VMware 2014 Annual Report Download - page 104

Table of Contents
period covered by this report, our disclosure controls and procedures were effective to provide reasonable assurance that information required to
be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms and to provide reasonable assurance that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to
allow timely decisions regarding required disclosures.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f)
of the Exchange Act. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2014 based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission. As a result of this assessment, management concluded that, as of December 31, 2014 , our internal control over financial reporting
was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. The effectiveness of our internal control over financial reporting
as of December 31, 2014 has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their
report which appears in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting during the most recent fiscal quarter ended December 31, 2014 that
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of
achieving their objectives as specified above. Our management, including our principal executive officer and principal financial officer,
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management does not
expect, however, that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and
fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not
absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to
error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
On February 25, 2015, VMware’s Board of Directors approved a change in control retention plan (the “Plan”) covering VMware
executives. The Plan provides severance benefits for participants who are involuntarily terminated without “cause”, or who terminate
employment for “good reason”, within 12 months following a “change in control” of VMware (each such term as defined in the Plan). The Plan
is designed to be competitive with the compensation practices of VMware’s peer companies in the technology sector.
Upon a qualifying termination under the Plan following a change in control, each participant is eligible to receive (i) a lump sum payment
equal to a multiple of annual base salary, target annual bonus and monthly health insurance premiums; and (ii) full accelerated vesting of
outstanding equity awards. VMware’s CEO is eligible to receive two times his annual base salary and target bonus and 24 months of the health
insurance premium amount. Other executives are eligible to receive 1.5 times their annual bases salary and target bonus and 18 months of the
health insurance premium amount.
The monthly health insurance premium amount equals 150% of the monthly cost required to obtain continuation coverage for the participant
and his or her covered dependents. Participants would be required to execute a release in favor of VMware in exchange for Plan benefits.
Performance-
based equity awards will generally convert into shares at target amounts if a change in control occurs during a performance period,
unless otherwise specified in the performance award agreement.
The Plan does not provide for any tax gross-ups. In the event the participant would be subject to an excise tax under Section 4999 of the
Internal Revenue Code (imposed on individuals who receive compensation in connection with a change of control that exceeds certain specified
limits), the benefits to the participant will be reduced to the extent that such benefits do not trigger the excise tax unless the participant would
retain greater value (on an after-tax basis) by receiving all benefits and paying applicable excise, income and payroll taxes.
The foregoing description of the Plan does not purport to be complete and is qualified in its entirety by the full text of the Plan, a copy of
which is filed as Exhibit 10.28 and incorporated by reference herein.
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ITEM 9B.
OTHER INFORMATION