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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

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

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

 

    Check the appropriate box:
         
    þ       Preliminary Proxy Statement    
 
    o       CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(E)(2))    
 
    o       Definitive Proxy Statement    
 
    o       Definitive Additional Materials    
 
    o       Soliciting Material under §.240.14a-12    
 

RENT-A-CENTER, INC.

GRAPHIC

(Name of Registrant as Specified In Its Charter)

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            (3)  Filing Party:    
 
            (4)  Date Filed:    
 

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GRAPHIC


RENT-A-CENTER, INC.
5501 Headquarters Drive
Plano, Texas 75024

Dear Fellow Stockholder:

        It is our pleasure to invite you to attend Rent-A-Center, Inc.'s 2021 Annual Meeting of Stockholders (the "2021 Annual Meeting"). The 2021 Annual Meeting will be held as a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/RCII2021 on Tuesday, June 8, 2021, at 8:00 a.m. Central Time.

        In connection with the 2021 Annual Meeting, the attached Notice of Annual Meeting and Proxy Statement describe the business items we plan to address at the meeting. We also plan to have a question and answer session following the adjournment of the meeting during which our stockholders will have the opportunity to ask questions of management regarding our business.

        In accordance with the Securities and Exchange Commission's "Notice and Access" model, we are furnishing proxy materials to our stockholders via the Internet. On or about April 26, 2021, we began mailing a Notice of Internet Availability of Proxy Materials detailing how to access the proxy materials electronically and how to submit your proxy via the Internet. The Notice of Internet Availability of Proxy Materials also provides instructions on how to request and obtain paper copies of the proxy materials and proxy card or voting instruction form, as applicable. We believe this process provides our stockholders with a convenient way to access the proxy materials and submit their proxies online, while allowing us to reduce our environmental impact as well as the costs of printing and distribution.

        Your vote is very important so we encourage you to review the information contained in the proxy materials and submit your proxy, regardless of the number of shares you own. It is important that beneficial owners of our common stock instruct their brokers on how they want to vote their shares. Please note that you will need the control number provided on your Notice of Internet Availability of Proxy Materials in order to submit your proxy online and, if desired, attend the 2021 Annual Meeting virtually.

        We look forward to seeing you online on June 8, 2021.

Sincerely,

/s/ Jeffrey Brown



Jeffrey Brown
Chairman of the Board
  /s/ Mitchell Fadel


Mitchell Fadel
Chief Executive Officer and Director

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GRAPHIC

Notice of 2021 Annual Meeting of Stockholders

Tuesday, June 8, 2021
8:00 a.m. Central Time

The 2021 annual meeting of stockholders of Rent-A-Center, Inc. will be held as a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/RCII2021 on Tuesday, June 8, 2021, at 8:00 a.m. Central Time, for the following purposes:

    1.
    To elect or re-elect the two Class III directors nominated by the Board of Directors;

    2.
    To ratify the Audit & Risk Committee's selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2021;

    3.
    To conduct an advisory vote approving the compensation of the named executive officers for the year ended December 31, 2020, as set forth in the proxy statement;

    4.
    To approve the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan;

    5.
    To approve amendments to the Company's Certificate of Incorporation to declassify the Board of Directors; and

    6.
    To transact other business that properly comes before the meeting and any adjournments or postponement thereof.

The foregoing items of business are more fully described in the proxy statement which is attached to, and made a part of, this notice. The Board of Directors has fixed the close of business on April 12, 2021 as the record date for determining the stockholders entitled to receive notice of, and to vote at, the 2021 annual meeting of stockholders and at any and all adjournments or postponements thereof.

We are using the "Notice and Access" method of furnishing proxy materials to our stockholders via the Internet. Instructions on how to access and review the proxy materials on the Internet can be found on the Notice of Internet Availability of Proxy Materials (the "Notice") mailed to stockholders of record on or about April 26, 2021. The Notice also contains instructions on how to receive a paper copy of the proxy materials.

Your vote is important, and whether or not you plan to attend the virtual 2021 annual meeting of stockholders, please vote as promptly as possible. We encourage you to vote via the Internet, as it is the most convenient and cost-effective method of voting. You may also vote by telephone or by mail (if you receive paper copies of the proxy materials or request a paper proxy card). Instructions regarding all three methods of voting are included in the Notice, the proxy card and the proxy statement.

Thank you in advance for voting and for your support of Rent-A-Center.

By Order of the Board of Directors,

Bryan Pechersky
Executive Vice President — General Counsel and Corporate Secretary
Rent-A-Center, Inc.
5501 Headquarters Drive, Plano, Texas 75024
April [    
·    ], 2021


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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2021

This Notice of Annual Meeting, the Proxy Statement and our annual report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K") (which we are distributing in lieu of a separate annual report to stockholders) are available on our website at investor.rentacenter.com, in the "Financial Information — Annual Reports and Proxies" subsection. Additionally, you may access the Notice of Annual Meeting, the Proxy Statement and the 2020 Form 10-K at www.proxyvote.com.


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TABLE OF CONTENTS

 
  Page

SUMMARY

  1

QUESTIONS AND ANSWERS ABOUT THE 2021 ANNUAL MEETING AND VOTING PROCEDURES

  6

Who may vote?

  6

What constitutes a quorum?

  6

How do I vote?

  6

How will the proxies be voted?

  7

How do I revoke my proxy if desired?

  7

How many votes must each proposal receive to be adopted?

  8

What are broker non-votes?

  8

How will stockholders be able to participate in and ask questions at the 2021 Annual Meeting?

  9

Who is soliciting my proxy?

  10

PROPOSAL ONE: ELECTION OF DIRECTORS

  11

Board Overview

  11

Nominees for Director at the 2021 Annual Meeting

  11

Continuing Members of the Board

  13

Skills and Qualifications of Board of Directors and Nominees

  15

Board Diversity

  15

CORPORATE GOVERNANCE

  17

General

  17

Code of Business Conduct and Ethics

  17

Structure of the Board

  17

Board Oversight

  21

Director Compensation

  23

Director Nominations

  25

Director Attendance

  26

Procedures for Reporting Accounting Concerns

  26

Communications with the Board

  27

Related Person Transactions

  27

PROPOSAL TWO: RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  29

Principal Accountant Fees and Services

  29

AUDIT AND RISK COMMITTEE REPORT

  31

EXECUTIVE OFFICERS

  32

COMPENSATION DISCUSSION AND ANALYSIS

  34

Executive Summary

  34

Compensation Process

  40

Forms of Compensation

  41

Termination of Employment and Change-in-Control Arrangements

  47

Policies and Risk Mitigation

  51

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  Page

CEO Pay Ratio

  53

Compensation Committee Interlocks and Insider Participation

  53

Section 162(m)

  54

Compensation Committee Report

  54

COMPENSATION TABLES

  55

Summary Compensation Table

  55

Grants of Plan-Based Awards

  57

Outstanding Equity Awards at Fiscal Year End

  58

Option Exercises and Stock Vested

  59

Non-Qualified Deferred Compensation

  59

No Pension Benefits

  60

Potential Payments and Benefits Upon Termination Without a Change in Control

  60

Potential Payments and Benefits Upon Termination With a Change in Control

  62

Potential Realizable Value of Outstanding Awards Upon a Change in Control Without Termination

  64

Equity Compensation Plan Information

  65

PROPOSAL THREE: ADVISORY VOTE ON EXECUTIVE COMPENSATION

  66

PROPOSAL FOUR: APPROVAL OF THE RENT-A-CENTER, INC. 2021 LONG-TERM INCENTIVE PLAN

  67

Highlights of the 2021 Plan

  68

Key Terms of the 2021 Plan

  69

U.S. Federal Income Tax Consequences

  73

New Plan Benefits

  75

PROPOSAL FIVE: APPROVAL OF THE DECLASSIFICATION AMENDMENTS

  76

Description of the Proposed Declassification Amendments

  76

Reasons for Declassifying the Board of Directors

  77

Vote Required

  77

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  78

OTHER INFORMATION

  79

Delinquent Section 16(a) Reports

  79

Annual Report on Form 10-K

  79

"Householding" of Proxy Materials

  79

Submission of Stockholder Proposals

  80

Other Business

  80

ANNEX A: 2021 LONG-TERM INCENTIVE PLAN

  A-1

ANNEX B: FORM OF AMENDMENT OF CERTIFICATE TO EFFECT THE DECLASSIFICATION AMENDMENTS

  B-1

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Proxy Statement
For the Annual Meeting of Stockholders
To Be Held on June 8, 2021

This proxy statement is furnished in connection with the solicitation of proxies by Rent-A-Center, Inc. on behalf of its Board of Directors (the "Board"), for the 2021 Annual Meeting of Stockholders of the Company (the "2021 Annual Meeting"). In this proxy statement, references to "Rent-A-Center", the "Company", "we", "us", "our" and similar expressions refer to Rent-A-Center, Inc., unless the context of a particular reference provides otherwise. Although we refer to our website and other websites in this proxy statement, the information contained on our website or other websites is not a part of this proxy statement. The Notice of Internet Availability of Proxy Materials (the "Notice") is being mailed on or about April 26, 2021 to stockholders of record as of April 12, 2021.


SUMMARY

This summary highlights certain information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting. For information regarding our 2020 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2020 (the "2020 Form 10-K").

Meeting Information

Date & Time:    8:00 a.m., Central Time, on Tuesday, June 8, 2021, or at such other time to which the meeting may be adjourned or postponed. References in this proxy statement to the 2021 Annual Meeting also refer to any adjournments, postponements or changes in time or location of the meeting, to the extent applicable.

Location:    The meeting will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/RCII2021.

Eligibility to Vote:    You can vote if you were a stockholder of record at the close of business on April 12, 2021 by following the instructions set forth in this proxy statement.

The Company's decision to hold a virtual meeting was made in light of ongoing developments relating to the novel coronavirus outbreak (COVID-19). We believe the virtual meeting will facilitate stockholder attendance and participation by enabling stockholders to participate from any location and at no cost, regardless of size, resources or physical location and will safeguard the health of our stockholders, Board and management.

You will be able to attend the 2021 Annual Meeting online, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/RCII2021. To participate in the virtual meeting, you will need the control number included on the Notice, proxy card or voting instruction form. The meeting webcast will begin promptly at 8:00 a.m., Central Time. We encourage you to access the meeting website approximately 10-15 minutes prior to the start time.

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Overview of Proposals

Proposal
  Board Vote Recommendation
One: Election of Directors   FOR each Director Nominee
Two: Ratification of Auditors   FOR
Three: Advisory Vote on Executive Compensation   FOR
Four: Approval of the 2021 Long-Term Incentive Plan   FOR
Five: Approval of Amendments to the Company's Certificate of Incorporation to Declassify the Board (the "Declassification Amendments")   FOR

Board Information

Board Nominees

The following table provides summary information about each director nominee who is nominated for election or re-election at the 2021 Annual Meeting. Unless the Declassification Amendments are approved by our stockholders at the 2021 Annual Meeting, each director nominee will serve a three-year term expiring at the 2024 annual meeting of stockholders and until their successors are elected and qualified.

Name
  Age
  Director
Since

  Experience/Qualification
  Independent
  Committee
Memberships

  Other Public
Company Boards

Glenn Marino

  64   2020  

Retail finance, business development and banking

  Yes   Audit & Risk
Nominating and Corporate Governance

 

B.C. Silver

    40     2021  

Financial technology, consumer products and retail industries

  Yes   Compensation
Nominating and Corporate Governance
 

As previously announced, Michael Gade determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at the end of his term at the 2021 Annual Meeting.

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Continuing Directors

The following directors are not standing for election or re-election and their terms will continue past this year's stockholder meeting:

Name
  Age
  Director
Since

  Current
Term
Expires

  Experience/Qualification
  Independent
  Committee
Memberships

  Other Public
Company
Boards

Jeffrey Brown (Chairman)

  60   2017   2023  

Significant public and private company board experience

  Yes   Audit & Risk (chair)  

Medifast,  Inc.

       

Broad transactional expertise

           

Christopher Hetrick

    42     2017     2023  

Extensive investment experience

  Yes   Compensation (chair)  

                   

Corporate strategy, capital allocation, executive compensation and investor communications

      Nominating and Corporate Governance    

Harold Lewis

  60   2019   2022  

Financial technology

  Yes   Audit & Risk  

       

Consumer finance

    Compensation    

Carol McFate

    68     2019     2022  

Corporate finance and treasury

  Yes   Audit & Risk  

Argo Group International Holdings, Ltd

                   

Governance; leadership

      Nominating and Corporate Governance(1)    

Mitchell Fadel

  63   2017   2023  

Chief Executive Officer and former Chief Operating Officer of the Company


 
   

       

Significant knowledge of the business and rent-to-own industry

           
(1)
Following the 2021 Annual Meeting, Ms. McFate will replace Mr. Gade as Chair of the Nominating and Corporate Governance Committee.

Independent Directors

Other than our Chief Executive Officer, all members of the Board are independent as determined in accordance with applicable rules of Nasdaq and the SEC and as determined by our Board.

Board Leadership Structure; Independent Chairman

Our Board separates the roles of Chairman and Chief Executive Officer. Mr. Brown serves as Chairman and Mr. Fadel serves as our Chief Executive Officer.

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Board Diversity

Our Board includes a range of individuals with diverse backgrounds and experiences, including both gender and ethnic diversity.

Corporate Governance

General

Our Board has established corporate governance practices designed to serve the best interests of our Company and our stockholders, including:

    a code of business conduct and ethics applicable to all of our Board members and employees;

    a majority voting standard in non-contested elections for directors;

    a policy for the submission of complaints or concerns relating to accounting, internal accounting controls or auditing matters; and

    procedures regarding stockholder communications with our Board and its committees.

Director Compensation

Our non-employee directors are entitled to receive annual retainers and meeting attendance fees, which are payable in cash unless the applicable director has elected to receive all or a portion of such amount in the form of deferred stock units ("DSUs"), as well as an annual DSU award under the 2016 Long-Term Incentive Plan (or, if approved by stockholders at the 2021 Annual Meeting, the 2021 Long-Term Incentive Plan) valued at $120,000.

Mr. Fadel, our Chief Executive Officer and our only employee director, is not entitled to receive compensation for his service as a director.

Executive Compensation

Program Objectives

The objectives of our executive compensation program are to:

    attract, retain and motivate senior executives with competitive compensation opportunities;

    balance short-term and long-term strategic goals;

    align our executive compensation program with the core values identified in our mission statement, which focuses on improving the quality of life for our co-workers and our customers; and

    reward achievement of our financial and non-financial goals.

The Company's compensation philosophy is generally to refer to the 50th-75th percentile of target total direct compensation (base salary, annual incentive opportunity and long-term incentive compensation opportunity) paid at similarly-situated public companies in the retail and consumer finance sectors, which include companies in the Company's Peer Group (as described under "Compensation Discussion and Analysis" below), as a guideline, with cash compensation (base salary and annual incentive opportunity) generally targeted at around the 50th percentile, and long-term incentive compensation generally targeted at around the 75th percentile.

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The following are the primary forms of compensation currently utilized by the Compensation Committee in compensating our named executive officers:

    base salary, which is paid in cash;

    annual incentive compensation, which is paid in cash and, for 2021, is based on (1) Acima (formerly Preferred Lease) segment revenues, (2) Rent-A-Center segment same store sales, and (3) consolidated adjusted EBITDA, which is calculated as net earnings before interest, taxes, depreciation and amortization, as adjusted for certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities ("Adjusted EBITDA"); and

    long-term incentive compensation, which was updated in 2021 to eliminate stock options and implement ratable vesting of restricted stock units and now consists of (1) restricted stock units which vest one-third each year over a three-year period, and (2) performance stock units which vest based solely on a relative total shareholder return metric over a three-year measurement period.

Pay for Performance; Relative Total Shareholder Return

Our executive compensation program directly links a substantial portion of executive compensation to our financial and stock price performance through both annual and long-term incentives.

For the 2020 annual cash incentive program, based on strong Company performance, each executive officer received an amount equal to 180% of such person's target bonus amount.

In 2020, performance stock units granted in 2018 also vested following their three-year vesting period. In 2018, our Compensation Committee granted to our executive officers performance-based restricted stock units based on our relative Total Shareholder Return ("TSR") as compared to the S&P 1500 Specialty Retail Index over a three-year measurement period. Our relative TSR performance as compared to the S&P 1500 Specialty Retail Index for the three-year period ended December 31, 2020, ranked us 2 out of 60 companies in the S&P 1500 Specialty Retail Index, or the 98th percentile, which resulted in the vesting of 200% of the performance-based restricted stock units that were granted.

Stock Ownership Guidelines

We believe that our Board and our management should have a significant financial stake in the Company to ensure that their interests are aligned with those of our stockholders. To that end, our directors, Chief Executive Officer, executive vice presidents, senior vice presidents and vice presidents are subject to equity interest guidelines.

Hedging and Pledging Restrictions

Our insider trading policy prohibits our directors, officers and employees from engaging in hedging, monetization or options transactions related to our securities or transactions involving any derivative security of the Company or similar instruments.

Our insider trading policy also prohibits the holding of securities of the Company in a margin account or pledging securities of the Company as collateral for a loan, in each case unless they are treated as non-marginable by the brokerage firm.

Clawback Policy

Our Board has adopted a clawback policy that allows the Company to seek recoupment, repayment and/or forfeiture of any annual or long-term cash, equity or equity-based incentive or bonus compensation outstanding and unpaid or paid and received during the three-year period preceding the date of a clawback event (as described under "Compensation Discussion and Analysis — Policies and Risk Mitigation — Clawback Policy").

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QUESTIONS AND ANSWERS ABOUT THE
2021 ANNUAL MEETING AND VOTING PROCEDURES

Who may vote?

Stockholders of record as of the close of business on April 12, 2021, the record date for the 2021 Annual Meeting, may vote at the virtual meeting. Each share of common stock entitles the holder to one vote per share. As of April 12, 2021, there were [    ·    ] shares of our common stock outstanding, which were held by [    ·    ] holders of record. At least ten days prior to the 2021 Annual Meeting, a complete list of stockholders entitled to vote at the meeting will be available for examination by any stockholder for any purpose germane to the meeting, during ordinary business hours at our principal executive offices located at 5501 Headquarters Drive, Plano, Texas 75024. Any such examination will be subject to adhering to required safety protocols implemented due to the COVID-19 pandemic. The list will also be available online at the 2021 Annual Meeting for examination by any stockholder who is present.

What constitutes a quorum?

The holders of at least a majority of our outstanding shares of common stock entitled to vote at the 2021 Annual Meeting must be present online or represented by proxy at the 2021 Annual Meeting to have a quorum. Any stockholder present online at the 2021 Annual Meeting or represented by proxy, but who abstains from voting, and "broker non-votes" will be counted for purposes of determining whether a quorum exists. If a quorum is not present, the meeting may be adjourned or postponed from time to time until a quorum is obtained.

How do I vote?

You cannot vote your shares of common stock unless you are present online at the virtual meeting or you have previously given your proxy before the applicable deadline. If you are a registered stockholder, you may vote your shares or submit a proxy in one of the following convenient ways:

 
   
   
   
   
    Voting Method

  Description of Process

    By Internet       You may submit a proxy electronically on the Internet, by visiting the website shown on the Notice or proxy card and following the instructions.    
    By Telephone       If you request paper copies of the proxy materials by mail, you may submit a proxy by telephone, by calling the toll-free telephone number shown on the Notice or proxy card and following the instructions.    
    By Mail       If you request paper copies of the proxy materials by mail, you may submit a proxy by signing, dating and returning a paper proxy card in accordance with its instructions. The Notice provides instructions on how to request a paper proxy card and other proxy materials    
    Online at the 2021 Annual Meeting       You may vote by attending the 2021 Annual Meeting and casting your vote during the designated portion of the meeting by following the instructions provided on the meeting website. Merely attending the meeting online, but without properly voting, will not count as a vote.    

If you are voting on the Internet prior to the 2021 Annual Meeting or by telephone, your voting instructions must be received by 11:59 p.m., Eastern Time on June 7, 2021, unless you are a participant in our 401(k) plan, in which case your voting instructions must be received by 11:59 p.m., Central Time, on June 2, 2021.

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If your shares are held in street name, you will receive instructions from your bank, broker or other holder of record that you must follow in order for your shares to be voted.

How will the proxies be voted?

The Board has appointed Mr. Bryan Pechersky, Executive Vice President, General Counsel and Corporate Secretary, and Ms. Maureen Short, Executive Vice President and Chief Financial Officer, as the management proxyholders for the 2021 Annual Meeting. All properly executed proxies, unless revoked as described below, will be voted by a management proxyholder at the meeting in accordance with your directions on the proxy. If a properly executed proxy does not provide instructions, the shares of common stock represented by your proxy will be voted:

 
   
   
   
   
    Proposal

  Board Recommendation

    One: Election of Directors       "FOR" each of the Board's nominees for Class III director    
    Two: Ratification of the Audit & Risk Committee's Selection of Ernst & Young LLP       "FOR" the ratification of the Audit & Risk Committee's selection of Ernst & Young LLP as our independent registered public accounting firm for 2021    
    Three: Advisory Vote on Executive Compensation       "FOR" the resolution approving, on an advisory basis, the compensation of the named executive officers for the year ended December 31, 2020, as set forth in this proxy statement    
    Four: Approval of the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan       "FOR" the approval of the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan    
    Five: Approval of the Declassification Amendments       "FOR" the approval of the Declassification Amendments    

As of the date of this proxy statement, the Board is not aware of any other business or nominee to be presented or voted upon at the 2021 Annual meeting. Should any other matter requiring a vote of stockholders properly arise, the management proxy holders will use their discretion to vote the proxies in accordance with their best judgment in the interests of the Company. Unless otherwise stated, all shares represented by your completed, returned, and signed proxy will be voted as described above.

How do I revoke my proxy if desired?

If you are a registered stockholder, you may revoke your proxy by timely following one of the processes set forth below.

 
   
   
   
   
    Revocation Method

  Description of Process

    New Proxy Card       Deliver a signed proxy, dated later than the first one, which proxy must be received by the Company prior to the vote at the 2021 Annual Meeting    
    New Internet/Telephone Proxy       Vote at a later time on the Internet or by telephone, if you previously voted on the Internet or by telephone, which vote must be submitted prior to the deadline set forth above    
    New Vote Online At 2021 Annual Meeting       Attend the virtual meeting and vote online or by proxy (attending the virtual meeting alone will not revoke your proxy)    
    Written Notice to the Company       Deliver a signed, written revocation letter, dated later than the previously submitted proxy, to Bryan Pechersky, Executive Vice President — General Counsel & Corporate Secretary, at 5501 Headquarters Drive, Plano, TX 75024, which letter must be received by the Company prior to the vote at the 2021 Annual Meeting    

If you are a street name stockholder and you submit a voting instruction form, you may change your vote by submitting new voting instructions to your bank, broker or other holder of record in accordance with the procedures of such bank, broker or other holder of record.

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How many votes must each proposal receive to be adopted?

 
   
   
   
   
   
   
    Proposal

  Required Vote for Approval

  Impact of Broker Non-Votes and
Abstentions


    One: Election of Directors       Under our Bylaws, directors are elected by a majority of the votes cast in uncontested elections. Accordingly, the numbers of votes cast "for" a director nominee must exceed the number of votes cast "against" that nominee. In contested elections, the vote standard would be a plurality of votes cast. Each share may be voted for each of the nominees, but no share may be voted more than once for any particular nominee.       Broker non-votes and abstentions will not affect the outcome of the vote.    
    Two: Ratification of the Audit & Risk Committee's Selection of Ernst & Young LLP       A majority of the votes cast is required to ratify Ernst & Young LLP as our independent registered public accounting firm.       Brokers have discretionary authority in the absence of timely instructions from their customers to vote on this proposal. Abstentions will not affect the outcome of the vote.    
    Three: Advisory Vote On Executive Compensation       The affirmative vote of the holders of a majority in voting power of the shares of common stock present online or represented by proxy and entitled to vote at the meeting is required to approve the advisory resolution on executive compensation.       Broker non-votes will not affect the outcome of the vote. Because abstentions are counted as shares present and entitled to vote on the proposal, each abstention will have the same effect as a vote "against" this proposal.    
    Four: Approval of the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan       The affirmative vote of the holders of a majority in voting power of the shares of common stock present online or represented by proxy and entitled to vote at the meeting is required to approve the Rent-A-Center,  Inc. 2021 Long-Term Incentive Plan.       Broker non-votes will not affect the outcome of the vote. Because abstentions are counted as shares present and entitled to vote on the proposal, each abstention will have the same effect as a vote "against" this proposal.    
    Five: Approval of the Declassification Amendments       The affirmative vote of the holders of at least eighty percent (80%) of the shares of common stock of the Company issued and outstanding as of the record date for the 2021 Annual Meeting is required to approve the Declassification Amendments.       Broker non-votes and abstentions will have the same effect as a vote "against" this proposal.    

A representative of Broadridge Financial Services, Inc. will tabulate the votes and act as inspector of elections.

What are broker non-votes?

Broker non-votes occur when nominees, such as banks and brokers, holding shares on behalf of beneficial owners, or customers, do not receive voting instructions from the customers. Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. In the event that a broker does not receive voting instructions for these matters, a broker may notify us that it lacks voting authority to vote those shares. These broker non-votes refer to votes that could have been cast on the matter in question by brokers with respect to uninstructed shares if the brokers had received their customers' instructions. These broker non-votes will be included in determining whether a quorum exists.

Your bank or broker is not permitted to vote your uninstructed shares in respect of Proposal One (election of directors), Proposal Three (advisory vote on executive compensation), Proposal Four (approval of the Rent-A-Center, Inc. 2021 Long-Term Incentive Plan) or Proposal Five (approval of the Declassification Amendments). As a result, if you hold your shares in street name and you do not instruct your bank or broker how to vote, no votes will be cast on your behalf in respect of the foregoing matters. However, if

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you hold your shares in street name and you do not instruct your bank or broker how to vote in respect of Proposal Two (ratification of auditors), your bank or broker is entitled to vote your shares.

To be certain your shares are voted in the manner you desire, you should instruct your bank or broker how to vote your shares.

How will stockholders be able to participate in and ask questions at the 2021 Annual Meeting?

The 2021 Annual Meeting will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/RCII2021. To participate in the virtual meeting, visit such website and enter the control number included on the Notice, proxy card or voting instruction form.

The virtual meeting will provide substantially the same opportunities to participate as stockholders would have at an in-person meeting. Stockholders will be able to attend and participate online and submit questions prior to or during the meeting. Questions may be submitted in advance of the meeting prior to 11:59 p.m., Eastern Time, on June 7, 2021, by logging into www.proxyvote.com, entering your control number and, once past the login screen, clicking on "Submit Questions," choosing a question type, typing in your question, and clicking "Submit." Alternatively, questions may be submitted during the meeting by logging into the virtual meeting platform at www.virtualshareholdermeeting.com/RCII2021, clicking on "Q&A," typing in your question, and clicking "Submit."

As part of the 2021 Annual Meeting, we will hold a question and answer session, during which we intend to answer questions submitted prior to and during the meeting in accordance with the 2021 Annual Meeting procedures and which are pertinent to the Company and the meeting matters, as time permits. Questions or comments that are irrelevant to the business of the meeting or the Company's business, in furtherance of the personal or business interests of a stockholder, relate to material non-public information of the Company or pending or threatened litigation or investigations, derogatory to individuals or groups or not in good taste, related to personal grievances or are otherwise not suitable for the conduct of the meeting as determined in the sole discretion of the Company will not be answered. The Company may not respond to questions that are substantially repetitious of other statements made or questions received, or may group questions together by topic with a representative question read aloud and answered. Any questions pertinent to meeting matters that are not answered during the meeting due to time constraints will be posted online and answered at investor.rentacenter.com. The questions and answers will be available as soon as practical after the meeting and will remain available until one week after posting.

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Shareholders should ensure that they have a strong internet connection if they plan to attend and/or participate in the meeting. We encourage you to access the meeting website approximately 10-15 minutes prior to the start time to allow for any unforeseen technical issues, as the meeting webcast will begin promptly at 8:00 a.m., Central Time. If you encounter any difficulties accessing the virtual meeting, please call the technical support number that will be posted on the virtual meeting login page for assistance. Technical support will be available beginning at 7:45 a.m., Central Time, on the date of the meeting through the conclusion of the meeting.

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Who is soliciting my proxy?

The Board is soliciting your proxy and we will bear the cost of soliciting proxies. Proxies may be solicited by telephone, electronic mail, personal interview or other means of communication. We will reimburse banks, brokers, custodians, nominees and fiduciaries for reasonable expenses they incur in sending proxy materials to you if you are a beneficial holder of our shares. We have engaged Saratoga Proxy Consulting LLC, a proxy solicitation firm, to assist in the solicitation of proxies for which we will pay a fee in the amount of $10,000 and will also reimburse Saratoga Proxy Consulting LLC for reasonable and customary out-of-pocket expenses incurred in performing such services.

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PROPOSAL ONE:
ELECTION OF DIRECTORS

Board Overview

Currently, the number of directors constituting our entire Board is eight, divided into three classes. Directors in each class serve for a term of three years, or until their earlier death, resignation, disqualification or removal. One class of directors is elected each year at the annual meeting of stockholders.

Director
  Class
  Expiration of Current Term
(Annual Stockholders Meeting)

 

Harold Lewis

  Class I   2022  

Carol McFate

  Class I     2022  

Jeffrey Brown

  Class II   2023  

Mitchell Fadel

  Class II     2023  

Christopher Hetrick

  Class II   2023  

Michael Gade

  Class III     2021  

Glenn Marino

  Class III   2021  

B.C. Silver

  Class III     2021  

Nominees for Director at the 2021 Annual Meeting

Two Class III directors are to be elected by our stockholders at the 2021 Annual Meeting. Our Board, upon recommendation of the Nominating and Corporate Governance Committee, has nominated (1) Glenn Marino to be re-elected, and (2) B.C. Silver, who was appointed to the Board in January 2021, to be elected, as Class III directors by our stockholders. As noted above, Michael Gade determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at the end of his term at the 2021 Annual Meeting.

The qualifications necessary for a board nominee and the Nominating and Corporate Governance Committee's process for evaluating prospective board members is discussed under "Director Nominations — Qualifications" below. Specific experience and relevant considerations with respect to each nominee are set forth in each candidate's respective biography below.

Mr. Marino and Mr. Silver have agreed to stand for re-election and election, respectively. However, should either of them become unable or unwilling to accept such nomination, the shares of common stock voted for that nominee by proxy will be voted for the election of a substitute nominee as the Board may recommend, or the Board may reduce the number of directors to eliminate the vacancy. If any nominee is unable to serve his or her full term, the Board may reduce the number of directors or designate a substitute to serve until the 2024 annual meeting of stockholders. Our Board has no reason to believe that either of Mr. Marino or Mr. Silver will be unable or unwilling to serve as a director, and, to the knowledge of the Board, each intends to serve the entire term for which election is sought.

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Our Board recommends that you vote "FOR" each of Mr. Marino and Mr. Silver.

GRAPHIC

Glenn Marino

Independent Director
Age: 64
Director Since: 2020
Committees Served: Audit & Risk; Nominating and Corporate Governance
Gender: Male
Ethnicity: Caucasian

Mr. Marino was appointed to the Board in February 2020. Mr. Marino brings 40 years of experience in the consumer retail finance industry, most recently serving as Executive Vice President, CEO — Payment Solutions and Chief Commercial Officer of Synchrony Financial, Inc., a $21 billion financial services company, from 2014 until 2018. Prior to the spin-off in 2014 of Synchrony by General Electric Corporation, Mr. Marino was an executive with the North American retail finance business of General Electric, serving as CEO — Payment Solutions and Chief Commercial Officer from 2012-2013, and CEO — Sales Finance from 2001 to 2011. From 1999 to 2001, Mr. Marino served as CEO of Monogram Credit Services, a joint venture between GE and BankOne (now JPMorgan Chase & Co.). Prior to that, Mr. Marino held various roles of increasing responsibility in finance, business development, credit risk, and marketing with General Electric and Citibank.

We believe Mr. Marino's extensive knowledge in retail finance, business development and banking provides a valuable perspective to our Board as we continue to grow our retail partnerships, particularly as it relates to the expansion of our Acima (formerly Preferred Lease) segment.

GRAPHIC

B.C. Silver

Independent Director
Age: 40
Director Since: 2021
Committees Served: Compensation; Nominating and Corporate Governance
Gender: Male
Ethnicity: African American

Mr. Silver was appointed to the Board in January 2021. Mr. Silver is an accomplished marketing executive and entrepreneur who has established several startup companies in the financial services and technology industries. Mr. Silver currently serves as the founder of Grind Finance, a mobile banking company launched in 2019 designed to empower underserved communities. From 2017 to 2019, Mr. Silver served as President, Chief Marketing Officer for RushCard (which was acquired by Green Dot Corporation) and as General Manager-Consumer Division and Vice President of Digital Marketing and Account Acquisition for Green Dot Corporation, a financial technology leader and bank holding company that designs and deploys mobile banking and financial services products directly to consumers through one of the largest retail banking distribution platforms in America. From 2015 to 2017, Mr. Silver served as Senior Director of Marketing and Strategic Planning for Mars, Incorporated, a leading global consumer products company with a portfolio of confectionery, food and pet care products and services. Prior to Mars, Mr. Silver served in sales and marketing positions with The Clorox Company and Procter & Gamble.

Mr. Silver has extensive knowledge of the financial technology, consumer products and retail industries and strong marketing and leadership skills, which we believe are valuable assets as we continue to invest in our digital lease-to-own solutions across our business.

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Continuing Members of the Board

The terms of the following five members of our Board will continue past the 2021 Annual Meeting.

Terms to Expire at the 2022 Annual Meeting:

GRAPHIC

Harold Lewis

Independent Director
Age: 60
Director Since: 2019
Committees Served: Audit & Risk; Compensation
Gender: Male
Ethnicity: African American

Mr. Lewis brings over 30 years of experience in financial services and mortgage lending. From August 2018 until June 2019, he served as the CEO of Renovate America, Inc., a national home improvement fintech company focused on energy efficient home improvement lending. From 2016 to 2018, Mr. Lewis was a senior advisor for McKinsey & Company, a worldwide management consulting firm. From 2012 to 2015 he served as President and COO of Nationstar Mortgage, one of the largest mortgage servicers in the country. In that position, he grew Nationstar's servicing platform from $30 billion to $400 billion and mortgage origination portfolio from $1.8 billion to $25 billion while also building and managing Nationstar's relationship with the newly created industry regulator, the Consumer Financial Protection Bureau. Prior to Nationstar Mortgage, he held C-Suite and senior executive positions at Citi Mortgage, Fannie Mae, Resource Bancshares Mortgage Group and Nations Credit, among others.

We believe that Mr. Lewis' significant financial technology knowledge and broad experience with a similar customer demographic provides our Board with an important resource with respect to our e-commerce platform and our Acima (formerly Preferred Lease) segment.

GRAPHIC

Carol McFate

Independent Director
Age: 68
Director Since: 2019
Committees Served: Audit & Risk; Nominating and Corporate Governance
Gender: Female
Ethnicity: Caucasian

Ms. McFate served from 2006 until October 2017 as the Chief Investment Officer of Xerox Corporation, a multinational document provider of multifunction document management systems and services, managing retirement assets for North American and UK plans. Previously, Ms. McFate served in various finance and treasury roles for a number of prominent insurance and financial services companies, including XL Global Services, Inc., a US-based subsidiary of XL Capital Ltd., a leading Bermuda-based global insurance and reinsurance company, American International Group, Inc., an American multinational property & casualty insurance, life insurance, and financial services provider, Prudential Insurance Company of America, an American Fortune Global 500 and Fortune 500 company whose subsidiaries provide life insurance, investment management and other financial products and services to both retail and institutional customers through the US and in over 30 other countries. Ms. McFate is a Chartered Financial Analyst. Ms. McFate also serves as a director and member of the investment and nominating committees of Argo Group International Holdings, Ltd.

Ms. McFate brings over 40 years of global corporate finance experience and a varied viewpoint to the Board which we believe supports us in our strategic initiatives and enhances our long-term vision, sustainable growth and shareholder value.

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Terms to Expire at the 2023 Annual Meeting (unless the Declassification Amendments are approved):

GRAPHIC

Jeffrey Brown

Chairman of the Board; Independent Director
Age: 60
Director Since: 2017
Committees Served: Audit & Risk (chair)
Gender: Male
Ethnicity: Caucasian

Mr. Brown is the Chief Executive Officer and founding member of Brown Equity Partners, LLC, which provides capital to management teams and companies. Mr. Brown's venture capital and private equity career spans 34 years, including positions with Hughes Aircraft Company, Morgan Stanley & Company, Security Pacific Capital Corporation and Bank of America Corporation and as founding partner of Forrest Binkley & Brown. Since June 2015, Mr. Brown has served as the Lead Director of Medifast, Inc., where he also serves as chairman of the Audit Committee and is a member of the Executive Committee. Mr. Brown previously served as a director of a number of public and private companies, including Cadiz, Inc., Outerwall Inc., Midatech Pharma PLC, Nordion, Inc. and Stamps.com Inc.

Mr. Brown brings to the Board extensive public and private company board experience and significant transactional expertise, having served as the chairman of the board of directors of 12 companies and as a member of the board of directors of over 50 companies in both the public and private sectors and having invested in a broad array of companies throughout his career.

GRAPHIC

Mitchell Fadel

Director; Chief Executive Officer
Age: 63
Director Since: 2017
Committees Served: N/A
Gender: Male
Ethnicity: Caucasian; Middle-Eastern

Mr. Fadel has served as one of our directors since June 2017 and was named Chief Executive Officer on January 2, 2018. Mr. Fadel was self-employed prior to joining the Company after most recently serving as President — U.S. Pawn for EZCORP, Inc., a leading provider of pawn loans in the United States and Mexico, from September 2015 to December 2016. Prior to that, Mr. Fadel served as President of the Company (beginning in July 2000) and Chief Operating Officer (beginning in December 2002) each until August 2015, and also as a director of the Company from December 2000 to November 2013. From 1992 until 2000, Mr. Fadel served as President and Chief Executive Officer of the Company's subsidiary Rent-A-Center Franchising International, Inc. f/k/a ColorTyme, Inc. Mr. Fadel's professional experience with the Company also includes previously serving as a Regional Director and a District Manager.

As our Chief Executive Officer, Mr. Fadel's day-to-day leadership provides him with intimate knowledge of our operations that are a vital component of our Board discussions. In addition, Mr. Fadel brings 30 years of experience in and knowledge of the rent-to-own industry, including his previous tenure as our President and Chief Operating Officer, to the Board. We believe Mr. Fadel's service as our Chief Executive Officer creates a critical link between management and our Board, enabling our Board to perform its oversight function with the benefit of management's perspectives on our business.

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GRAPHIC

Christopher Hetrick

Independent Director
Age: 42
Director Since: 2017
Committees Served: Compensation (chair); Nominating and Corporate Governance
Gender: Male
Ethnicity: Caucasian

Mr. Hetrick has been the Director of Research at Engaged Capital, a California based investment firm and registered advisor with the U.S. Securities and Exchange Commission ("SEC") focused on investing in small and mid-cap North American equities, since September 2012. Prior to joining Engaged Capital, Mr. Hetrick worked at Relational Investors LLC ("Relational"), a $6 billion activist equity fund, from January 2002 to August 2012. Mr. Hetrick began his career with Relational as an associate analyst. He eventually became the firm's senior consumer analyst overseeing over $1 billion in consumer sector investments. Prior to his work heading up the consumer research team, Mr. Hetrick was a generalist covering major investments in the technology, financial, automotive and food sectors.

We believe that Mr. Hetrick's extensive investment experience in a broad range of industries as well as his expertise in corporate strategy, capital allocation, executive compensation, and investor communications well qualifies him to serve on our Board.

Skills and Qualifications of Board of Directors and Nominees

The following table provides an overview of certain qualifications that we believe each of our directors possesses and which benefits our Board and Company. This table is not intended to provide a comprehensive list of all qualifications. Please refer to each directors' biographical information above in this proxy statement for additional information.

GRAPHIC

(1)
Mr. Gade has determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at that time.

Board Diversity

Our Nominating and Corporate Governance Committee believes that diversity is one of many attributes to be considered when selecting candidates for nomination to serve as one of our directors. While the Nominating and Corporate Governance Committee carefully considers diversity when evaluating nominees for director, the Nominating and Corporate Governance Committee has not established a formal policy regarding diversity in identifying director nominees.

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The matrix below summarizes the gender and ethnic diversity on our Board (including Mr. Gade, who has determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at that time):

 
   
   
   
   
   
   
   
   
   
   
    Board Diversity Matrix (as of the date of this proxy statement)

                   
    Board Size:                                  
    Total Number of Directors       8                            
    Gender:     Male
  Female
  Non-Binary
  Gender Undisclosed
    Number of directors based on gender identity       7       1                
    Number of directors who identify in any of the categories below:
                               
    African American or Black       2                      
    Alaskan Native or American Indian                            
    Asian                            
    Caucasian       4       1                
    Hispanic or Latino                            
    Native Hawaiian or Pacific Islander                            
    Two or More Races or Ethnicities       1                      
    LGBTQ+                                  
    Undisclosed                                  

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CORPORATE GOVERNANCE

General

Our Board has established corporate governance practices designed to serve the best interests of our Company and our stockholders. In this regard, our Board has, among other things, adopted:

    a code of business conduct and ethics applicable to all members of our Board, as well as all of our employees, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer and controller;

    separation of the Chairman and Chief Executive Officer roles;

    a majority voting standard in non-contested elections for directors;

    a policy for the submission of complaints or concerns relating to accounting, internal accounting controls or auditing matters;

    provisions in our Bylaws regarding director candidate nominations and other proposals by stockholders;

    written charters for its Audit & Risk Committee, Compensation Committee, and Nominating and Corporate Governance Committee;

    procedures regarding stockholder communications with our Board and its committees; and

    policies regarding the entry by our Company and its subsidiaries into transactions with certain persons related to our Company.

Our Board intends to monitor developing standards in the corporate governance area and, if appropriate, modify our policies and procedures with respect to such standards. In addition, our Board will continue to review and modify our policies and procedures as appropriate to comply with any new requirements of the SEC or Nasdaq and taking into consideration any feedback received from our stockholders.

Code of Business Conduct and Ethics

Our Board has adopted a Code of Business Conduct and Ethics applicable to all members of our Board, as well as all of our employees, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer and controller. The Code of Business Conduct and Ethics forms the foundation of a compliance program we have established as part of our commitment to responsible business practices that includes policies, training, monitoring and other components covering a wide variety of specific areas applicable to our business activities and employee conduct. A copy of the Code of Business Conduct and Ethics is published on our website at https://investor.rentacenter.com/governance-documents. We intend to make all required disclosures concerning any amendments to, or waivers from, this Code of Business Conduct and Ethics on our website.

Structure of the Board

Independent Chairman

Our Board separates the roles of Chairman and Chief Executive Officer. Mr. Brown serves as Chairman and Mr. Fadel serves as our Chief Executive Officer. The Board believes that the separation of the roles of Chairman and Chief Executive Officer at this time is appropriate in light of Mr. Fadel's tenure as Chief

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Executive Officer and is in the best interests of the Company's stockholders. Separating these positions aligns the Chairman role with our independent directors, enhances the independence of our Board from management and allows our Chief Executive Officer to focus on developing and implementing our strategic initiatives and supervising our day-to-day business operations. Our Board believes that Mr. Brown is well situated to serve as Chairman because of his experience serving on the boards of directors of other public companies, including as lead director of MediFast, Inc. Mr. Brown works closely with Mr. Fadel to set the agenda for Board meetings and to coordinate information flow between the Board and management.

Our Board understands that there is no single, generally accepted approach to providing Board leadership and that given the dynamic and competitive environment in which we operate, the right Board leadership structure may vary based on the situation. Our Board will review its determination to separate the roles of Chairman and Chief Executive Officer periodically or as circumstances and events may require.

Independent Directors

As part of the Company's corporate governance practices, and in accordance with Nasdaq rules, the Board has established a policy requiring a majority of the members of the Board to be independent. In January 2021, each of our non-employee directors completed a questionnaire which inquired as to their relationship (and the relationships of their immediate family members) with us and other potential conflicts of interest. Taking into account our review of the responses to this questionnaire process and such other due consideration and diligence as it deemed appropriate, in March 2021, our Board met to discuss the independence of those non-employee directors. Following such discussions and based on the recommendations of the Nominating and Corporate Governance Committee, our Board determined that the following directors are "independent" as defined under Nasdaq rules: Jeffrey Brown, Michael Gade, Christopher Hetrick, Harold Lewis, Glenn Marino, Carol McFate and B.C. Silver.

The table below includes a description of categories or types of transactions, relationships or arrangements, if any, considered by our Board in reaching its determination that the directors are independent.

Name
  Independent
  Transactions/Relationships/Arrangements

Jeffrey Brown

  Yes   None

Michael Gade(1)

  Yes   None

Christopher Hetrick

  Yes   Employee of Engaged Capital, LLC, a 4.4% stockholder in the Company (based on a Schedule 13D/A filed by Engaged Capital, LLC with the SEC on August 25, 2020). The Board did not deem this ownership by Mr. Hetrick's employer to impair his independence.

Harold Lewis

  Yes   None

Glenn Marino

  Yes   None

Carol McFate

  Yes   None

B.C. Silver

  Yes   None
(1)
Mr. Gade has determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at that time.

Committees of the Board

The standing committees of the Board during 2020 included the (1) Audit & Risk Committee, (2) Compensation Committee, and (3) Nominating and Corporate Governance Committee. Each of the standing committees has the authority to retain independent advisors and consultants, with all fees and expenses to be paid by the Company. From time to time, the Board may also appoint special committees for specific matters, as it did in 2020.

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The following table provides membership and meeting information for the Board and each of the Board's standing committees during 2020 and also describes changes to committees as of the date of this proxy statement:

Name
  Independent(1)
  Audit & Risk Committee(2)
  Compensation
Committee

  Nominating and
Corporate Governance
Committee

Jeffrey Brown   Yes   Chair    
Mitchell Fadel   No        
Michael Gade(3)   Yes     Member   Chair
Christopher Hetrick   Yes       Chair   Member
Harold Lewis   Yes   Member   Member  
Glenn Marino   Yes     Member     Member(4)
Carol McFate   Yes   Member     Member(5)
B.C. Silver   Yes       Member(4)   Member(4)
Number of Committee Meetings in 2020     9   7   5
(1)
The Board has determined whether the director is independent as described above under "Independent Directors".

(2)
The Board has determined that Mr. Brown is an "audit committee financial expert" as defined by SEC rules and that each of Mr. Lewis, Mr. Marino and Ms. McFate meets the financial sophistication requirements for Nasdaq audit committee members.

(3)
Mr. Gade has determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at that time (and, as a result, will no longer serve on any committee of the Board following the 2021 Annual Meeting).

(4)
The director was appointed to the indicated committee in March 2021 and did not attend any meeting of such committee in 2020.

(5)
Following the 2021 Annual Meeting, Ms. McFate will replace Mr. Gade as Chair of the Nominating and Corporate Governance Committee.

Audit & Risk Committee

The Audit & Risk Committee assists the Board in fulfilling its oversight responsibilities by reviewing risks relating to accounting matters, financial reporting, legal and regulatory compliance, and other enterprise-wide risks. To satisfy these oversight responsibilities, our Audit & Risk Committee reviews, among other things:

    the financial reports and other financial information provided by us to the SEC or the public;

    our systems of controls regarding finance, accounting, legal compliance and ethics that management and the Board have established;

    our independent auditor's qualifications and independence;

    the performance of our internal audit function and our independent auditors;

    the efficacy and efficiency of our auditing, accounting and financial reporting processes generally; and

    our risk management practices.

The Audit & Risk Committee has the direct responsibility for the appointment, compensation, retention and oversight of our independent auditors, and reviews our internal audit department's reports, responsibilities, budget and staffing. In addition, the Audit & Risk Committee meets regularly with our Chief Financial Officer, the head of our internal audit department, our independent auditors, and management (including regularly scheduled executive sessions with the head of our internal audit department and our independent auditors). The Audit & Risk Committee also oversees compliance with our Code of Business Conduct and Ethics.

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The Audit & Risk Committee pre-approves all audit and non-audit services provided by our independent auditors, other than de minimis exceptions for non-audit services that may from time to time be approved by the Audit & Risk Committee. The Audit & Risk Committee may delegate pre-approval authority to one or more of its members from time to time or may adopt specific pre-approval policies and procedures; however, any such pre-approvals must in all cases be presented for ratification by the Audit & Risk Committee at its next scheduled meeting.

The Board has adopted a charter for the Audit & Risk Committee, which can be found on our website at https://investor.rentacenter.com/governance-documents. The Audit & Risk Committee reviews, updates and assesses the adequacy of its charter on an annual basis, and may recommend any proposed modifications to its charter to the Board for its approval, if and when appropriate.

Compensation Committee

The Compensation Committee, among other things:

    discharges the Board's responsibilities with respect to all forms of compensation of our Chief Executive Officer, Chief Financial Officer, and each of our Executive Vice Presidents, including assessing the risks associated with our executive compensation policies and practices and employee benefits;

    administers our equity incentive plans;

    reviews and discusses with our management the Compensation Discussion and Analysis to be included in our annual proxy statement, Annual Report on Form 10-K or information statement, as applicable, and makes a recommendation to the Board as to whether the Compensation Discussion and Analysis should be included in our annual proxy statement, Annual Report on Form 10-K or any information statement, as applicable; and

    recommends to the Board the form and amount of director compensation and conducts a review of such compensation from time to time, as appropriate.

The Board has adopted a charter for the Compensation Committee, which can be found on our website at https://investor.rentacenter.com/governance-documents. In addition, the Compensation Committee reviews, updates and assesses the adequacy of its charter on an annual basis, and may recommend any proposed modifications to its charter to the Board for its approval, if and when appropriate.

The Compensation Committee's processes for fulfilling its responsibilities and duties with respect to executive compensation and the role of our executive officers in the compensation process are described in the section "Compensation Discussion and Analysis — Compensation Process" below in this proxy statement.

Pursuant to its charter, the Compensation Committee has the authority, to the extent it deems necessary or appropriate, to retain compensation consultants, independent legal counsel or other advisors and has the sole authority to approve the fees and other retention terms with respect to such advisors. From time to time, the Compensation Committee has engaged compensation consultants to advise it on certain matters. See the section "Compensation Discussion and Analysis — Compensation Process" below in this proxy statement for more information. In addition, the Compensation Committee also has the authority, to the extent it deems necessary or appropriate, to delegate matters to a sub-committee composed of members of the Compensation Committee.

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Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee manages risks associated with corporate governance and potential conflicts of interest and assists the Board in fulfilling its responsibilities by, among other things:

    identifying individuals believed to be qualified to become members of the Board, consistent with criteria approved by the Board;

    recommending to the Board candidates for election or reelection as directors, including director candidates submitted by the Company's stockholders;

    recommending to the Board members of the Board to serve on committees;

    overseeing, reviewing and making periodic recommendations to the Board concerning our corporate governance policies; and

    directing the succession planning efforts for the Chief Executive Officer and reviewing management's succession planning process with respect to our other senior executive officers.

The Board has adopted a written charter for the Nominating and Corporate Governance Committee, which is available on our website at https://investor.rentacenter.com/governance-documents. In addition, the Nominating and Corporate Governance Committee reviews, updates and assesses the adequacy of its charter on an annual basis, and may recommend any proposed modifications to its charter to the Board for its approval, if and when appropriate.

Board and Committee Self-Evaluations

Each year, the Board and its committees perform a rigorous self-evaluation. The Nominating and Corporate Governance Committee oversees the process. The evaluations solicit input from directors regarding the performance and effectiveness of the Board, its committees and its members and provide an opportunity for directors to identify areas of potential enhancements. Individual director responses are submitted through a third party firm engaged by the Company to administer the evaluation process and report the results, which are compiled for review and discussion by the Board and its committees. The Board believes this process is effective to evaluate the Board, its committees and the contributions of its members, and identify opportunities for continuous improvement.

Board Oversight

General Risk Oversight

Our Board takes an active role, as a whole and also at the committee level, in overseeing management of the Company's risks. The Board and the relevant committees receive regular reports from members of senior management on areas of material risk to the Company, including operational, financial, strategic, competitive, reputational, cybersecurity, legal and regulatory risks. The Board also meets with senior management annually for a strategic planning session and discussion of the key risks inherent in our short- and long-term strategies at the development stage, and also receives periodic updates on our strategic initiatives throughout the year. In addition, our Board has delegated the responsibility for oversight of certain risks to its standing committees, as discussed in this proxy statement. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire Board is regularly informed through committee reports concerning such risks and, in general, all independent directors regularly attend committee meetings regardless of membership on that committee and the full Board is provided with all Board and standing committee meeting materials.

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Cybersecurity Oversight

The Board maintains oversight of the Company's cybersecurity risk through regular updates from management. Specifically, the Board and its Audit Committee receive updates from management regarding the status of ongoing projects to strengthen our efforts against cybersecurity events and reviews risks relevant to cybersecurity and existing controls in place to mitigate the risk of cybersecurity incidents. Among other things, the Company maintains an incident response policy and plan designed to provide for timely, consistent responses to actual or attempted data and security incidents impacting the Company, and requires third party and other risk compliance attestations.

Environmental, Social, and Governance Initiatives Oversight

Our Board recognizes that environmental, social, governance and sustainability ("ESG") issues are of increasing importance to our investors, as well as our employees and customers, and that being a responsible corporate citizen helps drive shareholder value. Our Board is committed to integrating and maintaining responsible ESG initiatives into our operations and strategic business objectives.

Our ESG actions cover a wide range of areas of importance to our Company and our stakeholders, and are ultimately driven by our mission to improve the quality of life for our customers and employees. We provide household and other durable goods to underserved cash and credit constrained customers and offer an affordable and flexible way to furnish a home and obtain access to other essential items without incurring a long-term debt obligation or accessing credit. Our employees are offered competitive pay and benefits and paid time off, and we have a longstanding history of promoting from within to support our employees in advancing their careers and professional development. Our charitable giving efforts are aligned with our desire to help the underserved including hunger relief, family and youth empowerment, and disaster relief. We put our values into action by supporting causes that give families peace of mind and offer children opportunities that will help them reach their potential. We also strive to operate our retail stores efficiently to conserve the environment by optimizing our fleet of vehicles, implementing energy efficient lighting, recycling, and leasing energy efficient products.

In 2020, the COVID-19 pandemic created an unprecedented global health crisis and economic turmoil. The health and safety of our co-workers, customers and communities remained our top priorities as we navigated the impacts of the pandemic. Our culture of safety and the resilience of our co-workers served us well and allowed our stores to continue operating as an essential business so we could meet our customers' needs for critical household items. Our products allowed our customers and their families to focus on staying healthy and connected while they were forced to spend substantially more time at home and to address the economic dislocation caused by COVID-19. The Board was actively involved in the oversight of our COVID-19 responses throughout the year.

Also in 2020, the social unrest across the country gave rise to an important public discourse regarding racial justice and equality. With the support of our Board, we organized a series of town halls across our Company to openly discuss with our employees new programs and initiatives that would best support a diverse and inclusive workforce. Based on the feedback received, we have taken a number of initial steps. For example, we created a new Chief Diversity Officer position that will regularly report to the Board. While we intend to increase our overall focus on diversity within our development programs, the Chief Diversity Officer will take the lead in assessing the impact that proposed initiatives in our organization may have on our culture as well as in creating and implementing initiatives that are intended to promote an inclusive workforce. We have also implemented a program to deliver unconscious bias training to all employees. Further, we are launching additional Employee Resource Groups to continue the dialogue with our employees regarding our diversity initiatives.

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Our company and our Board firmly believe we are able to effect positive social and environmental change, enhance business results and improve the wellbeing of our employees through our robust ESG program.

Director Compensation

Cash Compensation

The following table provides an overview of the directors' 2020 annual retainers:

Position
  2020 Annual Retainer

All Non-Employee Directors (including the Chairman)

  $  77,500

Chairman of the Board

  $150,000

Chair of the Audit & Risk Committee

  $  27,500

Other members of the Audit & Risk Committee

  $  15,000

Chair of the Compensation Committee

  $  25,000

Other members of the Compensation Committee

  $  10,500

Chair of the Nominating and Corporate Governance Committee

  $  20,000

Other members of the Nominating and Corporate Governance Committee

  $  10,000

Additionally, each non-employee director receives $2,500 for each Board meeting attended in person (or, at the discretion of the Compensation Committee, via telephonic or other electronic means) and is reimbursed for his or her expenses in attending such meetings.

In 2020, Messrs. Brown and Hetrick also served on multiple special committees of the Board in connection with specific matters and were entitled to a total of $20,000 each for such special committee service. Mr. Fadel, as an employee of the Company, was not entitled to receive any cash compensation for his service as a director during 2020.

Retainers and meeting attendance fees may be paid in a combination of cash or DSUs at each non-employee director's election. Deferred fees are matched 25% by the Company and the total deferred fees and matching contributions are converted into an equivalent value of DSUs. Deferred fees plus matching contributions are converted to DSUs based on the closing price of Rent-A-Center common stock on the trading day immediately preceding the date on which the DSUs are granted. Currently, the Board's practice is to pay cash fees and issue DSUs in respect of any deferred cash fees on a quarterly basis.

Annual DSU Awards

Our non-employee directors receive an award of DSUs on the first business day of each year pursuant to the Rent-A-Center, Inc. 2016 Long-Term Incentive Plan (the "2016 Plan") or, if approved by stockholders as set forth in this proxy statement, the 2021 Long-Term Incentive Plan for future years.

The annual DSU award to our non-employee directors for 2020 was valued at $120,000, which was the same value as 2019. All of our non-employee directors serving on January 2, 2020, the first business day of 2020, were granted DSUs valued at $120,000 on that date.

Description of DSUs

Each DSU is fully vested and non-forfeitable at the time of award and represents the right to receive one share of common stock of the Company. Those shares of common stock are not issued to a director until that director ceases to be a member of the Board and, therefore, cannot be sold until such time. The DSUs do not have voting rights. The holder of a DSU is entitled to receive cash dividend equivalent

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payments with respect to the shares underlying such DSU if, as and when any cash dividend is declared by the Board with respect to our common stock.

Director Stock Ownership Guideline

Our Board has adopted a guideline providing that each non-employee member of the Board should hold at least $200,000 in our common stock within 5 years of the later of (1) December 1, 2020 (the date on which such ownership guideline was adopted), and (2) the date of their original election or appointment to the Board, and to hold such equity interest for so long as such member continues as a director. Moreover, because non-employee members of the Board receive equity compensation in the form of DSUs, they are effectively required to retain 100% of their equity compensation until they cease to be a member of the Board and are issued shares of common stock in respect of their DSUs.

Non-employee members of the Board may satisfy the ownership requirements in the equity ownership guidelines with common stock owned directly or indirectly (including as a result of fully vested awards from previous grants), shares of our common stock held through any Company benefit plan in which non-employee directors are eligible to participate, DSUs and unvested time-based restricted stock awards or restricted stock units.

As of December 31, 2020, based on the closing price of our common stock on the Nasdaq Global Select Market of $38.29 per share as of such date, each of Messrs. Brown, Gade, Hetrick, Marino and Lewis and Ms. McFate met the foregoing guideline. Mr. Silver was appointed to the Board in January 2021.

Director Compensation for 2020

The following table sets forth certain information regarding the compensation of our non-employee directors during 2020. Because Mr. Silver did not join the Board until January 2021, he did not earn any compensation for 2020 and is not included in the table below.

Name
  Fees Earned or
Paid in Cash(1)

  DSUs(2)
  Other
Compensation(3)

  Total
 

Jeffrey Brown

    $ 448,139   $ 48,067   $ 496,206  

Michael Gade(4)

  $ 108,000   $ 138,891   $ 62,792   $ 309,683  

Christopher Hetrick(5)

    $ 155,159   $ 33,279   $ 188,438  

Harold Lewis

  $ 113,000   $ 189,046   $ 7,604   $ 309,650  

Glenn Marino(6)

  $ 19,844   $ 50,381   $ 892   $ 71,117  

Carol McFate

  $ 56,250   $ 241,797   $ 9,234   $ 307,281  
(1)
Includes (a) annual retainers, (b) meeting attendance fees and (c) any special committee fees paid in cash to each non-employee director with respect to services rendered in 2020. For directors who elected to defer cash fees into DSUs, those deferred amounts are included in the DSUs column to the extent such DSUs were awarded in 2020.

(2)
Reflects the grant date fair value calculated pursuant to FASB ASC Topic 718 of DSUs granted to each director in fiscal 2020, as follows:

Each director (other than Mr. Marino) was granted 4,161 DSUs in January 2020, representing the $120,000 annual grant for service in fiscal 2020. Mr. Marino was appointed to the board of directors in February 2020 and in April 2021 was granted 1,882 DSUs, representing a portion of the $120,000 annual grant for his partial year of service in fiscal 2020, which grant is not reflected in the table above.

>During fiscal 2020, Messrs. Brown, Gade, Hetrick, Lewis and Marino and Ms. McFate were granted 14,489, 760, 1,219, 2,394 and 1,862 DSUs and 4,880 DSUs, respectively, in lieu of quarterly cash retainer and meeting attendance fees payable in respect of the fourth quarter of 2019 through and including the third quarter of 2020. Such amounts (and the table above) exclude DSUs that were awarded to such persons in January 2021 in lieu of quarterly cash retainer and meeting attendance fees payable in respect of the fourth quarter of 2020.

(3)
Represents dividend equivalents paid in cash in respect of vested DSUs.

(4)
Mr. Gade has determined not to stand for re-election at the 2021 Annual Meeting and will retire as a director at that time.

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(5)
Mr. Hetrick, by letter to the Board of Directors, declined to accept director fees otherwise payable to him from April 16, 2020 through December 31, 2020 and requested that the Company instead dedicate the amount to employees of the Company that need it the most in light of the COVID-19 pandemic and its effects. Such fees amounted to $132,500 in the aggregate and are not reflected in the table above.

(6)
Mr. Marino was appointed to the Board of Directors in February 2020.

Director Compensation Changes for 2021

At its December 2020 meeting, the Compensation Committee reviewed the non-employee director compensation program as part of its annual review process. The Compensation Committee engaged an independent consulting firm, Korn Ferry, to assist with its review and recommendation to the Board of any changes to the program for 2021. Korn Ferry provided the Compensation Committee with market data regarding director compensation programs from our Peer Group and a comparison of our director compensation program to the market data, which was taken into account by the Compensation Committee. As a result of its review, the Compensation Committee recommended, and the Board approved, retaining the same compensation program elements and amounts for 2021 as in 2020, other than an increase in the Chairman's annual retainer from $150,000 to $175,000 based on the market data provided by Korn Ferry.

Director Nominations

Director Nominees

Under our Bylaws, only persons who are nominated in accordance with the procedures set forth in our Bylaws are eligible for election as, and to serve as, members of our Board. Under our Bylaws, nominations of persons for election to our Board may be made at a meeting of our stockholders (1) by or at the direction of our Board or (2) by any stockholder, provided they comply with the provisions of Article I, Sections 3 and 4 of our Bylaws. The Board has delegated the screening and recruitment process for Board members to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee selects individuals it believes are qualified to be members of the Board, and recommends those individuals to the Board for nomination for election or re-election as directors. From time to time, the Nominating and Corporate Governance Committee may engage a consultant to conduct a search to identify qualified candidates. The Nominating and Corporate Governance Committee then undertakes the evaluation process described below for any candidates so identified.

In 2020, the Nominating and Corporate Governance Committee engaged Daversa Partners to assist the Board in finding an additional candidate to consider to join the Board. As a result of that process, the Board appointed Mr. Silver as an additional director in January 2021.

Qualifications

The goal of the Nominating and Corporate Governance Committee is to nominate qualified individuals with the objective of having membership on the Board that combines diverse business and industry experience, skill sets and other leadership qualities, represents diverse viewpoints and enables the Company to pursue its strategic objectives. The Nominating and Corporate Governance Committee also believes that members of the Board should possess character, judgment, skills (such as an understanding of the retail and lease-to-own industries, business management, finance, accounting, marketing, operations and strategic planning), diversity of viewpoints, background, experience and other demographics and experiences with businesses and other organizations of a comparable size and industry. The Nominating and Corporate Governance Committee also considers the interplay of the

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candidate's experience with the experience of the other Board members, the fit of the individual's skills and personality with those of other directors and potential directors in building a Board that is effective, collegial and responsive to the needs of the Company, and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board. In addition, the Nominating and Corporate Governance Committee considers the composition of the current Board and the Board's needs when evaluating the experience and qualification of director candidates. The Nominating and Corporate Governance Committee evaluates whether certain individuals possess the foregoing qualities and recommends to the Board candidates for nomination to serve as our directors. This process is the same regardless of whether the nominee is recommended by one of our stockholders.

Advance Resignation Policy

As a condition to nomination by the Nominating and Corporate Governance Committee of an incumbent director, a nominee shall, upon request by the Board or the Company's Corporate Secretary, submit an irrevocable offer of resignation to the Board, which resignation shall become effective in the event that (a) such nominee is proposed for reelection and is not reelected at a meeting of the stockholders in which majority voting applies and (b) the resignation is accepted by the Board by the vote of a majority of the directors, not including any director who has not been reelected.

Stockholder Nominations

In addition to nominees by or at the direction of our Board, the Nominating and Corporate Governance Committee will consider candidates for nomination proposed by a stockholder in the same manner and based on the same criteria as other candidates considered by the Nominating and Corporate Governance Committee as described above under "Qualifications." The proposing stockholder must provide notice and information on the proposed nominee to the Nominating and Corporate Governance Committee through the Secretary in accordance with the provisions of Article I, Sections 3 and 4 of our Bylaws relating to direct stockholder nominations.

Director Attendance

Board Meetings and Executive Sessions

During 2020, our Board met 16 times, including regularly scheduled and special meetings. All of our directors attended more than 75% of the aggregate of the total number of meetings of the Board and the total number of meetings of the Board committees on which they serve.

In addition to full Board executive sessions, our independent directors meet in executive session at each regularly scheduled quarterly meeting of the Board. Executive sessions are chaired by our Chairman of the Board.

Annual Meeting of Stockholders

Each member of the Board is expected to attend our annual meeting of stockholders. All of our directors then serving as directors attended the Company's 2020 annual meeting of stockholders.

Procedures for Reporting Accounting Concerns

The Audit & Risk Committee has established procedures for (1) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and

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(2) the submission by our employees, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters. These procedures are posted on our website at https://investor.rentacenter.com/governance-documents.

Communications with the Board

Our Board has established a process by which stockholders and other interested parties may communicate with our Board, Board committees or individual directors. Stockholders or other interested parties may contact our Corporate Secretary by any one of the below methods. The Corporate Secretary will forward such communications to the Board, committees or individual directors, as applicable. However, the Corporate Secretary is not required to forward communications if it is determined the communication is (1) unrelated to the duties and responsibilities of the Board, (2) unduly hostile, threatening or illegal, or (3) obscene or otherwise deemed inappropriate.

GRAPHIC

By telephone:
972-624-6210
  GRAPHIC

By mail:
Rent-A-Center, Inc.
Attn: Corporate Secretary
5501 Headquarters Drive
Plano, TX 75024
  GRAPHIC

By e-mail:
RAC.Board@rentacenter.com

Related Person Transactions

Policy on Review and Approval of Transactions with Related Persons

The Board has adopted a written statement of policy and procedures for the identification and review of transactions involving us and "related persons" (our directors and executive officers, stockholders owning five percent or greater of our outstanding stock, and immediate family members of any of the foregoing). Our directors and executive officers are required to provide notice to our general counsel of the facts and circumstances of any proposed transaction involving amounts greater than $120,000 involving them or their immediate family members that may be deemed to be a related person transaction. Our general counsel, in consultation with management and our outside counsel, as appropriate, will then assess whether the proposed related person transaction requires approval pursuant to the policy and procedures. If our general counsel determines that any proposed, ongoing or completed transaction involves an amount in excess of $120,000 and is a related person transaction, the Nominating and Corporate Governance Committee must be notified for consideration at the next regularly scheduled meeting of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has reviewed and determined that each of the following related person transactions are to be deemed pre-approved by the Nominating and Corporate Governance Committee: (1) employment agreements related to executive officers if (a) the related compensation is reported in our proxy statement or (b) the executive officer is not an immediate family member of another "related person" and the Compensation Committee approved, or recommended to the Board for approval, such compensation, (2) any compensation paid to a director if the compensation is reported in our proxy statement, (3) transactions where all of our stockholders receive proportional benefits and (4) any transaction with a "related person" involving the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. The Nominating and Corporate Governance Committee will approve or ratify, as applicable, only those related

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person transactions that are in, or are not inconsistent with, our best interests and those of our stockholders.

Reportable Transactions with Related Persons

The Company has not been a participant in any transaction since January 1, 2020 in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, nominees for director or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest that is reportable pursuant to Item 404(a) of Regulation S-K.

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PROPOSAL TWO:
RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit & Risk Committee has selected Ernst & Young LLP ("E&Y") as our independent registered public accounting firm for the fiscal year ended December 31, 2021. E&Y also served as our independent registered public accounting firm in 2020.

The Audit & Risk Committee reviews and pre-approves both audit and all permissible non-audit services provided by our independent registered public accounting firm, as described in "— Board Information — Board Committees" in this proxy statement, and accordingly, all services and fees in 2020 provided by E&Y were pre-approved by the Audit & Risk Committee. The Audit & Risk Committee has considered whether the provision of services, other than services rendered in connection with the audit of our annual financial statements, is compatible with maintaining E&Y's independence. The Audit & Risk Committee has determined that the rendering of non-audit services by E&Y during the year ended December 31, 2020, was compatible with maintaining such firm's independence.

Our Board has directed that we submit the selection of our independent registered public accounting firm for ratification by our stockholders at the 2021 Annual Meeting. Stockholder ratification of the selection of E&Y as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the Board is submitting the selection of E&Y to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit & Risk Committee will reconsider whether or not to continue the retention of E&Y. Even if the selection is ratified, the Audit & Risk Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in our best interests and those of our stockholders. The Audit & Risk Committee annually reviews the performance of our independent registered public accounting firm and the fees charged for their services. Based upon the Audit & Risk Committee's analysis of this information, the Audit & Risk Committee will determine which registered independent public accounting firm to engage to perform our annual audit each year.

Representatives of E&Y will attend the 2021 Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions from stockholders.

Our Board recommends that you vote "FOR" the proposal to ratify the selection of E&Y as our independent registered public accounting firm.

Principal Accountant Fees and Services

The aggregate fees billed by E&Y for the years ended December 31, 2020 and December 31, 2019, and the aggregate fees billed by KPMG LLP for the year ended December 31, 2019, for the professional services described below are as follows:

 
  2020
  2019
 

Audit Fees1

  $1,275,396   $1,692,105  

Audit-Related Fees2

    $588,480      

Tax Fees3

  $74,394    

All Other Fees

         
(1)
Represents the aggregate fees billed by E&Y and KPMG for (a) professional services rendered for the audit of our annual financial statements for the years ended December 31, 2020 and December 31, 2019, (b) the audit of management's assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020 and December 31, 2019, and (c) reviews of the financial statements included in our Quarterly Reports on Form 10-Q filed with the SEC.

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(2)
Represents the aggregate fees billed by E&Y for 2020 for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under the caption "Audit Fees." These services include engagements related to the due diligence review by E&Y of certain financial and other information of Acima Holdings, LLC, in connection with the Agreement and Plan of Merger executed by the Company in December 2020.

(3)
Represents the aggregate fees billed by E&Y for 2020 for professional services rendered for tax compliance, tax advice and tax planning. These services comprise engagements related to federal and international tax compliance and planning.

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AUDIT AND RISK COMMITTEE REPORT

The material in this Report is not "soliciting material", is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing under the Securities Act of 1933 (the "Securities Act") or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation by reference language in such filing.

In accordance with its written charter adopted by the Board, the Audit & Risk Committee assists the Board in fulfilling its oversight responsibilities by, among other things, reviewing the financial reports and other financial information provided by the Company to any governmental body or the public.

In discharging its oversight responsibilities, the Audit & Risk Committee obtained from the independent registered public accounting firm a formal written statement describing all relationships between the firm and the Company that might bear on the auditors' independence consistent with the applicable requirements of the Public Company Accounting Oversight Board, discussed with the independent auditors any relationships that may impact their objectivity and independence, and satisfied itself as to the auditors' independence. The Audit & Risk Committee also discussed with management, the internal auditors and the independent auditors the integrity of the Company's financial reporting processes, including the Company's internal accounting systems and controls, and reviewed with management and the independent auditors the Company's significant accounting principles and financial reporting issues, including judgments made in connection with the preparation of the Company's financial statements. The Audit & Risk Committee also reviewed with the independent auditors their audit plans, audit scope and identification of audit risks.

The Audit & Risk Committee discussed with the independent auditors the matters required to be discussed by the Public Company Accounting Oversight Board and the SEC, and, with and without management present, discussed and reviewed the results of the independent auditors' examination of the consolidated financial statements of the Company.

The Audit & Risk Committee reviewed and discussed the audited consolidated financial statements of the Company as of and for the year ended December 31, 2020 with management and the independent auditors. Management is responsible for the Company's financial reporting process, including its system of internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act), and for the preparation of the Company's consolidated financial statements in accordance with generally accepted accounting principles. The independent auditor is responsible for auditing those financial statements, and expressing an opinion on the effectiveness of internal control over financial reporting. The Audit & Risk Committee's responsibility is to monitor and review these processes. The members of the Audit & Risk Committee are "independent" as defined by SEC and Nasdaq rules, and our Board has determined that Mr. Jeffrey Brown is an "audit committee financial expert" as defined by SEC rules.

The Audit & Risk Committee discussed with the Company's internal and independent auditors the overall scope and plans for their respective audits, including internal control testing under Section 404 of the Sarbanes-Oxley Act. The Audit & Risk Committee periodically meets with the Company's internal and independent auditors, with and without management present, and in private sessions with members of senior management to discuss the results of their examinations, their evaluations of the Company's internal controls, and the overall quality of the Company's financial reporting. The Audit & Risk Committee also periodically meets in executive session.

In reliance on the reviews and discussions referred to above, the Audit & Risk Committee recommended to the Board (and the Board subsequently approved the recommendation) that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the SEC.

AUDIT & RISK COMMITTEE
Jeffrey Brown, Chairman
Harold Lewis
Glenn Marino
Carol McFate

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EXECUTIVE OFFICERS

The Board appoints our executive officers annually and updates the executive officer positions as needed throughout the year. Each executive officer serves at the behest of the Board and until their successors are appointed, or until the earlier of their death, resignation or removal.

The following table sets forth certain information with respect to our executive officers as of the date of this proxy statement:

Name
  Age
  Position

Mitchell Fadel

  63   Chief Executive Officer

Anthony Blasquez

    45   Executive Vice President — Rent-A-Center Business

Ann Davids

  52   Executive Vice President — Chief Customer and Marketing Officer

Jason Hogg

    49   Executive Vice President — Acima (formerly Preferred Lease)

Bryan Pechersky

  50   Executive Vice President — General Counsel & Corporate Secretary

Maureen Short

    46   Executive Vice President — Chief Financial Officer

Catherine Skula

  49   Executive Vice President — Chief Development Officer

Mitchell Fadel.    Mr. Fadel has served as one of our directors since June 2017 and was named Chief Executive Officer on January 2, 2018. Mr. Fadel was self-employed prior to joining the Company after most recently serving as President — U.S. Pawn for EZCORP, Inc., a leading provider of pawn loans in the United States and Mexico, from September 2015 to December 2016. Prior to that, Mr. Fadel served as President of the Company (beginning in July 2000) and Chief Operating Officer (beginning in December 2002) each until August 2015, and also as a director of the Company from December 2000 to November 2013. From 1992 until 2000, Mr. Fadel served as President and Chief Executive Officer of the Company's subsidiary Rent-A-Center Franchising International, Inc. f/k/a ColorTyme, Inc. Mr. Fadel's professional experience with the Company also includes previously serving as a Regional Director and a District Manager.

Anthony Blasquez.    Mr. Blasquez was named Executive Vice President — Rent-A-Center Business effective as of June 1, 2020. In such role, Mr. Blasquez focuses on improving the Rent-A-Center omni-channel business, which includes impacting performance from both e-commerce and the traditional store business. Mr. Blasquez has been with Rent-A-Center for 22 years and has served in every field operations position in the Company, most recently Divisional Vice President of Operations from 2015 to 2020 prior to being promoted to his current position.

Ann Davids.    Ms. Davids was named Executive Vice President — Chief Customer and Marketing Officer effective as of February 21, 2018. Ms. Davids served as Senior Vice President — Chief Customer and Marketing Officer for Direct General/National General Insurance from 2013 to 2018 with responsibility for the web channel development as well as marketing strategy and execution. Prior to 2013, Ms. Davids served as our chief marketing officer for 15 years.

Jason Hogg.    Mr. Hogg was named Executive Vice President — Preferred Lease effective as of June 22, 2020. In connection with our acquisition of Acima Holdings, LLC in February 2021, the Preferred Lease segment is now referred to as the Acima segment. Prior to joining Rent-A-Center, Mr. Hogg was the CEO of Aon Cyber Solutions from 2017 to 2020, where he oversaw global operations and held full

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profit and loss responsibility. Mr. Hogg has a proven track record as a leader and innovator in financial services and financial technology, with over 500 issued patent claims in complex technology systems. Prior to Aon, Mr. Hogg served as the CEO of Blackstone's B2R Holdings, L.P. from 2014 to 2016, where he led the organization to its first $1 billion in loans and to win the Innovator of the Year award from REFI Financing Awards in 2016. B2R was acquired by Finance of America. Mr. Hogg also founded, and served as the President and CEO of, Revolution Money, Inc., an alternative payment company from 2005 to 2010. Revolution Money was acquired by American Express in January of 2010. Following such acquisition, Mr. Hogg served as the President of American Express' Serve Enterprise division from 2010 to 2014. During his tenure, he launched the Bluebird alternative banking platform with Walmart and the Serve stored value platform, and established American Express' first mainland China office and operations while overseeing American Express' joint venture with LianLian.

Bryan Pechersky.    Mr. Pechersky was named Executive Vice President — General Counsel & Corporate Secretary effective as of June 1, 2020. Mr. Pechersky oversees our legal department, government affairs department and risk management department. Prior to joining Rent-A-Center, Mr. Pechersky served from 2010 through 2019 as Executive Vice President — General Counsel and Corporate Secretary for Cloud Peak Energy Inc., a publicly traded mining and logistics supplier to U.S. and Asian utilities. From 2007 to 2010, Mr. Pechersky was Senior Vice President, General Counsel and Secretary for Harte-Hanks, Inc., a publicly traded worldwide, direct and targeted marketing company. From 2005 to 2007, Mr. Pechersky was Senior Vice President, Secretary and Senior Corporate Counsel for Blockbuster Inc., a publicly traded global movie and game entertainment retailer. From 2004 to 2005, Mr. Pechersky was Deputy General Counsel and Secretary for Unocal Corporation, a publicly traded international energy company acquired by Chevron Corporation in 2005. Prior to these positions, from 1996 to 2004, Mr. Pechersky was a capital markets, mergers and acquisitions and litigation attorney for Vinson & Elkins L.L.P., a leading global law firm. Mr. Pechersky also served as a Law Clerk to the Hon. Loretta A. Preska of the U.S. District Court for the Southern District of New York in 1995 and 1996.

Maureen Short.    Ms. Short was named Executive Vice President — Chief Financial Officer on December 19, 2018. Ms. Short previously served as Interim Chief Financial Officer effective from December 2016 until December 2018, Senior Vice President — Finance, Investor Relations and Treasury from November 2014 until December 2016, as Senior Vice President — Finance, Analytics and Reporting from March 2013 until November 2014, and as Vice President — Finance, Analytics and Reporting from August 2010 until March 2013.

Catherine Skula.    Ms. Skula was named Executive Vice President — Chief Development Officer effective November 23, 2020. Prior to that position, Ms. Skula served as our Executive Vice President — Franchising effective as of January 1, 2018, after previously serving as Senior Vice President — Franchising since January 2012. Ms. Skula has also served as President and Chief Executive Officer of Rent A-Center Franchising International, Inc., a subsidiary of the Company, since January 2012. From August 2009 to January 2012, Ms. Skula served as Division Vice President — RTO Domestic. Ms. Skula began her employment with us in 1994 as a customer account representative and has held various other operations positions, including store manager, district manager, and regional director.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

We are committed to maintaining a strong pay-for-performance culture. The compensation program is reviewed annually in order to assure that its objectives and components are aligned with the Company's strategic goals and culture, and also that it incentivizes short- and long-term profitability and ethical business conduct in accordance with our values.

This Compensation Discussion and Analysis ("CD&A") describes key features of our executive compensation program, summarizes the 2020 cash and equity incentive compensation received by our named executive officers, highlights the strong pay for performance alignment of our executives' compensation with our financial, operating and stockholder returns and provides additional context to the data presented in the compensation tables included below in this proxy statement. This CD&A also describes any significant changes to our executive compensation program for 2021 that have been implemented prior to filing this proxy statement. The term "executive officers" means our senior executives who are listed above under the heading "Executive Officers". The term "named executive officers" means the five executive officers identified in the table below, each of whom were considered "executive officers" as of December 31, 2020.

Named Executive Officer
  Title
Mitchell Fadel   Chief Executive Officer
Maureen Short   Executive Vice President — Chief Financial Officer
Ann Davids   Executive Vice President — Chief Customer and Marketing Officer
Jason Hogg   Executive Vice President — Acima (formerly Preferred Lease)
Catherine Skula   Executive Vice President — Chief Development Officer

Please read the entirety of this CD&A and remaining compensation sections in this proxy statement for further details regarding the matters summarized below.

Executive Compensation Program Overview

Decisions with respect to compensation of our executive officers, including our Chief Executive Officer and other named executive officers, are made by our Compensation Committee, which is comprised solely of independent directors. Our Compensation Committee has identified four primary objectives for our executive compensation program, which guide the decisions it makes with respect to the amount and type of compensation paid to our named executive officers. The objectives of our executive compensation program are to:

    attract, retain and motivate senior executives with competitive compensation opportunities;

    balance short-term and long-term strategic goals;

    align our executive compensation program with the core values identified in our mission statement, which focuses on improving the quality of life for our co-workers and our customers; and

    reward achievement of our financial and non-financial goals.

The executive compensation program consists of a mix of three primary components, described below, which we believe appropriately rewards our executive officers for their overall contribution to company performance, contains a substantial portion of at-risk, performance-based compensation and aligns our

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executives' interests with those of our stockholders with the ultimate objective of increasing long-term stockholder value.

The Company's compensation philosophy is generally to position total direct compensation (base salary, annual incentive opportunity and long-term incentive compensation opportunity) around the 50th-75th percentile of similarly-situated public companies in the retail and consumer finance sectors. This includes companies in the Company's Peer Group described below. Cash compensation (base salary and annual incentive opportunity) is generally targeted at around the 50th percentile, and long-term incentive compensation is generally targeted at around the 75th percentile. The pay ultimately realized is highly variable and dependent primarily on (1) our financial and operational performance, (2) individual executive performance and (3) our multi-year relative TSR performance.

The three primary components of our executive compensation program are:

Component
 
Overview
Base Salary   Competitive base salaries are determined in large part through in-depth comparative analyses of comparable positions at companies in our Peer Group and generally targeted at around the 50th percentile of the Peer Group and other similarly-situated public companies in the retail and consumer finance sectors with the opportunity for above or below median base salaries based on experience, responsibilities, competencies and individual performance.

Annual Incentive Opportunity

 

Opportunity for an annual cash incentive award to align our executives with annual corporate and individual performance achievements. For 2020, the ultimate payout amount was based on (1) Rent-A-Center Business same store sales (25% weighting), (2) Preferred Lease (now known as Acima) invoice volumes (25% weighting), (3) Adjusted EBITDA (40% weighting), and (4) Free Cash Flow (10% weighting). The targeted achievement levels take into account the rigorous goals included in our annual operating budget which is approved by the Board. Each executive officer's target annual incentive opportunity is generally targeted at around the 50th percentile of the Peer Group and other similarly-situated public companies in the retail and consumer finance sectors. In the 2021 bonus plan, Free Cash Flow was eliminated as a performance metric and Acima invoice volumes were replaced with Acima revenues, as discussed in this CD&A.

Long-Term Incentive Compensation Opportunity

 

Long-term incentive plan and stock ownership guidelines to align our executives with longer term performance achievement and stockholder returns over time. The long-term incentive awards granted in February 2020 consisted of (1)  time-vested restricted stock units (weighted 20%) that cliff-vested after a three-year period, (2) stock options (weighted 20%) that vested pro rata annually over a four-year period, and (3) relative TSR-based performance stock units (weighted 60%) that vest solely based on the satisfaction of our performance based on our three-year TSR compared to the S&P 1500 Specialty Retail Index. Stock options were eliminated from the long-term incentive awards starting in 2021, as discussed in this CD&A, with performance stock units now weighted at 70%.

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Compensation Program Design and Governance Policies

In addition to our three primary components of executive compensation, our executive compensation program includes other features that we believe are consistent with strong governance practices, including:

What We Do

 

 

 

    Transparent Compensation Program:  Maintain a transparent executive compensation program that is understandable both to our stockholders and employees and is not overly complex or subject to constantly changing features

    Substantial Compensation Aligned with Performance:  A substantial percentage of both cash and equity compensation is at-risk and variable based on company performance

    Multi-Year Equity Vesting:  Three-year full vesting for all executive equity awards (starting in 2021, restricted stock units vest pro rata annually over three years; performance stock units cliff vest after three years based on relative TSR performance)

    Annual SOP Vote:  Annual Say on Pay stockholder vote regarding our executive compensation program to receive regular feedback from our investors

    Annual Program Risk Assessment:  Our Compensation Committee performs annual risk assessments of our compensation program

 

    Independent Compensation Consultant:
Engagement by the Compensation Committee of an independent compensation consultant to conduct a formal evaluation of, and advise the Compensation Committee with respect to, the compensation arrangements for our Chief Executive Officer, as well as provide guidance with respect to the compensation of our senior executives

    Rigorous Target Setting:  Rigorous performance targets for our annual cash incentive and long-term incentive compensation programs

    Total Reward Statement Review:  Regular review by the Compensation Committee of Chief Executive Officer and other executive total reward statements to evaluate multi-year cash and equity compensation awards as part of making compensation determinations

    Ownership Guidelines:  Stock ownership guidelines for our directors, Chief Executive Officer, executive vice presidents, senior vice presidents and vice presidents

    Clawback Policy:  Incentive compensation is subject to clawback, as described further in this proxy statement

     
What We Do Not Do

 

 

 

    No Hedging or Pledging Stock:    Insider Trading Policy that prohibits derivative transactions involving our common stock and pledging stock

    No gross-ups:    Employee benefits are provided without tax gross-ups (other than certain relocation-related expenses)

    No excessive perquisites:    We provide only limited perquisites, as described in this CD&A

 

    No Repricing Options:    We do not reprice stock options without stockholder approval (and starting in 2021, we no longer grant stock options)

    No Dividends Paid on Unvested Equity:    No prospective payment of dividends on unvested equity awards

2020 Company Performance Highlights

As described further in our year-end 2020 earnings announcement and in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K, our Company had strong performance during 2020 despite the many challenges resulting from the COVID-19 pandemic on

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overall economic conditions, the business environment, retail operations and supply chains. Highlights of our 2020 results and significant accomplishments are described below:

    Acima Acquisition:  In December 2020, we entered into a definitive agreement to acquire Acima Holdings LLC, a leading provider of virtual lease-to-own solutions. The transaction was completed in February 2021 and significantly accelerates our growth plans.

    Safely Continued Serving Customers and Managed Through COVID-19 Challenges with Strong Results:  

    o
    Our consolidated 2020 revenues of $2.8 billion were up 5.4% versus 2019.

    o
    Preferred Lease (now known as our Acima segment) annual invoice volume rose over 20%, which drove 8.1% revenue growth in 2020.

    o
    We realized twelve consecutive quarters of positive same store sales in the Rent-A-Center Business (+14.9% on a 2-year basis), with a significant year over year increase in profitability.

    o
    Rent-A-Center e-commerce increased 53% in the fourth quarter 2020 to 22% of Rent-A-Center sales to end the year.

    o
    We achieved significant year over year growth in our Adjusted EBITDA.

    Strong Stock Price Performance:  On December 31, 2019, our common stock closed at $28.84 per share. On December 31, 2020, our common stock closed at $38.29, an increase of approximately 33%.

    Launched Preferred Dynamix Platform:  Rent-A-Center launched its Preferred Dynamix platform, which includes a mobile application and is also planned to include a marketplace to empower unbanked and underbanked consumers with more financial freedom. Preferred Dynamix's proprietary digital platform leverages new decisioning technology and a portfolio of new lease-to-own solutions to expand the ways that consumers and retailers transact. This platform is being integrated with that of Acima Holdings, LLC as part of our integration efforts.

    Refranchised California Stores:  On July 22, 2020, we entered into an asset purchase agreement to sell all 99 Rent-A-Center Business corporate stores in the state of California to an experienced franchisee. The sale was consummated on October 5, 2020.

2020 Executive Compensation Highlights

Highlights of our 2020 executive compensation program are discussed below:

    Continued High Percentage of At-Risk, Variable Performance-Based Compensation:  Targeted direct compensation (base salary, target annual incentive compensation and target long-term incentive compensation) for our Chief Executive Officer was 84.6% at-risk, performance-based for the year ended December 31, 2020. Such percentage represents the Chief Executive Officer's target annual incentive compensation and target long-term incentive compensation as a percentage of his total targeted direct compensation.

    Maintained Rigorous Annual Incentive Award Targets with Increases Over Prior Year:  In establishing the 2020 annual cash incentive plan targets for each metric, the Compensation Committee reviewed sensitivity analyses to the key business drivers of Adjusted EBITDA, same store sales, invoice volume and free cash flow to establish rigorous threshold, target and maximum performance levels. In addition, target levels of Adjusted EBITDA and free cash flow were increased compared to the prior year targets. The metrics of same store sales and invoice volume were not used for purposes of assessing performance in the prior year.

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    Retained 60% Weighting of Performance Stock Units in Long-Term Incentive Program: The Compensation Committee decided to retain the same percentage split between time-vested restricted stock units (20%), performance-based performance stock units (60%) and stock options (20%) as in 2019, thereby including substantial weighting to the Company's TSR performance under the long-term incentive program.

    Strong Top Line and Bottom Line Financial Performance and Cash Flow Generation Resulted in 180% Bonus Plan Payouts:  As a result of our Company's strong performance in 2020 despite the challenging business environment discussed above, we achieved strong results on our 2020 bonus plan metrics and the Compensation Committee approved a 180% payout to our executives. This payout reflected an adjustment by the Compensation Committee to the invoice volume metric (which was established prior to the pandemic and was not adjusted in 2020) to reflect the adverse impact of the COVID-19 pandemic on our retail partner invoice volumes, as discussed in this CD&A.

    Strong Stock Price Performance Resulted in 200% Vesting of 2018 Performance Stock Units:  Our strong relative TSR performance as compared to the S&P 1500 Specialty Retail Index for the three year period ended December 31, 2020, ranked us 2 out of 60 companies in the S&P 1500 Specialty Retail Index, or the 98th percentile, which resulted in the vesting of 200% of the performance-based restricted stock units that were granted in 2018.

    Strong Stockholder Say on Pay Approval:  In June 2020, we held a stockholder advisory vote on the compensation of our named executive officers, referred to as a say on pay vote. Our stockholders approved the compensation of our named executive officers, with 97.7% of the shares of common stock present and entitled to vote at the meeting cast in favor of our proposal, which our Compensation Committee believed conveyed a general endorsement of our executive compensation program and related compensation actions.

2021 Executive Compensation Program Changes

In February 2021, the Compensation Committee conducted its annual review of the executive compensation program to ensure the program remains aligned with the Company's executive compensation philosophy and strategic objectives. In general, the Compensation Committee determined it was appropriate to retain the same overall structure in 2021 as in 2020 taking into account feedback from the Compensation Committee's independent compensation consultant, comparisons to peer group compensation programs, the strong say on pay approval from stockholders, and other factors. Although the same overall structure of 2020 is retained for 2021, the Compensation Committee approved certain adjustments to the 2020 executive compensation program:

    2021 Bonus Plan:  The Preferred Lease revenue-based metric in the 2020 bonus plan (invoice volume) was replaced with Acima (formerly Preferred Lease) segment revenue. This change was implemented due to the variability of invoice volumes and impact of retail partner supply chain issues on invoice volumes and because revenue is more closely aligned with profitability. The cash flow metric in the 2021 bonus plan was removed because of the Company's strategic focus on becoming a higher growth company primarily in the retail partner business and the need to make investments for future growth as highlighted by its recent acquisition of Acima Holdings, LLC, and was replaced with an increased Adjusted EBITDA weighting. Based on these adjustments, the 2021 bonus plan design consists of: (1) Rent-A-Center Business segment same store sales (25% weighting); (2) Acima (formerly Preferred Lease) segment revenues (25% weighting); and (3) Adjusted EBITDA (50% weighing).

    2021 LTIP:  The Compensation Committee replaced stock options with additional restricted stock units and performance stock units, weighted as 30% and 70%, respectively, and modified the

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      restricted stock unit vesting to be a ratable annual vesting rather than three-year cliff vesting to ensure the long-term incentive program is appropriately balanced between performance-based awards and time-vested awards and that it remains competitive to attract and retain executive talent.

    Expanded Ownership Guidelines:  The Compensation Committee also expanded the covered officers under the Company's equity ownership guidelines to include, in addition to the Chief Executive Officer (5x base salary requirement), all Executive Vice Presidents (3x base salary requirement) and Senior Vice Presidents/Vice Presidents (1x base salary requirement).

    Named Executive Officer Compensation Adjustments:  As part of its annual review of the executive compensation program, the Compensation Committee made certain adjustments to the compensation amounts for individual named executive officers.

Severance Arrangements

We have executive transition agreements with our named executive officers to provide certain payments and benefits upon an involuntary termination of the named executive officer's employment or the occurrence of certain other circumstances that may affect the named executive officer. The Compensation Committee believes that such severance arrangements assist us in recruiting and retaining top-level talent. In addition, formalizing our severance practices benefits us (1) by providing us with certainty in terms of our obligations to an eligible executive in the event that our relationship with him or her is severed and (2) by virtue of the non-competition, non-solicitation and release provisions in our loyalty agreements, which inure to our benefit in the event that an eligible executive severs employment with us.

For a more detailed description of the severance arrangements which apply to our named executive officers, please see "Termination of Employment and Change-in-Control Arrangements" below.

Employee Benefits and Limited Perquisites

Our named executive officers are eligible to participate in the benefit plans generally available to all of our employees, which include health, dental, life insurance, vision and disability plans, all of which the Compensation Committee believes are commensurate with plans of other similarly situated public companies in the retail industry. In addition, we will pay for the cost of an executive physical examination for each named executive officer each year and we do not gross our executives up for any taxes related to the cost of perquisites. Our named executive officers were eligible in 2020 to participate in our 401(k) Retirement Savings Plan and in the Rent-A-Center, Inc. Deferred Compensation Plan. The Deferred Compensation Plan allows our executive officers to defer certain compensation to help save for their longer term financial objectives on a tax-deferred basis.

The Compensation Committee has determined it is beneficial to offer the above-described employee benefits and perquisites in order to attract and retain our named executive officers by offering compensation opportunities that are competitive with those offered by similarly-situated public companies in the retail industry. In determining the total compensation payable to our named executive officers for a given fiscal year, the Compensation Committee will examine such employee benefits and perquisites in the context of the total compensation which our named executive officers are eligible to receive. However, because such employee benefits and perquisites which are available to our named executive officers represent a relatively insignificant portion of their total compensation, the availability of such items does not materially influence the decisions made by the Compensation Committee with respect to other elements of the total compensation to which our named executive officers are entitled or awarded.

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For a description of the employee benefits and perquisites received by our named executive officers in 2020, please see "— All Other Compensation" below.

Compensation Process

The Compensation Committee typically begins the process of determining the amount and mix of total compensation to be paid to our senior executives, including our named executive officers, in December of each year and finalizes the amounts the following February. This enables the Compensation Committee to examine and consider our performance during the previous year in establishing the current year's compensation. During the Compensation Committee's annual review of the executive compensation program, the Compensation Committee primarily considers market and Peer Group data (as described below), input provided by our Human Resources department, and input of the Chief Executive Officer other than with respect to his own compensation. The Compensation Committee also considers experience, responsibilities, competencies and individual performance.

Historically, the Compensation Committee has retained annually a compensation consultant to conduct a formal evaluation of, and advise it with respect to, the compensation arrangements for our Chief Executive Officer, as well as provide guidance with respect to the compensation of our senior executives, including our other named executive officers. For the 2020 fiscal year, the Compensation Committee reviewed the executive compensation analysis conducted by Korn Ferry in December 2019, which identified the Peer Group (as defined below), pursuant to its engagement by the Compensation Committee to assist the committee with compensation decisions for the 2020 fiscal year.

The Compensation Committee considered executive compensation practices of the following similarly-situated public companies (the "Peer Group") for the purpose of evaluating our 2020 compensation arrangements for our senior executives:

2020 Peer Group

Aaron's, Inc.

  Big Lots Inc.   Brinker International Inc.   Conn's

EZCorp, Inc.

  FirstCash, Inc.   H&R Block, Inc.   La-Z-Boy Incorporated

Michaels Stores, Inc.

  MoneyGram International, Inc.   OneMain Holdings   Sally Beauty, Inc.

Santander Consumer USA
Holdings Inc.


 
         

This Peer Group was approved by the Compensation Committee in the fall of 2019 based on work performed by Korn Ferry for use in connection with compensation decisions to be made for the 2020 fiscal year. The following criteria were considered in the selection of companies for this Peer Group:

    U.S.-based public companies with a similar business focus as ours, including both consumer finance and retail (particularly home furnishings, appliances and other retail organizations with which we compete for customers in a similar demographic);

    Companies with annual revenue similar to us (generally 0.5 to 2.0 times our revenue, based on the most recent available financial information at the time of the analysis) and annuitized revenue streams; and

    Competitors for executive talent.

In late 2020, the Compensation Committee considered the above criteria in reviewing the Peer Group to be used for 2021 benchmarking purposes, and determined to make no changes to the Peer Group.

Finally, various members of the Compensation Committee have significant professional experience in the consumer finance and retail industries, as well as with respect to the executive compensation practices of large publicly-traded companies. This experience provides a frame of reference within which to evaluate our executive compensation program relative to general economic conditions and our progress in achieving our short-term and long-term goals.

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Forms of Compensation

The following forms of compensation are currently utilized by the Compensation Committee in compensating our named executive officers:

    base salary, which is paid in cash;

    annual incentive compensation, which is paid in cash;

    long-term incentive compensation, which currently consists of restricted stock units and performance stock units;

    severance arrangements; and

    employee benefits, including limited perquisites, with no tax gross-ups (other than for certain relocation-related expenses).

Base Salary

The base salary for each of our named executive officers represents the guaranteed portion of their total compensation and is determined annually by the Compensation Committee. Base salaries help to achieve our goal of maintaining a competitive program that will attract and retain talent needed for our long-term success.

At the beginning of each year, the Compensation Committee considers whether adjustments should be made to the annual base salaries for our named executive officers. During the Compensation Committee's review of the then-current base salaries, the Compensation Committee primarily considers market data, including from the Peer Group, input provided by our Senior Vice President — Human Resources, input of the Chief Executive Officer (other than with respect to his own base salary), individual performance, our financial performance, the experience, responsibilities and competencies of the named executive officer, and each named executive officer's compensation in relation to our other executive officers.

In early 2020, based on the consideration of these factors, the Compensation Committee maintained the base salary of our Chief Executive Officer and increased the base salary for 2020 for each of our other then-existing named executive officers at a modest rate consistent with the salary increases for our other senior executive management. Mr. Hogg joined the Company in June 2020 and his base salary was established by the Committee in connection with his hiring. The following table sets forth the annual base salaries of the named executive officers for 2020 and, to the extent applicable, provides a comparison to each of the previous two years:

Name
  2018 Base Salary
  2019 Base Salary
  2020 Base Salary

Mitchell Fadel(1)

  $800,000   $1,000,000   $1,000,000

Maureen Short(2)

  $362,000   $416,300   $441,278

Ann Davids(3)

  $330,000   $339,900   $350,097

Jason Hogg(4)

      $600,000

Catherine Skula(5)

  $325,338   $335,098   $350,000
(1)
Mr. Fadel was named Chief Executive Officer effective as of January 2, 2018.

(2)
Ms. Short was named Chief Financial Officer effective as of December 19, 2018.

(3)
Ms. Davids was named Executive Vice 4 President — Chief Marketing and Customer Officer effective as of February 21, 2018.

(4)
Mr. Hogg was named Executive Vice President — Preferred Lease (which role has been retitled to Executive Vice President — Acima) effective as of June 22, 2020.

(5)
Ms. Skula was named Executive Vice President — Franchising effective as of January 2, 2018, and Executive Vice President — Chief Development Officer effective as of November 23, 2020.

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Annual Cash Incentive Compensation

The Compensation Committee maintains an annual incentive compensation program for our executive officers that provides for awards in the form of a cash bonus. These cash bonuses provide our named executive officers with short-term financial rewards based upon achievement of specified short-term objectives, which the Compensation Committee believes will ultimately increase the value of our Company by aligning our executive compensation with the achievement of annual performance objectives, as well as help us attract and retain our named executive officers by providing attractive compensation opportunities.

Under our annual cash incentive program, target cash bonus eligibility is established at a pre-determined percentage of the named executive officer's base salary, with such percentage amount set in accordance with the named executive officer's position and responsibilities with us. The ultimate payouts pursuant to our annual cash incentive program for prior year performance are typically approved by the Compensation Committee in February at the same time that all compensation (including base salaries, target annual cash incentive compensation, and target long-term incentive compensation) for our named executive officers for the current year is reviewed and approved. This timing enables the Compensation Committee to evaluate the named executive officer's performance during the prior performance year, as well as determine performance targets for the new fiscal year in light of the previous year's performance. Payouts under the plan may range from 0% to 200% of target compensation.

The annual cash incentive program for 2020 included four financial performance metrics focused on annual top line revenue performance, profitability and cash flow generation:

    Rent-A-Center Business Same Store Sales — The Compensation Committee determined to include a consolidated same store sales target in the 2020 annual cash incentive plan in lieu of the corporate revenue target used for the 2019 annual cash incentive program. This reflects the Compensation Committee's belief that a portion of the cash bonus opportunity should be based on our revenue growth, but takes into account potential impacts to the Company's revenues for 2020 in light of the Company's refranchising strategy, such as our 2020 California refranchising transaction.

    Preferred Lease (now known as Acima) Invoice Volumes — Because of the different business model for our Preferred Lease retail partner business, the Compensation Committee determined that invoice volume growth was an appropriate metric for top line performance of this business segment. Invoice volumes represent the amount of purchases that Preferred Lease makes from retail partners of merchandise, which Preferred Lease then leases to its customers. Invoice volumes are considered to be a leading indicator to future revenues.

    Adjusted EBITDA — The Compensation Committee included an Adjusted EBITDA target in the annual cash incentive program because it believes Adjusted EBITDA generally represents an accurate indicator of our core financial performance and profitability over a one-year period of time, while excluding the impact of items such as interest and depreciation which can vary significantly and other adjustments that are not considered to reflect the performance of our core business operations.

    Free Cash Flow — The Compensation Committee determined to include Free Cash Flow as one of the financial performance metrics comprising the annual cash incentive program to continue focusing management on this element of our strategy, which allows us to not only invest in our future growth but also return capital to stockholders as part of our capital allocation strategy. Free Cash Flow is defined as cash flows from operating activities less capital expenditures.

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The financial performance targets for the 2020 annual cash incentive program were established in February 2020 following a review of our financial projections developed pursuant to our strategic plan and objectives for 2020. In setting the performance targets under the 2020 annual cash incentive program, the Compensation Committee considered the level of actual achievement of the targets for the 2019 annual cash incentive program, the level of the Company's anticipated investment in its strategic initiatives for 2020, sensitivities for the key business drivers that may impact achievement of the targets and the Compensation Committee's goal to ensure a rigorous target-setting process. Based upon that review, the Compensation Committee established the following threshold, target and maximum payout achievement levels for each metric in the 2020 annual cash incentive program:

 
   
   
   
   
    Metric     Performance Levels


 

 

Rent-A-Center Business same store sales

 

 

 

Threshold — Less than 0.0% growth
Target — 1.35% to 1.65% growth
Maximum — Greater than or equal to 3.0% growth

 

 

 

 

Preferred Lease (now known as Acima) invoice volume

 

 

 

Threshold — Less than $623.07 million
Target — $685.38 to $699.23 million
Maximum — Greater than or equal to $761.53 million

 

 

 

 

Adjusted EBITDA

 

 

 

Threshold — Less than $249.50 million
Target — $274.45 to $277.22 million
Maximum — Greater than or equal to $304.94 million

 

 

 

 

Free Cash Flow

 

 

 

Threshold — Less than $95.99 million
Target — $117.59 million to $122.38 million
Maximum — Greater than or equal to $143.97 million

 

 

Despite the impacts and uncertainties associated with the COVID-19 pandemic, the Compensation Committee did not adjust any of the 2020 bonus targets during 2020 and instead elected to assess bonus target performance as part of its determination of achievement levels in early 2021.

In February 2021, the Compensation Committee determined the level of achievement against the 2020 bonus plan targets:

 
   
   
   
   
   
   
   
   
   
   
    Metric     Weighting (% of total
bonus opportunity)


  2020 Performance

  Percent of 2020
Target Achieved


  Payout for
2020
(% of Target)



    Rent-A-Center Business segment same store sales       25%       9.0%       598.4%       200%    
    Acima segment invoice volume (formerly known as the Preferred Lease segment)       25%       $707 million (1)       102.1% (1)       120%    
    Adjusted EBITDA (2) (3)       40%       $344 million       124.1%       200%    
    Free Cash Flow (2) (3)       10%       $202 million       168.3%       200%    
(1)
Represents an adjustment to the invoice volume achievement calculation made by the Compensation Committee based on a detailed review of the estimated lost volumes due to the COVID-19 pandemic. The COVID-19 pandemic had an adverse impact on invoice volumes for our retail partner business due to our retail partners' supply chain disruptions and their substantial store closures for portions of 2020. This impact was beyond the control of our management team. As a result and because the bonus targets, including invoice volumes, were all established prior to the pandemic and were not subsequently adjusted during 2020, the Compensation Committee determined it was appropriate to adjust the achievement of the invoice volume metric from 91.3% to 102.1% to offset the estimated adverse impacts described above. This resulted in an overall 180% payout on the 2020 bonus plan, compared to 155% in the absence of the invoice volume adjustment.

(2)
Adjusted EBITDA is a non-GAAP financial measure calculated as net earnings before interest, taxes, depreciation and amortization, as adjusted for certain gains and charges we view as extraordinary, unusual or non-recurring in nature and which we believe do not reflect our core business activities. Free Cash Flow is a non-GAAP financial measure calculated as cash flows from operating activities less capital expenditures.

(3)
In reviewing our actual 2020 performance relative to the performance targets, the Compensation Committee determined that it would be appropriate, consistent with past practices, to adjust Adjusted EBITDA to exclude the impact of the bonus payout itself. No other adjustments were made to Adjusted EBITDA, and no adjustments were made to Free Cash Flow.

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As a result, each executive officer in the 2020 annual cash incentive program received an amount equal to 180% of such person's target bonus amount. The actual amounts awarded to our named executive officers for their annual cash incentive bonus for 2020 performance are included under the column "Non-Equity Incentive Plan Compensation" in the table appearing in the section "Compensation Tables — Summary Compensation Table" below in this proxy statement.

Long-Term Incentive Compensation

Our equity incentive plans are administered by the Compensation Committee and are designed to enable the Compensation Committee to provide incentive compensation to our employees in the form of stock options, restricted stock and stock unit awards, other equity awards, and performance-based equity awards. The Compensation Committee believes that awarding our named executive officers non-cash, long-term equity incentive compensation, primarily in the form of long-term incentive awards which may increase or decrease in value depending on the satisfaction by us of pre-determined performance measures and/or an increase or decrease in the value of our common stock, more effectively aligns their interests with those of our stockholders. The Compensation Committee also believes that such awards will provide our named executive officers with an incentive to remain in their positions with us, since the determination as to whether a particular measure for our performance and/or an increase in the value of our common stock has been satisfied is typically made over an extended period of time.

Recent long-term incentive awards are made to our named executive officers pursuant to the 2016 Plan. Under the terms of each of the 2016 Plan, awards may be granted at times and upon vesting and other conditions as determined by the Compensation Committee, and may be made in the form of stock options, restricted stock and stock unit awards, other equity awards, and performance-based equity awards.

    Stock Options — Stock option awards under our equity incentive plans are granted at the fair market value per share of our common stock on the date the option is granted as determined by reference to the closing price for shares of our common stock on the Nasdaq Global Select Market on the last market trading day prior to the date the option is granted. The options granted to our named executive officers typically vest ratably over a four-year period, commencing one year from the date of grant, and expire after 10 years. Starting in 2021, the Compensation Committee eliminated stock options from the long-term incentive plan mix as discussed in this CD&A.

    Restricted Stock Units and Performance Stock Units — The restricted stock units granted by our Compensation Committee vest either after a set period of time or upon the achievement of specified goals for our performance over a period of time. Awards of restricted stock units with time-based vesting provide our named executive officers with a minimum level of value while also providing an additional incentive for such individuals to remain in their positions with us. Awards of restricted stock units with performance-based vesting provide an additional incentive for our named executive officers to remain in their positions with us in order to realize the benefit of such award and also focus them on a performance parameter which the Compensation Committee considers beneficial to increasing the long-term value of our Company.

The Compensation Committee determines the timing of the annual grants of equity awards to our named executive officers as well as the terms and restrictions applicable to such grants. The Compensation Committee approves generally in February of each year the annual grant to our executive officers in conjunction with its review and determination of each executive officer's compensation for the current year. Grants may also be made in connection with commencement of employment, promotions, or achieving certain tenure at Rent-A-Center.

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In February 2020, the Compensation Committee approved the target award percentages for 2020 for each of our named executive officers. The following table highlights the named executive officers' target 2020 equity award values as a percentage of each executive's base salary and provides a comparison to the previous two years:


2020 Named Executive Officer
LTIP Target Award Percentages
(% of base salary, rounded to the nearest 1%)

Name
  2018
  2019
  2020
 

Mitchell Fadel

  250%   350%   415%  

Maureen Short

    75%     130%     130%  

Ann Davids

  85%   85%   85%  

Jason Hogg

            (1)  

Catherine Skula

  85%   85%   85%(2)  
(1)
Mr. Hogg joined the Company in June 2020, several months after the Company's annual equity awards to executives. Mr. Hogg's 2020 LTIP award was made in connection with his hiring and took into account, among other considerations, the fact that Mr. Hogg would be forfeiting equity from a previous employer. Accordingly, his initial award in 2020 was not established as a specific percentage of his base salary.

(2)
Ms. Skula's LTIP Target Award Percentage was increased from 85% to 90% of base salary in November 2020 in connection with her promotion to Executive Vice President — Chief Development Officer.

Consistent with prior years, the long-term incentive compensation awards for 2020 were comprised of three vehicles, with greater emphasis on the portion of the long-term incentive award which is contingent on relative stock price performance:


2020 LTIP Award Types

 
   
   
   
   

 

 

Award Type


 
Weighting

 

 

Performance Stock Units

        60%    

 

 

Restricted Stock Units

        20%    

 

 

Stock Options

        20%    

The Compensation Committee has adopted a relative TSR metric over a three-year measurement period as the vesting condition for grants of performance stock units under our long-term incentive compensation program. The Compensation Committee made this decision in order to tie the performance of our common stock to executive compensation and because the Compensation Committee believes that a relative measure is a more appropriate basis for measuring long-term performance than an absolute measure. The Compensation Committee also took into consideration the fact that our annual cash incentive program includes an annual Adjusted EBITDA metric. The Compensation Committee selected a three-year period over which to measure relative TSR based upon the time-period utilized with respect to awards made by similarly-situated public companies in the retail industry, as well as upon its belief that a three-year measurement period was appropriate to place an emphasis on our relative TSR over an extended period of time, as opposed to the single year measure which is utilized in our annual cash incentive program.

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The Compensation Committee selected the S&P 1500 Specialty Retail Index as the comparison group for measuring our relative TSR over the applicable measurement period. The Compensation Committee selected this comparison group because it includes many of the Company's peers, represents the overall retail environment, and, in the determination of the Compensation Committee, was comprised of the companies most similar, in terms of operations and scope of operations, to the Company. The Compensation Committee adopted the following payout ranges applicable to the 2020 awards of performance-based restricted stock units:

Payout Chart
 
RCII's TSR Percentile Rank in the
S&P 1500 Specialty Retail Index

  RCII's TSR Actual Rank in the
S&P 500 Specialty Retail Index

   
 
>
  £
  Low
  High
  Payout
 
90%   100%   1   7   200%  
  80%       90%     8     13     175%  
70%     80%   14   19   150%  
  60%       70%     20     25     125%  
50%     60%   26   31   100%  
  40%       50%     32     37       75%  
30%     40%   38   43     50%  
  25%       30%     44     46       25%  
0%     25%   47   61       0%  

See the columns "Stock Awards" and "Option Awards" in the table appearing in the section "Compensation Tables — Summary Compensation Table" and the column "Estimated Future Payouts Under Equity Incentive Plan Awards" in the table appearing in the section "Compensation Tables — Grants of Plan-Based Awards" below in this proxy statement for threshold, target, and maximum amounts payable to our named executive officers under the 2020 long-term incentive performance-based awards.

In February 2021, the Compensation Committee determined the level of achievement of the minimum TSR condition with respect to the performance-based awards made in 2018, with a three-year measurement period. The Compensation Committee reviewed the Company's relative TSR performance as compared to the S&P 1500 Specialty Retail Index for the period January 1, 2018 through December 31, 2020, and determined that our relative TSR performance as compared to the S&P 1500 Specialty Retail Index for the three-year period ended December 31, 2020, ranked us 2 out of 60 companies in the S&P 1500 Specialty Retail Index, or the 98th percentile, which resulted in the vesting of 200% of the performance-based restricted stock units that were granted in 2018.

Say on Pay Results

In June 2020, we held a stockholder advisory vote on the compensation of our named executive officers, referred to as a say-on-pay vote. Our stockholders approved the compensation of our named executive officers, with 97.7% of the shares of common stock present and entitled to vote at the meeting cast in favor of our proposal. As noted above, our Compensation Committee believed this strong support expressed by our stockholders indicated a general endorsement of our compensation philosophy and pay-for-performance culture. Accordingly, the compensation decisions and changes implemented during the 2020 fiscal year were made keeping in mind this support. As a result, our Compensation Committee kept most facets of the executive compensation program consistent, with an emphasis on short- and long-term incentive compensation that rewards our executives for value creation for our stockholders.

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Termination of Employment and Change-in-Control Arrangements

Arrangements with Named Executive Officers Other Than Mr. Fadel

We have entered into executive transition agreements with each of our named executive officers other than Mr. Fadel. Each executive transition agreement has similar terms and is intended to provide certain payments and benefits upon an involuntary termination of the named executive officer's employment or the occurrence of certain other circumstances that may affect the named executive officer.

Termination Not in Conjunction with a Change in Control

If the named executive officer's employment is terminated without "cause" or, with respect to Mr. Hogg, for "good reason," the named executive officer will be entitled to receive:

    unpaid but earned base salary through the date of such termination;

    unless such termination occurs prior to April 1, a pro rata bonus calculated based upon (i) with respect to Mr. Hogg, the annual bonus earned by such named executive officer for the calendar year preceding the year of such termination, or (ii) with respect to Ms. Davids, Ms. Short and Ms. Skula, the annual bonus such named executive officer would have earned for the calendar year of termination, as determined in the Company's sole discretion and paid in a lump sum in cash in the normal course upon the Company's completion of annual bonus calculations (such amount, the "Pro Rata Bonus");

    for (i) Ms. Davids and Ms. Short, 1.0x, and (ii) Mr. Hogg and Ms. Skula, 1.5x, of the named executive officer's highest annual rate of salary during the 24 months preceding such termination, payable in equal monthly or more frequent installments by no later than the second December 31 following the calendar year of such termination;

    for Ms. Short and Ms. Skula, 1.0x and 1.5x, respectively, of the named executive officer's average annual bonus for the two calendar years preceding such termination; and

    continued health insurance coverage for the named executive officer and the named executive officer's spouse and covered dependents for up to (i) 12 months, for Ms. Davids and Ms. Short, or (ii) 18 months, for Mr. Hogg and Ms. Skula.

If the named executive officer's employment is terminated due to disability or death, the named executive officer will be entitled to receive:

    unpaid but earned base salary through the date of termination;

    the Pro Rata Bonus applicable to such named executive officer; and

    continued health insurance coverage for the named executive officer and the named executive officer's spouse and covered dependents for up to 12 months.

If the named executive officer's employment is terminated for "cause" or if the named executive officer terminates his or her employment for any reason other than disability or death or, with respect to Mr. Hogg, without "good reason," the named executive officer will be entitled to receive his unpaid but earned base salary through the date of termination (reduced by amounts owed by the named executive officer to us or our affiliates).

Termination in Conjunction With a Change In Control

If the named executive officer's employment is terminated within 24 months following a change in control of us without "cause" or by the named executive officer for "good reason," the named executive officer will be entitled to receive the same severance payments and benefits as described above (not in

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connection with a change in control) with respect to a termination without "cause," except that the named executive officer will be entitled to receive:

    for (i) Ms. Davids and Ms. Short, 1.5x (instead of 1.0x), and (ii) for Mr. Hogg and Ms. Skula, 2.0x (instead of 1.5x), of the named executive officer's highest annual rate of salary during the 24 months preceding such termination, payable in a lump sum in cash within 10 business days following the later of such termination or the change in control;

    for Ms. Short and Ms. Skula, 1.5x (instead of 1.0x) and 2.0x (instead of 1.5x), respectively, of the named executive officer's average annual bonus for the two calendar years preceding such termination, payable in a lump sum in cash within 10 business days following the later of such termination or the change in control; and

    continued health insurance coverage for the named executive officer and the named executive officer's spouse and covered dependents for an extended period of up to (i) 18 months (instead of 12 months) for Ms. Davids and Ms. Short and (ii) 24 months (rather than 18 months) for Mr. Hogg and Ms. Skula.

If the named executive officer's employment is terminated in connection with a change in control due to disability or death, or for "cause" or without "good reason," the named executive officer will be entitled to receive the same severance payments and benefits as described above (not in connection with a change in control) with respect to a termination due to disability or death or for "cause," respectively. If payments would subject the named executive officer to excise tax under section 4999 of the Code, or the Company would be denied a deduction under Section 280G of the Code, then the amounts otherwise payable to the named executive officer will be reduced by the minimum amount necessary to ensure the named executive officer will not be subject to such excise tax and the Company will not be denied any such deduction.

Under each of the executive transition agreements, a "change in control" would generally occur upon any of the following:

    any person becomes the beneficial owner of 40% or more of the combined voting power of our then outstanding voting securities;

    a consolidation, merger or reorganization of us, unless (i) our stockholders immediately prior to such transaction own at least a majority of the voting power of the outstanding voting securities of the resulting entity, (ii) the members of our Board immediately prior to the execution of the agreement providing for such a transaction constitute a majority of the board of directors of the surviving corporation or of its majority stockholder, and (iii) no person beneficially owns more than 40% of the combined voting power of the then outstanding voting securities of the surviving corporation other than a person who is (a) us or a subsidiary of us, (b) an employee benefit plan maintained by us, the surviving corporation or any subsidiary, or (c) the beneficial owner of 40% or more of the combined voting power of our outstanding voting securities immediately prior to such transaction;

    individuals who constitute our entire Board (the "Incumbent Board") cease to constitute a majority of our Board, provided that anyone who becomes a director and whose appointment or nomination for election was approved by at least two-thirds of our directors at the time shall be considered as though such individual were a member of the Incumbent Board; or

    a complete liquidation or dissolution of us, or a sale or other disposition of all or substantially all of our assets (other than to an entity described in the second bullet point above).

Loyalty and Confidentiality Agreements executed in connection with our executive transition agreements provide non-competition, non-solicitation and release provisions for the benefit of the Company that remain in effect during the period of employment and an additional period of two years thereafter.

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Arrangements with Mr. Fadel

Pursuant to Mr. Fadel's employment agreement, if we terminate Mr. Fadel's employment due to his disability or death, Mr. Fadel will be entitled to receive:

    unpaid but earned base salary through the date of termination;

    a pro rata bonus calculated based upon Mr. Fadel's bonus amount from the previous year; and

    continued health insurance coverage for Mr. Fadel and Mr. Fadel's spouse and covered dependents for up to 24 months.

If we terminate Mr. Fadel's employment for "cause," or if Mr. Fadel terminates his employment with us for any reason other than death, disability or for "good reason," Mr. Fadel will be entitled to receive his unpaid but earned base salary through the date of termination (reduced by amounts owed by Mr. Fadel to us or our affiliates).

If Mr. Fadel's employment is terminated by us without "cause" (as defined in the employment agreement) or by Mr. Fadel for "good reason," Mr. Fadel will be entitled to receive:

    unpaid but earned base salary through the date of termination;

    a pro rata bonus calculated based upon Mr. Fadel's bonus amount from the previous year;

    two times the sum of Mr. Fadel's (x) highest annual rate of salary during the previous 24 months and (y) his target cash bonus amount for the calendar year in which the termination occurs, payable in equal monthly installments over a period of 24 months; and

    continued health insurance coverage for Mr. Fadel and Mr. Fadel's spouse and covered dependents for up to 24 months.

If we terminate Mr. Fadel's employment without "cause" or if Mr. Fadel terminates his employment for "good reason," within the period beginning six months prior to a change in control or, if such change in control results in a person beneficially owning 40% or more of the voting power of the Company or is pursuant to a consolidation, merger or reorganization (subject to certain exceptions), beginning on the date of the definitive agreement pursuant to which the change in control is consummated and ending on the first anniversary of the date of the change in control, then Mr. Fadel will be entitled to receive in a lump sum the same aggregate severance payments and benefits as described above for a termination not in connection with a change in control. The Compensation Committee or the Board may condition the payment of severance or benefits on the execution and delivery by Mr. Fadel of a general release in favor of us, our affiliates and our officers, directors, and employees, provided that no such release will be required for the payment to Mr. Fadel of accrued compensation. If payments would subject Mr. Fadel to excise tax under section 4999 of the Code, or the Company would be denied a deduction under Section 280G of the Code, then the amounts otherwise payable to Mr. Fadel will be reduced by the minimum amount necessary to ensure Mr. Fadel will not be subject to such excise tax and the Company will not be denied any such deduction.

Mr. Fadel is also subject to a Loyalty and Confidentiality Agreement which provides non-competition, non-solicitation and release provisions for the benefit of the Company that remain in effect during the period of employment and an additional period of two years thereafter.

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Arrangements With Respect to Long-Term Incentive Plans

Pursuant to stock option agreements under the 2016 Plan and certain prior long-term incentive plans, if the individual's employment with us is terminated because of death or disability, any options that are vested and exercisable on the date of termination will remain exercisable for 12 months thereafter, but not beyond the term of the agreement. If the individual's employment is terminated by us for "cause," then the options (whether or not then vested and exercisable) will immediately terminate and cease to be exercisable. If the individual's employment with us is terminated for any other reason, any options that are vested and exercisable as of the date of termination will remain exercisable for three months thereafter, but not beyond the term of the agreement.

Pursuant to the 2016 Plan and certain prior long-term incentive plans, each holder of an option to purchase shares of our common stock may exercise such option immediately prior to an "exchange transaction," regardless of whether currently vested, and any outstanding options not exercised before the exchange transaction shall terminate. However, if, as part of an exchange transaction, our stockholders receive capital stock of another corporation in exchange for our common stock, and if our Board so directs, then all outstanding options shall be converted into options to purchase shares of such stock, with the amount and price to be determined by adjusting the amount and price of the options granted under the 2016 Plan and certain prior long-term incentive plans, as applicable, on the same basis as the determination of the number of shares of exchange stock the holders of our outstanding common stock are entitled to receive in the exchange transaction. In addition, unless our Board determines otherwise, the vesting conditions with respect to the converted options shall be substantially the same as those set forth in the original option agreement. The Board may accelerate the vesting of stock awards and other awards, provide for cash settlement of and/or make such other adjustments to any outstanding award as it deems appropriate in the context of an exchange transaction.

Under the 2016 Plan and certain prior long-term incentive plans, the term "exchange transaction" means a merger (other than in which the holders of our common stock immediately prior thereto have the same proportionate ownership of common stock in the surviving corporation immediately thereafter), consolidation, acquisition or disposition of property or stock, separation, reorganization (other than a reincorporation or the creation of a holding company), liquidation of us or any other similar transaction or event so designated by our Board, as a result of which our stockholders receive cash, stock or other property in exchange for or in connection with their shares of our common stock.

Pursuant to stock compensation agreements under the 2016 Plan and certain prior long-term incentive plans, if the individual's employment with us is terminated because of death or disability, or there is a change in ownership of us, then any unvested restricted stock units will vest on the date of such termination of employment or immediately prior to the consummation of the change in ownership of us, as the case may be. However, any unvested restricted stock units do not vest by reason of a change in ownership unless the individual remains continuously employed by us until such change in ownership is complete or the individual's employment is sooner terminated by us in connection with such change in ownership. In addition, upon the termination of the individual's employment or other service with us for any reason other than disability or death, any unvested restricted stock units will thereupon terminate and be canceled.

Under each of the stock compensation agreements, the term "change in ownership" is defined as any transaction or series of transactions as a result of which any one person or group of persons acquires (i) ownership of our common stock that, together with the common stock previously held by such person, constitutes more than 50% of the total fair market value or total voting power of such stock, or (ii) ownership of our assets having a total gross fair market value at least equal to 80% of the total gross fair market value of all of the assets immediately prior to such transaction or series of transactions.

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Policies and Risk Mitigation

Compensation-Related Risk

The Compensation Committee believes that the design of our compensation programs, including our executive compensation program, does not encourage our executives or employees to take unnecessary and excessive risks and that the risks arising from these programs are not reasonably likely to have a material adverse effect on us. The Compensation Committee considered the following factors in making that determination:

    The allocation among the components of direct annual compensation provides an appropriate balance between annual and long-term incentives and between fixed and performance-based compensation.

    The performance measures and the multi-year vesting features of the long-term equity incentive compensation component encourage participants to seek sustainable growth and value creation.

    Inclusion of share-based compensation through the long-term equity incentive compensation component encourages appropriate decision-making that is aligned with the long-term interests of our stockholders.

    Our annual cash incentive program and the awards of restricted stock with performance-based vesting contain provisions with respect to our achievement of the applicable performance target such that each participant may receive (1) an additional payout pursuant to such award in the event that we exceed the applicable performance target, and (2) a portion of the target payout pursuant to such award in the event that we approach, yet fail to achieve, the target level of financial performance.

    The various governance policies we have adopted to align the interests of our top management with those of our stockholders and to motivate sustainable growth, including stock ownership guidelines, hedging and pledging restrictions and our Clawback Policy, as described below.

    We maintain a values-driven, ethics-based culture supported by a strong tone at the top.

Stock Ownership Guidelines

We believe that our Chief Executive Officer, executive vice presidents, senior vice presidents and vice presidents should have a meaningful financial stake in the Company to ensure that their interests are aligned with those of our stockholders. To that end, in December 2020, the Board adopted new equity ownership guidelines to define our expectations for our Chief Executive Officer, executive vice presidents, senior vice presidents and vice presidents, which replaced our prior equity ownership guidelines. Under these new guidelines, our Chief Executive Officer, executive vice presidents, senior vice presidents and vice presidents are expected to own shares of our common stock having a value equal to a designated multiple of his or her annual base salary within five years of the later of (1) December 1, 2020 and (2) the date on which he or she was appointed to his or her position.

 
   
   
   
   

 

 

Position


 

Ownership Requirement


 

 

Chief Executive Officer

     

5 times annual base salary

   

 

 

Executive Vice President

     

3 times annual base salary

   

 

 

Senior Vice President or Vice President

     

1 times annual base salary

   

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Shares of our common stock that count toward meeting the foregoing equity ownership requirements include:

    shares of our common stock directly or indirectly beneficially owned outright, including as a result of fully vested awards from previous grants to the executive by the Company;

    shares of our common stock held through any Company benefit plan, including the Company's 401(k) plan, Non-Qualified Deferred Compensation Plan or any employee stock purchase plan; and

    unvested time-based restricted stock awards or restricted stock units granted to the executive by the Company.

Neither (i) performance-based stock awards or performance stock units, nor (ii) unexercised stock options (whether vested or unvested) count toward meeting the equity ownership requirements.

As of December 31, 2020, based on the closing price of our common stock on the Nasdaq Global Select Market of $38.29 per share as of such date, each of Ms. Short and Ms. Skula satisfied the new equity ownership guidelines. Each of our named executive officers is required to comply with the ownership guidelines no later than December 1, 2025.

Hedging and Pledging Restrictions

Our insider trading policy prohibits our directors, officers and employees, and members of their households, certain of their family members and certain other natural or legal persons or entities whose (i) management responsibilities are discharged by, (ii) are directly or indirectly controlled by or (iii) whose economic interests are substantially equivalent to those of any of the foregoing persons, from engaging in hedging, monetization or options transactions related to our securities or transactions involving any derivative security of the Company or other financial instruments that provide the economic equivalent of ownership of our common stock or an opportunity, whether direct or indirect, to profit from any change in the value of our common stock, such as prepaid variable forward contracts, puts, calls, equity swaps, credit default swaps and collars.

In addition, our insider trading policy prohibits (i) short sales of any securities of the Company, including through any "sale against the box" (sales with delayed delivery) and (ii) the holding of securities of the Company in a margin account or pledging securities of the Company as collateral for a loan, in each case unless they are treated as non-marginable by the brokerage firm.

Clawback Policy

Our Board has adopted a compensation recovery ("clawback") policy which provides that, in the event of a restatement of our financial statements due to our material noncompliance with any financial reporting requirement under the U.S. federal securities laws (other than restatements of financial results that are the direct result of changes in accounting standards) (a "clawback event"), we may seek recoupment, repayment and/or forfeiture of all or any portion of any annual or long-term cash, equity or equity-based incentive or bonus compensation outstanding and unpaid or paid and received during the three-year period preceding the date of the clawback event.

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CEO Pay Ratio

Below sets forth our reasonable estimate, calculated in a manner consistent with the requirements of Item 402(u) of Regulation S-K, of the ratio of the annual total compensation for fiscal year 2020 of our current Chief Executive Officer to that of the median of the annual total compensation for all of our other employees (the "CEO Pay Ratio"). Please note that due to the flexibility in estimates, assumptions and adjustments permitted by the SEC in calculating such ratio, the CEO Pay Ratio may not be comparable to those presented by other companies, even other companies operating in the same industries as Rent-A-Center.

We identified our median employee using our employee population (excluding our Chief Executive Officer) as of December 31, 2020, which consisted of approximately 13,648 full-time, part-time, seasonal and temporary workers, of which approximately 12,369 (90.6%) were located in the United States and approximately 1,279 (9.4%) were located in Mexico. As of December 31, 2020, approximately 50 (0.4%) employees were employed on a part-time basis and approximately 1,750 (12.9%) were paid on an hourly (rather than salaried) basis. In order to attract and retain employees, we pay what we believe to be competitive rates in each market where we operate.

We selected the median employee first by using a consistently applied compensation measure of annual base pay, which reflects (i) for salaried employees, base salary, and (ii) for hourly employees, annualized base hourly compensation assuming that full-time and part-time workers work 2,080 and 1,040 hours per year, respectively, which calculation excluded any wages in respect of guaranteed overtime. After narrowing the population of potential median employees to normalize for potential drivers of pay differential (e.g., based on factors such as bonus eligibility and active status of employment), our median employee was randomly selected from a pool of 83 individuals. The annual base pay of our employees located in Mexico was converted to U.S. dollars using an exchange rate of 19.913 Mexican pesos to $1.00 U.S. dollar, reflecting the exchange rate reported by the U.S. Department of the Treasury as of December 31, 2020. We did not make any cost of living adjustments to annual base pay in identifying our median employee.

Our median employee identified using the assumptions and methodologies described above was located in Florida and served in an hourly position as a Customer Account Representative. Our median employee was furloughed for a period of approximately 1.5 months during fiscal year 2020 in connection with our response measures related to the COVID-19 pandemic and temporary and partial operational closures throughout the U.S. and Mexico.

The 2020 annual total compensation of our median employee, calculated using the same methodology used to calculate the same metric for our named executive officers in the Summary Compensation Table in this Proxy Statement, was $33,055. Comparing this to our Chief Executive Officer's 2020 annual total compensation of $9,217,950, we estimate that the CEO Pay Ratio was approximately 279:1. For informational purposes only (and not as a substitute for the foregoing ratio), the estimated 2020 annual total compensation of our median employee would have been approximately $37,444 on an annualized basis had such employee not been furloughed, which would have yielded an estimated CEO Pay Ratio of approximately 246:1.

Compensation Committee Interlocks and Insider Participation

Messrs. Gade, Hetrick and Lewis each served as members of the Compensation Committee for all or a portion of 2020. Each such member is independent and no member of the Compensation Committee (1) has ever been employed by us, as an officer or otherwise, or (2) has or had any relationships requiring disclosure in this proxy statement pursuant to Item 404(a) of Regulation S-K.

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In addition, during 2020, none of our executive officers served as a member of the compensation or similar committee or as a member of the board of directors of any other entity having an executive officer that also served on the Compensation Committee or Board of Rent-A-Center.

Section 162(m)

Section 162(m) of the Internal Revenue Code (the "Code") generally prohibits a federal income tax deduction to public companies for compensation over $1,000,000 paid to a "covered employee." A "covered employee" includes (a) the Chief Executive Officer, (b) the Chief Financial Officer, (c) the three other most highly compensated executive officers, and (d) any individual who was a covered employee for