We believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining our named executive officersNamed Executive Officers with the goal of aligning their interests with those of our stockholders. To ensure this alignment and to motivate and reward individual initiative and effort, a substantial portion of our named executive officers’Named Executive Officers’ target annual compensation opportunity is both variable in nature and “at-risk.”
These variable pay elements ensure that, each year, a substantial portion of our named executive officers’Named Executive Officers’ target total direct compensation is contingent (rather than fixed) in nature, with the amounts ultimately payable subject to variability above or below target levels commensurate with our actual performance. The performance goals we set for fiscal 2019 for both our annual cash bonus plan and our PSUs were very aggressive and did not result in payment in spite of our strong financial performance. As we mature as a public company, we intend that our executive compensation program will continue to evolve
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. The compensation committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for executive talent. The following summarizes our executive compensation and related policies and practices:
•Retain an Independent Compensation Advisor. The compensation committee has engaged its own compensation consultant to provide information, analysis, and other advice on executive compensation independent of management. This consultant performed no other consulting or other services for us in fiscal 2019.2020.
•Annual Executive Compensation Review. The compensation committee conducts an annual review and approval of our compensation strategy, including a review and determination of our compensation peer group used for comparative purposes and a review of our compensation-related risk profile to ensure that our compensation programs do not encourage excessive or inappropriate risk-taking and that the level of risk that they do encourage is not reasonably likely to have a material adverse effect on us.
•Compensation At-Risk. Our executive compensation program is designed so that a significant portion of our named executive officers’Named Executive Officers’ compensation is “at risk” based on corporate performance, as well as equity-based, to align the interests of our named executive officersNamed Executive Officers and stockholders.
•Use a Pay-for-Performance Philosophy. The majority of our named executive officers’Named Executive Officers’ compensation is directly linked to corporate performance; we also structure their target total direct compensation opportunities with a significant long-term equity component, thereby making a substantial portion of each named executive officer’sNamed Executive Officer’s target total direct compensation dependent upon our stock price and/or total stockholder return.
•Nominal Base Salary and Zero Bonus Potential for our CEO. Our CEO receives only a nominal base salary and is not eligible for a cash bonus.
•Succession Planning. We review the risks associated with our key executive officer positions to ensure adequate succession plans are in place.
What We Do Not Do
•No Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our named executive officersNamed Executive Officers other than the plans and arrangements that are available to all employees. Our named executive officersNamed Executive Officers are eligible to participate in our Section 401(k) retirement plan on the same basis as our other employees.
•Limited Perquisites. Perquisites or other personal benefits are not a material part of our compensation program for our named executive officers.Named Executive Officers.
•No Excise Tax Payments on Future Post-Employment Compensation Arrangements. We do not provide any excise tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company.
•No Special Health or Welfare Benefits. We do not provide our named executive officersNamed Executive Officers with any health or welfare benefit programs, other than participation in our broad-based employee programs on the same basis as our other full-time, salaried employees.
•No Hedging or Pledging of our Equity Securities. We prohibit our employees, including our named executive officersNamed Executive Officers and the members of our board of directors, from hedging or pledging our equity securities.
Frequency of Future Stockholder Advisory Vote on Named Executive Officer Compensation
At the Annual Meeting we will be conducting a non-binding stockholder advisory vote on the compensation of our Named Executive Officers (commonly known as a “Say-on-Pay” vote). See Proposal No. 3 in this Proxy Statement.
At our 2019 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the frequency of future Say-on-Pay votes (commonly known as a “Say-When-on-Pay” vote). Our stockholders expressed a preference for holding future Say-on-Pay votes on an annual, rather than a biennial or triennial, basis. In recognition of this preference and other factors considered, our board of directors determined that, until the next Say-When-on-Pay vote, we will hold annual Say-on-Pay votes. Following the Annual Meeting of Stockholders to which this Proxy Statement relates, weour next Say-on-Pay vote will be conducting a non-binding advisory vote ontake place at our 2021 Annual Meeting of Stockholders.
We value the frequencyopinions of our stockholders. Our board of directors and the compensation committee will consider the outcome of future non-binding advisory votes on the compensation of our namedNamed Executive Officers, as well as feedback received throughout the year, when making compensation decisions for our executive officers (commonly known as a “Say-When-on-Pay” vote). Our board of directors is recommending that we hold future non-binding advisory votes on the compensation of our named executive officers on an annual, rather than a biennial or triennial, basis. For additional information about the Say-When-on-Pay vote, see Proposal No. 3 above.officers.
Executive Compensation Philosophy and Objectives
Our executive compensation program is guided by our overarching philosophy of paying for high and demonstrable performance. Consistent with this philosophy, we have designed our executive compensation program to achieve the following primary objectives:
•Provide market competitive compensation and benefit levels that will attract, retain, motivate, and reward a highly-talentedhighly talented team of executives within the context of responsible cost management;
•Establish a direct link between our financial and operational results and strategic objectives and the compensation of our executives;
•Align the interests and objectives of our executives with those of our stockholders by linking their long-term incentive compensation opportunities to stockholder value creation and their cash incentives to our annual performance; and
•Offer total compensation opportunities to our executives that, while competitive, are internally consistent and fair.
Generally, we structure the annual compensation of our named executive officersNamed Executive Officers using three principal elements: base salary, annual cash bonus opportunities, and long-term equity incentive opportunities in the form of equity awards. The design of our executive compensation program is influenced by a variety of factors, with the primary goals being to align the interests of our named executive officers and stockholders and to link pay with performance.
We have not adopted policies or employed guidelines for allocating compensation between current and long-term compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.
Compensation-Setting Process
Role of Compensation Committee
The compensation committee discharges the responsibilities of our board of directors relating to the compensation of our named executive officersNamed Executive Officers and the non-employee members of our board of directors.The compensation committee has overall responsibility for overseeing our compensation and benefits policies generally, and overseeing and evaluating the compensation plans, policies, and practices applicable to our CEO and other named executive officers.Named Executive Officers.
In carrying out its responsibilities, the compensation committee evaluates our compensation policies and practices with a focus on the degree to which these policies and practices reflect our executive compensation philosophy, develops strategies and makes decisions that it believes further our philosophy or align with developments in best compensation practices, and reviews the performance of our named executive officersNamed Executive Officers when making decisions with respect to their compensation.
The compensation committee’s authority, duties, and responsibilities are further described in its charter, which is reviewed annually and revised and updated as warranted. The charter is available at http://ir.zscaler.com.
The compensation committee retains a compensation consultant (as described below) to provide support in its review and assessment of our executive compensation program.
Setting Target Total Direct Compensation
The compensation committee reviews the base salary levels, annual cash bonus opportunities, and long-term incentive compensation opportunities of our named executive officersNamed Executive Officers and all related performance criteria at the beginning of each year, or more frequently as warranted. Adjustments to cash compensation are generally effective at the beginning of the fiscal year.
The compensation committee does not establish a specific target for formulating the target total direct compensation opportunities of our named executive officers.Named Executive Officers. In making decisions about the compensation of our named executive officers,Named Executive Officers, the members of the compensation committee rely primarily on their general experience and subjective considerations of various factors, including the following:
•our executive compensation program objectives;
•our performance against the financial, operational, and strategic objectives established by the compensation committee and our board of directors;
•each individual named executive officer’sNamed Executive Officer’s knowledge, skills, experience, qualifications, and tenure relative to other similarly-situated executives at the companies in our compensation peer group;
•the scope of each named executive officer’sNamed Executive Officer’s role and responsibilities compared to other similarly-situated executives at the companies in our compensation peer group;
•the prior performance of each individual named executive officer,Named Executive Officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;
•the potential of each individual named executive officerNamed Executive Officer to contribute to our long-term financial, operational, and strategic objectives;
•our CEO’s compensation relative to that of our named executive officers,Named Executive Officers, and compensation parity among our named executive officers;Named Executive Officers;
•our financial performance relative to our compensation and performance peers;
•the compensation practices of our compensation peer group and the positioning of each named executive officer’sNamed Executive Officer’s compensation in a ranking of peer company compensation levels based on an analysis of competitive market data; and
•the recommendations of our CEO with respect to the compensation of our named executive officersNamed Executive Officers (except with respect to his own compensation).
These factors provide the framework for compensation decision-making and final decisions regarding the compensation opportunity for each named executive officer.Named Executive Officer. No single factor is determinative in setting compensation levels, nor is the impact of any individual factor on the determination of pay levels quantifiable.
The compensation committee does not weight these factors in any predetermined manner, nor does it apply any formulas in developing its compensation recommendations. The members of the compensation
committee consider all of this information in light of their individual experience, knowledge of the Company, knowledge of the competitive market, knowledge of each named executive officer,Named Executive Officer, and business judgment in making their decisions.
The compensation committee does not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions with respect to our named executive officers. Instead, in making its determinations, the compensation committee reviews information summarizing the compensation paid at a representative group of peer companies, to the extent that the executive positions at these companies are considered comparable to our positions and informative of the competitive environment and more broad-based compensation surveys to gain a general understanding of market compensation levels.
Role of Management
In discharging its responsibilities, the compensation committee works with members of our management, including our CEO. Our management assists the compensation committee by providing information on corporate and individual performance, market compensation data, and management’s perspective on compensation matters. The compensation committee solicits and reviews our CEO’s proposals with respect to program structures, as well as his recommendations for adjustments to annual cash compensation, long-term incentive compensation opportunities, and other compensation-related matters for our named executive officersNamed Executive Officers (except with respect to his own compensation) based on his evaluation of their performance for the prior year.
At the beginning of each year, our CEO reviews the performance of our other named executive officersNamed Executive Officers based on such individual’s level of success in accomplishing the business objectives established for him or her for the prior year and his or her overall performance during that year and then shares these evaluations with, and makes recommendations to, the compensation committee for each element of compensation as described above.
The compensation committee reviews and discusses our CEO’s proposals and recommendations with our CEO and considers them as one factor in determining and approving the compensation of our named executive officers,Named Executive Officers, including our CEO. Our CEO also attends meetings of our board of directors and the compensation committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation.
Role of Compensation Consultant
The compensation committee engages an external compensation consultant to assist it by providing information, analysis, and other advice relating to our executive compensation program and the decisions resulting from its annual executive compensation review. The compensation consultant reports directly to the compensation committee and its chair and serves at the discretion of the compensation committee, which reviews the engagement annually.
In fiscal 2019,2020, the compensation committee engaged Compensia, Inc. (“Compensia”), a national compensation consulting firm, to serve as its compensation consultant to advise on executive compensation matters, including competitive market pay practices for our named executive officersNamed Executive Officers and with the data analysis and selection of the compensation peer group.
During fiscal 2019,2020, Compensia attended the meetings of the compensation committee (both with and without management present) as requested and provided the following services:
•consultation with the compensation committee chair and other members between compensation committee meetings;
•review, research, and updating of our compensation peer group;
•an analysis of competitive market data based on the compensation peer group for our named executive officers’Named Executive Officers’ positions and an evaluation of how the compensation we pay our named executive officersNamed Executive Officers compares both to our performance and to how the companies in our compensation peer group compensate their executives;
•review and analysis of the base salary levels, annual incentive bonus opportunities, and long-term incentive compensation opportunities of our named executive officers;Named Executive Officers;
review and analysis of the base salary levels, annual incentive bonus opportunities, and long-term incentive compensation opportunities for possible new hires;
•review and analysis of the compensation arrangements of the non-employee members of our board of directors against the companies in the compensation peer group;
•assessment of executive compensation trends within our industry, and updating on corporate governance and regulatory issues and developments; and
•support on other ad hoc matters throughout the year.
The terms of Compensia’s engagement includes reporting directly to the compensation committee chair. Compensia also coordinated with our management for data collection and job matching for our executive officers. In fiscal 2019,2020, Compensia did not provide any other services to us.
The compensation committee has evaluated its relationship with Compensia to ensure that it believes that such firm is independent from management. This review process included a review of the services that such compensation consultant provided, the quality of those services, and the fees associated with the services provided during fiscal 2019.2020. Based on this review, as well as consideration of the factors affecting independence set forth in Exchange Act Rule 10C-1(b)(4), Rule 5605(d)(3)(D) of the NASDAQ Marketplace Rules, and such other factors as were deemed relevant under the circumstances, the compensation committee has determined that no conflict of interest was raised as a result of the work performed by Compensia and that Compensia is independent.
Competitive Positioning
For purposes of assessing our executive compensation against the competitive market, the compensation committee reviews and considers the compensation levels and practices of a select group of peer companies. companies. This compensation peer group consists of technology companies that are similar to us in terms of revenue, market capitalization, and industry focus. The competitive data drawn from this compensation peer group is only one of several factors that the compensation committee considers however, in making its decisions with respect to the compensation of our named executive officers.Named Executive Officers.
The compensation peer group for the first portion of fiscal 2019,2020, which was first developedreviewed and updated in fiscal 2017 in advance of our initial public offering with the assistance of Compensia, to analyze the compensation of our executive officers, including our named executive officers,May 2019, was comprised of publicly-traded technology companies against which we compete for executive talent, as well as, in some instances, business opportunities. In
evaluating the companies comprising the compensation peer group, Compensia considered the following criteria:
•publicly-traded companies headquartered in the United States and traded on a major United States stock exchange;exchange with a preference for California-based companies;
•companies in the application software and Internet services sectors, with a secondary focus on other technology companies;systems software industries;
•similar revenues – within a range of ~0.5x to ~2.0x our then-projected fiscal 2017 revenuesthen-current trailing four quarters revenue of approximately $170$243 million (approximately $85$120 million to approximately $340$490 million); and
•similar market capitalization – within a range of ~0.33x to 3.0x our then-current 30-day average market capitalization of approximately $7.6 billion (approximately $2.5 billion to approximately $22.7 billion).
This compensation peer group for the first portion of fiscal 2020 consisted of the following companies:
| | | | | | | | | | | |
Alteryx | Elastic | Proofpoint | Zendesk |
Anaplan | MongoDB | Qualys | |
Blackline | New Relic | Tenable Holdings | |
Box | Okta | The Trade Desk | |
Coupa Software | Paycom Software | Twilio | |
This compensation peer group was used by the compensation committee through February 2020 as a reference for understanding the competitive market for executive positions in our industry.
In February 2020, the compensation committee, with the assistance of Compensia, reviewed and updated our compensation peer group to reflect changes in our market capitalization and to recognize our evolving business focus. In evaluating the companies comprising the compensation peer group at that time, Compensia considered the following criteria:
•publicly-traded companies headquartered in the United States and traded on a major United States stock exchange with a preference for California-based companies;
•companies in the application software and systems software industries;
•similar revenues – within a range of ~0.5x to ~2.0x our then-projectedthen-current trailing four quarters revenue of approximately $333 million (approximately $165 million to approximately $670 million); and
•similar market capitalization – within a range of ~0.33x to 3.0x our then-current 30-day average market capitalization of approximately $2.5$7.0 billion (approximately $1.25$2.3 billion to approximately $5.0$20.9 billion).
Based on a review of the analysis prepared by Compensia, the compensation committee approved a revised compensation peer group in March 2020 for the remainder of fiscal 2019 consisted2020 consisting of the following companies:
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| | | | | | | | | | |
Barracuda NetworksAlteryx | Ellie Mae | MuleSoft | Q2CrowdStrike Holdings |
BlackLine | Gigamon | New Relic | Qualys |
Box | HubSpot | Okta | Twilio |
Callidus Software | Imperva | Paycom Software | Zendesk |
Anaplan | Elastic | Proofpoint | |
Blackline | MongoDB | Qualys | |
Box | New Relic | Tenable Holdings | |
Coupa Software | LogMeInOkta | ProofpointThe Trade Desk | |
The compensation committee used data drawn from the companies in our compensation peer group, as well as data from Compensia’s proprietary database of public technology companies, to evaluate the competitive market when determining the total direct compensation packages for our named executive officers,Named Executive Officers, including base salary, target cash incentive award opportunities, and long-term incentive compensation opportunities.
The compensation committee reviews our compensation peer group at least annually and makes adjustments to its composition if warranted, taking into account changes in both our business and the businesses of the companies in the peer group.
Compensation Elements
In fiscal 2019,2020, the principal elements of our executive compensation program, and the purposes for each element, were as follows:
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| | | | | | | | | | |
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 | Designed to motivate our executives to achieve annual businesssemi-annual (and, in the case of Mr. Rajic, quarterly) financial objectives and provide financial incentives when we meet or exceed these annual objectives |
Long Term Incentive Compensation
| 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 |
Base Salary
Base salary represents the fixed portion of the compensation of our named executive officersNamed Executive Officers and is an important element of compensation intended to attract and retain highly-talentedhighly talented individuals. Generally, we use base salary to provide each named executive officerNamed 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 officersNamed Executive Officers through arm’s-length negotiation at the 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 officersNamed 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’sNamed Executive Officer’s performance, individual contributions and responsibilities, position in the case of a promotion, and market conditions.
In October 2018,September 2019, the compensation committee reviewed the base salaries of our named executive officers,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 for each of our named executive officersCEO at its fiscal 2018 level.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 base salaries of our named executive officersNamed Executive Officers for fiscal 20192020 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% |
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| | | |
Named Executive Officer | Fiscal 2018 Base Salary | Fiscal 2019 Base Salary | Percentage Adjustment |
Mr. Chaudhry | $23,660 | $23,660 | 0% |
Mr. Canessa | $300,000 | $300,000 | 0% |
Dr. Sinha | $300,000 | $300,000 | 0% |
Dr. Apte | $275,000 | $275,000 | 0% |
Mr. Schlossman | $275,000 | $275,000 | 0% |
(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 during fiscal 20192020 are set forth in the “Fiscal 20192020 Summary Compensation Table” below.
Annual Cash Bonuses
We use our Employee Incentive Compensation Plan, an annuala cash bonus plan, to motivate employees selected by the compensation committee, including our named executive officers,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. For fiscal 20192020, the Employee Incentive Compensation Plan included semi-annual performance periods with semi-annual award payouts after the end of the first six-month period (that is, the period from August 1,
2019 through January 31, 2020), and, then again, after the end of the fiscal year.year (that is, the period from February 1, 2020 through July 31, 2020). 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 administered the Employee Incentive Compensation Plan. As the administrator of the 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. Further, 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 under the Fiscal 2019Employee Incentive Compensation Plan wereare to be paid in cash (or its equivalent) in a single lump sum only after they are earned, which requires continued employment through the date the actual award is paid. The compensation committee reserved the right to settle an actual award with a grant of an equity award under our then-current equity compensation plan, which equity award may have such terms and conditions, as the compensation committee determines. Payment of awards wasis to occur as soon as administratively practicable after they are earned, but no later than the dates set forth in the Fiscal 2019Employee Incentive Compensation Plan.
Our board of directors and the compensation committee have the authority to amend, alter, suspend, or terminate the plan, provided such action does not impair the existing rights of any participant with respect to any earned awards.
Fiscal 20192020 Target Annual Cash Bonus Award Opportunities
For purposes of the Fiscal 2019Employee Incentive Compensation Plan, cash bonus awards were based upon fixed amountstarget annual cash bonus award opportunities as determined by the compensation committee. In October 2018,September 2019, the compensation committee
reviewed the target annual cash bonus award opportunities of our named executive officers.Named 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 maintainincrease the target annual cash bonus award opportunities of our named executive officersNamed Executive Officers for fiscal 2019 at their2020 to levels that were comparable to those of similarly-situated executives in the competitive marketplace. As in prior fiscal 2018 levels.years, our CEO declined to participate in the Employee Incentive Compensation Plan.
The target annual cash bonus award opportunities of our named executive officersNamed Executive Officers for fiscal 20192020 were as follows:
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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 | % |
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| | | | |
Named Executive Officer | | Fiscal 2019 Target Annual Cash Bonus Award Opportunity |
Mr. Chaudhry | |
| $0 |
|
Mr. Canessa | |
| $150,000 |
|
Dr. Sinha | |
| $125,000 |
|
Dr. Apte | |
| $100,000 |
|
Mr. Schlossman | |
| $75,000 |
|
(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 officersNamed Executive Officers under the Fiscal 2019Employee Incentive Compensation Plan could range from zero to 150% of their target annual cash bonus award opportunity.
CorporateIncentive Plan Performance ObjectivesMetrics
Under the Fiscal 2019Employee Incentive Compensation Plan, the compensation committee determined the performance measuresmetrics and related target levels for the fiscal 20192020 annual cash bonus awards.
In October2018, 2019, the compensation committee selected net new annual contract value (“net new ACV”) asdetermined 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 measure forand our corporate performance. The remaining 50% of the Fiscal 2019 Incentive Compensation Plan. For this purpose, “net new ACV” means generally the aggregate annual value of a new or upsell sales contractbonus pool to an end user or partner for productsbe used to make cash bonus awards would be distributed based on two equally weighted corporate performance metrics: revenue and services sold by Zscaler that is billable at the time of booking, offset by any lost or reduced renewals.calculated billings.
The compensation committee selected net new ACVrevenue and calculated billings as the appropriate corporate performance measuremetrics for the Fiscal 2019 Incentive Compensation PlanSenior Executives because, in its view, this measure was athese metrics were key indicatorindicators of our executionperiodic performance and our progress in executing on our business strategy.
For purposes of our strategy. Net new ACV, while significant to our achievement of our growth and business strategy, is an internal metric that we do not disclosethe 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. Forstatements; and
•“calculated billings” represented our total revenue plus the change in deferred revenue in a given fiscal 2019, the target netperiod. 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 ACV, as set forthand existing customers.
As reflected in our annual operating plan presented to and approved by our board of directors, the target levels established for each half of the year was greater than the amount achieved in the comparable periodrevenue and calculated billings for the priorfull year of fiscal year and represented a very aggressive growth target for fiscal 2019.2020 by the compensation committee were as follows:
For purposes of | | | | | |
Performance Metric | Full Year Fiscal 2020 |
Revenue | $443,000,000 |
Calculated Billings | $532,500,000 |
In addition, the Fiscal 2019 Incentive Compensation Plan,compensation committee determined that our named executive officersSenior Executives were eligible to earn cash bonus awards to the extent that we achieved athe minimum target net new ACVthresholds for revenue and calculated billings for each halfperformance 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 fiscal 2019 (that is, the periods from August 1, 2018 through January 31, 2019bonus pool reserved for distributions in the discretion of our CEO was to be funded based on achievement of the revenue and February 1, 2019 through July 31, 2019)calculated billings targets. If the average level of achievement for the applicable performance period for revenue and calculated billings was less than 90%, subjectthe discretionary bonus pool would not be funded.If the average level of achievement was equal to or greater payouts for increasedthan 90% but less than 100%, the discretionary pool would be funded at 100%.If the average level of achievement abovewas equal to or greater than 100%, the target.discretionary pool would be funded at 150%.
Annual Cash Bonus Payments (Other than Mr. Rajic)
As previously described, our named executive officersSenior Executives (other than Mr. Rajic) were eligible for semi-annual cash bonus awards only toin an amount, if any, determined by the extent and in the amount, that we met or exceeded the applicable minimum threshold for net new ACVrevenue and calculated billings for each six-month performance period. Because we did not achieve our desired net new
ACV goals for either half of fiscal 2019,2020. In March 2020, the compensation committee diddetermined 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 make anyfully 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 awardspayments to our named executive officers undereligible Named Executive Officers for the Fiscal 2019first 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 in the Employee Incentive Compensation Plan.Plan on 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 and the exercise of our CEO’s discretion, the cash bonus payments to Mr. Rajic 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 annual cash bonus award opportunity was pro-rated for the first 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 Table” 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 officersNamed 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 officersNamed Executive Officers with those of our stockholders. Typically, we have granted equity awards to our named executive officers as part of the compensation committee’s annual review of our executive compensation program.
Currently, we use RSU awards and PSU awards to retain, motivate, and reward our named executive officersNamed 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 officersNamed Executive Officers may earn shares of our common stock based on our achievement of pre-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 named executive officersour 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 retain our named executive officersNamed Executive Officers using fewer shares of our common stock than would be necessary if we regularly used stock options to provide equity to our executive officers. In addition, because the value of these RSU and PSU awards increases with any increase in the value of the underlying shares, RSU and PSU awards also provide incentives to our named executive officersNamed Executive Officers that are aligned with the interests of our stockholders.
To date, the compensation 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 as part of our annual focal review of equity awards.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 the named executive officer,Named Executive Officer, the cash compensation received by the named executive officer,Named Executive Officer, a competitive market analysis performed by its compensation consultant, the recommendations of our CEO (except with respect to himself)his own equity awards), the amount of equity compensation held by the named executive officerNamed 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 the creation of long-term stockholder value.
Fiscal 20192020 “Refresh” Equity Award GrantsAwards
In October 2018,May 2020, the compensation committee grantedapproved long-term incentive compensation opportunities in the form of “refresh” equity awards to our named executive officersNamed Executive Officers (other than our CEO) in amounts that it considered to be consistent with our compensation philosophy and its desired market positioning and which also recognized the performancepositioning. The number of each of our named executive officers, as follows:
Mr. Chaudhry – Mr. Chaudhry was not granted as RSU award, but was granted four separate PSU awards, each covering 150,000 units which may be settled for shares of our common stock with individual annual performance periods to correspond to fiscal 2019 through fiscal 2022. Each such PSU award is subject to being earnedthe RSU awards and vesting annually for each fiscal year from fiscal 2019 through fiscal 2022 based on the achievementnumber of one or more performance measuresunits subject to be established at the beginning of each fiscal yearPSU awards granted to our Named Executive Officers (viewed in the aggregate by the
compensation committee. Following the completion of each performance year,value) was determined by the compensation committee certifiesbased on its consideration of the factors described above. The “refresh” equity awards approved for grant to our achievementNamed Executive Officers in May 2020 were 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 RSU awards was June 2, 2020. The RSU awards will vest over a four-year period as follows: 6.25% of the shares of common stock subject to the award vest on December 15, 2020, and 6.25% of the shares 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 and 100%over fiscal 2022. Twenty-five percent of the earned units earned by our CEOsubject to the award will vest on the first trading day on or after September 15th. If such certification is made after September 15, 2022, with the remaining earned units will vestvesting as to 6.25% of such earned units on each Quarterly Vesting Date over the first trading daysubsequent 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 or after December 15th. our level of attainment of two equally 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 Awards because, in its view, these metrics were key indicators of our periodic performance and 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 2020, 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 Fiscal 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 20192020 performance year, the total number of units that could be earned scaled from 0% to 150% of the target number of units, based on actual achievement of the fiscal 20192020 performance measure. The performance measuresmetrics 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 related target performance levels for the fiscal 2020 through fiscal 2022 performance years will be determined in the applicable performance year, with the measures and related target performance levelscalculated billings results for fiscal 2020 performance being determined by the compensation committee in the first quarter of fiscal 2020. For each of these PSU awards, receipt of any shares of our common stock upon settlement of the awards is subject to Mr. Chaudhry continuing to be a service provider through any performance determination date or subsequent vesting date. Mr. Chaudhry currently intends to donate any shares of our common stock issued for earned PSU awards (or the proceeds from the sale thereof) to charity as part of his philanthropic commitments.
Mr. Canessa – Mr. Canessa was granted a mix of RSU awards and PSU awards. Mr. Canessa was granted a RSU award covering 56,250 units subject to a delayed vesting schedule. The RSU award will vest over approximately six years in total, with 6.25% of the units subject to vesting on December 15, 2020 and 6.25% of the units vesting on the first trading day on or after each of March 15, June 15, September 15 and December 15 (each a "Quarterly Vesting Date") thereafter. Mr. Canessa was also granted two separate PSU awards consisting of 28,125 units each, with individual annual performance periods to correspond to fiscal 2019 and fiscal 2020. For the 2019 performance year, the total number of units that could be earned scaled from 0% to 150% of the target number of units, based on actual achievement of the 2019 performance measure. The performance measures and related target performance levels for the 2020 performance year were determined by the compensation committee in the first quarter of fiscal 2020. For each performance year, any earned units will vest on the same schedule as for his RSU award, with 6.25% of the earned units vesting on December 15, 2020 and 6.25% of the units vesting each Quarterly Vesting Date thereafter. For each of the RSU and PSU awards, receipt of any shares of common stock upon settlement of the awards is subject to Mr. Canessa continuing to be a service provider through any applicable vesting date.
Dr. Sinha, Dr. Apte and Mr. Schlossman – Dr. Sinha, Dr. Apte and Mr. Schlossman were granted a mix of RSU and PSU awards. Dr. Sinha’s RSU award consists of two separate RSU awards each covering 62,500 units with 62,500 units vesting in 16 equal quarterly installments beginning on December 15, 2019 and the remaining 62,500 units vesting in 16 equal quarterly installments beginning on December 15, 2020. Dr. Apte’s RSU award consists of two separate RSU awards each covering 56,250 units with 56,250 units vesting in 16 equal quarterly installments beginning on December 15, 2019 and the remaining 56,250 units vesting in 16 equal quarterly installments beginning on December 15, 2020. Mr. Schlossman’s RSU award consists of two separate RSU awards each covering 31,250 units with 31,250 units vesting in 16 equal quarterly installments beginning on December 15, 2019 and the remaining 31,250 units vesting in 16 equal quarterly installments beginning on December 15, 2020.
The PSU awards of Dr. Sinha, Dr. Apte, and Mr. Schlossman each consist of two separate PSU awards of 62,500 units, 56,250 units, and 31,250 units, respectively, with individual annual performance periods to correspond to fiscal 2019 and fiscal 2020. For the 2019 performance year, the total number of units that could be earned scaled from 0% to 150% of the target number of units, based on actual achievement of the 2019 performance measure. The performance measures and related target performance levels for the 2020 performance year were determined by the compensation committee in the first quarter of fiscal 2020. For each performance year, any earned units will vest on the same schedule as for each named executive officer’s RSU awards, with any earned units from the fiscal 2019 PSU award vesting in 16 equal quarterly installments beginning on December 15, 2019 and any earned units from the fiscal 2020 PSU award vesting in 16 equal quarterly installments beginning on December 15, 2020. For each of the RSU and PSU awards, receipt of any shares of common stock underlying the awards is subject to the applicable named executive officer continuing to be a service provider through any vesting date.
The number of shares subject to the PSU and RSU awards granted to our named executive officers (viewed in the aggregate by value) was determined by the compensation committee based on its consideration of the factors described above.
Fiscal 2019 PSU Awards
The PSU awards granted to our CEO and our other named executive officers for the fiscal 2019 performance year, or the Fiscal 2019 PSU Awards, were to be earned based on our level of attainment of the same full-year fiscal 2019 net new ACV target performance level as the compensation committee selected for the Fiscal 2019 Incentive Compensation Plan.
The compensation committee selected target net new ACV as the appropriate corporate performance measure for the Fiscal 2019 PSU Awards, in addition to the Fiscal 2019 Incentive Compensation Plan, because, in its view, this measure was a key indicator of our execution of our strategy. For fiscal 2019, the net new ACV target performance level for the Fiscal 2019 PSU Awards was greater than the amount achieved in the comparable period for the prior fiscal year and represented a very aggressive target for fiscal 2019.
Each unit earned pursuant to a Fiscal 2019 PSU Award was to be settled for one share of our common stock, which was then eligible for time-based vesting as described above.For purposes of the Fiscal 2019 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 threshold for net new ACV for fiscal 2019 as determined as of the end of the fiscal year, subject to earning a greater number of units for increased achievement above the target performance level.
Results of Fiscal 2019 PSU Awards
In September 2019, our net new ACV results for fiscal 2019 were presented to the compensation committee.committee for review. After reviewing and analyzing these results, the compensation committee certified that, for the performance period ended July 31, 2019,2020, our net new ACV results forcalculated billings were achieved at 115.70% of the year did not meet the thresholdtarget performance level established for the Fiscal 2019 PSU Awards. Consequently, noneand 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 by 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. For each PSU awards, receipt of any shares of common stock underlying the awards is subject to the 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 subject to the Fiscal 2019 PSUstock.
For details of Mr. Rajic’s new hire equity awards were earned by our named executive officerssee “Employment Arrangements” and the awards were forfeited.“Potential Payments Upon Termination or Change in Control” below.
The equity awards granted to our named executive officersNamed Executive Officers in fiscal 20192020 are set forth in the “Fiscal 20192020 Summary Compensation Table” and the “Fiscal 20192020 Grants of Plan-Based Awards Table” below.
Health and Welfare Benefits
Our named executive officersNamed 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,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. Through the end ofDuring fiscal 2019,2020, we have not made anybegan making employer matching contributions to the 401(k) plan in an amount of up to date.$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,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 2019,2020, none of our named executive officersNamed 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 written employment agreement with our CEO 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 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 offer letters with certain of our named executive officersNamed Executive Officers provide them with certain protection in the event of their termination of employment other than for “cause,” death, or “disability” (as such terms are defined in the employment offer letters). In addition, our named executive officers,Named Executive Officers, are participants in our Change of Control and Severance Policy, or the SeveranceChange 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 officerNamed Executive Officer if he or 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 requiringconditioning post-employment compensation and benefits on a departing named executive officer to signNamed Executive Officer signing a separation and release agreement acceptable to us as a condition to receiving post-employment compensation payments or benefits. We also believe that these arrangements provided by the Severance Policy help maintain their continued focus and dedication to their assigned duties to maximize stockholder value if there is a potential transaction that could involve a change in control of the Company.us.
Under the SeveranceChange in Control Policy, all payments and benefits in the event of a change in control of the Company are payable only if there is a subsequent loss of employment by a named executive officerNamed Executive Officer (a so-called “double-trigger” arrangement). In the case of the acceleration of vesting of outstanding 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,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, certain of our employees (including officers) 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:
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 through 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) severance pay at a rate equal to 100% of his base salary, as then in effect, for a period of 6 months following the date of such termination, payable in accordance with our normal payroll practices.
To receive the severance benefits upon a qualifying termination, Mr. Canessa must sign and not revoke a release of claims within the time specified in his employment offer letter.
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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 offer 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 the equity plan under which the options 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 his employment hire date, the Buyout RSU Grant 2, the New Hire RSU Grant and the Option will vest as to shares that would have vested had Mr. Rajic remained employed for six months after his termination date. Further, If Mr. Rajic is subject to a "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 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
We maintain a tax-qualified retirement plan, or the 401(k) plan, that provides eligible employees 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 401(k) plan’s eligibility requirements, and participants are able to defer up to 100% of their eligible compensation subject to applicable annual Internal Revenue Code limits. All participants’ interests in their deferrals are 100% vested when contributed. We have not made any matching contributions to the 401(k) plan to date.
Fiscal 20192020 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 2019,2020, fiscal 2018,2019 and fiscal 2017.2018.
| | Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | 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 | 2019 | 23,660 | — |
| 5,556,000 |
| — |
| — |
| — |
| 5,579,660 | Jay Chaudhry | 2020 | 23,660 | — | 6,597,000 | — | — | 6,620,660 |
Chief Executive Officer
| 2018 | 96,500 | —
|
| — |
| — |
| —
|
| 200,809 |
| 297,309 | |
President and Chief Executive Officer | | President and Chief Executive Officer | 2019 | 23,660 | — | 5,556,000 | — | —
| — | 5,579,660 |
| 2017 | —
| —
|
| —
|
| —
|
| —
|
| —
|
| —
| | 2018 | 96,500 | — | —
| 200,809 | 297,309 |
Remo Canessa | 2019 | 300,000 | — |
| 3,125,250 |
| — |
| — |
| — |
| 3,425,250 | Remo Canessa | 2020 | 350,000 | — | 7,397,664 | — | 289,156 | — | 8,036,820 |
Chief Financial Officer | 2018 | 300,000 | — |
| — |
| — |
| 169,359 |
| — |
| 469,359 | Chief Financial Officer | 2019 | 300,000 | — | 3,125,250 | — | 3,425,250 |
| 2017 | 146,591 | 72,313 |
| — |
| 2,161,320 |
| — |
| — |
| 2,380,224 | | 2018 | 300,000 | — | 169,359 | — | 469,359 |
Amit Sinha(3) | 2019 | 300,000 | — |
| 6,945,000 |
| — |
| — |
| — |
| 7,245,000 | |
Amit Sinha. Ph.D. | | Amit Sinha. Ph.D. | 2020 | 350,000 | — | 9,936,247 | — | 289,156 | — | 10,575,403 |
President of Research and Development, Chief Technology Officer | 2018 | 300,000 | — |
| — |
| — |
| 129,519 |
| 1,457 |
| 430,976 | President of Research and Development, Chief Technology Officer | 2019 | 300,000 | — | 6,945,000 | — | 7,245,000 |
Majoj Apte(4) | 2019 | 275,000 | — |
| 6,250,500 |
| — |
| — |
| — |
| 6,525,500 | |
Chief Strategy Officer | | |
| |
| | | 2018 | 300,000 | — | 129,519 | 1,457 | 430,976 |
Dali Rajic(4) | | 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 | | President Go-To-Market and Chief Revenue Officer | |
Robert Schlossman(5) | 2019 | 275,000 | — |
| 3,472,500 |
| — |
| — |
| — |
| 3,747,500 | Robert Schlossman(5) | 2020 | 315,000 | — | 4,454,791 | — | 173,494 | — | 4,943,285 |
Chief Legal Officer | | | | 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 fiscal years 2019, 2018 and 2017 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, 2019. 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 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; Dr. Apte $3,125,250; 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. |
| |
(2) | (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 $1,736,250. These amounts do not necessarily correspond to the actual value recognized by our named executive officers. For example, no PSUs were earned for fiscal year 2019. (3) The amounts reported represent the aggregate grant date fair value of the stock options granted to our named executive officers, calculated in accordance with ASC Topic 718. The assumptions used in calculating the grant date fair value of the awards reported in this column are set forth in Note 10 to our audited consolidated financial statements included in our Annual Report on Form 10-K for our fiscal year ended July 31, 2019. These amounts do not necessarily correspond to the actual value recognized by the named executive officers. |
| |
(3) | Dr. Sinha was an executive officer but not a named executive officer for fiscal 2017. |
| |
(4) | Dr. Apte was an executive officer but not a named executive officer for fiscal 2017 and 2018. |
| |
(5) | Mr. Schlossman was an executive officer but not a named executive officer for fiscal 2017 and 2018. |
Annual Report on Form 10-K for our fiscal year ended July 31, 2020. These amounts do not necessarily correspond to the actual value recognized by the named executive officers.
(4) Mr. Rajic was hired as an executive officer in fiscal 2020.
(5) Mr. Schlossman was an executive officer but not a named executive officer for fiscal 2018.
Fiscal 20192020 Grants of Plan-Based Awards Table
The following table sets forth certain information with respect to all plan-based awards granted to our named executive officers during fiscal 2019.2020. | | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1) | | Estimated Possible Payouts under Equity Incentive Plan Awards (2) | | | | | | Estimated Possible Payouts under Non-Equity Incentive Plan Awards (1) | | Estimated Possible Payouts under Equity Incentive Plan Awards (2) | |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold (#) | | Target (#) | | Maximum (#) | | All Other Stock Awards: Number of shares of Stock or Units (#) | | Grant Date Fair Value of Stock and Options Awards ($)(3) | Name | | Grant Date | | Threshold ($) | | 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 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Jay Chaudhry | | 10/31/2019 | | — | | | — | | | — | | | — | | | 150,000 | | | 225,000 | | | — | | | — | | | 6,597,000 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | 150,000 |
| | 225,000 |
| | — |
| | 5,556,000 |
| |
Remo Canessa | | — |
| | 150,000 |
| | 225,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| Remo Canessa | | 10/31/2019 | | — | | | 250,000 | | | 375,000 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 56,250 (4) |
| | 2,083,500 |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 28,125 | | | 42,188 | | | — | | | — | | | 1,236,938 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | 28,125 |
| | 42,188 |
| | — |
| | 1,041,750 |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 58,027(4) | | — | | | 6,160,727 | |
Amit Sinha | | — |
| | 125,000 |
| | 187,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Amit Sinha, Ph.D. | | Amit Sinha, Ph.D. | | 10/31/2019 | | — | | | 250,000 | | | 375,000 | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 125,000 (5) |
| | 4,630,000 |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 62,500 | | | 93,750 | | | — | | | — | | | 2,748,750 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | 62,500 |
| | 93,750 |
| | — |
| | 2,315,000 |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 67,698(4) | | — | | | 7,187,497 | |
Manoj Apte | | — |
| | 100,000 |
| | 150,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
Dalibor Rajic | | 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 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 112,500 (6) |
| | 4,167,000 |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 23,182 | | | 34,773 | | | — | | | 1,019,544 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | 56,250 |
| | 84,375 |
| | — |
| | 2,083,500 |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 67,698(4) | | — | | | 7,187,497 | |
Robert Schlossman | | — |
| | 75,000 |
| | 112,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
| Robert Schlossman | | 10/31/2019 | | — | | | 150,000 | | | 225,000 | | — | | | — | | | — | | | — | | | — | | | — | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 62,500 (7) |
| | 2,315,000 |
| | 10/31/2019 | | — | | | — | | | — | | | — | | | 31,250 | | | 46,875 | | | — | | | — | | | 1,374,375 | |
| | 10/05/2018 | | — |
| | — |
| | — |
| | — |
| | 31,250 |
| | 46,875 |
| | — |
| | 1,157,500 |
| | 06/02/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 29,014(4) | | — | | | 3,080,416 | |
___________________________
| |
(1) | These amounts reflect the fiscal 2019 target cash bonus amounts for each of our named executive officers under our Incentive Compensation Plan. Mr. Chaudhry did not participate in the Incentive Compensation Plan. There are no threshold bonus amounts under the Incentive Compensation Plan. As set forth in the Summary Compensation Table, no bonuses were earned for fiscal 2019. As such, the amounts set forth do not represent actual compensation earned or earnable by the named executive officers for fiscal 2019. For a description of the Incentive Compensation Plan, see “Compensation Discussion and Analysis –Annual Cash Bonuses” above. |
| |
(2) | These amounts reflect PSUs for the 2019 fiscal year performance period granted during the 2019 fiscal year to each of our named executive officers under our 2018 Equity Incentive Plan. The PSUs were eligible to be earned based on the achievement of 2019 fiscal year ACV targets established by the compensation committee. There were no threshold amounts for the 2019 fiscal year performance period. The amounts set forth do not represent actual compensation earned or earnable by the named executive officers for fiscal 2019. For a description of the 2019(1) These amounts reflect the fiscal 2020 target cash bonus amounts for each of our named executive officers under our Incentive Compensation Plan. Mr. Chaudhry did not participate in the Incentive 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 2019, 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 RSUs vest as follows: (i) 62,500 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 62,500 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
| |
(6) | The RSUs vest as follows: (i) 56,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 56,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
(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.
| |
(7) | The RSUs vest as follows: (i) 31,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 31,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
Fiscal 20192020 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, 2019.2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 |
___________________________ |
| | | | | | | | | | | | | | | | | | | |
| | | 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 |
| 12,640,500 |
|
| 10/05/2018 | (3) | — |
| — |
| — |
| — |
| | — |
| — |
| 150,000 |
| 12,640,500 |
|
| 10/05/2018 | (4) | — |
| — |
| — |
| — |
| | — |
| — |
| 150,000 |
| 12,640,500 |
|
| 10/05/2018 | (5) | — |
| — |
| — |
| — |
| | — |
| — |
| 150,000 |
| 12,640,500 |
|
Remo Canessa | 03/02/2017 | (6) | 530,000 |
| — |
| 5.82 |
| 03/02/2024 |
| | — |
| — |
| — |
| — |
|
| 10/05/2018 | (7) | — |
| — |
| — |
| — |
| | 56,250 |
| 4,740,188 |
| — |
| — |
|
| 10/05/2018 | (8) | — |
| — |
| — |
| — |
| | — |
| — |
| 28,125 |
| 2,370,094 |
|
| 10/05/2018 | (9) | — |
| — |
| — |
| — |
| | — |
| — |
| 28,125 |
| 2,370,094 |
|
Amit Sinha | 01/29/2013 | (10) | 101,333 |
| — |
| 1.34 |
| 01/29/2020 |
| | — |
| — |
| — |
| — |
|
| 04/06/2017 | (11) | 138,891 |
| 194,442 |
| 5.93 |
| 04/06/2024 |
| | — |
| — |
| — |
| — |
|
| 10/05/2018 | (12) | — |
| — |
| — |
| — |
| | 125,000 |
| 10,533,750 |
| — |
| — |
|
| 10/05/2018 | (13) | — |
| — |
| — |
| — |
| | — |
| — |
| 62,500 |
| 5,266,875 |
|
| 10/05/2018 | (14) | — |
| — |
| — |
| — |
| | — |
| — |
| 62,500 |
| 5,266,875 |
|
Majoj Apte | 04/03/2015 | (10) | 266,666 |
| — |
| 2.63 |
| 04/03/2022 |
| | — |
| — |
| — |
| — |
|
| 04/06/2017 | (11) | 97,227 |
| 136,106 |
| 5.93 |
| 04/06/2024 |
| | — |
| — |
| — |
| — |
|
| 10/05/2018 | (15) | — |
| — |
| — |
| — |
| | 112,500 |
| 9,480,376 |
| — |
| — |
|
| 10/05/2018 | (13) | — |
| — |
| — |
| — |
| | — |
| — |
| 56,250 |
| 4,740,188 |
|
| 10/05/2018 | (14) | — |
| — |
| — |
| — |
| | — |
| — |
| 56,250 |
| 4,740,188 |
|
Robert Schlossman | 01/15/2016 | (16) | 230,000 |
| — |
| 4.40 |
| 01/15/2023 |
| | — |
| — |
| — |
| — |
|
| 10/05/2018 | (17) | — |
| — |
| — |
| — |
| | 62,500 |
| 5,266,876 |
| — |
| — |
|
| 10/05/2018 | (13) | — |
| — |
| — |
| — |
| | — |
| — |
| 31,250 |
| 2,633,438 |
|
| 10/05/2018 | (14) | — |
| — |
| — |
| — |
| | — |
| — |
| 31,250 |
| 2,633,438 |
|
(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.___________________________
| |
(1) | This column represents the market value of the shares underlying the RSUs or PSUs, as applicable, as of July 31, 2019, based on the closing price of our common stock, as reported on NASDAQ, of $84.27 per share on July 31, 2019. |
| |
(2) | Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2019, or the first quarterly vesting date after achievement has been certified. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%. None of these PSUs were earned in fiscal 2019. |
| |
(3) | Upon achievement of specified performance metrics, earned PSUs vest on September 15, 2020, or the first quarterly vesting date after achievement has been certified. Because the performance metrics for this award had not been determined in FY 2019 (and hence, no grant date fair value could be determined), it was not included in the summary |
(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%.
| |
(4) | 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 2019 (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%. |
| |
(5) | (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 2019 (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%. |
| |
(6) | 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. |
| |
(7) | The RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
| |
(8) | Upon achievement of specified performance metrics, earned PSUs vest in 16 equal quarterly installments beginning on December 15, 2020. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%. None of these PSUs were earned in fiscal year 2019. |
| |
(9) | Upon achievement of specified performance metrics, earned PSUs vest in 16 equal quarterly installments beginning on December 15, 2020. Because the performance metrics for this award had not been determined in FY 2019 (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%. |
| |
(10) | Shares subject to the option are fully vested and immediately exercisable. |
| |
(11) | One-fourth of the shares subject to the option vested on November 1, 2018 and 1/48 of the shares vest monthly thereafter. |
| |
(12) | The RSUs vest as follows: (i) 62,500 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 62,500 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
| |
(13) | Upon achievement of specified performance metrics, earned PSUs vest in 16 equal quarterly installments beginning on December 15, 2019. Amounts reported are at 100% target level of achievement, with maximum achievement paying out at 150%. None of these PSUs were earned in fiscal year 2019. |
| |
(14) | Upon achievement of specified performance metrics, earned PSUs vest in 16 equal quarterly installments beginning on December 15, 2020. Because the performance metrics for this award had not been determined in FY 2019 (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%. |
| |
(15) | The RSUs vest as follows: (i) 56,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 56,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
| |
(16) | One-fourth of the shares subject to the option vested on January 14, 2017 and 1/48 of the shares vest monthly thereafter. |
| |
(17) | The RSUs vest as follows: (i) 31,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2019 and (ii) 31,250 RSUs vest in 16 equal quarterly installments beginning on December 15, 2020. |
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 20192020 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 2019. No RSUs held by our named executive officers vested in fiscal 2019.2020. | | | | Option Awards | | Option Awards | | Stock Awards |
Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($)(1) | 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 | | — |
| | — |
| Jay Chaudhry | | — | | | — | | | — | | | — | |
Remo Canessa | | 220,000 |
| | 13,690,600 |
| Remo Canessa | | 330,000 | | 23,381,356 | | — | | | — | |
Amit Sinha | | — |
| | — |
| |
Manoj Apte | | — |
| | — |
| |
Amit Sinha, Ph.D. | | Amit Sinha, Ph.D. | | 251,333 | | 17,856,692 | | 11,718 | | 755,030 |
Dalibor Rajic | | Dalibor Rajic | | — | | | — | | | 55,636 | | 3,584,790 |
Robert Schlossman | | 200,000 |
| | 9,199,950 |
| Robert Schlossman | | 137,000 | | 10,795,481 | | 5,859 | | 377,515 |
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, 2019,2020, the last business day of fiscal 2019.2020. The values reflected also assume that the payments and benefits to our named executive officers are not reduced by virtue of the provision in the Severance Policy relating to Sections 280G and 4999 of the Code.