DATA I/O CORP
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
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SCHEDULE 14A
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Proxy
Statement Pursuant to Section 14(a) of the SecuritiesExchange Act
of 1934 (Amendment No.)
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Filed by the
Registrant
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Filed by a Party other than the
Registrant
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Check the appropriate box:
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☐
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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Data I/O Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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Title of each class of securities to which transaction
applies:
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Aggregate number of securities to which transaction
applies:
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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)
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Proposed maximum aggregate value of transaction:
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5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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DATA I/O CORPORATION
NOTICE OF 2021
ANNUAL MEETING
and
PROXY STATEMENT
DATA I/O CORPORATION
April 5, 2021
To Our Shareholders:
You are cordially invited to attend the 2021
Annual Meeting of Data I/O Corporation, which will be held at Data
I/O’s headquarters at 6645 185
th
Ave NE, Suite 100, Redmond, Washington
98052. The meeting will begin at 10:00 a.m. Pacific Daylight Time
on Thursday, May 20, 2021.
Officers
of Data I/O will be attending and will respond to questions after
the meeting. Formal business will include the election of
directors, ratification of the continued appointment of Grant
Thornton LLP as Data I/O’s independent auditors, an advisory
vote on executive compensation, and consideration of a proposal to
amend and restate Data I/O’s 2000 Stock Compensation
Incentive Plan.
Please read the proxy materials carefully. Your
vote is important. Data I/O appreciates you considering and acting
on the proposals presented. The meeting is not being held as a
virtual or hybrid meeting, so
in order to attend and
vote at the meeting
(as opposed
to voting by proxy), you must attend the meeting in person.
However, due to ongoing concerns related to the spread of COVID-19,
and in order to mitigate potential risks to the health and safety
of our shareholders, employees, and other stakeholders, the Company
encourages shareholders to vote on the matters before the meeting
by proxy, and if you wish to listen to the annual meeting matters
and voting results via conference call, we encourage you to use the
conference call, rather than attend the meeting in person. There is
no other business presentation planned for the meeting. The
conference call information will be available on the
Company’s website at
https://www.dataio.com/Company/Investor-Relations/Annual-Meeting
or contact the corporate
Secretary.
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Sincerely,
/s/
Anthony Ambrose
Anthony
Ambrose
President
and Chief Executive Officer
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DATA I/O CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS – May 20,
2021
To the Shareholders of Data I/O Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Data I/O Corporation (the “Company” or “Data
I/O”) will be held at 10:00 a.m. Pacific Daylight Time, on
Thursday, May 20, 2021, at Data I/O’s principal offices, 6645
185
th
Ave NE, Suite 100, Redmond, Washington
98052, for the following purposes:
(1)
Election of Directors:
To
elect four directors, each to serve until the next annual meeting
of shareholders or until his or her successor is elected and
qualified or until such director’s earlier death,
resignation, or removal.
(2)
Ratification of Independent Auditors:
To
ratify the continued appointment of Grant Thornton LLP as Data
I/O’s independent auditors for the calendar year ended
December 31, 2021.
(3)
Say on Pay – Advisory Vote on Executive
Compensation:
To
consider and vote on an advisory resolution on the compensation of
our named executive officers.
(4
2000 Stock Compensation Incentive Plan:
To consider and vote on a proposal to amend and
restate the Data I/O Corporation 2000
Stock Compensation Incentive Plan (the “2000
Plan”) and to increase the number of shares reserved for
issuance under the 2000 Plan by an additional 700,000 shares of
common stock.
(5)
Other Business:
To
consider and vote upon such other business as may properly come
before the meeting or any adjournments or postponements
thereof.
Important Notice Regarding the
Availability of Proxy Materials for the Shareholder Meeting To Be
Held on May 20, 2021. The proxy statement and annual report to
security holders are also available at
http://www.dataio.com/company/
investorrelations/annualmeeting.aspx
.
The Board of Directors has fixed the close of business on March 22,
2021, as the Record Date for the determination of shareholders
entitled to notice of, and to vote at, the 2021 Annual Meeting and
any adjournment or postponement thereof.
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By
Order of the Board of Directors
/s/
Anthony Ambrose
Anthony
Ambrose
President
and Chief Executive Officer
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Redmond, Washington
April 5, 2021
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YOUR VOTE IS IMPORTANT
Whether or not you expect to attend the meeting in person, we urge
you to sign, date, and return the accompanying proxy card at your
earliest convenience, or you may vote by the internet at
http://www.investorvote.com/DAIO or by telephone at 1-800-652-8683,
as provided in the instructions on the proxy card. This will ensure
the presence of a quorum at the meeting.
Promptly returning a signed and
dated proxy card, or voting by the internet or by telephone, will
save Data I/O the extra expense of additional solicitation.
Your proxy is revocable at your
request any time before it is voted. If you attend the meeting, you
may vote in person if you wish, even if you have previously
returned your proxy card. If you vote by mail, an addressed,
postage-paid envelope is provided in order to make certain that
your shares will be represented at the Annual
Meeting.
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DATA I/O CORPORATION
6645 185
th
Ave NE, Suite 100
Redmond, Washington 98052
____________________
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May, 20, 2021
INFORMATION REGARDING PROXY
This Proxy Statement and the accompanying form of proxy are
furnished in connection with the solicitation of proxies by the
Board of Directors (“Board of Directors”) of Data I/O
Corporation (the “Company” or “Data I/O”)
for use at the Annual Meeting of Shareholders to be held on
Thursday, May 20, 2021, at 10:00 a.m. Pacific Daylight Time at
Data I/O’s principal office, 6645 185
th
Ave NE, Suite 100, Redmond, Washington
98052, and at any adjournment of the meeting (the “Annual
Meeting”). Shareholders of record at the close of business on
March 22, 2021, (the “Record Date”) are entitled to
notice of, and to vote at, the Annual Meeting. This Proxy Statement
and a copy of Data I/O’s 2020 Annual Report to Shareholders
are being mailed to shareholders on or about April 9,
2021.
A proxy card is enclosed for your use.
You are requested on behalf of
the Board of Directors to sign, date, and return the proxy card in
the accompanying envelope
,
which is postage-paid if mailed in the United States or Canada, or
you may vote by the internet at
http://www.envisionreports.com/DAIO, or by telephone at
1-800-652-8683, as provided in the instructions on the proxy card.
If you vote by the internet or by telephone, you do not need to
mail back the proxy card.
A proxy in the accompanying form, which is properly signed, dated
and returned and not revoked, will be voted in accordance with its
instructions. To vote on the election of directors, check the
appropriate box under Proposal 1 on your proxy card. You may (a)
vote “FOR” all of the director nominees as a group, (b)
“WITHHOLD” authority to vote for all director nominees
as a group, or (c) vote “FOR” all director nominees as
a group except those nominees indicated to the contrary. To vote on
Proposal 2 to ratify the continued appointment of Grant Thornton
LLP as Data I/O’s independent auditors for the calendar year
ended December 31, 2021, check the appropriate box under Proposal 2
on your proxy card. You may (a) vote “FOR” approval of
the ratification of Grant Thornton LLP as Data I/O’s
independent auditors, (b) vote “AGAINST” approval of
the ratification of Grant Thornton LLP as Data I/O’s
independent auditors, or (c) “ABSTAIN” from voting on
the ratification of Grant Thornton LLP as Data I/O’s
independent auditors. To vote on Proposal 3, Say on Pay –
Advisory Vote on Executive Compensation, you may vote (a)
“FOR” the advisory resolution, (b)
“AGAINST” the advisory resolution, or (c)
“ABSTAIN” from voting on the advisory resolution on
executive compensation. To vote on Proposal 4, to amend and restate
the Data I/O Corporation 2000 Stock Compensation Incentive Plan
(the “2000 Plan”) to increase the number of shares
reserved for issuance under the 2000 Plan by an additional 700,000
shares of common stock, check the appropriate box under Proposal 4
on your proxy card. You may (a) vote “FOR” approval of
the amendment to the 2000 Plan, (b) vote “AGAINST”
approval of the amendment to the 2000 Plan, or (c)
“ABSTAIN” from voting on the approval of the amendment
to the 2000 Plan.
Proxies which are returned to Data I/O without instructions will be
voted as recommended by the Board of Directors. Any shareholder who
returns a proxy may revoke it at any time prior to voting on any
matter (without, however, affecting any vote taken prior to such
revocation) by (i) delivering written notice of revocation to the
Secretary of Data I/O at Data I/O’s principal offices, (ii)
executing and delivering to Data I/O another proxy dated as of a
later date, or (iii) voting in person at the Annual
Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only outstanding voting securities of Data I/O are shares of
common stock (the “Common Stock”). As of the Record
Date, there were 8,421,599 shares of Common Stock issued and
outstanding, and each such share is entitled to one vote at the
Annual Meeting. The presence in person or by proxy of holders of
record of a majority of the outstanding shares of Common Stock is
required for a quorum for transacting business at the Annual
Meeting. Shares of Common Stock underlying abstentions will be
considered present at the Annual Meeting for the purpose of
calculating a quorum. Under Washington law and Data I/O’s
charter documents, if a quorum is present, the four nominees for
election to the Board of Directors who receive the greatest number
of affirmative votes cast at the Annual Meeting will be elected
directors. Abstentions and broker non-votes will have no effect on
the election of directors because they are not cast in favor of any
particular candidate.
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Proxy
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1
The proposal to ratify the continued appointment of Grant Thornton
as Data I/O’s independent auditors and approve the amendment
and restatement of the 2000 Plan will be approved, if a quorum is
present, if the number of votes cast in favor of the proposal
exceeds the number of votes cast against the proposals. Abstentions
and broker non-votes on the proposals will have no effect because
approval of the proposal is based solely on the votes
cast.
Say on Pay – The advisory vote on the compensation of Data
I/O’s named executive officers will be approved, if a quorum
is present, if the number of votes cast in favor of the advisory
resolution exceeds the number of votes cast against the advisory
resolution. Abstentions and broker non-votes on the advisory
resolution will have no effect because approval of the advisory
resolution is based solely on the votes cast.
Proxies and ballots will be received and tabulated by
Computershare, an independent business entity not affiliated with
Data I/O.
Effect of Not Casting Your Vote
If you
hold your shares in street name, it is critical that you instruct
your broker or bank how to vote if you want it to count in Proposal
1, the election of directors; Proposal 3, Say on Pay; and Proposal
4, Amendment and Restatement of the 2000 Plan. Regulations no
longer allow your bank or broker to vote your uninstructed shares
in the election of directors on a discretionary basis. If you hold
your shares in street name and you do not instruct your bank or
broker how to vote in the Proposal 1, election of directors;
Proposal 3, Say on Pay; and Proposal 4, Amendment and Restatement
of the 2000 Plan, votes will not be cast on your behalf for these
Proposals. Your bank or broker will, however, continue to have
discretion to vote any uninstructed shares on Proposal 2,
ratification of the appointment of Data I/O’s independent
auditors. If you are a shareholder of record and you do not cast
your vote, votes will not be cast on your behalf on any of the
items of business at the Annual Meeting.
The Common Stock is traded on The NASDAQ Capital Market under the
symbol “DAIO”. The last sale price for the Common
Stock, as reported by The NASDAQ Capital Market on March 22, 2021,
was $5.37 per share.
Principal Holders of Data I/O’s Common Stock
The following table sets forth information for all shareholders
known by Data I/O to be the beneficial owners of more than five
percent of its outstanding Common Stock as of March 22, 2021.
Except as noted below, each person or entity has sole voting and
investment powers with for the shares shown.
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Name and Address
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Amount and Nature of Beneficial Ownership
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Percent of Shares Outstanding
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Renaissance
Technologies LLC
Renaissance
Technologies Holding Corporation
800
Third Avenue
New
York, NY 10022
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701,443
(1)
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8.33
%
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(1)
The
holding reported as of December 31, 2020, as jointly reported by
Renaissance Technologies LLC (“RTC”) and Renaissance
Technologies Holding Corporation (“RTHC”) on the most
recent (filed February 11, 2021) Schedule 13G filed under the
Securities Exchange Act of 1934. The Schedule 13G indicates that
RTC has sole voting power for 679,542 shares and dispositive power
for 701,443 shares. The Schedule 13G further indicates that RTHC
has sole voting power for 679,542 shares and dispositive power for
701,443 shares, comprising the shares beneficially owned by RTHC,
because of RTHC’s majority ownership of RTC.
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Proxy
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2
Directors’ and Officers’ Share Ownership
The following table indicates ownership of Data I/O’s Common
Stock by each director of Data I/O, each executive officer named in
the compensation tables appearing later in this Proxy Statement,
and by all directors and executive officers as a group, all as of
March 22, 2021. Data I/O is not aware of any family relationships
between any director, director nominee or executive officer of Data
I/O.
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Amount and Nature of Beneficial
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Percent of Shares
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Name
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Ownership
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Outstanding
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Anthony
Ambrose
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332,432
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3.9
%
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Joel
S. Hatlen
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163,023
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1.9
%
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Rajeev
Gulati
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90,964
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1.1
%
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Michael Tidwell
(2)
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49,074
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(1
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Douglas
W. Brown
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69,833
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(1
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Alan
B. Howe
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65,832
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(1
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Mark
J. Gallenberger
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60,209
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(1
)
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Sally
A. Washlow
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7,751
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(1
)
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All
current directors and executive officers
as a group (8 persons)
(2)
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839,118
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10.0
%
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(1)
Less than 1 percent
each.
(2)
Includes 12,500 options
exercisable within 60 days.
Data I/O is not aware of any arrangement the operation of which may
at a subsequent date result in a change of control of Data
I/O.
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Proxy
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3
CORPORATE GOVERNANCE
Board Charters
The Board of Directors has adopted Corporate Governance and
Nominating Committee, Audit Committee and Compensation Committee
Charters. All our Charters are reviewed and updated periodically by
our Board of Directors. All of our Charters were reviewed during
2020 and again in early 2021 and no changes were made. The current
versions of our Charters are posted on the corporate governance
page of our website at
https://www.dataio.com/Company/Investor-Relations/Corporate-Governance.aspx.
All of these Charters are consistent with the applicable
requirements of United States security laws and our NASDAQ listing
standards.
Code of Ethics
Our Code of Ethics was reviewed by our Board of Directors during
2020 and again in early 2021 and no changes were made. The current
version of our Code of Ethics is posted on the Corporate Governance
page of our website at
https://www.dataio.com/Company/Investor-Relations/Corporate-Governance.aspx.
Data I/O’s Code of Ethics apply to all directors, officers
and employees of Data I/O, including the named executive officers.
The key principles of the Code are to act legally, and with
integrity in all work for Data I/O. We will post any amendments to
our Code of Ethics on the corporate governance page of our website
at
www.dataio.com/company/investorrelations/corporategovernance.aspx.
In the unlikely event that the Board of Directors approves any
waiver to the Code of Ethics for our executive officers or
directors, information concerning such waiver will also be posted
on our website. In addition to posting information regarding
amendments and waivers on our website, the same information will be
included in a Current Report on Form 8-K within four business days
following the date of the amendment or waiver, unless website
posting of such amendments or waivers is permitted by the rules of
The NASDAQ Stock Market LLC.
Risk Oversight
Our current Board of Directors consists of four independent
directors, and one non-independent director, our Chief Executive
Officer. Risk oversight is generally handled by our entire Board of
Directors, although certain risk oversight areas such as internal
control and cyber risk are handled by our Audit Committee, and
compensation is handled by our Compensation Committee,
respectively. The Board leadership structure promotes effective
oversight of the Company's risk management for the same reasons
that the structure is most effective for the Company in general,
that is, by providing the Chief Executive Officer and other members
of senior management with the responsibility to assess and manage
the Company's day-to-day risk exposure and providing the Board, and
specifically the Audit Committee of the Board, with the
responsibility to oversee these efforts of senior
management.
Director Independence
Messrs. Gallenberger, Howe and Brown and Ms. Washlow are
independent directors as defined by applicable U.S. Securities and
Exchange Commission (“SEC”) rules and NASDAQ listing
standards. Mr. Delafield was also independent, but was no longer a
director as of October 27, 2020. Mr. Ambrose, our Chief Executive
Officer, is not an independent director.
Leadership Structure
Our Chairman, Mr. Howe, is an independent director (but will not be
standing for re-election so a new independent Board Chair will be
appointed) and Mr. Ambrose is our Chief Executive Officer,
President, and Director.
PROPOSAL 1: ELECTION OF DIRECTORS
At the 2020 Annual Meeting, the shareholders elected five directors
to serve until the next Annual Meeting or until such
director’s successor has been qualified and elected or such
director’s earlier death, resignation or removal. For the
2021 Annual Meeting, the Board of Directors has approved the four
nominees named below. Four nominees are currently members of the
Board of Directors. Each of the nominees has indicated that they
are willing and able to serve as directors. However, should one or
more of the nominees not accept the nomination, or otherwise be
unwilling or unable to serve, it is intended that the proxies will
be voted for the election of a substitute nominee or nominees
designated by the Board of Directors.
RECOMMENDATION: The Board of Directors recommends a vote FOR each
of the director nominees.
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Proxy
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4
Anthony Ambrose
, age 59, was
appointed a director of Data I/O effective October 25, 2012.
He joined Data I/O October 25, 2012 and has served as President and
Chief Executive Officer (“CEO”). Prior to Data
I/O, Mr. Ambrose was Owner and Principal of Cedar Mill Partners,
LLC, a strategy consulting firm since 2011. From 2007 to
2011, he was Vice President and General Manager at RadiSys
Corporation, a leading provider of embedded wireless infrastructure
solutions, where he led all product divisions and worldwide
engineering. Until 2007, he was general manager and held
several other progressively responsible positions at Intel
Corporation, where he led development and marketing of
standards-based telecommunications platforms, and grew the industry
standard server business to over $1B in revenues. He is Chair
of the EvergreenHealth Foundation Board of Trustees. In 2019
he also became a board member of CipherLoc Corporation (OTCQB:
CLOK). Mr. Ambrose has a Bachelor’s of Science in Engineering
from Princeton University, and completed the Stanford Graduate
School of Business Director Symposium.
Mr. Ambrose has extensive semiconductor, systems and networking
industry operating experience. He has significant executive
experience in strategy development, business management, marketing,
engineering, and new product development. His role as our
President and CEO gives him knowledge as well as unique insight
into our challenges, opportunities and operations that the Board of
Directors believes qualifies him to serve as a director of Data
I/O.
Douglas W. Brown
, age 65, was
appointed a director of Data I/O effective April 1, 2011. Mr. Brown
retired in 2019 from Executive Chairman of All Star Directories,
Inc., Seattle, Washington, a Web-based publisher of post-secondary
online and career school directories which he joined as President
in 2005 and served in that capacity until 2016. From 2003 to 2005,
he provided governance and interim executive services, with
engagements including Interim President and Board member, to
venture-backed clients. From 1998 to 2003, he was a Board member of
GoAhead Software and was appointed its President in 2001. From 1993
to 1999, he was a President of a Seattle-area manufacturing company
which became a Division of Leggett & Platt in 1996. Prior to
that time, he was the Chief Financial Officer (“CFO”)
of Seattle Silicon, and Executive Vice President, Finance and
Operations at Phamis. He started his career as a Certified Public
Accountant at Arthur Young & Co, now Ernst & Young, in
Seattle. Mr. Brown has a Bachelor’s degree in Business from
University of Idaho.
Mr. Brown has extensive software, financial, CEO, CFO, and board
level experience that the Board of Directors believes qualifies him
to serve as a director of Data I/O.
Mark J. Gallenberger
, age 57,
was appointed a director of Data I/O effective January 31, 2013. He
is currently the Executive Vice President, Chief Financial Officer
of Cerence, Inc. (NASDAQ: CRNC), a global industry leader in
providing voice A.I. solutions that create unique, moving
experiences for the automotive world. He was hired in July 2019 by
Nuance Communications, Inc. (NASDAQ: NUAN), to be the Chief
Financial Officer of the automotive spin-out (Cerence, Inc.) from
Nuance effective October 1, 2019. Previously, he was the Senior
Vice President, Chief Financial Officer, Chief Operating Officer
and Treasurer of Xcerra Corporation (formerly called LTX-Credence
Corporation) (NASDAQ: XCRA), a global provider of test and handling
capital equipment, interface products, test fixtures, and services
to the semiconductor, industrial, and electronics manufacturing
industries, which he joined in 2000. For the six years prior, he
was Vice President/Senior Manager with Ernst &Young (Cap
Gemini) in their consulting practice, establishing the Deals &
Acquisitions Group. Previously, he held management and technical
positions with Digital Equipment Corporation. He has a
Master’s of Business Administration from Northwestern
University’s Kellogg Graduate School of Management and a
Bachelor’s of Science – Electrical Engineering from
Rochester Institute of Technology.
Mr. Gallenberger has extensive semiconductor equipment industry,
automotive industry, mergers & acquisition, capital markets,
engineering, financial, operations, and CFO experience that the
Board of Directors believes qualifies him to serve as a director of
Data I/O.
Sally A. Washlow
, age 49, was
appointed a director of Data I/O effective October 28, 2020. She
currently leads the Midwest practice for LHH’s International
Center for Executive Options, a boutique provider of executive
transition consulting services since 2019. She operated SW
Consulting LLC supporting companies with executive management,
strategy initiatives and board service since 2017. She is also a
member of the Consumer Technology Association and serves on various
committees as well as the Board of Industry Leaders. From 2015 to
2017, Ms. Washlow was the Chief Executive Officer of Cedar
Electronics Corporation, a supplier of radar detectors, GPS
systems, dash cameras and other electronic products, and led the
integration of the Cobra and Escort electronics businesses. Prior
to that, Ms. Washlow worked for 13 years at Cobra Electronics
Corporation (COBR) in various capacities, including as President
from 2013 until 2015. Prior roles held were with Motorola in the
automotive and telecommunication sectors along with LG/ Zenith and
the launch of Digital Television. Ms. Washlow received a MBA in
Marketing from DePaul University and a BA in Supply Chain
Management from Michigan State University. In 2019, she
became a board member of Costar Technologies, Inc. (OTC Markets
Group: CSTI).
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Proxy
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5
Ms. Washlow as a consultant, and former Chief Executive Officer for
Cedar Electronics Corporation, has extensive experience as an
operating leader in the security and automotive electronics markets
that the Board of Directors believes qualifies her to serve as a
director of Data I/O.
THE BOARD OF DIRECTORS
Communications with the Board of Directors
Shareholders may communicate with the Board of Directors by sending
an email or by sending a letter to Data I/O Corporation Board of
Directors, c/o the Secretary, 6645 185
th
Ave NE, Suite 100, Redmond, WA 98052.
The Secretary will receive the correspondence and forward it to the
Chairman of the applicable Board of Directors Committee or to any
individual director or directors to whom the communication is
directed.
BOARD COMMITTEES
During the year ended December 31, 2020, there were nine meetings
of the Board of Directors. Each of the incumbent directors who was
on the Board of Directors during 2020 attended at least 75% of the
aggregate of the total number of meetings of the Board of Directors
and the total number of meetings held by all committees of the
Board of Directors on which they served during his term of service
on the Board of Directors. Data I/O does not have a policy
requiring members of the Board of Directors to attend the Annual
Meeting, although we typically encourage our Board of Directors to
attend. Due to COVID-19 Mr. Brown, Mr. Howe, Mr. Gallenberger, and
Mr. Delafield attended our 2020 Annual Meeting via Zoom
and Mr. Ambrose attended in
person.
The Board of Directors had three standing Committees during 2020:
the Audit Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee. Each committee was comprised
solely of independent directors during 2020, as defined by
applicable SEC rules, NASDAQ listing standards including director
independence generally as well as additional independence
requirements for audit and compensation committees, and the
Sarbanes-Oxley Act of 2002. The following table shows the
composition of the Board Committees and Board Leadership structure
during 2020 and through the date of this Proxy
Statement.
|
Director
M=member
|
Audit Committee
|
Compensation Committee
|
Corporate Governance and
Nominating Committee
|
Comments
|
|
Anthony Ambrose
|
|
|
|
President & CEO
|
|
Doug Brown
|
M
|
M
|
Chair
|
|
|
Alan Howe
|
M
|
|
M
|
Chair of the Board until May 20, 2021. No longer a director
effective May 20, 2021
|
|
Mark Gallenberger
|
Chair
|
M
|
M
|
|
|
JD Delafield
|
|
Chair (until 10/27/2020)
|
M (until
10/27/2020)
|
No longer a director effective October 27, 2020
|
|
Sally Washlow
|
|
Chair (start 10/28/2020)
|
M (start
10/28/2020)
|
A director effective October 28, 2020
|
Audit Committee
The Audit Committee appoints, oversees, evaluates, and engages
independent certified public accountants for the ensuing year and
approves the compensation and other terms of such engagement;
reviews the scope of the audit; periodically reviews Data
I/O’s program of internal control and audit functions;
receives and reviews the reports of the independent accountants;
and reviews the annual financial report to the directors and
shareholders of Data I/O. Each member of the Audit Committee is an
independent director, as defined by applicable NASDAQ listing
standards and the Sarbanes-Oxley Act of 2002. During 2020 and
through the date of this Proxy statement, all Audit Committee
members are “audit committee financial experts” as
defined by the applicable SEC rules adopted pursuant to the
Sarbanes-Oxley Act of 2002. The Audit Committee met five times
during 2020 and recorded 100% committee attendance at such
meetings. See the “Report of the Audit Committee” for
additional information.
|
Proxy
|
6
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee, or
“CGNC”, develops, recommends to the Board of Directors,
and monitors a set of corporate governance principles applicable to
Data I/O. The CGNC seeks qualified candidates to serve on the Board
of Directors, recommends them for the Board of Directors’
consideration for election as directors at the Annual Meeting of
Shareholders and proposes candidates to fill vacancies on the Board
of Directors. The CGNC met five times in 2020 and recorded at least
75% committee attendance at such meetings held during their term of
service. The CGNC continues to seek qualified candidates and
recommends the director nominees to the Board of Directors. The
CGNC identifies, evaluates, and recommends director nominees and
Committee assignments which are described in greater detail
below.
Compensation Committee
The Compensation Committee is composed entirely of independent
directors, as defined by applicable NASDAQ listing standards for
compensation committees. The Compensation Committee is responsible
for setting and administering the policies which govern all of the
compensation programs of Data I/O. The Compensation Committee may
delegate its authority and duties to subcommittees or individual
members of the Compensation Committee as it considers
appropriate.
The Compensation Committee makes recommendations to the Board of
Directors concerning the compensation of Data I/O’s executive
officers. The Compensation Committee administers Data I/O’s
long-term equity incentive plans. The Compensation Committee
reviews all employee benefit programs and approves significant
changes in major programs and all new programs. The Compensation
Committee met three times during 2020 and recorded 100% committee
attendance at such meetings.
As authorized by the Compensation Committee charter, the
Compensation Committee may retain consultants or other advisors, as
well as purchase compensation surveys, to assist in carrying out
its responsibilities.
Consideration of Director Nominees
The Corporate Governance and Nominating Committee has developed,
and the Board has approved, Board Responsibilities and Director
Recruitment Objectives, which further outline our directors’
roles and responsibilities and desired traits, diversity,
characteristics, experience and criteria for selection. The
Corporate Governance and Nominating Committee, or the independent
members of the Board of Directors, as applicable, in evaluating and
determining whether to recommend a person as a candidate for
election as a director consider, in light of the Board
Responsibilities and Director Recruitment Objectives, the relevant
management and/or technology industry experience of potential
director candidates (such as experience as chief executive,
operations or financial officer, or similar positions); business
development, mergers and acquisitions experience, public/corporate
board experience, diversity, knowledge of Data I/O; educational
experience; commitment to maximizing shareholder value; certain
values such as integrity, accountability, judgment and adherence to
high performance standards; independence pursuant to applicable
guidelines; ability and willingness to undertake the required time
commitment to Board functions; shareholder input; and an absence of
conflicts of interest with Data I/O.
Director Diversity
The Corporate Governance and Nominating Committee also considers
issues of diversity, such as diversity of gender, race and national
origin, education, professional experience and differences in
viewpoints and skills. The CGNC does not have a formal policy on
Board diversity; however, the CGNC believes that it is important
for Board members to represent diverse viewpoints, and comply with
specific applicable laws. Washington State has legislated, and
NASDAQ has proposed, formal director diversity requirements, which
will become requirements starting as early as 2022, but currently
are not imposed due to exemptions or proposed status. Data I/O
believes it is already in compliance with these requirements for
the coming year. For gender reasons, Sally Washlow is a diverse
director. Composition and quantity of board members will be
potentially impacted as we maintain compliance with these and
future requirements. In considering candidates for the Board, the
CGNC considers the entirety of each candidate’s credentials
in the context of these standards. With respect to evaluating the
nomination of continuing directors for re-election, the CGNC
considered each director’s contributions to the company as
well as the results of the Board of Directors self-evaluations
process.
|
Proxy
|
7
Identifying Director Nominees; Consideration of Nominees of the
Shareholders
The Corporate Governance and Nominating Committee may employ a
variety of methods for identifying and evaluating nominees for
director. The CGNC regularly assesses the size of the Board, the
need for particular expertise on the Board, and whether any
vacancies on the Board are expected due to retirement or otherwise.
In the event that vacancies are anticipated, or otherwise arise,
the CGNC considers various potential candidates for director which
may come to the CGNC’s attention through current Board
members, professional search firms, shareholders, or other persons
and evaluates these candidates in light of the Board
Responsibilities and Director Recruitment Objectives. These
candidates are evaluated at regular or special meetings of the
CGNC, and may be considered at any point during the
year.
The Corporate Governance and Nominating Committee will consider
candidates recommended by shareholders, when the nominations are
properly submitted, under the criteria summarized above in
“Consideration of Director Nominees” and in accordance
with the procedures described below in “Shareholder
Nominations and Proposals for the 2021 Annual Meeting of
Shareholders.” Following verification of the shareholder
status of persons proposing candidates, the CGNC makes an initial
analysis of the qualifications of any candidate recommended by
shareholders or others pursuant to the criteria summarized above to
determine if the candidate is qualified for service on the Data I/O
Board of Directors before deciding to undertake a complete
evaluation of the candidate. If any materials are provided by a
shareholder or professional search firm in connection with the
nomination of a director candidate, such materials are forwarded to
the CGNC as part of its review. Other than the verification of
compliance with procedures and shareholder status, and the initial
analysis performed by the CGNC, a potential candidate nominated by
a shareholder is treated like any other potential candidate during
the review process by the CGNC. For eligible shareholder nominees
to be placed on the ballot for the 2021 Annual Meeting of
Shareholders, shareholders were required to deliver nominations for
proposed director nominees to Data I/O by February 17, 2021. While
no formal candidate nominations were made by shareholders for
election at the 2021 Annual Meeting, Ms. Washlow was initially
identified and introduced by a Board member; Mr. Howe and Mr.
Gallenberger were initially identified by discussions with
significant shareholders and the Board and Mr. Brown was initially
identified and introduced by a member of management.
Certain Relationships and Related Transactions
Our Audit Committee is charged with monitoring and reviewing issues
involving potential conflicts of interest, and reviewing and
approving related party transactions as set forth in the Code of
Ethics, which is posted on the corporate governance page of our
website at
https://www.dataio.com/Company/Investor-Relations/Corporate-Governance.aspx.
Under our Code of Ethics, our directors, officers and employees are
expected to avoid conflicts of interest with Data I/O and are
required to report any such conflicts of interest to our Chief
Executive Officer or Chief Financial Officer, or to the Chair of
our Audit Committee. Our Audit Committee reviews all such
transactions and relationships by our directors and executive
officers that come to its attention either through the director and
officer questionnaires or otherwise, and considers whether to
approve or take other appropriate action with respect to such
transactions or relationships. During 2019 and 2020, no related
party transactions that were significant or material
occurred.
BOARD COMPENSATION
Employee directors (Anthony Ambrose) do not receive additional
compensation for serving on the Board of Directors. During 2020,
non-employee directors were scheduled to receive a quarterly cash
retainer of $7,750 and additional quarterly compensation to
Directors for service as Chair of the Board of Directors or as a
Committee chair: $3,750 for Chair of the Board of Directors; $2,500
for Chair of the Audit Committee; $2,000 for Chair of the
Compensation Committee; and $2,000 for Chair of the Corporate
Governance and Nominating Committee. Cash compensation for the
1
st
and 4
th
quarter of 2020 was paid as scheduled.
As part of measures taken at the start of COVID-19 pandemic to
preserve cash and reduce expenses, for the 2
nd
and 3
rd
quarter of 2020 the Board approved
reducing the retainer and additional Chair amounts by 20%, as well
as deferral of the remainder until the end of the
3
rd
quarter 2020, when it was paid in
stock under the Director Fee Plan effective September 30, 2020.
Fees are prorated based on time served for changes in directors and
assignments.
In addition, each non-employee Board of Directors member as of May
18, 2020, was granted a restricted stock award for 18,600 shares of
Data I/O stock. A new Director, Sally Washlow, was given a prorated
share grant upon appointment. The restricted stock awards were
granted under the provisions and terms of the Amended and Restated
2000 Stock Compensation Incentive Plan (“2000 Plan”)
and generally vest in one year or on the date of the next Annual
Meeting, if earlier. Data I/O also reimburses non-employee
directors for actual travel and out-of-pocket expenses incurred in
connection with service to Data I/O.
|
Proxy
|
8
Each Data I/O non-employee member of the Board of Directors is
required to achieve ownership of Data I/O stock at least equal to
three times the annual director cash retainer fee based on Data
I/O’s then current share price. Non-employee directors have
five years from their initial election or appointment to meet the
ownership target requirement. Amounts that count toward meeting the
target requirement include: shares owned; shared ownership (shares
owned or held in trust by immediate family); and the gain amount
from any in-the-money vested options. If the stock ownership target
requirement has not been met by any non-employee director, until
such time as such director reaches the target requirement, he or
she will be required to retain any Data I/O shares issued by Data
I/O to such director (other than those disposed of to pay for the
exercise and associated taxes on those shares). As of the Record
Date, Messrs. Howe, Brown and Gallenberger have met the stock
ownership target requirement and Ms. Washlow, as a result of her
recent appointment, has not yet met the requirement.
The Chief Executive Officer (“CEO”) is required to
achieve ownership of Data I/O stock of at least two times the base
pay of the CEO based on Data I/O’s then current share price.
The CEO has five years from appointment to meet the ownership
target requirement. Amounts that count toward meeting the target
requirement are the same as for the Board of Directors. If the
stock ownership target requirement has not been met by the CEO,
until such time as the CEO reaches the requirement amount, he or
she will be required to retain any Data I/O shares issued by Data
I/O (other than those disposed of to pay for the exercise and
associated taxes on those shares). As of the Record Date the CEO
has met the stock ownership target requirement.
Data I/O has a Securities Trading Policy that includes a
prohibition against hedging transactions.
DIRECTOR COMPENSATION
The following table shows compensation paid by Data I/O to
non-employee directors during 2020.
|
|
Fees Earned or
Paid in Cash
(3)
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Nonqualified
Deferred Compensation Earnings
|
All Other
Compensation
|
Total
|
|
Name
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
|
|
|
|
|
|
|
|
|
Douglas W. Brown
(1)(2)
|
$
35,100
|
$
55,986
|
$
0
|
$
0
|
$
0
|
$
0
|
$
91,086
|
|
|
|
|
|
|
|
|
|
|
Sally A. Washlow
(1)(2)(3)
|
$
6,889
|
$
27,671
|
$
0
|
$
0
|
$
0
|
$
0
|
$
34,560
|
|
|
|
|
|
|
|
|
|
|
Alan B. Howe
(1)(2)(4)
|
$
41,400
|
$
55,986
|
$
0
|
$
0
|
$
0
|
$
0
|
$
97,386
|
|
|
|
|
|
|
|
|
|
|
Mark J.
Gallenberger
(1)(2)
|
$
36,900
|
$
55,986
|
$
0
|
$
0
|
$
0
|
$
0
|
$
92,886
|
|
|
|
|
|
|
|
|
|
|
John D. Delafield
(1)(2)(3)
|
$
25,350
|
$
55,986
|
$
0
|
$
0
|
$
0
|
$
0
|
$
81,336
|
(1)
Each outside director elected at the annual
meeting in 2020 was awarded 18,600 shares of restricted stock with
a fair value of
$3.01
on May
18, 2020, vesting in one year or the next annual meeting, if
earlier. Ms. Washlow received a prorated grant under the same
provisions on the date of her appointment on October 28, 2020. Mr.
Delafield’s grant was forfeited as it had not vested at the
time he resigned on October 27, 2020.
(2)
No
outside director had option awards outstanding at December 31,
2020.
(3)
Retainer fees and Chair fees were paid as
scheduled in cash for Q1 and Q4 2020. For Q2 and Q3 the Board
approved reducing the retainer and additional Chair amounts by 20%
and deferring the remainder until the end of the
3
rd
quarter of 2020, when it was paid in
stock under the Director Fee Plan. Fees are prorated for Director
changes during a quarter.
(4)
Alan
Howe will resign as a Director and not seek re-election at the
Annual Meeting on May 20, 2021.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Data
I/O’s directors, certain officers and persons who own more
than ten percent (10%) of Data I/O’s Common Stock
(“Reporting Persons”) to file with the SEC initial
reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of Data I/O. Reporting Persons
are required by SEC regulations to furnish Data I/O with copies of
all Section 16(a) reports.
Delinquent Section 16(a) Reports
A new Director, Sally Washlow, as a result of delays in
reactivating her EDGAR filing codes, filed two forms late that
included 1 transaction. Both Form 3, reporting no holdings, and
Form 4, reporting an initial equity grant event on October 28,
2020, were filed 3 days late.
|
Proxy
|
9
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees Data I/O’s financial reporting
process on behalf of the Board of Directors. Management has the
primary responsibility for the consolidated financial statements
and the reporting process, including the systems of internal
controls. Audit Committee members are not professional accountants
or auditors and their functions are not intended to duplicate or to
certify the activities of management or the independent auditors.
In fulfilling its oversight responsibilities, the Committee
reviewed the audited consolidated financial statements in the
Annual Report (Form 10-K) with management, including a discussion
of the quality, not just the acceptability, of the accounting
principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those
audited consolidated financial statements with generally accepted
accounting principles in the United States, their judgments as to
the quality, not just the acceptability, of Data I/O’s
accounting principles and such other matters as are required to be
discussed by the applicable requirements of the Public Company
Accounting Oversight Board (“PCAOB”) and the
Commission, with the Committee under generally accepted auditing
standards. In addition, the Committee has discussed with the
independent auditors the auditors’ independence from
management and Data I/O including the matters in the written
disclosures and the letter provided by the independent auditors, as
required by the applicable requirements of the Public Company
Oversight Board and the SEC for independent auditor communications
with Audit Committees concerning independence, and considered the
compatibility of non-audit services with the auditors’
independence.
The Committee selects and engages Data I/O’s independent
auditors, is involved in selecting and approving the independent
auditors’ lead audit partner, and discusses the overall scope
and plans for the audits. The Committee meets with the independent
auditors, with and without management present, to discuss the
results of their examinations, their evaluations of Data
I/O’s internal controls, and the overall quality of Data
I/O’s financial reporting. The Committee held five meetings
during 2020, of which five were attended by Data I/O’s
independent auditors.
In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has
approved) that the audited consolidated financial statements be
included in Data I/O’s Annual Report (Form 10-K) for the year
ended December 31, 2020, for filing with the Securities and
Exchange Commission. The Committee has considered the Shareholder
vote of approval of 99% in May 2020, as well as the impact of
changing independent auditors and has selected Grant Thornton LLP
as Data I/O’s auditors for the current year.
Respectfully submitted,
AUDIT COMMITTEE
Mark Gallenberger (Chair)
Douglas W. Brown
Alan B. Howe
April 5, 2021
|
Proxy
|
10
PRINCIPAL ACCOUNTANT’S FEES AND SERVICES
Audit Fees:
Aggregate fees
billed by Grant Thornton LLP for professional services rendered for
the audit of Data I/O’s financial statements for each of the
years ended December 31, 2020, and 2019 and for review of the
financial statements included in each of Data I/O’s quarterly
reports on Form 10-Q during each of the years ended December 31,
2020, and 2019, were approximately $210,058 and $204,808,
respectively.
Audit Related Fees:
No
aggregate fees were billed for the years ended December 31, 2020,
and 2019 for assurance and subsidiary related services by Grant
Thornton LLP
that
are reasonably related to the performance of the
audit or review of Data I/O’s financial statements that are
not reported under the caption “Audit Fees” above,
including accounting treatment consultations.
Tax Fees:
No aggregate fees
were billed for the years ended December 31, 2020, and 2019 for
professional tax services rendered by Grant Thornton
LLP.
All Other Fees
: No aggregate
fees were billed for the years ended December 31, 2020, and 2019,
for all other products and services provided by Grant Thornton LLP
that are not otherwise disclosed above.
Policy on Pre-Approval by Audit Committee of Services Performed by
Independent Auditors
The Audit Committee’s policy is to pre-approve all audit and
permissible non-audit services provided by the independent
auditors. These services may include audit services, non-audit
services, tax services and other services. Pre-approval is detailed
as to the particular service or category of service and is subject
to a specific engagement authorization.
During the year, circumstances may arise when it may become
necessary to engage the independent auditors for additional
services not contemplated in the original pre-approval. In those
circumstances, the Audit Committee has delegated pre-approval
authority to the Chair of the Audit Committee for those instances
when pre-approval is needed prior to a scheduled Audit Committee
meeting. These additional approvals should be reported at the next
scheduled Audit Committee meeting.
For 2020, all services provided by the independent auditors were
pre-approved.
EXECUTIVE COMPENSATION
Shareholder Vote
At our
2020 Annual Meeting of Shareholders, our shareholders approved, in
an advisory vote, the compensation of our Named Executive Officers,
as disclosed in the Executive Compensation discussion and analysis,
the compensation tables and the related disclosures in our Proxy
Statement. The proposal was approved by our shareholders with 91
percent of the votes cast voting “for” approval and 5
percent voting “against” approval. In light of the
level of approval by our stockholders, the Compensation Committee
considered the result of the vote and did not make changes to our
compensation policies or practices specifically in response to the
stockholder vote.
COVID-19
As part of measures taken at the start of the COVID-19 pandemic to
preserve cash and reduce expense, executive officer base salary was
reduced for the second and third quarter of 2020 and resumed to the
previous level for the fourth quarter. No other base salary
increases took place in 2020. In addition, no adjustments to
incentive plans or measures were made for the impact of COVID-19 on
the business. The incentive plan measures had no amounts earned in
2020 due to the thresholds for financial performance not being
met.
|
Proxy
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11
Elements of Our Company’s Compensation Plan
Annual executive officer compensation consists of the following
elements which are described in more detail below:
●
Annual
base salary;
●
Management
Incentive Compensation Plan or “MICP”;
●
Long-term
equity incentives;
●
Benefits;
●
Perquisites
and other perceived benefits; and
●
Individual Executive Officers’
Performance
.
It is the Compensation Committee’s policy to set total
executive officer compensation at competitive levels based on
compensation surveys with similar positions in similar sized
company revenue ranges and at levels sufficient to attract and
retain a strong, motivated leadership team. Our philosophy for
compensation of executive officers is based on the following two
principles:
i.
Executive
base compensation levels should be established by comparison of job
responsibility to similar positions in comparable companies and be
adequate to retain highly-qualified personnel; and
ii.
Variable
compensation should be a critical element of compensation and be
set to be comparably competitive and to provide strong incentives
to improve performance and shareholder value.
●
Annual Base Salary.
The Compensation Committee establishes
a base salary structure for each executive officer position. This
structure defines the salary levels and the relationship of base
salary to total cash compensation. The Compensation Committee
reviews the salary structure periodically.
●
MICP.
The MICP offers each executive officer a
performance-based opportunity to earn the variable component of
annual cash compensation in an amount tied to a percentage of the
executive officer’s base salary. The Compensation
Committee’s philosophy in setting executive MICP percentages
and the formulas for MICP payout is to pay above average total
compensation for better than average historical or expected
financial performance and below average compensation for lower than
or average historical or expected financial performance. The
percentages of base salary targeted for MICP payout (“the
MICP Target”) for specific executive officers for a given
year are generally the same as the previous year, but can be
changed by the Compensation Committee on an annual basis. The MICP
payout can range from 0% to 200% of each executive’s MICP
Target based upon the actual achieved MICP Measures for the period.
The 2019 and 2020 MICP Target percentages for our executive
officers were as follows:
|
|
|
|
Estimated
|
|
|
|
|
Payout
at
|
|
|
Executive's
|
Executive's
|
Maximum
|
|
|
MICP
|
MICP
|
Measure
|
|
|
2019
Target
|
2020
Target
|
for
2021
|
|
Ambrose
|
70
%
|
70
%
|
140
%
|
|
|
|
|
|
|
Gulati
|
50
%
|
50
%
|
100
%
|
|
|
|
|
|
|
Hatlen
|
50
%
|
50
%
|
100
%
|
|
|
|
|
|
|
Tidwell
|
50
%
|
50
%
|
100
%
|
|
Proxy
|
12
The
Compensation Committee determined for 2019 and again for 2020 that
it was critical to emphasize profitability. For 2019 the
Compensation Committee established a single measure: Financial
Performance (“FP”), which is based on achievement of
various levels of operating income as percentage of revenue. (See
below for the Financial Performance Matrix.) For one new officer
position in 2019, it was determined that completion of key
development, operational projects, and objectives to deliver future
new revenue and profitability was critical. As a result, 50% of his
MICP would be measured by these objectives and the other 50% by the
FP measure. For 2020 as a result of the continued investment in
Data I/O’s SentriX® Security Deployment Platform, and
the critical focus on completion of key development, customer
objectives, and revenue growth objectives related to SentriX to
deliver future new revenue and profitability, Executive Officers
had their MICP measures spilt 50% SentriX objectives and 50% FP.
For 2021, the focus is on revenue growth for SentriX and
profitability for the rest of the business. Executive Officers will
have their 2021 MICP measures spilt 30% on SentriX revenue
objectives and 70% on FP. The SentriX revenue objective is based on
revenue growth in 2021 over a minimum threshold. The FP will be
based on achievement of various levels of adjusted operating income
established for the year as a percentage of revenue.
The
Compensation Committee believes that for 2019, 2020 and 2021, the
applicable measures of key results for Data I/O have affected or
will affect near-term and long-term shareholder value. A greater or
lesser percentage of MICP Target is to be paid based on Data
I/O’s actual achievement of these measures with the payout
target typically based on company financial plans as the Board
determines appropriate. For 2019, as a result of an operating loss
the FP measure was 0% and no MICP FP payout was made. For 2020, as
a result of an operating loss the FP measure was 0% and no MICP FP
payout was made. The SentriX objectives for 2020 were subject to a
minimum defined operating income which was not met, so the payout
was 0%. The Compensation Committee retains discretion to adjust the
calculation of the two measures for changes outside normal business
operations such as acquisitions or asset sales.
|
Data I/O Corporation 2019 & 2020 MICP Variable Compensation
Matrix
|
|
Range of Payouts
(actual
results interpolated)
|
The
2020 MICP Variable Compensation Matrix consists of two possible
measures: Financial Performance (FP) and a SentriX performance
objective. The 2019 Variable Compensation Matrix consisted of
solely of Financial Performance (FP).
|
2019 & 2020 Financial Performance Matrix
|
|
|
Target
|
|
Target 200%
|
|
|
|
|
Payout
|
|
Payout
|
|
Operating
Profit as a % of Revenue
|
0.0
%
|
3.0
%
|
6.0
%
|
9.0
%
|
12.0
%
|
|
FP
matrix payout as a % of Target
|
0
%
|
50
%
|
100
%
|
150
%
|
200
%
|
|
2020 Performance Objectives for SentriX
|
Minimum
|
Target 100%
|
Target 200%
|
|
|
|
Payout
|
Payout
|
|
Product
Revenue Objectives 50%
|
$
Threshold
|
4X $
Threshold
|
8X
$ Threshold
|
|
Product
and Marketing Objectives 50%
|
0
%
|
100
%
|
|
Overall
limitation: No Payout unless defined operating income minimum
achieved
●
Long-Term Equity
Incentives.
The Compensation
Committee approves grants under the Data I/O Corporation 2000 Stock
Compensation Incentive Plan (the “2000 Plan”). This is
Data I/O’s only long-term employee incentive plan. The
primary purpose of the 2000 Plan is to make a significant element
of executive pay a reward for taking actions which maximize
shareholder value over time. Generally, new options or stock awards
are granted under the 2000 Plan. New options or stock awards may
also be granted to the Board of Directors under the 2000
Plan.
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13
Award Criteria
The
Compensation Committee grants options or restricted stock unit
awards based primarily on its perception of the executive’s
ability to affect future shareholder value and secondarily on the
competitive conditions in the market for highly-qualified
executives who typically command compensation packages which
include a significant equity incentive. All restricted stock unit
awards granted to our executive officers in 2020 and 2019 were
based on these criteria.
Exercise Price
Historically,
all options granted by Data I/O have been granted with an exercise
price equal to the fair market value (an average of the day’s
high and low selling price) of Data I/O’s Common Stock on the
date of grant and, accordingly, will only have value if Data
I/O’s stock price increases. Options granted to employees are
non-qualified.
Vesting and Exercise
Options
granted to employees generally vest quarterly over four years at a
rate of 6.25% per quarter and have a six-year term. Options granted
to non-employee Directors are also non-qualified options and vest
quarterly over a three-year period. The current primary form of
equity compensation is restricted stock grants. Restricted stock
grants to employees typically vest annually over a four-year
period. Restricted stock grants to non-employee Directors vest in
one year or on the date of the next Annual Meeting of Shareholders,
if earlier. All grants are subject to possible acceleration of
vesting in connection with certain events leading to a change in
control of Data I/O or in the event in a change in control or at
any other time at the discretion of the Compensation Committee. All
options granted to executive officers are issued in tandem with
limited stock appreciation rights (“SARs”), which
become exercisable only in the event of a change in control of Data
I/O. See: “Change in Control and other Termination
Arrangements.”
Award Process
The
timing of our typical grant/award is usually determined well in
advance, with approval at a scheduled meeting of our Board of
Directors or its Compensation Committee with the grant date
generally to be effective on the date of our next Annual Meeting of
Shareholders. The Annual Meeting of Shareholders does not coincide
with any of our scheduled earning releases. We do not anticipate
option grants or restricted stock awards at other dates, except for
grants/awards to new employees based on their first date of
employment or in specific circumstances approved by the
Compensation Committee. The grant/award date is established when
the Compensation Committee approves the grant/award and all key
terms have been determined. If at the time of any planned
grant/award date, any member of our Board of Directors or Executive
Officers is aware of material non-public information, the Company
would not generally make the planned grant/award. In such an event,
as soon as practical after material information is made public, the
Compensation Committee would authorize the delayed
grant/award.
●
Benefits.
Executive Officers of Data I/O are eligible for
the same benefits as other Data I/O employees. Data I/O has no
defined benefit pension programs. Data I/O has a 401(k) tax
qualified retirement savings plan in which all U.S. based
employees, including U.S. Executive Officers are able to contribute
the lesser of up to 100% of their annual salary or the limit
prescribed by the IRS on a Roth or pre-tax basis. Data I/O will
match up to 4% of pay contributed. Matching contributions in any
year require employment on December 31, except in the case of
retirement per the plan, and vest after three years of service
credit.
●
Perquisites and Other Personal
Benefits.
We believe
perquisites are not conditioned upon performance, create divisions
among employees, undermine morale, and are generally inconsistent
with our compensation philosophy and policy of equitable treatment
of all employees based upon their contribution to our business. No
executive officer received perquisites valued at $10,000 or more in
2019 or 2020.
●
Individual Executive
Officers’ Performance.
The base salary of each executive officer is
reviewed annually by the President and Chief Executive Officer.
This is done on the basis of a review by the President and Chief
Executive Officer, evaluating the executive’s prior year
performance against their individual job responsibilities and
attainment of corporate objectives and Data I/O’s financial
performance. In developing executive compensation packages to
recommend to the Compensation Committee, the President and Chief
Executive Officer considers, in addition to each executive’s
prior year performance, the executive’s long-term value to
Data I/O, the executive’s pay relative to that for comparable
surveyed jobs, the executive’s experience and ability
relative to executives in similar positions, and the current year
increases in executive compensation projected in industry
surveys.
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Proxy
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14
The
Compensation Committee then reviews the President and Chief
Executive Officer’s recommendations for executive
officers’ total compensation and approves final decisions on
pay for each executive officer based on the President and Chief
Executive Officer’s summary of the executive officer’s
performance and on the other criteria and survey data described
above. In this process, the Compensation Committee consults with
Data I/O’s President and Chief Executive
Officer.
The
base salary, total cash compensation, and long-term equity
incentive compensation for the President and CEO are reviewed
annually by the Compensation Committee. This review includes a
written evaluation of the CEO’s performance for the previous
year. The Compensation Committee meets annually without the
President and Chief Executive Officer to evaluate his performance
and to develop a recommendation for his compensation for the coming
year. In addition to reviewing Data I/O’s financial
performance for the prior year, the Committee reviewed compensation
surveys for chief executive officers and the President and Chief
Executive Officer’s individual performance, including
development and execution of short-term and long-term strategic
objectives, Data I/O revenue growth and profitability, the
achievement of which is expected to increase shareholder
value.
The
Compensation Committee determined the compensation package,
including salary, bonus, MICP participation, stock option grants,
restricted stock awards, and other benefits for Mr. Ambrose,
President and Chief Executive Officer, based on the
Committee’s perception of his qualifications for the position
and his ability to affect future shareholder value, results
delivered, compensation surveys and the competitive conditions in
the market. No salary base pay adjustments were made in 2019 or
2020 for Mr. Ambrose.
Consideration of Risk in Compensation
The Compensation Committee believes that promoting the creation of
long-term value discourages behavior that leads to excessive risk.
The Compensation Committee believes that the following features of
our compensation programs provide incentives for the creation of
long-term shareholder value and encourage high achievement by our
executive officers without encouraging inappropriate or unnecessary
risks:
●
Our
long-term incentives in the form of stock options or restricted
stock awards are at the discretion of the Compensation Committee
and not formulaic.
●
Stock
options become exercisable over a four-year period and remain
exercisable for up to six years from the date of grant and
restricted stock awards vest over a four-year period, encouraging
executives to look to long-term appreciation in equity
values.
●
We
balance short and long-term decision-making with the annual cash
incentive program and stock options and restricted stock that vest
over four years.
●
Because
of the extent of the CEO and CFO’s direct stock ownership,
they could lose significant wealth if Data I/O were exposed to
inappropriate or unnecessary risks which in turn affected our stock
price.
●
The metric used in the MICP measure is set by the
Compensation Committee, which believes it will drive shareholder
value
.
Moreover, the Committee attempts to set ranges for
these measures that encourage success without encouraging excessive
risk-taking to achieve short-term results.
●
In
addition, the overall MICP incentive compensation cannot exceed two
times the MICP Target amount, no matter how much performance
exceeds the measures established for the year.
Accounting and Tax Considerations of our Compensation
Program
Options granted to employees are non-qualified options because of
the more favorable tax treatment for Data I/O. We are required to
value granted stock options under the fair value method and expense
those amounts in the income statement over the stock option’s
remaining vesting period. Restricted stock is valued at its fair
value on the award date and is expensed over its vesting
period.
|
Proxy
|
15
We have structured our compensation program in the past to comply
with Internal Revenue Code Sections 162(m) and 409A. Under Section
162(m) of the Internal Revenue Code, a limitation was placed on tax
deductions of any publicly-held corporation for individual
compensation to covered employees (generally the chief executive
officer and the three other most highly compensated executive
officers, other than the chief financial officer, whose
compensation must be disclosed pursuant to rules and regulations
under the Securities Exchange Act of 1934) exceeding $1 million in
any taxable year, unless the compensation is performance-based. Tax
reform in 2017 has revised and eliminated the performance-based pay
exception for new or modified compensation arrangements for 2018
and beyond. The Compensation Committee is aware of this limitation
and believes that no compensation paid in 2019 or 2020 or to be
paid in 2021 by Data I/O will exceed the $1 million limitation of
Section 162(m), as portions of taxable equity compensation expected
to be issued in 2021 continue to be excluded under a prior
unmodified performance-based compensation arrangement, except
possibly related to a change of control. The new Section 162(m)
treatment will be part of future compensation
considerations.
Change in Control and other Termination Arrangements
●
Change in Control
Arrangements
. Data I/O has
entered into agreements (the “Executive Agreements”)
with Messrs. Ambrose, Gulati, Hatlen and Tidwell which entitle them
to receive payments if they are terminated without cause or resign
with good reason within specified periods before or after the
occurrence of certain events deemed to involve a change in control
of Data I/O. Effective July 30, 2014, the Executive Agreements of
Messrs. Ambrose, Gulati, and Hatlen were amended and restated and
the term of their Executive Agreements was extended with automatic
renewal provisions. An Executive Agreement was entered into Mr.
Tidwell on his hiring in 2019. The Executive Agreements ensure
appropriate incentives are in place for Messrs. Ambrose, Gulati,
Hatlen and Tidwell to complete any change in control related
transaction and transition, as well as comply with the provisions
of Section 409A of the Internal Revenue Code. The Executive
Agreements state that the resulting additional severance will be
calculated under the Executive Agreements based on Data I/O’s
severance arrangements in place immediately preceding the date of a
change in control (See: “Other Termination
Arrangements” below for current severance policy). The
Executive Agreements provide for continuation and vesting in Data
I/O’s matching 401(k) contributions through the date of
termination after a change in control and include a reimbursement
allowance of $20,000 for outplacement services. The Executive
Agreements also have a transaction closing incentive of one-half
year’s annual salary for Messrs. Ambrose, Gulati, Hatlen and
Tidwell to encourage the consideration of all forms of strategic
alternatives.
Data
I/O’s option grants and stock awards have been granted
pursuant to the provisions of the 2000 Plan. The Change in Control
provision applicable to the 2000 Plan is as follows:
2000 Plan
The
2000 Plan allows for the granting of “Awards”, which
include options, restricted stock and other awards made pursuant to
the 2000 Plan. Subject to any different terms set forth in the
award agreement, vesting of “qualifying” options and
restricted stock awards may be affected by a Change in Control as
described out in the table below. A “Change in Control”
is defined to include (i) a merger or consolidation of the Company
in which more than 50% of the voting power of the Company’s
outstanding stock after the transaction is owned by persons who are
not shareholders immediately prior to such transaction, and (ii)
the sale or transfer of all or substantially all of the
Company’s assets. A “Qualifying Award’ is defined
as an option or other Award that has been held for at least 180
days as of the Change of Control. “Qualifying Shares”
means common stock issued pursuant to a Qualifying Award which are
subject to the right of Data I/O to repurchase some or all of such
shares at the original purchase price (if any) upon the
holder’s termination of services to Data I/O.
|
Proxy
|
16
|
Treatment of Awards on a Change in Control
|
Acceleration of Vesting
|
|
The outstanding Awards do not remain outstanding or are not assumed
by the surviving entity or replaced with comparable
Awards.
|
Subject
to certain limitations, the vesting of Qualifying Awards is
accelerated in full. Restricted stock will vest and options will be
exercisable in full prior to the effective date of the Change of
Control.
|
|
The outstanding Awards remain outstanding after a Change of Control
or are assumed by the surviving entity or replaced with comparable
Awards.
|
Subject
to certain limitations, the vesting of outstanding Qualifying
Awards will be accelerated to the extent of 25% of the unvested
portion thereof. The remaining 75% of the unvested portion will
vest in accordance with the vesting schedule set forth in the
applicable Award agreement.
|
|
The outstanding Awards remain outstanding after a Change of Control
or are assumed by the surviving entity or replaced with comparable
Awards, but the holder of a Qualifying Award is terminated
involuntarily within 180 days of the Change of
Control.
|
All
Awards held by such person will be accelerated in full. Restricted
stock will vest and options will be exercisable in full for a
period of 90 days commencing on the effective date of the
involuntary termination, or if shorter, the remaining term of the
option.
|
In
1983, Data I/O adopted a SAR Plan which allows the Board of
Directors to grant to each director, executive officer or holder of
10% or more of the stock of Data I/O a SAR with respect to certain
options granted to these parties. A SAR has been granted in tandem
with each option granted to an executive officer of Data I/O. SARs
granted which have been held for at least six months are
exercisable for a period of 20 days following the occurrence of
either of the following events: (i) the close of business on the
day that a tender or exchange offer by any person (with certain
exceptions) is first published or sent or given if, upon
consummation thereof, such person would be the beneficial owner of
30% or more of the shares of Common Stock then outstanding; or (ii)
approval by the shareholders of Data I/O (or, if later, approval by
the shareholders of a third party) of any merger, consolidation,
reorganization or other transaction providing for the conversion or
exchange of more than 50% of the outstanding shares of Data
I/O’s Common Stock into securities of a third party, or cash,
or property, or a combination of any of the foregoing.
●
Other Termination
Arrangements.
Data I/O has a
severance policy for U.S. employees that provides for severance
payouts for terminations without cause based upon years of service.
The current formula, effective March 1, 2014, is 1 week pay for
each year of service with a limit of six months’ pay. For Mr.
Hatlen, the prior standard formula applies, with pay and service
years frozen at March 1, 2014, which provided 1.5 weeks of pay for
each year of service for those with 10 or more years of service.
Mr. Ambrose, Mr. Hatlen, Mr. Gulati and Mr. Tidwell had at March
22, 2021, approximately 8, 29, 8 and 2 years of service,
respectively. Mr. Ambrose is entitled to a one year of base salary
severance, except in the case of a change in control, as part of
his employment arrangement. Mr. Gulati and Mr. Tidwell are entitled
to a one-half year of base salary severance, except in the case of
a change in control, as part of his employment arrangement. Data
I/O does not have a formal policy regarding executive severance but
has generally provided an amount it believes is consistent with
severance typically provided for executives in similar positions
and with similar periods of service.
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Proxy
|
17
Change in Control and Other Termination Arrangements
|
|
Termination without cause and Change in Control not
applicable
|
Termination without cause and Change in Control
applicable
|
Change in Control applicable without termination
|
||
|
Name
|
Compensation
(3)
|
Compensation
(2)
|
Option/SAR/RSA
Vesting
(1)
|
Compensation
(4)
|
Option/SAR/RSA
Vesting
(1)
|
|
|
|
|
|
|
|
|
Anthony Ambrose
(5)
|
$
330,000
|
$
645,308
|
172,500
|
$
165,000
|
172,500
|
|
Joel S. Hatlen
(3)
|
$
134,351
|
$
554,351
|
60,626
|
$
120,000
|
60,626
|
|
Rajeev Gulati
(6)
|
$
115,000
|
$
436,949
|
60,626
|
$
115,000
|
60,626
|
|
Michael Tidwell
(6)
|
$
112,500
|
$
380,324
|
93,125
|
$
112,500
|
93,125
|
(1)
Maximum
vesting on Change in Control as of March 22, 2021.
(2)
Represents
the Data I/O standard employee severance, alternative
Executive/Employment Agreement severance, change in control
transition/closing incentive, and outplacement expense
reimbursement, as applicable as of March 22, 2021.
(3)
Minimum amount per Data I/O standard employee
severance plan; no formal executive severance plan is in place as
of March 22, 2021. A letter agreement provides that Mr.
Hatlen’s severance shall be equal to the Data I/O standard
severance in effect at March 1, 2014. (See
(5)
below for Mr. Ambrose and
(6)
below for Mr. Gulati and Mr.
Tidwell.)
(4)
Represents
change in control transition/closing incentive as of March 22,
2021.
(5)
Mr.
Ambrose is entitled to a one year of base salary severance, except
in the case of a change in control, as part of his employment
arrangement.
(6)
Mr.
Gulati and Mr. Tidwell are entitled to a one-half year of base
salary severance, except in the case of a change in control, as
part of their employment arrangement.
|
Proxy
|
18
SUMMARY COMPENSATION TABLE
The following table shows compensation paid by Data I/O for
services rendered during 2019 and 2020 to each of our named
executive officers.
|
Name
1
|
|
Year
|
Salary
2
|
Bonus
3
|
Stock
Awards
4
|
Option
Awards
4,5
|
Non-Equity Incentive Plan
Compen- sation
6
|
Non-Qualified Deferred
Compen-sation Earnings
7
|
All Other Compen-
sation
8
|
Total
|
|
(a)
|
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
Ambrose
|
|
2020
|
$
297,000
|
$
0
|
$
270,900
|
$
0
|
$
0
|
$
0
|
$
10,400
|
$
578,300
|
|
Chief
Executive
|
|
2019
|
$
330,000
|
$
0
|
$
267,900
|
$
0
|
$
0
|
$
0
|
$
12,662
|
$
610,562
|
|
Officer
&
|
|
|
|
|
|
|
|
|
|
|
|
President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joel
Hatlen
|
|
2020
|
$
216,000
|
$
0
|
$
90,300
|
$
0
|
$
0
|
$
0
|
$
10,227
|
$
316,527
|
|
Vice
President
|
|
2019
|
$
240,000
|
$
0
|
$
89,300
|
$
0
|
$
0
|
$
0
|
$
12,638
|
$
341,938
|
|
Chief
Operating &
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
Secretary,
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajeev
Gulati
|
|
2020
|
$
207,000
|
$
0
|
$
90,300
|
$
0
|
$
0
|
$
0
|
$
8,918
|
$
306,218
|
|
Vice
President
|
|
2019
|
$
230,000
|
$
0
|
$
89,300
|
$
0
|
$
0
|
$
0
|
$
12,232
|
$
331,532
|
|
Chief
Technical
|
|
|
|
|
|
|
|
|
|
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
Tidwell
|
|
2020
|
$
202,500
|
$
0
|
$
120,400
|
$
0
|
$
0
|
$
0
|
$
9,893
|
$
332,793
|
|
Vice
President
|
|
2019
|
$
150,541
|
$
0
|
$
286,350
|
$
60,973
|
$
29,205
|
$
0
|
$
6,354
|
$
533,423
|
|
Marketing
& Business Development
|
|
|
|
|
|
|
|
|
|
|
(1)
Data
I/O currently has four named executive officers.
(2)
No
base pay adjustments were made for executive officers in 2020 or
2019 except on hiring. Base pay adjustments for executive officers
were last made effective July 1, 2017. In 2020, for the second and
third quarter, a COVID-19 impact related 20% temporary pay
reduction was in effect.
(3)
Employee
patent and service awards paid in 2020.
(4)
Amount
represents the fair value of restricted stock or the fair value of
stock options granted during the year.
(5)
All
options granted to executive officers are granted in tandem with an
equal number of SARs. SARs are only exercisable upon the occurrence
of certain events leading to a change in the control of Data I/O.
See “Change in Control and Other Termination
Arrangements.” No options and SARs were awarded to executive
officers in 2020.
(6)
Amounts
earned under the MICP variable compensation arrangement in place
for the year as approved by the Board.
(7)
Not
applicable for Data I/O.
(8)
These
amounts represent for Mr. Ambrose, Mr. Hatlen, Mr. Gulati and Mr.
Tidwell, Data I/O’s matching contributions to Data
I/O’s 401(k) Plan, and the value of group term life insurance
in excess of premiums paid by each of the executive officers under
the standard employee benefit plans.
|
Proxy
|
19
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
Option Awards
|
Stock Awards
|
|||||||
|
Name
|
Number of Securities Underlying Unexer-cised Options
Exercisable
|
Number of Securities Underlying Unexe-rcised Options
Unexer-cisable
|
Equity Incentive Plan Awards: Number of Securities Underlying
Unexercised Unearned Options
|
Option Exercise Price
|
Option Expiration Date
|
Number of Shares or Units of Stock Held That Have Not
Vested
|
Market Value of Shares or Units of Stock That Have Not
Vested
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not Vested
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned
Shares, Units or Other Rights That Have Not Vested
|
|
|
(#)
|
(#)
|
(#)
|
($)
|
|
#
|
($)
|
(#)
|
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
|
0
|
0
|
0
|
3
|
3
|
172,500
|
$
710,700
|
0
|
$
0
|
|
Ambrose
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joel
|
0
|
0
|
0
|
|
|
60,626
|
$
249,779
|
0
|
$
0
|
|
Hatlen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rajeev
|
0
|
0
|
0
|
|
|
60,626
|
$
249,779
|
0
|
$
0
|
|
Gulati
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
|
9,375
|
15,625
|
0
|
$
4.98
|
5/1/2025
|
77,500
|
$
319,300
|
0
|
$
0
|
|
Tidwell
|
|
|
|
|
|
|
|
|
|
|
Proxy
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20
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about Data I/O’s Common
Stock that may be issued upon the exercise of options and rights
under all of Data I/O’s existing equity compensation plans as
of December 31, 2020.
|
|
(a) Number of
securities to be issued upon the exercise of outstanding options,
warrants and rights
|
(b)
Weighted–average exercise price of outstanding options,
warrants and rights
|
(c) Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a)
|
|
Equity compensation plans approved by the security
holders
(1)
(2)
|
3,175
|
$
4.90
|
286,925
|
|
Equity compensation plans not approved by the
security holders
(3)
|
25,000
|
$
4.98
|
-
|
|
Total
|
28,175
|
$
4.97
|
286,925
|
(1)
Represents shares
of our Common Stock issuable pursuant to the Data I/O Corporation
2000 Stock Compensation Incentive Plan, 1982 Employee Stock
Purchase Plan and 1996 Director Fee Plan. Table excludes unvested
restricted stock awards of 605,728 from the 2000 Plan.
(2)
Stock Appreciation
Rights Plan (“SAR”) provides that directors, executive
officers or holders of 10% or more of our Common Stock have an
accompanying SAR with respect to each exercisable option. While the
plan has been approved by the security holders, no amounts are
included in columns (a), (b), or (c) relating to the
SAR.
(3)
Inducement grant to
Michael Tidwell of 25,000 non-qualified stock options. Table
excludes remaining unvested 2019 restricted stock inducement grant
of 37,500 to Michael Tidwell.
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21
PROPOSAL 2: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors requests that the shareholders ratify the
continued appointment of Grant Thornton LLP to serve as Data
I/O’s independent auditors for calendar year 2021. Grant
Thornton LLP examined the consolidated financial statements of Data
I/O for the year ended December 31, 2020. Representatives of Grant
Thornton LLP are invited to be present at the Annual Meeting to
make a statement if they desire to do so and to respond to
questions by shareholders.
The Board recommends a vote “FOR” the
continued appointment of Grant Thornton LLP to
serve as Data I/O’s independent auditors for calendar year
2021.
PROPOSAL 3: SAY ON PAY - ADVISORY VOTE ON EXECUTIVE
COMPENSATION
The Board of Directors requests that the shareholders approve, on
an advisory basis, the compensation paid to Data I/O’s Named
Executive Officers, as described in “Executive
Compensation”, pursuant to the following Advisory
Resolution:
“RESOLVED, that Data I/O’s shareholders approve, on an
advisory basis, the compensation of Data I/O’s named
executive officers, as disclosed in Data I/O’s Proxy
Statement for the 2021 Annual Meeting of Shareholders pursuant to
the compensation disclosure rules of the Securities and Exchange
Commission, including the 2020 Summary Compensation Table and the
other related tables and disclosure.”
Our
executive compensation program contains elements of cash, incentive
and equity-based compensation and is designed to align the
interests of our executives with those of our shareholders. The
“Executive Compensation” section of this Proxy
Statement, describes in detail our executive compensation
programs.
The
Board has implemented an executive compensation program that is
intended to reward financial performance based on goals established
by the Board. The Board fosters a performance-oriented culture by
linking a significant portion of each executive officer’s
compensation to overall Company financial performance (70%), as
measured in 2021 by adjusted operating income as a percentage of
revenue, and SentriX Revenue Objectives (30%), as measured by
revenue growth targets, which the Company believes are important
metrics for Data I/O and its shareholders. We believe that equity
awards align the interests of our executives with those of our
long-term shareholders by encouraging long-term performance and
incentivizing our executives to increase long-term shareholder
value. Equity awards represent a key component, and are a
significant portion, of our executive compensation.
The
Board has designed Data I/O’s executive compensation program
to attract, motivate, reward and retain our executive officers to
achieve Data I/O’s corporate objectives and increase
shareholder value.
The Say
on Pay vote is advisory and not binding on Data I/O or the Board of
Directors; however, the Board will consider the outcome of the vote
when making future compensation decisions for our executive
officers.
The Board recommends a vote “FOR” the Advisory
Resolution (Say on Pay) approving the compensation of the
Company’s named executive officers as described in this Proxy
Statement.
PROPOSAL 4: AMENDMENT AND RESTATEMENT OF 2000 PLAN
At the Annual Meeting, the shareholders of Data I/O will be asked
to approve an amendment and restatement of the 2000 Plan, which, if
approved, will increase the number of shares of Common Stock that
have been made available under the 2000 Plan by an additional
700,000 shares, to an aggregate of 3,228,739 shares, the fair
market value of such securities is $17,338,328 as of March 22,
2021, as well as make certain other modifications to the 2000 Plan.
As of March 22, 2021, Data I/O has outstanding options and awards
under the 2000 Plan with respect to598,228 shares of Common Stock
and 128,893 shares of Common Stock available for grants. Changes or
updates to the plan include: addition of 700,000 shares to the plan
along with updating the amendment notes, and making explicit three
items previously silent on 1) repricing of stock option’s
exercise price shall, in accordance with NASDAQ, require
shareholder approval; 2) excise tax gross ups are not allowed; and
3) awards are not transferrable to 3rd party financial
institutions.
Approval of the proposed increase will also be
deemed a ratification of the terms of the 2000 Plan, as
amended.
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22
The Board of Directors believes that the 2000 Plan has contributed
to strengthening the incentive of participating employees to
achieve the objectives of Data I/O and its shareholders by
encouraging employees to acquire a greater proprietary interest in
Data I/O. The Board of Directors believes that additional shares
must be reserved for use under the 2000 Plan to enable Data I/O to
attract and retain key employees through the granting of options
under the 2000 Plan. The proposed increase in the number of shares
reserved under the 2000 Plan is not required or intended to cover
awards previously made under the 2000 Plan. As such, no new plan
benefits have been granted to date, and future awards under the
2000 Plan are not yet determinable. Information concerning
outstanding awards under the 2000 Plan is available in this proxy
statement in the following tables and the narrative accompanying
them: Summary Compensation Table, Outstanding Equity Awards at
Fiscal Year End and Director Compensation.
See “Equity Plan Compensation
Information” for additional information about Data
I/O’s existing equity compensation plans which forms a part
of this proposal.
The last sale
price for the Common Stock, as reported by The NASDAQ Capital
Market on March 22, 2021, was $5.37 per share.
This proposal will be approved, if a quorum is present, and if the
number of votes cast, in person or by proxy, in favor of the
proposal exceeds the number of votes cast against the
proposal.
The Board of Directors
recommends a vote FOR approval of the proposed amendment and
restatement of the 2000 Plan.
Unless instructed otherwise, it is the intention
of the persons named in the accompanying form of proxy to vote
shares represented by properly executed proxies in favor of the
above-referenced amendment to the 2000 Plan.
Previously Granted Awards Under the 2000 Plan
The following table provides information related to the total
number of Common Shares issuable in connection with outstanding,
unexercised Award grants under the 2000 Plan held by each of the
following individuals and groups as at March 22, 2021.
|
Name
|
Stock Options/Awards Previously Granted
#
|
|
Anthony
Ambrose
|
172,500
|
|
Joel
Hatlen
|
60,626
|
|
Rajeev
Gulati
|
60,626
|
|
Michael
Tidwell
|
40,000
|
|
All executive officers as a group
|
333,752
|
|
All
directors who are not executive officers as a group
|
63,551
|
|
All
employees who are not executive officers as a group
|
200,925
[●]
|
Description of the 2000 Plan, As Proposed to be Amended and
Restated
The following description of the 2000 Plan, as proposed to be
amended and restated, is qualified in its entirety by reference to
the full text of such 2000 Plan, a copy of which is attached to
this Proxy Statement as Appendix A. The purpose of the 2000 Plan is
to enhance the long-term shareholder value of Data I/O by offering
opportunities to employees, persons to whom offers of employment
have been extended, directors, officers, consultants, agents,
advisors and independent contractors of Data I/O and its
subsidiaries to participate in Data I/O’s growth and success,
and to encourage them to remain in the service of Data I/O and its
subsidiaries and to acquire and maintain stock ownership in Data
I/O. The 2000 Plan may be administered either by the Board of
Directors or a committee or committees appointed by (in either
case, the “Committee”), and consisting of two or more
independent members of, the Board of Directors. The Committee will
have broad discretion to determine the amount and type of awards
and terms and conditions of the awards. Individual grants will
generally be based on a person’s present and potential
contribution to Data I/O.
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23
As of March 22, 2021, Data I/O had approximately 96 employees and 4
non-employee directors who would be eligible to participate in the
2000 Plan. Consultants, agents, advisors, and independent
contractors can be eligible under the 2000 Plan. Because the grant
of awards is based upon a determination made by the Committee after
a consideration of various factors, Data I/O currently cannot
determine the nature and amount of any awards that will be granted
in the future to any eligible individual or group of individuals.
However, with respect to awards granted prior to 2021, the maximum
number of shares that could be granted under the 2000 Plan during
any calendar year to covered employees (generally the chief
executive officer and the three other most highly compensated
officers, other than the chief financial officer, whose
compensation is required to be disclosed pursuant to the rules and
regulations under the Securities Exchange Act of 1934, as amended)
was 200,000, except that Data I/O could make additional one-time
grants to newly hired participants of up to 100,000 shares per such
participant. In addition, the maximum number of shares that can be
granted to a non-employee director of Data I/O during any calendar
year is limited to 100,000.
Awards may be granted in the form of incentive stock options
(“ISOs”) within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”),
nonqualified stock options (“NQOs”) (each ISO or NQO,
an “Option” and collectively, “Options”),
stock appreciation rights, stock awards in the form of restricted
stock (“Restricted Stock”), or other arrangements
determined by the Committee. Any award may be granted either alone
or in tandem with other awards granted under the 2000 Plan. The
option price of ISOs shall be as determined by the Committee, but
shall not be less than 100% of the fair market value of the Common
Stock on the grant date. The option price of NQOs may be less than
the fair market value of the Common Stock on the date of the grant;
however, as a matter of policy Data I/O does not grant options with
an exercise price that is less than the fair market value of the
shares on the date of grant of the option. The Committee may
condition the grant of the award upon the attainment of specified
performance goals or other criteria, which need not be the same for
all participants. No ISOs may be granted under the 2000 Plan on or
after February 22, 2027 (February 21, 2028 if this proposal is
approved), but ISOs outstanding under the 2000 Plan may extend
beyond that date.
Options.
Options granted under
the 2000 Plan may be ISOs or NQOs. The exercise price of ISOs may
not be less than the fair market value of the shares subject to the
ISO on the date of grant. The term of any ISO granted under the
2000 Plan may not exceed ten years. In addition, ISOs are subject
to certain other limitations in order to take advantage of the
favorable U.S. tax treatment that may be available for
ISOs.
Restricted Stock.
Restricted
Stock awards consist of non-transferable shares of Common Stock of
Data I/O which may be subject to a right of purchase by Data I/O
although Data I/O has not subjected any such awards to a repurchase
right. The Committee may provide for the lapse of the transfer
restrictions over a period of time, or may accelerate or waive such
restrictions, in whole or in part, based on service, performance or
other criteria determined by the Committee.
Stock Appreciation Rights.
A
stock appreciation right will give the holder the right to receive
an appreciation distribution in an amount equal to the excess of
the fair market value of the number of shares of Common Stock
covered by the right over the exercise price per share subject to
the right. Stock appreciation rights may be granted separately or
in tandem with a related Option. Payment may be made in a
combination of shares of Common Stock or in cash, as determined by
the Committee.
The consideration payable upon issuance or exercise of an award and
any taxes related to an award must generally be paid in cash or
check. However, the Committee, in its sole discretion, may, either
at the time the Option is granted or at any time before it is
exercised and subject to such limitations as the Committee may
determine, authorize payment by the tender of Common Stock already
owned by the participant for at least six months having a fair
market value on the day prior to the exercise date equal to the
aggregate Option exercise price, by net exercise of the Option, by
delivery of a promissory note, by delivery of a properly executed
exercise notice, together with irrevocable instruction (i) to a
third-party designated by Data I/O to deliver to Data I/O the
amount of sale or loan proceeds to pay the exercise price and
withholding tax obligations and (ii) to Data I/O to deliver the
certificates for such shares to the third-party, or by such other
consideration as the Committee may permit. In addition, to assist a
holder of award (excluding a holder who is an officer or director
of Data I/O due to Sarbanes Oxley restrictions) in acquiring shares
of Common Stock pursuant to an award granted under the 2000 Plan,
the Committee, in its sole discretion, may authorize, either at the
grant date or at any time before the acquisition of Common Stock
pursuant to the award, the extension of a loan to the holder by
Data I/O, the payment by the holder of the purchase price, if any,
of the Common Stock in installments, or the guarantee by Data I/O
of a loan obtained by the grantee from a third-party. Awards
generally may be exercised at any time within three months after
termination of a participant’s employment by, or consulting
relationship with, Data I/O (but, only to the extent exercisable or
payable at the time of termination). However, if termination is due
to the participant’s death or disability, the award generally
may be exercised for one year. Except as authorized by the
Committee, no award shall be assignable or otherwise transferable
by a participant other than by will or by the laws of descent and
distribution.
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24
The Committee may adjust the performance goals and measurements
applicable to awards. The Committee also may waive in whole or in
part any or all restrictions, conditions, vesting or forfeiture
with respect to any award granted under the 2000 Plan. The Board of
Directors may amend, alter or discontinue the 2000 Plan or any
award at any time, except that the consent of a participant is
required if the participant’s rights under an outstanding
award would be impaired. In addition, the shareholders of Data I/O
must approve any amendment, alteration or discontinuance of the
2000 Plan that would (i) increase the total number of shares
reserved under the 2000 Plan, (ii) with respect to provisions
solely as they relate to ISOs, to the extent required for the 2000
Plan to comply with Section 422 of the Code, (iii) to the extent
required by other applicable laws, rules or regulations or (iv) to
the extent that the Board of Directors otherwise concludes that
shareholder approval is advisable.
The 2000 Plan constitutes an unfunded plan for incentive and
deferred compensation. Data I/O is not required to create trusts or
arrangements to meet its obligations under the 2000 Plan to deliver
stock or make payments.
In the event of a “change in control” of Data I/O, as
defined in the 2000 Plan, in which the outstanding options do not
remain outstanding or are not assumed by the surviving entity or
replaced with comparable options, the vesting of outstanding
“qualifying” awards under the 2000 Plan will, unless
the applicable agreement with respect to the award or the Committee
determines otherwise, subject to certain limitations, be
accelerated in full. If outstanding options remain outstanding
after a change of control or are assumed by the surviving entity or
replaced with comparable options, subject to certain limitations,
the vesting of outstanding “qualifying” options will be
accelerated to the extent of 25% of the unvested portion thereof
and the vesting of outstanding Qualifying Shares will be
accelerated to the extent of 25% of the unvested portion thereof.
Director option grants and certain change in control agreements
provide for 100% vesting of all options on a change in control.
Further, if the holder of any “qualifying” award which
remains outstanding or is assumed by the surviving entity in a
change of control transaction is terminated involuntarily within
180 days of the change of control, the vesting of all options and
other awards held by such person will be accelerated in full. A
“qualifying” award is defined as an option or award
that has been held for at least 180 days as of the change of
control. Qualifying Shares means common stock issued pursuant to a
“qualifying” award which are subject to the right of
Data I/O to repurchase some or all of such shares at the original
purchase price (if any) upon the holder’s termination of
services to Data I/O. A “change in control” is defined
to include (i) a merger or consolidation of Data I/O in which more
than 50% of the voting power of Data I/O’s outstanding stock
outstanding after the transaction is owned by persons who are not
shareholders immediately prior to such transaction, and (ii) the
sale or transfer of all or substantially all of Data I/O’s
assets.
Certain Federal Income Tax Consequences
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED
UPON EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF.
THE APPLICABLE RULES ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY
VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH PLAN
PARTICIPANT. THIS PROXY STATEMENT DESCRIBES FEDERAL INCOME TAX
CONSEQUENCES OF GENERAL APPLICABILITY, BUT DOES NOT PURPORT TO
DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN
PARTICIPANT, OR FOREIGN, STATE OR LOCAL INCOME TAX CONSEQUENCES,
WHICH MAY DIFFER FROM THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES.
Incentive Stock Options
Awards and Exercise of Options.
ISOs are intended to constitute “incentive
stock options” within the meaning of Section 422 of the Code.
ISOs may be granted only to employees of Data I/O (including
directors who are also employees). The recipient of an Option (the
“Optionee”) does not recognize taxable income upon
either the grant or exercise of an ISO. However, the excess of the
fair market value of the shares purchased upon exercise over the
Option exercise price (the “Option Spread”) is
includable in the Optionee’s “alternative minimum
taxable income (“AMTI”) for purposes of the alternative
minimum tax (“AMT”). The Option Spread is generally
measured on the date of exercise and is includable in AMTI in the
year of exercise. Special rules regarding the time of AMTI
inclusion may apply for shares subject to a “substantial risk
of forfeiture” (including, in the case of each person subject
to the reporting requirements of Section 16(b) of the Exchange
Act). In addition, when stock is acquired subject to a
“substantial risk of forfeiture”, an Optionee’s
holding period for purposes of determining whether any capital gain
or loss on sale is long-term will generally not begin until the
restriction lapses.
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25
Sale of Option Shares.
If an
Optionee holds the shares purchased under an ISO for at least two
years from the date the ISO was granted and for at least one year
from the date such shares were transferred to the Optionee, any
gain from a sale of the shares other than to Data I/O should be
taxable as capital gain. Under these circumstances, Data I/O would
not be entitled to a tax deduction at the time the ISO was
exercised or at the time the stock was sold. If an Optionee were to
dispose of stock acquired pursuant to an ISO before the end of the
required holding periods (a “Disqualifying
Disposition”), the amount by which the market value of the
stock at the time the ISO was exercised exceeded the exercise price
(or, if less, the amount of gain realized on the sale) would be
taxable as ordinary income, and Data I/O would be entitled to a
corresponding tax deduction in the year of sale. Such income is
subject to information reporting requirements. Gain from a
Disqualifying Disposition in excess of the amount required to be
recognized as ordinary income is capital gain. Optionees are
required to notify Data I/O promptly after making a Disqualifying
Disposition. If the stock is sold to Data I/O rather than to a
third party, the sale may not produce capital gain or loss. A sale
of shares to Data I/O will constitute a redemption of such shares,
which could be taxable as a dividend unless the redemption is
“not essentially equivalent to a dividend” within the
meaning of the Code.
Exercise With Stock.
If an
Optionee pays for ISO shares with shares of Data I/O acquired under
an ISO or a qualified employee stock purchase plan
(“Statutory Option Stock”), the tender of shares is a
Disqualifying Disposition of the Statutory Option Stock if the
above described (or other applicable) holding periods respecting
those shares have not been satisfied. If the holding periods with
respect to the Statutory Option Stock are satisfied, or the shares
were not acquired under a statutory stock option of Data I/O, then
any appreciation in value of the surrendered shares is not taxable
upon surrender. Special basis and holding period rules apply where
previously-owned stock is used to exercise an
ISO.
Nonqualified Stock Options
Awards and Exercise of Options.
An Optionee is not taxable upon the award of an
NQO. Federal income tax consequences upon exercise will depend upon
whether the shares thereby acquired are subject to a
“substantial risk of forfeiture”. If the shares are not
subject to a “substantial risk of forfeiture”, or if
they are so restricted and the Optionee files a Section 83(b)
Election with respect to the shares, the Optionee will have
ordinary income at the time of exercise measured by the Option
Spread on the exercise date. The Optionee’s tax basis in the
shares will be their fair market value on the date of exercise, and
the holding period for purposes of determining whether capital gain
or loss upon sale is long- or short-term also will begin on that
date. If the shares are subject to a “substantial risk of
forfeiture” and no Section 83(b) Election is filed, the
Optionee will not be taxable upon exercise, but instead will have
ordinary income on the date the stock is no longer subject to a
“substantial risk of forfeiture”, in an amount equal to
the difference between the amount paid for the shares under the
Option and their fair market value as of the date of lapse; in
addition, the Optionee’s holding period will begin on the
date of lapse.
Whether or not the shares are subject to a “substantial risk
of forfeiture”, the amount of ordinary income taxable to an
Optionee who was an employee at the time of grant constitutes
“supplemental wages” subject to a withholding of income
and employment taxes by Data I/O, and Data I/O receives a
corresponding income tax deduction.
Sale of Option Shares.
Upon
sale, other than to Data I/O, of shares acquired under a NQO, an
Optionee generally will recognize capital gain or loss to the
extent of the difference between the sale price and the
Optionee’s tax basis in the shares, which will be long-term
gain or loss if the employee’s holding period in the shares
is more than one year. If the stock is sold to Data I/O rather than
to a third party, the sale may not produce capital gain or loss. A
sale of shares to Data I/O will constitute a redemption of such
shares, which could be taxable as a dividend unless the redemption
is “not essentially equivalent to a dividend” within
the meaning of the Code.
Exercise With Stock.
If the
Optionee pays the option exercise price by tendering other shares
of Common Stock of the Company then owned by the Optionee, the
Optionee will recognize ordinary income in an amount equal to the
fair market value of the number of shares received upon exercise of
the option, which exceed the number of shares tendered by the
Optionee.
If the surrendered shares are Statutory Option Stock as described
above under “Incentive Stock Options”, with respect to
which the applicable holding period requirements for favorable
income tax treatment have not expired, then the newly acquired
shares substituted for the Statutory Option Shares should remain
subject to the federal income tax rules governing the surrendered
shares, but the surrender should not constitute a Disqualifying
Disposition of the surrendered stock.
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26
Net Exercise
. If a NQO is
exercised through a net exercise, Data I/O will not require payment
of the exercise price of the NQO but will reduce the number of
shares issued upon exercise by the largest number of whole shares
that have a Fair Market Value that does not exceed the aggregate
exercise price. With respect to any remaining balance of the
aggregate exercise price, Data I/O will accept a cash payment from
the Optionee. The Optionee will recognize ordinary income in an
amount equal to the excess of the aggregate fair market value of
the shares that otherwise would be issued upon exercise of the NQO
over the aggregate exercise price of the NQO being exercised. The
Optionee’s tax basis in the shares received is their fair
market value at the time of exercise.
Restricted Stock Awards
Grant and Lapse of Restrictions
. Section 83(b) election of the Internal Revenue
Code allows the holder of a restricted stock award to elect, within
30 days after the date he receives a restricted stock award, to
recognize and be taxed on ordinary income equal to the fair market
value of the common stock at that time. If the holder does not make
a Section 83(b) election within 30 days from the date he receives a
restricted stock award, the holder will recognize ordinary income
equal to the fair market value of the common stock at expiration of
the restriction period. The holder’s basis in the shares will
equal their fair market value at the time the holder recognizes
ordinary income. The holder will be taxed at ordinary income rates
on cash dividends paid before the end of the restriction period.
Subject to the general rules concerning deductibility of
compensation, Data I/O will be allowed an income tax deduction in
the amount that, and for our taxable year in which, the holder
recognizes ordinary income in connection with a restricted stock
award. Dividends on the restricted stock that are received by the
holder before the end of the restriction period also will be
deductible by Data I/O subject to the general rules concerning
compensation.
Forfeiture of Restricted Stock
.
If the holder does not make the Section 83(b) election described
above and, before the restriction period expires, he forfeits the
restricted stock under the terms of the award, the holder will not
recognize any ordinary income in connection with the restricted
stock award. If the holder does make a Section 83(b) election and
subsequently forfeits the restricted stock under the terms of the
award, the holder will not be allowed an ordinary income tax
deduction with respect to the forfeiture. However, the holder may
be entitled to a capital loss.
Sale of Shares
. The holder
cannot sell or otherwise dispose of the restricted stock until
after the restriction period expires. When shares are sold after
the restriction period expires, the holder will recognize gain or
loss in an amount by which the sale price of the shares differs
from his tax basis in the shares. If, as usually is the case, the
shares are a capital asset in the hands of the holder, any gain or
loss recognized on a sale or other disposition of the shares will
qualify as capital gain or loss. Any capital gain or loss
recognized upon sale of the shares will be treated as long-term
capital gain or loss if the holder held the shares for more than 12
months from the date he recognized ordinary income with respect to
the shares and as short-term capital gain or loss if he held the
stock for 12 months or less from the date the holder recognized
ordinary income.
Stock Appreciation Rights
Grant
. At the time a SAR is
granted, the recipient will not recognize any taxable
income.
Exercise
. At the time the
holder exercises a SAR, he will recognize ordinary income equal to
the cash received, or fair market value of any shares of common
stock received, at that time (in the amount that is equal to the
excess of the fair market value of a share of our common stock on
the date the SAR is exercised over the grant price of the SAR). The
holder’s tax basis in any shares received will equal the fair
market value of those shares at the time he recognizes ordinary
income as a result of exercising the SAR. Subject to the general
rules concerning deductibility of compensation, Data I/O will be
allowed an income tax deduction in the amount that, and for our
taxable year in which, the holder recognizes ordinary income upon
the exercise of a SAR.
Sale of Shares
. If, as usually
is the case, shares received upon exercise of a SAR (if any) are a
capital asset in the hands of the holder, any additional gain or
loss recognized on a subsequent sale or exchange of the shares will
not be ordinary income but will qualify as a capital gain or loss.
Any capital gain or loss recognized upon sale of the shares will be
characterized as long-term capital gain or loss if the holder held
the shares for more than 12 months and as short-term capital gain
or loss if the holder held the stock for 12 months or less. For
purposes of determining whether the gain will be recognized as
long-term or short-term capital gain or loss on the subsequent sale
of the shares, the holding period will begin at the time the SAR
was exercised.
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Change in Control
Depending on the terms of an award and the determination of the
Committee, upon a change in control of Data I/O, restrictions on
awards may lapse, or the award may mature or become exercisable, on
an accelerated schedule. If this type of benefit, or other benefits
and payments connected with an award that result from a change in
control of Data I/O, are granted to certain individuals (such as
our executive officers), the benefits and payments may be deemed to
be “parachute payments” within the meaning of
Section 280G of the Internal Revenue Code. Section 280G
provides that if parachute payments to an individual equal or
exceed three times the individual’s “base
amount,” the excess of the parachute payments over one times
the base amount (1) will not be deductible by Data I/O and
(2) will be subject to a 20% excise tax payable by the
individual. “Base amount” is the individual’s
average annual compensation over the five taxable years preceding
the taxable year in which the change in control
occurs.
Deductibility of Executive Compensation Under Code Section
162(m)
Section 162(m) of the Code generally limits to $1,000,000 the
amount that a publicly-held corporation is allowed each year to
deduct for the compensation paid to each of the corporation’s
“covered employees” which generally includes the chief
executive officer, the chief financial officer and the
corporation’s three other most highly compensated executive
officers whose compensation is required to be disclosed under rules
and regulations under the Securities Exchange Act of 1934. Any
individual who is a covered employee at any time during a tax year
commencing after 2016 will remain a covered employee permanently.
However, awards of “qualified performance-based qualified
compensation” that were awarded pursuant to a written binding
contract in effect as of November 2, 2017 are
“grandfathered” under prior law and are not subject to
the $1,000,000 deduction limit as long as they are not materially
modified. In general, to qualify as performance-based compensation,
the following requirements need to be satisfied: (1) payments
must be computed on the basis of an objective, performance-based
compensation standard determined by a committee consisting solely
of two or more “outside directors,” (2) the
material terms under which the compensation is to be paid,
including the business criteria upon which the performance goals
are based, and a limit on the maximum bonus amount which may be
paid to any participant pursuant with respect to any performance
period, must be approved by a majority of the corporation’s
shareholders and (3) the committee must certify that the
applicable performance goals were satisfied before payment of any
performance-based compensation.
OTHER BUSINESS
As of the date of this Proxy Statement, Data I/O is not aware of
any other business to be acted upon at the Annual Meeting. If any
other business calling for a vote of the shareholders is properly
presented at the meeting, the holders of the proxies will vote or
refrain from voting in accordance with their best
judgment.
SHAREHOLDER NOMINATIONS AND PROPOSALS FOR THE 2021 ANNUAL MEETING
OF SHAREHOLDERS
Data I/O’s Bylaws provide that advance notice of nominations
for the election of directors at a meeting of shareholders must be
delivered to or mailed and received by Data I/O at its principal
offices on or before February 17, 2021, in the case of the 2021
annual meeting of shareholders, and in the case of a special
meeting of shareholders to elect directors, the close of business
on the 10th day following the date on which notice of such meeting
is first given to shareholders. Data I/O’s Bylaws also
provide that advance notice of business to be brought before the
2021 Annual Meeting of Shareholders by a shareholder must be
submitted in writing and delivered to, or mailed and received by,
Data I/O on or before February 17, 2021.
Each notice of a nomination or proposal of business must contain,
among other things: (i) the name and address of the shareholder who
intends to make the nomination or proposal; (ii) a representation
that the shareholder is a holder of record of stock of Data I/O
entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified
in the notice or to vote at the meeting for the proposal; (iii) a
description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder and any material
interest of such shareholder in any proposal to be submitted to the
meeting; (iv) such other information regarding each nominee or
proposal as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC; and (v) with respect
to the nominations, the consent of each nominee to serve as a
director of Data I/O if elected.
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A copy of the full text of the provisions of Data I/O’s
Bylaws dealing with shareholder director nominations and proposals
is available to shareholders from the Secretary of Data I/O upon
written request. The Bylaws may also be accessed online, as a Form
10K exhibit as referenced in our Annual Report on Form 10K. SEC
rules establish a deadline for submission of shareholder
nominations proposals that are not intended to be included in Data
I/O’s proxy statement with respect to discretionary voting
(the “Discretionary Vote Deadline”). The Discretionary
Vote Deadline for the 2021 Annual Meeting was February 17, 2021. If
a shareholder gives notice of such a nomination or proposal after
the Discretionary Vote Deadline, Data I/O’s proxy holders
will be allowed to use their discretionary voting authority to vote
against the shareholder nomination or proposal when and if the
proposal is raised at the 2021 Annual Meeting.
Eligible shareholders who intend to have a nomination or proposal
considered for inclusion in Data I/O’s proxy materials for
presentation at the 2022 Annual Meeting must submit the proposal to
Data I/O at its principal offices no later than December 10, 2021.
Shareholders who intend to present a nomination or proposal at the
2022 Annual Meeting without inclusion of such nomination or
proposal in Data I/O’s proxy materials are required to
provide notice of such nomination or proposal to Data I/O no later
than February 19, 2022, as further directed above.
To qualify as an “eligible” shareholder, a shareholder
must have been a record or beneficial owner of at least one percent
(1%) of Data I/O’s outstanding Common Stock, or shares of
Common Stock having a market value of at least $2,000, for a period
of at least one (1) year prior to submitting the proposal, and the
shareholder must continue to hold the shares through the date on
which the meeting is held.
Data I/O reserves the right to reject, rule out of order, or take
appropriate action with respect to any nomination or proposal that
does not comply with these and other applicable requirements, but
only after Data I/O has notified the shareholder(s) who have
submitted the nomination or proposal of the problem and such
shareholder(s) have failed to correct it. This obligation to notify
the appropriate shareholder(s) does not apply to the failure to
submit such nomination or proposal prior to the deadlines discussed
above.
STOCKHOLDERS SHARING THE SAME ADDRESS
To
reduce the expenses of delivering duplicate materials, we are
taking advantage of the SEC’s “house holding”
rules which permit us to deliver only one set of proxy materials
(or one Notice of Internet Availability of Proxy Materials) to
shareholders who share an address unless otherwise requested. If
you share an address with another shareholder and have received
only one set of these materials, you may request a separate copy at
no cost to you by contacting Investor Relations by email at
investorrelations@dataio.com
,
by phone at (425) 881-6444, by fax at (425) 881-2917 or by writing
to Data I/O investor relations, attention Joel Hatlen, 6645
185
th
Avenue NE, Suite 100, Redmond WA 98052. For future annual meetings,
you may request separate materials, or request that we send only
one set of materials to you if you are receiving multiple copies,
by contacting Investor Relations as noted above.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the
Board of Directors on behalf of the Company. Proxies may be
solicited by officers, directors and regular supervisory and
executive employees of Data I/O, none of whom will receive any
additional compensation for their services. In addition, Data I/O
may engage an outside proxy solicitation firm to render proxy
solicitation services and, if so, will pay a fee for such services.
Solicitations of proxies may be made personally, or by mail,
telephone, telegraph or messenger. Data I/O will pay persons
holding shares of Common Stock in their names or in the names of
nominees, but not owning such shares beneficially, such as
brokerage houses, banks and other fiduciaries, for the expense of
forwarding soliciting materials to their principals. All such costs
of solicitation of proxies will be paid by Data I/O.
Copies of our annual report on Form 10-K for the year ended
December 31, 2020, are being mailed with this Proxy Statement to
each shareholder of record. If you did not receive a copy of our
annual report Form 10-K, you may obtain a copy (without exhibits)
without charge by writing c/o Secretary, 6645
185
th
Avenue NE, Suite 100, Redmond, WA
98052 or by calling (425) 881-6444. Copies of the exhibits to our
annual report on Form 10-K are available for a nominal fee or may
be viewed at
https://www.dataio.com/Company/Investor-Relations/Annual-Meeting.aspx
or www.sec.gov in the EDGAR filing of our
report.
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By
Order of the Board of Directors
/s/
Anthony Ambrose
Anthony
Ambrose
President
and Chief Executive Officer
Redmond, Washington
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April 5, 2021
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Appendix A
DATA I/O CORPORATION
2000 STOCK COMPENSATION INCENTIVE PLAN
1.
PURPOSES
1.1
The purpose of the Data I/O
Corporation 2000 Stock Compensation Incentive Plan, as amended and
restated, (the “2000 Plan”) is to enhance the long-term
shareholder value of Data I/O Corporation, a Washington corporation
(the “Company”), by offering opportunities to
employees, persons to whom offers of employment have been extended,
directors, officers, consultants, agents, advisors and independent
contractors of Data I/O and its Subsidiaries (as defined in Section
2) to participate in Data I/O's growth and success, and to
encourage them to remain in the service of Data I/O and its
Subsidiaries and to acquire and maintain stock ownership in Data
I/O.
2.
DEFINITIONS
For
purposes of the 2000 Plan, the following terms shall be defined as
set forth below:
2.1
Acquired
Entities
.
“Acquired
Entities” has the meaning given in Section 6.2.
2.2
Acquisition
Transaction
.
“Acquisition
Transaction” has the meaning given in Section
6.2.
2.3
Award
.
“Award”
means a grant made to a Participant pursuant to the 2000 Plan,
including, without limitation, grants of Options, Stock
Appreciation Rights, Stock Awards, Other Stock-Based Awards or any
combination of the foregoing.
2.4
Board
.
“Board”
means the Board of Directors of Data I/O.
2.5
Cause
.
“Cause”
means dishonesty, fraud, misconduct, disclosure of confidential
information, conviction of, or a plea of guilty or no contest to, a
felony under the laws of the United States or any state thereof,
habitual absence from work for reasons other than illness,
intentional conduct which causes significant injury to Data I/O,
habitual abuse of alcohol or a controlled substance, in each case
as determined by the Plan Administrator, and its determination
shall be conclusive and binding.
2.6
Change in
Control
.
“Change
in Control” means (i) the consummation of a merger or
consolidation of Data I/O with or into another entity or any other
corporate reorganization, if more than 50% of the combined voting
power of the continuing or surviving entity’s securities
outstanding immediately after such merger, consolidation or other
reorganization is owned by persons who were not shareholders of
Data I/O immediately prior to such merger, consolidation or other
reorganization or (ii) the sale, transfer or other disposition of
all or substantially all of Data I/O’s assets. A transaction
shall not constitute a Change in Control if its sole purpose is to
change the state of Data I/O’s incorporation or to create a
holding company that will be owned in substantially the same
proportions by the persons who held Data I/O’s securities
immediately before such transaction.
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2.7
Code
.
“Code”
means the Internal Revenue Code of 1986, as amended from time to
time.
2.8
Common
Stock
.
“Common
Stock” means the common stock, no par value, of Data
I/O.
2.9
Disability
.
“Disability”
means a medically determinable mental or physical impairment or
condition of the Holder which is expected to result in death or
which has lasted or is expected to last for a continuous period of
twelve (12) months or more and which causes the Holder to be
unable, in the opinion of the Plan Administrator on the basis of
evidence acceptable to it, to perform his or her duties for Data
I/O and, in the case of a determination of Disability for purposes
of determining the exercise period for an Incentive Stock Option,
to be engaged in any substantial gainful activity. Upon making a
determination of Disability, the Plan Administrator shall, for
purposes of the 2000 Plan, determine the date of the Holder’s
termination of employment, service or contractual
relationship.
2.10
Exchange
Act
.
“Exchange
Act” means the Securities Exchange Act of 1934, as
amended.
2.11
Fair Market
Value
.
“Fair
Market Value” shall be as established in good faith by the
Plan Administrator or (a) if the Common Stock is listed on the
NASDAQ Capital Market, the mean between the high and low selling
prices for the Common Stock as reported by the NASDAQ Capital
Market for a single trading day or (b) if the Common Stock is
listed on the New York Stock Exchange or the American Stock
Exchange, the mean between the high and low selling prices for the
Common Stock as such prices are officially quoted in the composite
tape of transactions on such exchange for a single trading day. If
there is no such reported price for the Common Stock for the date
in question, then such price on the last preceding date for which
such price exists shall be determinative of Fair Market
Value.
2.12
Grant
Date
.
“Grant
Date” means the date the Plan Administrator adopted the
granting resolution or a later date designated in a resolution of
the Plan Administrator as the date an Award is to be
granted.
2.13
Holder
.
“Holder”
means the Participant to whom an Award is granted or the personal
representative of a Holder who has died.
2.14
Incentive Stock
Option
.
“Incentive
Stock Option” means an Option to purchase Common Stock
granted under Section 7 with the intention that it qualify as an
“incentive stock option” as that term is defined in
Section 422 of the Code.
2.15
Involuntary
Termination
.
“Involuntary
Termination” means termination of the Holder’s service
to Data I/O (or the parent or subsidiary company employing such
Holder) or the other party to the transaction constituting a Change
in Control by reason of (i) the involuntary discharge of such
Holder by Data I/O (or the parent or subsidiary company employing
such Holder) or the other party to the transaction constituting a
Change in Control for reasons other than Cause or (ii) the
voluntary resignation of the Holder following (A) a change in such
Holder’s position with Data I/O (or its successor or the
parent or subsidiary company that employs such Holder) or the other
party to the transaction constituting a Change in Control that
materially reduces such Holder’s level of authority or
responsibility or (B) a reduction in such Holder’s
compensation (including base salary, fringe benefits and
participation in bonus or incentive programs based on corporate
performance) by more than 20%.
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2.16
Nonqualified Stock
Option
.
“Nonqualified
Stock Option” means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock
Option.
2.17
Option
.
“Option”
means the right to purchase Common Stock granted under Section
7.
2.18
Option
Shares
.
“Option
Shares” means the shares of Common Stock issuable upon a
Holder’s exercise of an Option granted under the 2000
Plan.
2.19
Other Stock-Based
Award
.
“Other
Stock-Based Award” means an Award granted under Section
11.
2.20
Participant
.
“Participant”
means an individual who is a Holder of an Award or, as the context
may require, any employee, director (including directors who are
not employees), officer, consultant, agent, advisor or independent
contractor of Data I/O or a Subsidiary who has been designated by
the Plan Administrator as eligible to participate in the 2000
Plan.
2.21
Plan
Administrator
.
“Plan
Administrator” means the Board or any committee designated to
administer the 2000 Plan under Section 3.1.
2.22
Qualifying
Award
.
“Qualifying
Award” means an Option or an Award that is held by a person
who had been an employee, director, consultant or agent to Data I/O
for at least 180 days as of the effective date of a Change in
Control.
2.23
Qualifying
Shares
.
“Qualifying
Shares” means shares of Common Stock issued pursuant to a
Qualifying Award which are subject to the right of Data I/O to
repurchase some or all of such shares at the original purchase
price (if any) upon termination of the Holder’s services to
Data I/O.
2.24
Restricted
Stock
.
“Restricted
Stock” means shares of Common Stock granted pursuant to a
Stock Award under Section 10, the rights of ownership of which are
subject to restrictions prescribed by the Plan
Administrator.
2.25
Securities
Act
.
“Securities
Act” means the Securities Act of 1933, as
amended.
2.26
Stock Appreciation
Right
.
“Stock
Appreciation Right” means an Award granted under Section
9.
2.27
Stock
Award
.
“Stock
Award” means an Award granted under Section 10.
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2.28
Subsidiary
.
“Subsidiary,”
except as expressly provided otherwise, means any entity that is
directly or indirectly controlled by Data I/O or in which Data I/O
has a significant ownership interest, as determined by the Plan
Administrator, and any entity that may become a direct or indirect
parent of Data I/O.
2.29
Unvested
Portion
.
“Unvested
Portion” means the portion of a Qualifying Award or
Qualifying Shares that is/are unvested as of the effective date of
a Change in Control.
2.30
Vested
Portion
.
“Vested
Portion” means the portion of a Qualifying Award or
Qualifying Shares that is/are vested as of the effective date of a
Change in Control.
3.
ADMINISTRATION
3.1
Plan
Administrator
.
The
2000 Plan shall be administered by the Board or a committee or
committees (which term includes subcommittees) appointed by, and
consisting of two or more members of, the Board. Any such committee
shall have the powers and authority vested in the Board hereunder
(including the power and authority to interpret any provision of
the 2000 Plan or of any Award). The Board, or any committee thereof
appointed to administer the 2000 Plan, is referred to herein as the
"Plan Administrator." If and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, the
Board shall consider in selecting the Plan Administrator and the
membership of any committee acting as Plan Administrator for any
persons subject or likely to become subject to Section 16 under the
Exchange Act the provisions regarding (a) “outside
directors” as contemplated by Section 162(m) of the Code and
(b) “Non-Employee Directors” as contemplated by Rule
16b-3 under the Exchange Act. The Board or Plan Administrator may
delegate the responsibility for administering the 2000 Plan with
respect to designated classes of eligible Participants to one or
more senior executive officers or committees thereof, the members
of which need not be members of the Board, subject to such
limitations as the Board deems appropriate. Committee members shall
serve for such term as the Board may determine, subject to removal
by the Board at any time.
3.2
Administration and
Interpretation by the Plan Administrator
.
Except
for the terms, conditions and limitations explicitly set forth in
the 2000 Plan, the Plan Administrator shall have exclusive
authority, in its absolute discretion, to determine all matters
relating to Awards under the 2000 Plan, including the selection of
individuals to be granted Awards, the type of Awards, the number of
shares of Common Stock subject to an Award, all terms, conditions,
restrictions and limitations, if any, of an Award and the terms of
any instrument that evidences the Award. The Plan Administrator
shall also have exclusive authority to interpret the 2000 Plan and
may from time to time adopt, change and rescind rules and
regulations of general application for the 2000 Plan's
administration. This authority shall include the sole
authority to correct any defect, supply any omission or reconcile
any inconsistency in this 2000 Plan and make all other
determinations necessary or advisable for the administration of the
2000 Plan and do everything necessary or appropriate to administer
the 2000 Plan. The Plan Administrator's interpretation of the 2000
Plan and its rules and regulations, and all actions taken and
determinations made by the Plan Administrator pursuant to the 2000
Plan shall be conclusive and binding on all parties involved or
affected. The Plan Administrator may delegate administrative duties
to such of Data I/O's officers as it so determines.
4.
STOCK SUBJECT TO THE 2000 PLAN
4.1
Authorized Number of
Shares
.
As
of March 10, 2000, Data I/O had outstanding options with respect to
1,215,000 shares of Common Stock and 270,499 shares of Common Stock
available for additional grants under the 2000 Plan and the Data
I/O 1986 Employee Stock Option Plan (“1986 Plan”).
Subject to adjustment from time to time as provided in Section
14.1, Awards of the authorized but unissued shares of Common Stock
under the 1986 Plan, or shares of Common Stock that become
available under the 1986 Plan as a result of the expiration or
termination of options, may be granted under this 2000 Plan. Awards
for an additional 300,000 shares of Common Stock shall also be
available for issuance under the 2000 Plan. Shares issued under the
2000 Plan shall be drawn from authorized and unissued shares. See
also Section 18 for 2000 Plan amendments.
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4.2
Limitations
.
(a)
Subject
to adjustment from time to time as provided in Section 14.1, not
more than 200,000 shares of Common Stock may be made subject to
Awards under the 2000 Plan to any individual Participant in the
aggregate in any one (1) calendar year, except that Data I/O may
make additional one-time grants to newly hired Participants of up
to 100,000 shares per such Participant; such limitation shall be
applied in a manner consistent with the requirements of, and only
to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of
the Code.
(b)
Subject
to adjustment from time to time as provided in Section 14.1, not
more than 100,000 shares of Common Stock may be made subject to
Awards to any non-employee director in the aggregate in any one
calendar year.
4.3
Reuse of
Shares
.
Any
shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise
or payment of the Award to the extent it is exercised for or
settled in shares) and any shares repurchased by Data I/O from a
Holder upon exercise of a right of repurchase shall again be
available for issuance in connection with future grants of Awards
under the 2000 Plan; provided, however, that any such shares shall
be counted in accordance with the requirements of Section 162(m) of
the Code if and to the extent applicable. Shares that are subject
to tandem Awards shall be counted only once. Also, upon a
stock-for-stock exercise only the net number of shares will be
deemed to have been used under this 2000 Plan.
5.
ELIGIBILITY
Awards
may be granted under the 2000 Plan to those officers, directors and
key employees of Data I/O and its Subsidiaries as the Plan
Administrator from time to time selects. Awards may also be made to
consultants, agents, advisors and independent contractors who
provide services to Data I/O and its Subsidiaries.
6.
AWARDS
6.1
Form and Grant of
Awards
.
The
Plan Administrator shall have the authority, in its sole
discretion, to determine the type or types of Awards to be made
under the 2000 Plan. Such Awards may include, but are not limited
to, Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Stock Awards and Other Stock-Based Awards.
Awards may be granted singly, in combination or in tandem so that
the settlement or payment of one automatically reduces or cancels
the other. Awards may also be made in combination or in tandem
with, in replacement of, as alternatives to, or as the payment form
for, grants or rights under any other employee or compensation plan
of Data I/O.
6.2
Acquired Company
Awards
.
Notwithstanding
anything in the 2000 Plan to the contrary, the Plan Administrator
may grant Awards under the 2000 Plan in substitution for awards
issued under other plans, or assume under the 2000 Plan awards
issued under other plans, if the other plans are or were plans of
other acquired entities (“Acquired Entities”) (or the
parent of the Acquired Entity) and the new Award is substituted, or
the old Award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation
(an “Acquisition Transaction”). If a written agreement
pursuant to which an Acquisition Transaction is completed is
approved by the Board and said agreement sets forth the terms and
conditions of the substitution for or assumption of outstanding
awards of the Acquired Entity, said terms and conditions shall be
deemed to be the action of the Plan Administrator without any
further action by the Plan Administrator, except as may be required
for compliance with Rule 16b-3 under the Exchange Act, and the
persons holding such Awards shall be deemed to be Participants and
Holders.
7.
AWARDS OF OPTIONS
7.1
Grant of
Options
.
The
Plan Administrator is authorized under the 2000 Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as
Nonqualified Stock Options, which shall be appropriately
designated.
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7.2
Option Exercise
Price
.
The
exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than
100% of the Fair Market Value of the Common Stock on the Grant Date
with respect to Incentive Stock Options.
7.3
Term of
Options
.
The term of each Option shall be as established by
the Plan Administrator or, if not so established, shall
be
six (6) years from the Grant
Date.
7.4
Exercise of
Options
.
The
Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in
which the Option shall become exercisable, which provisions may be
waived or modified by the Plan Administrator at any time. If not so
established in the instrument evidencing the Option or otherwise
set at the time of grant, the Option will be subject to the
following: (a) 25% of the Option shall vest and become exercisable
on each anniversary of the Grant Date such that the Option shall be
fully vested on the fourth anniversary of the Grant Date; (b) in no
event shall any additional Option Shares vest after termination of
Holder’s employment by or service to Data I/O; and (c) the
Plan Administrator may waive or modify the foregoing schedule at
any time.
To
the extent that the right to purchase shares has accrued there
under, an Option may be exercised from time to time by written
notice to Data I/O, in accordance with procedures established by
the Plan Administrator, setting forth the number of shares with
respect to which the Option is being exercised and accompanied by
payment in full as described in Section 7.5. An Option may not be
exercised as to less than 100 shares at any one time (or the lesser
number of remaining shares covered by the Option).
7.5
Payment of Exercise
Price
.
The
exercise price for shares purchased under an Option shall be paid
in full to Data I/O by delivery of consideration equal to the
product of the Option exercise price and the number of shares
purchased. Such consideration must be paid in cash or check
(unless, at the time of exercise, the Plan Administrator determines
not to accept a personal check), except that the Plan
Administrator, in its sole discretion, may, either at the time the
Option is granted or at any time before it is exercised and subject
to such limitations as the Plan Administrator may determine,
authorize payment in cash and/or one or more of the following
alternative forms: (a) tendering (either actually or, if and so
long as the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, by attestation) Common Stock already owned by
the Holder for at least six months (or any shorter period necessary
to avoid a charge to Data I/O's earnings for financial reporting
purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price; (b) a
promissory note delivered pursuant to Section 12; (c) if and so
long as the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, delivery of a properly executed exercise
notice, together with irrevocable instructions, to (i) a third
party designated by Data I/O to deliver promptly to Data I/O the
aggregate amount of sale or loan proceeds to pay the Option
exercise price and any withholding tax obligations that may arise
in connection with the exercise and (ii) Data I/O to deliver the
certificates for such purchased shares directly to such third
party, all in accordance with the regulations of the Federal
Reserve Board; (d) the net exercise of the Option as defined below;
or (e) such other consideration as the Plan Administrator may
permit.
In
the case of a "net exercise" of an Option, the Company will not
require a payment of the exercise price of the Option from the
Holder but will reduce the number of shares of Common Stock issued
upon the exercise by the largest number of whole shares that have a
Fair Market Value that does not exceed the aggregate exercise
price. With respect to any remaining balance of the aggregate
exercise price, the Company will accept a cash payment from the
Participant.
The
number of shares of Common Stock underlying an Option will decrease
following the exercise of such Option to the extent of (i) shares
used to pay the exercise price of an Option under the "net
exercise" feature, (ii) shares actually delivered to the Holder as
a result of such exercise, and (iii) shares withheld for purposes
of tax withholding.
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7.6
Post-Termination Exercises.
The
Plan Administrator may establish and set forth in each instrument
that evidences an Option whether the Option will continue to be
exercisable, and the terms and conditions of such exercise, if a
Holder ceases to be employed by, or to provide services to, Data
I/O or its Subsidiaries, which provisions may be waived or modified
by the Plan Administrator at any time.
If
not so established in the instrument evidencing the Option, the
Option will be exercisable according to the following terms and
conditions, which may be waived or modified by the Plan
Administrator at any time.
In
case of termination of the Holder’s employment or services
other than by reason of death or Cause, the Option shall be
exercisable, to the extent of the number of shares purchasable by
the Holder at the date of such termination, only (a) within one (1)
year if the termination of the Holder’s employment or
services are coincident with Disability or (b) within three (3)
months after the date the Holder ceases to be an employee,
director, officer, consultant, agent, advisor or independent
contractor of Data I/O or a Subsidiary if termination of the
Holder’s employment or services is for any reason other than
death or Disability, but in no event later than the remaining term
of the Option. Any Option exercisable at the time of the
Holder’s death may be exercised, to the extent of the number
of shares purchasable by the Holder at the date of the
Holder’s death, by the personal representative of the
Holder’s estate entitled thereto at any time or from time to
time within one (1) year after the date of death, but in no event
later than the remaining term of the Option. In case of termination
of the Holder’s employment or services for Cause, the Option
shall automatically terminate upon first discovery by Data I/O of
any reason for such termination and the Holder shall have no right
to purchase any Shares pursuant to such Option, unless the Plan
Administrator determines otherwise. If a Holder’s employment
or services with Data I/O are suspended pending an investigation of
whether the Holder shall be terminated for Cause, all the
Holder’s rights under any Option likewise shall be suspended
during the period of investigation.
A
transfer of employment or services between or among Data I/O and
its Subsidiaries shall not be considered a termination of
employment or services. The effect of a Company-approved leave of
absence or short-term break in service on the terms and conditions
of an Option shall be determined by the Plan Administrator, in its
sole discretion.
8.
INCENTIVE STOCK OPTION LIMITATIONS
To
the extent required by Section 422 of the Code, Incentive Stock
Options shall be subject to the following additional terms and
conditions:
8.1
Dollar
Limitation
.
To
the extent the aggregate Fair Market Value (determined as of the
Grant Date) of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time during any calendar year
(under the 2000 Plan and all other stock option plans of Data I/O)
exceeds $100,000, such portion in excess of $100,000 shall be
treated as a Nonqualified Stock Option. In the event the
Participant holds two (2) or more such Options that become
exercisable for the first time in the same calendar year, such
limitation shall be applied on the basis of the order in which such
Options were granted.
8.2
10%
Shareholders
.
If
a Participant owns more than 10% of the total voting power of all
classes of Data I/O's stock, then the exercise price per share of
an Incentive Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the Grant Date and the Option
term shall not exceed five (5) years. The determination of 10%
ownership shall be made in accordance with Section 422 of the
Code.
8.3
Eligible
Employees
.
Individuals
who are not employees of Data I/O or one of its parent corporations
or subsidiary corporations may not be granted Incentive Stock
Options. For purposes of this Section 8.3, “parent
corporation” and “subsidiary corporation” shall
have the meanings attributed to those terms for purposes of Section
422 of the Code.
8.4
Term
.
The
term of an Incentive Stock Option shall not exceed ten (10)
years.
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8.5
Exercisability
.
To
qualify for Incentive Stock Option tax treatment, an Option
designated as an Incentive Stock Option must be exercised within
three (3) months after termination of employment for reasons other
than death, except that, in the case of termination of employment
due to total Disability, such Option must be exercised within one
(1) year after such termination. Employment shall not be deemed to
continue beyond the first 90 days of a leave of absence unless the
Participant's reemployment rights are guaranteed by statute or
contract.
8.6
Taxation
of Incentive Stock Options
.
In
order to obtain certain tax benefits afforded to Incentive Stock
Options under Section 422 of the Code, the Participant must hold
the shares issued upon the exercise of an Incentive Stock Option
for two (2) years after the Grant Date of the Incentive Stock
Option and one (1) year from the date the shares are transferred to
the Participant. A Participant may be subject to the alternative
minimum tax at the time of exercise of an Incentive Stock Option.
The Participant shall give Data I/O prompt notice of any
disposition of shares acquired by the exercise of an Incentive
Stock Option prior to the expiration of such holding
periods.
8.7
Promissory
Notes
.
The
amount of any promissory note delivered pursuant to Section 12 in
connection with an Incentive Stock Option shall bear interest at a
rate specified by the Plan Administrator but in no case less than
the rate required to avoid imputation of interest (taking into
account any exceptions to the imputed interest rules) for federal
income tax purposes.
8.8
Incorporation of Other
Provisions
.
With
respect to Incentive Stock Options, if this 2000 Plan does not
contain any provision required to be included herein under Section
422 of the Code, such provision shall be deemed to be incorporated
herein with the same force and effect as if such provision had been
set out in full herein; provided, however, that to the extent any
Option that is intended to qualify as an Incentive Stock Option
cannot so qualify, the Option, to that extent, shall be deemed to
be a Nonqualified Stock Option for all purposes of this 2000
Plan.
9.
STOCK APPRECIATION RIGHTS
9.1
Grant of Stock
Appreciation Rights
.
The
Plan Administrator may grant a Stock Appreciation Right separately
or in tandem with a related Option.
9.2
Tandem Stock
Appreciation Rights
.
A
Stock Appreciation Right granted in tandem with a related Option
will give the Holder the right to surrender to Data I/O all or a
portion of the related Option and to receive an appreciation
distribution (in shares of Common Stock or cash or any combination
of shares and cash, as the Plan Administrator, in its sole
discretion, shall determine at any time) in an amount equal to the
excess of the Fair Market Value for the date the Stock Appreciation
Right is exercised over the exercise price per share of the right,
which shall be the same as the exercise price of the related
Option. A tandem Stock Appreciation Right will have the same other
terms and provisions as the related Option. Upon and to the extent
a tandem Stock Appreciation Right is exercised, the related Option
will terminate.
9.3
Stand-Alone Stock
Appreciation Rights
.
A
Stock Appreciation Right granted separately and not in tandem with
an Option will give the Holder the right to receive an appreciation
distribution in an amount equal to the excess of the Fair Market
Value for the date the Stock Appreciation Right is exercised over
the exercise price per share of the right. A stand-alone Stock
Appreciation Right will have such terms as the Plan Administrator
may determine, except that the term of the right, if not otherwise
established by the Plan Administrator, shall be ten (10) years from
the Grant Date.
9.4
Exercise
of Stock Appreciation Rights
.
Unless
otherwise provided by the Plan Administrator in the instrument that
evidences the Stock Appreciation Right, the provisions of Section
7.6 relating to the termination of a Holder’s employment or
services shall apply equally, to the extent applicable, to the
Holder of a Stock Appreciation Right.
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10.
STOCK AWARDS
10.1
Grant of
Stock Awards
.
The
Plan Administrator is authorized to make Awards of Common Stock or
of rights to receive shares of Common Stock to Participants on such
terms and conditions and subject to such restrictions, if any
(which may be based on continuous service with Data I/O or the
achievement of performance goals related to (i) sales, gross
margin, operating profits or profits, (ii) growth in sales, gross
margin, operating profits or profits, (iii) return ratios related
to sales, gross margin, operating profits or profits, (iv) cash
flow, (v) asset management (including inventory management), or
(vi) total shareholder return, where such goals may be stated in
absolute terms or relative to comparison companies), as the Plan
Administrator shall determine, in its sole discretion, which terms,
conditions and restrictions shall be set forth in the instrument
evidencing the Award. The terms, conditions and restrictions that
the Plan Administrator shall have the power to determine shall
include, without limitation, the manner in which shares subject to
Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture of
Restricted Stock shall occur by reason of termination of the
Holder's services or upon the occurrence of other
events.
10.2
Issuance
of Shares.
Upon
the satisfaction of any terms, conditions and restrictions
prescribed with respect to a Stock Award, or upon the Holder's
release from any terms, conditions and restrictions of a Stock
Award, as determined by the Plan Administrator, Data I/O shall
transfer, as soon as practicable, to the Holder or, in the case of
the Holder's death, to the personal representative of the Holder's
estate or as the appropriate court directs, the appropriate number
of shares of Common Stock covered by the Award.
10.3
Waiver of
Restrictions
.
Notwithstanding
any other provisions of the 2000 Plan, the Plan Administrator may,
in its sole discretion, waive the forfeiture period and any other
terms, conditions or restrictions on any Restricted Stock under
such circumstances and subject to such terms and conditions as the
Plan Administrator shall deem appropriate.
11.
OTHER STOCK-BASED AWARDS
The
Plan Administrator may grant other Awards under the 2000 Plan
pursuant to which shares of Common Stock (which may, but need not,
be shares of Restricted Stock pursuant to Section 10) are or may in
the future be acquired, or Awards denominated in stock units,
including ones valued using measures other than market value. Such
Other Stock-Based Awards may be granted alone or in addition to or
in tandem with any Award of any type granted under the 2000 Plan
and must be consistent with the 2000 Plan’s
purpose.
12.
LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES
To
assist a Holder (excluding a Holder who is an officer or director
of Data I/O) in acquiring shares of Common Stock pursuant to an
Award granted under the 2000 Plan, the Plan Administrator, in its
sole discretion, may authorize, either at the Grant Date or at any
time before the acquisition of Common Stock pursuant to the Award,
(a) the extension of a loan to the Holder by Data I/O, (b) the
payment by the Holder of the purchase price, if any, of the Common
Stock in installments, or (c) the guarantee by Data I/O of a loan
obtained by the grantee from a third party. The terms of any loans,
installment payments or loan guarantees, including the interest
rate and terms of and security for repayment, will be subject to
the Plan Administrator's discretion; provided, however, that
repayment of any Company loan to the Holder shall be secured by
delivery of a full-recourse promissory note for the loan amount
executed by the Holder, together with any other form of security
determined by the Plan Administrator. The maximum credit available
is the purchase price, if any, of the Common Stock acquired, plus
the maximum federal and state income and employment tax liability
that may be incurred in connection with the
acquisition.
13.
ASSIGNABILITY
Except
as otherwise specified or approved by the Plan Administrator at the
time of grant of an Award or any time prior to its exercise, no
Award granted under the 2000 Plan may be assigned, pledged or
transferred by the Holder other than by will or by the laws of
descent and distribution, and during the Holder's lifetime, such
Awards may be exercised only by the Holder. Notwithstanding the
foregoing, and to the extent permitted by Section 422 of the Code,
the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercise ability and may permit a Holder
of such Awards to designate a beneficiary who may exercise the
Award or receive compensation under the Award after the Holder's
death; provided, however, that (i) any Award so assigned or
transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award, (ii) the original
Holder shall remain subject to withholding taxes upon exercise,
(iii) any subsequent transfer of an Award shall be prohibited and
(iv) the events of termination of employment or contractual
relationship set forth in subsection 7.6 shall continue to apply
with respect to the original transferor-Holder.
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14.
ADJUSTMENTS
14.1
Adjustment
of Shares
.
In
the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to
shareholders other than a normal cash dividend, or other change in
Data I/O's corporate or capital structure results in (a) the
outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or
class of securities of Data I/O or of any other corporation or (b)
new, different or additional securities of Data I/O or of any other
corporation being received by the holders of shares of Common Stock
of Data I/O, then the Plan Administrator, in its sole discretion,
shall make such equitable adjustments as it shall deem appropriate
in the circumstances in (i) the maximum number and class of
securities subject to the 2000 Plan as set forth in Section 4.1,
(ii) the maximum number and class of securities that may be made
subject to Awards to any individual Participant as set forth in
Section 4.2, and (iii) the number and class of securities that are
subject to any outstanding Award and the per share price of such
securities, without any change in the aggregate price to be paid
therefor. The determination by the Plan Administrator as to the
terms of any of the foregoing adjustments shall be conclusive and
binding. Repricing of stock option exercise prices shall, in
accordance with NASDAQ rules, require shareholder
approval.
14.2
Dissolution,
Liquidation or Change in Control Transactions
.
(a)
In
the event of the proposed dissolution or liquidation of Data I/O,
Data I/O shall notify each Holder at least fifteen (15) days prior
to such proposed action. To the extent not previously exercised,
all Awards will terminate immediately prior to the consummation of
such proposed action.
(b)
Unless the
applicable agreement representing an Award provides otherwise, or
unless the Plan Administrator determines otherwise in its sole and
absolute discretion in connection with any Change in Control, a
Qualifying Award which is not vested or is not exercisable in full
shall become exercisable or vested in connection with a Change in
Control which becomes effective before the Holder’s service
to Data I/O terminates as follows:
(i)
If
the Qualifying Award remains outstanding following the Change in
Control, is assumed by the surviving entity or its parent, or the
surviving entity or its parent substitutes awards with
substantially the same terms for such Qualifying Award, the vesting
and exercisability of the Qualifying Award shall be accelerated to
the extent of 25% of the Unvested Portion thereof, and the
remaining 75% of the Unvested Portion of such Qualifying Award
shall vest in accordance with the vesting schedule set forth in the
applicable Award agreement.
(ii)
If
the Qualifying Award remains outstanding following the Change in
Control, is assumed by the surviving entity or its parent, or the
surviving entity or its parent substitutes options with
substantially the same terms for such Qualifying Award and if the
Holder thereof is subject to an Involuntary Termination within 180
days following such Change in Control, then all Awards held by such
Holder (or options issued in substitution thereof) shall become
vested or exercisable in full, whether or not the vesting
requirements set forth in the Award agreement have been satisfied,
for a period of 90 days commencing on the effective date of such
Holder’s Involuntary Termination, or if shorter, the
remaining term of the Award.
(iii)
If
a Qualifying Award does not remain outstanding, and either such
Qualifying Award is not assumed by the surviving entity or its
parent, or the surviving entity or its parent does not substitute
awards with substantially the same terms for such Qualifying Award,
such Qualifying Award shall become vested or exercisable in full,
whether or not the vesting requirements set forth in the Award
agreement have been satisfied, for a period prior to the effective
date of such Change in Control of a duration specified by the Plan
Administrator, and thereafter the Award shall
terminate.
(c)
Unless the
applicable agreement representing an Award provides otherwise, or
unless the Plan Administrator determines otherwise in its sole and
absolute discretion in connection with any Change in Control, the
vesting of Qualifying Shares shall be accelerated, and Data
I/O’s repurchase right with respect to such shares shall
lapse, in connection with a Change in Control which becomes
effective before such Holder’s service to Data I/O terminates
as follows:
(i)
If
Qualifying Awards were outstanding at the effective time of the
Change in Control and they are partially accelerated pursuant to
Subsection (b)(i) above or if there were no Qualifying Awards
outstanding at the effective time of the Change in Control, the
vesting of all Qualifying Shares shall be accelerated to the extent
of 25% of the Unvested Portion thereof, and the remaining 75% of
the Unvested Portion of such Qualifying Shares shall vest in
accordance with the vesting schedule set forth in the applicable
Award agreement.
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(ii)
If
the preceding clause (i) applied and if a Holder of Qualifying
Shares is subject to an Involuntary Termination within 180 days
following the same Change in Control, then all Qualifying Shares
held by such Holder (or shares issued in substitution thereof)
shall become vested in full, whether or not the vesting
requirements set forth in the applicable Award agreement have been
satisfied.
(iii)
If
Qualifying Awards were outstanding at the effective time of the
Change in Control and they are accelerated in full pursuant to
Subsection (b)(iii) above or otherwise, the vesting of all
Qualifying Shares shall be accelerated in full, and Data
I/O’s repurchase right with respect to all such shares shall
lapse in full, whether or not the vesting requirements set forth in
the applicable Award agreement have been
satisfied.
14.3
Further
Adjustment of Awards
.
Subject
to the preceding Section 14.2, the Plan Administrator shall have
the discretion, exercisable at any time before a sale, merger,
consolidation, reorganization, dissolution, liquidation or Change
in Control of Data I/O, as defined by the Plan Administrator, to
take such further action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to
Awards. Such authorized action may include (but shall not be
limited to) establishing, amending or waiving the type, terms,
conditions or duration of, or restrictions on, Awards so as to
provide for earlier, later, extended or additional time for
exercise, payment or settlement or lifting restrictions, differing
methods for calculating payments or settlements, alternate forms
and amounts of payments and settlements and other modifications,
and the Plan Administrator may take such actions with respect to
all Participants, to certain categories of Participants or only to
individual Participants. The Plan Administrator may take such
actions before or after granting Awards to which the action relates
and before or after any public announcement with respect to such
sale, merger, consolidation, reorganization, dissolution,
liquidation or Change in Control that is the reason for such
action. Without limiting the generality of the foregoing, if Data
I/O is a party to a merger or consolidation, outstanding Awards
shall be subject to the agreement of merger or consolidation. Such
agreement, without the Holder’s consent, may provide
for:
(a)
the continuation of such outstanding Award by Data I/O
(if Data I/O is the surviving corporation);
(b)
the assumption of the 2000 Plan and some or all
outstanding Awards by the surviving corporation or its
parent;
(c)
the substitution by the surviving corporation or its
parent of Awards with substantially the same terms for such
outstanding Awards; or
(d)
the cancellation of such outstanding Awards with or without payment
of any consideration.
14.4
Limitations
.
The
grant of Awards will in no way affect Data I/O's right to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
14.5
Fractional
Shares
.
In
the event of any adjustment in the number of shares covered by any
Award, any fractional shares resulting from such adjustment shall
be disregarded and each such Award shall cover only the number of
full shares resulting from such adjustment.
15.
WITHHOLDING
Data
I/O may require the Holder to pay to Data I/O in cash the amount of
any withholding taxes that Data I/O is required to withhold with
respect to the grant, exercise, payment or settlement of any Award.
Data I/O shall have the right to withhold from any Award or any
shares of Common Stock issuable pursuant to an Award or from any
cash amounts otherwise due or to become due from Data I/O to the
Participant an amount equal to such taxes. Data I/O may also deduct
from any Award any other amounts due from the Participant to Data
I/O or a Subsidiary.
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16.
AMENDMENT AND TERMINATION OF 2000 PLAN
16.1
Amendment
of 2000 Plan
.
The
2000 Plan may be amended by the Board in such respects as it shall
deem advisable including, without limitation, such modifications or
amendments as are necessary to maintain compliance with applicable
statutes, rules or regulations; however, to the extent required for
compliance with Section 422 of the Code or any applicable law or
regulation, shareholder approval will be required for any amendment
that will increase the aggregate number of shares as to which
Incentive Stock Options may be granted or change the class of
persons eligible to participate. Amendments made to the 2000 Plan
which would constitute “modifications” to Incentive
Stock Options outstanding on the date of such Amendments shall not
be applicable to such outstanding Incentive Stock Options but shall
have prospective effect only. The Board may condition the
effectiveness of any amendment on the receipt of shareholder
approval at such time and in such manner as the Board may consider
necessary for Data I/O to comply with or to avail Data I/O, the
Holders or both of the benefits of any securities, tax, market
listing or other administrative or regulatory requirement which the
Board determines to be desirable. Whenever shareholder approval is
sought, and unless required otherwise by applicable law or exchange
requirements, the proposed action shall require the affirmative
vote of holders of a majority of the shares present, entitled to
vote and voting on the matter without including abstentions or
broker non-votes in the denominator.
16.2
Termination Of 2000
Plan
.
Data
I/O's shareholders or the Board may suspend or terminate the 2000
Plan at any time. The 2000 Plan will have no fixed expiration date;
provided, however, that no Incentive Stock Options may be granted
more than ten (10) years after the earlier of the 2000 Plan's
adoption by the Board or approval by the shareholders.
17.
GENERAL
17.1
Award
Agreements
.
Awards
granted under the 2000 Plan shall be evidenced by a written
agreement which shall contain such terms, conditions, limitations
and restrictions as the Plan Administrator shall deem advisable and
which are not inconsistent with the 2000 Plan.
17.2
Continued
Employment or Services; Rights In Awards
.
None
of the 2000 Plan, participation in the 2000 Plan as a Participant
or any action of the Plan Administrator taken under the 2000 Plan
shall be construed as giving any Participant or employee of Data
I/O any right to be retained in the employ of Data I/O or limit
Data I/O's right to terminate the employment or services of the
Participant.
17.3
Registration;
Certificates For Shares
.
Data
I/O shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities
Act, or to register or qualify under state securities laws, any
shares of Common Stock, security or interest in a security paid or
issued under, or created by, the 2000 Plan, or to continue in
effect any such registrations or qualifications if made. Data I/O
may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as
counsel for Data I/O deems necessary or desirable for compliance by
Data I/O with federal and state securities laws.
Inability
of Data I/O to obtain, from any regulatory body having
jurisdiction, the authority deemed by
Data
I/O's counsel to be necessary for the lawful issuance and sale of
any shares hereunder or the unavailability of an exemption from
registration for the issuance and sale of any shares hereunder
shall relieve Data I/O of any liability in respect of the
non-issuance or sale of such shares as to which such requisite
authority shall not have been obtained.
17.4
No Rights
As A Shareholder
.
No
Option, Stock Appreciation Right or Other Stock-Based Award shall
entitle the Holder to any cash dividend, voting or other right of a
shareholder unless and until the date of issuance under the 2000
Plan of the shares that are the subject of such Award, free of all
applicable restrictions.
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17.5
Compliance With Laws
And Regulations
.
In
interpreting and applying the provisions of the 2000 Plan, any
Option granted as an Incentive Stock Option pursuant to the 2000
Plan shall, to the extent permitted by law, be construed as an
“incentive stock option” within the meaning of Section
422 of the Code.
17.6
No Trust
Or Fund
.
The
2000 Plan is intended to constitute an “unfunded” plan.
Nothing contained herein shall require Data I/O to segregate any
monies or other property, or shares of Common Stock, or to create
any trusts, or to make any special deposits for any immediate or
deferred amounts payable to any Participant, and no Participant
shall have any rights that are greater than those of a general
unsecured creditor of Data I/O.
17.7
Severability
.
If
any provision of the 2000 Plan or any Award is determined to be
invalid, illegal or unenforceable in any jurisdiction, or as to any
person, or would disqualify the 2000 Plan or any Award under any
law deemed applicable by the Plan Administrator, such provision
shall be construed or deemed amended to conform to applicable laws,
or, if it cannot be so construed or deemed amended without, in the
Plan Administrator’s determination, materially altering the
intent of the 2000 Plan or the Award, such provision shall be
stricken as to such jurisdiction, person or Award, and the
remainder of the 2000 Plan and any such Award shall remain in full
force and effect.
17.8
Restrictions.
(a)
Excise tax gross-ups are not allowed.
(b)
Awards are
not transferable to 3
rd
party financial
institutions.
18.
EFFECTIVE DATE
The
2000 Plan's effective date is the date on which it is adopted by
the Board, so long as it is approved by Data I/O's shareholders at
any time within twelve (12) months of such adoption.
The
original 2000 Plan was adopted by the Board on February 28, 2000
and approved by Data I/O's shareholders in May 2000. The 2000 Plan
was amended and approved by the Board and Data I/O's shareholders
in: 2002 to add an additional 200,000 shares; 2004, to add an
additional 300,000 shares; 2006, to add an additional 300,000
shares; 2009, to add an additional 300,000 shares; 2011, to add an
additional 300,000 shares; 2012, to add an additional 300,000
shares; 2017, to add an additional 250,000 shares and 2018, to add
an additional 300,000 shares of Common Stock to be reserved for
issuance under the 2000 Plan On February 24, 2021, the Board
amended and restated the 2000 Plan to add an additional 700,000
shares of Common Stock to be reserved for issuance under the 2000
Plan.
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TABLE OF CONTENTS