DEF 14A 1 inuv_def14a.htm PROXY STATEMENT inuv_def14a.htm
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)

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Inuvo, Inc.
(Name of Registrant as Specified in Its Charter)

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NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS
____________________

TO BE HELD ON JUNE 26, 2014

We will hold the 2014 Annual Meeting of Stockholders of Inuvo, Inc. at the Company’s office located at 1111 Main Street, Suite 201, Conway, Arkansas 72032 on June 26, 2014 at 9:30 a.m. local time. At the annual meeting you will be asked to vote on the following matters:
 
 
●
the election of two Class III directors,
 
●
the ratification of the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm, and
 
●
any other business as my properly come before the meeting.
 
The Board of Directors has fixed the close of business on May 16, 2014 as the Record Date for determining the stockholders that are entitled to notice of and to vote at the 2014 Annual Meeting and any adjournments thereof.
 
All stockholders are invited to attend the annual meeting in person. Your vote is important regardless of the number of shares you own. Please vote your shares by proxy over the Internet by following the instructions provided in the Notice of Internet Availability of Proxy Materials, or, if you request printed copies of the proxy materials by mail, you can also vote by mail, by telephone or by facsimile.


By Order of the Board of Directors
/s/ Richard K. Howe
Conway, Arkansas                                                                                    Richard K. Howe
May 19, 2014                                                                                              Chairman and Chief Executive Officer

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on June 26, 2014:  This proxy statement, along with our Annual Report on Form 10-K for the year ended December 31, 2013, are available free of charge on our website www.inuvo.com.
 
 
 
 
 

INUVO, INC.

PROXY STATEMENT

2014 ANNUAL MEETING OF STOCKHOLDERS

TABLE OF CONTENTS

 
Page No.
General Information
1
Proposal 1 - Election of Class III Directors
2
Proposal 2 - Ratification of appointment of Mayer Hoffman McCann P.C.
4
Other Matters
5
Dissenter’s Rights
6
Corporate Governance
6
Executive Compensation
12
Principal Stockholders
17
Certain Relationships and Related Transactions
19
Stockholder Proposals to be Presented at the Next Annual Meeting
19
Availability of Annual Report on Form 10-K
20
Stockholders Sharing the Same Last Name and Address
20
Where You Can Find More Information
20
 
 
 
 
FORWARD-LOOKING STATEMENTS

 
This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on our current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in the statements. The forward-looking statements may include statements regarding actions to be taken in the future. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements should be evaluated together with the many uncertainties that affect our business, particularly those set forth in the section on forward-looking statements and in the risk factors in Item 1.A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission (the “2013 10-K”).
 
Stockholders Should Read the Entire Proxy Statement
Carefully Prior to Returning Their Proxies

PROXY STATEMENT
FOR
2014 ANNUAL MEETING OF STOCKHOLDERS


 
General Information

The accompanying proxy is solicited by the Board of Directors of Inuvo, Inc. for use at our 2014 Annual Meeting of Stockholders to be held on June 26, 2014, or any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of 2014 Annual Meeting of Stockholders. The date of this proxy statement is May 19, 2014, the approximate date on which this proxy statement and the enclosed proxy were first sent or made available to our stockholders.

This proxy statement and the accompanying proxy card are being mailed to owners of our common shares in connection with the solicitation of proxies by the Board of Directors for the 2014 Annual Meeting of Stockholders. This proxy procedure is necessary to permit all common stockholders, many of whom live throughout the United States and are unable to attend the 2014 Annual Meeting in person, to vote. We will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes.

Electronic Access.  To access our proxy statement and 2013 10-K electronically, please visit our corporate website at www.inuvo.com. The information which appears on our website is not part of this proxy statement.

Voting Securities. Only our stockholders of record as of the close of business on May 16, 2014, the Record Date for the 2014 Annual Meeting, will be entitled to vote at the meeting and any adjournment thereof. As of that date, there were 23,505,265 shares of our common stock issued and outstanding, all of which are entitled to vote with respect to all matters to be acted upon at the 2014 Annual Meeting.  Each holder of record as of that date is entitled to one vote for each share held. In accordance with our by-laws, the presence of at least 33 1/3% of the voting power, regardless of whether the proxy has authority to vote on all matters, constitutes a quorum which is required in order to hold 2014 Annual Meeting and conduct business. Presence may be in person or by proxy. You will be considered part of the quorum if you voted on the Internet, by telephone, by facsimile or by properly submitting a proxy card or voting instruction form by mail, or if you are present and vote at the 2014 Annual Meeting. Votes for and against, abstentions and “broker non-votes” will each be counted as present for purposes of determining the presence of a quorum.

Broker Non-Votes. A broker non-vote occurs when a broker submits a proxy card with respect to shares held in a fiduciary capacity (typically referred to as being held in “street name”) but declines to vote on a particular matter because the broker has not received voting instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. The routine matter to be voted upon at our 2014 Annual Meeting is the ratification of the appointment of our independent registered public accounting firm. The remaining proposal to be voted on at our 2014 Annual Meeting is not considered a routine matter.

Voting of Proxies. All valid proxies received prior to the meeting will be exercised. All shares represented by a proxy will be voted, and where a proxy specifies a stockholder’s choice with respect to any matter to be acted upon, the shares will be voted in accordance with that specification. If no choice is indicated on the proxy, the shares will be voted by the individuals named on the proxy card as recommended by the Board of Directors. A stockholder giving a proxy has the power to revoke his or her proxy, at any time prior to the time it is exercised, by delivering to our Corporate Secretary a written instrument revoking the proxy or a duly executed proxy with a later date, or by attending the meeting and voting in person. A stockholder wanting to vote in person at the 2014 Annual Meeting and holding shares of our common stock in street name must obtain a proxy card from his or her broker and bring that proxy card to the 2014 Annual Meeting, together with a copy of a brokerage statement reflecting such share ownership as of the Record Date.

 
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Board of Directors Recommendations. The Board of Directors recommends a vote FOR proposals 1 and 2.

Attendance at the Meeting. You are invited to attend the annual meeting only if you were an Inuvo stockholder or joint holder as of the close of business on May 16, 2014, the Record Date, or if you hold a valid proxy for the 2014 Annual Meeting.  In addition, if you are a stockholder of record (owning shares in your own name), your name will be verified against the list of registered stockholders on the Record Date prior to your being admitted to the annual meeting. If you are not a stockholder of record but hold shares through a broker or nominee (in street name), you should provide proof of beneficial ownership on the Record Date, such as a recent account statement or a copy of the voting instruction card provided by your broker or nominee. The meeting will begin at 9:30 a.m. local time. Check-in will begin at 9:00 a.m. local time.

Communication with our Board of Directors. You may contact any of our directors by writing to them c/o Inuvo, Inc., 1111 Main Street, Suite 201, Conway, Arkansas 72032. Each communication should specify the applicable director or directors to be contacted as well as the general topic of the communication. We may initially receive and process communications before forwarding them to the applicable director. We generally will not forward to the directors a stockholder communication that is determined to be primarily commercial in nature, that relates to an improper or irrelevant topic, or that requests general information about Inuvo. Concerns about accounting or auditing matters or communications intended for non-management directors should be sent to the attention of the Chairman of the Audit Committee at the address above. Our directors may at any time review a log of all correspondence received by Inuvo that is addressed to the independent members of the Board and request copies of any such correspondence.

Who can help answer your questions? If you have additional questions after reading this proxy statement, you may seek answers to your questions by writing, calling or emailing:
 
John B. Pisaris, Esq.
General Counsel
Inuvo, Inc.
1111 Main Street
Suite 201
Conway, Arkansas 72032
Telephone: (501) 205-8508
Telecopier: (561) 491-2716
email: john.pisaris@inuvo.com

PROPOSAL 1

ELECTION OF CLASS III DIRECTORS

The Board, upon recommendation by the Nominating, Corporate Governance and Compensation Committee, has nominated Messrs. Charles D. Morgan and Patrick Terrell for re-election as Class III directors, each to hold office until the 2017 annual meeting of stockholders or until his successor has been duly elected and qualified.

The following is biographical information on the current members of our Board of Directors:

Directors Standing for Election as Class III Directors

Name
Age
Positions
Director Since
Charles D. Morgan
71
Class III Director
2009
Patrick Terrell
59
Class III Director
2013

Charles D. Morgan. Mr. Morgan has been a member of our Board of Directors since June 2009. He is the CEO of First Orion Corp., a private company that developed and markets PrivacyStar, an application that helps protect the mobile phone users' privacy. He is an equity owner of Bridgehampton Capital Management LLC, for which he also serves as Chairman of its Advisory Board and co-manager of investments. Mr. Morgan also serves as a member and is the past Chairman of the Board of Trustees of Hendrix College. Mr. Morgan is also Chairman of the Board of Querencia, a private real estate development and golf course in Cabo San Lucas, Mexico. Mr. Morgan has extensive experience managing and investing in both private and public companies including Acxiom Corporation (NasdaqGS: ACXM), an information services company he helped grow from an early stage company to $1.4 billion in revenues during his tenure as Chief Executive Officer from 1975 to 2008. Mr. Morgan has served on the board and in various leadership roles with the Direct Marketing Association (DMA) throughout his career, serving in 2001 as chairman of the DMA board. Mr. Morgan was employed by IBM as a systems engineer for six years prior to joining Acxiom, and he holds a mechanical engineering degree from the University of Arkansas.

 
2
 
 
Pat Terrell. Mr. Terrell has been a member of our Board of Directors since January 2013. Mr. Terrell is currently the managing member of both Terrell Group Management and PatRick Investments, LLC, private equity and real estate investment companies. He also serves on the boards of RS Medical, Routeware Inc., Skagit Garden and Aequitas Capital. Mr. Terrell served as founder and CEO of Leading Technology, a $300 million per year manufacturer of personal computers. Additionally, he founded Byte Shops Northwest, which serviced personal computers, and grew to $50 million in annual revenues.

Required Vote

Because only the terms of the Class III directors are expiring at the 2014 Annual Meeting, proxies cannot be voted for more than two director nominees.  The two candidates receiving the highest number of affirmative votes at the 2014 Annual Meeting will be elected Class III directors.  Abstentions, broker non-votes and withheld votes will have no effect on the outcome of the vote.

In the event either Mr. Morgan or Mr. Terrell is unable or unwilling to serve as a director, the individual named as proxy on the proxy card will vote the shares that he represents for election of such other person as the Board of Directors may recommend.  The Board has no reason to believe that either Mr. Morgan or Mr. Terrell will be unable or unwilling to serve.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION
 OF THE CLASS III DIRECTOR NOMINEES.

Directors Not Standing For Election

Name
Age
Positions
Director Since
Richard K. Howe
51
Executive Chairman of the Board and Chief Executive Officer
2008
Charles L. Pope
62
Director
2008
Joseph P. Durrett
68
Director
2012

Class I Directors
Term Expires at the 2015 Annual Meeting

Richard K. Howe. Mr. Howe has been a member of our Board of Directors since November 2008, and has served as Executive Chairman of the Board since March 2012 and as our Chief Executive Officer since December 2012. Previously, he served as our President and Chief Executive Officer from November 2008 until March 2012. Prior to joining Inuvo, Mr. Howe served as Chief Marketing, Strategy and M&A Officer at billion dollar multi-channel marketing services leader the Acxiom Corporation (NasdaqGS: ACXM) where, since 2004, he lead the company's transition to online marketing services, the expansion into China and the development of the big data consulting services group. From 2001 to 2004, he served as general manager of Global Marketing Services (GMS) at Fair Isaac & Company (NYSE: FICO), a leading provider of analytics products and services where he drove the company's online initiatives. Between 1999 and 2001, Mr. Howe started, grew and sold private Internet search initiatives, ieWild. Mr. Howe has over his career led the acquisition, merger or divestiture of a dozen companies on 3 continents. Mr. Howe earned a bachelor’s degree with distinction in engineering from Concordia University, Canada, and he earned his master’s degree in engineering from McGill University, Canada.

Joseph P. Durrett. Mr. Durrett has been a member of our Board of Directors since March 2012 following the closing of our acquisition of Vertro, Inc. (“Vertro”). From August 2006 until March 2012 he was a director of Vertro. Mr. Durrett was chairman of PromoWorks, a marketing corporation, from November 2008 to December 2013, and president of Jocabos Brands, a marketing corporation since January 2008. Mr. Durrett has been a partner of PrimeGenesis, a management consulting organization, since April 2008. Mr. Durrett was a consultant to TA Associates Private Equity Firm from March 2008 to December 2008 and was senior advisor and investor for Madden Communications, a marketing organization, from August 2004 to August 2006. Prior to that, Mr. Durrett was presiding rights agent for Information Resources, Inc. Contingent Value Rights Trust, an independent trust, from December 2003 to August 2006, and chairman, president, and chief executive officer of Information Resources, Inc., a technology corporation, from May 1999 to January 2004.

 
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Class II Directors
Term Expires at the 2016 Annual Meeting

Charles L. Pope. Mr. Pope has been a member of our Board of Directors since September 2008. He has served as Chief Operating Officer and Chief Financial Officer of The Palm Bank, a community bank in Tampa, Florida, since June 2009. From 2007 through 2009, Mr. Pope served as Chief Financial Officer of and a consultant to Aerosonic Corporation, a manufacturer of aircraft instruments and displays. From February 2005 through April 2007, Mr. Pope served as Chief Financial Officer for Reptron Manufacturing, a manufacturer of electronic services and engineering services. From April 2002 until February 2005, Mr. Pope served as Chief Financial Officer for SRI/Surgical, a provider to hospitals of reusable and disposable products used in surgical procedures. Previously, Mr. Pope served as Chief Financial Officer for UTEK Corporation, a business development company that acquires and funds the development of new university technologies. Since February 2010, Mr. Pope has been a member of the Board of Directors of Innovaro Inc. (OTCQB: INNI) and is Chairman of its Audit Committee and since June 2010, he has been a member of the Board of Directors of Oragenics, Inc. (OTCBB: OGEN) and is Chairman of its Audit Committee. Mr. Pope was with PricewaterhouseCoopers LLP and left as a partner. Mr. Pope holds a B.S. in economics and accounting from Auburn University, and he is a Certified Public Accountant in Florida.

There are no family relationships between any of the directors.

PROPOSAL 2

RATIFICATION OF THE APPOINTMENT OF MAYER HOFFMAN MCCANN P.C.

The Audit Committee has appointed Mayer Hoffman McCann P.C. as our independent registered public accounting firm to audit our consolidated financial statements for the fiscal year ending December 31, 2014. Representatives of Mayer Hoffman McCann P.C. will be present at the annual meeting and will have an opportunity to make a statement or to respond to appropriate questions from stockholders. Although stockholder ratification of the appointment of our independent auditor is not required by our by-laws or otherwise, we are submitting the selection of Mayer Hoffman McCann P.C. to our stockholders for ratification to permit stockholders to participate in this important corporate decision. If not ratified, the Audit Committee will reconsider the selection, although the Audit Committee will not be required to select a different independent auditor for our company. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a changes would be in our best interests.

Fees and Services

The following table shows the fees that were billed for the audit and other services provided for the years indicated.

   
2013
    
2012
  
Audit Fees
   $ 327,769     $ 309,372  
Audit-Related Fees
     -       63,945  
Tax Fees
     108,082       146,540  
All Other Fees
     -       -  
Total
   $ 435,851     $ 519,857  

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
 
Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission and other accounting consulting.
 
Tax Fees — This category consists of professional services rendered by CBIZ MHM an affiliate of our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
 
All Other Fees — This category consists of fees for other miscellaneous items.

Mayer Hoffman McCann P.C. leases substantially all its personnel, who work under the control of Mayer Hoffman McCann P.C.  shareholders, from wholly-owned subsidiaries of CBIZ, Inc., in an alternative practice structure.

 
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Our board of directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm. Under the procedure, the Audit Committee of the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Audit Committee of the Board. The audit and tax fees paid to the auditors with respect to 2013 were pre-approved by the Audit Committee of the board of directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
 OF THE APPOINTMENT OF MAYER HOFFMAN MCCANN P.C.

OTHER MATTERS

As of the date hereof, there are no other matters that we intend to present, or have reason to believe others will present, at the annual meeting.  If, however, other matters properly come before the 2014 Annual Meeting, the accompanying proxy authorizes the person named as proxy or his substitute to vote on such matters as he determines appropriate.

 
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DISSENTER'S RIGHTS

Under Nevada law there are no dissenter's rights available to our stockholders in connection with any matter submitted to a vote of our stockholders at the 2014 Annual Meeting.

CORPORATE GOVERNANCE

We are committed to maintaining the highest standards of honest and ethical conduct in running our business efficiently, serving our stockholders interests and maintaining our integrity in the marketplace. To further this commitment, we have adopted our Code of Conduct and Business Code of Ethics, which applies to all our directors, officers and employees. To assist in its governance, our Board has formed two standing committees composed entirely of independent directors, Audit and Nominating, Corporate Governance and Compensation, and a third standing committee, Strategy and Risk, comprised of a majority of independent directors. A discussion of each committee’s function is set forth below. Additionally, we have adopted and published to all employees our Whistleblower Notice establishing procedures by which any employee may bring to the attention of our Audit Committee any disclosure regarding accounting, internal control or other auditing issues affecting our company or any improper activities of any officer or employee. Disclosure may be made anonymously.

Our by-laws, the charters of each Board committee, the independent status of a majority of our Board of Directors, our Code of Conduct and Business Code of Ethics and our Whistleblower Notice provide the framework for our corporate governance. Copies of our by-laws, committee charters, Code of Conduct and Business Code of Ethics and Whistleblower Notice may be found on our website at www.inuvo.com. Copies of these materials also are available without charge upon written request to our Corporate Secretary.

Board of Directors

The Board of Directors oversees our business affairs and monitors the performance of management. In accordance with our corporate governance principles, the Board of Directors does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Executive Chairman and Chief Executive Officer and our Chief Financial Officer and by reading the reports and other materials that we send them and by participating in Board of Directors and committee meetings. Commencing with our 2008 annual meeting, our directors were divided into three classes and designated Class I, Class II and Class III. Directors may be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. Directors are elected for a full term of three years. Our directors hold office until their successors have been elected and duly qualified unless the director resigns or by reason of death or other cause is unable to serve in the capacity of director. If any director resigns, dies or is otherwise unable to serve out his or her term, or if the Board increases the number of directors, the Board may fill any vacancy by a vote of a majority of the directors then in office, although less than a quorum exists. A director elected to fill a vacancy shall serve for the unexpired term of his or her predecessor. Vacancies occurring by reason of the removal of directors without cause may only be filled by vote of the stockholders.

Board Leadership Structure and Board’s Role in Risk Oversight

Prior to the departure of our former Chief Executive Officer in December 2012 the offices of Executive Chairman of the Board and Chief Executive Officer were separated. Commencing in December 2012 Mr. Richard K. Howe, our then Executive Chairman, resumed the position of Chief Executive Officer which he had previously held from November 2008 until March 2012. In February 2013, Mr. Charles D. Morgan, an independent director, assumed the role of Lead Independent Director. Our Board believes our current structure provides independence and oversight and facilitates the communication between senior management and the full Board of Directors regarding risk oversight, which the Board believes strengthens its risk oversight activities. Moreover, the addition of a Lead Independent Director will allow the Executive Chairman and Chief Executive Officer to better focus on his responsibilities of running the company, enhancing stockholder value and expanding and strengthening our business while allowing the Lead Independent Director to lead the Board in its fundamental role of providing independent oversight of management.

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of the risks we face, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, the Strategy and Risk Committee meets regularly with management to review Inuvo's risks. Additionally, the Chairman of the Audit Committee and other members of our Board of Directors meet regularly with management to discuss strategy and risks we face. Our Chief Financial Officer attends many of the Board meetings and is available to address any questions or concerns raised by the Board on risk management and any other matters. The independent members of the Board work together to provide strong, independent oversight of our management and affairs through its standing committees and, when necessary, special meetings of independent directors.

 
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Director Independence

The Board of Directors has determined that a majority of our current directors have no relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and is an “independent director” as defined in the NYSE MKT Company Guide. In determining the independence of our directors, the Board of Directors has adopted independence standards specified by applicable laws and regulations of the SEC and the listing standards of the NYSE MKT. In making the determination of the independence of our directors, the Board of Directors considered all known transactions in which Inuvo and any director had any interest, including any discussed under “Certain Relationships and Related Transactions” below.

Our independent directors may meet at any time in their sole discretion without any other directors or representatives of management present. Each independent director has access to the members of our management team or other employees as well as full access to our books and records. We have no policy limiting, and exert no control over, meetings of our independent directors.

Board Committees

The Board of Directors has standing Audit, Nominating, Corporate Governance and Compensation, and Strategy and Risk committees. Each committee has a written charter. The charters are available on our website at www.inuvo.com. Except as set forth below, all committee members are independent directors. Information concerning the current membership and function of each committee is as follows:
 
Director
Audit Committee Member
  
Nominating, Corporate Governance and Compensation Committee Member
  
Strategy and Risk Committee Member
Charles D. Morgan
    
ü
  
ü
Charles L. Pope
ü1
  
ü3
    
Joseph P. Durrett
ü
  
ü1
    
Pat Terrell
    
ü3
  
ü
Richard K. Howe 2
        
ü

          Denotes Chairperson.
2           Mr. Howe is not an independent director and is not a member of any committee of the Board.
3           Beginning in 2014 Mr. Pope no longer serves on the Nominating, Corporate Governance and Compensation Committee and Mr. Terrell was added to the committee.

Audit Committee. The Audit Committee assists the Board in fulfilling its oversight responsibility relating to:

 
●
the integrity of our financial statements;
 
●
our compliance with legal and regulatory requirements; and
 
●
the qualifications and independence of our independent registered public accountants.
 
The Audit Committee is composed of two directors, both of whom have been determined by the Board of Directors to be independent as defined by the NYSE MKT Company Guide. The Board has determined that Mr. Pope, the Chairman of the Audit Committee, qualifies as an “audit committee financial expert” as defined by the SEC. During 2013, the Audit Committee held seven meetings.

Nominating, Corporate Governance and Compensation Committee. The Nominating, Corporate Governance and Compensation Committee is responsible for:
 
 
●
overseeing our compensation programs and practices, including our executive compensation plans and incentive compensation plans,
 
●
recommending the slate of director nominees for election to our Board of Directors;
 
●
identifying and recommending candidates to fill vacancies occurring between annual stockholder meetings;
 
●
reviewing the composition of Board committees; and
 
●
monitoring compliance with, reviews, and recommends changes to our various corporate governance policies and guidelines.
 
 
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The Chief Executive Officer provides input to the committee with respect to the individual performance and compensation recommendations for the other executive officers. Although the committee’s charter authorizes the committee to retain an independent consultant, no third party compensation consultant was engaged for 2013. The committee also prepares and supervises the Board’s annual review of director independence and the Board’s annual self-evaluation.
 
A majority of the persons serving on our Board of Directors must be independent. Thus, the committee has considered transactions and relationships between each director or any member of his or her immediate family and us or our affiliates, including those reported under “Certain Relationships and Related Transactions” below. The committee also reviewed transactions and relationships between directors or their affiliates and members of our senior management or their affiliates. As a result of this review, the committee affirmatively determined that each of Messrs. Pope, Morgan, Terrell and Durrett are independent as defined by the NYSE MKT Company Guide.

The committee considers all qualified candidates for our Board of Directors identified by members of the committee, by other members of the Board of Directors, by senior management and by our stockholders. The committee reviews each candidate including each candidate’s independence, skills and expertise based on a variety of factors, including the person’s experience or background in management, finance, regulatory matters and corporate governance. Further, when identifying nominees to serve as director, while we do not have a policy regarding the consideration of diversity in selecting directors, the committee seeks to create a Board that is strong in its collective knowledge and has a diversity of skills and experience with respect to accounting and finance, management and leadership, vision and strategy, business operations, business judgment, industry knowledge and corporate governance. In addition, prior to nominating an existing director for re-election to the Board of Directors, the committee will consider and review an existing director’s Board and committee attendance and performance, length of Board service, experience, skills and contributions that the existing director brings to the Board, equity ownership in Inuvo and independence.

The committee follows the same process and uses the same criteria for evaluating candidates proposed by stockholders, members of the Board of Directors and members of senior management. Based on its assessment of each candidate, the committee recommends candidates to the Board. However, there is no assurance that there will be any vacancy on the Board at the time of any submission or that the committee will recommend any candidate for the Board.
 
During 2013 the Nominating, Corporate Governance and Compensation Committee was composed of three directors, all of whom have been determined by the Board of Directors to be independent as defined by the NYSE MKT Company Guide. During 2013, the Nominating, Corporate Governance and Compensation Committee held six meetings.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”)

Dodd-Frank requires public companies to provide stockholders with an advisory vote on compensation of the most highly compensated executives, which are sometimes referred to as “say on pay” as well as an advisory vote on how often the company will present say on pay votes to its stockholders. At our 2011 Annual Meeting of Stockholders, our stockholders approved a non-binding proposal that the frequency of an advisory vote on our executive compensation would be held every three years together with a non-binding resolution approving our executive compensation as described in that proxy statement. As such, the proxy statement for our 2014 annual meeting of stockholders will contain a non-binding say on pay proposal for the approval of our then current executive compensation structure.
 
The Securities and Exchange Commission has also approved new NYSE listing standards relating to compensation committees of listed companies, including companies on the NYSE MKT. The listing requirements were added pursuant to Dodd-Frank and address:
 
 
●
enhanced independence requirement for compensation committee members,
 
●
compensation committee authority relating to compensation consultants, counsel and other advisers, and
 
●
the responsibility of the compensation committee to consider potential conflicts of interests when choosing consultants, counsel and other advisers.

 
8
 
 
Listed companies have until the earlier of the first annual meeting after January 15, 2014, or October 31, 2014 to comply with the new compensation committee independence. Listed companies, however, are required to comply with other new standards, including those relating to the authority of the compensation committee, beginning on July 1, 2013. A smaller reporting company such as Inuvo is not subject to the requirements of these new compensation committee rules, except that a smaller reporting company must have, and certify that it has and will continue to have, a compensation committee of at least two members, each of whom must be an independent director as defined under the current NYSE MKT independence rules. Our Nominating, Corporate Governance and Compensation Committee meets this requirements. In addition, while a smaller reporting company must certify that it has adopted a formal written compensation committee charter or board resolution that specifies certain of the content discussed above, it will not need to incorporate into its charter or board resolutions provisions regarding authority to retain and fund compensation consultants, counsel, and advisers and responsibility to consider the independence of compensation consultants, counsel, and advisers. Although we are exempted from those portions of this rule, we expect to adopt an amendment to the Nominating, Corporate Governance and Compensation Committee charter to company with the new requirements, including:
 
 
●
reflecting the rights and responsibilities of the compensation committee under the Dodd-Frank compensation committee rules,
 
●
granting the committee the authority to retain consultants, counsel and advisers, and
 
●
reflecting the committee’s responsibility to consider conflicts of interest before selecting consultants, counsel or advisers.
 
Strategy and Risk Committee. The Strategy and Risk Committee supports the Board of Directors in the oversight of Inuvo's growth strategies, technology investments, risk assessments, and in the review and approval of corporate strategy. The Strategy and Risk Committee has three members, two of whom are independent as defined by the NYSE MKT Company Guide.

Among other things, the Strategy and Risk Committee is responsible for:

 
●
providing oversight of Inuvo’s strategic planning process and of our implementation of our strategic decisions, with emphasis on both technology investment and business partnering required to meet product development and marketing expectations;
 
●
meeting with management periodically to review and evaluate our progress in implementing the strategic plan and suggest appropriate modifications to reflect changes in market or business conditions;
 
●
reporting to the Board on findings about technology and development plans, in order to leverage and grow the business in existing markets, and defend the company’s technology leadership and market position;
 
●
working with Inuvo’s management to identify and evaluate major risk exposures, including operational, legal, regulatory, business, strategic, credit, liquidity, and reputational risks; and
 
●
overseeing management’s monitoring and evaluation of identified risks and mitigation of identified risks.

During 2013 the Strategy and Risk Committee was composed of three directors, two of whom have been determined by the Board of Directors to be independent as defined by the NYSE MKT Company Guide.  During 2013, the Strategy and Risk Committee held one meeting.

Stockholder nominations

Stockholders who would like to propose a candidate may do so by submitting the candidate’s name, resume and biographical information to the attention of our Corporate Secretary. All proposals for nomination received by the Corporate Secretary will be presented to the committee for appropriate consideration. It is the policy of the Nominating, Corporate Governance and Compensation Committee to consider director candidates recommended by stockholders who appear to be qualified to serve on our Board of Directors. The Nominating, Corporate Governance and Compensation Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors and the Nominating, Corporate Governance and Compensation Committee does not perceive a need to increase the size of the Board of Directors. In order to avoid the unnecessary use of the Nominating, Corporate Governance and Compensation Committee’s resources, the Nominating, Corporate Governance and Compensation Committee will consider only those director candidates recommended in accordance with the procedures set forth below. To submit a recommendation of a director candidate to the Nominating, Corporate Governance and Compensation Committee, a stockholder should submit the following information in writing, addressed to the Corporate Secretary of Inuvo at our main office:

 
●
the name and address of the person recommended as a director candidate;
 
●
all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended;
 
●
the written consent of the person being recommended as a director candidate to be named in the proxy statement as a nominee and to serve as a director if elected;
 
●
as to the person making the recommendation, the name and address, as they appear on our books, of such person, and number of shares of our common stock owned by such person; provided, however, that if the person is not a registered holder of our common stock, the person should submit his or her name and address along with a current written statement from the record holder of the shares that reflects the recommending person’s beneficial ownership of our common stock; and

 
9
 
 
Director Qualification

The following is a discussion for each director of the specific experience, qualifications, attributes or skills that led the Nominating, Corporate Governance and Compensation Committee to recommend to the Board, and for the Board to conclude that the individual should be serving as a director of Inuvo.

Class I Directors

Richard K. Howe – Mr. Howe’s track record as a successful high-technology operating and marketing executive in data, analytics, and marketing services as a result of building and/or running over a dozen businesses in five countries were factors considered by the Nominating, Corporate Governance and Compensation Committee and the Board. Specifically, the Nominating, Corporate Governance and Compensation Committee viewed favorably his position at companies that include Inuvo as president and CEO; Acxiom Corporation as chief marketing, business strategy and M&A officer, Fair Isaac & Company where he served as general manager, and ieWild, Inc. as co-founder and chairman and CEO; his service as a board member for the non-profit organization Business for Diplomatic Action; and his academic achievements at Concordia University and McGill University in making their recommendation.

Joseph P. Durrett – Mr. Durrett's track record as a seasoned operating and marketing executive were factors considered by the Nominating, Corporate Governance and Compensation Committee and the Board. Specifically, the Nominating, Corporate Governance and Compensation Committee viewed favorably Mr. Durrett's service as a director to Vertro, his work as chairman of PromoWorks, a marketing corporation, his involvement as president of Jocabos Brands, a marketing corporation, his involvement with PrimeGenesis, a management consulting organization, his service as a consultant to TA Associates Private Equity Firm, and his position as senior advisor and investor for Madden Communications, a marketing organization in making their recommendation.

Class II Directors

Charles L. Pope – Mr. Pope’s track record as a successful Tampa-based Chief Financial Officer and board member with decades of experience in public company accounting and finance were factors considered by the Nominating, Corporate Governance and Compensation Committee and the Board. Specifically, the Nominating, Corporate Governance and Compensation Committee viewed favorably his positions as CFO at companies that include Aerosonic Corporation, Reptron Manufacturing and UTEK Corporation; his experience at PricewaterhouseCoopers where he served as partner during his 20 years with the firm; his certification as a Certified Public Accountant; and his academic achievements from Auburn University in making their recommendation.

Class III Directors

Charles D. Morgan – Mr. Morgan’s successful track record as a high-technology executive in data, analytics, outsourcing and marketing services with a network of relationships worldwide as a result of building a billion dollar annual revenue enterprise as chairman and chief executive officer were factors considered by the Nominating, Corporate Governance and Compensation Committee and the Board. Specifically, the Nominating, Corporate Governance and Compensation Committee viewed favorably his experience at companies such as Acxiom Corporation as Chairman and CEO and IBM as a systems engineer; his role as an equity owner of Bridgehampton Capital Management LLC and a significant investor in its funds; his service as Chairman of the Advisory Board and co-manager of investments for Bridgehampton Capital Management LLC; his leadership on the board and in various leadership roles with the Direct Marketing Association (DMA) including his service as chairman of the DMA in 2001; his service as a member and past chairman of the board of trustees of Hendrix College; and his academic achievements at the University of Arkansas in making their recommendation.

Pat Terrell – Mr. Terrell’s track record as a successful operating executive and investor were factors considered by the Nominating, Corporate Governance and Compensation Committee and the Board. Specifically, the Nominating, Corporate Governance and Compensation Committee and the Board viewed favorably Mr. Terrell’s services as founder and CEO of Leading Technology, a manufacturer of personal computers, his founding of Byte Shops Northwest, and his services as managing member of Terrell Group Management and PatRick Investments, LLC in making their recommendation.

In addition to the each of the individual skills and background described above, the Nominating, Corporate Governance and Compensation Committee and our Board also concluded that each of these individuals will continue to provide knowledgeable advice to our other directors and to senior management on numerous issues facing our company and on the development and execution of our strategy.

 
10
 
 
Compensation of Directors

Each independent member of our Board of Directors received the following fees:

 
●
$2,000 fee for substantive Board meetings;
 
●
$1,000 fee for substantive committee meetings;
 
●
$2,000 for each day spent on general company business, not to exceed five (5) days; and
 
●
$10,000 annual retainer, paid quarterly.
 
Additionally, during 2013 each of our independent members of our Board of Directors received a restricted stock unit for 20,000 shares of our common stock which vested on December 31, 2013.

As he was our Executive Chairman and Chief Executive Officer during 2013, Mr. Howe did not receive any compensation for his services as a member of our Board of Directors in 2013.  The following table provides information concerning the compensation paid to our independent directors for their services as members of our Board of Directors for 2013. The information in the following table excludes any reimbursement of out-of-pocket travel and lodging expenses which we may have paid.

   
Director Compensation
  
Name
  
Fees
earned or
paid in
cash ($)
    
Stock
awards
($)
    
Option
awards
($)1
    
Non-equity
incentive plan
compensation
($)
    
Nonqualified
deferred
compensation
earnings
($)
    
All other
compensation
($)
    
Total
($)
  
Charles D. Morgan
    
26,000
      
35,560
      
-
      
-
      
-
      
-
      
61,560
  
Charles L. Pope
    
34,000
      
35,560
      
-
      
-
      
-
      
-
      
69,560
  
Joseph P. Durrett
    
34,000
      
15,400
      
-
      
-
      
-
      
-
      
49,400
  
Pat Terrell
    
22,000
      
15,400
      
-
      
-
      
-
      
-
      
37,400
  

1
The amounts included in the “Option Awards” column represent the aggregate grant date fair value of the stock options granted to directors during 2013, computed in accordance with ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 10 of the Notes to our Consolidated Financial Statements for the year ended December 31, 2013 appearing in our 2013 10-K.

Audit Committee Report

Report of the Audit Committee of the Board of Directors

The primary function of the Audit Committee is to assist the Board of Directors in its oversight of our financial reporting processes. Management is responsible for the preparation, presentation and integrity of the financial statements, including establishing accounting and financial reporting principles and designing systems of internal control over financial reporting. Our independent auditors are responsible for expressing an opinion as to the conformity of our consolidated financial statements with generally accepted accounting principles and auditing management’s assessment of the effectiveness of internal control over financial reporting.
 
With respect to the year ended December 31, 2013, in addition to its other work, the Audit Committee:
 
 
●
reviewed and discussed with management and Mayer Hoffman McCann P.C., our independent registered public accounting firm, our audited consolidated financial statements as of December 31, 2013 and the year then ended;
 
●
discussed with Mayer Hoffman McCann P.C. the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” as amended, with respect to its review of the findings of the independent registered public accounting firm during its examination of our financial statements; and
 
●
received from Mayer Hoffman McCann P.C. written affirmation of its independence as required by the Independence Standards Board Standard No. 1, “Independence Discussions with Audit Committees.” In addition, the Audit Committee discussed with Mayer Hoffman McCann P.C., its independence and determined that the provision of non-audit services was compatible with maintaining auditor independence.
 
 
11
 
 
The Audit Committee recommended, based on the review and discussion summarized above, that the Board of Directors include the audited consolidated financial statements in the 2013 10-K for filing with the SEC.
 
Dated May 19, 2014
  
Audit Committee of the Board of Directors of Inuvo, Inc.
     
   
/s/ Charles L. Pope, Chairman
   
/s/ Joseph P. Durrett

Compliance with Section 16(a) of the Exchange Act
 
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(d) of the Securities Exchange Act of 1934 during the year ended December 31, 2013 and Forms 5 and amendments thereto furnished to us with respect to the year ended December 31, 2013, as well as any written representation from a reporting person that no Form 5 is required, we are not aware that any officer, director or 10% or greater stockholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Securities Exchange Act of 1934 during the year ended December 31, 2013 other than each of Messrs. Howe, Ruiz, Pisaris and Barnett each failed to timely file one Form 4 reporting one transaction. 

EXECUTIVE COMPENSATION

Executive Officers

Name
  
Positions
Richard K. Howe
  
Executive Chairman of the Board
Wallace D. Ruiz
  
Chief Financial Officer, Secretary
John B. Pisaris, Esq.
  
General Counsel
Don Walker “Trey” Barrett III
  
Chief Operating Officer

Executive officers of our company are appointed by the Board of Directors and serve at the pleasure of the Board.

Richard K. Howe. For information regarding Mr. Howe, please see “Board of Directors” which appears earlier in this proxy statement.

Wallace D. Ruiz. Mr. Ruiz has served as our Chief Financial Officer since June 2010. From 2005 until April 2009, Mr. Ruiz was Chief Financial Officer and Treasurer of SRI Surgical Express, Inc. (NasdaqGM: STRC), a Tampa, Florida provider of central processing and supply chain management services. From 1995 until 2004 he was Chief Financial Officer of Novadigm, Inc., a Nasdaq-listed developer and worldwide marketer of enterprise infrastructure and software services that was acquired by Hewlett-Packard Company in 2004. Mr. Ruiz received a B.S. in Computer Science from St. John’s University and a M.B.A. in Accounting and Finance from Columbia University. Mr. Ruiz is a Certified Public Accountant.

John B. Pisaris. Mr. Pisaris has served as our General Counsel since March 2012 following our acquisition of Vertro.  He served as general counsel of Vertro from October 2004 until March 2012. From February 2004 to September 2004, Mr. Pisaris served as vice president of legal of Vertro, and prior to that was a partner at Porter Wright Morris & Arthur, LLP, a law firm, from January 2002 to January 2004.
 
Don Walker “Trey” Barrett, III. Mr. Barrett joined Inuvo in February 2010 as Senior Vice President of Corporate Strategy and Business Development, and was promoted to Chief Operating Officer in February 2013. Prior to joining Inuvo, Mr. Barnett served as Acxiom Corporation's Director of Interactive Media Products overseeing the innovation and development of the Relevance-X product line. With over 25 years of data-driven direct marketing experience, he has been involved in several successful business start-ups in the direct and interactive marketing industries. Mr. Barnett earned a bachelor’s degrees in Marketing and Economics from the University of Arkansas at Fayetteville.

 
12
 
 
Compensation Philosophy

The fundamental objectives of our executive compensation program are to attract and retain highly qualified executive officers, motivate these executive officers to materially contribute to our long-term business success, and align the interests of our executive officers and stockholders by rewarding our executives for individual and corporate performance based on targets established by the Compensation Committee which is now part of the Nominating, Corporate Governance and Compensation Committee.

We believe that achievement of these compensation program objectives enhances long-term stockholder value. When designing compensation packages to reflect these objectives, the Nominating, Corporate Governance and Compensation Committee has adopted the following four principles as a guide:
 
   ●
Alignment with stockholder interests: Compensation should be tied, in part, to our stock performance through the granting of equity awards to align the interests of executive officers with those of our stockholders,
   ●
Recognition for business performance: Compensation should correlate in large part with our overall financial performance,
   ●
Accountability for individual performance: Compensation should partially depend on the individual executive’s performance, in order to motivate and acknowledge the key contributors to our success, and
   ●
Competition: Compensation should generally reflect the competitive marketplace and be consistent with that of other well-managed companies in our peer group. In implementing this compensation philosophy, the Nominating, Corporate Governance and Compensation Committee takes into account the compensation amounts from the previous years for each of the named executive officers, and internal compensation equity between the named executive officers and other employees.
 
2013 Compensation Determination Process

In 2013, the compensation program for our executive officers consisted of the following components:

 
 ●
base salary;
 
 ●
2005 Plan and 2010 Plan awards; and
 
 ●  
other fringe benefits and perquisites.

The Nominating, Corporate Governance and Compensation Committee believes that our executive compensation package consists of elements of compensation that are typically used to incentivize and reward executive management at other companies of our size, in our geographic area or in our industry. Each of these components is designed to meet the program's objectives of providing a combination of fixed and variable, performance-based compensation linked to individual and corporate performance. In the course of setting the initial compensation level for new hires or adjusting the compensation of existing employees, the Nominating, Corporate Governance and Compensation Committee considered the advice and input of our management. Our Chief Executive Officer typically makes recommendations to the Nominating, Corporate Governance and Compensation Committee for any proposed changes in salary, as well as performance-based awards and stock option grants, for the other named executive officers. The Nominating, Corporate Governance and Compensation Committee decides any salary change, as well as performance-based awards and stock option grants, for the Chief Executive Officer

Base Salary

Base salary is an important component of executive compensation because it provides executives with an assured-level of income, assists us in attracting executives and recognizes different levels of responsibility and authority among executives. The determination of base salaries is based upon the executive’s qualifications and experience, scope of responsibility and potential to achieve the goals and objectives established for the executive. Additionally, contractual provisions in executive employment agreements, past performance, internal pay equity and comparison to competitive salary practices are also considered.
 
In general, the Nominating, Corporate Governance and Compensation Committee considers two types of potential base salary increases including “merit increases” based upon the executives’ individual performance and/or “market adjustments” based upon the peer group salary range for similar executives.
 
 
13
 

Plan Awards
 
The objective of our long-term incentive program is to provide a long-term retention incentive for the named executive officers and others and to align their interests directly with those of our stockholders by way of stock ownership. Under both our 2005 Long-Term Incentive Plan (the “2005 Plan”) and our 2010 Equity Compensation Plan (the “2010 Plan”), the Board of Directors or the Nominating, Corporate Governance and Compensation Committee has the discretion to determine whether equity awards will be granted to named executive officers and if so, the number of shares subject to each award. Both plans allow the Board or the Nominating, Corporate Governance and Compensation Committee to grant options and restricted stock and other stock-based awards with respect to up to shares of our common stock, valued in whole or in part by reference to the fair market value of the stock. In most instances, these long-term grants vest over a multi-year basis.
 
The Board or the Nominating, Corporate Governance and Compensation Committee determines the recipients of long-term incentive awards based upon such factors as performance, the length of continuous employment, managerial level, any prior awards, and recruiting and retention demands, expectations and needs. All our employees are eligible for awards. The Board or the Nominating, Corporate Governance and Compensation Committee grants such awards by formal action, which awards are not final until a stock option agreement is delivered by us and executed by both the company and the employee. There is no set schedule for the Board or the Nominating, Corporate Governance and Compensation Committee to consider and grant awards. The Board and the Nominating, Corporate Governance and Compensation Committee have the discretion to make grants whenever it deems it appropriate in our best interests. The Nominating, Corporate Governance and Compensation Committee has discretion to grant equity awards at any time.
 
We do not have any program, plan or practice in place to time option or other award grants with the release of material, non-public information and does not release such information for the purpose of affecting the value of executive compensation. The exercise price of stock subject to options awarded under the our plans is the fair market value of the stock on the date the grant is approved by the Board or the Nominating, Corporate Governance and Compensation Committee. Under the terms of each plan, the fair market value of the stock is the closing sales price of the stock on the date the grant is approved by the Board or the Nominating, Corporate Governance and Compensation Committee as reported by the NYSE MKT.
 
Other Compensation and Benefits
 
We have historically provided perquisites and other types of non-cash benefits on a very limited basis in an effort to avoid an entitlement mentality, reinforce a pay-for-performance orientation and minimize expense. Such benefits, when provided, can include additional health care benefits and additional life insurance.
 
Retirement and Other Post-Termination Benefits
 
Other than our 401(k) plan, employment agreements with our named executive officers and certain other employment agreements which provide for severance for termination without cause, we have not entered into any employment agreements that provide for a continuation of post-employment benefits. Our benefits plans are generally the same for all employees, and so as of the date of this proxy statement, the Nominating, Corporate Governance and Compensation Committee does not believe that any such plans in their present forms would continue post-employment, except as required by law (including with respect to COBRA), or otherwise set forth in this proxy statement. We do not currently maintain any other retirement or post-termination benefits plans.
 
Change in Control Severance Policy
 
We do not currently maintain any change in control severance plans or severance policies, except as provided in the executive employment agreements and the 2005 Plan, both of which are discussed later in this section. Therefore, none of our named executive officers will receive any cash severance payments in the event we undergo a change in control, unless their employment agreement otherwise provides.
 
Insurance
 
All full-time employees, including the named executive officers, are eligible to participate in our standard medical, dental, long-term and short-term disability and life insurance plans. The terms of such benefits for the named executive officers are generally the same as those for all other company employees, with the exception of the level of life insurance coverage. We pay approximately 95% of the annual health insurance premium with employees paying the balance through payroll deductions. Until the merger with Vertro on March 2, 2012, the company paid the entire premium for a basic long term care insurance plan for division manager and above. In addition, division directors and above received company-paid basic term life insurance and accidental death and dismemberment (AD&D) insurance in an amount of $500,000. Our executive officers receive up to $1,000,000 insurance amount of basic life insurance and AD&D insurance paid by us. All other full-time employees can elect basic life insurance and AD&D insurance coverage equal to their annual salary, up to $150,000, paid by us. We paid a portion of the elected short-term and long-term disability insurance opted by our employees. Other than the portion of the annual health insurance premium and all of the executive life insurance premiums, benefits paid by the company ceased on March 1, 2012.
 
 
14
 
 
401(k)

We sponsor a 401(k) plan, which is a qualified defined contribution retirement plan. Participants are provided the opportunity to make salary reduction contributions to the plan on a pre-tax basis. We have the ability to make discretionary matching contributions and discretionary profit sharing contributions to such plan. Our practice since 2010 was to not to make matching contribution. Since the merger with Vertro on March 1, 2012, we implemented the Vertro practice of matching 25% of the participant’s contributions, up to an aggregate of 5% of each participant’s earnings. Previously, the company match, if any vested over a three year period, subject to continued employment. Presently, the company match is fully vested  when made.

Other Benefits
 
We seek to maintain an open and inclusive culture in our facilities and operations among executives and other company employees. Thus, we do not provide executives with separate dining or other facilities, nor do we have programs for providing personal-benefit perquisites to executives, such as defraying the cost of personal entertainment or family travel. Our basic health care and other insurance programs are generally the same for all eligible employees, including the named executive officers. During 2012 Mr. Howe received reimbursement for certain relocation expenses and during 2012 and 2013 Mr. Ruiz received reimbursement for certain relocation expenses.

Summary Compensation Table
 
The following table summarizes all compensation recorded by us in each of the last two completed fiscal years for:
 
 
●
all individuals serving as our principal executive officer or acting in a similar capacity during the year ended December 31, 2013,
 
●
our two most highly compensated named executive officers at December 31, 2013 whose annual compensation exceeded $100,000, and
 
●
up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as a named executive officer of our company at December 31, 2013.
 
The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in Note 10 of the Notes to our Consolidated Financial Statements for the year ended December 31, 2013 appearing in our 2013 10-K.

 
Name and principal position
  
Year
  
Salary
($)
    
Bonus
($)
    
Stock
Awards
($)
    
Option
Awards
($)
    
Nonequity incentive plan compen-sation ($)
    
Non-qualified deferred compen-sation earnings ($)
    
All
other compen-sation
($)
    
Total
($)
  
                                                     
Richard K. Howe,
  
2013
  
370,889
    
0
    
432,300
    
0
    
0
    
0
    
0
    
803,189
  
Chairman and Chief Executive Officer1
  
2012
    
395,000
      
75,000
      
0
      
0
      
0
        
0
    
10,661
      
480,661
  
                                                                     
Wallace D. Ruiz,
  
2013
    
269,271
      
0
      
93,750
      
0
      
0
      
0
      
11,388
      
374,409
  
Chief Financial Officer 2
  
2012
    
265,000
      
50,000
      
0
      
0
      
0
      
0
      
25,140
      
340,140
  
                                                                     
John B. Pisaris
  
2013
    
306,271
      
0
      
15,900
      
0
      
0
      
0
      
0
      
322,171
  
General Counsel
  
2012
    
335,000
      
0
      
0
      
0
      
0
      
0
      
0
      
335,000
  

1
All other compensation for Mr. Howe in 2012 included $10,661 for relocation expenses.

2
All other compensation for Mr. Ruiz included $25,140 in 2012 and $11,388 in 2013 in relocation expenses.
 
 
 
15
 
 
Executive Employment Agreements

On March 1, 2012, we entered into employment agreements with each of Messrs. Howe, Ruiz, and Pisaris. The employment agreements entered into by Messrs. Howe, Ruiz, and Pisaris, each referred to as an executive, have an initial term of one year, after which each executive’s employment agreement automatically renews for additional one-year periods on the same terms and conditions, unless either party to the agreement exercises the respective termination rights available to such party in the agreement. The employment agreements provide for a minimum annual base salary of $395,000 for Mr. Howe, $335,000 for Mr. Pisaris, and $275,000 for Mr. Ruiz. The employment agreements require our company to compensate the executives and provide them with certain benefits if their employment is terminated. The compensation and benefits the executives are entitled to receive upon termination of employment vary depending on whether their employment is terminated:
 
●
by us for cause (as defined in the employment agreements);
●
by us without cause, or by the executive for good reason (as defined in the employment agreements);
●
due to death or disability; or
●
by the executive without good reason.
 
In the event of a termination by our company without cause or a termination by the executive for good reason, the executive would be entitled to receive the following:
 
●
his earned but unpaid basic salary through the termination date, plus a portion of the executive’s bonus based upon the bonus he would have earned in the year in which his employment was terminated, pro-rated for the amount of time employed by us during such year and paid on the original date such bonus would have been payable;
●
an amount payable over the 12-month period following termination equal to one times the sum of his basic salary at the time of termination, plus a termination bonus equal to the bonus paid to the executive during the four fiscal quarters prior to the date of termination (except that if a target bonus has been established for Mr. Howe, each such person’s termination bonus is equal to his target bonus for the fiscal year in which the termination occurs, increased or decreased pursuant to actual performance versus targeted performance in the then current plan measured as of the end of the calendar month preceding the termination date), or in the event of a change of control (as defined below), the greater of the relevant calculation above or the bonus paid to the executive during the four fiscal quarters prior to the change of control;
●
any other amounts or benefits owing to the executive under our then-applicable employee benefit, long-term incentive, or equity plans and programs, within the terms of such plans, payable over the 12-month period following termination; and
●
benefits (including health, life, and disability) as if the executive was still an employee during the 12-month period following termination.

Finally, in the event of a termination without cause by our company, with good reason by the executive, or following a change of control (as defined in the employment agreements), any equity award held by the executive will immediately and fully vest and become exercisable throughout the full term of such award as if the executive were still employed by us. In the event of a termination by us with cause, Messrs. Pisaris, Ruiz and Howe would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination.
 
In the event of a termination by us of Messrs. Pisaris or Ruiz upon the death or permanent disability of such executive, the executive would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, the earned but unpaid portion of any vested incentive compensation under and consistent with plans adopted by us prior to the date of termination, and over the 12 months following the date of termination an amount equal to 20% base salary at the time of termination for each year of employment with us or Vertro, capped at 100% of the base salary.
 
In the event of a termination by us of Mr. Howe upon the death or permanent disability of such executive, the executive would be entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, any other amounts or benefits owing to the executive under any of our then-applicable employee benefit, long-term incentive or equity plans and programs, and over the 12 months following the date of termination an amount equal to 20% base salary at the time of termination for each year of employment with us, capped at 100% of the base salary.
 
In the event of a termination by Messrs. Pisaris or Ruiz without good reason, each such executive is entitled to receive the earned but unpaid portion of such executive’s base salary through the date of termination, and the earned but unpaid portion of any vested incentive compensation under and consistent with our plans adopted by us prior to the date of termination. In the event of a termination by Mr. Howe without good reason, each such executive is entitled to receive the earned but unpaid portion of his base salary through the termination date and any other amounts and benefits owing to the executive under our then applicable employee benefit, long term incentive or equity plans and programs.

 
16
 
 
The executive may terminate employment for any reason (other than good reason) upon giving 30 days’ advance written notice to us. As to a termination by Messrs. Pisaris or Ruiz for any reason other than a good reason, we will pay the executive the earned but unpaid portion of his base salary through the termination date and any earned but unpaid vested incentive compensation under and consistent with plans adopted by us prior to the date of termination. As to a termination by Mr. Howe for any reason other than a good reason, we will pay the executive the earned but unpaid portion of his base salary through the termination date and any other amounts and benefits owing to the executive under our then applicable employee benefit, long term incentive or equity plans and programs.

Outstanding Equity Awards at Year End

The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2013.
 
OPTION AWARDS
    
STOCK AWARDS
  
Name
  
Number of securities underlying unexercised options
(#) exercisable
    
Number of securities underlying unexercised options
(#) unexercisable
    
Equity incentive plan awards: Number of securities underlying unexercised unearned options
(#)
    
Option exercise price
($)
    
Option expiration date
    
Number of shares or units of stock that have not vested (#)
    
Market value of shares or units of stock that have not vested ($)
    
Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)
    
Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
  
Richard K. Howe 1
    
110,000
      
10,000
      
-
      
2.93
    
3/14/2021
      
320,000
      
432,300
      
-
      
-
  
                                                                         
Wallace D. Ruiz 2
    
39,416
      
3,584
      
-
      
2.93
      
3/14/2021
      
75,000
      
93,750
      
-
      
-
  
                                                                         
John B. Pisaris
    
-
      
-
      
-
      
-
      
-
      
15,000
      
15,900
      
-
      
-
  
 
1
Mr. Howe voluntarily surrendered an aggregate of 521,031 options with an exercise price of $2.50 per share in the first quarter of 2013.
2
Mr. Ruiz voluntarily surrendered an aggregate of 95,339 options with exercise prices ranging from $1.70 to $2.50 per share in the first quarter of 2013.

Our Equity Compensation Plans

Information regarding the material terms of our 2005 Plan and our 2010 Plan is contained in the 2013 10-K.

PRINCIPAL STOCKHOLDERS

At May 16, 2014, we had 23,505,265 of common stock issued and outstanding. The following table sets forth information known to us as of May 16, 2014 relating to the beneficial ownership of shares of our common stock by:

 
●
each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;
 
●
each director and nominee;
 
●
each named executive officer; and
 
●
all named executive officers and directors as a group.

Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Inuvo, Inc., 1111 Main Street, Suite 201, Conway, Arkansas 72032. We believe that all persons, unless otherwise noted, named in the table have sole voting and investment power with respect to all shares of common stock shown as being owned by them. Under securities laws, a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributed to him) and that can be acquired by him within 60 days from the that date, including upon the exercise of options, warrants or convertible securities. We determine a beneficial owner’s percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person, and which are exercisable within 60 days of the that date, have been exercised or converted.
 
 
17
 
 
Name of Beneficial Owner
  
No. of Shares Beneficially Owned
    
% of Class
  
             
Charles Morgan 1
    
2,059,725
      
8.6
%
Pat Terrell 2
    
531,410
      
2.2
%
Richard K. Howe 3
    
481,750
      
2.0
 %
John B. Pisaris 4
    
271,621
      
1.1
%
Wallace D. Ruiz 5
    
175,519
      
*
  
Joe Durrett6
    
114,022
      
*
  
Don Walker “Trey” Barrett III 7
    
110,612
      
*
  
Charles L. Pope 8
    
100,041
      
*
  
All named executive officers, directors and director nominees as a group (eight persons)
    
3,844,700
      
16.1
%
William Blair & Company, L.L.C. 9
222 West Adams St.
Chicago, IL 60606
    
2,157,990
      
9.0
%
———————
*           represents less than 1%

1           Includes 1,228,315 shares of common stock held in a separate account (the "Separately Managed Account") managed by Bridgehampton Capital Management LLC ("BCM") for Charles D. Morgan. BCM is the sole manager of Bridgehampton Multi-Strategy Fund LLC (f/k/a Bridgehampton Arbitrage LLC, "Multi-Strategy Fund") and Bridgehampton Monument Fund LLC ("Monument Fund", and together with the Multi-Strategy Fund, the "Funds") and the manager of the Separately Managed Account. The Multi-Strategy Fund directly owns 350,000 shares of common stock and the Monument Fund directly owns 315,000 shares of common stock. Kenneth E. Lee is the managing member of BCM. Mr. Morgan, a member of BCM, has joint trading authority with respect to the shares of the issuer held by the Funds and in the Separately Managed Account. Therefore, each of BCM and Mr. Lee may be deemed to share beneficial ownership (but only partial pecuniary interest) of the shares beneficially owned by the Funds and the Separately Managed Account. Includes 166,410 shares of common stock issuable pursuant to the exercise of stock options, restricted stock grants and warrants exercisable within 60 days of May 16, 2014.

2           Includes 14,410 shares of common stock issuable pursuant to the exercise of warrants and restricted stock grants exercisable within 60 days of May 16, 2014.

3           Includes 120,000 shares of common stock issuable pursuant to the exercise of stock options exercisable within 60 days of May 16, 2014.

4           Includes 186 shares and 1,985 shares, respectively, held by Mr. Pisaris' minor children.

5           Includes 43,000 shares of common stock issuable pursuant to the exercise of stock options exercisable within 60 days of May 16, 2014.

6           Includes 6,410 shares of common stock issuable pursuant to restricted stock grants exercisable within 60 days of May 16, 2014.

7           Includes 40,000 shares of common stock issuable pursuant to the exercise of stock options exercisable within 60 days of May 16, 2014.

8           Includes 16,410 shares of common stock issuable pursuant to the exercise of stock options and restricted stock grants exercisable within 60 days of May 16, 2014.

9           Based on Schedule 13G filed with the Securities and Exchange Commission on February 6, 2014.

 
18
 
 
Securities Authorized for Issuance under Equity Compensation Plans
 
The following table sets forth securities authorized for issuance under any equity compensation plans approved by our stockholders as well as any equity compensation plans not approved by our stockholders as of December 31, 2013.
 
Plan category
  
Number of securities to be issued upon exercise of outstanding options, warrants and rights(a)
    
Weighted average exercise price of outstanding options, warrants and rights
    
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)
  
                         
Plans approved by our stockholders:
                        
2005 Long-Term Incentive Plan
    
656,946
    
$
0.12
      
14,343
  
2010 Equity Compensation Plan
    
364,370
    
$
1.96
      
2,260,752
  
Plans not approved by stockholders
    
982,551
    
$
9.62
      
0
  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In January 2013, we entered into a Sublease with First Orion Corp., an affiliate of one of our principal stockholders and director, Charles D. Morgan. Under the terms of the Sublease, which expires in February 2015, we lease approximately 5,834 square feet of office space in Conway, Arkansas for a monthly rental of $8,400. In April 2013, we entered into a Services Agreement with First Orion Corp. whereby we provide each other with office and technical support services on a cost plus 30% basis. The fees under the Services Agreement fluctuate depending on usage, however, we do not expect them to be material. Other than these transactions, there have been no transactions since January 1, 2012 nor are there any currently proposed transactions in which we were or are to be participant in which any related person had or will have a direct or indirect material interest.

STOCKHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING

As of the date of this proxy statement, we had not received notice of any stockholder proposals for the 2014 Annual Meeting described herein and proposals received subsequent to the date of this proxy statement will be considered untimely. For a stockholder proposal to be considered for inclusion in our proxy statement for the 2015 annual meeting, the Corporate Secretary must receive the written proposal at our principal executive offices no later than the deadline stated below. Such proposals must comply with SEC regulations under Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
 
Inuvo, Inc.
Attention: Corporate Secretary
1111 Main Street, Suite 201
Conway, Arkansas 72032
Facsimile: (561) 491-2716

Under Rule 14a-8, to be timely, a stockholder’s notice must be received at our principal executive offices not less than 120 calendar days before the date of our proxy statement release to stockholders in connection with the previous year’s annual meeting. However, if we did not hold an annual meeting in the previous year or if the date of this year’s annual meeting has been changed by more than 30 days from the date of the previous year’s annual meeting, then the deadline is a reasonable time before we begin to print and send our proxy materials. Therefore, stockholder proposals intended to be presented at the 2015 annual meeting must be received by us at our principal executive office no later than December 13, 2014 in order to be eligible for inclusion in our 2015 proxy statement and proxy relating to that meeting. Upon receipt of any proposal, we will determine whether to include such proposal in accordance with regulations governing the solicitation of proxies.
 
You may propose director candidates for consideration by the Board’s Nominating, Corporate Governance and Compensation Committee. Any such recommendations should include the nominee’s name and qualifications for Board membership, information regarding the candidate as would be required to be included in a proxy statement filed pursuant to SEC regulations, and a written indication by the recommended candidate of her or his willingness to serve, and should be directed to the Corporate Secretary of Inuvo at our principal executive offices: Inuvo, Inc., 1111 Main Street, Suite 201, Conway, Arkansas 72032 within the time period described above for proposals other than matters brought under SEC Rule 14a-8.
 
 
19
 
 
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
 
As required, we have filed our 2013 10-K with the SEC. Stockholders may obtain, free of charge, a copy of the 2013 10-K by writing to us at 1111 Main Street, Suite 201, Conway, Arkansas 72032, Attention: Corporate Secretary, or from our website, www.inuvo.com.

STOCKHOLDERS SHARING THE SAME LAST NAME AND ADDRESS

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. We and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they are or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you currently receive multiple proxy statements and would prefer to participate in householding, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to Inuvo, Inc., Attention: Corporate Secretary, 1111 Main Street, Suite 201, Conway, Arkansas 72032 or by faxing a communication to (561) 491-2716.

WHERE YOU CAN FIND MORE INFORMATION

This proxy statement refers to certain documents that are not presented herein or delivered herewith. Such documents are available to any person, including any beneficial owner of our shares, to whom this proxy statement is delivered upon oral or written request, without charge. Requests for such documents should be directed to Corporate Secretary, Inuvo, Inc., 1111 Main Street, Suite 201, Conway, Arkansas 72032. Please note that additional information can be obtained from our website at www.inuvo.com.

We file annual and special reports and other information with the SEC. Certain of our SEC filings are available over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities:

Public Reference Room Office
100 F Street, N.E.
Room 1580
Washington, D.C. 20549
 
You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Callers in the United States can also call 1-202-551-8090 for further information on the operations of the public reference facilities.

 
   
BY ORDER OF THE BOARD OF DIRECTORS
  
       
 
By:
/s/ Richard K. Howe  
    Richard K. Howe  
   
Chairman and Chief Executive Officer
  
Conway, Arkansas
      
May 19, 2014
      
       
 
 
20
 
 

INUVO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – JUNE 26, 2014 AT 9:30 AM LOCAL TIME
       
CONTROL ID:
              
REQUEST ID:
              
               
             
The undersigned, a stockholder of Inuvo, Inc. (the “Company”), hereby revoking any proxy heretofore given, does hereby appoint John B. Pisaris and Wallace D. Ruiz, and each of them, proxy, with power of substitution, for and in the name of the undersigned to attend the 2014 Annual Meeting of Stockholders of the Company to be held at the Company’s office located at 1111 Main Street, Suite 201, Conway, Arkansas 72032 on June 26, 2014 at 9:30 a.m. local time, or at any adjournment or postponement thereof, and there to vote, as designated below.
   
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
             
             
VOTING INSTRUCTIONS
            
If you vote by phone, fax or internet, please DO NOT mail your proxy card.
            
             
             
 
MAIL:
Please mark, sign, date, and return this Proxy Card promptly using the enclosed envelope.
          
 
FAX:
Complete the reverse portion of this Proxy Card and Fax to 202-521-3464.
          
 
INTERNET:
https://www.iproxydirect.com/INUV
          
 
PHONE:
1-866-752-VOTE(8683)
          
               
       
         
         
         
         
 
 
 
 
 
ANNUAL MEETING OF THE STOCKHOLDERS OF
INUVO, INC.
 
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ý
   
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
  
       
Proposal 1
  
à
FOR
ALL
  
AGAINST
ALL
  
FOR ALL
EXCEPT
      
 
Election of two Class III Directors:
  
¨
  
¨
          
 
Charles D. Morgan
          
¨
      
 
Patrick Terrell
          
¨
  
CONTROL ID:
  
                 
REQUEST ID:
  
                     
                     
                     
Proposal 2
  
à
FOR
  
AGAINST
  
ABSTAIN
      
 
The ratification of the appointment of Mayer Hoffman McCann P.C. as independent registered public accounting firm
  
¨
  
¨
  
¨
      
                     
                     
                     
                     
                     
         
MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING: ¨
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Meeting, and any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THESE PROPOSALS.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS INDICATED, THE VOTE OF THE UNDERSIGNED WILL BE CAST “FOR” PROPOSALS 1 AND 2. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
      
MARK HERE FOR ADDRESS CHANGE   ¨ New Address (if applicable):
____________________________
____________________________
____________________________
 
IMPORTANT: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
 
Dated: ________________________, 2014
 
 
(Print Name of Stockholder and/or Joint Tenant)
 
(Signature of Stockholder)
 
(Second Signature if held jointly)