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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934 (Amendment No.)

 

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-12

 

Quantum Corporation

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check all boxes that apply):

No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

Proxy Statement

2024

 

 

A Message from our Chairman and CEO

 

Dear Quantum Shareholders,

 

I sincerely believe in being transparent, so I want to acknowledge that our fiscal year 2024 was not one that any of us expected. We didn’t plan to spend much of the year being off file with our financial statements, and thus unable to share the details and positive impacts of our concentrated work to bolster our balance sheet, improve our operating results, increase our execution efficiencies, and focus on our mission to deliver unique solutions for AI workflows and unstructured data across our customers’ entire data lifecycle.

 

Now that we have reported on our financial performance, I am truly excited to speak with you about Quantum’s deep capabilities to succeed in the AI era. Our end-to-end software and hardware platforms deploy AI solutions to tag, catalog, and index your data, making it easy to find, recall, and reuse. Thousands of customers rely on our solutions to leverage their unique data to fuel AI, inform decisions, innovate new products, and improve people’s lives.

 

Our award-winning Quantum MyriadTM all-flash file and object storage platform and ActiveScaleTM multi-tiered, extremely durable software and hardware solutions are well positioned to leverage vastly multiplying AI-driven data workflows and analysis. Our ScalarTM tape libraries continue to operate as backbone infrastructure for the world’s largest hyperscalers and public cloud providers. Our customers don’t just store data with our products, they entertain the world, build homes and communities, secure borders, and save lives. I couldn’t be prouder of what we have helped them achieve, and am awed by the possibilities of how we can help solve our customers’ toughest challenges as we move further into fiscal year 2025, and beyond.

 

I hope you can feel my enthusiasm for what lies ahead, and join me in it. I look forward to speaking with you in more detail soon.

 

 

Jamie

     
     
     

James J. Lerner

President and Chief Executive Officer
Chairman of the Board

 
 

© 2024 Quantum Corporation | | 3

 

 

Notice of Annual Meeting of Shareholders

 

       
       
June 20, 2024 August 15, 2024 8:30a.m. Pacific Time http://www.viewproxy.com/QMCO/2024
Record Date Annual Meeting Date Annual Meeting Time Virtual Meeting
      (you must preregister in order to attend)

 

Quantum Corporation (Quantum or the Company) invites you to attend our 2024 annual meeting of shareholders (Annual Meeting) on Thursday, August 15, 2024, beginning promptly at 8:30a.m. Pacific Time. At the meeting, we will consider and vote on the following proposals:

 

         
Elect Directors Approve
Reverse Stock Split
Amend
the 2023 Long-Term
Incentive Plan
Non-Binding Advisory
Vote
on Executive
Compensation
Ratify
Grant Thornton LLP as
Independent Auditors
Other Matters
Properly Raised

 

Only shareholders of record at the close of business on June 20, 2024 (the Record Date), or their valid proxy holders, may vote at the meeting. Our Board of Directors (Board) recommends you vote “FOR” each of the nominees in Proposal 1, and “FOR” Proposals 2, 3, 4, and 5.

 

 

© 2024 Quantum Corporation | | 4

 

 

Important Notice Regarding the Availability of Proxy Materials

 

Our 2024 proxy statement, including more complete descriptions of proposals and Board candidates, is set forth on the following pages. This information is also available at http://www.viewproxy.com/QMCO/2024.

 

In order to increase efficiency and reduce the environmental impact of the proxy process, shareholders will not automatically receive paper copies of our proxy statement and annual report. We will instead send a Notice of Internet Availability (Notice) with instructions for accessing the proxy materials and voting online. The notice will also provide information about how shareholders may obtain paper copies of proxy materials if hard copies are preferred. Our Notice is first being mailed on or about July 2, 2024 to all shareholders entitled to vote at the Annual Meeting.

 

Quantum knows of no other matters to be submitted at the Annual Meeting. As Corporate Secretary, I must receive any shareholder proposals intended for consideration at the Annual Meeting within the timeframes, and including the required information, specified in our Bylaws and required by the rules of the Securities and Exchange Commission (SEC). If any other matters properly come before the Annual Meeting, the persons named in the form of proxy will vote the shares they represent as the Board may recommend.

 

By Order of the Board of Directors,

 

 

Brian E. Cabrera 

Senior Vice President, Chief Administrative Officer, Chief Legal and Compliance Officer, and Corporate Secretary
July 2, 2024

 

 

© 2024 Quantum Corporation | | 5

 

 

Table of Contents

 

BOARD OF DIRECTORS AND COMMITTEES

Director Biographies 8
Board Meetings and Independence 18
Board Committees and Leadership Structure 19
Director Candidate Evaluation 23
   

CORPORATE GOVERNANCE

 
Ethics and Compliance 26
Environmental, Social, and Governance Oversight 27
Board Role in Risk Oversight and Board Evaluation 28
Stock Ownership Guidelines 29
Non-Employee Director Compensation 30
   

PROPOSALS

 
Proposal 1: Election of Directors 34
Proposal 2: Approval of Reverse Stock Split 35
Proposal 3: Amendment to the 2023 Long-Term Incentive Plan 45
Proposal 4: Non-Binding Advisory Vote on Executive Compensation 56
Proposal 5: Ratification of Appointment of Independent Registered Public Accounting Firm 57
Other Proposals 59
     

COMPENSATION DISCUSSION AND ANALYSIS

 
Fiscal 2024 Executive Compensation Highlights 61
Executive Compensation Philosophy and Competitive Positioning 62
Compensation Elements 64
Perquisites and Other Benefits 70
Executive Compensation Process and Decision Making 72
Compensation Governance Best Practices 73
Change of Control Severance Policy and Employment and Severance Agreements 76
Tax and Accounting Considerations and Risks Related to Compensation Policies and Practices 77
   

FISCAL 2024 COMPENSATION TABLES

 
Fiscal 2024 Summary Compensation Table 79
Fiscal 2024 Grants of Plan-Based Awards 80
Outstanding Equity Awards at Fiscal 2024 Year End 81
Fiscal 2023 Options Exercised and Stock Vested 84
Potential Payments upon Termination or Change of Control for Fiscal 2024 85
Equity Compensation Plan Information 87
CEO Pay Ratio and Security Ownership of Certain Beneficial Owners and Management 88
Pay Versus Performance 91
     

BOARD COMMITTEE REPORTS AND RELATED INFORMATION

 
Compensation Committee Report 96
Report of the Audit Committee of the Board of Directors 97
Independent Registered Public Accounting Firm 98
Related Party Transactions 99
   

INFORMATION CONCERNING SOLICITATION, VOTING, AND COMMUNICATION

 
General Information, Notice and Access, Record Date and Outstanding Shares, and Voting Procedures 102
Householding, Solicitation, and Communicating with the Company 105
Shareholder Proposals for Our 2025 Annual Meeting 106

 

EXHIBITS

A: Certificate of Amendment to the Amended and Restated Certificate of Incorporation 108
B: 2023 Long-Term Incentive Plan 110
     
PROXY CARD 119
 

© 2024 Quantum Corporation | | 6

 

 

 

 

 

© 2024 Quantum Corporation | | 7

 

 

Director Biographies

 

               
               
James J. Lerner
President and Chief Executive Officer Chairman of the Board
Marc E. Rothman
Chair,
Audit Committee

 INDEPENDENT
Yue Zhou (Emily) White
Board Member
INDEPENDENT
Christopher D.
Neumeyer
Chair,
Corporate Governance
and Nominating Committee

INDEPENDENT
Donald J. Jaworski
Chair,
Leadership and
Compensation Committee

INDEPENDENT
Hugues Meyrath
Chair,
Technology Advisory
Committee

INDEPENDENT
Todd W. Arden
Board Member
INDEPENDENT
John T. Tracy
Board Member
INDEPENDENT

 

The key roles for our Board include, but are not limited to:

 

Selecting and evaluating the Company’s Chief Executive Officer (CEO).

 

Reviewing and approving the CEO’s objectives and compensation.

 

Overseeing CEO succession planning.

 

Advising the CEO and management on the Company’s fundamental strategies and approving the annual operating plan.

 

Approving acquisitions, divestitures, important organizational changes, and other significant corporate actions.

 

Mr. Lerner currently presides as the Chairman of the Board and Mr. Rothman serves as Lead Independent Director.

 

For the April 1 – September 12, 2023 portion of the fiscal year ended March 31, 2024 (Fiscal 2024), Ms. Rebecca J. Jacoby served on the Board as the Chair of our Leadership and Compensation Committee. Ms. Jacoby did not stand for re-election at our 2023 shareholder meeting.

 

Each of our directors, excluding Marc E. Rothman, have been nominated for election at the Annual Meeting. Mr. Rothman does not have any disagreements with the Board or Quantum management team on any matter relating to the Company’s operations, policies, or practices. The Board expects to appoint a new Lead Independent Director and Audit Committee Chair following the Annual Meeting.

 

There are no familial relationships between any directors or executive officers of the Company.

 

 

© 2024 Quantum Corporation | | 8

 

 

 

 

 

 

 

 

Mr. Lerner has served as our President and Chief Executive Officer since July 2018. He was appointed to the Board at that time and named Chairman in August 2018.

 

Some of Quantum’s key accomplishments during Mr. Lerner’s tenure include:

 

Furthering its transition from one-time hardware sales to a recurring software revenue model;

 

Launching more than 20 new products, including Quantum MyriadTM, an all-flash file and object storage platform, and acquiring additional software and hardware features, products, and business that introduced incremental performance capabilities; and

 

Driving the Company’s opportunities and position in the AI market.

 

Mr. Lerner previously served in senior leadership positions at Pivot3 Inc., a smart infrastructure solutions company. He held the roles of Vice President and Chief Operating Officer from March 2017 to June 2018 and Chief Revenue Officer from November 2016 to March 2017. Prior to Pivot3, from March 2014 to August 2015, he served as President of Cloud Systems and Solutions at Seagate Technology Public Limited Company, a publicly-traded data storage company.

 

Before working at Seagate, Mr. Lerner served in various executive roles at Cisco Systems, Inc., a publicly-traded networking hardware and software manufacturing company, including as Senior Vice President and General Manager of the Cloud & Systems Management Technology Group. Prior to beginning his career as a technology company executive, he was a Senior Consultant at Andersen Consulting, a financial advisory and consulting firm.

 

From 2011 to 2022, Mr. Lerner served on the Board of Trustees (including serving as Chair) of Astia, a global not-for-profit organization built on a community of men and women dedicated to the success of women-led, high-growth ventures.

 

Mr. Lerner earned a Bachelor of Arts in Quantitative Economics and Decision Sciences from the University of California, San Diego.

 

We believe Mr. Lerner’s extensive history in our industry and unstructured data, his deep understanding of our business given his role as our Chief Executive Officer, and executive-level experience at several publicly-traded companies qualifies him to serve on our Board.

 

Mr. Lerner does not sit on any Board committees.

 

© 2024 Quantum Corporation |  | 9
 
 
James J. Lerner
President and Chief Executive Officer
Age: 54
 
 
 
DIRECTOR
NOMINEE
 
Chair
Board of Directors
 
 
 
 
 
 
 

 

 

 

 

 

 

 

 

Ms. White was elected to our Board in September 2021.

 

She has served as Vice President of Enterprise Data and Analytics at NIKE, Inc., a public company that manufactures and sells athletic apparel, since April 2020. Prior to NIKE, from February 2017 to April 2020, Ms. White served as Vice President of Enterprise Data Engineering at Synchrony Financial, a publicly-traded consumer financial services company.

 

Ms. White previously held multiple positions at General Electric entities. From November 2013 to June 2015, she served as Data Science Director and Global Commercial IT Director at General Electric Healthcare, a company that manufactures and distributes medical imaging modalities. From May 2007 to October 2013, she was Global Enterprise Resource Director and Senior Global Business Intelligence Program Manager for General Electric Transportation, a company that manufactures equipment for energy generation industries.

 

Ms. White’s education includes a:

 

Bachelor of Science degree in Accounting and Finance from Shengyang Polytechnic University;

 

Master of Business Administration degree from Huron University;

 

Master of Applied Mathematics degree in Computer Science at the University of Central Oklahoma; and

 

Certificate in Health Economics & Outcomes Research from the University of Washington.

 

We believe Ms. White’s extensive senior management experience, particularly in data science and analytics, brings valuable perspective to our Board and to the oversight of these functions within Quantum.

 

 

 

 

 

 

© 2024 Quantum Corporation |  | 10
 
 
Yue Zhou (Emily) White
Age: 52
 
 
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
Member
Corporate Governance and Nominating Committee
 
 
 
 
 
 
 

 

 

 

 

 

 

 

 

Mr. Neumeyer was elected to our Board in August 2022 and previously served as a non-voting Board observer since 2016.

 

He is an executive vice president and portfolio manager at Pacific Investment Management Company, LLC (PIMCO), a global investment management firm that provides investment solutions to companies, educational institutions, foundations, and endowments across the world. Since joining PIMCO in January 2010, Mr. Neumeyer has held multiple roles and is currently responsible for identifying, originating, and structuring corporate investments across the capital structure in a variety of industries for various PIMCO-managed investment funds.

 

Mr. Neumeyer’s previous experience includes:

 

Various positions at The Blackstone Group, a leading global investment business from April 2004 to May 2009.

 

Work in the investment banking division of Credit Suisse First Boston, a global investment bank, from July 2002 to April 2004.

 

Mr. Neumeyer earned a Bachelor of Science degree in business from Indiana University and is a CFA® charterholder.

 

We believe Mr. Neumeyer is qualified to serve on the Board due to his financial expertise. In addition, we have found that his ability to convey shareholder interests to boards and management teams brings valuable shareholder perspectives to our Board oversight and decision-making processes.

 

 

 

 

 

 

© 2024 Quantum Corporation |  | 11
 
 
Christopher D. Neumeyer
Age: 43
 
 
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
Chair
Corporate Governance and Nominating Committee
 
Member
Leadership and Compensation Committee
 
 
 

 

 

 

 

 

 

 

 

Mr. Jaworski was appointed to our Board in November 2022.

 

Mr. Jaworski is President and Chief Operating Officer of Lacuna Technologies, Inc., a leader in software that helps municipalities to operationalize digital infrastructure and manage transportation, since March 2021. Mr. Jaworski leads execution and is focused on delivering value to Lacuna’s customers. Prior to joining Lacuna, from January 2015 to March 2020, he was CEO of SwiftStack, Inc., an open-source cloud data management company focused on large scale data applications, which was acquired by NVIDIA Corporation, a publicly-traded multinational technology company, in March 2020.

 

Mr. Jaworski previously served as:

 

Senior Vice President and General Manager of the core platform business at NetApp, Inc. from August 2010 through January 2012, where the team focused on the transition to scale-out systems.

 

Senior Vice President Product at Brocade Communications Systems, Inc.

 

General Manager of the Enterprise Security business unit at Nokia Corporation.

 

In addition, Mr. Jaworski’s early career included management positions at Sun Microsystems, Inc. and Amdahl Corporation. He has been an advisor and board member for a number of early-stage companies.

 

Mr. Jaworski received a B.S. in Computer Science from Bowling Green State University and an MBA from Santa Clara University.

 

We believe Mr. Jaworski brings strength to our Board through his broad and deep technology and product development and marketing experience.

 

 

 

 

 

 
© 2024 Quantum Corporation |  | 12
 
 
Donald J. Jaworski
Age: 65
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
Chair
Leadership and Compensation Committee
 
Member
Audit Committee
Technology Advisory Committee
 
 

 

 

 

 

 

 

 

 

Mr. Meyrath was appointed to our Board in November 2022.

 

Mr. Meyrath has developed an extensive background in various leadership roles at global technology companies, most notably in the networking and data storage segments. Most recently, from January 2017 to December 2021, he served as Chief Product Officer of ServiceChannel Holdings Inc., a provider of SaaS-based multi-site solutions, which was acquired by Fortive Corporation, a publicly-traded provider of connected workflow solutions, in 2021.

 

From January 2014 to January 2017, Mr. Meyrath was Vice President at Dell Technologies Capital, a venture capital arm of Dell Technologies that invests in enterprise and cloud infrastructure, where he was responsible for driving venture funding, mergers and acquisitions, and other advisory roles for a diverse set of portfolio companies. He also held the role of Vice President of Product Management and Business Development for Dell EMC’s Backup and Recovery Services, which offers data protection and business continuity products.

 

Mr. Meyrath’s experience also includes executive roles at:

 

Juniper Networks, Inc.

 

Brocade Communications Systems, Inc.

 

Strategic Business Systems, Inc.

 

He was previously a Quantum employee from January 2002 to September 2003.

 

We believe Mr. Meyrath’s extensive work in product portfolio and technology development, and in particular his experience with data storage technologies, provides valuable experience and perspective to our Board.

 

 

 

 

 

 

© 2024 Quantum Corporation |  | 13
 
 
Hugues Meyrath
Age: 54
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
Chair
Technology Advisory Committee
 
Member
Audit Committee
 
 
 

 

 

 

 

 

 

 

 

Todd W. Arden was appointed to our Board in June 2024.

 

Mr. Arden brings a long-term foundation in capital management and private equity business development. Most recently, he held the Senior Managing Director and Co-Chief Credit Officer position at Black Diamond Capital Management LLC, an alternative asset management firm, from January 2016 until March 2020.

 

From October 2012 to November 2014, Mr. Arden served as Chief Investment Officer – Octagon Credit Opportunities at CCMP Capital Advisors, LP, an American private equity investment firm. He was previously a Managing Director at TPG Angelo Gordon (formerly Angelo Gordon & Co. LP), a global alternative investment manager from March 2000 to June 2012. Prior to that, he held roles as:

 

Senior Research Analyst at AIG Global Investment Corporation.

 

Senior Equity Analyst at Troubh Partners LP.

 

Manager in the Financial Consulting Services practice at Arthur Anderson & Co., New York.

 

Mr. Arden received a Bachelor of Arts degree in Economics from Northwestern University and a Masters in Business Administration from Columbia University’s Graduate School of Business. He is a Chartered Financial Analyst.

 

We believe Mr. Arden’s expertise in capital structures and debt management brings important experience to our Board. Mr. Arden does not sit on any Board committees.

 

 

 

 

 

© 2024 Quantum Corporation |  | 14
 
 
Todd W. Arden
Age: 57
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
 
 
 
 
 
 
 
 
 
 

 

 

 

 

 

 

 

 

We appointed John R. Tracy to our Board in June 2024.

 

Mr. Tracy has an extensive background in public company financial planning and operations. Most recently, he served as Executive Vice President and Chief Financial Officer at Verifone Systems, Inc., a payment system company, from February 2019 until April 2024. Prior to that, from November 2017 to November 2019, Mr. Tracy served as Senior Director at Pine Hill Group, an accounting and transaction advisory firm.

 

From July 2015 to October 2016, Mr. Tracy held the position of Senior Vice President of Finance for TiVo Inc. (formerly Rovi), a streaming entertainment content delivery service. Prior to that, he was Vice President of Finance and Chief Financial Officer for TE Connectivity Inc., a publicly-traded electronics connector and sensor manufacturer, from June 2013 to June 2015. He also served as Vice President and Corporate Controller at ConvaTec, a publicly-traded medical products and technology company, from October 2012 to June 2013.

 

Mr. Tracy also held various senior finance roles at Motorola Inc. and its subsidiaries.

 

Mr. Tracy received a Bachelor of Science degree in Accounting from Rider University and a Masters of Science in Taxation from Fairleigh Dickinson University.

 

We believe Mr. Tracy’s financial expertise, including his experience as a public company chief financial officer, makes him a valuable member of our Board.

 

 

 

 

 

© 2024 Quantum Corporation |  | 15
 
 
John R. Tracy
Age: 59
 
INDEPENDENT
DIRECTOR
NOMINEE
 
 
Member
Audit Committee
 
 
 
 
 
 
 

 

 

 

 

 

 

 

 

Marc E. Rothman has served as a member of our Board since May 2017.

 

He has been Senior Vice President and Chief Financial Officer at BMC Software, Inc. (BMC), a company that develops, delivers, and services IT operations management software, since October 2020.

 

Before joining BMC, Mr. Rothman served as Executive Vice President and Chief Financial Officer of Verifone Systems, Inc., a multinational company providing technology for electronic payment transactions from 2013 to July 2020. Prior to Verifone, Mr. Rothman served in various capacities, including as Senior Vice President and Chief Financial Officer at Motorola Mobility, Inc., a consumer electronics and telecommunications company, from 2000 to 2012.

 

From 1995 to 2000, Mr. Rothman served in multiple leadership finance roles at General Instrument Corporation, which developed integrated and interactive broadband access solutions, including as Vice President and Corporate Controller.

 

From 1987 through 1995, he was with Deloitte & Touche LLP, a professional services company.

 

Mr. Rothman graduated with a bachelor’s degree in Business from Stockton University (formerly Richard Stockton College) with Distinction and is a Certified Public Accountant in California (inactive).

 

We believe that Mr. Rothman possesses specific attributes that qualify him to serve as a member of the Board, including his executive leadership experience and deep financial expertise in:

 

Corporate finance, accounting, and treasury;

 

Restructuring, mergers, and acquisitions; and

 

Capital markets.

 

 

 

 

 

© 2024 Quantum Corporation |  | 16
 
 
Marc E. Rothman
Age: 59
 
INDEPENDENT
 
 
Lead Independent Director
 
Chair
Audit Committee
 
Member
Corporate Governance and Nominating Committee
Leadership and Compensation Committee
 

 

 

 

 

Board Diversity Matrix as of July 2, 2024 Total Number of Directors 8 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 7 - - Part II: Demographic Background African American or Black - - - - Alaskan Native or Native American - - - - Asian 1 - - - Hispanic or Latin - - - - Native Hawaiian or Pacific Islander - - - - White - 7 - - Two or More Races or Ethnicities - - - - LGBTQ+ - Did Not Disclose Demographic Background -

 

© 2024 Quantum Corporation | | 17

 

 

Board Meetings and Independence

 

Board Meeting Attendance

 

The Board met a total of 19 times in Fiscal 2024. All Board members during Fiscal 2024 attended at least 75% of the Board and Committee meetings for which they were eligible to attend, which is the expectation outlined in our Corporate Governance Principles. Each of the directors nominated for election at our 2023 annual meeting of shareholders attended that meeting.

 

Director Independence

 

The Board has determined that all current members other than Mr. Lerner are independent directors as defined under the rules of the Nasdaq Stock Market LLC (Nasdaq). In addition to the listing standards and the SEC’s independence requirements, we are subject to additional independence criteria as defined in the April 2019 Stipulation of Settlement we executed upon settlement of the In re Quantum Corp. Derivative Litigation shareholder derivative action.

 

This additional independence criteria requires that independent directors:

 

Have not received, during the current calendar year or any of the three immediately preceding calendar years, direct or indirect remuneration (other than de minimis remuneration less than $5,000) resulting from service as our significant supplier or customer, or as an advisor, consultant, or legal counsel to Quantum or a member of our senior management team; and

 

Are not employed by a private or public company at which any of our executive officers serves as a director.

We also exceed Nasdaq listing standards by requiring approximately 75% of our Board to be comprised of independent directors.

 

Our independent directors meet in executive session, without employee directors, at least as often as each regularly scheduled quarterly Board meeting. The independent directors are also empowered to request reporting from any employee during the executive session, including audit and compliance personnel.

 

Leadership Structure

 

Quantum’s Board is committed to strong, independent Board leadership and oversight of management’s performance. The Board believes it should determine whether the CEO should also serve as Board Chair. The Board determines the Chair assignment, from time to time and in its business judgment after considering relevant factors, including Quantum’s needs and our shareholders’ best interests. Following a thorough evaluation, the Board has determined that Mr. Lerner should continue to serve as both Chairman and CEO. The Board believes this structure promotes aligning strategic development and execution, effectively implementing strategic initiatives, and exercising accountability for the Company’s performance. The Chair focuses on effectively leading and managing the Board. The Board has appointed a Lead Independent Director to help provide robust, independent Board leadership. The roles and responsibilities of the Chair and Lead Independent Director are described in more detail in our Corporate Governance Principles available on the investor relations section of our website at www.investors.quantum.com.

 

© 2024 Quantum Corporation | | 18

 

 

Board Committees and Leadership Structure

  

Board Demographics and Committees

 

Key demographics for our current Board members are: 

 

     
     

 Independent

Committee Chairs

(100%)

Independent

Directors(87.5%)

Female or Ethnically

Diverse

Directors(12.5%)

     
  2.2 55
     

Aggregate Meeting

Attendance (96%) 

Average Tenure 

(Years) 

Average Age 

(Years)

 

© 2024 Quantum Corporation | | 19

 

 

Board Committee Composition Independent Audit Committee Leadership and Compensation Committee Corporate Governance and Nominating Committee Technology Advisory Committee Key Expertise Mr. Lerner Video and unstructured data Mr. Rothman Corporate finance and accounting Ms. White Data analytics and technology infrastructures Mr. Neumeyer Capital structures and financing Mr. Jaworski Technology and product development Mr. Meyrath Technology and product development Mr. Arden Capital structure and debt management Mr. Tracy Corporate finance and accounting

 

© 2024 Quantum Corporation | | 20

 

 

 

 

1Each of our standing committees is governed by a written charter, available on the investor relations section of our website at www.investors.quantum.com.

Copies of the charters may be requested from Quantum’s Corporate Secretary at 224 Airport Parkway, Suite 550, San Jose, California, 95110.

 

Board Committee Responsibilities1 Audit Committee Leadership and Compensation Committee Corporate Governance and Nominating Committee Technology Advisory Committee • Held 9 meetings in Fiscal 2024. • Held 4 meetings in Fiscal 2024. • Held 4 meetings in Fiscal 2024. • Held 3 formal meetings in Fiscal 2024, plus informal working meetings generally held biweekly. • All members are financially literate and Mr. Rothman and Mr. Tracy each qualify as an “audit committee financial expert” per Nasdaq and SEC requirements. • Reviews and approves compensation philosophy, strategy, and practices. • Identifies and recommends director nominees and considers shareholder nominees to the Board. • Advises on the Company’s technology development plans. • Prepares Audit Committee report. • Reviews and approves executive compensation for all executive officers other than the CEO and recommends CEO and non-employee director compensation decisions to the Board. • Develops corporate governance principles and assesses Board effectiveness. • Assesses quality and development of product direction, investment, and roadmaps. • Appoints and approves independent registered public accounting firm, and meets with the firm without management present. • Reviews strategy and practices relating to the attraction, retention, development, performance, and succession planning of Quantum’s leadership team. • Advises Board on corporate governance matters, including Board and committee composition, roles, and procedures. • Reviews capabilities of Quantum’s research and development resources. • Assists Board with oversight of: • Develops guidelines for establishing and adjusting compensation of all non-executive vice presidents. • Recommends a Chair of the Board and Lead Independent Director as well as CEO succession planning. • Financial statement integrity and compliance with legal and regulatory requirements. • Assists Board with oversight of human capital management strategy. • Reviews potential conflicts of interest. • Internal accounting, financial reporting, and internal audit processes and controls adequacy. • Oversees Chief Compliance Officer and Quantum’s code of conduct. • Policies and processes for risk assessment and management, including cyber security risks. • Provides direction and guidance on environmental, social, and governance strategy. 

 

© 2024 Quantum Corporation | | 21

 

 

     
     
     
 

CHAIR RESPONSIBILITIES

 

•     Planning and organizing Board activities, including meeting agendas, frequency, content, and conduct.

•     Ensuring, along with the Corporate Governance and Nominating Committee, that the Board’s work processes effectively enable the Board to exercise oversight and due diligence in fulfilling its mandate, including for the oversight of Company strategy and risk.

•     Promoting effective communication among directors between Board meetings.

•     Working with committee chairs to ensure committees perform effectively and apprise the Board of actions taken. 

•     Ensuring that the Board’s action items are tracked and appropriately resolved.

•     Encouraging an environment that facilitates all directors expressing their views on key Board matters.

 

 

LEAD INDEPENDENT DIRECTOR RESPONSIBILITIES

 

•     Presiding at any Board meeting the Chair does not attend, including executive sessions of only independent directors.

•     Calling meetings of non-management directors and providing appropriate executive session feedback to the CEO and management.

•     Serving as a liaison and facilitator between the independent directors and CEO.

•     Advising the Chair regarding Board meeting agendas, frequency, content, and conduct.

•     Collaborating with Board committees, including the Corporate Governance and Nominating Committee, on appointing members and chairs.

 
     
     
     

 

 

 

© 2024 Quantum Corporation | | 22

 

 

Director Candidate Evaluation

 

The Corporate Governance and Nominating Committee is responsible for identifying, evaluating, recruiting, and recommending qualified director candidates to our Board. The Board nominates directors for election at each annual shareholder meeting and appoints new Board members at other times determined to be appropriate. Directors are not permitted to serve on the Board for more than ten years.

 

General and Specific Considerations

 

The Board’s evaluation process will generally consider a candidate’s:

 

Independence.

 

High integrity and character.

 

Qualifications that will increase Board effectiveness.

 

Diverse personal characteristics, thinking, and backgrounds.

 

Other requirements as may be set forth by applicable rules, such as financial expertise for audit committee members.

 

The Board will also more specifically weigh:

 

Its current size, composition, and performance and oversight requirements.

 

Previous experience serving on public company boards or senior management teams.

 

Independence determinations under all applicable rules, including Nasdaq and SEC.
Whether the candidate possesses knowledge, experience, skills, and diversity to enhance the Board’s ability to manage and direct the Company’s affairs and business.

 

Key personal characteristics including strategic thinking, objectivity, independent judgment, integrity, intellect, and the courage to speak out and actively participate in meetings.

 

Knowledge of and familiarity with information technology.

 

The absence of conflicts of interest with Quantum’s business.

 

A willingness to devote significant time in effectively carrying out duties and responsibilities, including committing to attend at least six Board meetings per year, sit on at least one committee, and serve on the Board for an extended period of time.

 

Other factors the Corporate Governance and Nominating Committee may consider appropriate.

 

Identifying and Evaluating Director Nominees

 

The Corporate Governance and Nominating Committee uses the following procedures to identify and evaluate potential director nominees:

 

Regularly reviewing the Board’s size, composition, and collective performance, in addition to individual member performance and qualifications.

 

Determining whether to retain or terminate any third-party search firm used to identify director candidates, including approving the fees paid.

 

© 2024 Quantum Corporation | | 23

 

 

Reviewing qualifications of any properly identified, recommended, or nominated candidate. The committee’s review, in its discretion, may consider only the information provided to it or include discussions with third parties familiar with the candidate, candidate interviews, or other actions the committee deems proper.

 

Evaluating each candidate according to the General and Specific Considerations previously outlined.

 

Recommending a slate of director nominees to be approved by the Board.

 

Endeavoring to promptly notify director candidates of its decision regarding whether to nominate a candidate for Board election.

 

The Board has not historically maintained a formal diversity policy for its members. However, in evaluating the Board’s composition, the Board and Corporate Governance and Nominating Committee consider diversity of:

 

         
         
Knowledge Culture Race Gender Age

  

The Board believes that directors with a diverse range of perspectives, skills, and experiences enable it to more effectively oversee all aspects of Quantum’s business. The Board considers underrepresented populations when seeking candidates for future nomination to the Board, and seeks to include women and members of underrepresented groups in each nominee candidate pool.

Shareholder Recommendations

 

The Corporate Governance and Nominating Committee’s policy is to consider shareholder recommendations for Board candidates. A shareholder must submit a written recommendation for a Board candidate to the attention of Quantum Corporation, Attn: Corporate Secretary, 224 Airport Parkway, Suite 550, San Jose, CA 95110.

 

Submissions must include:

 

Candidate name and contact information.

 

Detailed biographical data and relevant qualifications, including references.

 

Descriptions of any relationships between the candidate and Quantum.

 

The shareholder’s statement in support of the candidate.

 

The candidate’s written indication of his or her willingness to serve if elected.

 

Other nominee information that our Bylaws and applicable SEC regulations require to be disclosed.

 

Shareholder Nominees

 

Shareholders may also nominate director candidates for election to the Board. A shareholder that desires to nominate a candidate directly for election must meet the deadlines and other requirements set forth in our Bylaws1 and SEC rules and regulations (see Shareholder Proposals for Our 2025 Annual Meeting for more information).

 

The Corporate Governance and Nominating Committee may require any prospective nominee to furnish other information it reasonably desires to determine the nominee’s independence or eligibility to serve as a director.

 

1Our Bylaws are available on the investor relations section of our website at www.investors.quantum.com and as an exhibit to our annual report on Form 10-K.

 

 

© 2024 Quantum Corporation | | 24

 

 

 

© 2024 Quantum Corporation | | 25

 

 

Ethics and Compliance

 

We conduct business ethically, honestly, and in compliance with all applicable laws and regulations. Our path through complex AI and unstructured data environments presents new opportunities and as well as new challenges. Our code of conduct is meant to help us successfully navigate this new landscape by enabling effective business processes, relationships, and solutions.

 

The code applies to anyone conducting business on behalf of Quantum or its subsidiaries, including all directors, officers, and employees, and defines expectations in each of the following key areas:

 

 

The Board most recently revised the code in February 2024, and it was distributed to all employees in both English and local languages the following month.

 

We maintain an internal ethics committee comprised of leaders from our finance, internal audit, human resources, and legal teams. The committee supports the Chief Administrative Officer’s oversight of our compliance program and provides appropriate assistance in reviewing, investigating, and responding to reported concerns. We have also implemented a whistleblower policy and encourage reporting of ethics and compliance concerns, including by providing a confidential and anonymous third-party reporting hotline.

 

Concerns that may relate to material accounting or auditing matters are communicated promptly to our Audit Committee.

 

Waivers of the code’s applicability to a Quantum director or executive officer may only be granted by our Board or its committees and must be timely disclosed as required by applicable law.

 

The code of conduct is available on the investor relations section of our website at www.investors.quantum.com. Copies of the code may be requested from Quantum’s Corporate Secretary at 224 Airport Parkway, Suite 550, San Jose, California, 95110.

 

© 2024 Quantum Corporation | | 26

 

 

Environmental, Social, and Governance Oversight

 

Our environmental, social, and governance (ESG) sustainability philosophy is deeply ingrained in our core values. We view environmental stewardship as an essential component of our long-term business strategy but recognize that the path to environmental excellence is continuous and evolving. We are committed to adapting, innovating, and leading in this vital endeavor, fully cognizant that our actions today will shape the world of tomorrow.

 

To that end, in Fiscal 2024 we invested significant time and resources in improving our carbon footprint data, including by calculating product-specific footprints and estimating employee commute impacts. Our Carbon Disclosure Project score continued to keep pace with worldwide and industry-specific benchmarks.

 

The Corporate Governance and Nominating Committee oversees our ESG initiatives and policies, including communicating with stakeholders. Integral in that is our human capital management strategy, which includes:

 

           
           
Recruiting Retention Career
Development
Performance
Management
Rewards
and
Recognition
Succession
Planning

  

We also conducted a culture survey in Fiscal 2024, finding that respondents generally have strong relationships with their managers, which they value and find to be one of the best aspects of working at Quantum.

 

 

1Calculations assume 1 unit in service for 12 hours per day over a 5-year life span, in a controlled environment. Actual user results may vary.

 

© 2024 Quantum Corporation | | 27

 

 

Board Role in Risk Oversight and Board Evaluation

 

Quantum faces a wide spectrum of financial, strategic, operational, and regulatory risks. The Audit Committee is primarily responsible for overseeing the Company’s management of those risks and providing appropriate updates to the Board. The Audit Committee guides our risk identification, assessment, and management policies and procedures, including discussions of our major risk exposures, associated risk mitigation activities, and risk management practices implemented throughout the Company. It also actively monitors the Company’s product and information technology cybersecurity risks and mitigation procedures.

 

The Board’s other committees also oversee risks associated with their respective areas of responsibility, including:

 

The Leadership and Compensation Committee’s review of compensation practices risks.

 

The Corporate Governance and Nominating Committee’s guidance regarding compliance risks.

 

The committees update the Board regarding their risk oversight practices through regular reporting and discussion.

 

While the Board is responsible for risk oversight, risk management accountability lies with our management team. Quantum’s enterprise risk management practices and formal risk assessments are led by our internal audit team, which periodically reports status to the Audit Committee or Board, where appropriate. Our functional teams apply other appropriate risk assessment and mitigation techniques, with the relevant management representatives updating the Board as needed.

Our Board, committees, and individual directors perform annual self-evaluations in accordance with our corporate governance principles. The evaluations ensure our Board is strategic, productive, and effective, and contributes to long-term shareholder value. As part of the evaluation process, the Board, Mr. Lerner, and Mr. Cabrera hold ongoing discussions regarding Board and committee composition, effectiveness, and decision-making, as well as individual director performance.

 

© 2024 Quantum Corporation | | 28

 

 

Stock Ownership Guidelines

 

We annually review our stock ownership guidelines for our CEO, directors, and other officers. We compare our guidelines with those of peer group companies and consider ISS ownership governance best practices. Our Board believes that best aligning with shareholder interests requires our directors to hold common stock amounts on the larger end of our peer group and the ISS guidelines.

 

In Fiscal 2024, our Board determined it would continue the following stock ownership guidelines, which were last increased in 2020:

 

     
     
Directors CEO CFO
5x Annual Retainer 3x Annual Base Salary 2x Annual Base Salary

 

Our policy does not include vested and unvested outstanding stock options, unvested restricted stock and restricted stock units, and unearned performance stock and performance stock units in share ownership. Eligible stock ownership includes the following elements:

 

Shares purchased on the open market or through the 2022 rights offering.

 

Shares acquired by exercising stock options or under our Employee Stock Purchase Plan.

 

Vested restricted stock and restricted stock units.

 

Stock beneficially owned in a trust.

 

Stock held by a spouse or minor children.

Compliance with our stock ownership guidelines is due on the later of five years from:

 

The date an individual first became eligible for our stock ownership guidelines; or

 

February 4, 2020.

 

If the dollar value of required holdings increases due to base salary or director cash compensation increases, stock ownership must also be increased within five years. We measure compliance with these guidelines at the end of each fiscal year. At the end of Fiscal 2024, all included positions were on track to meet their stock ownership guidelines.

 

© 2024 Quantum Corporation | | 29

 

 

Non-Employee Director Compensation

 

The Board and Leadership and Compensation Committee (Committee) determine the amount and form of non-employee director compensation. Management provides information and recommendations regarding competitive market practices, target compensation levels, and compensation program design. The Committee also retains an independent compensation consultant to provide analysis and advice regarding:

 

Specific compensation recommendations.

 

The market competitiveness of our compensation program, including current compensation trends and developments.

 

Benchmarking against peer group and technology industry practices.

 

While the Committee carefully considers the information and recommendations it receives, the Board maintains ultimate authority for decisions relating to non-employee director compensation. Mr. Lerner is the only Quantum employee on the Board and receives no additional compensation for his Board service.

 

The Committee generally conducts a comprehensive periodic review of the Company’s compensation program, most recently in Fiscal 2023. Quantum engaged Compensia as its independent compensation consultant to complete an independent review, which compared the Company’s compensation program, design, and practices to those of our peer group. Our current non-employee director compensation program elements are listed in the chart to the right.

 

In Fiscal 2024, given the Company’s listing price and potential dilution impacts, the Board voted to delay its refresh equity grant. As a result, no Board members other than Mr. Lerner received equity grants in Fiscal 2024. Board members did not receive any incremental cash compensation to offset the delayed equity grant.

 

 

Compensation Element Annual Value Frequency Director Retainer $50,000 25% per quarter Lead Independent Director Retainer $25,000 25% per quarter Committee Chair Fees • Audit Committee • Leadership & Compensation Committee • Corporate Governance & Nominating Committee • Technology Advisory Committee • $25,000 • $17,500 • $15,000 • $15,000 25% per quarter Committee Member Fees • Audit Committee • Leadership & Compensation Committee • Corporate Governance & Nominating Committee • Technology Advisory Committee • $12,500 • $10,000 • $7,500 • $7,500 25% per quarter Non-Employee Board Chair Retainer $40,000 25% per quarter New Director Equity Grant $125,000 Pro-rated with 100% vesting at next annual meeting Director Refresh Equity Grant $125,000 100% vesting at earlier of next annual meeting or one year

 

© 2024 Quantum Corporation | | 30

 

 

 

 

 

 

 

We have executed change of control agreements with each of our non-employee directors other than Mr. Arden. The agreements provide for automatic accelerated vesting of equity-based awards if the director’s service with the Company ends within 12 months following a change of control (other than for termination due to death or disability).

 

We allow our non-employee directors to defer some or all of their cash fees, which defers federal and state income taxes. Plan participants direct the deemed investment of their deferred accounts among a preselected group of investment funds which excludes Quantum’s common stock. The deemed investment accounts mirror the investment options available under Quantum’s 401(k) Savings Plan. Plan participants’ deferred accounts are credited with interest based on their selected deemed investments. During Fiscal 2024, no non-employee directors elected to participate in the deferred compensation plan.

 

Compensation Committee Interlocks and Insider Participation

 

Mr. Jaworski, Mr. Neumeyer, and Mr. Rothman currently comprise the Leadership and Compensation Committee of our Board of Directors. None is currently, nor has been at any time since Quantum was formed, an officer or employee of the Company or any of its subsidiaries. Likewise, no Committee member has entered into any transactions in which they will have a direct or indirect material interest adverse to the Company. No interlocking relationships exist between any Board or Committee members and any other company’s board or compensation committee members, nor have they previously existed.

 

Fiscal 2024 Non-Employee Director Compensation Tables The following tables detail the Fiscal 2024 annual cash retainers, applicable committee service fees, and applicable Chair retainers paid to our directors. We do not pay meeting fees to our Board members. Name Fees Earned or Paid in Cash1 Stock Awards2 All Other Compensation Total Jacoby, Rebecca J.3 $36,223 - - $36,223 Jaworski, Donald J. $81,840 - - $81,840 Meyrath, Hugues $77,500 - - $77,500 Neumeyer, Christopher D.4 - - - - Rothman, Marc E. $112,972 - - $112,972 White, Yue Zhou (Emily) $58,632 - - $58,632 1Amounts reflect compensation earned by each director during Fiscal 2024 and include the amounts in the next table. 2In Fiscal 2024, given the Company’s listing price, the Board voted to delay its refresh equity grant. As a result, no Board members other than Mr. Lerner received equity grants in Fiscal 2024. 3Ms. Jacoby did not stand for re-election at Quantum’s 2023 annual meeting of shareholders and her term ended immediately prior to the start of the 2023 annual meeting on September 12, 2023. 4Mr. Neumeyer does not receive cash or equity compensation from Quantum for his Board service. 

 

 

© 2024 Quantum Corporation |  |  31

 

 

 

 

Name Board Retainer Lead Independent Director Retainer Committee Membership Retainer Committee Chair Retainer Total Fees Paid in Cash Jacoby, Rebecca J. $22,639 - $5,660 $7,924 $36,223 Jaworski, Donald J. $50,000 - $22,264 $9,576 $81,840 Meyrath, Hugues $50,000 - $12,500 $15,000 $77,500 Neumeyer, Christopher D. - - - - - Rothman, Marc E. $50,000 $25,000 $12,972 $25,000 $112,972 White, Yue Zhou (Emily) $50,000 - $8,632 - $58,632 Because no new non-employee director equity grants were awarded in Fiscal 2024, none held any outstanding or unvested equity awards as of March 31, 2024. Name Stock Awards Outstanding Options Outstanding Total Equity Awards Outstanding Jacoby, Rebecca J. - - - Jaworski, Donald J. - - - Meyrath, Hugues - - - Neumeyer, Christopher D. - - - Rothman, Marc E. - - - White, Yue Zhou (Emily) - - -

 

 

© 2024 Quantum Corporation |  |  32

 

 

 

Proposals

 

© 2024 Quantum Corporation |  |  33

 

 

Proposal 1

 

Election of Directors

 

Quantum has nominated seven directors to be elected to the Board at the Annual Meeting, to serve until the 2025 annual meeting or until their successors are duly qualified and elected. The Corporate Governance and Nominating Committee recommended all nominees and the Board nominated all for election.

 

The nominees are:

 

     
     
James J. Lerner Yue Zhou (Emily) White Christopher D. Neumeyer

 

       
       

Donald J. Jaworski

Hugues Meyrath

Todd W. Arden

John R. Tracy

Required Vote

 

This is an uncontested election requiring a majority of votes cast. A majority of votes cast means that the number of shares voted for a director exceeds the number of votes cast against the director. Abstentions will not be counted for or against a nominee. If a director nominee does not receive a majority of votes cast, he or she will not be elected. See Information Concerning Solicitation, Voting, and Communication for more information about majority voting.

 

Each shareholder voting on Proposal 1 may cumulate their votes as described in Information Concerning Solicitation, Voting, and Communication.

 

 

© 2024 Quantum Corporation |  |  34

 

 

Proposal 2

 

Approval of Reverse Stock Split

 

The Board has adopted and recommends that shareholders approve an amendment (the Amendment) to the Company’s amended and restated certificate of incorporation (the Restated Certificate) to effect a reverse stock split of our common stock by combining issued shares of common stock into a lesser number of issued shares of common stock at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares, with the exact ratio to be selected by the Board and set forth in a public announcement (the Reverse Stock Split). If the Amendment is approved by shareholders, the Reverse Stock Split may be effected at any time prior to August 15, 2025. The Board may alternatively elect, in its sole discretion, to abandon such proposed Amendment and not effect the Reverse Stock Split authorized by shareholders. Upon the effectiveness of the Amendment effecting the Reverse Stock Split, the issued shares of our common stock will be combined into a lesser number of shares such that one share of our common stock will be issued for a specified number of shares in accordance with the ratio for the Reverse Stock Split. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 promulgated under the Exchange Act.

 

The form of the proposed certificate of amendment to the Company’s Restated Certificate to effect the Reverse Stock Split is attached hereto as Exhibit A (the Certificate of Amendment). The Certificate of Amendment that will be filed to effect the Reverse Stock Split will include the Reverse Stock Split ratio fixed by the Board, within the range approved by our shareholders. If Proposal 2 is approved by our shareholders and the Board elects to effect the Reverse Stock Split, the Certificate of Amendment may be filed with the Secretary of State of the State of Delaware at any time prior to August 15, 2025, and the Reverse Stock Split and will become effective upon such filing or on the effective date and time specified in the Certificate of Amendment (the Effective Time).

If the Proposal 2 is approved by our shareholders, the board of directors would have the sole discretion to effect the Reverse Stock Split at any time prior to August 15, 2025, and to fix the specific ratio for the Reverse Stock Split, provided that the ratio would be not less than 1-for-5 and not more than 1-for-20. We believe that enabling our board of directors to fix the specific ratio of the Reverse Stock Split within the stated range will provide us with the flexibility to implement the split in a manner designed to maximize the anticipated benefits to the Company and our shareholders, as described below. The determination of the ratio of the Reverse Stock Split will be based on a number of factors, described further below under Criteria to be Used for Decision to Apply the Reverse Stock Split.

 

Reverse Stock Split 

 

The primary purpose for effecting the Reverse Stock Split is to increase the per share trading price of our common stock so as to: 

 

maintain the listing of our common stock on the Nasdaq Global Market and avoid a delisting of our common stock from Nasdaq in the future on the basis of the Minimum Bid Price Requirement (as defined below); and

 

broaden the pool of investors that may be interested in investing in the Company by attracting new investors who are prohibited from or prefer not to invest in shares that trade at lower share prices.
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While the number of authorized shares of our common stock will not change as a result of the Reverse Stock Split, it will cause the number of issued and outstanding shares of our common stock to be reduced in accordance with the selected exchange ratio and will therefore have the effect of increasing the authorized common stock available for future issuance.

 

In evaluating the Reverse Stock Split, the Board has taken, and will take, into consideration negative factors associated with reverse stock splits. These factors include: 

 

Negative perceptions of reverse stock splits held by many shareholders, investors, analysts and other stock market participants;

 

Reduced number of shares of common stock potentially adversely affecting the liquidity of our common stock;

 

A decrease in our market capitalization following implementation of a reverse stock split (recognized based on the experience of other companies that have effective reverse stock splits); and

 

The fact that the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels.

 

In recommending approval of the Reverse Stock Split, the Board determined that these potential negative factors were significantly outweighed by the potential benefits.

Criteria to be Used for Decision to Apply the Reverse Stock Split

 

If the stockholders approve the Reverse Stock Split, the Board will be authorized to proceed with the Reverse Stock Split, although it may determine not to effect a Reverse Stock Split. The exact ratio of the Reverse Stock Split, within the 1-for-5 to 1-for-20 range, would be determined by the Board and set forth in a public announcement. In determining whether to proceed with the Reverse Stock Split and setting the ratio for it, the Board expects to consider, among other things, factors such as:

 

Nasdaq’s minimum price per share requirements;

 

The historical trading prices and trading volume of our common stock;

 

The expected stability of the per share price of our common stock following the Reverse Stock Split;

 

The number of shares of our common stock that would be outstanding following the Reverse Stock Split;

 

The then-prevailing and expected trading prices and trading volume of our common stock and the anticipated impact of the Reverse Stock Split on the trading market for our common stock;

 

Our market capitalization before and after the Reverse Stock Split;

 

The anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs; and

 

Prevailing general market and economic conditions.

 

We believe that granting our board of directors the authority to set the ratio for the Reverse Stock Split is essential because it allows us to take these factors into consideration and to react to changing market conditions.

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Reasons for the Reverse Stock Split

 

The Board is seeking authority to effect the Reverse Stock Split with the primary intent of increasing the price of our common stock in order to meet the price criteria for continued listing on Nasdaq. Our common stock is publicly traded and listed on Nasdaq under the symbol “QMCO.” The Board believes that, in addition to increasing the price of our common stock to meet the price criteria for continued listing on Nasdaq, the Reverse Stock Split would also make our common stock more attractive to a broader range of institutional and other investors. Accordingly, for these and other reasons discussed below, we believe that effecting the Reverse Stock Split is in the Company’s and our shareholders’ best interests.

 

On September 20, 2023, we received written notice from Nasdaq notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq listing rule 5450(a)(1) for continued listing on Nasdaq (the Minimum Bid Price Requirement). Nasdaq listing rule 5450(a)(1) requires that listed securities maintain a minimum closing bid price of $1.00 per share, and Nasdaq listing rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock for the 30 consecutive business days prior to the date of the written notice, the Company did not meet the Minimum Bid Price Requirement. In accordance with Nasdaq listing rule 5810(c)(3)(A), we were provided with a period of 180 calendar days to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must have been at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to March 18, 2024.

On March 19, 2024, we received a notice from Nasdaq that we did not meet the Minimum Bid Price Requirement and our common stock would be scheduled for delisting at the opening of business on March 28, 2024, unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the Panel). On March 21, 2024, we timely requested a hearing before the Panel to appeal the delist determination. On the same day, we received written notice from Nasdaq that the delisting action would be stayed until April 5, 2024, and on April 4, 2024, we requested that the stay of delisting be extended until the Panel issued a final decision on the matter. On April 10, 2024, we received written notice from Nasdaq that the Panel granted our request to extend the stay of suspension pending the hearing on May 14, 2024 and the issuance of a final Panel decision.

 

On May 14, 2024, Messrs. Lerner, Gianella, Cabrera, and Ms. Nash met with the Panel to discuss our plan to regain compliance with the Minimum Bid Price Requirement. On June 6, 2024, the Panel notified us that it had granted an extension of time for the Company to regain Minimum Bid Price Requirement compliance, now due on or before September 16, 2024.

 

We may regain compliance with the Minimum Bid Price Requirement if the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days at any time prior to September 16, 2024.

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In the event we are delisted from Nasdaq, the only established trading market for our common stock would be eliminated and our common stock may then trade on the OTC Bulletin Board or other small trading markets. As a result, investors would likely find it more difficult to trade, or to obtain accurate price quotations for, our common stock. Delisting would likely also reduce the visibility, liquidity and value of our common stock, including as a result of reduced institutional investor interest in the Company, and may increase the volatility of our common stock. Delisting could also cause a loss of confidence of customers, suppliers, potential industry partners, lenders and employees, which could further harm our business and our future prospects. We believe that effecting the Reverse Stock Split may help us avoid delisting from Nasdaq and any resulting consequences.

 

In addition, the board of directors believes that an expected increased stock price could encourage investor interest and improve the marketability of our common stock to a broader range of investors. In particular, because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current share price of our common stock may result in an investor paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. The Board believes that the higher share price that may result from the Reverse Stock Split could enable brokerage firms and institutional investors with such policies and practices to invest in our common stock.

Although we expect that the Reverse Stock Split will result in an increase in the market price of our common stock, it may not result in a long-term increase in the market price of our common stock, which would be dependent on many factors, including general economic, market and industry conditions, our business and other factors detailed from time to time in the reports we file with the Securities and Exchange Commission.

 

Certain Risks Associated with the Reverse Stock Split

 

There can be no assurance that the total market capitalization of our common stock after the implementation of the Reverse Stock Split will be equal to or greater than the total market capitalization before it, or that the per share market price of our common stock following the Reverse Stock Split will increase in proportion to the reduction in the number of shares of our issued common stock in connection with it. Also, we cannot assure you that the Reverse Stock Split would lead to a sustained increase in the trading price of our common stock, or that the trading price of our common stock will remain above the Minimum Bid Price Requirement. The trading price of our common stock may change due to a variety of other factors, including our ability to successfully accomplish our business goals, market conditions and the market perception of our business. You should also keep in mind that the implementation of the Reverse Stock Split does not have an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership in the Company (subject to the treatment of fractional shares). However, should the overall value of our common stock decline after the proposed Reverse Stock Split, then the actual or intrinsic value of the shares of our common stock held by you will also proportionately decrease as a result of the overall decline in value.

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While the Board believes that a higher stock price may help generate investor interest, there can be no assurance that the Reverse Stock Split will result in a per-share market price that will attract institutional investors or that such share price will satisfy the investing guidelines of institutional investors.

 

If the Amendment is approved and effected, the total number of authorized shares of common stock will not be reduced in accordance with the Reverse Stock Split ratio, but rather, the number of outstanding shares of common stock will be reduced in proportion to the selected exchange ratio. Thus, the Reverse Stock Split would have the effect of increasing the number of shares of common stock authorized and available for issuance, relative to the number of issued and outstanding shares of our common stock. Any additional common stock authorized as a result of the Reverse Stock Split will be available for issuance by the Board for raising additional capital, acquisitions, stock dividends or other corporate purposes, and any such issuances may be dilutive to current stockholders.

 

While the Board has proposed the Reverse Stock Split to bring the price of our common stock back above $1.00 per share in order to meet the requirements for the continued listing of our common stock on Nasdaq, there is no guarantee that the price of our common stock will not decrease in the future, or that our common stock will remain in compliance with Nasdaq listing standards.

 

Additionally, there can be no guarantee that the closing bid price of our common stock will remain at or above $1.00 for 10 consecutive trading days, whether following the Reverse Stock Split or otherwise, which is required to cure our current Nasdaq listing standard deficiency.

Effect of the Reverse Stock Split

 

If the Reverse Stock Split is approved by our shareholders and the Board elects to effect it, the number of issued shares of common stock will be reduced in proportion to the ratio of the split chosen by the board of directors. As of the effective time of the Reverse Stock Split, we would also adjust and proportionately decrease the number of shares of our common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants and other rights to acquire our common stock. In addition, as of the effective time of the Reverse Stock Split, we would adjust and proportionately decrease the total number of shares of our common stock that may be the subject of the future grants under our stock plans.

 

The Reverse Stock Split would be effected simultaneously for all issued shares of our common stock. The Reverse Stock Split would affect all of our shareholders uniformly and would not change any shareholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split results in any of our shareholders owning fractional shares. As a result of the Reverse Stock Split, there will be a reduction of the number of shares of our issued common stock, resulting in an increase in the number of shares of common stock authorized and available for issuance, relative to the number of issued and outstanding shares of our common stock.

 

The Reverse Stock Split is not intended to modify the rights of existing shareholders in any material respect. Voting rights and other rights and preferences of the holders of common stock will not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). Common stock issued pursuant to the Reverse Stock Split will remain fully paid and nonassessable, and the par value per share of common stock will remain $0.01.

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If the Reverse Stock Split is effected, we intend to treat the shares of common stock held by beneficial owners in “street name” through a broker, bank or other nominee in the same manner as shareholders whose shares are registered in their own names. Banks, brokers or other nominees will be instructed to effect the Reverse Stock Split for their customers holding common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered shareholders for processing the Reverse Stock Split. If you hold shares of common stock with a broker, bank, or other nominee and have any questions in this regard, you are encouraged to contact that resource for assistance.

 

If the Board does not implement the Reverse Stock Split prior to August 15, 2025, the authority granted in this proposal to implement the Reverse Stock Split would terminate.

 

Interested Parties

 

Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal, except to the extent of their ownership in shares of our common stock and securities convertible or exercisable for our common stock. In that case, such shares and securities would be subject to the same proportionate adjustment in accordance with the terms of the Reverse Stock Split as all other outstanding shares of our common stock and securities convertible into or exercisable for our common stock.

 

Assuming Reverse Stock Split ratios of 1-for-5, 1-for-12, and 1-for-20, which reflect the low end, midpoint, and high end of the range that our shareholders are being asked to approve, the following table sets forth the: • Number of shares of our common stock that would be issued and outstanding, • Number of shares of our common stock that would be reserved for issuance pursuant to outstanding options, warrants, and long-term equity awards (including restricted stock units (RSUs) and performance-based restricted stock units (PSUs)), and • Weighted-average exercise price of outstanding options and warrants, each giving effect to the Reverse Stock Split and based on shares outstanding as of the Record Date. Before Reverse Stock Split Reverse Stock Split Ratio of 1-for-5 Reverse Stock Split Ratio of 1-for-12 Reverse Stock Split Ratio of 1-for-20 Number of Shares of Common Stock Issued and Outstanding 95,849,938 19,169,988 7,987,495 4,792,497 Number of Shares of Common Stock Reserved for Issuance Pursuant to Outstanding Options, Warrants, and Restricted Stock Units 18,611,146 3,722,229 1,550,929 930,557 Weighted-Average Exercise Price of Outstanding Options and Warrants $1.73 $8.65 $20.76 $34.60

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Procedure for Effecting the Amendment

 

If the Amendment is approved by our shareholders and the Board elects to effect the Reverse Stock Split, it would take effect upon the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware or on the effective date and time specified in the Certificate of Amendment. The exact timing of the filing of the Certificate of Amendment and the effectiveness of the Reverse Stock Split will be determined by the Board based on its evaluation as to when such action will be the most advantageous to us and our shareholders, but it will not occur after August 15, 2025. In addition, the Board reserves the right, notwithstanding shareholder approval and without further action by our shareholders, to abandon the Amendment (and therefore the Reverse Stock Split) if, at any time prior to the filing of the Certificate of Amendment with the Secretary of State of the State of Delaware, the Board, in its sole discretion, determines that it is no longer in the best interest of the Company our shareholders to proceed.

 

Beginning at the effective time of the Reverse Stock Split, your pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares. We expect that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock.

 

After the effective time of the Reverse Stock Split, our common stock will have a new Committee on Uniform Securities Identification Procedures (CUSIP) number, which is a number used to identify our equity securities.

Holders of common stock may hold some or all of their common stock electronically in book-entry form under the direct registration system for securities. These shareholders will not have stock certificates evidencing their ownership. They are, however, provided with a statement reflecting the number of shares of common stock registered in their accounts. If you hold registered common stock in book-entry form, you do not need to take any action to receive your post-split shares.

 

Holders of common stock that have certificated shares may be asked to surrender to the exchange agent certificate(s) representing pre-split shares in exchange for certificate(s) representing post-split shares, in accordance with the procedures to be set forth in a letter of transmittal. No new certificates will be issued to a shareholder until such shareholder has surrendered prior certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent.

 

STOCKHOLDERS WHO HOLD CERTIFICATES SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO.

 

Fractional Shares

 

No fractional shares will be issued in connection with the Reverse Stock Split. Instead, shareholders who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of post-split shares to be reclassified, will be entitled (and with respect to holders that have certificated shares, upon surrender to the exchange agent of certificates representing such shares) to have their fractional shares rounded up to the next whole number share quantity.

 

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Regardless of the fractional shares option implemented by the board of directors, if at all, shareholders will not be entitled to receive interest for the period of time between the Effective Time and the date additional shares acquired by rounding up fractional shares to the next whole number quantity are received.

 

The ownership of a fractional interest will not give the holder thereof any voting, dividend, or other rights except to the extent that interest in a fractional share would be rounded up to the nearest whole share, as described herein.

 

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

 

The following summary describes, as of the date of this proxy statement, certain material U.S. federal income tax consequences of the proposed Reverse Stock Split to U.S. Holders (as defined below) of our common stock. For purposes of this discussion, a U.S. Holder is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as:

 

An individual citizen or resident of the United States;

 

A corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

An estate, the income of which is subject to U.S. federal income taxation regardless of the source; or

 

A trust, if: (i) a court within the United States is able to exercise primary jurisdiction over its administration and one or more United States persons (as defined in Section 7701(a)(30) of the Code (United States Persons)) has the authority to control all of its substantial decisions or (ii) it was in existence before August 20, 1996, and a valid election is in place under applicable

Treasury regulations to treat such trust as a United States Person for U.S. federal income tax purposes.

 

This summary is based on the provisions of the Internal Revenue Code of 1986, as amended (the Code), U.S. Treasury regulations, administrative rulings, and judicial authority, all as in effect as of the date of this proxy statement. Subsequent developments in U.S. federal income tax law, including changes in law or differing interpretations, which may be applied retroactively, could have a material, and possibly adverse, effect on the U.S. federal income tax consequences of the proposed Reverse Stock Split. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below and there can be no assurance that the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the proposed Reverse Stock Split.

 

This summary does not address all of the tax consequences that may be relevant to any particular investor, including tax considerations that arise from rules of general application to all taxpayers or to certain classes of taxpayers or that are generally assumed to be known by investors. This summary also does not address the tax consequences to (i) persons that may be subject to special treatment under U.S. federal income tax law, such as banks, insurance companies, thrift institutions, regulated investment companies, real estate investment trusts, tax-exempt organizations, certain former U.S. citizens or residents, persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar, partnerships or other pass-through entities, traders in securities that elect to mark to market and dealers in securities or currencies, (ii) persons that hold our common stock as part of a position in a “straddle” or as part of a “hedging transaction,” “conversion transaction,” or other integrated investment transaction for federal income tax purposes, or (iii) persons that do not hold our common stock as “capital assets” (generally, property held for investment). This

 

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summary does not address backup withholding and information reporting or the Medicare contribution tax on net investment income, nor does it address U.S. Holders who beneficially own common stock through a “foreign financial institution” (as defined in Code Section 1471(d)(4)) or certain other non-U.S. entities specified in Code Section 1472. This summary does not address tax considerations arising under any state, local, or foreign laws, or under federal estate or gift tax laws.

 

If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors regarding the U.S. federal income tax consequences of the proposed Reverse Stock Split. Each holder should consult its tax advisors concerning the particular U.S. federal tax consequences of the proposed Reverse Stock Split, as well as the consequences arising under the laws of any other taxing jurisdiction, including any foreign, state, or local income tax consequences.

 

The proposed Reverse Stock Split is intended to be treated as a “recapitalization” pursuant to Section 368(a)(1)(E) of the Code. Assuming the proposed Reverse Stock Split qualifies as such a “recapitalization,” a U.S. Holder generally should not recognize gain or loss upon the proposed Reverse Stock Split for U.S. federal income tax purposes. A U.S. Holder’s aggregate adjusted tax basis in the shares of common stock received pursuant to the proposed Reverse Stock Split should equal the aggregate adjusted tax basis of the shares of common stock exchanged therefor.

U.S. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of common stock surrendered in a recapitalization to shares received in the recapitalization. The U.S. Holder’s holding period in the shares of common stock received pursuant to the proposed Reverse Stock Split should include the holding period in the shares of common stock exchanged therefor. U.S. Holders of shares of common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

 

As noted above, we will not issue fractional shares of common stock in connection with the Reverse Stock Split. In certain circumstances, stockholders who would be entitled to receive fractional shares of common stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional fraction of a share of common stock to round up to the next whole post-Reverse Stock Split share of common stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of common stock is not clear.

 

The U.S. federal income tax discussion set forth above does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular shareholder. Our view regarding the U.S. federal income tax consequences of the Reverse Stock Split is not binding on the IRS or the courts. Accordingly, you should consult with your tax advisors with respect to all of the potential U.S. federal, state, local, and foreign tax consequences to you of the Reverse Stock Split.  

 

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Required Vote

 

The affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the approval and adoption of an amendment to the Company’s Restated Certificate to effect a reverse stock split at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares, which ratio shall be selected by the Board. Abstentions will have the same effect as a vote against Proposal 2.

 

 

 

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Proposal 3 

Amendment to the 2023 Long-Term Incentive Plan

 

We are seeking approval to amend our 2023 Long-Term Incentive Plan (the 2023 Plan) to increase the number of shares of our common stock reserved for issuance under the 2023 Plan by an additional 5,000,000 shares. Our Board approved the amendment, subject to approval of our shareholders, on June 27, 2024. If the Reverse Stock Split is approved by our shareholders and the Board elects to effect it, this increase will be adjusted accordingly. For example, if the Board determined the Reverse Stock Split ratio to be 1-for-10, 500,000 shares would be added to the 2023 Plan instead of 5,000,000.

 

Background and Purpose of the Share Reserve Increase

 

As of the Record Date, approximately 5.1 million shares of our common stock remained available for future grants under the 2023 Plan. We believe that the current share reserve amount is insufficient to meet our future needs with respect to attracting, motivating and retaining key executives and employees in a competitive market for talent. We consider equity compensation to be a vital element of our employee compensation program and believe that the continued ability to grant equity awards at competitive levels is in the best interest of Quantum and our shareholders. If Proposal 3 is not approved, we may be unable to continue to offer competitive equity packages to attract and retain employees, creating a material retention risk for which we may need to consider other compensation alternatives. For example, if we were required to increase cash compensation, it would reduce capital available for operations, development, and other investment, which could adversely affect business results or strategy.

 

The remainder of this discussion, when referring to the 2023 Plan, refers to the amended 2023 Plan as if this proposal is approved by our shareholders, unless otherwise specified or the context otherwise references the 2023 Plan prior to the amendment and restatement.

Long-Term Equity is a Key Component of Our Employee Compensation Program

 

Our employees are our most valuable asset, and we strive to provide them with competitive compensation packages that reward personal and Company performance and help meet our retention needs. Equity awards, whose value depends on our stock performance, and which require continued service over time before any value can be realized, help achieve these objectives and are a key element of our compensation program. Equity awards also incentivize our employees to manage our business as owners, aligning their interests with those of our shareholders. We believe we must continue to use equity compensation on a broad basis to help attract, retain and motivate employees to grow our business, develop new products, increase operating efficiencies, and ultimately increase shareholder value.

 

As discussed in Compensation Discussion and Analysis, 50% of the long-term equity awards we granted to named executive officers in Fiscal 2024 were based on performance-based restricted stock units which were also subject to time-based vesting requirements and continued employment. While some performance targets have been met, many have not, demonstrating the pay-for-performance alignment of our executive compensation program. As a result, the actual compensation realized by our executive officers has been significantly lower than their target compensation metrics and competitive benchmarking data. We believe it is imperative that we have sufficient shares available to continue to offer equity, including performance-based equity that aligns executive interests with our business performance and shareholder value creation, to ensure there is sufficient retention interest for executive officers and to motivate performance achievement.

 

The 2023 Plan Incorporates Compensation and Governance Best Practices

 

The 2023 Plan includes the following important features:

 

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Prohibitions against liberal share recycling practices.

Shares tendered by participants to satisfy the exercise price or purchase price of awards, or tax withholding obligation with respect to awards, will not be added back to the balance of shares available to issue under the 2023 Plan.

 

Shareholder approval required for additional shares.

The 2023 Plan does not contain an annual “evergreen” provision. The 2023 Plan authorizes a fixed maximum number of shares and requires shareholder approval to increase the maximum number of shares of our common stock which may be issued under the 2023 Plan.

 

No discount stock options or stock appreciation rights.

All stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our common stock on the date the award is granted.

 

Repricing and cash buyouts not allowed without shareholder approval.

The 2023 Plan prohibits the repricing, cash-out or other exchange of underwater stock options and stock appreciation rights without prior shareholder approval.

 

Limitations on dividend payments on unvested awards.

Dividends and dividend equivalents may not be paid on awards subject to vesting conditions unless and until such conditions are met. In addition, dividend equivalents may not be granted on options or stock appreciation rights.

 

         
             

Clawback.

The 2023 Plan provides that all awards will be subject to our clawback policy.

 

No tax gross-ups.

The 2023 Plan does not provide for any tax gross-ups.

 

Compensation Committee independence.

Our employee equity plans are administered by the Board’s Leadership and Compensation Committee, which is comprised entirely of independent non-employee directors.

 

Broad-based eligibility.

59% of Fiscal 2024 equity awards were granted to employees who are not named executive officers or directors

 

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Our typical executive equity grants are comprised of:

 

 
     

50% Time-Based 

RSUs, which vest in equal annual installments over three years.

 

50% Performance-Based 

PSUs, which require attainment of defined performance goals as well as continuing employment over additional time-based vesting requirements.

 

The performance goals we set for equity award certification are designed to be challenging, and require consistent business execution and achievement in order to be earned. Given the challenges presented from the COVID-19 pandemic, supply chain constraints, inflationary pressure, Nasdaq listing compliance status, product launch delays, and general macroeconomic concerns, we have not yet achieved the majority of the performance-based metrics associated with equity granted to our executives in Fiscal 2024 or in fiscal years 2023 or 2022.

 

Peer Group Benchmarking

 

Benchmarking our Fiscal 2024 equity grant practices to those of our Peer Group shows our moderate equity use. According to our Peer Group’s most recent fiscal year Form 10-K filings at the time Fiscal 2024 grants were approved, our net value-adjusted burn rate for Fiscal 2024 is below the 20th percentile of our Peer Group. Our Fiscal 2024 issued and total overhang rates each fell below the 25th percentiles compared to our Peer Group.

 

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Amending the 2023 Plan Allows us to Meet Our Forecasted Equity Needs We are requesting an additional share reserve for the 2023 Plan of 5,000,000 shares. Shares outstanding and available under the 2023 Plan and our 2021 Inducement Plan (the Inducement Plan) as of the Record Date are shown below, in thousands. Plan Outstanding RSUs (Granted but not Vested) (000s) Outstanding PSUs (Granted but not Vested or Earned) (000s) Remaining Shares Available to Grant (000s) 2023 Plan 2,912 1,414 5,112 Inducement Plan 270 150 768 Our overhang for the 2023 Plan as of the Record Date was 8.96%. Assuming shareholders approve amending the 2023 Plan, our overhang will be 13.09%. For this purpose, we are defining overhang as (A + B) / (A + B + C), where A, B, and C are based on the following measurements as of the Record Date: A 4,326 shares subject to awards granted to employees and directors (in 000s). There were no options or stock appreciation rights outstanding as of the Record Date. B 5,112 shares available for future grants (if additional shares requested are approved by shareholders, 10,112) (both in 000s). C 95,850 shares outstanding (in 000s).

 

 

 

 

 

Overhang calculations exclude shares available for future issue or grant under the 2021 Inducement Plan or Employee Stock Purchase Plan.

 

Based on a review of our historical and projected grant practices, and absent unexpected events, we estimate that the requested additional share reserve for the 2023 Plan should meet our equity grant needs for approximately one to two years. This estimate is based on assumptions about our anticipated hiring rate, stock price over time, and historical forfeiture rates.

 

Material Terms of the Amended 2023 Long-Term Incentive Plan

 

This section summarizes certain principal features of the 2023 Plan. This summary is not a complete description of all of the provisions of the 2023 Plan and is qualified in its entirety by reference to the full text of the 2023 Plan.

 

Eligibility and Types of Awards

 

The 2023 Plan permits the grant of the following types of equity incentive awards:

 

Incentive stock options (ISOs);

 

Nonstatutory stock options (NSOs);

 

Stock appreciation rights (SARs);

 

Restricted stock; and

 

RSUs and PSUs.

 

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Amending the 2023 Plan Allows us to Meet Our Forecasted Equity Needs We are requesting an additional share reserve for the 2023 Plan of 5,000,000 shares. Shares outstanding and available under the 2023 Plan and our 2021 Inducement Plan (the Inducement Plan) as of the Record Date are shown below, in thousands. Plan Outstanding RSUs (Granted but not Vested) (000s) Outstanding PSUs (Granted but not Vested or Earned) (000s) Remaining Shares Available to Grant (000s) 2023 Plan 2,912 1,414 5,112 Inducement Plan 270 150 768 Our overhang for the 2023 Plan as of the Record Date was 8.96%. Assuming shareholders approve amending the 2023 Plan, our overhang will be 13.09%. For this purpose, we are defining overhang as (A + B) / (A + B + C), where A, B, and C are based on the following measurements as of the Record Date : A 4,326 shares subject to awards granted to employees and directors (in 000s). There were no options or stock appreciation rights outstanding as of the Record Date. B 5,112 shares available for future grants (if additional shares requested are approved by shareholders, 10,112) (both in 000s). C 95,850 shares outstanding (in 000s).

 

 

Employees, consultants and directors of Quantum and any parent, subsidiary or affiliate of Quantum are eligible to participate in and receive awards pursuant to the 2023 Plan. As of the Record Date, we had approximately 700 employees, directors, and consultants who would be eligible to participate in the 2023 Plan.

 

Administration 

The 2023 Plan will be administered by the Board or a committee of individuals satisfying applicable laws appointed by the Board (the Administrator). It currently is expected that the Committee will continue to administer the 2023 Plan, but the Board has the authority to appoint one or more other committees to separately or concurrently administer the 2023 Plan. The Board may require that any committee which administers the 2023 Plan consist of at least two directors who qualify as non-employee directors under Rule 16b-3 of the Securities Exchange Act of 1934 to qualify transactions under the 2023 Plan as exempt under Rule 16b-3.

 

Subject to the terms of the 2023 Plan, the Administrator has the sole discretion to select the employees, consultants, and directors who will receive awards, determine the terms and conditions of awards, interpret the provisions of the Plan and outstanding awards, and make all determinations necessary or advisable for administering the 2023 Plan. The Administrator may delegate any part of its authority and powers under the 2023 Plan to a committee of officers to the extent permitted by applicable law, provided that such delegation shall specify the total number of awards that such officers may award. The Administrator’s decisions, determinations, and interpretations will be final and binding on all participants and other holders of awards and will be given maximum deference permitted by law.

Share Reserve and Share Recycling Rules 

Maximum Share Limit. The maximum number of shares that may be issued or transferred pursuant to awards under the 2023 Plan is equal to the sum of:

 

5,000,000 shares;

 

The number of shares available for new grants under the 2023 Plan on the Record Date; and

 

Any shares subject to awards granted under the 2023 Plan that:

 

expire or otherwise terminate without having been vested or exercised in full; or

 

are forfeited to or repurchased by the Company due to failure to vest.

 

However, in no event will the number of shares available for issuance exceed 16,957,921 shares (on a pre-Reverse Stock Split basis).

 

Share Recycling

 

If an option or SAR expires or becomes unexercisable without having been exercised in full or is surrendered pursuant to an exchange program (as defined in the 2023 Plan, and subject to shareholder approval), the unpurchased shares subject to the option or SAR will become available for future issuance under the Plan.

 

Upon exercise of a SAR settled in shares, the gross number of shares covered by the portion of the award exercised (whether or not actually issued pursuant to the exercise) will cease to be available under the 2023 Plan.
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Vested shares that have actually been issued under the 2023 Plan will not be returned to the Plan and will not become available for future distribution under the Plan. Unvested shares issued pursuant to awards that are reacquired by the Company or are forfeited to the Company due to failure to vest will become available for future issuance under the 2023 Plan.

 

Shares used to pay the exercise price or purchase price of an award will not become available for future grant and/or sale under the 2023 Plan.

 

Shares purchased in the open market with proceeds from option exercises will not become available for issuance under the 2023 Plan.

 

Shares used to satisfy the tax withholding obligations related to an award of restricted stock, RSUs, options, or SARs will not become available for future grant or sale under the 2023 Plan.

 

If any portion of an award is paid to a participant in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2023 Plan.

 

Administration 

Awards granted under the 2023 Plan upon the assumption of, or in substitution for, awards authorized or outstanding under a qualifying equity plan maintained by an entity with which we enter into a merger or similar corporate transaction will not reduce the shares available for grant under the 2023 Plan, but will count against the maximum number of shares that may be issued upon the exercise of ISOs.

 

Capitalization Adjustments If Quantum experiences a dividend or other distribution (whether in cash, shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities of Quantum, or other change in corporate structure affecting the shares, the Committee will adjust the number and class of shares available for issuance under the 2023 Plan, the number, class and price of shares subject to outstanding awards, and the per-person share limits on awards. Individual Award Limitations The 2023 Plan contains annual grant limits. Specifically, subject to the adjustment provisions of the 2023 Plan, the maximum number of shares or dollars that can be subject to awards granted to any one employee or consultant in any fiscal year is: Award Type Annual Number of Shares or Dollar Value Additional Shares or Dollar Value in Connection with New Hire1 Maximum Number of Shares and/or Dollars Options, SARs, or a combination 1,000,000 shares 1,000,000 shares 2,000,000 shares Restricted Stock, RSUs, or a combination 750,000 shares 750,000 shares 1,500,000 shares Cash-denominated Performance Awards $10,000,000 $10,000,000 $20,000,000 1May be granted in the Company’s fiscal year in which the employee’s engagement with the Company (or a parent or subsidiary corporation of the Company or an affiliate of the Company) first commences.

  

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The 2023 Plan also provides that the maximum grant date fair value (calculated in accordance with generally accepted accounting principles) of all awards (as a combined limit) granted to an individual non-employee director in any one fiscal year may not exceed an aggregate of $500,000. In the fiscal year in which a non-employee director first joins the Board, this limit is increased to $750,000. Any awards granted to an individual while he or she was an employee or consultant but not a non-employee director shall not count for purposes of this limitation.

 

No Repricing or Cash Buyouts 

The 2023 Plan prohibits the implementation of any program to exchange awards or reduce the exercise price of options or stock appreciation rights, or otherwise implement certain programs under which participants can transfer awards to a financial institution or other person or entity, except with shareholder approval.

 

No Reload Options 

No stock option will include terms entitling a participant to a grant of stock options upon exercise of the original stock option.

 

Stock Options 

The Administrator may grant NSO or ISOs, the latter of which are entitled to potentially favorable tax treatment, under the 2023 Plan. The stock option exercise price is determined at grant by the Administrator and must be at least 100% of the fair market value of a share on the date of grant (110% for incentive stock options granted to shareholders who own more than 10% of the total outstanding shares of Quantum, its parent or any of its subsidiaries).

The term of a stock option shall not exceed 7 years from the date of grant. However, a participant who owns stock possessing more than 10% of the total combined voting power of all classes of stock of Quantum or any of its subsidiaries or any Quantum parent may not be granted an incentive stock option that is exercisable after 5 years from the option’s grant date. Dividend equivalents may not be granted on stock options.

 

Stock Appreciation Rights 

SARs are awards that grant the participant the right to receive an amount (in the form of cash, shares of equal value, or a combination thereof, as determined by the Administrator) equal to the number of shares exercised multiplied by the amount by which Quantum’s stock price exceeds the exercise price.

 

Quantum may pay the appreciation in cash, in shares or in a combination of both. The exercise price is set by the Administrator but cannot be less than 100% of the fair market value of the covered shares on the grant date. A SAR may be exercised only upon satisfying the vesting or other requirements established by the Administrator. SARs expire under the same rules that apply to options, meaning that the Administrator determines the time at which they expire but the expiration may not be later than 7 years after the grant date. Dividend equivalent rights may not be granted on SARs.

 

Restricted Stock 

Awards of restricted stock are shares that may be subject to vesting conditions in accordance with the terms and conditions established by the Administrator. A holder of restricted stock will have full voting rights, unless determined otherwise by the Administrator. Dividends paid on unvested stock grants will be subject to forfeiture if the vesting condition applicable to the stock grant is not satisfied.

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Restricted Stock Units 

RSUs represent a right to receive shares (and/or cash of equal value) at a future date determined in accordance with the participant’s award agreement. Participants holding RSUs have no voting rights with respect to the shares represented by the RSUs until the date the underlying shares are issued. The Administrator may provide for dividend equivalent rights on RSUs based on the amount of dividends paid on outstanding shares of our common stock. Any dividend equivalent rights that are awarded will be subject to forfeiture to the same extent as the corresponding RSUs to which the dividend equivalent rights relate.

 

Performance Awards 

Performance awards are awards that result in a payment to a participant (in the form of cash, shares of equal value, or a combination thereof, as determined by the Administrator) only if performance goals and/or other vesting criteria established by the Administrator are achieved or the awards otherwise vest. The applicable performance goals or vesting criteria will be determined by the Administrator and may be applied based on continued employment or service, the achievement of specific performance objectives (such as company-wide, departmental, divisional, business unit or individual goals), applicable federal or securities laws, or any other basis determined by the Administrator in its discretion. Performance awards that are RSUs may contain dividend equivalent rights.

 

Limited Transferability of Awards 

Awards granted under the 2023 Plan generally may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the applicable laws of descent and distribution, and may be exercised during a participant’s lifetime only by the participant.

Notwithstanding the foregoing, subject to the terms of the 2023 Plan, the Administrator may make an award transferable on such terms and conditions as the Administrator deems appropriate, such as permitting an individual to transfer an award to an individual or entity if the transfer is for bona fide estate planning purposes.

 

Merger, Change in Control, or Other Transactions 

In the event of a merger of Quantum with or into another corporation or a change in control (as defined in the 2023 Plan), each outstanding award will be treated as the Administrator determines, including that each award be assumed or substituted by the successor corporation (or its parent or subsidiary). The Administrator is not required to treat all awards similarly.

 

If there is no assumption or substitution of outstanding awards, the awards will fully vest, all restrictions will lapse, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and the awards will become fully exercisable. In addition, if an option or stock appreciation right is not assumed or substituted in the event of a merger or change in control, the Administrator will notify the participant that the award will be exercisable for a specified period prior to the transaction, and the award will terminate upon the expiration of such period.

 

With respect to awards granted to a non-employee director that are assumed or substituted for upon a merger or change in control, if the non-employee director’s status as a director is terminated other than upon voluntary resignation (unless resignation was required by the acquirer) on or after the assumption or substitution, then his or her awards will fully vest, all restrictions will lapse, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels, and the awards will become fully exercisable.

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In the event of a proposed dissolution or liquidation of Quantum, the Administrator will notify each participant as soon as practicable prior to the effective date of the proposed transaction. To the extent options and stock appreciation rights are not exercised or other awards are not vested, the awards will terminate immediately prior to the completion of the proposed transaction.

 

Amendment and Termination 

The Administrator or our Board generally may amend or terminate the 2023 Plan at any time and for any reason. However, no amendment, suspension, or termination may impair the rights of any participant without his or her consent. If not terminated earlier, the 2023 Plan will continue in effect until July 25, 2033.

 

Clawback Provisions 

Awards granted under the 2023 Plan will be subject to any provisions of applicable law providing for the recoupment or clawback of incentive compensation, such as provisions imposed pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the terms of any Quantum recoupment, clawback or similar policy in effect at the time of grant of the award, and any recoupment, clawback or similar provisions that may be included in the applicable award agreement.

 

Material U.S. Federal Income Tax Consequences 

 

The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the 2023 Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information.

Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.

 

Nonqualified Stock Options 

No taxable income is reportable when a nonqualified stock option with an exercise price at least equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the excess of the fair market value (on the exercise date) of the shares purchased over the exercise price of the portion of the option exercised. Any taxable income recognized in connection with an option exercise by an employee of Quantum is subject to tax withholding by Quantum. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

 

Incentive Stock Options 

No taxable income is reportable when an incentive stock option is granted or exercised (unless the participant is subject to the alternative minimum tax). If the participant exercises the option and then later sells or otherwise disposes of the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two- or one-year holding periods described above, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the exercised shares on the exercise date (or the sale price, if less) minus the exercise price of the portion of the option exercised.

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Stock Appreciation Rights 

No taxable income is reportable when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of cash received and/or the fair market value of any shares received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

 

Restricted Stock and RSUs 

A participant generally will not have taxable income at the time an award of restricted stock or RSUs is granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either freely transferable or no longer subject to substantial risk of forfeiture. However, the recipient of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award (less any cash paid for the shares) on the date the award is granted.

 

Tax Effect for Quantum 

Quantum generally will be entitled to a tax deduction in connection with an award under the 2023 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). However, special rules limit the deductibility of compensation paid to our Chief Executive Officer, Chief Financial Officer, and to our three other most highly compensated named executive officers (other than our Chief Executive Officer and our Chief Financial Officer). Because the exception for performance-based compensation under Section 162(m) has been repealed, the annual compensation paid to any of these specified executives generally will be deductible only to the extent that it does not exceed $1 million.

Section 409A of the Code 

Certain types of awards under the 2023 Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest, penalties and additional state taxes). To the extent applicable, the 2023 Plan and awards granted under the 2023 Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the Administrator, the 2023 Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.

 

New Plan Benefits 

 

Except with respect to grants of RSUs that will be awarded to each non-employee director serving on our Board on the date of this Annual Meeting as discussed above under Non-Employee Director Compensation, the number of awards that our named executive officers, directors, other executive officers and other employees and consultants may receive under the 2023 Plan in the future, will be determined in the discretion of our Board or Committee, and neither our Board nor the Committee has made any determination to make future grants to any persons under the 2023 Plan as of the date of this Annual Meeting. Therefore, it is not possible to determine the future benefits that will be received by these participants under the 2023 Plan.

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Summary 

 

We believe that approving the amendment of the 2023 Plan is essential to our continued ability to attract, reward, and retain our executive and non-executive employees, as well as our Board members. Awards such as those provided under the 2023 Plan constitute an important incentive desired by employees and candidates whose skills and performance are critical to our success. Shareholder approval of the 2023 Plan amendment is vital to achieving our projected operating results in fiscal year 2025 and beyond.

 

Required Vote 

 

Approval to amend the 2023 Plan requires the affirmative vote of a majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against Proposal 3. If shareholders do not approve amending the 2023 Plan, the 2023 Plan and the Inducement Plan will remain in place and will continue to be administered in their current form subject to shares remaining available for grant under such plans.

 

The amended 2023 Plan is provided for review as Exhibit B to this proxy statement.

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Proposal 4

 

Non-Binding Advisory Vote on Executive Compensation

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and Section 14A of the Securities Exchange Act of 1934 (the Exchange Act) require that we provide our shareholders with the opportunity to vote to approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in this proxy statement.

 

Following approval from a substantial majority of shareholders at our September 12, 2023 annual meeting, the Board adopted a policy providing for annual advisory votes to approve our named executive officer compensation.

 

We are again asking our shareholders to approve, on an advisory basis, our named executive officers’ compensation as disclosed in Compensation Discussion and Analysis, the Summary Compensation Table, and the related tables, notes, and narrative in this proxy statement. We believe that information demonstrates that our executive compensation program is appropriately designed, performance-based, and aligned with interests of our shareholders.

 

Required Vote

 

Adopting a resolution approving, on an advisory basis, our named executive officer compensation requires the affirmative majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting. While the advisory vote on Proposal 4 is non-binding, it is required under Section 14A of the Securities Exchange Act of 1934 and provides valuable information regarding shareholder sentiment, which the Leadership and Compensation Committee will consider when determining future executive compensation programs. Abstentions will have the same effect as a vote against Proposal 4.

 

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Proposal 5

 

Ratification of Appointment of Registered Public Accounting Firm

 

Our Audit Committee has appointed Grant Thornton LLP (GT) as our independent registered public accounting firm to audit our consolidated financial statements for our fiscal year ending March 31, 2025. GT was also our independent registered public accounting firm for Fiscal 2024. Armanino LLP served as our independent registered public accounting firm from January 2019 to July 2023.

 

At the Annual Meeting, we are asking our shareholders to ratify the appointment of GT as our independent registered public accounting firm for our fiscal year ending March 31, 2025. Our Audit Committee is submitting the appointment of GT to our shareholders because we value our shareholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Notwithstanding the appointment of GT, and even if our shareholders ratify the appointment, our Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our Audit Committee believes that such a change would be in the best interests of our Company and our shareholders. Although ratification is not required by our Bylaws or otherwise, in the event GT’s selection is not ratified, the Audit Committee will reconsider its decision. A representative of GT is expected to be present at the Annual Meeting, and they will have an opportunity to make a statement and are expected to be available to respond to appropriate questions from our shareholders.

 

Changes in Certifying Accountant

 

As we previously disclosed, Armanino LLP (Armanino), our previous independent public accountant, resigned effective as August 18, 2023. Also on that date, the Audit Committee approved appointing GT as our independent registered public

accounting firm to audit our consolidated financial statements for the fiscal year ending March 31, 2024.

 

Armanino’s audit reports on our consolidated financial statements as of and for the fiscal years ended March 31, 2022 and 2023 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the fiscal years ended March 31, 2022 and 2023, there were no disagreements with Armanino on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Armanino’s satisfaction, would have caused Armanino to make reference to the subject matter thereof in connection with its reports for such periods. Subsequent to Armanino’s replacement by GT and an extensive review process described in the current report on Form 8-K filed by the Company on May 22, 2024 (8-K), the Board concluded that certain of the Company’s previously-issued audited consolidated financial statements on Form 10-K and unaudited interim condensed consolidated financial statements on Form 10-Q, as well as its disclosures related to such financial statements, including any reports, earnings releases, and investor presentations, and related communications issued by or on behalf of the Company with respect to the periods described in the 8-K, should no longer be relied upon. The determination by the Board was made upon the recommendation its Audit Committee and after consultation with the Company’s management team. The Company discussed these matters with both GT and Armanino during the relevant periods.

 

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Required Vote

 

Ratifying Grant Thornton LLP’s appointment requires the affirmative majority of the votes present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as a vote against Proposal 5.

 

 

 

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Other Proposals

 

As of the date of this proxy statement, Quantum is not aware of:

Any other matter properly raised to be voted on at the Annual Meeting; or

 

Any shareholder intending to present a proposal from the floor at the Annual Meeting.

 

The Annual Meeting proxy solicited by the Board grants the proxy holders discretionary authority to vote on any matters other than Proposals 1 – 5 that may be properly brought before the Annual Meeting.

 

 

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Fiscal 2024 Executive Compensation Highlights

 

This Compensation Discussion and Analysis (CD&A) describes Quantum’s overall philosophy and criteria for determining our executive officer compensation practices. The CD&A disclosures relate to Fiscal 2024 for our principal executive officer, principal financial officer and three other most highly compensated executive officers, as well as our former chief revenue officer.

 

Our named executive officers for Fiscal 2024 were:

 

     
     
James J. Lerner Kenneth P. Gianella Brian E. Cabrera
President & Chief Executive Officer
Chairman of the Board
Chief Financial Officer Chief Administrative Officer and Chief Legal and Compliance Officer
Since 2023 Since 2021
Since 2018    

 

     
     
Laura A. Nash Henk Jan Spanjaard John Hurley
Chief Accounting Officer Chief Revenue Officer Former Chief Revenue
    Officer
     
Since 2023 Since 2023 From 2021 to 2023

For much of Fiscal 2024, the Board and management team prioritized completing the accounting reevaluation process explained in various 8-Ks filed throughout the year and regaining compliance with Nasdaq listing standards. However, the Company also concentrated work to bolster our balance sheet through capital structure changes, improve our operating results by implementing significant cost reduction measures, increase our execution efficiencies through improved systems and expanded partnerships, and evolve our mission to deliver unique solutions for AI workflows and unstructured data across our customers’ entire data lifecycle.

 

Consistent with our philosophy to grow from within, we promoted Laura A. Nash to Chief Accounting Officer and Henk Jan Spanjaard to Chief Revenue Officer in June and November 2023, respectively. In their prior positions at Quantum, Ms. Nash and Mr. Spanjaard contributed greatly to Quantum’s execution and sales reach improvements and we were excited to add their broad experience to our executive leadership team. Lewis W. Moorehead, our former Chief Accounting Officer, transitioned into a new role as Vice President, Finance and Treasurer effective with Ms. Nash’s promotion. Mr. Hurley’s service as Chief Revenue Officer was terminated at the time of Mr. Spanjaard’s appointment.

 

Listening to Our Shareholders

 

The Leadership and Compensation Committee of our Board (the Committee) is committed to seeking and listening to our shareholders’ views. We value meeting with our shareholders to hear their feedback, be transparent about our business direction, and ensure our actions are aligned with their expectations. A large majority of shareholders continued to approve our annual executive compensation programs in the non-binding advisory vote at our 2023 annual shareholder meeting.

 

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Executive Compensation Philosophy and Competitive Positioning

  

Each year, the Committee reviews Quantum’s executive compensation philosophy to pay for performance. We focus on maintaining a competitive total compensation program that rewards executives for delivering results and long-term shareholder value. That philosophy is founded on four guiding principles designed to:

 

       

Attract and Retain

top talent and

compete against our

peer companies.

Motivate

desired behaviors that

allow our team to drive

Company success.

Reward

achieving the

Company’s short- and

long-term objectives.

Align

executive and

shareholder interests

to drive long-term

value.

 

We believe that our mix of fixed and variable compensation elements, including cash and equity incentives, also: 

 

Promotes achievement of Quantum’s objectives established by the Board and the Company’s senior management team;

 

Provides a strong link between pay and performance while motivating and rewarding employees for significant contributions to our success;

 

Aligns our employees’ interests with shareholder expectations;

 

Considers relevant economic and market factors; and

 

Maintains equitable compensation programs that incorporate effective internal and external controls.

Peer Group

 

Market competitiveness is an important feature of our executive compensation program and helps motivate and retain our executive officers.

 

We annually evaluate our competitive peer group to identify companies similar in financial scope, size, and industry (Peer Group). Peer Group selection criteria include revenue, market capitalization, industry, and companies with which we compete in recruiting new employee talent. We also consider shareholder perspective by including companies with similar business structures, end markets, and competitors that align with our business. The Committee approves the Peer Group and uses it to guide executive compensation decisions for the associated fiscal year, following compensation assessments, performance evaluations, and potential pay gap resolutions.

 

In assessing competitiveness, we compare individual elements including base salary, target annual incentive opportunity, annual equity awards, and total aggregate compensation for each executive officer, to those of executive officers holding similar positions or comparable levels of responsibility in our Peer Group and other similarly sized technology companies.

 

The Company uses applicable compensation data from our Peer Group as well as the Radford Global Compensation Database of technology companies with annual revenue less than $1 billion. However, the Peer Group is only one factor in our executive compensation decision-making, which is also influenced by:

 

     
Company and individual performance Compensation program affordability Market conditions

 

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With assistance and input from independent compensation consultant Compensia, the Committee reviewed relevant considerations and approved the following Peer Group for Fiscal 2024, which is consistent with the group used for fiscal 2023 compensation decisions: Peer Group Member A10 Networks, Inc. Comtech Telecommunications, Corp. Arlo Technologies, Inc. Digi International, Inc. Aviat Networks, Inc. Extreme Networks, Inc. Avid Technology, Inc. Harmonic, Inc. Brightcove Inc. Infinera Corporation CalAmp Corp. NETGEAR Inc. Cambium Networks, Ltd. PCTEL, Inc. Commvault Systems, Inc. Upland Software, Inc.

 

 

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Compensation Elements

 

We provide a mix of compensation elements that emphasizes annual cash and long-term equity incentives, in a manner that is consistent with our compensation philosophy and objectives. The primary elements of our executive compensation program consist of:

 

     
     
Annual Base Salary Target Variable Cash Long-Term Equity Grants
as a fixed compensation element determined in comparison to the Peer Group and intended to competitively attract and retain executive talent. via annual cash-based incentives structured to reward achieving long-term strategic goals and paid based on Company and individual performance. consisting of both time- and performance-based restricted stock units used to attract and retain executives while creating long-term shareholder value.

 

Fiscal 2024 Pay Mix

 

We offer our named executive officers a total direct compensation package that includes both fixed and variable compensation. Because target variable cash was not paid in Fiscal 2024, the actual compensation earned was reduced from target and actual pay mix was restricted to only base salary and long-term incentives. The charts to the right show the target and actual Fiscal 2024 compensation mixes for our CEO and other named executive officers.

Target Mix

 

 

Actual Mix1

 

 

  1Actual Mix excludes Fiscal 2024 Target Variable Cash and Myriad-measured PSUs not earned in Fiscal 2024.

 

 

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Fiscal 2024 Annual Base Salary

 

Our executive officers typically receive base salaries approximating the midpoint of our Peer Group. The Committee annually reviews our named executive officers’ base salaries with Compensia. In the third quarter of Fiscal 2024, the Committee reviewed the competitiveness of our executive officers’ compensation against the Peer Group. After considering prior year performance, consulting with Compensia regarding independent compensation recommendations, and considering the Company’s significant interest in ensuring continuity and stability in our executive leadership team while we addressed the accounting reevaluation and Nasdaq listing compliance efforts, the Committee determined that increasing Mr. Gianella’s and Mr. Cabrera’s base salaries was appropriate given their contributions, as well as necessary to remain competitive in the market. In addition, Ms. Nash received a small adjustment to her base salary during the Company’s normal Fiscal 2024 merit adjustment process. No other named executive officer base salaries were adjusted.

 

Named executive officer base salaries in Fiscal 2024 were:

 

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Name Title Fiscal 2023 Salary Fiscal 2024 Ending Salary James J. Lerner President and Chief Executive Officer Chairman of the Board $700,000 $700,000 Kenneth P. Gianella Chief Financial Officer $400,000 $450,000 Brian E. Cabrera Chief Administrative Officer $415,000 $460,000 Laura A. Nash1 Chief Accounting Officer - $290,000 Henk Jan Spanjaard2 Chief Revenue Officer - €310,000 John Hurley3 Former Chief Revenue Officer $380,000 - 1Ms. Nash was promoted to Chief Accounting Officer in June 2023 and was not a named executive officer in fiscal year 2023. 2Mr. Spanjaard was promoted to Chief Revenue Officer in November 2023 and was not a named executive officer in fiscal year 2023. Mr. Spanjaard is also eligible to earn up to an additional €340,000 in sales commissions, for a total on target earnings amount of €650,000. 3Mr. Hurley served as the Company’s Chief Revenue Officer until November 9, 2023.

 

 

 

Fiscal 2024 Quantum Incentive Plan The Quantum Incentive Plan (QIP) is the Company’s short-term incentive bonus program, structured to competitively compensate our executive officers for achieving predetermined corporate performance goals. The Committee annually approves financial performance metrics that include threshold, target, and maximum levels of performance that serve as the bonus structure for the year and must be achieved to fund the plan. The Committee also ensures that QIP metrics align with our pay-for-performance philosophy. All of our executive officers other than Mr. Spanjaard participate in the QIP, and each has an annual bonus target expressed as a percentage of his or her base salary. No annual bonus targets were increased in Fiscal 2024. QIP payments are linked to both Company and individual performance. Mr. Spanjaard is not eligible for QIP payments given his sales commission target earnings opportunity. The annual target cash incentives for each of our named executive officers were: Name Fiscal 2024 Target Bonus Bonus as a Percentage of Base Salary James J. Lerner $875,000 125% Kenneth P. Gianella $225,000 50% Brian E. Cabrera $230,000 50% Laura A. Nash $101,500 35% Henk Jan Spanjaard Not eligible Not eligible John Hurley $190,000 50%

 

 

 

 

 

Fiscal 2024 QIP Performance Metrics

 

The Committee sets annual QIP performance metrics that incorporate challenging financial targets requiring consistent high performance before any payout is triggered. The Fiscal 2024 QIP financial performance metrics approved by the Committee are detailed below. After review and discussion with Compensia, the Committee determined that a single metric of full year non-GAAP operating expenses was appropriate to align executives’ interests on the Company’s concerted efforts to reduce costs, including discretionary spend, as a lever to increase profitability.

Payout Level Metric Fiscal Target Performance Result Minimum Goal (25% payout) Full year non-GAAP operating expenses $136M Satisfied Threshold Goal (50% payout) Full year non-GAAP operating expenses $128M Not satisfied Target Goal (100% payout) Full year non-GAAP operating expenses $122M Not satisfied Maximum Goal (200% payout) Full year non-GAAP operating expenses $115M Not satisfied

Based on the Company’s achievement of full Fiscal 2024 non-GAAP operating expenses of $136M or below, the Company expects that the Committee will certify attainment of the minimum QIP goal, resulting in an expected payout cash incentive payout of 25% of each named executive officer’s individual bonus target. The Company has not yet paid any such amounts and did not make any QIP payments in Fiscal 2024.

 

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Fiscal 2024 Equity Overview

 

All of our executive officers are eligible to receive long-term equity awards granted in alignment with our pay-for-performance philosophy, rewarding executives for achieving performance goals resulting in long-term shareholder value.

 

The Committee oversees all aspects of our equity program, including actual and projected share balances, eligibility to participate in the Company’s long-term incentive plan, the size and mix of equity awards, and the annual structure of performance-based stock unit metrics. Quantum management and Compensia advise the Committee on the appropriate mix of time- and performance-based restricted stock units granted to our officers, senior leaders, and key new hires during the fiscal year. The Committee monitors the use of equity awards throughout the fiscal year, as well as their impact to burn rate, dilution, and the financial accounting for compensation expense.

 

We offer two types of equity awards:

 

     
     

Time-Based RSUs allow us to:

 

•     Attract new executive talent.

 

•     Offer competitive total compensation programs.

 

•     Provide long-term retention interests to our executive team.

 

•     Align with our shareholders’ interest in retaining a stable leadership team. 

 

Performance-Based PSUs support:

 

•     Adhering to industry-wide best practice among our Peer Group and other technology companies.

 

•     Aligning our executives’ interests with those of our shareholders.

 

•     Properly linking our executive compensation programs with Quantum’s performance.

 

Generally speaking, annual refresh equity grants for executive officers have consisted of 50% RSUs and 50% PSUs.

 

Vesting

 

Both RSU and PSU grants typically include three-year vesting schedules, subject to satisfying pre-established performance goals and maintaining ongoing employment. Infrequently, certain PSU grants may employ shorter vesting schedules (but not less than one year), depending on performance target and the Committee’s intended incentives for delivering certain results.

 

Grant Values

 

The Committee considers the following factors to determine the size of individual equity awards to our executive officers:

 

Management’s input;

 

Our pay-for-performance philosophy;

 

The number of shares of Quantum’s common stock that are available to be granted under our 2023 Plan, and how long those shares are expected to last;

 

Individual performance of each executive officer and Company financial performance for the prior fiscal year;

 

The grant date fair value of equity awards granted to executive officers in similar positions in our Peer Group and technology companies of similar size;

 

Internal parity with the size of the equity awards among the executive officers;

 

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The number, type, and current retentive value of the outstanding equity awards held individually by each of the executive officers;

 

Executive retention concerns; and

 

Other internal and external factors impacting the appropriate amount and mix of RSUs and PSUs to award.

 

We intentionally use rigorous QIP performance targets which result in cash compensation at the lower end of the range compared to peers and the broader market. We have used more meaningful equity awards to supplement this gap and attract, reward, and retain talent. This approach also ties overall executive compensation to Quantum’s common stock price performance over a period of time.

 

Fiscal 2024 Equity Awards

 

In Fiscal 2024, the Committee determined appropriate equity awards for our executive officers based on the described criteria. After considering management’s recommendations and Compensia’s advice, the Committee approved the Fiscal 2024 equity awards listed in table to the right.

 

Given that Mr. Lerner received a substantial equity award in fiscal year 2023, his Fiscal 2024 award was reduced by 300,000 shares (43%) from the equity award he was granted the prior year.

 

Name Title Time-Based Restricted Stock Unit Awards (#) Performance-Based Restricted Stock Unit Awards (#) James J. Lerner President and Chief Executive Officer Chairman of the Board 200,000 200,000 Kenneth P. Gianella Chief Financial Officer 200,000 200,000 Brian E. Cabrera Chief Administrative Officer 150,000 150,000 Laura A. Nash Chief Accounting Officer 50,000 50,000 Henk Jan Spanjaard Chief Revenue Officer 75,000 75,000 John Hurley1 Former Chief Revenue Officer - - 1Mr. Hurley served as the Company’s Chief Revenue Officer until November 9, 2023 and did not receive an equity grant in Fiscal 2024. Time-Based Restricted Stock Units All named executive officers were granted 50% of their total Fiscal 2024 equity awards in RSUs scheduled to vest in equal installments on each grant date anniversary, with full vesting after three years, subject to continued employment.

 

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Performance-Based Restricted Stock Units

 

The Committee received recommendations from Quantum management, outside legal counsel, and Compensia regarding structuring PSU metrics that were challenging but achievable and aligned our long-term executive performance to the Company’s strategic objectives and shareholders’ interests. The Committee approved two Fiscal 2024 PSU metrics, and included separate time-based vesting requirements subject to continued employment on any PSUs deemed earned according to the performance metrics:

 

     
     

40% Full Year Fiscal 2024 

non-GAAP gross margin

 

•     March 31, 2025 performance deadline

 

•     Three-year vesting requirement

 

•     Performance target achieved

 

 

5 Initial Myriad Customers

 

•     March 31, 2024 performance deadline

 

•     Two-year vesting requirement

 

•     Performance target not achieved

 

The Committee considered the Company’s fiscal year 2022 and 2023 financial performance and executive compensation plan when setting the Fiscal 2024 PSU metrics, seeking to make them challenging yet achievable. The gross margin and Myriad sales PSU metrics were included in Fiscal 2024 as they reflected key areas of Fiscal 2024 performance growth potential and aligned executive compensation interests with the Company’s performance and shareholder interests. A two-year vesting period for the Myriad PSU metric was determined to be appropriate in recognition of the multi-year development process leading to launch of the Myriad product.

Although our Myriad platform reached general availability late in Fiscal 2024, we did not secure five initial customers before March 31, 2024. As a result, PSUs granted subject to fully achieving that performance metric were cancelled and returned to the 2023 Plan. Given our final Fiscal 2024 operating results, we expect the Committee to certify attainment of the gross margin-based PSUs. A summary of the Fiscal 2024 performance-based equity grants and PSU metrics is provided in the following table. Total PSUs (#) at: Name 40% Full Fiscal Year Gross Margin (50% Weight) 5 Initial Myriad Customers (50% Weight) Total PSU Grant (#) James J. Lerner 100,00 100,000 200,000 Kenneth P. Gianella1 100,000 75,000 200,000 Brian E. Cabrera 75,000 75,000 150,000 Laura A. Nash1 25,000 - 50,000 Henk Jan Spanjaard 37,500 37,500 75,000 John Hurley - - - 1Ms. Nash’s and 50,000 of Mr. Gianella’s Fiscal 2024 PSU grants were awarded prior to their promotions and the Committee’s approval of Fiscal 2024 performance targets, so were based on the then-current structure of 50% (25,000) based on 40% full fiscal year gross margin and 50% (25,000) based on a $3.00 100-day calendar average stock price.

 

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Perquisites and Other Benefits

 

We offer Company-paid tax preparation services to our executive officers and non-executive vice presidents. We believe these perquisites are limited and reasonable given the executive officers' responsibilities.

 

Except for these items and the non-qualified deferred compensation plan discussed below, we do not provide any other perquisites or personal benefits to our executive officers that are not available to all other full-time employees.

 

Employee Stock Purchase Plan

 

We offer all eligible employees, including our executive officers, the ability to acquire shares of Quantum’s common stock through our Employee Stock Purchase Plan (the ESPP). The plan allows employees to purchase the Company’s stock twice per year at a 15% discount relative to the market price. The Committee believes that the plan provides a cost-efficient method of encouraging employee stock ownership. ESPP contributions and participation were paused in Fiscal 2024, but we anticipate beginning a new offering period in the second half of Fiscal 2024.

 

Health and Welfare Benefits

 

We offer health, welfare, and other benefit programs to substantially all full-time employees. We share the cost of health and welfare benefits with our employees, with amounts depending on the level of coverage elected. Except for Mr. Hurley, the health and welfare benefits offered to our executive officers are identical to those offered to other full-time employees.

As Mr. Hurley received medical, dental, and vision benefits from a third party not associated with Quantum and did not participate in our corresponding benefit plans, we provided him a taxable monthly stipend to cover the premiums associated with those benefits. For his tenure as an employee in Fiscal 2024, the stipend paid was $2,758 per month. In Fiscal 2024, we also provided him with a taxable lump sum stipend of $7,758 to cover the costs of his comprehensive annual medical assessment. The stipends were cancelled with Mr. Hurley’s termination from the Company on December 1, 2023, for which we paid a lump sum payment of $18,000 in January 2024.

 

Qualified Retirement Benefits

 

All U.S.-based employees, including our executive officers, are eligible to participate in Quantum’s tax-qualified 401(k) Savings Plan. Participants may defer cash compensation up to statutory IRS limits and may receive a discretionary matching Company contribution. Participants direct their own investments in the plan, which does not include an opportunity to invest in Quantum’s common stock.

 

Non-Qualified Deferred Compensation Plan

 

We maintain a non-qualified deferred compensation plan which enables select employees, including our executive officers, to defer a portion of their base salary and annual bonus payouts, and associated federal and state income taxes. Plan participants direct the deemed investment of their deferred accounts among a preselected group of investment funds which excludes shares of Quantum common stock.

 

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The deemed investment accounts mirror the investment options available under Quantum’s 401(k) Savings Plan, including the ability to make daily changes to elected investments. Plan participants’ deferred accounts are credited with interest based on their selected deemed investments. We do not make employer or matching contributions to the non-qualified deferred compensation accounts. None of our executive officers participated in the plan in Fiscal 2024.

 

     
     

401(k) Plan

 

•     Tax-qualified

 

•     Discretionary Company match contribution

 

•     Employee-directed investments

 

•     No Quantum common stock included

 

 

Deferred Compensation Plan

 

•     Non-qualified

 

•     No Company contribution

 

•     Employee-directed investments

 

•     No Quantum common stock included

 

 

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Executive Compensation Process and Decision Making

 

Board and Committee Roles

 

The Committee oversees and approves all compensation and benefits for our executive officers, excluding the CEO. The independent directors review and approve CEO compensation based on the Committee’s recommendations.

 

The Committee reviews and approves corporate goals and objectives relevant to executive officer compensation. It also measures, at least annually, executive officer performance against those goals and objectives and communicates results to the CEO and Board.

 

Executive Compensation Consultant Role

 

In Fiscal 2024, the Committee engaged Compensia on a number of matters, including setting executive compensation. Compensia performs services only for the Committee, at its discretion. The Committee regularly reviews its advisors’ independence and determined that no relationship or conflict of interest exists that would preclude Compensia from independently advising the Committee.

 

Executive Management Role

 

The Committee reviews recommendations regarding compensation leveling and market trends from our executive management team, including the CEO, Chief Financial Officer, and Chief Administrative Officer. The Board and Committee retain final authority over executive compensation decisions. Management also assists the Committee in monitoring compensation related risk by reporting to the Committee on:

       
       
Equity Pool Balances Burn Rate and Dilution Shareholder Return Quantum’s Strategic Goals

 

Peer Group Role

 

The Committee examines Peer Group pay practices and programs and compares the total target compensation for our CEO and officers to similar roles as market reference points. While it is the Committee’s goal to ensure our compensation practices are competitive, the Committee also considers other factors when making compensation decisions, including Quantum’s financial position and individual and Company performance.

 

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Compensation Governance Best Practices

 

We are committed to designing and implementing sound executive compensation policies and practices. The Committee seeks guidance from varying levels of management within the Human Resources, Finance, and Legal teams, and engages with outside legal counsel and other external advisors to ensure proper governance protocols are in place and executed.

 

Our key compensation governance foundations and practices include:

 

       
               
 

Pay-for-Performance

 

•     100% of Fiscal 2024 QIP goals were tied to Company performance. 

 

•     50% of Fiscal 2024 equity awards were performance-based, and one-half of those were tied to Company gross margin performance. 

 

•     60% of the CEO’s total Fiscal 2024 target compensation was at risk, compared to an average 43% for other named executive officers.

 

Risk Mitigation

 

•     Annual risk assessment of compensation plans, policies, and practices. 

 

•     Anti-hedging/anti-pledging policies.

 

•     Clawback provisions. 

 

•     Stock ownership guidelines. 

 

•     Insider trading policy.

 

•     Independent compensation consultant.

 

Compensation Program Features

 

•     Pay mix emphasis on pay-for-performance.

 

•     Independent oversight.

 

•     Competitive benchmarking against Peer Group and Radford survey data.

 

•     No single-trigger change of control.

 

•     Limited perquisites.

 

Independent Consultant

 

•     Regular Committee engagement with our external independent compensation consultant on Board and executive compensation matters.

 

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Clawback Policy

 

•     Complies with the final Nasdaq listing standard implementing the Dodd-Frank Act clawback provisions.

 

•     Covers cash and equity incentive or bonus compensation paid to all Section 16 executive officers and all vice presidents.

 

Stock Ownership Guidelines

 

•     Please refer to the Stock Ownership Guidelines paragraph heading for an explanation of our director and officer stock ownership guidelines.

 

Anti-Hedging and Anti-Pledging Policies

 

•     Expressly prohibit buying Quantum securities on margin or using or pledging owned shares as collateral for loans, in addition to engaging in transactions in publicly traded options, puts and calls, and other derivatives of the Company’s stock.

•     Extends prohibition to any hedging or similar transaction designed to decrease the risks associated with holding Company securities.

 

Insider Trading Policy

 

•     Prohibits trading during a closed window.

•     Precludes buying stock on margin.

•     Prohibits pledging shares owned as loan collateral.

•     Applies to all directors and employees.

 

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No Single-Trigger Change of Control

 

•     Our change of control policy maintains that a double-trigger event must occur before an executive is entitled to specified compensation and benefits.

 

Annual Risk Assessment

 

•     We conduct an annual risk assessment of our executive compensation practices and believe our Fiscal 2024 programs were appropriate and discouraged excessive risk taking.

 

Pay Mix

 

•     Retaining our executive officers remains a primary focus as internal and external factors impact our business.

 

•     For Fiscal 2024, our long-term incentive mix was equally balanced between performance- and time- based awards.

 

•     Performance-based awards align our executives’ interests with Company performance goals.

 

•     Time-based awards help address potential retention concerns.

 

Perquisites

 

•     We grant only limited perquisites to our officers, as more fully described under the Perquisites and Other Benefits paragraph heading.

 

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Change of Control Severance Policy and Employment and Severance Agreements

 

Change of Control Agreements 

 

Our change of control agreements are designed to promote the best interests of the Company and our shareholders by maintaining the continued dedication and objectivity of key employees during a possible or actual change of control. The agreements provide eligible employees with compensation and stock benefits upon an involuntary termination (as defined in the agreement), providing financial security and encouraging them to stay at Quantum during times of uncertainty.

 

Employment and Severance Agreements 

 

We have employment agreements with all of our named executive officers. These agreements provide for certain severance benefits in the event of a qualifying termination of employment not associated with a change of control. Each named executive officer is employed at will and may be terminated at any time and for any reason, with or without notice.

 

Our current change of control and employment agreements are described further under Potential Payments Upon Termination or Change of Control.

   

 

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Tax and Accounting Considerations and Risks Related to Compensation Policies and Practices

 

Tax and Accounting Considerations 

 

Among other factors, the Committee considers the possible tax and accounting consequences applicable to Quantum or its executives when making decisions regarding our executive compensation programs. In particular, section 162(m) of the Internal Revenue Code limits our ability to deduct remuneration paid to our executives exceeding $1 million. While the Committee considers these factors, including the impact of section 162(m), it maintains maximum flexibility in designing compensation programs and does not limit compensation to those types that are intended to be deductible.

 

Risks Related to Compensation Policies and Practices 

 

Our Board and Committee conduct a risk assessment of our employee compensation policies and practices, including those relating to our executive compensation program. We also evaluate our pay-for-performance programs to determine whether they create unnecessary risk to the Company.

 

Based on our Fiscal 2024 risk assessment, we believe that our compensation programs are unlikely to create excessive risks adversely impacting Quantum.

 

Our programs contain various mitigation features to ensure our employees, including our executive officers, are not encouraged to take excessive or unnecessary risks in managing Quantum’s business. These features include:

The Committee’s independent oversight of the compensation programs;

 

An executive compensation program subject to our clawback policy;

 

The Committee’s annual review of target compensation levels for our executive officers based on a reasonable competitive Peer Group and other market data, including evaluating the alignment of executive compensation with performance;

 

A balanced mix of compensation programs that focuses our employees on achieving both short and long-term objectives;

 

A meaningful and robust insider trading policy that all our employees must follow;

 

Incentives focused on using reportable financial metrics, including non-GAAP gross margin and operating expense, revenue, and free cash flow;

 

Multiyear service-based vesting requirements for equity awards;

 

Risk mitigators, including stock ownership guidelines for the CEO, Chief Financial Officer, and the Board; and

 

Anti-pledging stock policies.
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The following table displays our named executive officer compensation as of the end of Fiscal 2024 for fiscal years 2024, 2023, and 2022. Name and Title Year Salary1 ($) Bonus2 ($) Stock Awards3 ($) All Other Compensation4 ($) Total ($) Footnotes James J. Lerner 2024 700,000 - 186,000 4,261 890,261 1The amounts reported in the Salary column represent the U.S. dollar values of the President & Chief Executive 2023 673,462 - 953,194 8,852 1,635,508 cash base salaries earned in Fiscal 2024. Officer 2022 577,404 - 1,939,820 9,678 2,526,902 2No bonuses were paid under the Quantum Incentive Plan in Fiscal 2024. Mr. Hurley Kenneth P. Gianella 2024 418,654 - 185,100 3,800 607,554 received a one-time retention bonus payout in fiscal year 2023, which was subject to Chief Financial Officer 2023 80,000 - 443,267 - 523,267 clawback based on voluntary termination or termination for cause prior to March 31, Brian E. Cabrera 2024 431,788 - 139,500 4,534 575,822 2023 but has now been fully earned. Mr. Spanjaard earns sales commissions. Chief Administrative Officer 2023 391,731 - 307,217 7,619 706,567 3The amounts reported were computed in accordance with ASC 718, excluding the 2022 318,462 - 1,589,991 4,361 1,912,814 effect of estimated forfeitures. See notes to the Company’s Annual Laura A. Nash5 2024 275,385 - 46,500 580 322,465 Report on Form 10-K for Fiscal 2024, regarding assumptions underlying valuing Chief Accounting Officer equity awards. Henk Jan Spanjaard5 2024 289,168 237,652 69,750 31,340 627,910 4All Other Compensation includes reimbursement for tax planning services. For Mr. Chief Revenue Officer Hurley, it includes health stipends as described in Perquisites and Other Benefits, plus John Hurley 2024 263,077 - - 240,317 503,394 $190,000 paid in accordance with his severance agreement following his termination Former Chief Revenue 2023 380,000 190,000 408,512 32,255 1,010,767 without cause, as defined therein. For Mr. Spanjaard, it includes a car allowance. Officer 2022 216,308 - 1,680,250 22,096 1,918,654 5Ms. Nash and Mr. Spanjaard were not named executive officers before Fiscal 2024. Fiscal 2024 Summary Compensation Table

 

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The table below presents information on incentive plan-based awards granted to our named executive officers. Estimated Future Payouts Under Non-Equity Incentive Plan Awards1 Estimated Future Payouts Under Equity Incentive Plan Awards2 All Other Stock Awards; Number of Shares of Stock or Units3 (#) Grant Date Fair Value of Stock and Option Awards4 ($) Footnotes Name Grant Date Threshold ($) Target ($) Maximum ($) Threshold ($) Target ($) Maximum ($) James J. Lerner 1/1/2024 200,000 4,000 1The amounts shown under “Estimated Future Payouts Under 1/1/2024 200,000 182,000 Non-Equity Incentive Plan Awards” represent the threshold, 437,500 875,000 1,750,000 target, and maximum amounts payable under the QIP. Only a Kenneth P. Gianella 9/1/2023 50,000 1,000 minimum 25% bonus target was achieved based on the 9/1/2023 50,000 45,500 Company’s financial performance, which did not pay out in 1/1/2024 150,000 3,000 Fiscal 2024. See Compensation Discussion and Analysis for more 1/1/2024 150,000 136,500 information about the QIP. 112,500 225,000 450,000 2Approximately one-half of PSUs granted were cancelled and Brian E. Cabrera 1/1/2024 150,000 3,000 returned to the plan because the associated performance 1/1/2024 150,000 136,500 metrics were not achieved in Fiscal 2024. See Compensation 115,000 230,000 460,000 Discussion and Analysis for more information. Laura A. Nash 7/1/2023 50,000 1,000 3RSUs vest in equal annual installments over three years on each 7/1/2023 50,000 45,500 anniversary of the grant date, subject to continued employment. 50,750 101,500 203,000 4The amounts reported were computed in accordance with ASC Henk Jan Spanjaard 1/1/2024 75,000 1,500 718, excluding the effect of estimated forfeitures. See notes to 1/1/2024 75,000 68,250 the Company’s Annual Report on Form 10-K filed for Fiscal John Hurley - - - - - - - - 2024 for more information. Fiscal 2024 Grants of Plan-Based Awards

 

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The following table provides information regarding outstanding restricted stock unit awards held by our named executive officers as of March 31, 2024. There were no outstanding stock options held by our named executive officers at that time. Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($)16 Equity Incentive Plan Awards Name Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) Market Value or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)16 Footnotes James J. Lerner 66,6661 40,000 1Granted 10/1/21 and vests annually over three years beginning with the grant date, subject to continued employment. 66,6662 40,000 2Unearned PSUs granted 10/1/21 subject to satisfying performance criteria and continued employment. 233,3333 140,000 3Granted 7/1/22 and vests annually over three years beginning with the grant date, subject to continued employment. 233,1004 139,860 4Unearned PSUs granted 7/1/22 subject to satisfying performance criteria and continued employment. 200,0005 120,000 5Granted 1/1/24 and vests annually over three years beginning with the grant date, subject to continued employment. 200,0006 120,000 6Unearned PSUs granted 1/1/24 subject to satisfying performance criteria and continued employment. Kenneth P. Gianella 116,6667 70,000 7Granted 2/1/23 and vests annually over the three years beginning with the grant date, subject to continued employment. 49,9508 29,970 8Unearned PSUs granted 2/1/23 subject to satisfying performance criteria and continued employment. 50,0009 30,000 9Granted 9/1/23 and vests annually over the three years beginning with the grant date, subject to continued employment. 50,00010 30,000 10Unearned PSUs granted 9/1/23 subject to satisfying performance criteria and continued employment. 150,0005 90,000 18Market value calculated by multiplying the number of units shown in the table by $.60, the closing stock price value on March 31, 2024. 150,0006 90,000 Outstanding Equity Awards at Fiscal 2024 Year End

 

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(continued from prior page) Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($)18 Equity Incentive Plan Awards Name Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) Market Value or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)18 Footnotes Brian E. Cabrera 58,33311 35,000 1Granted 10/1/21 and vests annually over three years beginning with the grant date, subject to continued employment. 1,6661 1,000 2Unearned PSUs granted 10/1/21 subject to satisfying performance criteria and continued employment. 1,6502 990 3Granted 7/1/22 and vests annually over three years beginning with the grant date, subject to continued employment. 1,66612 1,000 4Unearned PSUs granted 7/1/22 subject to satisfying performance criteria and continued employment. 1,66613 1,000 5Granted 1/1/24 and vests annually over three years beginning with the grant date, subject to continued employment. 58,3333 35,000 6Unearned PSUs granted 1/1/24 subject to satisfying performance criteria and continued employment. 58,2754 34,965 11Granted 5/1/21 and vests annually over the three years beginning with the grant date, subject to continued employment. 16,66614 10,000 12Granted 11/1/21 and vests annually over three years beginning with the grant date, subject to continued employment. 16,65015 9,990 13Unearned PSUs granted 11/1/21 subject to satisfying performance criteria and continued employment. 150,0005 90,000 14Granted 11/1/22 and vests annually over three years beginning with the grant date, subject to continued employment. 150,0006 90,000 15Unearned PSUs granted 11/1/22 subject to satisfying performance criteria and continued employment. Laura A. Nash 3,3331 2,000 16Granted 7/1/23 and vests annually over three years beginning with the grant date, subject to continued employment. 16,6663 10,000 17Unearned PSUs granted 11/1/22 subject to satisfying performance criteria and continued employment. 50,00016 30,000 18Market value calculated by multiplying the number of units shown in the table by $.60, the closing stock price value on March 31, 2024. 50,00017 30,000

 

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(continued from prior page) Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($)18 Equity Incentive Plan Awards Name Number of Unearned Shares, Units, or Other Rights That Have Not Vested (#) Market Value or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested ($)18 Footnotes Henk Jan Spanjaard 3,3331 2,000 1Granted 10/1/21 and vests annually over three years beginning with the grant date, subject to continued employment. 10,0002 6,000 2Unearned PSUs granted 10/1/21 subject to satisfying performance criteria and continued employment. 13,3333 8,000 3Granted 7/1/22 and vests annually over three years beginning with the grant date, subject to continued employment. 75,0005 45,000 5Granted 1/1/24 and vests annually over three years beginning with the grant date, subject to continued employment. 75,0006 45,000 6Unearned PSUs granted 1/1/24 subject to satisfying performance criteria and continued employment. John Hurley - - - - 18Market value calculated by multiplying the number of units shown in the table by $.60, the closing stock price value on March 31, 2024.

 

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The table below provides information on Fiscal 2024 restricted stock and RSU vesting for our named executive officers. There were no outstanding stock options held by our named executive officers, who did not exercise option awards in Fiscal 2024. Equity Incentive Plan Awards Name Number of Shares Acquired on Vesting Value Realized on Vesting1 ($) James J. Lerner 276,667 271,667 Kenneth P. Gianella 58,334 23,334 Brian E. Cabrera 99,168 113,683 Laura A. Nash 15,000 14,867 Henk Jan Spanjaard 26,666 9,367 John Hurley 141,666 112,750 1The amount reported is calculated by multiplying the number of vested shares by the market price of the underlying shares of Quantum’s common stock on the vesting date. Fiscal 2024 Options Exercised and Stock Vested

 

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We maintain change of control agreements with all of our named executive officers, and their employment agreements provide for certain severance benefits in the event of a qualifying employment termination not associated with a change of control. While the Board approved some administrative updates to the agreements in Fiscal 2023, the material terms have remained unchanged since fiscal year 2019, and are explained in the following table. CEO Named Executive Officers Excluding CEO Involuntary Terminations in Connection with a Change of Control1 Total Cash 1.5x Salary + 1.5x Target Bonus 1.0x Salary + 1.0x Target Bonus Equity •Any outstanding stock-based compensation held as of the termination date and not subject to performance criteria automatically vests. •Any stock-based compensation subject to performance criteria based on the Company’s stock price, whether absolute or relative, will be deemed earned based on the actual stock price performance through the close of the change of control transaction. •Any stock-based compensation subject to performance criteria not based on the Company’s stock price will be deemed satisfied at target levels. COBRA If elected, Quantum will reimburse COBRA premiums for up to: •18 months for the CEO; and •12 months for other executives following the involuntary termination date or until the employee or eligible dependents are no longer eligible to receive continued COBRA coverage. Involuntary Terminations Outside of a Change of Control2 Total Cash Lump sum cash payment equivalent to 12 months of the then-annual base salary Lump sum cash payment equivalent to 6 months of the then-annual base salary Equity No accelerated vesting No accelerated vesting COBRA2 Monthly reimbursement equivalent to 12 months Monthly reimbursement equivalent to 6 months 1A Change of Control occurs for this purpose only if an investor becomes the direct or indirect beneficial owner of Company securities representing more than 50% of the total outstanding voting power. 2In the event the Company believes it cannot provide the COBRA benefits without potentially violating applicable law, after employment terminates the Company will provide a taxable monthly payment in an amount equal to the monthly COBRA premium required to continue coverage under the Company’s group health plan. 3The severance is subject to entering into a release of claims and all payments are provided subject to applicable taxes or other required withholdings. Potential Payments Upon Termination or Change of Control for Fiscal 2024

 

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Fiscal 2024 Potential Severance Benefits Type of Benefit Potential Payments Upon Involuntary Termination Name Within 12 Months After a Change of Control ($) Not Associated with a Change of Control ($) James J. Lerner Cash Severance Payments 2,362,500 700,000 Vesting Acceleration1 599,859 - Continued Coverage of Employee Benefits2 43,388 28,926 Total Termination Benefits 3,005,747 728,926 Kenneth P. Gianella Cash Severance Payments 675,000 225,000 Vesting Acceleration1 339,970 - Continued Coverage of Employee Benefits2 27,324 13,662 Total Termination Benefits 1,042,294 238,662 Brian E. Cabrera Cash Severance Payments 690,000 230,000 Vesting Acceleration1 308,943 - Continued Coverage of Employee Benefits2 27,506 13,753 Total Termination Benefits 1,026,449 243,753 Laura A. Nash Cash Severance Payments 391,500 145,000 Vesting Acceleration1 71,999 - Continued Coverage of Employee Benefits2 27,506 13,753 Total Termination Benefits 491,005 158,753 Type of Benefit Potential Payments Upon Involuntary Termination Name Within 12 Months After a Change of Control ($) Not Associated with a Change of Control ($) Henk Jan Spanjaard Cash Severance Payments 702,696 167,566 Vesting Acceleration1 106,000 - Continued Coverage of Employee Benefits2 - - Total Termination Benefits 808,696 167,566 John Hurley Cash Severance Payments 570,000 190,000 Vesting Acceleration1 - - Continued Coverage of Employee Benefits2 36,000 18,000 Total Termination Benefits 606,000 208,000 1Reflects the aggregate market value of outstanding and unvested stock option grants, RSU awards, and PSU awards based on performance metrics other than common stock price. For unvested RSU and PSU awards, the aggregate market value is computed by multiplying $.60 by the number of unvested awards outstanding as of March 31, 2024. For purposes of vesting acceleration, any unvested PSU awards that have not satisfied performance criteria are included. We account for accelerated vesting or other modifications of stock-based awards in accordance with ASC 718. 2Assumes continued employee benefits coverage at the Fiscal 2024 COBRA premium rate for health, dental, and vision coverage, based on current enrollment selections.

 

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The table below presents information relating to compensation plans under which we may issue shares of our common stock, as of March 31, 2024. Number of Shares to be Issued Upon Exercise of Outstanding Stock Options and Settlement of Outstanding Restricted Stock Options1 Weighted-Average Exercise Price of Outstanding Options Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (a) (b) (c) Equity Compensation Plans Approved by Shareholders2 3,068,732 - 10,769,4113 Equity Compensation Plans Not Approved by Shareholders4 294,116 - 767,547 Total 3,362,848 - 11,536,958 1Consists of 1,941,737 shares issuable upon settlement of RSUs that are not subject to performance conditions and the maximum payable 1,126,995 shares issuable upon settlement of performance-based RSUs. 2This category consists of the 2023 Plan and the ESPP. 3Consists of 6,681,745 shares of common stock that remained available for issuance under the 2023 Plan as of March 31, 2024 and 4,087,666 shares that remain available under the ESPP. Additional grants made since April 1, 2024 reduced the available balance under the 2023 Plan as of the Record Date to 5.112 million shares. 4This category contains only the Company’s 2021 Inducement Plan, available only for initial grants to newly-hired executive officers. Equity Compensation Plan Information

 

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CEO Pay Ratio and Security Ownership of Certain Beneficial Owners and Management

 

CEO Pay Ratio

 

To calculate our Fiscal 2024 CEO pay ratio, we identified our median employee in Fiscal 2024 by:

 

Identifying all active Quantum employees on March 31, 2024.

 

Sorting all identified employees, excluding our CEO, by their total target cash compensation valued in United States dollars, which identified two median employees.

 

Selecting the median employee used for the pay ratio calculation based on the older hire date.

 

Comparing that employee’s total target cash compensation to Mr. Lerner’s total compensation earned in Fiscal 2024.

 

As of the Record Date, we employed 718 people globally, with 51% based in North America, 24% in Europe, the Middle East and Africa, and 25% in Asia Pacific.

 

Mr. Lerner’s total Fiscal 2024 as calculated in the Summary Compensation table was $890,261, while the total target cash compensation for the median employee on March 31, 2024 was $122,229. The ratio of these amounts is 7.3 to 1.

 

This ratio is a reasonable estimate calculated in a manner consistent with the U.S. Securities Exchange Act of 1934, Regulation S-K, Item 402(u). SEC rules for identifying the median employee allow companies to apply various methodologies and assumptions, so the pay ratio we report may not be comparable to those reported by other companies.

Security Ownership of Certain Beneficial Owners and Management

 

The table that follows sets forth as of the Record Date, certain information regarding the beneficial ownership of the Company’s common stock by:

 

Each person the Company knows to beneficially own more than five percent of the outstanding shares of common stock.

 

Each of the Company’s current directors and director nominees.

 

Each of the Fiscal 2024 named executive officers.

 

All current directors and officers as a group.

 

Unless otherwise indicated, the business address for the beneficial owners listed below is 224 Airport Parkway, Suite 550, San Jose, California, 95110.

 

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Name and Address Number of Shares Beneficially Owned1 Percent of Class2Shares Outstanding at the Record Date: 95,849,9385% or Greater Shareholders:Neuberger Berman Group LLC, 1290 Avenue of the Americas, New York, NY 101043 14,819,147 15.5%Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 926604 10,248,322 10.7%Long Focus Capital Management LLC, 207 Calle Del Parque A&M Tower, 8th Floor San Juan, PR 009125 9,160,819 9.6%ADK Soho Fund LP, 429 Lenox Avenue, Miami Beach, FL 331396 7,654,343 8.0%B. Riley Financial, Inc., 11100 Santa Monica Boulevard, Suite 800, Los Angeles, CA 900457 5,025,471 5.2%The Vanguard Group, 100 Vanguard Boulevard, Malvern, PA 193558 5,018,880 5.2%Directors, Director Nominees and Named Executive Officers:James J. Lerner9 2,138,125 2.2%Marc E. Rothman 297,625 *Yue Zhou (Emily) White 102,766 *Christopher D. Neumeyer - -Donald J. Jaworksi 73,498 *Hugues Meyrath 73,498 *Todd W. Arden - -John R. Tracy - -Kenneth P. Gianella 375,000 *Brian E. Cabrera10 430,192 *Laura A. Nash11 117,304 *Henk Jan Spanjaard12 127,778 *John Hurley 341,519 *All Current and Nominated Directors and Executive Officers as a Group (12 Holders) 3,735,786 3.9% © 2024 Quantum Corporation | | 93

 

 

 

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© 2024 Quantum Corporation | | 94Footnotes1Except pursuant to applicable community property laws or as indicated in the footnotes to this table, to the Company’s knowledge, each shareholder identified in the table possesses sole voting and investment power with respect to all shares of common stock shown asbeneficially owned by the shareholder.2Applicable percentage is based on 95,849,938 shares of common stock outstanding as of the Record Date. Beneficial ownership is determined in accordance with SEC rules, based on factors including voting and share investment power. Common stock shares subject tooptions or warrants exercisable currently or within 60 days after the Record Date, and common stock shares deliverable upon settling RSUs that vest within 60 days after the Record Date, are considered beneficially owned by the holder. * Represents beneficial ownership of lessthan 1%.3According to a Schedule 13G/A filed on February 12, 2024 by Neuberger Berman Group LLC, Neuberger Berman Investment Advisers LLC, Neuberger Berman Equity Funds, and Neuberger Berman Intrinsic Value Fund, and Neuberger Berman Group LLC have a shared votingpower of 12,029,681 shares and shared dispositive voting power of 14,819,147 shares. Neuberger Berman Investment Advisors LLC has shared voting power of 11,957,523 shares and shared dispositive voting power of 14,730,112 shares. Neuberger Berman Equity Fundsand Neuberger Berman Intrinsic Value Fund have a shared voting and dispositive power of 7,453,714 shares.4According to a Schedule 13D/A filed on July 14, 2023 by PIMCO, PIMCO beneficially owns and has dispositive power for 18,023,611 shares. The securities are held by certain funds and accounts for which the PIMCO serves as investment manager, advisor or sub-advisor,including (i) OC II FIE V LP, which holds 2,980,860 shares and warrants to purchase 6,525,289 shares and (ii) OC III LVS XL LP, which holds 7,267,462 shares and warrants to purchase 1,250,000 shares.5According to a Schedule 13G/A filed jointly on February 14, 2024 by Long Focus Capital Management, LLC, Long Focus Capital Master, LTD, Condagua, LLC, John B. Helmers, and A. Glenn Helmers (collectively, the “Long Focus Entities”), (i) John B. Helmers and Long FocusCapital Management LLC have shared voting and dispositive power with respect to 9,160,819 shares, and (ii) Long Focus Capital Master, Ltd. has shared voting and dispositive power with respect to 5,921,058 shares, and (iii) Condagua, LLC and A. Glenn Helmers have sharedvoting and dispositive power with respect to 3,239,761 shares. Long Focus Capital Management, LLC, John B. Helmers, and A. Glenn Helmers do not directly own any shares of common stock. A. Glenn Helmers controls Condagua, LLC. Pursuant to an investment managementagreement, Long Focus Capital Management, LLC maintains investment and voting power with respect to the shares of common stock held by Long Focus Capital Master, Ltd. John B. Helmers controls Long Focus Capital Management, LLC, and maintains investment andvoting power with respect to the shares of common stock held by Condagua, LLC.6According to a Schedule 13G/A filed on January 17, 2024 by ADK Soho Fund LP, ADK Capital LLC and Nat Klipper, ADK Soho Fund LP and ADK Capital LLC have sole voting and dispositive power with respect to 7,654,343 shares. Nat Klipper has sole voting and dispositivepower with respect to 9,309,935 shares. ADK Capital LLC serves as the general partner of ADK Soho Fund LP, which directly holds the shares and Nat Klipper serves as the Managing Member and the Managing Partner of ADK Soho Fund LP.7According to a Schedule 13D/A filed on August 8, 2022 by Bryant R. Riley, B. Riley Financial, Inc. (BRF), B. Riley Securities, Inc. (BRS), and BRF Investments, LLC (BRFI), Bryant R. Riley has a sole voting and dispositive power with respect to 925,515 shares of which (i) 832,729shares are held jointly with his wife, Carleen Riley, (ii) 12,614 shares are held as sole custodian for the benefit of Abigail Riley, (iii) 12,613 shares are held as sole custodian for the benefit of Eloise Riley, (iv) 12,615 shares are held as sole custodian for the benefit of SusanRiley, and (v) 54,944 shares are held as sole trustee of the Robert Antin Children Irrevocable Trust. Bryant R. Riley has a shared voting and dispositive power with respect to 4,099,956 shares held directly by BRS or BRFI. BRS beneficially owns directly 346,378 shares. BRF is theparent company of BRS. As a result, BRF may be deemed to indirectly beneficially own the shares held by BRS. BRFI beneficially owns directly 3,753,578 shares. BRF is the parent company of BRFI. As a result, BRF may be deemed to indirectly beneficially own the shares heldby BRFI. Bryant R. Riley disclaims beneficial ownership of the shares held by BRS and BRFI, or the Robert Antin Children Irrevocable Trust in each case except to the extent of his pecuniary interest therein.8According to a Schedule 13G filed on February 13, 2024 by The Vanguard Group, it has sole dispositive power with respect to 4,989,453 shares and shared dispositive power with respect to 29,427 shares.9Includes 233,217 shares of common stock that are deliverable in settlement of vested restricted stock units within 60 days of the Record Date.10Includes 58,305 shares of common stock that are deliverable in settlement of vested restricted stock units within 60 days of the Record Date.11Includes 25,000 shares of common stock that are deliverable in settlement of vested restricted stock units within 60 days of the Record Date.12Includes 6,666 shares of common stock that are deliverable in settlement of vested restricted stock units within 60 days of the Record Date.

 

 

 

Pay Versus Performance

 

As discussed in our Compensation Disclosure and Analysis, our executive compensation program is designed to reflect a strong focus on pay-for-performance to align our executives’ interests with those of our shareholders. As required by Item 402(v) of Regulation S-K, we are providing information about the relationship between executive “compensation actually paid” (CAP) computed in accordance with Item 402(v) of Regulation S-K and certain financial performance metrics of the Company.

 

The Committee considered the following pay versus performance disclosure in making its pay decisions for Fiscal 2024.

 

Tabular List of Performance Measures

 

While we utilize several performance measures to align executive compensation with our performance, not all of these measures are presented in the Pay Versus Performance table shown below.

 

We consider achievements related to the following metrics to be the most important links between performance and the compensation paid to our named executive officers for the most recently completed fiscal year:

 

       
       
Revenue Operating Expenses Gross Margin Stock Price

 

                     
     

Average
Summary
Compensation
Table Total for
Non-PEO NEOs 
($)

Average

Compensation
Actually Paid
to Non-PEO
NEOs3 ($) 

Value of Initial Fixed $100
Investment Based on:
      

Fiscal
Year1 

Summary
Compensation
Table Total for
PEO ($) 

Compensation
Actually Paid
to PEO2 ($)

Company
TSR4 ($) 

Peer
Group
TSR5 ($)
Net Income
($) (in
thousands)
Stock
Price6
($)
 
2024 890,261 605,312 527,429 355,588 18 264 (41,286) .60  
2023 1,635,508 613,584 698,916 469,781 37 252 (18,368) 1.15  
2022 2,526,902 (2,063,248) 1,437,464 467,884 73 269 38,355 2.27  
2021 2,989,619 9,101,583 919,011 2,232,959 255 191 (35,459) 8.33  

1 

Mr. Lerner served as our Chief Executive Officer and our principal executive officer (PEO) through the entire reporting period. The named executive officers included in the non-PEO named executive officer (NEO) average for each year are as follows: 

•     Fiscal 2024: Kenneth P. Gianella, Brian E. Cabrera, Laura A. Nash, Henk Jan Spanjaard, and John Hurley 

•     Fiscal year 2023: Kenneth P. Gianella, Brian E. Cabrera, John Hurley, Lewis W. Moorehead, and J. Michael Dodson 

•     Fiscal year 2022: J. Michael Dodson, Brian E. Cabrera, John Hurley, and Lewis W. Moorehead 

•     Fiscal year 2021: J. Michael Dodson, Regan J. MacPherson, Elizabeth P. King, and Lewis W. Moorehead

 
2 See Table A for the explanation of adjustments to the Summary Compensation Table totals to derive CAP for Mr. Lerner as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr. Lerner during the applicable year.  
3 See Table B for the explanation of adjustments to the Summary Compensation Table totals to derive the average CAP for our non-PEO NEOs as computed in accordance with Item 402(v) of Regulation S-K.  
4 Represents the Company’s common stock cumulative total shareholder return (TSR) on a fixed investment of $100 over the fiscal year starting from the market close on the last trading day of fiscal year 2020 (March 31, 2020) through the end of each applicable fiscal year in the table.  
5 Represents the cumulative TSR of the S&P 500 Technology Hardware & Peripherals Index on a fixed investment of $100 over the fiscal year starting from the market close on the last trading day of fiscal year 2020 through the end of each applicable fiscal year in the table.  
6 In Fiscal 2024 the Committee determined that the Company’s common stock price continues to be viewed as a key metric of our business performance and aligned with long term shareholder value creation. Values listed reflect the Company’s common stock price at market close on March 31 of each fiscal year, or the last day immediately before March 31 that was an open trading day.  
     
                     

 

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  Table A            
    PEO
        Fiscal 2024 Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021
    Summary Compensation Table – Total Compensation (a) 890,261 $1,635,508 $2,526,902 $2,989,619
  - (Minus) Grant Date Fair Value of Equity Awards Granted in Fiscal year (b) $(186,000) $(953,194) $(1,939,820) $(2,013,600)
  + Plus Fair Value at Fiscal Year End of Outstanding and Unvested Equity Awards Granted in Fiscal Year (c) $124,000 $768,870 $718,000 $4,652,000
  +/- Plus (Minus) Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Fiscal Years (d) $(222,949) $(584,266) $(2,100,796) $2,418,732
  +/- Plus (Minus) Change in Fair Value as of Vesting Date for Which Application Vesting Conditions Were Satisfied During Fiscal year (e) - $(253,333) $(1,267,534) $1,054,832
  - (Minus) Fair Value as of Prior Fiscal Year End That Failed to Meet Applicable Vesting Conditions During Fiscal Year (f) - - - -
  = Compensation Actually Paid   $605,312 $613,584 $(2,063,248) $9,101,583
  (a) Represents Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year.
  (b) Represents the aggregate grant date fair value of the stock awards and option awards granted to the PEO during the indicated fiscal year, computed in accordance with FASB ASC 718.
  (c) Represents the aggregate fair value as of the indicated fiscal year-end of the PEO's outstanding and unvested stock awards and option awards granted during such fiscal year, computed in accordance with FASB ASC 718.
  (d) Represents the aggregate change in fair value during the indicated fiscal year of the outstanding and unvested stock awards and option awards held by the PEO as of the last day of the indicated fiscal year, computed in accordance with FASB ASC 718 and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year.
  (e) Represents the aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award and option award held by the PEO that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with FASB ASC 718.
  (f) Represents the aggregate fair value as of the last day of the prior fiscal year of the PEO's stock awards and option awards that were granted in a prior fiscal year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with FASB ASC 718.
                 

 

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  Table B            
    NEO Average
        Fiscal 2024 Fiscal Year 2023 Fiscal Year 2022 Fiscal Year 2021
    Summary Compensation Table – Total Compensation (a) $527,419 $698,916 $1,437,464 $919,011
  - (Minus) Grant Date Fair Value of Equity Awards Granted in Fiscal year (b) $(110,213) $(310,778) $(684,225) $(420,535)
  + Plus Fair Value at Fiscal Year End of Outstanding and Unvested Equity Awards Granted in Fiscal Year (c) $19,807 $238,218 $332,569 $966,038
  +/- Plus (Minus) Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Fiscal Years (d) $(81,425) $(100,083) $(475,494) $526,285
  +/- Plus (Minus) Change in Fair Value as of Vesting Date of Equity Awards Granted in Prior Fiscal years for Which Application Vesting Conditions Were Satisfied During Fiscal year (e) - $(56,493) $(142,429) $242,161
  - (Minus) Fair Value as of Prior Fiscal Year End of Equity Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year (f) - - - -
  = Compensation Actually Paid   $355,588 $469,781 $467,884 $2,232,959
  (a) Represents the average Total Compensation as reported in the Summary Compensation Table for the reported NEOs in the indicated fiscal year.
  (b) Represents the average aggregate grant date fair value of the stock awards and option awards granted to the reported NEOs during the indicated fiscal year, computed in accordance with FASB ASC 718.
  (c) Represents the average aggregate fair value as of the indicated fiscal year-end of the reported NEOs’ outstanding and unvested stock awards and option awards granted during such fiscal year, computed in accordance with FASB ASC 718.
  (d) Represents the average aggregate change in fair value during the indicated fiscal year of the outstanding and unvested stock awards and option awards held by the reported NEOs as of the last day of the indicated fiscal year, computed in accordance with FASB ASC 718 and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year.
  (e) Represents the average aggregate change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award and option award held by the reported NEOs that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with FASB ASC 718.
  (f) Represents the average aggregate fair value as of the last day of the prior fiscal year of the reported NEOs’ stock awards and option awards that were granted in a prior fiscal year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with FASB ASC 718.
                 

 

 

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Description of Relationship Between Pay and Performance

 

The following graphs demonstrate the relationship between these defined variables for the periods covered in the Pay Versus Performance table:

 

The compensation actually paid to our named executive officers versus our total shareholder return.

 

The compensation actually paid to our named executive officers versus our net income.

 

The compensation actually paid to our named executive officers versus our common stock price.

 

 

 

Actual Compensation Paid vs.

Total Shareholder Return

 

Actual Compensation Paid vs.

Stock Price

 

Actual Compensation Paid vs.

Net Income

         
   

 

 

 

 

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Compensation Committee Report1

 

We, the Leadership and Compensation Committee of the Board, have reviewed and discussed the Compensation Discussion and Analysis within this proxy statement with Quantum’s management team. Based on such review and discussion, we have recommended to the Board that the CD&A be included as part of this proxy statement.

 

Submitted by the Leadership and Compensation Committee of the Board of Directors:

 

   
         
Donald J. Jaworski   Christopher D. Neumeyer   Marc E. Rothman
Chair        

 

 

 

 

 

 

 

 

 

 

 

 

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1This report shall not be deemed soliciting material or filed with the SEC, nor incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

 

 

Report of the Audit Committee of the Board of Directors1

 

The Audit Committee of the Board of Directors oversees Quantum’s financial reporting process and internal control structure on behalf of the Board. Management is responsible for preparing and presenting the financial statements and ensuring their integrity and the effectiveness of the Company’s internal control over financial reporting. The Audit Committee reviewed and discussed Quantum's Fiscal 2024 audited financial statements with management.

 

Quantum’s independent auditors are responsible for expressing an opinion regarding whether Quantum’s consolidated financial statements conform with generally accepted accounting principles and the effectiveness of the Company’s control over financial reporting.

 

The Audit Committee determined that it fulfilled its charter responsibilities during Fiscal 2024. Management represented to the Audit Committee that Quantum’s Fiscal 2024 consolidated financial statements were prepared in accordance with generally accepted accounting principles and the Audit Committee has reviewed and discussed them with the Company’s independent registered public accounting firm (the Firm). This review included discussing with management the:

 

Quality and acceptability of Quantum’s accounting principles.

 

Reasonableness of significant estimates and judgments.

 

Clarity of disclosure.

  

The Audit Committee also reviewed with the Firm those matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 1301, Communications with Audit Committees, and the SEC. The Firm provided the Audit Committee with the written disclosures and letter from auditors mandated by applicable PCAOB requirements, including the:

Independent accountant’s communications with the Audit Committee concerning independence; and

 

Firm’s own independence.

  

In reliance on these reviews and discussions and the report of the Firm, the Audit Committee has recommended to the Board, and the Board has approved, filing with the SEC the audited consolidated financial statements in Quantum’s Annual Report on Form 10-K for the year ended March 31, 2024.

 

Submitted by the Audit Committee of the Board of Directors:

 

   
         
Marc E. Rothman   Donald J. Jaworski   Hugues Meyrath
Chair        

 

 

 

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1This report shall not be deemed soliciting material or filed with the SEC, nor incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

 

 

 

 

 

  

financial statements included in Quantum’s Quarterly Reports on Form 10-Q. In Fiscal 2024 and fiscal year 2023, GT audit fees include charges billed in GT’s capacity as the independent external auditor for Quantum’s subsidiary companies located in Malaysia.

 

Audit-Related Fees 

Audit-related fees include the aggregate fees incurred for GT’s and Armanino LLP’s work related to our Fiscal 2023 filings of Registration Statements on Form S-3 and Form S-8, as well as the rights offering.

 

Tax Fees 

Tax fees paid relate to tax consulting services.

 

Preapproval Policies and Procedures

 

The Audit Committee annually preapproves, on a general approval schedule, appropriate audit, audit-related, and tax services the Firm may perform for Quantum, in accordance with its policy and applicable legal requirements. The Audit Committee preapproved all Fiscal 2024 services to avoid potential conflicts of interest that could arise if the Company received specified non-audit services from the Firm. The Audit Committee reviews and makes changes to the services listed on the general approval schedule annually and as otherwise necessary from time to time.

 

The Company must notify the Audit Committee when the Firm performs services expected to require more than ten billable hours of the Firm’s senior partner or equivalent time. The Company must also obtain specific engagement preapproval from the Audit Committee for all services to be performed by the Firm that are not specified on the general approval schedule. The Audit Committee receives all notices and requests regarding the Firm’s performance of services for the Company. The Audit Committee believes the Firm’s provision of services described above is compatible with maintaining the Firm’s independence from the Company.

 

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1Includes $5,525 originally billed in MYR and converted to US based on treasury.gov published exchange rate for March 31, 2024. 

2Originally billed in MYR and converted to US based on treasury.gov published exchange rate for March 31, 2023.

 

Independent Registered Public Accounting Firm As previously disclosed, Armanino LLP resigned as Quantum’s independentregistered public accounting firm on July 21, 2023 and was replaced by GrantThornton LLP.The Audit Committee has selected and recommends that our shareholders ratifyGT’s appointment as our independent registered public accounting firm for fiscalyear 2025. We expect representatives of GT to be present at the Annual Meeting.Independent Registered Public Accounting Firm Fees and ServicesThe following table details the fees billed by GT and Armanino LLP for Fiscal 2024and fiscal year 2023, including out of pocket expenses.Fees Paid to Grant Thornton LLP Fees Paid to Armanino LLPFiscal 2024Fiscal Year2023 Fiscal 2024Fiscal Year2023Audit Fees $1,702,7051 $7,4252 $310,736 $1,433,255Audit-RelatedFees- - - -Tax Fees - - 225,000 6,718Other Fees - - 54,370 -Total $1,702,705 $7,425 $590,106 $1,439,973Audit FeesAudit fees include the aggregate fees incurred for auditing Quantum’s annualconsolidated financial statements and reviewing the quarterly consolidated

 

 

Related Party Transactions

 

Quantum is or may be a party to individual and repeating or similar transactions since the beginning of Fiscal 2024, in which:

 

The amounts involved exceeded or may exceed $120,000; and

 

Certain related parties had or will have a direct or indirect material interest.

 

The Audit Committee has the primary responsibility for reviewing and approving these transactions (Related Party Transactions). We have adopted a formal written policy providing that we may not enter into a Related Party Transaction without the Audit Committee’s consent.

 

Related parties include:

 

         
                 
Executive Officers   Directors or Director Nominees   Beneficial Owners of More than 5% of our Common Stock   Immediate Family Members or Household Occupants of the People Just Identified   Any Entity in Which Any of Them Are Employed, a General Partner or Principal, or Has a 5% or Greater Beneficial Interest

In approving or rejecting any Related Party Transaction, the Audit Committee identifies and considers relevant and available facts and circumstances, including:

 

Whether the transaction terms are no less favorable than those generally available to an unaffiliated third party under the same or similar circumstances.

 

The extent of the related party’s interest in the transaction.

 

The Audit Committee has determined that certain transactions will be considered preapproved, even if the value exceeds $120,000, when they involve:

 

     
             
Executive Officer Employment Agreements   Director Compensation   Transactions Generally Available to All Employees   All Holders of Common Stock Receiving the Same Benefits on a Pro-Rata Basis

 

Quantum’s Fiscal 2024 Related Party Transactions, to the extent they currently exist or are otherwise planned, are described below.

 

Employment and Indemnification Agreements

 

We have entered into employment agreements with certain of our current executive officers, described in Change of Control Severance Policy, Employment Agreements, and Severance Agreements. We have also executed indemnification agreements with certain of our current and former directors and officers. Those agreements, along with our Restated Certificate and Bylaws, require us to indemnify our directors and officers to the fullest extent permitted by Delaware law, subject to applicable

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exclusions described in those documents.

 

Equity Award Grants to Directors and Executive Officers

 

We have granted RSUs and PSUs as described under Corporate Governance, Compensation Discussion and Analysis, and Fiscal 2024 Compensation Tables.

 

Debt Refinancing

 

Over the course of Fiscal 2024, we entered into additional and amended debt financing agreements with our then-existing lenders.

 

On June 1, 2023, the Company entered into an amendment (Amendment) to its Term Loan Credit and Security Agreement dated August 5, 2021. Among other things, the Amendment advanced $15.0 million in additional term loan borrowings (2023 Term Loan) and incurred $0.9 million in original issuances discount and origination fees. According to the terms of the 2023 Term Loan, the applicable margin for any 2023 Term Loan designated as (a) an “ABR Loan” is 9.00% per annum and (b) a “SOFR Loan” is 10.00% per annum. In connection with the 2023 Term Loan, the Company issued warrants to purchase an aggregate of 1.25 million shares (Warrants) of our common stock, at an exercise price of $1.00 per share. The principal and payable in kind interest related to the Amendment which totaled $17.3 million as of March 31, 2024 are payable at maturity. The fair value of the Warrants was $1.2 million on the issue date and $0.6 million as of March 31, 2024.

 

The Amendment and the Warrants were entered into with certain entities affiliated with PIMCO, which is considered a related party due to Mr. Neumeyer’s service as a member of our Board while also a vice president and portfolio manager at PIMCO. The Audit Committee and the Company analyzed the transaction’s independence and fairness. Mr. Neumeyer recused himself from the Board’s approval of the refinancing. 

 

Other Transactions

 

Other than as explained above, since April 1, 2023, we have not entered into any Related Party Transactions, nor are any currently proposed. We believe the terms of the transactions described above were comparable to those we could have obtained in arm’s-length negotiations with unrelated third parties.

 

Delinquent Section 16(a) Reports

 

Our directors and executive officers are required to file Quantum securities ownership reports on Form 4 with the SEC, and to provide us with copies. Based on the Form 4s we filed on behalf of our executive officers, our review of the Form 4s we otherwise received, and certain written representations that all required reports were filed, we believe that all of our directors and executive officers complied with the Form 4 reporting requirements applicable to them in Fiscal 2024, except for Form 4s for Messrs. Lerner, Gianella, Cabrera, and Spanjaard which were required to by filed by January 5, 2024 but were delayed until April 23, 2024 due to an administrative error related to implementing and configuring our new stock plan administration platform. A Form 4 for PIMCO was required to be filed by June 5, 2023, but was not filed until June 9, 2023. The Company is not aware of the reason for that delay.

 

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General Information, Notice and Access, Record Date and Outstanding Shares, and Voting Procedures

 

General Information

 

These proxy materials are provided on behalf of the Board in connection with its solicitation of your proxy for use at the Annual Meeting. The date, time, and purpose of the Annual Meeting are set forth in the Notice of Annual Meeting of Shareholders.

 

Notice and Access

 

To increase efficiency and reduce environmental impact, we have chosen to provide access to our proxy materials via the Internet.

 

Record Date and Outstanding Shares

 

Shareholders of record at the close of business on the Record Date are entitled to notice of, and vote at, the Annual Meeting. On June 20, 2024, 95,849,938 shares of Quantum common stock were issued and outstanding. The Company has no other voting securities entitled to vote at the Annual Meeting.

 

Voting Procedures

 

Cumulative Voting

Each share of common stock is entitled to one vote on matters other than electing directors. When voting on the election of directors, shareholders may cumulate their votes. Cumulative voting means that a shareholder may vote the

total of their eligible shares multiplied by the number of the directors to be elected. For example, if you own 100 shares of common stock, and there are five directors to be elected at the Annual Meeting, you could cast a total of 500 votes among as many or as few of the five director nominees as you choose.

 

If you choose to cumulate your votes, you will need to submit a paper proxy card that explicitly states your written intent to do so. Contact your broker, bank, or nominee if you hold shares beneficially and wish to cumulate votes. You will not be able to submit cumulative voting instructions by telephone or the Internet.

 

If you vote by proxy or voting instruction card and sign your card without further instructions, Quantum proxy holders James J. Lerner, Kenneth P. Gianella, and Brian E. Cabrera may, in their sole discretion, cumulate and cast your votes in favor of electing some or all of the applicable director nominees, excluding any nominee for which you decline to vote or choose to abstain.

 

Submitting Proxies 

Shareholders of record may submit proxies by Internet or telephone by following the instructions on the proxy card included with these materials. If you requested printed proxy materials, you should complete, sign, and date the enclosed proxy card and return it in the prepaid envelope provided. Shareholders who hold shares beneficially in street name may vote according to the instructions provided by their broker, bank, or nominee. Shareholders may also vote in person by attending the Annual Meeting while the polls are open.

 

Revocability of Proxies 

Any person who gives a proxy pursuant to this solicitation may revoke it at any time before it is voted. Proxies may be revoked by:

 

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Filing with the Company’s Secretary before voting commences at the Annual Meeting a written notice of revocation dated later than the original proxy;

 

Properly executing to the Company’s Secretary before voting commences a later-dated proxy relating to the same shares; or

 

Voting on a later date via telephone, the Internet, or in person at the Annual Meeting.

 

Quorum and Abstentions 

A majority of the shares of common stock issued and outstanding on the Record Date will constitute a quorum for conducting business at the Annual Meeting. Abstentions are counted for the purpose of determining the presence of a quorum.

 

Abstentions will have no effect on the outcome of proposals requiring approval by a majority of the votes cast. Abstentions will count as votes against proposals requiring approval by a majority of the shares present and entitled to vote.

 

Record holders of common stock held in brokerage accounts for clients who beneficially own the shares but do not provide voting instructions have the discretion to vote uninstructed shares on certain matters but not others. Accordingly, a broker who does not receiving voting instructions from a beneficial owner may vote on discretionary matters but not on those that are non-discretionary. Proposals 1 – 5 are non-discretionary. If your shares are held by a broker, you must provide them with voting instructions or your votes on Proposals 1 - 5 will not be counted.

 

Majority Voting Policy 

The Board believes it is in Quantum’s and our shareholders’ best interests to maintain a majority voting policy regarding uncontested director elections, providing additional director accountability to our shareholders. A majority of votes

cast (Majority) means that the number of shares voted for a director exceeds the number of votes cast against the director.

 

Shareholders may vote for, against, or abstain from voting on any proposal.

 

In an uncontested election, a director nominee will be elected to the Board if he or she receives a vote Majority. However, at any shareholders meeting for which:

 

The Corporate Secretary receives notice that a shareholder has nominated a candidate for election to the Board in compliance with our Bylaws; and

 

The nomination has not been withdrawn on or before the date ten days before we file our definitive proxy statement for the shareholders meeting, directors will be elected by a plurality of votes cast.

 

Proposal 1: Election of Directors requires Majority approval. If a director nominee does not receive a vote Majority, he or she will not be elected, creating a vacancy on the Board. Following the Annual Meeting, the Board may address the vacancy in accordance with the Company’s Bylaws.

 

All other proposals require the affirmative vote of a majority of the shares of common stock present in person or represented by proxy and entitled to vote on the matter. While Proposal 4 is advisory only, the Board considers shareholder input to be important and will take into account the outcome of the vote when evaluating future executive compensation programs.

 

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Attending the Annual Meeting 

All shareholders are cordially invited to attend the Annual Meeting remotely using the provided instructions. However, you are urged to submit your proxy in advance of the meeting. If you vote by ballot at the Annual Meeting, you will revoke any previous vote submitted. If you hold your shares through a broker, bank, or nominee, you will need to obtain their proxy prior to voting at the Annual Meeting.

 

You will be able to attend the Annual Meeting online and submit questions during the meeting. In order to attend, you must register in advance at www.viewproxy.com/QMCO/2024 before 11:59p.m. Eastern Time on August 14, 2024. You will then receive a registration confirmation including a unique link and password, which you will use to join the Annual Meeting. The unique link and password will enable you to attend, and vote at, the meeting (and any adjournments or postponements) with your control number.

 

Shares held in your name as the shareholder of record may be voted electronically at the Annual Meeting by visiting www.AALvote.com/QMCO and using the control number included on your proxy materials.

 

IT IS IMPORTANT TO PROMPTLY RETURN ALL PROXIES. THE BOARD URGES YOU TO VOTE VIA THE INTERNET OR BY TELEPHONE ACCORDING TO THE INSTRUCTIONS PROVIDED ON THE NOTICE OF INTERNET AVAILABILITY. IF YOU RECEIVED PRINTED MATERIALS, YOU MAY SIGN, DATE, AND RETURN YOUR PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED. YOUR VOTE IS IMPORTANT NO MATTER HOW MANY OR FEW SHARES OF COMMON STOCK YOU HOLD.

 

 

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Householding, Solicitation, and Communicating with the Company

 

Householding

 

The SEC allows satisfying proxy material delivery requirements by householding, which occurs when a single proxy statement is delivered to two or more shareholders sharing the same address.

 

Quantum and some brokers may household proxy materials unless contrary instructions have been provided by at least one of the affected shareholders. If you would like to begin or end householding, please contact +1 (866) 612-8937. Registered shareholders may also contact Quantum Investor Relations at +1 (949) 224-3874, and beneficial owners holding shares in street name may contact their brokers. We will promptly deliver a separate copy of the proxy statement after receiving the request.

 

Each shareholder who participates in householding will continue to be able to access or receive a separate proxy card.

 

Solicitation

 

Quantum will bear the cost of soliciting proxies, including preparing, assembling, hosting, printing, and mailing of the proxy materials.

 

The Company may also reimburse brokerage firms and other representatives of beneficial owners for their expenses in forwarding materials. Proxies may be solicited by certain of the Company’s directors and officers personally or by telephone, email, or other methods, without additional compensation. We have engaged Alliance Advisors LLC (Alliance) to assist with the soliciting proxies for an estimated fee of $15,000 plus expense reimbursement. We have agreed to

indemnify Alliance against potential certain liabilities arising from our agreement with them.

 

IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE VOTE IN ACCORDANCE WITH EACH CARD TO ENSURE ALL SHARES OF YOUR COMMON STOCK ARE VOTED.

 

Communicating with the Company

 

If you would like to receive information about Quantum at no cost, please contact Quantum Corporation, Attn: Corporate Secretary, 224 Airport Parkway, Suite 550, San Jose, CA 95110.

 

Shareholders and other interested parties may also contact the Board, its Chair, or our directors individually or as a group by emailing quantum.board@quantum.com or by writing to them at the mailing address above. Communications intended specifically for the Chair or independent directors should be directed to the Chair’s attention.

 

Anyone wishing to contact the Board or its Chair, a committee member, or any of our independent directors regarding a concern about Quantum’s conduct or about questionable accounting, internal accounting controls, or auditing matters, may do so anonymously by toll-free telephone at +1 (800) 461-9330 or via the Internet at app.convercent.com/en-us/LandingPage/4e23dc2d-ab06-ec11-a983-000d3ab9f062.

 

The anonymous reporting resources are operated by Convercent, an external third-party vendor that has trained professionals to take reports in confidence and distribute them to the appropriate contacts for proper handling. Reports received will be addressed in an appropriate manner.

 

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Shareholder Proposals for Our 2025 Annual Meeting

 

Shareholders may submit proposals for consideration at future shareholder meetings, including next year’s 2025 annual meeting. Any proposal submitted must meet the applicable requirements of Delaware law, the rules and regulations of the SEC, and contain the information specified in the Company’s Bylaws, in order to be eligible to be included in the proxy materials for, or to be brought before, the 2025 annual meeting. Proposals must be submitted in writing to the attention of the Corporate Secretary, Quantum Corporation, 224 Airport Parkway, Suite 550, San Jose, California, 95110.

 

SEC regulations require that shareholders who wish to have a proposal considered for inclusion in the Company’s proxy materials for the 2025 annual meeting submit their proposal by March 4, 2025. These proposals must also comply with the SEC’s Exchange Act Rule 14a-8 shareholder proxy proposal submission rules. Proposals we receive after that date will not be included in the proxy statement.

 

A director nomination or shareholder proposal not included in the proxy statement for the 2025 annual meeting will not be eligible for presentation at the meeting unless the shareholder gives timely notice of the nomination or proposal. To be timely, our Bylaws provide that we must have received the shareholder’s notice not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which we first mail our proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting. However, if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year’s annual meeting, it must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (i) the 90th day prior to such annual meeting, or (ii) the tenth day following the day on which a public announcement of the date of such annual meeting is first made.

Shareholders who wish to bring business before the 2025 annual meeting or to nominate a person for election as a director without being included in the 2025 proxy materials must submit their proposal no earlier than April 18, 2025 and no later than May 18, 2025. Shareholders who intend to solicit proxies in support of director nominees other than our nominees for the 2025 annual meeting of shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act.

 

In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than Quantum’s director nominees must provide the Company with required notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than June 16, 2025.

 

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Exhibit A

 

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Quantum Corporation

 

Quantum Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies as follows:

 

1.The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on January 28, 1987. The most recent Amended and Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on August 8, 2007, as amended by the Certificate of Amendment filed with the Secretary of State of Delaware on April 17, 2017, the Certificate of Amendment filed with the Secretary of State of Delaware on November 6, 2017, and the Certificate of Amendment filed with the Secretary of State of Delaware on August 19, 2022.

 

2.

This amendment to the Amended and Restated Certificate of Incorporation of the Corporation as set forth below has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware by the stockholders and directors of the Corporation.

 

3.The first paragraph of ARTICLE IV of the Amended and Restated Certificate of Incorporation of the Corporation as presently in effect is amended and restated to read in its entirety as follows:

 

“This Corporation is authorized to issue two classes of shares to be designated, respectively, Common Stock and Preferred Stock. The total number of shares of Common Stock that this Corporation is authorized to issue is 225,000,000, with a par value of $0.01 per share, and the total number of shares of Preferred Stock that this Corporation is authorized to issue is 20,000,000, with a par value of $0.01 per share.

 

Upon the effectiveness of the certificate of amendment first inserting this paragraph (the “Effective Time”), each five (5) to twenty (20) shares of Common Stock issued as of immediately prior to the Effective Time shall be automatically combined into (1) validly issued, fully paid and non-assessable share of Common Stock, without any further action by the Corporation or the holder thereof, the exact ratio within the five (5) to twenty (20) range to be determined by the Board of Directors of the Corporation prior to the Effective Time and publicly announced by the Corporation. Each certificate that immediately prior to the Effective Time represented shares of Common Stock shall thereafter represent that number of shares of Common Stock into which the shares of Common Stock represented by such certificate shall have been combined, subject to any elimination of fractional share interests.”

 

4.On [_____], the Board of Directors of the Corporation determined that each [_____] ([_____]) shares of the Corporation’s Common Stock, par value of $0.01 per share, issued as of immediately prior to the Effective Time shall automatically be combined into one (1) validly issued, fully paid and non-assessable share of Common Stock, par value of $0.01 per share. The Corporation publicly announced this ratio on [_____], 2024.

 

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5.This certificate of amendment shall become effective at [_____] [_].m. (Eastern Time) on [_____], 2024.

 

6.All other provisions of the Amended and Restated Certificate of Incorporation of the Corporation remain in full force and effect.

 

IN WITNESS WHEREOF, the Corporation has caused this certificate of amendment to be signed by its duly authorized officer this [_____] day of [_____], 2024.

 

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