2018 Guide to Effective Proxies

2.17.3 Business strategy | 309 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES EXECUTIVE COMPENSATION Compensation Discussion and Analysis This section provides information on our executive compensation program and our compensation philosophy for our named executive officers (NEOs), who in fiscal 2017 were: • Lawrence J. Ellison, Chairman and CTO • Safra A. Catz, CEO • Mark V. Hurd, CEO • Thomas Kurian, President, Product Development • John F. Fowler, Former Executive Vice President, Systems Fiscal 2017 began on June 1, 2016 and ended on May 31, 2017. Executive Summary Oracle’s Cloud Transformation Our customers are increasingly electing to run their IT environments using our suite of Oracle Cloud offerings. We have aggressively pursued the opportunities presented by this shift in customer preferences from on-premise to cloud offerings. Our Oracle Cloud offerings provide a comprehensive and fully integrated stack of application, platform, compute, storage and networking services in all three primary layers of the cloud: Software as a Service (SaaS), Platform as a Service (PaaS) and Infrastructure as a Service (IaaS). We believe this places us in a strong position relative to our competitors. Over the last five years, we have delivered a 46% compound annual growth rate in revenue from our SaaS offerings, and a 25% compound annual growth rate in revenue from our PaaS and IaaS offerings. Oracle Cloud Revenue PaaS/laaS SaaS 5 4 3 2 1 0 FY12 FY13 FY14 FY15 FY16 FY17 +25% PaaS/laaS +60% PaaS/IaaS Compound Annual Growth Rate (CAGR) 5 year 1 year +46% SaaS +61% SaaS $ Billions Significant Fiscal 2018 Compensation Changes Looking forward, we intend to capitalize on our cloud momentum by setting ambitious goals to be achieved over the next five fiscal years. In fiscal 2018, we granted each currently employed NEO an equity award consisting entirely of performance-based stock options (Performance Options) that may be earned only upon the attainment of rigorous stock price, market capitalization and operational performance goals over a five-year performance period . No time-based equity was granted to our NEOs in fiscal 2018. When the grant date fair value of Performance Options is annualized over the five- year performance period, it represents a 47% decrease from fiscal 2017 equity award values for our CTO and CEOs. The Performance Options are divided into seven equal tranches that are eligible to be earned based on the achievement of the following goals over the five-year performance period. See pages 29 to 30 for details. 1 tranche may be earned if Oracle’s average stock price equals or exceeds $80 for 30 calendar days 6 tranches may be earned based on achievement of both (1) market capitalization goals and (2) operational goals (one goal of each type must be satisfied in order for a tranche to be earned) Six Market Capitalization Goals • Increase Oracle’s market capitalization from a baseline market capitalization of $207 billion by: • $16.6 billion • $33.3 billion • $50 billion • $66.6 billion • $83.3 billion • $100 billion • Shares issued in connection with a material acquisition will be excluded from the calculation of market capitalization Six Operational Goals • Become the largest enterprise SaaS company as measured by an independent third-party report • Attain $20 billion in non-GAAP total cloud revenues in a fiscal year • Attain $10 billion in non-GAAP total SaaS revenues in a fiscal year • Attain $10 billion in non-GAAP total PaaS and IaaS revenues in a fiscal year • Attain non-GAAP SaaS gross margin of 80% • Maintain non-GAAP PaaS/IaaS gross margin of at least 30% for three of the five fiscal years in the performance period 26 2017 Annual Meeting of Stockholders Total of 02 pages in section ORACLE