Filed by the Registrant ☒
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Filed by a party other than the Registrant ☐
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☐
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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☒
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Definitive Proxy Statement
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Definitive Additional Materials
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☐
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Soliciting Material Under Rule 14a-12
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MEETING DETAILS
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Time and Date
March 10, 2022 at 11:00 a.m. Pacific Time
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Virtual Meeting Location
This year is a virtual meeting at www.virtualshareholdermeeting.com/FFIV2022
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Record Date
January 5, 2022. Only shareholders of record at the close of business on the record date are entitled to notice of and to vote at the annual meeting.
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Items of Business
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1
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To elect 11 directors nominated by the Board of Directors of the Company to hold office until the annual meeting of shareholders for fiscal year 2022;
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2
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To approve the F5, Inc. Incentive Plan as amended and restated to increase the number of shares of common stock issuable by an additional 1,200,000 shares;
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3
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To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2022;
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4
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To approve, on an advisory basis, the compensation of our named executive officers; and
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5
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To transact such other business as may properly come before the meeting and any adjournments or postponements thereof.
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By Order of the Board of Directors,
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SCOT F. ROGERS
Secretary
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Seattle, Washington
January 26, 2022
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Your Vote is Important!
Whether or not you attend the annual meeting, it is important that your shares be represented and voted at the meeting. Therefore, please promptly vote and submit your proxy by phone, over the Internet, or by signing, dating, and returning the accompanying proxy card in the enclosed, prepaid, return envelope or otherwise completing the appropriate voting instruction form. If you decide to attend the annual meeting and wish to vote virtually at the meeting, please see “Questions and Answers About the Annual Meeting and These Proxy Materials” below.
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Notice of Fiscal Year 2021 Annual Shareholders Meeting
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Table of Contents
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Time and Date
March 10, 2022 at 11:00 a.m. Pacific Time
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Virtual Meeting Location
This year is a virtual meeting at www.virtualshareholdermeeting.com/FFIV2022
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Record Date
January 5, 2022
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Mailing Date
Approximately January 26, 2022
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Voting
Shareholders as of the record date are entitled to vote. Each share of Company common stock is entitled to one vote for each director nominee and one vote for each of the proposals.
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• Election of the 11 directors listed in this Proxy Statement and on the proxy card
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•
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To approve the F5, Inc. Incentive Plan as amended and restated to increase the number of shares of common stock issuable by an additional 1,200,000 shares
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•
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Ratification of PricewaterhouseCoopers LLP (PWC) as our independent registered public accounting firm for fiscal year 2022
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Advisory vote on compensation of our named executive officers
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Transact other business that may properly come before the meeting, or any adjournment or postponement
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Proposal
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Board Vote
Recommendation
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Page References
for More Detail
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and Vote
Recommendation
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1
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To elect 11 directors nominated by the Board to hold office until the annual meeting of shareholders for fiscal year 2022
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FOR
(each nominee)
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pp. 61
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2
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To approve the F5, Inc. Incentive Plan as amended and restated to increase the number of shares of common stock issuable by an additional 1,200,000
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FOR
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pp. 62
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3
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To ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2022
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FOR
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pp. 70
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4
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Advisory vote to approve the compensation of our named executive officers
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FOR
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pp. 71
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Fiscal Year 2021 Proxy Statement
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1
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Proxy Summary
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Independent Board Chair
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10 of 11 Board Nominees are Independent
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7 of 11 Board Nominees Identify as Diverse
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Declassified Board — All Directors Elected Annually
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Share Ownership Guidelines for Executives & Directors
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Clawback Policy for Named Executive Officers
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One-Year Post-vesting Holding Period for Executive Equity Awards Beginning in fiscal year 2022
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Majority Voting for All Directors
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Annual Board Self-Assessment Process
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Independent Directors Meet Without Management Present
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Prohibition on Hedging, Pledging and Short Sale of Company Stock
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Performance Highlights
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Annual
revenue
$2.6
BILLION
↑11% over fiscal year 2020
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Cash flow
from operations
$645
MILLION
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GAAP net
income
$331
MILLION
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Cash returned to shareholders
through share repurchase
$500
MILLION
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Company
Recognition
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2
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Fiscal Year 2021 Proxy Statement
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Proxy Summary
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Policies and
Practices Linked
to Shareholder
Value Creation and
RISK Mitigation
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Pay for performance
We emphasize pay for performance and align executive compensation with the Company’s business objectives and performance, and the creation of shareholder value.
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Threshold performance metrics
Incentive-based compensation is at risk and payable only if certain threshold performance metrics are achieved.
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No excise tax
gross-ups
The Company does not provide “golden parachute” excise tax gross-ups upon a change in control of the Company.
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Benefit plans
The Company offers its executive officers only modest perquisites that are supported by a business interest and are consistent with broad-based benefit plans available to other employees.
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Stock ownership guidelines
The Board and Company executives are subject to stock ownership requirements that encourage alignment with the interests of shareholders.
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Clawback policy
Incentive compensation for each of the named executive officers (NEOs) may be subject to recoupment in the event the Company restates its reported financial results.
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No hedging or pledging of stock
Executive officers are prohibited from entering into hedging or pledging transactions or trading in puts, calls or other derivatives of the Company’s Common Stock or otherwise engaging in short sales of Common Stock of the Company.
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No re-pricing
of options
Under the terms of the equity plan, the re-pricing of underwater options is prohibited absent shareholder approval.
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Double-trigger change of control agreements
The Company’s change of control agreements with its executives contain a “double trigger” feature.
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Post-vesting holding requirement
Beginning with awards granted in fiscal year 2022, Company executives must retain for at least one year the net shares received on the vesting of Restricted Stock Units, which encourages alignment of executives’ long-term incentives with the interests of shareholders.
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Annual advisory vote
Annual advisory vote on executive compensation provides shareholders with a direct opportunity to express their opinion regarding the Company’s executive pay practices.
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Capped incentive compensation
Executive incentive compensation is capped avoiding excessive risk-tasking and limiting to a reasonable level the amount of total performance-based compensation paid.
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Fiscal Year 2021 Proxy Statement
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3
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Proxy Summary
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The following table provides summary information about each director nominee. Each director named below is a continuing director and all directors are elected annually by a majority of votes cast.
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Committees
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Name
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Age
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Director
Since
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Occupation
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Independent
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Diverse(1)
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Other
Public Boards
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Audit &
Risk
Oversight
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Talent and
Compensation
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Nominating
and ESG
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Sandra E. Bergeron
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63
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January 2013
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Chair of the Board, Qualys, Inc. and Director, SumoLogic, Inc.
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X
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Elizabeth L. Buse
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60
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September 2020
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Board Member, U.S. Bancorp.; Retired Chief Executive Officer, Monitise, Plc.
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X
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Michael L. Dreyer
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58
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October 2012
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Director, II-VI Incorporated; Retired Chief Operations Officer, Silicon Valley Bank
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X
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Alan J. Higginson
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74
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May 1996
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Chairman of the Board, F5; Former Chairman, Hubspan, Inc.
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Peter S. Klein
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59
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March 2015
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Board Member, Denali Therapeutics; Board Member, Sarcos Technology and Robotics Corp; Board Member, Accolade; Retired Chief Financial Officer, Microsoft
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X
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François Locoh-Donou
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50
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April 2017
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President and Chief Executive Officer, F5; Board Member, Capital One
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X
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Nikhil Mehta
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44
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January 2019
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Chief Executive Officer, Gainsight, Inc.
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Michael F. Montoya
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50
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June 2021
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Chief Information Security Officer, Equinix
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Marie E. Myers
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53
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January 2019
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Chief Financial Officer, HP, Inc.; Board Member, KLA Corp.
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X
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James M. Phillips
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55
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January 2022
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President, Digital Transformation Platform Group, Microsoft
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Sripada Shivananda
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49
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April 2020
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Executive Vice President and Chief Technology Officer, PayPal Holdings, Inc.
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= Chair
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= Member
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= Financial Expert
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1.
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Directors included in the diverse designation represent individuals whose race, ethnicity, gender or LGBTQ+ self-identification contribute to Board heterogeneity and expand the Board’s understanding of the needs and viewpoints of our customers, partners, employees, investors and other stakeholders, and meet the definition of “diverse director” under the Nasdaq Listing Rules.
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4
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Fiscal Year 2021 Proxy Statement
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Proxy Summary
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BOARD DIVERSITY
MATRIX (AS OF
JANUARY 5, 2022)
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Three of our 11 Director nominees are women, four of our 11 Director nominees are ethnically diverse with one identifying as Black, two identifying as Asian and one identifying as Latinx. No Directors identified as LGBTQ+. One director identifies as a Military veteran.
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Total number of directors: 11
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Female
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Male
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Non-Binary
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Number of directors based on gender identity:
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3
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8
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—
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Number of directors who Identify in any of the categories below:
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African American or Black
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—
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1
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—
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Alaskan Native or Native American
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—
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—
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—
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Asian
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—
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2
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—
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Hispanic or Latinx
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—
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1
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—
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Native Hawaiian or Pacific Islander
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—
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—
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—
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White
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3
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4
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—
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LGBTQ+
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—
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—
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—
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Did not disclose demographic background
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—
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—
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—
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Directors who are Military Veterans: 1
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Fiscal Year 2021 Proxy Statement
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5
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You are receiving these materials because you are a shareholder of the Company as of the close of business on January 5, 2022 (the “Record Date”) and are entitled to receive notice of the Annual Meeting and to vote on matters that will be presented at the meeting. This Proxy Statement contains important information regarding our Annual Meeting, the proposals on which you are being asked to vote, information you may find useful in determining how to vote, and information about voting procedures.
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The Board of Directors recommends that you vote:
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• FOR the election of Sandra E. Bergeron, Elizabeth L. Buse, Michael L. Dreyer, Alan J. Higginson, Peter S. Klein, François Locoh-Donou, Nikhil Mehta, Michael F. Montoya, Marie E. Myers, James M. Phillips and
Sripada Shivananda as directors to hold office until the annual meeting of shareholders for fiscal year 2022;
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• FOR the proposal to approve the F5, Inc. Incentive Plan as amended and restated to increase the number
of shares of common stock issuable by an additional 1,200,000 shares;
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• FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2022; and
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• FOR the approval, on an advisory basis, of the compensation of our named executive officers.
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The Company is not aware, as of the date of this Proxy Statement, of any matters to be voted upon at the Annual Meeting other than those stated in this Proxy Statement and the accompanying Notice of Annual Meeting of Shareholders. If any other items of business or other matters are properly brought before the Annual Meeting, your proxy gives discretionary authority to the persons named on the proxy card with respect to those items of business or other matters. The persons named on the proxy card intend to vote the proxy in accordance with their best judgment.
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Only holders of our common stock, no par value (the “Common Stock”), at the close of business on the Record Date may vote at the Annual Meeting. We refer to the holders of Common Stock as “shareholders” throughout this proxy statement. Each shareholder is entitled to one vote for each share of Common Stock held as of the Record Date.
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6
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Fiscal Year 2021 Proxy Statement
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Questions and Answers About the Annual Meeting and These Proxy Materials
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We need a quorum of shares of Common Stock eligible to vote to conduct business at our Annual Meeting. A quorum exists when at least a majority of the outstanding shares entitled to vote at the close of business on the Record Date are represented at the virtual Annual Meeting either in person or by proxy. As of the close of business on the Record Date, we had 60,732,260 shares of Common Stock outstanding and entitled to vote at the virtual Annual Meeting, meaning that 30,366,131 shares of Common Stock must be represented in person or by proxy to have a quorum. Abstentions and broker non-votes (as described below) will also count towards the quorum requirement. Your shares will be counted toward the number needed for a quorum if you: (i) submit a valid proxy card or voting instruction form, (ii) give proper instructions over the telephone or on the Internet, or (iii) in the case of a shareholder of record, virtually attend the Annual Meeting.
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• Shareholder of Record. You are a shareholder of record if at the close of business on the Record Date your shares were registered directly in your name with American Stock Transfer,
our transfer agent.
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• Beneficial Owner. You are a beneficial owner if at the close of business on the Record Date your shares were held by a brokerage firm or other nominee and not in your name. Being a beneficial owner means that, like many of our shareholders, your shares are held in “street name.” As the beneficial owner, you have the right to direct your broker or nominee how to vote your shares by following the voting instructions your broker or nominee provides. If you wish to vote the shares you own beneficially at the virtual meeting, you should follow the voting instructions or other information you received from your broker or other nominee and the instructions on the website at www.virtualshareholdermeeting.com/FFIV2022. If you do not provide your broker or nominee with instructions on how to vote your shares or a legal proxy, your broker or nominee will be able to vote your shares with respect to some, but not all, of the proposals. Please see “What will happen if I do not vote my shares?” and “What if I do submit my proxy but do not specify how my shares are to be voted?” for additional information.
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Shareholders of Record. If you are a shareholder of record, there are several ways for you to vote your shares:
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• Voting by Mail. You may submit your vote by completing, signing and dating each proxy card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy card. Proxy cards submitted by mail must be received no later than March 9, 2022 to be voted at the Annual Meeting. If you vote by telephone or on the Internet, please do not return
your proxy card unless you wish to change your vote.
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• Voting by Telephone. You may vote by telephone by using the toll-free number listed on your
proxy card.
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• Voting on the Internet. You may vote on the Internet by using the voting portal found at www.proxyvote.com. As with telephone voting, you can confirm that your instructions have been properly recorded. Voting via the Internet is a valid proxy voting method under the laws
of the State of Washington (our state of incorporation).
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• Voting “Virtually” at the Annual Meeting. You may vote your shares at the Annual Meeting by following the instructions on the website at www.virtualshareholdermeeting.com/FFIV2022. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy card or voting instructions or vote by telephone or via the Internet by the applicable deadline so that your vote will be counted if you do not vote at the virtual Annual Meeting.
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Beneficial Owners. You may vote by the method explained on the voting instructions or other information you receive from the broker or nominee.
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Fiscal Year 2021 Proxy Statement
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7
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Questions and Answers About the Annual Meeting and These Proxy Materials
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Yes. You may revoke or change your vote after submitting your proxy by one of the following procedures:
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• Delivering a proxy revocation or another proxy bearing a later date to the Secretary of the Company at 801 Fifth Avenue, Seattle, Washington 98104 up until 11:59 p.m. Eastern Time the day before the Annual Meeting;
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• If you have voted by Internet or telephone and still have your control number, you may change your vote via Internet or telephone up until 11:59 p.m. Eastern Time the day before the Annual
Meeting;
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• Attending the Annual Meeting and voting virtually. If you are a beneficial owner, you should follow the voting instructions or other information you received from your broker or other nominee and the instructions on the website at www.virtualshareholdermeeting.com/FFIV2022.
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Please note that attendance alone at the Annual Meeting will not revoke a proxy; you must actually vote at the virtual Annual Meeting.
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• Shareholders of Record. If you are the shareholder of record of your shares and you do not vote by mail, by telephone, via the Internet or virtually at the Annual Meeting, your shares will
not be voted at the Annual Meeting.
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• Beneficial Owners. If you are the beneficial owner of your shares, your broker or nominee may vote your shares only on those proposals on which it has discretion to vote. Under applicable stock exchange rules, your broker or nominee does not have discretion to vote your shares on non-routine matters, which include Proposals 1, 2 and 4. However, your broker or nominee does have discretion to vote your shares on routine matters such as Proposal 3.
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If you are a shareholder of record and you submit a proxy, but you do not provide voting instructions, your shares will be voted:
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• FOR the election of Sandra E. Bergeron, Elizabeth L. Buse, Michael L. Dreyer, Alan J. Higginson, Peter S. Klein, François Locoh-Donou, Nikhil Mehta, Michael F. Montoya, Marie E. Myers, James M. Phillips and
Sripada Shivananda as directors to hold office until the annual meeting of shareholders for fiscal year 2022;
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• FOR approval of the F5, Inc. Incentive Plan as amended and restated to increase the number of shares of
common stock issuable by an additional 1,200,000 shares;
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• FOR the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent
registered public accounting firm for fiscal year 2022; and
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• FOR the approval, on an advisory basis, of the compensation of our named executive officers.
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Brokers or other nominees who hold shares of Common Stock for a beneficial owner have the discretion to vote on routine proposals when they have not received voting instructions from the beneficial owner at least ten days prior to the Annual Meeting. A “broker non-vote” occurs when a broker or other nominee does not receive voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares. If you abstain from voting on a proposal, or if a broker or nominee indicates it does not have discretionary authority to vote on a proposal, the shares will be counted for the purpose of determining if a quorum is present but will not be included in the vote totals with respect to the proposal. Furthermore, any abstention or broker non-vote will have no effect on the proposals to be considered at the Annual Meeting since these actions do not represent votes cast by shareholders.
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8
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Fiscal Year 2021 Proxy Statement
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| |
Questions and Answers About the Annual Meeting and These Proxy Materials
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required for each
proposal?
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Proposal
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Vote Required*
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Broker Discretionary
Voting Allowed
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1
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Election of 11 directors nominated by the Board to hold office until the annual meeting of shareholders for fiscal year 2022 and until his or her successor is elected and qualified
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Majority of
Votes Cast
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No
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2
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To approve the F5, Inc. Incentive Plan as amended and restated to increase the number of shares of common stock issuable by an additional 1,200,000 shares
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Majority of
Votes Cast
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No
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3
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Advisory vote to ratify the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2022
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Majority of
Votes Cast
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Yes
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4
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Advisory vote to approve the compensation of our named executive officers
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Majority of
Votes Cast
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No
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*
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Under Washington law and the Company’s Fourth Amended and Restated Articles of Incorporation (the “Articles”) and Eighth Amended and Restated Bylaws (the “Bylaws”), if a quorum exists at the meeting, a nominee for director in an uncontested election will be elected by the vote of the majority of votes cast. A majority of votes cast means that the number of shares cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” that director. If a director nominee who is an incumbent does not receive the requisite votes, that director’s term will end on the earliest of (i) the date on which the Board appoints an individual to fill the office held by that director; (ii) 90 days after the date on which an inspector determines the voting results as to that director; or (iii) the date of the director’s resignation. With respect to Proposals 2, 3 and 4, a majority of votes cast means that the number of votes cast “FOR” the matter exceeds the number of votes cast “AGAINST” the respective matter.
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We believe that it is best to hold a virtual only Annual Meeting this year given global health concerns associated with the COVID-19 pandemic. In addition, a virtual meeting provides broad and convenient access to and enables participation by our shareholders in a cost-reducing and environmentally friendly way. The virtual Annual Meeting will allow our shareholders to ask questions and to vote.
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The Annual Meeting will be a completely virtual meeting of shareholders conducted exclusively via live audio webcast. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/FFIV2022. To participate in the Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability, proxy card or voting instruction form. The Annual Meeting will begin promptly at 11:00 a.m. Pacific Time on March 10, 2022. We encourage you to access the virtual meeting website prior to the start time. Online check-in will begin at 10:45 a.m. Pacific Time, and you should allow ample time to ensure your ability to access the meeting.
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Fiscal Year 2021 Proxy Statement
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9
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Questions and Answers About the Annual Meeting and These Proxy Materials
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We will hold our question and answer session with management immediately following the conclusion of the business to be conducted at the Annual Meeting.
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You may submit a question at any time during the meeting by visiting www.virtualshareholdermeeting.com/ FFIV2022. The Chair of the meeting has broad authority to conduct the Annual Meeting in an orderly manner, including establishing rules of conduct. A copy of the rules of conduct will be available online at the Annual Meeting.
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Yes. We have designed the format of the virtual Annual Meeting to ensure that our shareholders are afforded the same rights and opportunities to participate as they would have at an in-person meeting. After the voting results are announced at the Annual Meeting, we will hold a Q&A session during which we intend to answer questions submitted during the meeting that are pertinent to the Company, as time permits, and in accordance with our Rules of Conduct for Annual Meeting of the Shareholders. During the Annual Meeting, you can view our Rules of Conduct and submit any questions at virtualshareholdermeeting.com/FFIV2022.
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Technicians will be available to assist you if you experience technical difficulties accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call 844-986-0822 (domestic) or 303-562-9302 (international) for assistance.
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Your proxy will still be effective and will be voted at the rescheduled Annual Meeting. You will still be able to change or revoke your proxy until it is voted.
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The Board of Directors of the Company is soliciting the proxies accompanying this Proxy Statement. The Company will pay all of the costs of this proxy solicitation. However, you will need to obtain your own Internet access if you choose to access the proxy materials and/or vote over the Internet. In addition to mail solicitation, officers, directors, and employees of the Company may solicit proxies personally or by telephone, without receiving additional compensation. The Company has retained Alliance Advisors to assist with the solicitation of proxies in connection with the Annual Meeting. The Company will pay Alliance Advisors customary fees, which are expected to be $7,000 plus expenses. The Company, if requested, will pay brokers, banks, and other fiduciaries that hold shares of Common Stock for beneficial owners for their reasonable out-of-pocket expenses of forwarding these materials to shareholders.
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We intend to announce preliminary voting results at the Annual Meeting and publish final results on a Form 8-K within four business days of the Annual Meeting. The Form 8-K will be available on our website at www.f5.com under the “Company — Investor Relations— Financials—SEC Filings” section.
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10
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Fiscal Year 2021 Proxy Statement
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Accountability
Driving and supporting strong corporate governance and Board practices to ensure oversight, accountability, and good decision making.
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Transparency
Maintaining transparency on a range of financial, executive compensation, and governance issues to build trust and foster two-way dialogue that supports the Company’s business success.
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Engagement
Proactively engaging with shareholders in conversations on a variety of topics to identify emerging trends and issues to inform the Company’s thinking and approach.
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At F5, we care deeply not just about what we do, but how we do it. Our guiding principle to “do the right thing” applies to our employees, officers, Board of Directors, and our subsidiaries and controlled affiliates across the globe and is set forth in F5’s Code of Business Conduct and Ethics - available at www.f5.com under the “Company—Investor Relations—ESG—Governance Documents” section.
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Most importantly, our principle to “do the right thing” is expressed every day at F5 in what we call: BeF5 (culture behaviors) and LeadF5 (leadership principles).
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Fiscal Year 2021 Proxy Statement
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11
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Corporate Governance
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F5 is committed to business practices that preserve the environment upon which our society and economy depend. As we develop a comprehensive program that recognizes F5’s full environmental impact, our focus is on: expanding the volume of our environmental data collection; increasing the breadth of our environmental disclosures; standardizing our carbon reporting processes and metrics; and exploring options for carbon reduction, mitigation and removal. F5 is targeting disclosure of science-aligned targets for Scope 1 and 2 emissions in fiscal year 2022 and declaring 2030 Science-based targets with the Science Based Target Initiative (SBTi) in fiscal year 2023.
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Employees
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•
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81% of employees favorably rate “I feel a sense of belonging at F5.”
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•
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87% of employees favorably rate “F5 has a great culture.”
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88% of employees favorably rate “I am proud to work for F5.”
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•
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94% of employees favorably rate “F5 has demonstrated that employee well-being and health is a priority during the coronavirus outbreak.”
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12
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Fiscal Year 2021 Proxy Statement
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Corporate Governance
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•
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Inclusion: A sense of belonging for everyone at F5 that helps employees love what they do and the company they do it with.
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•
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Diversity: Variety in our employee demographics to incorporate diverse backgrounds, thinking, and viewpoints into our innovation.
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•
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Equity: Ensuring everyone has access to the resources, opportunities, and information they need to succeed.
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•
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Allyship: Listening and learning from those whose experiences are different from our own and getting feedback on the impact of our actions.
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1.
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Community: F5 supports charitable causes that our employees feel most passionately about, through corporate matching for employee donations, volunteer time off and employee-led grant selection committees. In fiscal year 2021, more than half of all worldwide employees participated in Global Good programs, volunteering over 6,000 hours in their communities and directing $100,000 in F5 Community Impact Grants.
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2.
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STEM Education: F5 enables girls, women, minorities, and other underrepresented groups to develop Science, Technology Engineering and Math (STEM) skills through grants that connect to global educational and employment opportunities. In fiscal year 2021, 10 students received F5 Women in STEM Scholarships from the United Negro College Fund and nine non-profit organizations serving majority women of color received $50,000 each in F5 STEM Education Grants.
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3.
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Tech for Good: F5 assists non-profit organizations through grants that fund their digital transformation so they can do even more to help those they serve. In fiscal year 2021, 20 non-profit organizations serving majority Black, Indigenous, People of Color (BIPOC) communities received $10,000 each in F5 Tech for Good Grants to help fill their technology gaps.
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Fiscal Year 2021 Proxy Statement
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13
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Corporate Governance
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Below we describe F5’s corporate governance policies and practices that foster effective Board oversight in service of the long-term interests of our shareholders, explain the process for selecting director candidates, and present the 2022 nominees for election to our Board.
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14
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Fiscal Year 2021 Proxy Statement
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Corporate Governance
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Fiscal Year 2021 Proxy Statement
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15
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Corporate Governance
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Assessing and managing risk is the responsibility of the Company’s senior management team. The Board of Directors takes an active role in overseeing the Company’s risk management efforts, coordinating closely with management and the Board’s committees in these efforts. The Audit Committee reviews and monitors the status of the Company’s enterprise risk management posture and processes and the emerging risks for the Company. The Audit Committee reviews and consults at each of its regular quarterly Audit Committee meetings with the Company’s senior management team and the Company’s Vice President of Internal Audit on strategic and operational opportunities, challenges and risks faced by the Company. As appropriate, the Audit Committee discusses and coordinates regarding certain risks or risk-related matters with the full Board or applicable Board committees. In fiscal year 2010, the Company implemented an enterprise risk management program. The Company retained Ernst & Young to assist the Company in performing an enterprise risk assessment to identify key strategic, operating, legal and compliance, and financial risks, evaluate the significance of those risks, formulate a risk profile which identified relevant risk levels and management control efforts, and develop action plans to address these key risks. The Company’s senior management team regularly reviews and evaluates these key risks and the effectiveness of the Company’s risk management programs, and reports back to the Audit Committee and the full Board of Directors on a regular basis during the course of the year. In addition, the Audit Committee oversees the Company’s financial and cybersecurity risk exposures, financial reporting, internal controls and internal information systems, including receiving regular updates from the Company’s Chief Information Security Officer on cyber risks the Company faces. The Compensation Committee oversees the Company’s executive compensation programs, monitors the administration of the Company’s various equity compensation plans, and conducts compensation-related risk assessments. The Nominating and ESG Committee oversees risks related to the Company’s overall corporate governance profile and ratings; board and committee composition and structure; and director independence, as well as environmental, social and other governance-related risks. Each Board committee presents regular reports to the full Board of Directors, including regarding risk-related matters in its applicable areas of oversight. The Board’s role in risk oversight has not had any effect on the Board’s leadership structure.
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The following directors served as members of the Compensation Committee during some or all of fiscal year 2021: Mses. Bergeron (chair), Bevier and Buse and Messrs. Ames, Higginson and Mehta. None of these persons has at any time been an officer or employee of the Company. During fiscal year 2021, none of the Company’s executive officers served as a member of the board of directors or compensation committee of any entity that has had one or more executive officers that served as a member of the Company’s Board of Directors or Compensation Committee.
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16
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Fiscal Year 2021 Proxy Statement
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Corporate Governance
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As set forth in the written charter of the Audit Committee of the Board of Directors, any related person transaction involving a Company director or executive officer must be reviewed and approved by the Audit Committee. Any member of the Audit Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote on the approval or ratification of the transaction. Related persons include any director or executive officer, certain shareholders and any of their “immediate family members” (as defined by SEC regulations). To identify any related person transaction, the Company requires each director and executive officer to complete a questionnaire each year requiring disclosure of any prior or proposed transaction with the Company in which the director, executive officer or any immediate family member might have an interest. Each director and executive officer is directed to notify the Company’s Executive Vice President and General Counsel of any such transaction that arises during the year, and the Company’s Chief Financial Officer reports to the Audit Committee on a quarterly basis regarding any potential related person transaction. In addition, the Board of Directors determines on an annual basis which directors meet the definition of independent director under the Nasdaq Listing Rules and reviews any director relationship that would potentially interfere with his or her exercise of independent judgment in carrying out the responsibilities of a director. A copy of the Company’s “Policy and Procedures for Approving Related-Person Transactions” is available on our website at www.f5.com under the “Company — Investor Relations—ESG—Governance Documents” section.
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The Company’s Articles limit the liability of the Company’s directors for monetary damages arising from their conduct as directors, except to the extent otherwise required by the Articles and the Washington Business Corporation Act. The Articles also provide that the Company may indemnify its directors and officers to the fullest extent permitted by Washington law, including in circumstances in which indemnification is otherwise discretionary under Washington law. The Company has entered into indemnification agreements with the Company’s directors and certain officers for the indemnification of, and advancement of expenses to, these persons to the fullest extent permitted by law. The Company also intends to enter into these agreements with the Company’s future directors and certain future officers.
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The Company considers it improper and inappropriate for any employee, officer or director of the Company to engage in short-term or speculative transactions in the Company’s securities. It therefore is the Company’s policy that directors, officers and other employees, and their family members, may not engage in any of the following transactions:
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•
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Short Sales. Short sales of the Company’s securities.
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•
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Publicly Traded Options. Buying or selling Company options including puts, calls or other derivative securities.
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•
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Hedging Transactions. Hedging transactions, including but not limited to zero-cost collars and forward sale contracts.
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•
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Margin Accounts and Pledges. Holding Company securities in margin accounts and/or pledging Company securities as collateral. The Company may on occasion provide limited exceptions to this prohibition such as where someone other than an executive officer or director wishes to pledge Company securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resort to the pledged securities.
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Fiscal Year 2021 Proxy Statement
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17
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Corporate Governance
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We have adopted a Code of Ethics for Senior Financial Officers that applies to certain of our senior officers, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics for Senior Financial Officers is posted under the “Company — Investor Relations—ESG—Governance Documents” section of the Company’s website, www.f5.com. A copy of the Code of Ethics may be obtained without charge by written request to the Company’s Corporate Secretary. We also have a separate Code of Conduct that applies to all of the Company’s employees, which may also be found under the “Company — Investor Relations—ESG—Governance Documents” section of our website.
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The Company’s Board of Directors met or acted by unanimous written consent 17 times during fiscal year 2021. The outside directors met 3 times during fiscal 2021, with no members of management present. The Audit Committee met 5 times and the Compensation Committee met or acted by unanimous written consent 9 times. During fiscal year 2021, the Nominating and ESG Committee met 6 times. Each member of the Board of Directors attended 75% or more of the aggregate of the Board of Directors meetings and the meetings of the committees on which the director served during fiscal year 2021. All directors are also expected to attend the Company’s annual meetings of shareholders. All directors attended the Company’s annual meeting of shareholders for fiscal year 2020 except Mr. Mehta and Mses. Bergeron and Myers.
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18
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Fiscal Year 2021 Proxy Statement
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Name
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| |
Director
Since
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Sandra E. Bergeron
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January 2013
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Elizabeth L. Buse
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September 2020
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Michael L. Dreyer
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October 2012
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Alan J. Higginson
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May 1996
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Peter S. Klein
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March 2015
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François Locoh-Donou
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April 2017
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Nikhil Mehta
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January 2019
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Michael F. Montoya
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June 2021
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Marie E. Myers
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January 2019
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James M. Phillips
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January 2022
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Sripada Shivananda
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April 2020
|
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Independence
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| |
The Nasdaq Listing Rules require that a majority of the Company’s directors be “independent,” as defined by Nasdaq Listing Rule 5605(a)(2) and determined by the Board of Directors. The Board of Directors consults with the Company’s legal counsel to ensure that the Board of Directors’ determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent.” After a review of relevant transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent registered public accounting firm, the Board of Directors determined that the following directors and nominees were independent: Sandra E. Bergeron, Elizabeth L. Buse, Michael L. Dreyer, Alan J. Higginson, Peter S. Klein, Nikhil Mehta, Michael F. Montoya, Marie E. Myers, James M. Phillips and Sripada Shivananda. François Locoh-Donou is not considered independent because he is the Company’s President and Chief Executive Officer.
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In October 2010, the Board of Directors adopted stock ownership guidelines for the Company’s directors and executive officers. Directors are required to own shares of Common Stock equal in value to five times the directors’ annual cash retainer. Directors are required to achieve this ownership level within three years of joining the Board. Shares of Common Stock that count toward satisfaction of the guidelines include shares purchased on the open market, shares obtained through stock option exercises, shares obtained through grants of Restricted Stock Units (RSUs), and shares beneficially owned in a trust, by a spouse and/or minor children. Shares owned by directors are valued at the greater of (i) the price at the time of acquisition/purchase or (ii) the current market value.
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Fiscal Year 2021 Proxy Statement
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19
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Board of Directors
|
| |
The following individuals have been nominated for election to the Board of Directors or will continue to serve on the Board of Directors after the Annual Meeting:
|
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François Locoh-Donou | Age 50 | Director since April 2017
|
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François Locoh-Donou, has served as our President, Chief Executive Officer and a director since April 2017. Prior to joining us, Mr. Locoh-Donou served as Chief Operating Officer at Ciena, a network strategy and technology company, from November 2015 to January 2017 and as Senior Vice President, Global Products Group, from August 2011 until November 2015. Mr. Locoh-Donou serves as a director of Capital One Financial Corporation, a publicly-held bank holding company specializing in credit cards, auto loans, banking and savings accounts, and is also the co-founder and Chairman of Cajou Espoir, a social enterprise focused on cashew-processing that employs several hundred people in rural Togo, 80 percent of whom are women. Mr. Locoh-Donou holds an engineering degree from École Centrale de Marseille, and a Masters in Sciences from Télécom ParisTech in France and a M.B.A. from the Stanford Graduate School of Business.
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Mr. Locoh-Donou has led the Company since April 2017. Mr. Locoh-Donou brings nearly two decades of enterprise technology experience building a wide range of products, teams and operations around the world. He has held numerous successive leadership positions prior to joining the Company, including Vice President and General Manager, EMEA; Vice President, International Sales; and Vice President, Marketing. Prior to joining Ciena, he held research and development roles for a French opto-electronics company. He brings multidisciplinary and multinational experience, ranging from product development to operations to sales. He is the sole member of management on the Board of Directors and serves a critical role in the communication between the Board of Directors and the Company’s senior management team.
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Alan J. Higginson | Age 74 | Director since May 1996
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Alan J. Higginson, has served as Chair of the Board since April 2004 (with the exception of the period of July 1, 2015 to December 13, 2015 when he served as our Lead Independent Director), and as one of our directors since May 1996. Mr. Higginson served as Chairman of Hubspan, Inc., an e-business infrastructure provider, from September 2009 to March 2012. He served as President and Chief Executive Officer of Hubspan from August 2001 to September 2007. From November 1995 to November 1998, Mr. Higginson served as President of Atrieva Corporation, a provider of advanced data backup and retrieval technology.
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Mr. Higginson also served as a director of Pivot3, Inc., a privately-held company that develops and markets automated hyperconverged infrastructure solutions, from December 2011 until February 2020. Mr. Higginson also served as a director of adeptCloud Inc., a privately-held company that provides cloud-based collaboration services, and Clarity Health Services, a privately-held company that provides web-based health care coordination services. Mr. Higginson holds a B.S. in Commerce and an M.B.A. from Santa Clara University.
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Mr. Higginson has over 30 years of experience as a senior executive in a wide range of both public and private software and other technology companies. His experience includes leading worldwide sales organizations and the management of international joint ventures and distribution channels. He has also been active in a number of software and technology industry associations, and as an advisor to early-stage technology companies. Mr. Higginson joined our Board of Directors shortly after the Company was founded. His deep understanding of the Company’s historical and current business strategies, objectives and technologies provides an important and insightful perspective for our Board of Directors, as well as our senior management.
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20
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Fiscal Year 2021 Proxy Statement
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Board of Directors
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Sandra E. Bergeron | Age 63 | Director since January 2013
|
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Sandra E. Bergeron, has served as one of our directors since January 2013. From 2004 until 2012, Ms. Bergeron was a venture partner at Trident Capital, Inc., a venture capital firm. Ms. Bergeron currently serves as Chair of the Board of Qualys, Inc., a publicly-traded provider of cloud security and compliance solutions, and was previously the Lead Independent Director from August 2018 through April 2021. Ms. Bergeron also serves on the board of directors of SumoLogic, Inc., a publicly-traded cloud-based machine data analytics company focusing on security, operations and BI use cases. Ms. Bergeron served on the board of directors of Sophos Group, PLC, a London Stock Exchange publicly-traded provider of IT security and data protection products, from December 2010 until March 2020. Previously, she served as chairman of TraceSecurity, a privately-held provider of cloud-based security solutions and IT governance, risk and compliance management solutions, and as a director of TriCipher, a privately-held secure access management company acquired by VMware in August 2010. She also served on the board of ArcSight, Inc., a publicly-traded security and compliance management company acquired by Hewlett-Packard Company in September 2010. Ms. Bergeron holds a BBA in Information Systems from Georgia State University and an M.B.A. from Xavier University in Cincinnati, Ohio.
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Ms. Bergeron has extensive experience in network and data security and related public policy issues. She has more than 25 years of experience in the security technology industry. In addition, she has extensive experience as a director of public and private technology companies, and as an executive managing product development and sales teams in the computer and internet security industries.
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Elizabeth L. Buse | Age 60 | Director since September 2020
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Elizabeth L. Buse, has served as one of our directors since September 2020. Ms. Buse served as Co-Chief Executive Officer and Chief Executive Officer of Monitise, PLC, a publicly-traded financial services technology company, from June 2014 through October 2015. Prior to that time, Ms. Buse served as Executive Vice President of Global Services with Visa, Inc., a publicly-traded leading global payments technology company. Ms. Buse held various other senior leadership positions at Visa during her 16-year tenure there, including Group President for Asia-Pacific, Central Europe, Middle East, and Africa. Ms. Buse has served on the board of directors of U.S. Bancorp, a publicly-traded bank holding company, since June 2018. She also served on the board of directors of eNett International, a privately-held payment services company specializing in B2B international payment solutions, from March 2016 until June 2019, and Travelport Worldwide Limited, a publicly-traded travel technology company, from September 2014 until June 2019. Ms. Buse holds a B.A. in Spanish Linguistics from UCLA and an M.B.A. from University of California – Berkeley, Haas School of Business.
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Ms. Buse has extensive experience in the financial services industry. She brings to our Board of Directors insights regarding the financial services industry globally and provides a valuable perspective on best practices and solutions. Ms. Buse’s financial services and technology expertise combined with her background as a chief executive officer in the financial services industry makes her well qualified to serve on our Board of Directors.
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Fiscal Year 2021 Proxy Statement
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21
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Board of Directors
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Michael L. Dreyer | Age 58 | Director since October 2012
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Michael L. Dreyer, has served as one of our directors since October 2012. Mr. Dreyer retired in 2019 as Chief Operations Officer for Silicon Valley Bank, a high-tech commercial bank, and prior to that Mr. Dreyer served as Chief Operating Officer at Monitise, a technology leader in mobile banking. Prior to joining Monitise, he was the Chief Information Officer at Visa Inc. from July 2005 to March 2014, where he was responsible for the company’s systems and technology platforms. Before the formation of Visa Inc., he was Chief Information Officer of Inovant, where he oversaw the development and management of Visa’s global systems technology. Previously, Mr. Dreyer held executive positions at VISA USA as Senior Vice President of processing and emerging products, and Senior Vice President of commercial solutions. He also held senior positions at American Express, Prime Financial, Inc., Federal Deposit Insurance Corporation, Downey Savings, Bank of America, and the Fairmont Hotel Management Company. Mr. Dreyer currently serves as a director of II-IV Incorporated, a publicly-held company that supplies engineered materials, optoelectronic components and optical systems solutions that acquired Finisar in 2019 (previous board), and Deep Labs, Inc., a private company specializing in artificial intelligence and machine learning. Mr. Dreyer received an M.B.A. and a B.A. in psychology from Washington State University.
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Mr. Dreyer has extensive experience as an information technology executive. He brings to our Board of Directors valuable insights regarding data center operations and the role of our technology in the data center, as well as an understanding of data traffic management technologies, data security, and other networking technology trends. Mr. Dreyer’s information technology and data management expertise combined with his background as a senior executive in the financial industry make him well qualified to serve on our Board of Directors.
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Peter S. Klein | Age 59 | Director since March 2015
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Peter S. Klein, has served as one of our directors since March 2015. Mr. Klein has almost 25 years of experience as a senior finance executive. He served as Chief Financial Officer of WME, a global leader in sports and entertainment marketing, from January 2014 until June 2014. Prior to that, he served as Chief Financial Officer of Microsoft Corporation from November 2009 until May 2013. Mr. Klein spent over 11 years at Microsoft, including roles as Chief Financial Officer of the Server and Tools and Microsoft Business Divisions. From 1990 until 2002, Mr. Klein held senior finance roles with McCaw Cellular Communications, Orca Bay Capital, Asta Networks and Homegrocer.com. He currently serves on the board of directors of Denali Therapeutics, a publicly-traded biotechnology company, Accolade, a publicly-traded health care technology and services company, Sarcos Technology and Robotics Corp., a publicly-traded robotics and microelectromechanical company, and Joshua Green Corporation, a privately-held investment company. He previously served on the board of directors of Apptio Inc., a publicly-traded software company, from October 2013 through January 2019. Mr. Klein holds a B.A. from Yale University and an M.B.A. from the University of Washington.
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Mr. Klein’s extensive experience as a finance executive in a variety of technology companies, including experience as the Chief Financial Officer of the world’s largest software company, and experience managing the finance function for significant enterprises with diverse operating models, bring important and valuable perspectives to our Board of Directors. His experience as a public company chief financial officer qualifies him as an “audit committee financial expert” as defined in Item 407 of Regulation S-K.
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22
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Fiscal Year 2021 Proxy Statement
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|
| |
Board of Directors
|
|
Nikhil Mehta | Age 44 | Director since January 2019
|
|
Nikhil Mehta, has served as one of our directors since January 2019. Mr. Mehta has been the Chief Executive Officer of Gainsight, Inc., a leading Customer Success SaaS platform provider, since February 2013. Prior to joining Gainsight, he served as Chief Executive Officer of LiveOffice, which was acquired by Symantec in January 2012. Before joining LiveOffice, Mr. Mehta served in several Product Management and Engineering leadership roles at Symantec. Mr. Mehta holds a B.A. degree in Biochemical Sciences from Harvard College and a M.S. degree in Computer Science from Harvard Graduate School of Arts and Sciences.
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Mr. Mehta has extensive experience as an executive at leading Software as a Service (SaaS) companies. His insights regarding SaaS and related technology combined with his background as serving as a chief executive officer make him well qualified to serve on our Board of Directors.
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Michael F. Montoya | Age 50 | Director since June 2021
|
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Michael F. Montoya, joined the Board in June 2021. Mr. Montoya has served as the Chief Information Security Officer of Equinix, Inc., a global interconnection and data center company, since October 2019. Prior to joining Equinix, he served as Senior Vice President and Chief Information Security Officer of Digital Realty Trust, Inc. from September 2018 through September 2019. Before joining Digital Realty Trust, Inc., Mr. Montoya served as Chief Security Advisor for Microsoft Singapore from August 2016 through September 2018, where he was responsible for the Asia region and incident response, security services and security revenue. Prior to Microsoft, Mr. Montoya served as Vice President, Cloud Security for FireEye Singapore, responsible for Asia services and global cloud security operations. Mr. Montoya holds a B.A. degree in Economics from The University of New Mexico.
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Mr. Montoya’s extensive experience as an information security executive provides a valuable perspective on best practices and solutions. His insights regarding cyber security combined with his background as serving as a chief information security officer make him well qualified to serve on our Board of Directors.
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Marie E. Myers | Age 53 | Director since January 2019
|
|
Marie E. Myers, has served as one of our directors since January 2019. Ms. Myers has served as the Chief Financial Officer with HP, Inc., a multinational technology company, since February 2021, where she previously served as Chief Transformation Officer from January 2020 through February 2021. Prior to that, Ms. Myers served as the Chief Financial Officer of UiPath, Inc., a robotic process automation company, from December 2018 through December 2019. Before joining UiPath, Ms. Myers served as HP’s Global Controller from November 2015 to December 2018, and HP’s Vice President of Finance for the Personal Systems Group, Americas between May 2012 and October 2015. She currently serves on the board of directors for KLA Corp., a publicly-traded capital equipment company specializing in process control and yield management systems. Ms. Myers holds a Bachelor of Arts degree and a Bachelor of Economics degree from University of Queensland and a Master’s in Business Administration with a focus in Marketing and Finance from the University of St. Thomas.
|
| |
|
Ms. Myer’s extensive experience as a finance executive for a multinational technology company, particularly in technology and financial operations functions, brings an important and valuable perspective to our Board of Directors. Her experience as a public company finance executive qualifies her as an “audit committee financial expert” as defined in Item 407 of Regulation S-K.
|
|
Fiscal Year 2021 Proxy Statement
|
| |
23
|
|
| |
Board of Directors
|
|
James M. Phillips | Age 55 | Director since January 2022
|
|
James M. Phillips, joined the Board effective January 2022. Mr. Phillips has served as the President of Microsoft’s Digital Transformation Platform Group, a product development organization, since 2020 where he previously served as a Corporate Vice President since 2012 after joining Microsoft as a strategy advisor to the President of Microsoft’s Cloud and Enterprise division. Prior to joining Microsoft, Mr. Phillips co-founded and served as CEO of multiple software companies as well as holding engineering, product management, corporate development and marketing leadership roles at Intel, VMware, and Synopsys. Mr. Phillips holds a BS in Mathematics from Louisiana State University and earned his MBA with honors, from the University of Chicago Booth School of Business.
|
| |
Mr. Phillip’s deep technology expertise and experience leading digital transformation initiatives brings an important and valuable perspective to F5. His insights regarding business applications and services combined with his background in engineering, product management, corporate development and capital markets make him well qualified to serve on our Board of Directors.
|
|
|
Sripada Shivananda | Age 49 | Director since April 2020
|
|
Sripada Shivananda, has served as one of our directors since April 2020. Mr. Shivananda joined PayPal Holdings, Inc., a publicly-traded financial technology company and global leader in digital payment technologies, in June 2015 as Vice President, Global Platform and Infrastructure and currently serves as Executive Vice President and Chief Technology Officer as of March 2021. Prior to joining PayPal, he served as Vice President, Global Platform and Infrastructure of eBay, Inc., a publicly-traded global ecommerce company, from November 2013 until June 2015, and prior to that in other positions during his 14-year tenure with eBay. Mr. Shivananda holds a Bachelor of Technology in Mechanical Engineering from Jawaharlal Nehru Technology University and a Master of Science in Mechanical Engineering from Ohio University, Russ College of Engineering.
|
| |
Mr. Shivananda’s extensive experience as a technology executive brings insights regarding product, technology, infrastructure and cyber security and provides a valuable perspective on best practices and solutions. Mr. Shivananda’s technology expertise combined with his extensive experience managing the technology for publicly traded technology companies makes him well qualified to serve on our Board of Directors.
|
|
| |
Criteria for Nomination to the Board of Directors. The Nominating and ESG Committee considers the appropriate balance of experience, skills and characteristics required of the Board of Directors, and seeks to ensure that at least a majority of the directors are independent under the Nasdaq Listing Rules, that members of the Company’s Audit Committee meet the financial literacy requirements under the Nasdaq Listing Rules and that at least one of them qualifies as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (the SEC). Nominees for director are selected on the basis of, among other things, their depth and breadth of experience, integrity, diversity, ability to work effectively as part of a team, understanding of the Company’s business environment, and willingness to devote adequate time to Board duties.
|
24
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Board of Directors
|
Fiscal Year 2021 Proxy Statement
|
| |
25
|
|
| |
Board of Directors
|
| |
Shareholders who wish to communicate with our directors may do so by contacting them c/o Corporate Secretary, F5, 801 Fifth Avenue, Seattle, Washington 98104. As set forth in the Company’s Corporate Governance Guidelines, a copy of which may be found under the “Company—Investor Relations—ESG—Governance Documents” section of our website, www.f5.com, these communications will be forwarded by the Corporate Secretary to a Board member, Board committee or the full Board of Directors, as appropriate.
|
| |
Prior to each annual meeting of shareholders, the Compensation Committee reviews with its compensation consultant the appropriate level and form of compensation for non-employee directors and makes recommendations to the Board of Directors. In making non-employee director compensation recommendations, the Compensation Committee takes various factors into consideration, including the compensation consultant’s review of the equity award and cash retainer elements of non-employee director compensation in terms of practice and pay level with respect to both the Company and companies comprising the same peer group used by the Compensation Committee in connection with its review of executive compensation, market trends and the emphasis on equity to support alignment with shareholders. The Compensation Committee did not recommend any changes to non-employee director compensation based on its review and the Board of Directors made no changes to the director compensation level for fiscal year 2021. The Board of Directors approves all equity awards to be granted to non-employee directors on the date of the annual meeting of shareholders as well as the amount of the annual cash retainer, paid in quarterly installments.
|
26
|
| |
Fiscal Year 2021 Proxy Statement
|
|
Name(1)
|
| |
Fees Earned
or Paid in Cash
($)(2)
|
| |
Stock Awards
($)(3)
|
| |
Total
($)
|
|
|
A. Gary Ames
|
| |
37,542
|
| |
—
|
| |
37,542
|
|
|
Sandra E. Bergeron
|
| |
97,500
|
| |
250,093
|
| |
347,593
|
|
|
Deborah L. Bevier
|
| |
40,854
|
| |
—
|
| |
40,854
|
|
|
Elizabeth L. Buse
|
| |
83,667
|
| |
365,575
|
| |
449,242
|
|
|
Michel Combes
|
| |
32,021
|
| |
—
|
| |
32,021
|
|
|
Michael L. Dreyer
|
| |
105,000
|
| |
250,093
|
| |
355,093
|
|
|
Alan J. Higginson
|
| |
185,000
|
| |
250,093
|
| |
435,093
|
|
|
Peter S. Klein
|
| |
100,000
|
| |
250,093
|
| |
350,093
|
|
|
Nikhil Mehta
|
| |
73,958
|
| |
250,093
|
| |
324,051
|
|
|
Michael F. Montoya
|
| |
23,736
|
| |
250,010
|
| |
273,746
|
|
|
Marie E. Myers
|
| |
80,000
|
| |
250,093
|
| |
330,093
|
|
|
Sripada Shivananda
|
| |
86,979
|
| |
250,093
|
| |
337,072
|
|
1.
|
François Locoh-Donou, the Company’s President and Chief Executive officer, is not included in this table as he is an employee of the Company and thus receives no compensation for his services as a director.
|
2.
|
Represents the aggregate annual retainers, Board of Directors chair retainer, committee chair retainers, and member committee fees. Non-employee directors of the Company are currently paid $60,000 annually for their services as members of the Board of Directors. The Chairman of the Board of Directors receives an additional $100,000 paid annually. Chairs of the Audit, Compensation, and Nominating and ESG Committees receive an additional $20,000, $12,500, and $12,500, respectively, annually. In addition, the members of the Audit, Compensation, and Nominating and ESG Committees (including the Committee chairs) are paid annual payments of $20,000, $12,500, and $12,500 respectively. Directors receive cash fees in quarterly installments. Mr. Ames and Ms. Bevier did not stand for renomination as directors at the Annual Meeting of Shareholders for fiscal year 2020 held on March 11, 2021 but continued to serve as directors until the date of the Annual Meeting. Mr. Combes resigned from the Board of Directors on March 11, 2021. Mr. Montoya was appointed to the Board of Directors on June 14, 2021, at which time Mr. Montoya also became a member of the Audit Committee. Ms. Buse and Messrs. Mehta and Shivananda became members of an additional committee on March 11, 2021. The following table provides a breakdown of fees earned or paid in cash:
|
Fiscal Year 2021 Proxy Statement
|
| |
27
|
|
| |
Director Compensation for Fiscal Year 2021
|
|
Name
|
| |
Annual
Retainers
($)
|
| |
Board and
Committee
Chair Fees
($)
|
| |
Member
Committee
Fees
($)
|
| |
Total
($)
|
|
|
A. Gary Ames
|
| |
26,500
|
| |
0
|
| |
11,042
|
| |
37,542
|
|
|
Sandra E. Bergeron
|
| |
60,000
|
| |
12,500
|
| |
25,000
|
| |
97,500
|
|
|
Deborah L. Bevier
|
| |
26,500
|
| |
0
|
| |
14,354
|
| |
40,854
|
|
|
Elizabeth L. Buse
|
| |
60,000
|
| |
0
|
| |
23,667
|
| |
83,667
|
|
|
Michel Combes
|
| |
26,500
|
| |
0
|
| |
5,521
|
| |
32,021
|
|
|
Michael L. Dreyer
|
| |
60,000
|
| |
12,500
|
| |
32,500
|
| |
105,000
|
|
|
Alan J. Higginson
|
| |
60,000
|
| |
100,000
|
| |
25,000
|
| |
185,000
|
|
|
Peter S. Klein
|
| |
60,000
|
| |
20,000
|
| |
20,000
|
| |
100,000
|
|
|
Nikhil Mehta
|
| |
60,000
|
| |
0
|
| |
13,958
|
| |
73,958
|
|
|
Michael F. Montoya
|
| |
17,802
|
| |
0
|
| |
5,934
|
| |
23,736
|
|
|
Marie E. Myers
|
| |
60,000
|
| |
0
|
| |
20,000
|
| |
80,000
|
|
|
Sripada Shivananda
|
| |
60,000
|
| |
0
|
| |
26,979
|
| |
86,979
|
|
3.
|
This column represents the aggregate grant date fair value of restricted stock units (RSUs) granted to directors in the applicable year computed in accordance with ASC Topic 718 and determined as of the grant date. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information, please refer to note 1 in our financial statements, “Summary of Significant Accounting Policies — Stock-based Compensation,” included in our Annual Report to Shareholders on Form 10-K for the year ended September 30, 2021. On March 11, 2021, the Board of Directors approved the recommendations of the Compensation Committee that each non-employee director receive a grant on March 11, 2021 of RSUs representing the right to receive 1,282 shares of Common Stock under the 2014 Incentive Plan (with a grant date fair value of $250,093 in accordance with ASC Topic 718), which will fully vest on March 9, 2022 if the non-employee director continues to serve as a director on that date. On October 30, 2020 the Board of Directors approved the recommendations of the Compensation Committee that Ms. Buse receive in connection with her appointment to the board a grant on November 2, 2020 representing the right to receive 880 shares of Common Stock under the 2014 Incentive Plan (with a grant date fair value of $115,482 in accordance with ASC Topic 718), which fully vested on March 10, 2021. On July 23, 2021 the Board of Directors approved the recommendations of the Compensation Committee that Mr. Montoya receive in connection with his appointment to the board a grant on August 2, 2021 representing the right to receive 1,210 shares of Common Stock under the 2014 Plan (with a grant date fair value of $250,010 in accordance with ASC Topic 718), which will fully vest on March 9, 2022 if Mr. Montoya continues to serve as a director on that date. As of September 30, 2021, these 1,282 RSUs awarded to each non-employee director and 1,210 RSUs awarded to Mr. Montoya, respectively, were the only RSUs held by each such director, and they were not yet vested.
|
| |
The Compensation Committee and Company management have reviewed the Company’s compensation plans and programs and have concluded that none of these plans or programs is reasonably likely to have a material adverse effect on the Company. In making this evaluation, the Compensation Committee reviewed the key elements of each of the Company’s compensation programs and the means by which any potential risks are mitigated, including through various elements in the Company’s enterprise risk management program.
|
28
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Director Compensation for Fiscal Year 2021
|
| |
The Compensation Committee has reviewed and discussed with management the Company’s “Compensation Discussion and Analysis.” Based on this review and discussions, the Compensation Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement and the Company’s Annual Report to Shareholders on Form 10-K for the fiscal year ended September 30, 2021.
|
Fiscal Year 2021 Proxy Statement
|
| |
29
|
Compensation Discussion and Analysis
|
| |
Introduction
This Compensation Discussion and Analysis provides information about the compensation program for our named executive officers (NEOs) in fiscal year 2021:
|
•
|
François Locoh-Donou, President and Chief Executive Officer
|
•
|
Frank Pelzer, Executive Vice President and Chief Financial Officer
|
•
|
Tom Fountain, Executive Vice President of Global Services and Chief Strategy Officer
|
•
|
Haiyan Song, Executive Vice President and General Manager, Security and Distributed Cloud
|
•
|
Chad Whalen, Executive Vice President of Worldwide Sales
|
30
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
| |
|
FISCAL YEAR 2021
Performance Highlights
|
| |
Annual
revenue
$2.6
BILLION
|
| |
Cash flow
from operations
$645
MILLION
|
| |
GAAP
net income
$331
MILLION
|
|
Annual revenue
growth
11%
|
| |
Annual non-GAAP
software revenue growth
37%
|
| |
Cash returned to
shareholders through
share repurchase
$500
MILLION
|
Company
Recognition
|
| |
|
| |
|
| |
|
|
| |
|
| |
|
| |
|
|
| ||
updates to the
compensation program for
fiscal year 2022
|
| |
The Committee with the assistance of its independent compensation consultant continues to monitor and evaluate the Company’s compensation practices for its executive officers and has implemented three significant changes for fiscal year 2022.
|
•
|
As described above in “Corporate Governance - Social - Diversity and Inclusion”, the Company believes our differences—when embraced with humility and respect—drive smarter decisions, increased innovation, stronger performance, and a culture where all employees can be themselves and reach their full potential. To continue to make F5 a more diverse and inclusive place to work, and in alignment with the Company’s commitments to its ESG initiatives, the Committee therefore included quantitative diversity and inclusion metrics as part of its executive officers’ fiscal year 2022 annual cash incentive program. The diversity and inclusion metrics together comprise 10% of the target annual cash incentive program award. The diversity metric corresponds with the Company’s initiative of increasing diverse employee representation of the following communities and is based on driving percentage growth targets in fiscal year 2022 compared to fiscal year 2021 including increasing our Black representation by 26% and Latinx representation by 11% in the United States and increasing our female representation by 8% globally. The inclusion metric is based on a belonging engagement survey score.
|
•
|
To reflect a greater emphasis on pay for performance, for fiscal year 2022, we have increased the performance-based portion of our Chief Executive Officer’s target equity award from 50% to 60%. 60% of our Chief Executive Officer’s equity award will be subject to the Company achieving specified performance targets over a three-year period, as explained in more detail below.
|
•
|
Beginning with equity awards granted in fiscal year 2022, executive officers will be required to hold shares earned as a result of equity award vesting (after payment of withholding taxes) for
|
Fiscal Year 2021 Proxy Statement
|
| |
31
|
|
| |
Executive Compensation
|
Policies and
Practices Linked
to Shareholder
Value Creation and
RISK Mitigation
|
| |
|
|
32
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
2021 Corporate
Performance
|
| |
The Company’s total annual revenue in fiscal year 2021, $2.6 billion, was the highest ever and an increase of 11% over fiscal year 2020. Cash flow from operating activities was $645 million and GAAP net income was $331 million.
|
|
| |
|
|
| |
|
Fiscal Year 2021 Proxy Statement
|
| |
33
|
|
| |
Executive Compensation
|
Engagement AND
ANNUAL ADVISORY VOTE
|
| |
The Company’s relationship with its shareholders is an important part of its success and the Company believes it is important to engage with its shareholders and to obtain their perspectives. The Company’s management team believes that engaging openly with shareholders on topics such as business strategy, executive compensation, and ESG, including the Company’s programs and policies, drives increased corporate accountability, improves decision-making, and ultimately creates long-term value. The Company is committed to:
|
|
| |
|
| |
Accountability: Driving and supporting strong corporate governance and Board practices to ensure oversight, accountability, and good decision making.
|
|
| |
|
| |
Transparency: Maintaining high levels of transparency on a range of financial, executive compensation, and governance, as well as social and environmental, issues to build trust and sustain two-way dialogue that supports the Company’s business success.
|
|
| |
|
| |
Engagement: Proactively engaging with shareholders in conversations on a variety of topics to identify emerging trends and issues to inform the Company’s thinking and approach.
|
34
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
Compensation
Program Objectives
and Compensation
Philosophy
|
| |
The Committee established a compensation program to align executive compensation with the Company’s business objectives, performance and creation of shareholder value. We design our executive pay program to link compensation to improvements in elements of the Company’s performance that link to the creation of shareholder value. We achieve this objective through a compensation program that:
|
•
|
provides a competitive total compensation package that enables the Company to attract, motivate, reward and retain executive officers who contribute to the Company’s success;
|
•
|
links incentive compensation to the performance of the Company and aligns the interests of executive officers with the long-term interests of shareholders; and
|
•
|
establishes incentives that relate to the Company’s annual and long-term business strategies and objectives.
|
Fiscal Year
2021 Compensation
|
| |
The three primary components of our fiscal year 2021 executive compensation program are:
|
|
(i) base salary (Salary),
|
||
|
(ii) incentive compensation in the form of cash bonuses (Bonus), and
|
||
|
(iii) long-term incentive compensation comprised of equity compensation that is both
performance-based and time-based (LTI).
|
Fits Into our
Overall Compensation
Objectives and
Affects Other Elements
of Compensation
|
| |
Consistent with our philosophy that a significant amount of the executive officers’ compensation should be directly linked to the performance of the Company and align the interests of executive officers with the long-term interests of shareholders, a majority of the CEO’s compensation is based on the Company achieving certain performance and financial targets.
|
Fiscal Year 2021 Proxy Statement
|
| |
35
|
|
| |
Executive Compensation
|
|
| |
|
|
| |
|
36
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
|
| |
|
•
|
The executive’s specific job responsibilities, experience, qualifications, job performance and potential contributions;
|
•
|
Market data from the Radford salary survey covering technology companies in comparable areas (Survey Companies); and
|
•
|
Compensation paid to comparable executives as set forth in proxy statements for the Peer Group Companies developed by an outside independent compensation consultant (See “Factors Considered by The Committee in Establishing Executive Compensation — Market Analysis”).
|
Fiscal Year 2021 Proxy Statement
|
| |
37
|
|
| |
Executive Compensation
|
|
|
| |
Base Salary
Annual Rate ($)
|
| |
Incentive Plan
Target as a % of
Base Salary
|
| |
Incentive Plan
Maximum as a % of
Base Salary
|
| |
Actual ($)
|
|
|
François Locoh-Donou
|
| |
$875,000
|
| |
130%
|
| |
260%
|
| |
$1,183,431
|
|
|
Frank Pelzer
|
| |
$510,000
|
| |
90%
|
| |
180%
|
| |
$477,534
|
|
|
Tom Fountain
|
| |
$546,000
|
| |
100%
|
| |
200%
|
| |
$568,047
|
|
|
Haiyan Song(1)
|
| |
$475,000
|
| |
90%
|
| |
180%
|
| |
$329,002
|
|
|
Chad Whalen
|
| |
$450,000
|
| |
100%
|
| |
200%
|
| |
$468,170
|
|
1.
|
Actual bonus pro-rated for Ms. Song’s commencement of employment January 4, 2021.
|
38
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
|
|
| |
Weight
|
| |
Performance Formula Examples
|
| ||||||||||||
|
% of Revenue Target Achieved
|
| |
70%
|
| |
90
|
| |
90
|
| |
100
|
| |
70
|
| |
70
|
|
|
% of EBITDA Target Achieved
|
| |
30%
|
| |
85
|
| |
150
|
| |
120
|
| |
90
|
| |
75
|
|
|
Total % Achieved
|
| |
|
| |
88.5
|
| |
100.0
|
| |
106.0
|
| |
27.0
|
| |
0
|
|
|
Performance measure
|
| |
Weighting
|
| |
Threshold
|
| |
Target
|
| |
Maximum
|
| |
Actual
|
| |
Actual as a
% of Target
|
|
|
Revenue
|
| |
70%
|
| |
$1,998.8M
|
| |
$2,498.5M
|
| |
$4,997.0M
|
| |
$2,603.4M
|
| |
104.2%
|
|
|
EBITDA
|
| |
30%
|
| |
$389.5M
|
| |
$486.9M
|
| |
$973.8M
|
| |
$504.7M
|
| |
103.7%
|
|
|
Cash bonus as a % of target
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
104.0%
|
|
Fiscal Year 2021 Proxy Statement
|
| |
39
|
|
| |
Executive Compensation
|
•
|
Relative position and responsibilities of each NEO,
|
•
|
Previous and expected contributions of each officer to the Company’s success, and
|
•
|
Equity compensation data from peer group companies provided by the independent compensation consultant, including data at the 25th, 50th and 75th percentiles.
|
|
|
| |
2021
Service-
Based Equity
Awards
|
| |
2021
Performance-
Based Equity
Awards
|
| |
2021
Total Target
Value
|
|
|
François Locoh-Donou
|
| |
32,386
|
| |
32,386
|
| |
$8,500,030
|
|
|
Frank Pelzer
|
| |
9,907
|
| |
9,907
|
| |
$2,600,060
|
|
|
Tom Fountain
|
| |
13,717
|
| |
13,717
|
| |
$3,600,033
|
|
|
Chad Whalen
|
| |
11,050
|
| |
11,050
|
| |
$2,900,052
|
|
40
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
•
|
50% of the goal was based on the Company achieving target GAAP revenue for the fiscal year;
|
•
|
25% of the goal was based on the Company achieving target software revenue growth for the fiscal year 2021 over fiscal year 2020 (the “Transformation metric”); and
|
•
|
25% of the 2021 Performance Award goal was based on one-year relative TSR benchmarked against the S&P 500 Index, 25% of the 2020 Performance Award was based on a two-year relative TSR, 25% of the 2019 Performance Award was based on a three-year relative TSR and 25% of the 2018 Performance Award was based on a four-year relative TSR as established by the Committee in fiscal year 2021, 2020, 2019 and 2018, respectively.
|
|
Level
|
| |
Total Revenue
Metric
|
| |
% Payout
|
| |
Transformation
Metric
|
| |
% Payout
|
| |
Relative TSR
Percentile
Rank Metric
|
| |
% Payout
|
|
|
Threshold
|
| |
$1.999B
|
| |
80%
|
| |
+15%
|
| |
50%
|
| |
25th
|
| |
50%
|
|
|
Target
|
| |
$2.499B
|
| |
100%
|
| |
+35%
|
| |
100%
|
| |
50th
|
| |
100%
|
|
|
Maximum
|
| |
$4.997B
|
| |
200%
|
| |
+55%
|
| |
200%
|
| |
>75th
|
| |
200%
|
|
|
2021 Actual
|
| |
$2.603B
|
| |
104.2%
|
| |
+37.2%
|
| |
111.1%
|
| |
76th
|
| |
200%
|
|
Fiscal Year 2021 Proxy Statement
|
| |
41
|
|
| |
Executive Compensation
|
•
|
Total revenue for fiscal year 2021 was $2,603,417,000 resulting in a payout of 104.2% for the revenue goal;
|
•
|
Software revenue for 2021 increased by 37.2% over 2020 for a total payout of 111.1% for the Transformation metric; and
|
•
|
The Company’s TSR for the one-year measurement period was 57.83% placing it in the 76th percentile relative to the companies listed in the S&P 500 resulting in a total payout of 200% for the TSR goal for the 2021 Performance Awards. The Company’s TSR for the two-year measurement period was 48.75% placing it in the 59th percentile relative to the companies listed in the S&P 500 resulting in a total payout of 136.77% for the two-year TSR goal for the 2020 Performance Awards. The Company’s TSR for the three-year measurement period was 4.95% placing it in the 18th percentile relative to the companies listed in the S&P 500 resulting in a total payout of 0% for the three-year TSR goal for the 2019 Performance Awards. The Company’s TSR for the four-year measurement period was 72.12% placing it in the 51st percentile relative to the companies listed in the S&P 500 resulting in a total payout of 103.68% for the four-year TSR goal for the 2018 Performance Awards.
|
•
|
Based on the relative weighting of each goal, the total achievement for the 2021 Performance Award was 129.9%, 114.1% for the 2020 Performance Award, 79.9% for the 2019 Performance Award and 105.8% for the 2018 Performance Award as illustrated below.
|
|
| |
|
42
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
The Committee in
Establishing Executive
Compensation
|
| |
Compensation in Connection with Recruitment
When recruiting for new executives, the Committee works closely with its independent compensation consultant to evaluate market data and trends, the executive’s prior compensation levels, any equity or other compensation value that the executive would be forfeiting by leaving the executive’s prior employer as well as relocation and other costs.
|
Fiscal Year 2021 Proxy Statement
|
| |
43
|
|
| |
Executive Compensation
|
44
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
•
|
ensure it consisted of organizations that are comparable to the Company in terms of complexity of operations and size;
|
•
|
compare each of the executive positions to positions in the peer group as well as positions in a survey prepared for the Company by Radford; and
|
•
|
gather and analyze compensation data from the peer group proxies and published survey sources, and provide an analysis of realized pay trends for the Company’s executive officers.
|
|
| |
Akamai Technologies, Inc.
Arista Networks, Inc.
Autodesk, Inc.
CheckPoint Software Technologies Ltd.
Citrix Systems, Inc.
|
| |
FireEye, Inc.
(now known as Mandiant, Inc.)
Fortinet, Inc.
Juniper Networks, Inc.
NetApp, Inc.
Palo Alto Networks, Inc.
|
| |
ServiceNow, Inc.
Splunk Inc.
VeriSign, Inc.
Workday, Inc.
|
Fiscal Year 2021 Proxy Statement
|
| |
45
|
|
| |
Executive Compensation
|
46
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
|
President and Chief Executive Officer
|
| |
5x base salary
|
|
|
All Other Executive Officers
|
| |
2x base salary
|
|
| |
The accounting and tax treatment of the elements of our compensation program is one factor considered in the design of the program. Although the Committee may consider the impact of tax and accounting consequences when developing and implementing the Company’s executive compensation program, the Committee retains the flexibility to design and administer a compensation program that is in the best interests of the Company and its shareholders.
|
Fiscal Year 2021 Proxy Statement
|
| |
47
|
|
| |
Executive Compensation
|
| |
After an extensive review process and in consultation with Willis Towers Watson and outside legal counsel, the Company entered into change-of-control agreements with each of the executive officers (the “Change of Control Agreement”) (See “Potential Payments Upon Termination or Change of Control”). The Committee recognizes that the threat or possibility of an acquisition by another company or some other change of control event can be a distraction and believes that it is in the best interests of the Company and its shareholders to ensure that the Company will have the continued full attention and dedication of the NEOs notwithstanding the possibility, threat or occurrence of such an event. See the “2021 Potential Payments Upon Termination or Change of Control Table” for additional information regarding the potential payments and benefits that each NEO could receive under the change-of-control agreements. The change-of-control agreements feature a “double trigger” in that the executive officer will not receive the severance amount unless their employment is terminated under certain circumstance within two years after the change of control event. The RSU grant agreements issued to our NEOs provide that upon certain changes of control of the Company the vesting of outstanding and unvested RSUs will accelerate and the RSUs will become fully vested. We believe that the change-of-control provisions provide an additional tool for attracting and retaining key executive officers.
|
48
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
| |
The following table sets forth information concerning compensation for services rendered to us by (a) our Chief Executive Officer in fiscal year 2021, (b) our Chief Financial Officer (the “CFO”) and (c) our three other most highly compensated executive officers who were serving as our executive officers at the end of fiscal year 2021. These executive officers are collectively hereinafter referred to as the “Named Executive Officers” or “NEOs”.
|
|
Name and Principal Position
|
| |
Year
|
| |
Salary
($)
|
| |
Bonus
($)
|
| |
Stock Awards
($)(3)
|
| |
Non-Equity
Incentive Plan
Compensation
($)(4)
|
| |
All Other
Compensation
($)(5)
|
| |
Total
($)(6)
|
|
|
François Locoh-Donou
President and Chief Executive Officer
|
| |
2021
|
| |
875,000
|
| |
—
|
| |
9,406,895
|
| |
1,183,431
|
| |
4,400
|
| |
11,469,726
|
|
|
2020
|
| |
875,000
|
| |
—
|
| |
8,911,165
|
| |
1,088,670
|
| |
4,400
|
| |
10,879,235
|
| |||
|
2019
|
| |
850,000
|
| |
—
|
| |
7,534,613
|
| |
1,080,044
|
| |
8,800
|
| |
9,473,457
|
| |||
|
Frank Pelzer
Executive VP and Chief
Financial Officer
|
| |
2021
|
| |
510,000
|
| |
—
|
| |
2,612,746
|
| |
477,534
|
| |
5,420
|
| |
3,605,700
|
|
|
2020
|
| |
510,000
|
| |
—
|
| |
2,320,436
|
| |
439,296
|
| |
4,400
|
| |
3,274,131
|
| |||
|
2019
|
| |
500,000
|
| |
—
|
| |
1,946,431
|
| |
439,837
|
| |
4,400
|
| |
2,890,668
|
| |||
|
Tom Fountain
Executive VP of Global
Services and Chief Strategy Officer
|
| |
2021
|
| |
546,000
|
| |
—
|
| |
3,465,578
|
| |
568,047
|
| |
3,295
|
| |
4,582,921
|
|
|
2020
|
| |
528,273
|
| |
—
|
| |
2,509,645
|
| |
505,654
|
| |
4,400
|
| |
3,547,973
|
| |||
|
2019
|
| |
500,000
|
| |
—
|
| |
2,180,224
|
| |
488,707
|
| |
4,400
|
| |
3,173,331
|
| |||
|
Haiyan Song(1)
Executive VP and General
Manager, Security and
Distributed Cloud
|
| |
2021
|
| |
338,009
|
| |
400,000(2)
|
| |
3,500,135
|
| |
329,002
|
| |
5,165
|
| |
4,572,311
|
|
|
Chad Whalen
Executive VP of Worldwide Sales
|
| |
2021
|
| |
450,000
|
| |
—
|
| |
2,865,121
|
| |
468,170
|
| |
5,420
|
| |
3, 788,711
|
|
|
2020
|
| |
450,000
|
| |
—
|
| |
2,399,849
|
| |
430,683
|
| |
4,400
|
| |
3,284,931
|
|
1.
|
Ms. Song joined the Company on January 4, 2021. Her salary and Non-Equity Incentive Plan Compensation amounts reflect pro-rata payments for the period of January 4, 2021 through September 30, 2021. Ms. Song’s Stock Awards amount reflects the full value of her new-hire award.
|
2.
|
Ms. Song received a one-time signing bonus as part of her employment offer in the amount of $400,000 which she must repay if she resigns from the Company within 24 months of her employment.
|
3.
|
This column represents the aggregate grant date fair value of RSUs treated as granted to Named Executive Officers in the applicable year computed in accordance with Accounting Standards Codification Topic 718, Stock Compensation (ASC Topic 718) and determined as of the grant date under ASC Topic 718. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information, please refer to note 1 “Summary of Significant Accounting Policies — Stock-based Compensation” and note 11 “Stock-based Compensation” included in our financial statements in our Annual Report to Shareholders on Form 10-K for the fiscal year ended September 30, 2021. Additional information about the RSUs including maximum opportunity appears in the Compensation Discussion and Analysis and in the Grants of Plan-Based Awards table and related narrative.
|
4.
|
This column represents the total cash incentive bonus paid to the Named Executive Officers for fiscal year 2021 under the Incentive Plan. For additional information, see the discussion of the cash incentive bonus set forth in the Compensation Discussion and Analysis and footnote (2) of the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
5.
|
Items in the “All Other Compensation” column for fiscal year 2021 include $4,400 in Company contributions to the 401(k) plan for Messrs. Locoh-Donou, Pelzer, and Whalen and for Ms. Song, and $2,275 in Company contributions to the 401(k) plan for Mr. Fountain. This also includes an annual communications stipend in the amount of $1,020 for Messrs. Pelzer, Fountain and Whalen, and a pro-rated amount of $765 for Ms. Song.
|
Fiscal Year 2021 Proxy Statement
|
| |
49
|
|
| |
Executive Compensation
|
6.
|
The Company did not provide any options for the applicable fiscal years and does not have a pension or nonqualified deferred compensation plan.
|
|
|
| |
|
| |
|
| |
Estimated Possible
Payouts Under Non-equity
Incentive Plan Awards(2)
|
| |
Estimated Possible
Payouts Under Equity
Incentive Plan Awards(5)
|
| |
All Other
Stock Awards:
Number of
Shares of Stock
or Units
(#)(6)
|
| |
Grant
Date Fair
Value of
Stock
Awards
($)(7)
|
| ||||||||||||
|
Name
|
| |
Grant
Date
|
| |
Approval
Date
|
| |
Threshold
($)
|
| |
Target
($)
|
| |
Maximum
($)
|
| |
Threshold
(#)
|
| |
Target
(#)
|
| |
Maximum
(#)
|
| ||||||
|
François Locoh-Donou
|
| |
11/2/2020(1)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
32,386
|
| |
4,250,015
|
|
|
10/30/2020(1)(3)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
13,907
|
| |
19,481
|
| |
38,963
|
| |
—
|
| |
2,589,846
|
| |||
|
11/2/2020(1)(4)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
9,716
|
| |
16,193
|
| |
32,386
|
| |
—
|
| |
2,567,035
|
| |||
|
|
| |
|
| |
|
| |
910,000
|
| |
1,137,500
|
| |
2,275,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Frank Pelzer
|
| |
11/2/2020(1)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
9,907
|
| |
1,300,096
|
|
|
|
| |
10/30/2020(1)(3)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
2,779
|
| |
3,970
|
| |
7,940
|
| |
—
|
| |
527,739
|
|
|
|
| |
11/2/2020(1)(4)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
2,972
|
| |
4,954
|
| |
9,907
|
| |
—
|
| |
784,912
|
|
|
|
| |
|
| |
|
| |
367,200
|
| |
459,000
|
| |
918,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Tom Fountain
|
| |
11/2/2020(1)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
13,717
|
| |
1,800,082
|
|
|
|
| |
10/30/2020(1)(3)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
3,045
|
| |
4,350
|
| |
8,701
|
| |
—
|
| |
578,322
|
|
|
|
| |
11/2/2020(1)(4)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
4,115
|
| |
6,859
|
| |
13,717
|
| |
—
|
| |
1,087,174
|
|
|
|
| |
|
| |
|
| |
436,800
|
| |
546,000
|
| |
1,092,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Haiyan Song
|
| |
2/1/2021(1)
|
| |
1/29/2021
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
17,826
|
| |
3,500,135
|
|
|
|
| |
|
| |
|
| |
243,366
|
| |
304,208
|
| |
608,416
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
|
Chad Whalen
|
| |
11/2/2020(1)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
11,050
|
| |
1,450,092
|
|
|
|
| |
10/30/2020(1)(3)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
2,839
|
| |
4,055
|
| |
8,111
|
| |
—
|
| |
539,105
|
|
|
|
| |
11/2/2020(1)(4)
|
| |
10/30/2020
|
| |
—
|
| |
—
|
| |
—
|
| |
3,315
|
| |
5,525
|
| |
11,050
|
| |
—
|
| |
875,925
|
|
|
|
| |
|
| |
|
| |
360,000
|
| |
450,000
|
| |
900,000
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
| |
—
|
|
1.
|
RSUs granted under the 2014 Incentive Plan. No options were granted to the NEOs in fiscal year 2021.
|
2.
|
Represents the cash incentive bonus opportunity for fiscal year 2021 under the Incentive Plan. The cash incentive bonus opportunity is a percentage of base salary for the fiscal year and for Ms. Song reflects a partial year incentive since she joined the Company on January 4, 2021.
|
50
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
3.
|
Represents (i) the second year performance portion of the Revenue metric and Transformation metric of the annual equity awards issued to all incumbent NEOs in fiscal 2020 (12.5% of the total annual equity awards issued in fiscal year 2020)(the “2020 Performance Award”), (ii) third year performance portion of the Revenue and Transformation metric of the annual equity awards issued to all incumbent NEOs in fiscal 2019 (12.5% of the total annual equity awards issued in fiscal year 2019)(the “2019 Performance Award”), (iii) fourth year performance portion of the Revenue metric and Transformation metric of the annual equity award issued to Mr. Locoh-Donou in fiscal 2018 (9.375% of the total annual equity award issued in fiscal year 2018)(the “2018 Performance Award”) and (iv) the last two quarters of the fourth year performance portion of the equity award issued to Mr. Locoh-Donou on May 1, 2017 (6.25% of the total equity award issued in fiscal 2017) (the “Locoh-Donou CEO Performance Award”). Under ASC Topic 718, these performance awards are treated as grants in fiscal year 2021 as the applicable performance targets were set in fiscal year 2021. The closing price of the Common Stock on the grant date of October 30, 2020 was $132.94.
|
4.
|
The performance-based annual equity awards issued to each NEO in fiscal year 2021 vest annually over three years, until such portion of the grant is fully vested on November 1, 2023. The Estimated Possible Payouts Under Equity Incentive Plan Awards is set forth for the first year performance portion of the Revenue metric (8.333% of the total annual equity awards issued in fiscal year 2021), first year performance portion of the Transformation metric (4.166% of the total annual equity awards issued in fiscal year 2021) and all three years performance portion of the TSR metric (12.5% of the total annual equity awards issued in fiscal year 2021) for the annual equity awards issued in fiscal year 2021 (25% of the total annual equity awards issued in fiscal year 2021) (the “2021 Performance Award”). The closing price of the Common Stock on the grant date of November 2, 2020 was $131.23.
|
5.
|
The Locoh-Donou CEO Performance Award is subject to the quarterly revenue and EBITDA goals set by the Board of Directors for the applicable periods in fiscal year 2021. 70% of the Locoh-Donou CEO Performance Award is based on achieving at least 80% of the revenue goal and the other 30% is based on achieving at least 80% of the EBITDA goal. The Locoh-Donou CEO Performance Award, if any, is paid on a quarterly basis linearly above 80% of the targeted goals with a maximum possible payout capped at 200%. Additional details regarding the equity incentive plan awards is set forth in the Compensation Discussion and Analysis.
|
6.
|
Represents the service-based 50% of the annual equity awards issued to each of Messrs. Locoh-Donou, Pelzer, Fountain and Whalen in fiscal year 2021, which vest in equal quarterly increments over three years, until such portion of the grant is fully vested on November 1, 2023. Ms. Song’s new-hire equity award vests 25% one year from the date of grant with the remaining 75% vesting in equal quarterly increments thereafter until such grant is fully vested on February 1, 2025.
|
7.
|
This column represents the aggregate grant date fair value of the RSUs treated as granted to NEOs in fiscal year 2021, computed in accordance with ASC Topic 718. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information, please refer to note 1 “Summary of Significant Accounting Policies — Stock-based Compensation” and note 11 “Stock-based Compensation” in our financial statements included in our Annual Report to Shareholders on Form 10-K for the fiscal year ended September 30, 2021.
|
Fiscal Year 2021 Proxy Statement
|
| |
51
|
|
| |
Executive Compensation
|
|
|
| |
Stock Awards(1)
|
| |||||||||
|
Name
|
| |
Number of
Shares or Units
of Stock That
Have Not Vested
(#)
|
| |
Market Value of
Shares or Units
of Stock That
Have Not Vested
($)(7)
|
| |
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That
Have Not Vested
(#)
|
| |
Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(7)
|
|
|
François Locoh-Donou
|
| |
39,582(2)
|
| |
7,868,110
|
| |
64,459(8)
|
| |
12,813,160
|
|
|
Frank Pelzer
|
| |
19,488(3)
|
| |
3,873,825
|
| |
18,166(9)
|
| |
3,611,037
|
|
|
Tom Fountain
|
| |
17,692(4)
|
| |
3,516,816
|
| |
22,712(10)
|
| |
4,514,691
|
|
|
Haiyan Song
|
| |
17,826(5)
|
| |
3,543,452
|
| |
—
|
| |
—
|
|
|
Chad Whalen
|
| |
13,601(6)
|
| |
2,703,607
|
| |
19,537(11)
|
| |
3,883,565
|
|
1.
|
No NEO had options outstanding at September 30, 2021.
|
2.
|
Comprised of the following equity awards: (i) 1,426 RSUs which vests in equal quarterly increments through November 1, 2021; (ii) 1,745 RSUs which vests in equal quarterly increments through November 1, 2021; (iii) 12,121 RSUs which vests in equal quarter increments through November 1, 2022; and (iv) 24,290 RSUs from the annual equity award issued in fiscal 2021 as set forth in footnote (6) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table which vests in equal quarterly increments through November 1, 2023.
|
3.
|
Comprised of the following equity awards: (i) 7,767 RSUs which vests 25% on August 1, 2019 and the remaining 75% vests in equal quarterly increments through August 1, 2022; (ii) 582 RSUs which vests in equal quarterly increments through November 1, 2021; (iii) 3,708 RSUs which vests in equal quarterly increments through November 1, 2022; and (iv) 7,431 RSUs from the annual equity award issued in fiscal 2021 as set forth in footnote (6) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table which vests in equal quarterly increments through November 1, 2023.
|
4.
|
Comprised of the following equity awards: (i) 2,759 RSUs which vests 25% on February 1, 2019 and the remaining 75% vests in equal quarterly increments through February 1, 2022; (ii) 652 RSUs which vests in equal quarterly increments through November 1, 2021; (iii) 3,993 RSUs which vests in equal quarterly increments through November 1, 2022; and (iv) 10,288 RSUs from the annual equity award issued in fiscal 2021 as set forth in footnote (6) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table which vests in equal quarterly increments through November 1, 2023.
|
5.
|
Represents a new-hire award issued in fiscal year 2021 to Ms. Song which vests 25% on February 1, 2022 and the remaining 75% vesting in equal quarterly increments through February 1, 2025.
|
6.
|
Comprised of the following equity awards: (i) 880 RSUs which vests in equal annual increments through August 1, 2022; (ii) 582 RSUs which vests in equal quarterly increments through November 1, 2021; (iii) 3,851 RSUs which vests in equal quarterly increments through November 1, 2022; and (iv) 8,288 RSUs from the annual equity award issued in fiscal 2021 as set forth in footnote (6) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table which vests in equal quarterly increments through November 1, 2023.
|
7.
|
Calculated by multiplying the number of unvested RSUs held by the NEO by the closing price of the Common Stock ($198.78) on September 30, 2021.
|
8.
|
Comprised of the following equity awards: (i) 5,700 RSUs from the annual equity award issued in fiscal year 2018 which vests in equal annual installments through November 1, 2021; (ii) 6,980 RSUs from the annual equity award issued in fiscal year 2019 which vests in equal annual installments through November 1, 2021, (iii) 19,393 RSUs from the annual equity award issued in fiscal year 2020 which vests in equal annual installments through November 1, 2022 and (iv) 32,386 RSUs from the annual equity award issued in fiscal year 2021 which vests in equal annual installments through November 1, 2023, subject to the Company achieving performance criteria and assuming target payout. The RSUs from the annual equity awards issued in fiscal years 2018, 2019, 2020 and 2021 for which the performance criteria have not been established as of September 30, 2021 have been treated as outstanding at target for purposes of this Table but are not yet treated as granted under ASC Topic 718.
|
52
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
9.
|
Comprised of the following equity awards: (i) 2,326 RSUs from the annual equity award issued in fiscal year 2019 which vests in equal annual installments through November 1, 2021, (ii) 5,933 RSUs from the annual equity award issued in fiscal year 2020 which vests in equal annual installments through November 1, 2022 and (iii) 9,907 RSUs from the annual equity award issued in fiscal year 2021 which vests in equal annual installments through November 1, 2023, subject to the Company achieving performance criteria and assuming target payout. The RSUs from the annual equity awards issued in fiscal years 2019, 2020 and 2021 for which the performance criteria have not been established as of September 30, 2021 have been treated as outstanding at target for purposes of this Table but are not yet treated as granted under ASC Topic 718.
|
10.
|
Comprised of the following equity awards: (i) 2,606 RSUs from the annual equity award issued in fiscal year 2019 which vests in equal annual installments through November 1, 2021, (ii) 6,389 RSUs from the annual equity award issued in fiscal year 2020 which vests in equal annual installments through November 1, 2022 and (iii) 13,717 RSUs from the annual equity award issued in fiscal year 2021 which vests in equal annual installments through November 1, 2023, subject to the Company achieving performance criteria and assuming target payout. The RSUs from the annual equity awards issued in fiscal years 2019, 2020 and 2021 for which the performance criteria have not been established as of September 30, 2021 have been treated as outstanding at target for purposes of this Table but are not yet treated as granted under ASC Topic 718.
|
11.
|
Comprised of the following equity awards: (i) 2,326 RSUs from the annual equity award issued in fiscal year 2019 which vests in equal annual installments through November 1, 2021, (ii) 6,161 RSUs from the annual equity award issued in fiscal year 2020 which vests in equal annual installments through November 1, 2022 and (iii) 11,050 RSUs from the annual equity award issued in fiscal year 2021 which vests in equal annual installments through November 1, 2023, subject to the Company achieving performance criteria and assuming target payout. The RSUs from the annual equity awards issued in fiscal years 2019, 2020 and 2021 for which the performance criteria have not been established as of September 30, 2021 have been treated as outstanding at target for purposes of this Table but are not yet treated as granted under ASC Topic 718.
|
|
|
| |
Stock Awards(1)
|
| |||
|
Name
|
| |
Number of Shares
Acquired on Vesting
(#)
|
| |
Value Realized
on Vesting
($)(2)
|
|
|
François Locoh-Donou
|
| |
59,554
|
| |
$9,884,741
|
|
|
Frank Pelzer
|
| |
20,072
|
| |
$3,448,871
|
|
|
Tom Fountain
|
| |
19,707
|
| |
$3,377,697
|
|
|
Haiyan Song
|
| |
—
|
| |
—
|
|
|
Chad Whalen
|
| |
14,115
|
| |
$2,388,194
|
|
1.
|
There were no option exercises in fiscal year 2021.
|
2.
|
Amounts reflect the closing price of the Common Stock on the day the stock award vested, multiplied by the number of shares.
|
Fiscal Year 2021 Proxy Statement
|
| |
53
|
|
| |
Executive Compensation
|
| |
Each of our Named Executive Officers is an “at-will” employee, and his employment may be terminated at any time with or without cause.
|
|
|
The Company has entered into change of control agreements with Messrs. Locoh-Donou, Pelzer, Fountain and Whalen and Ms. Song. These change of control agreements are “double trigger” agreements which provide a protection period of two years after a change of control during which the Named Executive Officer’s annual base salary and annual target incentive bonus cannot be reduced. In addition, each change of control agreement entitles the executive officer to severance benefits if his employment with the Company is terminated within two years after a change of control of the Company, unless such termination is (i) due to death or total disability, (ii) by the Company for cause, or (iii) by the executive officer without good reason. The amount of severance payable to Mr. Locoh-Donou will be equal to two times, and in the case of the other Named Executive Officers one times the sum of the executive officer’s (a) annual salary at the highest rate in effect in the 12 months preceding the change of control date and (b) highest annual target incentive bonus in effect in the 12 months preceding the change of control date. In addition, each Named Executive Officer will be entitled to a pro-rata annual bonus for the year in which his termination of employment occurs, and payment by the Company of premiums for health insurance benefit continuation for one year after termination of the Named Executive Officer’s employment, outplacement services for a period of up to 12 months with a cost to the Company of up to $25,000, and vesting of equity awards. The change of control agreements do not include a tax gross up payment provision. If payments under the change of control agreements or otherwise would subject a Named Executive Officer to the IRS parachute excise tax, the Company would then either (i) reduce the payments to the largest portion of the payments that would result in no portion of the payments being subject to the parachute excise tax or (ii) pay the full amount of such payments, whichever is better on an after-tax basis for the Named Executive Officer.
|
54
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
|
Name
|
| |
Benefit
|
| |
Termination
After Change
of Control ($)(4)
|
|
|
François Locoh-Donou
|
| |
Severance Amount(2)
|
| |
4,025,000
|
|
|
Accelerated Vesting of RSUs(3)
|
| |
20,681,270
|
| |||
|
Benefit coverage continuation
|
| |
28,239
|
| |||
|
Outplacement services
|
| |
25,000
|
| |||
|
Total
|
| |
24,759,509
|
| |||
|
Frank Pelzer
|
| |
Severance Amount(2)
|
| |
969,000
|
|
|
Accelerated Vesting of RSUs(3)
|
| |
7,484,862
|
| |||
|
Benefit coverage continuation
|
| |
28,239
|
| |||
|
Outplacement services
|
| |
25,000
|
| |||
|
Total
|
| |
8,507,101
|
| |||
|
Tom Fountain
|
| |
Severance Amount(2)
|
| |
1,092,000
|
|
|
Accelerated Vesting of RSUs(3)
|
| |
8,031,507
|
| |||
|
Benefit coverage continuation
|
| |
28,239
|
| |||
|
Outplacement services
|
| |
25,000
|
| |||
|
Total
|
| |
9,176,746
|
| |||
|
Haiyan Song
|
| |
Severance Amount(2)
|
| |
902,500
|
|
|
Accelerated Vesting of RSUs(3)
|
| |
3,543,453
|
| |||
|
Benefit coverage continuation
|
| |
28,239
|
| |||
|
Outplacement services
|
| |
25,000
|
| |||
|
Total
|
| |
4,499,192
|
| |||
|
Chad Whalen
|
| |
Severance Amount(2)
|
| |
900,000
|
|
|
Accelerated Vesting of RSUs(3)
|
| |
6,587,171
|
| |||
|
Benefit coverage continuation
|
| |
28,239
|
| |||
|
Outplacement services
|
| |
25,000
|
| |||
|
Total
|
| |
7,540,410
|
|
1.
|
Assumes termination and change in control occurred on September 30, 2021 . Because termination of employment is assumed to have occurred on September 30, 2021 (the end of the fiscal year), the prorated bonus otherwise payable upon a termination without cause or for good reason is not reflected in the table above.
|
2.
|
The Severance Amount is the product of (a) annual salary and annual target incentive bonus, times (b) two for Mr. Locoh-Donou and one for the other Named Executive Officers.
|
3.
|
Calculated by multiplying the number of unvested RSUs (assuming performance-based RSUs at target) held by the NEO by the closing price of the Common Stock ($198.78) on September 30, 2021.
|
4.
|
Amounts in the column “Termination after Change in Control” reflect amounts payable to the NEOs if terminated within two years after a change of control. Note that the acceleration of RSUs occurs upon a Change of Control regardless of whether employment is terminated.
|
Fiscal Year 2021 Proxy Statement
|
| |
55
|
|
| |
Executive Compensation
|
| |
As provided for by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted a rule requiring companies to disclose the ratio of the median employee’s annual total compensation relative to the annual total compensation of the CEO. As disclosed in the “Summary Compensation Table” above, the fiscal 2021 annual total compensation for our CEO was $11,469,726. We estimate that the fiscal 2021 annual total compensation for the median of all employees, excluding our CEO, was $206,330. The resulting ratio of our CEO’s annual total compensation to that of the median of all employees, excluding our CEO, for fiscal 2021 is 56 to 1.
|
| |
The Audit & Risk Oversight Committee (the Audit Committee) consists of directors, each of whom, in the judgment of the Board of Directors, is an “independent director” as defined in the Nasdaq Listing Rules. The Audit Committee acts pursuant to a written charter that has been adopted by the Board of Directors. The Audit Committee charter is available on the “Company — Investor Relations — ESG—Governance Documents” section of the Company’s website, located at https://s23.q4cdn.com/171843108/files/doc_governance/2021/F5-Audit-and-Risk-Oversight-
Committee-Charter-Final-October-2021.pdf.
|
56
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Executive Compensation
|
|
| |
Respectfully submitted,
|
|
| |
Elizabeth L. Buse
Michael L. Dreyer
Peter S. Klein, Chair
Michael F. Montoya
Marie E. Myers
Sripada Shivananda
|
Fiscal Year 2021 Proxy Statement
|
| |
57
|
|
| |
Executive Compensation
|
houseCoopers LLP
|
| |
The following is a summary of the fees billed to the Company by PricewaterhouseCoopers LLP for professional services rendered for the fiscal years ended September 30, 2021 and 2020:
|
|
|
| |
Years Ended September 30,
|
| |||
|
Fee Category
|
| |
2021
|
| |
2020
|
|
|
Audit Fees
|
| |
$4,222,098
|
| |
$4,499,060
|
|
|
Audit-Related Fees
|
| |
$25,000
|
| |
$5,000
|
|
|
Tax Fees
|
| |
$179,000
|
| |
$165,026
|
|
|
All Other Fees
|
| |
$10,490
|
| |
$6,390
|
|
|
Total Fees
|
| |
$4,436,588
|
| |
$4,675,476
|
|
Pre-Approval
Procedures
|
| |
The Audit Committee meets with our independent registered public accounting firm to approve the annual scope of accounting services to be performed and the related fee estimates. The Audit Committee also meets with our independent registered public accounting firm, on a quarterly basis, following completion of their quarterly reviews and annual audit and prior to our earnings announcements, to review the results of their work. During the course of the year, the Chairman of the Audit Committee has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. The Chairman of the Audit Committee reports any interim pre-approvals at the following quarterly meeting. At each of the meetings, management and our independent registered public accounting firm update the Audit Committee with material changes to any service engagement and related fee estimates as compared to amounts previously approved. During fiscal years 2020 and 2021, all services performed by PricewaterhouseCoopers LLP for the Company were pre-approved by the Audit Committee in accordance with the foregoing procedures.
|
Determination
|
| |
The Audit Committee considered whether the provision of non-audit services is compatible with the principal accountants’ independence and concluded that the provision of non-audit services is and has been compatible with maintaining the independence of the Company’s external auditors.
|
58
|
| |
Fiscal Year 2021 Proxy Statement
|
|
Name and Address(1)
|
| |
Number of
Shares of
Common Stock
Beneficially
Owned(2)
|
| |
Percent of
Common Stock
Outstanding(2)
|
|
|
BlackRock, Inc.(3)
55 East 52nd Street, New York, New York 10055
|
| |
4,733,245
|
| |
7.79%
|
|
|
The Vanguard Group(4)
100 Vanguard Blvd., Malvern, PA 19355
|
| |
6,585,366
|
| |
10.84%
|
|
|
Wellington Management Group LLP(5)
280 Congress Street Boston, MA 02210
|
| |
6,411,044
|
| |
10.56%
|
|
|
François Locoh-Donou(6)
|
| |
99,201
|
| |
*
|
|
|
Frank Pelzer(7)
|
| |
19,682
|
| |
*
|
|
|
Tom Fountain(8)
|
| |
13,823
|
| |
*
|
|
|
Haiyan Song(9)
|
| |
4,901
|
| |
*
|
|
|
Chad Whalen(10)
|
| |
9,715
|
| |
*
|
|
|
Sandra E. Bergeron
|
| |
4,664
|
| |
*
|
|
|
Elizabeth L. Buse
|
| |
880
|
| |
*
|
|
|
Michael L. Dreyer
|
| |
5,543
|
| |
*
|
|
|
Alan J. Higginson
|
| |
11,383
|
| |
*
|
|
|
Peter S. Klein
|
| |
9,900
|
| |
*
|
|
|
Nikhil Mehta
|
| |
4,476
|
| |
*
|
|
|
Michael F. Montoya
|
| |
0
|
| |
|
|
|
Marie E. Myers
|
| |
2,543
|
| |
*
|
|
|
James M. Phillips
|
| |
0
|
| |
|
|
|
Sripada Shivananda
|
| |
1,848
|
| |
*
|
|
|
All directors and executive officers as a group (20 people)(11)
|
| |
|
| |
*
|
|
*
|
less than 1%.
|
1.
|
Unless otherwise indicated, the address of each of the named individuals is c/o F5, 801 Fifth Avenue, Seattle, Washington 98104.
|
Fiscal Year 2021 Proxy Statement
|
| |
59
|
|
| |
Security Ownership of Certain Beneficial Owners and Management
|
2.
|
Beneficial ownership of shares is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power, or of which a person has the right to acquire beneficial ownership within 60 days after January 5, 2022. Except as otherwise noted, to the Company’s knowledge each person or entity has sole voting and investment power with respect to the shares shown.
|
3.
|
As reported by BlackRock, Inc. in a Schedule 13G/A filed on January 29, 2021.
|
4.
|
As reported by The Vanguard Group in a Schedule 13G/A filed on February 10, 2021.
|
5.
|
As reported by Wellington Management Group LLP in a Schedule 13G/A filed on November 10, 2021.
|
6.
|
Includes 6,672 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
7.
|
Includes 3,993 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
8.
|
Comprised of 3,999 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
9.
|
Includes 4,901 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
10.
|
Comprised of 2,330 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
11.
|
Directors and current executive officers as of January 5, 2022. Includes 35,731 shares of Common Stock underlying RSUs granted under the 2014 Incentive Plan that are issuable within 60 days of January 5, 2022. This does not include the shares of Common Stock underlying RSUs which are subject to future performance-based vesting as set forth in footnotes (3) and (4) to the Grants of Plan-Based Awards in Fiscal Year 2021 Table.
|
| |
Section 16(a) of the Exchange Act requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the SEC reports of ownership of Company securities and changes in reported ownership. Based on a review of reports filed with the SEC, or written representations from reporting persons that all reportable transaction were reported, the Company believes that during 2021 fiscal year the Company's officers, directors and greater than ten percent owners timely filed all reports they were required to file under Section 16(a), except that Mr. Dreyer filed one report late with respect to a sales transaction and Mr. Pelzer due to a Company administrative error filed one report one day late with respect to a sales transaction.
|
60
|
| |
Fiscal Year 2021 Proxy Statement
|
Majority Vote Standard for Director Election
|
| |
The Company’s Bylaws require that in an uncontested election each director will be elected by the vote of the majority of the votes cast. A majority of votes cast means that the number of shares cast “FOR” a director’s election exceeds the number of votes cast “AGAINST” that director. A share whose ballot is marked as withheld, which is otherwise present at the meeting but for which there is an abstention, or to which a shareholder gives no authority or direction shall not be considered a vote cast. In a contested election, the directors will be elected by the vote of a plurality of the votes cast. A contested election is one in which the number of nominees exceeds the number of directors to be elected.
|
|
|
| |
The Board of Directors Unanimously Recommends a Vote “FOR” the Election of All of the Nominees.
|
|
Fiscal Year 2021 Proxy Statement
|
| |
61
|
Proposal two:
|
62
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
|
|
| |
Current Status Reflecting
Share Repurchase
Program
|
| |
Excluding Impact of
Share Repurchase
Program
|
|
|
Annual Run Rate
|
| |
2.22%
|
| |
2.18%
|
|
|
Shareholder Dilution
|
| |
5.77%
|
| |
5.40%
|
|
|
Shareholder Dilution (including additional 1,200,000 shares for Amended Plan)
|
| |
7.49%
|
| |
7.02%
|
|
| |
A copy of the Amended Plan is attached to this Proxy Statement as Appendix A and is incorporated herein by reference. The following description is a summary and does not purport to be a complete description and is qualified in its entirety by reference to the text of the Amended Plan set forth in Appendix A. See Appendix A for more detailed information.
|
Fiscal Year 2021 Proxy Statement
|
| |
63
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
64
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
Fiscal Year 2021 Proxy Statement
|
| |
65
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
|
Name and Position/Group
|
| |
Number of
RSUs Granted
|
| |
Number of
Options Granted
|
|
|
François Locoh-Donou
President and Chief Executive Officer
|
| |
355,680
|
| |
0
|
|
|
Frank Pelzer
Executive VP and Chief Financial Officer
|
| |
94,426
|
| |
0
|
|
|
Tom Fountain
Executive VP of Global Services and Chief Strategy Officer
|
| |
101,012
|
| |
0
|
|
|
Haiyan Song
Executive VP and General Manager, Security and Distributed Cloud
|
| |
28,518
|
| |
0
|
|
|
Chad Whalen Executive VP of Worldwide Sales
|
| |
77,755
|
| |
0
|
|
|
Executive Group
|
| |
3,711,613
|
| |
0
|
|
|
Non-Executive Director Group
|
| |
415,082
|
| |
75,000
|
|
|
Non-Executive Officer Employee Group
|
| |
19,116,044
|
| |
0
|
|
66
|
| |
Fiscal Year 2021 Proxy Statement
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
| |
THE FOLLOWING SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES IS BASED UPON EXISTING STATUTES, REGULATIONS AND INTERPRETATIONS THEREOF. THE APPLICABLE RULES ARE COMPLEX, AND INCOME TAX CONSEQUENCES MAY VARY DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF EACH PLAN PARTICIPANT. THIS PROXY STATEMENT DESCRIBES FEDERAL INCOME TAX CONSEQUENCES OF GENERAL APPLICABILITY, BUT DOES NOT PURPORT TO DESCRIBE PARTICULAR CONSEQUENCES TO EACH INDIVIDUAL PLAN PARTICIPANT, OR FOREIGN, STATE OR LOCAL INCOME TAX CONSEQUENCES, WHICH MAY DIFFER FROM THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
|
Fiscal Year 2021 Proxy Statement
|
| |
67
|
|
| |
Approval of the Incentive Plan As Amended and Restated
|
| |
The following table provides information as of September 30, 2021 with respect to the shares of Common Stock that may be issued under the Company’s existing equity compensation plans.
|
|
|
| |
Column A
|
| |
Column B
|
| |
Column C
|
|
|
Plan Category
|
| |
Number of
securities to
be issued
upon exercise
of outstanding
options and rights
|
| |
Weighted-
average
exercise price
of outstanding
options and rights
|
| |
Number of
securities
remaining
available for
future issuance
under equity
compensation plans
(total securities
authorized
but unissued
under the plans,
less Column A)
|
|
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Equity compensation plans approved by security holders(1)
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2,168,163(2)
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$30.84(3)
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3,103,108(4)
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Equity compensation plans not approved by security holders(5)
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403,107(6)
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$3.95
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17,944
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Total(7)
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2,571,270
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$30.83
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3,121,052
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1.
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Consists of the F5 Networks, Inc. 2014 Incentive Plan, the F5 Networks, Inc. Assumed Nginx Inc. 2011 Share Plan (the “Assumed Nginx Plan”), the F5 Networks, Inc. Assumed Shape 2011 Stock Plan (the “Assumed Shape Plan”), and the F5 Networks, Inc. Assumed Volterra 2017 Stock Plan (the “Assumed Volterra Plan”). The Company terminated the Assumed Nginx Plan effective October 31, 2019 and no additional shares may be issued from the Assumed Nginx Plan. The Company terminated the Assumed Shape Plan effective December 28, 2020 and no additional shares may be issued from the Assumed Shape Plan. The Company terminated the Assumed Volterra Plan effective October 29, 2021 and no additional shares may be issued from the Assumed Volterra Plan.
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2.
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Includes 68,095 shares issuable upon exercise of outstanding options and 9,242 shares issuable upon vesting of outstanding RSUs granted under the Assumed Nginx Plan, 140,033 shares issuable upon exercise of outstanding options and 3,755 shares issuable upon vesting of outstanding RSUs granted under the Assumed Shape Plan, 116,447 shares issuable upon exercise of outstanding options and 34,863 shares issuable upon vesting of outstanding RSUs granted under the Assumed Volterra Plan, and 1,795,728 shares issuable upon vesting of outstanding RSUs granted under the 2014 Incentive Plan. Also included are performance-based RSU awards reported as outstanding at maximum achievement — 200% of the target award.
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3.
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The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding RSUs, including performance-based RSU awards, which have no exercise price.
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4.
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Includes 1,356,896 shares reserved for issuance under the 2011 Employee Stock Purchase Plan (ESPP Plan).
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5.
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Consists of the F5 Networks, Inc. Assumed Traffix Communication Systems Ltd. 2007 Israeli Employee Share Option Plan (the “Traffix 2007 Plan”), the F5 Networks, Inc. Nginx Acquisition Equity Incentive Plan (the “Nginx Acquisition Plan”), the F5 Networks, Inc. Shape Acquisition Equity Incentive Plan (the “Shape Acquisition Plan”), and the F5 Networks, Inc. Volterra Acquisition Equity Incentive Plan (the “Volterra Acquisition Plan”). The material features of each of these equity compensation plans are set forth in Note 11 in our financial statements, “Summary of Significant Accounting Policies — Stock-based Compensation” included in our Annual Report to Shareholders on Form 10-K for the year ended September 30, 2021. The Company terminated the Traffix 2007 Plan effective January 3, 2014 and no additional shares may be issued from the Traffix 2007 Plan. The Company terminated the Nginx Acquisition Plan effective October 31, 2019 and no additional shares may be issued from the Nginx Acquisition Plan. The Company terminated the Shape Acquisition Plan effective December 28, 2020 and no additional shares may be issued from the Shape Acquisition Plan. The Company terminated the Volterra Acquisition Plan effective October 29, 2021 and no additional shares may be issued from the Volterra Acquisition Plan.
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6.
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Includes 49 shares issuable upon exercise of outstanding options granted under the Traffix 2007 Plan, 71,302 shares issuable upon vesting of outstanding RSUs granted under the Nginx Acquisition Plan, 210,720 shares issuable upon vesting of outstanding RSUs granted under the Shape Acquisition Plan, and 121,036 shares issuable upon vesting of outstanding RSUs granted under the Volterra Acquisition Plan.
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68
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Fiscal Year 2021 Proxy Statement
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Approval of the Incentive Plan As Amended and Restated
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7.
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As of January 5, 2022, for all equity compensation plans, the number of securities to be issued upon exercise of outstanding options and rights totaled 2,892,101, which includes 245,696 shares issuable upon the vesting of outstanding options at a weighted-average exercise price of $32.56 and a weighted-average remaining option term of 7.11 years, and 2,646,405 shares issuable upon vesting of RSUs (assuming outstanding unearned performance-based RSU awards are earned at 200% maximum). As of January 5, 2022, the number of securities remaining available for future issuance under all equity compensation plans totaled 2,025,690, which includes 1,188,298 shares reserved for issuance under the ESPP, 828,230 shares reserved for issuance under the 2014 Incentive Plan (assuming outstanding unearned performance-based RSU awards are earned at 200% maximum), and 9,162 shares reserved for issuance under the F5 Networks, Inc. Threat Stack Acquisition Equity Incentive Plan, adopted in connection with the Company’s acquisition of Threat Stack. The Company terminated the Threat Stack Acquisition Plan effective January 10, 2022 and no additional shares may be issued from the Threat Stack Acquisition Plan.
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The Board of Directors Unanimously Recommends a Vote “FOR” Approval of the Company’s Incentive Plan as Amended and Restated
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Fiscal Year 2021 Proxy Statement
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69
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Proposal three:
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The Board of Directors Unanimously Recommends a Vote “FOR” Ratification of the Selection of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm
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70
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Fiscal Year 2021 Proxy Statement
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•
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As described in detail under the heading “Executive Compensation — Compensation Discussion and Analysis,” beginning at page 30, our executive compensation programs are designed to directly link executive officer compensation to and to reward executive officers for the Company’s financial performance and the creation of shareholder value. We believe that our executive compensation programs have achieved these objectives and the Board of Directors urges shareholders to approve the compensation of our NEOs by voting FOR the resolution set forth above. In deciding how to vote on this proposal, the Board of Directors urges you to consider the following factors:
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Strong Performance
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• Record annual revenue $2.6 billion, up 11% over fiscal year 2020
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• Cash flow from operations of $645 million
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• GAAP net income of $331 million
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• Year-over-year software revenue growth of 37%
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• $500 million returned to shareholders through share repurchase
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• Ten company employees were included in CRN’s 2021 Women of the Channel
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• F5 recognized in the Puget Sound Business Journal’s Top Corporate Philanthropists
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• F5 received the 2021 Microsoft Commercial Marketplace Partner of the Year Award
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• F5 named in the Top 10 in Tech Hardware sector for America’s Most JUST Companies, by JUST Capital
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• F5 captured REVMasters’ Award, Revenue Marketing Team of the Year
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• F5’s Shape Enterprise Defense named as Best AI-based Solution for Cybersecurity, AI Breakthrough Award
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Governance Programs
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• We emphasize pay for performance and align executive compensation with the Company’s business objectives and performance, and the creation of shareholder value.
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• Incentive-based compensation is at risk if certain threshold performance metrics are not achieved.
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•
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Our compensation programs do not encourage excessive or unnecessary risks that could have a material adverse effect on the Company’s value or operating results.
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Fiscal Year 2021 Proxy Statement
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71
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Advisory Vote to Approve Executive Compensation
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•
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We conduct an annual review of our executive compensation programs and use peer and survey group data to evaluate these programs and to ensure that they achieve the desired goals and objectives.
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•
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We have adopted stock ownership and stock holding guidelines for our executive officers to further ensure that the interests of the executive officers are aligned with those of our shareholders.
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•
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Company executives are required to retain the net shares received as the result of the vesting of RSUs granted during fiscal 2022 or thereafter for a minimum period of one year after such vesting which encourages alignment of long-term incentives between executives and shareholders.
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•
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We have a policy which prohibits executive officers from engaging in short sales of the Company’s securities, transactions in puts, calls or other derivative securities on an exchange or in any other organized market, and hedging transactions related to the Company’s securities. In addition, executive officers are prohibited, except under certain limited exceptions, from holding Company securities in a margin account or pledging Company securities as collateral for a loan.
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•
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We believe the revenue and EBITDA targets used for the cash incentive compensation are appropriate measurements as the Company’s ability to deliver consistent and strong financial performance is of crucial importance in maintaining and growing shareholder value, and furthers the shared interests of the Company’s executive officers and shareholders. The targets approved by the Compensation Committee each fiscal year require solid execution by the executive team. While the Compensation Committee believes that revenue and EBITDA targets continue to reflect metrics that drive the creation of shareholder value over time, the Committee also evaluates market conditions for executive compensation, shareholder feedback and the inputs of various proxy advisory services. In response to these various inputs, the Committee made changes to the long-term incentive program commencing with fiscal year 2018. The Committee now differentiates long-term performance-based equity incentive metrics from the short-term cash incentive program. More specifically, the Committee adopted the following long-term performance-based equity incentive metrics:
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•
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annualized total Company revenue to continue the executive focus on revenue growth while incentivizing a longer-term view of that growth;
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•
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year-over-year growth in Company stand-alone software revenues to recognize and reward the Company’s shift to a more software focus; and
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a relative total shareholder return component benchmarked against the S&P 500 to continue to align the compensation of the NEOs with shareholder return.
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•
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We conduct a shareholder advisory vote on executive compensation on an annual basis and meet regularly with shareholders and analysts. The Committee believes that the results of last year’s vote where the proposal met with over 87% shareholder approval represents a high level of approval of the Company’s executive compensation plan.
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The Board of Directors unanimously recommends a vote “FOR” the approval of the compensation of the named executive officers as disclosed in the Compensation Discussion and Analysis, the compensation tables and the related disclosures
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72
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Fiscal Year 2021 Proxy Statement
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Fiscal Year 2021 Proxy Statement
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73
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Other Business
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74
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Fiscal Year 2021 Proxy Statement
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Other Business
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By Order of the Board of Directors
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Scot F. Rogers
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Secretary
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Fiscal Year 2021 Proxy Statement
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75
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Fiscal Year 2021 Proxy Statement
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