PROOFPOINT, INC. UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant ☒ | Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
- Preliminary Proxy Statement
- Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
- Definitive Proxy Statement
- Definitive Additional Materials
- Soliciting Material under §240.14a-12
PROOFPOINT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
- No fee required.
- Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
- Title of each class of securities to which transaction applies:
- Aggregate number of securities to which transaction applies:
- Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
- Proposed maximum aggregate value of transaction:
- Total fee paid:
- Fee paid previously with preliminary materials.
- Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
- Amount Previously Paid:
- Form, Schedule or Registration Statement No.:
- Filing Party:
- Date Filed:
April 24, 2020
Dear Stockholders:
You are cordially invited to attend the 2020 Annual Meeting of Stockholders of Proofpoint, Inc. The meeting will be held as a virtual meeting on Friday, June 12, 2020, at 9:00 a.m. (Pacific Time) via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/PFPT2020.
The matters expected to be acted upon at the meeting are described in detail in the accompanying Notice of Annual Meeting of Stockholders and proxy
statement.
Your vote is important. Whether or not you plan to attend the meeting, please cast your vote as soon as possible by telephone, internet, or by completing and returning the enclosed proxy card in the postage-prepaid envelope to ensure that your shares will be represented. Your vote by written proxy will ensure your representation at the Annual Meeting regardless of whether or not you attend in person. Returning the proxy does not deprive you of your right to attend the meeting and to vote your shares.
If you attend the Annual Meeting via the live webcast, you will be able to vote and submit questions during the meeting by using the control number located on your proxy card.
We appreciate your continued support of Proofpoint.
Sincerely,
Gary Steele
Chief Executive Officer and Chairman
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 12, 2020, THIS PROXY STATEMENT AND THE ANNUAL REPORT ARE AVAILABLE AT
www.proxyvote.com
PROOFPOINT, INC.
892 Ross Drive
Sunnyvale, CA 94089
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2020 Annual Meeting of Stockholders of Proofpoint, Inc. will be held as a virtual meeting on Friday, June 12, 2020, at 9:00 a.m. (Pacific Time) via live interactive webcast at www.virtualshareholdermeeting.com/PFPT2020.
We are holding the meeting for the following purposes, which are more fully described in the accompanying proxy statement:
- To elect three Class II directors of Proofpoint, Inc. to serve until the third annual meeting of stockholders following this meeting and until his or her successor has been elected and qualified or until his or her earlier resignation or removal.
- To approve, on a non-binding advisory basis, the compensation paid by us to our named executive officers as disclosed in this proxy statement ("say-on-pay").
- To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending
December 31, 2020.
In addition, stockholders may be asked to consider and vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on April 15, 2020 are entitled to notice of, and to vote at, the meeting and any adjournments
thereof.
Your vote as a Proofpoint, Inc. stockholder is very important. Each share of stock that you own represents one vote. For questions regarding your stock ownership, you may contact the Proofpoint Investor Relations Department through our website at https://investors.proofpoint.com/investors/resources/contact- investor-relations/default.aspx or, if you are a registered holder, our transfer agent, Computershare Trust Company, N.A., by email through their website at www.computershare.com/contactus or by phone at (800) 962-4284.
By Order of the Board of Directors,
Gary Steele
Chief Executive Officer and Chairman
Sunnyvale, California
April 24, 2020
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, WE ENCOURAGE YOU TO VOTE AND SUBMIT YOUR PROXY BY INTERNET, TELEPHONE OR BY MAIL. FOR ADDITIONAL INSTRUCTIONS ON VOTING BY TELEPHONE, PLEASE REFER TO YOUR PROXY CARD. TO VOTE AND SUBMIT YOUR PROXY BY MAIL, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE DURING THE LIVE WEBCAST. IF YOU HOLD YOUR SHARES THROUGH AN ACCOUNT WITH A BROKERAGE FIRM, BANK OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS YOU RECEIVE FROM THEM TO VOTE YOUR SHARES.
PROOFPOINT, INC.
PROXY STATEMENT FOR 2020 ANNUAL MEETING OF STOCKHOLDERS
PROOFPOINT, INC.
892 Ross Drive
Sunnyvale, CA 94089
PROXY STATEMENT FOR THE 2020 ANNUAL MEETING OF STOCKHOLDERS
April 24, 2020
Information About Availability of Materials, Solicitation and Voting
The accompanying proxy is solicited on behalf of Proofpoint, Inc.'s ("Proofpoint") board of directors for use at Proofpoint's 2020 Annual Meeting of Stockholders (the "meeting") to be held as a virtual meeting on Friday, June 12, 2020, at 9:00 a.m. (Pacific Time) via live interactive webcast on the internet at www.virtualshareholdermeeting.com/PFPT2020, and any adjournment or postponement thereof. The Notice of Internet Availability of Proxy Materials (Notice) being distributed and our proxy statement and form of proxy are made available on the internet on or about April 24, 2020. The proxy materials include our proxy statement for the Annual Meeting, an annual report to stockholders, including our Annual Report on Form 10-K for the year ended December 31, 2019 (Annual Report), and the proxy card or a voting instruction card for the Annual Meeting.
In accordance with the SEC rules, we may furnish proxy materials, including this proxy statement and our Annual Report, to our stockholders by providing access to such documents on the internet instead of mailing printed copies. Accordingly, we are sending the Notice to our stockholders of record and beneficial owners as of April 15, 2020, which is the record date.
The Notice and proxy card or voting instruction card will contain instructions on how to view the proxy materials on the internet, vote your shares on the internet, and request electronic delivery of future proxy materials. An electronic copy of this proxy statement and Annual Report are available at www.proxyvote.com.
General Information About the Meeting
Purpose of the Meeting
At the meeting, stockholders will act upon the proposals described in this proxy statement. In addition, following the meeting, management will respond to questions from stockholders.
Record Date; Quorum
Only holders of record of common stock at the close of business on April 15, 2020, the record date, will be entitled to vote at the meeting. At the close of business on April 15, 2020, we had 57,296,117 shares of common stock outstanding and entitled to vote.
The holders of a majority of the voting power of the shares of stock entitled to vote at the meeting as of the record date must be present at the meeting in order to hold the meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the meeting if you are present and vote in person at the meeting or if you have properly submitted a proxy.
Voting Rights; Required Vote
Each holder of shares of common stock is entitled to one vote for each share of common stock held as of the close of business on April 15, 2020, the record date. You may vote all shares owned by you as of April 15, 2020, including (1) shares held directly in your name as the stockholder of record, and (2) shares held for you as the beneficial owner in street name through a broker, bank, trustee, or other nominee. On April 15, 2020, we had 57,296,117 shares of common stock issued and outstanding.
Stockholder of Record: Shares Registered in Your Name. If on April 15, 2020, your shares were registered directly in your name with our transfer agent, Computershare, then you are considered the stockholder of record with respect to those shares. As a stockholder of record, you may vote at the meeting or vote by telephone, or if you request or receive paper proxy materials by mail, by filling out and returning the proxy card on a timely basis as described below.
1
Beneficial Owner: Shares Registered in the Name of a Broker or Nominee. If on April 15, 2020, your shares were held in an account with a brokerage firm, bank or other nominee, then you are the beneficial owner of the shares held in street name. As a beneficial owner, you have the right to direct your nominee on how to vote the shares held in your account, and it has enclosed or provided voting instructions for you to use in directing it on how to vote your shares. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the meeting. Because you are not the stockholder of record, you may not vote your shares at the meeting unless you request and obtain a valid proxy from the organization that holds your shares giving you the right to vote the shares at the meeting.
To be elected to the board of directors, a nominee must receive a majority of the votes cast in an uncontested election. That is, the number of shares voted "for" a nominee exceeds the number of shares voted "against" such nominee. Abstentions and broker non-votes are not counted as votes cast with respect to a nominee and will have no effect on the outcome of the election of directors. You may vote "for" or "against" on each of the nominees for election as a director.
The advisory vote on named executive officer compensation described in Proposal No. 2 is referred to as a "say-on-pay" vote.
For each other item, the affirmative vote by holders of a majority of the votes cast is required for approval or to be considered the recommendation of the stockholders, as applicable.
Abstentions (shares present at the meeting and voted "abstain") are not counted as votes "for" or "against" a particular proposal and have no effect on the outcome of the matters voted upon, although the shares represented by such instruction will be counted for purposes of determining whether there is a quorum present. Broker non-votes occur when shares held by a broker for a beneficial owner are not voted either because (i) the broker did not receive voting instructions from the beneficial owner, or (ii) the broker lacked discretionary authority to vote the shares. Broker non-votes are counted for purposes of determining whether a quorum is present, but have no effect on the outcome of the matters voted upon. If your broker holds your shares in its name and you do not instruct your broker how to vote, your broker will only have discretion to vote your shares on "routine" matters. Where a proposal is not "routine," a broker who has not received instructions from its clients does not have discretion to vote its clients' uninstructed shares on that proposal. At our Annual Meeting, only the proposal regarding the ratification of the appointment of PricewaterhouseCoopers LLP is considered a routine matter. The other proposals presented at the Annual Meeting are non-routine matters. Accordingly, we encourage you to provide voting instructions to your broker, whether or not you plan to attend the Annual Meeting.
Recommendations of the Board of Directors on Each of the Proposals Scheduled to be Voted on at the Meeting
The board of directors recommends that you vote FOR the Class II directors named in this proxy statement (Proposal 1), FOR the approval, on a non- binding advisory basis, of the compensation of our named executive officers (Proposal 2), and FOR the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020 (Proposal 3).
Voting Instructions; Voting of Proxies
If you are a stockholder of record, you may:
- vote at the meeting-follow the instructions at www.virtualshareholdermeeting.com/PFPT2020 (have your proxy in hand when you visit the website);
- vote via the internet-go to www.proxyvote.com up until 11:59 pm Eastern Time the day before the meeting date. Have your proxy card in hand when accessing the website and follow the instructions to obtain your records and create an electronic voting instruction form.
- vote via telephone-in order to do so, please follow the instructions shown on your proxy card; or
- vote by mail-if you request or receive a paper proxy card and voting instructions by mail, simply complete, sign and date the proxy card and return it before the meeting in the envelope provided.
Votes submitted by telephone or mail must be received by 11:59 p.m., Eastern Time, on June 11, 2020. Submitting your proxy, whether by internet, telephone, or by mail if you request or received a paper proxy card, will not affect your right to vote in person should you decide to attend the meeting. If you are not the stockholder of record, please refer to the voting instructions provided by your nominee to direct it how to vote your shares. You may either vote "FOR" or "AGAINST" each nominee to the board of directors, or you may withhold your vote from such nominee. A nominee must receive a majority of the votes cast to be elected to the board of directors. For any other matter to be voted on, you may vote "FOR" or "AGAINST" or "ABSTAIN" from voting. Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure that your vote is counted.
2
If a stockholder attends the meeting and votes his, her or its shares during the meeting via the voting instructions described at www.virtualshareholdermeeting.com/PFPT2020 , then any previous votes that were submitted by such stockholder, whether by telephone or internet or mail, will be superseded by the vote that such stockholder casts during the meeting. Further, if the shares are held of record by a broker and a stockholder wishes to vote at the meeting, he, she or it must obtain a proxy issued in his, her or its name from the record holder in accordance with the materials and instructions for voting provided by his, her or its broker.
All proxies will be voted in accordance with the instructions specified on the proxy card. If you sign a physical proxy card and return it without instructions as to how your shares should be voted on a particular proposal at the meeting, your shares will be voted in accordance with the recommendations of our board of directors stated above.
If you do not vote and you hold your shares in street name, and your broker does not have discretionary power to vote your shares, your shares may constitute "broker non-votes" (as described above) and will not be counted in determining the number of shares necessary for approval of the proposals. However, shares that constitute broker non-votes will be counted for the purpose of establishing a quorum for the meeting.
If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on each proxy card and vote each proxy card by telephone or at the meeting. If you requested or received paper proxy materials by mail, please complete, sign and return each proxy card on a timely basis as described above to ensure that all of your shares are voted.
Expenses of Soliciting Proxies
The expenses of soliciting proxies will be paid by Proofpoint. Proofpoint and its agents may solicit proxies by mail, electronic mail, telephone, facsimile, by other similar means, or in person. Our directors, officers, and other employees, without additional compensation, may solicit proxies personally or in writing, by telephone, email, or otherwise. Proofpoint will request brokers, custodians, nominees and other record holders to forward copies of the soliciting materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, Proofpoint, upon the request of the record holders, will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials through the internet, you are responsible for any internet access charges you may incur.
Revocability of Proxies
A stockholder who has given a proxy may revoke it at any time before it is exercised at the meeting by:
- delivering to the Corporate Secretary of Proofpoint (by any means, including facsimile) a written notice stating that the proxy is revoked;
- signing and delivering a proxy bearing a later date;
- voting again by telephone or internet; or
- attending and voting at the meeting (following the instructions at www.virtualshareholdermeeting.com/PFPT2020 ) (note that attendance at the meeting will not, by itself, revoke a proxy).
Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a proxy, you must contact that firm to revoke any prior voting instructions.
Attending the Meeting
You will be able to attend the Annual Meeting online, submit your questions during the meeting and vote your shares electronically at the meeting by visiting www.virtualshareholdermeeting.com/PFPT2020. To participate in the Annual Meeting online, you will need the control number included on your proxy card. The Annual Meeting webcast will begin promptly at 9:00 a.m. Pacific Time. We encourage you to access the meeting prior to the start time. Online check-in will begin at 8:55 a.m. Pacific Time.
Shareholders as of our record date who attend and participate in our virtual Annual Meeting at www.virtualshareholdermeeting.com/PFPT2020 will have an opportunity to submit questions live via the Internet during a designated portion of the meeting. Such questions must be confined to matters properly before the Annual Meeting and of general Company concern. These shareholders may also submit a question in advance of the Annual Meeting at www.proxyvote.com. In both cases, shareholders must have available their control number provided on their proxy card, voting instruction form or Notice.
We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page www.virtualshareholdermeeting.com/PFPT2020.
3
Voting Results
Voting results will be tabulated and certified by the inspector of elections appointed for the meeting. The preliminary voting results will be announced at the meeting. The final results will be tallied by the inspector of elections and filed with the SEC in a current report on Form 8-K within four business days of the meeting.
4
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD; CORPORATE GOVERNANCE STANDARDS AND DIRECTOR
INDEPENDENCE
Proofpoint is strongly committed to good corporate governance practices. These practices provide an important framework within which our board of directors and management can pursue our strategic objectives for the benefit of our stockholders.
Corporate Governance Guidelines
Our board of directors has adopted Corporate Governance Guidelines that set forth expectations for directors, director independence standards, board committee structure and functions, and other policies for the governance of the company. Our Corporate Governance Guidelines are available on the Investor section of our website, which is located at http://investors.proofpoint.com, by clicking on "Corporate Governance Guidelines," under "Corporate Governance." The Corporate Governance Guidelines are reviewed periodically by our nominating and corporate governance committee, and changes are recommended to our board of directors with respect to changes as warranted.
Board Leadership Structure
Our Corporate Governance Guidelines provide that our board of directors shall be free to choose its chairman in any way that it considers in the best interests of our company, and that the nominating and corporate governance committee shall periodically consider the leadership structure of our board of directors and make such recommendations related thereto to the board of directors with respect thereto as the nominating and corporate governance committee deems appropriate. Historically, we have maintained a corporate governance structure where the chairman of the board and the chief executive officer have been separate offices held by separate individuals, with our founder, Eric Hahn, serving as chairman of the board. Upon the resignation of our former chairman of the board in July 2018, our board of directors, on recommendation of the nominating and corporate governance committee, combined the roles of the chairman and chief executive officer and appointed our chief executive officer Gary Steele to serve as chairman of the board. Our board of directors determined that Mr. Steele's thorough knowledge of our business, strategy, people, operations, competition and financial position, coupled with his leadership and vision made him well positioned to chair board meetings and bring key business and stakeholder issues to the board's attention. Our Corporate Governance Guidelines provide that, when the positions of chairman and chief executive officer are held by the same person, the independent directors shall designate a "lead independent director." Dana Evan, an independent director, was appointed to serve as our lead independent director in July 2018. Under the terms of our Corporate Governance Guidelines, the lead independent director has broad responsibility and authority, including: presiding at executive sessions; serving as a liaison between the chairman and the independent directors, being available, under appropriate circumstances, for consultation and direct communication with stockholders; and facilitating communication between the independent directors and management. Each of the directors other than Mr. Steele are independent, and our board believes that the independent directors provide effective oversight of management. While we believe that the combination of the chairman and chief executive officer roles is in our best interests in our current circumstances, our board of directors has the flexibility to modify the leadership structure in the future if it determines that to be appropriate.
Our Board of Directors' Role in Risk Oversight
Our board of directors, as a whole, has responsibility for risk oversight, although the committees of our board of directors oversee and review risk areas which are particularly relevant to them. In particular, in 2017 we formed a risk committee charged with assisting the board in fulfilling its oversight responsibilities with respect to management's identification and evaluation of the company's cybersecurity, and other principal operational, and business risks, as well as the company's risk management framework and its guidelines, policies and processes for monitoring and mitigating these risks. The risk oversight responsibility of our board of directors and its committees is supported by our management reporting processes, which are designed to provide visibility to the board of directors and to our personnel that are responsible for risk assessment and information about the identification, assessment and management of critical risks and management's risk mitigation strategies.
Each committee of the board of directors meets in executive session with key management personnel and representatives of outside advisors to oversee risks associated with their respective principal areas of focus. The audit committee reviews our major financial risk exposures and the steps management has taken to monitor and control such exposures, including our risk assessment and risk management policies and guidelines. The compensation committee reviews risks and exposures associated with compensation programs and arrangements, including incentive plans for our executive officers as well as all other employees, including to evaluate whether such policies create risks that are reasonably likely to have a material adverse effect on the company. The nominating and corporate governance committee, together with the audit committee, reviews our major legal compliance risk exposures and monitors the steps management has taken to mitigate these exposures, including our legal risk assessment and legal risk management policies and guidelines.
5
Independence of Directors
Our board of directors determines the independence of our directors by applying the independence principles and standards established by the NASDAQ Stock Market. These provide that a director is independent only if the board affirmatively determines that the director has no direct or indirect material relationship with our company. They also specify various relationships that preclude a determination of director independence. Material relationships may include commercial, industrial, consulting, legal, accounting, charitable, family and other business, professional and personal relationships.
Applying these standards, the board annually reviews the independence of the company's directors, taking into account all relevant facts and circumstances. In its most recent review, the board considered, among other things, the relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.
Based upon this review, our board of directors has determined that the following members of our board of directors are currently independent as determined under the rules of the NASDAQ Stock Market:
Dana Evan | R. Scott Herren |
Jonathan Feiber | Michael Johnson |
Kevin Harvey | Richard Wallace |
Kristen Gil | Leyla Seka |
All members of our audit committee, compensation committee, risk committee and nominating and corporate governance committee must be independent directors as defined by our Corporate Governance Guidelines. Members of the audit committee must also satisfy a separate SEC independence requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from Proofpoint or any of its subsidiaries other than their directors' compensation. No member of the audit committee may be a partner, member or principal of a law firm, accounting firm or investment banking firm that accepts consulting or advisory fees from Proofpoint or any of its subsidiaries. Our board of directors has determined that all members of our audit committee, compensation committee and nominating and corporate governance committee are independent and all members of our audit committee satisfy the relevant SEC additional independence requirements for the members of such committee.
Committees of Our Board of Directors
Our board of directors has established an audit committee, a compensation committee, mergers and acquisitions committee, risk committee and a nominating and corporate governance committee. The composition and responsibilities of each committee are described below. Copies of the charters for the audit committee, the compensation committee, and the nominating and corporate governance committee are available, without charge, upon request in writing to Proofpoint, Inc., 892 Ross Drive, Sunnyvale, California 94089, Attn: General Counsel or by clicking on "Corporate Governance" in the Investor section of our website, http://investors.proofpoint.com. Members serve on these committees until their resignations or until otherwise determined by our board of directors.
Audit Committee
Our audit committee is currently comprised of Mr. Herren, who is the chair of the audit committee, Ms. Evan, and Ms. Gil. The composition of our audit committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Each member of our audit committee is financially literate as required by current NASDAQ Stock Market listing standards. In addition, our board of directors has determined that both Mr. Herren and Ms. Evan are audit committee financial experts within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended. Our audit committee, among other things:
- selects a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
- helps to ensure the independence and performance of and oversees our company's relationship with the independent registered public accounting firm;
- discusses the scope and results of the audit with the independent registered public accounting firm, and reviews, with management and the independent accountants, our interim and year-end operating results;
- develops procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
- reviews our policies on risk assessment and risk management;
- reviews related party transactions;
- reviews the adequacy and effectiveness of our internal control policies and procedures and reviews our critical accounting policies;
6
- obtains and reviews a report by the independent registered public accounting firm at least annually, that describes our internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues;
- approves (or, as permitted, pre-approves) all audit and all permissible non-audit services, other than de minimis non-audit services, to be performed by the independent registered public accounting firm; and
- reviews our annual, quarterly and periodic reports related to financial matters to be filed with the SEC.
Compensation Committee
Our compensation committee is comprised of Mr. Feiber, who is the chair of the compensation committee, Ms. Evan and Mr. Wallace. The composition of our compensation committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Each member of this committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The purpose of our compensation committee is to discharge the responsibilities of our board of directors relating to compensation of our executive officers. Our compensation committee, among other things:
- reviews, approves and determines, or makes recommendations to our board of directors regarding, the compensation of our executive officers;
- administers our stock and equity incentive plans;
- reviews and approves and makes recommendations to our board of directors regarding incentive compensation and equity plans; and
- establishes and reviews general strategies relating to compensation and benefits of our employees.
The compensation committee has the exclusive authority and responsibility to determine all aspects of executive compensation packages for executive officers and makes recommendations to our board of directors regarding the compensation of non-employee directors and the chief executive officer. The compensation committee may take into account the recommendations of the chief executive officer with respect to compensation of the other executive officers.
Nominating and Corporate Governance Committee
Our nominating and governance committee is comprised of Ms. Evan, who is the chair of the nominating and governance committee, and Mr. Harvey. The composition of our nominating and governance committee meets the requirements for independence under current NASDAQ Stock Market and SEC rules and regulations. Our nominating and governance committee, among other things:
- identifies, evaluates and makes recommendations to our board of directors regarding, nominees for election to our board of directors and its committees;
- evaluates the performance of our board of directors and of individual directors;
- considers and makes recommendations to our board of directors regarding the composition of our board of directors and its committees;
- reviews proposed waivers of our code of conduct;
- reviews developments in corporate governance practices;
- evaluates the adequacy of our corporate governance practices and reporting; and
- develops and makes recommendations to our board of directors regarding corporate governance guidelines and matters.
Mergers and Acquisitions Committee
Our mergers and acquisitions committee is comprised of Ms. Evan, Mr. Feiber and Mr. Harvey. Our mergers and acquisitions committee, among other
things:
- reviews acquisition strategies with management and investigates acquisition candidates on behalf of the company;
- recommends acquisition strategies and candidates to our board of directors, as appropriate;
- authorizes and approves the negotiation of proposed acquisitions by the company within pre-approved threshold values; and
- develops and makes recommendations to the board of directors regarding guidelines for mergers and acquisitions.
7
Risk Committee
Our risk committee is comprised of Mr. Johnson, who is the chair of the risk committee, Mr. Herren and Mr. Feiber. Our risk committee, among other
things:
- reviews or discusses, as and when appropriate, with management the company's risk governance framework;
- oversees our risk management policies and procedures dealing with risk identification and risk assessment regarding the principal operational, business risks facing the company, whether internal or external in nature; and review and approves material changes to such policies;
- periodically reviews the major risk exposures of the company and the steps management has taken to monitor and control such exposures; and
- reviews risks related to information security and data protection, the steps taken by management to reduce the likelihood of security or data breaches, and the company's compliance with applicable information security and data protection laws and industry standards.
The risk committee's role is advisory to the board with respect to the above matters, and the board as a whole does not delegate any power or authority of the board as a whole to the risk committee with respect to them. The board of directors also retains oversight responsibility over our key strategic and reputational risks, and oversight responsibility for certain other risks have been assigned to the audit committee, the compensation committee and nominating and corporate governance committee as described above.
Compensation Committee Interlocks and Insider Participation
The members of our compensation committee during 2019 were Mr. Feiber, Ms. Evan and Mr. Wallace. None of the members of our compensation committee in 2019 has at any time been our officer or employee, and none had or have any relationships with Proofpoint that are required to be disclosed under Item 404 of Regulation S-K. None of our executive officers has served as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our board of directors or compensation committee during 2019.
Board and Committee Meetings and Attendance
During 2019 and including telephonic meetings, the board of directors met eight (8) times, the audit committee met eight (8) times, the compensation committee met three (3) times, the risk committee met four (4) times, the mergers and acquisitions committee met two (2) times, and the nominating and corporate governance committee met one (1) time. The board of directors acted by unanimous written consent ten (10) times, the audit committee acted by unanimous written consent one (1) time, the compensation committee acted by unanimous written consent ten (10) times, and the nominating and governance committee acted by unanimous written consent one (1) time. None of the directors attended fewer than 75% of the aggregate of the total number of meetings held by the board of directors and the total number of meetings held by all committees of the board of directors on which such director served (during the period which such director served).
Board Attendance at Annual Stockholders' Meeting
Our policy is to invite and encourage each member of our board of directors to be present at our annual meetings of stockholders. At our 2019 Annual Meeting of Stockholders, our lead independent director, Dana Evan, and Mr. Steele, attended the meeting.
Presiding Director of Non-Employee Director Meetings
The non-employee directors meet in regularly scheduled executive sessions without management to promote open and honest discussion. Our lead independent director, currently Ms. Evan, is the presiding director at these meetings.
Communication with Directors
Stockholders and interested parties who wish to communicate with our board of directors, non-management members of our board of directors as a group, a committee of the board of directors or a specific member of our board of directors (including our chairman or lead independent director) may do so by sending letters addressed to the attention of our Corporate Secretary or by sending emails to the board of directors through our website at https://investors.proofpoint.com/investors/governance/contact-the-board/default.aspx.
All communications are reviewed by the Corporate Secretary and provided to the members of the board of directors consistent with a screening policy providing that unsolicited items, sales materials, and other routine items and items unrelated to the
8
duties and responsibilities of the board of directors not be relayed on to directors. Any communication that is not relayed is recorded in a log and made available to our board of directors.
The address for these communications is:
Proofpoint, Inc.
c/o Corporate Secretary
892 Ross Drive
Sunnyvale, California 94089.
Business Conduct Guidelines
We have adopted business conduct guidelines that apply to all of our board members, officers and employees. Our Business Conduct Guidelines are posted on the Investor section of our website located at http://investors.proofpoint.com by clicking on "Corporate Governance." Any amendments or waivers of our Business Conduct Guidelines pertaining to a member of our board of directors or one of our executive officers will be disclosed on our website at the above- referenced address.
9
NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS
Nomination to the Board of Directors
Candidates for nomination to our board of directors are selected by our board of directors based on the recommendation of the nominating and corporate governance committee in accordance with the committee's charter, our certificate of incorporation and bylaws, our Corporate Governance Guidelines, and the criteria adopted by the board of directors regarding director candidate qualifications. In recommending candidates for nomination, the nominating and corporate governance committee considers candidates recommended by directors, officers, employees, stockholders and others, using the same criteria to evaluate all candidates. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate and, in addition, the committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees.
Additional information regarding the process for properly submitting stockholder nominations for candidates for membership on our board of directors is set forth below under "Stockholder Proposals to Be Presented at Next Annual Meeting."
Director Qualifications
With the goal of developing a diverse, experienced and highly-qualified board of directors, the nominating and corporate governance committee is responsible for developing and recommending to the board of directors the desired qualifications, expertise and characteristics of members of our board of directors, including the specific minimum qualifications that the committee believes must be met by a committee-recommended nominee for membership on the board of directors and any specific qualities or skills that the committee believes are necessary for one or more of the members of the board of directors to possess.
Since the identification, evaluation and selection of qualified directors is a complex and subjective process that requires consideration of many intangible factors, and will be significantly influenced by the particular needs of the board of directors from time to time, our board of directors has not adopted a specific set of minimum qualifications, qualities or skills that are necessary for a nominee to possess, other than those that are necessary to meet U.S. legal, regulatory and NASDAQ listing requirements and the provisions of our certificate of incorporation, bylaws, Corporate Governance Guidelines, and charters of the board committees. In addition, neither the board of directors nor the nominating and corporate governance committee has a formal policy with regard to the consideration of diversity in identifying nominees. When considering nominees, the nominating and corporate governance committee may take into consideration many factors including, among other things, a candidate's independence, integrity, skills, financial and other expertise, breadth of experience, and knowledge about our business or industry and ability to devote adequate time and effort to responsibilities of the board of directors in the context of its existing composition. Through the nomination process, the nominating and corporate governance committee seeks to promote board membership that reflects a diversity of business experience, expertise, viewpoints, personal backgrounds and other characteristics, such as gender, that are expected to contribute to the board of directors' overall effectiveness. We feel our board membership is diverse, including three (3) women and a wide variety of business backgrounds. The brief biographical description of each director set forth in Proposal 1 below includes the primary individual experience, qualifications, attributes and skills of each of our directors that led to the conclusion that each director should serve as a member of our board of directors at this time.
10
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our board of directors currently consists of eight directors and is divided into three classes. Each class serves for three years, with the terms of office of the respective classes expiring in successive years. Directors in Class II will stand for election at this meeting. The terms of office of directors in Class III and Class I do not expire until the annual meetings of stockholders held in 2021 and 2022, respectively. At the recommendation of our nominating and corporate governance committee, our board of directors proposes that the Class II nominees named below, who are currently serving as directors in Class II, be elected as Class II directors for a three-year term expiring at the 2023 Annual Meeting of Stockholders and until such director's successor is duly elected and qualified or until such director's earlier resignation or removal.
Our bylaws provide for a majority of votes cast standard for the election of directors in an uncontested election. The majority of votes cast standard for purposes of the election of director nominees means that in order for a director to be elected, the number of votes cast FOR a director's election must exceed the number of votes cast AGAINST that director's election. Our Corporate Governance Guidelines require that any director who, in an uncontested election, receives a greater number of AGAINST votes than FOR votes must promptly tender his or her resignation to the board of directors, subject to its acceptance.
Shares represented by proxies will be voted "FOR" the election of the nominee named below, unless the proxy is marked as to withhold authority to vote. If any nominee for any reason is unable to serve or for good cause will not serve, the proxies may be voted for such substitute nominee as the proxy holder might determine. Each respective nominee has consented to being named in this proxy statement and to serve if elected.
Nominees to the Board of Directors
The nominees, and their ages, occupation and length of board service as of April 24, 2020, are provided in the table below. Additional biographical description of the nominee is set forth in the text below the table. The description includes the primary individual experience, qualifications, qualities and skills of the nominee that led to the conclusion that the director should serve as a member of our board of directors at this time.
Name of Director
Jonathan Feiber (1)(3)(4)
Kevin Harvey (4)(5)
Leyla Seka
Age | Principal Occupation | Director Since |
63 | General Partner at Mohr Davidow Ventures | 2002 |
55 | Founder and General Partner of Benchmark Capital | 2002 |
46 | Partner, Operator Collective | 2019 |
- Member of the risk committee
- Member of the audit committee
- Member of the compensation committee
- Member of the mergers and acquisitions committee
- Member of the nominating and corporate governance committee
Jonathan Feiber has served as a director since July 2002. Mr. Feiber is a general partner at Mohr Davidow Ventures, a venture capital firm, which he joined in 1992. As a general partner at Mohr Davidow Ventures, Mr. Feiber serves on the board of directors of a number of privately held companies. Prior to joining Mohr Davidow Ventures, Mr. Feiber worked in various managerial positions at Sun Microsystems, a computer software and information technology company. Mr. Feiber holds a B.A. from the University of Colorado in distributed studies across computer science, math and astrophysics. The board of directors determined that Mr. Feiber should serve as a director based on his significant experience in the venture capital industry analyzing, investing in and serving on the boards of directors of other technology companies, and his significant management, software engineering and product development experience.
Kevin Harvey has served as a director since December 2002. Mr. Harvey is a founder and general partner of Benchmark Capital, which he joined in 1995. Before founding Benchmark, Mr. Harvey was founder, president and Chief Executive Officer of Approach Software Corp., a server database company. Before founding Approach Software, Mr. Harvey founded Styleware, Inc., a software company. Mr. Harvey currently serves on the board of directors of Upwork, Inc. Mr. Harvey holds a B.S. in engineering from Rice University. The board of directors determined that Mr. Harvey should serve as a director based on his significant experience investing in and serving on the boards of directors of other technology companies, and his management and leadership experience as a former founder and executive of multiple startup technology companies.
11
Leyla Seka has served as a director since September 2019. Ms. Seka is a partner at Operator Collective, a venture capital firm, where she has invested in technology companies since August 2019. From February 2008 to May 2019, Ms. Seka served in a variety of leadership roles at salesforce.com, inc., a customer relationship management software company, including most recently as Executive Vice President of Salesforce Mobile from September 2018 to May 2019, Executive Vice President of Salesforce AppExchange from October 2016 to September 2018, and Senior Vice President of Desk.com from February 2014 to October 2016. Prior to joining Salesforce, Ms. Seka held roles in product management and marketing at Primavera Systems, Inc., Evolve Software, Vivant Corporation and Eutron SPA. Ms. Seka also serves on the board of Girls Who Code, a non-profit empowering young female leaders through STEM education. Ms. Seka holds an M.B.A. from the University of San Francisco Masagung School of Management and a B.A. in international relations and French from the University of California, Davis. The board of directors determined that Ms. Seka should serve as a director based on her significant experience across product management, product marketing and business operations.
Continuing Directors
The directors who are serving for terms that end following the meeting, and their ages, occupations and length of board service as of April 24, 2020, are provided in the table below. Additional biographical descriptions of each such director are set forth in the text below the table. These descriptions include the primary individual experience, qualifications, qualities and skills of each of our nominees that led to the conclusion that each director should serve as a member of our board of directors at this time.
Name of Director | Age | Principal Occupation | Director Since | ||||
Class I Directors: | |||||||
Michael Johnson (1) | Former Senior Vice President and Chief Information Security Officer, Capital One | ||||||
52 | Financial Corporation | 2017 | |||||
R. Scott Herren (1) (2) | 58 | Chief Financial Officer, Autodesk, Inc. | 2016 | ||||
Richard Wallace (3) | 60 | Chief Executive Officer, KLA Corporation | 2017 | ||||
Class III Directors: | |||||||
Dana Evan (2)(3)(4)(5) | 60 | Venture Partner at Icon Ventures | 2008 | ||||
Kristen Gil (2) | 48 | Vice President, Business Operations & Strategy, Google Inc. | 2017 | ||||
Gary Steele | 57 | Chief Executive Officer and Chairman of Proofpoint, Inc. | 2002 | ||||
- Member of the risk committee
- Member of the audit committee
- Member of the compensation committee
- Member of the mergers and acquisitions committee
- Member of the nominating and corporate governance committee
Michael Johnson has served as a director since July 2017. Previously Mr. Johnson served as Senior Vice President and Chief Information Security Officer of Capital One Financial Corporation, a financial holding company where he led and managed cyber, cyber risk management, information security, cybersecurity operations, and security technology innovation from March 2017 to November 2019. While at Capital One Financial Corporation, Mr. Johnson served as Senior Vice President, Cybersecurity from November 2019 to February 2020. Prior to joining Capital One, Mr. Johnson served as Chief Information Officer for the U.S. Department of Energy from March 2015 to December 2016. Previously, Mr. Johnson served in key cyber-focused executive roles in the U.S. Government, including at the Office of the Director of National Intelligence, the U.S. Department of Homeland Security, and the White House Executive Office of the President, where he served as Assistant Director for intelligence programs and national security systems from July 2013 to March 2015. Mr. Johnson also serves on the board of a privately held company. Mr. Johnson holds a B.S. in computer engineering and an M.S. in computer science from the University of California, San Diego. The board of directors determined that Mr. Johnson should serve as a director based on his extensive experience in cybersecurity, cyber risk management, and security technology innovation as well as his leadership roles with the United States government.
12
R. Scott Herren has served as a director since July 2016. Mr. Herren has served as the Senior Vice President and Chief Financial Officer of Autodesk, Inc., a leading provider of cloud-based design and engineering software, since November 2014. Prior to joining Autodesk, Mr. Herren served as Senior Vice President, Finance at Citrix Systems, a software and cloud computing company, from September 2011 to October 2014, and in a variety of other leadership roles since joining Citrix in March 2000, including Vice President and Managing Director for EMEA and Vice President and General Manager of the company's virtualization systems group. Before joining Citrix, Mr. Herren spent 16 years in senior strategy and financial positions at FedEx and IBM. Mr. Herren holds a Bachelor of Science in Industrial Engineering from Georgia Institute of Technology and a M.B.A. from Columbia University. The board of directors determined that Mr. Herren should serve as a director based on his broad experience in operations, international business, accounting, financial management and investor relations at publicly held enterprise software companies.
Richard Wallace has served as a director since May 2017. Mr. Wallace has served as Chief Executive Officer and President and as a member of the board of directors of KLA Corporation, a leading provider of process control and yield management solutions, since January 2006. Mr. Wallace began as an applications engineer at KLA Instruments in 1988, and has held various general management positions throughout his thirty-one year tenure with the company. Earlier in his career, he held positions with Ultratech Stepper and Cypress Semiconductor. Mr. Wallace served on the board of directors for NetApp, Inc., a data management solutions company, from April 2011 until September 2019. Mr. Wallace holds a B.S. in electrical engineering from the University of Michigan and a M.S. in engineering management from Santa Clara University. The board of directors determined that Mr. Wallace brings exceptional technology leadership to the board that will further enhance Proofpoint's ongoing ability to scale its business to drive long-term sustained growth and profitability.
Dana Evan has served as a director since June 2008 and has been our lead independent director since July 2018. Ms. Evan is a venture partner at Icon Ventures and has invested in and served on the boards of directors of companies in the internet, technology and media sectors since July 2007. From May 1996 until July 2007, Ms. Evan served as Chief Financial Officer of VeriSign, Inc., a provider of intelligent infrastructure services for the internet and telecommunications networks. Ms. Evan currently serves on the boards of directors of Box, Inc., Farfetch Ltd., Survey Monkey Inc., Domo, Inc. and a privately held company. Ms. Evan also served on the board of Criteo S.A. from March 2013 until July 2017 and Fusion-IO from February 2011 until July 2014. Ms. Evan previously served on the board of directors of Everyday Health, Inc. until it was acquired by Ziff Davis in December 2016 and on the board of directors of Omniture, Inc. until it was acquired by Adobe Systems Incorporated in October 2009. Ms. Evan holds a B.S. in commerce from Santa Clara University and is a certified public accountant (inactive). The board of directors determined that Ms. Evan possesses specific attributes that qualify her to serve as a member of our board of directors, including broad expertise in operations, strategy, accounting, financial management and investor relations at both publicly and privately held technology, media and internet companies. In 2019, Ms. Evan received the Director of the Year award from the National Association of Corporate Directors (NACD).
Kristen Gil has served as a director since October 2017. Ms. Gil is the Business Finance Officer for Google's Research and Health product areas and leads the Business Operations and Strategy team at Google Inc., an internet technology company, where she has worked since November 2007. In addition, for several years Ms. Gil led the Women@Google group, a global network of thousands of Google employees committed to connecting, developing and retaining female talent. Before Google, Ms. Gil served as general manager of a division for Marketron International, Inc. a provider of revenue management and audience engagement software for media companies. She was also previously a management consultant with McKinsey & Company, a global consulting firm where she worked across many industries including technology, financial services, and manufacturing. Ms. Gil holds an M.B.A. from Harvard Business School and a B.S. in industrial engineering & operations research from Cornell University. The board of directors determined that Ms. Gil should serve as a director based on her operational and strategic experience that will contribute to Proofpoint's long term scale.
Gary Steele has served as a director and as our Chief Executive Officer since 2002, and as our Chairman since 2018. Mr. Steele currently serves on the board of directors of Vonage Holding Corp., and Upwork Inc., as well as on the board of two privately held companies. Prior to joining our company, Mr. Steele served from June 1997 to July 2002 as the Chief Executive Officer of Portera Systems Inc., a software company. Before Portera, Mr. Steele served as the vice president and general manager of the Middleware and Data Warehousing Product Group at Sybase, Inc., an enterprise and mobile software company. Mr. Steele's prior experience includes business development, marketing, and engineering roles at Sun Microsystems, Inc. and Hewlett-Packard Company, computer, computer software and information technology companies. He holds a B.S. degree in computer science from Washington State University. The board of directors determined that Mr. Steele should serve as a director based on his position as our Chief Executive Officer and his understanding of the internet security industry.
There are no familial relationships among our directors and officers.
13
Director Compensation
The following table provides information for the fiscal year ended December 31, 2019, regarding all compensation awarded to, earned by or paid to each person who served as a non-employee director for some portion or all of 2019. Our chief executive officer, Gary Steele, who serves as chairman of the board, does not receive any additional compensation for his service on the board.
Director Compensation- 2019
Fees Earned | Stock | |||||||||||
or Paid in | ||||||||||||
Name of Director | Cash | Awards | Total | |||||||||
(1) | (2)(3) | |||||||||||
Dana Evan | $ | 82,875 | $ | 221,741 | $ | 304,616 | ||||||
Jonathan Feiber (4) | $ | - | $ | 289,322 | $ | 289,322 | ||||||
Kristen Gil (4) | $ | - | $ | 274,892 | $ | 274,892 | ||||||
Kevin Harvey (4) | $ | - | $ | 269,360 | $ | 269,360 | ||||||
R. Scott Herren | $ | 64,375 | $ | 221,741 | $ | 286,116 | ||||||
Michael Johnson | $ | 53,000 | $ | 221,741 | $ | 274,741 | ||||||
Peter Leav (5) | $ | 19,000 | $ | 183,281 | $ | 202,281 | ||||||
Leyla Seka (4) | $ | - | $ | 216,605 | $ | 216,605 | ||||||
Richard Wallace (4) | $ | - | $ | 271,645 | $ | 271,645 | ||||||
- Consists of annual cash retainer fees for board and committee membership, as described below in the section entitled "Annual and Meeting Fees."
- Consists of Restricted Stock Units (RSUs). The amounts shown in this column include annual equity grant of RSUs equivalent to $200,000, as determined based on the closing price of our common stock on the date of the annual meeting.
- Amounts shown in this column reflect the aggregate full grant date fair value calculated in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 for awards granted during the fiscal year. There can be no assurance that this grant date fair value will ever be realized by the non-employee director. For information regarding the number of stock options and RSUs held by each non-employee director as of December 31, 2019, see the table "Director Stock Options and Awards Outstanding" below. A description of the grants appears below in the section entitled "Equity Awards."
- Messrs. Feiber, Harvey and Wallace, and Mses. Gil and Seka elected to receive their annual cash fees in the form of RSUs for 2019.
- Mr. Leav resigned from our board of directors effective January 16, 2020.
Our non-employee directors held the following number of stock options and RSUs as of December 31, 2019.
Director Stock Options and Awards Outstanding
Outstanding | Shares subject to | |||||||
Outstanding | ||||||||
Name of Director | Stock Awards | Options | ||||||
(#) | (#) | |||||||
Dana Evan | 1,844 | 15,146 | ||||||
Jonathan Feiber | 1,984 | 35,948 | ||||||
Kristen Gil | 1,954 | - | ||||||
Kevin Harvey | 1,943 | 32,748 | ||||||
R. Scott Herren | 1,844 | - | ||||||
Michael Johnson | 1,844 | - | ||||||
Peter Leav | 1,441 | - | ||||||
Leyla Seka | 1,529 | - | ||||||
Richard Wallace | 1,948 | - | ||||||
14 | ||||||||
Annual and Meeting Fees. Our non-employee directors, other than those who are prohibited from receiving director compensation pursuant to the policies of their affiliated funds and other than those who elected to receive their annual board service fees in the form of RSUs, were compensated as follows:
- $38,000 annual cash retainer;
- $20,000 for the chair of our audit committee and $10,000 for each of its other members;
- $15,000 for the chair of our compensation committee and $7,000 for each of its other members;
- $10,000 for the chair of our nominating and corporate governance committee and $5,000 for each of its other members;
- $17,000 for the chair of our risk committee and $8,000 for each of its other members; and
- $20,000 for the lead independent director
Equity Awards. Our non-employee director equity compensation policy provides that each newly-elected or appointed non-employee director will be granted an initial annual equity grant of restricted stock units (RSUs) equivalent to $200,000 (subject to monthly proration of such value as measured over a twelvemonth period from June 1 to May 31 of each year). For example, a director joining on December 15 of a given year would be entitled to an initial annual grant of RSUs valued at $100,000, i.e. 6/12ths of $200,000. Immediately following each annual meeting of our stockholders, each non-employee director will automatically be granted an additional equity grant of RSUs equivalent to $200,000. Each annual RSU award will vest in full on the one-year anniversary of the date of grant. Our non-employee director equity compensation policy also provides that a director can elect annually to receive the annual board service fees in the form of RSUs. One-quarter of each RSU award provided in lieu of annual board service fees will vest upon the completion of each calendar quarter of board service, commencing with the second calendar quarter of the year or with the grant immediately after the annual meeting of our stockholders. In addition, the RSUs granted to directors will fully vest upon the consummation of a corporate transaction. In addition to the awards provided for above, non-employee directors are eligible to receive discretionary equity awards.
Non-employee directors receive no other form of remuneration, perquisites or benefits, but are reimbursed for their expenses in attending meetings, including travel, meal and other expenses incurred to attend meetings solely among the non-employee directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF THE NOMINATED DIRECTORS.
15
PROPOSAL NO. 2
ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In accordance with the rules of the SEC, we are presenting stockholders with a non-binding advisory vote to approve the compensation of our named executive officers as described below under the heading "Executive Compensation."
This non-binding advisory vote, commonly referred to as a "say-on-pay" vote, gives our stockholders the opportunity to express their views on our named executive officers' compensation as a whole. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the compensation philosophy, policies and procedures described in this proxy statement.
Stockholders are urged to read the "Executive Compensation" section of this proxy statement, which discusses how our executive compensation policies and procedures implement our compensation philosophy and contains tabular information and narrative discussion about the compensation of our named executive officers. The compensation committee and the board of directors believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving our goals. Accordingly, we are asking you to vote, on a non-binding advisory basis, "FOR" the following resolution at the Annual Meeting:
"RESOLVED, that the compensation paid to Proofpoint, Inc.'s named executive officers, as disclosed pursuant to the Securities and Exchange Commission's compensation disclosure rules, including the Compensation Discussion and Analysis, compensation tables and narrative discussion set forth in the Proxy Statement relating to its 2020 Annual Meeting of Stockholders, is hereby APPROVED."
As an advisory vote, this proposal is not binding. However, our board of directors and compensation committee, which is responsible for designing and administering our executive compensation program, value the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE
COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS DESCRIBED IN THE "EXECUTIVE COMPENSATION" SECTION OF THIS
PROXY STATEMENT.
16
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Our audit committee has selected PricewaterhouseCoopers LLP as Proofpoint's principal independent registered public accounting firm to perform the audit of Proofpoint's consolidated financial statements for fiscal year ending December 31, 2020. As a matter of good corporate governance, our audit committee has decided to submit its selection of principal independent registered public accounting firm to stockholders for ratification. In the event that PricewaterhouseCoopers LLP is not ratified by our stockholders, the audit committee will review its future selection of PricewaterhouseCoopers LLP as Proofpoint's principal independent registered public accounting firm.
PricewaterhouseCoopers LLP audited Proofpoint's financial statements for Proofpoint's 2019 fiscal year. Representatives of PricewaterhouseCoopers LLP are expected to be present at the meeting, in which case they will be given an opportunity to make a statement at the meeting if they desire to do so, and will be available to respond to appropriate questions.
Principal Accountant Fees and Services
We regularly review the services and fees from our independent registered public accounting firm. These services and fees are also reviewed with our audit committee annually. In accordance with standard policy, PricewaterhouseCoopers LLP periodically rotates the individuals who are responsible for Proofpoint's audit.
In addition to performing the audit of Proofpoint's consolidated financial statements, PricewaterhouseCoopers LLP provided various other services during fiscal 2019 and 2018. Our audit committee has determined that PricewaterhouseCoopers LLP's provisioning of these services, which are described below, does not impair PricewaterhouseCoopers LLP's independence from Proofpoint. The aggregate fees billed for fiscal 2019 and 2018 for each of the following categories of services are as follows:
Fees Billed to Proofpoint | Fiscal Year 2019 | Fiscal Year 2018 | |||||
Audit fees(1) | $ | 2,946,000 | $ | 2,332,000 | |||
Audit-related fees(2) | $ | - | $ | - | |||
Tax fees(3) | $ | 333,300 | $ | 334,277 | |||
All other fees(4) | $ | 2,700 | $ | 2,700 | |||
Total fees | $ | 3,282,000 | $ | 2,668,977 | |||
- "Audit fees" include fees for audit services primarily related to the audit of our annual consolidated financial statements; the review of our quarterly consolidated financial statements; comfort letters, consents, and assistance with and review of documents filed with the SEC; and other accounting and financial reporting consultation and research work billed as audit fees or necessary to comply with the standards of the Public Company Accounting Oversight Board (United States). Fees for 2019 and 2018 include fees for work related to the adoption of ASC 842 and work related to acquisitions.
- "Audit-relatedfees" include fees for audit-related services that are not categorized as audit fees.
- "Tax fees" include fees for tax compliance and advice. Tax advice fees encompass a variety of permissible services, including technical tax advice related to federal and state income tax matters; assistance with sales tax; and assistance with tax audits.
- "All other fees" include fees for licensed software tools used for financial reporting.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm
Our audit committee's policy is to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval, and the fees for the services performed to date.
All of the services relating to the fees described in the table above were approved by our audit committee.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL NO. 3
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents the beneficial ownership of our common stock by holders of more than 5% of our common stock, each of our directors or director nominees; each of our named executive officers; and all of our directors and executive officers as a group. Except for the information about the greater than 5% stockholders, the following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 31, 2020 by each of our directors or director nominees; each of our named executive officers; and all of our directors, director nominees and executive officers as a group.
Percentage ownership of our common stock is based on 57,260,191 shares of our common stock outstanding on March 31, 2020. We have determined beneficial ownership in accordance with the rules of the SEC, and thus it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of our common stock subject to options that are currently exercisable or exercisable within 60 days of March 31, 2020, and the shares subject to RSUs that will be released within 60 days of March 31, 2020, to be outstanding and to be beneficially owned by the person holding the option and the RSU for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated, the address of each of the individuals and entities named below that owns 5% or more of our common stock is c/o Proofpoint, Inc., 892 Ross Drive, Sunnyvale, California 94089.
Number of | ||||||
Shares | ||||||
Name of Beneficial Owner | Beneficially | Percent Owned | ||||
Owned | ||||||
Directors and Named Executive Officers | ||||||
Dana Evan | 23,929 | (1) | * | |||
Jonathan Feiber | 43,106 | (2) | * | |||
Kristen Gil | 3,896 | * | ||||
Kevin Harvey | 285,759 | (3) | * | |||
R. Scott Herren | 10,301 | * | ||||
Michael Johnson | - | * | ||||
Leyla Seka | 262 | * | ||||
Richard Wallace | 5,278 | * | ||||
Gary Steele | 358,089 | (4) | * | |||
Paul Auvil | 602,245 | (5) | 1.05% | |||
David Knight | 26,510 | (6) | * | |||
Blake Sallé | 8,814 | (7) | * | |||
Bhagwat Swaroop | 6,303 | (8) | * | |||
All officers and directors as a group (13 persons) | 1,374,492 | (9) | 2.38% | |||
Greater than 5% Beneficial Owner | ||||||
T. Rowe Price Associates, Inc. | 8,308,498 | (10) | 14.51% | |||
The Vanguard Group, Inc. | 5,240,689 | (11) | 9.15% |
_______________________
- Represents beneficial ownership of less than 1% of our outstanding shares of common stock.
- Includes 15,146 shares subject to options held by Ms. Evan that are exercisable within 60 days of March 31, 2020.
- Includes (i) 35,948 shares subject to options held by Mr. Feiber that are exercisable within 60 days of March 31, 2020, and (ii) 1,699 shares held by the Feiber-Buhr Family Trust. Mr. Feiber is a trustee of the foregoing trust and as such may be deemed to have shared voting and investment power over these shares.
- Includes (i) 32,748 shares subject to options held by Mr. Harvey that are exercisable within 60 days of March 31, 2020, and (ii) 234,464 shares held by the Harvey Family Trust. Mr. Harvey is a trustee of the foregoing trust and as such may be deemed to have shared voting and investment power over these shares.
- Includes 249,241 shares subject to options held by Mr. Steele that are exercisable within 60 days of March 31, 2020.
- Includes (i) 144,000 shares subject to options held by Mr. Auvil that are exercisable within 60 days of March 31, 2020, and (ii) 361,398 shares held by the Auvil Family Trust. Mr. Auvil is a trustee of the foregoing trust and as such may be deemed to have shared voting and investment power over these shares.
- Includes 11,892 shares subject to options held by Mr. Knight that are exercisable within 60 days of March 31, 2020.
18
- Includes 5,000 shares subject to RSUs held by Mr. Sallé that will be released within 60 days of March 31, 2020.
- Includes 3,958 shares subject to options held by Mr. Swaroop that are exercisable within 60 days of March 31, 2020.
- Consists of 492,933 shares subject to options that are exercisable within 60 days of March 31, 2020 that are held by our directors and officers as a group. Also consists of 5,000 shares subject to RSUs that will be released within 60 days of March 31, 2020.
- As of December 31, 2019, based solely on Schedule 13G filed by T. Rowe Price Associates, Inc. on February 14, 2020 showing sole dispositive powers over the shares. T. Rowe Price Associates, Inc.'s principal business address is 100 E. Pratt Street, Baltimore, Maryland 21202.
- As of December 31, 2019, based solely on Schedule 13G filed by The Vanguard Group, Inc. on February 12, 2020 showing sole dispositive powers over the shares. The Vanguard Group, Inc.'s principal business address is 100 Vanguard Blvd., Malvern, PA 19355.
19
EXECUTIVE OFFICERS
The names of our executive officers, their ages as of April 24, 2020, and their positions are shown below.
Named Executive Officer
Gary Steele
Paul Auvil
David Knight
Blake Sallé
Bhagwat Swaroop
Age | Position |
57 | Chief Executive Officer and Chairman |
56 | Chief Financial Officer |
53 | Executive Vice President and General Manager, Security Products |
48 | Executive Vice President, Worldwide Sales |
45 | Executive Vice President, Industry Solutions and Business Development |
The board appoints executive officers, who then serve at the board's discretion. There is no family relationship between any of the directors or executive officers and any other director or executive officer of Proofpoint.
For information regarding Mr. Steele, please refer to Proposal No. 1, "Election of Directors," "Continuing Directors" above.
Paul Auvil has served as our Chief Financial Officer since March 2007. Prior to joining our company, from September 2006 to March 2007, Mr. Auvil was with Benchmark Capital, a venture capital firm, as an entrepreneur-in-residence. Prior to that, from 2002 to July 2006, he served as the CFO at VMware, Inc., a virtualization company. Previously, he served as the CFO for Vitria Technology, Inc., an eBusiness platform company and held various executive positions at VLSI Technology, Inc., a semiconductor and circuit manufacturing company, including vice president of the Internet and Secure Products Division. From 2007 to 2017, Mr. Auvil served on the board of directors for Quantum Corporation. Mr. Auvil was a member of the Board of Directors of Marin Software Incorporated from 2009 to 2017. Mr. Auvil holds a Bachelor of Engineering degree from Dartmouth College and a Master of Management degree from the J.L. Kellogg Graduate School of Management, Northwestern University.
David Knight has served as our Executive Vice President and General Manager, Security Products since April 2019. Mr. Knight served as the Executive Vice President, Threat Systems Products Group from July 2016 to March 2019, the General Manager Information Security Products Group from July 2013 to July 2016 and prior to that served as our Executive Vice President Product Management and Product Marketing since March 2011. Prior to joining our company, from May 2007 to February 2011, Mr. Knight served as Chief Technology Officer of the Collaboration Software Group and Senior Director of Product Management at Cisco Systems, Inc., a networking and communications technology company. Mr. Knight was previously vice president of product management, vice president of platforms, and senior director of product management for WebEx Communications Inc., a collaboration software company, from 2002 to May 2007. From 1998 to 2002, he was vice president of marketing and product management for Portera Systems Inc. Mr. Knight has also held management positions at Sybase, Inc., an enterprise and mobile software company, and Oracle. He holds a Master of Science in industrial administration and a B.S. in industrial management and information systems from Carnegie Mellon University.
Blake Sallé has served as our Executive Vice President, Worldwide Sales since October 2018. Mr. Sallé previously served as the Theatre Vice President for the Americas from April 2017 to October 2018. Prior to joining Proofpoint, Mr. Sallé served as President, Field Operations of Kony, Inc., a leading provider of enterprise mobility solutions from July 2014 to April 2017. During his career, Mr. Sallé has held key leadership positions across worldwide sales, channels, customer success, strategy, and field operations in multiple organizations ranging from start-up to scale-out in both the technology and healthcare sectors. These organizations include Cisco Systems, Inc., VCE, (a joint venture between VMware, Inc., Cisco Systems Inc. and EMC Corporation), Computer Sciences Corporation (CSC) and Silver Tail Systems. Mr. Sallé holds a Bachelor of Arts in psychology from the University of Texas at Austin.
Bhagwat Swaroop has served as our Executive Vice President, Industry Solutions and Business Development group since April 2019. Prior to this role, Mr. Swaroop was Executive Vice President and General Manager of Email Security Products Group since joining the company in July 2016. Prior to joining our company, Mr. Swaroop served as vice president of Global Solutions, Product Management and Product Marketing for Enterprise Security at Symantec from August 2015 to June 2016. Mr. Swaroop was Vice President of Corporate Strategy at Symantec from August 2014 to August 2015. He served as Vice President Products and Services for Symantec from May 2014 to August 2014. Prior to Symantec he served as a Product Management executive at NetApp from October 2011 to May 2014. Mr. Swaroop also brings experience from approximately four years at McKinsey & Company and ten years at Intel Corporation. He brings a deep understanding of the enterprise security landscape, technology ecosystem and cloud-driven business models to his role. Mr. Swaroop holds multiple degrees including a B.E. in instrumentation and control from Delhi Institute of Technology, a M.S. in electrical engineering from Arizona State University and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.
20
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis provides information about the 2019 compensation program for our principal executive officer, our principal financial officer, and the three executive officers (other than our principal executive officer and principal financial officer) at fiscal year-end who were our most highly-compensated executive officers (our "Named Executive Officers"). For 2019, our Named Executive Officers were:
- Gary Steele, our Chief Executive Officer and the Chairman of our Board of Directors (our "CEO");
- Paul Auvil, our Chief Financial Officer (our "CFO");
- David Knight, our Executive Vice President and General Manager, Security Products;
- Blake Sallé, our Executive Vice President, Worldwide Sales; and
- Bhagwat Swaroop, our Executive Vice President, Industry Solutions and Business Development.
This Compensation Discussion and Analysis describes the material elements of our executive compensation program during 2019, including the "best practices" we have adopted with respect to our executive compensation program. It also provides an overview of our executive compensation philosophy and the overall objectives of our executive compensation program. Finally, it analyzes how and why the Compensation Committee of our Board of Directors (the "Compensation Committee") arrived at the specific compensation decisions, policies, and practices for our Named Executive Officers in 2019, and discusses the key factors that the Compensation Committee considered in determining their compensation.
Executive Summary
Response to 2019 Stockholder Advisory Vote on Named Executive Officer Compensation
We believe stockholder insight and recommendations should be an integral part of the discussions of our Board of Directors on many matters, including the effectiveness of our executive compensation program. Consistent with this belief, we maintain an active, year-round investor relations program that involves our CEO, CFO, and other members of senior management regularly meeting with stockholders and prospective investors and presenting in investor conferences made available to the investing public via webcast. In this manner, our senior management holds hundreds of meetings with our investors throughout the year. In addition, we make our annual meeting of stockholders available electronically to facilitate investor access to our senior management. The feedback we receive from our stockholders and other investors through this process is regularly shared with our full Board of Directors and, when related to our executive compensation program, policies, and practices, the Compensation Committee.
In late 2018 and early 2019, during the lead-up to our 2019 Annual Meeting of Stockholders, we contacted most of our larger institutional stockholders (representing approximately 76% of our outstanding common stock) to discuss the items on the annual meeting agenda, including a proposal to amend and restate our 2012 Equity Incentive Plan to, among other things, increase the number of shares of stock authorized for issuance under the plan, as well as to solicit their views on our executive compensation program. From that outreach, 26 of our largest institutional stockholders, including 14 of our 15 largest institutional stockholders, had discussions with members of our senior management and, if requested, with certain members of the Compensation Committee.
As has been its normal cadence for compensation decisions, in the first quarter of 2019 the Compensation Committee reviewed and approved the key elements of our 2019 executive compensation program for our executive officers, including our Named Executive Officers. While these decisions were made prior to our 2019 Annual Meeting of Stockholders, and receipt of the results of the stockholder advisory proposal to approve the compensation of our Named Executive Officers (commonly known as a "Say-on-Pay" vote), the decisions took into consideration the feedback gathered from our stockholder engagement during the preceding months.
At our 2019 Annual Meeting of Stockholders, we received less than majority support for our Say-on-Pay proposal. This result was well below the level of support as reflected by our previous Say-on-Pay votes and sent a strong message to our Board of Directors. Given our commitment to clear and transparent communication with our stockholders, our Board of Directors resolved to learn more about the views of our stockholders on our executive compensation program and the reasons underlying their voting decisions.
Accordingly, our Board of Directors directed our senior management to conduct an outreach program with our stockholders about our executive compensation program and to understand what motivated their votes and what actions we could take to address any concerns about our program. Our objectives were to solicit feedback directly from our stockholders, listen to their views and
21
concerns, engage in a sustained dialogue with them, and respond to any questions they had about our executive compensation policies, practices, and decisions and about the views expressed in the reports of the proxy advisory firms used by many of our stockholders.
In late 2019 and early 2020, we contacted 23 of our top 25 institutional stockholders including all of the holders of over 5% of our outstanding common stock and representing 60% of our outstanding common stock, in order to obtain their perspectives on our executive compensation program, our related corporate governance practices, and any other topics about which they wished to engage. Although not all of the stockholders contacted chose to meet with us, members of our senior management, including one or more of our Senior Vice President, Human Resources, Vice President, General Counsel and Corporate Secretary, and our Vice President, Investor Relations, held telephonic meetings with five of our largest institutional stockholders (representing approximately 25% of our outstanding common stock) and offered follow-on meetings with senior management and members of our Board of Directors. While these institutional stockholders were generally supportive of our executive compensation program and of our 2019 proposal to increase shares for issuance under our 2012 Equity Incentive Plan, they also expressed concern over the size and duration of the one-time equity awards granted to our CEO in June and December of 2018, and the resulting magnitude of his overall 2018 compensation. These institutional stockholders also shared their perspectives on the relative mix between time-based and performance-based equity awards and the value of enhanced disclosures regarding our incentive compensation plans and awards to help them more readily recognize the alignment of our performance metrics and long-term value creation for our stockholders. The feedback received from our meetings with these stockholders was shared with our full Board of Directors and the Compensation Committee.
At the same time, the Compensation Committee embarked on a comprehensive review of our executive compensation program, policies, and practices and the related disclosure about our program in our proxy statement. As part of this process, the Compensation Committee carefully reviewed the feedback that we had already received from the major proxy advisory firms, whose services are engaged by many of our stockholders, the feedback collected by our Investor Relations team as part of our ongoing broader engagement activities, and the input provided to the Compensation Committee by its external compensation consultant.
The following table summarizes some of the feedback that we received from our stockholders and the major proxy advisory firms regarding our executive compensation program and how we have responded.
Topic | What We Heard | How We Responded | |
CEO equity awards | Multiple grants of long-term incentive | Revised CEO Equity Award Positioning. | |
(duration and | compensation awards, including significant off- | We faced several challenges in setting the 2018 compensation of our CEO. Based on | |
magnitude) | cycle awards, which have a total value well above | ||
that of equity awards granted to similarly situated | its evaluation of the key role that he has played in our recent success, our strong | ||
executives at the companies in our compensation | financial and operational performance under his leadership, his unique qualifications to | ||
continue to lead us, the fierce competition for proven senior leadership in the | |||
peer group, should be avoided. | |||
technology sector, and the potential risks to us if we had to replace him, the | |||
Compensation Committee and Board of Directors believed that it was necessary to | |||
offer a competitive package to incentivize and retain him. | |||
Based on stockholder feedback, we believe that the one-timeoff-cycle equity awards | |||
granted to our CEO, particularly the one-time equity award granted to him in | |||
December 2018, was the primary factor that led to the decreased level of support for | |||
our Say-on-Pay proposal in 2019. | |||
In recognition of stockholder feedback, our CEO only received one equity award as | |||
part of our regular annual grant cycle in 2019; the grant date fair value of the award | |||
was $7,259,610. Our CEO did not receive any special equity awards outside of the | |||
regular annual grant cycle in 2019. | |||
22 | |||
CEO pay-for- | A meaningful portion of CEO's long-term | Rebalanced Equity Mix. |
performance | incentive compensation awards should be | Our CEO's 2019 annual equity awards are weighted 74% in the form of a PSU award |
performance-based. | and only 26% in the form of a time-based RSU award. The time-based RSU award will | |
"cliff" vest five years from February 1 of the grant year. | ||
This adjustment to his pay mix increased the percentage of our CEO's 2019 target total | ||
direct compensation that is comprised of performance-basedlong-term incentives to | ||
64% from 37% in the prior year. | ||
Going forward, the Compensation Committee expects that at least half of the value of | ||
all future equity awards granted to our CEO will be performance-based. | ||
Enhanced disclosures on | Additional information should be provided | Enhanced Disclosures. |
incentive compensation | regarding the performance goals applicable to our | Enhanced disclosure about our annual incentive plan, including more specific |
and compensation | incentive compensation programs in order to more | information about how individual performance is factored into bonus decisions and |
decisions. | clearly demonstrate the alignment between | how award payouts are determined is provided in "Compensation Discussion and |
achievement of those performance goals and | Analysis- Annual Cash Bonus Plan- Individual Performance Measures." | |
implementation of our business strategy. In | Enhanced disclosure about how the selection and target-setting of performance | |
particular, additional information should be | measures support our business strategy and align with long-term stockholder value is | |
provided regarding: | provided in "Compensation Discussion and Analysis- Annual Cash Bonus Plan- | |
-The individual performance goals of our | Corporate Performance Objectives." | |
executive officers and the determination | ||
of annual incentive payments. | ||
-Howlong-term incentive compensation goals | ||
and payouts are determined. | ||
Say-on-Frequency, Annual Advisory Stockholder Vote
In addition, on April 15, 2020, our Board of Directors approved shifting from a triennial, to an annual, say-on-pay vote, consistent with the preference of our stockholders as expressed in a stockholder advisory vote on the frequency of future say-on-pay votes conducted at our 2019 Annual Meeting of Stockholders. Consequently, we are holding a say-on-pay vote at the Annual Meeting to which this Proxy Statement relates and intend to do so again at our 2021 Annual Meeting of Stockholders.
2019 Business Performance Highlights
Financial Performance
In 2019, we delivered strong financial results, solid execution and disciplined growth and investment in our leadership position in next-generation cybersecurity.
- Total revenue for the full year was $888.2 million, an increase of 24.0%, compared to $717.0 million in 2018.
- Total billings for the full year were $1,072.2 million, an increase of 22.0%, compared to $875.3 million in 2018.
- GAAP gross profit for the full year was $652.0 million compared to $515.2 million for 2018. Non-GAAP gross profit for the full year was $703.7 million compared to $558.5 million for 2018.
- GAAP gross margin for the full year was 73% compared to 72% for 2018. Non-GAAP gross margin was 79% for the full year of 2019 compared to 78% for 2018.
- We generated $242.5 million in net cash from operations for the full year compared to $184.7 million during 2018. We generated free cash flow of $207.3 million for the full year compared to $155.2 million during 2018.
23
From the closing price on the day of our initial public offering in 2012 to the closing price as of the end of December 2019, our stock price has increased over 715%, significantly above the NASDAQ Composite Index (IXIC) returns over the same period.
Significant Operational Achievements
- In March 2019, we won 14 gold and silver accolades in the 2019 Cybersecurity Excellence Awards, including gold recognitions for Most Innovative Cybersecurity Company and Best Cybersecurity Education Provider.
- In April 2019, we congratulated our lead independent director, Dana Evan, on the National Association of Corporate Directors (NACD) naming her as its Director of the Year.
- In May 2019, we acquired Meta Networks to bolster our cloud security capabilities.
- In August 2019, we closed our offering of $920 million aggregate principal amount of 0.25% convertible senior notes due 2024, including the full exercise of the initial purchasers' option to purchase up to an additional $120 million aggregate principal amount of such notes.
- In September 2019, we appointed a former Salesforce executive, Leyla Seka, as our third female member of our Board of Directors.
- In November 2019, we acquired Observe IT extending our leadership in people-centric security and compliance to deliver post-perimeter data loss prevention.
2019 Executive Compensation Decisions and Outcomes
Based on our overall operating environment and these results, the Compensation Committee (and the independent members of our Board of Directors in the case of our CEO) took the following key actions with respect to the compensation of our Named Executive Officers for 2019:
- Merit-BasedBase Salary Increases - Approved annual base salary increases ranging from 5.00% to 9.76%, including a base salary increase of 7.00% for our CEO, after review of each Named Executive Officer's continued contributions to the Company, scope of responsibility, and market conditions.
- Annual Cash Bonuses Paid Based on Over-Achievement - Approved annual cash bonuses ranging from $120,758 to $386,851 for our Named Executive Officers other than our CEO, as well as an annual cash bonus for our CEO in the amount of $620,938 based predominantly on the Company's over-achievement of its quarterly revenue objectives and the individual performance of our Named Executive Officers.
- Long-TermEquity Grants Reflecting our Pay-for-Performance Philosophy - Granted long-termincentive compensation opportunities in the form of (i) PSU awards that may be settled for shares of our common stock subject to our achievement of pre-establishedrevenue growth and free cash flow targets for five consecutive fiscal quarters during a four-yearperformance period and (ii) time-basedRSU awards that may be settled for shares of our common stock, in
24
aggregate amounts ranging from target levels of $1,904,160 to $3,808,320, including a PSU award and RSU award for our CEO with an aggregate target value of $7,259,610. The amounts actually realized by our Named Executive Officers will ultimately depend on the performance of our stock at the time of vesting.
50% percent of the long-term incentive awards for our Named Executive Officers other than our CEO were in the form of PSUs and the remaining 50% were in the form of RSUs. To further reinforce the pay-for-performance elements of our executive compensation program, 74% of the long- term incentive award for our CEO was in the form of PSUs and 26% was in the form of an RSU award with a five-year "cliff" vesting requirement.
2019 CEO Pay for Performance
We believe our steady and consistent growth since inception is directly correlated to the continued and exceptional leadership of our CEO. His focus, creativity, and ability to engage and inspire our workforce continues to be critical to our success. Most significantly, his recognized status as a leader in next- generation cybersecurity has allowed us to attract, develop, motivate, and retain a high-caliber executive team, focused on achieving our long-term growth initiatives.
We believe it is critical to our continued success to offer our CEO a total compensation package that will, among other things:
- motivate and reward the achievement of our annual and long-term financial, operational, and strategic initiatives;
- ensure he remains with us to guide our business as we emerge as a leader in the next-generation cybersecurity and compliance market sector; and
- align his total compensation with our stock price performance and company performance.
To further these objectives, each year our Compensation Committee has recommended, and the independent members of our Board of Directors have approved a target total direct compensation opportunity for our CEO heavily weighted towards variable compensation in the form of an annual cash bonus opportunity and long-term incentive compensation in the form of equity awards. Since 2015, the long-term incentive compensation component of these target total direct compensation opportunities has included PSU awards. With the exception of 2018, during which the Compensation Committee recommended, and the independent members of our Board of Directors approved the grant of two special off-cycle equity awards that included time-based RSU awards, each year the percentage of our CEO's long-term incentive compensation opportunity granted in the form of PSU awards has increased, culminating in the decision in 2019 to grant 74% of our CEO's long-term incentive compensation as PSU awards that will only be earned if we achieve rigorous revenue and free cash flow margin targets over an extended period.
As currently structured, the Compensation Committee and our Board of Directors believe our CEO's target total direct compensation opportunity is consistent with our broader executive compensation policies and practices, reinforces our pay for performance philosophy, and aligns with sound governance principles. As with our executive compensation program generally, over time, as the size, complexity, and performance of the Company has grown, the Compensation Committee has recommended to the independent members of our Board of Directors adjustment in the design of the target total direct compensation opportunity of our CEO to reflect his significant role, the Company's accelerated performance, his tenure with the organization, and the market requirements necessary to retain him. The Compensation Committee views the annual cash bonus opportunity and the PSU awards as strong performance-based compensation vehicles.
Further, as noted above, going forward the Compensation Committee expects that at least half of the value of all future equity awards granted to our CEO will be performance-based. This practice is reflected in his long-term incentive compensation opportunity for 2020 where 75% of his equity awards have been granted in the form of PSUs that have performance metrics aligned with the revenue and free cash flow goals to drive long-term value creation for stockholders, and 25% of his equity awards have been granted in the form of RSUs with a five-year "cliff" vesting requirement.
Consistent with past practice, all elements of compensation are reviewed independently to warrant merit on their own, and to ensure an appropriate target total direct compensation package reflecting our compensation philosophy and objectives.
25
Our 2019 CEO Pay Mix and Total Direct Compensation
Executive Compensation Philosophy and Objectives
We believe our executive compensation policies and practices reinforce our pay for performance philosophy that aligns with sound governance
principles:
What We Do | What We Don't Do |
✓Pay for Performance. Performance-based equity awards, including a | ×No "Single-Trigger"Vesting. We do not have agreements that would provide |
majority of performance-based equity awards for our CEO. | automatic "single-trigger" accelerated vesting. |
✓Long-TermVesting. Multi-year vesting periods for our time-based equity×No Excessive Perquisites. Perquisites and other personal benefits are not a
awards.significant portion of any executive officer's compensation.
✓Caps on Maximum. Caps on short-termperformance-based cash incentive ×No Defined Benefit Plans. We do not maintain defined benefit pension or non-
compensation.qualified deferred compensation plans.
✓Independent Compensation Consultant. Our compensation consultant is ×No Hedging or Pledging. We maintain a prohibition on short sales, hedging, or
directly engaged by the Compensation Committee to advise on executive | pledging of stock ownership positions and transactions involving our equity |
compensation matters. | securities for all employees and directors. |
✓Annual Compensation Risk Assessment. We conduct an annual risk | ×No Tax Gross-Ups. We do not provide any executive officer with any tax gross- |
assessment to identify any elements of our compensation program design | ups to cover taxes on any compensation element or change in control payment o |
or oversight processes that carry elevated levels of risk to the Company. | benefits. |
26
Compensation Elements
We compete in the dynamic, highly competitive cybersecurity space. To meet the challenges in this industry, we have embraced a compensation philosophy of offering our executive officers competitive total direct compensation opportunities that recognize and reward individual performance and contributions to our success. The specific objectives of our executive compensation program are to: (i) reward the successful achievement of our financial and strategic objectives; (ii) drive the development of a successful and profitable business; (iii) support the alignment of executive officer and stockholder interests by rewarding the achievement of company goals and the building of stockholder value; (iv) attract, motivate, reward, and retain highly qualified executive officers who are important to our success; and (v) recognize strong performers by offering compensation that rewards individual achievement as well as contributions to our overall success.
Base Salary. Base salary is the primary fixed element of our executive compensation program. We use base salary to compensate our executive officers, including our Named Executive Officers, for services rendered during the fiscal year, and to remain competitive in attracting and retaining executive talent. The Compensation Committee conducts an annual review of each executive officer's base salary and makes adjustments (or recommendations for adjustments to the independent members of our Board of Directors in the case of our CEO) as it determines to be reasonable and necessary to reflect the scope of an executive officer's performance, contributions, responsibilities, experience, prior base salary level and position (in the case of a promotion), and market conditions.
Variable Cash Compensation. A key component of our compensation objectives is to have a significant portion of the compensation of our executive officers tied to Company performance to drive the successful execution of our key business results. To accomplish this objective, we provide for performance-based annual cash bonus opportunities for our executive officers, including our Named Executive Officers, based on their level of achievement of one or more corporate performance objectives established at the beginning of the fiscal year and their individual contributions to that performance.
Long-TermEquity Compensation. As a public company, we emphasize the use of equity to provide incentives for our executive officers to focus on the growth of our overall enterprise value and, correspondingly, to create sustainable value for our stockholders. The annual equity awards granted to our executive officers reflect a balanced mix of PSU awards and RSU awards (in 2019, 74% PSU awards and 26% time-based RSU awards for our CEO and 50% PSU awards and 50% time-based RSU awards for our other executive officers) based on value. The guidelines for the amount of each equity award is developed based on a blend of grant value and value as a percentage of market capitalization. The Compensation Committee believes the combination of these equity awards aligns our executive officers' total direct compensation opportunity to Company performance and ensures a balance of compensation at risk based on Company performance.
In addition, through our performance-based stock program, PSU awards are designed to incent our executive officers to drive medium-term financial and operational performance that will further our longer-term business strategy and growth objectives. The PSU awards are earned based on our achievement of target levels linked to our financial and operational performance. Milestones have been established and awards may be earned when we have achieved year-over-year revenue growth targets and our pre-established cash flow levels.
Broad-BasedBenefit Programs. We design our broad-based 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.
We have not adopted any formal policies or guidelines for allocating compensation between current and long-term compensation, between cash and non- cash compensation, or among different forms of non-cash compensation. Instead, the Compensation Committee reviews each element of executive compensation separately and also takes into consideration the value of each executive officer's compensation package as a whole and its relative size in comparison to our other executive officers.
Compensation Setting-Process
Role of the Compensation Committee
The Compensation Committee is responsible for reviewing, evaluating, and approving the compensation arrangements, plans, policies, and practices for our executive officers, including our Named Executive Officers (other than our CEO), and overseeing our cash and equity-based compensation plans. Compensation decisions for our CEO are approved by the independent members of our Board of Directors.
27
Prior to the beginning of each fiscal year, the Compensation Committee, after consulting with management, establishes the applicable corporate performance objectives for our incentive compensation plans. At the beginning of each fiscal year, the Compensation Committee, after consulting with management, makes decisions with respect to any base salary adjustment, approves target annual cash bonus opportunities and the related individual performance objectives under our annual cash bonus plan, and grants equity awards for our executive officers (other than our CEO) and makes recommendations to the independent members of our Board of Directors with respect to the compensation of our CEO.
After the end of the fiscal year, the Compensation Committee reviews the performance of our executive officers, including our Named Executive Officers, to determine the payouts for the annual cash bonus opportunities for the previous fiscal year for our executive officers (other than our CEO), and makes a recommendation to the independent members of our Board of Directors for the annual cash bonus payout for our CEO.
Role of Management
The Compensation Committee works with members of our management, including our CEO and human resources professionals to design our executive compensation program. Typically, our management assists the Compensation Committee by providing information on corporate and individual performance, competitive market data, and management's perspective and recommendations on compensation matters. Typically, this information includes an analysis of our executive officers' compensation mix and levels compared to the competitive market (as determined using both compensation peer group and compensation survey data) prepared by our human resources professionals or the compensation consultant to the Compensation Committee. The Compensation Committee then uses this information as one factor in its deliberations on specific compensation actions, decisions, and recommendations.
Role of Compensation Consultant
The Compensation Committee is authorized to retain the services and obtain the advice of external advisors, including compensation consultants, legal counsel, or other advisors to assist in the evaluation of executive officer compensation. Pursuant to this authority, the Compensation Committee engaged Compensia to provide advice and ongoing recommendations on executive compensation matters for 2019.
Compensia representatives meet with the Compensation Committee during its regular meetings without any members of management present. Compensia, with the acknowledgment and consent of the Compensation Committee, also works with our management from time to time to assist it in the preparation of its recommendations for the Compensation Committee.
Based on the consideration of the various factors as set forth in SEC rules and the listing standards of the NASDAQ Stock Market, the Compensation Committee does not believe that its relationship with Compensia and the work of Compensia on behalf of the Compensation Committee has raised any conflict of interest.
Use of Competitive Market Data
To assess the competitiveness of our executive compensation program and to assist it in setting compensation levels, the Compensation Committee reviews data drawn from our compensation peer group, as well as data from the Radford Global Technology Compensation Survey (including a custom data cut for the peer companies that participate in the Radford Global Technology Compensation Survey).
The Compensation Committee uses this data as a point of reference so that it can establish total compensation levels that it believes were reasonably competitive. Compensation levels differ among our executive officers based on competitive factors, and the role, responsibilities, and performance of each specific executive officer.
In August 2018, the Compensation Committee reviewed its then-current compensation peer group in consultation with Compensia for use in connection with its 2019 review and evaluation of our executive compensation program and removed certain companies because they had been acquired, or because their revenue or market capitalization had significantly changed such that they no longer met the Compensation Committee's criteria for inclusion in the peer group, and included additional companies that are more comparable to our current profile and business.
This compensation peer group was developed based on the following criteria: (i) Industry: primary focus on SaaS and security software companies, with a secondary focus on broad software companies; (ii) Revenue: approximately 0.5x to approximately 2.0x our trailing four quarters revenue of approximately $614 million (or approximately $310 million to approximately $1.2 billion); and (iii) Market Capitalization approximately 0.33x to approximately 3.0x our market capitalization of approximately $6.2 billion (or approximately $2.1 billion to approximately $18.6 billion). In addition, in selecting our peer group, we give preference to companies with strong revenue growth and companies headquartered in the San Francisco Bay Area.
28
For 2019, the compensation peer group was updated to more accurately reflect changes in the Company's business mix, the evolution of the competitive landscape, newly public companies, and continued growth (increased market cap and revenue). DocuSign, Inc. and RingCentral were added while Barracuda Networks, Inc. and BroadSoft, Inc. were removed.
This peer group was comprised of the following companies: | |
Box, Inc. | Imperva, Inc. |
Cloudera, Inc. | LogMeIn, Inc. |
Cornerstone OnDemand, Inc. | New Relic, Inc. |
DocuSign, Inc. | Paycom Software, Inc. |
Ellie Mae, Inc. | Ring Central |
FireEye, Inc. | Splunk Inc. |
Fortinet, Inc. | The Ultimate Software Group, Inc. |
Guidewire Software, Inc. | Zendesk, Inc. |
Determination of 2019 Executive Compensation
Base Salary
In February 2019, the Compensation Committee, after considering the market practices of our compensation peer group and related compensation survey data based on an analysis prepared by Compensia, the recommendations of our CEO (except with respect to his own base salary), and the factors described in the preceding paragraph, increased the base salaries of our executive officers, including our Named Executive Officers (other than our CEO), for 2019 and recommended to the independent members of our Board of Directors an increase to the base salary of our CEO. These increases were made to strengthen our alignment with current competitive market practices and our compensation philosophy, and to recognize our executive officers' performance and contributions to our overall business success. The independent members of our Board of Directors approved the recommended increase to the base salary of our CEO in February 2019.
The base salaries of our Named Executive Officers for 2019, which became effective on February 1, 2019, were as follows:
Named Executive Officer | 2018 Base | 2019 Base | Percentage | ||||||
Salary | Salary | Increase | |||||||
Mr. Steele | $ | 500,000 | $ | 535,000 | 7.00% | ||||
Mr. Auvil | $ | 410,000 | $ | 450,000 | 9.76% | ||||
Mr. Knight | $ | 390,000 | $ | 425,000 | 8.97% | ||||
Mr. Sallé | $ | 400,000 | $ | 420,000 | 5.00% | ||||
Mr. Swaroop | $ | 365,000 | $ | 400,000 | 9.59% |
Annual Cash Bonus Plan
Target Annual Cash Incentive Bonus Opportunities
Under our 2019 Executive Bonus Plan, the target annual cash bonus opportunities of our executive officers, including our Named Executive Officers, were designed to reward them based on our overall company performance and each individual executive officer's contribution to that performance. These target annual cash bonus opportunities were established after review of the pay practices within our industry so as to help ensure a competitive and retentive target total cash compensation package. As in prior years, the Compensation Committee determined that the target annual cash bonus opportunities for each executive officer should be determined as a percentage of such executive officer's base salary.
In February 2019, the Compensation Committee, after considering the market practices of our compensation peer group and related compensation survey data provided by Compensia, the recommendations of our CEO (except with respect to his own target annual cash bonus opportunity), the scope of each executive officer's performance, contributions, responsibilities, experience, and market conditions established the target annual cash bonus opportunities of our executive officers, including our Named Executive Officers (other than our CEO), for 2019 and recommended to the independent members of our Board of Directors the target annual cash bonus opportunity for our CEO. The independent members of our Board of Directors approved the recommended target annual cash bonus opportunity of our CEO in February 2019. Generally, the Compensation Committee determined, and in the case of our CEO recommended to the independent members of our Board of Directors, that the target annual cash bonus opportunities of our executive officers, including our Named Executive Officers, remain at the same levels as for 2018.
29
The target annual cash bonus opportunities of our Named Executive Officers for 2019 were as follows:
2019 Bonus | |||
Opportunity | |||
Named Executive Officer | (as a percentage | ||
of base salary) | |||
Mr. Steele | 100% | ||
Mr. Auvil | 75% | ||
Mr. Knight | 60% | ||
Mr. Sallé | 25% | * | |
Mr. Swaroop | 60% |
*The remainder of Mr. Sallé's target annual incentive opportunity was based on his performance as measured by his sales incentive plan. See "Sales Incentive Plan for Mr. Sallé" below.
Corporate Performance Objectives
In December 2018, the Compensation Committee approved the corporate performance measures and related target achievement levels for our 2019 Executive Bonus Plan for purposes of providing annual cash bonus opportunities to our executive officers, including our Named Executive Officers.
For purposes of the 2019 Executive Bonus Plan, the Compensation Committee selected revenue and non-GAAP operating income as the two corporate performance measures to fund the 2019 bonus pool. The Company's quarterly performance, including over-achievement, on these two measures would determine the accrual in that fiscal quarter for the bonus pool, up to a maximum of 150% of the annual target bonus pool attributable to that quarter. Further, once a quarterly funding of the bonus pool was accrued, it was thereafter considered earned for eventual payout at the end of the year. To the extent one or more executive officers terminated their employment prior to the certification of the results under the 2019 Executive Bonus Plan and approval of bonus payments by the Compensation Committee, such individual would forfeit his or her earned bonus and the forfeited amounts would be reallocated to the bonus pool. The net effect of this feature and any Company performance over-achievement would be to potentially increase the eventual bonus payments to the executive officers receiving bonus payments (even if such increase resulted in a payment that was more than the executive officer's target annual cash bonus opportunity).
For purposes of the 2019 Executive Bonus Plan, threshold funding was approved at 50% of each quarterly target bonus pool for 95% achievement of our quarterly revenue performance with funding approved at 100% of the applicable target bonus pool for quarterly revenue performance equal to or greater than 97.5% achievement of the applicable quarterly target.
In addition, the size of the quarterly target bonus pool was adjusted depending on our achievement of our quarterly non-GAAP operating income performance. For purposes of the 2019 Executive Bonus Plan: In February 2019, the Compensation Committee approved the corporate performance measures and related target achievement levels for our 2019 Executive Bonus Plan for purposes of providing annual cash bonus opportunities to our executive officers, including the named executive officers.
- the quarterly bonus pool funding was subject to reduction on a dollar-for-dollar basis if our quarterly operating income failed to meet our 2019 non-GAAP operating income target for the applicable fiscal quarter; and
- the quarterly bonus pool funding was subject to increase at the rate of $0.30 for every dollar by which our quarterly operating income exceeded our 2019 non-GAAP operating income target for the applicable fiscal quarter (up to a maximum cap of 150% of the applicable quarterly target bonus pool).
The Compensation Committee believed that the operation of the plan design as impacted by the target levels for these two performance measures would require a focused effort by management to grow our revenue while meaningfully managing our expenses to achieve both levels of performance and contribute to long-term value creation for our stockholders.
For purposes of the 2019 Executive Bonus Plan, "non-GAAP operating income" was defined to mean operating loss, adjusted to exclude stock-based compensation expense and the amortization of intangibles and costs associated with acquisitions and litigation. The costs associated with acquisitions include legal, accounting, and other professional fees, as well as changes in the fair value of contingent consideration obligations.
30
Individual Performance Measures
To achieve our compensation objective of rewarding individual performance, our CEO developed, and the Compensation Committee approved, a series of performance objectives for our executive officers, including our Named Executive Officers (other than himself), which he deemed to be integral to the achievement of the corporate performance objectives and to strengthen our internal operations. These performance objectives were established by our CEO in consultation with our executive officers at the beginning of the year, with each objective weighted to collectively total 100%. In addition, the Compensation Committee developed and recommended the individual performance objectives for our CEO, which were approved by the independent members of our Board of Directors.
For purposes of the 2019 Executive Bonus Plan, the individual performance objectives for our Named Executive Officers were generally as follows:
- Mr. Steele - his performance objectives were related to achieving our externally-communicated revenue, billings, and net income targets for the year, and effectively overseeing our staffing goals, including development and succession matters, inorganic growth, acquisition integration, sales force growth and productivity, and international growth.
- Mr. Auvil - his performance objectives were related to successfully overseeing the ongoing implementation of various business management systems and processes, effectively overseeing our daily financial operations to support the scaling of the company, delivering key financial planning and analysis initiatives, driving various business development initiatives, overseeing key initiatives from our investors relations and legal groups, and supporting our global office requirements to further the scaling of the Company.
- Mr. Knight - his performance objectives were related to initiatives for our security products group including enhancing the productivity and effectiveness of the group drawing from various internal resources, driving continued leadership in specific core product categories, implementing our people-centric strategy across various product lines and delivering related initial product release, developing an enhanced strategy for non-email related products, and enhancing our ability to deliver best-in-class development productivity, service stability, and service security.
- Mr. Sallé - his performance objectives were related to our sales productivity, including meeting specific hiring goals and sales capacity enhancements, accelerating the volume of our leading growth indicators, furthering leadership development of our sales force, and accelerating our growth in targeted international regions.
- Mr. Swaroop - his performance objectives were aligned to his new role and title change (EVP, Industry Solutions and Business Development) which occurred in the summer of 2019 and included driving growth through business development, ecosystem partnerships and strategic alliances, driving growth through verticals, and continued growth of the Essentials Platform.
At the end of the fiscal year, each executive officer's individual performance was evaluated and scored (as to the percentage attainment of each objective) by our CEO resulting in a total weighted performance. Our CEO then made recommendations to the Compensation Committee with respect to each executive officer's individual performance attainment percentage. In the case of our CEO, the independent members of our Board of Directors evaluated his contributions towards the achievement of his individual performance objectives. In no event could an executive officer's weighted performance exceed 100%. Final payment with respect to an executive officer's individual performance objectives was the product of his or her weighted performance multiplied by that executive officer's target annual bonus opportunity, multiplied by the funding factor (as determined by the finally accrued, annual bonus pool).
Award Decisions
In February 2020, the Compensation Committee evaluated our 2019 performance and determined that for the fiscal year, we achieved:
- Revenue of $888.2 million, which was approximately 100.7% of our annual revenue target under the 2019 Executive Bonus Plan; and
- Non-GAAPoperating income of $122.2 million, which was approximately 106.0% of our non-GAAP operating income target under the 2019 Executive Bonus Plan.
Based on these achievement levels, and overall goal attainment, the Compensation Committee determined that the annual bonus accrual (the sum of the four quarterly executive bonus accruals) should be paid out to executive officers, taking into consideration their individual base salary, on target bonus rate and individual performance metrics, effectively yielding a company-wide funding factor of 124.06%.
31
As noted above, our CEO evaluated the achievement of each executive officer against his or her individual performance objectives and formulated a recommendation for each such executive officer's annual bonus for consideration by the Compensation Committee. These recommendations were based on his subjective assessment of each individual's contributions against their individual performance objectives during the year. In the case of our CEO, the independent members of our Board of Directors evaluated his performance against his individual performance objectives and determined the amount of his annual bonus.
The independent members of our Board of Directors determined that our CEO had satisfied his individual performance objectives at a level of 95%. The Compensation Committee determined that Mr. Auvil satisfied his individual performance objectives at a level of 94%; Mr. Knight satisfied his individual performance objectives at a level of 86%; Mr. Sallé satisfied his individual performance objectives at a level of 94%; and Mr. Swaroop satisfied his individual performance objectives at a level of 96%.
Based on these determinations, the Compensation Committee (and, in the case of our CEO, the independent members of our Board of Directors) approved annual cash bonuses based on pro-rated base salaries to account for base salary increases for our Named Executive Officers as follows:
Gary Steele
Paul Auvil
David Knight
Blake Sallé
Bhagwat Swaroop
_________________
Individual | Annual Cash | |||
Target Annual | Bonus | Bonus Pool | Final 2019 | |
performance | x Individual | |||
Cash Bonus * | Attainment | Performance | Funding Level | Bonus Payment |
$ | 526,850 | 95% | $ | 500,508 | 124.06% | $ | 620,939 |
$ | 331,725 | 94% | $ | 311,821 | 124.06% | $ | 386,851 |
$ | 250,770 | 86% | $ | 215,662 | 124.06% | $ | 267,554 |
$ | 103,550 | 94% | $ | 97,337 | 124.06% | $ | 120,758 |
$ | 235,920 | 96% | $ | 225,304 | 124.06% | $ | 280,979 |
- Target bonuses are determined by multiplying the bonus percentage by the base salary subject to the bonus. That base salary is made up of one month (January 2019) at the older 2018 base salary and 11 months at the newer 2019 base salary, which became effective February 2019.
Sales Incentive Plan for Mr. Sallé
As our Executive Vice President, Worldwide Sales, the majority of Mr. Sallé's annual cash incentive for 2019 was based on his ability to successfully execute on our annual Company-wide sales program. In 2019, Mr. Sallé was eligible to earn target sales commissions of $315,000 under his sales incentive plan. This commission opportunity was based on our sales organization's ability to generate new annual recurring revenue ("NARR") (weighted 70%), as well as its ability to complete renewal bookings and generate other non-recurring revenue (weighted 30%). We are not disclosing the target levels for these two components of our sales program because we believe to do so would be competitively harmful, as it would give competitors insight into our strategic and financial planning processes.
Mr. Sallé's commissions were to be calculated monthly based on the net impact of commissionable value of NARR and renewal bookings and paid in the following month based on our sales organization's actual performance against its monthly sales quotas. These commissions were based on a fixed rate for NARR sales up to 100% of the pre-established monthly quota and a higher fixed commission rate for NARR sales above the target quota. A similarly-structured commission scale was established for renewal bookings and other non-recurring revenue, albeit at a lower percentage rate given the greater emphasis placed on generating NARR during the year.
In 2019, Mr. Sallé earned a cash bonus under his sales incentive plan in the amount of $284,607, based on our achievement of our NARR sales quota for the year and our renewal sales and other non-recurring revenue sales quota for the year. This amount included a payment in the amount of $14,986 as a result of having exceeded our target quotas for 2019 in NAAR sales/renewal bookings. This additional bonus payment was calculated within the terms of Mr. Sallé's sales incentive plan as described above.
Long Term Incentive Compensation
In February 2019, the Compensation Committee approved, and in the case of our CEO recommended to the independent members of our Board of Directors who approved in March 2019, equity awards for our executive officers, including our Named Executive Officers. These equity awards consisted of a mix of PSU awards and RSU awards. The target award for each equity vehicle was determined based on a combination of grant value and value as a percentage of our market capitalization. In the case of our CEO, the combined value of this target award was then allocated 74% to his PSU award and 26% to his RSU award to establish share guidelines for his two equity awards, while, for our other executive officers, the combined value of the annual target award was then divided into halves (half PSU awards and half RSU awards) to establish the applicable share guidelines.
32
The size of the 2019 annual equity awards was determined by the Compensation Committee (or in the case of the annual equity awards granted to our CEO, recommended to the independent members of our Board of Directors for approval), based on its evaluation of the annual competitive market analysis prepared by Compensia, the Compensation Committee's subjective assessment of the performance of our executive officers, their objectives to motivate and retain our executive officers, and the relevant peer company market practices. The Compensation Committee reviews equity award amounts from two perspectives: grant date fair value and grant date value as a percentage of market capitalization. The Compensation Committee exercised its judgment to set the value of the equity awards for each executive officer, taking into consideration its assessment of each individual's performance, the current equity holdings of each executive officer (with an emphasis on the remaining vesting requirements of any unvested holdings), the relative roles and responsibilities of each executive officer, and its desire to maintain parity in the awards granted to executive officers performing substantially similar responsibilities. The individual equity awards delivered also were based on the executive officers' performance against their contributions, including each executive officer's individual performance for 2018, and an overall assessment of our financial performance in areas such as revenue, bookings, gross margin, and cash flow. We believe this approach allows for a more stable methodology on a year-over-year basis and ensures a more qualitative method to evaluate market values for equity and helps ensure we are granting equity awards in amounts that are market balanced and in line with our overall compensation philosophy.
Since January 2015, the annual PSU awards granted to our executive officers, including our Named Executive Officers, require attainment of a five- quarter long performance condition and vest over a four-year period based on both satisfaction of the performance condition and a time-based vesting requirement. Pursuant to the performance condition, 100% of the shares of our common stock subject to the 2019 PSUs will become eligible for vesting if, during the four-year period commencing January 1, 2019, we satisfy the performance condition.
The PSU awards and RSU awards granted to our Named Executive Officers in 2019 were as follows:
Performance-Based | Time-Based Restricted | ||||||
Restricted Stock Unit | Aggregate Grant Date Fair | ||||||
Named Executive Officer | ("PSU") Awards at Target | Stock Unit ("RSU") | |||||
(number of shares) (1) | Awards (number of shares) | Value ($) | |||||
Mr. Steele | 45,000 | 16,000 | 7,259,610 | ||||
Mr. Auvil | 16,000 | 16,000 | 3,808,320 | ||||
Mr. Knight | 13,000 | 13,000 | 3,094,260 | ||||
Mr. Sallé | 9,000 | 9,000 | 2,142,180 | ||||
Mr. Swaroop | 8,000 | 8,000 | 1,904,160 |
- The maximum number of shares eligible to be earned pursuant to the 2019 PSU awards granted to our Named Executive Officers is 100% of target. The PSU awards granted to our Named Executive Officers in 2019 are not eligible to be earned for achievement below target levels.
PSU Awards
The PSU awards granted to our Named Executive Officers are eligible to be earned and vest as follows:
- Target Milestone - as to 50% of the shares of our common stock subject to the awards if, during the four-year performance period commencing January 1, 2019 (the "Performance Period"), (i) we have had five consecutive fiscal quarters of year-over-year revenue growth of 20% or more and (ii) in each such fiscal quarter we have achieved a "Rule of 40" measurement of at least 44%; and
- Stretch Milestone - as to the entirety of the shares of our common stock subject to the awards (to the extent unearned and unvested) if, during the Performance Period, (i) we have had five consecutive fiscal quarters of year-over-year revenue growth of 20% or more and (ii) in each such fiscal quarter we have achieved a "Rule of 40" measurement of at least 46%.
For purposes of the PSU awards, a "Rule of 40 measurement" means the sum of the year-over-year quarterly revenue growth rate (expressed as a percentage) and the quarterly free cash flow margin (expressed as a percentage of that quarter's revenue), as both revenue and free cash flow are disclosed in our publicly-reported financial statements. For purposes of calculating free cash flow for the PSU milestone attainment for any fiscal quarter, all capital expenditures associated with our new headquarters campus project that are reported as a one-time charge in a given fiscal quarter will be added back to the free cash flow otherwise reported for that quarter.
To the extent that the Compensation Committee certifies the attainment of Target Milestone and/or the Stretch Milestone, a pro rata portion of the earned amount (as measured against the Performance Period) will vest subject to certification, with the remainder of the earned amount vesting in pro rata portions on the remaining anniversaries of the award grant date over a four-year period.
33
RSU Awards
The RSU awards granted to our Named Executive Officers (other than our CEO) vest over a four-year period, with one-quarter of the shares vesting on each of the first four anniversaries of February 1, 2019, the vesting start date, contingent upon the Named Executive Officer remaining continuously employed by us through each applicable vesting date. The time-based RSU award granted to our CEO vests in full on the fifth anniversary of February 1, 2019, the vesting start date, contingent upon his remaining continuously employed by us through such vesting date.
Welfare and Other Benefits
We have established a Section 401(k) retirement plan for all employees who satisfy certain eligibility requirements, including requirements relating to age and length of service. In 2019, we matched the Section 401(k) contributions for all employees who contribute to the plan, including our executive officers. Specifically, we match 50% of an employee's contributions up to a maximum of either the lesser of 2.5% of contributions or $1,500 in a calendar year. The match also includes a vesting schedule, based on tenure, with full vesting at four years of service. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code (the "Code") so that eligible contributions by employees to the plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the plan.
In addition, we provide other benefits to our executive officers, including our Named Executive Officers, on the same basis as all our full-time employees in the country in which they are resident. These benefits include medical, dental, and vision benefits, medical and dependent care flexible spending accounts and health spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage.
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 currently provide perquisites to our executive officers, including our Named Executive Officers. During 2019, none of our Named Executive Officers received perquisites or other personal benefits that were, in the aggregate, $10,000 or more for each individual.
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 or the independent members of our Board of Directors, as applicable.
Employment Arrangements
We have entered into employment offer letters with each of our executive officers, including each of our Named Executive Officers. Each of the employment offer letters provides for "at-will" employment and sets forth the initial compensation arrangements for the executive officer, including an initial base salary, an annual cash bonus opportunity and/or a commissions plan, and either a recommendation for or the grant of an equity award. We believe that these employment offer letters were necessary to recruit our executive officers to join us and induce these individuals to forego other employment opportunities.
Post-Employment Compensation Arrangements
We have entered into Change in Control and Severance Agreements with certain of our executive officers, including each of our Named Executive Officers, which are designed to provide severance payments and other benefits in the event of certain qualifying terminations of employment, including certain terminations of employment in connection with a change in control or executive leadership of the Company. The Compensation Committee and our Board of Directors believe that these post-termination payments and benefits serve our executive retention objectives by helping our Named Executive Officers maintain continued focus and dedication to their responsibilities to maximize stockholder value, including in the event that there is a potential transaction that could involve a change in control of the Company.
The terms of these agreements were determined after review by the independent members of our Board of Directors or the Compensation Committee, as applicable, of our retention goals for each Named Executive Officer and an analysis of relevant competitive market data.
For detailed descriptions of the post-employment compensation arrangements maintained 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.
34
Other Compensation Policies
Derivatives Trading Policy
The Company prohibits executive officers, directors and employees from directly or indirectly engaging in any kind of hedging transaction that could reduce or limit their economic risk with respect to their holdings, ownership or interest in the Company's securities, including prepaid variable forward contracts, equity swaps, collars, puts, calls and options.
Tax and Accounting Considerations
Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code (the "Code") generally disallows public companies a tax deduction for federal income tax purposes of remuneration in excess of $1 million paid to our principal executive officer, principal financial officer, and certain other current and former executive officers. While the Compensation Committee considers the deductibility of awards as one factor in determining the compensation for our executive officers, the 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 compensation paid or awards granted are not deductible by us for tax purposes.
Changes made in 2017 to Section 162(m) in connection with the passage of the Tax Cuts and Jobs Act repealed exceptions to the deductibility limit that were previously available for "qualified performance-based compensation," including stock option grants, effective for taxable years after December 31, 2017. As a result, any cash or equity compensation paid to certain of our executive officers in excess of $1 million will be non-deductible unless it qualifies for transition relief afforded to compensation payable pursuant to certain binding arrangements in effect on November 2, 2017 that are not subsequently materially modified. Because of uncertainties in the interpretation and implementation of the changes to Section 162(m), including the scope of this transition relief, we can offer no assurance of deductibility of any amounts in excess of $1 million paid to our current or former executive officers who are subject to the limitations of Section 162(m).
Taxation of "Parachute" Payments
Sections 280G and 4999 of the 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. None of our executive officers, including our Named Executive Officers, are entitled to "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.
Accounting for Stock-Based Compensation
We follow ASC 718 for our stock-based compensation awards. ASC 718 requires companies to measure the compensation expense for all share-based payment awards made to employees and directors based on the grant date "fair value" of these awards. This calculation is performed for accounting purposes and reported in the compensation tables below, even though our executive officers may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based compensation awards in their income statements over the period that an executive officer is required to render service in exchange for the stock option or other equity award. 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 our company that exceeds certain prescribed limits, and that our company (or a successor) may forfeit a deduction on the amounts subject to this additional tax. None of our executive officers, including our named executive officers, are entitled to "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.
Risk Assessment of Compensation Programs
We have determined that our compensation policies, practices, and plans are appropriately balanced and do not create risks that are reasonably likely to have a material adverse effect on the Company. To make this determination, the Compensation Committee, in consultation with management reviewed the compensation policies, practices, and plans for our executive officers, as well as for all other employees. We assessed the following features of our compensation policies, practices, and plans: design, payment methodology, potential payment volatility, relationship to our financial results, length of performance period, risk- mitigating features, performance measures and goals, oversight and controls, and plan features and values compared to market practices. Based on this review, we believe that our compensation policies, practices, and plans do not create risks that are reasonably likely to have a material adverse effect on our company.
35
Executive Compensation Tables
The following table provides information regarding all plan and non-plan compensation, earned by or awarded to, our named executive officers for the fiscal years ended December 31, 2019, 2018 and 2017.
Summary Compensation Table
Name and Principal Position
Gary Steele
Chief Executive Officer and Chairman
Paul Auvil
Chief Financial Officer
David Knight
Executive Vice President and General Manager, Security Products
Blake Sallé
Executive Vice President,
Worldwide Sales
Bhagwat Swaroop
Executive Vice President, Industry Solutions and Business Development
Stock | Option | Non-Equity | All Other | |||||||||
Fiscal | Incentive Plan | |||||||||||
Salary(1) | Awards | Awards | Compensation | Compensation | Total | |||||||
Year | (2) | (3) | (4) | (5) | ||||||||
2019 | $ | 530,625 | $ | 7,259,610 | $ | - | $ | 620,939 | $ | 2,520 | $ | 8,413,694 |
2018 | $ | 496,875 | $ | 63,477,494 | $ | - | $ | 753,514 | $ | 2,413 | $ | 64,730,296 |
2017 | $ | 472,917 | $ | 5,525,550 | $ | - | $ | 523,115 | $ | 625 | $ | 6,522,207 |
2019 | $ | 445,000 | $ | 3,808,320 | $ | - | $ | 386,851 | $ | 2,338 | $ | 4,642,509 |
2018 | $ | 406,250 | $ | 9,953,784 | $ | - | $ | 462,540 | $ | 1,690 | $ | 10,824,264 |
2017 | $ | 377,500 | $ | 2,421,600 | $ | - | $ | 317,208 | $ | 500 | $ | 3,116,808 |
2019 | $ | 420,625 | $ | 3,094,260 | $ | - | $ | 267,554 | $ | 2,296 | $ | 3,784,735 |
2018 | $ | 387,500 | $ | 3,913,284 | $ | - | $ | 340,832 | $ | 655 | $ | 4,642,271 |
2017 | $ | 367,500 | $ | 1,452,960 | $ | - | $ | 195,047 | $ | 4,217 | $ | 2,019,724 |
2019 | $ | 417,500 | $ | 2,142,180 | $ | - | $ | 405,365 | $ | 2,317 | $ | 2,967,362 |
2018 | $ | 358,333 | $ | 4,153,610 | $ | - | $ | 298,694 | $ | 1,673 | $ | 4,812,310 |
2019 | $ | 395,625 | $ | 1,904,160 | $ | - | $ | 280,979 | $ | 2,246 | $ | 2,583,010 |
2018 | $ | 363,125 | $ | 1,885,920 | $ | - | $ | 325,998 | $ | 1,614 | $ | 2,576,657 |
2017 | $ | 350,000 | $ | 968,640 | $ | - | $ | 195,505 | $ | 7,939 | $ | 1,522,084 |
- Mr. Sallé was promoted to the position of Executive Vice President, Worldwide Sales, effective October 25, 2018. In connection with his promotion, Mr. Sallé's base salary was increased from $350,000 to $400,000.
- Unless otherwise noted in these footnotes, the amounts in this column represent the aggregate grant date fair values of the RSU awards and PSU awards granted during the year indicated, computed in accordance with FASB Accounting Standards Codification Topic 718, excluding estimated forfeitures.
The table below sets forth the grant date fair value for PSUs awarded in 2019, 2018 and 2017.
Probable outcome of | Maximum outcome of | |||||||
Named Executive Officer | Fiscal Year | Performance Stock Units | Performance Stock Units | |||||
Grant Date Fair Value | Grant Date Fair Value | |||||||
Gary Steele | 2019 | $ | 5,355,450 | $ | 5,355,450 | |||
2018 | $ | 23,886,055 | $ | 23,886,055 | ||||
2017 | $ | 1,841,850 | $ | 3,683,700 | ||||
Paul Auvil | 2019 | $ | 1,904,160 | $ | 1,904,160 | |||
2018 | $ | 1,956,642 | $ | 1,956,642 | ||||
2017 | $ | 807,200 | $ | 1,614,400 | ||||
David Knight | 2019 | $ | 1,547,130 | $ | 1,547,130 | |||
2018 | $ | 1,956,642 | $ | 1,956,642 | ||||
2017 | $ | 484,320 | $ | 968,640 | ||||
Blake Sallé | 2019 | $ | 1,071,090 | $ | 1,071,090 | |||
Bhagwat Swaroop | 2019 | $ | 952,080 | $ | 952,080 | |||
2018 | $ | 942,960 | $ | 942,960 | ||||
2017 | $ | 322,880 | $ | 645,760 |
- The amounts in this column represent the aggregate grant date fair values of the stock options granted during the year indicated, computed in accordance with FASB Accounting Standards Codification Topic 718, excluding estimated forfeitures. The assumptions used in calculating the grant date fair value of the option awards reported are set forth in Note 11 to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2019.
- The amounts in this column represent total performance-based cash bonuses earned for services rendered in the year referenced in the row under the Executive Bonus Plan. As described above, achievement under the Executive Bonus Plan takes into consideration corporate performance measures as well as individual performance.
36
- Consists of amounts relating to the Company's payment of life insurance premiums on behalf of our named executive officers pursuant to the Company's health and welfare benefit plans and payments of 401(k) plan contribution matches.
2019 Grants of Plan-Based Awards
Estimated Future Payouts Under | Estimated Future Payouts | |
Non-Equity Incentive Plan | Under Equity Incentive Plan | |
Awards | Awards |
Named | ||||||||||
Executive | Grant | Threshold | Target | Maximum | ||||||
Officer | Date | Threshold | Target | Maximum | (#) | (#) | (#) | |||
Gary Steele | 3/28/2019 | |||||||||
3/28/2019 | - | 22,500 | 45,000 | (4) | ||||||
$ | 263,425 | $ | 526,850 | - | (2) | |||||
Paul Auvil | 3/28/2019 | |||||||||
3/28/2019 | - | 8,000 | 16,000 | (4) | ||||||
$ | 165,863 | $ | 331,725 | - | (2) | |||||
David Knight | 3/28/2019 | |||||||||
3/28/2019 | - | 6,500 | 13,000 | (4) | ||||||
$ | 125,385 | $ | 250,770 | - | (2) | |||||
Blake Sallé | 3/28/2019 | |||||||||
3/28/2019 | - | 4,500 | 9,000 | (4) | ||||||
$ | 51,775 | $ | 103,550 | - | (2) | |||||
Bhagwat Swaroop | 3/28/2019 | - | $ | 315,000 | (3) | - | ||||
3/28/2019 | - | 4,000 | 8,000 | (4) | ||||||
$ | 117,960 | $ | 235,920 | - | (2) |
All Other | |
Stock | |
Awards: | Grant Date |
Number of | Fair Value |
Shares of | |||
Stock or | of Stock | ||
Units | and Option | ||
(#) | Awards(1) | ||
16,000 | (5) | $ | 1,904,160 |
$ | 5,355,450 | ||
16,000 | (5) | $ | 1,904,160 |
$ | 1,904,160 | ||
13,000 | (5) | $ | 1,547,130 |
$ | 1,547,130 | ||
9,000 | (5) | $ | 1,071,090 |
$ | 1,071,090 | ||
8,000 | (5) | $ | 952,080 |
$ | 952,080 |
- The amounts in this column represent the aggregate grant date fair values of the RSUs and PSUs granted during the year indicated in the row, computed in accordance with FASB Accounting Standards Codification Topic 718.
- The 2019 Executive Bonus Plan did not provide for a maximum payout level. The Company evaluated achievement of its pre-established corporate performance metrics on a quarterly basis, with maximum accrual of 150% of the annual target bonus pool attributable to that quarter. However, quarterly accruals under the plan were considered earned for eventual payment to eligible executive bonus plan participants in February 2020. Any executive officer who terminated employment prior to certification of annual results under the 2019 Executive Bonus Plan was not eligible for payout and those accrued amounts were reallocated to the Company bonus pool. As a result, bonuses paid to executive officers could potentially exceed the executive officer's target annual cash bonus opportunity (with the ultimate amount payable varying based on the overall size of the earned bonus pool and the number of executive officers eligible to receive bonus payouts at the point of payout). For more information, please see the section entitled "Compensation Discussion and Analysis- Annual Cash Bonus Plan" contained in this Proxy Statement.
- The amounts reflected relate to Mr. Sallé's participation in a sales incentive plan, for which there is no minimum or maximum payout. Mr. Salle's commissions were calculated based on a fixed rate for certain sales up to 100% of the pre-established monthly quota and a higher fixed commission rate for sales above the annual target quota.
- The amounts in this row reflect, in share amounts, the target and maximum potential PSUs for the performance period from January 1, 2019, through December 31, 2022. The 2019 PSU program did not contain any threshold value. These PSU awards vest over a four-year period as follows: 50% of the unvested PSUs will become eligible for vesting if, during the four-year period following the grant (the "Performance Period"), the company (a) has had five consecutive quarters of year over year revenue growth exceeding the pre-defined target percentage and (b) has achieved certain cash flow metrics target per the Board-approved operating plan cumulatively over the same five quarter period, subject to the executive's continued service with us through the applicable year and achievement.100% of the unvested PSUs will become eligible for vesting if, during the four-year period following the grant (the "Performance Period"), the company (a) has had five consecutive quarters of year over year revenue growth exceeding the pre-defined target percentage and (b) has achieved certain cash flow metrics stretch target per the Board-approved operating plan cumulatively over the same five quarter period, subject to the executive's continued service with us through the applicable year and achievement.
- The RSU awards granted to our Named Executive Officers (other than our CEO) vest over a four-year period, with one-quarter of the shares vesting on each of the first four anniversaries of February 1, 2019, the vesting start date, contingent upon the Named Executive Officer remaining continuously employed by us through each applicable vesting date. The time-based RSU award granted to our CEO vests in full on the fifth anniversary of February 1, 2019, the vesting start date, contingent upon his remaining continuously employed by us through such vesting date.
37
Outstanding Equity Awards at December 31, 2019
Option Awards | Stock Awards |
Named Executive Officer
Gary Steele
Paul Auvil
David Knight
Blake Sallé
Bhagwat Swaroop
Number of Securities | Option |
Underlying Unexercised | Exercise |
Options(#)(1) | Price |
Exercisable | Unexercisable | (2) | |
4,241 | - | $ | 14.12 |
120,000 | - | $ | 36.00 |
100,000 | - | $ | 57.49 |
62,292 | 2,708 | $ | 50.93 |
80,000 | - | $ | 36.00 |
32,000 | - | $ | 57.49 |
30,667 | 1,333 | $ | 50.93 |
3,392 | - | $ | 57.49 |
15,333 | 667 | $ | 50.93 |
11,354 | 3,646 | $ | 77.50 |
Number of | Market Value of | |||
Shares | Shares or Units | |||
or Units That | of Stock That | |||
Option | Have Not | Have Not | ||
Expiration | Vested | Vested | ||
Date | (#)(3) | (4) | ||
3/4/2023 | ||||
3/25/2024 | ||||
4/5/2025 | ||||
4/7/2026 | 7,900 | $ | 906,762 | |
7,900 | $ | 906,762 | ||
22,500 | $ | 2,582,550 | ||
22,500 | $ | 2,582,550 | ||
31,950 | $ | 3,667,221 | ||
42,600 | (5) | $ | 4,889,628 | |
168,818 | $ | 19,376,930 | ||
225,090 | (5) | $ | 25,835,830 | |
16,000 | (6) | $ | 1,836,480 | |
3/25/2024 | 45,000 | (5) | $ | 5,165,100 |
4/5/2025 | ||||
4/7/2026 | 4,000 | $ | 459,120 | |
4,000 | $ | 459,120 | ||
10,000 | $ | 1,147,800 | ||
10,000 | $ | 1,147,800 | ||
12,450 | $ | 1,429,011 | ||
16,600 | (5) | $ | 1,905,348 | |
37,500 | $ | 4,304,250 | ||
16,000 | $ | 1,836,480 | ||
16,000 | (5) | $ | 1,836,480 | |
4/5/2025 | ||||
4/7/2026 | 2,000 | $ | 229,560 | |
2,000 | $ | 229,560 | ||
6,000 | $ | 688,680 | ||
6,000 | $ | 688,680 | ||
12,450 | $ | 1,429,011 | ||
16,600 | (5) | $ | 1,905,348 | |
13,000 | $ | 1,492,140 | ||
13,000 | (5) | $ | 1,492,140 | |
10,000 | $ | 1,147,800 | ||
5,250 | $ | 602,595 | ||
3,000 | $ | 344,340 | ||
22,500 | $ | 2,582,550 | ||
9,000 | $ | 1,033,020 | ||
8/28/2026 | 9,000 | (5) | $ | 1,033,020 |
11,875 | $ | 1,363,013 | ||
2,750 | $ | 315,645 | ||
4,000 | $ | 459,120 | ||
4,000 | $ | 459,120 | ||
6,000 | $ | 688,680 | ||
8,000 | (5) | $ | 918,240 | |
8,000 | $ | 918,240 | ||
8,000 | (5) | $ | 918,240 |
- Unless otherwise noted in these footnotes, all stock options referenced in this table vest as to 25% of the shares of our common stock subject to the option on the first anniversary of the vesting commencement date, with the remainder of the shares vesting monthly in equal installments over the next three years.
- Represents the fair market value of a share of our common stock, as determined by our Board of Directors or as determined by the closing market price, on the option's grant date. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operation-Critical Accounting Policies- Stock-Based Compensation" of our annual report on Form 10-K for a discussion of how we have valued our common stock.
- Unless otherwise noted in these footnotes, all RSUs referenced in this table vest as to 25% of the underlying shares of common stock on each of the four successive anniversaries of the vesting commencement date, subject to the executive's continued service on each applicable vesting date.
38
- Market value of shares based on closing price of our common stock as reported on the NASDAQ Stock Market on December 31, 2019 of $114.78.
- Represent maximum potential PSUs outstanding on December 31, 2019. Please refer to Note (4) for the "2019 Grants of Plan-Based Awards" table for detail.
- Represents the RSUs vesting with respect to 100% of the underlying shares on the fifth anniversary of the vesting commencement date.
2019 Options Exercised and Stock Vested
The following table provides information regarding stock option exercises by our named executive officers during the 2019 fiscal year, and the number of shares of underlying RSUs held by each named executive officer that vested during the 2019 fiscal year. Value realized on option exercise is calculated by subtracting the aggregate exercise price of the options exercised from the aggregate market value of the shares of common stock acquired on the date of exercise. Value realized on vesting of restricted stock unit awards is based on the fair market value of our common stock on the vesting date multiplied by the number of shares vested and does not necessarily reflect proceeds received by the named executive officer.
Option Awards | Stock Awards | |||||||||||
Number of | Number of | |||||||||||
Shares Acquired | Value Realized | Shares Acquired | Value Realized | |||||||||
Named Executive Officer | on Exercise | on Vesting | ||||||||||
(#) | on Exercise | (#) | on Vesting | |||||||||
Gary Steele | 83,774 | $ | 10,178,196 | 192,661 | $ | 22,269,613 | ||||||
Paul Auvil | 90,000 | $ | 10,941,087 | 43,150 | $ | 4,971,557 | ||||||
David Knight | 10,198 | $ | 1,239,363 | 19,400 | $ | 2,265,084 | ||||||
Blake Sallé | - | $ | - | 15,250 | $ | 1,753,435 | ||||||
Bhagwat Swaroop | 10,000 | $ | 1,197,420 | 20,125 | $ | 2,398,936 |
Potential Payments upon Termination or Change in Control
In April 2018 (and in the case of Mr. Sallé, October 2018), we entered into Change in Control and Severance Agreements ("Severance Agreement") with certain executive officers of the Company that provide for certain severance and other benefits in the event of certain terminations of employment, including in connection with a change in control transaction. These arrangements are designed to retain executives and provide continuity of management in the event of a change in control.
Change in Control Severance Agreements
Pursuant to each such Severance Agreement, in the event each executive officer experiences a qualifying termination (a termination without "cause" or resignation for "good reason"), each as defined in Severance Agreement, subject to his or her execution of a general release of claims, the executive will become entitled to receive (i) a cash lump-sum severance payment equal to six months of his or her base salary, as in effect immediately prior to the qualifying termination; and (ii) payment for continued healthcare coverage under COBRA for up to six months for the executive officer and his or her covered dependents.
In addition, solely to the extent the qualifying termination occurs within 12 months following any change in the Company's Chief Executive Officer, each of the executive officer's outstanding equity awards (including equity awards subject to performance-based vesting criteria, to the extent the applicable performance criteria has been achieved upon termination) shall accelerate and become vested and exercisable as if the executive officer had completed an additional 12 months of service following the effective date of his or qualifying termination (reduced to six months if the effective date of the qualifying termination is less than 12 months after executive officer's commencement of employment with the Company).
39
In the event the executive officer experiences a qualifying termination during the period beginning three months prior to a change in control of the Company (as defined in the Severance Agreement) or, if earlier, upon the execution of a definitive agreement to effect a change in control, and ending 18 months following the consummation of a change in control, subject to his or her execution of a general release of claims, the executive will become entitled to receive (i) a cash lump-sum severance payment equal to six months of his or her base salary, as in effect immediately prior to the qualifying termination; (ii) a cash lump-sum payment equal to 50% of the executive officers annual target bonus, as in effect immediately prior to the qualifying termination; and (iii) payment for continued healthcare coverage under COBRA for up to six months for the executive officer and his or her covered dependents. In addition, each of the executive officer's outstanding equity awards (including awards that would otherwise vest only upon satisfaction of performance criteria) will accelerate and become vested and exercisable in full; provided that if the Company's execution of the definitive agreement to effect a change in control occurs less than 12 months after the executive officer's commencement of employment with the Company, his or her equity awards will accelerate and become vested and exercisable, as applicable, with respect to 50% of the shares underlying his or her equity awards at the time of the qualifying termination, with all performance-based awards determined as if all applicable performance criteria were achieved at target levels.
We have entered into employment, termination of employment and change-in-control arrangements with our named executive officers as summarized
below:
Gary Steele The following table summarizes the potential payments and benefits payable to Mr. Steele upon termination of employment or a change in our control under each situation listed below, modeling, in each situation, that Mr. Steele was terminated on December 31, 2019.
Executive Benefits and Payments upon | Value of Accelerated Equity Awards | |||||||||||||||||||
Base Salary | Bonus | Options | RSUs and PSUs | Other Benefits | ||||||||||||||||
Termination | ||||||||||||||||||||
Voluntary Termination or Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Qualifying Termination Unrelated to a Change in Control | $ | 267,500 | $ | - | $ | - | $ | - | $ | 3,680 | ||||||||||
Qualifying Termination following Changes in the CEO | $ | 267,500 | $ | - | $ | 172,906 | $ | 12,077,496 | $ | 3,680 | ||||||||||
Qualifying Termination in Connection with a Change in | ||||||||||||||||||||
Control | $ | 267,500 | $ | 263,425 | $ | 172,906 | $ | 51,602,419 | $ | 3,680 |
Paul Auvil. The following table summarizes the potential payments and benefits payable to Mr. Auvil upon termination of employment or a change in our control under each situation listed below, modeling, in each situation, that Mr. Auvil was terminated on December 31, 2019.
Executive Benefits and Payments upon
Termination
Voluntary Termination or Termination for Cause Qualifying Termination Unrelated to a Change in Control Qualifying Termination following Changes in the CEO Qualifying Termination in Connection with a Change in Control
Base Salary
$ | - | $ |
$ | 225,000 | $ |
$ | 225,000 | $ |
$ | 225,000 | $ |
40 |
Value of Accelerated Equity Awards
Bonus | Options | RSUs and PSUs | Other Benefits | |||
- | $ | - | $ | - | $ | - |
- | $ | - | $ | - | $ | 15,888 |
- | $ | 85,112 | $ | 4,436,247 | $ | 15,888 |
165,863 | $ | 85,112 | $ | 14,525,409 | $ | 15,888 |
David Knight The following table summarizes the potential payments and benefits payable to Mr. Knight upon termination of employment or a change in our control under each situation listed below, modeling, in each situation, that Mr. Knight was terminated on December 31, 2019.
Executive Benefits and Payments upon | Value of Accelerated Equity Awards | |||||||||||||||||||
Base Salary | Bonus | Options | RSUs and PSUs | Other Benefits | ||||||||||||||||
Termination | ||||||||||||||||||||
Voluntary Termination or Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Qualifying Termination Unrelated to a Change in Control | $ | 212,500 | $ | - | $ | - | $ | - | $ | 15,888 | ||||||||||
Qualifying Termination following Changes in the CEO | $ | 212,500 | $ | - | $ | 42,588 | $ | 1,997,172 | $ | 15,888 | ||||||||||
Qualifying Termination in Connection with a Change in | ||||||||||||||||||||
Control | $ | 212,500 | $ | 125,385 | $ | 42,588 | $ | 8,155,119 | $ | 15,888 |
Blake Sallé The following table summarizes the potential payments and benefits payable to Mr. Sallé upon termination of employment or a change in our control under each situation listed below, modeling, in each situation, that Mr. Sallé was terminated on December 31, 2019.
Executive Benefits and Payments upon | Value of Accelerated Equity Awards | ||||||||||||||||||||
Base Salary | Bonus | Options | RSUs and PSUs | Other Benefits | |||||||||||||||||
Termination | |||||||||||||||||||||
Voluntary Termination or Termination for Cause | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Qualifying Termination Unrelated to a Change in Control | $ | 210,000 | $ | - | $ | - | $ | - | $ | 11,608 | |||||||||||
Qualifying Termination following Changes in the CEO | $ | 210,000 | $ | - | $ | - | $ | 2,008,650 | $ | 11,608 | |||||||||||
Qualifying Termination in Connection with a Change in | |||||||||||||||||||||
Control | $ | 210,000 | $ | 51,775 | $ | - | $ | 6,743,325 | $ | 11,608 |
Bhagwat Swaroop The following table summarizes the potential payments and benefits payable to Mr. Swaroop upon termination of employment or a change in our control under each situation listed below, modeling, in each situation, that Mr. Swaroop was terminated on December 31, 2019.
Executive Benefits and Payments upon
Termination
Voluntary Termination or Termination for Cause Qualifying Termination Unrelated to a Change in Control Qualifying Termination following Changes in the CEO Qualifying Termination in Connection with a Change in Control
Base Salary
$ | - | $ |
$ | 200,000 | $ |
$ | 200,000 | $ |
$ | 200,000 | $ |
41 |
Value of Accelerated Equity Awards
Bonus | Options | RSUs and PSUs | Other Benefits | |||
- | $ | - | $ | - | $ | - |
- | $ | - | $ | - | $ | 15,888 |
- | $ | 135,923 | $ | 2,596,898 | $ | 15,888 |
117,960 | $ | 135,923 | $ | 6,040,298 | $ | 15,888 |
Chief Executive Officer Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and SEC rules, we are providing the following information about the relationship of the annual total compensation of our employees (excluding Mr. Steele, our Chief Executive Officer, or CEO) and the annual total compensation of our CEO.
For 2019:
- The median of the annual total compensation of all employees of our company, excluding our CEO, was $157,971; and
- The annual total compensation of our CEO was $8,413,694.
Based on this information the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 53:1. This ratio is meant to be a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
In 2019, due to a significant change of employee population though organic hiring, acquisitions, and transitions, we determined there was a need to review the employee population and re-establish our median employee. Thus the ratio for 2019 represents a new median employee in the ratio.
As permitted by SEC rules, to identify our median employee, we selected base salary, which we calculated as annual base pay using a reasonable estimate of the hours worked during 2019 for hourly employees and using annual salary for our remaining employees, as the compensation measure to be used to compare the compensation of our employees as of December 31, 2019, for the 12-month period from January 1, 2019, through December 31, 2019.
We annualized base pay for any permanent employees who commenced work during 2019. We also applied a conversion rate for our non-U.S. employee as of December 31, 2019. We did not include any contractors or other non-employee workers in our employee population. We determined the annual total compensation of our CEO, Mr. Steele, for the fiscal year ended December 31, 2019 was $8,413,694, as report in our 2019 Summary Compensation Table.
Using this approach, we selected the individual who was at the median of our employee population. We then calculated annual total compensation for this individual using the same methodology we use for our named executive officers as set forth in our Summary Compensation Table. We determined that such individual's annual total compensation for the fiscal year ended December 31, 2019 was $157,971.
Because the SEC rules for identifying the median of the annual total compensation of all employees of our company and calculating the pay ratio based on that employee's annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee population and compensation practices, the pay ratio reported by other companies may not be comparable to the our pay ratio, as other companies have different employee populations and compensation practices and may have used different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. We provide this disclosure not to facilitate comparisons of pay ratios among different companies, even companies within the same industry, but rather to allow stockholders to better understand and assess our compensation practices.
42
REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The material in this report is not "soliciting material," is not deemed "filed" with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of Proofpoint under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Mr. Feiber, Chair
Ms. Evan
Mr. Wallace
43
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information as of December 31, 2019, with respect to compensation plans under which shares of our common stock may be issued. The category "Equity compensation plans approved by security holders" in the table below consists of the 2002 Stock Option/Stock Issuance Plan, 2012 Equity Incentive Plan and 2012 Employee Stock Purchase Plan. The table does not include information with respect to shares subject to outstanding awards granted under other equity compensation arrangements assumed by Proofpoint in connection with mergers and acquisitions of the companies that originally granted those awards.
Number of securities | |||||||||||
Weighted- | remaining available | ||||||||||
Number of securities | for future | ||||||||||
average | issuance under | ||||||||||
to be issued upon | exercise price | equity compensation | |||||||||
exercise of | of outstanding | plans (excluding | |||||||||
Plan category | outstanding options, | options, warrants | securities reflected in | ||||||||
warrants and rights(#) | and rights | column (a))(#) | |||||||||
Equity compensation plans approved by | |||||||||||
security holders | 947,668 | (1) | $ | 32.57 | 14,133,732 | (2) | |||||
Equity compensation plans not approved | |||||||||||
by security holders | - | (3) | $ | - | - | ||||||
Total | 947,668 | $ | 32.57 | 14,133,732 | |||||||
- Excludes purchase rights accruing under the 2012 Employee Stock Purchase Plan.
- Includes 2,165,251 shares that remain available for purchase under the 2012 Employee Stock Purchase Plan and 4,832,739 shares of common stock that are subject to outstanding awards under the 2012 Equity Incentive Plan. Any such shares of common stock that are subject to outstanding awards under the 2002 Stock Option/Stock Issuance Plan that are issuable upon the exercise of options that expire or become unexercisable for any reason without having been exercised in full will be available for future grant and issuance under the 2012 Equity Incentive Plan.
- Excludes outstanding options to acquire 99,351 shares of common stock with weighted average exercise price of $11.32 and 89,044 shares subject to outstanding awards that were assumed by Proofpoint in connection with mergers and acquisitions of the companies that originally granted those awards.
44
RELATED PARTY TRANSACTIONS
Other than compensation arrangements, including employment, termination of employment and change in control and indemnification arrangements, discussed above in the section entitled "Executive Compensation," there are no transactions since January 1, 2019, or currently proposed transactions in which:
- we have been or are to be a participant;
- the amount involved exceeded or exceeds $120,000; and
- any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest.
Review, Approval or Ratification of Transactions with Related Parties
Our board of directors has adopted a written related-person transactions policy. Under this policy, the audit committee reviews transactions that may be "related-person transactions," which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of the policy, a related person is a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed fiscal year, and their immediate family members.
This policy provides that, barring special facts or circumstances, a related person does not have a direct or indirect material interest in the following categories of transactions:
- employment-relatedcompensation to executive officers that is approved by the compensation committee;
- compensation to non-employee directors that is approved by our board of directors and is required to be reported in our proxy statement;
- transactions with another company at which (i) the related person's only relationship is as a beneficial owner of less than 10% of that company's shares or as a limited partner holding interests of less than 10% in that partnership; or (ii) the related person is a director (and his or her interest in the transaction arises solely from his or her position as a director of that company);
- charitable contributions, grants or endowments by us to a charitable organization, foundation or university at which the related person's only relationship is as an employee (or at which the related person is a trustee, director or executive officer if the aggregate amount involved in our fiscal year does not exceed $300,000), or any non-discretionary matching contribution, grant or endowment made pursuant to a matching gift program;
- transactions where the related person's interest arises solely from the ownership of publicly traded securities issued by us and all holders of those securities receive proportional benefits;
- ordinary course business travel and expenses, advances and reimbursements; and
- payments made pursuant to (i) directors and officers insurance policies, (ii) our certificate of incorporation or bylaws, and/or (iii) any policy, agreement or instrument previously approved by our board of directors, such as indemnification agreements.
When transactions involving related persons do not fall into one of the above categories, they will be reviewed by our disclosure committee. The disclosure committee determines whether a related person could have a significant interest in such a transaction, and any such transaction is referred to the audit committee. Transactions may also be identified through our code of business conduct and ethics or other policies and procedures and reported to the audit committee. The audit committee will review the material facts of all related person transactions and either approve, disapprove, ratify, rescind, or take other appropriate action (in its discretion) with respect to the transaction.
45
REPORT OF THE AUDIT COMMITTEE
The information contained in the following report of Proofpoint's Audit Committee is not considered to be "soliciting material," "filed" or incorporated by reference in any past or future filing by Proofpoint under the Securities Exchange Act of 1934 or the Securities Act of 1933 unless and only to the extent that Proofpoint specifically incorporates it by reference.
The Audit Committee has reviewed and discussed with Proofpoint's management and PricewaterhouseCoopers, LLP the audited consolidated financial statements of Proofpoint for the year ended December 31, 2019. The Audit Committee has also discussed with PricewaterhouseCoopers, LLP the matters required to be discussed by SAS No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers, LLP its independence from Proofpoint.
Based on the review and discussions referred to above, the Audit Committee recommended to the board of directors that the audited consolidated financial statements be included in Proofpoint's annual report on Form 10-K for the year ended December 31, 2019, for filing with the Securities and Exchange Commission.
Submitted by the Audit Committee
R. Scott Herren, Chair
Dana Evan
Kristen Gil
46
ADDITIONAL INFORMATION
Stockholder Proposals to be Presented at Next Annual Meeting
Proofpoint's bylaws provide that, for stockholder nominations to the Board or other proposals to be considered at an annual meeting, the stockholder must give timely notice thereof in writing to the Corporate Secretary at Proofpoint, Inc., 892 Ross Drive, Sunnyvale, California 94089, Attn: Corporate Secretary.
To be timely for the 2021 annual meeting, a stockholder's notice must be delivered to or mailed and received by our Corporate Secretary at the principal executive offices of Proofpoint not earlier than 5:00 p.m. Pacific Time on February 27, 2021 and not later than 5:00 p.m. Pacific Time on March 29, 2021. A stockholder's notice to the Corporate Secretary must set forth as to each matter the stockholder proposes to bring before the annual meeting the information required by Proofpoint's bylaws.
Stockholder proposals submitted pursuant to Rule 14a-8 under the Exchange Act and intended to be presented at Proofpoint's 2021 annual meeting must be received by the company not later than December 25, 2020 in order to be considered for inclusion in Proofpoint's proxy materials for that meeting.
Available Information
Proofpoint will mail without charge, upon written request, a copy of Proofpoint's annual report on Form 10-K for the year ended December 31, 2019, including the financial statements and list of exhibits, and any exhibit specifically requested. Requests should be sent to:
Proofpoint, Inc.
892 Ross Drive
Sunnyvale, California 94089
Attn: Investor Relations
(408) 517-4710
The Annual Report is also available at http://investors.proofpoint.com.
"Householding"-Stockholders Sharing the Same Last Name and Address
The SEC has adopted rules that permit companies and intermediaries (such as brokers) to implement a delivery procedure called "householding." Under this procedure, multiple stockholders who reside at the same address may receive a single copy of our annual report and proxy materials unless the affected stockholder has provided contrary instructions. This procedure reduces printing costs and postage fees, and helps protect the environment as well.
This year, a number of brokers with account holders who are Proofpoint stockholders will be "householding" our annual report and proxy materials. A single set of annual report and other proxy materials will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be "householding" communications to your address, "householding" will continue until you are notified otherwise or until you revoke your consent. Stockholders may revoke their consent at any time by contacting Broadridge, either by calling toll-free (800) 542-1061, or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York, 11717.
Upon written or oral request, Proofpoint will promptly deliver a proxy statement, proxy card, annual report and other proxy materials to any stockholder at a shared address to which a single copy of any of those documents was delivered. To receive a separate copy of the proxy statement, proxy card, annual report and other proxy materials, you may write Proofpoint's Investor Relations department at 892 Ross Drive, Sunnyvale, California 94089, Attn: Investor Relations, or at https://investors.proofpoint.com/investors/resources/contact-investor-relations/default.aspx .
Any stockholders who share the same address and currently receive multiple copies of Proofpoint's annual report and other proxy materials who wish to receive only one copy in the future can contact their bank, broker or other holder of record to request information about householding or Proofpoint's Investor Relations department at the address or telephone number listed above.
47
OTHER MATTERS
The board of directors does not presently intend to bring any other business before the meeting and, so far as is known to the board of directors, no matters are to be brought before the meeting except as specified in the notice of the meeting. As to any business that may arise and properly come before the meeting, however, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.
48
49
50
Attachments
- Original document
- Permalink
Disclaimer
Proofpoint Inc. published this content on 24 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 April 2020 14:42:17 UTC
