UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant þ | Filed by a Party other than the Registrant ¨ |
| Check the appropriate box: |
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
| þ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material under §240.14a-12 |
PROS HOLDINGS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s)
Filing Proxy Statement, if other than the Registrant)
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| Payment of Filing Fee (Check all boxes that apply): |
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| þ | | No fee required. |
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| o | | Fee paid previously with preliminary materials. |
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| o | | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
PROS | 20222023 Proxy Statement | Page 1
Attending the Annual Meeting
Our 20222023 annual meeting of stockholders (Annual Meeting) will be held in a virtual format to permit all stockholders equal access to the Annual Meeting.
To participate in the Annual Meeting, please follow the instructions posted at:
www.virtualshareholdermeeting.com/PRO2022PRO2023
Online access to the meeting platform will begin 30 minutes prior to the meeting, which will begin promptly at:
8:00 a.m. Central Daylight Time on May 12, 202211, 2023
If you wish to submit a question, you may do so in two ways. If you want to ask a question before the meeting, then beginning on April 13, 2022 and ending at 11:59 p.m. Eastern Time on April 27, 2022, you may log into www.proxyvote.comand enter your 16-digit control number. Questions pertinent to meeting matters which are submitted in advance will be answered during the Annual Meeting, subject to time constraints. Alternatively, if you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/PRO2022, type your question into the “Ask a Question” field, and click “Submit.” Any questions pertinent to meeting matters that are submitted during the meeting will be answered during the Annual Meeting. You do not need to attend the Annual Meeting to vote.
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If you want to ask a question before the meeting, then beginning on April 12, 2023 and ending at 11:59 p.m. Eastern Time on April 26, 2023, you may log into www.proxyvote.com and enter your 16-digit control number. Questions pertinent to meeting matters which are submitted in advance will be answered during the Annual Meeting, subject to time constraints. |
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If you want to submit your question during the meeting, log into the virtual meeting platform at www.virtualshareholdermeeting.com/PRO2023, type your question into the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters that are submitted during the meeting will be answered during the Annual Meeting. You do not need to attend the Annual Meeting to vote. |
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Even if you plan to attend the Annual Meeting, we encourage you to vote your shares in advance either online or as detailed underVoting Instructions in this Proxy Statement. |
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Even if you plan to attend the Annual Meeting, we encourage you to vote your shares in advance either online or as detailed under Voting Instructions in this Proxy Statement.
In this Proxy Statement, the terms “PROS,” the "Company," “we,” "us" and “our” refer to
PROS Holdings, Inc. together with its consolidated subsidiaries.
These materials were first sent or made available to stockholders on April 1, 2022.
PROS | 20222023 Proxy Statement | Page 2
PROS Holdings, Inc.
Notice of 20222023 Annual Meeting of Stockholders
Virtual Meeting Site:
www.virtualshareholdermeeting.com/PRO2022PRO2023
May 12, 202211, 2023
8:00 am Central Daylight Time
The Notice of Meeting, Proxy Statement and Annual Report on Form 10-K
are available free of charge at proxyvote.com and at ir.pros.com.ir.pros.com.
Items of Business
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| 1 | Elect threetwo Class IIII directors (Carlos Dominguez, Catherine Lesjak(Greg Petersen and Andres Reiner)Timothy Williams) to the board of directors of PROS Holdings, Inc. (Board of Directors or Board) to serve a three-year term until the annual meeting of our stockholders to be held in the year 2025 (20252026 (2026 Annual Meeting); |
| 2 | Advisory vote on named executive officer compensation; |
| 3 | Approval of amendments to our Amended and Restated 2017 Equity Incentive Plan to, among other items, increase the number of shares authorized for issuance by 2.9 million shares; |
| 4 | Ratification of appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2022; and2023; |
| 45 | Advisory vote on the frequency of voting on named executive officer compensation; and |
| 6 | Transaction of other business that may properly come before the Annual Meeting. |
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| Record Date | |
| Close of business on March 22, 202221, 2023 (Record Date). |
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| By Order of the Board of Directors, |
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| /s/ Damian Olthoff
_____________________________ | |
| Damian Olthoff |
| General Counsel and Secretary |
| Houston, Texas | |
| April 1, 2022March 31, 2023 | |
Your vote is important. Please vote.
PROS | 20222023 Proxy Statement | Page 3
In this Proxy Statement, the terms “PROS,” the "Company," “we,” "us" and “our” refer to PROS Holdings, Inc. together with its consolidated subsidiaries. This Proxy Statement includes website addresses and references to additional materials found on those websites. These websites are not incorporated in this Proxy Statement by reference.
This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our ESG goals and strategies. These statements involve risks and uncertainties. Actual results could differ materially from any future results expressed or implied by the forward-looking statements for a variety of reasons, including due to the risks and uncertainties that are discussed in our most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings. We assume no obligation to update any forward-looking statements or information, which speak as of their respective dates.
These materials were first sent or made available to stockholders on March 31, 2023.
PROS | 2023 Proxy Statement | Page 4
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TABLE OF CONTENTS | Our Values |
| | | Page | | At PROS, our mission is to help people and companies outperform. Our people, culture and values, reflected in our motto "We are Owners. We are Innovators. We Care.", are at the heart of everything we do to deliver on this mission. Our values are simple, celebrated and guide how we show up, how we treat others and how we make decisions every day. Consistent with our values, we publicly release information about our business across a number of important topics*, including corporate social responsibility (CSR) and environmental, social and governance (ESG) issues. We want our people to be proud of the work they do and of the company they work for. |
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PROS | 2022 Proxy Statement | Page 4
Our Values
At PROS, our mission is to help people and companies outperform, and our culture is at the heart of delivering on this mission. Centered on our core values of: We are Owners; We are Innovators; and We Care, our culture is built on our multi-decade commitment to innovating, leveraging the cutting edge of data science and putting our customers first. Consistent with these values, we publicly disclose information about our business across a number of important topics*, including corporate social responsibility (CSR) and environmental, social and governance (ESG) issues.
We are Owners
Our people’s success is PROS was built on an unwavering commitmentsuccess, and while our employees work hard every day to deliver the best experience for our customers, we look for every opportunity internally to create a better employee experience for our people. Our colleagues take pride in the work they do and in helping others, making everyone around them even better. We value and respect all voices across PROS, encouraging ongoing feedback to help us continuously learn and grow. We hold ourselves and others accountable and take ownership of our growth and success ofdevelopment. PROS offers several ways for our people to get involved and our customers. We are intensely focused on helping our customers competegrow their careers and win in the digital economy by optimizing their shoppingskillsets, including leadership training, mentorship opportunities and selling experiences. Delivering on this promise, however, requires more than best-of-breed, innovative technology, deep expertise in AI and machine learning and years of proven experience, all of which we pride ourselves in. Our customers and people count on us to also maintain a thriving business, one that embraces the value of diversity, supports our local communities and respects each individual for their unique talents and gifts. This focus speaks to the "heart" of our company, our rich and deeply rooted culture centered around caring for the people, the businesses and the communities we serve.employee resource groups.
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| We are Innovators
The diversity of experience and thought that our employees’ unique perspectives bring to the table not only foster an inclusive culture but are a central driver to our innovation and business success. We received recognition fromcontinue to be recognized by industry analysts for top products and innovation, including leadership positions in G2 for Pricing Software and the Gartner Magic Quadrant for CPQ, as well as the Constellation ShortList for Configure, Price, Quote and the IDC MarketScape for B2B Price Optimization and Management.Optimization. We were awarded numerous industry awards recognizing our continued product innovation, including: Best in Biz2022 International Stevie Winner for the PROS Platform, 2022 Silver Golden Bridge Award for 2021 Enterprise Product of the Year, Sales Software, MarTech'sPROS Platform, AI Breakthrough Award 2022: Best AI-Based Solution for Best Price Optimization Solution,Sales and Stevie Awards' International Business Awards Silver Stevie for our Price Optimization and Management Solutions.CRM Watchlist 2022 Winner.
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| We Care | | | |
| About our Employees. We are truly a people-first culture where every person is encouraged to bring their authentic selves to work and feel they belong and are valued. It’s how our company was started and how we’ll always operate. We believe that cultivating an inclusive environment – through diversity of thought, backgrounds, cultures and experiences – is key to making an impact and enabling our people to reach their full potential. Our teams prioritize wellbeing and genuinely care for and support each other, our communities and customers. The impact of these efforts is evidenced by our award-winning culture, Certified™ by Great Place to Work® and recognized as a Best Workplace in Texas, Most Loved Workplace and People’s 100 Companies that Care in 2022. | |
About our Communities.We believe in giving back and making a positive impact in the communities where we live and work. Through participation in community outreach projects, our people continue to create a culture that embraces inclusion and belonging and fosters a collaborative sense of purpose, creating a positive societal impact and further bringing our corporate values to life. Our employees volunteer their time to numerous social programs that are aimed at addressing a wide range of issues in the areas of homelessness, education, empowerment, crisis response and conservation.
| | | | | | | About our Employees. We believe that diversity and inclusion are key to driving true innovation. We are committed to continuing to hire and promote inclusively, increasing diverse representation and continuing to foster an inclusive culture that gives every employee the opportunity to realize their full potential. We also believe that an important part of our employee experience at PROS is our work environment and our commitment to employee well-being and development. Our commitment to caring about our employees can also be seen in our most recent global employee engagement survey conducted in 2021. Based on these responses, we were certified in all eligible locations as a great place to work.
| | About our Communities. Employees participating together in community outreach projects creates a culture that embraces inclusion and belonging, fosters a collaborative sense of purpose that creates a positive societal impact and further brings our corporate values to life. Our employees volunteer their time to numerous social programs that are aimed at addressing a range of issues in the areas of homelessness, education, empowerment, crisis response and conservation. |
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| About our World.We believe success is not just measured in dollars and cents; it is also measured in the impact we have on our communities. PROS continues to initiate sustainable activities that make a positive impact on the people and the environment around us. We are committed to understanding and minimizing our own environmental footprint. Our approach focuses on energy, emissions and waste across our operations including the PROS Platform and in our corporate facilities. |
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*CompanyOur goals are aspirational and may change. Statements regarding the Company are not guarantees or promises that they will be met. Content available at websites and in documents referenced in this section are not incorporated herein and are not part of this Proxy Statement. For more information regarding CSR and ESG at PROS, including our diversity and inclusion programs and metrics as well as our environmental stewardship activities, please visit ir.pros.com. |
PROS | 2023 Proxy Statement | Page 5
Proxy Statement Summary
This summary highlights selected information for PROS Holdings, Inc. (together with its consolidated subsidiaries, PROS, the Company, we, us or our) in this Proxy Statement. You should read this entire Proxy Statement carefully before voting.
PROS | 2022 Proxy Statement | Page 5
Proxy Statement Summary
This summary highlights selected information for PROS Holdings, Inc. (together with its consolidated subsidiaries, PROS, the Company, we, us or our) in this Proxy Statement. You should read this entire Proxy Statement carefully before voting.
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2022 | | | | | | | | | | 2023 Annual Meeting of Stockholders | | | | | Virtual Meeting Site: | | virtualshareholdermeeting.com/PRO2023 | | | | | Date: | | May 11, 2023 | | | | | Time: | | 8:00 am Central Daylight Time | | | |
The Record Date for the Annual Meeting is March 21, 2023. Only stockholders of record at the close of business on this date are entitled to vote at the Annual Meeting.
| | | | | Virtual Meeting Site: | virtualshareholdermeeting.com/PRO2022 | | | | Date: | | May 12, 2022 | | | | Time: | | 8:00 am Central Daylight Time | | | |
The Record Date for the Annual Meeting is March 22, 2022.
Only stockholders of record at the close of business on this date are entitled to vote at the Annual Meeting.
| | | | | | | | | | | | | Proposal
| | Proposal
| | Recommendation of the Board
| 1 | Election of Class III Directors | | FOR
each of the nominees
| 2 | Advisory Vote to Approve Executive Compensation | | FOR
| 3 | Ratification of appointment of Independent Registered Public Accounting Firm. | | FOR
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How to Vote
Please vote your shares promptly to ensure the presence of a quorum at the meeting. You may vote online prior to the meeting by visitingproxyvote.comand entering the control number found in your Notice of Internet Availability of Proxy Materials, or, if you requested printed copies of the proxy materials, by phone or by mail. You may also vote duringBoard
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| 1 | Election of Class I Directors | | FOR each of the Annual Meeting by visitingwww.virtualshareholdermeeting.com/PRO2022,entering the control number and following the instructions. For more detailed information, see the section entitled Voting Instructions.nominees
Materials
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| 2 | Advisory Vote to Review
We are mailingApprove Executive Compensation
| | FOR
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| 3 | Approval of amendments to our stockholders a Notice of Internet Availability of Proxy Materials (Notice) instead of a paper copy of this proxy statement (Proxy Statement)Amended and our Annual ReportRestated 2017 Equity Incentive Plan to, Stockholders for the Year Ended December 31, 2021 (2021 Annual Report). The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this Proxy Statement, our 2021 Annual Report and a form of proxy card or voting instruction card.PROS | 2022 Proxy Statement | Page 6
Business Highlights
In 2021, we continued to deliver on our mission of helping people and companies outperform, despite the disruptions of COVID on our business and our communities, by enabling our customers to optimize their shopping and selling experiences and compete in the digital economy. By continuing to execute on our strategy, we grew our subscription revenue by 4% and improved our cash flow metrics while managing the continuing impact of the COVID-19 pandemic. For more information on our financial performance, please see our 2021 Annual Report. Notable highlights for the year include:
•Improved customer gross revenue retention rate by more than 500 basis points, exceeding 93%, returning to our pre-COVID level.
•Significantly improved cash flow as net cash used in operating activities for the year ended December 31, 2021 was $30.8 million less, or an improvement of 62%, than in the prior year, primarily achieved through a combination of strong customer retention rates and operating efficiencies, in spite of the continuing impact of COVID on the travel industry.
•Announced next-generation intelligent SaaS editions for the PROS Platform, including PROS Smart Price Optimization and Management and PROS Smart Configure Price Quote.
•Completed the acquisition of EveryMundo LLC, a digital offer marketing pioneer that enables more direct customer engagement through dynamic webpages, offer visualization and digital ad campaigns, accelerating our vision to optimize every shopping and selling experience.
•Achieved a 2020-2021 Great Place to Work-Certified™ company designation for second year in a row, extending the certification to include all eligible countries: Australia, Bulgaria, France, Germany, United Kingdom and United States.
•Received recognition from industry analysts and numerous industry awards for top products and innovation, including leadership positions in G2 for Pricing Software, the Gartner Magic Quadrant for CPQ and the IDC MarketScape for B2B Price Optimization and Management; PROS was the only vendor to receive leadership rankings in both Price Optimization and Management and CPQ industry assessments.
| | | Annual Recurring Revenue (ARR) is one of our key performance metrics and should be viewed independently of revenue or other similar GAAP measures. ARR is defined, as of a specific date, as contractual recurring revenue, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements recognized as license revenue in accordance with GAAP. Gross revenue retention reflects our ability to retain existing customers and excludes any existing customer upsells. |
None of these accomplishments would have been possible without our team and culture, defined by our key values of:
•We are Owners;
•We are Innovators; and
•We Care (for each other, our customers, our communities and our world).
Our culture and values can be seen in our hybrid work model, our pandemic response and employee wellness initiatives. We emphasize work location and schedule flexibility, based on a blend of what makes sense for each employee, their team and our business, which we believe is the "future of work." We take an integrated approach to helping our employees manage their work and personal responsibilities, with a strong focus on employee physical and mental health. Recognizing that working in a hybrid environment across our global company is a relatively new way to interact, we offer company-wide initiatives to assist our employees managing through the changes and maintaining productivity. These initiatives have included, among other things, mental and physical health programming, periodic paid recharge days and "Work Well Wednesdays" with limited scheduled meetings to help combat video conference fatigue. We also offer our employees a trusted time off program, allowing our employees to take the time they need away from work, at their discretion, while still meeting business requirements. As we look forward, we created a wellbeing innovation team to help further develop a wellbeing program designed to meet the needs of our employees globally. For more information on our culture and values, please visit ir.pros.com.
PROS | 2022 Proxy Statement | Page 7
EXECUTIVE COMPENSATION PROGRAM
Our executive compensation program is designed with sound compensation policies and practices that align the compensation of our named executive officers (NEOs) with our stockholders’ interests. Our Compensation and Leadership Development (CLD) Committee believes that a well-functioning executive compensation program should reward executives for Company out-performance and that incentives should pay out at reduced levels or zero when Company performance is not achieved. Upon review, the CLD Committee (and our third party compensation consultants) have concluded that our executive compensation program is well aligned with these pay for performance tenets.
The overall design of our compensation program, consisting of three primary components (base salary, cash incentive and long-term equity awards), remained consistent year-over-year. Our CLD Committee made no changes to our NEOs' base salaries or cash incentive targets for 2021 as compared to 2020. For the 2021 NEO cash incentive program, the CLD Committee focused on improving profitability by adding improvement in Company free cash flow along with improvement in ARR, a core top-line Company metric. Half of our CEO's target equity grant value was delivered in performance-based Market Stock Units (MSUs) and half in time-based RSUs. Recognizing that in the midst of the COVID-19 pandemic, establishing multi-year Company performance targets for long-term equity awards was challenging, the CLD Committee chose to use relative stockholder return as the performance metric for the performance-based equity awards granted in 2021, where attainment is based on the Company's total stockholder return (TSR) versus the return of the Russell 2000 Index over a three-year performance period.
The Company's 2021 bonus plan performance goals were established in February 2021 and no adjustments or discretion were applied. The Company's performance against these preset goals led to a cash bonus payout of 115.4% of target. The above target bonus payout was aided by two strong performance indicators in 2021: solid improvement year-over-year in our free cash flow, which had a 40% weighting in the 2021 cash bonus plan, and a return to a customer gross retention rate well above 90%, which impacted our ARR performance, which had a 60% weighting in the plan.
The CLD Committee increased the target equity grant value for our NEOs in January 2021 in response to material increases in market equity compensation benchmarks and to continue to strongly align our NEOs' compensation with stockholders. These $100,000 to $500,000 increases in target equity award amounts, combined with the accounting fair market value calculation for market stock units (MSUs) drove the increases in year-over-year equity compensation values presented in the Summary Compensation Table. However, the 2021 MSUs, which have a three-year performance period, are currently tracking for a 0% of target earnout, and for any 2021 MSUs to be earned, the Company's TSR must outperform the Russell 2000 Index over the remaining performance period.Company Performance and CEO Pay
Our CEO's target compensation has remained similar over multiple years and decreased for 2022.
PROS | 2022 Proxy Statement | Page 8
The economic impact of the pandemic continued to adversely affect our CEO's actual compensation. Including restricted stock unit (RSU) equity awards, which change in value based on share price movement, more than 92% of our CEO’s 2021 total target compensation is at risk. While our CEO compensation reported in the Summary Compensation Tableincreased in 2021, compensation should be viewed with a multi-year lens, as performance-based equity is reported in the Summary Compensation Table at grant date fair value, but the compensation actually received depends on multiple factors, including our actual performance over the multi-year performance period and the share price at vesting and ultimate sale. For example, our CEO did not receive 48% of his target compensation for 2020, as his 2020 performance-based equity was not earned, and the 2020 bonus was below target. Our CEO's 2021 performance-based equity is currently not on pace to be earned, and if this performance continues over the remainder of the 3-year performance period, our CEO will not receive 40% of his target compensation for 2021.Our stock experienced unique headwinds from market forces in 2021. Our total stockholder return for 2021 was -32% and -42% over a two-year period, and was affected by both the travel and technology industries:
| | | | | | | | | | Travel Impact | The overall downturn in the travel industry due to the COVID-19 pandemic impacted our stock. For example, the ARCA Airline Index (NYSE: AXGAL) had a -26% two-year return through December 31, 2021. Sabre Corporation and Amadeus, technology providers that directly compete against a portion of our airline products, had a -61% and -17% two-year return, respectively, through December 31, 2021. | | | | | Tech Impact | In mid-2021, technology and SaaS stocks began to be adversely impacted by inflation and other economic headwinds. For example, the WisdomTree Cloud Computing Fund (NASD: WCLD) had a -7% return for the second half of 2021. More notably, from our peer group used for benchmarking our CEO's 2021 compensation, three-fourths of the companies that remained public at the end of 2021 had negative shareholder return in 2021. |
Our profitability metric significantly improved in 2021 and our CEO earned an above target cash incentive.
| | | | | | | | | | 2021 Cash Incentive | Our CEO's 2021 bonus was earned per the formula at 115.4% of target due to (a) free cash flow improving 62% year-over-year, well above the preset target of 42% improvement, and (b) ARR improving year-over-year, slightly above the minimum preset threshold target. Our CEO has earned 70% of his aggregate target bonus for 2020 and 2021 combined. |
Our CEO's performance-based equity awards, representing a significant amount of his pay, are operating as designed and align our CEO's actual compensation to Company performance and stockholders' interests. The multi-year impact of COVID-19 on our business has significantly impacted our CEO's compensation. For 2020, our CEO earned 4% of his targeted performance-based compensation. For 2021, if the 2021 MSUs are not earned as described below, our CEO would earn 20% of his targeted performance-based compensation. | | | | | | | | | | Incentive Award | Performance | | 2019 Equity | PRSUs awarded in 2019 (2019 PRSUs) were earned per the formula, at 79% of target due to total recurring revenue performance below target in 2020. These awards, earned below target, vested in early 2021. | | | | | 2020 Equity | PRSUs awarded in 2020 (2020 PRSUs) were not earned per the formula, due to total recurring revenue performance below target in 2021. Despite no actual compensation received by our CEO from this award, this award reflects $2.1 million of Mr. Reiner's compensation in the 2020 row of the Summary Compensation Table. | | | | | 2021 Equity | MSUs awarded in 2021 (2021 MSUs) are earned based on our TSR from January 1, 2021 through December 31, 2023 as compared to the Russell 2000 Index. This award reflects $3.3 million of Mr. Reiner's compensation in 2021. However, if the performance period had ended on December 31, 2021, no actual compensation would have been earned because our TSR relative to the Russell 2000 Index was below the minimum preset target threshold at that time. As a result of this underperformance, our TSR must outperform the Russell 2000 Index over the remaining two years of the performance period for any 2021 MSUs to be earned. |
Our CEO's personal interests are aligned with stockholders' interests. Our CEO holds a significant amount of PROS stock which was accumulated over his 23 years with PROS. Whileitems, increase the number of shares authorized for issuance by 2.9 million shares
| | FOR |
| 4 | Ratification of PROS stock our CEO owns increased by 16% in 2021 due to vestingappointment of certain equity awards, the aggregate valueIndependent Registered Public Accounting Firm | | FOR
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| 5 | Advisory Vote on Frequency of his PROS stock declined 21% due to PROS stock price declining in 2021. In addition, the value of his unvested equity awards are directly impacted by our stock price performance. For more informationVote on our CEO's stock ownership and value of his unvested equity awards, see Security Ownershipand Outstanding Equity Awards at FiscalExecutive Compensation | | 1 Year Endtable.Our CEO compensation plan is effective and operating as designed, and our CEO's interests are aligned with stockholders' interests.
PROS | 2022 Proxy Statement | Page 9
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How to Vote
Please vote your shares promptly to ensure a quorum at the meeting. You may vote online prior to the meeting by visitingproxyvote.comand entering the control number found in your Notice of Internet Availability of Proxy Materials, or, if you requested printed copies of the proxy materials, by phone or by mail. You may also vote during the Annual Meeting by visitingwww.virtualshareholdermeeting.com/PRO2023,entering the control number and following the instructions. For more detailed information, see the section entitled Voting Instructions.
Materials to Review
We are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (Notice) instead of a paper copy of this proxy statement (Proxy Statement) and our Annual Report to Stockholders for the Year Ended December 31, 2022 (2022 Annual Report). The Notice contains instructions on how to access those documents over the Internet. The Notice also contains instructions on how to request a paper copy of our proxy materials, including this Proxy Statement, our 2022 Annual Report and a form of proxy card or voting instruction card.
PROS | 2023 Proxy Statement | Page 6
2022 Business Highlights
In 2022, we continued to deliver on our mission of helping people and companies outperform by enabling our customers to optimize their shopping and selling experiences and compete in the digital economy. By continuing to execute on our strategy, we grew our subscription revenue and total revenue by double digits and advanced on our path to profitability, while managing through a challenging economic environment. For more information on our financial performance, please see our 2022 Annual Report. Highlights for the year include:
•Increased subscription revenue 15% and total revenue 10%.
•Improved subscription gross margin by over 300 basis points year-over-year to 73%.
•Published our customer value assessment results on pros.com, highlighting that our solutions generate for our customers, on average, 8% revenue uplift, 200 basis points of margin improvement, and 67% improvement in efficiency gain.
•Received recognition from industry analysts and numerous industry awards for top products and innovation, including being named a leader again in the Gartner 2022 Magic Quadrant for Configure, Price, and Quote Application Suites; together with our leadership position in the IDC MarketScape, PROS continues to be the only platform with a leadership position in both Price Optimization and Management and CPQ.
•Recognized as one of PEOPLE's 2022 Companies that Care, a list of the top 100 companies that have succeeded in business while demonstrating outstanding respect, care, and concern for their employees.
None of these accomplishments would have been possible without our dedicated team, inclusive culture, and strong values – We are Owners, We are Innovators, We Care – built into everything we do.
We believe cultivating a diverse and inclusive employee experience and environment sparks creativity, new ideas and innovation. We continue to evolve our business with the market, and our culture of trust, inclusion and innovation allows us to stay one step ahead. This is key to our success and why we continue to be a leader in our market. Happy employees make happy customers, and we take an integrated approach to helping our employees manage their work and personal responsibilities, with a strong focus on employee wellbeing. Our flexible work culture empowers employees and managers to work together to create inclusive work environments that balance both in-person collaboration with the flexibility of virtual work to meet business needs. We continue to evolve our hybrid playbook with new research, resources and best practices to help teams work efficiently. We offer company-wide initiatives to help our employees balance and maintain productivity. From generous time off and Recharge Days, our company-wide mental health holidays to disconnect, to our Work Well Wednesdays, a ‘quiet day’ for focused work, we’re helping our people unplug from work and meeting overload. New to 2022, we launched a Wellbeing Innovation Team of PROS colleagues across the business and globe to help further develop wellness programs designed to meet the needs of our diverse employee workforce.
For more information on our culture and values, please visit ir.pros.com.
PROS | 2023 Proxy Statement | Page 7
CORPORATE GOVERNANCE
Our Board and corporate governance structure is designed to assure that the long-term interests of our stockholders are being served. To satisfy the Board’s duties, directors are expected to take a proactive approach to overseeing our CEO and other senior management to ensure that PROS is committed to business success while maintaining high ethical standards.
Board and Committee Oversight in 20212022
| | | | | | | | | | | | | | |
| 20212022 Focus Areas | | Typical Board Meeting Process |
ü
| Strategy and M&A, including the acquisition of EveryMundo | | Before the meeting | Prep meetings with management, auditors and outside advisors |
| ü | Business Performance | | |
| ü | Investor Relations | | | |
| ü | Human Capital Management | | Day 1 | Board committee meetings and full Board meeting (including reports from each committee chair) |
| ü | Enterprise Risk Management | | |
| ü | Cybersecurity | | Day 2 | Full Board meeting, followed by an executive session |
| ü | ImpactPerformance and Integration of COVID-19EveryMundo | | |
| ü | Talent Acquisition, Retention and Development | | After the meeting | Management follow up to discuss, and respond to and execute on Board guidance and requests |
| ü | Oversight of ESG efforts | | |
| ü | Diversity and Inclusion | | | |
ü | Director Refreshment | | | |
Audit Committee
| | | | | |
| 20212022 Focus Areas & Select Activities |
| ü | Reviewing management's proposed public disclosures and investor communications and recommending enhancements |
| ü | Overseeing the detailed audit plan and auditor budget |
| ü | Monitoring critical accounting and financial reporting matters |
| ü | Reviewing annual internal control assessments with internal and external auditors |
| ü | Reviewing with management and external advisors the status of open tax matters and future tax strategies |
| ü | Reviewing with management the annual risk assessment |
| ü | CybersecurityProviding oversight of cybersecurity risk management and resilience |
Compensation and Leadership Development (CLD) Committee
| | | | | |
| 20212022 Focus Areas & Select Activities |
| ü | Human Capital Management |
| ü | Monitoring COVID-19 impact on existing programs |
ü | Updating peer group and developing NEO compensation program for 20222023 |
| ü | Reviewing acquisition, retention and succession plans for critical talent |
| ü | Monitoring equity plan usage |
| ü | Administering the Company's equity plans |
| ü | Reviewing and approving inducement grants for the acquisition of EveryMundoSuccession planning |
Nominating and Corporate Governance (NCG) Committee
| | | | | |
| 20212022 Focus Areas & Select Activities |
| ü | Director refreshment, including identifying, recruiting and onboarding a new director |
ü | Reviewing director Committee assignments and Committee leadership |
| ü | Overseeing annual performance evaluation of Board, Committees and individual directors |
| ü | Reviewing Code of Conduct, Governance Guidelines and Bylaws |
PROS | 20222023 Proxy Statement | Page 108
Diverse Board Representation
| | 33% | | 44% | | 66% | |
| 25% | | 25% | | 50% | | 63% |
| | Women | Women | | <3 years tenure | | Women and/or from underrepresented communities | Women | | <3 years tenure | | Women and/or from underrepresented communities |
Role of the Board of Directors
Our Board oversees our CEO and other senior management to assure that the long-term interests of stockholders are being served. Our Board currently consists of eight members, divided into three classes, with each class serving for a staggered three-year term. The term of office of one class of directors expires each year in rotation so that one class is elected at each annual meeting for a full three-year term. Our Board believes that our classified board structure aligns the Board with the Company’s long-term interests and allows for stable and informed oversight, providing institutional perspective both to management and other directors. Our Board has adopted formal Corporate Governance Guidelines to ensure that it has the practices in place to review and evaluate our business operations as needed, to make decisions independent of our management, and to align the interests of directors and management with the interests of our stockholders.
In 2022, our Board met four times and acted via unanimous written consent one time, the Audit Committee met 10 times and acted via unanimous written consent two times, the CLD Committee met five times and acted via unanimous written consent three times, and the NCG Committee met four times and acted via unanimous written consent one time. Each current director who served as a director in 2022 attended at least 75% of the meetings of our Board and the Committees on which he or she served during 2022. The Board encourages all directors to attend annual meetings of the stockholders. All incumbent directors attended the 2022 meeting of stockholders which was held virtually.
Composition of the Board of Directors and its Committees
The Board is led by our independent non-executive chairman, Mr. Russell. The Board’s current preferred governance structure is to have an independent director serve as chairman. We believe the current structure provides strong leadership for our Board and ensures independent oversight over the Company, while also positioning our Chief Executive Officer (CEO) as the leader of the Company.
The Board has determined that the followingall directors, have no relationships with us that would interfere with the exercise ofother than Mr. Reiner, are independent judgment in carrying out his or her responsibilities as a director, and as such are "independent" under NYSE listing standards and federal securities laws as of December 31, 2021: Messrs. Dominguez, Jourdan, Petersen, Russell, and Williams and Mses. Hammoud, Lesjak and Woestemeyer.2022. All Board committees are comprised entirely of independent directors. Ms. Mariette M. Woestemeyer, a Class I director, has informed the Board of her intention to retire from the Board effective as of the Annual Meeting.
The Board has standing Audit, CLD and NCG Committees. Each Committee has a written charter, which can be found under the Investor Relations section of our website at ir.pros.com. Our Board has determined that each member of the Audit Committee qualifies as "financially literate" within the rules of the NYSE and that three members of the Audit Committee, Ms. Lesjak and Messrs. Williams and Petersen and Ms. Lesjak,Williams, qualify as an Audit Committee financial expert within the meaning of the SEC regulations. Each member of our CLD Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code (Code). The following table provides additional information regarding our director nominees:current composition of the Board and its committees is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | Age | Director Since | Class | Independent | AC | CC | NCG | Other Public Company Boards |
| Carlos Dominguez | 63 | 2020 | III | Yes | M | | | Sprinklr; The Hartford |
| | | | | | | | |
| Catherine Lesjak | 63 | 2020 | III | Yes | M | | M | General Electric; SunPower |
| | | | | | | | |
| Andres Reiner | 51 | 2010 | III | No | | | | Paylocity |
| | | | | | | | | | | | | | | | | |
| Name | AC | CLD | NCG | Independent | Other Public Company Boards |
| Carlos Dominguez | M | | | Yes | The Hartford |
| Raja Hammoud | | M | | Yes | — |
| Leland T. Jourdan | | M | | Yes | — |
| Catherine Lesjak | C | | M | Yes | General Electric; GE HealthCare |
| Greg B. Petersen | M | C | | Yes | Plus Therapeutics |
Andres D. Reiner President & CEO | | | | | Paylocity |
William Russell Non-Executive Chairman | | M | C | Yes | Acesso Technology Group |
| Timothy Williams | M | | M | Yes | — |
| C = Committee Chair; M = Committee Member |
PROS | 20222023 Proxy Statement | Page 119
Audit Committee
The Audit Committee assists the Board in oversight and monitoring of:
•our accounting and financial reporting processes and the audits of our financial statements;
•our independent auditors, including their qualifications, engagement, performance and independence;
•the results of the annual audit and the independent auditor’s review of our annual and quarterly financial statements and reports, including discussions with independent auditors without management present;
•press releases regarding our financial results and any other financial information and earnings guidance provided;
•matters that have a significant impact on our financial statements;
•the scope, adequacy and effectiveness of our internal control over financial reporting and disclosure controls;
•our internal auditors;
•tax matters and tax strategies;
•risk management, including financial accounting, investment, capital structure, tax and business continuity
•cybersecurity risk management and resilience;
•procedures for complaints for employees to submit concerns anonymously about questionable accounting, internal control or auditing matters; and
•all material related-party transactions that require disclosure.
Compensation and Leadership Development Committee
The CLD Committee discharges the responsibilities of our Board relating to the compensation and benefits for our executive officers and directors, including:
•reviewing and approving the compensation arrangements for our executive officers and directors;
•engaging with a third-party independent advisor to assist in evaluating our executive compensation program;
•reviewing and approving corporate performance goals and objectives relevant to such compensation;
•reviewing our compensation discussion and analysis and CLD Committee report required by the rules of the SEC;
•administering our equity incentive plans;
•providing oversight on the overall leadership development program throughout the Company; and
•overseeing succession planning for executive officers jointly with the NCG Committee.
For more information regarding the roles of the CLD Committee, our independent compensation consultant, our CEO and stockholders with respect to executive compensation and other compensation matters, please see Compensation Discussion and Analysis.
Nominating and Corporate Governance Committee
The NCG Committee assists the Board in:
•identifying qualified candidates to become directors and considering the nomination of our incumbent directors for reelection;
•evaluating stockholder nominations of candidates for election to our Board;
•reviewing our general policy relating to selection of director candidates and members of committees of our Board, including an assessment of the performance of our Board;
•reviewing and making recommendations to our Board regarding corporate governance principles and policies;
•reviewing periodically our environmental and corporate social responsibility policies and practices; and
•overseeing succession planning for executive officers jointly with the CLD Committee.
The NCG Committee has the responsibility for establishing the criteria for recommending which directors should stand for reelection to our Board and the selection of new directors to serve on our Board. Although the NCG Committee has not formulated any specific minimum qualifications for director candidates, it has determined desirable characteristics including, but not limited to, business experience, mature judgment, leadership, personal and professional ethics, diversity and integrity. We do not have a formal policy with respect to consideration of diversity in identifying director nominees; however, in the process of selecting a director nominee, the NCG Committee assesses backgrounds, diversity and expected contributions of the individuals to the Board.
PROS | 2023 Proxy Statement | Page 10
Corporate Governance Practices
The Board of Directors has adopted corporate practices and policies that promote excellence in corporate governance. Our corporate governance practices are designed to assure that the long-term interests of stockholders are being served. Key corporate governance policies and practices include:
| | | | | | | | |
| Independent Oversight | | •All non-employee directors are independent. |
| | •All Board committees are comprised entirely of independent directors. |
| | •Our Board holds regular executive sessions of independent directors. |
| | •Our Board has an independent non-executive Chairman. |
| | •Charters of each of the committees of the Board clearly establish the committees’ respective roles and responsibilities. |
| | |
| Stock Ownership Guidelines | | |
| | |
| Accountability | | •Clawback policy that applies to all cash awards, and our stock plan has a clawback provision that applies to all equity awards.awards (including time-based and performance-based equity awards). |
| | •Anti-hedging, anti-short and anti-pledging policies.policies, applicable to all directors and employees. |
| | •Our director resignation policy requires director nominees who do not receive at least 50% of the stockholder votes “for” re-election to tender their resignation. |
| | •Directors may not serve on more than four other public company boards; directors who serve as CEOs should not serve on more than two other public company boards. |
| | |
| Ethics | | •Code of Business Conduct and Ethics annually affirmed by all employees. |
| | •Reporting hotline available to all employees, and PROS Audit Committee has procedures in place for the anonymous submission of employee complaints. |
| | |
| Stockholder Communication | | •We proactively engage with stockholders throughout each year, including at earnings conference calls, investor road shows and investor days, as well as at individual stockholder meetings. We also welcome stockholders to attend our annual OutPerform event for customers and prospects. |
| | •Annual “Say-on-Pay” advisory vote on our executive compensation program. |
| | |
| Board Refreshment | | •Reviewed regularly, with 4 new directors added50% of the Board refreshed since 2020. |
| | |
| Board Performance Evaluations | | •Annual board, committee and individual director performance evaluations, led by our non-executive Chairman. |
| | |
| Diversity | | •33%25% of our Board of Directors are women and 44%50% are from diverse ethnicities. |
| | |
| Education | | •Directors regularly attend continuing education events related to board governance best practices, including conferences and webinars provided by the NYSE, NACD and Equilar, among others. |
| | |
| Succession Planning | | •Annual review of executive succession planning. |
More information regarding our corporate governance is available under the Investor Relations section of our website at ir.pros.com, which also includes our corporate governance policies, our Code of Business Conduct and Ethics, and the charter for each committee of the Board.
PROS | 2023 Proxy Statement | Page 11
Risk Management
The Board oversees our risk management process and programs. Management reviews the process, including identification of key risks and steps taken to address them, with the full Board at least on an annual basis. The Audit Committee, the CLD Committee and the NCG Committee assist the Board in discharging its oversight duties. The Audit Committee considers risks related to the subject matters enumerated in its charter, including risks relating to internal controls, disclosure, financial reporting and cybersecurity.
The CLD Committee reviews risks related to the subject matters enumerated in its charter, including risks associated with our compensation programs. Similarly, theThe NCG Committee considers risks related to the subject matters for which it is responsible as identified in its charter, including risks associated with corporate governance. Accordingly, whileWhile each of the three committees contributes to the risk management oversight function by assisting the Board in the manner outlined above, the Board remains responsible for the oversight of our risk management.
PROS | 2022 Proxy Statement | Page 12
ESG Oversight
The Board oversees our ESG programs, including ongoing engagement with senior executives on key matters including cybersecurity, diversity, sustainability and governance practices. Our Chief People Officer leads our social investments and champions our commitment to ESG performance and transparency. The Audit Committee oversees our strategies and initiatives related to cybersecurity. The NCG Committee oversees our policies and programs concerning ESG matters, including review of our Sustainability Policy in early 2022.Policy. The CLD Committee oversees the development and implementation of our practices, strategies and policies used for recruiting, managing and developing employees (human capital management). These practices, strategies and policies focus on diversity and inclusion, leadership development, workplace environment and safety, and corporate culture. In addition, the full Board receives updates and progress on ESG matters from management, and Mr. Jourdan meets with our Chief People Officer outside of regularly scheduled Board meetings to review ESG matters. For more information on ESG matters, see our ESG Report (available at:ir.pros.com). Our ESG Report is not incorporated by reference into this proxy statement.
Cybersecurity Oversight
Our Board oversees the senior management team’s effortsdevotes significant time to address cybersecurity and data privacy risks, and annually reviews cyber risk mitigation and transfer efforts, including review of our cybersecurity insurance coverage. To provide even more focused oversight and guidance as part of our continuing evolution of our cybersecurity program, the Audit Committee amended its charter in 2021 to explicitly add oversight of issues related to cybersecurity risks.oversight. The Audit CommitteeBoard annually reviews our overall cyber security risk profile with respect to cybersecurity matters. The Audit Committee also reviews quarterly reports by our Head of Information Securityhelp ensure that sensitive data remains secure in an ever-changing threat landscape, including risk preparedness, mitigation and Cyber Security ontransfer strategies. This assessment considers a range of factors, including our business objectives, the threat landscape, industry trends and regulatory requirements. Our Chief Information Security Officer regularly reports to the Audit Committee and the Board on cybersecurity activities, including cybersecuritymatters. These updates include information on threats, and risks, security effectiveness, complianceincident response planning, remediation efforts, (such asemployee training and awareness (including the results of our annual cybersecurity training required for all employees)training), benchmarking incident response and planned initiatives.initiatives to help the Board evaluate the effectiveness of our cybersecurity program. Ms. Hammoud also meets with our Head ofChief Information Security and Cyber SecurityOfficer outside of regularly scheduled Board meetings to review cybersecurity matters.
Board Governance
Our non-executive chairman, among other responsibilities, oversees the planning of the annual Board calendar, and, with our CEO, in consultation with the other directors, schedules and sets the agenda for meetings of the Board, and leads the discussion at such meetings, serves as a liaison between the CEO and the independent directors, leads executive sessions of our Board, and performs such additional duties and responsibilities as requested by the Board from time to time. Executive sessions of the independent directors of the Board are scheduled during each regularly scheduled in-person Board meeting. Our non-executive chairman provides feedback to our CEO, as needed, promptly after the executive session.
Board Performance Evaluation Process. Our Board recognizes that a robust and constructive performance evaluation process is an essential component of Board effectiveness. Our Board conducts annual performance evaluations that are intended to determine whether the Board, each of its committees, and individual Board members are functioning effectively, and to provide them with an opportunity to reflect upon and improve processes and effectiveness. Our NCG Committee oversees this annual process, which is led by our non-executive chairman. As part of this process, each Board member completes written assessments of Board and Committee effectiveness and performance, and our non-executive chairman conducts one-on-one discussions with eachperformance. The Board member to obtain their assessment ofalso assesses the effectiveness and performance of individual Board members. For example, in 2022 each Board member completed written assessments of other Board members. A summary of the results of these assessments are presented to the NCG Committee identifying any themes or issues that have emerged. The results are then reported to the full Board, which considers the results and ways in which Board processes and effectiveness may be enhanced. Our Board is also implementing an additional process in 2022 to have Board members complete written assessments on individual Board member effectiveness and performance.
PROS | 2023 Proxy Statement | Page 12
Board Refreshment. Our Board recognizes that regularly evaluating Board refreshment is also an important component of Board effectiveness. The NCG Committee and the Board are focused on identifying individuals whose skills and experiences will enable them to effectively contribute to the Board. Following the annual Board performance evaluation described above, and as part of its consideration of director refreshment, the NCG Committee reviews the appropriate skills and characteristics required of Board members such as business experience, viewpoints and personal background, and diversity of skills in technology, finance, marketing, international business, financial reporting and other areas. The NCG Committee also continually evaluates committee appointments (or membership) and leadership and opportunities for effective rotation. For example, we currently plan for Ms. Lesjak to assumeassumed the role of Chair of the Audit Committee following the 2022 Annual Meeting. Mr. Williams, the current Audit Committee chair, has served in this role for the past 14 years. He will continue to serve on the Audit Committee.Additionally, due to the global nature of our business and our customers, the Board believes it is important that the Board include individuals with diversity of race, ethnicity, gender, sexual orientation, age, education, cultural background and professional experiences, and those factors are considered in evaluating board candidates in order to provide practical insights and diverse perspectives. Based on these assessments, the Board has added four new directors since 2020, including our newest Board member, Mr. Jourdan who was appointed following the recommendation of the NCG Committee in June 2021.2020. For more information on the skills and experience of Mr. Jourdan, see Our Board of Directors, and for more information on the qualifications, skills and attributes of our Board nominees,members, see Director Qualifications, Skills and Attributesin this Proxy Statement. PROS | 2022 Proxy Statement | Page 13
Accountability
Code of Business Conduct and Ethics. Our Board has adopted a Code of Business Conduct and Ethics that applies to all of our directors and employees. Our Code of Business Conduct and Ethics is available under the "Investor Relations"Investor Relations section of our website at ir.pros.com.
Director Resignation Policy. Our Board has adopted a director resignation policy. Under this policy, in an uncontested election of directors any nominee who receives a greater number of votes “withheld” from his or her election than votes “for” such election must promptly tender his or her resignation to the NCG Committee. The NCG Committee will promptly consider all relevant factors including, without limitation, (a) the stated reasons why votes were withheld from such director; (b) any alternatives for curing the underlying cause of the withheld votes; (c) the tenure and qualifications of the director; (d) the director’s past and expected future contributions to the Company; (e) our Corporate Governance Guidelines; and (f) the overall composition of the Board, including whether accepting the resignation would cause the Company to fail to meet any applicable SEC or NYSE requirement. The NCG Committee will recommend to the qualified independent directors the action to be taken with respect to such offered resignation, and the qualified independent directors will act on the NCG Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting in which the election occurred. If a majority of the members of the NCG Committee received a greater number of votes “withheld” from their election than votes “for” their election at the same election, then the remaining qualified independent directors on the Board will consider the matter directly or may appoint a committee of the Board amongst themselves solely for the purpose of considering the tendered resignations and making the recommendation to the Board whether to accept or reject them.
Stock Ownership Guidelines. Our Board has adopted stock ownership guidelines for our NEOs and directors that are designed to align our NEOs’ and directors' interests with our stockholders’ interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking and further increases our NEOs’ and directors' alignment with stockholder interests. These guidelines require our CEO to hold shares of our stock worth at least six times his annual salary, other NEOs to hold shares of our stock worth at least two times their annual salary, and each non-employee director to hold shares of our stock worth at least five times the director's annual retainer. New directors are expected to achieve their ownership threshold within six years after joining our Board. New NEOs are expected to achieve their ownership threshold within five years from the date of hire or promotion. As of December 31, 2021,2022, each of our NEOs and directors were in compliance with the applicable guidelines.
Prohibition Against Hedging, Short-Sale, Pledging and Repricing Underwater Stock Options. We have implemented both anti-hedging and anti-pledging policies, as well as a prohibition on participating in short sales of our stock, to ensure that our executives’ stock remains at-risk. Our Insider Trading Policy, which applies to all employees, including officers and non-employee directors, specifically prohibits short sales of our securities, transactions in puts, calls or other derivative securities involving our stock, hedging or monetization transactions (including but not limited to zero-cost collars, prepaid variable forwards and equity swaps), and holding our securities in a margin account or pledging our securities as collateral for a loan. Our Amended and Restated 2017 Equity Incentive Plan (2017 Plan) also prohibits repricing, repurchase or exchange of underwater stock options without stockholder approval.
Compensation Committee Interlocks and Insider Participation. No member of our CLD Committee and none of our executive officers has any relationships that would constitute an interlocking relationship with executive officers and directors of any other entity.
PROS | 2023 Proxy Statement | Page 13
Communication with Our Board
Stockholders or interested parties who wish to communicate with members of our Board may send correspondence to them in care of our Corporate Secretary at 3200 Kirby Drive, Suite 600, Houston, Texas 77098. Such communication will be forwarded to the intended recipient(s). We currently do not intend to have our Corporate Secretary screen this correspondence, but we may change this policy if directed by our Board due to the nature or volume of the correspondence. Communications that are intended specifically for the non-executive chairman of the Board may also be sent to the street address noted above, to the attention of the non-executive chairman of the Board.
Role of the Board of Directors
Our Board oversees our CEO and other senior management to assure that the long-term interests of stockholders are being served. Our Board currently consists of nine members, divided into three classes, with each class serving for a staggered three-year term. The term of office of one class of directors expires each year in rotation so that one class is elected at each annual meeting for a full three-year term. Our Board believes that our classified board structure aligns the Board with the Company’s long-term interests and allows for stable and informed oversight, providing institutional perspective both to management and other directors. Our Board has adopted formal Corporate Governance Guidelines to ensure that it has the practices in place to review and evaluate our business operations as needed, to make decisions independent of our management, and to align the interests of directors and management with the interests of our stockholders.
PROS | 20222023 Proxy Statement | Page 14
In 2021, our Board met 4 times and acted via unanimous written consent 3 times, the Audit Committee met 10 times and acted via unanimous written consent 2 times, the CLD Committee met 5 times and acted via unanimous written consent 4 times, and the NCG Committee met 4 times and acted via unanimous written consent one time. Each current director who served as a director in 2021 attended at least 75% of the meetings of our Board and the Committees on which he or she served during 2021. The Board encourages all directors to attend annual meetings of the stockholders. All incumbent directors, except for Mr. Jourdan who joined the Board in June 2021, attended the 2021 meeting of stockholders which was held virtually.
Audit Committee
The Audit Committee assists the Board in oversight and monitoring of:
•our accounting and financial reporting processes and the audits of our financial statements:
•our independent auditors, including their qualifications, engagement, performance and independence;
•the results of the annual audit and the independent auditor’s review of our annual and quarterly financial statements and reports, including discussions with independent auditors without management present;
•press releases regarding our financial results and any other financial information and earnings guidance provided;
•matters that have a significant impact on our financial statements;
•the scope, adequacy and effectiveness of our internal control over financial reporting and disclosure controls;
•our internal auditors;
•tax matters and tax strategies;
•risk management, including financial accounting, investment, capital structure, tax, business continuity and cybersecurity matters;
•procedures for complaints for employees to submit concerns anonymously about questionable accounting, internal control or auditing matters; and
•all material related-party transactions that require disclosure.
Compensation and Leadership Development Committee
The CLD Committee discharges the responsibilities of our Board relating to the compensation and benefits for our executive officers and directors, including:
•reviewing and approving the compensation arrangements for our executive officers and directors;
•reviewing and approving corporate performance goals and objectives relevant to such compensation;
•administering our equity incentive plans;
•reviewing our compensation discussion and analysis and CLD Committee report required by the rules of the SEC;
•engaging with a third-party independent advisor to assist in evaluating our executive compensation program;
•providing oversight on the overall leadership development program throughout the Company; and
•overseeing succession planning for executive officers jointly with the NCG Committee.
Nominating and Corporate Governance Committee
The NCG Committee assists the Board in:
•identifying qualified candidates to become directors and considering the nomination of our incumbent directors for reelection;
•evaluating stockholder nominations of candidates for election to our Board;
•reviewing our general policy relating to selection of director candidates and members of committees of our Board, including an assessment of the performance of our Board;
•reviewing and making recommendations to our Board regarding corporate governance principles and policies;
•reviewing periodically our environmental and corporate social responsibility policies and practices; and
•overseeing succession planning for executive officers jointly with the CLD Committee.
The NCG Committee has the responsibility for establishing the criteria for recommending which directors should stand for reelection to our Board and the selection of new directors to serve on our Board. Although the NCG Committee has not formulated any specific minimum qualifications for director candidates, it has determined desirable characteristics including, but are not limited to, business experience, mature judgment, leadership, personal and professional ethics, diversity and integrity. We do not have a formal policy with respect to consideration of diversity in identifying director nominees; however, in the process of selecting a director nominee, the NCG Committee assesses backgrounds, diversity and expected contributions of the individuals to the Board.
PROS | 2022 Proxy Statement | Page 15
OUR BOARD OF DIRECTORS
Our Board consists of a diverse group of highly qualified leaders in their respective fields. Most of our directors have senior leadership experience at major domestic and multinational technology companies. In these positions, they have gained significant and diverse experience, including strategy, finance, sales and marketing, risk management, public company financial reporting, compliance and leadership development. They also have public company experience serving as executive officers, or on boards of directors and board committees, and have an understanding of corporate governance practices and trends. The Board believes the experience, expertise and other attributes of our directors provide PROS with a diverse range of perspectives to provide oversight and represent the best interests of our stockholders. Among our nominees for election to the Board and continuing directors, threetwo self-identify as women and three self-identify as individuals from underrepresented communities (meaning, an individual who self-identifies as Black, Hispanic, Latino, Asian, Pacific Islander or Native American).
Directors and Director Nominees
| | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | |
| William Russell | | Andres D. Reiner |
| Non-Executive Chairman of the Board | | (Nominee)President and |
| NCG Committee Chairman | | President andChief Executive Officer |
| CLD Committee | | Chief Executive Officer |
| | | |
| | |
| Mr. Russell, 70,71, serves on the board of directors at Accesso Technology Group PLC (OTCMKTS:LOQPF)(AIM: ACSO). Mr. Russell previously served in a variety of roles on both public and private technology company boards and previously served on the boards of SABA Software, Inc. (from January 2010 to March 2015), webMethods and Cognos. Mr. Russell held a number of senior-level roles in his more than 20 years at Hewlett-Packard, including Vice President and General Manager of the multi-billion-dollar Enterprise Systems Group. Mr. Russell holds a Bachelor of Science in Computer Science from Edinburgh University and has completed several executive development programs from institutions including Harvard Business School and INSEAD. As a result of leading Hewlett-Packard’s substantial software business and his public company board experience, Mr. Russell brings to the Board his broad knowledge of large-scale software operations, including sales, marketing, development, finance, strategic planning and leadership, and corporate governance. | | | | Mr. Reiner, 51,52, serves as our President and Chief Executive Officer, a position he has held since November 2010. From 1999 to 2010, Mr. Reiner held a series of positions with successively increasing responsibility, including Senior Vice President of Product Development and Executive Vice President of Product and Marketing. Prior to becoming our President and Chief Executive Officer, he was responsible for global marketing and alliances, product management, science research, and development of our next generation software products. Mr. Reiner was also instrumental in our transition to a cloud business. Mr. Reiner has served on the board of directors of Paylocity Holding Corporation (NASD: PCTY) since September 2014 and serves on their Compensation and Nominating and Governance committees. Mr. Reiner holds a Bachelor of Science in Computer Science with a minor in Mathematics from the University of Houston. As a result of his more than 20 years of experience with PROS, Mr. Reiner has familiarity with all of our key day-to-day operations, in-depth experience in and knowledge of the development of our products, services and the markets in which we compete, and has leadership, management, strategy, corporate development, risk management and operating experience. | |
PROS | 20222023 Proxy Statement | Page 1615
| | | | | | | | | | | |
| | Mr. Dominguez, 63, has64, is a private investor and retired technology executive.
He served as Vice-Chairman and Chief Evangelist of Sprinklr, Inc. (NYSE: CXM) sincefrom December 2019. He has served2019 to September 2022 and as a director of Sprinklr since 2011.
from 2011 to 2022. He served as President of Sprinklr from 2015 to 2019 and as Chief Operating Officer from 2015 to 2018. He also serves on the board of directors of The Hartford Financial Services Group, Inc. (NYSE: HIG) and serves on the Compensation & Management Development and Nominating & Corporate Governance committees of Hartford's board. He also served on the board of directors of Medidata Solutions, Inc. (NASD: MDSO) from 2009 until its acquisition by Dassault Systemes in 2019. From 1992 to 2015, Mr. Dominguez held a variety of roles at Cisco Systems, Inc., including SVP, Worldwide Service Provider Operations (2004 to 2008) and SVP, Office of the Chairman and CEO (2008 to 2015).
Mr. Dominguez brings to the Board his extensive business and leadership experience in technology and software companies, including experience in sales, marketing, strategy, governance, compensation planning and mergers and acquisitions. | |
| | |
| Carlos Dominguez | |
(Nominee)Audit Committee | | |
Audit Committee | | |
| | |
| | | |
| | Ms. Hammoud, 50,51, has served as Executive Vice President of Products at Coupa Software Incorporated (NASD: COUP) since 2019.
She served as Senior Vice President of Products at Coupa from 2017 to 2019 and as Vice President of Product Marketing and Management from 2014 to 2017. Prior to joining Coupa, Ms. Hammoud directed product marketing for Adobe System’s (NASD: ADBE) business process management business and held a product development management role at webMethods. Ms. Hammoud earned a B.S. in Computer Science with high distinction from the American University of Beirut, Lebanon.
Ms. Hammoud brings to the Board her extensive technology industry experience, including her experience in product marketing, software development and product portfolio strategy. | |
| Raja Hammoud | | |
| CLD Committee | | |
| | | |
| | Mr. Jourdan, 64,65, retired from Chevron (NYSE: CVX) in 2021, after having served as Chevron's Chief Diversity and Inclusion Officer from 2018 to 2021 and Senior Management Sponsor from 2015 to 2018. In his more than 18-year career at Chevron, Mr. Jourdan served in a variety of management roles, including as Vice President, Commercial and Business Development for each of the IndoAsia and Asia South regions.
Prior to Chevron, Mr. Jourdan served in management, business development, trading and engineering roles at El Paso Energy, PG&E and Dominion Energy. As a graduate of the US Military Academy at West Point, Mr. Jourdan was commissioned as an officer in the US Army, obtaining the rank of Captain prior to entering the private sector. Mr. Jourdan currently serves on the board of SEARCH Homeless Services, a non-profit organization.
An author and frequent public speaker, Mr. Jourdan brings to the Board his substantial international commercial and business development, mergers and acquisitions, risk management and diversity, equity and inclusion experience at a global, Fortune 10 company. | |
| Leland T. Jourdan | | |
| CLD Committee | | |
| | |
| | | |
PROS | 2023 Proxy Statement | Page 16
| | | | | | | | | | | |
| | | |
| | Ms. Lesjak, 63,64, retired from HP, Inc. (NYSE: HPQ), formerly Hewlett-Packard Company (HP) in March 2019, serving as HP's interim Chief Operating Officer from 2018 to 2019, after having served as Chief Financial Officer from 2007 to 2018.
In addition, Ms. Lesjak served as interim Chief Executive OfficerCEO of HP from August 2010 through October 2010. During her 32-year careeer at HP, Ms. Lesjak held a broad range of financial leadership roles, including Senior Vice President and Treasurer and other financial operations and controller roles. Ms. Lesjak has a bachelor’s degree in biology from Stanford University and a master of business administration degreeMBA in finance from the University of California, Berkeley.
Ms. Lesjak serves on the board of directors of SunPower (NASD: SPWR) where she serves as Chair of the Audit committee and member of the Compensation committee and General Electric Company (NYSE: GE) where she serves on the Audit and Governance & Public Affairs committees.committees and GE HealthCare Technologies Inc. (NYSE: GEHC) where she serves as Chair of the Audit committee. She served on the board of directors and as Chair of the Audit Committee and a member of the Compensation committee of SunPower (NASD: SPWR) from 2013 to December 2022.
An audit committee financial expert, Ms. Lesjak brings to the Board extensive experience as the chief financial officer of a major corporation, with significant presence in both the business-to-consumer and business-to-business markets, including extensive experience in strategic business planning and execution, financial oversight, corporate development and public company governance. | |
| Catherine Lesjak | | |
(Nominee)Audit Committee Chair | | |
AuditNCG Committee | | |
| | |
PROS | 2022 Proxy Statement | Page 17
| | | | | | | | | | | |
| | Mr. Petersen, 59,60, has served as president of Brookview Capital Advisors since 2016. He currently serves on the board of directors of the following public companies: Aterian, Inc. (NASD: ATER) where he serves as Chairman of the Audit committee, and Plus Therapeutics, Inc. (NASD: PSTV) where he serves as Chairman of the Audit committee and a member of the Compensation committee.
Mr. Petersen previously served on the board of directors of Aterian, Inc. (NASD: ATER) (2019 to 2022), Diligent Corporation (2013 to 2016) and Piksel, Inc. (2012 to 2017). Mr. Petersen served as the chairman of the audit committee at Aterian, Diligent and Piksel, and as an advisory board member at Synthesio. From 2014 to 2015, he served as Executive Vice Chairman at Diligent Corporation. Mr. Petersen previously served as Chief Financial Officer for CBG Holdings, Lombardi Software, Inc. (which was sold to IBM in 2010), and Activant Solutions, Inc. Mr. Petersen previously served in executive roles with Trilogy Software and RailTex. Mr. Petersen began his career with American Airlines, Inc. (NASD:AAL), including serving as managing director of corporate development where he led a project to create Sabre Holdings, Inc. (NASD:SABR) and complete its IPO. Mr. Petersen holds a Bachelor of Arts in Economics from Boston College and a Master of Business AdministrationMBA from the Fuqua School of Business at Duke University.
An audit committee financial expert, Mr. Petersen brings to the Board his business and leadership experience in software companies, merger and acquisition experience, and extensive financial planning, accounting, governance, compensation planning and risk management knowledge. | |
| | |
| Greg B. Petersen | | |
CLD Committee Chairman(Nominee) | | |
| CLD Committee Chairman | | |
| Audit Committee | | |
| | |
| | | |
| | Mr. Williams, 73, has served on the board of directors74, is a private investor and as chairman of the Audit committee of ChannelAdvisor Corporation (NYSE: ECOM) since 2012. He also serves on the board of directors of PointClickCare Corp., a privately held company.retired chief financial officer. Mr. Williams previously served on the board of directors and as chairman of the audit committeeAudit committees of ChannelAdvisor Corporation (NYSE: ECOM) (2012 to 2022) and Halogen Software, Inc. (TSE: HGN) (April 2011(2011 to May 2017). Mr. Williams served as Senior Vice President and Chief Financial Officer of Blackbaud, Inc. (NASD: BLKB), a provider of software and services to non-profit organizations, from January 2001 until his retirement in November 2011. Mr. Williams previously served as Executive Vice President and Chief Financial Officer of both Mynd Corporation (now a subsidiary of Computer Sciences Corporation), and Holiday Inn Worldwide, a subsidiary of Bass PLC. Mr. Williams holds a Bachelor of Arts in business from the University of Northern Iowa. An audit committee financial expert, Mr. Williams has extensive financial, business, management and public software company expertise. Through his experience as a chief financial officer at three different companies, including two software and services firms, Mr. Williams brings to the Board extensive knowledge of accounting, risk management, general management of software companies and public company reporting requirements and processes. | |
| |
| Timothy V. Williams | | |
Audit Committee Chairman(Nominee) | | |
NCGAudit Committee | | |
| | |
| | | |
| | Mrs. Woestemeyer, 70, co-founded PROS in 1985 with her husband, Ronald Woestemeyer. She has served as a director of PROS since 1985. Mrs. Woestemeyer has notified the Board that she will be retiring from the Board as of the Annual Meeting.
Mrs. Woestemeyer was previously the Chief Financial Officer of Metro Networks, a broadcasting company, from 1983 to 1985 and held various financial roles with Continental Airlines and its predecessor, Texas International Airlines, prior to 1983. Mrs. Woestemeyer holds a Bachelor of Business Administration and a Master of Business Administration from the University of Houston.
As co-founder of PROS, Mrs. Woestemeyer brings to the Board continuity and history of current and past management and direct relevant industry experience. Mrs. Woestemeyer also has familiarity with all of our key operations as a result of serving as a director since our founding. Mrs. Woestemeyer also has experience as our Chief Financial Officer for many years and related operational expertise. | |
| | |
Mariette M. Woestemeyer | | |
Co-FounderNCG Committee | | |
| | |
PROS | 20222023 Proxy Statement | Page 1817
Director Qualifications, Skills and Attributes
The below table provides a summary view of the key experiences, expertise and other attributes of our continuing directors and director nominees as well as term of office information. A checkmark indicates a specific area of focus or experience on which the Board relies most. The lack of a checkmark does not mean the individual does not possess that qualification or skill.
| | Board Experience, Expertise or Attribute | Board Experience, Expertise or Attribute | Carlos Dominguez | Raja Hammoud | Leland Jourdan | Catherine Lesjak | Greg Petersen | Andres Reiner | William Russell | Timothy Williams | Mariette Woestemeyer | Board Experience, Expertise or Attribute | Carlos Dominguez | Raja Hammoud | Leland Jourdan | Catherine Lesjak | Greg Petersen | Andres Reiner | William Russell | Timothy Williams |
| | (Nominee) | | (Nominee) | | (Nominee) | | | (Nominee) | | (Nominee) |
| Accounting | Accounting | | ü | | ü | Accounting | | ü | | ü |
| Business Operations | Business Operations | ü | Business Operations | ü |
| Cloud Software | Cloud Software | ü | ü | | ü | | Cloud Software | ü | ü | | ü |
| Finance | Finance | | ü | | ü | Finance | | ü | | ü |
| International | International | ü | | ü | | ü | International | ü | | ü | |
| Leadership | Leadership | ü | Leadership | ü |
| M&A | M&A | ü | | M&A | ü |
| Public Company/Governance | Public Company/Governance | ü | | ü | | Public Company/Governance | ü | | ü |
| Risk Management | Risk Management | ü | | ü | | ü | | Risk Management | ü | | ü | | ü |
| Sales & Marketing | Sales & Marketing | ü | | ü | | Sales & Marketing | ü | | ü | | ü | |
| Software Product Development | Software Product Development | | ü | | ü | | Software Product Development | | ü | | ü | |
| Tech Industry | | Tech Industry | ü | | ü |
| Travel Industry | Travel Industry | | ü | | ü | Travel Industry | | ü | |
| | Race/Ethnicity | Race/Ethnicity | Race/Ethnicity |
| Black/African American | Black/African American | | ü | | Black/African American | | ü | |
| Hispanic/Latin American | Hispanic/Latin American | ü | | ü | | Hispanic/Latin American | ü | | ü | |
| Asian | Asian | ü | | Asian | ü | |
| Middle Eastern/North African | Middle Eastern/North African | | ü | | Middle Eastern/North African | | ü | |
| Caucasian/White | Caucasian/White | | ü | | ü | | Caucasian/White | | ü | | ü |
| Prefer not to disclose | | ü | |
| | Other Public Boards | Other Public Boards | Other Public Boards |
| At March 22, 2022 | 2 | — | 2 | 1 | — | |
| At March 1, 2023 | | At March 1, 2023 | 1 | — | 2 | 1 | — |
| | Term of Service on PROS Board | Term of Service on PROS Board | Term of Service on PROS Board |
| Director Since | Director Since | 2020 | 2021 | 2020 | 2007 | 2010 | 2008 | 2007 | 1985 | Director Since | 2020 | 2021 | 2020 | 2007 | 2010 | 2008 | 2007 |
| Current Term Expires | Current Term Expires | 2022 | 2024 | 2022 | 2023 | 2022 | 2024 | 2023 | Current Term Expires | 2025 | 2024 | 2025 | 2023 | 2025 | 2024 | 2023 |
| Class of Director | Class of Director | III | II | III | I | III | II | I | Class of Director | III | II | III | I | III | II | I |
PROS | 20222023 Proxy Statement | Page 1918
PROPOSAL ONE
ELECTION OF DIRECTORS
What am I voting on?
Stockholders are being asked to elect threetwo Class IIII director nominees to the Board for a three-year term.
Voting Recommendation:
The Board recommends voting “FOR” the election of each of the threetwo Class IIII director nominees.
Three (3)Two (2) directors are to be elected at the Annual Meeting. Our Board, upon the recommendation of the NCG Committee, has nominated Carlos Dominguez, Catherine LesjakGreg Petersen and Andres D. ReinerTimothy Williams as Class IIII directors, each to hold office until the 20252026 Annual Meeting and until their successor has been duly elected and qualified or until the earlier of their death, resignation or removal.
The Board is also composed of three Class I directors, whose terms expire upon the election and qualification of directors at the 2023 Annual Meeting, and three Class II directors, whose terms expire upon the election and qualification of directors at the 2024 Annual Meeting, and three Class III directors, whose terms expire upon the election and qualification of directors at the 2025 Annual Meeting.
The Board knows of no reason why any of the nominees would be unable or unwilling to serve, but if any nominee should for any reason be unable or unwilling to serve, the proxies will be voted for the election of such other person for the office of director as the Board may recommend in the place of such nominee. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named above.
Vote Required
In accordance with Delaware law, abstentions will be counted for purposes of determining both whether a quorum is present at the Annual Meeting and the total number of shares represented and voting on this proposal. While broker non-votes will be counted for purposes of determining the presence or absence of a quorum, broker non-votes will not be counted for purposes of determining the number of shares represented and voting with respect to the particular proposal on which the broker has expressly not voted and, accordingly, will not affect the approval of this proposal.
Directors are elected by a plurality vote of the votes cast by holders of our Common Stock entitled to vote at the Annual Meeting. Abstentions and broker non-votes will not have any effect on this proposal. Accordingly, the two nominees who receive the highest number of properly executed “FOR” votes from the holders of Common Stock will be elected as directors.
The number of “withhold” votes with respect to a nominee will affect whether our Director Resignation Policy will apply to that individual. In accordance with our Director Resignation Policy, any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election is required to offer his or her resignation following certification of the stockholder vote. The NCG Committee would then consider whether to accept the resignation and make a recommendation to our independent directors as to the action to be taken with respect to the offer. For more information about this policy, see Corporate Governance - Accountability - Director Resignation Policy. The NYSE broker discretionary rules prohibit banks, brokers and other intermediaries from voting shares held in their clients’ accounts on elections of directors unless the client has provided voting instructions. Therefore, ifIf you hold your shares in street name, it is important that you cast your vote if you want it to count in the election of directors.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION
OF EACH OF THE THREETWO CLASS IIII DIRECTOR NOMINEES.
PROS | 20222023 Proxy Statement | Page 2019
DIRECTOR COMPENSATION
The CLD Committee periodically reviews non-employee director compensation taking into account various factors, including director responsibilities, peer group data and market practices. In the spring of 2021, Frederic W. Cook & Co., Inc. (FW Cook) provided an independent analysis, including peer group data, which was taken into consideration by the CLD Committee. For 2021, theThe CLD Committee approved acontinued the director compensation program for 2022 with no changes from prior years. The compensation structure for non-employee directors unchanged from 2020 and consistingconsisted of an equity award, annual cash retainer, and for certain leadership roles, a supplemental cash retainer. All cash retainers are paid quarterly in arrears. In 2021,2022, each non-employee member of our Board serving as of the 20212022 Annual Meeting received a target RSU award with a target value of $165,000, which will vest in full on the earlier of the 20222023 Annual Meeting or May 12, 2022. Directors who joined the Board after the 2021 Annual Meeting received a pro rata award of RSUs which also vest in full on the earlier of the Annual Meeting or May 12, 2022.2023. Each non-employee member of our Board received an annual cash retainer of $35,000 in 2021, pro rated for directors who joined the Board mid-year.2022. The non-executive chairman of our Board received a supplemental cash retainer of $60,000 in 2021.2022. In addition, each non-employee director serving as a chair or member of a standing committee of our Board received the following supplemental cash retainer(s):
| | | | | | | | | | | | | | | | | | | | |
| Committee Role | | Audit Committee | | CLD Committee | | NCG Committee |
| Member | | $ | 15,000 | | | $ | 15,000 | | | $ | 7,500 | |
| | | | | | |
| Chair | | $ | 30,000 | | | $ | 20,000 | | | $ | 10,000 | |
We also reimburse our directors for reasonable out-of-pocket expenses incurred in connection with (i) their attendance at our Board and committee meetings and other Company meetings, and (ii) director continuing education programs, including participation in the NACD, of which the Company is a member.
20212022 Director Compensation Table
The following table sets forth the compensation paid to our non-employee directors for service on our Board during 2021.2022. Compensation for Andres D. Reiner our President and CEO is set forth in the Summary Compensation Table. Mr. Reiner does not receive compensation for his services as a director. | | Name | Name | | Fees Earned
or Paid in Cash
($) | | Restricted
Stock Units
($) (1) | | Total
($) | Name | | Fees Earned
or Paid in Cash
($) | | Restricted
Stock Units
($) (1) | | Total
($) |
| Carlos Dominguez | Carlos Dominguez | | $ | 50,000 | | | $ | 164,989 | | | $ | 214,989 | | Carlos Dominguez | | $ | 50,000 | | | $ | 164,982 | | | $ | 214,982 | |
| Raja Hammoud | Raja Hammoud | | $ | 50,000 | | | $ | 164,989 | | | $ | 214,989 | | Raja Hammoud | | $ | 50,000 | | | $ | 164,982 | | | $ | 214,982 | |
| Penelope Herscher (2) | | $ | 21,010 | | | $ | — | | | $ | 21,010 | | |
| Leland T. Jourdan (3) | | $ | 29,121 | | | $ | 156,384 | | | $ | 185,505 | | |
| Leland T. Jourdan | | Leland T. Jourdan | | $ | 50,000 | | | $ | 164,982 | | | $ | 214,982 | |
| Catherine Lesjak | Catherine Lesjak | | $ | 53,037 | | | $ | 164,989 | | | $ | 218,026 | | Catherine Lesjak | | $ | 67,060 | | | $ | 164,982 | | | $ | 232,042 | |
| Greg B. Petersen | Greg B. Petersen | | $ | 70,000 | | | $ | 164,989 | | | $ | 234,989 | | Greg B. Petersen | | $ | 70,000 | | | $ | 164,982 | | | $ | 234,982 | |
| William Russell | William Russell | | $ | 120,000 | | | $ | 164,989 | | | $ | 284,989 | | William Russell | | $ | 120,000 | | | $ | 164,982 | | | $ | 284,982 | |
| Timothy V. Williams | Timothy V. Williams | | $ | 72,500 | | | $ | 164,989 | | | $ | 237,489 | | Timothy V. Williams | | $ | 62,940 | | | $ | 164,982 | | | $ | 227,922 | |
| Mariette M. Woestemeyer | | $ | 35,000 | | | $ | 164,989 | | | $ | 199,989 | | |
| Mariette M. Woestemeyer (2) | | Mariette M. Woestemeyer (2) | | $ | 12,788 | | | $ | — | | | $ | 12,788 | |
(1)Represents the aggregate grant date fair value of equity awards granted in 20212022 calculated in accordance with GAAP. For additional information about valuation assumptions for equity awards, refer to Note 14 of our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021.2022. The May 12, 20212022 grant of RSUs awarded to all non-employee directors serving as of conclusion of the 20212022 Annual Meeting vest in full on the earlier of the 20222023 Annual Meeting and May 12, 2022 and had a grant date fair value of $37.60. The June 1, 2021 grant of RSUs awarded to Mr. Jourdan vest in full on the earlier of the 2022 Annual Meeting and May 12, 2022 and had a grant date fair value of $44.63.2023.
(2)Ms. Herscher'sWoestemeyer retired from service on the Board ended on May 12, 2021.2022.
(3)Mr. Jourdan joined the Board on June 1, 2021.
PROS | 20222023 Proxy Statement | Page 2120
EXECUTIVE OFFICERS
The following section sets forth our other NEOs and other significant employees of the Company, other than Mr. A. Reiner, their ages (immediately prior to the Annual Meeting), and the Company positions currently held by each such person:
| | | | | | | | | | | |
| | Mr. Schulz, 55,56, oversees our accounting, financial planning and analysis, legal, treasury, facilities, investor relations, internal audit, tax and corporate development functions. Mr. Schulz joined PROS in his current position in March 2015. Prior to joining us, Mr. Schulz served as Chief Financial Officer for Digital River, Inc., a global provider of cloud-based commerce, payments and marketing services, from July 2011 to February 2015. Mr. Schulz previously served in various roles, including as Senior Vice President, Chief Financial Officer and Chief Accounting Officer, with Lawson Software, an enterprise resource planning software company, from October 2005 to July 2011; in various finance and accounting roles at BMC Software, from 1993 to 2005, including as Vice President and Corporate Controller; and as an Audit Manager in the Enterprise Group with Arthur Andersen LLP. Mr. Schulz was instrumental in our transition to a cloud business. Mr. Schulz holds a B.B.A. in Accounting from Lamar University. | |
| Stefan B. Schulz | | |
| Executive Vice President | | |
| and Chief Financial Officer | | |
| | | |
Roberto Reiner served as our Executive Vice President and Chief Technology Officer from November 2019 through October 2021 when he stepped down from such role as part of his planned retirement. From November 1, 2021 until his retirement on March 1, 2022, Mr. R. Reiner assisted with the transition of his Chief Technology Officer duties and other special projects.
Leslie Rechan served as our Chief Operating Officer from May 2020 through January 2022. Mr. Rechan2022 and is no longer employed by PROS.
Other Significant Employees
| | | | | | | | | | | | | | |
| Name | | Age | | Position |
| Surain Adyanthaya | | 5758 | | President, Travel |
| Nikki Brewer | | 4142 | | Chief People Officer |
| Scott Cook | | 5455 | | Chief Accounting Officer |
| Ajay Damani | | 4849 | | Executive Vice President, Engineering |
| Sunil John | | 4849 | | Chief Product Officer |
Katrina KlierGrad Conn | | 5459 | | Chief Marketing Officer |
| Damian Olthoff | | 4748 | | General Counsel and Secretary |
| Martin Simoncic | | 4041 | | Chief Customer OfficerPresident, B2B |
| Craig Zawada | | 5152 | | Chief InnovationVisionary Officer |
PROS | 20222023 Proxy Statement | Page 2221
COMPENSATION AND LEADERSHIP DEVELOPMENT
COMMITTEE REPORT
| | | | | | | | |
| The Compensation and Leadership Development Committee of the Board of Directors of PROS has reviewed and discussed the following Compensation Discussion and Analysis with management and FW Cook. Based on this review and discussion, we recommended to the Board, and the Board has agreed, that the following Compensation Discussion and Analysis be included in this Proxy Statement. | |
| | |
| MEMBERS OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE | |
| | |
| Greg B. Petersen (Chairman) | Raja Hammoud | Leland T. Jourdan | William Russell | |
COMPENSATION DISCUSSION AND ANALYSIS
PROS provides solutions that optimize shopping and selling experiences. Our solutions leverage AI,artificial intelligence (AI), self-learning and automation to ensure that every transactional experience is fast, frictionless and personalized for every shopper, supporting both business-to-business and business-to-consumer companies across industry verticals. The ongoing COVID-19 pandemic continued to have a widespread impact on the global economy and our business in 2021, particularly as the virus continued to evolve and variants such as Delta and Omicron spread. We were encouraged by the increased availability of vaccines and reopening of markets. The travel industry began to recover in 2021, particularly for in-country travel, but remained well below pre-pandemic levels, particularly for international and business travel.
In 2021, despite the lingering headwinds from the impact of the pandemic,2022, we continued to executegrow our strategy with operational discipline. Whilesubscription revenue by enabling our customers to leverage our AI-driven solutions to help them compete in the digital economy, while managing our business towards profitability during a challenging macroeconomic environment. We increased subscription revenue 15% and total revenue was essentially flat in 202110%, each as compared to 2020,2021, and our subscription revenue grew 4%, we achieved greater than 93% gross customer revenue retention forrates remained above 93% during 2022. While we experienced negative shareholder return in 2022, technology stocks in general experienced a market reset, and our stock performed in the year and significantly improved our cash metrics. Our free cash flow, a key measuretop quartile of our recovery and path to profitability, improved 62%, well above our targetpeer group established in August 2022 for the year.
This Compensation Discussion and Analysis describes our2023 executive compensation program and the compensation paid to our NEOs:decisions.
| | | | | | | | | | | | | | |
| Annual Recurring Revenue (ARR) is one of our historic key performance metrics and should be viewed independently of revenue or other similar GAAP measures. ARR is defined, as of a specific date, as contractual recurring revenue, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements. |
| | | | | | | | |
| This Compensation Discussion and Analysis describes our executive compensation program and the compensation paid to our NEOs: |
| | |
| Andres D. Reiner | | Chief Executive Officer, President and Director |
| Stefan B. Schulz | | Executive Vice President and Chief Financial Officer |
Leslie Rechan(1) | | Former Chief Operating Officer |
Roberto Reiner | Former Executive Vice President and Chief Technology Officer (1) Mr. Rechan's employment with the Company ended in January 2022. |
In conjunction with his announced retirement plan, Mr. Roberto Reiner ceased serving as an executive officer at the end of October 2021 and retired from the Company in March 2022. The Company announced the elimination of the Chief Operating Officer role in January 2022, and Mr. Rechan is no longer employed by the Company.
PROS | 20222023 Proxy Statement | Page 2322
Our Compensation Philosophy
Our executive compensation program is designed to provide competitive pay enabling the Company to attract and retain high-caliber talent, to link pay to Company performance and to align the interests of our executives with those of our stockholders.
| | | | | | | | |
| Competitive Pay |
| Rationale | | Impact in 20212022 |
| To attract and retain high-caliber talent by setting compensation competitive with that paid to individuals holding comparable positions at other public companies with which we compete for business and talent. The Company does not target a specific percentile and reviews market data to check that compensation is generally in a market range and reflects the individual’s experience, performance and contribution. | | At the time the CLD Committee made its 20212022 executive compensation decisions, our leadership team's 2020 performance successfully navigating PROS throughCompany's below median TSR (as compared to our executive compensation peer group) informed the unprecedented challenges of the impact of COVID-19 on the global economy, particularly the travel industry, was taken into consideration2022 executive compensation decisions which included flat target cash and NEO 2021 total compensation was targeted within a reasonable range of the median of our 2021 peer group. See the next sectionlong-term incentive decreases for a discussion of CEO actual compensation in 2021. 2022. |
| | |
| Pay for Performance |
| Rationale | | Impact in 20212022 |
| Provide a compensation package that is weighted heavily towards performance-based pay to motivate high performance among our NEOs, with compensation levels reflecting the achievement of short- and long-term performance objectives. | | OurWhile we produced solid financial results (e.g. subscription revenue growth of 15%), our practice of setting aggressive performance against preset targets resulted in NEO bonus achievement at 115.4% of target for 2021.only 30.2% of target. The impact of COVID-19 on Company revenue in 2020 and 2021 continued to affect previously awarded performance-based equity: 79%0% of the 2019 PRSUs vested in early 2022, and no 2020 PRSUs were earned. Eachearned, and both the 2021 and 2022 MSUs are tracking below target as of these awards were measured over a two-year performance period that included 2020. If the performance period for 2021 MSUs ended on December 31, 2021, no MSUs would have been earned as the Company would not have achieved the minimum vesting threshold. Because of this underperformance in the first year, for any 2021 MSUs to be earned, the Company's TSR must outperform the Russell 2000 Index over the remaining two years of the performance period.
2022, 0% and 59% respectively. |
| | |
| Align the interests of our executives and stockholders |
| Rationale | | Impact in 20212022 |
| Directly link rewards to the achievement of measurable financial objectives that build long-term stockholder value. | | NEO bonus plan is based on growth targets established at beginning of period without discretion or adjustment. NEOs receive a mix of time-based and performance-based equity; one-half of the CEO's annual equity grant value is performance-based equity awards. We maintain robust stock ownership guidelines for our NEOs; our CEO continues to hold significant amount of PROS stock and the value of his holdings were negatively impacted in 2021.2022. |
Executive Compensation Operating as Designed
Our CLD Committee believes that a well-functioning executive compensation program should reward executives for out-performance. Conversely, when performance is not achieved the program's incentive elements pay out at reduced levels, and in some cases result in no payout for that element.
At the time the CLD Committee set the 2021 executive compensation program, the CLD Committee approved aggressive NEO bonus performance goals for 2021 which required 5% ARR growth and a 42% improvement in free cash flow for target bonus payouts. 2021 saw improvement in the global economy, the beginning of recovery in the travel industry and overall willingness of companies across industries to engage in digital commerce initiatives as their business prospects demanded investments in pricing and digital commerce solutions. Our 2021 bonus ARR target was $220.0 million and we achieved $213.4 million (excluding the impact of acquisitions), slightly above the minimum amount required for partial payout on this metric. The return to gross customer retention rates above 90% contributed to the above minimum ARR performance. Our 2021 free cash flow target was a 42% improvement over 2020, and we achieved a 62% improvement, above the amount required for maximum payout on this metric. Thus, our NEO bonus payout for 2021 was 115.4% of target based on the pre-established formula, and no adjustments nor discretion were applied.
PROS | 20222023 Proxy Statement | Page 2423
While Company performance was strong in 2021 and the cash incentive element of the executive compensation program reflects this, the financial impact of the pandemic affected our NEOs' equity incentives:
•The impact of COVID-19 on our recurring revenue in 2020 resulted in a 79% of target earnout for 2019 PRSUs. These PRSUs vested in early 2022. No discretion nor adjustments were made.
•Our 2020 PRSUs were based on two-year recurring revenue performance and were not earned at all.
•Approximately $2.1 million of our CEO's 2020 reported total compensation was attributable to the grant date fair value of his 2020 PRSUs. 2020 PRSUs actually delivered $0 to our NEOs, and no adjustments were made.
•Based in part on the unique headwinds from market forces affecting both the travel and technology industries, our negative TSR in 2021 lagged the performance of the benchmark (Russell 2000 Index) for the 2021 MSUs. If the performance period for the 2021 MSUs had ended on December 31, 2021, no MSUs would have been earned (and thus $0 in actual compensation would have been earned) because the Company's TSR relative to the Russell 2000 Index was below the threshold level.
•Approximately $3.3 million of our CEO's 2021 reported total compensation is attributable to the grant date fair value of his 2021 MSUs. Because of the underperformance in the first year of the performance period, for the 2021 MSUs to result in any actual compensation, our TSR must outperform the Russell 2000 Index over the remaining two years of the performance period.
•A significant portion of our customers are in the travel industry which have been negatively impacted on a much greater basis in the past two years, which has created a disadvantage when PROS is compared to the Russell 2000 or even our own peer group. The CLD Committee has not made any adjustments to the short or long-term plan nor applied any discretion to the payouts.
Our CEO's performance-based equity awards, representing significant amount of his pay, are operating as designed to align our CEO's actual compensation to Company performance and stockholders' interests.
PROS | 2022 Proxy Statement | Page 25
(1) The Realized Value for the 2019 PRSUs is calculated by multiplying the number of earned and vested units (79.1% of target units) by the PROS stock price of $28.27 on date of vesting (1/18/22).
(2) The Realized Value for the 2020 PRSUs is $0 based on actual performance through the end of the performance period for these units.
(3) The Realized Value for the 2021 MSUs is based on a performance assessment as of 12/31/2021; however there are two years remaining in this performance period.
The multi-year impact of COVID-19 on our business has significantly impacted our CEO's compensation.
For 2020, our CEO earned 4% of his target performance-based compensation. For 2021, if the 2021 MSUs are not earned, our CEO would earn 20% of his target performance-based compensation. The following chart depicts the significant amount of at target compensation not attained by our CEO over the past two years:
Target realizable pay for 2020 includes base salary ($540,000), actual bonus paid for 2020 ($143,748), 100% of time-based RSUs granted in 2020 valued at the closing stock price on 12/31/21 of $34.49, and 0% of 2020 PRSUs. Target realizable pay for 2021 includes base salary ($540,000), actual bonus paid for 2021 ($685,476), 100% of time-based RSUs granted in 2021 valued at the closing stock price on 12/31/21 of $34.49 and 0% of 2021 MSUs. As previously noted, the 2021 MSUs have a three-year performance period through December 31, 2023 and are earned based on Company TSR over that performance period versus the Russell 2000 Index. During the first year of the 3-year performance period, Company TSR underperformed the Russell 2000 Index. If the performance period for the 2021 MSUs had ended on December 31, 2021, no MSUs would have been earned. Because of the underperformance in the first year of the performance period, for any 2021 MSUs to result in any actual compensation, the Company's TSR must outperform the Russell 2000 Index over the remaining two years of the performance period.
PROS | 2022 Proxy Statement | Page 26
Executive Compensation Practices
Our executive compensation practices are designed to assure that our executive compensation is competitive, rewards performance and aligns the interests of our executives with our stockholders, as highlighted in the following table:
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| Pay for Performance | | We emphasize pay-for-performance where compensation is contingent upon the performance of our business and our stock price. |
| | We utilize performance-based pay through equity and cash incentive awards that require achievement of pre-established goals with no discretion. |
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| Stock Ownership Guidelines | | We maintain robust ownership guidelines for our directors and NEOs.NEOs, which are higher than median peer practice. |
| | We expect our CEO to hold stock equal to six times his base salary, and he has held significantly more than this requirement for many years. |
| | We expect each other NEO to hold stock equal to two times their base salary. |
| | We expect our directors to hold stock equal to five times their annual cash retainer. |
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| Accountability | | We have a clawback policy that applies to all cash and equity awards.awards, and our stock plan has a clawback provision that applies to all equity awards (including time-based and performance-based equity awards). |
| | We maintain anti-hedging, anti-short and anti-pledging policies.policies applicable to all employees. |
| | Although we have not recently utilized stock options or SARs, we do not discount from fair market value in setting the exercise price of stock options and SARs. |
| | Our NEO employment agreements have “double trigger” change in control provisions. |
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| No Excessive Perquisites | | We do not provide significant perquisites to our NEOs. |
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Repricing | | We do not reprice underwater stock options or SARs without stockholder approval. |
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| Minimum Equity Vesting Requirements | | We do not grant equity with vesting terms of less than one year after grant, except for up to 5% of the stock plan authorized shares. |
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| Compensation Risk Oversight | | Our CLD Committee oversees risks associated with compensation policies and practices. |
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| Independent Consultant | | The CLD Committee has directly retained an independent compensation consultant that performs no services for PROS other than for the CLD Committee. |
Role of Our Compensation and Leadership Development Committee
Our CLD Committee, comprised entirely of independent directors, is responsible for establishing, administering and interpreting our policies governing the compensation and benefits for our NEOs, as well as granting any share-based awards to our NEOs. Our CLD Committee establishes executive compensation programs that it believes, based on the members’ experience, is the most appropriate to achieve the goals described above. Our CLD Committee continues to evaluate our executive compensation programs on a quantitative and qualitative basis on at least a yearly basis or more frequently if circumstances dictate. Our CLD Committee expects to make new awards and adjustments to our executive compensation programs as appropriate. Our CLD Committee has taken the following steps to ensure that our executive compensation and benefit policies are consistent with both our compensation philosophy and our Corporate Governance Guidelines:
•solicited recommendations from an independent executive compensation consultant to evaluate our executive compensation practices and assisted in developing and implementing the executive compensation programs;
•established a practice, in accordance with the rules of the NYSE, of reviewing the performance and determining the compensation earned, paid or awarded to our CEO;
•established a policy, in accordance with the rules of the NYSE, to review on an annual basis the performance of our other executive officers with assistance from our CEO and determined what we believe to be appropriate total compensation for these executive officers; and
•our CLD Committee members attended continuing education related to compensation best practices provided by NYSE, NACD and Equilar, among others.
PROS | 20222023 Proxy Statement | Page 2724
Our CLD Committee considers a broad range of facts and circumstances in setting executive compensation. Among the factors considered for our executives generally in 2021,2022, and for the NEOs in particular, are market data and recommendations from the Committee's independent compensation advisor, FW Cook, advice from our CEO, general economic and market conditions, our financial condition and operating results, our operating plan, our geographic locations and executive compensation policy objectives described above. The weight given to each factor may differ by year and may differ among NEOs in any given year.
Role of Our Independent Compensation Consultant
Our CLD Committee retained FW Cook for advice on executive compensation matters for 20212022 due to the breadth and depth of FW Cook’s experience with executive compensation matters and their expertise in the software industry. During 2021,2022, FW Cook advised the CLD Committee on a variety of subjects such as compensation plan design and trends, pay for performance analytics, benchmarking norms, executive compensation best practices and other related matters. FW Cook reports directly to the CLD Committee, participates in meetings as requested and communicates with the CLD Committee Chair between meetings as necessary. FW Cook has served as the CLD Committee's independent compensation consultant since 2017.
The CLD Committee is directly responsible for the appointment, compensation and oversight of the work of FW Cook. Prior to engaging FW Cook for 2022, the CLD Committee reviewed FW Cook's qualifications, as well as all factors relevant to their independence and any potential conflicts of interest. The CLD Committee hasfrom management, including the sole authority to modify or approveindependence factors required by the compensation for FW Cook, determine the nature and scope of their services, evaluate their performance, terminate their engagement and hire replacement or additional consultants at any time.NYSE. FW Cook did not perform any services for us in 20212022 other than as serving as advisors to the CLD Committee.
Role of the Chief Executive Officer
In early 2021,2022, Mr. A. Reiner reviewed the performance and compensation of the NEOs, other than himself,NEO, our CFO, and made recommendations as to theirour CFO's compensation to the CLD Committee. In making its decisions regarding executive compensation, the CLD Committee meets outside the presence of executive officers when making final decisions about each executive officer. The CEO is periodically present during portions of these deliberations that relate to the compensation for other executive officers but does not participate in discussions regarding his own pay. In addition, the CLD Committee has delegated to the CEO the authority to make share-based awards to employees below the VP level within certain limitations on aggregate grants and specific award terms.
Role of Stockholders
Each year, our CLD Committee takes into account the result of our stockholders' advisory vote on the compensation paid to our NEOs (say-on-pay). More, a key indicator of stockholder sentiment. In 2022, more than 77%86% of the total votes cast were voted in favor of our say-on-pay proposal in 2021. Say-on-pay is a key indicator of stockholder sentiment and is taken into account by the CLD Committee in its policy and decision-making processes.proposal. We also keep an open dialogue with our institutional investors and stockholders throughout the year. We reach out to discuss business topics, seek feedback on our performance and address other matters of importance to our stockholders, including ESG topics and executive compensation. We actively engaged with the stockholders that represent a significant majority of our shares outstanding in 2020, before 2021 executive compensation decisions,through one-on-one meetings, conferences and again in 2021, after the 2021 stockholder voteroadshows and before 2022 executive compensation decisions. In 2021, this included the Company communicating in writing with stockholders that represent over 85% of our shares outstanding and having live, interactive discussions with stockholders who requested a meeting. We engaged with these stockholderscollected their feedback on a variety of topics, including our business and long-term strategy, corporate governance and risk management practices, board leadership and refreshment, diversity, corporate social responsibility initiatives (including ESG matters), our executive compensation program and other matters of stockholder interest. As a result of this ongoing outreach, the CLD Committee took into account the generally positive and supportive stockholder sentiment as it set 20222023 NEO compensation. The following table sets forth common themes we have heard from our stockholder engagement on executive compensation over the past several years and the CLD's ongoing response to this engagement:
PROS | 2022 Proxy Statement | Page 28
| | | | | | | | | | | | | | |
What We Heard | | What We Did
(with advice and data from our leading independent compensation consultants) |
ü | A focus on CEO pay level. | | ü | Reviewed and updated our peer groupeach year prior to January 2021 and January 2022 executive compensation decisions to ensure an accurate size-appropriate comparison of peer executive compensation practices and pay levels.
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| | | ü | Responded to changes in our relative revenue size in 2021 by removing two companies from our peer group that had larger revenue than ours and adding two companies with similar market cap and revenue as ours. |
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| | | ü | Set CEO 2021 target compensation near the expected median of our updated peer group. |
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ü | Aligning NEO pay with Stockholder interests. | | ü | Continued to set majority of pay based on performancethrough our bonus plan and equity grants tied to our performance.
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| | | ü | Set growth goals for cash incentive attainment at the beginning of the year tied to our strategic plan. For example, in 2021, our primary growth-oriented performance metric was ARR, and this goal required 5% annual growth to earn a target award, coming off a year in which ARR had declined due to the pandemic.
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ü | Making progress towards profitability. | | ü | Set financial metrics to drive operational improvement as part of cash incentives. For example, in 2021, our primary operational improvement performance metric was improvement in free cash flow, and this goal required 42% improvement to earn a target award. The actual improvement was 62%.
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ü | Paying for Performance | | ü | No COVID-19 related adjustments or discretionary actions were taken despite the fact that the pandemic was outside of management’s control.
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| | | ü | 2019 PRSUs were earned at 79% of target and 2020 PRSUs were not earned, each based on actual results against the respective two-year recurring revenue goal. The below-target achievement of each award was primarily due to the impact of COVID-19 on our business in 2020. |
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| | | ü | 2021 MSUs will be earned based on Company TSR vs. Russell 2000 Index over a 3-year period. If the performance period for the 2021 MSUs had ended on December 31, 2021, none would have been earned. Because of the underperformance in the first year of the performance period, for any 2021 MSUs to be earned and thus any actual compensation delivered, the Company's TSR must outperform the Russell 2000 Index over the remaining two years of the performance period.
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| | | ü | Reinstated ARR and Free Cash Flow as metrics for cash incentives in response to stockholder input to incentivize both top-line and profitability improvement.
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Role of Peer Companies
To assistThe CLD Committee utilizes a peer group of publicly-traded companies to help inform its decisions regarding executive compensation amounts and program design. The CLD Committee does not rigidly target a specific percentile when making compensation adjustments, but rather examines the latest-available compensation data from the peer group provided by its independent compensation consultant as one factor used in its decision-making process. The CLD Committee considers each individual officer’s role and scope of responsibilities relative to comparable positions at PROS’ peers. Based on this information, the CLD Committee in its deliberations onreviews PROS’ executive compensation programs and practices, and analyzes each NEO’s base salary, cash bonus and long-term incentives.
The CLD Committee reviews the constituents of our compensation peer group each year they review our peer group with our compensation consultant for appropriateness based on a variety of factors, including: similarities in market capitalization and revenue, relevant industry, the labor market for top management talent, our status as a publicly traded, U.S.-based firmcomparable headcount and various other characteristics. Starting in 2017 and continuing through 2021, theThe CLD Committee has largely transitioned away from including peers withalso prefers to focus on using peer companies that do not have a founder CEO because they tend to pay differently from typical market practices (exceptions have been made where business size and fit are strong and the pay program/mix is market normative).
The CLD Committee reviewed the peer group in August 2020 for purposes of informing executive compensation decisions for 2021 and made several changes to the group with a focus on aligning the group's overall market cap and revenue closer to PROS market cap and revenue at the time, which were impacted by the COVID-19 pandemic more than most of the peer companies due to the travel industry being particularly affected. The following three companies were removed from the peer group because they were acquired: Ellie Mae, Instructure and Monotype Imaging. Additional changes to the peer group for 2021 were made to reduce the peer median revenue and market capitalization to be responsive to our smaller size relative to peers as a result of COVID-19 impacts. Coupa Software was removed because its market capitalization grew larger than the CLD Committee’s target market cap range, and four new peers were added for the 2021 peer group, all of which had a smaller market cap and similar revenue as ours at the time: Model N, OneSpan, QAD and Upland Software. With these changes, the CLD Committee examined the compensation practices of these companies. We believe the companies in our 2021 peer group are in a comparable and appropriate size range, are similar in terms of scope and complexity and are representative of widely-accepted peer group development best practices. Our 2021 Peer Group is set forth in the following table:
PROS | 20222023 Proxy Statement | Page 2925
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2021 Peer Group (Count = 17) |
Aspen Technology, Inc. | Benefitfocus, Inc. | Bottomline Technologies, Inc. | Cornerstone OnDemand, Inc. | Everbridge, Inc. |
Five9, Inc. | Model N, Inc.* | OneSpan Inc.* | Paylocity Holding Corporation | QAD Inc.* |
Quotient Technology Inc. | Q2 Holdings, Inc. | Rapid7, Inc. | SPS Commerce, Inc. | Upland Software, Inc.* |
Workiva Inc. | 8x8, Inc. | *Added for 2021 peer group | | |
Market Cap range of 2021 Peer Group as of July 31, 2020 (time of peer group construction): 0.3x - 5.5x |
Latest TTM Revenue range of 2021 Peer group as of July 31, 2020: 0.6x - 2.3x |
The CLD Committee reviewed the peer group in August 2021 for purposes of informing executive compensation decisions for 2022 and made several changes to the group with a focus on aligning the group's overall revenue closer to PROS revenue at the time. The following two companies were removed from the peer group because their revenue had grown materially above ours: Aspen Technology and Cornerstone OnDemand. Two new peers were added for the 2022 peer group, each of which are enterprise-facing SaaS companies that havehad similar revenue and market cap to ours:ours at the time: PagerDuty and Ping Identity. With these changes, the CLD Committee examined the compensation practices of these companies.Identity (prior to its acquisition in Fall 2022). We believe that all companies in the 2022 peer group were in a comparable and appropriate size range to PROS at the time, were similar in terms of their scope and complexity and representative of widely-accepted peer group development best practices. The 2022 Peer Group is set forth in the following table:
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| 2022 Peer Group (Count = 17) |
| | | | |
| Benefitfocus, Inc. | Bottomline Technologies, Inc. | Everbridge, Inc. | Five9, Inc. | Model N, Inc. |
| OneSpan Inc. | PagerDuty, Inc.* | Paylocity Holding Corporation | Ping Identity Holding Corp.* | QAD Inc. |
| Quotient Technology Inc. | Q2 Holdings, Inc. | Rapid7, Inc. | SPS Commerce, Inc. | Upland Software, Inc. |
| Workiva Inc. | 8x8, Inc. | *Added for 2022 peer group | | |
|
Market Cap range of 2022 Peer Group as of July 6, 2021 (time of peer group construction): 0.2x - 6.3x PROS $2.1B market cap at the time |
Latest TTM Revenue range of 2022 Peer group as of July 6, 2021: 0.7x - 2.4x PROS $252M 2021 analyst consensus revenue at the time |
The CLD Committee reviewed the peer group in August 2022 for purposes of informing executive compensation decisions for 2023 and made several changes with a focus on aligning the group's overall financial size closer to PROS at the time. The following two companies were removed from the peer group because their market cap and revenue had grown above the CLD Committee's desired range: Five9 and Paylocity. Benefitfocus was also removed because its market cap had fallen below the CLD Committee's desired range. Two additional companies, QAD and Bottomline Technologies, were removed because they were acquired. Five new peers were added for the 2023 peer group, each of which are enterprise-facing cloud-based technology companies that had similar revenue and market cap to ours at the time: BigCommerce, BlackLine, Domo, Sumo Logic, and Telos. Four of the five newly-added peers had the same or lower market cap and revenue than ours at the time, and the fifth ,BlackLine, is larger than PROS but still smaller than Five9 and Paylocity, and has strong relevance because it operates in a comparable space, is a labor market competitor, has a similar headcount, and appears many times as a peer of PROS existing peers. We believe that all companies in the 2023 peer group are in a comparable and appropriate size range, are similar in terms of their scope and complexity, and are representative of widely-accepted peer group development best practices. A complete list of the 20222023 Peer Group is set forth in the following table:
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20222023 Peer Group (Count = 17) |
Benefitfocus, Inc. | Bottomline Technologies, Inc. | Everbridge, Inc. | Five9, Inc. | Model N, Inc. |
OneSpan Inc. | PagerDuty, Inc.* | Paylocity Holding Corporation | Ping Identity Holding Corp.* | QAD Inc. |
Quotient Technology Inc. | Q2 Holdings, Inc. | Rapid7, Inc. | SPS Commerce, Inc. | Upland Software, Inc. |
Workiva Inc. | 8x8, Inc. | *Added for 2022 peer group | | |
| BigCommerce Holdings, Inc.* | BlackLine, Inc.* | Domo, Inc.* | Everbridge, Inc. | Model N, Inc. |
| OneSpan Inc. | PagerDuty, Inc.* | Ping Identity Holding Corp. | Q2 Holdings, Inc. | Quotient Technology Inc. |
| Rapid7, Inc. | SPS Commerce, Inc. | Sumo Logic, Inc.* | Telos Corporation* | Upland Software, Inc. |
| Workiva Inc. | 8x8, Inc. | *Added for 2023 peer group | | |
|
Market Cap range of 20222023 Peer Group as of July 6, 2021June 30, 2022 (time of peer group construction): 0..2x0.2x - 6.3x3.4x PROS $1.2B market cap on 6/30/22 |
Latest TTM Revenue range of 20222023 Peer group as of July 6, 2021: 0.7xJune 30, 2022: 0.8x - 2.4x PROS $271M 2022 analyst consensus revenue at the time |
PROS | 20222023 Proxy Statement | Page 3026
CEO Compensation Program Overview
•Our CEO's total compensation has been near the median of our peer group. In recognition of our CEO's leadership and organizational guidance through unique, challenging conditions as well as movement in peer company data and other relevant factors, the CLD Committee increased our CEO's overall target compensation for 2021 by 6.3% as compared to his 2020 target total compensation. For 2022, the CLD Committee has made no changes to our CEO's base salary and target bonus amount. Our CEO's target equity awards for 2022 were valued at $5.5 million, a decrease from the targeted amount for 2021. As a result, his overall target compensation for 2022 was reduced by 2.2% as compared to his 2021 target total compensation.
•A significant portion of our CEO compensation program remained performance-based and aligned with stockholder interests. Including the annual cash bonus and the 2021 MSUs, 50% of our CEO's total target compensation is purely performance-based. Including time-based RSUs, which increase or decrease in value based on share price movement, more than 92% of our CEO’s 2021 total target compensation is considered at risk.
•Our CEO compensation program is operating as designed and we have not made any adjustments or deviations. Our CEO's earned bonus for 2021 was paid per the formula at 115.4% of target due to (a) free cash flow improving 62% year-over-year, above the target of 42% improvement set at the beginning of 2021, and (b) ARR (excluding acquisitions) of $213.4 million, which was between the threshold ($212 million) and target ($220 million) performance levels set at the beginning of 2021.
•Our CEO's performance-based equity awards, representing a significant amount of his pay, are operating as designed to align our CEO's actual compensation to Company performance and stockholders' interests. Our CEO's equity incentive from 2020 PRSUs were not earned per the formula, due to total recurring revenue performance below target in 2021. Our CEO's 2021 MSUs are earned based on our TSR for the period January 1, 2021 through December 31, 2023 as compared to the Russell 2000 Index. If the performance period had ended on December 31, 2021, no MSUs would have been earned (and thus $0 in actual compensation would have been earned) because the Company's TSR relative to the Russell 2000 Index was below the minimum threshold. A significant portion of our customers are in the travel industry which have been negatively impacted on a much greater basis in the past two years, which has created a disadvantage when PROS is compared to the Russell 2000 or even our own peer group. Because of the underperformance in 2021, for any 2021 MSUs to be earned, the Company's TSR must outperform the Russell 2000 Index over the remaining two years of the performance period. We believe these performance-based equity awards are operating as intended and align our CEO's compensation with our stockholders' interests.
PROS | 2022 Proxy Statement | Page 31
(1) The Realized Value for the 2019 PRSUs is calculated by multiplying the number of earned and vested units (79.1% of target units) by the PROS stock price of $28.27 on date of vesting (1/18/22).
(2) The Realized Value for the 2020 PRSUs is $0 based on actual performance through the end of the performance period for these units.
(3) The Realized Value for the 2021 MSUs is based on a performance assessment as of 12/31/2021; however there are two years remaining in this performance period.
The Company’s 2022 CEO compensation program reflects our ongoing emphasis on pay for performance with approximately 50% of total compensation directly performance-based (including annual cash incentive and performance-based equity) and >90% at risk (including time-based RSUs). The 2022 CEO equity award structure of 50% performance-based equity and 50% time-based equity was consistent with the CLD Committee's historic practices utilized each year for our CEO since 2012.
PROS | 2022 Proxy Statement | Page 32
Two-Year Look-Back at CEO Equity Grants
As stated above, our CLD Committee structures our CEO's equity awards based on a 50/50 ratio of performance-based equity and time-based equity, which is a more performance-based weighting than our peer group average. As reported, the Summary Compensation Table states that our CEO received a 28% increase in equity award value from 2020 to 2021 when in actuality the CLD Committee targeted a 7.6% increase. The below table sets forth the target award value for each equity component for each of the past two years. The total target award value for our CEO for 2020 was $5.25 million and increased by $400,000 for 2021 to $5.65 million. The number of time-based RSUs and target performance-equity RSUs awarded in 2020 were the same. However, the required Summary Compensation Table disclosure is calculated using the grant date fair value based on accounting fair value. Because the 2020 PRSUs were actually granted several weeks later due to finalization by the CLD Committee of the associated performance targets, the decrease in our stock price between January 13, 2020 and February 7, 2020 drove a lower accounting fair value for the 2020 PRSUs. By comparison, in 2021, the CLD Committee granted an equal number of time-based RSUs and target performance-equity MSUs on the same date. The MSUs are earned based on our TSR versus the Russell 2000 Index over a 3-year performance period. As such, we are required to report the 2021 MSUs at time of grant using a Monte Carlo simulation which requires disclosure in the Summary Compensation Table for 2021 at a higher per unit share price than actual share price on the date of grant. The table below illustrates that the total equity award value as disclosed in theSummary Compensation Table reports a more significant increase from 2020 to 2021 than determined by the CLD Committee:
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| CEO Equity Award | | Target Award Value (000s) | Grant Date | Share Price on Grant Date | Accounting Fair Value per Unit | SCT Grant Value (000s) | RSUs |
| Granted at Target | Earned or Vested as of 12/31/21 |
| 2020 Time-based RSUs | | $2,625 | 1/13/2020 | $66.44 | $66.44 | $2,624 | 39,500 | | 9,875 | |
| 2020 Performance-equity (PRSUs) | | $2,625 | 2/7/2020 | $54.23 | $54.23 | $2,142 | 39,500 | | 0 |
| 2021 Time-based RSUs | | $2,825 | 1/11/2021 | $48.31 | $48.31 | $2,825 | 58,476 | | — | |
| 2021 Performance-equity (MSUs) | | $2,825 | 1/11/2021 | $48.31 | $56.05 | $3,278 | 58,476 | | TBD |
Components of 20212022 Executive Compensation
Our CLD Committee chose to make the changes set forth below to our NEO compensation for 20212022 after reviewing each leader’s tenure and compensation history with us, the Company’s and each leader’s prior year performance, the compensation practices from our 20212022 peer group, each leader’s compensation relative to our updated peer group and feedback from stockholder engagement. Please see the tables under Executive Compensation below.
Base Salaries
We use baseThe CLD Committee determines salaries primarily to compensate and retain our NEOs for their services. Base salaries for our NEOs are reviewed on an annual basis and represent the minimum payment for a satisfactory level of individual performance as long as the executive remains employed with us. Base salary is set at the CLD Committee’s discretion after taking into account the competitive landscape, including the compensation practices of the companies in our selected peer group, our business strategy, our general performance goals and certain individual factors, such as position, salary history, individual performance and contribution, and length of service with the Company and placement within the general base salary range offered to our NEOs.Company.
No Base Salary changes for 2021. 2022. In light of the Company's performance in 20202021 which wascontinued to be impacted by COVID-19, the CLD Committee did not make any changes to NEO base salaries for 2021.2022.
The following table sets forth the annual base salaries for the past two years for each of our NEOs:
PROS | 2022 Proxy Statement | Page 33
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| | | | Annual Base Salaries | | |
| | Named Executive Officer | | 2020 | | 2021 | | % Increase | |
| | Andres D. Reiner | | $ | 540,000 | | | $ | 540,000 | | | — | |
| | Stefan B. Schulz | | $ | 405,000 | | | $ | 405,000 | | | — | |
| | Leslie Rechan | | $ | 425,000 | | (1) | $ | 425,000 | | | — | |
| | Roberto Reiner | | $ | 350,000 | | | $ | 350,000 | | (2) | — | |
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| (1) | | Mr. Rechan's actual salary was prorated for 2020 based on his May 2020 start date as an employee of the Company. See Summary Compensation Table below. | |
| (2) | | Mr. Roberto Reiner's actual salary was reduced effective November 1, 2021 to $240,000 in connection with his role changing from EVP, Chief Technology Officer to Vice President. From November 1, 2021 to his retirement on March 1, 2022, Mr. R. Reiner assisted with the transition of his Chief Technology Officer duties and other special projects. See Summary Compensation Table below. | |
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| | | | Annual Base Salaries | | |
| | Named Executive Officer | | 2021 | | 2022 | | % Increase | |
| | Andres D. Reiner | | $ | 540,000 | | | $ | 540,000 | | | — | |
| | | | | | | | | |
| | Stefan B. Schulz | | $ | 405,000 | | | $ | 405,000 | | | — | |
Annual Cash Incentives
For 2021, we utilized a cash incentive plan for our NEOs under which cash payments could be earned based on our performance against our corporate objectives for the year. This program is intended to reward our NEOs upon the achievement of financial performance goals. Each component of the cash incentive plan had minimum threshold, target and maximum levels and operated independently of the other components. Actual results between the minimum threshold, target and the maximum goal levels are interpolated. We use our cash incentive plan to align our NEOs' performance with our financial results and to motivate our NEOs to successfully implement our cloud strategy and execute our corresponding financial plan by achieving annual goals that were set at the beginning of the year and remained unchanged through the end of the year.
NEO Cash Incentive Plan for 20212022. The NEO cash incentive plan for 2021 (20212022 (2022 NEO Plan) was approved, including establishing the performance goals and setting the targets,established by the CLD Committee in February 2021.2022. Recognizing the importance of continuing to grow the top-line results while maintaining operational discipline, the 20212022 NEO Plan contained two performance-basedperformance measures: ARRAnnual Recurring Revenue (ARR) and improvement in free cash flow. ARR is the contracted annual recurring revenue, as of December 31, 2021,2022, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements recognized as license revenue in accordance with GAAP.agreements. Free cash flow is a non-GAAP financial measure consisting of net cash provided by (used in) operating activities, excluding severance payments, minus capital expenditures (excluding expenditures for the Company's new headquarters), purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs.
The CLD Committee believes that ARR, is a good forward looking metric that measures the future trajectory of recurring revenue growth, and that improvement in free cash flow, is a goodan indicator of the Company improving its operational efficiency. The two measures are distinct and complementary as one measures future recurring revenue of the Company and the other is a current year operational metric. In our discussions with our stockholders, thereefficiency, were common requests to incorporate a cash flow measure, and the most cited such metric from our stockholders was free cash flow. Thus, free cash flow was chosen by our CLD Committee as the most appropriate financialmeasures for the 2022 NEO Plan and reflect previous stockholder feedback to use a top-line metric at this time.and a profitability metric. The weighting of the 20212022 NEO Plan components is set forth in the following table:
| | | | | | | | |
Component | | Weighting | | | | | | |
| | Component | | Weighting | |
| | Annual Recurring Revenue | | 60% | |
| | | | | |
| | Free Cash Flow | | 40% | |
Each NEO's target payout was established as a percentage of base salary as set forth below. No changes were made to NEO target bonuses in the payout table below.2022 vs. 2021. Actual payout can range from 0% to 200% with the threshold payout being 50% of such target amount when the minimum performance is achieved, the target payout being 100% of such target amount when the target performance is achieved and the maximum payout being 200% of such target amount if the maximum performance targets are met or exceeded.achieved. Actual payouts under the 20212022 NEO Plan were based on Company performance compared to aggressive goals for each component’s target. In February 2021,target set by the CLD Committee set the 2021 NEO Plan targetin February 2022. These aggressive goals were established to drive performance goals as indicated in the table below. No discretion nor adjustments were made to the 2021 NEO Plan.above stockholder expectations.
As detailed below, the 2021The 2022 NEO Plan payout was 115.4%30.2% of target due primarily to overunderachievement on ARR and performance againstbetween the threshold and target for free cash flow metric.flow. No discretionary adjustments or changes to the goals were made after the plan was set at the beginning of the year. The minimum threshold, target and maximum goals for each component are set forth in the following table (linear interpolation applies between performance levels):
PROS | 20222023 Proxy Statement | Page 3427
| | | Goals | | Performance Achieved | | Goals ($ in millions) | | Performance Achieved |
| Component | Component | Threshold | | Target | | Maximum | | Component | Threshold | | Target | | Maximum | |
| Annual Recurring Revenue (in millions) | $212 | | $220 | | $227 | | 213.4(1) | |
| Free Cash Flow Improvement | 31% | | 42% | | 53% | | 62.0% | |
| ARR in constant currency | | ARR in constant currency | $248.0 | | $257.8 | | $263.0 | | $247.5 |
| Free Cash Flow (used) | | Free Cash Flow (used) | $(24.0) | | $(19.5) | | $(16.0) | | $(21.7) |
| Payout at Level | Payout at Level | 50% | | 100% | | 200% | | 115.4% | Payout at Level | 50% | | 100% | | 200% | | 30.2% |
(1) ARR for purposes of the 2021 NEO Plan excludes the impact of acquisitions.
| | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Target Payout | | Actual Payout |
| As a % of Base | Amount | | Incentive Paid | | As a % of Target |
| Andres D. Reiner | | 110% | $594,000 | | $179,388 | | 30.2% |
| | | | | | | |
| Stefan B. Schulz | | 80% | $324,000 | | $97,848 | | 30.2% |
No changes were made to target payout amounts as a percentage of base salary in 2021; they are the same as applied in 2020. The payout for 2021 performance as a percentage of the base salary of each NEO reflects actual results against the performance schedule described above and are set forth in the following table:
| | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Target Payout | Actual Payout |
| As a % of Base | Incentive Paid | | As a % of Target |
| Andres D. Reiner | | 110 | % | $685,476 | | 115.4 | % |
| Stefan B. Schulz | | 80 | % | $373,896 | | 115.4 | % |
| Leslie Rechan | | 90 | % | $441,405 | | 115.4 | % |
| Roberto Reiner | | 70 | % | $267,880 | (1) | 115.4 | % |
(1) Mr. Roberto Reiner's bonus was calculated for the period January 1, 2021 through October 31, 2021 (his last day serving as Executive Vice President) based on his base salary of $350,000 and for the period November 1, 2021 through December 31, 2021 based on a reduced salary of $240,000.
Equity Awards
The CLD Committee believes that equity compensation plans areis an essential tool to align the long-term interests of our NEOs and employees with those of our stockholders. For our NEOs, theThe CLD Committee awards a mix of performance-based equity awards and time-based equity awards. While SEC rules require us to disclose the grant-date fair value of equity awards granted to our NEOs in the Summary Compensation Table, the actual value received by an NEO depends on multiple factors, including the number of shares actually received via vesting and the share price upon ultimate sale. As such, even time-based RSUs include an implied performance element in that the ultimate value received is directly tied to the Company's stock performance over time.NEOs. The CLD Committee determines the size of awards following review of competitive market data from our peer group, as well as subjective factors such as relative job scope, individual performance, tenure and experience, expected future contributions to the growth and development of the Company, Company performance, historical equity compensation awarded to aeach NEO and the unvested equity position held by each NEO. The CLD Committee is satisfied that the NEO equity compensation program is well-aligned with stockholders, which is demonstrated by the meaningfully lower Compensation Actually Paid values compared to the Summary Compensation Table-reported values during years in which the Company’s share price decreased (see Pay vs. Performance table). The Committee reduced intended grant values in 2022 as compared to intended grant values in 2021 based on numerous factors which included market data from the 2022 Peer Group which was comprised of smaller companies than the 2021 Peer Group overall, and our relative TSR performance during 2021, which was below the median of our 2022 Peer Group.
2021 | | | | | | | | | | | |
| Named Executive Officer | Change In Intended Total Grant Value YOY (1) | |
| 2021 | 2022 | % Change |
| Andres D. Reiner | $5,650,000 | $5,500,000 | (2.7)% |
| | | |
| Stefan B. Schulz | $3,000,000 | $2,500,000 | (16.7)% |
(1) Committee-intended target grant values include Market Stock Units (MSUs) calculated as the number of target MSUs multiplied by the stock price on the date of grant. |
2022 Equity Awards
For 2021,2022, each NEO received a mix of performance-based and time-based RSUs based upon a target award value as set forth below:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Target Award | Mix of Equity Award Types(1) | Share Price | Units Granted |
| Value (000s) | Performance-Based | | Time-Based | on 1/11/21 | MSUs | RSUs |
| Andres D. Reiner | | $5,650 | 50% | | 50% | $48.31 | 58,476 | | 58,476 | |
| Stefan B. Schulz | | $3,000 | 40% | | 60% | $48.31 | 24,839 | | 37,259 | |
| Leslie Rechan | | $3,200 | 40% | | 60% | $48.31 | 26,495 | | 39,743 | |
| Roberto Reiner | | $1,900 | 40% | | 60% | $48.31 | 15,731 | | 23,597 | |
(1)The calculation of the number of respective units to grant was determined by the CLD Committee based upon the closing stock price of our Common Stock on the date of grant of the MSUs and RSUs, January 11, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Target Award | Mix of Equity Award Types(1) | Share Price | Units Granted |
| Value (000s) | Performance-Based | | Time-Based | on 1/10/22 | Target MSUs | RSUs |
| Andres D. Reiner | | $5,500 | 50% | | 50% | $32.15 | 85,536 | | 85,536 | |
| | | | | | | | |
| Stefan B. Schulz | | $2,500 | 40% | | 60% | $32.15 | 31,104 | | 46,656 | |
(1) The calculation of the number of respective units to grant was determined by the CLD Committee based upon the closing stock price of our Common Stock on the date of grant of the MSUs and RSUs, January 10, 2022. |
PROS | 2023 Proxy Statement | Page 28
Market Stock Units (MSUs). In 2021,2022, the CLD Committee granted MSUs for the performance-based equity component because at the time of awarding (January 2021) there still existed extreme uncertainty regarding the length of the impact of COVID-19. Therefore, rather than set long-term Company performance targets which appeared highly speculative at the time, the CLD Committee decided to use a relative performance metric for performance-based equity.component. The number of shares that will actually be earned will depend on our TSR for the three-year period from January 1, 20212022 through December 31, 20232024 as compared to the Russell 2000 Index (Index). To earn MSUs at target, we must outperform the Index by 5 percentage points. If we under-perform this level, the percentage at which the MSUs convert into shares of our Common Stockare earned will be reduced from 100%, at a rate of 2.5 to 1 (2½-percentage-point reduction in the number of target units for each percentage point of performanceunder-performance below 5 percentage points better thanabove the Index), with a minimum percentage of 0% of MSUs earned at 35 percentage points below the Index.of Index under-performance. If we outperform the Index beyond 5 percentage points better, then the percentage at which the MSUs convert to shares will be increased fromabove 100%, of target, at a rate of 2.5 to 1 (2½-percentage-point increase in the number of target units for each percentage point of over-performance)out-performance), with a maximum percentage of 200% MSUs earned. The units earned, if any, based on actual performance will vest on January 31, 2024. The amounts shown above reflect the number of 2021 MSUs that would be earned if the performance goals related to these awards were met at the target level at the end of the performance period.2025. If the minimum performance threshold is not met, there will be no payout.
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| | | | | | | | |
20212022 MSUs Thresholds | Units Earned | TSR Outperformance |
| Maximum | 200% | +45% |
| Target | 100% | +5% |
| Minimum | —% | (35)% |
As stated above, the 2022 MSUs will measure our relative TSR over a three-year period ending December 31, 2024. If the performance period for the 2022 MSUs had ended on December 31, 2022, 59% of such MSUs would have been earned as the Company underperformed the benchmark. To earn 100% or more of the 2022 MSUs, the Company's TSR must outperform the Russell 2000 Index over the remaining two years of the performance period.
Time-based RSUs. RSUs granted in 20212022 to our NEOs vest in four equal annual installments25% on the four anniversariesone year anniversary of the grant date and an additional 6.25% vests each quarter thereafter over the subsequent three years (i.e. four year total vesting period), assuming continued employment over the vesting period, and settle in shares of our Common Stock upon vesting. See 20212022 award detail included in the Grants of Plan-Based Awards table. table.
Earning of Prior YearPreviously Awarded Performance-Based Equity Awards
As stated above, performance-based equity is a key component of our executive compensation program. Once a performance period has completed, our CLD Committee certifies the performance and number of units that are earned. The following sections set forth information regarding the actual results of performance-based equity awards with performance periods that have recently completed.
2019 PRSUs
In January 2019, Messrs. A. Reiner and Schulz were awarded PRSUs as the performance-based equity component of their 2019 compensation. Messrs.Mr. Rechan and R. Reiner did not participate in such awards. The number of units (payable in shares of our Common Stock) actuallywere earned was based on our performance against a Total Recurring Revenue goal for a two-year performance period ended December 31, 2020. If performance was below the threshold goal, no units were earned. If performance was below the threshold goal, 50% of target units werewould have been earned. If performance was equal to the target goal, 100% of the awarded units werewould have been earned. If performance was equal to or above the maximum goal, 200% of the awarded units werewould have been earned. Linear interpolation was used to determine the number of earned units if the percentage attainment of the performance goal fell between the threshold, target orand maximum goals. In February 2021, the number of earned units was certified for each executive based on the award agreement formula (no discretion nor adjustment applied) as set forth in the table below.. The earned units were subject to an additional one-year vesting period and vested on January 15, 2022.
| | Named Executive Officer | Named Executive Officer | Total Recurring Revenue ($M) | | PRSUs | Named Executive Officer | 2020 Total Recurring Revenue ($M) | PRSUs | |
| Threshold | Target | Maximum | Earnout % of Target | #Granted at Target | Units Earned | | Threshold | Target | Maximum | #Granted at Target | Units Earned | Earnout % of Target |
| Named Executive Officer | | Threshold | Target | Maximum | #Granted at Target | Units Earned | Earnout % of Target | |
| | Goals | td06.5 | td21.4 | td36.8 | | | Goals | td06.5 | td21.4 | td36.8 | |
| | Actual | td15.2 | 79.1% | | | Actual | td15.2 | |
| | Andres D. Reiner | Andres D. Reiner | | 79.1% | 70,348 | 55,645 | Andres D. Reiner | | 70,348 | 55,645 | 79.1% |
| | Stefan B. Schulz | Stefan B. Schulz | | 79.1% | 24,206 | 19,146 | Stefan B. Schulz | | 24,206 | 19,146 | 79.1% |
2020 PRSUs
In February 2020, Messrs. A. Reiner Schulz and R. ReinerSchulz were awarded PRSUs as the performance-based equity component of their 2020 compensation. Mr. Rechan did not participate in such awards. The 2020 PRSUs were structured similar to the 2019 PRSUs, with performance measured over the two-year period ended December 31, 2021. The 2020 PRSUs were also structured to deliver a 50% of target earnout if the threshold level of performance would have been achieved, and a 200% of target earnout if the maximum level of performance would have been achieved. In February 2022, the number of earned units was certified based on the award agreement formula (no discretion nor adjustment applied). Because total recurring revenue for 2021 was below the minimum threshold target (set pre-pandemic) of $285 million, no units were earned. As a result, Messrs. A. Reiner Schulz and R. ReinerSchulz forfeited (at target) 39,500 15,100 and 10,80015,100 PRSUs, respectively.
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2021 and 2022 Market Stock Units (MSUs)
MSUs were granted in January 2021 to Messrs. Reiner, Schulz and Rechan. Mr. Rechan's 2021 MSUs were forfeited upon termination. The 2021 MSUs are earned based on our relative TSR over a three-year performance period ending December 31, 2023. The 2021 MSUs were tracking to be earned at 0% of target if performance was measured at December 31, 2022.
MSUs were granted in January 2022 to Messrs. Reiner and Schulz. The 2022 MSUs are earned based on our relative TSR over a three-year performance period ending December 31, 2024. The 2022 MSUs were tracking to be earned at 59% of target if performance was measured at December 31, 2022.
Other Compensation
Our NEOs are eligible to participate in our health and welfare programs, 401(k) plan, Employee Stock Purchase Plan and other benefit programs on the same basis as other U.S. employees. We also offer our NEOs reimbursement for the costs of an annual executive comprehensive physical, although none of our NEOs utilized this benefit in 2021.2022.
Severance Compensation and Termination Protection
We generally provide our NEOs with severance packages if they are terminated without cause (as defined in their employment agreements) or for good reason (as defined in their employment agreements) in order to attract and retain them.. The amount of severance benefits is described below, and in more detail elsewhere in the section titled PotentialPotential Payments Upon Termination or Change of Control. The CLD Committee reviews the potential payouts to ensure their market-competitiveness in order to incentivize our NEOs to maintain focus on both daily and long-term efforts.
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Our severance compensation provisions are designed to meet the following objectives:
•Change in Control: As part of our normal course of business, we may engage in discussions with other companies about possible collaborations and/or other ways in which the companies may work together to further our respective long-term objectives. In certain scenarios, the potential for merger or being acquired may be in the best interests of our stockholders. We provide a component of severance compensation if a NEO is terminated as a result of a change of control transaction to promote the ability of our NEOs to act in the best interests of our stockholders even though they could be terminated as a result of the transaction.
•Termination Without Cause or For Good Reason: If we terminate the employment of one of our NEOs “without cause” or one of our NEOs resigns for “good reason,” each as defined in the applicable agreement, we are obligated to make certain payments based on the NEO's then-effective base salary. We believe this is appropriate because the terminated NEO is bound by confidentiality and non-competition provisions continuing after termination. We also believe it is beneficial to have a mutually-agreed severance package in place prior to any termination event to avoid disruptive conflicts and provide us with more flexibility to make a change in management if such a change is in our and our stockholders’ best interests.
Governance and Other Considerations
Tax and Accounting Considerations
Limits on Deductibility of Compensation. Section 162(m) of the Code generally prevents us from deducting as a business expense that portion of compensation paid to certain of our officers that exceeds $1,000,000. The CLD Committee believes that its primary responsibility is to provide a compensation program to meet our stated business objectives, and accordingly the Company reserves the right to pay compensation that is not tax-deductible if it determines that such a payment is in the best interests of the Company and our stockholders.
Clawback Policy. Our “clawback” policy permits our Board to consider and make a decision in its sole discretion to recover, under applicable law, any incentive bonuses awarded to NEOs whose fraud or intentional misconduct significantly contributed to a restatement of financial results that led to the awarding of incentive bonuses. This “clawback” policy is designed to further link our executive compensation and our long-term performance. Additionally, the 2017 Plan provides for reimbursement of all awards, including cash and all types of equity (including time-based and performance-based equity awards), and profits from securities sales in similar circumstances, as detailed in the 2017 Plan. We intend to modify our clawback policy as needed to comply with the recently adopted SEC regulations concerning compensation recovery policies and the related listing standards when such listing standards require compliance.
PROS | 2023 Proxy Statement | Page 30
Prohibition Against Hedging, Pledging, and Short-Sales. We have implemented both anti-hedging and anti-pledging policies, as well as a prohibition on participating in short sales of our stock, to ensure that our executives’ stock remains at-risk. Our Insider Trading Policy, which applies to all employees, including officers, and non-employee directors, specifically prohibits short sales of our securities, transactions in puts, calls or other derivative securities involving our stock, hedging or monetization transactions (including but not limited to zero-cost collars, prepaid variable forwards, and equity swaps), and holding our securities in a margin account or pledging our securities as collateral for a loan.
Executive Stock Ownership Guidelines.
As part of our overall corporate governance and compensation practices, our Board adopted stock ownership guidelines for our NEOs. These guidelines are designed to align our NEOs' interests with our stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking and further increases our NEOs’ alignment with stockholder interests. These guidelines require our Chief Executive Officer to hold shares of our stock worth six times his annual salary and each other NEO is required to hold shares of our stock worth two times their annual salary. Vested units or unvested time-based RSUs held by a NEO under any of our equity incentive plans are included in calculating the value of ownership to determine whether this minimum ownership requirement has been met. NEOs must attain this ownership threshold within five years after being appointed as a NEO. As of December 31, 2022, each of our NEOs and directors were in compliance with the applicable guidelines.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presents the compensation paid to or earned by our NEOs during 2022, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and
Principal Position | | Year | | Salary | | Bonus | | Stock
Awards (1) | | Non-Equity
Incentive Plan Compensation | All Other
Compensation | Total |
| Andres D. Reiner | | 2022 | | $ | 540,000 | | | $ | — | | | $5,970,413 | (2) | $ | 179,388 | | | $ | 12,200 | | (3) | $ | 6,702,001 | |
| President and Chief | | 2021 | | $ | 540,000 | | | $ | — | | | $6,102,556 | (4) | $ | 685,476 | | | $ | 11,600 | | | $ | 7,339,632 | |
| Executive Officer | | 2020 | | $ | 540,000 | | | $ | — | | | $ | 4,766,465 | | (5) | $ | 143,748 | | | $ | 12,799 | | | $ | 5,463,012 | |
| | | | | | | | | | | | | | |
| Stefan B. Schulz | | 2022 | | $ | 405,000 | | | $ | — | | | $ | 2,671,056 | | (6) | $ | 97,848 | | | $ | 12,200 | | (3) | $ | 3,186,104 | |
| Executive Vice President | | 2021 | | $ | 405,000 | | | $ | — | | | $ | 3,192,208 | | (7) | $ | 373,896 | | | $ | 11,600 | | | $ | 3,982,704 | |
| and Chief Financial Officer | | 2020 | | $ | 405,000 | | | $ | — | | | $ | 2,320,417 | | (8) | $ | 78,408 | | | $ | 11,400 | | | $ | 2,815,225 | |
| | | | | | | | | | | | | | |
| Leslie Rechan | | 2022 | | $ | 35,417 | | (9) | $ | — | | | $ | — | | | $ | — | | | $ | 2,125,342 | | (10) | $ | 2,160,759 | |
| former Chief Operating Officer | | 2021 | | $ | 425,000 | | | $ | — | | | $ | 3,405,029 | | (11) | $ | 441,405 | | | $ | — | | | $ | 4,271,434 | |
| | 2020 | | $ | 298,952 | | (12) | $ | 100,000 | | (13) | $ | 3,999,985 | | (14) | $ | 58,928 | | | $ | — | | | $ | 4,457,865 | |
| | | | | | | | | | | | | | |
(1)Represents the aggregate grant date fair value of equity awards granted in the specified fiscal year as calculated in accordance with GAAP. For additional information about equity award valuation assumptions, refer to Note 14 of our financial statements in our Form 10-K for the year ended December 31, 2022.
(2)Represents 85,536 RSUs and 85,536 Target MSUs awarded to Mr. Reiner on January 10, 2022. The 2022 RSUs vest 25% on January 10, 2023 and 6.25% on the 10th day of the first month of each quarter thereafter and have a grant date fair value of $32.15 per unit. The 2022 MSUs settle on January 31, 2025 if performance is achieved, and have a grant date fair value of $37.65 per unit. For additional information on the 2022 RSUs and 2022 MSUs, see Grants of Plan-Based Awards. (3)Represents 401(k) Company match.
(4)Represents 58,476 RSUs and 58,476 MSUs awarded to Mr. Reiner on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs will settle on January 31, 2024, and have a grant date fair value of $56.05 per unit.
(5)Represents 39,500 RSUs awarded to Mr. Reiner on January 13, 2020 and 39,500 PRSUs awarded to Mr. Reiner on February 7, 2020. The 2020 RSUs vest annually in one-fourth installments on January 13th of each year and have a grant date fair value of $66.44 per unit. The 2020 PRSUs vested on January 13, 2023, and have a grant date fair value of $54.23 per unit. The number of PRSUs and target award value for the 2020 PRSUs was established by the CLD Committee on January 13, 2020 but were granted on February 7, 2020 when the performance targets were finalized.
(6)Represents 46,656 RSUs and 31,104 MSUs awarded to Mr. Schulz on January 10, 2022. The 2022 RSUs vest 25% on January 10, 2023 and 6.25% on the 10th day of the first month of each quarter thereafter and have a grant date fair value of $32.15 per unit. The 2022 MSUs settle on January 31, 2025, and have a grant date fair value of $37.65 per unit. For additional information on the 2022 RSUs and 2022 MSUs, see Grants of Plan-Based Awards. (7)Represents 37,259 RSUs and 24,839 MSUs awarded to Mr. Schulz on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs settle on January 31, 2024, and have a grant date fair value of $56.05 per unit.
(8)Represents 22,600 RSUs awarded to Mr. Schulz on January 13, 2020 and 15,100 PRSUs awarded to Mr. Schulz on February 7, 2020. The 2020 RSUs vest annually in one-fourth installments on January 13th of each year and have a grant date fair value of $66.44 per unit. The 2020 PRSUs vested on January 13, 2023, and have a grant date fair value of $54.23 per unit. The number of PRSUs and target award value for the 2020 PRSUs was established by the CLD Committee on January 13, 2020 but were granted on February 7, 2020 when the performance targets were finalized.
(9)Mr. Rechan's last day of employment was January 31, 2022, and the salary reflected is equivalent to 1/12th of his annual base of $425,000.
(10)Represents severance paid to Mr. Rechan per the terms of his employment agreement. This amount is comprised of: (i) $807,500 - 12 months of base salary plus target bonus as if Mr. Rechan had remained employed for 12 months; (ii) $22,428 - COBRA premiums for 12 months; and (iii) $1,295,414 - the value of RSUs accelerated on March 15, 2022, calculated based on our stock price on such date ($30.10).
(11)Represents 39,743 RSUs and 26,495 MSUs awarded to Mr. Rechan on January 11, 2021. The 2021 RSUs vested annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. Certain of these RSUs were accelerated as part of Mr. Rechan's severance. The 2021 MSUs were forfeited upon the termination of Mr. Rechan's employment.
(12)Mr. Rechan's base salary was prorated for 2020 based on his start date as Chief Operating Officer of May 13, 2020.
(13)Mr. Rechan was provided as part of his offer package $100,000 reimbursement for relocation expenses to move to the United States.
(14)Represents 132,406 RSUs awarded to Mr. Rechan on May 13, 2020. The RSUs vested annually in one-fourth installments on May 13th of each year and have a grant date fair value of $30.21 per unit. Certain of these RSUs were accelerated as part of Mr. Rechan's severance.
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Grants of Plan-Based Awards
The following table shows all plan-based awards granted to our NEOs during 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards:
Number of Shares of Stock or Units (#) | FMV on Grant Date
($/Sh) | Grant Date Fair Value of Stock and Option Awards
($) |
| Named Executive Officer | | Type of Award | Grant Date | Threshold
($) | Target
($) | Maximum
($) | Target
(#) | Maximum
(#) |
| Andres D. Reiner | | RSU | 1/10/2022 | | | | | | 85,536 | | $ | 32.15 | | $ | 2,749,982 | |
| MSU(1) | 1/10/2022 | | | | 85,536 | | 171,072 | | | $ | 37.65 | | $ | 3,220,430 | |
| Cash incentive(2) | | $ | 118,800 | | $ | 594,000 | | $ | 1,188,000 | | | | | | |
| | | | | | | | | | | |
| Stefan B. Schulz | | RSU | 1/10/2022 | | | | | | 46,656 | | $ | 32.15 | | $ | 1,499,990 | |
| MSU(1) | 1/10/2022 | | | | 31,104 | | 62,208 | | | $ | 37.65 | | $ | 1,171,066 | |
| Cash incentive(2) | | $ | 64,800 | | $ | 324,000 | | $ | 648,000 | | | | | | |
(1)The 2022 MSUs are performance-vesting units. The 2022 MSUs settle on January 31, 2025, and the number of shares of Common Stock issuable upon settlement is based on the Company's TSR in relation to the Russell 2000 Index (Index) over a three-year measurement period ending December 31, 2024. The range of shares of Company stock that may be earned is 0% to 200%. Total MSU grant date fair value is calculated by multiplying the target number of units awarded by the grant date fair value of $37.65 per unit. This grant date fair value per unit is estimated by the Company on the date of grant using a Monte Carlo simulation model. The model is affected by the Company's stock price and a number of assumptions including the expected volatility of the Company's stock and the Index, its risk-free interest rate and expected dividends. For more information on the assumptions and methodology used to estimate fair market value for MSUs, please see Note 14 of our financial statements in ourForm 10-Kfor the year ended December 31, 2022.
(2)Amounts represent the range of annual cash incentives that could have been earned under the NEO Cash Incentive Plan for 2022 based on ARR and Free Cash Flow, as described in the Components of 2022 Executive Compensation section above. The actual cash incentive bonus earned for 2022 is reported in the 2022 Summary Compensation Table.
PROS | 2023 Proxy Statement | Page 33
Outstanding Equity Awards at Fiscal Year End
The following table presents the number of outstanding equity awards held by our NEOs as of December 31, 2022 and the value of such awards based on the closing stock price of $24.26 as of December 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Stock Awards |
| Named Executive Officer | | | | | | | | | Equity incentive
plan awards:
number of
unearned shares,
units or other
rights that have
not vested
(#) | Equity incentive
plan awards:
market or payout
value of unearned shares,
units or other
rights that have
not vested ($) |
| | | | | | | | | | | | | | | |
| Andres D. Reiner | | | | | | | | | | | | 17,587 | | (1) | | $ | 426,661 | |
| | | | | | | | | | | | 19,750 | | (2) | | $ | 479,135 | |
| | | | | | | | | | | | 43,857 | | (3) | | $ | 1,063,971 | |
| | | | | | | | | | | | 7,309 | | (4) | | $ | 177,316 | |
| | | | | | | | | | | | 85,536 | | (5) | | $ | 2,075,103 | |
| | | | | | | | | | | | 85,536 | | (6) | | $ | 2,075,103 | |
| | | | | | | | | | | | | | | |
| Stefan B. Schulz | | | | | | | | | | | | 9,078 | | (1) | | $ | 220,232 | |
| | | | | | | | | | | | 11,300 | | (2) | | $ | 274,138 | |
| | | | | | | | | | | | 27,945 | | (3) | | $ | 677,946 | |
| | | | | | | | | | | | 3,104 | | (4) | | $ | 75,303 | |
| | | | | | | | | | | | 46,656 | | (5) | | $ | 1,131,875 | |
| | | | | | | | | | | | 31,104 | | (6) | | $ | 754,583 | |
(1)Represents 2019 RSUs awarded to Messrs. Reiner and Schulz on January 15, 2019. These 2019 RSUs vest annually in one-fourth installments on January 15th of each year through 2023.
(2)Represents 2020 RSUs awarded to Messrs. Reiner and Schulz on January 13, 2020. These 2020 RSUs vest annually in one-fourth installments on January 13th of each year through 2024.
(3)Represents 2021 RSUs awarded to Messrs. Reiner and Schulz on January 11, 2021. These 2021 RSUs settle annually in one-fourth installments on January 11th of each year through 2025.
(4)Represents 2021 MSUs awarded to Messrs. Reiner and Schulz on January 11, 2021. These 2021 MSUs settle on January 31, 2024. The amounts shown above reflect the number of 2021 MSUs that would be earned if the performance goals related to these awards were met at the threshold level at the end of the performance period. If the minimum performance threshold is not met, there will be no payout. The number of shares that will actually be earned will depend on our TSR for the period from January 1, 2021 through December 31, 2023 as compared to the Russell 2000 Index. If the performance period had ended as of December 31, 2022, no MSUs would have been earned.
(5)Represents 2022 RSUs awarded to Messrs. Reiner and Schulz on January 10, 2022. These 2022 RSUs settle 25% on January 10, 2023 and 6.25% on the 10th day of the first month of each quarter thereafter.
(6)Represents 2022 MSUs awarded to Messrs. Reiner and Schulz on January 10, 2022. These 2022 MSUs settle on January 31, 2025. The amounts shown above reflect the number of 2022 MSUs that would be earned if the performance goals related to these awards were met at the target level at the end of the performance period. The number of shares that will actually be earned will depend on our TSR for the period from January 1, 2022 through December 31, 2024 as compared to the Russell 2000 Index. If the performance period had ended as of December 31, 2022, 59% of the target MSUs would have been earned.
PROS | 2023 Proxy Statement | Page 34
Option Exercises and Equity Awards Vested
The following table presents information on the exercises of stock options and vesting of PRSUs, RSUs and MSUs for our NEOs during the year ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Named Executive Officer | | Number of shares acquired on exercise
(#) | | Value realized on exercise
($) | | Number of shares acquired on RSU vesting
(#) | | Number of shares acquired on PRSU and MSU vesting
(#)
| | Value realized on vesting
($) |
| Andres D. Reiner | | — | | | — | | | 62,818 | | | 55,645 | | | $ | 3,520,080 | |
| Stefan B. Schulz | | — | | | — | | | 34,458 | | | 19,146 | | | $ | 1,612,192 | |
| Leslie Rechan | | — | | | — | | | 52,972 | | | — | | | $ | 1,623,467 | |
Employment Agreements
Andres D. Reiner. In December 2018, we entered into a second amended and restated employment agreement with Mr. A. Reiner, our President and CEO. This agreement will automatically renew for additional three-year terms unless the Company decides not to renew. The base salary payable to Mr. A. Reiner is subject to periodic review by our CLD Committee. In the event Mr. A. Reiner’s employment with us is terminated by him for good reason, by us without cause or we decide not to renew his agreement, he will receive (i) his full base salary each month for the following 12 months, (ii) any unpaid bonus earned prior to the termination relating to periods preceding the date of termination, (iii) the payment of a bonus at 100% of performance targets, including discretionary components, within the bonus plan in effect as if employed by us for 12 months, (iv) an amount equal to 12 times the monthly cost of Mr. A. Reiner's health benefits, (v) the acceleration of vesting of all equity awards with respect to such shares that would have vested following his termination date, and (vi) the acceleration of vesting of all market stock awards where the number of units vesting is determined as if the performance period ended on his termination date. If Mr. A. Reiner’s employment is terminated by us without cause, if he resigns for good reason, or we decide not to renew his agreement, in any of these cases, within six months prior to, or any time after, a change of control of the Company, he will receive (i) an amount equal to 150% of his annual salary, (ii) any unpaid bonus earned prior to the termination relating to periods preceding the date of termination, (iii) the payment of an aggregate bonus equal to 100% of performance targets, including any discretionary components, within the bonus plan in effect as if employed by us for eighteen months, (iv) an amount equal to 18 times the monthly cost of Mr. A. Reiner's health benefits, and (v) the acceleration of vesting of all equity awards with respect to shares that would have vested following the termination date. If Mr. A. Reiner's employment with us terminates due to his death or disability, his employment will automatically terminate and he will be entitled to accelerated vesting of (i) all equity awards with respect to all shares that would have vested after the termination date, and (ii) all MSUs at 100% of the target number granted. In addition, if the surviving or acquiring entity (or its parent entity) elects not to assume, continue or substitute for the equity awards or options due under the either the 2007 Equity Incentive Plan (2007 Plan) or 2017 Plan, all outstanding equity awards and options under each plan will vest in full and become fully exercisable. Mr. Reiner is subject to non-competition and non-solicitation restrictions during the term of his employment and for the 12-month period following the termination of his employment.
PROS | 2022 Proxy Statement | Page 37
Stefan B. Schulzand Leslie Rechan. In December 2018, we entered into an amended and restated employment agreement with Mr. Schulz, our Executive Vice President and Chief Financial Officer. In May 2020, we entered into an employmentThe agreement with Mr. Rechan, our Chief Operating Officer. The agreements with these two officers utilize a similar form and provide that the agreements areis for a three-year term and automatically renewrenews for three-year terms unless the Company decides not to renew. The base salary payable to the officerMr. Schulz is subject to periodic review by our CLD Committee. In the event the officer'sMr. Schulz's employment with us is terminated by him for good reason, by us without cause, or we decide not to renew his agreement, he will receive (i) his full base salary each month for the following 12 months, (ii) any unpaid bonus earned prior to the termination relating to periods preceding the date of termination, (iii) the payment of a bonus at 100% of performance targets, including discretionary components, within the bonus plan in effect as if employed by us for 12 months, (iv) an amount equal to 12 times the monthly cost of the officer'shis health benefits, (v) the acceleration of vesting of all equity awards with respect to such shares that would have vested following the date of termination and prior to the first anniversary of his termination date, and (vi) the acceleration of vesting of all market stock awards in the case of Mr. Schulz, or performance stock awards, in the case of Mr. Rechan, scheduled to vest prior to the first anniversary of his termination date, where the applicable performance period is deemed to have ended on his termination date. Alternatively, if the officer'sMr. Schulz's employment is terminated by us without cause, if he resigns for good reason or we decide not to renew his agreement, in any of these cases, within six months prior to, or any time after, a change of control of the Company, he will receive (i) an amount equal to 150% of his annual salary, (ii) any unpaid bonus earned prior to the termination relating to periods preceding the date of termination, (iii) the payment of an aggregate bonus equal to 100% of performance targets, including discretionary components, within the bonus plan in effect as if employed by us for 18 months, (iv) an amount equal to 18 times the monthly cost of the officer'shis health benefits, and (v) the acceleration of vesting of all equity awards with respect to such shares that would have vested following the date of termination. In addition, if the surviving or acquiring entity (or its parent entity) elects not to assume, continue or substitute for the equity awards or options due under the 2007 Plan or 2017 Plan, all outstanding equity awards and options under each plan will vest in full and become fully exercisable. If the officer'sMr. Schulz's employment with us terminates due to his death or disability, his employment will automatically terminate and he will be entitled to accelerated vesting of (i) all equity awards with respect to all shares that would have vested after the termination date, and (ii) all MSUs in the case of Mr. Schulz, and all performance stock awards, in the case of Mr. Rechan, at 100% of the target number granted. Mr. Schulz and Mr. Rechan areis subject to non-competition and non-solicitation restrictions during the term of his employment and for the 12-month period following the termination of his employment.
As disclosed in January 2022, the Company eliminated the role of Chief Operating Officer and Mr. Rechan's employment agreement was terminated. The Company is paying Mr. Rechan severance consistent with the terms of his employment agreement.PROS | 2023 Proxy Statement | Page 35
Roberto Reiner.In November 2019, we entered into an amended and restated employment agreement with Mr. R. Reiner, our Executive Vice President and Chief Technology Officer. As disclosed in September 2021, as part of his planned retirement from the Company, Mr. R. Reiner ceased serving as an executive officer at the end of October 2021 and retired from the Company in March 2022. Mr. R. Reiner is subject to non-competition and non-solicitation restrictions for the 12-month period following the termination of his employment.
“Cause” is defined in these employment agreements as (a) the unauthorized use or disclosure of the confidential information or trade secrets of the Company by the officer which use or disclosure causes a material harm to the Company, (b) the officer’s conviction of, or a plea of guilty or no contest to, a felony or any other crime involving dishonesty or moral turpitude under the laws of the United States; (c) any intentional wrongdoing by the officer, whether by omission or commission, which adversely affects the business or affairs of the Company; (d) continued failure to perform assigned duties (other than by reason of disability) or comply with any Company policy after notice and a cure period; (e) any material breach by the officer of his employment agreement or any other agreement between the officer and the Company after notice and a cure period; and (f) any failure to cooperate in good faith with the Company in any governmental investigation or formal proceeding.
Each of our NEOs can resign for “good reason” and be entitled to certain severance payments as detailed abovebelow in the table titled “Potential Payments Upon Termination of Employment or Change of Control.” “Good reason” is defined in their employment agreements as (i) a material diminution in theirthe officer's authority, duties or responsibilities or the assignment of duties to them that are not materially commensurate with theirthe officer's position with the Company, other than, in the case of the employment agreement with Mr. R. Reiner, where he is asked to assume substantially similar duties and responsibilities in a larger entity after any change of control;Company; (ii) a material reduction in their base salaries, or in the case of Mr. Rechan his target bonus opportunity,salary, other than reductionsa reduction which areis part of a general reduction affecting all employees; (iii) the relocation of theirthe officer's principal place of service to theirhis employer to more than 25 miles from their present location;the principal place of service as of the effective date of the officer's employment agreement; (iv) any failure by the Company to continue to provide themthe officer with the opportunity to participate, on terms no less favorable than those in effect for the benefit of any employee holding a comparable position with the Company, in any material benefit or compensation plans and programs, which results in a material detriment to them;him; (v) any material breach by the Company of any provision of theirthe officer's employment agreement; or (vi) any failure by any successor corporation to assume the Company’s obligations under the NEO'sofficer's employment agreement.
PROS | 2022 Proxy Statement | Page 38
Governance and Other Considerations
Tax and Accounting Considerations
Limits on Deductibility of Compensation. Section 162(m) of the Code generally prevents us from deducting as a business expense that portion of compensation paid to certain of our executive officers that exceeds $1,000,000. The CLD Committee believes that its primary responsibility is to provide a compensation program to meet our stated business objectives, and accordingly the Company reserves the right to pay compensation that is not tax-deductible if it determines that such a payment is in the best interests of the Company and our stockholders.
Clawback Policy. Our “clawback” policy permits our Board to consider and make a decision in its sole discretion to recover, under applicable law, any incentive bonuses awarded to NEOs whose fraud or intentional misconduct significantly contributed to a restatement of financial results that led to the awarding of incentive bonuses. This “clawback” policy is designed to further link our executive compensation and our long-term performance. Additionally, the 2017 Plan provides for recovery of certain equity awards and profits from securities sales in similar circumstances.
Prohibition Against Hedging, Pledging, and Short-Sales. We have implemented both anti-hedging and anti-pledging policies, as well as a prohibition on participating in short sales of our stock, to ensure that our executives’ stock remains at-risk. Our Insider Trading Policy, which applies to all employees, including officers, and non-employee directors, specifically prohibits short sales of our securities, transactions in puts, calls or other derivative securities involving our stock, hedging or monetization transactions (including but not limited to zero-cost collars, prepaid variable forwards, and equity swaps), and holding our securities in a margin account or pledging our securities as collateral for a loan.
Stock Ownership Guidelines. As part of our overall corporate governance and compensation practices, our Board adopted stock ownership guidelines for our NEOs and directors. These guidelines are designed to align our NEOs’ and directors' interests with our stockholders’ long-term interests by promoting long-term share ownership, which reduces the incentive for excessive short-term risk taking and further increases our NEOs’ and directors’ alignment with stockholder interests. These guidelines require our Chief Executive Officer to hold shares of our stock worth six times his annual salary and each other NEO is required to hold shares of our stock worth two times their annual salary. The guidelines also state that each non-employee director is required to hold shares of our stock worth five times the annual cash retainer for directors. Vested units or unvested time-based RSUs held by a NEO or director under any of our equity incentive plans are included in calculating the value of ownership to determine whether this minimum ownership requirement has been met. Our NEOs must attain this ownership threshold within five years after being appointed as a NEO. Our directors must attain this ownership threshold within six years after joining our Board. As of December 31, 2021, eachEach of our NEOs can resign for “good reason” and directors werebe entitled to certain severance payments as detailed below in compliancethe table titled “Potential Payments Upon Termination of Employment or Change of Control.” “Good reason” is defined in their employment agreements as (i) a material diminution in the officer's authority, duties or responsibilities or the assignment of duties that are not materially commensurate with the applicable guidelines.
PROS | 2022 Proxy Statement | Page 39
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table presentsofficer's position with the compensation paid to or earned by our NEOs during 2021, 2020 and 2019:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards (1) | | Non-Equity
Incentive Plan Compensation | | All Other
Compensation | | Total |
| Andres D. Reiner | | 2021 | | $ | 540,000 | | | $ | — | | | $6,102,556 | (2) | $ | 685,476 | | | $ | 11,600 | | (3) | $ | 7,339,632 | |
| President and Chief | | 2020 | | $ | 540,000 | | | $ | — | | | $ | 4,766,465 | | (4) | $ | 143,748 | | | $ | 12,799 | | | $ | 5,463,012 | |
| Executive Officer | | 2019 | | $ | 525,000 | | | $ | — | | | $ | 4,650,003 | | (5) | $ | 1,155,000 | | | $ | 8,567 | | | $ | 6,338,570 | |
| | | | | | | | | | | | | | |
| Stefan B. Schulz | | 2021 | | $ | 405,000 | | | $ | — | | | $ | 3,192,208 | | (6) | $ | 373,896 | | | $ | 11,600 | | (3) | $ | 3,982,704 | |
| Executive Vice President | | 2020 | | $ | 405,000 | | | $ | — | | | $ | 2,320,417 | | (7) | $ | 78,408 | | | $ | 11,400 | | | $ | 2,815,225 | |
| and Chief Financial Officer | | 2019 | | $ | 392,000 | | | $ | — | | | $ | 2,000,021 | | (8) | $ | 627,200 | | | $ | 8,548 | | | $ | 3,027,769 | |
| | | | | | | | | | | | | | |
| Leslie Rechan | | 2021 | | $ | 425,000 | | | $ | — | | | $ | 3,405,029 | | (9) | $ | 441,405 | | | $ | — | | | $ | 4,271,434 | |
| former Chief Operating Officer | | 2020 | | $ | 298,952 | | (10) | $ | 100,000 | | (11) | $ | 3,999,985 | | (12) | $ | 58,928 | | | $ | — | | | $ | 4,457,865 | |
| | | | | | | | | | | | | | |
| Roberto Reiner | | 2021 | | $ | 331,667 | | (13) | $ | — | | | $ | 2,021,694 | | (14) | $ | 267,880 | | | $ | 9,950 | | (3) | $ | 2,631,191 | |
| former EVP | | 2020 | | $ | 350,000 | | | $ | — | | | $ | 1,668,656 | | (15) | $ | 59,290 | | | $ | 11,886 | | | $ | 2,089,832 | |
| and Chief Technology Officer | | 2019 | | $ | 338,000 | | | $ | — | | | $ | 1,800,002 | | (16) | $ | 444,808 | | | $ | 8,400 | | | $ | 2,591,210 | |
| | | | | | | | | | | | | | |
(1)Represents the aggregate grant date fair value of equity awards grantedCompany; (ii) a material reduction in the specified fiscal year as calculated in accordance with GAAP. For additional information about equity award valuation assumptions, refer to Note 14 of our financial statements in our Form 10-K for the year ended December 31, 2021.
(2)Represents 58,476 RSUs and 58,476 MSUs awarded to Mr. A. Reiner on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs will vest on January 31, 2024, and have a grant date fair value of $56.05 per unit. For additional information on the 2021 RSUs and 2021 MSUs, see Grants of Plan-Based Awards.(3)Represents 401(k) Company match.
(4)Represents 39,500 RSUs awarded to Mr. A. Reiner on January 13, 2020 and 39,500 PRSUs awarded to Mr. A. Reiner on February 7, 2020. The 2020 RSUs vest annually in one-fourth installments on January 13th of each year and have a grant date fair value of $66.44 per unit. The 2020 PRSUs will vest on January 13, 2023, and have a grant date fair value of $54.23 per unit. The number of PRSUs and target award value for the 2020 PRSUs was established by the CLD Committee on January 13, 2020 but were granted on February 7, 2020 when the performance targets were finalized.
(5)Represents 70,348 RSUs and 70,348 PRSUs awarded to Mr. A. Reiner on January 15, 2019. The 2019 RSUs vest annually in one-fourth installments on January 15th of each year and have a grant date fair value of $33.05 per unit. The 2019 PRSUs have a grant date fair value of $33.05 per unit, were earned at 79.1% of target and vested on January 15, 2022.
(6)Represents 37,259 RSUs and 24,839 MSUs awarded to Mr. Schulz on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs will vest on January 31, 2024, and have a grant date fair value of $56.05 per unit. For additional information on the 2021 RSUs and 2021 MSUs, see Grants of Plan-Based Awards.(7)Represents 22,600 RSUs awarded to Mr. Schulz on January 13, 2020 and 15,100 PRSUs awarded to Mr. Schulz on February 7, 2020. The 2020 RSUs vest annually in one-fourth installments on January 13th of each year and have a grant date fair value of $66.44 per unit. The 2020 PRSUs will vest on January 13, 2023, and have a grant date fair value of $54.23 per unit. The number of PRSUs and target award value for the 2020 PRSUs was established by the CLD Committee on January 13, 2020 but were granted on February 7, 2020 when the performance targets were finalized.
(8)Represents 36,309 RSUs and 24,206 PRSUs awarded to Mr. Schulz on January 15, 2019. The 2019 RSUs vest annually in one-fourth installments on January 15th of each year and have a grant date fair value of $33.05 per unit. The 2019 PRSUs have a grant date fair value of $33.05 per unit, were earned at 79.1% of target and vested on January 15, 2022.
(9)Represents 39,743 RSUs and 26,495 MSUs awarded to Mr. Rechan on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs will vest on January 31, 2024, and have a grant date fair value of $56.05 per unit. For additional information on the 2021 RSUs and 2021 MSUs, see Grants of Plan-Based Awards.(10)Mr. Rechan's base salary, was prorated for 2020 based on his start date as Chief Operating Officer of May 13, 2020.
(11)Mr. Rechan was provided asother than a reduction which is part of a general reduction affecting all employees; (iii) the relocation of the officer's principal place of service to his offer package $100,000 reimbursement for relocation expensesemployer to move tomore than 25 miles from the United States.
(12)Represents 132,406 RSUs awarded to Mr. Rechan on May 13, 2020. The RSUs vest annually in one-fourth installments on May 13thprincipal place of each year and have a grantservice as of the effective date fair value of $30.21 per unit.
(13)Mr. R. Reiner's base salary was $350,000 through the end of October 31, 2021, his last day serving as an executive officer, and then was at an annualized rate of $240,000 from November 1, 2021 through December 31, 2021.
PROS | 2022 Proxy Statement | Page 40
(14)Represents 23,597 RSUs and 15,731 MSUs awarded to Mr. R. Reiner on January 11, 2021. The 2021 RSUs vest annually in one-fourth installments on January 11th of each year and have a grant date fair value of $48.31 per unit. The 2021 MSUs will vest on January 31, 2024, and have a grant date fair value of $56.05 per unit. For additional information on the 2021 RSUs and 2021 MSUs, see Grants of Plan-Based Awards.(15)Represents 16,300 RSUs awarded to Mr. R. Reiner on January 13, 2020 and 10,800 PRSUs awarded to Mr. R. Reiner on February 7, 2020. The 2020 RSUs vest annually in one-fourth installments on January 13th of each year and have a grant date fair value of $66.44 per unit. The 2020 PRSUs will vest on January 13, 2023, and have a grant date fair value of $54.23 per unit. The number of PRSUs and target award value for the 2020 PRSUs was established by the CLD Committee on January 13, 2020 but were granted on February 7, 2020 when the performance targets were finalized.
(16)Represents 54,463 RSUs awarded to Mr. R. Reiner on January 15, 2019. The 2019 RSUs vest annually in one-fourth installments on January 15th of each year and have a grant date fair value of $33.05 per unit.
Grants of Plan-Based Awards
The following table shows all plan-based awards granted to our NEOs during 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards:
Number of Shares of Stock or Units (#) | FMV on Grant Date
($/Sh) | Grant Date Fair Value of Stock and Option Awards
($) |
| Named Executive Officer | | Type of Award | Grant Date | Threshold
($) | Target
($) | Maximum
($) | Target
(#) | Maximum
(#) |
| Andres D. Reiner | | RSU | 1/11/2021 | | | | | | 58,476 | | $ | 48.31 | | $ | 2,824,976 | |
| MSU(1) | 1/11/2021 | | | | 58,476 | | 116,952 | | | $ | 56.05 | | $ | 3,277,580 | |
| Cash incentive(2) | | $ | 118,800 | | $ | 594,000 | | $ | 1,188,000 | | | | | | |
| Stefan B. Schulz | | RSU | 1/11/2021 | | | | | | 37,259 | | $ | 48.31 | | $ | 1,799,982 | |
| MSU(1) | 1/11/2021 | | | | 24,839 | | 49,678 | | | $ | 56.05 | | $ | 1,392,226 | |
| Cash incentive(2) | | $ | 64,800 | | $ | 324,000 | | $ | 648,000 | | | | | | |
| Leslie Rechan | | RSU | 1/11/2021 | | | | | | 39,743 | | $ | 48.31 | | $ | 1,919,984 | |
| MSU(1) | 1/11/2021 | | | | 26,495 | | 52,990 | | | $ | 56.05 | | $ | 1,485,045 | |
| Cash incentive(2) | | $ | 76,500 | | $ | 382,500 | | $ | 765,000 | | | | | | |
| Roberto Reiner | | RSU | 1/11/2021 | | | | | | 23,597 | | $ | 48.31 | | $ | 1,139,971 | |
| MSU(1) | 1/11/2021 | | | | 15,731 | | 31,462 | | | $ | 56.05 | | $ | 881,723 | |
| Cash incentive(2) | | $ | 49,000 | | $ | 245,000 | | $ | 490,000 | | | | | | |
(1)The 2021 MSUs are performance-vesting units. The 2021 MSUs vest on January 31, 2024, and the number of shares of Common Stock issuable upon vesting is based on the Company's TSR in relation to the Russell 2000 Index (Index) over a three-year measurement period ending December 31, 2023. The range of shares of Company stock that may be earned is 0% to 200%. Total MSU grant date fair value is calculated by multiplying the target number of units awarded by the grant date fair value of $56.05 per unit. This grant date fair value per unit is estimatedofficer's employment agreement; (iv) any failure by the Company to continue to provide the officer with the opportunity to participate, on the date of grant using a Monte Carlo simulation model. The model is affected by the Company's stock price and a number of assumptions including the expected volatility of the Company's stock and the Index, its risk-free interest rate and expected dividends. For more information on the assumptions and methodology used to estimate fair market value for MSUs, please see Note 14 of our financial statementsterms no less favorable than those in our Form 10-Keffect for the year ended December 31, 2021.
(2)The 2021 cash incentive plan consistedbenefit of two independent measures eachany employee holding a comparable position with their own respective thresholds. The measure for ARR hadthe Company, in any material benefit or compensation plans and programs, which results in a threshold of 30% of target while free cash flow had a threshold of 20%.
PROS | 2022 Proxy Statement | Page 41
Outstanding Equity Awards at Fiscal Year End
The following table presents the number of optionsmaterial detriment to purchase shares of our Common Stock, SARs, RSUs and MSUs held by our NEOs as of December 31, 2021 and the value of such awards based on the closing stock price of $34.49 as of such date:
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Stock Awards |
| Named Executive Officer | | | | | | | | | Equity incentive
plan awards:
number of
unearned shares,
units or other
rights that have
not vested
(#) | Equity incentive
plan awards:
market or payout
value of unearned shares,
units or other
rights that have
not vested ($) |
| | | | | | | | | | | | | | | |
| Andres D. Reiner | | | | | | | | | | | | 20,737 | | (1) | | $ | 715,219 | |
| | | | | | | | | | | | 35,174 | | (2) | | $ | 1,213,151 | |
| | | | | | | | | | | | 55,645 | | (3) | | $ | 1,919,196 | |
| | | | | | | | | | | | 29,625 | | (4) | | $ | 1,021,766 | |
| | | | | | | | | | | | 58,476 | | (5) | | $ | 2,016,837 | |
| | | | | | | | | | | | 7,309 | | (6) | | $ | 252,087 | |
| | | | | | | | | | | | | | | |
| Stefan B. Schulz | | | | | | | | | | | | 10,417 | | (1) | | $ | 359,282 | |
| | | | | | | | | | | | 18,155 | | (2) | | $ | 626,166 | |
| | | | | | | | | | | | 19,146 | | (3) | | $ | 660,346 | |
| | | | | | | | | | | | 16,950 | | (4) | | $ | 584,606 | |
| | | | | | | | | | | | 37,259 | | (5) | | $ | 1,285,063 | |
| | | | | | | | | | | | 3,104 | | (6) | | $ | 107,057 | |
| | | | | | | | | | | | | | | |
| Leslie Rechan | | | | | | | | | | | | 99,305 | | (7) | | $ | 3,425,029 | |
| | | | | | | | | | | | 39,743 | | (5) | | $ | 1,370,736 | |
| | | | | | | | | | | | 3,311 | | (6) | | $ | 114,196 | |
| | | | | | | | | | | | | | | |
| Roberto Reiner | | | | | | | | | | | | 13,503 | | (1) | | $ | 465,718 | |
| | | | | | | | | | | | 27,232 | | (2) | | $ | 939,232 | |
| | | | | | | | | | | | 12,225 | | (4) | | $ | 421,640 | |
| | | | | | | | | | | | 23,597 | | (5) | | $ | 813,861 | |
| | | | | | | | | | | | 1,966 | | (6) | | $ | 67,807 | |
| | | | | | | | | | | | | | | |
(1)Represents 2018 RSUs awarded to Messrs. A. Reiner, Schulz and R. Reiner on January 8, 2018. These 2018 RSUs continue to vest annually in one-fourth installments on January 10th of each year through 2022.
(2)Represents 2019 RSUs awarded to Messrs. A. Reiner, Schulz, Dziersk and R. Reiner on January 15, 2019. These 2019 RSUs vest annually in one-fourth installments on January 15th of each year through 2023.
(3)Represents 2019 PRSUs awarded to Messrs. A. Reiner and Schulz on January 15, 2019. These 2019 PRSUs were subject to both a performance condition and a time-based vesting condition. The number of 2019 PRSUs earned (79.1% of target) was determined based upon achievementhim; (v) any material breach by the Company against total recurring revenue targets over a performance period ending December 31, 2020. Such earned 2019 PRSUs vested on January 15, 2022.
(4)Represents 2020 RSUs awarded to Messrs. A. Reiner, Schulz, and R. Reiner on January 13, 2020. These 2020 RSUs vest annually in one-fourth installments on January 13th of each year through 2024.
(5)Represents 2021 RSUs awarded to Messrs. A. Reiner, Schulz, Rechan and R. Reiner on January 11, 2021. These 2021 RSUs vest annually in one-fourth installments on January 11th of each year through 2025.
(6)Represents 2021 MSUs awarded to Messrs. A. Reiner, Schulz, Rechan and R. Reiner on January 11, 2021. These 2021 MSUs vest on January 31, 2024. The amounts shown above reflect the number of 2021 MSUs that would be earned if the performance goals related to these awards were met at the threshold level at the endany provision of the performance period. Ifofficer's employment agreement; or (vi) any failure by any successor corporation to assume the minimum performance threshold is not met, there will be no payout. The number of shares that will actually be earned will depend on our TSR forCompany’s obligations under the period from January 1, 2021 through December 31, 2023 as compared to the Russell 2000 Index. If the performance period had ended as of December 31, 2021, no MSUs would have been earned.officer's employment agreement.
(7)Represents RSUs awarded to Mr. Rechan in connection with his employment with the Company as Chief Operating Officer on May 13, 2020. These RSUs vest annually in one-fourth installments on May 13th of each year through 2024.
PROS | 2022 Proxy Statement | Page 42
Option Exercises and Equity Awards Vested
The following table presents information on the exercises of stock options and vesting of PRSUs, RSUs and MSUs for our NEOs during the year ended December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Option Awards | | Stock Awards |
| Named Executive Officer | | Number of shares acquired on exercise
(#) | | Value realized on exercise
($) | | Number of shares acquired on RSU vesting
(#) | | Number of shares acquired on PRSU and MSU vesting
(#)
| | Value realized on vesting
($) |
| Andres D. Reiner | | — | | | — | | | 69,199 | | | 165,896 | | | $ | 11,306,278 | |
| Stefan B. Schulz | | — | | | — | | | 34,944 | | | 55,556 | | | $ | 4,344,353 | |
| Leslie Rechan | | — | | | — | | | 33,101 | | | — | | | $ | 1,257,176 | |
| Roberto Reiner | | — | | | — | | | 47,519 | | | — | | | $ | 2,260,216 | |
Potential Payments Upon Termination of Employment or Change of Control
The following table represents amounts payable at, following, or in connection with the events described below, assuming that such events occurred on December 31, 20212022 for each of the NEOs:
| | Named Executive Officer | Named Executive Officer | Severance | Annual Bonus Payment | Equity Grants | Welfare Benefits | Total Payment | Named Executive Officer | Severance | Annual Bonus Payment | Equity Grants | Welfare Benefits | Total Payment |
| Andres D. Reiner | Andres D. Reiner | | | | | | | | | | | Andres D. Reiner | | | | | | | | | | |
| Death or Disability (1) | Death or Disability (1) | | — | | | — | | | $ | 8,903,007 | | | — | | | $ | 8,903,007 | | Death or Disability (1) | | — | | | — | | | $ | 7,538,601 | | | — | | | $ | 7,538,601 | |
| Termination (2) | Termination (2) | | $ | 1,134,000 | | | $ | 685,476 | | | $ | 6,886,170 | | | $ | 20,694 | | | $ | 8,726,340 | | Termination (2) | | $ | 1,134,000 | | | $ | 179,388 | | | $ | 5,269,181 | | | $ | 22,428 | | | $ | 6,604,997 | |
| Termination on Change of Control (3) | Termination on Change of Control (3) | | $ | 1,701,000 | | | $ | 685,476 | | | $ | 6,886,170 | | | $ | 31,041 | | | $ | 9,303,687 | | Termination on Change of Control (3) | | $ | 1,701,000 | | | $ | 179,388 | | | $ | 5,269,181 | | | $ | 33,643 | | | $ | 7,183,212 | |
| Vesting on Change of Control (4) | Vesting on Change of Control (4) | | — | | | — | | | $ | 1,919,196 | | | — | | | $ | 1,919,196 | | Vesting on Change of Control (4) | | — | | | — | | | $ | 407,731 | | | — | | | $ | 407,731 | |
| Retirement (5) | Retirement (5) | | — | | | — | | | $ | 5,537,163 | | | — | | | $ | 5,537,163 | | Retirement (5) | | — | | | — | | | $ | 2,652,661 | | | — | | | $ | 2,652,661 | |
| | Stefan B. Schulz | Stefan B. Schulz | | | | | | | | | | | Stefan B. Schulz | | | | | | | | | | |
| Death or Disability (1) | Death or Disability (1) | | — | | | — | | | $ | 4,372,159 | | | — | | | $ | 4,372,159 | | Death or Disability (1) | | — | | | — | | | $ | 3,661,368 | | | — | | | $ | 3,661,368 | |
| Termination (2) | Termination (2) | | $ | 729,000 | | | $ | 373,896 | | | $ | 1,848,845 | | | $ | 20,548 | | | $ | 2,972,289 | | Termination (2) | | $ | 729,000 | | | $ | 97,848 | | | $ | 866,252 | | | $ | 14,168 | | | $ | 1,707,268 | |
| Termination on Change of Control (3) | Termination on Change of Control (3) | | $ | 1,093,500 | | | $ | 373,896 | | | $ | 3,515,462 | | | $ | 30,822 | | | $ | 5,013,680 | | Termination on Change of Control (3) | | $ | 1,093,500 | | | $ | 97,848 | | | $ | 2,749,395 | | | $ | 21,253 | | | $ | 3,961,996 | |
| Vesting on Change of Control (4) | Vesting on Change of Control (4) | | — | | | — | | | $ | 660,346 | | | — | | | $ | 660,346 | | Vesting on Change of Control (4) | | — | | | — | | | $ | 148,266 | | | — | | | $ | 148,266 | |
| Retirement (5) | Retirement (5) | | — | | | — | | | $ | 2,678,062 | | | — | | | $ | 2,678,062 | | Retirement (5) | | — | | | — | | | $ | 1,512,271 | | | — | | | $ | 1,512,271 | |
| Leslie Rechan | | | | | | | | | | | |
| Death or Disability (1) | | — | | | — | | | $ | 5,709,578 | | | — | | | $ | 5,709,578 | | |
| Termination (2) | | $ | 807,500 | | | $ | 441,405 | | | $ | 1,484,361 | | | $ | 20,694 | | | $ | 2,753,960 | | |
| Termination on Change of Control (3) | | $ | 1,211,250 | | | $ | 441,405 | | | $ | 4,795,766 | | | $ | 31,041 | | | $ | 6,479,462 | | |
| Vesting on Change of Control (4) | | — | | | — | | | — | | | — | | | — | | |
| Retirement (5) | | — | | | — | | | $ | 2,968,721 | | | — | | | $ | 2,968,721 | | |
| Roberto Reiner | | | | | | | | | | | |
| Death or Disability (1) | | — | | | — | | | $ | 3,183,013 | | | — | | | $ | 3,183,013 | | |
| Termination (2) | | $ | 240,000 | | | — | | | — | | | $ | 13,066 | | | $ | 253,066 | | |
| Termination on Change of Control (3) | | $ | 360,000 | | | $ | 267,880 | | | $ | 2,640,451 | | | $ | 19,599 | | | $ | 3,287,930 | | |
| Vesting on Change of Control (4) | | — | | | — | | | $ | — | | | — | | | — | | |
| Retirement (5) | | — | | | — | | | $ | 2,092,974 | | | — | | | $ | 2,092,974 | | |
(1)Death or Disability. In the event of a termination of employment due to death or disability certain equity awards will vest. For an explanation of these benefits by executive officer, seeEmployment Agreementsabove. (2)Termination. In the event of an involuntary termination of employment by the Company without Cause or a termination of employment by the executive officer for Good Reason, certain severance, bonus, equity vesting and other benefits are due. For an explanation of these benefits by executive officer and the definitions of Cause and Good Reason, see Employment Agreementsabove. (3)Termination on Change of Control. In the event of an involuntary termination of employment by the Company without Cause or a termination of employment by the executive officer for Good Reason, in either event during the six-month period prior to a Change of Control or after a Change of Control, certain severance, bonus, equity vesting and other benefits are due. For an explanation of these benefits by executive officer, see Employment Agreements above. (4)Vesting on Change of Control. In the event of a Change of Control, certain performance-based equity awards accelerate their vesting by their terms, with the respective performance period deemed to have ended as of the date of the Change of Control. For PRSUs, if a Change of Control occurs prior to the one-year anniversary of the beginning of a performance period, the award vests at 100% of the target award amount and the earned shares are delivered, or paid out, to the executives as of the Change of Control. For MSUs, a Change of Control triggers a measurement of performance as of the Change of Control. Earned MSUs based on this measurement are paid out to the executives as of the Change of Control pro rata based on the length of the performance period concluded prior to the Change of Control. The remaining earned MSUs vest at the end of the original performance period.
(5)Retirement. In the event of retirement in which the executive provides advance notice of retirement and meets certain other qualifying conditions, certain equity awards may continue to vest post-retirement.
PROS | 20222023 Proxy Statement | Page 4336
CEO Pay Ratio
Under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, the Company is required to provide the ratio of the annual total compensation of our Chief Executive OfficerCEO (as set forth in the Summary Compensation Table above) to the annual total compensation of the median employee of the Company (Pay Ratio Disclosure). For 2021, the annual total compensation of the median employee of the Company and its subsidiaries other than our CEO, was $92,424.$84,224. Our CEO's total annual compensation for 20212022 for purposes of the Pay Ratio Disclosure was $7.3$6.7 million. As explained in this proxy statement, ourOur CEO's compensation as set forth in the Summary Compensation Table does not necessarily equate to actual realizable pay. The ratio of the total annual compensation of our CEO to the median of all other employees was 79:80:1. As SEC rules permit different methodologies, exemptions, estimates and assumptions for identifying the median employee and calculating pay ratio, our Pay Ratio Disclosure may not be comparable to the pay ratio reported by other companies.
We identified the median employee by examining the 20212022 total cash compensation for all individuals, excluding our CEO, who were employed by us during the 20212022 calendar year (whether employed on a full-time, part-time or seasonal basis). For such employees, we did not make any assumptions, adjustments or estimates with respect to total cash compensation, and we did not annualize the compensation for any full-time employees that were not employed by us for all of 2021.2022. We used the relevant exchange rate on December 31, 2021.2022. After identifying the median employee criteria, we calculated annual total compensation for such employee and compared it to the CEO’s total compensation as set forth in the Summary Compensation Table Table above.
Pay Versus Performance
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year | | SCT Total Compensation for CEO | Compensation Actually Paid to CEO (1) | Average SCT Total Compensation for Other NEOs (2) | Average Compensation Actually Paid to Other NEOs (1)(2) | Value of Initial Fixed $100 Investment Based On: | Net (Loss) Income (in millions) | Annual Recurring Revenue (in millions) |
| PROS Cumulative TSR | Peer Group Cumulative TSR (3) |
| 2022 | | $ | 6,702,001 | | $ | 2,824,846 | | $ | 2,673,432 | | $ | (112,975) | | $ | 40 | | $ | 106 | | $ | (82) | | $ | 245 | |
| 2021 | | $ | 7,339,632 | | $ | 1,811,242 | | $ | 3,628,443 | | $ | 997,555 | | $ | 58 | | $ | 135 | | $ | (81) | | $ | 227 | |
| 2020 | | $ | 5,463,012 | | $ | (2,648,100) | | $ | 2,727,907 | | $ | 159,042 | | $ | 85 | | $ | 118 | | $ | (77) | | $ | 210 | |
(1) To calculate Compensation Actually Paid, the following amounts were deducted from and added to the applicable Summary Compensation Table (SCT) total compensation:
| | | | | | | | | | | | | | | | | | | | |
| CEO |
| 2020 | | 2021 | | 2022 |
| Summary Compensation Table Total | $ | 5,463,012 | | | $ | 7,339,632 | | | $ | 6,702,001 | |
| Less: | Grant Date Fair Value of Stock Awards | $ | (4,766,465) | | | $ | (6,102,556) | | | $ | (5,970,413) | |
| Plus: | Fair Value at Year-End of Unvested Stock Awards Granted in the Covered Year* | $ | 2,005,415 | | | $ | 3,334,886 | | | $ | 4,223,768 | |
| Change in Fair Value of Unvested Stock Awards Granted in Prior Years* | $ | (2,953,760) | | | $ | (2,298,431) | | | $ | (1,632,905) | |
| Change in Fair Value of Stock Awards From Prior Years that Vested in the Covered Year* | $ | (2,396,302) | | | $ | (462,289) | | | $ | (497,604) | |
| = | Compensation Actually Paid | $ | (2,648,100) | | | $ | 1,811,242 | | | $ | 2,824,846 | |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| Average of Other NEOs |
| | 2020 | | 2021 | | 2022 |
| Summary Compensation Table Total | $ | 2,727,907 | | | $ | 3,628,443 | | | $ | 2,673,432 | |
| Less: | Grant Date Fair Value of Stock Awards | $ | (2,320,434) | | | $ | (2,872,977) | | | $ | (1,335,528) | |
| Plus: | Fair Value at Year-End of Unvested Stock Awards Granted in the Covered Year* | $ | 2,174,301 | | | $ | 1,660,435 | | | $ | 956,604 | |
| Change in Fair Value of Unvested Stock Awards Granted in Prior Years* | $ | (485,114) | | | $ | (1,177,223) | | | $ | (417,568) | |
| Change in Fair Value of Stock Awards From Prior Years that Vested in the Covered Year* | $ | (907,039) | | | $ | (241,123) | | | $ | (206,936) | |
| Less: | Fair Value of Stock Awards Forfeited During the Covered Year | $ | (1,030,580) | | | $ | — | | | $ | (1,782,979) | |
| = | Compensation Actually Paid | $ | 159,042 | | | $ | 997,555 | | | $ | (112,975) | |
| | | | | | |
*All Market Stock Unit (MSU) valuations included in "Compensation Actually Paid" values were performed using the Monte Carlo probability model in a manner consistent with the process used to determine MSU grant date fair values under ASC718 (refer to our 2022 Annual Report for additional detail). (2) For 2022, includes Stefan Schulz, CFO, and Leslie Rechan, former COO. For 2021, this includes Stefan Schulz, Leslie Rechan, and Roberto Reiner, former Chief Technology Officer. For 2020, includes Stefan Schulz, Leslie Rechan, Roberto Reiner, and Thomas Dziersk, former EVP, Worldwide Sales.
PROS | 2023 Proxy Statement | Page 37
(3) For purposes of this table, the Peer Group used is the Russell 2000 Index.
| | | | | | | | |
| The following measures in our assessment represent the most important financial performance measures that link compensation actually paid to our NEOs for 2022 to our performance: | |
| | |
| ü | Annual Recurring Revenue - Contractual recurring revenue, as of a specific date, including contracts with a future start date, together with annualized overage fees incurred above contracted minimum transactions, and excluding perpetual and term license agreements. | |
| | |
| ü | Free Cash Flow - Net cash provided by (used in) operating activities, excluding severance payments, minus capital expenditures (excluding expenditures for the Company's new headquarters), purchases of other (non-acquisition-related) intangible assets and capitalized internal-use software development costs. | |
| | |
| ü | Our Stock Price | |
The relationship between Compensation Actually Paid (CAP) and the financial performance elements
reflected in the above Pay versus Performance table are described in the below charts:
PROS | 2023 Proxy Statement | Page 38
PROS | 2023 Proxy Statement | Page 39
Equity Compensation Plan Information
The following table sets forth information as of December 31, 20212022 with respect to compensation plans under which our equity securities are authorized for issuance. For additional information on our equity compensation plans, see Note 14 of the Notes to the Consolidated Financial Statements in our 20212 Annual ReportAnnual Report. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| I | | | III | | |
| Plan Category | Number of
securities to be
issued upon
exercise of
outstanding options and rights (2) | | | Number of
securities
remaining available for future issuance
under plans
(excluding securities listed in Column (I)) (3) | | |
All compensation plans previously approved by security holders (1) | 2,344,107 | | | | 4,455,309 | | | |
All compensation plans not previously approved by security holders (4) | 332,004 | | | | 0 | | |
| Total | 2,676,111 | | | | 4,455,309 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| I | | | III | | |
| Plan Category | Number of
securities to be
issued upon
exercise of
outstanding options and rights (2) | | | Number of
securities
remaining available for future issuance
under plans
(excluding securities listed in Column (I)) (3) | | |
All compensation plans previously approved by security holders (1) | 2,420,205 | | | | 3,370,265 | | | |
All compensation plans not previously approved by security holders (4) | 245,816 | | | | 0 | | |
| Total | 2,666,021 | | | | 3,370,265 | | | |
(1) Includes awards from the 2017 Plan.
(2) Includes 1,812,6431,988,833 RSUs, 125,541and 215,686 MSUs (at maximum attainment of 200%),and 140,191 PRSUs (at 200%).
(3) Includes unissued award pools from the 2017 Plan and the 2013 Employee Stock Purchase Plan.
(4) Represents inducement RSU awards to employees of EveryMundo LLC in connection with our acquisition in November 2021 of EveryMundo.
PROS | 20222023 Proxy Statement | Page 4440
PROPOSAL TWO
NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION
What am I voting on?
As required pursuant to Section 14A of the Exchange Act, we are providing our stockholders with the opportunity to vote to approve, on an advisory or non-binding basis, the compensation of our NEOs as disclosed in this Proxy Statement in accordance with SEC rules. We currently conduct this advisory vote on an annual basis and expect to conduct the next advisory vote at our Annual Meeting to be held in 2023.2024.
As described in the Executive Compensation Programand Compensation Discussion and Analysis sections of this Proxy Statement, our executive compensation program is designed to attract, retain and motivate talented individuals with the executive experience and leadership skills necessary for us to manage our business and meet our long-term objectives. We seek to provide executive compensation that is competitive with companies that are similar to us. We also seek to provide near-term and long-term financial incentives that reward well-performing executives when strategic corporate objectives designed to increase long-term stockholder value are achieved. We believe that executive compensation should include base salary, cash incentives and equity awards. We also believe that our executive officers’ base salaries should be set at levels relative to comparable companies, and cash and equity incentives should generally be set at levels that give executives the opportunity to achieve above-average total compensation reflecting above-average Company performance. In particular, our executive compensation philosophy is to promote long-term value creation for our stockholders by rewarding improvement in selected financial metrics and by using equity incentives. Please see our Compensation Discussion and Analysis and related compensation tables for detailed information about our executive compensation programs, including information about the fiscal year 20212022 compensation of our NEOs.
For the reasons discussed above, the Board unanimously recommends that stockholders vote in favor of the following resolution:
Resolved, that the stockholders approve, on an advisory basis, the compensation paid to the Company's NEOs, as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
This vote is advisory and therefore not binding. However, the CLD Committee values the opinions of our stockholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, we will consider those stockholders’ concerns, and the CLD Committee will evaluate whether any actions are necessary to address those concerns.
Note that because the advisory vote on executive compensation occurs well after the beginning of the compensation year, in most cases it may not be feasible to change any executive compensation program in consideration of any one year’s advisory vote on executive compensation.
Vote Required
The affirmative vote of a majority of the outstanding shares of our Common Stock entitled to vote and present in person or represented by proxy at the Annual Meeting is required for advisory approval of this proposal. A properly executed proxy marked “ABSTAIN” with respect to this matter is considered entitled to vote, and thus will have the effect of a vote against this matter.
In accordance with Delaware law, abstentions will be counted for purposes of determining both whether a quorum is present at the Annual Meeting and the total number of shares represented and voting on this proposal. While broker non-votes will be counted for purposes of determining the presence or absence of a quorum, broker non-votes will not be counted for purposes of determining the number of shares represented and voting with respect to the particular proposal on which the broker has expressly not voted and, accordingly, will not affect the approval of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE
APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
AS DISCLOSED IN THIS PROXY STATEMENT.
PROS | 2023 Proxy Statement | Page 41
PROPOSAL THREE
APPROVAL OF AMENDMENTS TO THE AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN TO, AMONG OTHER ITEMS, INCREASE PLAN SHARES AUTHORIZED FOR ISSUANCE
What am I voting on?
We are seeking stockholder approval of the following amendments to our Amended and Restated 2017 Equity Incentive Plan (2017 Plan):
Increased Shares Authorized for Issuance. An increase of 2,900,000 shares, for an aggregate maximum number of shares of Common Stock of the Company (the Shares) reserved for issuance of new grants under the 2017 Plan of 4,208,854 Shares as of March 1, 2023, assuming the amendments are approved at the Annual Meeting. Our continuing ability to offer equity incentive awards under the 2017 Plan is critical to our ability to attract, motivate and retain qualified personnel, particularly as we grow and in light of the highly competitive market for employee talent in which we operate.
Extension of Plan Term. An extension of the term of the 2017 Plan for an additional two years (currently scheduled to expire in May 2031) to May 11, 2033.
The Board has determined that it is in the best interests of the Company and its stockholders to approve this proposal. The Board has approved the amendments to the 2017 Plan to increase the available shares thereunder and extend the term of the 2017 Plan, subject to stockholder approval, and recommends that stockholders vote in favor of this proposal at the Annual Meeting. Stockholder approval of this proposal requires the affirmative vote of a majority of the outstanding Shares that are present in person or by proxy and entitled to vote on the proposal at the Annual Meeting.
If stockholders approve this proposal, the amendments to the 2017 Plan will become effective as of the date of stockholder approval. If stockholders do not approve this proposal, the amendments to the 2017 Plan described in this proposal will not take effect and our 2017 Plan will continue to be administered in its current form. Our executive officers and directors have an interest in this proposal by virtue of their being eligible to receive equity awards under the 2017 Plan. The remainder of this discussion, when referring to the 2017 Plan, refers to the 2017 Plan as if this proposal is approved by our stockholders, unless otherwise specified or the context otherwise references the 2017 Plan prior to the amendments.
Increasing the Number of Shares Authorized for Issuance under the 2017 Plan
Background
The 2017 Plan was initially adopted by the Board in March 2017, and our stockholders approved it in May 2017. As described in more detail below, the initial share reserve under the 2017 Plan was 2,500,000 Shares. At the 2019 Annual Meeting, our stockholders, upon recommendation of the Board, approved amendments to the 2017 Plan and a share increase to reserve an additional 2,050,000 Shares. At the 2021 Annual Meeting, our stockholders, upon recommendation of the Board, approved amendments to the 2017 Plan and a share increase to reserve an additional 3,100,000 Shares. As discussed in our 2021 proxy, when we sought stockholder approval of the amendments to the 2017 Plan at the 2021 Annual Meeting, we believed that the Shares reserved for issuance under it following stockholder approval (along with Shares becoming available for future grant due to forfeitures and cancellations) would be sufficient to enable us to continue to grant equity awards under the 2017 Plan for approximately two to three years. This estimate was based on a forecast that took into account our anticipated rate of growth in hiring, an estimated range of our stock price over time and our historical forfeiture rates.
Shares Available for Future Awards
As of March 1, 2023, 1,308,854 Shares remained available for grant under the 2017 Plan. The Board believes that additional Shares are necessary to meet the Company’s anticipated equity compensation needs. The proposed Share increase is expected to last approximately two years. This estimate is based on our stock price at the time the share request number was determined and recent years' equity award practices.
If the amendments are approved, the total number of Shares that will be available for future awards under the 2017 Plan will be equal to 2,900,000, plus the 1,308,854 shares that remained available for grants as of March 1, 2023, less shares subject to awards made after March 1, 2023, and subject to adjustment as provided in the 2017 Plan and as described below.
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Reasons for Voting for the Proposal
Long-Term Equity Is a Key Component of Our Compensation Objective
As discussed in the Compensation Discussion and Analysis section, our overall compensation objective is to compensate our personnel in a manner that attracts and retains the highly talented employees necessary to manage and staff a high-growth business in an innovative and competitive industry. Our employees are our most valuable asset, and we strive to provide them with compensation packages that are competitive, that reward personal and company performance and that help meet our retention needs. Equity awards, whose value depends on our stock performance and which require continued service over time before any value can be realized, help achieve these objectives and are a key element of our compensation program. Equity awards also incentivize our employees to manage our business as owners, aligning their interests with those of our stockholders. We believe we must continue to use equity compensation on a broad basis to help attract, retain and motivate employees to continue to grow our business, develop new products and ultimately increase stockholder value. As of March 1, 2023, 720 of our employees and 7 non-employee directors held outstanding equity awards.
We Manage Our Equity Incentive Program Thoughtfully
We manage our long-term stockholder dilution by limiting the number of equity awards granted annually and limiting what we grant to what we believe is an appropriate amount of equity necessary to attract, reward and retain employees. Our three-year average burn rate, which we define as the number of RSUs granted and performance-based awards vested in a fiscal year divided by the weighted average Shares outstanding for that fiscal year, was 3.1% for fiscal years 2020 through 2022 (see table below for detailed calculation of our three-year average burn rate).
Equity Awards Outstanding
As of March 1, 2023, there were 3,004,121 RSUs and 358,072 Market Stock Units (MSUs) (at target) outstanding under the 2017 Plan, and 243,155 inducement RSUs awarded to employees of EveryMundo in connection with our November 2021 acquisition (2021 Inducement Plan) outstanding.
As of March 1, 2023, we had 46,029,253 common shares outstanding. Accordingly, our 3,605,348 outstanding awards (not including awards under our ESPP) plus 1,308,854 Shares available for future grant under our 2017 Plan (not including under our ESPP) as of March 1, 2023 represented 9.6% of our fully-diluted shares outstanding (commonly referred to as the “overhang”). No stock options or SARs were outstanding as of March 1, 2023. The 2017 Plan is our only equity-based plan for making incentive award grants. There are no shares available for future grant under our 2021 Inducement Plan.
| | | | | | | | |
| | As of March 1, 2023 |
| RSUs outstanding | 3,247,276 | |
| Performance-based equity awards outstanding, at target (1) | 358,072 | |
| Total shares available for grant under the 2017 Plan | 1,308,854 | |
| Total | 4,914,202 | |
| Common Shares Outstanding | 46,029,253 | |
| Total potential dilution (2) | 9.6 | % |
| | |
| (1) | Consists of MSUs, assuming target performance. |
| (2) | Calculated by dividing "Total" (the sum of outstanding RSUs, performance-based equity awards (at target) and shares available for grant under the 2017 Plan) by the sum of Total and Common Shares Outstanding. |
The 2017 Plan Incorporates Good Compensation and Governance Practices.
Fixed plan term. The 2017 Plan has a fixed term of ten years.
No evergreen authorization. The 2017 Plan does not have an evergreen provision, which would have permitted an annual increase in the number of shares authorized for issuance without further stockholder approval.
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No liberal share recycling on options and stock appreciation rights. The 2017 Plan generally provides for gross share counting. The number of shares remaining available for grant under the 2017 Plan is reduced by the gross number of shares subject to options and stock appreciation rights settled on a net basis, and any shares withheld for taxes in connection with the exercise or settlement of options and stock appreciation rights will not again be available for the future grant of awards. Shares withheld or reacquired by the Company for taxes up to the minimum statutory withholding rate in connection with the vesting or settlement of full value awards will not reduce the number of shares remaining available for the future grant of awards.
Individual award limits. The 2017 Plan limits the maximum number of shares for which share-denominated awards may be granted to any employee in any fiscal year and the maximum dollar amount that an employee may earn for each fiscal year contained in a performance period under a cash-denominated award.
Non-employee director award limit. The number of shares for which awards may be granted to any non-employee member of our Board plus the total amount of cash paid to such director in a fiscal year is limited.
No discounted options or stock appreciation rights. Options and stock appreciation rights must have an exercise price or base price at or above the fair market value per share of our common stock on the date of grant.
Prohibition of option repricing. The 2017 Plan prohibits the repricing of stock options and stock appreciation rights without the approval of our stockholders.
Minimum vesting. The 2017 Plan requires each stock-based award to have a minimum vesting period of one year, except for 5% of the aggregate number of shares authorized for issuance under the 2017 Plan.
Performance-based awards. Performance share and performance unit awards require the achievement of pre-established goals. The 2017 Plan establishes a list of measures of business and financial performance from which the CLD Committee may construct predetermined performance goals that must be met for an award to vest, although the CLD Committee may choose to construct performance goals using alternative metrics.
No liberal change-in-control definition. The 2017 Plan does not contain a “liberal” change in control definition (e.g., mergers require actual consummation).
No automatic vesting upon a change in control. With the exception of awards held by non-employee directors, the 2017 Plan does not provide for automatic acceleration of awards vesting upon a change in control. The 2017 Plan allows for an acquiring corporation to assume, continue or substitute new awards for outstanding awards, and, if such awards are assumed, continued or replaced, their vesting will generally not accelerate in connection with the change in control, unless the award holder is involuntarily terminated without cause within 18 months following the change in control. The vesting of awards that are not assumed, continued or replaced will be accelerated. The vesting of awards held by non-employee directors will accelerate in full upon a change in control.
No tax gross-ups. The 2017 Plan does not provide for any tax gross-ups.
Limitation on dividends and dividend equivalents. Dividend equivalents may not be granted in connection with options or stock appreciation rights. Any dividends or dividend equivalents payable in connection with a full value award will be subject to the same restrictions as the underlying award and will not be paid until and unless such award vests.
Clawback provision. The 2017 Plan has a clawback provision that applies to all awards, including cash, time- and performance-based awards, as described in more detail in our Compensation Discussion and Analysis.
Summary of the 2017 Plan
The following is a summary of the operation and principal features of the 2017 Plan. The summary is qualified in its entirety by reference to the complete text of the 2017 Plan, as amended, as set forth in Appendix A.
Purpose
Competition for talent in the software industry is intense and our Board believes equity plays an important role in the success of the Company by encouraging and enabling the employees, officers, non-employee directors and other key persons of the Company and its subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. Our Board anticipates that providing such persons with a direct stake in the Company will assure a closer identification of the interests of such individuals with those of the Company and its stockholders, thereby stimulating their efforts on the Company's behalf and strengthening their desire to remain with the Company. Further, our Board believes that the use of equity-based incentive awards supports the Company's goal of aligning our employees' compensation with long-term stockholder value, and serves as a retention tool for talent in a highly competitive environment.
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In approving the initial adoption of the 2017 Plan, our stockholders authorized us to issue up to 2,500,000 Shares under the 2017 Plan. At the 2019 Annual Meeting, our stockholders authorized us to issue an additional 2,050,000 Shares under the 2017 Plan. At the 2021 Annual Meeting, our stockholders authorized us to issue an additional 3,100,000 Shares under the 2017 Plan. As of March 1, 2023, a total of 1,308,854 shares remained available for the future grant of awards under the 2017 Plan. As described above, if the amendments are approved, the total number of shares that will be available for future awards under the 2017 Plan will be equal to 2,900,000, plus the 1,308,854 shares that remained available for grants as of March 1, 2023, less shares subject to awards made after March 1, 2023, subject to certain equitable adjustments as provided in the 2017 Plan and as described below. If the amendments are approved, the total historical approved shares available for grant under the 2017 Plan will be equal to 10,550,000 in the aggregate.
Dilution, Burn Rate and Equity Overhang
We recognize that equity awards dilute existing stockholders. Our CLD Committee regularly reviews our equity compensation program to ensure that we balance our employee compensation objectives with our stockholders’ interest in limiting dilution from equity awards.
Our CLD Committee also regularly reviews our burn rate and potential dilution from equity compensation. Our equity award burn rate averaged 3.1% of weighted average common shares outstanding over the last three fiscal years, calculated as follows:
Detailed Three-Year Average Burn Rate Calculation
| | | | | | | | | | | | | | | | | | | | |
| | 2020 | 2021 | 2022 | 3-Year Average | |
| RSUs granted | 976,000 | | 1,308,000 | | 1,415,693 | | 1,233,231 | | |
| Performance-based awards vested | 300,000 | | 111,000 | | 74,791 | | 161,930 | | |
| Total | 1,276,000 | | 1,419,000 | | 1,490,484 | | 1,395,161 | | |
| Weighted Average # of Shares Outstanding | 43,301,000 | | 44,348,000 | | 45,269,000 | | 44,306,000 | | |
| Gross Burn Rate (1) | 2.9% | 3.2% | 3.3% | 3.1% | |
(1) Calculated by dividing the Total (sum of RSUs granted and performance-based awards vested in each year) by the weighted average Shares outstanding.
Share Counting
Each share made subject to an award will reduce the number of shares remaining available for grant under the 2017 Plan by one share. If any award granted under the 2017 Plan expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by the Company for not more than the participant’s purchase price, any such shares reacquired or subject to a terminated award will again become available for issuance under the 2017 Plan. Shares will not be treated as having been issued under the 2017 Plan and will therefore not reduce the number of shares available for issuance to the extent an award is settled in cash. Shares that are withheld or that are tendered in payment of the exercise price of an option will not be made available for new awards under the 2017 Plan. However, shares withheld or reacquired by the Company in satisfaction of a tax withholding obligation determined by the minimum statutory withholding rate in connection with the vesting or settlement of any full value award (but not options or stock appreciation rights) will not reduce the number of shares remaining available for the future grant of awards. Shares withheld for taxes in excess of the minimum statutory withholding rate will not again be available for grant under the 2017 Plan. Upon the exercise of a stock appreciation right or net exercise of an option, the number of shares available under the 2017 Plan will be reduced by the gross number of shares for which the award is exercised.
Adjustments for Capital Structure Changes
Appropriate and proportionate adjustments will be made to the number of shares authorized under the 2017 Plan, to the numerical limits on certain types of awards described below, and to outstanding awards in the event of any change in our common stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution to our stockholders in a form other than common stock (excluding regular, periodic cash dividends) that has a material effect on the fair market value of our common stock. In such circumstances, the CLD Committee also has the discretion under the 2017 Plan to adjust other terms of outstanding awards as it deems appropriate.
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Non-employee Director Award Limits
A non-employee director may not be granted awards under the 2017 Plan in any calendar year having an aggregate grant date fair value exceeding, including the total cash compensation paid to such director for services rendered for such calendar year, $600,000.
Other Award Limits
The 2017 Plan establishes limits on the maximum aggregate number of shares or dollar value for which awards may be granted to an employee in any fiscal year, as follows:
•No more than 1,250,000 Shares under stock-based awards.
•No more than $2,000,000 in each full fiscal year contained in the performance period under cash-based awards.
In addition, to comply with applicable tax rules, the 2017 Plan also limits to 10,550,000 the number of shares that may be issued upon the exercise of incentive stock options granted under the 2017 Plan.
Administration
The 2017 Plan generally will be administered by the CLD Committee of the Board, although the Board retains the right to appoint another of its committees to administer the 2017 Plan or to administer the 2017 Plan directly. For purposes of this summary, the term “Committee” will refer to either such duly appointed committee or the Board. Subject to the provisions of the 2017 Plan, the Committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of awards, and all of their terms and conditions. The Committee may, subject to certain limitations on the exercise of its discretion provided by the 2017 Plan, amend, cancel or renew any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award.
The 2017 Plan provides, subject to certain limitations, for indemnification by the Company of any director, officer or employee against all reasonable expenses, including attorneys’ fees, incurred in connection with any legal action arising from such person’s action or failure to act in administering the 2017 Plan. All awards granted under the 2017 Plan will be evidenced by a written or digitally signed agreement between the Company and the participant specifying the terms and conditions of the award, consistent with the requirements of the 2017 Plan. The Committee will interpret the 2017 Plan and awards granted thereunder, and all determinations of the Committee generally will be final and binding on all persons having an interest in the 2017 Plan or any award.
Prohibition of Option and SAR Repricing
The 2017 Plan expressly provides that, without the approval of a majority of the votes cast in person or by proxy at a meeting of our stockholders, the Committee may not provide for any of the following with respect to options or stock appreciation rights: (1) the cancellation of outstanding options or stock appreciation rights with exercise prices per share greater than the then fair market value of the Company’s common stock in exchange for new options or stock appreciation rights having a lower exercise price, other awards or payments in cash (except in the event of a change in control), or (2) the amendment of outstanding options or stock appreciation rights to reduce the exercise price.
Minimum Vesting
No more than 5% of the aggregate number of shares authorized under the 2017 Plan may be issued pursuant to stock-based awards that vest earlier than one year following the date of grant. This minimum vesting requirement will not prohibit the Committee from accelerating vesting, including in connection with a participant’s death or disability or in connection with a change in control of the Company. Also, the minimum vesting requirement will not apply to awards granted by another company that we assume or substitute for in connection with our acquisition of such company, shares of stock delivered in lieu of fully vested cash-based awards, or to awards granted to our non-employee directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of the stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting.
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Eligibility
Awards may be granted to employees, directors and consultants of the Company or any present or future parent or subsidiary corporation or other affiliated entity of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the Company or any parent or subsidiary corporation of the Company. As of March 1, 2023, we had approximately 1,365 employees and 7 non-employee directors who would be eligible under the 2017 Plan. While the 2017 Plan permits awards to non-employee consultants to the Company, to date we have issued zero awards under the 2017 Plan to consultants.
Stock Options
The Committee may grant nonstatutory stock options, incentive stock options within the meaning of Section 422 of the Code, or any combination of these. The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (10% Stockholder) must have an exercise price equal to at least 110% of the fair market value of a share of common stock on the date of grant.
The 2017 Plan provides that the option exercise price may be paid in cash, by check, or cash equivalent; by means of a broker-assisted cashless exercise; by means of a net-exercise procedure; to the extent legally permitted, by tender to the Company of shares of common stock owned by the participant having a fair market value not less than the exercise price; by such other lawful consideration as approved by the Committee; or by any combination of these. Nevertheless, the Committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the participant has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the participant’s surrender of a portion of the option shares to the Company.
Options will become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee, subject to the minimum vesting requirements described above. The maximum term of any option granted under the 2017 Plan is ten years, provided that an incentive stock option granted to a 10% stockholder must have a term not exceeding five years. Unless otherwise permitted by the Committee, an option generally will remain exercisable for three months following the participant’s termination of service, provided that if service terminates as a result of the participant’s death or disability, the option generally will remain exercisable for 12 months, but in any event the option must be exercised no later than its expiration date.
Options are nontransferable by the participant other than by will or by the laws of descent and distribution, and are exercisable during the participant’s lifetime only by the participant. However, an option may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee and, in the case of an incentive stock option, only to the extent that the transfer will not terminate its tax qualification. No option may be transferred to a third party financial institution for value.
Stock Appreciation Rights
The Committee may grant stock appreciation rights either in tandem with a related option (Tandem SAR) or independently of any option (Freestanding SAR). A Tandem SAR requires the option holder to elect between the exercise of the underlying option for shares of common stock or the surrender of the option and the exercise of the related stock appreciation right. A Tandem SAR is exercisable only at the time and only to the extent that the related stock option is exercisable, while a Freestanding SAR is exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee. The exercise price of each stock appreciation right may not be less than the fair market value of a share of our common stock on the date of grant.
Upon the exercise of any stock appreciation right, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for such shares. Payment of this amount upon the exercise of a Tandem SAR may be made only in shares of common stock whose fair market value on the exercise date equals the payment amount. At the Committee’s discretion, payment of this amount upon the exercise of a Freestanding SAR may be made in cash or shares of common stock. The maximum term of any stock appreciation right granted under the 2017 Plan is ten years.
Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant’s lifetime only by the participant. If permitted by the Committee, a Tandem SAR related to a nonstatutory stock option and a Freestanding SAR may be assigned or transferred to certain family members or trusts for their benefit to the extent permitted by the Committee. Other terms of stock appreciation rights are generally similar to the terms of comparable stock options.
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Restricted Stock Awards
The Committee may grant restricted stock awards under the 2017 Plan either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase common stock, or in the form of a restricted stock bonus, in which stock is issued in consideration for services to the Company rendered by the participant. The Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our common stock. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Committee specifies, including the attainment of one or more performance goals similar to those described below in connection with performance awards. Shares acquired pursuant to a restricted stock award may not be transferred by the participant until vested. Unless otherwise provided by the Committee, a participant will forfeit any shares of restricted stock as to which the vesting restrictions have not lapsed prior to the participant’s termination of service. Participants holding restricted stock will have the right to vote the shares and to receive any dividends or other distributions paid in cash or shares, subject to the same vesting conditions as the original award.
Restricted Stock Units
The Committee may grant restricted stock units under the 2017 Plan, which represent rights to receive shares of our common stock at a future date determined in accordance with the participant’s award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant’s services to the Company. The Committee may grant restricted stock unit awards subject to the attainment of one or more performance goals similar to those described below in connection with performance awards, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. Restricted stock units may not be transferred by the participant. Unless otherwise provided by the Committee, a participant will forfeit any restricted stock units which have not vested prior to the participant’s termination of service. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such awards. However, the Committee may grant restricted stock units that entitle their holders to dividend equivalent rights, which are rights to receive cash or additional restricted stock units whose value is equal to any cash dividends the Company pays. Dividend equivalent rights will be subject to the same vesting conditions and settlement terms as the original award.
Performance Awards
The Committee may grant performance awards subject to such conditions and the attainment of such performance goals over such periods as the Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units, which consist of unfunded bookkeeping entries generally having initial values equal to the fair market value determined on the grant date of a share of common stock in the case of performance shares and a monetary value established by the Committee at the time of grant in the case of performance units. Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of common stock (including shares of restricted stock that are subject to additional vesting) or any combination of these.
Performance goals may be based on the attainment of specified target levels with respect to one or more measures of business, or financial (or other measure or metric, determined in the subjective discretion of the Committee) performance of the Company and each subsidiary corporation consolidated with the Company for financial reporting purposes, or such division or business unit of the Company as may be selected by the Committee. The Committee, in its discretion, may base performance goals on one or more of the following such measures (or any other metric or goal the Committee may determine, including subjective performance criteria): bookings, revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; adjusted pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; balance of cash, cash equivalents and marketable securities; stock price; earnings per share; return on stockholder equity; return on capital; return on assets; return on investment; total stockholder return, employee satisfaction; employee retention; market share; customer satisfaction; product development; research and development expense; completion of an identified special project and completion of a joint venture or other corporate transaction.
The target levels with respect to these performance measures may be expressed on an absolute basis or relative to an index, budget or other standard specified by the Committee. The degree of attainment of performance measures will be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, if applicable, or other methodology established by the Committee, but prior to the accrual or payment of any performance award for the same performance period, and, according to criteria established by the Committee, excluding the effect (whether positive or negative) of any event the Committee determines is appropriate to exclude, including changes in accounting standards or any unusual or infrequently occurring event or transaction.
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Following completion of the applicable performance period, the Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Committee retains the discretion to increase or reduce the amount that would otherwise be payable on the basis of the performance goals attained. The Committee may make positive or negative adjustments to performance award payments to reflect the participant’s individual job performance or other factors determined by the Committee. In its discretion, the Committee may provide for a participant awarded performance shares to receive dividend equivalent rights with respect to cash dividends paid on the Company’s common stock to the extent that the performance shares become vested. The Committee may provide for performance award payments in lump sums or installments.
Unless otherwise provided by the Committee, if a participant’s service terminates due to the participant’s death or disability prior to completion of the applicable performance period, the final award value will be determined at the end of the performance period on the basis of the performance goals attained during the entire performance period but will be prorated for the number of days of the participant’s service during the performance period. The Committee may provide similar treatment for a participant whose service is involuntarily terminated. If a participant’s service terminates prior to completion of the applicable performance period for any other reason, the 2017 Plan provides that the performance award will be forfeited, unless otherwise determined by the Committee. No performance award may be sold or transferred other than by will or the laws of descent and distribution prior to the end of the applicable performance period.
Cash-Based Awards and Other Stock-Based Awards
The Committee may grant cash-based awards or other stock-based awards in such amounts and subject to such terms and conditions as the Committee determines. Cash-based awards will specify a monetary payment or range of payments, while other stock-based awards will specify a number of shares or units based on shares or other equity-related awards. Such awards may be subject to vesting conditions based on continued performance of service or subject to the attainment of one or more performance goals similar to those described above in connection with performance awards. Settlement of awards may be in cash or shares of common stock, as determined by the Committee. A participant will have no voting rights with respect to any such award unless and until shares are issued pursuant to the award. The Committee may grant dividend equivalent rights with respect to other stock-based awards that will be subject to the same vesting conditions and settlement terms as the original award. The effect on such awards of the participant’s termination of service will be determined by the Committee and set forth in the participant’s award agreement.
Change in Control
The 2017 Plan provides that a “Change in Control” occurs upon (a) a person or entity (with certain exceptions described in the 2017 Plan) becoming the direct or indirect beneficial owner of more than 50% of the Company’s voting stock; (b) stockholder approval of a liquidation or dissolution of the Company; or (c) the occurrence of any of the following events upon which the stockholders of the Company immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of the Company, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of the Company’s voting stock; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
If a Change in Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. If so determined by the Committee, stock-based awards will be deemed assumed if, for each share subject to the award prior to the Change in Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change in Control. The vesting of any awards that are not assumed, continued or replaced in connection with a Change in Control will be accelerated in full, and, if not exercised prior to the Change in Control, will terminate effective as of the time of the Change in Control. The vesting of any awards that are assumed, continue or replaced will be accelerated in full if, within 18 months following the Change in Control, the holder’s employment is terminated without cause or the holder resigns following reduction in base salary of 15% or more.
Subject to the restrictions of Section 409A of the Code, the Committee may provide for the acceleration of vesting or settlement of any or all outstanding awards upon such other terms and to such extent as it determines. The vesting of all awards held by non-employee directors will be accelerated in full upon a Change in Control.
The 2017 Plan also authorizes the Committee, in its discretion and without the consent of any participant, to cancel each or any award denominated in shares of stock upon a Change in Control in exchange for a payment to the participant with respect each vested share (and each unvested share if so determined by the Committee) subject to the canceled award of an amount equal to the excess of the consideration to be paid per share of common stock in the Change in Control transaction over the exercise or purchase price per share, if any, under the award.
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Awards Subject to Section 409A of the Code
Certain awards granted under the 2017 Plan may be deemed to constitute “deferred compensation” within the meaning of Section 409A of the Code, providing rules regarding the taxation of nonqualified deferred compensation plans, and the regulations and other administrative guidance issued pursuant to Section 409A. Any such awards will be required to comply with the requirements of Section 409A. Notwithstanding any provision of the 2017 Plan to the contrary, the Committee is authorized, in its sole discretion and without the consent of any participant, to amend the 2017 Plan or any award agreement as it deems necessary or advisable to comply with Section 409A.
Amendment, Suspension or Termination
The 2017 Plan will continue in effect until its termination by the Committee, provided that no awards may be granted under the 2017 Plan following the tenth anniversary of the 2017 Plan’s effective date, which is May 11, 2033. The Committee may amend, suspend or terminate the 2017 Plan at any time, provided that no amendment may be made without stockholder approval that would increase the maximum aggregate number of shares of stock authorized for issuance under the 2017 Plan, change the class of persons eligible to receive incentive stock options or require stockholder approval under any applicable law or the rules of any stock exchange on which the Company’s shares are then listed. No amendment, suspension or termination of the 2017 Plan may affect any outstanding award unless expressly provided by the Committee, and, in any event, may not have a materially adverse effect on an outstanding award without the consent of the participant unless necessary to comply with any applicable law, regulation or rule, including, but not limited to, Section 409A of the Code.
Tax Aspects Under the Code
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2017 Plan and does not attempt to describe all possible federal or other tax consequences of such participation or tax consequences based on particular circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Code. Participants who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon the sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If a participant satisfies such holding periods upon a sale of the shares, we will not be entitled to any deduction for federal income tax purposes. If a participant disposes of shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the option exercise date and the exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
In general, the difference between the option exercise price and the fair market value of the shares on the date of exercise of an incentive stock option is treated as an adjustment in computing the participant’s alternative minimum taxable income and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to participants subject to the alternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options are nonstatutory stock options having no special tax status. A participant generally recognizes no taxable income upon receipt of such an option. Upon exercising a nonstatutory stock option, the participant normally recognizes ordinary income equal to the difference between the exercise price paid and the fair market value of the shares on the date when the option is exercised. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the exercise date, will be taxed as capital gain or loss. We generally should be entitled to a tax deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of a nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the Code.
PROS | 2023 Proxy Statement | Page 50
Stock Appreciation Rights
A Participant recognizes no taxable income upon the receipt of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant generally will recognize ordinary income in an amount equal to the excess of the fair market value of the underlying shares of common stock on the exercise date over the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exercise of the stock appreciation right, except to the extent such deduction is limited by applicable provisions of the Code.
Restricted Stock
A participant acquiring restricted stock generally will recognize ordinary income equal to the excess of the fair market value of the shares on the “determination date” over the price paid, if any, for such shares. The “determination date” is the date on which the participant acquires the shares unless the shares are subject to a substantial risk of forfeiture and are not transferable, in which case the determination date is the earlier of (i) the date on which the shares become transferable or (ii) the date on which the shares are no longer subject to a substantial risk of forfeiture (e.g., when they become vested). If the determination date follows the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to designate the date of acquisition as the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date on which the shares are acquired. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date, will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.
Restricted Stock Unit, Performance, Cash-Based and Other Stock-Based Awards
A participant generally will recognize no income upon the receipt of a restricted stock unit, performance share, performance unit, cash-based or other stock-based award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any substantially vested shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of the shares on the determination date (as defined above under “Restricted Stock”), will be taxed as capital gain or loss. We generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.
Number of Awards Granted to Employees and Directors
The number of awards that an employee or director may receive under the 2017 Plan is in the discretion of the Committee and therefore cannot be determined in advance.
The following table sets forth, with respect to the individuals and groups named below: (i) the aggregate number of Shares subject to awards of restricted stock units granted under the 2017 Plan during the fiscal year ended December 31, 2022, and (ii) the dollar value of such units based on $26.41 per share, the closing price of a Share on the NYSE on March 1, 2023. No stock options, no restricted stock awards nor any SARs have been issued under the 2017 Plan.
| | | | | | | | |
| Identity of Individual or Group | Number of Shares Subject to Stock Awards (#) | Dollar Value of Shares subject to Stock Awards ($) |
| Andres D. Reiner | 256,608(1) | $ | 6,777,017 | |
| Stefan B. Schulz | 108,864(2) | $ | 2,875,098 | |
| All current executive officers as a group | 365,472 | | $ | 9,652,115 | |
| All current non-employee directors as a group | 47,663 | | $ | 1,258,780 | |
| All other employees (including all current officers who are not executive officers) as a group | 1,235,838 | | $ | 32,638,482 | |
(1) Includes 171,072 2022 MSUs at maximum attainment.
(2) Includes 62,208 2022 MSUs at maximum attainment.
PROS | 2023 Proxy Statement | Page 51
Vote Required
Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on this proposal. If you hold your shares in your own name and abstain from voting on this matter, your abstention will have the same effect as a negative vote. If you hold your shares through a broker and you do not instruct the broker on how to vote on this proposal, your broker will not have authority to vote your shares. Broker non-votes will have no effect on the outcome of this vote. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE APPROVAL
OF THE PROPOSED AMENDMENTS TO THE 2017 EQUITY INCENTIVE PLAN.
PROS | 2023 Proxy Statement | Page 52
SECURITY OWNERSHIP
The following tables set forth information regarding beneficial ownership of our Common Stock for each person known to own beneficially more than 5% of our outstanding Common Stock, each of our NEOs, each director and director nominee, and our NEOs, directors and director nomineenominees as a group, each as of the Record Date unless otherwise noted below. Applicable percentage of ownership is based on 45,179,18446,030,988 shares of our Common Stock outstanding as of the Record Date.
| | | | | | | | | | | | | | |
| Principal Shareholders and Address | | Common Stock and Nature of Beneficial Ownership | | Percentage |
Brown Capital Management, LLC, 1201 N. Calvert Street, Baltimore, MD 21202 | | 5,341,0304,761,545(1)
| | 11.8 10.3 | % |
Alger Associates, Inc., 360 Park Avenue South, New York, NY 10010 | | 3,992,606(2)
| | 8.8 | % |
The Vanguard Group,100 Vanguard Blvd., Malvern, PA 19355 | | 4,099,720(2) | | 8.9 | % |
| BlackRock, Inc., 55 East 52nd Street, New York, NY 10055 | | 3,843,9903,529,192(3)
| | 8.5 7.7 | % |
| Conestoga Capital Advisors, LLC, 550 E. Swedesford Rd. Suite 120, Wayne, PA 19087 | | 3,688,3903,336,943(4)
| | 8.2 7.3 | % |
BlackRock,Alger Associates, Inc., 55 East 52nd Street,360 Park Avenue South, New York, NY 1005510010 | | 3,269,8823,271,613(5)
| | 7.2 7.1 | % |
| Ronald and Mariette Woestemeyer, 3331 Damico St., Houston, TX 77019 | | 2,909,578(6) | | 6.3 | % |
| RGM Capital, LLC 9010 Strada Stell Court, Suite 105, Naples, FL 34109 | | 3,215,561(6)2,896,038(7)
| | 7.1 6.3 | % |
Ronald F. and Mariette M. Woestemeyer,3200 Kirby Drive, Ste 600, Houston, TX 77098
| | 2,909,578(7)
| | 6.4 | % |
(1)Based solely upon a Schedule 13G/A filed by Brown Capital Management, LLC (Brown) with the SEC on February 14, 20222023 reporting that Brown beneficially owned 5,341,0304,761,545 shares of our Common Stock as of December 31, 2021,2022, with sole voting power with respect to 3,352,4743,297,162 shares of our Common Stock and sole dispositive power with respect to 5,341,0304,761,545 shares of our Common Stock.
(2)Based solely upon a Schedule 13G/A filed by The Vanguard Group (Vanguard) with the SEC on February 9, 2023 reporting that Vanguard owned 4,099,720 shares of our Common Stock as of December 31, 2022, with shared voting power with respect to 53,855 shares of our Common Stock, sole dispositive power with respect to 4,003,811 shares of our Common Stock and shared dispositive power with respect to 95,909 shares of our Common Stock.
(3)Based solely upon a Schedule 13G/A filed by BlackRock, Inc. (BlackRock) with the SEC on January 30, 2023 reporting that BlackRock beneficially owned 3,529,192 shares of our Common Stock as of December 31, 2022, with sole voting power with respect to 3,375,420 shares of our Common Stock and sole dispositive power with respect to 3,529,192 shares of our Common Stock.
(4)Based solely upon a Schedule 13G/A filed by Conestoga Capital Advisors, LLC (Conestoga) with the SEC on January 18, 2023 reporting that Conestoga owned 3,336,943 shares of our Common Stock as of December 31, 2022, with sole voting power with respect to 3,188,795 shares of our Common Stock and sole dispositive power with respect to 3,336,943 shares of our Common Stock.
(5)Based solely upon a Schedule 13G/A filed by Alger Associates, Inc. (Alger) with the SEC on February 14, 20222023 reporting that Alger and associated funds owned 3,992,6063,271,613 shares of our Common Stock as of December 31, 2021,2022, with sole voting and dispositive power with respect to all such shares of our Common Stock.
(3)(6)Based solely upon a Schedule 13G/AAs filed by The Vanguard Group (Vanguard)Ronald and Mariette Woestemeyer with the SEC on February 10, 20221, 2023 reporting that Vanguard owned 3,843,990the Woestemeyers beneficially own, including through various trusts for the benefit of certain family members, 2,909,578 shares of our Common Stock as of December 31, 2021, with shared voting power with respect to 76,089 shares of our Common Stock, sole dispositive power with respect to 3,733,078 shares of our Common Stock and shared dispositive power with respect to 110,912 shares of our Common Stock.2022.
(4)(7)Based solely upon a Schedule 13G/A filed by Conestoga Capital Advisors, LLC (Conestoga) with the SEC on January 10, 2022 reporting that Conestoga owned 3,688,390 shares of our Common Stock as of December 31, 2021, with sole voting power with respect to 3,520,742 shares of our Common Stock and sole dispositive power with respect to 3,688,390 shares of our Common Stock.
(5)Based solely upon a Schedule 13G/A filed by BlackRock, Inc. (BlackRock) with the SEC on February 3, 2022 reporting that BlackRock beneficially owned 3,269,882 shares of our Common Stock as of December 31, 2021, with sole voting power with respect to 3,136,076 shares of our Common Stock and sole dispositive power with respect to 3,269,882 shares of our Common Stock.
(6)Based solely upon a Schedule 13G filed by RGM Capital, LLC (RGM) with the SEC on February 11, 202213, 2023 reporting that RGM owned 3,215,5612,896,038 shares of our Common Stock as of December 31, 2021,2022, with voting and dispositive power shared with Robert G. Moses with respect to all such shares of our Common Stock.
(7)Includes 2,903,530 shares held by various trusts for the benefit of certain family members and 4,388 shares from RSUs scheduled to vest on May 11, 2022. | | | | | | | | | | | | | | |
| Name of Beneficial Owner | | Common Stock Beneficially Owned(1) | | Percentage |
| Named Executive Officers | | | | |
| Andres D. Reiner | | 1,029,675 (2) | | 2.2 | % |
| Stefan Schulz | | 280,768 (3) | | * |
| Non-Employee Directors and Director Nominees | | | | |
| Carlos Dominguez | | 16,008(4) | | * |
| Raja Hammoud | | 14,625(4) | | * |
| Leland T. Jourdan | | 10,313(4) | | * |
| Catherine A. Lesjak | | 14,773(4) | | * |
| Greg B. Petersen | | 114,223(4) | | * |
| William Russell | | 146,939(4) | | * |
| Timothy V. Williams | | 122,795(4) | | * |
| All NEOs, directors and director nominees as a group | | 1,806,044 | | | 3.9 | % |
| | | | | | | | | | | | | | |
| Name of Beneficial Owner | | Common Stock Beneficially Owned(1) | | Percentage |
| Named Executive Officers | | | | |
| Andres D. Reiner | | 986,186 | | | 2.2 | % |
| Stefan B. Schulz | | 258,776 | | | * |
| Non-Employee Directors and Director Nominees | | | | |
| Carlos Dominguez | | 9,199(2) | | * |
| Raja Hammoud | | 7,816(2) | | * |
| Leland T. Jourdan | | 3,504(3) | | * |
| Catherine A. Lesjak | | 7,964(2) | | * |
| Greg B. Petersen | | 114,950(2) | | * |
| William Russell | | 142,410(2) | | * |
| Timothy V. Williams | | 118,180(2) | | * |
| Mariette M. Woestemeyer | | 2,909,578(2) | | 6.4 | % |
| All NEOs, directors and director nominees as a group | | 4,558,563 | | | 10.1 | % |
* Represents less than 1% of the outstanding shares of our Common Stock
(1)Beneficial ownership represents sole voting and investment power.
(2)Includes 4,3885,346 shares from RSUs which are scheduled to vest on May 11, 2022.April 10, 2023.
(3)Includes 3,5042,916 shares from RSUs which are scheduled to vest on April 10, 2023.
(4)Includes 6,809 shares from RSUs which are scheduled to vest on the earlier of the Annual Meeting or May 11, 2022.12, 2023.
PROS | 20222023 Proxy Statement | Page 4653
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires each of our directors and NEOs, among others, to file with the SEC an initial report of ownership and reports of changes in ownership of Common Stock of the Company. Such persons are required by SEC regulations to furnish us with copies of all such filings. Based on a review of the copies of such forms in our possession, and on written representations from reporting persons, we believe that during 2021,2022, all of our NEOs and directors filed the required reports on a timely basis under Section 16(a).
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Since January 1, 2021,2022, there has not been (nor is there currently proposed), any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, and the transactions described below:
Relationships with Directors and Management
Indemnification agreements. We have entered into indemnification agreements with each of our current directors and officers. These agreements require us, among other things, to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with our future directors and officers.
Employment arrangements. We have entered into employment agreements with each of our executive officers, which address, among other things, the terms of their employment, such as base salary, severance payments and payment on a change in control.
Family relationships. Mr. Roberto Reiner, who served as our Executive Vice President and Chief Technology Officer until October 1, 2021 is the brother of Andres Reiner, our President and CEO. Prior to his appointment as Executive Vice President, Mr. R. Reiner's compensation was regularly reviewed by the CLD Committee and all his equity awards were approved by the CLD Committee. When he became Executive Vice President, Mr. R. Reiner's compensation and amended and restated employment agreement were approved by the CLD Committee, and his compensation was approved by the CLD Committee thereafter. Mr R. Reiner retired from the Company effective March 1, 2022.
Procedures for Related Party Transactions
Under our Code of Business Conduct and Ethics, our employees and officers are discouraged from entering into any transaction that may cause a conflict of interest. In addition, they must report any potential conflict of interest, including related party transactions, to their managers or our compliance officer who then reviews and summarizes the proposed transaction for our Audit Committee. Pursuant to its charter, our Audit Committee must then approve any related party transactions, including those transactions involving our directors. In approving or rejecting such proposed transactions, the Audit Committee considers the relevant facts and circumstances available and deemed relevant to the Audit Committee, including the material terms of the transactions, risks, benefits, costs, availability of other comparable services or products and, if applicable, the impact on a director’s independence. Our Audit Committee will approve only those transactions that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our Audit Committee determines in the good faith exercise of its discretion.
PROS | 20222023 Proxy Statement | Page 4754
AUDIT COMMITTEE REPORT
The Audit Committee operates under a written charter adopted by the Board of Directors, a current copy of which is available under Corporate Governance in the "Investor Relations" section of our website at ir.pros.comir.pros.com. The Audit Committee reviews and assesses the adequacy of its charter at least annually and, when appropriate, recommends changes to the Board to reflect the evolving role of the Audit Committee. The Audit Committee is composed of non-employee directors who meet the independence and financial literacy requirements of the NYSE and additional, heightened independence criteria applicable to members of the Audit Committee under SEC and NYSE rules. The Audit Committee currently consists of Timothy V. Williams (Chairman)Catherine A. Lesjak (Chair), Carlos Dominguez, Catherine A. Lesjak and Greg B. Petersen.Petersen, and Timothy V. Williams. Our Board of Directors has determined that three of the members of the Audit Committee (Messrs. Williams(Ms. Lesjak and Messrs. Petersen and Ms. Lesjak)Williams) are an “Audit Committee financial expert” as is currently defined under SEC regulations and the rules of the NYSE and Mr. Dominguez is "financially literate" under the rules of the NYSE.
Primary Responsibilities
The Audit Committee oversees the Company’s accounting and financial reporting processes on behalf of the Board of Directors and assists the Board in fulfilling its oversight responsibility relating to the integrity of the Company’s financial statements and the financial reporting process, the systems of internal accounting and financial controls, and the annual independent audit of the Company’s financial statements. The Audit Committee also oversees the independent auditors’ qualifications and independence and the Company's internal auditors. The Company’s management has the primary responsibility for preparing the Company’s financial statements, for maintaining effective internal control over financial reporting, and for assessing the effectiveness of internal control over financial reporting. The Audit Committee has additional responsibilities related to risk management, including oversight of cybersecurity risk management and resilience, related party transactions, and compliance and ethics, among others.
Oversight of Independent Auditors
The Audit Committee engaged PricewaterhouseCoopers LLP (PwC) as our independent auditors for the year ended December 31, 2021.2022. In its meetings with our independent auditors, the Audit Committee asks them to address, and discusses their responses to, several questions that the Audit Committee believes are relevant to its oversight. The Audit Committee also discussed with the independent auditors those matters required to be discussed by the auditors with the Audit Committee under the rules adopted by the Public Company Accounting Oversight Board (PCAOB). The Audit Committee received the written disclosures and the letter from the independent auditors required by applicable requirements of the PCAOB regarding the independent auditors’ communication with the Audit Committee concerning independence and has discussed with the independent auditors their independence.
20212022 Audited Financial Statements
In its oversight role, the Audit Committee relies on the work and assurances of the Company’s management. In fulfilling its oversight responsibilities in 2021,2022, the Audit Committee reviewed and discussed with management the Company’s consolidated financial statements for the fiscal year ended December 31, 2021,2022, including a discussion of, among other things, the quality of the Company’s accounting principles, the reasonableness of significant estimates and judgments, and the clarity of disclosures in the Company’s financial statements.
The Audit Committee has (1) reviewed and discussed the audited financial statements with management, (2) discussed with PwC, our independent registered public accounting firm, the matters required to be discussed by the Statement on Auditing Standards No. 1301, “Communications with Audit Committees”, as adopted by the PCAOB, (3) received the written disclosures and the letter from the independent auditors required by applicable requirements of the PCAOB regarding the independent auditor's communications with the Audit Committee concerning independence, and has discussed with the independent auditors the independent auditor's independence, and (4) considered with the independent auditors whether the provision of non-audit services provided by them to the Company during 20212022 was compatible with their independence. Based upon these discussions and reviews, the Audit Committee recommended to our Board of Directors, and the Board has approved, that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 and filed with the SEC.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Timothy V. Williams, ChairmanCatherine A. Lesjak, Chair
Carlos Dominguez
Catherine Lesjak
Greg B. Petersen
Timothy V. Williams
PROS | 20222023 Proxy Statement | Page 4855
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FEES
The Audit Committee has adopted a policy for the pre-approval of services performed by our independent registered public accounting firm. Under this policy, each year the Audit Committee pre-approves the audit engagement terms and fees and may also pre-approve detailed types of audit-related and permitted tax services, subject to certain dollar limits, to be performed during the year. All other permitted non-audit services are required to be pre-approved by the Audit Committee on an engagement-by-engagement basis.
The following table summarizes the aggregate fees billed for professional services rendered to us by PwC in 20212022 and 2020.2021. A description of these various fees and services follows the table:
| | | 2021 | | 2020 | | 2022 | | 2021 |
| Audit fees | Audit fees | | $ | 2,088,472 | | | $ | 1,604,294 | | Audit fees | | $ | 1,733,161 | | | $ | 2,088,472 | |
| Audit-related fees | Audit-related fees | | $ | 300,000 | | | — | | Audit-related fees | | $ | — | | | $ | 300,000 | |
| Tax fees | Tax fees | | — | | | — | | Tax fees | | — | | | — | |
| All other fees | All other fees | | $ | 3,106 | | | $ | 2,893 | | All other fees | | $ | 3,091 | | | $ | 3,106 | |
| Total fees | Total fees | | $ | 2,391,578 | | | $ | 1,607,187 | | Total fees | | $ | 1,736,252 | | | $ | 2,391,578 | |
Fees Billed by PricewaterhouseCoopers, LLP
Audit fees. The aggregate fees billed to us by PwC in connection with the annual audit of our financial statements, reviews of our financial statements included in quarterly reports on Form 10-Q, consents related to documents filed with the SEC and comfort letters, were $2,088,472$1,733,161 and $1,604,294$2,088,472 for the years ended December 31, 2022 and 2021, and 2020, respectively.
Audit-related fees. Audit-related fees consist of fees for professional services that are reasonably related to the performance of the audit or review of the Company's financial statements. This category may include fees related to due diligence related to mergers and acquisitions, accounting and financial reporting consultations and research necessary to comply with generally accepted audit standards. There were $300,000zero and zero$300,000 audit-related fees billed for the years ended December 31, 2022 and 2021, and 2020, respectively.
Tax fees. The aggregate tax fees billed to us by PwC related to tax compliance, tax advice and tax planning were zero for the years ended December 31, 20212022 and 2020.2021.
All other fees. The other fees consist of subscription fees for an accounting and auditing research tools.
Audit Committee Approval of Services
The Audit Committee is authorized by its charter to pre-approve all auditing and permitted non-audit services to be performed by our independent registered public accounting firm. The Audit Committee reviews and approves the independent registered public accounting firm’s retention to perform attest services, including the associated fees. The Audit Committee also evaluates other known potential engagements of the independent registered public accounting firm, including the scope of the proposed work and the proposed fees, and approves or rejects each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent registered public accounting firm’s independence from management. At subsequent meetings, the Audit Committee receives updates on services actually provided by the independent registered public accounting firm, and management may present additional services for approval. The Audit Committee has delegated to the chairmanchair of the Audit Committee the authority to evaluate and approve engagements on behalf of the Audit Committee in the event that a need arises for pre-approval between Audit Committee meetings. If the ChairmanChair approves any such engagements, hethe Chair reports that approval to the full Audit Committee at its next meeting. During fiscal year 2021,2022, all such services were pre-approved in accordance with the procedures described above.
Our Audit Committee has reviewed the fees described above and believes that such fees are compatible with maintaining the independence of PwC.
PROS | 20222023 Proxy Statement | Page 4956
PROPOSAL THREEFOUR
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM APPOINTMENT
The Audit Committee has selected the independent registered public accounting firm of PwC to audit our consolidated financial statements for the fiscal year ending December 31, 2022.2023. We have determined to submit the selection of auditors to stockholder ratification, even though it is not required by our governing documents or Delaware law, as a matter of good corporate governance practice. If the selection of PwC as our independent auditors is not ratified by our stockholders, our Audit Committee will reconsider, but might not change, its selection. Notwithstanding the selection and ratification, the Audit Committee, in its discretion, may appoint a different independent registered public accounting firm at any time, if it believes doing so would be in the best interests of us and our stockholders.
PwC has audited our financial statements annually since 2002. Representatives of PwC are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
Vote Required
Approval of the ratification of the appointment of PwC as our independent registered public accounting firm requires the affirmative vote of the holders of at least a majority of the outstanding shares of our Common Stock entitled to vote and present or represented at the Annual Meeting. A properly executed proxy marked “ABSTAIN” with respect to this matter is considered entitled to vote and thus, will have the effect of a vote against this matter.
In accordance with Delaware law, abstentions will be counted for purposes of determining both whether a quorum is present at the Annual Meeting and the total number of shares represented and voting on this proposal. While broker non-votes will be counted for purposes of determining the presence or absence of a quorum, broker non-votes will not be counted for purposes of determining the number of shares represented and voting with respect to the particular proposal on which the broker has expressly not voted and, accordingly, will not affect the approval of this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE RATIFICATION
OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022.2023.
PROS | 20222023 Proxy Statement | Page 5057
PROPOSAL FIVE
NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF VOTING ON NAMED EXECUTIVE OFFICER COMPENSATION
As required by Section 14A of the Exchange Act, we are providing stockholders with the opportunity to vote, on an advisory or non-binding basis, on the frequency with which the Company's stockholders shall have the advisory, non-binding "say-on-pay" vote on compensation paid to our named executive officers provided for in Proposal Two, as set forth in the Proxy Statement.
Under this Proposal Five, stockholders may vote on a non-binding basis to have the say-on-pay vote every year, every two years, or every three years. In addition, stockholders may abstain from voting on this Proposal Five. Exchange Act Section 14A requires the Company to hold an advisory vote on the frequency of the say-on-pay vote at least once every six years. Our stockholders last voted on a similar proposal at our annual meeting of stockholders in 2017, with a majority of the votes cast voting to hold the say-on-pay vote every year. Since 2017, we have held the say-on-pay vote at every annual meeting, including the Annual Meeting.
The Board believes that an annual stockholder vote on the compensation paid to our named executive officers represents a best practice in corporate governance and will provide the Board with current information on stockholder sentiment about our executive compensation program and enable the Board to respond timely, when deemed appropriate, to stockholder concerns about the program.
Stockholders may cast a vote on the preferred frequency by selecting the option of one year, two years, or three years (or abstain) when voting in response to the resolution set forth below.
“RESOLVED, that the stockholders wish the Company to include an advisory vote on the compensation of PROS Holdings, Inc. named executive officers pursuant to Section 14A of the Security Exchange Act every:
–one year (annual);
–two years (biennial); or
–three years (triennial)."
Vote Required
The proxy card provides stockholders with the opportunity to choose among four options (1 year, 2 years, 3 years, or abstain) and, therefore, stockholders will not be voting to approve or disapprove the recommendation of the Board. Approval of this proposal requires approval by holders of a majority of the shares represented in person or by proxy and entitled to vote at the Annual Meeting. Because this proposal has three possible substantive responses (1 year, 2 years or 3 years), if none of the frequency alternatives receives the vote of the holders of a majority of the shares present, then we will consider stockholders to have approved the frequency selected by holders of a plurality of the shares present. Abstentions will be treated as votes against this proposal. If you are a street name stockholder and you do not provide your brokerage firm with voting instructions, your brokerage firm may not cast votes with respect to the shares that you beneficially own. These broker non-votes will have no effect on the vote.
Please note that this vote is advisory and not binding on our company or the Board in any way. The Board and the CLD Committee will take into account the outcome of the vote, however, when considering the frequency of future advisory votes on executive compensation. The Board may decide now or in the future that it is in the best interests of our stockholders and our Company to hold an advisory vote on executive compensation on a different frequency than the frequency receiving the most votes cast by our stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE THE OPTION OF "ONE YEAR"
FOR FUTURE NON-BINDING, ADVISORY STOCKHOLDER VOTES
ON NAMED EXECUTIVE OFFICER COMPENSATION.
PROS | 2023 Proxy Statement | Page 58
General Information
Voting
As of the Record Date, 45,179,18446,030,988 shares of Common Stock were outstanding. Each stockholder of record as of the Record Date is entitled to one vote for each share of Common Stock held by such stockholder. Only stockholders "of record" as of close of business on the Record Date are entitled to vote at the Annual Meeting.
Vote Required
Our amended and restated bylaws, as contained inan exhibit to the Current Report on Form 8-K filed with the SEC on April 29, 2020 (Bylaws), provide that a majority of the outstanding shares of our stock entitled to vote, whether present in person or represented by proxy, shall constituteconstitutes a quorum for the transaction of business at the Annual Meeting. Shares present virtually during the Annual Meeting will be considered shares of stock represented in person at the meeting. Votes for and against, abstentions and “broker non-votes” (shares held by a broker or nominee that does not have the authority, either express or discretionary, to vote on a particular matter) will each be counted as present for purposes of determiningtowards the presence of a quorum.quorum requirement.
If a quorum is present, aUnder our Bylaws, directors are elected by plurality vote of the holders of our Common Stock entitled to vote and present or represented by proxy at the Annual Meeting is required for the election of a director.vote. This “plurality” standard means the nominees who receive the largest number of “for” votes cast are elected as directors. Thus,You may vote for all the director nominees, withhold authority to vote your shares for all the director nominees or withhold authority to vote your shares with respect to any one or more of the director nominees. The number of shares not voted for the election of a nominee, (andincluding broker non-votes, and the number of “withhold” votes cast with respect to that nominee)nominee will not affect the determination of whether that nominee has received the necessary votes for election under Delaware law.election. However, the number of “withhold” votes with respect to a nominee will affect whether our Director Resignation Policy will apply to that individual. Our Director Resignation Policy provides that any nominee for director who receives a greater number of votes “withheld” from his or her election than votes “for” such election is required to offer his or her resignation following certification of the stockholder vote. The Nominating and Corporate GovernanceNCG Committee would then consider the offer of resignation and make a recommendation to our independent directors as to the action to be taken with respect to the offer. This policy does not apply in contested elections. We will not count abstentions or broker non-votes as either for or against a director, so abstentions and broker non-votes have no effect on the election of a director.
The affirmative vote of the holders of a majority of the shares of Common Stock present or represented by proxy and voting at the Annual Meeting is required to approve the advisory vote on executive compensation, the amendments to the 2017 Equity Plan and the ratification of the selection of our independent auditors. The advisory vote on frequency of the advisory vote on executive compensation will be determined based on the number of years that receives the most votes cast. A properly executed proxy marked “abstain” with respect to any matter is considered entitled to vote, and thus, will have the effect of a vote against a matter, except for the election of directors.
Voting Instructions
Stockholders have four ways to vote:
•Online. You may vote online by visiting www.proxyvote.com, and entering the control number found in your proxy card. You can vote via the Internet up until 11:59 P.M. Eastern Time on May 11, 2022.10, 2023.
•Telephone. You may vote by calling the toll-free number provided on your proxy card, and following the instructions found on your proxy card. You can vote via the telephone up until 11:59 P.M. Eastern Time on May 10, 2022.2023.
•Mail. If you received a printed copy of the proxy card, you may vote by filling out the card and returning it in the postage-paid envelope provided. Please promptly mail your proxy card to ensure that it is received prior to the closing of the polls at the Annual Meeting.
•Virtual Meeting. You may vote at the virtual Annual Meeting by visitingwww.virtualshareholdermeeting.com/PRO2022PRO2023, and any previous votes that you submitted, whether by Internet, telephone or mail, will be superseded by the vote that you cast at the Annual Meeting.
If you are a beneficial owner, or you hold your shares in “street name,” please check your voting instruction card or contact your bank, broker or nominee to determine whether you will be able to vote by Internet or telephone. Even if you plan on attending the virtual Annual Meeting, we encourage you to vote in advance via the Internet, by phone, or by mail to ensure that your vote will be represented at the Annual Meeting.
Changing your Vote
You may revoke your proxy and change your vote at any time before the taking of the vote at the Annual Meeting:
•Online. Using the online voting method described above, in which case only your latest internet proxy submitted prior to the Annual Meeting will be counted.
PROS | 2023 Proxy Statement | Page 59
•Telephone. Using the telephone voting method described above, in which case only your latest telephone proxy submitted prior to the Annual Meeting will be counted.
•Mail. By signing and returning a new proxy card dated as of a later date, in which case only your latest proxy card or voting instruction form received prior to the Annual Meeting will be counted.
PROS | 2022 Proxy Statement | Page 51
•Virtual Meeting. By attending the virtual Annual Meeting and voting by visiting www.virtualshareholdermeeting.com/PROS2022.PROS2023. However, attendance at the virtual Annual Meeting will not in and of itself revoke your proxy unless you properly vote at the virtual Annual Meeting or specifically request that your prior proxy be revoked by delivering a written notice of revocation prior to the Annual Meeting to our Corporate Secretary at or before the taking of the vote at the Annual Meeting.
Any written notice of revocation or subsequent proxy should be delivered to PROS Holdings, Inc. at 3200 Kirby Drive, Suite 600, Houston, Texas 77098, Attention: Corporate Secretary, or hand-delivered to our Corporate Secretary before the taking of the vote at the Annual Meeting.
Effect of Not Casting Your Vote
Banks, brokers and other intermediaries may not vote shares held in their clients’ accounts on elections of directors and other “non-routine” matters unless the client has provided voting instructions. If you hold your shares in street name, you must cast your vote if you want it to count for purposes of Proposals One, Two, Three and Three.Five.
Proxy Materials are Available on the Internet
We use the internet as the primary means of furnishing proxy materials to our stockholders. We are mailing to our stockholders a Notice of Internet Availability of Proxy Materials (Notice) that contains instructions on how to access our proxy materials over the Internet, as well as how to request a paper copy of our proxy materials, including this Proxy Statement, our 20212022 Annual Report and a form of proxy card or voting instruction card. The Notice was first mailed and those documents were first made available on or about April 1, 2022March 31, 2023 to stockholders entitled to vote at the Annual Meeting. We encourage stockholders to take advantage of the availability of the proxy materials on the internet.
Eliminating Duplicate Mailings
Some banks, brokers and other nominee record holders participate in the practice of “householding,” which helps reduce the environmental impact of our annual meetings and reduces our printing and mailing costs, by sending only one copy of the Notice and Proxy Statement to multiple stockholders sharing the same address. If you would prefer to receive separate copies of a proxy statement, please contact our Corporate Secretary by calling 713-335-5151 emailing at legal@pros.comor by writing to us at 3200 Kirby Drive, Suite 600, Houston, Texas 77098. In addition, stockholders sharing an address and receiving multiple copies can request delivery of a single copy of proxy statements upon written request to our Corporate Secretary at the address stated above.
STOCKHOLDERS PROPOSALSStockholder Proposals and Director Nominations
Stockholders may present proposals for action, including director nominations, at meetings of stockholders only if they comply with the rules established by the SEC, applicable Delaware law and our Bylaws. No stockholder proposals were received for consideration at the Annual Meeting.
Stockholders interested in submitting a proposal for inclusion in our 2024 proxy materials and for consideration at the 20232024 annual meeting of our stockholders (2023(2024 Annual Meeting) may do so by following the procedures set forth in Rule 14a-8 under the Exchange Act. To be eligible for inclusion in such proxy materials, stockholder proposals must be received by our Corporate Secretary no later than the close of business on December 2, 20222023.
Under our Bylaws, for any stockholder proposal or director nomination that is not submitted for inclusion in the next year’s proxy statement but instead is proposed to be presented directly at our 20232024 Annual Meeting to be timely, we must receive the stockholdernotice or nomination between January 12, 2024 and February 11, 2024, unless the 2024 Annual Meeting is held earlier than April 11, 2024 or later than June 10, 2024, in which case the notice or nomination must provide us written noticebe received not later than the close of business on the later of the ninetieth day prior to our 20232024 Annual Meeting or the 10th day following the date on which public announcement of the date of the 20232024 Annual Meeting is first made. Any such notice for stockholder proposals (other than director nominations) must satisfy the requirements specified in Article I, Section 1.10(b) of our Bylaws. Any such notice for director nominations must satisfy the requirements specified in Article II, Section 2.15(b) of our Bylaws. Any such notice forIn addition, stockholders who intend to solicit proxies in support of director nominees other stockholder proposals (other than director nomination)the Company's nominees must satisfy the requirements specified in Article I, Section 1.10(b) of our Bylaws. In the absence of such notice meeting the above requirements, a stockholder shall not be entitled to present any business at our 2023 Annual Meeting.
Notwithstanding the above, in the event that the number of directors to be elected at an annual meeting of stockholders is increased and there is no public announcement by the Company naming the nominees foralso comply with the additional directorships at least 100 days prior torequirements of Rule 14a-19 under the first anniversary of the date of the Company’s previous year’s annual meeting of stockholders, a stockholder’s notice shall also be considered timely, but only with respect to nominees for the additional directorships, if it is be delivered to the Corporate Secretary at our principal executive offices not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company. In the event the Company calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person(s), for election to such positions as are specified in the Company’s notice of meeting, if the stockholder’s notice is delivered to the Corporate Secretary at our principal executive offices not earlier than the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by our Board to be elected at such meeting.
PROS | 2022 Proxy Statement | Page 52
DIRECTOR NOMINATION
Our Bylaws permit any stockholder of record to nominate directors. Stockholders who wish to submit nominees for election at an annual or special meeting of stockholders should follow the procedure described in the Stockholder Proposalssection above.Exchange Act. The NCG Committee applies the same standards in considering candidates submitted by stockholders as it does in evaluating candidates submitted by members of the Board. In the absence of notice of a proposal or nomination meeting the above requirements, a stockholder shall not be entitled to present any business at our 2024 Annual Meeting.
EXPENSES AND SOLICITATION
PROS | 2023 Proxy Statement | Page 60
Expenses and Solicitation
We will bear the expense of soliciting proxies in the enclosed form. In addition, we might reimburse banks, brokerage firms, and other custodians, nominees and fiduciaries representing beneficial owners of our Common Stock, for their expenses in forwarding soliciting materials to those beneficial owners. Proxies may also be solicited by our directors, officers or employees, personally or by telephone, telegram, facsimile or other means of communication. We do not intend to pay additional compensation for doing so.
NO INCORPORATION BY REFERENCE OF
CERTAIN PORTIONS OF THIS PROXY STATEMENT
Notwithstanding anything to the contrary set forth in any of our filings made under the Securities Act of 1933, as amended, or the Exchange Act, as amended, that might incorporate information in this Proxy Statement, neither the Audit Committee Report nor the Compensation and Leadership Development Committee Report is to be incorporated by reference into any such filings as provided by SEC regulations. In addition, this Proxy Statement includes certain website addresses intended to provide inactive, textual references only. The information on these websites shall not be deemed part of this Proxy Statement.
OTHER MATTERS
The Board knows of no other matters to be submitted at the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons appointed in the enclosed proxy intend to vote the shares represented thereby in accordance with their best judgment on such matters, under applicable laws.
The Board of Directors
PROS HOLDINGS, INC.
April 1, 2022March 31, 2023
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APPENDIX A
PROS
AMENDED AND RESTATED
2017 EQUITY INCENTIVE PLAN,
As amended
PROS | 2023 Proxy Statement | Page 66
| | | | | | | | | | | |
| | | Page |
| | | |
| | | |
| 1.1 Establishment | | |
| 1.2 Purpose | | |
| 1.3 Term of Plan | | |
| | | |
| | | |
| 2.1 Definitions | | |
| 2.2 Construction | | |
| | | |
| | | |
| 3.1 Administration by the Committee | | |
| 3.2 Authority of Officers | | |
| 3.3 Administration with Respect to Insiders | | |
| 3.4 Powers of the Committee | | |
| 3.5 Option or SAR Repricing | | |
| 3.6 Indemnification | | |
| | | |
| | | |
| 4.1 Maximum Number of Shares Issuable | | |
| 4.2 Share Counting | | |
| 4.3 Adjustments for Changes in Capital Structure | | |
| 4.4 Assumption or Substitution of Awards | | |
| | | |
| | | |
| 5.1 Persons Eligible for Awards | | |
| 5.2 Participation in the Plan | | |
| 5.3 Incentive Stock Option Limitations | | |
| 5.4 Award Limits | | |
| 5.5 Nonemployee Director Award Limit | | |
| 5.6 Minimum Vesting | | |
| | | |
| | | |
| 6.1 Exercise Price | | |
| 6.2 Exercisability and Term of Options | | |
| 6.3 Payment of Exercise Price | | |
| 6.4 Effect of Termination of Service | | |
| 6.5 Transferability of Options | | |
| | | |
| | | |
| 7.1 Types of SARs Authorized | | |
| 7.2 Exercise Price | | |
| 7.3 Exercisability and Term of SARs | | |
| 7.4 Exercise of SARs | | |
| 7.5 Deemed Exercise of SARs | | |
| 7.6 Effect of Termination of Service | | |
| 7.7 Transferability of SARs | | |
| | | |
| | | |
| 8.1 Types of Restricted Stock Awards Authorized | | |
| 8.2 Purchase Price | | |
TABLE OF CONTENTS
(continued)
| | | | | | | | | | | |
| 8.3 Purchase Period | | |
| 8.4 Payment of Purchase Price | | |
| 8.5 Vesting and Restrictions on Transfer | | |
| 8.6 Voting Rights; Dividends and Distributions | | |
| 8.7 Effect of Termination of Service | | |
| 8.8 Nontransferability of Restricted Stock Award Rights | | |
| | | |
| | | |
| 9.1 Grant of Restricted Stock Unit Awards | | |
| 9.2 Purchase Price | | |
| 9.3 Vesting | | |
| 9.4 Voting Rights, Dividend Equivalent Rights and Distributions | | |
| 9.5 Effect of Termination of Service | | |
| 9.6 Settlement of Restricted Stock Unit Awards | | |
| 9.7 Nontransferability of Restricted Stock Unit Awards | | |
| | | |
| | | |
| 10.1 Types of Performance Awards Authorized | | |
| 10.2 Initial Value of Performance Shares and Performance Units | | |
| 10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula | | |
| 10.4 Measurement of Performance Goals | | |
| 10.5 Settlement of Performance Awards | | |
| 10.6 Voting Rights; Dividend Equivalent Rights and Distributions | | |
| 10.7 Effect of Termination of Service | | |
| 10.8 Nontransferability of Performance Awards | | |
| | | |
| | | |
| 11.1 Grant of Cash-Based Awards | | |
| 11.2 Grant of Other Stock-Based Awards | | |
| 11.3 Value of Cash-Based and Other Stock-Based Awards | | |
| 11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards | | |
| 11.5 Voting Rights; Dividend Equivalent Rights and Distributions | | |
| 11.6 Effect of Termination of Service | | |
| 11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards | | |
| | | |
| | | |
| Section 12.1 Award Agreements | | |
| Section 12.2 Authority to Vary Terms | | |
| | | |
| | | |
| 13.1 Effect of Change in Control on Awards | | |
| 13.2 Effect of Change in Control on Nonemployee Director Awards | | |
| | | |
| | | |
| | | |
| | | |
| 15.1 Awards Subject to Section 409A | | |
| 15.2 Deferral and/or Distribution Elections | | |
| 15.3 Subsequent Elections | | |
TABLE OF CONTENTS
(continued)
| | | | | | | | | | | |
| 15.4 Payment of Section 409A Deferred Compensation | | |
| | | |
| | | |
| 16.1 Tax Withholding in General | | |
| 16.2 Withholding or in Directed Sale of Shares | | |
| | | |
| | | |
| | | |
| | | |
| 18.1 Repurchase Rights | | |
| 18.2 Forfeiture Events | | |
| 18.3 Provision of Information | | |
| 18.4 Rights as Employee, Consultant or Director | | |
| 18.5 Rights as a Stockholder | | |
| 18.6 Delivery of Title to Shares | | |
| 18.7 Fractional Shares | | |
| 18.8 Retirement and Welfare Plans | | |
| 18.9 Beneficiary Designation | | |
| 18.10 Severability | | |
| 18.11 No Constraint on Corporate Action | | |
| 18.12 Unfunded Obligation | | |
| 18.13 Choice of Law | | |
PROS
Amended and Restated 2017 Equity Incentive Plan
1. Establishment, Purpose and Term of Plan.
1.1 Establishment. The Amended and Restated PROS 2017 Equity Incentive Plan (the “Plan”) is hereby established effective as of May 11, 2023, the date of its approval by the stockholders of the Company (the “Effective Date”). The PROS 2017 Equity Incentive Plan was originally approved by stockholders of the Company on May 11, 2017, was amended and restated on March 22, 2019 by the Board and approved by stockholders on May 7, 2019, was further amended and restated by the Board on February 22, 2021 and approved by stockholders on May 12, 2021, and was further amended by the Board on February 22, 2023, and certain amendments to the Plan requiring stockholder approval were submitted for approval by the stockholders of the Company at the Company’s 2023 annual meeting of stockholders.
1.2 Purpose. The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group. The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.
1.3 Term of Plan. The Plan will continue in effect until its termination by the Committee; provided, however, that all Awards must be granted, if at all, within ten (10) years from the Effective Date.
2. Definitions and Construction.
2.1 Definitions. Whenever used herein, the following terms have their respective meanings set forth below:
(a) Affiliate” means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities. For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled by” have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.
(b)“Award” means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c)“Award Agreement” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.
(d) “Board” means the Board of Directors of the Company.
(e)“Cash-Based Award” means an Award denominated in cash and granted pursuant to Section 11.
(f) “Cashless Exercise” means a Cashless Exercise as defined in Section 6.3(b)(i).
(g) “Cause” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure; (vi) any material breach by the Participant of any employment, service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.
(h) “Change in Control” means the occurrence of any one or a combination of the following:
(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then-outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(ii) an Ownership Change Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(ee)(iii), the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or
(iii) a date specified by the Committee following approval by the stockholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(h) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership includes, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities. The Committee shall determine whether multiple events described in subsections (i), (ii) and (iii) of this Section 2.1(h) are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(i) Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations and administrative guidelines promulgated thereunder.
(j) “Committee” means the Compensation and Leadership Development Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as specified by the Board. If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board must exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
(k) “Company” means PROS Holdings, Inc., a Delaware corporation, and any successor corporation thereto.
(l) “Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S-8 under the Securities Act.
(m) “Director” means a member of the Board.
(n) “Disability” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.
(o) “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant. Dividend Equivalent Rights may not be granted in connection with an Option or SAR.
(p) “Employee” means any person treated as an employee (including an Officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a Director’s fee is sufficient to constitute employment for purposes of the Plan. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be. For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company are final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.
(q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(r) “Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i) Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value will be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value is established will be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as determined by the Committee, in its discretion.
(ii) Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A. The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.
(iii) If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock must be determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.
(s) “Full Value Award” means any Award settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined on the effective date of grant) of the shares subject to such Award.
(t) “Incentive Stock Option” means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.
(u) “Incumbent Director” means a Director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a Director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of Directors of the Company).
(v) “Insider” means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(w) “Net Exercise” means a Net Exercise as defined in Section 6.3(b)(iii).
(x) “Nonemployee Director” means a Director who is not an Employee.
(y) “Nonemployee Director Award” means any Award granted to a Nonemployee Director.
(z) “Non-Exempt Employee” means an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended.
(aa) “Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award Agreement evidencing such Option) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.
(bb) “Officer” means any person designated by the Board as an officer of the Company.
(cc) “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
(dd) “Other Stock-Based Award” means an Award denominated in shares of Stock and granted pursuant to Section 11.
(ee) “Ownership Change Event” means the occurrence of any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
(ff) “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(gg) “Participant” means any eligible person who has been granted one or more Awards.
(hh) “Participating Company” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.
(ii) “Participating Company Group” means, at any point in time, the Company and all other entities collectively which are then Participating Companies.
(jj) “Performance Award” means an Award of Performance Shares or Performance Units.
(kk) “Performance Award Formula” means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(ll) “Performance Goal” means a performance goal established by the Committee pursuant to Section 10.3.
(mm) “Performance Period” means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.
(nn) “Performance Share” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(oo) “Performance Unit” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(pp) “Restricted Stock Award” means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(qq) “Restricted Stock Bonus” means Stock granted to a Participant pursuant to Section 8.
(rr) “Restricted Stock Purchase Right” means a right to purchase Stock granted to a Participant pursuant to Section 8.
(ss) “Restricted Stock Unit” means a right granted to a Participant pursuant to Section 9 to receive on a future date or occurrence of a future event a share of Stock or cash in lieu thereof, as determined by the Committee.
(tt) “Rule 16b-3” means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.
(uu) “SAR” or “Stock Appreciation Right” means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price thereof.
(vv) “Section 409A” means Section 409A of the Code.
(ww) “Section 409A Deferred Compensation” means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.
(xx) “Securities Act” means the Securities Act of 1933, as amended.
(yy) “Service” means a Participant’s employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant. Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service or a change in the Participating Company for which the Participant renders Service, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company. However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of and reason for such termination.
(zz) “Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.3.
(aaa) “Stock Tender Exercise” means a Stock Tender Exercise as defined in Section 6.3(b)(ii).
(bbb) “Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
(ccc) “Substitute Awards” shall mean Awards granted or Stock issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company acquired by the Company or any Subsidiary Corporation or with which the Company or any Subsidiary Corporation combines.
(ddd) “Ten Percent Owner” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(eee) “Trading Compliance Policy” means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.
(fff) “Vesting Conditions” mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service or failure of a performance condition to be satisfied.
2.2 Construction. Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.
3. Administration.
3.1 Administration by the Committee. The Plan must be administered by the Committee. All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith. Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein. All expenses incurred in connection with the administration of the Plan shall be paid by the Company.
3.2 Authority of Officers. Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election.
3.3 Administration with Respect to Insiders. With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan must be administered in compliance with the requirements, if any, of Rule 16b-3.
3.4 Powers of the Committee. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a) to determine the persons to whom, and the time(s) at which, Awards are granted and the number of shares of Stock, units or monetary value to be subject to each Award;
(b) to determine the type of Award granted;
(c) to determine the Fair Market Value of Stock or other property;
(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares of Stock pursuant to any Award, (ii) the method of payment for shares of Stock purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of expiration of any Award, (vii) the effect of any Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(e) to determine whether an Award will be settled in Stock, cash, other property or in any combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares of Stock acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares of Stock acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;
(i) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, and to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose residents may be granted Awards; and
(j) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.5 Option or SAR Repricing. Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the stockholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of Stock (“Underwater Awards”) and the grant in substitution therefor of new Options or SARs having a lower exercise price, other Awards or payments in cash (except in the event of a Change in Control), or (b) the amendment of outstanding Awards to reduce the exercise price thereof. This Section shall not be construed to apply to (i) “issuing or assuming a stock option in a transaction to which Section 424(a) applies,” within the meaning of Section 424 of the Code, (ii) adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 409A, or (iii) an adjustment pursuant to Section 4.3.
3.6 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.
4. Shares Subject to Plan.
4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Sections 4.2 and 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to 10,550,000 shares1, and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.
4.2 Share Counting. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the exercise or settlement of Options or SARs pursuant to Section 16.2 shall not again be available for issuance under the Plan. Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the vesting or settlement of Full Value Awards pursuant to Section 16.2 will again become available for issuance under the Plan; provided, however, that any shares so withheld or tendered above the applicable minimum statutory withholding rate will not become available again for issuance under the Plan.
1 This is the sum of the previously approved 7,650,000 shares plus the new 2,900,000 shares. As of the new Effective Date of the plan, the number of shares available for new awards shall equal 4,208,854, which is the sum of 2,900,000 new shares, plus the 1,308,854 shares that remained available for grants as of March 1, 2023, less shares subject to awards made after March 1, 2023, and subject to adjustment as provided in the plan.
4.3 Adjustments for Changes in Capital Structure. Subject to any required action by the stockholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of Stock, appropriate and proportionate adjustments will be made in the number and kind of shares of Stock subject to the Plan and to any outstanding Awards, the Award limits set forth in Section 5.3 and Section 5.4, and in the exercise or purchase price per share of Stock under any outstanding Award in order to prevent dilution or enlargement of Participants’ rights under the Plan. For purposes of the foregoing, conversion of any convertible securities of the Company will not be treated as “effected without receipt of consideration by the Company.” If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards must be adjusted in a fair and equitable manner as determined by the Committee, in its discretion. Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the exercise or purchase price per share shall be rounded up to the nearest whole cent. In no event may the exercise or purchase price, if any, under any Award be decreased to an amount less than the par value, if any, of the Stock subject to such Award. The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods. Any adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.
4.4 Assumption or Substitution of Awards. The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.
5. Eligibility, Participation and Award Limitations.
5.1 Persons Eligible for Awards. Awards may be granted only to Employees, Consultants and Directors.
5.2 Participation in the Plan. Awards are granted solely at the discretion of the Committee. Eligible persons may be granted more than one Award. However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.
5.3 Incentive Stock Option Limitations.
(a) Maximum Number of Shares Issuable Pursuant to Incentive Stock Options. Subject to adjustment as provided in Section 4.3, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed 10,550,000 shares. The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options will be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2 and 4.3.
(b) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.
(c) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of Stock shall be determined as of the time the option with respect to such Stock is granted. If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise of the Option, shares of Stock issued pursuant to each such portion shall be separately identified.
5.4 Award Limits. Subject to adjustment as provided in Section 4.3, no Employee shall be granted within any fiscal year of the Company one or more share-denominated Awards which in the aggregate are for more than 1,250,000 shares or one or more cash-dominated Awards which could result in such Employee receiving more than $2,000,000 or equivalent value in shares for each full fiscal year of the Company contained in the Performance Period for such Award.
5.5 Nonemployee Director Award Limit. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with generally accepted accounting principles in the United States) of all Awards granted to any Nonemployee Director during any single calendar year, plus the total cash compensation paid to such Nonemployee Director for services rendered for such calendar year, shall not exceed $600,000; provided, however, that this limitation shall not apply to any amounts, including any severance, consulting fees or similar fees, paid to a Nonemployee Director for prior or current service as an employee or consultant of the Company; and provided, further, that any deferred compensation shall be counted for purposes of this limitation in the year it is first earned regardless of when paid or settled.
5.6 Minimum Vesting. As provided in Section 4, no Award (other than cash-based Awards) shall vest earlier than one year following the date of grant of such Award; provided that, the foregoing minimum vesting requirement shall not apply to any (a) acceleration of vesting of any Award, including upon death, disability, or in connection with a Change in Control, as determined by the Committee in its discretion, (b) Substitute Awards, (c) Awards to Nonemployee Directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, (d) shares of Stock delivered in lieu of fully vested cash-based Awards; and (e) other Awards up to a maximum of five percent (5%) of the aggregate number of shares of Stock that may be issued under the Plan (subject to adjustment as provided in Section 4.3).
6. Stock Options.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and must comply with and will be subject to the following terms and conditions:
6.1 Exercise Price. The Committee, in its discretion, shall establish the exercise price for each Option; provided, however, that (a) the exercise price per share will not be less than the Fair Market Value per share of Stock on the effective date of grant of the Option and (b) the exercise price per share for any Incentive Stock Option granted to a Ten Percent Owner, must be no less than one hundred ten percent (110%) of the Fair Market Value per share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price less than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or Section 424(a) of the Code.
6.2 Exercisability and Term of Options. Subject to the minimum vesting provisions of Section 5.6, Options will be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option will be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner will be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) no Option granted to a Non-Exempt Employee will be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Non-Exempt Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option terminates ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.
6.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option must be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof. The Committee may from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
(b) Limitations on Forms of Consideration.
(i) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares of Stock being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System). The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
(ii) Stock Tender Exercise. A “Stock Tender Exercise” means the delivery of a properly executed exercise notice accompanied by a Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares of Stock with respect to which the Option is exercised. A Stock Tender Exercise is not permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s Stock. If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(iii) Net Exercise. A “Net Exercise” means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.
6.4 Effect of Termination of Service.
(a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, a Participant may exercise an Option after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and the Option will thereafter terminate.
(i) Disability. If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares of Stock on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the “Option Expiration Date”).
(ii) Death. If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares of Stock on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date. The Participant’s Service will be deemed to have terminated on account of death if the Participant dies within three (3) months (or such longer or shorter period provided by the Award Agreement) after the Participant’s termination of Service.
(iii) Termination for Cause. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option will terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(iv) Other Termination of Service. If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares of Stock on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5 Transferability of Options. During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative. An Option is not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option. An Option shall never be transferred to a third-party financial institution for value.
7. Stock Appreciation Rights.
Stock Appreciation Rights must be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and must comply with and be subject to the following terms and conditions:
7.1 Types of SARs Authorized. SARs may be granted in tandem with all or any portion of a related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding SAR”). A Tandem SAR may only be granted concurrently with the grant of the related Option.
7.2 Exercise Price. The exercise price for each SAR will be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR will be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR may not be less than the Fair Market Value per share of Stock on the effective date of grant of the SAR. Notwithstanding the foregoing, an SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such SAR is granted pursuant to an assumption or substitution for another stock appreciation right in a manner that would qualify under the provisions of Section 409A of the Code.
7.3 Exercisability and Term of SARs.
(a) Tandem SARs. Tandem SARs are exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option will nevertheless remain exercisable in accordance with its terms. A Tandem SAR will terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled.
Upon the exercise of a Tandem SAR with respect to some or all of the shares of Stock subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR is canceled automatically as to the number of shares with respect to which the related Option was exercised.
(b) Freestanding SARs. Subject to the minimum vesting provisions of Section 5.6, Freestanding SARs are exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that (i) no Freestanding SAR will be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR and (ii) no Freestanding SAR granted to a Non-Exempt Employee will be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Non-Exempt Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act). Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Freestanding SAR, each Freestanding SAR terminates ten (10) years after the effective date of grant of the SAR, unless earlier terminated in accordance with its provisions.
7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value per share of Stock on the date of exercise of the SAR over the exercise price. The Company shall pay such amount (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR. When payment is to be made in shares of Stock, the number of shares to be issued will be determined on the basis of the Fair Market Value of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR is deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.
7.5 Deemed Exercise of SARs. If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised is automatically deemed to be exercised as of such date with respect to such portion.
7.6 Effect of Termination of Service. Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter terminates.
7.7 Transferability of SARs. During the lifetime of the Participant, an SAR is only exercisable by the Participant or the Participant’s guardian or legal representative. An SAR is not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR is assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S-8 under the Securities Act.
8. Restricted Stock Awards.
Restricted Stock Awards must be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
8.1 Types of Restricted Stock Awards Authorized. Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right. Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
8.2 Purchase Price. The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right will be established by the Committee in its discretion. No monetary payment (other than applicable tax withholding) is required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which is services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.
8.3 Purchase Period. A Restricted Stock Purchase Right is exercisable within the period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.
8.4 Payment of Purchase Price. Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.
8.5 Vesting and Restrictions on Transfer. Subject to the minimum vesting provisions of Section 5.6, shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as established by the Committee and set forth in the Award Agreement evidencing such Award. During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section 8.6, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.
8.7 Effect of Termination of Service. Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service. The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.
8.8 Nontransferability of Restricted Stock Award Rights. Rights to acquire shares of Stock pursuant to a Restricted Stock Award are not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution. All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
9. Restricted Stock Units.
Restricted Stock Unit Awards must be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
9.1 Grant of Restricted Stock Unit Awards. Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4. If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
9.2 Purchase Price. No monetary payment (other than applicable tax withholding, if any) may be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit. Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.
9.3 Vesting. Subject to the minimum vesting provisions of Section 5.6, Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as established by the Committee and set forth in the Award Agreement evidencing such Award.
9.4 Voting Rights, Dividend Equivalent Rights and Distributions. Participants have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Dividend Equivalent Rights, if any, will be paid by crediting the Participant with a cash amount or with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock, as determined by the Committee. The number of additional Restricted Stock Units (rounded to the nearest whole number), if any, to be credited will be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value of Stock on such date. Such cash amount or additional Restricted Stock Units are subject to the same terms and conditions and must be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments will be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property are immediately subject to the same Vesting Conditions as are applicable to the Award.
9.5 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.
9.6 Settlement of Restricted Stock Unit Awards. The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee in compliance with Section 409A, if applicable, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any. The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that if the settlement date with respect to any shares issuable upon vesting of Restricted Stock Units would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the settlement date will be deferred until the next trading day on which the sale of such shares would not violate the Trading Compliance Policy but in any event no later than the 15th day of the third calendar month following the year in which such Restricted Stock Units vest. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant must be set forth in the Award Agreement. Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
9.7 Nontransferability of Restricted Stock Unit Awards. The right to receive shares pursuant to a Restricted Stock Unit Award is not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder will be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
10. Performance Awards.
Performance Awards must be evidenced by Award Agreements in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and must comply with and will be subject to the following terms and conditions:
10.1 Types of Performance Awards Authorized. Performance Awards may be granted in the form of either Performance Shares or Performance Units. Each Award Agreement evidencing a Performance Award must specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.
10.2 Initial Value of Performance Shares and Performance Units. Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share has an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.3, on the effective date of grant of the Performance Share, and each Performance Unit has an initial monetary value established by the Committee at the time of grant. The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.
10.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period (subject to the minimum vesting provisions of Section 5.6), Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.
10.4 Measurement of Performance Goals. Performance Goals must be established by the Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more measures of business, financial or other measure or metric, determined in the subjective discretion of the Committee, of performance (each, a “Performance Measure”), subject to the following:
(a) Performance Measures. Performance Measures may be calculated in accordance with the Company’s financial statements, or, if such measures are not reported in the Company’s financial statements, they may be calculated in accordance with generally accepted accounting principles, a method used generally in the Company’s industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award. As specified by the Committee, Performance Measures may be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes, one or more Subsidiary Corporations or such division or other business unit of any of them selected by the Committee. Unless otherwise determined by the Committee, the Performance Measures applicable to the Performance Award will be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any event the Committee determines is appropriate to exclude, including change in accounting standards or any unusual or infrequently occurring event or transaction. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award. Performance Measures may be based upon one or more of the following, as determined by the Committee (or any other metric or goal as the Committee may determine, including subjective performance criteria):
(i) revenue;
(ii) sales;
(iii) expenses;
(iv) operating income;
(v) gross margin;
(vi) operating margin;
(vii) earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;
(viii) pre-tax profit;
(ix) net operating income;
(x) net income;
(xi) economic value added;
(xii) free cash flow;
(xiii) operating cash flow;
(xiv) balance of cash, cash equivalents and marketable securities;
(xv) stock price;
(xvi) earnings per share;
(xvii) return on stockholder equity;
(xviii) return on capital;
(xix) return on assets;
(xx) return on investment;
(xxi) total stockholder return;
(xxii) employee satisfaction;
(xxiii) employee retention;
(xxiv) market share;
(xxv) customer satisfaction;
(xxvi) product development;
(xxvii) research and development expenses;
(xxviii) completion of an identified special project;
(xxix) completion of a joint venture or other corporate transaction; and
(xxx) bookings.
(b) Performance Targets. Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the Performance Target level attained during the applicable Performance Period. A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.
10.5 Settlement of Performance Awards.
(a) Determination of Final Value. As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.
(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. The Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to increase or reduce some or all of the value of the Performance Award that would otherwise be paid to the Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula.
(c) Effect of Leaves of Absence. Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period will be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.
(d) Notice to Participants. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.
(e) Payment in Settlement of Performance Awards. As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment will be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award. Payment of such amount will be made in cash, shares of Stock, or a combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment will be made in a lump sum. If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant must be set forth in the Award Agreement. If any payment is to be made on a deferred basis, the Committee may, but is not obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.
(f) Provisions Applicable to Payment in Shares. If payment is to be made in shares of Stock, the number of such shares of Stock shall be determined by dividing the final value of the Performance Award by the Fair Market Value of Stock determined by the method specified in the Award Agreement. Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5. Any shares subject to Vesting Conditions must be evidenced by an appropriate Award Agreement and will be subject to the provisions of Sections 8.5 through 8.8 above.
10.6 Voting Rights; Dividend Equivalent Rights and Distributions. Participants have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant will be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited. Such Dividend Equivalent Rights, if any, will be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock, as determined by the Committee.
The number of additional Performance Shares (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date. Dividend Equivalent Rights, if any, will be accumulated and paid to the extent that the related Performance Shares become nonforfeitable. Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5. Dividend Equivalent Rights will not be paid with respect to Performance Units. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.
10.7 Effect of Termination of Service. Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award will be as follows:
(a) Death or Disability. If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award will be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and will be prorated based on the number of months of the Participant’s Service during the Performance Period. Payment will be made following the end of the Performance Period in any manner permitted by Section 10.5.
(b) Other Termination of Service. If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award is forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participant’s Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 10.7(a). Payment of any amount pursuant to this Section will be made following the end of the Performance Period in any manner permitted by Section 10.5.
10.8 Nontransferability of Performance Awards. Prior to settlement in accordance with the provisions of the Plan, no Performance Award is subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. All rights with respect to a Performance Award granted to a Participant hereunder is exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
11. Cash-Based Awards and Other Stock-Based Awards.
Cash-Based Awards and Other Stock-Based Awards must be evidenced by Award Agreements in such form as the Committee establishes. Such Award Agreements may incorporate all or any of the terms of the Plan by reference and will comply with and be subject to the following terms and conditions:
11.1 Grant of Cash-Based Awards. Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee determines.
11.2 Grant of Other Stock-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine. Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
11.3 Value of Cash-Based and Other Stock-Based Awards. Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee. Each Other Stock-Based Award must be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee. Subject to the minimum vesting provisions of Section 5.6, The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as established by the Committee and set forth in the Award Agreement evidencing such Award. If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met. The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.
11.4 Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards. Payment or settlement, if any, with respect to a Cash-Based Award or Other Stock-Based Award will be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines. The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award will comply with the requirements applicable to Performance Awards set forth in Section 10. To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.
11.5 Voting Rights; Dividend Equivalent Rights and Distributions. Participants have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award. However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated. Such Dividend Equivalent Rights, if any, will be paid in accordance with the provisions set forth in Section 9.4. Dividend Equivalent Rights are not granted with respect to Cash-Based Awards. In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.3, appropriate adjustments will be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property are immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.
11.6 Effect of Termination of Service. Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award must set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service. Such provisions will be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.
11.7 Nontransferability of Cash-Based Awards and Other Stock-Based Awards. Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award is not subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution. The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.
12. Standard Forms of Award Agreement.
12.1 Award Agreements. Each Award must comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time. No Award or purported Award is a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.
12.2 Authority to Vary Terms. The Committee has the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.
13. Change in Control.
13.1 Effect of Change in Control on Awards. In the event of a Change in Control, outstanding Awards will be subject to the definitive agreement entered into by the Company in connection with the Change in Control. Subject to the requirements and limitations of Section 409A, if applicable, the following provisions shall apply:
(a) Accelerated Vesting. In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following the Change in Control, and to such extent as the Committee determines.
(b) Assumption, Continuation or Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable.
For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock will be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control. Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control will become immediately exercisable and vested in full (a) as of ten (10) days prior to, and subject to, the consummation of the Change in Control or (b) settled effective immediately prior to the time of consummation of the Change in Control, as applicable. Any Award or portion thereof that is immediately exercisable and vested in full pursuant to the preceding sentence to the extent unexercised immediately prior to the consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of the consummation of the Change in Control.
(c) Termination in Connection with a Change in Control. Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated without Cause or the Participant voluntarily terminates the Participant’s employment after a reduction of the Participant’s base salary of fifteen percent (15%) or greater without the Participant’s express written consent within eighteen (18) months following the consummation of a Change in Control, such Participant’s Awards will become immediately exercisable and vested in full as of the date of such termination. Such immediately exercisable and fully vested Awards will be settled to the extent possible on the date of the Participant’s termination pursuant to this subsection (c). Awards requiring the Participant’s exercise, may be exercised by the Participant at any time prior to the expiration of three (3) months after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(d) Cash-Out of Outstanding Stock-Based Awards. The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, will be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award. In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment of consideration to the holder thereof. Payment pursuant to this Section (reduced by applicable withholding taxes, if any) will be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
13.2 Effect of Change in Control on Nonemployee Director Awards. Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), will be settled effective immediately prior to the time of consummation of the Change in Control.
13.3 Federal Excise Tax Under Section 4999 of the Code.
(a) Excess Parachute Payment. If any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, then, provided such election would not subject the Participant to taxation under Section 409A, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
(b) Determination by Tax Firm. To aid the Participant in making any election called for under Section 13.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.3(a), the Company shall request a determination in writing by the professional firm engaged by the Company for general tax purposes, or, if the tax firm so engaged by the Company is serving as accountant or auditor for the Acquiror, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section (the “Tax Firm”). As soon as practicable thereafter, the Tax Firm shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant. For the purposes of such determination, the Tax Firm may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Participant shall furnish to the Tax Firm such information and documents as the Tax Firm may reasonably request in order to make its required determination. The Company shall bear all fees and expenses the Tax Firm charges in connection with its services contemplated by this Section.
14. Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock pursuant to any Award is subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed. In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act is at the time of such exercise or issuance in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan will relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
15. Compliance with Section 409A.
15.1 Awards Subject to Section 409A. The Company intends that Awards granted pursuant to the Plan either be exempt from or comply with Section 409A, and the Plan shall be so construed. The provisions of this Section 15 apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation. Such Awards may include, without limitation:
(a) A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.
(b) Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.
Subject to the provisions of Section 409A, the term “Short-Term Deferral Period” means the 2½ month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture. For this purpose, the term “substantial risk of forfeiture” has the meaning provided by Section 409A.
15.2 Deferral and/or Distribution Elections. Except as otherwise permitted or required by Section 409A, the following rules applies to any compensation deferral and/or payment elections (each, an “Election”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:
(a) Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.
(b) Elections must be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to the Participant.
(c) Elections continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.
15.3 Subsequent Elections. Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award must comply with the following requirements:
(a) No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.
(b) Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.
(c) No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) may be made less than twelve (12) months before the date on which such payment would otherwise have been made.
(d) Subsequent Elections continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 15.3.
15.4 Payment of Section 409A Deferred Compensation.
(a) Permissible Payments. Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:
(i) The Participant’s “separation from service” (as defined by Section 409A);
(ii) The Participant’s becoming “disabled” (as defined by Section 409A);
(iii) The Participant’s death;
(iv) A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable;
(v) A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or
(vi) The occurrence of an “unforeseeable emergency” (as defined by Section 409A).
(b) Installment Payments. It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) will, for all purposes of Section 409A, be treated as a right to a series of separate payments.
(c) Required Delay in Payment to Specified Employee Pursuant to Separation from Service. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A and to the extent necessary to avoid the imposition of taxes under Section 409A, no payment pursuant to Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as defined by Section 409A) as of the date of the Participant’s separation from service before the date (the “Delayed Payment Date”) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death. All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.
(d) Payment Upon Disability. All distributions of Section 409A Deferred Compensation payable pursuant to Section 15.4(a)(ii) by reason of a Participant becoming disabled will be paid in a lump sum or in periodic installments as established by the Participant’s Election. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions will be paid in a lump sum upon the determination that the Participant has become disabled.
(e) Payment Upon Death. If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts will be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death. If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions will be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.
(f) Payment Upon Change in Control. Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount will become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A. Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) will vest to the extent provided by such Award but will be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.
(g) Payment Upon Unforeseeable Emergency. The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred Compensation for payment pursuant to Section 15.4(a)(vi) in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency. In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award. All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committee’s determination that an unforeseeable emergency has occurred. The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award will be altered or modified, is final, conclusive, and not subject to approval or appeal.
(h) Prohibition of Acceleration of Payments.Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.
(i) No Representation Regarding Section 409A Compliance. Notwithstanding any other provision of the Plan, the Company makes no representation that Awards will be exempt from or comply with Section 409A. No Participating Company is liable for any tax, penalty or interest imposed on a Participant by Section 409A.
16. Tax Withholding.
16.1 Tax Withholding in General. The Company has the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto. The Company has no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.
16.2 Withholding in or Directed Sale of Shares. The Company has the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company. The Fair Market Value of Stock withheld or tendered to satisfy any such tax withholding obligations may not (a) be less than the amount determined by the applicable minimum statutory withholding rates; and (b) exceed the amount determined by the maximum applicable statutory tax rates applicable to the Participant and to the particular Award or the shares acquired pursuant thereto. Any shares withheld above minimum statutory rates shall not be added back into the share authorization of Section 4.1, in accordance with Section 4.2. The Company may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.
17. Amendment, Suspension or Termination of Plan.
The Committee may amend, suspend or terminate the Plan at any time. However, without the approval of the Company’s stockholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Sections 4.2 and 4.3), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted. No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. Except as provided by the next sentence, no amendment, suspension or termination of the Plan may have a materially adverse effect on any then outstanding Award without the consent of the Participant. Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.
18. Miscellaneous Provisions.
18.1 Repurchase Rights. Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted. The Company has the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.
18.2 Forfeiture Events.
(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but are not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service, or any accounting restatement due to material noncompliance of the Company with any financial reporting requirements of securities laws as a result of which, and to the extent that, such reduction, cancellation, forfeiture, or recoupment is required by applicable securities laws.
(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve (12) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve (12) month period.
18.3 Provision of Information. Each Participant will be given access to information concerning the Company equivalent to that information generally made available to the Company’s common stockholders.
18.4 Rights as Employee, Consultant or Director. No person, even though eligible pursuant to Section 5, has a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant. Nothing in the Plan or any Award granted under the Plan confers on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time. To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award will in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.
18.5 Rights as a Stockholder. A Participant has no rights as a stockholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.3 or another provision of the Plan.
18.6 Delivery of Title to Shares. Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.
18.7 Fractional Shares. The Company is not be required to issue fractional shares upon the exercise or settlement of any Award.
18.8 Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation must be taken into account in computing a Participant’s benefit.
18.9 Beneficiary Designation. Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit. Each designation will revoke all prior designations by the same Participant, will be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse. If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.
18.10 Severability. If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision will be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan will not in any way be affected or impaired thereby.
18.11 No Constraint on Corporate Action. Nothing in this Plan will be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.
18.12 Unfunded Obligation. Participants shall have the status of general unsecured creditors of the Company. Any amounts payable to Participants pursuant to the Plan are considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974. No Participating Company will be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Participant account will not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company. Participants have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.
18.13 Choice of Law. Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of Texas, without regard to its conflict of law rules.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the PROS 2017 Equity Incentive Plan as duly adopted by the Board on February 22, 2023.
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| /s/ DAMIAN OLTHOFF |
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| Damian Olthoff, Secretary |
