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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant x | Filed by a Party other than the Registrant ¨ |
Check | the appropriate box: |
¨ | Preliminary Proxy Statement |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
x | Definitive Proxy Statement |
¨ | Definitive Additional Materials |
¨ | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-2 |
FUSION-IO, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. | |
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. | |
(1) | Title of each class of securities to which transaction applies:
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(2) | Aggregate number of securities to which transaction applies:
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(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
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(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: | |
¨ | Fee paid previously with preliminary materials. | |
¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
(1) | Amount Previously Paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
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2855 East Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121
(801) 424-5500
September 24, 2012
Dear Stockholder:
We are pleased to invite you to attend our 2012 annual meeting of stockholders to be held on Tuesday, November 6, 2012, at 10:30 a.m., Mountain Time, at our corporate headquarters in Salt Lake City, Utah. A map with directions to the meeting is found on the last page of the accompanying proxy statement. The formal meeting notice and proxy statement are attached.
At this year’s annual meeting, our stockholders will be asked to:
• | elect the two nominees for Class II director named in the proxy statement to the board of directors; |
• | ratify the selection by the audit committee of our board of directors of Ernst & Young LLP as Fusion-io’s independent registered public accounting firm for the current fiscal year ending June 30, 2013; and |
• | consider an advisory vote on the compensation of the named executive officers of Fusion-io for the fiscal year ended June 30, 2012. |
Your board of directors recommends that you vote “FOR” each of the proposals listed above. You should carefully read the attached proxy statement, which contains detailed information concerning each of these proposals.
Your vote is important. Whether or not you plan to attend the annual meeting, it is important that your shares be represented, and we hope you will vote as soon as possible. You may vote over the Internet, as well as by telephone, or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Please review the instructions on each of your voting options described in this proxy statement, as well as in the Notice of Internet Availability of Proxy Materials that you received in the mail. If you hold shares of our common stock through a broker, bank, or other nominee holder, please follow the voting instructions provided on the proxy card or the information forwarded by your bank, broker or other holder of record regarding your voting options.
Thank you for your ongoing support of Fusion-io. We look forward to seeing you at our annual meeting.
Very truly yours,
DAVID A. FLYNN
Chief Executive Officer, President and Chairman
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, please vote as soon as possible. Under New York Stock Exchange rules, your broker willNOT be able to vote your shares on proposals 1 or 3 unless they receive specific instructions from you. We strongly encourage you to vote.
We encourage you to vote by Internet. It is convenient for you and saves us postage and processing costs. For specific instructions on how to vote your shares, please refer to the section entitled “Questions and Answers about the Proxy Materials and Annual Meeting” beginning on page 1 of the accompanying proxy statement.
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FUSION-IO, INC.
NOTICE OF 2012 ANNUAL MEETING OF STOCKHOLDERS
TO STOCKHOLDERS OF FUSION-IO, INC.:
NOTICE IS HEREBY GIVEN that the 2012 annual meeting of stockholders of Fusion-io, Inc., a Delaware corporation, will be held on Tuesday, November 6, 2012, at 10:30 a.m., Mountain Time, at our corporate headquarters located at 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah, for the following purposes:
1. | elect the two nominees for Class II director named in the proxy statement to the board of directors, each to serve a term of three years, until our 2015 annual meeting of stockholders, or until their respective successors are duly elected and qualified; |
2. | to ratify the selection by the audit committee of our board of directors of Ernst & Young LLP as Fusion-io’s independent registered public accounting firm for the current fiscal year ending June 30, 2013, as described in the proxy statement; |
3. | to provide an advisory vote on the compensation of the named executive officers of Fusion-io for the fiscal year ended June 30, 2012, as described in the proxy statement; and |
4. | to transact any and all other business that may properly come before the meeting or at any and all adjournments or postponements of the meeting. |
The foregoing items of business are more fully described in the proxy statement accompanying this notice. We are not aware of any other business to come before the meeting at this time.
The meeting will begin promptly at 10:30 a.m., Mountain Time, and check-in will begin at 10:00 a.m., Mountain Time. Only stockholders of record at the close of business on September 13, 2012, or their valid proxies, are entitled to vote at the meeting and any and all adjournments or postponements of the meeting. If you are not a stockholder of record but hold shares through a broker, bank, trustee or nominee (that is, in “street name”), you will need to provide positive proof of beneficial ownership as of the record date, such as your most recent account statement prior to September 13, 2012, a copy of the voting instruction card provided by your broker, bank, trustee or nominee, or similar evidence of ownership.
A complete list of the stockholders entitled to vote at the meeting will be available and open to the examination of any stockholder for any purpose germane to the meeting for a period of at least 10 days prior to the meeting during normal business hours at our corporate headquarters.
Your vote is important. Whether or not you plan to attend the annual meeting, we encourage you to read the proxy statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions in the section entitled “Questions and Answers about the Proxy Materials and Annual Meeting” beginning on page 1 of the accompanying proxy statement.
By order of the Board of Directors | ||
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SHAWN J. LINDQUIST | ||
Chief Legal Officer, Executive Vice President and Secretary |
Salt Lake City, Utah
September 24, 2012
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 6, 2012: The notice of annual meeting, proxy statement and 2012 annual report are available by visiting http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=17123.
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PROXY STATEMENT
FOR 2012 ANNUAL MEETING OF STOCKHOLDERS
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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND ANNUAL MEETING | 1 | |||
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Process for Recommending Candidates to the Board of Directors | 15 | |||
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Class III Directors Continuing in Office until the 2013 Annual Meeting | 19 | |||
Class I Directors Continuing in Office until the 2014 Annual Meeting | 20 | |||
PROPOSAL 2—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 21 | |||
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Grants of Plan-Based Awards For Fiscal Year Ended June 30, 2012 | 46 | |||
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Option Exercises and Stock Vested in Fiscal Year Ended June 30, 2012 | 48 | |||
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Agreements Providing for Severance or Change of Control Benefits | 52 | |||
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RELATED PERSON TRANSACTIONS AND SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE | 57 | |||
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FUSION-IO, INC.
2855 East Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121
PROXY STATEMENT
The Board of Directors of Fusion-io, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), is soliciting proxies in the accompanying form to be used at our Annual Meeting of Stockholders to be held at our corporate headquarters, located at 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah on Friday, November 6, 2012 at 10:30 a.m. Mountain Time and for any postponement, adjournment or continuation thereof (the “Annual Meeting”).
ABOUT THE PROXY MATERIALS AND ANNUAL MEETING
What is a proxy?
A proxy is your legal designation of another person to vote the stock you own. The person you designate is your “proxy,” and you give the proxy authority to vote your shares by voting by telephone or over the Internet, or if you requested to receive printed proxy materials, by submitting the proxy card. We have designated the following persons to serve as proxies for the annual meeting:
— | David A. Flynn, Chief Executive Officer; |
— | Dennis P. Wolf, Chief Financial Officer; and |
— | Shawn J. Lindquist, Chief Legal Officer. |
Why am I receiving these materials?
Fusion-io has made these materials available to you on the Internet, or upon your request, has delivered printed versions of these materials to you by mail, in connection with the solicitation of proxies for use at our 2012 annual meeting of stockholders, which will take place on Friday, November 6, 2012 at 10:30 a.m., Mountain Time, at our corporate headquarters located at 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah. As a stockholder, you
are invited to attend the annual meeting and are requested to vote on the items of business described in this proxy statement. These materials were first sent or given to stockholders on September 24, 2012.
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
Pursuant to rules adopted by the U.S. Securities and Exchange Commission, or the SEC, Fusion-io has elected to provide access to its proxy materials via the Internet. Accordingly, Fusion-io is sending a Notice of Internet Availability of Proxy Materials, or the Notice, to its stockholders. All 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 access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of our annual meetings.
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What information is contained in this proxy statement?
The information in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, the compensation of our directors and most highly paid executive officers, our corporate governance policies, information on our board of directors, and certain other required information.
How do I get electronic access to the proxy materials?
The Notice will provide you with instructions regarding how to:
— | view on the Internet Fusion-io’s proxy materials for the annual meeting; and |
— | instruct us to send future proxy materials to you by email. |
Fusion-io’s proxy materials are also available at:http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=17123.
Choosing to receive future proxy materials by email will save Fusion-io the cost of printing and mailing documents to you and will reduce the impact of our annual meetings on the environment. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.
What items of business will be voted on at the annual meeting?
The items of business scheduled to be voted on at the annual meeting are as follows:
— | elect the two nominees for Class II director named in the proxy statement to the board of directors, each to serve a term of three years until our 2015 annual meeting of stockholders, or until their respective successors are duly elected and qualified; |
— | to ratify the selection by the audit committee of our board of directors of Ernst & Young LLP as Fusion-io’s independent registered public accounting firm for the current fiscal year ending June 30, 2013; and |
— | to vote, on an advisory basis, regarding the compensation of the named executive officers for the year ended June 30, 2012, as set forth in this proxy statement. |
We will also transact any other business that properly comes before the annual meeting.
How does the board of directors recommend that I vote?
Our board of directors recommends that you vote your shares:
— | “FOR” each of the two nominees for Class II director named in this proxy statement; |
— | “FOR” the ratification of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2013; and |
— | “FOR” on an advisory basis, the compensation of our named executive officers for the year ended June 30, 2012. |
What shares can I vote?
Each share of our common stock issued and outstanding as of the close of business on September 13, 2012, the record date for the 2012 annual meeting of stockholders, is entitled to vote on all items being considered at the 2012 annual meeting. You may vote all shares owned by you as of the record date, including (i) shares held directly in your name as the stockholder of record and (ii) shares held for you as the beneficial owner in street name through a broker, bank, or other nominee. On the record date, we had 95,033,241 shares of common stock issued and outstanding.
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How many votes am I entitled to per share?
For all matters described in this proxy statement for which your vote is being solicited, each holder of shares of common stock is entitled to one vote for each share of common stock held by such holder as of the record date.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
Many Fusion-io stockholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered, with respect to those shares, the stockholder of record, and these proxy materials were sent directly to you by Fusion-io. As the stockholder of record, you have the right to grant your voting proxy directly to our designated proxies or to vote in person at the annual meeting. If you requested to receive printed proxy materials, we have enclosed or sent a proxy card for you to use. You may also vote on the Internet or by telephone, as described in the Notice and below under the heading “How can I vote my shares without attending the annual meeting?”
Beneficial Owner
If your shares are held in an account at a brokerage firm, bank, or other similar organization, you are considered the beneficial owner of shares held in street name, and the proxy materials were forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank, or other nominee how to vote your shares, and you are also invited to attend the annual meeting.
Since a beneficial owner is not the stockholder of record, you may not vote your shares in person at the annual meeting unless you obtain a “legal proxy” from the broker, bank, trustee, or nominee that holds your shares giving you the right to vote the shares at the meeting. If you are a beneficial owner and do not wish to vote in person or you will not be attending the annual meeting, you may vote by following the instructions provided by your broker or other nominee.
How can I contact Fusion-io’s transfer agent?
Contact our transfer agent by writing American Stock Transfer & Trust Company at 6201 15th Avenue, Brooklyn, New York 11219, or telephoning 1-800-937-5449.
How can I attend the annual meeting?
You are entitled to attend the annual meeting only if you were a Fusion-io stockholder as of the record date or you hold a valid proxy for the annual meeting. If you are not a stockholder of record but hold shares as a beneficial owner in street name, you should provide proof of beneficial ownership as of the record date, such as your most recent account statement prior to September 13, 2012, together with a copy of the voting instruction card provided by your broker, bank, or nominee, or other similar evidence of ownership.
If you do not comply with the procedures outlined above, you may not be admitted to the annual meeting.
Please let us know if you plan to attend the meeting by marking the appropriate box on the proxy card if you requested to receive printed materials or, if you vote by telephone or Internet, by indicating your plans when prompted.
Will the annual meeting be webcast?
We do not expect to webcast the annual meeting.
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How can I vote my shares in person at the annual meeting?
Shares held in your name as the stockholder of record may be voted by you in person at the annual meeting. Shares held beneficially in street name may be voted by you in person at the annual meeting only if you obtain a legal proxy from the broker, bank, or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the annual meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.
How can I vote my shares without attending the annual meeting?
Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the annual meeting. If you are a stockholder of record, you may vote by proxy. You can vote by proxy over the Internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card. If you hold shares beneficially in street name, you may also vote by proxy over the Internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by telephone or mail by following the voting instruction card provided to you by your broker, bank, trustee, or nominee.
Can I change my vote or revoke my proxy?
You may change your vote at any time prior to the taking of the vote at the annual meeting. If you are the stockholder of record, you may change your vote by (i) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (and until the applicable deadline for each method), (ii) providing a written notice of revocation to our corporate secretary at Fusion-io, Inc.,Attention: Corporate Secretary, 2855 E. Cottonwood
Parkway, Suite 100, Salt Lake City, Utah 84121, prior to your shares being voted, or (iii) attending the annual meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request.
For shares you hold beneficially in street name, you may change your vote by submitting new voting instructions to your broker, bank, or nominee following the instructions they provided or, if you have obtained a legal proxy from your broker, bank, or nominee giving you the right to vote your shares, by attending the annual meeting and voting in person.
Is there a list of stockholders entitled to vote at the annual meeting?
The names of stockholders of record entitled to vote at the annual meeting will be available at the annual meeting and for 10 days prior to the meeting for any purpose germane to the meeting, between the hours of 9:00 a.m. and 4:30 p.m., at our corporate headquarters at 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah 84121, by contacting our corporate secretary.
Is my vote confidential?
Proxy instructions, ballots, and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Fusion-io or to third parties, except as necessary to meet applicable legal requirements, to allow for the tabulation of votes and certification of the vote, or to facilitate a successful proxy solicitation.
How many shares must be present or represented to conduct business at the annual meeting?
The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of the issued and outstanding shares of common stock be present in person or represented by proxy. Abstentions and “broker non-votes” are counted as present and entitled to vote for purposes of determining
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a quorum. A “broker non-vote” occurs when a broker, bank or other holder of record holding shares for a beneficial owner does not vote on a particular proposal because that holder does not have discretionary voting power for that particular item and has not received voting instructions from the beneficial owner. If there is no quorum, a majority of the votes present at the annual meeting may adjourn the meeting to another date.
What is the voting requirement to approve each of the proposals?
Proposal | Vote Required | Discretionary Voting Allowed? | ||
Election of Class II directors | Plurality of the shares | No | ||
Ratification of Ernst & Young LLP | Majority of the shares present, represented, and entitled to vote at the meeting | Yes | ||
Advisory Vote on Executive Compensation | Majority of the shares present, represented, and entitled to vote at the meeting | No |
If you are a beneficial owner, your broker, bank or other nominee holder of record is permitted to vote your shares on the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm, even if the record holder does not receive voting instructions from you. Due to recent rule changes, however, your broker, bank, or other nominee holder of record does not have discretionary authority to vote on the election of directors without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on this matter. In addition, discretionary voting is not allowed with respect to the proposals seeking approval of the advisory votes on executive compensation and the frequency for seeking such an advisory
stockholder vote. Accordingly, if you are a beneficial owner, it is particularly important that you provide your instructions for voting your shares on the election of directors and the two advisory compensation proposals to your broker, bank, or other nominee holder of record.
Election of Class II Directors
The nominees receiving the highest number of affirmative “FOR” votes will be elected as Class II directors. You may vote “FOR” or “WITHHOLD” for each director nominee. A properly executed proxy marked “WITHHOLD” with respect to the election of a Class II director will not be voted with respect to such director although it will be counted for purposes of determining whether there is a quorum. Abstentions and broker non-votes will not affect the outcome of the election of directors.
Ratification of Ernst & Young LLP
The affirmative “FOR” vote of a majority of the shares present, represented, and entitled to vote on the proposal is required to ratify the selection by our audit committee of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2013. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions are deemed to be votes cast and have the same effect as a vote against the proposal. Broker non-votes are not deemed to be votes cast, are not included in the tabulation of voting results on this proposal, and will not affect the outcome of voting on this proposal.
Advisory Vote on Executive Compensation
The affirmative “FOR” vote of a majority of the shares present, represented, and entitled to vote on the proposal is required to approve, on an advisory basis, the compensation awarded to our named executive officers for the year ended June 30, 2012. You may vote “FOR,” “AGAINST,” or “ABSTAIN” on this proposal. Abstentions are deemed to be votes cast and have the same effect as a vote against the proposal. Broker non-votes are not deemed to be votes cast, are not included in the tabulation of voting results on this proposal, and will not affect the outcome of voting on this proposal.
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Is cumulative voting permitted for the election of directors?
No. You may not cumulate your votes for the election of directors.
What happens if additional matters are presented at the annual meeting?
Other than the items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders,David A. Flynn,Dennis P. Wolf, andShawn J. Lindquist, or any of them, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any reason any of the nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the board of directors.
Who will count the votes?
A representative of American Stock Transfer & Trust Company will tabulate the votes and act as inspector of election of the annual meeting.
Who will bear the cost of soliciting votes for the annual meeting?
We will pay the entire cost of preparing, assembling, printing, mailing, and distributing these proxy materials and soliciting votes. If you choose to access the proxy materials or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We may also reimburse brokerage firms, banks, and other nominee holders of record for the cost of forwarding proxy materials to beneficial owners.
Where can I find the voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting. We will also disclose voting results on a Current Report on Form 8-K filed with the SEC within four business days after the annual meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K, we will file a Current Report on Form 8-K to publish preliminary results and, within four business days after final results are known, file an additional Current Report on Form 8-K to publish the final results.
I share an address with another stockholder and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single Notice, or proxy statement if applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards.
If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Notice, or, if applicable, proxy statement and annual report, please direct your written request to:
Fusion-io, Inc.
Attention: Investor Relations
2855 E. Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121
Stockholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.
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What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?
Stockholder Proposals
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to our corporate secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2013 annual meeting of stockholders, our corporate secretary must receive the written proposal at our principal executive offices not later than May 27, 2013. In addition, stockholder proposals must otherwise comply with the requirements of Rule 14a-8 of the Securities Exchange Act of 1934, as amended. Such proposals also must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
Fusion-io, Inc.
Attention: Corporate Secretary
2855 E. Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121
Fax: (801) 424-5500
Our bylaws also establish an advance notice procedure for stockholders who wish to present a proposal before an annual meeting of stockholders, but do not intend for the proposal to be included in our proxy statement. Our bylaws provide that the only business that may be conducted at an annual meeting is business that is (i) specified in our proxy materials with respect to such meeting, (ii) otherwise properly brought before the meeting by or at the direction of our board of directors, or (iii) properly brought before the meeting by a stockholder of record entitled to vote at the annual meeting who has delivered timely written notice to our corporate secretary, which notice must contain the information specified in our bylaws. To be timely for our 2013 annual meeting of stockholders, our
corporate secretary must receive the written notice at our principal executive offices:
— | not earlier than July 11, 2013; and |
— | not later than the close of business on August 9, 2013. |
In the event that we hold our 2013 annual meeting of stockholders more than 30 days before or more than 60 days after the one-year anniversary date of the 2012 annual meeting, then notice of a stockholder proposal that is not intended to be included in our proxy statement must be received no earlier than the close of business on the 120th day before such annual meeting and no later than the close of business on the later of the following two dates:
— | the 90th day prior to such annual meeting; or |
— | the 10th day following the day on which public announcement of the date of such meeting is first made. |
If a stockholder who has notified us of his or her intention to present a proposal at an annual meeting does not appear to present his or her proposal at such meeting, we are not required to present the proposal for a vote at such meeting.
Nomination of Director Candidates
You may propose director candidates for consideration by our nominating and corporate governance committee. Any such recommendations should include the nominee’s name and qualifications for membership on our board of directors, and should be directed to the corporate secretary of Fusion-io at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see “Corporate Governance and Board of Directors — Process for Recommending Candidates to the Board of Directors.”
In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director,
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the stockholder must provide the information required by our bylaws. In addition, the stockholder must give timely notice to our corporate secretary in accordance with our bylaws, which, in general, require that the notice be received by our corporate secretary within the time period described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in our proxy statement.
Availability of Bylaws
A copy of our bylaws may be obtained by accessing Fusion-io’s filings on the SEC’s website at www.sec.gov. You may also contact our corporate secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.
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CORPORATE GOVERNANCE AND BOARD OF DIRECTORS
Fusion-io Policies on Business Conduct
We are committed to the highest standards of integrity and ethics in the way we conduct our business. In 2011, we adopted a code of business conduct and ethics, which applies to all of our employees, officers and directors, including our chief executive officer, chief financial officer and other executive and senior financial officers. Our code of conduct establishes our policies and expectations with respect to a wide range of business conduct, including preparation and maintenance of financial and accounting information, compliance with laws, and conflicts of interest.
Under our code of conduct, each of our directors and employees is required to report suspected or actual violations to the extent permitted by law. In addition, we have adopted separate procedures concerning the receipt and investigation of complaints relating to accounting or audit matters. These procedures have been adopted and are administered by our audit committee.
Our code of conduct is available at our website by visiting www.fusionio.com and clicking through “Company,” “Investor Relations,” and “Corporate Governance.” When required by the rules of NYSE or the SEC, we will disclose any future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer, principal financial officer, or principal accounting officer or any member or members of our board of directors on our website within four business days following the date of such amendment or waiver.
Corporate Governance Guidelines
In 2011, our board of directors adopted a set of guidelines that establish the corporate governance policies pursuant to which our board of directors intends to conduct its oversight of the business of Fusion-io in accordance with its fiduciary responsibilities. Among other things, these corporate governance guidelines address the establishment and operation of board committees, the role of our chairman, and matters relating to director independence and performance assessments. Our corporate governance guidelines are available at our website by visiting www.fusionio.com and clicking through “Company,” “Investor Relations,” and “Corporate Governance.”
Role and Composition of the Board
As identified in our corporate governance guidelines, the role of our board of directors is to oversee the performance of our chief executive officer and other senior management. Our board of directors is responsible for hiring, overseeing, and evaluating management while management is responsible for running our day-to-day operations.
Our board of directors is currently comprised of seven members and is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three year term to succeed the class of directors whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2013 for the Class III directors, 2014 for the Class I directors, and 2015 for Class II directors.
Board Leadership Structure
The board of directors currently believes that our company is best served by combining the roles of chairman of the board and chief executive officer, coupled with a lead independent director. As a founder of the company, David Flynn, our chief executive officer, is the director most familiar with our
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business and industry, and most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. Independent directors and management have different perspectives and roles in the development of our strategy. Our independent directors bring experience, oversight and expertise from outside the company, while our chief executive officer brings company-specific experience and expertise. Our board of directors believes that the combined role of chairman and chief executive officer is the best leadership structure for us at the current time as it promotes the efficient and effective development and execution of our strategy and facilitates information flow between management and our board of directors. The board of directors recognizes, however, that no single leadership model is right for all companies at all times. Our corporate governance guidelines provide that the board of directors should be free to choose a chairman of the board based upon the board’s view of what is in the best interests of the company. Accordingly, the board of directors periodically reviews its leadership structure.
Lead Independent Director
In May 2011, our board of directors first appointed Scott D. Sandell as lead independent director, and in September 2012, our board reconfirmed Mr. Sandell’s appointment as lead independent director for our fiscal year ending June 30, 2013, or fiscal 2013. As the lead independent director, Mr. Sandell is responsible for coordinating the activities of the independent directors. The lead independent director has the following specific responsibilities:
— | call special meetings of the independent directors and chair meetings of independent directors; |
— | act as the principal liaison between the non-employee directors and the chairman of the board on sensitive issues; |
— | work with the chairman of the board to develop a schedule of meetings for the board and provide input with respect to meeting agendas for the board of directors and its committees; |
— | advise the chairman of the board with respect to the quality, quantity and timeliness of the flow of information from company management; |
— | coordinate and moderate executive sessions of the independent directors; and |
— | perform such other duties as the board of directors may from time to time delegate to the lead independent director. |
Board’s Role in Risk Oversight
Our board of directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance, and to enhance stockholder value. A fundamental part of risk management is not only understanding the most significant risks a company faces and what steps management is taking to manage those risks but also understanding what level of risk is appropriate for a given company. The involvement of our full board of directors in reviewing our business is an integral aspect of its assessment of management’s tolerance for risk and also its determination of what constitutes an appropriate level of risk.
While our board of directors has the ultimate oversight responsibility for the risk management process, various committees of the board also have responsibility for risk management. The charter of our audit committee provides that the committee’s responsibilities include oversight of our major
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financial risks and certain compliance matters. In addition, in setting compensation, our compensation committee strives to create incentives that encourage a level of risk-taking consistent with our business strategy and to encourage a focus on building long term value that does not encourage excessive risk-taking.
In connection with its oversight of compensation-related risks, our compensation committee has reviewed our compensation programs and practices for employees, including executive and non-executive programs and practices. In its review, our compensation committee evaluated whether our policies and programs encourage unnecessary or excessive risk taking and controls, and how such policies and programs are structured with respect to risks and rewards, as well as controls designed to mitigate any risks. As a result of this review, our compensation committee determined that any risks that may result from our compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on Fusion-io.
At periodic meetings of the board and its committees and in other meetings and discussions, management reports to and seeks guidance from the board and its committees with respect to the most significant risks that could affect our business, such as legal risks and financial, tax and audit related risks. In addition, among other matters, management provides our audit committee periodic reports on our compliance programs and efforts and investment policy and practices.
Our board of directors has three standing committees: an audit committee, a compensation committee, and a nominating and corporate governance committee. The membership and the function of each of the committees are described below. Our board of directors may from time to time establish a new committee or dissolve an existing committee depending on the circumstances.
Director’s Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | |||
Non-Employee Directors: | ||||||
Forest Baskett, Ph.D. | ![]() | |||||
H. Raymond (Ray) Bingham | ![]() | ![]() | ||||
Dana L. Evan | ![]() | ![]() | ||||
Shane V. Robison | ![]() | ![]() | ||||
Scott D. Sandell | ![]() | ![]() | ||||
Employee Directors: | ||||||
David A. Flynn | ||||||
Rick C. White | ||||||
![]() | ![]() | ![]() |
During our fiscal year ended June 30, 2012, or fiscal 2012, our board of directors held 10 meetings. Each of our directors attended or participated in 75% or more of the meetings of the board of directors and 75% or more of the meetings held by all committees of the board of directors on which he or she served during the past fiscal year.
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As a company listed on NYSE, we are required under NYSE listing requirements to maintain a board comprised of a majority of “independent” directors, as determined affirmatively by our board. In addition, NYSE rules require that, subject to specified exceptions, each member of our audit, compensation and nominating and corporate governance committees be independent. In September 2012, our nominating and corporate governance committee and board of directors undertook a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our nominating and corporate governance committee and board of directors determined that Ms. Evan, Dr. Baskett and Messrs. Bingham, Robison and Sandell, representing five of our seven directors, were “independent directors” as defined under applicable NYSE rules. Messrs. Flynn and White are not considered independent directors because of their positions as our chief executive officer and chief marketing officer, respectively.
Executive Sessions of Independent Directors
In order to promote open discussion among independent directors, our board of directors has a policy of conducting executive sessions of independent directors during each regularly scheduled board meeting and at such other times as requested by an independent director. These executive sessions are chaired by our lead independent director, Mr. Sandell. Neither Mr. Flynn nor Mr. White participates in such sessions.
Ms. Evan and Messrs. Bingham and Robison, each of whom is a non-employee member of our board of directors, comprise our audit committee. Ms. Evan is the chair of our audit committee. Our board of directors has determined that each of the members of our audit committee satisfies the requirements for independence and financial literacy under the rules and regulations of the NYSE and the SEC. Our board of directors has also determined that Ms. Evan qualifies as an “audit committee financial expert” as defined in the SEC rules and satisfies the financial sophistication requirements of the NYSE.
The audit committee of our board of directors is responsible for, among other things:
— | selecting and hiring our independent registered public accounting firm, approving the audit and pre-approving any non-audit services to be performed by our independent registered public accounting firm; |
— | supervising and evaluating the performance and independence of our independent registered public accounting firm; |
— | reviewing and discussing our financial statements and audits with management, our internal auditors and our independent registered public accounting firm, and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters; |
— | reviewing the adequacy and effectiveness of our internal control policies and procedures and our disclosure controls and procedures; |
— | overseeing procedures for the treatment of complaints on accounting, internal accounting controls or audit matters; |
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— | overseeing our internal auditors; |
— | discussing the scope and results of our annual audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results; |
— | reviewing and discussing our quarterly earnings releases and quarterly reports from our registered independent public accounting firm concerning our accounting policies and practices; |
— | reviewing and discussing with management, our internal auditors and our independent registered public accounting firm our major financial risk exposures and steps management has taken to control those exposures; |
— | reviewing our related party transaction policy; and |
— | preparing the audit committee report that the SEC will require in our annual proxy statement. |
Our audit committee held seven meetings during fiscal 2012. Our audit committee operates under a written charter approved by our board of directors. The charter is available on our website by visiting www.fusionio.com and clicking through “Company,” “Investor Relations,” and “Corporate Governance.”
Ms. Evan and Messrs. Bingham and Sandell, each of whom is a non-employee member of our board of directors, comprise our compensation committee. Mr. Bingham is the chair of our compensation committee. Our board of directors has determined that each member of our compensation committee meets the requirements for independence under the rules of the NYSE and is an “outside director” for purposes of Section 162(m) of the Internal Revenue Code. The compensation committee is responsible for, among other things:
— | reviewing and approving our Chief Executive Officer’s and other executive officers’ annual base salaries, equity compensation, annual incentive bonuses and severance, change in control and other compensation arrangements; |
— | overseeing our overall compensation philosophy and establishing, administering and reviewing our compensation plans and benefits programs, including our equity award programs; and |
— | preparing the compensation committee report that the SEC will require in our annual proxy statement. |
See “Compensation of Non-Employee Directors” and “Executive Compensation” for a description of our processes and procedures for the consideration and determination of executive and director compensation.
Our compensation committee held seven meetings during fiscal 2012. Our compensation committee operates under a written charter approved by the board of directors, which is available on our website by visiting www.fusionio.com and clicking through “Company,” “Investor Relations,” and “Corporate Governance.”
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Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is an officer or employee of our company. None of our executive officers currently serves, or in the past year has served, as a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers serving on our compensation committee.
Nominating and Corporate Governance Committee
Messrs. Robison, Sandell and Dr. Baskett, each of whom is a non-employee member of our board of directors, comprise our nominating and corporate governance committee. Dr. Baskett is the chair of our nominating and corporate governance committee. Our board of directors has determined that each member of our nominating and corporate governance committee meets the requirements for independence under the rules of the NYSE. The nominating and corporate governance committee is responsible for, among other things:
— | assisting our board of directors in identifying and evaluating prospective director nominees and recommending nominees for each annual meeting of stockholders to the board of directors; |
— | reviewing the composition of each committee of our board of directors and making recommendations for the creation of additional committees; |
— | developing and recommending governance principles applicable to our board of directors; |
— | overseeing the evaluation of our board of directors and management; |
— | reviewing and monitoring compliance with our code of business conduct and ethics; and |
— | recommending potential members for each board committee to our board of directors. |
Our nominating and corporate governance committee will consider recommendations of candidates for the board of directors submitted by stockholders of Fusion-io; see “Process for Recommending Candidates to the Board of Directors” below.
Our nominating and corporate governance committee held four meetings during fiscal 2012. Our nominating and corporate governance committee operates under a written charter approved by the board of directors, which is available on our website by visiting www.fusionio.com and clicking through “Company,” “Investor Relations,” and “Corporate Governance.”
Considerations in Evaluating Director Nominees
Our board of directors has established a policy for evaluating director nominees.
In its evaluation of director candidates, including the members of the board of directors eligible for re-election, our nominating and corporate governance committee will consider the following:
— | the current size and composition of our board of directors and the needs of the board and its respective committees; |
— | factors such as character, judgment, diversity, age, independence, expertise, corporate experience, length of service, understanding of our business, other commitments and the like; and |
— | other factors that our committee may consider appropriate. |
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Our nominating and corporate governance committee evaluates the factors listed above individually and does not assign any particular weighting or priority to any of these factors. The committee has not established any minimum qualifications for director nominees, and instead takes a holistic approach when evaluating the above factors. While not maintaining a specific policy on board diversity requirements, the board and the nominating and corporate governance committee believe that diversity is an important factor in determining the composition of the board and, therefore, seek a variety of occupational and personal backgrounds on the board in order to obtain a range of viewpoints and perspectives and to enhance the diversity of the board.
Process for Recommending Candidates to the Board of Directors
Our nominating and corporate governance committee is responsible for, among other things, recommending candidates for election to the board of directors. It is the policy of our nominating and corporate governance committee to consider recommendations for candidates to the board of directors from stockholders so long as such recommendations comply with our certificate of incorporation and bylaws and applicable law. Stockholder recommendations for candidates to the board of directors must be directed in writing to Fusion-io, Inc.,Attention: Corporate Secretary, 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah 84121, and should include the candidate’s name, home and business contact information, detailed biographical data, relevant qualifications, a signed letter from the candidate acknowledging that as a director of Fusion-io, the nominee will owe a fiduciary duty under Delaware law with respect to Fusion-io and its stockholders, information regarding any relationships between the candidate and Fusion-io, and evidence of the recommending stockholder’s ownership of our stock. Such recommendations should also include a statement from the recommending stockholder in support of the candidate, particularly within the context of the criteria for board membership, including issues of character, integrity, judgment, diversity of experience, independence, area of expertise, corporate experience, length of service, potential conflicts of interest, other commitments and the like. For details regarding the process to nominate a director directly for election to the board at an annual meeting of the stockholders, under the section entitled “Questions and Answers About the Proxy Materials and Annual Meeting,” please see “What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?”
Director Attendance at Annual Meetings
Although we do not have a formal policy regarding attendance by members of our board of directors at annual meetings of stockholders, we encourage, but do not require, directors to attend. We have scheduled our 2012 annual stockholder meeting on the same day as a regularly scheduled board meeting in order to facilitate attendance by our board members.
Communications with the Board of Directors
Stockholders who wish to communicate with our directors are welcome to do so in writing, at the following address:
Fusion-io, Inc.
Attention: Board of Directors
c/o Corporate Secretary
2855 E. Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121
Communications are distributed to our board or to the appropriate individual director.
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COMPENSATION OF NON-EMPLOYEE DIRECTORS
Non-employee Director Compensation Program
In May 2011, our board of directors adopted a non-employee director compensation policy regarding cash compensation and grants of equity compensation to non-employee directors. The policy was amended and restated in September 2011 and in September 2012.
Cash Compensation
Non-employee directors are entitled to receive the following cash compensation for their services as follows:
Annual Cash Retainer ($)* | ||||
Annual retainer | 50,000 | |||
Additional retainer for lead independent director(1) | 20,000 | |||
Additional retainer for audit committee chair(2) | 26,000 | |||
Additional retainer for audit committee member(3) | 14,500 | |||
Additional retainer for compensation committee chair(4) | 19,000 | |||
Additional retainer for compensation committee member(5) | 10,000 | |||
Additional retainer for nominating and governance committee chair(6) | 11,500 | |||
Additional retainer for nominating and governance committee member(7) | 5,750 | |||
|
* | Paid quarterly in arrears. |
(1) | In September 2012, our board of directors approved a retainer for our lead director of $20,000 |
(2) | In September 2012, our board of directors approved an increase of $5,500 to the annual retainer amount, from $20,500 to $26,000. |
(3) | In September 2012, our board of directors approved an increase of $4,500 to the annual retainer amount, from $10,000 to $14,500. |
(4) | In September 2012, our board of directors approved an increase of $3,500 to the annual retainer amount, from $15,500 to $19,000. |
(5) | In September 2012, our board of directors approved an increase of $1,500 to the annual retainer amount, from $8,500 to $10,000. |
(6) | In September 2012, our board of directors approved an increase of $2,250 to the annual retainer amount, from $9,250 to $11,500. |
(7) | In September 2012, our board of directors approved an increase of $1,375 to the annual retainer amount, from $4,375 to $5,750. |
Equity Compensation
Each non-employee director who first joins our board of directors will be granted a restricted stock unit, or RSU, award covering 30,000 shares of common stock and each non-employee director will be granted an annual RSU award covering 15,000 shares of common stock on the date of each of our annual stockholder meetings.
An initial RSU award will vest as to 25% of the shares on the first annual anniversary of the date the non-employee director joins our board of directors, and as to the remaining 75% of the shares in 12 substantially equal quarterly installments thereafter, subject to continued service as a board member through each such vesting date. Annual RSU awards will vest on the earlier of: the annual anniversary of the grant date or the day prior to the annual meeting of stockholders immediately following the annual meeting at which the award is granted, subject to continued service as a board member through the vesting date. In the event of a change in control, the director’s award will immediately vest in full and become fully exercisable.
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2012 Non-employee Director Compensation
The following table sets forth information concerning compensation paid or accrued for services rendered to us by members of our board of directors for fiscal 2012. The table excludes Messrs. Flynn and White, who are named executive officers and did not receive any compensation from us in their role as a director in fiscal 2012.
Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | Total ($) | |||||||||
Forest Baskett, Ph.D. | 59,250 | 1,057,339 | 1,116,589 | |||||||||
H. Raymond Bingham | 75,500 | 1,057,339 | 1,132,839 | |||||||||
Dana L. Evan | 79,000 | 1,057,339 | 1,136,339 | |||||||||
Shane V. Robison | 32,188 | 1,278,217 | 1,310,405 | |||||||||
Scott D. Sandell | 62,875 | 1,057,339 | 1,120,214 | |||||||||
Christopher J. Schaepe(2) | 32,188 | 1,256,339 | 1,288,527 | |||||||||
|
(1) | Amounts represent the aggregate grant date fair value of the stock or option award calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation, as amended (“ASC 718”), without regard to estimated forfeitures, or, with respect to repriced options, the incremental fair value as computed in accordance with ASC 718. See Note 8 of the notes to our audited consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended June 30, 2012 for a discussion of valuation assumptions made in determining the grant date fair value and compensation expense of our stock options. |
(2) | Mr. Schaepe served as a member of the board of directors until December 2011. The option award described in the table above was unvested at the time of his resignation from the board and, in accordance with the terms of the award, was terminated. Mr. Schaepe had also been granted an option to purchase 50,000 shares in February 2011, during fiscal 2011, which was also unvested at the time of his resignation. At the time of Mr. Schaepe’s resignation, the board approved a modification to this award to accelerate the vesting of 25% of the award, with the remaining 75% of the award terminating on his resignation date. There was a $199,000 increase in the grant date fair value as a result of the vesting acceleration of the award. |
Non-employee Director Equity Awards
The aggregate number of shares subject to stock options outstanding at June 30, 2012, for each non-employee director was as follows:
Name | Aggregate Number of Stock Options Outstanding as of June 30, 2012 | |||
Forest Baskett, Ph.D. | 100,000 | (1) | ||
H. Raymond Bingham | 150,000 | (2) | ||
Dana L. Evan | 144,000 | (3) | ||
Shane V. Robison | 100,000 | (4) | ||
Scott D. Sandell | 100,000 | (5) | ||
|
(1) | The outstanding options for Dr. Baskett consist of 50,000 from the grant awarded on February 19, 2011, which has an exercise price per share of $5.12 and 50,000 from the grant awarded November 18, 2011, which has an exercise price per share of $39.60. |
(2) | The outstanding options for Mr. Bingham consist of 100,000 from the grant awarded February 19, 2011, which has an exercise price per share of $5.12 and 50,000 from the grant awarded November 18, 2011, which has an exercise price per share of $39.60. |
(3) | The outstanding options for Ms. Evan consist of 94,000 from the grant awarded February 19, 2011, which has an exercise price per share of $5.12 and 50,000 from the grant awarded November 18, 2011, which has an exercise price per share of $39.60. |
(4) | The outstanding options for Mr. Robison consist of 100,000 from the grant awarded December 16, 2011, which has an exercise price per share of $23.07. |
(5) | The outstanding options for Mr. Sandell consist of 50,000 from the grant awarded February 19, 2011, which has an exercise price per share of $5.12 and 50,000 from the grant awarded November 18, 2011, which has an exercise price per share of $39.60. |
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ELECTION OF CLASS II DIRECTORS
Our board of directors is currently composed of seven members. Our amended and restated certificate of incorporation and bylaws provide that the number of our directors shall be one or more members, as determined from time to time by resolution of our board of directors.
Our board of directors is divided into three staggered classes of directors. At each annual meeting of stockholders, a class of directors will be elected for a three-year term to succeed the class of directors whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meetings of stockholders to be held during the years 2013 for the Class III directors, 2014 for the Class I directors, and 2015 for the Class II directors.
Nominees for Class II Directors (Terms Expiring in 2015)
At the 2012 annual meeting, two Class II directors will be elected to the board of directors by the holders of common stock. Our nominating and corporate governance committee recommended, and our board of directors nominated, Dr. Baskett and Ms. Evan as nominees for election as Class II directors at the 2012 annual meeting.
Each of Dr. Baskett and Ms. Evan has agreed to serve if elected, and management has no reason to believe that either nominee will be unavailable to serve. In the event one of the nominees is unable or declines to serve as a director at the time of the 2012 annual meeting, proxies will be voted for any nominee who may be proposed by the nominating and corporate governance committee and designated by the present board of directors to fill the vacancy.
Biographical Information Concerning the Class II Director Nominees
Forest Baskett, Ph.D., age 69, has served as a director since March 2008. Dr. Baskett hasbeen a general partner of New Enterprise Associates, a venture capital firm, since 2004. Dr. Baskett joined New Enterprise Associates in 1999. From 1986 to 1999, Dr. Baskett served as chief technology officer and senior vice president, research and development of Silicon Graphics, Inc. Dr. Baskett founded and directed the Western Regional Laboratory of Digital Equipment Corporation from 1982 to 1986. From 1971 to 1982, Dr. Baskett was a professor of Computer Science and Electrical Engineering at Stanford University. In addition to serving on our board of directors, Dr. Baskett serves on the boards of directors of Audience, Inc. and a number of privately held companies. Dr. Baskett holds a B.A. in Mathematics from Rice University, a Ph.D. in Computer Science from the University of Texas at Austin and is a member of the National Academy of Engineering. We believe that Dr. Baskett possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience with a wide range of technology companies and the venture capital industry.
Dana L. Evan, age 52, has served as a director since February 2011. Since July 2007, Ms. Evan has invested in and served on the boards of directors of companies in the Internet, technology and media sectors, including Omniture, Inc. From May 1996 until July 2007, Ms. Evan served as chief financial officer of VeriSign, Inc., a provider of intelligent infrastructure services for the Internet and telecommunications networks. Previously, Ms. Evan worked as a financial consultant in the capacity of chief financial officer, vice president of finance or corporate controller over an eight-year period for various public and private companies and partnerships, including VeriSign, Inc., Delphi Bioventures, a venture capital firm,
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and Identix Incorporated, a multi-biometric technology company. Prior to serving as a financial consultant, Ms. Evan worked in a variety of positions at KPMG LLP. Ms. Evan also serves on the board of directors of Proofpoint, Inc. and a number of privately held companies, including Box, Inc. Ms. Evan is a certified public accountant (inactive) and holds a B.S. in Commerce with a concentration in Accounting and Finance from Santa Clara University. We believe that Ms. Evan possesses specific attributes that qualify her to serve as a member of our board of directors, including broad expertise in operations, strategy, accounting, financial management and investor relations at both publicly and privately held technology and Internet companies.
Our Class II directors elected to the board of directors will be elected by a plurality of the votes present in person or represented by proxy and entitled to vote on the election of directors. In other words, the two nominees receiving the highest number of “FOR” votes will be elected as directors. Shares represented by executed proxies will be voted, if authority to do so is not expressly withheld (as indicated on the proxy card), for the election of Dr. Baskett and Ms. Evan.
Our board of directors recommends a vote “FOR” the election to the board of directors of each of Dr. Baskett and Ms. Evan as a Class II director.
* * * * *
Class III Directors Continuing in Office until the 2013 Annual Meeting
H. Raymond Bingham, age 66, has served as a director since February 2011. Mr. Bingham has been an advisory director of General Atlantic LLC, a private equity firm, since January 2010 and managing director and head of the Palo Alto office from September 2006 to December 2009. From August 2005 to August 2006, Mr. Bingham was a self-employed private
investor. From 1993 to 2005, Mr. Binghamserved in various positions at Cadence Design Systems, Inc., a supplier of electronic design automation software and services, including executive chairman of the board of directors, president and chief executive officer and executive vice president and chief financial officer. Mr. Bingham also currently serves as a director of Oracle Corporation, Flextronics International Ltd., STMicroelectronics N.V., Spansion Inc. and Dice Holdings, Inc. Mr. Bingham holds a B.S. from Weber State University and an M.B.A. from Harvard Business School. We believe that Mr. Bingham possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience in leading and managing a large, complex global organization in the technology industry and financial expertise and significant audit and financial reporting knowledge.
David A. Flynn, age 43, is one of our founders and has served as a director since July 2006 and was appointed as the Chairman of our board of directors in May 2011. Mr. Flynn has served as our Chief Executive Officer and President since March 2010 and previously served as our President from inception to February 2009 and Chief Technology Officer from inception to March 2010. From November 2004 to October 2006, Mr. Flynn served as chief scientist of Realm Systems, Inc., a company offering research and development services for developing mobile computing platforms. From January 2002 to November 2004, Mr. Flynn served as chief architect software engineer of Linux Networx, Inc., a developer of high performance computing technology. From 1996 to 2002, Mr. Flynn served as senior software engineer of Liberate Technologies, Inc. From 1995 to 1996, Mr. Flynn founded the Utah research and development satellite office of Oracle Corporation, which subsequently became a founding part of Network Computer Inc., later renamed Liberate Technologies. Mr. Flynn holds a B.S. in Computer Science from Brigham Young University. We believe Mr. Flynn possesses specific attributes that qualify him to serve as a member of our board of directors, including the perspective and experience he brings as our Chief Executive Officer and President, one of our founders and a significant stockholder.
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Scott D. Sandell, age 48, has served as a director since March 2008 and was appointed as the Lead Independent Director of our board of directors in May 2011. In 1996, Mr. Sandell joined New Enterprise Associates, where he became a general partner in 2000. In addition to serving on our board of directors, Mr. Sandell serves on the boards of directors of Spreadtrum Communications, Inc. and a number of privately held companies. Mr. Sandell started his career at the Boston Consulting Group and later joined C ATS Software, Inc. Later, he worked as a product manager for Windows 95 at Microsoft Corporation before joining New Enterprise Associates in 1996. Mr. Sandell is a member of the board of directors of the National Venture Capital Association. Mr. Sandell holds an A.B. in Engineering Sciences from Dartmouth College and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr. Sandell possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience with a wide range of technology companies and the venture capital industry.
Class I Directors Continuing in Office until the 2014 Annual Meeting
Shane V. Robison, age 58, has served as a director since December 2011. Mr. Robison served as Chief Strategy & Technology Officer and Executive Vice President of Hewlett-Packard Company from May 2002 to November 2011. From 2000 to May 2002, Mr. Robison served as Senior Vice President, Technology and Chief Technology Officer of Strategy and Technology of Compaq Computer Corporation. Prior to joining Compaq, Mr. Robison served as the President of Internet Technology and Development at AT&T Labs. Prior to AT&T Labs, Mr. Robison was Executive Vice President, Research and Development, and then served as President of the Design Productivity Group at Cadence Design Systems. Mr. Robison also spent seven years at Apple Inc., where he held a series of executive-level
positions, leaving the company as Vice President and General Manager of the Personal interactive Electronics Division. Mr. Robison’s experience includes work at Schlumberger’s research groups in Silicon Valley, at Evans & Sutherland Computer Corporation and consulting for the University of Utah in the area of database systems architecture. Mr. Robison holds a B.S. and a M.S. in Computer Science from the University of Utah. We believe that Mr. Robison possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience with a wide range of technology companies, including broad expertise in operations strategy.
Rick C. White, age 42, is one of our founders and has served as a director since April 2009. He also served as a director from inception to March 2008. Mr. White has served as our Chief Marketing Officer since 2008. From inception to February 2008, Mr. White served as our Chief Executive Officer. From 2006 to January 2007, Mr. White served as chairman of DAZ Productions, Inc., a developer of 3D graphics software and content. From 2002 to 2005, Mr. White served as chief executive officer of Realm Systems, Inc. From 2000 to 2005, Mr. White served as chairman of Forum Systems, Inc. a developer of XML enterprise messaging systems. From 1997 to 2000, Mr. White served as chief executive officer and chairman of Phobos Corporation, a developer of PCI based switching and load balancing technology for data centers. In April 2005, Mr. White filed for personal bankruptcy and was discharged under Chapter 7 of the U.S. Bankruptcy Code in February 2009. We believe Mr. White brings to our board of directors his perspective and experience as an officer, one of our founders and a significant stockholder.
The ages of our directors as indicated in this proxy statement are determined as of September 13, 2012.
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RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has selected Ernst & Young LLP as the independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending June 30, 2013, or fiscal 2013. During our fiscal year ended June 30, 2012, or fiscal 2012, Ernst & Young served as our independent registered public accounting firm and also provided certain audit-related and tax services.
Notwithstanding its selection and even if our stockholders ratify the selection, our audit committee, in its discretion, may appoint another 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 interests of Fusion-io and its stockholders. Our audit committee is submitting the selection of Ernst & Young to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. If the appointment is not ratified by our stockholders, our audit committee may reconsider whether it should appoint another independent registered public accounting firm.
Representatives of Ernst & Young are expected to attend the annual meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.
Ratification of the selection of Ernst & Young as our independent registered public accounting firm for the fiscal year ending June 30, 2013 requires the affirmative “FOR” vote of a majority of the shares present, represented, and entitled to vote on the proposal. Unless marked to the contrary, executed proxies received will be voted “FOR” ratification of the appointment of Ernst & Young.
Our board of directors recommends a vote “FOR” the selection of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2013.
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Principal Accounting Fees and Services
The following table sets forth the aggregate fees for services provided by Ernst & Young for the years ended June 30, 2011 and June 30, 2012:
2011 | 2012 | |||||||
Audit fees(1) | $ | 1,148,310 | $ | 837,860 | ||||
Audit-related fees(2) | — | 170,535 | ||||||
Tax fees(3) | 152,419 | 88,976 | ||||||
All other fees | — | — | ||||||
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Total fees | $ | 1,300,729 | $ | 1,097,371 | ||||
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(1) | Consists of fees billed for professional services rendered in connection with the audit of our consolidated financial statements and the audit of our internal control over financial reporting, review of the interim consolidated financial statements included in our quarterly reports and services that are normally provided by Ernst & Young in connection with statutory and regulatory filings or engagements and includes accounting services in connection with securities offerings. |
(2) | Consists of fees billed for 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 Fees.” These services include accounting consultations and due-diligence in connection with potential acquisitions, audits of acquired entities, and consultations concerning financial accounting and reporting standards. |
(3) | Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance. |
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Policy on Audit Committee Pre-Approval of Services Performed by Independent Registered Public Accounting Firm
Consistent with the requirements of the SEC and the Public Company Accounting Oversight Board, or PCAOB, regarding auditor independence, our audit committee has responsibility for appointing, setting compensation, and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, our audit committee has established a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. The audit committee generally pre-approves particular services or categories of services on a case-by-case basis. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with these pre-approvals, and the fees for the services performed to date. All of the services provided by Ernst & Young for our fiscal years ended June 30, 2011 and 2012 described above were pre-approved by the audit committee or our board of directors.
The audit committee assists the board in fulfilling its oversight responsibility over Fusion-io’s financial reporting process. It is not the duty of the committee to plan or conduct audits or to prepare Fusion-io’s financial statements. Management has the primary responsibility for preparing the financial statements and assuring their accuracy, effectiveness, and completeness. Management is also responsible for the reporting process, including the system of internal controls. The independent registered public accounting firm is responsible for auditing Fusion-io’s financial statements and, beginning with fiscal 2012, internal control over financial reporting and expressing its opinion as to whether the statements present fairly, in accordance with accounting principles generally
accepted in the United States, Fusion-io’s financial condition, results of operations, and cash flows. However, the audit committee does review and discuss the financial statements with management and the independent registered public accounting firm prior to the presentation of financial statements to our stockholders and, as appropriate, the committee initiates inquiries into various aspects of Fusion-io’s financial affairs.
Unless the committee has reason to question its reliance on management or the independent registered public accounting firm, the members of the committee necessarily rely on information provided to them by and on the representations made by management and the independent registered public accounting firm. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has applied appropriate accounting and financial reporting principles. Furthermore, the audit committee’s authority and oversight responsibilities do not independently assure that the audits of Fusion-io’s financial statements have been carried out in accordance with the standards of the PCAOB or that the financial statements are presented in accordance with accounting principles generally accepted in the United States.
In this context, the committee has met and held discussions with management and the independent registered public accounting firm to review Fusion-io’s 2012 audited consolidated financial statements (including the quality of Fusion-io’s accounting principles). Management represented to the committee that Fusion-io’s consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States, and the committee consulted with management and the independent registered public accounting firm prior to approving the presentation of the 2012 audited consolidated financial statements to stockholders. The committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by the PCAOB in Rule 3200T.
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The audit committee has discussed with the independent accountant the independent accountant’s independence from Fusion-io and its management. As part of that review, the committee received the written disclosures and letter required by the applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence. Based on the reviews and discussions referred to above, the audit committee recommended to the board, and the board approved, Fusion-io’s audited consolidated financial statements for the year ended June 30, 2012 for filing with the Securities and Exchange Commission as part of the company’s Annual Report on Form 10-K. The committee has selected Ernst & Young LLP as the company’s independent registered public accounting firm for the fiscal year ending June 30, 2013.
The Audit Committee
Dana L. Evan (Chair)
H. Raymond Bingham
Shane V. Robison
The Report of the Audit Committee does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing by Fusion-io under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent Fusion-io specifically incorporates the Report of the Audit Committee by reference therein.
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ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or Dodd-Frank Act, enables Fusion-io stockholders to vote to approve, on an advisory or non-binding basis, the compensation of Fusion-io’s named executive officers as disclosed in this proxy statement in accordance with SEC rules.
Our general executive compensation philosophy is to provide programs that attract, motivate, reward and retain highly qualified executives and motivate them to pursue our corporate objectives while encouraging the creation of long-term value for our stockholders. We evaluate and reward our executive officers through compensation intended to motivate them to identify and capitalize on opportunities to grow our business and maximize stockholder value over time. We strive to provide an executive compensation program that is market competitive, rewards achievement of our business objectives and is designed to provide a foundation of fixed compensation (base salary) and a significant portion of performance-based compensation (short-term and long-term incentive opportunities) that are intended to align the interests of executives with those of our stockholders. Please refer to the “Executive Compensation—Compensation Discussion and Analysis” section for a detailed discussion of Fusion-io’s executive compensation practices and philosophy.
We are asking for stockholder approval of the compensation of Fusion-io’s named executive officers as disclosed in this proxy statement in accordance with SEC rules, which disclosures include the disclosures in the “Executive Compensation—Compensation Discussion and Analysis” section, the compensation tables and the narrative discussion following the compensation tables. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the policies and practices described in this proxy statement.
This vote is advisory and therefore not binding on Fusion-io, our compensation
committee, or our board of directors. Our board of directors and compensation committee value the opinions of our stockholders and we are providing the vote as required pursuant to Section 14A of the Securities and Exchange Act of 1934. To the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, our compensation committee will consider such vote as it assesses our compensation policies and decisions.
At the annual meeting, we will ask our stockholders to approve, on an advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules. This proposal requires the affirmative vote of a majority of the voting power of the shares of our capital stock, present in person or represented by proxy, and entitled to vote thereon, voting together as a single class.
Abstentions will be counted toward the tabulations of voting power present and entitled to vote on the Fusion-io executive compensation proposal and will have the same effect as votes against the proposal. Brokers do not have discretion to vote on the proposal regarding our executive compensation and broker non-votes will have no effect on the proposal.
Fusion-io currently holds this vote annually, in accordance with the frequency vote which occurred at our 2011 annual meeting of stockholders.
Our board of directors recommends a vote “FOR” the approval of the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules.
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The names of our executive officers and a key employee, their ages, their positions with Fusion-io, and other biographical information as of September 13, 2012, are set forth below. There are no family relationships among any of our directors or executive officers.
Name | Age | Position | ||
Executive Officers: | ||||
David A. Flynn* | 43 | Chief Executive Officer, President and Chairman | ||
Dennis P. Wolf | 59 | Chief Financial Officer and Executive Vice President | ||
Richard W. Boberg | 64 | Executive Vice President, Strategic Business Development and General Manager of Caching Solutions | ||
Neil A. Carson | 36 | Chief Technology Officer and Executive Vice President | ||
James L. Dawson | 50 | Executive Vice President, Worldwide Sales | ||
Shawn J. Lindquist | 42 | Chief Legal Officer, Executive Vice President and Secretary | ||
Lance L. Smith | 48 | Chief Operating Officer and Executive Vice President | ||
Rick C. White† | 42 | Chief Marketing Officer, Executive Vice President and Director | ||
Key Employee: | ||||
Stephen G. Wozniak | 62 | Chief Scientist |
* | Biographical information for this individual is found above in the section titled “Class III Directors Continuing in Office until the 2013 Annual Meeting.” |
† | Biographical information for this individual is found above in the section titled “Class I Directors Continuing in Office until the 2014 Annual Meeting.” |
Dennis P. Wolf has served as our Chief Financial Officer and Executive Vice President since October 2010, as our Chief Financial Officer and Senior Vice President from March 2010 to October 2010, and as our Chief Financial Officer from November 2009 to March 2010. From January 2009 to April 2009, Mr. Wolf served as interim chief executive officer and chief financial officer of Finjan Software, Inc., a provider of web security solutions. From March 2005 to June 2008, Mr. Wolf served as executive vice president and chief financial officer of MySQL AB, an open source database software company. Prior to MySQL, Mr. Wolf held financial management positions for public high technology companies, including Apple Inc., Centigram Communications, Inc., Credence Systems Corporation, Omnicell, Inc., Redback Networks Inc. and Sun Microsystems, Inc. Mr. Wolf currently serves as a director of Codexis Inc. and Exponential Interactive, Inc., and is the chair of the audit committees of these companies, and has been a director and chair of the audit committee for other publicly and privately held companies including Quantum Corporation, BigBand Networks, Inc., Registry Magic, Inc., Avanex Corporation, Komag, Inc. and Vitria Technology, Inc. He holds a B.A. from the University of Colorado and an M.B.A. from the University of Denver.
Richard W. Boberg has served as our Executive Vice President, Strategic Business Development and General Manager of Caching Solutions since August 2012, and prior to that, Mr. Boberg served as our Executive Vice President, Corporate Business Development since April 2012 and our Executive Vice President and General Manager of Virtualization Solutions since joining the company following the completion of our acquisition of IO Turbine, Inc. in August 2011. Mr. Boberg was one of the co-founders of IO Turbine. From IO Turbine’s inception in December 2009 until August 2011, Mr. Boberg served as the president and chief executive officer and a director of IO Turbine. From 2005 to 2009, Mr. Boberg served as vice president of InnovationQ, a nonprofit organization that he co-founded, which focused on working with California Polytechnic University, San Luis Obispo to promote innovation and entrepreneurship. Mr. Boberg was the sixth employee at NetApp, Inc., a leading provider of storage and data management solutions, and during his 12 years with NetApp from 1993 to 2005, he held executive positions in marketing, corporate development, and engineering, directed product management, strategic marketing, mergers and acquisitions, several software engineering groups, and strategic alliances and business development. Mr. Boberg has also held
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engineering and engineering management positions at several other technology companies, including Intel Corporation. Mr. Boberg holds a B.S. in Electrical/Electronic Engineering from California Polytechnic State University, San Luis Obispo, and a M.S. in Electrical Engineering from Massachusetts Institute of Technology.
Neil A. Carson has served as our Chief Technology Officer and Executive Vice President since October 2010, and as our Chief Technology Officer from March 2010 to October 2010. From December 2007 to January 2010, Mr. Carson served as chief application architect for Dell services, Dell Inc., a computer hardware, software and peripherals company. From June 2005 to December 2007, Mr. Carson served as chief architect of Everdream Corporation, a software-as-a-service systems management company. From 2003 to June 2005, Mr. Carson served as principal engineer of Remedy software products at BMC Software, Inc., an IT service management company. From 1997 to 2003, Mr. Carson served as principal architect of Liberate Technologies, Inc. From 1995 to 1997, Mr. Carson served as director of Causality Limited, an embedded systems software company. Mr. Carson holds a B.Eng. degree from the Royal Military College of Science at Cranfield University.
James L. Dawson has served as our Executive Vice President, Worldwide Sales since October 2010, and as our Senior Vice President of Sales from April 2009 to October 2010. From 2004 to April 2009, Mr. Dawson served as vice president of worldwide sales of 3PAR Inc., a storage solutions company. From 2002 to 2004, Mr. Dawson served as vice president, strategic sales and business development of Neoscale Systems, Inc., an enterprise storage security company. From 2000 to 2002, Mr. Dawson served as vice president of worldwide sales for Scale Eight, Inc., a storage solutions company. From 1987 to 2000, Mr. Dawson served in various positions with Data General Corporation, a supplier of storage and enterprise computing solutions, most recently as vice president of EMEA and Asia Pacific for its CLARiiON Storage Division. Mr. Dawson holds a B.A. in Economics from Weber State University.
Shawn J. Lindquist has served as our Chief Legal Officer, Executive Vice President and Secretary since October 2010, and as our Chief Legal Officer, Senior Vice President and Secretary from February 2010 to October 2010. From 2005 to January 2010, Mr. Lindquist served as chief legal officer, senior vice president and secretary of Omniture, Inc., an online marketing and web analytics company, through the completion and integration of the merger of Omniture with Adobe Systems Incorporated. Mr. Lindquist was a corporate and securities attorney at Wilson Sonsini Goodrich & Rosati, P.C. from 2001 to 2005 and from 1997 to 1999. Mr. Lindquist has also served as in-house corporate and mergers and acquisitions counsel for Novell, Inc., and as vice president and general counsel of a privately held, venture-backed company. Mr. Lindquist is also an adjunct professor of law at the J. Reuben Clark Law School at Brigham Young University. Mr. Lindquist holds a B.S. in Business Management-Finance and a J.D. from Brigham Young University.
Lance L. Smith has served as our Chief Operating Officer since April 2010, as our Executive Vice President since October 2010, as our Senior Vice President of Engineering from September 2009 to October 2010, and as our Senior Vice President of Product Management and Marketing from May 2008 to September 2009. From January 2003 to May 2008, Mr. Smith served as vice president and general manager of RMI Corporation, a semiconductor company. From 2000 to 2002, Mr. Smith served as senior vice president, business development of Raza Foundries, Inc., a broadband networking and communications investment company, and served in various interim executive roles at Pacific Broadband Communications, Inc., Acirro, Inc. and Omnishift Technologies Inc. He also served as the director of commercial segment marketing and director of technical marketing for the computational products group of Advanced Micro Devices, Inc., the x86 microprocessor and video card maker, and had management roles at technology companies NexGen, Inc. and Chips and Technologies, Inc. Mr. Smith holds a B.S. in Electrical Engineering from Santa Clara University.
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Stephen G. Wozniak has served as our Chief Scientist since December 2008. From 1971 to 1976, Mr. Wozniak held engineering positions within HP. In 1976, Mr. Wozniak co-founded Apple Computer, Inc., now Apple Inc. In 1985, Mr. Wozniak was awarded the National Medal of Technology, for his role in the development and introduction of the personal computer. After leaving Apple in 1985, Mr. Wozniak was involved in various business and philanthropic ventures, focusing primarily on computer capabilities in schools, stressing hands-on learning and encouraging creativity for students. In 2000, Mr. Wozniak was inducted into the National Inventors Hall of Fame, and he was awarded the Heinz Award in Technology, the Economy and Employment. He also co-founded the Electronic Frontier Foundation, and was a founding sponsor of the Tech Museum, Silicon Valley Ballet and Children’s Discovery Museum of San Jose. Mr. Wozniak holds a B.S. in Electrical Engineering and Computer Sciences from the University of California, Berkeley.
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Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides an overview of the material components of our executive compensation program and discusses the amounts shown in the executive compensation tables that follow for our named executive officers, or NEOs. Our NEOs are the following executive officers:
— | David A. Flynn, our Chief Executive Officer, or CEO, and President; |
— | Dennis P. Wolf, our Chief Financial Officer, or CFO, and Executive Vice President; |
— | Lance L. Smith, our Chief Operating Officer and Executive Vice President; |
— | James L. Dawson, our Executive Vice President, Worldwide Sales; and |
— | Richard W. Boberg, our Executive Vice President, Strategic Business Development and General Manager of Caching Solutions. |
Specifically, this Compensation Discussion and Analysis provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program and each component of compensation that we provide. In addition, we explain how and why the compensation committee of our board of directors arrived at the specific compensation policies and decisions involving our executive officers during fiscal 2012.
Executive Summary
Overview
We seek to pay for performance, and we believe our record for fiscal 2012 indicates that we have accomplished this objective.
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The following graph shows the strong correlation between our pay and performance by comparing (1) our CEO’s target total direct compensation (that is, the sum of the base salary, target short-term incentive award, and equity awards granted in fiscal 2012) against fiscal 2012 revenue and non-GAAP operating income* targets and (2) our CEO’s actual total direct compensation (that is, the sum of the base salary, actual short-term incentive payments, and equity awards granted in fiscal 2012) against our achievements in revenue and non-GAAP operating income in fiscal 2012.
We provide equity compensation as the primary component of our executive compensation program because we believe it links the interests of our executive officers with our stockholders and provides financial incentives for our executive officers to remain with the company and expand our business. With the equity awards subject to time-based vesting, the compensation an executive officer realizes in connection with the equity awards is spread over several years, which we believe assists in motivating him to drive the growth of our business. The following graph further illustrates our CEO’s fiscal 2012 realizable pay as compared to his fiscal 2012 target pay.
* | Non-GAAP operating income is defined as GAAP income from operations excluding the effects of stock-based compensation expense, amortization of intangible assets and acquisition related costs. A reconciliation of this non-GAAP measure can be found in exhibit 99.1 to the current report on Form 8-K furnished to the Securities and Exchange Commission on August 9, 2012. GAAP is defined as U.S. generally accepted accounting principles. |
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* | Target Pay—includes annualized base salary, target short-term incentive compensation award, and the “fair value” at grant of equity awards (that is, Black Scholes for stock options). |
** | Realizable Pay—includes annualized base salary, actual incentive compensation paid, and the “in-the-money” value of all equity awards issued during fiscal 2012 using the closing price of our common stock on June 29, 2012 of $20.89. Realizable Pay assumes equity awards are 100% vested upon grant, even though such awards vest over a period of four years. |
Fiscal 2012 Business Highlights
We provide next generation datacenter solutions that accelerate databases, virtualization, cloud computing, big data, and the applications that help drive business from the smallest e-tailers to some of the world’s largest data centers, social media leaders, and Fortune Global 500 businesses. Our integrated hardware and software platform enables the decentralization of data from legacy architectures and specialized hardware. Our core technology leverages flash memory to significantly increase datacenter efficiency, with enterprise grade performance, reliability, availability, and manageability. We sell our solutions through a global direct sales force, original equipment manufacturers, or OEMs, including Cisco, Dell, HP, and IBM, and other channel partners.
In fiscal 2012, we achieved several significant financial results:
— | Recorded fiscal year revenues of approximately $359.3 million, an 82% increase over our fiscal 2011 revenues; |
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— | Recorded fiscal year gross margin of 55.7%; and |
— | Generated $34.8 million in operating cash flow in fiscal 2012, compared to use of $9.9 million in fiscal 2011. |
In addition, we experienced a number of significant business milestones:
— | In August 2011, we completed the acquisition of IO Turbine, Inc., which was a key part of our strategy in enabling enterprise customers to increase the utilization, performance and efficiency of their datacenter resources and extract greater value from their information assets. |
— | In August 2011, we announced ioCache solution featuring ioTurbine software and customized ioMemory accelerator to deliver affordable performance for virtualizing data-intensive enterprise applications. |
— | In October 2011, we announced our next generation ioMemory platform, the ioDrive 2. |
— | In November 2011, we completed a follow-on public offering in which we issued and sold three million shares of our common stock, resulting in net proceeds of approximately $94.0 million. |
— | In April 2012, we announced ioFX, a new product for the single user workstation market, which accelerates key content creation software, including Adobe Creative Suite 6. |
— | In April 2012, we announced our software development kit (SDK) to enable customers and software developers to optimize enterprise, web, and big data applications through direct programmatic access to Fusion-io’s ioMemory subsystem. |
Fiscal 2012 Corporate Governance Highlights
We endeavor to maintain good governance standards in our executive compensation policies and practices. The following policies and practices were either adopted or in effect during fiscal 2012:
— | The compensation committee is comprised solely of independent directors. |
— | The compensation committee’s compensation consultant, Compensia, Inc., is retained directly by the committee and performs no other consulting or other services for us. |
— | The compensation committee has conducted an annual review of our compensation strategy, including a review of our compensation-related risk profile to ensure that our compensation-related risks are not reasonably likely to have a material adverse effect on the company. The compensation committee intends to conduct such a review annually. |
— | Our compensation philosophy and related corporate governance features are complemented by several specific elements that are designed to align our executive compensation with long-term stockholder interests, including: |
¡ | Our change-in-control payments and benefits are reasonable and are based on a “double trigger” (that is, our executive officers are eligible to receive payments and benefits only in connection with a change in control of the company and the termination of the executive without cause or for good reasons within a specified period before or after the change in control). |
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¡ | As a general policy, we do not favor non-cash benefits or perquisites (such as guaranteed retirement arrangements or pension plan benefits) for our executive officers that are not available to our employees generally. |
— | Revised equity grant guidelines to establish a pre-set schedule for granting equity awards and avoid the appearance that grants are made to take advantage of material nonpublic information. |
Compensation Philosophy, Objectives and Design
Compensation Environment and Philosophy
We operate in a new and rapidly evolving market. To succeed in this environment, we must continually refine our business strategy, grow our customer base, increase the attractiveness and capabilities of our products and expand and enhance our product development and sales operations. To achieve these objectives, we need to attract and retain a highly talented and experienced team of design, engineering, sales, marketing, business development, and finance professionals. We expect these individuals to possess and demonstrate strong leadership and management capabilities.
Given our reputation for innovation and our recent success in developing and marketing our data decentralization platform, our executive officers are highly sought after by our competitors and other large organizations. Accordingly, we have had to develop an executive compensation program that not only rewards these individuals for their achievements but also provides sufficient incentives to ensure their continued employment with us.
Compensation Objectives
We strive to provide a total compensation package to our executive officers through a combination of base salary, short-term and long-term incentive opportunities and severance and change-of-control benefits. Our executive compensation program is designed to achieve the following objectives:
— | attract, motivate, reward, and retain highly-qualified executive officers, whose knowledge, skills and performance are critical to our success; |
— | motivate these executive officers to pursue our business objectives while encouraging the creation of long-term value for our stockholders; |
— | provide market-competitive compensation that is designed to provide a foundation of fixed compensation (base salary) and a significant portion of performance-based compensation (short-term and long-term incentive opportunities); and |
— | align the interests of our executive officers and stockholders. |
Impact of November 2011 Stockholder Advisory Vote on Named Executive Officer Compensation
At our annual meeting of stockholders on November 18, 2011, or our 2011 annual meeting, our first stockholder advisory vote was conducted on the compensation of our executive officers for whom compensation information was disclosed in the proxy statement relating to the 2011 annual meeting, who we refer to as the 2011 named executive officers. This advisory vote is commonly referred to as a “say-on-pay” vote. At our 2011 annual meeting, our stockholders approved the compensation of the 2011 named executive officers, with over 99% of shareholder votes cast in favor of the 2011 named executive officer compensation program. By the time this vote was conducted, most of the decisions
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relating to the compensation of our named executive officers for fiscal 2012 had already been made. For example, base salaries and the cash incentive compensation structure for fiscal 2012 had been established in September 2011. As a result, although carefully reviewed and considered by the compensation committee of our board of directors, the 2011 say-on-pay vote did not have a significant impact on the 2012 compensation of our NEOs. However, in determining 2013 compensation programs for our executive officers, the compensation committee has considered, and will continue to consider in future years, the results of the annual say-on-pay vote. Moreover, in determining how often to hold a stockholder advisory vote on executive compensation, our board of directors took into account our stockholders’ preference (over 98% of votes cast) for an annual vote at the 2011 annual meeting. Specifically, our board of directors determined that we will hold an annual advisory stockholder vote on our named executive officer compensation until our next say-on-pay frequency vote.
Compensation Design
As a new publicly held company, our executive compensation program has been heavily weighted towards equity, primarily in the form of stock options, with cash compensation that generally fell below the median of comparable publicly held companies. We believe that relying primarily on equity compensation has focused our executive officers on driving achievement of our financial and strategic goals while conserving cash during our early years. We continue to believe that making equity awards a key component of executive compensation aligns the executive team with the long-term interests of our stockholders. We also have offered cash compensation in the form of base salaries to reward individual contributions and compensate our executive officers for their day-to-day responsibilities, and short-term (annual) incentive awards to drive excellence and leadership and reward our executives for the achievement of our short-term financial objectives. The following graph shows for our CEO the percentage of each element of his compensation based on the total direct compensation paid to him in fiscal 2012.
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At the beginning of fiscal 2012, with the assistance of Compensia, Inc., a national compensation consulting firm, we evaluated the compensation of each executive officer against our compensation peer group, noting that the total target cash opportunity (that is, base salary and target short-term incentive compensation award) for each of our executive officers in fiscal 2011 was below the 25th percentile of our compensation peer group. As we continue our transition as a publicly held company, we believe it is important to begin aligning our executive compensation against our compensation peer group in order to further our goals of attracting, rewarding, and retaining highly talented individuals, and providing our current and future executives with compensation that is market-competitive. In addition to its review of market competitive compensation levels, the compensation committee of our board of directors also considers executive officer’s job performance, skill set, prior experience, and time in his position, as well as internal equity, pressures to attract and retain talent, and business conditions when determining our executive officers’ pay levels. The actual compensation each executive officer receives also may vary depending on the extent to which we achieve our performance goals each fiscal year.
Compensation-Setting Process
Role of the Compensation Committee
Pursuant to its charter, the compensation committee is responsible for reviewing, evaluating and approving the compensation arrangements for our executive officers and for establishing and maintaining our executive compensation policies and practices. For additional information on the compensation committee, including the scope of its authority, see “Corporate Governance and Board of Directors—Compensation Committee” elsewhere in this proxy statement.
At the beginning of each fiscal year, the compensation committee, after consulting with our CEO, establishes the company’s corporate performance objectives, and, after consulting with our CEO and Compensia, makes decisions with respect to any base salary adjustments, individual performance objectives and individual target short-term incentive award opportunities for our executive officers for the upcoming year, and new equity awards. The compensation committee conducts a bi-annual assessment of the company’s performance and the performance of our executive officers to determine the payouts, if any, for the short-term cash incentive award opportunities.
The compensation committee reviews on an annual basis our executive compensation program, including any incentive compensation plans, to determine whether they are appropriate, properly coordinated and likely to achieve their intended purposes and to make any necessary modifications or adopt any new plans or arrangements.
Role of Management
In carrying out its responsibilities, the compensation committee works with members of our management, including our CEO. Typically, our management assists the compensation committee by providing information on corporate and individual performance, market data and management’s perspective and recommendations on compensation matters.
Historically, the initial compensation arrangements with our executive officers have been determined in negotiations with each individual executive. Typically, our CEO has been responsible for negotiating these arrangements, with the oversight and final approval of our board of directors or, since July 2010, the compensation committee.
Typically, our CEO will make recommendations to the compensation committee regarding compensation matters, including the compensation of our executive officers (except with respect to his own compensation). He also typically attends compensation committee meetings, except with respect to discussions involving his own compensation.
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While the compensation committee solicits and reviews our CEO’s recommendations and proposals with respect to compensation-related matters, the compensation committee only uses these recommendations and proposals as one factor in making compensation decisions.
Role of Compensation Consultant
We engaged Compensia to review our executive compensation policies and practices and to conduct an executive compensation market analysis.
The compensation committee is authorized to retain the services of one or more executive compensation advisors from time to time, as it sees fit, in connection with carrying out its duties and the oversight of our executive compensation program. Compensia serves at the discretion of the compensation committee. In fiscal 2012, Compensia was engaged by the compensation committee to assist in summarizing our executive compensation program, providing its observations regarding our current executive compensation levels versus executive compensation practices of our compensation peer group, highlighting “gaps” to market and offering a framework for potential compensation adjustments, and developing a framework for go-forward equity awards.
Competitive Positioning
The compensation committee compares and analyzes our executive officers’ compensation with those of a peer group of companies. In 2011, the compensation committee, assisted by our management and Compensia, selected a peer group of comparable companies, taking into consideration size and growth potential. This compensation peer group generally consisted of technology companies that had conducted an initial public offering of their equity securities within the last four years and other technology companies of similar size with which we compete in attracting talent. In fiscal 2012, the compensation committee, in consultation with Compensia, made adjustments to the compensation peer group, adding other technology companies that recently conducted initial public offerings and removing companies that had been acquired during the previous 12 months. The median market capitalization of the fiscal 2012 peer group was $2,364.2 million as of August 11, 2011. At the end of fiscal 2011, our market capitalization was approximately $2,441.8 million. We intend to review the compensation peer group at least annually.
The following companies comprised the compensation peer group for fiscal 2012:
A123 Systems | Fortinet | |
Acme Packet | Infinera | |
Ancestry.com | Netsuite | |
ArcSight | Qlik Technologies | |
Aruba Networks | QuinStreet | |
Blue Coat Systems | Rackspace Hosting | |
CommVault Systems | Red Hat | |
Constant Contact | SuccessFactors | |
F5 Networks |
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For fiscal 2012, the compensation committee also analyzed the executive compensation programs of certain other larger technology companies with whom the company competes for talent. The compensation committee used this data as a reference point for recruiting and retaining executives but did not factor the executive compensation of these companies into its analysis of the competitiveness of our executive officers’ compensation levels. These companies include the following for fiscal 2012:
EMC | salesforce.com | |
NetApp | Symantec | |
Oracle | VMware |
Compensia used the compensation information reported in the public filings of compensation peer group companies to make its comparisons. Compensia compiled the compensation data from the compensation peer group and prepared assessments to use for benchmarking our executive officer compensation. To remain competitive, we sought to develop a transition plan for our executive compensation program such that by fiscal 2013 the total cash compensation of each executive officer was increased to approximately the 50th percentile of similarly situated executives at our peer group, and equity compensation of each executive officer was decreased to approximately the 75th percentile of similarly situated executives at our peer group. The compensation committee believed these levels were appropriate because they allowed a greater portion of each executive’s compensation to be in the form of equity awards, which link the executive’s financial interests with the long-term interests of our stockholders, while moving toward more market competitive levels of cash compensation. The compensation committee analyzed the data provided by Compensia and used it to set compensation for fiscal 2012 for executive officers (other than Mr. Boberg, whose compensation was determined in negotiations in connection with the purchase of IO Turbine, Inc. in August 2011). The compensation committee also took into consideration its assessment of each executive officer’s job performance and the company’s overall business objectives for fiscal 2012. In particular, the compensation committee set each executive officer’s fiscal 2012 total target cash compensation below the 50th percentile of our peer group and fiscal 2012 equity compensation above the 75th percentile in order to conserve cash resources, while at the same time incentivizing our executive officers through equity compensation that provides them with a financial interest to grow our company.
Executive Compensation Program Components
The following describes each component of our executive compensation program, the rationale for each, and how compensation amounts and awards are determined.
Base Salary
Base salary is the primary fixed component of our executive compensation program. We use base salary to compensate our executive officers for services rendered during the year and to recognize the experience, skills, knowledge and responsibilities required of each executive officer. Historically, we have not applied a specific formula to determine adjustments to base salary. Rather, the base salaries of our executive officers were reviewed on a periodic basis and adjustments made to reflect our economic condition and future expected performance, as well as what our executive officers could be expected to receive if employed at companies similarly situated to ours and our overall subjective assessment of appropriate base salary levels, while being mindful of the need to conserve cash resources.
In September 2011, the compensation committee reviewed the base salaries of our executive officers, taking into consideration Compensia’s compensation analysis and the recommendations of our CEO (except with respect to his own base salary and Mr. Boberg’s base salary), as well as the other factors described above. Compensia’s analysis showed that the fiscal 2011 annual base salaries
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of our executive officers were below the 25th percentile of our compensation peer group. After taking into account the factors described above, the compensation committee increased the base salaries of our executive officers (other than Mr. Boberg) to a level that was market-competitive with our peers and would place each executive officer’s target total cash compensation (cash and short-term incentive compensation opportunity) closer to the 50th percentile of similarly situated executives in our compensation peer group. Each executive officer’s total target cash compensation remained below the 50th percentile of similarly situated executives at our peer group, as we sought to conserve cash resources and fully transition total target cash compensation to the 50th percentile of our peer group by fiscal 2013. We did not benchmark any executive officer’s base salary to a specific percentile.
The base salaries paid to the NEOs during fiscal 2012 are set forth in the table below:
Named Executive Officer | Fiscal 2012 Base Salary(1) | |||
Mr. Flynn(1) | $ | 360,000 | ||
Mr. Wolf(2) | $ | 270,000 | ||
Mr. Smith(3) | $ | 300,000 | ||
Mr. Dawson(4) | $ | 255,000 | ||
Mr. Boberg(5) | $ | 210,000 |
(1) | Mr. Flynn’s base salary was $240,000 for the first two months of fiscal 2012 and increased by $120,000 to $360,000 effective September 1, 2011. |
(2) | Mr. Wolf’s base salary was $220,000 for the first two months of fiscal 2012 and increased by $50,000 to $270,000 effective September 1, 2011. |
(3) | Mr. Smith’s base salary was $220,000 for the first two months of fiscal 2012 and increased by $80,000 to $300,000 effective September 1, 2011. |
(4) | Mr. Dawson’s base salary was $225,000 for the first two months of fiscal 2012 and increased by $30,000 to $255,000 effective September 1, 2011. |
(5) | Mr. Boberg’s base salary was negotiated in connection with his hiring in August 2011 and was not adjusted in September 2011. |
Short-Term Incentive Compensation
Consistent with our objective of linking a significant portion of each of our executive officer’s total compensation to performance, we provide performance-based short-term incentive opportunities to our executive officers that are based on corporate and individual performance, to achieve our annual financial and operational objectives, while making progress towards our longer-term growth and other goals. Historically, the compensation committee has made short-term incentive awards to our executive officers in its discretion after the end of the fiscal year based on its evaluation of the achievement of one or more corporate objectives as established in our annual operating plan and the individual performance of each executive officer.
Target Short-Term Incentive Award Opportunities
In fiscal 2012, the short-term incentive awards were designed to reward our executive officers based on our overall performance in achieving our financial and business objectives.
Each executive officer (other than Mr. Dawson) participated in the Executive Incentive Compensation Plan. As a participant in this plan, each executive officer’s short-term incentive award was payable bi-annually, based on our achievement against revenue and non-GAAP operating income goals, which were selected by our compensation committee, with input from our CEO and management at the beginning of fiscal 2012. For fiscal 2012, our target annual revenue goal was $350 million and target annual non-GAAP operating income goal was $33.6 million, which were equally weighted metrics under the plan. These performance metrics were selected to motivate our
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management team and encourage growth in our business, and the targets were intentionally challenging and expected to be achieved only with significant effort and leadership from our management team. There was no minimum or maximum threshold for payment.
Mr. Dawson’s fiscal 2012 short-term incentive award initially was structured similarly to the other executive officers and based on our achievement of annual revenue and non-GAAP operating income goals. The compensation committee, in consultation with our CEO, later redesigned Mr. Dawson’s fiscal 2012 short-term incentive award to become a commission-based opportunity, similar to the incentive compensation arrangement Mr. Dawson had in prior years. Mr. Dawson was eligible to receive incentive compensation payments, based on achievement of bookings quotas and gross margin targets, weighted 80% and 20%, respectively. The compensation committee, with input from our CEO, determined that a sales-based commission-program would serve as a more effective motivational tool for Mr. Dawson, our top sales executive, in driving the growth of our business through sales. The bookings quotas and gross margin targets were set by our compensation committee, in consultation with our CEO, were based on our historical operating results and growth rates, and believed to be achievable only with significant effort and dedication from Mr. Dawson and our team. These targets were viewed as difficult to achieve because they represented significant increases over the results for fiscal 2011, and attaining those goals further required Mr. Dawson and our sales team to engage with a substantially higher number of potential customers and book a higher aggregate number of purchase commitments. There was no minimum or maximum threshold for payment. We do not publicly disclose this information and, if disclosed, we believe the information would provide competitors and others with insights into our operations and sales compensation programs that would be harmful to us.
With respect to each executive officer (other than Mr. Boberg), the amount of his target short-term incentive award opportunity was established by the compensation committee taking into consideration Compensia’s compensation analysis and the recommendation of our CEO (except with respect to his own target short-term incentive award opportunity) and several other factors, including the scope of his performance, contributions, responsibilities, experience, prior years’ target short-term incentive award opportunities, position (in the case of a promotion) and market conditions. Compensia’s analysis showed that the total target cash compensation of our executive officers was below the 25th percentile of our compensation peer group. After taking into account this and the other factors described above, the compensation committee increased the target short-term incentive awards for each executive officer to a level that would place his target total cash compensation closer to the 50th percentile of similarly situated executives of our compensation peer group. Each executive officer’s total target cash compensation remained below the 50th percentile of similarly situated executives at our peer group, as we sought to conserve cash resources and transition his total target cash compensation to the 50th percentile of our peer group by fiscal 2013. We did not benchmark any executive officer’s target short-term incentive award to a specific percentile. Mr. Boberg’s short-term incentive award was determined in connection with his hiring in August 2011 in connection with the company’s acquisition of IO Turbine, Inc.
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As in prior years, the compensation committee determined that the target short-term incentive award for each executive officer should be determined as a percentage of such executive officer’s base salary. The target short-term incentive awards for the NEOs, expressed as a percentage of base salary, were as follows:
Named Executive Officer | Fiscal 2012 Base Salary | Fiscal 2012 Target Short-Term Incentive Award (% of Base Salary) | ||||||
Mr. Flynn | $ | 360,000 | 100 | % | ||||
Mr. Wolf | $ | 270,000 | 70 | % | ||||
Mr. Smith | $ | 300,000 | 70 | % | ||||
Mr. Dawson(1) | $ | 255,000 | 100 | % | ||||
Mr. Boberg | $ | 210,000 | 50 | % |
(1) | Mr. Dawson’s target short-term incentive award was adjusted upwards from 70% of his base salary to 100% of his base salary when our compensation committee restructured his incentive compensation arrangement to a sales-based commission program because of the comparatively aggressive bookings and gross margin targets that the company would have to achieve for Mr. Dawson to achieve the targets under his incentive compensation arrangement. |
Award Decisions and Analysis
In February 2012, the compensation committee, in consultation with our CEO and management, evaluated our achievements in revenue and non-GAAP operating income and determined that we were on track to at least achieve our annual targets in revenue and non-GAAP operating income based on our performance for the first six months of fiscal 2012. The compensation committee approved short-term incentive compensation payments to our executive officers (other than Mr. Dawson) equal to 50% of their target short-term incentive awards. The fiscal 2012 target short-term incentive awards for our executive officers (other than Mr. Dawson) were based on annual achievements against our fiscal 2012 targets, and, to the extent we did not achieve our targets in revenue and non-GAAP operating income due to our performance in the second-half of fiscal 2012, our executive officers potentially would be required to return to the Company a portion of the short-term incentive awards previously paid to them. In July 2012, the compensation committee, in consultation with our CEO and management, evaluated our annual achievements in revenue and non-GAAP operating income and determined that we had exceeded our annual targets, achieving annual revenues of $359.3 million (103% of our fiscal 2012 revenue target) and non-GAAP operating income of $41.8 million (124% of our fiscal 2012 non-GAAP operating income target). The compensation committee approved short-term incentive compensation payouts to our executive officers (other than Mr. Dawson) equal to 65% of their target short-term incentive awards based on our revenue and operating achievement in fiscal 2012, resulting in total short-term incentive compensation payouts to our executive officers (other than Mr. Dawson) for fiscal 2012 equal to 115% of their target short-term incentive awards.
For Mr. Dawson, our CEO and management evaluated our achievement against annual bookings and quarterly gross margin goals and determined that we had exceeded our bookings quota and achieved 75% of the gross margin targets for fiscal 2012. We have not disclosed the specific formulae or performance targets contained in Mr. Dawson’s commission plan for several reasons, including our belief that disclosure would result in competitive harm. Mr. Dawson’s eligible aggregate commissions relating to bookings were equal to 128% of his target short-term incentive award for fiscal 2012, based on achievements and consistent with the accelerator rates under Mr. Dawson’s commission plan. Commissions relating to Mr. Dawson’s booking achievements were earned and paid monthly based on actual shipment of product relating to those bookings. Any commissions paid with respect to shipments that are later returned or otherwise cancelled are reversed and generally offset future commissions. Incentive payments relating to gross margin achievement were 75% of his target short-term incentive award for fiscal year 2012 and were earned and paid quarterly based on gross margin achievement against targets in the immediately preceding quarter.
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The aggregate amounts of short-term incentive awards earned by our NEOs are set forth in the “Non-Equity Incentive Compensation” column in our Summary Compensation Table below.
Long-Term Incentive Compensation
We believe that strong long-term corporate performance is achieved with a corporate culture that encourages a long-term focus by our executive officers through the use of equity-based awards, the value of which depends on the performance of our common stock. To date, our long-term incentive compensation has been provided largely in the form of equity awards. We have used stock options to provide our executive officers with incentives to help align their interests with the interests of our stockholders and to enable them to participate in the long-term appreciation of the value of our common stock. As we continued our transition following our initial public offering, we began granting restricted stock units to employees in fiscal 2012 in order to stay market-competitive and attract and retain key personnel. We also granted restricted stock units to Mr. Boberg in connection with our acquisition of IO Turbine, Inc. Stock options and restricted stock units provide an important tool for us to retain our executive officers, as they are subject to vesting over a multi-year period subject to continued service with the company.
Historically, we have not had an established set of criteria for granting equity awards to our executive officers. Instead, our board of directors and compensation committee have exercised their judgment and discretion, in consultation with our CEO, and considered, among other factors, the role and responsibility of each executive officer, competitive factors, the amount of stock-based equity compensation already held by the executive officer and the cash compensation to be received by the executive officer, to determine the size of equity awards. In fiscal 2012, as we continued our transition to a publicly held company, we began reviewing the equity compensation levels of our compensation peer group to gain an understanding of the market. After taking into consideration all of the factors above, including that the total target cash compensation for our executive officers was set at levels below the 50th percentile of our compensation peer group, the compensation committee approved equity awards to our executive officers in fiscal 2012 above the 75th percentile of our compensation peer group in order to conserve cash resources and provide the greatest portion of each executive officer’s compensation package in the form of equity compensation, which links the executive officer’s financial interests with those of our stockholders. In future years, we will continue to evaluate the equity compensation we provide to our executive officers.
In August 2011, in connection with Mr. Boberg joining the company following the company’s acquisition of IO Turbine, Inc., the board of directors granted Mr. Boberg a restricted stock unit award under the 2011 Equity Incentive Plan covering 88,905 shares, subject to a four-year vesting schedule.
In September 2011, the compensation committee approved stock options to purchase shares of our common stock to our NEOs (other than Mr. Boberg). Each of these stock options was granted with an exercise price equal to $19.00 per share, the fair market value of our common stock on September 30, 2011, the last day on which the New York Stock Exchange was open for trading in the month of September, in accordance with our equity guidelines in effect at the time, and subject to a four-year vesting schedule and a 10-year maximum term. The stock option grants made to the NEOs were as follows:
Named Executive Officer | Number of Shares Underlying Stock Option Grant | |||
Mr. Flynn | 520,000 | |||
Mr. Wolf | 270,000 | |||
Mr. Smith | 270,000 | |||
Mr. Dawson | 200,000 |
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In determining the amount of each NEOs stock option grant, the compensation committee took into consideration a compensation analysis performed by Compensia and the equity award recommendations of Compensia and our CEO, as well as each executive officer’s performance, contributions, responsibilities, experience, existing equity holdings (including the current economic value of his unvested equity and the ability of these unvested holdings to satisfy our retention objectives), market conditions and internal equity.
The stock options granted to the NEOs and restricted stock units granted to Mr. Boberg during fiscal 2012 are set forth in the Summary Compensation Table and the Grants of Plan-Based Awards Table below.
Welfare and Other Benefits
We have established a tax-qualified Section 401(k) retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. We currently do not match any contributions made to the plan by our employees, including our executive officers. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.
In addition, we provide other benefits to our executive officers on the same basis as all of our full-time salaried employees in the country in which they reside.
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide perquisites to our executive officers, except in limited situations where we believe it is appropriate to assist an individual in the performance of his duties, to make our executive officers more efficient and effective and for recruitment, motivation or retention purposes.
All future practices with respect to perquisites or other personal benefits are subject to approval and periodic review by the compensation committee.
Employment Agreements
We have entered into an employment agreement with our CEO and employment offer letter agreements with our other NEOs. Each of these arrangements was approved on our behalf by our board of directors and sets forth the initial terms and conditions of employment of each of the NEOs. We believe that these arrangements were critical to induce these individuals to accept their position with us or to forego other employment opportunities or leave their then-employer for the uncertainty of a demanding position in a new and unfamiliar organization.
In filling these positions, our board of directors was aware that it would be necessary to recruit candidates with the requisite experience and skills to manage a growing business in a unique market niche. Accordingly, it recognized that it would need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, our board of directors was sensitive to the need to integrate new executives into the executive compensation structure that it was seeking to develop, balancing both competitive and internal equity considerations.
Each of these arrangements provided for an initial base salary, an annual short-term incentive opportunity payable in cash and/or an equity award in the form of a stock option to purchase shares of our common stock.
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For a summary of the material terms and conditions of employment for the NEOs, see “Employment Agreements and Offer Letters” below.
Post-Employment Compensation
Our board of directors considers maintaining a stable and effective management team to be essential in protecting and enhancing the best interests of the company and our stockholders. We have established severance and/or change of control arrangements with the NEOs to provide assurances of specified severance payments and benefits if their employment is subject to involuntary termination or voluntary termination for good reason other than for death, disability or cause, including following a change of control of the company.
We believe that it is imperative to provide these individuals with severance payments and benefits upon certain types of terminations of employment, which we recognize can be triggered at any time, to secure their continued dedication to their work, notwithstanding the possibility of a termination of employment by us, and provide these individuals with an incentive to continue their employment with us. We further believe that the severance payments and benefits are competitive relative to the severance protection provided to similarly situated individuals at companies with which we compete for talent and appropriate because the payments and benefits are subject to the executive officer’s entry into a release of claims in favor of the company.
We also recognize that the possibility of a change of control of the company may exist from time to time, and that this possibility, and the uncertainty and questions it may raise among management, may result in the departure or distraction of management to the company’s and our stockholders’ detriment. Accordingly, our board of directors decided to take steps to encourage the continued attention, dedication and continuity of members of our management team to their assigned duties without the distraction that may arise from the possibility or occurrence of a change of control of the company. As a result, we have agreements with each of the NEOs that provide for specific payments and benefits in the event of a change of control of the company. The terms of these agreements were determined after review by our board of directors of our retention objectives for each NEO and an analysis of relevant market data.
For a summary of the material terms and conditions of these severance and change-of-control arrangements, see “Potential Payments Upon Termination or Change of Control” below.
Other Compensation Policies
Stock Ownership Guidelines
We have not adopted stock ownership guidelines for our executive officers and our stock plans have provided the principal method for our executive officers to acquire equity in the company. We currently expect to continue to provide a substantial portion of total compensation to our executives in the form of equity awards.
Compensation Recovery Policy
In September 2012, we adopted a compensation recovery policy under which the board of directors may require reimbursement of any cash-based incentive compensation paid to any current or former employee who is subject to Section 16 of the Securities Exchange Act of 1934 in the event (1) such employee’s fraud or intentional misconduct results in the restatement of the company’s financial results (other than a restatement due to a change in financial accounting rules) and (2) the board of directors (or a committee of the board of directors) determines that such employee would
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have received a lower amount of cash-based incentive compensation as a result of the corrected restatement. The compensation recovery policy applies to any cash-based incentive compensation paid to any current or former Section 16 reporting person during the three-year period preceding the date on which the company is required to prepare an accounting restatement.
We believe that by providing the company with the ability to recover cash-based incentive compensation paid to any Section 16 reporting person in this situation, the company demonstrates its commitment to strong corporate governance.
Derivatives Trading and Hedging Policy
Our insider trading compliance policy prohibits, among other things, short sales, hedging of stock ownership positions and transactions involving derivative securities relating to shares of our common stock.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Generally, Section 162(m) of the Internal Revenue Code, or the Code, disallows a tax deduction to any publicly held corporation for any remuneration in excess of $1 million paid in any taxable year to its chief executive officer and each of the three other most highly compensated executive officers (other than the chief financial officer). Remuneration in excess of $1 million may be deducted only if, among other things, it qualifies as “performance-based compensation” within the meaning of the Code. In this regard, the compensation income realized upon the exercise of stock options granted under a stockholder-approved employee stock plan generally will be deductible so long as the options are granted by a committee whose members are non-employee directors and certain other conditions are satisfied.
As a new publicly held corporation, under a specific exception contained in Section 162(m), any compensation paid pursuant to a compensation arrangement in existence before the effective date of our public offering of equity securities will not be subject to the $1 million deduction limit. In addition, any equity awards that we grant under our 2011 Equity Incentive Plan will not be subject to the deduction limit, provided such awards are made prior to the earliest of:
— | the expiration of the plan; |
— | a material modification of the plan (as determined under Section 162(m)); |
— | the issuance of all the shares of our common stock and other compensation allocated under the plan; or |
— | the first meeting of stockholders at which directors are elected after the close of the third calendar year following the year in which our public offering of equity securities occurred. |
We may, where reasonably practicable, seek to qualify the variable compensation paid to our executive officers for the “performance-based compensation” exemption from the deduction limit. As such, in approving the amount and form of compensation for our executive officers in the future, we will consider all elements of the cost to us of providing such compensation, including the potential impact of Section 162(m). The compensation committee may, in its judgment, authorize compensation payments that do not comply with an exemption from the deductibility limit when it believes that such payments are appropriate to attract, retain or motivate executive talent.
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Taxation of “Parachute” Payments and Deferred Compensation
Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax.
Section 409A of the Code also imposes significant additional taxes on the individual in the event that an executive officer, director or other service provider receives “deferred compensation” that does not meet the requirements of Section 409A.
We have not provided any executive officer with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G or 4999 during fiscal 2012 and we have not agreed and are not otherwise obligated to provide any executive officer, including any NEO, with such a “gross-up” or other similar reimbursement.
Accounting for Stock-Based Compensation
We follow Financial Accounting Standard Board Accounting Standards Codification Topic 718, or ASC 718, for our stock-based compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors, including stock options and restricted stock awards, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their share-based payment awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
The compensation committee oversees Fusion-io’s compensation policies, plans, and benefit programs. The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on such review and discussions, the compensation committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee
H. Raymond Bingham (Chair)
Dana L. Evan
Scott D. Sandell
The Report of the Compensation Committee does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other filing by Fusion-io under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent Fusion-io specifically incorporates the Report of the Compensation Committee by reference therein.
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The following table provides information regarding the compensation of our chief executive officer, chief financial officer and each of the next three most highly compensated executive officers, together referred to as our named executive officers, or NEOs, for the fiscal years ended June 30, 2012, 2011 and 2010.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | Total ($) | |||||||||||||||||||||
David A. Flynn Chief Executive Officer and President |
| 2012 2011 2010 |
|
| 340,000 240,000 224,849 |
| | — — | |
| 5,468,691 1,335,934 2,395,458 |
(4) |
| — — — |
|
| 414,000 168,000 — | (3) (3)
|
| 6,222,691 1,743,934 2,812,307 |
| |||||||
Dennis P. Wolf Chief Financial Officer and Executive Vice President |
| 2012 2011 2010 |
|
| 261,667 220,000 140,039 |
| | — — | |
| 2,839,513 807,394 235,875 |
|
| — — — |
|
| 217,350 115,500 — | (3) (3)
|
| 3,318,530 1,142,894 459,454 |
| |||||||
Lance L. Smith Chief Operating Officer and Executive Vice President |
| 2012 2011 2010 |
|
| 286,667 220,000 220,000 |
| | — — | | | 2,839,513 1,620,594 | |
| — — — |
|
| 241,500 126,500 — | (3) (3)
| | 3,367,680 1,967,094 | | |||||||
James L. Dawson Executive Vice President, World-wide Sales |
| 2012 2011 2010 |
|
| 250,000 225,000 225,000 |
|
| — — — |
|
| 2,103,343 267,187 — |
|
| — — — |
|
| 258,700 299,350 277,973 | (5) (5) (5) |
| 2,612,043 791,537 502,973 |
| |||||||
Richard W. Boberg Executive Vice President, Corporate Business Development | 2012 | 185,368 | — | — | 2,524,902 | 117,875 | (3) | 2,828,145 |
(1) | The amounts included in the “Option Awards” column represent the aggregate grant date fair value of option awards calculated in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in the notes to our consolidated financial statements included in our annual report on Form 10-K for the fiscal year ended June 30, 2012. |
(2) | The amounts included in the “Stock Awards” column represent the aggregate grant date fair value of restricted stock units granted to Mr. Boberg, calculated in accordance with ASC 718. |
(3) | These amounts represent amounts earned pursuant to our Executive Incentive Compensation Plan. For further information regarding the bonus amounts, please see the “Target Short-Term Incentive Award Opportunities” subsection of the Compensation Discussion and Analysis section of this proxy statement. |
(4) | Includes $96,410 of grant date fair value for a portion of an option that was canceled following the end of fiscal 2010. |
(5) | Represents amounts paid to Mr. Dawson pursuant to his sales commission plan. |
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Grants of Plan-Based Awards For Fiscal Year Ended June 30, 2012
The following table presents information concerning each grant of an award made to an NEO in fiscal 2012 under any plan.
Name | Grant Date | Estimated Payouts Under Non-Equity Incentive Plan Awards Target ($) | Number of Shares of Stock or Units(#)(3) | Number of Securities Underlying Options (#)(4) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(5) | ||||||||||||||||||||||
Threshold | Target (1) | Maximum | ||||||||||||||||||||||||||
David A. Flynn |
| 09/13/2011 09/30/2011 |
| 360,000 | (1) | — | 520,000 | 19.00 | 5,468,691 | |||||||||||||||||||
Dennis P. Wolf |
| 09/13/2011 09/30/2011 |
| 189,000 | (1) | — | 270,000 | 19.00 | 2,839,513 | |||||||||||||||||||
Lance L. Smith |
| 09/13/2011 09/30/2011 |
| 210,000 | (1) | — | 270,000 | 19.00 | 2,839,513 | |||||||||||||||||||
James L. Dawson | 09/13/2011 | 255,000 | (2) | |||||||||||||||||||||||||
09/30/2011 | — | 200,000 | 19.00 | 2,103,343 | ||||||||||||||||||||||||
Richard W. Boberg | 08/11/2011 | 88,905 | — | — | 2,524,902 | |||||||||||||||||||||||
| 09/13/2011 | | 102,500 | (1) |
(1) | The target bonus amounts for fiscal 2012 were set pursuant to pre-determined objectives established by the compensation committee. For further information regarding the fiscal 2012 target short-term incentive awards, please see the “Target Short-Term Incentive Award Opportunities” subsection of the Compensation Discussion and Analysis section of this proxy statement. |
(2) | This amount relates to the commission amount payable to Mr. Dawson under his sales commission plan, assuming achievement of the bookings and gross margin targets. Payments under this sales commission plan are not subject to a minimum or maximum payment limitation. The actual amount paid to Mr. Dawson is set forth in the table above titled “Summary Compensation Table.” |
(3) | The restricted stock units granted to Mr. Boberg on August 11, 2011 vest as to 1/24th of the units each month after August 11, 2014, subject to Mr. Boberg’s continued service through each vesting date. |
(4) | The stock options granted to the NEOs on September 30, 2011 vest as to 1/48th of the shares subject to the stock option each month after the grant date, subject to the continued service of the NEO on each vesting date. These stock options have a 10-year-term. For further information regarding the impact of certain events upon the vesting schedules of these options, please see the “Employment Agreements and Offer Letters” and “Agreements Providing for Severance or Change of Control Benefits” sections of this proxy statement. |
(5) | Represents the grant date fair value of stock options granted during our fiscal year ended June 30, 2012 in accordance with ASC 718. The grant date fair value is the amount of stock-based compensation expense we expect to realize over the option’s service period. Assumptions used in the calculation of these amounts are included in Note 8 to our consolidated financial statements for the fiscal year ended June 30, 2012 in our annual report on Form 10-K for fiscal 2012. |
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Outstanding Equity Awards at June 30, 2012
The following table presents information concerning outstanding equity awards for each NEO as of the end of fiscal 2012.
Option Awards | Stock Awards | |||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | ||||||||||||||||||
David A. Flynn | 527,025 | (1) | 359,701 | 0.65 | 06/01/2019 | — | — | |||||||||||||||||
1,265,366 | (1) | 1,092,963 | 1.96 | 05/27/2020 | — | — | ||||||||||||||||||
— | 500,000 | (2) | 5.12 | 01/24/2021 | — | — | ||||||||||||||||||
97,500 | (3) | 422,500 | 19.00 | 09/29/2021 | — | — | ||||||||||||||||||
Dennis P. Wolf | 4,208 | (4) | 258,542 | 0.65 | 11/17/2019 | — | — | |||||||||||||||||
13,750 | (1) | 56,250 | 1.96 | 09/11/2020 | — | — | ||||||||||||||||||
— | 200,000 | (2) | 5.12 | 01/24/2021 | — | — | ||||||||||||||||||
50,625 | (3) | 219,375 | 19.00 | 09/29/2021 | — | — | ||||||||||||||||||
Lance L. Smith | — | 135,000 | (1) | 0.65 | 06/01/2019 | — | — | |||||||||||||||||
2,084 | (1) | 31,250 | 0.65 | 09/21/2019 | — | — | ||||||||||||||||||
4,167 | (1) | 168,750 | 1.96 | 09/11/2020 | — | — | ||||||||||||||||||
— | 300,000 | (2) | 5.12 | 01/24/2021 | — | — | ||||||||||||||||||
50,625 | (3) | 219,375 | 19.00 | 09/29/2021 | — | — | ||||||||||||||||||
James L. Dawson | 450,708 | (4) | 218,750 | 0.65 | 06/01/2019 | — | — | |||||||||||||||||
— | 100,000 | (2) | 5.12 | 01/24/2021 | — | — | ||||||||||||||||||
37,500 | (3) | 162,500 | 19.00 | 09/29/2021 | — | — | ||||||||||||||||||
Richard W. Boberg | — | — | — | — | 88,905 | (5) | 1,857,225 |
(1) | The option vests monthly as to 1/48th of the total number of shares on the first monthly anniversary of the vesting commencement date, subject to the NEO’s continued service through each vesting date. The options held by Mr. Flynn have vesting commencement dates of April 3, 2009 and April 7, 2010, respectively. The options held by Mr. Wolf have a vesting commencement date of September 12, 2010. The options held by Mr. Smith have vesting commencement dates of June 2, 2009, September 22, 2009, and September 12, 2010, respectively. |
(2) | The option vests monthly as to 1/24th of the total number of shares on the 25th day of each month beginning on February 25, 2014, subject to the NEO’s continued service through each vesting date. |
(3) | The option vests monthly as to 1/48th of the total number of shares beginning on the 13th day of each month after September, 2011, subject to the NEO’s continued service through each vesting date. |
(4) | The option vests as to 1/4th of the total number of shares on the first anniversary of the vesting commencement date and an additional 1/48th of the total shares vests each month thereafter, subject to the NEO’s continued service through each vesting date. The options held by Messrs. Wolf and Dawson have vesting commencement dates of November 11, 2009 and April 30, 2009, respectively. |
(5) | The restricted stock units granted to Mr. Boberg vest as to 1/24 of the units subject to the award on the 11th day of each month after August 11, 2014. |
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Option Exercises and Stock Vested in Fiscal Year Ended June 30, 2012
The following table shows information regarding options that were exercised by our NEOs during fiscal 2012. None of our NEOs hold any stock awards that had a vesting event occurring during fiscal 2012.
Option Awards | ||||||||
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | ||||||
David A. Flynn | 100,000 | 2,815,049 | ||||||
Dennis P. Wolf | 412,250 | 10,756,645 | ||||||
Lance L. Smith | 798,749 | 22,559,355 | ||||||
James L. Dawson | 263,042 | �� | 7,233,190 | |||||
Richard W. Boberg | — | — |
Equity Compensation Plan Information
The following table summarizes the number of outstanding options, warrants and rights granted to our employees, consultants, and directors, as well as the number of shares of common stock remaining available for future issuance, under our equity compensation plans as of June 30, 2012.
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (B)($/share) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(A)) (C) | |||||||||
Equity compensation plans approved by security holders(1) | 21,416,533 | 4.83 | 8,125,215 | |||||||||
Equity compensation plans not approved by security holders(2) | 218,724 | 1.07 | — | |||||||||
Total | 21,635,257 | 4.79 | 8,125,215 |
(1) | Includes the following plans: 2011 Equity Incentive Plan, 2011 Employee Stock Purchase Plan, 2010 Executive Stock Incentive Plan, 2008 Stock Incentive Plan, and 2006 Stock Option Plan. Our 2011 Equity Incentive Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year equal to the least of (i) 10,000,000 shares of our common stock, (ii) five percent (5%) of the outstanding shares of our common stock on the last day of the immediately preceding fiscal year, or (iii) such lesser amount as our board of directors may determine. Our board of directors determined that the number of shares available for issuance under our 2011 Equity Incentive Plan would be increased by 4,681,423 shares for the 2013 fiscal year. Our 2011 Employee Stock Purchase Plan provides for annual increases in the number of shares available for issuance thereunder on the first day of each fiscal year, beginning with the 2011 fiscal year, equal to the least of (i) 1,000,000 shares of our common stock, (ii) two percent (2%) of the outstanding shares of our common stock on the first day of the fiscal year, or (iii) such lesser amount as our board of directors or a designated committee acting as administrator of the plan may determine. Our board of directors determined that the number of shares available for issuance under our 2011 Employee Stock Purchase Plan would be increased by 936,284 for the 2013 fiscal year. |
(2) | Consists of common shares to be issued upon exercise of outstanding options under the IO Turbine, Inc. 2009 Equity Incentive Plan, which was assumed by us in connection with our acquisition of IO Turbine, Inc. in August 2011. |
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Equity Awards Committee Authority and Limitations
In April 2011, our board of directors formed the equity awards committee and granted to the committee authority to grant equity awards to employees from our 2011 Equity Incentive Plan, or 2011 Plan, in accordance with certain specific grant guidelines determined by our board of directors and the compensation committee.
The equity awards committee is composed of three of our executive officers: David A. Flynn, Dennis P. Wolf and Shawn J. Lindquist, our chief executive officer, our chief financial officer, and our chief legal officer, respectively. The equity awards committee typically meets on the last trading day of each month. The equity awards committee has authority to grant equity awards under the 2011 Plan subject to the following guidelines and limitations established by our board of directors and the compensation committee:
— | The equity awards committee may grant equity awards only to employees who arenot: (1) Section 16 reporting persons; (2) executive vice presidents, senior vice presidents or vice presidents of the company; (3) employees who hold 5% or more of the outstanding capital stock of the company; or (4) members of the equity awards committee. |
— | All equity awards granted by the equity awards committee become effective in accordance with our Equity Granting Guidelines and Practices discussed below. |
— | All stock options granted by the equity awards committee shall have an exercise price equal to the closing sales price of our common stock on the effective date of grant. |
— | The vesting commencement date for stock options or stock appreciation rights and full value awards (i.e., restricted stock, restricted stock units, and performance shares/units) are determined in accordance with our Equity Granting Guidelines and Practices discussed below. |
— | The equity awards committee may grant equity awards subject to the following limitations for each calendar year: (1) a maximum of 50,000 shares subject to options to purchase common stock to any employee; (2) a maximum of 50,000 shares subject to stock appreciation rights to any employee; (3) a maximum of 25,000 restricted stock units to any employee, and (4) a maximum of 2,000,000 shares in total for all grants made pursuant to this delegation of authority. |
In addition, the equity awards committee is required to report at each meeting of the compensation committee concerning equity awards granted by the committee.
Equity Granting Guidelines and Practices
Our board of directors has determined that equity awards may be granted under the 2011 Plan by the board, the compensation committee and the equity awards committee. Our board of directors has adopted the equity award guidelines described below. These guidelines are designed to comply with: (1) the administrative provisions of the 2011 Plan; (2) the requirements of the Delaware General Corporation Law; (3) the corporate governance requirements of the New York Stock Exchange; (4) applicable rules and regulations of the SEC, including those relating to Section 16 of the Exchange Act, or Section 16; and (5) relevant sections of the Code, including Section 422 (incentive stock options), Section 409A (deferred compensation) and Section 162(m) (performance based compensation). In September 2011, the compensation committee, after consulting with Compensia,
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adopted equity award guidelines described below. In September 2012, the compensation committee amended the equity granting guidelines, which are noted in the descriptions below. The following guidelines apply with respect to equity awards made under the 2011 Plan:
— | Only the board of directors and the compensation committee may grant equity awards to employees who are (1) Section 16 reporting persons; (2) executive vice presidents, senior vice presidents, or vice presidents of the company; (3) members of the equity awards committee; or (4) employees who hold 5% or more of the outstanding common stock of the company. |
— | Following amendments made by the compensation committee in September 2012, equity awards become effective as follows: |
¡ | Awards granted to non-executives in connection with their initial hiring become effective on the last trading day of the month in which the grant is approved; |
¡ | Awards granted to executives in connection with their initial hiring that are approved during a trading blackout period is in effect under our Insider Trading Policy become effective on the last trading day of the month in which the grant is approved; |
¡ | For all other awards, if an award is approved when there is no trading blackout period in effect pursuant to the our Insider Trading Policy, it will granted and become effective on the date it is approved and if an award is approved during a trading blackout period under our Insider Trading Policy, the award will become effective on the first trading day of the next open trading window under our Insider Trading Policy. |
— | The vesting commencement date for stock options or stock appreciation rights shall generally be either: (1) the date on which the employee’sbona fide employment commences (for newly hired employees); or (2) the date on which the grant is approved. |
— | The vesting commencement date for full value awards shall generally be either the first quarterly vesting date to occur following: (1) the date on which the employee’sbona fide employment commences (for newly hired employees); or (2) the date on which the grant is approved. |
In addition, our board of directors has retained the authority to make discretionary equity award grants to non-employee directors, subject to the guidelines above. Discretionary grants are subject to the guidelines described above, except that the vesting commencement date for any such discretionary award will be the date on which the grant is approved by our board of directors. The compensation committee may at any time, and without the approval of the board of directors, modify the guidelines described above, including to the extent necessary to maintain compliance with state, federal or foreign laws or regulations.
Pension Benefits & Nonqualified Deferred Compensation
We do not provide a pension plan for our employees and no NEOs participated in a nonqualified deferred compensation plan during the fiscal year ended June 30, 2012.
Employment Agreements and Offer Letters
David A. Flynn
We entered into a second amended and restated employment agreement with David A. Flynn, dated April 7, 2010, in connection with his appointment as our Chief Executive Officer and President.
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This agreement has no specific term and constitutes at-will employment. Mr. Flynn’s current annual base salary is $500,000, and he is eligible to earn short-term cash incentive compensation with a target of 100 percent of his base salary. The second amended and restated employment agreement provides for severance and change of control benefits to Mr. Flynn, as described below under the “Agreements Providing for Severance or Change of Control Benefits” section.
Dennis P. Wolf
We entered into an offer letter agreement with Dennis P. Wolf, our Chief Financial Officer and Executive Vice President, dated November 4, 2009. The offer letter agreement has no specific term and constitutes at-will employment. Mr. Wolf’s current annual base salary is $340,000, and he is eligible to earn short-term incentive compensation with a target of 70 percent of his base salary. In August 2010, Mr. Wolf entered into an involuntary termination severance agreement providing for severance and change of control benefits to Mr. Wolf, as described below under the “Agreements Providing for Severance or Change of Control Benefits” section.
Lance L. Smith
We entered into an offer letter agreement with Lance L. Smith, our Chief Operations Officer and Executive Vice President, dated April 29, 2008. The offer letter agreement has no specific term and constitutes at-will employment. Mr. Smith’s current annual base salary is $360,000, and he is eligible to earn short-term cash incentive compensation with a target of 70 percent of his base salary. In August 2010, Mr. Smith entered into an involuntary termination severance agreement providing for severance and change of control benefits to Mr. Smith, as described below under the “Agreements Providing for Severance or Change of Control Benefits” section.
James L. Dawson
We entered into an offer letter agreement with James L. Dawson, our Executive Vice President of Worldwide Sales, dated April 1, 2008. The offer letter agreement has no specific term and constitutes at-will employment. Mr. Dawson’s current annual base salary is $310,000, and he is eligible to earn short-term cash incentive compensation with a target of $310,000. In August 2010, Mr. Dawson entered into an involuntary termination severance agreement providing severance and change of control benefits to Mr. Dawson, as described below under the “Agreements Providing for Severance or Change of Control Benefits” section.
Richard W. Boberg
We entered into an offer letter agreement with Richard W. Boberg, our Executive Vice President, Corporate Business Development, dated August 4, 2011, in connection with the company’s acquisition of IO Turbine, Inc. The offer letter agreement has no specific term and constitutes at-will employment. Mr. Boberg’s current annual base salary is $280,000, and he is eligible to earn short-term cash incentive compensation with a target of 50 percent of his base salary. The offer letter agreement provides for certain change of control severance benefits to Mr. Boberg, as described below under the “Agreements Providing for Severance or Change of Control Benefits” section. In connection with the acquisition of IO Turbine, Inc. and the same of his substantial equity interests in connection therewith, Mr. Boberg also entered into a Non-Competition Agreement, dated August 4, 2011, in which he agreed not to directly or indirectly compete with the company or IO Turbine in a territory in which either conducts business, or solicit any customers or employees of IO Turbine, in each case, through August 11, 2015.
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Agreements Providing for Severance or Change of Control Benefits
We have entered into agreements with each of our NEOs that may provide for benefits under the circumstances described below, if the NEO’s employment is terminated under certain conditions, and enhanced benefits, if the termination occurs in connection with a change of control.
David A. Flynn
Under the terms of Mr. Flynn’s April 2010 second amended and restated employment agreement, if Mr. Flynn’s employment is terminated without cause or he resigns for good reason, he will be eligible to receive the following benefits if he timely signs a release of claims:
— | continued payment of base salary for a period of 12 months (18 months, if his termination occurs on or following a change of control); |
— | an amount equal to 150% of his target annual bonus and payable over a period of 18 months following his termination, but only if his termination occurs on or following a change of control; |
— | accelerated vesting of outstanding equity awards equal to the lesser of (x) the remaining vesting schedule or (y) 12 months (100% accelerated vesting, if his termination occurs on or following a change of control); and |
— | payment by us for up to 18 months of COBRA premiums to continue health insurance coverage for him and his eligible dependents. |
In addition, if Mr. Flynn’s employment terminates as a result of death or disability, he will be eligible to receive 100% accelerated vesting of his outstanding equity awards.
Dennis P. Wolf, Lance L. Smith, James L. Dawson
Messrs. Wolf, Smith and Dawson each entered into involuntary termination severance agreements in August 2010, which provide for the severance and change of control benefits described below.
If, prior to the three-month period before a change of control, his employment is terminated without cause or he resigns for good reason, he will be eligible to receive the following benefits if he timely signs a release of claims:
— | continued payment of base salary for a period of 12 months (except that if a change of control occurs while he is receiving this benefit, he will be entitled to receive a lump sum payment equal to the remaining unpaid amount on the date of the change of control in lieu of the continuing payments); and |
— | payment by us for up to 12 months of COBRA premiums to continue health insurance coverage for him and his eligible dependents. |
If, within the period commencing three months before change of control and ending 12 months after a change of control, his employment is terminated without cause or he resigns for good reason, he will be entitled to the following benefits if he timely signs a release of claims:
— | a lump sum payment equal to (x) one times his annual base salary (for the year of the change of control or his termination, whichever is greater), plus (y) one times his target annual bonus (for the year of the change of control or his termination, whichever is greater); |
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— | 100% accelerated vesting of all outstanding equity awards; and |
— | payment by us for up to 12 months of COBRA premiums to continue health insurance coverage for him and his eligible dependents. |
In addition, in the event any of the amounts provide for under these agreements or otherwise payable to Messrs. Wolf, Smith or Dawson would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and could be subject to the related excise tax, the NEO would be entitled to receive either full payment of benefits under this agreement or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to the NEO. The agreements do not require us to provide any tax gross-up payments.
For purposes of the agreements above, the terms shall have the following meanings:
— | “Cause” means any of the following occurring during the named executive officer’s employment by or service to us (except with respect to clause (v) below): (i) personal dishonesty by the named executive officer involving company business or participation in a fraud against us, or breach of the named executive officer’s fiduciary duty to the company; (ii) indictment or conviction of a felony or other crime involving moral turpitude or dishonesty; (iii) the named executive officer’s willful refusal to comply with the lawful requests made of the named executive officer by our board of directors reasonably related to his employment by us and the performance of his employment duties (but which shall not include a request to waive or amend any portion of his agreement or terminate his agreement or to consent to an action that would result in the named executive officer’s loss of a right under his agreement); (iv) material violation of our policies, after written notice to the named executive officer and an opportunity to be heard by our board of directors and his failure to fully cure such violations within a reasonable period of time of not less than 30 days after such hearing; (v) threats or acts of violence in the workplace; (vi) unlawful harassment in the course of any business activity of any of our employees, independent contractors, vendors or suppliers; (vii) theft or unauthorized conversion by or transfer of any company asset or business opportunity to the named executive officer or any third party; and (viii) a material breach by the named executive officer of any material provision of his agreement or any other agreement with us after written notice to the named executive officer and an opportunity to be heard by our board of directors and his failure to fully cure such breach within a reasonable period of time of not less than 30 days after such hearing. |
— | “Change of Control” means the occurrence of any of the following events (i) any person or group of persons acquiring ownership of more than 50% of the total voting power of our stock; (ii) certain changes in the majority of our board of directors; (iii) the sale of all or substantially all of our assets. |
— | “Disability” means that the named executive officer has been unable to perform his employment duties as the result of named executive officer’s incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by us or our insurers and acceptable to the named executive officer or the named executive officer’s legal representative (such agreement as to acceptability not to be unreasonably withheld). |
— | “Good Reason” (applies to all named executive officers, except Mr. Wolf) means the named executive officer’s resignation within 90 days following the expiration of any company cure period (discussed below) following the occurrence of one or more of the following, without the |
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named executive officer’s express written consent: (i) prior to a change of control a material reduction of the named executive officer’s duties, authority, or responsibilities, relative to the named executive officer’s title, duties, authority, or responsibilities as in effect immediately prior to such reduction; or following a change of control, (A) the removal of the named executive officer from the position held by the named executive officer immediately prior to the change of control, provided that continued employment following the change of control with substantially the same responsibility with respect to our business and operations shall not constitute “Good Reason” (for example, the named executive officer shall not have been removed from his position if he is employed by us, the acquiring company or one of our affiliates and the named executive officer has substantially the same responsibilities with respect to our business as he had immediately prior to the change of control whether the named executive officer’s title is revised to reflect his placement within the overall corporate hierarchy and whether the named executive officer provides services to a subsidiary, affiliate, business unit or otherwise), or (B) a material reduction in the named executive officer’s responsibilities, authority or status as such (which for this purpose shall include a material reduction in the resources (financial, personnel and other) allocated to our business and under the named executive officer’s direction, including reallocation of key personnel engaged in our business to other businesses of the acquiring company); (ii) a material reduction of the named executive officer’s base compensation (base salary or bonus or benefits) in effect immediately prior to such reduction, other than reductions implemented as part of an overall company-wide reduction program that is applied similarly to all executive officers and is no more than 20%; (iii) a material change in the geographic location at which the named executive officer must perform services (in other words, the named executive officer’s relocation to a facility or an office location more than a 50-mile radius from the named executive officer’s then current location); or (iv) a material breach by us of a material provision of his agreement. Notwithstanding the foregoing, the named executive officer agrees not to resign for Good Reason without first providing us with written notice of the acts or omissions constituting the grounds for Good Reason within 90 days of the initial existence of the grounds for Good Reason and a reasonable cure period of 30 days following the date of such notice. |
— | “Good Reason” (Mr. Wolf only) means Mr. Wolf’s resignation within 90 days following the expiration of any company cure period (discussed below) following the occurrence of one or more of the following, without Mr. Wolf’s express written consent: (i) prior to a change of control, a material reduction of Mr. Wolf’s duties, authority, or responsibilities, relative to Mr. Wolf’s title, duties, authority, or responsibilities as in effect immediately prior to such reduction; or (ii) following a change of control, a change in Mr. Wolf’s reporting position such that Mr. Wolf no longer reports directly to the chief executive officer of the parent corporation in a group of controlled corporations; provided, however, that in the event of change of control, Mr. Wolf agrees to continue his employment with the company or its successor to help ensure a smooth transition of his responsibilities on mutually agreeable terms for a period of up to six months following the change of control. If the company or its successor, or any parent corporation in a control group of corporations that includes the company or its successor, is a company whose securities are listed, admitted to trade, or quoted on a national securities exchange, then Mr. Wolf not serving as the Chief Financial Officer of the publicly traded company (other than as the result of his voluntary resignation not at the request of the company or its successor or its parent) shall be deemed to constitute a material change or reduction in Mr. Wolf’s authority and responsibilities constituting grounds for a Good Reason termination; or (iii) a material reduction of Mr. Wolf’s base compensation (in other words, a material reduction in Mr. Wolf’s base salary or bonus or benefits) as in effect immediately prior to such reduction, other than reductions implemented as part of an overall company-wide reduction program that is applied similarly to all executive officers and is no |
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more than 20%; or (iv) a material change in the geographic location at which Mr. Wolf must perform services (in other words, Mr. Wolf’s relocation to a facility or an office location more than a 50 mile radius from Mr. Wolf’s then current location); or (v) a material breach by the company of a material provision of this agreement. Notwithstanding the foregoing, Mr. Wolf agrees not to resign for Good Reason without first providing the company with the written notice of the acts or omissions constituting the grounds for Good Reason within 90 days of the initial existence of the grounds for Good Reason and a reasonable cure period of 30 days following the date of such notice. |
Richard W. Boberg
Under the terms of Mr. Boberg’s offer letter agreement dated August 4, 2011, if, within the 12 months after a change of control, his employment is terminated other than for Cause (as described above for Messrs. Smith and Dawson), death, or disability or he resigns for Good Reason (as described above for Messrs. Smith and Dawson), he will be entitled to the following benefits if he timely signs a release of claims:
— | lump sum payment of base salary for a period of 12 months; |
— | lump sum payment equal to 100% of his target annual bonus; |
— | accelerated vesting of 100% of outstanding equity awards; and |
— | payment by us for up to 12 months of COBRA premiums to continue health insurance coverage for him, provided that such payments do not result in excise tax penalties for the company under applicable laws. |
Potential Payments Upon Termination or Change of Control
The tables below provide an estimate of the value of the compensation and benefits due to each of our NEOs in the events described below, assuming that the termination of employment and/or change of control was effective on June 30, 2012, under the agreements described above. The actual amounts to be paid can only be determined at the time of the termination of employment or change of control, as applicable.
Termination without Cause or Resignation for Good Reason
Salary Continuation ($) | Value of Accelerated Equity Awards ($)(1) | Continuation of Healthcare Coverage Premiums ($) | Total ($) | |||||||||||||
David A. Flynn | 360,000 | 18,811,376 | (2) | 26,029 | 19,197,405 | |||||||||||
Dennis P. Wolf | 270,000 | — | 11,232 | 281,232 | ||||||||||||
Lance L. Smith | 300,000 | — | 11,232 | 311,232 | ||||||||||||
James L. Dawson | 255,000 | — | 17,353 | 272,353 | ||||||||||||
Richard W. Boberg | — | — | — | — |
(1) | Amounts indicated in the table are calculated as the difference between the closing price of our common stock on the New York Stock Exchange as of June 29, 2012 ($20.89) and the exercise price of these options, multiplied by the number of accelerated shares. |
(2) | As of June 30, 2012, 1,085,862 shares of common stock subject to Mr. Flynn’s options would have accelerated if he had been terminated without cause or resigned for good reason, which is 12 months of additional vesting based on the shares subject to the options granted to Mr. Flynn that were unvested as of June 30, 2012. |
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Termination without Cause or Resignation for Good Reason
in connection with a Change of Control
Salary Continuation ($) | Short-Term Incentive Compensation ($) | Value of Accelerated Equity Awards ($)(1) | Continuation of Healthcare Coverage Premiums ($) | Total ($) | ||||||||||||||||
David A. Flynn | 540,000 | 540,000 | 36,653,663 | (2) | 26,029 | 37,759,692 | ||||||||||||||
Dennis P. Wolf | 270,000 | 189,000 | 9,866,321 | (3) | 11,232 | 10,336,553 | ||||||||||||||
Lance L. Smith | 300,000 | 210,000 | 11,704,956 | (4) | 11,232 | 12,226,188 | ||||||||||||||
James L. Dawson | 255,000 | 255,000 | 6,311,625 | (5) | 17,353 | 6,838,978 | ||||||||||||||
Richard W. Boberg | 210,000 | 105,000 | 1,857,225 | (6) | 17,353 | 2,189,578 |
(1) | Amounts indicated in the table are calculated as the difference between the closing price of our common stock on the New York Stock Exchange as of June 29, 2012 ($20.89) and the exercise price of these options, multiplied by the number of accelerated shares. |
(2) | As of June 30, 2012, 2,375,164 shares of common stock subject to Mr. Flynn’s options would have accelerated if he had been terminated without cause or resigned for good reason on or following a change of control, which is 100% of the shares subject to the options granted to Mr. Flynn that were unvested as of June 30, 2012. |
(3) | As of June 30, 2012, 734,167 shares of common stock subject to Mr. Wolf’s options would have accelerated if he had been terminated without cause or resigned for good reason within the period commencing three months before and ending twelve months after a change of control, which is 100% of the shares subject to the options granted to Mr. Wolf that were unvested as of June 30, 2012. |
(4) | As of June 30, 2012, 854,375 shares of common stock subject to Mr. Smith’s options would have accelerated if he had been terminated without cause or resigned for good reason within the period commencing three months before and ending twelve months after a change of control, which is 100% of the shares subject to the options granted to Mr. Smith that were unvested as of June 30, 2012. |
(5) | As of June 30, 2012, 481,250 shares of common stock subject to Mr. Dawson’s options would have accelerated if he had been terminated without cause or resigned for good reason within the period commencing three months before and ending twelve months after a change of control, which is 100% of the shares subject to the options granted to Mr. Dawson that were unvested as of June 30, 2012. |
(6) | As of June 30, 2012, 88,905 restricted stock units granted to Mr. Boberg would have accelerated if he had been terminated without cause or resigned for good reason within the 12 months following a change of control, which is 100% of the restricted stock units granted to Mr. Boberg that were unvested as of June 30, 2012. |
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RELATED PERSON TRANSACTIONS AND
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Other than compensation arrangements, we describe below transactions and series of similar transactions, since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
— | the amounts involved exceeded or will exceed $120,000; and |
— | any of our directors, executive officers or beneficial holders of more than 5% of any class of our capital stock had or will have a direct or indirect material interest. |
Compensation arrangements for our directors and NEOs are described elsewhere in this proxy statement.
Acquisition of IO Turbine, Inc.
On August 11, 2011, we acquired 100% of the stock of IO Turbine, Inc., a provider of caching solutions for virtual environments, based in San Jose, California. Immediately prior to the acquisition of IO Turbine, Lightspeed Venture Partners, a venture capital firm, through certain of its related funds (including Lightspeed Venture Partners VIII L.P. and Lightspeed Venture Partners VII, L.P.) owned over 10% of our outstanding capital stock and over 25% of IO Turbine’s capital stock. Christopher J. Schaepe, a former member of our board of directors, is a founding managing director of Lightspeed. In connection with the acquisition, Lightspeed received 744,866 shares of our common stock, prior to adjusting for escrowed shares. Pursuant to the definitive agreement related to the acquisition, such shares of common stock were valued at $30.02 per share individually and approximately $22.3 million in the aggregate.
We are party to an investors’ rights agreement which provides, among other things, that holders of our preferred stock have the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing.
Employment Arrangements and Indemnification Agreements
We have entered into employment and consulting arrangements with certain of our current and former executive officers. See “Executive Compensation — Employment Agreements and Offer Letters”.
We have also entered into indemnification agreements with each of our directors and officers, as well as certain stockholders affiliated with our directors. The indemnification agreements and our certificate of incorporation and bylaws currently in effect require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
Policies and Procedures for Related Party Transactions
In accordance with the charter for the audit committee of the board of directors, our audit committee reviews and approves in advance in writing any proposed related person transactions.
For purposes of these procedures, “related person” and “transaction” have the meanings contained in Item 404 of Regulation S-K.
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The individuals and entities that are considered “related persons” include:
— | Directors, nominees for director and executive officers of Fusion-io; |
— | Any person known to be the beneficial owner of five percent or more of Fusion-io’s common stock (a “5% Stockholder”); |
— | Any immediate family member, as defined in Item 404(a) of Regulation S-K, of a director, nominee for director, executive officer and 5% Stockholder; and |
— | Any firm, corporation or other entity in which any of the foregoing persons is employed or in which such person has a 5% or greater beneficial ownership interest. |
In accordance with our Related Person Transactions Policy and Procedures, the audit committee must review and approve all transactions in which (i) Fusion-io or one of its subsidiaries is a participant, (ii) the amount involved exceeds $120,000 and (iii) a related person has a direct or indirect material interest, other than transactions available to all our employees generally.
In assessing a related party transaction brought before it for approval the audit committee considers, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction. The audit committee may then approve or disapprove the transaction in its discretion. Additionally the following transactions do not require audit committee approval: (1) compensation arrangements for named executive officers and directors do not need to be approved by the audit committee if such arrangements are required to be publicly disclosed in the company’s SEC filings; (2) compensation arrangements of executive officers who are not named executive officers if approved by the compensation committee; (3) any transaction with another company at which a related person’s only relationship is as an employee (excluding as an executive officer or a director) or beneficial owner of less than 5% of that company’s shares; and (4) any transaction where the related person’s interest arises solely from the ownership of the company’s common stock and all holders of the company’s common stock received the same benefit on apro rata basis.
Any material related person transaction will be disclosed in the applicable SEC filing as required by the rules of the SEC.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, Fusion-io officers and directors and persons who beneficially own more than 10% of a registered class of Fusion-io’s equity securities are required to file initial statements of beneficial ownership (Form 3) and statements of changes in beneficial ownership (Forms 4 and 5) with the SEC. Such persons are required by the rules of the SEC to furnish Fusion-io with copies of all such forms they file. Based solely on a review of the copies of such forms furnished to Fusion-io and/or written representations that no additional forms were required, Fusion-io is not aware that any of its directors, officers or persons who beneficially owned more than 10% of a registered class of Fusion-io’s equity securities failed to comply with the reporting requirements applicable to them pursuant to Section 16(a) with respect to transactions during the fiscal year ended June 30, 2012, except with respect one late Form 4 filing by Richard W. Boberg on August 18, 2011 reporting three transactions that occurred on August 11, 2011, one late filing by H. Raymond Bingham on February 23, 2012 reporting one late transaction that occurred on February 17, 2012, and one late filing by Lance L. Smith on March 20, 2012, reporting five late transactions that occurred on March 15, 2012.
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Our Insider Trading Policy permits directors, officers and other employees covered under the policy to establish, subject to certain conditions and limitations set forth in the policy, written trading plans that are intended to comply with Rule 10b5-1 under the Exchange Act, which permit automatic trading of common stock of Fusion-io, Inc. or trading of common stock by an independent person (such as a stockbroker) who is not aware of material nonpublic information at the time of the trade. We are aware that certain of our directors and officers have entered into written trading plans, and we believe our directors and officers may establish such plans in the future.
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The following table sets forth information, as of September 13, 2012, concerning:
— | Each person who we know beneficially owns more than five percent of our common stock; |
— | Each of our directors and nominees for the board of directors; |
— | Each of our NEOs; and |
— | All of our directors and executive officers as a group. |
Unless otherwise noted below, the address of each person listed on the table is c/o Fusion-io, Inc., 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, Utah 84121.
We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 95,033,241 shares of common stock outstanding at September 13, 2012. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of September 13, 2012. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial ownership representing less than one percent is denoted with an asterisk (“*”).
The information provided in the table is based on our records, information filed with the SEC, and information provided to Fusion-io, except where otherwise noted.
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership (#) | Percent of Shares Beneficially Owned (%) | ||||||
5% Stockholders: | ||||||||
New Enterprise Associates 12, Limited Partnership(1) | 9,038,379 | 9.51 | ||||||
Fidelity Management & Research Company(2) | 13,992,363 | 14.72 | ||||||
Directors and Named Executive Officers: | ||||||||
David A. Flynn(3) | 6,628,368 | 6.81 | ||||||
Dennis P. Wolf(4) | 109,881 | * | ||||||
James L. Dawson(5) | 537,374 | * | ||||||
Lance L. Smith(6) | 131,875 | * | ||||||
Rick C. White(7) | 4,589,892 | 4.75 | ||||||
Richard W. Boberg(8) | 258,132 | * | ||||||
Forest Baskett(9) | 9,059,212 | 9.53 | ||||||
H. Raymond Bingham(10) | 36,666 | * | ||||||
Dana L. Evan(11) | 60,166 | * | ||||||
Shane V. Robison | — | * | ||||||
Scott D. Sandell(12) | 9,059,212 | 9.53 | ||||||
All directors and executive officers as a group (13 persons) | 21,508,038 | 21.52 |
* | Less than one percent. |
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(1) | Consists of 9,038,379 shares held of record by New Enterprise Associates 12, Limited Partnership (“NEA 12”). The shares directly held by NEA 12 are indirectly owned by NEA Partners 12, Limited Partnership (“NEA Partners 12”), the sole general partner of NEA 12, NEA 12 GP, LLC (“NEA 12 LLC”), the sole general partner of NEA Partners 12 and each of the individual Managers of NEA 12 LLC. The individual Managers (collectively, the “Managers”) of NEA 12 LLC are M. James Barrett, Peter J. Barris, Forest Baskett (a member of our board of directors), Ryan D. Drant, Patrick J. Kerins, Krishna “Kittu” Kolluri, C. Richard Kramlich, Charles W. Newhall III, Mark W. Perry and Scott D. Sandell (a member of our board of directors). NEA 12, NEA Partners 12, NEA 12 LLC and the Managers share voting and dispositive power with regard to the shares directly held by NEA 12. The principal business address of New Enterprise Associates, Inc. is 1954 Greenspring Drive, Suite 600, Timonium, MD 21093. |
(2) | Consists of (i) 13,598,370 shares held by Fidelity Management & Research Company, (ii) 391,780 shares held by Pyramis Global Advisors Trust Company, (iii) 2,200 shares held by Pyramis Global Advisors LLC and (iv) 13 shares held by Strategic Advisers Incorporated. Our information for these holdings is taken solely from the Form 13F filed with the SEC by Fidelity Management & Research Company on August 28, 2012. The principal business address of Fidelity Management & Research Company is 82 Devonshire Street, Boston, Massachusetts 02109. |
(3) | Mr. Flynn is the Chief Executive Officer, President and a Director of Fusion-io. Consists of (i) 3,939,697 shares held of record by Sandusky Investments, Ltd., which is controlled by Mr. Flynn and co-owned by Mr. Flynn and other affiliated persons, (ii) 407,647 shares held of record by Mr. Flynn, and (iii) 2,281,024 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(4) | Mr. Wolf is the Chief Financial Officer and an Executive Vice President of Fusion-io. Consists of (i) 2,340 shares held directly by Mr. Wolf and (ii) 107,541 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(5) | Mr. Dawson is the Executive Vice President, Worldwide Sales, of Fusion-io. Consists of (i) 20,000 held by the Dawson Family Trust and (ii) 517,374 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(6) | Mr. Smith is the Chief Operating Officer and an Executive Vice President of Fusion-io. Consists of 131,875 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(7) | Mr. White is the Chief Marketing Officer, an Executive Vice President and a Director of Fusion-io. Consists of (i) 2,896,472 shares held of record by West Coast VC, LLC, which is indirectly owned by Mr. White and his spouse, and (ii) 1,693,420 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(8) | Mr. Boberg is the Executive Vice President, Strategic Business Development and General Manager of Caching Solutions, of Fusion-io. Consists of (i) 156,957 shares held by the Boberg Family Trust and (ii) 101,175 shares held in trust for Mr. Boberg’s son, Mr. Boberg does not act as trustee of these trusts nor does he have any voting or dispositive control of these shares. |
(9) | See footnote (1) above regarding Dr. Baskett’s relationship with New Enterprise Associates, Inc. and its affiliated entities. In addition to the NEA shares, Dr. Baskett has 20,833 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(10) | Consists of (i) 5,000 shares held by Mr. Bingham and (ii) 31,666 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(11) | Consists of (i) 23,500 shares held by Ms. Evan, (ii) 1,000 held by her son, and (iii) 35,666 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
(12) | See footnote (1) above regarding Mr. Sandell’s relationship with New Enterprise Associates, Inc. and its affiliated entities. In addition to the NEA shares, Mr. Sandell has 20,833 shares issuable pursuant to stock options exercisable within 60 days of September 13, 2012. |
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We know of no other matters to be submitted at the 2012 annual meeting. If any other matters properly come before the 2012 annual meeting, it is the intention of the persons named in the proxy to vote the shares they represent as the board of directors may recommend. Discretionary authority with respect to such other matters is granted by a properly submitted proxy.
It is important that your shares be represented at the 2012 annual meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote as promptly as possible to ensure your vote is recorded.
THE BOARD OF DIRECTORS
Salt Lake City, Utah
September 24, 2012
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IMPORTANT INFORMATION CONCERNING
THE 2012 ANNUAL MEETING OF STOCKHOLDERS OF FUSION-IO, INC.
Check-in begins: 10:00 a.m. Mountain Time | Meeting begins: 10:30 a.m. Mountain Time |
— | Fusion-io stockholders as of the close of business on September 13, 2012 are entitled to attend the 2012 annual meeting of Stockholders of Fusion-io, Inc. on November 6, 2012 |
— | All Fusion-io stockholders and their proxies should be prepared to present photo identification for admission to the meeting |
— | If you are a street name holder (that is, you hold your shares through a broker, trustee or nominee), you will be asked to present proof of beneficial ownership of shares of Fusion-io common stock as of the record date – for example, a copy of your most recent brokerage statement prior to September 13, 2012, a copy of your voting instruction card, or other evidence of ownership |
— | Persons acting as proxies must bring a valid proxy from a record holder who owns shares of Fusion-io common stock as of the close of business on September 13, 2012 |
THANK YOU FOR YOUR INTEREST AND SUPPORT — YOUR VOTE IS IMPORTANT!
Directions to:
Fusion-io Corporate Headquarters
2855 E. Cottonwood Parkway, Suite 100
Salt Lake City, Utah 84121 U.S.A.
Telephone: 801.424.5500
www.fusionio.com
From Salt Lake International Airport (approximately 20 miles):
Exit the airport by taking I-80 East towards City Center, Ogden, Provo. Take I-215 towards Provo. Continue on I-215 for about 10 miles.
Take exit 6 for UT-190 East towards 3000 East. Turn right onto UT-190 East/South Cottonwood Canyon Road.
Take the first right onto South 3000 East. Turn right onto East Cottonwood Parkway.
Fusion-io’s corporate headquarters are located in the first of four buildings in the Cottonwood Corporate Center.
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ANNUAL MEETING OF STOCKHOLDERS OF
FUSION-IO, INC.
November 6, 2012
PROXY VOTING INSTRUCTIONS
VOTE BY INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page.
VOTE BY PHONE - Call toll-free 1-800-PROXIES (1-800-776- 9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
IN PERSON - You may vote your shares in person by attending the Annual Meeting.
COMPANY NUMBER
ACCOUNT NUMBER
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The Notice of Meeting, Proxy Statement, Proxy Card and Annual Report are available at http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=17123
Please detach along perforated line and mail in the envelope provided IF you are not voting via telephone or the Internet.
20230300000000001000 3 110612
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND “FOR” PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: x
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES
WITHHOLD AUTHORITY
FOR ALL NOMINEES
FOR ALL EXCEPT
(See instructions below)
NOMINEES:
Forest Baskett, Ph.D Class II director
Dana L. Evan Class II director
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here:
To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
FOR
AGAINST
ABSTAIN
2. The ratification of Ernst & Young LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2013.
FOR
AGAINST
ABSTAIN
3. The approval of the compensation of the named executive officers.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the under-signed stockholder. If no direction is made, this proxy will be voted “FOR ALL NOMINEES” in Proposal 1 and “FOR” Proposals 2 and 3, and as the appointed proxies deem advisable on such other matters as may come before the meeting.
MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING.
Signature of Stockholder Date: Signature of Stockholder Date:
Note: Please sign exactly as your name or names appear hereon. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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0
FUSION-IO, INC.
ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 6, 2012 10:30 AM
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David A. Flynn, Dennis P. Wolf and Shawn J. Lindquist, or any of them, as proxies, each with full power of substitution, to represent and to vote all shares of common stock of Fusion-io, Inc. which the undersigned would be entitled to vote if then and there personally present, on matters set forth on the reverse side, at the Annual Meeting of Stockholders to be held at Fusion-io’s headquarters located at 2855 E. Cottonwood Parkway, Suite 100, Salt Lake City, UT 84121, on November 6, 2012, at 10:30 am, or any adjournment or postponement thereof.
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.
(Continued and to be signed on the reverse side)
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