All fees described above were pre-approved by the Audit Committee in accordance with the requirements of Regulation S-X under the Exchange Act, as described below.

Pre-Approval Policies and Procedures

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board regarding auditor independence, our Audit Committee is responsible for the appointment, compensation and oversight of our independent registered public accounting firm. Our Audit Committee has established a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services, all of which are permitted to be provided by an independent registered public accounting firm under applicable securities laws.

Before it may be engaged for the fiscal year’s audit, the independent registered public accounting firm submits to the Audit Committee for approval a description of services it expects to render during that year.

The Audit Committee pre-approves particular services or categories of services on a case-by-case basis. In assessing whether to approve the use of our independent registered public accounting firm for permitted non-audit services, our Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. The fees are budgeted, and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee must pre-approve the services before engaging the independent registered public accounting firm for such services.

The affirmative vote of the holders of shares representing a majority of the voting power of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of E&Y.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE RATIFICATION OF THE APPOINTMENT OF E&Y AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR 2020.

Our Board of Directors oversees the management of our business and affairs, as provided by Delaware law, and conducts its business through meetings of the Board of Directors and three standing committees: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. In addition, from time to time, special committees may be established under the direction of the Board of Directors when necessary to address specific issues.

Corporate Governance Highlights

Our commitment to good corporate governance is reflected in several practices of our Board of Directors and committees, as described below.

Board Leadership

Director Independence

On March 8, 2018, theOur Board reviewedof Directors annually reviews its composition, structure, the composition of its committees and the independence of each director.director for both board and committee purposes. The determination of independence of members of the Board wasof Directors is based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships. In making this determination, the Board consideredof Directors considers the relationships that each non-employee director has with us and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownershipindependence.

The Board of our capital stock by each non-employee director. The BoardDirectors has determined that Mr. Comolli, Mr. Gavin, Ms. Iohan, Mr. Mendoza, Mr. Segev, Ms. Segev-Gal and Mr. Van Den Bosch, representing sixseven of our nine directors, are “independent” as that term is defined under the rules of The Nasdaq Global SelectStock Market LLC (“NASDAQ”) for purposes of serving on the Board.Board of Directors. Although Ms. Iohan previously served as our Chief Financial Officer, her service ended on March 31, 2017 and the Board of Directors believes that sufficient time has passed such that her relationship to the Company would not interfere with the exercise of independent judgment in carrying out her responsibilities as a director.

Our Current Board Leadership Structure

The Board of Directors is of the view that “one size” does not fit all, and thus does not have a formal policy regarding whether the same person should serve as both the Chief Executive Officer (“CEO”), Presidentand Chairman of the Board of Directors. Instead, the Board of Directors believes that an effective leadership structure could be achieved either by combining or separating the Chief Executive Officer and Chairman positions, if the structure encourages free and open dialogue of competing views of directors and provides for strong checks and balances on management directors. Specifically, an effective governance structure must balance the powers of the Chief Executive Officer and the independent directors and enable the independent directors to oversee management effectively, while ensuring that the independent directors are held by Yakov Faitelson. fully informed about the Company’s business and strategy and, ready to discuss and debate key issues.

Periodically, our Board of Directors assesses these roles and the board leadership structure to ensure that it serves the interests of the Company and our stockholders are best served. Ourand promotes the creation of long-term stockholder value. Currently, the Chairman of our Board is our Chief Executive Officer, and as a result of the Chairman’s non-independent status, our Board has determined that its current leadership structure is appropriate as our CEO,elected an independent Lead Director.

The Board of Directors believes that the responsibilities of the Company, our business and risks, and our customers. Our Board has no Lead Independent Director; however,Director help to ensure appropriate oversight of the Company’s management by the Board may choose to elect one.

Roleof Directors and optimal functioning of the Board in Risk Oversightof Directors. The effectiveness of the Lead Director is enhanced by the Board of Directors’ independent character. For more information, see “Director Independence.”

One of the Board’s key functions is informed oversight of our risk management process. TheDirector Qualification Standards, Selection and Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various Board standing committees that address risks inherent in their respective areas of oversight. In particular, the Board is responsible for monitoring and assessing strategic risk exposure, including a determination of the nature and level of risk appropriate for us. As part of monitoring and assessing strategic risk exposure, the Board assess our vulnerability to cyber-attacks and data breaches. Our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. Our Audit Committee also monitors compliance with legal and regulatory requirements, in addition to oversight of the performance of our internal audit function. OurComposition

The Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Typically, the entire Board meets periodically with senior managementis responsible for our risk management, and the applicable Board committees meet periodically with the employees responsible for risk management in the committees’ respective areas of oversight. The Board as a whole and the various standing committees receive periodic reports from the head of our legal and operations groups, as well as incidental reports as matters may arise. It is the responsibility of the committees’ chairs to report findings regarding material risk exposuresrecommending to the Board as quickly as possible.of Directors candidates for all vacant directorships at stockholder meetings and reviews the full composition of the Board of Directors and its committees on an annual basis.

Stockholder Recommendations and Nominations of Directors

Pursuant to our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee will consider nominees recommended by stockholders for election as directors. Stockholders may recommend director nominees for consideration by the Nominating and Corporate Governance Committee and the Board of Directors, by supplying in writing to the Company the information required by the Company’s bylaws for stockholder nominations. After we verify that the person submitting the recommendation is indeed a stockholder and that the recommendation is otherwise properly submitted, the recommendation will be brought to the attention of the Nominating and Corporate Governance Committee, and, if the Nominating and Corporate Governance Committee so decides, the Board of Directors. The Nominating and Corporate Governance Committee and Board evaluate nominees recommended by stockholders in the same way they evaluate other nominees.

Stockholders who wish to nominate persons directly for election to the Board of Directors at the Company’s annual meeting of stockholders must meet the deadlines and other requirements set forth in the bylaws. Recommendations and nominations of directors must be mailed to the Company at 1250 Broadway, 29^th Floor, New York, NY 10001, United States, Attn.: Chief Financial Officer and Chief Operating Officer. For more information, see “Other Information—Stockholder Proposals and Nominations for 2021 Annual Meeting of Stockholders.”

Director Qualification Standards and Selection

Candidates for the Board of Directors are generally selected based on desired skills and experience in the context of the existing composition of the Board of Directors and needs of the Board of Directors and its committees at that time, including the requirements of applicable SEC and the NASDAQ rules. The Nominating and Corporate Governance Committee does not assign specific weight to particular criteria, and no particular criterion is necessarily applicable to all candidates. In its consideration of the specific needs of the Board of Directors and the Company, the Nominating and Corporate Governance Committee considers diverse backgrounds so that the Board of Directors’ composition reflects a broad spectrum of experience and expertise.

Board Tenure

When recommending to the Board of Directors the slate of director nominees for election at an annual meeting of stockholders and reviewing directors not up for re-election, the Nominating and Corporate Governance Committee strives to maintain a healthy degree of board refreshment and prevent excessive entrenchment, while weighing the strong contributions delivered by directors with deep knowledge of our Company’s history and strategic long-term goals. Since 2015, three new directors have joined our Board of Directors, including one director who joined in 2017.

Board Diversity

The Nominating and Corporate Governance Committee and the Board of Directors seek candidates with a broad diversity of knowledge, experience and demonstrated expertise in an area or areas of importance to our Company, such as management, cybersecurity, finance, marketing, data privacy, data science, human resources and compliance/law. The Nominating and Corporate Governance Committee also considers traditional diversity factors such as race and gender but has no formal policy, guidelines or procedures with respect to consideration of diversity in the nominating process.

Expectations for Directors and Meetings of the Board of Directors

Directors are expected to attend Board of Directors and committee meetings on which they serve, and to meet as frequently as necessary in order to properly discharge their responsibilities. During the 2019 fiscal year, the Board of Directors met four times. Disclosure regarding meetings of the committees of the Board of Directors during the 2019 fiscal year can be found under “Committees of the Board of Directors.”

Committees of the Board of Directors

The Board met four times and took action by unanimous written consent two times duringof Directors has established various committees to assist it with the last fiscal year. Each Board member attended 75% or moreperformance of the aggregate number of meetings of the Board and of the committees on which he or she served, held during the portion of the last fiscal year for which he or she was a director or committee member. Four of our Board members attended the 2017 Annual Meeting.

Information Regarding Committees of the Board

its responsibilities. The Board has three committees: an Audit Committee, a Compensation Committeeof Directors designates the members of these committees and athe committee chairs based on the recommendations of the Nominating and Corporate Governance Committee. The followingchairperson of each committee develops the agenda for its respective committee, and each committee regularly provides a full report to the Board of Directors.

The table below provides membership and meeting information for fiscal 2017year 2019 for each of the Board committees:of Directors committees.

Director	Independent	Audit Committee(1)	Compensation Committee(2)	NOMINATING AND CORPORATE GOVERNANCE    Committee(3)
Yakov Faitelson, Chairman, President and CEO
Kevin Comolli	ü
John J. Gavin, Jr.  Lead Director	ü
Gili Iohan	ü
Ohad Korkus
Thomas F. Mendoza	ü
Ofer Segev	ü
Rona Segev-Gal	ü
Fred Van Den Bosch	ü

Our Board of Directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by the Board.Board of Directors.

The Board of Directors has adopted written charters for each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. These charters are available on the Company’s investor website at https://ir.varonis.com/corporate-governance. Annually, the chairperson of each committee reviews the respective committee charter and determines, in consultation with the rest of the committee, whether any amendments are required to reflect new rules or good governance practices. The following tables summarize the primary responsibilities of the committees pursuant to each committee’s charter.

Our Audit Committee oversees our accounting and financial reporting process and the audit of our financial statements and assists the Board in monitoring our financial systems and our legal and regulatory compliance. Our Audit Committee is responsible for, among other things:

We believe that the functioning of our Audit Committee complies with the applicable requirements of The Nasdaq Global Select Market and SEC rules and regulations.

The members of our Audit Committee are Mr. Gavin, Mr. Segev and Mr. Van Den Bosch. Mr. Gavin is the chairman of our Audit Committee. The Board has determined that Messrs. Gavin and Segev qualify as “audit committee financial experts” as contemplated by the rules of the SEC implementing Section 407 of the Sarbanes Oxley Act of 2002.

The Board has considered the independence and other characteristics of each member of our Audit Committee. Audit committee members must satisfy The Nasdaq Global Select Market independence requirements and additional independence criteria set forth under Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In order to be considered independent for purposes of Rule 10A-3, an Audit Committee member may not, other than in his capacity as a member of the board, accept consulting, advisory or other fees from us or be an affiliated person of us. The Board has determined that each of Mr. Gavin, Mr. Segev and Mr. Van Den Bosch of our Audit Committee qualifies as an independent director pursuant to Nasdaq rules and Rule 10A-3.

The Audit Committee operates under a written charter approved by the Board, which is available on our investor website at http://ir.varonis.com/corporate-governance.cfm.

Compensation Committee

Our Compensation Committee oversees our compensation policies, plans and programs. The Compensation Committee is responsible for, among other things:

We believe that the functioning of our Compensation Committee complies with the applicable requirements of The Nasdaq Global Select Market and SEC rules and regulations.

The members of our Compensation Committee are Mr. Comolli and Ms. Segev-Gal. Mr. Comolli is the chairman of our Compensation Committee. The Board has considered the independence and other characteristics of each member of our Compensation Committee. Compensation Committee members must satisfy The Nasdaq Global Select Market independence requirements and additional independence criteria set forth under Rule 10C-1 of the Exchange Act. In order to be considered independent for purposes of Rule 10C-1, the Board must consider whether the director has accepted, other than in his or her capacity as a member of the board, consulting, advisory or other fees from us or whether he or she is an affiliated person of us. Each of the members of our Compensation Committee qualifies as an independent director pursuant to Nasdaq rules and Rule 10C-1 as well as Section 162(m) of the Code.

The Compensation Committee operates under a written charter approved by the Board, which is available on our investor website at http://ir.varonis.com/corporate-governance.cfm.

Nominating and Corporate Governance Committee

Our Nominating and Corporate Governance Committee oversees and assists the Board in reviewing and recommending corporate governance policies and nominees for election to the Board and its committees. The Nominating and Corporate Governance Committee is responsible for, among other things:

Meetings held in fiscal 2019: 1

We believe thatEngagement with Stockholders

In recent years, we have made a concerted effort to engage with our stockholders both during and outside of the functioningproxy season in order to have a better understanding of their perspectives on our Company. This dialogue, in which both management and directors participate, as appropriate, has helped inform the Board of Directors’ decision-making and ensures our interests remain well-aligned with those of our Nominatingstockholders.

We regularly attend investor conferences and Corporate Governance Committee complieshold one-on-one meetings with stockholders and potential investors. In addition, we have telephonic calls with stockholders and analysts on a periodic basis, review correspondence submitted by stockholders to management and/or the applicable requirementsBoard of The Nasdaq Global Select Market.Directors and have discussions with various proxy advisory services. In 2019, in addition to our normal investor relations efforts, we contacted stockholders representing more than 90% of our outstanding shares of common stock, including our 50 largest stockholders, as part of our proxy outreach, offering to meet in person or telephonically with them, and ultimately spoke individually with stockholders representing more than 35% of our outstanding shares on various issues, including corporate governance and executive compensation. For more information about our stockholder outreach efforts, specifically related to executive compensation and the related changes made to such compensation program, see “Compensation Discussion and Analysis—Review of Executive Compensation Program in Light of Last Year’s Say-on-Pay Results.”

In response to investor feedback, in addition to making the changes to our executive compensation program (including the implementation of stock ownership guidelines and a claw-back policy), we implemented a Lead Director position and enhanced the corporate governance disclosure in our Proxy Statement to provide additional information regarding:

Ø  board tenure, refreshment and diversity;

Ø  board leadership;

Ø  corporate responsibility; and

Ø  disclosures related to bonus structure and targets.

The membersBoard of Directors and management continue to welcome feedback from stockholders on our Nominatingexecutive compensation program, as well as our business and governance. Stockholders are strongly encouraged to reach out to the Board of Directors or management to discuss issues important to them and should continue using the communication methods disclosed in this Proxy Statement.

Oversight of Corporate Governance Committee are Mr. Comolli, Mr. GavinStrategy and Ms. Segev-Gal. Mr. Comolli is the chairmanAllocation of our Nominating and Corporate Governance Committee. The Board has determined that each of Mr. Comolli, Mr. Gavin and Ms. Segev-Gal are independent within the meaning of the independent director guidelines of The NASDAQ Global Select Market.Risk Oversight

The NominatingBoard of Directors works with management to set the short-term and Corporate Governance Committee operates under a written charter approved bylong-term strategic objectives of the Company and to monitor progress on those objectives. In establishing and monitoring strategy, the Board whichof Directors, along with management, considers the risks and opportunities that impact the long-term sustainability of the Company’s business model and whether the strategy is available onconsistent with the Company’s risk appetite. The Board of Directors regularly reviews the Company’s progress with respect to its strategic goals, the risks that could impact the long-term sustainability of our investor website at http://ir.varonis.com/corporate-governance.cfm.business and the related opportunities that could enhance the Company’s long-term sustainability.

The Nominating and Corporate Governance Committee will consider nominees recommended by stockholders for election as directors. Candidates for the Board are generally selectedof Directors oversees these efforts in part through its various committees based on desired skillseach committee’s responsibilities and experienceexpertise, as set forth in the contextits respective charter. The Board of the existing composition of the Board and needs of the Board and its committees at that time, including the requirements of applicable SEC and NASDAQ Stock Market rules. The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily applicable to all candidates. Although the Nominating and Corporate Governance CommitteeDirectors does not have a specific policy on diversity,standing risk management committee, but rather administers its risk oversight function through the various other committees that address risks inherent in its considerationtheir respective areas of oversight. The entire Board of Directors meets periodically with senior management responsible for our risk management, and the applicable committees meet periodically with the employees responsible for risk management in the committees’ respective areas of oversight. The Audit Committee receives periodic reports from internal audit, and both the Audit Committee and Board of Directors receive cybersecurity updates from the Company's Chief Information Officer and Vice President of Technical Services; legal and operational updates from the head of our legal and operations groups; and incidental reports as matters may arise. It is the responsibility of the specificcommittee chairpersons to report findings regarding material risk exposures to the Board of Directors as quickly as possible. The primary areas of risk oversight of the committees are described below. This allocation of responsibility may change from time to time based on the evolving needs of the Board and the Company, the Nominating and Corporate Governance Committee considers diverse backgrounds so that the Board composition reflects a broad spectrum of experience and expertise.Company.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that is applicable to all of our employees, officers and directors, including our chief executive and senior financial officers. The Code of Business Conduct and Ethics is available on our website at http:https://ir.varonis.com/corporate-governance.cfm.corporate-governance. Any amendment to the code, or any waiverswaiver of its requirements, will be disclosed on our website.website within four business days of the waiver or amendment through a website posting to the extent required by the rules and regulations of the SEC.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee is or was an officer or employee of the Company.Company or had any relationship requiring related party transaction disclosure under SEC rules. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee (or other committee serving an equivalent function) of any entity that has one or more executive officers serving on the Board of Directors or Compensation Committee.

Corporate Governance Guidelines

The Board of Directors has adopted corporate governance guidelinesCorporate Governance Guidelines to assure that the Board of Directors will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The corporate governance guidelinesCorporate Governance Guidelines set forth the practices that the Board of Directors intends to follow with respect to board composition and selection, board meetings and involvement of senior management, Chief Executive OfficerCEO performance evaluation and succession planning, and board committees and compensation. The corporate governance guidelinesCorporate Governance Guidelines are available on our website at http:https://ir.varonis.com/corporate-governance.cfm.corporate-governance.

Board of Directors and Committee Assessments

The Nominating and Corporate Governance Committee evaluates each director annually to obtain his or her assessment of the effectiveness of the Board of Directors and the committees of the Board of Directors. This is intended to be an annual process. The purpose of these assessments is to identify opportunities for improvement on a number of relevant metrics such as composition, conduct of meetings, relationship between the Board of Directors and management, succession planning and strategy and performance. Our Nominating and Corporate Governance Committee conducts the evaluation through written questionnaires.

Corporate Responsibility

As our Company grows, our expanding workforce includes and affects more people in more communities every year. We believe that it is our responsibility to be a positive influence on our communities and give back so they can sustainably grow and develop. We maintain a Social Responsibility Policy (available at https://www.varonis.com/corporate-responsibility/).

Under our Social Responsibility Policy, we drive our commitment to social responsibility through various avenues, including human rights, community enrichment, business ethics and legal compliance, and environmental safety. We support human rights by making monetary donations, giving our employees opportunities within our Company or outside of the Company (through paid time off) to volunteer time to causes that further human rights, and matching certain employee donations. We also collaborate with programs in health, education and social services to contribute knowledge, time and financial support, with the goal of enhancing the development and quality of life of our surrounding communities. For instance, we run disadvantaged youth internship and tutoring programs and also provide scholarships for some students. As stated in our Social Responsibility Policy, Varonis is committed to promoting a safe and healthy environment for our employees, contractors and the community and reducing our impact on the environment through recycling and energy conservation.

Pursuant to our Social Responsibility Policy, we are also committed to protecting the rights of employees and contractors and eliminating discrimination based on race, gender, sexual orientation and other factors, and to eliminating harassment of any kind.

Other Policies

Insider Trading Policy. Our insider trading policy prohibits our employees and directors from engaging in short sales of Company securities, in transactions in publicly-traded options, such as puts and calls, and other derivative securities with respectWe have adopted various policies intended to our securities. This prohibition extends to any inherently speculative transaction or similar transaction designed to decrease themitigate risks associated with our executive and director compensation programs.

Each of these individuals is required to meet these ownership levels within five years of the date such individual was initially designated an executive officer or appointed as a director of the Company, securities. In addition,respectively (provided that executive officers or directors as of the date of the guidelines’ adoption must achieve their applicable levels of ownership on an accelerated basis, within two years after adoption). Until the required ownership level is reached, executive officers must retain 100% of the shares issued, net of applicable tax withholding, including those received upon the vesting or settlement of equity awards or the exercise of stock options. We intend to review our ownership guidelines periodically to ensure they align with peer group norms and corporate governance best practices and remain appropriate in light of our annual equity award levels. As of December 31, 2019, all of our executive officers and directors and employees are prohibited from pledging Company securities as collateral for loans and may not hold Company securities in margin accounts.had timely met their applicable stock ownership requirement.

Stockholder Communications with the Board of Directors

You canStockholders and other interested persons may contact the Board of Directors to provide comments, to report concerns or to ask a question, at the following address:

Corporate Secretary

Varonis Systems, Inc.

1250 Broadway, 29th Floor

New York, NY 10001

United States

Attn.: Chief Financial Officer and Chief Operating Officer

You may submit your concern anonymously or confidentially by postal mail. You may also indicate whether you are a stockholder, customer, supplier or otherThose interested party.

Communications are distributed to the Board, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, the Board has requested that certain items which are unrelated to the duties and responsibilitiescommunicating with one member of the Board should be excluded,of Directors or a group of such as:

In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, withmembers, including the provision that any communication that is filtered out must be made available to any non-management director upon request.

You may also communicate online withLead Director, the Board as a group. Please submit your question using the form you will find on our website: http://ir.varonis.com/contactboard.cfm.

PROPOSAL NO. 2

ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

In accordance with the rulesNominating and regulations of the SEC, pursuant to Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our named executive officers as disclosed in accordance with the rules and regulations of the SEC in the “Executive Compensation” section of this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and the philosophy, policies and practices described in this proxy statement.

The say-on-pay vote is advisory and therefore is not binding on us, our CompensationCorporate Governance Committee, or our Board. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies and practices, which our Compensation Committee will be able to consider when determining executive compensation for the remainder of the current fiscal year and beyond. Our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the compensation of our named executive officers as disclosed in this proxy statement, we will endeavor to communicate with stockholders to better understand the concerns that influenced the vote and consider our stockholders’ concerns and our Compensation Committee will evaluate whether any actions are necessary to address those concerns. Beginning with the 2017 fiscal year, the Company is no longer considered an emerging growth company. As such, for the first time we are seeking stockholder approval, on an advisory basis, for the Company’s 2017 executive compensation program and look forward to receiving feedback from our stockholders on what we believe to be a strong compensation program aligned with the interests of the Company and its stockholders.

We believe that the information we have provided in the section titled “Executive Compensation,” and in particular the information discussed in the section titled “Executive Compensation—Compensation Discussion and Analysis,” demonstrates that our executive compensation program has been designed appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term value creation. The Company encourages stockholders to review the executive compensation disclosure in the Compensation Discussion and Analysis and executive compensation tables for the details of how its executive compensation policies and procedures operate and are designed to achieve the Company’s compensation objectives.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
IN FAVOR OF THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION AS DISCLOSED IN THIS PROXY STATEMENT.

PROPOSAL NO. 3

ADVISORY VOTE ON THE FREQUENCY OF
ADVISORY VOTES ON EXECUTIVE OFFICER COMPENSATION

Stockholders have the opportunity to advise the Board, in a non-binding vote, whether we should conduct an advisory (non-binding) vote to approve named executive officer compensation (that is, votes similar to the non-binding vote in Proposal No. 2 above) every one, two or three years.

While our compensation strategies are related to both the short-term and longer-term business outcomes, we realize that compensation decisions are made annually. We also believe that an annual advisory vote on named executive officer compensation will give us more frequent feedback on our compensation disclosures and named executive officer compensation program. The Board has determined that holding an advisory vote on named executive officer compensation every year is the most appropriate policy for us at this time and recommends that stockholders vote for future advisory votes on named executive officer compensation to occur each year. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.

The frequency that receives the highest number of votes cast will be deemed to be the frequency selected by the stockholders. Because this vote is advisory, it will not be binding on the Board. However, the Compensation Committee, the Audit Committee or the non-employee/independent directors as a group, should specify in the correspondence to whom on the Board of Directors the correspondence is directed. The Company's Management will consider the outcome of the stockholder vote, along with other relevant factors, in recommending a voting frequency for the say-on-pay voteforward such correspondence, as appropriate. Complaints or concerns relating to our financial reporting, accounting, internal accounting controls or auditing will be referred to the Board. The Company strongly encourages all stockholders to vote on this matter.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
IN FAVOR OF A FREQUENCY OF “ONE YEAR” FOR AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.

PROPOSAL NO. 4

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMChairperson of our Audit Committee. 

The Audit Committee ofWhistleblower Hotline

Employees may submit complaints about accounting, internal accounting controls or auditing matters by contacting the Board has selected E&Y as our independent registered public accounting firmCompany’s whistleblower hotline maintained for the fiscal year ending December 31, 2018Company by a third party. Accounting and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. E&Y has audited our financial statements since the fiscal year ended December 31, 2007. Representatives of E&Y are expectedauditing complaints may be made on a confidential or anonymous basis, but all such communications should contain sufficiently specific information to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither our bylaws nor other governing documents or law require stockholder ratification of the selection of E&Y as our independent registered public accounting firm. However,permit the Audit Committee to pursue the matter. We also maintain a formal non-retaliation policy that prohibits retaliation against, or discipline of, the Board is submitting the selection of E&Y to the stockholders for ratification as a matter ofan employee who raises an ethical concern in good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.faith.

The affirmative vote of the holders of shares representing a majority of the voting power of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of E&Y.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents aggregate fees billedsets forth certain information with respect to the Company for the fiscal years ended December 31, 2017 and December 31, 2016 by E&Y, our principal accountant.executive officers as of April 15, 2020. Biographical information with regard to Mr. Faitelson is presented under “Proposal No. 1—Election of Directors” in this Proxy Statement.

		Fiscal Year Ended
		2017				2016
		(in thousands)
Audit Fees (1)		$	530			$	450
Audit-Related Fees (2)			60				40
Tax Fees (3)			130				49
All Other Fees			-				-
Total Fees		$	720			$	539

_______________

(1) Age: 40		Audit fees relate to professional services rendered for the audits of our annual consolidated financial statements and the reviews of our quarterly consolidated financial statements. GUY MELAMED
			Position, Principal Occupation and Professional Experience: Chief Financial Officer and Chief Operating Officer. Mr. Melamed has served as our Chief Financial Officer since April 2017 and as our Chief Operating Officer since February 2018. He is responsible for global operations, executing business strategies and financial management, including legal, treasury, investor relations and purchasing. Prior to becoming Chief Financial Officer, Mr. Melamed served in various finance roles within the Company since 2011, most recently as Vice President of Finance, during which time he was responsible for financial planning, reporting and operations and was instrumental in building and managing the global finance organization. Prior to joining Varonis, he held positions at E&Y as an Audit Manager and at KPMG, working with both foreign and domestic public and private companies. Mr. Melamed holds both a B.A and M.S.A from Boston College and is a Certified Public Accountant in the U.S. and Israel.

(2)    Age: 42		Audit-related fees relate to professional services rendered in connection with assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” These services include accounting consultations regarding financial accounting and reporting standards. DAVID BASS
		Position, Principal Occupation and Professional Experience: Executive Vice President of Engineering and Chief Technology Officer. Mr. Bass has served as our Executive Vice President of Engineering and Chief Technology Officer since March 2018 and is responsible for all of Varonis’ product development and quality assurance. He has been an employee of the Company since 2005 and served as its Senior Vice President of Engineering from May 2014 through February 2018. Under his leadership, the Company has assembled a world-class engineering organization with deep experience spanning digital collaboration, storage, networking and security. Prior to Varonis, Mr. Bass held managerial development positions at NetVision Internet Applications and was an independent contractor.

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Age: 55		JAMES O’BOYLE
	(3)		Tax fees consist Position, Principal Occupation and Professional Experience: Senior Vice President of professional servicesWorldwide Sales. Mr. O'Boyle has served as our Senior Vice President of Worldwide Sales since 2006. He is responsible for tax compliance, tax advicedeveloping and tax planning.growing the Company’s business through high performance sales teams and strategic channel partnerships in worldwide markets. Prior to joining Varonis, Mr. O'Boyle held leadership roles at Neoteris/Netscreen (acquired by Juniper), BlueCoat Systems, Inc. and Wellfleet/Bay Networks (acquired by Nortel). He holds a Bachelor of Science degree in computer science from the University of Scranton.

 

All fees described above were pre-approved by the Audit Committee in accordance with the requirements of Regulation S-X under the Exchange Act.

Pre-Approval Policies and Procedures

Consistent with requirements of the SEC and the Public Company Accounting Oversight Board, or PCAOB, regarding auditor independence, our Audit Committee is responsible for the appointment, compensation and oversight of the work of our independent registered public accounting firm. In recognition of this responsibility, our Audit Committee has established a policy for the pre-approval of all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

Age:  44  GILAD RAZ     17 Position, Principal Occupation and Professional Experience: Chief Information Officer and Vice President of Technical Services. Mr. Raz has served as our Chief Information Officer and Vice President of Technical Services since February 2015. He is responsible for ensuring customer satisfaction through successful deployment and continued operation of Varonis products. Prior to becoming Chief Information Officer and Vice President of Technical Services, Mr. Raz was an employee of the Company beginning in 2006. Prior to Varonis, he held roles at Network Appliance and NetVision Internet Applications, where he assisted customers with highly technical pre- and post-sale deployments of networking and storage infrastructure.   33 Before engagement of the independent registered public accounting firm for the next year’s audit, the independent registered public accounting firm submits a description of services expected to be rendered during that year to the Audit Committee for approval. The Audit Committee pre-approves particular services or categories of services on a case-by-case basis. The fees are budgeted, and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus budgeted fees periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the services must be pre-approved by the Audit Committee before the independent registered public accounting firm is engaged. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF RATIFICATION OF THE APPOINTMENT OF E&Y AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018. 18 AUDIT COMMITTEE REPORT REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS   The Audit Committee is a committee of the boardBoard of directors comprisedDirectors made up solely of independent directors as required by the listing standards of TheSEC and NASDAQ Global Select Market and rules of the SEC.rules. The Audit Committee operates underpursuant to a written charter approved by the boardBoard of directors,Directors, which is available on our investor website at http:https://ir.varonis.com/corporate-governance.cfm.corporate-governance. The composition of the Audit Committee, the attributes of its members and theits responsibilities, of the Audit Committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter and the Audit Committee’s performance on an annual basis.   The Audit Committee consists of three members: Mr. Gavin, Mr. Segev and Mr. Van Den Bosch. Mr. Gavin is the chairmanChairperson of our Audit Committee. With respectPursuant to our financial reporting process, ourthe Audit Committee’s charter, the Company’s management is responsible for (1) establishingthe financial reporting process, including the establishment and maintainingmaintenance of internal controls and (2) preparing ourthe preparation of the consolidated financial statements.statements in accordance with generally acceptable financial principles. E&Y, the Company’s independent registered public accounting firm, is responsible for auditing those financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles. In addition, E&Y is responsible for auditing theseand expressing an opinion on the Company’s internal controls over financial statements. Itreporting. The Audit Committee’s responsibility is the responsibility of the Audit Committee to oversee these activities.activities as well as the appointment, retention, compensation and performance of the independent auditors. It is not the responsibility of the Audit Committee to verify independently the information provided to it, prepare or certify ourthe Company’s financial statements, or guarantee the audits or reports of E&Y. These are the fundamental responsibilities of management andprepared by E&Y. In the performance of its oversight function, the Audit Committee has:   ·● reviewed and discussed the audited financial statements with management and E&Y; ·● discussed with E&Y the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and Board; ·● received periodic updates from management and E&Y at scheduled Audit Committee meetings regarding the testing and evaluation of the Company’s internal controls over financial reporting; ● discussed with E&Y the overall scope, plan and budget for the audit and the results of the audit, and discussed with management and E&Y the adequacy and effectiveness of the internal controls and the overall quality of the Company’s financial reporting; and ● received the written disclosures and the letter from E&Y required by applicable requirements of the Public Company Accounting Oversight Board regarding E&Y’s communications with the Audit Committee concerning independence and has discussed with E&Y its independence.   Based on the Audit Committee’s reviewreviews and discussions with management and E&Y, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee’s charter, the Audit Committee recommended to the boardBoard of directorsDirectors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended December 31, 20172019 for filing with the SEC.   Respectfully submitted by the members of the Audit Committee of the boardBoard of directors:Directors:   John J. Gavin, Jr. (Chair) Ofer Segev John J. Gavin, Jr. (Chair) Ofer Segev Fred Van Den Bosch   34 19 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth, as of February 26, 2018,March 31, 2020, information regarding beneficial ownership of our capital stock by:

 

	· ●	each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

	· ●	each of our named executive officers;

	· ●	each of our directors; and

	· ●	all of our current executive officers and directors as a group.

Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, or has the right to acquire beneficial ownership of that security within 60 days. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have or will have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable.

 

Our calculation of the percentage of beneficial ownership is based on 28,287,13031,466,270 shares of our common stock outstanding as of February 26, 2018. CommonMarch 31, 2020. Shares of common stock subject tounderlying stock options currently exercisable or exercisable within 60 days of February 26, 2018 isMarch 31, 2020 or RSUs vesting within 60 days of March 31, 2020 are deemed to be outstanding for computing the percentage ownership of the person holding these options and the percentage ownership of any group of which the holder is a member, but isare not deemed outstanding for computing the percentage of any other person.

The table is based upon information supplied by officers, directors and principal stockholders, Schedules 13G filed with the SEC and other SEC filings made pursuant tounder Section 16 of the Exchange Act and the Rules and Regulations promulgated thereunder.Act. Except as otherwise indicated in the table below, addresses of named beneficial owners are c/o Varonis Systems, Inc., 1250 Broadway, 29th Floor, New York, NY 10001.

 

Name of Beneficial Owner	Shares Outstanding Beneficially Owned	Shares Subject to Right to Acquire Within 60 Days(1))	Total Number of Shares Beneficially Owned	% of Total Outstanding Shares Beneficially Owned
Five-Percent-or-More Beneficial:
The Vanguard Group(2)	2,739,182	-	2,739,182	8.7%
BlackRock, Inc.(3)	2,221,797	-	2,221,797	7.1%
Jackson Square Partners, LLC (4)	2,034,966	-	2,034,966	6.5%
Cadian Capital Management, LP (5)	1,875,054	-	1,875,054	6.0%
Named Executive Officers and Directors:
Yakov Faitelson(6)	120,972	147,356	268,328	*
Guy Melamed	22,614	-	22,614	*
David Bass	47,500	-	47,500	*
James O’Boyle(7)	64,979	36,816	101,795	*
Gilad Raz(8)	30,282	15,828	46,110	*
Kevin Comolli(9)	115,125	440	115,565	*
John J. Gavin, Jr.(10)	45,154	33,440	78,594	*
Gili Iohan(11)	17,628	4,255	21,883	*
Ohad Korkus(12)	28,573	1,377	29,950	*
Thomas F. Mendoza(13)	25,488	440	25,928	*
Ofer Segev(14)	23,773	440	24,213	*
Rona Segev-Gal(15)	10,084	440	10,524	*
Fred Van Den Bosch(16)	45,154	10,440	55,594	*
All executive officers and directors as a group (13 persons)	597,326	251,272	848,598	2.7%

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Name of Beneficial Owner		Number of Shares		% of Total Voting Power
Named Executive Officers and Directors:
Yakov Faitelson(1)		571,813		2.0%
James O’Boyle(2)		175,378		*
Guy Melamed(3)		27,260		*
Ohad Korkus(4)		30,769		*
Kevin Comolli(5)		159,695		*
John J. Gavin, Jr.(6)		72,724		*
Gili Iohan(7)		70,091		*
Thomas F. Mendoza(8)		17,750		*
Ofer Segev(9)		18,343		*
Rona Segev-Gal(10)		14,654		*
Fred Van Den Bosch(11)		49,724		*
All executive officers and directors as a group (11 persons)(12):		1,208,201		4.2%
5% Stockholders:
BlackRock, Inc.(13)		2,382,680		8.4%
Prudential Financial, Inc.(14)		2,029,683		7.2%

_____________________________

* Represents beneficial ownership of less than one percent (1%).

 

(1)

20

For directors and executive officers, shares are deemed to be beneficially owned due to the individual’s right to acquire the shares upon the exercise of outstanding stock options or vesting of RSUs within 60 days from March 31, 2020 or upon termination of service other than for death, disability of involuntary termination.

 

(1) (2)

Based solely on a Schedule 13G/A filed by The Vanguard Group on February 12, 2020. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. Represents 62,668 shares of common stock over which The Vanguard Group has sole voting power, 4,457 shares of common stock over which The Vanguard Group has shared voting power, 2,675,938 shares of common stock over which The Vanguard Group has sole dispositive power and 63,244 shares over which The Vanguard Group has shared dispositive power.

(3)

Based solely on a Schedule 13G/A filed by BlackRock, Inc. on February 6, 2020. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055. Represents 2,159,539 shares of common stock over which BlackRock, Inc. has sole voting power and 2,221,797 shares of common stock over which BlackRock, Inc. has shared dispositive power.

(4)

Based solely on a Schedule 13G filed by Jackson Square Partners, LLC on February 14, 2020. The address of Jackson Square Partners, LLC is 101 California Street, Suite 3750, San Francisco, CA 94111. Represents 1,451,590 shares of common stock over which Jackson Square Partners, LLC has sole voting power, 254,231 shares of common stock over which Jackson Square Partners, LLC has shared voting power and 2,034,966 shares of common stock over which Jackson Square Partners, LLC has sole dispositive power.

(5)

Based solely on a Schedule 13G filed by Cadian Capital Management, LP on February 13, 2020. The address of Cadian Capital Management, LP is 535 Madison Avenue, 36th Floor, New York, NY 10022. Cadian Capital Management GP, LLC is the general partner of Cadian Capital Management, LP.  Eric Bannasch is the sole managing member of Cadian Capital Management GP, LLC. As such, Cadian Capital Management LLP and Eric Bannasch may be deemed to share voting and dispositive power over all such shares of common stock directly owned by Cadian Capital Management LP.

(6)

Consists of (i) 13,11346,888 shares held of record by Mr. Faitelson; (ii) 106,42631,575 shares held of record by the Faitelson Family 2014 Trust;2019 Grantor Retained Annuity Trust #2; (iii) 422,27442,509 shares held of record by the Faitelson 2020 Grantor Retained Annuity Trust #1; and (iv) 147,356 shares subject to stock options exercisable within 60 days of February 26, 2018; and (iv) 30,000 shares subject to restricted stock units exercisable within 60 days of February 26, 2018. March 31, 2020.

(2) (7)

Consists of (i) 83,93954,979 shares held of record by Mr. O’Boyle; (ii) 31,00010,000 shares held of record by the Jim O’Boyle 2014 Trust Family; and (iii) 48,43936,816 shares subject to stock options exercisable within 60 days of February 26, 2018; and (iv) 12,000 shares subject to restricted stock units exercisable within 60 days of February 26, 2018.March 31, 2020.

(3) (8)

Consists of (i) 2,03330,282 shares held of record by Mr. Melamed;Raz; and (ii) 1,72715,828 shares subject to stock options exercisable within 60 days of February 26, 2018; and (iii) 23,500 shares subject to restricted stock units exercisable within 60 days of February 26, 2018.March 31, 2020.

(4) (9)

Consists of 30,457 shares held of record by Mr. Korkus; and (ii) 312 shares subject to stock options exercisable within 60 days of February 26, 2018.

(5)

Consists of (i) 25,8593,140 shares held of record by Mr. Comolli; (ii) 905111,985 shares held of record by Kevin E Comolli Living Trust Dtd 3/28/18, of which Mr. Comolli is the beneficiary; and (iii) 440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018; and (iii) 132,931 shares held of record by Rothschild Trust Guernsey Limited, as trustee of the Max Trust, of which Mr. Comolli is a beneficiary.March 31, 2020.

(6) (10)

Consists of (i) 23,81930,154 shares held of record by Mr. Gavin; (ii) 15,000 shares held of record jointly with Mr. Gavin’s spouse; (iii) 33,000 shares subject to stock options exercisable within 60 days of February 26, 2018;March 31, 2020; and (iii) 905440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018. March 31, 2020.

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(7) (11)

Consists of (i) 33,29117,628 shares held of record by Ms. Iohan; (ii) 29,3473,815 shares subject to stock options exercisable within 60 days of February 26, 2018;March 31, 2020; and (iii) 7,453440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018. March 31, 2020.

(8) (12)

Consists of 28,573 shares held of record by Mr. Korkus; (ii) 937 shares subject to stock options exercisable within 60 days of March 31, 2020; and (iii) 440 shares subject to RSUs exercisable within 60 days of March 31, 2020.

(13)

Consists of (i) 16,84525,471 shares held of record by Mr. Mendoza; (ii) 17 shares held of record by Mr. Mendoza as custodian for the benefit of Dylan M. O’Rand, Mr. Mendoza’s nephew; and (ii) 905(iii) 440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018.March 31, 2020.

(9) (14)

Consists of (i) 17,43823,773 shares held of record by Mr. Segev; and (ii) 905440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018.March 31, 2020.

(10) (15)

Consists of (i) 13,74910,084 shares held of record by Ms. Segev-Gal; and (ii) 905440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018.March 31, 2020.

(11) (16)	Consists of (i) 38,81945,154 shares held of record by Mr. Van Den Bosch; (ii) 10,000 shares subject to stock options exercisable within 60 days of February 26, 2018;March 31, 2020; and (iii) 905440 shares subject to restricted stock unitsRSUs exercisable within 60 days of February 26, 2018.
(12)	Not including David Bass, whose appointment as our Executive Vice President of Engineering and Chief Technology Officer became effective March 1, 2018.
(13)	Based solely on a Schedule 13G filed by BlackRock, Inc. on February 1, 2018. The address of BlackRock, Inc. is 55 East 52ndStreet, New York, NY 10055.
(14)	Based solely on a Schedule 13G/A filed by Prudential Financial, Inc. on January 26, 2018 and Schedule 13G/A filed by Jennison Associates LLC on February 6, 2018. Consists of (i) 1,802,491 shares held of record by Jennison Associates LLC; and (ii) 227,192 shares held of record by Quantitative Management Associates LLC. According to these filings, Jennison Associates LLC and Quantitative Management Associates LLC are subsidiaries of Prudential Financial, Inc., which may be deemed the beneficial owner of and may have direct or indirect voting and/or investment discretion over the above referred 2,029,683 shares. The address of Prudential Financial, Inc. is 751 Broad Street, Newark, NJ 07102-3777. 31, 2020.

21

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers, directors and certain persons who beneficially own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on a review of reports filed with the SEC and written representations that no other reports were required, we believe that our executive officers, directors and greater than 10% stockholders complied with all applicable filing requirements on a timely basis during fiscal 2017, except for (1) Guy Melamed who filed late a Form 4 with respect to a tax withholding of 516 shares on March 31, 2017 (filed on September 7, 2017) and (2) Evergreen IV, L.P., which filed late Form 4s with respect to the sale of: (i) 5,177 shares on January 10, 2017 (filed on January 13, 2017); and (ii) 56,146 shares on January 17, 2017 (filed on January 20, 2017).

EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our executive officers as of March 1, 2018. Biographical information with regard to Mr. Faitelson is presented under “Proposal No. 1—Election of Directors” in this proxy statement.

Name		Age		Position
Yakov Faitelson		42		Chief Executive Officer, President and Chairman of the Board
Guy Melamed		38		Chief Financial Officer and Chief Operating Officer
James O’Boyle		53		Senior Vice President of Worldwide Sales
David Bass		40		Executive Vice President of Engineering and Chief Technology Officer COMPENSATION DISCUSSION AND ANALYSIS

Executive Officers

David Bass was appointed as our Executive Vice President of Engineering and Chief Technology Officer as of March 1, 2018 and is responsible for all of Varonis’ product development and quality assurance. Mr. Bass has been an employee of the Company since 2005 and served as its Senior Vice President of Engineering from May 2014 through February 2018. Under his leadership, the Company has assembled an engineering organization with deep experience spanning digital collaboration, storage, networking and security. Prior to Varonis, Mr. Bass held managerial development positions in NetVision Internet Applications and as an independent contractor.

Guy Melamedhas served as our Chief Financial Officer since April 2017 and was also appointed to serve as our Chief Operating Officer in February 2018. Mr. Melamed is responsible for global operations, executing business strategies and financial management, including legal, treasury, investor relations and purchasing. Prior to becoming Chief Financial Officer, Mr. Melamed served as Vice President of Finance, beginning in 2013, during which time he was responsible for financial planning, reporting and operations and was instrumental in building and managing the global finance organization. Before joining Varonis in 2011, Mr. Melamed held positions at Ernst & Young as an Audit Manager and KPMG, working with both foreign and domestic public and private companies. Mr. Melamed holds both a B.A and M.S.A from Boston College and is a Certified Public Accountant in the U.S. and Israel.

James O’Boyle has served as our Senior Vice President of Worldwide Sales since 2006. Prior to joining Varonis, Mr. O’Boyle held leadership roles at Neoteris/Netscreen (which was acquired by Juniper), BlueCoat Systems, Inc. and Wellfleet/Bay Networks (which was acquired by Nortel).

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COMPENSATION DISCUSSION AND ANALYSIS

Overview

 

Our executive compensation programs are administeredprogram is overseen by theour Compensation Committee of the Board.Committee. The Compensation Committee primarily assists the Board in fulfilling its compensation oversight responsibilities by ensuring best practices, which, among other things, include:

 

· ●

reviewing and approving the compensation of our Chief Executive OfficerOfficer;

●

reviewing and other seniorapproving compensation of all executive officers and establishing annual and long-term performance goals for these individuals;

 

·

reviewing and approving compensation of all executive officers;

 

· ●

reviewing and approving performance-based compensation of executive officers, including incentive awards;

 

· ●

reviewing our director compensation program and recommending changes in director compensation to the Board to the extent appropriate; and

 

· ●

administering our equity compensation plans and programs.

 

The Compensation Committee consists of Mr. Comolli and Ms. Segev-Gal. Mr. Comolli is the chairman of our Compensation Committee.

This section discusses the Company’sour compensation program, policies and programspractices as it relatesthey relate to the followingour “named executive officers” whose compensation information is presented in the tables that follow.

 

Named Executive Officers in Fiscal Year 2019

The following individuals were our “named executive officers” (also referred to as “NEOs”) in fiscal 2019:

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Name		Age		Position
Named Executive Officer		Title
Yakov Faitelson		42		Chief Executive Officer, President and Chairman of the Board
Guy Melamed		Chief Financial Officer and Chief Operating Officer
David Bass		Executive Vice President of Engineering and Chief Technology Officer
James O’Boyle		Senior Vice President of Worldwide Sales
Gilad Raz		Chief Information Officer and Vice President of Technical Services

Rationale for Prior Year CEO Compensation

In 2018, the Compensation Committee granted a long-term equity award to our CEO that was intended to make up for significantly below-average prior five-year total compensation. Even after factoring in the impact of the higher 2018 RSU award, total compensation for our CEO was still well below the median among the companies in our peer group. This is further described below in the section titled “Review and Reform of 2019 CEO Equity Compensation.”

Review of Executive Compensation Program in Light of Last Year’s Say-on-Pay Results

We are committed to using executive compensation as a way to align closely the interests of management and our stockholders and to retain and incentivize key talent, taking bold action where necessary to achieve these goals. In June 2019, following lengthy and substantive discussions with our stockholders, we finalized certain changes to the equity compensation of Mr. Faitelson, our Chief Executive Officer, including revised PSU and RSU awards that we had originally granted to him in February 2019. We believe these changes reflect our fundamental commitment to remaining responsive to the voice of our stockholders. We determined to revise Mr. Faitelson’s 2019 equity pay (1) to reduce the size of the PSU and RSU awards, (2) to extend the previously implemented one-year performance period under the PSUs to three consecutive one-year performance periods and (3) to make the performance metric of the PSUs—subscription revenue as a percentage of license revenue—more challenging. Additionally, any payout to Mr. Faitelson under the 2019 equity grant for performance in years 2019-2021 is subject to his continued employment through February 2022. The following shows the terms of Mr. Faitelson’s 2019 compensation, as revised:

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These changes, which we view as enhancements more closely supporting our pay-for-performance philosophy, resulted from extensive stockholder input, including the results of our “say-on-pay” vote on the 2018 compensation of our named executive officers, and consultation with our external advisors are summarized below:

SUMMARY OF CHANGES TO CHIEF EXECUTIVE OFFICER 2019 EQUITY COMPENSATION
	Original Award Terms	Modified Award Terms
Number of RSUs	66,642	38,536
Number of PSUs	66,642	38,536
Equity Value at Target	$7,399,928	$4,628,944
Maximum PSU attainment	170%	200%
Performance Period(s)	1 year (2019 performance)	1-year, 2-year, and 3-year target all set upfront in 2019
Vesting and Payout Timing	1/3 of earned shares vest per year based on continued service. Vesting occurs following years 2019, 2020, and 2021 and payouts occur shortly after vesting.	Shares are earned and vest during each of 2020, 2021 and 2022 based on prior year's performance. Delivery of all shares is deferred until completion of 3 years of continued service through February 2022.

We believe that Mr. Faitelson’s revised 2019 PSU award contains incentives that more appropriately reflect our ongoing transition from a perpetual license to a subscription-based business model. In particular, we modified this PSU award based on a review of our first quarter 2019 financial results, which revealed a more rapid shift to a subscription licensing model than expected, and a reevaluation of our timeline for completing the transition against the rates of subscription revenue growth at comparable companies that historically underwent a similar transition.

As described above, Mr. Faitelson’s 2019 equity compensation was modified to drastically reduce realizable pay following discussion with stockholders. However, pursuant to SEC rules, the Summary Compensation Table must still reflect the grant-date value of his original 2019 equity award. As a supplemental disclosure that we believe more faithfully reflects our 2019 compensation decisions and Mr. Faitelson’s actual equity awards, we summarize below Mr. Faitelson’s annual compensation based on the modification-date value of his revised compensation arrangements:

Summary of CEO Annual Compensation, After Modification of 2019 Equity Awards

Name and Position	Year	Salary ($)	Bonus ($)	Stock Awards ($)	Non-Equity Incentive Plan Compensation ($)	All Other Compensation ($)	Total ($)
Yakov Faitelson	2019	560,000	–	4,628,944	523,169	11,200	5,723,313
Chief Executive Officer	2018	560,000	–	7,792,500	407,472	11,000	8,770,972
and President	2017	400,000	–	1,831,050	460,000	10,800	2,701,850

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For further discussion of each element of compensation listed here, please see the footnotes to the “Summary Compensation Table.” Note that the stock award value shown above was conservatively calculated based on the fair market value on June 25, 2019, which was the formal modification date. However, discussions on modification started in early April as noted below and, if the February 14, 2019 original grant date price were used for comparison instead, the value of the modified grant would be lower still, at $4,279,038.

After our extensive review and discussions with stockholders, which is discussed in detail below, we believe that total compensation of $5,723,313 listed in the table above is a more appropriate reflection of Mr. Faitelson’s 2019 compensation and aligns with our compensation philosophy and peer practices.

Review and Reform of 2019 CEO Equity Compensation

The following table summarizes our process for designing and reforming the Chief Executive Officer’s 2019 equity compensation, with more detailed narrative disclosure following.

		38DESIGN PROCESS		ACTIVITIES COMPLETED
1		MAKE ORIGINAL GRANT   February 2019		▪     Conducted extensive analysis by considering benchmarking against the practices of peer companies, the CEO’s past performance, the policies of the major proxy advisory firms and institutional investors and general competitive market conditions. ▪      Set compensation as an equal mix of PSUs and RSUs.  ▪      Granted 66,642 RSUs and 66,642 PSUs. ▪     Set aggressive performance targets for PSUs, which were based on percentage of revenues from subscription licenses, based on 2018 FYE results and our planned transition to a subscription-based licensing model. PSUs had a one year-performance period and earned shares were scheduled to vest in one-third annual installments until 2022 subject to continued employment.
2		REEVALUATE   April 2019		▪      After reviewing Q1 2019 financial results, saw that we were transitioning more quickly than anticipated to a subscription-based licensing model.  ▪      Determined that target subscription revenue percentages for CEO’s PSUs would need to be substantially increased to remain challenging and create robust incentives.  ▪      Took a “wait-and-see” approach throughout Q2 2019, in order to assess other potential changes to CEO’s 2019 equity pay.
3		ENGAGE WITH STOCKHOLDERS  April 2019		▪      Reviewed proxy advisory firms' unfavorable voting recommendations and preliminary voting results for 2018 “say-on-pay” vote.  ▪      Supplementing ongoing stockholder engagement, undertook an extensive stockholder outreach program on executive compensation. Discussed with stockholders their concerns regarding CEO’s 2019 equity compensation.  ▪      Held annual meeting in May 2019, where a majority of stockholders cast votes against 2018 “say-on-pay” proposal.
4		DESIGN AND CONFIRM  Throughout Spring 2019		▪      Continued to communicate with stockholders their concerns which led to the majority “against” 2018 “say-on-pay” vote.  ▪       Consulted with compensation consultants on peer practices and engaged additional compensation advisors on tax, accounting and disclosure issues.

				▪     Evaluated potential methods of responding to stockholders’ concerns, including:  Ø  reduced grant size for CEO;  Ø  more difficult performance targets;  Ø  longer performance periods; and  Ø  no release of shares underlying PSUs until end of aggregated performance period.
5		FINALIZE  June 2019		▪     With end of Q2 2019 nearing, determined to take action following considerable internal analysis, including a review of historical subscription growth rates at other companies that had undertaken a license-based to subscription-based transition.  ▪     Decreased the number of shares underlying RSUs to 38,536 (from 66,642) and number of shares underlying target PSU payout to 38,536 (also from 66,642).  ▪     Increased percentage of shares potentially available for maximum PSU payout to 200% of target (from 170% of target previously).  ▪     Amended PSUs to be earned in three equal installments, based on achievement of higher annual target subscription revenue percentages for each of three years (based on survey of companies which had undertaken subscription transitions), and for all underlying shares to be released only in 2022.  ▪     Adjusted certain other risk mitigation compensation measures, including specifically the adoption of stock ownership guidelines and a claw-back policy.

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STEP 1: Make Original PSU and RSU Grants

On February 14, 2019, our Compensation Committee granted to our Chief Executive Officer a mix of PSUs and RSUs under our 2013 Omnibus Equity Incentive Plan (the “2013 Plan”). During its annual executive compensation review, the Compensation Committee had previously determined to introduce PSUs to our Chief Executive Officer’s executive compensation package, and to allocate 50% of his long-term equity compensation to PSUs and 50% to RSUs. This was based on benchmarking against the practices of peer companies, a review of the Chief Executive Officer’s past performance, the policies of major proxy advisory firms and institutional investors and general competitive market conditions.

With respect to the 2019 PSUs, the Compensation Committee established subscription revenues as a percentage of total license revenues as the performance metric, due to the Company’s transition from a perpetual license to a subscription-based business model. The Compensation Committee set its initial target revenue percentages based on the practices of our peer companies (including those listed under “Compensation Discussion and Analysis—Setting Compensation Levels of our Executive Officers—The Role of Peer Companies and Competitive Positioning”) and the pace of their subscription revenues growth over time. The Compensation Committee believes that the target percentages, when originally set shortly after fiscal 2018 year-end, were appropriately aggressive as a performance metric to incentivize strong subscription revenues growth in 2019.

The PSUs were scheduled to vest, subject to continued employment, in approximately one-third annual installments over 2020, 2021 and 2022 after being earned based upon the achievement of a target revenue percentage at the end of a one-year performance period in 2019.

STEP 2: Reevaluate Grants

Shortly after completing the first quarter of 2019, we found that the Company was moving to a subscription-based license model at a pace much faster than initially anticipated. In response to this shift in assumptions underlying the initial subscription revenue percentages, in its April 2019 meeting, our Compensation Committee considered ways to maintain the challenging nature of the performance metric that would reflect the successful start to the transition. The Compensation Committee determined at its April 2019 meeting that the previously-established target revenue percentages for the Chief Executive Officer’s 2019 PSUs should be substantially increased. The Compensation Committee decided to postpone for a brief period finalizing this change to the Chief Executive Officer’s 2019 compensation, so that it could review certain additional changes that might also be appropriate for the Chief Executive Officer’s long-term equity compensation.

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STEP 3: Engage with Stockholders

In April 2019, we began to receive the preliminary results of our stockholder vote on the “say-on-pay” proposal for the 2018  compensation of the Company’s named executive officers, including the Chief Executive Officer, to be voted on at the 2019 Annual Meeting of Stockholders (the “2019 Meeting”), which indicated that many stockholders had cast votes against the proposal. Proxy advisory firms also issued unfavorable recommendations with respect to our “say-on-pay” proposal. Based on these developments, we undertook an extensive outreach initiative to our diffuse stockholder base. This outreach formed part of our ongoing stockholder engagement program, described in more detail under “Information Regarding the Board of Directors and Corporate Governance—Engagement with Stockholders.” In our outreach both before the 2019 Meeting and in the second half of fiscal 2019, we contacted stockholders representing approximately 90% of our outstanding shares, including our 50 largest stockholders, and offered to meet in person or telephonically with them. We ultimately spoke individually with stockholders representing more than 35% of our outstanding shares on various executive compensation issues.

Conversations with stockholders occurred in person or telephonically. Board and management participants in our stockholder engagement, both before the 2019 Meeting and in the second half of fiscal 2019, included various participants as shown in the below graphic, to ensure access to key roles in the executive compensation planning process:

Company Participants	Results of Outreach
✓  Chairperson of Compensation Committee	Stockholders Contacted:
	> 90% of outstanding shares
✓Chief Financial Officer and Chief Operating Officer	(including our 50 largest stockholders)
James O’Boyle
✓  Head of Investor Relations	Stockholders with Whom We Met or Spoke Individually:
	> 35% of outstanding shares

  Stockholders primarily emphasized the concerns raised by the proxy advisory firms with respect to 2018 executive compensation, focusing on (i) the lack of performance-vesting equity awarded to the Chief Executive Officer in 2018 (insofar as all equity awards were in the form of time-based RSUs) and (ii) the nominal amount of the Chief Executive Officer’s 2018 RSU grant on a standalone basis, which was $7,792,500 based on grant date fair value. The proxy advisory firms also took issue with a lack of certain risk-mitigating measures inherent in our executive compensation and an overall misalignment of pay-for-performance. At the 2019 Meeting held on May 2, 2019, a majority of stockholders present cast votes against our “say-on-pay” proposal.

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STEP 4: Design and Confirm

To advance its preliminary steps from April for changing the Chief Executive Officer’s 2019 equity awards, and based on feedback from stockholders on the Chief Executive Officer’s 2018 equity compensation package and the outcome of the “say-on-pay” vote, the Compensation Committee met several times in spring 2019 to develop a long-term plan for enhancing the effectiveness of our Chief Executive Officer’s compensation. In particular, the Compensation Committee explored ways of changing the size and terms of the RSU and PSU awards to better align them with peer company practices and to enhance their performance-based orientation. Throughout this process, the Compensation Committee consulted with its independent compensation consultant, Compensia, Inc. (“Compensia”), and engaged other expert advisors and consultants to advise the Compensation Committee on related disclosure, tax and accounting issues. At a meeting in May 2019, the Compensation Committee evaluated:

(i)

potentially reduced grant sizes for both the PSUs and RSUs,

(ii)

performance targets for the PSUs that would be more difficult to achieve, including in light of our first quarter 2019 performance and revised full year 2019 projections,

(iii)

an overall performance period for PSUs of three years rather than one year, and

(iv)

no release to the Chief Executive Officer of any shares underlying the PSUs (even those earned during the 2019 and 2020 performance periods) until February 28, 2022.

Management also continued to communicate with stockholders regarding their concerns that led to the majority “against” 2018 “say-on-pay” vote.

STEP 5: Finalize

After further analysis, on and effective June 25, 2019, the Compensation Committee finalized its discussions and resolved to maintain the Chief Executive Officer’s 50%/50% split between RSUs and PSUs, while revising the 2019 RSU and PSU awards based on lessons learned from stockholder outreach regarding his 2018 equity compensation.

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The Compensation Committee elected to take bold action in an effort to demonstrate its keen interest in responding to stockholder feedback. These actions are summarized in detail in the tables below:

RSU Grant

What We Learned About the CEO’s 2018 Equity Pay		53What We Did for CEO’s 2019 and 2020 Compensation
✓   Although intended as a “catch-up” to make up for significantly below-average prior five-year total compensation, the 2018 RSU grant (150,000 shares with a grant date fair value of $7,792,500) was misaligned with peer company norms.		Senior Vice President ✓   Reduced 2019 RSU grant size: We decreased the size of Worldwide Salesthe 2019 grant from 66,642 RSUs to 38,536 RSUs, which aligns more with peer company norms and recognizes that Mr. Faitelson’s larger 2018 RSU award sufficiently rectified a pattern of lower total pay among our peers. Ø    In recent years, Mr. Faitelson’s total compensation, including his RSU award, was relatively low and consistently well below median among the companies in our peer group.   Ø   As a result, in 2018, our Compensation Committee granted to Mr. Faitelson an RSU award with a value considerably above the market median among our peer companies in 2018 to make up for the substantially below-market compensation from prior years. Even with the 2018 award, total compensation for our CEO was well below average on a five-year comparable basis. Ø    In 2019, having addressed this history of prior compensation, our Compensation Committee took steps to stabilize Mr. Faitelson’s equity compensation at a level closer to market norms. The Compensation Committee determined that the revised 2019 award of 38,536 RSUs was more appropriately sized given this objective. ✓  Sized 2020 RSU award using market norms: The Compensation Committee granted Mr. Faitelson RSUs with a value appropriately sized to meet market norms.

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PSU Grant 

What We Learned About the CEO’s 2018 Equity Pay		What We Did for CEO’s 2019 and 2020 Compensation
✓   Stockholders and proxy advisory firms were concerned with lack of performance-vesting equity.		✓  Added PSUs as significant portion of pay Ø   Introduced PSU award in 2019, making up 50% of the total equity award at target value.
✓   Performance-vesting equity with successive annual performance periods promotes long-term alignment of pay with performance, to the extent a company can set its long-term business goals with reasonable foresight.		✓  Extended performance period of 2019 PSUs   Ø    Implemented three one-year performance periods: We eliminated the PSUs’ single, one-year performance period and subsequent three-year vesting in equal annual installments subject to deferred receipt feature for all earned shares, as described in the section below. We revised the awards to contain three tranches of PSUs, each to be earned based on performance in the accompanying one-year performance periods (2019, 2020 and 2021). Under the PSUs’ modified terms, each tranche, to the extent earned, vests in full in the year following the applicable performance period (2020, 2021 and 2022, respectively). This was largely driven by a reevaluation of our goals for our planned transition from a perpetual license to a subscription-based business model, which we had begun in the first quarter of 2019. Since comparable companies that had successfully undertaken similar transitions completed their shift in four to six years, we determined that an aggressive three-year runway would more effectively incentivize higher subscription revenue growth.   Ø   Deferred receipt feature for all earned shares: We added a deferral feature to Mr. Faitelson’s 2019 PSU grant, in order to promote Mr. Faitelson’s focus on long-term performance throughout the full vesting schedule and his retention at our Company as a critical executive in a competitive industry. Upon vesting and after all applicable tax withholding, shares earned in respect of the 2019 and 2020 performance periods would be placed in a trust account or otherwise retained by the Company and only paid to CEO in 2022, subject to continued employment. If Mr. Faitelson’s employment terminates prior to this date, he will not receive any of the earned and vested PSUs.   ✓    Used Annual Recurring Revenue as the criteria for 2020 PSU award: The Compensation Committee granted Mr. Faitelson PSUs in 2020 that, assuming the applicable annual recurring revenue-based performance is achieved, will vest after three years (in February 2023), subject to Mr. Faitelson's continued employment through such date.
✓   PSU performance targets would need to be raised due to a successful start to our transition to a subscription-based licensing model.		✓  Set substantially more challenging performance metrics:  Ø    We raised target subscription revenue percentages for the 2019 performance period and set successively more difficult target percentages for the 2020 and 2021 performance periods. For 2019, those metrics are as follows:
			Year	Threshold	Target	Maximum
			2019	20%	25%	40%
		Ø    This was based on our first quarter 2019 financial results, which revealed a more rapid shift from a perpetual license model to a subscription-based business model than expected, and a survey of comparable companies that had completed the same transition and used subscription revenue percentages as their performance metrics.
✓   Like RSUs, size and terms of PSU awards should closely align with peer norms.		✓  Reduced 2019 PSU grant size substantially: We decreased the target number of PSUs from 66,642 to 38,536. We increased the maximum payout multiple for PSUs that may be earned from 170% of target to 200% of target, but the maximum number of earnable PSUs was substantially decreased.   ✓  Sized 2020 PSUs award using market norms: The Compensation Committee granted Mr. Faitelson PSUs with a value that was appropriately sized to meet market norms.

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Other

Gili Iohan*		42		Former Chief Financial Officer
Eric Mann** What We Learned About the CEO’s 2018 Equity Pay	What We Did for 2019 and 2020 Compensation
✓   We and our stockholders could benefit from a risk mitigation perspective if we adopted and/or revised certain compensation policies.	57			Former Chief Operating Officer ✓  2019 and 2020: Adopted robust stock ownership guidelines (with a holding period requirement) for directors and executive officers, requiring stock ownership equal to 6x salary for our CEO, 4x salary for our CFO/COO, 3x salary for our other executive officers and 5x annual retainer for our non-employee directors. ✓  2019 and 2020: Adopted claw-back policy for directors and executive officers. ✓  2019 and 2020: Removed exceptions to anti-hedging and anti-pledging policies for all directors, executive officers and employees.

* Ms. Iohan resigned as Chief Financial Officer effective as of March 31, 2017 and became a member of the Board effective as of April 1, 2017.

** Mr. Mann ceased to serve as Chief Operating Officer upon termination of employment effective as of May 2, 2017.

Stockholder Vote on Executive Compensation

Prior to the 2017 fiscal year, the Company has not been required to seek what is referred to as a “say-on-pay” vote from stockholders due to the Company’s status as an emerging growth company. Because the Company has not been required to seek a “say on pay” vote, the Company has not had the opportunity to consider or assess any stockholder vote for the approval, on an advisory basis, of executive compensation. Beginning with the 2017 fiscal year, the Company is no longer considered an emerging growth company. As such, we are seeking stockholder approval, on an advisory basis, for the Company’s 2017 executive compensation program and look forward to receiving feedback from our stockholders on what we believe to be a strong compensation program aligned with the interests of the Company and its stockholders.

 

Compensation Philosophy and Objectives

 

The Compensation Committee’s fundamental philosophy is to link closely link executive compensation with the achievement of pre-established performance goals and to promote a culture of aligning executive interests with those of the Company and its stockholders. The Compensation Committee’s objectives in administeringthe design and operation of our compensation program for our executive officers are to motivate, attract and retain highly-skilled executives as well as to incentivize management to optimize the Company’s performance and increase long-term stockholder value. follows:

✓

attract, motivate and retain highly skilled executives;

✓

incentivize management to optimize the Company’s performance; and

✓

increase long-term stockholder value.

The Compensation Committee also strives to ensure that overall compensation is fair for the services rendered and that the compensation structure is transparent. As such, the key components of executive compensation are limited to a base salary, an annual performance incentive cash award based on the achievement of pre-established performance goals (including, in certain instances, sales compensation plans providing commission opportunities) and long-term incentive awardscompensation in the form of stock-based awards. The Compensation Committee strives to ensure that our executive compensation aligns management with the Company’s annual and long-term plans and strategy.

 

Various key features of our executive compensation program are set forth below.

	23
What we do		What we don’t do
✓   Pay a majority of executive compensation in the form of long-term incentive-based awards, and, for the CEO, 50% of such long-term incentive-based awards in PSUs ✓   Cap the maximum payout under our cash incentive plan and PSUs  ✓   Set challenging targets and performance metrics for our cash incentive plan and our performance-vesting long-term equity incentive awards  ✓   Maintain a formal claw-back policy for cash and equity incentive programs  ✓   Subject executives and directors to robust stock ownership guidelines  ✓   Conduct an annual risk assessment of our compensation programs  ✓   Engage an independent consultant to provide support and advice to the Compensation Committee		×       Create a compensation program that will encourage excessive risk-taking  ×       Use the same performance metrics for cash incentive plans and PSUs ×       Allow our executive officers, directors or employees to hedge or pledge our stock (without exception)  ×       Provide tax gross-ups in connection with severance, such as in a change of control ×       Re-price underwater stock options ×       Pay guaranteed bonuses  ×       Pay dividends or dividend equivalents on unearned PSUs or unvested RSUs ×       Guarantee equity incentive awards for our named executive officers

 

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Setting Compensation Levels of Executive Officers

The Role of the Compensation Committee

 

The Compensation Committee reviews executive compensation at its meetings throughout the year and sets executive compensation based primarily on both the Company’s performance and executive management’s performance in executing the Company’s business strategy, optimizing the Company’s business performance and, thereby, increasing long-term stockholder value. The Compensation Committee also considers the scope of an executive’s duties and responsibilities and individual executive performance. Our Chief Executive Officer reviews the performance of our other named executive officers and makes recommendations, if any, to the Compensation Committee with respect to compensation adjustments for such officers. However, the Compensation Committee determines in its sole discretion whether to make any adjustments to the compensation paid to such executive officers.The duties and responsibilities of the Compensation Committee are set forth in its charter, which can be found on our website, under “Information Regarding the Board of Directors and Corporate Governance—Committees of the Board of Directors—Compensation Committee.”

 

For 2017,2019, a significant portion of each named executive officer’s total compensation was allocated to compensation in the form of an annual performance-based incentive cash award and stock-based awards, in order to provide incentives to maintain and increase long-term stockholder value. The Compensation Committee also reviewed and considered total direct compensation in setting each element of compensation for our named executive officers. For more information, see “—2019 Executive Compensation Elements—Mix of Pay.”

 

The Role of the Compensation Consultant.

The Compensation Committee has engaged Compensia, an independenta national compensation consulting firm, to provide research and analysis and to make recommendations as to the form and level of executive compensation. The Compensation Committee also sought input from Compensia on executive compensation matters for 2017,2019, including the design and competitive positioning of our executive compensation program, our peer group, appropriate compensation levels and evolving compensation trends. Additionally, the Compensation Committee retained other expert advisors and consultants to counsel the committee on disclosure, tax and accounting issues related to the changes in the Chief Executive Officer’s 2019 equity compensation.

 

The Compensation Committee has considered the independence of Compensia as a consultant to the Compensation Committee. In connection with this process, the Compensation Committee has reviewed, among other items, a letterdocuments from Compensia addressing itsthe firm’s independence, and the members of the consulting team serving the Compensation Committee, including the following factors: (i) other services provided to the Company by Compensia,the firm; (ii) fees paid by the Company as a percentage of Compensia’sthe firm’s total revenue,revenue; (iii) policies or procedures of Compensiathe firm that are designed to prevent conflicts of interest,interest; (iv) any business or personal relationships between the senior advisor of the Compensiafirm’s consulting team with a member of the Compensation Committee,Committee; (v) any Company stock owned by the senior advisor of the Compensiafirm’s consulting team or any member of that individual’s immediate familyfamily; and (vi) any business or personal relationships between our executive officers and the firm’s senior advisor. The Compensation Committee discussed these considerations and concluded that the work performed by Compensia and each of its senior advisoradvisors involved in the engagement did not raise any conflict of interest.

 

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The Role of the Chief Executive Officer.

Our CEOChief Executive Officer provides the Compensation Committee with his views on the performance of each of the named executive officers (other than himself) and also reviews the report prepared by Compensia providing research, analysis and recommendations as to the form and level of executive compensation. While the CEOChief Executive Officer made recommendations to the Compensation Committee regarding the 20172019 compensation of each of the named executive officers (other than himself) based on his assessment of Company and individual performance as well as his review of Compensia’s report onanalyzing the compensation of our executive compensation mattersofficers for 2017,2019, the Compensation Committee determines the form and level of executive compensation in its sole discretion.

 

24

The Role of Peer Companies and Competitive Positioning.

As part of its review of executive compensation for 2017,2019, the Compensation Committee reviewed the executive compensation arrangements at peer group companies. Our peer group includes comparable software companies that were selected based on specific financial criteria, including, but not limited to, revenue and market capitalization. For 2017,2019, the Compensation Committee removed the following companies from the peer group used in 2018 because they were acquired or merged and ceased to be publicly traded companies: Barracuda Networks, Bazaarvoice, Callidus Software, Gigamon, Hortonworks and Imperva. The Compensation Committee also added Carbon Black, OneSpan, SailPoint Technologies, Tenable Holdings and Zscaler as additional peers based on the criteria described above. For 2019, our peer group consisted of the following companies:

 

·A10 Networks	Imperva·Medidata Solutions	·Q2 Holdings
·AppFolio	Jive Software·MINDBODY	·Qualys
Bazaarvoice·Carbon Black	Marketo·MobileIron	·Rapid7
·Carbonite	MINDBODY·Model N	Rubicon Project·SailPoint Technologies
Five9·Coupa Software	Model N·Okta	Tangoe·SecureWorks
Gigamon·Five9	Paycom Software·OneSpan	·Tenable Holdings
Hortonworks·ForeScout Technologies	Proofprint·Proofpoint	·Zscaler

 

TheIn the course of its deliberations, the Compensation Committee reviewed the executive compensation benchmark data includingcompiled from the peer group companies, as contained in a report prepared by Compensia, containing its findings, data and recommendations, in order to evaluate and confirm whether our executive compensation was within a reasonably competitive range and to set executive compensation for 2017.2019. The Compensation Committee, however, did not set executive compensation or each element of compensation at a specific target percentile within the peer group. The Compensation Committee focuses on providing compensation that is fair for the services rendered and reflects an executive’s experience, performance and scope of responsibilities, closely linking executive compensation with the achievement of Company performance goals under the annual cash incentive program and long-term equity compensation program, and promoting a culture of aligning executive interests with those of the Company and its stockholders.

 

2017 Financial Performance Highlights

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2019 Executive Compensation Elements

 

In 2017, Varonis achieved revenuesMix of $217.4 million, an increase of 32% year-over-year. License revenues increased 33% for the full year, and maintenance and services revenues increased 31%. These results were supported by our consistently high maintenance renewal rate, which again came in at over than 90%.

These results demonstrate that our highly differentiated data security solutions are helping to solve critical needs of organizations globally as we ended the year with approximately 6,250 customers across a broad array of company sizes and industries located in over 75 countries. In the last three years, we have doubled our revenues and done so while improving our profitability profile and delivering meaningful levels of cash flow from operations. We continue with our focus to build an organization that is durable and well positioned to extend our lead globally.

2017 Executive Compensation ElementsPay

 

The key elements of our executive compensation program for the year ended December 31, 2017 were2019 comprised of:three components, summarized below:

 

	·	base salary;
Element		Purpose			Key Features
Base Salary		Provide competitive baseline compensation and a level of cash income predictability and stability.			ü	Fixed cash compensation.
					ü	Amounts informed by external competitive market levels, accounting for factors such as scope of the position, individual performance and corporate performance.
					ü	Target reasonably competitive range among our compensation peer group.
Annual Cash Incentive Plan or Annual Sales Compensation Plan (Cash Bonus)		Reward the achievement of corporate and individual performance during the year, and, in the case of annual sales compensation plan, pay a sales commission.			ü	Variable cash compensation governed by terms of plans.
					ü	Performance metrics include, under cash incentive plan, revenue and non-GAAP operating income (loss), along with individual performance, and under sales compensation plan, earned net revenues.
					ü	Target bonus opportunity amount determined in consideration of external market data (to attain reasonably competitive range among compensation peer group).
					ü	Actual value based on a combination of Company financial performance and (in case of annual cash incentive plan) individually defined, established performance objectives.
Long-Term Equity Incentives		Align with the long-term interests of Varonis, our stockholders and our executives, while rewarding long-term sustainable value creation and driving retention.			ü	Variable equity-based compensation governed by award agreements.
					ü	Performance metrics under CEO’s PSUs entail aggressive and challenging subscription-based revenue percentage goals.
					ü	Size of awards determined in consideration of external competitive market data.
					ü	RSUs generally have four-year ratable vesting and drive our goal of retaining top-tier talent.
					ü	PSUs have three-year ratable vesting and are earned based on achievement of applicable annual performance targets, with no release until three-year vesting period is completed.
					ü	Target PSU opportunity amount is determined in consideration of external competitive market data (to attain reasonably competitive range among compensation peer group).

·

annual incentive award (including, in certain instances, sales compensation plans providing commission opportunities); and

·

long-term incentive compensation in the form of restricted stock units (“RSUs”).

Executive officers are also entitledeligible to receive other benefits as outlineddescribed below under “Perquisites and Other Benefits.”

We believe that our executive pay mix strongly supports our pay-for-performance culture. The followingcombination of annual cash incentive compensation and long-term equity incentive compensation for our Chief Executive Officer and other named executive officers is balanced to avoid the risk of emphasizing short-term gains at the expense of long-term performance. The focus on long-term incentives demonstrates our strong commitment to the alignment of management and stockholder interests over time.

Ø     In 2019, approximately 80% of our CEO’s total target direct compensation and 85% of our non-CEO named executive officers’ total pay, on average, consisted of equity, compensation which underscores our use of executive pay as a summaryway to bring management interests in line with those of stockholders.

Ø     In 2019, approximately 90% of our CEO’s 2019 total target direct compensation was “at risk” and subject to future performance to have any realized value.

Average NEO (Other than CEO)
2019 Compensation Mix

85% long term-based 

 

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CEO 2019 Compensation Mix
90% at risk and 80% equity-based ^*

 

* Reflects grant date fair values of the considerations underlying each componentPSUs and RSUs granted to Mr. Faitelson in 2019 following their modification. For more information, see footnote 2 to the Summary Compensation Table under “Executive Compensation.”

Ø    Base salary, the primary element of our “fixed” pay for all named executive officers, serve to attract and retain top executive talent, and the use of these pay elements is consistent with competitive market practices.

Our equity pay practices have also evolved over time to reflect a more prudent use of stockholder capital. This progress toward more sophisticated equity compensation paidpractices has resulted in, (i) for our CEO, the introduction of performance-vesting equity, which directly ties our executive pay to key drivers of our business and our long-term strategy, and, (ii) for all of our named executive officers, for 2017.a greater portion of time-vesting full-value awards rather than options, which tracks market norms and our need to retain top talent in a competitive marketplace. The following conveys our CEO’s equity pay mix over time as an example of this progression.

 

 

Base Salary

 

Our named executive officers, and otherincluding our named executive officers, receive a base salary to compensate them for services rendered during the fiscal year. The Compensation Committee reviews and, as appropriate, adjusts the base salaries for our named executive officers. The factors that the Compensation Committee considers in setting base salaries include the scope of job responsibilities, individual execution of Company strategies and contributions to Company success, Company-wide performance and comparability to market compensation.

 

25

 

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For 2017,2019, the Compensation Committee, based on a review of the factors set forth above, including a reportan analysis prepared by Compensia of competitive market compensation, and to better align our annual cash compensation for our executive officers with our peer group compensation, adjustedcompanies in a competitive technology employment market (and with respect to Mr. Melamed, also in connection with his assumption of the responsibilities of Chief Operating Officer in addition to his existing role as Chief Financial Officer), maintained the annual base salaries for Messrs. Faitelson, Melamed, Bass, O’Boyle and Raz at $560,000, $400,000, $345,725, $350,000 and $360,000, respectively.

In determining salary levels for 2020, the Compensation Committee once again elected to maintain base salaries at the same amounts for all of our named executive officers. For Mr. O’Boyle. Effective as of January 1, 2017,Faitelson, 2020 represented the annualthird consecutive year for which his base salary forwas not increased. This decision by the Compensation Committee followed our historical pattern of not materially increasing Mr. O’Boyle was $310,000. The annualFaitelson’s base salary for eachyear to year (other than between 2017 and 2018), in an effort to keep a substantial portion of our other named executive officers, including Mr. Faitelson, remained unchanged for 2017.his compensation at risk, and thus tied to longer-term performance, and/or equity-based, and thus more closely aligned with stockholders’ interest.

 

 

Annual Cash Incentive Compensation

 

Mr. Faitelson and Mr. Melamed.

Bonus Amounts and Performance Metrics

Messrs. Faitelson and Melamed participated in our 20172019 Cash Incentive Plan.Plan, under which bonuses are earned in the form of quarterly and year-end bonus awards. For 2017,2019, the Compensation Committee, based on a review of factors including the scope of job responsibilities, individual execution of Company strategies and contributions to Company success, Company-wide performance and comparability to market compensation based on(by reference to the report prepared by Compensia, adjustedCompensia), maintained the targeted totaltarget bonus compensation opportunityopportunities for Mr. Faitelson. EffectiveMessrs. Faitelson and Melamed from 2018. Thus, effective as of January 1, 2017, Mr. Faitelson’s targeted total bonus compensation2019, the target cash incentive award opportunity for each of these named executive officers was $400,000. Mr. Melamed was provided the opportunity to earn targeted total bonus compensation in the amount of $80,000 in his role of Chief Financial Officer, which he assumed on April 1, 2017. as follows:

Named Executive Officer		Target Cash Incentive Award (% of salary and amount)
Yakov Faitelson		$440,000 (78.6%)
Guy Melamed		$250,000 (62.5%)

Each of Messrs. Faitelson’s and Melamed’s annual cash incentive compensation isfor 2019 was earned infor the form ofapplicable quarterly and year-end bonus awards weighted as follows: (i) 90%or annual period based on the quarterly achievementweighting of company revenue targets and (ii) 10%factors as follows:

·

67.5% based on the quarterly and annual achievement of Company revenue targets;

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·

22.5% based on the quarterly and annual achievement of Company non-GAAP operating income targets; and

·

10% based upon individual performance for each quarter and for the year as determined by the Compensation Committee in its discretion.

The Compensation Committee set the annual and quarterly target amounts for each performance metric at the beginning of the fiscal year, such that the annual target amounts may differ from the sum of all quarterly target amounts for that same metric. In light of our ongoing transition from a perpetual license to a subscription-based model, which launched in the first quarter of 2019, the Compensation Committee in its discretion. We must achieveprovided that each of the predeterminedquarterly and annual target amounts for revenue and non-GAAP operating income (loss) would be automatically adjusted upward or downward, based on the percentage of license revenues derived from subscriptions during such quarter or year (where subscription-based revenues comprised at least 10% of total license revenues, upward by approximately 0.33% for every 1% increase, and where subscription-based revenues comprised less than 10% of total revenues, downward by approximately 0.33% for every 1% decrease). With respect to the individual performance factor, following the end of each quarter and the year, the Compensation Committee approves an achievement percentage for the individual performance factor of each of the Chief Executive Officer and Chief Financial Officer (in the case of the Chief Financial Officer, based on the recommendation of the Chief Executive Officer).

Under the 2019 Cash Incentive Plan, no quarterly or annual payouts could be made, regardless of individual performance, unless we achieved a certain pre-established threshold level of corporate performance in respect of either the revenue targets before any payments may be made underor non-GAAP operating income target for the plan. The 2017applicable quarterly or annual period. Additionally, the 2019 Cash Incentive Plan provided for noa (i) payout at the target bonus to be paid if our quarterly and annual revenues were less than certain minimum amounts establishedopportunity amount for the corresponding fiscal periodsapplicable quarterly or annual period if we attained both of the revenue targets and non-GAAP operating income targets for such period, (ii) a cap equal topayout capped at 115% of the target bonus opportunity amount to be paidfor the applicable quarterly or annual period if either of our revenue or non-GAAP operating income (loss) performance equaled or exceeded the “stretch” revenue amounts for such period and (iii) a payout capped at 120% of the same periods.target bonus opportunity amount for the applicable quarterly or annual period if both of our revenue and non-GAAP operating income (loss) performance equaled or exceeded the “stretch” amounts for such period.

 

The establishedCompensation Committee chose to use revenue and non-GAAP operating income as the corporate performance metrics under the 2019 Cash Incentive Plan, as the Company has always tied its levels of investment to the revenues it planned to achieve. Additionally, these measures work to promote the alignment of stockholder interests with those of our executive officers, because they represent key financial measures used by us and our analysts reporting our financial results and may significantly impact our stock price. The cap on total payouts of the revenue and non-GAAP operating income components were set to manage potential incentive compensation costs and avoid incentivizing undue risk in our executive compensation program, while still maintaining appropriate incentives for our named executive officers.

The relevant performance targets under the 2019 Cash Incentive Plan, as pre-established and automatically adjusted for each quarter and/or annual period to reflect the percentage of subscription-based revenues, are disclosed below. Quarterly and/or annual bonus payouts earned for corporate performance between these performance targets were determined through linear interpolation.

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Period		Corporate Performance Metric
		Threshold Payout		Target Payout		“Stretch” Payouts
		Revenue*	Non-GAAP Operating Income (Loss)**	Revenue	Non-GAAP Operating Income (Loss)**	Revenue	Non-GAAP Operating Income (Loss)**
(in millions)
Q1 2019		$55.2	$(14.4)	$55.9	$(14.1)	$56.4	$(13.8)
Q2 2019		$54.9	$(15.2)	$55.7	$(14.8)	$56.1	$(14.5)
Q3 2019		$53.3	$(18.5)	$54.1	$(18.1)	$54.6	$(17.8)
Q4 2019		$69.5	$(11.1)	$70.4	$(10.6)	$71.2	$(10.2)
FY 2019		$226.7	$(65.2)	$229.7	$(63.7)	$232.0	$(62.4)

* The sequential increase in subscription mix throughout 2019 served as a headwind to reported revenues.

**Non-GAAP operating income (loss) is calculated as operating income (loss) as included in our annual and/or quarterly financial statements, excluding (i) stock-based compensation expense and (ii) payroll tax expense related to stock-based compensation.

The pre-established performance objectives for fiscal 20172019 were considered aggressive and attainable only with focused effort and execution and were designed to drive increased revenues and operating income, which, as stated above, the Compensation Committee feltbelieved would increase stockholder value consistent with our overall growth strategy. Management's 2019 target revenue metrics were lower relative to 2018, due to the Company's transition from a perpetual license to a subscription-based model, and the associated revenue headwinds. 65% of the Company's 2019 license revenues were from subscriptions in 2019, compared to 6% in 2018. Had the subscription mix remained flat in 2019, the targets would have been meaningfully higher than prior-year actuals.

 

BasedDetermination of 2019 Cash Incentive Award Payouts

For fiscal 2019, based on Companycorporate performance, including annual revenues of $254.2 million and annual non-GAAP operating loss of $27.2 million, and individual performance, Mr. Faitelson was awarded cash quarterly and annual bonuses in 2017 in the aggregate amount of $460,000,$523,169, and Mr. Melamed was awarded cash quarterly and annual bonuses in 2017 in the aggregate amount of $92,000. With the strong revenue growth achieved during the year, both$297,255. Each of Messrs. Faitelson and Melamed thus achieved 115%119% of their target bonus (the maximum allowed under the 2017 Cash Incentive Plan) aligned with the significantopportunities on an annual basis. These bonus amounts included, for Mr. Faitelson, aggregate amounts of $353,139 allocated to revenues (weighted at 67.5% of total bonus payout) and $117,713 allocated to non-GAAP operating income (weighted at 22.5% of total bonus payout), and for Mr. Melamed, aggregate amounts of $200,647 allocated to revenue growth(weighted at 67.5% of total bonus payout) and performance achieved during the year.$66,882 allocated to non-GAAP operating income (weighted at 22.5% of total bonus payout).

 

Ms. Iohan.Ms. Iohan also participatedThe Compensation Committee subsequently determined to allocate toward individual performance for Mr. Faitelson, $52,317, and for Mr. Melamed, $29,726 (each weighted at 10% of total bonus payout).

The following table illustrates in our 2017summary format the operation of the 2019 Cash Incentive Plan, which provided Ms. Iohanincluding the opportunityamounts actually awarded:

Named Executive Officer	Percentage of Base Salary Allocated to Target Bonus Opportunity	Target Bonus Opportunity	Revenue Metric				Non-GAAP Operating Income (Loss) Metric				Individual Performance Metric		Total Bonus Amount Awarded
			Corporate Performance		Allocation Within Executive’s Bonus		Corporate Performance		Allocation Within Executive’s Bonus		Allocation Within Executive’s Bonus
			Target	Actual	Weight	Actual Bonus Payout	Target	Actual	Weight	Actual Bonus Payout	Weight	Actual Bonus Payout
			(in millions)				(in millions)
Yakov Faitelson	78.6%	$440,000	Q1: $55.9	$56.4	67.5%	$353,139	Q1: $(14.1)	$(11.1)	22.5%	$117,713	10%	$52,317	$523,169
			Q2: $55.7	$59.6			Q2: $(14.8)	$(8.9)
			Q3: $54.1	$65.6			Q3: $(18.1)	$(4.7)
			Q4: $70.4	$72.6			Q4: $(10.6)	$(2.4)
			FY: $229.7	$254.2			FY: $(63.7)	$(27.2)
Guy Melamed	62.5%	$250,000	Q1: $55.9	$56.4	67.5%	$200,647	Q1: $(14.1)	$(11.1)	22.5%	$66,882	10%	$29,726	$297,255
			Q2: $55.7	$59.6			Q2: $(14.8)	$(8.9)
			Q3: $54.1	$65.6			Q3: $(18.1)	$(4.7)
			Q4: $70.4	$72.6			Q4: $(10.6)	$(2.4)
			FY: $229.7	$254.2			FY: $(63.7)	$(27.2)

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Mssrs. O’Boyle and Raz

Bonus Amounts and Performance Metrics

We establish sales commission plans for certain of our employees and executive officers to earn targeted total bonus compensation in the amount of $44,000 in the form of a bonus awardencourage and reward contributions to our long-term revenue growth. For our most senior executive officers, including our Chief Executive Officer and our Chief Financial Officer and Chief Operating Officer, our Compensation Committee believes that because these officers possess relatively greater responsibility and stewardship for the first quarteroverall performance of our Company, they should instead participate in a cash incentive plan using multiple performance metrics (such as the fiscal year weighted in the same manner and based on the same performance criteria as described above for Messrs. Faitelson and Melamed. Based on Company performance that exceeded the target level of performance and individual performance, Ms. Iohan was awarded a bonus in 2017 in the aggregate amount of $50,600, which was 115% of the target provided (the maximum allowed under the 20172019 Cash Incentive Plan).

 

Mr.As heads of specific divisions of our Company, Messrs. O’Boyle. Mr. O’Boyle and Raz participated in a 2017their own individual 2019 Sales Compensation Plan pursuant to which he wasPlan. Under these plans, Messrs. O’Boyle and Raz were entitled to annual sales commissions based on the revenues generated with Mr. O’Boyle’s assistance, which we receivegenerated from the sale of our products and services worldwide. For 2017,2019, the Compensation Committee, advised by Compensia and based on a review of factors including the scope of job responsibilities, individual execution of Company strategies and contributions to Company success, Company-wide performance, and comparability to market compensation, adjustedmaintained the annualized target commission opportunity from 2018 for Mr. O’Boyle.each of Messrs. O’Boyle and Raz. Effective as of January 1, 2017 and pursuant2019, the annual target sales commission opportunities for each of our named executive officers was as follows:

Named Executive Officer		Target Sales Commission Bonus (% of salary and amount)
James O’Boyle		$350,000 (100%)
Gilad Raz		$40,000 (11.1%)

Pursuant to his 2017their 2019 Sales Compensation Plan, Mr.each of Messrs. O’Boyle and Raz had the opportunity to earn an annualized target commission for the year if the annual “collectedannualized earned net revenues target” (as defined in the plan)target was met, or a pro-ratapro rata portion of histheir target compensation if annual collectedtheir annualized earned net revenues werefell below the annual collected net revenuessuch target. For any additional annual collected net revenuesamount in excess of 100% of the annual collectedannualized earned net revenues target for 2017, Mr.2019, each of Messrs. O’Boyle wasand Raz were entitled to receive one and a half percent (1.5%)1.5% of any such excess. Pursuant

“Earned net revenues” refer to credited sales value that was actually collected by us. Thus, named executive officers who participated in the 20172019 Sales Compensation Plan (asas well as in sales compensation plans from prior plans for Mr. O’Boyle), the performance condition for the sales commission was not met unless related revenues were collected by us; accordingly, Mr. O’Boyleyears only became entitled to receive their commission bonus payments with respectafter we collected the net revenues relating to any fiscal yearsuch payments for those prior years. For 2019, however, named executive officers were also entitled to receive 50% of their commission as an advance payment against the full commission bonus amount, and the remaining 50% only after we collected the net revenues to which the commission bonus payments relate. related. The earned net revenues target under the 2019 Sales Compensation Plan is disclosed below.

Named Executive Officer		Earned Net Revenues Target (in millions)
James O’Boyle		$385
Gilad Raz		$385

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Determination of 2019 Sales Compensation Plan Bonus Payouts

Mr. O’Boyle received in 20172019 an aggregate amount of commissions equal to $286,315,$275,829, which representsrepresented the sum of (i) $202,922$181,817 resulting from collected net revenuescredited sales value under the 20172019 Sales Compensation Plan; and (ii) $83,167$94,012 resulting from collected net revenues under his 2016 Sales Compensation Plan; and (iii) $235 resultingPlans from collected net revenues under his 2015 and 2014 Sales Compensation Plans.2018 to 2014. Assuming 100% collection of 20172019 net revenues, Mr. O’Boyle would receive an additional amount equal to $100,325$125,674 as a commission bonus pursuant to the 20172019 Sales Compensation Plan (which would be aggregated with the $202,922$181,817 already earned under the 20172019 Sales Compensation Plan toward the target commission opportunity of $350,000 set for Mr. O’Boyle in 2019).

Mr. Raz received in 2019 an aggregate amount of commissions equal to $27,930, which represented the sum of (i) $19,225 resulting from collected net credited sales value under the 2019 Sales Compensation Plan; and (ii) $8,705 resulting from collected net revenues under his Sales Compensation Plans from 2018 to 2014. Assuming 100% collection of 2019 net revenues, Mr. Raz would receive an additional amount equal to $12,754 as a commission bonus pursuant to the 2019 Sales Compensation Plan (which would be aggregated with the $19,224 already earned under the 2019 Sales Compensation Plan towards the target commission opportunity of $310,000$40,000 set for Mr. O’BoyleRaz in 2017)2019).

 

Discretionary Bonus

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On February 8, 2018, the Compensation Committee also grantedIn 2019, we paid Mr. O’Boyle a one-time discretionary bonus in the amount of $55,000$60,000, in recognition of Mr. O’Boyle’s exemplary efforts and contributions to the Company’s success in 2017.

Mr. Mann. Mr. Mann participated in a 2017 Sales Compensation Plan pursuant to which he was entitled to annual sales commissions based on the revenues, generated with Mr. Mann’s assistance, which we receive from the sale of our products and services worldwide. Pursuant to the 2017 Sales Compensation Plan, Mr. Mann had the opportunity to earn an annualized target commission of $350,000 for the year if the annual “collected net revenues target” (as defined in the plans) was met, or a pro-rata portion of his target compensation if annual collected net revenues were below the annual collected net revenues target. For any additional annual collected net revenues in excess of 100% of the annual collected net revenues target, Mr. Mann was entitled to receive two percent (2%) of any such excess. Pursuant to the 2017 Sales Compensation Plan, the performance condition for the sales commission was not met unless related revenues were collected by us; accordingly, Mr. Mann became entitled to receive commission bonus payments2019, including with respect to any fiscal year only after we collected the net revenuesCompany’s transition to which the commission bonus payments relate. Mr. Mann received in 2017 an aggregate amount of commissions equal to $168,846, which represents the sum of (i) $66,381 resulting from collected net revenues under the 2017 Sales Compensation Plan and (ii) $102,465 resulting from collected net revenues under his 2016 Sales Compensation Plan. Assuming 100% collection of 2017 net revenues achieved with the assistance of Mr. Mann, Mr. Mann would receive an additional amount equal to $283,619 as a commission bonus pursuant to his 2017 Sales Compensation Plan. Upon his termination of employment with us, Mr. Mann ceased to be eligible to earn additional commissions under the 2017 Sales Compensation Plan with respect to revenues achieved after the date of his termination of employment.subscription-based business model.

 

Long-Term Equity Incentive Awards

 

The Compensation Committee grants stock-based awards under our 2013 Plan to our named executive officers in order to provide long-term incentives,incentive compensation opportunities which align the long-term interests of management with the long-term intereststhose of the Company and its stockholders. The Compensation Committee believes that stock-based awards incentivize our named executive officers to optimize our long-term business performance and stockholder value and promote a culture aligning the interests of our executive officers with those of the Company and its stockholders. For 2017, the Compensation Committee administered our equity compensation plans and approved all stock-based awards under the Company’s 2013 Omnibus Equity Incentive Plan (referred to as the 2013 Plan).value.

 

Stock-based awards to our named executive officers are approved on an annual basis in amounts determined by the Compensation Committee. Below is a summary of the long-term incentive vehicles awarded to our named executive officers in fiscal 2019. 

Element		Purpose		Key Features
Performance-vesting RSUs (PSUs) (Chief Executive Officer only)		Incentivize continued focus on short- and long-term performance.		●     Three separate tranches of PSUs, earned based on one-year performance periods for 2019, 2020 and 2021, each vesting in the year following the applicable performance period (with no release of any underlying shares until the combined three-year vesting period is over in 2022).  ●     Earned based on achievement of targets over three annual performance periods.
Time-vesting RSUs (RSUs)		Promote retention of key talent in competitive industry.		●     Four-year vesting annually.

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Changes to CEO 2019 Equity Grants

In February 2017,2019, the Compensation Committee introduced PSUs to the mix of stock-based awards granted to our Chief Executive Officer, supplementing a retention-based RSU grant. The Compensation Committee determined to make certain changes to the 2019 PSU grant and RSU grant of our Chief Executive Officer, effective June 2019, in part due to extensive stockholder input, including the results of our “say-on-pay” vote on the 2018 compensation of our named executive officers, and further consultation with our external advisors regarding the practices of peer companies. Namely, we determined to revise the equity awards granted to Mr. Faitelson in 2019 in the following ways:

●

reduced the size of the PSU and RSU grants.

●

extended the one-year performance period in the PSUs to three consecutive one-year performance periods.

●

toughened the performance metric in the PSUs—subscription-based revenue as a percentage of license revenue—by making the goals more challenging.

Our Compensation Committee decided to make such revisions after reviewing our first quarter 2019 financial results, which revealed a more rapid shift from a perpetual license to a subscription-based model than expected, and evaluating our results and anticipated period for completing this transition against the rates of subscription revenue growth at other companies that historically underwent a similar transition. For more information on the full process surrounding the grant of these PSUs and RSUs, including revisions made to both of them in the course of 2019, see “Compensation Discussion and Analysis—Review of Executive Compensation Program in Light of Last Year’s Say-on-Pay Results.”

There was no incremental fair value recorded in accordance with FASB ASC Topic 718 (“Topic 718”) as of June 25, 2019, the date that the PSUs and RSUs were modified, because we decreased the size of the original PSU and RSU awards. While considerable value was removed as a result of this modification, Topic 718 does not permit a reduction in compensation cost below the value established at grant. Therefore, our reported values in the Summary Compensation Table reflect the original values calculated at the time of initial grant instead of the value immediately after the modification was enacted.

RSU Grants (CEO and Other NEOs)

In February 2019, the Compensation Committee approved the grant of time-based restricted stock unitRSU awards under the 2013 Plan to Messrs. Faitelson, Melamed, O’Boyle, Bass and O’Boyle on February 13, 2017Raz, making certain changes to Mr. Faitelson’s award in June 2019 (the “2017“February 2019 RSU Awards”). One quarter of the 2017February 2019 RSU Awards will vest annually upon the last calendar day of the month of February, beginning on February 28, 2018,2020, subject to the executive’sexecutive officer’s continued service.service with us on each applicable vesting date. The 2017February 2019 RSU Awards will be settled in shares of the Company’s common stock within 30 days of each applicable vesting date, subject to the terms and conditions set forth in the applicable RSU award agreement.

In determining the size of the grants madeawards granted to each named executive officer, as shown in the “Grants of Plan Based Awards in Fiscal 2017” table below, the Compensation Committee intended to reward and motivate theour named executive officers to drive the financial performance of the Company forward and determinedCompany. The Compensation Committee targeted award sizes that the grants werewould be within a reasonably competitive range of market practice among the Company’s peers. The RSU award forWith respect to Mr. Melamed in 2017 was approved byFaitelson’s compensation, the Compensation Committee amended his 2019 RSU grant in connection with his promotionJune 2019, reducing the size of the award from the amount initially granted in February 2019. The vesting terms were not changed. For more information on the process surrounding the amendment of Mr. Faitelson’s RSU grant and the related rationale for its amended design, see “Compensation Discussion and Analysis—Review of Executive Compensation Program in Light of Last Year’s Say-on-Pay Results—Step 5: Finalize—RSU Grant.”

The following shows the February 2019 RSU Awards (including, for Mr. Faitelson, the revised award) granted to the office of Chief Financial Officer with its attendant responsibilities.our named executive officers:

Named Executive Officer		Number of RSUs
Yakov Faitelson		38,536
Guy Melamed		75,000
David Bass		75,000
James O’Boyle		30,000
Gilad Raz		24,000

 

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PSU Grant (CEO)

During its annual executive compensation review in February 2019, the Compensation Committee determined to introduce PSUs to our Chief Executive Officer’s executive compensation package for the first time, and to allocate 50% of his long-term equity compensation to PSUs and 50% to RSUs. As further described under “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Long-Term Equity Incentive Awards—Changes to CEO 2019 Equity Grants,” the Compensation Committee first set the terms of the PSUs in February 2019 and then amended them to their current form in June 2019. The following discussion describes the 2019 PSU grant as amended.

PSU Amount and Performance Metrics

The PSUs are earned and vest in three equal installments based on the achievement of applicable annual 2019, 2020 and 2021 target percentages of total license revenue derived from subscription revenue. To the extent earned, each tranche vests in the year following the applicable one-year performance period. Upon vesting and after all applicable tax withholding, shares earned in respect of the 2019 and 2020 performance periods will be placed in a trust account or otherwise retained by the Company and only paid to the Chief Executive Officer in 2022, subject to his continued employment to such payment date. If Mr. Faitelson’s employment terminates prior to this date, he will not receive any of the earned and vested PSUs. The target number of shares underlying the PSUs for all three years is 38,536 (divided into approximately one-third for each of the three years), with a maximum payout opportunity capped at 200% of target shares.

We believe that these amended grant terms, which require Mr. Faitelson to meet increasingly challenging performance targets each year rather than attaining a single target in a one-year period, optimize Mr. Faitelson’s “at-risk” compensation and encourage him to lead our Company in line with a longer-term strategic business plan carefully set out at the inception of the grant period. We chose three, one-year performance periods to align the PSU incentives with our goals for transitioning our business from a perpetual license to a subscription-based business model, which we began in the first quarter of 2019. Since comparable companies that had successfully undertaken similar transitions completed their shift in four to six years, we concluded that an aggressive three-year runway would more effectively incentivize higher subscription revenue growth. Additionally, the deferred receipt feature of the PSUs is intended to promote Mr. Faitelson’s focus on long-term performance throughout the full vesting schedule and his retention at our Company as a critical executive in a competitive industry. For more information on the process surrounding the amendment to Mr. Faitelson’s PSU grant and the related rationale for its amended design, see “Compensation Discussion and Analysis—Review of Compensation Program in Light of Last Year’s Say-on-Pay Results—Step 5: Finalize—PSU Grant.”

The performance target for subscription revenue percentages for 2019, along with the PSU payout, was as follows:

Year		Threshold	Target	Maximum
		(50% of Target PSU Amount, or 6,359)	(100% of Target PSU Amount, or 12,717)	(200% of Target PSU Amount, or 25,434)
2019		20%	25%	40%

 

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Ms. Iohan did not receive a grantDetermination of restricted stock unit awards in February 2017, but subsequently received a grantPSU Payout

For fiscal 2019, 65% of time-based restricted stock unit awards on May 9, 2017 in connection with her appointment as a memberour license revenues were from subscriptions, such that 25,434 shares vested under the PSU (subject to the deferred receipt feature described above), which represented 200% of the Board. Ms. Iohan’s awards will vest as described in the section entitled “Director Compensation” beginning on page 37target PSU amount for 2019.

Other Elements of this proxy statement.Compensation

 

Perquisites and Other Benefits

 

We do not maintain aprovide perquisites plan foror other personal benefits to our named executive officers. Our compensation program for our named executive officers includes employee health and welfare benefits, including participation in the Company’s life, health and healthdisability insurance and similar benefit programs (including our 401(k) plan) on the same general terms as other participants in these programs. We make matching contributions to our 401(k) plan for Messrs. Faitelson, Melamed, Raz and O’Boyle. We also provide a car allowance to certain of our employees, including, among our named executive officers, Messrs. O’Boyle.

 

Employment AgreementsIn addition, with Named Executive Officersrespect to Israeli employees, we provide recreation pay as well as contributions to an education fund and to a government-mandated pension fund. Israeli law generally requires severance pay equal to one month’s salary for each year of employment upon the termination of an employee’s employment due to retirement, death, or termination without cause (and other circumstances as defined under Israeli law). We make monthly contributions on behalf of our employees, including Mr. Bass, to a pension plan. Pension plan funds provide a combination of 6.5% of the monthly salary to the pension component (including disability insurance), 8.3% of the monthly salary to the severance component and employee contributions of 6% of his or her salary to the pension component. Our full-time Israeli employees, including Mr. Bass, are entitled to participate in an education fund plan, pursuant to which each employee who participates in the plan contributes an amount equal to 2.5% of his or her salary to the education fund and we contribute 7.5% of his or her salary, up to the maximum amount exempted from tax.

Change of Control and Severance

 

On February 10, 2014, in connection with our initial public offering, we entered into employment agreements with Messrs. Faitelson and O’Boyle; and effective April 1, 2017, we entered into an employment agreement with Mr. Melamed, which was amended on February 8, 2018 in connection with Mr. Melamed’s appointment as our Chief Operating Officer in addition to his position as Chief Financial Officer.Officer; effective March 1, 2018, we entered into an employment agreement with Mr. Bass in connection with his appointment as our Chief Technology Officer in addition to his position as Vice President of Engineering; and effective January 1, 2019, we entered into an employment agreement with Mr. Raz in connection with his designation as an executive officer in October 2018. The employment agreements of Mr. Mannwith Messrs. Faitelson, Melamed and Ms. Iohan are no longerO’Boyle were further amended effective August 27, 2018 (the “August 2018 Amendments”) in effect as of Mr. Mann’s termination of employment as of May 2, 2017 and Ms. Iohan’s resignation as of March 31, 2017. Ms. Iohan became a memberconnection with the Compensation Committee’s review of the Board effective April 1, 2017.change in control provisions that had applied to our executive officers since our initial public offering and determined to make some technical and other modernizing changes to their employment agreements. None of the changes increased the level of severance or other compensation provided for under the employment agreements.

 

The Company does not provide gross-up“gross-up” payments or tax reimbursements, in each case, with respect to “excess parachute payments” under Section 280G of the Internal Revenue Code (“Section 280G”) pursuant to any agreements with the named executive officers, including the employment agreements.

 

Please refer to the section entitledsections titled “Executive Employment Agreements” beginning on page 32 of this proxy statement and the section entitled “Potential Payments Upon Termination or Change in Control” beginning on page 35 of this proxy statement for more information regarding the general terms of the employment agreements with Messrs. Faitelson, Melamed, Bass, O’Boyle and O’Boyle,Raz, including termination provisions, and separation terms relating to Mr. Mann.provisions.

 

Policy Regarding Recoupment of Certain Incentive Compensation

The Company has committed to adopting a recoupment (“clawback”) policy once final rules are established by the SEC.

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Company Policy on Section 162(m) Limits on Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code places a limit of $1 million per year on the amount of compensation paid to certain of our executive officers that the Company may deduct for federal income tax purposes. An exception to the $1 million limitation for performance-based compensation meeting certain requirements was repealed beginning in 2018, as further described below.

 

H.R.1, formally known as the “TaxThe Tax Cuts and Jobs Act,” enacted on December 22, 2017, substantially modifiesmodified Section 162(m) by, among other things, eliminating the exception for performance-based exceptioncompensation to the $1 million deduction limit effective as of January 1, 2018. As a result, beginning in 2018, we generally expect that compensation paid to each of our named executive officers in excess of $1 million will generally beis nondeductible, whether or not it is performance-based.

The Compensation Committee willintends to continue to maintain flexibility and the ability to pay competitive compensation by not requiring all compensation to be deductible. H.R.1The Tax Cuts and Jobs Act also includes a transition rule under which the changes to Section 162(m) described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017 and is not subsequently materially modified. To the extent applicable to our existing contracts and awards, the Compensation Committee may choose to avail itself of the transition rule. However, due to uncertainties as to the application and interpretation of the transition rule, no assurances can be given at this time that our existing plans and previously granted awards, even if in place on November 2, 2017, will meet the requirements of the transition rule. Regardless of any changes in law, the Compensation Committee intends to continue to implement compensation programs that it believes are competitive and in the best interests of the Company and its stockholders.

 

Managing Compensation-Related Risks

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We have adopted various policies intended to mitigate risks associated with our executive and director compensation programs. For a description of our claw-back policy, anti-hedging and anti-pledging policies and executive and director stock ownership guidelines and retention requirements, see “Information Regarding the Board of Directors and Corporate Governance—Other Policies.”

 

Conclusion2020 Compensation Actions

In February 2020, the Compensation Committee conducted its annual executive compensation review and made 2020 compensation decisions for our named executive officers. In making these decisions, the Compensation Committee considered, among other factors, pay levels of our named executive officers relative to the Company’s peers and the overall competitive market, based on a 2020 report prepared by Compensia, performance of each named executive officer and the published preferences of Institutional Shareholder Services, Inc. (“ISS”) for Chief Executive Officer compensation.

●

The Compensation Committee decided to maintain the base salaries and target annual incentive compensation opportunities of our named executive officers at the same amounts of such compensation in 2019.

●

The Compensation Committee granted Mr. Faitelson PSUs in 2020 that, assuming the applicable annual recurring revenue-based performance is achieved, will vest after three years (in February 2023), subject to Mr. Faitelson's continued employment through such date.

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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

 

The Compensation Committee, believes that our compensation programs appropriately incentivize executive performance and align the interests of our named executive officers and key employees with the long-term interests of our stockholders and enable the Company to attract and retain talented executives. The Compensation Committee will continue to assess and administer our compensation program in a manner that the Compensation Committee believes will be in the best interests of our stockholders.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee, comprisedmade up entirely of independent directors, reviewed and discussed the above Compensation Discussion and Analysis with the Company’s management. Based on this review and discussion, the Compensation Committee recommends to the Board that the Compensation Discussion and Analysis be included in these proxy materials.

 

The Compensation Committee: Kevin Comolli Rona Segev-Gal

Respectfully submitted by the members of the Compensation Committee of the Board of Directors:

 

Kevin Comolli (Chairperson)
Rona Segev-Gal

 

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EXECUTIVE COMPENSATION

Prior to the 2017 fiscal year, we provided compensation disclosure that satisfied the requirements applicable to emerging growth companies, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and complied with the executive compensation rules applicable to “smaller reporting companies,” as such term is defined under the Securities Act of 1933, as amended (the “Securities Act”), which required compensation disclosure for our principal executive officer and the two most highly compensated executive officers other than our principal executive officer.  Beginning with the 2017 fiscal year, we are no longer considered an emerging growth company and, thus, must comply with the broader compensation disclosure requirements under the Securities Act generally applicable to registrants who are not emerging growth or smaller reporting companies.

EXECUTIVE COMPENSATION

 

The following summary compensation table sets forth the cash and non-cash compensation paid to or earned by (i) our principal executive officer, (ii) our principal financial officer, (iii) the most highly compensated executive officer of the Company other than the principal executive officer or the principal financial officer who was serving at the end of the 2016 fiscal year and (iv) two former executive officers who would have been among the three most highly compensated executive officers (other than the principal executive officer and the principal financial officer) of the Company if they had continued to serve as executive officers at the end of the 2017 fiscal year (collectively, our named executive officers).officers. In each case, compensation is shown for the years during which compensation disclosure was required over the last three completed fiscal years of the Company: the fiscal years ended December 31, 2015,2017, December 31, 20162018 and December 31, 2017,2019, respectively.

 

SUMMARY COMPENSATION TABLESummary Compensation Table

 

Name and Position		Year		Salary ($)		Bonus ($)		Stock Awards ($)(1)		Option Awards ($)(1)		Non-Equity Incentive Plan Compensation ($)(2)		All Other Compensation ($)		Total ($)		Year		Salary ($)			Bonus ($)			Stock Awards ($)(1)			Non-Equity Incentive Plan Compensation ($)(3)			All Other Compensation ($)			Total ($)
Yakov Faitelson		2017		400,000				1,831,050		-		460,000		10,800(3)		2,701,850		2019		560,000			–			7,399,928	(2)		523,169			11,200	(4)		8,494,297
Chief Executive Officer		2016		400,000		-		337,400		196,269		389,837		10,600		1,334,106		2018		560,000			–			7,792,500			407,472			11,000			8,770,972
and President		2015		380,000		-		1,045,800		635,319		32,096		10,600		2,103,815		2017		400,000			–			1,831,050			460,000			10,800			2,701,850
Guy Melamed(4)		2017		285,000		-		2,394,450		-		92,000		10,320(3)		2,781,770
Chief Financial Officer and Chief Operating Officer
Guy Melamed																		2019		400,000			–			4,164,000			297,255			11,200	(4)		4,872,455
Chief Financial Officer and Chief																		2018		400,000			–			3,117,000			231,518			11,000			3,759,518
Operating Officer																		2017		285,000			–			2,394,450			92,000			10,320			2,781,770
David Bass(5)
Executive Vice President of																		2019		345,725			–			4,164,000			–			54,989	(6)		4,564,715
Engineering																		2018		343,027			–			2,857,250			–			54,408			3,254,685
and Chief Technology Officer
James O’Boyle		2017		310,000		55,000		704,250		-		286,315		15,801(7)		1,371,366		2019		350,000			60,000	(7)		1,665,600			275,829			26,226	(8)		2,377,655
Senior Vice President		2016		285,000		-		253,050		147,202		261,582		15,601		962,435		2018		350,000			–			2,597,500			305,832			15,973			3,269,305
of Worldwide Sales		2015		240,000		-		239,040		145,216		192,718		15,590		832,564		2017		310,000			55,000			704,250			286,315			15,801			1,371,366
Gilad Raz																		2019		360,000			–			1,332,480			27,930			11,200	(4)		1,731,610
Chief Information
Officer
and VP of Technical Services																		2018		360,000			–			1,084,500			33,888			11,000			1,489,388

  

30

Eric Mann(5)		2017		119,359		-		-		-		168,847		250,026(8)		538,232
Former Chief Operating Officer		2016		344,840		-		1,433,950		834,145		221,926		-		2,834,861
Gili Iohan(6)		2017		62,520		-		-		-		50,600		262,678(9)		375,798
Former Chief Financial Officer

_________________________

(1)

Represents the grant date fair value of each award computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (FASB ASC Topic 718).718. For a summary of the assumptions made in the valuation of the awards, granted in 2017, please see Note 2.k, “Accounting for Stock-Based Compensation,” of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2017.  For2019.

(2)

The value of Mr. Faitelson’s 2019 stock awards disclosed in this table does not reflect the subsequent modification to substantially reduce his grant size. On February 14, 2019, Mr. Faitelson was granted 66,642 PSUs (with a summarythreshold payout amount of 50% and a maximum payout amount of 170%) and 66,642 RSUs (respectively, the “Original PSUs” and the “Original RSUs”). On June 25, 2019, we modified the Original PSUs and the Original RSUs (respectively, the “Modified PSUs” and the “Modified RSUs”). There was no incremental fair value recorded in accordance with Topic 718 in connection with the Modified PSUs and Modified RSUs as of June 25, 2019. As a result, pursuant to the rules of the assumptions made inSEC, this column reports the valuationgrant date fair value of the awards granted in 2016, please see Note 2.l, “AccountingOriginal PSUs and the Original RSUs, assuming, for Stock-Based Compensation,”the Original PSUs, performance at the target payout level (the probable outcome of the Notesperformance conditions associated with this award, measured at the time of grant). Additionally, pursuant to Consolidated Financial StatementsSEC rules (which require us to report the maximum grant date fair value where not represented in our Annual Report on Form 10-K for the year ended December 31, 2016.  For a summary of the assumptions made in the valuation of the awards granted in 2015, please see Note 2.l, “Accounting for Stock-Based Compensation,” of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2015.  Ms. Iohan received a grant of restricted stock units in her capacity as a non-employee director beginning April 1, 2017, as disclosed in the “All Other Compensation” column of the Summary Compensation Table.Table), the grant date fair value of the Original PSUs assuming performance at the maximum payout level was $6,289,939.

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The Original PSUs were subject to annual vesting in equal installments over three years, to the extent earned based on the achievement of a single, one-year performance period. The Modified PSUs contain three separate tranches of PSUs, each to be earned based on the achievement of three separate one-year performance periods (2019, 2020 and 2021) and to vest, to the extent earned, in full in the year following the applicable performance period (with no release of any underlying shares until the three-year vesting period is completed in February 2022). For more information regarding the Original PSUs and the Modified PSUs, see “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Long-Term Equity Incentive Awards.”

The following shows data regarding the Modified RSUs and Modified PSUs, measured at the time of grant for all three annual performance periods, and the Modified PSUs earned by him in 2020 with respect to 2019 performance:

Award	Vesting	Shares Underlying Award		Grant Date Fair Value*	Shares Earned for 2019
Modified RSUs	Time	38,536		$2,314,472	n/a
Modified PSUs	Performance	For all three annual tranches of award			25,434 (one-third of maximum payout for 2019)
		Probable outcome (target)	38,536	$2,314,472
		Maximum	77,072	$4,628,944

*The grant date fair value shown above is conservatively based on the June 25, 2019 stock price at modification. If the February 14, 2019 original grant date price were used for comparisons instead, the value of the modified grant would be lower still at $4,279,038.

The actual amount of compensation that will be earned by Mr. Faitelson under the Modified PSUs will depend on the extent to which the remaining unearned awards vest and are earned in accordance with our financial performance.

(2)

(3)

Represents performance-based (i) bonusannual bonuses earned by Messrs. Faitelson and Melamed and Ms. Iohan in respect of companyCompany and individual performance in the relevantapplicable fiscal year and (ii) annual sales commissions paid to Messrs. MannO’Boyle and O’BoyleRaz in the relevantapplicable fiscal year. The material terms of the non-equity incentive plan compensation paid to named executive officers in our last completed fiscal year are described in the section entitled ““Compensation Discussion and Analysis—2019 Executive Compensation Discussion & Analysis, Elements—Annual Cash Incentive Compensation.”

(3)

(4)

Represents, for 2019, Company matching contributions to the 401(k) savings plan.

(4)	Mr. Melamed was appointed Chief Financial Officer effective April 1, 2017 and Chief Operating Officer effective February 8, 2018.
(5)	Mr. Mann’s employment terminated effective May 2, 2017.
(6)	Ms. Iohan ceased to serve as Chief Financial Officer effective March 31, 2017. Ms. Iohan began serving as a member of the Board effective April 1, 2017. The Summary Compensation Table above and the subsequent tables summarizing the compensation of our named executive officers below includes Ms. Iohan’s compensation in respect of her employment as Chief Financial Officer as well as her service as a member of the board of directors during the 2017 fiscal year.  Certain amounts payable to Ms. IohanMr. Bass were paid in New Israeli Shekels. The exchange rate used for the purpose of the Summary Compensation Table is $1.00 = ₪3.60.NIS3.563.

(6)

Includes, for 2019, $2,509 in tax gross-up payments in respect of sponsored meals and $52,480 in disability insurance benefits, contributions to pension and severance funds and recreation pay as required under Israeli law.

(7)

Represents a one-time, discretionary bonus paid to Mr. O’Boyle based on his performance in 2019. For more information, see “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Other Elements of Compensation.”

	(8)	Includes, $5,001for 2019, $7,583 in car allowance, and $10,800$11,200 in Company matching contributions to the 401(k) savings plan.
(8)	Includes $200,000plan and $3,644 in severancetax gross-up and $3,799 in payments and benefits and $50,026 in accrued vacation.
(9)	Includes $40,192 in redemption of accrued vacation days, a $635 tax gross up in respect of sponsored meals and $9,336 in disability insurance benefits and contributions to pension and severance funds as required under Israeli law. In addition, this column includes $212,515 in compensation Ms. Iohan received with respect to her service astravel expenses for Mr. O’Boyle and his spouse associated with attendance of our annual sales achievement event.

Grants of Plan-Based Awards for Fiscal 2019

The following table provides information regarding: (i) annual non-equity incentive plan awards under the Company’s 2019 Cash Incentive Plan and 2019 Sales Compensation Plan; and (ii) RSU and PSU awards under the 2013 Plan.

Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)			Estimated Future Payouts Under Equity Incentive Plan Awards(2)			All Other Stock Awards: Number of Shares of Stock or Units (#)(3)	Grant Date Fair Value of Stock Awards ($)(4)
		Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)
Yakov Faitelson		396,000	440,000	528,000	—	—	—	—	—
RSUs	2/14/19	—	—	—	—	—	—	66,642	3,699,964
PSUs(5))	2/14/19	—	—	—	33,321	66,642	113,291	—	3,699,964
Guy Melamed		225,000	250,000	300,000	—	—	—	—	—
RSUs	2/14/2019	—	—	—	—	—	—	75,000	4,164,000
David Bass		—	—	—	—	—	—	—	—
RSUs	2/14/2019	—	—	—	—	—	—	75,000	4,164,000
James O’Boyle		-	350,000	—	—	—	—	—	—
RSUs	2/14/2019	—	—	—	—	—	—	30,000	1,665,600
Gilad Raz		—	40,000	—	—	—	—	—	—
RSUs	2/14/2019	—	—	—	—	—	—	24,000	1,332,480

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(1)

Represents the threshold, target and and/or maximum cash payout opportunities for fiscal 2019 under our 2019 Cash Incentive Plan and 2019 Sales Compensation Plan. Pursuant to their 2019 Sales Compensation Plan, each of Messrs. O’Boyle and Raz had the opportunity to earn an annualized target commission for the year if the annualized earned net revenues target was met, or a non-employee director beginning April 1, 2017.  This directorpro rata portion of their target compensation consistsif their annualized earned net revenues fell below such target. For any amount in excess of $22,500 in fees paid in cash100% of the annualized earned net revenues target for 2019, each of Messrs. O’Boyle and Raz were entitled to receive 1.5% of any such excess. As a grant of restricted stock units with a value of $190,015 (with the number of RSUs calculated by dividing $190,000 by the closing priceresult, there was no threshold or maximum payout. For more information regarding our 2019 Cash Incentive Plan and 2019 Sales Compensation Plan, see “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Annual Cash Incentive Compensation.”

(2)

Represents shares of our common stock underlying the Original PSUs granted to Mr. Faitelson under our 2013 Plan on February 14, 2019, which were subject to annual vesting in equal installments over three years, once earned based on the achievement of a single, one-year performance period. The Original PSUs were modified on June 25, 2019. There was no incremental fair value recorded in accordance with Topic 718 in connection with the Modified PSUs as of June 25, 2019. As a result, pursuant to the rules of the SEC, this column reports the terms of the Original PSUs only. For information regarding the Modified PSUs, see footnote 5.

(3)

Represents shares of our common stock underlying RSUs granted under our 2013 Plan, subject to ratable time-based vesting over four years upon the last calendar day of the month of February beginning on February 28, 2020, including the Original RSUs granted to Mr. Faitelson on February 14, 2019. The Original RSUs were modified on June 25, 2019. There was no incremental fair value recorded in accordance with Topic 718 in connection with the Modified RSUs as of June 25, 2019. As a result, pursuant to the rules of the SEC, this column reports the terms of the Original RSUs only. For information regarding the Modified RSUs, see footnote 5.

(4)

Represents the grant date fair value of RSU and rounding upPSU awards computed in accordance with Topic 718, including the Original PSUs and Original RSUs granted to nearest whole numberMr. Faitelson. For a summary of the assumptions made in the valuation of these awards, please see Note 2.k, “Accounting for Stock-Based Compensation,” of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019. For Mr. Faitelson’s Original PSUs, the grant date fair value assumes performance at the target payout level (the probable outcome of the performance conditions associated with this award).

(5)

Mr. Faitelson’s Modified RSUs are subject to ratable, time-based vesting over four years upon the last calendar day of the month of February beginning on February 28, 2020. Mr. Faitelson’s Modified PSUs contain three separate tranches of PSUs, each to be earned based on the achievement of three separate one-year performance periods (2019, 2020 and 2021) and to vest, to the extent earned, in full on the last calendar day of the month of February in the year following the applicable performance period (with no release of any underlying shares until the three-year vesting period is completed in February 2022). For the Modified PSUs, the grant date fair value assumes performance at the target payout level for all three tranches of shares of common stock underlying the RSUs), which vestwith respect to 1/12(the probable outcome of the performance conditions associated with this award, measured at the time of grant for all three annual performance periods pursuant to SEC guidance). For more information regarding the Modified RSUs upon the end of each calendar month following the date of the grant, subjectand Modified PSUs, see “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Long-Term Equity Incentive Awards—Changes to the Ms. Iohan’s continued service on the Board.CEO 2019 Equity Grants.”

The following shows data regarding Mr. Faitelson’s Modified RSUs and Modified PSUs, measured at the time of grant for all three annual performance periods based on the June 25, 2019 stock price:

 

Name	Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	Grant Date Fair Value of Stock Awards ($)
	Threshold (#)	Target (#)	Maximum (#)
Yakov Faitelson
RSUs	—	—	—	38,536	2,314,472
PSUs	19,268	38,536	77,072	—	2,314,472

The actual amount of compensation that will be earned by Mr. Faitelson under the Modified PSUs will depend on the extent to which the awards vest and are earned in accordance with our financial performance.

 

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GRANTS OF PLAN BASED AWARDS TABLE FOR FISCAL 2017

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)			All Other Stock Awards: Number of Shares of Stock or Units (#)	Grant Date Fair Value of Stock Awards ($)
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)
Yakov Faitelson	-	360,000	400,000	460,000	-	-
	2/13/2017	-	-	-	65,000	1,831,050
Guy Melamed	-	72,000(2)	80,000(2)	92,000(2)	-	-
	2/13/2017	-	-	-	85,000	2,394,450
James O’Boyle	-	-	310,000	-	-	-
	2/13/2017	-	-	-	25,000	704,250
Eric Mann	-	-	350,000	-	-	-
Gili Iohan(4)	-	40,000(3)	44,000(3)	50,600(3)	-	-

__________________________________ 

(1) Actual annual incentive amounts and, in the cases of Messrs. O’Boyle and Mann, sales commission amounts, are shown in the Summary Compensation Table.

 

(2) Represents the annual incentive opportunity granted to Mr. Melamed, at threshold, target and at maximum, as indicated, for the portion of the fiscal year after his appointment to the office of Chief Financial Officer.

(3) Represents the annual incentive opportunity granted to Ms. Iohan, at threshold, target and at maximum, as indicated, while she served as a named executive officer of the Company. Based upon Ms. Iohan’s resignation, she was entitled to earn the bonus payable for the first quarter of fiscal 2017 only.

(4) The grant date fair market value of stock awards granted in the form of 5,439 restricted stock units on May 9, 2017 to Ms. Iohan in her capacity as a member of the board of directors are shown in the “All Other Compensation” column of Summary Compensation Table.

EXECUTIVE EMPLOYMENT AGREEMENTSExecutive Employment Agreements

 

On February 10, 2014, in connection with our initial public offering, we entered into employment agreements with Messrs. Faitelson and O’Boyle; and effective April 1, 2017, we entered into an employment agreement with Mr. Melamed, which was amended on February 8, 2018 in connection with Mr. Melamed’s appointment as Chief Operating Officer in addition to his position as Chief Financial Officer. TheOfficer; effective March 1, 2018, we entered into an employment agreement with Mr. Bass in connection with Mr. Bass’ appointment as our Executive Vice President and Chief Technology Officer; and effective January 1, 2019 we entered into an employment agreement with Mr. Raz in connection with Mr. Raz’s designation as an executive officer. On August 27, 2018, we entered into the August 2018 Amendments with Messrs. Faitelson, Melamed and O’Boyle, which, among other things, changed the treatment of Section 280G for technical and other modernizing updates to their employment agreements. None of the changes increased the level of severance or other compensation provided for under the employment agreements. Unless terminated earlier, the employment agreements have an initial term of Mr. Mann and Ms. Iohan are no longer in effect as of Mr. Mann’s termination of employmentthree years following the effective as of May 2, 2017 and Ms. Iohan’s resignation as of March 31, 2017. Ms. Iohan became a memberdate, subject to automatic one-year renewals unless either party provides ninety days’ written notice to the other prior to the expiration of the board of directors effective April 1, 2017.term.

 

The current employment agreements with each of Messrs. Faitelson and O’Boyle became effective upon the completion of our initial public offering.offering, and the current employment agreements with Messrs. Melamed, Bass and Raz became effective April 1, 2017, March 1, 2018 and January 1, 2019, respectively. According to the employment agreements, each executive will receive an annual base salary, which may be increased during the employment term (but not decreased other than pursuant to an across-the-board reduction that applies to all employees or to senior executives), in the sole discretion of the Compensation Committee. The current base salaries of Messrs. Faitelson, O’Boyle, Melamed, Bass and O’BoyleRaz are $560,000, $350,000, $400,000, $345,725 and $350,000,$360,000, respectively.

With respect to Mr.Messrs. Faitelson and Melamed, the employment agreementagreements also providesprovide for an annual target bonus opportunity. Mr.Messrs. Faitelson’s and Melamed’s current annual target bonus opportunity is $440,000.opportunities are $440,000 and $250,000, respectively. With respect to Mr.Messrs. O’Boyle and Raz, the employment agreement providesagreements provide for an annual target commission bonus opportunity. Mr.Messrs. O’Boyle’s and Raz’s current annual target commission bonus opportunity is $350,000. Unless terminated earlier, the employment agreements have an initial term of three years following the effective date, subject to automatic one-year renewals unless either party provides ninety days’ written notice to the other prior to the expiration of the term.opportunities are $350,000 and $40,000, respectively.

 

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The current employment agreement with Mr. Melamed provides that Mr. Melamed will receive an annual base salary, which may be increased during the employment term (but not decreased other than pursuant to an across-the-board reduction that applies to all employees or to senior executives), in the sole discretion of the Compensation Committee. Mr. Melamed’s current base salary is $400,000. The employment agreement with Mr. Melamed also provides for an annual target bonus opportunity. Mr. Melamed’s current target bonus opportunity is $250,000. Unless terminated earlier, the employment agreement has an initial term of three years following the effective date, subject to automatic one-year renewals unless either party provides ninety days’ written notice to the other prior to the expiration of the term.

PENSION AND NON-QUALIFIED DEFERRED COMPENSATION PLANS

We did not maintain a pension plan or non-qualified deferred compensation plan for any of our named executive officers in fiscal year 2017.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END 2017Outstanding Equity Awards at Fiscal Year End 2019

 

The following table shows information regarding outstanding equity awards held by each named executive officer as of our fiscal year end, December 31, 2017.2019.

 

		Option Awards				Stock Awards
Name	Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(1)	Grant Date	Option Awards				Stock Awards
Name								Grant Date	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)(1)	Market Value of Shares or Units of Stock That Have Not Vested ($)(1)	Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested (#)	Equity Incentive Plan Awards: Market Value of Unearned Shares That Have Not Vested ($)
	1/15/2009	176,950	-	1.256	1/15/2019	-			7,356	–	8.80	2/27/2022	–			–
	6/25/2009	52,560	-	1.256	6/25/2019	-
	8/5/2009	68,949	-	1.256	8/5/2019	-
	2/27/2012	7,356	-	8.80	2/27/2022	-
	8/7/2014	70,834	14,166(2)	21.00	8/7/2024	-
	2/20/2015	24,792	10,208(3)	29.88	2/20/2025	17,500(4)	849,625
	2/17/2016	9,166	10,834(3)	16.87	2/17/2026	15,000(5)	728,250
	2/13/2017	-				65,000(6)	3,155,750
Yakov Faitelson								8/7/2014	85,000	–	21.00	8/7/2024	–
								2/20/2015	33,542	–	29.88	2/20/2025	–	–
								2/17/2016	19,166	834 (2)	16.87	2/17/2026	5,000 (3)	388,550	–
								2/13/2017	–				32,500 (4)	2,525,575	–
								2/15/2018	–				112,500 (5)	8,742,375	–
								2/14/2019	–				38,536(6)	2,994,633	–
								2/14/2019	–						77,072(7)	5,989,265(7)
	3/21/2014	125	187(3)	39.86	3/21/2024	-		2/17/2016	–				1,250 (3)	97,138	–
	5/12/2014	209	520(3)	22.01	5/12/2024	-
	8/7/2014	104	416(3)	21.00	8/7/2024	-
	11/11/2014	83	458(3)	21.66	11/11/2024	-
	2/20/2015	167	1,166(3)	29.88	2/20/2025	2,000(4)	97,100
	5/11/2015	209	1,770(3)	19.51	5/11/2025	2,500(7)	121,375
	2/17/2016	-				3,750(5)	182,063
	2/13/2017	-				85,000(6)	4,126,750
Guy Melamed								2/13/2017	–				42,500 (4)	3,302,675	–
								2/15/2018	–				45,000 (5)	3,496,950	–
								2/14/2019	–				75,000(6)	5,828,250	–
								2/17/2016	–				5,000 (3)	388,550	–
David Bass								11/8/2016	–				4,250 (8)	330,268	–
								2/13/2017	–				20,000 (4)	1,554,200	–
								8/8/2017	–				6,000( 9)	466,260	–
								11/7/2017	–				2,500 (10)	194,275	–
								2/15/2018	–				41,250 (5)	3,205,538	–
								2/14/2019	–				75,000(6)	5,828,250	–
	4/17/2013	6,500	-	12.47	4/17/2023	-		5/12/2014	17,828	–	22.01	5/12/2024	–
	3/21/2014	2,813	187(3)	39.86	3/21/2024	-
	5/12/2014	22,396	2,604(3)	22.01	5/12/2024	-
	2/20/2015	5,667	2,333(3)	29.88	2/20/2025	4,000(4)	194,200
James O’Boyle								2/20/2015	6,488	–)	29.88	2/20/2025	–
								2/17/2016	11,875	625 (2)	16.87	2/17/2026	3,750 (3)	291,413	–
								2/13/2017	–				12,500 (4)	971,375	–
								2/15/2018	–				37,500 (5)	2,914,125	–
								2/14/2019	–				30,000(6)	2,331,300	–
								1/14/2010	1,470	–	1.576	1/14/2020			–
Gilad Raz								3/21/2014	1,500	–	39.86	3/21/2024			–
								5/12/2014	8,790	–	22.01	5/12/2024			–
								8/7/2014	1,666	–	21.00	8/7/2024			–
								11/11/2014	1,822	–	21.66	11/11/2024			–
								2/20/2015	2,050	–	29.88	2/20/2025	–
								2/17/2016	–				2,000 (3)	155,420	–
								8/12/2016	–				2,000 (12)	155,420	–
								2/13/2017	–				6,000 (4)	466,260	–
								8/8/2017	–				1,500 (9)	116,565	–
								11/7/2017	–				2,500 (10)	194,275	–
								2/15/2018	–				11,250 (5)	874,238	–
								8/2/2018	–				3,750 (13)	291,413	–
								2/14/2019	–				24,000(6)	1,865,040	–

 

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	2/17/2016	6,875	8,125(3)	16.87	2/17/2026	11,250(5)	546,188
	2/13/2017	-	-	-	-	25,000(6)	1,213,750
Eric Mann	-	-	-	-	-	-	-
Gili Iohan	10/1/2010	7,500	-	1.256	10/1/2020	-	-
	4/17/2013	750	-	12.47	4/17/2023	-	-
	3/21/2014	125	188(3)	39.86	3/21/2024	-	-
	5/12/2014	6,483	2,604(3)	22.01	5/12/2024	-	-
	2/20/2015	3,009	3,791(3)	29.88	2/20/2025	6,500(4)	315,575
	2/17/2016	6,875	8,125(3)	16.87	2/17/2026	11,250(5)	546,187
	5/9/2017	-	-	-	-	2,263(8)	109,869

(1)

Represents the market value of theRepresented unvested shares subject to RSUsRSUs. The market value is based on the closing price of our common stock on December 29, 2017 (the last trading day of our fiscal year),31, 2019, which was $48.55$77.71 per share.

	(2)	1/48th of the shares subject to the option vests each month on the same day of the month as the grant date (and if there is no corresponding day, on the last day of the month),subject to Mr. Faitelson continuing to be employed by us through each such date.
(3)	25%of the option award vests on the first anniversary of grant, and an additional 1/48th48th of the shares subject to the option vests at the end of each one-month period thereafter, subject to the optionee continuing to be employed by us through each such date.

(4)	(3)	The shares subject to the RSU award will vest, and an equal number of shares of our common stock will be deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of February beginning on February 29, 2016, subject tothe grantee continuing to be employed by us through each such date.
(5)	The shares subject to the RSU award will vest, and an equal number of shares of our common stock will beare deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of February beginning on February 28, 2017, subject tothe grantee continuing to be employed by us through each such date.

(6)

(4)

The shares subject to the RSU award will vest, and an equal number of shares of our common stock will beare deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of February beginning on February 28, 2018, subject tothe grantee continuing to be employed by us through each such date.

(7)

(5)

The shares subject to the RSU award will vest, and an equal number of shares of our common stock will beare deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of MayFebruary beginning on May 31, 2016,February 28, 2019, subject tothe grantee continuing to be employed by us through each such date.

(8)

Ms. Iohan received an RSU award grant in connection with her service as a member of the Board beginning April 1, 2017.  (6)

The shares subject to the RSU award will vest, and an equal number of shares of our common stock will settlewith respectare deliverable to 1/12the grantee, in four equal annual installments upon the last calendar day of the RSUs upon the endmonth of each calendar month following the date of the grant,February beginning on February 29, 2020, subject to the Ms. Iohan’s continued servicegrantee continuing to be employed by us through each such date.

(7)

Represents the number of Modified PSUs that were eligible to performance vest at the target performance level in 2020, 2021 and 2022, based on performance periods for 2019, 2020 and 2021, respectively. One-third of these Modified PSUs became eligible to time-vest at this level on February 28, 2020, based on the Board. Theresults of our performance in 2019, and an additional one-third are eligible to time vest on each of February 28, 2021 and February 28, 2022, subject to Mr. Faitelson’s continued employment through each such date and the achievement of applicable performance targets.

In accordance with SEC rules, this table shows the number of shares underlying the outstanding PSU award assuming a payout at the maximum level for all three performance periods, based the maximum number of shares underlying the one-third of the Modified PSUs having vested in 2020 based on our financial performance in 2019. The actual number of shares and value of compensation related to the PSUs that may vest in each of 2021 and 2022 (corresponding to performance periods for 2020 and 2021) will depend on the extent to which the awards vest and are earned in accordance with our financial performance and, with respect to value, the price of our common stock at the time of vesting. For more information, see “Compensation Discussion and Analysis—2019 Executive Compensation Elements—Long-Term Equity Incentive Awards.”

(8)

The shares subject to the RSU award includes 453vest, and an equal number of shares that were releasedof our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of November beginning on November 30, 2017, subject to the first business day following December 31, 2017. grantee continuing to be employed by us through each such date.

OPTION EXERCISES AND STOCK VESTED TABLE FOR FISCAL 2017

	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Yakov Faitelson	-	-	13,750	376,750
Guy Melamed	26,087	564,949	3,500	107,088
James O’Boyle	-	-	5,750	157,550
Eric Mann	24,791	516,460	21,250	582,250
Gili Iohan	148,424	5,147,849	10,619	342,873

(9)

The shares subject to the RSU award vest, and an equal number of shares of our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of August beginning on August 31, 2018 subject to the grantee continuing to be employed by us through each such date.

 

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(10)

The shares subject to the RSU award vest, and an equal number of shares of our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of November beginning on November 30, 2018, subject to the grantee continuing to be employed by us through each such date.

(11)

The shares subject to the RSU award vest, and an equal number of shares of our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of November beginning on November 30, 2016, subject to the grantee continuing to be employed by us through each such date.

(12)

The shares subject to the RSU award vest, and an equal number of shares of our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of August beginning on August 31, 2017 subject to the grantee continuing to be employed by us through each such date.

(13)

The shares subject to the RSU award vest, and an equal number of shares of our common stock are deliverable to the grantee, in four equal annual installments upon the last calendar day of the month of August beginning on August 31, 2019 subject to the grantee continuing to be employed by us through each such date.

Option Exercises and Stock Vested for 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)
Yakov Faitelson	121,509	1,603,881	67,500	3,844,800
Guy Melamed	1,562	85,725	39,750	2,271,135
David Bass	2,666	118,314	39,750	2,414,565
James O’Boyle	20,684	993,537	24,500	1,395,520
Gilad Raz	-	-	17,250	1,096,738

(1)

The value realized on exercise of stock option awards is based on the difference between the closing market price of our common stock on the date of exercise of the option award and the exercise price of the option.

(2)

The value realized on vesting of stock awards granted is based on the closing market price of our common stock on the date of vesting of the stock award.

Pension Plans

We did not maintain a pension plan for any of our named executive officers in fiscal year 2019.

Non-Qualified Deferred Compensation

We did not maintain a non-qualified deferred compensation plan for any of our named executive officers in fiscal year 2019. However, the PSUs granted in 2019 to Mr. Faitelson, our Chief Executive Officer, contain a deferred receipt feature. These PSUs vest in three equal installments in each of February 2020, 2021 and 2022, based on the achievement of applicable annual 2019, 2020 and 2021 performance targets, respectively. Pursuant to the PSUs’ deferred receipt feature, upon vesting and after all applicable tax withholding, shares underlying the PSUs earned in respect of the 2019 and 2020 performance periods will be placed in a trust account or otherwise retained by the Company and only paid to Mr. Faitelson in 2022, subject to continued employment. If Mr. Faitelson’s employment terminates prior to this date, he will not receive any of the earned and vested PSUs. For more information, see “2019 Executive Compensation Elements—Long-Term Equity Incentive Awards.” Because the first tranche of shares underlying the PSUs did not vest until February 2020, they do not qualify as disclosable non-qualified deferred compensation for 2019.

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

Termination Provisions of Employment Agreements

 

Upon a termination by us without “cause” (as defined in the respective employment agreements) or upon a termination by the executive for “good reason” (as defined in the respective employment agreements) and provided that the executive signs and does not revoke a general release of claims, the executive will be entitled to the following severance benefits: (i) with respect to Messrs. Faitelson and O’Boyle, a lump sum payment equal to one times the executive’s base salary, and with respect to Mr.Messrs. Melamed, Bass and Raz, a lump sum payment equal to one-half times Mr. Melamed’sthe executive’s base salary, and (ii) with respect to Messrs. Faitelson and Melamed, an amount equal to a pro rata portion of the annual bonus that each would have earned for the year of termination based on actual performance, and with respect to Mr.Messrs. O’Boyle and Raz, an amount equal to the amount of the annual commissions earned but not paid prior to histhe executive’s date of termination. Upon a termination by us without “cause” or upon a termination by the executive for “good reason” within the one-year period following a “change in control” (as defined in the respective employment agreements) and(and, in the case of Mr. Bass, provided that the executivehe signs and does not revoke a general release of claims,claims), the executive will be entitled to the following enhanced severance benefits: (i) for Messrs. Faitelson and O’Boyle, a lump sum payment equal to one and a half times the executive’s base salary and for Mr.Messrs. Melamed, Bass and Raz, a lump sum payment equal to one times histhe executive’s base salary, (ii) for Messrs. Faitelson and Melamed, an amount equal to the executive’s target annual bonus for the year of termination, and for Mr.Messrs. O’Boyle and Raz, an amount equal to histhe executive’s target annual commission opportunity for the year of termination to the extent not previously paid, and (iii) for Messrs. Faitelson, Melamed, O’Boyle and Raz, immediate vesting of all of the executive’s then outstanding equity-based awards (referred to as “double trigger” vesting).

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The employment agreements for Messrs. Faitelson, Melamed, O’Boyle and Raz provide for immediate vesting of all of the executive’s then outstanding equity-based awards upon a qualifying termination within 12 months following a change in control transaction. The employment agreement with Mr. Bass also provides that upon a “change in control” (as defined in the 2013 Plan and related agreements), Mr. Bass will be entitled to immediate vesting of all of his outstanding equity-based awards. Additionally, the employment agreement with Mr. Raz provides that upon a “change in control” (as defined in the 2013 Plan and related agreements), Mr. Raz will be entitled to immediate vesting of 50% of his outstanding equity-based awards.

 

If the executive’s employment is terminated by us for cause, due to death or “disability” (as defined in the respective employment agreements) or due to the executive’s resignation without good reason, the executive will not be entitled to any further compensation or benefits other than any accrued but unpaid base salary, reimbursement for any business expenses properly incurred by executive prior to the date of termination and vested benefits, if any, to which the executive may be entitled under the terms of the Company’s employee benefit plans as of the date of termination.

 

The Company does not provide gross-up payments or tax reimbursements, in each case, with respect to “excess parachute payments” under Section 280G. The employment agreements of Messrs. Faitelson, Melamed, O’Boyle and Raz do provide, in the event that any payments treated as “parachute payments” (within the meaning of Section 280G) made to the executive would fail to be deductible to the Company due to the impact of Section 280G, and subject the executive to the excise tax provisions of Section 4999 of the Internal Revenue Code.Code, such payments would be reduced to an amount that would not trigger the loss of deduction and excise tax, unless the executive would be in a better economic position (on an after-tax basis) in receiving all amounts and paying the excise tax (and all other required taxes).

 

The employment agreements contain standard twelve-month post-termination non-competition and non-solicitationnon- solicitation covenants. If the executive breaches any of the restrictive covenants, we are not required to make any of the severance payments listed above, and we can require the executive to repay any of the severance payments previously made.

 

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Treatment Underof Equity Plans

 

The outstanding and unvested equity awards held by our named executive officers are governed by the terms of the 2013 Plan. Under the terms of the 2013 Plan if an outstanding award is continued, assumed, or substituted in connection with a “change in control” (as definedand, in the 2013case of certain outstanding stock options, the 2005 Stock Plan and related agreements)(the “2005 Plan”), then if the participant’sas well as their respective employment is terminated without cause within 12 monthsagreements. For more information, see “Termination Provisions of the change in control, all of the participant’s outstanding equity awards that have not yet vested will immediately vest and become exercisable and all restrictions on such awards will immediately lapse.Employment Agreements.”

 

Under the 2013 Plan, if an outstanding award is not continued, assumed, or substituted in connection with the change in control, then such award will immediately vest and become exercisable and all restrictions on such awards will immediately lapse (if applicable, assuming achievement at the target level of performance for any awards subject to performance-based vesting conditions).

Quantification

 

The tables below reflect the amount of compensation that would have been payable to each of our named executive officers under any contract, agreement, plan, or arrangement with us that provides for any payment to such executive in the event of termination of such executive’s employment or termination in connection with a change in control of the Company, in each case assuming the termination and change in control occurred effective as of December 29, 2017, the last business day of our last completed fiscal year.31, 2019. The amount of compensation payable to each named executive officer upon “involuntary termination without cause or for good reason,” and “involuntary termination without cause or termination for good reason following change in control,” as applicable, is shown below. We have prepared the tables based on the closing price of our common stock on the last business day of our 20172019 fiscal year.

 

35

Named Executive Officer Benefits and Payments upon Termination

 

Name		Involuntary Termination Without Cause or for Good Reason(1)				Involuntary Termination Without Cause or Termination for Good Reason Following a Change in Control(2)			Involuntary Termination Without Cause or for Good Reason(1)	Involuntary Termination Without Cause or Termination for Good Reason Following a Change in Control(2)
Yakov Faitelson		$	400,000			$	1,000,000		$1,083,269	$	1,280,000
Guy Melamed		$	150,000			$	400,000		$497,355	$	650,000
David Bass									$172,863	$	347,725
James O’Boyle		$	310,000			$	775,000		$625,929	$	875,000
Gilad Raz									$208,029	$	400,000

 

(1)

(1)

Includes (i) a lump sum payment equal to one times base salary(or, in Mr. Melamed’s case, for Messrs. Faitelson and O’Boyle and one-half times base salary).salary for Messrs. Melamed, Bass and Raz and (ii) with respect to Messrs. Faitelson and Melamed, an amount equal to a pro rata portion of the annual bonus that each would have earned for the year of termination based on actual performance, and with respect to Messrs. O’Boyle and Raz, an amount equal to the amount of the annual commissions earned but not paid prior to the executive’s date of termination:

Name		Lump Sum Cash Payment				Pro Rata Annual Bonus
Yakov Faitelson		$	560,000			$	523,169
Guy Melamed		$	200,000			$	297,255
David Bass		$	172,863			$	-
James O’Boyle		$	350,000			$	275,829
Gilad Raz		$	180,000			$	27,930

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(2)

(2)

Includes (i) a lump sum payment equal to one and a half times base salary (or, in Mr. Melamed’s case,for Messrs. Faitelson and O’Boyle and one times base salary)salary for Messrs. Melamed, Bass and Raz and (ii) an amount equal to the executive’s target annual bonus for the year of termination (or, in Mr. O’Boyle’s case,for Messrs. Faitelson and Melamed and an amount equal to the executive’s target annual commission opportunity for the year of termination to the extent not previously paid),paid for Messrs. O’Boyle and Raz, as detailed in the table below.

Name	Lump Sum Cash Payment		Target Bonus Payment
Yakov Faitelson	$	840,000	$      440,000
Guy Melamed	$	400,000	$      250,000
David Bass	$	347,725	$                 -
James O’Boyle	$	525,000	$     350,000
Gilad Raz	$	360,000	$       40,000

Name		Lump Sum Cash Payment				Target Bonus Payment
Yakov Faitelson		$	600,000			$	400,000
Guy Melamed		$	300,000			$	100,000
James O’Boyle		$	465,000			$	310,000

Acceleration of Vesting of Options and RSUs upon Termination

 

		Change in Control(1)								Involuntary Termination within One Year of Change in Control(2)
Name		Number of Shares Underlying Accelerated RSUs and Options				Value of Shares Underlying Accelerated RSUs and Options				Number of Shares Underlying Accelerated RSUs and Options				Value of Shares Underlying Accelerated RSUs and Options
Yakov Faitelson			-				-				132,708			$	4,733,625
Guy Melamed			-				-				97,767			$	4,527,288
James O’Boyle			-				-				53,499			$	1,954,138

(1)	None of our named executive officers is entitled to single trigger vesting of equity awards.

	Change in Control		Involuntary Termination within One Year of Change of Control(1)
Name	Number of Shares Underlying Accelerated RSUs and Options	Value of Shares Underlying Accelerated RSUs and Options		Number of Shares Underlying Accelerated RSUs and Options	Value of Shares Underlying Accelerated RSUs and Options
Yakov Faitelson	–	–		374,428	$29,096,800
Guy Melamed	–	–		163,750	$12,725,013
David Bass	154,000(2)	$11,967,340		–	–
James O’Boyle	–	–		120,566	$9,369,184
Gilad Raz	35,149(3)	$2,731,429		35,149	$2,731,429

(2) (1)

The employment agreements for Messrs. Faitelson, Melamed, O’Boyle and Raz provide for immediate vesting of all of the executive’s then outstanding equity-based awards upon a qualifying termination within 12 months following a change in control transaction. Acceleration of the outstanding equity awards would also occur in the event that the awards are not assumed or substituted by the acquiring company in the change in control transaction. In the event that outstanding equity awards are assumed or substituted in connection with the change in control transaction, the outstanding awards would vest on a double trigger basis, requiring a qualifying termination of employment upon or following the change in control.

(2)	Mr. Bass’s employment agreement provides that upon a change in control transaction, Mr. Bass will be entitled to immediate vesting of all of his outstanding equity-based awards.

(3)	Mr. Raz’s employment agreement provides that upon a change in control transaction, Mr. Raz will be entitled to immediate vesting of 50% of his outstanding equity-based awards.

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DIRECTOR COMPENSATION

 

Executive Officer Departures in 2017

In connectionThe Compensation Committee, with his termination of employment effective May 2, 2017, Mr. Mann received a lump sum severance payment equal to $200,000 pursuantinput from its independent compensation consultant Compensia, periodically reviews and evaluates director compensation and makes recommendations to the termsBoard. Our Board reviews director compensation periodically to ensure that the director compensation package remains competitive such that we are able to recruit and retain qualified directors. Certain highlights of our employment agreement with Mr. Mann, subject to his execution of a general release. A total of $34,190 in earned commissions was subsequently paid to Mr. Mann upon collection pursuant to the terms of the commission bonus agreement with Mr. Mann.

36

DIRECTOR COMPENSATION

The following table sets forth information regardingBoard compensation earned by or paid to our non-employee directors during 2017:

Name(1)		Fees Earned or Paid in Cash ($)		Stock Awards(2)($)		Total ($)
Kevin Comolli		48,000		190,015		238,015
John J. Gavin Jr.		53,500		190,015		243,515
Thomas F. Mendoza		30,000		190,015		220,015
Ofer Segev		37,500		190,015		227,515
Rona Segev-Gal		38,500		190,015		228,515
Fred Van Den Bosch		37,500		190,015		227,515

_____________

are included below.

(1)

Restricted stock units	Ms. Iohan, who is not included	Each of our non-employee directors currently receives at least 75% of his or her annual compensation from us in the Director Compensation Table above, ceased to serve as Chief Financial Officer effective March 31, 2017 and began serving as a memberform of the Board effective April 1, 2017. The “All Other Compensation” column of the Summary Compensation Table beginningRSUs (based on page 30 of this proxy statement reflects Ms. Iohan’s compensation in respect of her service as a member of the board of directors.
(2)	Represents the grant date fair value of the RSU awards granted on May 9, 2017. The following table shows the aggregate number ofapproximately $190,000 for annual grants).
Director stock options and RSU awards held by eachownership guidelines		Each of our non-employeedirectors is required to beneficially own shares of our common stock with the equivalent value, as of the acquisition date, of at least five times his or her aggregate annual cash retainer, by the date of the fifth anniversary of his or her appointment (provided that directors as of December 31, 2017: the date of the guidelines’ adoption must achieve their applicable levels of ownership on an accelerated basis,  within two years after adoption). For more information, see “Information Regarding the Board of Directors and Corporate Governance—Other Policies.”
Compensation review		The Compensation Committee reviews the appropriateness of our director compensation.

Director		Options (#)		Restricted Stock Units (#)
Kevin Comolli		-		2,263
John J. Gavin Jr.		33,000		2,263
Thomas F. Mendoza		-		2,263
Ofer Segev		-		2,263
Rona Segev-Gal		-		2,263
Fred Van Den Bosch		10,000		2,263

We have a policy of reimbursing our directors for their reasonable out-of-pocket expenses incurred in attending Board and Board committee meetings. None of our employee directors receives additional compensation for his or her service on the Board.

 

Non-employee directors receive the following cash compensation for Board and Board committee services, as applicable, paid on a quarterly basis:

 

●	•	$30,000 per year for service as a Board member;

●	•	$20,000 per year for service as the chairchairperson of the Audit Committee and $7,500 per year for service as a member (other than as chair) of the Audit Committee;

●	•	$10,500 per year for service as the chairchairperson of the Compensation Committee and $5,000 per year for service as a member (other than as chair) of the Compensation Committee; and

●	•	$7,500 per year for service as the chairchairperson of the Nominating and Corporate Governance Committee and $3,500 per year for service as a member (other than as chair) of the Nominating and Corporate Governance Committee.
		Committee; and

●	$19,000 per year for services as Lead Director.

In addition, each non-employee director is entitled to receive an award of restricted stock unitsRSUs under the 2013 Plan in the amount of $190,000 each year following the date of our Annual Meeting of Stockholders (which, in 2017,2019, resulted in a grant of 5,4392,639 RSUs (calculated by dividing $190,000 by the closing price of our common stock on the grant date and rounding up to nearest whole number of shares of common stock underlying the RSUs)). Each such RSU will vest over one year with respect to 1/12 of the RSUs upon the end of each calendar month following the date of the grant, subject to the director’s continued service on the Board.

 

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The following table sets forth information regarding compensation earned by or paid to our non-employee directors during 2019:

Name	Fees Earned or Paid in Cash ($)	Stock Awards (1) ($)	All Other Compensation	Total ($)
Kevin Comolli	48,000	190,008	-	238,008
John J. Gavin, Jr. (2)	58,250	190,008	-	248,258
Gili Iohan	30,000	190,008	-	220,008
Ohad Korkus	30,000	190,008	-	220,008
Thomas F. Mendoza	30,000	190,008	-	220,008
Ofer Segev	37,500	190,008	-	227,508
Rona Segev-Gal	38,500	190,008	-	228,508
Fred Van Den Bosch	37,500	190,008	-	227,508

(1)

37

Represents the grant date fair value of the RSU awards granted on May 2, 2019.

(2)	John J. Gavin, Jr. was elected as Lead Independent Director as part of the October 2019 meeting of the Board of Directors and received $4,750 for his services in 2019.

 

The following table shows the aggregate number of outstanding stock options and RSU awards held by each of our non-employee directors as of December 31, 2019:

Director		Unexercised Options Outstanding (#)		Unvested Restricted Stock Units Outstanding (#)
Kevin Comolli		-		1,100
John J. Gavin, Jr.		33,000		1,100
Gili Iohan		15,580		4,850
Ohad Korkus		937		1,100
Thomas F. Mendoza		-		1,100
Ofer Segev		-		1,100
Rona Segev-Gal		-		1,100
Fred Van Den Bosch		10,000		1,100

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CHIEF EXECUTIVE OFFICER PAY RATIO

Pursuant to Item 402(u) of Regulation S-K and the Dodd-Frank Act, we are required to disclose in this proxy statement the ratio of the annual total compensation of our CEO to that of our median employee.

 

EQUITYPay Ratio

Based on SEC rules for this disclosure and applying the methodology described below, we estimate that the median employee’s annual total compensation for 2019 was approximately $166,759. Thus, the ratio of our CEO’s annual total compensation for 2019 to the median employee’s annual total compensation for 2019 was approximately 51 to 1 (based on our CEO’s annual total compensation for 2019 as reported in the “Summary Compensation Table” of $8,494,297).

The CEO’s annual total compensation used to calculate the ratio above reflects the value of the CEO’s equity grants in 2019 prior to their modification. After taking into consideration the grant date fair value of the CEO’s modified equity grants in 2019, the ratio of our CEO’s annual total compensation for 2019 to the median employee’s annual total compensation for 2019 was approximately 34 to 1 (based on our CEO’s modified annual total compensation for 2019 of $5,723,313). For more information, see footnote 2 to the Summary Compensation Table under “Executive Compensation.”

The ratio of annual total compensation excluding equity awards for 2019 was approximately 9 to 1.

Methodology

We selected December 31, 2019, which is a date within the last three months of fiscal 2019, as the determination date to identify our median employee. Pursuant to SEC rules, we used the same median employee we used to calculate the pay ratio under SEC rules in fiscal 2018, who we previously identified as of December 31, 2018. As of December 31, 2019, we had 1,574 employees, of which 706 were in the United States, 514 were in Israel and 354 were in other countries. We did not exclude any employees from our calculations. We calculated the annual total cash compensation (salary, wages, overtime and bonus) from our payroll records for all employees of the Company (excluding our Chief Executive Officer) as of this determination date. We believe that annual total cash compensation is a consistently applied compensation measure at Varonis and most appropriate for determining the median employee. In making this determination, we annualized the compensation for those employees who were hired during fiscal year 2019, as permitted under SEC rules. We did not make any cost-of-living adjustments in identifying the median employee. After identifying the median employee, we calculated the annual total compensation for such employee using the same methodology we used for Mr. Faitelson’s annual total compensation in the Summary Compensation Table for fiscal year 2019.

EQUITY COMPENSATION PLAN INFORMATION

 

The following table sets forth the number of shares of our common stock subject to outstanding stock options and RSUs under the 2013 Plan and our 2005 Stock Plan, as amended, the weighted average exercise price of outstanding stock options and the number of shares remaining available for future grants under the 2013 Plan and for future purchases under our 2015 Employee Stock Purchase Plan (the “ESPP”) as of December 31, 2017.2019. Future grants may not be made pursuant to the 2005 Stock Plan. In the event of certain changes in our capitalization, such as a reorganization, stock split, merger or similar change in our corporate structure or the number of outstanding shares of our common stock, our Compensation Committee will make appropriate adjustments to (i) under our 2013 Plan, the aggregate and individual share limits and to the number, class and/or exercise price under outstanding awards in order to prevent undue diminution or enlargement of the benefits or potential benefits available and (ii) under our ESPP, the number and class of shares or other securities that are reserved for issuance and the option price.

 

Plan Category	Number of Securities to be Issued upon Exercise of Outstanding Options and RSUs	Weighted Average Exercise Price of Outstanding Options	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column)(1)(2)
Equity compensation plans approved by security holders	3,506,591	$16.17(3)	558,981(4)
Equity compensation plans not approved by security holders	-	-	-
Total	3,506,591	$16.17	558,981

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Plan Category	Numbers of Securities to be Issued upon Exercise of Outstanding Options, RSUs and PSUs (1)	Weighted-Average Exercise Price of Outstanding Options	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column) (2) (3)
Equity compensation plans approved by security holders	3,110,790	20.63(4)	878,919(5)
Equity compensation plans not approved by security holders	—	—	—
Total	3,110,790	20.63	878,919

_______________

(1)	Pursuant to SEC guidance, includes the number of PSUs granted to our CEO issuable at the maximum payout level.

(2)

The Company initially reserved 1,904,633 shares of common stock for issuance under the 2013 Plan. The number of shares of common stock available for issuance under the 2013 Plan was increased on January 1, 2017,2016, and will be increased each January 1 thereafter, by four percent (4%) of the number of shares of our common stock issued and outstanding on each December 31 immediately prior to the date of increase, except that the amount of each increase will be limited to the number of shares of common stock necessary to bring the total number of shares of our common stock available for grant and issuance under the 2013 Plan to five percent (5%) of the number of shares of common stock issued and outstanding on each such December 31. On January 1, 2016, 2017, 2018, 2019 and 2018,2020, the share reserve under the 2013 Plan was automatically increased by 1,042,766, 1,072,870, 1,125,846, 1,183,075 and 1,125,8461,105,998 shares, respectively.

(2) (3)

The Company initially reserved 500,000 shares of common stock for purchase under the ESPP. The number of shares of common stock available for issuance under the ESPP was increased on January 1, 2016 and will be increased each January 1 thereafter, by an amount equal to the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase, except that the amount of each such increase will be limited to the number of shares of common stock necessary to bring the total number of shares of common stock available for issuance under the ESPP to two percent (2%) of the number of shares of common stock issued and outstanding on each such December 31, or (ii) 400,000 shares of common stock. On January 1, 2016, 2017, 2018, 2019 and 2018,2020, the share reserve under the ESPP was automatically increased by 21,383, 158,695, 188,813, 177,358 and188,813 155,914 shares, respectively.

(3) (4)

Since RSU awards have no exercise price, they are not included in the weighted-average exercise price calculation in this column.

(4) (5)

Represents, as of December 31, 2017, 184,8712019, 423,167 shares of common stock that remained available for issuance under the 2013 Plan and 374,110455,752 shares of common stock that remained available for purchase under the ESPP. There are no shares available for future grant under the 2005 Plan.

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TRANSACTIONS

TRANSACTIONS WITH RELATED PERSONS

 

We describe below “related party transactions,” or transactions and series of similar transactions, since the beginning of our last2019 fiscal year, to which we were a party or will be a party, in which:which (setting aside certain exceptions outlined in Item 404(a) of Regulation S-K):

 

· ●

the amounts involved exceeded or will exceed $120,000; and

 

· ●

any of our directors, director nominees, executive officers or beneficial holders of more than 5% of any class of our capital stock, or any immediate family members thereof, had or will have a direct or indirect material interest.

 

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Other than as described below, there has not been, nor is there any currently proposed, transactions or series of similar transactions to which we have been or will be a party.

 

Employment Arrangements and Indemnification Agreements

 

We have entered into employment arrangements with certain current executive officers. See “Executive Compensation.”

We have also entered into indemnification agreements with certain directors and officers. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

 

Sales Agent Agreement with NetApp

Mr. Thomas Mendoza is a member of our Board. Mr. Mendoza is also vice chairman of NetApp, Inc. (“NetApp”). We have entered into a Sales Agent Agreement with NetApp, under which NetApp acts as our non-exclusive sales agent to promote the Company’s products to possible customers. In 2017, NetApp earned $560,204 pursuant to this agreement, of which $107,581 was paid in 2017 and the remainder will be paid after collection.

Policies and Procedures for Related Person Transactions

 

We have adopted a written related person transactions policy by which all “related party transactions” that our executive officers, directors, nominees for election as a director, 5% stockholders, and any members of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted towe enter into a transaction with us without(as defined in Item 404(a) of Regulation S-K and described above) must receive the prior consentapproval of our Audit Committee, or other independent members of the Board of Directors, in the event that it is inappropriate for our Audit Committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, 5% stockholder or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting any such proposal,a transaction, our Audit Committee willmay consider all facts and information that isare available and deemed relevant by the Audit Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction.

 

HOUSEHOLDING

HOUSEHOLDING OF PROXY MATERIALS

 

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Notices of Internet Availability of Proxy Materials or other Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single Notice of Internet Availability of Proxy Materials or other Annual Meeting materials addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

 

This year, a number of brokers with account holders who are Varonis stockholders will be “householding”householding our proxy materials. A single Notice of Internet Availability of Proxy Materials will be delivered to multiple stockholders sharing an address, unless contrary instructions have been received from the affected stockholders. Once you have received notice from us (if you are a stockholder of record) or from your broker (if you are a beneficial owner) that, we or they, will be “householding”householding communications to your address, “householding”householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding”householding and would prefer to receive a separate Notice of Internet Availability of Proxy Materials, or if you currently receive multiple copies and would like to request “householding”householding of your communications, please notify your broker or us by contacting our General CounselJames Arestia, Director of Investor Relations, at 1250 Broadway, 29th29^th Floor, New York, NY 10001, or (877) 292-8767.(646) 640-2149.

OTHER MATTERS

Delinquent Section 16(a) Reports

 

39

OTHER MATTERSSection 16(a) of the Exchange Act requires our executive officers, directors and certain persons who beneficially own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Based solely on a review of reports filed with the SEC and written representations that no other reports were required, we believe that our executive officers, directors and greater than 10% stockholders complied with all applicable filing requirements on a timely basis during fiscal year 2019, except for one late Form 4 filing for Mr. Raz with respect to tax withholding of 1,292 shares on December 2, 2019 (filed on December 17, 2019).

 

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When are stockholder proposalsStockholder Proposals and director nominations dueNominations for next year’s2021 Annual Meeting?Meeting of Stockholders

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing and be received by our General CounselJames Arestia, Director of Investor Relations, at 1250 Broadway, 29th Floor, New York, NY 10001, no later than the close of business on NovemberDecember 16, 2018,2020, and must comply with all applicable requirements of Rule 14a-8 promulgated under the Exchange Act. If, however, our 20192021 Annual Meeting of Stockholders is called for a date that is not within 30 days before or after the anniversary of our 20182020 Annual Meeting of Stockholders, then the deadline is a reasonable amount of time before we begin to print and mailsend the Proxy Statementproxy materials for the 20192021 Annual Meeting of Stockholders.

 

If you wish to submit a proposal (including a director nomination) at the 20192021 Annual Meeting of Stockholders that is not to be included in next year’sthe Company’s proxy materials for that meeting, the proposal must be received by our General Counsel notJames Arestia, Director of Investor Relations, at the address above no later than the close of business on March 12, 2021 nor earlier than the close of business on February 10, 2019 nor earlier than the close of business on January 11, 2019.2021. The notice must contain certain information as specified in our bylaws. If, however, our 20192021 Annual Meeting of Stockholders is called for a date that is not within 25 days before or after the anniversary of our 20182020 Annual Meeting of Stockholders, then the deadline is not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the Annual Meetingannual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs.

 

In no event shallwill the adjournment or postponement of an Annual Meeting,annual meeting, or the public announcement of such an adjournment or postponement, commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

 

You are also advised to review our bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.

___  ___  ___  ___  ___  ___  ___  ___  ___ The bylaws are posted on our website at https://ir.varonis.com/corporate-governance.

 

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intentionBy Order of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

Stockholders may contact the Board by writing to them c/o our General Counsel at 1250 Broadway, 29th Floor, New York, NY 10001, and such mail will be forwarded to the director or directors, as the case may be.

of Directors,

	By Order /s/ Yakov Faitelson
	Chief Executive Officer, President and Chairman of the Board of Directors
	/s/ Yakov Faitelson
	Yakov Faitelson
	Chief Executive Officer, President
	and Chairman of the Board

 

A copy of our Annual Report to the SEC on Form 10-K for the fiscal year ended December 31, 20172019 is available without charge upon written request to: Varonis Systems, Inc., Attn: Legal Department,James Arestia, Director of Investor Relations, 1250 Broadway, 29th Floor, New York, NY 10001.10001, or (646) 640-2149. You may also access this Annual Report, along with all our filings made electronically with the SEC, including on Forms 10-Q and 8-K, on our website at https://ir.varonis.com/financials-and-filings/.

 

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	VOTE BY INTERNET - www.proxyvote.com
	Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut - off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
VARONIS SYSTEMS, INC. 1250 BROADWAY, 29TH FLOOR NEW YORK, NY 10001	ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
	VOTE BY PHONE - 1-800-690-6903
	Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut - off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
	VOTE BY MAIL
	Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:	KEEP THIS PORTION FOR YOUR RECORDS
	DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

For

Withhold

For All

To withhold authority to vote for any individual nominee(s),

The Board of Directors recommends you vote FOR

All

All

Except

mark “For All Except” and write the number(s) of

the following:

the nominee(s) on the line below.

☐

☐

☐

1.

To elect the three nominees for director named below to the Board of Directors to hold office until the 2021 Annual Meeting of Stockholders.

Nominees

01  Gili Iohan

02  Ofer Segev

03  Rona Segev-Gal

The Board of Directors recommends you vote FOR

The Board of Directors recommends you vote FOR

the following proposal:

For

Against

Abstain

proposals 4 and 5:

For

Against

Abstain

2.

Advisory vote to approve the Company's executive compensation, as disclosed in the proxy statement

☐

☐

☐

4.

To ratify the appointment by the Audit Committee of the Board of Directors of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global Limited, as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2018.

☐

☐

☐

The Board of Directors recommends you

vote 1 YEAR on the following proposal:

1 year

2 years

3 years

Abstain

3.

Advisory vote on the frequency of holding an advisory vote on executive compensation.

☐

☐

☐

☐

5.

To conduct any other business properly brought before the meeting.

☐

☐

☐

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Form 10-K are available atwww.proxyvote.com

	VARONIS SYSTEMS INC.
	Annual Meeting of Stockholders
	April 26, 2018 4:00 P.M.
	This proxy is solicited by the Board of Directors
	The stockholder(s) hereby appoint(s) Yakov Faitelson and Guy Melamed, or either of them, as proxies, each with the power to appoint his/her substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of VARONIS SYSTEMS, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholder(s) to be held at 4:00 PM, EDT, on April 26, 2018, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036, and any adjournment or postponement thereof.
	This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations.
	Continued and to be signed on reverse side