Item 2.02. Results of Operations and Financial Condition.
On May 12, 2021, VMware, Inc. ("VMware" or the "Company") issued a press release
announcing preliminary financial results for the quarter ended April 30, 2021.
The press release, including information regarding VMware's use of non-GAAP
financial measures, is attached hereto as Exhibit 99.1 and is incorporated by
reference herein.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
(b), (c), (d) and (e)
On May 9, 2021, the VMware Board of Directors (the "Board") elected Rangarajan
(Raghu) Raghuram, age 58, the Company's current Chief Operating Officer ("COO"),
Products and Cloud Services, as Chief Executive Officer ("CEO") and Sumit
Dhawan, age 46, the Company's current Chief Customer Experience Officer, as
President, both effective as of June 1, 2021. Zane Rowe, who has been serving as
interim CEO, will return to his role as Chief Financial Officer and Executive
Vice President.
On May 9, 2021, in connection with his election as CEO, the VMware Board also
elected Mr. Raghuram as a Class II, Group I member of the Board and appointed
him to serve as a member of its Mergers and Acquisitions Committee effective as
of June 1, 2021.
Mr. Raghuram has served as VMware's COO, Products and Cloud Services since
October 2016 and has been guiding VMware's cloud and SaaS transformation
efforts. Prior to that he served as Executive Vice President, Software-Defined
Data Center division from April 2012 to October 2016. Mr. Raghuram joined VMware
in 2003 and has held multiple product management and marketing roles.
Mr. Raghuram served as Senior Vice President and General Manager, Cloud
Infrastructure and Management, Virtualization and Cloud Platforms, and
Enterprise Products, from December 2009 through March 2012. Mr. Raghuram
previously served as Vice President of VMware's Server business unit and of
Product and Solutions Marketing through December 2009. Prior to VMware,
Mr. Raghuram held product management and marketing roles at Netscape
Communications Corporation and Bang Networks, Inc. Mr. Raghuram holds an MBA
from the Wharton School of Business, University of Pennsylvania and a master's
degree in electrical engineering from the Indian Institute of Technology,
Mumbai.
Mr. Dhawan has served as VMware's Senior Vice President and Chief Customer
Experience Officer since February 2020. Prior to that, Mr. Dhawan served as CEO
of Instart (formerly Instart Logic), a multinational cloud company focused on
web and mobile application delivery, customer experience and security for
enterprise customers, from May 2018 until February 2020. Previously, Mr. Dhawan
joined VMware in September 2013 and served in various roles in VMware's End User
Computing group, including as Senior Vice President, Desktop Products from July
2014 to November 2016 and as Senior Vice President and General Manager of
VMware's End User Computing group from November 2016 through May 2018.
In connection with their appointments as CEO and President, respectively, VMware
entered into offer letters with each of Messrs. Raghuram and Dhawan (the "Offer
Letters") setting forth the terms of their employment and compensation. Pursuant
to the Offer Letters, Messrs. Raghuram and Dhawan will receive base salaries of
$1,000,000 and $850,000, respectively, and be eligible for annual incentive cash
bonuses with target payouts of 150% and 125% of base salary, respectively, under
VMware's Executive Bonus Plan.
The Offer Letters also provide that Messrs. Raghuram and Dhawan will be granted
equity awards that will commence vesting on the start date of their new
positions, as described below.
• Messrs. Raghuram and Dhawan will be granted performance stock units based
on absolute and relative total shareholder return metrics ("TSR PSUs")
with a target number of TSR PSUs subject to the grants having grant date
values of $12 million and $10 million respectively, as determined by
VMware using a fair value methodology that utilizes the 15-day trailing
average stock price of VMware Class A common stock as of June 1, 2021
(the "Base Date") as the base price (the "Base Price") for measuring
VMware's total stockholder return ("TSR") over a five-year performance
period running through June 1, 2026. The TSR PSUs will fund progressively
with respect to one-eighth of the total number of TSR PSUs as VMware's
90-day trailing average stock price appreciation exceeds performance
tranches set at 50%, 75%, 100%, 125%, 150%, 200%, 250% and 300% above the
Base Price. Vesting will occur on the third-, fourth- and fifth-year
anniversaries of the Base Date. On each vesting date, VMware's TSR
performance to date will be measured against the performance goals in the
TSR PSUs to determine achievement, and VMware's TSR relative to the TSR
of the S&P 500 IT Index (the "Index") will also be measured, with
potential payouts subject to cutback if VMware does not equal or exceed
the median TSR performance of the Index.
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Fifty percent of vested TSR PSUs net of tax withholdings that vest on the
third- and fourth-year anniversary vesting dates are subject to a holding
period requirement that runs through the fifth-year anniversary vesting
date.
• Messrs. Raghuram and Dhawan will be granted restricted stock unit awards
("RSUs") with target values of $2.5 million and $5 million respectively.
The $2.5 million RSU award granted to Mr. Raghuram is in addition to the
$4 million RSU grant he received in April 2021 as part of VMware's annual
executive equity refresh program. The new $5 million RSU grant to
Mr. Dhawan includes his annual FY22 refresh grant amount. The number of
RSUs in each award will be determined based upon VMware's 45-day trailing
average stock price as of April 30, 2021. The RSUs will vest ratably over
a four-year period with a one-year vesting cliff and semi-annual vesting
thereafter.
• Messrs. Raghuram and Dhawan will be granted additional performance stock
unit awards valued at $2.5 million and $5 million respectively, based on
the Company's annual executive operating performance stock unit plan for
FY22 ("FY22 Operating PSUs"), which consists of three annual performance
periods corresponding to fiscal years 2022, 2023 and 2024, respectively,
subject to modification based upon VMware's relative TSR performance in
comparison to the Index as measured at the end of fiscal year 2024. The
new $2.5 million FY22 Operating PSU award granted to Mr. Raghuram is in
addition to the $4 million FY22 Operating PSU award he received in April
2021 as part of VMware's annual executive equity refresh program.
Mr. Dhawan had not previously received a grant under the FY22 Operating
PSU program. Achievement under the annual tranches of the FY22 Operating
PSU program is measured by performance against corporate financial
targets established each year by the Compensation and Corporate
Governance Committee of the Board.
Both Mr. Raghuram and Mr. Dhawan will participate in VMware's Executive
Severance Plan, which provides cash severance benefits consisting of one year of
their annual base salary and target bonus amounts and 150% of the cost of their
annual health and dental insurance premiums upon an "involuntary termination" as
defined in the Executive Severance Plan. Participants in the plan also receive
one year of vesting acceleration measured from their termination date in
outstanding RSU awards. Unvested PSU awards are also accelerated based upon
actual performance for performance periods that have been completed prior to the
participant's termination date, and performance periods that are incomplete will
be accelerated at target on a pro rata basis for PSU awards that will vest
within one year of termination. The TSR PSU awards are not eligible for
acceleration under the Executive Severance Plan. Mr. Raghuram is currently a
participant in the Executive Severance Plan, and Mr. Dhawan will become eligible
on June 1, 2021.
Mr. Raghuram and Mr. Dhawan will also participate in VMware's Change-in-Control
Retention Plan, which provides cash severance benefits consisting of two years
and one and a half years, respectively, of their annual base salary and target
bonus amounts and 150% of the monthly cost of their annual health and dental
insurance premiums for two years for Mr. Raghuram and one and a half years for
Mr. Dhawan upon an "involuntary termination" following a "change-in-control,"
each as defined in the Change-in-Control Retention Plan. Participants in the
plan also receive full vesting acceleration in their outstanding RSU and PSU
awards, unless otherwise indicated, with PSU awards accelerating at the level of
actual performance for completed performance periods and at target for
performance periods that are not completed prior to the change-in-control. In
the event of a change-in-control, performance under the TSR PSU awards would be
determined based on the per share consideration received by VMware stockholders
in the change-in-control transaction and the awards would otherwise continue to
vest in accordance with their vesting schedules, except that the post-vesting
holding period requirement would not apply. In the event of involuntary
termination following a change-in-control, the TSR PSUs would accelerate based
upon actual performance based on the change-in-control consideration price per
. . .
Item 7.01. Regulation FD Disclosure
On May 12, 2021, VMware issued a press release to announce the election of
Mr. Raghuram as VMware's CEO and to the Board and Mr. Dhawan as President, a
copy of which is attached hereto as Exhibit 99.1 and incorporated herein by
reference.
The information in Item 2.02, Item 7.01 and Exhibit 99.1 attached hereto shall
not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Exchange Act, regardless of any general
incorporation language in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
10.1 Letter Agreement between VMware, Inc. and Rangarajan (Raghu) Raghuram
dated May 11, 2021
10.2 Letter Agreement between VMware, Inc. and Sumit Dhawan dated May 11,
2021
99.1 Press Release of VMware, Inc. dated May 12, 2021
104 Cover Page Interactive Data File - the cover page XBRL tags are embedded
within the Inline XBRL document.
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