PFMT Performant Financial Corporation

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1.	Elect two Class II directors to serve until the 2023 Annual Meeting of Stockholders or until their successors are elected and qualified;

2.	Ratify the appointment of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for 2020;

3.	Approve an amendment of the Company’s certificate of incorporation to effect a reverse stock split of the outstanding shares of its common stock at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares, which ratio will be selected by the board of directors and set forth in a public announcement;

4.	Approve an amendment of the Company’s certificate of incorporation to remove the requirement that the Company have between 5 and 15 directors;

5.	Conduct an advisory (non-binding) vote to approve the Company’s executive compensation; and

6.	Conduct an advisory (non-binding) vote on the frequency of future advisory votes to approve executive compensation.

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PROXY STATEMENT

Annual Meeting of Stockholders

July 13, 2020

This proxy statement is being furnished to stockholders of Performant Financial Corporation in connection with the solicitation of proxies by our board of directors for use at our 2020 Annual Meeting of Stockholders, which is described below.

References to the “Company,” “we,” “us” or “our” throughout this proxy statement mean Performant Financial Corporation.

This proxy statement and accompanying form of proxy are made available to stockholders on or about ________/2020.

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

When and where will the Annual Meeting be held?

The 2020 Annual Meeting of Stockholders will be held on Monday, July 13, 2020, at 10:00 AM, P.D.T., at the Courtyard by Marriott located at 2929 Constitution Drive, Livermore, California, 94551.

What items will be voted on at the Annual Meeting?

The purpose of the Annual Meeting is to:

1.	Elect two Class II directors to serve until the 2023 Annual Meeting of Stockholders or until their successors are elected and qualified;

2.	Ratify the appointment of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for 2020;

3.	Approve an amendment of the Company’s certificate of incorporation to effect a reverse stock split (the “Reverse Stock Split Amendment”) of the outstanding shares of its common stock at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares, which ratio will be selected by the board of directors and set forth in a public announcement;

4.	Approve an amendment of the Company’s certificate of incorporation to remove the requirement that the Company have between 5 and 15 directors (the “Board Size Amendment”);

5.	Conduct an advisory (non-binding) vote to approve the Company’s executive compensation; and

6.	Conduct an advisory (non-binding) vote on the frequency of future advisory votes to approve executive compensation.

We will also transact any other business that may properly come before the Annual Meeting or at any adjournments or postponements of the Annual Meeting.

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How does the board of directors recommend that I vote?

Our board of directors unanimously recommends that you vote:

1.	"FOR" the election of each of the nominees for director;

2.	"FOR" the ratification of the appointment of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for 2020;

3.	“FOR” the approval of the Reverse Stock Split Amendment;

4.	“FOR” the approval of the Board Size Amendment;

5.	“FOR” the approval of the Company’s executive compensation; and

6.	“THREE YEARS” for the frequency of future advisory votes on executive compensation.

Who is entitled to vote at the Annual Meeting?

Stockholders at the close of business on May 14, 2020, the record date for the Annual Meeting, may vote at the Annual Meeting. Each stockholder is entitled to one vote per share held as of the record date for each of the director nominees to be elected and one vote per share held as of the record date on ratification of the appointment of our auditor and any other matter presented.

Who will engage in a solicitation of proxies? Who will bear the cost of that solicitation?

Certain of our directors, officers and employees may solicit proxies on our behalf by mail, phone, fax, e-mail, or in person. We will bear the cost of the solicitation of proxies. No additional compensation will be paid to our directors, officers or employees who may be involved in the solicitation of proxies.

How do I vote my shares?

You may vote your shares in one of several ways, depending upon how you own your shares.

Shares registered directly in your name with Performant Financial Corporation (through our transfer agent, American Stock Transfer & Trust Company, LLC):

•	Via Internet: Stockholders of record with internet access may submit proxies by following the internet voting instructions on their proxy cards.

•	By Telephone: Stockholders of record may submit proxies by following the telephone voting instructions on each proxy card.

•	In Writing: Stockholders of record may submit proxies by completing, signing and dating each proxy card received and returning it in the prepaid envelope. Sign your name exactly as it appears on the proxy. If you return your proxy card but do not specify how you want your shares voted on any particular matter, they will be voted in accordance with the recommendations of the board of directors.

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In Person at the Annual Meeting: Stockholders of record may vote by attending the Annual Meeting on Monday, July 13, 2020, at 10:00 AM, P.D.T., at the Courtyard by Marriott located at 2929 Constitution Drive, Livermore, California, 94551. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or vote by telephone or the internet so that your vote will be counted if you later decide not to attend the Annual Meeting.

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Shares of common stock held in “street” or “nominee” name (through a bank, broker or other nominee):

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You may receive a separate voting instruction form from your bank, broker or other nominee holding your shares. You should follow the voting instructions provided by your broker or nominee in order to instruct your broker or other nominee on how to vote your shares. The availability of telephone or internet voting will depend on the voting process of the bank, broker or nominee. To vote in person at the Annual Meeting, you must obtain a proxy, executed in your favor, from the holder of record.

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If you own shares in “street name” through a broker and do not instruct your broker how to vote, your broker may not vote your shares on proposals determined to be “non-routine.” Of the proposals included in this proxy statement, only the proposal to ratify the appointment of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for 2020 is considered to be “routine.” The election of the director nominees, the approval of the proposed Reverse Stock Split Amendments, the approval of the Board Size Amendment, the advisory vote on executive compensation, and the advisory vote on the frequency of future advisory votes on executive compensation are all considered to be a “non-routine” matters. Therefore, if you do not provide your bank, broker or other nominee holding your shares in “street name” with voting instructions, those shares will count for quorum purposes, but will not be voted on the election of the director nominees, the approval of the proposed Reverse Stock Split Amendments, the approval of the Board Size Amendment, the advisory vote on executive compensation, and the advisory vote on the frequency of future advisory votes on executive compensation. Therefore, it is important that you provide voting instructions to your bank, broker or other nominee.

If you vote via the internet, by telephone or return a proxy card by mail, but do not select a voting preference, the persons who are authorized on the proxy card and through the internet and telephone voting facilities to vote your shares, will vote your shares in accordance with the recommendations of the board of directors.

How do I change or revoke my proxy?

You may change your vote or revoke your proxy at any time prior to the vote at the Annual Meeting. If you submitted your proxy by mail, you must file with the Secretary of the Company a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later-dated proxy. If you submitted your proxy by telephone or the internet, you may change your vote or revoke your proxy with a later telephone or internet proxy, as the case may be. Attendance at the Annual Meeting, by itself, will not revoke a proxy. You may revoke your proxy by telephone by calling the number located on your proxy card and following the instructions or via the internet by going to the internet address on your proxy card and following the instructions.

If you are a stockholder in “street” or “nominee” name, you may revoke your voting instructions by informing the bank, broker or other nominee in accordance with that entity’s procedures for revoking your voting instructions.

What constitutes a quorum for purposes of the Annual Meeting?

On May 14, 2020, the record date, we had 53,146,350 shares of Common Stock outstanding. Voting can only take place at the Annual Meeting if the holders of a majority of the total number of shares of the Common Stock issued and outstanding and entitled to vote on the record date are present either in person or by proxy. Both abstentions and broker non-votes will be treated as present for purposes of determining the existence of a quorum.

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What vote is required to approve each matter and how are votes counted?

Proposal 1 - Election of Class II Directors

You may vote “FOR” all of the nominees or your vote may be “WITHHELD” with respect to one or more of the nominees.

Stockholders may not cumulate votes in the election of directors, which means that each stockholder may vote no more than the number of shares he or she owns for a single director candidate.

A nominee will be elected as a director at the Annual Meeting if the nominee receives a plurality of the votes cast "FOR" the applicable seat on the board of directors. An abstention or a broker non-vote will not have any effect on the election of nominees.

Proposal 2 - Ratification of the Appointment of Independent Registered Public Accounting Firm

You may vote “FOR”, “AGAINST” or “ABSTAIN”. The affirmative vote of a majority of the voting power of the Common Stock present in person or by proxy and entitled to vote at the Annual Meeting is required to ratify the appointment of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for the year ended December 31, 2020. Abstentions will have the same effect as "AGAINST" votes. Broker non-votes will not be counted in determining the number of shares entitled to vote.

Proposal 3 - Approval of Reverse Stock Split Amendment

You may vote “FOR”, “AGAINST” or “ABSTAIN”. The affirmative vote of the holders of shares of common stock representing a majority of outstanding shares entitled to vote thereon is required for approval of the Reverse Stock Split Amendment. Broker non-votes and abstentions will have the same effect as voting against the Reverse Stock Split Amendment.

Proposal 4 - Approval of Board Size Amendment

You may vote “FOR”, “AGAINST” or “ABSTAIN”. The affirmative vote of the holders of shares of common stock representing a majority of outstanding shares entitled to vote thereon is required for approval of the Board Size Amendment. Broker non-votes and abstentions will have the same effect as voting against the Board Size Amendment.

Proposal 5 - Advisory Vote to Approve Executive Compensation

You may vote “FOR”, “AGAINST” or “ABSTAIN”. The affirmative vote of the holders of shares of common stock representing a majority of the votes cast on the matter is required for the approval of executive compensation. Broker non-votes and abstentions will not be counted as votes cast on the matter and will have no effect on the outcome of this proposal.

Proposal 6 - Advisory Vote on Frequency of Future Advisory Votes on Executive Compensation

You may vote “1 YEAR”, “2 YEARS”, “3 YEARS” or “ABSTAIN”. The frequency period that receives the most votes will be deemed to be the recommendation of the stockholders. Broker non-votes and abstentions will have no effect on the outcome of this proposal, except to the extent that the failure to vote for a particular frequency period may result in another frequency period receiving a larger proportion of the votes cast.

Who will count the vote?

The votes will be counted, tabulated and certified by an Inspector of Elections appointed by the board of directors.

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Can I attend the Annual Meeting in person?

We cordially invite all our stockholders to attend the Annual Meeting. Persons who are not stockholders may attend only if invited by us. Evidence of share ownership may be in the form of a valid stock certificate or an account statement from our transfer agent or from a bank, broker or other nominee that evidences ownership as of the record date. Note that in order to vote at the meeting, beneficial owners who own shares in “street name” must present a legal proxy from the record holder of the shares. Stockholders of record must possess a copy of the proxy card in order to be admitted to the Annual Meeting. You should also be prepared to present photo identification for admittance.

Will any other matters be presented at the Annual Meeting?

We do not expect any matters, other than those included in this proxy statement, to be presented at the Annual Meeting because the deadline set forth in our bylaws for nominations for election as a director or to propose other business has already passed. Nonetheless, if you execute and deliver a proxy in the form provided and other matters are presented, the individuals named as proxies will have discretionary authority to vote your shares on any other matters that come before the annual meeting.

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PROPOSAL 1 — ELECTION OF DIRECTORS

Our board of directors is divided into three classes serving staggered three-year terms. The nominees listed below have been nominated by our board of directors at the recommendation of our nominating and governance committee in accordance with its charter, our Amended and Restated Bylaws and Corporate Governance Guidelines. All of the nominees are currently members of the board of directors. We have no reason to believe that these nominees will be unable to serve as directors. If any of the nominees become unable to serve as a director before the meeting (or decide not to serve), the individuals named as proxies may vote for a substitute nominee proposed by the board of directors or we may reduce the number of members of the board of directors. We recommend a vote FOR the nominees listed below.

Nominees for Election at This Meeting for a Term Expiring in 2023 (Class II)

William D. Hansen has served as a member of our board of directors since December 2011. Since July 2013, Mr. Hansen has served as chief executive officer and president of Strada Education Network, formerly called USA Funds, a non-profit organization focused on higher education and workforce challenges. From July 2011 through July 2013, Mr. Hansen served as the chief executive officer of Madison Education Group, LLC, an education-related consulting firm. From July 2009 to December 2010, he served as the president of Scantron Corporation, a provider of assessment and survey solutions. Mr. Hansen also served as the chairman of Scantron Corporation from September 2010 to July 2011. Mr. Hansen held various leadership positions at Chartwell Education Group, LLC, an education-related consulting firm, from July 2005 to July 2009, including chief executive officer and senior managing director. Mr. Hansen served as the Deputy Secretary at the United States Department of Education from May 2001 to July 2003. He served as a director of the First Marblehead Corporation from 2003 until that company was acquired in 2016. Mr. Hansen received a Bachelor’s degree in Economics from George Mason University. Mr. Hansen’s extensive experience in the student loan market provides valuable insight for the members of our board of directors.

Eric Yanagi was appointed to serve as a member of our board of directors on May 5, 2020. Mr. Yanagi is a Managing Director of Mill Road Capital Management LLC and has been with Mill Road since 2008. From 2006 to 2008, Mr. Yanagi was an investment professional at Nautic Partners, a middle-market private equity firm focused on business services, healthcare, manufacturing and media & communications. Prior to Nautic Partners, Mr. Yanagi was an investment banker in the Mergers & Acquisitions Group at Credit Suisse from 2004 to 2006. Mr. Yanagi received a Bachelor’s degree in Economics from Princeton University and a Master of Business Administration from the Haas School of Business at the University of California, Berkeley. Mr. Yanagi’s financial and accounting expertise and experience in business services provides valuable insight for the members of our board of directors.

Our Bylaws provide that a plurality of the votes cast at the meeting is required to elect directors. This means that the nominees for director receiving the highest number of votes cast will be elected. An abstention or a broker non-vote will not have any effect on the election of directors.

Unless authority is withheld, the persons named as proxies in the accompanying proxy will vote for the election of the nominees named above.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF THE NAMED NOMINEES.

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DIRECTORS AND EXECUTIVE OFFICERS

Our executive officers and directors, and their ages and positions as of May 14, 2020, are as set forth below:

Name	Age	Position
Lisa C. Im	55	Chief Executive Officer and Board Chair
Harold T. Leach, Jr.	62	Chief Compliance Officer
Ian A. Johnston	65	Vice President and Chief Accounting Officer
Simeon M. Kohl	53	Vice President of Healthcare
James LaCamp (1)(2)(3)	36	Director
William D. Hansen (1)(2)(3)	60	Director
Bradley M. Fluegel (1)(2)(3)	58	Director
Eric Yanagi	38	Director

(1)    Member of the audit committee.

(2)    Member of the compensation committee.

(3)    Member of the nominating and governance committee.

Board of Directors

Below is additional biographical information about our directors, other than directors nominated for re-election at the Annual Meeting:

Directors Continuing in Office until 2022 (Class I)

James LaCamp has served as a member of our board of directors since November 2019. Mr. LaCamp currently serves as VP Finance at Coupa Software. Before joining Coupa, Mr. LaCamp served in various roles at Deloitte & Touche LLP, most recently as a Partner from 2016 through 2018. Mr. LaCamp received his Bachelor’s degree in Accounting from Santa Clara University. Mr. LaCamp’s experience in growing technology companies as well as his financial and accounting expertise provides valuable insight for the members of the Board.

Directors Continuing in Office until 2021 (Class III)

Lisa C. Im has served as our Chief Executive Officer since April 2004 and as a member of our board of directors since January 2004. Ms. Im was elected by our board of directors to serve as the Chair of the board of directors in August 2014. From 2002 to 2004, she was Managing Director and Chief Financial Officer of our predecessor before it was acquired by Parthenon Capital Partners. From 1996 to 2002, Ms. Im was with Bestfoods Corporation, a food products manufacturer, where she gained broad experience including in general management as well as executive financial positions for various regions of Bestfoods Corporation. Ms. Im received a Bachelor of Business Administration in Marketing from Loma Linda University and a Master of Business Administration in Finance from California State University, East Bay. Ms. Im’s experiences and perspectives as our Chief Executive Officer led to the conclusion that she should serve as a member of our board of directors.

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Bradley M. Fluegel has served as a member of our board of directors since February 2014. Mr. Fluegel served as a Senior Vice President for Walgreen Co. from October 2012 to January 2018. From April 2011 to September 2012, Mr. Fluegel served as executive in residence at Health Evolution Partners, a healthcare private equity firm. Mr. Fluegel served as executive vice president and chief strategy and external affairs officer of WellPoint, Inc. from September 2007 to December 2010. Prior to that, Mr. Fluegel served as senior vice president of national accounts and vice president, enterprise strategy at Aetna.  Mr. Fluegel received a Master’s degree in Public Policy from Harvard University’s Kennedy School of Government and a Bachelor of Arts in Business Administration from the University of Washington. He also serves as a lecturer at the University of Pennsylvania’s Wharton School of Business. Mr. Fluegel’s extensive experience with leading companies in the healthcare market provides valuable insight for the members of our board of directors.

Director Compensation

Our non-employee, independent directors receive an annual retainer of $30,000, prorated for partial service in any year and paid in cash. The non-employee, independent members of our audit committee, compensation committee and nominating and governance committee, other than the chairpersons of those committees, receive an additional annual retainer of $10,000, $6,000 and $5,000, respectively. The chairpersons of our audit committee, compensation committee and nominating and governance committee each receive an additional annual retainer of $20,000, $12,000 and $10,000, respectively. Cash compensation for Brian P. Golson and Jeffrey S. Stein, both former directors who resigned in 2019, was paid to Parthenon Capital Partners at Mr. Golson’s and Mr. Stein's direction.

Our non-employee, independent directors (other than Mr. Golson and Mr. Stein) also receive an annual grant of restricted stock units valued at $75,000, vesting in full on the date of the following annual meeting of stockholders or upon a change of control. Mr. Golson received a conditional cash award of $75,000, vesting upon the same events as the restricted stock units granted to other non-employee, independent directors, that was paid to Parthenon Capital Partners at Mr. Golson’s direction. New directors are granted restricted stock units valued at $100,000 upon election to the board, vesting ratably over four years or upon a change of control. Our directors do not receive additional fees for attendance at a meeting of our board of directors or a committee of the board.

The table below summarizes the compensation paid by the Company to our non-employee independent directors for the fiscal year ended December 31, 2019. Because Mr. Golson's and Mr. Stein's compensation was paid to Parthenon Capital Partners at Mr. Golson's and Mr. Stein's direction, Mr. Golson and Mr. Stein did not receive compensation paid by the Company for their service as directors in the fiscal year ended December 31, 2019.

Name	Fees Earned or Paid in Cash($)	Stock Awards($)(1)(2)	Option Awards	Total($)
Bruce E. Hansen(3)	25,000		—	25,000
William D. Hansen	61,000	75,000	—	136,000
Todd R. Ford(4)	53,375		—	53,375
Bradley M. Fluegel	52,000	75,000	—	127,000
Brian P. Golson(5)	75,000	—	—	75,000
Jeffrey S. Stein(6)	20,000	—	—	20,000
James LaCamp(7)	7,625	175,000	—	182,625

(1)

The value of each stock award is based on the fair value of the award as of the grant date calculated in accordance with Accounting Standards Codification 718, Stock Compensation (ASC 718) for financial reporting purposes. See Note 8(b) of the Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019 for a discussion of our assumptions in determining the ASC 718 values of our stock awards.

(2)	Each of our non-employee, independent directors were awarded restricted stock units valued at $75,000 on November 15, 2019 (which equated to 78,947 stock units), which will vest in full (assuming continuous service) on July 13, 2020, the date of the annual meeting of stockholders.

(3)	Bruce Hansen resigned from the Board of Directors on July 8, 2019.

(4)	Todd Ford resigned from the Board of Directors on November 15, 2019.

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(5)	Brian Golson resigned from the Board of Directors on May 8, 2019.

(6)	Jeffrey Stein resigned from the Board of Directors on March 29, 2020.

(7)	Restricted stock unit award valued at $100,000 was granted November 15, 2019 (which equated to 105,263 stock units). The stock units will vest at a rate of 25% annually on the first, second, third and fourth anniversaries of November 15, 2019, provided that the Reporting Person remains in continuous service through each vest date.

Corporate Governance Guidelines; Code of Business Conduct and Ethics

We have established a corporate governance program to help guide our Company and our employees, officers and directors in carrying out their responsibilities and duties, as well as to set standards for their professional conduct. Our board of directors has adopted Corporate Governance Guidelines, or Governance Guidelines, which provide standards and practices of corporate governance that we have designed to help contribute to our success and to assure public confidence in our Company. In addition, all standing committees of our board of directors operate under charters that describe the responsibilities and practices of each committee. The charters of our standing committees are available on the Investor Relations page of our corporate website at investors.performantcorp.com under the Corporate Governance tab.

We have adopted a Conflict of Interest and Ethics Policy, or Ethics Policy, which provides ethical standards and corporate policies that apply to all of our officers and employees. Our Ethics Policy requires, among other things, that our officers and employees act with integrity and the highest ethical standards, comply with laws and other legal requirements, avoid conflicts of interest, and otherwise act in our best interests. We have also adopted a Code of Ethics for Senior Financial Officers and Directors that applies to senior management and directors and provides for accurate, full, fair and timely financial reporting and the reporting of information related to significant deficiencies in internal controls, fraud and legal compliance.

Composition of the Board of Directors

Our Second Amended and Restated Certificate of Incorporation provides that our board shall consist of not fewer than five and not more than fifteen directors as the board of directors may from time to time determine. Our board of directors currently consists of five directors. The authorized number of directors may be changed by resolution of our board of directors. Vacancies on our board of directors can only be filled by resolution of our board of directors. Our board of directors is currently divided into three classes, each serving staggered, three-year terms:

•	Our Class I director is James LaCamp and his term will expire at the Annual Meeting of Stockholders in 2022;

•	Our Class II directors are William D. Hansen and Eric Yanagi and their terms will expire at this Annual Meeting; and

•	Our Class III directors are Lisa C. Im and Bradley M. Fluegel and their terms will expire at the Annual Meeting of Stockholders in 2021.

As a result, only one class of directors will be elected at each Annual Meeting of Stockholders, with the other classes continuing for the remainder of their respective terms.

Our board of directors has determined that Messrs. Hansen, LaCamp, Yanagi and Fluegel are “independent directors” as defined under the rules of NASDAQ.

In July 2012, we entered into a Director Nomination Agreement with an affiliate of Parthenon Capital Partners, that provides Parthenon Capital Partners the right to designate nominees for election to our board of directors for so long as Parthenon Capital Partners owns 10% or more of the total number of shares of our Common Stock outstanding. The material provisions of the Director Nomination Agreement are described below under the heading “Directors and Officers—Director Nomination Policy”. Parthenon Capital Partners did not designate a nominee for election to our board of directors following Mr. Stein’s resignation on March 29, 2020.

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Our board of directors met a total of eight times in 2019. During 2019, all of our directors attended at least 75% of the meetings of our board of directors held during their tenure and 75% of the meetings, if any, of the committees of the board of directors upon which they served. Our board of directors does not have a policy requiring director attendance at annual meetings of our stockholders. None of our directors attended our 2019 Annual Meeting of Stockholders.

Leadership Structure of the Board of Directors

Our board of directors selects the Chair of the board of directors in the manner and upon the criteria that it deems best for the Company at the time of selection. The board of directors does not have a prescribed policy on whether the roles of the Chair and Chief Executive Officer should be separate or combined. The board of directors will periodically evaluate whether this leadership structure is in the best interests of the stockholders.

Lisa C. Im is our Chief Executive Officer and the Chair of the Company’s board of directors. As Chair of the board of directors, Ms. Im presides over each meeting of the board of directors, approves meeting agendas and schedules and notifies other members of the board of directors regarding any significant concerns of stockholders or interested parties of which she becomes aware. The Chair of the board of directors also presides over stockholders’ meetings. We believe that our current board leadership structure is appropriate for the Company because it allows for common, strong leadership, with one individual having primary responsibility for both board-level and operational matters.

In February 2014, our board appointed Mr. Hansen as the board's lead independent director with the primary responsibility to call and preside at executive sessions of our independent directors and to consult with the Chair regarding meeting agendas.

Committees of the Board of Directors

Audit committee. Our audit committee consists of Messrs. Hansen, Fluegel, and LaCamp. Mr. LaCamp serves as the chairperson of this committee. The audit committee met five times in 2019. Our board of directors has determined that Mr. LaCamp is an audit committee financial expert, as defined by the rules promulgated by the Securities and Exchange Commission, or the SEC. Our audit committee is composed entirely of independent directors.

In accordance with its charter, our audit committee provides assistance to the board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions. It engages our independent registered public accounting firm, approves the services performed by our independent registered public accounting firm and reviews their reports regarding our accounting practices. The audit committee also oversees the audit efforts of our independent registered public accounting firm and takes those actions as it deems necessary to satisfy itself that the independent registered public accounting firm is independent of management. Lastly, our audit committee reviews with management cybersecurity risks, including the results of independent third-party data security audits and management’s actions designed to mitigate potential breaches of data security.

Compensation committee. Our compensation committee consists of Messrs. Hansen, Fluegel, and LaCamp. Mr. Fluegel serves as chairperson of this committee. Our compensation committee met four times in 2019. Our compensation committee reviews and makes recommendations for approval by the independent members of our board of directors regarding our general compensation policies and the compensation provided to our directors and executive officers. The compensation committee also reviews and makes recommendations for approval by the independent members of our board of directors regarding bonuses for our officers and other employees. In addition, the compensation committee reviews and makes recommendations for approval by the independent members of our board of directors regarding equity-based compensation for our directors and executive officers, approves equity based compensation for other employees and administers our stock option plans and employee stock purchase plan. Our compensation committee is composed entirely of independent directors.

Nominating and governance committee.  Our nominating and governance committee consists of Messrs. LaCamp, Hansen and Fluegel. Mr. Hansen serves as chairperson of this committee. The nominating and governance committee met four times in 2019. The nominating and governance committee is responsible for making recommendations to the board of directors regarding candidates for directorships and the size and composition of the board. In addition, the nominating and governance committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the board of directors concerning corporate governance matters. Our nominating and governance committee is composed entirely of independent directors.

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Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between our board of directors or compensation committee and the board of directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past.

Role of Our Board of Directors in Risk Oversight

One of the key functions of our board of directors is informed oversight of our risk management process. Our board of directors administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for oversight of our risk management process. The nominating and governance committee periodically evaluates our risk management process and system in light of the nature of the material risks we face. Our compensation committee assesses and monitors whether any of our compensation policies and programs are reasonably likely to have a material adverse effect on us. Our audit committee periodically assesses any major financial risk exposures and the steps management has taken to monitor and control such exposures. The audit committee also has the responsibility to oversee management’s assessment of major legal and regulatory risk exposures and management’s implementation of policies and procedures to address these risks. In this regard, and because we handle sensitive personal information as part of our business, the audit committee regularly reviews with management cybersecurity risks, including the results of independent third-party data security audits and management’s actions designed to mitigate potential breaches of data security.

Director Nomination Policy

Our nominating and governance committee is responsible for identifying, evaluating, recruiting and recommending qualified candidates to our board of directors for nomination or election. Our board of directors nominates directors for election at each annual meeting of stockholders, and elects new directors to fill vacancies if they occur.

Our board of directors strives to find directors who are experienced and dedicated individuals with diverse backgrounds, perspectives and skills. Our governance guidelines contain membership criteria that call for candidates to be selected for their character, judgment, diversity of experience, business acumen and ability to act on behalf of all stockholders. In addition, we expect each director to be committed to enhancing stockholder value and to have sufficient time to effectively carry out his or her duties as a director.

Prior to our annual meeting of stockholders, our nominating and governance committee identifies director nominees first by evaluating the current directors whose terms will expire at the annual meeting and who are willing to continue in service. Subject to the Director Nomination Agreement described below, these candidates are evaluated based on the criteria described above, the candidate’s prior service as a director, and the needs of the board of directors for any particular talents and experience. If a director no longer wishes to continue in service, if the nominating and governance committee decides not to re-nominate a director, or if a vacancy is created on the board of directors because of a resignation or an increase in the size of the board of directors or other event, then the committee considers whether to recommend the nomination of a new director or to recommend a decrease in the size of the board of directors. If the decision is to nominate a new director, then the nominating and governance committee considers various candidates for membership on the board of directors, including those suggested by committee members, other members of the board of directors, a director search firm engaged by the committee, or our stockholders. Prospective nominees are evaluated by the nominating and governance committee based on the membership criteria described above and set forth in our Governance Guidelines.

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We are party to a Director Nomination Agreement with Parthenon Capital Partners that provides Parthenon Capital Partners the right to designate nominees for election to our board of directors for so long as Parthenon Capital Partners owns 10% or more of the total number of shares of our common stock outstanding. The number of nominees that Parthenon Capital Partners is entitled to designate under this agreement bears the same proportion to the total number of members of our board of directors as the number of shares of our common stock beneficially owned by Parthenon Capital Partners bears to the total number of shares of our common stock outstanding, rounded up to the nearest whole number. In addition, Parthenon Capital Partners is entitled to designate the replacement for any of its board designees whose board service terminates prior to the end of the director’s term regardless of Parthenon Capital Partners’ beneficial ownership at such time. Parthenon Capital Partners also has the right to have its designees participate on committees of our board of directors proportionate to its stock ownership, subject to compliance with applicable law and stock exchange rules. The Director Nomination Agreement will terminate at such time as Parthenon Capital Partners owns less than 10% of our outstanding common stock.

A stockholder who wishes to recommend a prospective nominee to the board of directors for consideration by the nominating and governance committee should notify our Secretary in writing at our principal office. Such notice must be delivered to our offices by the deadline relating to stockholder proposals to be considered for inclusion in our proxy materials, as described under “General Information — Stockholder Proposals for the 2021 Annual Meeting” in this proxy statement.

Each notice delivered by a stockholder who wishes to recommend a nominee to the board of directors for consideration by the nominating and governance committee generally must include the following information about the proposed nominee:

•	the name, age, business address and residence address of the proposed nominee;

•	the principal occupation of the proposed nominee;

•	the number of shares of our capital stock beneficially owned by the proposed nominee;

•	a description of all compensation and other relationships during the past three years between the stockholder and the proposed nominee;

•	any other information relating to the proposed nominee required to be disclosed pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, the Exchange Act; and

•	the proposed nominee’s written consent to serve as a director if elected.

The nominating and governance committee may require any proposed nominee recommended by a stockholder to furnish such other information as the nominating and governance committee may reasonably require, including, among other things, information to determine the eligibility of such person to serve as an independent director or that could be material to a stockholder’s understanding of the independence, or lack thereof, of such person.

In addition, a stockholder may nominate an individual for election at an annual meeting, without the approval of our nominating and governance committee, by following the procedures set forth in Article 3 of our Amended and Restated Bylaws and summarized below under “General Information - Stockholder Proposals for the 2021 Annual Meeting”.

Communications with Directors

Stockholders and interested parties may contact our directors to provide comments, to report concerns, or to ask a question, by mail at the following address:

Chair of the Board

Performant Financial Corporation

333 North Canyons Parkway

Livermore, California 94551

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Executive Officers

Below is additional biographical information about our executive officers, other than Ms. Im who serves as a director:

Harold T. Leach, Jr. has served as our Chief Compliance Officer of the Company since April 2016. Prior to his role as Chief Compliance Officer, Mr. Leach served as Chief Operating Officer of the Company and our predecessor since May 1982. In these roles, Mr. Leach has been a key participant in the development of our recovery processes and compliance program. During his tenure, Mr. Leach has led the development of our proprietary technology platform and has served as subject matter expert on key Congressional initiatives related to improving the efficacy of government debt management. Mr. Leach also led the development and implementation of our audit and recovery technology operations.

Ian A. Johnston has served as our Vice President and Chief Accounting Officer since April 2017. Prior to appointment as Vice President and Chief Accounting Officer, Mr. Johnston served as the Company’s Corporate Controller since 2005.  Mr. Johnston has 30 years of experience in a variety of industries, including service as Vice President and Corporate Controller of InVision Technologies, Inc., a manufacturer of airport security screening devices, and Corporate Controller of CardioGenesis Corporation, a medical device company.  He received his Certified Public Accountant accreditation in California, and received a Bachelor’s degree in Economics and an MBA from the University of California, Berkeley.

Simeon M. Kohl has served as our Vice President of Healthcare since April 2017. Prior to appointment as Vice President of Healthcare, Mr. Kohl served as the Company’s Vice President of Sales and Account Management since February 2012. Mr. Kohl has more than 20 years of executive management experience and an extensive background in Healthcare cost containment and related services. As the Company’s Vice President of Sales and Account Management, Mr. Kohl led Performant’s Commercial Healthcare growth initiatives and client facing programs. Prior to joining the Company, Mr. Kohl served as CEO for HOPS International, Inc., a leading provider of Integrity based analytic solutions for the healthcare and financial industries.  Prior to joining HOPS, Mr. Kohl held various senior sales and business development positions with Apple Computer and other privately held technology companies.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transaction Policy

We have a formal written policy that our executive officers, directors, holders of more than 5% of any class of our voting securities, and any member of the immediate family of and any entity affiliated with any of the foregoing persons, are not permitted to enter into a related party transaction with us without the prior consent of our audit committee, or other independent members of our board of directors in the event it is inappropriate for our audit committee to review such transaction due to a conflict of interest. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of their immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our audit committee is required to conduct a review of all relevant facts reasonably available to our audit committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction.

Registration Agreement

On January 8, 2004, in connection with the consummation of our acquisition by investment funds controlled by Parthenon Capital Partners and certain other stockholders, or the Acquisition, we entered into a registration agreement with Parthenon Capital Partners and certain other stockholders. This agreement was amended, effective upon the closing of our initial public offering in August 2012. The registration agreement, as amended, provides the stockholders party thereto with certain demand registration rights in respect of the shares of our common stock held by them. In addition, if we register additional shares of common stock for sale to the public, we are required to give notice of such registration to the stockholders who are party to the registration agreement of our intention to effect such a registration, and, subject to certain limitations, such holders will have piggyback registration rights providing them with the right to require us to include shares of common stock held by them in such registration. We will be required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes, associated with any registration of shares by the stockholders described above. The registration rights agreement includes lock up obligations that restrict the sale of securities during the initial 180 day period, or in certain circumstances 90 day period, following the effective date of any demand registration or piggyback registration effected pursuant to the terms of the registration agreement. We are also restricted from engaging in any public sale of equity securities during the initial 180 day period, or in certain circumstances 90 day period, following the effective date of any demand registration or piggyback registration effected pursuant to the terms of the registration agreement. The registration agreement includes customary indemnification provisions in favor of the stockholders who are parties thereto and any person who is or might be deemed a controlling person of the stockholders within the meaning of the Securities Act and related parties against liabilities under the Securities Act incurred in connection with the registration of any of our securities. These provisions provide indemnification against certain liabilities arising under the Securities Act and certain liabilities resulting from violations of other applicable laws in connection with any filing or other disclosure made by us under the securities laws relating to any such registrations. We have agreed to reimburse such persons for any legal or other expenses incurred in connection with investigating or defending any such liability, action or proceeding, except that we will not be required to indemnify any such person or reimburse related legal or other expenses if such loss or expense arises out of or is based on any untrue statement or omission made in reliance upon and in conformity with written information provided by such person.

Director Nomination Agreement

In July 2012, we entered into a Director Nomination Agreement with Parthenon Capital Partners that provides Parthenon Capital Partners the right to designate nominees for election to our board of directors for so long as Parthenon Capital Partners owns 10% or more of the total number of shares of common stock outstanding. The material provisions of the Director Nomination Agreement are described above under the heading “Directors and Officers—Director Nomination Policy”.

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Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and our Amended and Restated Bylaws require us to indemnify these individuals to the fullest extent permitted by Delaware law, subject to certain exceptions.

Credit Agreement with ECMC Group, Inc.

On August 7, 2017, we, through our wholly-owned subsidiary Performant Business Services, Inc. (the "Borrower"), entered into a credit agreement with ECMC Group, Inc. (as amended, the “Credit Agreement”). Before the amendment described below, the Credit Agreement provided for a term loan facility in the initial amount of $44 million (the “Initial Term Loan”) and for up to $15 million of additional term loans (“Additional Term Loans”; and together with the Initial Term Loan, the “Loans”) which original Additional Term Loans were initially able to be drawn until the second anniversary of the funding of the Initial Term Loans, subject to the satisfaction of customary conditions. On August 31, 2018, we entered into Amendment No. 2 to the Credit Agreement to among other things (i) extend the maturity date of the Initial Term Loan and any Additional Term Loans by one year to August 2021, (ii) expand the Additional Term Loans commitment from $15 million to $25 million, (iii) extend the period during which the Additional Term Loans can be borrowed by one year to August 2020, and (iv) relieve the Borrower from its obligation to comply with the financial covenants in the Credit Agreement during the six fiscal quarters following the Premiere acquisition.

On March 21, 2019, we entered into Amendment No. 3 to the Credit Agreement to among other things relieve the Borrower from its obligation to comply with the financial covenants in the Credit Agreement until the quarter ending June 30, 2020.

As of September 30, 2019, the Company has borrowed all of the $25 million available as Additional Term Loans.

As of May 14, 2020, $63.5 million was outstanding under the Credit Agreement.

We have the option to extend the maturity of the Loans for two additional one-year periods, subject to the satisfaction of customary conditions. The Loans bear interest at the one-month LIBOR rate (subject to a 1% per annum floor) plus a margin which may vary from 5.5% per annum to 10.0% per annum based on our total debt to EBITDA ratio. Our annual interest rate at December 31, 2018, was 8.0%, and at December 31, 2017 was 8.6%.  We are required to pay 5% of the original principal balance of the Loans annually in quarterly installments and to make mandatory prepayments of the Loans with a percentage of our excess cash flow which may vary between 75% and 0% depending on our total debt to EBITDA ratio and from the net cash proceeds of certain asset dispositions and debt not otherwise permitted under the Credit Agreement, in each case, subject to the lender's right to decline to receive such payments.

The Credit Agreement contains certain restrictive financial covenants which are not effective until the quarter ending June 30, 2020, at which point, we will be required to (1) achieve a minimum fixed charge coverage ratio of 1.0 through December 31, 2020, 1.25 to 1.0 through June 30, 2021, and 1.25 to 1.0 through June 30, 2022 if the maturity date of the Loans is extended until the fifth anniversary of the Closing Date and (2) maintain a maximum total debt to EBITDA ratio of 6.00 to 1.00. The Credit Agreement also contains covenants that restrict the Company and its subsidiaries’ ability to incur certain types or amounts of indebtedness, incur liens on certain assets, make material changes in corporate structure or the nature of its business, dispose of material assets, engage in a change in control transaction, make certain foreign investments, enter into certain restrictive agreements, or engage in certain transactions with affiliates. The Credit Agreement also contains various customary events of default, including with respect to change of control of the Company or its ownership of the Borrower.

The obligations under the Credit Agreement are secured by substantially all of our United States domestic subsidiaries’ assets and are guaranteed by the Company and its United States domestic subsidiaries, other than the Borrower.

In consideration for, and concurrently with, the extension of the Initial Term Loan in accordance with the terms of the Credit Agreement, we issued a warrant to the lender to purchase up to an aggregate of 3,863,326 shares of the Company’s common stock (representing approximately up to 7.5% of our diluted common stock as calculated using the “treasury stock” method as defined under U.S. GAAP for the fiscal quarter ended June 30, 2017, with an exercise price of $1.92 per share (the "Exercise Price").

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Upon borrowing of the Additional Term Loans, we were required to issue additional warrants at the same Exercise Price to purchase up to an aggregate of 77,267 additional shares of common stock (which represents approximately 0.15% of our diluted common stock calculated using the “treasury stock” method as defined under U.S. GAAP for the fiscal quarter ended June 30, 2017) for each $1.0 million of such Additional Term Loans. Similarly, upon our election to extend the maturity of the Loans for additional one year periods, we will be required to issue additional warrants at the same Exercise Price to purchase up to an aggregate of 515,110 additional shares of common stock for the first year’s extension, and to purchase up to an aggregate of 772,665 additional shares of common stock for the second year’s extension (which represent approximately 1.0% and 1.5% of our diluted common stock for the first and second years, respectively, calculated using the “treasury stock” method as defined under U.S. GAAP for the fiscal quarter ended June 30, 2017).

Acquisition of Premiere Credit of North America, LLC

On August 9, 2018, we and ECMC Holdings Corporation (“ECMC Holdings”), an affiliate of ECMC Group Inc., entered into an Agreement for Purchase of LLC Membership Interests (the “Purchase Agreement”), pursuant to which we agreed to acquire from ECMC Holdings all of the outstanding membership interests in Premiere Credit of North America, LLC (“Premiere”), a provider of asset recovery services to clients in the student loan, government, healthcare and commercial markets.  ECMC is also the lender under our existing credit agreement. The closing of this transaction took place on August 31, 2018. At the closing, we and ECMC also entered into a long-term agreement for us to be ECMC’s primary student loan recovery vendor. As consideration for the purchase, at closing we issued to ECMC Holdings 1,000,000 shares of our common stock and are obligated to issue to ECMC Holdings additional shares of common stock over the five year period following the closing (not to exceed 2,591,824 shares in the aggregate) based on revenues associated with the Premiere business in each year.  We estimate that we will issue approximately an additional 1,000,000 shares over the five year period if eligible revenues in each year are at the target level.

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EXECUTIVE COMPENSATION

Executive Compensation

Compensation Philosophy and Objectives

Our compensation philosophy is to align executive compensation with the interests of our stockholders and therefore to establish financial objectives that our board of directors believes are primary determinants of long-term stockholder value. The primary goal of our executive compensation program is to ensure that we hire and retain talented and experienced executives who are motivated to achieve or exceed our short-term and long-term corporate goals. Our executive compensation programs are designed to reinforce a strong pay-for-performance orientation and to serve the following purposes:

•	to reward our named executive officers for sustained financial and operating performance and leadership excellence;

•	to align their interests with those of our stockholders; and

•	to encourage our named executive officers to remain with us for the long-term.

Compensation Determination Process

All compensation decisions for our executive officers are made by the independent members of our board of directors, generally following the recommendation of our compensation committee. Typically, our Chief Executive Officer makes recommendations to our compensation committee regarding compensation for our executive officers, provided, however, that our Chief Executive Officer makes no recommendations as to her own compensation. Our compensation committee’s recommendations are based on its assessment of the performance of our Company and each individual executive officer, as well as other factors, such as prevailing industry trends. In making recommendations on salaries, annual incentives and equity compensation in 2019, our compensation committee retained the services of compensation consultant Compensia, Inc. to assist in designing our executive compensation program and in identifying market benchmarks for purposes of evaluating the reasonableness and competitiveness of such program.

Elements of Compensation

The primary components of compensation for our Chief Executive Officer and our three other executive officers in fiscal year 2019, whom we refer to as the named executive officers, were base salary, annual incentive compensation and equity-based compensation.

Base Salary

We pay our named executive officers a base salary based on the experience, skills, knowledge and responsibilities required of each officer, as well as base salaries of executive officers at companies we view as competitors. We believe base salaries are an important element in our overall compensation program because base salaries provide a fixed element of compensation that reflects job responsibilities and value to us.

Annual Incentive Plan

To date, our board of directors has not adopted a formal plan or set of formal guidelines with respect to annual incentive or bonus payments, and has rather relied on an annual assessment of the performance of our executives during the preceding year to make annual incentive and bonus determinations.

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Long-Term Equity Compensation

We provide our named executive officers with long-term equity compensation through our Amended and Restated 2012 Stock Incentive Plan. We believe that providing our named executive officers with an equity interest brings their interests in line with those of our stockholders and that including a vesting component to those equity interests encourages named executive officers to remain with us for the long-term. Long-term incentive awards are made under our Amended and Restated 2012 Stock Incentive Plan, under which we are authorized to issue stock options, restricted stock or other equity-based awards denominated in shares of our common stock. The plan is administered by the compensation committee, and the compensation committee recommends grants to our executive officers for approval by the independent members of our board of directors, and is authorized to make awards or delegate the authority to make awards to employees other than the executive officers. The committee also sets the standard terms for awards under the plan each year.

At her insistence and based in part upon her being one of our significant stockholders, Ms. Im did not receive any form of equity compensation during 2018 and 2019.

Other Supplemental Benefits

Our named executive officers are eligible for the following benefits on a similar basis as other eligible employees:

•	health, dental and vision insurance;

•	vacation, personal holidays and sick days;

•	life insurance and supplemental life insurance;

•	short-term and long-term disability; and

•	401(k) plan.

Summary Compensation Table

The following table presents information concerning the total compensation of our named executive officers for services rendered to us in all capacities for the fiscal years ended December 31, 2019 and December 31, 2018: 

Name and Principal Position	Year	Salary($)	Bonus($)		Stock Awards($)(1)		All other Compensation($)			Total($)
Lisa C. Im	2019	400,005	—				22,097		(3)	422,102
Chief Executive Officer and Chair of the Board of Directors	2018	400,005	—		—		23,843		(2)	423,848
Harold T. Leach, Jr.	2019	242,939	—				24,067		(4)	267,006
Chief Compliance Officer	2018	242,939	—		284,814		24,067		(4)	551,820
Ian A. Johnston	2019	240,924	—		133,350		3,628		(5)	377,902
Vice President and Chief Accounting Officer	2018	240,924	—		142,500		3,627		(5)	387,051
Simeon M. Kohl	2019	260,970	—		133,350		777		(5)	395,097
Vice President of Healthcare	2018	250,970	—		172,500		777		(5)	424,247

(1)

The value of the equity awards is based on the fair value of the award as of the grant date calculated in accordance with ASC 718, excluding any estimate of future forfeitures. Our assumptions with respect to the calculation of these values are set forth in Note 8 “Stock-based Compensation” in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for fiscal years ended December 31, 2019 and 2018. Regardless of the value on the grant date, the actual value that may be recognized by the executive officers will depend on the market value of our common stock on a date in the future when a stock award vests or a stock option is exercised.

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(2)	Includes payments for vehicle allowance ($18,000) and life insurance benefits ($5,838).

(3)	Includes payments for vehicle allowance ($18,000) and life insurance benefits ($4,097).

(4)	Includes payments for vehicle allowance ($20,400) and life insurance benefits ($3,667).

(5)	Payments for life insurance benefits.

Outstanding Equity Awards at Fiscal Year-End

The following table presents information on all outstanding equity awards held by our named executive officers as of December 31, 2019:

	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options(#)					Option Exercise Price ($/share)	Expiration Date of Options		Number of Shares or Units of Stock that have not Vested(#)			Market Value of Shares or Units of Stock that have not Vested($)(1)
	Exercisable			Unexercisable
Lisa C. Im	824,687			—		10.60	8/10/2022		—			—
	60,000			—		13.55	3/7/2023		—			—
Harold T. Leach, Jr.	274,896			—		10.60	8/10/2022		30,000		(2)	30,600
	30,000			—		13.55	3/7/2023		40,000		(4)	40,800
									30,000		(3)	30,600
									33,750		(5)	34,425
									60,000		(6)	61,200
Ian A. Johnston	54,979			—		10.60	8/10/2022		11,250		(2)	11,475
									30,000		(3)	30,600
									35,625		(5)	36,338
									45,000		(7)	45,900
									30,000		(8)	30,600
Simeon M. Kohl	27,490			—		10.60	8/10/2022		11,250		(2)	11,475
	10,000			—		11.00	9/19/2023		37,500		(3)	38,250
									43,125		(5)	43,988
									45,000		(7)	45,900
									30,000		(8)	30,600

(1)	The market value is based on $1.02 per share market price of our common stock on December 31, 2019.

(2)	Restricted Stock Unit Award vested 25% of the covered shares on March 7, 2017, an additional 25% on March 7, 2018, an additional 25% on March 7, 2019, and the final 25% of the covered shares on March 7, 2020.

(3)	Restricted Stock Unit Award vested 25% of the covered shares on May 11, 2018, an additional 25% on May 11, 2019, and will vest 25% of the covered shares on each of the second and third anniversaries of the initial vest date, provided that the holder remains in continuous service through each vest date.

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(4)

Restricted Stock Unit Award was granted on April 6, 2017 and vests over a three or four year period based upon the trading price of our Common Stock during the relevant vesting period. Specifically, and subject to the vesting limitations described in the following sentence, the trading price for our shares of Common Stock will need to be sustained for 60 consecutive trading days for one of the following vesting thresholds to have been met: (1) $2.75 stock price for 60 consecutive trading days triggers 33% vesting; (2) $3.00 stock price for 60 consecutive trading days triggers 67% vesting; and (3) $3.25 stock price for 60 consecutive trading days triggers 100% vesting (the “Share Price Thresholds”). Upon each of the first, second, third and fourth year anniversaries of the grant date if the Share Price Thresholds have been achieved during the preceding year and assuming the holder's continued service (1) up to a maximum of 33% of the Restricted Stock Units will vest upon the Year 1 anniversary date; (2) up to 67% of the Restricted Stock Units will vest upon the Year 2 anniversary date; and (3) up to 100% of the Restricted Stock Units will vest upon the Year 3 or Year 4 anniversary date. Restricted Stock Units that would vest solely on the basis of the share price thresholds but exceed the maximum vesting limitations for Year 1 or Year 2, will not vest until the subsequent anniversary date or dates (e.g., if the $3.25 trading price threshold is attained within the Year 1, the Restricted Stock Units will vest 33% after Year 1, 67% after Year 2 and 100% after Year 3). Linear interpolation will be applied between milestones for determining vesting on the Year 3 and Year 4 anniversary dates.

(5)	Restricted Stock Unit Award vested 25% of the covered shares on May 10, 2019, and will vest 25% of the covered shares on each of the first, second and third anniversaries of the initial vest date, provided that the holder remains in continuous service through each vest date.

(6)

Restricted Stock Unit award was granted on May 1, 2018. The number of Restricted Stock Units reported represents the maximum of 200% of the target level for this Restricted Stock Unit award. These Restricted Stock Units shall vest over a nearly four year period based upon continuing service and the trading price of our Common Stock during the relevant vesting period. Specifically, and subject to the vesting limitations described in the following sentence, the trading price for our shares of Common Stock will need to be sustained for 60 consecutive trading days for one of the following vesting thresholds to have been met: (1) $3.50 per share stock price for 60 consecutive trading days triggers 12.5% vesting; (2) $3.75 per share stock price for 60 consecutive trading days triggers 25% vesting; (3) $4.00 per share stock price for 60 consecutive trading days triggers 37.5% vesting; (4) $4.25 per share stock price for 60 consecutive trading days triggers 50% vesting; (5) $4.50 per share stock price for 60 consecutive trading days triggers 66.5% vesting; (6) $4.75 per share stock price for 60 consecutive trading days triggers 83% vesting; and (7) $5.00 per share stock price for 60 consecutive trading days triggers 100% vesting (the "Share Price Thresholds"). On March 29 in each of 2019, 2020, 2021 and 2022 (each a "vesting date"), if the Share Price Thresholds have been achieved during the preceding year and assuming the holder's continued service (1) up to a maximum of 25% of the Restricted Stock Units will vest upon the first vesting date; (2) up to a maximum of 50% of the Restricted Stock Units will vest upon the second vesting date; (3) up to a maximum of 75% of the Restricted Stock Units will vest upon the third vesting date; and (4) up to 100% of the Restricted Stock Units will vest upon the fourth vesting date. That portion of the Restricted Stock Units that would vest solely on the basis of the share price thresholds that exceeds the maximum vesting limitations for the first, second and third vesting dates will not vest until the subsequent vesting date or dates (e.g., if the $4.25 per share trading price threshold is attained prior to the first vesting date which would otherwise trigger 50% vesting, then 25% of Restricted Stock Units will vest as of the first vesting date, with the remaining 25% of the Restricted Stock Units to vest as of the second vesting date, subject to the vesting limitations as of such vesting date and continued service as of such vesting date). Linear interpolation will be applied between milestones for determining vesting on the third and fourth vesting dates.

(7)	The restricted stock unit award vests at a rate of 25% annually on the first, second, third and fourth anniversaries of April 29, 2019, provided that the Reporting Person remains in continuous service through each vest date.

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(8)

Restricted Stock Unit award was granted on May 2, 2019. The number of Restricted Stock Units reported represents the maximum of 200% of the target level for this Restricted Stock Unit award. These Restricted Stock Units shall vest over a nearly four year period based upon continuing service and the trading price of PFMT's Common Stock during the relevant vesting period. Specifically, and subject to the vesting limitations described in the following sentence, the trading price for PFMT's shares will need to be sustained for 60 consecutive trading days for one of the following vesting thresholds to have been met: (1) $2.75 per share stock price for 60 consecutive trading days triggers 12.5% vesting; (2) $3.00 per share stock price for 60 consecutive trading days triggers 25% vesting; (3) $3.25 per share stock price for 60 consecutive trading days triggers 37.5% vesting; (4) $3.50 per share stock price for 60 consecutive trading days triggers 50% vesting; (5) $3.75 per share stock price for 60 consecutive trading days triggers 66.5% vesting; (6) $4.00 per share stock price for 60 consecutive trading days triggers 83% vesting; and (7) $4.25 per share stock price for 60 consecutive trading days triggers 100% vesting (the "Share Price Thresholds"). On April 29 in each of 2020, 2021, 2022 and 2023 (each a "vesting date"), if the Share Price Thresholds have been achieved during the preceding year and assuming the Reporting Person's continued service to PFMT (1) up to a maximum of 25% of the Restricted Stock Units will vest upon the first vesting date; (2) up to a maximum of 50% of the Restricted Stock Units will vest upon the second vesting date; (3) up to a maximum of 75% of the Restricted Stock Units will vest upon the third vesting date; and (4) up to 100% of the Restricted Stock Units will vest upon the fourth vesting date. 4) That portion of the Restricted Stock Units that would vest solely on the basis of the share price thresholds that exceeds the maximum vesting limitations for the first, second and third vesting dates will not vest until the subsequent vesting date or dates (e.g., if the $3.50 per share trading price threshold is attained prior to the first vesting date which would otherwise trigger 50% vesting, then 25% of Restricted Stock Units will vest as of the first vesting date, with the remaining 25% of the Restricted Stock Units to vest as of the second vesting date, subject to the vesting limitations as of such vesting date and continued service as of such vesting date). Linear interpolation will be applied between milestones for determining vesting on the third and fourth vesting dates.

Employment and Change in Control Agreements

The section below describes the employment agreements that we have entered into with our Chief Executive Officer and Chair of our board of directors, as well as the form of employment agreement that each of our other executive officers entered into.

Chief Executive Officer

We entered into an employment agreement with Lisa C. Im, our Chief Executive Officer and Chair of the board of directors, on April 2, 2002, and this agreement has been subsequently amended. As amended, the agreement grants Ms. Im a salary of $33,334 per month, an automobile allowance of $1,500 per month and a Company-paid life insurance policy with a $1 million death benefit. This agreement also contains confidential information and invention assignment provisions.

Other Named Executive Officers

Each of our named executive officers, other than Ms. Im, has entered into our standard employment agreement. Our standard employment agreement provides for the named executive officer’s initial salary at the time of the agreement and grants the named executive officer the right to participate in our standard benefit plans. This agreement also contains confidential information and invention assignment provisions and does not provide for severance.

Potential Payments Upon Change of Control

We have also entered into a change of control agreement with Ms. Im. This agreement, as amended, provides that upon a triggering termination which follows a change in control by no more than two years, Ms. Im is entitled to receive a payment equal to her highest annual salary in effect during any period of 12 consecutive months within the 60 months immediately preceding the date of the triggering termination plus her highest annual bonus awarded in any of the three calendar years immediately preceding the year of the triggering termination. As of December 31, 2019, the aggregate change of control payment would be equal to $418,467 for Ms. Im.

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For purposes of Ms. Im’s change of control agreement:    

•

A Change in control occurs (i) if any person or group becomes the beneficial owner of 50% of the Company’s voting securities, (ii) if certain changes of the individuals who constitute the board of directors occur during any period of two consecutive years, (iii) upon consummation of a reorganization, merger or consolidation unless certain conditions are met, or (iv) upon stockholder approval of a complete liquidation of the Company.

    

•	Triggering termination is defined as Ms. Im’s termination for any reason other than (i) her death, (ii) her disability that entitles her to receive long-term disability benefits from the Company, (iii) her retirement on or after the age of 65, (iv) her termination for cause, or (v)  her resignation of employment for good reason.

    

•

Cause is defined as (i) the criminal conviction for embezzlement from the Company, (ii) the violation of a felony committed in connection with employment, (iii) the willful refusal to perform the reasonable duties of her position with the Company, (iv) the willful violation of the policies of the Company which is determined in good faith by the board of directors to be materially injurious to the employees, directors, property, or financial condition of the Company, or (v) the willful violation of the provisions of a confidentiality or non-competition agreement with the Company.

    

•	Good reason is defined as (i) a reduction in Ms. Im’s salary that was in effect immediately prior to a change of control, (ii) the relocation of the Company’s office that would add 35 miles or more to Ms. Im’s commute, or (iii) if the Company reduces certain benefits or vacation days that Ms. Im received prior to the change of control.

Retirement Plans

Except as described below, we currently have no plans that provide for the payment of retirement benefits, or benefits that will be paid primarily following retirement, including but not limited to tax-qualified defined benefit plans, supplemental executive retirement plans, tax-qualified defined contribution plans and nonqualified defined contribution plans.

We do maintain a 401(k) plan that is tax-qualified for our employees, including executive officers. We do not offer employer matching or other employer contributions to the 401(k) plan.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of May 14, 2020 about the number of shares of Common Stock beneficially owned by:

•	each person or group of persons known to us to be the beneficial owner of more than 5% of our Common Stock;

•	each of our current executive officers named under “Executive Compensation—Summary Compensation Table”;

•	each of our directors; and

•	all of our directors and executive officers as a group.

Unless otherwise noted below, the address of each beneficial owner listed in the table is: c/o Performant Financial Corporation, 333 North Canyons Parkway, Livermore, California 94551.

We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

The percentage of Common Stock beneficially owned is based on 54,185,553 shares issued and outstanding as of May 14, 2020. For purposes of calculating each person’s or group’s percentage ownership, shares of common stock issuable pursuant to the terms of stock options or restricted stock units exercisable or vesting within 60 days after May 14, 2020 are included as outstanding and beneficially owned for that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group. Beneficial ownership representing less than 1% is denoted with an asterisk (*).

Name of Beneficial Owner	Shares Beneficially Owned
	Number (1)		Percentage
5% Stockholders:
Parthenon DCS Holdings, LLC (2)	13,500,878		24.9%
Invesco Ltd. (3)	10,241,737		18.9%
Prescott Group Capital Management, LLC (4)	12,545,261		23.2%
ECMC Group, Inc. (5)	6,980,396		12.9%
Mill Road Capital Management, LLC (6)	3,479,615		6.4%
Executive Officers and Directors:
Lisa C. Im (7)	2,301,121		4.2%
Harold T. Leach, Jr. (8)	781,674		1.4%
Ian A. Johnston (9)	189,732		*
Simeon M. Kohl (10)	141,772		*
Bradley M. Fluegel (11)	244,600		*
William D. Hansen (12)	231,105		*
James LaCamp (13)	78,947		*
Eric Yanagi(6)	3,479,615		6.4%
All Executive Officers and Directors as a group (8 persons) (14)	7,448,566		13.7%

    

(1)	Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Unless otherwise noted, shares are owned of record and beneficially by the named person.

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(2)

Based on a Schedule 13G/A filed with the SEC on February 12, 2016 by Parthenon DCS Holdings, LLC (“DCS Holdings”). The reported shares are owned of record by DCS Holdings. Parthenon Investors II, L.P., as the manager of DCS Holdings; PCAP Partners II, LLC, as the general partner of Parthenon Investors II, L.P.; PCAP II, LLC, as the managing member of PCAP Partners II, LLC; PCP Managers, LLC, as the managing member of PCAP II, LLC; and Mr. Golson, William Kessinger and David Ament, as managing members of PCP Managers, LLC, may be deemed to beneficially own the securities owned of record by DCS Holdings. Mr. Golson is a Managing Director of Parthenon Capital Partners, an affiliate of PCAP Partners II, LLC. Each of the foregoing persons disclaims beneficial ownership of the reported securities except to the extent of their pecuniary interest therein. The address for the foregoing persons is c/o Parthenon Capital Partners, Four Embarcadero Center, Suite 3610, San Francisco, California 94111.

(3)	Based on a Schedule 13G/A filed with the SEC on February 7, 2020 by Invesco Ltd. (“Invesco”), an investment adviser which is deemed to be the beneficial owner of 10,241,737 shares. Invesco has sole voting and dispositive power over all shares beneficially owned by it. The principal business address of Invesco is 1555 Peachtree Street NE, Suite 1800, Atlanta, Georgia 30309.

(4)

Based on a Schedule 13/D filed with the SEC on March 26, 2020 by Prescott Group Capital Management, L.L.C. (“PGC”), and certain entities affiliated or associated with PGC, including Prescott Group Aggressive Small Cap, L.P., Prescott Group Aggressive Small Cap II, L.P. (collectively, the “Small Cap Funds”), and Phil Frohlich, the principal of PGC, reflecting shared voting and dispositive power with respect to 12,545,261 shares of common stock of the Company purchased by the Small Cap Funds through the account of Prescott Group Aggressive Small Cap Master Fund, G.P., (“Prescott Master Fund”), of which the Small Cap Funds are general partners. PGC serves as the general partner of the Small Cap Funds. The principal business address of PGC is 1924 South Utica Suite 1120, Tulsa, Oklahoma, 74104.

(5)

Based on a Schedule 13G filed with the SEC on February 13, 2020 by ECMC Group, Inc. (“ECMC”), a Delaware non-profit corporation, ECMC is the  record owner of 1,185,406 shares of Common Stock and warrants to purchase up to 5,794,990 additional shares of Common Stock, all of which are currently exercisable or exercisable within 60 days of such filling. ECMC has sole voting and dispositive power over all shares beneficially owned by it. The principal business address of ECMC is 111 South Washington Avenue, Minneapolis, Minnesota 55401.

(6)

Based on a Schedule 13D/A filed with the SEC on May 12, 2020 by Thomas E. Lynch, Eric Yanagi, Mill Road Capital II GP LLC, a Delaware limited liability company (the “GP”), and Mill Road Capital II, L.P., a Delaware limited partnership (the “Fund”). Each of the foregoing is referred to as a “Reporting Person” and, collectively, as the “Reporting Persons.” Messrs. Lynch and Yanagi and Justin C. Jacobs are the management committee directors of the GP and, in this capacity, are referred to as the “Managers.” The GP is the sole general partner of the Fund. Each of Messr. Lynch has shared authority to vote and dispose of 3,479,615 shares of common stock. The principal business address of Mill Road Capital II, L.P. is 382 Greenwich Ave, Suite One, Greenwich, Connecticut, 06830.

(7)	Includes 884,687 shares subject to options exercisable within 60 days of May 14, 2020.

(8)	Includes 304,896 shares subject to options exercisable within 60 days of May 14, 2020, and 11,250 shares underlying restricted stock units (RSUs) scheduled to vest within 60 days of May 14, 2020.

(9)	Includes 54,979 shares subject to options exercisable within 60 days of May 14, 2020, and 11,875 shares underlying RSUs scheduled to vest within 60 days of May 14, 2020.

(10)	Includes 37,490 shares subject to options exercisable within 60 days of May 14, 2020, and 14,375 shares underlying RSUs scheduled to vest within 60 days of May 14, 2020.

(11)	Includes 78,497 shares underlying RSUs scheduled to vest within 60 days of May 14, 2020.

(12)	Includes 78,497 shares underlying RSUs scheduled to vest within 60 days of May 14, 2020.

(13)	Includes 78,497 shares underlying RSUs scheduled to vest within 60 days of May 14, 2020.

(14)	Includes 1,282,052 shares subject to options exercisable within 60 days of May 14, 2020 and 274,341 underlying RSUs scheduled to vest within 60 days of May 14, 2020.

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AUDIT COMMITTEE REPORT

As part of fulfilling its responsibilities, the audit committee reviewed and discussed the Company’s audited financial statements for the fiscal year ended December 31, 2019 with management and Baker Tilly Virchow Krause, LLP, or Baker Tilly, and discussed with Baker Tilly those matters required by Auditing Standard No. 1301 as adopted by the Public Company Accounting Oversight Board, or the PCAOB. The audit committee received the written disclosures and the letter from Baker Tilly required by applicable requirements of the PCAOB regarding Baker Tilly’s communications with the audit committee concerning independence, and has discussed with Baker Tilly its independence.

Based on these reviews and discussions with management and Baker Tilly, the audit committee recommended to the board of directors that the Company’s audited financial statements for the fiscal year ended December 31, 2019 be included in its Annual Report on Form 10-K filed with the SEC.

The Audit Committee Members

James LaCamp (Chair)

William D. Hansen

Bradley M. Fluegel

Fees Paid to Independent Registered Public Accounting Firm

The audit committee’s policy is to evaluate and determine that the services provided by the Company’s auditors in each year are compatible with the respective auditor’s independence. The following table shows fees billed for each of 2019 and 2018 for professional services rendered by Baker Tilly for the audit of our financial statements and other services.

Year	Audit Fees(1)	Audit-Related Fees(2)	Tax Fees	All Other Fees(3)
2019	$ 930,000	$ 54,000	—	$ 290,000
2018	$ 686,000	—	—	—

(1)	Audit fees are fees for the audit of the Company’s annual financial statements. Audit fees also include fees for the review of financial statements included in the Company’s quarterly reports on Form 10-Q, for services that are normally provided in connection with statutory and regulatory filings or engagements, and in connection with public equity offerings and registration statements.

(2)	Audit-Related Fees are fees billed for the assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.”

(3)	All other fees are fees for products and services other than the services described above.

Audit Committee Pre-Approval Procedures

With respect to independent auditor services and fees, it is our practice to provide pre-approval of audit, audit-related, tax and other specified services on an annual basis. Unless a type of service to be provided by the independent registered public accounting firm has received general pre-approval, we seek specific pre-approval by the audit committee. Other specified services provided by the Company's auditors are generally reapproved only when the fees charged for the provision of such services is expected to be different than the prior year or normal fees. Proposed services anticipated to exceed pre-approved cost levels are discussed with the audit committee. It is our practice that the audit committee Chair has pre-approval authority with respect to permitted services. The Chair of the audit committee reports any pre-approval decisions to our audit committee at its next scheduled meeting.

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PROPOSAL 2 — RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020

Based upon its review of Baker Tilly Virchow Krause, LLP’s (“Baker Tilly”) qualifications, independence and performance, the audit committee of our board of directors has appointed Baker Tilly to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2020. Representatives of Baker Tilly are expected to attend the Annual Meeting, will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

The appointment of our independent registered public accounting firm is not required to be submitted for ratification by the stockholders. However, as a matter of proper corporate governance, the audit committee is submitting its appointment of Baker Tilly as the Company’s independent registered public accounting firm for 2020 for ratification by our stockholders.

If our stockholders fail to ratify the appointment of Baker Tilly, the audit committee may reconsider whether to retain Baker Tilly, and may continue to retain that firm or appoint another firm without resubmitting the matter to our stockholders. Even if our stockholders ratify the appointment of Baker Tilly, the audit committee may, in its discretion, appoint a different independent registered public accounting firm for us if it determines that such a change would be in the best interests of the Company and our stockholders.

The affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter at the Annual Meeting is required to ratify the appointment of Baker Tilly as our independent registered public accounting firm for 2020.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF BAKER TILLY AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2020.

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PROPOSAL 3 — APPROVAL OF REVERSE STOCK SPLIT

The board of directors has adopted and recommends that stockholders approve, a Certificate of Amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of our outstanding common stock by combining outstanding shares of common stock into a lesser number of outstanding shares of common stock at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares, which ratio will be selected by the our board of directors and set forth in a public announcement (the “Reverse Stock Split”). If approved by stockholders, the Reverse Stock Split may be effected at any time prior to December 31, 2020. The board of directors may alternatively elect in its sole discretion to abandon such proposed Certificate of Amendment and not effect the Reverse Stock Split authorized by stockholders. Upon the effectiveness of the Certificate of Amendment to Company’s Certificate of Incorporation effecting the Reverse Stock Split, the outstanding shares of our common stock will be reclassified and combined into a lesser number of shares such that one share of our common stock will be issued for a specified number of shares in accordance with the ratio for the Reverse Stock Split selected by the board of directors.

The form of the proposed Certificate of Amendment to Company’s Certificate of Incorporation to effect the Reverse Stock Split is attached as Appendix A (the “Reverse Stock Split Amendment”). The Certificate of Amendment to Company’s Certificate of Incorporation that will be filed to effect the Reverse Stock Split will include the Reverse Stock Split ratio fixed by our board of directors, within the range approved by our stockholders. If this proposal and Proposal 4 are approved by the stockholders, Appendix A will be filed with the Secretary of State of the State of Delaware promptly following the Annual Meeting and the proposed amendments will become effective upon such filing. If one or more of such proposals are not adopted, the board of directors intends to adopt a version of Appendix A that reflect the amendments adopted by stockholders, which will be filed promptly following adoption by the board of directors.

If the Reverse Stock Split is approved by our stockholders, the board of directors would have the sole discretion to effect the Reverse Stock Split at any time prior to December 31, 2020, and to fix the specific ratio for the Reverse Stock Split, provided that the ratio would be not less than 1-for-5 and not more than 1-for-20. We believe that enabling our board of directors to fix the specific ratio of the Reverse Stock Split within the stated range will provide us with the flexibility to implement the split in a manner designed to maximize the anticipated benefits to us and our stockholders, as described below. The determination of the ratio of the Reverse Stock Split will be based on a number of factors, described further below under the heading “-Criteria to be Used for Decision to Apply the Reverse Stock Split.”

The primary purpose for effecting the Reverse Stock Split is to increase the per share trading price of our common stock so as to:

•	maintain the listing of our common stock on The Nasdaq Global Select Market (“Nasdaq”) and avoid a delisting of our common stock from Nasdaq in the future on the basis of the Minimum Bid Price Requirement (as defined below);

•	broaden the pool of investors that may be interested in investing in the Company by attracting new investors who would prefer not to invest in shares that trade at lower share prices; and

•	make our common stock a more attractive investment to institutional investors.

In evaluating the Reverse Stock Split Amendment, the board of directors has taken, and will take, into consideration negative factors associated with reverse stock splits. These factors include the negative perception of reverse stock splits held by many investors, analysts and other stock market participants, as well as the fact that the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels. In recommending approval of the Reverse Stock Split Amendment, the board of directors determined that these potential negative factors were significantly outweighed by the potential benefits.

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Criteria to be Used for Decision to Apply the Reverse Stock Split

If the stockholders approve the Reverse Stock Split Amendment, the board of directors will be authorized to proceed with the Reverse Stock Split. The exact ratio of the Reverse Stock Split, within the 1-for-5 to 1-for-20 range, would be determined by the board of directors and publicly announced by us prior to the effective time of the Reverse Stock Split. In determining whether to proceed with the Reverse Stock Split and setting the appropriate ratio for the Reverse Stock Split, our board of directors will consider, among other things, factors such as:

•	Nasdaq’s minimum price per share requirements;

•	the historical trading prices and trading volume of our common stock;

•	the number of shares of our common stock that would be outstanding following the Reverse Stock Split;

•	the then-prevailing and expected trading prices and trading volume of our common stock and the anticipated impact of the Reverse Stock Split on the trading market for our common stock;

•	the anticipated impact of a particular ratio on our ability to reduce administrative and transactional costs;

•	business developments affecting us; and

•	prevailing general market and economic conditions.

Reasons for the Reverse Stock Split

The board of directors is seeking authority to effect the Reverse Stock Split with the primary intent of increasing the price of our common stock in order to meet the price criteria for continued listing on Nasdaq. Our common stock is publicly traded and listed on The Nasdaq Global Select Market under the symbol “PFMT.” The board of directors believes that, in addition to increasing the price of our common stock to meet the price criteria for continued listing on Nasdaq, the Reverse Stock Split would also make our common stock more attractive to a broader range of institutional and other investors. Accordingly, for these and other reasons discussed below, we believe that effecting the Reverse Stock Split is in our and our stockholders’ best interests.

On December 27, 2019, we received written notice from Nasdaq notifying us that we are not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Select Market (the “Minimum Bid Price Requirement”). Nasdaq Listing Rule 5450(a)(1) requires listed securities maintain a minimum closing bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum closing bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the Company’s common stock for the 30 consecutive business days prior to the date of the written notice, the Company did not meet the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days at any time prior to June 24, 2020 (the “Compliance Date”). On January 22, 2020, we received notification Nasdaq that we had regained compliance with the Minimum Bid Price Requirement and, as a result, the matter of the Company’s noncompliance with the Minimum Bid Price Requirement had been closed.

On April 17, 2020, we received a subsequent notice from Nasdaq that based upon the closing bid price of our shares of common stock for the last 30 consecutive business days leading up to the date of the letter, we no longer met the requirement set forth the Minimum Bid Price Rule. Nasdaq also notified us that due to the global market impact caused by COVID-19, Nasdaq had tolled the compliance periods for the Minimum Bid Price Rule through June 30, 2020. In accordance with NASDAQ Rule 5810(c)(3)(A) and the tolling of the Minimum Bid Price Rule compliance periods, we have been provided with a period of 180 calendar days starting July 1, 2020 to regain compliance with the Minimum Bid Price Rule. Accordingly, we may regain compliance with the Minimum Bid Price Rule if the bid price of our common stock closes at $1.00 per share or more for a minimum of 10 consecutive business days at any time prior to December 28, 2020.

Since the date of the second notice letter from Nasdaq, shares of our common stock have failed to maintain a minimum closing bid price of $1.00 per share. While we have yet to receive any subsequent communications from Nasdaq, the failure of shares of our common stock to meet the Minimum Bid Price Requirement may lead to delisting from Nasdaq.

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In the event we are delisted from Nasdaq, the only established trading market for our common stock would be eliminated and we would be forced to list our shares on the OTC Markets or another quotation medium, depending on our ability to meet the specific listing requirements of those quotation systems. As a result, an investor would likely find it more difficult to trade, or to obtain accurate price quotations for, our shares. Delisting would likely also reduce the visibility, liquidity and value of our common stock, including as a result of reduced institutional investor interest in the Company, and may increase the volatility of our common stock. Delisting could also cause a loss of confidence of potential industry partners, lenders and employees, which could further harm our business and our future prospects. We believe that effecting the Reverse Stock Split may help us avoid delisting from Nasdaq and any resulting consequences.

In addition, the board of directors believes that an expected increased stock price could encourage investor interest and improve the marketability of our common stock to a broader range of investors, and thus enhance our liquidity. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current share price of our common stock may result in an investor paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. The board of directors believes that the higher share price that may result from the Reverse Stock Split could enable institutional investors and brokerage firms with such policies and practices to invest in our common stock.

Although we expect that the Reverse Stock Split will result in an increase in the market price of our common stock, the Reverse Stock Split may not result in a permanent increase in the market price of our common stock, which would be dependent on many factors, including general economic, market and industry conditions and other factors detailed from time to time in the reports we file with the SEC.

Certain Risks Associated with the Reverse Stock Split

There can be no assurance that the total market capitalization of our common stock after the implementation of the Reverse Stock Split will be equal to or greater than the total market capitalization before the Reverse Stock Split or that the per share market price of our common stock following the Reverse Stock Split will increase in proportion to the reduction in the number of shares of our common stock outstanding in connection with the Reverse Stock Split. Also, we cannot assure you that the Reverse Stock Split would lead to a sustained increase in the trading price of our common stock. The trading price of our common stock may change due to a variety of other factors, including our ability to successfully accomplish our business goals, market conditions and the market perception of our business. You should also keep in mind that the implementation of the Reverse Stock Split does not have an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership in the Company (subject to the treatment of fractional shares). However, should the overall value of our common stock decline after the proposed Reverse Stock Split, then the actual or intrinsic value of the shares of our common stock held by you will also proportionately decrease as a result of the overall decline in value.

Further, the liquidity of our common stock may be harmed by the proposed Reverse Stock Split given the reduced number of shares that would be outstanding after the Reverse Stock Split, particularly if the expected increase in stock price as a result of the Reverse Stock Split is not sustained. For instance, the proposed Reverse Stock Split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting sales. If we effect the Reverse Stock Split, the resulting per-share stock price may nevertheless fail to attract institutional investors and may not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of our common stock may not improve.

While the board of directors has proposed the Reverse Stock Split to bring the price of our common stock back above $1.00 per share in order to meet the requirements for the continued listing of our common stock on Nasdaq, there is no guarantee that the price of our common stock will not decrease in the future, or that our common stock will remain in compliance with Nasdaq listing standards. Additionally, there can be no guarantee that the closing bid price of our common stock will remain at or above $1.00 for 10 consecutive trading days, whether following the Reverse Stock Split or otherwise, which is required to cure our current Nasdaq listing standard deficiency.

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Effect of the Reverse Stock Split

If the Reverse Stock Split Amendment is approved by our stockholders and the board of directors elects to effect the Reverse Stock Split, the number of outstanding shares of common stock will be reduced in proportion to the ratio of the split chosen by the board of directors. As of the effective time of the Reverse Stock Split, we would also adjust and proportionately decrease the number of shares of our common stock reserved for issuance upon exercise of, and adjust and proportionately increase the exercise price of, all options and warrants and other rights to acquire our common stock. In addition, as of the effective time of the Reverse Stock Split, we would adjust and proportionately decrease the total number of shares of our common stock that may be the subject of the future grants under our stock plans.

The Reverse Stock Split would be effected simultaneously for all outstanding shares of our common stock. The Reverse Stock Split would affect all of our stockholders uniformly and would not change any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split results in any of our stockholders owning fractional shares.

Assuming Reverse Stock Split ratios of 1-for-5, 1-for-10 and 1-for-20, which reflect the low end, middle end and high end of the range that our stockholders are being asked to approve, the following table sets forth (i) the number of shares of our common stock that would be issued and outstanding, (ii) the number of shares of our common stock that would be reserved for issuance pursuant to outstanding options, warrants and restricted stock units, and (iii) the weighted-average exercise price of outstanding options and warrants, each giving effect to the Reverse Stock Split and based on shares outstanding as of May 14, 2020:

	Before Reverse Stock Split	Reverse Stock Split Ratio of 1-for-5	Reverse Stock Split Ratio of 1-for-10	Reverse Stock Split Ratio of 1-for-20
Number of Shares of Common Stock Issued and Outstanding	54,185,553	10,837,110	5,418,555	2,709,277
Number of Shares of Common Stock Reserved for Issuance Pursuant to Outstanding Options, Warrants and Restricted Stock Units	10,301,667	2,060,333	1,030,166	515,083
Weighted-Average Exercise Price of Outstanding Options and Warrants	$ 3.93	$ 19.67	$ 39.35	$ 78.70

If our board of directors does not implement the Reverse Stock Split prior to December 31, 2020, the authority granted in this proposal to implement the Reverse Stock Split would terminate.

Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in this proposal, except to the extent of their ownership in shares of our common stock and securities convertible or exercisable for our common stock, which shares and securities would be subject to the same proportionate adjustment in accordance with the terms of the Reverse Stock Split as all other outstanding shares of our common stock and securities convertible into or exercisable for our common stock.

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Authorized Shares of Common Stock

We are currently authorized under our Certificate of Incorporation to issue up to a total of 550,000,000 shares of capital stock, comprised of 500,000,000 shares of common stock and 50,000,000 shares of preferred stock. While the Reverse Stock Split would decrease the number of outstanding shares of our common stock, it would not change the number of authorized shares under our Certificate of Incorporation. Consequently, the Reverse Stock Split would have the effect of increasing the number of shares of common stock available for issuance under our Certificate of Incorporation. The board of directors believes that such an increase is in our and our stockholders’ best interests as it would provide us with greater flexibility to issue shares of common stock in connection with possible future financings, joint ventures and acquisitions as well as under our equity incentive plans and for other general corporate purposes. We do not currently have any plans, understandings, arrangements, commitments or agreements, written or oral, for the issuance of the additional shares of common stock that would become available for issuance if the Reverse Stock Split is effected; however we desire to have the shares available to provide us with additional flexibility to use our common stock for these business and financial purposes in the future.

Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates

If the Reverse Stock Split Amendment is approved by our stockholders, the Reverse Stock Split would become effective upon the time specified in the Certificate of Amendment to the Company’s Certificate of Incorporation as filed with the Secretary of State of the State of Delaware. The exact timing of the filing of the Certificate of Amendment and the Reverse Stock Split will be determined by the board of directors based on its evaluation as to when such action will be the most advantageous to us and our stockholders, but the Reverse Stock Split will not occur after December 31, 2020. In addition, the board of directors reserves the right, notwithstanding stockholder approval and without further action by our stockholders, to abandon the Certificate of Amendment and the Reverse Stock Split if, at any time prior to the filing of the Certificate of Amendment with the Secretary of State, the board of directors, in its sole discretion, determines that it is no longer in the best interest of the Company our stockholders to proceed.

Beginning at the split effective time, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares. As soon as practicable after the split effective time, stockholders will be notified that the Reverse Stock Split has been effected. We expect that our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-split shares will be asked to surrender to the exchange agent certificates representing pre-split shares in exchange for certificates representing post-split shares in accordance with the procedures to be set forth in a letter of transmittal. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent. Any pre-split shares submitted for transfer, whether pursuant to a sale or other disposition, or otherwise, will automatically be exchanged for post-split shares.

After the effective time of the Reverse Stock Split, our common stock will have a new Committee on Uniform Securities Identification Procedures (“CUSIP”) number, which is a number used to identify our equity securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock certificates with the new CUSIP numbers by following the procedures described above.

STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.

Fractional Shares

No fractional shares will be issued in connection with the Reverse Stock Split. Stockholders of record who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of pre-split shares for which each post-split share is to be reclassified, will be entitled, upon surrender to the exchange agent of certificates representing such shares, to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the common stock on Nasdaq on the date immediately preceding the split effective time. The ownership of a fractional interest will not give the holder thereof any voting, dividend, or other rights except to receive payment therefor as described herein.

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Stockholders should be aware that, under the escheat laws of the various jurisdictions where stockholders reside, where the Company is domiciled, and where the funds will be deposited, sums due for fractional interests that are not timely claimed after the effective date of the split may be required to be paid to the designated agent for each such jurisdiction, unless correspondence has been received by us or the exchange agent concerning ownership of such funds within the time permitted in such jurisdiction. Thereafter, stockholders otherwise entitled to receive such funds will have to seek to obtain them directly from the state to which they were paid.

Material U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following discussion is a summary of the material U.S. federal income tax consequences of the proposed reverse stock split to holders of our common stock. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”), in each case in effect as of the date of this proxy statement. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the proposed reverse stock split.

This discussion is limited to holders who hold their common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to the particular circumstances of a stockholder, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to holders of common stock that are subject to special rules, including, without limitation:

•	Financial institutions;

•	Insurance companies;

•	Real estate investment trusts;

•	Regulated investment companies;

•	Grantor trusts;

•	Tax-exempt organizations;

•	Dealers or traders in securities or currencies;

•	Stockholders who hold common stock as part of a position in a straddle or as part of a hedging, conversion or integrated transaction for U.S. federal income tax purposes or U.S. holders that have a functional currency other than the U.S. dollar;

•	Stockholders who actually or constructively own 10% or more of our voting stock; or

•	A non-U.S. holder who is a U.S. expatriate, “controlled foreign corporation” or “passive foreign investment company.”

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is the beneficial owner of our common stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Accordingly, partnerships (and other entities treated as partnerships for U.S. federal income tax purposes) holding common stock and the partners in such entities should consult their own tax advisors regarding the U.S. federal income tax consequences of the proposed reverse stock split to them.

In addition, the following discussion does not address the U.S. federal estate and gift tax, alternative minimum tax, or state, local and non-U.S. tax law consequences of the proposed reverse stock split. Furthermore, the following discussion does not address any tax consequences of transactions effectuated before, after or at the same time as the proposed reverse stock split, whether or not they are in connection with the proposed reverse stock split.

STOCKHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

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Tax Consequences Applicable to U.S. Holders

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is or is treated as:

•	an individual who is a citizen or resident of the United States;

•	a corporation (or any other entity or arrangement treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

•	an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

•	a trust if (1) its administration is subject to the primary supervision of a court within the United States and all of its substantial decisions are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person.

The proposed reverse stock split should constitute a “recapitalization” for U.S. federal income tax purposes pursuant to Section 368(a)(1)(E) of the Code. As a result, a U.S. Holder of our common stock generally should not recognize gain or loss upon the proposed reverse stock split for U.S. federal income tax purposes, except with respect to cash received in lieu of a fractional share of common stock, as discussed below. A U.S. Holder’s aggregate adjusted tax basis in the shares of our common stock received pursuant to the proposed reverse stock split should equal the aggregate adjusted tax basis of the shares of the common stock surrendered (reduced by the amount of such basis that is allocated to any fractional share of common stock). The U.S. Holder’s holding period in the shares of our common stock received should include the holding period in the shares of common stock surrendered. U.S. Treasury Regulations provide detailed rules for allocating the tax basis and holding period of shares of common stock surrendered to shares of received in a recapitalization. U.S. Holders of shares of our common stock acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares.

A U.S. Holder of our common stock that receives cash in lieu of a fractional share of common stock pursuant to the Reverse Stock Split should recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the portion of the U.S. Holder’s aggregate adjusted tax basis in the shares of common stock surrendered that is allocated to such fractional share of common stock. Such capital gain or loss will be short term if the pre-reverse split shares were held for one year or less at the effective time of the reverse stock split and long term if held for more than one year. No gain or loss will be recognized by us as a result of the Reverse Stock Split.

Tax Consequences Applicable to Non-U.S. Holders

For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of our common stock that is neither a U.S. Holder nor a partnership (or an entity treated as a partnership for U.S. federal income tax purposes).

Generally, a Non-U.S. Holder will not recognize any gain or loss upon the proposed reverse stock split. Any gain or loss realized with respect to cash received in lieu of a fractional share generally will not be subject to U.S. federal income or withholding tax unless:

a)	such gain or loss is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder),

b)	the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the proposed reverse stock split and certain other conditions are met, or

c)	our common stock constitutes a U.S. real property interest by reason of our status as U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes. Although there can be no assurance, we believe that we are not currently and have not been, and we do not anticipate becoming, a USRPHC.

Gain described in clause (a) above generally will be subject to U.S. federal income tax on a net income basis at the graduated U.S. federal income tax rates applicable to United States persons. A Non-U.S. Holder that is a foreign corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items.

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A Non-U.S. Holder described in clause (b) above will be subject to U.S. federal income tax at a rate of 30% (or, if applicable, a lower treaty rate) on the gain realized with respect to cash received in lieu of a fractional share, which may be offset by certain U.S. source capital losses of the Non-U.S. Holder recognized in the year the reverse stock split is effected, even though the Non-U.S. Holder is not considered a resident of the United States.

Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Payments of cash made in lieu of a fractional share of common stock may, under certain circumstances, be subject to information reporting and backup withholding. To avoid backup withholding, each holder of our common stock that does not otherwise establish an exemption should furnish its taxpayer identification number and comply with the applicable certification procedures.

Backup withholding is not an additional tax and amounts withheld will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided the required information is timely furnished to the IRS. Holders of our common stock should consult their own tax advisors regarding the application of the information reporting and backup withholding rules to them.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT.

PROPOSAL 4 — REMOVAL OF BOARD SIZE REQUIREMENT FROM THE COMPANY’S CERTIFICATE OF INCORPORATION

The board of directors has adopted and recommends that stockholders approve an amendment to Article VI of the Company’s certificate of incorporation to remove of the requirement that the board of directors consist of not less than 5 and not more than 15 members.

The form of the proposed Certificate of Amendment to Company’s Second Amended and Restated Certificate of Incorporation to effect such change is attached as Appendix A (the “Board Size Amendment”). The board of directors has also authorized the submission of the Board Size Amendment to the stockholders for their consideration and approval. If this proposal and Proposal 3 are approved by the stockholders, Appendix A will be filed with the Secretary of State of the State of Delaware promptly following the Annual Meeting and the proposed amendments will become effective upon such filing. If one or more of such proposals are not adopted, the board of directors intends to adopt a version of Appendix A that reflect the amendments adopted by stockholders, which will be filed promptly following adoption by the board of directors.

The Company’s certificate of incorporation currently requires the Company to maintain between 5 and 15 seats on the board of directors. As directors’ fees have increased and qualified directors have become more difficult to find, it has become increasingly more challenging and expensive to maintain a Board of at least 5 directors. Therefore, the board of directors proposes to amend the Company’s certificate of incorporation to eliminate the size requirement and provide the board of directors additional flexibility with regard to the size of the board of directors. If such amendment is adopted by the stockholders, the size of the board of directors shall continue to be fixed from time to time pursuant to a resolution adopted by a majority of the directors of the Company then in office, but without the requirement that such size fall within the 5 to 15 member range.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR REMOVAL OF THE BOARD SIZE REQUIREMENT FROM THE COMPANY’S CERTIFICATE OF INCORPORATION.

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PROPOSAL 5 — ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

At the Annual Meeting, stockholders will vote to approve the Company’s executive compensation on an advisory basis in accordance with Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”) (the “say-on-pay” vote). The say-on-pay vote is an advisory vote on the compensation of the Company’s named executive officers, as such compensation is disclosed pursuant to Item 402 of Regulation S-K in the section titled “Executive Compensation” in this proxy statement. The say-on-pay vote is not a vote on the Company’s general compensation policies, compensation of the board of directors, or the Company’s compensation policies as they relate to risk management.

As an advisory vote, the say-on-pay vote is not binding on either the Company or the board of directors. However, the board of directors values the opinions of our stockholders, and, to the extent there is any significant vote against the Company’s executive compensation as disclosed in this proxy statement, the Company will consider our stockholders’ concerns and evaluate what actions may be appropriate to address those concerns.

Stockholders will be asked at the annual meeting to approve the following resolution pursuant to this proposal:

RESOLVED, that the stockholders of Performant Financial Corporation approve, on an advisory basis, the compensation of the Company’s named executive officers, as such compensation is disclosed pursuant to Item 402 of Regulation S-K in the section titled “Executive Compensation” in the Company’s definitive proxy statement for the 2020 annual meeting.

Unless the board of directors implements a policy of holding say-on-pay votes more frequently than once every three years, the next advisory vote to approve the Company’s executive compensation will occur at the 2023 annual meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY’S EXECUTIVE COMPENSATION.

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PROPOSAL 6 — ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION

The Company is required by the Dodd-Frank Act to provide stockholders with a separate advisory (non-binding) vote for the purpose of asking stockholders to express their preference for the frequency of future say-on-pay votes. Stockholders may indicate whether they would prefer an advisory vote on executive compensation once every one, two or three years. We are required to solicit stockholder votes on the frequency of future say-on-pay proposals at least once every six years, although we may seek stockholder input more frequently.

The frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of the stockholders. However, because this vote is advisory and not binding on the board of directors or the Company, the board of directors may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option selected by a plurality of our stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE, ON AN ADVISORY BASIS, TO CONDUCT FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY THREE YEARS.

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GENERAL INFORMATION

Stockholder Proposals for the 2021 Annual Meeting

Stockholder proposals for inclusion in the proxy materials for the 2021 annual meeting must be received at our principal executive offices not more than 120 days, or December 22, 2020, nor less than 90 days, or January 21, 2021, prior to the first anniversary date of the mailing date of the enclosed proxy materials. These proposals must also comply with the proxy submission rules of the Securities and Exchange Commission under Rule 14a-8.

In addition, our bylaws provide stockholders who wish to present proposals for action, or to nominate directors, at our next annual meeting of stockholders (that is, the next annual meeting following the annual meeting to which this proxy statement relates) must give written notice thereof to our Secretary at the address set forth on the cover page of this proxy statement in accordance with the provisions of our bylaws, which require that such notice be given not more than 120 days nor less than 90 days prior to the first anniversary of the date of the preceding annual meeting of stockholders. In the event the date of the 2021 annual meeting is more than 30 days before or 60 days after the anniversary date of the 2020 Annual Meeting, in order for a notice to be timely, it must be delivered not later than the close of business on the later of the 90th day prior to the 2021 annual meeting or the close of business on the 10th day following the day on which we first publicly announce the date of the 2021 annual meeting.

Annual Report and Financial Statements

A copy of our 2019 Annual Report to Stockholders, which includes our financial statements for the year ended December 31, 2019, is enclosed or provided with this proxy statement and other voting materials.

Delinquent Section 16(a) Reports

Under U.S. securities laws, directors, certain executive officers and any person holding more than 10% of our common stock must report their initial ownership of the common stock and any changes in that ownership to the SEC. The SEC has designated specific due dates for these reports and we must identify in this proxy statement those persons who did not file these reports when due. Based solely on our review of copies of the reports filed with the SEC and written representations of our directors and executive officers, we believe all persons subject to reporting filed the required reports on time in 2019.

Stockholders Sharing the Same Last Name and Address

To reduce the expense of delivering duplicate proxy materials to stockholders who may have more than one account holding our stock but who share the same address, we have adopted a procedure approved by the SEC called “householding.” Under this procedure, certain stockholders of record who have the same address and last name will receive only one copy of our proxy materials until such time as one or more of these stockholders notifies us that they want to receive separate copies. This procedure reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources. Stockholders who participate in householding will continue to have access to and utilize separate proxy voting instructions.

If you receive a single set of proxy materials as a result of householding, and you would like to have separate copies of our annual report or proxy statement mailed to you, please submit a request to our Secretary or call (925) 960-4800, and we will promptly send you what you have requested. You can also contact our Secretary at the phone number above if you received multiple copies of the annual meeting materials and would prefer to receive a single copy in the future, or if you would like to opt out of householding for future mailings.

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Copies of Corporate Governance Materials Available

Our board of directors has adopted various corporate governance guidelines setting forth our governance principals and governance practices. These documents are available for downloading or printing on our web site at www.performantcorp.com, by selecting “Investors” and then “Governance.”

•	Audit Committee Charter

•	Compensation Committee Charter

•	Nominating and Governance Committee Charter

•	Conflict of Interest and Ethics Policy

•	Code of Ethics for Senior Financial Officers and Directors

Appendix A

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Certificate of Amendment to the Second Amended and Restated

Certificate of Incorporation of Performant Financial Corporation

Performant Financial Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify as follows:

1.	The current name of the Corporation is Performant Financial Corporation.

2.	The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on October 8, 2003 under the name DCS Holdings, Inc.

3.

The Board of Directors of the Corporation duly adopted resolutions pursuant to Section 242 of the General Corporation Law proposing this Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation and declaring the advisability of this Certificate of Amendment of the second Amended and Restated Certificate of Incorporation and authorizing the appropriate officers of the Corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment is as follows:

RESOLVED, that Section A of Article IV of the Second Amended and Restated Certificate of Incorporation be and hereby is deleted in its entirety and the following is inserted in lieu thereof:

A. Classes of Stock.

1.

The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is 550,000,000, of which 500,000,000 shares shall be Common Stock, $0.0001 par value per shares (the “Common Stock”), and of which 50,000,000 shares shall be Preferred Stock, $0.0001 par value per share (the “Preferred Stock”). The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares of Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions established by the Board of Directors of the Corporation (the “Board of Directors”) in the resolution or resolutions providing for the issue of such Preferred Stock, and if such holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in the certificate of incorporation of the Corporation, the only stockholder approval required shall be the affirmative vote of a majority of the voting power of the Common Stock and the Preferred Stock so entitled to vote, voting as one class.

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2.

Pursuant to the General Corporation law of the State of Delaware, upon the filing and effectiveness of this Certificate of Amendment (the “Effective Time”), a one-for-[·]: reverse stock split of the Corporation’s Common Stock shall become effective, pursuant to which each [·] shares of Common Stock issued or outstanding (including treasury shares) immediately prior to the Effective Time shall be reclassified and combined into one validly issued, fully paid and nonassessable share of Common Stock automatically and without any action by the holder thereof upon the Effective Time (such reclassification and combination of shares, the “Reverse Stock Split”). The par value of the Common Stock following the Reverse Stock Split shall remain at $0.0001 par value per share. No fractional shares of Common Stock shall be issued as a result of the Reverse Stock Split and, in lieu thereof, upon surrender after the Effective Time of a certificate which formerly represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time, any person who would otherwise be entitled to a fractional share of Common Stock as a result of the Reverse Stock Split, following the Effective Time, shall be entitled to receive a cash payment equal to the fraction of a share of Common Stock to which such holder would otherwise be entitled multiplied by the fair value per share of the Common Stock immediately prior to the Effective Time as determined by the Board of Directors. Each stock certificate that, immediately prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of Common Stock after the Effective Time into which the shares formerly represented by such certificate have been reclassified (as well as the right to receive cash in lieu of fractional shares of Common Stock after the Effective Time); provided, however, that each person of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified.

RESOLVED, Section A of Article VI of the Third Amended and Restated Certificate of Incorporation be and hereby is deleted in its entirety and the following is inserted in lieu thereof:

The business and affairs of the Corporation shall be managed by a Board of Directors. The exact number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by the affirmative vote of a majority of the directors of the Corporation then in office. The Board of Directors, other than those directors elected by the holders of any series of Preferred Stock as provided for or fixed pursuant to the provisions of Article IV hereof, shall be divided into three classes, designated Class I, Class II and Class III, as nearly equal in number as possible, and the term of office of directors of one class shall expire at each annual meeting of stockholders, and in all cases as to each director until his successor shall be duly elected and qualified or until his earlier resignation, removal from office, death or incapacity.

IN WITNESS WHEREOF, this Corporation has caused this Certificate of Amendment of the Second Amended and Restated Certificate of Incorporation to be signed by its Chief Executive Officer this ___ day of __________, 2020

____________________

Lisa Im

Chief Executive Officer

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