Edgar Filing: AARON'S INC

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No. )

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Aaron’s, Inc.

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400 Galleria Parkway, S.E., Suite 300

Atlanta, Georgia 30339-3182

March 20, 2017

To Our Fellow Shareholders:

It is our pleasure to invite you to attend the 2017 Annual Meeting of Shareholders of Aaron’s, Inc. to be held on Tuesday, May 2, 2017, at 9:00 a.m., local time, at the SunTrust Conference Room located in the Atlanta Financial Center, 3343 Peachtree Road, N.E., Atlanta, Georgia 30326. The Annual Meeting will begin with a discussion of, and voting on, the matters described in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, and will be followed by a report on Aaron’s financial performance and operations.

The Proxy Statement is critical to our corporate governance process. We use this document to discuss the proposals being submitted to a vote of shareholders at the Annual Meeting, solicit your vote on those proposals, provide you with information about our board of directors and our executive officers, and inform you of the steps we are taking to fulfill our responsibilities to you as shareholders.

Your vote is important to us. Your broker cannot vote on certain of the proposals without your instruction. Please use your proxy card or voter instruction form to inform us, or your broker, as to how you would like to vote your shares on the proposals in the Proxy Statement. For instructions on voting, please refer to the notice you received in the mail or, if you requested a hard copy of the Proxy Statement, to your enclosed proxy card.

We look forward to seeing you at the Annual Meeting. On behalf of our management and directors, I want to thank you for your continued support of, and confidence in, Aaron’s.

Sincerely,




Ray M. Robinson	John W. Robinson III
Chairman of the Board	President and Chief Executive Officer

400 Galleria Parkway, S.E., Suite 300

Atlanta, Georgia 30339-3182

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 2, 2017

The 2017 Annual Meeting of Shareholders of Aaron’s, Inc., which we refer to as “Aaron’s” or the “Company,” will be held on Tuesday, May 2, 2017, at 9:00 a.m., local time, at the SunTrust Conference Room located in the Atlanta Financial Center, 3343 Peachtree Road, N.E., Atlanta, Georgia 30326, for the purpose of considering and voting on the following items:



1.	To elect nine directors to serve for a term expiring at the 2018 Annual Meeting of Shareholders.
2.	To vote on a non-binding, advisory resolution approving Aaron’s executive compensation.
3.	To vote on a non-binding, advisory recommendation to the board of directors regarding the frequency of the advisory vote on executive compensation.
4.	To ratify the appointment of Ernst & Young LLP as Aaron’s independent registered public accounting firm for 2017.
5.	To transact such other business as may properly come before the meeting or any adjournment or postponement thereof.

Information relating to these items is provided in the accompanying Proxy Statement.

Only shareholders of record, as shown on the stock transfer books of Aaron’s, on March 15, 2017 are entitled to notice of, or to vote at, the meeting. If you hold shares through a bank, broker or other nominee, more commonly known as holding shares in “street name,” you must contact the firm that holds your shares for instructions on how to vote your shares.

If you were a shareholder of record on March 15, 2017, you are strongly encouraged to vote in one of the following ways whether or not you plan to attend the Annual Meeting: (1) by telephone; (2) via the Internet; or (3) by completing, signing and dating a written proxy card and returning it promptly to the address indicated on the proxy card.



	BY ORDER OF THE BOARD OF DIRECTORS

	Robert W. Kamerschen
	Executive Vice President, General Counsel,
	Chief Administrative Officer & Corporate Secretary
Atlanta, Georgia
March 20, 2017

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON MAY 2, 2017.

We are pleased to announce that beginning this year, we are delivering your proxy materials for the 2017 Annual Meeting of Shareholders via the Internet. Because we are delivering proxy materials via the Internet, the Securities and Exchange Commission requires us to mail a notice to our shareholders notifying them that these materials are available on the Internet and how these materials may be accessed. This notice, which we refer to as our “Notice of Proxy Materials,” will be mailed to our shareholders on or about March 20, 2017.

Our Notice of Proxy Materials will instruct you on how you may vote your proxy via the Internet or by telephone, or how you can request a full set of printed proxy materials, including a proxy card to return by mail. If you would like to receive printed proxy materials, you should follow the instructions contained in our Notice of Proxy Materials. Unless you request them, you will not receive printed proxy materials by mail.

The Proxy Statement and Annual Report are available free of charge on our website at http://www.aarons.com/proxy and

http://www.aarons.com/annualreport, respectively,

and at http://www.envisionreports.com/AAN

Table of Contents




Proxy Summary	1

Matters To Be Voted On	3
Proposal 1: Election of Nine Directors	3
Proposal 2: Advisory Vote to Approve Executive Officer Compensation	4
Proposal 3: Advisory Vote to Determine the Frequency of the Advisory Vote on Executive Officer Compensation	5
Proposal 4: Ratification of the Appointment of Ernst & Young LLP as our Independent Registered Public Accounting Firm	6

Governance	7
Nominees to Serve as Directors	7
Executive Officers Who Are Not Directors	9
Composition, Meetings and Committees of the Board of Directors	10
Assessment of Director Candidates and Required Qualifications	11
Shareholder Recommendations and Nominations for Election to the Board	12
Board Leadership Structure	12
Board of Directors and Committee Evaluations	13
Board Role in Risk Oversight	13
Compensation Committee Interlocks and Insider Participation	13
Section 16(a) Beneficial Ownership Reporting Compliance	13

Non-Management Director Compensation in 2016	14
Stock Ownership Guidelines	14

Compensation Discussion and Analysis	15
Executive Summary	15
Objectives of Executive Compensation	17
Compensation Process	18
Benchmarking	18
Components of the Executive Compensation Program	19
Base Salary	20
Annual Cash Incentive Awards	21
Long-Term Equity Incentive Awards	23
Indirect Compensation and Perquisites	26
Employment Agreements and Other Post Termination Protections	27
Tally Sheets	27
Related Policies and Considerations	27

Compensation Committee Report	29

Executive Compensation	30
Summary Compensation Table	30
Grants of Plan-Based Awards in 2016	31
Employment Agreements with Named Executive Officers	31



Aaron's, Inc. 2015 Equity and Incentive Plan	32
Amended and Restated 2001 Stock Option and Incentive Award Plan	33
Outstanding Equity Awards at 2016 Fiscal Year-End	34
Option Exercises and Stock Vested in 2016	35
Pension Benefits	35
Non-Qualified Deferred Compensation as of December 31, 2016	35
Potential Payments Upon Termination or Change in Control	36
Securities Authorized for Issuance under Equity Compensation Plans	40

Audit Committee Report	41

Audit Matters	43
Fees Billed in the Last Two Fiscal Years	43
Approval of Auditor Services	43

Beneficial Ownership of Common Stock	44

Certain Relationships and Related Transactions	46
Policies and Procedures Dealing with the Review, Approval and Ratification of Related Party Transactions	46
Related Party Transactions	46
Other Transactions	47

Questions and Answers About Voting and the Annual Meeting	48

Additional Information	53
Shareholder Proposals for 2018 Annual Meeting of Shareholders	53
Householding of Annual Meeting Materials	54
Communicating with the Board of Directors and Corporate Governance Documents	54
Other Action at the Meeting	54

PROXY SUMMARY

This Proxy Statement is furnished in connection with the solicitation by the board of directors of Aaron’s, Inc., which we refer to as “we,” “our,” “us,” “Aaron’s” or the “Company,” of proxies for use at the 2017 Annual Meeting of Shareholders, including any adjournment or postponement thereof, which we refer to as the “Annual Meeting.” This summary highlights certain material information relating to the Annual Meeting contained elsewhere in this Proxy Statement, but does not contain all of the information you should consider prior to casting your vote. As a result, you should read this entire Proxy Statement carefully before voting. We anticipate that our Notice and Access Letter will first be mailed, and that this Proxy Statement and our 2016 Annual Report to Shareholders will first be made available to our shareholders, on or about March 20, 2017.

2017 Annual Meeting of Shareholders



Date and Time	May 2, 2017, at 9:00 a.m., local time
Place	The SunTrust Conference Room Atlanta Financial Center 3343 Peachtree Road, N.E. 30326
Record Date	March 15, 2017
Voting	Shareholders as of the record date are entitled to vote at the Annual Meeting. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on at the Annual Meeting.
Admission	Attendance at the Annual Meeting will be limited to shareholders as of the record date or their authorized representatives.

Matters To Be Considered and Voting Recommendations



Proposal	Board Recommendation
Elect nine directors to serve for a term expiring at the 2018 Annual Meeting of Shareholders	“FOR” each director nominee
Vote on a non-binding advisory resolution approving Aaron’s executive compensation	“FOR”
Vote on a non-binding advisory recommendation to the board of directors regarding the frequency of the advisory vote on executive compensation	“FOR” annual vote
Ratify the appointment of Ernst & Young LLP as Aaron’s independent registered public accounting firm for 2017	“FOR”

See “Matters To Be Voted On” beginning on page 3 for more information.

Executive Compensation Matters

The Compensation Committee of our board of directors designed our executive compensation program to retain key executives and motivate them to foster a culture of engagement and performance. Our executive compensation program is also structured so that a meaningful percentage of compensation is tied to the achievement of challenging levels of corporate and personal performance objectives. We believe this design will enable us to meet the operational, financial and strategic objectives established by our board of directors. Each of our named executive officers identified in “Compensation Discussion and Analysis” generally has a greater portion of their total direct compensation that is variable and performance-based than do other employees. This is consistent with our philosophy that incentive compensation opportunities linked to performance -including financial, operating and stock price performance - should increase as overall responsibility increases.

Incentive compensation for 2016 performance reflects solid financial results. Despite the challenges faced by the traditional rent-to-own industry, the Compensation Committee was pleased with management’s achievements and our performance in 2016, particularly the following:


•	Growing total revenues by 1%, as compared to 2015, to a record of $3.208 billion, driven by strong growth in our Progressive segment, offset by a decline in revenues from our traditional lease-to-own business, which we now refer to as our “Aaron’s Business,” in the face of an economy that has continued to prove challenging to traditional rent-to-own businesses;


•	Increasing Progressive’s revenues by nearly 18%, as compared to 2015, to $1.238 billion, driven primarily by a 35.6% increase in the number of active doors, and improving its pre-tax earnings by $50.2 million to $104.7 million, an increase of 92%;


•	Achieving pre-tax earnings of $218.4 million, a nearly 2.5% increase from the $213.1 million reached in 2015;


•	Ending 2016 with $308.6 million in cash and a net debt to total capitalization ratio of 9.6%;


•	Returning about $42 million of capital to shareholders through share repurchases and the payment of cash dividends;


•	Investing in and further improving the Company’s compliance programs and achieving compliance objectives;


•	Capturing about $12 million in cost reductions through initiatives implemented at our Aaron’s store support center and in the field;


•	Improving the percentage of lease revenue for the Aaron’s Business generated from our Aarons.com website from 1.1% for 2015 to 4.3% for 2016; and


•	Selling our 82 Company-operated HomeSmart stores, to strengthen our focus on improving our Aaron’s Business.

Based on our 2016 performance, the Compensation Committee approved the following incentive awards for our named executive officers:

•

Messrs. John W. Robinson III and Steven A. Michaels earned annual cash incentive awards of 97% of target based on Company-wide financial performance. Mr. Douglas A. Lindsay earned an annual cash incentive award of 74% of target based on Aaron’s Business results for financial performance and compliance-related goals. Messrs. Ryan K. Woodley and Curtis L. Doman earned annual cash incentive awards of 155% of target, based on Progressive’s results for financial performance and compliance-related goals.

•

Our named executive officers also earned awards under the performance share component that constitutes 50% of their annual grant values under our 2016 long-term incentive program. Messrs. Robinson and Michaels earned awards at 98% of target, based on the Company’s overall performance. Mr. Lindsay earned awards at 74% of target, based on the financial performance of our Aaron’s Business and the Company as a whole. Messrs. Woodley and Doman earned awards at 129% of target based on the financial performance of Progressive and the Company as a whole. The value realized from these awards was greater than the corresponding grant date target values in light of the subsequent increase in our stock price. Further, for the stock options and time-based restricted stock units that comprise the remainder of the annual grant for our named executive officers, our stock price increase resulted in year-end award values that were also greater than the grant date award values.

See “Compensation Discussion and Analysis” beginning on page 16 for more information.

MATTERS TO BE VOTED ON

Proposal 1-Election of Directors

Our board of directors recommends the election of the nominees listed below, each of whom will have a term of office expiring at our 2018 Annual Meeting of Shareholders. If, at the time of the Annual Meeting, any of such nominees should be unable to serve, the persons named in the proxy will vote for such substitutes as our board of directors recommends. In no event will the proxy be voted for more than nine nominees. Our management has no reason to believe that any nominee for election at the Annual Meeting will be unable to serve if elected, however.

The following table provides summary information about each nominee, all of whom currently serve on our board of directors. All of the nominees listed below have consented to serve as directors if elected.



Nominee	Age	Occupation	Independent	Joined Our Board
Kathy T. Betty	61	Former Owner Atlanta Dream (WNBA team)	Yes	August 2012
Douglas C. Curling	62	Managing Principal New Kent Capital LLC and New Kent Consulting LLC	Yes	January 2016
Cynthia N. Day	51	President and Chief Executive Officer Citizens Bancshares Corporation and Citizens Trust Bank	Yes	October 2011
Curtis L. Doman	44	Chief Technology Officer Progressive	No	August 2015
Walter G. Ehmer	51	President and Chief Executive Officer Waffle House, Inc.	Yes	May 2016
Hubert L. Harris, Jr.	73	Former Chief Executive Officer Invesco North America	Yes	August 2012
John W. Robinson III	45	President and Chief Executive Officer Aaron’s, Inc.	No	November 2014
Ray M. Robinson	69	Former President for the Southern Region AT&T	Yes	November 2002
Robert H. Yanker	58	Director Emeritus McKinsey & Company	Yes	May 2016

Assuming a quorum is present, a nominee will be elected upon the affirmative vote of a majority of the total votes cast at the Annual Meeting, which means that the number of votes cast in favor of a nominee’s election exceeds the number of votes cast against that nominee’s election. If an incumbent director fails to receive a majority of the votes cast, the incumbent director will promptly tender his or her resignation to our board of directors. Our board of directors can then choose to accept the resignation, reject it or take such other action that our board of directors deems appropriate.

Our board of directors recommends that you vote “FOR”

the election of each of the nominees above.

Proposal 2-Advisory Vote on Executive Compensation

We provide our shareholders with the annual opportunity to cast an advisory vote on the compensation of our named executive officers. The vote on this proposal represents an additional means by which we obtain feedback from our shareholders about executive compensation. Our Compensation Committee sets executive compensation for our named executive officers, which is designed to link pay with performance while enabling us to competitively attract, motivate and retain key executives. The overall objective of our executive compensation program is to encourage and reward the creation of sustainable, long-term shareholder value.

To meet this objective, in 2016 the Compensation Committee’s deliberations regarding how much to pay our named executive officers included, among other performance metrics, (i) objective measurements of business performance, (ii) the accomplishment of strategic and financial objectives, (iii) the development of management talent, (iv) enhancement of shareholder value and (v) other matters relevant to both the short- and the long-term success of Aaron’s. Our focus on internal financial performance as measured in our annual incentive plans led to solid results for 2016 and has positioned our operations well for the future. Our equity program serves to align the interests of our named executive officers with those of our shareholders.

We encourage our shareholders to read the Compensation Discussion and Analysis section of this Proxy Statement, which discusses how our compensation policies and programs support our compensation philosophy. Our board of directors and the Compensation Committee believe these policies and programs are strongly aligned with the long-term interests of our shareholders.

Accordingly, we ask for shareholder approval of the following resolution:

“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this Proxy Statement, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure, is hereby APPROVED.”

This vote is advisory and therefore not binding on us, our board of directors or the Compensation Committee. At last year’s annual meeting of shareholders, over 97% of votes cast were in support of the compensation paid to our named executive officers. Our board of directors and the Compensation Committee value the opinions of our shareholders, and the Compensation Committee takes seriously its role in the governance of compensation. The Compensation Committee will consider the result of this year’s vote, as well as other communications from shareholders relating to our compensation practices, and take them into account in future determinations concerning our executive compensation program.

Assuming a quorum is present, the resolution above approving our executive compensation will be approved if the votes cast by holders of shares of common stock present, in person or by proxy, at the Annual Meeting in favor of the resolution exceed the votes cast against the resolution.

Our board of directors recommends that you vote “FOR”

the resolution approving our executive compensation.

Proposal 3-Advisory Vote on the Frequency of the Advisory Vote on Executive Compensation

The Dodd-Frank Wall Street Reform and Consumer Protection Act enables our shareholders to indicate how frequently we should seek an advisory vote on the compensation of our named executive officers. By voting on this Proposal 3, shareholders may indicate whether they would prefer an advisory vote on named executive officer compensation once every one, two or three years.

After careful consideration, the board of directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate policy for the Company at this time, and therefore our board of directors recommends that you vote for an annual advisory vote on executive compensation. This advisory vote on the frequency of future advisory votes on executive compensation is non-binding on the board of directors.

You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting when you vote in response to the following resolution:

“RESOLVED, that the shareholders advise, on a non-binding basis, whether the preferred frequency of an advisory vote on the executive compensation of the Company's named executive officers as set forth in the Company's proxy statement should be every year, every two years, or every three years.”

The option of one year, two years or three years that receives the highest number of votes cast by shareholders will be the frequency for the advisory vote on executive compensation that has been selected by shareholders. However, because this vote is advisory and not binding on the board of directors or the Company in any way, the board of directors may decide that it is in the best interests of our shareholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our shareholders. The board of directors currently intends to consider the shareholders' selection in deciding on a frequency.

Assuming a quorum is present, the option of one year, two years or three years that receives the highest number of votes cast by holders of shares of common stock present, in person or by proxy, at the Annual Meeting will be the shareholders' preferred frequency.

Our board of directors recommends that you vote “FOR”

the option of once every year as the preferred frequency for future advisory votes on executive compensation.

Proposal 4-Ratification of the Appointment of the Independent Registered Public Accounting Firm

The Audit Committee of our board of directors has appointed Ernst & Young LLP, which we refer to as “EY,” to audit our consolidated financial statements for the year ending December 31, 2017, as well as the effectiveness of our internal controls over financial reporting as of December 31, 2017. A representative of EY will be present at the Annual Meeting, will have the opportunity to make a statement and will be available to respond to appropriate questions from shareholders.

We are asking our shareholders to ratify EY's appointment as our independent registered public accounting firm. Although ratification is not required by our bylaws or otherwise, our board of directors is submitting the selection of EY to our shareholders for ratification because we value our shareholders’ views on our independent registered public accounting firm and view the ratification vote as a matter of good corporate practice. In the event that our shareholders fail to ratify the appointment, it is anticipated that no change in our independent registered public accounting firm would be made for fiscal year 2017 because of the difficulty and expense of making any change during the current fiscal year. However, our board of directors and the Audit Committee would consider the vote results in connection with the engagement of an independent registered public accounting firm for fiscal year 2018. Even if EY's appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time if it determines that such a change would be in the best interests of the Company and its shareholders.

Assuming a quorum is present, the proposal to ratify the appointment of our independent registered public accounting firm for 2017 will be approved if the votes cast by holders of shares of common stock present, in person or by proxy, at the Annual Meeting in favor of the proposal exceed the votes cast against the proposal.

Our board of directors recommends that you vote “FOR”

the ratification of the appointment of our independent registered public accounting firm for 2017.

GOVERNANCE

Nominees to Serve as Directors

Kathy T. Betty, 61, has served as a director of the Company since August 2012. From 2009 until 2011, Ms. Betty was the owner of the Atlanta Dream of the WNBA. She also founded The Tradewind Group, an incubator company, where she worked until 2007. Her other experience includes serving as Executive Vice President and Partner of ScottMadden from 1993 to 2000, where she worked on international mergers and acquisitions, and working at Ernst & Young LLP from 1989 to 1993, including serving as one of the first women admitted to the partnership.

Among other qualifications, Ms. Betty brings over 30 years of business management and consultancy experience to our board of directors. Her leadership positions in the Atlanta community, including serving on the boards of the Children’s Healthcare of Atlanta Foundation, YMCA of Metropolitan Atlanta and the Alexander-Tharpe Fund, Georgia Institute of Technology, as well as the Board of Councilors of the Carter Center, provide her with management, entrepreneurial, financial and accounting experience, which are utilized by our board of directors. These skills and experience qualify her to serve on our board of directors.

Douglas C. Curling, 62, has served as a director of the Company since January 2016. Since March 2009, Mr. Curling has been the managing principal of New Kent Capital LLC, a family-run investment business, and New Kent Consulting LLC, a privacy and mergers and acquisitions consulting business. From 1997 until September 2008, Mr. Curling held various executive positions at ChoicePoint Inc., a provider of identification and credential verification services that was sold to Reed Elsevier in 2008, including serving as President from April 2002 to September 2008, as Chief Operating Officer from 1999 to September 2008 and as Executive Vice President, Chief Financial Officer and Treasurer from 1997 to May 1999. Mr. Curling also served as a director of ChoicePoint Inc. from May 2000 to September 2008. Mr. Curling currently serves on the board of directors of CoreLogic, a New York Stock Exchange listed company providing global property information, analytics and data-enabled services to financial services organizations and real estate professionals.

Among other qualifications, Mr. Curling brings substantial experience in managing and operating businesses with privacy, data analytics and other data-enabled matters to our board of directors. His prior service as a chief financial officer provides him with valuable accounting and financial expertise, and his consulting experience provides him with significant mergers and acquisitions expertise, all of which is utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Cynthia N. Day, 51, has served as a director of the Company since October 2011. Ms. Day is currently President and Chief Executive Officer of Citizens Bancshares Corporation and Citizens Trust Bank. She served as Chief Operating Officer and Senior Executive Vice President of Citizens Trust Bank from 2003 to January 2012 and served as its acting President and Chief Executive Officer from January 2012 to February 2012. Ms. Day previously served as the Executive Vice President and Chief Operating Officer and in other capacities of Citizens Federal Savings Bank of Birmingham from 1993 until its acquisition by Citizens Trust Bank in 2003 and previously served as an audit manager for KPMG. She currently serves on the board of directors of Primerica, Inc., Citizens Bancshares Corporation and its subsidiary, Citizens Trust Bank. As of January 2017, Citizens Bancshares Corporation no longer is a publicly traded company, and its subsidiary, Citizens Trust Bank, is not a publicly traded company. Ms. Day has also served as a member of the board of directors of the National Bankers Association, the Georgia Society of CPAs, the University of Alabama Continuing Education Advisory Board and the United Negro College Fund.

Among other qualifications, Ms. Day brings significant management and financial experience to our board of directors. Her experience in multiple senior executive leadership positions and service on other boards, provide her with accounting and financial expertise, which are utilized by our board of directors. These skills and experiences qualify her to serve on our board of directors.

Curtis L. Doman, 44, has served as a director of the Company since August 2015. Mr. Doman currently serves as the Chief Technology Officer of the Company’s Progressive segment. He was also President of IDS, Inc. from September 1993 until October 2015.

Among other qualifications, Mr. Doman brings significant experience in technology and data analytics matters to our board of directors. Mr. Doman’s intimate knowledge of our Progressive segment, including as the creator of the dynamic decision-making engine used by our Progressive segment in evaluating underwriting criteria for our lease products, is utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Walter G. Ehmer, 51, has served as a director of the Company since May 2016. Mr. Ehmer is currently the President and Chief Executive Officer of Waffle House, Inc., or “Waffle House,” a position he has held since 2012. Mr. Ehmer has held various positions with Waffle House since joining the company in 1992 as a senior buyer in the purchasing department, including most recently serving as its President and Chief Operating Officer from 2006 until 2012 and as Chief Financial Officer from 2001 until 2006. Mr. Ehmer previously served as a member of the Georgia Tech Industrial Engineering Advisory Board, the Georgia Tech Alumni Association Board of Trustees and the Georgia Tech President’s Advisory Board. Mr. Ehmer is also a past chairperson of the Georgia Tech Alumni Association and currently serves as a member of the executive committee of the Georgia Tech Foundation. Mr. Ehmer also serves on the boards of the City of Atlanta Policy Foundation and the Metro Atlanta Chamber of Commerce.

Among other qualifications, Mr. Ehmer brings significant management and financial experience to our board of directors. His experience in multiple senior executive leadership positions, including with responsibility for accounting-related matters, provide him with managerial and financial expertise that is utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Hubert L. Harris, Jr., 73, has served as a director of the Company since August 2012. Since 1992, Mr. Harris has owned and operated Harris Plantation, Inc., a cattle, hay and timber business. Mr. Harris has also served as a trustee for SEI mutual funds since 2008. Mr. Harris previously served as CEO of Invesco North America, CFO of Invesco PLC and Chairman of Invesco Retirement Services, and served on the board of directors of Invesco from 1993 to 2004. From 1988 to 2005, Mr. Harris was President and Executive Director of the International Association for Financial Planning. Mr. Harris also served as the Assistant Director of the Office of Management and Budget in Washington, D.C. from 1977 to 1980. Mr. Harris is on the Board of Councilors of the Carter Center, and he previously served as chair of the Georgia Tech Foundation and chair of the Georgia Tech Alumni Association.

Among other qualifications, Mr. Harris brings a strong financial background and extensive business experience to our board of directors. His service on numerous for-profit and non-profit boards and management experience provide him with governance and financial expertise, which are utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

John W. Robinson III, 45, has been a director of the Company since November 2014 when he was named the Chief Executive Officer of the Company. Mr. Robinson was also named President of the Company as of February 2016. From 2012 to November 2014, Mr. Robinson served as the Chief Executive Officer of Progressive Finance Holdings, LLC, which was acquired by Aaron’s, Inc. in April 2014. Prior to working at Progressive, he served as the President and Chief Operating Officer of TMX Finance LLC, or “TMX Finance.” He joined TMX Finance as Chief Operating Officer in 2004 and was appointed President in 2008. TMX Finance filed a voluntary Chapter 11 bankruptcy proceeding in April 2009 from which it emerged in April 2010. Prior to working at TMX Finance, he worked in the investment banking groups at Morgan Stanley, Lehman Brothers and Wheat First Butcher Singer.

Among other qualifications, Mr. Robinson brings significant operational and financial experience to our board of directors. His considerable experience in senior management, and his leadership and intimate knowledge of our business, including our Progressive segment in particular, provide him with strategic and operational expertise generally and for the Company specifically, which are utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Ray M. Robinson, 69, has served as a director of the Company since November 2002 and has been our Chairman since April 2014. From November 2012 until his appointment as Chairman, Mr. Robinson was the Company’s independent lead director. Mr. Robinson started his career at AT&T in 1968, and prior to his retirement in 2003, he held several executive positions, including President of the Southern Region, its largest region, President and Chief Executive Officer of AT&T Tridom, Vice President of Operations for AT&T Business Customer Care, Vice President of AT&T Outbound Services, and Vice President of AT&T Public Relations. Mr. Robinson is also a director of Acuity Brands, Inc., a lighting solutions company, American Airlines Group Inc., a holding company operating various commercial airlines (including American Airlines and US Airways), Avnet, Inc., a distributor of electronic components, enterprise computer and storage products, information technology services and embedded subsystems, and Fortress Transportation and Infrastructure Investors LLC, an investor in infrastructure and equipment for the transportation of goods and people, all of which are public companies. Since 2003, Mr. Robinson has also served as a director and non-executive Chairman of Citizens Bancshares Corporation and its subsidiary, Citizens Trust Bank, the largest African American-owned bank in the Southeastern United States and the nation’s second largest. As of January 2017, Citizens Bancshares Corporation no longer is a publicly traded company, and its subsidiary, Citizens Trust Bank, is not a publicly traded company. Mr. Robinson previously served as a director of RailAmerica, Inc. from 2010 to 2012. Mr. Robinson has also been Vice Chairman of the East Lake Community Foundation in Atlanta, Georgia since November 2003.

Among other qualifications, Mr. Robinson brings experience in senior management and board service for numerous public companies to our board of directors. His service on the boards of a number of organizations of varying sizes provides him with extensive operational skills and governance expertise, which are utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Robert H. Yanker, 58, has served as a director of the Company since May 2016. Mr. Yanker is currently a Director Emeritus at McKinsey & Company, or “McKinsey.” Mr. Yanker served at McKinsey for 27 years, from 1986 to 2013, where he worked with a variety of clients in the industrial, consumer and telecommunications sectors on a full range of issues from strategy, portfolio assessment, sales and operations transformation, restructuring and capability building. Mr. Yanker also served as a director of Wausau Paper Corp., a NYSE-listed manufacturer of away-from-home towel and tissue products, from July 2015 until January 2016 when the company was acquired by a subsidiary of SCA Americas, Inc.

Among other qualifications, Mr. Yanker brings significant management and operational experience to our board of directors. His experience throughout his career in advising and consulting for senior management teams provide him with significant managerial and operational expertise, and his prior service on another public company board provided him with governance expertise. Mr. Yanker's skills and areas of expertise are utilized by our board of directors. These skills and experiences qualify him to serve on our board of directors.

Executive Officers Who Are Not Directors

Set forth below are the names and ages of each current executive officer of the Company who is not a director. All positions and offices with the Company held by each such person are also indicated.




Name (Age)		Position with the Company and Principal Occupation During the Past Five Years
Robert W. Kamerschen (49)		Chief Administrative Officer since February 2016 and Executive Vice President, General Counsel and Corporate Secretary since April 2014. Previously, Mr. Kamerschen served as Senior Vice President and General Counsel from June 2013 and also as Corporate Secretary from November 2013. Before joining the Company, Mr. Kamerschen worked at information solution provider Equifax Inc. from 2008 through 2013, serving in multiple executive positions and most recently as its U.S. Chief Counsel, Senior Vice President and Chief Compliance Officer. Mr. Kamerschen began his legal career in 1994 in the Atlanta office of the international law firm Troutman Sanders LLP.
Douglas A. Lindsay (46)		President of Aaron’s Business since February 2016. Prior to joining the Company, Mr. Lindsay served as the Executive Vice President and Chief Operating Officer at ACE Cash Express from February 2012 to January 2016. Previously Mr. Lindsay also served as the Executive Vice President and Chief Financial Officer from June 2007 to February 2012 and the Vice President, Finance and Treasurer from February 2005 to June 2007 for ACE Cash Express.
Steven A. Michaels (45)		Chief Financial Officer and President of Strategic Operations since February 2016. Mr. Michaels previously served as President from April 2014 until February 2016, Vice President Strategic Planning & Business Development from 2013 until April 2014, Vice President, Finance from 2012 until April 2014 and Vice President, Finance, Aaron’s Sales & Lease Ownership Division from 2008 until 2011.
Robert P. Sinclair, Jr. (55)		Vice President, Corporate Controller since 1999.
Ryan K. Woodley (40)		Chief Executive Officer of Progressive Finance Holdings, LLC since January 2015. Mr. Woodley joined Progressive Finance Holdings, LLC as Chief Operating Officer and Chief Financial Officer in June of 2013. Prior to that, he was Chief Operating Officer and Chief Financial Officer at DigiCert, a digital security certificate provider which was sold to TA Associates in November 2012.

Composition, Meetings and Committees of the Board of Directors

Our board of directors is currently comprised of nine directors having terms expiring at the Annual Meeting. Each of our directors will continue to hold office until the expiration of his or her term and until his or her successor is duly elected and qualified or until his or her earlier resignation, removal from office or death.

Our Corporate Governance Guidelines include categorical standards adopted by our board of directors to determine director independence that meet the listing standards of the New York Stock Exchange, or “NYSE.” Our Corporate Governance Guidelines also require that at least 75% of our board of directors be “independent,” a requirement that is more stringent than the NYSE listing requirement that a majority of the board of directors be independent. Our board of directors has affirmatively determined that all of our directors are “independent” in accordance with NYSE listing requirements and the requirements of our Corporate Governance Guidelines, other than Mr. John Robinson, our President and Chief Executive Officer, and Mr. Doman, the Chief Technology Officer of our Progressive segment.

Our board of directors currently has three standing committees consisting of an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. From time to time, our board of directors may establish ad-hoc committees at its discretion. Our board of directors has adopted a charter for each of its standing committees, copies of which are available on the investor relations section of our website located at http://www.aaronsinc.com. The current members of each committee are identified in the table below:



Director	Audit Committee*	Compensation Committee	Nominating and Corporate Governance Committee
Kathy T. Betty		(Chair)	Member
Douglas C. Curling	Member	Member
Cynthia N. Day	(Chair)	Member
Walter G. Ehmer	Member		Member
Hubert L. Harris, Jr.	Member		(Chair)
Ray M. Robinson		Member	Member
Robert H. Yanker	Member		Member
Number of Meetings in Fiscal Year 2016	9	7	5



	*	Four of the members of the Audit Committee have been designated as an “audit committee financial expert” as defined by Securities and Exchange Commission, or "SEC", regulations.

Meetings

Our board of directors held seven meetings during 2016. The number of meetings held by each of our committees in 2016 is shown in the table above. Overall attendance at those meetings was approximately 98%. Each director attended 75% or more of the aggregate of all meetings of the board and the committees on which he or she served during 2016.

It is our policy that directors are expected to attend the annual meeting of shareholders in the absence of a scheduling conflict or other valid reason. All of our directors then in office attended the 2016 Annual Meeting of Shareholders held on May 4, 2016.

The non-management and independent members of our board of directors meet frequently in executive session, without management present. Mr. Ray Robinson, the Chairman of our board of directors, chairs these meetings.

Committees

Audit Committee. The function of the Audit Committee is to assist our board of directors in fulfilling its oversight responsibility relating to: (i) the integrity of the Company’s consolidated financial statements; (ii) the financial reporting process and the systems of internal accounting and financial controls; (iii) the performance of the Company’s internal audit function and independent auditors; (iv) the independent auditors’ qualifications and independence; (v) the Company’s compliance with ethics policies (including oversight and approval of related party transactions and reviewing and discussing calls to the Company’s ethics hotline and the Company’s investigation of and response to such calls) and legal and regulatory requirements; and (vi) the adequacy of the Company’s policies and procedures to assess, monitor and manage business risks and its corporate compliance programs, including receiving quarterly reports related to such risks and programs. The Audit Committee is directly responsible for the appointment, compensation, retention, and termination of our independent auditors, who report directly to the Audit Committee, and for recommending to our board of directors that the board recommend to our shareholders that the shareholders ratify the retention of our independent auditors. In connection with its performance of these responsibilities, the Audit Committee regularly receives reports from and holds discussions with Company management, leaders from the Company’s internal audit department, leaders from the Company’s legal department, and the independent auditors. Many of those discussions are held in executive session with the Audit Committee.

Each member of the Audit Committee satisfies the independence requirements of the NYSE and SEC rules applicable to audit committee members, and each is financially literate. Our board of directors has designated each of Ms. Day and Messrs. Curling, Ehmer and Harris as an “audit committee financial expert” as defined by SEC regulations.

Compensation Committee. The purpose of the Compensation Committee is to assist our board of directors in fulfilling its oversight responsibilities relating to: (i) executive and director compensation; (ii) equity compensation plans and other compensation and benefit plans; and (iii) other significant associate resources matters.

The Compensation Committee has the authority to review and approve performance goals and objectives for the named executive officers in connection with the Company’s compensation programs, and to evaluate the performance of the named executive officers, in light of such performance goals and objectives and other matters, for compensation purposes. Based on such evaluation and other matters, the Compensation Committee recommends to the independent members of our board of directors for determination (or makes such determination itself in some circumstances) the compensation of the named executive officers, including our President and Chief Executive Officer. The Compensation Committee also has the authority to approve grants of equity incentives and to consider from time to time, and recommend to our board of directors, changes to director compensation.

Each member of the Compensation Committee satisfies the independence requirements of the NYSE applicable to compensation committee members, is a non-employee director under Rule 16b-3 of the Securities Exchange Act of 1934, or the “Exchange Act,” and is an outside director under Section 162(m) of the Internal Revenue Code.

Nominating and Corporate Governance Committee. The purpose of the Nominating and Corporate Governance Committee is to assist our board of directors in fulfilling its responsibilities relating to: (i) board and committee membership, organization, and function; (ii) director qualifications and performance; (iii) management succession; and (iv) corporate governance. The Nominating and Corporate Governance Committee from time to time identifies and recommends to our board of directors individuals to be nominated for election as directors and develops and recommends to our board of directors for adoption corporate governance principles applicable to the Company.

Each member of the Nominating and Corporate Governance Committee satisfies the independence requirements of the NYSE.

Assessment of Director Candidates and Required Qualifications

The Nominating and Corporate Governance Committee is responsible for considering and recommending to our board of directors nominees for election as director at our annual meeting of shareholders and nominees to fill any vacancy on our board of directors. Our board of directors, after taking into account the assessment provided by the Nominating and Corporate Governance Committee, is responsible for considering and recommending to our shareholders nominees for election as director at our annual meeting of shareholders. In accordance with our Corporate Governance Guidelines, both the Nominating and Corporate Governance Committee and our board of directors, in evaluating director candidates, consider the experience, talents, skills and other characteristics of each candidate and our board of directors as a whole in assessing potential nominees to serve as director.

We believe that, at a minimum, a director should have the highest personal and professional ethics, moral character and integrity, demonstrated accomplishment in his or her field and the ability to devote sufficient time to carry out the duties of a director. To help ensure the ability to devote sufficient time to board matters, no director may serve on the board of more than four other public companies while continuing to serve on our board of directors, and no director that serves as chief executive officer of another company may serve on the board of more than two other public companies while continuing to serve on our board of directors, unless our board determines in its business judgment that such simultaneous service will not impair the director's ability to serve on our board of directors, and that such simultaneous service is otherwise in the best interests of the shareholders.

In addition to these minimum qualifications, our board of directors may consider all information relevant in their business judgment to the decision of whether to nominate a particular candidate for a particular board seat. These factors may include a candidate’s professional and educational background, reputation, industry knowledge and business experience and the relevance of those characteristics to us and our board of directors. In addition, candidates will be evaluated on their ability to complement or contribute to the mix of talents, skills and other characteristics needed to maintain the effectiveness of our board of directors and their ability to fulfill the responsibilities of a director and of a member of one or more of the standing committees of our board of directors. While our board of directors does not have a specific policy regarding diversity among directors, diversity of race, ethnicity, gender, age, cultural background and professional experience is considered in evaluating candidates for membership on our board of directors.

No person may be nominated for election to our board of directors after his or her 80th birthday and must offer his or her resignation, effective as of the next annual meeting of shareholders, from our board of directors following his or her 80th birthday. A director is also required to offer his or her resignation immediately in the event the director, or any of his or her respective affiliates or associates, takes any action (including encouraging or supporting others) to (i) nominate, propose or vote in favor of any candidate to serve on our board of directors (other than the nominees proposed by our board of directors) or oppose for election any nominee proposed by our board of directors or (ii) solicit proxies with respect to any of our securities within the meaning of the Exchange Act and the rules thereunder (other than any proxy solicitation in favor of a matter approved by our board of directors).

In determining whether to nominate an incumbent director for re-election, the Nominating and Corporate Governance Committee and our board of directors evaluate each incumbent’s continued service, in light of these collective requirements. When the need for a new director arises (whether because of a newly created seat or vacancy), the Nominating and Corporate Governance Committee and our board of directors proceed to identify a qualified candidate or candidates and to evaluate the qualifications of each candidate identified. Final candidates are generally interviewed by one or more members of the Nominating and Corporate Governance Committee or other members of our board of directors before a decision is made.

Shareholder Recommendations and Nominations for Election to the Board

Our Nominating and Corporate Governance Committee will consider nominees recommended by shareholders. Any shareholder wishing to nominate a candidate for director at the next annual shareholders’ meeting must submit a proposal as described under “Additional Information—Shareholder Proposals for the 2018 Annual Meeting of Shareholders” and otherwise comply with the advance notice provisions and information requirements contained in our bylaws. The shareholder submission should be sent to the President of Aaron’s, Inc. at 400 Galleria Parkway, S.E., Suite 300, Atlanta, Georgia 30339-3182.

Shareholder nominees are evaluated under the same standards as other candidates for board membership described above in “Assessment of Director Candidates and Required Qualifications.” In addition, in evaluating shareholder nominees for inclusion with the board’s slate of nominees, the Nominating and Corporate Governance Committee and our board of directors may consider any other information they deem relevant, including (i) the factors described in “Assessment of Director Candidates and Required Qualifications,” (ii) whether there are or will be any vacancies on our board of directors, (iii) the size of the nominating shareholder’s holdings in the Company, (iv) the length of time such shareholder has owned such holdings and (v) any statements by the nominee or the shareholder regarding proposed changes in our operation.

Board Leadership Structure

We currently separate the roles of Chairman and Chief Executive Officer in recognition of the differences between the two roles. The Chairman is responsible for leading our board of directors in its duty to oversee the management of our business and affairs. The Chief Executive Officer is responsible for oversight of our day-to-day operations and business affairs, including directing the business conducted by our employees, managers and officers.

Our Chief Executive Officer serves on our board of directors, which we believe helps to serve as a bridge between management and our board of directors, ensuring that both groups act with a common purpose. We believe that Mr. John Robinson’s presence on our board of directors enhances his ability to provide insight and direction on important strategic initiatives to both management and the independent directors.

Our board of directors does not have a formal policy on whether the Chairman and Chief Executive Officer roles should be separated or combined but, instead, makes that determination from time to time employing its business judgment. Our board of directors, however, does believe that if the Chairman and Chief Executive Officer roles are combined, or if the Chairman is not an independent director, that our board of directors should appoint an independent Lead Director to serve as the leader and representative of the independent directors in interacting with the Chairman and Chief Executive Officer and, when appropriate, our shareholders and the public. Our board of directors has determined that Mr. Ray Robinson, who serves as our Chairman, is independent under NYSE listing requirements. As a result, currently our board of directors has not designated a Lead Director.

Board of Directors and Committee Evaluations

Our board of directors and each of its committees conduct an annual evaluation, which includes a qualitative assessment by each director of the performance of our board of directors and the committee or committees on which the director sits. In 2017, our board of directors also engaged a third-party to facilitate our board self-evaluation process and board and committee review. That assessment was conducted via oral interviews by a third party legal advisor selected by our board of directors, using as the basis for discussion a list of questions that were provided to each director in advance. The results of the evaluation and any recommendations for improvement were reported to all directors and discussed with the Nominating and Corporate Governance Committee and our board of directors. The Nominating and Corporate Governance Committee oversees the evaluation process.

Board Role in Risk Oversight

Senior management is responsible for day-to-day risk management, while our board of directors oversees planning and responding to risks, as a whole, through its committees and independent directors. Although our board of directors has ultimate responsibility with respect to risk management oversight, primary responsibility for certain areas has been delegated, as appropriate, to its committees. For example, the Audit Committee is charged with, among other matters, overseeing risks attendant to (i) our system of disclosure controls and procedures, (ii) internal control over financial reporting, and (iii) performance of our internal audit function and independent auditors. The Audit Committee considers the steps management has taken to monitor and control such risks, including our risk assessment and risk management policies. The Audit Committee also considers issues relating to our legal and regulatory compliance obligations, including consumer protection laws in the lease-to-own industry in particular, at each meeting together with our General Counsel or another representative from our legal department.

Likewise, the Compensation Committee considers risks that may be implicated by our compensation programs. For 2016, our Compensation Committee, aided by its third-party compensation consultant, reviewed our compensation policies and practices and determined that they do not encourage excessive or unnecessary risk taking, and do not otherwise create risks that are reasonably likely to have a material adverse effect on the Company.

Compensation Committee Interlocks and Insider Participation

For the year ended December 31, 2016, the Compensation Committee consisted of Mses. Betty and Day and Messrs. Curling and Ray Robinson, each of whom our board of directors determined was independent in accordance with NYSE listing requirements.

No member of the Compensation Committee during 2016 is or was formerly an officer or employee of the Company or any of its subsidiaries or was a related person in a related person transaction with the Company required to be disclosed under applicable SEC rules.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of the Company’s common stock, to file with the SEC certain reports of beneficial ownership of the Company’s common stock. Based solely on a review of information furnished to us, the Company believes that its directors, officers and more than 10% shareholders complied with all applicable Section 16(a) filing requirements during the year ended December 31, 2016, other than one Form 4 filed three days late for Mr. Lindsay related to restricted stock units and stock options granted to him in February 2016 when he was hired as President of our Aaron's Business.

NON-MANAGEMENT DIRECTOR COMPENSATION IN 2016

The compensation program for our non-employee directors is designed to fairly compensate them for the effort and responsibility required to serve on the board of a company of our size and scope as well as to align our directors’ interests with those of our shareholders more generally.

Effective in January 2016, the compensation program for our non-employee directors was revised to better align with the interests of our shareholders as well as with current market practices. Under the re-designed program, non-employee directors received an annual cash retainer of $75,000 and an annual award of restricted stock units having a value of $100,000, which generally vests one year following the grant date. Our Chairman, Mr. Ray Robinson, also received a cash retainer of $100,000, paid quarterly in $25,000 installments, in recognition of the additional duties he performs by serving as our Chairman. Non-employee directors serving as the chairperson of the Audit, Compensation, and Nominating and Corporate Governance Committees also received an additional annual retainer of $20,000, $15,000 and $10,000, respectively, for their service in these roles and the additional time commitments required.

Directors who are employees of the Company receive no compensation for their service on our board of directors.

The following table shows compensation paid to our non-employee directors during 2016.



Name	Fees Earned or Paid in Cash($)		Stock Awards⁽²⁾($)	Total ($)
Matthew E. Avril⁽³⁾	38,364		100,000	138,364
Leo Benatar⁽³⁾	37,500		100,000	137,500
Kathy T. Betty^{(4), (5)}	90,000	⁽¹⁾	100,000	190,000
Douglas C. Curling^{(4), (6)}	75,000		100,000	175,000
Cynthia N. Day^{(4), (7)}	95,000		100,000	195,000
Walter G. Ehmer^{(4), (8)}	56,250		66,667	122,917
Hubert L. Harris, Jr.^{(4), (9)}	86,365		100,000	186,365
H. Eugene Lockhart⁽³⁾	37,500		100,000	137,500
Ray M. Robinson^{(4), (10)}	176,445		100,000	276,445
Robert H. Yanker^{(4), (11)}	64,543		66,667	131,210


(1)	Amounts listed for Ms. Betty reflect cash fees taken in the form of shares of our common stock. During 2016, Ms. Betty received 3,780 shares of our common stock in lieu of cash fees payable in connection with service on our board of directors, which includes 997 shares that Ms. Betty received for services rendered during 2015.


(2)	Represents the grant date fair value of stock awards pursuant to Financial Accounting Standards Board Codification Topic 718. A pro rata portion of the restricted stock units granted to Messrs. Avril, Benatar and Lockhart in January 2016 were forfeited upon their departures from our board of directors, effective as of June 3, 2016 for Mr. Avril and May 3, 2016 for Messrs. Benatar and Lockhart.


(3)	The amount of Fees Earned or Paid in Cash for Messrs. Avril, Benatar and Lockhart reflect that each of them no longer served on our board of directors effective as of June 3, 2016 for Mr. Avril and May 3, 2016 for Messrs Benatar and Lockhart.

(4)

As of December 31, 2016, each of our non-executive directors, other than Messrs. Ehmer and Yanker, held 4,466 units of restricted stock subject to vesting, which was the number of units of restricted stock granted to them in January 2016. As of December 31, 2016, Messrs. Ehmer and Yanker each held 2,599 units of restricted stock subject to vesting, which was the number of restricted stock units granted to them in May 2016, when they were first elected to our board of directors. Mr. Robinson held an aggregate of 6,000 vested options, of which 3,000 expire in October 2018 and have an exercise price of $14.11 and 3,000 expire in February 2020 and have an exercise price of $19.92.


(5)	Includes $22,500 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(6)	Includes $18,750 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(7)	Includes $23,750 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(8)	Includes $18,750 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(9)	Includes $21,250 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(10)	Includes $45,195 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.


(11)	Includes $25,900 in fees earned for services in the fourth quarter of 2016 which will be paid in 2017.

Stock Ownership Guidelines

Under the current stock ownership guidelines adopted by our board of directors in November 2015, each director is expected to own or acquire shares of our common stock and common stock equivalents (including restricted stock and restricted stock units, or "RSUs") having a value of at least $400,000 prior to the later of January 31, 2020 or four years from when the director first joined our board of directors.

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Introduction. The purpose of this section is to provide material information about the compensation objectives and policies for our named executive officers and to explain how the Compensation Committee of our board of directors made its compensation decisions for 2016.

For 2016, our named executive officers are listed below and consist of (i) our Chief Executive Officer, (ii) the two executives who served as our Chief Financial Officer during the year and (iii) our three most highly compensated executive officers for 2016 (other than our Chief Executive Officer and our Chief Financial Officers).



Named Executive Officer		2016 Position
John W. Robinson III		President and Chief Executive Officer
Gilbert L. Danielson		Executive Vice President (Chief Financial Officer until February 18, 2016)
Steven A. Michaels		Chief Financial Officer (as of February 18, 2016) and President of Strategic Operations
Ryan K. Woodley		Chief Executive Officer, Progressive
Curtis L. Doman		Chief Technology Officer, Progressive
Douglas A. Lindsay		President, Aaron’s Business

Our compensation programs are designed to retain key executives and to motivate them to foster a culture of engagement and performance. We believe that doing so will enable the Company to meet the operational, financial and strategic objectives established by our board of directors.

Fiscal Year Results. Key accomplishments and results from 2016 include:


•	Growing total revenues by 1%, as compared to 2015, to a record of $3.208 billion, driven by strong growth in our Progressive segment, offset by a decline in revenues from our traditional lease-to-own business, which we now refer to as our “Aaron’s Business,” in the face of an economy that has continued to prove challenging to traditional rent-to-own businesses;


•	Increasing Progressive’s revenues by nearly 18%, as compared to 2015, to $1.238 billion, driven primarily by a 35.6% increase in the number of active doors, and improving its pre-tax earnings by $50.2 million to $104.7 million, an increase of 92%;


•	Achieving pre-tax earnings of $218.4 million, a nearly 2.5% increase from the $213.1 million reached in 2015;


•	Ending 2016 with $308.6 million in cash and a net debt to total capitalization ratio of 9.6%;


•	Returning about $42 million of capital to shareholders through share repurchases and the payment of cash dividends;


•	Investing in and further improving the Company’s compliance programs and achieving compliance objectives;


•	Capturing about $12 million in cost reductions through initiatives implemented at our Aaron’s store support center and in the field;


•	Improving the percentage of lease revenue for the Aaron’s Business generated from our Aarons.com website from 1.1% for 2015 to 4.3% for 2016; and


•	Selling our 82 Company-operated HomeSmart stores, to strengthen our focus on improving our Aaron’s Business.

Pay for Performance Linkage. As discussed in further detail below, the fundamental principles of our Compensation Committee’s executive compensation philosophy remained unchanged for 2016. Our core compensation objective continues to be that we will pay for performance—we believe we should pay higher compensation when our management team succeeds and lower compensation when it does not. As a result, our 2016 compensation program linked a substantial portion of executive compensation to our operational, financial and strategic objectives.

Our performance as a whole during 2016 was slightly below the target financial performance goals set by the Compensation Committee for the annual and long-term incentive plans in which our named executive officers participated, with the exception of the return on capital metric, which was slightly above target. Progressive exceeded target performance levels for its goals, while our Aaron's Business fell below target performance levels for its financial goals, but exceeded its compliance goals.

The impact of our financial performance on incentive awards to our named executive officers is summarized below and discussed in greater detail under “—Components of the Executive Compensation Program:”


•	Our named executive officers earned awards under the annual incentive plan in which they participated, for performance against Company-wide financial goals, or for Progressive or our Aaron's Business's financial and compliance goals as follows:


◦	Messrs. Robinson and Michaels earned annual cash incentive awards of 97% of target based on Company-wide performance.


◦	Messrs. Woodley and Doman earned annual cash incentive awards of 155% of target, based on performance against pre-established financial and compliance goals for our Progressive segment.


◦	Mr. Lindsay earned an annual cash incentive award of 74% of target based on performance against pre-established financial and compliance goals for our Aaron's Business.


•	Our named executive officers also earned awards under the performance share component of our 2016 long-term incentive program, which constitute 50% of their annual grant values under the program:


◦	Messrs. Robinson and Michaels earned awards at 98% of target measured on our overall financial performance.


◦	Messrs. Woodley and Doman earned awards at 129% of target based on the financial performance of Progressive and the Company as a whole.


◦	Mr. Lindsay earned an award at 74% of target based on the financial performance of our Aaron’s Business and the Company as a whole.

The value of these awards as of December 31, 2016 was greater than the corresponding grant date target values in light of the subsequent increase in our stock price. Further, for the stock options and time-based RSUs that comprise the remainder of the annual grant for our named executive officers, our stock price increase during 2016 resulted in year-end award values that were also greater than the grant date award values.

Chief Financial Officer Transition. Mr. Danielson resigned as our Chief Financial Officer as of February 18, 2016, and agreed to serve as Executive Vice President and Senior Advisor and assist with managing strategic projects until his retirement from the Company at the end of 2016. For the remainder of 2016, Mr. Danielson received a base salary of $200,000, and did not participate in either our annual or long-term incentive programs.

Mr. Danielson enjoyed a long and distinguished career with Aaron's that included serving as our Chief Financial Officer for 26 years and as a member of our board of directors for 24 years. To facilitate this transition and his retirement, to acknowledge his contributions over many years of service, and in light of the fact that we do not have a formal retirement program, we agreed to provide Mr. Danielson with severance benefits as if his retirement was considered as a termination without cause under his prior employment agreement. The terms of retirement and severance for Mr. Danielson are described more fully in the section titled “Executive Compensation—Potential Payments upon Termination or Change in Control.”

Summary of our Executive Compensation Practices. The following discussion highlights key practices that we believe contribute to aligning the interests of our named executive officers with those of our shareholders.




What We Do		What We Don’t Do

þ Pay mix that emphasizes performance-based compensation rather than “fixed” pay		x No excessive perquisites or other benefits

þ Provide an appropriate balance between annual and long-term incentives		x No hedging or pledging of Company securities

þ Performance is measured from multiple perspectives in both the annual cash and long-term incentive plans		x No excise or other tax gross-ups related to a change in control

þ Set “caps” or maximum award levels under the annual cash incentive and long-term performance share awards		x No repricing of underwater options

þ Have meaningful share ownership requirements for our executives		x No stock options granted below fair market value

þ Have a clawback or recoupment policy for cash and equity incentives in the event of a restatement of our consolidated financial statements		x No dividend equivalents paid on unvested or unearned RSUs or performance shares and, although notional dividend amounts are accrued on unvested RSAs, no dividends are actually paid on RSAs until the RSAs vest.

þ Review tally sheets for our executive officers

þ 2015 and future equity awards vest on a “double trigger” basis after a change in control

þ Retain independent advisors who report directly to the Compensation Committee

Say on Pay Vote. Last year, our shareholders cast an advisory vote on our executive compensation practices as described in our 2016 proxy statement, and the result was that over 97% of the total votes cast approved the compensation of our named executive officers. In light of this high level of support from our shareholders, the Compensation Committee continued applying the same overall compensation practices. The Compensation Committee appreciates the shareholder support that this vote reflected, and regularly evaluates and revises the program as it considers necessary to better reflect the Company’s evolving business circumstances.

After carefully considering our existing programs, our upcoming business challenges, and the results of our 2016 Say on Pay vote, the Compensation Committee determined that no changes to the overall program structure for 2016 were necessary. As discussed later, to further enhance program alignment across the organization and address certain operational areas, the Compensation Committee revised the programs so that all named executive officers participate in compliance-related goals.

Objectives of Executive Compensation

The primary objectives and priorities of our executive compensation program are to:


•	attract, motivate and retain quality executive leadership;


•	align the incentive goals of our executive officers with the interests of our shareholders;


•	enhance the individual performance of each executive;


•	improve our overall performance; and


•	support achievement of our business plans and long-term goals.

To accomplish these objectives, the Compensation Committee provides the named executive officers with compensation opportunities based on the range of compensation paid by similar companies for positions of similar responsibility. Opportunities for compensation and amounts delivered reflect (i) our performance results, (ii) the individual’s performance and (iii) other factors the Compensation Committee views as relevant, as described in greater detail below in this Compensation Discussion & Analysis.

Compensation Process

Role of the Compensation Committee. The Compensation Committee is comprised solely of independent directors. Its role is to oversee (i) executive and outside director compensation, (ii) benefit plans and policies, including equity compensation plans and other forms of compensation, and (iii) other significant associate resources matters.

More specifically, the Compensation Committee reviews and discusses proposed compensation for the named executive officers, evaluates their performance and sets their compensation. In addition, the Compensation Committee approves all equity awards for named executive officers and other executive officers, based on the recommendations of senior management, as appropriate.

Role of Management. During 2016, the Compensation Committee considered the input and recommendations of Mr. Robinson with respect to our executive compensation programs and decisions that impact other named executive officers and other employees. Mr. Danielson and Mr. Michaels also provided input with respect to financial goals and recommendations and overall program design. Although management and other invitees at Compensation Committee meetings may participate in discussions and provide input, all votes and final decision-making on named executive officer compensation are solely the responsibility of the Compensation Committee.

Independent Compensation Consultants. The Compensation Committee has retained Meridian Compensation Partners, LLC, which we refer to as “Meridian,” as its ongoing independent consultant with respect to executive and outside director compensation matters. In this role, Meridian reports directly to the Compensation Committee, but works with management at the direction of the Compensation Committee. The Compensation Committee assessed Meridian’s independence, including the potential for conflicts of interest as required by New York Stock Exchange listing requirements, and concluded that Meridian was appropriately independent and free from potential conflicts of interest.

During 2016, Meridian assisted the Compensation Committee with several matters, including:


•	presenting information on executive compensation trends and related legislative, regulatory and governance developments;


•	reviewing compensation proposals relative to significant business transactions and executive transitions;


•	reviewing the benchmarking peer group for the consideration and approval of the Compensation Committee;


•	conducting competitive assessments of executive compensation levels and certain features of incentive program designs;


•	consulting on select aspects of compensation for outside directors;


•	conducting a review of our compensation programs from a risk assessment perspective;


•	preparing tally sheets for our senior officers;


•	assisting with review and disclosures regarding the executive compensation programs in the annual proxy statement; and


•	reviewing the Compensation Committee’s annual calendar and related governance matters.

Meridian representatives attended a majority of the Compensation Committee meetings and also participated in executive sessions as requested by the Compensation Committee.

Determination of 2016 Executive Compensation. The Compensation Committee established the base salary, annual cash incentive opportunities and the size and performance conditions of equity awards for Mr. Robinson and the other named executive officers. In making these compensation decisions, the Compensation Committee considered the conclusions of Meridian’s analyses. Other factors material to the Compensation Committee’s deliberations included (i) objective measurements of business performance, (ii) the accomplishment of strategic and financial objectives, (iii) the development and retention of management talent, (iv) enhancement of shareholder value and (v) other matters relevant to our short- and long-term success.

Benchmarking

Use of Market Data. We use compensation market data as a reference for understanding the competitive positioning of each element of our compensation program and of total compensation. The Compensation Committee does not manage total compensation for our named executive officers within a prescribed competitive position or percentile of the compensation market. Rather, the Compensation Committee reviews compensation for each named executive officer relative to market data and considers other internal and external factors when exercising its business judgment as to compensation decisions.

Peer Group. The proxy peer group used for compensation decisions made in early 2016 emphasized publicly traded retail and related consumer finance peers that were similar to the Company in terms of size, complexity and business focus at that time. Annual revenues for the peer companies generally range between 1/2x to 2x the annual revenues of Aaron’s but may extend outside that range for key competitors for talent. Median revenues for the peer companies for 2014 (based on the most recent financial information and executive pay data available when the analysis used for early 2016 pay decisions was conducted) were $1.52 billion and ranged from $568 million to $6.8 billion. The peer companies are:



Retail Peers
Big Lots	hhgregg	Rent-A-Center
Cabelas	Mattress Firm	Sears Hometown & Outlet
Conn’s	Outerwall	Select Comfort
Dick’s Sporting Goods	Overstock.com	Tractor Supply
Fred’s	Pier 1 Imports	Wayfair
Consumer Finance Peers
Blackhawk Network Holdings	EZCorp	Santander Consumer USA Holdings
Cash America International	Fair Isaac	SpringLeaf Holdings
Credit Acceptance	Green Dot	Transunion
Enova International	Heartland Payment Systems	WEX
EPlus	LendingClub	World Acceptance

Survey Data. If data from the proxy peer group are not available for all named executive officer positions, the Compensation Committee may also review broader survey benchmarking data from time to time, as necessary.

Components of the Executive Compensation Program

Direct Compensation. The three primary components of each named executive officer’s total direct compensation for 2016 were:


•	base salary;


•	annual performance-based cash incentive award; and


•	long-term equity incentive awards.

These components are designed to be competitive with employers with whom we compete for executive talent and to support our compensation program objectives. The Compensation Committee has not set a prescribed mix or allocation for each component, but rather focuses on total direct compensation when making compensation decisions for our executives. In making these decisions, the Compensation Committee also considers the following related factors: (i) performance against corporate and individual objectives for the previous year; (ii) performance of general management responsibilities; (iii) the value of any unique skills and capabilities; (iv) contributions as a member of the executive management team; and (v) competitive market considerations.

Total direct compensation for our named executive officers emphasizes variable and performance-based compensation more so than for our other employees. This reflects our philosophy that performance-based compensation opportunities - linked to financial, operating, and stock price performance - should increase as overall responsibility increases.

The following graphs demonstrate this philosophy by showing the mix of target pay for 2016 for our CEO and for our other named executive officers (other than Mr. Danielson) as a group:

The following describes the annual base salary, annual performance-based cash incentive awards and long-term equity incentive compensation awards for our named executive officers for 2016. Significant program design changes effective for 2017 are also described.

Base Salary

The Compensation Committee views base salary as fixed compensation intended to reflect the scope of an executive’s role. It reviews base salaries annually and adjusts them as necessary to ensure that salary levels remain appropriate and competitive. Salary increases are periodic rather than annual and are made after the Compensation Committee considers relevant factors including:


•	breadth and scope of an executive’s role, including any significant change in duties;


•	competitive market pay levels;


•	internal comparisons to similar roles;


•	individual performance throughout the year; and


•	overall economic climate and Company performance.

In 2016, Mr. Robinson did not receive an increase because his salary was viewed as appropriately aligned with the market. Mr. Michaels received a market adjustment to reflect his increased responsibility after being promoted to Chief Financial Officer. Messrs. Woodley and Doman received increases to appropriately align their salaries with market. Mr. Lindsay's salary was established when he became employed by us.

The base salaries for each of our named executive officers, as of January 1, 2016 and after being adjusted in February 2016, are set forth in the table below.



Named Executive Officer	Annualized Base Salary 1/1/2016		Annualized Base Salary after Adjustment
John W. Robinson III	$	700,000	$	700,000
Steven A. Michaels	$	412,000	$	550,000
Ryan K. Woodley	$	400,000	$	435,000
Curtis L. Doman	$	375,000	$	400,000
Douglas A. Lindsay	$	500,000	$	500,000

Annual Cash Incentive Awards

Annual cash incentive awards provide the opportunity to earn cash rewards for meeting Company financial and operational performance goals. Under the 2016 program, our named executive officers had the potential to earn cash incentive awards based on performance against pre-determined performance goals, with amounts that vary based on the degree to which the related goals are achieved.

Performance Measures. For Messrs. Robinson and Michaels, awards were based on overall Company revenue and Adjusted EBITDA. For Messrs. Woodley and Doman, awards were based on Progressive goals for revenue, Adjusted EBITDA and compliance. For Mr. Lindsay, awards were based on Aaron’s Business goals for revenue, Adjusted EBITDA and compliance. These goals were selected by the Compensation Committee to focus participants on measures viewed as primary drivers of our business and key indicators of our financial success and growth.

Results under this plan will be determined as follows:


•	Revenues are measured on a GAAP basis.


•	Adjusted EBITDA is based on GAAP earnings before interest, taxes, depreciation, and amortization, with overall Company and Progressive Adjusted EBITDA results adjusted to remove the effect of the provision for loan losses at Progressive's subsidiary Dent-A-Med, Inc., which we refer to as "DAMI."


•	Performance results for each measure also will exclude the effects of certain nonrecurring items of revenue or gain and expense or loss. In addition, the overall Company and Aaron’s Business revenue and Adjusted EBITDA goals were adjusted to reflect the sale of the HomeSmart business in May 2016.


•	Compliance-related goals for Progressive and our Aaron's Business for 2016 focused on several areas, including systems and technology enhancements, process improvements with respect to customer service and satisfaction levels, and increased business and operational knowledge to improve general performance.

The Compensation Committee established annual goals for each of the performance measures in the annual incentive program, and assigned weightings that vary by business segment. The payout scale for the financial goals for the Company, Aaron's Business and Progressive ranges as follows: threshold performance - 25% payout, target performance - 100% payout, and maximum performance - 200% payout. Payouts for results achieved between these points are interpolated, with scales that vary by business segment. For 2016, Messrs. Doman, Lindsay and Woodley each had four compliance-related goals. Payouts related to those goals were set at 100% of target if three of the four compliance goals were met, or at 125% of target if all four goals were met. No payout occurs if fewer than three of the compliance goals were met.

Target Awards. At the beginning of the year, the Compensation Committee increased Mr. Robinson's target award to 115% of base salary, to more closely align with the market for his position as well as to continue emphasizing performance-based compensation. The target awards for Messrs. Michaels, Woodley and Doman remained at 100% of base salary. Mr. Lindsay's target award was set at 100% of base salary upon being hired by us. As noted earlier, Mr. Danielson did not participate in our annual incentive plan during 2016.

Performance Goals and Results. Annual performance goals, results achieved and related payouts that apply to Messrs. Robinson and Michaels were as follows:



Financial Performance Measure	Weight	Aaron's Inc. Annual Performance Goals and Related Payouts (All $ Amounts in Millions)					Actual Results	Award as % of Target
Financial Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award as % of Target
Total Revenues	40%	$2,845	$3,314	-	$3,380	$3,849	$3,204	96%
Total Adjusted EBITDA	60%	$299	$348	-	$355	$404	$345	98%
Payout as % of Target		25%	100%			200%
Award earned as % of Target								97%

Annual performance goals, results achieved and related payouts that apply to Messrs. Woodley and Doman were as follows:



Performance Measure	Weight	Progressive Business Annual Performance Goals and Related Payouts (All $ Amounts in Millions)					Actual Results	Award as % of Target
Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award as % of Target
Progressive Revenues	30%	$1,067	$1,230	-	$1,280	$1,443	$1,258	100%
Progressive Adjusted EBITDA	50%	$115	$128	-	$134	$151	$153	200%
Payout as % of Target		25%	100%			200%
Compliance	20%	<3 Goals	3 of 4 Goals			4 Goals	4 Goals	125%
Payout as % of Target		0%	100%			125%
Award earned as % of Target								155%

Annual performance goals, results achieved and related payouts that apply to Mr. Lindsay were as follows:



Performance Measure	Weight	Aaron's Business Annual Performance Goals and Related Payouts (All $ Amounts in Millions)					Actual Results	Award as % of Target
Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award as % of Target
Aaron's Business Revenues	35%	$1,778	$2,050	-	$2,134	$2,406	$1,946	87%
Aaron's Business Adjusted EBITDA	45%	$187	$216	-	$225	$254	$191	42%
Payout as % of Target		25%	100%			200%
Compliance	20%	<3 Goals	3 of 4 Goals			4 Goals	4 Goals	125%
Payout as % of Target		0%	100%			125%
Award earned as % of Target								74%

The chart below shows the final annual cash incentive awards to our named executive officers (other than Mr. Danielson):



Named Executive Officer	Award Earned under Annual Incentive Plan
John W. Robinson III	$	781,600
Steven A. Michaels	$	516,200
Ryan K. Woodley	$	665,200
Curtis L. Doman	$	613,500
Douglas A. Lindsay	$	341,400

Discretionary Award. After considering a recommendation from our Chief Executive Officer, the Compensation Committee also approved an additional cash payment to Mr. Lindsay of $180,000. This award was made to recognize the important role that Mr. Lindsay played in developing the restructuring plan for our Aaron's business, and to reward him for the numerous operational and other business improvements he initiated during the year, as well as the strategies he has developed and implemented to improve our ongoing results.

Program Changes for 2017. After considering the economic challenges we face, and the evolution of our business strategy, the Compensation Committee concluded that continuing to use revenues and Adjusted EBITDA as annual incentive plan performance measures, along with compliance performance metrics related to pricing, technology and quality initiatives that will apply to all named executive officers, would best support our compensation objectives during 2017. The level at which performance is measured, and the weightings of the measures, will again vary based on an executive’s organizational level of responsibility. Performance and payout leverage at threshold and maximum will be aligned across the overall Company, Progressive and Aaron's Business programs.

Long-Term Equity Incentive Awards

Aaron’s long-term equity incentive awards are intended to:


•	reward the achievement of long-term business objectives that benefit our shareholders;


•	align the interests of our executives with those of our shareholders; and


•	assist with retaining our senior management to ensure continuity of leadership.

Beyond these objectives, the Compensation Committee also considers market design practices, potential for dilution, accounting expense and other internal considerations when deciding on the structure and size of equity awards.

2016 Program. Each year, the Compensation Committee grants equity awards to our named executive officers. The Compensation Committee designed the 2016 program to measure performance from multiple perspectives because this approach supports its objectives for the overall compensation program. Accordingly, in 2016 the Compensation Committee granted equity awards to each of our named executive officers in the form of performance shares, stock options, and time-based RSUs.

The key objectives, relative allocation of grant date award values, and features of each form of equity award granted under our 2016 long-term incentive award program are described below.

Target awards. Mr. Robinson’s target award is expressed as a dollar amount, with an annual grant date value that was established at $5.2 million as per the employment agreement we entered into with him when he was promoted to serve as our chief executive officer. Target awards for 2016 for our other named executive officers, excluding Mr. Danielson, who was not granted any performance shares or other form of equity in 2016, are expressed as a percentage of base salary, and are shown below:



Named Executive Officer		LTIP Target as a Percentage of Base Salary
Steven A. Michaels		200%
Ryan K. Woodley		400%
Curtis L. Doman		300%
Douglas A. Lindsay		100%

These award target percentages were set by the Compensation Committee after reviewing the general award levels across our peer group and considering the responsibilities of each named executive officer. The levels for Messrs. Michaels, Woodley and Doman remain the same as in the prior year. The award level for Mr. Lindsay was established when he became employed by us.

Awards generally are converted to a target number of performance shares and time-based RSUs by dividing the allocable portion of the grant date award value by our closing stock price on the date of grant. To determine the number of options to grant, the allocable portion of the grant date award value was divided by the estimated fair value of an option, as determined for benchmarking purposes using the Black-Scholes valuation methodology.

Program Structure. Key details of each type of award under our program, and the allocation of the grant date value of the award, are described below.

Performance shares – 50%. Performance shares could be earned based on the following parameters:


•	Performance shares could be earned by our named executive officers as follows:

Ø Messrs. Robinson and Michaels: based on the degree to which performance goals for total Company revenues, Adjusted EBITDA, and return on capital for the one-year period ending December 31, 2016 were achieved.

Ø Mr. Lindsay: based on the degree to which performance goals for revenue for the Company and Adjusted EBITDA for the Aaron's Business were achieved for the same one-year period.

Ø Messrs. Woodley and Doman: based on the degree to which performance goals for invoice volume and Adjusted EBITDA for Progressive, and also total Company revenues and Adjusted EBITDA, for the one-year period ending on December 31, 2016 were achieved.

Ø Performance results for each measure are assessed separately.


•	The Compensation Committee selected these measures to focus participants on growing our business and on sustaining and improving the quality of our earnings. It imposed an additional service period to promote retention and to ensure that the ultimate value of any awards earned was tied to subsequent stock price performance.

•

Performance results were based on financial results as compared to performance targets that were established early in the year. Results for all measures exclude the effects of certain nonrecurring items of revenue or gain and expense or loss. In addition, the revenue, Adjusted EBITDA and return on capital goals for the Company and the revenue and Adjusted EBITDA goals for the Aaron's Business were adjusted to reflect the sale of the HomeSmart business in May 2016.


•	Additional details for each measure are as follows:

Ø Revenue is based on Company or Progressive revenues for 2016.

Ø Adjusted EBITDA is based on Company, Progressive or Aaron's Business results for 2016, as described above in “Annual Cash Incentive Awards.”

Ø Return on capital was measured by dividing net operating profit after tax by the sum of average net debt and average total shareholders’ equity. Net operating profit after tax is based on operating profit before tax. Average net debt is the average of debt less cash and cash equivalents as measured at the end of 2015 and each quarter during 2016. Average total shareholders’ equity is the average of total shareholders’ equity as reported in our financial statements at the end of 2015 and each quarter during 2016.

Ø Invoice volume for Progressive is defined as the retail price of lease merchandise acquired and leased by Progressive during the performance period, net of returns.


•	Any awards earned will vest in three equal increments on each of March 15, 2017; March 15, 2018; and March 15, 2019, and are distributed in the form of Company stock upon vesting.


•	The initial one-third of shares earned for 2016 performance were distributed in March 2017 after performance results were certified by the Compensation Committee. The balance of shares earned will vest ratably over each of the next two years.

The performance goals and actual results for each of our named executive officers, excluding Mr. Danielson, who was not granted any performance shares or other form of equity in 2016, are shown below. The number of shares that could be earned range from a low of 25% of the target award for this component if threshold performance goals for the measures shown were achieved, to a maximum of 200% of the target award for this component if the maximum performance goals were achieved. Payouts for results between these levels are interpolated, with scales that vary by business segment.

Awards earned by Messrs. Robinson and Michaels were based on the following performance measures and results achieved:



Financial Performance Measure	Weight	Aaron's Inc. Financial Performance Goals and Related Payouts (All $ Amounts shown in Millions)					Actual Results	Award Earned as % of Target
Financial Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award Earned as % of Target
Total Revenues	50%	$2,845	$3,314	-	$3,381	$3,849	$3,204	96%
Total Adjusted EBITDA	25%	$299	$348	-	$355	$404	$345	98%
Return on Capital	25%	7.8%	9.0%	-	9.4%	10.5%	9.4%	102%
Payout as % of Target		25%	100%			200%
Award earned as % of Target								98%

Awards earned by Messrs. Woodley and Doman were based on the following performance measures and results achieved:



Financial Performance Measure	Weight	Progressive Financial Performance Goals and Related Payouts (All $ Amounts shown in Millions)					Actual Results	Award Earned as % of Target
Financial Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award Earned as % of Target
Progressive Invoice Volume	50%	$755	$870	-	$906	$1,021	$885	100%
Progressive Adjusted EBITDA	30%	$111	$129	-	$134	$151	$153	200%
Aaron's, Inc. Total Revenue	10%	$2,845	$3,314	-	$3,381	$3,849	$3,204	96%
Aaron's, Inc. Total Adjusted EBITDA	10%	$299	$348	-	$355	$404	$345	98%
Payout as % of Target		25%	100%			200%
Award earned as % of Target								129%

The award earned by Mr. Lindsay was based on the following performance measures and results achieved:



Financial Performance Measure	Weight	Aaron's Business Financial Performance Goals and Related Payouts (All $ Amounts shown in Millions)					Actual Results	Award Earned as % of Target
Financial Performance Measure	Weight	Threshold	Target			Maximum	Actual Results	Award Earned as % of Target
Aaron's, Inc. Total Revenue	60%	$2,845	$3,314	-	$3,381	$3,849	$3,204	96%
Aaron's Business Adjusted EBITDA	40%	$187	$216	-	$225	$254	$191	42%
Payout as % of Target		25%	100%			200%
Award earned as % of Target								74%

Time-based RSUs — 25%. Time-based RSUs vest pro rata over a three-year period, to promote retention and greater alignment with the interests of our shareholders.

Stock options — 25%. Stock options vest pro rata over a three year period, to promote retention and greater alignment with the interests of our shareholders. Stock options only deliver value to executives if our share price increases after the grant date.

Total 2016 Equity Awards. The long-term incentive target awards that were granted to our named executive officers, excluding Mr. Danielson, pursuant to the 2016 program structure are set forth in the table below:



Named Executive Officer	Number of Options	Number of Time Based Restricted Stock Units	Number of Performance Shares	Aggregate Shares Underlying Target 2016 Equity Awards
John W. Robinson III	182,250	57,450	114,900	354,600
Steven A. Michaels	38,550	12,150	24,300	75,000
Ryan K. Woodley	61,050	19,200	38,400	118,650
Curtis L. Doman	42,000	13,200	26,550	81,750
Douglas A. Lindsay	18,390	5,520	11,100	35,010

In addition to the time-based RSUs shown above for Mr. Lindsay, he received an award of 18,765 units, with a grant date value of $425,000 to compensate him for foregone employment, compensation and benefit opportunities when he left his former employer to accept his current role with the Aaron's Business. Those RSUs are expected to vest on February 1, 2019, the third anniversary of the grant date, subject to Mr. Lindsay remaining employed by the Company.

Performance shares earned. The number of performance shares earned by each named executive officer was determined after year-end, once the Compensation Committee certified the performance results achieved. Shares earned were calculated by multiplying the target performance shares shown above by the respective percent of target achieved, which was 98% for Messrs. Robinson and Michaels, 129% for Messrs. Woodley and Doman, and 74% for Mr. Lindsay. Awards earned vest one-third each year over a three-year period beginning March 15, 2017, and are settled in shares as of each vesting date.

CEO Discretionary Equity Award Pool. In 2016, the Compensation Committee again established a pool of 100,000 shares to be granted by the Chief Executive Officer at his discretion for retention and recognition purposes. Any awards proposed by Mr. Robinson for executive officers must be approved by the Compensation Committee. No awards to executive officers were made from this pool during 2016.

Program Changes for 2017. For 2017, the Compensation Committee concluded that the overall structure of the LTIP should generally remain the same as in 2016 and maintained similar metrics and performance and payout leverage structures for the 2017 program. The Compensation Committee elected to change the form of time-based equity awards granted under the program from restricted stock units to restricted stock awards, but did not alter the purpose behind granting these time-based awards or the overall mix between performance and time-based awards. The Compensation Committee again established a pool of 100,000 shares to be granted by the Chief Executive Officer at his discretion for retention and recognition purposes, with the same conditions described above that applied to the 2016 pool.

Indirect Compensation and Perquisites

Our executive compensation program also provides certain benefits and perquisites to our named executive officers. The value of these benefits and perquisites represents a small portion of a named executive officer’s overall total compensation opportunity and does not materially influence the Compensation Committee’s decisions with respect to the salary and incentive elements of the compensation of the named executive officers. Our Compensation Committee periodically reviews the perquisites and other personal benefits that we provide to senior management to ensure they remain in the best interests of the Company.

Benefits. Our named executive officers receive a full range of standard benefits, including the medical, dental, vision, life and voluntary disability coverage available to our employees generally. They also are eligible to participate on the same basis as other employees in the 401(k) Retirement Savings Plan, which we refer to as the 401(k) Plan, for all full-time employees. Employees with at least one year of service who meet certain eligibility requirements are eligible for a Company match.

Our 401(k) Plan uses a safe harbor formula that allows employees to contribute up to 75% of their annual compensation with 100% matching by the Company on the first 3% of compensation and an additional 50% match on the next 2% of compensation. All matching by the Company is immediately vested under the new plan formula and any prior contributions will continue to vest under the preceding vesting schedule.

Under the Company’s Nonqualified Deferred Compensation Plan, which we refer to as the Deferred Compensation Plan, a select group of management or highly compensated employees are eligible to elect to defer up to 75% of their base salary and up to 75% of their annual bonus on a pre-tax basis. Should they so elect, the Company will make matching contributions under the same formula that applies for our 401(k) Plan.

The Company paid aggregate matching 401(k) Plan contributions of $38,858 for the named executive officers in 2016. The Company did not make any matching contributions for the named executive officers under the Deferred Compensation Plan in 2016.

Corporate Aircraft Use. The named executive officers may use the Company’s aircraft from time to time for non-business use. Incremental operating costs associated with such personal use is paid by the Company. The amount of income attributed to the named executive officer for income tax purposes from personal aircraft use is determined by the Standard Industry Fare Level method, and the executives are responsible for paying the tax on this income. The aggregate incremental cost to the Company of such use by each named executive officer, if any, is included under the “All Other Compensation” column of “Executive Compensation—Summary Compensation Table.”

Club Dues. The Company reimbursed Mr. Danielson’s club dues for six months during 2016. The Company does not pay club dues for any other named executive officer.

Employment Agreements and Other Post-Termination Protections

To attract and retain talented executives, we recognize the need to provide protection to our executives in the event of certain termination situations. The highly competitive nature of the relevant market for key leadership positions means we may be at a competitive disadvantage in trying to retain our current leaders, or hire executives from outside the Company, if we are not able to offer them the type of protections typically found in the market.

Accordingly, we have entered into an employment agreement with Mr. Robinson that details the duties and related compensation for his service as our Chief Executive Officer. We also entered into employment agreements with Messrs. Woodley and Doman when we acquired Progressive. Finally, we have adopted a severance plan, under which Messrs. Michaels, Lindsay, Woodley and Doman are covered, that is intended to provide certain benefits in the event employment is terminated by us without cause, or termination of employment occurs without cause or for good reason within two years after a change in control of the Company. Both the employment agreements and the severance plan aid us in retaining key leaders who are critical to the ongoing stability of our business, foster objectivity across the participants should they be asked to evaluate proposals that may result in the loss of their employment, and provide important protections to us in terms of confidential information and competitive matters that could arise after their employment is terminated.

The specific details of the employment agreements and our severance plan are described later in this proxy statement, in the sections titled “—Employment Agreements with Named Executive Officers” and “—Potential Payments Upon Termination or Change in Control—Severance Plan.”

Tally Sheets

In 2016, the Compensation Committee reviewed tally sheets for select executives. These tally sheets provide a comprehensive view of target, actual and contingent executive compensation payouts under a variety of termination and performance scenarios. The tally sheets allow the Compensation Committee to understand the cumulative effect of prior pay decisions and stock performance, as well as the retentive ability of existing long-term incentives, severance and change in control arrangements. The tally sheets are intended to facilitate the Compensation Committee’s understanding of the nature and amounts of total compensation under our executive compensation program and to assist the Compensation Committee in its overall evaluation of our program.

Related Policies and Considerations

Stock Ownership Guidelines. The Compensation Committee has adopted stock ownership guidelines to further align the interests of senior executives with our shareholders. The table below summarizes the current guidelines that apply to our named executive officers:




Feature		Provision
Required levels		5x base salary: Chief Executive Officer 3x base salary: CFO and President, Strategic Operations; Chief Executive Officer, Progressive; and Chief Technology Officer, Progressive 2x base salary: President, Aaron's Business

Shares counted toward guidelines		Stock owned outright Shares held in retirement accounts Unvested time-based RSUs Earned but unvested performance shares “In the money” value of vested but unexercised stock options

Policy on Compensation Deductibility. Under Section 162(m) of the Internal Revenue Code, certain executive compensation in excess of $1 million paid to our Chief Executive Officer and the three-other most highly-paid named executive officers (excluding our Chief Financial Officer, Mr. Michaels) is not deductible for federal income tax purposes unless that compensation (i) is “performance-based,” (ii) was awarded under a performance-based plan approved by shareholders, and (iii) complies with certain other tax law requirements. The Company’s shareholders have previously approved the plans and terms under which the Company’s annual and long-term performance incentive awards may qualify as performance-based.

The Compensation Committee intends to preserve the tax deductibility of compensation paid to our executive officers to the extent consistent with our overall program objectives and philosophy, but recognizes that doing so may not always be feasible or appropriate. Other compensation objectives, such as attracting, motivating and retaining qualified executives, are important and may supersede the goal of maintaining deductibility. Consequently, compensation decisions may be made without regard to deductibility when it is in the best interests of the Company and its shareholders to do so.

Forfeiture of Awards. The Compensation Committee has adopted a policy that provides that annual incentive and equity awards to our executive officers may be recouped if we restate our consolidated financial statements. Under this policy, covered employees including our named executive officers may be required to repay to the Company the difference between the amount of incentives and awards received and the amount that would have been payable under the restated financial statements.

Securities Trading Policy. As part of our Insider Trading Policy, all of our officers and directors are prohibited from trading any interest or position relating to the future price of our securities. These prohibited transactions include trading in puts, calls, short sales or hedging transactions, but do not generally prohibit other purchases and sales of our common stock made in compliance with the limitations contained in our Insider Trading Policy. Pledging of Company securities is prohibited under our Insider Trading Policy.

COMPENSATION COMMITTEE REPORT

The Compensation Committee operates pursuant to a written charter adopted by the board of directors and available through the Company’s website, http://www.aarons.com. The Committee is composed of four independent members of the board as defined under the listing standards of the New York Stock Exchange and under the charter. The Compensation Committee is responsible for assisting the board of directors in fulfilling its oversight responsibilities with respect to executive and director compensation.

In keeping with its responsibilities, the Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis section included in the Proxy Statement related to the Company's 2017 Annual Meeting of Shareholders and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Based on such review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis section be included in the Proxy Statement and incorporated into the Annual Report on Form 10-K.

This report is respectfully submitted by the Compensation Committee of the board of directors.

Kathy T. Betty (Chair)

Douglas C. Curling

Cynthia N. Day

Ray M. Robinson

EXECUTIVE COMPENSATION

The following Summary Compensation Table summarizes the total compensation earned by, or awarded to, our named executive officers in 2016, 2015 and 2014, as applicable.

Summary Compensation Table



Name and Principal Position	Year	Salary ($)	Bonus⁽¹⁾ ($)	Stock Awards⁽²⁾($)	Option Awards($)	Non-Equity Incentive Plan Compensation⁽³⁾($)	All Other Compensation⁽⁴⁾($)			Total ($)
John W. Robinson III	2016	700,000	—	3,902,004	1,297,620	781,600	5,982	(5	)	6,687,206
Chief Executive Officer	2015	700,000	—	5,443,622	—	754,600	32,435			6,930,657
	2014	313,571	—	974,046	1,543,888	461,336	10,431			3,303,272
Gilbert L. Danielson	2016	263,029	150,000	—	—	—	2,128,885	(6	)	2,541,914
Executive Vice President	2015	675,000	—	924,110	240,870	509,400	16,095			2,365,475
	2014	675,000	—	1,143,673	247,715	153,090	15,720			2,235,198
Steven A. Michaels	2016	531,689	—	825,228	274,476	516,200	14,142	(7	)	2,161,735
Chief Financial Officer &	2015	410,000	—	750,200	195,804	442,000	11,071			1,809,075
President of Strategic	2014	374,096	—	711,473	119,941	265,000	9,714			1,480,224
Operations
Ryan K. Woodley	2016	429,166	—	1,304,064	434,676	665,200	10,556	(8	)	2,843,662
Chief Executive Officer	2015	410,963	—	1,197,840	384,252	430,400	10,812			2,434,267
Progressive
Curtis L. Doman	2016	395,833	—	899,940	299,040	613,500	8,744	(9	)	2,217,057
Chief Technology Officer	2015	387,213	—	843,640	270,600	403,500	12,643			1,917,596
Progressive
Douglas A. Lindsay	2016	458,333	180,000	801,359	115,489	341,400	175,207	(10	)	2,071,788
President, Aaron’s Sales &
Lease Ownership

(1)

Represents cash bonuses paid to (i) Mr. Danielson for the leadership he provided in managing the sale of the Company's HomeSmart business in May 2016, and (ii) Mr. Lindsay in recognition of the important role that he played in developing the restructuring plan for our Aaron's Business, and to reward him for the numerous operational and other business improvements he initiated during the year, as well as the strategies he has developed and implemented to improve our ongoing results.

(2)

Represents the aggregate grant date fair value of awards of time-based RSUs and performance shares recognized by the Company as required by Financial Accounting Standards Board Codification Topic 718. See Note 11 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of the assumptions used in calculating these amounts. For the time-based RSUs, the fair value is calculated using the closing stock price on the date of grant. For the performance shares, the fair value is also the closing stock price on the date of grant, multiplied by a number of shares that is based on the targeted attainment level, which represents the probable outcome of the performance condition on the date of grant. The amounts do not reflect the value actually realized or that may ultimately be realized by our named executive officers. Assuming the highest performance conditions for the performance share awards, the grant date fair value would be: Mr. Robinson $5,202,672; Mr. Michaels $1,100,304; Mr. Woodley $1,738,752; Mr. Doman $1,202,184; and Mr. Lindsay $502,608.


(3)	Reflects the value of the cash bonus earned under our annual cash incentive award program.

(4)

We provide a limited number of perquisites to our named executive officers and value those perquisites based on their aggregate incremental cost to the Company. During 2016, we calculated the incremental cost of Company aircraft use based on the average variable operating costs to the Company. Variable operating costs include fuel costs, maintenance fees, positioning costs, catering costs, landing/ramp fees and the amount, if any, of disallowed tax deductions associated with the personal use of Company aircraft. The total annual variable operating costs are divided by the annual number of flight hours flown by the aircraft to derive an average variable cost per flight hour. This average variable cost per flight hour is then multiplied by the flight hours flown for personal use to derive the incremental cost to the Company. This method excludes fixed costs that do not change based on usage, such as pilots’ and other employees’ salaries and benefits and hangar expenses. Aggregate incremental cost, if any, of travel by the executive’s family or other guests when accompanying the executive is also included.


(5)	Reflects costs associated with (i) use of Company aircraft $2,702, (ii) a medical assessment in the amount of $2,740, and (iii) certain life insurance benefits provided by the Company having an imputed value of $540.

(6)

Includes (i) reimbursement of club dues in the amount of $1,709, (ii) matching contributions in the amount of $8,958 made by the Company to Mr. Danielson’s account in the Company’s 401(k) plan, (iii) costs associated with the use of Company aircraft in the amount of $20, (iv) costs associated with a retirement gift $13,239, (v) cash severance payments totaling $2,056,959 and (vi) cash payment for insurance premiums following Mr. Danielson's retirement totaling $48,000. Amount shown does not include the value of stock options and equity awards of approximately $1 million which vested upon Mr. Danielson's retirement and which are reported under "—Option Exercises and Stock Vested in 2016".


(7)	Includes (i) matching contributions in the amount of $10,600 made by the Company to Mr. Michaels’ account in the Company’s 401(k) plan, (ii) costs associated with the use of Company aircraft in the amount of $40, (iii) medical assessment in the amount of $2,850, and (iv) certain life insurance benefits provided by the Company having an imputed value of $652.


(8)	Includes matching contributions in the amount of $10,556 made by the Company to Mr. Woodley’s account in the Company’s 401(k) plan.


(9)	Includes matching contributions in the amount of $8,744 made by the Company to Mr. Doman’s account in the Company’s 401(k) plan.


(10)	Includes (i) relocation expenses of $169,145, (ii) certain insurance reimbursements provided by the Company in the amount of $5,758, and (iii) certain life insurance benefits provided by the Company having an imputed value of $304.

Grants of Plan-Based Awards in 2016

Our Compensation Committee granted restricted stock, stock options and performance shares to our named executive officers during 2016. Set forth below is information regarding awards granted in 2016.



Name	Grant Date	Potential Payouts Under Non- Equity Incentive Plan Awards⁽¹⁾			Estimated Future Payouts Under Equity Incentive Plan Awards⁽²⁾			All Other Stock Awards: Number of Shares of Stock or Units⁽³⁾	All Other Option Awards: Number of Securities Under- lying Options⁽⁴⁾	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards⁽⁵⁾ ($)
Name	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)			Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards⁽⁵⁾ ($)
John W. Robinson III		201,250	805,000	1,610,000
	2/26/2016				28,725	114,900	229,800				2,601,336
	2/26/2016							57,450			1,300,668
	2/26/2016								182,250	22.64	1,297,620
Steven A. Michaels		132,922	531,689	1,063,378
	2/26/2016				6,075	24,300	48,600				550,152
	2/26/2016							12,150			275,076
	2/26/2016								38,550	22.64	274,476
Ryan K. Woodley		107,292	429,166	793,957
	2/26/2016				19,200	38,400	76,800				869,376
	2/26/2016							19,200			434,688
	2/26/2016								61,050	22.64	434,676
Curtis L. Doman		98,958	395,833	732,291
	2/26/2016				13,275	26,550	53,100				601,092
	2/26/2016							13,200			298,848
	2/26/2016								42,000	22.64	299,040
Douglas A. Lindsay		114,583	458,333	847,916
	2/26/2016				2,775	11,100	22,200				251,304
	2/1/2016							18,765			425,027
	2/1/2016							5,520			125,028
	2/1/2016								18,390	22.65	115,489

(1)

For the named executive officers, represents the amounts that could be earned under the annual cash incentive award program based on performance against pre-determined goals for revenue and Adjusted EBITDA, measured on a Company-wide basis or for Progressive, based on each executive’s organizational level. The amounts actually earned are included in the non-equity incentive plan compensation column of the Summary Compensation Table.

(2)

Represents the performance shares granted under our 2015 long-term equity incentive award program. Performance metrics for Messrs. Robinson and Michaels included overall Company total revenues, Adjusted EBITDA and return on capital. Performance metrics for Messrs. Woodley and Doman included Progressive Adjusted EBITDA and invoice volume and overall Company total revenues and Adjusted EBITDA. Performance metrics for Mr. Lindsay included Aaron’s Business revenue and Adjusted EBITDA, and total Company revenue and Adjusted EBITDA. For all named executive officers who received awards, the threshold number of shares represents 25% of target, and the maximum number of shares represents 200% of target. Any awards earned vest one-third each year over a three-year period beginning on March 15, 2017. Based on our performance for the year, performance shares were earned under the 2015 program at 98% of target for Messrs. Robinson and Michaels, at 129% of target for Messrs. Woodley and Doman, and at 74% of target for Mr. Lindsay


(3)	Includes the time-based RSUs granted to each of our named executive officers under our 2015 long-term equity incentive award program, that vest one-third each year over a three-year period beginning on March 15, 2017.


(4)	Includes stock options granted under our 2015 long-term equity incentive award program that vest one-third each year over a three-year period beginning March 15, 2017.


(5)	Represents the aggregate grant date fair value of awards recognized by the Company as required by Financial Accounting Standards Board Codification Topic 718. See Note 11 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of the assumptions used in calculating these amounts.

Employment Agreements with Named Executive Officers

Employment Agreement with Mr. Robinson. In connection with his appointment as Chief Executive Officer effective November 10, 2014, we entered into a new employment agreement with Mr. Robinson that superseded our prior agreement with him that was entered into when we acquired the Progressive segment.

Mr. Robinson’s compensation as Chief Executive Officer was established by the Compensation Committee after considering the following: his compensation as Chief Executive Officer of Progressive, the significant increase in his responsibilities as a result of his appointment as Chief Executive Officer of the Company, market compensation levels generally for chief executive officers across the Company’s historical retail-oriented peer group, and the need to provide compensation opportunities to Mr. Robinson commensurate with his experience in and knowledge of the industry.

Mr. Robinson’s current agreement contains a rolling, three-year term although the Company may, upon proper notice, cease the automatic extension. The agreement provides for an annual base salary of $700,000 for Mr. Robinson, a target annual cash incentive award of 100% of base salary, and an annual target long-term incentive award with a value of $5,200,000. The agreement also provided for an initial equity grant of 5,000 time-based RSUs that vest on the first anniversary of the grant date.

Pursuant to this agreement, Mr. Robinson is entitled to participate in any of the Company’s present and future stock or cash bonus plans that are generally available to the Company’s executive officers. Mr. Robinson is also entitled to paid vacation, life insurance, health insurance, fringe benefits and such other employee benefits generally made available by the Company to its executive officers. Specific benefits will be provided in the event Mr. Robinson’s employment is terminated without cause by the Company or by him for good reason which are discussed in greater detail in “—Potential Payments Upon Termination or Change in Control.” Mr. Robinson’s employment agreement also contains customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company.

Employment Agreement with Mr. Danielson. In January 2016, we entered into an amended and restated employment agreement with Mr. Danielson in connection with his retirement as our Chief Financial Officer and his agreement to continue working for us as an Executive Vice President through the remainder of 2016, in which we agreed to treat Mr. Danielson’s retirement at the end of the year as a termination without cause based on his compensation as of February 18, 2016. Under Mr. Danielson’s amended and restated employment agreement, Mr. Danielson’s annual base salary was reduced to a rate of $200,000 for the period from February 18, 2016 until December 31, 2016. He did not participate in our annual or long-term incentive programs during 2016.

Prior to its amendment and restatement in connection with Mr. Danielson stepping down from his role as Chief Financial Officer, our employment agreement with Mr. Danielson provided for an annual base salary of $675,000 and entitled Mr. Danielson to participate in any of the Company’s present and future stock or cash bonus plans generally available to the Company’s executive officers. Mr. Danielson continued to be entitled to paid vacation, life insurance, health insurance, fringe benefits and such other employee benefits generally made available by the Company to its executive officers, until the effective date of his retirement on December 31, 2016. Under his employment agreement, Mr. Danielson has also agreed to customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company.

Employment Arrangement with Mr. Woodley. In connection with our acquisition of Progressive in 2014, we entered into an employment agreement with Mr. Woodley to serve as the Chief Operating Officer / Chief Financial Officer of Progressive at an initial annual base salary of $350,000 and a four-year term. Under the terms of his employment agreement, Mr. Woodley is eligible to participate in the Company’s annual cash and long-term incentive programs. Mr. Woodley will receive benefits under his agreement in the event of death or disability, and will receive severance benefits under the Severance Plan in the event he is terminated by the Company without cause or resigns for good reason. Mr. Woodley has also agreed to customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company. The Company subsequently appointed Mr. Woodley as Chief Executive Officer of Progressive in January 2015. The Company did not enter into an amended or new employment agreement with Mr. Woodley upon his appointment as CEO of Progressive.

Employment Arrangement with Mr. Doman. In connection with our acquisition of Progressive in 2014, we entered into an employment agreement with Mr. Doman to serve as the Chief Technology Officer of Progressive at an initial annual base salary of $350,000 and a four-year term. Under the terms of his employment agreement, Mr. Doman is eligible to participate in the Company’s annual cash and long-term incentive programs. Mr. Doman will receive benefits under his agreement in the event of death or disability, and will receive severance benefits under the Severance Plan in the event he is terminated by the Company without cause or resigns for good reason. Under his employment agreement, Mr. Doman has also agreed to customary confidentiality, non-competition, non-solicitation and release provisions in favor of the Company.

Aaron’s, Inc. 2015 Equity and Incentive Plan

General. The purpose of the Aaron’s, Inc. 2015 Equity and Incentive Plan, or the “2015 Plan,” which was approved by our shareholders at an annual meeting on May 6, 2015, is to promote the long-term growth and profitability of Aaron’s and our subsidiaries by providing employees, directors, consultants, advisors and other persons who work for us and our subsidiaries with incentives to maximize shareholder value and otherwise contribute to our continued success. In addition, we believe the 2015 Plan is a critical component to help us attract, retain and reward the best talent and align their interests with our shareholders. The 2015 Plan may be amended and terminated by the Compensation Committee at any time, and no awards may be made under the 2015 Plan after March 10, 2025.

Administration. The Compensation Committee administers the 2015 Plan and has the right to select the persons who receive awards under the 2015 Plan. The Compensation Committee also has the authority to set the terms and conditions of all grants and awards made under the 2015 Plan, including the term, exercise price, vesting conditions, performance measures and the consequences of termination of employment of any such grants and awards. In particular, the Compensation Committee has the authority to reduce any award as it determines appropriate and, with regard to performance criteria, to determine whether the applicable performance criteria have been met for any awards made under the 2015 Plan.

Awards Available for Grant. The 2015 Plan provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, RSUs, performance shares, performance units, annual cash incentive awards and other stock-based awards to eligible participants. Incentive stock options may only be granted to employees of the Company or its subsidiaries.

Number of Shares Authorized. The number of shares available for issuance pursuant to awards granted under the 2015 Plan is 5,000,000 shares, subject to certain adjustments described in the 2015 Plan. Except to the extent the Compensation Committee determines that an award is not intended to comply with the performance-based compensation provisions of Section 162(m) of the Internal Revenue Code, the number of awards that, in the aggregate, may be granted in any one fiscal year to any participant is limited as follows:


•	the maximum number of options and SARs is 1,000,000;


•	the maximum number of shares of restricted stock and/or RSUs is 600,000 shares and/or units;


•	the maximum aggregate payout with respect to performance units is $5,000,000 dollars (to the extent settled in cash) or 600,000 shares (to the extent settled in shares);


•	the maximum number of other awards is the fair market value (determined as of the grant date) of 600,000 shares;


•	the maximum aggregate payout (determined as of the end of the applicable performance period) with respect to annual incentive cash awards is $5,000,000; and


•	the maximum aggregate number of shares under all awards granted in any one fiscal year to any non-employee director (excluding any awards made at the election of the director in lieu of all or a portion of the director’s annual and committee cash retainer fees) is 20,000 shares.

The limitations on performance shares, performance units and other awards are applied based on the maximum amount that could be paid under each such award.

Amended and Restated 2001 Stock Option and Incentive Award Plan

The Aaron Rents, Inc. 2001 Stock Option and Incentive Award Plan, as amended, or the “2001 Incentive Plan,” was terminated and replaced by the 2015 Plan. The 2001 Incentive Plan is no longer open to participation by any of our employees, officers or directors, and no further awards may be granted under the 2001 Incentive Plan. While the plan remained in effect, the Compensation Committee administered the 2001 Incentive Plan and had the exclusive right to set the terms and conditions of grants and awards, including the term, exercise price, vesting conditions (including vesting based on the Company’s performance or upon share price performance), and consequences of termination of employment. The Compensation Committee also selected the persons who receive such grants and awards and interpreted and administered the 2001 Incentive Plan. The last awards granted under the 2001 Incentive Plan are expected to vest in 2018, and the last stock options granted under that plan will expire in 2025.

Outstanding Equity Awards at 2016 Fiscal Year-End

The following table provides information on outstanding stock option and stock awards held by the named executive officers, including both unexercised and unvested awards. The market value of the stock awards is based upon the closing market price for the Company’s common stock as of December 31, 2016, which was $31.99.



Name of Executive	Number of Securities Under-lying Unexercised Options Exercisable		Number of Securities Under-lying Unexercised Options Unexercisable		Option Exercise Price ($)	Option Expiration Date	Number of Shares of Stock That Have Not Vested		Market Value of Shares or Units of Stock That Have Not Vested ($)⁽¹⁾	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)⁽¹⁾
John W. Robinson III
	107,280	⁽²⁾	53,639	⁽²⁾	27.80	12/5/2024
			182,250	⁽³⁾	22.64	2/26/2026
							28,846	⁽⁴⁾	922,784
							39,512	⁽⁵⁾	1,263,989	73,948	⁽⁵⁾	2,365,597
							57,450	⁽⁶⁾	1,837,826	114,900	⁽⁷⁾	3,675,651
Gilbert L. Danielson
	75,000		—		14.11	2/28/2017
	25,776		—		29.77	2/28/2017
	31,000		—		28.04	2/28/2017
Steven A. Michaels
	11,250		—		19.92	2/23/2020
	—		4,735	⁽⁸⁾	29.77	2/18/2024
	—		7,597	⁽⁹⁾	29.25	4/15/2024
	8,568	⁽¹⁰⁾	16,632	⁽¹⁰⁾	28.04	3/10/2025
	—		38,550	⁽³⁾	22.64	2/26/2026
							847	⁽¹¹⁾	27,096
							679	⁽¹²⁾	21,721
							666	⁽¹³⁾	21,305
							629	⁽¹⁴⁾	20,122
							2,000	⁽¹⁵⁾	63,980
							1,562	⁽¹⁵⁾	49,968
							2,506	⁽¹⁶⁾	80,167
							4,818	⁽⁵⁾	154,128	10,896	⁽⁵⁾	348,563
							12,150	⁽⁶⁾	388,679	24,300	⁽⁷⁾	777,357
Ryan K. Woodley
	14,484	⁽¹⁰⁾	28,116	⁽¹⁰⁾	32.20	2/6/2025
			61,050	⁽³⁾	22.64	2/26/2026
							26,923	⁽⁴⁾	861,267
							8,184	⁽⁵⁾	261,806	16,138	⁽⁵⁾	516,255
							19,200	⁽⁶⁾	614,208	38,400	⁽⁷⁾	1,228,416
Curtis L. Doman