Employment Agreement between InnerWorkings, Inc. and Donald W. Pearson, dated December 31, 2018
EX-10.1 2 ex101.htm EXHIBIT 10.1 Exhibit
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into on December 31, 2018 and is effective as of January 10, 2019 (the “Effective Date”), by and between InnerWorkings, Inc., a Delaware corporation (the “Company”), and Donald W. Pearson (“Executive”).
WHEREAS, the Company desires to employ Executive in the role of Chief Financial Officer and Executive Vice President, pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, Executive is willing and able to render such services to the Company and desires to do so on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the above recitals incorporated herein and the mutual covenants and promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby expressly acknowledged, the parties agree as follows:
1.Employment; Position and Duties. From and after the Effective Date, Executive shall be employed by the Company as the Chief Financial Officer and Executive Vice President of the Company. Executive will report directly to the Chief Executive Officer. In this capacity, Executive agrees to devote his full time, energy and skill to the faithful performance of his duties herein, and shall perform the duties and carry out the responsibilities assigned to him to the best of his ability and in a diligent, businesslike and efficient manner. Executive’s duties shall include all those duties customarily performed by a chief financial officer at a company similar to the Company, as well as those additional duties that may be reasonably assigned by the Chief Executive Officer or the Company’s Board of Directors (the “Board”). Executive shall comply with any policies and procedures established for Company employees, including, without limitation, those policies and procedures contained in the Company’s employee handbook.
2.Term of Employment. The term of this Agreement (the “Term”) shall commence on the Effective Date and shall continue until and shall expire on January 7, 2020, as may be extended in accordance with this Section 2 and unless terminated earlier by either party, in accordance with the terms of this Agreement. The Term shall be extended automatically without further action by either party by one (1) additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party shall have given written notice to the other party prior to the date that is ninety (90) calendar days prior to the date which such extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which the extension would otherwise have become effective, unless earlier terminated in accordance with this Agreement. This Agreement may be terminated by Executive, the Chief Executive Officer or the Board, with or without Cause (as defined below). Upon the termination of Executive’s employment with the Company for any reason, neither party shall have any further obligation or liability under this Agreement to the other party, except as set forth in Sections 4, 5, 6, 7, 8, 9, 10, 16, 17 and 18 of this Agreement. Non-renewal of the Term by the Company shall be treated for all purposes under this Agreement as a termination by the Company of Executive’s employment without Cause under Section 4(b).
3.Compensation. Executive shall be compensated by the Company for his services as follows:
(a)Base Salary. During the Term, Executive shall be paid a base salary (“Base Salary”) of $37,500 per month (or $450,000 on an annualized basis), subject to applicable withholdings, in accordance with the Company’s normal payroll procedures. Executive’s Base Salary shall be reviewed on an annual basis by the Board for possible increase (but not decrease) based on the Company’s operating results and financial condition, salaries paid to other Company executives, and general marketplace and other applicable considerations. Such increased Base Salary, if any, shall then constitute Executive’s “Base Salary” for purposes of this Agreement.
(b)Benefits. During the Term, Executive shall have the right, on the same basis as other members of senior management of the Company, to participate in and to receive benefits under any of the Company’s employee benefit plans, insurance programs and/or indemnification agreements, as may be in effect from time to time, subject to any applicable waiting periods and other restrictions, and to the benefits afforded to other members of the senior executive team under the Company’s vacation, holiday and business expense reimbursement policies (all such benefits, the “Benefits”). Executive shall receive four weeks of vacation per year pursuant to the Company’s vacation policies or, if greater, the amount afforded to other members of senior management. In addition, Executive shall be reimbursed $1,000 per month for automobile expenses.
(c)Bonuses. Beginning in fiscal year 2019, in addition to the Base Salary, Executive shall be eligible to receive an annual performance bonus at a target of not less than seventy-five percent (75%) of his Base Salary (the “Performance Bonus”). The Performance Bonus shall be a discretionary bonus, determined in the sole discretion of the Board or the Compensation Committee thereof, based upon Executive’s performance of his duties and the Company’s financial performance, as well as certain performance targets that are approved by the Board or the Compensation Committee. The Company will pay Executive’s Performance Bonus for each year at the same time as annual performance bonus payments for such year (if any) are made to other participants with respect to such fiscal year, and in any event, within the two and one half (2½) months following the end of the year in which the Performance Bonus is earned. The Performance Bonus is intended to qualify for the short-term deferral exception to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(d)Long-Term Incentive Awards. On or as soon as practicable following the Effective Date, Executive will receive a one-time award of stock-based compensation (the “Signing Grant”) under and pursuant to the InnerWorkings, Inc. 2006 Stock Incentive Plan, as amended, or any successor plan thereto (the “Stock Incentive Plan”), equivalent to seven hundred fifty thousand dollars ($750,000) in grant date target value (100% in restricted stock units), vesting on the third (3rd) anniversary of the date of grant based on Executive’s continued employment with the Company. The Signing Grant shall be subject to the terms of the Stock Incentive Plan and the award agreement entered into with respect thereto. In addition to the Signing Grant, beginning in fiscal year 2019, Executive shall be eligible to receive, on substantially the same basis as the long-term incentive awards granted to other senior executives of the Company, annual long-term incentive awards under and pursuant to the Stock Incentive Plan, with a targeted grant date value of one hundred percent (100%) of his Base Salary, subject to adjustment by the Compensation Committee of the Board in its sole discretion.
(e)Incentive Compensation Recoupment. Any incentive compensation payable pursuant to this Agreement shall be subject to any compensation recovery and/or recoupment policy adopted by the Company to comply with applicable law, including, without limitation, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or to comport with good corporate governance practices, as such policies may be adopted and/or amended from time to time.
4.Benefits Upon Termination.
(a)Termination for Cause or Termination for Other than Good Reason. In the event of the termination of Executive’s employment by the Company for Cause (as defined below), the termination of Executive’s employment by reason of his death or Disability (as defined in the Stock Incentive Plan), or the termination of Executive’s employment by Executive for any reason other than Good Reason (as defined below), Executive shall be entitled to no further compensation or benefits from the Company following the date of termination, except the Accrued Obligations (as defined below), which Accrued Obligations shall be paid to Executive within thirty (30) calendar days following the date of termination.
For purposes of this Agreement, Executive’s “Accrued Obligations” include, to the extent not theretofore paid:
(i)Executive’s Base Salary earned through the date of termination;
(ii)Executive’s Benefits, vested or earned through the date of termination;
(iii)Executive’s Performance Bonus for the fiscal year immediately preceding the fiscal year in which the date of termination occurs if such award has been earned but has not been paid as of the date of termination;
(iv)Executive’s vested restricted stock, stock options or other long-term or equity-based incentive compensation; and
(v)Executive’s business expenses that have not been reimbursed by the Company as of the date of termination that were incurred by Executive prior to the date of termination in accordance with the applicable Company policy.
For purposes of this Agreement, a termination for “Cause” occurs if Executive’s employment is terminated by the Company for any of the following reasons:
(A)theft, dishonesty, or falsification of any employment or Company records by Executive;
(B)the determination by the Board that Executive has committed an act or acts constituting a felony or any act involving moral turpitude;
(C)the determination by the Board that Executive has engaged in willful misconduct or gross negligence that has had a material adverse effect on the Company’s reputation or business;
(D)the determination by the Board that Executive has refused or failed to substantially comply with the Company’s policies relating to harassment and/or discrimination; or
(E)the continuing material breach by Executive of any provision of this Agreement after receipt of written notice of such breach from the Board and a reasonable opportunity to cure such breach.
For purposes of this Agreement, a termination by Executive shall be for “Good Reason” if Executive terminates his employment for any of the following reasons:
(1)the Company materially reduces Executive’s duties or authority below, or assigns Executive duties that are materially inconsistent with, the duties and authority contemplated by Section 1 of this Agreement;
(2)the Company requires Executive to relocate his office more than one hundred (100) miles from the current office of the Company without his consent; or
(3)the Company has breached any provision of this Agreement, including but not limited to, the provisions relating to the payment or providing of compensation and Benefits in accordance with Section 3 above, and such breach continues for more than thirty (30) calendar days after notice from Executive to the Company specifying the action which constitutes the breach and demanding its discontinuance.
(b)Termination Without Cause or Termination for Good Reason. Each of the Company and Executive is free to terminate this Agreement, and Executive’s employment with the Company, at any time, for any reason, in its or Executive’s absolute sole discretion. Except as otherwise provided in Section 5 of this Agreement, if Executive’s employment is terminated by the Company for any reason other than (1) for Cause or (2) by reason of his death or Disability, or if Executive’s employment is terminated by Executive for Good Reason, Executive shall only be entitled to:
(i)receive an amount equal to the sum of (A) Executive’s annual Base Salary in effect on the date of termination, and (B) Executive’s target annual Performance Bonus for the fiscal year in which the date of termination occurs, payable in substantially equal installments over a twelve (12) month period following the termination of Executive’s employment in accordance with the Company’s normal payroll procedures and subject to applicable withholdings;
(ii)no later than March 15 following the end of the year in which such termination occurs, in lieu of any annual Performance Bonus for the year in which such termination occurs, payment of an amount equal to (A) the annual Performance Bonus that would have been payable to Executive (based on actual Company performance, without any exercise of negative discretion disproportionate to any such exercise applicable to other bonus plan participants) had Executive remained employed by the Company during the entire year in which such termination occurred, multiplied by (B) a fraction, the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs, less applicable withholdings;
(iii)immediate vesting of all outstanding equity-based awards that would otherwise have vested based solely on the passage of time if Executive’s employment had continued for a period of twelve (12) months following the termination thereof;
(iv)with respect to equity-based awards that would otherwise have vested based on performance, Executive shall vest in the portion of such award (which shall not exceed 100% of such award) to which Executive would have been entitled had Executive remained employed until the last day of the applicable performance period, multiplied by a fraction, the numerator of which shall be the number of full calendar months elapsed during the performance period through the date Executive’s employment terminated, plus twelve (12) additional
months, and the denominator of which shall be the total number of months in the applicable performance period, which awards shall vest and be paid, if and to the extent that the applicable performance conditions are met, at the same time and in the same manner as though Executive had remained employed by the Company; and
(v)the Accrued Obligations.
(c)Release. Notwithstanding anything to the contrary herein, no payments shall be paid under Sections 4(b)(i), (ii), (iii), (iv), (v) or Section 5 (if applicable) unless and until Executive executes and delivers a general release and waiver of claims against the Company (the “Release”) (and any revocation period expires) by the Release Deadline, acknowledging Executive’s obligations under Sections 6 and 7 below, and in a form prescribed by the Company; provided, that such Release shall not require Executive to release any rights to Accrued Obligations, rights under the Indemnification Provisions (as defined below), or under this Agreement, and the execution of such Release shall be a condition to Executive’s rights under Sections 4(b)(i), (ii), (iii), (iv), (v) or Section 5 (if applicable). The “Release Deadline” means the date that is sixty (60) calendar days after Executive’s separation from service. Payment of any amount that is not exempt from Section 409A of the Code and that is conditioned upon the execution of the Release shall be delayed until the Release Deadline, irrespective of when Executive executes the Release; provided, however, that where Executive’s separation from service and the Release Deadline occur within the same calendar year, the payment may be made up to thirty (30) calendar days prior to the Release Deadline, and provided further that where Executive’s separation from service and the Release Deadline occur in two separate calendar years, payment may not be made before the later of January 1 of the second year or the date that is thirty (30) calendar days prior to the Release Deadline. In addition, if Section 409A of the Code requires that a payment hereunder may not commence for a period of six (6) months following termination of employment, then such payments shall be withheld by the Company and paid as soon as permissible, along with such other monthly payments then due and payable.
5.Change in Control. Upon the occurrence of a Qualifying Termination (as defined below), Executive shall, in addition to the benefits set forth in Section 4(b) of this Agreement, be entitled to receive immediate vesting of all outstanding equity-based awards (including immediate vesting at the target level of performance for equity-based awards that would otherwise vest based on performance). For purposes of this Agreement, a “Qualifying Termination” means a termination of Executive’s employment within ninety (90) calendar days prior to or twenty-four (24) months following the consummation of a Change in Control (as defined in the Stock Incentive Plan) as a result of Executive’s (A) resignation for Good Reason or (B) termination by the Company without Cause (including due to a non-renewal of the Term by the Company).
Notwithstanding the foregoing and notwithstanding any less favorable or contrary treatment in an award agreement or other grant documentation with respect to equity-based awards, the vesting of all equity-based awards that are not assumed by a successor company or exchanged for a replacement award on no less favorable economic terms will be fully accelerated as of the effective date of the Change in Control (including immediate vesting at the target level of performance for equity-based awards that would otherwise vest based on performance), and such equity-based awards shall be paid to Executive within thirty (30) calendar days after the effective date of the Change in Control.
6.Employee Inventions and Proprietary Rights Assignment Agreement. Executive agrees to abide by the terms and conditions of the Company’s standard Employee Inventions and Proprietary Rights Assignment Agreement as executed by Executive and attached hereto as Exhibit A.
(a)Covenants Not to Compete or Solicit. During Executive’s employment and for a period of two (2) years following the termination of Executive’s employment for any reason, Executive shall not, anywhere in the Geographic Area (as defined below), other than on behalf of the Company or with the prior written consent of the Company, directly or indirectly:
(i)perform “services” (as defined below) for (in any capacity, including, without limitation, as an employee, agent, consultant, advisor, independent contractor, proprietor, partner, officer, director or otherwise), have any ownership interest in (except for passive ownership of five percent (5%) or less of any entity whose securities have been registered under the Securities Act of 1933, as amended, or Section 12 of the Securities Exchange Act of 1934, as amended), or participate in the financing, operation, management or control of, any firm, partnership, corporation, entity or business that engages or participates in a “competing business purpose” (as defined below);
(ii)induce or attempt to induce any customer, potential customer, supplier, licensee, licensor or business relation of the Company to cease doing business with the Company, or in any way interfere with the relationship between any customer, potential customer, supplier, licensee, licensor or business relation of the Company or solicit the business of any customer or potential customer of the Company, whether or not Executive had personal contact with such entity; and
(iii)solicit, encourage, hire or take any other action which is intended to induce or encourage, or has the effect of inducing or encouraging, any employee or independent contractor of the Company or any subsidiary of the Company to terminate his or her employment or relationship with the Company or any subsidiary of the Company, other than in the discharge of his duties as an officer of the Company.
For purposes of this Agreement, (A) “Geographic Area” shall mean the United States of America, (B) “services” shall mean services of the type conducted, authorized, offered, or provided by Executive on behalf of the Company during the two (2) years prior to the termination of Executive’s employment with the Company, and (C) “competing business purpose” shall mean the sale or provision of any marketing or printed materials, items, or other products or services that are competitive with in any manner the products or services sold or offered by the Company during the Term.
(b)Confidentiality. Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliates, and their respective businesses, employees, suppliers or customers, which shall have been obtained by Executive during Executive’s employment by the Company and which shall not be or become public knowledge (“Confidential Information”). During the Term and after termination of Executive’s employment with the Company, Executive shall not, without the prior written consent of the Company or as otherwise may be required by law or legal process (provided, that Executive shall give the Company reasonable notice of such process, and the ability to contest it) or as may be necessary, in Executive’s reasonable discretion, to discharge his duties to the Company, communicate or divulge any Confidential Information to anyone other than the Company and those designated by it. Notwithstanding the above, this Agreement shall not prevent Executive from revealing evidence of criminal wrongdoing to law enforcement or prohibit Executive from divulging Confidential Information by order of court or agency of competent jurisdiction, or from making other disclosures that are protected under the provisions of law or regulation. Nothing in this Agreement prohibits Executive from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, Congress, and any Inspector General, or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation. Executive does not need the prior authorization of the Company to make any such reports or disclosures, and Executive is not required to notify the Company that Executive has made such reports or disclosure.
Executive acknowledges and agrees that the Company has provided Executive with written notice below that the Defend Trade Secrets Act, 18 U.S.C. § 1833(b), provides an immunity for the disclosure of a trade secret to report suspected violations of law and/or in an anti-retaliation lawsuit, as follows:
(1) IMMUNITY. - An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that -
(A) is made -
(i) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney; and
(ii) solely for the purpose of reporting or investigating a suspected violation of law; or
(B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(2) USE OF TRADE SECRET INFORMATION IN ANTI-RETALIATION LAWSUIT. - An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual-
(A) files any document containing the trade secret under seal; and
(B) does not disclose the trade secret, except pursuant to court order.
(c)The covenants contained in this Section 7 shall be construed as a series of separate covenants, one for each county, city, state, or any similar subdivision in any Geographic Area. Except for geographic coverage, each such
separate covenant shall be deemed identical in terms to the covenant contained in the preceding sections. If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event that the provisions of this Section 7 are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable law. If Executive breaches any of the restrictions set forth in this Section 7 and the Company commences a legal proceeding in connection therewith, the time period applicable to each such restriction shall be tolled and extended for a period of time equal to the period of time during which Executive is determined by a court of competent jurisdiction to be in non-compliance or breach (not to exceed the duration set forth in the applicable restriction) commencing on the date of such determination.
8.Equitable Remedies. Executive acknowledges and agrees that the agreements and covenants set forth in Sections 6 and 7 are reasonable and necessary for the protection of the Company’s business interests, that irreparable injury will result to the Company if Executive breaches any of the terms of said covenants, and that in the event of Executive’s actual or threatened breach of any such covenants, the Company will have no adequate remedy at law. Executive accordingly agrees that, in the event of any actual or threatened breach by Executive of any of said covenants, the Company will be entitled to seek immediate injunctive and other equitable relief, without bond and without the necessity of showing actual monetary damages. Nothing in this Section 8 will be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of any damages that it is able to prove.
9.Dispute Resolution. In the event of any dispute or claim relating to or arising out of this Agreement (including, but not limited to, any claims of breach of contract, wrongful termination or age, sex, race or other discrimination), Executive and the Company agree that all such disputes shall be fully and finally resolved by binding arbitration conducted by the American Arbitration Association in Chicago, Illinois in accordance with its National Employment Dispute Resolution rules, as those rules are currently in effect (and not as they may be modified in the future). Executive acknowledges that by accepting this arbitration provision he is waiving any right to a jury trial in the event of such dispute. Notwithstanding the foregoing, this arbitration provision shall not apply to any disputes or claims relating to or arising out of (i) the misuse or misappropriation of trade secrets or proprietary information or (ii) the breach of any non-competition, non-solicitation or confidentiality covenants.
10.Governing Law. This Agreement has been executed in the State of Illinois, and Executive and the Company agree that this Agreement shall be interpreted in accordance with and governed by the laws of the State of Illinois, without regard to its conflicts of laws principles.
11.Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns, provided that such successor or assignee is the successor to substantially all of the assets of the Company, or a majority of its then outstanding shares of common stock, and that such successor or assignee assumes the liabilities, obligations and duties of the Company under this Agreement, either contractually or as a matter of law. In view of the personal nature of the services to be performed under this Agreement by Executive, he shall not have the right to assign or transfer any of his rights, obligations or benefits under this Agreement, except as otherwise noted herein.
12.Entire Agreement. This Agreement, including its attached Exhibit A, constitutes the entire employment agreement between Executive and the Company regarding the terms and conditions of his employment. This Agreement supersedes all prior negotiations, representations or agreements between Executive and the Company, whether written or oral, concerning Executive’s employment.
13.No Conflict. Executive represents and warrants to the Company that neither his entry into this Agreement nor his performance of his obligations hereunder will conflict with or result in a breach of the terms, conditions or provisions of any other agreement or obligation to which Executive is a party or by which Executive is bound, including without limitation, any noncompetition or confidentiality agreement previously entered into by Executive.
14.Validity. Except as otherwise provided in Section 7, above, if any one or more of the provisions (or any part thereof) of this Agreement shall be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions (or any part thereof) shall not in any way be affected or impaired thereby.
15.Modification. This Agreement may not be modified or amended except by a written agreement signed by Executive and the Company.
16.Code Section 409A. This Agreement is intended to comply with Section 409A of the Code, and the interpretative guidance thereunder, including the exceptions for short-term deferrals, separation pay arrangements, reimbursements, and in kind
distributions, and shall be administered accordingly. Executive hereby agrees that the Company may, without further consent from Executive, make the minimum changes to this Agreement as may be necessary or appropriate to avoid the imposition of additional taxes or penalties on Executive pursuant to Section 409A of the Code. The Company cannot guarantee that the payments and benefits that may be paid or provided pursuant to this Agreement will satisfy all applicable provisions of Section 409A of the Code. In the case of any reimbursement payment that is required to be made promptly under this Agreement, such payment will be made in all instances no later than December 31 of the calendar year following the calendar year in which the obligation to make such reimbursement arises. For purposes of Section 409A of the Code, Executive’s right to receive installment payments pursuant to this Agreement will be treated as a right to receive a series of separate and distinct payments. To the extent that reimbursements or other in-kind benefits under this letter constitute nonqualified deferred compensation, (x) all expenses or other reimbursements hereunder shall be made on or prior to the last day of the taxable year following the taxable year in which such expenses were incurred by Executive, (y) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (z) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. Notwithstanding the foregoing, if any payments or benefits under this Agreement become subject to Section 409A of the Code, then for the purpose of complying therewith, to the extent such payments or benefits do not satisfy the separation pay exemption described in Treasury Regulation § 1.409A-1(b)(9)(iii) or any other exemption available under Section 409A of the Code (the “Non-Exempt Payments”), if Executive is a specified employee as described in Treasury Regulation § 1.409A-1(i) on the date of termination, any amount of such Non-Exempt Payments that would be paid prior to the six (6) month anniversary of the date of termination shall instead be accumulated and paid to Executive in a lump sum payment within five (5) business days after such six (6) month anniversary. A termination of employment shall be deemed to occur only if it is a “separation from service” as such term is defined under Section 409A of the Code, and references to “termination,” “termination of employment,” or like terms shall mean a “separation from service.”
17.Adjustments Due to Excise Tax.
(a)If it is determined that any amount or benefit to be paid or payable to Executive under this Agreement or otherwise in conjunction with his employment (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in conjunction with his employment) would give rise to liability of Executive for the excise tax imposed by Section 4999 of the Code, as amended from time to time, or any successor provision (the “Excise Tax”), then the amount or benefits payable to Executive (the total value of such amounts or benefits, the “Payments”) shall be reduced by the Company to the extent necessary so that no portion of the Payments to Executive is subject to the Excise Tax. Such reduction shall only be made if the net amount of the Payments, as so reduced (and after deduction of applicable federal, state, and local income and payroll taxes on such reduced Payments other than the Excise Tax (collectively, the “Deductions”) is greater than the excess of (1) the net amount of the Payments, without reduction (but after making the Deductions) over (2) the amount of Excise Tax to which Executive would be subject in respect of such Payments. In the event Payments are required to be reduced pursuant to this Section 17(a), Executive shall designate the order in which such amounts or benefits shall be reduced in a manner consistent with Section 409A of the Code.
(b)The independent public accounting firm serving as the Company's auditing firm, or such other accounting firm, law firm or professional consulting services provider of national reputation and experience reasonably acceptable to the Company and Executive (the “Accountants”) shall make in writing in good faith all calculations and determinations under this Section 17, including the assumptions to be used in arriving at any calculations. For purposes of making the calculations and determinations under this Section 17, the Accountants and each other party may make reasonable assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and Executive shall furnish to the Accountants and each other such information and documents as the Accountants and each other may reasonably request to make the calculations and determinations under this Section 17. The Company shall bear all costs the Accountants incur in connection with any calculations contemplated hereby.
18.Indemnification. To the fullest extent permitted by the indemnification provisions of the laws of the state or jurisdiction of the Company, as applicable, in effect from time to time, and subject to the conditions thereof, the Company shall:
(a)indemnify Executive against all liabilities and reasonable expenses that Executive may incur in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal or administrative, or investigative and whether formal or informal, because Executive is or was an officer or director of or service provider to the Company or any of its affiliates provided, however, that Executive shall have acted in good faith and in a manner that Executive reasonably believed to be in the best interests of the Company; and
(b)pay for or reimburse the reasonable expenses upon submission of appropriate documentation incurred by Executive in the defense of any proceeding to which Executive is a party because Executive is or was an officer or director of or service provider to the Company or any of its affiliates, including an advancement of such expenses to the extent permitted by applicable law, subject to Executive’s execution of any legally required repayment undertaking.
The preceding indemnification right shall be in addition to, and not in lieu of, any rights to indemnification to which Executive may be entitled pursuant to the documents under which the Company is organized as in effect from time to time and shall not apply with respect to any action or failure to act by Executive which constitutes willful misconduct or bad faith on the part of Executive. The indemnification rights of Executive in this Section 18 are referred to herein as the “Indemnification Provisions.” The rights of Executive under the Indemnification Provisions shall survive the cessation of Executive’s employment with the Company. The Company shall also maintain a directors’ and officers’ liability insurance policy, or an equivalent errors and omissions liability insurance policy, covering Executive with reasonable scope, exclusions, amounts and deductibles based on Executive’s positions with the Company.
Notwithstanding the foregoing, the Company shall have no obligation to indemnify, defend or hold harmless Executive from and against any liabilities and expenses, or to pay for, or reimburse Executive for, any expenses arising from or relating to (i) Executive’s gross negligence or intentional or willful misconduct, or (ii) actions or claims which are initiated by Executive unless such action was approved in advance by the Board.
[Signatures on Next Page(s)]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
INNERWORKINGS, INC., a Delaware corporation
/s/ Richard S. Stoddart
Richard S. Stoddart
Chief Executive Officer and President
/s/ Donald W. Pearson
Donald W. Pearson
Employee Inventions and Proprietary Rights Assignment Agreement