Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 
SCHEDULE 14A

 Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934


 
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Soliciting Material Pursuant to §240.14a-12
InnerWorkings, Inc.

(Name of Registrant as Specified In Its Charter)


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InnerWorkings, Inc.
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601

April 28, 2020

To Our Stockholders:

On behalf of the Board of Directors (the "Board") and management, we cordially invite you to attend the 2020 annual meeting of stockholders (including any adjournments or postponements thereof, the “Annual Meeting”) of InnerWorkings, Inc. (the “Company”) to be held on Tuesday, June 9, 2020 , at 11:00 a.m. , Central Time, at our corporate headquarters, 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 .

The following pages contain the formal notice of the Annual Meeting, the proxy statement and the proxy card. Please review this material for information concerning the business to be conducted at the meeting and the nominees for election as directors. You may also find copies of these items online at www.inwk.com . Information on, or accessible through, our website is not a part of, or incorporated by reference into, this proxy statement.

The purpose of the meeting is to consider and vote upon proposals to (i) elect nine director candidates who have been nominated for election, (ii) approve, on an advisory, non-binding basis, the compensation of our named executive officers, (iii) approve our 2020 Omnibus Incentive Plan, and (iv) ratify the appointment of our independent registered public accounting firm for 2020 .

We are pleased to again take advantage of the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of our annual meeting. The proxy statement contains instructions on how you can request a paper copy of the proxy statement and annual report.

Whether or not you plan to attend the meeting, your vote is important and we encourage you to vote promptly. You may vote your shares via a toll-free telephone number, over the Internet or by mail. We urge you to fill out and submit the enclosed proxy card today. Instructions regarding these methods of voting are contained on the notice regarding the availability of proxy materials for the annual meeting of stockholders to be held on June 9, 2020 .

On behalf of your Board, we thank you for your continued support.

Sincerely yours,
jackgreenbergsignature02.jpg
 
richstoddartsignaturea02.jpg
Jack M. Greenberg
Chairman of the Board
 
Richard S. Stoddart
Chief Executive Officer, President and Director

This proxy statement is dated April 28, 2020 and is first being distributed to stockholders via the Internet on or about April 28, 2020 .



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Notice of 2020 Annual Meeting of Stockholders
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601
June 9, 2020 , 11:00 a.m. , Central Time
April 28, 2020

Fellow stockholders:

Notice is hereby given that the Annual Meeting of the stockholders (including any adjournments or postponements thereof, the “Annual Meeting”) of InnerWorkings, Inc. (the “Company”), a Delaware corporation, will be held on Tuesday, June 9, 2020 at 11:00 a.m. , Central Time, at our corporate headquarters, 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 for the following purposes:

1.
to elect nine members of the Board of Directors (the “Board”) to serve until the 2021 annual meeting of stockholders or until their respective successors are elected and qualified;
2.
to approve, on an advisory, non-binding basis, the compensation of our named executive officers;
3.
to approve our 2020 Omnibus Incentive Plan;
4.
to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2020 ; and
5.
to transact any other business properly brought before the Annual Meeting.

These items of business, including the nominees for director, are more fully described in the proxy statement accompanying this notice.

You are cordially invited to attend the Annual Meeting in person. In accordance with our security procedures, all persons attending the Annual Meeting will be required to present a form of government-issued photo identification. If you hold your shares in “street name,” you must also provide proof of ownership, such as a recent brokerage statement. If you are a holder of record and attend the Annual Meeting, you may vote by ballot in person even if you have previously returned your proxy card. If you hold your shares in “street name” and wish to vote in person, you must provide a “legal proxy” from your bank, broker or other nominee.

The Board has fixed the close of business on April 16, 2020 as the record date for determining the stockholders of the Company entitled to notice of and to vote at the Annual Meeting. Such stockholders are urged to submit the enclosed proxy card, even if your shares were sold after such date. If your bank, broker or other nominee is the holder of record of your shares (i.e., your shares are held in “street name”), you will receive voting instructions from the holder of record. You must follow these instructions in order for your shares to be voted. We recommend that you instruct your bank, broker or other nominee to vote your shares “FOR” each of the items listed on the enclosed proxy card.

IF YOU CANNOT ATTEND THE ANNUAL MEETING, PLEASE TAKE THE TIME TO PROMPTLY VOTE YOUR PROXY BY CAREFULLY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. Even if you plan to attend the Annual Meeting, we recommend that you vote using the enclosed proxy card prior to the Annual Meeting to ensure that your shares will be represented. If you submit your proxy and then decide to attend the Annual Meeting to vote your shares in person, you may still do so. Your proxy is revocable in accordance with the procedures set forth in the proxy statement. Only stockholders of record as of the close of business on April 16, 2020 are entitled to receive notice of, and to attend and to vote at, the meeting.

THE BOARD UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ELECTION OF EACH OF THE BOARD'S NOMINEES UNDER PROPOSAL 1 AND “FOR” PROPOSALS 2, 3 AND 4 USING THE ENCLOSED PROXY CARD.




By Order of the Board,

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Oren B. Azar
Executive Vice President, General Counsel & Corporate Secretary



Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on June 9, 2020

As permitted by rules adopted by the United States Securities and Exchange Commission ("the SEC"), we are making this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2019, available to stockholders electronically via the Internet at http://www.proxyvote.com . We will mail to most of our stockholders a Notice Regarding the Availability of Proxy Materials containing instructions on how to access this proxy statement and our 2019 annual report and to vote via the Internet or by telephone.

You may also request hard copies of these documents free of charge by writing to the following address.

Investor Relations
InnerWorkings, Inc.
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601




PROXY SUMMARY

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information you should consider, and you should read the entire proxy statement carefully before voting.

Annual Meeting Information
Date, Time and Location:
June 9, 2020 at 11:00 a.m. Central Time, at our corporate headquarters, 203 N. LaSalle Street, Suite 1800, Chicago, Illinois 60601
Record Date:
April 16, 2020

Items to be Voted on at the 2020 Annual Meeting of Stockholders
 
Proposal
Board of Directors’ Recommendation
Elect nine members of the Board to serve until the 2021 annual meeting of stockholders or until their respective successors are elected and qualified.
FOR
Approve, on an advisory, non-binding basis, the compensation of the Company’s named executive officers.
FOR
Approve our 2020 Omnibus Incentive Plan.
FOR
Ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2020.
FOR

Director Nominees
Name
 
Director
Since
 
Independent
 
Other Public
Boards (1)
 
Committee Memberships
AC
 
CC
 
NCG
Jack M. Greenberg (Chairman of the Board)
 
2005
 
Yes
 
 
 
 
M
 
M
Richard S. Stoddart (Chief Executive Officer)
 
2018
 
No
 
1
 
 
 
 
 
 
Charles K. Bobrinskoy
 
2008
 
Yes
 
 
C, F
 
M
 
 
Lindsay Y. Corby
 
2018
 
Yes
 
 
M, F
 
 
 
 
David Fisher
 
2011
 
Yes
 
2
 
M
 
M
 
 
Adam J. Gutstein
 
2018
 
Yes
 
 
 
 
 
 
C
Julie M. Howard
 
2012
 
Yes
 
1
 
M
 
C
 
M
Kirt P. Karros
 
2019
 
Yes
 
 
 
 
M
 
 
Marc Zenner
 
2019
 
Yes
 
2 (2)
 
M
 
 
 
 
(1) Other Public Boards reflects directorships as of the date of this proxy statement of public companies listed on a U.S. stock exchange.
(2)  Includes Sentinel Energy Services, Inc., which has been delisted and returned its capital to its shareholders.

AC
Audit Committee
C
Chair
NCG
Nominating and Corporate Governance Committee
CC
Compensation Committee
M
Member
F
Financial expert

Corporate Governance and Compensation Practices

Governance
 
 
 
Location
 
All directors except the CEO are independent
 
All directors are elected annually
 
Directors are elected by majority vote, with plurality standard for contested elections
 
No shareholder rights plan or poison pill
 
No cumulative voting
 
Proactive stockholder governance outreach
 
Published corporate governance guidelines summarizing key governance practices




Compensation
 
 
 
Location
 
Pay for performance approach
 
Independent compensation committee
 
Independent compensation consultant
 
Directors and officers subject to stock ownership guidelines and stock holding policy
 
Policy against hedging/pledging
 
Officers subject to compensation clawback policy
 
Long-term focus and stockholder alignment through equity compensation
 
No problematic pay practices, such as excise tax gross-up provisions
 
No “single trigger” change in control severance arrangements


Table of Contents

Proxy Statement for the Annual Meeting of Stockholders of InnerWorkings, Inc. 

To Be Held on June 9, 2020

TABLE OF CONTENTS
PROXY STATEMENT
Annual Meeting Information
Voting Information
PROPOSALS TO BE VOTED ON
Proposal 1: Election of Directors
Proposal 2: Advisory Approval of Named Executive Officer Compensation
Proposal 3: Approval of InnerWorkings, Inc. 2020 Omnibus Incentive Plan
Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Summary of Corporate Governance Practices
Board Leadership Structure
Board of Directors Role in Risk Oversight
Meetings and Committees of the Board of Directors
Director Independence
Governance Documents
Compensation Committee Interlocks and Insider Participation
Communications with Directors
Attendance at Annual Meeting
STOCK OWNERSHIP
Security Ownership of Certain Beneficial Owners and Management
Delinquent Section 16(a) Reports
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
EXECUTIVE OFFICERS
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Executive Compensation
Employee Benefit Plans
Employment and Other Related Agreements
Summary of Director Compensation
REPORT OF THE COMPENSATION COMMITTEE
AUDIT COMMITTEE REPORT
FEES BILLED FOR SERVICES RENDERED BY PRINCIPAL REGISTERED PUBLIC ACCOUNTING FIRM
OTHER INFORMATION
Stockholder Proposals for the 2021 Annual Meeting
Expenses of Solicitation
“Householding” of Proxy Materials
Proxy Voting Card
APPENDIX A—INNERWORKINGS, INC. 2020 OMNIBUS INCENTIVE PLAN
APPENDIX B—RECONCILIATION OF NON-GAAP MEASURES


Table of Contents

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203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601

PROXY STATEMENT

This proxy statement and enclosed proxy card are being furnished commencing on or about April 28, 2020 in connection with the solicitation by the Board of Directors of InnerWorkings, Inc., a Delaware corporation of proxies for our 2020 annual meeting of stockholders (including any postponements or adjournments thereof, the “Annual Meeting”). In this proxy statement, we refer to InnerWorkings, Inc. as the “Company,” “we,” “our” or “us” and the Board of Directors as the “Board.” We are sending the proxy materials because the Board is seeking your permission (or proxy) to vote your shares at the Annual Meeting on your behalf. This proxy statement presents information that is intended to help you in reaching a decision on voting your shares of common stock. Only stockholders of record at the close of business on April 16, 2020 , the record date, are entitled to vote at the meeting, with each share entitled to one vote. We have no other voting securities.
Annual Meeting Information
Date and Location.  We will hold the Annual Meeting on Tuesday, June 9, 2020 at 11:00 a.m. , Central Time, at our corporate headquarters at 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 .
Admission.  Only record or beneficial owners of the Company’s common stock or their duly authorized proxies may attend the Annual Meeting in person.
All persons attending the Annual Meeting will be required to present a valid government-issued picture identification, such as a driver’s license or passport, to gain admittance to the Annual Meeting. Beneficial owners must also provide evidence of stock holdings, such as a recent brokerage account or bank statement.
Voting Information
Record Date.  The record date for the Annual Meeting is April 16, 2020 . You may vote all shares of the Company’s common stock that you owned as of the close of business on that date. Each share of common stock entitles you to one vote on each item to be voted on at the Annual Meeting. Cumulative voting is not permitted. As of April 16, 2020 , 52,369,708 shares of our common stock were outstanding.
Confidential Voting.   Your vote is confidential and will not be disclosed to any officer, director or employee, except in certain limited circumstances, such as when you request or consent to disclosure.
Vote by Proxy.   If your shares of common stock are held in your name, you can vote your shares on items presented at the Annual Meeting or by proxy. There are three ways to vote by proxy:
1.
By Telephone — Stockholders can vote by telephone by calling 1-800-690-6903 and following the instructions on the proxy card;
2.
By Internet — You can vote over the Internet at www.proxyvote.com by following the instructions on the proxy card; or
3.
By Mail — You can vote by mail by signing, dating and mailing a proxy card.
Submitting Voting Instructions for Shares Held Through a Broker.   If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name,” and your broker, bank or nominee is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the Annual Meeting with proper evidence of stock holdings, such as a recent brokerage account or bank statement. Street name stockholders should check the voting instruction cards used by their brokers or nominees for specific instructions on methods of voting. If your shares are held in street name, you must contact your broker or nominee to revoke your proxy.
If you hold shares through a broker, follow the voting instructions you receive from your broker. If you want to vote in person at the Annual Meeting, you must obtain a legal proxy from your broker and present it at the Annual Meeting. If you do not submit voting instructions to your broker, your broker may still be permitted to vote your shares in certain cases. Brokers may vote your shares as described below.


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Non-discretionary Items.   All items, other than the ratification of the appointment of the Company’s independent registered public accounting firm, are “non-discretionary” items. It is critically important that you submit your voting instructions if you want your shares to count for non-discretionary items, such as the election of directors. Your shares will remain unvoted for such items if your broker does not receive instructions from you.
Discretionary Item.   The ratification of the appointment of the Company’s independent registered public accounting firm is a “discretionary” item. Brokers that do not receive instructions from beneficial owners may vote uninstructed shares in their discretion.
In order to carry on the business of the meeting, we must have a quorum. This means that stockholders representing at least a majority of the common stock issued and outstanding as of the record date must be present at the Annual Meeting, either in person or by proxy, for there to be a quorum at the Annual Meeting. Abstentions and broker non-votes are counted as present for purposes of establishing a quorum, but broker non-votes are not considered “present” for purposes of voting on non-discretionary items, such as the election of directors. A broker non-vote occurs when a broker or other nominee holding shares for a beneficial owner does not vote on a particular proposal because the broker or nominee does not have discretionary voting power and has not received instructions from the beneficial owner.
Revoking Your Proxy.   You can revoke your proxy at any time before your shares are voted by (i) delivering a written revocation notice prior to the Annual Meeting to Oren B. Azar, Corporate Secretary, InnerWorkings, Inc., 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 ; (ii) submitting a later-dated proxy that we receive no later than the conclusion of voting at the Annual Meeting; or (iii) voting in person at the Annual Meeting. Attending the Annual Meeting does not revoke your proxy unless you vote in person at the meeting.
Votes Required to Elect Directors.   In order to be elected, director nominees must receive the affirmative vote of a majority of the votes cast in the election of directors. In other words, a nominee for director must receive more votes “FOR” his or her election than votes “AGAINST” such nominee. The size of the Board is currently set at nine members.
Votes Required to Adopt Other Proposals.   The approval, on an advisory, non-binding basis, of the compensation of our named executive officers, the approval of our 2020 Omnibus Incentive Plan, and the ratification of Ernst & Young LLP’s appointment as independent registered public accounting firm require the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting and entitled to vote thereon.
“Abstaining” and “Broker Non-Votes.”   You may “abstain” from voting for any nominee in the election of directors and on the other proposals. Shares “abstaining” from voting on any proposal will be counted as present at the Annual Meeting for purposes of establishing the presence of a quorum. Your abstention will have no effect on the election of directors and will have the effect of a vote against the approval, on an advisory, non-binding basis, of the compensation of our named executive officers, against the approval of the 2020 Omnibus Incentive Plan and against the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm. Broker non-votes will have no effect on the election of directors, the approval, on an advisory, non-binding basis, of the compensation of our named executive officers, and the approval of the 2020 Omnibus Incentive Plan. There will be no broker non-votes with respect to the ratification of Ernst & Young LLP’s appointment as independent registered public accounting firm, as it is a discretionary item.

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PROPOSALS TO BE VOTED ON
Proposal 1: Election of Directors

Nominees

The size of the Board is currently set at nine members. At the Annual Meeting, the stockholders will elect nine directors to serve until the 2021 annual meeting of stockholders or until their respective successors are elected and qualified. All of the nominees are currently directors. Any director vacancy occurring after the election may be filled by a majority vote of the remaining directors. In accordance with the Company’s Bylaws, a director appointed to fill a vacancy will be appointed to serve until the next annual meeting of stockholders.

If a quorum is present, the election of each director nominee requires the affirmative vote of a majority of the votes cast. In other words, a director nominee must receive more votes “FOR” his or her election than votes “AGAINST” such nominee. Abstentions and broker non-votes (if any) will not constitute votes cast on Proposal 1 and will accordingly have no effect on the outcome of the vote on Proposal 1. If an incumbent nominee fails to receive the vote needed to be re-elected, Delaware law provides that such nominee would continue to serve on the Board as a “holdover director,” which means that such director would remain in office until a successor is elected and qualified or until such director’s earlier resignation or removal.

Our Corporate Governance Guidelines require that prior to each annual stockholder meeting, incumbent directors submit a contingent resignation in writing to the Chairman of the Nominating and Corporate Governance Committee to become effective only if the director receives a greater number of votes “AGAINST” his or her election than votes “FOR” his or her election. Following the stockholder vote, the Nominating and Corporate Governance Committee will promptly consider the resignation submitted by such director and will recommend to the Board whether to accept or reject the tendered resignation. In considering whether to accept or reject the tendered resignation, the Committee will consider all factors deemed relevant by its members. The Board will act on the Committee’s recommendation no later than 90 days following the date of the stockholder meeting where the election occurred. In considering the Committee’s recommendation, the Board will consider the factors considered by the Committee and such additional information and factors as the Board deems to be relevant. Any director who tenders his or her resignation pursuant to our Corporate Governance Guidelines will not participate in the Committee recommendation or Board consideration regarding whether or not to accept the tendered resignation.

All nominees of the Board have consented to serve as directors, if elected. If any such nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, the persons who are designated as proxies intend to vote, in their discretion, for such other persons, if any, as may be designated by the Board. As of the date of this proxy statement, the Board has no reason to believe that any of the director nominees named herein will be unable or unwilling to serve as a director if elected.

The Company believes that its Board, as a whole, should encompass a range of talent, skill, diversity, experience and expertise enabling it to provide sound guidance with respect to the Company’s operations and interests. In addition to considering a candidate’s background, experience and accomplishments, candidates are reviewed in the context of the current composition of the Board and the evolving needs of our business. Although the Company does not have a formal policy with regard to the consideration of diversity in identifying candidates, the Nominating and Corporate Governance Committee strives to nominate candidates with a variety of complementary skills so that, as a group, the Board will possess the appropriate level of talent, skills and expertise to oversee the Company’s business. The Company regularly assesses the size of the Board, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the Board. The Company’s policy is to have at least a majority of our directors qualify as “independent directors” as defined in the rules of NASDAQ. Currently, eight of our nine directors are independent.

The Nominating and Corporate Governance Committee seeks candidates with strong reputations and experience in areas relevant to the strategy and operations of the Company, particularly in industries and growth segments that the Company serves, as well as key geographic markets where it operates. Each of the Board’s director nominees holds or has held senior positions in complex organizations and has operating experience that meets this objective, as described below. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, financial reporting, corporate governance, risk management and leadership development. Each of our director nominees also has experience serving on boards of directors and committees of other organizations.

The Nominating and Corporate Governance Committee also believes that each of the nominees has the experience, expertise, integrity, sound judgment and ability to engage management in a collaborative fashion to collectively comprise an effective Board. In addition, the Nominating and Corporate Governance Committee believes that each of the nominees are committed to devoting significant time and energy to service on the Board and its committees.


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The names of the director nominees, their ages as of April 28, 2020 , their recent employment or principal occupation, the names of other public companies for which they currently serve as a director or have served as a director within the past five years, and their period of service as an InnerWorkings director are set forth below.
Name
 
Age
 
Position
Jack M. Greenberg (1)(2)
 
77
 
Chairman of the Board
Richard S. Stoddart
 
57
 
Chief Executive Officer, President and Director
Charles K. Bobrinskoy (1)(3)
 
60
 
Director
Lindsay Y. Corby (3)
 
42
 
Director
David Fisher (1)(3)
 
51
 
Director
Adam J. Gutstein (2)
 
57
 
Director
Julie M. Howard (1)(2)(3)
 
57
 
Director
Kirt P. Karros (1)
 
50
 
Director
Marc Zenner (3)
 
57
 
Director
(1)  Current member of our Compensation Committee.
(2)  Current member of our Nominating and Corporate Governance Committee.
(3)  Current member of our Audit Committee.

DIRECTOR NOMINEES

Jack M. Greenberg has served on our Board since October 2005 and has served as Chairman of the Board since September 2018. Mr. Greenberg was Lead Independent Director from April to September 2018 and Chairman of the Board from June 2010 to April 2018. Mr. Greenberg served on the Board of IQVIA until April 2019, and was Chairman of The Western Union Company until his retirement in May 2017. He retired as Chairman and Chief Executive Officer of McDonald’s Corporation, a publicly traded global food service retailer, at the end of 2002. He had served as McDonald’s Chairman since May 1999, and as its Chief Executive Officer since August 1998. Mr. Greenberg served as McDonald’s President from August 1998 to May 1999, and as its Vice-Chairman from December 1991 to August 1998. He also served as Chairman from October 1996, and Chief Executive Officer, from July 1997, of McDonald’s USA until August 1998. Before joining McDonald’s, Mr. Greenberg was a Partner and Director of Tax Services for both the Midwest Region and Chicago office of Arthur Young & Company, and served on the firm’s management committee. He is a member of the American Institute of Certified Public Accountants, the Illinois CPA Society, and the Chicago Bar Association. He also served as a Director of The Allstate Corporation and of Hasbro, Inc. until 2015 and as a Director of Manpower, Inc. until 2014. Mr. Greenberg’s civic involvement includes service on the board of DePaul University, where he previously served as Chairman, the Institute of International Education, and the Field Museum. Mr. Greenberg is a graduate of DePaul University’s School of Commerce and School of Law. Mr. Greenberg’s various leadership positions, including Chief Executive Officer of a major global corporation, brings to the Board extensive management experience and economics expertise and strengthens the Board’s global perspective. In addition to Mr. Greenberg’s significant public company experience, he is a certified public accountant and an attorney, which provides additional value and perspective to the Board.

Richard S. Stoddart has served on our Board and as our Chief Executive Officer and President since April 2018. Prior to his appointment as Chief Executive Officer, from February 2016 through April 2018, Mr. Stoddart served as Global President and the Chief Executive Officer of Leo Burnett Worldwide, a global advertising agency. He previously served as Chief Executive Officer of Leo Burnett North America from 2013 to 2016 and as President of Leo Burnett North America from 2005 to 2013. From 2001 to 2005, he was Manager of Marketing Communications of Ford Motor Company (NYSE). He currently serves on the Board of Directors of Hasbro, Inc. (NASDAQ) and is a member of its Audit and Finance Committees. Mr. Stoddart also served as a member of the Board of Directors of Carbon Media Group, LLC, the largest outdoor sports digital media company, until its acquisition in 2018. Mr. Stoddart holds a Bachelor of Arts from Dartmouth College. As Chief Executive Officer of the Company, Mr. Stoddart brings to the Board the critical link to management’s perspective in Board discussions regarding the business and strategic direction of the Company.

Charles K. Bobrinskoy has served on our Board since August 2008. Mr. Bobrinskoy is currently Vice Chairman, Head of Investment Group at Ariel Investments, a global financial institution. Additionally, he is a Portfolio Manager of Ariel Focus Fund, a concentrated portfolio investing in mid-to-large cap companies. Prior to Ariel, Mr. Bobrinskoy spent 21 years as an investment banker at Salomon Brothers, a global financial institution, and its successor company, Citigroup, a global financial institution, where he held many leadership positions, most recently Managing Director and Head of North American Investment Banking Branch Offices. Mr. Bobrinskoy currently serves as a director of State Farm Automobile Insurance Company. In addition to his work at Ariel, Mr. Bobrinskoy serves on the boards of the Museum of Science and Industry, La Rabida Children’s Foundation,

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Big Shoulders Fund, Abraham Lincoln Presidential Library Foundation, Chicago Club, and Lakeshore Athletic Club. He is also a member of the Executive Committee of the Commercial Club of Chicago. He is a member of the Economic Club of Chicago and is a Henry Crown Fellow of the Aspen Institute. He holds a bachelor’s degree from Duke University and a Master of Business Administration from the University of Chicago Booth School of Business. Mr. Bobrinskoy’s extensive financial knowledge obtained through his various leadership positions within global financial institutions brings valuable perspectives to the Company in connection with its financial strategies and reporting, particularly in his role as Chairman and financial expert of the Board’s Audit Committee.

Lindsay Y. Corby has served on our Board since July 2018. Ms. Corby is currently Executive Vice President and Chief Financial Officer of Byline Bank (NYSE: BY), a role she has held since July 2015. Ms. Corby joined Byline in June 2013, serving as Chief Administrative Officer until July 2015. From February 2011 to June 2013, Ms. Corby served as a Principal at BXM Holdings, Inc., an investment fund specializing in community bank investments. Prior to joining BXM Holdings, Ms. Corby was a Vice President of Keefe, Bruyette & Woods, Inc., an investment bank. From 2012 to 2016, Ms. Corby also served as a Director on the Board of QCR Holdings, Inc., a public bank holding company. Ms. Corby holds a master’s degree in accounting and a bachelor’s degree in accounting and Spanish from Southern Methodist University. She is also a Registered Certified Public Accountant. Ms. Corby’s financial acumen and experience as a chief financial officer and her prior service on the board of a public company provides the Board and Audit Committee with valuable knowledge and insight on financial strategies, reporting, and controls.

David Fisher has served on our Board since November 2011. Mr. Fisher is currently Chairman and Chief Executive Officer of Enova International, Inc., a global consumer lending company. He has served as Enova’s Chief Executive Officer since January 2013. From September 2011 through February 2012, Mr. Fisher served as both President of optionsXpress online brokerage, which was acquired by The Charles Schwab Corporation, a leading provider of financial services, in September 2011, and as Senior Vice President of Derivatives at The Charles Schwab Corporation. From 2007 until the acquisition, Mr. Fisher served as Chief Executive Officer and a member of the optionsXpress Board of Directors. Mr. Fisher is a member of the Board of Directors of GrubHub, Inc. and serves as chairman of its audit committee and a member of its compensation committee, and is a member of the Board of Directors of FRISS. From January 2008 through October 2011, Mr. Fisher served as a member of the Board of Directors of CBOE Holdings, Inc. From 2001 through 2004, Mr. Fisher served as Chief Financial Officer at Potbelly Sandwich Works. Mr. Fisher also served as Chief Financial Officer of RBC Mortgage from 2000 through 2001 and of Prism Financial from December 1998 through January 2001. Mr. Fisher is also a member of the Board of Trustees for the Museum of Science and Industry. Mr. Fisher received his bachelor’s degree in Finance from the University of Illinois at Champaign and his Juris Doctor from Northwestern University School of Law. Mr. Fisher’s experience as Chief Executive Officer of a public company and his previous years of service as the Chief Financial Officer of several organizations provide valuable financial knowledge and valuable insight on reporting to the Board as well as to the Company’s Audit Committee on which he serves.

Adam J. Gutstein has served on our Board since October 2018. From June 2012 to September 2018, Mr. Gutstein served as Vice Chairman at PricewaterhouseCoopers US (“PwC”), a professional services firm and network, where he led PwC’s Eastern Region from June 2016 to September 2018. He joined PwC in 2010 and became a member of the US Advisory Leadership Group where he held various roles, including leading the integration of Diamond Management & Technology Consultants and other large transactions, leading the firm's Management Consulting practice, and serving as a Director of PwC Hispanic America Advisory. From April 2006 to November 2010, Mr. Gutstein served as the President and Chief Executive Officer of Diamond Management & Technology Consultants, Inc., and a member of the Board of Directors of Diamond, and from March 1994 to March 2006, he served as Vice President and Partner of that company. At times during his tenure as CEO and a board member of Diamond, Mr. Gutstein served on the boards of two other public companies, HealthAxis and InnerWorkings. Before joining Diamond as a founding partner in 1994, Mr. Gutstein was an officer of Technology Solutions Company, and he began his career at Andersen Consulting. Mr. Gutstein holds a bachelor’s degree in economics from Haverford College. Mr. Gutstein’s experience at PwC and Diamond leading global teams to deliver client and shareholder value through growth strategies, improving operations, and capitalizing on technology provides valuable knowledge and operational strategy insight to the Company.

Julie M. Howard has served on our Board since October 2012 and has been the Chair of the Compensation Committee since 2019. Ms. Howard served as the Chairman and Chief Executive Officer of Navigant Consulting, Inc. until its acquisition in October 2019. Prior to becoming Chief Executive Officer of Navigant Consulting in March 2012, Ms. Howard served as President beginning in 2006 and Chief Operating Officer beginning in 2003. Ms. Howard serves on the Board of Directors of ManpowerGroup Inc., including its Nominating and Governance Committee. Ms. Howard also serves as a member of the Medical Center Board for Lurie Children's Hospital. Ms. Howard formerly served on the Board of Directors for Kemper Corporation, including service on its Audit, Compensation and Nominating and Governance Committees, the Board of Directors for the Association of Management Consulting Firms, the Dean's Advisory Board of the Business School at the University of Wisconsin-Madison, and the Board of Governors for the Metropolitan Planning Council of Chicago. Ms. Howard is a founding member and serves on the board of the Women’s Leadership and Mentoring Alliance. Ms. Howard holds a Bachelor of Science in Finance from the University of Wisconsin. She has also participated in Harvard Business School Executive Education programs and completed the Corporate

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Governance program at Stanford University. Ms. Howard’s business experience and involvement with strategic and operational programs, development of growth and profitability initiatives and regular interaction with a wide range of corporate constituents contributes unique perspectives and skill sets to the Board in its oversight of the Company’s business and its respective strategic initiatives.

Kirt P. Karros has served on our Board since August 2019. Mr. Karros has served as Senior Vice President, Finance and Treasurer at Hewlett Packard Enterprise since November 2015. Prior to that, Mr. Karros performed a similar role at Hewlett Packard Co., as well as leading Investor Relations, from May 2015 to October 2015. Previously, Mr. Karros served as a Principal and Managing Director of Research for Relational Investors LLC, an investment manager, from 2001 to May 2015. Prior to joining Relational in 1997, Mr. Karros was a Tax Manager at Arthur Andersen LLP, primarily providing tax consulting to public and private entities. From August 2013 to May 2015, Mr. Karros served on the Board of Directors of PMC-Sierra, Inc., a semiconductor company, including on its compensation committee. Mr. Karros holds a master’s degree in accounting and bachelor’s degree in business administration (summa cum laude) from San Diego State University. He is a Certified Public Accountant and holds the professional designation of Chartered Financial Analyst. Mr. Karros’ financial expertise and his shareholder perspective enable him to offer valuable contributions in his service to the Board as well as the Compensation Committee.

Marc Zenner has served on our Board since August 2019. Until his retirement in September 2017, Mr. Zenner was Global co-head of Corporate Finance Advisory within J.P. Morgan’s Investment Bank, where he was a managing director from 2007 to 2017. Before joining J.P. Morgan, Mr. Zenner was managing director and Global Head of the Financial Strategy Group (FSG), the corporate finance advisory group within the Investment Banking Division of Citi’s Global Markets. Prior to his career in investment banking, Mr. Zenner was the Chairman of the Finance and Economics Area and a Professor of Finance at the University of North Carolina’s Kenan-Flagler Business School. Mr. Zenner received an undergraduate degree in business engineering from the Katholieke Universiteit in Leuven, Belgium, an MBA from City University in London, and a Ph.D. in Financial Economics from Purdue University. Mr. Zenner currently serves on the Board of Directors of OneSpan Inc. where he is a member of the Audit Committee, Compensation Committee and Corporate Governance and Nominating Committee. He also serves on the Board of Directors of Sentinel Energy Services Inc., a blank check company that redeemed its publicly held shares in November 2019, where he is the Chairman of the Audit Committee and a member of the Nominating and Corporate Governance Committee. Mr. Zenner also provides strategic advice to various public and private companies. We believe that Mr. Zenner’s background in corporate finance make him well qualified to serve on our Board and Audit Committee.

Required Vote

A nominee for director must receive more votes “FOR” his or her election than votes “AGAINST” such nominee as described above. Abstentions and broker non-votes will not constitute votes cast on Proposal 1 and will accordingly have no effect on the outcome of the vote on Proposal 1.

Recommendation of the Board

THE BOARD RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL NOMINEES NAMED ABOVE.

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Proposal 2: Advisory Approval of Named Executive Officer Compensation

Under Section 14A of the Securities Exchange Act of 1934, enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Company is providing a stockholder advisory vote to approve the compensation of the Company’s named executive officers, as disclosed in our Compensation Discussion and Analysis, related compensation tables, and other related material under the compensation disclosure rules of the Securities and Exchange Commission, as set forth in this proxy statement. As most recently approved by stockholders at our 2017 annual meeting and consistent with the Board’s recommendation, we are submitting this proposal for a non-binding vote on an annual basis. Holders of approximately 97% of our shares present and entitled to vote at our 2019 annual meeting approved the compensation of our named executive officers.

The Company maintains executive compensation and governance best practices and a long-term, pay-for-performance approach, as described more fully in the Compensation Discussion and Analysis section of this proxy statement. These practices include eliminating all “single trigger” or “modified single trigger” change in control severance benefits, the Compensation Committee’s retention of an independent compensation consultant, stock ownership guidelines for our executive officers and directors, no excise tax gross-up provisions, and prohibition of hedging transactions and pledging of our stock by our executive officers and directors.

This vote will not be binding on or overrule any decisions by our Board, will not create or imply any additional fiduciary duty on the part of the Board, and will not restrict or limit the ability of our stockholders to make proposals related to executive compensation for inclusion in proxy materials. However, our Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. Our Board has determined to ask our stockholders to vote on the Company’s executive pay programs and policies through the following resolution:

RESOLVED , that the stockholders approve the Company’s compensation of its named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission (which includes the Compensation Discussion and Analysis, the compensation tables, and related material).”

Required Vote

The affirmative vote of the holders of a majority of the shares of common stock of the Company represented at the Annual Meeting in person or by proxy and entitled to vote on this proposal is required to approve this proposal. Abstentions will have the same effect as votes against this proposal. Broker non-votes if any will have no effect on the outcome of the proposal.

Recommendation of the Board

THE BOARD RECOMMENDS A VOTE “FOR” THE ADVISORY APPROVAL OF THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.



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Proposal 3: Approval of the InnerWorkings, Inc. 2020 Omnibus Incentive Plan

Introduction

On April 24, 2020, the Compensation Committee (“Committee”) of the Board of Directors (“Board”) of the Company recommended and the Board approved the InnerWorkings, Inc. 2020 Omnibus Incentive Plan (“2020 Plan”), subject to approval by stockholders at the Annual Meeting. A copy of the 2020 Plan is attached as Appendix A to this Proxy Statement. The 2020 Plan will become effective on the date it is approved by stockholders.

The 2020 Plan will replace the Company’s 2006 Stock Incentive Plan, as amended and restated effective September 6, 2018 (the “Prior Plan”).

If the 2020 Plan is approved by stockholders, any shares of Company common stock (“Shares”) issued to eligible participants under the 2020 Plan (“Participants”) after the date of such approval will be counted against the 2020 Plan Share reserve and no further Shares will be issued pursuant to the Prior Plan. Any Shares issued prior to such stockholder approval of the 2020 Plan will be subject to the terms and conditions of the Prior Plan, including its applicable Share reserve. (See Equity Compensation Plan Information on page 17 of this Proxy Statement for information as of December 31, 2019.)

We are requesting stockholders to approve the 2020 Plan pursuant to which an aggregate of 4 million Shares will initially be available for issuance. In addition, we are requesting stockholder approval so that certain compensation that may be granted under the 2020 Plan may qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

Factors Considered in Setting Size of Requested Share Reserve

In setting the proposed number of Shares reserved and issuable under the 2020 Plan, the Committee and the Board considered a number of factors. These factors included:

The Company’s three-year average burn rate . Our three-year average “burn rate” was 3.3% for fiscal years 2017 through 2019. We define burn rate as the total number of Shares subject to Awards (as defined below) granted to Participants in a single year expressed as a percentage of our fully diluted weighted average Shares outstanding. We believe our historical burn rate is reasonable for a company of our size in our industry.

Estimated duration of Shares available for issuance under the 2020 Plan . Based on the requested number of Shares to be reserved under the 2020 Plan and on our three-year average burn rate as described above, we expect that the requested Share reserve will cover Awards for approximately the next two years. We believe the estimated duration of the requested Share reserve is reasonable for a company of our size in our industry.

Expected dilution . As of December 31, 2019, our existing overhang as it relates to the Prior Plan was 14.2%. We define existing overhang as the sum of the following items expressed as a percentage of our fully diluted weighted average Shares outstanding during 2019: (i) the total number of Shares subject to outstanding Awards; and (ii) the total number of Shares available for future grants. Our total overhang as of that same date would be 21.4% based on including the 4 million Shares that would be available for issuance under the 2020 Plan. We believe that the expected dilution that will result from the 2020 Plan is reasonable for a company of our size in our industry.

Rationale for Implementing Proposed 2020 Plan

We are asking stockholders to approve the 2020 Plan because we anticipate that the Share reserve under the Prior Plan will be exhausted within the next two years. As a result, the Company might need to make significant changes to its compensation practices that would limit its flexibility to provide competitive compensation and thus its ability to attract, motivate and retain highly qualified talent. Shareholder approval of the 2020 Plan will allow us to continue to grant equity awards (as well as cash incentive awards) to our executive officers, employees and non-employee directors. We believe that a comprehensive equity incentive compensation program serves as a necessary and significant tool to attract and retain key employees, encourage Participants to contribute materially to the growth of the Company and align the interests of our Participants with those of our stockholders.


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Principal Features of the Proposed 2020 Plan

The principal features of the 2020 Plan include:

A broad range of equity and cash vehicles . The 2020 Plan provides for a variety of awards, including stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance share units, performance units, cash-based awards and other stock-based awards (collectively referred to herein as “Awards”). We believe that the breadth of Awards available under the 2020 Plan will provide the Committee the flexibility to structure appropriate incentives and respond to market-competitive changes in compensation practices.

A fixed reserve of shares of our common stock . The 2020 Plan does not contain an evergreen provision.

Conservative share-counting provisions . For purposes of determining the number of Shares remaining available for issuance under the 2020 Plan, we may not add back Shares (i) repurchased on the open market with proceeds from the exercise of a stock option, (ii) tendered or withheld to pay the exercise price of a stock option or grant price of an SAR or (iii) Shares that were not issued upon the exercise of a stock-settled SAR.

Minimum vesting requirement . Any Award granted under the 2020 Plan will be subject to a minimum one-year vesting requirement. However, the Committee may grant Awards covering up to five percent (5%) of the total number of Shares authorized under the 2020 Plan without respect to the minimum vesting standards. In addition, the vesting of Awards granted to Nonemployee Directors will be deemed to satisfy the one-year minimum vesting requirement to the extent that the Awards vest on the earlier of the one-year anniversary of the applicable grant date and the next annual meeting of the Company’s stockholders that is at least fifty (50) weeks after the immediately preceding year’s annual meeting.

Limits on Nonemployee Director Compensation . The 2020 Plan includes an aggregate limit on the value of any stock and cash-based Awards, taken together any cash fees, that may be granted or paid to any Nonemployee Director in any calendar year.

Limits on dividends and dividend equivalents . The 2020 Plan prohibits the issuance of dividends and dividend equivalents on stock options and SARs; and prohibits the current payment of dividends or dividend equivalents on any Awards until all applicable performance and/or service objectives have been achieved.

Limits on the duration of stock options and SARs. The 2020 Plan sets ten (10) years as the maximum term for stock options and SARs.

No stock option repricing . The 2020 Plan prohibits the repricing of stock options and SARs without prior stockholder approval.

No discounted stock options or SARs . The 2020 Plan requires the exercise price of stock options and the grant price of SARs to be not less than the fair market value of a Share on the date of grant.

Compensation recoupment policy . Awards granted under the 2020 Plan (including any Shares subject to an Award) will be subject to any Company policy providing for recovery, recoupment, clawback and/or other forfeiture.

Limited term . The 2020 Plan will terminate ten (10) years following the date it is approved by the Company’s stockholders.

Summary Description of 2020 Plan

The following is a summary of the material terms of the 2020 Plan. The summary is not a complete description of all the terms of the 2020 Plan and is qualified in its entirety by reference to the complete text of the 2020 Plan, which is attached to this Proxy Statement as Appendix A. To the extent there is a conflict between this summary and the actual terms of the 2020 Plan, the terms of the 2020 Plan will govern.

Administration

The Committee will have the exclusive authority to administer the 2020 Plan with respect to Awards made to our executive officers, other eligible employees and third-party advisers. The Committee may delegate all or any portion of its authority to one or more of its members or, as to Awards to Participants who are not subject to Section 16 of the Securities Exchange Act of 1934 (“Exchange Act”), to one or more officers of the Company or other Nonemployee Directors. If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee.

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Awards granted to Nonemployee Directors are subject to approval of the Board.

The term ‘‘plan administrator,’’ as used in this summary, in the case of Awards granted to employees, shall refer to the Committee, any of its authorized delegates, and the Board to the extent it is required to perform all or part of the functions of the Committee under the 2020 Plan and, in the case of Awards granted to nonemployee directors, shall refer to the Board.

Eligibility

All employees and nonemployee directors of the Company and its Subsidiaries will be eligible to participate in the 2020 Plan. As of April 24, 2020, the Company had approximately 2,000 employees, including the current six executive officers, and eight nonemployee directors who could be eligible to participate in the 2020 Plan. The plan administrator has not made a determination as to which of these eligible individuals will receive Awards under the 2020 Plan.

Share Reserve

Subject to capitalization adjustments described below, 4 million Shares will be reserved for issuance under the 2020 Plan all of which may be granted pursuant to an incentive stock option, as defined below. The Shares issuable under the 2020 Plan may be drawn from shares of our authorized but unissued common stock or from treasury shares (including Shares that we purchase on the open market or in private transactions).

Share Counting Rules

The number of Shares reserved for issuance under the 2020 Plan will be reduced by one (1.00) share for every one (1.00) share granted in respect of an Award.

Any shares of common stock related to an Award granted under the 2020 Plan or Prior Plan that terminates by expiration, forfeiture, cancellation or otherwise without the issuance of such shares, are settled in cash in lieu of such shares, or are exchanged with the Committee’s permission, prior to the issuance of such shares, for Awards not involving shares of common stock will be added back to the share reserve and will be available again for future grants under the 2020 Plan.

Any Shares that are withheld by the Company or tendered (by either actual delivery or attestation) by a Participant to satisfy tax withholding obligations associated with an Award (other than a stock option or SAR) granted under the 2020 Plan or Prior Plan will be added back to the share reserve and will become available for future grants under the 2020 Plan.

Any Shares that are withheld by the Company or tendered (by either actual delivery or attestation) by a Participant to satisfy tax withholding obligations associated with the exercise of a stock option or SAR granted under the 2020 Plan or Prior Plan will not be added back to the share reserve and will not become available for future grants under the 2020 Plan.

Any Shares that are withheld by the Company or tendered (by either actual delivery or attestation) by a Participant to pay the Exercise Price (as defined below) of a stock option or SAR will not be added back to the share reserve and will not become available for future grants under the 2020 Plan.

Any Shares that were subject to a SAR granted under the 2020 Plan that were not issued upon the exercise of such SAR will not be added back to the share reserve and will not become available for future grants under the 2020 Plan.

Any Shares that were purchased by the Company on the open market with the proceeds from the exercise of a stock option will not be added back to the share reserve and will not become available for future grants under the 2020 Plan.

Any Awards that, pursuant to their terms, may be settled only in cash will not count against the share reserve under the 2020 Plan.

Minimum Vesting Standard

Any Award granted under the 2020 Plan will be subject to a minimum one-year vesting requirement. However, the Committee may grant Awards covering up to five percent (5%) of the total number Shares authorized under the 2020 Plan without respect to the minimum vesting standards. In addition, the vesting of Awards granted to Nonemployee Directors will be deemed to satisfy the one-year minimum vesting requirement to the extent that the Awards vest on the earlier of the one-year anniversary of the applicable grant date and the next annual meeting of the Company’s stockholders that is at least fifty (50) weeks after the

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immediately preceding year’s annual meeting.

Awards

Under the 2020 Plan, Participants may be granted stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance share units, performance units, cash- based awards and other stock-based Awards (referred to individually and collectively as “Award” or “Awards”). The plan administrator will have complete discretion to determine which eligible individuals are to receive Awards, the type of Awards to be granted, and the time or times when those Awards are to be granted. In addition, the plan administrator will have complete discretion to set the terms and conditions of each granted Award (including but not limited to, the number of shares subject to or cash value of each Award, performance and service conditions, performance period, payout amounts at various levels of achieved performance, Exercise Price or other consideration required to be paid for shares subject to the Award, and the maximum term for which stock options or SARs are to remain outstanding. In addition, the plan administrator, as it deems advisable, may impose restrictions on shares acquired pursuant to the exercise or settlement of an Award.

Each Award will be evidenced by a written or electronic agreement or statement (“Award Agreement”) that specifies the Award’s terms and conditions as determined by the plan administrator.

A detailed description of each type of Award follows.

Stock Options

Under the 2020 Plan, the plan administrator may grant Awards in the form of an option to purchase shares of common stock (“Stock Options”) that are intended to meet the requirements of Section 422 of the Internal Revenue Code (referred to as “Incentive Stock Options”) and other Stock Options that do not meet such requirements (referred to as “Non-Qualified Stock Options”). The applicable Award agreement will specify whether a stock option is an Incentive Stock Option or Non-Qualified Stock Option. A Stock Option will grant the holder the right to purchase a specific number of Shares of common stock at a fixed price (“Exercise Price”) over a period not to exceed ten (10) years from the date of the grant.

A Stock Option’s Exercise Price per share may not be less than one hundred percent (100%) of the fair market value of a share of common stock on the date the Stock Option is granted.

No grant of an Incentive Stock Option may be made more than ten (10) years after the adoption of the 2020 Plan by the Board.

Unless otherwise provided by the plan administrator, or as otherwise directed by the Participant in writing to the Company, each vested and exercisable Stock Option with an Exercise Price per share that is less than the fair market value per Share as of the application expiration date of the Stock Option will be automatically exercised.

Stock Appreciation Rights

Under the 2020 Plan, the plan administrator may grant Awards in the form of a stock appreciation right. A stock appreciation right will allow the holder to exercise that right as to a specific number of shares of common stock over a period not to exceed ten (10) years to receive the appreciated value of such shares. The appreciated value is equal to the excess of (i) the fair market value of the shares of common stock as to which the right is exercised (determined as of the date of exercise) over (ii) the aggregate “Grant Price” (as defined below) for those shares. The applicable Award Agreement will specify whether this value will be paid in cash, shares of common stock or a combination of both.

A SAR’s grant price per share may not be less than one hundred percent (100%) of the fair market value per share of common stock on the date the SAR is granted.

Unless otherwise provided by the plan administrator, or as otherwise directed by the Participant in writing to the Company, each vested and exercisable SAR with a Grant Price per share that is less than the fair market value per Share as of the application expiration date of the SAR will be automatically exercised.

Restricted Stock and Restricted Stock Units

Under the 2020 Plan, the plan administrator may grant Awards denominated in shares of common stock (“Restricted Stock”) or stock units (“Restricted Stock Units” or “RSUs”) subject to a period in which such shares or units are subject to forfeiture

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based on discontinued service, the failure to achieve performance criteria and/or the occurrence of other events as determined by the plan administrator. Each RSU corresponds in value to a single share of common stock. Restricted Stock Units may be paid in cash, shares of common stock or a combination of the two as determined by the plan administrator and set forth in the applicable Award Agreement. Restricted Stock will be settled in shares of common stock.

The plan administrator may impose such conditions or restrictions on Restricted Stock or Restricted Stock Units, as it deems advisable. Holders of Restricted Stock will have the same voting rights and dividend rights as holders of shares of common stock unless such rights are expressly limited by the plan administrator in the applicable Award Agreement. No Restricted Stock Unit will confer any voting rights. The plan administrator will determine and set forth in each applicable Award Agreement the extent to which a holder of RSUs has the right to receive dividend equivalents on each unit and the conditions under which such dividend equivalents will be paid to the holder. No dividends or dividend equivalents will be paid on Restricted Stock or RSUs unless the applicable performance goals and/or service conditions are satisfied.

Performance Share Units and Performance Units

Under the 2020 Plan, the plan administrator may grant an Award denominated in shares of common stock (“Performance Share Units” or “PSUs”) or denominated in dollar units (“Performance Units” or “PUs”) that are earned based on the achievement of one or more performance goals over a specified performance period. The number of PSUs or PUs earned over a performance period may vary based on the level of achieved performance.

Each Performance Share Unit will have a value that corresponds to the fair market value of a Share. Each Performance Unit will have an initial dollar value as determined in the discretion of the plan administrator. The dollar value of Performance Units may vary based on the level of achieved performance over the applicable performance period. Performance Share Units and Performance Units may be payable in the form of cash, shares or a combination of the two as determined by the plan administrator and set forth in the applicable Award Agreement.

The plan administrator will determine and set forth in each applicable Award Agreement the extent to which a holder of PSUs has the right to receive dividend equivalents on each unit and the conditions under which such dividend equivalents will be paid to the holder. No dividend equivalents will be paid on PSUs unless the applicable performance goals and service conditions are satisfied.

Cash-Based Awards and Stock-Based Awards

Under the 2020 Plan, the plan administrator may grant Awards, not otherwise described by the terms of the 2020 Plan that are denominated in cash (“Cash-Based Awards”) or denominated in stock (“Other Stock-Based Awards”). The plan administrator will determine the terms and conditions applicable to each Cash-Based Award and Stock-Based Award, which may include a vesting requirement based on the completion of a service period with the Company or achievement of a specified performance goal(s) and form of payment in shares of common stock, cash or a combination of the two.

The plan administrator may impose such restrictions on shares of common stock acquired pursuant to the settlement of Cash-Based Awards and Other Stock-Based Awards as it determines advisable.

Performance Measures and Goals

The plan administrator may grant Awards that are intended to provide compensation solely on account of the attainment of one or more pre-established Performance Goal. The vesting, level of payout, or value of such Awards will be determined by the attainment of one or more Performance Goals based on such performance measures as selected by the plan administrator, in its sole discretion, which may include, but not be limited to, GAAP or adjusted GAAP accounting measures, operational metrics, strategic goals and objectives, environmental, social and governance metrics, individual goals or any other measure or measures that the Committee, in its sole discretion, deems appropriate.

Individual Annual Limits on Awards Granted to Nonemployee Directors

The maximum aggregate value of Awards granted to any Nonemployee Director during any calendar year, taken together with any cash fees, shall not exceed $400,000 (“Annual Limit”).

Prohibition on Repricing/Cash-Out of Stock Options and SARs

The plan administrator may not implement any of the following repricing or cash-out programs without obtaining prior

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stockholder approval: (i) a reduction in the Exercise Price or Grant Price of any previously granted Stock Option or SAR, (ii) a cancellation of any previously granted Stock Option or SAR in exchange for another Stock Option or SAR with a lower Exercise Price or Grant Price, respectively, or (iii) a cancellation of any previously granted Stock Option or SAR in exchange for cash or another Award if the Exercise Price of the Stock Option or the Grant Price of the SAR exceeds the fair market value of a share of common stock on the date of such cancellation, in each case other than in connection with a Change in Control (as defined below) or the capitalization adjustment provisions in the 2020 Plan.

Change in Control and Vesting Acceleration

The following paragraphs describe how Awards under the 2020 Plan would be affected in the event of a Change in Control (as defined below), except as otherwise provided in the Award Agreement or other agreement between a Participant and the Company.

Definition of Change in Control . Generally, a Change in Control will be deemed to occur upon:

an effective change of control pursuant to which any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) acquires, or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such Person, beneficial ownership of stock of the Company representing more than thirty-five percent (35%) of the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors;
a direct or indirect acquisition by Person of beneficial ownership of shares of our common stock which, together with other direct or indirect acquisitions or beneficial ownership by such Person, results in aggregate beneficial ownership by such Person of fifty percent (50%) or more of (A) the combined voting power of the then outstanding voting securities of the Company or (B) the Company’s then outstanding shares of common stock (subject to certain exceptions);
certain changes in the composition of our Board of Directors; or
any Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets from the Company that have a total gross fair market value of at least forty percent (40%) of the total gross fair market value of all the assets of the Company immediately prior to such acquisition.

Vesting Acceleration if Awards are Not Assumed, Replaced or Converted. If an Award is not assumed, replaced or converted at the time of a Change in Control by the surviving entity, then such outstanding nonvested Award will be subject to the following treatment:

Upon a Change in Control, all outstanding Stock Options and SARs that are not vested and as to which vesting depends solely upon the satisfaction of a service obligation by the holder will become fully vested and immediately exercisable over the exercise period set forth in the applicable Award Agreement. However, the plan administrator may require such vested Stock Options and SARs to be settled in cash within thirty (30) days following such Change in Control.
Upon a Change in Control, all outstanding Stock Options and SARs that are not vested and as to which vesting depends upon the satisfaction of one or more performance conditions will immediately vest and all performance conditions will be deemed satisfied as if target performance was achieved and will be exercisable over the exercise period set forth in the applicable Award Agreement. However, the plan administrator may require such vested Stock Options and SARs to be settled in cash within thirty (30) days following such Change in Control.
All Awards, other than Stock Options and SARs, that are not vested and as to which vesting depends solely upon the satisfaction of a service obligation by the holder shall become fully vested upon a Change in Control and will be paid in shares, cash or a combination thereof, as determined by the plan administrator, within thirty (30) days following the effective date of the Change in Control.
All Awards, other than Stock Options and SARs, that are not vested and as to which vesting depends upon the satisfaction of one or more performance conditions will immediately vest and all performance conditions will be deemed satisfied as if target performance was achieved and will be paid in shares, cash or a combination thereof, as determined by the plan administrator. within thirty (30) days following the effective date of a Change in Control.

Vesting Acceleration if Awards are Assumed, Replaced or Converted. If an Award is assumed, replaced or converted at the time of a Change in Control by the surviving entity (“Replacement Award”), then such Replacement Award will become fully vested upon a Participant’s involuntary Termination of Service without Cause or a voluntary Termination of Service for Good Reason subject to the follow:

Replacement Awards in the form of service-based stock options or stock appreciation rights shall be fully exercisable for the remainder of their respective terms.
Replacement Awards in the form of a performance-based stock option or performance-based stock appreciation right

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shall be deemed to be satisfied at target performance and shall be fully exercisable for the remainder of term of the stock option or stock appreciation right, as applicable,
Replacement Awards in the form of performance-based Awards shall be deemed to be satisfied at target performance and paid upon or within thirty (30) days of such Termination of Service.
Replacement Awards in the form of service-based Awards (other than stock options or stock appreciation rights) shall be paid upon or within thirty (30) days of such Termination of Service.

Changes in Capitalization

If an equity restructuring causes the per-share value of our common stock to change, such as by reason of a stock dividend, extraordinary cash dividend, stock split, spin-off, rights offering, recapitalization or otherwise, equitable adjustments will be made to the number of shares available for issuance under the 2020 Plan and to the terms of outstanding Awards in a manner designed to preclude any dilution or enlargement of the 2020 Plan and any outstanding Awards.

Fair Market Value

For any Award made pursuant to the 2020 Plan, the fair market value per share of our common stock as of any date will be deemed to be equal to the closing price of a share of the Company’s common stock as reported on the primary national securities exchange on which the shares are listed on such date.

Stockholder Rights

No Participant will have any stockholder rights with respect to the shares subject to a Stock Option or SAR until such Participant has exercised the Stock Option or SAR and paid the Exercise Price for the purchased shares (in the case of Stock Options), and any related withholding taxes. A Participant will not have any stockholder rights with respect to the shares of common stock subject to a Restricted Stock Unit, Performance Share Unit, Performance Unit or Other Stock-Based Award or Cash-Based Award until that Award vests and shares of common stock are actually issued under such Awards. Subject to the terms of the applicable Award Agreement, a Participant will have full stockholder rights with respect to any shares of common stock subject to a Restricted Stock grant issued under the 2020 Plan, whether or not the Participant’s interest in those shares is vested.

Transferability

Awards are not transferable other than by will or the laws of descent and distribution or, subject to the consent of the plan administrator, pursuant to a domestic relations order entered into by a court of competent jurisdiction. However, the plan administrator may, in its discretion, determine that any or all Awards may be transferable, without compensation by the transferor, to and exercisable by such transferees, and subject to such terms and conditions, as the plan administrator may deem appropriate; provided, however, no Award may be transferred for value without stockholder approval. In addition, under no circumstances will a Participant be permitted to transfer a Stock Option or an SAR to a third-party financial institution without prior stockholder approval.

Withholding

The plan administrator may provide holders of Awards with the right to have the Company withhold cash or a portion of the shares otherwise issuable to such individuals in satisfaction of any applicable withholding taxes to which they become subject in connection with the exercise, vesting or settlement of their Awards. Alternatively, the plan administrator may allow such individuals to deliver cash or previously acquired shares of our common stock in payment of such withholding tax liability.

Deferral Programs

The plan administrator may structure one or more Awards so that the Participants may be provided with an election to defer the payment of the compensation associated with those Awards for federal income tax purposes.

Clawback and Forfeitures for Cause

The plan administrator may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable treatment of an Award. Upon a Participant’s termination of service for cause, the Participant will forfeit, as of the date immediately preceding such termination of service, (i) outstanding and unexercised vested and nonvested Options and SARs, (ii) outstanding and nonvested Restricted Stock and (iii) outstanding and not yet settled vested and unvested

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RSUs, Performance Share Units, Performance Units, Cash-Based Awards and Other Stock-Based Awards granted to the Participant.

Amendment and Termination

The Board may, at any time, amend, suspend or terminate the 2020 Plan in whole or in part. No amendment of the 2020 Plan may result in the “repricing” of any outstanding Stock Options or SARs without stockholder approval. To the extent necessary under any applicable law, regulation or exchange requirement, no amendment will be effective unless approved by the stockholders of the Company. No termination, amendment or suspension of the 2020 Plan may adversely affect in any material way any Award previously granted under the 2020 Plan without the written consent of the Award recipient subject to certain exceptions. These exceptions permit the Board or plan administrator to amend outstanding Awards to adjust for the occurrence of certain unusual or nonrecurring events and to conform to legal requirements without the written consent of the Award recipient.

New Plan Benefits

The number of Awards to be made pursuant to the 2020 Plan is subject to the discretion of the plan administrator and, therefore, cannot be determined with certainty at this time. However, the Company anticipates that the plan administrator will continue in future years to make annual cash and equity awards as described above. With respect to fiscal year 2019, a total of 1,449,232 SARs, 1,892,803 RSUs and 593,946 performance share units (at target) were awarded under the Prior Plan.

On April 27, 2020, the closing price per Share of our common stock on the NASDAQ Global Market was $1.16.

Summary of Federal Income Tax Consequences of Awards Granted under the 2020 Plan

The following is a summary of the United States Federal income tax treatment applicable to the Company and the Participants who receive Awards under the 2020 Plan. This discussion does not address all aspects of the United States Federal income tax consequences of participating in the 2020 Plan that may be relevant to Participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2020 Plan. Each Participant is advised to consult his or her particular tax advisor concerning the application of the United States Federal income tax laws to such Participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any Awards.

Incentive Stock Options . An Incentive Stock Option is a type of stock option that is intended to satisfy the requirements of Section 422 of the Code. In general, no taxable income is recognized by the Participant upon the grant of an Incentive Stock Option, and no taxable income is recognized for regular tax purposes at the time the Incentive Stock Option is exercised, although taxable income may arise upon exercise for alternative minimum tax purposes. The Participant will generally recognize taxable income in the year in which the shares of common stock acquired upon the exercise of an Incentive Stock Option are sold or otherwise made the subject of certain other dispositions. For Federal tax purposes, dispositions are divided into two categories: (i) qualifying, and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the related Incentive Stock Option was granted and more than one (1) year after the date such Incentive Stock Option was exercised for those shares. If the sale or disposition occurs before both of these two periods are satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition, the Participant will generally recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the acquired shares of common stock over (ii) the Exercise Price paid for those shares. If there is a disqualifying disposition of the acquired shares of common stock, then the excess of (i) the fair market value of those shares on the exercise date or (if less) the amount realized upon such sale or disposition over (ii) the Exercise Price paid for the shares will be taxable as ordinary income to the Participant. Any additional gain recognized upon the disposition will be eligible for capital gain treatment. We will not be entitled to any income tax deduction if the Participant makes a qualifying disposition of the shares.

If the Participant makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the holder in connection with the disqualifying disposition.

Non-Qualified Stock Options . A Non-Qualified Stock Option is a type of stock option that does not satisfy the requirements of Section 422 of the Code. In general, no taxable income is recognized by a Participant upon the grant of a Non-Qualified Stock Option. The Participant will generally recognize ordinary income in the year in which the Non-Qualified Stock Option is exercised, equal to the excess of the fair market value of the shares of common stock acquired upon the exercise of the Non-Qualified Stock Option on the exercise date over the Exercise Price paid for the shares (and subject to any applicable income tax withholding). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount

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of ordinary income recognized by the Participant with respect to an exercised Non-Qualified Stock Option.

Stock Appreciation Rights . In general, no taxable income is recognized by a Participant upon the grant of a SAR. The Participant will generally recognize ordinary income in the year in which the SAR is exercised, in an amount equal to the fair market value of the shares of common stock issued to the Participant upon the exercise of the SAR (or the amount of the cash payment made to the Participant upon the exercise of the SAR) and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant with respect to an exercised SAR.

Restricted Stock . No taxable income is recognized by a Participant upon the grant of Restricted Stock, unless the Participant makes an election pursuant to Section 83(b) of the Code to be taxed at the time of grant. If such election is made, the Participant will recognize compensation taxable as ordinary income (and subject to any applicable income tax withholding) at the time of the grant in an amount equal to the excess of the fair market value of the shares of common stock subject to such grant at such time over the amount, if any, paid for those shares.

If the Participant does not make an election to be taxed at the time of grant, the Participant will recognize ordinary income when shares of common stock subject to the grant subsequently vest in an amount equal to the excess of the fair market value of the shares on the vesting date over the amount, if any, paid for the shares (and subject to any applicable income tax withholding). Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant in connection with the vesting of a Restricted Stock Award.

In addition, a Participant receiving dividends with respect to Restricted Stock for which the above- described election has not been made and prior to the time the restrictions lapse will recognize compensation taxable as ordinary income (and subject to any applicable income tax withholding), rather than dividend income, in an amount equal to the dividends paid and we will be entitled to a corresponding deduction, except to the extent the deduction limits of Code Section 162(m) apply.

Restricted Stock Units . In general, no taxable income is recognized by a Participant upon the grant of Restricted Stock Units. The Participant will generally recognize ordinary income in the year in which the RSU grant is settled and paid in an amount equal to the fair market value of the shares of common stock issued to the Participant upon the settlement of the RSUs (or the amount of the cash payment made to the Participant upon the settlement of the RSUs) and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant at the time the RSU is settled and paid.

In addition, a Participant eligible to receive dividend equivalents with respect to a grant of Restricted Stock Units will recognize compensation taxable as ordinary income (and subject to any applicable income tax withholding), rather than dividend income, in the year in which the dividend equivalent is paid in an amount equal to such payment if made in cash (or, if such payment is made in shares of common stock, then the fair market value of such shares on the date of payment). We will be entitled to a corresponding deduction, except to the extent the deduction limits of Code Section 162(m) apply.

Performance Share Units . In general, no taxable income is recognized by a Participant upon the grant of Performance Share Units. The Participant will recognize ordinary income in the year in which the PSU grant is settled and paid in an amount equal to the fair market value of the shares of common stock issued to the Participant upon the settlement of the Performance Share Units (or cash paid to the Participant upon the settlement of the Performance Share Units) and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant at the time the PSU is settled and paid. The deduction will be allowed for the taxable year in which such ordinary income is recognized by the Participant.

In addition, a Participant eligible to receive dividend equivalents with respect to a grant of Performance Share Units will recognize compensation taxable as ordinary income (and subject to any applicable income tax withholding), rather than dividend income, in the year in which the dividend equivalent is paid in an amount equal to such payment (or, if such payment is made in shares of common stock, then the fair market value of such shares on the date of payment). We will be entitled to a corresponding deduction, except to the extent the deduction limits of Code Section 162(m) apply.

Performance Units . In general, no taxable income is recognized by a Participant upon the grant of Performance Units. The Participant will recognize ordinary income in the year in which the Performance Units are settled and paid in an amount equal to the cash payment made to the Participant upon the settlement of the Performance Units (or the fair market value of the shares of common stock issued to the Participant upon the settlement of the Performance Unit) and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant at the time the Performance Units are settled and paid.

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Other Stock-Based Awards and Cash-Based Awards . The Company may grant Other Stock-Based Awards and Cash-Based Awards to Participants that are not otherwise described by the above Awards. In general, no taxable income is recognized by a Participant upon the grant of such Awards unless at the time of grant any shares of common stock issued or cash paid to the Participant is fully vested and non- forfeitable. In this case, the Participant would recognize ordinary income equal to the fair market value of the shares of common stock issued to the Participant at the time of grant or the amount of the cash payment made to the Participant at the time of grant and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant at the time of grant. The deduction will be allowed for the taxable year in which such ordinary income is recognized by the Participant.

Other Stock-Based Awards and Cash-Based Awards may be subject to vesting and forfeiture provisions. In this case, a Participant will not recognize taxable income upon the grant of such Awards but will recognize ordinary income in the year in which such Awards are settled and paid in an amount equal to the fair market value of the shares of common stock issued to the Participant upon the settlement of such Awards or the amount of the cash payment made to the Participant upon the settlement of such Awards and subject to any applicable income tax withholding. Subject to the deductibility limitations of Code Section 162(m), we will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant at the time such Awards are settled and paid.

Deductibility Limit on Compensation in Excess of $1 Million. Section 162(m) of the Code generally limits the deductible amount of total annual compensation paid by a public company to each “covered employee” to no more than $1 million.

Equity Compensation Plan Information

The following table sets forth certain information regarding securities authorized for issuance under our equity compensation plans as of December 31, 2019 (in thousands, except per share amounts). It supersedes the similar table included in Item 12 of Part III of our Annual Report on Form 10-K for the year ended December 31, 2019 and is specifically incorporated by reference therein.
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) (#)
 
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (b) ($)
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) (#)
 
Equity compensation plans approved by security holders
5,094

(1)  
8.59

(2)  
1,724

(3)  
Equity compensation plans not approved by security holders

 

 

 
Total
5,094

 
8.59

 
1,724

 
(1)  The number of securities to be issued upon exercise includes 2,161 options, 2,132 RSUs and 801 PSUs. The shares issuable upon the vesting of PSUs outstanding as of December 31, 2019 assume performance goals are achieved at target performance. Following the end of the fiscal year, 36 PSUs were forfeited because the applicable performance goals were not satisfied.
(2)  Represents the weighted average exercise price of options to purchase shares. This weighted average does not take into account shares that may be issued upon vesting of other forms of equity.
(3)  Includes shares remaining available for future issuance under our 2006 Stock Incentive Plan. No further grants will be made under the 2006 Stock Incentive Plan upon stockholder approval of the 2020 Plan.

Required Vote

The affirmative vote of the holders of a majority of the shares of common stock of the Company represented at the Annual Meeting in person or by proxy and entitled to vote on this proposal is required to approve the 2020 Omnibus Incentive Plan.

Recommendation of the Board

THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL AND ADOPTION OF THE INNERWORKINGS, INC. 2020 OMNIBUS INCENTIVE PLAN.


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Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm

Ernst & Young LLP has served as the Company’s independent registered public accounting firm since March 2006 and has been appointed by the Audit Committee to continue as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 . In the event that ratification of this selection is not approved by the affirmative vote of the holders of a majority of the shares of common stock of the Company represented at the Annual Meeting in person or by proxy and entitled to vote on the item, the Audit Committee and the Board will review the Audit Committee’s future selection of an independent registered public accounting firm.

Representatives of Ernst & Young LLP will be present at the Annual Meeting. The representatives will have an opportunity to make a statement and will be available to respond to appropriate questions.

Required Vote

The affirmative vote of the holders of a majority of the shares of common stock of the Company represented at the Annual Meeting in person or by proxy and entitled to vote on this proposal is required to approve the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the current fiscal year. Abstentions will have the same effect as votes against this proposal. There will be no broker non-votes for this proposal because this is a discretionary item.

Recommendation of the Board

THE BOARD RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020 .







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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Summary of Corporate Governance Practices

We are committed to high standards of ethical and business conduct and strong corporate governance practices. This commitment is highlighted by the practices described below as well as the Corporate Governance Guidelines contained on our website at www.inwk.com on the “Investors” page under the link “Corporate Governance.” Information on, or accessible through, our website is not a part of, or incorporated by reference into, this proxy statement. In addition, we engage in shareholder outreach activities, which have informed our Board’s decisions concerning governance and related practices, as described below.

Our directors are elected annually by majority vote for one-year terms.
A nominee for director must receive more votes “FOR” his or her election than votes “AGAINST” such director.
We currently separate the roles of Chairman of the Board and Chief Executive Officer.
Our Board and its committees have an advisory role in risk oversight for the Company.
Eight of our nine director nominees are independent.
Each of our key Board committees (Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee) is comprised entirely of independent directors and operates under a written charter.
We do not currently have in place, nor have we ever had, a shareholder rights plan, commonly known as a “poison pill.”

Board Leadership Structure
Our Board is led by an independent Chairman, Jack M. Greenberg. We believe that such Board leadership structure for the Company is appropriate in light of the differences between the roles of Chairman of the Board and Chief Executive Officer. The Chief Executive Officer is responsible for setting the strategic direction of the Company and for the day-to-day leadership and performance of the Company, whereas the Chairman of the Board provides guidance to the Chief Executive Officer, is responsible for chairing Board meetings, including executive sessions with Board members, and advising on agenda topics and corporate governance matters. We have had this leadership structure for the majority of our existence; however, the Board recognizes that other leadership structures could be appropriate depending on the circumstances and, therefore, regularly re-evaluates this structure.

Board of Directors Role in Risk Oversight

Our Board and its committees have an advisory role in risk oversight for the Company. Company management maintains primary responsibility for the risk management of the Company, however, the Audit Committee and the Board review a risk assessment of the Company on a regular basis. While it is not possible to identify and mitigate all potential risks, the Board relies on the representations of management, the external audit of the financial information, and the Company’s systems of internal controls to provide comfort on the Company’s ability to manage its risks. Management’s discussion of current risk factors is set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 .

Meetings and Committees of the Board of Directors

During 2019 , the Board held 12 meetings. During 2019 , each director attended at least 75% of the aggregate of the total number of meetings of the Board held during the period in which he or she was a director and the total number of meetings held by all of the committees of the Board on which he or she served, with the exception of Mr. Gallagher who attended 65% of such meetings. The Board has an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and an Executive Committee. The Audit, Compensation and Nominating and Corporate Governance Committees were formally established in August 2006 in connection with the Company’s initial public offering and operate under written charters adopted by the Board. The Executive Committee was established in April 2010.

Audit Committee.  Charles K. Bobrinskoy, Lindsay Y. Corby, David Fisher, Julie M. Howard and Marc Zenner serve on the Audit Committee. Mr. Bobrinskoy serves as the chairman of our Audit Committee. The Audit Committee is composed of independent non-employee directors and is responsible for, among other things, supervising internal audit and reviewing internal financial controls and accounting principles to be employed in the preparation and review of our financial statements. In addition, the Audit Committee has authority to engage public accountants to audit our annual financial statements and determine the scope of the audit to be undertaken by such accountants. Each member of the Audit Committee is financially literate and Charles K. Bobrinskoy and Lindsay Y. Corby are Audit Committee financial experts under the SEC rule implementing Section 404 of the Sarbanes-Oxley Act of 2002. During 2019 , the Audit Committee held five meetings.

Compensation Committee.  Charles K. Bobrinskoy, David Fisher, Jack M. Greenberg, Julie M. Howard and Kirt P. Karros serve on the Compensation Committee. Ms. Howard serves as the chairman of our Compensation Committee. The Compensation

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Committee is composed of independent non-employee directors, each of whom is an “independent director” as required by the applicable listing standards of NASDAQ (including the specific independence requirements for compensation committee members), and is responsible for, among other things, reviewing and approving compensation of our Chief Executive Officer and our other executive officers. Additionally, the Compensation Committee reviews and recommends to our Chief Executive Officer and the Board policies, practices and procedures relating to the compensation of managerial employees and the establishment and administration of certain employee benefit plans for managerial employees. The Compensation Committee has the authority to administer our incentive plans, and to advise and consult with our officers regarding managerial personnel policies. In 2019 , the Compensation Committee engaged Meridian Compensation Partners LLC to perform certain compensation consulting services related to benchmarking the Company’s executive compensation. In connection with this engagement, the Compensation Committee requested that Meridian:

review the appropriateness of our proxy peer group based on an evaluation of our size and operations;
provide advice on executive compensation issues; and
assess the extent to which our executive compensation is aligned with performance and market practices.

Meridian provided compensation consulting services to the Compensation Committee only on matters for which the Compensation Committee is responsible. While the Compensation Committee sought input from Meridian on the matters described above, the Compensation Committee is solely responsible for determining the final amount and form of compensation and the level of performance targets. Meridian is directly engaged by and reports to the Compensation Committee, although it does interact with Company management at the Compensation Committee’s direction. In accordance with the requirements of Regulation S-K, the Company has determined that no conflict has arisen in connection with the work of Meridian as compensation consultant to the Compensation Committee. See the “Executive and Director Compensation—Compensation Discussion and Analysis” section of this proxy statement for discussion of the Company’s processes and procedures for considering and determining executive and director compensation. During 2019 , the Compensation Committee held seven meetings.

Nominating and Corporate Governance Committee.  Adam J. Gutstein, Jack M. Greenberg and Julie M. Howard serve on the Nominating and Corporate Governance Committee. Mr. Gutstein serves as the chairman of our Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee is composed of independent non-employee directors and is responsible for, among other things, assisting the Board with its responsibilities regarding:

the identification of individuals qualified to become directors;
the selection of the director nominees for the next annual meeting of stockholders;
the selection of director candidates to fill any vacancies on the Board;
the performance, composition, duties and responsibilities of the Board and the committees of the Board;
succession planning for the Chief Executive Officer; and
the operation of the Board with respect to corporate governance matters.

In evaluating and determining whether to nominate a candidate for a position on the Company’s Board, the Nominating and Corporate Governance Committee will consider the candidate’s professional ethics and values, relevant management experience and a commitment to enhancing stockholder value. The Company regularly assesses the size of the Board, whether any vacancies are expected due to retirement or otherwise, and the need for particular expertise on the Board. Candidates may come to the attention of the Nominating and Corporate Governance Committee from current Board members, stockholders, professional search firms, officers or other persons. The Nominating and Corporate Governance Committee will review all candidates in the same manner regardless of the source of recommendation. During 2019 , the Nominating and Corporate Governance Committee held three meetings.

The Nominating and Corporate Governance Committee will consider stockholder recommendations of candidates when the recommendations are properly submitted. Any stockholder recommendations which are submitted under the criteria summarized above should include the candidate’s name and qualifications for Board membership and should be addressed to Oren B. Azar, Corporate Secretary, InnerWorkings, Inc., 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 .



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Director Independence

There are no family relationships among any of the directors or executive officers of the Company. Our Board has affirmatively determined that the following eight of our nine director nominees are “independent directors” as defined in the rules of NASDAQ: Jack M. Greenberg, Charles K. Bobrinskoy, Lindsay Y. Corby, David Fisher, Adam J. Gutstein, Julie M. Howard, Kirt P. Karros and Marc Zenner. In making the independence determination, the Board considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances that the Board deemed relevant, including the beneficial ownership of the Company’s capital stock by each non-employee director and the transactions involving them as described in the section titled “Certain Relationships and Related Party Transactions.”

In particular, the Board considered the Company’s business relationship with Enova International, Inc., of which Mr. Fisher serves as Chairman, President and Chief Executive Officer. The Board noted that:
Mr. Fisher is not involved in the transactions or ongoing discussions or negotiations between parties.
The transactions between the companies are on terms and conditions no more favorable than what is to be expected of an arm's length transaction.
The relationship between the companies is transactional in nature and does not involve sensitive professional services such as legal or accounting services. The Company’s services to Enova International, Inc. are marketing execution and procurement services. Enova International, Inc. does not provide any services to the Company.
Amounts involved represent less than 1.4% of each company’s revenue in 2019 .

After assessing the relationship, the Board concluded that such relationship was not material, would not interfere with Mr. Fisher’s ability to exercise independent judgment as a director and would not give rise to any undue influence. Therefore, the Board concluded that Mr. Fisher continues to be an independent director.

Governance Documents

The Company’s Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee charters are available at www.inwk.com on the “Investors” page under the “Corporate Governance” link. In addition, the Board has adopted corporate governance guidelines, which are available at www.inwk.com on the “Investors” page under the “Corporate Governance” link. Information on, or accessible through, our website is not a part of, or incorporated by reference into, this proxy statement. For a further discussion of compensation and governance updates, see “Executive and Director Compensation—Compensation Discussion and Analysis—Executive Summary.”

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee serves, or has at any time served, as an officer or employee of us or any of our subsidiaries. None of our executive officers has served as a member of the Compensation Committee, or other committee serving an equivalent function, of any other entity, one of whose executive officers served as a member of our Compensation Committee.

Communications with Directors

We value shareholder outreach activities, which serve to inform our Board’s decisions concerning governance and related practices. For a discussion of our shareholder outreach activities, see “Executive and Director Compensation—Compensation Discussion and Analysis—Executive Summary—Shareholder Outreach.”

The Board has also established a process to receive communications from stockholders. Stockholders and other interested parties may contact any member (or all members) of the Board, or the non-management directors as a group, any Board committee or any chair of any such committee by mail. To communicate with the Board, any individual directors or any group or committee of directors, correspondence should be addressed to the Board or any such individual directors or group or committee of directors by either name or title. All such correspondence should be sent “c/o Oren B. Azar, Corporate Secretary” at 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 .

All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary for the sole purpose of determining whether the contents represent a message to our directors. The Corporate Secretary will forward copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or its committees or that he otherwise determines requires the attention of any member, group or committee of the Board.


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Attendance at Annual Meeting

Directors are encouraged, but not required, to attend our annual stockholders’ meeting. Six directors attended the 2019 annual meeting of stockholders.


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STOCK OWNERSHIP

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the beneficial ownership of our common stock as of April 16, 2020 (except as indicated below) by:

all persons known by us to own beneficially 5% or more of our outstanding common stock;
each of our directors and director nominees;
each of the named executive officers listed in the “Executive and Director Compensation—Executive Compensation—Summary Compensation Table” section of this proxy statement; and
all of our directors, director nominees and executive officers as a group.

Unless otherwise indicated, the address of each beneficial owner listed below is c/o InnerWorkings, Inc., 203 N. LaSalle Street, Suite 1800 , Chicago, Illinois 60601 .
Name and Address
 
Number of Shares
Beneficially
Owned (1)
 
Approximate
Percent of
Class (1)
CERTAIN BENEFICIAL OWNERS (not including directors and executive officers):
 
 
   
 
  

ArrowMark Colorado Holdings LLC
100 Fillmore Street, Suite 325
Denver, CO 80206
 
9,023,423

(2)  
 
17.2
%
Richard A. Heise, Jr. 
2221 Old Willow Road 
Northfield, IL 60093
 
6,344,907

(3)  
 
12.1
%
Dimensional Fund Advisors LP
Building One 6300 Bee Cave Road
Austin, TX, 78746
 
4,105,187

(4)  
 
7.8
%
American Century Capital Portfolios, Inc.
4500 Main Street, 9th Floor
Kansas City, Missouri 64111
 
3,567,245

(5)  
 
6.8
%
Aristotle Capital Boston, LLC
One Federal Street, 36th Floor
Boston, MA 02110
 
3,542,944

(6)  
 
6.8
%
BlackRock, Inc.
55 East 52nd Street
New York, New York 10055
 
3,109,723

(7)  
 
5.9
%
DIRECTORS, DIRECTOR NOMINEES AND NAMED EXECUTIVE OFFICERS:
 
 
   
 
 
Richard S. Stoddart
 
604,660

(8)  
 
1.2
%
Ronald C. Provenzano
 
484,837

(9)  
 
*

Jack M. Greenberg
 
323,031

(10)  
 
*

Charles K. Bobrinskoy
 
222,422

(11)  
 
*

David Fisher
 
142,300

(12)  
 
*

Oren B. Azar
 
136,513

(13)  
 
*

Julie M. Howard
 
133,191

 
 
*

Donald W. Pearson
 
89,194

 
 
*

Marc Zenner
 
55,000

 
 
*

Lindsay Y. Corby
 
53,002

 
 
*

Adam J. Gutstein
 
52,776

 
 
*

Renae D. Chorzempa
 
45,119

 
 
*

Charles D. Hodgkins III
 
10,620

 
 
*

Kirt P. Karros
 

 
 
*

All directors, director nominees and executive officers as a group (14 persons)
 
2,352,665

 
 
4.5
%

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*
= less than 1%.
(1)
“Beneficial ownership” means any person who, directly or indirectly, has or shares voting or investment power with respect to a security or has the right to acquire such power within 60 days. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of April 16, 2020 are deemed outstanding for computing the ownership percentage of the person holding such options, but are not deemed outstanding for computing the ownership percentage of any other person. The number of shares beneficially owned is determined as of April 16, 2020 , and the percentages are based upon 52,369,708 shares of our common stock outstanding as of April 16, 2020 . Unless otherwise indicated, each stockholder listed below has sole voting and investment power with respect to the shares of common stock beneficially owned by such stockholder.
(2)
Based solely on a Schedule 13G/A filed with SEC on February 14, 2020 .
(3)
Includes 4,013,316 shares owned by Old Willow Partners, LLC and 1,897,418 shares of common stock held by the Heise Family Dynasty Trust, both of which are controlled by Richard A. Heise, Jr. Based solely on a Schedule 13G/A filed with the SEC on February 14, 2013.
(4)
Based solely on a Schedule 13G/A filed with the SEC on February 12, 2020 .
(5)
Based solely on a Schedule 13G/A filed with the SEC on February 11, 2020 .
(6)
Based solely on a Schedule 13G filed with the SEC on February 14, 2020 .
(7)
Based solely on a Schedule 13G/A filed with the SEC on February 5, 2020 .
(8)
Includes options to purchase 162,094 shares of common stock exercisable within 60 days.
(9)
Includes options to purchase 279,480 shares of common stock exercisable within 60 days.
(10)
Includes options to purchase 11,160 shares of common stock exercisable within 60 days.
(11)
Includes options to purchase 11,160 shares of common stock exercisable within 60 days.
(12)
Includes options to purchase 1,499 shares of common stock exercisable within 60 days.
(13)
Includes options to purchase 51,161 shares of common stock exercisable within 60 days.

Delinquent Section 16(a) Reports

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC reports regarding their ownership and changes in ownership of our common stock. They are also required to provide us with copies of any forms they file.

Based solely on our review of the reports furnished to us, we believe that during the last fiscal year, all reports filed by our directors and executive officers under Section 16(a) were made timely with the exception of the Form 3 for Marc Zenner, which was inadvertently filed one day late on August 20, 2019.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In the ordinary course of our business, we have entered into transactions with our directors, officers and 5% or greater stockholders or companies in which they have a material interest. We entered into the transactions set forth below in 2019 , which were approved by our Audit Committee. We believe that we executed these transactions on terms no less favorable to us than we could have obtained from unrelated third parties. Our Audit Committee is responsible for approving related party transactions, as defined in applicable rules promulgated by the SEC. Our Audit Committee operates under a written charter pursuant to which all related party transactions are reviewed for potential conflicts of interest situations. Such transactions must be approved by our Audit Committee.

Relationships with Arthur J. Gallagher & Co. and Enova International, Inc.

During 2019 , the Company provided print procurement services to Arthur J. Gallagher & Co. J. Patrick Gallagher, Jr., a former member of our Board (through November 1, 2019), is the Chairman, President and Chief Executive Officer of Arthur J. Gallagher & Co. and has a direct ownership interest in Arthur J. Gallagher & Co. The Company billed Arthur J. Gallagher & Co. $1.8 million for these services in 2019 . The amount receivable from Arthur J. Gallagher & Co. was $0.2 million as of December 31, 2019 . Additionally, Arthur J. Gallagher & Co. provided insurance brokerage and risk management services to the Company. Arthur J. Gallagher & Co. billed the Company $0.3 million for such services in 2019 .

The Company also provided marketing execution services to Enova International, Inc. during 2019 . David Fisher, a member of the Board of Directors, is the Chairman and Chief Executive Officer of Enova International, Inc. and has a direct ownership interest in Enova International, Inc. The total amount billed for such marketing services during the year ended December 31, 2019 was $16.1 million . The amount receivable from Enova International, Inc. was $4.6 million as of December 31, 2019 . See also “Board of Directors and Corporate Governance—Director Independence.”

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EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of our six executive officers as of April 28, 2020 :
Name
 
Age
 
Position
Richard S. Stoddart
 
57
 
Director, President and Chief Executive Officer
Donald W. Pearson
 
58
 
Executive Vice President and Chief Financial Officer
Ronald C. Provenzano
 
54
 
Executive Vice President and Head of Operations Excellence
Oren B. Azar
 
56
 
Executive Vice President, General Counsel and Corporate Secretary
Renae D. Chorzempa
 
46
 
Executive Vice President and Chief Human Resources Officer
Adan K. Pope
 
53
 
Chief Technology Officer

Biographies for our executive officers are set forth below.

Richard S. Stoddart.  For more information on Mr. Stoddart, please see above under “Directors.”

Donald W. Pearson has served as Chief Financial Officer of InnerWorkings since January 2019. Mr. Pearson was a private investor and independent consultant from October 2016 to January 2019. From June 2015 to October 2016, Mr. Pearson was Executive Vice President and Chief Financial Officer of BWAY Corporation. Previously, Mr. Pearson served as Senior Vice President and Chief Financial Officer of Sparton Corporation from September 2014 to June 2015 and as Senior Vice President and Chief Financial Officer of AMCOL International Corporation from 2008 to 2014. Mr. Pearson holds a Master of Business Administration from the University of Chicago Booth School of Business and a Bachelor of Arts in Accounting from Augustana College.

Ronald C. Provenzano has served as Executive Vice President and Head of Operations Excellence since October 2018. Mr. Provenzano served as General Counsel of InnerWorkings from September 2012 to October 2018, and additionally as Executive Vice President since June 2016 to October 2018, as interim head of human resources from January 2016 to August 2018, and as Corporate Secretary from March 2015 to October 2018. Previously, Mr. Provenzano served in senior legal executive roles for R.R. Donnelley & Sons Company, Huron Consulting Group and True North Communications. Before joining True North in 1999, Mr. Provenzano was a partner at Kirkland & Ellis, a large global law firm. Mr. Provenzano holds a Juris Doctor from University of Illinois College of Law, a Bachelor of Science in Accountancy from the University of Illinois, Urbana-Champaign, and a Master of Business Administration from the University of Chicago Booth School of Business.

Oren B. Azar has served as Executive Vice President, General Counsel and Corporate Secretary since October 2018. Mr. Azar served as Senior Vice President and Deputy General Counsel of the Company from June 2014 to October 2018. Previously, Mr. Azar served in senior legal roles for Walgreen Co. and Joy Global Inc. and practiced corporate law as a partner at Shearman & Sterling LLP. He holds the professional designation of Chartered Financial Analyst. Mr. Azar holds a Juris Doctor from Harvard Law School and a Bachelor of Science in Economics from the Wharton School of the University of Pennsylvania.

Renae D. Chorzempa has served as Chief Human Resources Officer since August 2018 and additionally as Executive Vice President since February 2019. From May 2012 to November 2017, Ms. Chorzempa was Vice President of Human Resources at Hill-Rom Holdings, Inc. Previously, Ms. Chorzempa held senior human resources positions at Alberto Culver, Illinois Tool Works and Kraft Foods, Inc. Ms. Chorzempa holds a Master of Science degree in Human Resources Management from Purdue University’s Krannert School of Management and a Bachelor of Arts degree in Psychology and Sociology from Purdue University.

Adan K. Pope has served as Chief Technology Officer since March 2019. Prior to joining InnerWorkings, Mr. Pope worked at Ciena from 2016 to 2019 and was the Chief Information Technology Officer globally and Chief Strategy Officer for the Blue Planet Software Division. Mr. Pope served as the Chief Technology Officer of ShopperTrack from 2015 to 2016 and as Vice President and Chief Technology Officer, Support Solutions at Ericsson from 2013 to 2015. Previously, Mr. Pope worked for Telcordia Technologies from 2008 to 2012, where he was the Chief Strategy Officer from 2009 to 2010 and subsequently the Chief Technology Officer from 2010 to 2012. Mr. Pope holds both a Master of Computer Science and a Master of Business Administration from North Central College as well as a BSEET from DeVry University.

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EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

This compensation discussion and analysis describes the material elements of compensation awarded to, earned by, or paid to each of the individuals who served as our named executive officers during the last completed fiscal year, as set forth in the table below:
Name
 
Position
Richard S. Stoddart
 
Director, President and Chief Executive Officer
Donald W. Pearson (1)
 
Executive Vice President and Chief Financial Officer
Ronald C. Provenzano
 
Executive Vice President and Head of Operations Excellence
Oren B. Azar
 
Executive Vice President, General Counsel and Corporate Secretary
Renae D. Chorzempa
 
Executive Vice President and Chief Human Resources Officer
Charles D. Hodgkins III (1)
 
Former Interim Chief Financial Officer, Senior Vice President, Corporate Development and Strategic Initiatives
(1) As previously disclosed, on December 6, 2017, Mr. Hodgkins was appointed Interim Chief Financial Officer of the Company. The Board appointed Mr. Pearson as Executive Vice President and Chief Financial Officer of the Company effective January 10, 2019, and Mr. Hodgkins resigned from employment with the Company effective January 15, 2019. For additional information regarding the CFO transition, please see the summary set forth below under the caption, “Employment and Other Related Agreements Agreements with Former CFO.”

This compensation discussion focuses on the last completed fiscal year, but we also describe compensation actions taken before or after the last completed fiscal year to the extent it enhances the understanding of our executive compensation disclosure.

Executive Summary

Key Factors Affecting Compensation in 2019

Long-Term Restructuring and Executive Compensation. In response to the Company’s disappointing results in the first half of 2018, the Company initiated a major restructuring program designed to reduce selling, general and administrative expense and improve the efficiency of the Company’s operations. As a result of an in-depth review and analysis completed in late 2018 with the assistance of management consultants specializing in operational restructuring, the Company determined the specific changes that would be needed to enable the Company to achieve its long-term goal of sustainable, profitable growth and increasing operating leverage. A central goal of the restructuring program is to organize the Company’s client service delivery model in a way that will enable improved operating leverage while continuing to deliver superior service and execution to the Company’s clients.

2019 Financial Performance . The Company’s restructuring efforts led to a substantial improvement in financial performance in 2019 . Highlights of our 2019 financial performance included the following:

Gross revenue increased by $37 million , or 3% , to $1,158 million

Gross profit increased by $8 million , or 3% , to $262 million

Selling, general and administrative expenses declined by $16 million , or 7% , to $223 million

Net loss declined by $67 million , or 87% , to $10 million

Adjusted EBITDA* increased by $22 million , or 80% , to $49 million

Additional client work awarded during the year increased to $159 million, a new annual record

* Adjusted EBITDA (“Non-GAAP Adjusted EBITDA”) is a financial measure that is not calculated according to accounting principles generally accepted in the United States (“GAAP”), and we are including our 2019 results for this measure to show an aspect of our performance. Appendix B to this proxy statement contains reconciliations of this measure to the most directly comparable GAAP financial measures under the heading “Reconciliation of Non-GAAP Financial Measures.”

Due to the Company’s substantially improved financial performance in 2019, the quantitative metrics applicable to the Company’s annual incentive program were substantially achieved. Based on those results, the Compensation Committee

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determined that each of the Company’s named executive officers had earned a 2019 annual incentive payout equal to 96% of target. For additional information, see “Determining 2019 Executive Compensation—2019 Annual Cash Incentives” below. This payout represented a marked turnaround from 2018, when no bonus was payable to the Company’s named executive officers under the annual incentive program due to the Company’s failure to meet the minimum levels for all quantitative metrics.

In determining the 2019 compensation of the Company’s executive officers, and in particular a one-time retention award made to Mr. Stoddart in the first half of 2019, the Board and Compensation Committee considered that retention of the new executive team installed since early 2018 was critical to continuing the progress being made on the Company’s restructuring program. Mr. Stoddart’s 2018 sign-on equity award lost nearly 80% of its target value between the grant date and June 2019 due to a decline in the Company’s share price largely attributable to factors that predated his arrival (including the 2018 restatement of prior year financial statements). The Compensation Committee determined that the reduced amount was insufficient to provide the intended retentive value. In order to ensure that Mr. Stoddart would remain in place through completion of the restructuring program, on June 13, 2019 the Compensation Committee granted Mr. Stoddart a special retention award with a target grant date value of $1,500,000. For additional information, see “Determining 2019 Executive Compensation—2019 Long-Term Equity Incentives” below. Mr. Stoddart’s total compensation for 2019, including the retention award, approximates median annual CEO compensation for the Company’s peer group.

2020 Incentive Compensation Program Updates . For 2020 , the Company implemented a number of changes to its annual and long-term incentive programs to reduce the overlap in incentive metrics, conform vesting periods across equity grants, increase the percentage of performance-based equity awards, and better match other best practices in executive compensation. The 2020 updates included the following:

Beginning in 2020, performance share units were increased from 40% to 50% of the annual long-term incentive mix and stock appreciation rights were eliminated.

For consistency purposes, all long-term equity vehicles (time- and performance-based) now have a vesting period of three years.

Return on invested capital ( ROIC ) was eliminated as a metric for our annual incentive program to avoid overlap with the long-term performance share unit metrics.

Say on Pay. The Company’s executive compensation as disclosed in our 2018 Proxy Statement was approved on an advisory basis by holders of approximately 97% of the shares present and entitled to vote at the Company’s 2019 annual meeting. The Compensation Committee believes that the compensation of our named executives is competitive with the market and aligns with the best interest of our stockholders. However, the Compensation Committee regularly reviews the structure of our executive compensation program, and makes changes in light of investor and advisory feedback, changes in market practice, and other factors. As a result, the Compensation Committee made a number of changes in 2020 to better match current market best practices, as described above in “2020 Incentive Compensation Program Updates.” As previously disclosed, at the 2017 annual meeting, a majority of votes cast by stockholders approved an annual frequency for the stockholder advisory vote to approve executive compensation. Accordingly, our next stockholder advisory vote on executive compensation will be held at our 2020 annual meeting of stockholders.

Shareholder Outreach. We conduct an annual shareholder governance outreach program, in order to obtain input from our large shareholders on governance and related practices, including executive compensation. During 2019, our General Counsel and Vice President of Investor Relations, on behalf of the Board, invited each of our top 20 institutional shareholders to participate in individual telephonic meetings regarding governance and related practices, and held telephonic meetings with representatives of institutional shareholders representing approximately 36% of shares outstanding based on shares owned on the applicable meeting date. The feedback received in these and other communications with shareholders has informed our Board’s and Compensation Committee’s decisions concerning governance and executive compensation matters. The feedback regarding the Company’s executive compensation programs has generally been very positive, with strong support for the level and design of executive compensation, especially our substantial emphasis on meaningful and challenging financial metrics rather than highly discretionary or easily achieved “soft” targets. Starting in 2017, based on feedback received as part of our outreach program, our Board determined to add ROIC as one of the metrics used for our long-term incentive programs. Our Board and Compensation Committee intend to continue this outreach program.

Summary of Executive Compensation Practices.  We adhere to executive compensation best practices, as summarized below.


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What we do
We have a “pay for performance” approach
Our Compensation Committee is comprised solely of independent directors under SEC and NASDAQ requirements
Our Compensation Committee retains an independent compensation consultant
Our performance-based compensation is closely tied to quantitative metrics of Company performance
We provide limited perquisites and reasonable severance arrangements
We maintain stock ownership and stock holding guidelines for our executive officers and directors
We have a compensation clawback policy

What we don’t do
We have no “single trigger” or “modified single trigger” change in control severance benefits
We maintain no excise tax gross-up provisions
We prohibit hedging transactions and pledging of our stock by executive officers and directors
Our InnerWorkings, Inc. 2006 Stock Incentive Plan, as amended and restated (the “2006 Plan”) and our proposed 2020 Omnibus Incentive Plan are not evergreen (i.e., each has a fixed term and a finite share pool), prohibit repricing of stock options, and do not permit recycling of shares used to pay the exercise price or withholding obligations upon the exercise of stock options

Compensation Principles.  Our Compensation Committee designs and maintains our compensation programs to attract, motivate and retain talented and dedicated executive officers who are essential to our long-term success. To that end, our executive compensation programs focus on the principles summarized below:

Pay for Performance Approach: The majority of our total direct compensation is variable and directly or indirectly tied to Company performance

Long-Term Focus and Shareholder Alignment: We reward long-term strategic management and growth in the value of the Company through long-term equity incentives, which make up a significant portion of our incentive opportunity

Stock Ownership Requirements: We have stock ownership requirements that apply to our executive officers

Components and Objectives of Compensation Program.  The principal elements of our executive compensation program in 2019 were base salary, annual cash incentives, and long-term equity incentives. The objectives and benefit to stockholders of each component and its relative percentage of total compensation are described below.
Component
Objective
Benefit to Stockholders
Base Salary
Provides a measure of stable fixed compensation. Amount reflects individual’s experience, performance, responsibilities, and competitive market for executive talent.
Enables us to attract and retain top talent for each position.
Annual Cash Incentives
Provides motivation for achievement of annual company and individual performance goals.
Focuses executives on meeting key Company performance goals.
Long-Term Equity Incentives*
Provides long-term incentive to focus on stockholder value creation.
Value opportunity for executives is directly tied to long-term Company performance and stock price.
*For 2019, these consisted of performance share units, restricted stock units and stock appreciation rights. For 2020, these consisted solely of performance share units and restricted stock units.


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2019 Target Compensation Allocation
Name
 
Base Salary
(%)
 
Short-Term
Incentive
Compensation
(%)
 
Long-Term
Equity
Incentives
(%)
Richard S. Stoddart
 
25.8
%
 
25.8
%
 
48.4
%
Donald W. Pearson
 
36.4
%
 
27.2
%
 
36.4
%
Ronald C. Provenzano
 
33.9
%
 
23.7
%
 
42.4
%
Oren B. Azar
 
41.7
%
 
25.0
%
 
33.3
%
Renae D. Chorzempa
 
45.4
%
 
27.3
%
 
27.3
%
Charles D. Hodgkins III (1)
 
100.0
%
 
%
 
%
(1)   Pursuant to his Transition Agreement with the Company, Mr. Hodgkins did not participate in the Company’s annual incentive program or receive any additional equity awards during 2019.

Determining Executive Compensation

Role of the Compensation Committee. We define our competitive market for executive talent to be the business and technology services industries. For each of our named executive officers, the Compensation Committee reviews and approves all elements of compensation taking into consideration recommendations from our Chief Executive Officer (for compensation other than his own). The Compensation Committee meets in executive session to determine the compensation of our Chief Executive Officer and to approve the compensation of the other named executive officers.

Role of Executive Officers.  The Compensation Committee meets at least annually with our Chief Executive Officer to review the performance of our other named executive officers and receive the Chief Executive Officer’s recommendations regarding the compensation of those named executive officers. Neither the Chief Executive Officer nor any other named executive officer plays any role in the discussion or setting of his or her own compensation by the Compensation Committee.

Role of the Compensation Consultant.  The Compensation Committee retains an external independent consultant to advise the Committee on executive compensation matters, including the composition of the Company’s peer group and competitive pay practices. Willis Towers Watson served as the Committee’s independent consultant for 2018 and the first half of 2019, and advised the Committee in connection with the structure and design of 2019 executive compensation. For the second half of 2019 and 2020 to date, Meridian Compensation Partners LLC has served as the Committee’s independent consultant, including with respect to the structure and design of 2020 executive compensation.

Compensation Benchmarking Peer Group. In 2017, the Compensation Committee worked with Willis Towers Watson to review and update the peer group that had been used to advise executive compensation determinations for 2018 and 2019. The peer group was selected from a pool of U.S. public companies primarily within the Company’s industry (based on GICS code) and a comparable revenue range. The Compensation Committee determined that the updated peer group of 13 companies listed below provided a robust statistical set of compensation data to serve as a basis for compensation decisions. In addition to the compensation data disclosed by the companies in the peer group, for the Compensation Committee’s independent consultant utilized compensation data from nationally recognized compensation surveys to advise the Committee on competitive compensation levels.

The companies included in the peer group used to benchmark 2019 compensation levels of the executive officers are listed below:
CBIZ, Inc.
ICF International, Inc.
CSG Systems International, Inc.
Matthews International Corporation
Deluxe Corp.
Navigant Consulting, Inc.
Echo Global Logistics, Inc.
Resources Connection, Inc.
Ennis, Inc.
Sykes Enterprises, Inc.
FTI Consulting, Inc.
Viad Corp.
Huron Consulting Group, Inc.
 
                        
For 2019 , the Compensation Committee considered the 25th percentile, median, and 75th percentile base salaries, annual incentive targets, long-term incentives and total compensation of the peer group to evaluate each executive’s compensation. In

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addition to peer group pay data, the Compensation Committee considered other factors when determining each named executive officer’s total compensation, including prior experience, tenure with the Company, and overall performance of the Company and the executive officer.

Determining 2019 Executive Compensation

2019 Base Salary.  We provide the opportunity for our named executive officers and other executives to earn a competitive annual base salary. We believe that in order to attract and retain an appropriate caliber of talent for each position, a portion of our executives’ compensation should be fixed and predictable. The Compensation Committee considers a number of factors when setting each named executive officer’s base salary including peer group pay data, tenure with the Company, overall performance of the Company, and the named executive officer’s total compensation package.

The Summary Compensation Table sets forth the actual base salary earned by each of our named executive officers during 2019 . The table below sets forth our named executive officers’ base salary rates as in effect in 2018 , the changes that went into effect on April 1, 2019 , and the percentage of increase, if any.

 
 
Comparative Information for 2019
Base Salary Rates
Name
 
Base Salary
Rate in 2018
($)
 
Base Salary
Rate Effective April 2019
($)
 
Percentage
Increase
(%)
Richard S. Stoddart
 
800,000

 
800,000

 
%
Donald W. Pearson
 

 
450,000

 
N.A.

Ronald C. Provenzano
 
400,000

 
400,000

 
%
Oren B. Azar (1)
 
300,000

 
325,000

 
8.3
%
Renae D. Chorzempa
 
300,000

 
300,000

 
%
Charles D. Hodgkins III (2)
 
239,850

 

 
N.A.

(1)  Mr. Azar’s salary was increased to $300,000 from $229,389 under the employment agreement entered into in connection with his appointment as Executive Vice President, General Counsel and Corporate Secretary on October 16, 2018.
(2) Mr. Hodgkins resigned from employment with the Company effective January 15, 2019.
N.A.: Not applicable

As previously disclosed, pursuant to his transition agreement with the Company, Mr. Hodgkins received $9,000 per month, paid semimonthly in arrears during his time serving as a Senior Advisor to the Company. For more information, see “Employment and Other Related Agreements—Agreements with Former CFO—Transition Agreement with Charles D. Hodgkins III” below.

2019 Annual Cash Incentives.  We provide the opportunity for our named executive officers and other executives to earn an annual cash incentive award. We provide this opportunity to attract and retain a high caliber executive talent and to motivate executives to achieve our annual business goals. We review annual cash incentive awards for our named executive officers and other executives annually in February to determine award payments for the last completed fiscal year, as well as to establish award opportunities for the current fiscal year. Annual cash incentive awards for 2019 were administered under our Annual Incentive Plan.

The 2019 target opportunities and incentive design under the Annual Incentive Plan were approved by the Compensation Committee on March 20, 2019 . The 2019 management bonus award opportunities were based on the following criteria, which were the same for all named executive officers:
30% on gross profit (50% to 200% pay-out based on reaching approximately 90% to 110% of 2019 target gross profit of $281.0 million), which our Compensation Committee regards as the most accurate measure of the Company’s growth;
30% on Non-GAAP Adjusted EBITDA (50% to 200% pay-out based on reaching approximately 80% to 125% of 2019 target Non-GAAP Adjusted EBITDA of $45.7 million), which our Compensation Committee views as the most useful measure of the overall profitability of our business and an important metric to our investors;
20% on ROIC (50% to 200% pay-out based on reaching approximately 80% to 125% of 2019 target ROIC of 6.1%), which our Compensation Committee considers a good measure of balance sheet management; and
20% on qualitative Company performance, which includes goals such as retention of top 100 accounts, successful implementation of recent client contracts, continued wins of new large, long-term client contracts, and successful implementation of key initiatives, including the restructuring plan, employee retention and operational excellence.

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The 2019 targets under our Annual Incentive Plan, while below the prior year targets, were substantially above the actual results reported for the Company’s 2018 performance:
the gross profit target for 2019 was $26 million (approximately 10%) above the actual results reported for 2018;
the Non-GAAP Adjusted EBITDA target for 2019 was $18 million (approximately 64%) above the actual results reported for 2018; and
the ROIC target for 2019 was 420 basis points above the actual results reported for 2018.

The following table sets forth the Company’s 2019 final results with respect to the quantitative criteria components of our Annual Incentive Plan ($ in millions):
 
 
2019 Target
 
2019 Actual (1)
 
Percentage of Target Reached
 
Weighting
 
Pay-Out Percentage
Gross Profit
 
$
281.0

 
$
262.0

 
93
%
 
30
%
 
66
%
Non-GAAP Adjusted EBITDA
 
$
45.7

 
$
49.0

 
107
%
 
30
%
 
129
%
ROIC (2)
 
6.1
%
 
6.8
%
 
111
%
 
20
%
 
145
%
(1)
The amounts shown above are based upon the Company’s audited financial statements that were included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on March 17, 2020. For purposes of determining the 2019 payout under the Annual Incentive Plan, the Compensation Committee exercised its discretion to exclude the impacts of a revision of historical financial statements and an accounting reclassification affecting gross profit, in light of the fact that the original targets had been established on the basis of the prior accounting treatment. See Notes 2 and 20 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
(2)
2019 ROIC for purposes of our Annual Incentive Plan was calculated as follows ($ in millions):
Non-GAAP Adjusted EBITDA
$
49.0

Less: Stock-based compensation expense
6.3

Less: Depreciation and amortization
12.3

Less: Tax expense
8.5

Adjusted net operating profit after tax
$
21.9

 
 
Average total assets (trailing four quarters)
$
634.5

Less: Average non-interest bearing current liabilities (trailing four quarters)
243.0

Less: Average non-interest bearing long-term liabilities (trailing four quarters)
53.4

Less: Average excess cash (trailing four quarters)
15.3

Average invested capital (trailing four quarters)
$
322.9

 
 
ROIC
6.8
%

The Compensation Committee determined in February 2020 that the qualitative performance targets under the Annual Incentive Plan had been substantially met. Due to such qualitative performance, in combination with the Company’s performance against the quantitative criteria, the Committee set the 2019 bonus payout percentage for all executive officers at 96% of target.

In March 2020, the Committee determined to postpone the payment of all 2019 Company bonuses, including those payable to executive officers. This decision was made in order to provide the Company with additional liquidity in light of the economic uncertainties created by the COVID-19 pandemic and associated public health measures. As of the date of this proxy statement, the Committee has made no decision regarding the timing for the payment of such 2019 bonuses.

The table below sets forth the fiscal 2019 target and maximum annual incentive compensation opportunities for our named executive officers and the actual incentive bonus earned by each named executive officer in dollar amounts and as a percentage of the target.

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Target Incentive
 
Maximum Incentive
 
Actual Incentive Earned
Name
 
% of
Salary
 
Amount
($)
 
% of
Target
 
Amount
($)
 
% of
Target
 
Amount
($)
Richard S. Stoddart
 
100
%
 
800,000

 
200
%
 
1,600,000

 
96
%
 
768,000

Donald W. Pearson (1)
 
75
%
 
328,253

 
200
%
 
656,506

 
96
%
 
315,123

Ronald C. Provenzano
 
70
%
 
280,000

 
200
%
 
560,000

 
96
%
 
268,800

Oren B. Azar
 
60
%
 
195,000

 
200
%
 
390,000

 
96
%
 
187,200

Renae D. Chorzempa
 
60
%
 
180,000

 
200
%
 
360,000

 
96
%
 
172,800

Charles D. Hodgkins III (2)
 
40
%
 
95,940

 
200
%
 
191,880

 
%
 

(1)  Mr. Pearson’s annual incentive for 2019 was pro-rated based on his first date of employment of January 10, 2019.
(2) Pursuant to his Transition Agreement with the Company, Mr. Hodgkins did not participate in the Company’s annual incentive program or receive any equity awards in 2019.

Under the Annual Incentive Plan, the Compensation Committee may define performance measures to allow for reasonable adjustments to our overall corporate performance goals and our actual performance results that may cause differences between the numbers used for our performance goals and the numbers reported in our financial statements. These adjustments may exclude all or a portion of both the positive or negative effect of external events that are outside the control of our executives, such as natural disasters, litigation, or regulatory changes in accounting or taxation standards. These adjustments may also exclude all or a portion of both the positive or negative effect of unusual or significant strategic events that are within the control of our executives but that are undertaken with an expectation of improving our long-term financial performance, such as restructurings, acquisitions, or divestitures. For 2019, the Compensation Committee exercised its discretion to exclude the impacts of a revision of historical financial statements and an accounting reclassification affecting gross profit, in light of the fact that the original targets had been established on the basis of the prior accounting treatment. For more information regarding the revision and reclassification, see Notes 2 and 20 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Hodgkins One-Time Payments. In accordance with the terms of the Transition Agreement entered into between the Company and Mr. Hodgkins on January 3, 2019, Mr. Hodgkins received a one-time payment of $60,000 on March 31, 2019 and a one-time payment of $100,000 on June 30, 2019. For more information, see “Employment and Other Related Agreements—Agreements with Former CFO—Transition Agreement with Charles D. Hodgkins III” below.

2019 Long-Term Equity Incentives.  We provide the opportunity for our named executive officers and other executives to earn long-term equity incentive awards. Long-term incentive awards align the interests of our executives with those of our stockholders and incent retention. Although the Compensation Committee determines the actual grant value for each named executive officer annually, the Company has an employment agreement with each of our named executive officer that specifies a targeted grant date value. The 2019 annual equity awards to our named executive officers (excluding Mr. Hodgkins) were weighted as follows based on targeted grant date value: 40% performance share units ("PSUs"), 40% restricted stock units ("RSUs"), and 20% stock appreciation rights (“SARs”). The target long-term incentive grant values for our named executive officers in 2019 were as follows: Mr. Stoddart ($1,500,000), Mr. Pearson ($450,000), Mr. Provenzano ($500,000), Mr. Azar ($260,000), and Ms. Chorzempa ($180,000).

The 2019 grants of SARs and RSUs to our named executive officers vest ratably over a period of four years from the grant date. The 2019 grants of PSUs to our named executive officers are earned and vested over the performance period beginning April 1, 2019 and ending December 31, 2021 based upon actual performance against pre-set goals.

In determining the amounts of equity compensation awarded, our Compensation Committee generally considers a variety of factors, including individual performance, scope of responsibility within the organization and demonstrated leadership competencies, in addition to the target long-term incentive value specified in the individual’s employment agreement. The equity awards granted to our named executive officers in 2019 are summarized below. Additional details regarding our equity grants, including vesting schedules for awards, are set forth in the Summary Compensation Table and the Grants of Plan-Based Awards table.

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Stock Appreciation Rights and Restricted Stock Units

The table below sets forth the amounts and grant date values of our stock appreciation rights and RSU awards to our named executive officers in 2019 .
 
 
2019 Stock Appreciation Rights and Restricted Stock Units
Name
 
SARs (#)
 
Grant Date Value of SARs ($)
 
Restricted Stock Units (#)
 
Grant Date Value of Restricted Stock Units ($)
 
Total Value ($)
Richard S. Stoddart
 
823,800

 
1,050,000

 
363,095

 
1,350,000

 
2,400,000

Donald W. Pearson
 
79,646

 
90,000

 
217,211

 
930,000

 
1,020,000

Ronald C. Provenzano
 
88,496

 
100,000

 
76,696

 
260,000

 
360,000

Oren B. Azar
 
46,018

 
52,000

 
30,678

 
104,000

 
156,000

Renae D. Chorzempa
 
31,858

 
36,000

 
35,988

 
122,000

 
158,000

Charles D. Hodgkins III (1)
 

 

 

 

 

(1) Mr. Hodgkins did not receive any equity awards in 2019.

The 2019 SARs were granted under the 2006 Plan. These SARs include the following terms: a 10-year contractual exercise term, an excise price equal to our share price on the date of grant, and upon exercise, cash settlement in an amount equal to the product of (i) the then current share price less the exercise price and (ii) the number of SARs exercised. The Compensation Committee determined to grant SARs in lieu of stock options for 2019 in order to mitigate the dilution resulting from the decline in the Company’s share price over the course of 2018 and early 2019. In connection with the decision to utilize cash-settled SARs for 2019, the Compensation Committee also decided to slightly increase the proportion of whole share grants (in the form of RSUs) in order to limit the Company’s exposure to the accounting and cash flow implications of cash-settled equity awards.

The 2019 SARs provide a relatively straightforward incentive for our executives to increase share price, which aligns the interests of our named executive officers with those of our stockholders. In addition, compared with stock options, SARs result in less immediate dilution of existing stockholders’ interests.

The 2019 RSU awards were granted under the 2006 Plan. The RSUs provide a relatively straightforward incentive and retention tool for our executives and align the interests of our named executive officers with those of our stockholders. The 2019 RSUs entitle the holder to receive a share of our common stock for each RSU that vests on an applicable vesting date, assuming that the holder has been continuously employed through such vesting date.

In addition, on June 13, 2019, the Compensation Committee approved a one-time retention grant for Mr. Stoddart with a target grant value of $1,500,000. This award consisted of 50% RSUs and 50% SARs, in each case cliff vesting three years from the grant date. Due to the significant decline in the intrinsic value of Mr. Stoddart’s sign-on equity grants, such grants currently provide little retentive value. In deciding to approve the grant, the Committee considered that Mr. Stoddart has quickly assembled a talented leadership team and is driving critical operational improvements that have gained significant momentum during his tenure. The grant is intended to incent Mr. Stoddart to remain as the Company’s CEO throughout the vesting period, and thereby ensure his continued leadership of the Company through the successful implementation of the Company’s multi-year plan to rationalize costs, improve operating efficiencies and drive profitable growth.

Those critical improvements included immediate cost reduction measures, substantial improvement in the Company’s annual planning process, significant reductions in selling, general and administrative expenses, and reorganization of the Company’s account leadership teams in North America. Together, those improvements have led to meaningful increases in ROIC and Adjusted EPS during the first half of 2019 and are expected to continue to do so in future periods. In addition to operational improvements, Mr. Stoddart has played a major role in the Company’s efforts to develop new clients, making an important contribution to its future revenue growth. The Committee further considered that the Company’s circumstances had changed substantially since Mr. Stoddart accepted the role of CEO, due largely to factors that predated his arrival (including the 2018 restatement of prior year financial statements), which substantially reduced both the current value of Mr. Stoddart’s sign-on equity grant and Mr. Stoddart’s annual compensation since joining the Company. Another factor the Compensation Committee considered when determining the appropriate amount of the retention award was the competitive market. Mr. Stoddart’s 2019 target total direct compensation, inclusive of the retention grant, approximates the peer group median of annual CEO pay.

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Performance Share Unit Awards

On February 20, 2019, the Compensation Committee approved awards of PSUs to our named executive officers. The PSUs are performance-based awards that will settle in shares of Company stock, in an amount between 0% and 200% of the target award level, based on cumulative adjusted earnings per share (“EPS”) (weighted 50%) and ROIC (weighted 50%) achieved by the Company during the performance period beginning April 1, 2019 and ending December 31, 2021 . The Compensation Committee selected these metrics because it considered adjusted EPS to be strongly aligned with shareholder value creation and ROIC to be a good measure of both long-term profitability and balance sheet management. Each of these awards vests following the end of the performance period, provided that the applicable performance metrics have been satisfied.
 
 
2019-2021 Performance Share Unit Awards
Name
 
Target PSU Award (#)
 
Grant Date Value of PSUs ($)
Richard S. Stoddart
 
176,991

 
600,000

Donald W. Pearson
 
53,097

 
180,000

Ronald C. Provenzano
 
58,997

 
200,000

Oren B. Azar
 
30,678

 
104,000

Renae D. Chorzempa
 
21,239

 
72,000

Charles D. Hodgkins III (1)
 

 

(1) Mr. Hodgkins did not receive any PSUs in 2019.

Our 2019 PSU awards were granted under the terms and conditions of the 2006 Plan. The grant of a PSU entitles the participant to receive a share of our common stock upon the achievement of specific performance objectives during a performance period. Grants of PSUs become vested in accordance with such terms and conditions as may be established by the Compensation Committee and set forth in the applicable award agreement.

Despite the Company’s substantially improved financial performance in 2019, in February 2020 the Compensation Committee determined that the threshold performance levels for our 2017-2019 PSU awards had not been achieved for the performance period as a whole. As a result, no shares were issued by the Company in relation to such PSU awards.

Determining 2020 Executive Compensation

2020 Base Salary.  Consistent with our historical practice, on February 24, 2020 our Compensation Committee set 2020 base salaries, approving the following base salaries to take effect on April 1, 2020: Mr. Stoddart ($800,000); Mr. Pearson ($450,000); Mr. Provenzano ($435,000, an increase of $35,000); Mr. Azar ($350,000, an increase of $25,000); and Ms. Chorzempa ($325,000, an increase of $25,000).

On April 10, 2020 our Compensation Committee approved the following modifications to the 2020 base salaries above, given the business uncertainty created by the COVID-19 pandemic and the need for maximum liquidity and cash flexibility in light of the rapidly changing environment:

The base salaries of Mr. Stoddart and Mr. Pearson were reduced by 15% on an interim basis effective May 1, 2020; and
The previously approved 2020 base salary increases for Mr. Provenzano, Mr. Azar and Ms. Chorzempa were cancelled, which also resulted in a corresponding reduction to their respective annual incentive opportunities for 2020.
    
The table below sets forth our named executive officers’ base salary rates as in effect in 2019, the base salaries for 2020 (excluding interim reductions), and the percentage of increase, if any.

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Comparative Information for 2020 Base Salary Rates
Name
 
Base Salary Rate in 2019 ($)
 
Base Salary Rate Effective April 1, 2020 ($)
 
Percentage Increase (%)
Richard S. Stoddart
 
800,000

 
800,000

 
%
Donald W. Pearson
 
450,000

 
450,000

 
%
Ronald C. Provenzano
 
400,000

 
400,000

 
%
Oren B. Azar
 
325,000

 
325,000

 
%
Renae D. Chorzempa
 
300,000

 
300,000

 
%

2020 Annual Cash Incentives.  The 2020 target opportunities and targets under the Annual Incentive Plan (including criteria and weightings) were approved by the Compensation Committee on February 24, 2020 . The target annual incentive award for each named executive officer remaining employed in 2020 is shown in the table below. The maximum incentive awards payable to the named executive officers are 200% of such target amounts. For 2020 , the Compensation Committee discontinued the use of ROIC as a metric in the Annual Incentive Plan, to eliminate the duplication of that metric, which was determined to be more appropriate for the Company’s performance share units (as to which the metric was retained in 2020). With the elimination of ROIC as a metric, the weightings of the remaining metrics were adjusted to be gross profit (40% weighting), Non-GAAP Adjusted EBITDA (40% weighting), and qualitative goals (20% weighting).
Name
 
2019 Annual Cash Incentive as a Percentage of Salary
 
2020 Annual Cash Incentive as a Percentage of Salary (1)
Richard S. Stoddart
 
100
%
 
110
%
Donald W. Pearson
 
75
%
 
75
%
Ronald C. Provenzano
 
70
%
 
70
%
Oren B. Azar
 
60
%
 
60
%
Renae D. Chorzempa
 
60
%
 
60
%
(1) Both the annual cash incentive and the percentage shown are based on base salary level for 2020. Such base salary levels were impacted by the salary increase cancellations approved by the Compensation Committee on April 10, 2020, but were not impacted by the temporary salary reductions approved on the same date.

2020 Long-Term Equity Incentives.  The 2020 annual target long-term equity incentive opportunities were approved by the Compensation Committee on February 24, 2020 . The 2020 annual equity awards consisted (by grant date target value) 50% of PSUs and 50% of RSUs. These awards were granted to our named executive officers on March 2, 2020 . The approved target long-term incentive grant values for 2020 awards are Mr. Stoddart $2,000,000, Mr. Pearson $495,000, Mr. Provenzano $543,750, Mr. Azar $280,000 and Ms. Chorzempa $227,500. Each annual grant of 2020 RSUs to our named executive officers vests over a period of three years, with 25% vesting on each of the first and second anniversary and the remaining 50% vesting on the third anniversary. Each annual grant of PSUs vests at the end of the performance period, which covers three fiscal years. None of these equity awards will begin vesting until at least one year after the grant date.

2020 Target Compensation Allocation
Name
 
Base Salary (1)
(%)
 
Short-Term
Incentive
Compensation
(%)
 
Long-Term
Equity
Incentives
(%)
Richard S. Stoddart
 
21.7
%
 
23.9
%
 
54.4
%
Donald W. Pearson
 
35.1
%
 
26.3
%
 
38.6
%
Ronald C. Provenzano
 
32.7
%
 
22.9
%
 
44.4
%
Oren B. Azar
 
40.6
%
 
24.4
%
 
35.0
%
Renae D. Chorzempa
 
42.4
%
 
25.4
%
 
32.2
%
(1) Excludes interim reductions approved in April 2020.

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Table of Contents


Other Executive Compensation Practices, Arrangements and Policies

Executive Benefits and Perquisites.  We provide the opportunity for our named executive officers and other executives to receive certain perquisites and general health and welfare benefits. We also offer participation in our defined contribution 401(k) plan. The Company maintains a discretionary 401(k) matching program, under which it may make a contribution equal to 50% of an employee’s contributions under our 401(k) plan, capped at the lesser of 5% of the employee’s eligible compensation or $6,000. In February 2020, the Compensation Committee approved a matching contribution equal to the maximum, and as a result each of our named executive officers became eligible for a matching contribution of $6,000. In 2019 , we provided automobile allowances and fully paid medical insurance premiums to some of our named executive officers. We offer these benefits, at relatively low cost, to remain competitive in the marketplace for executive talent.

Change in Control and Severance Benefits.  We provide the opportunity for certain of our named executive officers to be protected under the severance and change in control provisions contained in their employment agreements. We provide this opportunity to attract and retain an appropriate caliber of talent for the position. We believe our arrangements are reasonable and consistent with market practices. Cash severance is limited to one year of salary continuation (at a rate equal to his or her then-current base salary) plus one year’s target annual bonus for Mr. Pearson, Mr. Provenzano, Mr. Azar and Ms. Chorzempa, and two years of salary continuation (at a rate equal to his then-current base salary) plus two year’s target annual bonus for Mr. Stoddart. Mr. Hodgkins would have been entitled to receive six months of salary continuation (at a rate equal to his then-current base salary). There is no severance increase in connection with a change in control for any of our named executive officers. In addition, the unvested equity awards held by all of our named executive officers will vest upon a qualifying termination in connection with a change in control (i.e., on a “double trigger” basis), all subject to conditions in the applicable agreements. See “Employment and Other Related Agreements” and “Potential Payments upon Termination or Change in Control” below for a more detailed discussion of these employment, severance and change in control arrangements.

Regulatory Considerations.  One of the factors the Compensation Committee considers when determining executive compensation is the anticipated tax treatment to the Company and to the executives of the various payments and benefits. Section 162(m) of the Internal Revenue Code (“Section 162(m)”) generally provides that a publicly held company may not deduct compensation paid to certain covered executive officers to the extent that such compensation exceeds $1,000,000 per executive officer in any year. While the Compensation Committee generally considers this limit when determining compensation, there are instances in which the Compensation Committee has concluded, and reserves the discretion to conclude in the future, that it is appropriate to exceed the limitation on deductibility under Section 162(m) to ensure that executive officers are compensated in a manner that it believes to be consistent with the Company’s best interests and those of its stockholders. Furthermore, interpretations of and changes in the tax laws, and other factors beyond the Compensation Committee’s control, may also affect the deductibility of compensation.

Stock Ownership Guidelines. In 2011, the Compensation Committee approved stock ownership guidelines for the named executive officers of the Company. Under the stock ownership guidelines, the named executive officers are expected to hold common stock with a value equal to a designated multiple of annual base salary. The Chief Executive Officer must hold stock with a value equal to four times his annual base salary and the other named executive officers must hold stock with a value equal to three times their respective annual base salaries. The named executive officers are required to meet these guidelines within three years of becoming subject to them. Shares that count toward satisfaction of the stock ownership guidelines include:

shares owned outright by the executive officer or his or her immediate family members residing in the same household;
shares held in trust for the benefit of the executive officer or his or her immediate family members;
shares acquired upon stock option exercise;
shares purchased in the open market;
restricted stock granted under our equity incentive plan; and
shares subject to stock options that are fully vested, after deducting shares that would be required to be sold or surrendered
to cover the applicable exercise price.

In the event that the stock ownership guidelines place a severe hardship on an executive officer, our Compensation Committee will make the final decision as to developing an alternative stock ownership guideline for such executive officer that reflects the intention of the stock ownership guidelines and his or her personal circumstances. Currently, Mr. Provenzano is our only named executive officer who has been subject to the guidelines for more than three years and is therefore required to meet them. Although Mr. Provenzano was in compliance with the guidelines in 2018, he does not currently meet the guidelines due to declines in our stock price since that time. In the interim, he and our other named executive officers remain subject to the Stock Holding Policy described below.


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Table of Contents

Stock Holding Policy.  In 2014, as an enhancement to our stock ownership guidelines, our Compensation Committee adopted a holding policy requiring our executive officers and directors to hold and refrain from selling any shares of our common stock acquired through equity awards (net of shares withheld or sold in order to satisfy tax obligations or exercise prices) until the executive officer or director has satisfied the ownership requirements in the applicable stock ownership guidelines.

Clawback Policy. Effective April 18, 2018, the Company adopted an incentive compensation recoupment policy (the “Clawback Policy”). Under the Clawback Policy, if the Company is required to restate its financial results because of its material noncompliance with any financial reporting requirement under the securities laws, the Board will review cash and equity awards or payments of any form of cash and equity incentive-based compensation made to current and former employees of the Company. If the Board determines that any such cash or equity incentive awards or payments were based on erroneous data and would have been lower had they been calculated based on the restated results, the Board may, to the extent permitted by applicable law, seek to recover for the benefit of the Company the difference between the amounts awarded or paid and the amounts that would have been awarded or paid based on the restated results. These remedies would be in addition to, and not in lieu of, any penalties imposed by law enforcement agencies, regulators or other authorities.

Hedging/Pledging Policy.  Under the Company’s long-standing trading policy, there are various restrictions on trading in the Company’s stock, including during blackout periods. As an enhancement to the trading policy, in 2014, the Board adopted an additional policy prohibiting executive officers and directors from (i) entering into hedging, short sale or monetization transactions involving Company stock and (ii) holding Company stock in a margin account or pledging Company stock as collateral for a loan. Limited exceptions to the margin account/pledging prohibition may be granted by the Company’s General Counsel. With respect to employees who are not executive officers, the Company prohibits short sales but does not otherwise maintain a policy against hedging.


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Table of Contents

Executive Compensation

The following table sets forth the information regarding 2019 compensation for each of our named executive officers. 2018 and 2017 information is presented for executives who were also named executive officers during those years.

2019 SUMMARY COMPENSATION TABLE
Name and Principal Position
Year
Salary
($)
Bonus (1)
($)
Option/SAR
Awards
(2)
($)
Stock
Awards
(3)
($)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
(4)
($)
Total
($)
Richard S. Stoddart
Director, President and Chief Executive Officer
2019
800,000


1,050,000

1,950,000

768,000

52,744

4,620,744

2018
599,000


1,469,600

1,800,010


32,313

3,900,923

Donald W. Pearson
Executive Vice President and Chief Financial Officer (5)
2019
438,068


90,000

1,110,000

315,123

20,182

1,973,373

Ronald C. Provenzano
Executive Vice President and Head of Operations Excellence
2019
400,000


100,000

460,000

268,800

52,746

1,281,546

2018
387,500


186,388

350,002


50,846

974,736

2017
350,000


169,558

332,500

68,460

47,802

968,320

Oren B. Azar
Executive Vice President, General Counsel and Corporate Secretary
2019
318,750


52,000

208,000

187,200

18,000

783,950

2018
242,500


34,203

214,230


87,605

578,538

Renae D. Chorzempa
Executive Vice President and Chief Human Resources Officer
2019
300,000


36,000

194,000

172,800

26,400

729,200

Charles D. Hodgkins III
Former Interim Chief Financial Officer (6)
2019
10,763

5,000




209,850

225,613

2018
238,388

100,000

57,315

107,628


106,315

609,646

2017
234,000


26,772

52,500

131,040

14,400

458,712

(1) For 2018, this column includes a discretionary bonus of $100,000 paid in April 2018 to Mr. Hodgkins pursuant to his amended and restated employment agreement.
(2) For 2019 and 2018, represents the full grant date fair value of the stock appreciation right and option awards, respectively, granted to the named executive officers, calculated in accordance with FASB ASC Topic 718. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the stock appreciation rights awards, please see Notes 2 and 16 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 .
(3) For 2019 , represents the aggregate grant date fair value of the RSU and PSU awards granted to each of the named executive officers calculated in accordance with FASB ASC Topic 718. The fair value of the RSU and PSU awards as of the grant date is broken down as follows:
Name
RSUs ($)
PSUs at Target ($)
PSUs at Maximum ($)
Mr. Stoddart
1,350,000

600,000

1,200,000

Mr. Pearson
930,000

180,000

360,000

Mr. Provenzano
260,000

200,000

400,000

Mr. Azar
104,000

104,000

208,000

Ms. Chorzempa
122,000

72,000

144,000

Mr. Hodgkins



For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the equity awards granted, please see Notes 2 and 16 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019 .
(4) In 2019 , consists of 401(k) matching contributions, auto allowances, and medical insurance premiums.
(5) Mr. Pearson was appointed to the position of Executive Vice President and Chief Financial Officer of the Company effective January 10, 2019.
(6) Mr. Hodgkins resigned from employment with the Company effective January 15, 2019. All Other Compensation includes $209,500 paid to Mr. Hodgkins for advisory services rendered under his transition agreement. See “Employment and Other Related Agreements—Agreements with Former CFO—Transition Agreement with Charles D. Hodgkins III” below.

For a description of the material terms of employment agreements with our named executive officers, see “Employment and Other Related Agreements” below.

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Table of Contents

2019 GRANTS OF PLAN-BASED AWARDS

The following table provides information for each of the Company’s named executive officers regarding 2019 plan-based awards.
Name
Grant Date
Estimated Possible Payouts Under Non-Equity Incentive Plan Awards (1)
 
Estimated Future Payouts Under Equity Incentive Plan Awards
 
All Other Stock Awards: Number of Shares of Stock (#)
All SAR Awards: Number of Securities Underlying SARs (#) (2)
Exercise Price of SAR Awards ($)/sh
Grant Date Fair Value of Stock and SAR Awards (3)
 ($)
Threshold ($)
Target ($)
Maximum ($)
 
Threshold (#)
Target (#)
Maximum (#)
 
Richard S. Stoddart
  
$
400,000

$
800,000

$
1,600,000

 



 


$

$

6/3/2019



 
88,496

176,991

353,982

 



600,000

6/3/2019



 



 
176,991



600,000

6/3/2019



 



 

265,487

3.39

300,000

6/13/2019



 



 
186,104



750,000

6/13/2019



 



 

558,313

4.03

750,000

Donald W. Pearson
 
164,127

328,253

656,506

 



 




1/10/2019



 



 
164,114



750,000

6/3/2019



 
26,549

53,097

106,194

 



180,000

6/3/2019



 



 

79,646

3.39

90,000

6/3/2019