the following: (A) In the case of an Incentive Stock Option: (1)     grantedCompany’s payroll office (or its designee), on or before a date prescribed by the Administrator prior to an Employee who,applicable Exercise Date, a new subscription agreement authorizing the change in payroll deduction rate in the form provided by the Administrator for such purpose, or (ii) following an electronic or other procedure prescribed by the Administrator; provided, however, that a participant may only make one payroll deduction change during each Offering Period. If a participant has not followed such procedures to change the rate of payroll deductions, the rate of his or her payroll deductions will continue at the timeoriginally elected rate throughout the Incentive Stock Option is granted, owns stock representing more than ten percent (10%)Offering Period and future Offering Periods (unless terminated as provided in Section 10). The Administrator may, in its sole discretion, limit the nature and/or number of payroll deduction rate changes that may be made by participants during any Offering Period. Any change in payroll deduction rate made pursuant to this Section 6(d) will be effective as of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share onfirst full payroll period following five (5) business days after the date of grant.on which the change is made by the participant (unless the Administrator, in its sole discretion, elects to process a given change in payroll deduction rate more quickly).   (2)     granted(e) Notwithstanding the foregoing, to any Employee other than an Employee described in paragraph (A)(1) immediately above, the per Share exercise price will be no less than 100%extent necessary to comply with Section 423(b)(8) of the Fair Market Value per Share onCode and Section 3(c), a participant’s payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period. Subject to Section 423(b)(8) of the dateCode and Section 3(c) hereof, payroll deductions will recommence at the rate originally elected by the participant effective as of grant.the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10.   65 Table of Contents   (B)     In(f) At the casetime the option is exercised, in whole or in part, or at the time some or all of a Nonstatutorythe Company’s Common Stock Option,issued under the per SharePlan is disposed of, the participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exercise priceof the option or the disposition of the Common Stock. At any time, the Company may, but will not be obligated to, withhold from the participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to the sale or early disposition of Common Stock by the Employee. 7. Grant of Option. On the Enrollment Date of each Offering Period, each Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such participant’s payroll deductions accumulated prior to such Exercise Date and retained in the participant’s account as of the Exercise Date by the applicable Purchase Price; provided that in no event will a participant be permitted to purchase during each Offering Period more than 2,000 shares of Common Stock (subject to any adjustment pursuant to Section 19), and provided further that such purchase will be subject to the limitations set forth in Sections 3(c) and 13. The Employee may accept the grant of such option (i) with respect to the First Offering Period under the Plan, by submitting a properly completed subscription agreement in accordance with the requirements of Section 5(a) on or before the last day of the Enrollment Window, and (ii) with respect to any future Offering Period under the Plan, by electing to participate in the Plan in accordance with the requirements of Section 5(b). The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that a participant may purchase during each Offering Period. Exercise of the option will occur as provided in Section 8, unless the participant has withdrawn pursuant to Section 10. The option will expire on the last day of the Offering Period. 8. Exercise of Option. (a) Unless a participant withdraws from the Plan as provided in Section 10, his or her option for the purchase of shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to option will be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares of Common Stock will be purchased; any payroll deductions accumulated in a participant’s account which are not sufficient to purchase a full share will be retained in the participant’s account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10. Any other monies left over in a participant’s account after the Exercise Date will be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shares hereunder is exercisable only by him or her. (b) Notwithstanding any contrary Plan provision, if the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which options are to be exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the Plan on such Exercise Date, the Administrator may in its sole discretion (x) provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, or (y) provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 20. The Company may make pro rata allocation of the shares of Common Stock available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares of Common Stock for issuance under the Plan by the Company’s shareholders subsequent to such Enrollment Date. 66 Table of Contents 9. Delivery. As soon as administratively practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each participant, as appropriate, the shares purchased upon exercise of his or her option in a form determined by the Administrator (in its sole discretion) and pursuant to rules established by the Administrator. No participant will have any voting, dividend, or other shareholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and delivered to the participant as provided in this Section 9. 10. Withdrawal. (a) Under procedures established by the Administrator, a participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan, at least ten days prior to an applicable Exercise Date, by following an electronic or other withdrawal procedure prescribed by the Administrator. All of the participant’s payroll deductions credited to his or her account will be paid to such participant as promptly as practicable after the effective date of his or her withdrawal and such participant’s option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions will not be less than one hundred percent (100%)resume at the beginning of the Fair Market Valuesucceeding Offering Period unless the participant re-enrolls in the Plan in accordance with the provisions of Section 5. (b) A participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 11. Termination of Employment. Upon a participant’s ceasing to be an Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant’s account during the Offering Period but not yet used to purchase shares of Common Stock under the Plan will be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such participant’s option will be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment will be treated as continuing to be an Employee for the participant’s customary number of hours per Shareweek of employment during the period in which the participant is subject to such payment in lieu of notice. 12. Interest. No interest will accrue on the datepayroll deductions of grant.a participant in the Plan.   (C)     Notwithstanding the foregoing, Options may be granted with (or adjusted13. Stock. (a) Subject to include) a per Share exercise price of less than 100%adjustment upon changes in capitalization of the Fair Market Value per Share onCompany as provided in Section 19, as of the dateEffective Date, the maximum number of grant pursuantshares of Common Stock which will be made available for sale under the Plan will be 4,400,000 shares of Common Stock. (b) Shares of Common Stock to be delivered to a transaction describedparticipant under the Plan will be registered in Section 424(a)the name of the Code.participant or in the name of the participant and his or her spouse.   (ii)       Waiting Period and Exercise Dates14. Administration. AtThe Board or a committee of members of the Board who will be appointed from time an Option is granted, the Administrator will fix the period within which the Option may be exercisedto time by, and will determine any conditions that must be satisfied beforeserve at the Option may be exercised. (iii)      Formpleasure of, Consideration.the Board, will administer the Plan. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (A) cash (including electronic wire transfer); (B) check; (C) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equalfull and exclusive discretionary authority to the aggregate exercise price of the Shares as to which said Option will be exercisedconstrue, interpret and provided further that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole discretion; (D) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (E) by net exercise; (F) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (G) any combination of the foregoing methods of payment. (d) Exercise of Option. (i)      Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder will be exercisable according toapply the terms of the Plan, to determine eligibility, to adjudicate all disputed claims filed under the Plan and atto establish such timesprocedures that it deems necessary for administration of the Plan (including, without limitation, to adopt such procedures and undersub-plans as are necessary or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the United States). The Administrator, in its sole discretion and on such terms and conditions as determinedit may provide, may delegate to one or more individuals all or any part of its authority and powers under the Plan. Every finding, decision and determination made by the Administrator (or its designee) will, to the full extent permitted by law, be final and set forthbinding upon all parties. 67 Table of Contents 15. Designation of Beneficiary. (a) A participant may designate a beneficiary who is to receive any shares of Common Stock and cash, if any, from the participant’s account under the Plan in the Award Agreement. An Optionevent of such participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may designate a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent will be exercisedrequired for a fractionsuch designation to be effective. (b) Such designation of beneficiary may be changed by the participant at any time. In the event of the death of a Share.participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.   An Option(c) All beneficiary designations under this Section 15 will be deemed exercised when the Company receives: (A) notice of exercise (inmade in such form and manner as the Administrator may specifyprescribe from time to time) fromtime. 16. Transferability. Neither payroll deductions credited to a participant’s account nor any rights with regard to the person entitled to exercise the Option, and (B) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes), with the exercise effective only if the exercise otherwise complies with Applicable Laws. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Optionoption or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15) by the participant. Any such attempt at assignment, transfer, pledge or other disposition will be issuedwithout effect, except that the Company may treat such act as an election to withdraw from an Offering Period in the nameaccordance with Section 10. 17. Use of the ParticipantFunds. All payroll deductions received or if requestedheld by the Participant, inCompany under the namePlan may be used by the Company for any corporate purpose, and the Company will not be obligated to segregate such payroll deductions. Until shares of the Participant and his or her spouse or lawfully recognized domestic partner. Until SharesCommon Stock are issued under the Plan (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any othera participant will only have the rights as a stockholder will existof an unsecured creditor with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. Except as otherwise provided in Section 14 of the Plan, no adjustmentshares. 18. Reports. Individual accounts will be mademaintained for a dividend or other right foreach participant in the Plan. Statements of account will be given to participating Employees at least annually, which statements will set forth the record date is prior toamounts of payroll deductions, the date the Shares are issued. 66 Table of Contents Exercising an Option in any manner will decreasePurchase Price, the number of Shares thereafter available, both for purposesshares of Common Stock purchased and the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.remaining cash balance, if any.   (ii)      Termination19. Adjustments, Dissolution, Liquidation or Change of Continuous Service. If a Participant’s Continuous Service terminates (other than upon the Participant’s termination as the result of the Participant’s death or Disability), the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for three (3) months following the termination of Participant’s Continuous Service. Unless otherwise provided by the Administrator, if on the date of termination of Participant’s Continuous Service, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If, after termination of Participant’s Continuous Service, the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan. The Administrator may provide in the Award Agreement that the Option will terminate immediately on a termination of the Participant’s Continuous Service for Cause. (iii)     Disability of Participant. If a Participant’s Continuous Service is terminated as a result of the Participant’s Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination of Continuous Service (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following the Participant’s termination of Continuous Service due to Disability. Unless otherwise provided by the Administrator, if on the date of termination of Continuous Service Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination of Continuous Service Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan. (iv)     Death of Participant. If a Participant’s Continuous Service terminates as a result of such Participant’s death, the Option may be exercised following the Participant’s death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the Option be exercised later than the expiration of the term of such Option as set forth in the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has been designated prior to Participant’s death in a form acceptable to the Administrator. If no such beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participant’s estate or by the person(s) to whom the Option is transferred pursuant to the Participant’s will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participant’s death. Unless otherwise provided by the Administrator, if at the time of death, Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option will terminate, and the Shares covered by the unexercised portion of such Option will revert to the Plan. 67 Table of Contents 7.            Restricted StockControl.   (a) GrantAdjustments. In the event that any dividend or other distribution (whether in the form of Restrictedcash, Common Stock,. Subject to the terms and provisions other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Plan,Company, or other change in the Administrator, at any time and from time to time, may grant Sharescorporate structure of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine. (b)     Restricted Stock Agreement. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Unless the Administrator determines otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until Period of Restriction expires and all restrictions onaffecting the Common Stock such Shares have lapsed. (c)     Transferability. Unless otherwisethat an adjustment is determined by the Administrator Shares of Restricted Stock may not(in its sole discretion) to be sold, transferred, pledged, assigned,appropriate in order to prevent dilution or otherwise alienated or hypothecated until the endenlargement of the applicable Period of Restriction. (d)     Other Restrictions. Thebenefits or potential benefits intended to be made available under the Plan, then the Administrator will, in its sole discretion, may impose such other restrictions on Shares of Restricted Stockmanner as it may deem advisable or appropriate. (i)      General Restrictions. The Administratorequitable, adjust the number and class of Common Stock which may set restrictions based upon continued employment or service withbe delivered under the CompanyPlan, the Purchase Price per share and its Affiliates, the achievementnumber of Performance Goals or other performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion. (ii)     Performance Restrictions. The Administrator, in its discretion, may make the grantshares of Restricted Stock, or the vesting of Restricted Stock, contingent upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator in connection with the grant of such Restricted Stock. (e)      Removal of Restrictions. Unless otherwise determined by the Administrator, Shares of RestrictedCommon Stock covered by each Restricted Stock grant madeoption under the Plan will be released from escrow as soon as practicable afterwhich has not yet been exercised, and the last daynumerical limits of the Period of Restriction. After the grant of a Restricted Stock, the Administrator, in its sole discretion, may reduce or waive any restrictions or performance objectives or other vesting provisions for such Restricted Stock.Sections 7 and 13.   68 Table of Contents   (f)     Stockholder Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise. (g)     Dividends. At the discretion of the Administrator, an Award of Restricted Stock may provide the Participant with the right to receive dividends, which shall be subject to the same restrictions and vesting conditions applicable to such Award. (h)     Return of Restricted Stock to Company. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan. 8.            Stock Appreciation Rights. (a)      Grant of SARs. Subject to the terms and conditions of the Plan, a SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof. (b) Number of Shares. Subject to the following limitations, the Administrator will have complete discretion to determine the number of SARs granted to any Service Provider: (i)      No Service Provider will be granted, in any Fiscal Year, SARs to purchase more than 1,000,000 Shares. (ii)   In connection with his or her initial service, a Service Provider may be granted SARs to purchase up to an additional 1,250,000 Shares, which will not count against the limit set forth in Section 8(b)(i) above. (iii)     The foregoing limitations will be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 14. (iv)     If a SAR is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 14), the cancelled SAR will be counted against the limits set forth in subsections (i) and (ii) above. (c)      Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms and conditions of SARs granted under the Plan. However, the exercise price of Tandem or Affiliated SARs will equal the exercise price of the related Option. In addition, the exercise price of Freestanding SARs will not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant; provided, however that a SAR may be granted with (or adjusted to include) a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in Section 424(a) of the Code. 69 Table of Contents (d)     Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (i) the Tandem SAR will expire no later than the expiration of the underlying Incentive Stock Option; (ii) the value of the payout with respect to the Tandem SAR will be for no more than one hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (iii) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option exceeds the exercise price of the Incentive Stock Option. (e)     Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be exercised upon the exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option. (f)     Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions as the Administrator, in its sole discretion, will determine. (g)     SAR Agreement. Each SAR Award will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine. (h)     Expiration of SARs. A SAR granted under the Plan will expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs. (i)     Payment of SAR Amount. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying: (i)        The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times (ii) The number of Shares with respect to which the SAR is exercised. At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. (j)      Stockholder Rights. Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends), or any other rights as a stockholder will exist with respect to the SARs, notwithstanding the exercise of the SARs. The Company will issue (or cause to be issued) such Shares promptly after the SAR is exercised, subject to the payment of applicable withholding taxes and compliance with Applicable Laws. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 14 of the Plan. 70 Table of Contents 9.             Performance Units. (a)     Grant of Performance Units. Performance Units may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units granted to each Participant. (b)     Value of Performance Units. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant and denominated in U.S. dollars. (c)     Performance Objectives and Other Terms. The Administrator, in its discretion, shall set performance objectives (including objectives based on Performance Goals) or other vesting criteria which, depending on the extent to which they are met, will determine the number or value of Performance Units that will be paid out to the Participants. Each Award of Performance Units shall be evidenced by an Award Agreement that shall specify the Performance Period, if applicable, and such other terms and conditions as the Administrator, in its sole discretion, shall determine. (i)     General Restrictions. The Administrator may condition the granting of the Performance Units, or the vesting of the Performance Units, on continued employment or service with the Company and its Affiliates, the achievement of Performance Goals or other performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion. (ii)  ��  Performance Restrictions. The Administrator, in its discretion, may condition the granting or vesting of Performance Units on the achievement of Performance Goals. The Performance Goals shall be set by the Administrator in connection with the grant of such Performance Unit Award. (d)     Earning of Performance Units. After the applicable Performance Period has ended, the holder of Performance Units will be eligible to receive a payout of the number of Performance Units earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals, performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions applicable to such Performance Unit. (e)     Form and Timing of Payment of Performance Units. Except as otherwise provided in an Award Agreement, payment of earned Performance Units will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units on the date set forth in the Award Agreement) or in a combination thereof. (f)     Cancellation of Performance Units. Upon the occurrence of the termination of the Participant’s Continuous Service and/or such other date set forth in the Award Agreement (or any other written agreement between the Company and the Participant), or except as otherwise determined by the Committee, all unearned or unvested Performance Units will be forfeited to the Company, and again will be available for grant under the Plan. 71 Table of Contents (g)     Stockholder Rights. Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Performance Units. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, as applicable, except as provided in Section 14 or Section 9(h) of the Plan or as determined by the Administrator as applicable to the calculation of Performance Goals or other performance criteria. (h)     Dividend Equivalents. Dividend Equivalents may be credited in respect of Shares subject to Performance Units, as determined by the Administrator and as contained in the applicable Award Agreement or a separate Award Agreement. Dividend Equivalents will be subject to the same terms and conditions applicable to the underlying Performance Units to which they relate, including vesting, performance conditions, forfeiture, and restrictions on transfer or alienation. 10. Restricted Stock Units. (a)     Grant of Restricted Stock Units. Restricted Stock Units may be granted to Service Providers at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Restricted Stock Units granted to each Participant. (b)     Value of Restricted Stock Units. Each Restricted Stock Unit will have a value equal to the Fair Market Value of one Share. (c)     Other Restrictions. The Administrator, in its sole discretion, may impose such restrictions on Restricted Stock Units as it may deem advisable or appropriate. (i)     General Restrictions. The Administrator may set restrictions based upon continued employment or service with the Company and its Affiliates, the achievement of Performance Goals or other specific performance objectives (Company-wide, departmental, or individual), or any other basis determined by the Administrator in its discretion. (ii)     Performance Restrictions. The Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals shall be set by the Administrator in connection with the grant of such Restricted Stock Units. Restricted Stock Units that are subject to Performance Goals are sometimes referred to as “Performance RSUs” or “PRSUs.” (d)     Earning of Restricted Stock Units. After the applicable vesting period or Performance Period has ended, the holder of Restricted Stock Units will be eligible to receive a payout of the number of Restricted Stock Units earned by the Participant, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of Restricted Stock Units, the Administrator, in its sole discretion, may reduce or waive any restrictions or performance objectives or other vesting provisions applicable to such Restricted Stock Units. 72 Table of Contents (e)     Form and Timing of Payment of Restricted Stock Units. Except as otherwise provided in an Award Agreement, payment of earned Restricted Stock Units will be made as soon as practicable after the expiration of the applicable vesting period or Performance Period. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in the form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Restricted Stock Units at the close of the applicable vesting period or Performance Period), or in a combination thereof. (f)     Cancellation of Restricted Stock Units. On the termination of the Participant’s Continuous Service and/or such other date set forth in the Award Agreement, all unearned or unvested Restricted Stock Units will be forfeited to the Company, and again will be available for grant under the Plan. (g)     Stockholder Rights. Unless and until Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends (except as otherwise provided in Section 10(h)), or any other rights as a stockholder will exist with respect to the Restricted Stock Units. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, as applicable, except as provided in Section 10(h) and Section 14 of the Plan. (h)     Dividend Equivalents. At the discretion of the Administrator, Dividend Equivalents may be credited in respect of Shares subject to Restricted Stock Units, which shall be subject to the same restrictions and vesting conditions applicable to such Award. The terms of any Dividend Equivalents will be contained in the applicable Award Agreement or a separate Award Agreement. 11.           Limitation on Grants to Outside Directors. No Outside Director shall be granted, in any one Fiscal Year, compensation for such service having an aggregate maximum value (measured at the date of grant as applicable, and calculating the value of any Awards based on the grant date fair value for financial reporting purposes) in excess of $1,000,000. 12.           Leaves of Absence; Transfer Between Locations. Unless the Administrator provides otherwise (including for purposes of compliance with Applicable Laws), vesting of Awards granted hereunder will be suspended during any unpaid leave of absence. A Participant will not cease to be an Employee in the case of any leave of absence approved by the Company or transfers between locations of the Company or between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then on the date that is six (6) months following the first (1st) day of such leave, any Incentive Stock Option held by the Participant will cease to be treated as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option. The Administrator reserves the right to unilaterally reduce the rate of vesting of, or the number of Shares or units subject to, an Award if a Participant’s level of regular service is reduced (e.g., a reduction from full-time to part-time status). 73 Table of Contents 13.           Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 14.           Adjustments; Dissolution or Liquidation; Merger or Change in Control. (a)     Adjustments. If, after the Effective Date, there is an equity restructuring (within the meaning of FASB Accounting Standards Codification (ASC) 718) that causes the per share value of Shares to change, such as any large and nonrecurring cash dividend, stock dividend, stock split, combination of shares, recapitalization, or other change in the capital structure of the Company, any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing (any such event, a “Capitalization Adjustment”), the Administrator shall cause there to be made an equitable adjustment to: (i) the number and, if applicable, kind of shares that may be issued under the Plan or pursuant to any type of Award under the Plan, (ii) the Award limits established and approved by stockholders for purposes of Section 421 of the Code, (iii) the number and, if applicable, kind of shares subject to outstanding Awards, (iv) as applicable, the exercise or purchase price of any then outstanding Awards, and/or (v) any other Award terms. Any fractional shares resulting from a Capitalization Adjustment shall be eliminated. Any Capitalization Adjustment made pursuant to this Section 14(a) shall be conclusive and binding for all purposes of the Plan. (b)     Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the AdministratorOffering Period then in progress will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Awardbe shortened by setting a new Exercise Date (the “New Exercise Date”), and will terminate immediately prior to the consummation of such proposed action.dissolution or liquidation, unless provided otherwise by the Board. The New Exercise Date will be before the date of the Company’s proposed dissolution or liquidation. The Board will notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10.   (c) Change inof Control. In the event of a Change inof Control, each outstanding Awardoption will be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Award,option, any Offering Period then in progress will be shortened by setting a new Exercise Date (the “New Exercise Date”) and such Offering Period will end on the ParticipantNew Exercise Date. The New Exercise Date will fully vestbe before the date of the Company’s proposed Change of Control. The Board will notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10. 20. Amendment or Termination. (a) The Administrator may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19, no such termination can affect options previously granted under the Plan, provided that an Offering Period may be terminated by the Administrator on any Exercise Date if the Administrator determines that the termination or suspension of the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 19 and this Section 20, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company will obtain stockholder approval in such a manner and to such a degree as required. (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the rightAdministrator will be entitled to exercise allchange the Offering Periods, limit the frequency and/or number of hischanges in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars using any reasonable method, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or her outstanding Awards, including Sharesmistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures as tothe Administrator determines in its sole discretion advisable which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapseare consistent with the Plan. (c) In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent applicablenecessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: (i) altering the Purchase Price for any kind of Award, all performance goals or other vesting criteria will be deemed achievedOffering Period including an Offering Period underway at maximum levels and all other terms and conditions met; provided, however, that no such acceleration shall occur to the extent the Administrator determines that an Award constitutes “nonqualified deferred compensation” within the meaning of Section 409Atime of the Codechange in Purchase Price; (ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and such acceleration would cause the Participant to incur additional taxes pursuant to Section 409A. In addition, if an Option or Stock Appreciation Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or Stock Appreciation Right will be fully vested and exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period. (iii) allocating shares.   7469 Table of Contents   With respect to Awards granted to an Outside Director that are assumedSuch modifications or substituted for, if onamendments will not require stockholder approval or the dateconsent of any Plan participants. 21. Notices. All notices or following such assumption or substitution the Participant’s status asother communications by a Director or a director of the successor corporation, as applicable, is terminated other than upon a voluntary resignation by the Participant that is not required by or a condition of the applicable definitive agreement pursuant to which the Change in Control occurs, then the Participant will fully vest in, and have the right to exercise Options and/or Stock Appreciation Rights as to, all of the Shares subjectparticipant to the Award, including Shares as to which such Award would not otherwise be vestedCompany under or exercisable, all restrictions on Restricted Stock will lapse and, toin connection with the extent applicable for all Awards, all performance goals or other vesting criteriaPlan will be deemed achieved at maximum levels and all other terms and conditions met. For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation Right upon the exercise of which the Administrator determines to pay cash or a Performance Unit or Restricted Stock Unit which the Administrator can determine to pay in cash, the fair market value of the considerationhave been duly given when received in the Change in Controlform specified by holdersthe Company at the location, or by the person, designated by the Company for the receipt thereof. 22. Conditions Upon Issuance of Shares. Shares of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares). If the consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Unit or Restricted Stock Unit, for each Share subject to such Award (or in the case of Performance Units, the number of implied shares determined by dividing the value of the Performance Units by the per share consideration received by holders of Common Stock in the Change in Control), to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control. Notwithstanding anything in this Section 14(c) to the contrary, an Award that vests, is earned or paid out upon the satisfaction of one or more Performance Goals will not be considered assumed if the Company or its successor modifies any of such Performance Goals without the Participant’s consent; provided, however, a modification to such Performance Goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption. 15. Tax Withholding. (a)     Withholding Requirements. The Company and each of its Affiliates shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company or any of its Affiliates, an amount sufficient to satisfy federal, state, local, domestic or foreign taxes required by law or regulation to be withheld with respect to any taxable event arising as a result of the Plan. 75 Table of Contents (b)     Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from time to time, may permit a Participant to satisfy any tax withholding, in whole or in part by, without limitation (i) paying cash, (ii) electing to have the Company or any of its Affiliates withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the minimum statutory amount required to be withheld or (iv) electing any other method as may be set forth in the Participant’s Award Agreement. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. In addition, the Fair Market Value of the Shares to be withheld or delivered pursuant to this Section 15(b) may exceed the minimum amount required to be withheld only if (A) an additional amount can be withheld and not result in adverse accounting consequences and (B) such additional withholding amount is authorized by the Committee. 16.          No Effect on Employment or Service. Neither the Plan nor any Award will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company or any of its Affiliates, nor will they interfere in any way with the Participant’s right or the right of the Company or any of its Affiliates to terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. 17.          Date of Grant. The date of grant of an Award will be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is provided for by the Administrator on which the Award becomes effective. Notice of the determination will be provided to each Participant within a reasonable time after the date of such grant. 18.          Term of Plan. The original Monolithic Power Systems, Inc. 2014 Equity Incentive Plan was adopted by the Board on April 22, 2013 and became effective as of November 13, 2014. This amendment and restatement of the Monolithic Power Systems, Inc. 2014 Equity Incentive Plan was adopted by the Board on April 21, 2020, and its Effective Date (the “Effective Date”) shall be the date on which it is approved by the stockholders of the Company in accordance with Section 22 of the Plan. No Awards shall be granted pursuant to this Plan more than ten (10) years after the Effective Date. 19.          Amendment and Termination of the Plan. (a)     Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b)     Stockholder Approval. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws, including any amendment that, for purposes of the applicable stock exchange rules (and except as permitted under Section 14 of the Plan) (i) would materially increase the number of securities which may be issued under this Plan, or (ii) must otherwise be approved by the stockholders of the Company in order to comply with applicable law or the rules of the Nasdaq Stock Market or, if the Common Stock is not traded on the Nasdaq Stock Market, the principal national securities exchange upon which the Common Stock is traded or quoted, all as determined by the Board. 76 Table of Contents (c)     Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan or an Award will materially impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company; provided that an amendment or modification that may cause an Incentive Stock Option to become a Nonstatutory Stock Option shall not be treated as adversely affecting the rights of the Participant for purposes of Section 19(c) of the Plan. Termination of the Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 20. Conditions Upon Issuance of Shares. (a)     Legal Compliance. Shares will not be issued with respect to an option under an Awardthe Plan unless the exercise of such Award (if applicable)option and the issuance and delivery of such Sharesshares pursuant thereto will comply with Applicable Lawsall applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, including the rules and regulations promulgated thereunder, the Exchange Act and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with respect to such compliance. No exercise will be deemed effective unless and until the exercise complies with Applicable Laws.   (b)     Investment Representations. As a condition to the exercise of an Award,option, the Company may require the person exercising such Awardoption to represent and warrant at the time of any such exercise that the Sharesshares are being purchased only for investment and without any present intention to sell or distribute such Sharesshares if, in the opinion of counsel for the Company, such a representation is required.required by any of the aforementioned applicable provisions of law.   21.        Inability to Obtain Authority. The inability23. Term of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority will not have been obtained. 22.        Stockholder ApprovalPlan. The Plan was subject to approval byoriginally effective on the stockholdersOriginal Plan Effective Date. This amended and restated version of the Company within twelve (12) months afterPlan will become effective upon the dateEffective Date. It will continue in effect for a term of fifteen (15) years following the Plan is adopted by the Board. For future material modifications, such stockholder approval will be obtained in the manner and to the degree requiredEffective Date, unless sooner terminated under Applicable Laws.Section 20. 70   23.        No Repricings. ExceptSAMPLE SUBSCRIPTION AGREEMENT MONOLITHIC POWER SYSTEMS, INC. 2004 EMPLOYEE STOCK PURCHASE PLAN (Amended and Restated as otherwise provided in Section 14, the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.August 16, 2023) SUBSCRIPTION AGREEMENT 1.  hereby elects to participate in Monolithic Power Systems, Inc.’s 2004 Employee Stock Purchase Plan (the “Plan”), as amended and restated from time to time, including as of August 16, 2023, and subscribes to purchase shares of the Company’s Common Stock in accordance with this Subscription Agreement and the Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of % of my Compensation on each payday (from 0 to 15%) during the Offering Period in accordance with the Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions will be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option. 4. I have received a copy of the complete Plan. I understand that my participation in the Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to shareholder approval of the Plan. 5. Shares of Common Stock purchased for me under the Plan should be issued in the name(s) of Employee or Employee and Spouse only. 6. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Offering Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days after the date of any disposition of my shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain. 7. I hereby agree to be bound by the terms of the Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Plan.   7771 Table of Contents 24.       Accommodations for Participants of Different Nationalities. In order to facilitate the making of any grant or combination of grants under this Plan, the Administrator may provide for such special terms for Awards to Participants as the Administrator may consider necessary or appropriate to accommodate differences in local law, tax policy or custom given that Participants are expected to be nationals of both the United States of America and other countries, or to be employed by the Company or any Subsidiary both within and outside of the United States of America. Moreover, the Administrator may approve such supplements to or amendments, restatements or alternative versions of this Plan (including sub-plans) as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the stockholders of the Company. 25.        Compliance with Section 409A of the Code. (a)     To the extent applicable, it is intended that this Plan and any grants made hereunder comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Participants. This Plan and any grants made hereunder will be administered in a manner consistent with this intent. Any reference in this Plan to Section 409A of the Code will also include any regulations or any other formal guidance promulgated with respect to such section by the U.S. Department of the Treasury or the Internal Revenue Service. (b)     Neither a Participant nor any of a Participant’s creditors or beneficiaries will have the right to subject any deferred compensation (within the meaning of Section 409A of the Code) payable under this Plan and grants hereunder to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment. Except as permitted under Section 409A of the Code, any deferred compensation (within the meaning of Section 409A of the Code) payable to a Participant or for a Participant’s benefit under this Plan and grants hereunder may not be reduced by, or offset against, any amount owed by a Participant to the Company or any of its Subsidiaries. (c)     If, at the time of a Participant’s separation from service (within the meaning of Section 409A of the Code), (i) the Participant will be a specified employee (within the meaning of Section 409A of the Code and using the identification methodology selected by the Company from time to time) and (ii) the Company makes a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A of the Code) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A of the Code in order to avoid taxes or penalties under Section 409A of the Code, then the Company will not pay such amount on the otherwise scheduled payment date but will instead pay it, without interest, on the tenth business day of the seventh month after such separation from service. (d)     Notwithstanding any provision of this Plan and grants hereunder to the contrary, in light of the uncertainty with respect to the proper application of Section 409A of the Code, the Company reserves the right to make amendments to this Plan and grants hereunder as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A of the Code. In any case, a Participant will be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on a Participant or for a Participant’s account in connection with this Plan and grants hereunder (including any taxes and penalties under Section 409A of the Code), and neither the Company nor any of its Affiliates will have any obligation to indemnify or otherwise hold a Participant harmless from any or all of such taxes or penalties.   7872 Table of Contents Table of Contents73