| | | | | | | | | | | |
(3)Element | Type of Element | Compensation Element | Objective |
Base Salary | Fixed | Cash | Designed to attract and retain highly talented executives by providing fixed compensation amounts that are competitive in the market and reward performance |
Annual Cash Bonuses | Variable | Cash | The amount reported consistsDesigned to motivate our executives to achieve semi-annual (and, in the case of a pro-rated bonus guaranteed to Mr. Canessa under the terms of his offer letter.Rajic, quarterly) financial objectives and provide financial incentives when we meet or exceed theseobjectives
|
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(4) | These amounts represent aggregate achievement against plan of 99% for the first half and 118% for the second half of fiscal 2018 under the Company's EmployeeLong Term Incentive Compensation Plan. | Variable | Equity awards in the form of PSU awards and RSU awards that may be settled for shares of our common stock | Designed to align the interests of our executives and our stockholders by motivating them to create sustainable long-term stockholder value |
| |
(5) | Dr. Sinha was an executive officer but not a named executive officer for fiscal 2017. |
| |
(6) | This amount consists of a tax gross-up provided with respect to the Company-paid costs of attending a Company sales team and leadership event, which was provided on the same terms to all other employees who attended the event. |
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(7) | Mr. Welch resigned as our chief operating officer in May 2018. |
| |
(8) | The amount reported represents payments to Mr. Welch under our Sales Compensation Plan. |
Base Salary
Outstanding Equity AwardsBase salary represents the fixed portion of the compensation of our Named Executive Officers and is an important element of compensation intended to attract and retain highly talented individuals. Generally, we use base salary to provide each Named Executive Officer with a specified level of cash
compensation during the year with the expectation that he or she will perform his or her responsibilities to the best of his or her ability and in our best interests.
Generally, we establish the initial base salaries of our Named Executive Officers through arm’s-length negotiation at Fiscal Year-End 2018the time we hire the individual, taking into account his or her position, qualifications, experience, prior salary level, and the base salaries of our other executive officers. Thereafter, the compensation committee reviews the base salaries of our Named Executive Officers each year as part of its annual compensation review, with input from our CEO (except with respect to his own base salary) and makes adjustments as it determines to be reasonable and necessary to reflect the scope of a Named Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion, and market conditions.
In September 2019, the compensation committee reviewed the base salaries of our Named Executive Officers, taking into consideration a competitive market analysis and the recommendations of our CEO (except with respect to his own base salary), as well as the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Following this review, the compensation committee determined to maintain the base salary of our CEO at its fiscal 2019 level and to increase the base salaries of our other Named Executive Officers to levels that were comparable to those of similarly-situated executives in the competitive marketplace. The base salary adjustments were effective August 1, 2019.
The following table provides information regarding equity awards held bybase salaries of our Named Executive Officers for fiscal 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Fiscal 2019 Base Salary | | Fiscal 2020 Base Salary | | Percentage Adjustment |
Mr. Chaudhry | | $23,660 | | $23,660 | | 0% |
Mr. Canessa | | $300,000 | | $350,000 | | 16.7% |
Mr. Rajic (1) | | --- | | $400,000 | | --- |
Dr. Sinha | | $300,000 | | $350,000 | | 16.7% |
Mr. Schlossman | | $275,000 | | $315,000 | | 14.5% |
(1) In connection with his appointment as our President Go-To-Market and Chief Revenue Officer in September 2019, the compensation committee set the initial annual base salary of Mr. Rajic at $400,000.
The base salaries paid to our named executive officers as of July 31, 2018.during fiscal 2020 are set forth in the “Fiscal 2020 Summary Compensation Table” below.
Cash Bonuses
|
| | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
Name | Grant Date (1) | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($)(2) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) |
Jay Chaudhry | — |
| — |
| | — |
| | — |
| | — |
| | — |
| — |
| — |
|
Remo Canessa | 03/02/2017 |
| 750,000(4) |
| | — |
| | 5.82 |
| | 03/02/2024 |
| | — |
| | — |
|
Amit Sinha | 01/29/2013 |
| 101,333(5) |
| | — |
| | 1.34 |
| | 01/29/2020 |
| | 62,493 |
| | 2,206,628 |
|
| 04/06/2017 |
| — |
| | 333,333(6) |
| | 5.93 |
| | 04/06/2024 |
| | | | |
William Welch | — |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
____________________________
| |
(1) | Each of the outstanding equity awards was granted pursuant toWe use our 2007 Stock Plan (the “2007 Plan”). |
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(2) | This column represents the fair value of a share of our common stock on the date of grant, as determined by our board of directors. |
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(3) | This column represents the fair market value of the shares of our common stock as of July 31, 2018, based on the closing price of our common stock, as reported on the Nasdaq Global Select Market, of $35.31 per share on July 31, 2018. |
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(4) | The option is subject to an early exercise provision and is immediately exercisable. One-fourth of the shares subject to the option vested on February 6, 2018 and 1/48 of the shares vest monthly thereafter. |
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(5) | Shares subject to the option are fully vested and immediately exercisable. |
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(6) | One-fourth of the shares subject to the option vest on November 1, 2018 and 1/48 of the shares vest monthly thereafter. |
Non-Equity Incentive Plan Compensation
Our board of directors has adopted an Employee Incentive Compensation Plan, ora cash bonus plan, to motivate employees selected by the Incentive Compensation Plan.compensation committee, including our Named Executive Officers, to achieve our annual business goals. Our Employee Incentive Compensation Plan allows our compensation committee to provide cash incentive awards to employees selected by our compensation committee, including our named executive officers,Named Executive Officers, based upon performance goals established by our compensation committee. Pursuant to the Employee Incentive Compensation Plan, our compensation committee, in its sole discretion, establishes a target award for each participantexecutive and a bonus pool for the executives as a group, with actual awards payable from such bonus pool, with respect to the applicable performance period.
Under our For fiscal 2020, the Employee Incentive Compensation Plan our compensation committee determinesincluded semi-annual performance periods with semi-annual award payouts after the performance goals applicable to any award, which goals may include, without limitation, the attainment of research and development milestones, billings, bookings, business divestitures and acquisitions, cash flow, cash position, contract awards or backlog, customer-related measures, customer retention rates, business unit or division earnings (which may include any calculation of earnings, including but not limited to earnings before interest and taxes, earnings before taxes, earnings before interest, taxes, depreciation and amortization, earnings before taxes and net earnings), earnings per share, employee retention, employee mobility, expenses, geographic expansion, gross margin, growth in stockholder value relative to the moving averageend of the S&P 500 Index or another index, hiring targets, internal ratefirst six-month period (that is, the period from August 1,
2019 through January 31, 2020), and, then again, after the end of return, inventory turns, inventory levels, market share, milestone achievements, net billings, net income, net profit, net revenue margin, net sales, new customers, new product development,
new product invention or innovation, number of customers, operating cash flow, operating expenses, operating income, operating margin, origination volume, overhead or other expense reduction, product defect measures, product development, product release timelines, productivity, profit, return on assets, return on capital, return on equity, return on investment, return on sales, revenue, revenue growth, sales efficiency, sales results, sales growth, stock price, time to market, total stockholder return, units sold (total and new) working capital, and individual objectives such as management by objectives, peer reviews or other subjective or objective criteria. The performance goals may differ from participant to participant and from award to award. For the fiscal year ended(that is, the period from February 1, 2020 through July 31, 20182020). In the case of Mr. Rajic, pursuant to the terms of his Employment Offer Letter, he was eligible to receive quarterly award payouts under the Employee Incentive Compensation Plan.
The compensation committee selected goals based onadministered the dollar value of annual contracts for new and existing Zscaler customers.
Our compensation committee administers ourEmployee Incentive Compensation Plan. TheAs the administrator of our Incentive Compensation Planthe plan, the compensation committee may, in its sole discretion and at any time, increase, reduce, or eliminate a participant’s actual award, and/or increase, reduce, or eliminate the amount allocated to the bonus pool for a particular performance period. The actual award may be below, at or above a participant’s target annual cash bonus award, in the discretion of the administrator. TheFurther, the administrator may determine the amount of any increase, reduction, or elimination on the basis of such factors as it deems relevant, and it is not required to establish any allocation or weighting with respect to the factors it considers.
Actual awards willunder the Employee Incentive Compensation Plan are to be paid in cash (or its equivalent) in a single lump sum only after they are earned, which usually requires continued employment through the date the actual award is paid. The compensation committee reservesreserved the right to settle an actual award with a grant of an equity award under the Company’sour then-current equity compensation plan, which equity award may have such terms and conditions, as the compensation committee determines. Payment of awards occursis to occur as soon as administratively practicable after they are earned, but no later than the dates set forth in ourthe Employee Incentive Compensation Plan.
Our board of directors and ourthe compensation committee have the authority to amend, alter, suspend, or terminate our Incentive Compensation Plan,the plan, provided such action does not impair the existing rights of any participant with respect to any earned awards.
We sponsored a Fiscal Year 2018 Sales2020 Target Annual Cash Bonus Award Opportunities
For purposes of the Employee Incentive Compensation Plan, orcash bonus awards were based upon target annual cash bonus award opportunities as determined by the compensation committee. In September 2019, the compensation committee reviewed the target annual cash bonus award opportunities of our SalesNamed Executive Officers. Following this review and after taking into consideration the factors described in “Governance of Executive Compensation Program – Compensation-Setting Process” above, the compensation committee determined to increase the target annual cash bonus award opportunities of our Named Executive Officers for fiscal 2020 to levels that were comparable to those of similarly-situated executives in the competitive marketplace. As in prior fiscal years, our CEO declined to participate in the Employee Incentive Compensation Plan.
The target annual cash bonus award opportunities of our Named Executive Officers for fiscal 2020 were as follows:
| | | | | | | | | | | | | | | | | | | | |
Named Executive Officer | | Fiscal 2019 Target Annual Cash Bonus Award Opportunity | | Fiscal 2020 Target Annual Cash Bonus Award Opportunity | | Percentage Adjustment |
Mr. Chaudhry | | $0 | | | $0 | | | --- |
Mr. Canessa | | $150,000 | | | $250,000 | | | 67 | % |
Mr. Rajic (1) | | --- | | $400,000 | | | --- |
Dr. Sinha | | $125,000 | | | $250,000 | | | 100 | % |
Mr. Schlossman | | $75,000 | | | $150,000 | | | 100 | % |
(1) In connection with his appointment as our President Go-To-Market and Chief Revenue Officer in September 2019, the compensation committee set the target annual cash bonus award opportunity of Mr. Rajic at $400,000. Mr. Rajic’s target annual cash bonus award opportunity was pro-rated during fiscal 2020 to reflect his 10 month’s employment with us.
Potential annual cash bonus awards for our Named Executive Officers under the Employee Incentive Compensation Plan could range from zero to 150% of their target annual cash bonus award opportunity.
Incentive Plan Performance Metrics
Under the Employee Incentive Compensation Plan, the compensation committee determined the performance metrics and related target levels for the fiscal 2020 annual cash bonus awards. In October 2019, the compensation committee determined that, in the case of our CEO’s executive staff, which included our other Named Executive Officers (the “Senior Executives”), 50% of the bonus pool to be used to make cash bonus awards would be reserved for distribution in the discretion of our CEO (subject to final approval by the compensation committee) based on his evaluation of each Senior Executive’s individual performance and our corporate performance. The remaining 50% of the bonus pool to be used to make cash bonus awards would be distributed based on two equally weighted corporate performance metrics: revenue and calculated billings.
The compensation committee selected revenue and calculated billings as the appropriate corporate performance metrics for the Senior Executives because, in its view, these metrics were key indicators of our periodic performance and our progress in executing on our business strategy.
For purposes of the Senior Executives’ cash bonus awards:
•“revenue” represented total revenue calculated in accordance with generally accepted accounting principles, or GAAP, as reported in our audited financial statements; and
•“calculated billings” represented our total revenue plus the change in deferred revenue in a given fiscal period. Calculated billings in any particular fiscal period aims to reflect amounts invoiced for subscriptions to access our cloud platform, together with related support services for our new and existing customers.
As reflected in our annual operating plan presented to and approved by our board of directors, the target levels established for revenue and calculated billings for the full year of fiscal 2020 by the compensation committee were as follows:
| | | | | |
Performance Metric | Full Year Fiscal 2020 |
Revenue | $443,000,000 |
Calculated Billings | $532,500,000 |
In addition, the compensation committee determined that our Senior Executives were eligible to earn cash bonus awards to the extent that we achieved the minimum thresholds for revenue and calculated billings for each performance period in fiscal 2020 as set forth in the following schedule:
| | | | | | | | |
Metric Achievement | Payment | Bonus Attainment |
Less than 90% | 0% | No payout below 90% achievement |
90% - 95% | 70% to 90% linear | 90% attainment pays 70%, and 95% pays 90% |
95% - 100% | 90% to 100% linear | 95% attainment pays 90% and 100% pays 100% |
100% - 105% | 100% to 125% linear | 100% attainment pays 100%, and 105% pays 125% |
105% - 110% | 125% to 150% linear | 105% attainment pays 125%, and 110% pays 150% |
>110% | TBD | Payout over 150%, determined in the discretion of the board of directors |
The compensation committee also determined that the 50% of the bonus pool reserved for distributions in the discretion of our CEO was to be funded based on achievement of the revenue and calculated billings targets. If the average level of achievement for the applicable performance period for revenue and calculated billings was less than 90%, the discretionary bonus pool would not be funded.If the average level of achievement was equal to or greater than 90% but less than 100%, the discretionary pool would be funded at 100%.If the average level of achievement was equal to or greater than 100%, the discretionary pool would be funded at 150%.
Cash Bonus Payments (Other than Mr. WelchRajic)
As previously described, our Senior Executives (other than Mr. Rajic) were eligible for cash bonus awards only in an amount, if any, determined by the extent that we met or exceeded the applicable minimum threshold for revenue and calculated billings for each half of fiscal 2020. In March 2020, the compensation committee determined that we had achieved 97.9% of our revenue target and 98.9% of our calculated billing target for the first half of fiscal 2020, resulting in cash payments equal to 95.8% and 97.8%, respectively. In addition, because the average level of achievement for these metrics for the first half of fiscal 2020 was greater than 90% but less than 100%, the discretionary portion of the bonus pool reserved for our CEO was funded at 100%. Our CEO determined (with compensation committee approval) that, because we had not fully achieved our target performance levels for the two corporate performance metrics and factoring in our performance with respect to other key metrics that we use internally to monitor our financial progress against our annual operating plan, it was appropriate to only award approximately 43% of the discretionary bonus pool to each of our Senior Executives. As a result, the cash bonus payments to our eligible Named Executive Officers for the first half of the year were equal to 70% of their target semi-annual cash bonus opportunities for that period as follows:
| | | | | | | | |
Named Executive Officer | First Half Target Bonus Opportunity | First Half Bonus Payment |
Mr. Canessa | $125,000 | $87,500 |
Mr. Sinha | $125,000 | $87,500 |
Mr. Schlossman | $75,000 | $52,500 |
In September 2020, the compensation committee determined that we had achieved 96.9% of our revenue target and 106.3% of our calculated billing target for the second half of fiscal 2020, resulting in cash payments equal to 93.8% and 131.5%, respectively. In addition, because the average level of achievement for these metrics for second half of fiscal 2020 was greater than 100%, the discretionary portion of the bonus pool reserved for our CEO was funded at 150%. Our CEO determined (with compensation committee approval) that, because we had significantly exceeded our calculated billings target for the second half of the fiscal year and factoring in our performance with respect to other key metrics that we use internally to monitor our financial progress against our annual operating plan, it was appropriate to award 100% of the discretionary bonus pool to each of our Senior Executives. As a result, the cash bonus payments to our eligible Named Executive Officers for the second half of the year were equal to 131.3% of their target annual cash bonus award opportunities for that period.
In addition, given our outstanding performance for the full fiscal year, which resulted in our exceeding our calculated billings target for fiscal 2020 and factoring in our performance with respect to other key metrics that we use internally to monitor our financial progress against our annual operating plan, our CEO determined (with compensation committee approval) to pay our Senior Executives the unpaid portion of the CEO’s discretionary bonus pool from the first half of the fiscal year.
As a result, the cash bonus payments to our eligible Named Executive Officers (other than Mr. Rajic) for the second half of the year were as follows:
| | | | | | | | | | | | | | |
Named Executive Officer | Second Half Target Bonus Opportunity | Second Half Bonus Payment | Bonus Catchup for First Half of Fiscal 2020 | Total Second Half Bonus Payment |
Mr. Canessa | $125,000 | $164,156 | $37,500 | $201,656 |
Mr. Sinha | $125,000 | $164,156 | $37,500 | $201,656 |
Mr. Schlossman | $75,000 | $98,494 | $22,500 | $120,994 |
Cash Bonus Payments for Mr. Rajic
As provided pursuant to his Employment Offer Letter, Mr. Rajic was eligible to participate. The Salesparticipate in the Employee Incentive Compensation Plan had anon the same terms and conditions, described above for our other Senior Executives, subject to determination and receipt of his cash bonus payments on a quarterly, rather than a semi-annual, basis.
As previously described, given our outstanding performance for the full fiscal year, which resulted in our exceeding our calculated billings target for fiscal 2020 and factoring in our performance with respect to other key metrics that we use internally to monitor our financial progress against our annual operating plan, our CEO determined (with compensation committee approval) to pay Mr. Rajic the unpaid portion of the CEO’s discretionary bonus pool from the first half of the fiscal year. Based on our
corporate performance period, and the exercise of our CEO’s discretion, the cash bonus payments to Mr. Welch’sRajic for fiscal 2020 were as follows:
| | | | | | | | | | | |
Fiscal Period | Quarterly Target Bonus Opportunity | Bonus Catchup for First Half of Fiscal 2020 | Quarterly Bonus Payment |
First Fiscal Quarter | $33,333 (1) | | $33,433 |
Second Fiscal Quarter | $100,000 | | $70,000 |
Third Fiscal Quarter | $100,000 | | $102,900 |
Fourth Fiscal Quarter | $100,000 | $28,567 | $161,975 |
Total | | | $368,308 |
(1) Mr. Rajic’s target commissionannual cash bonus award opportunity was $300,000. Amounts underpro-rated for the Salesfirst fiscal quarter to reflect his September 10, 2019 employment hire date.
The cash bonuses paid to our Named Executive Officers for fiscal 2020 are set forth in the “Fiscal 2020 Summary Compensation Plan generally were payableTable” below.
Long-Term Incentive Compensation
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. We use equity awards to incentivize and reward our Named Executive Officers for long-term corporate performance based on the value of our common stock and, thereby, to align the interests of our Named Executive Officers with those of our stockholders.
Currently, we use RSU awards and PSU awards to retain, motivate, and reward our Named Executive Officers for long-term increases in the value of our common stock and, thereby, to align their interests with those of our stockholders. Our PSU awards provide that our Named Executive Officers may earn shares of our common stock based on our achievement of newpre-established target levels for one or more financial or operational performance measures as well as continued service. We also grant RSU awards with solely time-based vesting requirements to our Named Executive Officers other than our CEO. Because RSU awards have value to the recipient even in the absence of stock price appreciation, we are able to incentivize and upsell annual contract value and renewal amounts.
retain our Named Executive Employment Agreements
Jay Chaudhry
We entered into an employment agreement with Jay Chaudhry, our president, chief executive officer and chairmanOfficers using fewer shares of our board of directors, on August 23, 2017. The employment agreement does not have a fixed expiration date, and Mr. Chaudhry’s employment is at-will. Mr. Chaudhry’s current annual base salary is $23,660, and he is currently eligiblecommon stock than would be necessary if we regularly used stock options to receive discretionary bonuses, as determined byprovide equity to our board of directors or our compensation committee.
executive officers. In addition, because the value of these RSU and PSU awards increases with any increase in August 2017,the value of the underlying shares, RSU and PSU awards also provide incentives to our boardNamed Executive Officers that are aligned with the interests of directors approvedour stockholders.
To date, the paymentcompensation committee has not applied a rigid formula in determining the size and form of the equity awards to be granted to our Named Executive Officers. Instead, in making these decisions, the compensation committee has exercised its judgment as to the amount and form of the awards. The compensation committee considers the retention value of the equity compensation held by usthe Named Executive Officer, the cash compensation received by the Named Executive Officer, a competitive market analysis performed by its compensation consultant, the recommendations of filing fees inour CEO (except with respect to his own equity awards), the amount of $125,000equity compensation held by the Named Executive Officer (including the current economic value of his or her unvested equity and the ability of these unvested holdings to satisfy our retention objectives), and the other factors described in “Compensation-Setting Process – Setting Target Total Direct Compensation” above. Based upon these factors, the compensation committee has determined the size of each award at levels it considered
appropriate to create a meaningful opportunity for reward predicated on behalfthe creation of Mr. Chaudhrylong-term stockholder value.
Fiscal 2020 “Refresh” Equity Awards
In May 2020, the compensation committee approved long-term incentive compensation opportunities in connectionthe form of “refresh” equity awards to our Named Executive Officers (other than our CEO) in amounts that it considered to be consistent with a filing made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as a result of the acquisition by entities controlled by Mr. Chaudhryour compensation philosophy and its desired market positioning. The number of shares of our common stock from existing stockholders. Our board of directors also approved reimbursing Mr. Chaudhry for any applicable taxes payable by Mr. Chaudhry as a result of such payment.
Mr. Chaudhry is an eligible participant in our Change of Control and Severance Policy described below and eligible to receive the change of control benefits described below.
In October 2018, the compensation committee approved the award of performance-based restricted stock units to Mr. Chaudhry (the “CEO PSUs”). The CEO PSUs consist of four separate 150,000 PSU grants with individual annual performance periods to correspond to fiscal years 2019 through 2022. Each CEO PSU grant will be subject to vesting annually for each fiscal year from fiscal year 2019 through fiscal year 2022 based on achievementthe RSU awards and the number of units subject to the performance metricsPSU awards granted to be determined each yearour Named Executive Officers (viewed in the aggregate by the compensation committee. For each performance year, 100% of the earned CEO PSUs will vest on the first Quarterly Vesting Date (as defined below) following the date the achievement for the applicable year performance metric isvalue) was determined by the compensation committee. For the 2019 performance year, the total number of CEO PSUs that can be earned scales from 0% to 150% of target,committee based on actual achievementits consideration of the 2019 performance metric.factors described above. The performance metrics and performance targets“refresh” equity awards approved for thegrant to our Named Executive Officers in May 2020 through 2022 performance years will be determined in the future by the compensation committee. For eachwere as follows:
| | | | | | | | |
Named Executive Officers | Restricted Stock Unit Award (Number of shares) | Performance Stock Unit (Target number of units) |
Mr. Chaudhry | --- | --- |
Mr. Canessa | 58,027 | 38,685 |
Dr. Sinha | 67,698 | 67,698 |
Mr. Rajic | 67,698 | 67,698 |
Mr. Schlossman | 29,014 | 29,014 |
The effective grant date of the CEO PSUs, receiptRSU awards was June 2, 2020. The RSU awards will vest over a four-year period as follows: 6.25% of anythe shares of common stock underlying the awards is subject to Mr. Chaudhry continuing to be a service provider through any performance determination date or subsequent vesting date. Mr. Chaudhry intends to donate any shares of common stock issued for earned PSUs (or the proceeds from the sale thereof) to charity as part of his philanthropic commitments. A “Quarterly Vesting Date” is the first trading day on or after each of March 15, June 15, September 15 and December 15 in a given year.
Remo Canessa
We entered into an employment letter with Remo Canessa, our chief financial officer, on January 8, 2017. The employment letter does not have a fixed expiration date, and Mr. Canessa’s employment is at-will. Mr. Canessa’s current annual base salary is $300,000, and he is currently eligible to earn annual incentive compensation with a target equal to $150,000. For fiscal 2017, Mr. Canessa's bonus was pro-rated based on Mr. Canessa’s date of hire and guaranteed so long as Mr. Canessa continued employment with us through the date the bonus was paid.
If we terminate Mr. Canessa’s employment other than for “cause”, death or “disability” outside of the “change of control period” (as such terms are defined in our Change of Control and Severance Policy), he will receive (1) continuing payments of base salary for a period of six months, (2) acceleration of the vesting of his equity awards to the extent such awards would have vested had he remained employed with us for an additional six months, and (3) an extended post-termination exercise period of stock options for 12 months after termination, subject to his signing and not revoking a release of claims within the time specified in the employment letter.
Mr. Canessa is an eligible participant in our Change of Control and Severance Policy described below and is eligible to receive the change of control benefits described below. In addition to such benefits described below, Mr. Canessa’s extended 12-month post-termination exercise period described above will also apply for qualified terminations during the change of control period.
In October 2018, the compensation committee approved the award of a mix of restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”) to Mr. Canessa. The 56,250 RSUs granted to Mr. Canessa are subject to a delayed vesting schedule. The RSUs will vest over approximately six years in total, with 6.25% of the RSUs vesting on December 15, 2020, and 6.25% of the RSUsshares subject to the award vest on each subsequent Quarterly Vesting Date over the subsequent 45 months.
The PSU awards will be earned (if at all) over a five-year period with the applicable performance measure or measures and related target performance levels to be determined by the compensation committee in the first quarter of fiscal 2022. The actual number of units earned will be between 0% and 125% of the target number of units based on our actual performance against the applicable performance measure or measures over fiscal 2022. Twenty-five percent of the earned units subject to the award will vest on September 15, 2022, with the remaining earned units vesting as to 6.25% of such earned units on each Quarterly Vesting Date thereafter. Mr. Canessa’s PSUs consistover the subsequent three years.
Fiscal 2020 Performance Period PSU Awards
In October 2019, the compensation committee determined that PSU awards previously granted to our Named Executive Officers for the fiscal 2020 performance year were to be earned based on our level of attainment of two separateequally weighted performance metrics: revenue and calculated billings. The compensation committee selected revenue and calculated billings as the appropriate corporate performance metrics for the Fiscal 2020 PSU grantsAwards because, in its view, these metrics were key indicators of 28,125 units with individual annualour periodic performance periods to correspond toand our progress in executing our business strategy.
For purposes of the Fiscal 2020 PSU Awards, “revenue” and “calculated billings” had the same meanings as under the Employee Incentive Compensation Plan for the Senior Executives. For fiscal years 20192020, the revenue and calculated billing levels for the Fiscal 2020 PSU Awards were greater than the amount achieved in the comparable period for the prior fiscal year and represented a very aggressive target for fiscal 2020. For purposes of the 2019Fiscal 2020 PSU Awards, our Named Executive Officers were eligible to
earn the units underlying and subject to these awards to the extent that we achieved the pre-established performance thresholds for revenue and calculated billings for fiscal 2020.
For the fiscal 2020 performance year, the total number of PSUsunits that cancould be earned scalesscaled from 0% to 150% of the target number of units, based on actual achievement of the 2019 performance metric. Thefiscal 2020 performance metrics as follows:
| | | | | | | | |
Metric Achievement | Payment | PSU Award Attainment |
Less than 90% | 0% | No attainment below 90% achievement |
90% - 95% | 70% to 90% linear | 90% attainment pays 70%, and 95% pays 90% |
95% - 100% | 90% to 100% linear | 95% attainment pays 90% and 100% pays 100% |
100% - 105% | 100% to 125% linear | 100% attainment pays 100%, and 105% pays 125% |
105% - 110% | 125% to 150% linear | 105% attainment pays 125%, and 110% pays 150% |
In September 2020, our revenue and performance targetscalculated billings results for fiscal 2020 were presented to the compensation committee for review. After reviewing and analyzing these results, the compensation committee certified that, for the performance period ended July 31, 2020, performance year will be determined in
the future by the compensation committee. For each performance year, earned PSUs will vest on the same schedule as the RSUs, with 6.25%our calculated billings were achieved at 115.70% of the target performance level and our revenue was achieved at 94.71% of the target performance level, resulting in the following award payments:
| | | | | | | | | | | | | | |
Named Executive Officer | Performance Stock Unit Award (Target number of units) | Calculated Billings Performance Measure – Units Earned | Revenue Performance Measure – Units Earned | Performance Stock Unit Award (Total Units awarded) |
Mr. Chaudhry | 150,000 | 86,777 | 71,033 | 157,810 |
Mr. Canessa | 28,125 | 16,271 | 13,319 | 29,590 |
Dr. Sinha | 62,500 | 36,157 | 29,597 | 65,754 |
Mr. Rajic | 23,182 | 13,411 | 10,978 | 24,389 |
Mr. Schlossman | 31,250 | 18,079 | 14,799 | 32,878 |
In the case of Messrs. Chaudhry and Rajic, following certification of our achievement against the applicable performance metrics, 100% of the units earned PSUs vestingby them vested on September 15, 2020. In the case of Messrs. Canessa, Sinha, and Schlossman, following certification of our achievement against the applicable performance metrics, their earned units vest in 16 equal quarterly installments beginning on December 15, 2020 and 6.25% of the PSUs vesting each Quarterly Vesting Date thereafter.2020. For each of the RSU and PSU awards, receipt of any shares of common stock underlying the awards is subject to Mr. Canessathe applicable Named Executive Officer continuing to be a service provider through any vesting date. Each unit earned pursuant to a Fiscal 2020 PSU Award was to be settled for one share of our common stock.
Amit SinhaFor details of Mr. Rajic’s new hire equity awards see “Employment Arrangements” and “Potential Payments Upon Termination or Change in Control” below.
The equity awards granted to our Named Executive Officers in fiscal 2020 are set forth in the “Fiscal 2020 Summary Compensation Table” and the “Fiscal 2020 Grants of Plan-Based Awards Table” below.
Health and Welfare Benefits
Our Named Executive Officers are eligible to receive the same employee benefits that are generally available to all employees, subject to the satisfaction of certain eligibility requirements. These benefits include medical, dental, and vision insurance, business travel insurance, an employee assistance program, health and dependent care flexible spending accounts, basic life insurance, accidental death and dismemberment insurance, short-term and long-term disability insurance and reimbursement for mobile phone coverage.
We maintain a tax-qualified retirement plan, or the 401(k) plan, that provides eligible employees, including our Named Executive Officers, with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to participate in the 401(k) Plan as of the first day of the month following the date they meet the plan’s eligibility requirements, and participants are able to defer up to 100% of their eligible compensation subject to applicable annual limits as set under the Internal Revenue Code. All participants’ interests in their deferrals are 100% vested when contributed. During fiscal 2020, we began making employer matching contributions to the 401(k) plan in an amount of up to $2,000 annually on a dollar for dollar basis.
The 401(k) Plan is intended to be qualified under Section 401(a) of the Internal Revenue Code with the plan’s related trust intended to be tax-exempt under Section 501(a) of the Internal Revenue Code. As a tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to our employees until distributed from the plan.
We design our employee benefits programs to be affordable and competitive in relation to the market as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Accordingly, we do not provide significant perquisites or other personal benefits to our Named Executive Officers, except as generally made available to our employees or in situations where we believe it is appropriate to assist an individual in the performance of his or her duties, to make him or her more efficient and effective, and for recruitment and retention purposes. During fiscal 2020, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for any individual.
We have in the past and may in the future, we may provide perquisites or other personal benefits in limited circumstances, such as those described in the preceding paragraph. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the compensation committee.
Employment Arrangements
We entered into anwritten employment letteragreement with Amit Sinha, our chief technologyCEO and employment offer letters with our other named executive officers in connection with their employment with us. We believe that these arrangements were necessary to induce these individuals to forego other employment opportunities or leave their then-current employer for the uncertainty of a demanding position in a new and unfamiliar organization.
In filling each of our executive positions, our board of directors or the compensation committee, as applicable, recognized that it would need to develop competitive compensation packages to attract qualified candidates in a dynamic labor market. At the same time, our board of directors and the compensation committee were sensitive to the need to integrate new executive officers into the executive compensation structure that we were seeking to develop, balancing both competitive and internal equity considerations.
Each of these arrangements provides for “at will” employment (meaning that either we or the executive officer on October 10, 2010. may terminate the employment relationship at any time without cause) and sets forth the initial compensation arrangements for the executive officer, including their base salary, target annual cash bonus opportunity (expressed as fixed amount or as a percentage of his or her base salary), participation in our employee benefit programs, eligibility for future equity awards, and reimbursement for all reasonable and necessary business expenses.
In addition, in the case of our named executive officers, their employment offer letters and other agreements provide that the executive officer will be eligible to receive certain severance payments and benefits in connection with certain terminations of employment. These post-employment compensation arrangements are discussed in “Post-Employment Compensation” below.
For detailed descriptions of the employment arrangements with our named executive officers, see “Potential Payments upon Termination or Change in Control” below.
Post-Employment Compensation
The employment letter does not have a fixed expiration date, and Dr. Sinha’s employment is at-will. Dr. Sinha’s current annual base salary is $300,000, and he is currently eligible to earn annual incentive compensationoffer letters with a target equal to $125,000.
If we terminate Dr. Sinha’scertain of our Named Executive Officers provide them with certain protection in the event of their termination of employment other than for “cause”,“cause,” death, or “disability” outside of the “change of control period” (as such terms are defined in the employment offer letters). In addition, our Named Executive Officers, are participants in our Change of Control and Severance Policy),Policy, or the Change in Control Policy, which provides for certain protections in the event of a termination of employment in connection with a change in control of the Company. We believe that these protections were necessary to induce these individuals to leave their former employment for the uncertainty of a demanding position in a new and unfamiliar organization and help from a retention standpoint and to retain their services on an ongoing basis. We also believe that these arrangements provided by the Change in Control Policy help maintain the continued focus and dedication of our Named Executive Officers to their assigned duties to maximize stockholder value if there is a potential transaction that could involve a change in control of the Company.
These arrangements provide reasonable compensation to a Named Executive Officer if he will receive (1) continuingor she leaves our employ under certain circumstances to facilitate his or her transition to new employment. Further, in some instances we seek to mitigate any potential employer liability and avoid future disputes or litigation by conditioning post-employment compensation and benefits on a departing Named Executive Officer signing a separation and release agreement acceptable to us.
Under the Change in Control Policy, all payments and benefits in the event of base salary for a periodchange in control of six months, (2)the Company are payable only if there is a subsequent loss of employment by a Named Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of the vesting of hisoutstanding equity awards, we use this double-trigger arrangement to protect against the loss of retention value following a change in control of the Company and to avoid windfalls, both of which could occur if vesting of either equity or cash-based awards accelerated automatically as a result of the transaction.
In the event of a change in control of the Company, to the extent Section 280G or 4999 of the Internal Revenue Code is applicable to a Named Executive Officer, such individual is entitled to receive either:
•payment of the full amounts specified in the policy to which he or she is entitled; or
•payment of such lesser amount that does not trigger the excise tax imposed by Section 4999, whichever results in him or her receiving a higher amount after taking into account all federal, state, and local income, excise and employment taxes.
We do not use excise tax payments (or “gross-ups”) relating to a change in control of the Company and have no such obligations in place with respect to any of our named executive officers.
We believe that having in place reasonable and competitive post-employment compensation arrangements, including in the event of a change in control of the Company, are essential to attracting and retaining highly-qualified executive officers. The compensation committee does not consider the specific amounts payable under the post-employment compensation arrangements when determining the annual compensation for our named executive officers. We do believe, however, that these arrangements are necessary to offer compensation packages that are competitive.
For detailed descriptions of the post-employment compensation arrangements with our named executive officers, as well as an estimate of the potential payments and benefits payable under these arrangements, see “Potential Payments upon Termination or Change in Control” below.
Other Compensation Policies
Hedging and Pledging Prohibitions
Under our Insider Trading Policy, our employees (including officers) and members of our board of directors are prohibited from making short-sales and engaging in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respect to our securities. This latter prohibition extends to any hedging or similar transaction designed to decrease the risks associated with holding our securities. In addition, under our Insider Trading Policy, our employees and members of our board of directors are prohibited from using our securities as collateral for a loan or holding our securities in a margin account.
Tax and Accounting Considerations
The compensation committee takes the applicable tax and accounting requirements into consideration in designing and overseeing our executive compensation program.
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a public company can deduct in any one year for certain executive officers. While our compensation committee considers tax deductibility as one factor in determining executive compensation, our compensation committee also looks at other factors in making its decisions, as noted above, and retains the flexibility to award compensation that it determines to be consistent with the goals of our executive compensation program even if the awards are not deductible by us for tax purposes.
Taxation of “Parachute” Payments
Sections 280G and 4999 of the Internal Revenue Code provide that executive officers and directors who hold significant equity interests and certain other service providers may be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of the company that exceeds certain prescribed limits, and that the company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. We have not agreed to provide any executive officer, including any named executive officer, with a “gross-up” or other reimbursement payment for any tax liability that the executive officer might owe as a result of the application of Sections 280G or 4999 of the Internal Revenue Code.
Section 409A of the Internal Revenue Code
Section 409A of the Internal Revenue Code imposes additional significant taxes in the event that an executive officer, director or service provider receives “deferred compensation” that does not satisfy the requirements of Section 409A of the Internal Revenue Code. Although we do not maintain a traditional nonqualified deferred compensation plan for our executive officers, Section 409A of the Internal Revenue Code does apply to certain severance arrangements, bonus arrangements and equity awards, and we have structured all such arrangements and awards in a manner to either avoid or comply with the applicable requirements of Section 409A of the Internal Revenue Code.
Accounting for Stock-Based Compensation
The compensation committee takes accounting considerations into account in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record a compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date “fair value” of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period (which, generally, will correspond to the award’s vesting schedule). This compensation expense is also reported in the compensation tables below, even though recipients may never realize any value from their equity awards.
Employment Offer Letter with Remo Canessa
Under Mr. Canessa’s employment offer letter, if we terminate Mr. Canessa’s employment with us other than for “cause,” death or “disability” outside of the period beginning on a “change of control” (as such terms are defined in the Severance Policy) and ending 12 months following the change of control, he will be entitled to receive (i) accelerated vesting as to the number of unvested shares subject to equity awards that otherwise would have vested during the 6 months following the date his employment with us terminates had he remained employed with us for an additional sixthrough such time; (2) extension of the period of time in which he has to exercise his vested options until the date that is 12 months following his termination date, subject to earlier termination on a change in control (or similar transaction) pursuant to the terms of the equity plan under which the options are granted; and (3) an extended post-termination exerciseseverance pay at a rate equal to 100% of his base salary, as then in effect, for a period of stock options for 6 months afterfollowing the date of such termination, subject to his signingpayable in accordance with our normal payroll practices.
To receive the severance benefits upon a qualifying termination, Mr. Canessa must sign and not revokingrevoke a release of claims within the time specified in his employment offer letter.
Employment Offer Letter with Dali Rajic
Under Mr. Rajic's employment offer letter, if we terminate Mr. Rajic's employment with us other than for “cause” or he resigns for “good reason”, outside of the “change of control period (as such terms are defined in the employment letter.
Dr. Sinha is an eligible participant in our Change of Control and Severance Policy described below and is eligibleoffer letter), he will be entitled to receive (i) severance pay at a rate equal to 100% of his base salary, as then in effect (less applicable withholdings) for a period of six months following the date of such termination; (ii) extension of the period of time in which he will have to exercise his vested options to purchase our common stock subject to the Option until the date that is 12 months following his termination date, subject to earlier termination on a change in control (or similar transaction) pursuant to the terms of control benefits described below.
In October 2018, the compensation committee approvedequity plan under which the awardoptions were granted; (iii) any unvested Buyout RSU Grant 1 shares will vest; and (iv) if such termination occurs prior to the two year anniversary of a mix of RSUs and PSUs to Dr. Sinha. Dr. Sinha’s RSUs consist of two separatehis employment hire date, the Buyout RSU grants of 62,500 units with 62,500 RSUs vesting in 16 equal quarterly installments beginning on December 15, 2019Grant 2, the New Hire RSU Grant and the remaining 62,500 RSUs vesting in 16 equal quarterly installments beginning on December 15, 2020. Dr. Sinha’s PSUs consist of two separate PSU grants of 62,500 units with individual annual performance periods to correspond to fiscal years 2019 and 2020. For the 2019 performance year, the total number of PSUs that can be earned scales from 0% to 150% of target, based on actual achievement of the 2019 performance metric. The performance metrics and performance targets for the 2020 performance year will be determined in the future by the compensation committee. For each performance year, earned PSUsOption will vest on the same schedule as the RSUs, with any earned fiscal year 2019 PSUs vesting in 16 equal quarterly installments beginning on December 15, 2019 and any earned fiscal year 2020 PSUs vesting in 16 equal quarterly installments beginning on December 15, 2020. For each of the RSU and PSU awards, receipt of anyto shares of common stock underlying the awardsthat would have vested had Mr. Rajic remained employed for six months after his termination date. Further, If Mr. Rajic is subject to Dr. Sinhaa "qualifying termination" (as defined in the employment offer letter), he will be entitled to an extension of the period of time in which he will have to exercise his vested options to purchase our common stock subject to the Option until the date that is 12 months following his termination date, subject to earlier termination on a change in control (or similar transaction) pursuant to the terms of the equity plan under which the options were granted.
To receive the severance benefits upon a qualifying termination, Mr. Rajic must sign and not revoke a release of claims within the time specified in his employment offer letter.
Employment Offer Letter with Robert Schlossman
Under Mr. Schlossman’s employment offer letter, if we terminate Mr. Schlossman’s employment with us other than for “cause” or he resigns for “good reason”, without a “change of control” (as such terms are defined in the employment offer letter), he will be entitled to receive continuing severance pay at a rate equal to 100% of his base salary, as then in effect, for a period of 3 months from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll practices.
To receive the severance benefits upon a service provider through any vesting date.qualifying termination, Mr. Schlossman must sign and not revoke a release of claims within the time specified in his employment offer letter.
Change of Control and Severance Policy
Our board of directors adopted a Change of Control and Severance Policy, or the Severance Policy. Each of our current executive officers is a participant in the Severance Policy. Under the Severance Policy, if we terminate a participant other than for “cause,” death or “disability” or the named executive officer resigns for “good reason” during the period beginning on a “change of control” (as such terms are defined in the Severance Policy) and ending 12 months following the change of control (which we refer to as the change of control period), such named executive officer will be eligible to receive the following severance benefits:
•100% of the then-unvested shares subject to his then-outstanding equity awards will become vested and exercisable, and in the case of equity awards with performance-based vesting, all performance goals and other vesting criteria will be deemed achieved at the specified percentage of target levels;
•a lump-sum payment equal to 100% of the greatest of (i) a participant's annual base salary as in effect immediately prior to his termination, (ii) if the termination is a resignation for
good reason based on a material reduction in base salary, a participant's annual base salary as in effect immediately prior to such reduction, or (iii) a participant's annual base salary as in effect immediately prior to the change of control;
•a lump-sum payment equal to (i) 100% of a participant's target annual bonus for the fiscal year in which the termination occurs plus (ii) a pro-rated portion of such target annual bonus reduced by any bonus payments made during such fiscal year; and
•a lump-sum health benefit severance payment of $36,000.
To receive the severance benefits upon a qualifying termination, a named executive officer must sign and not revoke a release of claims within the time specified in the Severance Policy. If we discover after a named executive officer receives severance benefits that grounds for terminating him for cause existed, such named executive officer will not receive any further severance benefits under the Severance Policy, and to the extent permitted by law, the named executive officer will be required to repay to us any severance payments and benefits (or gain derived from such payments and benefits) he received under the Severance Policy.
If any of the payments or benefits provided for under the Severance Policy or otherwise payable to a named executive officer would constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code and would be subject to the related excise tax under Section 4999 of the Internal Revenue Code, then the named executive officer will be entitled to receive either full payment of such payments and benefits or such lesser amount which would result in no portion of the benefits being subject to the excise tax, whichever results in the greater amount of after-tax benefits to him.
In addition to the benefits described above, Mr. Canessa’s 12-month extended post-termination exercise period continues to apply for a qualified termination during the change of control period.
Fiscal Year 2018 Equity Incentive Plan and 2007 Stock Plan
Our Fiscal Year 2018 Equity Incentive Plan (the “2018 Plan”) provides that in the event of a merger or change in control, as defined under our 2018 Plan, each outstanding award will be treated as the administrator determines, without a participant’s consent. The administrator is not required to treat all awards or participants similarly.
In the event that a successor corporation or its parent or subsidiary does not assume or substitute an equivalent award for any outstanding award, then such award will fully vest, all restrictions on such award will lapse, all performance goals or other vesting criteria applicable to such award will be deemed achieved at 100% of target levels and all other terms and conditions met and such award will become fully exercisable, if applicable. If an option or stock appreciation right is not assumed or substituted, the administrator will notify the participant in writing or electronically that such option or stock appreciation right will be exercisable for a period of time determined by the administrator in its sole discretion and the option or stock appreciation right will terminate upon the expiration of such period.
In the event of a change in control, with respect to awards granted to an outside director, his or her options and stock appreciation rights, if any, will vest fully and become immediately exercisable, all restrictions on his or her restricted stock and restricted stock units will lapse and all performance goals or other vesting requirements
for his or her performance shares and units will be deemed achieved at 100% of target levels, and all other terms and conditions met.
Our 2007 Plan provides that, in the event of a merger or change in control, as defined under our 2007 Plan, each outstanding award may be assumed or substituted for an equivalent award. In the event that awards are not assumed or substituted for, then the vesting of outstanding awards will be accelerated, and stock options will become exercisable in full prior to such transaction. In addition, if an option is not assumed or substituted in the event of a merger or change in control, the administrator will notify the participant that such award will be fully vested and exercisable for a specified period prior to the transaction, and such award will terminate upon the expiration of such period for no consideration, unless otherwise determined by the administrator.
401(k) Plan
Fiscal 2020 Summary Compensation Table
The following table presents information regarding the compensation awarded to, earned by and paid to each individual who served as one of our named executive officers during fiscal 2020, fiscal 2019 and fiscal 2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
Jay Chaudhry | 2020 | 23,660 | — | 6,597,000 | — | — | — | 6,620,660 |
President and Chief Executive Officer | 2019 | 23,660 | — | 5,556,000 | — | —
| — | 5,579,660 |
| 2018 | 96,500 | — | —
| —
| —
| 200,809 | 297,309 |
Remo Canessa | 2020 | 350,000 | — | 7,397,664 | — | 289,156 | — | 8,036,820 |
Chief Financial Officer | 2019 | 300,000 | — | 3,125,250 | — | — | — | 3,425,250 |
| 2018 | 300,000 | — | — | — | 169,359 | — | 469,359 |
Amit Sinha. Ph.D. | 2020 | 350,000 | — | 9,936,247 | — | 289,156 | — | 10,575,403 |
President of Research and Development, Chief Technology Officer | 2019 | 300,000 | — | 6,945,000 | — | — | — | 7,245,000 |
| 2018 | 300,000 | — | — | — | 129,519 | 1,457 | 430,976 |
Dali Rajic(4) | 2020 | 356,667 | — | 19,625,876 | 3,414,630 | 368,308 | — | 23,765,481 |
President Go-To-Market and Chief Revenue Officer | | | | | | | | |
Robert Schlossman(5) | 2020 | 315,000 | — | 4,454,791 | — | 173,494 | — | 4,943,285 |
Chief Legal Officer | 2019 | 275,000 | — | 3,472,500 | — | — | — | 3,747,500 |
___________________________
(1) The amounts reported represent the grant date fair value of the awards granted to the named executive officers during the respective fiscal years as computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in Note 10 to our audited consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2020. The awards for fiscal year 2020 are comprised of (i) time-based RSU and (ii) PSU awards. The amounts shown in respect of the PSUs represent the grant date fair value of the second tranche of the PSU award that was granted in October 2018 based upon the probable outcome of the fiscal 2020 performance conditions as of the grant date. The grant date fair value of the PSU awards granted in fiscal year 2020 assuming achievement of the maximum level of performance are: Mr. Chaudhry, $9,895,500; Mr. Canessa, $1,855,428; Dr. Sinha $4,123,125; Mr. Rajic $1,529,317; and Mr. Schlossman $2,061,563. These amounts do not necessarily correspond to the actual value recognized by our name executive officers. For example, PSUs were earned at 105.2% for fiscal year 2020.
(2) The awards for fiscal year 2019 are comprised of (i) time-based RSU and (ii) PSU awards. The amounts shown in respect of the PSUs represent the grant date fair value of the first of multiple tranches of the PSU award that was granted in October 2018 based upon the probable outcome of the fiscal year 2019 performance condition as of the grant date. The grant date fair value of the PSU awards granted in fiscal years 2019 assuming achievement of the maximum level of performance are: Mr. Chaudhry, $8,334,000; Mr. Canessa $1,562,625; Dr. Sinha $3,472,500; and Mr. Schlossman $1,736,250. These amounts do not necessarily correspond to the actual value recognized by our named executive officers. For example, no PSUs were earned for fiscal year 2019.
(3) The amounts reported represent the aggregate grant date fair value of the stock options granted to our named executive officers, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in Note 10 to our audited consolidated financial statements included in our
Annual Report on Form 10-K for our fiscal year ended July 31, 2020. These amounts do not necessarily correspond to the actual value recognized by the named executive officers.
(4) Mr. Rajic was hired as an executive officer in fiscal 2020.
(5) Mr. Schlossman was an executive officer but not a tax-qualified retirement plan, ornamed executive officer for fiscal 2018.
Fiscal 2020 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to all plan-based awards granted to our named executive officers during fiscal 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1) | | Estimated Possible Payouts under Equity Incentive Plan Awards (2) | | | | | | |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | All Other Stock Awards: Number of shares of Stock or Units (#) | | Exercise Price of Option Awards ($)(3) | | Grant Date Fair Value of Stock and Options Awards ($)(3) |
Jay Chaudhry | | 10/31/2019 | | — | | | — | | | — | | | — | | | 150,000 | | | 225,000 | | | — | | | — | | | 6,597,000 | |
Remo Canessa | | 10/31/2019 | | — | | | 250,000 | | | 375,000 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 28,125 | | | 42,188 | | | — | | | — | | | 1,236,938 | |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 58,027(4) | | — | | | 6,160,727 | |
Amit Sinha, Ph.D. | | 10/31/2019 | | — | | | 250,000 | | | 375,000 | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 62,500 | | | 93,750 | | | — | | | — | | | 2,748,750 | |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 67,698(4) | | — | | | 7,187,497 | |
Dalibor Rajic | | 10/31/2019 | | — | | | 333,333 | | | 500,000 | | | — | | | — | | | — | | | — | | | 49.59 | | | — | |
| | 09/12/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 150,000(5) | | — | | | 3,414,630 | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 74,182(6) | | — | | | 3,262,524 | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 46,364(7) | | — | | | 2,039,089 | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 46,364(8) | | — | | | 2,039,089 | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 92,727(9) | | — | | | 4,078,133 | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 23,182 | | | 34,773 | | | | | — | | | 1,019,544 | |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 67,698(4) | | — | | | 7,187,497 | |
Robert Schlossman | | 10/31/2019 | | — | | | 150,000 | | | 225,000 | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 31,250 | | | 46,875 | | | — | | | — | | | 1,374,375 | |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 29,014(4) | | — | | | 3,080,416 | |
___________________________
(1) These amounts reflect the 401(k) plan, that provides eligible employees with an opportunity to savefiscal 2020 target cash bonus amounts for retirement on a tax-advantaged basis. Eligible employees are able toeach of our named executive officers under our Incentive Compensation Plan. Mr. Chaudhry did not participate in the 401(k) planIncentive Compensation Plan. Mr. Rajic amounts were pro-rated based on date of hire of September 12, 2019. There are no threshold bonus amounts under the Incentive Compensation Plan. As set forth in the Summary Compensation Table, bonuses were earned for fiscal 2020 at 105.2%. As such, the amounts set forth do not represent actual compensation earned or earnable by the named executive officers for fiscal 2020. For a description of the Incentive Compensation Plan, see “Compensation Discussion and Analysis –Annual Cash Bonuses” above.
(2) These amounts reflect PSUs for the 2020 fiscal year performance period for which performance metrics were established during the 2020 fiscal year under our 2018 Equity Incentive Plan. The PSUs were eligible to be earned based on the achievement of 2020 fiscal year revenue and calculated billing targets established by the compensation committee. There were no threshold amounts for the 2020 fiscal year performance period. The amounts set forth do not represent actual compensation earned or earnable by the named executive officers for fiscal 2020. For a description of the 2020 fiscal year PSU program, see “Compensation Discussion and Analysis –Long-Term Incentive Compensation” above.
(3) The amounts reported represent the aggregate grant date fair value of the stock awards granted to our named executive officers in fiscal 2020, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value are set forth in the notes to our consolidated financial statements included in the Annual Report. These amounts do not necessarily correspond to the actual value recognized by our named executive officers.
(4) The RSUs vest in 16 equal quarterly installments beginning on December 15, 2020.
(5) The options vest as follows: (i) 25% on the one year anniversary of the grant date, and (ii) 1/48th each month thereafter.
(6) The RSUs vest in four equal quarterly installments beginning on December 15, 2019.
(7) The RSUs vest in two equal biannual installments beginning on March 15, 2021.
(8) The RSUs vest in two equal biannual installments beginning on March 15, 2022.
(9) The RSUs vest as follows: (i) 23,182 on September 15, 2020; (ii) 69,545 RSUs vest in 12 equal quarterly installments beginning on December 15, 2020.
Fiscal 2020 Outstanding Equity Awards at Fiscal Year-End Table
The following table provides information regarding outstanding equity awards held by our named executive officers as of July 31, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
Name | Grant Date |
| Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Unexercisable (#) | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares or Units That Have Not Vested (#) | Equity Incentive Plan Awards: Market Value of Unearned Shares or Units or That Have Not Vested ($) |
Jay Chaudhry | 10/05/2018 | (2) | — | | — | | — | | — | | | — | | — | | 150,000 | | 19,477,500 |
| 10/05/2018 | (3) | — | | — | | — | | — | | | — | | — | | 150,000 | | 19,477,500 | |
| 10/31/2019 | (4) | — | | — | | — | | — | | | 157,810 | | 20,491,629 | | — | | — | |
Remo Canessa | 03/02/2017 | (5) | 200,000 | — | | 5.82 | | 03/02/2024 | | — | | — | | — | | — | |
| 10/05/2018 | (6) | — | | — | | — | | — | | | 56,250 | | 7,304,063 | — | | — | |
| 10/31/2019 | (7) | — | | — | | — | | — | | | 29,590 | | 3,842,262 | — | | — | |
| 06/02/2020 | (6) | — | | — | | — | | — | | | 58,027 | | 7,534,806 | — | | — | |
| 06/02/2020 | (8) | — | | — | | — | | — | | | | | 38,685 | 5,023,247 |
Amit Sinha, Ph.D. | 04/06/2017 | (9) | 72,227 | | 111,106 | | 5.93 | | 04/06/2024 | | — | | — | | — | | — | |
| 10/05/2018 | (10) | — | | — | | — | | — | | | 113,282 | | 14,709,668 | — | | — | |
| 10/31/2019 | (7) | — | | — | | — | | — | | | 65,754 | | 8,538,157 | — | | — | |
| 06/02/2020 | (6) | — | | — | | — | | — | | | 67,698 | | 8,790,585 | — | | — | |
| 06/02/2020 | (8) | — | | — | | — | | — | | | — | | — | | 67,698 | | 8,790,585 |
Dalibor Rajic | 09/12/2019 | (11) | — | | 150,000 | | 49.59 | | 09/12/2029 | | — | | — | | — | | — | |
| 10/31/2019 | (4) | — | | — | | — | | — | | | 24,389 | | 3,166,912 | — | | — | |
| 10/31/2019 | (2) | — | | — | | — | | — | | | — | | — | | 23,182 | | 3,010,183 |
| 10/31/2019 | (3) | — | | — | | — | | — | | | — | | — | | 23,182 | | 3,010,183 |
| 10/31/2019 | (12) | — | | — | | — | | — | | | — | | — | | 23,182 | | 3,010,183 |
| 10/31/2019 | (13) | — | | — | | — | | — | | | 204,001 | | 26,489,530 | — | | — | |
| 06/02/2020 | (6) | — | | — | | — | | — | | | 67,698 | | 8,790,585 | — | | — | |
| 06/02/2020 | (8) | — | | — | | — | | — | | | — | | — | | 67,698 | | 8,790,585 |
Robert Schlossman | 01/15/2016 | (14) | 93,000 | — | | 4.40 | | 01/15/2023 | | — | | — | | — | | — | |
| 10/05/2018 | (15) | — | | — | | — | | — | | | 56,641 | | 7,354,834 | — | | — | |
| 10/31/2019 | (7) | — | | — | | — | | — | | | 32,878 | | 4,269,208 | — | | — | |
| 06/02/2020 | (6) | — | | — | | — | | — | | | 29,014 | | 3,767,468 | — | | — | |
| 06/02/2020 | (8) | — | | — | | — | | — | | | — | | — | | 29,014 | | 3,767,468 |
___________________________ (1) This column represents the market value of the shares underlying the RSUs or PSUs, as applicable, as of July 31, 2020, based on the closing price of our common stock, as reported on NASDAQ, of $129.85 per share on July 31, 2020.
(2) Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2021, or the first quarterly vesting date after achievement has been certified. Because the performance metrics for this award had not been determined in FY 2020 (and hence, no grant date fair value could be determined), it was not included in the summary compensation table or grants of plan-based awards table above. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%.
(3) Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2022, or the first quarterly vesting date after achievement has been certified. Because the performance metrics for this award had not been determined
in FY 2020 (and hence, no grant date fair value could be determined), it was not included in the summary compensation table or grants of plan-based awards table above. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%.
(4) Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2020, or the first quarterly vesting date after achievement has been certified. Amounts reported reflect PSUs were achieved at 105.2% of target in fiscal 2020.
(5) The option is subject to an early exercise provision and is immediately exercisable. One-fourth of the shares subject to the option vested on February 6, 2018 and 1/48 of the shares vest monthly thereafter.
(6) The RSUs vest in 16 equal quarterly installments beginning on December 15, 2020.
(7) Upon achievement of specified performance metrics, earned PSUs vest in 16 equal quarterly installments beginning on December 15, 2020. Amounts reported reflect PSUs were achieved at 105.2% of target in fiscal 2020.
(8) Upon achievement of specified performance metrics, earned PSUs vest 25% on September 15, 2022 or the first quarterly vesting date after achievement has been certified and the remaining 75% vest in 12 equal quarterly installments beginning on December 15, 2022. Because the performance metrics for this award had not been determined in FY 2020 (and hence, no grant date fair value could be determined), it was not included in the summary compensation table or grants of plan-based awards table above. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 125%.
(9) One-fourth of the shares subject to the option vested on November 1, 2018 and 1/48 of the shares vest monthly thereafter.
(10) The RSUs vest as follows: (i) 50,782 RSUs vest in 13 equal quarterly installments beginning on September 15, 2020 and (ii) 62,500 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020.
(11) One-fourth of the shares subject to the option vest on September 10, 2020 and 1/48th of the shares vest monthly thereafter.
(12) Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2023, or the first quarterly vesting date after achievement has been certified. Because the performance metrics for this award had not been determined in FY 2020 (and hence, no grant date fair value could be determined), it was not included in the summary compensation table or grants of plan-based awards table above. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%.
(13) The RSUs vest as follows: (i) 18,546 RSUs vest on September 15, 2020 and (ii) 92,728 RSUs vest in four equal biannual installments beginning on March 15, 2021. (iii) 23,182 vest on September 15, 2020 and 69,545 vest in 12 equal quarterly installments beginning on December 15, 2020.
(14) One-fourth of the shares subject to the option vested on January 14, 2017 and 1/48 of the shares vest monthly thereafter.
(15) The RSUs vest as follows: (i) 25,391 RSUs vest in 13 equal quarterly installments beginning on September 15, 2020 and (ii) 31,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020.
Fiscal 2020 Option Exercises and Stock Vested Table
The following table presents, for each of our named executive officers, the shares of our common stock that were acquired upon the exercise of stock options and the related value realized upon exercise during fiscal 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 ($)(2) |
Jay Chaudhry | | — | | | — | | | — | | | — | |
Remo Canessa | | 330,000 | | 23,381,356 | | — | | | — | |
Amit Sinha, Ph.D. | | 251,333 | | 17,856,692 | | 11,718 | | 755,030 |
Dalibor Rajic | | — | | | — | | | 55,636 | | 3,584,790 |
Robert Schlossman | | 137,000 | | 10,795,481 | | 5,859 | | 377,515 |
___________________________
(1) The value realized on exercise is pre-tax and represents the difference between the market price of our common stock on the date of exercise less the option exercise price paid for those shares, multiplied by the number of shares for which the option was exercised.
(2) The value realized on vesting is calculated as the number of vested shares multiplied by the closing market price of our common stock on the vesting date.
Potential Payments upon Termination or Change in Control
The tables below quantify (i) the potential payments to Messrs. Canessa, Rajic and Schlossman under the terms of the Severance Policy in the event of a qualifying termination of employment that is not in connection with a change in control of the Company and (ii) the potential payments to our named executive officers under the terms of the Severance Policy in the event of a qualifying termination of employment in connection with a change in control of the Company. The amounts shown assume that the change in control and/or termination of employment occurred on July 31, 2020, the last business day of fiscal 2020. The values reflected also assume that the month followingpayments and benefits to our named executive officers are not reduced by virtue of the date they meetprovision in the 401(k) plan’s eligibility requirements,Severance Policy relating to Sections 280G and participants are able4999 of the Code.
Potential Payments Upon Termination Not in Connection with a Change in Control
| | | | | | | | | | | | | | |
| | Value of Accelerated Equity Awards | |
Named Executive Officer | Salary Severance ($) | Restricted Stock Units ($)(1) | Options ($)(2) | Total ($) |
Mr. Canessa | 175,000 | | 927,259 | | 15,503,502 | 16,605,761 |
Mr. Rajic | 200,000 | | 6,170,862 | | 4,013,000 | | 10,383,862 |
Mr. Schlossman | 78,750 | | — | | — | | 78,750 | |
___________________________
(1) These amounts reflect the aggregate market value of the unvested shares of our common stock underlying outstanding restricted stock unit awards. The aggregate market value is equal to defer up to 100%the product obtained by multiplying (i) the number of their eligible compensationunvested shares of our common stock subject to applicable annual Internal Revenue Code limits. All participants’ interestsoutstanding restricted stock
unit awards as of July 31, 2020, by (ii) $129.85 (the closing market price of our common stock on Nasdaq on July 31, 2020, the last trading day in their deferrals are 100% vested when contributed. We have not made any matching contributionsthe fiscal year ended July 31, 2020).
(2) These amounts reflect the aggregate market value of the unvested shares of our common stock underlying outstanding options. The aggregate market value is equal to (i) the product obtained by multiplying (x) the number of unvested shares of our common stock subject to vesting of outstanding options as of July 31, 2020, by (y) $129.85 (the closing market price of our common stock on Nasdaq on July 31, 2020, the last trading day in the fiscal year ended July 31, 2020), minus (ii) the aggregate exercise price for such unvested shares.
Potential Payments Upon Termination in Connection with a Change in Control
| | | | | | | | | | | | | | | | | | | | |
| | | Value of Accelerated Equity Awards | | |
Named Executive Officer | Salary Severance ($) | Bonus Severance ($) | Restricted Stock Units ($)(1) | Options ($)(2) | Health Benefit Severance Payments ($) | Total ($) |
Mr. Chaudhry | 23,660 | | — | | 58,432,500 | | — | | 36,000 | | 58,492,160 | |
Mr. Canessa | 350,000 | | 500,000 | | 23,514,147 | | 18,087,419 | | 36,000 | | 42,487,566 | |
Dr. Sinha | 350,000 | | 500,000 | | 40,406,463 | | 13,768,811 | | 36,000 | | 55,061,274 | |
Mr. Rajic | 400,000 | | 800,000 | | 56,111,431 | | 12,039,000 | | 36,000 | | 69,386,431 | |
Mr. Schlossman | 315,000 | | 300,000 | | 18,947,582 | | — | | 36,000 | | 19,598,582 | |
___________________________
(1) These amounts reflect the aggregate market value of the unvested shares of our common stock underlying outstanding restricted stock unit awards. The aggregate market value is equal to the 401(k) planproduct obtained by multiplying (i) the number of unvested shares of our common stock subject to date.
outstanding restricted stock unit awards as of July 31, 2020, by (ii) $129.85 (the closing market price of our common stock on the Nasdaq Global Select Market on July 31, 2020, the last trading day in the fiscal year ended July 31, 2020). For performance-based restricted stock unit awards, the assumed number of unvested shares is equal to the target number of shares subject to such award.
(2) These amounts reflect the aggregate market value of the unvested shares of our common stock underlying outstanding options. The aggregate market value is equal to (i) the product obtained by multiplying (x) the number of unvested shares of our common stock subject to outstanding options as of July 31, 2020, by (y) $129.85 (the closing market price of our common stock on the Nasdaq Global Select Market on July 31, 2020, the last trading day in the fiscal year ended July 31, 2020), minus (ii) the aggregate exercise price for such unvested shares.
Equity Compensation Plan Information
The following table provides information as of July 31, 20182020 with respect to shares of our common stock that may be issued under our existing equity compensation plans.
| | | | | | | | | | | |
Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Restricted Stock Units and Rights (#) | Weighted Average Exercise Price of Outstanding Options and Rights ($) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) (#) |
Equity compensation plans approved by security holders | | | |
2007 Stock Plan (1) | 5,020,019 | 7.66 | — | |
Fiscal Year 2018 Equity Incentive Plan (2)(3) | 10,273,966 | 49.32 | 15,792,761 |
Fiscal Year 2018 Employee Stock Purchase Plan (4) | — | | — | | 2,721,747 |
Equity compensation plans not approved by security holders | — | | — | | — | |
TOTAL | 15,293,985 | 8.90 | 18,514,508 |
(1) As a result of the adoption of the 2018 Plan, we no longer grant awards under the 2007 Plan; however, all outstanding options issued pursuant to the 2007 Plan continue to be governed by their existing terms. To the extent that any such awards are forfeited or lapse unexercised or are repurchased, the shares of common stock subject to such awards will become available for issuance under the 2018 Plan.
(2) Our 2018 Plan provides that the number of shares available for issuance under the 2018 Plan will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 12,700,000 shares, (ii) five percent (5%) of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (iii) such other amount as our board of directors may determine.
(3) Includes all PSUs granted in fiscal 2019 which consists of (i) fiscal 2020 PSUs at the maximum payout (PSUs were paid out for fiscal 2020 at 105.2% resulting in 33,133 above target) (ii) fiscal 2021, fiscal 2022, at target (100%), as no metrics had been determined as of fiscal 2020 year-end. And all PSUs granted in fiscal 2020 which consists of (i) fiscal 2021, fiscal 2022 and fiscal 2023.
(4) Our Fiscal Year 2018 Employee Stock Purchase Plan (the "ESPP") provides that the number of shares available for issuance under the ESPP will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 2,200,000 shares, (ii) one percent (1%) of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (iii) such other amount as may be determined by the administrator of the ESPP.
CEO Pay Ratio Disclosure
As required by SEC rules, we are providing the following information about the relationship between the annual total compensation of our Chief Executive Officer and President, Jay Chaudhry (our CEO), and the annual total compensation of our median employee (our “CEO pay ratio”).
For fiscal 2020, the median of the annual total compensation of all employees of our company (other than our CEO) was $169,833 and the annual total compensation of our CEO was $6,620,660. Accordingly, the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was approximately 39 to 1. This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules.
|
| | | | | | | | | |
Plan Category | | Number of Securities to be Issued upon Exercise of Outstanding Options, Restricted Stock Units and Rights | | Weighted Average Exercise Price of Outstanding Options and Rights | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the first Column) |
Equity compensation plans approved by security holders | | | | | | |
2007 Stock Plan (1) | | 16,131,798 |
| | $6.19 |
| | — |
|
Fiscal Year 2018 Equity Incentive Plan (2) | | 219,291 |
| | $ 41.25 |
| | 13,471,075 |
|
Fiscal Year 2018 Employee Stock Purchase Plan (3) | | — |
| | — |
| | 2,200,000 |
|
Equity compensation plans not approved by security holders | | — |
| | — |
| | — |
|
TOTAL | | 16,351,089 |
| | $ 6.21 |
| | 15,671,075 |
|
| |
(1) | As a result of the adoption of the 2018 Plan, we no longer grant awards under the 2007 Plan; however, all outstanding options issued pursuant to the 2007 Plan continue to be governed by their existing terms. To the extent that any such awards are forfeited or lapse unexercised or are repurchased, the shares of common stock subject to such awards will become available for issuance under the 2018 Plan. |
| |
(2) | Our 2018 Plan provides that the number of shares available for issuance under the 2018 Plan will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 12,700,000 shares, (ii) five percent (5%) of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (iii) such other amount as our board of directors may determine. |
| |
(3) | Our Fiscal Year 2018 Employee Stock Purchase Plan (the "ESPP") provides that the number of shares available for issuance under the ESPP will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 2,200,000 shares, (ii) one percent (1%) of the outstanding shares of common stock on the last day of the immediately preceding fiscal year or (iii) such other amount as may be determined by the administrator of the ESPP. |
We selected July 31, 2020, the last day of our fiscal year, as the determination date for identifying our median employee. As of July 31, 2020, our employee population consisted of approximately 2,000 individuals (other than our CEO) working at our parent company and consolidated subsidiaries both within and outside the United States, which included all employees whether employed on a full-time, part-time, temporary or seasonal basis. We did not include any contractors or other non-employee workers in our employee population.
To identify our median employee, we used a consistently applied compensation measure consisting of the target base salary of our employees for the 12-month period from August 1, 2019 through July 31, 2020. We selected the foregoing compensation element because it represented our principal broad-based compensation element. Payments not made in U.S. dollars were converted to U.S. dollars using the applicable currency exchange rate in effect as of July 31, 2020. We did not make any cost-of-living adjustment.
Using this approach, we selected the individual at the median of our employee population, who was a full-time employee based in the United States. We then calculated annual total compensation for this individual using the same methodology we use for our named executive officers as set forth in our fiscal 2020 Summary Compensation Table.
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column (column (j)) of our fiscal 2020 Summary Compensation Table in this Proxy Statement.
Because SEC rules for identifying the median of the annual total compensation of all employees allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their employee population and compensation practices, the pay ratio reported by other companies may not be comparable to our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. As explained by the SEC when it adopted these rules, the rule was not designed to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess each particular company’s compensation practices and pay ratio disclosures.
COMPENSATION COMMITTEE REPORT
The compensation committee has reviewed and discussed the section titled “Executive Compensation” with management. Based on such review and discussion, the compensation committee has recommended to the board of directors that the section titled “Executive Compensation” be included in this proxy statement.Proxy Statement.
Respectfully submitted by the members of the compensation committee of the board of directors:
Andrew Brown (Chair)
Karen Blasing
Charles Giancarlo
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of October 25, 2018November 11, 2020 for:
•each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock;
•each of our named executive officers;
•each of our directors and nominees for director; and
•all of our current executive officers and directors as a group.
We have determined beneficial ownership in accordance with the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable.
We have based our calculation of the percentage of beneficial ownership on 122,096,519134,171,753 shares of our common stock outstanding as of October 25, 2018.November 11, 2020. We have deemed shares of our common stock subject to stock options that are currently exercisable or exercisable within 60 days of October 25, 2018,November 11, 2020, to be outstanding and to be beneficially owned by the person holding the stock option for the purpose of computing the percentage ownership of that person. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Zscaler, Inc., 110 Rose Orchard120 Holger Way, San Jose, California 95134.
| | | | | | | | |
Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned |
5% Stockholders: | | |
Ajay Mangal, as trustee(1) | 29,824,532 | 22.2% |
Named Executive Officers and Directors: | | |
Jay Chaudhry(2) | 26,838,047 | | 20.0% |
Remo Canessa(3) | 353,675 | | * |
Amit Sinha, Ph.D.(4) | 666,431 | | * |
Dali Rajic(5) | 133,167 | | * |
Robert Schlossman(6) | 67,740 | | * |
Karen Blasing(7) | 181,595 | | * |
Andrew Brown(8) | 100,797 | | * |
Scott Darling(9) | 71,262 | | * |
Charles Giancarlo(10) | 367,095 | | * |
David Schneider(11) | 7,667 | | * |
All current executive officers and directors as a group (10 persons)(12) | 28,787,476 | 21.4% |
* Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock.
(1) Consists of (i) 21,566,041 shares held of record by The CJCP Trust for which Mr. Mangal serves as trustee, (ii) 2,752,830 shares held of record by The CKS Trust for the benefit of YPC dated 12/30/2017 for which Mr. Mangal serves as trustee, (iii) 2,752,830 shares held of record by The CKS Trust for the benefit of SRC dated 12/30/2017 for which Mr. Mangal serves as trustee, (iv) 2,752,830 shares held of record by The CKS Trust for the benefit of SDC dated 12/30/2017 for which Mr. Mangal serves as trustee, and (v) one share held of record by The CKS Trust dated December 30, 2017 for which Mr. Mangal serves as trustee. The beneficiaries of The CJCP Trust and each of The CKS Trusts are members of Jay Chaudhry’s family. The address for The CJCP Trust and The CKS Trusts is c/o The Goldman Sachs Trust Company, 200 Bellevue Parkway, Suite 250, Wilmington, Delaware 19809. This information is derived from a Schedule 13G/A filed by Ajay Mangal with the SEC on February 13, 2020.
(2) Consists of (i) 2,269,432 shares held of record by Mr. Chaudhry, (ii) 24,561,949 shares held of record by Jyoti Chaudhry and (iii) 6,666 shares held of record by P. Jyoti Chaudhry Family Trust dated March 1, 2000 for which Surjit Kaur serves as trustee.
(3) Consists of (i) 254,685 shares held of record by Mr. Canessa, (ii) 90,000 shares subject to options exercisable within 60 days of November 11, 2020, of which 69,197 are fully vested and (iii) 8,990 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(4) Consists of (i) 14,932 shares held of record by Dr. Sinha, (ii) 281,702 shares held of record by the Sinha Revocable Trust dated September 24, 2011 for which Dr. Sinha serves as trustee, (iii) 204,749 shares held of record in trusts for Dr. Sinha's minor children for which Neha and Piyush Kumar serve as co-trustees, (iv) 35,000 held of record by the Amit & Deepali Sinha Foundation for which Dr. Sinha and Deepali Sinha serve as trustees, (v) 113,895 shares subject to options exercisable within 60 days of November 11, 2020, all of which are fully vested and (vi) 16,153 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(5) Consists of (i) 73,141 shares held of record by Mr. Rajic, (ii) 50,000 shares subject to options exercisable within 60 days of November 11, 2020, all of which are fully vested and (iii) 10,026 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(6) Consists of (i) 27,966 shares held of record by Mr. Schlossman, (ii) 32,000 shares subject to options exercisable within 60 days of November 11, 2020, all of which are fully vested and (iii) 7,774 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(7) Consists of (i) 595 shares held of record by Ms. Blasing, (ii) 25,624 shares held of record by The Blasing Family Revocable Trust U/A dtd 12/22/2005 for which Ms. Blasing serves as trustee and (iii) 154,334 shares subject to options exercisable
|
| | | | | | |
Name of Beneficial Owner | | Number of Shares Beneficially Owned | | Percentage of Shares Beneficially Owned |
5% Stockholders: | | | | |
Ajay Mangal, as trustee(1) | | 29,824,532 |
| | 24.4 |
|
Named Executive Officers and Directors: | | |
| | |
|
Jay Chaudhry(2) | | 26,848,704 |
| | 22.0 |
|
Remo Canessa(3) | | 1,000,000 |
| | * |
|
Amit Sinha(4) | | 1,755,687 |
| | 1.4 |
|
William Welch(5) | | 627,797 |
| | * |
|
Lane Bess(6) | | 2,191,792 |
| | 1.8 |
|
Karen Blasing(7) | | 248,958 |
| | * |
|
Andrew Brown(8) | | 198,333 |
| | * |
|
Scott Darling(9) | | 62,500 |
| | * |
|
Charles Giancarlo(10) | | 358,333 |
| | * |
|
Nehal Raj | | — |
| | * |
|
All current executive officers and directors as a group (11 persons)(11) | | 34,032,805 |
| | 27.4 | % |
within 60 days of November 11, 2020, all of which are fully vested and (iv) 1,042 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.__________________
| |
* | Represents beneficial ownership of less than one percent (1%) of the outstanding shares of our common stock. |
(8) Consists of (i) 6,609 shares held of record by Mr. Brown, (ii) 24,813 shares held of record by the Andrew W.F. Brown 2017 Grantor Retained Annuity Trust, for which Mr. Brown’s spouse serves as a trustee and (iii) 68,333 shares subject to options exercisable within 60 days of November 11, 2020, all of which are fully vested and (iv) 1,042 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(9) Consists of (i) 70,220 shares held of record by Mr. Darling and (ii) 1,042 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
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(1) | Consists of (i) 21,566,041 shares held of record by The CJCP Trust for which Mr. Mangal serves as trustee and (ii) 8,258,491 shares held of record by The CKS Trust for which Mr. Mangal serves as trustee. The beneficiaries of The CJCP Trust and The CKS Trust are members of Jay Chaudhry’s family. The address for The CJCP Trust and The CKS Trust is c/o The Goldman Sachs Trust Company, 200 Bellevue Parkway, Suite 250, Wilmington, Delaware 19809. |
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(2) | Consists of (i) 2,177,994 shares held of record by Mr. Chaudhry, (ii) 24,617,379 shares held of record by Jyoti Chaudhry, (iii) 33,333 shares held of record by The Chaudhry Family Trust dated August 1, 2014 for which Surjit Kaur serves as trustee, (iv) 13,332 shares held of record by The Chaudhry Family Trust f/b/o Manpreet Bains for which Ms. Kaur serves as trustee and (v) 6,666 shares held of record by P. Jyoti Chaudhry Family Trust dated March 1, 2000 for which Ms. Kaur serves as trustee. |
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(3) | Consists of (i) 250,000 shares held of record by Mr. Canessa and (ii) 750,000 shares subject to options exercisable within 60 days of October 25, 2018, of which 208,341 are fully vested. |
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(4) | Consists of (i) 1,143,017 shares held of record by the Sinha Revocable Trust dated September 24, 2011 for which Mr. Sinha serves as trustee, of which 41,662 may be repurchased by us at the original exercise price as of October 25, 2018, (ii) 421,059 shares held of record by the ADRR Trust for which Neha Kumar serves as trustee and (iii) 191,611 shares subject to options exercisable within 60 days of October 25, 2018, all of which are fully vested. |
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(5) | All of the shares are held of record by Mr. Welch. |
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(6) | All of the shares are held of record by the Lane M. and Leticia L. Bess Family Trust UAD 8/16/2006 for which Mr. Bess serves as a trustee. |
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(7) | Consists of (i) 39,999 shares held of record by Ms. Blasing, (ii) 15,625 shares held of record by The Blasing Family Revocable Trust U/A dtd 12/22/2005 for which Ms. Blasing serves as trustee and (iii) 193,334 shares subject to options exercisable within 60 days of October 25, 2018, of which 71,809 shares are fully vested. |
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(8) | Consists of (i) 1,187 shares held of record by Mr. Brown, (ii) 48,813 shares held of record by the Andrew W.F. Brown 2017 Grantor Retained Annuity Trust, for which Mr. Brown’s wife serves as a trustee and (ii) 148,333 shares subject to options exercisable within 60 days of October 25, 2018, of which 97,098 shares are fully vested. |
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(9) | All of the shares are held of record by Mr. Darling. |
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(10) | Consists of (i) 179,861 shares held of record by Mr. Giancarlo, of which 121,525 may be repurchased by us at the original exercise price as of October 25, 2018, (ii) 125,000 shares are held of record by The Charles H. & Dianne G. Giancarlo Family Trust U/D/T 11/2/98 for which the reporting person serves as trustee, (iii) 26,736 shares held of record by The 2012 Marielle Christina Giancarlo Trust UAD 12/26/12 for which Mr. Giancarlo serves as a trustee and (iv) 26,736 shares held of record by The 2012 Gianna Marie Giancarlo Trust UAD 12/26/12 for which Mr. Giancarlo serves as a trustee. |
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(11) | Consists of (i) 32,034,666 shares beneficially owned by our executive officers and directors, 163,187 shares of which may be repurchased by us at the original exercise price as of October 25, 2018 and (ii) 1,998,139 shares subject to options exercisable within 60 days of October 25, 2018, of which 1,135,114 shares are fully vested. |
(10) Consists of (i) 187,581 shares held of record by Mr. Giancarlo, (ii) 125,000 shares are held of record by The Charles H. & Dianne G. Giancarlo Family Trust U/D/T 11/2/98 for which Mr. Giancarlo serves as trustee, (iii) 26,736 shares held of record by The 2012 Marielle Christina Giancarlo Trust UAD 12/26/12 for which Mr. Giancarlo serves as a trustee, (iv) 26,736 shares held of record by The 2012 Gianna Marie Giancarlo Trust UAD 12/26/12 for which Mr. Giancarlo serves as a trustee and (v) 1,042 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(11) Consists of (i) 6,375 shares held of record by Mr. Schneider and (ii) 1,292 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
(12) Consists of (i) 28,230,511 shares beneficially owned by our current executive officers and directors, (ii) 508,562 shares subject to options exercisable within 60 days of November 11, 2020, and (iii) 48,403 shares issuable upon vesting of RSUs within 60 days of November 11, 2020.
RELATED PERSON TRANSACTIONS
We describe below transactions and series of similar transactions, since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
•the amounts involved exceeded or will exceed $120,000; and
•any of our directors, nominees for director, executive officers or beneficial holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities (each, a related person), had or will have a direct or indirect material interest.
Investors’ Rights Agreement
We are party to an amended and restated investors’ rights agreement dated July 24, 2015 which provides, among other things, that certain holders of our capital stock, including (i) entities affiliated with Mr. Chaudhry, (ii) entities affiliated with Mr. Chaudhry’s wife, Jyoti Chaudhry, who was a member of our board of directors at the time we entered into such investors’ rights agreement, (iii) entities affiliated with Lane Bess, who was a member of our board of directors at the time we entered into such investors’ rights agreement, and (iv) entities affiliated with Kailash Kailash, who was a member of our board of directors at the time we entered into such investors’ rights agreement, have the right to demand that we file a registration statement or request that their shares of our capital stock be covered by a registration statement that we are otherwise filing.
Transactions with Stockholders
From time to time, stockholders, including those that may beneficially own more than 5% of our outstanding capital stock subscribe to, license or otherwise purchase, in the normal course of business, certain of our products and services. These transactions are negotiated on an arm’s-length basis and are subject to review under the Company’s policies and procedures for related person transactions described below.
Other Agreements
In addition to the indemnification required in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into an indemnification agreement with each member of our board of directors and each of our officers. These agreements provide for the indemnification of our directors and officers for certain expenses and liabilities incurred in connection with any action, suit, proceeding or alternative dispute resolution mechanism, or hearing, inquiry or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent or fiduciary of the Company, or any of our subsidiaries, by reason of any action or inaction by them while serving as an officer, director, agent or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent or fiduciary of another entity. In the case of an action or proceeding by or in the right of the Company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification. We believe that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
We have entered into employment agreements with certain of our executive officers that, among other things, provide for certain severance and change of control benefits. For a description of employment agreements with our named executive officers, see “Executive“Executive Compensation—Executive Employment Agreements.Agreements.”
We have granted stock options to our named executive officers, other executive officers and certain of our directors. See “Executive“Executive Compensation—Executive Employment Agreements.Agreements.”
Other than as described above, since JulyAugust 1, 2017,2019, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will have a direct or indirect material interest.
We believe the terms of the transactions described above were comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties.
Policies and Procedures for Related Party Transactions
We have adopted a formal written policy providing that our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our common stock and any member of the immediate family of any of the foregoing persons, is not permitted to enter into a related-party transaction with us without the consent of our audit committee, subject to the exceptions described below.
In approving or rejecting any such proposal, our audit committee is to consider the relevant facts and circumstances available and deemed relevant to our audit committee, including, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, and the extent of the related party’s interest in the transaction. Our audit committee has determined that certain transactions will not require audit committee approval, including certain employment arrangements of executive officers, director compensation, transactions with another company at which a related party’s only relationship is as a non-executive employee, director or beneficial owner of less than 10% of that company’s shares and the aggregate amount involved does not exceed $120,000 in any fiscal year, transactions where a related party’s interest arises solely from the ownership of our common stock and all holders of our common stock received the same benefit on a pro rata basis and transactions available to all employees generally.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of our common stock, file reports of ownership and changes of ownership with the SEC. Such directors, executive officers and 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
SEC regulations require us to identify in this proxy statementProxy Statement anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received, or written representations from reporting persons stating that they were not required to file these forms, we believe that during our fiscal year ended July 31, 2018,2020, all Section 16(a) filing requirements were satisfied on a timely basis.
Fiscal Year 20182020 Annual Report and SEC Filings
Our financial statements for our fiscal year ended July 31, 20182020 are included in our Annual Report on Form 10-K filed with the SEC on September 13, 201817, 2020 (File No. 001-38413). This proxy statementProxy Statement and our Annual Report are posted in the Financial Information section of the InvestorsInvestor Relations webpage at http://ir.zscaler.com and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual reportAnnual Report without charge by sending a written request to Zscaler, Inc., Attention: Investor Relations, 110 Rose Orchard120 Holger Way, San Jose, California 95134.
Company Website
We maintain a website at www.zscaler.com. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement,Proxy Statement, and references to our website address in this proxy statementProxy Statement are inactive textual references only.
PROPOSALS OF STOCKHOLDERS FOR 2019FISCAL 2020 ANNUAL MEETING
Stockholders who wish to present proposals for inclusion in the proxy materials to be distributed in connection with next year’s annual meeting must submit their proposals so that they are received at Zscaler’s principal executive offices no later than July 10, 2019.28, 2021. Pursuant to the rules promulgated by the SEC, simply submitting a proposal does not guarantee that it will be included.
In order to be properly brought before the 2019fiscal 2021 annual meeting of stockholders, a stockholder’s notice of a matter the stockholder wishes to present, or the person or persons the stockholder wishes to nominate as a director, must be delivered to the Secretary of Zscaler at its principal executive offices not less than 45 nor more than 75 days before the first anniversary of the date on which Zscaler first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year’s annual meeting. As a result, any notice given by a stockholder pursuant to these provisions of our bylaws must be received no earlier than August 25, 2019,September 11, 2021, and no later than September 24, 2019,October 11, 2021, unless our annual meeting date occurs more than 30 days before or 60 days after December 18, 2019.January 6, 2022. In that case, we must receive proposals not earlier than the close of business on the 120th day prior to the date of the 2019fiscal 2021 annual meeting and not later than the close of business on the later of the 90th day prior to the date of the annual meeting or the 10th day following the day on which we first make a public announcement of the date of the meeting.
To be in proper form, a stockholder’s notice must include the specified information concerning the proposal or nominee as described in our bylaws. A stockholder who wishes to submit a proposal or nomination is encouraged to seek independent counsel about our bylaws and SEC requirements. Zscaler will not consider any proposal or nomination that is not timely or otherwise does not meet the bylaws and SEC requirements for submitting a proposal or nomination.
Notices of intention to present proposals at the 2019fiscal 2021 annual meeting of stockholders must be addressed to: Secretary, Zscaler, Inc., 110 Rose Orchard120 Holger Way, San Jose, California 95134. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
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The board of directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named on the enclosed proxy card will have discretion to vote the shares of common stock they represent in accordance with their own judgment on such matters.
It is important that your shares of common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone, by using the Internet or by mail at your earliest convenience, as instructed on the Notice of Internet Availability of Proxy Materials.
THE BOARD OF DIRECTORS
San Jose, California
November 25, 2020
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| THE BOARD OF DIRECTORS
San Jose, California
November 8, 2018
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