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Executive Talent Management and Succession Planning
Our board of directors places a high priority on senior management development and succession planning and recognizes that thoughtful succession planning is critical to creating long-term shareholder value.
Pursuant to our Corporate Governance Guidelines, the nominating and corporate governance committee, in consultation with the full board
of directors, is primarily responsible for succession planning for the role of chief executive officer. In addition, the nominating and corporate governance committee monitors management’s succession plans for other key executives.
The nominating and corporate governance committee evaluates our key executives, discusses their development and develops succession plans with the view of ensuring that a strong pipeline of talent is being developed for planned or unplanned events. In addition, our lead independent director facilitates discussions among independent directors about succession planning at executive sessions.
In 2019, the nominating and corporate governance committee followed the succession planning process in promoting Anshul Sadana to Senior Vice President and Chief Operating Officer of the Company, and Manuel Rivelo as Senior Vice President and Chief Customer Officer of the Company.
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Director Compensation
Director Compensation Table
The following table provides information regarding the total compensation that was granted to each of our directors who was not serving as an executive officer in 2018.2019. Directors who are also our employees do not receive no additional compensation for their service as directors.
Director | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($) | Option Awards ($) | Total ($) |
Charles Giancarlo | | 97,000 | | | — | | | — | | | 97,000 | |
Ann Mather | | 100,000 | | | — | | | — | | | 100,000 | |
Daniel Scheinman | | 97,000 | | | — | | | — | | | 97,000 | |
Mark Templeton | | 95,000 | | | — | | | — | | | 95,000 | |
Nikos Theodosopoulos | | 95,000 | | | — | | | — | | | 95,000 | |
In particular, Jayshree Ullal, a named executive officer, and Andreas Bechtolsheim, an executive officer, did not receive additional compensation for their service as directors.
| Charles Giancarlo | | | 97,000 | | | 667,044 | | | — | | | 764,044 | |
| Ann Mather | | | 100,000 | | | 667,044 | | | — | | | 767,044 | |
| Daniel Scheinman | | | 130,750 | | | 667,044 | | | — | | | 797,794 | |
| Mark Templeton | | | 95,000 | | | — | | | — | | | 95,000 | |
| Nikos Theodosopoulos | | | 95,000 | | | — | | | — | | | 95,000 | |
| (1)
| The amount reported represents the fees earned for service on our board of directors and committees of our board of directors for 2018.2019. |
(2)
| Stock awards to directors elected at an annual meeting vest over a period of 3 years. |
The following table lists all outstanding equity awards held by our non-employee directors as of December 31, 2018:
Director | Stock Awards (#)(1) | Option Awards (#) |
Charles Giancarlo | | 11,667 | (2) | | — | |
Ann Mather | | 1,667 | | | 50,000 | |
Daniel Scheinman | | 1,667 | | | 28,000 | |
Mark Templeton | | 2,620 | | | — | |
Nikos Theodosopoulos | | 2,620 | | | 25,000 | |
2019:
| Charles Giancarlo | | | 7,194(2) | | | — | |
| Ann Mather | | | 2,194 | | | 13,844 | |
| Daniel Scheinman | | | 2,194 | | | 28,000 | |
| Mark Templeton | | | 873 | | | — | |
| Nikos Theodosopoulos | | | 873 | | | 22,500 | |
| (1)
| Represents the number of restricted stock units unvested as of December 31, 2018.2019. |
| (2)
| This number includes 10,0005,000 shares of restricted stock issued upon the early exercise of stock options that remained unvested as of December 31, 2018,2019, which are subject to a repurchase right held by us at their original exercise prices in the event of the termination of Mr. Giancarlo’s service on our board.board is terminated. |
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With respect to 20182019 board service, our board of directors approved compensation to each of our non-employee directors as follows:
a $75,000 cash retainer for general board service;
service, except that our lead independent director will receive a $120,000 cash retainer;
a $25,000 cash retainer for chairing the audit committee;
committee
a $12,000 cash retainer for chairing the compensation committee;
a $12,000 cash retainer for chairing the nominating and corporate governance committee;
a $10,000 cash retainer for service on each committee.
Under our outside director compensation policy, each director elected at an annual meeting is granted restricted stock units on the date of the annual meeting with a total value of $750,000 (based on the average closing stock price for the 30 trading day period ending on the applicable annual meeting) that vest quarterly over three years.
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In February 2019, our board of directors selected Mr. Scheinman to serve as lead independent director effective immediately upon such appointment. The lead independent director will be paid an annual cash retainer of $120,000.
Stock Ownership Guidelines
In April 2019, our board of directors adopted stock ownership guidelines.
Our stock ownership guidelines are designed to encourage our directors and our Chief Executive Officer to achieve and maintain a meaningful equity stake in our Company and more closely align their interests with those of our
shareholders.stockholders. The guidelines provide that our non-employee directors should accumulate and hold investment levels of three times the annual cash base retainer for service on the board of directors within five years from the later of the date of the adoption of the stock ownership guidelines or the date such director is appointed or elected.
As of the end of fiscal 2018, all
All of our directors and our Chief Executive Officer are on track to meet these guidelines based on their current rate of stock accumulations in the time frames set out in the guidelines.
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Proposal No.PROPOSAL NO. 1—
Election Of DirectorsELECTION OF DIRECTORS
Our board of directors is currently composed of seven members. In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three staggered classes of directors. At the Annual Meeting,
threetwo Class
IIIII directors will be elected for a three-year term to succeed the same class whose term is then expiring.
Each director’s term continues until the election and qualification of his or her successor, or such director’s earlier death, resignation, or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. This classification of our board of directors may have the effect of delaying or preventing changes in control of our Company.
Our nominating and corporate governance committee has recommended, and our board of directors has approved,
Charles Giancarlo, Ann MatherMark Templeton and
Daniel Scheinman,Nikos Theodosopoulos, as nominees for election as Class
IIIII directors at the Annual Meeting. If elected, each of
Charles Giancarlo, Ann MatherMark Templeton and
Daniel ScheinmanNikos Theodosopoulos will serve as Class
IIIII directors until the
20222023 annual meeting of stockholders and until their successors are duly elected and qualified. Each of the nominees is currently a director of our Company. For information concerning the nominees, please see the section titled “Board of Directors and Corporate Governance.”
If you are a stockholder of record and you sign your proxy card or vote by telephone or over the Internet but do not give instructions with respect to the voting of directors, your shares will be voted “FOR” the re-election of:
Charles Giancarlo,
Ann MatherMark Templeton and
Nikos Theodosopoulos.
Daniel Scheinman.
Charles Giancarlo, Ann MatherMark Templeton and Daniel ScheinmanNikos Theodosopoulos have each has consented to being a nominee and to serving as a director, if elected; however, in the event that a director nominee is unable to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by our board of directors to fill such vacancy. If you are a street name stockholder and you do not give voting instructions to your broker or nominee, your broker will leave your shares unvoted on this matter.
The election of directors is by plurality vote. “Plurality” means that the nominees who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of a withheld vote or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. You may vote “for” or “withhold” on each of the nominees for election as a director.
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED ABOVE. | |
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Proposal No.PROPOSAL NO. 2—
Advisory Vote on Executive CompensationADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables stockholders to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed pursuant to Section 14A of the Securities Exchange Act of 1934. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement.
The say-on-pay vote is advisory, and therefore not binding on us, the compensation committee or our board of directors. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies and practices, which the compensation committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our board of directors and our compensation committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will communicate directly with stockholders to better understand the concerns that influenced the vote, consider our stockholders’ concerns and the compensation committee will evaluate whether any actions are necessary to address those concerns.
We believe that the information provided in the “Executive Compensation” section of this proxy statement, and in particular the information discussed in “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Philosophy and Objectives” beginning on page
3031 below, demonstrates that our executive compensation program was designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the named executive officers, as disclosed in the proxy statement for the Annual Meeting pursuant to the compensation disclosure rules of the SEC, including the compensation tables and narrative discussion, and other related disclosure.”
The advisory vote on executive compensation requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting (including by proxy) and entitled to vote thereon. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no effect.
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION. | |
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Proposal No.PROPOSAL NO. 3—
Ratification of Appointment of Independent Registered Public Accounting FirmRATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our audit committee has appointed Ernst & Young LLP (“EY”), an independent registered public accounting firm, to audit our consolidated financial statements for our fiscal year ending December 31, 2019. During our fiscal year ended December 31,
2018,2019, EY served as our independent registered public accounting firm.
Notwithstanding the appointment of EY and even if our stockholders 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 stockholders. At the Annual Meeting, our stockholders are being asked to ratify the appointment of EY as our independent registered public accounting firm for our fiscal year ending December 31,
2019.2020. Our audit committee is submitting the appointment of EY to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of EY
will be present atare expected to attend the Annual Meeting
virtually and they will have an opportunity to make a statement and will be available to respond to appropriate questions from our stockholders.
If our stockholders do not ratify the appointment of EY, our audit committee may reconsider the
appointment.appointment of EY.
Fees Paid to the Independent Registered Public Accounting Firm
The following table presents fees for professional audit services and other services rendered to our Company by EY for our fiscal years ended December 31,
20172018 and
2018. | 2017 | 2018 |
| (In Thousands) |
Audit Fees(1) | $ | 2,414 | | $ | 2,503 | |
Audit-Related Fees(2) | | 140 | | | 36 | |
Tax Fees(3) | | 1,759 | | | 3,429 | |
All Other Fees(4) | | — | | | — | |
Total Fees | $ | 4,313 | | $ | 5,968 | |
2019.
| Audit Fees(1) | | | $2,503 | | | $2,495 | |
| Audit-Related Fees(2) | | | 36 | | | 304 | |
| Tax Compliance Fees(3) | | | 1,450 | | | 1,236 | |
| Tax Advice and Planning Fees(4) | | | 1,979 | | | 1,161 | |
| All Other Fees(5) | | | — | | | — | |
| Total Fees | | | $5,968 | | | $5,196 | |
| (1)
| Audit Fees consist of professional services rendered in connection with the audit of our annual consolidated financial statements, including audited financial statements presented in our Annual Report on Form 10-K and services that are normally provided by the independent registered public accountants in connection with statutory and regulatory filings or engagements for those fiscal years. |
| (2)
| Audit-Related Fees consist of fees for professional services for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include accounting consultations concerning financial accounting and reporting standards. |
| (3)
| Tax Compliance Fees consist of fees for professional services for tax compliance and the preparation of original and amended tax advice, tax planningreturns and tax consulting. These services include assistance regarding federal, staterefund claims. |
(4)
| Tax Advice and international tax compliance. TaxPlanning Fees in 2018 also includedconsist of fees for tax advice and tax planning assistance, regarding mergersincluding non-recurring tax assistance in connection with acquisitions and acquisitions.intellectual property alignment. |
| (4)(5)
| All Other Fees consist of permittedfees billed for products and services provided by the independent registered public accountants other than those that meet the criteria above. |
Auditor Independence
In our fiscal year ended December 31,
2018,2019, there were no other professional services provided by EY, other than those listed above, that would have required our audit committee to consider their compatibility with maintaining the independence of EY.
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Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our audit committee has established a policy governing our use of the services of our independent registered public accounting firm. Under the policy, our audit committee is required to pre-approve all audit and non-audit services performed by our independent registered public accounting firm in order to ensure that the provision of such services does not impair the public accountants’ independence. All services and fees paid to EY for our fiscal years ended December 31,
20172018 and
20182019 were pre-approved by our audit committee.
The ratification of the appointment of EY requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy at the Annual Meeting (including by proxy) and entitled to vote thereon. Abstentions will have the effect of a vote AGAINST the proposal and broker non-votes will have no effect.
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP. | |
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Report of The Audit CommitteeREPORT OF THE AUDIT COMMITTEE
The audit committee is a committee of the board of directors comprised solely of independent directors as required by the listing standards of the New York Stock Exchange and rules and regulations of the SEC. The audit committee operates under a written charter approved by the board of directors, which is available on the
Corporate Governance section of our website at http://investors.arista.com. The composition of the audit committee, the attributes of its members and the responsibilities of the audit committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The audit committee reviews and assesses the adequacy of its charter and the audit committee’s performance on an annual basis.
With respect to the Company’s financial reporting process, the management of the Company is responsible for (1) establishing and maintaining internal controls and (2) preparing the Company’s consolidated financial statements. Our independent registered public accounting firm, Ernst & Young LLP (“EY”), is responsible for auditing these financial statements. It is the responsibility of the audit committee to oversee these activities. It is not the responsibility of the audit committee to prepare our financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the audit committee has:
reviewed and discussed the audited financial statements with management and EY;
discussed with EY the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees,” as issued by the Public Company Accounting Oversight Board;Board, and
the Securities and Exchange Commission; and
received the written disclosures and the letter from EY required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with EY its independence.
Based on the audit committee’s review and discussions with management and EY, the audit committee recommended to the board of directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20182019 for filing with the SEC.
Respectfully submitted by the members of the audit committee of the board of directors:
Ann Mather (Chair)
Mark Templeton
Nikos Theodosopoulos
This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (“Securities Act”), or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
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Executive OfficersEXECUTIVE OFFICERS
The following table identifies certain information about our executive officers as of April 4, 2019.2, 2020. Officers are elected by our board of directors to hold office until their successors are elected and qualified. There are no family relationships among any of our directors or executive officers.
| Jayshree Ullal | | | 5859
| | | Chief Executive Officer, President and Director | |
| Andreas Bechtolsheim | | | 6364
| | | Founder, Chief Development Officer, Director and Chairman of the Board of Directors | |
| Ita Brennan | | | 5253
| | | Senior Vice President, Chief Financial Officer | |
| Kenneth Duda | | | 4748
| | | Founder, Chief Technology Officer and Senior Vice President, Software Engineering | |
| John McCool | | | 5960
| | | Chief Platform Officer, Senior Vice President of Engineering Operations | |
Manuel Rivelo | 54
| Chief Customer Officer
|
Anshul Sadana | | | 4243
| | | Chief Operating Officer | |
| Marc Taxay | | | 5051
| | | Senior Vice President, General Counsel | |
For a brief biography of Ms. Ullal and Mr. Bechtolsheim, please see “Board of Directors and Corporate Governance – Continuing Directors.”
Ms. Brennan joined Arista Networks, Inc. in May 2015 as Senior Vice President and Chief Financial Officer. From February 2014 to May 2015, Ms. Brennan served as chief financial officer of a stealth start up firm in the energy sector. Prior to that, Ms. Brennan held various roles at Infinera Corporation, an intelligent transport networking company, most recently as chief financial officer from July 2010 to February 2014 and vice president of finance and corporate controller from July 2006 to July 2010. From 1997 to 2006, Ms. Brennan held various roles at Maxtor Corporation, a multi-billion dollar information storage solutions company, including vice president of finance for the company’s worldwide operations. Ms. Brennan has been a member of the board of directors of Cadence Design Systems, Inc. since March 2020 and of LogMeIn, Inc. since November 2018. Ms. Brennan is a fellow of the Institute of Chartered Accountants and a public accounting alumna of Deloitte and Touche, having worked at the firm in both Ireland and the U.S.
Mr. Duda is one of our founders and has served in various roles with us from 2004 to present. Since September 2011, Mr. Duda has served as our Chief Technology Officer and Senior Vice President of Software Engineering. From April 1999 to October 2004, Mr. Duda served as chief technology officer of There, Inc., a virtual worlds company. From September 1996 to April 1999, Mr. Duda was leading the software development of the switch kernel for the Gigabit System Business Unit with Cisco Systems, Inc. Mr. Duda holds B.S. and M.S. degrees in Computer Science and Electrical Engineering from the Massachusetts Institute of Technology and a Ph.D. degree in Computer Science from Stanford University.
Mr. McCool joined Arista Networks, Inc. in March 2017 as Chief Platform Officer and Senior Vice President of Engineering and Operations. From 2014 to 2017, Mr. McCool served as senior vice president and general manager of DSDD, a DellEMC business, a products, services and solutions provider for information management and storage. From 2013 to 2014, Mr. McCool served as president and chief executive officer of Firetide, Inc., a provider of wireless mesh networks. From 1996 to 2013, Mr. McCool served in various positions
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at Cisco Systems, Inc., including senior vice president and general manager for the data center switching and services group with his last position as senior vice president – global sales, enterprise segment. Mr. McCool holds a B.S. degree in Electrical Engineering from Drexel University and an M.S. degree in Computer Engineering from Santa Clara University.
Manuel Rivelo
Mr. Rivelo has served as our Chief Customer Officer since March 2019. He joined Arista Networks, Inc. in January 2018 as Chief Sales Officer. Mr. Rivelo has more than 30 years of technology expertise and is responsible for the Company’s Worldwide Sales Strategy, including Business Development and Field Marketing. Prior to this, he held key leadership roles as chief executive officer at AppviewX and F5 Networks, as well as executive vice president at F5 Networks and senior vice president at Cisco Systems. Mr. Rivelo has successfully applied technology to drive profitable growth, innovation, productivity and sales excellence. He is a member of the board of directors at Sandvine. Mr. Rivelo holds a B.S. degree and an M.S. degree in Electrical Engineering from Stevens Institute of Technology.
Anshul Sadana
Mr. Sadana has served as our Chief Operating Officer since March 2019. He served as our Chief Customer Officer from October 2016 through February 2019. From January 2012 to September 2016, Mr. Sadana served as our Senior Vice President of Customer Engineering. From July 2007 to December 2011, Mr. Sadana served in various other positions with us including Vice President of Customer Engineering. From November 1999 to July 2007, Mr. Sadana was the senior engineering manager of Gigabit Switching Business Unit at Cisco Systems, Inc. Mr. Sadana holds a B.E. degree in Electronics from the University of Mumbai, an M.S. degree in Computer Science from the University of Illinois at Chicago and an executive M.B.A. degree from the Wharton School of Business.
Mr. Taxay has served as our Senior Vice President, General Counsel since March 2016 and as our General Counsel since February 2013. From 2007 to 2013, Mr. Taxay served as the senior vice president and general counsel of MedeAnalytics, Inc., a healthcare analytics company. From 2006 to 2007, Mr. Taxay served as the assistant general counsel of Coremetrics, Inc. a digital marketing company. From 2002 to 2006, Mr. Taxay worked as a partner at Cohen & Grigsby. Mr. Taxay holds a B.A. degree in Political Science and a J.D. from The University of Michigan.
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Executive Compensation
Compensation Discussion and Analysis
The compensation provided to those individuals who are our named executive officers for our fiscal year ended December 31, 20182019 (our “Named Executive Officers”) is set forth in detail in the Fiscal 20182019 Summary Compensation Table and the other tables that follow this Compensation Discussion and Analysis. The following discussion provides an overview of our executive compensation philosophy, the overall objectives of our executive compensation program, and each component of compensation that we provide to our Named Executive Officers. In addition, we explain how and why the compensation committee of our board of directors arrived at the specific compensation policies and decisions for our Named Executive Officers. The following are the individuals who served as our Named Executive Officers for our fiscal year ended December 31, 2018:2019:
Jayshree Ullal, our President and Chief Executive Officer;
Ita Brennan, our Chief Financial Officer;
Andreas Bechtolsheim, our Founder and Chief Development Officer;
Kenneth Duda, our Chief Technology Officer and Senior Vice President of Software Engineering; and
Anshul Sadana, our Chief Operating Officer.Officer; and
Marc Taxay, our Senior Vice President, General Counsel
2019 Management Changes
In February 2019, we promoted Anshul Sadana to Chief Operating Officer. The promotion was effective on March 4, 2019.
Our
Boardboard of directors has delegated to the compensation committee authority and responsibility for establishing and overseeing salaries, administering the incentive compensation programs, and establishing and overseeing other forms of compensation for our executive officers, general remuneration policies for the balance of our employee population and for overseeing and administering our equity incentive and benefits plans.
The following compensation governance standards in our executive compensation policies and practices wereare currently in effect during our fiscal year ended December 31, 2018:effect:
| ✔ Annual Review. Annual review of our executive
compensation program.
✔ CEO Performance-Based Equity. In 2020, we introduced performance-based equity as a significant part of our compensation program to our Chief Executive Officer.
✔ Independence. Our compensation committee is made up solely of independent directors and
makes all executive compensation decisions.
✔ Compensation Consultant. Our compensation committee engages its own independent compensation consultant to assist with its
compensation reviews.
✔ Stock Ownership Guidelines. To align our chief executive officer’s long-term interests with those of our stockholders, our chief executive officer is required to own specified minimum levels of
Company’s stock.
✔ Clawback Policy. We may seek the recovery of
cash incentive compensation and
performance-based equity compensation paid to
our executive officers. | | | ✘ No Executive-Only Retirement Programs. We do not offer pension arrangements, retirement plans, or nonqualified deferred compensation plans or arrangements to our executive officers, other than the plans generally available to all employees.
✘ No Excise Tax Gross-Ups. We do not offer golden parachute tax gross-ups to any of our Named Executive Officers or other executive
officers.
✘ No “Single-Trigger” Benefits and Limited “Double Trigger” Benefits. Potential change in control payments and benefits are limited in nature and are received only in connection with the termination of employment without cause or for good reason in connection with or following a change in control. | |
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✔ Clawback Policy. We may seek the recovery of cash incentive compensation and performance-based equity compensation paid to our executive officers. | | | | |
Fiscal
20182019 Business
and Innovation Highlights
Our executive compensation program is designed to align the compensation of our executives with our operating and financial performance and create value for our stockholders. Accordingly, you should consider our executive compensation decisions in the context of our financial and operational performance during fiscal 2018,2019, including:
| Revenue | | | Revenue for our fiscal year 20182019 was $2.2$2.41 billion, representing an increase of 30.7%12.1% compared to fiscal year 2017.2018. This represented a deceleration in growth rate from prior years and resulted in a revenue amount that was somewhat below our internal targets, established at the beginning of the year. We haveexecuted well in expanding our enterprise datacenter and campus businesses, but this was offset by more muted demand for the year from our cloud customers. We exited the year with over 5,6006,000 customers and continue to add new customers and expand our market presence and geographic footprint. | |
| Operating Income | | | Our non-GAAP operating income for fiscal year 20182019 was $922.7 million or 38.3% of revenue, compared to $789.0 million or 36.7% of revenue compared to $586.1 million or 35.6% of revenue for fiscal year 2017.2018. This represented 34.6%16.9% growth in non-GAAP operating income on a year over year basis.basis reflecting the deceleration in revenue growth outlined above combined with an expansion in operating margin. The ratio of non-GAAP operating income to revenue is a key metric for our stockholders as it provides a consistent measure of the profitability of our business and as a result we used non-GAAP operating income as a metric in our 20182019 Bonus Plan (as defined below). | |
| Industry Leadership | | | Arista maintained a leadership position in the Gartner July 20182019 Magic Quadrant for Data Center Networking for the fourthfifth consecutive year.
The Forrester WaveTM Hardware Platforms for SDN, Q1 2018, recognized Arista as a leader in the current offering and strategy categories. | |
Product Innovation30
| | | Arista Introduced 400 Gigabit Platforms, New 400G fixed systems deliver the performance for the growth of applications such as AI (artificial intelligence), machine learning, and server less computing. Arista also introduced Cognitive Cloud Networking for the Campus encompassing a new network architecture designed to address transitional changes as the enterprise moves to an IoT ready campus. | | | 2020 Proxy Statement |
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Fiscal
20182019 Executive Compensation Highlights
As reflected in our general compensation philosophy and objectives, our executive compensation program is intended to reward performance, attract and retain key personnel and increase stockholder value. In light of our
strongfinancial performance as described in the “Fiscal
20182019 Business
and Innovation Highlights” section above, our fiscal
20182019 executive compensation program was intended to reward
exceptional performance and incentivize continued successful performance. Accordingly, our key executive compensation actions in our fiscal year ended December 31,
2018,2019, advanced these objectives:
| • | Modest Base Salary Increases No Base Salary Increases- We provided modest base salary increases for Messrs. Duda and Sadana, and we did not increase base salaries for our other Named Executive Officers. |
| • | Annual Bonuses Reflecting Pay for Performance - As noted above, we demonstrated strong financial performance in fiscal 2018, achieving revenue of approximately $2.2 billion an increase of 30.7% over 2017 levels, with non-GAAP gross margin of 64.4%, and a non-GAAP operating income to revenue ratio of 36.7%. These results combined with continued excellence in product innovation and customer quality and support, resulted in payments to our Named Executive Officers under the 2018 Bonus Plan. |
Annual Bonuses Reflecting Pay for Performance - As noted above, our financial performance in fiscal 2019 achieved revenue of approximately $2.41 billion an increase of 12.1% over 2018 levels and a non-GAAP operating income to revenue ratio of 38.3%. These results combined with continued excellence in product innovation and customer quality and support, resulted in payments to our Named Executive Officers under the 2019 Bonus Plan. Despite our strong overall performance, our Chief Executive Officer declined a bonus for fiscal 2019.
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| • | Equity Awards Promoting Our Stockholders’ Interests - Long-term equity incentives constitute a significant majority of compensation paid to Named Executive Officers in 2018. Long-term equity incentives align the interests of executives with those of our stockholders. Further, a meaningful portion of the equity awards we granted to our Named Executive Officers in 2018 were in the form of options, which provide value only if our stock price increases during the term of the option. Further, 2018 equity awards provided for long-term retention with vesting period of generally 5 to 6 years from the date of grant. |
Equity Awards Promoting Our Stockholders’ Interests - Long-term equity incentives constitute a significant majority of compensation paid to Named Executive Officers in 2019. Long-term equity incentives align the interests of executives with those of our stockholders. Further, a meaningful portion of the equity awards we granted to our Named Executive Officers in 2019 were in the form of options, which provide value only if our stock price increases during the term of the option.Subsequent to year end, we included performance-based equity as part of our executive compensation program for our Chief Executive Officer. While the grant was made in 2020, our compensation committee reviewed and considered the performance-based equity grant throughout 2019 and, as a result, the 2020 performance grant to our Chief Executive Officer reflects the outcome of our compensatory decisions in 2019.
Effect of Most Recent Stockholder Advisory Vote on Executive Compensation
Our compensation committee considers the results of the annual stockholder advisory vote on the compensation of our Named Executive Officers and stockholder feedback on our executive compensation program as part of its annual executive compensation review. At our 2018 annual meeting of stockholders,
over 96%approximately 90.4% of the votes cast approved the compensation program for our Named Executive Officers as described in our
20182019 proxy statement. Based on this strong stockholder support, our compensation committee determined not to make any significant changes to our existing executive compensation program and
policies.policies, except that our compensation committee deliberated through the year about adding performance-based equity awards to our executive compensation program and made this performance-based grant to our Chief Executive Officer in 2020. Our compensation committee continues to evaluate the executive compensation program and policies to determine the most appropriate ways of effecting our executive compensation philosophy and objectives. Our compensation committee currently intends to continue to consider the results of the annual advisory vote on executive compensation and stockholder feedback as data points in making executive compensation decisions.
Executive Compensation Philosophy and Objectives
We operate in a highly competitive business environment, which is characterized by frequent technological advances. To successfully grow our business in this dynamic environment, we must continually develop and refine our products and services to stay ahead of our competitors. To achieve these objectives, we need a highly talented and seasoned team of technical, sales, marketing, operations, and other business professionals.
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We compete with other companies in our industry and other technology companies in the Silicon Valley to attract and retain a skilled management team. To attract and retain qualified executive candidates, our compensation committee recognizes that it needs to develop competitive compensation packages. At the same time, our compensation committee is sensitive to the need to integrate new Named Executive Officers into our executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations. To meet this challenge, we have embraced a compensation philosophy of offering our Named Executive Officers a competitive total compensation program, which we view as the sum of base salary, cash performance-based incentives, equity compensation and employee benefits, each of which recognizes and rewards individual performance and contributions to our success, allowing us to attract, retain, and motivate talented executives with the skills and abilities needed to drive our desired business results.
The specific objectives of our executive compensation program are to:
reward the successful achievement of our financial growth objectives;
drive the development of a successful and profitable business;
attract, motivate, reward, and retain highly qualified executives who are important to our success;
recognize strong performers by offering cash performance-based incentive compensation and equity awards that have the potential to reward individual achievement as well as contributions to our overall success; and
create value for our stockholders.
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Compensation Program Design
Our executive compensation program for the fiscal year ended December 31,
2018,2019 reflected our stage of development as a growing publicly-traded company. Accordingly, the compensation of our Named Executive Officers consisted of base salary, a short-term cash incentive compensation opportunity, long-term equity compensation in the form of stock options and restricted stock units, and certain employee health and welfare benefits.
We offer cash compensation in the form of base salaries and cash incentive compensation opportunities with an annual payment component. Typically, we have structured our annual cash incentive compensation opportunities to focus on the achievement of specific short-term financial and operational objectives that will further our longer-term growth objectives.
Additionally, equity awards for shares of our common stock serve as a key component of our executive compensation program. Currently, we grant stock options covering shares of our common stock, which provide value only if our stock price increases, thereby aligning the recipient’s interests with those of our stockholders and restricted stock units which provide certain value to recipients and limit dilution to our stockholders. In the future, we may introduce other forms of equity awards, as we deem appropriate, into our executive compensation program to offer our Named Executive Officers additional types of long-term incentive compensation that further the objective of aligning the recipient’s interests with those of our stockholders.
Finally, we offer executives with standard health and welfare benefits that are generally available to our other employees, including medical, dental, vision, flexible spending accounts, life insurance and 401(k) plans.
We have not adopted any formal policies or guidelines for allocating compensation between current and long-term compensation or between cash and non-cash compensation, although we use competitive market data to understand the competitive market framework for pay mix. Within this overall framework, our compensation committee reviews each component of executive compensation separately and also takes into consideration the value of each Named Executive Officer’s compensation package as a whole and its relative value in comparison to our other Named Executive Officers.
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Our compensation committee evaluates our compensation philosophy and executive compensation program as circumstances require, and reviews executive compensation annually. As part of this review, we expect that our compensation committee will apply our philosophy and the objectives outlined above, together with consideration for the levels of compensation that we would be willing to pay to ensure that our executive compensation remains competitive and that we meet our retention objectives, as well as the cost to us if we were required to find a replacement for a key executive officer.
Compensation-Setting Process
Role of our Compensation Committee
Compensation decisions for our executives are made by our compensation committee. Currently, our compensation committee is responsible for reviewing, evaluating and approving the compensation arrangements, plans, policies, and practices for our Named Executive Officers and overseeing and administering our cash-based and equity-based compensation plans.
Each fiscal year, our compensation committee, after consulting with our management team and its compensation consultant, establishes our corporate performance objectives and makes decisions with respect to any base salary adjustment, and approves the corporate performance objectives and target annual cash incentive compensation opportunities and equity awards for our executive officers, including our Named Executive Officers for the upcoming fiscal year. With respect to our cash incentive compensation plan
and, in 2020, for our performance-based equity grant to our Chief Executive Officer, our compensation committee determines the applicable goals for each corporate performance objective used for the applicable year.
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Our compensation committee reviews our executive compensation program from time to time, including any incentive compensation plans, to determine whether they are appropriate, properly coordinated, and achieve their intended purposes, and to make any modifications to existing plans and arrangements or to adopt new plans or arrangements.
In carrying out its responsibilities, our compensation committee works with members of our management team, including our Chief Executive Officer and our Vice President, Global Human Resources. Typically, our management team (together with our compensation consultant) assists our compensation committee in the execution of its responsibilities by providing information on corporate and individual performance, market data, and management’s perspective and recommendations on compensation matters.
Typically, except with respect to her own compensation, our Chief Executive Officer will make recommendations to our compensation committee regarding compensation matters, including the compensation of our executive officers. Our Chief Executive Officer also participates in meetings of our compensation committee, except with respect to discussions involving her own compensation in which case she leaves the meeting.
While our compensation committee solicits the recommendations and proposals of our Chief Executive Officer with respect to compensation-related matters, these recommendations and proposals are only one factor in our compensation committee’s decision-making process.
Role of Compensation Consultant
Our compensation committee is authorized to retain the services of one or more executive compensation advisors from time to time, as it sees fit, in connection with carrying out its duties.
In our fiscal year ended December 31, 2018,2019, our compensation committee continued to engage Radford, a national compensation consulting firm, to assist us in executing our executive compensation strategy and guiding principles, assessing current executive total compensation levels against competitive market practices, developing a compensation peer group and advising on potential executive compensation decisions for our fiscal year ended December 31, 2018.2019. Our compensation committee provided Radford with instructions
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regarding the goals of our executive compensation program and the parameters of the competitive review of executive officer compensation packages that it was to conduct. In particular, the compensation committee instructed Radford to analyze whether the compensation packages of our executive officers were consistent with our compensation philosophy and competitive relative to market comparables. The compensation committee further instructed Radford to evaluate the following components to assist the compensation committee in establishing fiscal
20182019 compensation: base salary; target and actual annual incentive compensation; target and actual total cash compensation (base salary and annual incentive compensation); long-term incentive compensation (equity awards); target and actual total direct compensation (base salary, annual incentive compensation and long-term incentive compensation); and beneficial ownership of our common stock.
Radford does not provide any services to us other than the services provided to our compensation committee. Our compensation committee has assessed the independence of Radford taking into account, among other things, the factors set forth in Exchange Act Rule 10C-1 and the listing standards of the New York Stock Exchange, and has concluded that no conflict of interest exists with respect to the work that Radford performs for our compensation committee.
To assess the competitiveness of our executive compensation program and to assist in setting compensation levels, Radford provided market data for the compensation peer group approved by our compensation committee.
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In our fiscal
2018,2019, our compensation committee continued to compare and analyze our executive compensation program with that of a formal compensation peer group of companies.
With respect to fiscal 2018 executive compensation decisions, our compensation committee initially considered a group of peer publicly-traded companies that met some or all of the following criteria: (i) companies in the computer networking, communication products/services and other high technology companies, with an emphasis on growing technology companies that have recently gone public; (ii) companies with revenues between $600 million to $3 billion (approximately 0.5x to 2.5x of our then-current trailing 12-month revenue); and (iii) companies with market capitalization generally between $3 and $30 billion (approximately 0.3x to 3x of our then-current market capitalization). The following group was our executive compensation peer group for fiscal 2018 compensatory decisions made prior to July 30, 2018:
Executive Compensation Peer Group from January 1, 2018 through July 29, 2018
|
| | | | |
Brocade
| Fortinet
| NetScout Systems
| ServiceNow
| Ubiquiti Networks
|
Citrix Systems
| Juniper Networks
| Nutanix
| Splunk
| Workday
|
F5 Networks
| Mellanox Technologies
| Palo Alto Networks
| Tableau Software
| |
FireEye
| NetApp
| Red Hat
| The Ultimate Software
Group
| |
In July 2018, since our revenues and market capitalization had increased significantly since our executive compensation peer group was selected, our compensation committee decided that it was appropriate to update our executive compensation peer group. Radford recommended an updated group of peer publicly-traded companies that met some or all of the following criteria: (i) companies in the computer networking, communication products/services and other high technology companies, with an emphasis on growing technology companies that have recently gone public; (ii) companies with revenues between $900 million to $4 billion (approximately 0.5x to 2.5x of our then-current trailing 12-month revenue); and (iii) companies with market capitalization generally between $6 and $40 billion (approximately 0.3x to 2x of our then-current market capitalization). Based on the recommendations from Radford and the considerations described in the previous sentence, the following group was our executive compensation peer group for fiscal 20182019 compensatory decisions made on or afterprior to July 30, 2018:
22, 2019: | | | | 22, 2019 |
Akamai Technologies | | | F5 Networks | | | NetApp | | | ServiceNow | | | Twitter |
Autodesk | | | Fortinet | | | Nutanix | | | Splunk | | | VMWare |
Citrix Systems | | | Juniper Networks | | | Palo Alto Networks | | | Tableau Software | | | Workday |
Dropbox | | | Mellanox Technologies | | | Red Hat | | | The Ultimate Software Group | | | |
With respect to fiscal 2019 executive compensation decisions made on and following July 22, 2019, our compensation committee reconsidered the peer group, measuring potential outliers in the existing group and considering a broader screen of the technology market. In considering an updated peer group, our compensation committee considered the following criteria: (i) companies in the computer networking, communication products/services and software sectors with a focus on growing technology companies; (ii) companies with revenues between $1 billion to $5.5 billion (approximately 0.5x to 2.5x of our then-current
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trailing 12-month revenue); and (iii) companies with market capitalization generally between $6 and $40 billion (approximately 0.3x to 3x of our then-current market capitalization). As a result, the following group was our executive compensation peer group for fiscal 2019 compensatory decisions made on and following July 22, 2019:
Akamai Technologies | | | F5 Networks | | | NetApp | | | ServiceNow | | | Twitter |
Autodesk | | | Fortinet | | | Nutanix | | | Splunk | | | VMWare |
Citrix Systems | | | Juniper Networks | | | Palo Alto Networks | | | Square | | | Workday |
Dropbox | | | Mellanox Technologies | | | Red Hat | | | Tableau Software | | | |
As a result of changes in our compensation peer group, we positioned at the 36th percentile in terms of revenue and the 68th percentile in terms of market capitalization.
Radford provides our compensation committee with market data from our compensation peer group regarding each element of our executive compensation program. However, our compensation committee does not benchmark in our compensation peer group with respect to any particular element of compensation.
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Executive Compensation Program Components
For
2018,2019, the portion of our Named Executive Officers’ actual total direct compensation (which consists of the base salaries and annual cash incentive
plan compensation paid to our Named Executive Officers with respect to
20182019 and the grant-date fair values of the equity awards granted to our Named Executive Officers in
2018)2019, with each such value calculated in the same manner as set forth in our Fiscal 2019 Summary Compensation Table below) represented by each
material component of our executive compensation program was as follows:
The following describes each component of our executive compensation program, the rationale for each, and how the compensation amounts and awards were determined for our fiscal year ended December 31,
2018.2019.
Base Salary
. Base salary is the primary fixed component of our executive compensation program. We use base salary to compensate our Named Executive Officers for services rendered during the fiscal year and to ensure that we remain competitive in attracting and retaining executive talent.Our compensation committee reviews the base salaries of each Named Executive Officer annually and makes adjustments as it determines to be reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, contributions, responsibilities, experience, prior salary level, position (in the case of a promotion), and market conditions. We typically establish the initial base salary of a Named Executive Officer through arm’s-length negotiation at the time, after taking into consideration his or her position, qualifications, experience, salary expectations, and the base salaries of our other executives.
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In April 2018, our compensation committee increased the base salaries for Messrs. Duda and Sadana effective as of May 21, 2018, in order to bring their base salaries in line with the market 25th percentile and to promote compensation parity among our other Named Executive Officers.
For our fiscal year ended December 31,
2018,2019, our compensation committee determined not to make any changes to the base salaries of our
other Named Executive Officers (which were
generally below the market 25
th percentile)percentile in our compensation peer group) as it thought the base salary levels continued to be appropriate.
Our Named Executive Officers’ base salaries for fiscal
20182019 were as follows:
Named Executive Officer | Base Salary Effective January 1, 2018 | Base Salary Effective May 21, 2018 |
Jayshree Ullal | $ | 300,000 | | $ | 300,000 | |
Ita Brennan | $ | 300,000 | | $ | 300,000 | |
Andreas Bechtolsheim | $ | 300,000 | | $ | 300,000 | |
Kenneth Duda | $ | 250,000 | | $ | 300,000 | |
Anshul Sadana | $ | 275,000 | | $ | 300,000 | |
| 2019 Proxy StatementJayshree Ullal
| | | $300,000 | |
| Ita Brennan | | | $300,000 | |
| Kenneth Duda | | | $300,000 | |
| Anshul Sadana | | | $300,000 | |
| MarcTaxay | | | $300,000 | |
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Annual Cash Incentive Compensation; 20182019 Bonus Plan
We use cash incentive compensation under our omnibus Employee Incentive Plan to motivate our executive officers, including our Named Executive Officers, to achieve our annual financial and operational objectives, while making progress towards our longer-term strategic and growth goals. Each fiscal year, our compensation committee sets the terms and conditions of the Employee Incentive Plan for that fiscal year, which identifies the plan participants and establishes the target cash incentive opportunity for each participant, the performance measures to be used to determine whether to make payouts related to the fiscal year and the associated target levels for each measure, and the potential payouts based on actual performance for the fiscal year. Typically, cash incentive payouts have been determined after the end of the applicable performance period based on our performance against one or more financial and operational performance objectives for the performance period as set forth in our annual operating plan.
In February 2018,2019, our compensation committee set the terms and conditions of the Employee Incentive Plan for fiscal 20182019 (the “2018“2019 Bonus Plan”). The 20182019 Bonus Plan included the following corporate performance metrics for the plan: revenue non-GAAP gross margin,and non-GAAP operating margin, customer quality and support and product innovation. In additionincome. These two metrics result in funding the overall bonus pool available for distribution. No payout would be made if achievement of the revenue metric was below 85% of target.
Once the 2019 Bonus Plan was funded, our compensation committee considered additional metrics for our Named Executive Officer. Prior to
corporate performance measures,payout of each Named Executive Officer, our compensation committee would
considerconsider: (A): the quantitative corporate measures set forth above regarding the ability to fund the bonus pool at target (40% weighting); (B) additional qualitative measures that are important to the growth of our business, including ability to diversify and deliver in new markets (40% weighting); and quality and customer satisfaction (20% weighting); and (C) any individual performance.
The 2018 Bonus Plan included a base component that was accrued on a quarterly basis based on revenue performance, taking into consideration non-GAAP gross margin, non-GAAP operating margin, and customer quality and support and product innovation. If non-GAAP gross margin was not in the target range or customer quality and support or product innovation were not acceptable, then management would have had the discretion to reduce funding. The 20182019 Bonus Plan provided for a single annual payout to each participant following the end of fiscal 20182019 after our compensation committee evaluated corporate and individual performance on a holistic basis. There was no formal weighting of the performance criteria. No payout would be made if achievement of the revenue metric was below 85% of target.
In addition, the 2018 Bonus Plan provided for a potential over-performance component based on out-performance on the revenue and/or non-GAAP operating margin targets, assuming non-GAAP gross margin was in the range of 63% to 65% and customer quality and support and product innovation were acceptable.
For purposes of our
20182019 Bonus Plan, we define revenue in accordance with GAAP,
and non-GAAP
gross marginoperating income as GAAP
gross profit,operating income, less stock-based compensation expenses,
and other non-recurring items, divided by revenue, and non-GAAP operating margin as GAAP operating profit, less stock-based compensation expenses and other non-recurring items including costs associated with the Cisco
lawsuit and
certainOptumsoft lawsuits, one time acquisition related
costs.costs and the amortization of intangible assets. A reconciliation of
thesethe non-GAAP financial metrics to the related GAAP financial measure
asis set forth in our quarterly and annual financial statements and reports is provided in our press release announcing our financial results for the fourth quarter and the fiscal year ended December 31,
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In July 2018, ourOur compensation committee approved the following preliminary target rangestargets for the 20182019 annual cash incentive compensation of our Named Executive Officers (which provided each of our Named Executive Officers with target annual cash incentive compensation and target total cash compensation belowat or around the market 25th percentile)percentile in our compensation peer group). For our Chief Executive Officer, and Chief Development Officer, these preliminary ranges were 20-100%this target was 100% of base salary, while the rangestargets for our other Named
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Executive Officers was
20-60%60% of base salary. These
rangestargets are not strict
rangestargets and merely inform the aggregate of bonuses that will be accrued for financial accounting purposes. Once a total incentive pool is accrued for all participants in the
20182019 Bonus Plan, our compensation committee looks at the year on a holistic basis and factors individual performance and market comparable compensation in our peer group in determining a total incentive paid to each Named Executive Officer.
For our fiscal year ended December 31, 2018,2019, we achieved revenue of approximately $2.2$2.41 billion (an increase of 30.7%12.1% from 2017. Our 2018, revenues werebut below our original plan target by approximately 2.3%, but this was more than offset by a higher than expected level of product deferred revenue as of December 31st 2018)10.4%. In addition, we achieved non-GAAP operating income of approximately $789.0$922.7 million (an increase of 34.6%16.9% from 20172018 levels, and exceedingbut below our plan target by approximately 1.8%11.7%). Our non-GAAP gross margin and customer quality and support and product innovation metrics were determined to have met the targets set forth in the 2018 Bonus Plan. This resulted in funding the 2019 Bonus Plan at an 89% level.
Following the funding of the
base component of the 20182019 Bonus Plan
by the strict corporate quantitative metrics, our compensation committee looked at diversification and delivery into new markets, quality and customer satisfaction and individual performance. Our compensation committee considered that we made good progress with
no incremental fundingrespect to diversification of our revenue base during the year, including the expansion of our enterprise datacenter and campus businesses. Further, as of December 31, 2019, we were on track to exceed our $100M first year campus revenue target. Also, our compensation committee considered quality and customer satisfaction and observed consistent product performance metrics for
over-performance.the year.
Given our overall performance for the year on a holistic basis, our compensation committee’s determination of individual performance for each of our Named Executive Officers and in light of our total cash compensation being at or
belowaround the
5025th percentile of compensation
of our peer group, the total payouts to our Named Executive Officers under the
20182019 Bonus Plan
were:Named Executive Officer | Actual Incentive Compensation |
Jayshree Ullal | $ | 350,000 | |
Ita Brennan | $ | 300,000 | |
Andreas Bechtolsheim | $ | 350,000 | |
Kenneth Duda | $ | 320,000 | |
Anshul Sadana | $ | 440,000 | |
were made as set forth below. Given we underperformed our high expectations, our Chief Executive Officer declined a bonus for 2019. The payment to Mr. Sadana was materially higher than our other Named Executive Officers in light of his additional duties and responsibilities during the year as a result of his promotion. | Ita Brennan | | | $150,000 | |
| Kenneth Duda | | | $160,000 | |
| Anshul Sadana | | | $220,000 | |
| Marc Taxay | | | $150,000 | |
Equity Compensation
We use equity awards to incentivize and reward our executives (including our Named Executive Officers) for long-term corporate performance based on the value of our common stock and, thereby, to align the interests of our executives with those of our stockholders. We grant stock options covering shares of our common stock and full value awards for shares of our common stock, or awards without a purchase price, such as restricted stock unit awards.
New hire, or initial, equity awards for our executives are established through arm’s-length negotiations at the time the individual executive is hired. In making these awards, we consider, among other things, the prospective role and responsibility of the individual executive, competitive factors, the expectations concerning the size of the equity award, the cash compensation to be received by the executive, and the need to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.
In addition, we grant equity awards to our executives when our compensation committee determines that such awards are necessary or appropriate to recognize corporate and individual performance, in recognition of a promotion, or to achieve our retention objectives. To date, we have not applied a rigid formula in determining the size of these equity awards. Instead, our compensation committee has determined the size of such equity awards for an individual executive after taking into consideration market data compiled from our compensation peer group, a compensation analysis performed by Radford, the equity award recommendations of our Chief Executive Officer, the scope of an executive’s performance, contributions, responsibilities, and experience, and
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the amount of equity compensation held by the executive, including the current economic value of his outstanding unvested equity awards and the ability of this equity to satisfy our retention objectives, market conditions, and internal equity considerations. In making its award decisions, our compensation committee has exercised its judgment and discretion to set the size of each award at a level it considered appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value. Equity awards to our named executive officers typically have multi-year vesting periods of four or more years.
The equity awards granted to our Named Executive Officers include refresh awards of restricted stock units granted in March 2018May 2019 and refresh options granted in April 2018.February 2019. We granted the refresh awards of restricted stock units to our Named Executive Officers to ensure that they receive a base value for the shares regardless of fluctuations in our stock price, while incentivizing stockholder growth to deliver greater value for the Company and the Named Executive Officer. We granted the refresh options to our Named Executive Officers in order to align their interests with those of our stockholders and to provide them with additional incentive to grow our business, since each option only provides value if our stock price increases during the term of the option. In determining the size of the refresh awards to our Named Executive Officers, our compensation committee considered market compensation data from our peer group, the unvested equity held by each Named Executive Officer and the Named Executive Officer’s expected future contributions to the Company and growing stockholder value. To promote retention, the refresh awards of restricted stock units and stock options granted to our other Named Executive Officers vest over a period of approximately 4 years from November 2020.
Further, in
March 2018May 2019, we made promotion grants to Anshul Sadana to reflect his increased duties as our Chief Operating Officer. The promotion awards of restricted stock units vest over a period of approximately 5
years from the date of grant, and the refresh options granted in April 2018 vest over a period of approximately 6 years from the date of grant.Further, in November 2018, we made limited out-of-cycle equity grants to our Named Executive Officers other than Ms. Ullal and Mr. Bechtolsheim. We do not customarily provide for out-of-cycle equity grants to Named Executive Officers. However, our compensation committee thought it was prudent in this context to promote long-term retention. These out-of-cycle awards of restricted stock units and options vest over a period of approximately 6 years from the date of grant, which is significantly longer than our general vesting period.
period, while the promotion awards of stock options vest over a period of approximately 4 years from the date of grant.
The numbers of shares of our common stock covered by each equity award granted to our Named Executive Officers in 20182019 were as follows:
February Refresh Stock Options
| Jayshree Ullal | | | 10,000 | | | $1,075,639 | |
| Ita Brennan | | | 5,000 | | | $537,820 | |
| Anshul Sadana | | | 14,000 | | | $1,505,894 | |
| Kenneth Duda | | | 10,000 | | | $1,075,639 | |
| Marc Taxay | | | 5,000 | | | $537,820 | |
May Refresh RSUs
| Ita Brennan | | | 6,250 | | | $1,651,375 | |
| Anshul Sadana | | | 8,000 | | | $2,113,760 | |
| Kenneth Duda | | | 7,000 | | | $1,849,540 | |
| Marc Taxay | | | 6,250 | | | $1,651,375 | |
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Named Executive Officer | March RSUs | April Options | November RSUs | November Options |
Jayshree Ullal | | 20,000 | | | 8,000 | | | — | | | — | |
Ita Brennan | | 5,000 | | | 5,000 | | | 3,500 | | | 2,500 | |
Andreas Bechtolsheim | | 20,000 | | | 8,000 | | | — | | | — | |
Kenneth Duda | | 6,000 | | | 8,000 | | | 5,000 | | | 3,000 | |
Anshul Sadana | | 7,000 | | | 8,000 | | | 6,000 | | | 4,000 | |
Promotion Grants
| Anshul Sadana | | | 2,000 stock options | | | $232,583 | |
| Anshul Sadana | | | 12,000 RSUs | | | $3,170,640 | |
February 2020 Performance-Based Equity Award to our Chief Executive Officer
Throughout 2019, our compensation committee evaluated a performance-based equity grant to our Chief Executive Officer. The compensation committee considered an array of potential metrics including quantitative and qualitative metrics for an applicable fiscal year. Ultimately, the compensation committee determined that revenue and non-GAAP operating margin targets would be appropriate metrics that incentivize our Chief Executive Officer and drive stockholder value creation. Given that fiscal 2019 was completed by the time our compensation committee had finalized an appropriate quantitative metric, our compensation committee decided to delay the grant until February 2020 with targets applicable to fiscal 2020. The weighting of the grant was 75% based on revenue, and 25% based on non-GAAP operating income. Achievement at target for fiscal 2020 would result in an eligibility to vest in 100% of the shares, with overachievement yielding a maximum payout of 150%. Once achievement is determined for fiscal 2020, 25% of eligible shares vest on this determination date in 2021 and the remainder of eligible shares vest quarterly over an additional 3 years. The table below describes our performance-based equity grant to our Chief Executive Officer. The intended value was converted into a number of shares using a 30-day average trading price in accordance with our standard practices.
2020 Chief Executive Officer Grants
| Jayshree Ullal | | | 27,000 | | | $5,500,000 | |
Welfare and Other Employee Benefits
We have established a tax-qualified Section 401(k) retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. In
2018,2019, we made matching contributions for the contributions made to the 401(k) plan by our employees, including our Named Executive Officers. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code (the “Code”), so that contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.
In addition, we provide other benefits to our Named Executive Officers on the same basis as all of our full-time employees. These benefits include standard health, vacation and other benefits offered to our employees.
Perquisites and Other Personal Benefits
We generally do not provide perquisites to our Named Executive Officers or other personal benefits beyond what is provided to employees on a broad basis.
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Executive Officer Employment Arrangements
Jayshree Ullal Offer Letter
We have entered into an offer letter with Jayshree Ullal, our President and Chief Executive Officer, pursuant to which Ms. Ullal is an at-will employee. Ms. Ullal’s current annual base salary is $300,000 per year, and her target annual bonus range is from $60,000 to $300,000, which does not consider the over-performance pool.targeted at $300,000. Ms. Ullal is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
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Ita Brennan Offer Letter & Severance Agreement
Ms. Brennan joined us as our new Chief Financial Officer in May 2015. We have entered into an offer letter with Ms. Brennan that provides that she is an at-will employee. Ms. Brennan currently receives a base salary of $300,000 per year, and her
target annual bonus
range is
from $60,000 to $180,000, which does not consider the over-performance pool.targeted at $180,000. Ms. Brennan is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
In addition, we entered into a severance agreement with Ms. Brennan, effective May 2015. The severance agreement provides that if Ms. Brennan’s employment is involuntarily terminated other than “cause” (as generally defined below) or if Ms. Brennan resigns for “good reason” (as generally defined below) then, subject to her execution of a release of claims, Ms. Brennan will receive continuing payments of her base salary for 12 months and accelerated vesting of time-based equity awards that would have vested had Ms. Brennan remained employed with us for 12 months following her termination of employment date. If the qualified termination of employment occurred during the period beginning on, and for 12 months following a change in control, then the equity acceleration benefit would be 50% of the then-unvested equity awards (and for any equity awards that vest based on the achievement of performance criteria, assuming the performance criteria had been achieved at target levels for the relevant performance periods), if greater than the acceleration benefit described in the previous sentence.
For purposes of the severance agreement with Ms. Brennan, “cause” means generally:
an act of dishonesty made by her in connection with her responsibilities as an employee;
her conviction of, or plea of nolo contendere to, a felony or any crime involving fraud, embezzlement or any other act of moral turpitude;
her gross misconduct;
her unauthorized use of disclosure of any proprietary information or trade secrets of ours or any other party to whom she owes a duty of non-disclosure as a result of her relationship with us;
her willful breach of any obligations under any written agreement or covenant with us; or
her continued failure to perform his or her duties after a demand from us setting the basis of our belief and failure to cure within 10 business days after receiving such notice.
For purposes of the severance agreement with Ms. Brennan, “good reason” means generally a resignation within 30 days following the expiration of any cure period following the occurrence of one or more of the following, without her consent:
a material diminution of her authority, duties or responsibilities (which includes a reduction in authority, duties or responsibilities in connection with our being acquired and made part of a larger entity);
a material reduction of her base salary (which excludes a reduction in her base salary of 15% or less in any one year) other than a reduction applied to management generally; or
a material change in the geographic location of her primary work facility or location (which excludes a relocation of less than 50 miles from her then-present location).
TABLE OF CONTENTS
Ms. Brennan must provide written notice within 90 days of the initial existence of good reason and provide a cure period of 30 days following the date of such notice.
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Andreas Bechtolsheim
Mr. Bechtolsheim is a founder and our Chief Development Officer. We have not entered into any formal employment letter with Mr. Bechtolsheim. Mr. Bechtolsheim is an at-will employee. Mr. Bechtolsheim’s current annual base salary is $300,000 per year, and his target annual bonus range is from $60,000 to $300,000, which does not consider the over-performance pool. Mr. Bechtolsheim is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
Anshul Sadana Offer Letter
We have entered into an offer letter with Anshul Sadana, our Chief
CustomerOperating Officer, pursuant to which Mr. Sadana is an at-will employee. Mr. Sadana’s current annual base salary is $300,000 per year, and his
target annual bonus
range is
from $60,000 totargeted at $180,000, which does not consider the over-performance pool. Mr. Sadana is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
Kenneth Duda Offer Letter
We have entered into an offer letter with Kenneth Duda, our Chief Technology Officer and Senior Vice President, Software Engineering, pursuant to which Mr. Duda is an at-will employee. Mr. Duda’s current annual base salary is $300,000 per year, and his target annual bonus range is from $60,000 to $180,000, which does not consider the over-performance pool.targeted at $180,000. Mr. Duda is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
Marc Taxay Offer Letter & Severance Agreement
We have entered into an offer letter with Marc Taxay, our Senior Vice President, General Counsel, pursuant to which Mr. Taxay is an at-will employee. Mr. Taxay’s current annual base salary is $300,000 per year and he is eligible for an annual bonus is targeted at $180,000. Mr. Taxay is also eligible to participate in all of our standard health, vacation and other benefits offered to our employees.
In addition, we entered into a severance agreement with Mr. Taxay, effective March 2015. The severance agreement provides that if Mr. Taxay’s employment is involuntarily terminated other than “cause” (as generally defined below) or if Mr. Taxay resigns for “good reason” (as generally defined below) then, subject to his execution of a release of claims, Mr. Taxay will receive continuing payments of his base salary for 12 months and accelerated vesting of time-based equity awards that would have vested had Mr. Taxay remained employed with us for 12 months following his termination of employment date. If the qualified termination of employment occurred during the period beginning on, and for 12 months following a change in control, then the equity acceleration benefit would be 50% of the then-unvested equity awards, if greater than the acceleration benefit described in the previous sentence.
For purposes of the severance agreement with Mr. Taxay, “cause” and “good reason” have the same general meanings as set forth in Ms. Brennan’s severance agreement.
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Fiscal 20182019 Summary Compensation Table
The following table provides information regarding the total compensation for services rendered in all capacities that was earned by our Named Executive Officers.
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(3) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
Jayshree Ullal Chief Executive Officer
| | 2018 | | | 300,000 | | | — | | | 5,903,000 | | | 988,542 | | | 350,000 | | | 8,532 | (4) | | 7,550,074 | |
| 2017 | | | 300,000 | | | — | | | 3,939,788 | | | 3,278,228 | | | 400,000 | | | 5,763 | | | 7,923,779 | |
| 2016 | | | 300,000 | | | — | | | — | | | 2,327,870 | | | 450,000 | | | 432 | | | 3,078,302 | |
Ita Brennan Chief Financial Officer
| | 2018 | | | 300,000 | | | — | | | 2,331,255 | | | 915,205 | | | 300,000 | | | 8,532 | (4) | | 3,854,992 | |
| 2017 | | | 300,000 | | | 120,000 | | | 1,490,040 | | | — | | | 250,000 | | | 2,163 | | | 2,162,203 | |
| 2016 | | | 300,000 | | | — | | | 337,440 | | | 473,412 | | | 250,000 | | | 432 | | | 1,361,284 | |
Andreas Bechtolsheim Chief Development Officer
| | 2018 | | | 300,000 | | | — | | | 5,903,000 | | | 988,542 | | | 350,000 | | | 432 | (5) | | 7,541,974 | |
| 2017 | | | 300,000 | | | — | | | 3,939,788 | | | 3,278,228 | | | 400,000 | | | 432 | | | 7,918,448 | |
| 2016 | | | 300,000 | | | — | | | — | | | 2,327,870 | | | 450,000 | | | 432 | | | 3,078,302 | |
Kenneth Duda(1) Chief Technology Officer
| | 2018 | | | 280,769 | | | — | | | 2,993,050 | | | 1,345,381 | | | 320,000 | | | 8,502 | (4) | | 4,947,702 | |
| 2017 | | | 250,000 | | | 120,000 | | | 2,483,400 | | | — | | | 280,000 | | | 7,860 | | | 3,141,260 | |
| 2016 | | | 250,000 | | | — | | | 562,400 | | | 591,765 | | | 380,000 | | | 360 | | | 1,784,525 | |
Anshul Sadana(2) Chief Operating Officer
| | 2018 | | | 290,385 | | | — | | | 3,532,630 | | | 1,464,327 | | | 440,000 | | | 8,517 | (4) | | 5,735,859 | |
| 2017 | | | 275,000 | | | 150,000 | | | 2,483,400 | | | — | | | 350,000 | | | 5,323 | | | 3,263,723 | |
| 2016 | | | 248,077 | | | — | | | 1,769,150 | | | 591,765 | | | 400,000 | | | 354 | | | 3,009,346 | |
| Jayshree Ullal Chief Executive Officer | | | 2019 | | | 300,000 | | | — | | | — | | | 1,075,639 | | | — | | | 8,532(3) | | | 1,384,171 | |
| 2018 | | | 300,000 | | | — | | | 5,903,000 | | | 988,542 | | | 350,000 | | | 8,532 | | | 7,550,074 | |
| 2017 | | | 300,000 | | | — | | | 3,939,788 | | | 3,278,228 | | | 400,000 | | | 5,763 | | | 7,923,779 | |
| Ita Brennan Chief Financial Officer | | | 2019 | | | 300,000 | | | — | | | 1,651,375 | | | 537,820 | | | 150,000 | | | 8,532(3) | | | 2,647,727 | |
| 2018 | | | 300,000 | | | — | | | 2,331,255 | | | 915,205 | | | 300,000 | | | 8,532 | | | 3,854,992 | |
| 2017 | | | 300,000 | | | 120,000 | | | 1,490,040 | | | — | | | 250,000 | | | 2,163 | | | 2,162,203 | |
| Kenneth Duda Chief Technology Officer | | | 2019 | | | 300,000 | | | 5,800(1) | | | 1,849,540 | | | 1,075,639 | | | 160,000 | | | 8,532(3) | | | 3,399,511 | |
| 2018 | | | 280,769 | | | — | | | 2,993,050 | | | 1,345,381 | | | 320,000 | | | 8,502 | | | 4,947,702 | |
| 2017 | | | 250,000 | | | 120,000 | | | 2,483,400 | | | — | | | 280,000 | | | 7,860 | | | 3,141,260 | |
| Anshul Sadana Chief Operating Officer | | | 2019 | | | 300,000 | | | — | | | 5,284,400 | | | 1,738,477 | | | 220,000 | | | 8,532(3) | | | 7,551,409 | |
| 2018 | | | 290,385 | | | — | | | 3,532,630 | | | 1,464,327 | | | 440,000 | | | 8,517 | | | 5,735,859 | |
| 2017 | | | 275,000 | | | 150,000 | | | 2,483,400 | | | — | | | 350,000 | | | 5,323 | | | 3,263,723 | |
| Marc Taxay Senior Vice President, General Counsel | | | 2019 | | | 300,000 | | | | | | 1,651,375 | | | 537,820 | | | 150,000 | | | 8,532 (3) | | | 2,647,727 | |
(1)
| (1) | Kenneth Duda receivedThe amount reported for fiscal 2019 represents a salary increase from $250,000patent bonus award and a spot bonus award paid by the Company to $300,000 on May 21, 2018.Mr. Duda. |
| (2) | Anshul Sadana received a salary increase from $275,000 to $300,000 on May 21, 2018. |
| (3)
| The amounts reported represent the aggregate grant-date fair value of the restricted stock units or stock options awarded to the Named Executive Officer, calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 718 (“ASC Topic 718”). The assumptions used in calculating the grant-date fair value of the stock options reported in this column are set forth in our audited consolidated financial statements included in our Annual Report on Form 10-K, as filed with the SEC on February 15, 2019.14, 2020. |
| (4)(3)
| The amounts reported for fiscal 20182019 include Company matching contributions from the Company for the contributions made to the 401(k) plan by the Named Executive Officer and a life insurance premium paid on the Named Executive Officer’s behalf. |
| (5) | The amount reported for fiscal 2018 represents a life insurance premium paid on the Named Executive Officer’s behalf. |
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Outstanding Equity Awards at 20182019 Fiscal Year-End
The following table sets forth information regarding outstanding stock options and stock awards held by our Named Executive Officers as of December 31,
2018. | | Option Awards | Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
Jayshree Ullal | | 1/13/2014 | (3) | | 13,333 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/12/2016 | (4) | | 6,667 | | | 60,000 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/6/2017 | (5) | | 5,500 | | | 52,250 | | | 95.51 | | | 2/5/2027 | | | — | | | — | |
| 2/6/2017 | (6) | | — | | | — | | | — | | | — | | | 24,750 | | | 5,214,825 | |
| 3/9/2018 | (7) | | — | | | — | | | — | | | — | | | 20,000 | | | 4,214,000 | |
| 4/13/2018 | (8) | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
Ita Brennan | | 6/16/2015 | (9) | | 7,917 | | | 7,083 | | | 84.97 | | | 6/15/2025 | | | — | | | — | |
| 6/16/2015 | (10) | | — | | | — | | | — | | | — | | | 22,500 | | | 4,740,750 | |
| 9/11/2015 | (11) | | 4,000 | | | 6,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016 | (12) | | 7,000 | | | 13,000 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016 | (13) | | — | | | — | | | — | | | — | | | 3,000 | | | 632,100 | |
| 3/10/2017 | (14) | | — | | | — | | | — | | | — | | | 9,600 | | | 2,022,720 | |
| 3/9/2018 | (15) | | — | | | — | | | — | | | — | | | 5,000 | | | 1,053,500 | |
| 4/13/2018 | (16) | | — | | | 5,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018 | (17) | | — | | | 2,500 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018 | (18) | | — | | | — | | | — | | | — | | | 3,500 | | | 737,450 | |
Andreas Bechtolsheim | | 1/13/2014 | (19) | | 13,000 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 5/20/2014 | (20) | | 308,333 | | | — | | | 38.00 | | | 5/19/2024 | | | — | | | — | |
| 12/16/2014 | (21) | | 3,728 | | | 14,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | |
| 2/12/2016 | (22) | | 6,667 | | | 60,000 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/6/2017 | (23) | | 5,500 | | | 52,250 | | | 95.51 | | | 2/5/2027 | | | — | | | — | |
| 2/6/2017 | (24) | | — | | | — | | | — | | | — | | | 24,750 | | | 5,214,825 | |
| 3/9/2018 | (25) | | — | | | — | | | — | | | — | | | 20,000 | | | 4,214,000 | |
| 4/13/2018 | (26) | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
Kenneth Duda | | 10/4/2011 | (27) | | 100,000 | | | — | | | 3.33 | | | 10/3/2021 | | | — | | | — | |
| 12/27/2012 | (28) | | 20,000 | | | — | | | 4.18 | | | 12/26/2022 | | | — | | | — | |
| 3/11/2013 | (29) | | 100,000 | | | — | | | 7.76 | | | 3/10/2023 | | | — | | | — | |
| 1/13/2014 | (30) | | 20,000 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/11/2014 | (31) | | 100,000 | | | — | | | 30.67 | | | 2/10/2024 | | | — | | | — | |
| 12/16/2014 | (32) | | 20,000 | | | 30,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | |
| 9/11/2015 | (33) | | 8,000 | | | 12,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016 | (34) | | 8,750 | | | 16,250 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016 | (35) | | — | | | — | | | — | | | — | | | 5,000 | | | 1,053,500 | |
| 3/10/2017 | (36) | | — | | | — | | | — | | | — | | | 16,000 | | | 3,371,200 | |
| 3/9/2018 | (37) | | — | | | — | | | — | | | — | | | 6,000 | | | 1,264,200 | |
| 4/13/2018 | (38) | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018 | (39) | | — | | | 3,000 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018 | (40) | | — | | | — | | | — | | | — | | | 5,000 | | | 1,053,500 | |
2019.
| Jayshree Ullal | | | 1/13/2014(3) | | | 11,000 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/12/2016(4) | | | 15,000 | | | 40,000 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/6/2017(5) | | | 13,750 | | | 35,750 | | | 95.51 | | | 2/5/2027 | | | — | | | — | |
| 2/6/2017(6) | | | — | | | — | | | — | | | — | | | 16,500 | | | 3,356,100 | |
| 3/9/2018(7) | | | — | | | — | | | — | | | — | | | 16,250 | | | 3,305,250 | |
| 4/13/2018(8) | | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 2/8/2019(9) | | | — | | | 10,000 | | | 226.34 | | | 2/7/2029 | | | — | | | — | |
| Ita Brennan | | | 6/16/2015(10) | | | 12,917 | | | 2,083 | | | 84.97 | | | 6/15/2025 | | | — | | | — | |
| 6/16/2015(11) | | | — | | | — | | | — | | | — | | | 7,500 | | | 1,525,500 | |
| 9/11/2015(12) | | | 6,000 | | | 4,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016(13) | | | 11,000 | | | 9,000 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016(14) | | | — | | | — | | | — | | | — | | | 1,500 | | | 305,100 | |
| 3/10/2017(15) | | | — | | | — | | | — | | | — | | | 7,200 | | | 1,464,480 | |
| 3/9/2018(16) | | | — | | | — | | | — | | | — | | | 4,062 | | | 826,211 | |
| 4/13/2018(17) | | | — | | | 5,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018(18) | | | — | | | 2,500 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018(19) | | | — | | | — | | | — | | | — | | | 3,500 | | | 711,900 | |
| 2/8/2019(20) | | | — | | | 5,000 | | | 226.34 | | | 2/7/2029 | | | — | | | — | |
| 5/10/2019(21) | | | — | | | — | | | — | | | — | | | 6,250 | | | 1,271,250 | |
| Kenneth Duda | | | 10/4/2011(22) | | | 100,000 | | | — | | | 3.33 | | | 10/2/2021 | | | — | | | — | |
| 12/27/2012(23) | | | 20,000 | | | — | | | 4.18 | | | 12/26/2022 | | | — | | | — | |
| 3/11/2013(24) | | | 100,000 | | | — | | | 7.76 | | | 3/10/2023 | | | — | | | — | |
| 1/13/2014(25) | | | 20,000 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/11/2014(26) | | | 100,000 | | | — | | | 30.67 | | | 2/10/2024 | | | — | | | — | |
| 12/16/2014(27) | | | 30,000 | | | 20,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | |
| 9/11/2015(28) | | | 12,000 | | | 8,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016(29) | | | 13,750 | | | 11,250 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016(30) | | | — | | | — | | | — | | | — | | | 2,500 | | | 508,500 | |
| 3/10/2017(31) | | | — | | | — | | | — | | | — | | | 12,000 | | | 2,440,800 | |
| 3/9/2018(32) | | | — | | | — | | | — | | | — | | | 4,875 | | | 991,575 | |
| 4/13/2018(33) | | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018(34) | | | — | | | 3,000 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018(35) | | | — | | | — | | | — | | | — | | | 5,000 | | | 1,017,000 | |
| 2/8/2019(36) | | | — | | | 10,000 | | | 226.34 | | | 2/7/2029 | | | — | | | — | |
| 5/10/2019(37) | | | — | | | — | | | — | | | — | | | 7,000 | | | 1,423,800 | |
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| | Option Awards | Stock Awards |
Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(1) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) |
Anshul Sadana | | 3/11/2013 | (41) | | — | | | — | | | — | | | — | | | 10,500 | | | 2,212,350 | |
| 4/19/2013 | (42) | | 7,667 | | | — | | | 7.76 | | | 4/18/2023 | | | — | | | — | |
| 1/13/2014 | (43) | | 16,000 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/11/2014 | (44) | | 100,000 | | | — | | | 30.67 | | | 2/10/2024 | | | — | | | — | |
| 12/16/2014 | (45) | | 3,333 | | | 30,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | |
| 9/11/2015 | (46) | | 1,333 | | | 12,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016 | (47) | | 1,667 | | | 16,250 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016 | (48) | | — | | | — | | | — | | | — | | | 5,000 | | | 1,053,500 | |
| 10/14/2016 | (49) | | — | | | — | | | — | | | — | | | 9,000 | | | 1,896,300 | |
| 3/10/2017 | (50) | | — | | | — | | | — | | | — | | | 16,000 | | | 3,371,200 | |
| 3/9/2018 | (51) | | — | | | — | | | — | | | — | | | 7,000 | | | 1,474,900 | |
| 4/13/2018 | (52) | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018 | (53) | | — | | | 4,000 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018 | (54) | | — | | | — | | | — | | | — | | | 6,000 | | | 1,264,200 | |
| Anshul Sadana | | | 4/19/2013(38) | | | 2,396 | | | — | | | 7.76 | | | 4/18/2023 | | | — | | | — | |
| 1/13/2014(39) | | | 11,600 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/11/2014(40) | | | 70,000 | | | — | | | 30.67 | | | 2/10/2024 | | | — | | | — | |
| 12/16/2014(41) | | | 4,167 | | | 20,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | |
| 9/11/2015(42) | | | 1,667 | | | 8,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016(43) | | | 2,083 | | | 11,250 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016(44) | | | — | | | — | | | — | | | — | | | 2,500 | | | 508,500 | |
| 10/14/2016(45) | | | — | | | — | | | — | | | — | | | 6,000 | | | 1,220,400 | |
| 3/10/2017(46) | | | — | | | — | | | — | | | — | | | 12,000 | | | 2,440,800 | |
| 3/9/2018(47) | | | — | | | — | | | — | | | — | | | 5,687 | | | 1,156,736 | |
| 4/13/2018(48) | | | — | | | 8,000 | | | 244.20 | | | 4/12/2028 | | | — | | | — | |
| 11/9/2018(49) | | | — | | | 4,000 | | | 244.43 | | | 11/8/2028 | | | — | | | — | |
| 11/9/2018(50) | | | — | | | — | | | — | | | — | | | 6,000 | | | 1,220,400 | |
| 2/8/2019(51) | | | — | | | 14,000 | | | 226.34 | | | 2/7/2029 | | | — | | | — | |
| 5/10/2019(52) | | | 292 | | | 1,708 | | | 264.22 | | | 5/9/2029 | | | — | | | — | |
| 5/10/2019(53) | | | — | | | — | | | — | | | — | | | 10,200 | | | 2,074,680 | |
| 5/10/2019(54) | | | — | | | — | | | — | | | — | | | 8,000 | | | 1,627,200 | |
| Marc Taxay | | | 1/13/2014(55) | | | 833 | | | — | | | 22.49 | | | 1/12/2024 | | | — | | | — | |
| 2/11/2014(56) | | | 833 | | | — | | | 30.67 | | | 2/10/2024 | | | — | | | — | |
| 12/16/2014(57) | | | 4,000 | | | 68.34 | | | 12/15/2024 | | | — | | | — | | | | |
| 9/11/2015(58) | | | — | | | 4,000 | | | 64.46 | | | 9/10/2025 | | | — | | | — | |
| 2/12/2016(59) | | | — | | | 4,500 | | | 56.24 | | | 2/11/2026 | | | — | | | — | |
| 2/12/2016(60) | | | — | | | — | | | — | | | — | | | 1,000 | | | 203,400 | |
| 4/8/2016(61) | | | 250 | | | 3,750 | | | 65.01 | | | 4/07/2026 | | | — | | | — | |
| 4/8/2016(62) | | | — | | | — | | | — | | | — | | | 3,000 | | | 610,200 | |
| 3/10/2017(63) | | | — | | | — | | | — | | | — | | | 7,200 | | | 1,464,480 | |
| 3/9/2018(64) | | | — | | | — | | | — | | | — | | | 4,062 | | | 826,211 | |
| 4/13/2018(65) | | | — | | | 5,000 | | | 244.20 | | | 04/12/2028 | | | — | | | — | |
| 11/9/2018(66) | | | — | | | 2,500 | | | 244.43 | | | 11/08/2028 | | | — | | | — | |
| 11/9/2018(67) | | | — | | | — | | | — | | | — | | | 3,500 | | | 711,900 | |
| 2/8/2019(68) | | | — | | | 5,000 | | | 226.34 | | | 02/07/2029 | | | — | | | — | |
| 5/10/2019(69) | | | — | | | — | | | — | | | — | | | 6,250 | | | 1,271,250 | |
| (1)
| Represents (i) restricted stock awards and (ii) shares of restricted stock issued upon the early exercise of stock options, in each case that remained unvested as of December 31, 2018.2019. |
| (2)
| This column represents the market value of the shares of our common stock underlying the restricted stock awards or restricted stock as of December 31, 2018,2019, based on the closing price of our common stock, as reported on the New York Stock Exchange, of $210.70$203.40 per share on December 31, 2018,2019, the last trading day of our fiscal 2018.2019. |
(3)
| (3) | The option is subject to an early exercise provision and is immediately exercisable. This option vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 12,0002019, 8,000 shares of the amount exercisable were unvested. |
(4)
| (4) | This option vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/60th60th of the shares each month from January 1, 2017. |
(5)
| (5) | This option vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from February 6, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
(6)
| (6) | This award of restricted stock units vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/20th20th of the shares each quarter from February 20, 2017. |
(7)
| (7) | This award of restricted stock units vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from May 20, 2019. |
44 | (8) | | | | | 2020 Proxy Statement |
TABLE OF CONTENTS
(8)
| This option vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from June 1, 2020. |
(9)
| (9)This option vests, subject to Ms. Ullal’s continued role as a service provider to us, with respect to 1/48th of the shares each month from December 1, 2020. |
(10)
| This option vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/5th5th of the shares one year from May 18, 2015 with the remaining shares vesting in equal amounts over the next 48 months. |
(11)
| (10) | This award of restricted stock units vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/5th5th of the shares one year from May 18, 2015 with the remaining shares vesting in equal amounts over the next 16 quarters. |
(12)
| (11) | This option vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/5th5th of the shares one year from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. |
(13)
| (12) | This option vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/60th60th of the shares each month from April 1, 2017. |
(14)
| (13) | This award of restricted stock units vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from February 20, 2017. |
(15)
| (14) | This award of restricted stock units vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/20th20th of the shares each quarter from February 20, 2018. |
(16)
| (15) | This award of restricted stock units vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from May 20, 2019. |
(17)
| (16) | This option vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from June 1, 2020. |
(18)
| (17) | This option vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from December 1, 2020. |
(19)
| (18) | This award of restricted stock units vests, subject to Ms. Brennan’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from November 20, 2020. |
42 (20)
| | 2019 Proxy Statement
|
TABLE OF CONTENTS
| (19) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Bechtolsheim’sMs. Brennan’s continued role as a service provider to us, with respect to 1/5th48th of the shares granted one yeareach month from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end2020. |
(21)
| This award of 2018, 12,000 shares of the exercisable shares were unvested. |
| (20) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This optionrestricted stock units vests, subject to Mr. Bechtolsheim’sMs. Brennan’s continued role as a service provider to us, with respect to 1/5th of the shares one year from September 30, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 275,000 shares of the exercisable shares were unvested. |
| (21) | This option vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/5th of the shares one year from December 1, 2014 with the remaining shares vesting in equal amounts over the next 48 months. |
| (22) | This option vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/60th of the shares each month from January 1, 2017. |
| (23) | This option vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/5th of the shares granted one year from February 6, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
| (24) | This award of restricted stock units vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/20th16th of the shares each quarter from FebruaryNovember 20, 2017.2020. |
(22)
| (25) | This award of restricted stock units vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from May 20, 2019. |
| (26) | This option vests, subject to Mr. Bechtolsheim’s continued role as a service provider to us, with respect to 1/48th of the shares each month from June 1, 2020. |
| (27) | This option vests 1/4th of shares granted on September 30, 2013 with the remaining shares vesting in equal amounts over the next 36 months. |
(23)
| (28) | This option vests 1/4th of shares granted on December 1, 2014 with the remaining shares vesting in equal amounts over the next 36 months. |
(24)
| (29) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/4th4th of the shares granted on December 1, 2016 with the remaining shares vesting in equal amounts over the next 36 months. At the end of 2018, 25,000 shares2019, none of the exercisable shares were unvested. |
(25)
| (30) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/5th of the shares granted on December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 12,0002019, 8,000 shares of the exercisable shares were unvested. |
(26)
| (31) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/5th of shares granted on December 1, 2018 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 80,0002019, 60,000 shares of the exercisable shares were unvested. |
(27)
| (32) | This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/5th of shares granted on December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
(28)
| (33) | This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/5th of shares granted on December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
(29)
| (34) | This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/60th of shares granted on April 1, 2017, with the remaining shares vesting in equal amounts over the next 59 months. |
(30)
| (35) | This award of restricted stock units vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/16th of the shares granted on February 20, 2017 with the remaining shares vesting in equal amounts over the next 15 quarters. |
(31)
| (36) | This award of restricted stock units vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/20th of the shares granted on February 20, 2018 with the remaining shares vesting in equal amounts over the next 19 quarters. |
(32)
| (37) | This award of restricted stock units vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/16th of the shares granted on May 20, 2019 and will continue to vest at the same rate on each quarterly vest date thereafter. |
(33)
| (38) | This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from June 1, 2020. |
(34)
| (39) | This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from December 1, 2020. |
(35)
| (40) | This award of restricted stock units vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/16th of the restricted stock units awarded on November 20, 2020 and will continue to vest at the same rate on each quarterly vest date thereafter. |
(36)
| (41)This option vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/48th of the shares each month from December 1, 2020. |
(37)
| This award of restricted stock units vests, subject to Mr. Duda’s continued role as a service provider to us, with respect to 1/16th of the restricted stock united awarded on November 20, 2020 and will continue to vest at the same rate on each quarterly vest date thereafter. |
(38)
| These shares remain subject to a repurchase right held by us at the original exercise price, in the event of the termination of Mr. Sadana’s employment with us. These shares vest with respect to 1/4th4th of the shares granted one year from December 1, 2015 with the remaining shares vesting in equal amounts over the next 36 months. |
2020 Proxy Statement | (42) | | | | | 45 |
TABLE OF CONTENTS
(39)
| The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/4th of the shares granted one year from December 1, 2015 with the remaining shares vesting in equal amounts over the next 36 months. At the end of 2018, 5,750 shares of the exercisable shares were unvested. |
| (43) | The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 14,4002019, 9,600 shares of the exercisable shares were unvested. |
(40)
| (44) | The option is subject to an early exercise provision and is immediately exercisable. This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2018, 80,0002019, 60,000 shares of the amount exercisable were unvested. |
(41)
| (45) | This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. |
(42)
| (46) | This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/5th5th of the shares granted one year from December 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. |
2019 Proxy Statement (43)
| | 43
|
TABLE OF CONTENTS
| (47) | This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/60th60th of the shares each monthgranted one year from April 1, 2017.2016 with the remaining shares vesting in equal amount over the next 59 months. |
(44)
| (48) | This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/16th16th of the shares on Februaryeach quarter from November 20, 2017 with the remaining shares vesting quarterly in equal amounts over the next 15 quarters.2017. |
(45)
| (49) | This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/20th20th of the shares each quarter from February 20, 2017. |
(46)
| (50) | This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/20th20th of the shares each quarter from February 20, 2018. |
(47)
| (51) | This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from May 20, 2019. |
(48)
| (52) | This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from June 1, 2020. |
(49)
| (53) | This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/48th48th of the shares each month from December 1, 2020. |
(50)
| (54) | This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/16th16th of the shares each quarter from November 20, 2020. |
(51)
| This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/48th of the shares each month from December 1, 2020. |
(52)
| This option vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/48th of the shares each month from June 10, 2019. |
(53)
| This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/20th of the shares each quarter from May 20, 2019. |
(54)
| This award of restricted stock units vests, subject to Mr. Sadana’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from November 20, 2020. |
(55)
| The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/5th of the shares each month from May 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2019, 833 of the exercisable shares were unvested. |
(56)
| The option is subject to an early exercise provision and was immediately exercisable at the time of grant. This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/5th of the shares each month from May 1, 2016 with the remaining shares vesting in equal amounts over the next 48 months. At the end of 2019, 833 of the exercisable shares were unvested. |
(57)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/5th of the shares each month from December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
(58)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/5th of the shares each month from December 1, 2017 with the remaining shares vesting in equal amounts over the next 48 months. |
(59)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/60th of the shares each month from April 1, 2017 with the remaining shares vesting in equal amounts over the next 59 months. |
(60)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from February 20, 2017. |
(61)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/60th of the shares each month from April 28, 2016 with the remaining shares vesting in equal amounts over the next 59 months. |
(62)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/20th of the shares each quarter from May 20, 2016. |
(63)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/20th of the shares each quarter from February 20, 2018. |
(64)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from May 20, 2019. |
(65)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/48th of the shares each month from June 1, 2020. |
(66)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/48th of the shares each month from December 1, 2020. |
(67)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from November 20, 2020. |
(68)
| This option vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/48th of the shares each month from December 1, 2020. |
(69)
| This award of restricted stock units vests, subject to Mr. Taxay’s continued role as a service provider to us, with respect to 1/16th of the shares each quarter from November 20, 2020. |
46 | | | | | | 2020 Proxy Statement |
TABLE OF CONTENTS
Fiscal
20182019 Grants of Plan-Based Awards
The following table presents information regarding the amount of plan-based awards granted to our Named Executive Officers during our fiscal year ended December 31,
2018.Named Executive Officer | Grant Date | Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Target) ($)(1) | All Other Stock Awards: Number of Shares of Stock or Units (#)(2) | All Other Option Awards: Number of Shares Underlying Options (#)(2) | Exercise Price of Option Awards ($) | Grant Date Fair Value of Stock and Option Awards ($)(3) |
Jayshree Ullal | | — | | | 300,000 | | | — | | | — | | | — | | | — | |
| | 3/9/2018 | | | — | | | 20,000 | | | — | | | — | | | 5,903,000 | |
| | 4/13/2018 | | | — | | | — | | | 8,000 | | | 244.20 | | | 988,542 | |
Ita Brennan | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | 3/9/2018 | | | — | | | 5,000 | | | — | | | — | | | 1,475,750 | |
| | 4/13/2018 | | | — | | | — | | | 5,000 | | | 244.20 | | | 617,839 | |
| | 11/9/2018 | | | — | | | — | | | 2,500 | | | 244.43 | | | 297,366 | |
| | 11/9/2018 | | | — | | | 3,500 | | | — | | | — | | | 855,505 | |
Andreas Bechtolsheim | | — | | | 300,000 | | | — | | | — | | | — | | | — | |
| | 3/9/2018 | | | — | | | 20,000 | | | — | | | — | | | 5,903,000 | |
| | 4/13/2018 | | | — | | | — | | | 8,000 | | | 244.20 | | | 988,542 | |
Kenneth Duda | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | 3/9/2018 | | | — | | | 6,000 | | | — | | | — | | | 1,770,900 | |
| | 4/13/2018 | | | — | | | — | | | 8,000 | | | 244.20 | | | 988,542 | |
| | 11/9/2018 | | | — | | | — | | | 3,000 | | | 244.43 | | | 356,839 | |
| | 11/9/2018 | | | — | | | 5,000 | | | — | | | — | | | 1,222,150 | |
Anshul Sadana | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | 3/9/2018 | | | — | | | 7,000 | | | | | | | | | 2,066,050 | |
| | 4/13/2018 | | | — | | | — | | | 8,000 | | | 244.20 | | | 988,542 | |
| | 11/9/2018 | | | — | | | — | | | 4,000 | | | 244.43 | | | 475,785 | |
| | 11/9/2018 | | | — | | | 6,000 | | | — | | | — | | | 1,466,580 | |
2019.
| Jayshree Ullal | | | — | | | 300,000 | | | — | | | — | | | — | | | — | |
| | | | 2/8/2019 | | | — | | | — | | | 10,000 | | | 226.34 | | | 1,075,639 | |
| Ita Brennan | | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | | | 2/8/2019 | | | — | | | — | | | 5,000 | | | 226.34 | | | 537,820 | |
| | | | 5/10/2019 | | | — | | | 6,250 | | | — | | | — | | | 1,651,375 | |
| Kenneth Duda | | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | | | 2/8/2019 | | | — | | | — | | | 10,000 | | | 226.34 | | | 1,075,639 | |
| | | | 5/10/2019 | | | — | | | 7,000 | | | — | | | — | | | 1,849,540 | |
| Anshul Sadana | | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | | | 2/8/2019 | | | — | | | — | | | 14,000 | | | 226.34 | | | 1,505,895 | |
| | | | 5/10/2019 | | | — | | | — | | | 2,000 | | | 264.22 | | | 232,583 | |
| | | | 5/10/2019 | | | — | | | 12,000 | | | — | | | — | | | 3,170,640 | |
| | | | 5/10/2019 | | | — | | | 8,000 | | | — | | | — | | | 2,113,760 | |
| Marc Taxay | | | — | | | 180,000 | | | — | | | — | | | — | | | — | |
| | | | 2/8/2019 | | | — | | | — | | | 5,000 | | | 226.34 | | | 537,820 | |
| | | | 5/10/2019 | | | — | | | 6,250 | | | — | | | — | | | 1,651,375 | |
| (1)
| Each Named Executive Officer has the following target annual bonus range under the 20182019 Bonus Plan: (i) Ms. Ullal: $60,000 to $300,000; (ii) Mr. Bechtolsheim: $60,000 to $300,000; (iii) Ms. Brennan: $60,000 to$180,000; (iii) Mr. Duda: $180,000; (iv) Mr. Duda: $60,000 toSadana: $180,000; and (v) Mr. Sadana: $60,000 toTaxay: $180,000. |
| (2)
| The restricted stock unit and stock option awards were made under the 2014 Equity Incentive Plan. |
| (3)
| The amounts reported in the Grant Date Fair Value of Stock and Option Awards column represent the grant date fair value of stock options and/or restricted stock awards granted in fiscal 2018,2019, calculated in accordance with ASC Topic 718. |
TABLE OF CONTENTS
Fiscal 20182019 Option Exercises and Stock Vested
The following table presents information regarding the exercise of stock options and the vesting of stock awards by our Named Executive Officers during our fiscal year ended December 31,
2018. | Option Awards | Stock Awards |
Named Executive Officer | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) |
Jayshree Ullal | | 64,750 | | | 15,346,691 | | | 8,250 | | | 2,056,288 | |
Ita Brennan | | 5,000 | | | 1,118,050 | | | 18,900 | | | 4,710,825 | |
Andreas Bechtolsheim | | 141,523 | | | 33,075,487 | | | 8,250 | | | 2,056,288 | |
Kenneth Duda | | — | | | — | | | 6,500 | | | 1,620,125 | |
Anshul Sadana | | 53,750 | | | 13,840,430 | | | 9,500 | | | 2,367,875 | |
2019.
| Jayshree Ullal | | | 22,250 | | | 5,144,446 | | | 12,000 | | | 2,738,556 | |
| Ita Brennan | | | — | | | — | | | 19,838 | | | 4,594,844 | |
| Kenneth Duda | | | — | | | — | | | 7,625 | | | 1,756,280 | |
| Anshul Sadana | | | 57,087 | | | 14,376,001 | | | 12,613 | | | 2,889,109 | |
| Marc Taxay | | | 13,000 | | | 2,522,712 | | | 9,738 | | | 2,326,201 | |
| (1)
| Based on the market price of our common stock on the date of exercise less the option exercise price paid for those shares, multiplied by the number of shares for which the option was exercised. |
| (2)
| Based on the market price of our common stock on the vesting date or last trading date, multiplied by the number of shares vested. |
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We did not sponsor any defined benefit pension or other actuarial plan for our Named Executive Officers during our fiscal year ended December 31,
2018.2019.
Nonqualified Deferred Compensation
We did not maintain any nonqualified defined contribution or other deferred compensation plans or arrangements for our Named Executive Officers during our fiscal year ended December 31,
2018.2019.
Potential Payments Upon Termination or Change in Control
The tables below provide an estimate of the value of the compensation and benefits due to each of our Named Executive Officers for our fiscal year ended December 31,
2018,2019, in the events described below, assuming that the termination of employment and change in control was effective on December 31,
2018,2019, under the applicable employment agreements described above. The actual amounts to be paid can only be determined at the time of the termination of employment.
Termination of Employment Unrelated to a Change in Control
| | Value of Accelerated Equity Awards ($)(1) | |
Named Executive Officer | Salary Continuation ($) | Restricted Stock Units | Options | Total ($) |
Ita Brennan | | 300,000 | | | 4,179,867 | | | 1,538,970 | | | 6,018,837 | |
| Ita Brennan | | | 300,000 | | | 2,697,084 | | | 1,113,210 | | | 4,110,294 | |
| Marc Taxay | | | 300,000 | | | 1,558,044 | | | 1,552,072 | | | 3,410,116 | |
| (1)
| The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying outstanding restricted stock unit awards and stock options that would become vested on a qualifying termination. For the unvested stock options, the aggregate market value is computed by multiplying (i) the number of shares of our common stock underlying unvested and outstanding stock options at December 31, 2018,2019, that would become vested by (ii) the difference between $210.70$203.40 (the closing market price of our common stock on the New York Stock Exchange on December 31, 2018)2019) and the exercise price of such option. For the restricted stock unit awards, the aggregate market value is computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding restricted stock awards or outstanding restricted stock unit awards at December 31, 2018,2019, that would become vested by (ii) $210.70$203.40 (the closing market price of our common stock on the New York Stock Exchange on December 31, 2018)2019). |
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Termination of Employment in Connection with a Change in Control
| | Value of Accelerated Equity Awards ($)(1) | |
Named Executive Officer | Salary Continuation ($) | Restricted Stock Units | Options | Total ($) |
Ita Brennan | | 300,000 | | | 5,383,385 | | | 2,071,360 | | | 7,754,745 | |
| Ita Brennan | | | 300,000 | | | 3,967,520 | | | 1,186,790 | | | 5,454,310 | |
| Marc Taxay | | | 300,000 | | | 2,828,480 | | | 1,588,862 | | | 4,417,343 | |
| (1)
| The amounts reported in the table reflect the aggregate market value of the unvested shares of our common stock underlying outstanding restricted stock unit awards and stock options that would become vested on a qualifying termination. For the unvested stock options, the aggregate market value is computed by multiplying (i) the number of shares of our common stock underlying unvested and outstanding stock options at December 31, 2018,2019, that would become vested by (ii) the difference between $210.70$203.40 (the closing market price of our common stock on the New York Stock Exchange on December 31, 2018)2019) and the exercise price of such option. For the restricted stock unit awards, the aggregate market value is computed by multiplying (i) the number of unvested shares of our common stock subject to outstanding restricted stock unit awards at December 31, 2018,2019, that would become vested by (ii) $210.70$203.40 (the closing market price of our common stock on the New York Stock Exchange on December 31, 2018)2019). |
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Risk Assessment and Compensation Practices
Our management assesses and discusses with our compensation committee our compensation policies and practices for our employees as they relate to our risk management, and based upon this assessment, we believe that, for the following reasons, any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on us in the future:
Our annual bonus plan considers a multiple of performance factors and allows our compensation committee to review performance on a holistic basis minimizing risk related to our short-term variable compensation; and
Our equity awards include multi-year vesting schedules requiring a long-term employee commitment.
Other Compensation Policies
Stock Ownership Guidelines
. In April 2019, our board of directors adopted stock ownership guidelines. Our stock ownership guidelines are designed to encourage our directors and our chief executive officer to achieve and maintain a meaningful equity stake in our Company and more closely align their interests with those of our shareholders.stockholders. The guidelines provide that our chief executive officer should accumulate and hold, within five years from the later of the date of the adoption of the stock ownership guidelines or the date such chief executive officer became chief executive officer, an investment level in our common stock of three times the chief executive officer’s annual base salary.
Clawback Policy.
In April 2019, our compensation committee adopted a Clawback Policy that permits the Company to seek the recovery of both cash and equity compensation from an executive officer if: (i) the Company restates its financial statements as a result of a material error; (ii) the amount of cash incentive compensation or performance-based equity compensation that was paid that was determined based on achievement of specific financial results paid to the executive officer would have been less if the financial statements had been correct; (iii) no more than three years have elapsed since the original filing date of the financial statements upon which the incentive compensation was determined; and (iv) the compensation committee determines that gross negligence, fraud or intentional misconduct by such executive officer caused the material error.
Hedging and Pledging Policies
. Our insider trading policy prohibits our executive officers from engaging in derivative securities transactions, including hedging, with respect to our common stock and from pledging Company securities as collateral or holding Company securities in a margin account.TABLE OF CONTENTS
Tax and Accounting Considerations
Deductibility of Executive Compensation
. Section 162(m) of the Code generally disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to the Chief Executive Officer and certain other highly compensated executive officers.Our compensation committee may consider the deductibility of compensation when making decisions, but may authorize the payment of compensation that is not deductible when it believes it appropriate.
Taxation of “Parachute” Payments. Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control that exceeds certain prescribed limits and that we (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We did not provide any of our Named Executive Officers with a “gross-up” or other reimbursement
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payment for any tax liability that the Named Executive Officer might owe as a result of the application of Sections 280G or 4999, and we have not agreed and are not otherwise obligated to provide any Named Executive Officer with such a “gross-up” or other reimbursement.
Accounting for Share-Based Compensation
. We follow ASC Topic 718 for our share-based compensation awards. ASC Topic 718 requires companies to measure the compensation expense for all share-based compensation awards made to employees and directors, including stock options, based on the grant date “fair value” of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our Named Executive Officers may never realize any value from their awards. ASC Topic 718 also requires companies to recognize the compensation cost of their share-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the option or other award.
As required by Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of our Chief Executive Officer:
For 2018,2019, our last completed fiscal year:
the median of the annual total compensation of all employees of our Company (other than our Chief Executive Officer), was $135,688;$151,647; and
the annual total compensation of our Chief Executive Officer, as reported in the Fiscal 2019 Summary Compensation Table presented elsewhere in this proxy statement, was $7,550,074.$1,384,171.
Based on this information, for 2018,2019, the ratio of the annual total compensation of our Chief Executive Officer to the median of the annual total compensation of all employees was approximately 569 to 1. This pay ratio is a reasonable estimate based on our reasonable judgement and assumptions and calculated in a manner consistent with Item 402(u) of Regulation S-K. SEC rules do not specify a single methodology for identification of the median employee or calculation of the pay ratio, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of the “median employee,” the methodology and the material assumptions, adjustments, and estimates that we used were as follows:
We selected October 31, 20182019 as the date upon which we would identify the median employee.
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To identify the “median employee” from our employee population we used payroll and equity plan records.
The compensation measure included the following: annual base salary for salaried employees (or hourly rate multiplied by estimated work schedule for hourly employees), actual incentive compensation paid in 20182019 as of the determination date, and grant date fair value of equity awards granted in 2018.
2019.
We did not apply any de minimis exclusions to remove certain employees in non-U.S. jurisdictions allowed by Item 402(u).
Amounts paid in foreign currency were converted into United States dollars using 20172019 average exchange rates.
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The calculation was performed for all employees, excluding Ms. Ullal, whether employed on a full-time, part-time, or seasonal basis. Because there was an even number of employees, two individuals were identified as the median. As a resultone of this process,these two received extraordinary equity grants during 2019, we identified anselected the other employee, whose compensation was determinedwe consider to be anomalous. Therefore, we exercised discretion permitted by SEC rules to select an alternative median employee, whose compensation was viewed to be more representativeconsistent with that of other employees at or near the median. The selected employee was within two individuals, below the median.
With respect to the annual total compensation of the “median employee,” we identified and calculated the elements of such employee’s compensation for 20182019 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $135,688.
$151,647.
With respect to the annual total compensation for our Chief Executive Officer, we used the amount reported in the “Total” column of our Summary Compensation Table for Fiscal Year 2018.2019.
Compensation Committee Report
The compensation committee has reviewed and discussed the section titled “Executive Compensation” with management. Based on such review and discussion, the compensation committee has recommended to the board of directors that the section titled “Executive Compensation” be included in this proxy statement.
Respectfully submitted by the members of the compensation committee of the board of directors:
Charles Giancarlo (Chair)
Daniel Scheinman
Mark Templeton
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Equity Compensation Plan Information
The following table summarizes our equity compensation plan information as of December 31,
2018.2019. Information is included for equity compensation plans approved by our stockholders and equity compensation plans not approved by our stockholders. We will not grant equity awards in the future under any of the equity compensation plans not approved by our stockholders included in the table below.
Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflecting in Column (a)) |
Equity compensation plans approved by stockholders | | 7,207,567 | (1) | | 37.09 | (2) | | 17,919,266 | (3) |
Equity compensation plans not approved by stockholders | | — | | | — | | | — | |
Total | | 7,207,567 | | | 37.09 | | | 17,919,266 | |
| Equity compensation plans approved by stockholders | | | 5,633,907(1) | | | 42.50(2) | | | 18,338,496(3) | |
| Equity compensation plans not approved by stockholders | | | — | | | — | | | — | |
| Total | | | 5,633,907 | | | 42.50 | | | 18,338,496 | |
| (1)
| Includes 5,899,3654,563,595 shares underlying stock options and 1,308,2021,070,312 shares of restricted stock units. |
| (2)
| The weighted average exercise price is calculated based solely on outstanding stock options. |
| (3)
| Includes the following plans: Arista Networks, Inc. 2014 Equity Incentive Plan (“2014 Plan”) and Arista Networks, Inc. 2014 Employee Stock Purchase Plan (“ESPP”). Our 2014 Plan provides that on the first day of each fiscal year beginning in 2016 and ending in (and including) 2024, the number of shares available for issuance thereunder is automatically increased by a number equal to the least of (i) 12,500,000 shares, (ii) 3% of the outstanding shares of our common stock as of the last day of our immediately preceding year, or (iii) such other amount as our board of directors may determine. On January 1, 2019, our board of directors determined not to increase2020, the number of shares available for issuance under our 2014 Plan.Plan increased by 2,291,660 shares pursuant to these provisions. Our ESPP provides that on the first day of each fiscal year beginning in 2015 and ending in (and including) 2034, the number of shares available for issuance thereunder is automatically increased by a number equal to the least of (i) 2,500,000 shares, (ii) 1% of the outstanding shares of our common stock on the first day of such year, or (iii) such other amount as our board of directors may determine. On January 1, 2019,2020, the number of shares available for issuance under our ESPP increased by 756,679763,886 shares pursuant to these provisions. These increases are not reflected in the table above. |
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Security Ownership of Certain Beneficial Owners And Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 4, 20192, 2020 for:
each of our directors and nominees for director;
each of our Named Executive Officers;
all of our current directors and executive officers as a group; and
each person or group, who beneficially owned more than 5% of our common stock.
We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable.
We have based our calculation of the percentage of beneficial ownership on
76,506,47275,658,741 shares of our common stock outstanding as of April
4, 2019.2, 2020. We have deemed shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of April
4, 20192, 2020 and RSUs that vest within 60 days of April
4, 2019,2, 2020, which are subject to vesting conditions expected to occur to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Arista Networks, Inc., 5453 Great America Parkway, Santa Clara, California 95054. The information provided in the table is based on our records, information filed with the SEC and information provided to us, except where otherwise noted.
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned |
5% Stockholders:
| | | | | | |
The Bechtolsheim Family Trust(1) | | 12,663,121 | | | 16.55 | % |
The Vanguard Group(2) | | 5,568,472 | | | 7.28 | % |
The 2010 David R. Cheriton Irrevocable Trust dtd July 28, 2010(3) | | 5,067,061 | | | 6.62 | % |
Named Executive Officers and Directors:
| | | | | | |
Jayshree Ullal(4) | | 3,694,427 | | | 4.83 | % |
Ita Brennan(5) | | 34,086 | | | | * |
Andreas Bechtolsheim(1)(6) | | 13,029,925 | | | 16.95 | % |
Kenneth Duda(7) | | 1,376,024 | | | 1.79 | % |
Anshul Sadana(8) | | 104,613 | | | | * |
Charles Giancarlo(9) | | 83,334 | | | | * |
Ann Mather(10) | | 55,833 | | | | * |
Daniel Scheinman(11) | | 37,167 | | | | * |
Mark Templeton(12) | | 3,493 | | | | * |
Nikos Theodosopoulos(13) | | 28,053 | | | | * |
All executive officers and directors as a group (13 persons)(14) | | 18,474,266 | | | 23.83 | % |
| 5% Stockholders:
| | | | | | | |
| The Bechtolsheim Family Trust(1) | | | 12,575,230 | | | 16.62% | |
| The Vanguard Group(2) | | | 5,986,495 | | | 7.91% | |
| The 2010 David R. Cheriton Irrevocable Trust dtd July 28,2010(3) | | | 4,217,061 | | | 5.57% | |
| BlackRock, Inc.(4) | | | 3,962,098 | | | 5.24% | |
| Named Executive Officers and Directors:
| | | | | | | |
| Jayshree Ullal(5) | | | 3,718,246 | | | 4.91% | |
| Ita Brennan(6) | | | 50,908 | | | * | |
| Kenneth Duda(7) | | | 1,232,544 | | | 1.62% | |
| Anshul Sadana(8) | | | 112,957 | | | * | |
| Marc Taxay(9) | | | 8,467 | | | * | |
| Charles Giancarlo(10) | | | 84,212 | | | * | |
| Ann Mather(11) | | | 14,321 | | | * | |
| Daniel Scheinman(12) | | | 26,712 | | | * | |
| Mark Templeton(13) | | | 5,240 | | | * | |
| Nikos Theodosopoulos(14) | | | 25,610 | | | * | |
| All executive officers and directors as a group (12 persons)(15) | | | 18,228,551 | | | 23.77% | |
| *
| Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock. |
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(1)
| Includes 12,663,12112,575,230 shares held by the Bechtolsheim Family Trust for which trust Mr. Bechtolsheim serves as trustee. Mr. Bechtolsheim may be deemed to exercise sole voting and investment power over such shares held by the trust. |
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| (2)
| Based solely upon a Schedule 13G/A filed with the SEC on February 11, 201912, 2020 by The Vanguard Group (“Vanguard”) reporting beneficial ownership as of December 31, 2018.2019. Vanguard reported sole voting power with respect to 85,556 shares and shared voting power with respect to 12,68115,281 shares. Vanguard reported sole dispositive power with respect to 5,890,917 shares and shared dispositive power with respect to 78,28495,578 shares. The address for Vanguard is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. |
| (3)
| Based upon a Schedule 13G/A filed with the SEC on February 12, 2019.January 24, 2020. Includes 5,067,0614,217,061 shares held in an irrevocable, directed trust for the benefit of the minor children of Mr. Cheriton. The trustee of the trust is the South Dakota Trust Company, LLC and Mr. Cheriton ultimately has the ability to replace the trustee. The investment management functions of the trust are handled by the investment committee of the trust. The address for the trustee of the trust is c/o South Dakota Trust Company LLC, 201 South Phillips Ave., Suite 200, Sioux Falls, South Dakota 57104. |
(4)
| (4)Based solely upon a Schedule 13G filed with the SEC on February 7, 2020 by BlackRock, Inc. (“BlackRock”) reporting beneficial ownership as of December 31, 2019. BlackRock reported sole voting power with respect to 3,453,845 shares and sole dispositive power with respect to 3,962,098 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055. |
(5)
| Includes 2,262,5642,252,564 shares held by Jayshree Ullal and Vijay Ullal as Trustees of the 2000 Ullal Trust dated February 15, 2000. Mr. and Ms. Ullal may be deemed to be the beneficial owner of the shares and to have shared voting and investment control over such shares. Includes 1,398,0001,388,000 shares held in trusts for Ms. Ullal’s family members for which trusts Ms. Ullal serves as trustee. Ms. Ullal may be deemed to exercise sole voting and investment control over shares held in each of the trusts. Includes 10,42517,577 shares held directly by Ms. Ullal. Includes 11,000 shares subject to outstanding options which may be exercised prior to vesting, as of a date within 60 days of April 4, 2019, 10,000 of which shares may be repurchased by us, if exercised, at the original exercise price in the event of the termination of Ms. Ullal’s services to us. Also includes 12,43860,105 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Ms. Ullal.Ullal, of which 6,000 shares may be repurchased by us, if exercised, at the original exercise price. |
| (5)(6)
| Includes 29,03840,142 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Ms. Brennan. |
| (6)(7)
| Includes 2,388 shares held directly by Mr. Bechtolsheim. Includes 321,333 shares subject to outstanding options which may be exercised prior to vesting as of a date within 60 days of April 4, 2019, 243,333 of which shares may be repurchased by us, if exercised, at the original exercise price in the event of the termination of Mr. Bechtolsheim’s services to us. Also, includes 43,083 shares issuable within 60 days of April 4, 2019 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Bechtolsheim. |
| (7) | Includes 397,089330,071 shares held by Kenneth Duda and Jennifer Duda as Trustees of the Kenneth Duda and Jennifer Duda Family Trust dated September 24, 2004. Mr. and Ms. Duda may be deemed to be the beneficial owners of the shares and to have shared voting and investment control over such shares. Includes 260,053213,944 shares held in grantor retained annuity trusts of which Mr. Duda is Trustee; 260,053213,944 shares held in grantor retained annuity trusts of which Mr. Duda’s spouse is Trustee; 69,76859,514 shares held in trusts for Mr. Duda’s children for which trusts Mr. Duda serves as Trustee; 2,360 shares held in a 501(c) foundation for which Mr. Duda and 811his spouse serve as co-trustees and 5,294 shares held directly by Mr. Duda. Includes 340,000 shares subject to outstanding options which may be exercised prior to vesting as of a date within 60 days of April 4, 2019, 92,500 of which shares may be repurchased by us, if exercised, at the original exercise price in the event of the termination of Mr. Duda’s services to us. Also, includes 48,250407,417 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Duda. |
| (8) | Includes 7,000 shares held by Mr. Sadana, which remain subject to a repurchase right held by us at the original exercise price, as of a date within 60 days of April 4, 2019, in the event of the termination of Mr. Sadana’s employment with us. The repurchase right lapses as to approximately 875 shares per month. Also includes 91,633 shares subject to outstanding options which may be exercised prior to vesting, as of a date within 60 days of April 4, 2019, 84,875 sharesDuda, of which 56,000 shares may be repurchased by us, if exercised, at the original exercise price. Also includes 5,980 |
(8)
| Includes 105,493 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Sadana.Sadana, of which 57,200 shares may be repurchased by us, if exercised, at the original exercise price. |
(9)
| (9)Includes 3,700 shares issuable within 60 days of April 2, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Taxay. |
(10)
| Includes 73,334 shares held of record by Mr. Giancarlo as trustee of the Giancarlo Family Trust UAD 11/02/98. Mr. Giancarlo may be deemed to be the beneficial owner of the shares and to have voting and investment power over such shares. The 73,334 shares includes 7,5002,500 shares which may be repurchased by us at the original exercise price, as of a date within 60 days of April 4, 2019,2, 2020, in the event of the termination of Mr. Giancarlo’s services to us. The repurchase right lapses as to approximately 417 shares per month. Includes 9,16710,658 shares held directly by Mr. Giancarlo. Also includes 833220 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units held by Mr. Giancarlo. |
| (10)(11)
| Includes 50,00014,064 shares subject to outstanding options which may be exercised prior to vesting, as of a dateissuable within 60 days of April 4, 2019, 12,5002, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Ms. Mather, of which 7,500 shares may be repurchased by us, if exercised, at the original exercise price in the event of the termination of Ms. Mather’s services to us. Also includes 833price. |
(12)
| Includes 18,887 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units held by Ms. Mather. |
| (11) | Includes 28,000 shares subject toor the exercise of outstanding exercisable options which may be exercised prior to vesting, as of a date within 60 days of April 4, 2019, 3,333 of which shares may be repurchased by us, if exercised, at the original exercise price in the event of the termination of Mr. Scheinman’s services to us. Also includes 833 shares issuable within 60 days of April 4, 2019 upon vesting of restricted stock units held by Mr. Scheinman. |
| (12)(13)
| Includes 437 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units held by Mr. Templeton. |
| (13)(14)
| Includes 25,43721,687 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of restricted stock units or the exercise of outstanding exercisable options held by Mr. Theodosopoulos. |
| (14)(15)
| Includes 1,021,8911,031,573 shares issuable within 60 days of April 4, 20192, 2020 upon vesting of options and restricted stock units or the early exercise of outstanding options, 450,207268,533 of which shares are unvested and may be repurchased by us, if exercised, at the original exercise price in the event of the termination of employment or other services to us. |
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Related Person Transactions
RELATED PERSON TRANSACTIONS In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements discussed above in the sections titled “Board of Directors and Corporate Governance – Director Compensation” and “Executive Compensation,” we describe below transactions and series of similar transactions, since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
the amounts involved exceeded or will exceed $120,000; and
any of our directors, nominees for director, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
Other than as described below, there has not been, nor is there any currently proposed, transactions or series of similar transactions to which we have been or will be a party.
Investors’ Rights Agreement
We are party to an investors’ rights agreement which provides, among other things, that certain holders of our common stock have the right to demand that we file a registration statement or request that their shares of our common stock be covered by a registration statement that we are otherwise filing.
Charles Giancarlo, a member of our board of directors, also serves as chief executive officer and a member of the board of directors of Pure Storage, Inc., a data storage solutions company, since August 2017. Pure Storage, Inc. has purchased, and may purchase from time to time, our products in the ordinary course of
business. Webusiness and we have also purchased, and may purchase from time to time, products from Pure Storage in the ordinary course of
business.business (collectively, the “Pure Storage Transactions”). Mr. Giancarlo did not participate in negotiations involving, and does not have a direct or indirect material interest in, these transactions.
Our audit committee has established certain guidelines to pre-approve the Pure Storage Transactions, subject to the review by our audit committee at each regularly scheduled audit committee meeting that such Pure Storage Transactions complied with such guidelines.
We have granted stock options and restricted stock units to our Named Executive Officers and certain of our directors. See the section titled “Executive Compensation – Outstanding Equity Awards at
20182019 Year-End” for a description of these stock options and restricted stock units.
In the ordinary course of business, we enter into offer letters and employment agreements with our executive officers. We have also entered into indemnification agreements with each of our directors and officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
Other than as described above under this section titled “Related Person Transactions,” since January 1, 2018,2019, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will have a direct or indirect material interest. We believe the terms of the transactions described above were comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties.
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Policies and Procedures for Related Party Transactions
Our audit committee has the primary responsibility for reviewing and approving or ratifying related party transactions. We have a formal written policy providing that a related party transaction is any transaction between us and an executive officer, director, nominee for director, beneficial owner of more than 5% of any class of our capital stock, or any member of the immediate family of any of the foregoing persons, in which such party has a direct or indirect material interest and the aggregate amount involved exceeds $120,000. In reviewing any related party transaction, our audit committee is to consider the relevant facts and circumstances available to our audit committee, including, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent of the related party’s interest in the transaction. Our audit committee has determined that certain transactions will be deemed to be pre-approved by our audit committee, including certain executive
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officer and director compensation, transactions with another company at which a related party’s only relationship is as a non-executive employee, director or beneficial owner of less than 10% of that company’s shares, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis, and transactions available to all employees generally. If advance approval of a transaction is not feasible, the Chair of our audit committee may approve the transaction and the transaction may be ratified by our audit committee in accordance with our formal written policy.
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Other Matters
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of our common stock, file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
SEC regulations require us to identify in this proxy statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received, or written representations from reporting persons stating that they were not required to file these forms, we believe that during our fiscal year ended December 31, 2018, all Section 16(a) filing requirements were satisfied on a timely basis.
Fiscal Year 20182019 Annual Report and SEC Filings
Our financial statements for our fiscal year ended December 31,
20182019 are included in our Annual Report on Form 10-K, which we will make available to stockholders at the same time as this proxy statement. This proxy statement and our annual report are posted on the Financial Information section of our website at http://investors.arista.com and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual report without charge by sending a written request to Arista Networks, Inc., Attention: Investor Relations, 5453 Great America Parkway, Santa Clara, California 95054.
The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.
It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.
Santa Clara, California
April
17, 201915, 2020
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