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.)

 

 

 

 

6312 South Fiddler’s Green Circle, Suite 600E

Greenwood Village, Colorado 80111

To Our Shareholders:

On behalf of the Board of Directors of Ciber, I am pleased to invite you to the 2016 Annual Meeting of Shareholders of Ciber, Inc. We will be holding the meeting as a “virtual” meeting over the Internet on June 8, 2016, at 9:00am Mountain Time. Instructions for attending the virtual meeting are included in the attached proxy statement.

Included in our proxy statement are complete descriptions of the matters to be decided at our annual meeting. You will find that we are proposing the election of two members to our Board of Directors, advisory approval of the compensation of our named executive officers, and ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm. Please give each of the proposals your careful consideration.

We value your participation in the governance of Ciber. You may participate by joining the annual meeting or by casting your votes by proxy. To make your voting experience as easy as possible, we have included a proxy card that you may complete and return to us. We have also provided instructions for voting electronically via the Internet or by telephone. The attached proxy statement includes detailed instructions for all of these voting options. If you have any questions about voting or attending the annual meeting, please contact our Corporate Secretary and let us know how we can help.

As always, we encourage every shareholder to communicate directly with Ciber’s management and with the Board of Directors. We look forward to hearing from you.

Sincerely,

Bobby G. Stevenson

Chairman of the Board of Directors

Greenwood Village, Colorado

April 29, 2016

 

6312 South Fiddler’s Green Circle, Suite 600E

Greenwood Village, Colorado 80111

NOTICE OF THE 2016 ANNUAL MEETING OF SHAREHOLDERS

 

Your vote is important to us, so please contact us if you have any questions about the meeting or the voting process.

By order of the Board of Directors,

Bobby G. Stevenson

Chairman of the Board of Directors

Greenwood Village, Colorado

April 29, 2016

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

Part 1—Information Concerning Solicitation and Voting

Information about the Annual Meeting

Shares Entitled to Vote

Shareholders of record of Ciber common stock (NYSE: CBR) at the close of business on the Record Date, April 11, 2016, are entitled to vote at the annual meeting, or any adjournment or postponement of the annual meeting. Each shareholder entitled to vote at the annual meeting will be entitled to one vote per share of common stock. A list of shareholders entitled to vote at the annual meeting will be available for examination at Ciber’s corporate offices for ten days prior to and during the annual meeting. To request examination of the list, contact the Corporate Secretary and be prepared to reference the information on your proxy card to verify your status as a shareholder.

On the Record Date, there were 80,540,481 shares of common stock outstanding.

Attendance at the Virtual Annual Meeting

To attend the virtual annual meeting, log on to www.virtualshareholdermeeting.com/CBR2016 at least 15 minutes prior to the start of the meeting. Register on the website as a shareholder by using the twelve-digit number printed on your proxy card. During the virtual meeting, you may electronically submit your vote or change or revoke a prior vote. Select the “Vote” button and complete the information from your proxy card to verify your eligibility to vote. Be sure to characterize whether the vote is your first vote or the withdrawal of a prior vote. Your vote must be cast before the polls are closed.

Solicitation of Proxies

We pay the cost of printing and mailing all proxy and voting materials and all solicitation expenses associated with this proxy statement. The Board of Directors of Ciber is soliciting the proxy accompanying this proxy statement. Proxies may be solicited by Ciber’s officers, directors, and employees, none of whom will receive any additional compensation for such activity. In addition, MacKenzie Partners, Inc. may solicit proxies on our behalf. We anticipate that if they do so, the cost of MacKenzie’s services will not exceed $15,000. These solicitations may be made personally or by telephone, mail, email, or the Internet. We will reimburse brokerage firms, banks, and other fiduciaries for the expense of forwarding solicitation materials to their principals.

Revocation of Proxies

At any time prior to final tabulation of the votes on June 8, 2016, you may change your vote or revoke your proxy by following one of the procedures set forth below:

Other Matters Related to Voting

Quorum.  Our bylaws provide that the holders of not less than a majority of the shares of common stock entitled to vote at the annual meeting must participate in order to constitute a quorum and conduct business at the annual meeting. We count on your participation by proxy or at the annual meeting to help us achieve a quorum. So we may verify that we have a quorum in advance of the annual meeting, please complete your proxy (by mail or electronically) and return it promptly.

Effect of Abstentions on Quorum.  The shares of a shareholder whose proxy card is marked to “abstain” with respect to any proposal will be included in the number of shares present at the annual meeting to determine whether a quorum is present.

Brokers.  If your shares are held in the name of a bank or broker, the process for voting by mail, telephone or Internet will depend on the processes of your bank or broker, and you should follow the voting instructions on the form you receive from your bank or broker. If you wish to vote the shares you own beneficially at our annual meeting, you must first request and obtain a legal proxy from your broker or other custodian. If you choose not to provide instructions or a legal proxy, your shares are referred to as “uninstructed shares.” Whether your broker or custodian has the discretion to vote these shares on your behalf depends on the ballot item. See the full description of each proposal, below, for a complete description of how uninstructed shares impact the vote on a given proposal.

Online Availability of Information.    Pursuant to the rules of the Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials, which include our notice of annual meeting, proxy statement and annual report to shareholders over the internet. On or about April 29, 2016, we will mail a Notice of Internet Availability of Proxy Materials to our shareholders as of the Record Date and,  such shareholders will have the ability to access all of the proxy materials on a website referened at the URL address included in the Notice of Internet Availability of Proxy Materials. These proxy materials are available without charge.

Householding.  Under a procedure called “householding,” we hope to reduce the environmental impact and cost of the proxy process by sending a single copy of our proxy materials when multiple shareholders share an address and have requested proxy materials in hard copy. Any shareholder at such an address may ask to receive a separate copy of this proxy statement and all related materials. If you wish to receive

a separate copy, contact us and we will promptly mail a complete set to you: Ciber, Inc., Attention: Corporate Secretary—Annual Meeting Document Request, 6312 South Fiddler’s Green Circle, Suite 600E, Greenwood Village, Colorado 80111.

If you have requested to receive proxy materials in hard copy and are receiving multiple copies of our proxy materials at your address, you may request householding in the future. Registered shareholders may send that request to our transfer agent, while beneficial shareholders will need to contact each broker or bank where you hold Ciber common stock.

This proxy statement is dated April 29, 2016 and is first being made available to shareholders on or about April 29, 2016.

 

Part 2—Proposals to Be Voted On

Proposal Summary

The following proposals will be voted on at the 2016 Annual Meeting of Shareholders:

The following chart summarizes the voting standards and handling of uninstructed shares applicable to each of the proposals to be voted on at the 2016 Annual Meeting of Shareholders:

Voting Instructions

You may cast your vote by any of the methods listed below. Please refer to the detailed instructions included with your proxy for submission deadlines and step-by-step instructions.

Voting Prior to the Annual Meeting

 

 

Voting During the Annual Meeting

You may vote electronically during the virtual annual meeting prior to the announcement that the polls are closed. To vote electronically during the annual meeting, be sure you are logged on to www.virtualshareholdermeeting.com/CBR2016, follow the instructions, be ready to provide the twelve-digit number printed on your proxy card, and register your vote.

PROPOSAL 1

Election of Directors

We ask you to elect two nominees to serve as Class I Director for the ensuing three-year term to expire in 2019, or until a successor is elected and qualified. The Nominating/Corporate Governance Committee, with the approval of the non-incumbent members of the Board, has nominated the following individuals for re-election as Class I Directors (see “Directors and Executive Officers—Class I Directors”):

If either of the nominees becomes unavailable or unwilling to serve as a director, persons named in the proxy intend to cast votes for which they hold proxies in favor of the election of such other person as the Board may designate. The Board knows of no reason why either of the nominees would be unable or unwilling to serve on the Board.

Directors are elected by a majority of votes of shares of the Company present in person or by proxy and entitled to vote at the annual meeting on the election of directors in uncontested elections. As a result, a

nominee for director can be elected only if the number of votes cast “for” the nominee exceeds the number of votes cast “against” that nominee. To address the potential for a “holdover director” situation in which, under Delaware law, a director remains on the Board of Directors until his or her successor is elected and qualified, our bylaws require each director nominee to submit an irrevocable resignation in advance of the vote of our shareholders. This resignation is contingent upon both the nominee not receiving the required vote for re-election and acceptance of the resignation by the Board of Directors pursuant to its policies and our Corporate Governance Guidelines.

If a director nominee receives more “against” votes than “for” votes for their election, after receipt of the certified results of the shareholder vote pertaining to such election, our Nominating/Corporate Governance Committee of our Board of Directors will, in light of the best interests of the Company and its shareholders make a recommendation to the Board of Directors regarding the acceptance or rejection of such resignation. In considering whether to recommend accepting or rejecting the tendered resignation, the Nominating/Corporate Governance Committee will consider all factors deemed relevant by such committee, including, without limitation, (1) the impact of the acceptance of the resignation on our New York Stock Exchange (“NYSE”) listing or other regulatory requirements, (2) the financial impact of the acceptance of the resignation (including, for example, amounts that may become payable under executive compensation or other agreements), (3) the unique qualifications of the director whose resignation has been tendered (including, for example, whether the director serves on the Audit Committee as an “audit committee financial expert” and whether there are one or more other directors qualified, eligible and available to serve on the Audit Committee in such capacity), (4) the reasons that the Nominating/Corporate Governance Committee believes are the reasons that shareholders cast votes against the election of such director (including, for example, whether the director was the target of a "vote no" campaign on an illegitimate or wrongful basis), and (5) any alternatives for addressing the reasons for the "against" votes (including, for example, rejection of the resignation coupled with a commitment to seek to address and cure such underlying reasons).

The Board of Directors will take formal action on the Nominating/Corporate Governance Committee’s recommendation no later than 90 days following the receipt of the certified results of the shareholder vote pertaining to such election. In considering the Nominating/Corporate Governance Committee's recommendation, the Board of Directors will consider the information, factors and alternatives considered by the Nominating/Corporate Governance Committee and such additional information, factors and alternatives as the Board of Directors deems relevant. If the Board of Directors accepts the resignation of a director who is an unsuccessful incumbent, or if in a non‑contested election a nominee for director who is not an incumbent director does not receive a majority vote, then the Board of Directors may fill the resulting vacancy, or may decrease the size of the Board of Directors in accordance with our bylaws.

Cumulative voting is not permitted. Brokers and other custodians are not entitled to vote uninstructed shares on this proposal and such shares will not be counted in evaluating the results. Unless otherwise indicated on the proxy card, proxies will be voted FOR the election of the director nominees.

 

PROPOSAL 2

Advisory Vote to Approve the Compensation of our Named Executive Officers

We believe that the shareholder advisory vote on executive compensation represents one of the most important forms of shareholder feedback. In early 2015, we conducted significant shareholder outreach efforts and following our 2015 Annual Meeting, our executive management team continued our extensive shareholder outreach program throughout the rest of the year. In addition to ongoing dialogue we have with our key investors, we also conducted investor roadshows in 2015 in Portland, Boston, and New York City and in 2016, we have met with or are scheduled to meet with investors in Dallas, Chicago and Milwaukee.

Following shareholder discussions in late 2014 and early 2015, we instituted a number of changes to our compensation program, including the following key 2015 program changes:

We believe that these changes are consistent with the feedback received from our shareholders and demonstrate our commitment to a strong pay for performance philosophy. The program changes are described in detail in the “Compensation Discussion and Analysis” section of this proxy statement, beginning on page 30.

As required by Section 14A of the Exchange Act, we are asking for your non-binding advisory vote to approve the compensation of the Company’s named executive officers as disclosed in this proxy statement (which disclosure includes the “Compensation Discussion and Analysis,” the compensation tables, and the narrative disclosures that accompany the compensation tables below). We believe that it is beneficial to seek the vote of our shareholders on the design and effectiveness of our executive compensation program on an annual basis.

The Board of Directors asks you to vote “FOR” the following resolution:

“RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative discussion.”

As an advisory vote, this proposal is not binding on the Company or the Board of Directors. However, the Compensation Committee, which is responsible for designing and administering our executive compensation program, values the opinions of our shareholders and considers the outcome of the prior shareholder votes in making compensation decisions. The Compensation Committee, as well as the Board of Directors, intends to continue taking into account the outcome of future shareholder votes in its deliberations on executive compensation matters.

Approval of this proposal requires the affirmative vote of a majority of shares of the Company present in person or by proxy at the annual meeting and entitled to vote on the proposal. Brokers and other custodians are not entitled to vote uninstructed shares on this proposal and such shares will not be counted in evaluating the results. Unless otherwise indicated on the proxy card, proxies will be voted FOR approval of the compensation of named executive officers.

PROPOSAL 3

Ratification of Appointment of Independent Registered Public Accounting Firm

The Audit Committee of the Board has appointed Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. Services provided to Ciber, Inc. and its subsidiaries by Ernst & Young LLP in fiscal years 2015 and 2014 are described below (see “Independent Registered Public Accounting Firm—Auditor Fees and Services”).

Ernst & Young LLP audited our consolidated financial statements for the fiscal year ended December 31, 2015.

We are asking our shareholders to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016. Although shareholder ratification is not required by our bylaws or otherwise, the Board believes that submitting the selection of Ernst & Young LLP to the shareholders for ratification is advisable as a matter of good corporate practice. If the shareholders fail to ratify the appointment of Ernst & Young LLP, the Audit Committee will consider whether or not to retain Ernst & Young LLP; however, the Audit Committee may select Ernst & Young LLP notwithstanding the failure of the shareholders to ratify this appointment. If the appointment of Ernst & Young LLP is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interest of Ciber and its shareholders.

Representatives of Ernst & Young LLP will be present at the annual meeting to respond to appropriate questions and make any statements if they desire to do so.

Approval of this proposal requires the affirmative vote of a majority of shares of the Company present in person or by proxy at the annual meeting and entitled to vote on the proposal. Brokers and other custodians are entitled to vote uninstructed shares on this proposal and such votes will be counted in evaluating the results. Please contact your broker or other custodian for information on their voting policy with respect to uninstructed shares. Unless otherwise indicated on the proxy card, proxies will be voted FOR the ratification of the appointment of Ernst & Young LLP.

 

 

Part 3—Beneficial Ownership

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our common stock on April 22, 2016 (unless noted otherwise). The table includes stock options exercisable for shares of common stock within sixty days of April 22, 2016 and Restricted Stock Unit (“RSU”) awards that will vest within sixty days of April 22, 2016, held by (i) each person or group of persons known by us to own beneficially more than 5% of the outstanding common stock, (ii) each of our directors and director nominees, (iii) each Named Executive Officer (as identified and defined in “Executive Compensation” below), and (iv) all of our executive officers and directors as a group. All information is taken from or based upon ownership filings made by such persons with the SEC and other information provided by such persons to us. Unless otherwise indicated, (i) the beneficial owners listed below have sole voting and investment power with respect to the shares reported as owned and (ii) the address for all of the beneficial owners listed below is 6312 South Fiddler’s Green Circle, Suite 600E, Greenwood Village, Colorado, 80111. On April 22, 2016, there were 80,616,915 shares of common stock outstanding.

*Less than 1%

 

Part 4—Directors and Executive Officers

Our Board of Directors

Each year at our annual meeting, directors constituting approximately one-third of the Board are elected for a three-year term or until a successor is duly elected and qualified. The terms of the current Class I Directors (Mark Floyd and Bobby G. Stevenson) will expire at this 2016 Annual Meeting of Shareholders. The Nominating/Corporate Governance Committee has nominated Messrs. Floyd and Stevenson for election at the 2016 Annual Meeting of Shareholders as Class I Directors. The terms of the Class II Directors (Michael Boustridge and H. Paulett Eberhart) will expire in 2017 and the terms of the Class III Directors (Richard K. Coleman, Jr. and Mark Lewis) will expire in 2018.

The following table sets forth our directors and nominees, their ages, positions currently held with us, the year elected, and class of directorship.

 

Pursuant to our bylaws, vacancies on the Board may be filled by the affirmative vote of a majority of the remaining directors then in office. A director elected to fill a vacancy, including a vacancy created by an increase in the size of the Board, serves for the remainder of the full term of the new directorship or of the class of directors in which the vacancy occurred. If the number of directors is changed, any increase or decrease will be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, but in no case will a decrease in the number of directors shorten the term of any incumbent director. Currently, our Board of Directors has set our Board size at six members.

Class I Directors

Class II Directors

Class III Directors

 

Director Selection Process

We believe that our directors must bring the skill mix and experience necessary to perform the Board of Directors’ oversight function effectively. Prospective Board members are identified by a combination of methods, including use of search firms, studying other boards, word-of-mouth in industry circles, inquiries of outside professionals, and recommendations made to us. Although we do not have a formal policy with regard to diversity when considering candidates for director, our Nominating/Corporate Governance Committee looks at the entirety of our Board and seeks to add skills and experience that complement other members of the Board, rather than director nominees who may represent a particular constituency. We value, encourage, and draw upon diverse viewpoints, believing that they add perspective and creativity to our discussion of business issues and challenges. The Nominating/Corporate Governance Committee considers a number of factors for Board nominees including, but not limited to, the following:

In recruiting Board members to serve on a designated committee, the Nominating/Corporate Governance Committee also takes into account skills and experience specific to that committee. For example, our objective is to recruit Audit Committee members who are financial experts or financially literate.

Stockholder Agreement

On March 29, 2015, we entered into a stockholder agreement (the “Stockholder Agreement”) with Bobby G. Stevenson, the 1989 Bobby G. Stevenson Revocable Trust, the Bobby G. Stevenson Revocable Trust, and the Dixie Foundation (together with their affiliates and associates, the “Stockholder Group”).

Pursuant to the Stockholder Agreement, among other things, the Board of Directors agreed (i) to nominate Bobby G. Stevenson as a director of the Board at the 2016 Annual Meeting of Shareholders to serve a three-year term and (ii) following the 2015 Annual Meeting of Shareholders, to appoint Mr. Stevenson as acting Chairman of the Board with no compensation for such service until such time as the Board of Directors appoints a new Chairman of the Board to replace Mr. Stevenson. Pursuant to the Stockholder Agreement, the Stockholder Group has agreed to vote their shares in accordance with all of the nominations and proposals recommended by the Board until one day after the 2017 Annual Meeting of Shareholders.

The Stockholder Agreement includes customary standstill provisions, subject to certain exceptions. The Stockholder Group agreed to not disclose certain confidential information concerning the business and affairs of the Company. Each party further agreed not to publicly disparage or criticize the other party.

Director Compensation

Our Board of Directors periodically reviews and establishes the compensation of our non-employee directors based on recommendations from the Compensation Committee. In setting director compensation, we review, among other things, director compensation surveys in publications for boards of directors and the publicly-available data of our compensation peer group (see “Compensation Discussion and Analysis” below for a detailed discussion of our compensation peer group).

The following table sets forth the components of the non-employee director compensation program that were in effect for 2015:

The RSU awards granted upon initial service as a non-employee director are based on the average closing price for our common stock for the 30 days preceding the grant and vest in equal quarterly installments over a period of three years. The annual RSU awards to non-employee directors are granted based on the average closing price for our common stock for the 30 days preceding the grant and vest in equal quarterly installments over a period of one year. Employee directors receive no additional compensation for serving on our Board of Directors. All equity awards are made under our Amended and Restated 2004 Incentive Plan.

Director Stock Ownership and Retention Policy.  In 2014 we increased the minimum stock holding for non-employee directors to $300,000. Our current non-employee directors have until January 1, 2019 to meet this increased holding requirement. Any newly elected non-employee director will have until the later of January 1, 2019 or five years from the date of his or her initial election or appointment to our Board of Directors to meet this stock ownership requirement. In addition, all non-employee directors are also required to hold at least 50% of any shares of our common stock acquired upon the vesting of any stock awards or

exercise of stock options through the non-employee director compensation program for at least a six-month period after such vesting or exercise.

Other Benefits.  We reimburse our non-employee directors for travel and lodging expenses incurred in connection with their attendance at Board and shareholders’ meetings and at other Company-sponsored events. We also have made health care insurance and long-term care insurance available to our non-employee directors and their spouses, in which the non-employee directors may participate at their option. The cost to us of long-term care insurance depends upon the age of the director or spouse electing to participate. Except as set forth below for Messrs. Stevenson and Kurtz (see the notes to the “2015 Director Compensation Table” below), our non-employee directors receive no other perquisites.

2015 Director Compensation Table

 

*            Under the SEC rules and regulations, Messrs. Jacobs, Lauk and Spira were not Section 16 reporting persons as of December 31, 2015, and as a result, they are not reported in this footnote.

In addition, we have agreed to continue paying health care insurance for Mr. Stevenson and his spouse for three years after he ceases to be a member of our Board of Directors, subject to certain limitations. In addition, Mr. Stevenson will be eligible to participate in the Company’s health care insurance plan for a period of ten years after the three year period previously noted for Mr. Stevenson and his spouse, to the extent permitted under the Company’s insurance plans, and subject to his reimbursement of the net cost of such insurance to the Company.

 

Executive Officers 

(as of the Record Date)

 

 

 

 

 

 

 

Part 5—Corporate Governance Practices 

Director Independence

Our Board of Directors has determined that five of our current six directors are independent within the meaning of the listing standards of the NYSE and our Corporate Governance Principles (provided on our website at “Investor Relations—Corporate Governance”). After reviewing such standards, principles and additional relevant facts and circumstances, including any related party transactions, the Board has determined that each of the following directors or nominees is independent and has or had no material relationship with the Company that would impair his independence: Messrs. Coleman, Floyd, Lewis and Stevenson and Ms. Eberhart.

Board Leadership Structure

The positions of Chief Executive Officer and Chairman of the Board of Directors are separated at Ciber. In our Board’s opinion, such separation allows for the objective evaluation of our management’s performance and strong, independent oversight by the Board. Mr. Stevenson currently serves as the Chairman of the Board of Directors.

Role of the Board in Risk Oversight

While our entire Board is accountable for and involved in risk oversight, our directors have elected to assign primary responsibility for risk oversight to the Audit Committee. The Audit Committee periodically reviews the risk management processes designed and implemented by the Company and receives reports from Company management to ensure that their approach is consistent with our corporate strategies and that there is an appropriate culture of risk awareness and assessment in decision making. At the same time, the Audit Committee recognizes that other Board committees, such as our Compensation Committee, have expertise in areas of risk oversight specific to their duties and responsibilities and therefore the Audit Committee delegates specific aspects of risk oversight to the other committees. Each committee periodically reports key risk oversight findings back to the full Board of Directors, so that the risk oversight activities are coordinated and consistent with our overall risk management processes. The full Board can then monitor risk taking across the organization and ensure that appropriate risk taking is aligned with and incorporated into our strategic planning process.

Meetings of Independent Directors

Our non-management directors meet regularly in executive session without management. The executive sessions are chaired by our Chairman of the Board. The executive sessions of our non-management directors are held in conjunction with each regularly scheduled Board meeting.

Board Meetings

The Board met eleven times in 2015 in regularly scheduled quarterly and special meetings. Each incumbent director participated either in person or by telephone conference in at least 75% of all 2015 Board meetings and committee meetings (of which such director was a member). Seven directors attended the 2015 annual meeting and each director is expected to attend the 2016 Annual Meeting of Shareholders.

Board Committees

The Board has three standing committees: Audit, Compensation, and Nominating/Corporate Governance. Current membership in those committees is set forth below.

Audit Committee

The principal responsibilities of the Audit Committee are, among others: (1) engaging and overseeing the work of the independent auditor, including the execution of the engagement letter and review of the audit plan; (2) reviewing the independence, internal quality control procedures and performance of the independent auditors and the qualifications of the key audit partner and audit managers; (3) overseeing the documentation, evaluation and testing of our system of internal controls; (4) establishing our policy on provision of non-audit services; (5) pre-approving all audit and permitted non-audit services provided to us; (6) establishing the Committee’s procedure for receiving and reviewing complaints regarding accounting, internal controls and auditing matters; (7) discussing policies and guidelines with respect to financial risk exposure and management; (8) receiving reports from the auditor and reviewing with the auditor critical accounting policies and practices, alternative treatments of financial information that have been discussed with management and the effectiveness of internal controls and any material written communications between the auditor and our management; (9) reviewing Management’s Discussion and Analysis and our annual audited financial statements and periodic reports that include financial statements prior to filing or distribution; (10) discussing, generally, all financial disclosures including financial media releases as well as financial information and earnings guidance provided to analysts and rating agencies; (11) reviewing and approving any related party transactions pursuant to our Related Party Transaction Policy; (12) determining and approving the compensation of the independent auditor; (13) discussing policies with respect to risk assessment and risk management; and (14) reporting to the Board with respect to their actions.

The Audit Committee met eight times during 2015. The Audit Committee Charter is available for review on our website at www.ciber.com under “Investor Relations—Corporate Governance.”

The Board has determined that each of Ms. Eberhart and Messrs. Coleman and Floyd each qualify as an “audit committee financial expert” pursuant to Item 407(d) of Regulation S-K. The Board of Directors has determined that all of the members of the Audit Committee are independent within the meaning of the listing standards of the NYSE and applicable SEC rules and our Corporate Governance Principles.

Compensation Committee

The principal responsibilities of the Compensation Committee are, among others: (1) to define our philosophy, policies and procedures regarding executive compensation; (2) to administer and approve awards under our Amended and Restated 2004 Incentive Plan and to administer our Employee Stock Purchase Plan; (3) to review the performance of the Chief Executive Officer and the other executive officers (see “Compensation Discussion and Analysis,” below); (4) to approve the annual base salary, cash

incentive compensation, and equity compensation for our executive officers; (5) to make recommendations regarding non-employee director compensation; and (6) to review the Compensation Discussion and Analysis and recommend its inclusion in the proxy statement for the 2016 Annual Meeting of Shareholders and its incorporation by reference into our 2015 Annual Report on Form 10-K.

The Compensation Committee met nine times during 2015. The Compensation Committee Charter is available for review on our website at www.ciber.com under “Investor Relations—Corporate Governance.”

The Board of Directors has determined that all of the members of the Compensation Committee are independent within the meaning of the listing standards of the NYSE and our Corporate Governance Principles.

Nominating/Corporate Governance Committee

The principal responsibilities of the Nominating/Corporate Governance Committee are to identify and nominate qualified individuals to serve as members of the Board, to evaluate and recommend to the Board of Directors individuals to serve as Chairman of the Board and as Chief Executive Officer, to develop and recommend to the Board of Directors a succession plan for the Chief Executive Officer and the Chairman of the Board, and to nominate candidates to committees of the Board of Directors, including the chairs of such committees and to nominate candidates to fill such other positions as may be deemed necessary and advisable by the Board. In addition, the Nominating/Corporate Governance Committee is responsible for developing, reviewing and recommending to our Board of Directors our Corporate Governance Principles and our Code of Business Conduct and Ethics, as well as evaluating the Board and its processes.

The Nominating/Corporate Governance Committee met one time in 2015. The Nominating/Corporate Governance Committee’s Charter can be found at www.ciber.com under “Investor Relations—Corporate Governance.”

The Board of Directors has determined that all of the members of the Nominating/Corporate Governance Committee are independent within the meaning of the listing standards of the NYSE and our Corporate Governance Principles.

Governance Policies

Corporate Governance Principles

Our Board has adopted formal Corporate Governance Principles to address matters of corporate governance including, but not limited to, Board composition and leadership, Board member qualifications, compensation, tenure, succession, Board organization, term limits, director service on additional public company committees, resignation policies relating to significant changes of a director’s principal employment or the major responsibilities they held when they joined the Board and our majority voting standard for the election of directors in uncontested elections and Board committee responsibilities.

Code of Business Conduct and Ethics

Our Code of Business Conduct and Ethics is applied consistently to all employees and has been a prominent part of our Employee Handbook for several years. The Code of Business Conduct and Ethics adopted by our Board of Directors applies to all employees and includes specific requirements for executives and senior financial officers with respect to the ethical standards and obligations relevant to accounting and financial reporting. The Code of Business Conduct and Ethics contains procedures for reporting suspected violations of the Code of Business Conduct and Ethics and references the Audit

Committee procedure for the reporting of questionable accounting and auditing matters or other concerns about accounting and auditing matters.

If the Board makes any substantive amendments to, or grants certain waivers from the Code of Business Conduct and Ethics as it applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.

Compensation Committee Interlocks and Insider Participation

During 2015, none of the current members of our Compensation Committee served, or has at any time served, as an officer or employee of the Company or any of our subsidiaries. In addition, none of our executive officers has served as a member of a board of directors or a compensation committee, or other committee serving an equivalent function, of any other entity, one of whose executive officers served as a member of the Board or the Compensation Committee. Accordingly, our Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.

Report of the Compensation Committee

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on that review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement for the 2016 Annual Meeting of Shareholders and incorporated by reference in the 2015 Annual Report on Form 10-K.

Submitted by the Members of the Compensation Committee:

Mark Floyd, Chairman

Mark Lewis

 

Certain Relationships and Related Person Transactions

Our Board has adopted a written policy that requires the Audit Committee to review any financial transactions, arrangements, or relationships that exceed $120,000 in which Ciber is a participant and a related party (as defined in Item 404(b) of Regulation S-K) has a direct or indirect interest. Audit Committee approval of any related party transaction will depend upon whether or not the transaction is fair and beneficial to Ciber and its shareholders. Our Related Party Transaction Policy and the conflict of interest provision contained in our Code of Business Conduct and Ethics further describe our policies relating to relationships and related party transactions.

The Corporate Governance Principles, Code of Business Conduct and Ethics, and Related Party Transaction Policy can be found on our website at www.ciber.com under “Investor Relations—Corporate Governance” or you may request a copy by writing to us at Ciber, Inc., Attention: Investor Relations, 6312 South Fiddler’s Green Circle, Suite 600E, Greenwood Village, Colorado 80111.

Communicating with the Board

Any shareholder or other interested party who wishes to contact our Chairman of the Board, our non-management Directors, our independent Directors, or any individual director, may do so by writing to our Chairman at: Ciber, Inc., Attn: Chairman of the Board, 6312 South Fiddler’s Green Circle, Suite 600E, Greenwood Village, Colorado 80111. Any communication that raises concerns regarding our internal controls or financial disclosures will immediately be referred to our Audit Committee.

 

Part 6—Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Shareholder Outreach and Key Changes to 2015 Executive Compensation Program

We believe that the shareholder say-on-pay vote represents one of the most important forms of shareholder feedback, and we continually strive for a best-in-class compensation program that successfully addresses our senior executive talent attraction and retention needs. Following extensive shareholder outreach efforts in 2014 and early 2015, along with a number of key program changes for 2015, we were pleased with the positive outcome of our 2015 say-on-pay vote. Following our 2015 Annual Meeting, we continued our extensive shareholder outreach program throughout the rest of the year. In addition to ongoing dialogue we have with our key investors, we also conducted investor roadshows in Portland, Boston, and New York City in November and December 2015. As in prior years, the comments received were carefully considered and thoroughly reviewed by the Compensation Committee and our senior executives.

We take shareholder feedback seriously and based on recent discussions, we instituted a number of changes to our compensation program in the last year, including several key 2015 program changes described below.

Key 2015 Program Changes

We believe that these changes demonstrate our ongoing commitment to a strong pay for performance philosophy and will help to retain and motivate our senior executives to successfully implement both our short-term and long-term business strategies, and strengthen the link between the compensation of our executives and the return to our shareholders. As in prior years, the Compensation Committee will continue to review the annual say-on-pay vote results, as well as feedback from our shareholders, and determine whether to make any future changes in light of the comments it receives and prevailing market practices.

For 2016, have met with or are scheduled to meet with investors in Dallas, Chicago and Milwaukee, continuing our ongoing robust shareholder outreach efforts.

Executive Summary

Our Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs as well as the relevant decisions and factors considered by the Compensation Committee in establishing our executive compensation programs for 2015. For 2015, our Named Executive Officers were:

These individuals above are collectively referred to herein as our "Named Executive Officers" or "NEOs."  Eric Stine joined Ciber on March 16, 2015 and his compensation reported represents compensation only for the applicable portion of fiscal 2015. Mr. Stine resigned from the Company effective April 6, 2016.

Overall, our compensation programs are designed to attract, motivate, and retain talented, competent, and high quality executives capable of successfully executing the business strategy for a leading global IT consulting company. Consistent with prior years, our 2015 executive compensation programs were based upon the following guiding principles:

These guiding principles are reinforced further by the following best practices found in our compensation programs:

 

During 2015, we had a tremendous year of change and development at Ciber. The Company underwent a significant business transformation and reorganization and made substantial progress over the past year, including:

 

Though the strides we made in 2015 are not yet reflected in our financial results, we have taken the important actions necessary to achieve the profitable growth and strong cash generation that our shareholders expect and desire. Despite our challenges, we improved margins while maintaining revenues and investing in our business in 2015: 

 

While these accomplishments were significant, our key financial results as measured by global revenue and by net operating income before interest, taxes, amortization and restructuring (“EBITA,” which we use as a performance metric in our compensation programs) fell short of our challenging target goals for 2015. After carefully considering these financial results (which were above our threshold level goals), as well as other operational and strategic accomplishments made in 2015 and the current state of the business, the Compensation Committee determined that no annual incentive awards would be paid to our Chief Executive Officer and other NEOs under our 2015 annual performance-based cash incentive plan for 2015 performance.  

 

 

 

 

 

 

 

1 Please see Annex A to this proxy statement for a reconciliation of revenue on a constant currency basis to the closest measure under U.S. generally accepted accounting principles.

 

Key Components of Our Executive Compensation Program

The following table outlines the key components of our executive compensation program as well as how each component reinforces one or more facets of our executive compensation philosophy and goals:

 

In recent years, stock options have been used on a limited basis. The Compensation Committee views stock options as another performance-based LTI vehicle that can be granted when the Compensation Committee deems them a useful tool.

Establishing Annual Compensation Levels

In setting annual compensation levels for our executive officers, the Compensation Committee thoughtfully considered all elements of Ciber’s compensation programs, both separately and in aggregate, to help ensure that our executive compensation objectives are met. In making its decisions, the Compensation Committee considers multiple relevant internal and external factors as it deems appropriate, including but not limited to: the Company’s business objectives and strategy, market best practices and trends with respect to compensation program design and levels, executive talent attraction and retention needs, and each executive’s role and responsibilities.

Peer Group

In order to ensure that our executive compensation programs are reasonable and competitive in the marketplace, the Compensation Committee compares our compensation programs and levels to those at

other companies of a size similar to Ciber (based primarily on revenues and market value) and against which we compete on an operational basis and/or for executive talent. While the Compensation Committee believes that a compensation peer group is a useful reference point, it is not an exclusive measure in determining our executive compensation, as it is just one of several factors that it considers in setting our executive compensation. During 2015, we performed a rigorous review of our peer group and replaced five of the companies in the compensation peer group (and removed one that was no longer publicly traded) in order to ensure we were using a group that was reflective of Ciber's size, mix of services and global client base, and against whom we would compete for executive level talent. Based on this review, the following compensation peer group was used for 2015 compensation decisions:

 

At the time of the 2015 executive compensation review, Ciber was positioned slightly above the median of the compensation peer group in terms of revenues.

Base Salary

The Compensation Committee conducts an annual review of each executive officer’s base salary, with input from our Chief Executive Officer (except with respect to his own base salary), and makes adjustments as it determines to be reasonable and necessary to reflect the scope of an executive officer’s performance, individual contributions and responsibilities, competitive market conditions, and retention objectives. While the Compensation Committee believes that the base salaries of our executive officers should be competitively positioned relative to comparable positions at the companies in our compensation peer group, it makes decisions on individual adjustments to base salaries in its sole discretion based on its evaluation of the previously-described factors.

The following table shows the annualized base salaries for the NEOs for 2015:

*Since Mr. Stine joined Ciber in March 2015, he was paid a pro-rata portion of his annualized salary based on time served at Ciber.

 

Annual Performance-based Cash Incentive Plan

Consistent with our strong pay for performance philosophy and in order to align our executive officers’ interests with those of our shareholders, the Compensation Committee established an annual performance-based cash incentive plan to motivate and reward executives for achieving annual financial, strategic, and individual objectives.

The Compensation Committee established target annual incentive opportunities for each of our serving NEOs at the start of the year. Target opportunities for the NEOs were set at competitive levels relative to comparable roles in the market based upon a review of market compensation and also in consideration of each NEO’s individual role and responsibilities.

For 2015, target annual incentive opportunities for our NEOs (as a percentage of their respective annualized base salaries) were as follows:

 

*Since Mr. Stine joined Ciber in March 2015, he was eligible for an incentive opportunity calculated as a pro-rata portion of his annualized target bonus based on time served at Ciber. 

The Compensation Committee established the following metrics and weightings under the 2015 annual performance-based cash incentive plan for our NEOs:

 

 

The different weightings for Mr. Stine reflect the fact that he was not yet with Ciber at the time of the design of the 2015 annual performance-based cash incentive plan for the NEOs.

 

Financial Metrics and Performance

The financial metrics and weightings approved by the Compensation Committee were selected because it believed that these: (1) were the primary drivers of shareholder value in the near term; and (2) provide direct accountability for our NEOs. The Compensation Committee established the following performance

levels and payout percentages related to the 2015 financial metrics – Ciber Global Revenue and Ciber Global EBITA Dollars – under the annual performance-based cash incentive plan:

 

For performance between the levels shown, payouts are to be linearly interpolated.  A minimum EBITA achievement threshold of 60% of the Ciber Global EBITA plan also must be achieved in order for a payout to be earned under the Ciber Global Revenue component. As shown in the table above, annual award opportunities are capped at 200% of the target opportunities.

 

The following table shows the target performance goals and corresponding actual performance for the Ciber Global Revenue and Ciber Global EBITA Dollars metrics for 2015 (in $000s):

 

 

Individual Performance

The individual performance component of our annual performance-based cash incentive plan was weighted as 30% of the overall target opportunity for NEOs other than Mr. Stine. Our NEOs are eligible to earn a bonus based upon individual performance against Compensation Committee-approved goals. The evaluation of each NEO’s individual performance against his/her goals is based upon a subjective assessment by the Compensation Committee based, in part, on the Chief Executive Officer’s recommendation (except as related to his own performance). We believe that it is important to have this element in our annual performance-based cash incentive plan in order to be able to formally recognize key individual contributions made by our NEOs to our overall success that cannot be quantitatively measured.

Awards for Fiscal 2015 Performance

For 2015, based on our performance against our financial metrics and the Compensation Committee’s assessment of individual performance, although the Company performed at threshold levels for the financial metric component, no bonuses were paid to any of our NEOs under our 2015 annual performance-based cash incentive plan. The Compensation Committee made this determination after carefully considering the 2015 financial results, as well as other operational and strategic accomplishments made in 2015 and the current state of the business. Mr. Stine received a one-time payment of $19,000 in September 2015 outside of our annual performance-based cash incentive plan to recognize his efforts and achievements toward launching Ciber MomentumTM.

Long-term Equity-based Compensation

We use equity awards granted under our Amended and Restated 2004 Incentive Plan to incentivize and reward our executive officers, including the NEOs, for long-term corporate performance based on the value of our common stock. Thus, the interests of our executive officers are aligned with those of our shareholders. We do not apply a rigid formula in determining the value of equity awards to be granted to our executive officers upon their initial employment. Instead, these awards are established through arms-length negotiation at the time the individual executive officer is hired. Thereafter, as part of its annual review of our executive compensation program, the Compensation Committee determines the value of any additional equity award at levels it considers appropriate. The specific dollar amount is determined, taking into consideration the nature of the NEO's position, his/her responsibilities and contributions to the Company, and equivalent awards to NEOs or key employees in similar positions at companies comparable to Ciber.

Beginning in 2015, our annual LTI grants consisted of performance-based restricted stock units (“PRSUs”) and time-based restricted stock units (“RSUs”):

PRSUs:  PRSUs will be earned over a three-year period based on performance against Compensation Committee-approved EBITA targets for each year of the performance period.  Any PRSUs earned over this period will then be subject to a relative TSR multiplier based on Ciber's relative TSR performance against its TSR Peer Group Index (the S&P Small Cap 600 IT Sector Index).  Thus, the total number of PRSUs “banked” with respect to the EBITA performance during the three-year performance period can, in the aggregate, be positively or negatively adjusted based on the relative TSR multiplier at the end of the performance period. The maximum number of PRSUs that can be earned is 300% of the target number of PRSUs granted; in order to achieve this payout, performance must be achieved at maximum on both the EBITA goals and Ciber’s relative TSR performance as shown in the following tables:

 

 

PRSUs are weighted 30% of the overall LTI mix.

RSUs:  RSUs will vest quarterly over three years commencing six months from the grant date and are weighted 70% of the overall LTI mix.   

The following table shows the number of PRSUs awarded (at target level for the entire performance period) and RSUs granted to the NEOs in 2015.

The PRSUs and RSUs awarded to Mr. Stine were granted in conjunction with him joining Ciber.  The vesting terms and conditions for the PRSUs were the same as those for the other NEOs, and the RSUs were to vest quarterly over three years commencing six months from the grant date.  Mr. Stine resigned from the Company effective April 6, 2016 and forfeited all unvested equity awards.

The following table shows the target performance goals and corresponding actual performance for the Ciber Global EBITA Dollars metrics for the 2015 PRSUs (in $000s):

 

The following table shows the number of PRSUs available to be earned in 2015 at Target Level and the number of PRSUs banked for 2015 based on 2015 EBITA achievement:

 

Stock Ownership Guidelines

On January 1, 2014, we expanded our stock ownership policy to apply not only to members of our Board of Directors but also to certain of our executive officers, specifically our Chief Executive Officer, Chief Financial Officer and, when applicable, our Chief Operating Officer. Each of these executive officers is required to hold equity in the Company equal to three times that officer’s annual base salary. The total value of an executive officer’s equity holdings includes all shares of common stock owned by the executive officer, plus 50% of the value of all unvested equity awards held by the executive officer. Relevant executive officers have five years from the date of joining Ciber to meet their stock ownership requirement.

Anti-Hedging and Anti-Pledging Policies

Our Insider Trading Policy includes an express prohibition against trading derivatives based on our securities, hedging any investment in our equity securities, or pledging our equity securities by members of our Board of Directors, executive officers, or other employees designated as “insiders.” We believe this policy is another means of preserving the ongoing alignment between our business leaders and our shareholders.

Compensation Recovery/Clawback Policy

Under the oversight and approval of our Compensation Committee, we intend to approve a general compensation recovery (“clawback”) policy once the NYSE adopts final rules implementing such requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Compensation Program Risk Assessment

The Company reviews and monitors the compensation-related risks associated with its compensation programs on an ongoing basis. The Compensation Committee believes that these programs, as well as our compensation policies and practices, are not reasonably likely to present material risk to the Company.

Retirement Benefits and Plans

The Company does not provide any defined benefit pension plans or deferred compensation benefits to our NEOs.

Health, Welfare, and Other Benefits

We have established a tax-qualified Section 401(k) retirement savings plan available on the same terms and conditions to all of our benefit eligible employees, including the NEOs. Under this plan, participants may elect to make pre-tax contributions of up to 75% of their compensation, with the exception of employees who meet the Internal Revenue Service discrimination testing definition of “highly-compensated employees,” who may contribute a maximum of 9%. Contributions made may not exceed the statutory income tax limitation for the applicable year. In addition, in 2015, employees 50 years old or older were eligible to make an annual “catch-up” contribution of up to $6,000. For the 2015 plan year, we matched up to 33% of the first 6% of compensation contributed to the plan, with a limit of $2,000 per calendar year. We intend for the plan to qualify under Section 401(a) of the Internal Revenue Code so that contributions by participants to the plan, and income earned on plan contributions, are not taxable to participants until withdrawn from the plan.

Additional benefits received by our executive officers, including the NEOs, include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, basic life insurance coverage, and long-term care coverage. These benefits are provided to our executive officers on the same basis as to all of our full-time employees.

We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.

Perquisites

We do not view perquisites or other personal benefits as a significant component of our executive compensation program. From time to time, we have provided limited perquisites to certain executive officers. In the future, we may provide perquisites or other personal benefits in limited circumstances, such as where we believe it is appropriate to assist an individual executive officer in the performance of his or her duties, to make our executive officers more efficient and effective, and for recruitment, motivation, or retention purposes. All future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by the Compensation Committee.

Agreements between the Company and the NEOs

We have entered into employment agreements with each of our current NEOs. These agreements contain market competitive compensation packages designed to retain our critical personnel and to motivate these key employees to successfully execute our long-term business strategy. The Compensation Committee evaluated and determined the payments and benefits to be provided pursuant to these executive employment agreements. Its determinations were based primarily upon an analysis prepared by its compensation consultant regarding the practices of our compensation peer group, arms-length negotiations with the applicable executive, and/or other employment market-related data at the time.

In addition to provisions relating to compensation payments and benefits, confidentiality, non-competition and/or non-solicitation of clients and employees, the employment agreements also provide these executive officers, including the NEOs, with certain protections in the event of termination of their employment under specified circumstances, including following a change in control of the Company. We believe that entering into these agreements helps these executive officers maintain continued focus and dedication to their assigned duties to maximize shareholder value when faced with a potential transaction that could involve a change in control of the Company. The terms and conditions of these agreements were determined after review by our Compensation Committee of our retention goals for each executive officer, as well as an analysis of competitive market data.

Role of Compensation Committee

The Compensation Committee is responsible for formulating, determining, reviewing, and modifying the compensation of our executive officers as well as the development and oversight of our compensation philosophy. The Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it determines in its discretion, in connection with the discharge of its responsibilities. The Compensation Committee:

Role of Management

In determining the performance criteria and compensation of our executive officers, the Compensation Committee takes into account the recommendations of our Chief Executive Officer (except with respect to his own compensation). Typically, our Chief Executive Officer will make these recommendations for our executive officers based on his assessment of each executive officer’s individual performance as well as his knowledge of each executive officer’s job responsibilities, seniority, expected future contributions, and his evaluation of competitive market data.

Our Chief Executive Officer also attends meetings of our Board of Directors and the Compensation Committee at which executive compensation matters are addressed, except with respect to discussions involving his own compensation. Decisions with respect to our Chief Executive Officer’s compensation are made by the Compensation Committee, all of the members of which are also independent members of our Board of Directors.

Role of Compensation Consultant

Beginning in 2015, Mercer, an industry leading global human resources consulting firm, served as the compensation consultant to the Compensation Committee. Mercer was engaged to provide advice and assist the Compensation Committee in (i) reviewing our compensation peer group, (ii) analyzing executive officer and Board of Director compensation, (iii) reviewing and analyzing market data related to our executive officers' base salaries, annual performance-based cash incentives, and long-term equity incentive compensation levels, and (iv) evaluating equity plan design and structures.

Mercer reported directly to the Compensation Committee and did not provide any services to the Company or its management in 2015 other than those provided to the Compensation Committee described above. The Compensation Committee has considered the independence of Mercer in light of the listing standards of the NYSE on compensation committee advisor independence and the rules of the SEC and has concluded that the work performed by Mercer did not raise any conflict of interest.

Equity Grant Policy

We do not have an established formal policy with respect to the timing of equity awards in coordination with the release of material nonpublic information. As a matter of practice and informal policy, however, the Compensation Committee generally grants equity awards during periods considered to be our “open trading windows” (that is, the periods beginning 24 hours following our earnings release and ending one month 14 calendar days prior to the end of the fiscal quarter). In addition, any options to purchase shares of our common stock are required to be granted with an exercise price at least equal to the closing price of our common stock on the date of grant.

Deductibility of Executive Compensation

Generally, Section 162(m) of the Internal Revenue Code disallows a tax deduction to a publicly-traded corporation for any remuneration in excess of $1 million paid in any taxable year to its chief executive officer and each of its three other most highly-compensated executive officers (other than its chief financial officer). Remuneration in excess of $1 million may be deducted if, among other things, it qualifies as “performance-based compensation” within the meaning of the Internal Revenue Code.

To the extent consistent with our overall compensation philosophy and practices, we generally intend to seek to qualify most of the variable compensation paid to our executive officers for the “performance-based compensation” exemption from the deduction limit. As such, in approving the amount and form of compensation for our executive officers, the Compensation Committee considers all elements of the cost

to us of providing such compensation, including the potential impact of the Section 162(m) deduction limit. The Compensation Committee may, in its judgment, authorize compensation payments that do not comply with an exemption from the deduction limit when it believes that such payments are appropriate to attract and retain executive talent.

Taxation of Non-qualified Deferred Compensation

Section 409A of the Internal Revenue Code requires that amounts that qualify as “non-qualified deferred compensation” satisfy certain requirements with respect to the timing of deferral elections, timing of payments, and certain other matters. Generally, the Compensation Committee intends to administer our executive compensation program and design individual compensation components, as well as the compensation plans and arrangements for our employees generally, so that they are either exempt from, or satisfy the requirements of, Section 409A. From time to time, we may be required to amend some of our compensation plans and arrangements to ensure that they are either exempt from, or compliant with, Section 409A.

Taxation of “Parachute” Payments and No Excise Tax Gross-ups

Sections 280G and 4999 of the Internal Revenue Code provide that certain executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change in control of the Company that exceeds prescribed limits, and that the Company, or a successor, may forfeit a deduction on the amounts subject to this additional tax. The employment agreements with our executive officers provide that, if the payments to the executive officer would cause him or her to become subject to the excise tax imposed under Section 4999 (or any similar federal, state, or local tax), we will reduce the change in control payments or benefits to the extent necessary to avoid the application of the excise tax if, as a result of such reduction, the net benefit payable to the executive officer as so reduced (after payment of applicable income taxes) exceeds the net benefit to him or her of the change in control payment or benefits without such reduction (after payment of applicable income taxes and excise taxes).

Accounting for Stock-Based Compensation

The Compensation Committee considers accounting requirements in designing compensation plans and arrangements for our executive officers and other employees. Chief among these is Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“ASC Topic 718”), the standard which governs the accounting treatment of certain stock-based compensation. Among other things, ASC Topic 718 requires us to record compensation expense in our income statement for all equity awards granted to our executive officers and other employees. This compensation expense is based on the grant date fair value of the equity award and, in most cases, will be recognized ratably over the award’s requisite service period, which generally will correspond to the award’s vesting schedule. The full grant date fair value of equity awards is reported in the compensation tables below, even though recipients may never realize any value from their equity awards.

Executive Compensation Tables

2015 Summary Compensation Table

The following table discloses the compensation awarded, earned, or paid to each NEO for the fiscal year ended December 31, 2015, as well as the prior fiscal year, where applicable, as only Messrs. Boustridge and Mezger and Ms. Piermarini were NEOs in fiscal 2014 and none of our NEOs were NEOs in fiscal 2013.