The following graph compares the cumulative five-year total stockholder return on the Common Stock from December 31, 20112013 through December 31, 2016,2018, with the cumulative total return on (i) the NASDAQ Composite Index and (ii) S&P 500 Index. The comparison assumes the investment of $100 on December 31, 2011,2013, in the Common Stock and in each of the indices and, in each case, assumes reinvestment of all dividends.
22 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | 12/31/2013 | | 12/31/2014 | | 12/31/2015 | | 12/31/2016 | | 12/31/2017 | | 12/31/2018 |
Perficient | | $ | 100.00 |
| | $ | 79.55 |
| | $ | 73.10 |
| | $ | 74.68 |
| | $ | 81.43 |
| | $ | 95.05 |
|
NASDAQ Composite Index | | 100.00 |
| | 113.40 |
| | 119.89 |
| | 128.89 |
| | 165.29 |
| | 158.87 |
|
S&P 500 Index | | 100.00 |
| | 111.39 |
| | 110.58 |
| | 121.13 |
| | 144.65 |
| | 135.63 |
|
PROPOSAL 2. APPROVAL OF ADVISORY VOTE ON EXECUTIVE COMPENSATION
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the stockholders of the Company are being provided with the opportunity to vote on an advisory resolution to approve the 20162018 compensation of the named executive officers, as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K (including the Compensation Discussion and Analysis section (the “CD&A”), compensation tables and accompanying narrative). Item 402 of Regulation S-K is the SEC regulation that sets forth what companies must include in their CD&A and compensation tables. The Compensation Committee and the Board value the opinions expressed by the Company’s stockholders and will carefully consider the outcome of the vote when making future compensation decisions for the named executive officers.
As described in the CD&A beginning on page 9, the Company believes that the quality, ability, and commitment of the named executive officers are significant factors contributing to the proper leadership of Perficient and driving stockholder value for the Company. Accordingly, our executive compensation programs are designed to:
• | Attract, retain, and motivate qualified talent; |
• | Motivate executives to improve the overall performance of the Company and reward executives when the Company achieves specific measurable results; |
• | Encourage accountability by determining salaries and incentive awards based on the Company’s collective performance and contribution; |
• | Ensure compensation levels are externally competitive and create internal pay equity among executives; and |
• | Align our executives’ long-term interests with those of our stockholders. |
Attract, retain, and motivate qualified talent;
Motivate executives to improve the overall performance of the Company and reward executives when the Company achieves specific measurable results;
Encourage accountability by determining salaries and incentive awards based on the Company’s collective performance and contribution;
Ensure compensation levels are externally competitive and create internal pay equity among executives; and
Align our executives’ long-term interests with those of our stockholders.
Stockholders are urged to read the CD&A beginning on page 9, which more thoroughly discusses how the compensation policies and procedures implement the Company’s compensation philosophy. The Compensation Committee and the Board believe that these policies and procedures are effective in implementing the Company’s compensation philosophy and in achieving its goals.
Stockholders have the opportunity to vote “FOR,” “AGAINST,”“FOR”, “AGAINST”, or “ABSTAIN” on the following advisory resolution relating to the executive compensation of our named executive officers as disclosed in this Proxy Statement:
“Resolved, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion set forth in this Proxy Statement, is hereby approved.”
This vote is not intended to address a specific item of compensation, but rather the overall compensation of the named executive officers and the philosophy, policies, and practices as described in this Proxy Statement. The affirmative vote of a majority of the shares of the Company’s Common Stock cast in person or by proxy, excluding abstentions, on the proposal will be considered approval by the stockholders of the advisory resolution on executive compensation.
The Board recommends a vote “FOR” the proposal to approve the advisory resolution relating to the executive compensation of our named executive officers.
PROPOSAL 3. APPROVAL OF FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, stockholders of the Company are being provided with the opportunity to cast an advisory vote on whether the non-binding advisory vote to approve the compensation of the named executive officers should occur every one, two, or three years. After careful consideration of this agenda item, and as previously determined by the Board and supported by the vote of the stockholders in 2011, the Board has determined that an annual advisory vote on executive compensation is most appropriate for the Company at this time and demonstrates our commitment to good corporate governance.
While the results of voting on this item are advisory, the Board values the opinions of our stockholders and will take the results of this vote, as it did in 2011, into account when determining the frequency of an advisory vote on executive compensation. The alternative (one, two, or three years) that receives the greatest number of votes will be considered by the Nominating and Corporate Governance Committee and the Board as our stockholders’ advice on the frequency issue.
You may cast your vote by specifying one of the following four options on the accompanying proxy card: “1 year,” “2 years,” “3 years,” or “Abstain.” Abstentions will not have any effect on the outcome of this matter. You are not voting to approve or disapprove the Board’s recommendation.
The Board recommends stockholders vote “1 year” on the advisory vote on the frequency of future advisory votes on executive compensation.
PROPOSAL 4. AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The Board of Directors has unanimously approved, subject to stockholder approval, an amendment to Paragraph A of Article V of our certificate of incorporation to increase the total number of authorized shares of Common Stock from 50,000,000 shares to 100,000,000 shares; the authorized shares of our preferred stock remain unchanged. Subject to stockholder approval, Paragraph A of Article V of our certificate of incorporation will be amended and restated in its entirety as follows:
“The aggregate number of shares that the Corporation shall have authority to issue is 108,000,000 divided into (i) 100,000,000 shares of which shall be Common Stock, par value $0.001 per share and (ii) 8,000,000 of which shall be Preferred Stock, par value $0.001 per share.”
Purpose and Effects of the Amendment
As of April 24, 2017, there were 35,271,759 shares of Common Stock outstanding and no outstanding warrants or options to purchase additional shares of our Common Stock. As set forth in Proposal 5 of this Proxy Statement, the Board has approved a resolution, subject to stockholder approval, to further amend and restate the Amended and Restated Perficient, Inc. 2012 Long Term Incentive Plan to increase the number of shares of Common Stock available for issuance thereunder by two million shares to seven million total shares. Additionally 344,687 shares are reserved for issuance under the Perficient, Inc. Employee Stock Purchase Plan. Only 129,418 unallocated shares of Common Stock remain available for future issuance. The Board of Directors believes it is in the best interests of the Company and its stockholders to increase the number of shares of the Company’s authorized Common Stock. No changes are being requested to the Company’s authorized Preferred Stock. As of April 24, 2017, no shares of Preferred Stock were outstanding.
The additional authorized shares of Common Stock will provide us and our Board of Directors with the flexibility to issue Common Stock for a variety of purposes in the future. These purposes could include, among other things, the use of stock to raise additional capital, to purchase assets, to acquire other companies consistent with our disciplined acquisition strategy, to provide equity compensation and incentives to employees and directors, and for other bona fide corporate purposes. Other than shares reserved for issuance under the Amended and Restated 2012 Long Term Incentive Plan and the Employee Stock Purchase Plan and shares issuable upon satisfaction of conditions to earnout agreements entered into in connection with certain of our past acquisitions, we have no written or other plans, proposals, arrangements, agreements or understandings to issue any shares of Common Stock at this time.
The additional shares of Common Stock will be available for issuance without further action by our stockholders unless such action is required by applicable law or by the rules of any applicable stock exchange. Under our certificate of incorporation, the holders of our Common Stock do not have preemptive rights with respect to future issuances of Common Stock. Thus, should our Board of Directors elect to issue additional shares of Common Stock, our existing stockholders will not have any preferential rights to purchase such shares and such issuance could have a dilutive effect on the voting power and percentage ownership of these stockholders. The issuance of additional shares of Common Stock could also have a dilutive effect on our earnings per share.
The increase in the number of shares of Common Stock authorized for issuance could, under certain circumstances, be construed as having an anti-takeover effect. For example, in the event a person seeks to effect a change in the composition of our Board of Directors or contemplates a tender offer or other transaction involving the combination of Perficient with another company, it may be possible for us to impede the attempt by issuing additional shares of Common Stock, thereby diluting the voting power of the other outstanding shares and increasing the potential cost to acquire control of Perficient. By potentially discouraging initiation of any such unsolicited takeover attempt, our certificate of incorporation may limit the opportunity for our stockholders to dispose of their shares at the higher price generally available in takeover attempts or that may be available under a merger proposal. The increase in the number of shares of Common Stock may also have the effect of permitting our current management, including our Board of Directors, to retain its position indefinitely and place it in a better position to resist changes that stockholders may wish to make if they are dissatisfied with the conduct of our business.
Vote Required and Board of Directors’ Recommendation
The affirmative vote of the holders of a majority of the shares of Common Stock outstanding is required for the approval of the amendment to our certificate of incorporation. Broker non-votes and abstentions with respect to this matter have the same effect as a vote “against” the matter.
The Board recommends that the stockholders vote “FOR” the amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock.
PROPOSAL 5. APPROVAL OF THE COMPANY’S SECOND AMENDED AND RESTATED 2012 LONG TERM INCENTIVE PLAN
At the meeting, you will be asked to approve the Second Amended and Restated Perficient, Inc. 2012 Long Term Incentive Plan (the “Plan”).
The Company adopted the 2012 Long Term Incentive Plan at its annual stockholder meeting in 2012 at the recommendation of the Board and amended and restated it, again at the recommendation of the Board, at the annual stockholder meeting in 2014 (such amended and restated plan, the “2012 Plan”). On February 21, 2017, the Board approved a second amendment and restatement of the 2012 Plan and directed that it be submitted to the stockholders for their approval at this Annual Meeting. You are being asked to consider and approve the Plan which provides, among other things, for: (1) an increase in the maximum number of shares of Common Stock available for issuance thereunder by two million shares; (2) a provision that shares of restricted stock settled in cash in lieu of Common Stock will be added back to the plan maximum; (3) a provision that shares of Common Stock repurchased with proceeds obtained in connection with an option exercise shall not be added to the plan maximum; (4) a limited number of exceptions from the otherwise required minimum three-year vesting schedule for restricted stock and option awards; (5) a prohibition on the issuance of dividends on awards until the award is issued or is otherwise unrestricted; (6) a provision prohibiting the participant from surrendering an equity award for cash unless the award agreement specifically contemplates the same; and (7) permission for the Company to withhold an amount greater than the minimum amount of tax required to be withheld to satisfy federal, state, and local taxes, provided that such greater amount is permissible under applicable tax, legal, accounting and other guidance.
The purposes of the Plan are to encourage employees, officers and directors to acquire a proprietary and vested interest in the growth and performance of the Company, to generate an increased incentive to contribute to the Company’s future success and prosperity, thus enhancing the value of the Company for the benefit of its stockholders, and to enhance the ability of the Company to attract and retain individuals of exceptional management talent. The Plan allows eligible award recipients to receive stock options, stock appreciation rights, restricted stock awards, performance awards, and stock unit awards. Upon approval of the Plan by the stockholders, an additional two million shares will be available for issuance under the Plan. As of April 24, 2017, there were 1,242,295 shares of Common Stock available for issuance under the Plan.
A copy of the Plan is attached to this Proxy Statement as Appendix A, and the following description is qualified in its entirety by reference to the complete text of the Plan.
Summary of the Material Terms of the Plan
Key Plan Features. As amended and restated, the Plan generally provides for:
• | Ten-year maximum term for stock options and stock appreciation rights; |
• | Options and restricted stock generally subject to a three-year minimum vesting period and no portion of the grant may vest prior to the first anniversary of the grant date, no more than one-third of the grant may vest prior to the second anniversary of the grant date and no more than two-thirds of the grant may vest prior to the third anniversary of the grant date; |
• | Up to 100,000 shares of restricted stock and certain awards to directors may be exempt from the required vesting schedule; |
• | Up to 100,000 shares of each of non-qualified stock options and incentive stock options may be exempt from the required vesting schedule; |
• | No granting of awards below fair market value on the date of grant; |
• | No re-pricing of stock options or stock appreciation rights without prior stockholder approval; |
• | No reload or “evergreen” share replenishment features; |
• | No dividends on equity awards until the actual shares are issued and any applicable restrictions lifted; |
• | Independent plan administration by our independent Compensation Committee; |
• | The issuance of up to seven million shares of Common Stock, including the five million shares of Common Stock previously authorized under the 2012 Plan. |
As compared to the 2012 Plan approved at the annual stockholder meeting in 2014, the Plan includes changes to:
• | The total number of shares of Common Stock available for issuance as awards under the Plan will be increased by two million, such that a total of seven million shares will be authorized for issuance thereunder; |
• | Provide that shares of restricted stock to be settled in cash in lieu of shares of Common Stock will be added back to the plan maximum; |
• | A limited number of exceptions from the otherwise required minimum three-year vesting schedule for restricted stock and option awards; |
• | Prohibit the addition of shares of common stock repurchased with proceeds obtained in connection with an option exercise to the plan maximum; |
• | Prohibit the issuance of dividends on awards until the award is issued or is otherwise unrestricted; |
• | Prohibit the participant from surrendering an equity award for cash unless the award agreement specifically contemplates the same; and |
• | Allow the Company to withhold an amount greater than the minimum amount of tax required to be withheld to satisfy federal, state, and local taxes, provided that such greater amount is permissible under applicable tax, legal, accounting and other guidance. |
Why We Believe You Should Vote For this Proposal
The Board believes that the Plan is essential for the ongoing success of the Company and its ability to recruit, retain and reward directors of the Company, officers and key employees. The Board believes that if the Plan is not approved, the Company’s ability to align the interests of its officers and key employees with its stockholders through equity-based compensation would be compromised, in particular, disrupting the Company’s compensation program and impairing the Company’s ability to recruit and retain officers and key employees. The Board recommends approval of the Plan for the following reasons:
The Need for Additional Shares. We have used a substantial portion of the previously authorized share pool under the 2012 Plan for existing awards. As of April 24, 2017, only 1,242,295 shares of our Common Stock remained available for future award grants under the 2012 Plan, a number that the Compensation Committee, and the Board believes to be insufficient to meet our anticipated needs. As a result, at the recommendation of the Compensation Committee, on February 21, 2017, the Board approved, subject to stockholder approval, the amendment and restatement of the 2012 Plan to increase the number of shares available for issuance by two million shares for a total of seven million shares available for issuance under the Plan. If the Plan is approved by our stockholders, the Compensation Committee believes the total shares available should be sufficient to cover grants over the next three years.
The Compensation Committee and the Board believe that the increased number of shares to be made available for issuance under the Plan represents a reasonable amount of potential additional equity dilution and allows the Company to continue awarding equity incentives, which have been an important component of our compensation program. Since April 2014, the Company’s employee population has increased 44% from 1,925 to 2,763 as a result of both internal growth and growth by acquisitions of BioPharm Systems, Inc. in April 2014, Trifecta Technologies, Inc. and Trifecta Technologies Canada, Limited in May 2014, Zeon Solutions Incorporated in January 2015, Market Street Solutions, Inc. in September 2015, the Pup Group, Inc. d/b/a Enlighten in December 2015, Bluetube, LLC in October 2016 and RAS Associates, LLC in January 2017. As the Company’s employee population increased, so has the Company’s need for additional availability under the Plan to grant long-term equity awards. We will continue to evaluate our compensation strategy and programs to ensure they continue to provide a competitive opportunity and align the interests of our stockholders with that of our employees. The Plan is designed with maximum flexibility to grant a variety of equity-based vehicles described below, while maintaining limits that attempt to ensure stockholder dilution levels continue to remain at or below those of comparable companies.
Historical Company Equity Usage. We believe that our historical equity usage has been in line with industry norms on an aggregate basis. We set targets for equity compensation based on industry standards and other data provided to the Compensation Committee by management and independent compensation consultants. Based on this information, we believe that our equity usage is generally consistent with the broader market as well as with the peer group of companies we use to benchmark executive compensation. Our equity grant levels are consistent with our overall compensation philosophy of pay-for-performance and with respect to the executives officers below average cash-based compensation. We believe our compensation philosophy aligns our management’s compensation with stockholder interest.
The Need to Provide Competitive Compensation. Similar to other companies in our industry, we believe equity compensation is integral in providing a competitive total compensation package necessary to recruit, retain and reward officers and key employees. Equity awards are commonly used by companies our size and the ability to provide competitive grants is essential to competing in our labor markets. Therefore, we believe it is imperative to provide long-term incentive awards as a component of our compensation program. We will seek an appropriate balance between meeting employee hiring, retention and compensation goals and avoiding excessive stockholder dilution.
Cash Compensation Expense Increase. If our ability to provide equity compensation is impaired, the Company’s cash compensation costs could increase substantially to offset equity compensation typically provided in the marketplace. It is important that we use our cash resources to operate and expand our business, rather than diverting cash to pay compensation.
Our Continuing Emphasis on Providing Performance-Based Compensation. We believe it is essential to provide a long-term link between compensation and stockholder value creation and rely on equity compensation as one of the most efficient and effective means to create such a relationship. The long-term equity incentive program is designed to align the interests of our officers and other key employees with those of our stockholders, motivate the executive officers to achieve key financial goals and reward superior performance over a multi-year period. We have historically utilized restricted stock awards instead of stock options to create this link between pay and performance. We believe that by offering this type of incentive compensation, we have recruited high quality employees and will incent those employees to remain with the Company. Share-based payments allow our officers and other key employees to obtain a proprietary interest in the Company and therefore participate in the profit and success of the Company in meeting its objectives and goals. If stockholders do not approve the Plan, our ability to create long-term incentives for our officers and key employees will be substantially diminished.
Consequences of Failing to Ratify the Incentive Plan
In the event our stockholders fail to approve the proposal to adopt the Plan, we will not be able to make the proposed additional two million shares available for issuance under the 2012 Plan, but the 2012 Plan will otherwise remain in effect. Without the ability to grant equity awards contemplated by the Company, the Company believes it will be unable to offer competitive compensation terms to attract and retain key personnel and further align our employees’ interests with that of the stockholders. In fact, if the Plan is not approved by our stockholders, we will only have 1,242,295 shares available for issuance under the 2012 Plan. In such event, we will be required to re-evaluate our compensation structure to ensure that it remains competitive. This evaluation may result in the modification of the amount and types of compensation that are payable to our employees.
The stockholders are urged to read this entire proposal and the Plan document attached in full as Appendix A. The Company believes that the Plan is necessary to recruit and retain directors, officers and key employees critical to the Company’s success, and thus is in the best interest of the Company’s stockholders.
Eligibility; Plan Benefits
Members of the Board and our officers and employees are eligible to receive awards under the Plan as are other persons providing significant services to the Company and its subsidiaries, subject in each case to the discretion of the Compensation Committee. As of April 24, 2017, approximately 280 individuals were eligible to receive awards under the Plan, including approximately four non-management members of the Board, three executive officers and 273 employees.
Since all awards will be made at the discretion of the Compensation Committee, it is not possible to determine the amount, timing or recipients of future awards. Therefore, it is not presently possible to determine the benefits or amounts that will be received by particular eligible persons or groups pursuant to the Plan in the future.
Administration of the Plan
The Plan will be administered by the Compensation Committee, or another committee of the Board composed solely of two or more independent directors. The Compensation Committee has discretionary authority with respect to the granting of awards to eligible persons and the administration of the Plan, subject to its terms.
Types of Awards
Non-Qualified Stock Options (“NQSOs”). NQSOs are options to purchase shares of Common Stock that are not intended to qualify as “incentive stock options” at purchase prices established by the Committee on the date the options are granted; the purchase price shall not be less than 100% of the fair market value of the shares on the date of the grant. No NQSO may be exercisable later than ten years after the date it is granted. NQSOs shall become exercisable over a period of not less than three years from the grant date and no portion of the NQSO shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, however, that the Plan allows the Compensation Committee to establish a vesting schedule other than the immediately foregoing schedule for up to 100,000 shares of NQSOs in the aggregate.
Incentive Stock Options (“ISOs”). ISOs are options to purchase shares of Common Stock at no less than 100% of the fair market value of the shares on the date of the grant, which qualify for favorable tax treatment as described below. The aggregate fair market value of the stock with respect to which ISOs are exercisable for the first time by a recipient in any calendar year shall not exceed $100,000. No ISO may be exercisable later than ten years after the date it is granted. ISOs granted under the Plan shall become exercisable over a period of not less than three years from the grant date and no portion of the ISO shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, however, that the Plan allows the Compensation Committee to establish a vesting schedule other than the immediately foregoing schedule for up to 100,000 shares of ISOs in the aggregate.
Stock Appreciation Rights (“SARs”). A SAR is the right to receive all or a portion of the difference between the fair market value of a share of Common Stock and the exercise price of the SAR. The Compensation Committee may grant an award in the form of an SAR which may, but need not, relate to a specific stock option granted. The exercise price of an SAR shall not be less than the fair market value of the Company’s Common Stock on the date of grant. The term of the SAR will be determined by the Compensation Committee at its sole discretion, but it cannot exceed ten years. A SAR may be granted in connection with a stock option or may be granted independently. SARs shall become exercisable over a period of not less than three years from the grant date in equal increments of the first and subsequent anniversaries of the grant date.
Restricted Stock Awards. The Compensation Committee may grant restricted stock awards for no cash consideration or for cash consideration determined by it in its discretion. Unless the Compensation Committee otherwise provides in the award, a holder of restricted stock will be entitled to vote the stock during the period of restriction. The period of restriction shall be established by the Compensation Committee provided that, subject to certain exceptions for grants made as part of an annual or initial grant to non-employee members of the Board and small restricted grants made in connection with sales award programs, restricted stock shall vest over a period of not less than three years from the grant date and no portion of the grant shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, further, that the Plan allows the Compensation Committee to establish a vesting schedule other than the immediately foregoing schedule for up to 100,000 shares of restricted stock in the aggregate.
Performance Awards. The Committee may issue performance awards in the form of Common Stock or cash payments or some combination thereof to be issued in the event that certain performance goals established by the Committee are achieved over a period of time designated by the committee of not less than one year or more than five years.
Stock Unit. A stock unit is the right to receive a share of Common Stock at such time and subject to such terms and conditions established by the Committee.
No dividend will be paid on any equity award until the shares are actually issued and any applicable restrictions are lifted. No dividend equivalent units may be granted under the Plan either independently or in connection with another award.
Stock Awards under the Plan
The maximum aggregate number of shares of our Common Stock that may be issued under the Plan (subject to any adjustment due to recapitalization or reorganization permitted under the Plan) will not exceed seven million shares of our Common Stock. Stock underlying outstanding options, stock appreciation rights, restricted stock units or performance awards will reduce the number of shares of Common Stock issuable under the Plan while such options, stock appreciation rights, restricted stock units or performance awards are outstanding. Shares underlying expired, cancelled or forfeited options, stock appreciation rights, restricted stock units or performance awards shall, once expired, cancelled, or forfeited, become available for future issuance under the Plan. Any shares which are used as full or partial payment for the purchase price of shares or to satisfy the tax withholding obligation with respect to any award shall not be added back to the Plan. The gross number of shares of Common Stock covered by a stock appreciation right will be counted against the plan maximum, regardless of the number of shares delivered upon exercise. Restricted stock issued pursuant to the Plan will reduce the shares available under the Plan while outstanding even while subject to restriction. Shares of restricted stock which are forfeited or returned to the Company shall also be added back to the Plan for future issuance. Shares of Common Stock repurchased with proceeds obtained in connection with an option exercise may not be added back to the Plan. The shares of our Common Stock issued pursuant to the Plan may be authorized but unissued shares, shares held by us in treasury or shares which have been reacquired by us including shares which have been bought in the open market or pursuant to private transactions.
Other Provisions
Tax Withholding. An award recipient’s tax withholding with respect to an award will be satisfied by withholding from any payment related to the award or, with respect to awards settled in our Common Stock, at the discretion of the Compensation Committee and subject to conditions that the Compensation Committee may impose, by the withholding of shares of stock based on the fair market value of the shares. The Plan allows the Company to withhold an amount greater than the minimum amount of tax required to be withheld to satisfy federal, state, and local taxes, provided that such greater amount is permissible under applicable tax, legal, accounting and other guidance.
Amendment and Termination. The Board may amend or terminate the Plan or the Compensation Committee’s authority to grant awards under the Plan without the consent of stockholders or award recipients except, that no amendment to the Plan may be made without stockholder approval if it would either increase the number of shares that may be issued under the Plan or change the eligibility requirements. The Board may condition any amendment on the approval of our stockholders if such approval is necessary or advisable under tax, securities or other applicable laws, policies or regulations. No amendment or termination of the Plan may adversely affect any award previously granted under the Plan without written consent of the affected award recipient. Except as prohibited by applicable law (including, without limitation, Section 162(m) of the Code), the Compensation Committee may amend or terminate any outstanding award, or waive any conditions or rights under such award, but any such amendment or termination may require the consent of the award recipient.
Federal Tax Consequences
The following discussion is for general information only and is intended to briefly summarize the U.S. federal tax consequences to award recipients arising from participation in the Plan. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of an award granted under the Plan may vary depending on the award recipient’s particular situation and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state or local tax consequences.
Non-qualified Stock Options. At the time an NQSO is granted, no income will be recognized by the award recipient. When the NQSO is exercised, the award recipient will recognize ordinary income in an amount equal to the difference between the option price paid for the Common Stock and the fair market value of the stock on the date of exercise. When the Common Stock acquired through exercise of an NQSO is sold, the appreciation (or depreciation) in the value of the stock after the date of exercise will be treated as a short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Incentive Stock Options. At the time an ISO is granted, no income will be recognized by the award recipient. In general, no income is recognized upon the exercise of an ISO. If the award recipient exercises an ISO and holds the stock acquired from that exercise for at least one year after the exercise date, and two years after the option grant date, then the award recipient will recognize a long-term capital gain upon the sale of the Common Stock for the amount realized in excess of the option price (or a long-term capital loss if the amount realized is less than the option price). If the award recipient sells the shares acquired through exercise of an ISO within two years of the option grant date or within one year after the transfer of the shares to the award recipient, ordinary income will be recognized in the year of disposition in an amount equal to the excess of the fair market value of the stock at the time of exercise over the option price.
Stock Appreciation Rights. No income will be recognized by the recipient of an SAR grant. When the SAR is exercised, the award recipient will include an amount equal to the cash received and fair market value of unrestricted stock or property received on the exercise as ordinary income.
Restricted Stock Awards. Generally, restricted stock awards are not subject to tax until the shares are no longer subject to forfeiture or other restrictions, at which time the award recipient must recognize ordinary income for the fair market value of the shares. If an award recipient elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares, the shares will be taxable to the award recipient upon receipt of the award as ordinary income for the fair market value of the shares. Short-term or long-term capital gain (or loss) will be recognized upon sale of the shares depending on how long the shares have been held and the amount of appreciation (or depreciation).
Subject to the discussion immediately below, we (or our subsidiaries) will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the ordinary compensation income recognized by an award recipient under the foregoing rules.
Tax Code Limitations on Deductibility. For the amounts described above to be deductible by us (or by our subsidiaries), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
Our ability (and the ability of our subsidiaries) to obtain a deduction for future payments under the Plan could also be limited by the golden parachute payment rules of Section 280G of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change of control of an employer-corporation.
Finally, our ability (and the ability of our subsidiaries) to obtain a deduction for amounts paid under the Plan could be limited by Section 162(m) of the Code, which limits the deductibility, for federal income tax purposes, of compensation paid to a covered employee to $1,000,000 during any taxable year. Although the Plan has been drafted to satisfy the requirements for the performance-based compensation exception to this $1,000,000 deduction limit with respect to performance awards, the Compensation Committee retains the flexibility to approve compensation in certain cases that will not meet the requirements in order to ensure competitive levels of total compensation for its executive officers while creating and improving stockholder value. In these situations, the Compensation Committee may approve compensation that is non-deductible under IRC Section 162(m). Additionally, the rules and regulations promulgated under IRC Section 162(m) are complicated, and may change from time to time, sometimes with retroactive effect. As such, there can be no guarantee that any compensation intended to meet the requirements of IRC Section 162(m) will do so.
Application of Section 409A of the Code. Section 409A of the Code imposes an additional 20% tax and interest on an individual receiving non-qualified deferred compensation under a plan that fails to satisfy certain requirements. For purposes of Section 409A of the Code, “non-qualified deferred compensation” includes certain equity-based incentive programs, including performance award programs. Generally speaking, Section 409A of the Code does not apply to incentive awards that are paid at the time the award vests. Likewise, Section 409A of the Code typically does not apply to restricted stock. Section 409A of the Code does, however, apply to incentive awards the payment of which is delayed beyond the calendar year in which the award vests.
The Company intends that awards made pursuant to the Plan will be designed to comply with the requirements of Section 409A of the Code to the extent such awards are not exempt from coverage. However, if an award fails to comply with Section 409A of the Code in operation, a holder could be subject to the additional taxes and interest.
The above summary relates to U.S. federal income tax consequences only and applies to U.S. citizens and foreign persons who are U.S. residents for U.S. federal income tax purposes. The U.S. federal income tax consequences associated with the issuance of shares of our Common Stock to nonresident aliens depends upon a number of factors, including whether such issuance is considered to be U.S. source income and whether the provisions of any treaty are applicable. The acquisition, ownership or disposition of shares of our Common Stock may also have tax consequences under various state, local and foreign laws.
Vote Required and Board of Directors’ Recommendation
The affirmative vote of the holders of a majority of the shares present or represented by proxy at the meeting and entitled to vote on the matter will be required to approve the Plan. Abstentions with respect to this matter have the same effect as a vote “against” the matter.
The Board recommends stockholders vote “FOR” the proposal to adopt and approve the Second Amended and Restated Perficient, Inc. 2012 Long Term Incentive Plan.
PROPOSAL 6. APPROVAL OF THE COMPANY’S PLAN FOR TAX DEDUCTIBLE EXECUTIVE INCENTIVE COMPENSATION
At the meeting, you will be asked to approve the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation (the “162(m) Plan”). Stockholder approval of the 162(m) Plan will permit Perficient to take a tax deduction for the full amount of annual incentive compensation paid to employees who are “covered employees” under IRC Section 162(m). The 162(m) Plan replaces the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation approved by stockholders in 2012.
Approval of the 162(m) Plan is only to allow the Company to take advantage of tax deductions and will not result in a change in the Company’s practices with respect to determining the amount of incentive compensation paid to executives.
IRC Section 162(m) generally does not allow publicly held companies to take tax deductions of more than $1,000,000 in a year for compensation paid to officers named in the Summary Compensation Table (“covered employees”) unless that compensation satisfies the conditions in Section 162(m) for “performance based” compensation. One of the conditions is stockholder approval of the material terms of the performance goals on which compensation is based. Approval of the 162(m) Plan at the meeting will satisfy this condition. Approval of the 162(m) Plan does not guarantee that all payments made under the plan will be deductible by the Company.
A copy of the 162(m) Plan, as approved by the Company’s Board of Directors, is attached to this Proxy Statement as Appendix B, and the following description is qualified in its entirety by reference to the complete 162(m) Plan.
Administration
The 162(m) Plan will be administered by either the Compensation Committee or another committee appointed by the Board. The committee administering the 162(m) Plan (the “Committee”) will, at all times, consist of “outside directors” within the meaning of Section 162(m).
Eligibility
The Committee will designate the participants in the 162(m) Plan for each fiscal year or “Performance Period.” Participants will be employees who are or who may be covered employees for the Performance Period. For the 2017 Performance Period, the Committee has designated three executives to participate in the 162(m) Plan.
Performance Target
The Committee will establish a performance target which must be attained in a Performance Period before the Target Award is to be paid to a participant. The performance target will be based on one or more of the following criteria: (a) earnings per share or adjusted earnings per share; (b) pre-tax or after-tax return on equity; (c) pre-tax or after-tax net income; (d) business unit or departmental pre-tax or after-tax income; (e) book value per share; (f) market price per share; (g) relative performance to peer group companies; (h) expense management; (i) total return to stockholders, and (j) sales. The performance target shall be established in writing by the Committee no later than 90 days after the beginning of the first Performance Period under the 162(m) Plan.
The Committee will establish a target award for each participant for a Performance Period in writing no later than 90 days after the beginning of each Performance Period. If the performance target for a Performance Period has been attained and is certified by the Committee in writing, the target award shall be paid to each participant for that period, less the amount of any discretionary reduction made by the Committee based on criteria that it shall determine.
Because the amounts payable are subject to the satisfaction of the performance target and subject to negative adjustments by the Committee in its discretion, it cannot be determined at this time what amounts, if any, will be received by participants under the 162(m) Plan with respect to the 2017 Performance Period. The 2012 162(m) Plan applied to the 2016 Performance Period. No bonuses were paid to the named executive officers for 2016 as the Company did not achieve the required performance criteria applicable under the 2012 162(m) Plan.
Amendment and Termination
The Committee, in its sole and absolute discretion, may modify or amend any or all of the provisions of the 162(m) Plan at any time and from time to time, without notice, and may suspend or terminate it entirely.
Vote Required and Board of Directors’ Recommendation
The affirmative vote of a majority of the shares of the Company’s Common Stock cast in person or by proxy, excluding abstentions, will be required to approve the 162(m) Plan. If the stockholders do not approve the 162(m) Plan, it will not become effective. The Board may pay bonuses for 2017 pursuant to another plan, but any such bonuses paid would be subject to the $1,000,000 limit on deductibility.
The Board recommends that the stockholders vote “FOR” the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation.
PROPOSAL 7. RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed the firm of KPMG LLP (“KPMG”) as the Company’s independent registered public accounting firm for 2017.2019. KPMG has served as the Company’s independent registered public accounting firm since 2007. Although action by the stockholders in this matter is not required, the Audit Committee believes that in light of the critical role played by the independent registered public accounting firm in providing assurance regarding the integrity of the Company’s internal controls over financial reporting, it is a matter of good practice. The affirmative vote of a majority of the shares of our Common Stock cast in person or by proxy, excluding abstentions, on the proposal will be considered approved by the stockholders.
In the event our stockholders fail to approve the proposal to appoint KPMG as the Company’s independent registered public accounting firm, the Audit Committee will reconsider whether or not to retain the firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of the Company and its stockholders.
The Board recommends a vote “FOR” the proposal to ratify the independent registered public accounting firm.
Principal Accounting Firm Fees and Services
The table below sets forth an estimate of the fees that we expect to be billed for professional audit services rendered by KPMG for fiscal year 2016,years 2018 and 2017, as well as the fees expected to be billed with respect to audit-related, tax and all other services rendered during that period. In addition, the table sets forth the fees billed for audit, audit-related, tax and all other services during or in connection with fiscal year 2015.those periods.
| |
| Year Ended December 31, |
| | 2016 | | | | 2015 |
Audit fees | $ | 825,000 | | | $ | 739,000 |
Audit-related fees | | 33,000 | | | | 9,000 |
Tax fees | | 585,000 | | | | 530,000 |
All other fees | | 51,000 | | | | - |
Total fees | $ | 1,494,000 | | | $ | 1,278,000 |
|
| | | | | | | | |
| | Year Ended December 31, |
| | 2018 | | 2017 |
Audit fees | | $ | 1,033,000 |
| | $ | 952,000 |
|
Audit-related fees | | — |
| | — |
|
Tax fees | | 28,000 |
| | 38,000 |
|
All other fees | | — |
| | — |
|
Total fees | | $ | 1,061,000 |
| | $ | 990,000 |
|
Audit Fees. Audit fees represent fees for professional services provided in connection with the audits of the Company’s annual consolidated financial statements and the operating effectiveness of internal control over financial reporting included in the Company’s Annual Report on Form 10-K; the quarterly reviews of condensed consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q; statutory audits of subsidiaries; other statutory or regulatory filings; and services that are normally provided in connection with such filings.
Audit-Related Fees. Assurance and related services that are reasonably related to the performance of the audit or review of financial statements including attest or audit services that are not required.
Tax Fees. Tax fees represent all fees provided for professional services rendered by KPMG for tax compliance, tax advice and tax planning.planning. The Company did not pay any other tax-related fees to KPMG for the years ended December 31, 20162018 or December 31, 2015.2017.
All Other Fees. All other fees represents fees for services at a foreign subsidiary related to an operational assessment of information technology security and an operational assessment of processes against leading industry and regulatory requirements.
Services. The audit report of KPMG on the Company’s consolidated financial statements as of December 31, 20162018 and 20152017 and for each of the three years ended December 31, 20162018 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. KPMG’s audit report on the effectiveness of internal control over financial reporting as of December 31, 20162018 indicated that in KPMG’s opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016.2018.
We expect that one or more representatives of KPMG will be present at the Meeting. Each of these representatives will have the opportunity to make a statement, if he or she desires, and is expected to be available to respond to any questions.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has adopted policies and procedures relating to the pre-approval of all audit services and non-audit services that are permitted by applicable laws and regulations, and that are to be performed by the Company’s independent auditors. As part of those policies and procedures, the Audit Committee has pre-approved specific audit and audit-relatednon-audit services that may be provided by the Company’s independent auditors subject to certain maximum dollar amounts. No further approval by the Audit Committee is required in advance of services falling within the specific types of services and cost-levels included in the pre-approved services. Any proposed services not specifically pre-approved or exceeding pre-approved cost levels require specific pre-approval by the Audit Committee. No services of any kind were approved pursuant to a waiver permitted pursuant to 17 CFR 210.2-01(c)(7)(i)(C).
The Audit Committee reports to and acts on behalf of the Board by providing oversight of the financial management, legal compliance programs, independent auditors, and accounting policies and procedures of the Company. The Company’s management is responsible for preparing the Company’s financial statements and systems of internal control and the independent auditors are responsible for auditing those financial statements and expressing its opinion as to whether the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows of the Company in conformity with U.S. GAAP. The Audit Committee is responsible for overseeing the conduct of these activities by the Company’s management and the independent auditors.
In this context, the Audit Committee has met and held discussions with management and the independent auditors. Management represented to the Audit Committee that the Company’s consolidated financial statements, as of and for the fiscal year ended December 31, 2016,2018, were prepared in accordance with U.S. GAAP, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and the independent auditors.
The Audit Committee has discussed with the independent auditors matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 1301 “Communications with Audit Committees.” The Audit Committee also received the written disclosures from the independent auditors required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and discussed with the independent auditors their independence and related matters.
The Audit Committee also has discussed with the Company’s independent auditors, with and without management present, their evaluation of the Company’s internal controls over financial reporting and the overall quality of the Company’s financial reporting.
In further reliance on the reviews and discussions with management and the independent auditors referred to above, the Audit Committee recommended to the Board the inclusion of the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2018, for filing with the SEC.
The Audit Committee
David S. Lundeen, Chairman
Ralph C. Derrickson
James R. Kackley
33
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Directors and Executive Officers
The following table sets forth the beneficial ownership of the Common Stock as of April 24, 20171, 2019 for each director, each of the Nominee Directors, and each executive officer named in the Summary Compensation Table herein, and by all directors and executive officers of the Company as a group.
| | | | | | |
Name and Company Position | | Shares Beneficially Owned (1) | | | Percent of Class (2) | |
Jeffrey S. Davis, President, CEO and Chairman | | | 620,589 | | | | 1.8 | % |
Kathryn J. Henely, COO | | | 251,256 | | | | * | |
Paul E. Martin, CFO | | | 257,187 | | | | * | |
Ralph C. Derrickson, Director | | | 40,647 | | | | * | |
John S. Hamlin, Director | | | 37,807 | | | | * | |
James R. Kackley, Director | | | 38,752 | | | | * | |
David S. Lundeen, Director | | | 55,534 | | | | * | |
Brian L. Matthews, Director | | | 5,855 | | | | * | |
Directors and executive officers as a group (8 persons) | | | 1,307,627 | | | | 3.7 | % |
|
| | | | | | |
Name and Company Position | | Shares Beneficially Owned (1) | | Percent of Class (2) |
Jeffrey S. Davis, President, CEO and Chairman | | 533,289 |
| | 1.6 | % |
Thomas J. Hogan, COO | | 58,674 |
| | * |
|
Kathy J. Henely, Former COO (3) | | 205,167 |
| | * |
|
Paul E. Martin, CFO | | 197,674 |
| | * |
|
Ralph C. Derrickson, Director | | 37,251 |
| | * |
|
James R. Kackley, Director | | 38,242 |
| | * |
|
David S. Lundeen, Director | | 58,857 |
| | * |
|
Brian L. Matthews, Director | | 8,536 |
| | * |
|
Gary M. Wimberly, Director | | 18,925 |
| | * |
|
Directors and executive officers as a group (8 active persons) | | 951,448 |
| | 2.9 | % |
(1) | Represents the Company’s only class of voting Common Stock. |
(2) | The percentage of Common Stock owned is based on total shares outstanding of 35,271,759 as of April 24, 2017.
|
(3) | Mr. Hamlin will not stand for re-election to the Board. | |
* | Represents less than 1% of the Company’s Common Stock outstanding as of April 24, 2017. | |
(1) Represents the Company’s only class of voting Common Stock.
(2) The percentage of Common Stock owned is based on total shares outstanding of 32,977,070 as of April 1, 2019.
(3) Ms. Henely’s information is based on the last Form 4 filed by the Company on her behalf on May 9, 2018.
* Represents less than 1% of the Company’s Common Stock outstanding as of April 1, 2019.
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of April 24, 2017,1, 2019, information for each entity that, to the knowledge of the Company, beneficially owned more than 5% of the Common Stock, based on statements filed with the SEC pursuant to Section 13(g) or 13(d) of the Exchange Act:
| | Amount and Nature of Shares | | | |
Name and Address of Beneficial Owner | | Beneficially Owned | | | Percent of Class (1) |
FMR LLC | | | 4,870,998 | (2) | | | 13.8% |
245 Summer Street |
Boston, MA 02210 |
BlackRock Inc. | | | 4,170,067 | (3) | | | 11.8% |
55 East 52nd Street |
New York, NY 10022 |
| | | | | Amount and Nature of Shares |
Name and Address of Beneficial Owner | | | Beneficially Owned | | Percent of Class (1) |
BlackRock Inc. | | | 4,940,755 |
| (2) | | 15.0 | % |
55 East 52nd Street | | |
New York, NY 10022 | | |
Dimensional Fund Advisors LP | | 1,811,239 | (4) | | 5.1% | | 2,304,894 |
| (3) | | 7.0 | % |
6300 Bee Cave Rd., Building One | |
Austin, TX 78746 | |
The Vanguard Group | | | 2,108,503 |
| (4) | | 6.4 | % |
100 Vanguard Blvd. | | |
Malvern, PA 19355 | | |
(1) | |
(1) | The percentage of Common Stock owned is based on total shares outstanding of 35,271,75932,977,070 as of April 24, 2017.1, 2019. |
| |
(2) | According to information provided to the Company in an amendment to Schedule 13G filed with the SEC on January 31, 2019. The Schedule 13G states that the filer has sole voting power for 4,831,184 shares and sole power to dispose or to direct the disposition of all shares. |
| |
(3) | According to information provided to the Company in an amendment to Schedule 13G filed with the SEC on February 14, 2017.8, 2019. The Schedule 13G states that the filer has sole voting power for 1,312,0582,181,587 shares and sole power to dispose or to direct the disposition of all shares. Dimensional Fund Advisors LP disclaims beneficial ownership of these securities which are owned by various investment companies and accounts for which it serves as investment manager or sub-adviser. |
(3) | According to information provided to the Company in an amendment to Schedule 13G filed with the SEC on January 17, 2017. The Schedule 13G states that the filer has sole voting power for 4,093,702 shares and sole power to dispose or to direct the disposition of all shares. |
(4) | According to information provided to the Company in a Schedule 13G filed with the SEC on February 9, 2017.11, 2019. The Schedule 13G states that the filer has sole voting power for 1,691,16347,286 shares, andshared voting power for 7,953 shares, sole power to dispose or to direct the disposition of all shares. |
| |
34
power to dispose or to direct the disposition of 2,057,211 shares and shared power to dispose or to direct the disposition of 51,292 shares.
Equity Compensation Plan Information
The following table provides information with respect to the equity securities that are authorized for issuance under the Company’s compensation plans as of December 31, 2016:2018:
|
| | | | | | | | | | |
Plan Category | | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights (#) | | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($) | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation (#)(1) | |
Equity Compensation Plans Approved by Security Holders | | — | - |
| | $ | -— |
| | 2,940,214 | | 1,926,116 |
|
Equity Compensation Plans Not Approved by Security Holders | | — | -
| | — |
| | -— | | | | - |
|
Total | | — | - |
| | $ | -— |
| | 2,940,214 |
|
(1) | Represents authorized shares issuable pursuant to the Amended and Restated Perficient, Inc. 2012 Long Term Incentive Plan. Also includes 347,530332,376 shares reserved for issuance under the Perficient, Inc. Employee Stock Purchase Plan. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires executive officers, directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the SEC and Nasdaq. BasedTo the best of the Company’s knowledge, based solely on a review of the copies of reportsForms 3, 4 and 5, and amendments thereto, and, if applicable, written representations furnished to the Company and written representations from the Company’s executive officers, directors, and persons who beneficially own more than 10% of the Company’s equity securities,concerning whether a Form 5 was required to be filed for 2018, the Company believes that, during the preceding year, all filing requirements applicable to the Company’sits directors, executive officers directors, and 10% beneficial owners undercomplied will all applicable Section 16(a) were satisfied.filing requirements in a timely manner with respect to fiscal year 2018, except that: (i) a Form 5 for two gifts related to Mr. Derrickson was not reported on a timely basis and (ii) a Form 5 for one gift related to Mr. Kackley was not reported on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In order to identify and address concerns regarding related party transactions and their disclosures, the Company uses Directors and Officers Questionnaires and its conduct and ethics policies. The Company also considers the independence of its directors. The discussion of the independence of the directors is contained herein under the caption “Composition and Meetings of the Board of Directors and Committees” beginning on page 5.
Directors and Officers Questionnaires are distributed to directors and executive officers at the beginning of each fiscal year to identify any potential related-party transactions. Within the questionnaire, directors and executive officers are asked to describe any transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships, occurring since January 1, 2016,2018, in which the Company was or is to be a participant and the amount involved exceeds $120,000, and in which any of the following had or will have a direct or indirect interest: (i) the individual; (ii) any director or executive officer of the Company; (iii) a nominee for director; (iv) an immediate family member of a director or executive officer of the Company; (v) an immediate family member of a nominee for director; (vi) a security holder of 5% or more of the Common Stock; or (vii) an immediate family member of the security holder. Responses provided within the questionnaire are reviewed by management of the Company to determine any necessary course of action. In 2016,2018, no related party transactions were entered into except that Mr. Matthews is a greater than 5% member and officer of River City Internet Group, L.L.C. d/b/a Hostirian (“Hostirian”), a contractor that in the ordinary course of business hosts certain equipment for the Company for which the Company paid Hostirian approximately $123,000$137,000 in 2016.2018. The Company expects that in 2017,2019, it will continue to use Hostirian’s services and pay Hostirian an amount consistent with, or less than, 20162018 payments. Mr. Matthews does not have a material interest in the transaction other than in his capacity as a member and officer of Hostirian. None of our directors or director nominees are a party to any agreement or arrangement relating to compensation provided by a third party in connection with their candidacy or board service as required to be disclosed pursuant to NASDAQ Rule 5250(b)(3).
It is the policy of the Company that all employees, directors, and agents maintain the highest ethical standards and comply with all applicable legal requirements when conducting Company business. Guidelines regarding conflicts of interest are detailed in the Company’s Corporate Code of Business Conduct and Ethics (the “Code of Conduct”) for employees and in the Financial Code of Ethics for the CEO, CFO, and Other Senior Financial Officials (the “Financial Code of Ethics”), both adopted by the Board. These policies are available on the Company’s website at www.perficient.com. Any amendment to, or waiver of, the Financial Code of Ethics will be disclosed by the Company on its website at www.perficient.com. All Company employees must deal with vendors, customers, and others doing business with the Company in a manner that avoids even the appearance of conflict between personal interests and those of the Company. Potential conflicts of interest may arise from any of the following:
A direct or indirect financial interest in any business or organization that is a Company vendor or competitor, if the employee or director can influence decisions with respect to the Company’s business with respect to such business or organization; and
• | A direct or indirect financial interest in any business or organization that is a Company vendor or competitor, if the employee or director can influence decisions with respect to the Company’s business with respect to such business or organization; and |
• | Serving on the board of directors of, or being employed in any capacity by, a vendor, competitor or customer of the Company. | |
Serving on the board of directors of, or being employed in any capacity by, a vendor, competitor or customer of the Company.
Relationships, including business, financial, personal, and family, may give rise to conflicts of interest or the appearance of a conflict. Employees are encouraged to carefully evaluate their relationships as they relate to Company business to avoid conflict or the appearance of a conflict. To avoid conflicts of interest or the appearance of a conflict:
• | Employees are prohibited from directly or indirectly competing, or performing services for any person or entity in competition with, the Company. | | |
• | Employees are required to comply with the policies set forth in the Code of Conduct regarding the receipt or giving of gifts, favors or entertainment. | | |
• | A full-time employee is required to obtain the approval of his or her supervisor before serving as a trustee, regent, director, or officer of a philanthropic, professional, national, regional, or community organization, or educational institution. | | |
• | Employees may not sell or lease equipment, materials or property to the Company without appropriate corporate authority. | | |
• | Employees are required to purchase Company equipment, materials or property only on terms available to the general public. | | |
Employees are prohibited from directly or indirectly competing, or performing services for any person or entity in competition with, the Company.
Employees are required to comply with the policies set forth in the Code of Conduct regarding the receipt or giving of gifts, favors or entertainment.
A full-time employee is required to obtain the approval of his or her supervisor before serving as a trustee, regent, director, or officer of a philanthropic, professional, national, regional, or community organization, or educational institution.
Employees may not sell or lease equipment, materials or property to the Company without appropriate corporate authority.
Employees are required to purchase Company equipment, materials or property only on terms available to the general public.
Anyemployee or director who becomes aware of a conflict is required to bring it to the attention of a supervisor, management or other appropriate personnel.
Directors are expected and required to uphold the same dedication to corporate ethics as the Company’s employees.
If a conflict of interest arises involving an executive officer or director, the Board must approve a waiver to the Code of Conduct and if a director has the conflict, that director must abstain from the approval. Waivers are made on a case-by-case basis. The Board has not adopted a formal written policy with respect to waiving conflict of interests or approving related party transactions. In making this determination, the Board considered the infrequency in occurrence of these transactions. Any waivers to the Code of Conduct granted to an executive officer or director shall be disclosed by the Company on its website at www.perficient.com.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder of Perficient eligible to vote in an election may make stockholder proposals and nominations for the 20182020 Annual Meeting. In order to be considered for inclusion in the 20182020 Proxy Statement and considered at the 20182020 Annual Meeting, all stockholders proposals, nominations and notifications must: (i) comply with the procedures set forth in Perficient’s bylaws; and (ii) be appropriately received by the Secretary of Perficient on or before December 29, 2017.19, 2019.
Pursuant to the bylaws of Perficient, nominations of persons for election to the Board may be made at a meeting of stockholders by or at the direction of the Board or by any stockholder entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in the bylaws. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to notice in writing to the Secretary of the Company, and must be received by the Secretary of Perficient on or before December 29, 2017.19, 2019. Such stockholder’s notice shall set forth:
(1) the name, age, business address and residence address of such person;
(2) the principal occupation or employment of such person;
(3) the class and number of shares of the Company which are beneficially owned by such person;
(4) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder; and
(5) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required in each case pursuant to Regulation 14A of the Exchange Act (including without limitation such person’s written consent to being named in the Proxy Statement, if any, as a nominee and to serve as a director if elected).
Any nominations received from stockholders must be in full compliance with applicable laws and with the bylaws of Perficient.
OTHER MATTERS
The Board does not intend to bring any matters before the Meeting other than those stated in this Proxy Statement, and is not aware that any other matters will be presented for action at the Meeting. If any other matters come before the Meeting, the persons named in the enclosed form of proxy will vote the proxy with respect thereto in accordance with their best judgment, pursuant to the discretionary authority granted by the proxy. Whether or not you plan to attend the Meeting in person, please promptly complete, sign, date, and return a proxy card or vote your proxy by telephone or the Internet according to the instructions on your proxy card.
APPENDIX A
SECOND AMENDED AND RESTATED
PERFICIENT, INC.
2012 LONG TERM INCENTIVE PLAN
(as amended and restated as of February 21, 2017)
Perficient, Inc. (the “Corporation”) adopted the 2012 Long Term Incentive Plan at its annual stockholder meeting in 2012 and amended and restated the plan in its entirety in 2014, which such amended and restated plan was approved by the Corporation’s stockholders at the annual stockholder meeting of the Corporation in 2014 (as amended and restated, the “2012 Plan”). The Corporation now wishes to further amend and completely restate the 2012 Plan including amendments to increase the number of shares, further clarify and restrict the terms “Plan Maximum” and “repricing”, prohibit the entitlement of dividends on restricted stock during the period of restriction and extend the duration of the 2012 Plan. These plan changes are contingent upon approval of the stockholders of the Corporation at its 2017 Annual Meeting of Stockholders. This second amendment and restatement of the 2012 Plan (the “Plan”) was approved by the Board of Directors of the Corporation on February 21, 2017.
The 2012 Plan is hereby amended to read in its entirety as follows:
1.Purpose. The purpose of the Plan is to encourage officers, employees, directors and other persons providing significant services to the Corporation and its subsidiaries to acquire a proprietary and vested interest in the growth and performance of the Corporation, to generate an increased incentive to contribute to the Corporation’s future success and prosperity, thus enhancing the value of the Corporation for the benefit of stockholders, and to enhance the ability of the Corporation to attract and retain individuals of exceptional managerial talent upon whom, in large measure, the sustained progress, growth and profitability of the Corporation depends.
2.Administration. The Plan shall be administered by a committee of the Board of Directors (the “Administrator”), composed solely of two or more “outside directors” as defined in Section 162(m) of the Internal Revenue Code, as amended, and the regulations thereunder (the “Code”).
The authority to select persons eligible to participate in the Plan, to grant benefits in accordance with the Plan, and to establish the timing, pricing, amount and other terms and conditions of such grants (which need not be uniform with respect to the various participants or with respect to different grants to the same participant), may be exercised by the Administrator in its sole discretion. Subject to the provisions of the Plan, the Administrator shall have exclusive authority to interpret and administer the Plan, to establish appropriate rules relating to the Plan, to delegate some or all of its authority under the Plan and to take all such steps and make all such determinations in connection with the Plan and the benefits granted pursuant to the Plan as it may deem necessary or advisable.
The Administrator in its sole discretion may delegate and assign specified duties and authority of the Administrator to any other committee and retain the other duties and authority of the Administrator to itself.
3.Shares Reserved Under the Plan. Subject to the provisions of Section 13 (relating to adjustment for changes in capital stock) the aggregate number of shares of the common stock of the Corporation (“Common Stock”) that may be available for delivery pursuant to awards granted under the Plan shall be Seven Million (7,000,000) shares of Common Stock. The shares may be authorized but unissued shares or treasury shares, including shares reacquired by the Corporation either in the open market or in private transactions.
As used in this Section 3, the term “Plan Maximum” shall refer to the number of shares of Common Stock of the Corporation that are available for grant of awards pursuant to the Plan. Stock underlying outstanding options, stock appreciation rights, restricted stock units or performance awards will reduce the Plan Maximum while such options, stock appreciation rights, restricted stock units or performance awards are outstanding. Shares underlying expired, canceled or forfeited options, stock appreciation rights, restricted stock units or performance awards shall be added back to the Plan Maximum. Any shares which are used as full or partial payment for the purchase price of shares or the tax withholding obligation with respect to any award granted under the Plan shall not be added back to the Plan Maximum. For example, if the exercise price of an option is paid by net exercise or by tender to the Corporation of shares of Common Stock, or attestation to the ownership, of shares of Common Stock owned by the recipient, the number of shares available for issuance under the Plan will be reduced by the gross number of shares of Common Stock for which the option is exercised. The gross number of shares of Common Stock covered by a stock appreciation right shall be counted against the Plan Maximum, regardless of the number of shares delivered upon exercise. Restricted stock issued pursuant to the Plan will reduce the Plan Maximum while outstanding even while subject to restriction. Shares of restricted stock that are forfeited or are returned to the Corporation as part of a restructuring of benefits granted pursuant to the Plan shall be added back to the Plan Maximum. Shares of Common Stock repurchased with proceeds obtained in connection with an option exercise shall not be added back to the Plan. No award may be granted under the Plan more than ten years after the date the Plan is approved by the Board of Directors.
Notwithstanding the above, the maximum number of shares subject to stock options or stock appreciation rights that may be awarded in any calendar year to any individual shall not exceed 100,000 shares (as adjusted in accordance with Section 13).
4.Participants. Eligible participants under the Plan will consist of such officers, employees and directors of the Corporation or any designated subsidiary as the Administrator in its sole discretion shall determine. Eligible participants under the Plan may also include any individual other than an employee who has been retained to render consulting or advisory services to the Corporation or any designated subsidiary as the Administrator may determine in its sole discretion. Designation of a participant in any year shall not require the Administrator to designate such person to receive a benefit in any other year or to receive the same type or amount of benefit as granted to the participant in any other year or as granted to any other participant in any year. The Administrator shall consider such factors as it deems pertinent in selecting participants and in determining the type and amount of their respective benefits.
5.Types of Benefits. The following benefits may be granted under the Plan: (a) stock appreciation rights (“SARs”); (b) restricted stock (“Restricted Stock”); (c) performance awards (“Performance Awards”); (d) incentive stock options (“ISOs”); (e) nonqualified stock options (“NQSOs”); and (f) stock units (“Stock Units”), all as described below.
6.Stock Appreciation Rights. A SAR is the right to receive all or a portion of the difference between the fair market value of a share of Common Stock at the time of exercise of the SAR and the exercise price of the SAR established by the Administrator, which shall be no less than 100% of the fair market value of the underlying shares on the date the SAR is granted, subject to such terms and conditions set forth in a SAR agreement as may be established by the Administrator in its sole discretion. At the sole discretion of the Administrator, SARs may be exercised: (a) in lieu of exercise of an option, (b) in conjunction with the exercise of an option, (c) upon lapse of an option, (d) independent of an option or (e) in each of the circumstances stated in (a) through (d) above, in connection with a previously awarded option under the Plan. If the option referred to in (a), (b) or (c) above qualified as an ISO pursuant to Section 422 of the Code, the related SAR shall comply with the applicable provisions of the Code. At the time of grant, the Administrator may establish, in its sole discretion, a maximum amount per share which will be payable upon exercise of a SAR, and may impose conditions on exercise of a SAR that conform to the requirements of the Plan. At the sole discretion of the Administrator, payment for SARs may be made in cash or shares of Common Stock, or in a combination thereof. SARs will be exercisable not later than ten years after the date they are granted and will expire in accordance with the terms established by the Administrator. SARs shall become exercisable over a period of no less than three years in equal increments on the first and subsequent anniversaries of the grant date.
7.Restricted Stock. Restricted Stock is Common Stock issued or transferred under the Plan (other than upon exercise of stock options or as Performance Awards), subject to such terms and conditions set forth in a Restricted Stock agreement as may be established by the Administrator in its sole discretion. In the case of any Restricted Stock:
(a)The purchase price, if any, will be determined by the Administrator.
(b)The period of restriction shall be established by the Administrator for any grants of Restricted Stock; provided that Restricted Stock shall vest over a period of no less than three years, and that no portion of the grant shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, further, that the Administrator may establish a vesting schedule other than the immediately foregoing schedule with respect to grants under the Plan of up to 100,000 shares of Restricted Stock in the aggregate.
(c)Restricted Stock may be subject to (i) restrictions on the sale or other disposition thereof; (ii) rights of the Corporation to reacquire such Restricted Stock at the purchase price, if any, originally paid therefor upon termination of the recipient’s employment or service within specified periods; (iii) representation by the recipient that he or she intends to acquire Restricted Stock for investment and not for resale; and (iv) such other restrictions, conditions and terms as the Administrator deems appropriate.
(d)Unless otherwise provided in the Restricted Stock agreement established by the Administrator, the recipient shall be entitled to vote the Restricted Stock during the period of restriction.
(e)The Administrator shall determine whether Restricted Stock is to be delivered to the recipient with an appropriate legend imprinted on the certificate or if the shares are to be issued in the name of a nominee or deposited in escrow pending removal of the restrictions.
Paragraph (b) above shall not apply to Restricted Stock (i) issued to a non-employee director of the Corporation as part of an annual or initial grant made to non-employee members of the Board of Directors; or (ii) issued pursuant to a sales award program existing on January 25, 2017 (or a successor to such a program), provided that the award has a value of less than $100,000 on the grant date.
8.Performance Awards. Performance Awards are Common Stock, monetary units or some combination thereof, to be issued without any payment therefor, in the event that certain performance goals established by the Administrator are achieved over a period of time designated by the Administrator, but not in any event less than one year or more than five years. The goals established by the Administrator may include (a) earnings per share or adjusted earnings per share; (b) pre-tax or after-tax return on equity; (c) pre-tax or after-tax net income; (d) business unit or departmental pre-tax or after-tax income; (e) book value per share; (f) market price per share; (g) relative performance to peer group companies; (h) expense management; (i) total return to stockholders; (j) sales; and (k) such other goals as may be established by the Administrator. In the event the minimum corporate goal is not achieved at the conclusion of the applicable performance period, no payment shall be made to the recipient. Actual payment of the award earned shall be in cash or in Common Stock or in a combination thereof, as the Administrator may determine in its sole discretion. If Common Stock is used, the recipient shall not have the right to vote and receive dividends until the goals are achieved and the actual shares are issued.
9.Incentive Stock Options. ISOs are options to purchase shares of Common Stock that qualify as and are intended to be incentive stock options under the requirements of Section 422 of the Code. The exercise price of such option shall not be less than 100% of the fair market value of the shares on the date the option is granted, and such option shall be subject to such other terms and conditions set forth in an option agreement established by the Administrator in its sole discretion. ISOs are intended to qualify with the requirements of Section 422 of the Code. The purchase price for ISOs may be paid: (a) by check or (b) in the sole discretion of the Administrator, by the delivery of shares of Common Stock owned by the recipient, or (c) in the sole discretion of the Administrator, by a combination of any of the foregoing, in the manner provided in the option agreement. The aggregate fair market value (determined as of the time an option is granted) of the stock with respect to which ISOs are exercisable for the first time by a recipient during any calendar year (under all option plans of the Corporation and its subsidiaries) shall not exceed $100,000. No ISO shall be exercisable more than ten years after the date it is granted. ISOs shall become exercisable over a period of no less than three years from the grant date and no portion of the ISO shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, however, that the Administration may establish a vesting schedule other than the immediately foregoing schedule with respect to grants of ISOs under the Plan of up to 100,000 shares in the aggregate.
10.Nonqualified Stock Options. NQSOs are options to purchase shares of Common Stock that are not intended to qualify as “incentive stock options” under Section 422 of the Code. The exercise price of an NQSO shall not be less than 100% of the fair market value of the shares on the date the options are granted, and such option shall be subject to such other terms and conditions set forth in an option agreement as established by the Administrator in its sole discretion. The purchase price for NQSOs may be paid: (a) by check or (b) in the sole discretion of the Administrator, by the delivery of shares of Common Stock owned by the recipient, or simply by delivering to the recipient upon exercise of the option only the net number of shares of Common Stock with a value equal to the difference between the fair market value of the shares subject to the option and the purchase price of the option, or (c) in the sole discretion of the Administrator, by a combination of any of the foregoing, in the manner provided in the option agreement. No NQSO shall be exercisable later than ten years after the date it is granted. NQSOs shall become exercisable over a period of no less than three years from the grant date and no portion of the NQSO shall vest prior to the first anniversary of the grant date, no more than one-third of the grant shall vest prior to the second anniversary of the grant date and no more than two-thirds of the grant shall vest prior to the third anniversary of the grant date; provided, however, that the Administration may establish a vesting schedule other than the immediately foregoing schedule with respect to grants of NQSOs under the Plan of up to 100,000 shares in the aggregate.
11.Stock Units. A Stock Unit represents the right to receive a share of Common Stock at such time and, subject to such terms and conditions set forth in a Stock Unit agreement established by the Administrator in its sole discretion. At the sole discretion of the Administrator, a Stock Unit may be paid in cash or shares of Common Stock, or a combination thereof. The recipient of a Stock Unit does not have the rights of a stockholder until receipt of Common Stock (i.e., the recipient shall not have the right to vote and receive dividends until the actual shares are issued).
12.No Dividends or Dividend Equivalent Units. No dividends shall be paid with respect to any equity award unless and until such award is issued and any applicable restrictions are lifted. Notwithstanding anything to the contrary in the Plan, no dividend equivalent units shall be granted under the Plan either in connection with any award or in a grant independent of any award.
13.Adjustment Provisions.
(a)If the Corporation shall at any time change the number of issued shares of Common Stock without new consideration to the Corporation (such as by stock dividends or stock splits), the total number of shares reserved for issuance under the Plan and the number of shares covered by each outstanding benefit granted under the Plan shall be adjusted so that the aggregate consideration payable to the Corporation, if any, and the value of each such benefit shall not be changed. Benefits may also contain provisions for their continuation or for other equitable adjustments after changes in the Common Stock resulting from reorganization, sale, merger, consolidation, issuance of stock rights or warrants, or similar occurrence.
(b) Notwithstanding any other provision of the Plan, and without affecting the number of shares reserved or available hereunder, the Board of Directors may authorize the issuance or assumption of benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate.
14.Change in Control. Except as otherwise set forth in the terms of an employment agreement entered into prior to the date this Plan is approved by the Board of Directors, in the event of a Change in Control of the Corporation, as defined below, the vesting of all outstanding SARs, shares of Restricted Stock, ISOs, NQSOs and Stock Units shall be accelerated only to the extent set forth in the applicable award agreement established by the Administrator in its sole discretion; provided, however, that in no event shall vesting accelerate with respect to (i) employees of the Corporation: (A) because of a merger, consolidation, acquisition or similar transaction prior to the consummation of such transaction; and (B) absent a termination of employment (either by the Corporation or by the participant) of the recipient; and (ii) directors of the corporation because of a merger, consolidation, acquisition or similar transaction prior to the consummation of such transaction.
“Change in Control” means:
(a)The acquisition by one person, or more than one person acting as a group, of ownership of stock of the Corporation that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Corporation;
(b)The acquisition by one person, or more than one person acting as a group, of ownership of stock of the Corporation, that together with stock of the Corporation acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group, constitutes 30% or more of the total voting power of the stock of the Corporation;
(c)A majority of the members of the Board of Directors is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board of Directors before the date of the appointment or election;
(d)One person, or more than one person acting as a group, acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or group) assets from the Corporation that have a total gross fair market value (determined without regard to any liabilities associated with such assets) equal to or more than 40% of the total gross fair market value of all of the assets of the Corporation immediately before such acquisition or acquisitions.
Persons will not be considered to be acting as a group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering. However, persons will be considered to be acting as a group if they are owners of a corporation or other entity that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Corporation.
This definition of Change in Control shall be interpreted in accordance with, and in a manner that will bring the definition into compliance with, the regulations under Section 409A of the Code.
15.Nontransferability. Each benefit granted under the Plan to an employee shall not be transferable otherwise than by will or the laws of descent and distribution; provided, however, that NQSOs granted under the Plan may be transferred, without consideration, to a Permitted Transferee (as defined below). Benefits granted under the Plan shall be exercisable, during the recipient’s lifetime, only by the recipient or a Permitted Transferee. In the event of the death of a recipient, exercise or payment shall be made only:
(a)By or to the Permitted Transferee, executor or administrator of the estate of the deceased recipient or the person or persons to whom the deceased recipient’s rights under the benefit shall pass by will or the laws of descent and distribution; and
(b)To the extent that the deceased participant or the Permitted Transferee, as the case may be, was entitled thereto at the date of his or her death.
For purposes of this Section 15, “Permitted Transferee” shall include: (i) one or more members of the recipient’s family, (ii) one or more trusts for the benefit of the recipient and/or one or more members of the recipient’s family, or (iii) one or more partnerships (general or limited), corporations, limited liability companies or other entities in which the aggregate interests of the recipient and members of the recipient’s family exceed 80% of all interests. For this purpose, the recipient’s family shall include only the recipient’s spouse, children and grandchildren.
16.Taxes. The Corporation shall be entitled to withhold the amount of any tax required to be withheld with respect to any amounts payable or shares deliverable under the Plan (and may withhold such greater amount as is permissible under applicable tax, legal, accounting and other guidance) after giving the person entitled to receive such payment or delivery notice as far in advance as practicable, and the Corporation may defer making payment or delivery as to any benefit if any such tax is payable until indemnified to its satisfaction. The person entitled to any such delivery may, by notice to the Corporation at the time the requirement for such delivery is first established, elect to have such withholding satisfied by a reduction of the number of shares otherwise so deliverable, such reduction to be calculated based on a closing market price on the date of such notice.
17.Tenure. A participant’s right, if any, to continue to serve the Corporation and its subsidiaries as an officer, employee, director, consultant, advisor or otherwise, shall not be enlarged or otherwise affected by his or her designation as a participant under the Plan.
18.Duration, Interpretation, Amendment and Termination; Repricing.
a)No benefit shall be granted more than ten years after the date the Plan becomes effective in accordance with Section 19 below; provided, however, that the terms and conditions applicable to any benefit granted within such period may thereafter be amended or modified by mutual agreement between the Corporation and the recipient or such other person as may then have an interest therein.
b)Without the prior approval of the Corporation’s stockholders, the Corporation will not effect a “repricing” (as defined below) of any stock options or other benefits granted under the Plan. For purposes of the immediately preceding sentence, a “repricing” shall be deemed to mean any of the following actions or any other action having the same effect: (i) the lowering of the purchase price of an option or other benefit after it is granted; (ii) the canceling of an option or other benefit in exchange for another option or benefit at a time when the purchase price of the cancelled option or benefit exceeds the fair market value of the underlying stock (unless the cancellation and exchange occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction); (iii) the purchase or surrender of an option or other benefit for cash or other consideration at a time when the purchase price of the stock option or benefit exceeds the fair market value of the underlying stock (unless the purchase occurs in connection with a merger, acquisition, spin-off or other similar corporate transaction); (iv) an action that is treated as a repricing under generally accepted accounting principles; or (v) allowing the participant to surrender an equity award for cash; provided however, that subpart (v) shall not prevent the Corporation from electing to settle an award in cash as contemplated in the award agreement. To the extent that any stock options or other benefits which may be granted under the Plan would qualify under present or future laws for tax treatment that is beneficial to a recipient, then any such beneficial treatment shall be considered within the intent, purpose and operational purview of the Plan and the sole discretion of the Administrator, and to the extent that any such stock options or other benefits would so qualify within the terms of the Plan, the Administrator shall have full and complete authority to grant stock options or other benefits that so qualify (including the authority to grant, simultaneously or otherwise, stock options or other benefits which do not so qualify) and to prescribe the terms and conditions (which need not be identical as among recipients) in respect to the grant or exercise of any such stock option or other benefits under the Plan.
c)The Board of Directors may amend the Plan from time to time or terminate the Plan at any time. However, no action authorized by this paragraph shall reduce the amount of any existing benefit or change the terms and conditions thereof without the recipient’s consent. No amendment of the Plan shall, without approval of the stockholders of the Corporation, (a) increase the total number of shares which may be issued under the Plan or increase the amount or type of benefits that may be granted under the Plan; or (b) modify the requirements as to eligibility for benefits under the Plan.
19.Effective Date. The Plan shall become effective as of the date it is last approved by the stockholders of the Corporation as required under applicable law and regulation, including the requirements of the applicable listing exchange.
APPENDIX B
PERFICIENT, INC.
Plan for Tax Deductible Executive Incentive Compensation
Article I. Establishment And Purpose
1.1Establishment of the Plan. Perficient, Inc. (the “Company”) hereby establishes the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation (the “Plan”). The Plan is a successor to the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation adopted in 2012.
1.2Purpose. Section 162(m) of the Code (as defined below) limits to $1,000,000 the amount of an employer’s deduction for a fiscal year relating to compensation for certain executive officers, with exceptions for specific types of compensation such as performance-based compensation.
This Plan is intended to provide for the payment of qualified performance-based compensation in the form of incentive compensation that is not subject to the Section 162(m) deduction limitation.
1.3Effective Date. The effective date of the Plan is January 1, 2017, subject to approval of the material terms of the Plan by the Company’s stockholders.
Article II. Definitions
2.1Definitions. Whenever used herein, the following terms will have the meanings set forth below, unless otherwise expressly provided. When the defined meaning is intended, the term is capitalized.
(a)“Board” means the Board of Directors of the Company.
(b)“Code” means the Internal Revenue Code of 1986, as amended.
(c)“Committee” means the Compensation Committee of the Board, or another committee appointed by the Board to serve as the administrator for the Plan, which committee at all times consists of persons who are “outside directors” as that term is defined in the regulations promulgated under Section 162(m) of the Code.
(d)“Company” means Perficient, Inc.
(e)“Employer” means the Company and any entity that is a subsidiary or affiliate of the Company.
(f)“Participant” for a Performance Period means an officer or other key employee of an Employer who is designated by the Committee as a participant in the Plan for that Performance Period in accordance with Article III.
(g)“Performance Period” shall mean the fiscal year of the Company or such other period as the Committee may designate.
(h)“Plan” means the Perficient, Inc. Plan for Tax Deductible Executive Incentive Compensation.
(i)“Target Award” shall mean the maximum amount that may be paid to a Participant as incentive compensation for a Performance Period if certain performance criteria are achieved in the Performance Period.
2.2.Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provision had not been included.
Article III. Eligibility And Participation
3.1Eligibility. The Participants in this Plan for any Performance Period shall be comprised of each employee of the Employer who is a “covered employee” for purposes of Section 162(m) of the Code, or who may be such a covered employee as of the end of a tax year for which the Employer would claim a tax deduction in connection with the payment of compensation to such employee, during such Performance Period and who is designated individually or by class to be a Participant for such Performance Period by the Committee not later than ninety days after the beginning of the Performance Period.
3.2Participation. Participation in the Plan will be determined annually by the Committee.
3.3Termination of Approval. The Committee may withdraw approval for a Participant’s participation at any time. In the event of such withdrawal, the employee concerned will cease to be a Participant as of the date of such withdrawal. A Participant who is withdrawn from participation under this Section will not receive any award under this Plan for the Performance Period.
Article IV. Performance Criteria
4.1Target Awards. The Committee shall establish objective performance criteria for the Target Award of each Participant for each Performance Period in writing. Such formula shall be based upon one or more of the following criteria, individually or in combination, as the Compensation Committee in its discretion shall determine: (a) earnings per share or adjusted earnings per share; (b) pre-tax or after-tax return on equity; (c) pre-tax or after-tax net income, as defined by the Committee; (d) business unit or departmental pre-tax or after-tax income; (e) book value per share; (f) market price per share; (g) relative performance to peer group companies; (h) expense management; (i) total return to stockholders, and (j) sales. Such formula shall be sufficiently detailed and objective so that a third party having knowledge of the relevant performance results could calculate the incentive compensation to be paid to the Participant pursuant to such Target Award formula.
Such Target Award shall be established in writing by the Committee no later than ninety days after the beginning of such Performance Period (but no later than the time prescribed by Section 162(m) of the Code or the regulations thereunder in order for the level to be considered pre-established).
At the time it establishes the performance criteria for a Target Award, or at any time thereafter, in either case to the extent permitted under Section 162(m) of the Code and the regulations thereunder without adversely affecting the treatment of the Target Award as performance-based compensation, the Committee may, in its discretion, provide for the manner in which performance will be measured against the performance criteria (or may adjust the performance criteria) to reflect the impact of specified corporate transactions, accounting or tax law changes and other extraordinary or nonrecurring events.
4.2Payment of Incentive Compensation. As a condition to the right of a Participant to receive any incentive compensation under this Plan, the Committee shall first be required to certify in writing, by resolution of the Committee or other appropriate action, the level of performance criteria on which the Target Award is based that were achieved for the applicable fiscal year, and that the incentive compensation amount of such Target Award has been accurately determined in accordance with the provisions of this Plan. For this purpose, approved minutes of a meeting of the Committee in which the certification is made shall be treated as written certification. Base salary is not subject to this Plan.
A Target Award may be paid in the form of cash, an award of Restricted Stock, Stock Units or other benefit under the Perficient, Inc. Second Amended and Restated 2012 Long Term Incentive Plan or any successor plan, or any other form of payment approved by the Committee; provided that the value of such payments at the time the payment, credit or award is made, does not exceed the dollar amount of the Target Award.
The Committee shall have the right to reduce the amount payable pursuant to a Target Award of a Participant in its sole discretion at any time and for any reason before the incentive compensation is payable to the Participant, based on such criteria as it shall determine. Notwithstanding any contrary provision of this Plan, the Committee may not adjust upwards the amount payable pursuant to a Target Award subject to this Plan, nor may it waive the achievement of the performance criteria established pursuant to this Plan for the applicable Performance Period.
The Committee shall have the power to impose such other restrictions on Target Awards and incentive compensation subject to this Plan as it may deem necessary or appropriate to ensure that such awards and compensation satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code, the regulations promulgated thereunder, and any successors thereto.
4.3Maximum Compensation. The maximum incentive compensation amount payable under this Plan to a Participant for the 2017 fiscal year Performance Period shall be $2,000,000 (two million dollars). Thereafter, the maximum incentive compensation amount for each subsequent fiscal year Performance Period shall be increased by 10% over the maximum incentive compensation amount for the immediately preceding fiscal year Performance Period. If the Committee establishes a Performance Period that is longer than a single fiscal year, the maximum incentive compensation for such Performance Period shall be the sum of the amount of maximum incentive compensation that would have been payable for each fiscal year Performance Period included in such Performance Period.
Article V. Rights Of Participation
5.1.Employment. Nothing in this Plan will interfere with or limit in any way the right of the Employer to terminate a Participant’s employment at any time, nor confer upon any Participant any right to continue in the employ of an Employer.
5.2Nontransferability. No right or interest of any Participant in this Plan will be assignable or transferable or subject to any lien or encumbrance, whether directly or indirectly, by operation of law or otherwise, including without limitation execution, levy, garnishment, attachment, pledge, and bankruptcy.
5.3No Funding. Nothing contained in this Plan and no action taken hereunder will create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant or beneficiary or any other person. Amounts due under this Plan at any time and from time to time will be paid from the general funds of the Company. To the extent that any person acquires a right to receive payments hereunder, such right shall be that of an unsecured general creditor of the Company.
5.4No Rights Prior to Award Approval. No Participant will have any right to payment of incentive compensation pursuant to this Plan unless and until it has been determined and approved under Section 4.2.
Article VI. Administration
6.1Administration. This Plan will be administered by the Committee according to any rules that it may establish from time to time that are not inconsistent with the provisions of the Plan. It is intended that the awards under this Plan shall constitute qualified performance-based compensation under Section 162(m) of the Code and the Plan and all awards hereunder shall be administered, interpreted and construed accordingly.
6.2Expenses of the Plan. The expenses of administering the Plan will be borne by the Company.
Article VII. Requirements Of Law
7.1Governing Law. The Plan will be construed in accordance with and governed by the laws of the State of Missouri.
7.2Withholding Taxes. The Company has the right to deduct from all payments under this Plan any federal, state, or local taxes required by law to be withheld with respect to such payments (and may withhold such greater amount as is permissible under applicable tax, legal, accounting and other guidance).
Article VIII. Amendment and Termination
8.1Amendment and Termination. The Committee, in its sole and absolute discretion, may modify or amend any or all of the provisions of this Plan at any time and from time to time, without notice, and may suspend or terminate it entirely.
Article IX. Stockholder Approval
9.1Stockholder Approval. This Plan shall be subject to approval by the affirmative vote of a majority of the shares cast in a separate vote of the stockholders of the Company at the 2017 Annual Meeting of Stockholders, and such stockholder approval shall be a condition to the right of a Participant to receive any incentive compensation hereunder.