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TABLE OF CONTENTS
CD&A Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )1)
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
Preliminary Proxy Statement | ||
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
Definitive Proxy Statement | ||
o | Definitive Additional Materials | |
o | Soliciting Material under §240.14a-12 |
Virtusa Corporation | ||||
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(Name of Registrant as Specified In Its Charter) | ||||
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount Previously Paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: |
Preliminary Proxy Statement—Subject to Completion Dated, August 10, 2020
July 27, 2018
[ · ] 2020
Dear Stockholder:Virtusa Stockholders and Stakeholders:
YouIt is likely that what we do touches your lives daily, even if you do not see our name on products or services you buy as individuals. Virtusa is a leading global information technology (IT) services firm providing deep industry based digital engineering and consulting. We design and build end-to-end digital systems and applications that help businesses move faster, operate more efficiently, and serve their customers in ways that are cordially invitedoptimized for today's digital economy. Our digital engineering services and solutions meet some of the most complex and rapidly evolving technology needs of Global 2000 customers worldwide.
The emergence of the COVID-19 pandemic in early 2020 has created unprecedented challenges for economies and communities around the world. It has also created challenges for Virtusa and the IT services industry as a whole. From this crisis, however, we have learned just how important Virtusa is to attendour clients, and how dedicated our global team is to serving our clients to ensure their success even under the annual meetingmost extraordinary circumstances. Since the onset of COVID-19, we have upheld our commitment to our clients by maintaining nearly uninterrupted service and developing new solutions that help them address the economic challenges of the pandemic. We have also doubled down on our commitment to our stockholders by intensifying our efforts under our Three-Pillar strategy to increase our profitable revenue growth, achieve greater revenue diversification, and improve our long-term gross and operating margins. Finally, and most importantly, we have kept our commitment to our employees and our community by doing everything in our power to ensure the health and well-being of Virtusa Corporationour global team members and their families. Today, nearly all of our global delivery team has the ability to be held at 8:00 a.m., local time, on Thursday, September 6, 2018 at the offices of Virtusa Corporation located at 132 Turnpike Road, Southborough, Massachusetts 01772.work from home and we have put strict measures in place to help ensure our people remain safe and healthy.
At this annual meeting, youLooking ahead to the remainder of our fiscal 2021 and beyond, we remain steadfast in our commitment to our clients, our stockholders, our team, and our community. We will be askedcontinue to (i) elect three (3) class IIhelp our clients in their time of need by delivering leading services and solutions that help them navigate the challenges of COVID-19 and emerge stronger competitors in their respective industries. To do so, we will focus on strengthening our skills and capabilities that enable our clients' digital transformation and empower our clients to flourish in the digital economy. We have already launched several new initiatives on both the client development and cost containment sides of our business to ensure we continue to make progress against our long-term plan and deliver increased value to our stockholders. In addition, we recently increased the strength of our already exceptional board of directors as nominated bywith the election of former Wipro Chief Executive Officer, Abidali Neemuchwala, to our board of directors,directors. Finally, we will focus on finding and keeping the best people throughout our organization. Our performance management systems are individual, real time, continual, and visible to all employees. We monitor and disclose turnover data and apply our own digital expertise to encourage employee feedback, engagement, training, retention and well-being.
Our focus on sustainable operations helps reduce our risks and enhance our financial sustainability. Our key sustainability disclosures are third-party certified by International Organization for Standardization ("ISO") and Occupational Health and Safety Assessment Series ("OHSAS") and result in excellent grades from leading scorers including top marks from Institutional Shareholder Services Inc. ("ISS") for environmental and social, an A from MSCI and a three-year term, and, with respect to the holders of our Series A Convertible Preferred Stock, one (1) Series A director, until his/her successor is duly elected and qualified or until such Series A director's right to hold the office terminates, whichever occurs earlier, (ii) ratify the appointment of our independent registered public accountants, (iii) cast an advisory vote on the compensation of our named executive officers, and (iv) transact such other business as may properly come before the annual meeting and any adjournments or postponements thereof. The board of directors unanimously recommends that you vote FOR electionB from CDP.
On behalf of the director nominees, FOR ratification of appointment ofboard and management, we extend our independent registered public accountantsappreciation for your support and FOR approval, on an advisory basis, of the compensation of our named executive officers.
Details regarding the matters to be acted upon at this annual meeting appearinterest in the accompanying proxy statement. Please give this material your careful attention.
Whether or not you plan to attend the annual meeting, please submit your vote via the Internet (www.envisionreports.com/VRTU), by telephone (1-800-652-VOTE (8683)), or by your proxy by completing, signing and dating the enclosed proxy card and returning it in the envelope provided as soon as possible so that your shares will be represented at the annual meeting. If you vote via the Internet or by telephone or send your proxy in, you will not limit your right to vote in person at the annual meeting. Your prompt cooperation will be greatly appreciated.Virtusa.
Very truly yours, | ||
Kris Canekeratne |
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Appendix A: Reconciliation of GAAP and Non-GAAP Financial Measures | ||||
Appendix B: Information Concerning Persons Who Are Deemed Participants in Virtusa Corporation's Solicitation of Proxies | 93 |
Virtusa Corporation132 Turnpike RoadSouthborough, Massachusetts 01772(508) 389-7300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERSTo Be Held on Thursday, September 6, 2018
To the Stockholders of Virtusa Corporation:
TheYou are cordially invited to attend the annual meeting of stockholders of Virtusa Corporation, a Delaware corporation (the "Company"), at:
DATE
[ · ] [ · ]
2020
TIME
[ · ]
(Eastern Standard Time)
The annual meeting will be held on Thursday, September 6, 2018,virtually via https://www.cesonlineservices.com/vrtu20_vm, and will begin promptly at 8:00 a.m., local time, at Virtusa Corporation located at 132 Turnpike Road, Southborough, Massachusetts 01772,[ · ]. If you plan to participate in the virtual meeting, you will need to pre-register by [ · ]. To pre-register for the following purposes:meeting, please follow the instructions provided under "General Information" in the proxy statement accompanying this notice. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend. Stockholders may only participate online and must pre-register.
ITEMS OF BUSINESS:
At the annual meeting, you will be asked:
Proposal 1 relates solely to the election of three (3)two (2) class III directors and the one (1) Series A director nominated by the board of directors and does not include any other matters relating to the election of directors, including without limitation, the election of directors nominated by any stockholder of the Company. New Mountain Vantage Advisers, L.L.C. ("NMV") has notified the Company that NMV intends to nominate three individuals for election as directors at the annual meeting in opposition to the nominees recommended by our board of directors. Any candidates nominated by NMV have NOT been endorsed by our board of directors. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU DO NOT SIGN ANY PROXY CARDS SENT TO YOU BY NMV. IF YOU HAVE PREVIOUSLY SIGNED A PROXY CARD SENT TO YOU BY NMV, YOU CAN REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE PROVIDED, OR, IF YOUR SHARES ARE HELD IN STREET NAME, BY INSTRUCTING YOUR BROKER TO VOTE YOUR SHARES FOR THE WHITE PROXY CARD.
RECORD DATE:
Only stockholders of record at the close of business on July 17, 2018,[ · ], are entitled to notice of and to vote at the annual meeting and at any adjournment or postponement thereof.
HOW TO VOTE:
All stockholders are cordially invited to attend the annual meeting in person.virtually. However, to assure your representation at the annual meeting, we urge you, whether or not you plan to attend the annual meeting, to submit your vote via the Internet, (www.envisionreports.com/VRTU),or by telephone, (1-800-652-VOTE (8683)),following the instructions on the WHITE proxy card, or by completing, signing and dating the enclosedWHITE proxy card and returning it in the envelope provided as soon as possible so that your shares will be represented at the annual meeting. If you vote via the Internet or by telephone or send your proxy in, you will not limit your right to vote in personvirtually at the annual meeting. If you have any questions about the annual meeting or how to vote your shares, please contact MacKenzie Partners, Inc., our proxy solicitor assisting us in connection with the annual meeting. Stockholders may call toll free at 1-800-322-2885 or collect at 212-929-5500.
By | ||
Ranjan Kalia Executive Vice President, Chief Financial Officer, | ||
[·], 2020 | Treasurer and Secretary |
Southborough, MassachusettsJuly 27, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON THURSDAY, SEPTEMBER 6, 2018: THE PROXY
STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS ARE AVAILABLE AT www.envisionreports.com/VRTU, FOR REGISTERED HOLDERS AND AT www.edocumentview.com/VRTU FOR BENEFICIAL/STREET HOLDERS.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, OR PLEASE PROMPTLY SUBMIT YOUR VOTE VIA THE INTERNET (www.envisionreports.com/VRTU), OR BY TELEPHONE (1-800-652-VOTE (8683)), IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
IN ACCORDANCE WITH OUR SECURITY PROCEDURES, ALL PERSONS ATTENDING THE ANNUAL MEETING WILL BE REQUIRED TO PRESENT PICTURE IDENTIFICATION.
VIRTUSA CORPORATION
PROXY STATEMENT132 Turnpike RoadSouthborough, Massachusetts 01772For the Annual Meeting of Stockholders
To be Held on [ · ], 2020
2020 Annual Stockholders Meeting
PROXY STATEMENTFOR THE ANNUAL MEETING OF STOCKHOLDERSTo Be Held on Thursday, September 6, 2018
July 27, 2018
This proxy statement isand the accompanying WHITE proxy card are furnished in connection with the solicitation of proxies by the board of directors of Virtusa Corporation, a Delaware corporation (the "Company," "our," "we" or "us"), for use at the annual meeting of stockholders to be held on Thursday, September 6, 2018,[ · ], at 8:00 a.m.[ · ]., local time, or at the offices of Virtusa Corporation located at 132 Turnpike Road, Southborough, Massachusetts 01772, and any adjournments or postponements thereof. An annual report to stockholders, containing financial statements for the fiscal year ended March 31, 2018,2020, is being mailed together with this proxy statement to all stockholders entitled to vote at the annual meeting. This proxy statement and the form ofaccompanying WHITE proxy card are expected to be first mailed to stockholders on or about August 2, 2018.[ · ].
The purposes of the annual meeting are to (i) elect three (3)two (2) class III directors, as nominated by our board of directors, for a three-year term, and, with respect to the holders of our Series A Convertible Preferred Stock, one (1) Series A director, as nominated by our board of directors, until his/her successor is duly elected and qualified or until such Series A director's right to hold the office terminates, whichever occurs earlier, (ii) ratify the appointment of the accounting firm of KPMG LLP as the Company's independent registered public accountants for the current fiscal year, and (iii) holdto approve, on an advisory vote onbasis, the compensation of our named executive officers, and (iv) transact such other business as may properly come before the annual meeting and any adjournments or postponements thereof.NEOs. The board of directors unanimously recommends that you vote FOR election of the director nominees, FOR ratification of the appointment of our independent registered public accountants and FOR approval, on an advisory basis, of the compensation of our named executive officers.NEOs.
Only stockholders of record at the close of business on July 17, 2018,[ · ], the record date, will be entitled to receive notice of and to vote at the annual meeting. As of July 17, 2018, 32,741,394the record date, [ · ] shares of common stock, $.01 par value per share, of the Company were eligible to vote at the annual meeting, of which 29,741,394[ · ] shares of common stock were issued and outstanding and 3,000,000 shares of common stock were issuable upon conversion of the 108,000 shares of Series A Convertible Preferred Stock, $.01 par value per share (the "Series A Preferred Stock") which are issued and outstanding. The holders of common stock (including the 3,000,000 shares of common stock issuable upon conversion of the Series A Preferred Stock) are entitled to one vote per share on any proposal presented at the annual meeting.
The annual meeting will be held virtually via https://www.cesonlineservices.com/vrtu20_vm, and will begin promptly at [ · ]. Stockholders will be able to listen, vote, and submit questions from their home or from any remote location that has Internet connectivity. There will be no physical location for stockholders to attend. Stockholders may voteonly participate online and must pre-register. In order to attend the virtual-only meeting, you will need to pre-register by [ ]. To pre-register for the meeting, please follow these instructions:
If your shares are registered in personyour name with our transfer agent and you wish to attend the virtual meeting, please go to https://www.CESVote.com, enter the control number you received on
your WHITE proxy card to access the voting page, then click on the "Click here to pre-register for the online meeting" link at the top of the page.
If you do not have your WHITE proxy card, you may pre-register to attend the virtual meeting by emailing your proof of ownership of shares of our common stock as of [ ] to VRTURegister@Proxy-Agent.com. Your proof of ownership may include a copy of your proxy card received either from us or from NMV or a statement showing your ownership of shares of our common stock as of [ ]. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the annual meeting with instructions for attending the virtual annual meeting online.
If your shares are not registered in your name with our transfer agent, but you are a beneficial owner and your shares are held by a broker, bank, financial institution or other nominee or intermediary in "street name" as of [ ], you may pre-register to attend the annual meeting by emailing VRTURegister@Proxy-Agent.com and attaching evidence that you beneficially owned shares of our common stock as of [ ], which evidence may consist of a copy of the Voting Instruction Form (or Notice) provided by your broker, bank, financial institution or other nominee or intermediary, an account statement, or a letter or legal proxy or stockholdersfrom such custodian. After pre-registering, and upon verification of your ownership, you will receive a confirmation email prior to the annual meeting with instructions for attending the virtual annual meeting online.
Stockholders may submit their vote via the Internet, (www.envisionreports.com/VRTU), by telephone (1-800-652-VOTE (8683))(following the instructions on the WHITE proxy card), or by completing, signing and dating the enclosedWHITE proxy card and returning it in the envelope provided as soon as possible so that the stockholderstockholder's shares will be represented at the annual meeting. If you attend the annual meeting, you may vote in personvirtually even if you have previously returned yourWHITE proxy card or voted via telephone or the Internet. Voting via the Internet or telephone will not limit your right to vote in personvirtually at the annual meeting as stated above. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, before the taking of the vote at the annual meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly completing a later-dated proxy relating to the
same shares and delivering it to the Secretary of the Company before the taking of the vote at the annual meeting, or (iii) attending the annual meeting and voting in personvirtually (although attendance at the annual meeting will not in and of itself constitute a revocation of a proxy). Any written notice of revocation or subsequent proxy should be sent before the taking of the vote at the annual meeting so as to be delivered to:to Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772, Attention: Secretary, before the taking of the vote at the annual meeting.Secretary.
The representation in personvirtually or by proxy of at least a majority of the outstanding shares of commonthe capital stock of the Company issued and outstanding and entitled to vote at the annual meeting is necessary to constitute a quorum for the transaction of business. Votes withheld from any nominee, abstentions and broker "non-votes" are counted as present or represented for purposes of determining the presence or absence of a quorum for the annual meeting. A "non-vote" occurs when a nominee holding shares for a beneficial owner votes on one proposal but does not vote on another proposal because, with respect to such other proposal, the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. It is anticipated that the 2020 Annual Meeting of Stockholders will be contested (see the foregoing discussion) as such broker "non-votes" may not occur.
For Proposal 1, the three (3) class IIour by-laws require that each director nomineesnominee shall be elected if the number of votes cast for such nominee's election exceed the number of votes cast against such nominee's election, except where a different vote is required by law, the certificate of incorporation (including
any certificates of the powers, designations, preferences and rights of any class or series of stock) or the one (1)by-laws; provided, however, that in a contested election, a nominee shall be elected by a plurality of the votes cast, meaning that the director nominees receiving the most votes would be elected. The certificates of the powers, designations, preferences and rights of the Series A director isConvertible Preferred Stock require that the Series A Director shall be elected by the affirmative vote of a majority of the votes properly cast by the holders of the Series A Convertible Preferred Stock for such election at the annual meeting.
New Mountain Vantage Advisers, L.L.C. ("NMV") has notified us of its intent to nominate three individuals for election as directors at the annual meeting. If NMV proceeds with its alternative nominations, the election of directors would be considered a contested election. As a result, the two (2) director nominees for the Class I directors receiving the most votes at the annual meeting will be elected and the one (1) Series A director shall be elected by a majority of the votes properly cast by the holders of Series A Convertible Preferred Stock for such election at the annual meeting. You may not vote your shares cumulatively or for a greater number of persons than the number of director nominees named in this proxy statement. In the event NMV does not proceed with its nominations or withdraws its nominees on or prior to the day preceding the date the Company first mails the proxy materials for the annual meeting to the Company's stockholders, the election of directors will not be contested, and the director nominees for Class I directors will be elected if the number of votes cast for such nominee's election exceed the number of votes cast against such nominee's election.
For Proposal 2, the ratification of the appointment of KPMG LLP as the Company's independent registered public accountants for the current fiscal year, and for Proposal 3, the advisory vote on theapproval of compensation of our named executive officers,NEOs, an affirmative vote of a majority of the shares properly cast for and against each such matter is required for approval.
Brokerage firms, banks and other nominees who hold shares on behalf of their clients in "street name" are not permitted to vote the shares if the clients do not provide instructions (either vote FOR, or vote AGAINST, WITHHOLD their vote, or ABSTAIN) on matters that are not routine matters. If NMV provides proxy materials in opposition to our board of directors to your broker to forward to you on its behalf, your broker will not have discretionary authority to vote your shares are heldon any of the matters to be presented at the annual meeting. Therefore, if you hold your shares in "street-name" through a broker thoseor other nominee, absent voting instructions from you, your shares will not be votedcounted as voting and will have no effect on those proposals requiring approval by a plurality or majority of the votes cast. On the other hand, in the absence of NMV providing proxy materials in opposition to our board to your broker to forward to you on its behalf, Proposal 1 (the election of directors) or Proposal 3 (the advisory vote on2 to ratify the compensationappointment of our named executive officers), unless you affirmatively provide theindependent registered public accountants will be a "routine" matter for which your broker instructions on howdoes not need your voting instruction in order to vote.vote your shares. Abstentions and broker "non-votes" will have no effect in determining the outcome of Proposal 1. Abstentions and broker "non-votes" are not counted as votes cast for or against a matter and thus will have no effect on Proposals 2 and 3.
The persons named as attorney-in-fact in the proxies, Ranjan Kalia, Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the Company, and Paul D. Tutun, Executive Vice President, General Counsel and Assistant Secretary, were selected by the board of directors. All properly executedWHITE proxies returned in time to be counted at the annual meeting including any votes properly made via the Internet or telephone, will be voted by such personsthe named proxies at the annual meeting. Where a choice has been specified on the WHITEproxy with respect to the foregoing matters, the shares represented by the WHITEproxy will be voted in accordance with the specifications. If noyou return a validly executed WHITE proxy card without indicating how your shares should be voted on a matter and you do not revoke your proxy, such specifications are indicated, suchWHITE proxies will be voted FOR election of the director nominees set forth on the WHITE proxy card, FOR ratification of the appointment of our independent registered public accountants for the current fiscal year, and FOR the approval, on an advisory basis, of the compensation of our named executive officers
NEOs. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU DO NOT SIGN OR OTHERWISE VOTE USING ANY PROXY CARD SENT TO YOU BY NMV.
If you have any questions or require assistance with voting, please call:
Toll-Free at 800-322-2885
Call Collect at 212-929-5500
Email: VRTU@mackenzieparnters.com
Aside from the election of directors, the ratification of the appointment of the independent registered public accountants and the advisory vote on the compensation of our named executive officers,NEOs, the board of directors knows of no other matters to be presented at the annual meeting. If any other matter should be presented at the annual meeting upon which a vote properly may be taken, shares represented by all proxies received by the board of directors will be voted with respect thereto in accordance with the judgment of the persons named as attorney-in-fact in the proxies.
You may receive proxy solicitation materials from NMV, including an opposition proxy statement and proxy card. Our board of directors recommends that you do not sign or otherwise vote using any proxy card sent to you by NMV. To vote as our board of directors recommends, stockholders must use the WHITE proxy card or attend the annual meeting and vote virtually. Voting against any NMV nominees or voting to withhold or abstain on the proxy card sent to you by NMV will not be counted as a vote for our board's nominees and will result in the revocation of any previous vote you may have cast on the WHITE proxy card. If you wish to vote pursuant to the recommendation of our board of directors, you should disregard any proxy card you receive other than the WHITE proxy card. If you have previously voted using the proxy card sent to you by NMV, you have the right to change your vote by executing a later dated WHITE proxy card or by attending and voting at the annual meeting. Only the latest dated proxy you submit will be counted.
OUR BOARD RECOMMENDS THAT YOU DO NOT VOTE FOR ANY INDIVIDUALS WHO MAY BE NOMINATED BY NMV.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED WHITEPROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE, OR PLEASE PROMPTLY SUBMIT YOUR VOTE VIA THE INTERNET OR BY TELEPHONE FOLLOWING THE INSTRUCTIONS ON THEWHITEPROXY CARD, IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF THEWHITEPROXY CARD IS MAILED IN THE UNITED STATES.
IN ACCORDANCE WITH OUR SECURITY PROCEDURES, ALL PERSONS ATTENDING THE ANNUAL MEETING WILL BE REQUIRED TO PRESENT GOVERNMENT ISSUED PICTURE IDENTIFICATION.
Our board is soliciting proxies for the annual meeting from our stockholders. We will bear the entire cost of soliciting proxies from our stockholders. Further, we may reimburse brokers, banks and
other nominees that hold shares of our common stock on behalf of beneficial owners for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to such beneficial owners of our common stock. In the event of a contested proxy solicitation for the election of directors, Virtusa may incur additional costs related to the mailing and printing of proxy materials, data processing and tabulation costs, and other related expenses of up to approximately $[ · ] in the aggregate.
We have retained MacKenzie Partners, Inc. ("MacKenzie") to aid in soliciting proxies and advise on certain matters relating to the annual meeting for a fee estimated not to exceed $[ · ] plus reasonable out-of-pocket expenses. MacKenzie has informed us that approximately twenty-five (25) of its employees will assist in the solicitation. Proxies may be solicited on our behalf by telephone or through other means by our directors, officers and other employees who will receive no additional compensation for such services. Appendix B to this proxy statement sets forth information relating to our directors, nominees, executive officers and employees who are considered "participants" in our solicitation under the rules of the Securities and Exchange Commission (the "SEC"). If there is a contested solicitation for the election of directors at the annual meeting, Virtusa will also incur significant additional expenses related to the solicitation (in excess of those normally spent for an annual meeting). To date, as a result of the nomination of candidates by NMV and the potential proxy contest related thereto, the Company has incurred approximately $[ · ] related to the fees of legal, financial and other advisors (including MacKenzie). If the contested solicitation proceeds, we expect to incur an additional $[ · ] of such fees and expenses, resulting in an aggregate amount of approximately $[ · ].
VIRTUSA AT A GLANCE
Virtusa is a leading global provider of digital engineering, consulting, and information technology ("IT") services and solutions that help our clients change, disrupt, and unlock new value. We combine our deep industry and domain expertise with the right tools, techniques, accelerators and agile teams to help businesses move forward, faster.
Our digital engineering services and solutions solve some of the most complex and rapidly evolving problems for global 2000 companies.
Our experience with a large customer base provides us with real-time, granular, and globally differentiated market intelligence to investments in the research, infrastructure, and training.
We are innovation engineers.
Our mission
We apply domain and technology innovation to accelerate business outcomes for our clients.
Our strategy
With over 22,000 world class professionals, servicing clients from 50+ locations in 24 countries, our strategy focuses on three fundamental pillars:
Our values
Agile in thought and transparent in action, our organization is innately driven to find a better way through our PIRL values.
FY2020 performance highlights
Background of the Solicitation
The following timeline is provided to make clear how extensive the discussions have been between the Company and New Mountain Vantage Advisers, L.L.C. ("NMV"), regarding the Company's business and potential candidates to join our Board. We believe this illustrates our openness to input from all shareholders and stakeholders as well as the earnestness of our efforts to seek a resolution without incurring the expenses of a proxy contest. NMV has nominated three directors in opposition to the two (2) class I directors who are recommended by our Board for election. The Board does not endorse the NMV nominees and unanimously recommends you use the WHITE proxy card to vote FOR the election of each of the nominees proposed by the Board. The Board also recommends that you do not sign or return any proxy cards sent to you from NMV.
Following the Company's 2019 annual meeting, the Board had discussions about augmenting the Board with new members and undertook the process of determining the qualifications and skills desired for such new members. As discussed in the section below entitled "How We Are Selected," our Nominating and Corporate Governance Committee (the "Nominating Committee") seeks members from diverse professional backgrounds who combine public company senior executive and board-level experience with a broad spectrum of relevant industry and strategic experience and expertise, that, in concert, offer us and our stockholders diversity of opinion and insight in the areas most important to us and our corporate mission. In addition, nominees for director are selected to have complementary, rather than overlapping, skill sets. Through this skills-based approach, our Nominating Committee focused on reviewing the skill set of our then-existing directors and adding to our Board directors who would bring new perspectives and broaden the experience of the Board. The Nominating Committee actively seeks to identify candidates who would strengthen the ability of
our Board to offer practical business advice and strategic guidance to management and fulfill its fiduciary duties to stockholders.
On March 27, 2020, at NMV's request, a call took place between our Chief Financial Officer, Ranjan Kalia and Tyler Saitta, a NMV Vice President, in which Mr. Saitta asked questions regarding the Company's business and strategy for the future.
On April 23, 2020, at NMV's request, our Chairman and Chief Executive Officer, Kris Canekeratne and Mr. Kalia had a call with Chad Fauser, Head of Engagement for NMV and Prasad Chintamaneni, Managing Director of NMV. These meetings covered a broad range of topics, including the Company's business and results of operations, our earnings performance, long-term business strategies, capital allocation and the composition of our Board.
On April 29, 2020, at NMV's request, Mr. Canekeratne, Mr. Kalia and our Chief Strategy Officer, Thomas Holler, had a call with representatives of NMV, including Mr. Fauser and Mr. Chintamaneni. At this meeting the representatives of NMV delivered a presentation to the Company which included NMV's views regarding the Company's operating margins, M&A strategy and corporate governance. The NMV representatives also made a request for Board representation for Mr. Chintamaneni and Mr. Fauser, both NMV employees.
From May 1 through 12, 2020, the Board held meetings, together with members of management and advisors, to discuss NMV's demands and potential next steps. At the meetings, representatives of the Company's advisors reviewed with the Board the mechanics, expense and timetable related to a potential proxy contest with NMV. The Board also discussed steps that could be taken to avoid the expense and distraction of a potential proxy contest with NMV. Finally, the Board reviewed elements of NMV's business strategy presentation against the Company's current Three Pillar strategy and concluded that the Company's current plan would, if successfully implemented, address the points of concern in NMV's presentation. The Board engaged in a lengthy discussions of these topics during which questions were asked and answered by the advisors.
On May 18, 2020, following the Company's announcement of its fourth quarter and fiscal year 2020 financial results on May 13, 2020, Mr. Canekeratne, Mr. Kalia and Mr. Holler had a discussion with representatives of NMV, including Mr. Fauser and Mr. Chintamaneni. During this discussion, the NMV representatives expressed their views regarding certain issues related to the Company's business, strategies and financial performance. In addition, NMV requested that the Board form a new Business Optimization Committee which would be comprised principally of the proposed NMV representatives. On May 20, 2020, Mr. Fauser contacted Mr. Canekeratne and asked to speak with the Company's directors and Mr. Canekeratne said that he would arrange such a meeting.
On May 27, 2020, our Lead Independent Director and Chair of our Nominating Committee, Rowland Moriarty, and our Series A Director and member of our Nominating Committee, Vikram Pandit, had a discussion with representatives of NMV, including Mr. Fauser and Mr. Chintamaneni. During this discussion, Mr. Moriarty and Mr. Pandit acknowledged NMV's interest in joining the Board and invited Mr. Fauser and Mr. Chintamaneni to participate in the Board's standard process for evaluating director candidates that involves interviews, reference checks and other steps to help ensure both a complementary fit with the Board, as well as finding candidates with skill sets that align with the Company's current business needs.
Later on May 27, 2020, the Board and the Nominating Committee held a meeting, together with members of management and advisors, and discussed NMV's demands, the composition of the Board and various corporate governance matters. At these meetings the directors also discussed
steps that could be taken to avoid the expense and distraction of a potential proxy contest with NMV. The Board also decided to offer NMV an opportunity to provide responses to certain questions that our directors had regarding the perspectives expressed by NMV's representatives.
On May 30, 2020, Mr. Moriarty emailed Mr. Fauser and Mr. Chintamaneni a set of nine questions from the Board for NMV to address. The following day, Mr. Pandit and Mr. Moriarty conducted a call with representatives of NMV to address their questions regarding the purpose of the questionnaire, whether the request represented constructive engagement by the Company that was likely to lead to increased stockholder representation on the Board, and whether other candidates considered for Board appointment are required to complete a similar questionnaire.
During June 2020, the Nominating Committee continued its work to identify potential new director candidates. In this search, the Nominating Committee continued to follow the Company's longstanding approach of reviewing the skill sets of existing directors, identifying future Company needs, and identifying the qualifications and skill sets that new board members would bring to the Board. The Nominating Committee conducted interviews with four director candidates, including Mr. Fauser and Mr. Chintamaneni, and spoke to references for these candidates during this period.
On June 2, 2020, the Board held a meeting, together with members of management and advisors, to review, among other things, the recent discussions with NMV. The Board discussed NMV's demands, the composition of the Board and various corporate governance matters. The Board also discussed steps that could be taken to avoid the expense and distraction of a potential proxy contest with NMV, including considering Mr. Fauser and Mr. Chintamaneni in its process for identifying potential new director candidates. Following discussion, the Board determined to propose that Mr. Fauser and Mr. Chintamaneni be interviewed by directors Deborah Hopkins and Izhar Armony, the two members of the Nominating Committee who had not yet met with Mr. Fauser and Mr. Chintamaneni.
Following the Board meeting, Mr. Canekeratne emailed Mr. Fauser to inform him that members of the Nominating Committee, Ms. Hopkins and Mr. Armony, would arrange interviews with Mr. Fauser and Mr. Chintamaneni and gather more information in accordance with the Board's standard procedure for considering potential new director candidates.
Also on June 2, 2020, Mr. Fauser and Mr. Chintamaneni emailed Mr. Moriarty NMV's responses to the May 30 questions. NMV's responses were provided to the Board.
On June 9, 2020, Ms. Hopkins and Mr. Armony each interviewed both Mr. Fauser and Mr. Chintamaneni.
On June 11, 2020, the Board and the Nominating Committee held meetings, together with members of management and advisors, to consider, among other things, potential new director candidates. The Board and Nominating Committee discussed four director candidates, which included Mr. Fauser and Mr. Chintamaneni. The members of the Nominating Committee provided feedback regarding each of the candidates. The Nominating Committee noted that one of the candidates, Abidali Neemuchwala, had extensive public company senior executive and board-level experience and possessed the skill set sought by the Company. Following discussion, the Board and Nominating Committee determined to further consider the potential new director candidates at subsequent meetings.
On June 12, 2020, Mr. Canekeratne, Mr. Kalia and Mr. Holler had a discussion with representatives of NMV, including Mr. Fauser and Mr. Chintamaneni. Mr. Canekeratne informed the
representatives of NMV that the Nominating Committee was in the process of identifying a potential new director candidate whom it would consider adding to the Board. Mr. Canekeratne also indicated that the Company would be open to having NMV meet with the candidate, and that the Company would be willing to jointly announce with NMV the addition of a highly experienced industry veteran to the Board.
On June 14, 2020, Mr. Moriarty and Mr. Pandit had a discussion with representatives of NMV, including Mr. Fauser. Mr. Fauser reiterated NMV's views regarding certain issues related to the Company's business, strategies, financial performance and corporate governance. Mr. Fauser also expressed his opinion regarding Institutional Shareholder Services Inc.'s ("ISS") ranking of the Company and his understanding that ISS would recommend voting against the Company's director nominees at the 2020 annual meeting. Mr. Moriarty and Mr. Pandit questioned Mr. Fauser's assertions about the position of ISS and noted that the Company had not disclosed its nominees for the current election or even made any final decisions and had not as of yet had any engagement with ISS on the topic. Mr. Fauser rephrased his position and indicated that it was simply his belief that ISS would recommend against the Company's nominees. Mr. Moriarty and Mr. Pandit thanked Mr. Fauser and his colleagues for their time and input and concluded by noting that the Company values input from all of its stockholders.
Also on June 14, 2020, the Board and the Nominating Committee held meetings, together with members of management and advisors, to consider potential new director candidates and the recent discussions with NMV. After due consideration, and in accordance with the Company's corporate governance policies, the Nominating Committee unanimously determined that Mr. Fauser and Mr. Chintamaneni did not have the extensive public company C-suite senior executive or board-level experience and other qualifications which they were seeking in new director candidates. In addition, the Committee noted that Mr. Chintamaneni's executive experience was in the BFSI space which both NMV and the Company had separately concluded was a sector that the Company should seek to expand beyond. As a result, the Committee concluded that it was not in the best interests of the Company and its stockholders to grant NMV's demand for Mr. Fauser and Mr. Chintamaneni to be added to the Board. During these meetings, the Nominating Committee also officially considered the candidacy of Mr. Neemuchwala. The Board and the Nominating Committee noted Mr. Neemuchwala's extensive public company senior executive and board-level experience and determined that he possessed the skill set sought by the Company and would provide valuable insight as the Company continued to focus on creating value for stockholders. The Board and the Nominating Committee determined to pursue Mr. Neemuchwala to join the Board. The Board again discussed steps that could be taken to resolve the issues with NMV, including inviting NMV into the process to vet Mr. Neemuchwala's candidacy and proposing to add an additional independent director candidate mutually acceptable to NMV and the Board. The Committee also noted that it was anticipated that one of our long-standing directors was not going to stand for re-election at the 2020 annual meeting.
On June 15, 2020, Mr. Canekeratne and Mr. Moriarty had a discussion with representatives of NMV, including Mr. Fauser. Mr. Fauser reiterated NMV's demands discussed at the previous meetings. Mr. Canekeratne and Mr. Moriarty informed NMV that the Nominating Committee had identified a potential new director candidate whom it was interested in adding to the Board. Mr. Canekeratne and Mr. Moriarty also indicated the Board's willingness to consider material changes to the composition of the Board. These changes included adding an additional independent director candidate mutually acceptable to NMV and the Board following the Nominating Committee's process, and having one of our long standing directors retire. The NMV representatives were also invited to meet with and provide input on the candidate that the Board felt was most qualified. Mr. Fauser stated that anything short of adding either himself or Mr. Chintamaneni to the Board was
a "non-starter" for NMV. Mr Fauser also indicated NMV's willingness to compromise by modifying its request such that if the Board appointed either of Mr. Fauser or Mr. Chintamaneni, and one director not affiliated with NMV, but who was mutually acceptable to NMV and the Company, NMV would not submit a nomination notice (or would withdraw it, if submitted). Mr. Fauser then indicated that NMV would discuss internally and respond to the Board's proposal.
On June 17, 2020, NMV sent the Company a notice of intent to nominate the following three candidates for election as directors at the Company's 2020 annual meeting: Michael J. Baresich, Ramakrishna Prasad Chintamaneni and Patricia B. Morrison. Also on June 17, 2020, NMV sent a letter to the Board. In particular, NMV's letter discussed its views regarding the Company's (i) operating margins, (ii) EPS growth, (iii) capital allocation, and (iv) corporate governance.
Also on June 17, 2020, Mr. Moriarty and Ms. Hopkins had a discussion with representatives of NMV, including Mr. Fauser. Mr. Fauser expressed his opinion that NMV's candidates, Mr. Baresich, Mr. Chintamaneni and Ms. Morrison, would add value to the Board, and that the Board's appointment of a new independent director at the present time would not be well received by the Company's stockholders notwithstanding how well qualified the person may be.
On June 18, 2020, the Board and the Nominating Committee met, together with members of management and advisors, to consider potential new director candidates and the recent discussions with NMV. Following the recommendation of the Nominating Committee, our Board then officially voted to add Mr. Neemuchwala to the Board. The Nominating Committee determined that that it would continue conducting the process to identify and seat additional new, highly qualified independent directors, and would evaluate NMV's independent director candidates under this process.
On June 19, 2020, the Company issued a press release announcing the appointment of Mr. Neemuchwala to our Board. The Company also announced that the Board intended to continue conducting a vigorous process to identify and seat new, highly qualified independent directors to the Board. The Company also disclosed it had received NMV's nomination of director candidates and stated that the Board welcomed the opportunity to interview NMV's independent director candidates.
On June 22, 2020, NMV issued a press release disclosing its nomination of its three director nominees and its June 17 letter to the Board. NMV also announced that it would be willing to withdraw its nominations in exchange for: (i) adding either Mr. Fauser or Mr. Chintamaneni to the Board; (ii) adding one of NMV's independent nominees to the Board and (iii) the Company's public commitment to a margin improvement and revenue diversification strategy.
On June 23, 2020, Mr. Moriarty emailed Mr. Fauser and indicated that the Nominating Committee wanted to interview NMV's independent director nominees, Mr. Baresich and Ms. Morrison, as the Nominating Committee was seeking to add one more independent director to our Board as discussed in the Company's June 19 press release.
On July 2, 2020, the Board met, together with members of management and advisors, to consider potential new director candidates and the recent discussions with NMV. The Board discussed the feedback and interviews regarding potential new director candidates. The Board also discussed steps that could be taken to avoid the expense and distraction of a potential proxy contest with NMV.
On July 6, 2020, NMV filed a Schedule 13D with the SEC disclosing it beneficially owned approximately 8.98% of the Company's outstanding shares of common stock, plus economic
exposure through derivatives to approximately 1.79% of the Company's outstanding shares of common stock. Also on that day NMV delivered to the Company a demand letter for a copy of a list of the Company's stockholders pursuant to Section 220 of the Delaware General Corporation Law (the "220 Demand Letter").
During late June and July, 2020, the members of the Nominating Committee, as well as our directors, Barry Nearhos and Al-Noor Ramji, and Mr. Canekeratne interviewed Ms. Morrison and Mr. Baresich.
On July 22, 2020, the Company entered into a confidentiality agreement with NMV relating to the 220 Demand Letter.
On July 27, 2020, NMV delivered to the Company a purported demand letter for copies of certain corporate records of the Company related to the Company's margin improvement, revenue diversification, management compensation, director selection and review process, corporate governance, financing committee activities, and acquisition of Polaris Consulting and Services, Ltd., pursuant to Section 220 of the Delaware General Corporate Law. The Company is assessing the demand letter and will respond accordingly. On July 29, 2020, NMV filed an amendment to its Schedule 13D with the SEC attaching the demand letter and disclosing that NMV beneficially owned approximately 9.89% of the Company's outstanding shares of common stock, plus economic exposure through derivatives to approximately 0.90% of the Company's outstanding shares of common stock.
On August 3, 2020 the Company filed with the SEC a preliminary proxy statement with respect to the 2020 annual meeting. In the preliminary proxy statement the Company disclosed that William K. O'Brien, who is currently a Class I director, was not nominated for reelection to the Board because he is over the age of 72, and pursuant to our corporate governance guidelines, unless otherwise approved by the Board, no director who is 72 years of age or older will be nominated for re-election. Mr. O'Brien will remain on the Board until the 2020 annual meeting and the successors to the Class I directors which are up for election at the 2020 annual meeting are duly elected.
At the time of Mr. O'Brien's re-election to the Board at the 2017 annual meeting, the Board had experienced a lot of turn-over of long-tenured directors who stepped off the Board, including Ron Maheu, Martin Trust and Bob Davoli. Given this, the Board determined that it was important to retain Mr. O'Brien on the Board to ensure some level of continuity and also because his financial experience was critical to the Board. At the present time, the Board determined that there was sufficient continuity and also that a number of the other members were positioned to provide the level of financial and business experience necessary for the Board to function effectively.
On August 5, 2020, NMV filed with the SEC a preliminary proxy statement with respect to the 2020 annual meeting.
On August 6, 2020, at the direction of the Board, representatives of the Company's outside counsel had a call with representatives of NMV's outside counsel to discuss whether a consensual resolution might be reached in order to avoid the expense and distraction of a proxy fight.
On August 10, 2020, the Company filed with the SEC an amended preliminary proxy statement with respect to the 2020 annual meeting.
SECURITY OWNERSHIPOUR BOARD OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTDIRECTORS
The following table sets forth certain information regarding beneficial ownership of our common stock at June 30, 2018: (i) by each person who is known by us to beneficially own more than 5% of the outstanding shares of common stock and Series A Preferred Stock; (ii) by each director or nominee; (iii) by each named executive officer; and (iv) by all directors and executive officers as a group. Unless otherwise noted below, the address of each person listed on the table is c/o Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772.
Name of Beneficial Owner | Number of Common Shares Beneficially Owned(1) | Percentage of Class Beneficially Owned(2) | Number of Shares of Series A Convertible Preferred Stock Beneficially Owned | Percentage of Class Beneficially Owned(2) | |||||||||
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Five percent stockholders: | |||||||||||||
FMR LLC(3) | 3,642,497 | 11.12 | % | — | 0.00 | % | |||||||
245 Summer Street | |||||||||||||
Boston, MA 02210 | |||||||||||||
BlackRock, Inc.(4) | 3,408,244 | 10.41 | % | — | 0.00 | % | |||||||
55 East 52nd Street | |||||||||||||
New York, NY 10022 | |||||||||||||
The Vanguard Group(5) | 2,107,167 | 6.44 | % | — | 0.00 | % | |||||||
100 Vanguard Blvd. | |||||||||||||
Malvern, PA 19355 | |||||||||||||
Dimensional Fund Advisors LP(6) | 2,028,563 | 6.20 | % | — | 0.00 | % | |||||||
Building One | |||||||||||||
6300 Bee Cave Road | |||||||||||||
Austin, TX 78746 | |||||||||||||
Orogen Viper LLC(7) | 3,000,000 | 9.16 | % | 108,000 | 100 | % | |||||||
One Rockefeller Plaza | |||||||||||||
Suite 2416 | |||||||||||||
New York, NY 10020 | |||||||||||||
Executive officers, directors and director nominees: | |||||||||||||
Kris A. Canekeratne(8) | 753,020 | 2.30 | % | — | * | ||||||||
Ranjan Kalia(9) | 82,196 | * | — | * | |||||||||
Raj Rajgopal(10) | 29,875 | * | — | * | |||||||||
Samir Dhir(11) | 59,159 | * | — | * | |||||||||
Thomas R. Holler(12) | 14,382 | * | — | * | |||||||||
Izhar Armony(13) | 26,855 | * | — | * | |||||||||
Rowland T. Moriarty(14) | 449,514 | 1.37 | % | — | * | ||||||||
William K. O'Brien(15) | 35,077 | * | — | * | |||||||||
Al-Noor Ramji(16) | 28,509 | * | — | * | |||||||||
Barry R. Nearhos(17) | 4,115 | * | — | * | |||||||||
Joseph G. Doody(18) | 1,373 | * | — | * | |||||||||
Vikram S. Pandit(19) | 908 | * | — | * | |||||||||
Deborah C. Hopkins(20) | — | * | — | * | |||||||||
All executive officers, directors and nominees as a group (15 persons)(21) | 1,680,187 | 5.11 | % |
stock, issuable upon conversion of 108,000 shares of Series A Preferred Stock. Orogen Viper LLC has shared voting power and shared dispositive power with respect to 3,000,000 of the shares of common stock beneficially owned with Orogen Holdings LLC, Vikram S. Pandit, Atairos-Orogen Holdings, LLC, Atairos Group, Inc., Atairos Partners, L.P., Atairos Partners GP, Inc., and Michael J. Angelakis. Mr. Vikram S. Pandit is Chairman and CEO of Orogen Viper LLC.
and which will not settle within 60 days of June 30, 2018. The grantee retains no voting rights in restricted stock units until vesting but does retain voting rights with respect to shares of unvested restricted stock awards unless and to the extent that such shares are forfeited.
PROPOSAL 11—
ELECTION OF DIRECTORS
Our board of directors currently consists of eightten members. Pursuant to our bylaws, our board of directors, on June 18, 2018, fixed the size of the Board at nine (9) members, subject to and effective upon the election of Ms. Deborah (Debby) C. Hopkins at our 2018 annual meeting of stockholders on September 6, 2018.
Our seventh amended and restated certificate of incorporation also divides the members of our board of directors that are elected by all holders of our capital stock into three classes. One class is elected each year for a term of three years. TheseWe are asking our stockholders to elect two (2) class I directors, as nominated by our board of directors, for a three-year term, and, with respect to the holders of our Series A Convertible Preferred Stock, one (1) Series A director, until his/her successor is duly elected and qualified or until such Series A director's right to hold the office terminates, whichever occurs earlier. The following table sets forth the nominees to be elected at the annual meeting and continuing directors.
Nominee's or Director's Name | Age | Director Since | Position(s) with the Company | Independent | Other Public Company Boards | Year Current Term Will Expire | Current Class of Director | |||||||||||
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Nominees for Class I Director | ||||||||||||||||||
Al-Noor Ramji | | 66 | | 2011 | Director | Yes | | — | | 2020 | I | |||||||
Joseph G. Doody | 67 | 2017 | Director | Yes | 2 | 2020 | I | |||||||||||
Nominee for Series A Director |
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Vikram S. Pandit | | 63 | | 2017 | Series A Director | Yes | | 2 | | — | Series A Director (1) | |||||||
Continuing Directors |
|
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Izhar Armony | | 56 | | 2004 | Director | Yes | | — | | 2021 | II | |||||||
Rowland T. Moriarty | 73 | 2006 | Director | Yes | 2 | 2021 | II | |||||||||||
Deborah C. Hopkins | | 65 | | 2018 | Director | Yes | | 2 | | 2021 | II | |||||||
Kris Canekeratne | 54 | 1996 | Chief Executive Officer and Chairman of the Board | No | — | 2022 | III | |||||||||||
Barry R. Nearhos | | 62 | | 2016 | Director | Yes | | 1 | | 2022 | III | |||||||
Abidali Neemuchwala | 52 | 2020 | Director | Yes | — | 2022 | III |
In accordance with our corporate governance guidelines, William K. O'Brien, who is currently a Class I director, was not nominated for reelection to the board of directors because he is over the age of 72. Mr. O'Brien will remain on the Board until the 2020 annual meeting and the successors to the Class I directors which are up for election at the 2020 annual meeting are duly elected. The Board has resolved to decrease its size to nine members effective upon expiration of the current term of the Class I directors. If all of the Board's nominees are elected, by a majoritythe Board will be comprised of votes cast by stockholders.nine members immediately following the 2020 annual meeting.
The board of directors, upon the recommendation of the nominating and corporate governance committee, has nominated Izhar Armony, Rowland T. MoriartyAl-Noor Ramji and Deborah C. Hopkins,Joseph G. Doody and recommended that each
nominee be elected to the board of directors as a class IIClass I director, each to hold office until the annual meeting of stockholders to be held in the year 20212023 and until his/her successor has been duly elected and qualified or until his/her earlier death, resignation or removal.
The board of directors is also composed of (i) two (2) class III directors (Kris Canekeratne and Barry R. Nearhos) whose terms expire upon the election and qualification of directors at the annual meeting of stockholders to be held in 2019 and (ii) three (3) class I directors (William K. O'Brien, Al-Noor Ramji, and Joseph G. Doody) whose terms expire upon the election and qualification of directors at the annual meeting of stockholders to be held in 2020. In addition, under the terms of our Series A Convertible Preferred Stock issued to Orogen Viper LLC ("Orogen") in connection with their purchase of an aggregate of 108,000 shares of convertible preferred stock Also, for aggregate consideration of $108 million which closed on May 3, 2017, and the terms of the Investment Agreement dated as of May 3, 2017 by and between the Company and Orogen, the holders of Series A Convertible Preferred Stock, voting separately as a class and to the exclusion of holders of all other classes of our capital stock, have the right to elect one (1) Series A Director (the "Series A Director") to our board of directors, separate and apart from the members of our board of directors that are elected by all holders of our capital stock. For this annual meeting, the board of directors, upon the recommendation of the nominating and corporate governance committee, has nominated Vikram S. Pandit and recommended that such nominee be elected to the board of directors as a Series A Director, to hold office until his successor is duly elected and qualified or until such Series A Director's right to hold the office terminates, whichever occurs earlier, subject to such Series A Director's earlier death, disqualification or removal. Only the holders of our Series A Convertible Preferred Stock have the right to vote on Mr. Pandit's election. Mr. Canekeratne is our chief executive officer and the chairman of the board.
The board of directors knows of no reason why any of the nominees would be unable or unwilling to serve, but if any nominee should for any reason be unable or unwilling to serve, the proxies will be voted for the election of such other person for the office of director as the board of directors may recommend in the place of such nominee. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the nominees named below.
For Proposal 1,Each proxy executed and returned by a holder of shares of common stock will be voted for the election of three (3) class II directors, the two Class I director nominees, shall be elected if the number of votes cast forunless otherwise indicated on such nominee's election exceed the number of votes cast against such nominee's electionproxy. Each proxy executed and the one (1) Series A director is electedreturned by a majorityholder of the votes properly cast by the holdersshares of the Series A Convertible Preferred Stock will be voted for the election of the two Class I director nominees and the Series A director nominee, unless otherwise indicated on such proxy.
We have received a notice from NMV for the nomination of three individuals for election to our board of directors at the annual meeting.meeting in opposition to the director nominees named in this proxy statement.
By-law Amendment Adopting Majority Voting The board of directors does not endorse any NMV nominees and unanimously recommends that you vote for the directors who have been named in Uncontested Director Electionsthis proxy statement and on the WHITE proxy card, and do not sign or otherwise vote using any proxy card sent to you by NMV. OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU DO NOT SIGN ANY PROXY CARDS SENT TO YOU BY NMV. IF YOU HAVE PREVIOUSLY SIGNED OR OTHERWISE VOTED USING A PROXY CARD SENT TO YOU BY NMV, YOU CAN REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE PROVIDED
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE "FOR" THE NOMINEES LISTED ABOVE FOR
WHICH YOU ARE ENTITLED TO VOTE FOR ELECTION AS A DIRECTOR.
On July 27,We, the members of Virtusa's board of directors, know that the most important decision you, as stockholders, make is that of selecting the people who oversee the Company on your behalf. We, therefore, open this proxy statement by sharing information essential to making these critical voting decisions. In addition to the material in our board profiles that follow, we would like to emphasize some key facts that we think set our board apart.
Our board includes directors who:
Our strength comes from our collective and diverse skills, experiences, and backgrounds, as described in these individual profiles below.
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Chairman of the board and Chief Executive Officer of the Company Age: 54 Class III Director | | Experience • Co-Founder, Virtusa, Chairman (1996 – present), Chief Executive Officer (1996 – 1997; 2000 – present) • Co-founded eDocs, Inc., a provider of electronic account management and customer care, later acquired by Oracle Corporation (1997) • One of the founding team members of INSCI Corporation, a supplier of digital document repositories and integrated output management products and services (1989 – 1996); Senior Vice President (1992 – 1996) Qualifications • Innovative and passionate entrepreneur co-founded three technology companies and led them to commercial success • Deep knowledge of our Company, our employees, our client base, our prospects, the global IT industry and our competitors • Unique capacity to see the emerging trends and next generation technologies that will significantly impact the course of industries and business in general Education • B.S. in Computer Science, Syracuse University |
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Managing General Partner at Charles River Ventures Independent Director since 2004 Age: 56 Class II Director Committees: • Nominating and Corporate Governance • Finance (April 1 through November 26, 2019)* Attendance: 94% * Dissolved in favor of an ad hoc M&A committee which may review strategic M&A opportunities from time to time | | Experience • Managing General Partner, Charles River Ventures, a venture capital investment firm (1997 – present) • Served as vice president of marketing and business development, Onyx Interactive, an interactive training company based in Tel Aviv Qualifications • Extensive experience in the technology industry, through both company operations and venture capital investment Education • M.B.A., Wharton School of Business • M.A. in International Studies from the University of Pennsylvania Also... • Served as an officer in the Israeli Army |
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President and Chief Executive Officer of Cubex Corporation Lead Independent Director Independent Director since 2006 Age: 73 Class II Director Committees: • Nominating and Corporate Governance (Chair) Attendance: 100% | | Experience • President and Chief Executive Officer, Cubex Corporation, a privately-held consulting company (1981 – present) • Professor of Business Administration, Harvard Business School (1981 – 1992) Qualifications • Thorough understanding of our business • Extensive experience regarding the operation and management of complex global organizations Other Public Boards • CRA International, a worldwide economic and business consulting firm (Chair) • WEX Inc. (formerly Wright Express Corporation) Education • D.B.A., Harvard University • M.B.A., Wharton School of Business • B.A., Rutgers University |
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Independent Director since 2008 Age: 75 Class I Director Not standing for re-election Committees: • Audit • Compensation Attendance: 92% Financial Expert | | Experience • Executive Chairman, Enterasys Networks, a public technology company (2003 – 2006), Chief Executive Officer (April 2002 – March 2004), Member of the board of directors (2002 – 2006) • Worked for over 33 years at PricewaterhouseCoopers ("PwC"), where he served in a number of roles including Chief Operating Officer of the former Coopers & Lybrand, with responsibility for the audit, tax, and financial advisory components of the U.S. business; Managing Partner for the Boston office; and a Global Managing Partner of PwC Qualifications • Extensive financial and accounting expertise • Strong leadership and management background Other Public Boards • Mercury Systems, Inc., a leading commercial provider of secure processing subsystems for a wide variety of critical defense and intelligence programs Education • Graduate, Bentley University |
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Group Chief Digital Officer of Prudential plc Independent Director since 2011 Age: 66 Class I Director Committees: • Compensation Attendance: 89% | | Experience • Group Chief Digital Officer, Prudential plc (2016 – present) • Chief Strategy Officer, Calypso Technology, Inc., a global application software provider that sells an integrated suite of trading and risk applications to the capital markets function within banks and other financial institutions (2014 – 2016) • Executive Vice President and General Manager, Misys Banking, Misys plc, a mid-size software company that serves the financial services industry (2010 – 2013) • Served in various executive roles at British Telecom, most recently as Chief Executive Officer for BT Innovate and Design, and Chief Information Officer and Chief Technology Officer of BT Group plc. (2004 – 2010) • Executive Vice President, Chief Information Officer and Chief E-Commerce Officer, Qwest Communications • Served as Chief Information Officer at UBS (then called SBC) • Global Head of Operations at Credit Suisse First Boston Qualifications • Extensive industry, domain and operational experience arising from holding management positions in large, complex technology companies, which enables him to provide invaluable insights to the challenges facing IT application outsourcing companies with respect to both the markets and clients being served. Education • Chartered Financial Analyst • BSc in Electronics, University of London Also... • He is a multi-year winner of the CIO 100 Award, CIO Insight IT Leader of the Year 2009, and the British Computer Society CIO of the Year |
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Independent Director since 2016 Age: 62 Class III Director Committees: • Audit (Chair) • Finance (April 1 through November 26, 2019)* Attendance: 100% Financial Expert * Dissolved in favor of an ad hoc M&A committee which may review strategic M&A opportunities from time to time | | Experience • Over 35 years of experience with PwC providing assurance, business advisory and other services to clients across multiple industries, including technology, life sciences, telecom, and manufacturing, including serving as Market Managing Partner for PwC's Northeast region, responsible for directing the strategy and operations of the firm's Boston, Hartford and Albany offices (2008 – 2015), leader of PwC's Northeast Assurance practice (2005 – 2008), an audit partner in PwC's Assurance practice (1989 – 2015) Qualifications • Extensive financial and accounting expertise as well as extensive knowledge of technology companies • Extensive operational skills and human capital management resulting from his valuable experience of overseeing and managing a workforce of 3,000 employees Other Public Boards • Mercury Systems, Inc., a leading commercial provider of secure processing subsystems for a wide variety of critical defense and intelligence programs Education • Graduate, Boston College |
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Independent Director since 2017 Age: 67 Class I Director Committees: • Audit • Compensation Attendance: 100% | Experience • Most recently served as Vice Chairman of Staples, Inc. where he led Staples' strategic reinvention and had responsibility for strategic planning, business development, and the company's operations in Australia, New Zealand and high-growth markets, including China and Brazil; previously served as President of North American Commercial, President of North American Delivery and President of North America (1998 – 2017) • Served as President of Danka Office Imaging in North America • Held various managerial positions with Eastman Kodak Company Qualifications • Extensive business experience regarding the planning, business development and strategic management of complex, global organizations Other Public Boards • Casella Waste Systems, Inc., an integrated regional solid waste services company • Paychex, Inc., a leading provider of solutions for payroll, HR, retirement, and insurance services Education • M.B.A., Simon School of Business, University of Rochester • B.S. in Economics from State University of New York at Brockport |
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Chairman and Chief Executive Officer of The Orogen Group Series A Director since 2017 Age: 63 Committees: • Compensation (effective February 1, 2020) (Chair) • Nominating and Corporate Governance • Finance (April 1 through November 26, 2019)* (Chair) Attendance: 88% * Dissolved in favor of an ad hoc M&A committee which would review strategic M&A opportunities from time to time | Experience • Chairman and Chief Executive Officer, The Orogen Group LLC ("The Orogen Group"), an operating company he created with the Atairos Group, Inc. that makes control and other strategic investments in financial services companies and related businesses (2016 – present). • Chief Executive Officer and Director, Citigroup Inc.; previously led Citi's Institutional Clients Group and Chairman and CEO of Citi Alternative Investments (2007 – 2012) • Founding Member and Chairman, Old Lane LLC, a hedge fund, which was acquired by Citigroup in 2007 • Chief Operating Officer of Institutional Securities and Investment Banking businesses, Morgan Stanley (2000 – 2005); President of Institutional Securities (2003 – 2005); Co-President (2000 - 2003), joined in 1983 Qualifications • Extensive experience and knowledge in banking and financial services • Proven track record of leadership of complex, global financial organizations • Extensive client network individually and as part of The Orogen Group Other Public Boards • ExlService Holdings, Inc. • Bombardier Inc. • The Nasdaq OMX Group, Inc. (formerly) Education • Ph.D. in Finance, Columbia University • M.S. and B.S. in Electrical Engineering, Columbia University | |
Also... • Serves as a Member of Advisory Board of NerdWallet, Inc., the Board of Overseers of Columbia Business School and of the Board of Visitors of the Columbia School of Engineering and Applied Sciences. |
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Independent Director since 2018 Age: 65 Class II Director Committees: • Nominating and Corporate Governance (effective November 26, 2019) • Finance (April 1 through November 26, 2019)* Attendance: 87% * Dissolved in favor of an ad hoc M&A committee which may review strategic M&A opportunities from time to time | Experience • Founder and Chief Executive Officer, Citi Ventures and Citi's first Chief Innovation Officer (2008 – 2016); joined Citi in 2003 as Head of Corporate Strategy and M&A, and was later appointed to Chief Operations and Technology Officer • Chief Financial Officer, The Boeing Company and Lucent Technologies, • General Auditor, General Motors before being named Vice President of Finance at General Motors Europe • Corporate Controller, Unisys • Started her career at Ford Qualifications • Significant leadership experience in finance, technology and innovation at various multinational companies Other Public Boards • Union Pacific, • Marsh and McLennan Companies • E.I. DuPont de Nemours & Company, Dendrite International and Qlik Technologies (formerly) Education • Honorary doctorates, Westminster College and Walsh College • B.A. in Accounting, Walsh College Also... | |
• Member of the Board of Directors of privately held cybersecurity company, Deep Instinct • Board of Trustees, St. John's Health located in Jackson, Wyoming |
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Independent Director since 2020 Age: 52 Class III Director Committees: • Audit (effective August 3, 2020) | Experience • Chief Executive Officer and Managing Director, Wipro, a global company delivering innovation-led strategy, technology, and business process services; (2019 – 2020); CEO and Executive Director (2016 – 2019); Group President and Chief Operating Officer (2015 – 2016) • Headed the BPO division of Tata Consultancy Services Limited, a global leader in IT services, consulting & business solutions (2009 – 2015) Qualifications • Extensive leadership, strategic and business experience in the IT services industry Education • India Institute of Technology, Bombay and National Institute of Technology, Raipur. B.E. Electronics and Communications Also... • Serves on the Board of Directors of Texas Economic Development Corporation, an independently funded and operated 501(c)(3) nonprofit organization responsible for marketing and promoting Texas as a premier business location and World Affairs Council of Dallas Fort Worth, a multifaceted informational organization that educate and engage the local community in national and international affairs. • Former member of the Business Roundtable in Washington, DC, IT Governance Council of World Economic Forum (WEG) Davos, US-India Business Council (USIBC). • Former board member of TCS eServe Limited (Indian – BPO) and TCS eServe America Inc (US – Mortgage processing) and Diligent Ltd (UK – Insurance/Life and Pensions Platform) • BPO CEO of the Year 2010 & 2012 |
Excluding Mr. O'Brien who was not nominated for reelection to the board of directors in accordance with our corporate governance guidelines because he is over the age of 72, our board of directors currently consists of nine members and:
The board of directors brings together a diversity of experience. This includes planning, business development and strategic management of complex, global organizations, knowledge of and significant leadership positions in the technology and application outsourcing industry, financial and accounting expertise, and domain experience.
A total of five directors have joined since 2016, enhancing the board's breadth and depth of experience and diversity. Abidali Neemuchwala joined the board in June 2020. Mr. Neemuchwala was identified within our corporate network and recommended to the Nominating and Corporate Governance Committee for consideration. Our nominating and corporate governance committee conducted a rigorous interview and selection process which included a number of potential director candidates before recommending Mr. Neemuchwala.
Director Key Skills and Experience
The nominating and corporate governance committee of the board of directors is responsible for reviewing with the board of directors from time to time the appropriate qualities, skills and characteristics desired of members of the board of directors in the context of the needs of the business and current make-up of the board of directors. This assessment includes consideration of the following minimum qualifications that the nominating and corporate governance committee believes must be met by all directors:
We do not have a formal diversity policy. However, as part of its evaluation of director candidates and in addition to other standards, the nominating and corporate governance committee may consider whether each candidate, if elected, assists in achieving a diverse mix of board members. Accordingly, the board of directors seeks members from diverse professional backgrounds who combine a broad spectrum of relevant industry and strategic experience and expertise that, in concert, offer us and our stockholders diversity of opinion and insight in the areas most important to us and our corporate mission. In addition, nominees for director are selected to have complementary, rather than overlapping, skill sets. All candidates for director nominee must have time available to devote to the activities of the board of directors. The nominating and corporate governance committee also considers the independence of candidates for director nominee, including the appearance of any conflict in serving as a director. Candidates for director nominee who do not meet these criteria may still be considered for nomination to the board of directors, if the nominating and corporate governance committee believes that the candidate will make an exceptional contribution to us and our stockholders.
Process for Identifying and Evaluating Director Nominees
The board of directors is responsible for selecting its own members. The board of directors delegates the selection and nomination process to the nominating and corporate governance committee, with the expectation that other members of the board of directors, and of management, will be requested to take part in the process as appropriate.
Generally, the nominating and corporate governance committee identifies candidates for director nominees in consultation with management, or other advisors, through the recommendations submitted by stockholders or through such other methods as the nominating and corporate governance committee deems to be helpful to identify candidates. Once candidates have been identified, the nominating and corporate governance committee confirms that the candidates meet all the minimum qualifications for director nominees established by the nominating and corporate governance committee; provided, however, that no incumbent director shall be deemed qualified to be nominated for re-election if such incumbent director has failed to attend at least 75% of all meetings of the board of directors held during such incumbent director's then-current term, except as a result of illness or family emergency. In addition, the board of directors believes that age limits for the Company's directors is in the best interests of the board of directors and the stockholders because it promotes turnover and allows for greater board diversity. Pursuant to our corporate governance guidelines, unless otherwise approved by the board of directors, no director who is 72 years of age or older will be nominated for re-election.
The nominating and corporate governance committee may gather information about director candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that the nominating and corporate governance committee deems to be helpful in the evaluation process. The nominating and corporate governance committee then meets as a group to
discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the board of directors. Based on the results of the evaluation process, the nominating and corporate governance committee recommends candidates for the board of directors' approval as director nominees for election to the board of directors. The nominating and corporate governance committee also recommends candidates to the board of directors for appointment to the committees of the board of directors.
Procedures for Recommendation of Director Nominees by Stockholders
The nominating and corporate governance committee will consider director nominee candidates who are recommended by our stockholders. Stockholders, in submitting recommendations to the nominating and corporate governance committee for director nominee candidates, shall follow the following procedures:
All recommendations for nomination must be in writing and include the following:
All other information relating to the recommended candidate that would be required to be disclosed in solicitations of proxies for the election of directors or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), including the recommended candidate's written consent to being named in the proxy statement as a nominee and restatedto serving as a director if approved by the board of directors and elected.
Nominations must be sent to the attention of our secretary by U.S. mail (or other courier or expedited delivery service) to: Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772.
Our secretary will promptly forward any such nominations to the nominating and corporate governance committee. The nominating and corporate governance committee must receive any such recommendation for nomination not less than 90 days nor more than 120 days prior to the first
anniversary of the preceding year's annual meeting. Once the nominating and corporate governance committee receives the nomination of a candidate and the candidate has complied with the minimum procedural requirements above, such candidacy will be evaluated and a recommendation with respect to such candidate will be delivered to the board of directors.
The Company's by-laws were amended to instituteinclude a majority voting standard under which a director nominee is only elected to the Boardboard of Directorsdirectors if
the votes cast for such nominee's election exceed the votes cast against such nominee's election. Abstentions and broker non-votes are not considered votes "for" or "against" the candidate. Prior to the amendment, our by-laws provided that at each annual meeting of stockholders, director nominees would be elected by a plurality of the votes cast at such meeting.
The majority voting standard applies to all uncontested elections of directors other than the Series A Director, which is elected by the holders of a majority of the Series A Preferred Stock; a director nominee will be elected to the Boardboard if the votes cast for such nominee's election exceed the votes cast against such nominee's election.
An incumbent director who is nominated for election and fails to receive a majority of the votes cast for such director's reelectionre-election would be required to promptly deliver to the Boardboard of Directorsdirectors an irrevocable offer to resign from the Board.board. The Boardboard of Directorsdirectors will consider such director's offer to resign, taking into consideration any such factors that the Boardboard of Directorsdirectors deems relevant in deciding whether to accept such director's resignation. In a contested election, a plurality voting standard will continue to apply to director elections other than the Series A Director whichwho is elected by the holders of a majority of the Series A Preferred Stock. A contested election will generally include any situation in which we receive a notice that a stockholder has nominated a person for election to the Boardboard of Directorsdirectors at a meeting of stockholders.stockholders, as discussed in further detail in "General Information" above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE"FOR"How we are Organized THE NOMINEES LISTED BELOW.
The following table sets forth the nominees to be elected at the annual meeting and continuing directors, the year each such nominee or director was first elected a director, the positions with us currently held by such nominee and director, the year such nominee's or director's current term will expire and such nominee's and director's current class:
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EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the executive officers, director nominees to be elected at the annual meeting, and the directors of the Company, their ages, and the positions currently held by each such person with the Company as of the date of this proxy statement.
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Kris Canekeratne, one of our co-founders, has served as chairman of our board of directors from our inception and chief executive officer from 1996 to 1997 and from 2000 to the present. In 1997, Mr. Canekeratne co-founded eDocs, Inc., a provider of electronic account management and customer care, later acquired by Oracle Corporation. In 1989, Mr. Canekeratne was one of the founding team members of INSCI Corporation, a supplier of digital document repositories and integrated output management products and services and served as its senior vice president from 1992 to 1996. Mr. Canekeratne obtained his B.S. in Computer Science from Syracuse University. As a co-founder and chief executive officer, Mr. Canekeratne provides a critical contribution to our board of directors, reflecting his detailed knowledge of the Company, our employees, our client base, our prospects, the global IT industry and our competitors.
Ranjan Kalia has served as our executive vice president, chief financial officer, treasurer and secretary since October 2012. Prior to his promotion, Mr. Kalia served as our senior vice president, chief financial officer, treasurer and secretary since October 2008 and senior vice president, finance since he joined us in April 2008. Prior to joining us, from 2000 to December 2007, Mr. Kalia served as
Vice President, Finance Emerging Markets and International Development and Chief Financial Officer—Asia Pacific for EMC Corporation. Mr. Kalia received a M.B.A. from Nichols College and an undergraduate degree from Delhi University, India.
Raj Rajgopal has served as our president of Digital Business Strategy (DBS) since August 2017. Prior to his appointment as president of DBS, Mr. Rajgopal served as president of Enterprise Transformation Services (ETS) since March 2016, president since May 2013, executive vice president, business development and client services since October 2008 and served as our general manager of communications, content, and technology, or CCT, Business Unit beginning when he joined us in April 2005. Prior to joining us, from 2003 to April 2005, Mr. Rajgopal served as President, Rajgopal Management Consulting, a consulting company, which provided consulting services to us from time to time from January 2004 to March 2005. From September 1990 to April 2003, Mr. Rajgopal held several positions with Cap Gemini Ernst & Young, a consulting company, including serving most recently as Vice President, Management Consulting. Mr. Rajgopal graduated from the Indian Institute of Technology, with a B.S. in Mechanical Engineering, earned his M.S. in Industrial Engineering and Operations Research and in Computer Science from Virginia Tech and earned his M.B.A. from Massachusetts Institute of Technology (M.I.T.), Sloan School of Management.
Thomas R. Holler has served as our executive vice president and chief strategy officer since May 2011 and, prior to his promotion, served as our executive vice president, chief operating officer since October 2008. He has also previously served as our executive vice president, finance, chief financial officer, treasurer and secretary since 2001. Before joining us, from 1996 to 2001, Mr. Holler was chief financial officer and vice president of finance at Cerulean Technology, Inc., a global supplier of wireless mobile applications and services, which was later acquired by Aether Systems Inc. Mr. Holler earned his B.S. in Business Administration from Wayne State University and his M.B.A. from Northeastern University.
Roger Keith Modder has served as our executive vice president and chief operating officer since May 2011 and, prior to his promotion, served as president, Asia and executive vice president, global services since October 2008. He also has previously served as our executive vice president and managing director, Asian operations since 2001. Mr. Modder also was a member of our board of directors from April 2004 to October 2004. Prior to joining us, Mr. Modder worked for the John Keells Group where he held managing director positions for two IT solutions companies in the John Keells Group. Mr. Modder is a member of the board of directors of the Lanka Software Foundation and Commercial Bank, a large private bank in Sri Lanka and in Bangladesh, and has been a member of the ICT Advisory Committee of the Sri Lanka Export Development Board.
Samir Dhir has served as our president since August 2017 and, prior to his appointment, served as president of our Banking and Financial Services since November 2016. He also has previously served as our executive vice president, chief delivery officer and head of India operations since May 2013, senior vice president, global delivery head and head of India operations since February 2010 and as an executive officer since April 1, 2011. Prior to joining us, Mr. Dhir worked for Wipro Technologies where he managed a delivery organization with over 5,000 IT professionals focused on the technology, media and transportation industries. Mr. Dhir also led Wipro's SAP Practice and managed services business. Prior to his time at Wipro, Mr. Dhir held leadership positions with Avaya Inc. and Lucent Technologies in the United Kingdom. Mr. Dhir received his M.B.A. from the Warwick Business School, UK and holds a B.Tech from the Indian Institute of Technology Roorkee.
Izhar Armony has served as a member of our board of directors since April 2004. Mr. Armony has been a partner at Charles River Ventures, a venture capital investment firm, since 1997. Prior to joining Charles River Ventures, Mr. Armony was with Onyx Interactive, an interactive training company based in Tel Aviv where he served as vice president of marketing and business development. Mr. Armony also served as an officer in the Israeli Army. Mr. Armony received an M.B.A. from the Wharton School of
Business and an M.A. in Cognitive Psychology from the University of Tel Aviv in Israel. Mr. Armony brings to the board of directors his extensive experience in the technology industry, through both company operations and venture capital investment, which makes him particularly well-suited to help the board address the specific types of challenges commonly faced by technology companies.
Rowland T. Moriarty has served as a member of our board of directors since July 2006. Mr. Moriarty is currently chairman of the board of directors of CRA International, Inc., a worldwide economic and business consulting firm. Mr. Moriarty also serves as a member of the board of directors of WEX Inc. (formerly Wright Express Corporation). Mr. Moriarty has been the president and chief executive officer of Cubex Corporation, a privately-held consulting company, since 1981. From 1981 to 1992, Mr. Moriarty was Professor of Business Administration at Harvard Business School. He received a D.B.A. from Harvard University, an M.B.A. from the Wharton School of Business and a B.A. from Rutgers University. Mr. Moriarty brings to the board of directors a thorough understanding of our business, as well as his extensive experience regarding the operation and management of complex global organizations.
William K. O'Brien has served as a director since November 2008. Mr. O'Brien served as chief executive officer of Enterasys Networks from April 2002 until March 2004 and was named executive chairman of the board in 2004. Prior to Enterasys, Mr. O'Brien worked for over thirty three years at PricewaterhouseCoopers, where he served in a number of roles including chief operating officer of the former Coopers & Lybrand, with responsibility for the audit, tax, and financial advisory components of the U.S. business; managing partner for the Boston office; and a global managing partner of PricewaterhouseCoopers. He currently serves on the board of directors of Mercury Systems, Inc., a leading commercial provider of secure processing subsystems for a wide variety of critical defense and intelligence programs. He has previously served on other public company boards. He is a graduate of Bentley College. Mr. O'Brien brings to the board of directors his extensive financial and accounting expertise, as well as his strong leadership and management background.
Al-Noor Ramji has served as a director since February 2011. Mr. Ramji is currently the Group Chief Digital Officer of Prudential plc since January 2016. Prior to joining Prudential plc, Mr. Ramji was chief strategy officer of Calypso Technology, Inc., a global application software provider that sells an integrated suite of trading and risk applications to the capital markets function within banks and other financial institutions, a position he has held since March 2014. From April 2010 to June 2013, Mr. Ramji was the executive vice president and general manager, Misys Banking, at Misys PLC, a mid-size software company that serves the financial services industry. From May 2004 to March 2010, Mr. Ramji served in various executive roles at British Telecom, most recently as chief executive officer for BT Innovate and Design, and chief information officer and chief technology officer of BT Group Plc. Prior to British Telecom, Mr. Ramji was executive vice president, chief information officer and chief e-commerce officer for Qwest Communications. Mr. Ramji has also served as chief information officer at UBS (then called SBC) and, prior to UBS, as global head of operations at Credit Suisse First Boston. Mr. Ramji is a Chartered Financial Analyst and holds a BSc in Electronics from the University of London. He is a multi-year winner of the CIO 100 Award, CIO Insight IT Leader of the Year 2009, and the British Computer Society CIO of the Year. Mr. Ramji brings to the board of directors his extensive industry, domain and operational experience arising from holding management positions in large, complex technology companies, which enables him to provide invaluable insights to the challenges facing IT application outsourcing companies with respect to both the markets and clients being served.
Barry R. Nearhos has served as a director since March 2016. Mr. Nearhos has over 35 years of experience with PricewaterhouseCoopers ("PwC") providing assurance, business advisory and other services to clients across multiple industries, including technology, life sciences, telecom, and manufacturing. Before his retirement from PwC in June 2015, Mr. Nearhos was Market Managing Partner for PwC's Northeast region, responsible for directing the strategy and operations of the firm's
Boston, Hartford and Albany offices. During his tenure, Mr. Nearhos also served as the leader of PwC's Northeast Assurance practice, a position he held from 2005 until 2008, and as a partner in PwC's Assurance practice from 1989 to 2005. He currently serves on the board of directors of Eastern Bank, an independent, mutual bank providing banking, investment and insurance services. Mr. Nearhos is a graduate of Boston College. Mr. Nearhos brings to the board of directors his extensive financial and accounting expertise, as well as his extensive knowledge of technology companies.
Joseph G. Doody has served as a director since February 2017. Mr. Doody has over 40 years of professional experience most recently serving as Vice Chairman of Staples, Inc. where he led Staples' strategic reinvention and had responsibility for strategic planning, business development, and the company's operations in Australia, New Zealand and high-growth markets. Mr. Doody retired from Staples in September 2017. Previously, Mr. Doody was President of North American Commercial for Staples, President of Staples Contract & Commercial, and President of North American Delivery. Before joining Staples in 1998, Mr. Doody served as President of Danka Office Imaging in North America and held various managerial positions with Eastman Kodak Company. Mr. Doody currently serves on the Board of Directors of Casella Waste Systems, Inc., an integrated regional solid waste services company and Paychex, Inc., a leading provider of solutions for payroll, HR, retirement, and insurance services. Mr. Doody holds a B.S. in Economics from State University of New York at Brockport and an M.B.A. from the Simon School of Business, University of Rochester. Mr. Doody brings to the board of directors his extensive business experience regarding the planning, business development and strategic management of complex, global organizations.
Vikram S. Pandit has served as a Series A Director since May 3, 2017. Mr. Pandit has over 35 years of professional experience and since July 1, 2016 has served as Chairman and Chief Executive Officer of The Orogen Group LLC, an operating company he created with the Atairos Group, Inc. that makes control and other strategic investments in financial services companies and related businesses. Previously, Mr. Pandit was Chief Executive Officer and a member of the Board of Directors of Citigroup Inc. from December 2007 until October 2012. In July 2007, when Citigroup acquired Old Lane LLC, a hedge fund of which he was a founding member and Chairman of the members committee since 2006, Mr. Pandit became Chairman and CEO of Citi Alternative Investments and later led Citi's Institutional Clients Group prior to being appointed CEO of Citigroup. Prior to Old Lane, Mr. Pandit served as the Chief Operating Officer of Institutional Securities and Investment Banking businesses, a Division of Morgan Stanley, from September 2000 to March 2005. He served as the President of Institutional Securities at Morgan Stanley from December 2003 to March 2005 and Co-President since September 2000. Mr. Pandit began his career at Morgan Stanley in 1983. Mr. Pandit currently serves as an Independent Director of Bombardier Inc. since 2014. He serves as a Member of Advisory Board of NerdWallet, Inc. since 2015. Mr. Pandit is a member of the Board of Overseers of Columbia Business School and a member of the Board of Visitors of the Columbia School of Engineering and Applied Science. He serves as a Member of the Governing Board of The Indian School of Business. Mr. Pandit previously served as a Director of The Nasdaq OMX Group, Inc. from 2000 to 2003. Mr. Pandit also served as a Director of the Institute of International Finance, Inc. He holds an MS degree and a BS degree in Electrical Engineering from Columbia University and received his PhD in Finance from Columbia. Mr. Pandit brings to the board of directors extensive experience and knowledge in banking and financial services, a proven track record of leadership of complex, global financial organizations, as well as his extensive client network individually and as part of the Orogen Group.
Deborah C. Hopkins is a nominee for election as a Class II director. Ms. Hopkins was founder and Chief Executive Officer of Citi Ventures and as Citigroup's Chief Innovation Officer from 2003 until her retirement at the end of 2016. Prior to joining Citi, she was Chief Financial Officer at the Boeing Company and Lucent Technologies. She also held senior-level positions at General Motors and Unisys Corporation. Ms. Hopkins is a member of the Board of Directors at Union Pacific and Marsh &
McLennan and serves on the Advisory Boards of Riverwood Capital Partners, VentureWell, Marto Capital, and Sales Hero, and an Executive Fellow at the University of California Berkeley's Haas School of Business. She serves on the Board of St. John's Hospital Foundation and is a Trustee at Silicon Couloir, both located in Jackson, Wyoming. She is a former director of Qlik Technologies, E.I. DuPont de Nemours & Company and Dendrite International. Ms. Hopkins holds honorary doctorates from Westminster College and Walsh College and a B.A. in Accounting from Walsh College. Ms. Hopkins brings to the board of directors her extensive experience in the industry as a seasoned business executive.
Our executive officers are elected by the board of directors on an annual basis and serve until their successors have been duly elected and qualified or until their earlier death, resignation or removal.
CORPORATE GOVERNANCE AND BOARD MATTERS
Board Leadership Structure
Mr. Canekeratne, a founder of our company,Company, serves as our chief executive officer ("CEO") and chairman of the board. The board of directors believes that having our executive officer as chairman of the board facilitates the board of directors' decision-making process because Mr. Canekeratne has first-hand knowledge of our operations and the major issues facing us and is most capable of effectively identifying strategic priorities and leading the discussion and execution of strategy. This also enables Mr. Canekeratne to act as the key link between the board of directors and other members of management.
To maintain effective independent oversight, the board of directors reviews the designation of the lead independent director from time to time, recommends any change in the lead independent director to the board of directors and annually appoints a lead independent director, as discussed further in "Executive Sessions of Independent Directors"Directors; Lead Independent Director" below. The board of directors believes the combined role of chief executive officerCEO and chairman, together with a lead independent director having the duties described below, is in the best interest of stockholders because it provides the appropriate balance between strategy development and independent oversight of management.
The board of directors met twelve times during the fiscal year ended March 31, 2020. No directors attended fewer than 87% of the meetings of the board and the committees on which he or she served during the fiscal year ended March 31, 2020. No nominee directors attended fewer than 89% of the meetings of the board and the committees on which he or she served during the fiscal year ended March 31, 2020.
The board of directors has the following standing committees: audit committee; compensation committee; and the nominating and corporate governance committee, each of which operates pursuant to a separate charter that has been approved by the board of directors. Upon approval by the board, in part by recommendation of the nominating and corporate governance committee, our finance committee was dissolved on November 26, 2019 in favor of an ad hoc M&A committee to be used on a case by case basis in case of any material acquisitions. A current copy of each charter is available at the Corporate Governance section of our website at http://www.virtusa.com/investors. Each committee reviews the appropriateness of its charter at least annually. Each committee retains
the authority to engage its own advisors and consultants. The responsibilities of each committee are summarized as follows:
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| Committee | | | Responsibilities | | |||
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| Audit Committee | | | · appointing, approving the compensation of, and assessing the independence and performance of our independent registered public accounting firm; | | |||
| Meetings held in fiscal 2020: Eight Meetings | | | · approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm; | | |||
| | | · reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures; | | ||||
| | | · reviewing the Company's application of financial reporting and accounting standards and principles, significant changes in such standards or principles or in their application and the key accounting decisions affecting the Company's financial statements, including alternatives to, and the rationale for, the decisions made; | | ||||
| | | · overseeing the audit of the Company's financial statements and effectiveness of the Company's system of internal controls over financial reporting; | | ||||
| | | · approving the Internal Audit department charter and annual audit and staffing plans; | | ||||
| | | · monitoring Internal Audit's performance, results of internal audits and management's responses thereto; | | ||||
| | | · review and approve or ratify any transaction between the Company and a related person, which is required to be disclosed under the rules of the Exchange Act; | | ||||
| | | · establishing policies and procedures for the receipt, retention and treatment of complaints on accounting, internal accounting controls or auditing matters, as well as for confidential, anonymous submissions by Company employees or other parties of concerns regarding accounting or auditing matters; and | | ||||
| | | · preparing the audit committee report required by SEC rules to be included in our annual proxy statement. | | ||||
| | | | | | | | |
| Compensation Committee | | | · annually reviewing and approving corporate goals and objectives relevant to compensation of our CEO and other executive officers; | | |||
| Meetings held in fiscal 2020: Six Meetings | | | · evaluating the performance of our CEO and other executive officers in light of such corporate goals and objectives and determining the compensation of our CEO and other executive officers; | | |||
| | | · overseeing and administering our equity plans and similar plans; | | ||||
| | | · reviewing and making recommendations to the board with respect to director compensation; | | ||||
| | | · retaining and approving the compensation of any compensation advisors; and | | ||||
| | | · reviewing and approving the retention or termination of, and obtaining the advice of, any consulting firm or outside advisor engaged to assist the committee in the evaluation of compensation matters. | | ||||
| | | | | | | | |
| | | | | | | | |
| Committee | | | Responsibilities | | |||
| | | | | | | | |
| Nominating and Corporate Governance Committee | | | · developing and recommending to the board criteria for board and committee membership; | | |||
| | | · establishing procedures for identifying and evaluating director candidates including nominees recommended by stockholders; | | ||||
| | | · identifying individuals qualified to become board members; | | ||||
| Meetings held in fiscal 2020: Two Meetings | | | · recommending to the board the persons to be nominated for election as directors and to each of the board's committees; | | |||
| | | · developing and recommending to the board a code of business conduct and ethics and a set of corporate governance guidelines; and | | ||||
| | | · overseeing the evaluation of the board and management. | | ||||
| | | | | | | | |
| Finance Committee (April 1 through November 26, 2019) | | | · advising the board and the Company's management regarding potential corporate transactions, including strategic investments, mergers, acquisitions and divestitures, the Company's debt or equity financings, credit arrangements, investments, capital structure and capital policies. | | |||
| Meetings held in fiscal 2020: Two Meetings | | | | ||||
| | | | | | | | |
Compensation Committee Interlocks and Insider Participation
During our fiscal year ended March 31, 2020, Messrs. O'Brien, Ramji, Doody and Pandit served as members of the compensation committee. No member of the compensation committee was an employee or former employee of us or any of our subsidiaries, or had any relationship with us requiring disclosure herein.
During our fiscal year ended March 31, 2020, no executive officer of the Company served as: (i) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our compensation committee; (ii) a director of another entity, one of whose executive officers served on our compensation committee; or (iii) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of the Company.
Compensation Committee Independence
The compensation committee of the board of directors, which is comprised solely of independent directors within the meaning of applicable rules of The NASDAQ Stock Market, Inc., or Nasdaq, and non-employee directors within the meaning of Rule 16b-3 under the Exchange Act, is responsible for developing executive compensation policies and advising the board of directors with respect to such policies and administering the Company's cash incentive, stock option and equity incentive plans. The compensation committee sets performance goals and objectives for the CEO and the other executive officers, evaluates their performance with respect to those goals and sets their compensation based upon the evaluation of their performance. In evaluating executive officer pay, the compensation committee may retain the services of a compensation consultant and consider recommendations from the CEO with respect to goals and compensation of the other executive officers. The compensation committee assesses the information it receives in accordance with its business judgment. The compensation committee also periodically reviews director compensation. It has been our practice that decisions with respect to executive and director
compensation are approved by the compensation committee and generally are also recommended to the full board (but only to the independent, outside directors thereof) for approval and/or ratification. Messrs. O'Brien, Ramji, Pandit and Doody are the current members of the compensation committee.
How we Govern and are Governed
Independence of Members of the Board of Directors
The board of directors has determined that Messrs. Armony, Moriarty, O'Brien, Ramji, Nearhos, Doody, Neemuchwala and Pandit, and Ms. Hopkins are independent within the meaning of the director independence standards of The NASDAQ Stock Market, Inc., or NASDAQ,Nasdaq and the Securities and Exchange Commission,SEC, including Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Furthermore, the board of directors has determined that each member of each of the committees of the board of directors is independent within the meaning of the director independence standards of NASDAQNasdaq and the Securities and Exchange Commission.SEC.
Executive Sessions of Independent Directors; Lead independentIndependent Director
Executive sessions of the independent directors are generally held immediately after each regularly scheduled in-person meeting of the board of directors. Executive sessions doIt is the policy of the board of directors that at such times, as the chairman is not include any of our non-independentan independent director, it is appropriate and necessary for the independent directors and are chaired byto designate a lead independent director who is appointed annually bywould be expected to serve in such capacity for several years. Our nominating and corporate governance committee reviews the designation of the lead independent director from time to time and recommends any change in the lead independent director it deems appropriate to the board of directors from our independent directors.
Mr. Rowland Moriarty currently serves as the lead independent director. In this role, Mr. Moriarty serves as chairperson of the independent director sessions and assists the board in assuring effective corporate governance. The lead independent director proactively spends considerable time with the chief executive officer and other executive officers, to understand the Company's vision and strategy, and works to focus the board of directors on areas aligned with the Company's vision and strategy. In addition to acting as the chairperson of the independent director sessions, the lead independent director also assists the board in assuring effective corporate governance. The lead independent director's specific duties include:
The independent directors of the board of directors met in executive session four (4) times in our fiscal year ended March 31, 2018.2020.
Board of Directors' Role in Risk Oversight by the Board of DirectorsManagement
The board of directors' role in overseeing the management of the Company's risks is primarily accomplished through management's reporting processes, including receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic and reputational risk and assessments and prioritization of such risks. Our board of directors provides oversight of the recommendations of management and associated timeline to identify and assess severity of enterprise risks, the prioritization of such risks and development of any action plans to mitigate such risks. The standing committees of our board of directors, pursuant to the respective charters, also represent a key element of enterprise risk management. The nominating and corporate governance committee of our board of directors identifies and oversees risks and issues associated with director independence, related party transactions and the implementation of corporate governance policies and our code of ethics. Our audit committee focuses on risks and issues related to accounting, internal controls, financial and tax reporting and cyber security issues. The audit committee also monitors compliance with ethical standards, including conflicts of interest, related party transactions and adherence to standards of ethical conduct. The compensation
committee identifies and oversees risks and issues associated with our executive compensation policies and practices. Oversight of particular risks may also be delegated to other committees of the Board, such as the finance committee, as appropriate, based upon the nature of any particular risk. All of theseThese committees are ultimately subject to oversight and direction of the full board of directors and report directly to the board of directors on these matters.
Policies Governing Director Nominations
Director Qualifications
The nominating and corporate governance committee of the board of directors is responsible for reviewing with the board of directors from time to time the appropriate qualities, skills and characteristics desired of members of the board of directors in the context of the needs of the business and current make-up of the board of directors. This assessment includes consideration of the following minimum qualifications that the nominating and corporate governance committee believes must be met by all directors:
We do not have a formal diversity policy. However, as part of its evaluation of director candidates and in addition to other standards, the nominating and corporate governance committee may deem appropriate from time to time for the overall structure and composition of the board of directors, the nominating and corporate governance committee considers whether each candidate, if elected, assists in achieving a mix of board members that represent a diversity of background and experience. Accordingly, the board of directors seeks members from diverse professional backgrounds who combine a broad spectrum of relevant industry and strategic experience and expertise that, in concert, offer us and our stockholders diversity of opinion and insight in the areas most important to us and our corporate mission. In addition, nominees for director are selected to have complementary, rather than overlapping, skill sets. All candidates for director nominee must have time available to devote to the activities of the board of directors. The nominating and corporate governance committee also considers the independence of candidates for director nominee, including the appearance of any conflict in serving as a director. Candidates for director nominee who do not meet all of these criteria may still be considered for nomination to the board of directors, if the nominating and corporate governance committee believes that the candidate will make an exceptional contribution to us and our stockholders.
Process for Identifying and Evaluating Director Nominees
The board of directors is responsible for selecting its own members. The board of directors delegates the selection and nomination process to the nominating and corporate governance committee, with the expectation that other members of the board of directors, and of management, will be requested to take part in the process as appropriate.
Generally, the nominating and corporate governance committee identifies candidates for director nominees in consultation with management, or other advisors, through the recommendations submitted by stockholders or through such other methods as the nominating and corporate governance committee deems to be helpful to identify candidates. Once candidates have been identified, the nominating and corporate governance committee confirms that the candidates meet all of the minimum qualifications for director nominees established by the nominating and corporate governance committee. The nominating and corporate governance committee may gather information about the candidates through interviews, detailed questionnaires, comprehensive background checks or any other means that the nominating and corporate governance committee deems to be helpful in the evaluation process. The nominating and corporate governance committee then meets as a group to discuss and evaluate the qualities and skills of each candidate, both on an individual basis and taking into account the overall composition and needs of the board of directors. Based on the results of the evaluation process, the nominating and corporate governance committee recommends candidates for the board of directors' approval as director nominees for election to the board of directors. The nominating and corporate governance committee also recommends candidates to the board of directors for appointment to the committees of the board of directors.
Procedures for Recommendation of Director Nominees by Stockholders
The nominating and corporate governance committee will consider director nominee candidates who are recommended by our stockholders. Stockholders, in submitting recommendations to the nominating and corporate governance committee for director nominee candidates, shall follow the following procedures:
All recommendations for nomination must be in writing and include the following:
Nominations must be sent to the attention of our secretary by U.S. mail (including courier or expedited delivery service) to:
Our secretary will promptly forward any such nominations to the nominating and corporate governance committee. The nominating and corporate governance committee must receive any such recommendation for nomination not later than the close of business on the 120th day nor earlier than
the close of business on the 150th day prior to the first anniversary of the date of the proxy statement delivered to stockholders in connection with the preceding year's annual meeting. Once the nominating and corporate governance committee receives the nomination of a candidate and the candidate has complied with the minimum procedural requirements above, such candidacy will be evaluated and a recommendation with respect to such candidate will be delivered to the board of directors.
Policy Governing Stockholder Communications with the Board of Directors
The board of directors provides to every stockholder the ability to communicate with the board of directors as a whole and with individual directors on the board of directors through an established process for stockholder communication.
Any of our stockholders who wish to communicate directly with the board of directors or an individual member of the board of directors may do so by sending such communication by U.S. Mail (including courier or expedited delivery service) addressed to the chairman of the board, as a representative of the entire board of directors, or to the individual director or directors, in each case, c/o Secretary, Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772.
We will forward any such stockholder communication to the chairman of the board of directors, as a representative of the board of directors, or to the director to whom the communication is addressed, on a periodic basis.
Policy Governing Director Attendance at Annual MeetingsMeeting of Stockholders
Our policy is to encourage all of our directors to be present at our annual stockholder meetings and six of our eight members who were directors at the time of the annual meeting of stockholders held in 2017,2019, attended the meeting (in person or via conference call).
BoardHow you can Communicate with us
We seek input from a wide array of Directors' Evaluation Programsources to inform our work. Our stockholders are an important source of information and feedback for us; we recognize that they have a uniquely at-risk financial interest in providing valuable input and responses.
We therefore provide a variety of means to seek or receive stockholder input. In years in which we can hold in-person annual meetings, we welcome stockholders' attendance in person. We listen to stockholders when we attend industry and investor events on a regular basis. We provide a hotline that any person can use to report important information. We speak with stockholders at their request when that is appropriate and possible and we undertake extensive engagement programs to reach our large and involved stockholders, including those that may not interact as frequently with our investor relations professionals.
We also provide every stockholder a more formal ability to communicate with us, the board of directors, as a whole or with individual directors or committee chairs.
Any stockholder wishing to use this process may do so by sending their communication by US Mail (including courier or expedited delivery services) addressed to our board chair, as a representative of the entire board of directors, or to an individual director or directors, in each case, c/o Secretary, Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772. We will forward any such communication to the director or group of directors to whom the communication is addressed, on a periodic basis, except for advertisements, solicitations, employment requests or similarly inappropriate material.
The board of directors performs annual self-evaluations of its composition and performance, including evaluations of its standing committees and individual evaluations for each director. In addition, each of the standing committees of the board of directors conducts its own self-evaluation, which is reported to the board of directors. The board of directors retains the authority to engage its own advisors and consultants.
Stock Ownership GuidelinesHow We Are Paid
We have adopted equity ownership guidelines for our executive officers and directors to further align their interests with those of our stockholders. Under the guidelines, executives andOur non-employee directors are expectedcompensated under our fourth amended and restated non-employee director compensation policy, as amended, or our non-employee director compensation policy. It is designed to hold commonprovide competitive compensation to attract, motivate and retain highly qualified non-employee directors in alignment with stockholder interests.
Under our non-employee director compensation policy, each director receives an annual cash retainer and an annual equity grant of restricted stock inunits. Additional annual cash compensation is paid to the lead independent director and chairperson of each committee due to the additional time, effort and expertise required for these roles. In addition, new non-employee directors receive an amount equal to a multipleinitial equity award of their base salary as determined by their position or annual board retainer as applicable. These equity ownership guidelinesrestricted stock units upon joining the board. Directors who are discussed further elsewhere in this proxy statement in the section entitled "Compensation Analysis and Discussion."
Hedging and Pledging Policies
We have adopted insider trading policies and procedures applicable to all ofalso our employees includingreceive no additional compensation for serving on the board of directors. All cash payments are made on a quarterly basis.
Upon recommendation of the compensation committee, our named executive officers. Our insider trading policies do not permit any insiders, includingnon-employee directors who are independent within the named executive officersmeaning of the director independence standards of NASDAQ (the "Independent Board") approved a fourth amended and board members, to "hedge" ownership of Virtusa securities, or otherwise engage in short sales or purchases or sales of any other type of derivative securities with respect to Virtusa securities. In addition, no insider, including our named executive officer and board members, may pledge Virtusa securities. Under our policy, we designate all executive officers and board members as "insiders," as well as any other employee who is designated as an insider by the Generalrestated non-employee director compensation
Counselpolicy, effective December 5, 2017. For fiscal 2020, no further change were made to the director fees as set forth below:
| | | | | | | | |
Fiscal Year 2020 Director Compensation | | | | |||||
| | | | | | | | |
Annual Cash Retainer Fee | $60,000 | |||||||
| | | | | | | | |
| Additional Cash Retainer Fees for the following positions: | | | | ||||
| | | | | | | | |
· Lead Independent Director | $30,000 | |||||||
| | | | | | | | |
| · Chairman of the Audit Committee | | $22,000 | | ||||
| | | | | | | | |
· Chairman of the Compensation Committee | $15,000 | |||||||
| | | | | | | | |
| · Chairman of the Nominating and Corporate Governance Committee | | $10,000 | | ||||
| | | | | | | | |
· Chairman of the Finance Committee (1) | $10,000 | |||||||
| | | | | | | | |
| Dollar Value of Annual Equity Grant (2) | | $140,000 | | ||||
| | | | | | | | |
Dollar Value of Initial Equity Grant (2) | $50,000 | |||||||
| | | | | | | | |
In May 2015, we adoptedEach restricted stock unit award granted to a clawbacknon-employee director under the non-employee director compensation policy that provides thatis made at the board of directors has discretiondirectors' meeting immediately following our annual meeting. These restricted stock units vest in three equal installments annually at a rate of 33.33%, with the first installment vesting on the September 1 following the board meeting giving rise to clawback the amount of excess proceeds received by, or reduce the amount of future compensation payable to, an executivedirectors' annual equity award grant, and remaining restricted stock units vesting on each of the Company for excess proceeds from incentivenext two anniversaries of September 1. The vesting of all equity awards granted to our non-employee directors will also accelerate by 12 months in the event of a change in control.
Under the non-employee director compensation payable to, or received by, such executive due to misconduct by such executive that resultedpolicy, the one-time, initial restricted stock unit award vests in three equal installments annually at a material restatementrate of financial statements. The clawback period is the three-year period preceding the filing of any such restated financial statements33.33%, with the Securitiesfirst vesting date on the anniversary of the first day of the third month of the quarter following the director's appointment to the board of directors. See also changes to our director compensation policy for the fiscal year ending March 31, 2021 in section "Cash and Exchange Commission ("SEC").Equity Compensation for Non-Employee Directors for Fiscal 2021" below.
Code of EthicsExpense Reimbursement
We have adopted a "code of ethics," as defined by regulations promulgated under the Securities Act of 1933, as amended, and the Exchange Act, that applies toreimburse all non-employee directors for their reasonable out-of-pocket expenses incurred in attending meetings of our board of directors and employees worldwide, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. A current copyany committees thereof.
The following table sets forth a summary of the Codecompensation earned by or paid to our non-employee directors for our fiscal year ended March 31, 2020:
Name | Fees Earned or Paid in Cash ($) (1) | Stock Awards ($) (2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Izhar Armony | 60,000 | | 139,972 | — | — | — | — | 199,972 | ||||||||
Rowland T. Moriarty (a) | 100,000 | 139,972 | — | — | — | — | 239,972 | |||||||||
William K. O'Brien (b) | 75,000 | | 139,972 | — | �� | — | — | — | 214,972 | |||||||
Al-Noor Ramji | 60,000 | 139,972 | — | — | — | — | 199,972 | |||||||||
Barry R. Nearhos (c) | 82,000 | | 139,972 | — | — | — | — | 221,972 | ||||||||
Joseph G. Doody | 60,000 | 139,972 | — | — | — | — | 199,972 | |||||||||
Vikram S. Pandit (d) | 66,549 | | 139,972 | — | — | — | — | 206,521 | ||||||||
Deborah C. Hopkins | 60,000 | 139,972 | — | — | — | — | 199,972 |
The non-employee members of our website at http://www.virtusa.com/investors. A copyboard of directors who held such positions as of March 31, 2020 held the Codefollowing aggregate number of Business Conductshares underlying unexercised options and Ethics may also be obtained, freeunvested restricted stock units as of charge, from us upon a request directed to:such date:
Name | Number of Securities Underlying Unexercised Options | Number of Unvested Restricted Stock Units | ||
---|---|---|---|---|
Izhar Armony | 20,092 | 6,235 | ||
Rowland T. Moriarty | 2,665 | 6,235 | ||
William K. O'Brien | 20,092 | 6,235 | ||
Al-Noor Ramji | 22,921 | 6,235 | ||
Barry R. Nearhos | — | 6,235 | ||
Joseph G. Doody | — | 6,235 | ||
Vikram S. Pandit | — | 6,781 | ||
Deborah C. Hopkins | — | 5,791 |
The following table shows the grant of restricted stock units made to the non-employee members of our board of directors during the fiscal year ended March 31, 2020:
Name | Grant Date | Number of Shares Underlying Restricted Stock Units | ||
---|---|---|---|---|
Izhar Armony | 3,558 | |||
Rowland T. Moriarty | 09/17/2019 | 3,558 | ||
William K. O'Brien | 09/17/2019 | 3,558 | ||
Al-Noor Ramji | 09/17/2019 | 3,558 | ||
Barry R. Nearhos | 09/17/2019 | 3,558 | ||
Joseph G. Doody | 09/17/2019 | 3,558 | ||
Vikram S. Pandit | 09/17/2019 | 3,558 | ||
Deborah C. Hopkins | 09/17/2019 | 3,558 |
We intend to disclose any amendment to or waiverCash and Equity Compensation for Non-Employee Directors for Fiscal 2021
The compensation committee, with the assistance of its independent compensation consultant, performed a provisionreview of the CodeCompany's compensation for non-employee directors. Based on market data, including data for our peer group, on June 18, 2020, the compensation committee recommended, and the Independent Board approved, an increase to the one-time, initial equity grant value (to $100,000 from $50,000). These restricted stock units will vest over three years in three equal installments at a rate of Business Conduct33.33% per year, with the first vesting date to occur on the one-year anniversary of the first day of the month in which such director is appointed to the board. Additionally, due to the COVID-19 pandemic and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such informationimpact on our website availablebusiness and our clients, effective April 1, 2020, our board of directors approved a temporary reduction of 20% of the annual cash retainer payable to all our independent members of the board of directors (from $60,000 to $48,000) for the fiscal year ending March 31, 2021.
Each non-employee director is required to own our common stock with a market value of at http://www.virtusa.com/investors and/or inleast four times their current annual board cash retainer fee (excluding chairperson and lead independent director fees). Non-employee directors are expected to meet their ownership guidelines within three years of becoming subject to the guidelines. The directors' compliance with these guidelines was assessed by our public filings with the Securities and Exchange Commission.
For more corporate governance information, you are invited to access the Corporate Governance sectioncompensation committee. All members of our website available at http://www.virtusa.com/investors.board of directors have met, and the majority have exceeded, these guidelines.
THE BOARD OF DIRECTORS AND ITS COMMITTEESOUR COMPANY
Board of Directors
TheVirtusa is a team of over 22,000 employees working in our offices around the globe as well as in our delivery centers in the U.S., India, Sri Lanka, Hungary, Singapore and Malaysia. We have set forth biographies of our executive leadership team below and our board of directors met eleven (11) times during the fiscal year ended March 31, 2018. Eachabove.
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Chairman of the board and Chief Executive Officer of the Company Age: 54 | Experience • Co-Founder, Virtusa, Chairman (1996 – present), Chief Executive Officer (1996 – 1997; 2000 – present) • Co-founded eDocs, Inc., a provider of electronic account management and customer care, later acquired by Oracle Corporation (1997) • One of the founding team members of INSCI Corporation, a supplier of digital document repositories and integrated output management products and services (1989 – 1996); Senior Vice President (1992 – 1996) Education • B.S. in Computer Science, Syracuse University |
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Executive Vice President, Chief Financial Officer, Treasurer and Secretary Age: 59 | Experience • Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the Company (October 2012 – present); Senior Vice President, Chief Financial Officer, Treasurer and Secretary (October 2008 – October 2012); Senior Vice President, Finance (April 2008 – October 2008) • Vice President, Finance Emerging Markets and International Development and Chief Financial Officer – Asia Pacific for EMC Corporation (2000 – December 2007) Education • M.B.A, Nichols College • Undergraduate degree, Delhi University, India |
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President and Head of Americas Age: 49 | Experience • President and Head of Americas of the Company (April 2019 – present); President (August 2017 – April 2019); President of our Banking and Financial Services (November 2016 – August 2017); Executive Vice President, Chief Delivery Officer and Head of India operations (May 2013 – November 2016); Senior Vice President, Global Delivery Head and Head of India operations (February 2010 – May 2013); Executive Officer since April 1, 2011 • Previously, worked for Wipro Technologies where he managed a delivery organization with over 5,000 IT professionals focused on the technology, media and transportation industries; also led Wipro's SAP Practice and managed services business • Held leadership positions with Avaya Inc. and Lucent Technologies in the United Kingdom Education • M.B.A., Warwick Business School, UK • B.Tech, Indian Institute of Technology Roorkee |
Table of the directors attended at least 75%Contents
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Executive Vice President and Chief Strategy Officer Age: 57 | Experience • Executive Vice President and Chief Strategy Officer (May 2011 – present); Executive Vice President, Chief Operating Officer (October 2008 – May 2011); Executive Vice President, Finance, Chief Financial Officer, Treasurer and Secretary (2001 – October 2008) • Chief Financial Officer and Vice President of Finance, Cerulean Technology, Inc., a global supplier of wireless mobile applications and services, which was later acquired by Aether Systems Inc. (1996 – 2001) Education • B.S. in Business Administration, Wayne State University • M.B.A., Northeastern University |
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Executive Vice President, Chief Operating Officer & Managing Director, EMEA Age: 56 | Experience • Executive Vice President, Chief Operating Officer & Managing Director, EMEA (April 2019 – present); Executive Vice President and Chief Operating Officer (May 2011 – April 2019); President, Asia and Executive Vice President, Global Services (October 2008 – May 2011); Executive Vice President and Managing Director, Asian operations (2001 – October 2008); member of our board of directors (April 2004 – October 2004) • Worked for the John Keells Group where he held managing director positions for two IT solutions companies in the John Keells Group • Mr. Modder is a member of the board of directors of the Lanka Software Foundation and Commercial Bank, a large private bank in Sri Lanka and in Bangladesh, and has been a member of the ICT Advisory Committee of the Sri Lanka Export Development Board Other Positions • Member of the board of directors of the Lanka Software Foundation and Commercial Bank, a large private bank in Sri Lanka and in Bangladesh, and has been a member of the ICT Advisory Committee of the Sri Lanka Export Development Board |
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Executive Vice President and Chief People Officer Age: 45 | Experience • Executive Vice President and Chief People Officer (August 2016 – present); Chief People Officer, Global Head of Human Resources (April 2016 – August 2016); Senior Vice President, Global Head of Human Resources (October 2013 – March 2016); Vice President, Global Head of Human Resources (May 2012 – October 2013); Senior Director of U.S. and Europe Human Resources (June 2010 – May 2012); Executive Officer since August 31, 2016 • Vice President, Polaris Software Lab limited (1996 – 2010) Education • B.E. in Computer Science, Madras University with global certifications in Human Resources |
The audit committee of the board of directors currently consists of Messrs. Nearhos, O'Brien and Doody, each of whomIn a sector like ours where it is an independent director withineveryday phenomenon to hear our employees talk about—and work on—AI model zoos and data lakes, cloud native middleware, and microservice frameworks, it is not just important—it is essential—that we find, enable and retain the meaning of the director independence standards of NASDAQbest talent globally. Our focus on our people is thus as precise, intense, immediate and the Securities and Exchange Commission, or SEC, including Rule 10A-3(b)(1) under the Exchange Act. Mr. Nearhos serveseffective as the chairman of the audit committee. In addition, the board of directors has determined that each of Mr. Nearhos, Mr. O'Brien and Mr. Doody are each financially literate and that Mr. Nearhos and Mr. O'Brien each qualifies as an "audit committee financial expert" under the rules of the SEC. Stockholders should understand that this designation is our focus on digital capabilities. To give just a disclosure requirement of the SEC related to Mr. Nearhos and O'Brien's experience and understanding with respect to certain accounting and auditing matters. The designation does not impose upon Mr. Nearhos or Mr. O'Brien any duties, obligations or liability that are greater than are generally imposed on him as a member of the audit committee and the board of directors, and his designation as an audit committee financial expert pursuant to this SEC requirement does not affect the duties, obligations or liability of any other member of the audit committee or the board of directors.
The audit committee met ten (10) times during the fiscal year ended March 31, 2018. The audit committee operates under a written charter adopted by the board of directors, a current copy of which is available at the Corporate Governance section of our website at http://www.virtusa.com/investors.
As described more fully in its charter, the audit committee oversees our accounting and financial reporting processes, internal controls and audit functions. In fulfilling its role, the audit committee responsibilities include:few examples:
Compensation CommitteeSustainability
The compensation committeeInvestors know that loss avoidance is one of the boardkeys to protecting portfolio returns over time; good companies know this too. Virtusa's sustainability programs cover management of directors currently consists of Messrs. O'Brien, Ramjielements such as health and Doody, each of whomsafety, environment exposure, business continuity, information security, labor standards, diversity, anti-bribery and corruption, social impact, and reputation management. Our sustainability program is backed by relevant certifications, policies, and employee training for these core areas. This includes certification for OHSAS 18001:2007 (health and safety), ISO 14001:2015 (environmental management), ISO 22301:2012 (business continuity), and ISO 27001:2013 (information security).
Our sustainability efforts are recognized by the leading Environmental, Social and Governance ("ESG") scorers. MSCI has steadily improved our grades so that we are now an independent director withinA with exceptionally high marks for human capital management. ISS gave us their top score—a one—for both our environmental and our social disclosures for FY2019. Our good CDP scores are reported in the meaning ofnext section.
Our commitment to reducing our environmental footprint and adhering to all environmental regulations is set out in the director independence standards of NASDAQ, a non-employee director as defined in Rule 16b-3 of the Exchange Act,following policies, which we review annually: Environment, Health and an outside director pursuant to Section 162(m) of the Internal Revenue Code. Mr. O'Brien serves as the chairman of the compensation committee.Safety Policy, Energy Policy, Climate Change Policy, Waste Policy, and Water Policy.
The compensation committee's responsibilities include:
The compensation committee met seven (7) times duringIn FY2019 and FY2020 we also sponsored the fiscal year ended March 31, 2018. The compensation committee operates under a written charter adoptedCarbon Zero Challenge, which is hosted jointly by the boardIndian Institute of directors, a current copy of which is available at the Corporate Governance section of our website at http://www.virtusa.com/investors.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee of the board of directors currently consists of Messrs. Moriarty, Armony and Pandit, each of whom is an independent director within the meaning of the director independence standards of NASDAQ. Mr. Moriarty serves as the chairman of the nominating and corporate governance committee. The nominating and corporate governance committee's responsibilities include:
The nominating and corporate governance committee met two (2) times during the fiscal year ended March 31, 2018. The nominating and corporate governance committee operates under a written charter adopted by the board of directors, a current copy of which is available at the Corporate Governance section of our website at http://www.virtusa.com/investors.
Finance Committee
The finance committee of the board of directors currently consists of Messrs. Pandit, Armony and Nearhos. Mr. Pandit serves as the chairman of the finance committee. The finance committee's responsibilities include advising the BoardTechnology Madras (IIT Madras) and the Company's management regarding potential corporate transactions, including strategic investments, mergers, acquisitionsIndustrial Waste Management Association (IWMA). The challenge aims to identify innovative solutions for energy and divestitures,environmental problems in India. We also continued our partnership with Biodiversity Sri Lanka (BSL) on the Company's debt or equity financings, credit arrangements, investments, capital structure and capital policies.
The finance committee met two (2) times during the fiscal year ended March 31, 2018. The finance committee operates under a written charter adopted by the boardKanneliya Reforestation Program, which aims to restore ten hectares of directors, a current copy of which is available at the Corporate Governance section of our website at http://www.virtusa.com/investors.
Compensation Committee Interlocks and Insider Participation
During our fiscal year ended March 31, 2018, Messrs. O'Brien, Ramji and Doody served as members of the compensation committee. No member of the compensation committee was an employee or former employee of us or any of our subsidiaries, or had any relationship with us requiring disclosure herein.
During our fiscal year ended March 31, 2018, no executive officer of the Company served as: (i) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our compensation committee; (ii) a director of another entity, one of whose executive officers served on our compensation committee; or (iii) a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director of the Company.degraded forest.
We use our Supplier Guidelines and Supplier Sustainability Survey to help us expand the reach of our sustainability programs. In addition, we seek to engage with our supply chain companies to ensure that they follow internationally accepted standards on human rights, labor, the environment, and business ethics.
Detailed information about our sustainability program is available in our sustainability report, which also forms our communication on progress to the United Nations Global Compact (UNGC). The report can be accessed at: https://www.unglobalcompact.org/participation/report/cop/create-and-submit/active/437452.
Proposal 2—Ratification of Appointment of Independent Registered Public Accountants
The audit committee of the board of directors has retained the firm of KPMG LLP, independent registered public accountants, to serve as independent registered public accountants for our 2021 fiscal year. KPMG LLP has served as our independent registered public accounting firm since 2004. The audit committee reviewed their performance and selected KPMG LLP for our 2021 fiscal year. As a matter of good corporate governance, the audit committee has determined to submit its selection to stockholders for ratification. If the selection of independent registered public accountants is ratified, the audit committee, at its discretion, may select a different independent registered public accounting firm at any time during the fiscal year if it determines that such a change would be in the best interests of us and our stockholders.
Representatives of KPMG LLP attended all eight of the meetings of the audit committee in our fiscal year ended March 31, 2020. We expect that a representative of KPMG LLP will attend the annual meeting, and the representative will have an opportunity to make a statement if he or she so desires. The representative will also be available to respond to appropriate questions from stockholders.
The following table shows the aggregate fees for professional services rendered by KPMG LLP to us during the fiscal years ended March 31, 2020 and 2019:
| | 2020 | | 2019 |
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Audit Fees | | $ 2,171,000 | | $ 2,430,000 |
Audit-Related Fees | | 183,512 | | 30,108 |
Tax Fees | | 15,272 | | 256,010 |
All Other Fees | | 15,573 | | 59,913 |
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Total | | $ 2,385,357 | | $ 2,776,031 |
Audit fees
Audit fees for both years consist of fees for professional services associated with the audit of our annual consolidated financial statements, the review of the consolidated interim financial statements and the audit of our internal control over financial reporting. These fees also include fees for services that are normally provided in connection with statutory audit and regulatory filings.
Audit-related fees
Fees for audit-related services consist of fees for statutory audit certification services and other services that were reasonably related to the performance of audits or reviews of our financial statements and are not reported above under "Audit fees." The increase in audit-related services from fiscal year 2019 to 2020 was primarily due to financial due diligence services in fiscal 2020.
Tax fees
Tax fees primarily consists of international tax consulting services. The audit committee has determined that the provision of these services to us by KPMG is compatible with maintaining their independence. The decrease in tax fees from fiscal year 2019 to 2020 was attributable to consulting services related to the Tax Cuts and Jobs Act provided in fiscal year 2019.
All other fees
All other fees relate to permissible non-audit services, and primarily include Capability Maturity Model Integration services.
All of the foregoing fees were pre-approved by the audit committee.
Audit committee pre-approval process of fees
The audit committee of the board of directors has implemented procedures under our audit committee pre-approval policy for audit and non-audit services, or the Pre-Approval Policy, to ensure that all audit and permitted non-audit services to be provided to us have been pre-approved by the audit committee. Specifically, the audit committee pre-approves the use of KPMG LLP for specific audit and non-audit services, within approved monetary limits. If a proposed service has not been pre-approved pursuant to the Pre-Approval Policy, then it must be specifically pre-approved by the audit committee before it may be provided by KPMG LLP. Any pre-approved services exceeding the pre-approved monetary limits require specific approval by the audit committee. For additional information concerning the audit committee and its activities with KPMG LLP, see "Report of the Audit Committee of the Board of Directors".
For Proposal 2, the ratification of the appointment of KPMG LLP as the Company's independent registered public accountants for the current fiscal year, an affirmative vote of a majority of the shares present, virtually or represented by proxy, and voting on such matter is required for approval.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE RATIFICATION OF KPMG LLP
AS VIRTUSA CORPORATION'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
FOR FISCAL YEAR ENDING MARCH 31, 2021.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
No portion of this audit committee report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Act, or the Exchange Act, of 1934, as amended, through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be "soliciting material" or filed under either the Securities Act or the Exchange Act.
The Virtusa Corporation (the "Company") board of directors appointed us as an audit committee to oversee the Company's accounting and financial reporting processes on behalf of the board of directors, including review of the Company's consolidated financial statements, its system of internal controls and the independence and performance of its internal auditor and independent registered public accounting firm. As an audit committee, we select the independent registered public accounting firm. The audit committee has robust policies and procedures in place for selecting and monitoring the independent registered public accounting firm and its independence, including: an annual evaluation process; review of auditor and team member qualifications; rotation of lead engagement and concurring partners every five years; hiring restrictions for auditor employees; pre-approval of non-audit services; review of results from internal quality reviews, peer reviews and PCAOB inspections; and private meetings between the audit committee and the independent registered public accounting firm throughout the year.
We are governed by a written charter adopted by the audit committee and our board of directors, which is available through the Investor Relations page of our website at http://www.virtusa.com.
The audit committee consisted of three members, Messrs. Nearhos, (chairman, effective as of May 31, 2017), O'Brien (chairman until May 31, 2017) and Doody, (who was appointed May 31, 2017), all non-employee directors at the time that the actions of the committee described in this report were undertaken during the Company's fiscal year ended March 31, 2018.2020. None of the members of the audit committee is an officer or employee of the Company, and the board of directors has determined that each member of the audit committee meets the independence requirements promulgated by The NASDAQ Stock Market, Inc. and the Securities and Exchange Commission,SEC, including Rule 10A-3(b)(1) under the Exchange Act. Messrs. Nearhos and O'Brien are each "audit committee financial experts" as is currently defined under SEC rules.
The Company's management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles. The Company's independent registered public accounting firm is responsible for auditing those financial statements. Our responsibility is to monitor and review these processes. However, we are not professionally engaged in the practice of accounting or auditing. We have relied, without independent verification, on the information provided to us and on the representations made by the Company's management and the independent registered public accounting firm.
In fulfilling our oversight responsibilities, we discussed with representatives of KPMG LLP, the independent registered public accounting firm for our fiscal year ended March 31, 2018,2020, the overall scope and plans for their audit of the consolidated financial statements for the fiscal year ended March 31, 2018.2020. At the end of each quarter and financial year, we have met with the Company's independent registered public accounting firm, KPMG LLP, with and without the Company's management present, to discuss the results of their examinations, their evaluations of the Company's internal control over financial reporting and the overall quality of the Company's financial
reporting. We reviewed and discussed the audited consolidated financial statements for the fiscal year ended March 31, 20182020 with management and the independent registered public accounting firm.
We also reviewed the report of management contained in the Annual Report on Form 10-K for the fiscal year ended March 31, 2018,2020, filed with the Securities and Exchange Commission,SEC, on its assessment of the effectiveness of the Company's internal control over financial reporting, as well as the Reports of Independent Registered Public Accounting Firm included in the Annual Report on Form 10-K related to KPMG's audit of (i) the consolidated financial statements and (ii) the effectiveness of internal control over financial reporting. We continue to oversee the Company's efforts related to its internal control over financial reporting and management's preparations for the evaluation in the Company's fiscal year ending March 31, 2019.2021.
We discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301,Communications with Audit Committees, as amended, as adopted by the Public Company Accounting Oversight Board (PCAOB)("PCAOB"), including a discussion of the Company's accounting principles, the application of those principles, and the other matters required to be discussed with audit committees under generally accepted auditing standards.
We have reviewed the permitted services under rules of the Securities and Exchange CommissionSEC as currently in effect and discussed with KPMG their independence from management and the Company, including the matters in the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the PCAOB regarding the independent accountant's communications with the audit committee concerning independence. In evaluating the independence of our independent registered public accountant, we considered whether the services they provided beyond their audit and review of the consolidated financial statements were compatible with maintaining their independence. We also considered the amount of fees they received for audit and non-audit services.
Based on our review and these meetings, discussions and reports, and subject to the limitations on our role and responsibilities referred to above and in the audit committee charter, we recommended to the board of directors that the audited consolidated financial statements for the fiscal year ended March 31, 20182020 be included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2018.2020.
THE AUDIT COMMITTEE
Barry R. Nearhos, Chair
William K. O'Brien
Joseph G. Doody
Abidali Neemuchwala
OUR PAY
Proposal 3—Advisory Approval Vote on the Compensation of
Our Named Executive Officers
The following proposal, commonly known as a say-on-pay proposal, is provided as required pursuant to Section 14A of the Exchange Act and gives our stockholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our NEOs. This vote is not intended to address any specific item of compensation or the compensation of any particular officer, but rather the overall compensation of our NEOs and our compensation philosophy, policies and practices, as discussed in this proxy statement. Accordingly, we are asking our stockholders to vote "FOR" the following resolution at our annual meeting of stockholders:
RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's NEOs, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion".
In considering your vote, we invite you to review the Compensation Discussion and Analysis included in this proxy statement. This vote is advisory, and therefore not binding on the Company, the compensation committee or our board of directors. However, our board of directors and our compensation committee value the opinions of our stockholders and will review and consider the outcome of the vote when considering future compensation decisions for our NEOs.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE APPROVAL OF, ON AN ADVISORY BASIS,
THE COMPENSATION OF OUR NEOS
AS DISCLOSED IN THIS PROXY STATEMENT.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
No portion of this compensation committee report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act, of 1934, as amended, through any general statement incorporating by reference in its entirety the proxy statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed to be "soliciting material" or filed under either the Securities Act or the Exchange Act.
The compensation committee of the board of directors, which is comprised solely of independent directors within the meaning of applicable rules of The NASDAQ Stock Market, Inc., outside directors within the meaning of Section 162 of the Internal Revenue Code of 1986, as amended, and non-employee directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended, is responsible for developing executive compensation policies and advising the board of directors with respect to such policies and administering the Company's cash incentive, stock option and equity incentive plans. The compensation committee sets performance goals and objectives for the chief executive officer and the other executive officers, evaluates their performance with respect to those goals and sets their compensation based upon the evaluation of their performance. In evaluating executive officer pay, the compensation committee may retain the services of a compensation consultant and consider recommendations from the chief executive officer with respect to goals and compensation of the other executive officers. The compensation committee assesses the information it receives in accordance with its business judgment. The compensation committee also periodically reviews director compensation. It has been our practice that decisions with respect to executive and director compensation are approved by the compensation committee and generally are also recommended to the full board (but only to the independent, outside directors thereof) for approval and/or ratification. Messrs. O'Brien, Ramji and Doody are the current members of the compensation committee.
The compensation committee has reviewed and discussed the Compensation Discussion and Analysis (the "CD&A") for the fiscal year ended March 31, 20182020 with management. In reliance on the reviewsreview and discussionsdiscussion referred to above, the compensation committee has approved of the CD&A, and has recommended to the board of directors, and the board of directors has approved, the CD&A for inclusion in the proxy statement for the fiscal year ended March 31, 20182020 for filing with the Securities and Exchange Commission.SEC.
Respectfully submitted by the
Compensation Committee,
Vikram S. Pandit, Chair
William K. O'Brien (chairman)
Al-Noor Ramji
Joseph G. Doody
VIRTUSA CORPORATION 20182020
COMPENSATION DISCUSSION AND ANALYSIS
INTRODUCTION
This sectioncompensation discussion and analysis ("CD&A") explains our executive compensation program, including philosophy, policies, practices and key compensation decisions for fiscal 20182020 as it relates to our named executive officers.NEOs. Compensation for our named executive officersNEOs is further described in the Summary Compensation Table and other compensation tables contained in this proxy statement. The table below shows our named executive officers for fiscal 2018.
Our Named Executive Officers (NEOs) |
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Kris Canekeratne | Chairman and Chief Executive Officer | ||||
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CD&A Table of Contents |
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Compensation Overview | |||||
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Compensation Philosophy | |||||
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Compensation Elements | |||||
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Compensation Policies and Governance Practices | 64 | ||||
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Principal ComponentsTable of CEO Contents
Virtusa Corporation is a global provider of digital business strategy, digital engineering and information technology ("IT") services and solutions that help clients change, disrupt, and unlock new value through innovation engineering. We support Global 2000 clients across key industries including banking, financial services, insurance, healthcare, communications, technology, and media and entertainment. We help improve business performance through accelerating revenue growth, delivering compelling consumer experiences, improving operational efficiencies, and lowering overall IT costs. We provide services across the entire spectrum of the IT services lifecycle, from consulting, to technology and user experience ("UX") design, development of IT applications, systems integration, digital engineering, testing and business assurance, and maintenance and support services, including cloud, infrastructure and managed services. We help our clients solve critical business problems by leveraging a combination of our distinctive consulting approach, end-to-end digital engineering capabilities, unique platforming methodology, and deep domain and technology expertise.
Virtusa helps clients grow their business with innovative services that create operational efficiency using digital labor, future-proof operational and IT platforms, and rationalization and modernization of IT applications infrastructure. We help organizations realize the benefits of digital transformation ("DT") and cloud transformation ("CT") by bringing together digital infrastructure, analytics and intelligence and customer experience by engineering the digital enterprise of tomorrow on the cloud. We deliver cost effective solutions through a global delivery model, applying advanced methods such as Agile, an industry standard technique designed to accelerate application development. We use our Digital Transformation Studio ("DTS") engineering tools to drive software development lifecycle ("SDLC") automation to improve quality, enabling speed and increasing productivity. Our proprietary DTS was built by Virtusa's engineering teams that have decades of industry knowledge and experience. These teams are certified and leverage Virtusa's industry leading tools and assets, providing increased speed and transparency.
Headquartered in Massachusetts, we have offices throughout the Americas, Europe, Middle East and Asia, with global delivery centers in the United States, India, Sri Lanka, Hungary, Singapore and Malaysia. We also have many employees who work with our clients either onsite or virtually, which offers flexibility for both clients and employees.
Fiscal 2018 Compensation2020 Performance Highlights
In fiscal year 2020, we initiated a multi-year strategy to increase our revenue, operating margin, and earnings per share. Our strategy focuses on three fundamental pillars: increasing profitable revenue growth by targeting large digital and cloud transformation engagements, achieving greater revenue diversification, categorized by geography, industry, and client, and increasing gross and operating margins through pyramid efficiencies, project profitability, and general and administrative expense leverage.
While we began to implement these three pillars in fiscal year 2020, we faced significant headwinds which masked our progress. These headwinds were primarily related to a decline in revenue from a large European banking client, negotiated productivity savings which affected growth at our largest client, adverse impacts on our clients' spend in the fiscal fourth quarter of 2020 due to
the onset of the COVID-19 pandemic and related negative impact on our client budgets and the economy as a whole.
Fiscal Year 2020 Results:
Non-GAAP Results*:
* For a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure, see page 62 of our Annual Report on Form 10-K filed on May 28, 2020, and Appendix A attached to this proxy statement.
Response to COVID-19:
The graphics below show that 76%significant negative impact of COVID-19 on the global economy has created near-term challenges for us and the entire IT services industry. Simultaneously, the global pandemic has revealed unique opportunities for us to strengthen and advance our three-pillar plan. As a result, in late fiscal year 2020 and early fiscal year 2021, we launched several new initiatives under our three-pillar strategy designed to enable us to navigate the pandemic's near-term economic impacts, and strengthen our overall market, financial and operational positioning going forward. For example, we proactively launched a series of new services and solutions tailored to help clients address the challenges created by COVID-19, including hyper distributed agile services, agile squads, and release assurance. In addition, we initiated a comprehensive cost reduction and efficiency plan across delivery, shared services and professional services to mitigate the impacts of COVID-19 on our profitability, and improve our gross and operating margin performance over time.
We are incredibly proud of our success in maintaining our commitment to serve our clients and protect the health and safety our global team members during the COVID-19 pandemic. At the onset of the pandemic, our crisis management team quickly enacted strict work-from-home measures while our business continuity protocols enabled nearly uninterrupted service to our clients. Currently over 98% of our billable workforce has the ability to work from home. Our COVID-19 Task Force meets on a frequent basis to consistently review developments and act in accordance with the guidance provided by governments and relevant public health organizations around the world. Virtusa has also stepped up our pay for performance philosophy.efforts to serve our clients during their time of need during the pandemic. We proactively launched a series of new services and solutions tailored to help clients address the challenges created by COVID-19 such as hyper distributed agile services, agile squads, and release assurance. Lastly, Virtusa has worked to maintain our commitment to our stockholders by implementing a comprehensive cost reduction and efficiency plan across delivery, shared services and professional services in order to mitigate the impact of slower revenue growth on our margin performance.
Our executive compensation program reflects the following best practices:
What We Do | What We Don't Do | ||||
Closely align pay-for-performance Balance performance metrics with annual and long-term plans Align performance metrics with management and stockholder interests Set rigorous goals aligned to business strategy Pay the majority of direct compensation over the long term Retain an independent compensation consultant Maintain significant stock ownership guidelines Maintain enhanced clawback requirements | Use "single-trigger" change of control provisions Provide tax gross-ups on perquisites Pay dividends on unvested equity Allow pledging, hedging or short-sale transactions Encourage unreasonable risk-taking Grant equity awards discounted at values below 100% of fair market value Reprice stock options without stockholder approval Our compensation committee charter was amended to reflect our commitment that we will not make any adjustments to performance metrics mid-performance period other than for M&A activities. |
Performance Measures Affecting Fiscal 20182019 Say on Pay OutcomesVoting Results and Stockholder Engagement
Annual Incentive Payouts. Fiscal 2018 produced strong financial results for At our annual meeting of stockholders in September 2019, we held our annual vote on an advisory resolution to approve the Companycompensation of our NEOs ("say-on-pay") and 97.7 percent of votes cast approved our say-on-pay proposal. Our board of directors and compensation committee carefully review the voting results. As part of this review, and as a result,matter of policy, our management and compensation committee may gather feedback directly from stockholders to understand their concerns with our pay structure and our compensation practices.
Although we received strong support for our say-on-pay proposal at our 2019 annual meeting of stockholders, which we believe reflects general stockholder approval of our compensation program, we continuously engage with our stockholders on corporate governance matters, including executive compensation, and strive to be responsive to stockholder feedback. In the Companypast, we received input from our stockholders expressing a preference for longer performance periods for our performance-based LTI grants, for a relative performance measure in those awards as well as separate metrics for our variable cash compensation plan and LTI performance grants. In response, we made a number of changes to out LTI program as described in the following incentive cash payoutssection titled "Key Elements of Fiscal 2020 Compensation" below.
We appreciate the feedback received through our stockholder engagement, and the compensation committee will continue to consider the outcome of our named executive officers.
say-on-pay votes, stockholder input, regulatory changes, and emerging best practices when making future compensation decisions for our NEOs.
185.54% of target PSUs were earned. Due to our strong fiscal 2018 financial results, our named executive officers earned 185.54% of their PSUs for fiscal 2018.
The above graphics demonstrate the close relationship between corporate performance and pay outcomes.
Relationship between CEO ReportedPerformance-Based Compensation Target Total Compensation and Realized CompensationStructure
In this section of the compensation discussion and analysis, we disclose our CEO's compensation in the following three methods: (i) reported compensation, (ii) target total compensation and (iii) realized compensation. Reported compensation is the compensation disclosed in the Summary Compensation Table in accordance with rules promulgated by the SEC. This disclosure includes the theoretical accounting values of equity grants. Target total compensation is the compensation an executive officer would earn assuming achievement of target performance (see page 34 of this proxy statement, which sets forth a tabular analysis of each executive officer's target total compensation). The compensation committee is responsible for approving each executive officer's total target compensation. Realized compensation is the amount of compensation that an executive officer is paid or earned during a fiscal year. For a given fiscal year, the amounts shown under each of the three disclosed methods typically will differ from each other, often materially.
The numbers shown below are not intended to replace the SEC mandated Summary Total Compensation, but rather provide a perspective on the relationship between the CEO's reported compensation, target total compensation and realized compensation.
and (iv) time-based restricted stock units that vested during the fiscal year (value based on vesting date share price).
OVERVIEW
We believe that the compensation of our executive officers should focus executive behaviorexecutives on the achievement of near-term corporate targets as well as long-term business objectives and strategies. We place significant emphasis on pay-for-performance compensation programs, which reward our executives when we achieve certain financial and business goals and create stockholder value and also result in reduced executive compensation when we do not achieve our business and shareholderstockholder value goals. We use a combination of base salary, annual variable cash incentive compensation programs, a long-term equity incentive compensation program and a broad-based benefits program to create a competitive compensation package for our executive management team.
Our executive compensation structure is focused on both short-term (variable cash compensation plan, or "VCCP") and long-term ("PSUs") performance-based compensation ("at-risk" pay). The charts below highlight that 76% of the CEO's fiscal 2020 total target compensation and 63% of the average fiscal 2020 total target compensation of our other NEOs as a group is at risk which is consistent with our pay-for-performance philosophy.
Relationship between CEO Reported Compensation, Target Total Compensation and Realized Compensation
We describereview our CEO's compensation using the following three methods:
For a given fiscal year, the amounts shown under each of the three disclosed methods typically will differ from each other, often materially. The numbers shown in the following graph are not intended to replace the SEC mandated Summary Compensation Table, but rather provide a perspective on the relationship between the CEO's reported compensation, target total compensation and realized compensation.
The graph below shows the following:
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Our compensation committee believes that a substantial percentage of the compensation of our executive officers should be performance-based. In that regard, our compensation philosophy, policiesprogram places the greatest emphasis on long-term incentive compensation through equity grants that vest predominantly on achievement of performance goals, which we believe effectively aligns the interests of our executive officers and practicesthose of our stockholders.
Our compensation committee has designed our overall executive compensation program to achieve the following objectives:
Key Elements of Fiscal 2020 Compensation
The compensation committee implemented the following changes for fiscal 2020:
Below is a description of the primary elements of our compensation program.
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Base Salary | · Annual fixed cash compensation | ||||||||
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Variable Cash Compensation Plan | · Annual Variable Cash Compensation Plan (50%) Revenue (50%) Non-GAAP Income from operations | ||||||||
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Long-term Incentives | · Performance-based LTI Awards Two-year performance period beginning April 1, 2019 and ending March 31, 2021 (50%) Two-year aggregate revenue (50%) Two-year adjusted net income Use of a modifier based on the Company's relative TSR over a two-year performance period as compared to the relative TSR in the S&P Composite 1000 Services companies, which could reduce or increase payouts by up to 20% Vesting: 50% on June 1, 2021; 50% on June 1, 2022, subject to achievement of the performance metrics | ||||||||
· Time-based Equity Awards Vest 33.33% over three years, subject to continued service, on each of June 1, 2020, June 1, 2021 and June 1, 2022 | |||||||||
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Change in Fiscal 2020 LTI Metric
In our fiscal 2020 long-term incentive program, our compensation committee replaced the non-GAAP income from operations metric with adjusted net income. Our compensation committee continues to believe that focusing on profitability and growth are still the primary objectives to create sustainable long-term stockholder value,
The change in long-term metrics strongly differentiated the aspects of profitability that are measured over the short-term and long-term horizons. In the short term, our compensation committee has focused our management team on just two numbers: our operating revenue and our operating expenses. This provides management with an extremely clear line of sight, and tightly aligns management with stockholders over the short-term.
The long-term profitability metric encourages management to think about a much more expansive set of factors when managing towards long-term objectives—those factors include operating the business in a tax-efficient manner and managing our non-operating income and expenses. In addition, certain adjustments in the long-term profitability metric—such as adjusting out changes to tax code regimes—provide important safeguards against potential windfalls.
We believe that maintaining a competitive benefit package for our executive officers is a key factor in attracting and retaining highly qualified personnel. Executive officers are eligible to participate in all of our group employee benefit plans, such as medical, dental, vision, and group life
and accidental death and dismemberment insurance, in each case on the same basis as other employees.
Executive officers are also eligible to participate in our 401(k) plan, which we offer to all our U.S.-based employees. Eligible employees may contribute, on a pre-tax basis, a portion of their salaries to the 401(k) plan and invest their contributions among available investment alternatives. We do not offer pension benefits to our executive officers or other employees, except as mandated by the governments of India and Sri Lanka.
For fiscal 2020, we provided no perquisites or personal benefits to any of our NEOs other than to Keith Modder, our executive vice president, chief executive officer, chief financialoperating officer and managing director, EMEA. We provide Mr. Modder, who resides in Sri Lanka, certain perquisites as described in footnote 5 the Summary Compensation Table. These perquisites are considered customary in Sri Lanka and similar to those customarily provided to other Sri Lankan-based executives. Our compensation committee approved (and our independent members of our board approved) each of these perquisites for fiscal 2020.
Fiscal 2020 Target Compensation
The table below shows each NEO's fiscal 2020 target total compensation and each element of target total compensation as approved by the compensation committee, and approved by the board. Disclosed target amounts are those amounts that would be earned assuming achievement of target performance, as set and approved by the compensation committee and approved by our independent members of our board of directors.
Name | Position | Base Salary | Target Incentive Opportunity | Target Total Cash Compensation | Time-based Share Units (1) | Performance Share Units at Target (1) | Target Total Compensation | |||||||||||||||
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Kris Canekeratne | Chairman and Chief Executive Officer | $ | 525,000 | $ | 535,000 | $ | 1,060,000 | $ | 1,337,028 | $ | 5,245,856 | $ | 7,642,884 | |||||||||
Ranjan Kalia | Executive Vice President, Chief Financial Officer | $ | 410,000 | $ | 290,000 | $ | 700,000 | $ | 540,455 | $ | 1,236,949 | $ | 2,477,404 | |||||||||
Samir Dhir | President, Head of Americas | $ | 410,000 | $ | 365,000 | $ | 775,000 | $ | 549,571 | $ | 1,257,813 | $ | 2,582,384 | |||||||||
Tom Holler | Executive Vice President, Chief Strategy Officer | $ | 375,000 | $ | 290,000 | $ | 665,000 | $ | 436,271 | $ | 998,501 | $ | 2,099,772 | |||||||||
Keith Modder | Executive Vice President, Chief Operating Officer and Managing Director, EMEA | $ | 325,000 | $ | 270,000 | $ | 595,000 | $ | 477,944 | $ | 1,093,880 | $ | 2,166,824 |
Our NEOs are each paid a base salary, which the compensation committee reviews each fiscal year. The compensation committee primarily used competitive market data within our peer group to set base salary levels and to determine any base salary adjustment. The compensation committee generally set each of our NEO's base salary between the 25th and 50th percentile of the compensation peer group which is aligned with our philosophy of focusing on performance-based compensation.
Our compensation committee approved and recommended to our board, and our independent members of our board of directors approved, the following fiscal 2020 annual base salaries for our NEOs reflecting merit increases:
| | | | | | |
Name | FY2019 Base Salary | % Increase | FY2020 Base Salary | |||
| | | | | | |
Kris Canekeratne | $513,000 | 2.3% | $525,000 | |||
| | | | | | |
Ranjan Kalia | $400,000 | 2.5% | $410,000 | |||
| | | | | | |
Samir Dhir | $400,000 | 2.5% | $410,000 | |||
| | | | | | |
Thomas R. Holler | $364,000 | 3.0% | $375,000 | |||
| | | | | | |
Keith Modder | $315,000 | 3.2% | $325,000 | |||
| | | | | | |
In response to the COVID-19 pandemic and impact on our results of operations for the fiscal year ended March 31, 2020, our executives voluntarily accepted, in the case of our CEO, a 30% reduction in base pay and, in the case of our other executive officers.executives, a 20% reduction in base pay, from the fiscal year 2020, effective for fiscal year 2021.
ADMINISTRATION AND OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAMVariable Cash Compensation Plan
We have established the annual VCCP to incent our executive officers to achieve performance goals established and approved by the compensation committee. The VCCP supports our pay-for-performance philosophy by providing incentive compensation to our executive officers that is earned solely based upon the achievement of pre-set performance goals. Our compensation committee and our non-employee directors who are independent within the meaning of the director independence standards of NASDAQ (the "Independent Board") approved a revenue target of $1,385 million and a non-GAAP operating income target of $152 million (each weighted 50%).
Based on fiscal 2020's actual performance of $1,312.3 million in revenue and $113.8 million of non-GAAP operating income, we did not achieve our revenue and non-GAAP income from operations threshold performance goals for our fiscal year ended March 31, 2020 and, as a result, Virtusa made no payments under the VCCP to our NEOs as further described below. We also made no discretionary cash payments to our NEOs for the fiscal year ended March 31, 2020.
In response to the COVID-19 pandemic and impact on our results of operations for the fiscal year ended March 31, 2020, our executives voluntarily accepted suspension of the VCCP, and, as a result, no variable cash compensation will be paid for the fiscal year ending March 31, 2021.
VCCP Target Opportunities
The compensation committee primarily used peer group data to set each NEO's target cash incentive opportunity. Historically, the compensation committee has set target cash incentive opportunity between the 25th and 50th percentile of the compensation peer group. However, the compensation committee also considered other factors in setting each NEO's fiscal 2020 target cash incentive opportunity, including the executive officer's prior performance, experience, expertise and ability to drive corporate performance.
The payout opportunity under the fiscal 2020 VCCP ranged from 25% of the target incentive opportunity for achieving threshold performance to 200% of the target cash incentive opportunity for achieving the maximum level of performance. The chart below shows each NEO's fiscal 2020 cash incentive opportunities.
| | | | | | | | | | | | |
Name | Threshold Incentive Opportunity 25% | % of Base Salary | Target Incentive Opportunity | % of Base Salary | Maximum Incentive Opportunity 200% | % of Base Salary | ||||||
| | | | | | | | | | | | |
Kris Canekeratne | $133,750 | 25% | $535,000 | 102% | $1,070,000 | 204% | ||||||
| | | | | | | | | | | | |
Ranjan Kalia | $72,500 | 18% | $290,000 | 71% | $580,000 | 141% | ||||||
| | | | | | | | | | | | |
Samir Dhir | $91,250 | 22% | $365,000 | 89% | $730,000 | 178% | ||||||
| | | | | | | | | | | | |
Thomas R. Holler | $72,500 | 19% | $290,000 | 77% | $580,000 | 155% | ||||||
| | | | | | | | | | | | |
Keith Modder | $67,500 | 21% | $270,000 | 83% | $540,000 | 166% | ||||||
| | | | | | | | | | | | |
VCCP Performance Measures, Goals, and Results
For fiscal 2020, the compensation committee approved two equally weighted performance measures: (i) revenue and (ii) non-GAAP income from operations, along with minimum, target and maximum goals for these measures. The compensation committee selected these performance measures as they reflect Virtusa's on-going strategic goal of driving profitable revenue growth, which in turn translates into enhanced stockholder value. The compensation committee considered using other financial metrics but revenue growth and non-GAAP income from operations continue to be the central drivers of our business. Further, our executive team focuses each business unit on achieving stretch revenue and gross margin goals, which directly contribute to the Company's revenue and non-GAAP income from operations objectives. Additionally, our compensation committee believes that these financial metrics, revenue and non-GAAP income from operations, most align with investor focus and stockholder value creation, and are consistent with Virtusa's stated goal of increasing top line growth faster than industry growth and increasing non-GAAP operating margins and non-GAAP income from operations and year-over-year.
The compensation committee approved the VCCP revenue goals and non-GAAP income from operations goals at the beginning of the fiscal year at its first regularly scheduled or special meeting. The compensation committee set these goals to be challenging, but achievable, based on our business plan. In that regard, the target revenue goal for fiscal year 2020 approved by the compensation committee was 11% higher than the actual revenue results for fiscal year 2019, which itself represented an increase of 22% from revenues recognized in fiscal year 2019 to fiscal year 2018. The National Association of Software and Services Companies ("NASSCOM") estimated a growth rate of 7.7% rate for the IT services industry for fiscal 2020.
The following chart shows the VCCP performance goals approved by the compensation committee and our independent members of our board for fiscal 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| VCCP Performance Measure | | Weight | | Fiscal 2019 Actuals (millions) | | Threshold 25% (millions) | | Target 100% (millions) | | Maximum 200% (millions) | | Fiscal 2020 Actual Performance (millions) | | % Target Payout Factor Achieved | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Revenue | 50% | $1,247.9 | $1,348 | $1,385 (2) | $1,435 | $1,312.3 | 0% | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Non-GAAP Income from operations(1) | 50% | $123.2 | $142 | $152 (3) | $167 | $113.8 | 0% | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
VCCP Payout Levels
In fiscal 2020, we did not achieve the threshold performance goals for either revenue or non-GAAP operating income. Therefore, Virtusa made no incentive cash payments under the VCCP to our NEOs as shown in the chart below:
| | | | | | |
Name | Target Incentive Opportunity | Achievement | VCCP Paid (1) | |||
| | | | | | |
Kris Canekeratne | $535,000 | 0% | — | |||
| | | | | | |
Ranjan Kalia | $290,000 | 0% | — | |||
| | | | | | |
Samir Dhir | $365,000 | 0% | — | |||
| | | | | | |
Thomas R. Holler | $290,000 | 0% | — | |||
| | | | | | |
Keith Modder | $270,000 | 0% | — | |||
| | | | | | |
Over the past five years, our payout fluctuations have varied according to our Company's performance in each year. The following chart depicts our NEOs' VCCP payouts, in comparison to target, over the last five fiscal years:
Long-Term Incentive (LTI) Compensation
We have established a long-term incentive compensation program to incent our executive officers to achieve key financial metrics, enhance stockholder value and align the interests of our executive officers with our stockholders. Under this program, we granted performance share units ("PSUs") and time-based restricted stock units ("RSUs") to our executive officers during fiscal 2020. For fiscal 2020, the long-term incentive compensation of our CEO and NEOs comprised of:
CEO
Other NEOs
The compensation committee must approve grants of equity awards to our NEOs. The compensation committee approves annual equity grants at its first regularly scheduled or special meeting during the fiscal year. Our practice is also to require our independent members of our board to ratify and approve all equity awards approved by the compensation committee.
The compensation committee primarily used peer group data to set the fiscal 2020 target value of each NEO's annual equity grant. In this regard, while the compensation committee generally sets total compensation opportunity near the peer median, PSU grants are over-weighted within the overall compensation mix, and fixed compensation such as base salary is under-weighted. The compensation committee may also consider other factors in setting each NEO's fiscal 2020 target
value, including the executive officer's prior performance, experience and expertise and ability to drive corporate performance and key share usage statistics such as run rate, overhang, shares available for future grants and dilution.
For fiscal 2020, in response to its commitment to stockholder feedback, the compensation committee approved a grant of PSUs to each NEO with a two-year performance measurement period ("Fiscal 2020 PSUs") over which the Company's performance is measured across two components: revenue and adjusted net income. The Fiscal 2020 PSUs are subject to the achievement of performance goals established and approved by the compensation committee as discussed below. The grant of the Fiscal 2020 PSUs supported our pay-for-performance philosophy by providing incentive compensation to our executive officers that is earned solely based upon the achievement of pre-set performance goals.
The chart below shows the target number and related value of the Fiscal 2020 PSUs granted to each of our NEOs.
| | | | |
Name | Fiscal 2020 PSUs Granted at 100% Achievement of Target (#) | Target Value (1) | ||
| | | | |
Kris Canekeratne | 123,200 | $ 5,245,856 | ||
| | | | |
Ranjan Kalia | 29,050 | $ 1,236,949 | ||
| | | | |
Samir Dhir | 29,540 | $ 1,257,813 | ||
| | | | |
Thomas R. Holler | 23,450 | $ 998,501 | ||
| | | | |
Keith Modder | 25,690 | $ 1,093,880 |
The payout opportunity under the Fiscal 2020 PSUs ranges from 25% of the target number of PSUs for achieving a threshold level of performance to 200% of the target number of PSUs for achieving the maximum level of performance.
PSU Performance Measures and Goals
The compensation committee approved two equally-weighted performance measures for the Fiscal 2020 PSUs: (i) two-year aggregate revenue, weighted 50%, and (ii) two-year adjusted net income, weighted 50%, along with threshold, target and maximum goals for these measures. The achievement of the performance metrics for the Fiscal 2020 PSUs will be measured over a two-year performance period beginning on April 1, 2019 and ending March 31, 2021. The payout of PSUs tied to each financial metric will also be subject to a modifier based on our relative TSR over a two-year performance period, as compared to the stockholder return in the S&P 1000, which could reduce or increase the payouts by up to 20%. The compensation committee made these material changes to the performance measures in response to stockholder feedback raised during our 2019 stockholder outreach program. As the performance period is incomplete, payout is not yet known.
The relative TSR modifier will operate by adjusting the payout resulting from the revenue and adjusted net income metrics. If the Company's relative TSR falls below the 25th percentile relative to all components of the S&P 1000 index, payouts will be reduced by 20%. If the Company's relative TSR falls at or above the 75th percentile of the S&P 1000 index, payouts will in increased by 20%. And, if the Company's relative TSR falls between these two ranges, the modifier will not affect the payouts at all.
Payout and targets for the Fiscal 2020 PSUs will be disclosed in the 2021 proxy statement, retrospectively, once the performance period is complete. If earned, the conditionally earned PSUs will vest 50% on June 1, 2021 and the remaining 50% will vest on June 1, 2022, provided the executive remains employed with the Company through the date of vesting.
The compensation committee used cumulative revenue growth and cumulative adjusted net income from operations as these metrics are core to the Company's short and long-term success. These metrics are rigorous and also support the Company's three pillar strategy of high quality revenue growth, revenue diversification and margin expansion.
For fiscal 2020, the compensation committee approved a grant of time-based RSUs to each NEO ("Annual 2020 RSUs"). The Annual 2020 RSUs vest over a three-year period, with one-third vesting on each of June 1, 2020, June 1, 2021 and June 1, 2022, provided the executive remains employed with the Company through the date of vesting. The number of RSUs that vest on each vesting date is settled in a like number of shares of our common stock. The grant of the Annual 2020 RSUs supports our philosophy to retain key talent by providing compensation to our NEOs based on the completion of a service period. In addition, these grants incent our NEOs to enhance stockholder value as the value of the award increases as our stock price increases.
Fiscal 2017 One-time Five-Year Performance Share Unit Grants
On August 11, 2016, each of our NEOs received a one-time five-year performance share unit grant ("5-year PSUs"). The 5-year PSUs are earned based on achievement against non-GAAP income from operations goals over a five-year performance period beginning April 1, 2016 and ending March 31, 2021 ("Performance Period").
During the Performance Period, the 5-year PSUs vest based on Virtusa's achievement of 12-month trailing ("TTM") non-GAAP income from operations goals as of any eligible fiscal quarter ending within the Performance Period. The following are the compensation committee-approved non-GAAP income from operations goals and related vesting schedule:
The first target of $117 million was met in fiscal 2019 and 30% of the PSUs were earned and vested in fiscal 2019.
For fiscal 2020, based on our financial performance during the performance period, there was no additional vesting of 5-year PSUs under this plan.
Executive Compensation Decisions
Our compensation committee, which is comprised entirely of independent directors, is responsible for establishing and administering our policies governing the compensation for our executive officers, including executive officer salaries, bonuses and equity incentive compensation. The compensation committee reviews all components of compensation for our named executive officers.NEOs. In accordance with its charter, the compensation committee also, among other responsibilities, administers our incentive compensation plan, and reviews and makes recommendations to management on company-wideCompany-wide compensation programs and practices. It has been our practice that all decisions with respect to our executive officers are determined and approved by the compensation committee and are also recommended to our non-employee directors who are independent within the meaning of the director independence standards of NASDAQ (the "Independent Board")Independent Board for approval and/or ratification.
Our compensation committee has designed our overall executive compensation program to achieve the following objectives:
We use a mix of short-term compensation (base salaries and variable cash incentive compensation) and long-term compensation (equity incentive compensation) to provide a total compensation structure that is designed to achieve the objectives of our executive compensation program. We determine the percentage mix of compensation structures that we think is appropriate for each of our executive
officers. The compensation committee believes that a substantial percentage of the compensation of our executive officers should be performance-based. In that regard, our compensation program places the greatest emphasis on long-term incentive compensation through equity grants that vest predominantly on achievement of performance goals, which we believe effectively aligns the interests of our executive officers and those of our stockholders.
METHODOLOGY FOR ESTABLISHING EXECUTIVE COMPENSATION
The compensation committee meets outside the presence of the executive officers and uses its judgment and experience and the recommendations of the chiefCEO (with respect to executive officerofficers other than himself) to determine the appropriate mix of compensation for each individual. The compensation committee has the authority to engage the services of outside consultants and advisors to assist it with making decisions regarding the establishment of ourexecutive compensation programs and philosophy.decisions. The compensation committee retained Meridian Compensation Partners, LLC ("Meridian")Mercer as its independent compensation consultant to advise the compensation committee, considering SEC rules and Nasdaq listing requirements, in matters related to executive officer and director compensation for our 2018 fiscal year ending March 31, 2020, as described in more detail below. MeridianMercer does not provide any services to us other than the executive or board compensation services provided to the compensation committee.
In assessingdetermining the target and actual compensation paid to our chief executive officer and other executive officers,NEOs, the compensation committee considers a broad range of information, data and advice, including information,but not limited to peer group compensation data, derived from our selected peer group,executive experience and performance, internal pay equity, pay mix, additional responsibilities of the officer, succession planning, advice from our compensation consultant and legal counsel and input from our chief executive officer but solelyCEO (solely with respect to his direct reports. The committee also considers the following factors when assessing and setting each named executive officer's compensation:reports).
The chief executive officerCEO makes recommendations to the compensation committee regarding base salary levels, target variable cash incentive awards, equity awards and performance goals for both variable cash incentive compensation and performance-based equity awards for the named executive officers.NEOs other than himself. The compensation committee considers the recommendations of the chief executive officerCEO when setting compensation levels, payout opportunities and mix of pay for these named executive officers.NEOs.
2017 Say-On-Pay Vote and Stockholder Outreach
At our annual meeting of stockholders in September 2017, we held our annual vote on an advisory resolution to approve the compensation of our named executive officers ("say-on-pay"). Less than 50% of the votes cast approved the compensation of our named executive officers reported in our 2017 proxy statement, which was not satisfactory to us or our Board. The table below shows the specific vote results:
For | 10,535,929 | 37.25 | % | ||||
Against | 17,745,649 | 62.75 | % | ||||
Abstain | 656,647 | N/A | |||||
Non-Votes | 1,752,989 | N/A |
In response to this vote outcome, our Board of Directors took the following actions with respect to our executive compensation program:
The compensation committee will continue to consider the outcome of our say-on-pay votes, regulatory changes and emerging best practices when making future compensation decisions for our named executive officers.
DEVELOPMENT OF FISCAL 2018 COMPENSATION PEER GROUP
Each year, the compensation committee evaluates the appropriateness of the peer group we use to benchmark and evaluate compensation levels and design. When evaluating the appropriateness of compensation peer group, the compensation committee seeks to construct and approve a peer group of companies that shares similar attributes to Virtusa. In that regard, the compensation committee evaluated existing and potential peer companies against the following criteria: (i) revenues of between one-half and two times Virtusa's projected revenues; (ii) market capitalization of between one-half and two times Virtusa's market capitalization, (iii) similar or allied industries of Virtusa (e.g., IT consulting, application software and data processing) and (iv) revenue and operating margin growth rate.
Based on this evaluation criteria, the compensation committee approved the following fiscal 2018 peer group, which is comprised of 16 publicly traded companies:
The fiscal 2018 peer group companies' annual revenues ranged between $474 million and $1.6 billion, with median revenues of approximately $1.0 billion and median market capitalization of approximately $1.4 billion. At the time the compensation committee approved the fiscal 2018 peer group, Virtusa's forecasted fiscal 2018 revenues were approximately $935 million at the mid-point of publicly issued financial guidance for fiscal 2018 and our market capitalization was approximately $928 million.
In setting compensation for each named executive officer, the compensation committee has generally targeted total compensation (i.e., the sum of base salary, target bonus opportunity and target long-term incentive value) at the 50th percentile of the peer group, except that in recognition of the CEO's long term success in driving profitable revenue growth for Virtusa and unique ability and expertise to execute on Virtusa's strategic business plans, the compensation committee determined that it was appropriate and in the best interests of Virtusa to set the CEO's total compensation up to the 75th percentile. With respect to each component of compensation, the compensation committee generally targets base salaries and total cash compensation (i.e., the sum of base salary and target bonus opportunity) between the 25th and 50th percentile of the peer group and long-term incentive compensation target value between the 50th and 75th percentile of the peer group. This mix of below median cash compensation and above median long-term incentive opportunity generally yielded targeted total compensation for each of our executive officers within a competitive range of market median.
Peer group compensation data is one of many factors that the compensation committee considers in setting compensation levels for each of our named executive officers.NEOs. Based on factors and considerations, (which were described above), the compensation committee may set a named executive officer'sNEO's total compensation and each component of compensation above or below the referenced benchmark.
We believe that the use of a peer group data and generally targeting the market median of our peer group are importantkey factors in remaining competitive with our peers and furthering our objective of attracting, motivating and retaining highly qualified personnel.
FISCAL 2018 TARGET TOTAL COMPENSATION
The table below shows each named executive officer's fiscal 2018 target total compensation and each element of target total compensation as approved byEach year, the compensation committee. Disclosed target amounts are those amounts that would be earned assuming achievementcommittee, along with benchmark analysis from our executive compensation consultant, evaluates the appropriateness of target performance, as set bythe peer group we use to benchmark and evaluate compensation levels and design. When evaluating the appropriateness of our compensation peer group, the compensation committee.committee seeks to construct and approve a peer group of companies in similar industries of similar size to that of Virtusa. In that regard, the compensation committee evaluated existing and potential peer companies against the following criteria:
| | (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Position | Base Salary | Target Annual Incentive Opportunity as a Percent of Salary | Target Annual Incentive Opportunity (a) x (b) | Total Cash Compensation (a) + (c) | Time-based Share Units | Performance Share Units at Target | Target Total Compensation (d) + (e) + (f) | ||||||||||||||||
Kris Canekeratne | Chairman and Chief Executive Officer | $ | 500,000 | 100 | % | $ | 500,000 | $ | 1,000,000 | $ | 1,200,000 | $ | 4,800,000 | $ | 7,000,000 | |||||||||
Ranjan Kalia | Executive Vice President, Chief Financial Officer | $ | 390,000 | 66 | % | $ | 258,000 | $ | 648,000 | $ | 433,125 | $ | 1,010,625 | $ | 2,091,750 | |||||||||
Raj Rajgopal | President, DBS | $ | 400,000 | 95 | % | $ | 380,000 | $ | 780,000 | $ | 393,750 | $ | 918,750 | $ | 2,092,500 | |||||||||
Samir Dhir | President | $ | 360,000 | 83 | % | $ | 300,000 | $ | 660,000 | $ | 393,750 | $ | 918,750 | $ | 1,972,500 | |||||||||
Tom Holler | Executive Vice President, Chief Strategy Officer | $ | 355,000 | 75 | % | $ | 265,000 | $ | 620,000 | $ | 433,125 | $ | 1,010,625 | $ | 2,063,750 |
| | | | | | | | |
| Criteria | | Selections | | ||||
| | | | | | | | |
Type | Publicly traded on a US stock exchange | |||||||
| | | | | | | | |
Industry Groups | Software & IT Services | |||||||
| | | | | | | | |
Annual Revenues | Revenue range of ~$600 million to ~$2.5 billion | |||||||
| | | | | | | | |
Growth Statistics | Positive 3-year revenue growth CAGR | |||||||
| | | | | | | | |
Employee Size | At least 3,000 employees (indicating a more employee intensive business) | |||||||
| | | | | | | | |
FISCAL 2018 EXECUTIVE COMPENSATION COMPONENTS
Our Based on these evaluation criteria, the fiscal 2018 executive compensation program is primarily composed of base salary, annual cash incentive compensation, time-based equity compensation2019 peer group was modified with three companies removed and performance-based equity compensation. Our compensation committee has not adopted a formal policy for allocating between various forms of compensation. However, we generally strive to provide our named executive officers with a balance of short-term and long-term incentives to encourage consistently strong performance and be competitive within our peer group.
Forthree companies added. In late fiscal 2018,2019, the compensation committee approved a long-term incentive mix to enhance the retentive aspects of our equity compensation and the alignment of our equity compensation with market practice. The long-term incentive mix was comprised of performance share units and restricted stock units. For the chief executive officer, his long-term incentive target value was allocated 80% to performance-based restricted stock units and 20% to time-based restricted stock units. For our other named executive officers, their long-term incentive target value was allocated 70% to performance-based restricted stock units and 30% to time-based restricted stock units.
Our fiscal year 2018 pay mix for our chief executive officer and our other named executive officers is shown in the below pie charts.
Described below is each fiscal year 2018 pay component.
Base Salary
Our named executive officers are each paid a base salary, which the compensation committee reviews each fiscal year. The compensation committee primarily used competitive market data within our peer group to set base salary levels and to determine any base salary adjustment. The compensation committee set each of our named executive officer's base salary at between the 25th and 50th percentile of the compensation peer group.
Our compensation committee approved the following newly constituted fiscal 2018 annual base salaries2020 peer group, which is comprised of 16 publicly traded companies and was used for our named executive officers:the benchmarking of fiscal 2020 compensation:
Name | 2017 Base Salary | % Increase | 2018 Base Salary | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Kris Canekeratne | $ | 475,000 | 5.3 | % | $ | 500,000 | ||||
Ranjan Kalia | $ | 360,000 | 8.3 | % | $ | 390,000 | ||||
Raj Rajgopal | $ | 375,000 | 6.7 | % | $ | 400,000 | ||||
Samir Dhir(1) | $ | 260,000 | 38.5 | % | $ | 360,000 | ||||
Thomas R. Holler | $ | 340,000 | 4.4 | % | $ | 355,000 |
| | |
ACI Worldwide Inc. | LiveRamp Holdings, Inc. | |
| | |
Cardtronic plc | LogMeln, Inc.* | |
| | |
Corelogic, Inc.* | ManTech International Corporation | |
| | |
Endurance International Group Holdings Inc. | Nutanix, Inc. | |
| | |
EPAM Systems, Inc. | Sykes Enterprises, Incorporated | |
| | |
ExlService Holdings Inc. | TTEC Holdings, Inc. | |
| | |
FireEye, Inc. | Verint Systems, Inc. | |
| | |
j2 Global, Inc. | WEX Inc.* | |
| | |
* Added to peer group in fiscal year 2020
At the time the fiscal 2020 peer group was approved, Virtusa's compensation committee evaluated the peer group across a one-time increase for Mr. Dhir's promotionnumber of relevant measures to President and permanent relocation toensure that the United States from India.group represented an appropriate set of comparator companies. Among the factors considered were the following:
| | | | | | | | | | | | |
| Attribute | | Peer Group Median | | Virtusa | | ||||||
| | | | | | | | | | | | |
Revenue | $1.230 billion | $1.247 billion (fiscal 2019) | ||||||||||
| | | | | | | | | | | | |
Market Cap | $3.276 billion | $1.611 billion (as of March 31, 2019) | ||||||||||
| | | | | | | | | | | | |
Revenue Growth (3-year CAGR) | 9.1% | 27.6% (through fiscal 2019) | ||||||||||
| | | | | | | | | | | | |
Employee Count | 3,951 | 21,745 (as of March 31, 2019) | ||||||||||
| | | | | | | | | | | | |
Compensation Policies and Governance Practices
Annual Cash Incentive ProgramStock Ownership Guidelines
We have established the annual cash incentive program, or VCCP, to incent our executive officers to achieve performance goals established and approved by the compensation committee. Therefore, VCCP supports our pay-for-performance philosophy by providing incentive compensation to our executive officers solely upon the achievement of pre-set performance goals.
We achieved threshold performance goals for both revenue and non-GAAP operating income in our fiscal year ended March 31, 2018 and, as a result, Virtusa made annual cash incentive payments under the VCCP to our named executive officers. We made no discretionary cash payments to our named executive officers.
The compensation committee primarily used competitive market data within our peer group to set each named executive officer's target cash incentive opportunity. Historically, the compensation committee has set target cash incentive opportunity between the 25th and 50th percentile of the compensation peer group. However, the compensation committee also considered other factors in setting each named executive officer's fiscal 2018 target cash incentive opportunity, including the executive officer's prior performance, experience, expertise and ability to drive corporate performance. The payout opportunity under fiscal 2018 VCCP ranged from 33% of the target incentive opportunity for achieving threshold performance to 200% of the target cash incentive opportunity for achieving maximum level of performance.
Fiscal 2018 Target Cash Incentive Opportunity
The chart below shows each named executive officer's fiscal 2018 target cash incentive opportunity.
Name | Fiscal 2018 Target Cash Incentive Opportunity | Fiscal 2018 Target Cash Incentive Opportunity as a % of Base Salary | |||||
---|---|---|---|---|---|---|---|
Kris Canekeratne | $ | 500,000 | 100 | % | |||
Ranjan Kalia | $ | 258,000 | 66 | % | |||
Raj Rajgopal | $ | 380,000 | 95 | % | |||
Samir Dhir | $ | 300,000 | 83 | % | |||
Thomas R. Holler | $ | 265,000 | 75 | % |
Fiscal 2018 VCCP Performance Measures and Goals
For fiscal 2018, the compensation committee approved two equally weighted performance measures: (i) revenue and (ii) non-GAAP operating income, along with minimum, target and maximum goals for these measures. The compensation committee selected these performance measures as they reflect Virtusa's on-going strategic goal of driving profitable revenue growth, which in turn translates into enhanced shareholder value. The compensation committee also approved the VCCP revenue goals and non-GAAP operating income goals. The compensation committee set these goals to be challenging, but achievable, based on our business plan. In that regard, the target revenue goal for fiscal year 2018 approved by the compensation committee was 9% higher than the actual revenue results for fiscal year 2017, which itself represented an increase of 43% from revenues recognized in fiscal year 2017 to fiscal year 2016. In addition, the National Association of Software and Services Companies (NASSCOM) estimated revenue growth rate for the IT services industry for fiscal 2017/2018 was set at between 7-8%.
In addition to setting revenue growth rates above industry averages, the rigor and challenge of our goal setting process is further demonstrated by the various levels of payouts earned over the last five fiscal years, as shown in the below chart:
The following chart shows the compensation committee approved performance goals for fiscal 2018 and achieved results against those goals.
Performance Measure | Weight | Threshold 33% | Target 100% | Maximum 200% | FY2018 Actual Performance | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | 50 | % | $ | 920 million | $ | 935 million | (2) | $ | 970 million | $ | 1,020.7 million | |||||
Non-GAAP Operating Income(1) | 50 | % | $ | 71.3 million | $ | 76.5 million | (3) | $ | 88.0 million | $ | 87.1 million |
Fiscal 2018 VCCP Payouts
In fiscal 2018, based on revenues of $1,020.7 million, our named executive officers earned 200% of their targeted variable cash compensation tied to revenue and based on non-GAAP operating income of $87.1 million (an increase of 56.3% from fiscal 2017) our named executive officers earned 191.39% of their targeted variable cash compensation tied to non-GAAP operating income, which yielded a payout equal to 195.69% of their targeted variable cash compensation. The chart below shows the amount of each named executive officer's payout under the VCCP:
Name | Target Incentive Opportunity | Achievement | VCCP Paid(1) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Kris Canekeratne | $ | 500,000 | 195.69 | % | $ | 978.466 | ||||
Ranjan Kalia | $ | 258,000 | 195.69 | % | $ | 504,888 | ||||
Raj Rajgopal | $ | 380,000 | 195.69 | % | $ | 743,634 | ||||
Samir Dhir | $ | 300,000 | 195.69 | % | $ | 587,079 | ||||
Thomas R. Holler | $ | 265,000 | 195.69 | % | $ | 518,587 |
Long-Term Incentive Compensation
We have established a long-term incentive compensation program to incent our executive officers to achieve key financial metrics, enhance shareholder value and align the interests of our executive officers with our stockholders. Under this program, we granted performance share units and time-based restricted stock units to our executive officers during fiscal 2018.
The compensation committee must approve grants of equity awards to our named executive officers. The compensation committee approves annual equity grants at its first regularly scheduled or special meetings during the fiscal year. Our practice is also to require our Independent Board to ratify all equity awards approved by the compensation committee.
The compensation committee primarily used competitive market data to set the fiscal 2018 target value of each named executive officer's annual equity grant. In this regard, the compensation committee generally set each named executive officer's target value between the 50th and 75th percentile of the compensation peer group. However, the compensation committee also considered other factors in setting each named executive officer's fiscal 2018 target value, including the executive officer's prior performance, experience and expertise and ability to drive corporate performance and key share usage statistics such as run rate, overhang, shares available for future grants and dilution.
Annual Fiscal 2018 PSU Grants
Description of Annual Fiscal 2018 PSU Grants. For fiscal 2018, the compensation committee approved a grant of performance-based restricted stock units (PSUs) to each named executive officer ("Annual 2018 PSUs"). These Annual 2018 PSUs were subject to the achievement of performance goals established and approved by the compensation committee. The payout opportunity under the Annual 2018 PSUs ranged from 33% of the target number of PSUs for achieving a minimum level of performance to 200% of the target number of PSUs for achieving maximum level of performance. The grant of the Annual 2018 PSUs supported our pay-for-performance philosophy by providing incentive compensation to our executive officers solely upon the achievement of pre-set performance goals.
Annual Fiscal 2018 PSU Grants' Target Value. The chart below shows the target number and related value of the Annual 2018 PSUs granted to each of our named executive officers.
Name | Annual 2018 PSUs Granted at 100% Achievement of Target (#) | Target Value | |||||
---|---|---|---|---|---|---|---|
Kris Canekeratne | 137,064 | $ | 4,799,981 | ||||
Ranjan Kalia | 28,858 | $ | 1,010,607 | ||||
Raj Rajgopal | 26,235 | $ | 918,750 | ||||
Samir Dhir | 26,235 | $ | 918,750 | ||||
Thomas R. Holler | 28,858 | $ | 1,010,607 |
Annual Fiscal 2018 PSU Grants' Performance Measures and Goals. The compensation committee approved two performance measures for the Annual 2018 PSUs: (i) revenue (weighted 50%) and (ii) non-GAAP operating income (weighted 50%), along with minimum target and maximum goals for these measures. The compensation committee selected these performance measures as they reflect Virtusa's on-going strategic goal of driving profitable revenue growth, which in turn should translate into enhanced shareholder value. The compensation committee set these goals to be rigorous, but achievable, based on our business plan at the time of approval. In that regard, the target revenue goal for fiscal 2018 approved by the compensation committee was 9% higher than the actual revenue achieved for fiscal year 2017, which itself represented an increase of 43% from the revenue achieved in fiscal 2016. In addition, the National Association of Software and Services Companies (NASSCOM) estimated revenue growth rate for the IT services industry for fiscal 2017/2018 was set at between 7-8%
The chart below shows the compensation committee approved performance goals for fiscal 2018.
Performance Measure | Weight | Threshold 33% | Target 100% | Maximum 200% | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenue | 50 | % | $ | 920 million | $ | 935 million | (1) | $ | 1,000 million | ||||
Non-GAAP Operating Income | 50 | % | $ | 71.3 million | $ | 76.5 million | (2) | $ | 92.0 million |
The rigor of our goal setting process for our performance-based equity awards is further demonstrated by the various levels of payouts earned over the last five fiscal years, as shown in the below chart:
The Number and Value of Annual Fiscal 2018 PSU Grants' Earned. Based on revenues of $1,020.7 million, our named executive officers earned 200% of their target Annual 2018 PSUs tied to revenue and based on non-GAAP operating income of $87.1 million our named executive officers earned 171.08% of their target Annual 2018 PSUs, which resulted in each named executive officer earning 185.54% of their respective target number of Annual 2018 PSUs. The chart below shows the number and value of PSUs earned at the conclusion of the fiscal 2018.
Name | Annual 2018 PSUs Granted at 100% Achievement of Target (#) | Achievement | PSUs Earned (#) | Value of PSUs Earned | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kris Canekeratne | 137,064 | 185.54 | % | 254,310 | $ | 8,905,981 | |||||||
Ranjan Kalia | 28,858 | 185.54 | % | 53,543 | $ | 1,875,101 | |||||||
Raj Rajgopal | 26,235 | 185.54 | % | 48,676 | $ | 1,704,667 | |||||||
Samir Dhir | 26,235 | 185.54 | % | 48,676 | $ | 1,704,667 | |||||||
Thomas R. Holler | 28,858 | 185.54 | % | 53,543 | $ | 1,875,101 |
Annual Fiscal 2018 RSU Grants
Description of Annual Fiscal 2018 RSU Grants. For fiscal 2018, the compensation committee approved a grant of time-based restricted stock units (RSUs) to each named executive officer ("Annual 2018 RSUs"). RSUs vest over a three-year period, with one-third vesting on June 1, 2018, June 1, 2019 and June 1, 2020. The number of RSUs which vest on each vesting date is settled in a like number of shares of our common stock. The grant of the Annual 2018 RSUs supports our philosophy to retain key talent by providing compensation to our named executive officers based on the completion of a service period. In addition, these grants incent our named executive officers to enhance shareholder value.
Annual Fiscal 2018 RSU Grants. The chart below shows the number and related grant date value of the Annual 2018 RSUs granted to each of our named executive officers.
Name | Annual 2018 RSUs (#) | Grant Date Value | |||||
---|---|---|---|---|---|---|---|
Kris Canekeratne | 34,266 | $ | 1,199,995 | ||||
Ranjan Kalia | 12,367 | $ | 433,092 | ||||
Raj Rajgopal | 11,243 | $ | 393,730 | ||||
Samir Dhir | 11,243 | $ | 393,730 | ||||
Thomas R. Holler | 12,367 | $ | 433,092 |
PEER REVIEW OF EXECUTIVE CHANGE IN CONTROL AGREEMENTS
During fiscal 2019, we undertook a comprehensive peer based review of the severance benefits ("Severance Benefits") provided under each of our named executive officer's Executive Agreement. Based on this review, our executive officers, including our named executive officers, with the exception of our President, DBS, entered into new Executive Agreements, effective July 25, 2018. These new Executive Agreements, which were previously approved by our Board and compensation committee, contained modifications designed to enhance the alignment of the Severance Benefits with market practices, including the elimination of the single trigger change of control and certain other changes. See section "CHANGES IN FISCAL 2019 TO EXECUTIVE CHANGE IN CONTROL AGREEMENTS" on page 52 for a summary of these changes.
STOCK OWNERSHIP GUIDELINES
We introduced equity ownership guidelines in November 2010 to align the interests of our executive officers, including our named executive officers,NEOs, and non-employee directors with those of our stockholders. Under the guidelines, executives and non-employee directors are expected to hold common stock in an amount equal to a multiple of their base salary as determined by their position. The compensation committee reviewed
the ownership levels and determined all our NEOs and members of the board of directors have met these guidelines. The guidelines range from three times base salary (in the case of our executives, other than our chief executive officer) to six times base salary for our chairman and chief executive officer.are as follows:
| | | | |
Named Executive Officer | Guideline as a Multiple of Salary or Fees | In Compliance (Yes/No) | ||
| | | | |
Kris Canekeratne | 6 x | Yes | ||
| | | | |
Ranjan Kalia | 3 x | Yes | ||
| | | | |
Samir Dhir | 3 x | Yes | ||
| | | | |
Thomas R. Holler | 3 x | Yes | ||
| | | | |
Keith Modder | 3 x | Yes | ||
| | | | |
Non-Employee Directors | 4 x | Yes | ||
| | | | |
In addition, under the guidelines, our directors are expected to hold common stock in an amount equal to four times their current annual board, cash retainer fee (excluding chairman fees).
For purposes of these guidelines, stockStock ownership includes shares over which the executive has direct or indirect ownership or control, including restricted stock and in-the-money vested stock options,RSUs but does not include unvested performance-based restricted stockPSUs or vested or unvested stock options. Named executive officers and directors
NEOs are expected to meet their ownership guidelines within three years of becoming subject to the guidelines. AllFor purposes of the foregoing chart, the compensation of non-employee directors' annual board cash retainer fee excludes chairman fees.
Anti-Hedging and Anti-Pledging Policies
We have adopted insider trading policies and procedures applicable to all of our namedemployees, including our NEOs. Our insider trading policies do not permit any insiders, including the NEOs and board members, to "hedge" ownership of Virtusa securities, or otherwise engage in short sales or purchases or sales of any other type of derivative securities with respect to Virtusa securities. In addition, no insider, including our NEOs and board members, may pledge Virtusa securities. Under our policy, we designate all executive officers and board members as "insiders", as well as any other employee who is designated as an insider by the General Counsel of the Company, if the General Counsel determines that such employee, in the ordinary course of performance of his/her duties, may have access to material, non-public information regarding the Company.
In May 2015, we adopted a clawback policy that provides that the board of directors have compliedhas discretion to clawback the amount of excess proceeds received by, or reduce the amount of future compensation payable to, an executive of the Company for excess proceeds from incentive compensation payable to, or received by, such executive due to misconduct by such executive that resulted in a material restatement of financial statements. The clawback period is the three-year period preceding the filing of any such restated financial statements with these guidelines.the SEC.
We believehave adopted a "code of ethics", as defined by regulations promulgated under the Securities Act and the Exchange Act, that maintaining a competitive benefit package forapplies to all our directors and employees worldwide, including our principal executive officer, principal financial officer, principal accounting officer and executive officerscontroller, or persons performing similar functions. A current copy of the Code of Business Conduct and Ethics is a key factor in attracting and retaining highly qualified personnel.
Executive officers are eligible to participate in allavailable at the Corporate Governance section of our group employee benefit plans, such as medical, dental, vision, group life and accidental death and dismemberment insurance and our 401(k) plan, in each case on the same basis as other employees.
Executive officers are also eligible to participate in our 401(k) plan, which we offer to all of our U.S. based employees. Eligible employees may contribute, on a pre-tax basis, a portion of their salaries to the 401(k) plan and invest their contributions among a family of mutual funds. We do not offerwebsite at
retirement benefitshttp://www.virtusa.com/investors. A copy of the Code of Business Conduct and Ethics may also be obtained, free of charge, from us upon a request directed to: Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772 Attention: Investor Relations.
We intend to disclose any amendment to or waiver of a provision of the Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website available at http://www.virtusa.com/investors and/or in our public filings with the SEC.
For more corporate governance information, you are invited to access the Corporate Governance section of our website available at http://www.virtusa.com/investors.
Risk Oversight of Compensation Programs
The compensation committee believes that our compensation program for fiscal 2020 for our NEOs is not reasonably likely to present a material adverse risk to us based on the following factors:
We provide no perquisitesthe Company, if the General Counsel determines that such employee, in the ordinary course of performance of his/her duties, may have access to material, non-public information regarding the Company.
compensation payable to, or received by, such executive due to misconduct by such executive that resulted in a material restatement of financial statements. The clawback period is the three-year period preceding the filing of any such restated financial statements with the SEC.
Tax Deductibility of our named executive officers.
SEVERANCE AND CHANGE IN CONTROL BENEFITSExecutive Compensation
In April 2007, we entered intoSection 162(m) of the Internal Revenue Code, as amended, generally disallows a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation's CEO and certain other executive agreementsofficers. However, prior to the amendment of Section 162(m) pursuant to 2017 Tax Cuts and Jobs Act ("Tax Act"), performance-based compensation was not subject to the $1 million deduction limit if certain requirements were met. Among other changes to Section 162(m), the Tax Act eliminated the exemption for performance-based compensation. The amendment to Section 162(m) is effective with Messrs. Canekeratnerespect to compensation paid in fiscal 2018 and Hollerin future years. The Tax Act includes a transition rule that allows the performance-based compensation exemption to continue for compensation payable pursuant a written binding contract in effect on November 2, 2017 that is not modified in any material respect before the compensation is paid ("Transition Rule").
The compensation committee will consider the impact of Section 162(m) when designing our cash and equity bonus program, but may elect to provide for certain severance and change in control payments. In July 2009, we entered into similar agreements with Mr. Rajgopal and Mr. Kaliacompensation that is not fully deductible as a result of their promotionsSection 162(m) if it determines it is in fiscal 2009. In connection with Mr. Dhir's appointmentour best interests. Further, to the extent that our NEOs participate in performance-based compensation plans that qualify for treatment as President of Virtusa, we entered into an amendedperformance-based compensation under the Transition Rule, the compensation committee may, at its discretion, consider actions that would be considered a material modification to such plan or agreement if it determines it is in our best interests.
Severance and restated executive agreement with Mr. Dhir, that provide for certain severance and changeChange in control payments.Control Benefits
Our goal in providing severance and change in control benefits is to offer sufficient cash continuity protection such that our executives will focus their full time and attention on the requirements of the business rather than the potential implications for their respective positions. We prefer to have certainty regarding the potential severance amounts payable to the named executive officersNEOs under certain circumstances, rather than negotiating severance at the time that a named executive officer'sNEO's employment terminates. We have also determined that accelerated vesting provisionsof certain equity awards in connection with a termination following a change in control are appropriate because they will encourage our restricted stock and option holders, including our named executive officers,NEOs to stay focused on the business in such circumstances, rather than the potential personal implications for them. See "Potential payments upon termination of change"Payments Upon Termination or Change in control"Control" set forth below for a more detailed discussion.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Prior to its amendment pursuant to 2017 Tax Cuts and Jobs Act ("Tax Act"), Section 162(m) of the Internal Revenue Code, as amended, generally disallowed a tax deduction to public corporations for compensation greater than $1 million paid for any fiscal year to the corporation's CEO and certain other executive officers. However, performance-based compensation was not subject to the $1 million deduction limit if certain requirements were met. Among other changes to Section 162(m), the Tax Act eliminated the exemption for performance-based compensation. The amendment to Section 162(m) is effective with respect to compensation paid in our fiscal 2019 and in future years. The Tax Act includes a transition rule that allows the performance-based compensation exemption to continue for executive officers with a right to participate in a plan that is part of a written binding contract in effect on November 2, 2017 that is not modified in any material respect before the compensation is paid ("Transition Rule"). However, the IRS has not issued complete guidance with respect to application of the Transition Rule.
During fiscal 2018, prior to the effectiveness of the amendment to Section 162(m), the compensation committee considered the impact of Section 162(m) when designing our cash and equity bonus program, but might have elected to provide compensation that was not fully deductible as a result of Section 162(m) if it determined it was in our best interests. Accordingly, during fiscal 2018, the compensation committee structured our fiscal 2018 variable cash compensation program for our named executive officers and the PSUs granted in fiscal 2018 in order to allow each to qualify as performance-based compensation under Section 162(m). The RSUs granted in fiscal 2018 did not qualify as performance-based compensation. To the extent that our named executive officers participate in performance-based compensation plans that are likely to qualify for treatment as performance-based compensation under the Transition Rule, the compensation committee may consider avoiding actions that would be considered a material modification to such plan or agreement if it determines it is in our best interests.
RISK OVERSIGHT OF COMPENSATION PROGRAMSCompensation Tables
The compensation committee believes that our compensation program for our named executive officers is not reasonably likely to present a material adverse risk to us based on the following factors:
EXECUTIVE COMPENSATION SUMMARY
The following table sets forth summary compensation information for the Company's chief executive officer, chief financial officer and the three other most highly compensated executive officers,NEOs, in each case, for the fiscal years ended March 31, 2018, 20172020, 2019 and 2016:2018:
Name and Principal Position | Year | Salary ($)(1) | Bonus ($) | Stock Awards ($)(2)(3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Kris Canekeratne | 2018 | 500,000 | — | 7,294,531 | — | 978,466 | — | — | 8,772,997 | |||||||||||||||||||
Chairman and Chief | 2017 | 475,000 | — | 4,220,310 | — | — | — | — | 4,695,310 | |||||||||||||||||||
Executive Officer | 2016 | 462,500 | — | 3,717,200 | — | 237,500 | — | — | 4,417,200 | |||||||||||||||||||
Ranjan Kalia | 2018 | 390,000 | — | 1,716,260 | — | 504,888 | — | — | 2,611,148 | |||||||||||||||||||
Executive Vice President and | 2017 | 360,000 | — | 1,707,466 | — | — | — | — | 2,067,466 | |||||||||||||||||||
Chief Financial Officer | 2016 | 352,500 | — | 1,301,018 | — | 115,000 | — | — | 1,768,518 | |||||||||||||||||||
Raj Rajgopal | 2018 | 400,000 | — | 1,560,266 | — | 743,634 | — | — | 2,703,900 | |||||||||||||||||||
President, DBS | 2017 | 375,000 | — | 1,164,366 | — | — | — | — | 1,539,366 | |||||||||||||||||||
2016 | 372,500 | — | 1,486,870 | — | 175,000 | — | — | 2,034,370 | ||||||||||||||||||||
Samir Dhir | 2018 | 360,000 | 100,000 | (6) | 1,560,266 | — | 587,079 | — | 174,857 | (7) | 2,782,202 | |||||||||||||||||
President(5) | 2017 | 252,241 | — | 1,058,139 | — | — | — | 29,026 | (7) | 1,339,406 | ||||||||||||||||||
2016 | 234,864 | — | 929,264 | — | 88,094 | — | 20,595 | (7) | 1,272,817 | |||||||||||||||||||
Thomas R. Holler | 2018 | 355,000 | — | 1,716,260 | — | 518,587 | — | — | 2,589,847 | |||||||||||||||||||
Executive Vice President, | 2017 | 340,000 | — | 1,346,575 | — | — | — | — | 1,686,575 | |||||||||||||||||||
and Chief Strategy Officer | 2016 | 332,500 | — | 1,486,870 | — | 115,000 | — | — | 1,934,370 |
Name and Principal Position | Year | Salary ($) (1) | Bonus ($) | Stock Awards ($) (2) (3) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) (4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Kris Canekeratne | | 2020 | | 525,000 | | - | | 7,710,743 | | - | | - | | - | | - | | 8,235,743 | ||||||||||
Chairman and Chief | | 2019 | | 513,000 | | - | | 6,920,730 | | - | | 545,749 | | - | | - | | 7,979,479 | ||||||||||
Executive Officer | | 2018 | | 500,000 | | - | | 7,294,531 | | - | | 978,466 | | - | | - | | 8,772,997 | ||||||||||
Ranjan Kalia | 2020 | 410,000 | - | 2,043,348 | - | - | - | - | 2,453,348 | |||||||||||||||||||
Executive Vice President and | 2019 | 400,000 | - | 1,864,099 | - | 285,868 | - | - | 2,549,967 | |||||||||||||||||||
Chief Financial Officer | 2018 | 390,000 | - | 1,716,260 | - | 504,888 | - | - | 2,611,148 | |||||||||||||||||||
Samir Dhir | | 2020 | | 410,000 | | - | | 2,077,814 | | - | | - | | - | | - | | 2,487,814 | ||||||||||
President, Head of Americas | | 2019 | | 400,000 | | 100,000 | | 2,330,098 | | - | | 363,832 | | - | | - | | 3,193,930 | ||||||||||
| | 2018 | | 360,000 | | 100,000 | | 1,560,266 | | - | | 587,079 | | - | | 174,857 | | 2,782,202 | ||||||||||
Thomas R. Holler | 2020 | 375,000 | - | 1,649,449 | - | - | - | - | 2,024,449 | |||||||||||||||||||
Executive Vice President, | 2019 | 364,000 | - | 1,506,762 | - | 291,066 | - | - | 2,161,828 | |||||||||||||||||||
and Chief Strategy Officer | 2018 | 355,000 | - | 1,716,260 | - | 518,587 | - | - | 2,589,847 | |||||||||||||||||||
Keith Modder | | 2020 | | 315,256 | | - | | 1,807,009 | | - | | - | | 32,727 | (6) | | 103,441 | (7) | | 2,258,433 | ||||||||
Executive Vice President, | | 2019 | | 288,975 | | - | | 1,449,854 | | - | | 259,881 | | 10,237 | | 79,689 | | 2,088,636 | ||||||||||
Chief Operating Officer | | 2018 | | 291,340 | | - | | 1,560,266 | | - | | 450,094 | | 22,207 | | 94,333 | | 2,418,240 | ||||||||||
& Managing Director, EMEA (5) | | | | | | | | | |
date fair valuevalues of stock awards subject tothe PSUs assuming the highest level of performance conditions (i.e., performance share units), assuming achievement of maximum performance for the fiscal year ended March 31, 2018:
Name | Grant Date Fair Value of Assuming Achievement of Maximum Performance ($) | |||||
---|---|---|---|---|---|---|
Kris Canekeratne | ||||||
Ranjan Kalia | ||||||
| ||||||
Samir Dhir | ||||||
Thomas R. Holler | ||||||
Keith Modder | 2,187,760 |
| | | | | | | | |
Perquisite | Fiscal 2020 | |||||||
| | | | | | | | |
| Company-paid vehicle | | $31,175 | | ||||
| | | | | | | | |
Company paid health insurance premium | $18,926 | |||||||
| | | | | | | | |
| Golf and athletic club memberships | | $1,324 | | ||||
| | | | | | | | |
Employee provident fund and employee trust fund contributions | $47,288 | |||||||
| | | | | | | | |
| Company-owned auto expenses | | $4,728 | | ||||
| | | | | | | | |
Total: | $103,441 | |||||||
| | | | | | | | |
Perquisite | Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Company-paid vehicle(a) | $ | 18,829 | $ | 12,222 | ||||||
Company paid health insurance premium | $ | 353 | $ | 208 | ||||||
Employee provident fund and employee trust fund contributions | $ | 4,606 | $ | 4,718 | ||||||
Company-owned auto expenses | $ | 5,238 | $ | 3,447 | ||||||
Housing(b) | $ | 138,288 | ||||||||
Business round trip to India for family(c) | $ | 9,483 | ||||||||
Car Rental(c) | $ | 27,086 | ||||||||
Total: | $ | 174,857 | $ | 29,026 | $ | 20,595 |
TableFiscal 2020 Grants of Contents
FISCAL 2018 GRANTS OF PLAN-BASED AWARDSPlan-based Awards
The compensation committee approves all of our equity-based and non-equity-based awards to all of our employees, including our executive officers. The expected payouts under the non-equity incentive plan awards in the table below for Messrs. Canekeratne, Kalia, Rajgopal, Dhir and Holler are those under our VCCP. All of these incentive plans areVCCP, which is discussed above and amountsabove. Amounts awarded are recorded in the fiscal year to which they apply and there are no provisions for future payouts.
GRANTGRANTS OF PLAN-BASED AWARDS
| | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards | Estimated Future Payouts under Equity Incentive Plan Awards | Exercise or Base Price of Option or Stock Awards ($/Share) | Grant Date Fair Value of Option and Stock Awards ($)(2) | |||||||||||||||||||||||||||||||
Name | Grant Date | Action Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||
Kris Canekeratne | — | — | 165,000 | 500,000 | 1,000,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | 45,231 | 137,064 | 274,128 | (3) | — | — | — | 6,094,536 | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | — | — | — | 34,266 | (4) | — | — | 1,199,995 | |||||||||||||||||||||||||
Ranjan Kalia | — | — | 85,140 | 258,000 | 516,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | 9,523 | 28,858 | 57,716 | (3) | — | — | — | 1,283,168 | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | — | — | — | 12,367 | (4) | — | — | 433,092 | |||||||||||||||||||||||||
Raj Rajgopal | — | — | 125,400 | 380,000 | 760,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | 8,657 | 26,235 | 52,470 | (3) | — | — | — | 1,166,536 | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | — | — | — | 11,243 | (4) | — | — | 393,730 | |||||||||||||||||||||||||
Samir Dhir | — | — | 99,000 | 300,000 | 600,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | 8,657 | 26,235 | 52,470 | (3) | — | — | — | 1,166,536 | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | — | — | — | 11,243 | (4) | — | — | 393,730 | |||||||||||||||||||||||||
Thomas R. Holler | — | — | 87,450 | 265,000 | 530,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | 9,523 | 28,858 | 57,716 | (3) | — | — | — | 1,283,168 | |||||||||||||||||||||||||
8/10/2017 | 6/29/2017 | — | — | — | — | — | — | 12,367 | (4) | — | — | 433,092 |
| | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option or Stock Awards ($/Share) | | |||||||||||||||
| | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards | Estimated Future Payouts under Equity Incentive Plan Awards | Grant Date Fair Value of Stock and Option Awards ($) (2) | |||||||||||||||||||||
Name | Grant Date | Action Date | Threshold ($)(1) | Target ($)(1) | Maximum ($)(1) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Kris Canekeratne | — | — | 133,750 | 535,000 | 1,070,000 | — | — | | — | | — | — | — | — | ||||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | 30,800 | 123,200 | | 246,400 | (3) | | — | — | — | 6,373,715 | |||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | — | — | | — | | 30,800 | (4) | — | — | 1,337,028 | |||||||||||
Ranjan Kalia | — | — | 72,500 | 290,000 | 580,000 | — | — | — | — | — | — | — | ||||||||||||||
5/20/2019 | 5/14/2019 | — | — | — | 7,262 | 29,050 | 58,100 | (3) | — | — | — | 1,502,893 | ||||||||||||||
5/20/2019 | 5/14/2019 | — | — | — | — | — | — | 12,450 | (4) | — | — | 540,455 | ||||||||||||||
Samir Dhir | — | — | 91,250 | 365,000 | 730,000 | — | — | | — | | — | — | — | — | ||||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | 7,385 | 29,540 | | 59,080 | (3) | | — | — | — | 1,528,243 | |||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | — | — | | — | | 12,660 | (4) | — | — | 549,571 | |||||||||||
Thomas R. Holler | — | — | 72,500 | 290,000 | 580,000 | — | — | — | — | — | — | — | ||||||||||||||
5/20/2019 | 5/14/2019 | — | — | — | 5,862 | 23,450 | 46,900 | (3) | — | — | — | 1,213,179 | ||||||||||||||
5/20/2019 | 5/14/2019 | — | — | — | — | — | — | 10,050 | (4) | — | — | 436,271 | ||||||||||||||
Keith Modder | — | — | 67,500 | 270,000 | 540,000 | — | — | | — | | — | — | — | — | ||||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | 6,422 | 25,690 | | 51,380 | (3) | | — | — | — | 1,329,064 | |||||||||||
| 5/20/2019 | 5/14/2019 | — | — | — | — | — | | — | | 11,010 | (4) | — | — | 477,944 | |||||||||||
FISCAL 2018 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDFiscal 2020 Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information concerning the number of outstanding equity awards held by our named executive officers that are exercisable and unexercisable or vested and not vestedNEOs at March 31, 2018:2020:
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
| Option Awards | Stock Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date(1) | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Unit Other Rights That Have Not Vested ($)(2) | |||||||||||||||||
Kris Canekeratne | 38,175 | — | 9.82 | 8/4/2019 | — | — | — | — | |||||||||||||||||
— | — | — | — | 18,480 | (3) | 895,541 | — | — | |||||||||||||||||
— | — | — | — | 34,266 | (4) | 1,660,530 | — | — | |||||||||||||||||
— | — | — | — | 9,998 | (5) | 484,503 | — | — | |||||||||||||||||
— | — | — | — | — | — | 150,000 | (7) | 7,269,000 | |||||||||||||||||
— | — | — | — | — | — | 137,064 | (8) | 6,642,121 | |||||||||||||||||
Ranjan Kalia | 6,135 | — | 10.02 | 5/23/2018 | — | — | — | — | |||||||||||||||||
2,139 | — | 9.82 | 8/4/2019 | — | — | — | — | ||||||||||||||||||
— | — | — | — | 5,775 | (3) | 279,857 | — | — | |||||||||||||||||
— | — | — | — | 12,367 | (4) | 599,305 | — | — | |||||||||||||||||
— | — | — | — | 3,399 | (5) | 164,716 | — | — | |||||||||||||||||
— | — | — | — | 10,000 | (6) | 484,600 | — | — | |||||||||||||||||
— | — | — | — | — | — | 50,000 | (7) | 2,423,000 | |||||||||||||||||
— | — | — | — | — | — | 28,858 | (8) | 1,398,459 | |||||||||||||||||
Raj Rajgopal | 1,360 | — | 10.02 | 5/23/2018 | — | — | — | — | |||||||||||||||||
2,665 | — | 9.82 | 8/4/2019 | — | — | — | — | ||||||||||||||||||
— | — | — | — | — | — | — | — | ||||||||||||||||||
— | — | — | — | 5,775 | (3) | 279,857 | — | — | |||||||||||||||||
— | — | — | — | 11,243 | (4) | 544,836 | — | — | |||||||||||||||||
— | — | — | — | 3,699 | (5) | 179,254 | — | — | |||||||||||||||||
— | — | — | — | — | — | 40,000 | (7) | 1,938,400 | |||||||||||||||||
— | — | — | — | — | — | 26,235 | (8) | 1,271,348 | |||||||||||||||||
Samir Dhir | — | — | — | — | 3,465 | (3) | 167,914 | — | — | ||||||||||||||||
— | — | — | — | 11,243 | (4) | 544,836 | — | — | |||||||||||||||||
— | — | — | — | 2,199 | (5) | 106,564 | — | — | |||||||||||||||||
— | — | — | — | — | — | 40,000 | (7) | 1,938,400 | |||||||||||||||||
— | — | — | — | — | — | 26,235 | (8) | 1,271,348 | |||||||||||||||||
Thomas R. Holler | — | — | — | — | 4,851 | (3) | 235,079 | — | — | ||||||||||||||||
— | — | — | — | 12,367 | (4) | 599,305 | — | — | |||||||||||||||||
— | — | — | — | 3,099 | (5) | 150,178 | — | — | |||||||||||||||||
— | — | — | — | — | — | 50,000 | (7) | 2,423,000 | |||||||||||||||||
— | — | — | — | — | — | 28,858 | (8) | 1,398,459 |
Stock Awards | |||||||||||||
| | | | | | | | | | | | | |
Name | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(1) | |||||||||
| | | | | | | | | | | | | |
Kris Canekeratne | | 11,423 | (2) | | 324,413 | | — | | — | ||||
| | 18,718 | (3) | | 531,591 | | — | | — | ||||
| | 30,800 | (4) | | 874,720 | | — | | — | ||||
| | 78,549 | (5) | | 2,230,792 | | — | | — | ||||
| | — | | — | | 105,000 | (7) | | 2,982,000 | ||||
| | — | | — | | 123,200 | (8) | | 3,498,880 | ||||
Ranjan Kalia | 4,123 | (2) | 117,093 | — | — | ||||||||
7,600 | (3) | 215,840 | — | — | |||||||||
12,450 | (4) | 353,580 | — | — | |||||||||
18,604 | (5) | 528,354 | — | — | |||||||||
2,000 | (6) | 56,800 | — | — | |||||||||
— | — | 35,000 | (7) | 994,000 | |||||||||
— | — | 29,050 | (8) | 825,020 | |||||||||
Samir Dhir | | 3,748 | (2) | | 106,443 | | — | | — | ||||
| | 9,500 | (3) | | 269,800 | | — | | — | ||||
| | 12,660 | (4) | | 359,544 | | — | | — | ||||
| | 23,254 | (5) | | 660,414 | | — | | — | ||||
| | — | | — | | 28,000 | (7) | | 795,200 | ||||
| | — | | — | | 29,540 | (8) | | 838,936 | ||||
Thomas R. Holler | 4,123 | (2) | 117,093 | — | — | ||||||||
6,143 | (3) | 174,461 | — | — | |||||||||
10,050 | (4) | 285,420 | — | — | |||||||||
15,037 | (5) | 427,051 | — | — | |||||||||
— | — | 35,000 | (7) | 994,000 | |||||||||
— | — | 23,450 | (8) | 665,980 | |||||||||
Keith Modder | | 3,748 | (2) | | 106,443 | | — | | — | ||||
| | 5,911 | (3) | | 167,872 | | — | | — | ||||
| | 11,010 | (4) | | 312,684 | | — | | — | ||||
| | 14,469 | (5) | | 410,920 | | — | | — | ||||
| | — | | — | | 28,000 | (7) | | 795,200 | ||||
| | — | | — | | 25,690 | (8) | | 729,596 |
of Plan Based Awards" listed above under the column "Estimated Future Payouts under Equity Incentive Plan Awards" for more details on these grants. See also the section "Compensation DiscussionFiscal 2020 Option Exercises and Analysis-Annual Fiscal 2018 PSU Grants" for more details.
GAAP Revenue (50%) | Conditional Vesting Percentage | Non-GAAP Operating Income (50%) | Conditional Vesting Percentage | |||||||
---|---|---|---|---|---|---|---|---|---|---|
$1,000M | 200 | % | $92.0M | 200 | % | |||||
$970M | 175 | % | $88.0M | 175 | % | |||||
$950M | 150 | % | $82.1M | 150 | % | |||||
$935M | 100 | % | $76.5M | 100 | % | |||||
$920M | 33 | % | $71.3M | 33 | % | |||||
Below $920M | 0 | % | Below $71.3M | 0 | % |
To the extent that the Company achieves at least the minimum targets above, the shares underlying the PSUs are then subject to time-based vesting as follows: 33% vest on September 1, 2018 and the remaining 67% vest on March 1, 2020. See the table "Grant of Plan Based Awards" listed above under the column "Estimated Future Payouts under Equity Incentive Plan Awards" for more details on these grants. See also the section "Compensation Discussion and Analysis-Annual Fiscal 2018 PSU Grants" for more details.
FISCAL 2018 OPTION EXERCISES AND STOCK VESTEDStock Vested
The following table sets forth for each named executive officerNEO certain information with respect to the exercise of stock options and the vesting of restricted stock awards during the fiscal year ended March 31, 2018:2020:
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(2) | |||||||||
Kris Canekeratne | 100,000 | 1,466,340 | 104,670 | 4,374,735 | |||||||||
Ranjan Kalia | 13,865 | 547,787 | 39,269 | 1,644,971 | |||||||||
Raj Rajgopal | 32,201 | 1,046,402 | 39,951 | 1,682,654 | |||||||||
Samir Dhir | — | — | 24,597 | 1,039,747 | |||||||||
Thomas R. Holler | — | — | 37,283 | 1,598,075 |
Option Awards | Stock Awards | ||||||||||||
| | | | | | | | | | | | | |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($)(1) | |||||||||
| | | | | | | | | | | | | |
Kris Canekeratne | | — | | — | | 229,855 | | 9,856,904 | |||||
Ranjan Kalia | — | — | 56,957 | 2,425,036 | |||||||||
Samir Dhir | | — | | — | | 52,563 | | 2,219,325 | |||||
Thomas R. Holler | — | — | 50,473 | 2,164,910 | |||||||||
Keith Modder | | — | | — | | 46,443 | | 1,989,118 |
PENSION BENEFITSPension Benefits
NoneOur subsidiary, Virtusa (Sri Lanka) Private Limited, contributes to a defined benefit plan covering its respective employees in Sri Lanka as mandated by the Sri Lankan government. Benefits are based on the employee's years of service and compensation level. Except for Mr. Modder, none of our named executive officersother NEOs are covered by a pension plan or other similar benefit plan that provides for payments or other benefits at, following, or in connection with retirement.
The following table summarizes the defined benefit plan of our Sri Lanka subsidiary for our fiscal year ended March 31, 2020:
NONQUALIFIED DEFERRED COMPENSATION
2020 Pension Benefits
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefits ($)(1) | Payments During Last Fiscal Year ($) | ||||||
| | | | | | | | | | |
| Sri Lanka | | | | | |||||
Keith Modder | Benefit Gratuity | 19 | 249,458 | (2) | — | |||||
| Plan | | | | | |||||
| | | | | | | | | | |
monthly salary times the number of years of credited service. The amount reflected in the table represents the accumulated benefits payable at the end of fiscal 2020.
Nonqualified Deferred Compensation
None of our named executive officersNEOs are covered by a defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
POTENTIAL PAYMENTS UPON TERMINATION OF CHANGE IN CONTROLPotential Payments Upon Termination or Change in Control
In April 2007, we entered into executive agreements with Messrs. Canekeratne and Holler, in July 2009, we entered into executive agreements with Messrs. Rajgopal and Kalia, and in August 2017, we entered into an amended and restated executive agreement with Mr. Dhir, that provide for certain severance and change in control payments. The following summaries set forth potential payments payable to these executive officers upon termination of employment by us other than for cause or by the executive for good reason, or a change in control of us under the executive agreements and our other compensation programs. Cause is defined under these agreements to include willful misconduct or non-performance of duties, certain violations of our policies, the commission of a felony or misdemeanor involving moral turpitude and the failure to cooperate in certain internal or other investigations. Good reason includes a material reduction in the executive's annual base salary or targeted annual cash compensation, a substantial diminution of the executive's responsibility or authority or a more than 50 mile50-mile relocation of the executive's primary business location. The compensation committee may, in its discretion, revise, amend or add to the benefits if it deems advisable. See section "CHANGES IN FISCAL 2019 TO EXECUTIVE CHANGE IN CONTROL AGREEMENTS" on page 52.
Termination by us other than for cause or termination by executive for good reason, prior to a change in control. Our executive agreements with Messrs. Canekeratne, Kalia, Rajgopal, Dhir and Holler,our NEOs provide that if we terminate such executive's employment other than for cause, death or disability, or if such executive terminates his employment for good reason, the executive is entitled to a lump-sum severance payment (less applicable withholding taxes) equal to:
In addition, upon any such termination,
The foregoing benefits are subject to the execution of a general release by the executive officer.
Termination by us other than for cause or termination by executive for good reason following a change in control. Our executive agreements with our NEOs provide that, in the event of a termination of employment other than for cause, death or disability, or if such executive terminates his employment for good reason, within 24 months following a change in control, such executive is entitled to a lump-sum severance payment (less applicable withholding taxes) equal to:
In addition, upon any such termination,
The foregoing benefits are subject to the execution of a general release by the executive officer.
Termination by us other than for cause or termination by executive for good reason following a change in control. Our executive agreements with our other executive officers provide that, in the event of a termination of employment other than for cause, or if such executive terminates his employment for good reason, within 24 months following a change in control in the case of Mr. Canekeratne and 12 months following a change in control in the case of Messrs. Kalia, Rajgopal, Dhir and Holler, such executive is entitled to a lump-sum severance payment (less applicable withholding taxes) equal to:
In addition, upon any such termination, Mr. Canekeratne is entitled to continued health benefits for 24 months and each of Messrs. Kalia, Rajgopal, Dhir and Holler is entitled to six months of continued health benefits, upon a change of control. All unvested equity awards held by each such executive officer also become fully-vested and immediately exercisable. The foregoing benefits are subject to the execution of a general release by the executive officer.
Automatic acceleration of vesting upon a change in control. The terms of our executive agreements with our executive officers listed above whose rights and obligations on employment termination are solely stated aboveNEOs provide that the equity awards granted to such executive officers prior to November 2, 2017 will have their vesting accelerated by 12 months upon any change in control, regardless of whether there is a subsequent termination of employment. With respect to all equity awards granted after November 2, 2017, the acceleration of 12 months of vesting solely upon a change in control has been eliminated in the event that such awards are assumed, continued or substituted with equivalent awards following the change in control.
KRIS CANEKERATNE
The following table describes the potential payments and benefits upon employment termination or change in control for Kris Canekeratne, our chairman and chief executive officer,CEO, as if his employment terminated asthe triggering event occurred of March 31, 2018,2020, the last business day of our last fiscal year.year and assuming that Mr. Canekeratne's equity awards are assumed, continued or substituted with equivalent awards in a change in control.
Executive Benefits and Payments Upon Termination | Voluntary Resignation for Good Reason | Termination by the Company for Other Than Cause | Termination by the Company for Other Than Cause or Voluntary Resignation for Good Reason Following Change in Control | Acceleration Following Change in Control | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary | $ | 500,000 | $ | 500,000 | $ | 1,000,000 | $ | — | |||||
Variable Cash Compensation(1) | 978,466 | 978,466 | 1,956,932 | — | |||||||||
Accrued vacation | 38,464 | 38,464 | 38,464 | — | |||||||||
Acceleration of stock option vesting | — | — | — | — | |||||||||
Acceleration of restricted stock award vesting(2) | — | — | 15,364,437 | 6,000,366 | |||||||||
Continued health benefits | 10,308 | 10,308 | 20,615 | — | |||||||||
| | | | | | | | | | | | | |
Total | $ | 1,527,238 | $ | 1,527,238 | $ | 18,380,448 | $ | 6,000,366 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Executive Benefits and Payments Upon Termination | | Resignation for Good Reason | | Termination by the Company for Other Than Cause | | Termination by the Company for Other Than Cause or Resignation for Good Reason Following Change in Control | | Acceleration Upon Change in Control | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | |
Base salary | $ | | 787,500 | $ | | 787,500 | $ | | 1,050,000 | $ | | - | ||||||||||
Variable Cash Compensation (1) | 802,500 | 802,500 | 1,070,000 | - | ||||||||||||||||||
Continued health benefits | | | 15,709 | | | 15,709 | | | 20,945 | | | - | ||||||||||
Accrued vacation | 40,387 | 40,387 | 40,387 | - | ||||||||||||||||||
Acceleration of restricted stock unit vesting(2) | | | - | | | - | | | 7,460,396 | | | 324,413 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 1,646,096 | $ | 1,646,096 | $ | 9,641,728 | $ | 324,413 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
RANJAN KALIA
The following table describes the potential payments and benefits upon employment termination or change in control for Ranjan Kalia, our executive vice president and chief financial officer,CFO, as if his employment terminatedthe triggering event occurred as of March 31, 2018,2020, the last business day of our last fiscal year.year and assuming that Mr. Kalia's equity awards are assumed, continued or substituted with equivalent awards in a change in control.
Executive Benefits and Payments Upon Termination | Voluntary Resignation for Good Reason | Termination by the Company for Other Than Cause | Termination by the Company for Other Than Cause or Voluntary Resignation for Good Reason Following Change in Control | Acceleration Following Change in Control | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary | $ | 195,000 | $ | 195,000 | $ | 195,000 | $ | — | |||||
Variable Cash Compensation(1) | 504,888 | 504,888 | 504,888 | — | |||||||||
Accrued vacation | 29,756 | 29,756 | 29,756 | — | |||||||||
Acceleration of stock option vesting | — | — | — | — | |||||||||
Acceleration of restricted stock award vesting(2) | — | — | 4,123,171 | 1,694,404 | |||||||||
Continued health benefits | 5,154 | 5,154 | 5,154 | — | |||||||||
| | | | | | | | | | | | | |
Total | $ | 734,798 | $ | 734,798 | $ | 4,857,968 | $ | 1,694,404 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Executive Benefits and Payments Upon Termination | | Resignation for Good Reason | | Termination by the Company for Other Than Cause | | Termination by the Company for Other Than Cause or Resignation for Good Reason Following Change in Control | | Acceleration Upon Change in Control | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | |
Base salary | $ | | 410,000 | $ | | 410,000 | $ | | 615,000 | $ | | - | ||||||||||
Variable Cash Compensation—Actual (1) | 290,000 | 290,000 | 435,000 | - | ||||||||||||||||||
Continued health benefits | | | 10,472 | | | 10,472 | | | 15,709 | | | - | ||||||||||
Accrued vacation | 23,384 | 23,384 | 23,384 | - | ||||||||||||||||||
Acceleration of restricted stock unit vesting(2) | | | - | | | - | | | 2,096,687 | | | 173,893 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 733,856 | $ | 733,856 | $ | 3,185,780 | $ | 173,893 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
RAJ RAJGOPAL
The following table describes the potential payments and benefits upon employment termination or change in control for Raj Rajgopal, our president, as if his employment terminated as of March 31, 2018, the last business day of our last fiscal year.
Executive Benefits and Payments Upon Termination | Voluntary Resignation for Good Reason | Termination by the Company for Other Than Cause | Termination by the Company for Other Than Cause or Voluntary Resignation for Good Reason Following Change in Control | Acceleration Following Change in Control | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary | $ | 200,000 | $ | 200,000 | $ | 200,000 | $ | — | |||||
Variable Cash Compensation(1) | 743,634 | 743,634 | 743,634 | — | |||||||||
Accrued vacation | 30,771 | 30,771 | 30,771 | — | |||||||||
Acceleration of stock option vesting | — | — | — | — | |||||||||
Acceleration of restricted stock award vesting(2) | — | — | 3,362,785 | 1,419,054 | |||||||||
Continued health benefits | 5,154 | 5,154 | 5,154 | — | |||||||||
| | | | | | | | | | | | | |
Total | $ | 979,559 | $ | 979,559 | $ | 4,342,344 | $ | 1,419,054 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
SAMIR DHIR
The following table describes the potential payments and benefits upon employment termination or change in control for Samir Dhir, our president and head of Americas, as if his employment terminatedthe triggering event occurred as of March 31, 2018,2020, the last business day of our last fiscal year.year and assuming that Mr. Dhir's equity awards are assumed, continued or substituted with equivalent awards in a change in control.
Executive Benefits and Payments Upon Termination | Voluntary Resignation for Good Reason | Termination by the Company for Other Than Cause | Termination by the Company for Other Than Cause or Voluntary Resignation for Good Reason Following Change in Control | Acceleration Following Change in Control | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary | $ | 180,000 | $ | 180,000 | $ | 180,000 | $ | — | |||||
Variable Cash Compensation(1) | 587,079 | 587,079 | 587,079 | — | |||||||||
Accrued vacation | 27,694 | 27,694 | 27,694 | — | |||||||||
Acceleration of stock option vesting | — | — | — | — | |||||||||
Acceleration of restricted stock award vesting(2) | — | — | 3,178,152 | 1,234,422 | |||||||||
Continued health benefits | 5,154 | 5,154 | 5,154 | — | |||||||||
| | | | | | | | | | | | | |
Total | $ | 799,927 | $ | 799,927 | $ | 3,978,079 | $ | 1,234,422 | |||||
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Executive Benefits and Payments Upon Termination | | Resignation for Good Reason | | Termination by the Company for Other Than Cause | | Termination by the Company for Other Than Cause or Resignation for Good Reason Following Change in Control | | Acceleration Upon Change in Control | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | |
Base salary | $ | | 410,000 | $ | | 410,000 | $ | | 615,000 | $ | | - | ||||||||||
Variable Cash Compensation (1) | 365,000 | 365,000 | 547,500 | - | ||||||||||||||||||
Continued health benefits | | | 10,472 | | | 10,472 | | | 15,709 | | | - | ||||||||||
Accrued vacation | 31,541 | 31,541 | 31,541 | - | ||||||||||||||||||
Acceleration of restricted stock unit vesting(2) | | | - | | | - | | | 2,235,137 | | | 106,443 | ||||||||||
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Total | $ | 817,013 | $ | 817,013 | $ | 3,444,887 | $ | 106,443 | ||||||||||||||
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THOMAS R. HOLLER
The following table describes the potential payments and benefits upon employment termination or change in control for Thomas R. Holler, our executive vice president and chief strategy officer, as if his employment terminatedthe triggering event occurred as of March 31, 2018,2020, the last business day of our last fiscal year.year and assuming that Mr. Holler's equity awards are assumed, continued or substituted with equivalent awards in a change in control.
Executive Benefits and Payments Upon Termination | Voluntary Resignation for Good Reason | Termination by the Company for Other Than Cause | Termination by the Company for Other Than Cause or Voluntary Resignation for Good Reason Following Change in Control | Acceleration Following Change in Control | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Base salary | $ | 177,500 | $ | 177,500 | $ | 177,500 | $ | — | |||||
Variable Cash Compensation(1) | 518,587 | 518,587 | 518,587 | — | |||||||||
Accrued vacation | 27,310 | 27,310 | 27,310 | — | |||||||||
Acceleration of stock option vesting | — | — | — | — | |||||||||
Acceleration of restricted stock award vesting(2) | — | — | 3,579,256 | 1,441,249 | |||||||||
Continued health benefits | 5,154 | 5,154 | 5,154 | — | |||||||||
| | | | | | | | | | | | | |
Total | $ | 728,551 | $ | 728,551 | $ | 4,307,807 | $ | 1,441,249 | |||||
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Executive Benefits and Payments Upon Termination | | Resignation for Good Reason | | Termination by the Company for Other Than Cause | | Termination by the Company for Other Than Cause or Resignation for Good Reason Following Change in Control | | Acceleration Upon Change in Control | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Base salary | $ | | 375,000 | $ | | 375,000 | $ | | 562,500 | $ | | - | ||||||||||
Variable Cash Compensation (1) | 290,000 | 290,000 | 435,000 | - | ||||||||||||||||||
Continued health benefits | | | 10,472 | | | 10,472 | | | 15,709 | | | - | ||||||||||
Accrued vacation | 27,164 | 27,164 | 27,164 | - | ||||||||||||||||||
Acceleration of restricted stock unit vesting(2) | | | - | | | - | | | 1,670,005 | | | 117,093 | ||||||||||
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Total | $ | 702,636 | $ | 702,636 | $ | 2,710,378 | $ | 117,093 | ||||||||||||||
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CHANGES IN FISCAL 2019 TO EXECUTIVE CHANGE IN CONTROL AGREEMENTS
As previously mentioned under the section "PEER REVIEW OF EXECUTIVE CHANGE IN CONTROL AGREEMENTS" on page 40, during fiscal 2019, we undertook a comprehensive peer based review of the severance benefits ("Severance Benefits") provided under each of our named executive officer's Executive Agreement. Based on this review, our executive officers, including our named executive officers, with the exception of our President, DBS, entered into new executive agreements, effective July 25, 2018. These new executive agreements, which were previously approved by our Board and compensation committee, contained modifications designed to enhance the alignment of the Severance Benefits with market practice. These modifications for these executive officers are described below.
The following changes relate to Severance Benefits provided to these executive officers upon a termination without cause or a termination for good reason following a change in control.
KEITH MODDER
The following table describes the potential payments and benefits upon employment termination or change in control for Keith Modder, our executive vice president, chief operating officer and managing director, EMEA, as if the triggering event occurred as of March 31, 2020, the last business day of our last fiscal year and assuming that Mr. Modder's equity awards are assumed, continued or substituted with equivalent awards in a change in control. All cash amounts in U.S. dollars in the table below would be paid in Sri Lankan rupees.
Executive Benefits and Payments Upon Termination | | Resignation for Good Reason | | Termination by the Company for Other Than Cause | | Termination by the Company for Other Than Cause or Resignation for Good Reason Following Change in Control | | Acceleration Upon Change in Control | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | |
Base salary | $ | | 325,000 | $ | | 325,000 | $ | | 487,500 | $ | | - | ||||||||||
Variable Cash Compensation (1) | 270,000 | 270,000 | 405,000 | - | ||||||||||||||||||
Continued health benefits | | | 18,926 | | | 18,926 | | | 28,389 | | | - | ||||||||||
Accrued vacation | 24,021 | 24,021 | 24,021 | - | ||||||||||||||||||
Acceleration of restricted stock unit vesting(2) | | | - | | | - | | | 1,727,516 | | | 106,443 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 637,947 | $ | 637,947 | $ | 2,672,426 | $ | 106,443 | ||||||||||||||
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The following changes relate to Severance Benefits provided to these executive officers12 months vesting solely upon a termination without cause or a termination for good reason prior to a change in control.
Table of base salary and target bonus;Contents
EQUITY COMPENSATION PLAN INFORMATIONEquity Compensation Plan Information
The following table provides information about the securities authorized for issuance under our equity compensation plans as of March 31, 2018,2020, consisting of the 2015 Plan and the 2007 Stock Option and Incentive Plan.:Plan:
| Equity Compensation Plan Information | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted Average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)) (c) | |||||||
Equity compensation plans approved by security holders | 1,769,333 | (1) | 14.24 | (2) | 1,671,797 | (3) |
| | Equity Compensation Plan Information | | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | | Weighted Average exercise price of outstanding options, warrants and rights (b) | | Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)) (c) | | |||||||||
Equity compensation plans approved by security holders | | | 1,464,060 | (1) | | | 17.87 | (2) | | | 945,643 | | |
DIRECTOR COMPENSATION
Upon recommendation of the compensation committee, our Independent Board approved a fourth amended and restated non-employee director compensation policy, effective December 5, 2017, that provides for annual compensation of $200,000, of which we will make an annual restricted stock award/unit grant to each non-employee director with an economic value of $140,000 (with the number of shares (or underlying shares) determined by dividing $140,000 by the fair market value of the closing price of our common stock on the date of grant) and, effective on January 1, 2018, an annual retainer fee of $60,000 payable in cash. In addition, the following positions receive additional cash retainers:
Lead Independent Director | $ | 30,000 | ||
Chairman of the Audit Committee | $ | 22,000 | ||
Chairman of the Compensation Committee | $ | 15,000 | ||
Chairman of the Nominating and Corporate Governance Committee | $ | 10,000 | ||
Chairman of the Finance Committee | $ | 10,000 |
All cash payments will be made on a quarterly basis.
In addition, we will make, under our applicable stock plan, a one-time, initial restricted stock award (or unit award) of $50,000 with the number of shares (or underlying shares) determined by dividing $50,000 by the fair market value of the closing price of our common shares on the date of grant) to any new non-employee director who joins the board of directors. These shares will vest in three equal installments annually, with the first vesting date on the anniversary of the first day of the third month of the quarter following the director's join date.
Each restricted stock (or unit) award granted to a non-employee director under the non-employee director compensation policy will be made at the board of directors' meeting immediately following our annual meeting. The shares (or underlying shares) will vest in three equal installments annually at a rate of 33.33%, with the first installment vesting on the September 1 following the board meeting giving rise to the directors' annual equity award grant, with remaining vesting each one- year anniversary thereafter. The vesting of all equity awards granted to our non-employee directors will also accelerate by 12 months in the event of a change in control.
We reimburse all non-employee directors for their reasonable out-of-pocket expenses incurred in attending meetings of our board of directors or any committees thereof.
The following table sets forth a summary of the compensation earned by or paid to our non-employee directors for our fiscal year ended March 31, 2018:
Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Izhar Armony | 52,500 | 139,973 | — | — | — | — | 192,473 | |||||||||||||||
Rowland T. Moriarty(a) | 85,000 | 139,973 | — | — | — | — | 224,973 | |||||||||||||||
William K. O'Brien(b) | 66,500 | 139,973 | — | — | — | — | 206,473 | |||||||||||||||
Al-Noor Ramji | 52,500 | 139,973 | — | — | — | — | 192,473 | |||||||||||||||
Barry R. Nearhos(c) | 71,750 | 139,973 | — | — | — | — | 211,723 | |||||||||||||||
Joseph G. Doody | 52,500 | 139,973 | — | — | — | — | 192,473 | |||||||||||||||
Vikram S. Pandit(d) | 55,430 | 223,282 | (3)(4) | — | — | — | — | 278,712 |
The non-employee members of our board of directors who held such positions as of March 31, 2018 held the following aggregate number of unexercised options and unvested restricted stock awards as of such date:
Name | Number of Securities Underlying Unexercised Options | Number of Unvested Restricted Stock Awards/Units | |||||
---|---|---|---|---|---|---|---|
Izhar Armony | 21,267 | 7,258 | |||||
Rowland T. Moriarty | 13,906 | 7,258 | |||||
William K. O'Brien | 43,563 | 7,258 | |||||
Al-Noor Ramji | 22,921 | 7,258 | |||||
Barry R. Nearhos | — | 7,550 | |||||
Joseph G. Doody | — | 5,844 | |||||
Vikram S. Pandit | — | 5,458 |
The following table shows the grant of restricted stock awards/units made to the non-employee members of our board of directors during the fiscal year ended March 31, 2018:
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CEO PAY RATIOPay Ratio
In accordance with Item 402(u) of Regulation S-K, promulgated under the Dodd Frank Act, we determined the ratio of: (a) the annual total annual compensation of our CEO to (b) the annual total annual compensation of the median employee out of all of our employees, except for our CEO, both calculated in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
We selectedare required to identify the median employee once every three years unless re-calculation of the median employee is necessary or appropriate in light of a change to our employee population or compensation arrangements that would significantly impact the pay ratio disclosure. For the fiscal year ended March 31, 20182020, we finished the fiscal year with a total headcount of 22,830 as compared with a total headcount of 21,745 for the date onfiscal year ended March 31, 2019, which to determineis net of voluntary and involuntary attrition. Our employee population increased by approximately 5% and, accordingly, we re-identified our median employee.employee based on our global workforce of 22,830 employees as of March 31, 2020.
In identifying the worldwide median employee, as permitted by SEC rules, we elected to useused the consistently applied compensation measure of base salary as of March 31, 2018.2020. We did not include independent contractors in the calculation. For purposes of this disclosure, we converted employee compensation from local currency to U.S. dollars using an average of monthly exchange rates for fiscal 2018.2020.
The following table provides information, based on our reasonable estimates, about the relationship between the annual total annual compensation of our CEO and the median of the annual total annual compensation of all our employees (except for the CEO) as of March 31, 2018.2020.
Median Employee Total Annual Compensation | CEO Total Annual Compensation | Pay Ratio (CEO : Median Employee) | |||||
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$14,507 | $ | 8,772,998 | 605: 1 |
Median Employee Annual Total Compensation | CEO Annual Total Compensation | Pay Ratio (CEO : Median Employee) | ||
---|---|---|---|---|
$13,076 | $8,235,743 | 630 : 1 |
We calculated the annual total annual compensation for the median employee in the same manner used to calculate total compensation for each of our named executive officersNEOs as set forth in the "Summary Compensation Table" on page 42 of this proxy statement.
We operate in an employee-intensive industry and have a diverse, global workforce of more than 22,000 employees. The pay ratio and median annual total compensation disclosed above reflect that the bulk of our employees are located in countries that have significantly lower prevailing wages than the United States. The assumptions used in the calculation of our pay ratio are specific to our Company and our global employee population. As such, our pay ratio may not be comparable to the pay ratios of other companies, including companies in our compensation peer group.
The information disclosed in this section was developed and is provided solely to comply with specific legal requirements. We do not use this information in managing our Company. We do not believe this information provides stockholders with a useful mechanism for evaluating our management's effectiveness, operating results, or business prospects, nor for comparing our Company with any other company in any meaningful respect.
TRANSACTIONS WITH RELATED PERSONSTransactions with Related Persons
Other than compensation agreements, which are described above, and the transactions described below, since April 1, 2017,2019, there has not been and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any director, executive officer, holder of five percent or more of any class of our capital stock or any member of their immediate family had or will have a direct or indirect material interest.
We entered into an Investment Agreement, dated as of May 3, 2017, with Orogen, pursuant to which we issued and sold an aggregate of 108,000 shares of convertible preferred stock for aggregate consideration of $108.0 million. Following such transaction, the common stock issuable upon conversion of such convertible preferred stock represented beneficial ownership of approximately 9.18% as of June 30, 2017. In addition, we appointed Mr. Vikram S. Pandit, a nominee of Orogen, to our board of directors as a Series A Director, pursuant to the terms of the Investment Agreement and the terms of our convertible preferred stock.
Our Independent Board has adopted a written related party transaction approval policy, which sets forth our policies and procedures for the review, approval or ratification of any transaction required to be reported in our filings with the Securities and Exchange Commission.SEC. Our policy with regard to related party transactions is that all related party transactions are to be reviewed by our general counsel, who will determine whether the contemplated transaction or arrangement requires the approval of the Independent Board, the audit committee, both or neither.
PROPOSAL 2RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTANTS
The audit committee of the board of directors has retained the firm of KPMG LLP, independent registered public accountants, to serve as independent registered public accountants for our 2019 fiscal year. KPMG LLP has served as our independent registered public accounting firm since 2004. The audit committee reviewed and discussed its selection of, and the performance of, KPMG LLP for our 2019 fiscal year. As a matter of good corporate governance, the audit committee has determined to submit its selection to stockholders for ratification. If the selection of independent registered public accountants is ratified, the audit committee, at its discretion, may select a different independent registered public accounting firm at any time during the fiscal year if it determines that such a change would be in the best interests of us and our stockholders.
Representatives of KPMG LLP attended nine (9) of ten (10) meetings of the audit committee in our fiscal year ended March 31, 2018. We expect that a representative of KPMG LLP will attend the annual meeting, and the representative will have an opportunity to make a statement if he or she so desires. The representative will also be available to respond to appropriate questions from stockholders.
Fees billed by KPMG LLP
The following table shows the aggregate fees for professional services rendered by KPMG LLP to us during the fiscal years ended March 31, 2018 and 2017:
| 2018 | 2017 | |||||
---|---|---|---|---|---|---|---|
Audit Fees | $ | 2,186,011 | $ | 2,157,407 | |||
Audit-Related Fees | 317,848 | 8,043 | |||||
Tax Fees | 46,230 | 94,648 | |||||
All Other Fees | 49,206 | 31,033 | |||||
| | | | | | | |
Total | $ | 2,599,295 | $ | 2,291,131 |
Audit fees
Audit fees for both years consist of fees for professional services associated with the audit of our annual consolidated financial statements, the review of the consolidated interim financial statements and the audit of our internal control over financial reporting. These fees also include fees for services that are normally provided in connection with statutory audit and regulatory filings.
Audit-related fees
Fees for audit-related services consist of fees for statutory audit certification services, due diligence services provided in connection with acquisitions and other services that were reasonably related to the performance of audits or reviews of our financial statements and are not reported above under "Audit fees." The increase in audit-related services from fiscal year 2017 to 2018 was primarily due to the due diligence services and consultation on financial reporting matters provided in connection with the eTouch acquisition in fiscal year 2018.
Tax fees
Tax fees primarily consists of tax due diligence services provided in connection with acquisitions, including the eTouch acquisition. The audit committee has determined that the provision of these services to us by KPMG is compatible with maintaining their independence.
All other fees
All other fees relate to permissible non-audit services, and primarily include IT process assessment services.
All of the foregoing fees were pre-approved by the audit committee.
Audit committee pre-approval process of fees
The audit committee of the board of directors has implemented procedures under our audit committee pre-approval policy for audit and non-audit services, or the Pre-Approval Policy, to ensure that all audit and permitted non-audit services to be provided to us have been pre-approved by the audit committee. Specifically, the audit committee pre-approves the use of KPMG LLP for specific audit and non-audit services, within approved monetary limits. If a proposed service has not been pre-approved pursuant to the Pre-Approval Policy, then it must be specifically pre-approved by the audit committee before it may be provided by KPMG LLP. Any pre-approved services exceeding the pre-approved monetary limits require specific approval by the audit committee. For additional information concerning the audit committee and its activities with KPMG LLP, see "The Board of Directors and Its Committees" and "Report of the Audit Committee of the Board of Directors."
For Proposal 2, the ratification of the appointment of KPMG LLP as the Company's independent registered public accountants for the current fiscal year, an affirmative vote of a majority of the shares present, in person or represented by proxy, and voting on such matter is required for approval.
Recommendation of the board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOUVOTE"FOR" THE RATIFICATION OF KPMG LLPAS VIRTUSA CORPORATION'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTSFOR FISCAL YEAR ENDING MARCH 31, 2019
Other MattersPROPOSAL 3ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
The following proposal, commonly known as a say-on-pay proposal, is provided as required pursuant to Section 14A of the Exchange Act and gives our stockholders the opportunity to vote to approve or not approve, on an advisory basis, the compensation of our named executive officers. This vote is not intended to address any specific item of compensation or the compensation of any particular officer, but rather the overall compensation of our named executive officers and our compensation philosophy, policies and practices, as discussed in this proxy statement. Accordingly, we are asking our stockholders to vote "FOR" the following resolution at our annual meeting of stockholders:
"RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation of the Company's named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, compensation tables and narrative discussion."
This vote is advisory, and therefore not binding on the Company, the compensation committee or our board of directors. However, our board of directors and our compensation committee value the opinions of our stockholders and intend to take into account the outcome of the vote when considering future compensation decisions for our named executive officers.
Recommendation of the Board
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOUVOTE"FOR" THE APPROVAL OF, ON AN ADVISORY BASIS,THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERSAS DISCLOSED IN THIS PROXY STATEMENT.
The board of directors knows of no other matters to be brought before the annual meeting. If any other matters are properly brought before the annual meeting, the persons appointed in the accompanying proxy intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.
Stockholder ProposalsSTOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement to be furnished to all stockholders entitled to vote at our 20192021 annual meeting of stockholders, pursuant to Rule 14a-8 promulgated under the Exchange Act by the Securities and Exchange Commission,SEC, must be received at the Company's principal executive offices not later than April 4, 2019.[ · ], 2021. Stockholders who wish to make a proposal and/or nominate director candidates at the 20192021 annual meeting—other than one that will be included in the Company's proxy statement—must notify us between May 9, 2019[ · ], 2021 and June 8, 2019.[ · ], 2021. If a stockholder who wishes to present a proposal and/or nominate a director candidate fails to notify us by June 8, 2019[ · ], 2021 and such proposal and/or nomination is brought before the 20192021 annual meeting, then under the Securities and Exchange Commission'sSEC's proxy rules, the proxies solicited by management with respect to the 20192021 annual meeting will confer discretionary voting authority with respect to the stockholder's proposal and/or nomination on the persons selected by management to vote the proxies. If a stockholder makes a timely notification, the proxies may still exercise discretionary voting authority under circumstances consistent with the SecuritiesSEC's proxy rules. The chairman of the 2021 annual meeting has the power and Exchange Commission's proxy rules.duty to determine whether business was properly brought before the 2021 annual meeting in accordance with the Company's by-laws. In order to curtail controversy as to the date on which we received a proposal, it is suggested that proponents submit their proposals by Certified Mail, Return Receipt Requested, to: Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772, Attn: Secretary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial ownership of our common stock at July 15, 2020: (i) by each person who is known by us to beneficially own more than 5% of the outstanding shares of common stock and Series A Preferred Stock; (ii) by each director or nominee; (iii) by each named executive officer; and (iv) by all directors and executive officers as a group. Unless otherwise noted below, the address of each person listed on the table is c/o Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772.
Name of Beneficial Owner | Number of Common Shares Beneficially Owned(1) | Percentage of Class Beneficially Owned(2) | Number of Shares of Series A Convertible Preferred Stock Beneficially Owned | Percentage of Class Beneficially Owned(2) | ||||
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Five percent stockholders: | ||||||||
Black Rock, Inc.(3) | 4,465,979 | 13.43% | - | * | ||||
55 East 52nd Street | ||||||||
Orogen Viper LLC(4) | 3,000,000 | 9.02% | 108,000 | 100.00% | ||||
One Rockefeller Plaza | ||||||||
New Mountain Vantage Advisers, L.L.C.(5) | 2,706,161 | 8.14% | - | * | ||||
787 Seventh Avenue, 49th Floor | ||||||||
The Vanguard Group(6) | 2,529,854 | 7.61% | - | * | ||||
100 Vanguard Blvd. | ||||||||
Executive officers and directors: | ||||||||
Kris Canekeratne(7) | 693,796 | 2.09% | - | * | ||||
Ranjan Kalia(8) | 123,942 | * | - | * | ||||
Samir Dhir(9) | 84,933 | * | - | * | ||||
Thomas R. Holler(10) | 40,630 | * | - | * | ||||
Keith Modder(11) | 204,650 | * | - | * | ||||
Izhar Armony(12) | 36,942 | * | - | * | ||||
Rowland T. Moriarty(13) | 459,601 | 1.38% | - | * | ||||
William K. O'Brien(14) | 35,767 | * | - | * | ||||
Al-Noor Ramji(15) | 38,596 | * | - | * | ||||
Barry R. Nearhos(16) | 14,049 | * | - | * | ||||
Joseph G. Doody(17) | 15,046 | * | - | * | ||||
Vikram S. Pandit(18) | 3,008,650 | 9.05% | 108,000 | 100% | ||||
Deborah C. Hopkins(19) | 3,416 | * | - | * | ||||
Abidali Neemuchwala(20) | 365 | * | - | * | ||||
All executive officers, directors and nominees as a group (15 persons)(21) | 4,820,843 | 14.47% | 108,000 | 100% |
* Represents less than 1% of the outstanding common stock.
shares. Steven B. Klinsky is the sole managing member of New Mountain Vantage GP, L.L.C. and the sole member of New Mountain Vantage Advisers, L.L.C.
This proxy statement contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of
historical facts are forward-looking statements. These statements are based on our current expectations and are subject to a number of risks, uncertainties and assumptions, which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding actions to be taken by us. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those discussed in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for the year ended March 31, 2020, as such disclosure may be updated in our quarterly reports on Form 10-Q and our current reports on Form 8-K.
Householding Of Proxy MaterialsEXPENSES AND SOLICITATION
The cost of solicitation of proxies will be borne by us and, in addition to soliciting stockholders by mail through its regular employees, we may request banks, brokers and other custodians, nominees and fiduciaries to solicit their customers who have our stock registered in the names of a nominee and, if so, will reimburse such banks, brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket costs. Solicitation by our officers and employees may also be made of some stockholders in person or by mail, telephone, e-mail or telegraph following the original solicitation. We may also retain an independent proxy solicitation firm to assist in the solicitation of proxies.
VIEWING OF PROXY MATERIALS VIA THE INTERNET
Federal Law permits us to distribute our annual report and this proxy statement to our stockholders in a fast and efficient manner via the Internet. This reduces the amount of paper delivered to a stockholder's address and eliminates the cost of sending these documents by mail. Stockholders may elect to view all future annual reports and proxy statements on the Internet instead of receiving them by mail. If you would like to receive future stockholder communications over the Internet exclusively, and no longer receive any material by mail, please visit www.envisionreports.com/VRTU, for registered holders or visit www.edocumentview.com/VRTU for beneficial holders, and follow the instructions in the secured website, enter your account number (shown on your proxy card) and tax identification number to log in, and then select receive company mailings via e-mail and provide your e-mail address. Your election to view proxy materials online is perpetual unless you revoke it later.
HOUSEHOLDING OF PROXY MATERIALS
Our 20182020 Annual Report, including audited financial statements for the fiscal year ended March 31, 2018,2020, is being mailed to you along with this proxy statement. In order to reduce printing and postage costs, Broadridge Financial Solutions has undertaken an effort to deliver only one Annual Report and one proxy statement to multiple shareholdersstockholders sharing an address. This delivery method, called "householding,""householding", is not being used, however, if Broadridge has received contrary instructions from one or more of the stockholders sharing an address. If your household has received only one Annual Report and one proxy statement, we will deliver promptly a separate copy of the Annual Report and the proxy statement to any shareholderstockholder who sends a written request to Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772, Attn: Secretary, (508) 389-7300.Secretary. If your household is receiving multiple copies of our Annual Report or proxy statement and you wish to request delivery of a single copy if to any shareholderstockholder who sends a written request to:to Virtusa Corporation, 132 Turnpike Road, Southborough, Massachusetts 01772, Attn: Secretary.
Reconciliation of GAAP and Non-GAAP Financial Measures
The following table presents a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure for the fiscal years ended March 31:
| | Fiscal Year Ended March 31, | | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | 2020 | | 2019 | | 2018 | | |||
| | (in thousands, except share | | |||||||
| | and per share amounts) | | |||||||
GAAP income from operations | | $ | 80,212 | | $ | 70,268 | | $ | 46,387 | |
Add: Stock-based compensation expense | | 15,716 | | 29,056 | | 27,411 | | |||
Add: Acquisition-related charges and restructuring charges (1) | | 17,915 | | 23,904 | | 13,278 | | |||
| | | | | | | | |||
Non-GAAP income from operations | | $ | 113,843 | | $ | 123,228 | | $ | 87,076 | |
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | | |||
GAAP operating margin | | 6.1 | % | 5.6 | % | 4.5 | % | |||
Effect of above adjustments to income from operations | | 2.6 | % | 4.3 | % | 4.0 | % | |||
| | | | | | | | |||
Non-GAAP operating margin | | 8.7 | % | 9.9 | % | 8.5 | % | |||
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | | |||
GAAP net income (loss) available to Virtusa common stockholders | | $ | 43,552 | | $ | 11,796 | | $ | (2,709 | ) |
Add: Stock-based compensation expense | | 15,716 | | 29,056 | | 27,411 | | |||
Add: Acquisition-related charges and restructuring charges (1) | | 18,182 | | 25,710 | | 13,346 | | |||
Add: Non-recurring third party financing costs (9) | | — | | — | | 701 | | |||
Add: Impairment of investment (10) | | 184 | | 1,411 | | — | | |||
Add: Other impairment charge (11) | | — | | 3,955 | | — | | |||
Add: Foreign currency transaction losses (2) | | 15,999 | | 13,130 | | 3,543 | | |||
Add: Impact from the Tax Act (8) | | — | | (1,628 | ) | 22,724 | | |||
Tax adjustments (3) | | (26,080 | ) | (16,365 | ) | (14,037 | ) | |||
Less: Noncontrolling interest, net of taxes (4) | | (44 | ) | (68 | ) | (1,469 | ) | |||
| | | | | | | | |||
Non-GAAP net income available to Virtusa common stockholders | | $ | 67,509 | | $ | 66,997 | | $ | 49,510 | |
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | | |||
GAAP diluted earnings (loss) per share (6) | | $ | 1.42 | | $ | 0.38 | | $ | (0.09 | ) |
Effect of stock-based compensation expense (7) | | 0.47 | | 0.86 | | 0.85 | | |||
Effect of acquisition-related charges and restructuring charges (1) (7) | | 0.54 | | 0.77 | | 0.41 | | |||
Effect of non-recurring third party financing costs (9) (7) | | — | | — | | 0.02 | | |||
Effect of impairment of investment (10) (7) | | — | | 0.04 | | — | | |||
Effect of other impairment charge (11) (7) | | — | | 0.12 | | — | | |||
Effect of foreign currency transaction losses (2) (7) | | 0.48 | | 0.39 | | 0.11 | | |||
Effect of impact from the Tax Act (7) (8) | | — | | (0.05 | ) | 0.70 | | |||
Tax adjustments (3) (7) | | (0.77 | ) | (0.49 | ) | (0.43 | ) | |||
Effect of noncontrolling interest (4) (7) | | — | | — | | (0.05 | ) | |||
Effect of dividend on Series A Convertible Preferred Stock (6) (7) | | 0.13 | | 0.13 | | 0.10 | | |||
Effect of change in dilutive shares for non-GAAP (6) | | (0.13 | ) | (0.03 | ) | 0.01 | | |||
| | | | | | | | |||
Non-GAAP diluted earnings per share (5) (7) | | $ | 2.14 | | $ | 2.12 | | $ | 1.63 | |
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | |
changes in the fair value of contingent consideration liabilities, accreted interest related to deferred acquisition payments, charges for impairment of acquired intangible assets and other acquisition-related costs including integration expenses consisting of outside professional and consulting services and direct and incremental travel costs. Restructuring charges, when applicable, include termination benefits, facility exit costs as well as certain professional fees related to restructuring. The following table provides the details of the acquisition-related charges and restructuring charges:
| | Fiscal Year Ended March 31, | | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | 2020 | | 2019 | | 2018 | | |||
Amortization of intangible assets | | $ | 14,675 | | $ | 11,394 | | $ | 10,089 | |
Acquisition and integration costs | | 3,240 | | 12,101 | | 1,821 | | |||
Restructuring charges | | — | | 409 | | 1,368 | | |||
| | | | | | | | |||
Acquisition-related charges included in costs of revenue and operating expense | | 17,915 | | 23,904 | | 13,278 | | |||
Accreted interest related to deferred acquisition payments | | 267 | | 1,806 | | 68 | | |||
| | | | | | | | |||
Total acquisition-related charges and restructuring charges | | $ | 18,182 | | $ | 25,710 | | $ | 13,346 | |
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | |
The following table provides the non-GAAP net income available to Virtusa common stockholders and non-GAAP dilutive weighted average shares outstanding using if-converted method to calculate the non-GAAP diluted earnings per share for the fiscal year ended March 31, 2020, 2019 and 2018:
| | Fiscal Year Ended March 31, | | |||||||
---|---|---|---|---|---|---|---|---|---|---|
| | 2020 | | 2019 | | 2018 | | |||
Non-GAAP net income available to Virtusa common stockholders | | $ | 67,509 | | $ | 66,997 | | $ | 49,510 | |
Add: Dividends and accretion on Series A Convertible Preferred Stock | | 4,350 | | 4,350 | | 3,262 | | |||
| | | | | | | | |||
Non-GAAP net income available to Virtusa common stockholders and assumed conversion | | $ | 71,859 | | $ | 71,347 | | $ | 52,772 | |
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | | |||
GAAP dilutive weighted average shares outstanding | | 30,654,527 | | 30,659,654 | | 29,397,350 | | |||
Add: Incremental dilutive effect of employee stock options and unvested restricted stock awards and restricted stock units | | — | | — | | 728,820 | | |||
Add: Incremental effect of Series A Convertible Preferred Stock as converted | | 3,000,000 | | 3,000,000 | | 2,250,000 | | |||
| | | | | | | | |||
Non-GAAP dilutive weighted average shares outstanding | | 33,654,527 | | 33,659,654 | | 32,376,170 | | |||
| | | | | | | | |||
| | | | | | | | |||
| | | | | | | |
Information Concerning Persons Who Are Deemed Participants in Virtusa Corporation's Solicitation of Proxies
The following sets forth the name, principal business address and the present principal occupation or employment, and the name, principal business and address of any corporation or other organization in which their employment is carried on, of the directors, director nominees and executive officers of Virtusa Corporation who, under SEC rules, are deemed to be "participants" in our solicitation of proxies from our stockholders in connection with the 2020 annual meeting of stockholders.
The following table sets forth the names and business addresses of our current directors and nominees. The principal occupation or employment of each non-employee director or nominee who are deemed to be a participant is set forth in the section of this proxy statement entitled "Who We Are."
Name | Business Address | |||
---|---|---|---|---|
Kris Canekeratne | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Izhar Armony | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Rowland T. Moriarty | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
William K. O'Brien | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Al-Noor Ramji | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Barry R. Nearhos | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Joseph G. Doody | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Vikram S. Pandit | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Deborah C. Hopkins | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 | |||
Abidali Neemuchwala | Virtusa Corporation 132 Turnpike Road Southborough, Massachusetts 01772 |
Executive Officers and Other Employees
Name | Position | |
---|---|---|
Kris Canekeratne | Chief Executive Officer and Chairman of the Board of Directors | |
Ranjan Kalia | Executive Vice President, Chief Financial Officer, Treasurer and Secretary | |
Samir Dhir | President and Head of Americas | |
Thomas R. Holler | Executive Vice President and Chief Strategy Officer | |
Keith Modder | Executive Vice President, Chief Operating Officer and Managing Director, EMEA | |
Sundararajan Narayanan | Executive Vice President and Chief People Officer | |
Paul D. Tutun | General Counsel |
Information Regarding Ownership of Company Securities by Participants
Except as described in this Appendix B, or as otherwise indicated in the "Security Ownership of Certain Beneficial Owners and Management" section of this proxy statement, none of the persons listed above under "Directors and Nominees" and "Executive Officers and Other Employees" beneficially owns any of our securities of record. The number of shares of our common stock held by directors, nominees and the named executive officers as of July 15, 2020, is set forth in the "Security Ownership of Certain Beneficial Owners and Management" section of this proxy statement.
Information Regarding Transactions in Our Securities by Participants
The following table sets forth purchases and sales during the past two years of shares of our common stock by the persons listed above under "Directors and Nominees" and "Executive Officers and Other Employees." Unless otherwise indicated, all transactions were in the public market and none of the purchase price or market value of those shares is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such securities.
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
Kris Canekeratne | | 5/17/2018 | | 28,076 | (4) | |||
| | 5/23/2018 | | 254,310 | (4) | |||
| | 6/1/2018 | | (4,445 | ) | (3) | ||
| | 6/1/2018 | | (5,077 | ) | (3) | ||
| | 6/4/2018 | | (8,000 | ) | (1) | ||
| | 6/5/2018 | | (16,000 | ) | (1) | ||
| | 7/11/2018 | | (6,000 | ) | (1) | ||
| | 7/12/2018 | | (6,000 | ) | (1) | ||
| | 9/4/2018 | | (37,304 | ) | (3) | ||
| | 12/28/2018 | | (1,480 | ) | (1) | ||
| | 12/31/2018 | | (10,520 | ) | (1) | ||
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
| | 1/4/2019 | | (12,000 | ) | (1) | ||
| | 2/14/2019 | | (12,000 | ) | (1) | ||
| | 2/15/2019 | | (13,840 | ) | (1) | ||
| | 2/19/2019 | | (10,160 | ) | (1) | ||
| | 3/1/2019 | | 45,000 | (4) | |||
| | 3/1/2019 | | (17,064 | ) | (3) | ||
| | 3/1/2019 | | (8,206 | ) | (3) | ||
| | 3/11/2019 | | 38,175 | (2) | |||
| | 3/11/2019 | | (38,175 | ) | (6) | ||
| | 3/11/2019 | | (24,000 | ) | (1) | ||
| | 3/28/2019 | | (12,000 | ) | (1) | ||
| | 4/10/2019 | | (12,000 | ) | (1) | ||
| | 5/3/2019 | | (12,000 | ) | (1) | ||
| | 5/14/2019 | | 117,236 | (4) | |||
| | 5/20/2019 | | 30,800 | (4) | |||
| | 6/1/2019 | | (5,072 | ) | (3) | ||
| | 6/1/2019 | | (4,155 | ) | (3) | ||
| | 9/3/2019 | | (17,178 | ) | (1) | ||
| | 3/2/2020 | | (72,254 | ) | (3) | ||
| | 5/18/2020 | | 83,562 | (4) | |||
| | 6/1/2020 | | (5,067 | ) | (3) | ||
| | 6/1/2020 | | (4,151 | ) | (3) | ||
| | 6/1/2020 | | (4,553 | ) | (3) | ||
Tushara Canekeratne | 4/16/2018 | (3,000 | ) | (1) | ||||
5/1/2018 | (3,000 | ) | (1) | |||||
6/1/2018 | (3,000 | ) | (1) | |||||
7/5/2018 | (3,000 | ) | (1) | |||||
8/17/2018 | (3,000 | ) | (1) | |||||
1/16/2018 | (10,000 | ) | (1) | |||||
2/12/2019 | (10,000 | ) | (1) | |||||
3/1/2019 | (10,000 | ) | (1) | |||||
4/1/2019 | (10,000 | ) | (1) | |||||
5/1/2019 | (7,500 | ) | (1) | |||||
5/29/2019 | (16,350 | ) | (7) | |||||
6/13/2019 | (7,500 | ) | (1) | |||||
7/1/2019 | (7,500 | ) | (1) | |||||
9/4/2019 | (15,000 | ) | (1) | |||||
10/23/2019 | (7,500 | ) | (1) | |||||
11/12/2019 | (7,500 | ) | (1) | |||||
12/2/2019 | (7,500 | ) | (1) | |||||
Ranjan Kalia | | 5/17/2018 | | 11,399 | (4) | |||
| | 5/21/2018 | | 6,135 | (2) | |||
| | 5/21/2018 | | (3,488 | ) | (6) | ||
| | 5/23/2018 | | 53,543 | (4) | |||
| | 6/1/2018 | | (1,511 | ) | (3) | ||
| | 6/1/2018 | | (445 | ) | (3) | ||
| | 6/1/2018 | | (1,833 | ) | (3) | ||
| | 6/5/2018 | | 2,139 | (2) | |||
| | 6/5/2018 | | (2,139 | ) | (6) | ||
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
| | 6/5/2018 | | (2,647 | ) | (6) | ||
| | 9/4/2018 | | (445 | ) | (3) | ||
| | 9/4/2018 | | (7,854 | ) | (3) | ||
| | 12/3/2018 | | (445 | ) | (3) | ||
| | 2/12/2019 | | (6,386 | ) | (6) | ||
| | 2/12/2019 | | (2,500 | ) | (6) | ||
| | 2/13/2019 | | (2,500 | ) | (6) | ||
| | 2/20/2019 | | (900 | ) | (6) | ||
| | 2/22/2019 | | (2,642 | ) | (6) | ||
| | 2/27/2019 | | (2,500 | ) | (6) | ||
| | 3/1/2019 | | 15,000 | (4) | |||
| | 3/1/2019 | | (4,468 | ) | (3) | ||
| | 3/1/2019 | | (295 | ) | (3) | ||
| | 3/1/2019 | | (2,010 | ) | (3) | ||
| | 3/11/2019 | | (90,695 | ) | (7) | ||
| | 5/14/2019 | | 27,766 | (4) | |||
| | 5/20/2019 | | 12,450 | (4) | |||
| | 6/3/2019 | | (445 | ) | (3) | ||
| | 6/3/2019 | | (1,831 | ) | (3) | ||
| | 6/3/2019 | | (1,687 | ) | (3) | ||
| | 6/4/2019 | | (4,958 | ) | (7) | ||
| | 9/3/2019 | | (444 | ) | (3) | ||
| | 9/3/2019 | | (4,068 | ) | (3) | ||
| | 12/2/2019 | | (444 | ) | (3) | ||
| | 12/10/2019 | | (6,206 | ) | (7) | ||
| | 3/2/2020 | | (12,716 | ) | (3) | ||
| | 3/2/2020 | | (347 | ) | (3) | ||
| | 5/18/2020 | | 28,156 | (4) | |||
| | 6/1/2020 | | (444 | ) | (3) | ||
| | 6/1/2020 | | (1,829 | ) | (3) | ||
| | 6/1/2020 | | (1,686 | ) | (3) | ||
| | 6/1/2020 | | (1,841 | ) | (3) | ||
Anuranjan K. Kalia Revocable Trust, u/d/t dated April 12, 2018 | 3/11/2019 | 90,695 | (8) | |||||
6/4/2019 | 4,958 | (8) | ||||||
12/10/2019 | 6,206 | (8) | ||||||
Samir Dhir | | 5/17/2018 | | 14,249 | (4) | |||
| | 5/23/2018 | | 48,676 | (4) | |||
| | 6/1/2018 | | (726 | ) | (3) | ||
| | 6/1/2018 | | (1,175 | ) | (3) | ||
| | 6/11/2018 | | (4,000 | ) | (6) | ||
| | 8/13/2018 | | (4,000 | ) | (1) | ||
| | 9/4/2018 | | (6,223 | ) | (3) | ||
| | 11/1/2018 | | (4,000 | ) | (1) | ||
| | 2/1/2019 | | (4,000 | ) | (1) | ||
| | 3/1/2019 | | 12,000 | (4) | |||
| | 3/1/2019 | | (3,921 | ) | (3) | ||
| | 3/1/2019 | | (1,188 | ) | (3) | ||
| | 5/1/2019 | | (4,000 | ) | (1) | ||
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
| | 5/14/2019 | | 34,706 | (4) | |||
| | 5/20/2019 | | 12,660 | (4) | |||
| | 6/3/2019 | | (1,284 | ) | (3) | ||
| | 6/3/2019 | | (2,015 | ) | (3) | ||
| | 8/30/2019 | | (4,000 | ) | (1) | ||
| | 9/3/2019 | | (5,641 | ) | (3) | ||
| | 11/1/2019 | | (4,000 | ) | (1) | ||
| | 2/3/2020 | | (4,000 | ) | (1) | ||
| | 3/2/2020 | | (12,497 | ) | (3) | ||
| | 5/18/2020 | | 28,625 | (4) | |||
| | 6/1/2020 | | (1,846 | ) | (3) | ||
| | 6/1/2020 | | (2,340 | ) | (3) | ||
| | 6/1/2020 | | (2,078 | ) | (3) | ||
Thomas R. Holler | 5/17/2018 | 9,214 | (4) | |||||
5/23/2018 | 53,543 | (4) | ||||||
5/24/2018 | (7,500 | ) | (6) | |||||
6/1/2018 | (1,378 | ) | (3) | |||||
6/1/2018 | (1,833 | ) | (3) | |||||
9/1/2018 | (7,854 | ) | (3) | |||||
2/4/2019 | (24,197 | ) | (1) | |||||
3/1/2019 | 15,000 | (4) | ||||||
3/1/2019 | (4,475 | ) | (3) | |||||
3/1/2019 | (1,450 | ) | (3) | |||||
5/14/2019 | 22,443 | (4) | ||||||
5/20/2019 | 10,050 | (4) | ||||||
6/3/2019 | (1,831 | ) | (3) | |||||
6/3/2019 | (1,364 | ) | (3) | |||||
9/3/2019 | (3,289 | ) | (3) | |||||
11/12/2019 | (10,525 | ) | (6) | |||||
3/2/2020 | (12,626 | ) | (3) | |||||
5/18/2020 | 22,718 | (4) | ||||||
6/1/2020 | (1,829 | ) | (3) | |||||
6/1/2020 | (1,362 | ) | (3) | |||||
6/1/2020 | (1,486 | ) | (3) | |||||
Keith Modder | | 5/17/2018 | | (5,706 | ) | (6) | ||
| | 5/17/2018 | | 8,866 | (4) | |||
| | 5/17/2018 | | (8,294 | ) | (6) | ||
| | 5/23/2018 | | 48,676 | (4) | |||
| | 6/1/2018 | | (816 | ) | (3) | ||
| | 6/1/2018 | | (900 | ) | (3) | ||
| | 9/1/2018 | | (3,855 | ) | (3) | ||
| | 2/13/2019 | | 17,716 | (2) | |||
| | 3/1/2019 | | 12,000 | (4) | |||
| | 3/1/2019 | | (2,880 | ) | (3) | ||
| | 3/1/2019 | | (1,165 | ) | (3) | ||
| | 5/14/2019 | | 21,595 | (4) | |||
| | 5/20/2019 | | 11,010 | (4) | |||
| | 6/3/2019 | | (900 | ) | (3) | ||
| | 6/3/2019 | | (710 | ) | (3) | ||
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
| | 9/3/2019 | | (1,711 | ) | (3) | ||
| | 2/12/2020 | | (2,427 | ) | (6) | ||
| | 2/13/2020 | | (7,573 | ) | (6) | ||
| | 2/14/2020 | | (10,000 | ) | (6) | ||
| | 3/2/2020 | | (5,871 | ) | (3) | ||
| | 5/18/2020 | | 24,890 | (4) | |||
| | 6/1/2020 | | (675 | ) | (3) | ||
| | 6/1/2020 | | (532 | ) | (3) | ||
| | 6/1/2020 | | (661 | ) | (3) | ||
Sundararajan Narayanan | 5/23/2018 | 38,940 | (4) | |||||
6/1/2018 | (235 | ) | (3) | |||||
6/1/2018 | (387 | ) | (3) | |||||
6/1/2018 | (883 | ) | (3) | |||||
6/13/2018 | (2,000 | ) | (6) | |||||
9/4/2018 | (4,441 | ) | (3) | |||||
2/12/2019 | (6,000 | ) | (6) | |||||
3/1/2019 | 7,500 | (4) | ||||||
3/1/2019 | (2,277 | ) | (3) | |||||
3/1/2019 | (680 | ) | (3) | |||||
5/14/2019 | 20,053 | (4) | ||||||
5/20/2019 | 9,000 | (4) | ||||||
6/3/2019 | (387 | ) | (3) | |||||
6/3/2019 | (882 | ) | (3) | |||||
6/3/2019 | (807 | ) | (3) | |||||
9/3/2019 | (2,849 | ) | (3) | |||||
11/26/2019 | (613 | ) | (6) | |||||
11/27/2019 | (1,887 | ) | (6) | |||||
3/2/2020 | (8,295 | ) | (3) | |||||
5/18/2020 | 20,343 | (4) | ||||||
6/1/2020 | (1,331 | ) | (3) | |||||
6/1/2020 | (1,217 | ) | (3) | |||||
6/1/2020 | (1,331 | ) | (3) | |||||
Al-Noor Ramji | | 9/7/2018 | | 2,467 | (4) | |||
| | 9/17/2019 | | 3,558 | (4) | |||
Joseph G. Doody | 9/7/2018 | 2,467 | (4) | |||||
5/31/2019 | 5,000 | (5) | ||||||
9/17/2019 | 3,558 | (4) | ||||||
Vikram S. Pandit | | 9/7/2018 | | 2,467 | (4) | |||
| | 9/17/2019 | | 3,558 | (4) | |||
Izhar Armony | 9/7/2018 | 2,467 | (4) | |||||
6/14/2019 | 1,175 | (2) | ||||||
9/17/2019 | 3,558 | (4) | ||||||
Rowland T. Moriarty | | 6/1/2018 | | (5,000 | ) | (6) | ||
| | 6/1/2018 | | (5,000 | ) | (6) | ||
| | 9/7/2018 | | 2,467 | (4) | |||
| | 6/5/2019 | | 5,518 | (2) | |||
| | 6/5/2019 | | 5,723 | (2) | |||
| | 9/17/2019 | | 3,558 | (4) | |||
| | 12/19/2019 | | (672 | ) | (7) | ||
Name | Date | Purchase/(Sale) of Common Stock (number of shares) | Transaction Type | |||||
---|---|---|---|---|---|---|---|---|
Charles Moriarty Trust | 12/19/2019 | 672 | (8) | |||||
Rubex LLC | | 4/12/2019 | | 65,372 | (8) | |||
Rowgra, LLC | 4/12/2019 | (65,372 | ) | (7) | ||||
William K. O'Brien | | 6/5/2018 | | 14,074 | (2) | |||
| | 6/5/2018 | | (14,074 | ) | (6) | ||
| | 9/7/2018 | | 2,467 | (4) | |||
| | 9/17/2019 | | 3,558 | (4) | |||
| | 11/12/2019 | | 9,397 | (2) | |||
| | 11/12/2019 | | (9,397 | ) | (6) | ||
Deborah C. Hopkins | 9/7/2018 | 881 | (4) | |||||
9/7/2018 | 2,467 | (4) | ||||||
9/17/2019 | 3,558 | (4) | ||||||
Barry R. Nearhos | | 9/7/2018 | | 2,467 | (4) | |||
| | 9/17/2019 | | 3,558 | (4) | |||
Abidali Neemuchwala | 6/18/2020 | 1,097 | (4) | |||||
6/18/2020 | 3,136 | (4) | ||||||
Paul D. Tutun (non-Section 16) | | 5/17/2018 | | 5,500 | (4) | |||
| | 5/24/2018 | | (440 | ) | (6) | ||
| | 5/25/2018 | | (100 | ) | (6) | ||
| | 5/31/2018 | | (736 | ) | (6) | ||
| | 6/1/2018 | | (235 | ) | (3) | ||
| | 6/1/2018 | | (194 | ) | (3) | ||
| | 6/1/2018 | | (451 | ) | (3) | ||
| | 6/1/2018 | | (421 | ) | (3) | ||
| | 6/1/2018 | | (60 | ) | (3) | ||
| | 6/1/2018 | | (1,194 | ) | (6) | ||
| | 6/4/2018 | | (4,851 | ) | (6) | ||
| | 6/11/2018 | | (1,162 | ) | (6) | ||
| | 6/12/2018 | | (800 | ) | (6) | ||
| | 9/1/2018 | | (555 | ) | (3) | ||
| | 9/1/2018 | | (60 | ) | (3) | ||
| | 12/1/2018 | | (60 | ) | (3) | ||
| | 2/12/2019 | | (2,612 | ) | (6) | ||
| | 2/13/2019 | | (330 | ) | (6) | ||
| | 3/1/2019 | | 3,000 | (4) | |||
| | 3/1/2019 | | (829 | ) | (3) | ||
| | 3/1/2019 | | (881 | ) | (3) | ||
| | 3/1/2019 | | (60 | ) | (3) | ||
| | 3/12/2019 | | (2,477 | ) | (6) | ||
| | 3/13/2019 | | (500 | ) | (6) | ||
| | 5/20/2019 | | 5,000 | (4) | |||
| | 6/1/2019 | | (194 | ) | (3) | ||
| | 6/1/2019 | | (405 | ) | (3) | ||
| | 6/1/2019 | | (450 | ) | (3) | ||
| | 6/1/2019 | | (420 | ) | (3) | ||
| | 6/25/2019 | | 5,500 | (4) | |||
| | 9/1/2019 | | (534 | ) | (3) | ||
| | 3/1/2020 | | (1,203 | ) | (3) | ||
| | 5/18/2020 | | 4,550 | (4) | |||
| | 5/18/2020 | | 5,000 | (4) |
Miscellaneous Information Regarding Participants
Except as described in this Appendix B or otherwise disclosed in this proxy statement, no person listed above under "Directors and Nominees" and "Executive Officers and Other Employees" or any of his or her "associates" beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, any shares or other securities of the Company or any of its subsidiaries. Furthermore, except as described in this Appendix B or otherwise disclosed in this proxy statement, no such person or any of his or her associates is either a party to any transaction or series of similar transactions in the last fiscal year, or any currently proposed transaction or series of similar transactions (1) to which the Company or any of its subsidiaries was or is to be a party, (2) in which the amount involved exceeds $120,000 and (3) in which such person or associate had or will have a direct or indirect material interest.
Except as described in this Appendix B or otherwise disclosed in this proxy statement, no person listed above under "Directors and Nominees" and "Executive Officers and Other Employees" or any of his or her associates has entered into any arrangement or understanding with any person with respect to (1) any future employment with the Company or its affiliates, or (2) any future transactions to which the Company or any of its affiliates will or may be a party. Except as described in this Appendix B or otherwise disclosed in this proxy statement, there are no contracts, arrangements or understandings by any of the persons listed under "Directors and Nominees" and "Executive Officers and Other Employees" within the past year with any person with respect to any of our securities, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies.
Except as described in this Appendix B or otherwise disclosed in this proxy statement, no persons listed under "Directors and Nominees" and "Executive Officers and Other Employees" has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon at the 2020 annual meeting of stockholders (and no other person who is a party to an arrangement or understanding pursuant to which a nominee for election as director is proposed to be elected, has any such interests).
PRELIMINARY – SUBJECT TO COMPLETION Virtusa Corporation
Proxy for Annual Meeting of Stockholders [•], [•] PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED Please mark votes with a checkmark as in this example. The Board of Directors recommends a vote FOR items 1, 2 and 3. 1. To elect two members to the board of directors, nominated by the board of directors, to serve for a three-year term as Class I directors, in each case until his/her respective successor has been duly elected and qualified, or until his/her earlier death, resignation or removal. The board recommends a vote FOR each nominee. CLASS I NOMINEES: Al-Noor Ramji For Withhold Joseph G. Doody For Withhold 2. To ratify the appointment of the firm of KPMG LLP, as our independent registered public accounting firm, for the fiscal year ending March 31, 2021. The board recommends a vote FOR this proposal number 2. 3. To approve, on an advisory basis, the compensation of our Named Executive Officers. The board recommends a vote FOR this proposal number 3. AGAINST ACTIVE/104457926.2 W H I T EP R O X YC A R D
September 6, 2018
Important notice regarding the availability of the proxy materials for the Annual Meeting of Stockholders to be held on [•]: The Proxy Statement, Annual Report to Stockholders, and instructions to pre-register to attend the annual meeting virtually, for registered stockholders are available at [•], and for beneficial holders with shares in street name, at [•]. If you plan to participate in the virtual meeting, you will need to pre-register by [•]. SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Ranjan Kalia and Paul D. Tutun, together, and each of them singly, proxies, with full power of substitution to vote all shares of stock of Virtusa Corporation (the "Company"“Company”) which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Virtusa Corporation to be held virtually via https://www.cesonlineservices.com/vrtu20_vm on Thursday, September 6, 2018[•] at 8:00 a.m.[•]., local time, at the offices of Virtusa Corporation located at 132 Turnpike Road, Southborough, Massachusetts 01772, and at any adjournments or postponements thereof, upon matters set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated July 27, 2018,[•], a copy of which has been received by the undersigned.
THIS WHITE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS WHITE PROXY WILL BE VOTED FOR ITEMS 1, 2 andAND 3 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES, TO THE EXTENT PERMITTED BY RULE 14a-4(c) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ON ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. YOU MAY ALSO SUBMIT YOUR VOTE VIA THE INTERNET (www.envisionreports.com/VRTU)([•]) BY FOLLOWING THE INSTRUCTIONS IN THE SECURE WEBSITE OR BY TELEPHONE (1-800-652-VOTE (8683)([•]) BY FOLLOWING THE INSTRUCTIONS IN THE RECORDED MESSAGE, IN EACH CASE BY 1:00 A.M. EASTERN TIME, ON SEPTEMBER 6, 2018.MESSAGE. IF YOU VOTE VIA THE INTERNET OR VIA TELEPHONE OR HAVE PREVIOUSLY SENT YOUR PROXY IN, YOU WILL NOT LIMIT YOUR RIGHT TO VOTE IN PERSONVIRTUALLY AT THE ANNUAL MEETING. See Reverse Side ACTIVE/104457926.2
SEE REVERSE SIDE
PRELIMINARY – SUBJECT TO COMPLETION Virtusa Corporation Proxy for Annual Meeting of Stockholders [•], [•] PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDEDý Please mark votes with a checkmark as in this example.
The Board of Directors recommends a vote FOR items 1, 2 and 3.
1. To elect threetwo members to the board of directors, nominated by the board of directors, to serve for a three-year term as classClass I directors and, with respect to the holders of our Series A Convertible Preferred Stock, one (1) Series A director, until his/her successor is duly elected and qualified or until such Series A director's right to hold the office terminates, whichever occurs earlier, in each case until his/her respective successor has been duly elected and qualified, or until his/her earlier death, resignation or removal.The Boardboard recommends a vote FOR each nominee.
CLASS III NOMINEES: Izhar Armony, Rowland T. Moriarty, and Deborah C. Hopkins
Al-Noor Ramji For Withhold Joseph G. Doody For Withhold SERIES A NOMINEE: Vikram S. Pandit
For Withhold 2. To ratify the appointment of the firm of KPMG LLP, as our independent registered public accounting firm, for the fiscal year ending March 31, 2019.2021. The Boardboard recommends a vote FOR this proposal number 2.
3. To approve, on an advisory basis, the compensation of our named executive officers.Named Executive Officers. The Boardboard recommends a vote FOR this proposal number 3.
4. To transact such other business as may properly come before the annual meeting and any adjournment thereof. ACTIVE/104457932.2 W H I T EP R O X YC A R D
o MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
Important notice regarding the availability of the proxy materials for the Annual Meeting of Stockholders to be held on Thursday, September 6, 2018: the[•]: The Proxy Statement, Annual Report to Stockholders, and instructions to pre-register to attend the address of the location of the Annual Meeting of Stockholders,annual meeting virtually, for registered stockholders are available at www.envisionreports.com/VRTU,[•], and for beneficial holders with shares in street name, at www.edocumentview.com/VRTU.
[•]. If you plan to participate in the virtual meeting, you will need to pre-register by [•]. SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Ranjan Kalia and Paul D. Tutun, together, and each of them singly, proxies, with full power of substitution to vote all shares of stock of Virtusa Corporation (the "Company"“Company”) which the undersigned is entitled to vote at the Annual Meeting of Stockholders of Virtusa Corporation to be held virtually via https://www.cesonlineservices.com/vrtu20_vm on Thursday , September 6, 2018[•] at 8:00 a.m.[•]., local time, at the offices of Virtusa Corporation located at 132 Turnpike Road, Southborough, MA 01772, and at any adjournments or postponements thereof, upon mattermatters set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated July 27, 2018,[•], a copy of which has been received by the undersigned.
THIS WHITE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS GIVEN, THIS WHITE PROXY WILL BE VOTED FOR ITEMS 1, 2 andAND 3 AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES, TO THE EXTENT PERMITTED BY RULE 14a-4(c) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ON THESE MATTERS AND ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
YOU MAY ALSO SUBMIT YOUR VOTE VIA THE INTERNET ([•]) BY FOLLOWING THE INSTRUCTIONS IN THE SECURE WEBSITE OR BY TELEPHONE ([•]) BY FOLLOWING THE INSTRUCTIONS IN THE RECORDED MESSAGE. IF YOU VOTE VIA THE INTERNET OR VIA TELEPHONE OR HAVE PREVIOUSLY SENT YOUR PROXY IN, YOU WILL NOT LIMIT YOUR RIGHT TO VOTE VIRTUALLY AT THE ANNUAL MEETING. See Reverse Side ACTIVE/104457932.2