Document


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


 
SCHEDULE 14A
(Amendment No. 1)

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


 
Filed by the Registrant
þ
 
Filed by a Party other than the Registrant
o

Check the appropriate box:
 
o
Preliminary Proxy Statement
 
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
þ
Definitive Proxy Statement
 
o
Definitive Additional Materials
 
o
Soliciting Material Pursuant to §240.14a-12
InnerWorkings, Inc.

(Name of Registrant as Specified In Its Charter)


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
 
þ
No fee required.
 
o
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies:
(2)
Aggregate number of securities to which transaction applies:
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
 
o
Fee paid previously with preliminary materials.
 
o
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:




Explanatory Note
This amended and restated proxy statement (the “Amended Proxy Statement”) is being filed to amend and restate in its entirety the Proxy Statement on Schedule 14A previously filed by InnerWorkings, Inc. (the “Company”) on April 18, 2018 (the “Original Proxy Statement”) in connection with the 2018 annual meeting of stockholders (the "Annual Meeting").

Subsequent to the filing of the Original Proxy Statement, the Company identified errors in certain of its historical financial statements during the course of its first quarter of 2018 financial reporting close process. As a result of the errors, the Company restated certain of its historical financial statements (the “Restatement”) in Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission on July 27, 2018.

In addition, on July 28, 2018, the Board of Directors of the Company (the "Board") resolved to appoint two new independent directors to the Board, Lindsay Y. Corby, whose appointment is effective July 30, 2018, and Adam J. Gutstein, whose appointment will be effective October 1, 2018, subject to his election by stockholders at the Annual Meeting. As a result of these additions to the Board, the Board expanded the Company's slate of director candidates to include Ms. Corby and Mr. Gutstein.

This Amended Proxy Statement has been revised to (1) reflect the effects of the Restatement, including the recoupment of certain incentive compensation paid with respect to 2017 as discussed in the “EXECUTIVE AND DIRECTOR COMPENSATION - Compensation Discussion and Analysis” section of this Amended Proxy Statement and the postponement of the Annual Meeting and (2) include Ms. Corby and Mr. Gutstein as nominees of the Company to be elected by stockholders and to provide information related to their respective backgrounds and candidacies. The Company will distribute and make available to its stockholders this Amended Proxy Statement in lieu of the Original Proxy Statement.






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InnerWorkings, Inc.
600 West Chicago Avenue, Suite 850
Chicago, Illinois 60654


July 31, 2018

To Our Stockholders:

On behalf of the Board of Directors (the "Board") and management, we cordially invite you to attend the 2018 annual meeting of stockholders (including any adjournments or postponements thereof, the “Annual Meeting”) of InnerWorkings, Inc. (the “Company”) to be held on Thursday, September 6, 2018, at 11:00 a.m., Central Time, at our corporate headquarters, 600 West Chicago Avenue, Suite 850, Chicago, Illinois 60654. The Annual Meeting was originally scheduled to be held on Thursday, May 31, 2018, but has been postponed as described below. The new record date for the Annual Meeting has been changed to July 16, 2018. No changes have been made to the location of the Annual Meeting.

As described in Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on July 27, 2018 (the “Form 10-K/A”), the Company identified errors during the course of its first quarter 2018 financial reporting close. Accordingly, the Company restated its historical financial statements previously filed with the Securities and Exchange Commission for the years ended December 31, 2017 and 2016 and voluntarily revised the financial statements for the year ended December 31, 2015 and the Company postponed the Annual Meeting. In connection with the postponement of the Annual Meeting, we are hereby amending and restating our original proxy statement, which was filed with the SEC on April 18, 2018 (the “Original Proxy Statement”).

Additionally, on July 28, 2018, the Board appointed two new independent directors to the Board, Lindsay Y. Corby, whose appointment was effective on July 30, 2018, and Adam J. Gutstein, whose appointment will be effective October 1, 2018, subject to his election by stockholders at the Annual Meeting. As a result of these additions to the Board, the Board expanded the Company's slate of director candidates to include Ms. Corby and Mr. Gutstein.

The following pages contain the formal notice of the Annual Meeting, the amended and restated proxy statement (the "Amended Proxy Statement") and a NEW 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.

The purpose of the meeting is to consider and vote upon proposals to (i) elect ten 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 amended and restated 2006 Stock Incentive Plan, including an increase in the share reserve of 1,035,000 shares and (iv) ratify the appointment of our independent registered public accounting firm for 2018. In addition to the specific items to be acted upon, there will be a report on the progress of the Company and an opportunity for questions of general interest to the stockholders.

We urge you to fill out and submit the enclosed NEW proxy card today. Any proxy card previously received by the Company will be disregarded for purposes of determining the number of votes cast with respect to each proposal described in the Amended Proxy Statement.





If you have any questions or require any assistance with voting your NEW proxy card, please contact our proxy solicitor Morrow Sodali LLC at:

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470 West Avenue
Stamford, Connecticut 06902
Stockholders call toll free: (800) 662-5200
Banks and Brokerage Firms, please call: (203) 658-9400
Email: INWK@morrowsodali.com

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


Sincerely yours,
 
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Eric D. Belcher
Chairman of the Board
 
Richard S. Stoddart
Chief Executive Officer, President and Director



The enclosed Notice, Amended Proxy Statement, NEW proxy card and Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2017 are first being mailed to stockholders on or about August 1, 2018.




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Notice of 2018 Annual Meeting of Stockholders
600 West Chicago Avenue, Suite 850
Chicago, Illinois 60654
September 6, 2018, 11:00 a.m., Central Time
July 31, 2018

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 Thursday, September 6, 2018 at 11:00 a.m., Central Time, at our corporate headquarters, 600 West Chicago Avenue, Suite 850, Chicago, Illinois 60654 for the following purposes:

1.
to elect ten members of the Board of Directors (the “Board”) to serve until the 2019 annual meeting of stockholders or until their respective successors are elected and qualified, except with respect to Eric D. Belcher, who will serve until the end of the 2018 fiscal year;
2.
to approve, on an advisory, non-binding basis, the compensation of our named executive officers;
3.
to approve our amended and restated 2006 Stock Incentive Plan, including an increase in the share reserve of 1,035,000 shares;
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, 2018; 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 amended and restated proxy statement (the “Amended 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 July 16, 2018 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 NEW 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 NEW 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 NEW PROXY CARD. Any proxy card previously received by the Company will be disregarded for purposes of determining the number of votes cast with respect to each proposal described in the Amended Proxy Statement. Even if you plan to attend the Annual Meeting, we recommend that you vote using the enclosed NEW 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 Amended Proxy Statement. Only stockholders of record as of the close of business on July 16, 2018 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 NEW ENCLOSED PROXY CARD.






By Order of the Board of Directors,
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Ronald C. Provenzano
General Counsel & Corporate Secretary


The enclosed Notice, Amended Proxy Statement, NEW proxy card and Amendment No. 1 to our Annual Report on Form 10-K/A for the year ended December 31, 2017 are first being mailed to stockholders on or about August 1, 2018.





PROXY SUMMARY

As described in Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on July 27, 2018 (the “Form 10-K/A"), the Company identified errors in certain of its historical financial statements during the course of its first quarter of 2018 financial reporting close process. As a result of the errors, the Company restated its historical financial statements for the years ended December 31, 2017 and 2016 and all interim periods therein and revised its historical statements for the year ended December 31, 2015 in the Form 10-K/A and postponed the Annual Meeting. Additionally, on July 28, 2018, the Board of Directors (the "Board") of the Company appointed two new independent directors to the Board, Lindsay Y. Corby, whose appointment is effective July 30, 2018, and Adam J. Gutstein, whose appointment will be effective October 1, 2018, subject to his election by stockholders at the Annual Meeting. In connection with the postponement of the Annual Meeting, which has been rescheduled for September 6, 2018, due to the expansion of the Company's slate to include Ms. Corby and Mr. Gutstein, we are hereby amending and restating our original proxy statement, which was previously filed with the SEC on April 18, 2018.

This summary highlights information contained elsewhere in this amended and restated proxy statement (the "Amended Proxy Statement"). This summary does not contain all of the information you should consider, and you should read the entire Amended Proxy Statement carefully before voting.

Annual Meeting Information
Date, Time and Location:
September 6, 2018 at 11:00 a.m. Central Time, at our corporate headquarters, 600 West Chicago Avenue Suite 850, Chicago, Illinois 60654
Record Date:
July 16, 2018

Items to be Voted on at the 2018 Annual Meeting of Stockholders
 
Proposal
 
Board of Directors’ Recommendation
Elect ten members of the Board of Directors to serve until the 2019 annual meeting of stockholders or until their respective successors are elected and qualified, except with respect to Eric D. Belcher who will serve until the end of the 2018 fiscal year.
 
FOR
Approve, on an advisory, non-binding basis, the compensation of the Company’s named executive officers.
 
FOR
Approve the amended and restated 2006 Stock Incentive Plan, including an increase in the share reserve of 1,035,000 shares
 
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, 2018.
 
FOR





Director Nominees
Name
 
Director
Since
 
Independent
 
Other Public
Boards(1)
 
Committee Memberships
AC
 
CC
 
NCG
Eric D. Belcher (Chairman of the Board)(2)
 
2009
 
No
 
 
  
 
 
 
 
Jack M. Greenberg (Lead Independent Director)(2)
 
2005
 
Yes
 
2
 
 
 
M
 
M
Richard S. Stoddart (Chief Executive Officer)(2)
 
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
 
 
J. Patrick Gallagher, Jr.
 
2011
 
Yes
 
1
 
  
 
C
 
M
Adam J. Gutstein
 
(3)
 
Yes
 
 
 
 
 
 
 
Julie M. Howard
 
2012
 
Yes
 
2
 
M
 
M
 
M
Linda S. Wolf
 
2006
 
Yes
 
 
M
 
M
 
C
(1)
Other Public Boards reflects directorships as of date of this Amended Proxy Statement.
(2)
As previously disclosed, effective April 5, 2018, Mr. Belcher has transitioned from his position as President and Chief Executive Officer to the role of Chairman of the Board, and the Board has appointed Richard S. Stoddart as his successor. Upon Mr. Belcher’s transition to the Chairman of the Board role, Mr. Greenberg became Lead Independent Director. Subject to his re-election at the Annual Meeting, Mr. Belcher will serve as a member of the Board through December 31, 2018. In addition, subject to the re-election of each of Messrs. Belcher and Greenberg at the Annual Meeting, Mr. Belcher will no longer serve as the Chairman of the Board, Mr. Greenberg will return to that role and the Company will no longer have a Lead Independent Director. For additional information regarding the transition, please see the summary set forth below under the captions, “CEO Transition” and "Board Leadership Structure".
(3)
As previously disclosed, the Board appointed Mr. Gutstein as a director, effective October 1, 2018, subject to his election at the Annual Meeting.
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
 
Ÿ
All directors except the CEO and Chairman are independent
20
-
22
 
Ÿ
All directors are elected annually
20
 
Ÿ
Directors are elected by majority vote, with plurality standard for contested elections
5
&
20
 
Ÿ
No shareholder rights plan or poison pill
20
 
Ÿ
No cumulative voting
1
 
Ÿ
Proactive stockholder governance outreach
20
&
38
 
Ÿ
Published corporate governance guidelines summarizing key governance practices
23




Compensation
 
 
 
Location
 
Ÿ
Pay for performance approach
28
 
Ÿ
Independent compensation committee and independent compensation consultant
21
&
29
 
Ÿ
Directors and officers subject to stock ownership guidelines and stock holding policy
29, 37-38
&
56
 
Ÿ
Policy against hedging/pledging
38
 
Ÿ
Officers subject to compensation clawback policy
38
 
Ÿ
Long-term focus and stockholder alignment through equity compensation
34-35
 
Ÿ
No problematic pay practices, such as excise tax gross-up provisions
29
 
Ÿ
No “single trigger” change in control severance arrangements
29




Amended Proxy Statement for the Annual Meeting of Stockholders of INNERWORKINGS, INC. 

To Be Held on Thursday, September 6, 2018

TABLE OF CONTENTS
AMENDED 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 Amended and Restated 2006 Stock 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
Section 16(a) Beneficial Ownership Reporting Compliance
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 2019 Annual Meeting
Expenses of Solicitation
“Householding” of Proxy Materials
Proxy Voting Card
APPENDIX A
APPENDIX B




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600 West Chicago Avenue, Suite 850
Chicago, Illinois 60654

AMENDED PROXY STATEMENT

This amended and restated proxy statement (the “Amended Proxy Statement”), which amends and restates the original proxy statement dated April 18, 2018 (the “Original Proxy Statement”) of InnerWorkings, Inc., a Delaware corporation, and the enclosed NEW proxy card are being furnished by the Board of Directors in connection with the solicitation of proxies for our 2018 annual meeting of stockholders (including any postponements or adjournments thereof, the “Annual Meeting”). In this Amended 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 Amended 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 July 16, 2018, 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

As described in Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on July 27, 2018 (the “Form 10-K/A”), the Company identified errors in certain of its historical financial statements during the course of its first quarter of 2018 financial reporting close process. As a result of the errors, the Company has restated certain financial statements in the Form 10-K/A (the “Restatement”) and postponed the Annual Meeting.

Date and Location. In light of the Restatement, the Board has postponed the Annual Meeting to Thursday, September 6, 2018 at 11:00 a.m., Central Time, at our corporate headquarters at 600 West Chicago Avenue, Suite 850, Chicago, Illinois, 60654.

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 has been changed to July 16, 2018. 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. On the record date, 52,171,438 shares of our common stock were outstanding.

Quorum. We need a majority of the shares of common stock outstanding on the record date, represented in person or by proxy, to hold the Annual Meeting. Abstentions and broker non-votes will be counted as present and entitled to vote for purposes of establishing a quorum. Broker non-votes will not be considered “present” for purposes of voting on non-discretionary items. In the absence of a quorum, the Annual Meeting may be adjourned either by the holders of a majority of the shares present in person or represented by proxy, and entitled to vote at the meeting.

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.


1



Voting in Person or by Proxy for Shares Held of Record. You can vote by attending the Annual Meeting and voting in person, or you can vote by proxy. If you are the record holder of your shares, you can vote in the following ways:

1.
In Person - If you attend the Annual Meeting, you may deliver your completed NEW proxy card in person or you may vote by completing a ballot, which we will provide to you at the Annual Meeting. You are encouraged to complete, sign and date the NEW proxy card and mail it in the enclosed postage-paid envelope regardless of whether or not you plan to attend the Annual Meeting.
2.
By Mail - You can vote by mail by signing, dating and mailing a NEW proxy card.

Submitting Voting Instructions for Shares Held Beneficially. 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 bank, broker or nominee is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your bank, broker or other 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 nominees for specific instructions on methods of voting. If you hold shares through a bank, broker or other nominee, follow the voting instructions you receive from that nominee. 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.

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 important that you submit your voting instructions if you want your shares to count for nondiscretionary 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.

Proxy Card. The proxy card has been amended to reflect the addition of Ms. Corby and Mr. Gutstein as director nominees of the Company. Even if you previously submitted a proxy card, you must fill out and submit the enclosed NEW proxy card in order for your shares to be voted. The shares represented by any NEW proxy card which is properly executed and received by the Company prior to or at the Annual Meeting will be voted in accordance with the specifications made thereon. Where a choice has been specified on the enclosed NEW proxy card with respect to the proposals, the shares represented by the enclosed NEW proxy card will be voted in accordance with the specifications. If you return a validly executed enclosed NEW proxy card without indicating how your shares should be voted on a matter and you do not revoke your proxy, your proxy will be voted: “FOR” the election of all of the director nominees of the Board set forth on the enclosed NEW proxy card (Proposal 1); “FOR” the approval, on an advisory, non-binding basis, the compensation of our named executive officers (Proposal 2); “FOR” the approval of our amended and restated 2006 Stock Incentive Plan, including an increase in the share reserve of 1,035,000 shares (Proposal 3) and “FOR” the ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for the fiscal year ending December 31, 2018 (Proposal 4).

The Board is not aware of any matters that are expected to come before the Annual Meeting other than those described in this Amended Proxy Statement. If any other matter should be presented at the Annual Meeting upon which a vote may be properly taken, shares represented by all enclosed NEW proxy cards received by the Board will be voted with respect thereto at the discretion of the persons named as proxies on the enclosed NEW proxy card.

We urge you to fill out and submit the enclosed NEW proxy card today. Any proxy card previously received by the Company will be disregarded for purposes of determining the number of votes cast with respect to each proposal described in the Amended Proxy Statement.

Revoking Your Proxy. If you are a stockholder of record, you can revoke your proxy at any time before the Annual Meeting by (1) delivering a written revocation notice prior to the Annual Meeting to Ronald C. Provenzano, Corporate Secretary, InnerWorkings, Inc., 600 West Chicago Avenue, Suite 850, Chicago, Illinois, 60654; (2) submitting a later-dated proxy that we receive no later than the conclusion of voting at the Annual Meeting; or (3) voting in person at the Annual Meeting. Attending the Annual Meeting does not revoke your proxy unless you vote in person at the meeting.

If your shares are held of record by a bank, broker or other nominee and you desire to vote at the Annual Meeting, you may change your vote by submitting new voting instructions to your nominee in accordance with such nominee’s procedures.


2



Votes Required to Elect Directors. The size of the Board is currently set at nine members. 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 enclosed NEW proxy card enables a stockholder to vote “FOR,” “AGAINST” or “ABSTAIN” from voting as to each director nominated by the Board. 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.

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, the incumbent directors submit a resignation in writing to the Chairman of our Nominating and Corporate Governance Committee. The resignation will become effective 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 the director and will recommend to the Board whether to accept or reject the director’s resignation. The Board will act on the Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting.

Votes Required to Adopt Other Proposals. The approval, on an advisory, non-binding basis, of the compensation of our named executive officers (Proposal 2), the approval of our amended and restated 2006 Stock Incentive Plan (Proposal 3), and the ratification of Ernst & Young LLP’s appointment as independent registered public accounting firm (Proposal 4) require the affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote thereon.

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 NEW ENCLOSED NEW PROXY CARD.

“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 amended and restated 2006 Stock Incentive Plan and against the ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm.

If you are a beneficial owner holding your shares in “street name” and you do not provide voting instructions to your bank, broker or other nominee holding shares of our common stock for you, then your shares will not be voted with respect to any proposal for which the stockholder of record does not have “discretionary” authority to vote. 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. Broker non-votes (if any) will not be counted in tabulations of the votes cast at the Annual Meeting and will have no effect on the outcome of any of the proposals. 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.

Settlement with Engine Capital. On July 6, 2018, Engine Capital, L.P. and certain of its affiliates (“Engine”) caused to be delivered to the Company a notice of intent to nominate director candidates for election as directors of the Company at the Annual Meeting. On July 29, 2018, the Company and Engine entered into a settlement agreement pursuant to which Engine irrevocably withdrew its previously submitted nomination notice. The full text of the settlement agreement and a summary description thereof may be found in the Current Report on Form 8-K filed by the Company with the SEC on July 30, 2018.

Appraisal Rights. Stockholders do not have appraisal rights under Delaware law in connection with the matters to be voted on at the Annual Meeting.

Stockholder List. A list of our stockholders as of the close of business on July 16, 2018 will be available for inspection during business hours for 10 days prior to the Annual Meeting at our corporate headquarters located at 600 West Chicago Avenue, Suite 850, Chicago, Illinois, 60654.


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Voting Results. We will disclose the preliminary voting results in a Current Report on Form 8-K, which we expect to file on or after September 6, 2018. You can obtain a copy of the Form 8-K by accessing our website at www.inwk.com or by visiting the SEC’s public reference room at 100 F Street, NE Washington, DC 20549, or through the EDGAR system at www.sec.gov. Information on our website does not constitute part of this Amended Proxy Statement.

Other Matters. If you have any questions or require any assistance with voting your shares, or if you need additional copies of the proxy materials, please contact our proxy solicitor Morrow Sodali LLC (“Morrow Sodali”) using the below contact information:

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12380471&doc=4

470 West Avenue
Stamford, Connecticut 06902
Stockholders call toll free: (800) 662-5200
Banks and Brokerage Firms, please call: (203) 658-9400
Email: INWK@morrowsodali.com


IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON SEPTEMBER 6, 2018: THIS AMENDED AND RESTATED PROXY STATEMENT FOR THE ANNUAL MEETING AND THE ANNUAL REPORT ON FORM 10-K/A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 AND AMENDMENT NO. 1 THERETO ARE AVAILABLE FREE OF CHARGE ON OUR WEBSITE AT WWW.INWK.COM.


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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. The Board resolved to expand the Board from seven to eight members in connection with Mr. Stoddart's appointment as Chief Executive Officer, President and Director, effective as of April 5, 2018 and from eight to nine directors in connection with Ms. Corby's appointment as an independent director, effective as of July 30, 2018. Additionally, the Board resolved to expand the Board from nine to ten members in connection with Mr. Gutstein's appointment as an independent director, effective October 1, 2018, subject to his election at the Annual Meeting. At the Annual Meeting, the stockholders will elect ten directors to serve until the 2019 annual meeting of stockholders or until their respective successors are elected and qualified, with the exception of Mr. Belcher, who will serve until the end of the fiscal year, at which time the size of the Board will be reduced to nine members. All of the nominees, with the exception of Mr. Gutstein, 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. We have two independent director nominees standing for election for the first time. Ms. Corby is an incumbent director. As such, if Ms. Corby fails to receive the vote needed to be re-elected, Ms. Corby would continue to serve on the Board as a holdover director, albeit subject to our resignation policy described below. Mr. Gutstein, on the other hand, will not be an incumbent director immediately prior to the Annual Meeting. As such, if Mr. Gutstein fails to receive the vote needed to be elected, Mr. Gutstein would not become a member of the Board on October 1, 2018.

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 stockholders’ 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 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 Amended 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, seven of our nine directors are independent.


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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.

The Company’s Bylaws provide that the number of directors that shall constitute the Board shall not be less than three nor more than fifteen. The size of the Board is currently set at nine members.

The names of the director nominees, their ages as of July 16, 2018, 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
Eric D. Belcher (1) 
 
49
 
Chairman of the Board
Jack M. Greenberg (1)(3)(4) 
 
75
 
Lead Independent Director
Richard S. Stoddart (1) 
 
55
 
Chief Executive Officer, President and Director
Charles K. Bobrinskoy(2)(3)
 
58
 
Director
Lindsay Y. Corby (2)
 
40
 
Director
David Fisher(2)(3)
 
49
 
Director
J. Patrick Gallagher, Jr.(3)(4)
 
66
 
Director
Adam J. Gutstein(5)
 
55
 
Director
Julie M. Howard(2)(3)(4)
 
55
 
Director
Linda S. Wolf(2)(3)(4)
 
70
 
Director

(1)
As previously disclosed, effective April 5, 2018, Mr. Belcher has transitioned from his position as President and Chief Executive Officer to the role of Chairman of the Board, and the Board has appointed Richard S. Stoddart as his successor. Upon Mr. Belcher’s transition to the Chairman of the Board role, Mr. Greenberg became Lead Independent Director. Subject to his re-election at the Annual Meeting, Mr. Belcher will serve as a member of the Board through December 31, 2018. In addition, subject to the re-election of each of Messrs. Belcher and Greenberg at the Annual Meeting, Mr. Belcher will no longer serve as the Chairman of the Board, Mr. Greenberg will return to that role and the Company will no longer have a Lead Independent Director. For additional information regarding the transition, please see the summary set forth below under the captions, “CEO Transition” and "Board Leadership Structure".
(2)
Current member of our Audit Committee, except Ms. Corby will join the Audit Committee immediately following the Company's filing of its Form 10-Q for the period ended March 31, 2018.
(3)
Current member of our Compensation Committee.
(4)
Current member of our Nominating and Corporate Governance Committee.
(5)
As previously disclosed, the Board appointed Mr. Gutstein as a director, effective October 1, 2018, subject to his election at the Annual Meeting.

DIRECTOR NOMINEES

Eric D. Belcher has served on our Board since January 2009 and has served as the Chairman of the Board since April 2018. From January 2009 until April 2018, Mr. Belcher served as our Chief Executive Officer and President. Prior to his appointment as Chief Executive Officer, Mr. Belcher served as our President since April 2008 and our Chief Operating Officer from December 2006 to December 2008. From May 2005 to December 2006, Mr. Belcher served as our Executive Vice President of Operations. Mr. Belcher served as Chief Operating Officer from March 2003 to June 2005 and as Chief Financial Officer from April 2001 to

6



March 2003 of MAN Roland Inc., a printing equipment manufacturer and distributor. From 1995 to 2000, he led project teams at Marakon Associates, an international management consulting firm. Mr. Belcher holds a bachelor’s degree from Bucknell University and a Master of Business Administration from the University of Chicago Booth School of Business. He currently serves on the Advisory Board for the Polsky Center for Entrepreneurship at Chicago Booth. As the prior Chief Executive Officer of the Company, Mr. Belcher brings to the Board an extensive understanding of InnerWorkings’ business through his thirteen years of service to the Company.

Jack M. Greenberg has served on our Board since October 2005 and has served as the Lead Independent Director since April 2018. Subject to his re-election at the Annual Meeting, he will return to the role of non-executive Chairman of the Board, a position that he held from June 2010 to April 2018. Greenberg retired as the Chairman of The Western Union Company in May 2017 and currently serves on the Board of IQVIA. 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 as the Chairman of the Metropolitan Pier & Exposition Authority (MPEA), the public agency which owns McCormick Place and Navy Pier, and service on the board of Choose Chicago, DePaul University, where he previously served as Chairman, the Institute of International Education, the Field Museum, and Navy Pier, Inc. 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 serves as a member of the Board of Directors of Carbon Media Group, LLC, the largest outdoor sports digital media company. 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. 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, 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 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.

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Corby’s financial acumen and experience as a chief financial officer and her 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. 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 provides valuable financial knowledge and valuable insight on reporting to the Board as well as to the Company’s Audit Committee on which he serves.

J. Patrick Gallagher, Jr. has served on our Board since August 2011. Mr. Gallagher is currently Chairman, President and Chief Executive Officer of Arthur J. Gallagher & Co., an international insurance brokerage and risk management services firm. He began his career with Gallagher in 1974. In addition to his corporate responsibilities, Mr. Gallagher serves on the boards of the American Institute for Chartered Property Casualty Underwriters and the International Insurance Foundation. He also serves on the Advisory Council for Boys Hope/Girls Hope and the Board of Advisors for Catholic Charities. He is a member of the Economic Club of Chicago, the Executive Club of Chicago and the Commercial Club of Chicago. Mr. Gallagher holds a Bachelor of Arts in Government from Cornell University. Mr. Gallagher’s 19 years as the Chief Executive Officer of a publicly-listed services business provides valuable insight and perspective to the Company.

Adam J. Gutstein has been appointed to serve on our Board, effective October 1, 2018, subject to his election at the Annual Meeting. Mr. Gutstein is currently Vice Chairman at PricewaterhouseCoopers US (“PwC”), a professional services firm and network. He has served as Vice Chairman of PwC since June 2012 and has led PwC’s Eastern Region since June 2016. 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 firms’ Management Consulting practice, and serving as a Director of PwC Hispanic America Advisory. Mr. Gutstein will retire from PwC prior to October 1, 2018. 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. Ms. Howard is currently Chairman and Chief Executive Officer of Navigant Consulting, Inc. 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 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.


8



Linda S. Wolf has served on our Board since November 2006. Ms. Wolf retired as Chairman and Chief Executive Officer of Leo Burnett Worldwide, a global advertising agency, in April 2005. She had served as Leo Burnett Worldwide’s Chairman and Chief Executive Officer since January 2001 and as President of Leo Burnett USA from July 1996 to December 2000. From March 1992 to June 1996, she was an Executive Vice President responsible for Business Development at Leo Burnett USA. Ms. Wolf joined the Board of Directors of Wal-Mart Stores Inc. in 2005 and served on the Board until June 2017. Ms. Wolf joined the Board of Wrapports LLC in 2012. She is a trustee for investment funds advised by the Janus Capital Group Inc. She is also a director of Lurie Children’s Hospital, The Chicago Council on Global Affairs, the Chicago Community Trust and the Rehabilitation Institute of Chicago. Ms. Wolf holds a bachelor’s degree from Ohio Wesleyan University. As a former senior executive of a global advertising agency, Ms. Wolf brings to the Board extensive senior executive and global leadership experience, including business development, marketing, operations and strategic planning. Ms. Wolf also strengthens the Board’s global perspective and governance expertise.

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 of Directors

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 Amended 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 98% of our shares present and entitled to vote at our 2017 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 Amended 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 of Directors, 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 of Directors 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 Amended 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 Company’s common stock present 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 of Directors

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



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Proposal 3: Approval of the Amended and Restated 2006 Stock Incentive Plan

A proposal will be presented at the Annual Meeting to approve the amended and restated InnerWorkings, Inc. 2006 Stock Incentive Plan, which we refer to as the Plan. The Plan was originally adopted by the Board of Directors effective July 31, 2006 and was amended and restated on June 19, 2008, June 18, 2009, June 16, 2011, June 21, 2012, June 13, 2014 and June 6, 2016. On April 18, 2018, the Compensation Committee of the Board (which we refer to in this proposal as the Committee) approved the further amendment and restatement of the Plan, subject to stockholder approval. The Plan, as proposed to be amended and restated effective September 6, 2018, (i) increases the maximum number of shares of common stock that may be issued under the Plan by 1,035,000 shares, from 10,750,000 (a majority of which have been previously granted as set forth in our Equity Compensation Plan Information table on page 17 to, plus any shares that are or become available for grant under our prior unit option plans (a majority of which have been previously granted as set forth in our Equity Compensation Plan Information table on page 17) to 11,785,000, (ii) extends the term of the Plan to April 18, 2028; and (iii) implements certain other minor clarifying and technical changes to the Plan.

Share Usage and Burn Rate

The Plan is an integral component of the Company’s executive compensation program, which enhances and implements our “pay for performance” philosophy in order to continue to attract, retain, and appropriately motivate the Company’s key employees who drive long-term value creation. In determining to approve the amended and restated Plan, the Committee took into consideration the Company’s effective management of share usage under the Plan to avoid excessive stockholder dilution. Our burn rates for the fiscal years 2015, 2016 and 2017 were 4.45%, 3.82%, and 2.65%, respectively, which represents a three-year average burn rate of 3.63%. These burn rates were calculated using an assumption that each full value award is equivalent to an award of two stock options. Our unadjusted burn rates for the fiscal years 2015, 2016 and 2017 were 3.15%, 2.79%, and 2.03%, respectively, which represents a three-year unadjusted average burn rate of 2.65%. In addition, our potential equity dilution is approximately 15.4% on a fully diluted basis (determined based on the number of shares subject to outstanding awards that are unvested or unexercised and shares remaining available under our plans for future awards as of March 31, 2018, including the additional 1,035,000 shares of our common stock that we are requesting under the amendment and restatement of the Plan, relative to our fully diluted issued and outstanding shares of common stock as of the record date). Based on our historically judicious use of available shares under the Plan and the fact that continuing to offer equity-based awards is important to our ability to continue to attract, retain and motivate talented executive officers and employees, the Committee has determined that the increase in the number of shares reserved for issuance under the Plan is reasonable and appropriate.

A summary of the material provisions of the Plan, as amended and restated, is set forth below. This summary is qualified in its entirety by reference to the provisions of the Plan, which is attached as Appendix B. Unless otherwise indicated, terms used in this summary shall have the meanings set forth in the Plan.

Description of the Plan

Purpose of the Plan. The Plan was established by the Company to (i) promote the success and enhance the value of the Company by linking the personal interests of participants to those of Company stockholders and by providing participants with an incentive for outstanding performance; and (ii) provide flexibility to the Company in its ability to motivate, attract, and retain the services of participants upon whose judgment, interest and special effort the successful conduct of its business is largely dependent.

The Plan permits the Company to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other stock awards and forms of incentive compensation to all participants in the Plan. Any option granted under the Plan may be either an incentive stock option, which we refer to as an ISO, or a non-qualified stock option, which we refer to as an NQSO.

Eligibility and Limits on Awards. Any employee, consultant or director of the Company or an affiliate is eligible to receive awards under the Plan. As of December 31, 2017, the Company and its affiliates had approximately 2,000 employees and independent contractors and six non-employee directors. The specific employees, consultants and directors who will be granted awards under the Plan and the type and amount of any such awards will be determined by the Committee or such person or persons to whom the Committee has delegated this authority under the Plan.


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The Plan limits the awards that may be granted to participants. The maximum number of shares of common stock that may be delivered to participants and their beneficiaries with respect to ISOs under the Plan is 1,000,000 shares. The aggregate awards that may be granted to any one participant during any one calendar year shall not exceed: (i) 1,000,000 shares subject to options or stock appreciation rights; (ii) 500,000 shares subject to restricted stock, restricted stock units, performance shares, or any other awards (other than options and stock appreciation rights), which are determined by reference to the value of shares or appreciation in value thereof, to the extent that such awards are intended to be performance-based for purposes of Section 162(m) of the Code; and (iii) $5,000,000 with respect to any cash-based awards, to the extent that such awards are intended to be performance-based for purposes of Section 162(m) of the Code. Notwithstanding the foregoing, the maximum number of shares that may be granted in a calendar year to any one participant who is a non-employee director under all types of awards available under the Plan, when taken together with any cash fees paid to such non-employee director with respect to his or her service as a director in such calendar year, will not exceed $400,000 in total value (calculating the value of any such awards based on the fair market value at the time of grant for financial reporting purposes). No performance shares or other performance-based award may be granted to a participant who is a non-employee director.

Shares Reserved for Awards. Subject to the stockholders’ approval of this amendment and restatement, the maximum number of shares of our common stock that may be delivered to participants and their beneficiaries under the Plan is 11,785,000 (plus any shares that are or become available for grant under our prior unit plan), which includes the 1,035,000 shares added pursuant to the proposed amendment and restatement and would leave approximately 2,983,149 shares available for grants under the Plan on and after July 16, 2018 (consisting of 1,948,149 shares available for issuance as of July 16, 2018, plus the 1,035,000 proposed additional shares). The closing price of the Company’s common stock on the NASDAQ Global Market on July 16, 2018 was $8.71 per share.

The table below quantifies, as of December 31, 2017 and July 16, 2018, without taking into account the proposed amendment, the number of stock option awards outstanding under the Plan, unvested restricted stock awards (with full voting rights) outstanding under the Plan, and shares available for issuance pursuant to future awards under the Plan. If approved, the amendment and restatement of the Plan would increase the available share pool by 1,035,000.


 
December 31, 2017
 
July 16, 2018
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Life
 
Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Life
Shares currently available for grant under the 2006 Stock Incentive Plan
1,838

 

 

 
1,948

 

 

Shares subject to outstanding stock option rights under the 2006 Stock Incentive Plan
4,434

 
$
8.57

 
5.70

 
4,311

 
$
8.31

 
5.68

Shares subject to outstanding, unvested restricted stock award rights under the 2006 Stock Incentive Plan
772

 

 
8.48

 
487

 

 
8.37



12



To the extent any shares of our common stock covered by an award are not delivered because the award is forfeited, canceled, or otherwise terminated, such shares shall not be deemed to have been delivered for purposes of determining the number of shares of our common stock available for delivery under the Plan. The Plan provides that, to the extent (i) shares are not delivered by reason of their being withheld to cover taxes or the exercise price of any award of stock options or stock appreciation rights (“SARs”), such shares shall be treated as having been issued under the Plan and shall not be available for issuance under the Plan, and (ii) any share-settled SARs are exercised, the aggregate number of shares subject to such SARs shall be deemed issued under the Plan and shall not be available for issuance under the Plan. Shares tendered to exercise outstanding stock options or other awards or to cover applicable taxes on awards of stock options and SARs shall not be available for issuance under the Plan, but shares tendered to cover applicable taxes on awards other than options and SARs shall be available for issuance under the Plan.

In the event of a corporate transaction involving the Company (including, without limitation, any merger, reorganization, consolidation, recapitalization, separation, liquidation, split-up, or share combination), the Committee shall adjust awards in any manner determined by the Committee to be an appropriate and equitable means to prevent dilution or enlargement of rights.    

Administration. The authority to control and manage the operation and administration of the Plan is vested in the Committee. To the extent not prohibited by applicable law or the applicable rules of any stock exchange, the Board in its discretion may determine that the Plan will be administered by another committee appointed by the Board whose composition satisfies the “nonemployee director” requirements of Rule 16b-3 under the Securities Exchange Act of 1934, the “independent director” requirements of NASDAQ and the “outside director” provisions of Section 162(m) of the Code or any successor regulations or provisions, to the extent applicable.

The Committee has the authority and discretion to select employees, directors and consultants to participate in the Plan, determine the sizes and types of awards, determine the terms and conditions of awards in a manner consistent with the Plan, construe and interpret the Plan and any agreement or instrument entered into under the Plan, establish, amend or waive rules and regulations for the Plan’s administration, amend the terms and conditions of any outstanding award to the extent they are within the discretion of the Committee as provided in the Plan, and make all other determinations that may be necessary or advisable for the administration of the Plan.

Except to the extent prohibited by applicable law or the applicable rules of a stock exchange, the Committee may delegate some or all of its authority under the Plan to any person or persons selected by it.

Stock Options. The Plan permits the granting of stock options. The grant of an option entitles the participant to purchase shares of our common stock at an exercise price established by the Committee. Any option granted under the Plan may be either an ISO or an NQSO, as determined in the discretion of the Committee.

The full exercise price for shares of our common stock purchased upon the exercise of any option shall be paid at the time of such exercise: (a) in cash; (b) by tendering previously acquired shares (provided that the shares that are tendered must have been held by the participant for at least six months prior to the payment date) duly endorsed for transfer to the Company or shares issuable to the participant upon exercise of the option; (c) by a combination of the above-mentioned payment methods; or (d) by any other means the Committee determines to be consistent with the Plan's purposes and applicable law (including through broker-assisted cashless exercises).

Except for either adjustments in connection with a corporate transaction for the purpose of preserving the benefits or potential benefits of the awards, or reductions of the exercise price approved by the Company’s stockholders, the exercise price for any outstanding option may not be decreased after the date of grant. This prohibition on repricing without stockholder approval also applies to canceling an option and issuing an option with a lower exercise price, or canceling an underwater option and issuing a substitute award.

Stock Appreciation Rights. The Plan permits the granting of SARs. The exercise price of a SAR is determined by the Committee, but must be equal to or greater than the fair market value of a share of our common stock on the date of grant. The term of a SAR may not exceed ten years. A SAR may be exercised upon the terms and conditions imposed by the Committee. Upon exercise of a SAR, a participant will receive payment equal to the number of SARs exercised multiplied by the excess of the fair market value of a share of our common stock on the date of exercise over the exercise price. Payment of a SAR may be made in cash, shares of our common stock, or a combination of cash and shares, as determined by the Committee.

Except in certain recapitalization events, a SAR award may not be modified to specify a lower exercise price without the approval of our stockholders. This prohibition on repricing without stockholder approval also applies to canceling a SAR and issuing a SAR with a lower exercise price or canceling an underwater SAR and issuing a substitute award. The Plan does not permit grants of dividend equivalent rights with respect to SARs.

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Restricted Stock and Restricted Stock Units. The Plan permits the granting of restricted stock and restricted stock units. The grant of a share of restricted stock entitles the participant to receive a share of our common stock upon completing a specified period of service with the Company or its affiliates and/or the achievement of specific performance objectives. The grant of a restricted stock unit entitles the participant to receive a payment of a share of our common stock, which vests upon completing a specified period of service with the Company or its affiliates and/or the achievement of specific performance objectives.

Grants of restricted stock and restricted stock units become vested in accordance with such terms and conditions and during such periods as may be established by the Committee and set forth in the applicable award agreement. Selected participants may elect (or be required, as to bonuses) to defer a portion of their salary and/or bonus in exchange for restricted stock units. Each participant who elects to make a deferral will be credited under the Plan with a number of restricted stock units equal to no less than the amount of the deferral divided by the fair market value of a share of our common stock on the date of the grant of the restricted stock units.

Participants holding shares of restricted stock during the restriction period may exercise full voting rights with respect to those shares, unless otherwise determined by the Committee. In addition, during the restriction period a participant will receive regular cash dividends that are paid with respect to underlying shares of restricted stock, unless otherwise determined by the Committee. If the award agreement governing the restricted stock units permits it, during the restriction period a participant may receive regular cash dividend equivalents paid with respect to restricted stock units.

Performance Shares. The Plan permits the granting of performance shares. Each performance share must have an initial value equal to the fair market value of a share of our common stock on the date of grant. The Committee will set the performance periods and performance objectives that, depending on the extent to which they are met, will determine the number of performance shares payable in cash, shares or a combination of cash and shares, as applicable.

Other Stock Awards. Subject to the terms of the Plan, other stock awards may be granted to participants in such amounts and upon such terms, and at any time from time to time, as the Committee determines.

Transfers. Except as designated by the participant by will or by the laws of descent and distribution, awards under the Plan are not transferable. However, subject to the conditions of the Plan and the applicable award agreement and any such additional conditions as the Committee may impose, a participant may transfer NQSOs as a gift to certain trusts maintained solely for the benefit of the participant’s spouse or children or designate the trusts to which the Company may issue NQSOs. A participant may not transfer NQSOs to a third-party financial institution.

Change in Control. In the event of a change in control (defined in the Plan attached hereto as Appendix B), if a participant terminates employment or service due to the participant’s death, disability, termination by the participant for good reason (as defined in the Plan), or termination by the Company without cause (as defined in the Plan), in each case, which occurs upon or within 24 months after a change of control, all awards with time-based vesting conditions or restrictions shall become fully vested (and options or SARs exercisable) at the time of such termination; and (ii) all performance shares and other awards with respect to which the vesting or amount is based on the satisfaction or achievement of performance objectives or performance-based criteria, shall become earned and vested and the performance criteria shall be deemed to be achieved or fulfilled, at the greater of (i) the actual performance achieved or (ii) the target level of performance applicable to the award.

In the event of a change in control in which the Company is the surviving entity and any adjustments necessary to preserve the value of the participants’ outstanding awards have been made, or the Company’s successor at the time of the change in control irrevocably assumes the Company’s obligations under the Plan or replaces each participant’s outstanding award with an award of equal or greater value and having terms and conditions no less favorable to the participant than those applicable to the participant’s award immediately prior to the change in control, there will be no accelerated vesting of participants’ awards on account of the change in control unless a participant terminates employment or service due to the participant’s death, disability, termination by the participant for good reason, or termination by the Company without cause.

In the event of a change in control, unless the Company is the surviving entity and any adjustments necessary to preserve the value of participants’ outstanding awards have been made, or the Company’s successor at the time of the change in control irrevocably assumes the Company’s obligations under the Plan or replaces each Participant’s outstanding award with an award of equal or greater value and having terms and conditions no less favorable to the participant than those applicable to the participant’s award immediately prior to the change in control: (i) all awards with time-based vesting conditions or restrictions shall become fully vested (and options or SARs exercisable) at the time of such change in control; and (ii) all performance shares and other awards with respect to which the vesting or amount is based on the satisfaction or achievement of performance objectives or other

14



performance-based criteria, shall become earned and vested and the performance criteria shall be deemed to be achieved or fulfilled, at the greater of (a) the actual performance achieved or (b) the target level of performance applicable to the award.

Vesting of Awards. Awards granted under the Plan shall vest no earlier than the first anniversary of the date the award is granted and no award may provide for partial or graduated vesting beginning before the first anniversary of the date it is granted; provided that, awards that result in the issuance of an aggregate of up to 5% of the shares available under the Plan may be granted to any one or more participants without respect to these minimum vesting period requirements.

Clawback Policy. Notwithstanding any provision in the Plan or in any award agreement to the contrary, all awards granted or paid under the Plan will be subject to recoupment by the Company pursuant to the Company’s Clawback Policy.

Employment Agreements. To the extent a participant’s employment, consulting, severance, change in control, or other written agreement between the participant and the Company provides vesting terms with respect to an award that are more favorable to the participant than those set forth in the Plan or an award agreement, the vesting terms in such employment agreement shall control, but within the limits of the minimum vesting requirement noted above.

Federal Income Tax Consequences

Nonqualified Stock Options. Under the current tax rules, NQSOs granted under the Plan will not be taxable to a participant at grant, but generally will result in taxation at exercise, at which time the participant will recognize ordinary income in an amount equal to the difference between the option’s exercise price and the fair market value of the shares on the exercise date. The Company will be entitled to deduct a corresponding amount as a business expense in the year the participant recognizes this income.

Incentive Stock Options. Under the current tax rules, an employee will generally not recognize ordinary income on receipt or exercise of an ISO so long as he or she has been an employee of the Company or its subsidiaries from the date the ISO was granted until three months before the date of exercise; however, the amount by which the fair market value of the shares on the exercise date exceeds the exercise price is generally an adjustment in computing the employee’s alternative minimum tax in the year of exercise. If the employee holds the shares of our common stock received on exercise of the ISO for one year after the date of exercise (and for two years from the date of grant of the ISO), any difference between the amount realized upon the disposition of the shares and the amount paid for the shares will be treated as long-term capital gain (or loss, if applicable) to the employee. If the employee exercises an ISO and satisfies these holding period requirements, the Company may not deduct any amount in connection with the ISO. If an employee exercises an ISO but engages in a “disqualifying disposition” by selling the shares acquired on exercise before the expiration of the one- and two-year holding periods described above, the employee generally will recognize ordinary income (for regular income tax purposes only) in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price; and any excess of the amount realized on the disposition over the fair market value on the date of exercise will be taxed as long- or short-term capital gain (as applicable). If, however, the fair market value of the shares on the date of disqualifying disposition is less than on the date of exercise, the employee will recognize ordinary income equal only to the difference between the amount realized on the disqualifying disposition and the exercise price. In either event, the Company will be entitled to deduct an amount equal to the amount constituting ordinary income to the employee in the year of the disqualifying disposition.

Stock Appreciation Rights. Under the current tax rules, a participant will generally not recognize income, and we will not be entitled to a deduction from income, at the time of grant of a SAR. When the SAR is exercised, the participant will recognize ordinary income equal to the difference between the aggregate exercise price and the fair market value, as of the date the SAR is exercised, of our common stock. The participant’s tax basis in shares acquired upon exercise of a stock-settled SAR will equal the amount recognized by the participant as ordinary income. We will generally be entitled to a federal income tax deduction, in the tax year in which the SAR is exercised, equal to the ordinary income recognized by the participant as described above. If the participant holds shares acquired through exercise of a stock-settled SAR for more than one year after the exercise of the SAR, the capital gain or loss realized upon the sale of those shares will be a long-term capital gain or loss. The participant’s holding period for shares acquired upon the exercise of a stock-settled SAR will begin on the date of exercise.

Restricted Stock and Restricted Stock Units. The Company is required to withhold taxes to comply with federal and state laws applicable to the value of shares of restricted stock when they vest. Upon the lapse of the applicable restrictions, the value of the restricted stock generally will be taxable to the participant as ordinary income and deductible by the Company. Restricted stock units generally are subject to tax at the time of payment and the Company will generally have a corresponding deduction when the participant recognizes income.

Performance Shares. Performance shares generally are subject to tax at the time of payment and we generally will have a corresponding deduction when the participant recognizes income.

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Section 409A. To the extent that Section 409A of the Code is applicable, we intend to administer the Plan and any grants made thereunder in a manner consistent with the requirements of Section 409A, and any regulations and other guidance promulgated with respect to Section 409A by the U.S. Department of Treasury or Internal Revenue Service. The Committee may permit or require a participant to defer receipt of cash or shares of common stock that would otherwise be due to the participant under the Plan or otherwise create a deferred compensation arrangement (as defined in Section 409A of Code) in accordance with the terms of the Plan.

The deferral of an award under the Plan or compensation otherwise payable to the participant will be set forth in the terms of the award agreement or as elected by the participant pursuant to such rules and procedures as the Committee may establish. Any such initial deferral election by a participant will designate a time and form of payment and will be made at such time as required by and in accordance with Section 409A. Any deferred compensation arrangement created under the Plan will be distributed at such times as provided in an award agreement or a separate election form and in accordance with Section 409A. No distribution of a deferral will be made pursuant to the Plan if the Committee determines that a distribution would (i) violate applicable law; or (ii) violate a loan covenant or similar contractual requirement of the Company causing material harm to the Company. In any such case, a distribution will be made at the earliest date at which the Committee determines such distribution would not trigger clause (i) or (ii) above. All awards under the Plan are intended either (i) to be exempt from Section 409A or (ii) to comply with Section 409A, and will be administered in a manner consistent with that intent.

Withholding. The Company has the right to deduct or withhold, or require the participant to remit to the Company, the amount the Company determines is necessary to satisfy federal, state and local taxes, domestic or foreign, required by applicable law or regulation to be withheld with respect to any taxable event arising under the Plan. The Company may withhold shares of our common stock to satisfy the withholding tax required upon a taxable event arising under the Plan (or another amount, if determined by the Committee not to result in adverse accounting consequences), but the participant may elect, subject to the approval of the Committee, to deliver to the Company the necessary funds to satisfy the withholding obligation, in which case there will be no reduction in the shares of our common stock otherwise distributable to the participant.

Tax Advice. The preceding discussion is based on U.S. income tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete description of the U.S. income tax aspects of the Plan. A participant may also be subject to state and local income taxes in connection with the grant of awards under the Plan. The Company suggests that participants consult with their individual tax advisors to determine the applicability of the tax rules to the awards granted to them in their personal circumstances.

Other Information

The Plan was originally effective on July 31, 2006. The amendment and restatement of the Plan will be effective September 6, 2018, subject to stockholder approval, and, subject to the right of the Committee to amend or terminate the Plan, will remain in effect as long as any awards under it are outstanding; provided, however, that no awards may be granted under the Plan after April 18, 2028.

The Committee may, at any time, amend, suspend or terminate the Plan, and the Committee may amend any award agreement; provided that no amendment may, in the absence of written consent to the change by the affected participant, materially alter or impair any rights or obligations under an award already granted under the Plan.

New Plan Benefits and Other Matters

The Committee has discretion to determine the type, terms and conditions and recipients of awards granted under the Plan. Other than certain awards of restricted stock, stock options, and performance shares granted subject to our stockholders’ approval of this amendment and restatement, it is not possible to determine the amount of the awards that will be received by any director, officer, consultant or employee of the Company under the Plan if the amendment and restatement of the Plan is approved. The approximate dollar value of equity awards that we expect to grant following our stockholders’ approval of this amendment and restatement is set forth below.


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Name or Group
 
Total Dollar Value (1)
Richard S. Stoddart
 
$
1,500,000
Charles D. Hodgkins III
 
 
153,750
Ronald C. Provenzano
 
 
500,000
Robert L. Burkart
 
 
128,125
All executive officers as a group
 
 
2,281,875
All directors as a group (excluding CEO)
 
 
1,175,000
All non-executive employees as a group (2)
 
 
4,500,000
(1)
For all grant recipients who are executive officers, amounts reflect the total grant value approved by the Committee, which will be awarded 40% in the form of performance shares, 30% in the form of stock options, and 30% in the form of restricted stock. For the non-employee directors, amounts are equal to the total value of all restricted stock awards that will be issued to our non-employee directors for 2018. For the non-executive employees, amounts reflect the total grant value approved by the Committee, which will be awarded in the form of performance shares, stock options, restricted stock, or a combination thereof. The number of shares of restricted stock and stock options granted will depend on the value of a share of stock on the grant date.
(2)
The total dollar value of equity awards to be granted to all non-executive employees as a group, subject to approval of the Plan’s amendment and restatement, is an estimate; the actual total dollar value of equity awards may differ from the amount disclosed.

Equity Compensation Plan Information

The following table sets forth information regarding securities authorized for issuance under our equity compensation plans as of December 31, 2017 (in thousands, except per share amount). 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, 2017 and is specifically incorporated by reference therein.
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options (a)
 
Weighted Average Exercise Price of Outstanding Options
 
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
 
Equity compensation plans approved by security holders (1)
4,562

(2) 
8.57

(3) 
1,710

(4) 
Equity compensation plans not approved by security holders  (5)

 

 

 
Total
4,562

 
8.57

 
1,710

 

(1) Includes our 2004 Unit Option Plan, which was merged with our 2006 Stock Incentive Plan.
(2) The number of securities to be issued upon the exercise of outstanding options includes 128 shares issuable upon the vesting of performance shares outstanding as of December 31, 2017, assuming performance goals are achieved at target performance. These awards are not reflected in column (b) as they do not have an exercise price.
(3) 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.
(4) Includes shares remaining available for future issuance under our 2006 Stock Incentive Plan.
(5) There are no equity compensation plans in place not approved by our stockholders.


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Required Vote

The affirmative vote of the holders of a majority of the Company’s common stock present at the Annual Meeting in person or by proxy and entitled to vote on this proposal is required to approve this proposal to amend and restate our 2006 Stock Incentive Plan. Abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of the proposal.

Recommendation of the Board of Directors

THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2006 STOCK 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, 2018. 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 of Directors 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 Company’s common stock present 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 of Directors

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, 2018.






19



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 “Investor” page under the link “Corporate Governance.” 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 ten 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
At this time, Eric D. Belcher, our former Chief Executive Officer, serves as Chairman of the Board and Jack M. Greenberg serves as our Lead Independent Director. As previously disclosed, effective April 5, 2018, Mr. Belcher transitioned from his position as President and Chief Executive Officer to the role of Chairman of the Board, and the Board appointed Richard S. Stoddart as his successor (the “CEO Transition”). In light of how well the CEO Transition process has gone, we believe we are now well positioned to return to a governance framework under Mr. Greenberg’s strong leadership. Therefore, subject to the re-election of each of Messrs. Belcher and Greenberg at the Annual Meeting, Mr. Greenberg will return to his role as Chairman of the Board of Directors, a role he previously held from June 2010 to April 2018. Mr. Belcher will continue to serve on the Board through December 31, 2018.
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. For the majority of our existence, we have had this leadership structure; 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, the Company’s systems of internal controls and the historically conservative practices of the Company to provide comfort on the Company’s ability to manage its risks. Management’s discussion of current risk factors is set forth in its Form 10-K/A.

Meetings and Committees of the Board of Directors

During 2017, the Board held five meetings. During 2017, 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. 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, David Fisher, Julie M. Howard and Linda S. Wolf serve on the Audit Committee, and Lindsay Y. Corby will join the Audit Committee effective immediately after the filing of the Company's first quarter 2018 Form 10-Q. Mr. Bobrinskoy serves as the chairman of our Audit Committee and, subject to his re-election to serve an additional one-year term, the Board has elected Mr. Bobrinskoy to continue as chairman of the Audit Committee. The Audit Committee is composed of independent non-employee directors and is responsible for, among other things, supervising internal audit and

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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 is our Audit Committee financial expert under the SEC rule implementing Section 404 of the Sarbanes-Oxley Act of 2002. During 2017, the Audit Committee held four meetings.

Compensation Committee. Charles K. Bobrinskoy, David Fisher, J. Patrick Gallagher, Jr., Jack M. Greenberg, Julie M. Howard and Linda S. Wolf serve on the Compensation Committee. Mr. Gallagher serves as the chairman of our Compensation Committee and, subject to his re-election to serve an additional one-year term, the Board has elected Mr. Gallagher to continue as chairman of the Compensation Committee. The Compensation 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 Stock Incentive Plan, and to advise and consult with our officers regarding managerial personnel policies. In 2017, the Compensation Committee engaged Willis Towers Watson to perform certain compensation consulting services related to benchmarking the Company’s executive compensation. In connection with this engagement, the Compensation Committee requested that Willis Towers Watson:

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.

Willis Towers Watson 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 Willis Towers Watson 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. Willis Towers Watson is directly engaged by and reports to the Compensation Committee, although it does interact with Company management at the Compensation Committee’s direction. A different division of Willis Towers Watson (known as Willis Group prior to the merger of Willis Group and Towers Watson) provides non-executive benefits and insurance brokerage services to the Company. For 2017, we paid Willis Towers Watson approximately $156,000 for services provided to the Compensation Committee, and we paid approximately $248,000 for the benefits and brokerage services provided to the Company. In accordance with the requirements of Regulation S-K, the Company has determined that no conflict has arisen in connection with the work of Willis Towers Watson as compensation consultant to the Compensation Committee. See the “EXECUTIVE AND DIRECTOR COMPENSATION - Compensation Discussion and Analysis” section of this Amended Proxy Statement for discussion of the Company’s processes and procedures for considering and determining executive and director compensation. During 2017, the Compensation Committee held four meetings.

Nominating and Corporate Governance Committee. J. Patrick Gallagher, Jr., Jack M. Greenberg, Julie M. Howard and Linda S. Wolf serve on the Nominating and Corporate Governance Committee. Ms. Wolf serves as the chairman of our Nominating and Corporate Governance Committee and, subject to her re-election to serve an additional one-year term, the Board has elected Ms. Wolf to continue as chairman of the 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.


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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 2017, the Nominating and Corporate Governance Committee held four 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 Ronald C. Provenzano, Corporate Secretary, InnerWorkings, Inc., 600 West Chicago Avenue, Suite 850, Chicago, Illinois 60654.

For purposes of potential nominees to be considered at the 2019 annual stockholders’ meeting, the Corporate Secretary must receive this information no earlier than June 8, 2019 and no later than the close of business on July 8, 2019; provided, however, that in the event that the 2019 annual stockholders’ meeting is called for a date that is not within thirty days before or after September 6, 2018, to be timely, notice by the stockholder must be received not later than the close of business on the tenth day following the earlier of (i) the day on which notice of the date of the meeting was mailed or (ii) public disclosure of the meeting was made, whichever first occurs, in accordance with the procedures in the Bylaws. The notice must set forth the candidate’s name, age, business address, residence address, principal occupation or employment, the number of shares beneficially owned by the candidate and information that would be required to solicit a proxy under federal securities law. In addition, the notice must include the stockholder’s name, address and the number of shares beneficially owned (and the period they have been held).

In 2017, the Company did not engage a third party to identify, evaluate or assist in identifying potential nominees for director.

Director Independence

There are no family relationships among any of the directors or executive officers of the Company. Our Board of Directors has affirmatively determined that the following eight of our ten director nominees are “independent directors” as defined in the rules of NASDAQ: Jack M. Greenberg, Charles K. Bobrinskoy, Lindsay Y. Corby, David Fisher, J. Patrick Gallagher, Jr., Adam J. Gutstein, Julie M. Howard and Linda S. Wolf. 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 Arthur J. Gallagher & Co., of which Mr. Gallagher serves as Chairman, President and Chief Executive Officer. The Board noted that:

The relationship between the companies preceded Mr. Gallagher’s appointment as director.
Mr. Gallagher is not involved in the transactions or ongoing discussions or negotiations between the 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. Arthur J. Gallagher & Co.’s services to the Company are insurance brokerage and risk management services and Arthur J. Gallagher & Co. is not an insurer of the Company. The Company’s services to Arthur J. Gallagher & Co. are print procurement services.
Amounts involved represent less than 0.2% of each company’s revenue in 2017.

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

The Board also 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 expected of an arm's length transaction.

22



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 0.02% of each company’s revenue in 2017.

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 “Investor” page under the link “Corporate Governance.” In addition, the Board has adopted corporate governance guidelines, which are available at www.inwk.com on the “Investor” page under the link “Corporate Governance.” Information on, or accessible through, our website is not a part of, or incorporated by reference into, this Amended 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.

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 Ronald C. Provenzano, Corporate Secretary” at 600 West Chicago Avenue, Suite 850, Chicago, Illinois 60654.

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.

Attendance at Annual Meeting

Directors are encouraged, but not required, to attend our annual stockholders’ meeting. Messrs. Belcher and Greenberg attended the 2017 annual meeting of stockholders.

23



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 July 16, 2018 (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 Amended 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., 600 West Chicago Avenue, Suite 850, Chicago, Illinois 60654.
Name and Address
 
Number of Shares
Beneficially
Owned(1)
 
Approximate
Percent of
Class(1)
CERTAIN BENEFICIAL OWNERS (not including directors and executive officers):
 
 
  
 
  

Richard A. Heise, Jr. 
2221 Old Willow Road 
Northfield, IL 60093
 
6,344,907

(2) 
 
12.2
%
ArrowMark Colorado Holdings LLC
100 Fillmore Street, Suite 325
Denver, CO 80206
 
5,617,907

(3) 
 
10.8
%
Dimensional Fund Advisors LP
Building One 6300 Bee Cave Road
Austin, Texas, 78746
 
4,602,163

(4) 
 
8.8
%
The Vanguard Group
100 Vanguard Blvd
Malvern, PA 19355
 
3,836,345

(4) 
 
7.4
%
BlackRock, Inc.
55 East 52nd Street
New York, New York 10055
 
3,289,719

(5) 
 
6.3
%
DIRECTORS, DIRECTOR NOMINEES AND NAMED EXECUTIVE OFFICERS:
 
 
  
 


Eric D. Belcher
 
1,794,353

(6) 
 
3.4
%
Richard S. Stoddart
 
316,124

 
 
*

Ronald C. Provenzano
 
297,748

(6) 
 
*

Charles K. Bobrinskoy
 
212,441

 
 
*

Jack M. Greenberg
 
176,849

 
 
*

Linda S. Wolf
 
142,225

 
 
*

J. Patrick Gallagher, Jr.
 
127,290

 
 
*

Robert Burkart
 
123,456

(6) 
 
*

David Fisher
 
89,298

 
 
*

Julie M. Howard
 
80,189

 
 
*

Lindsay Y. Corby
 

 
 
%
Adam J. Gutstein
 

 
 
%
Charles D. Hodgkins III
 
72,085

(6) 
 
*

Jeffery P. Pritchett (6)
 
110,134

 
 
*

All directors, director nominees and executive officers as a group (13 persons)
 
3,432,058

 
 
6.6
%

24




*
= 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 July 16, 2018 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 July 16, 2018, and the percentages are based upon 52,171,438 shares of our common stock outstanding as of July 16, 2018. 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)
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 Securities and Exchange Commission (the “SEC”) on February 14, 2013.
(3)
Based solely on a Schedule 13G/A filed with the SEC on April 9, 2018.
(4)
Based solely on a Schedule 13G/A filed with the SEC on February 9, 2018.
(5)
Based solely on a Schedule 13G/A filed with the SEC on January 25, 2018.
(6)
Includes options to purchase shares of common stock exercisable within 60 days of July 16, 2018, of which there were none.
Section 16(a) Beneficial Ownership Reporting Compliance

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 during 2017.


25



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 2017, 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 2017, the Company provided print procurement services to Arthur J. Gallagher & Co. J. Patrick Gallagher, Jr., a member of our Board, 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. $1.9 million for these services in 2017. Additionally, Arthur J. Gallagher & Co. provided insurance brokerage and risk management services to the Company. Arthur J. Gallagher & Co. billed the Company $0.1 million for such services in 2017. See “BOARD OF DIRECTORS AND CORPORATE GOVERNANCE - Director Independence.”

In the fourth quarter of 2017, the Company began providing marketing execution services to Enova International, Inc. David Fisher, a member of the Company’s 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, 2017 is $0.1 million. The amount receivable from Enova, Inc. was $0.1 million as of December 31, 2017. See “BOARD OF DIRECTORS AND CORPORATE GOVERNANCE - Director Independence.”
 
 


26



EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of our executive officers as of July 16, 2018:
Name
 
Age
 
Position
Richard S. Stoddart*
 
55
 
Chief Executive Officer, President and Director
Charles D. Hodgkins III**
 
39
 
Interim Chief Financial Officer; Senior Vice President, Corporate Development and Strategic Initiatives
Ronald C. Provenzano
 
52
 
Executive Vice President, General Counsel and Corporate Secretary
Robert L. Burkart
 
39
 
Chief Information Officer

* As previously disclosed, effective April 5, 2018, Mr. Belcher has transitioned from his position as President and Chief Executive Officer to the role of Chairman of the Board, and the Board has appointed Richard S. Stoddart as his successor. For additional information regarding the transition, please see the summary set forth below under the caption, “CEO Transition.”

** As previously disclosed, on December 6, 2017, Mr. Pritchett resigned as Chief Financial Officer of the Company, and Mr. Hodgkins was appointed Interim Chief Financial Officer of the Company. For additional information regarding the amended and restated employment agreement entered into between Mr. Hodgkins and the Company in connection with his appointment as Interim Chief Financial Officer, please see the summary set forth below under the caption, “Amended and Restated Employment Agreement with Charles Hodgkins.”

Biographies for our executive officers are set forth below.

Richard S. Stoddart. For more information on Mr. Stoddart, please see the section of this Amended Proxy Statement entitled “PROPOSALS TO BE VOTED ON - Proposal No. 1 - Election of Directors.”

Charles D. Hodgkins III has served as Interim Chief Financial Officer of InnerWorkings since December 2017. Prior to assuming the role of Interim Chief Financial Officer, Mr. Hodgkins served as the Company’s Senior Vice President of Corporate Development and Strategic Initiatives since 2014. Prior to that, Mr. Hodgkins served as the Company’s Head of Mergers and Acquisitions from 2010 through 2013, and, from 2007 through 2009, as the Company’s lead external advisor for mergers and acquisitions. Before joining the Company, Mr. Hodgkins worked at an early stage venture capital firm and a boutique investment bank. Mr. Hodgkins holds a bachelor’s degree from Duke University and a Master of Business Administration from the University of Chicago Booth School of Business.

Ronald C. Provenzano has served as General Counsel of InnerWorkings since September 2012, and additionally as Executive Vice President since June 2016, as interim head of human resources since January 2016 and as Corporate Secretary since March 2015. From January 2005 to August 2012, Mr. Provenzano served as Senior Vice President, Deputy General Counsel for R.R. Donnelley & Sons Company, a global print services company. Previously, Mr. Provenzano served in senior legal executive roles for 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.

Robert L. Burkart has served as the Chief Information Officer of InnerWorkings since May 2014. Prior to becoming Chief Information Officer, Mr. Burkart served as Senior Vice President, Business Technology from March 2013 to April 2014, Vice President, Strategic Growth from January 2011 to February 2013, and Vice President, Operations from July 2009 to December 2011. Before joining InnerWorkings in 2009, Mr. Burkart held engineering positions at Johnson Controls and MPC Products. Mr. Burkart holds a Bachelor of Science in Engineering from Purdue University West Lafayette and a Master of Business Administration from the University of Chicago Booth School of Business.


27



EXECUTIVE AND DIRECTOR COMPENSATION

Compensation Discussion and Analysis

This compensation discussion 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
Eric D. Belcher
 
Chairman of the Board; Former Chief Executive Officer and President
Charles D. Hodgkins III
 
Interim Chief Financial Officer; Senior Vice President, Corporate Development and Strategic Initiatives
Ronald C. Provenzano
 
Executive Vice President, General Counsel and Corporate Secretary
Robert L. Burkart
 
Chief Information Officer
Jeffrey P. Pritchett
 
Former Executive Vice President, Chief Financial Officer

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.

Explanatory Note

The discussion that follows in this Compensation Discussion and Analysis regarding the Company’s 2017 financial performance results and the payout of 2017 annual incentive compensation reflects the impact on 2017 results and payouts arising from the correction of errors identified by the Company as reflected in Amendment No. 1 to its Annual Report for the year ended December 31, 2017 on Form 10-K/A.

Executive Summary

Overview. 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.

Highlights of Company Performance in 2017. We had a successful year in 2017, achieving strong profitable growth. Highlights of our 2017 performance are summarized below.

Gross revenue in 2017 was $1.138 billion, an increase of 4% compared to $1.094 billion in 2016.

2017 gross profit (net revenue) was $275.5 million, an increase of 5% compared to $262.6 million in 2016.

Net income in 2017 was $16.4 million, or $0.30 per diluted share, compared to $3.9 million, or $0.07 per diluted share, in 2016.

2017 Non-GAAP Adjusted Diluted Earnings per Share* was $0.36, compared to $0.38 in 2016.

2017 Non-GAAP Adjusted EBITDA* was $57.9 million, reflecting a 1% decrease compared to $58.6 million in 2016.

We achieved a 97% client retention rate, based on successfully retaining 97 of our top 100 clients, and signed new client contracts totaling $130 million in projected annual revenue at full run-rate.

Our 3-year TSR as of December 31, 2017 was 28.8%, compared to 27.5% for the Russell 2000 index.

28





*
Adjusted diluted earnings per share (“Non-GAAP Adjusted Diluted Earnings per Share”) and adjusted EBITDA (“Non-GAAP Adjusted EBITDA”) are financial measures that are not calculated according to accounting principles generally accepted in the United States (“GAAP”), and we are including our 2017 results for these measures to show an aspect of our performance. Appendix A to this Amended Proxy Statement contains reconciliations of these measures to the most directly comparable GAAP financial measures.

Impact of Company Performance on Compensation. Our Company’s results in 2017 had a direct impact on compensation earned by our named executive officers, as more thoroughly described later in this “Compensation Discussion and Analysis.” Our results in 2017 reflected performance below the ambitious goals established in February 2017. Therefore, our named executive officers who were subject to these goals earned between 28% and 33% of their target annual incentive awards for 2017, reflecting overall achievement below the targets established in February 2017. The equity component of compensation further aligns pay with performance. Specifically, the realizable value of the named executive officers’ equity holdings varies depending on the Company’s stock price, and the Company introduced performance-based share compensation as part of the equity mix for named executive officers in 2017.

Advisory Approval of Executive Compensation. The Company’s executive compensation as disclosed in our 2017 Proxy Statement was approved on an advisory basis by holders of approximately 98% of the shares present and entitled to vote at the Company’s 2017 annual meeting. The Compensation Committee’s current compensation programs, objectives and philosophy remain consistent with the compensation programs in existence since 2013, and 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. As such, we did not make any specific changes to our executive compensation program in connection with the results of the 2017 stockholder advisory vote. 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 this Annual Meeting.

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

We have a “pay for performance” approach.
We have no “single trigger” or “modified single trigger” change in control severance benefits.
Our Compensation Committee is comprised solely of independent directors under SEC and NASDAQ requirements.
Our Compensation Committee retains an independent compensation consultant.
We maintain stock ownership and stock holding guidelines for our executive officers and directors.
Our InnerWorkings, Inc. 2006 Stock Incentive Plan, as amended and restated (the “2006 Plan”), has a fixed term and a finite share pool (i.e., it is not evergreen), prohibits repricing of stock options, and does not permit recycling of shares used to pay the exercise price or withholding obligations upon the exercise of stock options.
We have no excise tax gross-up provisions.
We prohibit hedging transactions and pledging of our stock by executive officers and directors.
We provide modest perquisites and reasonable severance arrangements.

Components and Objectives of Compensation Program. The principal elements of our executive compensation program are base salary, annual cash incentives, and long-term equity incentives in the form of stock options, restricted stock awards, and performance share units. The objectives and benefit to stockholders of each component and its relative percentage of total compensation are described below.

29



Component
 
Objective
 
Benefit to Stockholders
Base Salary
 
Provides a measure of stable fixed compensation. Amount reflects individual’s performance, responsibilities, and competitive market for executive talent.
 
Enables us to attract and retain top talent for position.
Annual Cash Incentives
 
Provides motivation for achievement of annual company and individual performance goals.
 
Focuses executives on meeting key company and individual 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 improvement of Company stock price.

2017 Target Compensation Allocation
Name
 
Base Salary
(%)
 
Short-Term
Incentive
Compensation
(%)
 
Long-Term
Equity
Incentives
(%)
Eric D. Belcher
 
24.1
%
 
27.7
%
 
48.2
%
Charles D. Hodgkins III
 
58.1
%
 
23.2
%
 
18.6
%
Ronald C. Provenzano
 
35.5
%
 
21.3
%
 
43.1
%
Robert L. Burkart
 
50.0
%
 
25.0
%
 
25.0
%
Jeffrey P. Pritchett
 
30.8
%
 
23.1
%
 
46.2
%

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 own compensation by the Compensation Committee.

Role of the Compensation Consultant. For 2017, the Compensation Committee retained an external independent consultant, Willis Towers Watson, to advise the Compensation Committee on executive compensation matters, including the composition of the Company’s peer group and competitive pay practices for 2017 and 2018. For 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 2016. The peer group was selected from a pool of U.S. public companies primarily within the Company’s industry (GICS code) and a comparable revenue range. The Compensation Committee determined that the updated peer group of 14 companies listed below provided a robust statistical set of compensation data to serve as a basis for 2017 compensation decisions. In addition to the compensation data disclosed by the companies in the peer group, Willis Towers Watson utilized compensation data from nationally recognized compensation surveys to advise the Compensation Committee on competitive compensation levels.

The companies included in the peer group used to benchmark the 2017 compensation levels of the executive officers are listed below:

30



Sykes Enterprises, Inc.
Deluxe Corp.

ICF International, Inc.
The Advisory Board Company

Navigant Consulting, Inc.
Viad Corp.

Huron Consulting Group, Inc.
Echo Global Logistics, Inc.
Matthews International Corporation
CEB, Inc.

Resources Connection, Inc.
CSG Systems International, Inc.

Ennis, Inc.
Hill International, Inc.

                        
For 2017, the Compensation Committee considered the 25th percentile, median, and 75th percentile base salaries, bonus targets, long term incentives and total compensation to evaluate each executive’s compensation. The Compensation Committee primarily looks at the 50th percentile of the peer group companies as a benchmark when determining the named executive officers’ total compensation, but also considers other factors such as prior experience, tenure with the Company and overall performance of the Company and the executive officer.

Determining 2017 Executive Compensation

2017 Base Salary. We provide the opportunity for our named executive officers and other executives to earn a competitive annual base salary. We believe that to attract and retain an appropriate caliber of talent for the position, a portion of our executives’ compensation should be fixed and predictable. The Compensation Committee looks at the 50th percentile of the peer group companies as a benchmark when considering and determining the executive officer’s base salaries, but also considers other factors such as prior experience, tenure with the Company, overall performance of the Company, and the named executive officer’s total compensation package.

Based on these considerations, the 2017 base salary of our Chief Executive Officer increased $50,000, from $700,000 to $750,000, our Chief Information Officer’s base salary increased by $35,000, from $215,000 to $250,000, and the base salaries of our Chief Financial Officer and General Counsel remained unchanged from 2016 levels (i.e., $400,000 for Mr. Pritchett and $350,000 for Mr. Provenzano).

The Summary Compensation Table sets forth the actual base salary earned by each of our named executive officers during 2017. The table below sets forth our named executive officers’ base salary rates as in effect in 2016, the changes that went into effect on April 1, 2017, and the percentage of increase, if any.
 
 
Comparative Information for 2017
Base Salary Rates
Name
 
Base Salary
Rate in 2016
($)
 
Base Salary
Rate Effective
April 1, 2017
($)
 
Percentage
Increase
(%)
Eric D. Belcher
 
$
700,000

 
$
750,000

 
7.1
%
Charles D. Hodgkins III
 
234,000

 
234,000

 

Ronald C. Provenzano
 
350,000

 
350,000

 

Robert L. Burkart
 
215,000

 
250,000

 
16.3

Jeffrey P. Pritchett
 
400,000

 
400,000

 


2017 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 an appropriate caliber of talent for the position 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 January or 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 2017 were administered under our Annual Incentive Plan.


31



The 2017 target opportunities and incentive design under the Annual Incentive Plan were approved by the Compensation Committee on February 16, 2017. The 2017 management bonus award opportunities were based on the following criteria: 30% on revenue growth (50% to 200% pay-out based on reaching approximately 95% to 105% of 2017 target revenue of $1.181 billion), 30% on Non-GAAP Adjusted EBITDA performance (50% to 200% pay-out based on reaching approximately 92.5% to 115% of 2017 target Non-GAAP Adjusted EBITDA of $67.1 million), 20% on return on invested capital ("ROIC") (50% to 200% pay-out based on reaching approximately 89% to 111% of 2017 target ROIC of 7.4%), and 20% based 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. These criteria were the same for all named executive officers.

The following table sets forth the Company’s 2017 results with respect to the quantitative criteria components of our Annual Incentive Plan ($ in millions):
 
 
2017 Target
 
2017 Actual
 
Percentage of
Target Reached
 
Weighting
 
Pay-Out
Percentage
Revenue (1)
 
$
1,181.0

 
$
1,138.4

 
96
%
 
30
%
 
59
%
Non-GAAP Adjusted EBITDA(2)
 
$
67.1

 
$
57.0

 
85
%
 
30
%
 
0
%
ROIC (3)
 
7.4
%
 
5.5
%
 
74
%
 
20
%
 
0
%

(1)
2017 actual results shown for Revenue differ slightly from Revenue as reported in our Annual Report on Form 10-K for the year ended December 31, 2017, as amended by Form 10-K/A filed on July 27, 2018 (see also page 32 of this Amended Proxy Statement for reported Revenue) because for purposes of our Annual Incentive Plan, Revenue is further adjusted to reflect currency and other adjustments, as approved by the Compensation Committee, for purposes of measuring performance versus targets.
(2)
2017 actual results shown for Non-GAAP Adjusted EBITDA differ slightly from Non-GAAP Adjusted EBITDA as presented in Appendix A and as reported in our Annual Report on Form 10-K for the year ended December 31, 2017, as amended by Form 10-K/A filed on July 27, 2018 (see also page 32 of this Amended Proxy Statement for reported Non-GAAP Adjusted EBITDA) because for purposes of our Annual Incentive Plan, Non-GAAP Adjusted EBITDA is further adjusted to reflect currency and other adjustments, as approved by the Compensation Committee, for purposes of measuring performance versus targets.
(3)
2017 ROIC for purposes of our Annual Incentive Plan was calculated as follows ($ in millions):
Non-GAAP Adjusted EBITDA
$
57.0

Less: Stock-based compensation expense
6.8

Less: Depreciation and amortization
13.4

Less: Tax expense
15.0

Adjusted net operating profit after tax
$
21.8

 
 
Average total assets (trailing four quarters)
$
631.7

Less: Average total current liabilities (trailing four quarters)
211.4

Less: Average non-interest bearing long-term liabilities (trailing four quarters)
14.2

Less: Average excess cash (trailing four quarters)
7.9

Average invested capital (trailing four quarters)
$
398.2

 
 
ROIC
5.5
%

The Compensation Committee’s determination of the qualitative payout levels relative to target for the named executive officers is as follows and was unaffected by the restatement of the Company’s financials: Mr. Belcher (50%), Mr. Provenzano (75%), and Mr. Burkart (75%).

Prior to the restatement of the Company’s historical financials, the weighted payout levels for the 2017 incentive bonuses were 59% of target for Mr. Belcher and 64% for Messrs. Provenzano and Burkart, with corresponding payouts of $508,875, $134,400 and $80,000, respectively. However, based on the restated 2017 financial performance results, the weighted payout levels for the 2017 incentive bonuses would have been 28% of target for Mr. Belcher, 33% of target for Mr. Provenzano, and 33% of target for Mr. Burkart. The table below sets forth the fiscal 2017 target and maximum annual incentive compensation opportunities for our named executive officers and the actual incentive bonus that each named executive officer would have earned based on the restated performance results for 2017, in dollars and as a percentage of target:




32



  
 
Target Incentive
 
Maximum Incentive
 
Actual Incentive Earned
Name
 
% of
Salary
 
Amount
($)
 
% of
Target
 
Amount
($)
 
% of
Target
 
Amount
($)
Eric D. Belcher
 
115
%
 
$
862,500

 
200
%
 
$
1,725,000

 
28
%
 
$
238,048

Charles D. Hodgkins III*
 
40

 
93,600

 
200

 
187,200

 
140

 
131,040

Ronald C. Provenzano
 
60

 
210,000

 
200

 
420,000

 
33

 
68,640

Robert L. Burkart
 
50

 
125,000

 
200

 
250,000

 
33

 
40,750

Jeffrey P. Pritchett**
 
75

 
300,000

 
200

 
600,000

 
-

 
-


* Mr. Hodgkins was appointed an executive officer in December 2017; therefore, his 2017 bonus was determined by the Compensation Committee according to the criteria established for him before his appointment. Mr. Hodgkins' bonus payout reflected the maximum performance level on his individual goals multiplied by 70%, which was the global multiplier used to establish the 2017 bonus pool based on total Company performance.
** Mr. Pritchett resigned from employment on December 6, 2017 and thus forfeited the opportunity to receive a 2017 incentive bonus payout.

There were no specific individual performance goals for 2017 incentive awards, except as noted above with respect to Mr. Hodgkins, but the Compensation Committee exercised discretion and took into account individual performance in determining the payout level for the qualitative component awarded to each named executive officer. Except as described above, the 2017 awards were based solely on the Company’s performance relative to targets.

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.

Recoupment of Incentive Compensation. In light of the Restatement, the Board (excluding Mr. Belcher for the portion of the discussion relating to the recoupment of his 2017 cash incentive bonus), after discussion with the Compensation Committee, determined to recoup an aggregate of $376,017 in 2017 cash incentive bonuses paid to Messrs. Belcher, Provenzano and Burkart with respect to the 2017 performance year, which the Board will effect through the recoupment of compensation that would otherwise be paid to each of them. The amounts subject to recoupment are as follows: Mr. Belcher: $270,827; Mr. Provenzano: $65,940; and Mr. Burkart: $39,250. The Board discussed with the Compensation Committee whether to recoup any of the 2016 and 2015 cash incentive bonuses paid to the named executive officers in those years. The Board determined against recouping 2016 or 2015 cash incentive bonuses based on a variety of considerations, including, but not limited to, the following: (i) the impact of the restatement in 2016 and the revision in 2015 was minimal as compared to 2017, and (ii) the errors in the financial statements were not the result of any misconduct or fraud on the part of anyone at the Company, including the named executive officers.

The Board (excluding Mr. Belcher for the portion of the discussion relating to the recoupment of his 2017 cash incentive bonus) further determined to effectuate the recoupment of the 2017 cash incentive bonuses from Mr. Belcher, Mr. Provenzano, and Mr. Burkart, by a combination of reducing the base salary payable to Mr. Belcher, Mr. Provenzano, and Mr. Burkart for the remainder of 2018 and reducing or eliminating the amount of 2018 cash incentive bonus payable to Mr. Belcher, Mr. Provenzano, and Mr. Burkart. In the alternative, if no 2018 cash incentive bonus would be earned and payable to Mr. Belcher, Mr. Provenzano, or Mr. Burkart, the base salary payable to Mr. Belcher, Mr. Provenzano, or Mr. Burkart monthly for 2019 would instead be subject to recoupment.


33



The table below sets forth the fiscal 2017 annual incentive compensation bonus for our named executive officers calculated before discovery of the financial reporting errors, the amount the Company will recoup from each named executive officer, and the actual incentive bonus that each named executive officer would have earned based on the restated performance results for 2017:
 
Incentive Payout Based on Pre-Restatement Financials

 
Amount Recouped from NEO

 
Incentive Payout Retained by NEO (After Recoupment)

Name
 
 
 
 


Eric D. Belcher
$
508,875

 
$
270,827

 
$
238,048

Ronald C. Provenzano
$
134,400

 
$
65,940

 
$
68,460

Robert L. Burkart
$
80,000

 
$
39,250

 
$
40,750


2017 Long-Term Equity Incentives. We provide the opportunity for our named executive officers and other executives to earn a long-term equity incentive award. Long-term incentive awards provide employees with the incentive to stay with us for longer periods of time, which in turn provides us with greater stability during a period of rapid growth. In addition, we believe that these awards are the best way to align the interests of the executives with those of our stockholders. For our named executive officers, equity incentives were initially based on grants individually negotiated in connection with employment agreements, and now consist of annual grants. The 2017 equity awards to our named executive officers were weighted as follows: 40% performance share units, 30% stock options, and 30% restricted shares. The target long-term incentive grant values for our named executive officers in 2017 were as follows: Mr. Belcher ($1,500,000), Mr. Hodgkins ($75,000), Mr. Provenzano ($425,000 plus additional $50,000 for service as Interim Chief Human Resources Officer), Mr. Burkart ($125,000), and Mr. Pritchett ($600,000).

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. The equity awards granted to our named executive officers in 2017 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.

Stock Option and Restricted Stock Awards
The table below sets forth the amounts and grant date values of our stock option and restricted stock awards to our named executive officers. Each of these awards vests ratably over a period of four years from the grant date.
 
 
2017 Stock Option and Restricted Stock Awards
Name
 
Stock Options (#)
 
Grant Date Value of Options ($)
 
Restricted Stock (#)
 
Grant Date Value of Restricted Stock ($)
 
Total Value ($)
Eric D. Belcher
 
121,622

 
$
450,000

 
40,541

 
$
450,000

 
$
900,000

Charles D. Hodgkins III
 
6,081

 
22,500

 
2,027

 
22,500

 
45,000

Ronald C. Provenzano
 
38,514

 
142,500

 
12,838

 
142,500

 
285,000

Robert L. Burkart
 
10,135

 
37,500

 
3,378

 
37,500

 
75,000

Jeffrey P. Pritchett*
 
48,649

 
180,000

 
16,216

 
180,000

 
360,000

* Mr. Pritchett forfeited all unvested awards upon his resignation from employment on December 6, 2017.

Our stock options are granted under the terms and conditions of the 2006 Plan, and generally have a 10-year contractual exercise term. We have traditionally used stock options as a form of equity compensation because stock options provide a relatively straightforward incentive for our executives, and result in less immediate dilution of existing stockholders’ interests. All grants of stock options to our employees are granted with exercise prices equal to or greater than the fair market value of our common stock on the respective grant dates. Grants of stock options become vested in accordance with such terms and conditions and during such periods as may be established by the Compensation Committee and set forth in the applicable award agreement. For a discussion of the determination of the grant date fair value of these grants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Stock-Based Compensation” in our Annual Report on Form 10-K.


34



Our restricted stock awards are granted under the terms and conditions of the 2006 Plan. We have traditionally used restricted stock as a form of equity compensation because restricted stock provides a relatively straightforward incentive and retention tool for our executives, and aligns our executives’ interests with stockholders’ interests. The grant of a share of restricted stock entitles the participant to receive a share of our common stock that becomes transferable upon completing a specified period of service and/or the achievement of specific performance objectives. Grants of restricted stock become vested in accordance with such terms and conditions and during such periods as may be established by the Compensation Committee and set forth in the applicable award agreement.

2017-2019 Performance Share Unit Awards

As previously disclosed, on June 1, 2017, the Compensation Committee also approved awards of performance share units (“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 the cumulative adjusted earnings per share (“EPS”) and the ROIC achieved by the Company during the performance period beginning April 1, 2017 and ending December 31, 2019. Each of these awards vests following the end of the performance period, provided that the applicable performance metrics have been satisfied.  

 
 
2017-2019 Performance Share Unit Awards
Name
 
Target PSU Award (#)
 
Grant Date Value of PSUs ($)
Eric D. Belcher
 
54,054

 
$
600,000

Charles D. Hodgkins III
 
2,703

 
30,000

Ronald C. Provenzano
 
17,117

 
190,000

Robert L. Burkart
 
4,505

 
50,000

Jeffrey P. Pritchett*
 
21,622

 
240,000

* Mr. Pritchett forfeited all unvested awards upon his resignation from employment on December 6, 2017.

Our PSU awards are 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.

Determining 2018 Executive Compensation

2018 Base Salary. Taking into consideration the Company’s performance in 2017, the individual performance of our named executive officers, and the competitive benchmarking results from our annual executive compensation review, on March 12, 2018, the Compensation Committee determined that the annual base salary of our then Chief Executive Officer (now Chairman) would remain at the level of $750,000 for the remainder of his tenure in the role of Chief Executive Officer, at which time his base salary would be reduced to $400,000 in accordance with the terms of his Transition Agreement; the annual base salary of our Interim Chief Financial Officer would increase from $234,000 to $239,850, and such salary would be temporarily augmented by a monthly stipend of $10,000 for the duration of his service in the Interim Chief Financial Officer role; the annual base salary of our General Counsel would increase from $350,000 to $400,000; and the annual base salary of our Chief Information Officer would increase from $250,000 to $256,250. The base salary of Mr. Stoddart, our new Chief Executive Officer, remained unchanged from the level set forth in his employment agreement ($800,000). All of these changes took effect in April 2018.


35



 
 
 
Comparative Information for 2018
Base Salary Rates
Name
 
 
Base Salary
Rate in 2017
($)
 
Base Salary
Rate Effective
April 1, 2018
($)
 
Percentage
Increase
(%)
Richard S. Stoddart*
 
$
-

 
$
800,000

 
%
Eric D. Belcher**

 
750,000


400,000


-

Charles D. Hodgkins III
 
 
234,000

 
239,850

 
2.5

Ronald C. Provenzano

 
350,000


400,000


14.3

Robert L. Burkart

 
250,000


256,250


2.5

Jeffrey P. Pritchett***

 
400,000


-


-

* Mr. Stoddart was appointed President and Chief Executive Officer, effective April 5, 2018.
** As summarized above, effective April 5, 2018, Mr. Belcher transitioned from his position as President and Chief Executive Officer to the role of Chairman of the Board. Pursuant to his Transition Agreement (described below under the caption, "CEO Transition"), he will receive a base salary of $400,000 during the transition period.
*** Mr. Pritchett resigned from employment as the Company's Chief Financial Officer on December 6, 2017.

2018 Annual Cash Incentives. The 2018 target opportunities under the Annual Incentive Plan were approved by the Compensation Committee on March 12, 2018. The target bonus award is 115% of the base salary for Mr. Belcher, prorated for the percentage of 2018 that Mr. Belcher served as President and Chief Executive Officer, 40% of the base salary for Mr. Hodgkins, 70% of the base salary for Mr. Provenzano, and 50% of the base salary for Mr. Burkart. The target bonus award for Mr. Stoddart, our new Chief Executive Officer, is 85% of his base salary, prorated based on Mr. Stoddart's start date of April 5, 2018. The maximum bonus awards payable to the named executive officers are 200% of such target amounts. The criteria and weightings for these bonus awards were approved by the Compensation Committee on February 22, 2018. At this meeting, the Compensation Committee approved the same weightings and similar metrics to those used in the 2017 Annual Incentive Plan, namely gross profit (net revenue) growth (30% weighting), EBITDA growth (30% weighting), ROIC improvement (20% weighting), and qualitative goals (20% weighting). Additionally, Mr. Burkart earned a special bonus of $30,000 in 2018 relating to the achievement of a milestone relating to technology implementation, and Mr. Hodgkins earned a special bonus of $100,000 in April 2018 relating to his performance in the Interim Chief Financial Officer role.

2018 Long-Term Equity Incentives. The 2018 target long-term equity incentive opportunities were approved by the Compensation Committee on February 22, 2018, subject to further evaluation of the form of the awards. The Compensation Committee anticipates that the 2018 equity awards will consist approximately 40% of PSUs, 30% of restricted shares, and 30% of stock options. These awards are expected to be granted to our named executive officers on September 7, 2018, the day after our 2018 annual stockholders’ meeting. The approved target long-term incentive grant value for 2018 awards are $1,500,000 for the Chief Executive Officer, $76,875 for the Interim Chief Financial Officer plus an additional $76,875 as additional equity compensation associated with the Interim Chief Financial Officer role, $500,000 for the General Counsel, and $128,125 for the Chief Information Officer. Additionally, Mr. Stoddart received a signing long-term incentive grant on April 5, 2018 as described below in his employment agreement. All of these equity awards will have minimum vesting periods of no less than three years and will not begin vesting until at least one year after the grant date. For purposes of determining the number of options to award based on the target award value, the Committee uses a different valuation methodology than the Black-Scholes method used for accounting purposes. The numbers reported in the Summary Compensation Table and the Grants of Plan-Based Awards Table reflect the accounting valuation of options.

Effect of Restatement on 2018 Compensation Decisions. The restatement of the Company’s 2017 financial statements did not affect the 2018 annual cash incentive metrics or weightings established by the Compensation Committee in February and March 2018 under the Annual Incentive Plan for the named executive officers for the 2018. However, due to the restatement of financials, the Compensation Committee may, in its discretion, revisit and determine to adjust, as appropriate, the performance targets established under the Annual Incentive Plan for 2018.

In addition, as described above under “Recoupment of Incentive Compensation,” in light of the restatement of the Company’s 2017 financial statements, the Board (excluding Mr. Belcher for the portion of the discussion relating to the recoupment of his 2017 cash incentive bonus) determined to recoup the cash incentive bonuses paid to Messrs. Belcher, Provenzano and Burkart with respect to the 2017 performance year, by a combination of reducing the base salary payable to Mr. Belcher, Mr. Provenzano, and Mr. Burkart for the remainder of 2018 and reducing or eliminating the amount of 2018 cash incentive bonus payable to Mr. Belcher, Mr. Provenzano, and Mr. Burkart.


36



2018 Target Compensation Allocation
Name
 
Base Salary
(%)
 
Short-Term
Incentive
Compensation
(%)
 
Long-Term
Equity
Incentives
(%)
Richard S. Stoddart

26.8
%

22.8
%

50.3
%
Charles D. Hodgkins III

58.1
%

23.2
%

18.6
%
Ronald C. Provenzano

33.9
%

23.7
%

42.4
%
Robert L. Burkart

50.0
%

25.0
%

25.0
%

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. In 2017, we provided a 401(k) matching 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. Each of our named executive officers received matching contributions of $4,200 for 2017. In 2017, we provided automobile allowances and medical insurance premiums to 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 six months of salary continuation for Mr. Burkart (at a rate equal to his then-current base salary); one year of salary continuation for Mr. Provenzano (at a rate equal to his then-current base salary); two years of salary continuation (at a rate equal to his then-current base salary) plus one year’s target annual bonus for Mr. Belcher; and two years of salary continuation (at a rate equal to his then-current base salary) plus up to two year’s target annual bonus for Mr. Stoddart. In addition, we entered into an amended and restated employment agreement with Mr. Hodgkins, effective December 6, 2017, pursuant to which he would be entitled to cash severance in the form of six months of salary continuation (at a rate equal to his then-current base salary). Mr. Pritchett would have been entitled to receive one year 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. Further, the employment agreement of Mr. Belcher was amended, effective February 22, 2013, to eliminate the “modified single-trigger” severance provision that (1) required Mr. Belcher to continue employment for nine months following a change in control and (2) provided that Mr. Belcher’s resignation for any reason during the 90 days following such nine-month period would constitute “good reason” entitling the executive to severance benefits. In addition, the unvested options and restricted stock 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 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 compensation is the anticipated tax treatment to the Company and to the executives of the various payments and benefits. Section 162(m) of the Code generally places a limit of $1 million on the amount of compensation the Company may deduct in any one year with respect to our covered executive officers. While the Compensation Committee generally considers this limit when determining compensation, it reserves to award compensation that is not deductible under Section 162(m). Furthermore, interpretations of and changes in the tax laws, and other factors beyond the Compensation Committee’s control, also affect the deductibility of compensation. We will consider the size and frequency of any future awards under our long-term equity incentive program based on Company and individual performance and other market factors.

Our incentive plans were designed to allow the Compensation Committee to grant certain awards thereunder that were intended to qualify as performance-based compensation under Section 162(m) of the Code. However, the Section 162(m) exemption from the deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.


37



Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exception to the deduction limit for performance-based compensation, no assurance can be given that compensation intended to satisfy the requirements for exception from the Section 162(m) deduction limit will in fact satisfy the exception. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with the Company’s business needs.

Stock Ownership Guidelines. On May 26, 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. As of December 31, 2017, our Chief Executive Officer (now Chairman) and General Counsel met and exceeded the stock ownership guidelines. As of July 16, 2018, the former Chief Executive Officer (now Chairman) continues to meet and exceed the share ownership guidelines. As of July 16, 2018, the General Counsel is approximately 13% below the share ownership guidelines, due primarily to a base salary increase that took effect in 2018; the General Counsel is expected to meet the share ownership guidelines no later than one year from the date in which the base salary increase went into effect, and in the interim remains subject to the Stock Holding Policy described below. The Chief Information Officer would not have been subject to the guidelines until September 1, 2018, however the Board of Directors has provided a one-year extension for the Chief Information Officer to meet the guidelines, and in the interim remains subject to the Stock Holding Policy described below. Our other named executive officers are on track to meet the guidelines within three years of becoming subject to them, consistent with the policy. In the interim, these executive officers remain subject to the Stock Holding Policy described below.

Stock Holding Policy. On April 21, 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 (“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 all awards or payments of any form of incentive-based compensation made to current and former employees of the Company. If the Board determines that any such 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, on April 21, 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.


38



Shareholder Outreach. Beginning in 2013, we initiated a shareholder governance outreach program, in order to obtain input from our large shareholders on governance and related practices, including executive compensation. From June 2017 through February 2018, our General Counsel, on behalf of the Board, held telephonic meetings with representatives of institutional shareholders representing approximately 15% 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. Our Board and Compensation Committee intend to continue this outreach program.


Executive Compensation

The following table sets forth the information regarding 2017 compensation for each of our named executive officers. 2016 and 2015 information is presented for executives who were also named executive officers during those years.

2017 SUMMARY COMPENSATION TABLE
Name and Principal Position
 
Year
 
Salary
($)
 
Bonus
($)
 
Option
Awards(1)
($)
 
Stock
Awards(2)
($)
 
Non-Equity
Incentive Plan
Compensation (Net of Recoupment)(3)
($)
 
All Other
Compensation(4)
($)
 
Total
($)
Eric D. Belcher
Chairman; Former
President and Chief
Executive Officer
 
2017
 
$
750,000

 

 
$
535,441

 
$
1,050,000

 
$
238,048

 
$
50,202

 
$
2,623,691

 
2016
 
700,000

 

 
2,087,830

 
700,000

 
805,000

 
49,487

 
4,342,317

 
2015
 
700,000

 

 
600,000

 
600,000

 
842,600

 
44,921

 
2,787,521

Charles D. Hodgkins III
Interim Chief
Financial Officer
 
2017
 
234,000

 

 
26,772

 
52,500

 
131,040

 
14,400

 
458,712

Ronald C. Provenzano
General Counsel
 
2017
 
350,000

 

 
169,558

 
332,500

 
68,460

 
47,802

 
968,320

 
2016
 
350,000

 

 
262,235

 
212,500

 
210,000

 
37,487

 
1,072,222

 
2015
 
340,000

 

 
167,500

 
167,500

 
213,500

 
32,921

 
921,421

Robert Burkart
Chief Information Officer
 
2017
 
250,000

 

 
44,619

 
87,500

 
40,750

 
49,002

 
471,871

 
2016
 
215,000

 

 
77,500

 
62,800

 
86,000

 
47,662

 
488,962

 
2015
 
196,250

 

 
50,000

 
50,000

 
83,700

 
32,921

 
412,871

Jeffrey P. Pritchett
Former Chief
Financial Officer
 
2017
 
400,000

 

 
214,177

 
420,000

 

 
37,064

 
1,071,241

 
2016
 
400,000

 

 
308,509

 
250,000

 
300,000

 
36,597

 
1,295,106

 
2015
 
166,667

 

 
600,000

 
600,000

 
314,000

 
11,479

 
1,692,146


(1) For 2017, represents the full grant date fair value of the stock option awards 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 option awards, please see Notes 2 and 14 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
(2) For 2017, represents the aggregate grant date fair value of the restricted stock and performance share unit awards granted to each of the named executive officers calculated in accordance with FASB ASC Topic 718. The fair value of the restricted stock and performance share unit awards as of the grant date is broken down as follows:
Name             Restricted Stock ($)    PSU at Target ($)        PSU at Maximum ($)
Mr. Belcher            $450,000            $600,000            $1,200,000
Mr. Hodgkins             22,500             30,000             60,000
Mr. Provenzano              142,500             190,000             380,000
Mr. Burkart             37,500             50,000             100,000
Mr. Pritchett             180,000             240,000             480,000
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 17 to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
(3) The numbers reported for 2017 in this column for Messrs. Belcher, Provenzano and Burkart reflect the actual 2017 annual incentive compensation earned by each named executive officer net of recoupment. See Recoupment of Incentive Compensation above.
(4) Consists of 401(k) matching contributions, auto allowances, and medical insurance premiums.


39



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

40



2017 GRANTS OF PLAN-BASED AWARDS

The following table provides information for each of the Company’s named executive officers regarding 2017 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 Option
Awards:
Number of
Securities
Underlying
Options
(#)
 
Exercise
Price of
Option
Awards
($)/sh
 
Grant Date
Fair Value
of Stock
and Option
Awards
($)(2)
Threshold
($)
 
Target
($)
 
Maximum
($)
 
Threshold
(#)
 
Target
(#)
 
Maximum
(#)
 
Eric D. Belcher
 
  
 
$
431,250

 
$
862,500

 
$
1,725,000

 
 
 
 
 
 
 

 

 

 
$

 
 
6/1/2017
 
 
 
 
 
 
 
27,027

 
54,054

 
108,108

 
 
 
 
 
 
 
$
600,000

  
 
6/1/2017
 

 

 

 

 

 

 
40,541

 

 

 
$
450,000

  
 
6/1/2017
 

 

 

 

 

 

 


 
121,622

 
$
11.10

 
$
535,441

Charles D. Hodgkins III
 
 
 
$
46,800

 
$
93,600

 
$
187,200

 
 
 
 
 
 
 

 

 

 
$

 
 
6/1/2017
 
 
 
 
 
 
 
1,351

 
2,703

 
5,405

 
 
 
 
 
 
 
$
30,000

 
 
6/1/2017
 

 

 

 

 

 

 
2,027

 

 

 
$
22,500

 
 
6/1/2017
 

 

 

 

 

 

 
 
 
6,081

 
$
11.10

 
$
26,772

Ronald C. Provenzano
 
  
 
$
105,000

 
$
210,000

 
$
420,000

 
 
 
 
 
 
 

 

 


 
$

 
 
6/1/2017
 
 
 
 
 
 
 
8,559

 
17,117

 
34,234

 
 
 
 
 
 
 
$
190,000

 
 
6/1/2017
 

 

 

 

 

 

 
12,838

 

 

 
$
142,500

 
 
6/1/2017
 

 

 

 

 

 

 
 
 
38,514

 
$
11.10

 
$
169,558

Robert Burkart
 
 
 
$
62,500

 
$
125,000

 
$
250,000

 
 
 
 
 
 
 

 

 

 
$

 
 
6/1/2017
 
 
 
 
 
 
 
2,252

 
4,505

 
9,009

 
 
 
 
 
 
 
$
50,000

 
 
6/1/2017
 

 

 

 

 

 

 
3,378

 

 

 
$
37,500

 
 
6/1/2017
 

 

 

 

 

 

 

 
10,135

 
$
11.10

 
$
44,619

Jeffrey P. Pritchett
 
 
 
$
150,000

 
$
300,000

 
$
600,000

 
 
 
 
 
 
 

 

 

 
$

 
 
6/1/2017
 
 
 
 
 
 
 
10,811

 
21,622

 
43,243

 
 
 
 
 
 
 
$
240,000

 
 
6/1/2017
 

 

 


 

 

 

 
16,216

 

 

 
$
180,000

 
 
6/1/2017
 

 

 

 

 

 

 


 
48,649

 
$
11.10

 
$
214,177

(1)
These represent potential incentive opportunities for 2017 annual incentive awards. Actual amounts earned for the named executive officers for 2017 are reported in the Summary Compensation Table.
(2)
The exercise price for options granted is the closing price of a share of our common stock on the date of grant. Values for restricted stock awards are based on the closing price of a share of our common stock on the date of grant. Values for option grants and performance share unit awards are based on the grant date value 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 option awards, performance share unit and restricted stock awards, please see Notes 2 and 14 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Employee Benefit Plans

2004 Unit Option Plan

Effective January 1, 2004, we adopted the InnerWorkings, LLC 2004 Unit Option Plan. The principal purpose of the Unit Option Plan has been to attract, retain and reward selected employees, consultants and directors through the granting of non-qualified stock options.

Upon adoption of our 2006 Plan, the Unit Option Plan was merged into the 2006 Plan and ceased to separately exist. Except with respect to rights that may be protected under prior award agreements, outstanding awards under the Unit Option Plan are

41



now subject to the 2006 Plan. The awards remaining under the Unit Option Plan were rolled into the 2006 Plan. No additional awards may be made under the Unit Option Plan on or after the effective date of the 2006 Plan.

2006 Stock Incentive Plan

We maintain the InnerWorkings, Inc. 2006 Stock Incentive Plan. The principal purpose of the 2006 Plan is to attract, motivate, reward and retain selected employees, consultants and directors through the granting of stock-based compensation awards. The 2006 Plan provides for a variety of awards, including non-qualified stock options, incentive stock options (within the meaning of Section 422 of the Code), stock appreciation rights, restricted stock awards, performance-based awards and other stock-based awards.

Annual Incentive Plan

We maintain the InnerWorkings Annual Incentive Plan that rewards employees for meeting and exceeding annual performance goals established by the Compensation Committee based on one or more criteria set forth in the Annual Incentive Plan.

Eligibility to participate in the Annual Incentive Plan is limited to substantially all regular full-time and part-time employees. Temporary employees, any independent contractors, and certain other specified classifications are not eligible to participate in the Annual Incentive Plan.

Employees are eligible to receive bonuses based on meeting operational and financial goals that may be stated (a) as goals of the company, a subsidiary, or a portion thereof, (b) on an absolute basis and/or relative to other companies, or (c) separately for one or more participants or business units. The objective performance goals for the Annual Incentive Plan are established by our Compensation Committee at the beginning of the year. Bonus payouts are determined within a reasonable time after the end of the performance period.

Our Compensation Committee administers the Annual Incentive Plan and has the authority to construe, interpret and implement the Annual Incentive Plan and prescribe, amend and rescind rules and regulations relating to the Annual Incentive Plan. The determination of the Compensation Committee on all matters relating to the Annual Incentive Plan or any award agreement will be final, binding and conclusive. The Annual Incentive Plan may be amended or terminated by the Compensation Committee or our Board.
 



42



OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END

The following table summarizes the number of securities underlying outstanding plan awards for each named executive officer as of December 31, 2017.
 
 
Option Awards
 
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
 
Option
Exercise
Price
($)
 
Option
Expiration
Date
 
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
 
Market Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(1)
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (2)
 
Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2)
 
Eric D. Belcher
 
161,031

 

 
 
 
14.36

 
1/22/2018
 
20,792

 
(3) 
 
208,544

 
54,054

 
600,000

 
  
 
575,000

 

 
 
 
6.00

 
11/14/2018
 
44,910

 
(4) 
 
450,447

 

 

 
  
 
100,952

 

 
 
 
8.24

 
6/23/2021
 
62,130

 
(5) 
 
623,164

 

 

 
  
 
91,668

 

 
 
 
11.97

 
3/15/2022
 
40,541

 
(6) 
 
406,626

 

 

 
  
 
120,898

 

 
 
 
15.05

 
3/15/2023
 

 
 
 

 

 

 
  
 
126,152

 
42,051

 
(3) 
 
7.18

 
6/13/2024
 

 
 
 

 

 

 
  
 
90,909

 
90,909

 
(4) 
 
6.68

 
6/3/2025
 

 
 
 

 

 

 
 
 

 
100,000

 
(7) 
 
7.30

 
3/15/2026
 

 
 
 

 

 

 
 
 

 
100,000

 
(7) 
 
7.30

 
3/15/2026