Definitive Proxy Statement


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

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

Citrix Systems, Inc.

(Name of Registrant as Specified in Its Charter)

 

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

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LOGO

 

Dear Shareholder:   April 27, 2017

You are cordially invited to attend the 2017 Annual Meeting of Shareholders of Citrix Systems, Inc. to be held on Thursday, June 22, 2017 at 4:00 p.m. Pacific time, at our offices at 4980 Great America Parkway, Santa Clara, California 95054, United States.

At the 2017 Annual Meeting, the agenda includes: (1) the election of nine directors for one-year terms; (2) the approval of the Citrix Amended and Restated 2014 Equity Incentive Plan; (3) the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017; (4) an advisory vote to approve the compensation of our named executive officers; and (5) an advisory vote on the frequency of holding future advisory votes on the compensation of our named executive officers. The Board of Directors unanimously recommends that you vote FOR the election of the director nominees and FOR each of the other matters.

All shareholders are cordially invited to attend the 2017 Annual Meeting in person. We are providing proxy material access to our shareholders via the Internet. Accordingly, you can access proxy materials and vote at www.proxyvote.com . Details regarding the matters to be acted upon at this 2017 Annual Meeting are described in the Notice of Internet Availability of Proxy Materials you received in the mail. Please give the proxy materials your careful attention.

You may vote via the Internet or by telephone by following the instructions on your Notice of Internet Availability and on that website. In order to vote via the Internet or by telephone, you must have the shareholder identification number which is provided in your Notice. If you have requested a proxy card by mail, you may vote by signing, voting and returning that proxy card in the envelope provided. If you attend the 2017 Annual Meeting, you may vote in person even if you have previously returned your proxy card or have voted via the Internet or by telephone. Please review the instructions for each voting option described in the Notice and in this Proxy Statement. Your prompt cooperation will be greatly appreciated.

Very truly yours,

 

LOGO

ANTONIO G. GOMES

Senior Vice President, General

Counsel and Secretary


Table of Contents

Table of Contents

 

 

 

Proxy Highlights

     3  

Part 1 Corporate Governance

     10  

Independence of Members of Our Board

     10  

Board Leadership Structure

     10  

Executive Sessions of Independent Directors

     10  

Executive Succession

     10  

Considerations Governing Director Nominations

     10  

Policy Governing Director Attendance at Annual Meetings of Shareholders

     13  

Code of Ethics

     13  

Risk Oversight

     13  

Compensation-Related Risk Assessment

     14  

Shareholder Outreach and Engagement

     15  

Part 2 Board of Directors

     17  

Our Directors

     17  

Meetings and Meeting Attendance

     22  

Our Board Committees

     22  

Director Compensation

     26  

Part 3 Executive Management

     29  

Our Management

     29  

Part 4 Executive Compensation

     31  

Compensation Discussion and Analysis

     31  

Purpose of Compensation Discussion and Analysis

     31  

2016 Highlights

     31  

Shareholder Engagement

     35  

Objectives and Elements of Our Executive Compensation Programs

     35  

How Executive Pay Decisions Are Made

     38  

Components of Compensation

     42  

Individual Executive Compensation Decisions

     52  

Executive Chairman and President and Chief Executive Officer Compensation

     52  

Other Named Executive Officers Cash Compensation – Base Salary and Variable Cash Compensation

     54  

Other Named Executive Officers Equity – Based Long-term Incentive Compensation

     55  

Other Compensation Policies and Information

     56  

Summary of Executive Compensation

     58  

Grants of Plan-Based Awards

     60  

Outstanding Equity Awards

     62  

Option Exercises and Stock Vested

     64  

Nonqualified Deferred Compensation

     65  

Potential Payments upon Termination or Change in Control

     66  

Report of the Compensation Committee of the Board of Directors

     72  

Compensation Committee Interlocks and Insider Participation

     72  

Related Party Transactions Policies and Procedures and Transactions with Related Persons

     72  

Security Ownership of Certain Beneficial Owners and Management

     73  

Cooperation Agreement with Elliott

     74  

Section 16(a) Beneficial Ownership Reporting Compliance

     75  

Tax Deductibility of Executive Compensation

     75  

Securities Authorized for Issuance under Equity Compensation Plans

     76  

Equity Compensation Plans

     76  

Part 5 Audit Committee Matters

     77  

Report of the Audit Committee

     77  

Fees Paid to Ernst & Young

     78  

Audit Partner Rotation

     78  

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

     78  

Part 6 Proposals to be Voted on at the Meeting

     79  

Proposal 1: Election of Director Nominees

     79  

Proposal 2: Amended and Restated 2014 Equity Incentive Plan

     80  

Proposal 3: Ratification of Appointment of Independent Registered Public Accounting Firm

     90  

Proposal 4: Advisory Vote to Approve the Compensation of Our Named Executive Officers

     91  

Proposal 5: Advisory Vote to Approve the Frequency of Holding Future Advisory Votes on the Compensation of Our Named Executive

     92  

Part 7 Additional Information

     93  

Other Matters

     93  

Shareholder Proposals

     93  

Expenses and Solicitation

     93  

Delivery of Documents to Shareholders Sharing an Address

     93  

Note Regarding Forward-Looking Statements

     94  

Exhibit A Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan

     A-1  

 

  CITRIX SYSTEMS, INC.    |    2017 PROXY STATEMENT


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CITRIX SYSTEMS, INC.

851 West Cypress Creek Road

Fort Lauderdale, Florida 33309

NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS

To Be Held at 4:00 p.m. Pacific Time on Thursday, June 22, 2017

To the Shareholders of Citrix Systems, Inc.:

The 2017 Annual Meeting of Shareholders of Citrix Systems, Inc., a Delaware corporation, will be held on Thursday, June 22, 2017, at 4:00 p.m. Pacific time, at our offices at 4980 Great America Parkway, Santa Clara, California 95054, United States for the following purposes:

 

  1. to elect nine members to the Board of Directors, each to serve for a one-year term and until his or her successor has been duly elected and qualified or until his or her earlier resignation or removal;

 

  2. to approve an amendment and restatement of our 2014 Equity Incentive Plan;

 

  3. to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017;

 

  4. to hold an advisory vote on the compensation of our named executive officers;

 

  5. to hold an advisory vote on the frequency of holding future advisory votes on the compensation of our named executive officers; and

 

  6. to transact such other business as may properly come before the 2017 Annual Meeting or any adjournments or postponements thereof.

The proposal for the election of directors relates solely to the election of nine directors nominated by our Board of Directors and does not include any other matters relating to the election of directors, including, without limitation, the election of directors nominated by any shareholder.

Only shareholders of record at the close of business on April 24, 2017 are entitled to notice of and to vote at the 2017 Annual Meeting and at any adjournment or postponement thereof.

All shareholders are cordially invited to attend the 2017 Annual Meeting in person. To assure your representation at the 2017 Annual Meeting, we urge you to vote via the Internet at www.proxyvote.com or by telephone by following the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail and which instructions are also provided on that website, or, if you have requested a proxy card by mail, by signing, voting and returning your proxy card to Broadridge Financial Solutions, 51 Mercedes Way, Edgewood, New York 11717. For specific instructions on how to vote your shares, please review the instructions for each of these voting options as detailed in your Notice of Internet Availability and in this Proxy Statement. If you attend the 2017 Annual Meeting, you may vote in person even if you have previously returned your proxy card or have voted via the Internet or by telephone.

In addition to their availability at www.proxyvote.com , this Proxy Statement and our Annual Report to Shareholders are available for viewing, printing and downloading at investors.citrix.com/annuals.cfm .

 

    By Order of the Board of Directors,
 

LOGO

 

 

ANTONIO G. GOMES

Senior Vice President, General

Counsel and Secretary

Fort Lauderdale, Florida

April 27, 2017

WHETHER OR NOT YOU PLAN TO ATTEND THE 2017 ANNUAL MEETING, PLEASE PROMPTLY COMPLETE YOUR PROXY AS INDICATED ABOVE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. PLEASE REVIEW THE INSTRUCTIONS FOR EACH OF YOUR VOTING OPTIONS DESCRIBED IN THIS PROXY STATEMENT AND THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS YOU RECEIVED IN THE MAIL.


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CITRIX SYSTEMS, INC.

851 West Cypress Creek Road

Fort Lauderdale, Florida 33309

PROXY STATEMENT

For the 2017 Annual Meeting of Shareholders

To Be Held on June 22, 2017

April 27, 2017

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Citrix Systems, Inc., a Delaware corporation, for use at the 2017 Annual Meeting of Shareholders to be held on Thursday, June 22, 2017 at 4:00 p.m. Pacific time, at our offices at 4980 Great America Parkway, Santa Clara, California 95054, United States, or at any adjournments or postponements thereof. An Annual Report to Shareholders, containing financial statements for the year ended December 31, 2016, and this Proxy Statement are being made available to all shareholders entitled to vote at the 2017 Annual Meeting. This Proxy Statement and the form of proxy were first made available to shareholders on or about April 27, 2017.

The purposes of the 2017 Annual Meeting are to:

 

    elect nine directors for one-year terms;

 

    approve an amendment and restatement of our 2014 Equity Incentive Plan;

 

    ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017;

 

    hold an advisory vote to approve the compensation of our named executive officers; and

 

    hold an advisory vote on the frequency of holding future advisory votes on the compensation of our named executive officers.

Only shareholders of record at the close of business on April 24, 2017, which we refer to as the record date, will be entitled to receive notice of and to vote at the 2017 Annual Meeting. As of that date, 151,182,997 shares of our common stock, $0.001 par value per share, were issued and outstanding. Shareholders are entitled to one vote per share on any proposal presented at the 2017 Annual Meeting. You may vote via the Internet at www.proxyvote.com or by telephone at 1-800-690-6903 by following the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail and which are also provided on that website; or, if you have requested a proxy card by mail, by signing, voting and returning your proxy card. If you attend the 2017 Annual Meeting, you may vote in person even if you have previously voted by phone or via the Internet or returned a proxy card by mail.

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by:

 

  (a) filing with our Secretary, before the taking of the vote at the 2017 Annual Meeting, a written notice of revocation bearing a later date than the proxy;

 

  (b) properly casting a new vote via the Internet or by telephone at any time before the closure of the Internet or telephone voting facilities;

 

  (c) duly completing a later-dated proxy relating to the same shares and delivering it to our Secretary before the taking of the vote at the 2017 Annual Meeting; or

 

  (d) attending the 2017 Annual Meeting and voting in person (although attendance at the 2017 Annual Meeting will not in and of itself constitute a revocation of a proxy).

Any written notice of revocation or subsequent proxy should be sent so as to be delivered to our principal executive offices at Citrix Systems, Inc., 851 West Cypress Creek Road, Fort Lauderdale, Florida 33309, Attention: Secretary, before the taking of the vote at the 2017 Annual Meeting.

 


 

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The representation in person or by proxy of at least a majority of the outstanding shares of our common stock entitled to vote at the 2017 Annual Meeting is necessary to constitute a quorum for the transaction of business. Abstentions and broker non-votes (discussed below) are counted as present or represented for purposes of determining the presence or absence of a quorum for the 2017 Annual Meeting. When a quorum is present at any meeting of shareholders, the holders of a majority of the stock present or represented and voting on a matter shall decide any matter to be voted upon by the shareholders at such meeting, except when a different vote is required by express provision of law, our amended and restated certificate of incorporation (as amended and currently in effect, our “Certificate of Incorporation”) or our bylaws.

For Proposal 1, the election of nine directors, each nominee shall be elected as a director if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. Any director who fails to receive the required number of votes for his or her re-election is required to submit his resignation to the Board of Directors. Our Nominating and Corporate Governance Committee (excluding any director nominee who failed to receive the required number of votes) will promptly consider any such director’s resignation and make a recommendation to the Board of Directors as to whether such resignation should be accepted. The Board of Directors is required to act on the Nominating and Corporate Governance Committee’s recommendation within 90 days of the certification of the shareholder vote for the 2017 Annual Meeting.

For each of Proposal 2 (approval of our Amended and Restated 2014 Equity Incentive Plan), Proposal 3 (the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017), Proposal 4 (the advisory vote to approve the compensation of our named executive officers) and Proposal 5 (the advisory vote on the frequency of holding future votes on the compensation of our named executive officers), an affirmative vote of a majority of the shares present, in person or represented by proxy, and voting on such matter is required for approval.

Broadridge Financial Solutions tabulates the votes. The vote on each matter submitted to shareholders is tabulated separately.

Broker non-votes are shares held by a nominee (such as a bank or brokerage firm) which, although counted for purposes of determining a quorum, are not voted on a particular matter because voting instructions have not been received from the nominees’ clients (who are the beneficial owners of such shares). Under national securities exchange rules, nominees who hold shares of common stock in street name for, and have transmitted our proxy solicitation materials to, their customers but do not receive voting instructions from such customers, are not permitted to vote such customers’ shares on non-routine matters. Proposal 3 is considered a routine matter and nominees therefore have discretionary voting power as to Proposal 3. For non-routine matters, these broker non-votes shall not be counted as votes cast and therefore will have no effect on Proposals 1, 2, 4, and 5. Similarly, abstentions are not counted as votes cast and thus will have no effect on any proposal.

The persons named as attorneys-in-fact in the proxies, Kirill Tatarinov and David J. Henshall, were selected by the Board of Directors and are officers of Citrix. All properly executed proxies submitted in time to be counted at the 2017 Annual Meeting will be voted by such persons at the 2017 Annual Meeting. Where a choice has been specified on the proxy with respect to the foregoing matters, the shares represented by the proxy will be voted in accordance with the specifications. If no such specifications are indicated, such proxies will be voted FOR Proposal 1 (the election of each of the director nominees), FOR Proposal 2 (approval of our Amended and Restated 2014 Equity Incentive Plan), FOR Proposal 3 (the ratification of the appointment of Ernst  & Young LLP as our independent registered public accounting firm for 2017), FOR Proposal 4 (the advisory vote to approve the compensation of our named executive officers) and FOR an annual vote on Proposal 5 (the advisory vote on the frequency of holding future votes on the compensation of our named executive officers).

Aside from the proposals included in this Proxy Statement, our Board of Directors knows of no other matters to be presented at the 2017 Annual Meeting. If any other matter should be presented at the 2017 Annual Meeting upon which a vote may properly be taken, shares represented by all proxies received by the Board of Directors will be voted with respect to such matter in accordance with the judgment of the persons named as attorneys-in-fact in the proxies.

 


 

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Proxy Highlights

 

 

This summary should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016 and the entire Proxy Statement .

 

 

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Our Business

Our mission is to power a world where people, organizations and things are securely connected and accessible. We aim to accomplish this by building the world’s best integrated technology services for secure delivery of apps and data anytime, anywhere.

2016: A TRANSFORMATIONAL YEAR

Over the past few years, we’ve taken actions to refocus our business and position Citrix for further growth. We began our transformation in 2015 by simplifying our strategy and message, rationalizing our product portfolio and restructuring our workforce. Also in 2015, we announced the proposed separation of our GoTo business; and in January 2017, we completed the separation of our GoTo business and its subsequent merger with LogMeIn, Inc.

These actions allowed us to significantly increase focus on our core enterprise strategy of secure and reliable delivery of applications and data, and consequently build a more efficient, scalable and profitable company.

This is evident by the progress we made during 2016 in advancing our vision, strategy and culture, while at the same time expanding profitability and growth in our core business. We believe that these efforts have also increased our pace of innovation, improved our competitive position and put us on a path for sustained, profitable growth in our core business and growth in strategic areas such as Citrix Cloud, where we see an opportunity to accelerate our business. In fact, we are seeing early traction in our cloud transformation.

Additionally, in early 2017, we transitioned Citrix to a unified functional organization bringing our three core business units into one agile structure enabling us to drive even stronger innovation going forward and continue to focus on what is important to our shareholders, customers and partners.

 



 

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Chief Executive Officer Transition and Role of our Executive Chairman

At the end of 2015, our Executive Chairman, Robert M. Calderoni, was also serving as Interim Chief Executive Officer and President, leading the execution of strategic and operational initiatives we were undertaking, while also leading the search for our next President and Chief Executive Officer.

Our CEO search focused on identifying leaders that have demonstrated both strong product management and operational leadership skills. Kirill Tatarinov, who most recently served as Executive Vice President of the Microsoft Business Solutions Division, has a proven track record of growing businesses and driving operational performance. Because of these demonstrated skills, in January 2016, our Board of Directors identified Mr. Tatarinov as the best person to lead our company for the long term and to execute on the strategic initiatives that we started in 2015. Mr. Tatarinov was appointed President and Chief Executive Officer in January 2016 and joined our Board as a director at that time.

Following Mr. Tatarinov’s appointment, Mr. Calderoni continued in his role as Executive Chairman of our Board of Directors. While the roles of President and Chief Executive Officer and Executive Chairman have distinct responsibilities, during 2016, both Messrs. Calderoni and Tatarinov focused on driving execution of our strategic plan, including operational and capital structure efficiency and portfolio simplification. Mr. Calderoni also focused on special strategic and operational initiatives in 2016, including the separation of our GoTo business and its subsequent merger with LogMeIn, Inc. which resulted in the receipt of LogMeIn shares by our shareholders valued at approximately $2.9 billion.

Mr. Calderoni’s experience leading a software company through a transition of its legacy business to a cloud-based, subscription revenue business gives him the operational skills, experience and judgment necessary to oversee the execution of our strategic plan and to help drive our transition to the cloud. Our Board of Directors believes that it is in the best interests of our shareholders for Mr. Calderoni to remain in the role of Executive Chairman through December 31, 2018, and thereafter serve on our Board of Directors as a non-employee director with compensation that is consistent with that of our independent directors. As a result, we entered into an employment agreement with Mr. Calderoni that was effective as of January 31, 2017 and has a term that ends on December 31, 2018, subject to Mr. Calderoni’s re-election to the Board of Directors by our shareholders. Under the employment agreement, Mr. Calderoni receives a base salary and received a restricted stock unit award in February 2017 that vests over a two-year period with 5/8 of the award vesting monthly during the first year and 3/8 vesting monthly during the second year, reflecting a two-year commitment to the role of Executive Chairman and the Board of Director’s plan to transition the role over this period. Mr. Calderoni will not participate in our variable cash compensation plan and there are no further equity awards planned for Mr. Calderoni during this two-year transition period.

See Individual Executive Compensation Decisions beginning on page 52 for a discussion of Messrs. Tatarinov’s and Calderoni’s compensation arrangements.

 



 

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2016 Business Highlights

Our transformational efforts led to the following performance in 2016 as compared to 2015:

 

    4% increase in annual revenue to $3.42 billion

 

    68% increase in net income of $536 million, or $3.41 per diluted share

 

    8% increase in cash flow from operations to $1.12 billion

 

 

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Our balance sheet is robust, including $1.80 billion in deferred revenue and $2.66 billion in net cash and investments as of December 31, 2016. As part of our commitment to return capital to shareholders, in January 2017, we announced that our Board of Directors authorized up to an additional $500 million in stock repurchases in addition to the approximately $404 million remaining for stock repurchases from previous authorizations.

As illustrated in the graph below, our total shareholder return, or TSR, over the five-year period ended on December 31, 2016 was approximately 47%.

 

 

 

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Over the one-year period ended on December 31, 2016, our TSR was approximately 18%, as compared to a TSR of approximately 7.5% for the Nasdaq Index during the same period, outperforming nearly 77% of the index constituents and creating over $2.3 billion in value in 2016.

 

 

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Executive Compensation Highlights

 

 

Highlights of Our Compensation Approach

 

 

Conceptual Approach

 

  

 

Implementation

 

Link senior executive’s annual target compensation directly with company performance   

   Approximately 47% of the total target direct compensation (1) of our Named Executive Officers, other than our Executive Chairman and our President and Chief Executive Officer, on average, was performance-based

 

  President and Chief Executive Officer Kirill Tatarinov’s total target direct compensation (1) was approximately 58% performance-based

   
Payout opportunity levels for executive variable cash compensation plan should motivate performance that meets or exceeds our financial plan objectives while mitigating undue exposure to under-performance of these objectives   

  In 2016, each executive officer’s variable cash compensation plan award was based 100% on the achievement of objective financial operating targets consistent with our annual operating plan

 

  Based on 2016 company performance, variable cash compensation plan awards for 2016 paid 160.9% of the target amount

 

  Over the past nine years, our variable cash compensation plan awards have paid out between 56.4% and 160.9% and paid above 100% less than half of the time

   
Our shareholders seek long-term total shareholder return and our executives should share that goal   

  At least 50% of annual equity awards to executive officers are awarded as performance-based RSUs; and for 2016, these awards vest primarily based on a compounded annual total shareholder return metric measured on an absolute basis

 

  President and Chief Executive Officer Kirill Tatarinov’s initial equity award mix was 65% performance-based with a focus on compounded annual total shareholder return measured on an absolute basis

   
To account for the speed of the business environment within the software sector, our compensation program should be flexible so that it can be tailored to the specific challenges facing the company at any given time   

  Each year, our variable cash compensation plan and performance-based equity awards granted to executive officers are designed to fit our strategic and operational initiatives and reflect feedback we receive from our shareholders

 

(1) Includes 2016 base salary, target variable cash compensation and grant date fair value of equity compensation.

 



 

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See Individual Executive Compensation Decisions beginning on page 52 for further details regarding our Named Executive Officers’ compensation.

Governance Highlights

The following summary of our governance policies and facts highlights our commitment to governance practices that protect shareholder rights:

 

   Eliminated classified Board of Directors  

  Long-standing commitment to corporate responsibility

  

Lead independent director

 

  Stock ownership guidelines for executive officers and directors

   Annual Board self-assessment process  

  Policies prohibiting hedging, short selling and pledging of our common stock

   Active shareholder engagement  

  Commitment to evolving and diversifying our Board of Directors

   Majority voting for director elections  

  Strong focus on pay-for-performance

   Independent directors regularly meet without management present  

  Board oversight of risk management

   Executive compensation recovery policy  

  Annual say-on-pay vote

Shareholder Engagement

Our Board of Directors welcomes the views and insights of our shareholders and conducts an annual outreach effort to connect with our larger shareholders in order to ensure open lines of communication. Further, our executives regularly engage with shareholders to better understand their perspective on a wide range of issues.

In 2016, we reached out to over 30 of our largest shareholders and proxy advisory firms to understand their perspective and discuss our governance and executive compensation policies. As a result, we held in-person and telephonic meetings with our largest shareholders and a proxy advisory firm representing approximately 28% of Citrix’s outstanding common stock, including our shareholders that we believe are influenced by the proxy advisory firm. These shareholder meetings covered a wide range of topics including corporate governance practices such as proxy access, board refreshment and composition, succession planning, our executive compensation program, and other matters of shareholder interest. The Chairperson of our Compensation Committee, Nanci E. Caldwell, participated in every meeting along with other senior executives.

Management, the Chairperson of our Compensation Committee, and other Board members who participate in shareholder engagement meetings, regularly share shareholder feedback with relevant Board committees and the full Board of Directors. In general, feedback from our shareholders regarding our compensation programs and corporate governance practices is positive. The Board of Directors carefully considers the feedback from shareholders and has implemented their feedback into our executive compensation and corporate governance practices, including:

 

  Increasing our focus on our diversity and inclusion initiatives, including diversity of our Board of Directors;

 

  Adopting an executive compensation recovery policy; and

 

  Implementing a relative performance metric for our 2017 annual performance-based equity awards.

We believe it is important to continue to engage with our shareholders on a regular basis to understand their perspectives and to give them a voice in shaping our governance and executive compensation policies and practices.

Compensation Consultant Change

Our Compensation Committee regularly reviews its executive compensation consulting needs and periodically invites compensation consulting firms to discuss these executive compensation needs with the Compensation Committee. This

 



 

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process enables the Compensation Committee to reevaluate its compensation consultant and take a fresh look at our compensation practices and policies. Beginning in October 2016, the Compensation Committee invited five consulting firms to present to the Compensation Committee. The Compensation Committee evaluated the consulting firms on consulting competency, technical competency, industry knowledge, independence and fee structure, among other things. As a result of the review, our Compensation Committee appointed Frederic W. Cook & Co., Inc., which we refer to as FW Cook, in December 2016 as its independent compensation consultant, replacing Radford.

In connection with FW Cook’s appointment, the Compensation Committee evaluated its independence and considered our policy on independence of the Compensation Committee’s consultant and other advisers, which is contained in our Corporate Governance Guidelines and the Compensation Committee’s charter. The Compensation Committee also considered six independence factors as required by Nasdaq and the SEC and concluded that FW Cook is independent. See Independence of Compensation Consultant beginning on page 40.

Our Board of Directors

The following table provides summary information about each director nominee and the standing committees on which they serve. Each director will be elected for a one-year term.

 

 

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Voting Matters

The proposals to be considered at the 2017 Annual Meeting are as follows:

 

         Board
recommendation
  

See page number 

for more detail 

PROPOSAL 1

  Election of Directors    FOR
each Nominee
   79

PROPOSAL 2

  To approve an amendment and restatement of our 2014 Equity Incentive Plan    FOR    80

PROPOSAL 3

  Ratification of Appointment of Independent Registered Public Accounting Firm for 2017    FOR    90

PROPOSAL 4

  Advisory Vote to Approve the Compensation of our Named Executive Officers (Say-on-Pay)    FOR    91

PROPOSAL 5

  Advisory Vote to Approve the Frequency of Holding Future Advisory Votes to Approve the Compensation of our Named Executive Officers (Say-on-Frequency)    FOR
an annual vote
   92

 



 

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Part 1 Corporate Governance

 

 

Independence of Members of Our Board

Our Board of Directors has determined that seven of our directors (Ms. Caldwell, Mr. Cohn, Mr. Daleo, Mr. Demo, Mr. Sacripanti, Mr. Smith and Mr. Sullivan) are independent within the meaning of the director independence standards of The Nasdaq Stock Market LLC, or Nasdaq, and the SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended. Furthermore, our Board of Directors has determined that each member of each of our regular standing committees of the Board of Directors is independent within the meaning of Nasdaq’s and the SEC’s director independence standards. In making this determination, our Board of Directors solicited information from each of our directors regarding whether such director, or any member of his or her immediate family, had a direct or indirect material interest in any transactions involving Citrix, was involved in a debt relationship with Citrix or received personal benefits outside the scope of such person’s normal compensation. The Board of Directors determined that each of Mr. Calderoni, who is currently serving as our Executive Chairman, and Mr. Tatarinov, who is currently serving as our President and Chief Executive Officer, is not independent within these definitions. Our Board of Directors considered the responses of our directors, and independently considered the commercial agreements, acquisitions, and other material transactions entered into by Citrix during 2016.

Board Leadership Structure

Our Corporate Governance Guidelines provide our Board of Directors with flexibility to select the appropriate leadership structure based on the specific needs of our business and the best interests of our shareholders. Our Corporate Governance Guidelines set forth our general policy that the positions of Chairperson of the Board of Directors and Chief Executive Officer will be held by different persons. In certain circumstances, however, our Board of Directors may determine that it is in our best interests for the same person to hold the positions of Chairperson and Chief Executive Officer, or, in the case of Mr. Calderoni’s appointment as Executive Chairman in July 2015, for the position of Chairperson to also be an executive role. In such event, the Board of Directors will appoint an independent member of our Board of Directors

as the Lead Independent Director, which is currently Godfrey R. Sullivan. Our general policy is that the position of Chairperson or Lead Independent Director, as the case may be, will be held by an independent member of our Board of Directors. The Chairperson or Lead Independent Director will preside at executive sessions of the independent directors and will have such further responsibilities as the full Board of Directors may designate from time to time.

Executive Sessions of Independent Directors

Executive sessions of the independent directors are held at least four times a year following regularly scheduled in-person meetings of our Board of Directors. Executive sessions do not include Messrs. Calderoni and Tatarinov and the Lead Independent Director of our Board of Directors, Mr. Sullivan, is responsible for chairing the executive sessions.

Executive Succession

Executive succession is regularly reviewed and discussed by our Board of Directors in Board meetings and in executive sessions of the Board of Directors. At least one Board meeting each year is focused on human capital, including formal reviews of executive talent, organizational structure and succession planning for the role of Chief Executive Officer and other senior executive roles. In these sessions, among other things, our Board of Directors reviews the assumptions, processes and strategy for various succession events and reviews potential internal and external successor candidates. Potential external candidates may also be identified as part of this process. The Board of Director’s goal is to have a long-term and continuing program for effective executive development and succession and to be prepared for both short-term unexpected loss of a key leader and permanent transitions.

Considerations Governing Director Nominations

Director Qualifications

The Nominating and Corporate Governance Committee of our Board of Directors is responsible for reviewing with the Board of Directors from time to time the appropriate

 

 

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qualities, skills and characteristics desired of members of the Board of Directors in the context of the needs of the business and current make-up of our Board of Directors. This assessment includes consideration of the following

minimum qualifications that the Nominating and Corporate Governance Committee believes must be met by all directors.

 

 

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The Nominating and Corporate Governance Committee also may consider numerous other qualities, skills and characteristics when evaluating director nominees, such as:

 

  an understanding of and experience in software, hardware or services, technology, accounting, governance, finance and/or marketing;

 

  leadership experience with public companies or other major complex organizations;

 

  experience on another public company board; and

 

  the specific needs of our Board of Directors and the committees of our Board of Directors at that time.

Our Board of Directors believes that a diverse membership with varying perspectives and breadth of experience is an important attribute of a well-functioning board and will enhance the quality of the Board of Director’s deliberations and decisions. As a result, the Nominating and Corporate Governance Committee will consider the diversity of background and experience of a director nominee (such as diversity of knowledge, skills, experience and expertise) as well as diversity of personal characteristics (such as diversity of gender, race, ethnicity, culture, thought and geography) among its members in the overall context of the composition of the Board of Directors. The Nominating

and Corporate Governance Committee and the Board of Directors discuss the composition of our Board of Directors, including diversity of background and experience, as part of the annual Board of Directors evaluation process.

Process for Identifying and Evaluating Director Nominees

Our Board of Directors delegates the selection and nomination process to the Nominating and Corporate Governance Committee, with the expectation that other members of the Board of Directors, and of management, will be requested to take part in the process as appropriate. Generally, the Nominating and Corporate Governance Committee identifies candidates for director nominees in consultation with management and the other directors, through the use of search firms or other advisers, through the recommendations submitted by shareholders or through such other methods as the Nominating and Corporate Governance Committee deems to be helpful to identify candidates. Once candidates have been identified, the Nominating and Corporate Governance Committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the Nominating and Corporate Governance Committee.

 

 

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The Nominating and Corporate Governance Committee gathers information about the candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that the Nominating and Corporate Governance Committee deems to be helpful in the evaluation process. The Nominating and Corporate Governance Committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of our Board of Directors. Based on the results of the evaluation process, the Nominating and Corporate Governance Committee recommends candidates for the Board of Director’s approval as director nominees for election to our Board of Directors. The Nominating and Corporate Governance Committee also recommends candidates to the Board of Directors for appointment to the committees of the Board of Directors. The Executive Chairman assists the Nominating and Corporate Governance Committee with Board composition and evolution planning, including review of committee memberships.

Board Evaluation Program

Our Board of Directors annually undertakes an evaluation process. During 2016, our Board of Directors, with the assistance of an outside advisor, conducted one-on-one interview discussions to assess the Board’s performance. These one-on-one interview discussions focused on an assessment of the structure, process, and culture of the Board of Directors and its committees. The interview discussions also addressed appropriate Board size, committee composition and the functional, business and organizational skills that may be required of future Board members.

Procedures for Recommendation of Director Nominees by Shareholders

The Nominating and Corporate Governance Committee will consider director nominee candidates who are recommended by our shareholders. Shareholders, in submitting recommendations to the Nominating and Corporate Governance Committee for director nominee candidates, shall follow the procedures described below.

Generally, the Nominating and Corporate Governance Committee must receive any such recommendation for nomination not later than the close of business on the 120th day nor earlier than the close of business on the 150th day prior to the first anniversary of the date the

Proxy Statement was delivered to shareholders in connection with our preceding year’s annual meeting.

All recommendations for nomination must be in writing and include the following:

 

  name and address of the shareholder making the recommendation, as they appear on our books and records, and of such record holder’s beneficial owner;

 

  number of shares of our capital stock that are owned beneficially and held of record by such shareholder and such beneficial owner;

 

  name of the individual recommended for consideration as a director nominee;

 

  all other information relating to the recommended candidate that would be required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, including the recommended candidate’s written consent to being named in the Proxy Statement as a nominee and to serving as a director if approved by our Board of Directors and elected; and

 

  a written statement from the shareholder making the recommendation stating why such recommended candidate meets Citrix’s criteria and would be able to fulfill the duties of a director.

Nominations must be sent to the attention of our Secretary by one of the two methods listed below:

By U.S. mail (including courier or expedited delivery service) to:

Citrix Systems, Inc.

851 West Cypress Creek Road

Fort Lauderdale, FL 33309

Attn: Secretary of Citrix Systems, Inc.

By facsimile to: (954) 267-2393

Attn: Secretary of Citrix Systems, Inc.

 

 

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Our Secretary will promptly forward any such nominations to the Nominating and Corporate Governance Committee. As a requirement for being considered for nomination to our Board of Directors, a candidate will need to comply with the following minimum procedural requirements:

 

  a candidate must undergo a comprehensive private investigation background check by a qualified firm of our choosing;

 

  a candidate must complete a detailed questionnaire regarding his or her experience, background and independence;

 

  a candidate must submit to the Board of Directors his or her written consent to serve as director if elected; and

 

  a candidate must submit to our Board of Directors a statement to the effect that (1) if elected, he or she will tender promptly following his or her election an irrevocable resignation effective upon his or her failure to receive the required vote for re-election at the next meeting at which he or she would face re-election, and (2) upon acceptance of his or her resignation by our Board of Directors, in accordance with our Corporate Governance Guidelines, he or she shall resign as a member of the Board of Directors.

Once the Nominating and Corporate Governance Committee receives the nomination of a candidate and the candidate has complied with the minimum procedural requirements above, such candidacy will be evaluated and a recommendation with respect to such candidate will be delivered to our Board of Directors.

Policy Governing Director Attendance at Annual Meetings of Shareholders

We conduct an annual meeting of shareholders, and all directors are offered the opportunity to attend at our expense. No members of our Board of Directors other than Mr. Tatarinov attended our annual meeting of shareholders held in 2016.

Code of Ethics

We have adopted a “code of ethics,” as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, which we refer to as our Code of Business Conduct and which applies to all of our directors and employees worldwide, including our principal executive

officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A current copy of our Code of Business Conduct is available in the Corporate Governance section of our website at http://www.citrix.com/about/governance.html .

A copy of our Code of Business Conduct may also be obtained, free of charge, upon a request directed to: Citrix Systems, Inc., 851 West Cypress Creek Road, Fort Lauderdale, Florida 33309, Attention: Investor Relations. We intend to disclose any amendment to or waiver of a provision of our Code of Business Conduct, to the extent required by rules and regulations, that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website, available at http://www.citrix.com/about/governance.html . For more corporate governance information, you are invited to access the Corporate Governance section of our website available at http://www.citrix.com/about/governance.html .

Risk Oversight

Assessing and managing risk is the responsibility of Citrix’s management. Our Board of Directors oversees and reviews certain aspects of our risk management efforts.

Our Board of Directors is involved in risk oversight through direct decision-making authority with respect to significant matters and the oversight of management by the Board of Directors and its committees. Among other areas, the Board of Directors is directly involved in overseeing risks related to our overall corporate strategy, including product, go-to-market and sales strategy, executive officer succession, cybersecurity, business continuity, crisis preparedness and competitive and reputational risks.

The committees of the Board of Directors execute their oversight responsibility for risk management as follows:

 

 

The Audit Committee has responsibility for overseeing our internal financial and accounting controls, work performed by our independent registered public accounting firm and our internal audit function. As part of its oversight function, the Audit Committee regularly reviews the policies and processes by which our exposure to certain significant areas of risk is assessed and managed. The Audit Committee also regularly discusses with management and our independent registered public accounting firm our major financial and controls-related risk exposures and steps that

 

 

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management has taken to monitor and control such exposures. The Audit Committee also oversees cybersecurity risks and reports to the full Board of Directors on such matters. In addition, we have, under the supervision of the Audit Committee, established procedures available to all employees for the anonymous and confidential submission of complaints relating to any matter to encourage employees to report questionable activities directly to our Audit Committee.

 

  The Finance Committee is responsible for overseeing risks related to our investments, financing activities, capital allocation strategies and world-wide insurance programs.

 

  The Compensation Committee is responsible for ensuring that our compensation practices are consistent with our overall philosophy and drive the intended outcomes, overseeing risks related to our cash and equity-based compensation programs and practices, and evaluating whether our compensation plans encourage participants to take excessive risks that are reasonably likely to have a material adverse effect on Citrix. For a detailed discussion of our efforts to manage compensation-related risks, see Compensation-Related Risk Assessment below.

 

  The Nominating and Corporate Governance Committee is responsible for overseeing risks related to the composition and structure of our Board of Directors and its committees, our corporate governance and certain areas of regulatory compliance. In this regard, the Nominating and Corporate Governance Committee conducts an annual evaluation of the Board of Directors and its committees, plans for Board member and executive officer succession, reviews transactions between Citrix and our officers, directors, affiliates of officers and directors, or other related parties for conflicts of interest, and annually reviews our most significant compliance policies and compliance training program. The Nominating and Corporate Governance Committee also periodically reviews reputational, intellectual property and litigation-related risks with management.

We maintain a risk management program to identify, scope, communicate and manage risks across Citrix. As part of this program, our Internal Audit team, acting with executive sponsorship, facilitates a cross-functional engagement process that assesses and prioritizes risks that we face and monitors certain of our risk management

programs. The Audit Committee receives a report concerning our risk management efforts on an annual basis.

Compensation-Related Risk Assessment

We believe that our executive officer and employee compensation plans are appropriately structured so as not to incent excessive risk taking and are not reasonably likely to have a material adverse effect on our business. In particular, the Compensation Committee considered the following aspects of our compensation plans and policies when evaluating these areas:

 

  Our base salary component of compensation does not encourage risk taking because it is a fixed amount.

 

  Our Board of Directors annually approves a corporate operating plan with goals that it believes are appropriate and reasonable in light of past performance and current market opportunities. Our annual operating plan is the basis for the performance targets in our annual variable cash compensation plans.

 

  For our executive variable cash compensation plans, awards are based on the achievement of at least two objective performance measures, thus diversifying the risk associated with any single indicator of performance.

 

  For our variable cash compensation plans, we select performance measures that we believe are less susceptible to manipulation (for example, non-GAAP operating margin) than other performance measures that we could select (for example, non-GAAP earnings per share).

 

  We model amounts payable under proposed variable cash compensation plan structures against various scenarios and assess those payouts as a percentage of non-GAAP earnings per share, non-GAAP corporate operating income and other variables to ensure that our framework appropriately balances pay versus return to shareholders.

 

  All of our executive and corporate variable cash compensation plans are capped at 200% of target awards so as to prevent award payments in excess of specific returns to the business and our shareholders, even if we dramatically exceed our performance or financial targets.

 

 

Assuming achievement of a threshold level of performance, payouts under our performance-based

 

 

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plans if target performance metrics are not achieved result in compensation at levels below full target achievement, rather than an “all-or-nothing” approach, which could engender excessive risk taking.

 

  We implemented a performance-based restricted stock unit program for 2016, which awards our executive officers with restricted stock units based primarily on the compounded annual total return to shareholders measured on an absolute basis over a three-year period, thereby providing executive officers with strong incentives to increase shareholder value over the long-term. This program has been capped at 200% of target awards to prevent excessive compensation even if we dramatically outperform our goals.

 

  No opportunities for non-qualified deferrals of compensation were offered to our executive officers in 2016 and none will be offered in 2017.

 

  The Compensation Committee, or in the case of our Executive Chairman and President and Chief Executive Officer, the entire Board of Directors, determines achievement levels under our variable cash compensation plan and performance-vesting restricted stock unit awards after reviewing the company’s performance.

 

  Our executive stock ownership policy requires executives to hold significant levels of stock, which aligns an appropriate portion of their personal wealth to our long-term performance.

Shareholder Outreach and Engagement

Our Board of Directors welcomes the views and insights of our shareholders and conducts an annual outreach effort to connect with our larger shareholders in order to ensure open lines of communication. Further, our executives regularly engage with shareholders to better understand their perspective on a wide range of issues.

In 2016, we reached out to over 30 of our largest shareholders and proxy advisory firms to understand their perspective and discuss our governance and executive policies. As a result, we held in-person and telephonic meetings with our largest shareholders and a proxy advisory firm representing approximately 28% of Citrix’s outstanding common stock, including our shareholders that we believe are influenced by the proxy advisory firm. These shareholder meetings covered a wide range of topics including corporate governance practices such as

proxy access, board refreshment and composition, succession planning, our executive compensation program, and other matters of shareholder interest. The Chairperson of our Compensation Committee, Nanci E. Caldwell, participated in every meeting along with other senior executives.

Management, the Chairperson of our Compensation Committee, and other Board members who participate in shareholder engagement meetings, regularly share shareholder feedback with relevant Board committees and the full Board of Directors. In general, feedback from our shareholders regarding our compensation programs and corporate governance practices is positive. The Board of Directors carefully considers the feedback from shareholders and has implemented their feedback into our executive compensation and corporate governance practices, including:

 

  Increasing our focus on our diversity and inclusion initiatives, including diversity of our Board of Directors;

 

  Adopting an executive compensation recovery policy; and

 

  Implementing a relative performance metric for our 2017 annual performance-based equity awards.

We believe it is important to continue to engage with our shareholders on a regular basis to understand their perspectives and to give them a voice in shaping our governance and executive compensation policies and practices.

Our Board of Directors provides to every security holder the ability to communicate with the Board of Directors as a whole and with individual directors on the Board of Directors through an established process for security holder communication as follows:

 

  For communications directed to our Board of Directors as a whole, security holders may send such communications to the attention of the Executive Chairman of the Board of Directors by one of the two methods listed below:

By U.S. mail (including courier or expedited delivery service) to:

Citrix Systems, Inc.

851 West Cypress Creek Road

Fort Lauderdale, FL 33309

Attn: Chairperson of the Board of Directors, c/o Secretary

 

 

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By facsimile to: (954) 267-2393

Attn: Chairperson of the Board of Directors, c/o Secretary

 

  For security holder communications directed to an individual director in his or her capacity as a member of our Board of Directors, security holders may send such communications to the attention of the individual director by one of the two methods listed below:

By U.S. mail (including courier or expedited delivery service) to:

Citrix Systems, Inc.

851 West Cypress Creek Road

Fort Lauderdale, FL 33309

Attn: Secretary of Citrix Systems, Inc.

By facsimile to: (954) 267-2393

Attn: Secretary of Citrix Systems, Inc.

We will forward any such security holder communication to the Chairperson of the Board of Directors, as a representative of the Board of Directors, or to the director to whom the communication is addressed, on a periodic basis. We will forward such communications by certified U.S. mail to an address specified by each director and the Chairperson of the Board of Directors for such purposes or by secure electronic transmission.

 

 

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Part 2 Board of Directors

 

 

Our Directors

The following table sets forth our current directors, who are being nominated for re-election at the 2017 Annual Meeting. All nine directors are nominated for re-election to one-year terms at the 2017 Annual Meeting.

The biographical description below for each director nominee includes the specific experience, qualifications, attributes and skills that led to the conclusion by our Board of Directors that such person should serve as a director of Citrix.

 

    Name    Position(s) with Citrix
  Robert M. Calderoni    Executive Chairman and Director
  Nanci E. Caldwell    Director
  Jesse A. Cohn    Director
  Robert D. Daleo    Director
  Murray J. Demo    Director
  Peter J. Sacripanti    Director
  Graham V. Smith    Director
  Godfrey R. Sullivan    Lead Independent Director
    Kirill Tatarinov    Director, President and Chief Executive Officer

Director Nominees

 

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  Robert M. Calderoni
  Executive Chairman of Citrix; Former Interim Chief Executive Officer and President of Citrix; Former Chairman and Chief Executive Officer of Ariba, Sunnyvale, CA (Software solutions provider for suppliers and procurement)
  Age : 57
  Director Since : June 2014
  Executive Chairman Since : July 2015

Other Boards : Since 2003, Mr. Calderoni has served on the Board of Directors of Juniper Networks, Inc., a publicly-traded networking company; since 2007, he has served on the Board of Directors of KLA-Tencor, a publicly-traded semiconductor equipment company; and since January 2017, he has served on the Board of Directors of LogMeIn, Inc., a publicly-traded remote access and remote software company.

Key Director Qualifications : Mr. Calderoni served as Chairman and Chief Executive Officer of Ariba, Inc., a cloud applications and business network company, from October 2001 until it was acquired by SAP, a publicly-traded software and IT services company, in October 2012, and then continued as Chief Executive Officer of Ariba following the acquisition until January 2014. Mr. Calderoni also served as a member of the global managing board at SAP AG between November 2012 and January 2014 and as President SAP Cloud at SAP AG from June 2013 to January 2014. Mr. Calderoni has also held senior finance roles at Apple and IBM and served as Chief Financial Officer of Avery Dennison Corporation, a publicly-traded packaging and labelling solutions company. From October 2015 to January 2016, Mr. Calderoni served as the Interim Chief Executive Officer and President of Citrix. Mr. Calderoni was named Executive Chairman of Citrix in July 2015. The Board believes Mr. Calderoni’s qualifications to sit on our Board of Directors include his extensive leadership

 

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and business development experience as leader of a publicly-traded software-as-a-service company and his deep financial, accounting, corporate finance and operations expertise, including business transition situations, gleaned through his experience in managing large scale global enterprises.

 

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  Nanci E. Caldwell
  Former Executive Vice President and Chief Marketing Officer of PeopleSoft, Pleasanton, California (Human resources management software company)
  Age : 59
  Director Since : July 2008
 

Committees : Compensation (Chair), Nominating and Corporate Governance

Other Boards : Since December 2015, Ms. Caldwell has served on the Board of Directors of Equinix, Inc., a publicly-traded IT data center company, as well as the Board of Directors of Canadian Imperial Bank of Commerce, a publicly-traded financial institution. Since November 2016, Ms. Caldwell has served on the Board of Directors of Donnelley Financial Solutions, Inc., a publicly-traded financial communications and data services company and since February 2017, Ms. Caldwell has served on the Board of Directors of Talend SA, a publicly-traded data integration company.

Key Director Qualifications : Since 2005, Ms. Caldwell has served as a member of a number of Boards of both public and private technology companies, including Deltek, Inc., a publicly-traded enterprise management software company from 2005 to 2012; Network General, now NetScout Inc., a publicly-traded provider of integrated network performance management solutions from 2005 to 2007; and Hyperion Solutions Corporation, a publicly-traded provider of performance management software acquired by Oracle in 2007, from 2006 to 2007. From April 2001 until it was acquired by Oracle in December 2004, Ms. Caldwell served as Executive Vice President and Chief Marketing Officer for PeopleSoft, Inc., a publicly-held human resource management software company. In addition, from June 2009 to December 2014, Ms. Caldwell served as a member of the Board of Tibco Software Inc., a publicly-traded leading business integration and process management software company. The Board believes Ms. Caldwell’s qualifications to sit on our Board of Directors include her extensive experience with technology and software companies, including in the areas of sales and marketing, as well as her executive leadership and management expertise with publicly-traded companies.

 

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  Jesse A. Cohn
  Senior Portfolio Manager and Head of U.S. Equity Activism, Elliott Management Corporation, New York, NY (Hedge fund manager)
  Age : 36
  Director Since : July 2015
 

Committees : Nominating and Corporate Governance


Other Boards : Since January 2017, Mr. Cohn has served on the Board of Directors of LogMeIn, Inc., a publicly-traded remote access and remote software company.

Key Director Qualifications : Mr. Cohn is a senior portfolio manager and head of U.S. equity activism at Elliott Management Corporation, a $32 billion investment firm. Mr. Cohn joined Elliott in 2004 and manages both public and private investments for the firm. Mr. Cohn also serves on the Board of Directors of several private companies. Mr. Cohn joined the Board in connection with our entry into a cooperation agreement with affiliates of Mr. Cohn’s employer, Elliott Management. The Board believes Mr. Cohn’s qualifications to sit on our Board of Directors include the breadth of his knowledge of technology/software companies, including his service on the boards of directors of MSC Software, E2Open, SonicWall, Quest Software and Ark Continuity.

 

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  Robert D. Daleo
  Retired Vice Chairman of Thomson Reuters, New York, NY (Integrated information solutions provider)
  Age : 67
  Director Since : May 2013
 

Committees : Audit (Chair), Finance (Chair)


Other Boards : Since August 2006, Mr. Daleo has served on the Board of Directors of Equifax Inc., a publicly-traded global provider of information solutions and human resources business process outsourcing services.

Key Director Qualifications : Prior to his retirement in December 2012, Mr. Daleo served as Vice Chairman of Thomson Reuters, a publicly-traded global provider of integrated information solutions to business and professional customers. Mr. Daleo previously served as Executive Vice President and Chief Financial Officer of Thomson Reuters or its predecessors from 1998 through 2011, and was a member of The Thomson Corporation Board from 2001 to April 2008. Prior to joining The Thomson Corporation, he held various financial and operational leadership positions with The McGraw-Hill Companies, Inc., a publicly-traded content and analytics provider, and Automatic Data Processing, Inc., a publicly-traded provider of business outsourcing solutions. The Board believes Mr. Daleo’s qualifications to sit on our Board of Directors include his experience in managing a large scale global enterprise, extensive financial accounting, corporate finance, operations and business development expertise through his experience as Chief Financial Officer of a large multinational company, as well as his Board-level experience with Thomson Reuters and Equifax.

 

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  Murray J. Demo
  Chief Financial Officer of Atlassian Corporation, San Francisco, CA (Software solutions provider for team collaboration and project management); Former Executive Vice President and Chief Financial Officer of Dolby Laboratories, San Francisco, CA (Entertainment technologies company); Former Executive Vice President and Chief Financial Officer of Adobe Systems, San Jose, CA (Digital marketing and digital media solutions company)
  Age : 55
  Director Since : February 2005
  Committees : Audit, Finance

Key Director Qualifications : Mr. Demo currently serves as Chief Financial Officer of Atlassian Corporation, a publicly-traded enterprise software company, since October 2015. Previously, Mr. Demo served as Executive Vice President and Chief Financial Officer of Dolby Laboratories, a publicly-traded global leader in entertainment technologies, from May 2009 until June 2012. Mr. Demo has also served as Executive Vice President and Chief Financial Officer of LiveOps, a privately-held virtual call center company, and as Executive Vice President and Chief Financial Officer of Postini, Inc., a security software company, which was acquired by Google in September 2007. Mr. Demo also held various executive-level finance roles at Adobe Systems, including Executive Vice President and Chief Financial Officer. Mr. Demo previously served on the Board of Xoom Corporation, a formerly publicly-traded global online money transfer provider that was acquired by PayPal in November 2015, from May 2012 to November 2015; and from December 2011 to December 2015, Mr. Demo served on the Board of Directors of Atlassian Corporation. The Board believes Mr. Demo’s qualifications to sit on our Board of Directors include his extensive experience with finance and accounting matters for global organizations in the technology industry, including the experience that he has gained in his roles as Chief Financial Officer of publicly-traded companies.

 

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  Peter J. Sacripanti
  Chairman Emeritus and Partner, McDermott Will & Emery, New York, NY (International law firm)
  Age : 61
  Director Since : December 2015
 

Committees : Audit, Finance, Nominating and Corporate Governance


Other Boards : Since January 2017, Mr. Sacripanti has served on the Board of Directors of LogMeIn, Inc., a publicly-traded remote access and remote software company.

Key Director Qualifications : Since 1996, Mr. Sacripanti has served as a Partner at McDermott Will & Emery, an international law firm with 2,000 full-time employees in North America, Europe and Asia. In this position, he represents and defends major corporations and industry groups, including Fortune 500 companies. From 2009 to 2016, Mr. Sacripanti served as chairman of the firm’s Executive Committee. The Board believes Mr. Sacripanti’s qualifications to sit on our Board of Directors include his management of an international business organization and his years of experience representing large corporations on a variety of legal matters.

 

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  Graham V. Smith
  Former Chief Financial Officer and Executive Vice President of Salesforce, San Francisco, CA (Cloud-based computing company)
  Age : 57
  Director Since : December 2015
 

Committees : Compensation


Other Boards : Since July 2011, Mr. Smith has served on the Board of Directors of Splunk Inc., a publicly-traded software company that develops products to enhance searching, monitoring and analyzing machine-generated data. In February 2015, Mr. Smith also became a Director of Xero Limited, a publicly-traded New Zealand, cloud-based accounting software company, Mindbody Inc., a publicly-traded cloud-based business management software company focused on the wellness services industry, and in May 2015, Mr. Smith became a Director of BlackLine Inc., a publicly-traded cloud-based financial corporate performance management software company.

Key Director Qualifications : Mr. Smith has served in various management roles for Salesforce, a provider of enterprise cloud computing software, including as Executive Vice President, Finance from 2014 to 2015, Executive Vice President and Chief Financial Officer from 2008 to 2014, and Executive Vice President and Chief Financial Officer Designate from 2007 to 2008. Mr. Smith brings to the Citrix Board over 25 years’ experience in the software industry. Mr. Smith has proven himself an accomplished business leader in his capacity as an executive of Salesforce. The Board believes Mr. Smith’s qualifications to sit on our Board of Directors include his ability to manage rapidly growing global enterprises at scale and his financial expertise and professional experience as an executive of other public software companies.

 

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LOGO   Godfrey R. Sullivan
  Chairman of Splunk, San Francisco, CA (IT and search software company)
  Age : 63
  Director Since : February 2005
 

Committees : Compensation, Nominating and Corporate Governance (Chair)


Other Boards : Since 2008, Mr. Sullivan has served on the Board of Directors of Splunk Inc., a publicly-traded software company that develops products to enhance searching, monitoring, and analyzing machine-generated data, and as its Chairman of the Board since 2011.

Key Director Qualifications : Mr. Sullivan also served as President and Chief Executive Officer of Splunk Inc. from 2008 until November 2015. Prior to Splunk, Mr. Sullivan led Hyperion Solutions Corporation, a publicly-traded software company, where he was first its President and Chief Operating Officer and subsequently its President and Chief Executive Officer, until its acquisition by Oracle in April 2007. Mr. Sullivan also served on the Board of Informatica Corporation, a publicly-traded data integration company, from January 2008 to June 2013. The Board believes Mr. Sullivan’s qualifications to sit on our Board of Directors include his decades of executive and operational experience with technology and software companies.

 

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  Kirill Tatarinov
  President, Chief Executive Officer and Director, Citrix; former President, Executive Vice President, and Corporate Vice President of Business Solutions Division at Microsoft Corp., Seattle, WA
  Age : 52
 

Director Since : January 2016


Key Director Qualifications : With over 30 years of industry experience, Mr. Tatarinov previously served as Executive Vice President of the Microsoft Business Solutions Division (MBS) with responsibility for the Microsoft Dynamics business across development, sales, marketing, and operations. Prior to joining MBS in 2007, Mr. Tatarinov led the Management and Solutions Division at Microsoft, where he was in charge of the Microsoft Windows management technologies and products, including Microsoft System Center, as well as Windows Server solutions. Additionally, Mr. Tatarinov holds two patents for managing computer resources and related technologies. The Board believes Mr. Tatarinov’s qualifications to sit on our Board of Directors include his decades of experience in the software industry and his unique insight into our markets, products, technology and operations through his role as our President and Chief Executive Officer.

 

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Meetings and Meeting Attendance

 

Our Board of Directors met ten times during the year ended December 31, 2016. Each of the directors attended at least 75% of the aggregate of the total number of

meetings of our Board of Directors and the total number of meetings of all committees of our Board of Directors on which he or she served during fiscal 2016.

 

 

 

Our Board Committees

 

Our Board of Directors has standing Audit, Compensation, Finance and Nominating and Corporate Governance Committees. Each of the Audit, Compensation, Finance and Nominating and Corporate Governance Committees

has a written charter that has been approved by the Board of Directors. Each committee reviews the appropriateness of its charter at least annually. The table below provides current membership for each Board committee:

 

 

LOGO

 

In addition to our standing committees, in July 2015, our Board of Directors formed a Search Committee to lead the search for our next Chief Executive Officer. In January 2016, after completing its search process with the appointment of Kirill Tatarinov, the Search Committee was disbanded. Also, in July 2015, our Board of Directors formed an Operations Committee to work closely with our management team in a comprehensive review of our operations and capital structure. In February 2016, the Operations Committee was disbanded following completion of its work to drive our operational review.

Further, in August 2015, our Board of Directors formed a Transaction Committee to lead the separation of our GoTo business. In January 2017, the Transaction Committee was disbanded following the completion of the separation of our GoTo business and its subsequent merger with LogMeIn, Inc.

Audit Committee

Our Board of Directors has determined that each member of the Audit Committee meets the independence requirements promulgated by Nasdaq and the SEC,

 

 

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Name
Audit
Compensation
Finance
Nominating and Corporate Governance
Robert M. Calderoni
Nanci E. Caldwell
Jesse A . Cohn
Robert D. Daleo
Murray J. Demo
Peter J. Sacripanti
Graham V. Smith
Godfrey R. Sullivan
Kirill Tatarinov
Chair
Member


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including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended. In addition, our Board of Directors has determined that each member of the Audit Committee is financially literate and that Messrs. Daleo and Demo each qualify as an “audit committee financial expert” under the rules of the SEC. The Audit Committee met ten times during the year ended December 31, 2016. The Audit Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available in the Corporate Governance section of our website at http://www.citrix.com/about/governance.html .

As described more fully in its charter, the Audit Committee oversees our accounting and financial reporting processes, internal controls and audit functions. In fulfilling its role, the Audit Committee:

 

  reviews the financial reports and related disclosure provided by us to the SEC, our shareholders or the general public;

 

  reviews our internal financial and accounting controls;

 

  oversees the appointment, compensation, retention and work performed by any independent registered public accounting firms we engage;

 

  oversees procedures designed to improve the quality and reliability of the disclosure of our financial condition and results of operations;

 

  oversees our internal audit function;

 

  serves as the Qualified Legal Compliance Committee of Citrix in accordance with Section 307 of the Sarbanes-Oxley Act of 2002, and the related rules and regulations promulgated by the SEC;

 

  recommends, establishes and monitors procedures designed to facilitate (1) the receipt, retention and treatment of complaints relating to accounting, internal accounting controls or auditing matters, and (2) the receipt of confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters;

 

  engages advisers as necessary; and

 

  determines the funding from us that is necessary or appropriate to carry out the Audit Committee’s duties.

In addition, our Audit Committee oversees cybersecurity risks and reports to the full Board of Directors on such matters.

Finance Committee

Our Board of Directors has determined that each member of the Finance Committee meets the independence requirements promulgated by Nasdaq. The members of the Finance Committee also serve on the Audit Committee. The Finance Committee met two times during the year ended December 31, 2016. The Finance Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available at the Corporate Governance section of our website at http://www.citrix.com/about/governance.html .

As described more fully in its charter, the Finance Committee advises the Board of Directors and, in certain instances, acts on behalf of our Board of Directors, on matters relating to our investment policies, financing activities and world-wide insurance programs.

Compensation Committee

Our Board of Directors has determined that each of the members of the Compensation Committee is independent as defined by the Nasdaq rules. In addition, each member of the Compensation Committee is an “outside director” as defined in Section 162(m) of the Code, and is a “non-employee” director as defined under Section 16 of the Securities Exchange Act of 1934, as amended. The Compensation Committee met sixteen times during the year ended December 31, 2016. The Compensation Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available in the Corporate Governance section of our website at http://www.citrix.com/about/governance.html .

As described more fully in its charter, the Compensation Committee is responsible for determining and making recommendations with respect to all forms of compensation to be granted to our executive officers and preparing an annual report on executive compensation for inclusion in the Proxy Statement for our annual meeting of shareholders in accordance with applicable rules and regulations.

In fulfilling its role, the Compensation Committee also:

 

  reviews and makes recommendations to our management on company-wide compensation programs and practices;

 

  approves the salary, variable cash, equity-based and other compensation arrangements of our executive officers reporting directly to our President and Chief Executive Officer;
 

 

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  recommends, subject to approval by the entire Board of Directors, the salary, variable cash, equity-based and other compensation arrangements of our Executive Chairman and President and Chief Executive Officer;

 

  selects a peer group to conduct a competative analysis of the compensation paid to our executive officers and considers the composition of such peer group on an annual basis;

 

  appoints, retains, compensates, terminates and oversees the work of any independent experts, consultants and other advisers, reviews and approves the fees and retention terms for such experts, consultants and other advisers and considers at least annually the independence of such consultants;

 

  considers the independence of and potential conflicts of interests with compensation consultants, legal counsel or other advisers, including based on factors required to be considered by the SEC or Nasdaq;

 

  evaluates director compensation and recommends to the full Board of Directors appropriate levels of director compensation;

 

  establishes policies and procedures for the grant of equity-based awards and periodically reviews our equity award grant policy;

 

  recommends, subject to approval by the entire Board of Directors, any equity-based plans and any material amendments to those plans;

 

  evaluates whether our compensation plans encourage participants to take excessive risks that are reasonably likely to have a material adverse effect on Citrix;

 

  evaluates our compensation philosophy and reviews actual compensation for consistency with our compensation philosophy;

 

  reviews and recommends for inclusion in our annual Proxy Statement the Compensation Discussion and Analysis section; and

 

  reviews and evaluates, on a periodic basis, our stock ownership guidelines for directors and executive officers and recommends any modifications to such guidelines to the Board of Directors for its approval.

The Compensation Committee has the authority to engage its own outside advisers, including experts in particular areas of compensation, as it determines appropriate, apart from counsel or advisers hired by management. In 2016, the Compensation Committee retained Radford

Consulting, an independent compensation consultant, which we refer to as Radford, to assist the committee in evaluating the compensation of our executive officers and directors. In December 2016, the Compensation Committee retained Frederic W. Cook & Co., Inc., which we refer to as FW Cook, as its independent compensation consultant, replacing Radford, to assist the committee in evaluating the compensation of our executive officers and directors.

Our Corporate Governance Guidelines and the charter of the Compensation Committee provide that any independent compensation consultant, such as Radford or FW Cook, engaged by the Compensation Committee works for the Compensation Committee, not our management, with respect to executive officer and director compensation matters. Please read the Compensation Discussion and Analysis included in this Proxy Statement for additional information on the role of, and amounts paid to, Radford in the compensation review process for 2016.

Nominating and Corporate Governance Committee

Our Board of Directors has determined that each member of the Nominating and Corporate Governance Committee meets the independence requirements promulgated by Nasdaq. The Nominating and Corporate Governance Committee met four times during the year ended December 31, 2016. The Nominating and Corporate Governance Committee operates under a written charter adopted by our Board of Directors, a current copy of which is available at the Corporate Governance section of our website at http://www.citrix.com/about/governance.html .

As described more fully in its charter, the Nominating and Corporate Governance Committee:

 

  reviews and makes recommendations to our Board of Directors regarding the Board’s composition and structure;

 

  establishes criteria for membership on the Board of Directors and evaluates corporate policies relating to the recruitment of members of the Board of Directors;

 

  recommends to our Board of Directors the nominees for election or re-election as directors at our annual meeting of shareholders;

 

 

reviews policies and procedures with respect to transactions between Citrix and our officers, directors,

 

 

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affiliates of officers and directors, or other related parties; and

 

  establishes, implements and monitors policies and processes regarding principles of corporate governance in order to assist the Board of Directors in complying with its fiduciary duties to us and our shareholders. As described above in the section entitled Procedures for Recommendation of Director Nominees by Shareholders , the Nominating and Corporate Governance Committee will consider nominees recommended by shareholders.

Search Committee

Our Board formed a Search Committee in July 2015 to lead the search for our next President and Chief Executive Officer. The Search Committee consisted of Messrs. Calderoni (Chair), Cohn and Sullivan, each of whom served on the Search Committee since its formation. The Search Committee did not meet in 2016. The Search Committee completed its role and responsibilities in January 2016 upon the appointment of Kirill Tatarinov as our President and Chief Executive Officer and was disbanded.

Operations Committee

The Operations Committee was formed in July 2015 to work with management on a comprehensive operational review of our company. The Operations Committee consisted of Messrs. Calderoni (Chair), Daleo and Cohn, each of whom served on the Operations Committee since its formation. The Operations Committee did not meet in 2016. In February 2016, the Board of Directors determined that the Operations Committee was no longer required following completion of its work driving the operational review, and the Operations Committee was disbanded.

Transaction Committee

The Transaction Committee was formed in August 2015 to lead the separation of our GoTo business. From August 2015 to February 2016 the Committee consisted of Messrs. Daleo (Chair), Demo and Francis deSouza, who resigned from our Board of Directors in June 2016. Since February 2016, the Committee consisted of Messrs. Daleo (Chair), Cohn, Sacripanti and Smith. The separation of our GoTo business and its subsequent merger with LogMeIn, Inc. was completed in January 2017; and as a result, the Transaction Committee was disbanded.

 

 

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Director Compensation

 

2016 Non-employee Director Cash Compensation

It is our policy that our employee-directors do not receive cash compensation for their service as members of our Board of Directors.

The Compensation Committee, with assistance from its independent compensation consultant, formerly Radford and currently FW Cook, oversees director compensation and reviews the appropriateness of our non-employee directors’ compensation on a regular basis. Most recently, in October 2015 and again in December 2016, Radford prepared a comprehensive benchmarking of our non-employee director cash compensation program against the compensation programs offered by our peer companies and reviewed this benchmarking in detail with the Compensation Committee.

Under our non-employee director cash compensation program, non-employee members of our Board of Directors receive retainer fees, which are paid in cash in semi-annual installments. Each non-employee director was entitled to receive the retainers detailed in the tables below (provided that committee chairpersons were only entitled to receive a retainer as committee chair and were not entitled to the non-chair membership retainer for the committee(s) he or she chairs). In addition, non-employee directors were reimbursed for their reasonable out-of-pocket expenses incurred in attending meetings of our Board of Directors or any of its committees that are conducted in person. Upon review and discussion regarding the benchmarking of our non-employee director cash compensation program with assistance from Radford, and then FW Cook, in February 2017, our Compensation Committee approved an increase in the annual retainer to be paid to members of the Nominating and Corporate Governance Committee.

 

 

The following table summarizes our non-employee director cash compensation program:

Board Retainers

 

    Compensation Element    Annual Cash Compensation     
  Annual Board Member Retainer    $60,000     
  Annual Retainer for Lead Independent Director    $35,000 (in addition to Annual Board Member Retainer)     

Committee Retainers

 

   Committee    Annual Cash Compensation
   Chair        Member    

   Audit Committee

   Annual: $35,000        Annual: $17,500    

   Compensation Committee

   Annual: $30,000        Annual: $15,000    

   Finance Committee

   None        None    

   Nominating and Corporate Governance Committee

  

Annual: $15,000    

Monthly: $10,000(2)

  

Annual:   $7,500(1)

Monthly: $10,000(2)

   Operations Committee(3)

   None       

One-time: $20,000    

Monthly: $10,000    

   Search Committee(4)

   None       

One-time: $10,000    

Monthly: $10,000    

   Transaction Committee(5)

  

One time: $40,000    

Monthly: $10,000    

  

One-time: $20,000    

Monthly: $10,000    

 

(1) Annual retainer for members of the Nominating and Corporate Governance Committee was increased to $10,000, effective February 8, 2017.
(2) Only applicable during periods when the Nominating and Corporate Governance Committee is engaging in a director search to recognize the additional commitment during such periods.
(3) The Operations Committee was disbanded in February 2016 following completion of our operational review.

 

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(4) The Search Committee was disbanded in January 2016 following the appointment of Mr. Tatarinov as our new President and Chief Executive Officer.
(5) The Transaction Committee was disbanded in January 2017 following the completion of the separation of our GoTo business and its subsequent merger with LogMeIn, Inc.

 

Non-employee Director Equity-based Compensation

Equity Awards to our Non-employee Directors

The Compensation Committee, with assistance from Radford, reviewed the appropriateness of equity awards granted to our non-employee directors under the 2014 Equity Incentive Plan (which we refer to as the 2014 Plan) in October 2015 and again in December 2016. Radford prepared a comprehensive benchmarking of our non-employee director equity awards against the equity awards offered by our peer companies and reviewed this benchmarking in detail with the Compensation Committee.

Each non-employee director is eligible to receive an annual grant on the first business day of the month following our annual shareholders meeting consisting of restricted stock units valued at $250,000 that vest in equal monthly installments over a one-year period. Newly appointed non-employee directors are entitled to receive restricted stock units valued at $500,000 upon his or her initial election to our Board of Directors, which vest in accordance with our standard three-year vesting schedule. The number of restricted stock units issued is calculated based on the closing price per share of our common stock on the date of grant.

Outside Directors’ Deferred Compensation Program

We offer our directors an Outside Directors’ Deferred Compensation Program to defer restricted stock units awarded to them under the 2014 Plan. In advance of an award and in compliance with the program’s requirements, a non-employee director may elect to defer the receipt of all of his or her restricted stock units until ninety days after such director’s separation from service from us or upon a change in control. Upon the vesting of awards of restricted stock units, any amounts that would otherwise have been paid in shares of common stock are converted to deferred stock units on a one-to-one basis and credited to the director’s deferred account. In addition, beginning in January 2016, non-employee directors may defer the cash portion of their compensation such that if a director elects

to defer cash, the cash will be converted into a number of deferred stock units on the date that the cash compensation would otherwise be paid. The stock units will be held in the director’s deferred account until ninety days after such director’s separation from service from us or upon a change in control.

Director Stock Ownership Guidelines

To further align the interests of members of our Board of Directors with our shareholders, our Board of Directors adopted stock ownership guidelines for our non-employee directors. Pursuant to these guidelines, each non-employee director is expected to hold at least 8,000 shares of our common stock (which includes vested but deferred restricted stock units) for so long as he or she is a director or, in the case of certain shares acquired upon the exercise of a stock option, for nine months after termination of his or her service on our Board of Directors. In addition, if a director exercises a stock option, it is expected that such director would, from such option exercise, maintain ownership of at least a number of shares equal to twenty percent of the net value of the shares acquired (after deducting the exercise price and taxes) if such director has not satisfied the shareholding requirement. New directors are expected to meet the standards set forth in the guidelines within three years after the date of his or her election to our Board of Directors.

Director Compensation Limits

On March 14, 2017, our Board of Directors, upon the recommendation of the Compensation Committee, approved our Amended and Restated 2014 Equity Incentive Plan, subject to shareholder approval, that provides, among other things, for a limitation of $795,000 with respect to the value of annual equity compensation grant that could be awarded to each non-employee director and a limitation of $500,000 with respect to the value of any annual cash compensation that could be paid to each non-employee director.

See Proposal 2 Approval of Citrix Systems, Inc. Amended and Restated 2014 Equity Incentive Plan beginning on page 80 for further details regarding our Amended and Restated 2014 Equity Incentive Plan.

 

 

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The following table sets forth a summary of the compensation earned by, or paid to, our non-employee directors in 2016:

DIRECTOR COMPENSATION TABLE FOR FISCAL YEAR 2016

 

     Name   

Fees Earned or

Paid in Cash ($)

   

Stock Awards ($)

(1)(2)

   

Option

Awards ($)

(1)(3)

    Total ($)  

     Thomas F. Bogan(4)

     36,534                   36,534  

     Nanci E. Caldwell

     97,500       250,000             347,500  

     Jesse A. Cohn

     223,894       250,000             473,894  

     Robert D. Daleo

     235,863 (5)      250,000             485,863  

     Francis A. deSouza(6)

     48,767                   48,767  

     Murray J. Demo

     99,226       250,000             349,226  

     Peter J. Sacripanti

     211,394       250,000             461,394  

     Graham V. Smith

     205,000       250,000             455,000  

     Godfrey R. Sullivan

     129,315       250,000             379,315  

 

(1) These amounts represent the aggregate grant date fair value of the stock awards in the year in which the grant was made. The assumptions we used for calculating the grant date fair value are set forth in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 16, 2017. These amounts do not represent the actual amounts paid to or realized by our directors for these awards during fiscal year 2016.
(2) Consists solely of restricted stock units. Each continuing non-employee director is entitled to an annual grant consisting of a number of restricted stock units equaling $250,000 in value vesting in equal monthly installments over a one-year period. Pursuant to our Outside Director’s Deferred Compensation Program, each of Ms. Caldwell and Messrs. Cohn, Daleo, Sacripanti and Smith elected to defer his or her 2016 annual restricted stock unit award. Please see the discussion above under the heading Outside Directors’ Deferred Compensation Program for additional details on our deferral program.
(3) As of December 31, 2016, there were no shares of our common stock subject to outstanding option awards held by our non-employee directors.
(4) Mr. Bogan’s service on our Board of Directors ended on June 23, 2016, and his fees were prorated for his service from January 1, 2016 through June 23, 2016.
(5) Pursuant to our Outside Director’s Deferred Compensation Program, Mr. Daleo elected to defer his cash fees in 2016. Mr. Daleo received 2,807 deferred stock units based on fees of $235,863 foregone, with no matching or premium given in calculating the number of stock units awarded.
(6) Mr. deSouza’s service on our Board of Directors ended on June 23, 2016, and his fees were prorated for his service from January 1, 2016 through June 23, 2016.

 

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Part 3 Executive Management

 

 

Our Management

The following table sets forth our executive officers and the positions currently held by each such person with Citrix. The biographical descriptions below outline the relevant experience, qualifications, attributes and skills of each executive officer.

 

    Name    Position
  Robert M. Calderoni    Executive Chairman and Director
  Kirill Tatarinov    President, Chief Executive Officer and Director
  David J. Henshall    Executive Vice President, Chief Operating Officer and Chief Financial Officer
  Timothy A. Minahan    Senior Vice President and Chief Marketing Officer
    Carlos E. Sartorius    Executive Vice President, Worldwide Sales and Services

 

LOGO   Robert M. Calderoni
  Age: 57
  Mr. Calderoni has served as our Executive Chairman since July 2015. From October 2015 to January 2016, he also served as our Interim Chief Executive Officer and President. He has been a member of our Board of Directors since June 2014. Mr. Calderoni served as Chairman and Chief Executive Officer of Ariba, Inc. from October 2001 until it was acquired by SAP in October 2012, and then continued as Chief Executive Officer of Ariba following the acquisition until January 2014. Mr. Calderoni also served as a member of the global managing board at SAP AG between November 2012 and January 2014 and as President SAP Cloud at SAP AG from June 2013 to January 2014. Mr. Calderoni has also held senior finance roles at Apple and IBM and served as Chief Financial Officer of Avery Dennison Corporation.
 

 

LOGO   Kirill Tatarinov
  Age: 52
  Mr. Tatarinov has served as our President and Chief Executive Officer and member of our Board of Directors since January 2016. Prior to joining Citrix, Mr. Tatarinov served as Executive Vice President of the Microsoft Business Solutions Division (MBS) with responsibility for the Microsoft Dynamics business across development, sales, marketing and operations. Prior to joining MBS in 2007, Mr. Tatarinov led the Management and Solutions Division at Microsoft, where he was in charge of the Microsoft Windows management technologies and products, including Microsoft System Center, as well as Windows Server solutions. Additionally, Mr. Tatarinov holds two patents for managing computer resources and related technologies.
 

 

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LOGO   David J. Henshall
  Age: 48
  Mr. Henshall has served as our Executive Vice President and Chief Financial Officer beginning in September 2011 and as our Chief Operating Officer beginning in February 2014. Mr. Henshall was appointed Acting Chief Executive Officer and President during Mark B. Templeton’s temporary leave of absence from October 2013 to February 2014. From January 2006 to September 2011, Mr. Henshall served as our Senior Vice President and Chief Financial Officer, and from April 2003 to January 2006, he served as our Vice President and Chief Financial Officer. Since January 2017, Mr. Henshall has served on the Board of Directors of LogMeIn, Inc., a publicly-traded remote access and remote software company.
 

 

LOGO   Timothy A. Minahan
  Age: 47
  Mr. Minahan has served as our Senior Vice President and Chief Marketing Officer since November 2015. Prior to joining Citrix, Mr. Minahan served as Senior Vice President and Chief Marketing Officer of SAP from June 2013 to July 2015, where he led their effort to transition to the cloud. Before SAP, Mr. Minahan was the Senior Vice President of Business Network Strategy and Global Chief Marketing Officer at Ariba from December 2007 to June 2013. Mr. Minahan has also served as Senior Vice President of Marketing at Procuri, Inc. and as Chief Services and Research Officer at Aberdeen Group.

 

LOGO   Carlos E. Sartorius
  Age: 56
  Mr. Sartorius has served as our Executive Vice President, Worldwide Sales and Services since January 2015. Prior to this appointment, Mr. Sartorius served as Managing Director and Vice President, Sales and Services of our Europe, Middle East and Africa (EMEA) organization from September 2011 to January 2015. Prior to joining Citrix, Mr. Sartorius was Vice President and General Manager, HP Networking at Hewlett-Packard Company, a publicly-traded hardware, software and IT services company, from November 2009 to September 2011.

Our executive officers are appointed by the Board of Directors on an annual basis and serve until their successors have been duly qualified and appointed.

 

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Part 4 Executive Compensation

 

 

 

Compensation Discussion and Analysis

Purpose of Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides comprehensive information about the 2016 compensation for the following executive officers (who we refer to as our Named Executive Officers):

 

  Robert M. Calderoni, Executive Chairman and Former Interim Chief Executive Officer and President

 

  Kirill Tatarinov, President and Chief Executive Officer

 

  David J. Henshall, Executive Vice President, Chief Operating Officer and Chief Financial Officer

 

  William L. Burley, Former Corporate Vice President and General Manager, Workspace Services, whose employment with Citrix ended in March 2017

 

  Timothy A. Minahan, Senior Vice President and Chief Marketing Officer

 

  Klaus Oestermann, Former Senior Vice President and General Manager, Delivery Networks, whose employment with Citrix ended in March 2017

 

  Carlos E. Sartorius, Executive Vice President, Worldwide Sales and Services

NAVIGATING THE COMPENSATION DISCUSSION AND ANALYSIS

 

     Page  

2016 Highlights

     31  
Objectives and Elements of Our Executive Compensation Programs      35  

How Executive Pay Decisions are Made

     38  

Components of Compensation

     42  

Individual Executive Compensation Decisions

     52  

Other Compensation Policies and Information

     56  

2016 Highlights

Our Business

Our mission is to power a world where people, organizations and things are securely connected and accessible. We aim to accomplish this by building the

world’s best integrated technology services for secure delivery of apps and data anytime, anywhere.

2016: A Transformational Year

Over the past few years, we’ve taken actions to refocus our business and position Citrix for further growth. We began our transformation in 2015 by simplifying our strategy and message, rationalizing our product portfolio and restructuring our workforce. Also in 2015, we announced the proposed separation of our GoTo business; and in January 2017, we completed the separation of our GoTo business and its subsequent merger with LogMeIn, Inc.

These actions allowed us to significantly increase focus on our core enterprise strategy of secure and reliable delivery of applications and data, and consequently build a more efficient, scalable and profitable company.

This is evident by the progress we made during 2016 in advancing our vision, strategy and culture, while at the same time expanding profitability and growth in our core business. We believe that our efforts have also increased our pace of innovation, improved our competitive position and put us on a path for sustained, profitable growth in our core business and growth in strategic areas such as Citrix Cloud, where we see an opportunity to accelerate our business. In fact, we are seeing early traction in our cloud transformation.

Additionally, in early 2017, we transitioned Citrix to a unified functional organization bringing our three core business units into one agile structure which will enable us to drive even stronger innovation going forward and continue to focus on what is important to our shareholders, customers and partners.

Chief Executive Officer Transition and Role of our Executive Chairman

At the end of 2015, our Executive Chairman, Robert M. Calderoni, was also serving as Interim Chief Executive Officer and President, leading the execution of strategic and operational initiatives we were undertaking, while also leading the search for our next President and Chief Executive Officer.

 

 

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Our CEO search focused on identifying leaders that have demonstrated both strong product management and operational leadership skills. Kirill Tatarinov, who most recently served as Executive Vice President of the Microsoft Business Solutions Division, has a proven track record of growing businesses and driving operational performance. Because of these demonstrated skills, in January 2016, our Board of Directors identified Mr. Tatarinov as the best person to lead our company for the long term and to execute on the strategic initiatives that we started in 2015. Mr. Tatarinov was appointed President and Chief Executive Officer in January 2016 and joined our Board of Directors as a director at that time.

In approving the initial annual total target cash compensation and equity awards for Mr. Tatarinov, our Compensation Committee was mindful of both the fierce competition for talented executives in the technology sector and the demands on, and responsibilities of, a leader of a global organization of the scale and complexity of Citrix. Further, our Compensation Committee recognized the challenges in not only finding an individual to fit the specific needs of Citrix, but also in retaining that person during a time when the company was going through a significant transition and the Board of Directors was driving substantial change. Accordingly, our Compensation Committee, with assistance from our independent compensation consultant, conducted a comprehensive review of pay structures for chief executive officers at peer companies. As a result of that review, our Compensation Committee determined that it was important to establish a compensation framework for Mr. Tatarinov that would provide a total target direct compensation opportunity that was competitive with those of chief executive officers at other major global technology companies, that included long-term company performance as a significant portion of pay and that provided the opportunity to build significant share ownership when the chief executive officer creates sustained long-term value for shareholders. Therefore, our Compensation Committee determined that it was important to align a significant amount of Mr. Tatarinov’s compensation to company performance.

As a result of that review, our Board of Directors and Compensation Committee approved an initial target direct compensation package for Mr. Tatarinov that was 58% performance-based. Target direct compensation includes base salary, target variable cash compensation and the grant date fair value of service-based restricted stock and performance-based restricted stock units. This percentage of performance-based target direct compensation is above

average when compared to the pay mix for chief executive officers in our current peer group.

In connection with Mr. Tatarinov’s employment, we entered into an employment agreement with Mr. Tatarinov that provides for an initial base salary of $1,000,000, which will be subject to annual review. In addition, Mr. Tatarinov is entitled to participate in our variable cash compensation plan at an annual target variable cash payment of 125% of his base salary. Mr. Tatarinov’s base salary is at the market median, and his variable cash compensation is at the 25th percentile, of Citrix’s executive compensation peer group.

Upon the commencement of his employment with us and to align Mr. Tatarinov’s incentives with the interests of our shareholders, Mr. Tatarinov received an initial grant of 118,588 service-based shares of restricted stock that vest in twelve quarterly installments over a three-year period and 220,235 performance-based restricted stock units that vest based primarily on the compounded annual total return to shareholders measured on an absolute basis over a three-year performance period as further described in Restricted Stock Unit and Restricted Stock Awards beginning on page 48.

Mr. Tatarinov’s new hire long-term equity incentive award is approximately three times the median for annual long-term equity incentive awards to chief executive officers among Citrix’s executive compensation peer group when measured on a value basis. Based on the experience and recommendation of its independent compensation consultant, our Compensation Committee believes that Mr. Tatarinov’s new hire long-term equity incentive award is consistent with market practice for new chief executive officers (that is, approximately three times the market median annual long-term incentive award) and that the award mix, which is 65% performance-based with a focus on compounded annual total shareholder return measured on an absolute basis versus relative total shareholder return, is more heavily performance-based than comparable chief executive officer compensation packages in our peer group.

During our annual compensation cycle in early 2017, our Compensation Committee and Board of Directors reevaluated Mr. Tatarinov’s compensation package per the terms of his employment agreement. For 2017, Mr. Tatarinov will continue to receive a base salary of $1,000,000 and will continue to participate in our variable cash compensation plan at an annual target variable cash payment of 125% of his base salary. Also, as part of our annual equity grant cycle in early 2017 and consistent with

 

 

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Mr. Tatarinov’s employment agreement, Mr. Tatarinov was granted long-term incentive awards having a value of $8,500,000, half of which are tied to relative performance metrics as described under 2017 Equity Awards beginning on page 51. The performance-based restricted stock units granted to Mr. Tatarinov do not have an interim performance measurement and vest at the end of a three-year performance period ending on December 31, 2019. The target value of this annual long-term incentive award package is approximately 35% of the target value of his new hire long-term incentive award package.

Following Mr. Tatarinov’s appointment, Mr. Calderoni continued in his role as Executive Chairman of our Board of

Directors. While the roles of President and Chief Executive Officer and Executive Chairman have distinct responsibilities, as indicated in the table below, during 2016, both Messrs. Calderoni and Tatarinov focused on driving execution of our strategic plan, including operational and capital structure efficiency and portfolio simplification. Mr. Calderoni also focused on special strategic and operational initiatives in 2016, including the separation of our GoTo business and its subsequent merger with LogMeIn, Inc., which resulted in the receipt of LogMeIn shares by our shareholders valued at approximately $2.9 billion.

 

 

Responsibilities of Executive Chairman

  

Responsibilities of President and

Chief Executive Officer

   

  Drives development of our strategic plan to improve Citrix’s margins, profitability and capital structure

 

  Sets agenda for and chairs Board meetings

 

  Coordinates with chairs of Board committees

 

  Assists Nominating and Corporate Governance Committee with the Board’s annual evaluation and self-assessment

 

  Assists Nominating and Corporate Governance Committee with Board composition and evolution planning, including review of committee memberships

  

  Drives execution of our strategic plan to improve Citrix’s margins, profitability and capital structure

 

  Sets strategic imperatives and priorities of the organization

 

  Develops and drives our product and innovation strategy

 

  Oversees all corporate functions and go-to-market activities

 

  Oversees the attainment of our strategic, operational and financial goals and strategic and operational planning

 

  Chief spokesperson to our employees, customers, partners and shareholders

 

Mr. Calderoni’s experience leading a software company through a transition of its legacy business to a cloud-based, subscription revenue business gives him the operational skills, experience and judgment necessary to oversee the execution of our strategic plan and to help drive our transition to the cloud. Our Board of Directors believes that it is in the best interests of our shareholders for Mr. Calderoni to remain in the role of Executive Chairman through December 31, 2018, and thereafter serve on our Board of Directors as a non-employee director with compensation that is consistent with that of our independent directors. As a result, we entered into an employment agreement with Mr. Calderoni that was effective as of January 31, 2017 and has a term that ends on December 31, 2018, subject to Mr. Calderoni’s re-election to the Board of Directors by our shareholders. Under the employment agreement, Mr. Calderoni receives

a base salary of $500,000 (a decrease from his prior base salary of $1,000,000 that he was receiving as Executive Chairman beginning in 2015 and continued to receive while serving as Interim Chief Executive Officer and President). Mr. Calderoni also received a restricted stock unit award in February 2017 that vests over a two-year period with 5/8 of the award vesting monthly during the first year and 3/8 of the award vesting monthly during the second year, reflecting a two-year commitment to the role of Executive Chairman and the Board of Director’s plan to transition the role over this period. Mr. Calderoni will not participate in our variable cash compensation plan and there are no further equity awards planned for Mr. Calderoni during this two-year transition period.

See Individual Executive Compensation Decisions beginning on page 52 for a discussion of Messrs. Tatarinov’s and Calderoni’s compensation arrangements.

 

 

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2016 Business Highlights

Our transformational efforts led to the following performance in 2016 as compared to 2015:

 

  4% increase in annual revenue to $3.42 billion

 

  68% increase in net income of $536 million, or $3.41 per diluted share

 

  8% increase in cash flow from operations to $1.12 billion

 

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Our balance sheet is robust, including $1.80 billion in deferred revenue and $2.66 billion in net cash and investments as of December 31, 2016. As part of our commitment to return capital to shareholders, in January 2017, we announced that our Board of Directors authorized up to an additional $500 million in stock repurchases in addition to the approximately $404 million remaining for stock repurchases from previous authorizations.

As illustrated in the graph below, our total shareholder return, or TSR, over the five-year period ended on December 31, 2016 was approximately 47%.

 

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Over the one-year period ended on December 31, 2016, our TSR was approximately 18%, as compared to a TSR of approximately 7.5% for the Nasdaq Index during the same period, outperforming nearly 77% of the index constituents and creating over $2.3 billion in value in 2016.

 

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Shareholder Engagement

Our Board of Directors welcomes the views and insights of our shareholders and conducts an annual outreach effort to connect with our larger shareholders in order to ensure open lines of communication. Further, our executives regularly engage with shareholders to better understand their perspective on a wide range of issues.

In 2016, we reached out to over 30 of our largest shareholders and proxy advisory firms to understand their perspective and discuss our governance and executive compensation policies. As a result, we held in-person and telephonic meetings with our largest shareholders and a proxy advisory firm representing approximately 28% of Citrix’s outstanding common stock, including our shareholders that we believe are influenced by the proxy advisory firm. These shareholder meetings covered a wide range of topics including corporate governance practices such as proxy access, board refreshment and composition, succession planning, our executive compensation program, and other matters of shareholder interest. The Chairperson of our Compensation Committee, Nanci E. Caldwell, participated in every meeting along with other senior executives.

Management, the Chairperson of our Compensation Committee, and other Board members who participate in shareholder engagement meetings, regularly share shareholder feedback with relevant Board committees and the full Board of Directors. In general, feedback from our shareholders regarding our compensation programs and corporate governance practices is positive. The Board of Directors carefully considers the feedback from shareholders and has implemented their feedback into our

executive compensation and corporate governance practices, including:

 

  Increasing our focus on our diversity and inclusion initiatives, including diversity of our Board of Directors;

 

  Adopting an executive compensation recovery policy; and

 

  Implementing a relative performance metric for our 2017 annual performance-based equity awards.

We believe it is important to continue to engage with our shareholders on a regular basis to understand their perspectives and to give them a voice in shaping our governance and executive compensation policies and practices.

Objectives and Elements of Our Executive Compensation Programs

The compensation that we offer our executive officers is designed to reflect our principles of integrity, fairness and transparency – concepts that have continually underscored the design and delivery of the compensation opportunity at Citrix. We believe our compensation programs should emphasize sustainable corporate growth through a pay-for-performance orientation and a commitment to both operational and organizational execution. We also believe that lavish perquisites, excessive severance and bonuses unrelated to performance are inconsistent with our executive compensation principles. Furthermore, while the establishment of variable cash compensation targets for our executive officers necessarily involves judgment, the actual payouts against those targets are based on pre-determined, objective financial criteria reflective of our

 

 

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annual operating plan or total shareholder return and indicative of positive business growth.

For more than a decade, the objectives of our executive compensation programs have been to:

 

  provide competitive compensation that attracts, retains and engages high-performing talent; and
  align the long-term interests of executive officers with those of our shareholders by linking a significant portion of total cash and equity compensation to company performance.

These objectives still hold true today and guided us through the compensation decisions we made in 2016 during a transformational year.

 

 

Highlights of Our Compensation Approach
Conceptual Approach    Implementation
Link senior executive’s annual target compensation directly with company performance   

  Approximately 47% of the total target direct compensation (1) of our Named Executive Officers, other than our Executive Chairman and our President and Chief Executive Officer, on average, was performance-based

 

  President and Chief Executive Officer Kirill Tatarinov’s total target direct compensation (1) was approximately 58% performance-based

 

Payout opportunity levels for executive variable cash compensation plan should motivate performance that meets or exceeds our financial plan objectives while mitigating undue exposure to under-performance of these objectives   

  In 2016, each executive officer’s variable cash compensation plan award was based 100% on the achievement of objective financial operating targets consistent with our annual operating plan

 

  Based on 2016 company performance, variable cash compensation plan awards for 2016 paid 160.9% of the target amount

 

  Over the past nine years, our variable cash compensation plan awards have paid out between 56.4% and 160.9% and paid above 100% less than half of the time

 

Our shareholders seek long-term total shareholder return and our executives should share that goal   

  At least 50% of annual equity awards to executive officers are awarded as performance-based RSUs; and for 2016, these awards vest primarily based on a compounded total annual shareholder return metric measured on an absolute basis

 

  President and Chief Executive Officer Kirill Tatarinov’s initial equity award mix was 65% performance-based with a focus on compounded annual total shareholder return measured on an absolute basis

 

To account for the speed of the business environment within the software sector, our compensation program should be flexible so that it can be tailored to the specific challenges facing the company at any given time   

  Each year, our variable cash compensation plan and performance-based equity awards granted to executive officers are designed to fit our strategic and operational initiatives and reflect feedback we receive from our shareholders

 

 

(1) Includes 2016 base salary, target variable cash compensation and grant date fair value of equity compensation.

 

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Further, we engage in the following practices to ensure our executive compensation program achieves our objectives and is aligned with shareholders’ interests.

 

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The elements of compensation that we use to accomplish our objectives include:

 

  base salary;

 

  variable cash compensation;

 

  equity-based long-term incentives; and

 

  benefits.

We considered each of these items in determining the individual compensation packages for our executive officers.

Link of Pay to Performance Proven Effective: Performance-Based Equity Awards Only Deliver on Results

From 2012 to 2015, we granted market performance-based restricted stock units. These awards rewarded our executive officers with restricted stock units based on the total return to our shareholders over a three-year period compared to the return on the Nasdaq Composite Total Return Index, thereby providing executive officers with strong incentives to increase shareholder value over the long-term. The performance period for the market

performance-based restricted stock units granted in 2014, the third year we granted awards having these performance metrics, ended on December 31, 2016. During the three-year performance period for these awards, our returns significantly exceeded the Nasdaq Composite Index. Based on this comparative performance, 130.21% of the target shares vested under these awards. This was the first year in three years that our market performance-based restricted stock units had any shares vest. When there is no vesting under this program, such as the market performance-based awards granted in 2012 and 2013, it significantly impacts our executive officers’ realizable compensation. On the contrary, our executives are rewarded when we outperform.

For example, the average realizable equity compensation of our named executive officers listed in our 2013 and 2014 Proxy Statements (the years in which we reported the market performance-based restricted stock units granted in 2012 and 2013) was only 42% and 57%, respectively, of the equity compensation reported. We did not grant discretionary bonuses or awards or make any compensation adjustments to compensate for the awards that failed to vest.

 

 

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By contrast, the average realizable equity compensation of our named executive officers listed in our 2015 Proxy Statement (the year in which we reported the market performance-based restricted stock units granted in 2014) was 114% of the equity compensation reported, assuming each named executive officer had stayed with us through the vesting date of the market performance-based restricted stock units granted in 2014.

 

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(1) Values are calculated using the aggregate grant date fair value of restricted stock unit awards in 2012, 2013, and 2014, the years in which the grants were made, and are as reported in the Summary Compensation Table in our 2013, 2014 and 2015 Proxy Statements. The values include service-based and market performance-based restricted stock unit awards. The assumptions we used for calculating the grant date fair value are set forth in Note 7 to our consolidated financial statements included in our Annual Reports on Form 10-K for each of the years ended December 31, 2012, December 31, 2013 and December 31, 2014, which were filed with the SEC on February 21, 2013, February 20, 2014 and February 19, 2015, respectively. In the case of market performance-based restricted stock units, the fair value reported in the Summary Compensation Tables in our 2013, 2014 and 2015 Proxy Statements were the probable outcome, which was 100% target achievement. No shares vested under the market performance-based awards for the awards granted in 2012 and 2013; and as a result, no value is realizable for these awards. 130.21% of the target shares for the market performance-based awards granted in 2014 vested.

 

How Executive Pay Decisions Are Made

Compensation Process and Criteria

Evaluation Process

The compensation packages for our executive officers are reviewed by our Compensation Committee and include an analysis of all elements of compensation separately and in the aggregate. In 2016, Radford was retained by the Compensation Committee as its independent adviser to assist with its oversight of executive compensation and as discussed in this Compensation Discussion and Analysis, the Compensation Committee retained Frederic W. Cook & Co., Inc., which refer to as FW Cook, in December 2016 replacing Radford. In addition, our legal, finance and human resources departments support the Compensation Committee in its work and act in accordance with the direction given to them to administer our compensation programs.

Throughout 2016, the Compensation Committee held meetings with management, our human resources department and representatives of Radford to:

 

  review our compensation objectives;
  evaluate and develop our executive compensation peer group;

 

  review the actual compensation of our executive officers and compensation packages for new executive officers for consistency with our objectives;

 

  analyze trends in executive compensation;

 

  assess our variable cash compensation structure, as well as the plan components and mechanics, to ensure an appropriate correlation between pay and performance with resulting compensation opportunities that balance returns to the business and our shareholders (this included, among other things, modeling amounts payable under proposed plan structures against various scenarios, and assessing those payouts as a percentage of non-GAAP corporate operating income and other variables);

 

  assess our equity-based awards programs against our objectives of executive engagement, retention and alignment with shareholder interests;

 

  benchmark our executive cash compensation and equity-based awards programs, and assess our pay versus performance against our peer group; and
 

 

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  review recommendations for 2016 target direct compensation for appropriateness relative to our compensation objectives.

At several meetings throughout the first quarter of 2016, the Compensation Committee reviewed proposed compensation programs and packages for our executive officers for 2016, which were prepared by management and evaluated by our finance department for alignment with our operating plan. In February 2016, the Compensation Committee approved the proposed 2016 variable cash compensation plan, which we refer to as the variable cash compensation plan. In March 2016, the Compensation Committee approved individual compensation packages for our other executive officers. In each case, the determinations of the Compensation Committee were reviewed with our Board of Directors.

In evaluating our 2016 executive compensation program, the Compensation Committee considered a number of factors as discussed above, including the shareholder advisory (“say-on-pay”) vote on our executive compensation for 2015, which was approved by over 84% of the votes cast. We are asking our shareholders to vote on the frequency of such shareholder advisory votes at this meeting. See Proposal 5 Advisory Vote to Approve the Frequency of Holding Future Advisory Votes on the Compensation of our Named Executive Officers beginning on page 92.

Evaluation Criteria

In determining the amount and mix of the target compensation elements, the Compensation Committee relies upon its judgment about the scope and strategic impact of each individual executive officer’s role. In setting final compensation targets for our executive officers in 2016, the Compensation Committee considered many factors, including:

 

  the performance and experience of each individual;

 

  the scope and strategic impact of the executive officer’s responsibilities;

 

  our past business and financial performance and future expectations;

 

  our long-term goals and strategies;

 

  difficulty in, and the cost of, replacing high performing leaders with in-demand skills;

 

  past compensation levels of each individual and of our executive officers as a group;
  relative levels of compensation among our executive officers;

 

  the amount of each compensation component in the context of the executive officer’s total target compensation and other benefits;

 

  for each executive officer, other than our Executive Chairman and President and Chief Executive Officer, the evaluation and recommendation of our President and Chief Executive Officer;

 

  for our President and Chief Executive Officer, the evaluation of our Board of Directors, a self-evaluation by our President and Chief Executive Officer and feedback from his direct reports; and

 

  the competitiveness of the compensation packages relative to the selected benchmarks as highlighted by the independent compensation consultant’s analysis.

Role of the Independent Compensation Consultant

During 2016, Radford reported directly to the Compensation Committee for purposes of advising the Committee on executive compensation matters. The Compensation Committee provided Radford with preliminary instructions regarding the goals of our compensation program and the parameters of the competitive review of executive officer total direct compensation packages to be conducted by Radford. Radford was instructed to review and provide guidance on our peer group development. Radford was then instructed to benchmark all components of compensation for all executive officer positions, including base salary, target total cash (base salary plus target variable cash compensation) and equity-based long-term incentive awards. The Compensation Committee also instructed Radford to review the public disclosure by our peer companies concerning their executive compensation practices and to review our internal compensation model and guidelines and compare them to our peer companies and to our actual compensation practices.

Throughout the fourth quarter of 2015 and the first quarter of 2016, Radford attended meetings of the Compensation Committee, both with and without members of management present, and interacted with members of our human resources department with respect to its assessment of the compensation packages of our executive officers. Once Radford, working in conjunction with our human resources department,

 

 

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completed its preliminary analysis of our executive officer compensation, their analysis was presented to the Compensation Committee, which was discussed at the Compensation Committee’s February and March 2016 meetings.

Independence of Compensation Consultant

During 2016, our accounting department engaged Aon Hewitt, an affiliate of Aon, Radford’s parent company, as a resource to assist us in determining the fair value of our performance-based awards. Additionally, our treasury department retained Aon to serve as our broker of record for our world-wide insurance lines. Finally, our human resources department purchased commercially available compensation survey reports and a data application from Radford. The services purchased from Aon in 2016 were reviewed and approved by the Audit Committee of our Board of Directors. In total, fees paid to Aon during 2016

for services not related to Radford’s work with our Compensation Committee were approximately $426,177. Fees paid to Radford during 2016 for services related to recommending the amount and form of executive and director compensation were approximately $96,500. In assessing Radford’s independence, the Compensation Committee considered the fees paid to Radford and Aon and our policy on independence of the Compensation Committee’s consultant and other advisers, which is contained in our Corporate Governance Guidelines and the Compensation Committee’s charter. As specified in our Corporate Governance Guidelines and Compensation Committee charter, the Compensation Committee also considered six independence factors as required by Nasdaq and the SEC, which are specified in the following table. After analyzing each of these factors indicated in the following table and our policy on independence relative to Radford’s engagement, the Compensation Committee concluded that Radford is independent.

 

 

Independence Factor    Information Considered
Other services provided to Citrix by Radford    None other than services described in the preceding paragraphs.
Citrix fees received by Radford, as a percentage of Aon’s total revenue    Modest and represents less than 0.00083% of Aon’s total revenue.
Radford’s policies and procedures that are designed to prevent conflicts of interest    Radford maintains a number of internal mechanisms and policies to ensure its ability to provide objective, third-party advice to its clients and avoid potential conflicts of interest.
Business or personal relationships between the Compensation Committee’s individual compensation adviser and members of the Compensation Committee    The Compensation Committee’s individual compensation adviser has no direct business or personal relationships with any member of the Compensation Committee. Radford has provided consulting services to three companies that are affiliated with members of the Compensation Committee.
Citrix stock owned by the Compensation Committee’s individual compensation adviser    The Compensation Committee’s individual compensation adviser does not directly own any Citrix stock and the practice is prohibited under Aon’s Code of Conduct.
Business or personal relationships between the Compensation Committee’s individual compensation adviser, or Radford, with a Citrix executive officer    Neither the Compensation Committee’s individual compensation adviser, nor Radford, has a direct business or personal relationship with any Citrix executive officer.

 

Compensation Consultant Change

Our Compensation Committee regularly reviews its executive compensation consulting needs and periodically invites compensation consulting firms to discuss these executive compensation needs with the Compensation Committee. This process enables the Compensation Committee to reevaluate its compensation consultant and take a fresh look at our compensation practices and policies. Beginning in October 2016, the Compensation Committee invited five consulting firms to present to the Compensation Committee. The Compensation Committee evaluated the consulting firms on consulting competency,

technical competency, industry knowledge, independence and fee structure, among other things. As a result of the review, our Compensation Committee appointed FW Cook in December 2016 as its independent compensation consultant, replacing Radford.

In connection with FW Cook’s appointment, the Committee evaluated its independence and considered our policy on independence of the Compensation Committee’s consultant and other advisers, as discussed above. The Compensation Committee also considered the six independence factors as required by Nasdaq and the SEC and concluded that FW Cook is independent.

 

 

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Our use of Benchmarks and Peer Group Analysis

We annually conduct a competitive analysis of the compensation paid to our executive officers and review the compensation practices of our peer group and of the software industry overall. As in prior years, the analysis for 2016 measured our compensation opportunities for executive officers and actual compensation paid against information from the following sources:

 

  independent, commercially available surveys on executive compensation within the software industry, tailored to reflect our relative market capitalization and revenue, including the Radford Global Technology Survey, the Radford Global Sales Survey; and

 

  an internally-prepared benchmark analysis using commercially available survey data and information from publicly filed reports from a group of 17 peer technology companies, or the peer group, specifically identified by the Compensation Committee.

We annually evaluate the composition of our peer group and adjust the composition of our peer group for factors such as recent acquisitions of peer companies, new markets that we have entered or changes in the technology market landscape. In 2015, with assistance from Radford, we again focused on developing a peer group to address the dynamics in the markets for talent in which we compete. Further, based on an assessment of

our shareholder return performance relative to our peers and recent acquisitions of peer companies, among other factors, in October 2015 our Compensation Committee revised our executive compensation peer group for 2016 to include Cadence Design Systems, NetApp, Symantec and Yahoo! and to exclude Cisco, Concur, Microsoft and Riverbed. Our peer group includes:

 

  companies that represent an appropriate range from a size and scope perspective;

 

  innovative companies that operate in virtualization, cloud, software-as-a-service and networking markets; and

 

  companies with whom we compete for talent.

We believe that our peer group continues to be aligned with our strategic vision and positions us to attract, retain and engage high performing leaders. Moreover, our current peer group, with its inclusion of a full array of companies with whom we compete for talent, maintains Citrix’s position at approximately the group median across key financial metrics we view as important in selecting a peer group. The table below lists the companies in our 2016 peer group indicating the peers with whom we regularly compete for executive, managerial and technical talent. We believe that, like Citrix, our 2016 peer group is composed of innovative, software-focused businesses operating on a global scale and are the companies with whom we look to align our executive compensation practices.

 

 

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Trademarks are property of their respective owners.

 

  (1) Fiscal year end data presented in the table is for fiscal year ending in 2016, other than LinkedIn Corporation and Rackspace Hosting, Inc. whose fiscal year end data is for fiscal year ending in 2015.

 

We use the peer group benchmarks as one of several factors that inform our judgment of appropriate compensation parameters for base salary, variable cash compensation and equity-based, long-term incentives. Our executive compensation decisions are made on a case-by-case basis, and benchmarks are just one consideration within our holistic approach to executive compensation. Based on an assessment of our peer group, in October 2016, our Compensation Committee revised our executive compensation peer group for 2017 to include Palo Alto Networks and ServiceNow and to exclude LinkedIn and Yahoo!.

Components of Compensation

Commitment to Performance-Based Compensation

We are committed to aligning at least 50% of our President and Chief Executive Officer’s annual target compensation directly with company performance. For 2016, our President and Chief Executive Officer’s total target direct compensation was 58% performance-based as shown below. Also as shown below, approximately 46% of the target direct compensation of our Named Executive Officers, other than our Executive Chairman, Former Interim Chief Executive Officer and President, on average, was performance-based.

 

 

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  (1) Includes base salary, target variable cash compensation and grant date fair value of equity compensation.

 

Base Salary

Salary levels for our executive officers are based on several factors, including individual performance and experience, the scope of the role and competitive ranges informed by compensation data reported for similar roles at companies in our peer group.

 

In 2016, based on the objectives of our executive compensation program, our evaluation criteria for individual performance, Citrix’s overall performance and other factors described above, the base salaries of our Named Executive Officers, were increased, effective April 1, 2016 unless otherwise indicated below.

 

 

    

2015 Base
Salary

($)

    

  2016 Base
Salary

($)

       Increase
(%)
 

Robert M. Calderoni(1)

 

Executive Chairman, Former Interim Chief Executive Officer and President

     1,000,000          1,000,000         

Kirill Tatarinov(2)

 

President and Chief Executive Officer

            1,000,000         

David J. Henshall

 

Executive Vice President, Chief Operating Officer and Chief Financial Officer

     695,000        725,000              4.3  

William L. Burley

 

Former Corporate Vice President and General Manager, Workspace Services

     400,000        400,000         

Timothy A. Minahan

 

Senior Vice President and Chief Marketing Officer

     400,000        400,000         

Klaus Oestermann

 

Former Senior Vice President and General Manager, Delivery Networks

     425,000        450,000        5.9  

Carlos E. Sartorius

 

Executive Vice President, Worldwide Sales and Services

     525,000        550,000        4.8  

 

(1) Mr. Calderoni was appointed as Interim Chief Executive Officer and President on October 20, 2015 and served in such role until January 25, 2016. Mr. Calderoni continued to receive a base salary of $1,000,000 in his capacity as Executive Chairman during 2016, which is the same level of compensation he was receiving prior to his appointment as Interim Chief Executive Officer and President. Mr. Calderoni’s salary was reduced to $500,000, effective January 31, 2017.
(2) Mr. Tatarinov was appointed as President and Chief Executive officer on January 25, 2016 and received a base salary of $1,000,000 from his appointment date through the end of 2016.

 

Variable Cash Compensation

For 2016, our compensation evaluation processes resulted in target awards for our Named Executive Officers under our variable cash compensation plan that ranged from 90% to 125% of base salary, based on the factors discussed above.

Our Compensation Committee oversees our variable cash compensation plan, with administrative tasks delegated to management. Consistent with the way we calculate and publicly report our financial results, the financial targets and attainment levels for variable cash compensation are adjusted to exclude certain GAAP measurements, including

 

 

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amortization of intangible assets primarily related to business combinations, non-cash charges associated with the expensing of equity-based compensation, non-cash charges related to amortization of debt discount, accruals related to patent litigation, charges related to our restructuring programs, the tax effects related to these items and any other items adjusted from our GAAP results in our reported earnings. In addition, the Compensation Committee and our Board of Directors retain the discretion to decrease or increase payouts to account for extraordinary circumstances and to balance the interests of the plan participants with the interests of our shareholders. As in the past, in 2016, we did not adjust the resulting payouts under the variable cash compensation plan or our 2016 performance-based restricted stock unit awards discussed below.

Participants in our variable cash compensation plan received variable cash compensation awards for 2016 based upon the achievement of objective financial goals, including targets based on reported revenue and non-GAAP corporate operating margin. We believe that, for an annual incentive program to be effective, it should

be easy to understand. Thus, we use a limited number of financial targets that focus our executive officers on the key metrics underlying our strategic plan and align performance pay strictly with financial results.

To ensure the integrity of our operating plan, and to safeguard shareholder value, the payout levels under our variable cash compensation plan are designed to motivate performance that meets or exceeds our financial plan objectives while mitigating undue exposure for under-performance of these objectives. We rigorously test our plan design to ensure that the structure and possible outcomes do not create incentives for our executive officers to take unnecessary and excessive risks that would impact our long-term value.

Specifically, we model potential award payouts generated by various performance attainment levels against corporate goals for revenue and non-GAAP corporate operating margin. We also model the likely impact on shareholder value based on achieving all possible revenue and non-GAAP corporate operating margin targets. We summarize this analysis in the following diagram:

 

 

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    The X axis represents plan payouts for any level of revenue;
    The Y axis represents plan payouts for any level of non-GAAP corporate operating margin;
    The solid green area in the lower left corner of the graphic represents minimum payouts under the plan;
    The lightest green area in the upper right corner on the graphic represents the maximum payouts under the plan, of up to 200%; and
    The green rectangle in the middle of the graphic represents the area of actual plan payouts under our plans over the last 5 years.

Over the past nine years, the plan has paid between 56.4% and 160.90% and has paid above 100% 4 times, as shown below:

 

    2008 – 56.4%
    2009 – 103.6%
    2010 – 130.4%
    2011 – 97.7%
    2012 – 92.1%
    2013 – 58.8%
    2014 – 89.4%
    2015 – 118.4%
    2016 – 160.9%

 

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We also model the likely impact on shareholder value based on achieving all possible revenue and non-GAAP corporate operating margin targets. This modeling helps to inform threshold, target and maximum payout levels for the plan and ensures that awards, when viewed relative to our non-GAAP corporate operating margin goal, are consistent with our overall operating plan for the year and provide the right balance of compensation to our executive officers for actual results versus returns to the business and our shareholders.

For 2016, each executive officer’s variable cash compensation plan award was based 100% on the achievement of financial targets established by the Compensation Committee. The financial targets established are consistent with our annual operating plan, which is approved by our Board of Directors. Our variable cash compensation plan weighted these financial components as follows:

 

  50% for achieving a reported revenue target of $3.310 billion; and

 

  50% for achieving a non-GAAP corporate operating margin target of 29.0%.

For 2016, we revised the weighting of our variable cash compensation plan financial targets to weight equally revenue and non-GAAP operating margin. In our 2015 plan, we weighted financial targets to be 60% for achieving a revenue target and 40% for achieving an operating

margin target. This shift during 2016 was to reflect our focus on increasing our operating margin while maintaining a significant focus on our revenue as part of our operational transformation. See 2016 Highlights beginning on page 31 for a discussion of our transformation.

This revenue target is nearly flat when compared to the revenue target of $3.336 billion for the 2015 variable cash compensation plan, which is consistent with our operational transformation plan we shared with the shareholders in November 2015 and discussed in our 2016 Proxy Statement. Also consistent with our operational transformation and to align with the profitability target in our annual operating plan approved by our Board of Directors in January 2016, the 2016 non-GAAP corporate operating margin target represents an increase of 510 basis points from the operating margin target of 23.9% in our 2015 variable cash compensation plan.

Our variable cash compensation plan provided for a premium in the event of overachievement of targets, capped at 200% of the target payout amount, and a reduction in the event of underachievement of targets, depending on actual results. The following chart shows the maximum performance amounts that would have resulted in a payout of 200% of the target amount and the minimum performance requirements that needed to be met before any award could be earned.

 

 

      

Maximum Performance

(200% payout)

    

Minimum Performance

(30% payout)

Revenue

     $3.475 billion      $2.979 billion

Non-GAAP Operating Margin %

     32.6%      26.1%

 

The maximum revenue threshold represents a 7.4% decrease from the $3.754 billion maximum threshold set for fiscal year 2015 consistent with our operational transformation as discussed above. Although the maximum revenue threshold in the 2016 variable cash compensation plan decreased as compared to the 2015 maximum revenue threshold, at the time it was established by our Compensation Committee, our Committee viewed it as requiring the same level of performance rigor as was the case under our 2015 variable cash compensation plan.

The maximum operating margin threshold represents an increase of 570 basis points from the 26.9% maximum threshold set for fiscal year 2015, which was incorrectly reported in our 2016 Proxy Statement, reflecting our focus on increasing our operating margin during 2016.

When actual performance falls between the threshold and the target performance levels or between the target and maximum performance levels, payouts are calculated using a graduated slope to provide for the fair distribution of operating profit for overachievement and appropriate compensation reductions for underachievement, as applicable. Further, no incentive is payable under our variable cash compensation plan unless at least 90% of either financial component of our performance goal is achieved, and at such threshold level an executive officer receives only 30% of his or her target variable cash compensation allocated to such component. This payout structure recognizes that, in a business of this scale, while overachievement merits a greater reward, any underachievement should be penalized.

 

 

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Target Total Cash Compensation Mix

Our Named Executive Officer compensation packages had the following target mix of cash compensation in 2016,

expressed both as a percentage of target total cash compensation and in dollars:

 

 

    

Target Total Cash Compensation Mix

($ and % of Total Target Cash Compensation)

 
   Base Salary     

Target

Variable Cash

Compensation

    

Target Total Cash

Compensation

 
   ($)      (%)      ($)      (%)      ($)      (%)  
Robert M. Calderoni                  
Executive Chairman, Former Interim Chief Executive Officer and President      1,000,000        44.4        1,250,000        55.6        2,250,000        100  
Kirill Tatarinov                  
President and Chief Executive Officer      1,000,000        44.4        1,250,000        55.6        2,250,000        100  
David J. Henshall                  
Executive Vice President, Chief Operating Officer and Chief Financial Officer      725,000        50.0        725,000        50.0        1,450,000        100  
William L. Burley                  
Former Corporate Vice President and General Manager, Workspace Services      400,000        52.6        360,000        47.4        760,000        100  
Timothy A. Minahan                  
Senior Vice President and Chief Marketing Officer      400,000        52.6        360,000        47.4        760,000        100  
Klaus Oestermann                  
Former Senior Vice President and General Manager, Delivery Networks      425,000        52.6        382,500        47.4        807,500        100  
Carlos E. Sartorius                  
Executive Vice President, Worldwide Sales and Services      550,000        50.0        550,000        50.0        1,100,000        100  

 

Determination of Awards

Early in the first quarter of 2017, our Executive Vice President, Chief Operating Officer and Chief Financial Officer reviewed and approved the calculations of financial target attainment levels, which were based on and consistent with, our publicly reported financial results for 2016, and the 2016 award amounts payable to executive officers that were generated by members of our human

resources department in accordance with the terms of our variable cash compensation plan. At a meeting held in February 2017, our Compensation Committee approved (or, in the case of our Executive Chairman and our President and Chief Executive Officer, recommended to the Board of Directors for approval) the payouts under our 2016 variable cash compensation plan, including approval of the following award calculations:

 

 

                          Weighted    
     Goal      Actual      Attainment      Payout      Weighting      Payout    
     (amounts are approximate due to rounding)  

Revenue

   $ 3.310 billion      $ 3.418 billion        103.3%        165.4%        50%        82.7%  

Non-GAAP Operating Margin %

     29.0%        31.0%        107.1%        156.4%        50%        78.2%  

Total Weighted Payout %

                                160.9%  

 

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The table below summarizes the payments approved by our Compensation Committee (or, in the case of our Executive Chairman and President and Chief Executive Officer, approved by the Board of Directors) under our variable cash

compensation plan compared to each executive officer’s target award for 2016. Each Named Executive Officer listed below received 160.9% of his target award for 2016, except as noted below in the notes to the table.

 

 

     Target
Variable Cash
Compensation
Award
($)
     Actual
Variable Cash
Compensation
Award Paid
($)
     Percentage of
Target
Awards Paid
(%)
 
Robert M. Calderoni(1)         
Executive Chairman, Former Interim Chief Executive Officer and President                    81,967                      131,885                    160.9  
Kirill Tatarinov(2)         
President and Chief Executive Officer      1,168,033        1,879,365        160.9  
David J. Henshall         
Executive Vice President, Chief Operating Officer and Chief Financial Officer      725,000        1,166,525        160.9  
William L. Burley         
Former Corporate Vice President and General Manager, Workspace Services      360,000        579,240        160.9  

Timothy A. Minahan

        

Senior Vice President and Chief Marketing Officer

     360,000        579,240        160.9  
Klaus Oestermann         
Former Senior Vice President and General Manager, Delivery Networks      382,500        615,443        160.9  

Carlos E. Sartorius

        
Executive Vice President, Worldwide Sales and Services      550,000        884,950        160.9  

 

(1) Mr. Calderoni’s target variable cash compensation and actual variable cash compensation are prorated to reflect less than one year of service as Interim Chief Executive Officer and President. Mr. Calderoni did not participate in our variable cash compensation plan during 2016 while serving as Executive Chairman.
(2) Mr. Tatarinov’s target variable cash compensation and his actual variable cash compensation award are prorated to reflect less than a full year of service.

 

Equity-Based Long-term Incentives

The purpose of our equity-based long-term incentives is to attract, retain and engage high performing leaders, further align employee and shareholder interests, and continue to closely link executive compensation with company performance. Our equity-based long-term incentive program is an essential component of the total compensation package offered to our executive officers, reflecting the importance that we place on motivating and rewarding superior results with long-term and performance-based incentives.

Approach to Equity-Based Awards

Since 2012, our annual equity grant program consists entirely of restricted stock units, except restricted stock awards granted to our Executive Chairman and President and Chief Executive Officer. Our portfolio of equity awards granted to executive officers on an annual basis is a mix of just two equity elements, half of which are tied to long-term total shareholder return. Specifically, beginning in 2012, our equity-based long-term incentive program is

targeted to consist of at least 50% performance-based restricted stock units tied to achievement of total shareholder return metrics and 50% service-based restricted stock units. We targeted this same mix in 2016 and we tied our performance-based equity awards based primarily on the compounded annual total return to shareholders measured on an absolute basis as discussed below. We believe that our executive officers’ compensation portfolio, including equity awards, consists of a higher percentage of awards tied to objective financial measures than is the case in the compensation portfolios of most of our peer group companies. The exclusive use of restricted stock units granted to our executive officers, other than our Executive Chairman and President and Chief Executive Officer, furthers our goals of reducing dilution, burn rate and overhang by reducing the number of shares of our common stock subject to equity-based awards while continuing to provide incentive for our high performers to remain with us and continue to perform at a high level. Also, the inclusion of performance-based restricted stock units based on the achievement of total return to our shareholders over a three-year period places

 

 

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a strong emphasis on stock price performance, which underscores our focus on growth. We believe that this equity mix aligns our executive officers’ interests with those of our shareholders since our executive officers must return value to our shareholders over the long-term before half of their awards are earned.

Equity - Based Award Grant Levels

When establishing equity grant levels for our executive officers, the Compensation Committee considers the existing value of vested and unvested equity-based awards held by the executive officers relative to each other and to our employees as a whole, previous grants of equity-based awards to our executive officers, our overhang of equity-based awards and targeted burn rates for equity-based awards and the vesting schedules of previously granted equity-based awards, as well as the various other factors described above. While our Compensation Committee is aware of the accounting costs of equity-based awards, that in itself is only one of several factors in determining individual equity-based awards. Further, annual equity awards for each Named Executive Officer (other than our Executive Chairman, who did not receive an equity-based award during 2016, and our President and Chief Executive Officer, who received a new-hire award in January 2016) reflect the market competitive value for his or her respective role, the relative level of impact the executive officer has on company performance, and the current and prospective performance of the executive officer in his or her role. Consistent with our past methodology, award levels for 2016 annual grants were set using an estimated value of Citrix stock based upon an average of the last 30 trading days in 2015.

Adjustments to Outstanding Equity in Connection with GoTo Transaction

As previously discussed, in January 2017, we completed the separation of our GoTo business and its subsequent merger with LogMeIn, Inc., which we refer to as the GoTo transaction. In connection with the GoTo transaction and as recently reported in our Annual Report on Form 10-K for

the fiscal year ended December 31, 2016, in February 2017, we adjusted the number of our outstanding restricted stock unit and stock option awards, as well as the exercise price of stock option awards to preserve the intrinsic value of the awards following the transaction. Unless otherwise noted, the restricted stock units reported in this Proxy Statement are on an unadjusted basis.

Further, to reflect the value of the shares of LogMeIn stock distributed to our shareholders in the GoTo transaction, in February 2017, we adjusted the opening price of our outstanding market-performance and performance-based equity awards as discussed below.

Restricted Stock Unit and Restricted Stock Awards

Pursuant to the 2014 Plan, we may grant executive officers various types of awards, including market performance-based and performance-based restricted stock units, service-based restricted stock units and service-based restricted stock. Once vested, each restricted stock unit represents the right to receive one share of our common stock.

Performance-Based Awards

In January 2016, our Compensation Committee deviated from our typical equity compensation program to recruit and retain Mr. Tatarinov and draw him away from competing opportunities as further discussed in Individual Executive Compensation Decisions beginning on page 52. When designing the performance-based awards to be granted to Mr. Tatarinov and subsequently our executive officers in March 2016, the Compensation Committee considered three objectives:

 

  Provide an incentive that has clear performance measures and aligned rewards;

 

  Provide meaningful retention value and reward for performance even during a market downturn if Citrix outperforms similar software companies; and

 

  Reward performance throughout the three-year performance period.
 

 

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To achieve the first objective, our Compensation Committee tied vesting of the performance-based restricted stock units to absolute total shareholder return based on a rigorous compounded annual growth hurdle calculated using the trailing 20-trading day average closing price on the grant date and the trailing 20-trading day

average closing price on the last day of the performance period so as to payout only on sustained increases in total shareholder value, in accordance with the following payout curve (utilizing straight-line interpolation between percentages for any total shareholder return percentage greater than 5%):

 

 

 

LOGO

 

Our Compensation Committee determined that this metric was sufficiently challenging to align the interests of our executive officers (other than our Executive Chairman) with those of our shareholders. For example, for Mr. Tatarinov’s performance-based equity award granted in connection with his appointment as Chief Executive Officer and President as further discussed in Individual Executive Compensation Decisions beginning on page 52, to generally achieve an absolute total shareholder return based on compounded annual growth of 10%, which would result in Mr. Tatarinov receiving 100% of his performance-based award at the end of the performance period on January 24, 2019, the trailing 20-trading day average share price at the end of the performance period would have to be at least $70.75 as compared to the opening share price of $53.15, as adjusted for the GoTo transaction. Based on the outstanding shares on January 25, 2016, the date of grant of Mr. Tatarinov’s award, a share price of $70.75 would result in a market capitalization of $13.8 billion (consisting of $10.0 billion in Citrix market capitalization plus $2.9 billion distributed to our shareholders in connection with the GoTo transaction) as compared to the grant date market capitalization of $10.9 billion based on the unadjusted opening share price of Mr. Tatarinov’s award and the outstanding shares on the date of grant. Further, to achieve an absolute total shareholder return based on compounded annual growth of 30%, which would result in Mr. Tatarinov receiving 200% of his performance-based award, the trailing 20-trading day average share price at the end of the performance period would have to be at least $116.77 as compared to the opening share price of Mr. Tatarinov’s award of $53.15, as adjusted for the GoTo transaction. This would result in a market capitalization of $20.9 billion (consisting of $18.0 billion in Citrix market capitalization plus $2.9 billion

distributed to our shareholders in connection with the GoTo transaction) as compared to the grant date market capitalization of $10.9 billion.

Similarly, when granting these performance-based awards to our other executive officers in March 2016 as further discussed in Individual Executive Compensation Decisions beginning on page 52, our Compensation Committee determined that the absolute total shareholder return metric remained sufficiently challenging. To generally achieve an absolute total shareholder return based on compounded annual growth of 10%, which would result in our executive officers receiving 100% of the performance-based award at the end of the performance period on March 30, 2019, the trailing 20-trading day average share price at the end of the performance period would have to be at least $77.91 as compared to the opening share price of $58.61, as adjusted for the GoTo transaction. Further, to achieve an absolute total shareholder return based on compounded annual growth of 30%, which would result in our executive officers receiving 200% of the performance-based awards, the trailing 20-trading day average share price at the end of the performance period would have to be at least $128.77 as compared to the opening share price of the awards of $58.61, as adjusted for the GoTo transaction.

To achieve the second objective of meaningful retention during a challenging market environment, for example, a period of increased stock volatility, our Compensation Committee provided a means to reward our executive officers for superior relative performance during a period of market correction. Our executive officers (other than our Executive Chairman) may receive a portion of his or her performance-

 

 

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based award based on Citrix’s relative total shareholder return percentile rank compared to companies included in the S&P Computer Software Select Index as follows:

 

 

LOGO

 

Our executives will receive no payment if relative total shareholder return is below the 60 th percentile and absolute total shareholder return is below 5%, and the payout in a negative shareholder return scenario is capped at 75% of target and awarded only if Citrix’s performance is at or above the 85 th percentile.

To achieve the third objective of rewarding performance not just at the end of the three-year performance period but also throughout the performance period, the Compensation Committee provided for an interim measurement of performance. When determining the mix of equity-based compensation for our President and Chief Executive Officer, as discussed in Individual Executive Compensation Decisions beginning on page 52, rather than granting an equity award mix to Mr. Tatarinov having a higher percentage of service-based awards, our Compensation Committee chose to grant an equity award mix having a higher percentage of performance-based equity awards with an interim measurement period to closely align Mr. Tatarinov’s interests with those of our shareholders, while providing retention to Mr. Tatarinov. Following an interim measurement period of eighteen months, the Compensation Committee will determine the number of restricted stock units that would be deemed earned based on performance to date, and only up to 33% of the target award may be earned by our executive officers based on such interim performance. Further, any restricted stock units that are deemed earned will remain subject to continued service and will not vest until the end of the full three-year performance period.

As discussed under 2017 Equity Award beginning on page 51, our performance-based equity awards granted in 2017 do not have an absolute total shareholder return

metric nor an interim measurement of performance as these were metrics we implemented during our chief executive officer transition and during a time of transformation.

Service-Based Awards

Consistent with our past practice, in March 2016, we also entered into restricted stock unit agreements with our executive officers, other than our Executive Chairman and our President and Chief Executive Officer, for service-based restricted stock unit awards that were not subject to performance criteria and that vest over three years, with one-third of the units vesting on the first, second and third anniversaries of the date of the award agreement.

The equity-based awards indicated in the table below for our Executive Vice President, Chief Operating Officer and Chief Financial Officer, Former Senior Vice President and General Manager, Workspace Services, Senior Vice President and Chief Marketing Officer, Former Senior Vice President and General Manager, Delivery Networks, and Executive Vice President, Worldwide Sales and Services reflect an equity portfolio mix based on a number of shares underlying the awards that is 50% performance-based restricted stock units and 50% service-based restricted stock units. Mr. Tatarinov received new hire-equity based awards in January 2016 in connection with his appointment as President and Chief Executive Officer. These new-hire awards are reflected in the table below. Mr. Calderoni did not receive an equity award in 2016.

For further details regarding these service-based awards, see Individual Executive Compensation Decisions beginning on page 52.

 

 

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The following table summarizes our 2016 equity-based awards to our Named Executive Officers:

 

    

Target
Performance-
Based Restricted

Stock Unit Awards
(#)(1)(2)

     Service-Based
Restricted Stock or
Restricted Stock Unit
Awards  (#)(1)
 

Robert M. Calderoni

     

Executive Chairman, Former Interim Chief Executive Officer and President

                                          —                                             —  

Kirill Tatarinov

     

President and Chief Executive Officer(3)

     220,235        118,588  

David J. Henshall

     

Executive Vice President, Chief Operating Officer and Chief Financial Officer

     28,500        28,500  

William L. Burley

     

Former Corporate Vice President and General Manager, Workspace Services

     12,500        12,500  

Timothy A. Minahan

     

Senior Vice President and Chief Marketing Officer

     12,500        12,500  

Klaus Oestermann

     

Former Senior Vice President and General Manager, Delivery Networks

     12,500        12,500  

Carlos E. Sartorius

     

Executive Vice President, Worldwide Sales and Services

     27,500        27,500  

 

(1) In February 2017, we adjusted the numbers of our outstanding restricted stock unit and stock option awards to preserve the intrinsic value of the awards in connection with the GoTo transaction. The restricted stock units reported are on an unadjusted basis.
(2) Reflects the target number of restricted stock units that our executive officers may earn under the terms of their 2016 performance-based restricted stock unit agreements.
(3) Reflects Mr. Tatarinov’s new-hire equity-based awards. Mr. Tatarinov’s service-based award was granted in the form of restricted stock.

 

2017 Equity Awards

Based on a review of our equity compensation during the first quarter of 2017, with the assistance of FW Cook and as a result of feedback we received from our shareholders, our Compensation Committee implemented a relative total shareholder return metric for our 2017 performance-based restricted stock units and moved away from having an interim performance measure that gives executives an opportunity to vest awards during the performance period. These performance-based restricted stock units cliff vest after a three-year period and do not have an interim performance measurement period. The performance-based restricted stock units are earned based on Citrix’s three-year relative total shareholder return compared to a pre-established custom index group. Our total shareholder return index group was identified using objective selection criteria recommended by FW Cook. These performance-based awards ensure that a meaningful share of our executives’ equity compensation is contingent upon future outperformance compared to an index group rather than continued employment or the appreciation of Citrix stock alone. Our executives, including our Chief Executive Officer and President, received performance-based restricted stock units having these relative metrics in March 2017 as part of our annual grant cycle.

Benefits

Our executive officers participate in our broad-based employee benefit plans on the same terms as eligible, non-executive employees, subject to any legal limits on the amounts that may be contributed or paid by executive officers under these plans. We offer a stock purchase plan, under which our employees may purchase shares of our common stock at a 15% discount from the fair market value of our common stock on the first or last business day of the purchase period, whichever is lower (determined by reference to the closing price of our common stock on each such date), and a 401(k) plan, which allows our employees to invest in a wide array of funds on a pre-tax basis and which provides a matching contribution from our company. We also maintain insurance and other benefit plans for our employees. Our executive officers receive higher life, accidental death and dismemberment and disability insurance benefits than other employees, which reflects industry standards and their relative base salary levels. Our executive officers also receive reimbursement for annual health physicals and are eligible for relocation assistance upon joining our company. During 2016, we did not offer any non-qualified deferred compensation plans or supplemental retirement plans to our executive officers. During 2016 we provided relocation benefits to our President and Chief Executive Officer and our Executive

 

 

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Vice President Worldwide Sales and Services as described below. For more information, please refer to the Summary Compensation Table and the Nonqualified Deferred Compensation Table below. We have always limited the perquisites that are generally made available to our executive officers.

Individual Executive Compensation Decisions

Next, we discuss how we apply the policies and practices described above and the resulting compensation paid or awarded to each of our Named Executive Officers for the year ended December 31, 2016 as set forth in the Summary Compensation Table and the Grants of Plan-Based Awards Table.

Executive Chairman and President and Chief Executive Officer

Executive Chairman, Former Interim Chief Executive Officer and President

Mr. Calderoni, a director of Citrix since June 2014 and Executive Chairman since July 2015, served as Interim Chief Executive Officer and President from October 2015 through Mr. Tatarinov’s appointment in January 2016.

As Interim Chief Executive Officer and President, Mr. Calderoni was entitled to base salary of $1,000,000 and to participate in our variable cash compensation plan at 125% of his base salary. Upon Mr. Tatarinov’s appointment as our Chief Executive Officer in January 2016, Mr. Calderoni’s compensation returned to his pre-existing compensation for service as our Executive Chairman consisting of a base salary of $1,000,000 with no participation in our variable cash compensation plan. As a result, Mr. Calderoni received a base salary of $1,000,000 for 2016 and variable cash compensation of $131,885 reflecting service as our Interim Chief Executive Officer and President for less than one month in 2016. Mr. Calderoni did not receive any equity awards during 2016.

Our Compensation Committee and Board of Directors reevaluated the role of Executive Chairman at the end of 2016 and during the first quarter of 2017. During that review, our Compensation Committee and Board of Directors considered, among other things, that Mr. Calderoni’s experience leading a software company through a transition of its legacy business to a cloud-based, subscription revenue business gives him the operational skills, experience and judgment necessary to oversee the execution of our strategic plan and to help drive our transition to the cloud. Our Board of Directors believes that it is in the best interests of our shareholders for Mr. Calderoni to remain in the role of Executive Chairman through December 31, 2018, and

thereafter serve on our Board of Directors as a non-employee director with compensation that is consistent with that of our independent directors. As a result, we entered into an employment agreement with Mr. Calderoni that was effective as of January 31, 2017 and has a term that ends on December 31, 2018, subject to Mr. Calderoni’s re-election to the Board of Directors by our shareholders.

The Compensation Committee, in making its recommendation to our Board of Directors regarding the employment agreement with Mr. Calderoni, consulted with its independent compensation consultant and considered Mr. Calderoni’s current compensation package as Executive Chairman and the transitional nature of the ongoing role. Under the employment agreement, Mr. Calderoni receives a base salary of $500,000 (a decrease from his prior base salary of $1,000,000) and received a restricted stock unit award in February 2017 with an aggregate value of $8,000,000 that vests over a two-year period with 5/8 of the award vesting monthly during the first year and 3/8 vesting monthly during the second year, reflecting a two-year commitment to the role of Executive Chairman and the Board’s plan to transition the role over this period. Mr. Calderoni will not participate in our variable cash compensation plan and no further equity-based awards are planned for Mr. Calderoni during this two-year transition period. During the term of his employment, Mr. Calderoni also will be entitled to participate in all other employee benefit plans and programs generally available to our senior executive employees.

President and Chief Executive Officer

Our President and Chief Executive Officer is responsible for overseeing all of our business functions, go-to-market activities and the attainment of our strategic, operational and financial goals. Working in concert with management and our Board of Directors, our President and Chief Executive Officer formulates current and long-term strategic plans and objectives and is chief spokesperson to our employees, customers, partners and shareholders.

Based on a recommendation by the Compensation Committee, our Board of Directors determines compensation for our President and Chief Executive Officer using the same factors it uses for other executive officers, placing less emphasis on base salary and, instead, driving greater performance-based alignment with our shareholders through equity-based long-term and variable cash compensation. In assessing the compensation paid to our President and Chief Executive Officer, the Compensation Committee relies on the advice of its independent compensation consultant, information from selected

 

 

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benchmarks and its judgment with respect to the factors described above and specific factors described below.

In January 2016, our Board of Directors concluded its search process for our next President and Chief Executive Officer with the appointment of Kirill Tatarinov as our President and Chief Executive Officer. Our CEO search focused on identifying leaders that have demonstrated both strong product management and operational leadership skills. Kirill Tatarinov, who most recently served as Executive Vice President of the Microsoft Business Solutions Division, has a proven track record of growing businesses and driving operational performance. Because of these demonstrated skills, in January 2016, our Board of Directors identified Mr. Tatarinov as the best person to lead our company for the long term and to execute on the operational and

strategic initiatives that we started in 2015. He was appointed President and Chief Executive Officer in January 2016 and joined our Board as a director at that time.

In approving the initial annual total target cash compensation and equity awards for Mr. Tatarinov, our Compensation Committee was mindful of both the fierce competition for talented executives in the technology sector and the demands on, and responsibilities of, a leader of a global organization of the scale and complexity of Citrix. Further, our Compensation Committee recognized the challenges in not only finding an individual to fit the specific needs of Citrix, but also in retaining that person during a time when the company was going through a significant transition and the Board of Directors was driving substantial change. Accordingly, our Compensation Committee, with assistance from our independent compensation consultant, conducted a comprehensive review of pay structures for chief executive officers at peer companies. As a result of that review, our Compensation Committee determined that it was important to establish a compensation framework for Mr. Tatarinov that would provide a total target direct compensation opportunity that was competitive with those of chief executive officers at other major global technology companies, that included long-term company performance as a significant portion of pay and that provided the opportunity to build significant share ownership when the chief executive officer creates sustained long-term value for shareholders. Therefore, our Compensation Committee determined that it was important to align a significant amount of Mr. Tatarinov’s compensation to company performance.

As a result of that review, our Board of Directors and Compensation Committee approved an initial target direct

compensation package for Mr. Tatarinov that was 58% performance-based. Target direct compensation includes base salary, target variable cash compensation and the grant date fair value of service-based restricted stock and performance-based restricted stock units. This percentage of performance-based target direct compensation is above average when compared to the pay mix for chief executive officers in our current peer group.

In connection with Mr. Tatarinov’s employment, we entered into an employment agreement with Mr. Tatarinov that provides for an initial base salary of $1,000,000, which will be subject to annual review. In addition, Mr. Tatarinov is entitled to participate in our variable cash compensation plan at an annual target variable cash payment of 125% of his base salary. Mr. Tatarinov’s base salary is at the market median, and his variable cash compensation is at the 25 th percentile, of Citrix’s executive compensation peer group. As a result, on a pro-rated basis for 2016, Mr. Tatarinov received $937,500 in base salary and $1,879,365 in variable cash compensation reflecting the 160.9% payout under such plan for significantly overachieving against the plan’s 2016 revenue and non-GAAP operating margin percentage targets.

Upon the commencement of his employment with us and to align Mr. Tatarinov’s incentives with the interests of our shareholders, Mr. Tatarinov received an initial grant of 118,588 service-based shares of restricted stock that vest in twelve quarterly installments over a three-year period and 220,235 performance-based restricted stock units that vest based primarily on the compounded annual total return to shareholders measured on an absolute basis over a three-year performance period as described above.

Mr. Tatarinov’s performance-based restricted stock unit award was granted with an opening price of $70.83, which was calculated using the trailing 20-day trading average price on the grant date. This opening price was adjusted by our Compensation Committee in February 2017 to $53.51 to reflect the value of the portion of a share of LogMeIn common stock received by our shareholders with respect to each share of our outstanding common stock in connection with the GoTo transaction as described above.

Our Compensation Committee determined that the absolute total shareholder return metric based on compounded annual growth for Mr. Tatarinov’s performance-based equity awards would align Mr. Tatarinov’s interests with those of our shareholders. For example, to generally achieve an absolute total shareholder return based on compounded annual growth of 10%, which would result in Mr. Tatarinov receiving 100% of his performance-based award at the end of the

 

 

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performance period on January 24, 2019, the trailing 20-trading day average share price at the end of the

performance period would have to be at least $70.75 as compared to the opening share price of $53.15, as adjusted for the GoTo transaction. Based on the outstanding shares on January 25, 2016, the date of grant of Mr. Tatarinov’s award, a share price of $70.75 would result in total shareholder value of $13.8 billion (consisting of $10.9 billion in Citrix market capitalization plus $2.9 billion of LogMeIn shares received by our shareholders in connection with the GoTo transaction) as compared to the grant date market capitalization of $10.9 billion based on the unadjusted opening share price of Mr. Tatarinov’s award and the outstanding shares on the date of grant. Further, to achieve an absolute total shareholder return based on compounded annual growth of 30%, which would result in Mr. Tatarinov receiving 200% of his performance-based award, the trailing 20-trading day average share price at the end of the performance period would have to be at least $116.77 as compared to the opening share price of Mr. Tatarinov’s award of $53.15, as adjusted for the GoTo transaction. This would result in total shareholder value of $20.9 billion (consisting of $18.0 billion in Citrix market capitalization plus $2.9 billion of LogMeIn shares received by our shareholders in connection with the GoTo transaction) as compared to the grant date market capitalization of $10.9 billion.

Mr. Tatarinov’s new hire long-term equity incentive award is approximately three times the median for annual long-term equity incentive awards to chief executive officers among Citrix’s executive compensation peer group when measured on a value basis. Based on the experience and recommendation of its independent compensation consultant, our Compensation Committee believes that Mr. Tatarinov’s new hire long-term equity incentive award is consistent with market practice for new chief executive officers (that is, approximately three times the market median annual long-term incentive award) and that the award mix, which is 65% performance-based with a focus on compounded annual total shareholder return measured on an absolute basis versus relative total shareholder return, is more heavily performance-based than comparable chief executive officer compensation packages in our peer group.

Also, in connection with his appointment as President and Chief Executive Officer, we provided assistance to Mr. Tatarinov with respect to the costs of his relocation from the State of Washington to our corporate headquarters in Florida. This assistance included the reimbursement of certain travel, storage, household goods, automobile shipment, and related moving expenses, as

well as a one-time taxable relocation allowance of $650,000 for additional costs associated with his relocation. This assistance was not subject to a gross-up. Mr. Tatarinov has agreed to reimburse Citrix for payment of the relocation allowance in the event his employment is terminated under certain conditions within two years following the commencement of his employment with us.

During our annual compensation cycle in early 2017, our Compensation Committee and Board of Directors reevaluated Mr. Tatarinov’s compensation package per the terms of his employment agreement. For 2017, Mr. Tatarinov will continue to receive a base salary of $1,000,000 and will continue to participate in our variable cash compensation plan at an annual target variable cash payment of 125% of his base salary. Also, as part of our annual equity grant cycle in early 2017 and consistent with Mr. Tatarinov’s employment agreement, Mr. Tatarinov was granted long-term incentive awards having a value of $8,500,000, half of which are tied to relative performance metrics as described under 2017 Equity Awards beginning on page 51. These performance-based restricted stock units granted to Mr. Tatarinov do not have an interim performance measurement and vest at the end of a three- year performance period ending on December 31, 2019. The target value of this annual long-term incentive award package is approximately 35% of the target value of his new hire long-term incentive award package.

Our Board of Directors unanimously approved Mr. Tatarinov’s employment agreement, including his equity awards and his 2017 compensation package, upon the recommendation of the Compensation Committee.

Other Named Executive Officers Cash Compensation – Base Salary and Variable Cash Compensation

Executive Vice President, Chief Operating Officer and Chief Financial Officer

As Executive Vice President, Chief Financial Officer and Chief Operating Officer, David J. Henshall is responsible for overseeing our relations with our investors, budgeting and planning, financial accounting, operations, tax, treasury, information technology and security, and supply chain management. Mr. Henshall is also responsible for developing our overall financial and capital management strategies.

As discussed above, effective April 1, 2016, Mr. Henshall’s annual base salary was increased from $695,000 to $725,000. As a result, in 2016, Mr. Henshall received base salary compensation of $717,500.

For 2016, Mr. Henshall’s target variable cash compensation award as a percentage of base salary was set at 100% of his

 

 

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base salary. For 2016, Mr. Henshall was awarded variable cash compensation of $1,166,525 in accordance with our 2016 variable cash compensation plan.

Former Corporate Vice President and General Manager, Workspace Services

As our former Corporate Vice President and General Manager, Workspace Services, William L. Burley was responsible for overseeing our enterprise product strategy and our former Workspace Services business unit.

Mr. Burley’s annual base salary for 2016 was $400,000 and Mr. Burley received base salary compensation of $400,000 in 2016.

For 2016, Mr. Burley’s target variable cash compensation as a percentage of base salary was set at 90% of his base salary.

Mr. Burley left Citrix at the end of March 2017. We entered into a retention agreement with Mr. Burley in July 2016 to provide for an orderly transition of leadership of our former Workspace Services business unit. In accordance with the terms of his retention agreement, Mr. Burley received a retention bonus of $320,000 in January 2017. Mr. Burley also received variable cash compensation for fiscal year 2016 based on actual company performance in the amount of $579,240. The total value of the payments provided to Mr. Burley under the terms of his retention agreement was approximately $899,240, not including continued salary, equity that continued to vest pursuant to its terms and company benefits provided through his departure date in March 2017. Such payments were subject to the execution of a separation and release agreement by Mr. Burley.

Senior Vice President and Chief Marketing Officer

As Senior Vice President and Chief Marketing Officer, Timothy A. Minahan is responsible for overseeing our worldwide customer experience and marketing efforts.

Mr. Minahan’s annual base salary in 2016 was $400,000 and Mr. Minahan received base salary compensation of $400,000 in 2016.

Mr. Minahan’s target variable cash compensation award as a percentage of base salary was set at 90% of his base salary. For 2016, Mr. Minahan was awarded variable cash compensation of $579,240 in accordance with our 2016 variable cash compensation plan.

Former Senior Vice President and General Manager, Delivery Networks

As former Senior Vice President and General Manager, Delivery Networks, Klaus Oestermann was responsible for

overseeing our former Delivery Networks business unit.

Effective April 1, 2016, Mr. Oestermann’s annual base salary was increased from $400,000 to $425,000. As a result, in 2016, Mr. Oestermann received base salary compensation of $415,000. Mr. Oestermann’s target variable cash compensation award as a percentage of base salary was set at 90% of his base salary. For 2016, Mr. Oestermann was awarded variable cash compensation of $615,443 in accordance with our 2016 variable cash compensation plan.

Mr. Oestermann left Citrix at the end of March 2017.

Executive Vice President, Worldwide Sales and Services

As Executive Vice President, Worldwide Sales and Services, Carlos E. Sartorius is responsible for overseeing our worldwide sales and services efforts.

Effective April 1, 2016, Mr. Sartorius’ base salary was increased from $525,000 to $550,000. As a result, in 2016, Mr. Sartorius received base salary compensation of $543,750.

Mr. Sartorius’ target variable cash compensation award as a percentage of base salary was set at 100% of his base salary. For 2016, Mr. Sartorius was awarded variable cash compensation of $884,950 in accordance with our 2016 variable cash compensation plan.

Other Named Executive Officers Equity – Based Long-term Incentive Compensation

Our Compensation Committee developed our 2016 performance-based awards in connection with the appointment of our President and Chief Executive Officer in January 2016. To align our executive officers with the goals of the President and Chief Executive Officer, our Compensation Committee determined to grant our executive officers performance-based awards during the 2016 annual grant cycle that had the same performance metrics as Mr. Tatarinov’s new hire performance-based equity award.

As a result, on March 30, 2016, our Named Executive Officers, other than our Executive Chairman and our President and Chief Executive Officer, were awarded performance-based restricted stock unit awards pursuant to which each executive officer is eligible to earn restricted stock units based primarily on the compounded annual total return to shareholders measured on an absolute basis over a three-year performance period as described above. These awards were granted with an opening price of $76.29, which was calculated using the trailing 20-day average closing price on the date of grant. This opening price was adjusted by our Compensation Committee in

 

 

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February 2017 to $58.61 to reflect the value of the portion of a share of LogMeIn common stock received by our shareholders with respect to each share of our outstanding common stock in connection with the GoTo transaction as

previously described above. Attainment levels will be determined following the end of the performance period on March 30, 2019.

 

 

The following executives were awarded grants of performance-based restricted stock units at the following target award levels:

 

  Name and Principal Position   

Target Performance-
Based Restricted

Stock Unit Awards(1)

 

  David J. Henshall

  Executive Vice President, Chief Operating Officer and Chief Financial Officer

                                  28,500  

  William L. Burley

  Former Corporate Vice President and General Manager, Workspace Services

     12,500  

  Timothy A. Minahan

  Senior Vice President and Chief Marketing Officer

     12,500  

  Klaus Oestermann

  Former Senior Vice President and General Manager, Delivery Networks

     12,500  

  Carlos E. Sartorius

  Executive Vice President and Worldwide Sales and Services

     27,500  

 

(1) In February 2017, we adjusted the numbers of our outstanding restricted stock unit and stock option awards to preserve the intrinsic value of the awards in connection with the GoTo transaction. The restricted stock units reported are on an unadjusted basis.

On March 30, 2016, the following Named Executive Officers were awarded service-based restricted stock units as part of our annual compensation process, which vest in three equal annual installments as follows:

 

  Name and Principal Position   

Service-
Based Restricted

Stock Unit Awards(1)

 

   David J. Henshall

  Executive Vice President, Chief Operating Officer and Chief Financial Officer

                             28,500  

   William L. Burley

  Former Corporate Vice President and General Manager, Workspace Services

     12,500  

   Timothy A. Minahan

  Senior Vice President and Chief Marketing Officer

     12,500  

   Klaus Oestermann

  Former Senior Vice President and General Manager, Delivery Networks

     12,500  

   Carlos E. Sartorius

  Executive Vice President, Worldwide Sales and Services

     27,500  

 

(1) In February 2017, we adjusted the numbers of our outstanding restricted stock unit and stock option awards to preserve the intrinsic value of the awards in connection with the GoTo transaction. The restricted stock units reported are on an unadjusted basis.

 

 

Other Compensation Policies and Information

 

Equity Award Grant Policy

In 2007, the Compensation Committee adopted the Citrix Equity Award Grant Policy, or the Awards Policy. The Awards Policy enhances our controls with respect to grants of equity awards by establishing procedures for approving and pre-determining the dates on which awards will be made. Pursuant to the Awards Policy, unless a different date is set by our Board of Directors or the Compensation Committee, annual grants of full value awards are made on the last business day in March on or prior to March 30th.

The Awards Policy also establishes fixed grant dates for new hire and performance grants. An employee’s eligibility to receive an award as of a particular, fixed grant date is subject to the time of the month in which the employee’s employment begins or promotion is effective or, if later, the date on which all documentation necessary for the approval of the grant is obtained. A copy of our Awards Policy is available on the Corporate Governance section of our website at http://www.citrix.com/about/governance.html under Governance Documents.

 

 

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Executive Stock Ownership Guidelines

To align the interests of our executive officers with the interests of our shareholders, our Board of Directors has established stock ownership guidelines for our executive officers. Under our current guidelines, our executive officers who report to the President and Chief Executive Officer are expected to own at least the number of shares of our common stock as indicated in the table below.

 

  Position   Stock Ownership    
  President and Chief Executive Officer       100,000    
  Chief Operating Officer     50,000    
  Chief Financial Officer     25,000    
  Executive Officers     20,000    

To comply with these guidelines, each executive officer is required to retain an amount equal to one-third (1/3) of the net shares (those shares remaining after shares are deducted or withheld to cover any exercise price or tax obligations arising in connection with the exercise, vesting or payment of an equity award) received as a result of the exercise, vesting or payment of any equity-based award granted to the executive officer by the company unless such executive officer holds the applicable guideline number of shares. Each of our executive officers is expected to hold such shares for so long as he or she is one of our executive officers. Failure to satisfy the stock ownership guidelines when required to do so will result in suspension of an executive officer’s ability to sell shares of our common stock until the requisite ownership levels are reached. Our executive officers may accumulate shares of our common stock through stock option exercises, settlement of restricted stock units or other awards and open market purchases made in compliance with applicable securities laws, our policies or any other equity plans we may adopt from time to time. Shares of our common stock beneficially owned (unless the executive officer disclaims beneficial ownership of the shares) and vested restricted stock (including vested but deferred restricted stock units) count towards the satisfaction of the stock ownership guidelines. Given the nature and expected duration of his role, our Board of Directors determined that Mr. Calderoni, as Executive Chairman, would be subject to our director ownership guidelines and not these executive stock ownership guidelines.

Policy Concerning Hedging And Pledging Transactions

Certain transactions in Citrix securities (such as buying or selling puts, calls or other derivative securities of Citrix securities, or any derivative securities that provide the economic equivalent of ownership of any Citrix securities or an opportunity, direct or indirect, to profit from any change in the value of Citrix securities, or engaging in any other hedging transactions with respect to Citrix securities) create a heightened compliance risk or could create the appearance of misalignment between management and shareholders. As a result, our insider trading policy prohibits our executive officers and directors from engaging in hedging transactions, such as in short sales and/or derivative transactions, purchasing Citrix securities on margin, holding Citrix securities in an account that is, or is linked to, a margin account, and pledging Citrix securities as collateral for a loan.

Policy Regarding Change In Control Arrangements

It is our policy that we will not enter into any agreements with our executive officers that provide the executive officer with severance payments following a change in control unless such agreements provide for a double-trigger termination event (that is, upon the termination of the executive officer’s employment without cause or for good reason following a change in control).

Policy Regarding Recovery of Executive Compensation

In 2016, the Compensation Committee adopted a formal executive compensation recovery policy, or “clawback” policy, which allows Citrix to recoup from its executive officers excess proceeds from certain incentive compensation received by such executive due to a material restatement of Citrix’s financial results due to an executive officer engaging in an act of embezzlement, fraud, willful misconduct or breach of fiduciary duty. Excess compensation includes any cash or equity-based compensation if the payment, grant or vesting of such compensation is predicated on the achievement of financial performance goals or financial metrics (excluding any incentive-based compensation based on total shareholder return or any similar stock price-based metric). The Compensation Committee intends to periodically review this policy and, as appropriate, conform it to any applicable final rules adopted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

 

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Summary of Executive Compensation

The following table sets forth certain information with respect to compensation for the years ended December 31, 2016, 2015 and 2014 earned by or paid to our Executive Chairman, former Interim Chief Executive Officer and our President, President and Chief Executive Officer, our Executive Vice President, Chief Operating Officer and Chief Financial Officer, our three other most highly-compensated executive officers and one additional individual who would have been listed as one of our most highly-compensated executive officers but who was no longer serving as an executive officer at the end of our last fiscal year, referred to as our Named Executive Officers, as determined in accordance with applicable SEC rules.

SUMMARY COMPENSATION TABLE

FOR THE 2016, 2015 AND 2014 FISCAL YEARS

 

Name and

Principal Position

  Year    

Salary

($)*

   

Bonus

($)

   

Stock

Awards

($)(1)

   

Option

Awards

($)

   

Non-Equity

Incentive Plan

Compensation

($)

   

All Other

Compensation

($)

   

Total

($)

 

Robert M. Calderoni(2)

    2016       1,000,000                           —       131,885 (3)      12,950 (4)      1,144,835  

Executive Chairman, Former

Interim Chief Executive Officer

and President

    2015       430,556             18,254,249             636,818       309,811       19,631,434  

Kirill Tatarinov(5)

    2016       937,500             18,774,012             1,879,365 (6)      683,092 (7)      22,273,969  

President and

                       

Chief Executive Officer

                       

David J. Henshall

    2016       717,500             4,103,145             1,166,525       16,090 (8)      6,003,260  

Executive Vice President,

    2015       690,000             8,523,444             823,158       16,010       10,052,612  

Chief Operating Officer and

Chief Financial Officer

    2014       666,250             4,941,335             603,383       15,778       6,226,746  

William L. Burley(9)

    2016       400,000             1,799,625             579,240       330,571 (10)      3,109,436  

Former Senior Vice President

and General Manager,

Workspace Services,

               
Timothy A. Minahan(11)     2016       400,000             1,799,625             579,240       11,799 (12)      2,790,664  

Senior Vice President and Chief

Marketing Officer

               

Klaus Oestermann(13)

Former Senior Vice President

and General Manager,

Delivery Networks

    2016       415,000             1,799,625             615,443       14,530 (14)      2,844,598  
    2015       392,173             4,420,699             333,293       15,403       5,161,568  
                       
                       
Carlos E. Sartorius(15)     2016       543,750             3,959,175             884,950       393,603 (16)      5,781,478  

Executive Vice President

    2015       522,531             6,110,608             621,810       439,191       7,694,140  
Worldwide Sales and Services                                                            

 

* Each year, our salary levels are determined during our first fiscal quarter and become effective April 1, except in 2014 when our Executive Vice President, Chief Operating Officer and Chief Financial Officer’s salary was determined and became effective on February 1, 2014 upon his promotion to Chief Operating Officer, in 2015 when our former Senior Vice President and General Manager, Delivery Networks’ salary was increased in connection with his promotion to such position, in 2015 when our Executive Vice President, Worldwide Sales and Services’ salary was increased in connection with his promotion to such position and in 2016, our Chief Executive Officer and President was appointed in January 2016 and his salary was determined and became effective on January 25, 2016. The amounts represented in this table reflect salary actually paid during the fiscal year.
(1) These amounts represent the aggregate grant date fair value of restricted stock unit and restricted stock awards in the year in which the grant was made. The assumptions we used for calculating the grant date fair value are set forth in Note 7 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 16, 2017. These amounts do not represent the actual amounts paid to or realized by the executive officer for these awards during fiscal years 2016, 2015 or 2014. The value as of the grant date for restricted stock awards is recognized over the number of days of service required for the grant to become vested. In the case of performance-based restricted stock units, the fair value is reported for the probable outcome, which for this purpose is estimated as 100% target achievement. The fair value of awards at the maximum level of achievement for performance-based restricted stock units for 2016 is as follows: Mr. Calderoni had no equity awards in 2016; Mr. Tatarinov, $21,882,550; Mr. Henshall, $3,772,260; Mr. Burley, $1,654,500; Mr. Minahan, $1,654,500; Mr. Oestermann, $1,654,500; and Mr. Sartorius, $3,639,900.

 

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(2) Mr. Calderoni was not a Named Executive Officer for the fiscal year ended December 31, 2014. Mr. Calderoni has served as a director of our company since 2014; in July 2015, he was appointed as our Executive Chairman; and he served as our Interim Chief Executive Officer and President from October 2015 to January 2016.
(3) Mr. Calderoni’s non-equity incentive award is prorated to reflect less than one year of service as Interim Chief Executive Officer and President in 2016.
(4) Includes 401(k) matches made by our company ($7,950) and the value of a company-covered physical examination available to each executive officer ($5,000).
(5) Mr. Tatarinov was not a Named Executive Officer for the fiscal years ended December 31, 2014 and 2015.
(6) Mr. Tatarinov’s non-equity incentive award is prorated to reflect less than one year of service as President and Chief Executive Officer in 2016.
(7) Includes 401(k) matches made by our company ($7,500), the value of a company-covered physical examination available to each executive officer ($5,000), reimbursement of certain moving expenses ($20,592), and a one-time allowance to cover any additional costs of relocation ($650,000).
(8) Includes 401(k) matches made by our company ($7,950), premiums for split-dollar life insurance and disability policies ($3,140), and the value of a company-covered physical examination available to each executive officer ($5,000).
(9) Mr. Burley was not a Named Executive Officer for the fiscal years ended December 31, 2014 and 2015.
(10) Includes retention bonus paid to Mr. Burley pursuant to his retention agreement ($320,000), 401(k) matches made by our company ($5,571), and the value of a company-covered physical examination available to each executive officer ($5,000).
(11) Mr. Minahan was not a Named Executive Officer for the fiscal years ended December 31, 2014 and 2015.
(12) Includes 401(k) matches made by our company ($6,799) and the value of a company-covered physical examination available to each executive officer ($5,000).
(13) Mr. Oestermann was not a Named Executive Officer for the fiscal year ended December 31, 2014.
(14) Includes 401(k) matches made by our company ($6,270), premiums for split-dollar life insurance and disability policies ($3,260), and the value of a company-covered physical examination available to each executive officer ($5,000).
(15) Mr. Sartorius was not a Named Executive Officer for the fiscal year ended December 31, 2014.
(16) Includes 401(k) matches made by our company ($7,950), relocation benefits in connection with relocation to the United States from Switzerland ($380,003), plus an additional amount to cover the estimated taxes that Mr. Sartorius would incur as a result of receipt of such relocation benefits ($650) and the value of a company-covered physical examination available to each executive officer ($5,000).

 

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Grants of Plan-Based Awards

The following table sets forth certain information with respect to grants of plan-based awards for the year ended December 31, 2016 to the Named Executive Officers. Grants of equity awards to each Named Executive Officer were made pursuant to our variable cash compensation plan. There can be no assurance that the Grant Date Fair Value of the Stock Awards listed below will ever be realized.

GRANTS OF PLAN-BASED AWARDS TABLE

FOR THE 2016 FISCAL YEAR

 

                                                    All                    
                                                    Other                    
                                                    Stock     All Other              
                                                    Awards     Option           Grant  
                                                    Number     Awards:     Exercise     Date Fair  
                Estimated Future Payouts     Estimated Future Payouts     Of     Number of     Or Base     Value of  
          Comp.     Under Non-Equity     Under Equity Incentive     Shares     Securities     Price of     Stock and  
          Comm.     Incentive Plan Awards     Plan Awards     Of Stock     Underlying     Option     Option  
Name   Grant
Date
    Action
Date
    Threshold
($)
    Target
($)(1)
    Maximum
($)
    Threshold
(#)(2)
    Target
(#)(2)(3)
    Maximum
(#)(2)
    Units
(#)(2)
    Options
(#)(2)
    Awards
($/Sh)
    Awards
($) (2)(4)
 

Robert M.

Calderoni

                                                                       
                375,000       1,250,000       2,500,000                                            

Kirill

Tatarinov

    1/25/16       1/18/16                                           118,588 (5)                  7,832,737  
    1/25/16       1/18/16                         55,059       220,235 (6)              440,470                         10,941,275  
                375,000       1,250,000       2,500,000                                            

David J.

Henshall

    3/30/16       3/8/16                                           28,500                   2,217,015  
    3/30/16       3/8/16                         7,125       28,500 (7)      57,000                         1,886,130  
    3/30/16       3/8/16       217,500       725,000       1,450,000                                            

William L.

Burley

    3/30/16       3/8/16                                           12,500                   972,375  
    3/30/16       3/8/16                         3,125       12,500 (7)      25,000                         827,250  
          3/8/16       108,000       360,000       720,000                                            

Timothy A.

Minahan

    3/30/16       3/8/16                                           12,500                   972,375  
    3/30/16       3/8/16                         3,125       12,500 (7)      25,000                         827,250  
          3/8/16       108,000       360,000       720,000                                            

Klaus

Oestermann

    3/30/16       3/8/16                                           12,500                   972,375  
    3/30/16       3/8/16                         3,125       12,500 (7)      25,000                         827,250  
          3/8/16       114,750       382,500       765,000                                            

Carlos E.

Sartorius

    3/30/16       3/8/16                                           27,500                   2,139,225  
    3/30/16       3/8/16                         6,875       27,500 (7)      55,000                         1,819,950  
          3/8/16       165,000       550,000       1,100,000                                            

 

(1) On February 8, 2017, the Compensation Committee determined that the reported revenue target was 103.3% attained and the non-GAAP corporate operating margin target was 107.1% attained, resulting in a payout of 160.9% and in the following variable cash compensation awards: Mr. Calderoni received $131,885; Mr. Tatarinov received $1,879,365; Mr. Henshall received $1,166,525; Mr. Burley received $579,240; Mr. Minahan received $579,240; Mr. Oestermann received $615,443, and Mr. Sartorius received $884,950. See the column labelled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table included in this Proxy Statement. Mr. Calderoni’s variable cash compensation award was pro-rated through the date he ceased to be Interim Chief Executive Officer and President. Mr. Tatarinov’s variable cash compensation award was pro-rated based on the date he began service as President and Chief Executive Officer.
(2) In February 2017, we adjusted the numbers of our outstanding restricted stock unit and stock option awards to preserve the intrinsic value of the awards in connection with the GoTo transaction. The restricted stock units reported are on an unadjusted basis
(3) The “Estimated Future Payouts Under Equity Incentive Plan Awards” columns represent the minimum, target, and maximum number of restricted stock units that may vest pursuant to 2016 performance-based restricted stock unit agreements.
(4) The grant date fair value of awards in this column reflects the fair value of such awards, excluding estimated forfeitures. The assumptions we used for calculating the grant date fair value are set forth in Note 7 to the financial statements filed with our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on February 16, 2017. In the case of performance-based restricted stock units, the fair value is reported for the probable outcome after the three-year performance period, which for this purpose is 100% achievement.
(5) Reflects service-based restricted stock awards that vest as follows: 9,882 restricted shares on April 1, 2016 and on the first business day of each succeeding third month, and 9,886 restricted shares vest on January 2, 2019, in accordance with Mr. Tatarinov’s employment agreement.

 

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(6) The attainment level under the performance-based awards will be based primarily on the compounded annual total return to shareholders measured on an absolute basis over the three-year performance period ending January 24, 2019.
(7) The attainment level under the performance-based awards will be based primarily on the compounded annual total return to shareholders measured on an absolute basis over the three-year performance period ending March 30, 2019.

 

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Outstanding Equity Awards

The following table sets forth certain information with respect to the outstanding equity awards at December 31, 2016 for each of the Named Executive Officers.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2016 TABLE

 

    Option Awards           Stock Awards(1)  
                                                    Equity  
                                              Equity     Incentive  
                                              Incentive     Plan Awards  
                                              Plan Awards     Market or  
                                        Market     Number of     Payout Value  
                                        Value of     Unearned     Of Unearned  
                      Number of     Shares or     Shares, Units     Shares, Units  
    Number of Securities                       Shares or     Units of     Or Other     Or Other  
    Underlying Unexercised     Option                 Units of Stock     Stock That     Rights That     Rights that  
          Options     Exercise     Option           That have not     Have Not     Have Not     Have Not  
           (#)     Price     Expiration           Vested     Vested     Vested     Vested  
  Name   Exercisable     Unexercisable     ($)     Date(2)           (#)     ($)(3)     (#)     ($)(3)  

  Robert M. Calderoni

                                 
              3,333 (4)      297,670      
              5,305 (5)      473,790      
                  23,826 (6)      2,127,900  
                  23,826 (7)      2,127,900  

  Kirill Tatarinov

                              88,942 (8)      7,943,410      
                  220,235 (9)      19,669,188  

  David J. Henshall

                                 
              14,048 (10)      1,254,627      
              18,749 (11)      1,674,473      
              28,500 (12)      2,545,335      
                  42,144 (13)      3,763,881  
                  28,124 (14)      2,511,754  
                  35,000 (7)      3,125,850  
                  28,500 (15)      2,545,335  

  William L. Burley

                              1,686 (10)      150,577      
              3,118 (16)      278,469      
              2,666 (17)      238,100      
              3,800 (18)      339,378      
              8,933 (19)      797,806      
              12,500 (20)      1,116,375      
                  1,685 (13)      150,487  
                  1,559 (21)      139,234  
                  25,000 (7)      2,232,750  
                  12,500 (22)      1,116,375  

  Timothy A. Minahan

                                 
              26,666 (23)      2,381,540      
              12,500 (12)      1,116,375      
                  20,000 (7)      1,786,200  
                  12,500 (15)      1,116,375  

  Klaus Oestermann

                                 
              2,528 (10)      225,776      
              8,315 (24)      742,613      
              12,500 (25)      1,116,375      
                  2,528 (13)      225,776  
                  12,473 (26)      1,113,964  
                  20,000 (7)      1,786,200  
                  12,500 (27)      1,116,375  

  Carlos E. Sartorius

                                 
              2,107 (10)      188,176      
              1,666( 28)      148,790      
              13,512 (11)      1,206,757      
              27,500 (12)      2,456,025      
                  2,107 (13)      188,176  
                  20,268 (14)      1,810,135  
                  25,000 (7)      2,232,750  
                                                              27,500 (15)      2,456,025  

 

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(1) In February 2017, we adjusted the numbers of our outstanding restricted stock unit and stock option awards to preserve the intrinsic value of the awards in connection with the GoTo transaction. The restricted stock units reported are on an unadjusted basis.
(2) Unless otherwise indicated in the table, options vest at a rate of 1/3 of the shares underlying the stock option one year from the date of grant and at a rate of 1/36 monthly thereafter. Vesting, in all applicable cases, will be rounded up to the nearest whole share with the balance vesting on the last vesting date.
(3) Based on a per share price of $89.31, which was the closing price per share of our common stock on the last business day of the 2016 fiscal year (December 30, 2016).
(4) Restricted stock units that vest in three annual installments, with 33.4% having vested on July 15, 2015, 33.3% having vested on July 15, 2016, and 33.3% vesting on July 15, 2017. Mr. Calderoni has elected to defer receipt of 100% of the vested units until his separation from service from the Board of Directors, pursuant to the Outside Directors Deferred Compensation Program previously established by the company.
(5) Restricted stock units that vest in 18 monthly installments as follows: 5,294 units vested on the last day of each month beginning on August 31, 2015, through December 31, 2016, and 5,305 units vested on January 31, 2017.
(6) Represents the target number of restricted stock units that vested if our total shareholder return over the 18-month period ending on January 31, 2017 was 20%. On February 8, 2017, it was determined that 100% payout was achieved.
(7) Represents the target number of restricted stock units that vested on December 31, 2016, if our operating margin was 28%. On February 8, 2017, it was determined that 100% payout was achieved.
(8) Represents restricted stock that vests in twelve quarterly installments commencing on April 1, 2016 and vesting the first business day of each succeeding third month thereafter.
(9) Represents the target number of restricted stock units that will vest January 24, 2019 based on our compounded annual total shareholder return over a three-year performance period.
(10) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 28, 2015, 33.3% having vested on March 28, 2016, and 33.3% having vested on March 28, 2017.
(11) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 30, 2016, 33.3% having vested on March 30, 2017, and 33.3% vesting on March 30, 2018.
(12) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 30, 2017, 33.3% vesting on March 30, 2018, and 33.3% vesting on March 30, 2019.
(13) Represents the target number of restricted stock units that vested on December 31, 2016, if the percentage point difference of our total shareholder return and the XCMP total shareholder return was 0%. On February 8, 2017 it was determined that 130.21% payout was achieved.
(14) Represents the target number of restricted stock units that will vest on December 31, 2017, if the percentage point difference of our total shareholder return and the XCMP total shareholder return is 0%.
(15) Represents the target number of restricted stock units that will vest on March 30, 2019 based on our compounded annual total shareholder return over a three-year performance period.
(16) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 30, 2016, 33.3% having vested on March 30, 2017, and 33.3% vesting on March 30, 2018. Mr. Burley forfeited one-third of these restricted stock units upon his departure from our company on March 31, 2017.
(17) Restricted stock units that vest in three annual installments, with 33.4% having vested on August 3, 2016, 33.3% vesting on August 3, 2017, and 33.3% vesting on August 3, 2018. Mr. Burley forfeited two-thirds of these restricted stock units upon his departure from our company on March 31, 2017
(18) Restricted stock units that vest in three installments, with 25% having vested on March 1, 2016, 25% having vested on September 1, 2016 and 50% having vested on March 1, 2017.
(19) Restricted stock units that vest in three annual installments, with 33.4% having vested on December 1, 2016, 33.3% vesting on December 1, 2017, and 33.3% vesting on December 1, 2018. Mr. Burley forfeited two-thirds of these restricted stock units upon his departure from our company on March 31, 2017.
(20) Restricted stock units that vest in three annual installments, with 33.4% vesting on March 30, 2017, 33.3% vesting on March 30, 2018, and 33.3% vesting on March 30, 2019. Mr. Burley forfeited two-thirds of these restricted stock units upon his departure from our company on March 31, 2017.
(21) Represents the target number of restricted stock units that will vest on December 31, 2017, if the percentage point difference of our return and the XCMP total shareholder return is 0%. Mr. Burley forfeited all of these restricted stock units upon his departure from our company on March 31, 2017.
(22) Represents the target number of restricted stock units that will vest on March 30, 2019 based on our compounded annual total shareholder return over a three-year performance period. Mr. Burley forfeited all of these restricted stock units upon his departure from our company on March 31, 2017.
(23) Restricted stock units that vest in three annual installments, with 33.4% having vested on December 1, 2016, 33.3% vesting on December 1, 2017, and 33.3% vesting on December 1, 2018.
(24) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 30, 2016, 33.3% having vested on March 30, 2017, and 33.3% vesting on March 30, 2018. Mr. Oestermann forfeited one-third of these restricted stock units upon his departure from our company on March 31, 2017.
(25) Restricted stock units that vest in three annual installments, with 33.4% having vested on March 30, 2017, 33.3% vesting on March 30, 2018, and 33.3% vesting on March 30, 2019. Mr. Oestermann forfeited two-thirds of these restricted stock units upon his departure from our company on March 31, 2017.
(26) Represents the target number of restricted stock units that will vest on December 31, 2017, if the percentage point difference of our return and the XCMP total shareholder return is 0%. Mr. Oestermann forfeited all of these restricted stock units upon his departure from our company on March 31, 2017.

 

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(27) Represents the target number of restricted stock units that will vest on March 30, 2019 based on our compounded annual total shareholder return over a three-year performance period. Mr. Oestermann forfeited all of these restricted stock units upon his departure from our company on March 31, 2017.
(28) Restricted stock units that vest in three annual installments, with 33.4% having vested on October 1, 2015, 33.3% having vested on October 1, 2016 and 33% vesting on October 1, 2017.

 

 

Option Exercises and Stock Vested

The following table sets forth certain information regarding stock option exercises and restricted stock unit and restricted stock vesting, during the year ended December 31, 2016 under our equity incentive plans for our Named Executive Officers.

OPTION EXERCISES AND STOCK VESTED TABLE

FOR THE 2016 FISCAL YEAR

 

     Option Awards      Stock Awards  
     Number of Shares      Value      Number of Shares      Value  
     Acquired on      Realized on      Acquired on      Realized on  
     Exercise      Exercise      Vesting      Vesting  
  Name    (#)      ($)      (#)      ($)(1)  

  Robert M. Calderoni

                   154,568        12,641,479  

  Kirill Tatarinov

                   29,646        2,411,801  

  David J. Henshall

                   67,666        5,409,612  

  William L. Burley

                   14,826        1,208,277  

  Timothy A. Minahan

                   13,334        1,139,657  

  Klaus Oestermann

                   31,686        2,572,472  

  Carlos E. Sartorius

                   38,501        3,120,245  

 

(1) Based on the closing price per share of our common stock on the date upon which the restricted stock units or shares of restricted stock, as applicable, vested.

 

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Nonqualified Deferred Compensation

 

The following table sets forth certain information regarding non-tax qualified compensation deferred during the year ended December 31, 2016, under our equity incentive plans for our Named Executive Officers. The deferred compensation consists of shares of our common stock that will be issued with respect to vested stock units under a long-term incentive program, or LTIP, that we instituted in 2009 and non-employee director restricted stock units granted to Robert M. Calderoni during 2014 and 2015.

The LTIP’s design and structure were intended to, and ultimately did, reward executive officers for generating both relative and absolute shareholder returns. The number of vested stock units was determined after the conclusion of a three-year period ending December 31, 2011, subject to employment of the executive officer by

us throughout the three-year period. The number of shares of common stock issuable upon settlement of the LTIP restricted stock units was determined by comparing the performance of our common stock to the performance of the specified market indices over the same three-year period. Although the LTIP stock units have vested, the units will not be settled in shares of our common stock until the earliest of (1) six months and one day following termination of the executive officer’s employment for any reason other than cause, (2) the executive officer’s death, or (3) the effective date of a change in control of our company.

Mr. Calderoni’s non-employee director restricted stock units are deferred pursuant to the Outside Directors’ Deferred Compensation Program described on page 27.

 

 

NONQUALIFIED DEFERRED COMPENSATION TABLE

FOR THE 2016 FISCAL YEAR

 

  Name   

Executive
Contributions
in Last FY

($)

    

Registrant
Contributions
in Last FY

($)

     Aggregate
Earnings
in Last FY
($)
     Aggregate
Withdrawals/
Distributions
($)
    

Aggregate
Balance at
Last FYE

($)

 

  Robert M. Calderoni

                                 952,670 (1) 

  Kirill Tatarinov

                                  

  David J. Henshall

                                 3,539,445 (2) 

  William L. Burley

                                  

  Timothy A. Minahan

                                  

  Klaus Oestermann

                                  

  Carlos E. Sartorius

                                  

 

(1) Mr. Calderoni elected to defer the receipt of all of his 2014 and 2015 non-employee director restricted stock unit grants. Based on a per share price of $89.31, which was the closing price per share of our common stock on December 30, 2016, the last business day of the 2016 fiscal year.
(2) Based on a per share price of $89.31, which was the closing price per share of our common stock on December 30, 2016, the last business day of the 2016 fiscal year, and reflects the balance of restricted stock units currently outstanding that were issued under the LTIP that vested on December 31, 2011, net of any underlying shares that were withheld to satisfy minimum tax withholding obligations that arose upon vesting. The number of restricted stock units on a net basis for each of the Named Executive Officers is as follows: Mr. Henshall, 39,631 units; and Messrs. Calderoni, Tatarinov, Burley, Minahan, and Sartorius, no units. The grant date fair value of the LTIP awards was included in the “ Stock Awards ” column of the Summary Compensation Table for 2009.

 

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Potential Payments upon Termination or Change in Control

 

We have change in control and severance arrangements with our Named Executive Officers that provide severance and other benefits to our Named Executive Officers in the event of the termination of their employment under certain circumstances. Set forth below is a summary of these arrangements.

Executive Chairman

We entered into an employment agreement with Mr. Calderoni on October 20, 2015, in connection with his appointment as our Interim Chief Executive Officer and President. The employment agreement terminated in accordance with its terms upon commencement of Mr. Tatarinov’s employment as our President and Chief Executive Officer on January 25, 2016. At such time, Mr. Calderoni continued in his role as Executive Chairman.

Our Compensation Committee and Board of Directors reevaluated the role of Executive Chairman at the end of 2016 and first quarter of 2017. During that review, our Compensation Committee and Board of Directors considered, among other things, that Mr. Calderoni’s experience leading a software company through a transition of its legacy business to a cloud-based, subscription revenue business gives him the operational skills, experience and judgment necessary to oversee the execution of our strategic plan and to help drive our transition to the cloud. Our Board of Directors believes that it is in the best interests of our shareholders for Mr. Calderoni to remain in the role of Executive Chairman through December 31, 2018, and thereafter serve on our Board of Directors as a non-employee director with compensation that is consistent with that of our independent directors. As a result, we entered into an employment agreement with Mr. Calderoni that was effective as of January 31, 2017 and has a term that ends on December 31, 2018, subject to Mr. Calderoni’s re-election to the Board of Directors by our shareholders. In the event of a change in control, the term will be automatically extended until 18 months after the change in control.

Under the employment agreement, Mr. Calderoni receives a base salary of $500,000 (a decrease from his prior base salary of $1,000,000) and received a restricted stock unit award in February 2017 with an aggregate value of $8,000,000 that vests over a two-year period with 5/8 of

the award vesting monthly during the first year and 3/8 of the award vesting monthly during the second year, reflecting a two-year commitment to the role of Executive Chairman and the Board of Director’s plan to transition the role over this period. Mr. Calderoni will not participate in our variable cash compensation plan during this two-year transition period and no further equity awards are planned for Mr. Calderoni in 2017 or 2018. During the term of his employment, Mr. Calderoni also will be entitled to participate in all other employee benefit plans and programs of the Company generally available to its senior executive employees.

Pursuant to the employment agreement, in the event that Mr. Calderoni’s employment is terminated without “cause” or if he resigns his position for “good reason”, in either case, within the 18-month period following a “change in control” (such definitions are substantially the same as the definitions included in the executive agreements for the other Named Executive Officers described below), he will receive:

 

    a lump sum payment equal to 150% of his annual base salary;

 

    continued health insurance coverage for 18 months; and

 

    accelerated vesting of the unvested portion of the restricted stock unit award described above.

In the event that any payments made to Mr. Calderoni in connection with a change in control or termination would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the payments to Mr. Calderoni would be reduced to the maximum amount that can be paid under the Code without the imposition of an excise tax under Section 4999 of the Internal Revenue Code, but only if such reduction provides a higher benefit on an after-tax basis to Mr. Calderoni. The employment agreement does not provide any “gross-up” payments in connection with a change in control.

All severance payments and benefits under the employment agreement are subject to the execution by Mr. Calderoni of a separation and release agreement containing a general release of claims in favor of Citrix.

In addition, if Mr. Calderoni’s service relationship with Citrix terminates as a result of his non-election as a director by our shareholders, the failure of the Board of Directors to nominate him for re-election at a subsequent annual

 

 

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meeting of shareholders, either his resignation or agreement not to stand for re-election, each at the request of the Board of Directors (where he is otherwise willing and able to continue in such capacity), or his death or disability, Mr. Calderoni’s rights in the unvested portion of any equity awards will vest in full.

The equity awards that were previously granted to Mr. Calderoni in his capacity as Executive Chairman and/or Interim Chief Executive Officer and President also were subject to accelerated vesting upon a change in control, and if Mr. Calderoni’s employment had terminated as a result of his death or disability (defined under our long-term disability plan), he would have remained eligible to earn any such performance-based awards on a pro-rata basis at the end of the performance period based on our achievement of the applicable performance metrics. All such equity awards previously granted to Mr. Calderoni had vested in accordance with their terms as of the date of this Proxy Statement.

President and Chief Executive Officer

On January 19, 2016, we entered into an employment agreement with Mr. Tatarinov in connection with his appointment as President and Chief Executive Officer. The employment agreement has a term of three years, with one-year extensions thereafter unless written notice of non-renewal is given by either party no fewer than 180 days prior to the end of the then-current term. In the event of a change in control, the term will be automatically extended until 18 months after the change in control.

The employment agreement provides Mr. Tatarinov with an initial base salary of $1,000,000, which is subject to annual review and may be increased but not decreased. In addition, Mr. Tatarinov is entitled to participate in the executive variable cash compensation plan at an annual target variable cash payment of 125% of his base salary and a maximum variable cash payment of 200% of his base salary, with the actual amount to be determined in the discretion of the Compensation Committee based on company and individual performance.

Upon the commencement of his employment, Mr. Tatarinov received an initial equity grant consisting of (a) 118,588 service-based shares of restricted stock that vest in 12 quarterly installments and (b) 220,235 performance-based restricted stock units, as further described in “Compensation Discussion and Analysis”. Mr. Tatarinov became entitled to participate in our annual

equity compensation program beginning in 2017, and is eligible to receive annual equity grants with a target value of at least $8,000,000. The structure and terms of the equity grants to Mr. Tatarinov will be determined by the Compensation Committee consistent with such grants for other members of our executive management team. Mr. Tatarinov is also entitled to participate in all employee benefit plans or programs generally available to any of our senior executive employees.

Pursuant to the employment agreement, upon a termination of Mr. Tatarinov’s employment without “cause” or for “good reason”, in either case, before a “change in control” (such definitions are substantially the same as the definitions included in the executive agreements for the other Named Executive Officers described below), Mr. Tatarinov will be entitled to severance pay and benefits as follows:

 

    salary continuation in an amount equal to two times the sum of Mr. Tatarinov’s base salary and target variable cash compensation payable over 24 months;

 

    continued health insurance coverage for 18 months; and

 

    acceleration of unvested equity awards with time-based vesting then scheduled to vest over the following 24 months. In such event, his performance-based equity awards will remain outstanding and may be earned on a pro-rata basis at the end of the performance period based on actual performance.

In the event Mr. Tatarinov is terminated without “cause” or if he resigns his position for “good reason” in the 18-month period following a “change in control,” he will be entitled to receive:

 

    a lump sum payment equal to 150% of the sum of his annual base salary plus his target variable cash compensation for the then-current fiscal year;

 

    continued health coverage for 18 months;

 

    accelerated vesting of all unvested equity awards; and

 

    a lump sum cash payment of $3,375,000 for being subject to a non-competition and non-solicitation agreement extending for 18 months following the date of termination of his employment.

In the case of unvested equity awards with performance-based vesting, each award will be deemed earned at the time of the change in control either at target or based on

 

 

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actual achievement of the relevant performance metric, if higher; however, the shares deemed earned will remain subject to time-based vesting over the remaining measurement period, subject to full vesting if Mr. Tatarinov is terminated without cause or resigns for good reason following the change in control as described above.

Upon Mr. Tatarinov’s death or “disability” (defined as being disabled and unable to perform the essential functions of the then existing position or positions under the employment agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period), all unvested equity awards with time-based vesting held by Mr. Tatarinov will immediately vest, and any equity awards with performance-based vesting will remain outstanding and may be earned on a pro-rata basis at the end of the performance period based on actual performance.

All severance payments and benefits under the employment agreement are subject to the execution of a separation and release agreement by Mr. Tatarinov containing, among other provisions, a general release of claims in favor of Citrix.

In the event that any payments made to Mr. Tatarinov in connection with a change in control or termination would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the payments to Mr. Tatarinov would be reduced to the maximum amount that can be paid under the Code without the imposition of an excise tax under Section 4999 of the Internal Revenue Code, but only if such reduction provides a higher benefit on an after-tax basis to Mr. Tatarinov. The employment agreement does not provide any “gross-up” payments in connection with a change in control.

Other Named Executive Officers

On January 19, 2017, we entered into executive agreements with certain members of our senior executive team, including Mr. Henshall, Mr. Sartorius and Mr. Minahan. The executive agreements extended certain severance benefits to our executive officers, including Messrs. Henshall, Sartorius and Minahan, under their existing incentive agreements with the company, which were scheduled to expire in accordance with their terms on January 25, 2017, and require the executive to comply with additional provisions protective of company and shareholder interests to be eligible to receive the

severance benefits. The executive agreements also supersede the executives’ existing change in control agreements by consolidating the benefits under those agreements into a single agreement with the company.

The executive agreements have a term of three years and automatically renew for one-year periods, unless written notice of non-renewal is given by either party at least 180 days prior to the end of the term. In the event of a change in control, the term will be automatically extended until 12 months after the change in control.

Under the executive agreements, if an executive’s employment is terminated by Citrix without “cause” or by the executive for “good reason”, in either case before a “change in control” (each as defined below), he will be entitled to receive:

 

    a lump sum payment equal to the sum of his then-current annual base salary plus the higher of (a) the percentage of his then-current annual base salary represented by his annual variable cash compensation opportunity (100% for each of Mr. Henshall and Mr. Sartorius and 90% for Mr. Minahan) or (b) the amount of variable cash compensation paid to him for the fiscal year prior to termination;

 

    continued health coverage for 12 months;

 

    accelerated vesting of the unvested portion of his equity awards with time-based vesting that would have vested within the 12-month period following his date of termination; and

 

    12 months of executive-level outplacement services.

In addition, the executive agreements provide for certain benefits in the event that the executive’s employment is terminated following a change in control of Citrix substantially consistent with the executive’s former change in control agreements. In the event that an executive’s employment is terminated without “cause” or if he resigns his position for “good reason”, in either case, within the 12-month period following a “change in control”, he will be entitled to receive:

 

    A lump sum payment equal to 150% of the sum of (a) his annual base salary and (b) his variable cash compensation target for the then-current fiscal year;

 

    continued health coverage for 18 months;

 

    accelerated vesting of the unvested portion of any equity awards; and

 

    18 months of executive-level outplacement services.
 

 

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In the case of unvested equity awards with performance-based vesting, each award will be deemed earned at the time of the change in control based on actual achievement of the relevant performance metric; provided, however, that the shares deemed earned will remain subject to time-based vesting over the remaining measurement period, subject to full vesting if the executive is terminated without cause or resigns for good reason following the change in control as described above.

Under the executive agreements, a “change in control” would include any of the following events:

 

    any “person,” as defined in the Securities Exchange Act of 1934, as amended, acquires 30% or more of our voting securities;

 

    the consummation of a consolidation, merger or sale or other disposition of all or substantially all of our assets in which our shareholders would beneficially own less than 50% of the voting securities of the resulting entity or its ultimate parent after such transaction;

 

    our incumbent directors cease to constitute a majority of our Board of Directors;

 

    any other acquisition of the business of Citrix in which a majority of our Board of Directors votes in favor of a decision that a change in control has occurred; or

 

    our shareholders approve a plan or proposal for our liquidation or dissolution.

Termination of the executive officer’s employment by Citrix for “cause” includes a termination of the executive officer’s employment as a result of:

 

    an indictment for the commission of any felony or a misdemeanor involving deceit, material dishonesty or fraud, or any willful conduct that would reasonably be expected to result in material injury or reputational harm to Citrix if the executive were retained in his or her position;

 

    willful disclosure of material trade secrets or other material confidential information related to our business;

 

    willful and continued failure substantially to perform the executive’s duties with Citrix, other than any such failure resulting from the executive’s incapacity due to physical or mental illness (subject to notice and a period for the executive officer to cure such failure);
    willful and knowing participation in releasing false or materially misleading financial statements or submission of a false certification to the Securities and Exchange Commission; or

 

    failure to cooperate with a bona fide internal investigation by regulatory or law enforcement authorities.

Termination of the executive officer’s employment by the executive officer for “good reason” includes a termination of the executive officer’s employment as a result of:

 

    a substantial reduction, not consented to by the executive officer, in the nature or scope of the executive officer’s responsibilities, authorities, powers, functions or duties;

 

    a reduction in the executive officer’s annual base salary or target variable cash compensation;

 

    failure to provide the executive with any payments, rights and other entitlements under the applicable agreement, including upon a change in control;

 

    material breach by Citrix of any agreements, plans, policies and practices relating to the executive’s employment with Citrix;

 

    the relocation of our offices at which the executive officer is principally employed by more than 35 miles; or

 

    with respect to executive officers other than our Executive Chairman, Citrix’s issuance to the executive of a notice of non-renewal of the applicable agreement.

With respect to Mr. Calderoni, Mr. Tatarinov and Mr. Henshall, it will be considered a substantial reduction in his duties or responsibilities for purposes of the definition of “good reason” if he is no longer serving in the offices held prior to the change in control for the ultimate parent of the resulting company or such parent is not a publicly-traded company.

The severance payments and benefits described above are subject to the e