UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant x
Filed by a
Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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DefinitiveProxy Statement |
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DefinitiveAdditional Materials |
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SolicitingMaterial Pursuant to Rule §240.14a-12 |
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THE HACKETT GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
March 25, 2015
Dear Shareholder:
You are
cordially invited to attend the 2015 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) to be held on May 8, 2015 at 11:00 a.m. (local time) at the Company’s headquarters located at 1001 Brickell Bay Drive,
Suite 3000, Miami, Florida.
At this meeting you will be asked to:
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vote for the election of two directors; |
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approve an amendment to the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) to (i) increase the sublimit under the Plan
for restricted stock and restricted stock unit issuances by 1,200,000 shares, and (ii) increase the total number of shares authorized for issuance under the Plan by 1,200,000 shares; and |
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hold an advisory vote on executive compensation |
These matters are discussed in detail in the accompanying proxy statement.
It is
important that your shares be represented at the meeting whether or not you plan to attend. Included with these soliciting materials is a proxy card for voting, an envelope with postage prepaid in which to return your proxy, instructions for voting
by telephone or on the Internet, and our 2014 Annual Report to Shareholders.
On or about March 26, 2015, we are mailing
to our shareholders a notice containing instructions on how to access our proxy statement and 2014 Annual Report and vote online. The notice also contains instructions on how you can receive a paper copy of your annual meeting materials, including
the notice of annual meeting, proxy statement and proxy card.
We look forward to receiving your vote and seeing you at the
meeting.
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| Sincerely, |
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| Ted A. Fernandez |
| Chairman and Chief Executive Officer |
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 8, 2015
The 2015 Annual Meeting of Shareholders of The Hackett Group, Inc. (the “Company”) will be held on May 8, 2015, at 11:00 a.m. (local time) at the Company’s headquarters located at 1001
Brickell Bay Drive, Suite 3000, Miami, Florida, for the following purposes:
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to elect two directors to the Board of Directors; |
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approve an amendment to the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) to (i) increase the sublimit under the Plan for restricted
stock and restricted stock unit issuances by 1,200,000 shares, and (ii) increase the total number of shares authorized for issuance under the Plan by 1,200,000 shares; |
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to hold an advisory vote on executive compensation; and |
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to transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
The Board of Directors has fixed the close of business on March 16, 2015 as the record date for determining the shareholders entitled
to notice of and to vote at the annual meeting. Only holders of common stock of record at the close of business on that date will be entitled to notice of and to vote at the annual meeting or any postponement or adjournment thereof. A list of the
Company’s shareholders entitled to vote at the annual meeting will be open to examination by any shareholder for any purpose related to the meeting during ordinary business hours for the ten days prior to the annual meeting at the
Company’s offices, as well as on May 8, 2015 at the location of the annual meeting. All shareholders are cordially invited to attend the annual meeting.
On or about March 26, 2015, we are mailing to our shareholders a notice containing instructions on how to access our proxy statement and 2014 Annual Report and vote online. The notice also contains
instructions on how you can receive a paper copy of your annual meeting materials, including the notice of annual meeting, proxy statement and proxy card.
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| By Order of the Board of Directors, |
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| Frank A. Zomerfeld |
| Secretary |
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| Miami, Florida |
| March 25, 2015 |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held
on May 8, 2015: The Hackett Group, Inc.’s Proxy Statement and 2014 Annual Report are available at www.edocumentview.com/hckt.
Whether or not you plan to attend the annual meeting, we ask that you do the following. If you are receiving this document via U.S. mail, please complete, date, sign and return the enclosed proxy
card in the postage prepaid envelope or vote by telephone or through the Internet as instructed on the proxy card. If you sign and return your proxy card without specifying a choice, your shares will be voted in accordance with the recommendations
of the Board of Directors. If you are receiving this document via Internet delivery only, please vote by telephone or through the Internet as instructed on the notice you received via U.S. mail. You may, if you wish, revoke your proxy at any time
before it is voted by submitting to the Secretary of the Company, Frank A. Zomerfeld, a written revocation or a duly executed proxy bearing a later date, or by attending the annual meeting and voting in person. If you submit your proxy by telephone
or through the Internet, you may also revoke it by submitting a new proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record will close at 1:00 a.m. Central Time on the day of the
meeting.
TABLE OF CONTENTS
THE HACKETT GROUP, INC.
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 8, 2015
SOLICITATION, VOTING AND
REVOCABILITY OF PROXIES
This proxy statement and the accompanying notice of annual meeting and proxy card are being
furnished and made available, on or about March 26, 2015, to the shareholders of The Hackett Group, Inc. (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company (the “Board”)
to be voted at the 2015 Annual Meeting of Shareholders to be held on May 8, 2015 at 11:00 a.m. (local time) at the Company’s headquarters located at 1001 Brickell Bay Drive, Suite 3000, Miami, Florida, and any postponement or adjournment
thereof.
If the form of proxy enclosed or provided via the Internet is properly executed and returned to the Company, or
voted via telephone or the Internet in time to be voted at the annual meeting, the shares represented thereby will be voted in accordance with the instructions thereon or submitted via the telephone or Internet.
The Board recommends that you vote:
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“FOR” Proposal 1 to elect the Board’s nominees for directors; |
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“FOR” Proposal 2 to approve an amendment to the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) to
(i) increase the sublimit under the Plan for restricted stock and restricted stock unit issuances by 1,200,000 shares, and (ii) increase the total number of shares authorized for issuance under the Plan by 1,200,000 shares; and
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“FOR” Proposal 3 to approve, in an advisory vote, the Company’s executive compensation |
Executed but unmarked proxies submitted to the Company will be voted in accordance with the Board’s recommendations.
If any other matters are properly brought before the annual meeting, proxies will be voted in the discretion of the proxy holders. The
Company is not aware of any such matters that are proposed to be presented at the annual meeting.
On or about March 26,
2015, the Company is mailing to its shareholders a notice containing instructions on how to access this Proxy Statement and the Company’s 2014 Annual Report and vote online. The notice also contains instructions on how you can receive a paper
copy of your annual meeting materials, including the notice of annual meeting, Proxy Statement and proxy card.
Shareholders
receiving this document and accompanying proxy card and annual report via the Internet may submit their proxies by telephone or through the Internet as instructed in the notice delivered via U.S. mail. If shareholders choose to receive this document
and accompanying proxy card via U.S. mail, those shareholders may submit a signed proxy card or they may submit their proxy by telephone or through the Internet as instructed on the proxy card. Telephone and Internet proxies must be used in
conjunction with, and will be subject to, the information and terms contained on the proxy card. These procedures may not be available to shareholders that hold their shares through a broker, nominee, fiduciary or other custodian. If your shares are
held in this manner, please check your proxy card or contact your broker, nominee, fiduciary or other custodian to determine whether you will be able to vote by telephone or through the Internet.
1
The cost of soliciting proxies in the form enclosed herewith will be borne entirely by the
Company. In addition to the solicitation of proxies by mail, proxies may be solicited by directors, officers and regular employees of the Company, without extra remuneration, by personal interviews, telephone or otherwise. The Company will request
persons, firms and corporations holding shares in their name or in the names of their nominees, which are beneficially owned by others, to send proxy materials to and obtain proxies from the beneficial owners and will reimburse the holders for their
reasonable expenses in doing so.
The securities that may be voted at the annual meeting consist of shares of the
Company’s common stock. Each outstanding share of common stock entitles its owner to one vote on each matter as to which a vote is taken at the annual meeting. The close of business on March 16, 2015 has been fixed by the Board as the
record date (the “Record Date”) for determination of shareholders entitled to vote at the annual meeting. On the Record Date, 29,844,726 shares of common stock were issued and outstanding and entitled to vote. The presence, in person
or by proxy, of at least a majority of the shares of common stock issued and outstanding and entitled to vote on the Record Date is necessary to constitute a quorum at the annual meeting. Shares can be voted only if the shareholder is present in
person or represented by proxy. Whether or not you plan to attend in person, you are encouraged to sign and return the enclosed proxy card or vote by telephone or through the Internet as instructed on the proxy card or in the notice mailed to you.
Assuming the presence of a quorum at the annual meeting, the following voting standards will apply to the various proposals:
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In the absence of a contested election, pursuant to the majority voting provisions of our bylaws, each of the Board’s nominees for director will
be elected only if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. For more information regarding the majority voting provisions of the Bylaws, see “Proposal 1—Election of
Directors” on page 3 of this proxy statement. |
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The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is
required to approve the plan amendment in Proposal 2. |
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The affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote is
required to approve the proposal on executive compensation in Proposal 3. Proposal 3 is an advisory vote, which means that it is not binding on the Company. However, the Compensation Committee of the Board will take into account the outcome of the
vote when considering future executive compensation decisions. |
Abstentions and broker non-votes will be
treated as shares that are present in person or represented by proxy at the meeting and entitled to vote for purposes of determining the presence of a quorum at the annual meeting. A “broker non-vote” occurs when a nominee holding shares
for a beneficial owner votes on one proposal, but does not vote on another proposal because the nominee does not have discretionary voting power and has not received instructions from the beneficial owner. Abstentions and broker non-votes will not
have any effect on the approval of Proposal 1. Because abstentions will be counted for purposes of determining the shares present or represented at the annual meeting and entitled to vote, abstentions will have the same effect as a vote
“against” Proposals 2 and 3. Broker non-votes will not have any effect on the approval of Proposals 2 and 3.
The
presence of a shareholder at the annual meeting will not automatically revoke the shareholder’s proxy. Shareholders may, however, revoke a proxy at any time prior to its exercise by filing with the Secretary of the Company a written notice of
revocation, by delivering to the Company a duly executed proxy bearing a later date or by attending the annual meeting and voting in person. If you submitted your proxy by telephone or through the Internet, you may also revoke it by submitting a new
proxy using the same procedures at a later date. The telephone and Internet voting facilities for shareholders of record will close at 1:00 a.m. Central Time on the day of the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE APPROVAL OF PROPOSALS 1, 2 AND 3.
2
PROPOSAL 1
ELECTION OF DIRECTORS
General
The Company’s articles of incorporation provide that the Board shall consist of no fewer than five directors and no more than fifteen directors. The Company’s bylaws provide that the number of
directors, within such limits, shall be determined by resolution of the Board. The Board currently is composed of seven directors. The Board is divided into three classes. One class is elected each year for a term of three years.
Two directors will be elected at the annual meeting. The Board has nominated David N. Dungan and Richard N. Hamlin, existing directors,
for the positions. If elected, Messrs. Dungan and Hamlin will each serve a three-year term expiring at the annual meeting in 2018. You can find more information about Messrs. Dungan and Hamlin below.
Unless otherwise instructed on the proxy, it is the intention of the proxy holders to vote the shares represented by each properly
executed proxy for the election of both nominees. The Board believes that both nominees will stand for election and will serve if elected. However, if any nominee fails to stand for election or is unable to accept election, proxies will be voted by
the proxy holders for the election of such other person as the Board may recommend.
In the absence of a contested election,
pursuant to the majority voting provisions of our bylaws, each of the Board’s nominees for director will be elected only if the votes cast for such nominee’s election exceed the votes cast against such nominee’s election. If the
majority vote requirement applies and a nominee who currently is serving as a director is not re-elected, our bylaws provide that he or she must tender his or her resignation to the Board. The Nominating and Corporate Governance Committee will then
consider such resignation and recommend to the Board whether to accept or reject the resignation. The Board will decide whether to accept or reject any such tendered resignation within 90 days after certification of the election results and will
publicly disclose its decision and the rationale therefor. If the resignation is not accepted, the director will continue to serve until his or her successor is elected and qualifies, until there is a decrease in the number of directors, or until
the director’s earlier resignation or removal. The majority voting provisions apply only to elections in which the number of nominees does not exceed the number of directors to be elected. In the event of an election in which the number of
nominees exceeds the number of directors to be elected, nominees will be elected by a plurality vote.
THE BOARD OF
DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF
MESSRS. DUNGAN AND HAMLIN AS DIRECTORS.
Information as to the Nominees and Continuing Directors
The following table sets forth certain information regarding the Board’s nominees for election as directors and those directors who will continue to serve as such after the annual meeting.
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| David N. Dungan |
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61 |
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2000 |
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Vice Chairman and Chief Operating Officer |
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2015 |
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| Richard N. Hamlin(3) |
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67 |
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2003 |
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| CONTINUING DIRECTORS |
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| Ted A. Fernandez |
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1997 |
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Chairman and Chief Executive Officer |
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| Terence M. Graunke |
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2009 |
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| Alan T.G. Wix(3) |
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73 |
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1999 |
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2016 |
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| John R. Harris(3) |
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67 |
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2006 |
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| Edwin A. Huston(3) |
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76 |
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2001 |
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The ages shown are as of March 16, 2015. |
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The dates shown reflect the year in which these persons were first elected as directors of the Company. |
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Member of the Audit, Compensation and Nominating and Corporate Governance Committees. |
3
The principal occupations and other public company directorships for the past five years or
more of the two nominees for director and the five directors whose terms of office will continue after the annual meeting are set forth below.
Nominees
David N. Dungan is a founder of the Company. He served as a Managing Director from the Company’s inception until March 2000 when he became a director and was named Chief Operating Officer
(“COO”). Mr. Dungan was named Vice Chairman in February of 2006. Prior to founding the Company, Mr. Dungan served as the National Partner-in-Charge of the World Class Finance Practice of the Strategic Services Consulting Division
of KPMG from May 1994 to February 1997. Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with that firm.
Richard N. Hamlin is a consultant and investor. He served as the Chief Financial Officer of CommerceQuest, Inc. from July 2002 to August 2003. Mr. Hamlin retired in June 2000 as a partner
of KPMG Consulting, a position he held from January 2000. Mr. Hamlin served as a partner of KPMG from 1979 until January 2000, including service on KPMG’s board of directors from 1994 to 1998. Mr. Hamlin was a member of the board of
directors of eTelecare Global Solutions from February 2006 to August 2009. Mr. Hamlin served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad, from October 2007 through
November 2008.
Continuing Directors
Ted A. Fernandez is a founder of the Company. He has served as Chairman of its Board and Chief Executive Officer (“CEO”) since inception. Mr. Fernandez served as the National
Managing Partner of KPMG LLP’s (“KPMG”) Strategic Services Consulting Division from May 1994 to January 1997. Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995 to 1997. From 1979 to 1994,
Mr. Fernandez held several industry, executive and client service positions with KPMG.
Terence M.
Graunke was appointed to the Company’s Board on November 10, 2009 in connection with the Company’s acquisition of Archstone Consulting. Mr. Graunke is the Chairman and co-founder of Lake Capital Management LLC
(“Lake Capital”), a private investment firm headquartered in Chicago. Mr. Graunke has served as Chairman of Lake Capital since 1998. Mr. Graunke serves on the boards of numerous portfolio companies of Lake Capital Partners LLC,
an affiliate of Lake Capital. Mr. Graunke also sits on the board of directors of the Max McGraw Wildlife Foundation.
John R. Harris serves as a part time operating partner and investor with glendonTodd Capital and was Chief Executive Officer
of Chemical Information Services, a company which provides information services to sourcing professionals from February 2010 to November 2012. He is the former President and Chief Executive Officer of eTelecare Global Solutions, a provider of
outsourced customer care services. Mr. Harris served in these roles from February 2006 until October 2009. Mr. Harris served as Chief Executive Officer of Seven Worldwide Inc., a digital content management company, from December 2003 to
January 2005. From July 2002 to December 2003, he served as Chief Executive Officer and President of Delinea Corporation, an application and business process management company serving the energy industry. From August 2001 to July 2002,
Mr. Harris served as Chief Executive Officer and President of Exolink. From September 1999 to September 2001, he served as Chairman and Chief Executive Officer of Ztango, Inc. Mr. Harris previously spent 25 years with Electronic Data
Systems (“EDS”), during which he held a variety of executive leadership positions including Group Executive and President of EDS’s four strategic business units serving the telecommunications and media industries. He also served
as EDS’s Corporate Vice President, Marketing & Strategy. Mr. Harris is a member of the board of directors of Premiere Global Services, Inc. and Sizmek (formerly DG FastChannel) where he assumed the role of Chairman of the Board in
March of 2014.
4
Edwin A. Huston served as the Vice Chairman of Ryder System, Inc.
(“Ryder”), an international logistics and transportation solutions company, from March 1999 until retiring on June 30, 2000. Mr. Huston served as Senior Executive Vice President, Finance and Chief Financial Officer of Ryder from
January 1987 until he became Vice Chairman. Mr. Huston is a director of Tennenbaum Opportunities Fund V, LLC. During the past five years Mr. Huston also served on the board of directors of Enterasys Networks, Kaman Corporation and Unisys
Corporation.
Alan T.G. Wix is a Director of BDC Partnership Ltd. Mr. Wix was the Chairman of Fiva Marketing,
Ltd. from April 2003 to December 2008. Mr. Wix served as the Chairman of the Board of Farsight PLC from April 1999 until June 2005. Mr. Wix served as the Chief Executive Officer of Farsight PLC from April 1999 until June 2002. Mr. Wix
retired in August 1998 as Managing Director Core IT Development of Lloyds TSB, a position he held from January 1993. From April 1990 to January 1993, Mr. Wix held the position of Head of Development at Lloyds TSB. Prior to being elevated to
that position, Mr. Wix held a variety of positions within the information systems division of Lloyds TSB.
Other Executive Officer
The principal occupation during the past five years or more of the Company’s other executive officer is set forth below.
Robert A. Ramirez, 48, is the Company’s Executive Vice President, Finance and Chief Financial Officer (“CFO”), a position he has held since August 2007. Mr. Ramirez served as
Corporate Controller of the Company from July 2006 through July 2007. Mr. Ramirez served as Senior Director, Finance and Practice Controller of the Company from October 2005 to July 2006 when he was named Corporate Controller. Mr. Ramirez
held a variety of other positions within the Company’s business intelligence, finance transformation and retail consulting practices from 1998 to 2005.
Corporate Governance and Other Matters
Board
Composition
The Board consists of seven members, a majority of which are considered “independent directors”
under the current listing standards of the NASDAQ Stock Market (“NASDAQ”). The Company’s independent directors are Terence M. Graunke, Richard N. Hamlin, John R. Harris, Edwin A. Huston and Alan T.G. Wix. The Board currently has three
committees—the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee.
Leadership Structure
The roles of Chairman of the Board and Chief Executive Officer have been unified since the Company was founded. The Company believes that its Board leadership structure demonstrates to its employees,
clients and shareholders that the Company is under strong leadership with a single person setting the tone and having primary responsibility for managing its operations. It provides an effective connection between management’s role of
identifying, assessing and managing risks and the Board’s role of risk oversight. Mr. Fernandez has an in-depth knowledge of the issues, opportunities and challenges that the Company faces. The Board believes that he is best positioned to
develop agendas and highlight issues that ensure that the Board’s time and attention are focused on the most critical matters impacting the Company. The Board also believes that the unification of the roles of Chairman and Chief Executive
Officer is appropriate for the Company at this time. The Board has not appointed a “lead” director. The Board believes that its structure with five of its seven members being independent directors and all its committees chaired and
entirely comprised of independent directors provides independent oversight. The Board recognizes that different board leadership structures may be appropriate for companies in different situations and understands that no one structure is appropriate
for all companies. While the Board intends to review the appropriate leadership structure for the Company from time to time, the Board believes that the Company has been, and is currently, well-served by its current leadership structure.
5
The Board’s Role in Risk Oversight
The Board oversees the proper safeguarding of the assets of the Company, the maintenance of appropriate financial and other internal
controls and the Company’s compliance with applicable laws and regulation and proper governance. Risks are considered in virtually every business decision as part of the Company’s business strategy. The Board as a whole has the
responsibility to review and approve the Company’s annual operating plan. In connection with that process, the Board typically inquires as to the greatest areas of risk associated with the annual operating plan and the Company’s operating
model taken as a whole, and confirms that these risks are appropriately mitigated.
While the Board oversees risk management,
its committees, which meet regularly and report back to the Board play significant roles in carrying out the risk oversight function. Company management also plays an important role in connection with risk management through internal processes and
effective internal controls.
The Board delegates certain risk oversight functions to its Audit Committee, namely assisting
the Board in its responsibility for oversight of:
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the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices;
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the Company’s systems of internal controls regarding finance and accounting compliance; |
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the independence and performance of the Company’s independent registered public accounting firm; and |
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the Company’s ethical compliance programs. |
The Board delegates compensation program risk oversight to its Compensation Committee. The Compensation Committee is charged with understanding the risks and rewards associated with the Company’s
various compensation philosophy and programs and ensuring that the programs are aligned with the Company’s goals and objectives. The Committee reviews and approves compensation programs with features that mitigate risk without diminishing the
incentive of the programs.
The Board delegates to its Nominating and Corporate Governance Committee the authority to develop
and implement the Company’s director nomination guidelines and to recommend nominees for election, thus ensuring that the Board contains the appropriate mix of experience, qualifications, attributes and skills necessary to effectively exercise
its oversight function. The Nominating and Corporate Governance Committee is also responsible for developing and implementing the Company’s corporate governance guidelines.
Specific Experience, Qualifications, Attributes and Skills of Current Board Members, Including Director Nominees
Specific experience, qualifications, attributes and skills that the Board believes qualify each current director, including director
nominees, for his position on the Board are summarized below. This description is not intended as an exclusive description of the types of expertise or contributions provided by each director.
Ted A. Fernandez—Mr. Fernandez founded the Company in 1997 based on a strategy he developed from his extensive history in the
professional services industry, which included an eighteen year career with KPMG. His career at KPMG culminated in the role of the National Managing Partner of KPMG’s Strategic Services Consulting Division from May 1994 to January 1997.
Mr. Fernandez also served as a member of KPMG’s Management Committee from 1995 to 1997. He brings an in-depth knowledge of the professional services industry, especially business consulting, and organizational leadership within that
industry. He also provides extensive financial and accounting experience to the Board. Mr. Fernandez provides the Board with day to day knowledge of the Company’s business and markets. He also provides broad and deep experience with
strategic plan development and execution.
6
David N. Dungan—Along with Mr. Fernandez, Mr. Dungan founded the
Company in 1997. Mr. Dungan joined KPMG in 1986 and, until May 1994, held various executive positions with KPMG. Mr. Dungan served as the National Partner-in-Charge of the World Class Finance Practice of KPMG’s Strategic Services
Consulting Division from May 1994 to February 1997. Mr. Dungan provides the Board with broad financial and operational experience managing and leading a professional services firm focused on business consulting.
Terence M. Graunke—Mr. Graunke is Chairman and co-founder of Lake Capital, a private investment firm that makes
investments in mid-sized businesses. He co-founded Lake Capital in 1998 as a vehicle to acquire interests in service-based companies creating significant enterprise value by applying the firm’s capital, as well as strategic and operating
expertise to enhance growth, profitability and market position. Since 1998, Lake Capital has owned and built more than twenty companies, including start-up business consultancy firms. Lake Capital enterprises are located across the United States and
have operations that extend to Canada and Europe. Mr. Graunke brings to the Board an extensive history of evaluating, purchasing and managing professional services firms in the Company’s industry. He also brings a history of board
participation in the Company’s business segment with an emphasis on business services and international experience through the management of Lake Capital’s interests abroad.
Richard N. Hamlin—Mr. Hamlin provides the Board with extensive financial and accounting experience gained over a more
than thirty-year career as a Certified Public Accountant at KPMG. Mr. Hamlin served as a partner of KPMG for twenty-one years, which included service on KPMG’s board of directors from 1994 to 1998, and later became a partner of KPMG
Consulting. Mr. Hamlin’s experience provides additional depth of capability to the Audit Committee. Mr. Hamlin is designated an “audit committee financial expert” as defined by regulations of the Securities and Exchange
Commission (the “SEC”). Mr. Hamlin also possesses a history of board participation on a public company board as a former member of the board of directors and Chairman of the Audit Committee of eTelecare Global Solutions.
Mr. Hamlin also provides operational perspective from outside of the business consulting segment, having served as the Chairman and Trustee of the Dakota Minnesota Eastern Railroad, a wholly-owned subsidiary of Canadian Pacific Railroad.
John R. Harris—Mr. Harris has an extensive history of senior executive leadership positions and board
participation in the information technology, media, telecommunications and outsourcing industries having spent twenty-five years in various roles with EDS including Group Executive and President of EDS’s four strategic business units serving
the telecommunications and media industries and Corporate Vice President, Marketing & Strategy. He also has in-depth experience in public company operations and management having served as the President and Chief Executive Officer of
eTelecare Global Solutions, a provider of outsourced customer care services. Mr. Harris also provides significant public company board experience through his prior service on the boards of, and as an advisor to, several startup companies
including BancTec, Applied Graphic Technologies, Genuity, CapRock Communications and Startek. He continues to provide additional operational perspective through his participation as a director of Premiere Global Services, Inc. and Sizmek (formerly
DG Fast Channel) where he serves as the Chairman of the Board.
Edwin A. Huston—Mr. Huston provides the Board with
in-depth finance experience from his educational background in finance to progressively senior roles at Ryder, an international logistics and transportation services provider, over a thirty-year period. Mr. Huston’s experience provides
additional depth of capability to the Audit Committee. Mr. Huston is designated an “audit committee financial expert” as defined by SEC regulations. Mr. Huston has also served on the boards and audit committees of several other
companies, including Unisys Corporation, Enterasys Networks, Inc., Kaman Corporation and the Tennenbaum Opportunity Fund on whose board he currently serves. Mr. Huston’s senior-level operational background at Ryder also provides the Board
with additional perspective on strategic planning.
Alan T.G. Wix—Mr. Wix brings to the Board an extensive
history of senior executive leadership at a major financial institution, having retired in August 1998 as Managing Director Core IT Development of Lloyds TSB. He has in-depth operational experience leading a significant division of an institution
with global reach. He also has extensive experience as a purchaser of technology and business consulting services, and, as such, provides
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perspective on customer experience. Mr. Wix is a native of the United Kingdom and spent his professional career in the United Kingdom. He continues to make his home there. His knowledge of
the European marketplace provides valuable international perspective to the Board.
Audit
Committee
The Audit Committee reviews, acts on, and reports to the Board with respect to various auditing and accounting
matters. The Audit Committee is directly responsible for the appointment, compensation, evaluation, retention and oversight of the Company’s independent auditors. The primary functions of the Audit Committee are to assist the Board in its
responsibility for oversight of:
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the quality and integrity of the Company’s consolidated financial statements and its financial reporting and disclosure practices;
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the Company’s system of internal controls regarding finance and accounting compliance; |
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the independence and performance of the Company’s independent registered public accounting firm; and |
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the Company’s ethical compliance programs. |
The Audit Committee performs all functions required of audit committees of public companies under applicable laws, rules and regulations and the requirements of NASDAQ.
The current members of the Audit Committee are Messrs. Hamlin (Chairman), Harris, Huston and Wix. Rules adopted by NASDAQ and the SEC
impose strict independence requirements for members of audit committees. In addition to meeting NASDAQ’s tests for director independence, directors on audit committees must meet two basic criteria set forth in the SEC’s rules. First, audit
committee members are barred from accepting, directly or indirectly, any consulting, advisory or other compensatory fee from the issuer or an affiliate of the issuer, other than in the member’s capacity as a member of the board of directors and
any board committee. Second, an audit committee member may not be an affiliated person of the issuer or any subsidiary of the issuer apart from his or her capacity as a member of the board and any board committee. Each member of the Company’s
Audit Committee meets these independence requirements, in addition to the independence criteria established by NASDAQ. The Board has determined that both Mr. Hamlin and Mr. Huston are audit committee financial experts, as that term is
defined under SEC rules.
The Audit Committee is governed by a written charter approved by the Board. A copy of the charter
can be found on the Company’s website at www.thehackettgroup.com/about/ir_governance.jsp. For further information on the Audit Committee, see the “Report of the Audit Committee” on page 42 in this proxy statement.
Compensation Committee
The Compensation Committee is responsible for determining the compensation of the Company’s executive officers and approving
compensation and human resource programs for the Company. The Compensation Committee determines the compensation of the Company’s CEO. In addition, the Compensation Committee has the following authority and responsibilities:
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to approve the compensation of all executive officers other than the CEO with input from the CEO; |
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to review, approve and, when appropriate, recommend to the Board for approval, incentive compensation plans, equity-based plans, employment agreements
and any severance arrangements or plans; |
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to administer the Company’s incentive compensation plans, equity-based plans and employee benefit plans; |
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to review the Company’s incentive compensation arrangements to determine whether they encourage excessive risk-taking, and to review and discuss
at least annually the relationship between risk management policies and practices and compensation; |
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to review director compensation for service on the Board and Board committees at least once a year and to recommend any changes to the Board; and
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periodically, retain and outside consultant to review the Company’s compensation programs. |
The current members of the Compensation Committee are Messrs. Huston (Chairman), Hamlin, Harris and Wix. The Board has determined that
the current members of its Compensation Committee satisfy all of the independence requirements of the NASDAQ listing standards.
On an annual basis, the Company completes a review of the policies and practices associated with all of its compensation programs,
including its executive compensation programs. As part of this assessment, the Company considers that rewards are heavily weighted towards annual profitability, which is based on the delivery of services for which fees are collected in a
relatively short period of time with financial results being known prior to the pay out of incentives. For 2014, the Company conducted, and the Compensation Committee reviewed, a risk assessment of its compensation programs and considered the extent
to which its compensation policies and practices influence the behaviors of its executives and other employees with respect to taking business risks that could affect the Company. The Company believes that none of its compensation policies and
practices are reasonably likely to have a material adverse effect on the Company.
The Compensation Committee is governed by a
written charter approved by the Board. A copy of the charter can be found on the Company’s website at www.thehackettgroup.com/about/ir_governance.jsp.
Nominating and Corporate Governance Committee
The current members of the Nominating and Corporate Governance Committee are Messrs. Wix (Chairman), Hamlin, Harris and Huston. The
Nominating and Corporate Governance Committee is responsible for:
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identifying individuals qualified to become members of the Board; |
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recommending candidates for election or re-election to the Board; and |
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administering the Board’s annual self-evaluation process. |
The Nominating and Corporate Governance Committee selects and must approve by at least a majority vote all candidates to stand for
election as directors. Pursuant to the Company’s bylaws, other candidates may also be nominated by any shareholder, provided each such other nomination is submitted in accordance with the procedures set forth in the bylaws. For a discussion of
the requirements for including information with respect to a shareholder’s nominee in the Company’s proxy statement, see “Shareholder Proposals for the Annual Meeting in 2016” on page 49 of this proxy statement.
In addition, the Nominating and Corporate Governance Committee is responsible for the development and implementation of the
Company’s corporate governance guidelines. The Company’s corporate governance guidelines can be found on the Company’s website at http://www.thehackettgroup.com/about/ir_governance.jsp. The corporate governance guidelines
implemented by the Nominating and Corporate Governance Committee contain criteria which it employs to identify and recommend candidates to the Board. These criteria include:
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personal and professional integrity; |
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the skills, business experience and industry knowledge useful in the oversight of the Company based on the perceived needs of the Company and the Board
at any given time; |
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the ability and willingness to devote the required amount of time to the Company’s affairs, including attendance at Board and committee meetings;
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interest, capacity and willingness, in conjunction with the members of the Board, to serve the long-term interests of the Company and its shareholders;
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to the extent considered appropriate by the Board, whether a director candidate may be required to be a “financial expert” as defined in
relevant SEC rules. |
These qualities would be considered as they relate to any candidate, whether suggested
by management or by one or more of the Company’s shareholders. The Company does not have a specific policy which addresses how diversity should be considered in connection with the identification of director nominees. The Committee and the
Board have always taken an approach that neither favors nor disfavors any particular color, race, creed, gender or other component of a nominee’s background such as skills and qualifications. The Board evaluates all candidates equally across
all relevant factors and seeks members whose background, qualifications and skills will assist the Company in accomplishing its goals.
The Company’s corporate governance guidelines also contain stock ownership guidelines for the Company’s CEO and the outside members of the Board. Pursuant to these guidelines, the Company’s
CEO is required to own a number of shares of the Company’s common stock equal in value to six times his annual base salary. Mr. Fernandez’s base salary for 2015 is $750,000. The Company’s outside Board members are required to own
a number of shares of the Company’s common stock equal in value to three times their maximum annual cash compensation under the current Outside Director Compensation Program. For 2015, the maximum annual cash compensation is $40,000 at
regularly scheduled Board meetings. Fees related to special meetings are not subject to this limitation. The Company’s CEO and its outside Board members have five years from the date that these guidelines were adopted, February 17, 2012,
to achieve these goals. The Company’s CEO and its outside Board members already satisfy these requirements. The Company’s CEO and its outside Board members are not required to purchase shares in the open market to satisfy these guidelines.
Rather, they are expected to retain shares received upon vesting of restricted stock unit grants or upon the exercise of stock options until the guidelines are satisfied. Once the guidelines are achieved, neither the CEO nor any outside Board member
will be considered to be out of compliance with these guidelines due to fluctuations in the Company’s stock price.
The
Company’s corporate governance guidelines also contain hedging restrictions which prohibit Directors and officers of the Company from, directly or indirectly, engaging in hedging transactions with respect to securities of the Company. The
Company’s corporate governance guidelines also contain pledging restrictions that prohibit Directors and officers of the Company from pledging securities of the Company as collateral for a loan or otherwise use securities of the Company to
secure a debt (e.g., to secure a margin loan) without the prior written approval of the Audit Committee.
The Nominating and
Corporate Governance Committee is governed by a written charter approved by the Board. A copy of the charter can be found on the Company’s website at www.thehackettgroup.com/about/ ir_governance.jsp.
Other Matters
During the fiscal year ended January 2, 2015, the Board, Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee each held 5 meetings. During that period, no
director attended fewer than 75% of the total number of all meetings of the Board and any committee on which he served. The Company’s independent directors regularly meet as a group in executive session outside of the presence of management.
The Company’s shareholders may communicate with its Board members via written correspondence mailed to the individual
addresses found in the “Beneficial Ownership of Common Stock” table on page 45 of this proxy statement.
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As is the case with all regularly scheduled meetings of the Board and its committees, all of
the Company’s directors are expected to attend the annual meeting of shareholders in person. All of the Company’s directors attended the 2014 Annual Meeting of Shareholders, except for Messrs. Graunke and Harris who both had unavoidable
conflicts.
The Company has adopted a Code of Conduct and Ethics that is applicable to all directors, officers and employees
of the Company. It complies with the requirements of Section 406(c) of the Sarbanes-Oxley Act. More importantly, it reflects the Company’s policy of dealing with all persons, including its customers, employees, investors, regulators and
vendors, with honesty and integrity. A copy of the Company’s Code of Conduct and Ethics can be found on the Company’s website at www.thehackettgroup.com/about/ir_governance.jsp. The Company intends to post amendments to or
waivers from the Code of Conduct and Ethics that are applicable to the Company’s CEO, CFO or Controller on this website under the circumstances and within the period required under SEC rules.
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COMPENSATION COMMITTEE REPORT
The Compensation Committee met with management to review and discuss the Compensation Discussion and Analysis below. Based on such review
and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference in the Company’s Annual Report on Form 10-K for its fiscal year
ended January 2, 2015, and the Board has approved that recommendation.
Respectfully submitted,
Compensation Committee
Edwin A. Huston,
Chairman
Richard N. Hamlin
John R.
Harris
Alan T.G. Wix
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COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Objectives
The Company’s objectives relating to compensation are to align the financial interests of its executives with those of its shareholders and to attract and retain highly qualified executives. The
Company achieves these objectives by linking a substantial portion of each executive’s compensation to the achievement of financial and operational objectives in the executive’s particular business unit or the Company as a whole. The
Compensation Committee has adopted a “pay-for-performance” compensation program for the Company’s executive officers that rewards the achievement of both long-and short-term term business objectives. By linking pay to both long-term
and short-term business objectives, executive officers are encouraged to focus on the future growth and current profitability of the Company. The Company believes that this focus on both long-term and short-term objectives will lead to increased
shareholder value. The Board and the Compensation Committee are primarily focused on operating performance, earnings growth and share price appreciation.
The main goals of the Company’s executive compensation programs are as follows:
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to focus executives on critical business issues; |
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to ensure that the executive team has clear goals and accountability with respect to the Company’s financial performance;
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to attract and retain executive talent; |
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to increase shareholder value; and |
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to provide significant incentive opportunities tied to the attainment of specific financial performance goals. |
In order to attract, retain, and commit top executives to the fulfillment of superior performance results, the executive compensation
programs are designed to provide superior pay opportunities in exchange for superior performance.
The Company believes that
its compensation program supports its business strategies and directly links pay with performance results. The Company continues to observe what it believes to be its comparative pay market, which is other strategic consulting and business advisory
organizations and professional services firms of similar or greater size.
The Elements of Executive Compensation at the Company
Overview
The Company’s executive compensation program applies to its three named executive officers. This program commits the Company’s
named executive officers to the fulfillment of exceptional operating results by providing significant incentive opportunities tied to the attainment of specific financial performance goals. The design of the program has been substantially consistent
since it was created by the Compensation Committee in 2005 based on recommendations from Mercer, a nationally recognized executive compensation consulting firm. The program consists of base salaries and cash and equity incentive opportunities that
the Company believes are market competitive for companies of similar size within its industry. Historically, the executive compensation program has been comprised of two primary elements: (1) annual compensation, consisting of base salaries and
employee benefits; and (2) incentive compensation, in the form of performance-based cash awards and equity incentive grants issued in the form of restricted stock units.
Cash and equity bonuses are tied to the achievement of pro-forma diluted net earnings per share targets based on a Board-approved operating plan. Pro-forma diluted net earnings per share is defined as net
income before taxes and before income from discontinued operations and does not include restructuring costs or benefits,
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acquisition-related adjustments, non-cash stock compensation expense, stock appreciation rights expense or the amortization of intangible assets. Pro-forma diluted net earnings per share is based
on weighted average common and common equivalent shares outstanding and also includes a normalized tax rate. In addition, the Compensation Committee retains the right to exclude the impact of certain nonrecurring events from the pro-forma diluted
net earnings per share calculation when, in the opinion of the Compensation Committee, their inclusion would not accurately reflect the operating performance of the Company. The Company believes that pro-forma diluted net earnings per share is the
best measure of true operating performance and therefore the most appropriate metric for determining incentive compensation.
On an annual basis, the Compensation Committee evaluates and establishes the threshold and target achievement levels for the
Company’s incentive compensation program, which it refers to as “Commence,” “Goal” and “Superior.” If the Company’s performance falls short of the established goals for business growth, then the bonus
compensation paid in connection with the program is reduced or no bonuses are paid at all. Payouts are interpolated if results fall between performance levels and extrapolated for performance exceeding the Superior level. The Company believes the
targets established for the executive team, including the named executive officers, are challenging. In the ten years since this program has been in effect, no bonuses were paid to its executive team for two of those years. The “Superior”
target was achieved three times and the “Goal” target was achieved two times. In three years, a prorated bonus was paid based on the achievement of an amount between the “Commence” target and the “Goal” target.
Performance-based incentive awards earned are divided by the Company’s share price on the date of grant to calculate the number of restricted stock units to be issued. See “Executive Compensation Program Decisions for 2014” on page 16
of this proxy statement for more information about the incentive compensation program.
The Compensation Committee targets an
even balance between the cash and equity award opportunities included in the programs, weighting the equity component more heavily in the case of its CEO and COO. A key feature of the equity grants for the named executive officers is that
performance-based awards also vest one third per year beginning on the first anniversary of the grant date. Performance-based grants issued to employees, other than the Company’s named executive officers, vest over a three or four year period,
based on the recipient’s individual compensation program. All restricted stock unit grants, other than those issued upon hiring, are issued based on the achievement of Company, practice or individual performance goals, or any combination
thereof. Vesting is contingent on continued employment over time. The Company regards this vesting period as an important retention tool. More importantly, the Company believes that incentive compensation that is paid in the form of equity serves as
a meaningful long-term incentive that is directly correlated to the increase in the price of the Company’s common stock, which rewards employees for increasing shareholder value. A heavier weighting on the equity component ties a greater
portion of the Company’s executives’ ultimate compensation to their ability to deliver increased shareholder value. To further ensure the alignment of the CEO’s interests with those of shareholders, the Board of Directors has adopted
stock ownership guidelines that require the CEO to own a number of shares equal in value to six times his annual base salary. The CEO is currently in compliance with this guideline.
In connection with the 2011 update review of the Company’s compensation program with John Bloedorn, formerly of Mercer, the
Compensation Committee modified the program with respect to the Company’s CEO and COO to include a performance-based stock option grant. In 2012, the CEO and COO were each awarded a single performance-based stock option grant in lieu of one
half of their existing restricted stock unit incentive opportunities for 2012 through 2015. The awards provided that half of the grant would vest upon achievement of 50% growth of pro-forma diluted net earnings per share and the other half would
vest upon achievement of 50% growth of pro-forma earnings before interest, taxes, depreciation and amortization (“EBITDA”) over a trailing twelve month period. For this purpose, the Company defines pro-forma EBITDA as income before taxes,
interest, depreciation and amortization of intangible assets, and does not include income from discontinued operations, restructuring costs or benefits, acquisition-related adjustments or non-cash stock compensation expense. The Compensation
Committee chose to include the pro-forma EBITDA measurement component to ensure that a substantial portion of the performance criteria for the option awards would not benefit from
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accretion resulting from the Company’s 2012 modified Dutch auction tender offer. In 2013, the CEO and COO voluntarily converted these option grants into stock appreciation rights
(“SARs”) subject to the same terms as were applicable to the options, with the exception that the SARs will be settled in cash, Company stock, or any combination thereof, at the Company’s discretion. After 2015, it is expected that
the CEO’s and COO’s performance-based equity program will revert to the program in place prior to the 2011 option grants. See “Role of Consultants” below for additional information regarding the Compensation Committee’s use
of external consultants in connection with changes to the Company’s incentive compensation program beginning in 2012.
In
2014, the Company’s executive compensation programs for its named executive officers included base salaries, cash and equity incentive programs with payout opportunities tied to the achievement of pro-forma diluted net earnings per share
targets based on Board-approved operating plans. See “Executive Compensation Decisions for 2014” on page 16 of this proxy statement. In 2014, the Compensation Committee introduced a new “Senior Practice Leaders Equity Incentive
Program” which allowed its senior practice leaders the opportunity to defer the vesting dates for three additional years of outstanding unvested RSU grants in exchange for a guaranteed value of the Company stock on the deferred vesting dates.
The Compensation Committee believes that this Program serves as a valuable retention tool for the Company. Our named executive officers were not included in the pool of associates eligible to participate in this Program, as the Compensation
Committee believes that the compensation program for the named executive officers functions as a sufficient retention tool.
Annual
Compensation
Annual compensation consists of base salaries and employee benefits. These elements are intended to provide a
degree of compensation certainty to the named executive officers by providing compensation that, unlike incentive compensation, is not variable based on the achievement of performance criteria.
Base Salaries
The salaries payable to the Company’s named executive officers are generally recommended to the Board by the Compensation Committee during the first quarter of each fiscal year. Each of the named
executive officers is a party to an employment agreement that establishes a minimum salary level for the named executive officer. The employment agreements do not provide for any guaranteed increases to base salaries.
The Company believes the base salaries it currently pays to its named executive officers are at market competitive levels for companies
of similar size within its industry. The Company has not increased the base salary of any of its named executive officers since 2010. See the “Summary Compensation Table” on page 19 of this proxy statement and the related footnotes for
additional information about base salaries.
Customary Employee Benefits
The named executive officers, like the rest of the Company’s employees, receive certain customary employee benefits. For 2014, these
benefits included health insurance, dental and vision coverage, prescription drug plans, life insurance, flexible spending accounts, short-term and long-term disability insurance and a 401(k) plan. The Company covers approximately 60% of the cost of
the health benefits for its North American based employees, including its named executive officers. In other geographies, the Company’s compensation and benefits packages vary by country and are based on market standards, local custom and legal
requirements in the jurisdiction. The Company does not provide for any special retirement-related benefits, such as pensions or 401(k) contribution matches, for its senior executives.
No Perquisites
The Company does not provide any executive perquisites.
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Incentive Compensation
The Compensation Committee strongly believes that a significant portion of the Company’s named executive officers’ compensation should be tied to performance and the Company’s annual
incentive program reflects this. For 2014, variable, non- guaranteed performance based compensation paid to Messrs. Fernandez and Dungan represented 75% and 71%, respectively, of their total compensation.
The Company’s annual incentive compensation component consists of annual performance based cash incentive awards and performance
based equity incentive grants in the form of restricted stock units which vest over a three year period following the year of performance. These performance based cash and equity opportunities are tied to the achievement of pro-forma diluted net
earnings per share targets based on a Board-approved operating plan. Each participant in the Company’s executive compensation program has target cash and equity incentive opportunities expressed as a percentage of salary. Cash and equity
payouts are based on the dollar amount of the opportunity earned based on target levels achieved. Cash awards are paid to the executives and performance-based equity incentive awards earned expressed in a dollar amount are divided by the
Company’s share price on the date of grant to calculate the equity incentive grant. The equity portion of the incentive programs established for the CEO and COO for 2012 through 2014 was reduced by 50% from historical levels in recognition of
the opportunity contained in their outstanding SAR grants, and the equity portion for the incentive program for 2015 will be similarly reduced.
Role of Consultants
In
2011, the Compensation Committee engaged John Bloedorn, formerly of Mercer, an independent executive compensation consultant who served as the lead consultant for the program review conducted in 2005, to review the Company’s executive
compensation programs and update the recommendations received by the Compensation Committee in 2005. In light of that review, the Compensation Committee concluded that the programs remain competitive and appropriate given the Company’s size and
industry. However, the Committee chose to further enhance its pay-for-performance objectives by modifying its equity-related incentive feature for the CEO and COO described above under “The Elements of Executive Compensation at the
Company.” With respect to both the 2005 and 2011 reviews, the consultant did not perform any services on behalf of management and did not have any potential business conflicts that would affect its role as an independent advisor.
A compensation consultant was not engaged by the Committee in 2014.
Shareholder “Say on Pay” Vote
In the “Say on Pay” vote
provided by the Company at its 2014 annual meeting of shareholders, our shareholders approved the compensation of the Company’s executives as disclosed in the Company’s proxy statement for the meeting, with approximately 72.4% of the votes
cast in favor. The Compensation Committee considered the results of this vote in choosing to maintain the Company’s overall compensation philosophy and objectives and in setting the compensation of the Company’s named executive officers
for fiscal year 2015. However, to ensure that the Company’s equity incentive plan is in line with best practices, the Compensation Committee has approved the amendments described in Proposal 2, including the adoption of a one-year minimum
vesting period for full value awards, the prohibition of accelerated vesting except in certain limited instances and a narrowing of the Change in Control definition under the equity incentive plan. See “Proposal 3—Advisory Vote on
Executive Compensation” on page 40 of this proxy statement and “Proposal 2—To Approve An Amendment to the Company’s 1998 Stock Option and Incentive Plan to (I) Increase the Sublimit for Issuances of Restricted Stock and
Restricted Stock Units by 1,200,000 Shares and (II) Increase the Total Number of Shares Authorized for Issuance Under the 1998 Stock Option and Incentive Plan by 1,200,000 Shares” for more information.
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Executive Compensation Decisions for 2014
Base Salary
The Compensation Committee believes that the base salaries of
the Company’s named executive officers, Messrs. Fernandez, Dungan, and Ramirez, remain at market competitive levels for companies of similar size within the Company’s industry. Accordingly, the Compensation Committee decided not to
increase the named executive officers’ base salaries in 2014, and their base salaries will remain unchanged for 2015 as well. Messrs. Fernandez, Dungan, and Ramirez’s base salaries in 2014 were $750,000, $525,000 and $300,000,
respectively. For information about the 2014 compensation of the Company’s named executive officers, see “Summary Compensation Table” on page 19 of this proxy statement.
Incentive Compensation
Each participant in the Company’s executive
compensation program has cash and equity incentive opportunities expressed as a percentage of salary that are tied to specified performance targets. For 2014, variable compensation paid to Messrs. Fernandez, Dungan, and Ramirez in the form of cash
and restricted stock units subject to a three year vesting period represented 75%, 71%, and 61%, respectively, of their total compensation as reported in the Summary Compensation Table.
At its meeting held on February 12, 2014, the Compensation Committee reviewed and approved base salaries and cash and equity
incentive plan targets for the Company’s named executive officers, as well as for the Company’s other senior leaders. The Compensation Committee specifically approved a program for its named executive officers that would pay annual cash
and equity bonuses in connection with the achievement 2014 pro-forma diluted earnings per share performance targets. For 2014, the “Goal” and “Superior” targets established by the Compensation Committee were 45.5 cents and 50.0
cents, respectively. These targets represented a 10% and 21% improvement over the Company’s prior year actual pro-forma diluted net earnings per share results, respectively.
2014 Performance Outcomes
In 2014, the Company generated revenue and pro-forma earnings of $236.7 million and $16.9 million, respectively. The Company had revenue growth in 2014 of 6% with corresponding pro-forma diluted net
earnings per share growth of 37% and pro-forma EBITDA growth of 13%. In accordance with the targets established by the Compensation Committee, the Company’s actual 2014 pro-forma diluted net earnings per share resulted in 103% of the
“Superior” level payout under the Company’s 2014 executive compensation plan. In addition, subsequent to year end, in connection with the Company’s achievement of over 50% growth of pro-forma diluted net earnings per share since
fiscal year 2011, upon the approval of the Audit Committee’s review of the Company’s 2014 financial statements and Annual Report on Form 10-K, 50% of the outstanding SARs awards granted to the CEO and COO became vested, along with 50,000
performance-based stock options granted to our CFO in 2012.
Executive Compensation Program Decisions for 2015
At its meeting held on February 20, 2015, the Compensation Committee reviewed and approved 2015 base salaries and cash and equity
incentive plan targets for the Company’s named executive officers, as well as for the Company’s other senior leaders. Consistent with prior years, the Compensation Committee specifically approved a program for its named executive officers
that, in addition to base salaries, would pay annual cash and equity incentive bonuses in connection with the achievement specified 2015 performance targets. The Compensation Committee chose to retain the pro-forma diluted net earnings per share as
the performance measure in the 2015 program. Consistent with fiscal years 2012 through 2014, for 2015 the equity incentive opportunity for the Company’s CEO and COO is 50% less than historical levels in recognition of the 2012
performance-based stock option grants that subsequently were converted into SARs in 2013.
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The Company’s Compensation Committee has established challenging performance targets
for 2015 seeking to build on the momentum established in 2014. The Company’s pro-forma diluted net earnings per share must improve at least 16% from 2014 actual results in order for the Company’s named executive officers to earn their
“Goal” cash and restricted stock unit performance incentive awards. The Company’s pro-forma diluted net earnings per share must improve at least 25% from 2014 actual results in order for the Company’s named executive officers to
earn their “Superior” cash and restricted stock unit performance incentive awards.
Timing of Equity Incentive Plan Awards and
Discretionary Equity Awards
The Company does not have a program, plan or practice to time equity awards, including option
grants, to its named executive officers or directors in coordination with the release of material non-public information. The Company consistently presents to its Compensation Committee for approval all year-end cash and equity bonus awards based on
the previous year’s results at the first Compensation Committee meeting of the year. However, the timing of this approval may be changed in the event of extraordinary circumstances. The Company’s equity plan expressly prohibits the
repricing of options and SARs.
Tax and Accounting Considerations and Compensation Deductibility Policy
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over $1
million paid for any fiscal year to the corporation’s chief executive officer and up to three other executive officers (other than the chief financial officer) whose compensation must be included in this proxy statement because they are our
most highly compensated executive officers. Section 162(m) exempts qualifying performance-based compensation from the deduction limit, however, if certain requirements are met. It is the Compensation Committee’s intent that awards to
executive officers under the Company’s annual performance-based cash bonus and equity awards program qualify for this exemption. However, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m)
and the regulations issued thereunder, no assurance can be given that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so. Furthermore, the Compensation Committee believes
that tax deductibility is one of several important consideration in determining compensation for the Company’s named executive officers, and therefore retains the flexibility to pay compensation to senior executives based on other
considerations, even if certain amounts that may be payable in excess of $1 million may not be deductible under Section 162(m).
Compensation Recovery
Under the Sarbanes-Oxley Act, in the event of misconduct that results in a financial restatement that would have reduced a previously paid
incentive amount, the Company can recoup, or “claw back”, those improper payments from the CEO and CFO. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”) directed the SEC to craft new rules for
recoupment in addition to that contained in the Sarbanes-Oxley Act. Notwithstanding the lack of final compensation recovery rules pursuant to Dodd-Frank, the Company adopted an Incentive Compensation Recoupment Policy that allows for the recovery
from its current or former named executive officers of any erroneously awarded compensation in the three-year period prior to a restatement. A copy of the Company’s Incentive Compensation Recoupment Policy can be found on the Company’s
website at www.thehackettgroup.com/about/ir_governance.jsp
18
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name and Principal Position |
|
Year |
|
|
Salary
($) |
|
|
Cash
Bonus
($)(1) |
|
|
Equity
(Restricted
Stock Unit)
Incentive
Compensation
Awards
($)(2) |
|
|
Performance
Based
Stock
Option
Awards
($)(3) |
|
|
Total
($) |
|
| Ted A. Fernandez
(Chairman, Chief Executive
Officer) |
|
|
2014
2013
2012 |
|
|
|
750,000
750,000
750,000 |
|
|
|
1,350,000
555,900
602,873 |
|
|
|
957,500
472,515
512,645 |
|
|
|
—
—
914,674 |
|
|
|
3,057,500
1,778,415
2,780,192 |
|
|
|
|
|
|
|
|
| David N. Dungan
(Vice Chairman, Chief Operating Officer) |
|
|
2014
2013
2012 |
|
|
|
525,000
525,000
525,000 |
|
|
|
756,000
311,304
337,609 |
|
|
|
502,688
248,070
269,139 |
|
|
|
—
—
480,204 |
|
|
|
1,783,688
1,084,374
1,611,952 |
|
|
|
|
|
|
|
|
| Robert A. Ramirez
(Executive Vice President Finance and Chief Financial Officer) |
|
|
2014
2013
2012 |
|
|
|
300,000
300,000
300,000 |
|
|
|
230,000
111,180
120,575 |
|
|
|
230,000
161,180
120,622 |
|
|
|
—
—
47,826 |
|
|
|
760,000
572,360
589,023 |
|
| (1) |
See “Compensation Discussion and Analysis” on page 13 of this proxy statement for a discussion of how the cash (non-equity) incentive amounts are
determined. Also see the “Grants of Plan-Based Awards” table on page 20 of this proxy statement for additional detail on cash and equity incentive compensation earned based on fiscal 2014 performance. |
| (2) |
Amounts shown in this column are based on the aggregate grant date fair value, computed in accordance FASB ASC Topic 718, of grants of performance-based restricted
stock units to the named executive officers in the applicable fiscal year. |
| (3) |
The amounts shown for 2012 in this column represent the grant date fair value of stock options subject to performance-based vesting conditions granted in 2012, based on
the probable outcome of such conditions. This amount is consistent with the estimate of the aggregate compensation cost for each award to be recognized over the service period determined as of the grant date in accordance FASB ASC Topic 718,
excluding the effect of estimated forfeitures. The value of each award at the grant date assuming that the highest level of performance conditions will be achieved for Messrs. Fernandez, Dungan and Ramirez is $2,504,897, $1,315,072 and
$130,975, respectively. In March 2013, the performance-based options for Mr. Fernandez and Mr. Dungan were replaced with SARs equal in number to the number of options granted to each of them in 2012, which will be settled in cash, Company
stock or any combination thereof, at the Company’s discretion. Half of the grant vests upon the achievement of 50% growth of pro-forma diluted net earnings per share and the other half vests based on 50% growth of pro-forma EBITDA growth based
on a trailing twelve month period. Because all of the SARs represent replacement awards for the options granted to Mr. Fernandez and Mr. Dungan in 2012, no amounts in respect of the SARs have been reported in this column for 2013.
Subsequent to year end and as of the Record Date, in connection with the Company’s achievement of over 50% growth of pro-forma diluted net earnings per share since fiscal year 2011, upon the Audit Committee’s approval of the Company’s
2014 financial statements and their recommendation that the financial statements be included in the Company’s Annual Report on Form 10-K, 50% of the outstanding SARs awards granted to the CEO and COO vested. |
19
GRANTS OF PLAN-BASED AWARDS
FOR FISCAL YEAR 2014
The following table sets forth information on the cash and equity grant awards issued to the named executive officers under the Company’s executive compensation plan for fiscal 2014.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name |
|
Grant
Date |
|
|
Cash
(Non-Equity)
Incentive
Compensation
Awards
($) |
|
|
Equity (Restricted
Stock Units)
Incentive
Compensation
(#)(1) |
|
|
Grant Date
Fair Value of
Stock Awards
($) |
|
| Ted A. Fernandez |
|
|
February 20, 2015 |
|
|
|
1,350,000 |
|
|
|
119,837 |
|
|
|
957,500 |
|
| David N. Dungan |
|
|
February 20, 2015 |
|
|
|
756,000 |
|
|
|
62,915 |
|
|
|
502,688 |
|
| Robert A. Ramirez |
|
|
February 20, 2015 |
|
|
|
230,000 |
|
|
|
28,786 |
|
|
|
230,000 |
|
| (1) |
See “Compensation Discussion and Analysis” on page 13 of this proxy statement for a discussion of the performance criteria and how awards are determined.
One third of each equity grant vests annually beginning with the first anniversary of the grant date. |
Equity Compensation
Plan Information
The Company maintains The Hackett Group, Inc. 1998 Stock Option and Incentive Plan and The Hackett Group,
Inc. Employee Stock Purchase Plan.
The table below sets forth the following information as of January 2, 2015 for
(1) all compensation plans previously approved by the Company’s shareholders and (2) all compensation plans not previously approved by the Company’s shareholders:
| |
• |
|
The number of securities to be issued upon the exercise of outstanding options, warrants, rights and restrict stock units and the vesting of unvested
restricted stock units; |
| |
• |
|
The weighted-average exercise price of such outstanding options, warrants and rights; and |
| |
• |
|
The number of securities remaining available for future issuance under the plans, other than securities to be issued upon the exercise of such
outstanding options, warrants and rights and the vesting of restricted stock units. |
20
|
|
|
|
|
|
|
|
|
|
|
|
|
| Plan Category |
|
Number of Securities to
be Issued Upon
Exercise of Outstanding
Options and
Unvested
Restricted Stock Units,
Warrants and Rights
(#)(4) |
|
|
Weighted-Average
Exercise Price
of
Outstanding Options
and Unvested
Restricted
Stock Units,
Warrants and Rights
($) |
|
|
Number of Securities
Remaining Available for
Future Issuance
Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column 1)
(#)(3) |
|
| Restricted stock units issued under equity compensation plans approved by shareholders(1) |
|
|
2,315,213 |
|
|
|
— |
|
|
|
1,247,404 |
(2) |
| Stock options issued under equity compensation plans approved by shareholders(1)(5) |
|
|
297,667 |
|
|
|
4.00 |
|
|
|
479,534 |
|
| Equity compensation plans not approved by shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
2,612,880 |
|
|
|
|
|
|
|
1,726,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The equity compensation plans approved by the Company’s shareholders are the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) and the
Company’s Employee Stock Purchase Plan. The Plan authorizes the issuance of compensation equity awards in the form of restricted stock, restricted stock units, stock options and SARs. Since fiscal year 2005, the Company’s primary equity
compensation plan component has been restricted stock units. As such, the Company believes it is important to highlight in this table statistical information related to the restricted stock units issued, outstanding, unvested and available for
issuance under the Plan. |
| (2) |
As of the Record Date, the number of shares available for issuance pursuant to awards of restricted stock or restricted stock units was 674,790.
|
| (3) |
This amount does not include 170,073 shares available for issuance under the Company’s Employee Stock Purchase Plan. |
| (4) |
Excludes 2,916,563 SARs with a weighted average exercise price of $4.00 and an average remaining life of 7.1 years, assuming that all of the SARs become fully vested
prior to February 9, 2018 based on the achievement of performance targets contained in the SARs award agreements. |
| (5) |
The stock options issued under equity compensation plans approved by shareholders have an average remaining life of 6.8 years. |
21
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(Does not include equity awards granted after fiscal year-end. See the “Grants of Plan-Based Awards” table
on page 20 of this Proxy Statement and “Executive Compensation Decisions for 2015” on page 17 of this proxy statement for information on payments and grants made following the 2014 fiscal year-end.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Outstanding SAR Awards |
|
|
Stock Awards |
|
| Name |
|
Number of
Securities
Underlying
Unexercised
SARs
Exercisable
(#) |
|
|
Number of
Securities
Underlying
Unexercised
SARs
Unexercisable
(#) |
|
|
SAR
Exercise
Price
($) |
|
|
SAR
Expiration Date |
|
|
Number of
Restricted
Units of Stock
That Have
Not Vested
(#) |
|
|
Market Value
of Restricted
Units of Stock
That Have
Not
Vested
($)(7) |
|
| Ted A. Fernandez |
|
|
— |
|
|
|
1,912,500 |
(1) |
|
|
4.00 |
|
|
|
February 8, 2022 |
|
|
|
266,209 |
(2) |
|
|
2,316,018 |
|
| David N. Dungan |
|
|
— |
|
|
|
1,004,063 |
(3) |
|
|
4.00 |
|
|
|
February 8, 2022 |
|
|
|
139,760 |
(4) |
|
|
1,215,912 |
|
| Robert A. Ramirez(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
56,250 |
(6) |
|
|
489,375 |
|
| (1) |
Includes 956,250 SARs which vested subsequent to fiscal year end 2014, upon the Audit Committee’s approval of the Company’s 2014 financial statements and
their recommendation that the financial statements be included in the Company’s Annual Report on Form 10-K, subject to the achievement of the pro-forma diluted net earnings per share target contained in the award agreement. Includes 956,250
SARs which have not vested, and which will vest only upon the achievement of the pro-forma EBITDA target contained in the award agreement. These unvested SARs will expire February 9, 2018 if the target is not achieved. Any portion of the
options vested as of February 8, 2018 will expire on February 8, 2022. |
| (2) |
Represents 266,209 performance-based restricted stock units granted in 2012, 2013 and 2014 for 2011, 2012 and 2013 fiscal year performance. Excludes 119,837 restricted
stock units granted on February 20, 2015 for 2014 fiscal year performance, one third of which vest annually on the anniversary of the date of grant. 174,244 of these stock units will vest in 2015. See “Executive Compensation Decisions for
2015” on page 17 of this proxy statement. |
| (3) |
Includes 502,032 SARs which vested subsequent to fiscal year end 2014, upon the Audit Committee’s approval of the Company’s 2014 financial statements and
their recommendation that the financial statements be included in the Company’s Annual Report on Form 10-K, subject to the achievement of the pro-forma diluted net earnings per share target contained in the award agreement. Includes 502,031
SARs which have not vested, and which will vest upon the achievement of the pro-forma EBITDA target contained in the award agreement. These unvested SARs will expire February 9, 2018 if the target is not achieved. Any portion of the options
vested as of February 8, 2018 will expire on February 8, 2022. |
| (4) |
Represents 139,760 performance-based restricted stock units granted in 2012, 2013 and 2014 for 2011, 2012 and 2013 fiscal year performance. Excludes 62,915 restricted
stock units granted on February 20, 2015 for 2014 fiscal year performance, one third of which vest annually on the anniversary of the date of grant. 91,479 of these stock units will vest in 2015. See “Executive Compensation Decisions for
2015” on page 17 of this proxy statement. |
| (5) |
Excludes performance-based options granted in 2012 to Mr. Ramirez of 100,000 with an exercise price of $4.00. 50,000 of these options vested subsequent to year end
2014, upon the Audit Committee’s approval of the Company’s 2014 financial statements and their recommendation that the financial statements be included in the Company’s Annual Report on Form 10-K, subject to the achievement of the
pro-forma diluted net earnings per share target contained in the award agreement. 50,000 of these options have not vested and will vest upon the achievement of the pro-forma EBITDA target contained in the award agreement. These unvested options will
expire on February 17, 2018 if the target is not achieved. Any portion of the options vested as of February 17, 2018 will expire on February 17, 2022. No other options are outstanding for the named executive officers at the end of
fiscal 2014. |
| (6) |
Represents 49,817 performance-based restricted stock units granted in 2012, 2013 and 2014 for 2011, 2012 and 2013 fiscal year performance. Also includes 6,433
restricted stock units granted in 2013 at the discretion of the Compensation Committee. Excludes 28,786 restricted stock units granted on February 20, 2015 for 2014 fiscal year performance, one third of which vest annually on the anniversary of
the date of grant. 30,323 of these stock units will vest in 2015. See “Executive Compensation Decisions for 2015” on page 17 of this proxy statement. |
22
OPTION EXERCISES AND STOCK VESTED
(During fiscal year-ended January 2, 2015)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Option Awards |
|
|
Outstanding Restricted Stock Awards |
|
| Name |
|
Number of Shares
Acquired on Exercise
(#) |
|
|
Value Realized
on
Exercise
($) |
|
|
Number of Shares
Acquired on Vesting
(#) |
|
|
Value Realized
on
Vesting
($) |
|
| Ted A. Fernandez |
|
|
— |
|
|
|
— |
|
|
|
280,881 |
|
|
|
1,675,198 |
|
| David N. Dungan |
|
|
— |
|
|
|
— |
|
|
|
177,534 |
|
|
|
1,047,451 |
|
| Robert A. Ramirez |
|
|
— |
|
|
|
— |
|
|
|
46,999 |
|
|
|
281,989 |
|
Narrative Disclosure to Summary Compensation Table and Plan-Based Awards Table
Mr. Fernandez
Mr. Fernandez entered into an employment agreement with the Company effective as of June 2, 1998, as amended on November 10, 2004 and June 10, 2005. It was further amended as of
December 30, 2008 to comply with Section 409A of the Internal Revenue Code. The agreement provided for a three-year term (with an automatic renewal for one additional year on each subsequent anniversary thereafter unless either party gives
contrary notice) and currently provides for an annual salary and bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement also contains certain confidentiality, non-competition and
non-solicitation provisions. Mr. Fernandez’s employment agreement also includes the following provisions:
| |
• |
|
upon a change of control, regardless of termination, Mr. Fernandez will receive two hundred percent of his annual salary and bonus paid in lump
sum and full vesting of all issued and outstanding equity grants, including restricted stock units, stock options and SARs and no further payments would be due upon termination; |
| |
• |
|
upon termination by the Company without cause, or upon termination by Mr. Fernandez for “good reason,” Mr. Fernandez will receive
one year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants, including restricted stock units, stock options and SARs; |
| |
• |
|
upon termination for disability, Mr. Fernandez will receive one year’s annual salary and bonus paid in lump sum and full vesting of all
issued and outstanding equity grants, including restricted stock units, stock options and SARs; and |
| |
• |
|
upon termination due to death, all issued and outstanding equity grants, including restricted stock units, stock options and SARs will immediately
vest. |
| |
• |
|
The agreement does not provide for any golden parachute excise tax gross-ups. |
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 13 of this
proxy statement.
23
Mr. Dungan
Mr. Dungan entered into an employment agreement with the Company effective as of December 26, 2001, as amended on November 10, 2004 and on March 24, 2006. It was further amended as of
December 30, 2008 to comply with Section 409A of the Internal Revenue Code. Mr. Dungan’s agreement provided for a three-year term (with an automatic renewal for one additional year on the first and each subsequent anniversary
thereafter unless either party gives contrary notice) and currently provides for an annual salary and bonus to be determined and paid pursuant to a bonus plan to be adopted by the Board for each fiscal year. The agreement contains certain
confidentiality, non-competition and non-solicitation provisions. The agreement also includes the following provisions:
| |
• |
|
upon a change of control, regardless of termination, Mr. Dungan will receive two hundred percent of his annual salary and bonus paid in lump sum
and full vesting of all issued and outstanding equity grants, including restricted stock units, stock options and SARs and no further payments would be due upon termination; |
| |
• |
|
upon termination by the Company without cause, or upon termination by Mr. Dungan for “good reason,” Mr. Dungan will receive one
year’s annual salary and bonus paid in lump sum and full vesting of all issued and outstanding equity grants, including restricted stock units, stock options and SARs; |
| |
• |
|
upon termination for disability, Mr. Dungan will receive one year’s annual salary and bonus paid in lump sum and full vesting of any issued
and outstanding equity grants, including restricted stock units, stock options and SARs; and |
| |
• |
|
upon termination due to death, all issued and outstanding equity grants, including restricted stock units, stock options and SARs will immediately
vest. |
| |
• |
|
The agreement does not provide for any golden parachute excise tax gross-ups. |
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 13 of this
proxy statement.
Mr. Ramirez
Mr. Ramirez entered into an employment agreement with the Company effective as of August 1, 2007. Mr. Ramirez’s employment agreement provided for a three-year term (with an automatic
renewal for one additional year thereafter on each subsequent anniversary unless either party gives contrary notice) and currently provides for an annual salary and bonus pursuant to a bonus plan to be adopted by the Board for each fiscal year. The
agreement contains provisions regarding confidentiality, proprietary information and work product, non-competition and non-solicitation. The agreement also includes the following provisions:
| |
• |
|
if Mr. Ramirez is terminated by the Company without cause, or Mr. Ramirez terminates his employment with “good reason,”
Mr. Ramirez will be entitled to a severance payment at the rate of his annual salary and benefits for a six-month period from the date of termination; |
| |
• |
|
if Mr. Ramirez finds new employment after termination, the Company may eliminate or reduce such severance payments and benefits
|
| |
• |
|
if Mr. Ramirez’s employment is terminated by the Company without cause or by Mr. Ramirez with “good reason,” in either case in
anticipation of, in connection with or within one year after a “change of control” (as defined), his salary will be continued for one year, his benefits will be continued for one year (subject to cessation if Mr. Ramirez is entitled
to similar benefits from a new employer) and restricted stock, restricted stock units and stock options then held by him will become fully vested. |
| |
• |
|
The agreement does not provide for any golden parachute excise tax gross-ups. |
Also see “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 13 of this
proxy statement.
24
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The tables below quantify (in U.S. Dollars) the potential payments upon termination or a change in control of the Company
for each of the named executive officers actively employed by the Company at the end of fiscal 2014. All amounts are calculated assuming (i) a fiscal year-end 2014 termination date of January 2, 2015 and (ii) the price per share of
the Company’ securities was the closing market price as of that date. These payments are subject to the terms of the employment agreements that are summarized on pages 24 and 25 under “Narrative Disclosure to Summary Compensation Table and
Plan-Based Awards Table” above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mr. Fernandez’s Benefits and Payments
Upon Termination |
|
Death
($) |
|
|
Disability
($) |
|
|
By
the
Company for
Cause
($) |
|
|
By the
Executive for
Good Reason
($) |
|
|
Change in
Control
($) |
|
| Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Base Salary |
|
|
— |
|
|
|
750,000 |
|
|
|
— |
|
|
|
750,000 |
|
|
|
750,000 |
|
| Annual Bonus |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,350,000 |
|
|
|
2,700,000 |
|
| Stock Options and Restricted Stock Units (unvested and accelerated)(1) |
|
|
2,316,018 |
|
|
|
2,316,018 |
|
|
|
— |
|
|
|
2,316,018 |
|
|
|
2,316,018 |
|
|
|
|
|
|
|
| Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Health Insurance Premiums |
|
|
18,543 |
|
|
|
18,543 |
|
|
|
— |
|
|
|
18,543 |
|
|
|
18,543 |
|
| Life, Accidental Death and Disability Premiums |
|
|
5,904 |
|
|
|
5,904 |
|
|
|
— |
|
|
|
5,904 |
|
|
|
5,904 |
|
| Life Insurance Premium |
|
|
10,894 |
|
|
|
10,894 |
|
|
|
— |
|
|
|
10,894 |
|
|
|
10,894 |
|
| Gross-up Payment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
2,351,359 |
|
|
|
3,101,359 |
|
|
|
— |
|
|
|
4,451,359 |
|
|
|
5,801,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mr. Dungan’s Benefits and Payments
Upon Termination |
|
Death
($) |
|
|
Disability
($) |
|
|
By
the
Company for
Cause
($) |
|
|
By the
Executive for
Good Reason
($) |
|
|
Change in
Control
($) |
|
| Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Base Salary |
|
|
— |
|
|
|
525,000 |
|
|
|
— |
|
|
|
525,000 |
|
|
|
525,000 |
|
| Annual Bonus |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
756,000 |
|
|
|
1,512,000 |
|
| Stock Options and Restricted Stock Units (unvested and accelerated)(1) |
|
|
1,215,912 |
|
|
|
1,215,912 |
|
|
|
— |
|
|
|
1,215,912 |
|
|
|
1,215,912 |
|
|
|
|
|
|
|
| Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Health Insurance Premiums |
|
|
12,894 |
|
|
|
12,894 |
|
|
|
— |
|
|
|
12,894 |
|
|
|
12,894 |
|
| Life, Accidental Death and Disability Premiums |
|
|
5,031 |
|
|
|
5,031 |
|
|
|
— |
|
|
|
5,031 |
|
|
|
5,031 |
|
| Life Insurance Premium |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Gross-up Payment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
1,233,837 |
|
|
|
1,758,837 |
|
|
|
— |
|
|
|
2,514,837 |
|
|
|
3,270,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mr. Ramirez’s Benefits and Payments
Upon Termination |
|
Death
($) |
|
|
Disability
($) |
|
|
By
the
Company for
Cause
($) |
|
|
By the
Executive for
Good Reason
($) |
|
|
Change in
Control
($) |
|
| Compensation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Base Salary |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
|
300,000 |
|
| Annual Bonus |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Stock Options and Restricted Stock Units (unvested and accelerated)(1) |
|
|
489,375 |
|
|
|
489,375 |
|
|
|
— |
|
|
|
489,375 |
|
|
|
489,375 |
|
|
|
|
|
|
|
| Benefits and Perquisites: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Health Insurance Premiums |
|
|
20,366 |
|
|
|
20,366 |
|
|
|
— |
|
|
|
20,366 |
|
|
|
20,366 |
|
| Life, Accidental Death and Disability Premiums |
|
|
2,817 |
|
|
|
2,817 |
|
|
|
— |
|
|
|
2,817 |
|
|
|
2,817 |
|
| Life Insurance Premium |
|
|
5,037 |
|
|
|
5,037 |
|
|
|
— |
|
|
|
5,037 |
|
|
|
5,037 |
|
| Gross-up Payment |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
517,595 |
|
|
|
517,595 |
|
|
|
— |
|
|
|
667,595 |
|
|
|
817,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Does not include any value ascribed to issued, but unearned and unvested performance-based SARs and options, as of year end. Subsequent to year end, upon the Audit
Committee’s approval of the Company’s 2014 financial statements and their recommendation that the financial statements be included in the Company’s Annual Report on Form 10-K, 50% of the outstanding SARs awards granted to the CEO and
COO became vested, along with 50,000 performance-based stock options previously granted to our CFO in connection with the Company’s achievement of over 50% growth of pro-forma diluted earnings per share since fiscal year 2011. Upon death,
disability, termination without cause or for good reason or upon a change of control, the remaining unvested SARs would vest on a pro-rata basis based on achievement against a pro-forma EBITDA growth target. As of the Record Date, the shares
underlying the vested portion of the performance based SARs for Mr. Fernandez and Mr. Dungan were 521,591 and 273,835, respectively, and had a value as of the Record Date of $4.6 million and $2.4 million, respectively. Also, as of the
Record Date, based on the pro rata achievement against the 50% pro-forma adjusted EBITDA growth target measured as of year end 2014, the shares underlying Mr. Fernandez’ and Mr. Dungan’s unvested SARs were 130,398 and 68,459,
respectively, and had a value as of the Record Date of $1.1 million and $602 thousand, respectively. See “Compensation Discussion and Analysis – The Elements of Executive Compensation at the Company” on page 13 of this proxy statement
for more information. |
In certain cases the tax laws deny an income tax deduction to a company for payments that
are contingent upon a change in control. Benefits under the employment agreements will be delayed or modified if such delays or modifications are necessary to comply with the rules governing deferred compensation plans under Section 409A of the
Internal Revenue Code.
DIRECTOR COMPENSATION
Director Compensation for 2014
Directors who are officers or employees of the Company or any subsidiary of the Company receive no additional compensation for serving on the Board or any of its committees. Each outside director receives
an annual $15,000 cash retainer. Outside directors also receive a cash fee of $4,000 for each regularly scheduled Board meeting attended in person and a cash fee of $1,500 for each regularly scheduled Board meeting attended by telephone. Committee
members also receive a cash fee of $1,000 for each regularly scheduled committee meeting attended. Both Board and committee members also receive a cash fee of $750 for each special meeting attended whether in person or otherwise. All directors are
reimbursed for travel expenses incurred in connection with attending Board and committee meetings. Board fees related to attendance at regularly scheduled meetings is limited to $40,000 per year. Fees related to special meetings are not subject to
this limitation.
26
The Company’s outside directors also receive an annual restricted stock unit grant
equal in value to $60,000 on the date of grant. All restricted stock units granted under this program vest in three equal annual installments beginning on the first anniversary of the grant and will also vest upon termination of service. The Board
reserves the right to make additional stock option or restricted stock unit grants to directors who are not officers of the Company on a discretionary basis during any fiscal year. Upon reaching ten years of service on the Board, outside directors
members receive a restricted stock unit grant equal in number of units to his or her annual service grant for that year. Beginning with grants that occurred in 2012, each of the Company’s outside directors is allowed to elect to defer the
receipt of their shares upon vesting for three years, five years or until death, disability or termination of service on the Board.
Director Compensation for Fiscal 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
| Name |
|
Fees
Earned or
Paid
in
Cash
($) |
|
|
Restricted
Stock
Awards
(1) ($) |
|
|
Total
($) |
|
| Terence M. Graunke |
|
|
24,250 |
|
|
|
60,000 |
|
|
|
84,250 |
|
| Richard N. Hamlin |
|
|
43,000 |
|
|
|
60,000 |
|
|
|
103,000 |
|
| John R. Harris |
|
|
43,000 |
|
|
|
60,000 |
|
|
|
103,000 |
|
| Edwin A. Huston |
|
|
41,000 |
|
|
|
60,000 |
|
|
|
101,000 |
|
| Alan T.G. Wix |
|
|
43,000 |
|
|
|
60,000 |
|
|
|
103,000 |
|
| (1) |
Amounts shown in this column are based on the aggregate grant date fair value as computed in accordance with FASB ASC Topic 718 for restricted stock unit and stock
option awards during fiscal 2014. The aggregate number of stock awards and the aggregate number of option awards outstanding at fiscal year-end appears in the following “Outstanding Director Equity Awards at 2014 Fiscal Year-End” table.
|
Director Compensation for 2015
For 2015, the Company’s outside director compensation program will remain unchanged.
OUTSTANDING DIRECTOR EQUITY AWARDS
AT 2014
FISCAL YEAR-END
|
|
|
|
|
| Name |
|
Restricted Stock
Awards
(unvested)
(#)(1)(2) |
|
Stock Option Awards
(exercisable/
unexercisable)
(#) |
| Terence M. Graunke |
|
24,326 |
|
— |
| Richard N. Hamlin |
|
24,326 |
|
7,500 /— |
| John R. Harris |
|
24,326 |
|
— |
| Edwin A. Huston |
|
24,326 |
|
10,000 /— |
| Alan T.G. Wix |
|
24,326 |
|
— |
| (1) |
Does not include 7,510 restricted stock units granted on February 20, 2015 in connection with the Company’s Outside Director Compensation Plan, one third of
which vest annually on the each of the first three anniversaries of the date of grant. |
| (2) |
Outside Board members are subject to stock ownership guidelines. See “Nominating and Corporate Governance Committee” on page 9 of this proxy statement.
|
Compensation Committee Interlocks
The Compensation Committee consists of Messrs. Huston (Chairman), Hamlin, Harris and Wix. No current or former member of the Compensation Committee is, or has ever been, an officer or employee of the
Company. None of the Company’s directors and none of their family members are employed as an executive of another company where any of the Company’s executives serve on the compensation committee of which the director is an executive.
27
PROPOSAL 2
TO APPROVE AN AMENDMENT TO THE COMPANY’S 1998 STOCK OPTION AND INCENTIVE PLAN TO (I) INCREASE THE SUBLIMIT FOR ISSUANCES OF
RESTRICTED STOCK AND RESTRICTED STOCK UNITS BY 1,200,000 SHARES AND (II) INCREASE THE TOTAL NUMBER OF SHARES AUTHORIZED FOR ISSUANCE UNDER THE 1998 STOCK OPTION AND INCENTIVE PLAN BY 1,200,000 SHARES.
Description of Proposed Amendment. The Board has adopted, subject to shareholder approval, an amendment to the
Company’s 1998 Stock Option and Incentive Plan, as amended and restated as of March 13, 2015 (the “Plan”). As described in further detail below, the purpose of the amendment is to increase the sublimit for issuances of restricted
stock and restricted stock units by 1,200,000 shares and to increase the total number of shares authorized for issuance under the Plan by 1,200,000 shares. In addition, while such changes are not subject to shareholder approval, the Plan amendment
includes the following changes to ensure that the Plan is in line with best practices: (1) the adoption of a one-year minimum vesting period for full value awards, (2) the prohibition of accelerated vesting except in certain limited
instances, and (3) a narrowing of the Change in Control definition under the Plan. A copy of the Amended and Restated Plan is attached hereto as Appendix A.
The table below contains information about the Plan as of the Record Date and reflects the impact of Proposal 2, assuming approval by the Company’s shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
As of Record Date |
|
|
If Proposal 2 is Approved |
|
| Plan Category |
|
Number of
Securities to
be Issued
Upon Exercise
of Outstanding
Options
and
Unvested
Restricted
Stock Units,
Warrants and
Rights
(#)(3) |
|
|
Weighted
Average
Exercise Price
of Outstanding
Options
and
Unvested
Restricted
Stock Units,
Warrants and
Rights
($) |
|
|
Number of
Securities
Remaining
Available for
Future Issuance
Under
Equity
Compensation
Plans (Excluding
Securities
Reflected
in Column 1)
(#) |
|
|
Plan and
RSU
Sublimit
Increase
(#) |
|
|
Number of
Securities
Remaining
Available for
Future Issuance
Under
Equity
Compensation
Plans (Excluding
Securities
Reflected
in Column 1)
(#) |
|
| Restricted stock units issued under equity compensation plans approved by shareholders(1) |
|
|
2,108,794 |
|
|
|
— |
|
|
|
674,790 |
|
|
|
1,200,000 |
(2) |
|
|
1,874,790 |
|
| Stock options issued under equity compensation plans approved by shareholders(1) |
|
|
297,667 |
(4) |
|
|
4.00 |
|
|
|
479,534 |
|
|
|
— |
|
|
|
479,534 |
|
| Equity compensation plans not approved by shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
2,406,461 |
|
|
|
|
|
|
|
1,154,324 |
|
|
|
|
|
|
|
2,354,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The equity compensation plans approved by the Company’s shareholders are the Company’s 1998 Stock Option and Incentive Plan (the “Plan”) and the
Company’s Employee Stock Purchase Plan. The Plan authorizes the issuance of compensation equity awards in the form of restricted stock, restricted stock units, stock options and SARs. Since fiscal year 2005, the Company’s primary equity
compensation plan component has been restricted stock units. As such, the Company believes it is important to highlight in this table statistical information related to the restricted stock units issued, outstanding, unvested and available for
issuance under the Plan. |
| (2) |
Since the approval of Proposal 2 would result in an increase in the sublimit amount that equals the increase in the total shares available for issuance, the increase is
reflected as shares available for restricted stock unit issuances. |
28
| (3) |
Excludes 2,916,563 outstanding SARs with a weighted average exercise price of $4.00 and an average remaining life of 6.9 years that can be settled in stock or cash at
the Company’s option. |
| (4) |
The stock options outstanding have an average remaining life of 6.6 years. |
Increase in Restricted Stock and Restricted Stock Unit Issuance Sublimit. As of the Record Date, 674,790 shares were available for issuance under the Plan pursuant to awards of
restricted stock or restricted stock units. The Company is seeking additional shares available for the issuance of restricted stock and restricted stock units and a corresponding increase in the total number of shares authorized for issuance under
the Plan to ensure that it can fund the Company’s current compensation programs for 2015 and 2016, including potential grants to senior new hires. The Board believes that the awards currently subject to the limit have and, if the amendment is
approved by shareholders, will continue to be a successful element of the Company’s overall compensation strategy and in the best interest of the Company and its shareholders. If the amendment is not approved, this would create uncertainty with
regard to the Company’s ability to continue the current programs. In addition, the Company will have to create an alternative to this equity component in order to provide compensation programs that are considered competitive. The most likely
alternatives would be awards settled in cash which would eliminate the significant retention value that comes from the vesting of restricted stock units as well as eliminate shareholder value creation alignment that comes from holding unvested
restricted stock units as compared to cash compensation.
Importance of the Equity Component of the Company’s
Compensation Programs. The Board believes that the continued growth and success of the Company depends, in large part, upon its ability to attract, retain and motivate key employees. In order to accomplish these goals, the Company must
maintain compensation programs that include an appropriate balance of short-term and long-term incentives. The Company’s primary competitors in the strategic consulting and executive advisory sector have compensation programs that are focused
on cash compensation and are further supported with meaningful retirement benefits. The Company does not provide any retirement benefits to its executives. The Company’s programs provide for a combination of cash and equity compensation that
allows it to compete for high-impact talent. Total compensation is provided in the form of a base salary and performance-based cash bonus and an equity award opportunities, which are both defined as a percentage of salary. A key element of this
compensation strategy is the equity component of the Company’s compensation plan. This component allows the Company to distribute to participants equity in lieu of the cash compensation awards that they would receive from most of its
competitors. The Board believes that this equity award component of compensation, when funded with restricted stock units under the Plan, accomplishes several key objectives. By issuing restricted stock units based on performance, the Company is
able to provide its best associates measurable competitive incentive compensation for current year performance, in lieu of or in addition to cash. This also allows key employees to participate in shareholder value creation and acts as a significant
retention tool since the awards vest over a three-year period. Additionally, the issuance of equity is essential to the compensation and retention of senior executives since the Company does not provide any retirement (pension or 401k match)
benefits.
Impact of Plan Amendment. If the Plan amendment is approved by the Company’s shareholders,
total shares available for issuance under the Plan will be 2,354,324. The sublimit for restricted stock and restricted stock unit issuances will be 1,874,790 shares and 479,534 shares will be available for the issuance of stock options and SARs
under the Plan. In addition, to ensure that the Plan is in line with best practices, the Plan amendment includes the adoption of a one-year minimum vesting period for full value awards, the prohibition of accelerated vesting except in certain
limited instances, and a narrowing of the Change in Control definition under the Plan. These additional changes are described below under “Recent Changes to the Plan.”
Aspects of Equity Compensation at The Hackett Group. The Company’s equity incentive plan for its named executive
officers provides significant incentive opportunities tied to the attainment of specific financial performance goals—currently annual pro-forma diluted net earnings per share growth targets—which are tied to an operating plan approved by
the Board. Similar equity incentive plans exist for the senior service line and practice leaders of the Company with significant responsibilities. The targets for these leaders are tied to the
29
performance of the individual service line and practices they manage. Each participant in these programs has target equity incentive opportunities expressed as a percentage of salary. The payout
levels are based on target achievements that, when taken in the aggregate, should result in a certain level of operating results for the Company as a whole that warrants equity bonus payouts at these levels. As the annual level of corporate
performance (measured in pro-forma diluted net earnings per share) changes, so too will the number of potential restricted stock units that may be awarded in any given year. There are three levels of performance
achievement—“Commence,” “Goal” and “Superior.” Performance-based incentive awards earned (calculated in U.S. Dollars) are divided by the Company’s share price on the date of grant to calculate the equity
incentive grant in the form of restricted stock units. Therefore, as the share price increases, the number of restricted stock units issued decreases and vice versa. If Company performance falls short of the Board’s goals for the business, then
the bonus compensation paid in connection with these programs is reduced or eliminated.
Restricted stock unit awards are
performance-based and issued based on target pro-forma diluted net earnings per share and underlying practice plans which, if achieved, the Board believes should result in share price appreciation consistent with the compensation opportunity,
subject to market conditions. The restricted stock unit awards are in lieu of cash compensation that would not align the interest of the Company’s key associates with shareholders’ interests. By issuing restricted stock units in lieu of
cash, key associates have strong incentives to increase shareholder value. The restricted stock units vest over three or four years. This is one of the Company’s most important retention tools.
The grant of restricted stock units is also a vital component of the Company’s equity incentive plan applicable to its senior
leaders who are not named executive officers. This is of special importance given that senior executives receive no retirement (pension or 401k match) benefits.
The foregoing is a broad summary of the 2015 long-term equity incentive program. The Board retains the right to modify the program in the future. Please refer to the “Compensation Discussion and
Analysis” on page 13 of this Proxy Statement for more details on the Company’s executive compensation program and other significant compensation programs.
Restricted Stock Unit Issuance History and the Impact of Company Actions on Volatility. The number of restricted stock units issued by the Company continues to decline. The Company
expects to grant in 2015 approximately 40% fewer restricted stock units than it granted in 2012 assuming that the price of the Company’s common stock remains at or above current levels. The following table includes for 2012, 2013, 2014 the
number of restricted stock units granted by the Company to its employees and Board as well as an estimate for 2015. The Company believes that grant historical grant activity is the best indication of future activity, subject to fluctuations in the
price of the Company’s common stock and Company performance. The downward trend in the number of restricted stock issuances reflects the result of ambitious performance targets in the Company’s compensation programs and share price
valuation increase which resulted in fewer equity grants. In addition, in 2012 our CEO and COO agreed to forego half of their restricted stock unit equity bonus opportunities for 2012 through 2015 in exchange for performance-based
SARs that vest only upon the achievement of performance targets set by the Compensation Committee. This action further reduced the number of restricted stock units issuances reflected below.
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year |
|
Restricted
Stock Units
Granted |
|
|
Year-over-Year
Restricted
Stock Unit
Grant Variances |
|
|
Cumulative
Impact |
|
| 2012 |
|
|
1,407,077 |
|
|
|
— |
|
|
|
|
|
| 2013 |
|
|
1,261,783 |
|
|
|
-10 |
% |
|
|
-10 |
% |
| 2014 |
|
|
914,233 |
|
|
|
-28 |
% |
|
|
-35 |
% |
| 2015(est) |
|
|
850,000 |
|
|
|
-7 |
% |
|
|
-40 |
% |
30
Dilutive Impact of the Plan
The table below presents the dilutive impact of the new shares for which approval is sought under this Proposal versus the dilution
calculation historically used by proxy research firms which includes all outstanding SARs on a one for one basis. For the 2,916,563 SARs outstanding as of the Record Date, the calculation on the left includes only the number of shares required
to satisfy the full exercise of the outstanding SARs and assumes full vesting and a fair market value upon exercise of $9.37 which is the 52 week high for the Company’s common stock as of the Record Date. The proxy research firm
calculation on the right includes all of the outstanding SARs on a one for one basis which the Company believes distorts the true dilutive impact of the Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Share
Allocation |
|
|
Voting Power
Dilution |
|
|
Research
Firm
Allocation |
|
|
Voting
Power
Dilution |
|
| New Shares |
|
|
1,200,000 |
|
|
|
3.31 |
% |
|
|
1,200,000 |
|
|
|
3.20 |
% |
| Available Shares |
|
|
1,154,324 |
|
|
|
3.18 |
% |
|
|
1,154,324 |
|
|
|
3.08 |
% |
| RSUs Outstanding |
|
|
2,108,794 |
|
|
|
5.81 |
% |
|
|
2,108,794 |
|
|
|
5.62 |
% |
| Options Outstanding |
|
|
297,667 |
|
|
|
0.82 |
% |
|
|
297,667 |
|
|
|
0.79 |
% |
| SARs Outstanding |
|
|
1,671,499 |
(1) |
|
|
4.61 |
% |
|
|
2,916,563 |
|
|
|
7.77 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total Plan Shares |
|
|
6,432,284 |
|
|
|
17.73 |
% |
|
|
7,677,348 |
|
|
|
20.46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Shares Outstanding as of Record Date Plus Total Plan Shares |
|
|
36,277,010 |
|
|
|
|
|
|
|
37,522,074 |
|
|
|
|
|
| (1) |
Assumes full vesting of all outstanding SARs and a fair market value for the Company’s Stock on the date of exercise equal to $9.37 which is the current 52 week
high for the Company’s common stock. |
Recent Changes to the Plan
In connection with its recent review of the Plan, the Compensation Committee approved the following amendments to the Plan. The Board of
Directors has approved the Plan as amended and restated as of March 13, 2015. A copy of the Amended and Restated 1998 Stock Option and Incentive Plan can be found on the Company’s website
at www.thehackettgroup.com/about/ir_governance.jsp:
Stock Plan Feature Change to Include Minimum Vesting for Full
Share Grants. Section 12.1 of the Plan has been updated to require a minimum vesting period of one year for full share grants. The Company’s performance grants already include a vesting component in addition to the achievement of the
performance targets which result in the issuance of the awards.
Stock Plan Feature Change to Prohibit Acceleration of
Vesting. The Plan has been updated to prohibit the acceleration of vesting subject to certain exceptions – death, disability, change of control or extraordinary corporate transaction. The changes to sections 3.3 and 12.2 and the
elimination of the former Section 10.3 reflect this change.
Definition of “Change of Control”. The
definition of Change of Control contained in Section 2.6 of the Plan now requires the consummation of a transaction in order for the Change of Control to have been deemed to occur.
Material Features of the Plan
The following description of the material
terms of the Plan, as amended, is intended to be a summary only. This summary is qualified in its entirety by the complete text of the Plan. Except for the increase in the sublimit for awards of restricted stock and restricted stock units and the
increase in the total number of shares available for issuance under the Plan, the proposed amendment for which stockholder approval is sought make no material changes in the Plan as previously in effect.
31
Purpose. The purpose of the Plan is to advance the interests of the Company by
providing eligible individuals an opportunity to acquire or increase a proprietary interest in the Company, which thereby will create a stronger incentive to expend maximum effort for the growth and success of the Company and will encourage such
eligible individuals to remain employed by the Company. The Board believes that the opportunity to acquire an equity interest in the Company, especially through restricted stock and restricted stock units, will attract and encourage the continued
employment and service of officers and other key employees by facilitating their acquisition of an equity interest in the Company. Further, approval of the Plan to increase the aggregate number of shares available for the issuance of restricted
stock or restricted stock units will afford the Company the ability to sustain existing performance-based compensation plans and the additional flexibility in making awards deemed necessary to support the goals of the Company in the future.
Eligible Individuals. The Plan provides for grants to officers, directors, employees, consultants and other
service providers of the Company and its subsidiaries. Approximately 50 individuals are eligible to receive awards under the Plan from time to time. This number varies from year to year.
Shares Available for Issuance; Award Restrictions. If this Proposal is approved, the number of shares that can be awarded as
restricted stock or restricted stock units will be increased by 1,200,000 and the total shares authorized for issuance under the Plan will increase by 1,200,000. During any calendar year, the maximum number of options that may be granted to any one
person is 1,000,000 and the maximum number of shares underlying the issuance of restricted stock and restricted stock units that may be issued to any one person is 400,000. Each of these limits is subject to anti-dilution adjustments in the event of
a stock split, recapitalization or similar transaction. Assuming the amendment is approved by the Company’s shareholders, as of the Record Date, 2,354,324 shares would be available for issuance under the Plan and 1,874,790 shares of restricted
stock or restricted stock units would be available for issuance. As of the Record Date, the number of issued and unvested restricted stock units was 2,108,794 and the number of outstanding stock options, both vested and unvested was 297,667. These
stock options had an average weighted exercise price of $4.00 and an average remaining term of 2.7 years.
Administration. The Board has such powers and authorities related to the administration of the Plan as are consistent with
the Company’s certificate of incorporation, bylaws and applicable law. The Board, from time to time, may delegate to a committee such powers and authorities related to the administration and implementation of the Plan as the Board shall
determine. The Board has the full power and authority to take all actions and to make all determinations required or provided for under the Plan and to take all such other actions and make all such other determinations not inconsistent with the
specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan. To the extent an award is intended to constitute performance-based compensation for purposes of Section 162(m) of
the Internal Revenue Code, it will be granted and administered by a committee consisting solely of “outside directors” as that term is defined in Section 162(m). The Company’s Compensation Committee has been delegated the
authority to administer the Plan.
Stock Subject to the Plan. The shares issued or to be issued under the Plan are
shares of the Company’s common stock. On the Record Date, the opening market price of the Company’s common stock on the NASDAQ Global Market was $8.80.
Types of Awards. Awards under the Plan include incentive stock options, non-qualified stock options, restricted stock, restricted stock units and SARs.
Stock Options. The Board may, from time to time, grant nonqualified stock options or incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code). The exercise price of all stock options generally may not be less than 100% (110% in the case of incentive stock options granted to individuals who own more than 10% of the Company’s
voting securities) of the fair market value of a share of common stock on the date of grant. Unless otherwise specified in an award agreement, stock options expire ten years after the date
32
of grant (five years in the case of incentive stock options granted to individuals who own more than 10% of the Company’s voting securities). Unless otherwise determined by the Board,
(i) upon a termination of a grantee’s employment other than for death or disability, unvested options will terminate and be cancelled immediately and vested options will remain exercisable for 90 days, (ii) upon a grantee’s
termination due to death all options will vest and will remain exercisable for one year and (iii) upon a grantee’s termination of employment due to disability, all options will continue to vest and shall remain exercisable for one year.
Stock options are intended to constitute “performance-based” compensation for purposes of Section 162(m) of the Internal Revenue Code.
Restricted Stock and Restricted Stock Units. The Board may, from time to time, grant restricted stock or restricted stock units to persons eligible to receive grants under the Plan, subject to
such restrictions, conditions and other terms as the Board may determine. A restricted stock unit represents a conditional right to receive a share of common stock in the future. At the time a grant of restricted stock or restricted stock units is
made, the Board shall establish a period of time (but not less than one year) over which the grant vests subject to the continued employment of the grantee (the “Restricted Period”). Each grant of restricted stock or restricted stock units
may be subject to a different Restricted Period. The Board may, in its sole discretion, at the time a grant of restricted stock or restricted stock units is made, prescribe restrictions in addition to or other than the expiration of the Restricted
Period, including the satisfaction of corporate practice or individual performance objectives, which may be applicable to all or any portion of the restricted stock or restricted stock units. Unless otherwise determined by the Board, (i) upon a
termination of a grantee’s employment other than for death or disability, unvested restricted stock and restricted stock units will terminate immediately, (ii) upon a grantee’s termination due to death, all restricted stock and
restricted stock units will vest immediately and (iii) upon a grantee’s termination of employment due to disability, all restricted stock and restricted stock units will continue to vest for one year. Restricted stock and restricted stock
units are intended to constitute “performance-based” compensation for purposes of Section 162(m) of the Internal Revenue Code.
Stock Appreciation Rights. On March 11, 2013 the Board amended the Plan to allow for the grant of SARs. The exercise price of all SARs generally may not be less than 100% of the fair market
value of a share of common stock on the date of grant. SARs expire ten years after the date of grant, unless otherwise specified in an award agreement. Unless otherwise determined by the Board (i) upon a termination of a grantee’s
employment other than for death or disability, unvested SARs will terminate and be cancelled immediately and vested SARS will remain exercisable for 90 days, (ii) upon a grantee’s termination due to death all SARs will vest and will remain
exercisable for one year and (iii) upon a grantee’s termination of employment due to disability, all SARs will continue to vest and shall remain exercisable for one year. The Company can satisfy its obligation upon exercise of SARs in cash
or stock, in the sole discretion of the Board. The grantee may, in the sole discretion of the Board, be awarded dividend equivalent rights with respect to the shares of stock underlying the SARs that have vested as of the date the dividend is
declared. Each dividend equivalent right will be distributed to the grantee as a specific dollar amount equal to the dollar amount of the dividend paid on an actual share of stock on the date the dividend is declared multiplied by the number of
shares underlying the grantee’s SAR. SARs are intended to constitute “performance-based” compensation for purposes of Section 162(m) of the Internal Revenue Code.
33
Historical Share Grant and Delivery/Vesting Table. The table below is provided
to highlight the timing of both the issuance and delivery of performance-based and non-performance-based restricted stock units. Generally, all restricted stock units issued to the Company’s employees have time-vesting requirements.
Performance-based issuances are granted upon the achievement of annual Company, practice or individual performance goals, or a combination thereof, and are delivered after the satisfaction of additional time-vesting requirements. The Company
believes this additional disclosure is important to evaluate the dilutive impact of its equity compensation programs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Shares Granted (#)(1)(6) |
|
|
Shares Delivered/Vested (#)(1) |
|
| |
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
| Performance based restricted stock units(2) |
|
|
1,293,124 |
|
|
|
1,200,357 |
|
|
|
857,169 |
|
|
|
1,682,513 |
(4) |
|
|
747,673 |
|
|
|
1,258,819 |
|
| Non performance related restricted stock units(3) |
|
|
113,953 |
|
|
|
61,426 |
|
|
|
57,064 |
|
|
|
5,000 |
|
|
|
29,692 |
|
|
|
63,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
1,407,077 |
|
|
|
1,261,783 |
|
|
|
914,233 |
|
|
|
1,687,513 |
|
|
|
777,365 |
|
|
|
1,321,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Average weighted shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,703,544 |
|
|
|
30,283,298 |
|
|
|
29,881,002 |
|
| (1) |
Excludes 164,474 granted and 529,487 vested restricted shares of common stock subject to vesting requirements issued in connection with acquisitions that do not reduce
the number of shares available under the Plan. |
| (2) |
Units issued upon achievement of Company, practice or individual performance goals, or a combination thereof, with vesting and delivery subject to time vesting.
|
| (3) |
Units issued upon hiring subject to vesting requirements. |
| (4) |
Includes 399,591 performance-based restricted stock units for which vesting and payment was advanced fifty-seven days into 2012. Correspondingly, the 2013 shares
delivered/vested amount does not include these RSUs. |
Performance-Based Awards. The Compensation
Committee may designate any stock options, restricted stocks, restricted stock units or SARs awarded under the Plan as “performance-based compensation” as that term is used in Section 162(m) of the Internal Revenue Code. The
performance targets that may be used by the Compensation Committee for such grants will be based on the achievement of measurable and attainable financial targets selected by the Compensation Committee from the following list with respect to the
Company or its subsidiaries, divisions, departments, regions, functions or business units: costs, expense targets, market share, net income, revenue, net revenue, operating cash flow, operating margin, operating revenue, revenue growth rates, pretax
income, pretax operating income, operating income growth, net operating profit, return on assets, return on net assets, sales, total shareholder return, relative total shareholder return (versus an index or peer group), stock price, return on
equity, return on capital, total earnings, operating earnings, earnings before interest and taxes (EBIT), earnings before interest, taxes, depreciation and amortization (EBITDA) calculated on a pro-forma basis or based on generally accepted
accounting principles, basic or diluted net earnings per share or earnings per share growth calculated on a pro-forma basis or based on generally accepted accounting principles, operating efficiency ratios, economic value added, cash flow return on
investment, free cash flow, net cash provided by operations, gross margin, internal rate of return, or a combination thereof as selected by the Committee.
The performance targets may be measured on an absolute or cumulative basis or on the basis of a percentage of improvement over time and may be measured in terms of the performance of the Company (or its
subsidiaries, departments, divisions, regions, functions, or business units) or measured relative to selected peer companies or a market index. The applicable performance goals will be established by the Compensation Committee within 90 days
following the commencement of the applicable performance period (or such earlier or later date as permitted or required by Section 162(m)). Each grantee will be assigned a target number of shares of stock
34
options, restricted stock, restricted stock units or SARs payable if the specified performance targets are achieved. At the end of the performance period, the Compensation Committee will certify
the attainment of the performance targets and payment of the awards will be conditioned upon such certification. The Compensation Committee may provide that the number of shares of common stock payable under a grant will exceed the target number,
but in no event can the amounts exceed the limits described above. The terms of performance-based awards will be made and administered in accordance with Section 162(m).
Re-pricing of Options. The Plan prohibits re-pricing of stock options and SARs. For these purposes, to re-price a stock option or SAR means (i) to reduce the exercise price, or
(ii) to grant a new award with a lower exercise or grant price in exchange for the cancellation of the original award.
Transferability. Except as otherwise provided in the Plan or an applicable award agreement, during the lifetime of a grantee,
only the grantee (or, in the event of legal incapacity or incompetence, the grantee’s guardian or legal representative), may exercise an option or SAR. Except as otherwise provided in the Plan or an applicable award agreement, no option or SAR
shall be assignable or transferable by the grantee to whom it is granted, other than by will or the laws of descent and distribution. Notwithstanding the forgoing, the Board may permit a grantee to transfer an option without consideration to a
family member (as defined in the Plan). Neither restricted stock nor restricted stock units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such restricted stock or restricted stock units other than by will or the laws of descent and distribution.
Recoupment. All grants made under the Plan, any payments made under the Plan and any gains realized upon exercise or settlement of a grant are subject to claw-back or recoupment as permitted
or mandated by applicable law, rules, regulations or any Company policy or as set forth in an award agreement.
Term;
Amendment. The Plan will remain in effect until terminated by the Board, however, no incentive stock options may be granted on or after the 10th anniversary of the last shareholder approval of the Plan (five years in the case of incentive
stock options granted to individuals who own more than 10% of the Company’s voting securities). The Board may generally amend or terminate the Plan at any time to the extent permitted by applicable laws, rules and regulations.
Change of Control. Awards granted under the Plan may vest upon a change of control of the Company (as defined in the Plan),
if the awards are not assumed or substituted for by an acquiring company. Outstanding options and other awards will be adjusted in the event of a stock split or other similar corporate transactions.
Summary of U.S. Federal Tax Consequences. The following is a brief and general discussion of the U.S. federal income tax
rules applicable to awards granted under the Plan.
Options Generally. The grant of an option is not a taxable event
for the optionee or the Company.
Incentive Stock Options. A grantee will not recognize taxable income upon exercise of
an incentive stock option (except that the alternative minimum tax may apply), and any gain realized upon a disposition of shares of common stock received pursuant to the exercise of an incentive stock option will be taxed as long-term capital gain
if the grantee holds the shares of common stock for at least two years after the date of grant and for one year after the date of exercise (the “holding period requirement”). The Company will not be entitled to any business expense
deduction with respect to the exercise of an incentive stock option, except as discussed below.
For the exercise of an
incentive stock option to qualify for the forgoing tax treatment, the grantee generally must be an employee of the Company from the date the option is granted through a date within three months before the date of the option is exercised. In the case
of a grantee who is disabled or dies, the three-month period is extended to one year.
35
If all of the requirements for incentive stock option treatment are met except for the
holding period requirement, the grantee will recognize ordinary income upon the disposition of shares of common stock received pursuant to the exercise of an incentive stock option in an amount equal to the excess of the fair market value of the
shares of common stock at the time the option was exercised over the exercise price. The balance of the realized gain, if any, will be taxed at applicable capital gains tax rates. The Company will be allowed a business expense deduction to the
extent the optionee recognizes ordinary income, subject to the limitations under Section 162(m) of the Internal Revenue Code.
Non-Qualified Stock Options. Upon exercising a stock option that is not an incentive stock option, a grantee will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the shares of common stock on the date of exercise. Upon a subsequent sale or exchange of shares of common stock acquired pursuant to the exercise of a non-qualified stock option, the grantee will have
taxable gain or loss, measured by the difference between the amount realized on the disposition and the tax basis of the shares of common stock (generally, the amount paid for the shares of common stock plus the amount treated as ordinary income at
the time the option was exercised).
The Company will be entitled to a business expense deduction in the same amount and
generally at the same time as the grantee recognizes ordinary income provided that the deduction is not disallowed under Section 162(m) of the Internal Revenue Code. The options are intended to comply with the exception to Section 162(m)
for “qualified performance-based compensation.”
Restricted Stock. A grantee will not recognize any
taxable income for federal income tax purposes in the year restricted stock is granted, provided that the shares of common stock are subject to restrictions (that is, the restricted stock is nontransferable and subject to a substantial risk of
forfeiture). However, the grantee may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the common stock on the date of the award,
determined without regard to the restrictions. If the grantee does not make a Section 83(b) election, the fair market value of the common stock on the date the restrictions lapse will be treated as compensation income to the grantee and will be
taxable in the year the restrictions lapse. The Company generally will be entitled to a deduction for compensation paid in the same amount treated as compensation income to the grantee in the year the grantee is taxed on the income subject to
Section 162(m).
Restricted Stock Units. There are no immediate tax consequences upon the grant of restricted
stock units under the Plan. A grantee who is awarded restricted stock units will be required to recognize ordinary income in an amount equal to the fair market value of the common stock issued to such grantee at the end of the restriction period or,
if later, the payment date. The Company generally will be entitled to a deduction for compensation paid in the same amount treated as compensation income to the grantee in the year the grantee is taxed on the income subject to Section 162(m).
Stock Appreciation Rights. There are no federal income tax consequences when SARs are granted. However, at exercise,
the grantee will realize ordinary income in an amount equal to the excess of the fair market value on the exercise date of the shares subject to the option or stock appreciation right over the exercise price of the option or stock appreciation
right. If the award is settled in stock, the amount of the gain is taxable at exercise, even if the shares are not sold. Any subsequent gain on the shares is taxable as capital gain.
Section 162(m). Section 162(m) of the Internal Revenue Code sets a limit of $1,000,000 on the amount the Company
can deduct for compensation paid to each of the Chief Executive Officer and the other named executive officers other than the Chief Financial Officer. Compensation that qualifies as “performance-based” compensation under
Section 162(m) does not count toward the $1,000,000 limit. It is the Compensation Committee’s intent that awards to executive officers under the Company’s annual performance-based cash bonus and equity awards program qualify for this
exemption. However, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, no assurance can be
36
given that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so. Furthermore, the Compensation Committee believes that
tax deductibility is one of several important consideration in determining compensation for the Company’s named executive officers, and therefore retains the flexibility to pay compensation to senior executives based on other considerations,
even if certain amounts that may be payable in excess of $1 million may not be deductible under Section 162(m).
The
forgoing is not to be considered as tax advice to any person who may be a participant in the Plan and any such persons are advised to consult their own tax counsel. The forgoing is intended to be a general discussion and does not cover all aspects
of an individual’s unique tax situation such as the tax consequences of deferred compensation or state and local taxes.
New Plan Benefits. Because the granting of awards under the Plan is completely within the discretion of the Compensation
Committee, it is not possible to determine at this time the awards that may be made to officers or other employees under the Plan in the future. However, under the existing incentive compensation plans for the Company’s executive team and
senior leaders, the grant of restricted stock units is conditioned upon attainment of certain performance targets. The Board reserves the right to make additional grants in its sole discretion.
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote is required to approve
the amendment to the Plan. Unless otherwise instructed on the proxy, properly executed proxies will be voted in favor of Proposal 2 to approve the amendment to the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE
“FOR” PROPOSAL 2:
TO APPROVE AN AMENDMENT TO THE 1998 STOCK OPTION AND INCENTIVE PLAN TO (I) INCREASE
THE SUBLIMIT FOR ISSUANCES OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS BY 1,200,000 SHARES AND (II) INCREASE THE TOTAL NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE UNDER THE 1998 STOCK OPTION AND INCENTIVE
PLAN
BY 1,200,000 SHARES.
37
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company is providing its shareholders an opportunity to indicate whether they support the named executive officer compensation as described in this proxy statement. This advisory vote, commonly
referred to as a “Say on Pay” vote, is not intended to address any specific item of compensation, but instead relates to the “Compensation Discussion and Analysis,” the tabular disclosures regarding named executive officer
compensation, and the narrative disclosures accompanying the tabular presentation. These disclosures allow you to view the Company’s executive compensation program and the application of the Company’s compensation philosophies for the
years presented.
The Company’s primary objectives relating to executive compensation are to (1) align the financial
interests of its executives with those of its shareholders by linking a substantial portion of each executive’s compensation to the achievement of financial objectives for the Company as a whole and (2) attract and retain highly qualified
executives at salaries that are competitive with companies of similar or greater size within its industry.
The Company’s
executive compensation programs, which focus on operating performance, earnings growth and share price appreciation, reflect the Company’s “pay for performance” approach to compensation. Annually, our executives have the opportunity
to earn cash payouts and equity awards based on the achievement of pro-forma diluted net earnings per share growth targets specified by the Company’s Compensation Committee. Another key aspect of the executive compensation is that a meaningful
part of total compensation is paid with performance-based restricted stock that not only requires the achievement of performance targets, but also has a three-year vesting period. The vesting requirement of the equity portion of the compensation
program (1) extends the value of current year compensation to a three-year period, (2) creates a strong incentive for the executives to increase shareholder value, and (3) serves as a powerful executive retention tool. This equity
component is also essential to the compensation and retention of the Company’s executives since the Company does not provide retirement (pension or 401(k) match) benefits for senior executives and have no perquisites. Finally, our CEO and COO
have significant incentives tied to SAR’s grants one half of which vested upon the achievement of a pro-forma diluted net earnings per share growth target and one half of which would vest in the future upon the achievement of a pro-forma EBITDA
target. Both of these targets were specified by the Company’s Compensation Committee. The Company can settle these SAR’s in cash or stock, at the Company’s option. The SARs provide incentives for our CEO and COO to focus not only on
the critical performance criteria on which vesting is based, but also on the share value appreciation in order to maximize the benefit of the awards.
In 2014, the Company generated revenue and pro-forma earnings of $236.7 million and $16.9 million, respectively. The Company had revenue growth of $12.9 million with corresponding pro-forma diluted net
earnings per share growth of 37% and pro-forma EBITDA of $27.7 million. In accordance with the targets established by the Compensation Committee, the Company’s actual 2014 pro-forma diluted net earnings per share resulted in 103% of the
“Superior” level payout under the Company’s 2014 executive compensation plan. In addition, subsequent to year end, upon the certification of the Company’s 2014 results by the Audit Committee of the Board of Directors, 50% of the
SARs grants referred to above became vested due to the achievement of the pro-forma diluted earnings per share targets contained in the award agreement.
The Company’s Compensation Committee has established challenging performance targets for 2015 seeking to build on the momentum established in 2014. The Company’s pro-forma diluted net earnings
per share must improve at least 16% from 2014 actual results in order for the Company’s named executive officers to earn their “Goal” cash and restricted stock unit performance incentive awards. The Company’s pro-forma diluted
net earnings per share must improve at least 25% from 2014 actual results in order for the Company’s named executive officers to earn their “Superior” cash and restricted stock unit performance incentive awards.
See “Compensation Discussion and Analysis” beginning on page 13 of this proxy statement for more information regarding aspects
of the Company’s executive compensation programs and the Compensation Committee’s decisions in respect of executive compensation in 2014.
38
For the reasons discussed above, the Board unanimously recommends that shareholders vote in
favor of the following resolution:
“Resolved, that the shareholders approve the compensation of the Company’s
named executive officers as disclosed in this proxy statement pursuant to the rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and the related footnotes and narrative disclosures.”
Although this vote is advisory and is not binding on the Company, the Compensation Committee will take into account the outcome of the
vote when considering future executive compensation decisions. The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote is required to approve the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE “FOR” PROPOSAL 3:
APPROVAL OF THE RESOLUTION APPROVING THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS
39
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board currently consists of Messrs. Hamlin (Chairman), Harris, Huston and Wix. The Audit Committee is composed
of “independent” directors as defined in standards promulgated by the SEC and NASDAQ. The Board determined that Messrs. Hamlin and Huston are audit committee financial experts under the SEC rules. The Company’s Audit Committee is
governed by a written charter approved by the Board. A copy of the Audit Committee Charter can be found on the Company’s website at www.thehackettgroup.com/about/ ir_governance.jsp. All members of the Audit Committee share equally
the responsibility for the performance of the functions set forth below.
The Audit Committee reviewed with BDO USA, LLP
(“BDO”) all matters required to be discussed by AU Section No. 380 “The Auditor’s Communication with Those Charged with Governance” “Communications with Audit Committees,” as amended. In addition, the Audit
Committee has discussed with BDO its independence from management and the Company, and it received the written disclosures and letter from BDO as required by applicable requirements of the Public Company Accounting Oversight Board regarding
BDO’s communications with the Audit Committee concerning independence, and has discussed with BDO their independence.
The
Audit Committee discussed with BDO the overall scope and plans for the Company’s audit. The Audit Committee meets with BDO, without management present when appropriate, to discuss the results of their quarterly reviews and annual examination,
their evaluations of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee held 5 meetings during fiscal year 2014.
The Audit Committee approved all audit and non-audit services provided by BDO in 2014, as described in “Pre-Approval of Non-Audit
Services” below.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board.
Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal control over financial reporting. In performing its oversight responsibilities, the Audit Committee reviewed and
discussed the audited financial statements of the Company for the fiscal year ended January 2, 2015 with management and with representatives of BDO. The Audit Committee also reviewed, and discussed with management and representatives of BDO,
management’s assessment and report and BDO’s assessment and report and attestation on the effectiveness of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. In reliance on the
reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) inclusion of the audited consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended January 2,
2015 filed with the SEC.
Fees Paid To Independent Accountants
The following table sets forth fees for professional services provided by BDO for the audit of the Company’s consolidated financial statements for fiscal years 2014 and 2013, and fees billed for
audit-related services, tax services, and all other services rendered by BDO during fiscal years 2014 and 2013:
|
|
|
|
|
|
|
|
|
| |
|
2014 |
|
|
2013 |
|
| Audit Fees(1) |
|
$ |
518,264 |
|
|
$ |
530,085 |
|
| Audit-Related Fees(2) |
|
$ |
18,000 |
|
|
$ |
18,000 |
|
| Tax Fees(3) |
|
$ |
— |
|
|
$ |
— |
|
| All Other Fees(4) |
|
$ |
— |
|
|
$ |
— |
|
| (1) |
Represents aggregate fees for professional services provided in connection with the audit of the Company’s annual consolidated financial statements, reviews of its
quarterly consolidated financial statements and audit services provided in connection with other statutory or regulatory filings. Fees also include the report and attestation on the effectiveness of internal control over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act of 2002. |
| (2) |
Represents fees for services in connection with audits of the Company’s benefit plans, mergers and acquisitions and recently issued accounting pronouncements.
|
| (3) |
Represents fees for services provided in connection with the Company’s tax compliance. |
| (4) |
Represents fees for services provided to the Company not otherwise included in the categories seen above. |
40
Pre-Approval of Non-Audit Services
All audit-related services, tax services and other services were pre-approved by the Audit Committee, which concluded that the provision
of such services by BDO was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Policy for Pre-Approval of Non-Audit Services provides for pre-approval of
audit-related, tax and other services specifically described by the Audit Committee in the policy on an annual basis. In addition, individual engagements anticipated to exceed pre-established thresholds must be separately approved. If the entire
Audit Committee is not able to convene so that permitted non-audit services desired to be performed by the Company’s independent auditors can be reviewed and approved on a timely basis, the Audit Committee Chairman is authorized to approve such
services and make a verbal report to the full Audit Committee as to the nature and cost of such services at the next Audit Committee meeting following such approval.
Respectfully submitted,
Audit Committee
Richard N. Hamlin, Chairman
John R. Harris
Edwin A. Huston
Alan T.G. Wix
41
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review, Approval or Ratification of Related Person Transactions
In accordance with the charter for the Audit Committee of the Board, the members of the Audit Committee, all of whom are independent
directors, review and approve in advance any transaction which involves “related persons,” that is, parties whose relationship with the Company may enable them to negotiate terms more favorable than those available to other, more
independent parties and all other transactions to the extent required by NASDAQ or applicable law to be approved by an audit committee or comparable body. For purposes of these procedures, the individuals and entities that are considered
“related persons” include:
| |
• |
|
any of the Company’s directors, nominees for director and executive officers; |
| |
• |
|
any person known to be the beneficial owner of five percent or more of the Company’s common stock (a “5% Shareholder”); and
|
| |
• |
|
any immediate family member, as defined in Item 404(a) of Regulation S-K, of a director, nominee for director, executive officer and 5%
Stockholder. |
The Company will report all such material related person transactions under applicable
accounting rules, federal securities laws and SEC rules and regulations.
42
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the beneficial ownership of common stock as of March 16, 2015 by:
| |
• |
|
each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than 5% of the outstanding common stock;
|
| |
• |
|
each of the named executive officers; |
| |
• |
|
each director and nominee of the Company; and |
| |
• |
|
all of the Company’s directors and executive officers as a group. |
|
|
|
|
|
|
|
|
|
| |
|
Amount and
Nature of
Beneficial
Ownership |
|
|
Percent of
Class |
|
| Name of Beneficial Owner |
|
(#)(12) |
|
|
(%)(12) |
|
| Ted A. Fernandez(1)(13) |
|
|
3,297,427 |
|
|
|
11.0 |
|
| David N. Dungan(2)(13) |
|
|
1,738,029 |
|
|
|
5.8 |
|
| Robert A. Ramirez(3)(13) |
|
|
264,400 |
|
|
|
* |
|
| Terence M. Graunke(4)(13) |
|
|
73,914 |
|
|
|
* |
|
| Richard N. Hamlin(5)(13) |
|
|
112,670 |
|
|
|
* |
|
| John R. Harris(6)(13) |
|
|
95,089 |
|
|
|
* |
|
| Edwin A. Huston(7)(13) |
|
|
132,281 |
|
|
|
* |
|
| Alan T.G. Wix(8)(13) |
|
|
64,620 |
|
|
|
* |
|
| Columbia Wanger Asset Management, L.P.(9) |
|
|
3,934,885 |
|
|
|
13.2 |
|
| Dimensional Fund Advisors(10) |
|
|
1,959,052 |
|
|
|
6.6 |
|
| Blackrock, Inc.(11) |
|
|
1,868,430 |
|
|
|
6.3 |
|
| All current directors and current named executive officers as a group (8 persons) |
|
|
5,778,430 |
|
|
|
19.4 |
|
| * |
Represents less than 1%. |
| (1) |
Excludes 956,250 unvested performance-based SARs. Includes 521,591 net shares which could be acquired upon exercise of 956,250 vested performance-based SARs with an
exercise price of $4.00. Includes 211,803 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Fernandez’s death, disability, resignation for good reason or involuntary termination without cause.
Includes 157,091 shares which are held in trust for the benefit of Mr. Fernandez’s children. |
| (2) |
Excludes 502,032 unvested performance-based SARs. Includes 273,836 net shares which could be acquired upon exercise of 502,031 vested performance-based SARs with an
exercise price of $4.00. Includes 111,196 unvested performance-based restricted stock units that would vest upon a change of control, Mr. Dungan’s death, disability, resignation for good reason or involuntary termination without cause.
Includes 225,000 shares held in the Jeanine G. Dungan Trust dated August 5, 1998. |
| (3) |
Excludes 50,000 unvested performance-based stock options. Includes 50,000 vested performance-based stock options. Includes 56,857 unvested performance-based restricted
stock units that would vest upon a change of control, Mr. Ramirez’s death, disability, resignation for good reason or involuntary termination without cause. |
| (4) |
Mr. Graunke joined the Company’s Board on November 10, 2009, in connection with of its acquisition of Archstone Consulting. As of the Record Date, Lake
Capital and certain of its affiliates (the “Lake Affiliates”), Archstone Holdings LLC and certain of its affiliates (the “Archstone Affiliates”), Mr. Graunke and Paul G. Yovovich have shared power to vote or direct the vote
and shared power to dispose or direct the disposition of 55,109 shares of common stock. The number of shares reported above includes 18,805 unvested restricted stock units issued to Lake Capital in recognition of Mr. Graunke’s service on
the Board that would vest upon termination of service on the Board. Also includes 27,804 vested restricted stock units of which Lake Capital elected to defer receipt in connection with the Company’s Outside Director Compensation program.
|
43
| (5) |
Includes 7,500 vested options to purchase common stock and 18,805 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation
program that would vest upon termination of service on the Board. Also includes 1,300 shares held by Mr. Hamlin’s wife in an individual retirement account. |
| (6) |
Includes 18,805 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service
on the Board. Also includes 12,420 vested restricted stock units of which Mr. Harris elected to defer receipt in connection with the Company’s Outside Director Compensation program. |
| (7) |
Includes 10,000 vested options to purchase common stock and 18,805 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation
program that would vest upon termination of service on the Board. Also includes 27,804 vested restricted stock units of which Mr. Huston elected to defer receipt in connection with the Company’s Outside Director Compensation program.
|
| (8) |
Includes 18,805 unvested restricted stock units granted pursuant to the Company’s Outside Director Compensation program that would vest upon termination of service
on the Board. |
| (9) |
The information reported is based on a Schedule 13G/A filed with the SEC on February 11, 2015 by Columbia Wanger Asset Management, LLC (“WAM”), a
registered investment adviser of the type specified in Rule 13d-1(b)(1)(ii)(E) under the Exchange Act. The statement discloses that, as of the date specified in the filing, WAM had sole voting power with respect to 3,631,885 shares of common stock
and sole dispositive power with respect to 3,934,884 shares of common stock. This amount includes 2,903,719 shares of common stock held by Columbia Acorn Fund (“Acorn Fund”), a Massachusetts business trust that is advised by WAM, over
which shares Acorn Fund had both sole voting power and sole dispositive power. The address of WAM and Acorn Fund is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606. For additional disclosure regarding the persons affiliated with WAM and
their voting and dispositive powers with regard to the Company’s common stock, please refer to the Schedule 13G/A filed with the SEC on February 11, 2015. |
| (10) |
The information reported is based on a Schedule 13G/A filed with the SEC on January 30, 2015 by BlackRock, Inc. (“BlackRock”). The statement discloses
that, as of the date specified in the filing, BlackRock had sole voting power with respect to 1,821,207 shares of common stock and sole dispositive power with respect to 1,868,430 shares of common stock. The address for BlackRock is 55 East 52nd
Street, New York, NY 10022. For additional disclosure regarding the persons affiliated with BlackRock and their voting and dispositive powers with regard to the Company’s common stock, please refer to the Schedule 13G/A filed with the SEC
on January 30, 2015. |
| (11) |
The information reported is based on a Schedule 13G/A filed with the SEC on February 5, 2015 by Dimensional Fund Advisors LP (“Dimensional Fund”). The
statement discloses that, as of date specified in the filing, Dimensional Fund had sole voting power with respect to 1,870,575 shares of common stock and sole dispositive power with respect to 1,959,052 shares of common stock. The address for
Dimensional Fund is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746. For additional disclosure regarding the persons affiliated with Dimensional Fund and their voting and dispositive powers with regard to the Company’s
common stock please refer to the Schedule 13G/A filed with the SEC on February 5, 2015. |
| (12) |
The persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable, and except as indicated in the other footnotes to this table. Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to restricted stock units, options, stock appreciation rights or warrants held by that person that are currently vested or exercisable, or that will vest or become exercisable
within 60 days after March 16, 2015 (or upon the occurrence of an event, such as change of control, resignation for good reason, involuntary termination without cause, death or disability) are both deemed outstanding and included in the number
of shares beneficially owned by such person. In calculating the number of shares underlying vested stock appreciation rights, the Company assumed exercise with a Record Date closing price for the Company’s common stock of $8.80. The Company
also includes in these amounts all unvested but earned performance restricted stock units held by the its named executive officers and members of its Board as it believes this results in a more accurate representation of overall share ownership.
|
| (13) |
The address for each of Messrs. Dungan, Fernandez, Hamlin, Harris, Huston, Ramirez and Wix is 1001 Brickell Bay Drive, Suite 3000, Miami, Florida 33131. The address for
Mr. Graunke is in care of Lake Capital Management LLC, 676 North Michigan Ave., Suite 3900, Chicago, Illinois 60611. |
44
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive
officers and holders of more than 10% of the common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Based upon a review of filings with the SEC,
the Company believes that, except for the late filing of one Form 4 on behalf of Mr. Hamlin relating to the sale of Company common stock, all of its directors and executive officers complied during fiscal year 2014 with the reporting
requirements of Section 16(a) of the Exchange Act.
SHAREHOLDER PROPOSALS FOR THE ANNUAL
MEETING IN 2016
Any proposal or proposals by a shareholder intended to be included in the Company’s proxy statement
and form of proxy relating to the 2016 Annual Meeting of Shareholders must be received by the Company no later than November 23, 2015, pursuant to the proxy solicitation rules of the SEC. Nothing in this paragraph shall be deemed to require the
Company to include in its proxy statement and proxy relating to the 2016 Annual Meeting of Shareholders any shareholder proposal which may be omitted from the Company’s proxy materials pursuant to applicable regulations of the SEC in effect at
the time such proposal is received. Pursuant to the Company’s bylaws, all other shareholder proposals to be presented at the 2016 Annual Meeting of Shareholders must be submitted in writing and received by the Secretary of the Company at the
principal executive offices of the Company not earlier than February 9, 2016 and not later than March 10, 2016. However, if the date of the 2016 Annual Meeting of Shareholders is advanced by more than 30 days or delayed by more than 60
days from the anniversary of the 2015 Annual Meeting, the shareholder must deliver the notice not earlier than the 90th day prior to the annual meeting and not later than the close of business on the later of the 60th day prior to the annual meeting
or the tenth day following the day on which public announcement of the date of such meeting is first made. The shareholder’s notice with respect to such proposal must comply with the requirements set forth in the Company’s bylaws.
Similarly, shareholders may nominate director candidates, provided that such nominations must be submitted in writing and
received by the Secretary of the Company at the principal executive offices of the Company not earlier than February 9, 2016 and not later than March 10, 2016. However, if the date of the 2016 Annual Meeting of Shareholders is advanced by
more than 30 days or delayed by more than 60 days from the anniversary of the 2015 Annual Meeting, the shareholder must deliver the notice not earlier than the 90th day prior to the annual meeting and not later than the close of business on the
later of the 60th day prior to the annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. If the number of directors to be elected to the Board is increased and there is no public
announcement by the Company naming all of the nominees for director or specifying the size of the increased board at least 70 days prior to the first anniversary of the preceding annual meeting, then a shareholder wishing to nominate a director for
the new position must deliver the notice not later than the close of business on the tenth day following the day on which public announcement of the date of the meeting is first made.
The shareholder’s notice nominating a candidate for director must set forth:
| |
• |
|
as to each person whom the shareholder proposes to nominate for election as a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors pursuant to Section 14(a) of the Securities Exchange Act of 1934 and the rules and regulations thereunder (together with the nominee’s written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); and |
| |
• |
|
as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made, the name and address of the
shareholder, as it appears on the Company’s books, and of the beneficial owner, the class and number of shares of the Company that are owned of record and beneficially by the shareholder and beneficial owner, respectively, and a representation
that the shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. |
45
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION
Upon written request, the Company will provide, without charge, a copy of its Annual Report on Form 10-K for its fiscal year ended
January 2, 2015. For a copy of the Company’s Form 10-K, please contact Josie Estevez-Lugo at 1001 Brickell Bay Drive, Suite 3000, Miami, FL 33131, telephone (305) 375-8005, facsimile (305) 379-8810.
46
OTHER BUSINESS TO BE TRANSACTED
As of the date of this proxy statement, the Board knows of no other matters that may come before the annual meeting. However, if any
other matters properly come before the meeting, it is the intention of the proxy holders to vote or act in accordance with their best judgment with respect to such matters.
By Order of the Board of Directors,
Frank A. Zomerfeld
Secretary
March 25, 2015
47
APPENDIX A
THE HACKETT GROUP, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
(Amended and Restated as of
March 16, 2015)
The Hackett Group, Inc., a Florida corporation (the “Company”), sets forth herein the
terms of its amended and restated 1998 Stock Option and Incentive Plan (the “Plan”) as follows:
1. PURPOSE
The Plan is intended to enhance the Company’s ability to attract and retain highly qualified officers, key employees, outside
directors and other persons, and to motivate such officers, key employees, outside directors and other persons to serve the Company and its Affiliates (as defined herein) and to expend maximum effort to improve the business results and earnings of
the Company, by providing to such officers, key employees, outside directors and other persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides
for the grant of Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights and Other Awards (as each is defined herein) in accordance with the terms hereof. Stock Options granted under the Plan may be non-qualified Stock
Options or Incentive Stock Options, as provided herein, except that Stock Options granted to Outside Directors (as defined in Section 2.22) shall in all cases be non-qualified Stock Options. The Plan is intended to comply with
Section 162(m) of the Code.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award Agreements, as defined below), the following definitions shall apply:
2.1 “Affiliate” of, or person “affiliated” with, a person means any company or other trade or business that controls,
is controlled by or is under common control with such person within the meaning of Rule 405 of Regulation C under the Securities Act.
2.2 “Award Agreement” means the Stock Option agreement, Restricted Stock agreement, Restricted Stock Unit agreement, Stock Appreciation Right agreement, Other Award agreement or other written
agreement between the Company and a Grantee that evidences and sets out the terms and conditions of a Grant.
2.3
“Beneficial Owner” means a beneficial owner within the meaning of Rule 13d-3 under the Exchange Act.
2.4
“Benefit Arrangement” shall have the meaning set forth in Section 15 hereof.
2.5 “Board” means the
Board of Directors of the Company.
2.6 “Change of Control” means (A) any Person, other than any Person who is
a Beneficial Owner of the Company’s securities before the Effective Date, becomes, after the Effective Date, the Beneficial Owner, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the
Company’s then outstanding securities; (B) during any two-year period, individuals who at the beginning of such period constitute the Board (including, for this purpose, any director who after the beginning of such period filled a vacancy
on the Board caused by the resignation, mandatory retirement, death, or disability of a director and whose election or appointment was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of
such period) cease for any reason to constitute a majority thereof; (C) notwithstanding clauses (A) or (E) of this paragraph, the Company consummates a merger or consolidation
48
of the Company with or into another corporation, the result of which is that the Persons who were stockholders of the Company at the time of the execution of the agreement to merge or consolidate
own less than 80% of the total equity of the corporation surviving or resulting from the merger or consolidation or of a corporation owning, directly or indirectly, 100% of the total equity of such surviving or resulting corporation; (D) the
sale in one or a series of transactions of all or substantially all of the assets of the Company; or (E) the consummation of a tender or exchange offer whereby any Person acquires Beneficial Ownership of 40% or more of the total number of
voting shares of the Company, unless the Board has made a determination that such action does not constitute and will not constitute a material change in the Persons having control of the Company.
Notwithstanding the foregoing, with respect to an award that is subject to Section 409A of the Code where the payment or settlement
of the award will accelerate upon a Change of Control, no event set forth herein will constitute a Change of Control for purposes of the Plan or any Grant unless such event also constitutes a “change in ownership,” “change in
effective control,” or “change in the ownership of a substantial portion of the Company’s assets” as defined under Section 409A of the Code.
2.7 “Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended and the regulations and guidelines promulgated thereunder.
2.8 “Committee” means a committee of, and designated from time to time by resolution of, the Board, which shall consist of no
fewer than two members of the Board, none of whom shall be an officer or other salaried employee of the Company or any affiliate of the Company, which committee shall meet the requirements of Section 162(m) of the Code, Section 16(b) of
the Exchange Act, the applicable rules of the NASDAQ National Market and all other applicable rules and regulations (in each case as amended or superseded from time to time); provided, however, that, if any Committee member is found
not to have met the qualification requirements of Section 162(m) of the Code or Section 16(b) of the Exchange Act, any actions taken or Grants made by the Committee shall not be invalidated by such failure to so qualify.
2.9 “Company” means The Hackett Group, Inc.
2.10 “Effective Date” means April 23, 1998, the date on which the Plan was adopted by the Board.
2.11 “Exchange Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.
2.12 “Exercise Price” means (i) in the case of a Stock Option, the purchase price for each share of Stock subject to an Option or (ii), in the case of a Stock Appreciation Right, the value
from which Stock appreciation will be measured.
2.13 “Fair Market Value” means the value of a share of Stock,
determined as follows: if on the Grant Date or other determination date the Stock is listed on an established national or regional stock exchange, is admitted to quotation on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the closing price of the Stock on such exchange or in such market (the highest such closing price if there is more than one such exchange or market) on the Grant Date or such
other determination date (or if there is no such reported closing price, the Fair Market Value shall be the mean between the highest bid and lowest asked prices or between the high and low sale prices on such trading day) or, if no sale of Stock is
reported for such trading day, on the next preceding day on which any sale shall have been reported. If the Stock is not listed on such an exchange, quoted on such system or traded on such a market, Fair Market Value shall be the value of the Stock
as determined by the Board in good faith.
2.14 “Family Members” means the any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employees household (other
than a
49
tenant or employee), a trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the employee) control the management of
assets, and any other entity in which these persons (or the employee) own more than fifty percent of the voting interests.
2.15 “Grant” means an award of an Option, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights or Other Awards
under the Plan.
2.16 “Grant Date” means, as determined by the Board or authorized Committee, (i) the date as
of which the Board or such Committee approves a Grant, (ii) the date on which the recipient of such Grant first becomes eligible to receive a Grant or (iii) such other date as may be specified by the Board or such Committee.
2.17 “Grantee” means a person who receives or holds an Option, Restricted Stock, Restricted Stock Units, Stock Appreciate
Rights or Other Awards under the Plan.
2.18 “Incentive Stock Option” means an “incentive stock option”
within the meaning of Section 422 of the Code, or the corresponding provision of any subsequently enacted tax statute, as amended from time to time.
2.19 “Option” means an option to purchase one or more shares of Stock pursuant to the Plan.
2.20 “Other Agreement” shall have the meaning set forth in Section 15 hereof.
2.21 “Other Award” means any form of award (other than an Option, Restricted Stock, Restricted Stock Unit or Stock Appreciation Right) granted pursuant to Section 13.
2.22 “Outside Director” means a member of the Board who is not an officer or employee of the Company.
2.23 “Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.
2.24 “Plan” means this The Hackett Group, Inc. 1998 Stock Option and Incentive Plan.
2.25 “Restricted Period” means the period during which Restricted Stock or Restricted Stock Units are subject to restrictions or conditions pursuant to Section 12.2 hereof.
2.26 “Restricted Stock” means shares of Stock, awarded to a Grantee pursuant to Section 12 hereof, that are subject to
restrictions and to a risk of forfeiture.
2.27 “Restricted Stock Unit” means a unit awarded to a Grantee pursuant
to Section 12 hereof, which represents a conditional right to receive a share of Stock in the future, and which is subject to restrictions and to a risk of forfeiture.
2.28 “Securities Act” means the Securities Act of 1933, as now in effect or as hereafter amended, and the regulations and guidelines promulgated thereunder.
2.29 “Service Provider” means a consultant or adviser to the Company, a manager of the Company’s properties or affairs, or
other similar service provider or affiliate of the Company, and employees of any of the foregoing, as such persons may be designated from time to time by the Board.
2.30 “Stock” means the common stock, par value $0.001 per share, of the Company.
50
2.31 “Stock Appreciation Right” means a right to receive all or some portion of
the appreciation on Shares granted pursuant to Section 7.1.
2.32 “Subsidiary” means any “subsidiary
corporation” of the Company within the meaning of Section 424(f) of the Code.
2.33 “Termination Date”
shall be the date upon which an Option or Stock Appreciation Right shall terminate or expire, as set forth in Section 10.2 hereof.
3.
ADMINISTRATION OF THE PLAN
3.1 Board.
The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s certificate of incorporation, by-laws and applicable law. The Board
shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Grant or any Award Agreement, and shall have full power and authority to take all such other actions and make all
such other determinations not inconsistent with the specific terms and provisions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan, any Grant or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of the Board present at a meeting or by unanimous consent of the Board executed in writing in accordance with the Company’s certificate of incorporation, by-laws and
applicable law. The interpretation and construction by the Board of any provision of the Plan, any Grant or any Award Agreement shall be made in its sole discretion and shall be final, binding and conclusive on all parties having an interest herein.
3.2 Committee.
The Board from time to time may delegate to a Committee such powers and authorities related to the administration and implementation of the Plan, as set forth in Section 3.1 above and in other
applicable provisions, as the Board shall determine, consistent with the certificate of incorporation, by-laws of the Company and applicable law. In the event that the Plan, any Grant or any Award Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may be taken by or such determination may be made by the Committee if the power and authority to do so has been delegated to the Committee by the Board as provided for in
this Section. Unless otherwise expressly determined by the Board, any such action or determination by the Committee shall be final, binding and conclusive on all parties having an interest herein. As permitted by law, the Committee may delegate its
authority under the Plan to a member of the Board of Directors or an executive officer of the Company.
3.3 Grants.
Subject to the other terms and conditions of the Plan, the Board shall have full and final authority (i) to designate
Grantees, (ii) to determine the type or types of Grant to be made to a Grantee, (iii) to determine the number of shares of Stock to be subject to a Grant, (iv) to establish the terms and conditions of each Grant (including, but not
limited to, the exercise price of any Option or Stock Appreciation Right, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer, or forfeiture of a Grant or the shares of
Stock subject thereto, and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options), (v) to prescribe the form of each Award Agreement evidencing a Grant, and (vi) to amend, modify, or supplement the
terms of any outstanding Grant. Such authority specifically includes the authority, in order to effectuate the purposes of the Plan, but without amending the Plan, to modify Grants to eligible individuals who are foreign nationals or are individuals
who are employed outside the United States to recognize differences in local law, tax policy, or custom. As a condition to any subsequent Grant, the Board shall have the right, at its discretion, to require Grantees to return to the Company Grants
previously awarded under the Plan. Subject to the terms and conditions of the Plan, any such new Grant shall be upon such
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terms and conditions as are specified by the Board at the time the new Grant is made. Notwithstanding any of the foregoing to the contrary, the Board shall not have discretion to accelerate the
vesting of any Grant, except in the event of a Grantee’s death or permanent disability, or upon a Change of Control or other extraordinary corporate transaction.
3.4 No Liability.
Subject to applicable laws, rules and regulations: (i) no
member of the Board or Committee (or its delegates) shall be liable for any good faith action, omission or determination made in connection with the operation, administration or interpretation of the Plan and (ii) the members of the Board or
the Committee (and its delegates) shall be entitled to indemnification and reimbursement in the manner provided in the Company’s certificate of incorporation as it may be amended from time to time. In the performance of its responsibilities
with respect to the Plan, the Committee shall be entitled to rely upon information and/or advice furnished by the Company’s officers or employees, the Company’s accountants, the Company’s counsel and any other party the Committee
deems necessary, and no member of the Committee shall be liable for any action taken or not taken in reliance upon any such information and/or advice.
4. STOCK SUBJECT TO THE PLAN
4.1 Plan Limits.
Subject to adjustment in accordance with Section 18, the maximum number of shares of Stock that may be issued for all purposes under
the Plan shall the aggregate of (i) 19,267,536 shares and (ii) any shares of Stock that are represented by awards previously granted by the Company, including awards granted under the Answerthink, Inc. 1997 Stock Option Plan and the
Answerthink, Inc. Restricted Stock Plan as of the Effective Date. Stock to be issued under the Plan may be authorized and unissued shares, issued shares that have been reacquired by the Company (in the
open-market or in private transactions) and that are being held in treasury, or a combination thereof. All of the Stock subject to the Plan may be issued as Incentive Stock Options. The maximum number of
shares of Stock that may be granted pursuant to grant of (i) Restricted Stock, (ii) Restricted Stock Units or (iii) Other Awards shall not exceed 15,430,237.
4.2 Share Counting.
For purposes of determining the number of shares of Stock
that remain available for issuance (“Stock Available for Issuance”) under the Plan, (i) any Stock that is tendered by a Grantee or withheld by the Company to pay the exercise price of a Grant or to satisfy the Grantee’s tax
withholding obligations in connection with the exercise or settlement of a Grant and (ii) all of the Stock covered by a stock-settled Stock Appreciation Right to the extent exercised shall not be added
back to the total Stock Available for Issuance under the Plan. In addition, the number of shares of Stock corresponding to Awards under the Plan that are forfeited or cancelled or otherwise expire for any reason without having been exercised or
settled or that are settled through the issuance of consideration other than Stock (including, without limitation, cash) shall be added back to the aggregate Stock Available for Issuance and again be available for the grant of Awards;
provided, however, that this provision shall not be applicable with respect to (i) the cancellation of a Stock Appreciation Right granted in tandem with an Option upon the exercise of the Option or (ii) the cancellation of an
Option granted in tandem with a Stock Appreciation Right upon the exercise of the Stock Appreciation Right.
5. EFFECTIVE DATE AND TERM OF
THE PLAN
The Plan shall be effective as of the Effective Date. The Plan has no termination date; however, no Incentive
Stock Option may be granted under the Plan on or after the tenth anniversary of the date the Plan was last approved by stockholders.
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6. AWARD AGREEMENT
Each Grant pursuant to the Plan shall be evidenced by an Award Agreement, in such form or forms as the Board shall from time to time determine. Award Agreements granted from time to time or at the same
time need not contain similar provisions but shall be consistent with the terms of the Plan. Each Award Agreement evidencing a Grant of Options shall specify whether such Options are intended to be non-qualified Stock Options or Incentive Stock
Options, and, in the absence of such specification, such Options shall be deemed non-qualified Stock Options.
7. OPTION GRANTS AND STOCK
APPRECIATION RIGHTS
7.1 Company or Subsidiary Employees.
Grants of Stock Options (including Grants of Incentive Stock Options) and Stock Appreciation Rights may be made under the Plan to any
employee of, or Service Provider or employee of a Service Provider providing, or who has provided, services to, the Company or of any Subsidiary, including any such employee who is an officer or director of the Company or of any Subsidiary, as the
Board shall determine and designate from time to time. Stock Options and Stock Appreciation Rights are intended to constitute “performance-based compensation” as that term is used in Section 162(m) of the Code.
7.2 Successive Grants.
An eligible person may receive more than one Grant of Stock Options or Stock Appreciation Rights, subject to such restrictions as are provided herein.
8. LIMITATIONS ON GRANTS
8.1 Limitation on Shares of Stock Subject to Grants.
During any time when the Company has a class of equity securities registered under Section 12 of the Exchange Act, no person eligible for a Grant hereunder may be awarded Options or Stock
Appreciation Rights in any calendar year exercisable for greater than 1,000,000 shares of Stock (subject to adjustment as provided in Section 18 hereof). During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act, the maximum number of shares of Restricted Stock or Restricted Stock Units that can be awarded under the Plan to any person eligible for a Grant hereunder is 400,000 per calendar year (subject to adjustment
as provided in Section 18 hereof).
8.2 Limitations on Incentive Stock Options.
No Incentive Stock Option may be issued pursuant to the Plan to any individual who, at the time the Incentive Stock Option is granted,
owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of Stock of the Company or any of its Subsidiaries, unless (i) the exercise price determined as of the Grant Date is at least one hundred
ten percent (110%) of the Fair Market Value on the Grant Date of the shares of Stock subject to such Incentive Stock Option and (ii) the Incentive Stock Option is not exercisable more than five (5) years from the Grant Date. No
Grantee shall be granted any Incentive Stock Option which would result in such Grantee receiving a grant of Incentive Stock Options that would have an aggregate Fair Market Value in excess of one hundred thousand dollars ($100,000), determined as of
the Grant Date, that would be exercisable for the first time by such Grantee during any calendar year. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code,
or any successor provision thereto, as amended from time to time.
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9. EXERCISE PRICE OF OPTIONS AND STOCK APPRECIATION RIGHTS
The Exercise Price of each Option and Stock Appreciation Right shall be fixed by the Board and stated in the Award Agreement evidencing
such Option or Stock Appreciation Right. The Exercise Price shall be no lower than the Fair Market Value on the Grant Date of a share of Stock; provided, however, that in the event that a Grantee would otherwise be ineligible to receive an Incentive
Stock Option by reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than ten percent of the Company’s outstanding Stock), the Exercise Price of an Option granted to such Grantee that is intended
to be an Incentive Stock Option shall be not less than the greater of the par value or 110 percent of the Fair Market Value of a share of Stock on the Grant Date. In no case shall the Exercise Price of any Option or Stock Appreciation Right be less
than the par value of a share of Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS
10.1 Vesting and Exercise Period.
Subject to Sections 10.2 and 18.3 hereof, each Option and Stock Appreciation Right granted under the Plan shall vest and become exercisable at such times and under such conditions as shall be determined
by the Board and stated in the Award Agreement. For purposes of this Section 10.1, fractional numbers of shares of Stock subject to an Option or Stock Appreciation Right shall be rounded down to the next nearest whole number.
10.2 Term.
Each Option and Stock Appreciation Right granted under the Plan shall terminate, and all rights to purchase shares of Stock thereunder
shall cease, upon the expiration of ten years from the Grant Date, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the Award Agreement relating to such Option or
Stock Appreciation Right (the “Termination Date”); provided, however, that in the event that the Grantee would otherwise be ineligible to receive an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to ownership of more than ten percent of the outstanding Stock), an Option granted to such Grantee that is intended to be an Incentive Stock Option shall not be exercisable after the expiration of five years from its
Grant Date.
10.3 Termination of Employment or Other Relationship.
Except and unless as set forth in an Award Agreement or other employment agreement, upon the termination of a Grantee’s employment
or other relationship with the Company other than by reason of “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code), any Option or Stock Appreciation Right or portion thereof held by such Grantee that
has not vested in accordance with the provisions of Section 10.1 hereof shall terminate immediately, and any Option or Stock Appreciation Right or portion thereof that has vested in accordance with the provisions of Section 10.1 hereof but
has not been exercised shall terminate at the close of business on the 90th day following the Grantee’s termination of employment or other relationship (or, if such 90th day is a Saturday, Sunday or holiday, at the close of business on the next
preceding day that is not a Saturday, Sunday or holiday), unless the Board, in its discretion, extends the period during which the Option or Stock Appreciation Right may be exercised (which period may not be extended beyond the original term of the
Option or Stock Appreciation Right). Upon termination of an Option or Stock Appreciation Right or portion thereof, the Grantee shall have no further right to receive shares of Stock pursuant to such Option or Stock Appreciation Right or portion
thereof. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan shall be determined by the Board, which determination shall be final, binding
and conclusive on all parties having an
interest herein. For purposes of the Plan, a termination of employment, service or other relationship
shall not be deemed to occur if the Grantee is immediately thereafter employed with the Company or any other Service
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Provider, or is engaged as a Service Provider or an Outside Director of the Company. Whether a termination of a Service Provider’s or an Outside Director’s relationship with the Company
occurs shall be determined by the Board or Committee, which determination shall be final, binding and conclusive on all parties having an interest herein.
10.4 Rights in the Event of Death.
Except and unless as set forth in an Award
Agreement or other employment agreement, if a Grantee dies while employed by or providing services to the Company, all Options and Stock Appreciation Rights granted to such Grantee shall fully vest on the date of death, and the executors or
administrators or legatees or distributees of such Grantee’s estate shall have the right, at any time within one year after the date of such Grantee’s death (or such longer period as the Board, in its discretion, may determine prior to the
expiration of such one-year period) and prior to termination of the Option or Stock Appreciation Rights pursuant to Section 10.2 above, to exercise any Option or Stock Appreciation Right held by such Grantee at the date of such Grantee’s
death.
10.5 Rights in the Event of Disability.
Except and unless as set forth in an Award Agreement or other employment agreement, if a Grantee’s employment or other relationship with the Company is terminated by reason of the “permanent and
total disability” (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee’s Options and Stock Appreciation Rights shall continue to vest, and shall be exercisable to the extent that they are vested, for a
period of one year after such termination of employment or service (or such longer period as the Board, in its discretion, may determine prior to the expiration of such one-year period), subject to earlier termination of the Option or Stock
Appreciation Right as provided in Section 10.2 above. Whether a termination of employment or service is to be considered by reason of “permanent and total disability” for purposes of the Plan shall be determined by the Board, which
determination shall be final, binding and conclusive on all parties having an interest herein.
10.6 Limitations on Exercise
of Options and Stock Appreciation Rights.
Notwithstanding any other provision of the Plan, in no event may any Option or
Stock Appreciation Right be exercised, in whole or in part after ten years following the date upon which the Option or Stock Appreciation Right is granted, or after the occurrence of an event referred to in Section 18 hereof which results in
termination of the Option or Stock Appreciation Right.
10.7 Method of Exercise.
An Option or Stock Appreciation Right that is exercisable may be exercised by the Grantee’s delivery to the Company of written
notice of exercise on any business day, at the Company’s principal office, addressed to the attention of the Board. Such notice shall specify the number of shares of Stock with respect to which the Option or Stock Appreciation Right is being
exercised and, with respect to Options only, shall be accompanied by payment in full of the Exercise Price of the shares for which the Option is being exercised.
The minimum number of shares of Stock with respect to which an Option or Stock Appreciation Right may be exercised, in whole or in part, at any time shall be the lesser of (i) 100 shares or such
lesser number set forth in the applicable Award Agreement and (ii) the maximum number of shares available under the Option or Stock Appreciation Right at the time of exercise. In the case of an Option, payment of the Exercise Price for the
shares purchased shall be made (i) in cash or in cash equivalents; (ii) through the tender to the Company of shares of Stock, which shares, if acquired from the Company, shall have been held for at least six months and which shall be
valued, for purposes of determining the extent to which the Exercise Price has been paid thereby, at their Fair Market Value on the date of exercise; (iii) by a combination of cash and Stock equal in value to the Exercise Price,
(iv) through net share settlement or similar procedure involving the withholding of Stock subject to the
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Option with a value equal to the Exercise Price or (v) by such other means as the Board may authorize. With respect to Stock Appreciation Rights, the appreciation distribution with respect
to the SAR may be paid to the Grantee, at the discretion of the Board, by any of the following methods: (a) shares of Common Stock; (b) cash; or (c) in any combination of shares of Common Stock and cash. Payment to a Grantee pursuant
to a Stock Appreciation Right shall be made within thirty (30) days of exercise and in no event later than March 15 of the calendar year following the calendar year of exercise.
An attempt to exercise any Option or Stock Appreciation Right granted hereunder other than as set forth above shall be invalid and of no
force and effect. Unless otherwise stated in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a shareholder (for example, the right to receive cash or dividend payments or distributions
attributable to the subject shares of Stock or to direct the voting of the subject shares of Stock) until the shares of Stock covered thereby are fully issued to such individual. Except as provided in Section 18 hereof, no adjustment shall be
made for dividends, distributions or other rights for which the record date is prior to the date of such issuance. With respect to Stock Appreciation Rights, the Company may, in its sole discretion, award dividend equivalent rights to the Grantee on
the shares of stock underlying the portion of the Stock Appreciation Right that has vested as of the date the dividend is declared. The right to receive such dividend equivalents, if granted, will be set forth in the applicable Stock Appreciation
Right Award Agreement.
10.8 Prohibition on Repricing of Options and Stock Appreciation Rights.
Notwithstanding anything in the Plan to the contrary, an Option or Stock Appreciation Right shall not be granted in substitution for a
previously granted Option or Stock Appreciation Right being canceled or surrendered as a condition of receiving a new Grant if the new Grant would have a lower exercise price than the Grant it replaces, nor shall the exercise price of an Option or
Stock Appreciation Right be reduced once the Option or Stock Appreciation Right is granted. The foregoing shall not prevent adjustments pursuant to Section 18.
11. TRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS
11.1 General
Rule.
Except as provided in Section 11.2, during the lifetime of a Grantee, only the Grantee (or, in the event of legal
incapacity or incompetency, the Grantee’s guardian or legal representative) may exercise an Option or Stock Appreciation Right. Except as provided in Section 11.2, no Option or Stock Appreciation Right shall be assignable or transferable
by the Grantee to whom it is granted, other than by will or the laws of descent and distribution.
11.2 Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may transfer all or part of an Option or Stock Appreciation Right
that is not an Incentive Stock Option to (i) any Family Member, (ii) a trust or trusts for the exclusive benefit of any Family Member, or (iii) a partnership in which Family Members are the only partners, provided that (x) there
may be no consideration for any such transfer, and (y) subsequent transfers of transferred Options and Stock Appreciation Rights are prohibited except those in accordance with this Section 11.2 or by will or the laws of descent and
distribution. Following transfer, any such Option or Stock Appreciation Right shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of this Section 11.2 hereof
the term “Grantee” shall be deemed to refer the transferee. The events of termination of the employment or other relationship of Section 10.3 hereof shall continue to be applied with respect to the original Grantee, following which
the Option or Stock Appreciation Right shall be exercisable by the transferee only to the extent, and for the periods specified in Sections 10.3, 10.4 or 10.5.
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12. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
12.1 Grant of Restricted Stock or Restricted Stock Units.
The Board may from time to time grant Restricted Stock or Restricted Stock Units to persons eligible to receive Grants hereunder, subject to such restrictions, conditions and other terms as the Board may
determine.; provided, however, that in no event shall any portion of a Grant of Restricted Stock or Restricted Stock Units made under the Plan vest prior to the first anniversary of the grant date,
12.2 Restrictions.
At the time a Grant of Restricted Stock or Restricted Stock Units is made, the Board shall establish a period of time (the “Restricted Period”) applicable to such Restricted Stock or Restricted
Stock Units. Each Grant of Restricted Stock or Restricted Stock Units may be subject to a different Restricted Period. The Board may, in its sole discretion, at the time a Grant of Restricted Stock or Restricted Stock Units is made, prescribe
restrictions in addition to or other than the expiration of the Restricted Period, including the satisfaction of corporate or individual performance objectives, which may be applicable to all or any portion of the Restricted Stock or Restricted
Stock Units. Neither Restricted Stock nor Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other restrictions prescribed by the
Board with respect to such Restricted Stock or Restricted Stock Units.
12.3. Performance-Based Grants.
The Committee may determine whether any Grant of Restricted Stock or Restricted Stock Units under the Plan is intended to be
“performance-based compensation” as that term is used in Section 162(m) of the Code. Any such Grants designated to be “performance-based compensation” shall be conditioned on the achievement of one or more performance
targets, to the extent required by Section 162(m) of the Code and will be subject to all other conditions and requirements of Section 162(m). The performance targets that may be used by the Committee for such Grants will be comprised of
specified levels of one or more of the following as the Committee deems appropriate: costs, expense targets, market share, net income, revenue, net revenue, operating cash flow, operating margin, operating revenue, revenue growth rates, pretax
income, pretax operating income, operating income growth, net operating profit, return on assets, return on net assets, sales, total shareholder return, relative total shareholder return (versus an index or peer group), Stock price, return on
equity, return on capital, total earnings, operating earnings, earnings before interest and taxes (EBIT), earnings before interest, taxes, depreciation and amortization (EBITDA) calculated on a pro-forma basis or based on generally accepted
accounting principles, basic or diluted earnings per share or earnings per share growth calculated on a pro-forma basis or based on generally accepted accounting principles, operating efficiency ratios, economic value added, cash flow return on
investment, free cash flow, net cash provided by operations, gross margin, internal rate of return, or a combination thereof. The performance targets may be described in terms of objectives that are related to the individual Grantee or objectives
that are Company-wide or related to a Subsidiary, division, department, region, function or business unit and may be measured on an absolute or cumulative basis or on the basis of percentage of improvement over time, and may be measured in terms of
Company performance (or performance of the applicable Subsidiary, division, department, region, function or business unit) or measured relative to selected peer companies or a market index.
The Grantees will be designated, and the applicable performance targets will be established, by the Committee within ninety
(90) days following the commencement of the applicable performance period (or such earlier or later date permitted or required by Section 162(m) of the Code). Each Grantee will be assigned a target number of shares of Stock payable if
performance targets are achieved. Any payment of a Grant with performance targets shall be conditioned on the written certification of the Board or Committee in each case that the performance targets and any other material conditions were satisfied.
The Board or Committee may determine, at the time a Grant is made, that if performance exceeds the specified performance targets, the Grant may be settled with payment greater than the target number of shares of Stock, but in no event may such
payment
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exceed the limits set forth in Section 8.1. In the event that all members of the Committee are not “outside directors” as that term is defined in Section 162(m) of the Code,
the grant and terms of Grants intended to qualify as “performance-based compensation” will be made, and the Grant will be administered, by a subcommittee of the Committee or the Board of Directors consisting of two or more “outside
directors” for purposes of Section 162(m) of the Code.
12.4 Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock shall have the right to vote such Stock and the
right to receive any dividends declared or paid with respect to such Stock. The Board may provide that any dividends paid on Restricted Stock must be reinvested in shares of Stock, which may or may not be subject to the same vesting conditions and
restrictions applicable to such Restricted Stock. All distributions, if any, received by a Grantee with respect to Restricted Stock as a result of any stock split, stock dividend, combination of shares, or other similar transaction shall be subject
to the restrictions applicable to the original Grant.
12.5 Rights of Holders of Restricted Stock Units.
Unless the Board otherwise provides in an Award Agreement, holders of Restricted Stock Units shall have no rights as stockholders of the
Company. The Board may provide in an Award Agreement evidencing a Grant of Restricted Stock Units that the holder of such Restricted Stock Units shall be entitled to receive, upon the Company’s payment of a cash dividend on its outstanding
Stock, a cash payment for each Restricted Stock Unit held equal to the per-share dividend paid on the Stock. Such Award Agreement may also provide that such cash payment will be deemed reinvested in additional Restricted Stock Units at a price per
unit equal to the Fair Market Value of a share of Stock on the date that such dividend is paid.
12.6 Termination of
Employment or Other Relationship.
Upon the termination of the employment of a Grantee with the Company or a Service Provider or of a Service
Provider’s relationship with the Company, in either case other than, in the case of individuals, by reason of death or “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code), any shares of
Restricted Stock or Restricted Stock Units held by such Grantee that have not vested, or with respect to which all applicable restrictions and conditions have not lapsed, shall immediately be deemed cancelled and forfeited, unless the Board, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the Grantee shall have no further rights with respect to such Grant, including but not limited to any right to vote Restricted Stock or any right to
receive dividends with respect to shares of Restricted Stock or Restricted Stock Units. Whether a leave of absence or leave on military or government service shall constitute a termination of employment or other relationship for purposes of the Plan
shall be determined by the Board, which determination shall be final, binding and conclusive on all parties with an interest herein. For purposes of the Plan, a termination of employment, service or other relationship shall not be deemed to occur if
the Grantee is immediately thereafter employed with the Company or any other Service Provider, or is engaged as a Service Provider or an Outside Director of the Company. Whether a termination of a Service Provider’s or an Outside
Director’s relationship with the Company shall have occurred shall be determined by the Committee, which determination shall be final, binding and conclusive on all parties with an interest herein.
12.7 Rights in the Event of Death.
If a Grantee dies while employed by the Company or a Service Provider, or while serving as a Service Provider, all Restricted Stock or Restricted Stock Units granted to such Grantee shall fully vest on
the date of death, and the shares of Stock represented thereby shall be deliverable in accordance with the terms of the Plan to the executors, administrators, legatees or distributees of the Grantee’s estate.
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12.8 Rights in the Event of Disability.
If a Grantee’s employment or other relationship with the Company or a Service Provider, or while serving as a Service Provider, is
terminated by reason of the “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code) of such Grantee, such Grantee’s Restricted Stock or Restricted Stock Units that would have vested during the twelve
(12) month period following the termination of employment had the Grantee remained employed shall be deemed to have vested in accordance with the applicable Award Agreement (or such longer period as the Board, in its discretion, may determine
prior to the expiration of such one-year period), subject to the earlier forfeiture of such Restricted Stock or Restricted Stock Units in accordance with the terms of the applicable Award Agreement. Whether a termination of employment or service is
to be considered by reason of “permanent and total disability” for purposes of the Plan shall be determined by the Board, which determination shall be final, binding and conclusive on all parties with an interest herein.
12.9 Delivery of Stock and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to shares of Restricted Stock or Restricted
Stock Units shall lapse. Receipt of the Stock by the Grantee is conditioned upon payment by the Grantee to the Company, in cash or by check, of the aggregate par value of the shares of Stock represented by such Restricted Stock or Restricted Stock
Units.
13. OTHER AWARDS
The Committee shall have the authority to specify the terms and provisions of other forms of equity-based or equity-related
Grants not described above that the Board or Committee determines to be consistent with the purpose of the Plan and the interests of the Company, which Grants may provide for cash payments based in whole or in part on the value or future value of
Stock, for the acquisition or future acquisition of Stock, or any combination thereof.
14. RECOUPMENT
Notwithstanding anything in the Plan to the contrary, all Grants made under the Plan, any payments made under the Plan and any gains
realized upon exercise or settlement of an Grant shall be subject to claw-back or recoupment as permitted or mandated by applicable law, rules, regulations or any Company policy as enacted, adopted or modified
from time to time or as set forth in an Award Agreement.
15. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered
into by a Grantee with the Company or any Subsidiary, except an agreement, contract, or understanding hereafter entered into that expressly modifies or excludes application of this paragraph (an “Other Agreement”), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of participants or beneficiaries of which the Grantee is a member), whether or not such compensation is
deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified individual,” as defined in Section 280G(c) of the Code, any Option, Restricted Stock,
Restricted Stock Unit, Stock Appreciation Right or Other Award held by that Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise,
vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under this Plan to
be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”) and (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax
amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be
59
less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any
such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee’s sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee
under this Plan be deemed to be a Parachute Payment.
16. REQUIREMENTS OF LAW
16.1 General.
The Company shall not be required to sell or issue any shares of Stock under any Grant if the sale or issuance of such Stock would
constitute a violation by the Grantee, any other individual exercising an Option or Stock Appreciation Right, or the Company of any provision of any law or regulation of any governmental authority, including without limitation any federal or state
securities laws or regulations. If at any time the Company shall determine, in its discretion, that the listing, registration or qualification of any shares subject to a Grant upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or purchase of shares hereunder, no shares of Stock may be issued or sold to the Grantee or any other individual exercising an Option or stock-settled Stock Appreciation
Right pursuant to such Grant unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the
date of termination of the Grant. Specifically, in connection with the Securities Act, upon the exercise of any Option or stock-settled Stock Appreciation Right or the delivery of any shares of Restricted Stock or Stock underlying Restricted Stock
Units, unless a registration statement under such Act is in effect with respect to the shares of Stock covered by such Grant, the Company shall not be required to sell or issue such shares unless the Board has received evidence satisfactory to it
that the Grantee or any other individual exercising an Option or stock-settled Stock Appreciation Right may acquire such shares pursuant to an exemption from registration under the Securities Act. Any determination in this connection by the Board
shall be final, binding, and conclusive on all parties with an interest herein. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take
any affirmative action in order to cause the exercise of an Option or any other issuance of shares of Stock pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable until the shares of Stock covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall
be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.
16.2
Section 162(m) of the Code.
The Plan is intended to comply in all respects with Section 162(m) of the Code;
provided, however, that in the event the Board or Committee determines that compliance with Section 162(m) of the Code is not desired with respect to a particular Grant, compliance with Section 162(m) of the Code will not be
required. In addition, if any provision of this Plan would cause Grants that are intended to constitute “qualified performance-based compensation” under Section 162(m) of the Code, to fail to do so qualify, that provision shall be
severed from, and shall be deemed not to be a part of, the Plan with respect to such Grant, but the other provisions hereof shall remain in full force and effect.
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17. AMENDMENT AND TERMINATION OF THE PLAN
17.1 General.
Subject to applicable laws, rules and regulations, the Board may, at any time and from time to time, amend, suspend, or terminate the
Plan as to any shares of Stock as to which Grants have not been made; provided, however, that no termination, amendment, modification or suspension shall: (i) be effective without the approval of the stockholders of the Company if
such approval is required under applicable laws, rules and regulations, including the rules of the NASDAQ National Market, and (ii) materially and adversely alter or impair the rights of a Grantee in any Grant previously made under the Plan
without the consent of the holder thereof. Notwithstanding the foregoing, the Board shall have broad authority to amend the Plan or any Grant under the Plan without the consent of a Grantee to the extent it deems necessary or desirable: (a) to
comply with, or take into account changes in, or interpretations of, applicable tax laws, securities laws, employment laws, accounting rules and other applicable laws, rules and regulations, (b) to take into account unusual or nonrecurring
events or market conditions (including, without limitation, the events described in Section 18), or (c) to take into account significant acquisitions or dispositions of assets or other property by the Company. The Company may retain the
right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of the Grantee taking actions in “competition with the Company,” as defined in the applicable Award Agreement. Furthermore, the Company may
annul a Grant if the Grantee is an employee of the Company or an Affiliate and is terminated “for cause” as defined in the applicable Award Agreement. Except as permitted under this Section 17 or Section 18 hereof, no amendment,
suspension, or termination of the Plan shall, without the consent of the Grantee, alter or impair rights or obligations under any Grant theretofore awarded under the Plan.
17.2 Section 409A of the Code.
To the extent that the Board determines that
any Grant made under the Plan is subject to Section 409A of the Code, the Award Agreement evidencing such Grant shall incorporate the terms and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award
Agreements shall be interpreted in accordance with Section 409A of the Code and interpretive guidance issued thereunder. Notwithstanding any contrary provision in the Plan or an Award Agreement, if the Board determines that any provision of the
Plan or an Award Agreement contravenes any regulations or guidance promulgated under Section 409A of the Code or would cause a Grant to be subject to additional taxes, accelerated taxation, interest and/or penalties under Section 409A of
the Code, the Board may modify or amend such provision of the Plan or Award Agreement without consent of the Grantee in any manner the Board deems reasonable or necessary. In making such modifications the Board shall attempt, but shall not be
obligated, to maintain, to the maximum extent practicable, the original intent of the applicable provision without contravening the provisions of Section 409A of the Code. Moreover, any discretionary authority that the Board may have pursuant
to the Plan shall not be applicable to a Grant that is subject to Section 409A of the Code to the extent such discretionary authority would contravene Section 409A of the Code.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.1 Changes in Stock.
Notwithstanding any provision of the Plan or any Award Agreement, if the number of outstanding shares of Stock is increased or decreased
or the shares of Stock are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such shares effected without receipt of consideration by the Company occurring after the Effective Date, the number and kinds of securities or
other consideration for which Grants of Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights and Other Awards may be made under the Plan shall be adjusted proportionately and accordingly by the Company in order to preserve,
but not
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increase, the benefits or potential benefits intended to be made available under the Plan. In addition, the number and kind of securities or other consideration for which Grants are outstanding
shall be adjusted proportionately and accordingly so that the proportionate interest of the Grantee immediately following such event shall, to the extent practicable, be the same as immediately before such event. Any such adjustment in outstanding
Options or Stock Appreciation Rights shall not change the aggregate Exercise Price payable with respect to shares that are subject to the unexercised portion of an Option or Stock Appreciation Right outstanding but shall include a corresponding
proportionate adjustment in the Exercise Price per share. The conversion of any convertible securities of the Company shall not be treated as an increase in shares effected without receipt of consideration. Unless otherwise determined by the Board,
such adjusted Grants shall be subject to the same restrictions and vesting or settlement schedule to which the underlying Grant is subject.
18.2 Reorganization in Which the Company Is the Surviving Entity and in Which No Change of Control Occurs.
Subject to Section 18.3 hereof, if the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities in which no Change of
Control occurs, any Option or Stock Appreciation Right theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to such Option or Stock Appreciation Right would
have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Exercise Price per share so that the aggregate Exercise Price thereafter shall be the same as the aggregate
Exercise Price of the shares remaining subject to the Option or Stock Appreciation Right immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing a Grant of Restricted
Stock or Restricted Stock Units, any restrictions applicable to such Grants shall apply as well to any replacement awards received by the Grantee as a result of the reorganization, merger or consolidation.
18.3 Reorganization, Sale of Assets or Sale of Stock Which Involves a Change of Control.
Subject to the exceptions set forth in the last sentence of this Section 18.3, (i) upon the occurrence of a Change of Control,
all outstanding shares of Restricted Stock and Restricted Stock Units shall be deemed to have vested, and all restrictions and conditions applicable to such shares of Restricted Stock and Restricted Stock Units shall be deemed to have lapsed,
immediately prior to the occurrence of such Change of Control, and (ii) fifteen days prior to the scheduled consummation of the Change of Control, all Options and Stock Appreciation Rights outstanding hereunder shall become immediately
exercisable and shall remain exercisable for a period of fifteen days. Any exercise of an Option or a Stock Appreciation Right during such fifteen-day period shall be conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event. Upon consummation of any Change of Control, the Plan and all outstanding but unexercised Options and Stock Appreciation Rights shall terminate. The Board shall send written notice of an event that
will result in such a termination to all individuals who hold Options and Stock Appreciation Rights not later than the time at which the Company gives notice thereof to its shareholders. This Section 18.3 shall not apply to any Change of
Control to the extent that (A) provision is made in writing in connection with such Change of Control for the continuation of the Plan or the assumption of the Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights and
Other Awards theretofore granted, or for the substitution for such Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights and Other Awards of new options, restricted stock, restricted stock units, stock appreciation rights and
other awards covering the stock of a successor entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kinds of shares or units and exercise prices, in which event the Plan and Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights and Other Awards theretofore granted shall continue in the manner and under the terms so provided or (B) a majority of the full Board determines that such Change of Control shall not trigger
application of the provisions of this Section 18.3.
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18.4 Adjustments.
Adjustments under this Section 18 related to shares of Stock or securities of the Company shall be made by the Board, whose determination in that respect shall be final, binding and conclusive on all
parties with an interest herein. No fractional shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest
whole share.
18.5 No Limitations on Company.
The making of Grants pursuant to the Plan shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, consolidate, dissolve, or liquidate, or to sell or transfer all or any part of its business or assets.
19.
DISCLAIMER OF RIGHTS
No provision in the Plan or in any Grant or Award Agreement shall be construed to confer upon any
individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or a Service Provider either to increase or decrease the compensation
or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise stated in the
applicable Award Agreement, no Grant awarded under the Plan shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a director, officer, consultant or employee of the Company. The obligation of
the Company to pay any benefits pursuant to this Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to
require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any participant or beneficiary under the terms of the Plan. No Grantee shall have any of the rights of a shareholder
with respect to the shares of Stock subject to an Option or stock-settled Stock Appreciation Right except to the extent exercised.
20.
NONEXCLUSIVITY OF THE PLAN
Nothing herein shall be construed as creating any limitations upon the right and authority of
the Board to adopt such other incentive compensation arrangements (which arrangements may be applicable either generally to a class or classes of individuals or specifically to a particular individual or particular individuals) as the Board in its
discretion determines desirable, including, without limitation, the granting of Stock Options otherwise than under the Plan.
21. UNFUNDED
PLAN
The Plan is intended to constitute an unfunded plan for incentive compensation. Prior to the issuance of Stock, cash
or other form of payment in connection with a Grant, nothing contained herein shall give any Grantee any rights that are greater than those of a general unsecured creditor of the Company.
22. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be,
shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state, or local taxes of any kind required by law to be withheld with respect to the vesting of or other lapse of restrictions applicable to Restricted
Stock or Restricted Stock Units or upon the issuance of any shares of Stock upon the exercise of an Option or stock-settled Stock Appreciation Right. At the time of such vesting, lapse, or exercise, the Grantee shall pay to the Company or the
Subsidiary, as
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the case may be, any amount that the Company or the Subsidiary may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Company or the
Subsidiary, which may be withheld by the Company or the Subsidiary, as the case may be, in its sole discretion, the Grantee may elect to satisfy such obligations, in whole or in part, (i) by causing the Company or the Subsidiary to withhold
shares of Stock otherwise issuable to the Grantee or (ii) by delivering to the Company or the Subsidiary shares of Stock already owned by the Grantee. The shares of Stock so delivered or withheld shall have an aggregate Fair Market Value equal
to such withholding obligations. The Fair Market Value of the shares of Stock used to satisfy such withholding obligation shall be determined by the Company or the Subsidiary as of the date that the amount of tax to be withheld is to be determined.
A Grantee who has made an election pursuant to this Section 22 may satisfy his or her withholding obligation only with shares of Stock that are not subject to any repurchase, forfeiture, unfulfilled vesting, or other similar requirements.
23. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the convenience of reference only and shall not affect the meaning of any
provision of the Plan or such Award Agreement.
24. OTHER PROVISIONS
In the event of any conflict or inconsistency between the Plan and any Award Agreement, the Plan shall govern and the Award Agreement
shall be interpreted to minimize or eliminate any such conflict or inconsistency.
25. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine
gender, etc., as the context requires.
26. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions shall remain enforceable in any other jurisdiction.
27.
GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing the Grants awarded hereunder shall
be governed by the laws of the State of Florida.
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing
your proxy, you may choose one of the voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on May 8, 2015.
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Vote by Internet
• Go to www.investorvote.com/hckt
• Or scan the QR code with your
smartphone • Follow the steps
outlined on the secure website |
Vote by telephone
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone |
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Follow the instructions provided by the recorded message |
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q IF YOU HAVE NOT VOTED VIA THE INTERNET
OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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To approve an amendment to the Company’s 1998 stock option and Incentive Plan to raise the sublimit for restricted stock and restricted stock unit issuances under the Plan by 1,200,000
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Change of Address — Please print your new address below. |
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Comments — Please print your comments below. |
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Meeting Attendance |
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Mark the box to the right if you plan to attend the Annual Meeting. |
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Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee,
guardian, or custodian, please give full title.
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01ZGED
2015 Annual Meeting Admission Ticket
2015 Annual Meeting of
The Shareholders of The Hackett Group, Inc.
Friday, May 8, 2015 11:00 A.M. Local Time
The Hackett Group, Inc.’s Company Headquarters
1001 Brickell Bay Drive, Suite 3000
Miami, Florida 33131
Upon arrival, please present this admission ticket
and photo identification at the registration desk.
Important notice regarding the Internet availability of
proxy materials for the Annual Meeting of shareholders.
The proxy statement and The Company’s Annual Report on Form 10-K are available at:
www.edocumentview.com/hckt
q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG
THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
Proxy — The Hackett Group, Inc.
Notice of 2015 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting – May 8, 2015
Ted A. Fernandez or Robert A. Ramirez, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of The Hackett Group, Inc. to be held on May 8, 2015 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all
nominees and FOR Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before
the meeting.
(Items to be voted appear on reverse side.)
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q PLEASE FOLD ALONG THE PERFORATION,
DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q
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Proposals — The Board recommends a vote FOR all nominees, and FOR Proposals 2 and 3. |
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Election of Directors: |
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To approve an amendment to the Company’s 1998 stock
option and Incentive Plan to raise the sublimit for restricted stock and restricted stock unit issuances under the Plan by 1,200,000 shares and to increase the total shares available for issuance under the Plan by 1,200,000 shares. |
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Say on Pay - An advisory vote on the approval of executive
officer compensation. |
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Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.
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Signature 1 — Please keep signature within the box. |
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Signature 2 — Please keep signature within the box. |
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01ZGFD
Important notice
regarding the Internet availability of
proxy materials for the Annual Meeting of shareholders.
The proxy statement and The Company’s Annual Report on Form 10-K are available at:
www.edocumentview.com/hckt
q PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN THE ENCLOSED ENVELOPE. q
Proxy — The Hackett Group, Inc.
Notice of 2015 Annual Meeting of Shareholders
Proxy Solicited by Board of Directors for Annual Meeting – May 8, 2015
Ted A. Fernandez or Robert A. Ramirez, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if personally present, at the Annual Meeting of Shareholders of The Hackett Group, Inc. to be held on May 8, 2015 or at any postponement or adjournment thereof.
Shares represented by this proxy will be voted by the shareholder. If no such directions are indicated, the Proxies will have authority to vote FOR all
nominees and FOR Proposals 2 and 3.
In their discretion, the Proxies are authorized to vote upon such other business as may properly come before
the meeting.
(Items to be voted appear on reverse side.)
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