At the time the updated compensation peer group was approved, the revenues of the peer companies for the last four fiscal quarters ranged from 0.5x to 2.5x of our revenue
and the market capitalizations of the peer companies ranged from 0.3x to 2.4x of our market capitalization.
Executive compensation benchmarking also included survey data provided by Radford Surveys and Consulting, a business unit of Aon Hewitt Consulting,
Inc. ("Radford"), from publicly-traded and privately-held technology companies with comparable revenues to us. Radford did not provide compensation consulting services to the
Compensation Committee during fiscal 2015.
The elements of our executive compensation program during fiscal 2015 were as follows:
We believe that the total compensation opportunities provided to our executive officers, including the named executive officers, for fiscal 2015 achieved the
overall objectives of our executive compensation program.
Generally, the Compensation Committee reviews the base salaries of our executive officers, including the named executive officers, as part of its annual
review of our executive compensation program and makes recommendations to our Board for adjustments to their base salaries to take into account competitive market practices,
company and individual performance from the prior fiscal year and promotions or changes in responsibilities. Typically, our Board sets the base salaries of our executive officers at
levels which are competitive with the market as reflected in our compensation peer group, and after taking into consideration each individual executive officer's role and the scope of
his or her responsibilities, his or her experience, and the base salary levels of the other executive officers.
On July 1 and October 21, 2014, the Compensation Committee recommended the following adjustments to executive officer base salaries. The
Compensation Committee approved these changes based on its review of competitive market data as well as the performance of the executives during their tenure with the
Company. Base salaries for other executives were not changed during fiscal year 2015.
Mr. Arora was not eligible for the Management Incentive Plan, rather he is eligible for the Commission Incentive Plan as set forth
below in "Commission Incentive Plan".
Performance Objectives
For fiscal 2015, the performance objectives for the MIP were developed by the Compensation Committee, after taking into consideration the
recommendations of our CEO and CFO and consisted of both corporate and individual performance objectives.
The fiscal 2015 corporate performance objectives for the MIP were adjusted non-GAAP pre-tax net income and organic recurring service revenue ("RSR"). RSR is
GAAP service revenue plus revenue allocated in accordance with the guidance of ASC 605-25 less non-recurring engineering fees that are not recognized ratably over a term
greater than one month less any revenue acquired during the plan fiscal year (through acquisition, merger or business combination). For purposes of the MIP, "adjusted
non-GAAP pre-tax net income" was calculated as GAAP pre-tax net income plus loss on investment, non-cash tax adjustments, stock-based compensation, amortization of
acquired intangible assets, acquisition-related costs, facility exit costs, gain on patent sale and other extraordinary or non-recurring, non-representative items determined by the
Compensation Committee, including profit and/or loss associated with acquisitions, mergers and/or business combinations.
The fiscal 2015 individual performance objectives for the MIP consisted of individually-assigned Management Bonus Objectives ("MBOs"). These
MBOs were established at the beginning of the fiscal year for each participant in the MIP, including each of our executive officers and were related to the participant's specific area of
responsibility, although by their nature some MBOs (for example, in the case of certain executive officers, new customer and revenue targets) were shared by more than one
participant. All MBOs were subject to review and approval by the Compensation Committee, and typically required achievement of specific goals tied to, for example, sales targets,
customer retention, and operational improvements.
Terms of the MIP
For fiscal 2015, the Compensation Committee approved MIP targets with an initial condition that no annual cash incentive awards would be paid unless
our adjusted non-GAAP pre-tax net income for the year was at least equal to 6% of our revenue for the year. If our non-GAAP pre-tax net income exceeded this 6% threshold level
for each fiscal quarter, as well as for the full fiscal year, a corporate performance factor based on non-GAAP net income and RSR results would be calculated. The effect of each
corporate performance objective was cumulative, as illustrated by the following table.
Performance Attainment Level |
Non-GAAP Pre-tax Net Income Performance Objective |
RSR Performance Objective |
Corporate Performance Factor |
Threshold |
15% |
35% |
50% |
Target |
30% |
70% |
100% |
Stretch |
30% |
140% |
170% |
Maximum |
30% |
210% |
240% |
In addition, under the fiscal 2015 MIP, 10% of the target annual cash incentive award opportunity of each MIP participant could be earned each fiscal quarter,
such that 40% of his or her target annual cash incentive award was tied to our quarterly results. The remaining 60% of each MIP participant's target annual cash incentive award
was tied to our full fiscal year results.
Under the fiscal 2015 MIP, the quarterly bonus payable to the MIP participant was equal to 10% of his or her target annual cash incentive award opportunity
multiplied by the corporate performance factor for that fiscal quarter, as determined by our actual financial results. As reflected by the table above, the maximum amount that could
be earned by a participant for each fiscal quarter was limited to 240% of his or her target annual cash incentive opportunity for that quarter.
Under the fiscal 2015 MIP, the annual bonus payable to each MIP participant at the end of the fiscal year was equal to 60% of his or her target annual cash
incentive award opportunity multiplied by the corporate performance factor for the full fiscal year, as determined by our actual financial results. In addition, the amount payable at the
end of the fiscal year was subject to adjustment based on each participant's attainment of his or her individual MBOs. The degree of achievement of the MBOs generated an MBO
factor for each participant ranging from 0% to 115%.
The annual cash incentive award payment for each participant was calculated as the product of the corporate performance factor for the full fiscal year and
the MBO factor determined for each participant. Under the MIP, the maximum payment for any participant with respect to the annual performance portion of the MIP was equal to
262% of the individual's target annual cash incentive award opportunity for this portion of the award.
For fiscal 2015, the MIP also provided that if payment of the full accrual amounts to all participants based on target level achievement of the
performance objectives would reduce the adjusted non-GAAP pre-tax net income to less than 6% for each quarter and 6% for the full year, then the available bonus pool for such
period would be reduced to achieve the minimum non-GAAP pre-tax net income, and individual award payments would be adjusted on a pro rata basis.
Award Decisions
For the fiscal 2015 MIP, the non-GAAP pre-tax net income and RSR target levels for fiscal 2015 under the MIP and the fiscal 2015 corporate performance
factor for each fiscal quarter and for the full fiscal year based on our actual performance were as follows (dollar amounts represent millions):
|
Q1 |
Q2 |
Q3 |
Q4 |
FY 2015 |
Non-GAAP Pre-tax Net Income ($MM) |
$3.09 |
$4.28 |
$4.26 |
$5.00 |
$16.63 |
RSR ($MM) |
$34.69 |
$36.52 |
$37.89 |
$40.28 |
$149.38 |
Actual Company Performance Factor |
97.82% |
100.23% |
85.3% |
84.1% |
92.5% |
Further, based on an evaluation of each named executive officer's individual performance, the Compensation Committee approved the
following MBO factors for each of them: Mr. Martin, 95%; Mr. Verma, 98%; Ms. Genovese 115%; and Mr. Hakeman 98%. Due to Mr. Weirich's resignation as CFO, he was not
eligible for an MBO bonus.
Following the end of fiscal 2015, the Compensation Committee determined that the named executive officers had earned annual cash incentive award payments in the following amounts:
Named Executive Officers |
Target Annual Cash Incentive Award Opportunity |
Actual Annual Cash Incentive Award Payment |
Actual Annual Cash Incentive Award Payment as a Percentage of the Target Opportunity |
Mr. Martin |
$165,000 |
$147,584 |
89.4% |
Mr. Verma |
$434,050 |
$395,189 |
91.0% |
Mr. Weirich |
$183,225 |
$35,113 |
19.2%(1) |
Ms. Genovese |
$105,542 |
$104,307 |
98.8% |
Mr. Hakeman |
$134,063 |
$121,921 |
90.9% |
(1) Mr. Weirich was not eligible for the MIP for the third and fourth quarters of fiscal 2015 due to his resignation.
Commission Incentive Plan
Pursuant to Mr. Arora's employment agreement, starting in the fourth quarter of fiscal 2015 (January 5, 2015), he became eligible to participate in a
Commission Incentive Plan, with a target annual commission of $150,000 earned quarterly based on achievement of quarterly quota. In month one and two of the quarter he will
receive a recoverable draw of $12,000 each month with a true up at quarter end based on actual quarterly results in accordance with his Incentive Compensation Plan. In addition he
is eligible to receive an annual $75,000 bonus tied to MBOs determined by the CEO, of which 40% of any amount payable will be paid based on quarterly targets and 60% based on
annual targets. For the fourth quarter of fiscal 2015 only, he received a commission of $37,500 at target and $18,750 bonus tied to MBOs as determined for the fourth quarter of
fiscal 2015 by the CEO.
Long-Term Incentive Compensation
Our long-term incentive compensation consists of equity awards in the form of options to purchase shares of our common stock, time-based restricted
stock unit ("RSU") awards for shares of our common stock, and performance-based restricted stock unit ("PSU") awards to ensure that our senior
management members, including the named executive officers, have a continuing stake in our long-term success. The Compensation Committee believes that these types of equity
awards best meets our overall goals of alignment with long-term performance and stockholder value creation, and retention of our executive officers.
Typically, we grant equity awards to our executive officers during the first or second fiscal quarter of each year in connection with our annual performance
reviews and, initially, when an individual is hired as an executive officer. In determining the size of the long-term incentive compensation awards for our named executive officers,
the Compensation Committee considers our performance against our long-term strategic plan, each individual named executive officer's role and responsibilities, his or her
performance against his or her performance objectives and expected future contributions, market data concerning comparative long term incentive compensation levels, the extent
to which the shares of our common stock subject to previously-granted equity awards are vested, and the recommendations of our CEO. Long term incentive awards granted to Ms.
Genovese and Mr. Arora during fiscal 2015 also account for their initial appointment to the Chief Financial Officer and SVP, Global Sales positions, respectively. Generally, all equity
awards are subject to the recipient's continuous employment or other association (referred to as "continuous service") with us for a stated vesting period.
Based on the factors and analysis described above, the Compensation Committee determined the dollar value of fiscal 2015 long term incentive
compensation for each executive and then converted this value into a number of stock options, RSUs and PSUs based on the accounting value of each award type. Approximately
25% of the value of Mr. Verma's fiscal 2015 long term incentive compensation was allocated into each of Absolute TSR PSUs, Relative TSR PSUs, stock options, and RSUs. PSUs
represent approximately 20% of the total long term incentive value awarded to Mr. Arora and approximately 25% for Mr. Martin, Ms. Genovese, and Mr. Hakeman. The value of
PSUs awarded to these named executives was allocated equally into Absolute and Relative TSR performance shares, while the remainder of long term incentive value was awarded
in a mix of stock options and RSUs.
On July 22, 2014, October 21, 2014 and January 20, 2015, the Board approved the grant of options to purchase shares of common stock, RSUs and PSUs
to our named executive officers set forth in the following table:
Named Executive Officer |
Stock Options (number of shares granted) |
Restricted Stock Unit Awards (number of shares granted) |
Performance Stock Unit Awards - Absolute Price Performance (number of shares granted) |
Performance Stock Unit Awards - Relative TSR Performance (number of shares granted) |
Aggregate Grant Date Fair Value of Equity Awards |
Mr. Martin |
54,176 |
32,504 |
13,344 |
13,856 |
$587,000 |
Mr. Verma |
192,624 |
115,572 |
142,332 |
147,792 |
$3,126,000 |
Ms. Genovese |
223,796 |
24,024 |
33,360 |
34,640 |
$1,443,000 |
Mr. Hakeman |
108,352 |
-- |
13,344 |
13,856 |
$582,000 |
Mr. Arora |
117,702 |
34,722 |
21,381 |
22,201 |
$1,159,000 |
The awards to Ms. Genovese and Mr. Arora were specified in their initial employment agreements, described, below. The awards to our other named
executive officers were based on the Board's and Compensation Committee's consideration of the above-described factors.
The options to purchase shares of our common stock have a ten-year term, and vest over a period of four years from the date of grant at the rate of 1/48th of
the total number of shares of common stock subject to the option on the last day of each full month from the date of grant, subject to their continuous service with us.
Awards of RSUs are grants of rights to receive shares of common stock that vest at 25% annually on the first four anniversaries of the grant, subject to the
recipient's continuous service with us.
Awards of PSUs are grants of rights to receive shares of common stock subject to satisfaction of service and performance requirements established by the
Board or the Compensation Committee in connection with the award. Such awards may, in the discretion of the Board or the Compensation Committee, include the right to the
equivalent of any dividends on the shares covered by the award, but any such dividends would be paid only if and when the award vests. Named executive officers have been
granted two kinds of PSUs, absolute price performance PSUs, and relative total shareholder return (TSR) PSUs.
Absolute Price Performance PSUs shown in the preceding table are subject to the following performance conditions:
- If, during the four-year period following the date of grant, the average closing market price of our common stock
for at least at one period of 30 consecutive trading days
exceeds 150% of its closing market price on the date of grant,
- Then 25% of the shares of our common stock subject to the award will vest on each consecutive anniversary of the date of grant of the award, subject to
her continued employment with us on each such vesting date.
The Relative TSR PSU awards shown in the preceding table are subject to the following performance conditions for fiscal 2016, 2017, and 2018, described
below, as well as time-based vesting over four years.
Each award increment for the measurement periods set forth above is subject to the following performance conditions:
- If the performance return on the price per share of our common stock exceeds the performance return on the NASDAQ Composite Index (determined by
subtracting the percentage return on the NASDAQ Composite Index from the percentage return on the price per share of the Common Stock), then 100% of the shares of our
common stock allocated to that measurement period will be earned;
- If the performance return on the price per share of our common stock is more than 50% lower than the performance return on the NASDAQ Composition
Index, then none of the shares of our common stock allocated to that measurement period will be earned; and
- If the performance return on the price per share of our common stock is between 0% and 50% lower than the performance return on the NASDAQ
Composite Index, then the number of shares of our common stock earned for that measurement period will be reduced by 2% for each 1% by which the performance return on the
NASDAQ Composite Index exceeds the performance return on our common stock.
Health, Welfare, and Other Benefits
We offer health and welfare benefits to our employees, including our executive officers, which are designed to be competitive with overall market
practices and to attract, retain, and motivate the talent needed by us to achieve our strategic and financial goals. All United States salaried employees, including our executive
officers, are eligible to participate in our Section 401(k) plan, health care coverage, life insurance, disability, paid time-off, and paid holidays.
In addition, we provide our employees, including our executive officers, with the opportunity to purchase discounted shares of our common stock under the
1996 Employee Stock Purchase Plan (the "Purchase Plan"), which is intended to be a qualified plan under Section 423 of the Internal Revenue Code (the "Code").
Perquisites and Other Personal Benefits
Currently, we do not view perquisites or other personal benefits as a significant component of our executive compensation program. Although we
do not have a formal policy relating to perquisites and other personal benefits, during fiscal 2015 we did not provide any perquisites or other personal benefits to our executive
officers.
In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an
individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes.
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
General
We had extended written employment offer letters to all of our named executive officers, other than Mr. Martin, when they joined us as employees.
The negotiation of these employment offer letter was undertaken on our behalf by the Board. In addition, our named executive officers are subject to our general employment policies
and procedures and other policies adopted from time to time by the Board, such as our executive change-in-control and severance policy, which they have agreed to apply to their
employment agreements in lieu of any change-in-control payment and severance payment provisions in their individual employment agreements.
Vikram Verma
On September 9, 2013, we entered into an employment letter agreement with Mr. Verma in connection with his appointment as our CEO. Mr.
Verma's employment agreement provides for "at will" employment. Under his employment agreement, in fiscal 2014 he received the cash compensation and equity awards set forth
in the Summary Compensation Table. His base salary is subject to annual review by the Board and may be adjusted in its discretion, but it may not be reduced except as part of a
salary reduction plan that similarly affects all executives reporting to the CEO. He may elect to receive any bonus under the MIP in cash or RSUs at the time of the award, with the
RSU value fixed as of the first day of the applicable fiscal year. He is entitled to standard benefits, including vacation, for our executive officers, with a maximum vacation
accrual of 300 hours. Under his employment agreement, Mr. Verma has agreed by the fifth anniversary of his employment commencement date to acquire and retain an ownership
interest in our common stock which is equal in value to three times the amount of
his current base salary, or approximately $1.3 million. As of fiscal 2015, Mr. Verma has exceeded this requirement as his ownership of shares of our common stock is approximately $1.5 million.
Mary Ellen Genovese
On November 1, 2014, we entered into a new employment letter agreement with Ms. Genovese in connection with her appointment as our CFO, which
superseded her employment agreement as Senior Vice President of Human Resources. This agreement was approved on our behalf by our Board. We believe that Ms.
Genovese's employment arrangement was necessary to induce Ms. Genovese to forego other employment opportunities and leave her current position as Senior Vice President of Human
Resources for a demanding Chief Financial Officer position.
In connection with Ms. Genovese's appointment as our Chief Financial Officer on November 1, 2014, we entered into an employment letter agreement with
her providing for an initial annual base salary of $315,500 and a target annual cash incentive award opportunity equal to 60% of her annual base salary.
In addition, her employment agreement provided for an initial equity award in the form of an option to purchase 189,612 shares of our common stock, a
performance-based restricted stock unit (PSU) award for 33,360 shares of our common stock to be earned based on the absolute price performance of our common stock over a
four-year period, and a PSU award for 34,640 shares of our common stock to be earned based on our total shareholder return over performance periods ending March 31, 2016,
March 31, 2017, and March 31, 2018 relative to the NASDAQ Composite Index (^IXIC).
Previous to her appointment to CFO of the Company, Ms. Genovese had been serving as our Senior Vice President of Human Resources since July 2014
and prior to that, as a consultant to the Company since April 2012.
Ms. Genovese's employment agreement provides for "at will" employment. Under her employment agreement, she is entitled to receive the cash
compensation and equity awards described above. In addition, her base salary is subject to annual review by the Board and may be adjusted in its discretion, but it may not be
reduced except as part of a salary reduction plan that similarly affects all executives reporting to the CEO. She is entitled to standard benefits, including vacation, for our executive
officers, with a maximum vacation accrual of 300 hours.
Ms. Genovese has agreed by the fifth anniversary of her start date to acquire and retain an ownership interest in Common Stock which is equal in value to
one times the amount of her initial base salary.
Darren Hakeman
On September 9, 2013, we entered into an employment letter agreement with Mr. Hakeman in connection with his appointment as Senior Vice
President of Product and Strategy. Mr. Hakeman's employment agreement provides for "at will" employment. Under his employment agreement, in fiscal 2014, he received the cash
compensation and equity awards set forth in the Summary Compensation Table. In addition, his base salary is subject to annual review by the Board and may be adjusted in its
discretion. He is entitled to standard benefits, including vacation, for our executive officers. Mr. Hakeman has agreed by the fifth anniversary of his employment commencement date
to acquire and retain an ownership interest in common stock which is equal in value to one times the amount of his initial base salary.
Puneet Arora
In connection with Mr. Arora's appointment as our Senior Vice President of Global Sales on January 5, 2015, we entered into an employment letter
agreement with him for an initial annual base salary of $275,000 and a commission incentive plan opportunity equal up to $150,000.
He is also eligible to receive an annual $75,000 bonus tied to MBOs determined by the CEO.
In addition, his employment agreement provided for an initial equity award in the form of an option to purchase 117,702 shares of our common stock,
a time-based restricted stock unit (RSU) award for 34,722 shares of our common stock, a performance-based
restricted stock unit (PSU) award for 21,381 shares of our common stock to be earned based on the absolute price performance of our common stock over a four-year period, and a
PSU award for 22,201 shares of our common stock to be earned based on our total shareholder return over performance periods ending June 30, 2016, June 30, 2017, and June
30, 2018 relative to the NASDAQ Composite Index (^IXIC).
Mr. Arora's employment agreement provides for "at will" employment. Under his employment agreement, he is entitled to receive the cash compensation and
equity awards described above. In addition, his base salary is subject to annual review by the Board and may be adjusted in its discretion. He is entitled to standard benefits,
including vacation, for our executive officers. Mr. Arora has agreed by the fifth anniversary of his start date to acquire and retain an ownership interest in common stock which is
equal in value to one times the amount of his initial base salary.
Executive Change-in-Control and Severance Policy
On June 19, 2015, the Board approved a new executive change-in-control and severance policy that applies to our CEO, all executive vice presidents
and all senior vice presidents of 8x8, Inc. This policy supersedes our existing change-in-control provisions. All of our named executive officers have accepted the terms of the new
policy in place of any severance benefits and change-in-control compensation payable pursuant to their respective employment agreements.
Severance
Upon a constructive termination of employment (other than in connection with a change-in-control):
- Executives will receive all compensation that is earned but unpaid as of the termination date, including salary, commissions and accrued but unused
paid time off and vacation;
- Executives will receive a single lump sum severance payment equal to the sum of the percentage of base salary and bonus as applicable to the
executive's job tier. For the CEO, the amount is equal to 150% of base salary plus a prorated percentage of earned bonus based on the percentage of performance achieved prior
to the termination date; for executive vice presidents, the amount is
equal to 100% of base salary plus a prorated percentage of earned bonus based on the percentage of performance achieved prior to the termination date; and for senior vice presidents,
the amount is equal to 75% of base salary plus a prorated percentage of earned bonus based on the percentage of performance achieved prior to the termination date;
- Executives will receive full payment of insurance premium amounts for continuation of such executive's group health insurance due under COBRA, and have the right to
participate and to receive benefits under any of our group medical, dental, life, disability or other group insurance plans. The premium payments will continue for 18 months after the
termination date for the CEO, 12 months for executive vice presidents, and nine months for senior vice presidents;
- The CEO will receive 12 months of accelerated vesting of outstanding time-based vesting equity awards; other executives will not receive any acceleration of time-based
vesting equity awards;
- Executives will not receive any acceleration of vesting of outstanding PSUs.
Under the policy, a constructive termination occurs when the executive's employment is terminated by us other than for "cause" or
"disability," or by the executive for "good reason."
"Cause" means (i) willful failure to attend to executive's duties that is not cured by executive within 30 days of receiving written notice from the
CEO (or, in the case of the CEO, from the Board) specifying such failure; (ii) material breach of executive's employment agreement that is not cured by executive within 30 days of
receiving written notice from the CEO (or, in the case of the CEO, from the Board) specifying such breach; (iii) conviction of (or plea of guilty or nolo contendere to) any felony or a
misdemeanor involving theft, embezzlement, dishonesty or moral turpitude; or (iv) misconduct resulting in material harm to our business or reputation, including fraud,
embezzlement, misappropriation of funds or a material violation of the executive's confidential information, non-disclosure and invention assignment agreement.
"Disability" means a physical or mental impairment for which the executive qualifies for benefits under our long-term disability program, as it may
be amended from time to time.
"Good Reason" means the occurrence of any of the following conditions without executive's consent, but only if such condition is reported by the
executive within 90 days of executive's knowledge of such condition and remains uncured 30 days after written notice from executive to the Board of the condition: (i) a material
reduction in executive's then-current base salary or annual target bonus (expressed as a percentage of executive's then-current base salary), except for a reduction proportionate to
reductions concurrently imposed on all other members of our executive management; (ii) a material reduction in executive's then-current employee benefits package, taken as a
whole, except for a reduction proportionate to reductions concurrently imposed on all other members of our executive management; (iii) a material reduction in executive's
responsibilities with respect to our overall operations, such that continuity of responsibilities with respect to business operations existing prior to a corporate transaction will serve as
a material reduction in responsibilities if such business operations represent only a subsidiary or business unit of ours after the corporate transaction; (iv) a material reduction in the
responsibilities of the executive's direct report, including a requirement for the CEO to report to another officer as opposed to the Board or a requirement for an executive vice
president or senior vice president to report to any officer other than the CEO; (v) a material breach by us of any material provision of the executive's employment agreement; (vi) a
requirement that executive relocate executive's office to a location more than 35 miles from executive's then-current office location with us, unless such office relocation results in the
distance between the new office and executive's home being closer or equal to the distance between the prior office and executive's home; (vii) a failure of a successor or transferee
to assume our obligations under this policy; or (viii) a failure to nominate executive for election as a director on the Board, if at the proper time for nomination, the executive is a
Board member.
The policy is the exclusive source of severance benefits for the covered executives. They will not be entitled to severance payments for any termination of
employment other than a constructive termination.
Change-in-Control
The policy provides that upon a "change-in-control," the satisfaction of the performance targets under the executives' Absolute Price Performance
PSUs and TSR PSUs will be determined as of the date of the date of such change-in-control, based on the value of the consideration paid per share of our common stock in such
transaction (which we refer to as the "Transaction Price"), with the underlying shares deemed earned as of such date to the extent the performance targets as computed
on this basis have been satisfied. Such awards will remain subject to any remaining service, or time-based vesting, requirements, in the absence of a constructive termination of
employment "in connection with the change-in-control." No other benefits are earned by the executives as a result of a "single trigger" change-in-control.
As defined under the policy, "Change-in-Control" means the consummation of any of the following transactions: (i) an acquisition in one
or more related transactions of 45% or more of our common stock or voting securities by a "person" (as defined in Sections 13(d) and 14(d) of the Securities Exchange
Act, but excluding us, any employee benefit plan of ours and any corporation controlled by our stockholders) or multiple "persons" acting as a group; (ii) a complete
liquidation or dissolution of the Company; (iii) a sale, transfer or other disposition of all or substantially all of the Company's assets; or (iv) a merger, consolidation or
reorganization (collectively, a "Business Combination") other than a Business Combination (a) in which our stockholders receive 50% or more of the stock of the
corporation resulting from the Business Combination, (b) in which at least a majority of the board of directors of such resulting corporation were incumbent directors serving on our
Board immediately prior to the consummation of the Business Combination and (c) after which no individual, entity or group (excluding any corporation or other entity resulting from
the Business Combination or any employee benefit plan of such corporation or of ours) who did not own 45% or more of the stock of the resulting corporation or other entity
immediately before the Business Combination owns 45% or more of the stock of such resulting corporation or other entity. An executive's employment will be considered
constructively terminated "in connection with a change-in-control," if the constructive termination occurs three months before, on, or within 12 months following the
change-in-control."
Upon a constructive termination of employment in connection with a change-in-control:
- Executives will be entitled to a lump sum payment equal to 100% of base salary, and for the CEO, 100% of target bonus for the fiscal year, in
addition;
- Executives will receive all compensation that is earned but unpaid as of the termination date, including salary, commissions and accrued but unused
paid time off and vacation;
- Executives will receive full payment of insurance premium amounts for continuation of such executive's group health insurance due under COBRA, and
have the right to participate and to receive benefits under any of our group medical, dental, life, disability or other group insurance plans for 12 months after the termination
date;
- Executives will receive accelerated vesting of 100% of their then unvested time-based equity awards; and
- Executives' Absolute Price Performance PSUs and TSR PSUs will be determined as of the date of the date of such change-in-control, based on the
Transaction Price (i.e. the value of the consideration paid per share of our common stock in such transaction), with the underlying shares deemed earned as of such date to the
extent the performance targets as computed on this basis have been satisfied, and any remaining service, or time-based vesting requirements, will be deemed satisfied in full as of
the date of the constructive termination, regardless of when it occurs.
Fiscal 2014 Stockholder Advisory Vote on Executive Compensation
At our fiscal 2014 Annual Meeting of Stockholders, we conducted a stockholder advisory vote on the fiscal 2011 compensation of the Named Executive Officers (commonly
known as a "Say-on-Pay" vote). Our stockholders approved the fiscal 2014 compensation of the then-named executive officers with approximately 96% of the votes cast
in favor of the proposal.
We believe that the outcome of the Say-on-Pay vote reflects our stockholders' support of our compensation approach, specifically our efforts to attract, retain, and motivate our
executive officers through a performance-oriented executive compensation program. Accordingly, no significant design changes were made to the executive compensation program
following the fiscal 2014 Say-on-Pay vote.
We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received throughout the
year, when making compensation decisions for our executive officers, including the named executive officers. Following the Annual Meeting of Stockholders to which this proxy
statement relates, the next stockholder advisory vote on the compensation of the named executive officers will take place in 2017, reflecting the results of the separate stockholder
advisory vote on the frequency of future stockholder advisory votes regarding the compensation of the named executive officers conducted at our fiscal 2014 Annual Meeting of
Stockholders, our Board of Directors determined that we will hold our Say-on-Pay votes once every three years.
Tax and Accounting Considerations
Deductibility of Compensation
Section 162(m) of the Code generally disallows a deduction for federal income tax purposes to any publicly-traded corporation for any remuneration in
excess of $1 million paid in any taxable year to its chief executive officer and each of the three other most highly-compensated executive officers (other than its chief financial
officer). Generally, remuneration in excess of $1 million may be deducted, however, if, among other things, it qualifies as "performance-based compensation" within the
meaning of the Code. In this regard, the compensation income realized upon the exercise of options to purchase shares of the granting company's securities granted under a
stockholder-approved stock option plan will be deductible so long as the options are granted by a committee whose members are outside directors and certain other conditions are
satisfied.
The Compensation Committee regularly reviews the impact of Section 162(m) on the various elements of our executive compensation program. Further, the
Compensation Committee believes that, at this time, achieving our compensation objectives is more important than the benefit of tax deductibility. Consequently, the compensation
may, from time to time, award incentive compensation that is not exempt from the deduction limit of Section 162(m). Nevertheless, when not inconsistent with these objectives, the
Compensation Committee endeavors to award compensation that will be deductible for federal income tax purposes. None of the compensation paid to our covered executive
officers for the fiscal year ended March 31, 2015 that would be taken into account for purposes of Section 162(m) exceeded the $1 million limitation for fiscal 2015.
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 stock-based compensation awards.
ASC Topic 718 requires us to recognize in our consolidated statement of operations all share-based payments to employees, including grants of options to
purchase shares of our common stock and restricted stock unit awards for shares of our common stock to our executive officers, based on their fair values. ASC Topic 718 also
requires companies to recognize the compensation cost of their share-based payment awards in their income statements over the period that an executive officer is required to
render service in exchange for the option or other award (which, generally, will correspond to the award's vesting schedule).
Compensation Risk Assessment
The Compensation Committee has reviewed our compensation programs to ensure that our incentive and other motivational elements of pay are
aligned with long-term value creation, taking into consideration prudent risk management. We do not believe any of our compensation policies and practices create any risks that
are reasonably likely to have a material adverse effect on us. In making this determination, the Compensation Committee considered the mix of fixed and variable
compensation, our use of equity in our long-term incentive compensation arrangements, the time horizon of performance measurement in incentive opportunities, and the ability of
the Compensation Committee and management to rely on judgment in determining compensation and assessing performance outcome.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy
statement. Based on this review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy
statement and in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015.
THE COMPENSATION COMMITTEE
Eric Salzman, Chairman
Guy Hecker
Ian Potter
FISCAL 2015 SUMMARY COMPENSATION TABLE
Name and Principal Position |
Fiscal Year |
Salary |
Bonus |
Stock Awards (1) |
Option Awards (2) |
Non-Equity Incentive Plan Compensation(3) |
All Other Compensation |
Total |
Vikram Verma (4) |
2015 |
$432,158 |
-- |
$2,348,916 |
$775,947 |
$395,189 |
$2,949 |
$3,955,159 |
Chief Executive Officer |
2014 |
$224,359 |
-- |
$2,597,675 |
$1,791,060 |
-- |
$42,177 |
$4,655,271 |
|
2013 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
|
Bryan R. Martin |
2015 |
$275,000 |
-- |
$368,865 |
$218,237 |
$147,584 |
$2,400 |
$1,012,086 |
Chairman, Chief |
2014 |
$275,000 |
-- |
$216,164 |
$507,597 |
$153,723 |
$2,400 |
$1,154,884 |
Technology Officer |
2013 |
$275,000 |
-- |
-- |
$702,560 |
$212,077 |
$2,550 |
$1,192,187 |
|
|
|
|
|
|
|
|
|
Mary Ellen Genovese (5) |
2015 |
$195,176 |
-- |
$545,381 |
$896,978 |
$104,307 |
$3,155 |
$1,744,997 |
Chief Financial Officer |
2014 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
2013 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
|
Dan Weirich (6) |
2015 |
$224,812 |
-- |
-- |
-- |
$35,113 |
$464 |
$260,389 |
Former Chief Financial |
2014 |
$267,500 |
-- |
$185,559 |
$434,866 |
$148,273 |
$2,039 |
$1,038,237 |
Officer |
2013 |
$260,000 |
-- |
-- |
$439,100 |
$139,882 |
$2,092 |
$841,074 |
|
|
|
|
|
|
|
|
|
Darren Hakeman (7) |
2015 |
$266,875 |
-- |
$145,888 |
$436,474 |
$121,921 |
$2,156 |
$973,314 |
Senior Vice President, |
2014 |
$145,833 |
-- |
$592,816 |
$895,530 |
-- |
$329 |
$1,634,508 |
Product Development |
2013 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
|
Puneet Arora (8) |
2015 |
$61,458 |
-- |
$543,821 |
$614,758 |
$56,250 (9) |
$125 |
$1,276,412 |
Senior Vice President |
2014 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
Global Sales |
2013 |
-- |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
|
(1) The amounts reported reflect the aggregate grant date fair value of stock awards computed in accordance with ASC
FASB 718 Topic based on the closing price of our common stock on the date of the grant. For a more detailed discussion of the assumptions used to calculate the fair value of our
stock awards, refer to note 1 to the consolidated financial statements contained in our 2015 Annual Report on Form 10-K for our fiscal year ended March 31, 2015.
(2) The amounts reported reflect the aggregate grant date fair value of option awards computed in accordance with FASB ASC Topic 718. The fair value of
each option grant is estimated based on its fair market value on the date of grant using the Black-Scholes option-pricing model. For a more detailed discussion of the valuation
model and assumptions used to calculate the fair value of our options, refer to note 1 to the consolidated financial statements contained in our 2015 Annual Report on Form 10-K for
our fiscal year ended March 31, 2015.
(3) Compensation earned based on the NEO's participation in the MIP in fiscal 2015, 2014 and 2013.
(4) For fiscal 2015, Mr. Verma's salary was increased to $445,400 effective July 1, 2014. For fiscal 2014, other compensation for Mr. Verma includes
$40,000 of director fees.
(5) Effective November 1, 2014, Ms. Genovese become CFO of our Company, with an annual base salary of $315,500. Previously, from July 1, 2014 to
October 31, 2014, Ms. Genovese was employed with us as Senior Vice President of Human Resources. The above table reflects her salary received, and awards and options
granted for fiscal 2015.
(6) Mr. Weirich's salary was increased to $315,500 effective July 1, 2014. Effective October 31, 2014, Mr. Weirich resigned as Chief Financial Officer of the
Company. Mr. Weirich continued to be employed as an advisor to the Company through December 31, 2014. His existing options to purchase common stock continued to vest through December 31, 2014.
None of Mr. Weirich's compensation was considered a severance payment.
(7) Mr. Hakeman's salary was increased to $275,000 effective September 15, 2014.
(8) Effective January 5, 2015, Mr. Arora become Senior Vice President of Global Sales of our Company, with an annual base salary of $275,000.
(9) For Mr. Arora only, compensation earned based on his participation in his commission incentive plan for fiscal 2015. He is not eligible to participate in the
Company's MIP.
FISCAL 2015 GRANTS OF PLAN-BASED AWARDS TABLE
The following table sets forth certain information regarding plan-based awards granted to the NEOs during the fiscal year ended March 31, 2015.
Name |
Grant Date |
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (Target) (1) |
Estimated Future Payouts Under Equity Incentive Plan Awards (Target) (2) |
All Other Stock Awards: Number of Shares of Stock or Units |
All Other Option Awards: Number of Underlying Options |
Exercise or Base Price of Option Awards (3) |
Grant Date Fair Value of Stock and Option Awards (4) |
Vikram Verma |
-- |
$434,050 |
-- |
-- |
-- |
-- |
-- |
|
10/21/14 |
-- |
142,332 (5) |
-- |
-- |
-- |
$791,057 |
|
10/21/14 |
-- |
147,792 (6) |
-- |
-- |
-- |
$765,035 |
|
10/21/14 |
-- |
-- |
115,572 (7) |
-- |
-- |
$792,824 |
|
10/21/14 |
-- |
-- |
-- |
192,624 (8) |
$6.86 |
$775,947 |
|
|
|
|
|
|
|
|
Bryan R. Martin |
-- |
$165,000 |
-- |
-- |
-- |
-- |
-- |
|
10/21/14 |
-- |
13,344 (5) |
-- |
-- |
-- |
$71,724 |
|
10/21/14 |
-- |
13,856 (6) |
-- |
-- |
-- |
$74,164 |
|
10/21/14 |
-- |
-- |
32,504 (7) |
-- |
-- |
$222,977 |
|
10/21/14 |
-- |
-- |
-- |
54,176 (8) |
$6.86 |
$218,237 |
|
|
|
|
|
|
|
|
Mary Ellen |
|
|
|
|
|
|
|
Genovese |
-- |
$105,542 |
-- |
-- |
-- |
-- |
-- |
|
7/22/14 |
-- |
-- |
24,024 (7) |
-- |
-- |
$180,660 |
|
7/22/14 |
-- |
-- |
-- |
34,184 (9) |
$7.52 |
$133,164 |
|
10/21/14 |
-- |
33,360 (5) |
-- |
-- |
-- |
$179,310 |
|
10/21/14 |
-- |
34,640 (6) |
-- |
-- |
-- |
$185,411 |
|
10/21/14 |
-- |
-- |
-- |
189,612 (8) |
$6.86 |
$763,814 |
|
|
|
|
|
|
|
|
Dan Weirich |
-- |
$183,225 |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
Darren Hakeman |
-- |
$134,063 |
-- |
-- |
-- |
-- |
-- |
|
10/21/14 |
-- |
13,344 (5) |
-- |
-- |
-- |
$71,724 |
|
10/21/14 |
|
13,856 (6) |
-- |
-- |
-- |
$74,164 |
|
10/21/14 |
-- |
-- |
-- |
108,352 (8) |
$6.86 |
$436,474 |
|
|
|
|
|
|
|
|
Puneet Arora |
1/20/2015 |
-- |
21,381 (5) |
-- |
-- |
-- |
$114,923 |
|
1/20/2015 |
-- |
22,201 (6) |
-- |
-- |
-- |
$118,831 |
|
1/20/2015 |
-- |
-- |
34,722 (7) |
-- |
-- |
$310,067 |
|
1/20/2015 |
-- |
-- |
-- |
117,702 (10) |
$8.93 |
$614,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The amounts reported in the "Estimated Possible Payouts under Non-Equity Incentive Plan Awards" column represent the
annual bonuses payable pursuant to the MIP. For a discussion of the fiscal 2015 MIP, see "Compensation Discussion and Analysis - Annual Cash Incentive Awards" above.
(2) The amounts reported in the "Estimated Future Payments under Equity Incentive Plan Awards" column represent
the number of shares of our common stock subject to performance-based restricted stock unit awards granted to the named executive officers during fiscal 2015. The shares of
common stock subject to these awards could be earned upon achievement of the performance conditions established by the Compensation Committee in connection with the
awards. The performance conditions of the performance-based restricted stock unit awards are described in "Compensation Discussion and Analysis - Long-Term Incentive
Compensation" above. Such awards may, in the discretion of the Compensation Committee, include the right to the equivalent of any dividends on the shares of common stock
covered by the award, but any such dividends would be paid only if and when the awards vest.
(3) The exercise price of the options to purchase shares of our common stock is equal to the value of a share of our common stock on the date of grant
which the closing market price of our common stock on the NASDAQ Global Select Market ("Nasdaq GSM") on that date.
(4) Represents the aggregate grant date fair value of the stock-based awards granted to the NEOs during fiscal 2015, as computed in accordance with ASC
718. The fair value of each option grant is estimated based on its fair market value on the date of grant using the Black-Scholes option-pricing model. For a detailed discussion of
the valuation model and assumptions used to calculate the fair value of our options, refer to note 1 to the consolidated financial statements contained in our 2015 Annual Report on
Form 10-K for our fiscal year ended March 31, 2015.
(5) This performance-based restricted stock unit award may be earned based on the achievement of absolute price performance objectives established for
our common stock over the award's four-year performance period, subject to the recipient's continued employment with the Company.
(6) This performance-based restricted stock unit award may be earned based on the relative performance of our total shareholder return compared to the
NASDAQ Composite Index (^IXIC") over three separate performance periods ending March 31, 2016, March 31, 2017, and March 31, 2018, respectively, subject to the
recipient's continued employment with the Company.
(7) This time-based restricted stock unit award vests at the rate of 25% annually from the date of grant, subject to the recipient's continued employment
with the Company.
(8) This option to purchase shares of our common stock has a ten-year term, and vest over a period of four years from the date of grant at the rate of
1/48th of the total number of shares of common stock subject to the option on the last day of each full month from the date of grant, subject to the recipient's continued employment
with the Company.
(9) This option to purchase shares of our common stock has a ten-year term, and vest over a period of four years from the date of grant at the rate of 1/4th
of the total number of shares of common stock subject to the option on July 22, 2015 and 1/36th of the remaining shares on the last day of each full month from the
date of grant, subject to the recipient's continued employment with the Company.
(10) This option to purchase shares of our common stock has a ten-year term, and vest over a period of four years from the date of grant at the rate of 1/4th
of the total number of shares of common stock subject to the option on January 20, 2016 and 1/36th of the remaining shares on the last day of each full month from
the date of grant, subject to the recipient's continued employment with the Company.
FISCAL 2015 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
The following table sets forth certain information concerning outstanding equity awards held by the NEOs at March 31, 2015.
|
Option Awards
|
Stock Awards
|
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable (1) |
Number of Securities Underlying Unexercised Options (#) Unexercisable (1)(2) |
Option Exercise Price |
Option Expiration Date |
Number of Shares of Stock That Have Not Vested (2) |
Market Value of Shares of Stock That Have Not Vested ($)(3) |
Vikram Verma |
-- |
-- |
-- |
-- |
16,656 (4) |
$139,910 |
|
-- |
-- |
-- |
-- |
103,500 (5) |
$869,400 |
|
-- |
-- |
-- |
-- |
80,325 (6) |
$674,730 |
|
59,375 |
15,625 (7) |
$4.26 |
1/19/2022 |
-- |
-- |
|
112,500 |
187,500 (8) |
$9.70 |
9/9/2023 |
-- |
-- |
|
-- |
-- |
-- |
-- |
115,572(9) |
$970,805 |
|
-- |
-- |
-- |
-- |
142,332(10) |
$1,195,589 |
|
-- |
-- |
-- |
-- |
147,792(11) |
$1,241,453 |
|
20,064 |
172,560(12) |
$6.86 |
10/21/2024 |
-- |
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan R. Martin |
100,000 |
-- |
$1.79 |
8/23/2015 |
-- |
-- |
|
100,000 |
-- |
$1.27 |
10/24/2016 |
-- |
-- |
|
100,000 |
-- |
$1.26 |
8/28/2017 |
-- |
-- |
|
100,000 |
-- |
$0.87 |
9/30/2018 |
-- |
-- |
|
-- |
-- |
-- |
-- |
2,082 (13) |
$17,489 |
|
129,165 |
70,835 (14) |
$5.87 |
8/21/2022 |
-- |
-- |
|
31,824 |
53,040 (15) |
$9.74 |
9/17/2023 |
-- |
-- |
|
-- |
-- |
-- |
-- |
13,808 (16) |
$115,987 |
|
-- |
-- |
-- |
-- |
10,668 (17) |
$89,611 |
|
-- |
-- |
-- |
-- |
32,504 (9) |
$273,034 |
|
-- |
-- |
-- |
-- |
13,344 (10) |
$112,090 |
|
-- |
-- |
-- |
-- |
13,856 (11) |
$116,390 |
|
5,643 |
48,533(12) |
$6.86 |
10/21/2024 |
-- |
-- |
|
|
|
|
|
|
|
Dan Weirich |
-- |
-- |
-- |
-- |
-- |
-- |
|
|
|
|
|
|
|
Mary Ellen Genovese |
-- |
-- |
-- |
-- |
24,024 (18) |
$201,802 |
|
-- |
34,184 (19) |
$7.52 |
7/22/2024 |
-- |
-- |
|
-- |
-- |
-- |
-- |
33,360 (10) |
$280,224 |
|
-- |
-- |
-- |
-- |
34,640 (11) |
$290,976 |
|
-- |
189,612 (12) |
$6.86 |
10/21/2014 |
-- |
-- |
|
|
|
|
|
|
|
Darren Hakeman |
56,250 |
93,750 (20) |
$9.70 |
9/9/2023 |
-- |
-- |
|
-- |
-- |
-- |
-- |
25,400 (5) |
$213,360 |
|
-- |
-- |
-- |
-- |
19,650 (6) |
$165,060 |
|
-- |
-- |
-- |
-- |
13,344 (10) |
$112,090 |
|
-- |
-- |
-- |
-- |
13,856 (11) |
$116,390 |
|
56,250 |
93,750 (20) |
$9.70 |
9/9/2023 |
-- |
-- |
|
11,285 |
97,067 (12) |
$6.86 |
10/21/2024 |
-- |
-- |
|
|
|
|
|
|
|
Puneet Arora |
-- |
-- |
-- |
-- |
34,722 (21) |
$291,665 |
|
-- |
-- |
-- |
-- |
21,381 (22) |
$179,600 |
|
-- |
-- |
-- |
-- |
22,201 (23) |
$186,488 |
|
-- |
117,702 (24) |
$8.93 |
1/20/2025 |
-- |
-- |
|
|
|
|
|
|
|
(1) Each outstanding stock option has a 10 year term.
(2) The vesting of any unvested shares is subject to the recipient's continuous service.
(3) The market value of unvested stock awards is calculated by multiplying the number of unvested stock awards held by the applicable named executive
officers by the closing market price of our common stock on the Nasdaq GSM on March 31, 2015.
(4) Awards granted August 21, 2012. Subject to continuous service of the recipient, 1/4th of the total number of shares vest annually on the
grant date anniversary until all of the options have vested.
(5) Awards granted September 9, 2013. Subject to continuous service of the recipient and performance requirements earned based on the absolute price
performance of our common stock over a four-year period.
(6) Awards granted September 9, 2013. Subject to continuous service of the recipient and performance requirements to be earned based on TSR over
performance periods ending March 31, 2015, March 31, 2016, and March 31, 2017 relative to the NASDAQ Composite Index (^IXIC).
(7) Stock options granted January 19, 2012. Subject to continuous service of the recipient, 1/4th of the total number of shares vested on
January 19, 2013, and 1/36th of the remaining shares vest on the last day of each full month thereafter until all stock options have vested.
(8) Stock options granted September 9, 2013. Subject to continuous service of the recipient, 1/4th of the total number of shares vested on
September 9, 2014, and 1/36th of the remaining shares vest on the last day of each full month thereafter until all stock options have vested.
(9) Awards granted October 21, 2014. Subject to continuous service of the recipient, 1/4th of the total number of shares vest annually on the
grant date anniversary until all of the options have vested.
(10) Awards granted October 21, 2014. Subject to continuous service of the recipient and performance requirements earned based on the absolute price
performance of our common stock over a four-year period.
(11) Awards granted October 21, 2014. Subject to continuous service of the recipient and performance requirements to be earned based on TSR over
performance periods ending March 31, 2016, March 31, 2017, and March 31, 2018 relative to the NASDAQ Composite Index (^IXIC).
(12) Stock options granted October 21, 2014. Subject to continuous service of the recipient, 1/48th of the total number of shares vest on the
last day of each full month until all stock options have vested.
(13) Subject to continuous service of the recipient, 1/16th of the total number of shares vest quarterly on the last day of each three full months
after the vesting commencement date thereafter until all of the stock awards have vested. Stock awards granted on April 19, 2011.
(14) Stock options granted August 21, 2012. Subject to continuous service of the recipient, 1/48th of the total number of shares vest on the
last day of each full month until all stock options have vested.
(15) Stock options granted September 17, 2013. Subject to continuous service of the recipient, 1/48th of the total number of shares vest on
the last day of each full month until all stock options have vested.
(16) Awards granted September 17, 2013. Subject to continuous service of the recipient and performance requirements earned based on the absolute price
performance of our common stock over a four-year period.
(17) Awards granted September 17, 2013. Subject to continuous service of the recipient and performance requirements to be earned based on our TSR
over performance periods ending March 31, 2015, March 31, 2016, and March 31, 2017 relative to the NASDAQ Composite Index (^IXIC).
(18) Awards granted July 22, 2014. Subject to continuous service of the recipient, 1/4th of the total number of shares vest annually on the
grant date anniversary until all of the options have vested.
(19) Stock options granted July 22, 2014. Subject to continuous service of the recipient, 1/4th of the total number of shares vested on July
22, 2015, and 1/36th of the remaining shares vest on the last day of each full month thereafter until all stock options have vested.
(20) Stock options granted September 9, 2013. Subject to continuous service of the recipient, 1/4th of the total number of shares vest on
September 9, 2014, and 1/36th of the remaining shares vest on the last day of each full month thereafter until all stock options have vested.
(21) Awards granted January 20, 2015. Subject to continuous service of the recipient, 1/4th of the total number of shares vest annually on the
grant date anniversary until all of the options have vested.
(22) Awards granted January 20, 2015. Subject to continuous service of the recipient and performance requirements earned based on the absolute price
performance of our common stock over a four-year period.
(23) Awards granted January 20, 2015. Subject to continuous service of the recipient and performance requirements to be earned based on TSR over
performance periods ending March 31, 2016, March 31, 2017, and March 31, 2018 relative to the NASDAQ Composite Index (^IXIC).
(24) Stock options granted January 20, 2015. Subject to continuous service of the recipient, 1/4th of the total number of shares vested on
January 20, 2016, and 1/36th of the remaining shares vest on the last day of each full month thereafter until all stock options have vested.
FISCAL 2015 OPTION EXERCISES AND STOCK VESTED TABLE
The following table presents, for each of the NEOs, the number of shares of common stock acquired upon the exercise of stock options and the vesting
of stock awards during the fiscal year ended March 31, 2015, and the aggregate value realized upon the exercise or vesting of such awards.
|
Option Awards |
Stock Awards |
Name |
Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise ($)(1) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting ($)(2) |
Vikram Verma |
-- |
$-- |
8,328 |
$65,375 |
Bryan R. Martin |
50,000 |
$219,942 |
12,492 |
$102,955 |
Dan Weirich |
772,916 |
$5,144,412 |
10,410 |
$83,946 |
Mary Ellen Genovese |
-- |
$-- |
-- |
$-- |
Darren Hakeman |
-- |
$-- |
-- |
$-- |
Puneet Arora |
-- |
$-- |
-- |
$-- |
(1) The value realized has been calculated by multiplying the number of shares acquired upon exercise by the difference between the
exercise price and the closing market price of our common stock on the date of exercise.
(2) The value reported is the closing market price of a share of our common stock on the Nasdaq GSM on the date of vesting multiplied by the number of
shares that vested on that date.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL
All of our named executive officers are subject to our new executive change-in-control and severance policy. The table below quantifies potential payments and other benefits to our named
executive officers under this new policy upon (a) a constructive termination of employment in connection with a change-in-control and (b) a constructive termination not in connection with a change of control. The
calculations assume that the triggering event took place on March 31, 2015, the last business day of our last completed fiscal year and assumes that the closing price of our common stock on the NASDAQ GSM as of
that date was the Transaction Price (i.e., the value of the consideration paid per share of our common stock in the change-in-control) for purposes of determining the satisfaction of performance requirements under
their outstanding PSUs.
The payments and other benefits that would be provided to our named executive officers in the event of a constructive termination in connection with a change-in-control-and the
meaning of the term "in connection with a change-in-control"-are described above under "Employment Agreements-Executive Change-in-Control and Severance Policy-Change-in-Control."
As described above under "Employment Agreements-Executive Change-in-Control and Severance Policy-Change-in-Control," the occurrence of a change-in-control would not by
itself result in any payment or the provision of any other benefits to a named executive officer. However, the satisfaction of the performance targets under the named executive officer's PSUs will be determined as of
the date of such change-in-control, based on the Transaction Price. The shares subject to such PSUs will be deemed earned as of such date to the extent the performance targets as computed on this
basis have been satisfied, but the awards will remain subject to any remaining service, or time-based vesting, requirements, unless the named executive officer is terminated in connection with
the change-in-control.
Name |
Cash Severance Payment |
Bonus Payment |
Value of Accelerated Stock Awards (1) |
Acceleration of Stock Options Unvested (2) |
Health Care and Miscellaneous Benefits (3) |
Total Payout |
Vikram Verma |
|
|
|
|
|
|
Constructive termination in connection with change-in-control |
$445,400 |
$434,050 |
$1,421,078 |
$330,430 |
$18,969 |
$2,649,927 |
|
|
|
|
|
|
|
Bryan R. Martin |
|
|
|
|
|
|
Constructive termination in connection with change-in-control |
$275,000 |
-- |
$319,620 |
$253,953 |
$2,428 |
$851,001 |
|
|
|
|
|
|
|
Mary Ellen Genovese |
|
|
|
|
|
|
Constructive termination in connection with change-in-control |
$315,500 |
-- |
$274,546 |
$322,084 |
$27,428 |
$939,558 |
|
|
|
|
|
|
|
Darren Hakeman |
|
|
|
|
|
|
Constructive termination in connection with change-in-control |
$275,000 |
-- |
$29,098 |
$149,483 |
$25,121 |
$478,702 |
|
|
|
|
|
|
|
Puneet Arora |
|
|
|
|
|
|
Constructive termination in connection with change-in-control |
$275,000 |
-- |
$323,904 |
-- |
$ 27,405 |
$626,309 |
The payments and other benefits that would be provided to our named executive officers in the event of a constructive termination not in connection with a change-in-control are
described above under "Employment Agreements-Executive Change-in-Control and Severance Policy-Severance." None of our named executive officers would be entitled to payments upon any
termination of employment other than a constructive termination.
Name |
Cash Severance Payment |
Bonus Payment |
Value of Accelerated Stock Awards (1) |
Acceleration of Stock Options Unvested (2) |
Health Care and Miscellaneous Benefits (3) |
Total Payout |
Vikram Verma |
|
|
|
|
|
|
Other Constructive Termination |
$668,100 |
$395,189 |
$312,656 |
$138,848 |
$27,704 |
$1,542,497 |
|
|
|
|
|
|
|
Bryan R. Martin |
|
|
|
|
|
|
Other Constructive Termination |
$275,000 |
$147,584 |
-- |
-- |
$2,428 |
$425,012 |
|
|
|
|
|
|
|
Mary Ellen Genovese |
|
|
|
|
|
|
Other Constructive Termination |
$315,500 |
$104,307 |
-- |
-- |
$27,428 |
$447,235 |
|
|
|
|
|
|
|
Darren Hakeman |
|
|
|
|
|
|
Other Constructive Termination |
$206,250 |
$121,921 |
-- |
-- |
$19,216 |
$347,387 |
|
|
|
|
|
|
|
Puneet Arora |
|
|
|
|
|
|
Other Constructive Termination |
$206,250 |
$56,250 |
-- |
-- |
$20,929 |
$283,429 |
(1) Represents the value of unvested stock awards held by each NEO on March 31, 2015, the vesting of which would be accelerated by the
applicable triggering event, based upon the closing market price of $8.40 per share of our common stock on the Nasdaq GSM on March 31, 2015.
(2) The value represented in this column is the number of shares of our common stock subject to stock options for which vesting would be accelerated by the
applicable triggering event multiplied by the amount in-the-money (market price less the exercise price) of the stock options as of March 31, 2015.
(3) Includes employer and employee share of medical insurance premiums, 401k match, and other miscellaneous employer provided benefits.
Indemnification Arrangements
We have entered into indemnification agreements with each of our current and former directors and the members of our executive
management team, including our NEOs, in addition to the indemnification provided for in our certificate of incorporation and by-laws and the 2013, 2012 and 2006 Stock Plans. Such
indemnification agreements require us to indemnify the directors and executive officers to the fullest extent permitted by Delaware law. These agreements, among other things,
provide for indemnification of our directors and executive officers for any expenses, including attorneys' fees, judgments, fines, penalties and settlement amounts reasonably
incurred by any such person in connection with any threatened, pending or completed action, suit or proceeding, including any action by or in the right of the Company, arising out of
such person's services as a director or executive officer.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information concerning shares of our common stock that may be issued upon the exercise of stock options and other rights
under all of our existing equity compensation plans as of March 31, 2015, including the 2013 New Employee Inducement Incentive Plan, 2012 Equity Incentive Plan, 2006 Stock Plan, and the Purchase Plan.
Plan Category |
Number of Securities to be Issued upon Exercise of Outstanding Options and Rights |
Weighted- Average Exercise Price of Outstanding Options Warrants and Rights |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the
1st Column of This Table) |
Equity Compensation plans approved by security holders |
6,856,385 |
$3.35 |
6,352,176 |
Equity Compensation plans not approved by security holders (2) |
1,394,043 |
$0.70 |
722,727 (1) |
Total |
8,250,428 |
$4.06 |
7,074,903 |
*
|
Less than 1%
|
(1)
|
The number of securities remaining for issuance consists of 722,727 shares issuable under the 2013 New Employee
Inducement Incentive Plan, 5,957,088 shares issuable under the 2012 Equity Incentive Plan, 201,336 shares issuable under the 2006 Stock Plan and 193,752 under the Employee
Stock Purchase Plan. All other option plans have expired or been terminated.
|
(2)
|
This amount reflects restricted stock units granted in fiscal 2015 in accordance with Rule 5635(c)(4) (formerly Rule 4350(i)(l)(A)(iv)) of the
NASDAQ listing rules to new employees as inducements material to their entering into employment with us. Rule 5635(c)(4) requires all such awards to be approved by the
Compensation Committee or a majority of the independent directors on our Board, but does not require stockholder approval of these awards.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of June 2, 2015 by:
- each person (or group of affiliated persons) who is known by us to own beneficially 5% or more of our common stock;
- each of our directors and nominees for election as directors;
- each of the Named Executive Officers; and
- all directors and officers as a group.
Ownership information is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the SEC.
The number of shares of common stock beneficially owned by each person is determined under rules promulgated by the SEC. Under such rules, beneficial ownership includes any
shares as to which the person has sole or shared voting power or investment power, and also includes any shares that the person has the right to acquire within 60 days of the date
as of which the beneficial ownership determination is made. Applicable percentages are based upon
88,172,901
voting shares issued and outstanding as of June 2, 2015, and treating any shares that the holder has the right to acquire within sixty days as outstanding
for purposes of computing their percent ownership. Unless otherwise noted, the address of the beneficial owner is c/o 8x8, Inc. 2125 O'Nel Drive, San Jose, CA 95131.
Except as indicated in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares of our
common stock shown as beneficially owned by them, subject to community property laws where applicable.
Name and Address of Beneficial Owner
|
Amount and Nature of Beneficial Ownership |
Percent of Class |
Named Executive Officers & Directors(1):
|
|
|
Guy L. Hecker, Jr.
|
1,065,847 |
1.2% |
Bryan Martin
|
939,575 |
1.1% |
Vikram Verma
|
422,475 |
0.5% |
Darren Hakeman
|
102,647 |
0.1% |
Eric Salzman
|
80,718 |
0.1% |
Ian Potter
|
64,375 |
0.1% |
Mary Ellen Genovese
|
42,085 |
* |
Jaswinder Pal Singh
|
32,812 |
* |
Puneet Arora
|
-- |
* |
Vladimir Jacimovic
|
-- |
* |
Dan Weirich
|
-- |
* |
All officers and directors as a group
(10 persons)
|
2,750,534 |
3.1% |
5% Stockholders:
|
|
|
BlackRock, Inc.(2)
|
10,001,244 |
11.3% |
The Vanguard Group(3)
|
4,783,097 |
5.4% |
FMR, LLC(4)
|
4,409,350 |
5.0% |
___________________
*
|
Less than 1%
|
(1)
|
Includes the following number of shares (rounded) of options that were exercisable and/or awards expected to vest: Mr.
Verma, 239,000; Mr. Martin, 595,000; Major General Hecker, 400,000; Ms. Genovese, 15,000; Mr. Hakeman, 89,000 Mr. Salzman, 64,000; Mr. Potter, 34,000; Dr. Singh, 33,000; Mr.
Jacimovic, 25,000; Mr. Weirich, 0; and all directors and officers as a group, 1,494,000.
|
(2)
|
This information is based solely on Schedule 13G/A filed with the SEC by BlackRock, Inc. on January 9, 2015 reporting share ownership as of
December 31, 2014. Blackrock Inc. has sole dispositive and voting power of all of the shares beneficially owned. This principal business address of BlackRock, Inc. is 55 East
52nd Street, New York, New York 10055.
|
(3)
|
This information is based solely on Schedule 13G/A filed with the SEC by FMR LLC on February 13, 2015 reporting share ownership as of December
31, 2014. FMR LLC share the dispositive and voting power of all of the shares beneficially owned. The principal business address of FMR LLC is 245 Summer Street, Boston,
Massachusetts, 02210.
|
(4)
|
This information is based solely on Schedule 13G filed with the SEC by The Vanguard Group on February 10, 2015 reporting share ownership as of
December 31, 2014. The Vanguard Group share the dispositive and voting power of all of the shares beneficially owned. The principal business address of The Vanguard Group is
100 Vanguard Blvd. Malvern, Pennsylvania 19355.
|
STOCKHOLDER PROPOSALS FOR 2016 ANNUAL MEETING
We expect to hold the 2016 Annual Meeting of Stockholders on a date that is no more than 30 days earlier than the anniversary date of the 2015 Annual
Meeting. To be considered for inclusion in our proxy statement relating to the 2016 Annual Meeting of Stockholders, stockholder proposals pursuant to Rule 14a-8 of Regulation 14A
under the Securities Exchange Act of 1934 must be received a reasonable time before the date we make available our proxy materials for the 2016 Annual Meeting of Stockholders,
but in no event later than February 25, 2016.
For any other business to be properly submitted by a stockholder for the 2016 Annual Meeting of Stockholders, the stockholder must give us proper and
timely notice in writing. For stockholder proposals other than nominations for election to the Board to be considered timely for the 2016 Annual Meeting of Stockholders, the
stockholder's notice must be delivered to or mailed and received by the Secretary not less than 90 days nor more than 120 days in advance of the anniversary of the release date of
this Proxy Statement for the 2015 Annual Meeting, except as provided otherwise in our by-laws. Stockholder proposals for nomination of a candidate for director must be delivered
to or mailed and received by the Secretary not less than 90 days or more than 120 days in advance of the anniversary date of the 2015 Annual Meeting, except as provided
otherwise in our by-laws. All stockholder proposals must be addressed to the attention of our Secretary at our principal office and contain the information required by our by-laws
and applicable SEC rules.
OTHER MATTERS
Our Board knows of no other matters to be presented for stockholder action at the 2015 Annual Meeting. However, if other matters
do properly come before the 2015 Annual Meeting or any adjournments or postponements thereof, our Board intends that the persons named in the proxies will vote upon such
matters in accordance with the best judgment of the proxy holders.
|
BY ORDER OF THE BOARD
|
|
|
San Jose, CA
June 25, 2015
|
Bryan R. Martin
Chairman
|
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