Proxy 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 
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Extreme Networks, Inc.
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Date Filed: September 19, 2014
 







October , 2014

Dear Stockholder:

You are cordially invited to attend the 2014 Annual Meeting of Stockholders of Extreme Networks, Inc. to be held on Wednesday, November 12, 2014 at 8:00 a.m. Pacific Daylight Time at our principal offices located at 145 Rio Robles, San Jose, CA 95134.
Details of business to be conducted at the Annual Meeting are described in the Notice of Annual Meeting of Stockholders and Proxy Statement. At the Annual Meeting, we will present a report on the Company's operations during the past year and respond to questions from stockholders. Accompanying this Proxy Statement is the Company’s 2014 Annual Report to Stockholders.
We are pleased to take advantage of Securities and Exchange Commission rules that allow companies to furnish proxy materials to stockholders over the Internet. We believe that these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of the Annual Meeting. On or about October 2, 2014, you were provided with a Notice of Internet Availability of Proxy Materials (“Notice”) and provided access to our proxy materials over the Internet. The Notice also provides instructions on how to vote online or by telephone and includes instructions on how to receive a paper copy of the proxy materials by mail.
We hope that you will attend the Annual Meeting. Whether or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone, by Internet or, if you have received a paper copy of your proxy materials by mail, by completing, signing, dating and returning your proxy card in the envelope provided.
If you have any further questions concerning the Annual Meeting or any of the proposals, please contact our Investor Relations department at (408) 579-3483. We look forward to your attendance at the Annual Meeting.
Yours Truly,


Charles W. Berger
President and Chief Executive Officer

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting of Stockholders, we urge you to vote and submit your proxy by telephone, the Internet or by mail in order to ensure the presence of a quorum. If you attend the meeting and do not hold your shares through an account with a brokerage firm, bank or other nominee, you will have the right to revoke the proxy and vote your shares in person. If you hold your shares through an account with a brokerage firm, bank or other nominee, please follow the instructions you receive from them to vote your shares and revoke your vote, if necessary.








Extreme Networks, Inc.
145 Rio Robles
San Jose, California 95134
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 12, 2014
 
TO THE STOCKHOLDERS:
 
Notice is hereby given that the 2014 Annual Meeting of Stockholders of Extreme Networks, Inc. will be held on Wednesday, November 12, 2014 at 8:00 a.m. Pacific Daylight Time at our principal offices located at 145 Rio Robles, San Jose, CA 95134, in order to:

1.
Elect seven members of the Board of Directors for a one-year term;
2.
Vote on a non-binding advisory resolution to approve executive compensation;
3.
Ratify the appointment of our independent auditors for our fiscal year ending June 30, 2015;
4.
Vote to extend the term of the Amended and Restated Shareholders Rights Plan for an additional year to May 31, 2015;
5.
Approve the adoption of the Extreme Networks, Inc. 2014 Employee Stock Purchase Plan and to authorize an aggregate of twelve million shares issuable under the plan: and
6.
Transact such other business as may properly come before the meeting and any adjournment or postponement thereof.

Our Board of Directors recommends a vote "FOR" each of the nominees in Item 1 and "FOR" Items 2, 3, 4 and 5. Stockholders of record at the close of business on September 17, 2014 are entitled to notice of, and to vote at, this meeting and any adjournment or postponement thereof. For ten days prior to the meeting, a complete list of stockholders entitled to attend and vote at the meeting will be available for review by any stockholder during normal business hours at our headquarters located at 145 Rio Robles, San Jose, California 95134.
 
BY ORDER OF THE BOARD OF DIRECTORS,
 
Allison Amadia
Vice President, General Counsel and Corporate Secretary
 
San Jose, California
October , 2014
 
YOUR VOTE IS IMPORTANT: Please vote your shares via telephone or the Internet, as described in the accompanying materials, to assure that your shares are represented at the meeting, or, if you received a paper copy of the proxy card by mail, you may mark, sign and date the proxy card and return it in the enclosed postage-paid envelope. If you attend the meeting, you may choose to vote in person even if you have previously voted your shares.
 
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 12, 2014: This Proxy Statement and the financial and other information concerning Extreme Networks contained in our Annual Report to Stockholders for the fiscal year ended June 30, 2014 are available on the Internet and may be viewed at www.proxyvote.com, where you may also cast your vote.





TABLE OF CONTENTS
TO THE PROXY STATEMENT
 
INFORMATION CONCERNING SOLICITATION AND VOTING
General
Who May Vote, Record Date, Admission to Meeting
Broker Non-Votes
Quorum
"Notice and Access" Model
Vote Required to Adopt Proposals
Effect of Abstentions and Broker Non-Votes
Voting Instructions
Solicitation of Proxies
Voting Results
 
 
PROPOSAL ONE: ELECTION OF DIRECTORS
Vote Required and Board of Directors Recommendation
 
 
BOARD OF DIRECTORS
Nominees for Election at 2014 Annual Meeting
Arrangements Regarding Appointment of Directors
 
 
CORPORATE GOVERNANCE
Board and Leadership Structure
Board’s Role in Risk Oversight
Meetings of the Board of Directors
Executive Sessions
Committees of the Board of Directors
Compensation Committee Interlocks and Insider Participation
Director Nominations
Communications with Directors
Director Attendance at Annual Meetings
Section 16(a) Beneficial Ownership Reporting Compliance
Code of Ethics and Corporate Governance Materials
 
 
DIRECTOR COMPENSATION
 
 
PROPOSAL TWO: ADVISORY VOTE ON EXECUTIVE COMPENSATION
Background
Vote Required and Board of Directors Recommendation
 
 
PROPOSAL THREE: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2015
Principal Accounting Fees and Services
Vote Required and Board of Directors Recommendation
 
 
PROPOSAL FOUR: ADVISORY VOTE TO RATIFY THE EXTENSION OF THE TERM OF THE AMENDED AND RESTATED SHAREHOLDERS RIGHTS PLAN FOR AN ADDITIONAL YEAR TO MAY 31, 2015
Background
Vote Required and Board of Directors Recommendation
 
 
PROPOSAL FIVE: ADOPTION OF THE EXTREME NETWORKS, INC. 2014 EMPLOYEE STOCK PURCHASE PLAN AND TO AUTHORIZE AN AGGREGATE OF 12,000,000 SHARES ISSUABLE UNDER THE PLAN
Summary of the Plan
Vote Required and Board of Directors Recommendation
 
 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
 
EXECUTIVE COMPENSATION AND OTHER MATTERS
Compensation Discussion and Analysis
Summary Compensation Table
Summary of Employment and Other Agreements
Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
Option Exercises and Stock Vested During Last Fiscal Year
Pension Benefits and Nonqualified Deferred Compensation Plans
Potential Payments upon Termination or Change in Control
Compensation Committee Interlocks and Insider Participation
 
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Actual or Potential Conflicts of Interest
Reporting, Review and Approval of Related Party Transactions
 
 
EQUITY COMPENSATION PLAN INFORMATION
 
 
REPORT OF THE COMPENSATION COMMITTEE
 
 
REPORT OF THE AUDIT COMMITTEE
 
 
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
 
 
TRANSACTION OF OTHER BUSINESS
 
 
STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
 
 
COMMUNICATING WITH EXTREME NETWORKS
 
 
Annex A
Appendix A
Appendix B
 


ii


 
 
 
 
 
EXTREME NETWORKS, INC.
 
 
 
 
 
PROXY STATEMENT
 
 
 
 
 
INFORMATION CONCERNING SOLICITATION AND VOTING

General
 
Our Board of Directors, or our Board, is soliciting your proxy for the 2014 Annual Meeting of Stockholders to be held on Wednesday, November 12, 2014, or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. This proxy statement and related materials are first being made available to stockholders on or about October 2, 2014. References in this proxy statement to the “Company,” “we,” “our,” “us” and “Extreme Networks” are to Extreme Networks, Inc., and references to the “Annual Meeting” are to the 2014 Annual Meeting of Stockholders. When we refer to the Company’s fiscal year, we mean the annual period ending on June 30. This proxy statement covers our 2014 fiscal year, which was from July 1, 2013 through June 30, 2014 (“fiscal 2014”).

Who May Vote, Record Date, Admission to Meeting
 
Only holders of record of common stock at the close of business on September 17, 2014 (the "Record Date") will be entitled to notice of and to vote at the meeting and any adjournment thereof. As of the Record Date, 97,511,116 shares of common stock were outstanding and entitled to vote. You are entitled to one vote for each share you hold.
 
You are entitled to attend the Annual Meeting if you were a stockholder of record or a beneficial owner of our common stock as of the Record Date, or you hold a valid legal proxy for the Annual Meeting. If you are a stockholder of record, you may be asked to present valid picture identification, such as a driver’s license or passport, for admission to the Annual Meeting.
 
If your shares are registered in the name of a bank, brokerage firm or other holder of record (your record holder), you may be asked to provide proof of beneficial ownership as of the Record Date, such as a brokerage account statement or voting instruction form provided by your record holder, or other similar evidence of ownership, as well as picture identification, for admission. If you wish to be able to vote in person at the Annual Meeting, you must obtain a legal proxy from your brokerage firm, bank or other holder of record and present it to the inspector of elections with your ballot at the Annual Meeting.
 
If you do not provide picture identification and comply with the other procedures outlined above, you may not be admitted to the Annual Meeting. We recommend that you arrive early to ensure that you are seated by the commencement of the Annual Meeting.


Broker Non-Votes

A broker non-vote occurs when a broker submits a proxy card with respect to shares held in a fiduciary capacity (typically referred to as being held in “street name”) but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the ratification of selection of auditors and approval of pro rata stock splits. Non-routine matters include the election of directors and amendments to or the adoption of stock plans.

Quorum
 
Our bylaws provide that a majority of all of the shares of stock entitled to vote at the meeting as of the Record Date must be represented at the meeting, either in person or by proxy, to constitute a quorum for the transaction of business at the meeting, except to the extent that the presence of a larger number may be required by law. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker or bank) or if you vote in person at the meeting. Abstentions and “broker non-votes” (shares held by a broker or nominee that does not have the authority, either express or discretionary, to vote on a particular matter) will each be counted as present for purposes of determining the presence of a quorum.


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“Notice and Access” Model
The SEC’s proxy rules set forth how companies must provide proxy materials. These rules are often referred to as “notice and access.” Under the notice and access model, a company may select either of the following options for making proxy materials available to stockholders: (i) the full set delivery option; or (ii) the notice only option. A company may use a single method for all its stockholders, or use full set delivery for some while adopting the notice only option for others. We must comply with these rules in connection with our 2014 Annual Meeting.
Under the full set delivery option a company delivers all proxy materials to its stockholders by mail or, if a stockholder has previously agreed, electronically. In addition to delivering proxy materials to stockholders, the company must post all proxy materials on a publicly-accessible web site (other than the SEC’s web site) and provide information to stockholders about how to access that web site and the hosted materials. Under the notice only option, instead of delivering its proxy materials to stockholders, the company instead delivers a “Notice of Internet Availability of Proxy Materials” which outlines (i) information regarding the date and time of the meeting of stockholders as well as the items to be considered at the meeting; (ii) information regarding the web site where the proxy materials are posted; and (iii) various means by which a stockholder can request paper or email copies of the proxy materials.
In connection with our 2014 Annual Meeting, we have elected to use the notice only option. Accordingly, you should have received a notice by mail instructing you how to access proxy materials at www.proxyvote.com and providing you with a control number you can use to vote your shares. You may request that the Company deliver paper copies of the proxy materials as well.
All valid proxies received before the meeting will be exercised. All shares represented by a proxy will be voted, and where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted in favor of the proposal. A stockholder whose shares are registered in their own name has the power to revoke his or her proxy at any time before it is exercised by delivering to the Secretary of the Company a written instrument revoking the proxy or a duly executed proxy with a later date, or by attending the meeting and voting in person. If you hold shares in street name, through a bank, broker or other nominee, please contact the bank, broker or other nominee to revoke your proxy.

Vote Required to Adopt Proposals
 
The holder of each share of the Company's common stock outstanding on the Record Date is entitled to one vote on each of the director nominees and one vote on each other matter. For the election of directors, the director nominees who receive the highest number of “For” votes will be elected as directors. You may vote “For” or “Withhold” with respect to each director nominee. Votes that are withheld will be excluded entirely from the vote with respect to the nominee from which they are withheld and will have the same effect as an abstention. All other matters shall be determined by a majority of the votes cast affirmatively or negatively on the matter.

Effect of Abstentions and Broker Non-Votes
 
Shares not present at the meeting and shares voted “Withhold” will have no effect on the election of directors. For each of the other proposals, abstentions will have the same effect as a vote against. If you are a beneficial owner and hold your shares in “street name,” it is critical that you cast your vote if you want it to count in the election of directors and the other proposals included in this proxy. Under the rules governing banks and brokers who are voting with respect to shares held in street name, such banks and brokers have the discretion to vote on routine matters, but not on non-routine matters. Routine matters include the ratification of auditors. Non-routine matters include the election of directors, the amendment or adoption of equity incentive plans, advisory vote on the extension of the term of our rights plan and the executive compensation advisory proposal. Banks and brokers may not vote on these proposals if you do not provide specific voting instructions. Accordingly, we encourage you to vote promptly, even if you plan to attend the Annual Meeting. In tabulating the voting results for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal.

Voting Instructions
 
If you complete and submit your proxy card or voting instructions, the persons named as proxies will follow your instructions. If you are a stockholder of record and you submit a proxy card or voting instructions but do not direct how to vote on each item, the persons named as proxies will vote as the board recommends on each proposal. Depending on how you hold your shares, you may vote in one of the following ways:
 

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Stockholders of Record:    You may vote by proxy or over the Internet or by telephone. Please follow the instructions provided herein or on the proxy card you received, then sign and return it in the prepaid envelope. You may also vote in person at the Annual Meeting.
 
Beneficial Stockholders:    Your bank, broker or other holder of record will provide you with a voting instruction card for you to use to instruct them on how to vote your shares. Check the instructions provided by your bank, broker or other holder of record to see which options are available to you. However, since you are not the stockholder of record, you may not vote your shares in person at the Annual Meeting unless you request and obtain a valid proxy from your bank, broker or other agent.
 
Votes submitted by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on November 11, 2014. Submitting your proxy by telephone or via the Internet will not affect your right to vote in person should you decide to attend the Annual Meeting.
 
If you are a stockholder of record, you may revoke your proxy and change your vote at any time before the polls close by returning a later-dated proxy card, by voting again by Internet or telephone as more fully detailed on your proxy card, or by delivering written instructions to the Corporate Secretary before the Annual Meeting. Attendance at the Annual Meeting will not in and of itself cause your previously voted proxy to be revoked unless you specifically so request or vote again at the Annual Meeting. If your shares are held by a bank, broker or other agent, you may change your vote by submitting new voting instructions to your bank, broker or other agent, or, if you have obtained a legal proxy from your bank, broker or other agent giving you the right to vote your shares, by attending the Annual Meeting and voting in person.

Solicitation of Proxies
 
We will bear the entire cost of soliciting proxies. In addition to soliciting stockholders by mail, we will request banks, brokers and other intermediaries holding shares of our common stock beneficially, owned by others to obtain proxies from the beneficial owners and will reimburse them for their reasonable expenses in so doing. We may use the services of our officers, directors and other employees to solicit proxies, personally or by telephone, without additional compensation.
 

Voting Results
 
We will announce preliminary voting results at the Annual Meeting. We will report final results in a Current Report on Form 8-K filed with the SEC within four business days of the Annual Meeting.


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PROPOSAL ONE:
ELECTION OF DIRECTORS
 
 
The terms of the current directors expire upon the election and qualification of the directors to be elected at the 2014 Annual Meeting. The Board has nominated seven persons for election at the Annual Meeting to serve until the 2015 Annual Meeting of Stockholders and until their successors are duly elected and qualified. All nominees for election to the Board are presently directors of Extreme Networks. Our Board’s nominees for election at the 2014 Annual Meeting are Charles W. Berger, Charles Carinalli, Randi Paikoff Feigin, Edward H. Kennedy, John H. Kispert, Edward B. Meyercord, III and John C. Shoemaker. Maury Austin has notified the Company of his intention not to stand for re-election at the 2014 Annual Meeting. Extreme extends its sincere appreciation to Mr. Austin for his valuable contributions during his service as a member of our Board of Directors.

 Please see below under the heading “Board of Directors” for information concerning each nominee. If elected, each of the nominees will serve as directors until the Annual Meeting of stockholders in 2015 and until their successors are elected and qualified or until their earlier resignation or removal.
 
Each nominee has indicated to us that he or she will serve if elected. If a nominee declines to serve or becomes unavailable for any reason, or if a vacancy otherwise occurs before the election, although management knows of no reason that this will occur, the proxies may be voted for a substitute nominee as the Nominating and Corporate Governance Committee or our Board may designate.
 
Vote Required and Board of Directors Recommendation
 
The persons receiving the highest number of votes represented by outstanding shares of common stock present or represented by proxy and entitled to vote at the 2014 Annual Meeting will be elected, assuming a quorum is present. Votes “For”, votes to “Withhold” authority and “Broker Non-Votes” will each be counted as present for purposes of determining the presence of a quorum, but broker non-votes will have no effect on the outcome of the election. If you sign and return a proxy card without giving specific voting instructions as to the election of any director, your shares will be voted in favor of the nominees recommended by our Board.
 
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE NOMINEES NAMED ABOVE.


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BOARD OF DIRECTORS
 
The following table provides biographical information for each nominee to our Board of Directors.
 
Name
 
Age
 
Director Since
Charles W. Berger, Director, President and Chief Executive Officer
 
60
 
2013
Edward B. Meyercord, III, Chairman of the Board of Directors
 
49
 
2009
Charles Carinalli, Director
 
66
 
1996
Randi Paikoff Feigin, Director
 
47
 
2014
Edward H. Kennedy, Director
 
60
 
2011
John H. Kispert, Director
 
51
 
2009
John C. Shoemaker, Director
 
72
 
2007

There are no family relationships among any of our directors or executive officers.
 
The biographies of each of our continuing directors below contains information regarding the person’s service as a director, if applicable, business experience, other director positions held currently or at any time during the last five years, information regarding involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating and Corporate Governance Committee and our Board to determine that the person should serve as a director.
 

Nominees for Election at 2014 Annual Meeting
 
Charles W. Berger. Mr. Berger has served as our President and Chief Executive Officer since April 2013. Mr. Berger served previously as Chairman, President and Chief Executive Officer of ParAccel, Inc. from August 2010 until its sale to Actian Corporation in April 2013. From June 2010 through August 2010, Mr. Berger served as the Interim Chief Executive Officer of Official Payments Holdings, Inc. (NASDAQ: OPAY), for which he has served as a director since 2002. From April 2006 through December 2009, Mr. Berger served as Chief Executive Officer, and from December 2001, the Chairman, of DVDPlay, Inc. prior to its acquisition by NCR Corporation. Mr. Berger served as President, Chief Executive Officer, and as a director of Nuance Communications, Inc. from March 2003 until September 2005 when it merged with Scansoft, Inc. Mr. Berger also serves on the board of directors and as a trustee for the United States Naval Memorial, is a trustee and member of the investment committee for Bucknell University and is a trustee for Presentation High School in San Jose, CA. Mr. Berger received his B.S. in Business Administration from Bucknell University and his M.B.A., cum laude, from Santa Clara University.

Mr. Berger has extensive executive experience in the communications technology industry and provides strong financial and operational expertise to our Board. As our current President and Chief Executive Officer, Mr. Berger also provides our Board with important insights about the Company and its operations.

Edward B. Meyercord, III.    Mr. Meyercord has served as the Chairman of our Board of Directors since March 2011, and as one of our directors since October 2009. Mr. Meyercord currently serves as Chief Executive Officer and director of Critical Alert Systems LLC, a private company that provides healthcare communications technology solutions, where he has served since August 2010. He previously was the founder and President of Council Rock Advisors LLC, a financial advisory company. From December 2006 until January 2009, Mr. Meyercord served as Chief Executive Officer of Cavalier Telephone & TV, a privately held voice and data services company. Previously, Mr. Meyercord served as Chief Executive Officer and a member of the board of directors of Talk America, Inc., a publicly traded provider of phone and internet services to consumers and small businesses. Mr. Meyercord also served on the board of directors of Tollgrade Communications, Inc. (formerly; NASDAQ:TLGD), a supplier of telecommunications network service assurance and smartgrid products and solutions owned by Golden Gate Capital. Mr. Meyercord received his Bachelors in economics from Trinity College in Hartford, CT and his M.B.A. from New York University.
 
Mr. Meyercord has extensive executive experience in corporate finance, risk assessment and management. His background in the telecommunications industry provides our Board with valuable industry expertise in one of our key markets.
 

5


Charles Carinalli.    Mr. Carinalli has served as one of our directors since October 1996. Mr. Carinalli has been a Principal of Carinalli Ventures since January 2002. From 1999 to May 2002, Mr. Carinalli was Chief Executive Officer and a director of Adaptive Silicon, Inc., a private developer of semiconductors. From November 2000 to November 2001, Mr. Carinalli served as Chairman of Clearwater Communications, Inc., a privately held telecommunications company. From December 1996 to July 1999, Mr. Carinalli served as President, Chief Executive Officer and a director of Wavespan, Inc., a developer of wireless broadband access systems that was acquired by Proxim, Inc. From 1970 to 1996, Mr. Carinalli served in various positions for National Semiconductor Corporation, developing analog-based semiconductor and integrated communication products, most recently as Senior Vice President and Chief Technical Officer. Mr. Carinalli also serves on the boards of directors of Fairchild Semiconductor (NYSE: FCS), a publicly traded semiconductor company, Atmel Corporation (NASDAQ: ATML), a publicly traded semiconductor company and several privately held companies. Mr. Carinalli holds a B.S. in electrical engineering from the University of California, Berkeley and a M.S. in electrical engineering from Santa Clara University.
 
Mr. Carinalli provides our Board with extensive engineering and engineering management expertise, as well as management expertise and technology expertise, which aids our Board in understanding product development, engineering management and strategic planning, as well as risk assessment and planning.

Randi Paikoff Feigin. Mrs. Feigin has served as one of our directors since February 2014. For 13 years ending in 2012, Mrs. Feigin served at Juniper Networks in a variety of operational and leadership roles including Vice President of Strategic Alliances; Vice President of Business Process Re-engineering; and Vice President of Investor Relations. Prior to joining Juniper Networks in 1999, Mrs. Feigin held a leadership position in the Investor Relation’s organization at Cisco Systems. She joined Cisco as a result of Cisco's acquisition of StrataCom in 1996, where she was head of Investor Relations. Prior to her corporate roles, she had a variety of responsibilities as an equity research analyst. In addition, Mrs. Feigin has served as a board member of the National Investor Relations Institute, including 4 years on the National Board of Directors and 7 years on the Silicon Valley Chapter Board of Directors. Mrs. Feigin graduated from Ithaca College with a B.S. degree in Finance.

Mrs. Feigin brings 20 years of executive management experience, with specialties in investor relations and communications, business process re-engineering and technology alliances which provides our Board with financial expertise and effective insight into our Company and its business.
 
Edward H. Kennedy.    Mr. Kennedy has served as one of our directors since April 2011. Currently, Mr. Kennedy is the Chief Executive Officer and President of Tollgrade Communications, Inc. (formerly; NASDAQ:TLGD). Mr. Kennedy previously served as the Chief Executive Officer and President of Rivulet Communications, Inc., a medical video networking company. He also previously served as President of Tellabs North American Operations and Executive Vice President of Tellabs, and co-founded Ocular Networks, a provider of optical networking technologies, until it was sold to Tellabs. He has also held various executive positions at several telecommunications equipment companies, including Alcatel and Newbridge Networks Corporation. Mr. Kennedy was also a Venture Partner at Columbia Capital, a private equity investment firm, where he advised investments into new and existing portfolio companies. Mr. Kennedy holds a B.S. in electrical engineering from the Virginia Polytechnic Institute.

Mr. Kennedy has extensive financial and executive leadership experience in technology companies, including networking companies, and provides management and financial expertise to our Board.
 
John H. Kispert.    Mr. Kispert has served as one of our directors since May 2009. Mr. Kispert has served as President and Chief Executive Officer of Spansion, Inc., a publicly-traded manufacturer of flash memory products, since February 2009 and on its Board of Directors since May 2010. From 1995 to January 2009, Mr. Kispert held various executive management positions at KLA-Tencor Corporation, including President and Chief Operating Officer, Executive Vice President and Chief Financial Officer and Vice President, Finance and Accounting. Prior to KLA-Tencor, Mr. Kispert served in a number of positions with the IBM Corporation. Mr. Kispert received his B.S. in political science from Grinnell College and his M.B.A. from the University of California, Los Angeles.
 
Mr. Kispert has extensive management and leadership experience and provides our Board with technology, leadership and financial expertise that aids our Board in understanding corporate needs and strategic opportunities.
 
John C. Shoemaker.    Mr. Shoemaker has served as one of our directors since October 2007. From 1990 to June 2004, Mr. Shoemaker held various executive management positions at Sun Microsystems, Inc., including as Executive Vice President, Worldwide Operations Organizations and Executive Vice President and General Manager for its Computer Systems Division. Mr. Shoemaker previously served in a number of senior executive positions with the Xerox Corporation, a provider of document management technology and services, including as Senior Vice President, World Wide Marketing. Mr. Shoemaker is

6


a director of Altera Corporation (NASDAQ: ALTR), a publicly traded provider of programmable logic solutions, and several privately held companies. Mr. Shoemaker holds a B.A. from Hanover College, where he is currently on the Board of Trustees, and a M.B.A. from Indiana University’s Kelley School of Business, where he is a member of the School of Business Dean’s Advisory Council, the IT Advisory Council, and the Johnson Center for Entrepreneurship Board.
 
Mr. Shoemaker has extensive executive experience in senior level management positions in the technology industry, particularly in hardware systems, and provides strong operational, management and financial expertise to our Board.

Arrangements Regarding Appointment of Directors
 
Charles W. Berger, our President and Chief Executive Officer, was appointed to our Board in connection with an offer letter of employment we entered into with him in April 2013. Pursuant to the offer letter, Mr. Berger must immediately resign as a member of our Board upon the date his employment with the Company terminates.
 

CORPORATE GOVERNANCE
 
Our Board currently consists of eight directors. Our Board has determined that, other than Charles W. Berger, each member of our Board is an independent director for purposes of the NASDAQ Marketplace Rules. In making these independence determinations, our Board has concluded that these directors do not have an employment, business, family or other relationship which, in the opinion of our Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
 
Directors to be elected at the 2014 Annual Meeting are to hold office until the next Annual Meeting and until their respective successors are elected and qualified.

Board and Leadership Structure
 
Our leadership structure currently consists of an Independent Chairman and a Chief Executive Officer. In the current structure, the roles of Chief Executive Officer and Chairman of our Board are separated. Edward B. Meyercord, III has served as the Independent Chairman of our Board since March 2011, while Charles W. Berger serves as our President and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on setting our strategic direction and for day-to-day leadership and performance, while allowing the Chairman of our Board to lead our Board in its fundamental role of providing advice to, and independent oversight of, management.
 
Our Board recognizes the time, effort, and energy that our Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitments required to serve as the Chairman of our Board, particularly as our Board’s oversight responsibilities continue to grow. While our bylaws and Corporate Governance Guidelines do not require that the Chairman of our Board and Chief Executive Officer positions be separate, our Board believes that separating these positions is the appropriate leadership structure for us at this time and results in an effective balancing of responsibilities, experience and independent perspective to meet the current corporate governance needs and oversight responsibilities of our Board.
 
Mr. Meyercord’s duties as Independent Chairman include:
chairing executive sessions of the independent directors;
ensuring that independent directors have adequate opportunities to meet without management present;
serving as designated contact for communication to independent directors, including being available for consultation and direct communication with major stockholders;
ensuring that the independent directors have an opportunity to provide input on the agenda for meetings of our Board;
assuring that there is sufficient time for discussion of all agenda items; and
being identified as the recipient of communications with stockholders in the annual meeting proxy statement.

Our Board elects our President, Chief Financial Officer, Secretary and all executive officers. All executive officers serve at the discretion of our Board. Each of our officers devotes his or her full time to our affairs. Our directors devote time to our affairs as is necessary to discharge their duties. In addition, our Board has the authority to retain its own advisers to assist it in the discharge of its duties. There are no family relationships among any of our directors, officers or key employees.

Board’s Role in Risk Oversight
 

7


Our Board has an active role, as a whole and also at the committee level, in overseeing management of the risks we face. This role is one of informed oversight rather than direct management of risk. Our Board regularly reviews and consults with management on strategic direction, challenges and risks we face. Our Board also reviews and discusses with management quarterly financial results and forecasts. The Audit Committee of our Board oversees management of financial risks, and its charter tasks the committee to provide oversight of and review at least annually our risk management policies, including its investment policies and anti-fraud program. The Compensation Committee of our Board is responsible for overseeing the management of risks relating to and arising from our executive compensation plans and arrangements. These committees provide regular reports, generally on a quarterly basis, to the full Board.
 
Management is tasked with the direct management and oversight of legal, financial, and commercial compliance matters, which includes identification and mitigation of associated areas of risk. Our General Counsel provides regular reports of legal risks to the Audit Committee and our Board. Our Chief Financial Officer and the Corporate Controller provide regular reports to the Audit Committee concerning financial, tax and audit related risks. In addition, the Audit Committee receives periodic reports from management on our compliance programs and efforts, investment policy and practices and the results of various internal audit projects. Management and the Compensation Committee’s compensation consultant provide analysis of risks related to our compensation programs and practices to the Compensation Committee.

Meetings of the Board of Directors
 
Our Board held twelve meetings during the fiscal year ended June 30, 2014. No director serving on our Board in fiscal 2014 attended fewer than 75% of the aggregate of the meetings of our Board and the meetings of the committees on which he served.

Executive Sessions
 
The independent members of our Board meet regularly in executive session (without the participation of executive officers or other non-independent directors), generally before or after a regularly scheduled Board meetings or at such other times requested by our independent directors. Executive sessions of the independent directors are chaired by our Chairman. The executive sessions include discussions and recommendations regarding guidance to be provided to the Chief Executive Officer and such topics as the independent directors determine.

Committees of the Board of Directors
 
Our Board has a separately-designated standing Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Strategy Committee. Our Board has adopted a written charter for each of these committees, each of which is available on our website at http://www.extremenetworks.com/about-extreme/corp-governance.aspx.
 
Fiscal 2014 Committee Membership

Name
  
Audit
Committee
  
Compensation Committee
  
Nominating and Corporate Governance Committee
  
Strategy Committee
Maury Austin
  
Member
 
Member
 
 
 
 
Charles Carinalli
  
 
 
Chairman
 
Member
 
 
Randi Paikoff Feigin
 
 
 
 
 
 
 
Member
John H. Kispert
  
Chairman
 
 
 
 
 
Member
Edward H. Kennedy
  
Member
 
 
 
 
 
Member
Edward B. Meyercord, III
  
 
 
Member(1)
 
Member
 
Chairman
John C. Shoemaker
  
 
 
Member
 
Chairman
 
 
 
(1) Served as a member of the Compensation Committee through 1/1/2014.

Audit Committee.    The current members of the Audit Committee are Messrs. Kispert, Austin and Kennedy. Mr. Kispert serves as Chairman. Each member of the Audit Committee has been determined by our Board to be independent for purposes of the NASDAQ Marketplace Rules and the rules of the SEC as these rules apply to audit committee members. Our Board has determined that Mr. Kispert is an audit committee financial expert, as defined in the rules of the SEC. The Audit Committee retains our independent auditors, reviews and approves the planned scope, proposed fee arrangements and terms of engagement

8


of the independent auditors, reviews the results of the annual audit of our financial statements and the interim reviews of our unaudited financial statements, evaluates the adequacy of accounting and financial controls, reviews the independence of our auditors, and oversees our financial reporting on behalf of our Board. The Audit Committee is also responsible for establishing procedures for the receipt, retention and treatment of complaints received by us regarding questionable accounting or auditing matters, including the anonymous submission by our employees of concerns regarding accounting or auditing matters. In addition, the Audit Committee reviews with our independent auditors the scope and timing of their audit services and any other services they are asked to perform, the independent auditor’s report on our consolidated financial statements following completion of their audit, and our critical accounting policies and procedures and policies with respect to our internal accounting and financial controls. The Audit Committee also assists our Board in fulfilling its oversight responsibilities with respect to financial risks, including risk management in the areas of financial reporting, internal controls, and compliance with legal and regulatory requirements. The Audit Committee held ten meetings during the fiscal year ended June 30, 2014.
 
Compensation Committee.    The current members of the Compensation Committee are Messrs. Carinalli, Austin, and Shoemaker. Mr. Carinalli serves as Chairman. Mr. Meyercord served as a member of the Compensation Committee through January 1, 2014. Each member of the Compensation Committee has been determined by our Board to be independent for purposes of the NASDAQ Marketplace Rules as they apply to compensation committee members. The Compensation Committee has responsibility for, among other things, discharging our Board’s responsibilities relating to compensation and benefits of our officers, including responsibility for evaluating and reporting to our Board on matters concerning management performance, officer compensation and benefits plans and programs. In carrying out these responsibilities, the Compensation Committee is required to review all components of executive officer compensation for consistency with our compensation philosophy. The Compensation Committee also administers our stock option plans and stock incentive plans. The Compensation Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The charter of the Compensation Committee provides that the Compensation Committee may delegate duties or responsibilities to subcommittees or to one member of the Compensation Committee from time to time, as appropriate. However, historically the Compensation Committee has delegated duties or responsibilities only under limited circumstances. Our President and Chief Executive Officer and our Senior Vice President of World Wide Human Resources assist the Compensation Committee in its deliberations with respect to the compensation of our executive officers, except that our Chief Executive Officer does not play a role in the Compensation Committee’s deliberations regarding his own compensation determination, other than discussing his performance objectives with the Compensation Committee. The other executive officers do not play a role in the Compensation Committee’s deliberations regarding their own compensation determination, except that each executive officer discusses his or her individual performance objectives with our Chief Executive Officer, and our General Counsel may be present for deliberations and may provide advice to the Compensation Committee regarding legal issues associated with compensation plans and decisions. The Compensation Committee held twelve meetings during the fiscal year ended June 30, 2014. For more information about the Compensation Committee, see the discussion below under the heading “Executive Compensation.”
 
Nominating and Corporate Governance Committee.    The current members of the Nominating and Corporate Governance Committee are Messrs. Shoemaker, Carinalli and Meyercord. Mr. Shoemaker serves as Chairman. Each member of the Nominating and Corporate Governance Committee has been determined by our Board to be independent for purposes of the NASDAQ Marketplace Rules as they apply to nominating committee members. The Nominating and Corporate Governance Committee identifies, reviews, evaluates and nominates candidates to serve on our Board, is responsible for recommending corporate governance principles, codes of conduct and compliance mechanisms applicable to us, and assists our Board in its annual reviews of the performance of our Board, each committee and management. The Nominating and Corporate Governance Committee assists our Board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. The Nominating and Corporate Governance Committee held five meetings during the fiscal year ended June 30, 2014.

Strategy Committee. The current members of the Strategy Committee are Messrs. Meyercord, and Kispert and Mrs. Feigin. Mr. Meyercord serves as Chairman. Each member of the Strategy Committee has been determined by our Board to be independent for purposes of the NASDAQ Marketplace Rules. The Strategy Committee advises and assists the Board in carrying out the development, articulation, and execution of the Company’s long-term strategic plan, including oversight and responsibilities relating to potential mergers, acquisitions, divestitures, combinations and other key strategic transactions outside the ordinary course of the Company’s business. The Strategy Committee held two meetings during the fiscal year ended June 30, 2014.

Compensation Committee Interlocks and Insider Participation
 

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Each of Charles Carinalli, Maury Austin and John C. Shoemaker served as a member of the Compensation Committee in fiscal 2014. Edward B. Meyercord, III served on the Committee through January 1, 2014. None of our executive officers has served on the board of directors or compensation committee of any other entity that has, or has had, one or more executive officers who served as a member of our Board or Compensation Committee during the 2014 fiscal year. No member of the Compensation Committee was, during fiscal 2014 or any prior period, an officer or employee of the Company.

Director Nominations
 
Director Qualifications.    In fulfilling its responsibilities, the Nominating and Corporate Governance Committee considers numerous factors in reviewing possible candidates for nomination as director, including:
 
the appropriate size of our Board and its committees;
the perceived needs of our Board for particular skills, industry expertise, background and business experience;
the skills, background, reputation, and business experience of nominees and the skills, background, reputation, and business experience already possessed by other members of our Board;
the nominees’ independence from management;
the nominees’ experience with accounting rules and practices;
the nominees’ background with regard to executive compensation;
the applicable regulatory and listing requirements, including independence requirements and legal considerations, such as antitrust compliance;
the benefits of a constructive working relationship among directors; and
the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

While we do not have a formal diversity policy, in evaluating the qualifications of the candidates, the Nominating and Corporate Governance Committee considers many factors, including issues of character, judgment, independence, age, education, expertise, diversity of experience, length of service, other commitments and ability to serve on committees of our Board, as well as other individual qualities and attributes that contribute to board heterogeneity, including characteristics such as race, gender, and national origin. The Nominating and Corporate Governance Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors.
 
Other than the foregoing there are no stated minimum criteria for director nominees, although the Nominating and Corporate Governance Committee may also consider other factors as it may deem, from time to time, are in the best interests of us and our stockholders. The Nominating and Corporate Governance Committee believes that it is preferable that at least one member of our Board should meet the criteria for an “audit committee financial expert” as defined by SEC rules. Under applicable listing requirements, at least a majority of the members of our Board must meet the definition of “independent director.” The Nominating and Corporate Governance Committee also believes it appropriate for one or more key members of management to participate as members of our Board.
 
Identifying and Evaluating Candidates for Nomination as Director.    The Nominating and Corporate Governance Committee annually evaluates the current members of our Board whose terms are expiring and who are willing to continue in service against the criteria set forth above in determining whether to recommend these directors for election. The Nominating and Corporate Governance Committee regularly assesses the optimum size of our Board and its committees and the needs of our Board for various skills, background and business experience in determining if our Board requires additional candidates for nomination.
 
Candidates for nomination as director come to the attention of the Nominating and Corporate Governance Committee from time to time through incumbent directors, management, stockholders or third parties. These candidates may be considered at meetings of the Nominating and Corporate Governance Committee at any point during the year. Candidates are evaluated against the criteria set forth above. If the Nominating and Corporate Governance Committee believes at any time that our Board requires additional candidates for nomination, the Nominating and Corporate Governance Committee may poll directors and management for suggestions or conduct research to identify possible candidates and may engage, if the Nominating and Corporate Governance Committee believes it is appropriate, a third party search firm to assist in identifying qualified candidates.
The Nominating and Corporate Governance Committee evaluates any recommendation for director nominee proposed by a stockholder. In order to be evaluated in connection with the Nominating and Corporate Governance Committee’s established procedures for evaluating potential director nominees, any recommendation for director nominee submitted by a stockholder must be sent in writing to the Corporate Secretary, 145 Rio Robles, San Jose, California 95134 and must be received at our principal executive offices not less than 120 days nor more than 150 calendar days in advance of the date that our proxy statement was released to stockholders in connection with the previous year’s Annual Meeting of stockholders, except that if no

10


Annual Meeting was held in the previous year or the date of the Annual Meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous year’s proxy statement, notice by the stockholders to be timely must be received not later than the close of business on the tenth day following the day on which public announcement of the date of such meeting is first made. For purposes of the foregoing, “public announcement” shall mean disclosure in a broadly disseminated press release or in a document publicly filed by us with the SEC. The recommendation for director nominee submitted by a stockholder must contain the information required by our bylaws. You may contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

All directors and director nominees must submit a completed director agreement and directors’ and officers’ questionnaire as part of the nominating process. The evaluation process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Corporate Governance Committee. In addition, nominees must enter into an agreement to abide by the Company’s Code of Conduct and disclose any voting arrangements or compensation provided by third parties in connection with their service on the Company’s Board.
 
The Nominating and Corporate Governance Committee evaluates incumbent directors, as well as candidates for director nominee submitted by directors, management and stockholders consistently using the criteria stated in our policies and procedures and selects the nominees that, in the Nominating and Corporate Governance Committee’s judgment, best suit the needs of our Board at the time.

Communications with Directors
 
Edward B. Meyercord, III has been selected by our directors as our Independent Chairman and, as such, is responsible for receiving, distributing and arranging responses to communications from our stockholders to our Board. Stockholders may communicate with our Board by transmitting correspondence by mail, facsimile or email, addressed as follows:
 
Chairman of the Board (or individually named director(s))
Extreme Networks, Inc.
145 Rio Robles
San Jose, California 95134
 
The Chairman transmits each communication as soon as practicable to the identified director addressee(s), unless (i) there are safety or security concerns that mitigate against further transmission of the communication; or (ii) the communication contains commercial matters not related to the stockholder’s stock ownership, as determined by the Chairman in consultation with legal counsel. Our Board or individual directors are advised of any communication withheld for safety, security or other reasons as soon as practicable.

Director Attendance at Annual Meetings
 
We use reasonable efforts to schedule our Annual Meeting of stockholders at a time and date to maximize attendance by directors, taking into account the Directors’ schedules. In cases where management, in its reasonable business judgment, expects stockholder attendance at our Annual Meeting to be significant, we encourage director attendance at the Annual Meeting. Directors make every effort to attend our Annual Meeting of stockholders when meaningful stockholder attendance at the meeting is anticipated. Of our current directors, Messrs. Austin, Berger, Carinalli, Kennedy, Kispert, Meyercord and Shoemaker attended our 2013 Annual Meeting of stockholders.

Section 16(a) Beneficial Ownership Reporting Compliance
 
Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of our common stock to file initial reports of beneficial ownership and reports of changes in beneficial ownership with the SEC. These persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such person. Based solely on our review of the forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and persons who beneficially own more than 10% of our common stock were complied with in the fiscal year ended June 30, 2014.

Code of Ethics and Corporate Governance Materials
 
Our Board has adopted a charter for its Audit, Compensation and Nominating and Corporate Governance Committees, each of which is available on our website at http://www.extremenetworks.com/about-extreme/corp-governance.aspx. Our Board

11


has also adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. The Code of Business Conduct and Ethics can be found on our website at http://investor.extremenetworks.com/corporate-governance.cfm.
 
We believe that good corporate governance is essential to ensure that we are managed for the benefit of stockholders. Our Board has adopted our Corporate Governance Guidelines to address key corporate governance issues. The Nominating and Corporate Governance Committee is responsible for reviewing the Corporate Governance Guidelines and recommending to our Board any changes to them. The Corporate Governance Guidelines can be found on our website at http://investor.extremenetworks.com/corporate-governance.cfm. 


12


DIRECTOR COMPENSATION
 
During our fiscal year ended June 30, 2014, the compensation policies for service on our Board and its committees were revised following consultation with Compensia, Inc., the independent compensation consultant to the Compensation Committee. Effective starting April 1, 2014, the compensation paid to our directors was as follows:
 
Cash Compensation
 
Each non-employee director receives (a) $50,000 in cash compensation annually for service in this position and (b) the applicable compensation set forth below for serving as a chair or as a member of one or more of the committees of our Board. For service on any special committee that may be formed by our Board from time to time, our Board determines compensation on a case-by-case basis upon a recommendation from the Compensation Committee based on the anticipated amount of time and work related to service on the special committee and other factors as the Compensation Committee may consider. Each director receives reimbursement of expenses related to attendance of meetings of our Board and its committees.

Annual Committee Member Compensation
 
Audit Committee
$
10,000

Compensation Committee
10,000

Nominating and Governance Committee
5,000

Strategy Committee
5,000

 
Annual Retainers for Chairman or Committee Chair
 
Audit Committee Chair
$
25,000

Compensation Committee Chair
20,000

Nominating and Corporate Governance Committee Chair
10,000

Strategy Committee Chair
10,000

Board Chairman
30,000

 
Equity Compensation
 
On the date of each Annual Meeting of our stockholders, each non-employee director is awarded an annual grant with a fixed value $95,000, determined by dividing such amount by the price of the Company’s commons stock at the close of business on the NASDAQ Global Market on the date of the Company’s Annual Meeting of stockholders, rounded down to the nearest whole share. Such annual equity grants shall vest upon the earlier of the first anniversary of the date of grant or the date of next Annual Meeting of stockholders of the Company Any non-employee director joining the Board during the fiscal year shall receive an equity award pro-rated for such new director’s period of service in that year.
 
Following the 2013 Annual Meeting of stockholders, each non-employee director received a grant of 15,175 shares of our restricted stock.

On February 11, 2014, the Board approved a special one-time restricted stock award for each non-employee director then in service. These awards for 7,042 shares each were granted on May 8, 2014.
 
In July 2001, our Board ratified and approved a policy regarding the acceleration of vesting of shares subject to options granted to directors upon a change-in-control. Under the policy, in the event of a change in control that occurs prior to a director’s termination of service with us, the shares subject to options vest fully. The policy defines a change-in-control as a single or series of sales or exchanges of voting stock, a merger or consolidation, the sale, or transfer of all or substantially all of the assets, or a liquidation wherein the stockholders immediately before the change-in-control do not retain, immediately after the change-in-control, more than 50% of the total combined voting power of us or the corporation to which the assets were transferred. This policy applies to all options granted to directors after July 2001.
 
2014 Director Compensation
 
The compensation information for our non-employee directors during the fiscal year ended June 30, 2013 is set forth below:
 


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Director Fees Earned or Paid in Cash ($)
Stock Awards ($)(1)
Total ($)
Maury Austin
62,500 (2)
119,995
182,495
Charles Carinalli
63,750 (3)
119,995
183,745
Randi Paikoff Feigin
13,750 (4)
71,053
84,803
Ed Kennedy
57,500 (5)
119,995
177,495
John Kispert
68,750 (6)
119,995
188,745
Ed Meyercord
102,500 (7)
119,995
222,495
John Shoemaker
62,500 (8)
119,995
182,495
__________
(1)
Represents the aggregate grant date fair value computed in accordance with ASC Topic 718 and does not reflect whether the director has actually realized a financial benefit from the award. In accordance with SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
(2)
Consists of $42,500 for annual retainer and $10,000 for service on the Audit Committee and $10,000 for service on the Compensation Committee.
(3)
Consists of $42,500 for annual retainer, $16,250 for service as the Chairman of the Compensation Committee and $5,000 for service on the Nominating and Corporate Governance Committee.
(4)
Consists of $12,500 for annual retainer and $1,250 for service on the Strategy Committee. Mrs. Feigin was appointed to the Board in February, 2014.
(5)
Consists of $42,500 for annual retainer, and $10,000 for service on the Audit Committee and $5,000 for service on the Strategy Committee.
(6)
Consists of $42,500 for annual retainer and $21,250 for service as the Chairman of the Audit Committee and $5,000 for service on the Strategy Committee.
(7)
Consists of $82,500 for annual retainer for service as the Chairman of the Board, $5,000 for service on the Compensation Committee through January 1, 2014, $5,000 for service on the Nominating and Corporate Governance Committee and $10,000 for service as the Chairman of the Strategy Committee.
(8)
Consists of $42,500 for annual retainer, $10,000 for service on the Compensation Committee, $10,000 for service as the Chairman of the Nominating and Corporate Governance Committee.


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PROPOSAL TWO:
ADVISORY VOTE ON EXECUTIVE COMPENSATION

Background
 
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, our stockholders are entitled to vote to approve, on an advisory non-binding basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the Company’s named executive officers and the philosophy, policies and practices described in this proxy statement.
 
As described in further detail under the heading “Executive Compensation and Other Matters -Compensation Discussion and Analysis,” our executive compensation philosophy is designed to attract high quality candidates for senior leadership positions, to retain these employees and to establish a total compensation program which, motivates and rewards individual and team performance in a highly competitive industry. Our compensation programs are designed to align our executive officers’ performance with our goals, principal among which is the creation of stockholder value. For fiscal 2014, the principal components for our executive officers were cash base salary with variable annual cash and long term equity incentives. Please read the “Compensation Discussion and Analysis” for additional details about our executive compensation programs, including information about the fiscal 2014 compensation of our named executive officers and how our executive compensation programs reflect our philosophy and are linked to the Company’s performance.
 
We are asking our stockholders to indicate their support for the compensation arrangements with our named executive officers as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. Accordingly, we are asking our stockholders to vote “FOR” the following resolution to be presented at the 2014 Annual Meeting:
 
“RESOLVED, that the stockholders approve the compensation paid to the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2014 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative discussion.”

Vote Required and Board of Directors Recommendation
 
The proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the 2014 Annual Meeting, as well as the presence of a quorum representing a majority of the shares of our common stock entitled to vote at the 2014 Annual Meeting, present in person or represented by proxy. Abstentions and broker non-votes will each be counted as present for purposes of determining a quorum but will not have any effect on the outcome of the proposal.
 
This “say-on-pay” vote is advisory, and therefore is not binding on us, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our stockholders, and to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are appropriate to address those concerns. The Board has adopted a policy providing for annual say-on-pay advisory votes. Unless the Board modifies this policy, the next say-on-pay advisory vote will be held at our 2015 Annual Meeting.
 
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE RESOLUTION ABOVE, RELATING TO THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SECURITIES AND EXCHANGE COMMISSION.


15


PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JUNE 30, 2015
 
The Audit Committee has appointed KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm to serve as independent auditors to audit our consolidated financial statements for the fiscal year ending June 30, 2015. KPMG has served as the Company’s independent registered public accounting firm since November 2010. A representative of KPMG is expected to be present at the 2014 Annual Meeting, will have an opportunity to make a statement if desired and will be available to respond to appropriate questions.
 
Representatives of our independent auditors normally attend most meetings of the Audit Committee. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent auditors. These services may include audit services, audit-related services, tax services and other services. Any pre-approval is detailed as to the particular service or category of services. Our independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by our independent auditors in accordance with this pre-approval policy. For fiscal 2014 and 2013, all fees paid to our independent auditors were pre-approved in accordance with this policy without exception.
 
The Audit Committee on an annual basis reviews the services performed by the independent registered public accounting firm, and reviews and approves the fees charged by the accounting firm. The Audit Committee has considered the role of the independent registered public accounting firm in providing tax and other non-audit services to us and has concluded that these services are compatible with the accounting firm’s independence as our independent auditors.

Principal Accounting Fees and Services
 
The following table sets forth the fees accrued or paid to the Company’s independent registered public accounting firms for the fiscal years ended June 30, 2014 and June 30, 2013.
 
 
2014
 
2013
Audit fees(1)
$
2,045,000

 
$
1,042,000

Audit related fees(2)
347,500

 

Tax Fees(3)
10,400

 

Total
$
2,402,900

 
$
1,042,000

______________ 
(1)
Audit fees relate to professional services rendered in connection with the audit of our annual financial statements and internal control over financial reporting, quarterly review of financial statements included in the Company’s Quarterly Reports on Form 10-Q and audit services provided in connection with other statutory and regulatory filings.
(2)
Audit-related fees comprise fees for professional services that are reasonably related to the performance of the audit or review of the Company’s financial statements.
(3)
Tax fees relate to professional services rendered in connection with tax audits, international tax compliance, and international tax consulting and planning services.

Vote Required and Board of Directors Recommendation
 
Stockholder ratification of the selection of KPMG as our independent registered public accounting firm is not required by our bylaws or otherwise. Our Board, however, is submitting the selection of KPMG to stockholders for ratification as a matter of good corporate practice. If stockholders fail to ratify the selection, the Audit Committee and our Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee and our Board in their discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of us and our stockholders.
 
Approval of this proposal requires the affirmative vote of a majority of the votes cast affirmatively or negatively on the proposal, assuming a quorum is present. Votes for, against, abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum, but abstentions and broker non-votes will not have any effect on the outcome of the vote on this proposal. If you sign and return a proxy card without giving specific voting instructions on this proposal, your shares will be voted in favor of the proposal.
 

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OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY KPMG LLP AS EXTREME NETWORKS’ INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JUNE 30, 2015.


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PROPOSAL FOUR:

ADVISORY VOTE TO RATIFY THE EXTENSION OF THE TERM OF THE
AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN TO MAY 31, 2015

Background
 
Our Board is inviting stockholders to vote to ratify, on a nonbinding advisory basis, the extension to May 31, 2015 of the term of the Company's Amended and Restated Rights Agreement, dated April 26, 2012, as amended effective April 30, 2013 and April 30, 2014, between the Company and Computershare Inc. as the rights agent (the “Restated Rights Plan”). The Restated Rights Plan governs the terms of each right (“Right”) that has been issued with respect to each share of common stock of the Company. Each Right initially represents the right to purchase one one-thousandth of a share of Series A Preferred Stock (“Preferred Stock”) of the Company. The Restated Rights Plan replaces in its entirety the Rights Agreement, dated as of April 27, 2001, as amended, between the Company and Mellon Investor Services LLC (the “Prior Rights Plan”).

The Board believed it to be in the best interests of the Company to enter into and to extend the Restated Rights Plan to preserve the value of the Company’s deferred tax assets, including its net operating loss carry forwards, with respect to its ability to fully use its tax benefits to offset future income. The Prior Rights Plan was adopted in part in an effort to preserve stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carry-forwards and other tax attributes (the “Tax Benefits”) to reduce potential future federal income tax obligations. At June 30, 2014, our Tax Benefits included approximately $290.2 million and $97.4 million of federal and state tax net operating loss carry forwards, respectively. The Tax Benefits expire on various dates beginning in fiscal year ending June 30, 2015 (state) and fiscal year ending June 30, 2021(federal).
 
The unexpired balance of our Tax Benefits can generally be used to offset taxable income or income taxes (if any). Utilization of Tax Benefits to offset taxable income can, however, be limited if there is an ownership change, as discussed below. Because the amount and timing of our future taxable income cannot be accurately predicted, we cannot predict to what extent our Tax Benefits may ultimately be used to reduce our income tax liability. Although we are unable to quantify an exact value, we believe that the Tax Benefits are a very valuable asset. The Restated Rights Plan was adopted because the Board believed it to be in the Company’s and the stockholders’ best interests to attempt to prevent the imposition of limitations on use of the Tax Benefits.
 
The ability to use the Tax Benefits could be significantly impaired if there were an “ownership change” of the Company as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Determining whether an ownership change has occurred and the effect of an ownership change is complex. In general, to determine whether an ownership change has occurred on a testing date, the Company must compare the percentage of shares owned by each stockholder or groups of stockholders who own or are deemed to own directly or indirectly at least 5.0% of our stock (a “5-percent shareholder”) immediately after the close of the testing date to the lowest percentage of shares owned by such 5-percent shareholder at any time during the testing period (which is generally a three-year rolling period). The amount of the increase in the percentage of Company shares owned by each 5-percent shareholder whose share ownership percentage has increased is added together with increases in share ownership of other 5-percent shareholders, and an ownership change occurs if the aggregate increase in ownership by all such 5-percent shareholders exceeds 50%.
 
If an ownership change occurs, there is an annual limit on use of Tax Benefits (the “382 Limitation”) equal to (i) the aggregate value of our outstanding equity immediately prior to the ownership change (reduced by certain capital contributions made during the immediately preceding two years and certain other items) multiplied by (ii) the federal long-term tax-exempt interest rate in effect for the month of the ownership change. In calculating the 382 Limitation, numerous special rules and limitations apply, including provisions dealing with “built-in gains and losses.” If the Company were to have taxable income in excess of the 382 Limitation following an ownership change, the Company would not be able to offset tax on the excess income with the net operating losses. Although any loss carry forwards not used as a result of any Section 382 Limitation would remain available to offset income in future years (again, subject to the Section 382 Limitation in such future years) until the net operating losses expire, an ownership change could significantly defer the utilization of the net operating loss carry forwards, accelerate payment of federal income tax and could cause some of the net operating losses to expire unused. Because the aggregate value of our outstanding stock and the federal long-term tax-exempt interest rate fluctuate, it is impossible to predict with any accuracy the Section 382 Limitation upon the amount of our taxable income that could be offset by such loss carry forwards and credits if an ownership change were to occur in the future. Such limitation could, however, be material.


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The Restated Rights Plan is designed to reduce the likelihood that the Company will experience an ownership change by discouraging any person (together with such person’s affiliates and associates), without the approval of the Board, from acquiring 4.95% or more of the outstanding common stock, or, if any person (together with such person’s affiliates and associates) already beneficially owns in excess of 4.95% or more of the outstanding common stock, from acquiring more shares of common stock, other than by exercise or conversion of currently existing warrants or as a result of as a result of a redemption of shares of common stock by the Company. There is no guarantee that the Restated Rights Plan will prevent the Company from experiencing an ownership change.
 
The following description of the Restated Rights Plan is qualified in its entirety by reference to the text of the Rights Agreement, and related amendments thereto, which are attached as Appendix A. We urge you to read carefully the Restated Rights Plan in its entirety as the description below is only a summary.

Nature of Right:
When exercisable, each Right will initially entitle the holder to purchase one one-thousandth of a share of Preferred Stock.
Means of Distribution:
The Rights will be distributed to holders of the Company’s outstanding common stock at a dividend of one Right for each share of common stock. The Rights will also be attached to all future issuances of common stock prior to the Distribution Date (as defined below).
Exercise Price:
$150.00 per one one-thousandth of a share of Preferred Stock, which is the amount that in the judgment of the Board represents the long-term value of the common stock over the term of the Restated Rights Plan (the “Exercise Price”).
Term:
The Rights will expire upon the earlier of (i) May 31, 2015 or (ii) redemption or exchange by the Company as described below.
Redemption of Rights:
Rights are redeemable at a price of $.001 per Right, by the vote of the Board, at any time until the occurrence of a Flip-In Event (defined below).
Preferred Stock:
The Preferred Stock purchasable upon exercise of the Rights will be nonredeemable and junior to any other series of preferred stock the Company may issue (unless otherwise provided in the terms of such other series). Each share of Preferred Stock will have a preferential cumulative quarterly dividend in an amount equal to the greater of (a) $3,750.00 or (b) 1,000 times the dividend declared on each share of common stock. In the event of liquidation, the holders of Preferred Stock will receive a preferred liquidation payment equal to the greater of (a) $150,000.00 per share, plus accrued dividends to the date of distribution, whether or not earned or declared, or (b) an amount per share equal to 1,000 times the aggregate payment to be distributed per share of common stock. Each share of Preferred Stock will have 1,000 votes, voting together with the shares of common stock. In the event of any merger, consolidation or other transaction in which shares of common stock are exchanged for or changed into other securities, cash and/or other property, each share of Preferred Stock will be entitled to receive 1,000 times the amount and type of consideration received per share of common stock. The rights of the Preferred Stock as to dividends, liquidation and voting, and in the event of mergers and consolidations, are protected by customary anti-dilution provisions. Fractional shares (in integral multiples of one one-thousandth) of Preferred Stock will be issuable; however, the Company may elect to distribute depositary receipts in lieu of such fractional shares. In lieu of fractional shares other than fractions that are multiples of one one-thousandth of a share, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise. Because of the nature of the Preferred Stock’s dividend, liquidation and voting rights, the value of one one- thousandth of a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of common stock.

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Rights in Event of Self-Dealing Transaction or Acquisition of Substantial Amount of common stock:
In the event that an Acquiring Person engages in certain self-dealing transactions or becomes a beneficial owner of 4.95% or more of the outstanding common stock (“Flip-In Events”), a holder of a Right thereafter has the right to purchase, upon payment of the then current Exercise Price, in lieu of one one-thousandth of a share of Preferred Stock, such number of shares of common stock having a market value at the time of the transaction equal to the Exercise Price divided by one- half the Current Market Price (as defined in the Restated Rights Plan) of the common stock. Notwithstanding the foregoing, Rights held by the Acquiring Person or any associate or affiliate thereof or certain transferees will be null and void and no longer be transferable.
Self-dealing transactions are defined to include a consolidation, merger or other combination of an Acquiring Person with the Company in which the Company is the surviving corporation, the transfer of assets to the Company in exchange for securities of the Company, the acquisition of securities of the Company (other than in a pro rata distribution to all stockholders), the sale, purchase, transfer, distribution, lease, mortgage, pledge or acquisition of assets by the Acquiring Person to, from or with the Company on other than an arm’s length basis, compensation to an Acquiring Person for services (other than for employment as a regular or part-time employee or director on a basis consistent with the Company’s past practice), a loan or provision of other financial assistance (except proportionately as a stockholder) to an Acquiring Person or the licensing, sale or other transfer of proprietary technology or know-how from the Company to the Acquiring Person on terms not approved by the Board or a reclassification, recapitalization or other transaction with the effect of increasing by more than 1% the Acquiring Person’s proportionate share of any class of securities of the Company.
Rights in Event of Business Combination:
If, following the occurrence of a Flip-In Event, the Company is acquired by any person in a merger or other business combination transaction in which the common stock is exchanged or converted or in which the Company is not the surviving corporation, or 50% or more of its assets or earnings power are sold to any person, each holder of a Right (other than an Acquiring Person, or affiliates or associates thereof) shall thereafter have the right to purchase, upon payment of the then current Exercise Price, such number of shares of common stock of the acquiring company having a current market value equal to the Exercise Price divided by one-half the Current Market Price of such common stock.
Exchange Option:
In the event (i) any person or group becomes an Acquiring Person or (ii) any of the types of transactions, acquisitions or other events described above as self-dealing transactions occur, and prior to the acquisition by such person or group of 50% or more of the outstanding shares of common stock, the Board may require all or any portion of the outstanding Rights (other than Rights owned by such Acquiring Person which have become void) to be exchanged for common stock on a pro rata basis, at an exchange ratio of one share of common stock or one one-thousandth of a share of Preferred Stock (or of a share of a class or series of the Company’s Preferred Stock having equivalent rights, preferences and privileges) per Right (subject to adjustment).
Fractional Shares:
No fractional shares of common stock will be issued upon exercise of the Rights and, in lieu thereof, a payment in cash will be made to the holder of such Rights equal to the same fraction of the current market value of a share of common stock.
Adjustment:
The Exercise Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding dividends payable in Preferred Stock) or of subscription rights or warrants (other than those referred to above). The number of Rights associated with each share of common stock is also subject to adjustment in the event of a stock split of the common stock or a stock dividend on the common stock payable in common stock or subdivisions, consolidations or combinations of the common stock occurring, in any such case, prior to the Distribution Date.
Rights as Stockholder:
The Rights themselves do not entitle the holder thereof to any rights as a stockholder, including, without limitation, voting rights or the right to receive dividends.

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Amendment of Rights:
Until the Rights become nonredeemable, the Company may, except with respect to the redemption price, amend the Restated Rights Plan in any manner. After the Rights become nonredeemable, the Company may amend the Restated Rights Plan to cure any ambiguity, to correct or supplement any provision which may be defective or inconsistent with any other provisions, to shorten or lengthen any time period under the Restated Rights Plan, or to change or supplement any provision in any manner the Company may deem necessary or desirable, provided that no such amendment may adversely affect the interests of the holders of the Rights (other than the Acquiring Person or its Affiliates or associates) or cause the Rights to again be redeemable or the Restated Rights Plan to again be freely amendable.

Although none of the Restated Rights Plan, our certificate of incorporation, our bylaws or applicable law require stockholder approval or ratification of the Restated Rights Plan, our Board has decided to request the stockholders ratify, on a nonbinding advisory basis, the extension of the Restated Rights Plan to May 31, 2015. If the extension of the Restated Rights Plan is not ratified by stockholders as proposed, the Board will consider whether to terminate the Restated Rights Plan following the Annual Meeting or to permit the Restated Rights Plan to expire per its terms on May 31, 2015. Regardless, the Board may elect to extend the Restated Rights Plan or adopt a new stockholder rights plan at a future date if it determines that the adoption of a stockholder rights plan is in the stockholders’ best interests at that time.

Anti-Takeover Effects
 
While intended to reduce the risk of an “ownership change” within the meaning of Section 382 of the Code, and thereby preserve the current ability of the Company to utilize the Tax Benefits, the Rights could have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group who becomes an Acquiring Person on terms not approved by the Company’s Board. The Rights should not interfere with any merger or other business combination approved by the Board since the Board may exempt such merger or business combination from the Restated Rights Plan. In addition, the Rights may be redeemed by the Company at any time as described above.

Vote Required and Board of Directors Recommendation
 
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. Abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this vote.
 
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE EXTENSION OF THE TERM OF THE AMENDED AND RESTATED SHAREHOLDER RIGHTS PLAN TO MAY 31, 2015.


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PROPOSAL FIVE:

TO APPROVE THE ADOPTION OF OUR 2014 EMPLOYEE STOCK PURCHASE PLAN AND TO AUTHORIZE AN AGGREGATE OF TWELVE MILLION SHARES ISSUABLE UNDER THE PLAN.
On August 27, 2014, the Board of Directors of the Company adopted the Extreme Networks, Inc. 2014 Employee Stock Purchase Plan (the “Purchase Plan”). If approved by the Company’s stockholders, the Purchase Plan will authorize the issuance of up to 12,000,000 shares of the Company’s Common Stock (subject to adjustment for certain changes in the capital structure of the Company) and will replace our existing Employee Stock Purchase Plan originally adopted in 1999. A copy of the proposed Purchase Plan is attached as Appendix B.
The Board of Directors believes that the Purchase Plan will advance the interests of the Company and its stockholders by providing its employees with an opportunity through payroll deductions to purchase shares of Common Stock and will be helpful in attracting, retaining and rewarding valued employees.

Summary of the Purchase Plan

The following summary of the Purchase Plan is qualified in its entirety by the specific language of the Purchase Plan, which is attached as Appendix B to this Proxy Statement.
General. The Purchase Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code but also permits us to include our non-United States employees in offerings not intended to qualify under Section 423. Each participant in the Purchase Plan is granted at the beginning of each offering under the Purchase Plan (an “Offering”) the right to purchase (a “Purchase Right”) through accumulated post-tax payroll deductions up to a number of shares of the Common Stock of the Company determined on the first day of the Offering. The Purchase Right is automatically exercised on each purchase date during the Offering, unless the participant has withdrawn from participation in the Purchase Plan prior to such date.
Shares Subject to the Purchase Plan. The Purchase Plan authorizes the sale of an aggregate of 12,000,000 shares of the Company’s Common Stock. If any Purchase Right expires, terminates or is canceled, the shares allocable to the unexercised portion of such Purchase Right will again be available for issuance under the Purchase Plan. To prevent dilution or enlargement of the rights of participants under the Purchase Plan, appropriate and proportionate adjustments to the number of shares subject to the Purchase Plan will be made if any change is made to the outstanding Common Stock by reason of merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or any similar change in the capital structure of the Company not involving the receipt of consideration by the Company.
Administration. The Purchase Plan is administered by the Compensation Committee or other committee or subcommittee duly appointed by our Board of Directors to administer the Plan. Subject to the provisions of the Purchase Plan, the Compensation Committee determines the terms and conditions of Purchase Rights granted under the Purchase Plan. The Compensation Committee will interpret the Purchase Plan and the Purchase Rights granted, and all determinations of the Compensation Committee will be final and binding on all persons having an interest in the Purchase Plan or any Purchase Right.
Eligibility. Generally, any employee of the Company or any present or future parent or subsidiary corporation of the Company designated by the Compensation Committee for inclusion in the Purchase Plan is eligible to participate in an Offering under the Purchase Plan, so long as the employee is customarily employed for more than 20 hours per week and more than five months in any year. If any local laws applicable to any of our non-United States employees require that participation in the Purchase Plan be extended to additional classes of employees or otherwise impose different terms or restrictions on their participation, those requirements may be satisfied through separate Offerings under the Purchase Plan not intended to qualify under Section 423 of the Code, and such separate Offerings will be treated part of a “Non-423 Plan” component of the Purchase Plan. Employees in certain jurisdictions having unfavorable laws regarding stock purchase plans may be excluded from participating in the Purchase Plan. In any event, no employee who owns or holds options to purchase, or who, as a result of participation in the Purchase Plan, would own or hold options to purchase, five percent or more of the total combined voting power or value of all classes of stock of the Company or of any parent or subsidiary corporation of the Company is eligible to participate in the Purchase Plan. As of August 31, 2014 approximately 1,450 employees, including its six executive officers, would have been eligible to participate in the Purchase Plan were it then in effect.
Offerings. Generally, each Offering under the Purchase Plan will be for a period of 24 months (an “Offering Period”), with new, overlapping Offering Periods commencing on the first trading days of February and August of each year. The

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Compensation Committee may establish a different term for one or more Offerings, not to exceed 27 months, or different beginning or ending dates for any Offering Period. Each 24-month Offering Period will be divided into four purchase periods of six months’ duration, with the last day of each purchase period being a purchase date.
If the fair market value of the Company’s Common Stock on any purchase date (other than the last purchase date of an Offering Period) is less than on the first day of the Offering Period, then all participants will be withdrawn from the Offering Period after the exercise of their Purchase Rights on such purchase date and enrolled as participants in a new Offering Period beginning on the next trading day following such purchase date, provided that the participant remains an eligible employee.
Participation and Purchase of Shares. Participation in an Offering under the Purchase Plan is limited to eligible employees who deliver a properly completed subscription agreement and, with the exception of non-United States employees for whom local law does not permit such deductions, who authorize payroll deduction contributions under the Purchase Plan prior to the first day of the Offering Period (the “Offering Date”). Payroll deductions may not exceed 15% (or such other rate as the Compensation Committee determines) of an employee’s compensation on any payday during the Offering Period. The Compensation Committee will specify alternative means for funding share purchases under the Purchase Plan by non-United States employees in jurisdictions where local law does not permit payroll deduction contributions. An employee who becomes a participant in the Purchase Plan will automatically participate in each subsequent Offering Period beginning immediately after the last day of the Offering Period in which he or she is a participant until the employee withdraws from the Purchase Plan, becomes ineligible to participate, or terminates employment.
Subject to any uniform limitations or notice requirements imposed by the Company, a participant may increase or decrease his or her rate of payroll deductions or withdraw from the Purchase Plan at any time during an Offering. Upon withdrawal, the Company will refund without interest the participant’s accumulated payroll deductions not previously applied to purchase shares. Once a participant withdraws from an Offering, that participant may not again participate in the same Offering.
Subject to certain limitations and unless different terms are specified by the Compensation Committee, each participant in an Offering is granted a Purchase Right for a number of whole shares determined by dividing the product of $2,083.33 and the number of months in the Offering Period by the fair market value of a share of our Common Stock on the Offering Date. In any event, no participant may be granted a Purchase Right that would allow the participant to purchase shares under the Purchase Plan or any other employee stock purchase plan of the Company or any of our subsidiaries having a fair market value (measured on the first day of the Offering Period in which the shares are purchased) exceeding $25,000 for each calendar year in which the Purchase Right is outstanding at any time. Further, the Purchase Plan provides that the maximum number of shares of Common Stock that may be purchased by all participants may not exceed one million shares on any purchase date during an Offering Period, unless the Compensation Committee establishes a different limit prior to the Offering Date. Purchase Rights are nontransferable and may only be exercised by the participant.
On each purchase date, the Company issues to each participant in the Offering the number of shares of Common Stock determined by dividing the amount of payroll deductions (or other funds that may have been contributed by certain non-United States participants) accumulated for the participant during the Offering Period by the purchase price, limited in any case by the number of shares subject to the participant’s Purchase Right for that Offering. The price at which shares are sold under the Purchase Plan is established by the Compensation Committee but may not be less than 85% of the fair market value per share of Common Stock on the Offering Date or the purchase date, whichever is less. The fair market value of the Common Stock on any relevant date generally will be the closing price per share as reported on the Nasdaq Global Select Market. For example, on September 15, 2014, the closing price per share of our Common Stock was $4.86. Any amounts credited to a participant’s plan account not applied to purchase shares will be returned to the participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share of Common Stock, in which case the remaining amount may be applied to the next Offering Period, or will be refunded in the event the employee chooses not to participate in the Purchase Plan during such Offering Period.
Change in Control of the Company. The Purchase Plan provides that a “Change in Control” occurs upon (a) a person or entity (with certain exceptions described in the Purchase Plan) becoming the direct or indirect beneficial owner of more than 50% of the Company’s voting stock; (b) stockholder approval of a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company). If a Change in Control occurs, then, unless the surviving or acquiring corporation assumes or continues the outstanding Purchase Rights or substitutes equivalent rights for such corporation’s shares, the Purchase Plan participants’ accumulated payroll deductions will

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be applied to purchase shares of the Common Stock in the current Offerings on a date before the Change in Control specified by the Compensation Committee.
Termination or Amendment. The Purchase Plan will continue until terminated by the Compensation Committee. The Compensation Committee may at any time amend, suspend or terminate the Purchase Plan, except that the approval of the Company’s stockholders is required within twelve months of the adoption of any amendment that either increases the number of shares authorized for issuance under the Purchase Plan or changes the definition of the corporations whose employees may participate in the Purchase Plan.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the United States federal income tax consequences of participation in the Purchase Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.
Generally, there are no tax consequences to an employee of either becoming a participant in the Purchase Plan or purchasing shares under the Purchase Plan. The tax consequences of a disposition of shares vary depending on the period such stock is held before its disposition. If a participant disposes of shares within two years after the Offering Date or within one year after the purchase date on which the shares are acquired (a “disqualifying disposition”), the participant recognizes ordinary income in the year of disposition in an amount equal to the difference between the fair market value of the shares on the purchase date and the purchase price. Such income may be subject to withholding of tax. Any additional gain or resulting loss recognized by the participant from the disposition of the shares is a capital gain or loss.
If the participant disposes of shares at least two years after the Offering Date and at least one year after the purchase date on which the shares are acquired, the participant recognizes ordinary income in the year of disposition in an amount equal to the lesser of (i) the difference between the fair market value of the shares on the date of disposition and the purchase price or (ii) the difference between the fair market value of the shares on the Offering Date and purchase price (determined as if the Purchase Right were exercised on the Offering Date). Any additional gain recognized by the participant on the disposition of the shares is a capital gain. If the fair market value of the shares on the date of disposition is less than the purchase price, there is no ordinary income, and the loss recognized is a capital loss. If the participant owns the shares at the time of the participant’s death, the lesser of (i) the difference between the fair market value of the shares on the date of death and the purchase price or (ii) the difference between the fair market value of the shares on the Offering Date and the purchase price (determined as if the Purchase Right were exercised on the Offering Date) is recognized as ordinary income in the year of the participant’s death.
If the exercise of a Purchase Right does not constitute an exercise pursuant to an “employee stock purchase plan” under section 423 of the Code, the exercise of the Purchase Right will be treated as the exercise of a nonstatutory stock option. The participant would therefore recognize ordinary income on the purchase date equal to the excess of the fair market value of the shares acquired over the purchase price. Such income is subject to withholding of income and employment taxes. Any gain or loss recognized on a subsequent sale of the shares, as measured by the difference between the sale proceeds and the sum of (i) the purchase price for such shares and (ii) the amount of ordinary income recognized on the exercise of the Purchase Right, will be treated as a capital gain or loss, as the case may be.
If the participant disposes of the shares in a disqualifying disposition, the Company should be entitled to a deduction equal to the amount of ordinary income recognized by the participant as a result of the disposition, except to the extent such deduction is limited by applicable provisions of the Code or the regulations thereunder. In all other cases, no deduction is allowed for the Company.
New Plan Benefits and Additional Information
Because benefits under the Purchase Plan will depend on employees’ elections to participate and the fair market value of the Company’s Common Stock at various future dates, it is not possible to determine the benefits that will be received by employees if the Purchase Plan is approved by the stockholders. Non-employee Directors are not eligible to participate in the Purchase Plan.

Vote Required and Board of Directors’ Recommendation
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have no

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effect on the outcome of this vote. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSED 2014 EMPLOYEE STOCK PURCHASE PLAN.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth, as of September 4, 2014, certain information with respect to the beneficial ownership of our common stock by: (i) each stockholder known by us to be the beneficial owner of more than 5% of our common stock, (ii) each named executive officer, (iii) each of our directors and director nominees, and (iv) all executive officers and directors as a group.
 
Except as otherwise indicated, the address of each beneficial owner is c/o Extreme Networks, Inc., 145 Rio Robles, San Jose, California 95134.
Name and Address (1)
Amount of Beneficial Ownership (2)
 
Percent of Class (3)
Directors and Named Executive Officers:
 
 
 
Maury Austin, Director
123,753

(4)
*

Charles Carinalli, Director
442,969

(5)
*

Randi Paikoff-Feigin, Director
20,015

 
*

Edward Kennedy, Director
145,586

(6)
*

John H. Kispert, Director
182,086

(7)
*

Edward B. Meyercord, III, Independent Chairman of the Board of Directors
193,086

(8)
*

John C. Shoemaker, Director
222,086

(9)
*

Charles W. Berger, President and Chief Executive Officer, Director
1,040,000

(10)
*

Kenneth Arola, Senior Vice President, Chief Financial Officer
117,000

 
*

Edward Carney, Executive Vice President, Products and Customer Success
248,469

(11)
*

Frank Blohm, Executive Vice President of Operations and IT
533,676

(12)
*

Allison Amadia, Vice President, General Counsel and Corporate Secretary
105,812

(13)
*

John Kurtzweil, Former Senior Vice President, Chief Financial Officer
371,166

(14)
*

All Executive Officers and Directors as a Group (13 persons)
3,745,704

(15) 
3.8



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*
Less than 1%
(1)
Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table.
(2)
Under the rules of the SEC, a person is deemed to be the beneficial owner of securities that can be acquired by the person within 60 days of September 4, 2014.
(3)
Calculated on the basis of 97,506,357 shares of common stock outstanding as of September 4, 2014, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days of September 4, 2014 are deemed to be outstanding for purposes of calculating that stockholder’s percentage of beneficial ownership. These shares are not, however, deemed to be outstanding and beneficially owned for the purpose of computing the percentage ownership of any other person.
(4)
Includes 16,667 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(5)
Includes 150,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014
(6)
Includes 40,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(7)
Includes 70,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014. Includes 20,000 shares held by the Kispert Family Trust UTD September 13, 2000.
(8)
Includes 70,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(9)
Includes 100,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(10)
Includes 750,000 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(11)
Includes 156,250 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(12)
Includes 388,697 issuable pursuant to options exercisable within 60 days of September 4, 2014.
(13)
Includes 46,875 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(14)
Includes 204,166 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
(15)
Includes 1,992,655 shares issuable pursuant to options exercisable within 60 days of September 4, 2014.
 


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EXECUTIVE COMPENSATION AND OTHER MATTERS

Compensation Discussion and Analysis
 
Executive Summary
 
We promote a pay for performance compensation philosophy for our management team (including our named executive officers) by creating a compensation framework that emphasizes the following features:
Simple compensation structure. Target compensation for our management team in 2013 consisted primarily of base salary, performance based cash bonuses and stock option and restricted stock unit (RSU) grants.
Management bonus plan tied to straightforward financial metrics. The Company maintains a performance based cash bonus plan, under which bonuses are tied to the achievement of Company performance targets established by the Compensation Committee at the outset of the fiscal year.
Reasonable equity grants. The Company generally grants stock options and RSUs to its management team with standard time based vesting, which encourages retention and stability in the management team and ties realizable compensation from such equity grants to stock price.
Performance equity awards. The Company grants performance awards to ensure alignment with stockholders over a multi-year period, which will only be earned by our executives if the Company achieves certain defined targets over the applicable performance period.
No compensation guarantees. The Company does not guarantee employment, salary increases, bonuses, pension arrangements, equity grants, or deferred compensation to its management.
Limited perquisites. The Company does not generally provide any benefits/perquisites to our executive officers that are not generally available to all employees. These are comprised of a 401(k) partial contribution matching program and insurance coverage. No tax gross up payments on bonuses or other payments are provided.
Reasonable severance benefits. Certain executive officers are party to agreements which provide reasonable severance benefits related to “without cause” terminations, or “without cause” or “for good reason” terminations in connection with a change-in-control transaction. The benefits under these arrangements are continuation of base salary, bonus, and COBRA payments for limited time periods.
Mitigated compensation-related risk. The Company has adopted policies, including an insider trading policy, all of which are subject to independent Compensation Committee oversight, to mitigate compensation-related risk.
Recoupment policy. The Company has adopted a recoupment policy which under certain circumstances allows us to recover incentive based compensation paid to any current or former executive officer.
No hedging transactions, speculative transactions or pledging of securities. Under our insider trading policy, certain employees deemed to be insiders under the policy including all of executive officers and directors are prohibited from engaging in any speculative transactions in Company securities, including engaging in short sales, engaging in transactions with respect to put options, call options or other derivative securities, or engaging in any other forms of hedging transactions. In addition, no deemed insider may hold Extreme Networks securities in a margin account, or pledge Extreme Networks securities as collateral for a loan.
Annual reviews by Compensation Committee. The Company’s Compensation Committee is comprised solely of independent directors. The Compensation Committee has the discretion to retain independent consultants and counsel, and it utilizes Compensia Inc. to provide guidance in conducting its annual executive compensation review.
The Company's executive compensation program is guided by the principle that the compensation of the executive officers should encourage creation of value for stockholders and achievement of strategic corporate objectives. In furtherance of this principle, the Company's executive compensation program includes a number of features intended to reflect best practices in the market and to help ensure that the program reinforces stockholder interests. These features are described in more detail below in this Compensation Discussion and Analysis and include the following:
For fiscal 2014, approximately 64 percent of the target total direct compensation for our President and Chief Executive Officer, and approximately 22 percent of the target total direct compensation for each of the other named executive officers, was performance-based and/or linked to the value of the Company's stock price. As used in this discussion, "target total direct compensation" means the aggregate amount of the executive's base salary, target annual incentive bonus, and long-term equity incentive awards based on the grant-date fair value of such awards as determined under the accounting principles used in the Company's financial reporting.


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Executives' bonuses under our annual incentive plan are determined each year by the Compensation Committee based on a number of quantitative and qualitative factors to assess the performance of the Company and the individual executive during the year. The annual bonus for each executive is capped at 150 percent of the executive's target bonus.

Executives were granted equity awards in fiscal 2014 in the form of options and RSUs. These options and awards provide a retention incentive as they vest over a multi-year period and, as the ultimate value of the award depends on our stock price, further align the interests of our executives with those of our stockholders.

Compensation Philosophy and Objectives
 
Our guiding compensation principle is to align executive compensation with the Company’s strategic objectives and financial performance. To achieve this principle we seek to provide a competitive total compensation package that allows us to attract high quality candidates for senior leadership positions, to retain these employees and to establish a total compensation program which motivates and rewards individual and team performance in alignment with our long-term business strategies and objectives. Our compensation program is designed to motivate individual and team accountability for our absolute and relative competitive performance. We also align the interests of management and our stockholders by providing variable compensation to our executives that is directly linked to the performance of the Company and stockholder return. We believe it is in our stockholders’ interests to attract, motivate and retain highly qualified individuals in critical positions by providing competitive compensation opportunities. We establish market competitive target levels of total compensation, focusing on both current pay and the opportunity for long term and future compensation. Annual compensation for a given executive is determined with reference to competitive market data, as well as the individual’s experience, knowledge, skills, education, performance and importance to our business.

2013 “Say on Pay” Advisory Vote on Executive Compensation
 
The Company provided stockholders with an advisory vote on executive compensation for the third time at the 2013 Annual Meeting. During that meeting, approximately 96 percent of the votes cast in the “say on pay” advisory vote were “FOR” approval of our executive compensation. The Committee took the results of our 2013 advisory vote on executive compensation into consideration in determining whether modifications to our executive compensation programs were necessary. The Committee viewed this level of stockholder support as a vote of confidence in our compensation policies and that material changes were not required.
 
Compensation Process
 
Our Compensation Committee, in consultation with the Board and the Company’s human resources group, designs, establishes and oversees the Company’s compensation programs and compensation philosophy. The Committee establishes all elements of compensation paid to the Chief Executive Officer and reviews and approves all elements of compensation paid to the named executive officers and our senior officers. Throughout the year, the Chair of our Compensation Committee meets with our Senior Vice President of Worldwide Human Resources to monitor issues relating to executive compensation. At the end of the fiscal year, our Chief Executive Officer conducts a qualitative and quantitative assessment of each named executive officer’s performance for the past fiscal year based upon the officer’s individual and team business goals and objectives. As set forth in additional detail below, our Chief Executive Officer and our Senior Vice President of Worldwide Human Resources also review:
the competitive benchmarking assessments of similarly situated executives in comparable companies in our industry;
our competitive position relative to comparable companies in our industry; and
the available salary and equity merit increase budget for the Company.

Our Chief Executive Officer then makes specific recommendations to the Compensation Committee for any changes to base salary, target bonus opportunities, other cash incentives and equity awards, if appropriate. The Compensation Committee considers these proposals and makes any final approvals required in executing their duties. In addition, the Compensation Committee similarly assesses the performance of our Chief Executive Officer, based on the achievement of the approved financial goals, performance metrics, and strategic objectives identified to improve our operating performance. Our Chief Executive Officer is not present at the time the Compensation Committee reviews his performance and discusses his compensation.
 
Compensation Consultant, Peer Group Selection and Benchmarking
 
In connection with the Compensation Committee’s desire to make sure our executive compensation is market-based, to more closely tie future compensation to performance and to further align executive compensation with stockholder value, the

29


Compensation Committee has engaged Compensia, Inc., an independent compensation consultant with expertise in the technology sector, to assist it in the performance of its duties and to advise it with respect to compensation matters for fiscal 2014 and beyond. The Committee routinely assigned Compensia projects designed to ensure that our executive compensation programs are reflective of companies in our peer group. Additionally, the Company’s human resources group supported the work of Compensia and the Committee. In its role as independent compensation consultant, at the request of the Committee, Compensia participated in Committee meetings and provided compensation advice to the Committee. In 2014, Compensia provided advice and recommendations to the Committee on:

competitiveness of executive officer compensation levels;
revisions and additions to the Company’s peer group, goal metrics and bonus design, compensation mix between cash and equity;
developments in high technology compensation programs, employment contracts, legislation and regulation affecting executive compensation; and
the impact of the global economy on executive compensation and director compensation.

Compensia also provides the Compensation Committee with guidance on the Company’s equity plans, including the 2014 Employee Stock Purchase Plan proposal. At the direction of the Committee, Compensia also periodically provides guidance to the Chief Executive Officer and the Senior Vice President of Worldwide Human Resources on compensation issues. Although the Company pays Compensia’s fees for its engagement by the Compensation Committee, the Committee has sole discretion with respect to Compensia’s continued engagement and assignments.

 Peer Group Selection and Benchmarking
The Committee looks at a variety of factors when setting pay including the market data, the executive’s experience, the scope of the executive’s role relative to the roles in the comparable data, the executive’s performance and the Company’s performance. Within this framework, the Committee generally seeks to ensure total compensation of our executives, including our named executive officers, is competitive with similarly-situated executives in comparable companies in our industry or at companies with whom we may compete in our hiring and retention of executives. However, the Committee does not “target” or “benchmark” compensation at any particular competitive level.

For the Compensation Committee’s deliberations regarding our fiscal 2014 executive compensation, the Compensation Committee, in consultation with Compensia, reviewed publicly disclosed market compensation data for our peer group to assist with setting compensation for our Chief Executive Office, Chief Financial Officer and select other top executives. As there is no public disclosure of specific compensation information for non-executives or for executive positions which are not generally disclosed in public filings, survey data is used to assist with setting compensation for these positions.

In October 2013, following consultation with Compensia, we revised our peer group to better reflect our size after the closing of our acquisition of Enterasys as follows:
ADTRAN
Harmonic
Riverbed
Aruba Networks
Infinera
QLogic Corporation
Black Box
InterDigital
RadiSys Corporation
Calix
Ixia
Sonus Networks
Emulex
Netgear
Symmetricon
Finisar
QLogic
 

 
The peer group is comprised of computer networking and communication equipment companies and other high-tech companies with $225 million to $1,323 million in revenue and market capitalizations of $323 million to $3.7 billion at the time selected for inclusion in the peer group. The peer group assessment examined a range of pay levels including the 25th, 50th and 75th percentile of the applicable benchmark group to reflect a range of pay to be considered when determining individual pay elements.
 

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Compensation Program Elements
 
The main elements of our compensation program and their respective purposes are as follows:
 
Element
  
Purpose
Base salary
  
Attract and retain talented employees. Serve as the primary element of fixed compensation.
Annual cash incentives
  
Encourage and reward individual and overall company performance relative to our current plans and objectives, particularly in the short term.
Annual time and performance-based long-term equity incentives
  
Promote the achievement longer-term financial and strategic objectives. Encourage employee retention. Align the interests of officers and stockholders.
Change in control and severance benefits
  
Retain executives during the pendency of a proposed change in control transaction. Avoid adverse impacts to the morale of executives and of uncertainty regarding continued employment. Align the interests of executives and stockholders in the event of a change in control. Assist with the recruitment of executives and other key employees.
Benefit plans
  
Attract and retain talented employees. Provide assurance of financial support in the event of illness or injury. Encourage retirement savings. Encourage additional equity ownership by employees.
 
The Compensation Committee does not have a set formula for determining the mix of pay elements for executive officers. Other than certain changes in control and severance benefits, our executives generally receive only compensation elements that are provided to our rank-and-file employees.
 
2014 Compensation Decisions
 
For the fiscal year ended June 30, 2014, our named executive officers and their respective titles were as follows:
 
Name
  
Title
Charles Berger
  
President and Chief Executive Officer, Director
Kenneth Arola
  
Senior Vice President and Chief Financial Officer
Edward Carney
  
Executive Vice President, Products and Customer Success
Frank Blohm
  
Executive Vice President of Operations and IT
Allison Amadia
  
Vice President, General Counsel, and Corporate Secretary
John Kurtzweil (1)
 
Former Senior Vice President and Chief Financial Officer
Christopher Crowell (2)
  
Former Chief Operating Officer
(1) Mr. Kurtzweil served in this position through June 1, 2014 but will remain an employee of the Company as Special Assistant to the CEO supporting the Company until September 30, 2014, at which time Mr. Kurtzweil’s employment with the Company will cease.
(2)
Mr. Crowell's employment with the Company ceased effective May 6, 2014.
Base Salaries
 
At the beginning of the year, the Compensation Committee, together with our Chief Executive Officer, reviewed the base salaries for our continuing executive officers for the fiscal year ending June 30, 2014, though the Chief Executive Officer did not participate in discussions pertaining to his base salary. The Compensation Committee decided at that time not to make any adjustments to the base salaries of any of our named executive officers for fiscal 2014. However, after consideration of peer group compensation data following the acquisition by the Company of Enterasys Networks, Inc. and the relative contributions of the executive officers, increased the annual salaries and/or target cash incentive amounts of certain of the Company’s executive officers, including certain of the Company’s Named Executive Officers, effective as of April 1, 2014. The base salaries for the named executives after such increases were as follows:


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Executive
 
Annual Base Salaries effective April 1, 2014
Charles Berger, President and Chief Executive Officer
 
$
600,000

Frank Blohm, Executive Vice President, Operations and IT
  
$
323,000

Allison Amadia, Vice President, General Counsel and Corporate Secretary
 
$
330,000

John Kurtzweil, Former Senior Vice President, Chief Financial Officer
  
$
385,000


For additional information regarding the Compensation Committee’s decisions with respect to named executive officer base salaries, including a summary of any applicable separation arrangements, see the discussion below under the heading “Summary of Employment and Other Agreements.”
 
Annual Short-Term Incentives
 
Our Compensation Committee establishes an incentive plan each year, designed to reward individual and overall Company performance relative to our current plans and objectives, particularly in the short term. The structure and elements of the plan are reviewed and modified annually based upon expectations for our business based on our Board-approved operating plan. In August 2013 the Compensation Committee approved the terms of our Fiscal Year 2014 Incentive Bonus Plan (the “2014 Incentive Plan”).
 
The 2014 Incentive Plan was a 100 percent cash bonus program that provided payouts for quarterly and annual operating periods which were to be funded and earned based on the achievement of pre-established corporate and individual objectives. All Company employees, including our named executive officers, who were not on a commission plan were eligible for the 2014 Incentive Plan. In order to participate in the 2014 Incentive Plan, participants must have been employed by us for a minimum of one full fiscal quarter and must have been employed by us, or one of our subsidiaries, on the day any awards under the 2014 Incentive Plan were made.

Under the terms of the 2014 Incentive Plan the Compensation Committee established bonus targets for our named executive officers and set the targets for officers hired or promoted during the course of the year. The individual target bonus amounts as a percentage of base salary for each of Mr. Berger, Mr. Carney, Mr. Blohm, Ms. Amadia and Mr. Kurtzweil, were 100 percent (changed to 120 percent during the year), 50 percent (not changed during the year), 50 percent (changed to 55 percent during the year), 50 percent (not changed during the year) and 50 percent (changed to 55 percent during the year), respectively. Mr. Arola, who was not employed for a minimum of a full quarter during the fiscal year, and Mr. Crowell, who participated in an individual sales commission plan were not eligible to participate in the 2014 Incentive Plan. The maximum payout a participant was eligible to receive was to be calculated based upon 150 percent of the participant’s target bonus. Based upon achievement of the performance goals, the target award opportunity was 15 percent per quarter for meeting quarterly targets and 40 percent for meeting the annual target. Employees and executives were eligible for payments on a quarterly basis. 

The Compensation Committee does not adhere to a strict formula in determining performance goals. Instead, the Committee employs a flexible approach that enables it to choose performance metrics that are specifically designed to allow the company to adjust to evolving market conditions. For 2014, the Compensation Committee adopted performance goals based on achievement of operating income. The 2014 Incentive Plan was structured to payout at the 100 percent level if the Company achieved a cumulative $16.3M in operating income over the course of the year based on the Annual Operating Plan (AOP), subject to adjustment downward and upward based on actual performance. The Aggregate Operating Income (AOI) goal was broken down into four discrete quarterly goals and payouts, if any, were to be made on a quarterly basis.

No awards would be earned until the quarterly operating income goals were reached, following which, all incremental operating income dollars above the goal threshold would fund the quarterly bonus pool up to a target payout equal to 100 percent for the applicable period. Once the 100 percent award level was reached, 50 percent of the incremental operating income dollars above the operating income threshold would fund the quarterly bonus pool up to the 150 percent maximum. The Compensation Committee included a recoupment provision such that if third quarter bonus, if any, was not funded at the 100 percent level, and fourth quarter performance resulted in payment of the full bonus award, with accelerators, capped at 150 percent, any incremental operating income dollars above the threshold for the fourth quarter would be used to recoup the third quarter bonus on the same 100 percent/50 percent levels described above.


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Sales Commission Plan

Mr. Crowell did not participate in our 2014 Incentive Plan, but instead participated in a separate sales incentive plan. For 2014, Mr. Crowell was given a target total incentive of 100 percent of his base salary, or $400,000, based on total revenue. A table of revenue attainment and incentive potential was used to make the plan easy to understand and to directly tie Mr. Crowell’s compensation to our success. Because our management wanted to incentivize Mr. Crowell to maximize sales of our products and services and thereby maximize his own compensation, the maximum amount established for Mr. Crowell’s sales incentive plan was capped at 200 percent of his base salary.
 
Sign-on Bonus Granted to Ms. Amadia

In connection with the negotiation of her terms of employment, Ms. Amadia was entitled to a sign-on bonus of $15,000, which was paid in a lump sum in July 2013.

Long-Term Equity Incentive Compensation

We grant equity awards under our equity incentive plans to our executive officers in order to promote the achievement of longer-term financial and strategic objectives, to encourage employee retention and to align the interests of our officers and of our stockholders. Under our 2013 Equity Incentive Plan, (the "2013 Plan"), we may grant stock options, stock appreciation rights, restricted stock, RSUs, performance shares, performance units, and other share-based or cash-based awards to employees and consultants. The 2013 Plan also authorizes the grant of awards of stock options, stock appreciation rights, or SARs, restricted stock, and RSUs to non-employee members of our Board and deferred compensation awards to officers, directors and certain management or highly compensated employees. Under the 2013 Plan, all stock options must be granted with an exercise price per share that is not less than the fair market value of a share of our common stock on the effective date of grant of the option. The 2013 Plan replaced the 2005 Equity Incentive Plan. During the year, as part of the acquisition of Enterasys, the Company assumed the stock options and awards granted under the 2013 Enterasys Equity Incentive Plan. As of June 30, 2014, there were 23,691,603 shares available for future grant under the 2013 Plan. To further align the interests of our executive officers with those of our stockholders we grant performance awards which vest over multiple years and which will only be earned by our executives if the Company achieves certain defined targets over the applicable performance period.

New Hire Grants; Promotional Grants
 
Generally, we grant equity awards to our new employees, including our named executive officers, in connection with the start of their employment in order to induce them to join us and to tie their long term compensation to future increases in our stock price. We occasionally grant additional equity awards in connection with the promotion of employees as a reward for outstanding past performance and to provide incentives resulting from future stock gains. New-hire stock options and promotional grants granted to named executive officers generally vest as follows: one-fourth vests one year after the officer’s employment start date or grant date of the promotional grants, and the remaining shares vest monthly over the following three years at a rate of 1/48th of the entire option each month, subject to the officer’s continued employment with us. However, our Board or the Compensation Committee has approved certain exceptions to vesting schedules for new hire and promotional equity awards in the past. For example, see “Change in Control and Severance Agreements,” below. The aggregate amounts of the new-hire or promotional grants to named executive officer are negotiated with the named executive officer.
 
The following table sets forth information on new-hire or promotional grants to named executive officers in fiscal 2014:

Executive
 
Equity Award
Grant Date
 
Number of Shares
Subject to Stock
Option Grant
 
Number of Shares
Subject to RSU
Grant
Edward Carney, Executive Vice President, Products and Customer Success
 
August 1, 2013
 
500,000
 
70,000
Allison Amadia, Vice President General Counsel and Corporate Secretary
 
August 1, 2013
 
150,000
 
50,000
Chris Crowell, Former Chief Operating Officer (1)
 
November 1, 2013
 
614,717
 
307,358

(1) Options and RSU Awards assumed as part of the acquisition of Enterasys.


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Annual Merit Grants
 
We have typically granted our executive officers additional stock option, RSU and/or performance grants on an annual basis, with the goal of more closely aligning the interests of management and our stockholders by providing continued incentives to our officers in order to retain strong executives and improve corporate performance. Only executives with positive performance rankings are eligible for annual merit grants. Merit based annual stock options granted to named executive officers generally vest one-fourth after one year from the date of grant and at a rate of 1/48th of the entire option each month for 36 months thereafter, subject to the officer’s continued employment with us. Merit based RSU grants generally vest over a two or three year period, with equal installments vesting on the anniversary date of each grant, subject to the officer’s continued employment with us. PSUs will vest upon achievement of specific performance metrics over a defined performance period, each as selected by the Compensation Committee. However, our Board and/or the Compensation Committee has approved certain exceptions to vesting schedules in the past.
 
During the fiscal year, the Compensation Committee evaluated the performance of each of our named executive officers and, decided to grant merit based stock options, RSUs and/or performance grants to certain of our executive officers. The following table sets forth information on merit based and performance grants to named executive officers in fiscal 2014:

Executive
 
Equity Award
Grant Date
 
Number of Shares
Subject to Stock
Option Grant
 
Number of Shares
Subject to RSU
Grant
Charles Berger,  President and Chief Executive Officer
 
February 7, 2014
 

 
280,000

Edward Carney, Executive Vice President, Products and Customer Success
 
February 7, 2014
 

 
30,000

Frank Blohm, Executive Vice President of Operations and IT
 
February 7, 2014
 
80,000

 
32,500

Allison Amadia, Vice President General Counsel and Corporate Secretary
 
February 7, 2014
 
80,000

 
20,000

John Kurtzweil, Former Senior Vice President, Chief Financial Officer
 
February 7, 2014
 
103,000

 
42,000


Our process with regard to grants of equity compensation awards to Board members, officers, and non-officer employees is as follows:

The general practice for equity awards is to make grants once per quarter, during open trading windows only, on the second trading day following the public announcement of quarterly financial results, pursuant to a list to be circulated to the appropriate granting authority prior to the proposed approval date.
All grants are to be approved by the Compensation Committee.
Grants are to be approved at Compensation Committee meetings (not by unanimous written consent, except in extraordinary circumstances).
Granting authority may not be delegated to management.
Our Board and management are to continue monitoring processes and policies recommended by the SEC, self-regulatory authorities and outside advisors.
All Board and Compensation Committee minutes are to be circulated to the directors as soon as reasonably practicable (generally, within two weeks of meeting). Counsel should attend all Board and Compensation Committee meetings, and must be present when stock is granted.
Management has instituted a mechanism for monitoring compliance with and reporting to our Board on our policies and procedures relating to options grants.

These processes are designed to ensure that we continue to employ best practices and procedures with respect to equity compensation awards.
 
In addition, we monitor the number of shares that we are utilizing for all of our equity compensation programs, including new hire grants, promotional grants and annual merit grants, in order to prudently manage stock option expense and potential

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dilution of stockholder ownership. The Compensation Committee, in consultation with our compensation consultant approved a target gross equity pool that could be used for all grants issued to new hires, promotion grants and merit grants, and to reflect industry practices for managing the overall stock option burn rate.
 
Change in Control and Severance Agreements
 
Each of our named executive officers is employed at-will. However, from time to time, we implement plans or enter into agreements that would provide benefits payable to certain employees, including named executive officers, in connection with the termination of employment, a change in our control or other situations. These benefits assist us in our recruiting efforts and, without these benefits, officers may be tempted to leave us prior to the closing of the change in control, especially if they do not wish to remain with or believe they will not be retained by the entity after the transaction closes, and any departures could jeopardize the consummation of the transaction or our interests if the transaction does not close. The Compensation Committee believes that these benefits therefore serve to enhance stockholder value, and align the officers’ interest with those of our stockholders.
 
Our agreements with named executive officers are described under “Summary of Employment and Other Agreements” below. The potential payments that each of named executive officer would have received if a change in control or termination of employment had occurred on June 30, 2014, are set forth under “Potential Payments Upon Termination or Change in Control” below.
 
Other Benefits
 
We provide other customary benefits that are comprehensive and apply uniformly to all of our employees, including our named executive officers. Our employee benefits program includes medical, dental, prescription drug, flexible spending contribution plans, vision care, disability insurance, life insurance benefits, business travel insurance, 401(k) savings plan with employer match, educational assistance, employee assistance program and holidays. We do not include a fixed vacation allowance for named executive officers, as they typically travel extensively and are requested to be available to us even while vacationing. We do not provide a defined benefit retirement pension plan, supplemental life insurance or the use of company vehicles to our named executive officers.
 
In January 1999, our Board adopted our 1999 Employee Stock Purchase Plan, or the Purchase Plan. In December 2005, our stockholders approved an amendment to the Purchase Plan to increase the maximum number of shares of common stock that may be issued under the plan by 5,000,000 to a total of 12,000,000 shares. The Purchase Plan permits eligible employees, including our named executive officers, to acquire shares of our common stock through periodic payroll deductions of up to 15 percent of total compensation. No more than 1,000 shares may be purchased on any purchase date per employee, and each offering period currently has a maximum duration of three months. The price at which the common stock may be purchased is 85 percent of the lesser of the fair market value of our common stock on the first day of the applicable offering period or on the last day of the respective purchase period.
 
Tax Considerations
 
The Compensation Committee has considered the provisions of Section 162(m) of the Internal Revenue Code ("the Code"), and related Treasury Department regulations, which restrict deductibility of executive compensation paid to our named executive officers holding office at the end of any year to the extent this compensation exceeds $1,000,000 for any of these officers in any year and does not qualify for an exception under the statute or regulations. Income from options granted under our stockholder-approved stock option plan would generally qualify for an exemption from these restrictions so long as the options are granted by a committee whose members are “outside directors” (as defined by Section 162(m)) and have an exercise price no less than the fair market value of the shares on the date of grant. We expect that the Compensation Committee will continue to be comprised solely of outside directors, and that any options granted to our executive officers will be approved by the Compensation Committee. The other components of our executive compensation program may not qualify for exemptions from Section 162(m). In the future, the Compensation Committee expects to continue evaluating the advisability of qualifying our executive compensation for deductibility. The Compensation Committee’s policy is to qualify its executive compensation for deductibility under applicable tax laws where reasonably practicable and consistent with the Company’s compensation goals and objectives.
 
Compensation Risk Evaluation
 
At the direction of our Compensation Committee management reviews and reports to the Compensation Committee on its assessment regarding elements of our compensation program that could pose a risk to the Company. Management reported to the Compensation Committee its determination that the Company’s executive compensation program does not encourage excessive risk or unnecessary risk taking due to factors such as our programs are composed of fixed and variable pay components, the balance of short-term and long-term performance goals in our incentive compensation system, the established

35


limits on permissible incentive award levels and generally applicable internal controls, including financial, operational and compliance policies and practices.
 
Stock Ownership, Hedging and Pledging
 
At present, the Compensation Committee has not established any equity or security ownership requirements for its executive officers or directors which is a policy that is reviewed annually as part of the regular review of our pay plans. Under our insider trading policy, we prohibit certain employees deemed to be insiders under the policy, including all executive officers and directors from hedging the economic risk of ownership of our stock. In addition, employees and directors may not hold Extreme Networks securities in a margin account, or pledge Extreme Networks securities as collateral.

Recoupment Policy

The Compensation Committee has adopted the Extreme Networks, Inc. Recoupment Policy that applies to all of our current and former executive officers within the meaning of the Securities Exchange Act. Under this policy, in the event of a restatement of financial results (other than a voluntary restatement due to a change in applicable accounting rules or interpretations) due to the material noncompliance of the Company with any financial reporting requirement under the U.S. federal securities laws due to fraud during the one-year period following the date of the first public issuance or filing with the SEC (whichever first occurs), the Compensation Committee will have the right to use reasonable efforts to recover any incentive-based compensation in excess of the amount of such incentive based compensation that would have been earned and paid to the executive officer under the restated financial results.

The Compensation Committee will have the discretion to determine the manner in which a recovery of excess incentive based compensation will be effected, for example, by reducing the future payment of excess incentive based compensation earned on the basis of an erroneous financial measure but not yet paid or by reducing payment of other future compensation to offset excess incentive-based compensation previously paid. The Compensation Committee will amend the policy, as necessary, to comply with the final SEC rules regarding the recoupment policies of the Dodd-Frank Wall Street Reform and Consumer Protection Act.


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Summary Compensation Table
 
The following table sets forth information for fiscal 2014 concerning the compensation of our named executive officers:
 
SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary
($)
Bonus
($)(1)
Stock Awards
($)(2)
Option Awards
($)
Other Equity
And Non-Equity
Incentive Plan
Compensation
($)(3)
All Other Compensation
($)(4)
 
Total
($)
Charles W. Berger
2014
525,000
1,587,600
360,691
11,200
 
2,484,491
President and Chief Executive
2013
91,025
125,000
2,846,459
11,845
 
3,074,329
Officer
 
 
 
 
 
 
 
 
 
Kenneth Arola
2014
30,834
194
 
31,028
Senior Vice President and
 
 
 
 
 
 
 
 

Chief Financial Officer
 
 
 
 
 
 
 
 
 
Edward Carney
2014
371,282
462,700
1,160,850
121,450
8,615
 
2,124,897
Executive Vice President of
 
 
 
 
 
 
 
 

Product and Customer Success
 
 
 
 
 
 
 
 
 
Frank Blohm
2014
305,750
55,000
184,275
229,536
130,336
12,384
 
917,281
Executive Vice President of Operations and IT
2013
296,875
272,198
186,450
18,700
15,193
 
789,416
Allison Amadia
2014
294,609
15,000
322,400
577,791
100,463
1,153
 
1,311,416
Vice President, General
 
 
 
 
 
 
 
 

Counsel and Corporate Secretary
 
 
 
 
 
 
 
 

John Kurtzweil
2014
385,000
238,140
295,527
167,264
10,079
 
1,096,010
Former Senior Vice President and Chief Financial Officer
2013
385,000
135,200
652,575
16,026
 
1,188,801
 
2012
1,481
 
1,481
Christopher Crowell (5)
2014
156,923
1,628,997
1,715,060
675,555
 
4,176,535
Former Chief Operating Officer
 
 
 
 
 
 
 
 
 

(1)
Bonus amounts represent discretionary fixed bonuses, including sign-on bonuses. Performance-based bonuses are generally paid under our equity incentive plans and sales commission plan and represented as Non-Equity Incentive Plan Compensation.
(2)
Represents the aggregate grant date fair value computed in accordance with Accounting Standards Codification, or ASC, Topic 718, and do not reflect whether our named executive officer has actually realized a financial benefit from the award. For information on the assumptions used to calculate the value of the awards, refer to Note 5 to our consolidated financial statements in our Form 10-K for the fiscal year ended June 30, 2014. In accordance with SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
(3)
Represents awards under our incentive plans, including sales commission plans. Does not include performance based equity awards as at this time the performance metrics are not expected to be achieved.
(4)
Comprised of contributions to group term life insurance, employer sponsored health benefits and other miscellaneous items.
(5)
Includes $673,900 for severance payments to Mr. Crowell following his resignation from the Company.

Summary of Employment and Other Agreements
 
The following is a description of employment and other agreements between us and our named executive officers.

President and Chief Executive Officer
 
In April 2013, we entered into an offer letter of employment with Mr. Berger for service as our President and Chief Executive Officer. Pursuant to the offer letter of employment, Mr. Berger is to receive an annual salary of $500,000, less applicable taxes and withholdings, and is eligible to participate in our standard employee benefits plans, including our annual incentive plan with a target of 100 percent of his annual base salary. Mr. Berger was granted a one-time option to acquire 900,000 shares of our common stock with an exercise price equal to the closing price of our common stock on the grant date. One-fourth of these

37


shares vest one year after the commencement of Mr. Berger’s employment with us, and the remaining shares vest monthly over the following three years at a rate of 1/48 th of the entire option each month, subject to Mr. Berger’s continued employment with us. In addition, Mr. Berger received a performance option award (the “Performance Option”) which was a one-time option to acquire 900,000 additional shares of our common stock with an exercise price equal to the closing price of our common stock on the grant date. Such Performance Option was earned during the fiscal year ending June 30, 2014 and is vesting at a rate of 1/24th of the earned portion of the Performance Option for each month following the date on which such shares were earned. The vesting of the shares subject to this option may be accelerated upon a change in control, pursuant to the terms and conditions described below under the Executive Change in Control Severance Plan. Mr. Berger was also entitled to a one-time, sign-on bonus in the amount of $125,000, less applicable taxes and withholdings, which was paid in a lump sum in August 2013, when other Company employee bonuses were paid.
 
In addition, pursuant to the terms of Mr. Berger’s offer letter, Mr. Berger would be entitled to receive certain benefits in the event of the termination of his employment from the Company in certain circumstances, including certain conditions of a change of control, termination without cause or a resignation for ‘good reason’ as such terms are described in his offer letter agreements. Such benefits include, but are not limited to, a lump sum payment equal to: (i) 18 months of his base salary, less applicable withholding taxes, in certain circumstances involving a change of control or (ii) 12 months of his base salary, less applicable withholding taxes, in certain circumstances involving the Company’s termination of Mr. Berger employment without cause. Defined terms with respect to change of control and severance benefits generally have the same definitions as ascribed in the Executive Change in Control Severance Plan.

Senior Vice President and Chief Financial Officer
 
In May 2014, we entered into an offer letter of employment with Mr. Arola for service effective June 2, 2014, as our Senior Vice President and Chief Executive Officer. Pursuant to the terms the offer letter of employment, Mr. Arola is to receive an annual salary of $370,000, less applicable taxes and withholdings and will be eligible to participate in our standard employee benefits plans, including our annual incentive plan with a target of 70 percent of his annual base salary. In addition, Mr. Arola was granted a one-time option to acquire 268,000 shares of our common stock with an exercise price equal to the closing price of our common stock on the grant date. One-fourth of these shares vest one year after the commencement of Mr. Arola’s employment with us, and the remaining shares vest monthly over the following three years at a rate of 1/48th of the entire option each month, subject to Mr. Arola’s continued employment with us. Mr. Arola was also granted 117,000 shares of restricted stock that vest in three annual installments, subject to his continued employment with us.

In addition, we entered into an Executive Change in Control Severance Agreement with Mr. Arola in the form standard for our executive officers under which Mr. Arola would be entitled to a severance benefit period of 12 months. In addition, under his employment agreement, should Mr. Arola employment be terminated by the Company other than for “Cause,” he is entitled to receive a payment equal to 12 months of his salary as of the date of termination, a payment equal to the pro rata portion of his target bonus through his date of termination, and the continuation of medical benefits for 12 months, as further described in his offer letter.

Executive Vice President, Products and Customer Success
 
In July 2013, we entered into an offer letter of employment with Mr. Carney for service, as our Executive Vice President, Products and Customer Success. Pursuant to the terms the offer letter of employment, Mr. Carney is to receive an annual salary of $400,000, less applicable taxes and withholdings and will be eligible to participate in our standard employee benefits plans, including our annual incentive plan with a target of 50 percent of his annual base salary. In addition, Mr. Carney was granted a one-time option to acquire 500,000 shares of our common stock with an exercise price equal to the closing price of our common stock on the grant date. One-fourth of these shares vest one year after the commencement of Mr. Carney’s employment with us, and the remaining shares vest monthly over the following three years at a rate of 1/48th of the entire option each month, subject to Mr. Carney’s continued employment with us. Mr. Carney was also granted 70,000 shares of restricted stock that vest in three annual installments, subject to his continued employment with us.

In addition, we entered into an Executive Change in Control Severance Agreement with Mr. Carney in the form standard for our executive officers under which Mr. Carney would be entitled to a severance benefit period of 12 months. In addition, under his employment agreement, should Mr. Carney employment be terminated by the Company other than for “Cause,” he is entitled to receive a payment equal to 12 months of his salary as of the date of termination, a payment equal to the pro rata portion of his target bonus through his date of termination, and the continuation of medical benefits for 12 months, as further described in his offer letter.
 

38


Vice President, General Counsel and Corporate Secretary

In June 2014, we entered into an offer letter of employment with Ms. Amadia for service as our Vice President and General Counsel. Pursuant to the terms the offer letter of employment, Ms. Amadia is to receive an annual salary of $290,000, less applicable taxes and withholdings and is eligible to participate in our standard employee benefits plans, including our annual incentive plan with a target of 50 percent of her annual base salary. In addition, Ms. Amadia was granted a one-time option to acquire 150,000 shares of our common stock with an exercise price equal to the closing price of our common stock on the grant date. One-fourth of these shares vest one year after the commencement of Ms. Amadia’s employment with us, and the remaining shares vest monthly over the following three years at a rate of 1/48th of the entire option each month, subject to Ms. Amadia’s continued employment with us. Ms. Amadia was also granted 50,000 shares of restricted stock that vest in three annual installments, subject to her continued employment with us. Ms. Amadia also received the offer of a one-time cash payment of $15,000, less applicable taxes and withholdings, which was paid in July 2013.

In addition, we entered into an Executive Change in Control Severance Agreement with Ms. Amadia in the form standard for our executive officers under which Ms. Amadia would be entitled to a severance benefit period of 12 months. In addition, under her employment agreement, should Ms. Amadia's employment be terminated by the Company other than for “Cause,” she is entitled to receive a payment equal to 12 months of her salary as of the date of termination, a payment equal to the pro rata portion of her target bonus through her date of termination, and the continuation of medical benefits for 12 months, as further described in her offer letter.

Senior Vice President of Services, Operations and IT
 
In September 2002, we entered into an offer letter of employment with Mr. Blohm as our Senior Director of Procurement. Mr. Blohm’s terms of employment have changed over the past 11 years, during which we have not entered into a new agreement with Mr. Blohm. In addition, we entered into an Executive Change in Control Severance Agreement with Mr. Blohm in the form standard for our executive officers under which Mr. Blohm would be entitled to a severance benefit period of 12 months.
 
Former Senior Vice President and Chief Financial Officer

In connection with his departure from the Company effective September 30, 2014, we entered into a general release of claims with Mr. Kurtzweil under which he will receive a lump sum payment equal to 12 months of his current salary, $385,000, payable in January 2015, any bonus earned up to and including the separation date and 12 months of COBRA premiums.

Former Chief Operating Officer

 In connection with his departure from the Company effective May 6, 2014, we entered into a general release of claims with Mr. Crowell under which he received a lump sum payment equal to 12 months of his current salary, $450,000, a payment equal to the pro-rata portion of his target bonus through the separation date of $223,900, which was paid to him in May 2014, 12 months of COBRA premiums and acceleration of vesting equal to 12 months of his unvested stock options and restricted stock units.

 Executive Change in Control Severance Plan
 
On February 8, 2006, the independent members of our Board, upon the recommendation of the Compensation Committee, approved the terms of an Executive Change in Control Severance Plan in order to ensure retention of key personnel and continuity of the business in the event of a change in control of the business. On August 7, 2008, the independent members of our Board, upon the recommendation of the Compensation Committee, approved an amendment and restatement of the Executive Change in Control Severance Plan. On February 11, 2014, the approved an amendment and restatement of the Executive Change in Control Severance Plan to fix the individual participation agreement term to three years from the date of hire of the individual. We refer to this plan, as amended and restated, as the “Severance Plan.” Any severance and change of control payments which may be due Mr. Berger are covered by his offer letter of employment and not the Severance Plan.
 

39


Cash Compensation and Benefits
 
Under the Severance Plan, severance compensation, health care and other benefits are provided to a Severance Plan participant if the participant is terminated without cause or resigns as a result of certain adverse circumstances described in the Severance Plan within 12 months after a change in control. The amount of this severance compensation that would be provided to a participant is equal to that participant’s then current salary and target bonus for the applicable “severance benefit period.” The Compensation Committee has established that the severance benefit period for participants is 18 months in the case of the Chief Executive Officer, 12 months in the case of Section 16 Officers and vice presidents who report directly to the Chief Executive Officer and 6 months in the case of eligible vice presidents designated by the Compensation Committee. In addition, the severance benefit period establishes the period of time during which health care and other benefits are provided to a participant.
 
Equity Awards
 
The Severance Plan also provides that equity awards granted prior to August 7, 2008 (the effective date of the amendment to the plan), with respect to individuals who were participants as of that date and certain other equity awards as determined by the Compensation Committee at the time of grant are treated as follows in the event of a Change in our Control:
 
if the participant’s options and SARs are not assumed or otherwise continued by an acquirer, 100 percent of the participant’s then unvested options and SARs would accelerate;

if the participant is not terminated and an acquirer assumes the participant’s outstanding options and SARs, the vesting of 50 percent of the participant’s then unvested options and SARs would accelerate as of the date of the change in control and the remainder of the participant’s unvested options and SARs would vest in equal monthly installments over a period equal to one half of the remainder of the participant’s original vesting schedule;
if the participant is terminated and the participant’s options and SARs are assumed or otherwise continued by an acquirer, 100 percent of the participant’s then unvested options and SARs would accelerate; and
the vesting of all other awards, including restricted stock and RSUs, would accelerate.
 
However, the Severance Plan further provides that, unless otherwise determined by the Compensation Committee at the time of grant, equity awards granted after August 7, 2008 (the effective date of the amendment to the plan) to participants are treated as follows in the event of a Change in our Control:

if equity awards are not assumed or otherwise continued by an acquirer, accelerated vesting would occur only with respect to the number of months in the applicable participant’s severance benefit period; and
if equity awards are assumed or otherwise continued by an acquirer, acceleration of vesting of these awards would occur only upon a Double Trigger Termination (as defined in the plan), and then would accelerate 100 percent;

 
In the event that any payment or benefit received or to be received by a participant under the Severance Plan or otherwise would subject the participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such payments as an excess parachute payment under Section 280G of the Code, then, notwithstanding the other provisions of the Severance Plan, the amount of such payments would not exceed the amount which produces the greatest after-tax benefit to the participant. The Severance Plan does not provide for payment of any applicable excise tax by us or other “gross-up” payments to offset the impact of any applicable excise tax.
 

40


Certain Definitions
 
For purposes of the Severance Plan, the following definitions apply:
 
Cause” means the occurrence of any of the following: (i) the participant’s theft, dishonesty, misconduct, breach of fiduciary duty for personal profit, or falsification of any our documents or records; (ii) the participant’s material failure to abide by our code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (3) misconduct by the participant within the scope of Section 304 of the Sarbanes-Oxley Act of 2002 as a result of which of we are required to prepare an accounting restatement; (4) the participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of ours (including, without limitation, the participant’s improper use or disclosure of our confidential or proprietary information); (5) any intentional act by the participant which has a material detrimental effect on our reputation or business; (6) the participant’s repeated failure or inability to perform any reasonable assigned duties after written notice from us of, and a reasonable opportunity to cure, such failure or inability; (7) any material breach by the participant of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement between the participant and us, which breach is not cured pursuant to the terms of such agreement; or (8) the participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the participant’s ability to perform his or her duties with us.
 
Change in our Control” means the occurrence of any of the following:

any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than a trustee or other fiduciary holding our securities under an employee benefit plan, becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of our securities representing more than 50 percent of the total combined voting power of our then-outstanding securities entitled to vote generally in the election of directors;
we are party to a merger or consolidation which results in the holders of our voting securities outstanding immediately prior thereto failing to retain immediately after such merger or consolidation direct or indirect beneficial ownership of more than 50 percent of the total combined voting power of the securities entitled to vote generally in the election of our directors or the surviving entity outstanding immediately after such merger or consolidation;
the sale or disposition of all or substantially all of our assets or consummation of any transaction having similar effect (other than a sale or disposition to one or more of our subsidiaries); or
a change in the composition of our Board within any 12-month period as a result of which fewer than a majority of the directors are Incumbent Directors (defined as a director who either (i) is a member of our Board as of February 8, 2006, or (ii) is elected, or nominated for election, to our Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but (iii) was not elected or nominated in connection with an actual or threatened proxy contest relating to the election of our directors).
 
However, to the extent that any amount constituting nonqualified deferred compensation subject to Section 409A of the Code would become payable under the Severance Plan by reason of a Change in our Control, such amount shall become payable only if the event constituting a Change in our Control would also constitute a change in ownership or effective control of us, or a change in the ownership of a substantial portion of our assets, within the meaning of Section 409A of the Code.
 
Indemnity Agreements
 
We have entered into indemnification agreements with our executive officers and directors. These indemnification agreements require us to indemnify these individuals to the fullest extent permitted by law.


41


Grants of Plan-Based Awards
 
The following table sets forth certain information with respect to stock and option awards and other plan-based awards, including non-equity incentive awards, granted during the fiscal year ended June 30, 2014, to our named executive officers. For a narrative description of the various plan-based awards set forth in the following table, see the discussion above under the heading “Compensation Discussion and Analysis.”
 
 
 
 
 
 
Estimated Future Payouts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under Non-Equity Incentive
 
All Other Stock Awards:
 
All Other Option Awards:
 
Exercise or
 
Grant Date Fair
 
 
 
 
 
 
Plan Awards(1)
 
Number of Shares
 
Number of Securities
 
Base Price of
 
Value of Stock
 
 
Grant
 
Approval
 
Threshold
 
Target
 
Maximum(2)
 
Of Stock
 
Underlying Options
 
Option Awards
 
and Option Awards
Name
 
Date
 
Date
 
($)
 
($)
 
($)
 
Or Units (#)
 
(#)
 
($/Sh)
 
($)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles W. Berger
 
02/07/2014

 
02/07/2014

 
612,000

 
720,000

 
1,080,000

 
280,000

 

 
5.67

 
1,587,600

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Kenneth Arola
 

 

 
18,346

 
21,583

 
32,375

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Edward Carney
 
08/01/2013

 
08/01/2013

 
170,000

 
200,000

 
300,000

 
 
 
500,000

 
4.18

 
2,090,000

 
 
08/01/2013

 
08/01/2013

 
 
 
 
 
 
 
70,000

 
 
 
4.18

 
292,600

 
 
02/07/2014

 
02/07/2014

 
 
 
 
 
 
 
30,000

 
 
 
5.67

 
170,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Frank Blohm
 
02/07/2014

 
02/07/2014

 
151,003

 
177,650

 
266,475

 
 
 
80,000

 
5.67

 
453,600

 
 
02/07/2014

 
02/07/2014

 
 
 
 
 
 
 
32,500

 
 
 
5.67

 
184,275

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allison Amadia
 
08/01/2013

 
08/01/2013

 
140,250

 
165,000

 
247,500

 
 
 
150,000

 
4.18

 
627,000

 
 
08/01/2013

 
08/01/2013

 
 
 
 
 
 
 
50,000

 
 
 
4.18

 
209,000

 
 
02/07/2014

 
02/07/2014

 
 
 
 
 
 
 
 
 
80,000

 
5.67

 
453,600

 
 
02/07/2014

 
02/07/2014

 
 
 
 
 
 
 
20,000

 
 
 
5.67

 
113,400

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
John Kurtzweil (6)
 
02/07/2014

 
02/07/2014

 
179,988

 
211,750

 
317,625

 
 
 
103,000

 
5.67

 
584,010

 
 
02/07/2014

 
02/07/2014

 
 
 
 
 
 
 
42,000

 
 
 
5.67

 
238,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Christopher Crowell (4)(5)
 
11/01/2013

 
11/01/2013

 
382,500

 
450,000

 
900,000

 
 
 
614,717

 
5.30

 
3,258,000

 
 
11/01/2013

 
11/01/2013

 
 
 
 
 
 
 
307,358

 

 
5.30

 
1,628,997


(1)
Our annual incentives usually are (and, in fiscal 2014, were) based upon threshold, target and maximum payout amounts set by our Board, upon the recommendation of the Compensation Committee, at the beginning of each fiscal year. The actual amounts earned by each named executive officer for fiscal 2014 is set forth in the Summary Compensation Table elsewhere in this Proxy Statement under the heading “Non-Equity Incentive Plan Compensation.”
(2)
The maximum amount payable if results exceed objectives was 150 percent for our named executive officers except Christopher Crowell who had the opportunity to earn 200 percent under the Sales Commissions plan.
(3)
The grant date fair value is generally the amount we would expense in our financial statements over the award’s service period in accordance with ASC Topic 718, but does exclude the impact of estimated forfeitures related to service-based vesting conditions.
(4)
Mr. Crowell did not participate in our executive incentive plans, but instead had a separate commission plan as discussed in additional detail elsewhere in this Proxy Statement under the heading “Sales Commission Plan.”
(5)
Mr. Crowell departed from the Company effective May 7, 2014
(6)
Mr. Kurtzweil will depart from the Company effective September 30, 2014.


42


Outstanding Equity Awards at Fiscal Year-End
 
The following table sets forth certain information with respect to the value of all unexercised options previously awarded to our named executive officers as of June 30, 2014:

Outstanding Equity Awards
 
Option Awards
Stock Awards
 
 
 
 
 
 
 
 
 
 
Number of Securities
Number of Securities
 
 
 
Number of Shares
 
Market Value of
 
Underlying Unexercised
Underlying Unexercised
 
 
 
or Units of
 
Shares or Units of
 
Options
Options
 
Option Exercise
Option Expiration
Stock That Have Not
 
Stock That Have Not
Name
Exercisable (#)
Unexercisable (#)
 
Price ($)
Date
Vested (#)
 
Vested ($)
Charles W. Berger
262,500

637,500

(1) 
$3.17

5/2/2020
280,000

(11) 
1,587,600

 
262,500

637,500

(2) 
$3.17

5/2/2020
 
 
 
 
 
 
 
 
 
 
 
 
Edward Carney

500,000

(3) 
4.18

7/29/2020
70,000

(12) 
292,600

 
 
 
 
 
 
30,000

(13) 
170,100

 
 
 
 
 
 
 
 
 
Frank Blohm
60,000


 
$
3.74

8/3/2017
5,000

(14) 
17,200

 
82,500


 
$
4.25

10/26/2017
50,000

(15) 
172,000

 
82,500


 
$
4.25

10/26/2017
65,000

(16) 
223,600

 
39,583

7,917

(4) 
$
3.68

2/2/2018
32,500

(17) 
184,275

 
56,666

23,334

(5) 
$
3.29

8/3/2018
 
 
 
 
45,833

54,167

(6) 
$
3.38

8/21/2019
 
 
 
 

80,000

(7) 
$
5.67

2/7/2021
 
 
 
 
 
 
 
 
 
 
 
 
Allison Amadia

150,000

(8) 
$
4.18

7/8/2020
50,000

(18) 
209,000

 

80,000

(9) 
$
5.67

2/7/2021
20,000

(19) 
113,400

 
 
 
 
 
 
 
 
 
John Kurtzweil
175,000

175,000

(10) 
$
3.38

8/21/2019
13,333

(20) 
45,866

 
 
 
 
 
 
42,000

(21) 
238,140

 
 
 
 
 
 
65,000

(22) 
223,600

 
 
 
 
 
 
 
 
 
Christopher Crowell
307,358


 
$
5.30

11/1/2020

 


(1) This stock option vests monthly and will be fully vested on 04/25/17.
(2) This stock option vests monthly and will be fully vested on 12/16/15.
(3) This stock option vests as to 25 percent of the shares on 07/29/14 and as to 1/48th of the shares each month over the three years thereafter.
(4) This stock option vests monthly and will be fully vested on 02/02/2015.
(5) This stock option vests monthly and will be fully vested on 08/03/2015.
(6) This stock option vests monthly and will be fully vested on 08/21/2016.
(7) This stock option vests as to 25 percent of the shares on 02/07/15 and as to 1/48th of the shares each month over the three years thereafter.
(8) This stock option vests as to 25 percent of the shares on 07/08/14 and as to 1/48th of the shares each month over the three years thereafter.
(9) This stock option vests as to 25 percent of the shares on 02/07/15 and as to 1/48th of the shares each month over the three years thereafter.
(10) This stock option vests monthly and will be fully vested on 06/29/2016.
(11) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 02/07/2015.
(12) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 07/29/2014.
(13) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 02/07/2015

43


(14) These RSU's will be fully vested on 08/03/2014.
(15) These RSU's vest as to 50 percent of the units each anniversary over two years, starting on 08/21/2014.
(16) Performance based restricted stock units.
(17) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 02/07/2015.
(18) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 07/08/2014.
(19) These RSU's vest will be fully vested on 06/29/2015.
(20) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 02/07/2015.
(21) These RSU's vest as to 33.3 percent of the units each anniversary over three years, starting 02/07/2015.
(22) Performance based restricted stock units.

Option Exercises and Stock Vested During Last Fiscal Year
 
The following table sets forth certain information concerning option exercises by our named executive officers and vesting of our common stock held by them during the fiscal year ended June 30, 2014.
 
OPTION EXERCISES AND STOCK VESTED
 
Option Exercises and Stock Awards Released
 
 
Option Awards
 
Stock Awards
 
Number of Shares
Value
 
Number of Shares
Value
 
Acquired on
Received on
 
Acquired on
Realized on
 
Exercise (#)
Exercise ($)
 
Vesting (#)
Vesting ($)(1)
 
 
 
 
 
 
Frank Blohm


 
30,000

117,800

John Kurtzweil


 
13,333

59,199

Christopher Crowell


 
153,679

819,109

(1)
Represents the amount realized based on the market price of our common stock on the vesting date.

Pension Benefits and Nonqualified Deferred Compensation Plans
 
We do not have any plans with any of our named executive officers that provide for payments or other benefits at, following, or in connection with retirement. We also do not have any defined contribution or other plan with any of our named executive officers that provides for the deferral of compensation on a basis that is not tax-qualified.

Potential Payments upon Termination or Change in Control
 
We have entered into agreements under our Executive Change of Control and Severance Plan that may require us to provide compensation to our named executive officers in the event of a termination of employment or a change in control of us:
 
These agreements, including the circumstances that would trigger payments or the provision of other benefits, and material conditions and obligations applicable to the recipient of payments and benefits, are described in “Summary of Employment and Other Agreements” elsewhere in this “Executive Compensation” section.

The following table describes the potential payments that we would have been required to make upon our termination of each of our named executive officers, whether or not within one year following a change in our control, had we terminated such officer as of June 30, 2014, under the assumptions set forth in the footnotes to the table. Accordingly, the table does not present information regarding named executive officers whose service to us was terminated prior to this date. Except as expressly noted, these assumptions have not actually occurred.
 

44


 
Potential  Payments upon Termination Other than for Cause ($)(1)
Potential Payments Following Change of Control Other than  for Cause ($)(2)
Potential Payments upon Termination Other than for Cause Following Change in Control($)(3)
Charles W. Berger
 
 
 
Salary(4)
600,000
-  
900,000
Bonus
-  
1,080,000
Equity award vesting acceleration(6)
1,279,938
2,862,450
2,862,450
Health and welfare benefits(7)
17,815
26,723
 
 
 
 
Total
1,897,753
2,862,450
4,869,173
 
 
 
 
Ken Arola
 
 
 
Salary(4)
370,000
Bonus(5)
259,000
Equity award vesting acceleration(6)
Health and welfare benefits(7)
12,409
 
 
 
 
Total
641,409
 
 
 
 
Edward Carney
 
 
 
Salary(4)
400,000
Bonus(5)
200,000
Equity award vesting acceleration(6)
211,183
574,000
Health and welfare benefits(7)
22,392
 
 
 
 
Total
211,183
1,196,392
 
 
 
 
Frank Blohm
 
 
 
Salary(4)
323,000
Bonus(5)
177,650
Equity award vesting acceleration(6)
237,779
767,368
Health and welfare benefits(7)
15,515
 
 
 
 
Total
237,779
1,283,533
 
 
 
 
Allison Amadia
 
 
 
Salary(4)
330,000
Bonus(5)
165,000
Equity award vesting acceleration(6)
122,881
349,800
Health and welfare benefits(7)
 
 
 
 
Total
122,881
844,800
 
 
 
 
John Kurtzweil(8)
 
 
 
Salary
385,000
Bonus
Equity award vesting acceleration

45


Health and welfare benefits
15,613
 
 
 
 
Total
400,613
 
 
 
 
Christopher Crowell (9)
 
 
 
Salary
450,000
Bonus
223,900
Equity award vesting acceleration (10)
1,905,101
Health and welfare benefits
17,815.2
 
 
 
 
Total
2,596,816.2
 
(1)
Assumes termination without “cause” as of June 30, 2014, not within one year after a change in control. “Cause” is described, as applicable to each officer, in the “Summary of Employment and Other Agreements” section of this Proxy Statement. As a condition to receiving any benefits under this column, the applicable named executive officer is required to execute a general release of known and unknown claims in a form satisfactory to us.
(2)
Assumes a hypothetical change in control as of June 30, 2014, with no termination without cause within one year after the change in control. Also assumes that the company acquiring us in the hypothetical change in control did not assume or substitute equivalent replacements for the outstanding equity awards of the participants in the Severance Plan.
(3)
Assumes termination without cause as of June 30, 2014, within one year after a change in control.
(4)
Under the Severance Plan, if a participant in the Severance Plan is terminated without cause or resigns as a result of certain adverse circumstances described in the Severance Plan within 12 months after a change in control, among other things, the participant would be entitled to a lump sum payment in an amount equal to the aggregate amount of his monthly salary for a period of 18 months in the case of the chief executive officer and 12 months in the cases of the other named executive officers. Mr. Berger’s salary coverage is governed by his offer letter with the Company. The amounts listed do not include the payment of accrued salary that would be due upon termination of employment, are not adjusted for any applicable tax withholding, and do not include portions of bonuses that may be payable on a pro-rated basis based on the amount earned as of the time of the termination of employment.
(5)
Under the Severance Plan, if a participant in the Severance Plan is terminated without cause or resigns as a result of certain adverse circumstances described in the Severance Plan within 12 months after a change in control, among other things, the participant would be entitled to a lump sum bonus payment for a period of 18 months in the case of the chief executive officer and 12 months in the cases of the other named executive officers with the applicable annual bonus amount to be based upon the aggregate of all annual incentive bonuses that would have been earned by the participant for the fiscal year of termination of employment, determined as if 100 percent of all applicable performance goals were achieved. The amounts listed do not include the payment of accrued salary that would be due upon termination of employment, are not adjusted for any applicable tax withholding, and do not include portions of bonuses that may be payable on a pro-rated basis based on the amount earned as of the time of the termination of employment.
(6)
Assumes a price per share of our common stock equal to $4.44, the closing market price on June 30, 2014 (the last business day of our last fiscal year). In the case of shares of common stock or RSUs, represents the aggregate value of all shares that would be accelerated. In the case of stock options, represents the aggregate spread (i.e., the difference between the exercise price and the closing price of our common stock on June 30, 2014) with respect to all options that would be accelerated.
(7)
Under the Severance Plan, if a participant in the Severance Plan is terminated without cause or resigns as a result of certain adverse circumstances described in the Severance Plan within 12 months after a change in control, among other things, the participant is entitled to reimbursement of 18 months of COBRA premiums in the case of the chief executive officer and 12 months of COBRA premiums in the cases of the other named executive officers. Assumes our payment of all premiums necessary to cover the applicable officer from June 30, 2013 until the 18 or 12 month anniversary thereof, as applicable, assuming that the applicable officer was covered under our group health plan as of June 30, 2013, that the officer timely elected to continue these benefits until the 18 or 12 month anniversary thereof, as applicable, and that premiums remain at the amounts in effect as of June 30, 2014. Mr. Berger’s COBRA coverage is governed by his offer letter with the Company.
(8)
Mr. Kurtzweil will depart from the Company effective September 30, 2014, and the included amounts reflect actual benefits to be paid to Mr. Kurtzweil as of January 15, 2015 in accordance with his severance agreement.
(9)
Mr. Crowell resigned from the Company effective May 6, 2014 and the included amounts reflect actual benefits paid to Mr. Crowell upon his resignation.
(10)
Represents the value calculated upon the vesting of 204,904 of Mr. Crowell's unvested options at $5.30 per share and 153,679 of Mr. Crowell’s unvested RSUs as based on the closing price of our common stock of $5.33 on May 6, 2014, Mr. Crowell’s last day with the Company.

Compensation Committee Interlocks and Insider Participation
 
See above under “Corporate Governance - Compensation Committee Interlocks and Insider Participation.”


46


CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Actual or Potential Conflicts of Interest
 
We are not currently party to any transaction, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest.

Reporting, Review and Approval of Related Party Transactions
 
Pursuant to the charter of the Audit Committee, the Audit Committee has the responsibility and duty to approve all related-party transactions after reviewing each transaction for potential conflicts of interests and other improprieties. Pursuant to our Code of Business Conduct and Ethics:

Each employee, including each executive officer, is prohibited from engaging in activities that compete with us or compromise our interests unless first notifying our General Counsel or Senior Vice President of Worldwide Human Resources and Culture, and obtaining a waiver in writing in each instance. Each employee is required to inform his or her manager or our legal department of any conflict of interest, and is encouraged to consult with his or her manager or our legal department if the employee becomes aware of any conflict or potential conflict, or has a question as to a potential conflict.

Each member of our Board is prohibited from participating in any activities that are contrary to our interests, or which interfere with the director’s ability to perform his or her duties objectively and effectively, or which interfere with the director’s duty of loyalty to us and our stockholders. Each member of our Board is required to disclose to our Board any potential conflict of interest regarding or personal interest in any transaction our Board is considering. As to any potential conflict, the independent directors consult, as appropriate, with management and counsel in assessing the potential conflict, and the appropriate action or procedure for addressing or avoiding the potential conflict. A director is required to recuse himself or herself from participation in any deliberation or decision regarding a matter or transaction in which there is a conflict of interest between our interests and the director’s personal interests or the interests of any other entity to which the director provides services. In the event a director becomes aware of any potential corporate opportunity that the director believes would have any direct or indirect value to us, the director is required to advise the Chief Executive Officer or our Board of the opportunity. In addition, each director is required to notify our Board of any outside board seats, public or private, on which the director has agreed to serve. Related party transactions in which a director may be involved are subject to the review of the Audit Committee.

The Code of Business Conduct and Ethics provides the following non-exhaustive list of examples of actual or potential conflicts with respect to the persons subject to the Code of Business Conduct and Ethics (a “Subject Person”):
 
receipt, by a Subject Person or a member of his or her family, of improper personal benefits as a result of the Subject Person’s position with us;
use by the Subject Person of our property for his or her personal benefit;
engagement by the Subject Person in activities that interfere with the Subject Person’s loyalty to us or his or her ability to perform duties or responsibilities effectively;
work by a Subject Person simultaneously (whether as an employee or a consultant) for a competitor, customer or supplier;
a Subject Person, or a member of his or her family, having a financial interest in a customer, supplier or competitor which is significant enough to cause divided loyalty with us, or the appearance of divided loyalty (with the significance of a financial interest depending on many factors, such as size of investment in relation to the Subject Person’s income, net worth and/or financial needs, the Subject Person’s potential to influence decisions that could impact the Subject Person’s interests, and the nature of the business or level of competition between us and the supplier, customer or competitor);
acquisition, by a Subject Person or a member of his or her family, of an interest in property (such as real estate, patent or other intellectual property rights or securities) in which the Subject Person has reason to know we have, or might have, a legitimate interest;
receipt, by a Subject Person or a member of his or her family, of a loan or a guarantee of a loan from a customer, supplier or competitor (other than a loan from a financial institution made in the ordinary course of business and on an arm’s-length basis);
 a Subject Person’s divulging or using our confidential information-such as financial data, customer information, or computer programs-for the Subject Person’s own personal or business purposes that are not first approved by our Vice President General Counsel or Senior Vice President of Worldwide Human Resources in writing;
 a Subject Person’s making gifts or payments, or providing special favors, to customers, suppliers or competitors (or

47


their immediate family members) with a value significant enough to cause the customer, supplier or competitor to make a purchase, or take or forego other action, which is beneficial to us and which the customer, supplier or competitor would not otherwise have taken;
 a Subject Person’s being given the right to buy stock in other companies or receipt of cash or other payments in return for promoting the services of an advisor, such as an investment banker, to us;
a Subject Person’s, or his or her family member’s, solicitation or acceptance of valuable gifts, payments, special favors or other consideration from customers, suppliers or competitors; and
a Subject Person’s giving or receipt or gifts not in compliance with the Foreign Corrupt Practices Act.

EQUITY COMPENSATION PLAN INFORMATION
 
We currently maintain two compensation plans that provide for the issuance of our common stock to officers and other employees, directors and consultants. These consist of the Purchase Plan and the 2013 Plan, which have been approved by our stockholders. The Purchase Plan was adopted by our Board in January 1999, and was approved by our stockholders in February 1999. The 2013 Plan was adopted by our Board in October 2013, and was approved by our stockholders in November 2013, replacing our prior equity compensation plans. We are currently seeking stockholder approval of the 2014 Employee Stock Purchase Plan. See Proposal Five in this Proxy Statement.
 
The following table summarizes our equity compensation plans as of June 30, 2014:

 
Number of Securities to be
 
Weighted Average
Number of Securities
 
 
Issued Upon Exercise of
 
Exercise Price of
Remaining Available for
 
 
Outstanding Options,
 
Outstanding Options,
Future Issuance Under Equity
 
Plan Category
Warrants and Rights
 
Warrants and Rights
Compensation Plans (3)
 
Equity compensation plans approved by security holders
11,636,195

(1) 
2.7094

7,554,839

(4) 
 
 
 
 
 
 
Equity compensation plans not approved by security holders
5,705,360

(2) 
3.2241

0

 
 
 
 
 
 
 
Totals
17,341,555

 
2.8788

7,554,839

 

(1)
Of this amount, options for 1,148,300 and 1,001,098 shares of restricted stock were outstanding under the 2013 Plan and 6,809,382 and 2,373,652 shares of restricted stock were outstanding under the 2005 Plan, and options for 303,763 were outstanding under the 1996 Plan.
(2)
Of this amount, options for 3,465,820 and 2,234,540 shares of restricted stock were outstanding under the Enterasys Plan and 5,000 options were outstanding under the 2000 Stock Plan.
(3)
Effective as of November 20, 2013, 2005 Plan was terminated and shares subject to awards that remained outstanding under the 2005 Plan as of November 20, 2013 and which subsequently terminate without having been exercised or which are forfeited to the Company were added to the shares available under the 2013 Plan.
(4)
Of this amount 1,204,791 shares were available for issuance under the Stock Purchase Plan and 6,350,048 shares were available for issuance under the 2013 Plan

 Please see Part II, Item 8 “Financial Statements and Supplementary Data” of our 2014 Annual Report on Form 10-K in the notes to Consolidated Financial Statements at Note 7, “Employee Benefit Plans (including Share-based Compensation)” for further information regarding our equity compensation plans and awards.

REPORT OF THE COMPENSATION COMMITTEE
 
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of the Securities and Exchange Commission’s Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, as amended.
 

48


The material in this report shall not be deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission, shall be deemed “furnished” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014, as amended, and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, as a result of furnishing the disclosure in this manner.
 
COMPENSATION COMMITTEE
 
Charles Carinalli, Chairman
Maury Austin
John C. Shoemaker
 

REPORT OF THE AUDIT COMMITTEE
 
The Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of Extreme Networks, Inc. (the “Company”) oversees the quality of the Company’s financial statements and its financial reporting on behalf of the Board. Management has the primary responsibility for the financial statements, maintaining appropriate accounting and financial reporting principles and policies and the reporting process, including internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Company’s independent registered public accounting firm is responsible for expressing opinions on the Company’s annual financial statements and its internal control over financial reporting as of the end of the fiscal year. It is not the duty or responsibility of the Audit Committee or its members to conduct any type of auditing or accounting review or procedure, and each member of the Audit Committee relies on the integrity of those persons and organizations within and outside of the Company from whom the Audit Committee receives information and the accuracy of the financial and other information provided to the Audit Committee.
 
The current members of the Audit Committee are Maury Austin, John H. Kispert and Edward H. Kennedy. Each member of the Audit Committee has been determined by the Board to be independent for purposes of the NASDAQ Marketplace Rules and the rules of the U.S. Securities and Exchange Commission (the “SEC”) as these rules apply to audit committee members. The Board has determined that Mr. Kispert is an “audit committee financial expert,” as defined in the rules of the SEC.
 
The Audit Committee has discussed and reviewed with the Company’s independent auditors all matters required to be discussed under Statement on Auditing Standards No. 61, Communication with Audit Committees, SEC rules and other professional standards. The Audit Committee has received from the independent auditors a formal written statement describing all relationships between the auditors and the Company that might bear on the auditors’ independence consistent with Ethics and Independence Rule 3526 of the Public Company Accounting Oversight Board, “Communication with Audit Committee Concerning Independence,” discussed with the independent auditors any relationships that may impact their objectivity and independence, and satisfied itself as to the independent auditors’ independence.
 
The Audit Committee discussed with the Company’s independent auditors the overall scope and plans for their respective audits. The Audit Committee meets with the Company’s independent auditors, with and without the Company’s management present, to discuss the results of their audit of the Company’s financial statements and its internal control over financial reporting as of the end of the fiscal year, the Company’s internal audits and the overall quality of the Company’s financial reporting. Additionally, the Audit Committee has discussed and reviewed with the Company’s management the audited financial statements and management’s report on internal control over financial reporting as of the end of the fiscal year.
 
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2014 for filing with the SEC. The Audit Committee and the Board have also recommended ratification of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2015.
 
 
AUDIT COMMITTEE
 
John H. Kispert, Chairman
Maury Austin
Edward H. Kennedy
 
The foregoing Audit Committee Report shall not be deemed to be filed or incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates such information by reference.


49


STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
 
Stockholder proposals may be included in our proxy statement for an annual meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Stockholder proposals not intended to be included in our proxy materials may be brought before an Annual Meeting so long as they are provided to us on a timely basis and satisfy the other conditions set forth in the rules of the SEC and under our bylaws. Under our bylaws, in order for a stockholder proposal to be properly brought before the 2015 Annual Meeting, the proposal must be timely and be received at our principal executive offices, addressed to the Secretary, not earlier than July 15, 2015 and not later than August 14, 2015, which, respectively, are 120 days and 90 days prior to the one-year anniversary of the 2014 Annual Meeting. In the likelihood that the date of the 2015 Annual Meeting is more than 30 days earlier or later than such anniversary date, notice by the stockholder to be timely must be received not later than the close of business on the later of the 90th day prior to the 2015 Annual Meeting or the 10th day following the date on which public announcement of the date of such meeting is first made.

If a stockholder proposal is brought before the 2015 Annual Meeting, our management proxy holders will be authorized by our proxy form to vote for or against the proposal, in their discretion, in several circumstances, including if we provide information in the proxy statement for the meeting (a) regarding the nature of the matter and (b) advising stockholders how management intends to exercise its discretion to vote on the matter.

TRANSACTION OF OTHER BUSINESS
 
As of the date of this Proxy Statement, we know of no business that will be conducted at the 2014 Annual Meeting, other than as described in this Proxy Statement. If any other matter is properly brought before the 2014 Annual Meeting, or any adjournment or postponement of the 2015 Annual Meeting, the persons named in the accompanying form of proxy intend to vote the proxy on such matters in their discretion.

STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS
 
To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding Extreme Networks stock but sharing the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain stockholders of record who have the same address and last name, and who do not participate in electronic delivery of proxy materials, will receive only one copy of our Notice of Internet Availability of Proxy Materials and, as applicable, any additional proxy materials that are delivered until such time as one or more of these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.
 
If you receive a single set of proxy materials as a result of householding, and you would like to have separate copies of our Notice of Internet Availability of Proxy Materials, annual report, or proxy statement mailed to you, please submit a request to our Corporate Secretary, or call our Investor Relations department at (408) 579-3030, and we will promptly send you what you have requested. However, please note that if you want to receive a paper proxy or voting instruction form or other proxy materials for purposes of this year’s Annual Meeting, you should follow the instructions included in the Notice of Internet Availability of Proxy Materials that was sent to you. You can also contact our Investor Relations department at the phone number above if you received multiple copies of the Annual Meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings.

 COMMUNICATING WITH EXTREME NETWORKS
 
You can obtain information about us by one of the following methods:
 
1. Our home page on the Internet, located at http://www.extremenetworks.com, gives you access to product and marketing information, in addition to recent press releases, financial information and stock quotes, as well as links to our filings with the SEC.
 
2. To have information such as our latest quarterly earnings release, 2014 Annual Report, or Quarterly Report on Form 10-Q mailed to you, please contact our Investor Relations at (408) 579-3483.
 
For other questions that you wish to direct via telephone, you may contact our Investor Relations department at (408) 579-3483.
 

50


Should you wish to send correspondence, you may send it either to (1) our Investor Relations department, or (2) if you wish for your correspondence to directly reach our Board, you may send it to our Chairman of the Board, who has been selected by our independent directors to receive, distribute and arrange responses for communications from our stockholders to our Board.
 
In sending any correspondence, you should use the following address:
 
Extreme Networks, Inc.
145 Rio Robles
San Jose, California 95134
Attn: Investor Relations
-or-
Attn: Chairman of the Board
 
We encourage you to conserve natural resources, as well as reduce printing and mailing costs, by signing up for electronic delivery of stockholder communications at http://investor.extremenetworks.com. For more information, see above under the heading “Electronic Delivery of Stockholder Communications.”
 
 
 
 
BY ORDER OF THE BOARD OF DIRECTORS
 
 
 
 
Charles W. Berger
President and Chief Executive Officer
 





51




 
VOTE BY INTERNET - www.proxyvote.com
Extreme Networks Inc.,
145 Rio Robles
San Jose, CA 95134
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
 
 
 
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
 
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
 
 
 
VOTE BY PHONE - 1-800-690-6903
 
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
 
 
 
VOTE BY MAIL
 
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x        KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For
Withold
For All
 
To withold authority to vote for any
 
 
 
 
 
 
 
 
 
 
All
All
Except
 
individual nominee (s), mark "For All
 
 
 
 
 
 
 
 
 
The Board of Directors recommends you vote FOR the following:
 
 
 
 
Except" and write the number (s) of the nominee (s) on the line below.
 
 
 
 
 
 
 
 
1. Election of Directors
c
c
c
 
 
 
 
 
 
 
 
 
 
  Nominees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
01 Edward B. Meyercord III 02 John H. Kispert 03 Charles W. Berger 04 Charles Carinalli 05 John C. Shoemaker
 
 
06 Edward H. Kennedy 07 Randi Paikoff-Feigin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Board of Directors recommends you vote FOR proposals 2., 3., 4. and 5.
For
 
 
Against
 
Abstain
 
 
 
2.  To approve a non-binding advisory resolution regarding executive compensation
c
 
 
c
 
c
 
 
 
 
 
 
 
 
 
 
 
 
 
3.  To ratify the appointment of KPMG LLP, independent registered public accounting firm, as Extreme Networks, Inc.'s independent auditors for the fiscal year ending June 30, 2015.
c
 
 
c
 
c
 
 
 
 
 
 
 
 
 
 
 
 
 
4.  Advisory vote to ratify the extension of the term of the Amended and Restated Shareholder Rights Plan to May 31, 2015.
c
 
 
c
 
c
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.  To approve the adoption of the Extreme Networks, Inc. 2014 Employee Stock Purchase Plan and to authorize an aggregate of 12 million shares issuable under the plan.
c
 
 
c
 
c
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOTE: Such other business as may properly come before the meeting or any adjournment thereof.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Signature [ PLEASE SIGN WITHIN BOX]
Date
 
 
 
Signature (Joint Owners)
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

52


Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/are available at www.proxyvote.com.
 
 
 
 
 
EXTREME NETWORKS, INC.
Proxy for the Annual Meeting of Stockholders
To be held on Wednesday, November 12, 2014 8:00 AM

Solicited by the Board of Directors

The undersigned hereby appoints Charles Berger and Edward Meyercord, and each of them, with full power