Document


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  þ
Filed by a Party other than the Registrant  ¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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Commvault Systems, 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):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
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Form, Schedule or Registration Statement No.:
 
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Date Filed:








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Commvault Systems, Inc.
1 Commvault Way
Tinton Falls, NJ 07724
(732) 870-4000
July 3, 2019
To the Stockholders of Commvault Systems, Inc.:
You are cordially invited to attend the 2019 Annual Meeting of Stockholders of Commvault Systems, Inc. (“Commvault” or the “Company”). The Annual Meeting will be held on Thursday, August 22, 2019, at 9:00 a.m., local time, at the Company’s offices located at 1 Commvault Way, Tinton Falls, New Jersey.
We are taking advantage of the Securities and Exchange Commission rules that allow companies to furnish proxy materials to stockholders via the Internet. This electronic process gives you fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. If you received a Notice Regarding the Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials, unless you specifically request one. The Notice Regarding the Availability of Proxy Materials instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report, as well as how to submit your proxy over the Internet or by telephone. If you would still like to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials which are included in the Notice Regarding the Availability of Proxy Materials.
In the materials accompanying this letter, you will find a Notice of Annual Meeting of Stockholders and a Proxy Statement relating to the proposals you will be asked to consider and vote upon at the Annual Meeting. The Proxy Statement includes general information about Commvault as well as information on the specific proposals you will be asked to consider and vote upon at the Annual Meeting. A record of our activities for the year ended March 31, 2019 is contained in the Annual Report to stockholders, a copy of which is available on the Internet as described in the Notice Regarding the Availability of Proxy Materials and a printed copy is available upon request and without charge to stockholders entitled to vote at the Annual Meeting.
All stockholders are invited to attend the Annual Meeting in person. Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. Therefore, I urge you to promptly vote by either using our telephone or internet voting procedures or by completing, executing and returning the proxy card which you have received from us. If you attend the Annual Meeting, you may vote in person even if you have previously submitted your proxy.
 
Very truly yours,
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NICHOLAS ADAMO
Chairman of the Board




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Commvault Systems, Inc.
1 Commvault Way
Tinton Falls, NJ 07724
(732) 870-4000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 22, 2019

Important Notice Regarding the Availability of Proxy Materials for the Meeting to Be Held on August 22, 2019
The Annual Meeting of Stockholders of Commvault Systems, Inc. will be held at the Company’s offices located at 1 Commvault Way, Tinton Falls, New Jersey on Thursday, August 22, 2019, at 9:00 a.m., local time.
The purposes of the meeting are:
1. To elect three Class I Directors for a term to expire at the 2022 Annual Meeting of Stockholders;
2. To ratify the appointment of Ernst & Young LLP as independent public accountants for the fiscal year ending March 31, 2020;
3. To approve additional shares to be available for grant under the Company’s 2016 Omnibus Incentive Plan (the “2016 Incentive Plan”), as amended by the Third Amendment;
4. To vote, on an advisory basis, on executive compensation; and
5. To transact such other business as may properly come before the meeting, or any adjournment or postponement thereof.
Only stockholders of record as of the close of business on June 28, 2019 are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof. Stockholders of record will be mailed a Notice Regarding the Availability of Proxy Materials on or around July 9, 2019, which provides stockholders with instructions on how to access the proxy materials on the Internet, and if they prefer, how to request paper copies of these materials.
Each stockholder is urged to either to utilize our telephone or Internet voting procedures to submit a proxy or to complete, date and sign the proxy card which you have received from us and return it to us in the envelope which we have provided and which requires no postage if mailed in the United States. Utilizing our telephone or Internet voting procedures to submit your proxy or sending in your proxy card will not prevent you from voting in person at the Annual Meeting.
This proxy statement and our annual report to stockholders are available at www.edocumentview.com/CVLT.
 
By Order of the Board of Directors
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WARREN H. MONDSCHEIN
Vice President, General Counsel and Secretary
Chief Compliance Officer

Tinton Falls, New Jersey
July 3, 2019




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Commvault Systems, Inc.
1 Commvault Way
Tinton Falls, NJ 07724
(732) 870-4000
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 22, 2019
July 3, 2019

This statement is furnished in connection with the solicitation on behalf of the Board of Directors of Commvault Systems, Inc. (which we refer to as we, us, our, Commvault or our company) of proxies to be voted at the Annual Meeting of Stockholders on August 22, 2019, or at any adjournment or postponement thereof. This proxy statement and the associated proxy card are first being made available at www.edocumentview.com/CVLT, and we intend to begin distribution of the Notice Regarding the Availability of Proxy Materials to stockholders, on or about July 9, 2019. A copy of our annual report on form 10-K for the fiscal year ended March 31, 2019, which includes audited financial statements, is also being made available concurrently with the proxy statement at www.edocumentview.com/CVLT.
Voting Rights and Solicitation
June 28, 2019 was the record date for the determination of stockholders entitled to vote at the Annual Meeting. On that date, 45,076,718 shares of common stock were outstanding and entitled to vote. Each stockholder is entitled to one vote for each share of common stock held of record. A list of stockholders entitled to vote at the Annual Meeting will be available for examination by stockholders during regular business hours at our principal executive offices located at 1 Commvault Way, Tinton Falls, New Jersey, 07724 for 10 days preceding the meeting and also will be available for examination at the Annual Meeting.
Stockholders may provide voting instructions by completing, executing and returning the proxy card which we have provided. Alternatively, stockholders may submit a proxy over the Internet or by telephone in accordance with the instruction set forth on the proxy card or the Notice Regarding Availability of Proxy Materials. All properly completed, unrevoked proxies received prior to the close of voting at the Annual Meeting will be voted in accordance with the instructions provided. If a properly executed, unrevoked written proxy card submitted by a record holder does not specifically direct the voting of shares, the shares represented by such proxy will be voted (i) FOR the election of all nominees for election as director described in this proxy statement, (ii) FOR the ratification of the appointment of Ernst & Young LLP as our independent public accountants for the fiscal year ending March 31, 2020, (iii) FOR the approval of additional shares to be available for grant under the 2016 Incentive Plan, as amended by the Third Amendment, (iv) FOR approval, on an advisory basis, of executive compensation, and (v) in accordance with the judgment of the persons named in the proxy as to such other matters as may properly come before the Annual Meeting. If you are a beneficial owner of shares, the broker will ask you how you want your shares to be voted. If you give the broker instructions, the broker will vote your shares as you direct. If your broker does not receive instructions from you about how your shares are to be voted, one of two things can happen, depending on the type of proposal. Brokers have discretionary power to vote your shares with respect to “routine” matters, but they do not have discretionary power to vote your shares on “non-routine” matters. Brokers holding shares beneficially owned by their clients do not have the ability to cast votes with respect to the election of directors or executive compensation unless they have received instructions from the beneficial owner of the shares. It is therefore important that you provide instructions to your broker so that your vote with respect to directors and executive compensation is counted.
A proxy may be revoked at any time prior to the voting at the Annual Meeting by submitting a later-dated proxy (including a later-dated proxy via the Internet or telephone), giving timely written notice of such revocation to the Secretary of our Company or by attending the Annual Meeting and voting in person.
The presence at the Annual Meeting, in person or by proxy, of holders of a majority of the issued and outstanding shares of common stock as of the record date is considered a quorum for the transaction of business. If you submit a properly completed proxy or if you appear at the Annual Meeting to vote in person, your shares of common stock will be considered part of the quorum. Once a quorum is present, voting on specific proposals may proceed.



Assuming the presence of a quorum, the affirmative vote of a majority of the votes cast at the Annual Meeting (in person or by proxy) is required (1) to elect directors, (2) to ratify Ernst & Young LLP as our independent public accountants for the fiscal year ending March 31, 2020, and (3) approval of additional shares to be available for grant under the Company’s 2016 Incentive Plan. As a non-binding, advisory vote, there is no specific approval requirement for the advisory vote on executive compensation. However, the Board of Directors will consider that the stockholders have approved executive compensation on an advisory basis if the advisory vote on executive compensation receives the affirmative vote of a majority of the votes cast on such proposal.
In order to assure that your votes, as a record holder, are tabulated in time to be voted at the Annual Meeting, you must complete your voting over the Internet or by telephone so that it is received by 3:00 a.m. Eastern Time on August 22, 2019. Similarly, in order to assure that your votes, as a beneficial holder, are tabulated in time to be voted at the Annual Meeting, you must submit your voting instructions, so that your broker will be able to vote, by 11:59 p.m. Eastern Time on August 21, 2019. If you attend the Annual Meeting, you may vote in person even if you have previously submitted your proxy.
If you choose to vote your shares in person at the Annual Meeting, please bring the Notice Regarding the Availability of Proxy Materials containing your control number. Shares held in “street name” through your broker, bank or other nominee may be voted in person by you only if you obtain a signed proxy from the shareholder of record giving you the right to vote the shares. You must bring such signed proxy to the Annual Meeting, along with an account statement or letter from the broker, bank or other nominee indicating that you are the beneficial owner of the shares and that you were the beneficial owner of the shares on June 28, 2019.
Effect of Abstentions and Broker Non-Votes
Abstentions will be counted for the purposes of establishing a quorum, but will not be counted as a vote cast either for or against a nominee or other matter and accordingly will be disregarded for the purpose of determining whether a nominee was elected as director or a matter was approved. As a result, abstentions have no effect on the outcome of the election of directors, the ratification of the appointment of Ernst & Young LLP as our independent public accountants, or approval of additional shares to be available for grant under the Company’s 2016 Incentive Plan. Similarly, abstentions have no effect on the advisory proposals to approve executive compensation.
If you hold shares through a broker or other nominee, your broker or nominee is permitted to exercise voting discretion only with respect to certain, routine matters. Broker non-votes are shares held by brokers or other nominees that do not have discretionary voting authority with respect to a matter and have not received specific voting instructions from the beneficial owner. Broker non-votes will be counted for purposes of establishing a quorum, but will not be counted as a vote cast either for or against a nominee or other matter. As a result, broker non-votes have no effect on the outcome of the vote on any of the matters presented for your vote.
Brokers who have not received voting instructions from beneficial owners may vote in their discretion with respect to Proposal No. 2 (the ratification of the appointment of our independent auditors).






















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Fiscal Year 2019 Leadership and Governance Highlights
Fiscal year 2019 was an exciting year for our company, with new leadership both at the board and executive levels, and important changes in our governance polices.
Leadership Changes
New company leadership. Our new President and Chief Executive Officer, Mr. Sanjay Mirchandani, joined our company in February 2019. Mr. Mirchandani brings a wealth of international business experience to our company through his diverse and well-rounded career in technology. His appointment represents the culmination of an extensive leadership search through fiscal 2019.
New leadership for the Board. Our new Chairman of the Board, Mr. Nicholas Adamo, joined the Board in August 2018 as an independent Director and succeeded to the role of Chairman of the Board in April 2019. He is an experienced executive in the information technology industry, with more than twenty years as a senior executive at Cisco Systems.
Separation of the roles of CEO and Board Chairman. With the retirement of Mr. Bob Hammer, our longstanding President, Chairman and Chief Executive Officer, in February 2019, we have bifurcated the roles of CEO and Board Chairman. Our Board has determined that this represents the most effective leadership structure for our company at this time, as it allows the Board to focus on its oversight functions, led by an independent director, while the CEO focuses his efforts and attention on the day-to-day leadership of the company.
Four new directors appointed. In fiscal year 2019, we welcomed four new directors to our Board. In addition to Mr. Adamo, our new Chairman, and Mr. Mirchandani, our new President and CEO, Ms. Martha Bejar and Mr. Chuck Moran joined the Board in July 2018 as independent directors.
Increased Gender Diversity at the Board Level. Two of our most recent additions to the Board are women. In calendar year 2018, we welcomed Ms. YY Lee and Ms. Martha Bejar to the Board as independent directors, both of whom provide the Board with unique insights and perspectives based on their extensive executive-level experiences in the technology industry.
We are pleased to welcome each of these individuals to our company.
Corporate Governance Developments
Implementation of Proxy Access Provision. In May 2019, we implemented a “proxy access” provision in our amended and restated corporate Bylaws, which gives shareholders the ability to nominate director candidates for inclusion in our proxy materials.
Termination of Shareholder Rights Plan. In August 2018, we terminated our shareholder rights plan that had provided existing shareholders with preferred stock rights exercisable in certain circumstances. This plan had originally been put into place in 2008.
Increased Board Diversity. In 2018, the Board adopted a policy on Board diversity, which prioritizes a Board comprised of individuals with diverse backgrounds. Our recent Board appointments reflect these considerations, and we believe that our new Board members have a diverse range of experiences and backgrounds which benefit our Board and our company.
Continued Advisory Vote on Compensation. Consistent with our prior practice, we continue to seek shareholder support on an annual basis for our compensation of senior executives. See “Proposal No. 4” in this Proxy Statement.
We believe these changes and practices represent strong corporate governance measures that are in the best interests of our company and its shareholders.


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PROPOSAL NO. 1

ELECTION OF DIRECTORS
Our Board of Directors is divided into three classes, with one class of directors elected for a three-year term at each annual meeting. Each class consists of four directors, except for Class I which consists of three directors. Each director holds office until the third annual meeting after the meeting at which such director is elected and until his or her successor is duly elected and qualified or until his or her earlier resignation, removal or death.
Upon the recommendation of the Nominations and Governance Committee, the Board of Directors has nominated Nicholas Adamo, Martha H. Bejar and David F. Walker to hold office as Class I Directors until the annual meeting in 2022.
The persons named as proxy voters in the proxy card for our 2019 Annual Meeting, or their substitutes, will vote your proxy for all the nominees, each of whom has been designated as such by the Board of Directors, unless otherwise indicated in your proxy. Commvault has no reason to believe that the nominees named herein will be unavailable to serve as directors. However, in the event that any nominee for director withdraws or for any reason is not able to serve as a director, we will vote your proxy for the remainder of those nominated for director (except as otherwise indicated in your proxy) and for any replacement nominee designated by the Nominations and Governance Committee of the Board of Directors.
You may vote for or against, or you may abstain from voting on, any or all of the director nominees. Assuming a quorum is present, the affirmative vote of a majority votes cast at the Annual Meeting (in person or by proxy) will be required for the election of directors.

OUR BOARD OF DIRECTORS
The following table shows information as of June 28, 2019 with respect to each person who is a continuing director or director nominee. Biographical information for each continuing director is set forth immediately following the table. Biographical information for each director nominee appears under “Election of Directors” above.
 
Name
 
Age
 
Position
 
Director Since
Nicholas Adamo
 
55
 
Chairman
 
2018
Martha H. Bejar
 
57
 
Director
 
2018
Alan G. Bunte
 
65
 
Director, Executive Advisor to the Chief Executive Officer
 
2008
Frank J. Fanzilli Jr. (1)
 
62
 
Director
 
2002
Keith Geeslin (1)
 
66
 
Director
 
1996
Vivie “YY” Lee (1)
 
52
 
Director
 
2018
Sanjay Mirchandani
 
55
 
Director, President and Chief Executive Officer
 
2019
Chuck Moran (2)
 
64
 
Director
 
2018
Daniel Pulver (2)(3)
 
50
 
Director
 
1999
Gary B. Smith (3)
 
58
 
Director
 
2004
David F. Walker (2)(3)
 
65
 
Director
 
2006
 

(1)
Member of the Compensation Committee

(2)
Member of the Audit Committee

(3)
Member of the Nominations and Governance Committee


Nominees for Election
Nicholas Adamo has served as the Chairman of the Board since April 2019 and has served as a director of our company since August 2018. Mr. Adamo is a former senior executive of Cisco Systems, where he served a variety of sales and leadership roles

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over a 22 year career prior to his retirement in 2016. While there, Mr. Adamo served as the Senior Vice President ("SVP") of the Americas, where he managed Cisco’s largest geographic region, with annual IT and communications sales of more than $26 billion, and was responsible for 6,500 employees working across 60 different countries. Mr. Adamo also served as the SVP of Cisco's $12 billion Global Service Provider organization, leading sales, service delivery and development for the company's top service provider customers, among various other roles. Prior to his tenure at Cisco, he spent more than a decade at IBM in various sales and management assignments. Since leaving Cisco in 2016, Mr. Adamo has consulted with a range of small scale tech companies, and currently serves on the boards of Lookout, Blue Danube Systems and GTT Communications. In addition, Mr. Adamo serves on the board of directors of Inwood House, a not-for-profit organization in the New York City Area dedicated to helping at-risk teens. Mr. Adamo holds a bachelor of science degree in computer engineering from Columbia University.
Mr. Adamo is an experienced executive in the information technology industry, who brings a deep working knowledge of the industry and experience from both enterprise and service provider segments, that he can deploy to provide valuable insight and perspectives to our Board. He also has extensive experience and successes as a leader who is able to balance strategy and execution, foster long-standing strategic relationships, and guide business and technology discussions and decisions for shared success. This combination makes him an effective leader for our Board. 
Martha Bejar has served as a director of our company since July 2018. Ms. Bejar is the co-founder and Chief Executive Officer of Red Bison Advisory Group, LLC, a position she has held since April 2013. Previously, Ms. Bejar held the position of the Chief Executive Officer of several private telecommunications and technology companies, including Unium Inc., Flow Mobile Inc., and Wipro Infocrossing Inc. She has also held executive positions at Microsoft Corporation, Nortel Networks Corporation, and Bell Communications Research. Ms. Bejar currently serves as a member of the board of directors of CenturyLink Inc., Neopost SA and Sportman's Warehouse. In addition, Ms. Bejar serves on two non-for-profit boards, the Board of Trustees at Rainier Scholars and the President’s Advisory Group at EastWest Institute. Ms. Bejar earned an Advanced Management Program degree from Harvard Business School, graduated cum laude with a bachelor of science degree in Industrial Engineering from the University of Miami and also earned a master's of business administration from Nova Southeastern University.
Ms. Bejar has a strong track record of leadership with some of the world's leading corporations where she evidenced a proven ability to drive and support innovation in the technology and software space. She also provides the Board with a wealth of executive, strategic and financial experience in the industry which enables her to provide valuable insights regarding our company's operations and strategic development.
David F. Walker has served as a director of our company since February 2006 and is chair of our Audit Committee. Mr. Walker also serves on the boards of directors of Chico’s FAS, Inc. and CoreLogic, Inc., currently chairing the board of directors and the executive and audit committees at Chico’s, and chairing the audit committee and participating on the acquisition and strategic planning committee at CoreLogic. In addition, Mr. Walker previously served on the boards of directors of Atlantic Blue Group, Inc. during 2012, First Advantage Corporation from 2003 to 2009, Paradyne Networks from 2003 to 2005 and Technology Research Corporation from 2004 to 2010.
Mr. Walker was employed as the Director of the Accountancy Program and the Program for Social Responsibility and Corporate Reporting at the University of South Florida St. Petersburg from 2002 through his retirement in 2009. Prior to joining the University of South Florida, Mr. Walker was with Arthur Andersen LLP, having served as a partner in that firm from 1986 through 2002 and as partner in charge of the firm’s assurance and business advisory services practice for the Florida and Caribbean region. Mr. Walker earned a master’s of business administration from the University of Chicago Booth School of Business with concentrations in accounting, finance and marketing, and a bachelor of arts degree from DePauw University with majors in economics and mathematics and a minor in business administration. Mr. Walker is an NACD Board Leadership Fellow, a certified public accountant and a certified fraud examiner.
Mr. Walker’s governance, accounting and finance qualifications include an in depth understanding of risk oversight, accounting and financial reporting which is valuable to the Board of Directors, and he is an audit committee financial expert.
The Board of Directors recommends that you vote FOR each of the nominees listed above.

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Continuing Directors
Class II Directors Whose Terms Expire in 2020
Alan G. Bunte has served as a director of our company since January 2008, and served as our Executive Vice President and Chief Operating Officer from October 2003 until March 2019. Since March 2019, Mr. Bunte has served in the role of Executive Advisor to the CEO. Prior to joining our company, Mr. Bunte was with Norand Corporation from 1986 to January 1998, serving as its senior vice president of planning and business development from 1991 to January 1998. Mr. Bunte obtained his bachelor’s and master’s degrees in business administration from the University of Iowa.
Mr. Bunte’s detailed knowledge of the operational aspects of Commvault’s business, obtained through his long tenure as chief operating officer, is a valuable resource for Board discussions and decision-making. The Board benefits from Mr. Bunte’s long experience with our company and its management. Mr. Bunte has a strong financial background. In addition, his industry experience provides the Board with valuable insights.
Frank J. Fanzilli, Jr. has served as a director of our company since July 2002.  Mr. Fanzilli was previously a Managing Director and the Global Chief Information Officer of Credit Suisse First Boston, where he oversaw all aspects of Information Technology globally, from 1985 until 2002. Mr. Fanzilli continues to act as a Senior Advisor to Credit Suisse under their NeXT Fund, which invests in early and mid-stage technology and financial services companies. Prior to joining Credit Suisse, Mr. Fanzilli was an engineer with IBM, where he managed systems engineering and software development for Fortune 50 accounts. Mr. Fanzilli has served on the boards of a number of notable companies in the software industry, including PeopleSoft (acquired by Oracle), InterWoven (acquired by HP/Autonomy), 1010Data (acquired by Advance/Newhouse) and Enterprise DB (acquired by Greathill Partners). Mr. Fanzilli has also been a member of the compensation, nominating and governance, and audit committees of a number of public and private company boards. In addition to Commvault, Mr. Fanzilli currently serves on the boards of directors of Sapience Analytics, iBoss Cybersecurity, Skytap, and The Linux Foundation. He obtained his bachelor’s degree in management, cum laude, from Fairfield University and his master’s in business administration, with distinction, from New York University, where he was the Marcus Nadler Scholar.  He also attended the Stanford University Directors College for corporate directors and officers.
Mr. Fanzilli has extensive experience in information technology, and maintains an extensive network of C-Level executives in the IT industry.  He brings to our company the perspective of a corporate user of information systems and services, as well as the insights and perspective of an engineer and software developer.  His background of executive and board positions at large financial and technology companies has provided him with experience, knowledge and contacts in the industry.  Mr. Fanzilli’s insights in this core area of Commvault’s business are very useful to the Board. Mr. Fanzilli also contributes a customer perspective to the Board, allowing him to use his background, contacts, and experience to actively assist our company in sales and customer engagements. 
Charles "Chuck" Moran has served as a director of our company since July 2018. Mr. Moran is the founder of Skillsoft Plc., and served as its Chief Executive Officer and President from 1998 until his retirement in December 2015. He was also a director on the Skillsoft board. Prior to Skillsoft, Mr. Moran was the President and Chief Executive Officer of NETg National Education Training Group, a computer-based information technology training company, from 1995 –1997. Prior to NETg, Mr. Moran was the Chief Financial Officer and Chief Operations Officer of Softdesk, Inc, where he helped lead the company's successful initial public offering. Mr. Moran has previously held senior level sales and marketing positions at Insite Peripherals, Inc. and Archive Corporation. Mr. Moran currently serves as a member of the board of directors of Clarivate Analytics Plc. and Manhattan Associates, Inc., and serves as a director and advisor to various private companies. Mr. Moran earned a master's of business administration from Suffolk University and a bachelor of science degree from Boston College.
With more than two decades of experience working with technology companies, Mr. Moran has extensive leadership experience in the industry and expertise in critical areas including operations, finance and sales and marketing which are valuable to our Board. Mr. Moran's history and experience, including his various board memberships, also gives him financial expertise which he can deploy to great benefit to the company as a member of our Audit Committee.

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Daniel Pulver has served as a director of our company since October 1999. Mr. Pulver has also served as our lead independent director since July 2013, and will continue in that role until the date of the 2019 Annual Meeting. Prior to serving as our lead director, Mr. Pulver served as the chairman of our Nominations and Governance Committee. Mr. Pulver is a founder and managing member of Pulver Capital Management. Mr. Pulver served as a director at Credit Suisse First Boston LLC from November 2000, when Credit Suisse First Boston LLC (now Credit Suisse Securities (USA) LLC) merged with Donaldson, Lufkin & Jenrette, until April 2005. Mr. Pulver obtained his bachelor’s degree from Stanford University and his master’s in business administration from Harvard Business School. Mr. Pulver also serves on the board of directors of several private technology companies. In addition, he served on the board of directors of the NeuroMatrix Group from 2009 to 2012 and Accellent Inc. from 2005 to 2006. Prior to May 2007, Mr. Pulver served on the Compensation Committee of our company.
Mr. Pulver has extensive private equity and investment banking experience in technology industries, which has given him both business and finance expertise which is valuable to the board. He brings financial management and financial analysis perspective to Board. In addition, Mr. Pulver has held directorships, including a public company directorship, and brings that experience to the Board. The combination of his experience has made him well suited to serve as our company’s lead independent director.
Class III Directors Whose Terms Expire in 2021
Keith Geeslin has served as a director of our company since May 1996 and is chairman of our Compensation Committee. Mr. Geeslin has been a partner at Francisco Partners, a global private equity firm, since January 2004, prior to which Mr. Geeslin spent 19 years with the Sprout Group, the venture capital arm of Credit Suisse’s asset management business, which conducts its activities through affiliates of Credit Suisse Securities (USA) LLC. Prior to joining the Sprout Group, Mr. Geeslin was the general manager of a division of Tymshare, Inc, a provider of public computer and network services and held various positions at its Tymnet subsidiary from 1980 to 1984. He was also previously a staff member of the U.S. Senate Commerce Committee. Mr. Geeslin obtained his bachelor’s degree in electrical engineering from Stanford University and master’s degrees from Stanford University and Oxford University. Mr. Geeslin also serves on the board of directors of Synaptics, Inc.
Mr. Geeslin’s private equity and venture capital experience, with a focus on technology sector companies, has given him an understanding of finance and of growth strategies, as well as experience in evaluating businesses in our company’s industry, all of which is very helpful to the Board of Directors. Originally representing one of our company’s initial investors, Mr. Geeslin has a long history with Commvault and its management, providing continuity to Board deliberations. Mr. Geeslin has held various public company directorships and brings that experience to the Board.
Vivie YY Lee has served as a director of our company since February 2018. Ms. Lee has served as Senior Vice President and Chief Strategy Officer of Anaplan, a SaaS software company, since October 2018. Prior to joining Anaplan, Ms. Lee served as Chief Executive Officer for FirstRain, a business analytics platform company, from 2015 until that company was acquired by Ignite Technologies in August 2017. She joined FirstRain in 2005 where she served as Chief Operating Officer before becoming CEO.

Prior to joining FirstRain, Ms. Lee served as General Manager of Worldwide Services at Cadence Design Systems. In that position, she merged several services divisions into an industry-leading advanced technology operation. She held P&L responsibility for the business spanning research and development, go-to-market, sales, and support across global regions including the US, UK/EU, India, China, and Japan. Before Ms. Lee’s tenure at Cadence, she co-founded the software company Aqueduct Software, an enterprise-class software development solution for automating application data collection, profiling and analysis during iterative development, testing and deployment. Bootstrapping the company from the ground-up, she secured top-tier VC financing, and ultimately led the company through acquisition by NetManage in 2000. Ms. Lee began her career at Bell Labs and has also worked at Synopsys and 8x8 (formerly Integrated Information Technology, Inc.) in various product management roles. Ms. Lee earned a bachelor of arts in mathematics from Harvard University.
 
Through her tenures at numerous start-up and mature Silicon Valley-based technology companies, Ms. Lee brings significant entrepreneurial and executive-level experience in the technology and software industry to the Board.  Her expertise in the IT space is broad, and provides the Board with tech-focused insight and perspective in the critical areas of operations, marketing and strategic development.

Sanjay Mirchandani is the President and Chief Executive Officer of our company, and has served as a director since joining the company in February 2019. Prior to joining our company, Mr. Mirchandani served as the Chief Executive Officer of Puppet, Inc. (“Puppet”), an Oregon-based IT automation company. Mr. Mirchandani joined Puppet in May 2016 as President and Chief Operating Officer, and assumed the role of Chief Executive Officer in September 2016. Before joining Puppet, Mr. Mirchandani

7



served as Corporate Senior Vice President and General Manager of Asia Pacific and Japan at VMware, Inc. from October 2013 to April 2016. From June 2006 to October 2013, Mr. Mirchandani held various senior leadership positions at EMC Corporation, including Chief Information Officer and leader of the Global Centers of Excellence. Prior to that, Mr. Mirchandani held various positions at Microsoft Corporation and Arthur Andersen LLP. Mr. Mirchandani has a masters of business administration degree from the University of Pittsburgh and earned a bachelor's degree in mathematics from Drew University.

Mr. Mirchandani brings a wealth of international business and start-up experience through his diverse well-rounded career in technology. As our Chief Executive Officer, Mr. Mirchandani brings his knowledge and perspective about critical company business strategies, financial position and operational matters into Board deliberations. His insight regarding the company's operations and future are critical to the successful functioning of the Board.

Gary B. Smith has served as a director of our company since May 2004 and is chairman of our Nominations and Governance Committee. Prior to serving as chairman of our Nominations and Governance Committee, Mr. Smith served as our lead independent director from May 2006 to July 2013. Mr. Smith is currently the president, chief executive officer and a director of Ciena Corporation, a global supplier of telecommunications networking equipment, software and services. Mr. Smith began serving as chief executive officer of Ciena in May 2001, in addition to his existing responsibilities as president and director, positions he has held since October 2000. Mr. Smith joined Ciena in November 1997, and previously served as the company’s chief operating officer and senior vice president, worldwide sales. From 1995 through 1997, Mr. Smith served as vice president of sales and marketing for INTELSAT. He also previously served as vice president of sales and marketing for Cray Communications, Inc. Mr. Smith received his master’s in business administration from Ashridge Management College, United Kingdom. Mr. Smith is a member of the National Security Telecommunications Advisory Committee (NSTAC), is chairman of the Advisory Council to the Wake Forest Center for Entrepreneurship and participates in initiatives with the Center for Corporate Innovation.
Mr. Smith is an experienced chief executive officer of a company in the information technology industry. As such, he has leadership skills and industry experience, as well as perspectives on the operations, challenges and complex issues facing growing technology-based companies. He also has global sales and marketing experience which is useful to the Board. Mr. Smith’s experience as a director of a public company also benefits the Board. The combination of his experience makes him well suited to serve as the chairman of our Nominations and Governance Committee.


CORPORATE GOVERNANCE
Overview
We have established a comprehensive corporate governance plan for the purpose of defining responsibilities, setting high standards of professional and personal conduct and assuring compliance with such responsibilities and standards. As part of its annual review process, the Board of Directors monitors developments in the area of corporate governance. Listed below are some of the key elements of our corporate governance plan. Many of these matters are described in more detail elsewhere in this proxy statement.
Independence and Composition of our Board of Directors

Nine of our eleven current directors are independent under the listing standards of The Nasdaq Stock Market, Inc. (“Nasdaq”).

We have bifurcated the roles of CEO and Board chairman so that we now have an independent chairman of the Board, Mr. Adamo, who succeeded to that role in April 2019.

We currently have a lead independent director, Mr. Pulver. However, in light of Mr. Adamo's elevation to independent chairman, the Board has determined that Mr. Pulver's position of lead independent director will terminate effective as of the 2019 Annual Meeting.
In the last 18 months, we have replaced 5 directors, helping to address the long-tenured composition of our Board. Two of these new directors are women, thereby increasing the gender diversity of our Board.

8



Majority Voting for Directors

We have adopted a majority vote standard for the election of directors in an uncontested election.

If an incumbent director does not receive a majority of the votes cast in an uncontested election, that director must promptly tender his or her irrevocable resignation to the Board of Directors, contingent upon acceptance by the Board of Directors.
Audit Committee
All members meet the independence standards for audit committee membership under the Nasdaq listing standards and applicable Securities and Exchange Commission (“SEC”) rules.

All members qualify as an “audit committee financial expert,” as defined in the SEC rules, and satisfy Nasdaq’s financial literacy requirements.

The Audit Committee operates under a written charter that governs its duties and responsibilities, including its sole authority to appoint or replace our independent auditors.

The Audit Committee has adopted policies and procedures governing the pre-approval of all audit and non-audit services provided by our independent auditors.
Compensation Committee

All members meet the independence standards for compensation committee membership under the Nasdaq listing standards and applicable SEC rules.

The Compensation Committee operates under a written charter that governs its duties and responsibilities, including the responsibility for executive compensation.
Nominations and Governance Committee

All members meet the independence standards for nominating committee membership under the Nasdaq listing standards.

The Nominations and Governance Committee operates under a written charter that governs its duties and responsibilities, including the responsibility for nominating directors and developing corporate governance guidelines.
Corporate Governance Policies

We have adopted Corporate Governance Policies, including qualification and independence standards for directors.
We have implemented a “proxy access” provision in our amended and restated corporate Bylaws, which gives shareholders the ability to nominate director candidates for inclusion in our proxy materials.
We have terminated our shareholder rights plan, that had provided existing shareholders with preferred stock rights exercisable in certain circumstances.
We have adopted a policy on Board diversity, which prioritizes a Board comprised of individuals with diverse backgrounds. Our recent Board appointments reflect these considerations, and we believe that our new Board members have a diverse range of experiences and backgrounds which benefit our Board and our company.
Codes of Business Ethics and Conduct

We have adopted a Code of Ethics for Senior Financial Managers that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller.

We also operate under an omnibus Code of Business Ethics and Conduct that applies to all directors, officers and employees and includes provisions ranging from restrictions on gifts to conflicts of interests.


9



We have established a process for confidential and anonymous submissions by our employees, as well as submissions by other interested parties, regarding questionable accounting or auditing matters.
Our Audit Committee, Nominations and Governance Committee and Compensation Committee Charters, Code of Ethics for Senior Financial Officers, Corporate Governance Policies, Code of Business Ethics and Conduct, Second Amended and Restated Bylaws, Charter of the Commvault Systems Disclosure Committee, Insider Trading Policy and Policy of Fair Disclosure to Investors may be accessed on our website at www.commvault.com, from the Investor Relations tab. The contents of the website are not, however, a part of this proxy statement. In addition, we will make a copy of any of these documents available to any person, without charge, upon written request to Commvault Systems, Inc., 1 Commvault Way, Tinton Falls, New Jersey 07724, Attn: General Counsel. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K and applicable Nasdaq rules regarding amendments to or waivers of our Code of Ethics for Senior Financial Officers and Corporate Governance Principles by posting this information on our website at www.commvault.com.
Majority Vote Standard and Resignation Policy in Director Elections
A majority vote standard, as described in our Bylaws, applies to the election of directors. In uncontested elections, if a quorum is present or represented, directors are elected by an affirmative vote of a majority of the votes cast.
If an incumbent director fails to receive the affirmative vote of a majority of votes cast in an uncontested election, such director shall promptly tender his or her irrevocable resignation to the Board of Directors, contingent upon acceptance by the Board of Directors. Within 90 days after certification of the results of the stockholder vote, the Board of Directors shall act on the resignation, taking into account, among other things, a recommendation of the Company’s Nominations and Governance Committee. Within four business days after the Board of Directors formally decides whether or not to accept the resignation, the Company will publicly disclose that decision, together with an explanation of the process (and the reasons for rejecting the resignation, if applicable) in a press release, in Form 8-K or other filing with the Securities and Exchange Commission or by other public announcement. Any director whose resignation is being so considered may not participate in the Nominations and Governance Committee’s recommendation or the Board of Director’s decision on the resignation. If the resignations of a majority of the members of the Nominations and Governance Committee were to become effective as a result of this procedure, the remaining independent directors will appoint a special committee among themselves for the purpose of considering the resignations and recommending whether to accept or reject them.
The Board of Directors and Its Committees
General. Our Board of Directors currently comprises eleven members, nine of whom are not officers of our company and two of whom are officers of our company. Our Board of Directors believes that our ratio of outside directors to inside directors represents a commitment to the independence of our Board of Directors and a focus on matters of importance to our stockholders.
Our Board of Directors has determined that each of Nicholas Adamo, Martha H. Bejar, Frank J. Fanzilli, Jr., Keith Geeslin, YY Lee, Chuck Moran, Daniel Pulver, Gary B. Smith and David F. Walker, who collectively constitute all of the outside directors, is “independent” as that term is defined under the applicable listing standards of Nasdaq. In making this determination for each director, the Nominations and Governance Committee, on behalf of our Board of Directors, considered the standards of independence set forth in the Nasdaq corporate governance listing standards and all relevant facts and circumstances to ascertain whether there was any relationship between a director and our company that, in the opinion of the Nominations and Governance Committee, would interfere with the exercise of independent judgment in carrying out the responsibilities of the director, or any material relationship with our company (either directly, or as a partner, stockholder or other officer of an organization that has a relationship with our company).
During the year ended March 31, 2019, our Board of Directors held seven meetings and acted by unanimous written consent on three occasions. All of our directors who served in the year ended March 31, 2019 attended more than 80% of the meetings of the Board of Directors and meetings of the committees of the Board on which the director served (excluding any such meetings that occurred prior to the date on which any individual became a director of our company or after the date on which any director resigned from the Board). The Board of Directors is scheduled to meet in executive session, without management, at every Board meeting that the directors attend in person. During fiscal year 2019, Mr. Pulver acted as lead independent director to chair these executive sessions and acted as primary spokesperson in communicating matters arising out of these sessions to our management. Following Mr. Adamo's appointment as independent Chairman in April 2019, Mr. Adamo has assumed those responsibilities.
Because we do not schedule a Board of Directors meeting to coincide with our Annual Meeting, attendance at our Annual Meeting by our directors is encouraged but not required. With the exception of Mr. Mirchandani who was appointed in February

10



of 2019, all of our directors attended our 2018 Annual Meeting telephonically or in person. The Board of Directors has three standing committees. These committees have the responsibilities and authority described later in this section.
Board Leadership Structure. Commvault’s policy regarding its leadership structure is to adopt the practice which best serves our company’s needs at any particular time. Our Board has determined that the most effective leadership structure for our company at this time is for Mr. Nicholas Adamo, an independent director, to serve as Chairman of the Board while our new President and Chief Executive Officer, Mr. Sanjay Mirchandani, focuses on his executive leadership role. Mr. Mirchandani is, however, a member of our Board, which ensures that Board members have a high level of access and visibility regarding Mr. Mirchandani's efforts, including his insights and perspectives regarding our company's operations, strategy and future performance. In his capacity as the independent Chairman of the Board, Mr. Adamo is responsible for presiding at Board meetings and executive sessions, and facilitating communication between Board members and the CEO and other members of senior management.
Prior to April 2019, our former President and Chief Executive Officer, Mr. Hammer, also served as Chairman of the Board. Mr. Hammer's dual role capitalized on his long and successful history in leading both our company and the Board. However, in light of Mr. Hammer's departure from the company in 2019, the Board determined that the role of President and Chief Executive Officer should be separated from the role of Chairman of the Board.
With Mr. Adamo's appointment to Chairman of the Board, the Board has determined that the position of independent Lead Director, previously held by Daniel Pulver, will no longer be filled following the August 2019 Annual Meeting. Mr. Adamo has assumed the responsibilities previously undertaken by Mr. Pulver in this respect.
Board Oversight of Risk. Our company’s policies and procedures relating to risk assessment and risk management are overseen by its Board of Directors. A fundamental part of risk assessment and risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for our company. The involvement of the Board in setting our company’s business strategy is a key part of its assessment of management’s risk tolerance and what constitutes an appropriate level of risk for our company. The Board of Directors considers risk management to varying degrees regularly at its meetings. The Board will adjust its practices with respect to risk oversight whenever it determines it needs to do so and will involve itself in particular areas or business circumstances where its proper exercise of oversight requires it.
While the Board of Directors has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk assessment and risk management. The Audit Committee is required under its charter to inquire of management and the independent auditor concerning significant financial risks or exposures and to assess the steps management has taken to minimize such risks. The Audit Committee also oversees our company’s internal audit function, compliance matters and reviews with the General Counsel any legal matters, including litigation, that may have a material impact on our company’s financial statements, financial condition or results of operations. In addition, the Compensation Committee assesses compensation related risk and the Nominations and Governance Committee addresses management and governance risk, including through its oversight of the succession planning process. Each of these Board committees reports to the full Board with respect to its risk oversight functions.
At the management level, our company has appointed our General Counsel as our Chief Compliance Officer to oversee risk related matters, and we have established a disclosure committee to monitor our company’s compliance with its disclosure obligations under law and Nasdaq regulations and an executive review committee to monitor and approve certain transactions or other corporate matters that deviate from our company’s standard practices. The senior management of our company, including the Chief Compliance Officer, report to the Board or Board committees regarding risk issues, including those identified by the foregoing committees. In accordance with our company’s Corporate Governance Policies, the Board has complete and open access to any member of our company’s management and any of our company’s employees, as well as any outside advisors or independent advisors retained by the Board. In addition, our company’s Chief Financial Officer and General Counsel and Chief Compliance Officer are available at Board and committee meetings to answer questions relating to risk oversight. Further because the Chief Executive Officer is a director, he brings a unique perspective on our company’s risk profile and risk assessment to Board deliberations based on their day to day management responsibilities and knowledge about the company.
Audit Committee. The Audit Committee is responsible for the appointment of, compensation of and oversight over the work of our independent auditor. Additionally, the Audit Committee monitors the integrity of our financial statements, our independent auditor’s qualifications and independence, our compliance with legal and regulatory requirements and the performance of our internal audit function and independent auditor. The Audit Committee relies on the knowledge and expertise of our management, the internal auditors and the independent auditor in carrying out its oversight responsibilities. The members of the Audit Committee are Messrs. Walker (Chairman), Pulver and Moran. The Audit Committee is comprised solely of directors who meet all of the independence standards for audit committee membership as set forth in the applicable listing standards of Nasdaq. The Board of

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Directors has determined that each of Messrs. Walker, Pulver and Moran qualify as an “audit committee financial expert” as that term is defined in the SEC rules, and that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the Audit Committee.
The Audit Committee operates under a written charter. The Audit Committee held five meetings in the year ended March 31, 2019. A report of the Audit Committee appears elsewhere in this proxy statement.
Compensation Committee. The Compensation Committee is responsible for overseeing our compensation and benefit plans, including all compensation arrangements for executive officers and directors. The members of the Compensation Committee are Messrs. Geeslin (Chairman) and Fanzilli and Ms. Lee. The Compensation Committee is comprised solely of outside directors who meet the independence standards for compensation and nominating committee members as set forth in Nasdaq listing standards.
Management assists the Compensation Committee in the performance of its duties. Each year, the Chief Executive Officer reviews the performance and compensation of each of the executive officers and makes recommendations to the Compensation Committee with respect to the executive officers’ compensation.
The Compensation Committee has the authority to engage its own independent advisors to assist in carrying out its responsibility. From time to time, consultants, including Compensia, also provide additional services at the request of our company. In fiscal year 2019, the Compensation Committee and management jointly engaged Compensia for services that included assistance and advice in the formulation of our company’s cash and equity compensation programs. The Compensation Committee reviewed the independence of Compensia under SEC and Nasdaq rules and concluded that its works had not raised any conflict of interest.
The Compensation Committee operates under a written charter. The Compensation Committee held five meetings and the Committee, or a sub-committee thereof, acted by unanimous written consent 13 times during fiscal year 2019. A report of the Compensation Committee appears elsewhere in this proxy statement. For a more detailed discussion of the Compensation Committee’s processes and procedures for considering and determining executive compensation, see “Executive Compensation - Compensation Discussion and Analysis.”
Nominations and Governance Committee. The Nominations and Governance Committee is responsible for identifying and recommending to our Board of Directors appropriate director nominee candidates and providing oversight with respect to corporate governance matters, including reviewing our corporate governance policy. The members of the Nominations and Governance Committee are Messrs. Smith (Chairman), Pulver and Walker. The Nominations and Governance Committee is comprised solely of outside directors who meet the independence standards for compensation and nominating committee members as set forth in Nasdaq listing standards.
The Nominations and Governance Committee is responsible for assessing the appropriate balance of experience, skills and characteristics required of our Board of Directors and for carrying out adequate due diligence with respect to prospective board members. The Nominations and Governance Committee will consider nominees that are recommended by members of the Board of Directors, management or other stockholders. Nominees for director shall be selected on the basis of diversity, depth and breadth of experience, integrity, ability to make independent analytical inquiries, understanding of our business environment, the willingness of the candidate to devote adequate time to board duties, the interplay of the candidate’s experience and skills with those of other board members, and the extent to which the candidate would be a desirable addition to our Board of Directors and any committees of the Board. In addition to the foregoing, the Nominations & Governance Committee may also take into account gender, race and ethnicity when recommending director nominees to the Board of Directors, with the objective of achieving a Board with diverse business, personal and educational backgrounds.
The Nominations and Governance Committee operates under a written charter. The Nominations and Governance Committee met seven times in the year ended March 31, 2019.
Board Diversity. The Board of Directors has adopted a policy on Board diversity that is implemented by the Nominations and Governance Committee.  This policy requires the Nominations and Governance Committee to consider diversity in professional experience, skills, broad-based business knowledge, understanding of our company’s business environment and training when recommending Director nominees to the Board, with the objective of achieving a board with diverse business and educational backgrounds. It is the goal of this policy for the Board to be composed of members with individual backgrounds that, when combined, provide a portfolio of experience and knowledge that will serve our company's governance and strategic needs. In accordance with our company’s Corporate Governance Guidelines, the Nominations and Governance Committee will consider the interplay of the director candidate’s experience and skills with those of other Board members, as well as the extent to which the candidate would be a desirable addition to the Board and any Committees of the Board. In addition to the foregoing, the Nominations & Governance Committee may also take into account gender, race and ethnicity when recommending director

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nominees to the Board of Directors, with the objective of achieving a Board with diverse business, personal and educational backgrounds. When recommending nominees for Director, the Nominations and Governance Committee does not discriminate against candidates based on gender, ethnicity, religion or national origin. Our company’s Board diversity policy specifies that the Nominations and Governance Committee will review the skills and attributes of Board members within the context of the current make-up of the full Board from time to time as the Nominations and Governance Committee deems appropriate. In connection with its deliberations with respect to Director nominations for our company’s August 2019 Annual Meeting, the Nominations and Governance Committee assessed that it effectively nominates candidates for Director in accordance with the above described standards, with the current Board being composed of individuals with finance, accounting, technology, management and international experience. See each nominee’s and director’s biography appearing earlier in this proxy statement for a description of the specific experiences that each such individual brings to the Board.
Stockholder Communications, Proposals and Director Nominations
Stockholder Communication Policy. Stockholders can contact our Board of Directors to provide comments, to report concerns, or to ask a question, at the following address.
Corporate Secretary
Commvault Systems, Inc.
1 Commvault Way
Tinton Falls, New Jersey 07724

You may submit your concern anonymously or confidentially by postal mail.
Communications are distributed to our Board of Directors, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication. You may also communicate online with our Board of Directors as a group through the Investor Relations section of our website at www.commvault.com. The Secretary will forward all communications to the Board to the Chairman of the Audit Committee or the Chairman of the Nominations and Governance Committee, who will determine when it is appropriate to distribute such communications to other members of the Board or to management.
Proxy Access. The Board of Directors has approved amendments to our Bylaws to include a "proxy access" provision by which eligible stockholders may nominate director candidates for inclusion in our proxy statement and proxy card. Proxy access may be used by a stockholder or a group of up to 20 stockholders who own at least 3% of our outstanding common stock continuously for at least three (3) years to nominate up to the greater of 20% of the Board of Directors or two directors. Proxy access is subject to certain limitations and requirements, including that we must receive a valid nomination notice with the requisite information and representations regarding both the nominating stockholders and the director candidates between 120 and 150 days before the anniversary of the date of mailing for the prior year’s proxy statement. The Board of Directors believes that this provision provides meaningful proxy access to stockholders while mitigating the risk of abuse and protecting the interests of all stockholders. The full text of this provision and each of its requirements appears in our Second Amended and Restated Bylaws, which is available as an exhibit to the Current Report on Form 8-K filed with the SEC on May 7, 2019.
Stockholder Proposals and Nominations. Stockholders who desire to (i) submit a proposal for consideration at a stockholders' meeting or (ii) nominate persons for election as directors at a stockholders' meeting without utilizing the proxy access provision noted above may do so by providing our company with written notice of the stockholder's intent to make such a proposal or nomination at least 90 days before the anniversary of the date of mailing for the prior year’s proxy statement. Each notice shall describe the proposal or nomination in sufficient detail for the proposal or nomination to be summarized on the agenda for the meeting. Among other things, the notice shall set forth:
• the name and address, as it appears on our books, of the stockholder who intends to make the proposal or nomination and the beneficial owner, if any, on whose behalf the nomination or proposal is made;
• a representation that the stockholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to present such proposal or nomination;
• whether the stockholder plans to deliver or solicit proxies from other stockholders; and
• the class and number of our shares which are beneficially owned by the stockholder.
In the case of a stockholder nomination, additional information must be included in the notice to our company, such as (i) the name and address of any person to be nominated, (ii) a description of all arrangements or understandings between the stockholder

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and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder, (iii) such other information regarding such nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, (iv) the consent of each nominee to serve as a Director of our company if so elected, and (v) such other information as is set forth in our Second Amended and Restated Bylaws, which are available as an exhibit to the Current Report on Form 8-K filed with the SEC on May 7, 2019.
Transactions with Related Persons
The Board of Directors recognizes that transactions between us and certain related persons present a heightened risk of conflicts of interest. It is our policy to have the Audit Committee review and approve, ratify or disapprove of proposed transactions or courses of dealings with respect to which executive officers or directors or members of their immediate families have an interest (including all transactions required to be disclosed pursuant to the SEC’s related persons disclosure requirements (“Related Persons Transactions”). The Audit Committee is to review such transaction based upon the rules of Nasdaq and upon our ethics and governance guidelines.
During fiscal 2019, Joseph F. Eazor, former CEO of Rackspace, Inc (Rackspace), was a director on our Board prior to his resignation from that position on July 31, 2018. Rackspace has been a customer of ours since 2006. Total recognized revenue related to Rackspace during fiscal year 2019 was $5.1 million, of which $0.6 million recognized through July 31, 2018, which is the period Mr. Eazor served on the Board. We did not enter into any additional Related Persons Transactions during the year ended March 31, 2019 or during the first quarter of fiscal year ending March 31, 2020.

We have a Code of Business Ethics and Conduct, a copy of which is posted on the Investor Relations portion of our web page at www.commvault.com, which applies to all of our employees. The Code, among other things, has a policy governing conflicts of interests generally and, in particular, prohibiting employment or other activities in certain other businesses, soliciting clients for any other purpose or relationships that may be perceived as impairing the ability of the individual or our company from performing his or its duties, as the case may be, in an impartial manner, and use of corporate property for improper personal gain. Any complaints or concerns require disclosure to the Vice President, General Counsel or Vice President, Worldwide Human Resources and, if warranted, to the Audit Committee or Nominations and Governance Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and beneficial owners of 10 percent or more of a registered class of our equity securities to file with the SEC initial reports of beneficial ownership (Form 3) and reports on changes in beneficial ownership (Form 4 or 5). SEC rules adopted pursuant to Section 16(a) require that such persons furnish us with copies of all such forms they file with the SEC.
Based solely upon our review of such forms furnished to us during the year ended March 31, 2019, and upon the written representations received by us from certain of our directors and executive officers, we believe that our officers and 10% stockholders complied with all Section 16(a) filing requirements on a timely basis during the year ended March 31, 2019, except that Messrs. Hammer, Bunte, Carolan, Miiller and Merrill each had one late filing related to the vesting of performance share units, due to administrative errors.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Management
The following table shows, as of May 31, 2019, the number of shares of our common stock, par value $.01 per share (the only class of voting securities outstanding), beneficially owned by: (1) each director and nominee for director; (2) each named executive officer (defined below), including former named executive officers who are no longer with the company, and (3) all directors and former and current executive officers as a group. The number of shares of our common stock beneficially owned by a person includes shares of common stock issuable with respect to options, restricted stock units (including performance-based stock units), and convertible securities held by the person which are exercisable, convertible or will vest within 60 days. The percentage of our common stock beneficially owned by a person assumes that the person has exercised all options, vested in restricted stock units and converted all convertible securities, the person holds which are exercisable, convertible or will vest within 60 days, and that no other persons exercised any of their options, vested in any of their restricted stock units or converted any of their convertible securities. 

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Shares of Common  Stock Owned
 
Percent of Common Stock Outstanding
Directors
 
 
 
 
Nicholas Adamo
 

 
%
Martha H. Bejar
 

 
%
Alan G. Bunte (1)
 
1,247,025

 
2.7
%
Frank J. Fanzilli, Jr. (2)
 
137,767

 
*

Keith Geeslin (3)
 
56,118

 
*

Vivie “YY” Lee
 
1,290

 
*

Sanjay Mirchandani
 

 
%
Chuck Moran
 

 
%
Daniel Pulver (4)
 
131,574

 
*

Gary B. Smith (5)
 
72,462

 
*

David F. Walker (6)
 
65,462

 
*

Named Executive Officers that are not Directors
 
 
 

Brian Carolan (7)
 
223,918

 
*

Former Executive Officers

 
 
 
 
N. Robert Hammer (8)
 
3,508,989

 
7.6
%
Ron Miiller (9)
 
269,388

 
*

All directors and named executive officers as a group
 
5,713,993

 
12.0
%
 
*
Less than 1%.
(1)
Includes options to acquire 785,481 shares of common stock which are exercisable within 60 days of May 31, 2019
(2)
Includes options to acquire 35,750 shares of common stock which are exercisable within 60 days of May 31, 2019
(3)
Includes options to acquire 24,500 shares of common stock which are exercisable within 60 days of May 31, 2019.
(4)
Includes options to acquire 35,750 shares of common stock which are exercisable within 60 days of May 31, 2019.
(5)
Includes options to acquire 35,750 shares of common stock which are exercisable within 60 days of May 31, 2019.
(6)
Includes options to acquire 32,000 shares of common stock which are exercisable within 60 days of May 31, 2019.
(7)
Includes options to acquire 180,053 shares of common stock which are exercisable within 60 days of May 31, 2019.
(8)
Former President and Chief Executive Officer resigned from this position February 5, 2019; Includes options to acquire 964,200 shares of common stock which are exercisable within 60 days of May 31, 2019.
(9)
Former Senior Vice President of Worldwide Sales resigned from this position March 31, 2019; Includes options to acquire 181,194 shares of common stock which are exercisable within 60 days of May 31, 2019.

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Certain Other Stockholders

The following table sets forth, as of May 31, 2019 (except to the extent otherwise indicated), certain information regarding the persons known by us to be the beneficial owner of more than 5% of our outstanding common stock (the only class of voting securities outstanding).
 
Name and Address of Beneficial Owner
Shares of
Common  Stock
Owned
 
Percent of Common
Stock  Outstanding
Elliott Associates, L.P. (1)
40 West 57th Street
New York, NY 10019
3,104,367

 
5.5
%
BlackRock, Inc. (2)
55 East 52nd Street
New York, NY 10022
4,628,691

 
10.2
%
The Vanguard Group, Inc. (3)
100 Vanguard Blvd.
Malvern, PA 19355
3,871,168

 
8.6
%
 
(1)
Based solely on a Schedule 13D/A filed on February 22, 2019 by Elliott Associates, L.P. on behalf of itself and Elliott International, L.P. and Elliott International Capital Advisors Inc. (collectively, "Elliott Associates"), except for Percent of Common Stock Outstanding. As disclosed therein, Elliott Associates' collective beneficial ownership is approximately 4% of shares outstanding and combined economic exposure is equivalent to approximately 5.5% of shares outstanding.
(2)
Based solely on a Schedule 13G/A filed on February 11, 2019 by BlackRock, Inc., except for Percent of Common Stock Outstanding.
(3)
Based solely on a Schedule 13G filed on February 11, 2019, by The Vanguard Group, except for Percent of Common Stock Outstanding.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This section discusses the compensation of the following individuals who served as executive officers during the fiscal year ended on March 31, 2019.

Sanjay Mirchandani
President and Chief Executive Officer
N. Robert Hammer
Former President and Chief Executive Officer
Alan G. Bunte
Executive Advisor to the CEO, Former Executive Vice President and Chief Operating Officer
Brian Carolan
Vice President and Chief Financial Officer
Ron Miiller
Former Senior Vice President of Worldwide Sales

Mr. Sanjay Mirchandani was appointed as the President and Chief Executive Officer of the Company on February 5, 2019, replacing retiring President and Chief Executive Officer Mr. N. Robert Hammer. Effective as of February 5, 2019, Mr. Hammer resigned from his position as President and Chief Executive Officer and Mr. Al Bunte resigned from his position as Executive Vice President and Chief Operating Officer, though both Mr. Hammer and Mr. Bunte remained with the Company during a transition period. Effective as of March 31, 2019, Mr. Hammer departed the Company and, effective as of April 29, 2019, also resigned from his position on the Board. Mr. Bunte remains with the Company as a Director and as the Executive Advisor to the CEO. Furthermore, Mr. Ron Miiller departed the company effective as of March 31, 2019.

Compensation Committee Membership and Organization

The Compensation Committee of the Board of Directors has responsibility for establishing, implementing and continually monitoring adherence with our company’s compensation philosophy. Its duties include:

16




setting the total compensation of our Chief Executive Officer and evaluating his performance based on corporate goals and objectives;

reviewing and approving our Chief Executive Officer’s decisions relevant to the total compensation of our company’s other executive officers;
making recommendations to the Board of Directors with respect to equity-based plans in order to allow us to attract and retain qualified personnel; and

reviewing director compensation levels and practices and recommending, from time to time, changes in such compensation levels and practices to the Board of Directors.
 
The members of our Compensation Committee are Messrs. Fanzilli and Geeslin and Ms. Lee. Mr. Geeslin currently serves as Chairman of the Compensation Committee. Each member of the Compensation Committee is an “independent director” as such term is defined by Nasdaq’s Listing Rules and as determined by the Board of Directors. The Compensation Committee meets as necessary during the fiscal year as well as considers and takes action by written consent.
 
Executive Summary
We believe that the skill, talent, judgment and dedication of our executive officers are critical factors affecting the long-term value of Commvault. Therefore, the philosophy and objectives in setting compensation policies for executive officers are to align pay with performance, while at the same time providing fair, reasonable and competitive compensation that will allow us to retain and attract superior executive talent. The Compensation Committee strongly believes that executive compensation should align executives’ interests with those of stockholders by rewarding achievement of specific annual, long-term and strategic goals by our company, with the ultimate objective of improving long-term stockholder value.
Consideration of Prior Advisory Vote on Executive Compensation
Although the annual advisory stockholder vote on executive compensation is non-binding, the Compensation Committee has considered, and will continue to consider, the outcome of this vote each year when making compensation decisions for our named executive officers. Our Compensation Committee periodically undertakes a top-to-bottom review of our executive compensation programs to better align our compensation plan with our pay-for-performance philosophy, to account for changing industry compensation practices and to meet the expectations of our stockholders.  At our Annual Meeting of Stockholders held on August 23, 2018, 86% of our stockholders voted in favor for the “say on pay” executive compensation proposal.
We believe the approval by our shareholders in the prior year was the result of the steps we took in transforming our executive compensation program over the last several years. We believe that these steps further align executives with our stockholders and creates a significant performance-focus to our reward system. During our stockholder outreach in recent years, we heard feedback from our stockholders that desired further alignment between equity awards and the achievement of specific financial goals. We also heard that such alignment should apply to more than just our CEO.
 
Based in part on this feedback, we continued the following key practices in our equity program for fiscal 2019:
 
Established aggressive performance targets and paid performance-based cash bonuses earned under our non-equity incentive plans for our executive and senior management that reflected the achievement of high levels of financial and operational performance.
Equity awards for the fiscal year are made in May of the fiscal year, rather than in October. This allows us to align our grant timing with the beginning of the fiscal year and our fiscal year goals.
Equity awards consisted of the following three components, with the weighting of each component varying by named executive officer:
Vehicle
CEO Weighting1
Former CEO/COO Weighting
Weighting for other NEOs (and Senior Leaders)
Financial performance stock units, linked to revenue and non-GAAP operating income
—%
33%
25%
Total shareholder return performance stock units
37%
33%
25%
Time-vested restricted stock units
63%
34%
50%
1 - Based on February 5, 2019 new hire grant. Based on the employment agreement of our current CEO, we expect future awards to our CEO to reflect the weighting used for our former CEO. 

17



Pay for Performance
We believe our executive compensation program has been designed to pay for performance and is aligned with the long-term value of Commvault. We believe the charts below demonstrate the correlation between our performance and the compensation we paid to our former Chairman, President and CEO, Mr. Hammer, over the last five fiscal years prior to his departure from the company in 2019. Furthermore, as described below, the executive compensation package for our new CEO, Mr. Mirchandani, has been carefully structured to achieve similar goals and align compensation with the company's performance.
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1)
Non-GAAP EBIT (or non-GAAP income from operations) is defined as income from operations excluding noncash stock-based compensation charges and additional FICA and related payroll tax expense incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. In fiscal 2019 Commvault also excluded restructuring, costs related to a non-routine shareholder matter and costs associated with a non-routine legal settlement from its non-GAAP results. Commvault believes that non-GAAP EBIT is a useful metric for management and investors because it compares Commvault’s core operating results over multiple periods. When evaluating the performance of Commvault’s operating results and developing short and long term plans, Commvault does not consider such expenses that are excluded in the computation of non-GAAP EBIT. See heading below labeled Reconciliation of GAAP to Non-GAAP Financial Measures for the detailed calculation of non-GAAP EBIT.
2)
Reflects non-equity cash incentive plan compensation. See heading below labeled Non-Equity Incentive Plan Compensation for more details.
3)
Reflects the aggregate grant price fair value of stock option and restricted stock unit awards computed in accordance with FASB ASC Topic 718.
4)
Reflects the stock price on the last business day of the fiscal year.

Mix of Compensation Elements. Our fiscal 2019 executive compensation program consists of three principal elements: base salary, non-equity cash incentive awards, or cash bonuses, and long-term equity-based incentive awards. The chart below illustrates the overall mix of compensation components for both our former CEO and our current CEO in total for fiscal 2019. Consistent with our pay for performance philosophy, the majority of CEO level compensation in fiscal 2019 consisted of incentive awards, particularly long-term equity-based incentive awards. By using a significant equity-based element, we believe we create an incentive for our CEO to achieve long-term stockholder value.
 

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(1) The above break-out includes the $12 million modification expense for our former CEO's stock options and awards.
(2) The above break-out includes our current CEO's February 2019 one-time new hire grant with a grant value of approximately $10 million. Additionally, Other Compensation is primarily related to relocation and transition costs.

Fiscal 2019 Financial Highlights. Fiscal 2019 revenues were $711.0 million, an increase of 2% from fiscal 2018. In addition, non-GAAP income from operations for fiscal 2019 was $111.9 million. Our fiscal 2019 financial results were the basis of the non-equity cash incentive compensation paid to our executive officers. The following table illustrates our financial results in fiscal 2019 in terms of total revenue, non-GAAP EBIT and non-GAAP diluted earnings per share, which the Compensation Committee takes into account when making compensation decisions.

20



 
 
Fiscal 2019
 
Fiscal 2018
 
% Change
2018 to 2019
Revenue (in millions)
 
$
711.0

 
$
699.4

 
2
%
Non-GAAP Income from Operations (EBIT) (in millions)
 
$
111.9

 
$
76.0

 
47
%
Non-GAAP Diluted Earnings per Share (EPS) (1)
 
$
1.80

 
$
1.03

 
75
%
Stock Price (on last business day)
 
$
64.74

 
$
57.20

 
13
%

1)
Non-GAAP EPS is derived from non-GAAP net income divided by the weighted average shares outstanding on a fully diluted basis. Non-GAAP net income excludes noncash stock-based compensation, the additional FICA and related payroll tax expenses incurred by Commvault when employees exercise in the money stock options or vest in restricted stock awards. In fiscal 2019 Commvault also excluded restructuring, costs related to a non-routine shareholder matter and costs associated with a non-routine legal settlement from its non-GAAP results. In addition, non-GAAP net income and non-GAAP diluted EPS incorporate a non-GAAP effective tax rate of 27% in fiscal 2019 and 37% in fiscal 2018. We believe that the use of a non-GAAP tax rate is a useful measure as it allows management and investors to compare its operating results on a more consistent basis over the multiple periods presented in its earnings release without the impact of significant variations in the tax rate. See heading below labeled “Reconciliation of GAAP to Non-GAAP Financial Measures” for the detailed calculation of Non-GAAP EPS.

Please see the “Reconciliation of GAAP to Non-GAAP Financial Measures” section of this Compensation Discussion and Analysis for additional detail about our non-GAAP financial measures.


Compensation Philosophy and Objectives

As a growing high-technology company, we operate in an extremely competitive and rapidly changing industry. The Compensation Committee’s philosophy and objectives in setting compensation policies for executive officers are to align pay with performance, while at the same time providing fair, reasonable and competitive compensation that will allow us to retain and attract superior executive talent. The Compensation Committee strongly believes that executive compensation should align executives’ interests with those of stockholders by rewarding achievement of specific annual, long-term and strategic goals of our Company, with the ultimate objective of improving long-term stockholder value.
The specific goals that our current executive compensation program rewards are focused primarily on revenue growth and profitability, as the Compensation Committee believes that revenue growth and profitability are the most direct drivers of long-term stockholder value. To that end, the Compensation Committee believes executive compensation packages provided by our Company to its executive officers should include a mix of both cash and equity-based compensation that reward performance as measured against established goals. As a result, the principal elements of our executive compensation are base salary, non-equity incentive plan compensation, long-term equity incentives generally in the form of restricted stock and performance-based stock units and post-termination severance and acceleration of equity award vesting for certain named executive officers upon termination and/or a change in control.

Our goal is to maintain an executive compensation program that will fairly compensate our executives, attract and retain qualified executives who are able to contribute to our long-term success, induce performance consistent with clearly defined corporate goals and align our executives’ long-term interests with those of our stockholders. The decision on the total compensation for our executive officers is based primarily upon an assessment of each individual’s performance and the potential to enhance long-term stockholder value. Often, judgment is relied upon, rather than rigid guidelines or formulas, in determining total executive compensation and the amount and mix of compensation for each executive officer. Factors affecting such judgment include performance compared to strategic goals established for the individual and our Company at the beginning of the year, the nature and scope of the executive’s responsibilities, effectiveness in leading initiatives to achieve corporate goals and conducting all activities in a manner consistent with our core company values.


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Role of Executive Officers in Compensation Decisions

The Compensation Committee is responsible for setting the compensation of our Chief Executive Officer and also reviewing and approving our Chief Executive Officer’s decisions relevant to the compensation of our other executive officers. Our Chief Executive Officer, Chief Financial Officer and Chief Human Resources Officer support the Compensation Committee in its work by providing information relating to our financial plans, performance assessments of our executive officers and other personnel-related data. In addition, the Compensation Committee has authority under its charter to engage outside advisors and experts for advice as appropriate.

Performance Measures

The performance measures selected by our Compensation Committee for determination of the CEO’s cash bonus and applicable components of senior management’s equity compensation were revenue and non-GAAP EBIT targets because of its belief that they were the most relevant measures of our company’s financial performance at the time and are a good measure of stockholder value. In fact, as part of our regular stockholder engagements, it is the case that stockholders typically focus on our revenue and non-GAAP EBIT performance as the best measurement of our performance. Further, in our public communications (including on earnings calls), our disclosures typically reference revenue and non-GAAP EBIT performance measures, in addition to our GAAP measures, as measurements of how we view our own performance. In other words, these metrics are most closely tied to how we manage the business. In making its determination, our Compensation Committee took into consideration that our CEO owns a significant stock position in the Company; thus aligning his interests in stock price performance with those of other stockholders.

Because our Compensation Committee believes that revenue and non-GAAP EBIT targets are the most relevant measures of the Company’s financial performance, it has chosen to use such metrics for both the cash bonus for our CEO and certain components of senior management’s equity compensation to further drive stockholder value. In that regard, the Compensation Committee believes that it has established aggressive performance goal targets. The rigor of our metrics and aggressive performance goal targets are evidenced by our former CEO’s recent performance against the targets prior to his departure in 2019. Over the past five fiscal years, our former CEO’s average attainment was 60% (92%, 53%,132%, 0% and 21% in fiscal 2019, 2018, 2017, 2016 and 2015 respectively). Because our current CEO, Mr. Mirchandani, was appointed to that position in February 2019, we do not yet have complete information available with respect to Mr. Mirchandani's average attainment. In fiscal 2016, the Compensation Committee expanded the performance measures to include Total Shareholder Return (“TSR”). A significant portion of the restricted stock units awarded to the CEO and other senior executives are contingent on the performance of our stock against the Russell 3000 index over the next three years.

The following tables show our company’s recent performance against the measures used to determine the CEO cash bonus and applicable components of senior management’s equity compensation:
 
Performance Vesting RSUs / CEO Cash Bonus
Financial Performance
Grant
May 2016 (Fiscal 2017)
May 2017
(Fiscal 2018)
May 2018
(Fiscal 2019)
 
 
 
 
Revenue Achievement
102%
98%
61%
Non-GAAP EBIT Achievement
110%
79%
139%
Payout % Based on Scale
132%
53%
92%

Performance Vesting RSUs -
Total Shareholder Return (TSR)
Grant
May 2016
May 2017
May 2018
February 2019(1) - New CEO
Actual Vest %:
 
 
 
 
First Annual Tranche
111%
159%
0%
N/A (2)
Second Annual Tranche
143%
98%
TBD
TBD
Third Annual Tranche
99%
TBD
TBD
TBD
(1) This market-based award was granted to Mr. Mirchandani, our current CEO, as part of his new hire grant. 
(2) The first tranche of Mr. Mirchandani's awards vest upon the second anniversary.  

22




The Compensation Committee also considered the appropriate time horizon for the performance measures used in the CEO compensation plan and determined that single year performance metrics, and a three-year vesting period, were most appropriate in light of the other components of the CEO compensation plan. In making its determination, our Compensation Committee took into consideration the Company’s use of multi-year vesting periods for equity awards (generally three years) to emphasize a longer-term perspective and the frequency of such awards, which historically and currently are awarded as part of the CEO’s compensation on a yearly basis. Due to the recurring nature of these grants on a yearly basis and their accompanying performance measures in the following year’s financial results, our Compensation Committee believes that multi-year performance measures tied to a single equity grant are less relevant. We believe that the multiple-year vesting requirements also serve an important retention purpose, as our CEO must remain employed, absent a change in control or termination without cause, for the full vesting period in order to receive the benefits of these awards. As described below, the compensation package for our new CEO has been aligned with these guidelines.

Peer Analysis of Executive Compensation

In the fourth quarter of fiscal 2018, the company and our Compensation Committee jointly engaged Compensia, Inc. to conduct a review and provide peer analysis information for structuring our base salary, non-equity incentive plan compensation programs and long-term equity incentive plan programs. The Compensation Committee and management used this data to ensure that our compensation programs are optimally structured to retain our highly experienced executive management team, to keep management focused during our expected period of growth, to motivate management to maximize stockholder value and to align our compensation practices with comparable technology industry companies. The research provided by Compensia included compensation data a peer group of 18 technology and related industry companies with annual revenue ranging from $393 million to $1.4 billion (median revenue was $720 million), market capitalization ranging at the time from $1.5 billion to $10.4 billion (median market capitalization was $3.6 billion). At the time the peer group was finalized, our revenue for the trailing four quarters was $714 million (50th percentile in the peer group) and market capitalization was $3.0 billion (31st percentile).

The peer companies included in research provided by Compensia were ACI Worldwide; Aspen Technology; Blackbaud; Bottomline Technologies; Box; Cornerstone OnDemand; Fair Isaac; FireEye; Manhattan Associates; MicroStrategy; NetScout Systems; Nutanix; Paylocity Holding; Pegasystems; Progress Software; Pure Storage; SecureWorks; and Ultimate Software Group.

The Compensation Committee utilized this peer group for decisions throughout fiscal 2019. The company and the Compensation Committee review this peer group annually and make changes as needed to ensure its appropriateness for future decisions.


Components of Executive Compensation

The principal components of compensation for our executive officers are:

Base salary;

Non-equity incentive plan compensation;

Long-term equity incentives; and

Other benefits.

Base salary

We provide our executive officers and other employees with base salary to compensate them for services rendered during the fiscal year. We believe that our base salaries are competitive and we generally compare our executive officer base salaries to the 30th - 80th percentile of the technology industry compensation data obtained. We compare this range, allowing for compensation at the upper reaches where appropriate, because executive compensation in the technology industry is intensely competitive and some of our competitors are larger organizations that compensate executive management at greater levels than organizations of our size. Due to the intense competition to both attract and retain talent, it is appropriate to target compensation for our executives at these levels. In some circumstances, such as the need to retain key individuals, to recognize roles that were larger in scope or accountability than standard market positions and/or to reward individual performance, we may need to provide compensation above these ranges.


23



Salary levels are typically reviewed annually each October as part of our performance review process as well as upon a promotion or other change in job responsibility. Mr. Mirchandani's salary was set in this employment agreement. No adjustments were otherwise made in fiscal 2019. In addition to considering the analysis provided by Compensia discussed above, the Compensation Committee considered the scope of and accountability associated with each executive officer’s position; the performance of each executive officer since the last annual review; and the overall experience of each executive officer when approving the base salary levels that became effective in October 2018. The table below shows the fiscal 2018 and 2019 base salary rates for each named executive officer:
 
Name and Principal Position Held
 
Fiscal 2019
Salary (1)
 
Fiscal 2018
Salary (1)
 
Amount of
Increase
 
Percentage
Increase
Sanjay Mirchandani (2) President and Chief Executive Officer
 
$
500,000

 
N/A

 
N/A

 
N/A

N. Robert Hammer (3)
Former Chairman, President and
Chief Executive Officer
 
628,000

 
628,000

 

 
%
Alan G. Bunte (4)
Former Executive Vice President
and Chief Operating Officer
 
541,000

 
541,000

 

 
%
Brian Carolan (5)
Vice President and
Chief Financial Officer
 
397,000

 
397,000

 

 
%
Ron Miiller (6)
Former Senior Vice President of Worldwide Sales
 
371,000

 
371,000

 

 
%
 
(1)
Base salaries were effective since October 2016 and, solely with respect to Mr. Mirchandani, February 2019.
(2)
In fiscal 2019, Mr. Mirchandani's base salary was at approximately the 35th percentile of the technology industry compensation data obtained.
(3)
In fiscal 2019, Mr. Hammer’s base salary was at approximately the 80th percentile of the technology industry compensation data obtained.
(4)
In fiscal 2019, Mr. Bunte’s base salary was at approximately the 80th percentile of the technology industry compensation data obtained.
(5)
In fiscal 2019, Mr. Carolan’s base salary was at approximately the 40th percentile of the technology industry compensation data obtained.
(6)
In fiscal 2019, Mr. Miiller’s base salary was at approximately the 30th percentile of the technology industry compensation data obtained.

Non-Equity Incentive Plan Compensation

Non-equity incentive plan compensation for our executive officers is designed to reward performance against key corporate goals. In early fiscal 2019, the non-equity incentive plan compensation targets for that year were approved after considering targets for comparable positions provided by our external compensation consultant discussed above; the scope of and accountability associated with each executive officer’s position; and the performance and experience of each executive officer. The performance metrics against which our executive officers are measured are clearly communicated, consistently applied and are focused on corporate objectives.

Our executive officer incentive targets are designed to motivate management to achieve specific goals related to certain revenue and profitability objectives. These metrics and benchmarking targets were selected because we believe that, at this stage of our development, they are most closely correlated to increasing stockholder value. We believe that our revenue and profitability goals are aggressive and not easy to achieve because they are based on growth objectives that are higher than the industry average. These targets are only achievable as the result of performance that exceeds industry averages.


24



Mr. Mirchandani - Fiscal 2019 Non-Equity Incentive Compensation

Our Chief Executive Officer, Mr. Mirchandani, joined our company in February 2019 as Chief Executive Officer and served in that role for the last two months of the fiscal year. As part of Mr. Mirchandani's employment agreement, he was eligible for non-equity incentive plan compensation with a target bonus potential equal to 100% of his $500,000 ending base salary. For the fiscal year beginning April 1, 2019, Mr. Mirchandani’s annual cash bonus will not be less than 50% of his annual target cash bonus. Further, for the period beginning with his arrival at our company through March 31, 2019, Mr. Mirchandani was eligible to receive a guaranteed cash bonus payment equal to 2/12 multiplied by the annual target cash bonus.

Mr. Hammer - Fiscal 2019 Non-Equity Incentive Compensation

Our former Chief Executive Officer, Mr. Hammer, was eligible for non-equity incentive plan compensation with a target bonus potential equal to 105% of his $628,000 ending base salary for fiscal 2019. Mr. Hammer’s target bonus was based on our company’s total revenue and non-GAAP income from operations (EBIT) achievement against the financial plan approved by our Board of Directors. The Compensation Committee evaluated Mr. Hammer based on these performance metrics because we currently believe that growth in revenue and non-GAAP income from operations (EBIT) drives our ability to increase stockholder value.

For fiscal 2019, the Compensation Committee established two separate objectives to determine Mr. Hammer’s non-equity incentive plan award:

60% of the award was based on total revenue and
40% was based on full-year non-GAAP EBIT.

The terms of Mr. Hammer’s fiscal 2019 non-equity incentive plan contained both minimum threshold amounts that must be achieved to qualify for an award as well as additional payment amounts for surpassing the performance metrics. Specifically, actual results below 90% of revenue and 75% of full-year non-GAAP EBIT targets result in no payment for the respective target.

Revenue - 60% of total award factor
Financial Performance Achievement
% of Target Earned
< 90%
0%
90%
65%
100%
100%
110%
200%
Scale is linear between shown points
Non-GAAP EBIT - 40% of total award factor
Financial Performance Achievement
% of Target Earned
< 75%
0%
75%
50%
100%
100%
125%
200%
Scale is linear between shown points
    
Actual revenue for fiscal 2019 was $711.0 million, and actual full-year non-GAAP income from operations was $111.9 million. As a result, Mr. Hammer was awarded $605,672, or approximately 92% of his fiscal 2019 target bonus amount, related to achievement against his total revenue (61% of target earned) and non-GAAP EBIT performance targets (139% of target earned). Pursuant to the terms of the separation agreement executed by the company and Mr. Hammer upon his retirement as President and CEO in February 2019, as described in further detail below, Mr. Hammer was entitled to, among other things, all declared but unpaid bonuses for the fiscal year, including the foregoing.


25



Mr. Bunte and Mr. Carolan - Fiscal 2019 Non-Equity Incentive Compensation

Our former Chief Operating Officer, Alan Bunte, and our Chief Financial Officer, Brian Carolan, are also eligible for non-equity incentive plan compensation with a target bonus potential equal to a percentage of their base salary. For fiscal 2019, Mr. Bunte’s target bonus was 100% of his $541,000 ending fiscal 2019 base salary and Mr. Carolan’s target bonus was 60% of his $397,000 ending fiscal 2019 base salary. Non-equity incentive plan compensation awarded to Messrs. Bunte and Carolan were determined and approved by our CEO and reviewed by the Compensation Committee. The performance goals for Messrs. Bunte and Carolan were both quantitative and qualitative. With respect to quantitative goals for fiscal 2019, Messrs. Bunte and Carolan were measured against the same performance objectives as Mr. Hammer prior to his departure. However, achievement against qualitative objectives which are subjective in nature was also considered. Therefore, the ultimate non-equity incentive compensation achievement percentage awarded to Messrs. Bunte and Carolan may be either higher or lower than that of Mr. Hammer’s strictly quantitative calculation. The CEO and the Compensation Committee did not use a specific formula or apply specific weights when evaluating performance and the resulting impact that such qualitative objectives have on the overall non-equity incentive compensation payout. Instead, our CEO and the Compensation Committee used business judgment to determine an appropriate award after considering both the quantitative and qualitative objectives. Among the most important qualitative factors used to evaluate the performance of Messrs. Bunte and Carolan are: innovation; leadership; strategic planning; product development initiatives and achievements; financial and operational excellence; customer satisfaction; and staff development.

Mr. Bunte received a fiscal 2019 non-equity incentive award that was 92% of his target bonus amount resulting in a non-equity incentive plan compensation of $497,000, or 92%, of his base salary which was consistent with Mr. Hammer’s quantitative bonus calculation.

Mr. Carolan received a fiscal 2019 non-equity incentive award that was 100% of his target bonus amount resulting in a non-equity incentive plan compensation of $238,000, or 60% of his ending fiscal 2019 base salary. In determining Mr. Carolan’s bonus award, Mr. Hammer and the Compensation Committee considered fiscal 2019 achievements in addition to the financial performance of our company. Mr. Carolan worked closely with Mr. Hammer and Mr. Bunte to lead company-wide efforts focused on strategic initiatives as well as resource and related investment decisions. During fiscal 2019 Mr. Carolan also led the Company's operational efficiency efforts which resulted in successfully reducing the Company's annual expenses by more than $60 million and resulted in a 47% increase in non-GAAP income from operations. During fiscal 2019, Mr. Carolan continued to lead the Company’s significant initiative related to the transition to subscription pricing and assisted in the transition of the new Chief Executive Officer during the fourth quarter. Mr. Carolan also continued to oversee responsibility over certain administrative functions such as IT operations and oversaw our worldwide facilities in over 40 countries during fiscal 2019.

Mr. Miiller - Fiscal 2019 Non-Equity Incentive Compensation

Our former Senior Vice President of Worldwide Sales, Ron Miiller, was eligible for non-equity incentive plan compensation with a target bonus potential equal to 100% of his $371,000 ending base salary for fiscal 2019. His fiscal 2019 non-equity incentive plan compensation was based on the following components: quarterly attainment related to worldwide total revenue, quarterly attainment related to worldwide commissionable software bookings, annual attainment related to worldwide non-GAAP income from operations (EBIT), and quarterly attainment related to management by objectives (MBOs). Total revenue and EBIT are reported in our consolidated statement of operations. Commissionable software bookings generally consist of the dollar amount of software orders executed during the fiscal period for which software bookings has been recognized or will be recognized generally in the one to two subsequent fiscal quarters. We believe compensating Mr. Miiller based on revenue aligns his compensation with the employees within the field organization whose compensation is directly influenced by our field sales employees’ efforts.
Mr. Miiller’s non-equity incentive plan was most weighted toward the worldwide total revenue component as that was his primary responsibility. As a result, Mr. Miiller’s fiscal 2019 non-equity incentive plan components had the following weighted averages: 45% to worldwide total revenue, 25% to worldwide commissionable software bookings; 15% to non-GAAP income from operations (EBIT); and 15% to MBOs. Mr. Miiller’s quarterly target payout for total revenue, commissionable software bookings, and MBOs averaged $78,838 per quarter (or $315,350 for the entire annual period) and his annual target payout for non-GAAP income from operations (EBIT) totaled $55,650 for the entire fiscal year period.

Commissions are awarded using a sliding payout scale, based on the attainment for that individual component. The following tables detail the relationship between each component’s attainment and commission award earned. The MBO component is paid out straight-line, where attainment on goal is equal to the commissions percentage awarded.
  

26



Total Worldwide Revenue
 
Commissionable SW Bookings
 
EBIT
Target Achieved
Commission Awarded
 
Target Achieved
Commission Awarded
 
Target Achieved
Commission Awarded
0
%
0
%
 
0
%
0
%
 
0
%
0
%
90
%
50
%
 
50
%
40
%
 
75
%
50
%
100
%
100
%
 
70
%
60
%
 
100
%
100
%
110
%
200
%
 
75
%
70
%
 
125
%
200
%
 
 
 
80
%
75
%
 
 
 
 
 
 
85
%
85
%
 
 
 
 
 
 
90
%
90
%
 
 
 
 
 
 
95
%
95
%
 
 
 
 
 
 
100
%
100
%
 
 
 
 
 
 
105
%
110
%
 
 
 
 
 
 
107
%
120
%
 
 
 
 
 
 
110
%
140
%
 
 
 
 
 
 
115
%
150
%
 
 
 


The maximum quarterly commission payout allowed under Mr. Miiller’s compensation plan was 200% achievement of the applicable worldwide revenue and EBIT targets, and 150% on the commissionable software bookings targets. No quarterly payment is awarded for less than 90% achievement on the quarterly worldwide revenue target, or any total revenue falling below $694.8 million. No quarterly payment is awarded for less than 50% achievement on the quarterly commissionable software bookings target, or any commissionable software bookings falling below $174 million. No quarterly payment is awarded for less than 75% achievement on the annual EBIT, or EBIT lower than $76.5 million.

Mr. Miiller was awarded $282,529 or 76% of his target commission award for fiscal 2019.

We believe that the performance targets set for Mr. Miiller were challenging and required substantial effort to be attained, which is evidenced by Mr. Miiller’s historical achievements against his performance targets of 92% in fiscal 2016, 94% in fiscal 2017, and 87% in fiscal 2018. Mr. Miiller’s compensation plan included quarter over quarter sequential growth targets that we believe are important to sustain consistent revenue growth over prior year actual amounts. In connection with Mr. Miiller's departure from our company effective as of March 31, 2019, Mr. Miiller was entitled to, among other things, all declared but unpaid bonuses for the fiscal year, including the foregoing.

Long-Term Equity Incentive Awards

We currently provide long-term equity incentive compensation pursuant to our 2016 Incentive Plan, which is designed to provide employees, directors and other service providers with appropriate incentives to perform in a superior manner and to achieve long-range goals and to align the interests of plan participants with those of stockholders. The 2016 Incentive Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, full value awards (including restricted stock awards, restricted stock units (including performance-based stock units), and performance stock awards) based on, or related to, shares of our company’s common stock and cash incentive awards which are contingent on performance. As of March 31, 2019, we have only granted restricted stock units and performance-based stock units under the 2016 Incentive Plan to our executive officers (and not other types of awards such as options). We previously granted stock options under a prior stock incentive plan. We anticipate that future grants under the 2016 Incentive Plan will continue to be limited to restricted stock units and performance-based stock units. Our restricted stock units generally vest over three years. We currently do not anticipate granting any stock options.

We account for equity compensation paid to all of our employees under the rules of ASC 718 Compensation - Stock Compensation, which requires us to estimate and record compensation expense over the service period of the award. All equity awards to our employees, including executive officers, and to our directors have been granted and reflected in our consolidated financial statements, based upon the applicable accounting guidance, at fair market value on the grant date. Generally, the granting of a non-qualified stock option to our executive officers is not a taxable event to those employees, provided, however, that the exercise of such stock option would result in taxable income to the optionee equal to the difference between the fair market value of the stock on the exercise date and the exercise price paid for such stock. Similarly, a restricted stock award subject to a vesting

27



requirement is also not taxable to our executive officers unless such individual makes an election under section 83(b) of the Internal Revenue Code of 1986, as amended. In the absence of a section 83(b) election, the value of the restricted stock award becomes taxable to the recipient as the restrictions lapse.

Generally, a significant stock grant is made to a new executive officer when that executive officer commences employment. This grant is made within our guidelines for new-hire grants, consistent with the executive’s position. The guidelines were developed based on our historical practices and survey data. The size of each grant is set at a level that we believe is appropriate to create a meaningful opportunity for stock ownership based upon our company’s grant guidelines, the individual’s position with us and the individual’s potential for future responsibility and promotion. The relative weight given to each of these factors varies from individual to individual and all grants to executive officers are approved by the Compensation Committee.

Each executive officer’s performance during the prior year is measured as well as overall corporate performance when follow-on awards are granted and such performance is taken into account when determining equity awards. We generally grant follow-on equity awards on an annual basis. The terms of the award and the number of shares granted are established to ensure a meaningful incentive to remain an employee of our company. The annual long-term equity incentive award granted to our executives during fiscal 2019 occurred in May 2018 and was considered to be our fiscal 2019 long-term equity incentive award.

In anticipation of this equity award granted in May 2018, we utilized the technology industry compensation data described above in the “Peer Analysis of Executive Compensation” section to obtain comparable market data. In determining the amount of the long-term equity incentive awards granted in May 2018, we reviewed the technology peer group data obtained primarily related to the grant date fair value of shares awarded. The long-term equity incentive awards granted in May 2018 were generally targeted around the 60th percentile of the technology industry compensation data obtained.

Our Compensation Committee determined that the aggregate economic value of long-term equity incentive compensation awarded to the executive officers should contain a mix of time-vested restricted stock units and performance-based stock units. In addition, grants of restricted stock units allow us to offer equity compensation with fewer shares and less dilution to our stockholders, while simultaneously maintaining competitive rewards to retain our executive employee talent. As a result, in February 2019, the Compensation Committee, consistent with our guidelines for new-hire grants, discussed above, allocated the value of Mr. Mirchandani's one-time new hire long-term equity incentive award approximately 37% to TSR performance-based stock unit awards (based on Monte Carlo valuation) and 63% to restricted stock units. The TSR awards vest on the performance of the company's stock against the Russell 3000 index over the next three years. Two-thirds of the awards will vest on the two-year anniversary of the grant date and the remaining third will vest on the third-year anniversary of the grant date.

Award Type
Shares Granted
Description
Time Vesting RSUs
108,423
Vesting in three equal annual installments beginning on the one year anniversary of the grant date
Performance Vesting RSUs - TSRs
46,467
Performance awards vest according to meeting certain CVLT stock price thresholds against the Russell 3,000 index, with 67% vesting on the 24th month anniversary of the grant and the remaining 33% vesting on the 36th month anniversary of the grant


In May 2018, the Compensation Committee allocated the value of Mr. Hammer’s long-term equity incentive award approximately 37% to TSR performance-based stock unit awards (based on Monte Carlo valuation), 31% to Financial Performance Awards and 32% to restricted stock units. The TSR awards vest based on the performance of the Company’s stock against the Russell 3000 index over the next three years. A third of the grant vests each year based on cumulative performance since the grant date. In accordance with Mr. Hammer's termination agreement, he will continue to vest in these awards in the same manner they were granted.

Award Type
Shares Granted
Description
Time Vesting RSUs
22,542
Vesting in three equal annual installments beginning on the one year anniversary of the grant date
Performance Vesting RSUs - TSRs
21,879
Performance awards vest according to meeting certain CVLT stock price thresholds against the Russell 3,000 index, shown below (also subject to our customary three year vesting)
Performance Vesting RSUs - Financial Performance Awards
21,879
Performance awards vest according to meeting certain revenue and Non-GAAP EBIT targets, shown below. (also subject to our customary three year vesting)

28





The sliding scales for the performance-based units are as follows:
Relative TSR Percentile Rank
% of Target PSU Earned
< 25th
0%
25th
50%
50th
100%
75th
150%
85th
200% (max)
Scale is linear between shown points and units earned cannot exceed 100% of target if the Company’s stock price declines.

Revenue - 60% of total award factor
Financial Performance Achievement
% of Target Earned
< 90%
0%
90%
50%
100%
100%
110%
200%
Scale is linear between shown points, maximum award is 200%
Non-GAAP EBIT - 40% of total award factor
Financial Performance Achievement
% of Target Earned
< 75%
0%
75%
50%
100%
100%
120%
200%
Scale is linear between shown points, maximum award is 200%

The table below shows the estimated value and shares of equity awards granted in May 2018 to Messrs. Bunte, Carolan and Miiller. These awards are allocated between TSR performance-based stock units, financial performance-based stock units and restricted stock units. The performance conditions for the TSR performance share units granted to Messrs. Bunte, Miiller, and Carolan are the same as described for Mr. Hammer above. With respect to Mr. Miiller please see additional information at "Actual Payments and Benefits Upon Termination".

 
Financial performance grants
% financial performance
TSR grants
% TSR
RSU grants
% RSU
Alan G. Bunte
Former Executive Vice President
        and Chief Operating Officer
9,512

31
%
9,512

37
%
9,801

32
%
Brian Carolan
Vice President and
Chief Financial Officer
6,486

24
%
6,486

28
%
12,972

48
%
Ron Miiller
Former Senior Vice President of Worldwide Sales
5,044

24
%
5,044

28
%
10,089

48
%


We anticipate that we will continue to grant long-term equity incentive awards to each of our other executive officers on an annual basis at the discretion of the Compensation Committee. We have no program, plan or practice to coordinate award grants with the release of material non-public information. We believe that the resulting overlapping vesting schedule from awards made in prior years, together with the number of shares subject to each award, help provide meaningful retention incentives for executives and enhance stockholder value over time.

At the fiscal 2014 Annual Meeting of Stockholders of the Company held on August 21, 2014, the Company’s stockholders approved the formation of the Employee Stock Purchase Plan (the “ESPP”) to provide eligible employees the opportunity to become stockholders through the purchase of shares of the Company’s common stock. The ESPP is a stockholder approved plan under which substantially all employees may purchase the Company’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of six-month offering periods. An employee’s payroll deductions under the ESPP are limited to 10% of the employee’s salary and employees may not purchase more than $25,000

29



of stock during any calendar year. Mssrs. Bunte, Miiller, and Carolan participated in the ESPP in fiscal 2019 and received nominal benefits related to the 15% discount on the purchase price of the Company’s stock.

Other benefits

Our executive officers participate in benefit programs that are substantially the same as all other eligible employees of our company. These benefits include a 50% matching contribution on the first 4% of eligible pay contributed to our 401(k) plan starting January 1, 2012.

Stock Ownership Guidelines

We currently require our independent directors and our CEO to acquire an equity ownership interest in our common stock within five years of the date of our adoption of the policy (or five years from the date that they first became a director or CEO, as applicable) that, in the case of the independent directors is equal to five (5) times their base annual retainer, or in the case of our CEO is equal to five (5) times our CEO’s current annual base salary. The Compensation Committee is satisfied that this level of equity ownership among our independent directors and our CEO, and the equity ownership interests of our other directors and executive officers, is sufficient to provide motivation and to align these group’s interests with those of our stockholders.

We also have a policy that prohibits employees and directors from engaging in any hedging transactions, which are transactions that allow the holder to continue to own stock but without the full risks and rewards of ownership. When the holder no longer has the full risks and/or rewards of ownership, they may no longer have the same objectives as the Company and our other stockholders, and therefore such transactions are prohibited.

Financial Restatements

The Compensation Committee has not adopted a policy with respect to whether we will make retroactive adjustments to any cash- or equity-based incentive compensation paid to executive officers (or others) where the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement. Our Compensation Committee believes that this issue is best addressed when the need actually arises and all of the facts regarding the restatement are known.

Deductibility of Executive Compensation

Section 162(m) of the Code imposes a $1 million limit on the amount that a publicly-traded corporation may deduct for compensation paid to each of the company’s principal executive officer, principal financial officer and the company’s three next most highly compensated executives (“covered employees”). The Tax Reform and Jobs Act of 2017 (the “Act”) eliminated the ability of companies to rely on the “performance-based“ compensation exception under Section 162(m) and extended the application of Section 162(m) to compensation payable to any person who was a covered employee at any time after 2016 (including compensation payable after termination of employment). As a result, beginning in 2018, we were no longer able to take a deduction for any compensation paid to our named executive officers in excess of $1 million unless the compensation originally qualified for the “performance-based” compensation exception and qualifies for transition relief applicable to certain arrangements in place on November 2, 2017. It is expected that the application of the transition rule will be of limited future value with respect to the preservation of deductions for compensation payable to covered employees in excess of the Section 162(m) limits. In any event, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the company’s business needs.


30



Reconciliation of GAAP to Non-GAAP Financial Measures

The following table provides a reconciliation of our reported GAAP results to the non-GAAP financial measures discussed above and used in certain of our named executive officers fiscal 2019 compensation plans. The following results are based on the accounting principles that were used to prepare the fiscal 2019 consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2019.  
 
 
Fiscal Year Ended
March 31,
 
 
2019
 
2018
 
 
(in thousands except per
share data)
Non-GAAP financial measures and reconciliation:
 
 
 
 
GAAP income (loss) from operations
 
$
4,908

 
$
(946
)
Noncash stock-based compensation (1)
 
77,855

 
74,129

FICA and related payroll tax expense related to equity compensation (2)
 
3,034

 
2,818

Restructuring (3)
 
14,765

 

Non-routine shareholder matters (4)
 
9,966

 

Litigation settlement (5)
 
1,400

 

Non-GAAP income from operations
 
$
111,928

 
$
76,001

GAAP net income (loss)
 
$
3,561

 
$
(61,900
)
Noncash stock-based compensation
 
77,855

 
74,129

FICA and related payroll tax expense related to equity compensation
 
3,034

 
2,818

Restructuring
 
14,765

 

Non-routine shareholder matters
 
9,966

 

Litigation settlement
 
1,400

 

Equity in loss of affiliate (6)
 

 
3,621

Noncash interest expense amortization (7)
 

 
231

Non-GAAP provision for income taxes adjustment (8)
 
(24,843
)
 
29,799

Non-GAAP net income
 
$
85,738

 
$
48,698

Diluted weighted average shares outstanding (9)
 
47,601

 
47,469

Non-GAAP diluted net income per share
 
$
1.80

 
$
1.03

 
(1)
Represents noncash stock-based compensation charges associated with stock options, restricted stock units granted and our Employee Stock Purchase Plan.

(2)
Represents additional FICA and related payroll tax expenses incurred by our company when employees exercise in the money stock options or vest in restricted stock awards.

(3)
In fiscal 2019 we initiated a restructuring plan to increase efficiency in its sales, marketing and distribution functions as well as reduce costs across all functional areas. These restructuring charges relate primarily to severance and related costs associated with headcount reductions, as well as the closure of two sales offices. Restructuring includes $1,150 and $2,632 of stock-based compensation for the three months and year ended March 31, 2019, respectively, related to modifications of awards granted to former employees. Management believes, when used as a supplement to GAAP results, that the exclusion of these charges will better help investors and financial analysts understand our operating results and underlying operational trends as compared to prior periods.

(4)
During fiscal 2019 we incurred costs related to a non-routine shareholder matter. The costs are for professional fees related to the settlement agreement with the shareholder and consulting fees incurred with the operational review which was agreed to as part of the settlement. Management believes, when used as a supplement to GAAP results, that the exclusion of these costs will better help investors and financial analysts understand our operating results and underlying operational trends as compared to prior periods.


31



(5)
During the second quarter of fiscal 2019 we incurred costs related to a litigation settlement. Management believes, when used as a supplement to GAAP results, that the exclusion of these costs will help investors and financial analysts understand our operating results and underlying operational trends as compared to prior periods.

(6)
Represents our company's share of loss from its investment in Laitek, Inc. In the fourth quarter of fiscal 2018 we recorded a non-cash impairment charge to reduce the value of our investment to zero.

(7)
We terminated its line of credit in February 2018. As a result, it incurred additional non-cash amortization related to the unamortized portion of deferred financing fees. The impact of this additional amortization has been adjusted in order to make fiscal 2018 comparable to the prior period.

(8)
The provision for income taxes is adjusted to reflect our estimated non-GAAP effective tax rate of approximately 27% in fiscal 2019 and 37% in fiscal 2018.

(9)
For GAAP purposes the potentially dilutive impact of options and shares associated with our stock-based compensation programs were excluded from the calculation of GAAP loss per share in certain periods because they would have been anti-dilutive. For purposes of non-GAAP income per share the impact of dilutive options and shares has been included.

Summary Compensation Table

The following table summarizes the compensation earned by both individuals who served as our Principal Executive Officer during the fiscal year ended March 31, 2019, our Principal Financial Officer and our other most highly paid executive officers whose total compensation in fiscal 2019 exceeded $100,000. We refer to these individuals as our “named executive officers”. Certain of these individuals have subsequently left our company or retired from their executive positions, as noted below.
Name and Principal Position
 
Year
 
Salary
 
Stock
Awards(1)(2)
 
Non-Equity
Incentive Plan
Compensation (3)
 
All Other
Compensation
 
Total
Sanjay Mirchandani
 
2019
 
$
76,923

 
$
11,423,757

 
$
250,000

 
$
167,337

(4)
$
11,918,017

President and Chief Executive Officer
 
 
 
 
 
 
 
 
 
 
 
 
N. Robert Hammer
 
2019
 
628,000

 
17,006,866

 
605,672

 
124,011

(5)
$
18,364,549

Former Chairman, President and
 
2018
 
628,000

 
5,141,161

 
349,757

 
115,546

 
$
6,234,464

Chief Executive Officer
 
2017
 
619,000

 
5,736,338

 
872,970

 
105,384

 
7,333,692

Alan G. Bunte
 
2019
 
541,000

 
3,813,453

 
497,000

 
20,876

(6)
4,872,329

Former Executive Vice President
 
2018
 
541,000

 
2,682,202

 
287,000

 
20,360

 
3,530,562

and Chief Operating Officer
 
2017
 
533,000

 
2,647,557

 
530,000

 
20,222

 
3,730,779

Brian Carolan
 
2019
 
397,000

 
1,874,064

 
238,000

 
18,039

(7)
2,527,103

Vice President and
 
2018
 
397,000

 
1,851,506

 
191,000

 
17,634

 
2,457,140

Chief Financial Officer
 
2017
 
391,000

 
1,617,185

 
262,000

 
17,506

 
2,287,691

Ron Miiller
 
2019
 
371,000

 
2,287,279

 
282,529

 

(8
)
2,940,808

Former Senior Vice President of
 
2018
 
371,000

 
1,524,740

 
321,245

 

 
2,216,985

Worldwide Sales
 
2017
 
365,450

 
1,509,348

 
342,390

 

 
2,217,188

 
(1)
The amounts in this column represents the grant date fair value of restricted stock units and performance stock units granted during the fiscal year indicated as computed in accordance with FASB ASC Topic 718. The amounts shown disregard estimated forfeitures related to service-based vesting conditions. See the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended March 31, 2019 for a discussion of all assumptions made by us in determining the grant date fair value of such awards.
(2)
Fiscal 2019 grants include both time-based and performance-based awards. See the “Long-Term Equity Incentive Awards” section in the Compensation Discussion and Analysis for details.
(3)
The amounts reported in this column consist of awards earned in fiscal 2019 under each executive officer non-equity incentive plan compensation. The full amount of the bonus paid was performance based. Such amounts are more fully described above under the heading “Non-Equity Incentive Plan Compensation” in the Compensation Discussion and Analysis.

32



(4)
Mr. Mirchandani's other annual compensation in fiscal 2019 included a monthly housing and travel allowance of $15,000 per month for two months and a relocation reimbursement and a one-time, lump sum set-up and transition reimbursement of approximately $136,000. It also includes $1,154 related to his 401(k) plan company matching contributions.
(5)
Mr. Hammer’s stock awards include the $12,157,113 stock modification our company recorded as of March 31, 2019. Refer to the section "Stock Compensation Expense for Senior Leadership" below for further detail regarding this modification. Mr. Hammer's other annual compensation in fiscal 2019 included our payment of $67,084 for airfare for Mr. Hammer mainly between his residence in Florida and our headquarters in New Jersey, $31,452 related to housing costs for the rental of an apartment for Mr. Hammer in New Jersey and $25,475 for transportation related costs.
(6)
Mr. Bunte's stock awards include the $1,704,948 stock modification our company recorded as of March 31, 2019. Refer to the section "Stock Compensation Expense for Senior Leadership" below for further detail regarding this modification. Additionally, Mr. Bunte's other compensation primarily relate to transportation related costs, and 401(k) plan company matching contributions.
(7)
The amounts reported in this caption primarily relate to transportation related costs, and 401(k) plan company matching contributions.
(8)
Mr. Miiller's stock awards include the $829,796 stock modification our company recorded as of March 31, 2019. Refer to the section "Stock Compensation Expense for Senior Leadership" below for further detail regarding this modification.

Fiscal 2019 salary and non-equity incentive compensation in proportion to total compensation

The amount of salary and non-equity incentive compensation earned in fiscal 2019 in proportion to the total compensation reported for each of our named executive officers during fiscal 2019 was:

Sanjay Mirchandani: 3%
N. Robert Hammer: 20%
Alan G. Bunte: 33%
Brian Carolan: 25%
Ron Miiller: 31%

Grants of Plan Based Awards

The following table sets forth information as to grants of awards to the named executive officers in fiscal 2019:
 
 
 
 
 
 
 
Estimated Future Payouts under
Non-Equity Incentive Plan Awards
 
All Other
Stock Awards:
Number of
Shares of
 
All Other
Options Awards:
Number of
Securities
 
Exercise or Base
Price of
Option
 
Grant Date
Fair Value
of Stock and
Name
 
Grant
Date
 
Approval
Date
 
Threshold
(1)
 
Target
(2)
 
Maximum
(3)
 
Stock or
Units(4)
 
Underlying
Options
 
Awards
($/Sh)
 
Option
Awards(5)
Sanjay Mirchandani
 

 

 
$
250,000

 
$
500,000

 
$

 

 

 
$

 
$

 
 
2/5/2019

 
2/5/2019

 
$

 
$

 
$

 
154,890

 

 
$

 
$
11,423,757

N. Robert Hammer
 

 

 
$
369,000

 
$
659,400

 
$

 

 

 
$

 
$

 
 
5/15/2018

 
5/15/2018

 
$

 
$

 
$

 
66,300

 

 
$

 
$
4,849,753

Alan G. Bunte
 

 

 
$

 
$
541,000

 
$

 

 

 
$

 
$

 
 
5/15/2018

 
5/15/2018

 
$

 
$

 
$

 
28,825

 

 
$

 
$
2,108,505

Brian Carolan
 

 

 
$

 
$
238,200

 
$

 

 

 
$

 
$

 
 
5/15/2018

 
5/15/2018

 
$

 
$

 
$

 
25,944

 

 
$

 
$
1,874,064

Ron Miiller
 

 

 
$
148,400

 
$
371,000

 
$
556,500

 

 

 
$

 
$

 
 
5/15/2018

 
5/15/2018

 
$

 
$

 
$

 
20,177

 

 
$

 
$
1,457,483

(1)
Represents the total threshold amount with respect to each applicable metric under the fiscal 2019 non-equity incentive plans for each named executive officer. Actual total pay-outs may be less than the threshold amounts above if individual thresholds are not met. Mr. Mirchandani's non-equity incentive compensation plan as part of his new hire agreement include a 50% of base salary minimum for non-equity awards for fiscal 2020. Mr. Hammer’s non-equity incentive compensation plan includes individual annual threshold amounts for total revenue and non-GAAP income from operations (EBIT). Mr. Miiller’s non-equity incentive compensation plan includes individual quarterly threshold amounts for worldwide commissionable software bookings; worldwide maintenance support revenue; worldwide professional services revenue and annual attainment related to worldwide non-GAAP income from operations (EBIT). Annual non-equity incentive plans

33



for Messrs. Bunte and Carolan do not contain threshold amounts. See “Non-Equity Incentive Plan Compensation” above for more information on the plans and performance objectives for each of our named executive officers.

(2)
We believe that our non-equity incentive plan targets are aggressive and not easy to achieve. See “Non-Equity Incentive Plan Compensation” above for more information.

(3)
Annual non-equity incentive plan awards to Messrs. Mirchandani. Hammer, Bunte and Carolan do not contain maximum pay-outs. Mr. Miiller was entitled to non-equity incentive plan compensation based on tiered plans that contain maximum pay-outs. See “Non-Equity Incentive Plan Compensation” above for more information on the plan for each of our named executive officers.

(4)
Amounts in this column reflect restricted stock units granted during fiscal 2019 to a named executive officer under our 2016 Incentive Plan.

(5)
The amounts in theses column represent the grant date fair value of restricted stock units and non-qualified stock options granted during the fiscal year indicated as computed in accordance with FASB ASC Topic 718. The amounts shown disregard estimated forfeitures related to service-based vesting conditions. See Note 8 to the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the grant date fair value of such awards.


34



Outstanding Equity Awards at Fiscal Year End
The following table reflects all outstanding equity awards held by the named executive officers, including former executive officers, as of March 31, 2019:
 
 
 
Option Awards
 
Stock Awards
Name
Grant Date (1)
 
Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
 
Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
 
Option
Exercise
Price
 
Option
Expiration
Date
 
Number of
Shares or
Units of Stock
That Have
Not Vested
 
Market
Value of
Shares or
Units of
Stock That
Have
Not
Vested (2)
Sanjay Mirchandani
2/4/2019
 

 

 
$

 

 
154,890

 
$
10,027,579

N. Robert Hammer
12/12/2008
 
180,000

 

 
$
11.12

 
12/12/2018

 

 
$

 
12/14/2009
 
84,154

 

 
$
22.59

 
12/14/2019

 

 
$

 
10/14/2010
 
158,730

 

 
$
26.83

 
10/14/2020

 

 
$

 
10/14/2011
 
218,750

 

 
$
41.55

 
10/14/2021

 

 
$

 
10/12/2012
 
190,857

 

 
$
56.57

 
10/12/2022

 
 
 
$

 
10/14/2013
 
193,929

 

 
$
87.20

 
10/14/2023

 

 
$

 
10/14/2014
 
76,375

 
17,625

 
$
45.44

 
10/14/2024

 

 
$

 
3/31/2015
 
19,322

 
4,458

 
$
44.13

 
3/31/2025

 
951

 
$
54,397

 
10/15/2015
 

 

 
$

 

 
19,100

 
$
1,092,520

 
5/13/2016
 

 

 
$

 

 
59,663

 
$
3,412,724

 
5/12/2017
 

 

 
$

 

 
80,278

 
$
4,591,902

 
5/15/2018
 

 

 
$

 

 
66,300

 
$
4,292,262

Alan G. Bunte
12/12/2008
 
135,000

 

 
$
11.12

 
12/12/2018

 

 
$

 
12/14/2009
 
64,167

 

 
$
22.59

 
12/14/2019

 

 
$

 
10/14/2010
 
139,683

 

 
$
26.83

 
10/14/2020

 

 
$

 
10/14/2011
 
145,714

 

 
$
41.55

 
10/14/2021

 

 
$

 
10/12/2012
 
152,550

 

 
$
56.57

 
10/12/2022

 

 
$

 
 3/14/2013
 
65,000

 

 
$
77.57

 
3/14/2023

 

 
$

 
10/14/2013
 
158,669

 

 
$
87.20

 
10/14/2023

 

 
$

 
10/14/2014
 
100,640

 
23,225

 
$
45.44

 
10/14/2024

 
3,871

 
$
221,421

 
10/15/2015
 

 

 
$

 

 
10,416

 
$
595,795

 
5/13/2016
 

 

 
$

 

 
27,535

 
$
1,575,002

 
5/12/2017
 

 

 
$

 

 
41,882

 
$
2,395,650

 
5/15/2018
 

 

 
$

 

 
28,825

 
$
1,866,131


35



 
 
 
Option Awards
 
Stock Awards
Name
Grant Date (1)
 
Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
 
Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
 
Option
Exercise
Price
 
Option
Expiration
Date
 
Number of
Shares or
Units of Stock
That Have
Not Vested
 
Market
Value of
Shares or
Units of
Stock That
Have
Not
Vested (2)
Brian Carolan
12/12/2008
 
3,636

 

 
$
11.12

 
12/12/2018

 

 
$

 
12/14/2009
 
10,940

 

 
$
22.59

 
12/14/2019

 

 
$

 
10/14/2010
 
23,937

 

 
$
26.83

 
10/14/2020

 

 
$

 
1/14/2011
 
6,897

 

 
$
30.26

 
1/14/2021

 

 
$

 
10/14/2011
 
22,500

 

 
$
41.55

 
10/14/2021

 

 
$

 
10/12/2012
 
35,256

 

 
$
56.57

 
10/12/2022

 

 
$

 
3/14/2013
 
12,000

 

 
$
77.57

 
3/14/2023

 

 
$

 
10/14/2013
 
45,132

 

 
$
87.20

 
10/14/2023

 

 
$

 
10/14/2014
 
36,806

 
8,493

 
$
45.44

 
10/14/2024

 
2,832

 
$
161,990

 
10/15/2015
 

 

 
$

 

 
5,658

 
$
323,638

 
5/13/2016
 

 

 
$

 

 
16,515

 
$
944,658

 
5/12/2017
 

 

 
$

 

 
29,668

 
$
1,697,010

 
5/15/2018
 

 

 
$

 

 
25,944

 
$
1,679,615

Ron Miiller
10/14/2010
 
44,762

 

 
$
26.83

 
10/14/2020

 

 
$

 
4/14/2011
 
12,000

 

 
$
38.74

 
4/14/2021

 

 
$

 
10/14/2011
 
47,250

 

 
$
41.55

 
10/14/2021

 

 
$

 
10/12/2012
 
48,816

 

 
$
56.57

 
10/12/2022

 

 
$

 
3/14/2013
 
25,000

 

 
$
77.57

 
3/14/2023

 

 
$

 
10/14/2013
 
56,416

 

 
$
87.20

 
10/14/2023

 

 
$

 
10/14/2014
 
50,962

 

 
$
45.44

 
10/14/2024

 

 
$

 
10/15/2015
 

 

 
$

 

 

 
$

 
5/13/2016
 

 

 
$

 

 

 
$

 
5/12/2017
 

 

 
$

 

 

 
$

 
5/15/2018
 

 

 
$

 

 

 
$

(1)
Unless otherwise indicated, all stock option and restricted stock unit awards granted to named executive officers vest quarterly in equal installments over a three or four-year period, except that the shares that would otherwise vest quarterly over the first twelve months do not vest until the first anniversary of the grant. The vesting commencement date for all stock options and restricted stock units is the grant date.
(2)
Computed based on the number of unvested shares multiplied by the closing market price of our common stock at the end of fiscal year 2019. The actual value (if any) to be realized by the named executive officer depends on whether the shares vest and the future performance of our common stock. On March 31, 2019, the closing price of our common stock was $64.74 per share.

36




Option Exercises and Stock Vested

The following table sets forth information on the number and value of stock options exercised and restricted stock units vested during fiscal 2019 for the named executive officers and former executive officers who held office in fiscal 2019.
 
 
 
Option Awards
 
Stock Awards
Name
 
Number of Shares
Acquired on
Exercise
 
Value Realized
on
Exercise (1)
 
Number of
Shares  Acquired
on Vesting
 
Value Realized
on
Vesting (2)
Sanjay Mirchandani
 

 
$

 
$

 
$

N. Robert Hammer
 
180,000

 
8,319,628

 
118,178

 
$
7,799,637

Alan G. Bunte
 
199,167

 
10,244,087

 
62,718

 
4,157,050

Brian Carolan
 
25,544

 
1,160,019

 
39,395

 
2,608,191

Ron Miiller
 
104,012

 
3,167,017

 
35,219

 
2,330,637

(1)
The value realized on the exercise of stock options is based on the difference between the exercise price and the sale price of common stock at the time of exercise.
(2)
The value realized on the vesting of restricted stock units is based on the market price of our common stock on the day that the restricted stock vested.

Stock Compensation Expense for Changes in Executive Leadership

During fiscal 2019, our Company’s then-current Chief Executive Officer, N. Robert Hammer, announced his retirement effective as of February 1, 2019. As part of his retirement, the Company modified his equity awards to allow for continued vesting of his restricted stock awards and performance based awards. The Company also increased the timeframe for which his stock options shall remain exercisable to their original ten years expiration date and not thirty days from his last date of employment. The expense related to these modifications was $12,157,113 and was recorded in our financial statements for the year ended March 31, 2019.

The Company also recorded expenses of approximately $378,877 and $829,796, respectively, related to the modifications of awards for Mr. Bunte and Mr. Miiller for the fiscal year ended 2019 in connection with Mr. Bunte's retirement from his role as Chief Operating Officer and Mr. Miiller's departure from the company.

Pension Benefits

None of our named executive officers during fiscal 2019 participated in or had account balances in qualified or non-qualified defined benefit plans sponsored by us.

Nonqualified Deferred Compensation

None of our named executive officers during fiscal 2019 participated in or had account balances in non-qualified defined contribution plans maintained by us.


37



Employment Agreements

In January 2019, we entered into an employment agreement with Sanjay Mirchandani upon his appointment as President and Chief Executive Officer. The agreement provides that Mr. Mirchandani's annual salary shall be subject to annual review by our Board of Directors. The agreement also provides that Mr. Mirchandani shall be eligible for annual non-equity incentive plan compensation with bonus potential and that he shall be entitled to participate in the employee benefits plans in which our other executives may participate. The agreement further provides that Mr. Mirchandani is entitled to certain equity awards, including annual target equity awards and a one-time new hire award. If we terminate Mr. Mirchandani's employment without cause or if Mr. Mirchandani terminates his employment for good reason, the agreement provides that Mr. Mirchandani will be entitled to receive a lump sum payment equal to (i) 12 months of his then-current base salary and (ii) his target bonus for the year in which termination occurs. We will also be required to continue paying the premiums for Mr. Mirchandani's and his dependents’ health insurance coverage for a period of 18 months. In addition, Mr. Mirchandani will be entitled to any other amounts or benefits previously accrued under our then applicable employee benefit plans, incentive plans or programs. Furthermore, the vesting of all stock options and stock awards held by Mr. Mirchandani shall immediately accelerate as for one (1) year of additional vesting and any stock awards with performance conditions not yet determined shall be deemed earned at 100% of target. If we terminate Mr. Mirchandani's employment by reason of death or disability, he will be entitled to any compensation earned but not yet paid, any stock options or awards shall immediately vest, and any stock awards with performance conditions not yet determined shall be deemed earned at 100% of target. The agreement also provides that, during his term of employment with us and for a period of one year following any termination of employment with us, Mr. Mirchandani may not participate, directly or indirectly, in any capacity whatsoever, within the United States, in a business in competition with us, other than beneficial ownership of up to one percent of the outstanding stock of a publicly held company. In addition, Mr. Mirchandani may not solicit our employees or customers for a period of one year following any termination of his employment with us. Mr. Mirchandani's employment agreement also contains a change in control provision which is discussed below in the section titled “Change in Control Agreements.”

In February 2019, we entered into a separation agreement with N. Robert Hammer pursuant to which Mr. Hammer's employment with our company was terminated effective as of March 31, 2019. Pursuant to that separation agreement, and in accordance with Mr. Hammer's then-existing employment agreement, upon his termination, Mr. Hammer became entitled to: (i) payment of earned but unpaid salary, (ii) payment of any declared but unpaid bonus for the fiscal year prior to the termination date, (iii) payment of earned but unused vacation days, as determined in accordance with our company's policy as in effect from time to time, payable in accordance with applicable law, (iv) reimbursements of any reasonable business expenses incurred prior to the termination date, and (v) any other vested payments or benefits to which he is entitled under the express terms of any employee benefit plans, arrangements or programs of our company. Furthermore, we agreed to provide him with the following benefits to which he would not otherwise have been entitled: (i) any outstanding equity awards granted by our company and held by Mr. Hammer upon the date of his departure shall continue to vest (and, if applicable become exercisable) in accordance with their terms as if his termination had not occurred, (ii) in the case of any equity awards that are performance-based restricted stock units, the determination of whether and to what extent the awards will become vested will be determined based on the actual performance otherwise applicable to such awards and will be determined at the time that the performance and vesting is otherwise determined for similarly-situated employees whose termination of employment had not occurred, (iii) in the case of any equity award that is a stock option, such stock options shall remain exercisable until the earlier of the 10th anniversary of the grant date of such stock option and the date on which the stock option would otherwise have expired if his termination had not occurred. We also provided for the value of medical benefits as agreed in his original employment agreement.

The February 2019 separation agreement with Mr. Hammer terminated the employment agreement we previously entered into with him in February 2004. That employment agreement had provided that Mr. Hammer’s annual salary would be subject to annual review by our Board of Directors. The employment agreement also provided that Mr. Hammer would be eligible for annual non-equity incentive plan compensation with bonus potential and that he would be entitled to participate in the employee benefits plans in which our other executives may participate. Under the terms of the employment agreement, if the Company terminated Mr. Hammer’s employment for any reason other than cause, death or upon a change in control of our company, for a one-year period, Mr. Hammer would be entitled to receive his then-current base salary (either in equal bi-weekly payments or a lump sum payment, at our discretion) and we would be required to continue paying the premiums for Mr. Hammer’s and his dependents’ health insurance coverage. In addition, Mr. Hammer would be entitled to any other amounts or benefits previously accrued under our then applicable employee benefit plans, incentive plans or programs. The employment agreement provided that, during his term of employment with us and for a period of one year following any termination of employment with us, Mr. Hammer may not participate, directly or indirectly, in any capacity whatsoever, within the United States, in a business in competition with us, other than beneficial ownership of up to one percent of the outstanding stock of a publicly held company. In addition, Mr. Hammer may not solicit our employees or customers for a period of one year following any termination of his employment with us. These non-solicit and non-compete provisions were expressly referenced in the February 2019 separation agreement and are presently in full force and effect. Mr. Hammer’s employment agreement also contained a change in control provision which is discussed below in the section titled “Change in Control Agreements.”

38




During Mr. Hammer's tenure as Chairman, President and Chief Executive Officer, he maintained his primary residence in the state of Florida. As part of his annual compensation, we therefore paid costs associated with Mr. Hammer’s travel between his residence in Florida and our headquarters in New Jersey and we also leased an apartment for Mr. Hammer’s use in New Jersey. See “Summary Compensation Table” for more information. The members of the Compensation Committee considered these costs in reviewing the annual compensation of Mr. Hammer. We do not believe that Mr. Hammer’s Florida residency had a negative impact on the quality of his service to us or on his ability to meet his obligations as Chairman, President and Chief Executive Officer prior to his departure in 2019.

In March 2019, we entered into a retention and separation agreement with Alan G. Bunte outlining each party's agreement in respect of Mr. Bunte's ongoing transitionary role with our company following his resignation from the role as Chief Operating Officer in February 2019. Pursuant to that retention and separation agreement, the parties agreed that, upon a qualifying termination, (a) all stock options and stock appreciation rights held by Mr. Bunte shall become immediately vested and exercisable to the extent such grants would have become vested and exercisable had Mr. Bunte remained employed with our company for a designated severance period of 18 months following his termination (or, if termination occurs after February 4, 2020, a period of 12 months) and shall expire at the same time such grants would have expired had Mr. Bunte remained employed through such date; and (b) all other equity or equity-based awards granted to Mr. Bunte shall immediately become vested and non-forfeitable to the extent such awards would have become vested and non-forfeitable had Mr. Bunte remained employed with our company through such date. The retention and separation agreement also provides that upon a qualifying termination, Mr. Bunte is entitled to receive severance compensation in an amount equal to 18 times his monthly base salary (or, if termination occurs after February 4, 2020, 12 times his monthly base salary), which is payable in accordance with our normal payroll practices. Mr. Bunte shall also receive a lump sum payment equal to the cost Mr. Bunte would have to pay for continuation of group health coverage under our group health plan. A qualifying termination under this agreement includes termination by our company other than for good cause, or termination by Mr. Bunte for good cause, which includes his decision to leave our company at any time, for any reason, after June 30, 2019.

The March 2019 retention and separation agreement with Mr. Bunte terminated his then-existing employment agreement which was originally executed in February 2004. The employment agreement with Mr. Bunte provided that his annual salary would be subject to annual review by our chief executive officer or his designee, and also provided that he would be eligible for annual non-equity incentive plan compensation with a target bonus potential equal to a percentage of Mr. Bunte’s base salary. The employment agreement with Mr. Bunte provided that he would be entitled to participate in the employee benefits plans in which our other executives may participate. Furthermore, that employment agreement provided that if we terminated the employment of Mr. Bunte for any reason other than for cause or death, for a one-year period, Mr. Bunte would be entitled to receive his then-current base salary (either in equal bi-weekly payments or a lump sum payment, at our discretion) and we would be required to continue paying the premiums for his and his dependents’ health insurance coverage. In addition, Mr. Bunte would be entitled to any other amounts or benefits previously accrued under our then applicable employee benefit plans, incentive plans or programs. The employment agreement provided that, during his term of employment with us and for a period of one year following any termination of employment with us, Mr. Bunte may not participate, directly or indirectly, in any capacity whatsoever, within the United States, in a business in competition with us, other than beneficial ownership of up to one percent of the outstanding stock of a publicly held company. In addition, Mr. Bunte may not solicit our employees or customers for a period of one year following any termination of employment with us. These non-solicit and non-compete provisions were expressly referenced in the March 2019 retention and separation agreement, and as set forth in such agreement, would apply in the event of Mr. Bunte's departure in accordance with the terms of such separation agreement.

Change in Control Agreements

Mr. Mirchadani's employment agreement provides for the vesting of equity awards upon a change in control of our company. Specifically, if a change in control of our company occurs and Mr. Mirchandani's employment is terminated for reasons other than for cause or on account of disability or if Mr. Mirchandani terminates his employment for good reason, in each case, within two years of the change in control, then all equity awards held by Mr. Mirchandani shall immediately become exercisable and any equity awards with performance conditions not yet determinable will be deemed earned at 100% of target. Furthermore, subject to execution of a release of claims, he shall be entitled to (1) a lump sum severance payment equal to 18 months of his base salary at the time of the change in control plus an amount equal to Mr. Mirchandani's target cash bonus at the time of the change in control, and (2) health insurance coverage for Mr. Mirchandani and his dependents for an 18 month period.

Mr. Hammer's separation agreement provides if a change in control of our company occurs prior to the date on which any of Mr. Hammer's equity awards are fully vested, then, upon such a change in control, all equity awards held by Mr. Hammer shall immediately become vested and exercisable and any equity awards with performance conditions not yet determinable will be determined in accordance with the applicable plan.

39




We have entered into change of control agreements with each of our other named executive officers whose employment agreement sets forth the protections upon a change of control described above. Each of these agreements provide that if a change in control of our company occurs and the employment of any of the officers is terminated for reasons other than for cause, or if the officer terminates his employment within 60 days of a material diminution in his salary or duties or the relocation of his employment following a change in control of our company, then all equity awards held by the officer shall immediately become exercisable or vested. In addition, the change of control agreement with Mr. Bunte provides that if a change in control of our company occurs and the employment of Mr. Bunte is terminated for reasons other than for cause within two years of the change in control, or if Mr. Bunte terminates his employment within 60 days of a material diminution in his salary or duties or the relocation of his employment within two years following a change in control of our company, then Mr. Bunte shall be entitled to (1) a lump sum severance payment equal to one and a half times the sum of his annual base salary at the time of the change in control and all bonus payments made to him during the one-year period preceding the date of the change in control, and (2) health insurance coverage for him and his dependents for an 18 month period. The change of control agreements with Mr. Carolan has substantially identical provisions that provide for a lump sum severance payment equal to the officer’s annual base salary at the time of the change in control and health insurance coverage for the officer and his dependents for a 12 month period.

The change of control agreement with Mr. Bunte provides that, for an 18 month period following the termination of employment, Mr. Bunte may not engage in, or have any interest in, or manage or operate any company or other business (whether as a director, officer, employee, partner, equity holder, consultant or otherwise) that engages in any business which then competes with any of our businesses, other than beneficial ownership of up to five percent of the outstanding voting stock of a publicly traded company. The agreement also prohibits Mr. Bunte from inducing any of our employees to terminate their employment with us or to become employed by any of our competitors during the 18 month period. As noted above, these provisions have been expressly referenced in Mr. Bunte's retention and separation agreement. Mr. Carolan is subject to substantially identical non-competition and non-solicitation provisions for a one-year period following the termination of employment.


40



Estimated Payments and Benefits upon Termination or Change in Control

The amount of compensation and benefits payable to each named executive officer has been estimated in the table below. The amounts below assume that such termination was effective as of March 31, 2019, the last day of our fiscal year. The actual amounts to be paid out can only be determined at the time of such executive’s separation from us.
 
 
 
Compensation
 
 
 
 
 
 
Base Salary
 
Non-Equity
Incentive  Plan
 
Accelerated
Vesting of
Restricted Stock
Units(2)
 
Continuation of
Medical  Benefits
(Present Value)
 
Total
Compensation
and
Benefits
Sanjay Mirchandani
 
 
 
 
 
 
 
 
 
 
Death
 
$

 
$

 
$
10,027,579

 
$

 
$
10,027,579

Disability
 
$

 
$

 
$
10,027,579

 
$

 
$
10,027,579

Involuntary termination without cause or by non-extension of employment term
 
$
500,000

 
$
500,000

 
$
3,008,274

 
$
11,385

 
$
4,019,659

Change in Control
 
$
750,000

 
$
750,000

 
$
10,027,579

 
$
17,078

 
$
11,544,657

Al Bunte
 
 
 
 
 
 
 
 
 
 
Death
 
$

 
$

 
$

 
$

 
$

Disability
 
$

 
$

 
$

 
$

 
$

Involuntary termination without cause or by non-extension of employment term
 
$
811,500

 
$

 
$
3,294,748

 
$
22,741

 
$
4,128,989

Change in Control
 
$
811,500

 
$

 
$
3,813,251

 
$
22,741

 
$
4,647,492

Brian Carolan
 
 
 
 
 
 
 
 
 
 
Death
 
$

 
$

 
$

 
$

 
$

Disability
 
$

 
$

 
$

 
$

 
$

Involuntary termination without cause or by non-extension of employment term
 
$
595,500

 
$

 
$
2,470,737

 
$
36,698

 
$
3,102,935

Change in Control
 
$
397,000

 
$

 
$
2,926,119

 
$
24,465

 
$
3,347,584

(1)
Amounts in this column describe the value of stock options that would vest upon the triggering event described in the leftmost column. The value of stock options is based on the difference between the exercise price of the options and the $64.74 closing price of our common stock on March 31, 2019.
(2)
Amounts in this column describe the value of restricted stock units that would vest upon the triggering event described in the leftmost column, based on a closing price of $64.74 of our common stock on March 31, 2019.



















41



Actual Payments and Benefits upon Termination

The amount of compensation and benefits payable to each named executive officer who has resigned from our Company as of March 31, 2019 has been included in the table below.
 
 
Compensation
 
 
 
 
 
 
Severance(1)
 
Modification of
Restricted Stock
Units(2)
 
Continuation of
Medical  Benefits
(Present Value)