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

SCHEDULE 14A

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

October 19, 20187, 2019

Dear Fellow Stockholder:

        We are pleased to invite you to attend our 20182019 Annual Meeting on November 29, 2018,20, 2019, at 8:30 a.m. (central time) to be held at the Tuesday Morning Corporate Office, 6250 Lyndon B. Johnson Freeway, Dallas, Texas 75240.

        Several years ago, we began a transformation of our Company in order to regain our position as a leader in off-price retail. We are excited abouthave executed on a number of critical steps under our business turnaround strategy, primarily focused on driving profitable sales through merchandising and marketing initiatives and operating efficiencies in the momentum atsupply chain and overall across our business model. In addition, capital allocation and balance sheet management have been priorities with an emphasis on repositioning our real estate portfolio, working capital management and inventory turns.

        Fiscal 2019 was an important year for Tuesday Morning. In fiscal year 2018, we crossed the $1.0 billion annual sales threshold for the first timeWe delivered significant improvement in our 45 year history.operating performance. We haveincreased sales slightly despite significantly reducing our traditional ad events and operating 12 fewer stores. We also made significantsolid progress this past year. We continue to enhanceagainst our merchandise assortment and seekey initiatives including driving improvements in inventory turn. We are pleased with our digital initiatives and brand campaign to drive new business and we continue to refine efficiencies in our supply chain. Your Board plays a key role in overseeingchain, increasing marketing efficiencies and renegotiating our progressleases. On the merchandising front, we have continued to reorganize our buying organization, adding talent and supportingresources focused on executing our strategic initiatives.off-price model. We also announced our plan to retrofit our existing, owned Dallas-based distribution center.

        Attached is our Notice of Annual Meeting. We have chosen to furnish our proxy statement and annual report to our stockholders over the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive the proxy materials by email or, upon request, in printed form by mail. Our proxy statement will instruct you how to vote your shares. Your vote is important. Thank you for your investment in Tuesday Morning.

Sincerely,

Sincerely,
Terry Burman		Steven Becker
Chairman of the Board		Steven Becker Chief Executive Officer and President

TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 29, 201820, 2019

        The 20182019 Annual Meeting of Stockholders (the "Annual Meeting") of Tuesday Morning Corporation (the "Company") will be held at Tuesday Morning Corporation's Headquarters, 6250 LBJ Freeway, Dallas, Texas 75240, on November 29, 201820, 2019 at 8:30 a.m., central time. For directions to the Annual Meeting, please write to our Corporate Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual Meeting, the Company will ask the stockholders to:

1.

elect seveneight directors to the Board of Directors;



2.

approve, inon an advisory capacitybasis, the Company's executive compensation;



3.

ratify the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2019;2020; and



4.

transact any other business that may properly come before the Annual Meeting or any postponement or adjournment thereof.

        This Notice of Annual Meeting, the Proxy Statement for the Annual Meeting and our Annual Report for fiscal 20182019 are being made available to our stockholders on or about October 19, 20187, 2019 on the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive the proxy materials by email or, upon request, in printed form by mail.

        Only stockholders of record at the close of business on October 11, 2018September 30, 2019 are entitled to notice of, and to vote at, the Annual Meeting or any postponement or adjournment thereof. If you are the beneficial owner of shares of our common stock held in "street name," you will receive voting instructions from your broker, bank or other nominee (the stockholder of record), which will provide you with details as to how to vote these shares. Additionally, you may vote these shares in person at the Annual Meeting if you have requested and received a legal proxy from your broker, bank or other nominee giving you the right to vote the shares at the Annual Meeting, and you complete the legal proxy and present it to us at the Annual Meeting. Stockholders of record may vote over the internet, by telephone, by mail if you received a printed set of proxy materials or in person at the Annual Meeting.

        Under applicable rules, if you hold your shares in street name, brokers, banks or other nominees will not have discretion to vote these shares on the election of directors and the advisory vote on executive compensation. Accordingly, if your shares are held in street name and you do not submit voting instructions to your broker, bank or other nominee, these shares will not be counted in determining the outcome of these proposals at the Annual Meeting. We encourage you to provide voting instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on these matters.

        Thank you for your continued support of and interest in Tuesday Morning Corporation.

		By Order of the Board of Directors,
		Bridgett C. Zeterberg Secretary

Dallas, Texas
October 19, 20187, 2019

YOUR VOTE IS IMPORTANT

        Your vote is important. We urge you to review the accompanying Proxy Statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting.

TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240

PROXY STATEMENT
for the
ANNUAL MEETING OF STOCKHOLDERS
to be held on
Thursday,Wednesday, November 29, 201820, 2019

        This Proxy Statement and the related proxy materials are being furnished to stockholders of Tuesday Morning Corporation, a Delaware corporation, on or about October 19, 2018,7, 2019, on the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive our proxy materials by email, or, upon request, in printed form by mail. The Board of Directors of the Company (the "Board of Directors" or the "Board") is soliciting your proxy for use at the Annual Meeting of Stockholders to be held on November 29, 2018,20, 2019, at 8:30 a.m., central time, at our corporate headquarters located at 6250 LBJ Freeway, Dallas, Texas 75240, and at any and all adjournments or postponements thereof (the "Annual Meeting"). For directions to the Annual Meeting, please write to our Corporate Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual Meeting, our stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders and described in more detail in this Proxy Statement.

        As used in this Proxy Statement, the terms "Tuesday Morning," "Company," "we," "us," and "our" refer to Tuesday Morning Corporation.

Important Notice Regarding Internet Availability

        In accordance with rules adopted by the Securities and Exchange Commission ("SEC"), we may furnish proxy materials, including this Proxy Statement and the Company's 20182019 Annual Report to Stockholders, by providing access to these documents on the internet instead of mailing a printed copy of our proxy materials to our stockholders. Based on this practice, most of our stockholders receive a Notice of Internet Availability of Proxy Materials (the "Notice"), which provides instructions for accessing our proxy materials on a website referred to in the Notice and for requesting to receive printed copies of the proxy materials by mail or electronically by email.

        If you would like to receive a paper or email copy of our proxy materials for our Annual Meeting or for all future meetings, please follow the instructions for requesting such materials included in the Notice. Please note that if you previously requested or consented to delivery of our proxy materials by mail or electronically via email, you did not receive the separate Notice. Instead, we sent you a full set of our proxy materials, which includes instructions for voting on the proposals described in this Proxy Statement. We believe the delivery options that we have chosen allow us to provide our stockholders with the proxy materials they need, while lowering the cost of the delivery of such materials and reducing the environmental impact of printing and mailing paper copies.

PROXY STATEMENT SUMMARY

        This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting Information

Annual Meeting Agenda and Voting Recommendations

Board Nominees

        The following table provides summary information about each director nominee.

        William Montalto is retiring from the Board, effective immediately prior to the Annual Meeting. The Board thanks Mr. Montalto for his years of service to the Company.

Corporate Governance Highlights

•

During the fiscal year ended June 30, 2018,2019, all directors (other than Mr. Montalto and Mr. Becker) were independent and met regularly in executive session.



•

The roles of Chief Executive Officer and Chairman of the Board are separate.



•

Only independent directors are Committee members.



•

All directors are elected annually.



•

The Board has a robust director nominee selection process.

•

The Board has stock ownership guidelines for directors and executive officers.

•

The Company has anti-hedging and anti-pledging policies.



•

The Company has a robust clawback policy.



•

Board, Committee and director performance evaluations are performed annually.



•

The Board and Committees are responsible for risk oversight.



•

All of our directors attended at least 75% of the meetings of the Board and Committees on which they served during the 20182019 fiscal year.



•

All sitting directors, other than Mr. Slone who joined the Board in June 2019, and Ms. Smith, attended the Company's 20172018 Annual Meeting of Stockholders.

Financial Review

        InFor fiscal 2018, we continued to implement our strategy of improving store locations and the in-store experience for our customers, which included (i) closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprints that are on average three to five thousand square feet larger, (ii) expanding some existing stores to a larger footprint, and (iii) improving the finishes in these relocated, new and expanded stores. We operated 726 stores in 40 states as of June 30, 2018. As part of the implementation of our real estate strategy, we opened 15 new stores in fiscal 2018 and relocated 45 stores.

        Some of our fiscal 2018 business highlights include:

•

Net2019, net sales wereslightly exceeded $1.0 billion, an increase of 4.1% compared toconsistent with fiscal 20172018 net sales of $966.7 million despite a decrease in store count.



•

$1.0 billion. Comparable store sales increased 3.9% compared to(stores open at least five quarters, including stores relocated in the same period a year ago.market and renovated stores) increased 0.4%. The increase in comparable store sales was comprised of an increase in customer transactions of 2.9% along with0.9% and was partially offset by a 1.0% increasedecrease in average ticket. During the periodticket of January 1 to June 30 ("Spring Period"), we had a 5.6% increase in comparable store sales.



•

Gross profit for fiscal 2018 was $341.0 million, an increase of 6.3% compared to $320.7 million for fiscal 2017. As a percentage of net sales, gross margin increased to 33.9% in fiscal 2018 compared with 33.2% in fiscal 2017.



•

0.5%. Sales at the 4512 stores relocated during the past 12 months increased approximately 58%49% on average for fiscal 20182019 as compared to fiscal 2017last year and contributed approximately 370160 basis points of comparable store sales growth.

•

Cost of sales, as a percentage of net sales, for fiscal 2019 was 65.0%, compared to 66.1% for fiscal 2018.



•

Selling, general and administrative expenses (SG&A) increased $0.9 million to $362.8 million from $361.9 million for fiscal 2019.



•

Our operating loss for fiscal 20182019 was $21.0$10.5 million compared to an operating loss of $32.3$21.0 million for fiscal 2017.2018. Our operating incomenet loss for the Spring Period improved $14.6fiscal 2019 was $12.4 million, versus the Spring Period from the prior year. Foror diluted net loss per share of $0.28, compared to a net loss for fiscal 2018 our net loss wasof $21.9 million, or diluted net loss per share of $0.50 per share, compared to a net loss of $32.5 million, or $0.74 per share, in the prior year period.$0.50.



•

EBITDA, a non-GAAP measure, was $16.4 million for fiscal 2019, compared to $5.6 million for fiscal 2018. Adjusted EBITDA, a non-GAAP financial measure, was $20.0 million for fiscal 2019 compared to $9.6 million for fiscal 20182018. A reconciliation of EBITDA and Adjusted EBITDA to net income, the most comparable GAAP financial measure, is included under the heading "Non-GAAP Financial Measures" on pages 22 and 23 of the Company's Annual Report on Form 10-K for the year ended June 30, 2019.



•

Inventory levels at June 30, 2019 increased $3.5 million to $237.9 million from $234.4 million at June 30, 2018. Inventory turnover for the trailing five quarters as of June 30, 2019 was 2.7 turns, compared to negative $2.8the trailing five quarter turnover as of June 30, 2018 of 2.8 turns.



•

Outstanding borrowings, net of cash and cash equivalents, improved as compared to the prior year. Cash and cash equivalents at June 30, 2019 increased $1.9 million for fiscal 2017.to $11.4 million from $9.5 million at June 30, 2018. We had borrowings of $34.7 million under our revolving credit facility as of June 30, 2019, and borrowings of $38.5 million at June 30, 2018.




        During the fiscal year, we benchmarked our progress against our top priorities, which are regularly discussed at executive team meetings and are included in both job performance and compensation objectives. Many factors contributed to the positive tone of the business, including the following:

•

We benefit from continued improvementAfter successfully repositioning a significant portion of our store portfolio including opening, relocating and expanding approximately 285 stores over the last 5 years, as well as the closure of many of our least productive locations, we have now pivoted our real estate strategy and made substantial headway in our merchandise.rent renegotiation program;



•

Our supply chain ran smoothly and efficiently with improved costs, handling 7% more units with lower cost per piece and lower overall costs. We introduced DC bypass and domestic consolidation to further improve distribution, freight and transportation efficiencies, and also completed the groundwork to begin the next phase of our supply chain repositioning;



•

We increased the effectiveness of our marketing dollars. We completed a three-year reduction of our traditional advertising events which contributed to a meaningful increase in gross margins and shifted advertising dollars to more efficient digital channels while growing our brand impressions by 100%;



•

We improved our markdown management which helped drive our gross margin improvement;



•

Late in Fiscal 2019 we enhanced our merchant organization with the addition of a number of experienced off-price merchants. The team deliversis focused on delivering great products at compelling value. Additionally, the product sourcing environment continues to be favorable. All of these elements have combined to driveprovide broad based strength in our assortment.assortment; and






•

We have worked closely with our field operations team to enhance our store presentation as well as improve other operational metrics.



•

We have remained focused on inventory management. Over the past year, we have worked to identify cohorts in our store base that we felt would respond to adjustments in baseline inventory levels. This project has been successful, and we have seen a notable sales lift in a high percentage of the stores we have touched to date. We continue to identify and address opportunities within our store fleet to improve assortment and adjust inventory levels. The second major focus on the inventory front has been around turn and freshness. We are committed to showing our customer a steady flow of new deals and giving them a reason to return often.



•

We have increased the effectiveness of our marketing dollars. Our marketing efforts focus on driving customer engagement. Last year, we partnered with a new advertising agency and over the past year we have been moving advertising dollars to our everyday branding message. We continue to see an excellent response to our email messages and are pleased with the economics of our digital initiatives and the success we are having in driving new customers to Tuesday Morning.



•

While we experienced operational supply chain challenges in fiscal 2017 for which the financial impact carried over into fiscal 2018, our distribution centers are now functioning more efficiently and costs are improving. In fact, our distribution centers are exceeding many of our internal efficiency metrics. These efforts are expected to continue to reduce costs over time.



•

Increased retail vacancies present new opportunities and we are leveraging these opportunities through lease negotiations and selective portfolio repositioning.

Executive Compensation Highlights

        Our executive compensation philosophy is to pay for the creation of long-term value for our stockholders. Accordingly, our program is designed to reward performance linked to the creation of stockholder value and to support executive recruitment, engagement and retention. A significant portion of the executives' total direct compensation is based on the Company's performance and improving stockholder value. This philosophy is reflected in the design of both our short-term cash incentive program and our long-term equity incentive program. We believe that performance-based and equity compensation better alignsalign the interests of executives and stockholders.

        Our pay for performancestrong pay-for-performance philosophy is evidenced by the payoutsmixed performance-based pay results for our executives based on actual fiscal 2019 performance. Operating income financial performance over the 12-month measurement period exceeded expectations for the plan year resulting in an annual incentive payout. This is attributed to our executives. As a result of our performance in fiscal 2018an extraordinary focus on gross margin improvement and the strong emphasis that our executive compensation program places on performance-based compensation, the actual compensation realized by our NEOs in fiscal 2018,expense control as well as a modest increase in fiscal 2017,top line sales. However, the comparable sales growth metric was significantly lower than our target levelsnot achieved resulting in no payout for that component of compensation. In fiscal 2018, our CEOthe annual incentive plan. The first 36-month performance cycle of the LTI plan that began on July 1, 2016 and other executive officers did not receive a base pay increase or any payout under our short-term incentive programs. Also in fiscal 2018, as in fiscal 2017, theconcluded on June 30, 2019 produced below threshold financial results; therefore, those awards were canceled. The Compensation Committee chosecontinued to move from value-based dollar grants ofgrant long-term incentive equity toawards of flat share amounts equal to the same number of shares awarded in fiscal 2017. As a result, CEO total compensation decreased by 39% from $2,100,796 in fiscal 2017 to $1,284,748 inand fiscal 2018 as represented on the Summary Compensation Table. These decreased valuesrather than returning to market-based dollar value grants of long-term equity awards have resulted in overall compensation levels to the NEOs that are significantly below market.

        While our financial performance in fiscal 2018 did not meet the threshold levels for payouts under our incentive compensation programs, our Board and Compensation Committee believe our executive management team is implementing and executing a strategic plan that is positioning the Company for long-term success. We believe our improved performance over the Spring Period shows the positive momentum of our strategic plan and the benefits it is providing to the Company. In 2018, ourequity.




Compensation Committee carefully considered the challenges to maintaining this positive momentum, including the risks of attrition in the executive management team due to competitive pressures in the retail industry and competitive hiring pressures in the Dallas-Fort Worth area market. The Compensation Committee also considered the negative impacts on retention of maintaining lower than market target level compensation for our executive officers and the out of the money position of most outstanding long-term equity awards held by our executive team.

        In order to maintain our positive momentum and recognizing the significant benefits of continuity, our Compensation Committee, after consultation with its independent compensation consultant, has taken several actions. First, our Compensation Committee approved retention agreements with the members of our executive team (other than our Chief Executive Officer) that will provide retention payments in exchange for each such officer's agreement to remain employed through December 31, 2019. The retention payments are tied to our fiscal year completion and critical upcoming two peak seasons with the majority of the payment occurring in 2020. Second, in connection with approving Mr. Becker's 2019 compensation, our Compensation Committee approved a one-time award to Mr. Becker, 50% of which will be paid in stock that will vest equally over four years and 50% of which will be paid in cash and will be payable only if the Company's stock price appreciates significantly. This award is intended to further focus our CEO on driving performance as measured directly by increases in our share price. These decisions demonstrate the Compensation Committee's commitment to its philosophy of providing executive compensation arrangements that will attract and retain an executive team that will create long-term value for our stockholders while making a substantial portion of pay dependent on our performance.

        Some of the compensation "best practices" we employ in furtherance of our philosophy include:

Compensation Governance—What We Do & What We Don't Do
✓		What We Do		✗ What We Don't Do
​	​	​	​	​
✓		Annual "Say on Pay" vote		✗ No discretionary bonuses paid to permanent NEOs when performance results are below threshold performance.performance
✓		Pay for performance culture, emphasis on performance-based compensation		✗ No tax gross-up upon change-in-control
✓		Meaningful executive ownership guidelines that create a line of sight between stockholders and executive officers		✗ No repricing of stock options and no liberal share recycling
✓		Executive equity retention/holding requirements, clawback policy		✗ No across-the-board pay increases
✓		Manage compensation risk by using a variety of financial metrics in pay programs and capping payouts		✗ No formal non-qualified benefits or perquisite programs
✓		Hedging/pledging and clawback policiesRegular review of share utilization		✗ No hedging or pledging of stock
✓		Use of independent compensation consultant		✗ No pension or executive SERP





QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
AND VOTING PROCEDURES


Who Can Vote?

        The record date for the Annual Meeting is October 11, 2018was September 30, 2019 (the "Record Date"). Only holders of record of shares of our common stock, par value $0.01 per share (the "Common Stock"), at the close of business on such date are entitled to notice of, and to vote at, the Annual Meeting. Holders of record of Common Stock are entitled to one vote per share on the matters to be considered at the Annual Meeting. At the close of business on the Record Date, 45,946,65647,641,255 shares of Common Stock were issued and outstanding and the holders thereof are entitled to vote at the Annual Meeting.

What Constitutes a Quorum?

        In order for any business to be conducted at the Annual Meeting, the holders of at least a majority of the shares of our Common Stock entitled to vote at the Annual Meeting must be represented at the Annual Meeting, either in person or by proxy. Proxies received but marked as abstentions and broker non-votes (which are described below) will be considered present at the Annual Meeting for purposes of determining a quorum at the Annual Meeting. Although it is not expected, if holders of less than a majority of the shares of our Common Stock are present or represented by proxy at the Annual Meeting, we may adjourn and reschedule the Annual Meeting, without notice other than an announcement at the Annual Meeting, until a quorum is present or represented.

How Do I Vote My Shares?

        If you are a stockholder of record, you cannot vote your shares of Common Stock unless you are present at the Annual Meeting or you have previously given your proxy. Written ballots will be provided to anyone who wants to vote in person at the Annual Meeting and is entitled to do so. You can vote by proxy in one of three convenient ways:

•

by mail—if you received a printed set of proxy materials, you can vote by completing, signing, dating and returning the separate proxy card in the postage-paid, self-addressed envelope;



•

over the internet—by visiting the website provided in the Notice or provided in the separate proxy card if you received a printed set of proxy materials, and following the instructions provided; or



•

by telephone—by calling the toll-free number provided in the Notice or provided in the separate proxy card if you received a printed set of proxy materials, and following the instructions provided.

        Stockholders of record may vote their shares by telephone or over the internet 24 hours24-hours a day, seven days a week. Telephone and internet votes must be received by 11:59 p.m. Eastern time on November 28, 201819, 2019 and votes by mail must be received on or before the Annual Meeting.

        If your shares of Common Stock are held in "street name" by a broker, bank or other nominee, you should have received different voting instructions from your broker, bank or other nominee as to how to vote such shares. These instructions should indicate if internet or telephone voting is available and, if so, provide details regarding how to use those systems to vote your shares. Additionally, you may vote these shares in person at the Annual Meeting if you have requested and received a legal proxy from your broker, bank or other nominee (the stockholder of record) giving you the right to vote these shares in person at the Annual Meeting.




What Is the Recommendation of the Board of Directors?

        The Board unanimously recommends that you vote (1) "FOR" the election of each of the Board's director nominees, (2) "FOR" the approval, on an advisory basis, of the Company's executive compensation, and (3) "FOR" the ratification of the selection of Ernst & Young LLP ("Ernst & Young") as our independent registered public accounting firm for fiscal 2019.2020.

How Will the Proxies Be Voted?

        Where stockholders have appropriately specified how their proxies are to be voted, they will be voted accordingly. If a properly executed proxy does not indicate any voting instructions, the shares of Common Stock represented by such proxy will be voted as follows:

•

"FOR" the election of each of the Board's director nominees;



•

"FOR" the approval, on an advisory basis, of the Company's executive compensation;



•

"FOR" the ratification of the selection of Ernst & Young as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2019;2020; and



•

at the discretion of the proxy holders on any other matter that may properly come before the Annual Meeting.

        If the Company proposes to adjourn the Annual Meeting, the proxy holders will vote all shares for which they have voting authority in favor of such adjournment. The Board of Directors is not presently aware of any matters other than those stated in the Notice of Annual Meeting of Stockholders and described in this Proxy Statement to be presented for consideration of the Company's stockholders at the Annual Meeting.

Why Did I Receive Multiple Proxy Cards?

        Many of our stockholders hold their shares in more than one account and may receive separate proxy cards or voting instruction forms for each of those accounts. To ensure that all of your shares are represented at the Annual Meeting, we recommend that you vote every proxy card that you receive.

How May I Change My Vote or Revoke My Proxy?

        If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is exercised by:

•

delivering a signed, written revocation letter, dated later than the proxy, to our Secretary at our corporate headquarters at 6250 LBJ Freeway, Dallas, Texas 75240 no later than November 28, 2018;19, 2019;



•

timely mailing another duly executed proxy bearing a later date to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 which is received by Vote Processing prior to the applicable deadline;



•

voting at a later time over the internet or by telephone prior to the applicable deadline, if you previously voted over the internet or by telephone; or



•

attending the Annual Meeting and casting your vote in person. Your attendance at the Annual Meeting will not, in and of itself, revoke your proxy.

        If your shares are held in "street name" through a broker, bank or other nominee, you must contact your broker, bank or other nominee to receive instructions as to how to revoke your proxy if such instructions have not already been provided to you. In any case, your last properly-received and timely votedtimely-voted proxy or ballot will be the vote that is counted.




How Do I Vote My Shares Held in Street Name?

        If you are the beneficial owner of shares held in "street name" and do not submit voting instructions to your broker, bank or other nominee, under the applicable rules, the broker, bank or other nominee that holds your shares may use its discretion in voting your shares with respect to "routine items" but not with respect to "non-routine items." On non-routine items for which you do not submit voting instructions to your broker, bank or other nominee, these shares will not be voted and will be treated as "broker non-votes." The proposal to ratify the selection of Ernst & Young as our independent registered public accounting firm for fiscal 20192020 is considered a routine item and, therefore, may be voted upon by your broker, bank or other nominee if you do not provide voting instructions on this proposal. However, the election of directors and the advisory vote on executive compensation are considered non-routine items. Accordingly, if your shares are held in "street name"street name and you do not provide voting instructions to your broker, bank or other nominee, these shares will not be counted in determining the outcome of these proposals at the Annual Meeting. We encourage you to provide voting instructions to your broker, bank or other nominee if you hold your shares in "street name"street name so that your voice is heard on these matters.

How Many Votes Must Each Proposal Receive to be Adopted?

        Assuming the presence of a quorum, the following vote is required for each proposal:

•

Election of directors—The nominees for director who receive a plurality of the votes of the shares of Common Stock present in person or by proxy at the Annual Meeting, and entitled to vote thereon, will be elected to the Board of Directors. This means the seveneight nominees who receive the highest number of votes"FOR" his or her election at the Annual Meeting will be elected to the Board. Stockholders may not cumulate their votes in the election of directors. If you do not vote for a particular nominee, or if you indicated on your proxy card, via the internet or by telephone that you want to withhold authority to vote for a particular nominee, then your shares will not be voted for that nominee. If you hold your shares in "street name" through a broker, bank or other nominee, your shares will not be voted for any director nominee unless you provide the broker, bank or other nominee with specific voting instructions on a timely basis directing the broker, bank or other nominee to vote for such nominee. Abstentions and broker non-votes do not constitute a vote "for" or "against" a nominee.



•

Advisory vote on executive compensation—The approval, on an advisory basis, of the Company's executive compensation requires the affirmative vote of the majority of shares of our Common Stock present in person or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered to be "present" and "entitled to vote" at the Annual Meeting with respect to this proposal, and as a result, abstentions will have the same effect as a vote against this proposal. Shares underlying broker non-votes are not considered to be "entitled to vote" at the Annual Meeting with respect to this proposal, and as a result, broker non-votes will generally have no effect on the outcome of this proposal, except that each broker non-vote will reduce the absolute number, but not the percentage, of affirmative votes necessary for the approval of the Company's executive compensation.



•

Ratification of the selection of the Company's independent registered public accounting firm—The ratification of the selection by the Audit Committee of the Board (the "Audit Committee") of Ernst & Young as the Company's independent registered public accounting firm for fiscal 20192020 requires the affirmative vote of the majority of shares of our Common Stock present in person or by proxy at the Annual Meeting and entitled to vote thereon. Although SEC regulations and NASDAQ rules require the Company's independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the selection is being submitted for ratification at the Annual Meeting with a view towards soliciting the opinion of the Company's




stockholders, which the Audit Committee will take into consideration in future deliberations. If the selection of Ernst & Young as the Company's independent registered public accounting firm is not ratified at the Annual Meeting, the Audit Committee may consider the engagement of another independent registered public accounting firm, but will not be obligated to do so. Abstentions are considered to be "present" and "entitled to vote" at the Annual Meeting with respect to this proposal, and as a result, abstentions will have the same effect as a vote against this proposal. As discussed above, under applicable rules, brokers, banks and other nominees may use their discretion to vote shares of Common Stock held in "street name" for which voting instructions are not submitted with respect to the ratification of the selection of Ernst & Young, so no broker non-votes are expected for this proposal.

Who Is Soliciting this Proxy?

        The Board of Directors is soliciting this proxy. The Company will bear the cost of the solicitation of proxies by the Board of Directors. The Company's directors, and certain of the Company's officers and employees in the ordinary course of their employment, may solicit proxies by mail, internet, telephone, facsimile, personal contact, email or other online methods. We will reimburse their expenses in connection therewith. We also will reimburse banks, brokers, custodians, nominees or fiduciaries for reasonable expenses they incur in sending these proxy materials to you if you are a beneficial holder of our shares. Other proxy solicitation expenses that we will pay include those for preparing, mailing, returning and tabulating proxies.

        The costs of soliciting proxies pursuant to this Proxy Statement will be paid by the Company. Solicitation may be made in person or by telephone, email, mail or facsimile by our directors, officers or employees.

How May I Attend the Annual Meeting?

        All stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Please note that if you hold your shares in "street name" through a broker, bank or other nominee, you will need to bring a legal proxy from your broker, bank or other nominee (the stockholder of record) or a brokerage statement reflecting your stock ownership as of the Record Date and check in at the registration desk at the Annual Meeting.

When Will the Voting Results Be Announced?

        The preliminary voting results are expected to be announced at or shortly following the Annual Meeting. We will report the final voting results, or the preliminary voting results if the final voting results are unavailable, in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. You may obtain a copy of this Form 8-K by visiting the SEC's website atwww.sec.gov or our website atwww.tuesdaymorning.com, under "Investor Relations—Financial Info—SEC Filings."


PROPOSAL NO. 1
ELECTION OF DIRECTORS


        At the Annual Meeting, the holders of Common Stock as of the Record Date will consider and vote upon the election of seveneight directors. The Board has nominated Terry Burman, Steven R. Becker, James T. Corcoran, Barry S. Gluck, Frank M. Hamlin, Reuben E. Slone, Sherry M. Smith, and Richard S Willis for election as directors of the Company. Each of Terry Burman, Steven R. Becker, James T. Corcoran, Barry S. Gluck, Frank M. Hamlin, Reuben E. Slone, Sherry M. Smith, and Richard S Willis are currently serving as our directors, and each has agreed to stand for re-election to our Board. William Montalto is retiring from




the Board, effective immediately prior to the Annual Meeting, at which time the size of the Board will be reduced to seven. The Board thanks Mr. Montalto for his years of service to the Company.

        If they are elected, each of the nominees will continue to serve until their successors are duly elected and qualified at the next annual meeting of stockholders, or until their earlier death, resignation or removal. Should any nominee become unable or unwilling to accept nomination for election, which is not currently anticipated, the Board may designate a substitute nominee or reduce the number of directors accordingly. The proxy holders will vote for any substitute nominee designated by the Board. Each of the Board's nominees has indicated his or her willingness to serve the full term.

        The following is biographical information about each of the nominees to the Board of Directors, including the specific experience, qualifications, attributes and skills of the nominees that led to the conclusion that each of the nominees should serve as a director of the Company, in light of the Company's business and structure:

        Terry Burman, age 72,73, joined the Board of Tuesday Morning as a director in February 2013, and has served as Chairman of the Board of the Company since December 2015. Prior to that, Mr. Burman served as Lead Independent Director and a member of the Office of the Chairman from September 2015 to December 2015. Mr. Burman has served as the Non-Executive Chairman of the Board of Abercrombie & Fitch Co., a clothing retailer, since February 2018 and prior to that as Lead Independent Director since May 2017 and on the boardBoard of directorsDirectors of Abercrombie & Fitch Co., since January 2014. He has been a director of Learning Care Group, a privately-held company operating over 900 learning and daycare centers in the United States, since July 2014. He has been a board member of the St. Jude Children's Research Hospital Board of Governors since July 2004 and served as Chairman of the Board from July 2013 to June 2015. Mr. Burman has also served as a board member of ALSAC, the fundraising organization of St. Jude, since July 2004 and on the Board of Trustees of the Norman Rockwell Museum since September 2016. Mr. Burman served as Chairman of the Board and a director of Zale Corporation, a jewelry retailer, from May 2013 until it was acquired in May 2014 and served on the Board of Directors of YCC Holdings LLC, a retailer of candles, fragrances and other products, from October 2007 until it was acquired in October 2013. From March 2001 to January 2011, Mr. Burman was the Chief Executive Officer of Signet Jewelers Limited ("Signet"), a specialty jewelry retailer. Mr. Burman joined Signet in 1995 as the Chairman and CEO of Sterling Jewelers, Inc., a U.S. division of Signet. Mr. Burman also served on the boardBoard of directorsDirectors of Signet until January 2011. Mr. Burman served on the board of directors of YCC Holdings LLC, a retailer of candles, fragrances and other products, from October 2007 until it was acquired in October 2013, and served as chairman of the board and a director of Zale Corporation, a jewelry retailer, from May 2013 until it was acquired in May 2014. Prior to joining Signet, Mr. Burman held various senior executive positions of increasing responsibility with Barry's Jewelers, Inc., which now does business as Samuels Jewelers, from 1980 to 1995, including President and Chief Executive Officer from 1993 to 1995. Prior to that, Mr. Burman was a partner with Roberts Department Stores, a regional department store chain specializing in apparel. In nominating Mr. Burman to serve as a director of the Company, the Board of Directors considered his extensive executive, financial and management expertise and experience, his experience as a chief executive officer in the retail industry, his significant international management experience, and his general business and financial acumen.

        Steven R. Becker, age 51,52, has served as a director of Tuesday Morning since July 2012 and was appointed its Chief Executive Officer in December 2015. Prior to becoming CEO of Tuesday Morning, Mr. Becker served as Chairman of the Board of the Company from July 2012 until September 2015 and as Executive Chairman and head of the Office of the Chairman from September 2015 until December 2015. Prior to becoming CEO of Tuesday Morning, Mr. Becker spent 20 years in the investment management industry with a focus on investing in middle market public companies. Mr. Becker has extensive public company board experience having previously served as a board member at a variety of public companies including, Hot Topic, Inc., an apparel retailer, Ruby Tuesday, a national restaurant company, Emcore, a semiconductor producer, Plato Learning, an educational software Company,company, Pixelworks, a semiconductor producer, Fuel Systems Solutions, a manufacturer of alternative energy systems, and Special Diversified Opportunities, a holding company that owns




businesses in a variety of industries, among others. Prior to becoming CEO of Tuesday Morning, Mr. Becker was the co-managing partner at Becker Drapkin Asset Management, whose predecessor,




Greenway Capital, he founded in 2005. From 1997 to 2004, Mr. Becker was a partner at Special Situations Funds, a New York City-basedCity based asset manager. Prior to joining Special Situations Funds, Mr. Becker was a part of the distressed debt and leveraged equities research team at Bankers Trust Securities. Mr. Becker began his career at Manley Fuller Asset Management in New York as a small cap analyst. In nominating Mr. Becker to serve as a director of the Company, the Board of Directors considered the insights Mr. Becker brings through his prior service as a director of ourthe Company, his demonstrated leadership and experience as our Chief Executive Officer and his extensive financial experience, in both public and private companies, which provides the Board with valuable expertise in corporate finance, strategic planning, and corporate governance.

        James T. Corcoran, age 35,36, has served as a director of Tuesday Morning since November 2017. He has served as the founderis a Partner at AREX Investment Partners, LP, an investment management firm focused on special situations. He founded and remains Chief Executive Officer of Purple Mountain Capital Partners LLC, a private investment firm, since June 2017.from 2017 to 2019. Prior to founding Purple Mountain Capital Partners LLC, he served as a Principal at Highfields Capital Management, a value-oriented investment management firm in Boston, from 2010 to 2016. Mr. Corcoran worked as an investment banking analyst for Credit Suisse (USA), Inc. in its leveraged finance and restructuring group, from 2006 to 2008, in addition to working in its hedge funds investment group, from 2005 to 2006. Mr. Corcoran received his MBA from the Harvard Business School and his AB with honors in Economics and Political Science from the University of Chicago and is a CFA charter holder.charterholder. Mr. Corcoran was nominated by the Board pursuant to the terms of a Cooperation Agreement entered into with certain Company stockholders to settle a contested election for directors at the 2017 annual meeting of stockholders for the Company. See "Cooperation Agreement" below for additional information.

        Barry S. Gluck, age 66,67, has served as a director of Tuesday Morning since January 2017. Mr. Gluck served in various senior management positions with Ross Stores Inc. ("Ross") from 1989 to 2007, most recently as Executive Vice President of Merchandising, Marketing and Store Planning and Allocation. Prior to joining Ross, Mr. Gluck was with Today's Man as Vice President, General Merchandise Manager and Chief Merchandising Officer and with Macy's Department Stores as Vice President Divisional Merchandising Manager. Since 2012, Mr. Gluck has served as the Founder and Managing Director of Gluck Consulting LLC, a management consultant group which focuses primarily on off-price/value channels. In nominating Mr. Gluck to serve as a director of the Company, the Board considered his 30-years32 years of off-price and value channel experience, his extensive executive, marketing and management expertise having served as a chief merchandising officer in the retail industry, and his general business and financial acumen.

        Frank M. Hamlin, age 50,51, has served as a director of Tuesday Morning since April 2014. Mr. Hamlin is currently theExecutive Vice President, Chief MarketingCustomer Officer of GameStop Corporation ("GameStop"), a global, multichannel video game, consumer electronics and wireless services retailer. Mr. Hamlin had previously served as Chief Marketing Officer of GameStop from June 2014 to August 2016. Mr. Hamlin served as Chief Marketing Officer of Spence Diamonds from May 2018 to August 14, 2018 and as Executive Vice President and Chief Marketing Officer for Tailored Brands, Inc., a leading national menswear retailer from September 2017 to May 2018. Mr. Hamlin previously served as Executive Vice President and GM, Marketing and E-Commerce of Guitar Center, Inc., a musical instruments retailer, from June 2010 until May 2014, and as Executive Vice President and Chief Operating Officer of E-Miles, LLC, an interactive marketing company, from February 2007 to June 2010. From July 2004 until February 2007, he was Director of Marketing, Central Market Division for H.E. Butt Grocery, a fresh, specialty and prepared foods retailer. Prior to that time, Mr. Hamlin held various positions with Brierley & Partners, E-Rewards, Inc., Arista Records and The Walt Disney Company. In nominating Mr. Hamlin to serve as a director of the Company, the Board of Directors




considered the various senior executive-level positions he haspreviously held with retail service companies, as well as his extensive experience in marketing, branding strategy and customer engagement.




Reuben E. Slone, age 56, has served as a director of Tuesday Morning since June 2019. Mr. Slone is currently Executive Vice President, Supply Chain at Advance Auto Parts, Inc. (NYSE: AAP) and sat on the Board of Directors from March 2016 to October 2018. Mr. Slone is a seasoned supply chain executive with experience across multiple consumer-facing industry sectors at best-in-class companies. Previous to Advance Auto Parts Inc., Mr. Slone was Senior Vice President, Supply Chain at Walgreens, a pharmaceutical retailer from May 2012 to October 2018. From November 2004 until May 2012, Mr. Slone was Executive Vice President, Supply Chain, and General Manager, Services at Office Max. From April 2000 to November 2004, Mr. Slone held various positions at Whirlpool Corporation including Vice President Global Supply Chain, Vice President North American Region Supply Chain and Vice President, Global eBusiness. From February 1997 to March 2000, Mr. Slone was eGM Director, Global eSales and Director, Global Manufacturing Strategic Process and System Alignment at General Motors Corporation. Prior to that time, Mr. Slone held various positions with Federal-Mogul Corporation, Electronic Data Systems, Ernst & Young and Engineering Technology LTD. In nominating Mr. Slone to serve as a director of the Company, the Board of Directors considered his leadership qualities developed from his experience while serving as a senior supply chain executive with Advance Auto Parts, Walgreens, Office Max and Whirlpool, his other board experience, as well as his general business and financial acumen.

        Sherry M. Smith, age 57,58, has served as a director of Tuesday Morning since April 2014. Ms. Smith served in various positions with SUPERVALU, Inc., a grocery retailer and food distributor, from 1987 to 2013. Ms. Smith served as Chief Financial Officer and Executive Vice President of Supervalu Inc.SUPERVALU, Inc.. from December 2010 until August 2013, and she previously served as Senior Vice President, Finance from 2006 until 2010, Senior Vice President, Finance and Treasurer from 2002 until 2005, and in various other capacities with SUPERVALU, Inc. prior to 2002. Prior to joining SUPERVALU, Inc., Ms. Smith held various positions with McGladrey LLP, a public accounting firm. Ms. Smith has served on the boardBoard of directorsDirectors of Deere & Company, a manufacturer and distributor of agricultural, turf, construction and forestry equipment, since December 2011, and currently serves as a member of the audit committee and finance committee. Ms. Smith has also served on the boardBoard of directorsDirectors of Realogy Holdings Corporation since December 2014, and currently serves on its audit committee and nominating and governance committee. Ms. Smith has served on the boardBoard of directorsDirectors of Piper Jaffrey Corp since January 2016, and currently serves on its compensation committee and audit committee. SinceFrom January 2015 to December 2018, Ms. Smith has served on the Financial Accounting Standards Advisory Council (FASAC), a group that advises the Financial Accounting Standards Board (FASB) on strategic issues, project priorities and other matters. In nominating Ms. Smith to serve as a director of the Company, the Board of Directors considered her leadership qualities developed from her experience while serving as a senior executive and as Chief Financial Officer of SUPERVALU, Inc., the breadth of her experiences in auditing, finance, accounting, compensation, strategic planning, and other areas of oversight, and her subject matter knowledge in the areas of finance and accounting and other board experience.

        Richard S Willis, age 58,59, has served as a director of Tuesday Morning since July 2012. Since January 2016, Mr. Willis has served as the Chief Executive Officer, President and a Director of Pharmaca Integrative Pharmacies, an innovative retail pharmacy that combines traditional pharmacy services with natural health and beauty products and expert practitioners. From September 2011 through December 2015, Mr. Willis served as the President, and Chief Executive Officer and as a director of Speed Commerce, Inc. (formerly Navarre Corporation), one of the nation's largest omni channel, pure play, end-to-end e-commerce solution providers. Mr. Willis previously served as the Executive Chairman of Charlotte Russe, a mall-based specialty retailer of fashionable, value-priced apparel and accessories, from January 2011 to September 2011. From 2009 to 2011, Mr. Willis served as President of Shoes for Crews, a seller of slip resistant footwear. From 2003 to 2007, Mr. Willis was President and Chief Executive Officer of Baker & Taylor Corporation, a global distributor of books, DVDs and music. Previously, Mr. Willis served as Chairman, President and Chief Executive Officer of Troll Communications and President and Chief Executive Officer of Bell Sports. Mr. Willis served four terms




as Chairman of the Board of Regents at Baylor University. In nominating Mr. Willis to serve as a director of the Company, the Board of Directors considered his considerable executive leadership experience across multiple industries, including distribution businesses that serve retailers and their suppliers, and his significant expertise in operating businesses and directing transformative plans, including executive level experiences of more than 20 years in retail and manufacturing industries.

        The Board of Directors unanimously recommends that you vote "FOR" the election of each of the Board's nominees.


PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION


        As required by Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company is asking stockholders to approve, on an advisory basis, the compensation for the named executive officers ("NEOs") disclosed in these materials. This proposal, commonly referred to




as a "say on pay" proposal, gives stockholders the opportunity to express their views on the compensation of the NEOs.

        The vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of our NEOs, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee of the Board. The Company currently submits the compensation of NEOs to an advisory vote of stockholders on an annual basis.

        As described in more detail below under the heading "Executive Compensation—Compensation Discussion and Analysis," our executive compensation program is designed to motivate our executives to create a successful company. We believe that our compensation program, with its balance of short-term incentives (including performance-based cash bonus awards) and long-term incentives (including equity awards that vest over certain time periods and performance-based equity awards), rewards sustained performance that is aligned with long-term stockholder interests. Please read the "Compensation Discussion and Analysis," compensation tables and narrative discussion sections of this Proxy Statement below for additional details about our executive compensation program, including information about the fiscal 20182019 compensation of our NEOs.

        We believe a significant amount of total compensation should be in the form of short-term and long-term incentive awards to align compensation with our financial and operational performance goals as well as individual performance goals. We continually evaluate the individual elements of our executive compensation program in light of market conditions and governance requirements and make changes where appropriate for our business. We believe that the core of our executive compensation program provides opportunities to reward high levels of individual and Company performance and will help drive the creation of sustainable stockholder value.

        The Compensation Committee, which is responsible for determining the compensation of our executive officers, is comprised solely of non-employee directors who satisfy the independence requirements under NASDAQ rules and will continue to emphasize responsible compensation arrangements that attract, retain, and motivate high caliber executives to achieve the Company's business strategies and objectives.

        Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting:

        "RESOLVED, that the Company's stockholders approve, on an advisory basis, the compensation paid to the Company's NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion."

        The Board of Directors unanimously recommends that you vote "FOR" the approval of the compensation of the Company's NEOs, as disclosed in this Proxy Statement.





PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM


        On September 26, 2018,10, 2019, the Audit Committee selected Ernst & Young as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2019.2020. Although SEC regulations and the NASDAQ listing requirements require the Company's independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the selection is being submitted for ratification at the Annual Meeting with a view towards soliciting the opinion of the Company's stockholders, which the Audit Committee will take into consideration in future deliberations. If the selection of Ernst & Young as the Company's independent registered public accounting firm is not ratified at the Annual Meeting, the Audit Committee may consider the




engagement of another independent registered public accounting firm, but will not be obligated to do so. The Audit Committee may terminate the engagement of Ernst & Young as the Company's independent registered public accounting firm without the approval of the Company's stockholders if the Audit Committee deems termination to be necessary or appropriate. The Company expects that representatives of Ernst & Young will be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.

        The Board of Directors unanimously recommends that you vote "FOR" the ratification of the selection of Ernst & Young as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2019.2020.


CORPORATE GOVERNANCE


Director Nomination

        The Nominating and Governance Committee of the Board of Directors is responsible for providing oversight as to the identification, selection and qualification of candidates to serve as directors of the Company and will recommend to the Board candidates for election or re-election as directors (or to fill any vacancies on the Board). The members of the Nominating and Governance Committee are Terry Burman, as Chair, Richard S Willis, Barry S. Gluck and James T. Corcoran. Each of the members of the Nominating and Governance Committee is an independent director under applicable NASDAQ rules. The Nominating and Governance Committee Charter is available on the Company's website atwww.tuesdaymorning.com under "Investor Relations—Corporate Governance—Corporate Governance Documents." The Nominating and Governance Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

        In identifying and evaluating nominees for director, the Nominating and Governance Committee will take into account the following attributes and qualifications: (1) relevant knowledge and mix of background and experience; (2) personal and professional ethics, integrity and professionalism; (3) accomplishments in their respective fields; (4) the skills and expertise to make a significant contribution to the Board, the Company and its stockholders; and (5) whether the candidate has any of the following qualities: financial expertise, general knowledge of the retail industry, and Chief Executive Officer, Chief Financial Officer or other senior management experience. In addition, although the Nominating and Governance Committee does not have a formal diversity policy in place for the director nomination process, diversity is an important factor in the Nominating and Governance Committee's consideration and assessment of a candidate, with diversity being broadly construed to mean a variety of opinions, perspectives, experiences and backgrounds, including gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements of the Board at that point in time. In addition, no person may be considered as a candidate for nomination as a director of the Company if (i) during the last ten years, that person, or




any of his or her affiliates, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or is currently under investigation for same or (ii) during the last ten years, that person, or any of his or her affiliates, was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which that person, or any of his or her affiliates, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws on finding any violation with respect to such laws, or is currently under investigation for same. In addition, the Nominating and Governance Committee will recommend to the Board candidates for re-election as directors. The Nominating and Governance Committee may conduct all necessary and appropriate inquiries into the backgrounds and qualifications of potential candidates. There are no specific or minimum qualities a candidate must have to be recommended as a director nominee by the Nominating and Governance Committee.




        The process for evaluating candidates is the same regardless of the source of the recommendation. The Nominating and Governance Committee will not discriminate on the basis of race, color, national origin, gender, religion, sexual orientation or disability in selecting nominees. In addition to those candidates identified through its own internal processes, the Nominating and Governance Committee will evaluate a candidate proposed by any single stockholder (or group of stockholders) that beneficially owns our Common Stock provided that the information regarding the potential candidate or candidates has been timely given to the Company. In order to be considered by the Nominating and Governance Committee for evaluation for an upcoming annual meeting of stockholders, a notice from a stockholder regarding a potential candidate must be sent to the Company's Secretary at the Company's headquarters by the date specified in the "Stockholders' Proposals" section of the previous year's proxy statement for notice of the intention to nominate directors at the meeting. The notice should set forth (a) as to each person whom the stockholder proposes as a potential candidate for director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Company that are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice, (i) the name and address of the stockholder of record, as they appear on the Company's books, of the beneficial owners, if any, and, if such stockholder or beneficial owner is an entity, the persons controlling such entity, proposing such nomination, (ii) the class and number of shares of the Company which are held of record and beneficially by such stockholder and control persons and a description of certain agreements, arrangements or understandings among the stockholder, beneficial owners or control persons (and a representation to notify the Company of any such agreements, arrangements or understandings in effect as of the record date of the meeting), (iii) a representation that the stockholder is entitled to vote at the meeting and intends to appear at the meeting in person or by proxy, and (iv) a representation whether the stockholder or the beneficial owner or control person, if any, will engage in a solicitation with respect to the nomination and, if so, certain information concerning the solicitation. All candidates (whether identified internally or by a stockholder) who, after evaluation and recommendation by the Nominating and Governance Committee, are then nominated by the Board will be included as the Board's recommended slate of director nominees in the Company's proxy statement.

        In addition to submitting potential candidates for consideration by the Nominating and Governance Committee, any stockholder of the Company may nominate one or more individuals for election as a director of the Company at an annual meeting of stockholders if the stockholder sends a notice to the Company's Secretary at the Company's headquarters, in the form specified in the Bylaws, by the date specified in the "Stockholders' Proposals" section of the previous year's proxy statement for nomination of directors. The procedures described in the prior paragraph are meant to establish an additional means by which certain stockholders can have access to the Company's process for




identifying and evaluating Board candidates and is not meant to replace or limit stockholders' general nomination rights in any way.

        Each of the nominees for director was elected to serve as a director at the last annual meeting of stockholders.stockholders, except for Reuben E. Slone, who was elected by the Board effective June 1, 2019. The Board selected Mr. Slone by working with a national search firm. Mr. Slone was selected for his business acumen and supply chain expertise. Mr. Corcoran was nominated to the Board at the last annual meeting of stockholders pursuant to the terms of a Cooperation Agreement described below.

Cooperation Agreement

        Pursuant to the terms of a Cooperation Agreement, dated as of October 1, 2017 (the "Cooperation Agreement"), among the Company, Jeereddi II, LP, Purple Mountain Capital Partners LLC and certain of their affiliates, the Company agreed to nominate James T. Corcoran for




election to the Board at the 2017 Annual Meeting. Under the terms of the Cooperation Agreement, Mr. Corcoran willagreed to offer his resignation to the Board if at any time the Jeereddi/PMCP Group no longer beneficially ownsowned at least 533,344 shares of the Company's common stock (subject to adjustment for stock splits, reclassifications, combinations and similar adjustments, the "Minimum Ownership Threshold"). In addition, so long as the Jeereddi/PMCP Group meetsmet the Minimum Ownership Threshold, the Jeereddi/PMCP Group will bewas entitled to certain replacement rights during the Standstill Period (as defined below) in the event Mr. Corcoran is unable to serve as a director.

        Also under the terms of the Cooperation Agreement, Jeereddi II agreed to irrevocably withdraw its notice of nomination of candidates for election at the 2017 Annual Meeting. In addition, each member of the Jeereddi/PMCP Group agreed that it willwould not, directly or indirectly, (i) nominate or recommend for nomination any person for election at the 2018 Annual Meeting, (ii) submit proposals for consideration or otherwise bring any business before the 2018 Annual Meeting, or (iii) engage in certain activities related to "withhold" or similar campaigns with respect to the 2018 Annual Meeting.

        The Cooperation Agreement also providesprovided that at the 2018 Annual Meeting, each member of the Jeereddi/PMCP Group willwould cause all shares of the Company's common stock beneficially owned by them to be present and voted (i) in favor of all of the directors nominated for election by the Board, (ii) in favor of the appointment of the Company's independent registered accounting firm for the years ended June 30, 2019, respectively, and (iii) in accordance with the Board's recommendation with respect to the Company's "say-on-pay" proposal, provided, however, that to the extent that the recommendation of both Institutional Shareholder Services Inc. ("ISS") and Glass Lewis & Co., LLC ("Glass Lewis") differsdiffered from the Board's recommendation with respect to any matter other than nominees for election as directors to the Board, the Jeereddi/PMCP Group shall havehad the right to vote in accordance with the recommendation of ISS and Glass Lewis with respect to such matters.

        Further, under the terms of the Cooperation Agreement, each member of the Jeereddi/PMCP Group agreed to certain normal and customary standstill provisions during a standstill period, which iswas defined as the period beginning on the date of the Cooperation Agreement and through the later of (x) the date that is the first day to submit stockholder nominations for the 2019 annual meeting of stockholders pursuant to the Company's Bylaws (the "2019 Advance Notice Date") and (y) the date that Mr. Corcoran no longer serves on the Board; provided, however, that if Mr. Corcoran resignsresigned for any reason prior to the 2019 Advance Notice Date, the Standstill Period shallwould continue until the 2019 Advance Notice Date (the "Standstill Period").

        Among other things, the standstill provisions provideprovided that, during the Standstill Period, each member of the Jeereddi/PMCP Group willwould not, among other things, solicit proxies or consents regarding any matter to come before any annual or special meeting of stockholders, or enter into a voting agreement or any group with stockholders other than affiliates of the Jeereddi/PMCP Group and current group members. In addition, each member of the Jeereddi/PMCP Group willwould not seek to




make, or encourage any third party in making, any offer or proposal with respect to any tender offer, merger, acquisition, amalgamation, recapitalization, restructuring, disposition, spin-off, asset sale, joint venture or other business combination involving the Company and will not seek, or encourage any person, to submit nominees in furtherance of a contested solicitation for the election or removal of directors.

        Each of the parties also agreed to certain mutual non-disparagement obligations, and the Company agreed to reimburse the Jeereddi/PMCP Group for its reasonable, documented out-of-pocket fees and expenses, including legal expenses, occurred in connection with the matters related to the negotiation and execution of the Cooperation Agreement, up to a maximum of $25,000.

        On July 24, 2019, the Parties amended and restated the cooperation agreement ("A&R Cooperation Agreement") to extend the term of the Standstill Period during which the Jeereddi/PMCP Group will remain subject to certain previously disclosed normal and customary standstill provisions, and extend and continue certain other matters related to annual meetings of the stockholders and the continuing service of James T. Corcoran on the Board.

        Pursuant to the A&R Cooperation Agreement, the Company will nominate Mr. Corcoran for election to the Board at the 2019 Annual Meeting of Stockholders and the Standstill Period will be extended through the later of (x) the date that is the first day to submit stockholder director nominations for the 2021 Annual Meeting of Stockholders pursuant to the Company's Bylaws (the "2021 Advance Notice Date") and (y) the date that Mr. Corcoran no longer serves on the Board; provided, however, that if Mr. Corcoran is not re-nominated by the Board for election at the 2020 annual meeting of stockholders, the Standstill Period shall end thirty (30) days following the conclusion of the 2020 Annual Meeting of Stockholders; and provided, further, that if Mr. Corcoran resigns for any reason prior to the 2021 Advance Notice Date, the Standstill Period shall continue until the 2021 Advance Notice Date. In addition, the A&R Cooperation Agreement continues to provide that if the Jeereddi/PMCP Group no longer beneficially owns at least 533,344 shares of the Company's common stock, Mr. Corcoran will offer his resignation to the Board and the Jeereddi/PMCP Group will no longer be entitled to replacement rights in the event Mr. Corcoran is unable to serve as a director. The A&R Cooperation Agreement also extends the agreement by the Jeereddi/PMCP Group to vote in favor of certain matters at the 2019 and 2020 annual meetings of stockholders.

Director Independence

        NASDAQ listing standards require our Board of Directors to be comprised of at least a majority of independent directors. For a director to be considered independent, the Board must determine that




the director does not have any direct or indirect material relationship with the Company which would interfere with the exercise of independent judgment in carrying out of his or her responsibilities as a director. Based on the independence standards prescribed by NASDAQ, our Board has affirmatively determined that sixseven of the eight current directors are independent. Mr. Becker is not independent due to his relationship with the Company as Chief Executive Officer. The Board determined that Mr. Montalto is not independent due to the services that he provided to the Company between August 2015 and October 2016 in various capacities. In determining that Mr. Burman is independent, our Board considered his prior service as a member and Vice Chairman of the Office of the Chairman as described below, and determined that such service would not interfere with his independence because he received no compensation for such service, served only in an advisory role and did not perform any management or executive functions. As prescribed by NASDAQ rules, the independent directors have regularly scheduled meetings without management present.

Independent Chairman of the Board

        With the exception of a three-month period in 2015 following the retirement of the Company's chief executive officer, the Company has had different individuals serving as its Chief Executive Officer and Chairman of the Board since 2000.        Since December 2015, Mr. Burman has served as independent Chairman of the Board. The separation of the roles of Chairman of the Board and Chief Executive Officer is designed to allow our Chief Executive Officer, Mr. Becker, to focus on the day-to-day management of the Company's business and to allow our independent Chairman of the Board, Mr. Burman, to focus on the continued development of a high-performing Board, including (1) ensuring the Board remains focused on the Company's long-term strategic plans, (2) developing Board agendas, (3) working with Company management to ensure the Board has timely and adequate information, (4) coordinating Board




committee activities, (5) supporting the Chief Executive Officer and (6) ensuring effective stakeholder communications. The Board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as the Board's oversight responsibilities continue to grow. The Board believes, due to the continued leadership and experience provided by these two individuals, that having separate positions is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.

Board of Directors' Role in Risk Oversight

        In the normal course of business, our Company faces a variety of enterprise risks, including operational risks, cyber security risks and liquidity risk. In fulfilling its risk oversight role, the Board focuses on the adequacy of the Company's risk management process and overall risk management system. The Board believes an effective risk management system will (1) adequately identify the material risks that the Company faces in a timely manner, (2) implement appropriate risk management strategies that are responsive to the Company's risk profile and specific material risk exposures, (3) integrate consideration of risk and risk management into business decision-making throughout the Company and (4) include policies and procedures that adequately transmit necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee.

        The Board of Directors oversees the Company's strategic direction and its policies with respect to risk assessment and risk management, as well as major risk exposures and the process used to manage those exposures. Accordingly, the Board of Directors periodically reviews the risks associated with the various departments within the Company, in addition to its other duties. The Board of Directors receives information from Board committees, management and advisors regarding the Company's risk management process and system, the nature of the material risks the Company faces and the adequacy of the Company's policies and procedures designed to respond to and mitigate these risks.




Communication with the Board of Directors

        Stockholders may communicate with one or more members of the Board in writing by regular mail. The following address may be used by stockholders who wish to send such communications:

Board of Directors
c/o Secretary
Tuesday Morning Corporation
6250 LBJ Freeway
Dallas, Texas 75240

        Such communication should be clearly marked "Stockholder-Board Communication." The communication must indicate whether it is meant to be distributed to the entire Board, a specific committee of the Board or to specific members of the Board, and must state the number of shares beneficially owned by the stockholder making the communication. The Secretary has the authority to disregard any inappropriate communications. If deemed an appropriate communication, the Secretary will submit such stockholder's correspondence to the Chairman of the Board (on behalf of the Board) or to any specific committee, director or directors to whom the correspondence is directed.

Code of Business Conduct

        We have adopted a "Code of Business Conduct" that establishes the business conduct to be followed by all of our officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the "Senior Financial Officers"), and all of our employees and members of our Board and embodies the Company's principles and practices relating to the ethical conduct of the Company's business and its long-standing




commitment to honesty, fair dealing and full compliance with all laws affecting the Company's business. This policy is reviewed by the Board annually. Amendments to and waivers from the Code of Conduct with respect to the Senior Financial Officers will be posted on our website within four business days after approval by the Board. Any waiver from the Code of Conduct with respect to our Senior Financial Officers requires approval by the Board. There were no waivers from the Code of Conduct with respect to the Senior Financial Officers during the fiscal year ended June 30, 2018.2019. The Code of Conduct is available on the Company's website atwww.tuesdaymorning.com under "Investor Relations—Corporate Governance—Corporate Governance Documents".Documents."





MEETINGS AND COMMITTEES OF THE BOARD


Board of Directors

        Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board, committee and stockholder's meetings. During the fiscal year ended June 30, 2018,2019, the Board of Directors held seven meetings. Each of our directors attended more than 75% of the Board and committee meetings held during the fiscal year (or portion of the fiscal year during which he or she served as a director or committee member). Directors are encouraged to attend the Company's annual meeting of stockholders. All of the directors then serving on the BoardDirectors other than Ms. Smith, attended the Company's 20172018 Annual Meeting of Stockholders meeting held on November 15, 2017.29, 2018.

Committees of the Board

        The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. The committees are the Audit Committee, the Compensation Committee and the Nominating and Governance Committee.

Audit Committee

        For the fiscal year ended June 30, 2018,2019, the Audit Committee had three members and met eight times. Such members were Richard S Willis, as Chair, Frank M. Hamlin and James T. Corcoran, all of whichCorcoran. Mr. Slone joined the Committee in June 2019 upon his joining the Board. All Audit Committee members were non-employee directors and all of whom the Board has determined areall were independent pursuant to the applicable NASDAQ rules and satisfy the SEC requirements relating to the independence of audit committee members. The Board also determined that all the members of the Audit Committee had the ability to read and understand fundamental financial statements.

        For the fiscal year ended June 30, 2018,2019, the Board of Directors determined that Mr. Willis qualified as an "audit committee financial expert" as defined by applicable SEC rules and designated him as the Company's audit committee financial expert. The Board has adopted a charter for the Audit Committee, which is available on the Company's website atwww.tuesdaymorning.com under "Investor Relations—Corporate Governance—Corporate Governance Documents." The Audit Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

        The Audit Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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establish policies and procedures for reviewing and approving the appointment, compensation, retention and oversight of our independent registered public accounting firm;



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review and discuss with our independent registered public accounting firm, internal auditors and management the adequacy and effectiveness of the Company's system of internal controls;



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review the scope and results of our independent registered public accounting firm's audit of the Company's annual financial statements, accompanying footnotes and audit report;



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pre-approve all audit and permissible non-audit fees;



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review and discuss with management and the registered independent public accounting firm of the Company the annual and quarterly consolidated financial statements of the Company and related disclosures;



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review and discuss with management and the registered independent public accounting firm of the Company significant issues regarding accounting principles and financial statement presentations;





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review, approve and ratify related party transactions; and






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perform other functions or duties deemed appropriate by the Board.

        The Audit Committee has authority under its charter to retain any independent counsel, experts or advisors (accounting, financial, legal or otherwise) that the Audit Committee believes to be necessary or appropriate to assist in the fulfillment of its responsibilities. Audit Committee Meetings have been regularly attended by the Chairman of the Board and the Chief Executive Officer. At each meeting, the Audit Committee meets in executive session in which only independent directors are present. The Audit Committee also meets independently with the Company's independent registered public accounting firm.

Compensation Committee

        The Compensation Committee has three members and met 12seven times during the fiscal year ended June 30, 2018.2019. The Compensation Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules.

        For the fiscal year ended June 30, 2018,2019, the Compensation Committee was comprised of Sherry M. Smith, as Chair, Frank M. Hamlin and Barry S. Gluck. On October 4, 2017, Jimmie L. Wade, a director and member of the Compensation Committee, provided the Company with notice of his intention to retire and not to seek reelection as a director at the Company's 2017 Annual Meeting of Stockholders. After the Company's 2017 Annual Meeting of Stockholders, the Board appointed Barry S. Gluck to serve on the Compensation Committee. The Board adopted a charter for the Compensation Committee, which is available on the Company's website atwww.tuesdaymorning.com under "Investor Relations—Corporate Governance—Corporate Governance Documents." The Compensation Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

        The Compensation Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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review and approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluate the performance of our Chief Executive Officer in light of those goals and objectives, and determine the compensation of our Chief Executive Officer based on this evaluation;



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review and approve compensation and incentive arrangements (including any employment or severance agreements) for the executive officers of the Company;



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review and assess the results of any stockholder advisory vote with respect to the Company's executive compensation;



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administer the Company's equity incentive plans, including the review and grant of stock options and other equity incentive grants to directors, executive officers and other key employees of the Company; and



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perform other functions or duties deemed appropriate by the Board.

        The Compensation Committee also oversees the Company's stock ownership guidelines for non-employee directors and certain executive officers.

        Compensation Committee meetings have been regularly attended by the Chairman of the Board and the Chief Executive Officer. At each meeting, the Compensation Committee meets in an executive session in which only independent directors are present. None of the executive officers are present during voting or deliberations on his or her compensation.

        The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist in the fulfillment of its responsibilities. See "Executive Compensation—Compensation Discussion and Analysis—How Compensation Decisions Are Made—The Role of the Executive Compensation Consultant" below for




more information regarding the role of the compensation consultant utilized by the Compensation




Committee. Prior to engaging any such advisor, consultant or legal counsel, the Compensation Committee conducts an independence assessment of such advisor pursuant to NASDAQ rules and federal securities laws and regulations, but the Compensation Committee retains discretion to engage any such advisor, without regard to its independence, after considering the findings in such assessment. The Compensation Committee also reviews and discusses with the appropriate officers of the Company any disclosures required under federal securities laws and regulations regarding conflicts of interest with respect to such advisors.

Nominating and Governance Committee

        The Nominating and Governance Committee has four members and met four times during the fiscal year ended June 30, 2018.2019. The Nominating and Governance Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules.

        The Nominating and Governance Committee is currently comprised of Terry Burman, as Chair, Richard S Willis, Barry S. Gluck and James T. Corcoran. The Board adopted a charter for the Nominating and Governance Committee, which is available on the Company's website atwww.tuesdaymorning.com under "Investor Relations—Corporate Governance—Corporate Governance Documents." The Nominating and Governance Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

        The Nominating and Governance Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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evaluate and recommend to the Board from time to time as to changes that the Nominating and Governance Committee believes to be necessary, appropriate or desirable with respect to the size, composition, and functional needs of the Board;



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periodically review the Company's Certificate of Incorporation and Bylaws and make recommendations to the Board as they relate to corporate governance matters;



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develop and recommend to the Board specific guidelines and criteria for screening and selecting nominees to the Board, including any director nominations submitted by the Company's stockholders;



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provide oversight as to the identification, selection, and qualification of candidates for the Board, including interviewing and evaluating new candidates for the Board;



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recommend to the Board candidates for election or re-election as directors or to fill any vacancies on the Board;



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recommend to the Board candidates for appointment to the standing committees of the Board in accordance with the policies and principles in such committees' charters and taking into consideration such other factors as it deems necessary, appropriate or desirable;



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oversee and approve the management continuity planning process and make recommendations to the Board regarding CEO and other executive officer succession;



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periodically review and assess the Company's corporate governance principles and make recommendations to the Board for changes as deemed necessary, appropriate or desirable; and



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perform other functions or duties deemed appropriate by the Board.

        The Nominating and Governance Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist in the fulfillment of its responsibilities.





Executive Compensation

Compensation Discussion and Analysis


        This Compensation Discussion and Discussion Analysis provides a summary of our compensation policies, principalsprinciples and practices. More specifically, it presents a review and analysis of fiscal 20182019 earned compensation by our NEOs. This discussion analysis does include statements regarding Company and individual targets and goals which are disclosed in context of our compensation programs and are not intended to provide estimates of results or to provide other guidance.

Letter from Compensation Committee

Dear Fellow Stockholders:

        Our Board and Compensation Committee believe our executive management team is implementing and executing a strategic plan that positions the Company for long term success. Significant investments in our real estate and merchandise strategies, supply chain operations and marketing activities—while putting pressure on our operating income goals—are producing tangible results. We believe our improved financial performance shows the positive momentum of our strategic plan and the benefits it is providing to the Company.

        Our strong pay for performance philosophy is evidenced by the compensation realized by our executives for actual performance. Under the Annual Cash Incentive Plan, operating income performance exceeded expectations for the plan year, triggering a formulaic annual incentive payout for the first time since fiscal 2015. This is attributed to both an extraordinary focus on gross margin expansion and continued expense control as well as a modest increase in top line sales. However, comparable sales growth did not meet threshold level performance, resulting in no payout with respect to this performance metric. Further, the completion of our first three-year long-term performance share cycle (ending June 30, 2019) produced below threshold financial results, and no vesting occurred for our executive participants. Also, in fiscal 2019, as in 2018, the Compensation Committee again continued to grant long-term incentive awards of flat share amounts, equal to the same number of shares awarded in fiscal 2017 rather than returning to market-based dollar value grants of long-term incentive equity. For fiscal 2020, in an attempt to retrun to a more regular grant, the Compensation Committee approved equity grants for the NEOs at 65% of the regular grant value but still below the market-based dollar value LTI target award opportunity. The Compensation Committee took this approach because it believes the current market value of the Tuesday Morning stock is not reflective of the value of the Company and that the awards will provide the potential for substantial future value to participants based on the Company's performance.

As members of the Compensation Committee, we have establishedestablish and oversee an executive compensation program directly linked to performance and the creation of long-term value for our stockholders. The program is designed to reward performance linked to stockholder value and support executive recruitment, engagement and retention.

        Our pay-for-performance philosophy is evidenced by the payouts to our executives. As a result of our performance in fiscal 2018 and the strong emphasis that When establishing our executive compensation, program places on performance-based compensation, the actual compensation realized by our NEOs in fiscal 2018, as well as in fiscal 2017, was significantly lower than our target levelsCommittee follows a thoughtful and deliberate approach that includes analysis of compensation. In particular:

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our CEO and executive officers did not receive a base pay increase in fiscal 2018;



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our CEO and executive officers did not receive any payout under our short-term incentive programs;



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based on our fiscal 2018 performance, it is unlikely that our executive officers will receive any payout under the performance-based long-term incentive awards granted in fiscal 2018 or those granted in fiscal 2017. In addition, in fiscal 2018, as in fiscal 2017, the Compensation Committee chose to move from value-based dollar grants of LTI equity to flat share amounts equal to the same number of shares awarded in fiscal 2017. As a result CEO total compensation decreased by 39% from $2,100,796 in fiscal 2017 to $1,284,748 in fiscal 2018, as represented on the Summary Compensation Table. These decreased values of long-term equity awards have resulted in overall compensation levels to the NEOsqualitative and quantitative data points that are below market.

        While our financialmeant to balance business needs, individual and company performance in fiscal 2018 did not meet the threshold levels for payouts under our incentiveand compensation programs, our Board and Compensation Committee believe our executive management team is implementing and executing a strategic plan that is positioning the Company for long-term success. In fiscal 2018, we continued to implement our strategy of improving store locations and the in-store experience for our customers, which included (i) closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprints that are on average three to five thousand square feet larger, (ii) expanding some existing stores to a larger footprint, and (iii) improving the finishes in these relocated, new and expanded stores.

        We believe our improved performance over the Spring selling season shows the positive momentum of our strategic plan and the benefits it is providing to the Company. In 2018, our Compensation Committee carefully considered the challenges to maintaining this positive momentum, including the risks of attrition in the executive management team due to competitive pressures in the retail industry and competitive hiring pressures in the Dallas-Fort Worth area market, as well as the negative impacts on retention of continuing actual realized compensation being lower than target level




compensation for our executive officers and the significantly under water position of most outstanding long-term equity awards held by our executive team.

        In order to maintain our positive momentum and recognizing the significant benefits of continuity, our Compensation Committee, after consultation with its independent compensation consultant, has taken several actions. First, our Compensation Committee approved retention agreements with the members of our executive team (other than our Chief Executive Officer) that will provide additional payments in exchange for each such officer's agreement to remain employed through December 31, 2019, taking us through two critical peak seasons. Second, in connection with approving Mr. Becker's 2019 compensation, our Compensation Committee approved a one-time award to Mr. Becker, 50% of which will be paid in stock that will vest equally over four years and 50% of which will be paid in cash and will be payable only if the Company experiences substantial stock price appreciation. These decisions demonstrate the Compensation Committee's commitment to it philosophy of providing executive compensation arrangements that will attract and retain an executive team that will create long-term value for our stockholders while making a substantial portion of pay dependent on our performance.rewards.

        We held 12seven Compensation Committee meetings during fiscal 2018,2019, and the average Directordirector attendance at these meetings of our current Compensation Committee member was 100%. We are engaged and take our responsibilities seriously in establishing and overseeing the executive compensation program.

        We thank you for your continued support.




Compensation Committee Report

        The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement.

		THE COMPENSATION COMMITTEE Sherry M. Smith, Chair Frank M. Hamlin Barry S. Gluck




Fiscal 2018 Financial and Business Performance Review

        While certain areas of the retail industry continue to be challenged by external market pressures, Tuesday Morning continues to make both financial and operational progress on its key initiatives. We achieved a number of milestones during the past fiscal year and had positive inflections in our performance metrics. Some of our financial and business highlights for the fiscal year include:

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Net sales of $1.0 billion, an increase of 4.1% compared to fiscal 2017 net sales of $966.7 million despite a decrease in store count.



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Comparable store sales increased 3.9% compared to the same period a year ago. The increase in comparable store sales was comprised of an increase in customer transactions of 2.9% along with a 1.0% increase in average ticket. During the Spring Period, we had a 5.6% increase in comparable store sales.



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Gross profit for fiscal 2018 was $341.0 million, an increase of 6.3% compared to $320.7 million for fiscal 2017. As a percentage of net sales, gross margin increased to 33.9% in fiscal 2018 compared with 33.2% in fiscal 2017.



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Sales at the 45 stores relocated during the past 12 months increased approximately 58% on average for fiscal 2018 as compared to fiscal 2017 and contributed approximately 370 basis points of comparable store sales growth.



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The Company's operating loss for fiscal 2018 was $21.0 million, compared to an operating loss of $32.3 million for fiscal 2017. Our operating income for the Spring Period improved $14.6 million versus the Spring Period from the prior year. For fiscal 2018, our net loss was $21.9 million, or diluted net loss per share of $0.50 per share, compared to a net loss of $32.5 million, or $0.74 per share, in the prior year period.



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Adjusted EBITDA, a non-GAAP financial measure, was $9.6 million for fiscal 2018 compared to negative $2.8 million for fiscal 2017.

In a very competitive and challenging retail environment, we have been able to attract and retain a strong leadership team that has continued to be focused on making positive progress against our priorities:

Fiscal 2018 Priority		Summary of Objective
Financial Results		Achieve total sales projection
SG&A		Operate within the budget
Real Estate		Continue to drive performance in new and relocated stores while placing increased emphasis on legacy stores
Supply Chain		Continue to capitalize on efficiencies in distribution centers
Merchandising		Increase inventory turn; provide freshness in merchandise and brands
Marketing		Execute digital campaign; shift from print to digital

Our Compensation Philosophy

        The connection between pay and performance continues to be a primary focus of our compensation philosophy. Our executive compensation program is directly linked to performance and the creation of long-term value for our stockholders. The program is designed to reward performance linked to the creation of stockholder value and to support executive recruitment, engagement, and retention. A significant portion of the executives' total direct compensation is based on the Company's performance and improving stockholder value. This philosophy is reflected in the design of both our short-term cash incentive program and our long-term equity incentive program. We believe that




performance-based and equity compensation better aligns the interests of executives and stockholders. We aim to reward short-term financial performance achievements through our cash incentive program, while long-term value creation is incentivized through our long-term equity incentive program. In addition, we have stock ownership guidelines for executives to ensure direct alignment of incentives with stockholders.

        We consider a number of relevant factors when determining an individual executive's compensation package and manage total compensation around the median of the market as determined by analysis of our peer group and an evaluation of the broader retail industry. Our total compensation program is designed to attract and retain talented executives who are excited about and committed to our future success.

As a result of our performance in fiscal 2018 and the strong emphasis that our executive compensation program places on performance-based compensation, the actual compensation realized by our NEOs in fiscal 2018, as well as in fiscal 2017, was significantly lower than each individual executive's target compensation opportunity.

Compensation Governance for Fiscal 2018

What We Do & What We Don't Do


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Our commitment to good corporate governance practices and accountability to our stockholders is described below:

Compensation Governance—What We Do & What We Don't Do
✓		What We Do		What We Don't Do
​	​	​	​	​
✓		Annual "Say on Pay" vote		✗ No discretionary bonuses paid to NEOs when performance results are below threshold performance
✓		Pay for performance culture, with an emphasis on performance-based compensation		✗ No tax gross-up upon change-in-control
✓		Meaningful executive ownership guidelines that create a line of sight between stockholders and executive officers		✗ No re-pricing of stock options and no liberal share recycling
✓		Executive equity retention/holding requirements		✗ No across-the-board pay increases
✓		Manage compensation risk by using a variety of financial metrics in pay programs and capping payouts		✗ No formal non-qualified benefits or perquisite programs
✓		Restrict hedging and pledging activities and employ clawback policies		✗ No hedging or pledging of stock
✓		Use of independent compensation consultant reporting directly to the Compensation Committee





EXECUTIVE OFFICERS


Our Named Executive Officers (NEOs)

        OurFor fiscal 2019, our NEOs remained consistent fromincluded the following persons, reflecting the changes in our leadership team during the fiscal 2017 to fiscal 2018. Our NEOs were:year:

Named Executive Officer		Principal Position
Steven R. Becker		Chief Executive Officer and President
Stacie R. Shirley		Executive Vice President and Chief Financial Officer & Treasurer
Phillip D. Hixon		Executive Vice President, Store Operations
Trent E. Taylor		Chief Information Officer and Executive Vice President, Supply Chain and Inventory Management
Belinda J. Byrd-RohlederBridgett C. Zeterberg		SeniorExecutive Vice President Human Resources, General Counsel and General Merchandising ManagerCorporate Secretary

        Ms. Zeterberg was promoted to Executive Vice President in February 2019 in recognition of an increase in responsibility for the Human Resources, Loss Prevention and Risk Management functions.

        The following sets forth certain information about our executive officers, other than Mr. Becker, our Chief Executive Officer, whose biographical information is included above under "Proposal No. 1—Election of Directors."

Stacie R. Shirley

        Ms. Shirley, age 4950, has served as the Company's Executive Vice President and Chief Financial Officer and Treasurer since January 2016. Prior to joining the Company, Ms. Shirley served as an executive officer of Neiman Marcus Group LTD LLC, a luxury fashion retailer, serving as Senior Vice President, Finance and Treasurer from September 2010 until December 2015 and Vice President, Finance and Treasurer from December 2001 until September 2010. In her most recent position with Neiman Marcus Group, Ms. Shirley's areas of responsibility included finance, capital markets, and treasury operations, capital planning and forecasting, credit operations, investor relations, risk management and internal audit. Prior to joining Neiman Marcus Group, Ms. Shirley served in various capacities at CompUSA Inc. from 1993 to 2001, including serving as Vice President, Finance and Treasurer from 1999 to 2001. Ms. Shirley began her career as an accountant with Ernst & Young in 1990 and is a certified public accountant.

Phillip D. Hixon

        Mr. Hixon, age 64,65, has served as the Company's Executive Vice President, Store Operations since September 2015 and served as a member of the Office of Chairman from September 2015 until the dissolution of that office in December 2015. From June 2014 to September 2015, Mr. Hixon served as the Company's Senior Vice President, Store Operations, and from September 2013 to June 2014, Mr. Hixon served as the Company's Vice President, Store Planning. Prior to joining the Company, Mr. Hixon served as Vice President of Business Development of Merchco Services, Inc., a provider of retail store development and support services, from June 2012 until August 2013. From 2011 until 2012 and 2005 until 2006, Mr. Hixon owned and served as principal of Diversified Resources LLC, where he developed and implemented programs for clients in the areas of strategic planning, effective business practices, process enhancement and organizational effectiveness. From 2009 until 2011, Mr. Hixon served in the Department of Strategy and Innovation of Petco Animal Supplies Inc., a specialty retailer of pet supplies. From 2006 until 2009, Mr. Hixon held various executive positions with Duckwall-Alco Stores Inc., a retail chain, including Senior Vice President, Store Operations, Real Estate, Store Development and Senior Vice President, Merchandising. Mr. Hixon served as Vice President, Store




Development for Michaels Stores, Inc., a national arts and crafts specialty retailer, from 1987 until 2005.




Trent E. Taylor

        Mr. Taylor, age 61,62, has served as the Company's Chief Information Officer and Executive Vice President, Supply Chain and Inventory Management since March 2018. From June 2017 to February 2018, he served as the Company's Senior Vice President, Chief Information and Inventory Management Officer, from January 2017 to June 2017 as Senior Vice President, Chief Information Officer and Supply Chain Officer, and from April 2016 to January 2017 as the Company's Senior Vice President, Chief Information Officer. Prior to joining the Company, Mr. Taylor served as an executive officer of hhgregg, a retailer of consumer electronics and home appliances as Chief Information Officer from September 2011 until March 2016. From November 1992 until 2009, Mr. Taylor served in various roles for the Walgreen Company including Chief Information Officer and Executive Vice President of e-commerce.

Belinda J. Byrd-RohlederBridgett C. Zeterberg

        Ms. Byrd-Rohleder,Zeterberg, age 55,56, has served as the Company's Executive Vice President Human Resources, General Counsel and Corporate Secretary responsible for the Company's legal matters and oversight of the human resources, risk management and loss prevention functions since February 2019. From April 2017 to February 2019, she served as the Company's Senior Vice President Human Resources, General Counsel and Corporate Secretary. From July 2016 to April 2017, she served as the Company's Senior Vice President, General Merchandising Manager since January 2017Counsel and served as Vice President, Division Merchandising Manager from June 2015 until January 2017.Corporate Secretary. Prior to joining the Company, Ms. Byrd-RohlederZeterberg served as the Senior Vice President of Arden Companies from August 2012 until May 2014. From February 2010 until January 2012, Ms. Byrd-Rohleder served as the Senior Vice President, General Merchandise Manager for HomeCounsel and Hardlines at Shopko, a regional mass merchant. Prior to joining Shopko, Ms. Byrd-Rohleder was theCorporate Secretary of Zale Corporation, and as Senior Vice President, at HSN for Home and Apparel/Accessories from August 2006 to July 2008. Prior to joining HSN,General Counsel of Total Wine & More. Ms. Byrd-Rohleder held the role of VP/GMM of Soft Home for Sears Holdings (both Kmart and Sears companies) from May 2004 to August 2006. Prior to Sears Holdings, Ms. Byrd-RohlederZeterberg served in various roles with Kmart Corporation from 1994 to 2004,for hospitality company Accor North America including DivisionalVice President, Assistant General Counsel and Vice President of Soft HomeHuman Resources for the Motel 6 Division.

Fiscal 2019 Financial and Senior BuyerBusiness Performance Review

        While certain areas of numerous home businesses,the retail industry continue to be challenged by external market pressures, Tuesday Morning continues to make both financial and operational progress on its key initiatives. We achieved a number of milestones during the past fiscal year and had positive inflections in our performance metrics. Some of our financial and business highlights for the fiscal year include:

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For fiscal 2019, net sales slightly exceeded $1.0 billion, consistent with fiscal 2018 net sales of $1.0 billion. Comparable store sales (stores open at least five quarters, including Home Textiles, Housewaresstores relocated in the same market and Furniture.renovated stores) increased 0.4%. The increase in comparable store sales was comprised of an increase in customer transactions of 0.9% and was partially offset by a decrease in average ticket of 0.5%. Sales at the 12 stores relocated during the past 12 months increased approximately 49% on average for fiscal 2019 as compared to last year and contributed approximately 160 basis points of comparable store sales growth.



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Cost of sales, as a percentage of net sales, for fiscal 2019 was 65.0%, compared to 66.1% for fiscal 2018.



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Selling, general and administrative expenses (SG&A) increased $0.9 million to $362.8 million from $361.9 million for fiscal 2019.



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Our operating loss for fiscal 2019 was $10.5 million compared to an operating loss of $21.0 million for fiscal 2018. Our net loss for fiscal 2019 was $12.4 million, or diluted net loss per share of $0.28, compared to a net loss for fiscal 2018 of $21.9 million, or diluted net loss per share of $0.50.




•

EBITDA, a non-GAAP measure, was $16.4 million for fiscal 2019, compared to $5.6 million for fiscal 2018. Adjusted EBITDA, a non-GAAP measure, was $20.0 million for fiscal 2019 compared to $9.6 million for fiscal 2018.



•

Inventory levels at June 30, 2019 increased $3.5 million to $237.9 million from $234.4 million at June 30, 2018. Inventory turnover for the trailing five quarters as of June 30, 2019 was 2.7 turns, compared to the trailing five quarter turnover as of June 30, 2018 of 2.8 turns.



•

Outstanding borrowings, net of cash and cash equivalents, improved as compared to the prior year. Cash and cash equivalents at June 30, 2019 increased $1.9 million to $11.4 million from $9.5 million at June 30, 2018. We had borrowings of $34.7 million under our revolving credit facility as of June 30, 2019, and borrowings of $38.5 million at June 30, 2018.

        In a very competitive and challenging retail environment, we have attracted and retained a strong leadership team that has continued to be focused on making positive progress against our priorities:

Fiscal 2019 Priority		Summary of Objective
Financial Results		Achieve total sales projection
SG&A		Operate within the budget
Real Estate		Continue to drive performance in new and relocated stores while placing increased emphasis on legacy stores
Supply Chain		Continue to capitalize on efficiencies in distribution centers
Merchandising		Drive improved inventory turn; provide freshness in merchandise and brands; and improve markdown management
Marketing		Execute digital campaign; shift from print to digital

Our Compensation Philosophy

        Our overall executive compensation philosophy and approach has been consistent for years. It is reflective of our Core Values and the strategic objectives of the business. We are passionate about the deal. We are welcoming to all. We are resourceful and do more with less. We are open and honest. And, we are driven to continuously improve.

        Our goal is to pay our leadership team for the creation of long-term value for our stockholders. Accordingly, both our short-term and long-term incentive plans include only financial metrics. Therefore, a significant portion of the executives' total direct compensation is pay-at-risk tied to the Company's actual financial performance and to improving stockholder value. We believe that performance based annual incentives and long-term equity compensation better align the interests of executives and stockholders.

        We aim to reward short-term financial performance achievements through our cash incentive program, while long-term value creation is incentivized through our long-term equity incentive program. In addition, we have stock ownership guidelines for executives to ensure direct alignment of executives with stockholders.

        We consider a number of relevant factors when determining an individual executive's compensation package and manage total compensation around the median of the market as determined by analysis of our peer group and an evaluation of the broader retail industry. Our total compensation program is designed to attract and retain talented executives who are excited about and committed to our future success.




Compensation Governance for Fiscal 2019

What We Do & What We Don't Do


        Our commitment to good corporate governance practices and accountability to our stockholders is described below:

✓		What We Do		✗ What We Don't Do
​	​	​	​	​
✓		Annual "Say on Pay" vote		✗ No discretionary bonuses paid to permanent NEOs when performance results are below threshold performance
✓		Pay for performance culture, with an emphasis on performance-based compensation		✗ No tax gross-up upon change-in-control
✓		Meaningful executive ownership guidelines that create a line of sight between stockholders and executive officers		✗ No repricing of stock options and no liberal share recycling
✓		Executive equity retention/holding requirements, clawback policy		✗ No across-the-board pay increases
✓		Manage compensation risk by using a variety of financial metrics in pay programs and capping payouts		✗ No formal non-qualified benefits or perquisite programs
✓		Regular review of share utilization		✗ No hedging or pledging of stock
✓		Use of independent compensation consultant		✗ No pension or executive SERP

How Compensation Decisions are Made

        TheOur Compensation Committee which is comprised solelyconsists of three independent directors, overseesdirectors. As members of the developmentCommittee, we have established and administration of ouroversee an executive compensation programs.program directly linked to performance and the creation of long-term value for our stockholders. The Compensationprogram is designed to reward performance linked to stockholder value and support executive recruitment, engagement and retention.

        While overseeing the program and making compensation decisions, the Committee considers financialfollows a thoughtful and strategic achievementsdeliberate approach that includes a number of qualitative and quantitative data points reviewed each year that are meant to balance business needs, individual and company performance and compensation rewards. Our annual process includes:

•

review of annual and long-term business plan and strategy;



•

review of Company results against businessprior year performance goals and plans in its annual alignment of pay and performance;



•

determination of upcoming year compensation program metrics and performance levels;



•

review of total executive compensation programs and practices relative to market trendsbenefits benchmarking;



•

review of peer group benchmarking;



•

completion of compensation risk assessment; and practices, as well as to the Company's performance.





•

ongoing feedback from stockholder outreach.




        The Compensation Committee establishes the design of all executive pay programs, including those for our Chief Executive Officer. The Compensation Committee assesses market data and competitive practices, reviews and approves individual executive annual pay targets, sets financial and business metrics for performance-based plans, reviews results and approves final payout levels for executive officers.

The Role of the Executive Compensation Consultant

        The Compensation Committee has an independent executive compensation consultant that reports directly to the Committee. The Committee has the authority to retain, terminate, compensate and oversee any compensation consultant or other advisors to assist the committeeCommittee in the discharge of its responsibilities.

        The Korn Ferry Hay Group had been providing executive compensation consulting services to the Compensation Committee of the Board since December 2013. InSince February 2018, following a request for proposal, the Committee has engaged Willis Towers Watson to provide executiveas its outside compensation consulting services.consultant. For fiscal 2019, Willis Towers Watson has significant retail experience to help benchmark and position our




executive compensation programs to ensure they are competitive, performance-based, compliant and cost-effective. Since that time, Willis Towers Watson has assisted the Compensation Committee with:

•

advice and analysis on the design, structure and level of executive compensation; focused heavily on long-term incentive compensation;



•

review of market survey and proxy compensation data for benchmarking;



•

advice on the external retail environment executive retention issues and evolving compensation trends;



•

peer group review and analysis; and



•

review of current and past retail practices for delivering performance-based pay in a challenging environment; and



•

assistance with continuing tax and regulatory compliance and changes regarding compensation matters.environment.

        Willis Towers Watson will also be involved in the analysis of the design, structure and level of the non-employee director compensation program, when requested.

        Following a review of the independence of Willis Towers Watson, the Compensation Committee concluded that no conflict of interest exists with respect to the work of Willis Towers Watson. Willis Towers Watson did no other work with the Company in fiscal 2019. The Compensation Committee has a policy that states that any projects done with Willis Towers Watson outside of board and executive compensation activities must be reviewed and approved by the committee.Committee.

        As compensation consultants, Willis Towers Watson representatives attend theall Compensation Committee meetings, including executive sessions.sessions and are available to the Compensation Committee on an ongoing basis. Although the compensation consultants to the Compensation Committee work with our management on various matters for which the Compensation Committee is responsible, our management does not direct or oversee the retention or activities of Willis Towers Watson. During fiscal 2018, a total of $61,168 was paid to Korn Ferry Hay Group and a total of $26,622 was paid to Willis Towers Watson. All of these costs have been paid to these firms as the Compensation Committee's compensation consultant in fiscal 2018.

The Role of Management

        In reviewing and making compensation decisions, the Compensation Committee also relies on the CEO's view of the business, people strategy and the performance of other senior leaders. However, the CEO has no role in setting his own compensation package. Certain members of our management meet periodically with Willis Towers Watson consultants at the direction of the Compensation Committee to ensure the consultants have the information they need to advise the Compensation Committee. The compensation consultant works directly with the Compensation Committee on CEO compensation.

Stockholder Support of Fiscal 20172018 Advisory Vote on Executive Compensation

        At our November 20172018 annual stockholders' meeting, 96.9%99.5% of our stockholders who voted on our "Say on Pay" advisory proposal voted in favor of our executive compensation program, up from approximately 88%97.4% in the prior year. Although the advisory stockholder vote on executive compensation is non-binding, the Compensation Committee takes the results of the stockholder vote into consideration when determining its approach to future compensation decisions. We look forward to continued feedback on compensation matters and other issues relevant to our business.




Our Use of Compensation Peer Group Analysis

        We generally review peer group information in making compensation determinations. In fiscal 2018,2019, the Compensation Committee conducted a comprehensive review of our peer group to assure




that it provides a relevant comparison to the market. The Compensation Committee considered a number of factors in determining the appropriate peer group including:

•

similar size in terms of revenue (1/2x to 2x our revenue),;



•

financial performance (market capitalization, profitability, and gross margin),; and



•

business model (e.g., retail, hard goods retail, household goods retail, and off-price retail, number of stores, number of employees).

        Companies may still be considered for inclusion in the peer group even if they do not meet all of the criteria. The Compensation Committee, with advice from Willis Towers Watson, elected to make the followingno changes to our peer group in fiscal 2018:

Company		Action
At Home Group, Inc.		Add
Citi Trends, Inc.		Add
Fred's, Inc.		Remove

2019. Our currentfiscal 2019 peer group includes the following 16 companies:is:

Fiscal 20182019 Peer Group
At Home Group, Inc.		Ollie's Bargain Outlet Holdings, Inc.
Big 5 Sporting Goods Corporation		Pier 1 Imports, Inc.
Citi Trends, Inc.		Restoration Hardware
Five Below, Inc.		Shoe Carnival, Inc.
Haverty Furniture Companies, Inc.		Stage Stores, Inc.
Hibbett Sports, Inc.		Stein Mart, Inc.
Kirkland's, Inc.		The Cato Corporation
La-Z-Boy Incorporated		Vitamin Shoppe, Inc.

Fiscal 20182019 Compensation Program and Payouts

Summary

•

        Our top priorities continued to be focused on making financial investments in the business and to create operational improvements to our processes and procedures in order to create sustainable profitability. As a result, for fiscal 2019 there was clear alignment between compensation received, and the financial outcomes of the business. The Compensation Committee confirmed the fiscal 20182019 market position of our base salary, short-term cash incentive opportunity and long-term equity incentive awards to be generally at the median of the market.



•

Due to the granting of flat share long-term incentive awards equal to those granted in fiscal 2017 and fiscal 2018, long-term incentive compensation grant values are significantly below median of the market.

In fiscal 2017, our compensation program showed strong alignment between actual pay and performance. Therefore, consistent with fiscal 2017, in fiscal 20182019, we continued to provide the same three basic elements of executive compensation, consisting of base salary, short-term incentive cash compensation and long-term equity compensation, with limited changes other than those business considerations and initiatives, as discussed below.



•

Our top priorities continued This simplified approach to be focused on making financial investments in the businesscompensation provided motivation and to create operational improvements to our processesclear line of sight between actions and procedures in order to create sustainable profitability. As a result, for fiscal 2018 the majority of the compensation programs.

results.




objectives and pay practices aligned pay with actual Company financial and operational performance.

•

While we are focused on delivering on our initiatives and continue to make positive progress, our fiscal 2018 financial operating income        A summary of those results did not meet the threshold performance required to result in a payout under the short-term annual cash incentive program. Therefore, consistent with our pay-for-performance philosophy, no short-term incentive bonuses were paid to NEOs.

follows:

Element of Compensation		FY2019 Action
Annual Base Salary		Generally, NEO compensation increases approximated the merit budget guidelines of 2.5% approved for all employees. Based on the results of the annual Executive Compensation Assessment study provided by Willis Towers Watson, the base salary for the Executive Vice President, Human Resources, General Counsel and Corporate Secretary lags the market base salary rates for similar positions at peer competitors. As a result, Ms. Zeterberg was given a market base salary adjustment, inclusive of merit, to $350,000.
Annual Cash Incentive Plan		In addition, each NEO's annual cash incentive award opportunity was based on achievement of operating income goals (80% of total) and the achievement of approved comparable sales growth percent (20% of total). At the close of the fiscal 2019 measurement period, the threshold level of comparable sales growth was not achieved, therefore no payout was earned for that metric. Operating income actual performance was 170% of target resulting in an overall annual incentive plan earned payout of 136% of target.
Equity Award Grants		Because the Company continues to believe that the current market value of our stock is undervalued, for the fiscal year 2019 grant, all participants, including Board members, received the same number of shares, based on organization level, which they received with the fiscal year 2017 and 2018 grants. The Compensation Committee also retained the performance based equity portion of the LTI awards for the CEO, CFO, Executive Vice Presidents and Senior Vice Presidents. All NEOs received a performance based LTI equity award opportunity measured over a 36-month performance period (with a maximum opportunity for performance above target level), tied to overall Company EBITDA, as adjusted.
		The completion of our first long-term performance share cycle that began on July 1, 2016 and concluded on June 30, 2019 produced below threshold adjusted EBITDA financial results for the 36-month measurement period; therefore, no performance share awards for that cycle vested.

Pay Mix

        Our executive pay programs place a significant portion of the executive's total compensation at risk based on performance. As was disclosedpreviously discussed, in the 2017 annual meeting proxy statement,fiscal 2018 the Compensation Committee chose to move from value-based dollar grants of LTI equity to flat share amounts equal to the same number of shares awarded in fiscal 2017. The Compensation Committee took2017 and continued this approach because it believesin fiscal 2019. Despite the current market value ofcontinued flat-share approach to LTI granting practices, the Tuesday Morning stock is not reflective of the value of the Company and that the awards will provide the potential for substantial future value to participants based on the Company's performance. As a result, the grant date fair values of the fiscal 2018 awards granted to participants were significantly less than the grant date fair values of the fiscal 2017 awards. The NEO total compensation pay-at-risk ratio is significant despite the change in LTI grant practice.

significant. The charts below represent the targeted mix of pay between base salary, short-term and




long-term incentives, exclusive of the one-time retention agreements, for our CEO and other NEOs for fiscal 2018:2019:



Components of Compensation

Base salary

        Upon hire, a Tuesday Morning executive's base salary level is determined using a combination of internal and external factors. Generally, an executiveIndividual base salary offer is evaluated near the median valuelevels are designed to reward experience, retail knowledge, duties and scope of the job in the market based on our peer group. This amount may be adjusted based on the executive's experience and based on the internal equity of peer jobs within the Company.responsibility.

        Since we keep a significant percentage of compensation at risk, subsequent base salary increases are generally based on annual market movement and individual performance. Base salary may be reviewed at promotion or based on a change in responsibility. The Compensation Committee receives input from the Board of Directors regarding our CEO's performance, and the Committee receives input from the CEO on the other NEOs' performance.




        Based upon the factors described above, at the annual merit review in September 2017,2018, the Compensation Committee did not approvegenerally awarded merit pay increases forconsistent with the NEOs. This decision was primarily duemerit budget guidelines provided to the financial performance of the Company during fiscal 2017.our broad-based employee population.

Named Executive Officer		Fiscal 2017 Annual Base Salary			Fiscal 2018 Annual Base Salary			Percent Increase				Fiscal 2018 Annual Base Salary			Fiscal 2019 Annual Base Salary			Percent Increase
Steven R. Becker		$	717,500		$	717,500			0	%		$	717,500		$	735,500			2.5	%
Stacie R. Shirley		$	404,167		$	404,167			0	%		$	404,167		$	415,000			2.7	%
Phillip D. Hixon		$	306,000		$	306,000			0	%		$	306,000		$	314,000			2.6	%
Trent E. Taylor		$	340,000		$	350,000			2.9%	*		$	350,000		$	360,000			2.9	%
Belinda J. Byrd-Rohleder		$	270,000		$	270,000			0	%
Bridgett C. Zeterberg												$	305,000		$	350,000			14.8	%*

---

*

In March 2018, Mr. Taylor'sMs. Zeterberg received a market adjustment increasing her base salary increased from $340,000$305,000 to $350,000 in connection with his promotion to Chief Information Officer and Executive Vice President Supply Chain and Inventory Management in light of hisher increased scope of responsibility.

Annual Cash Incentive Plan

        Our NEOs were not paid bonuses for fiscal 2018.        The Annual Cash Incentive Program is designed to recognize short-term operational and financial performance. The annual cash incentive is completely at risk and results are 100% formula driven. The individual target award opportunity levels are determined based on guidance from our independent compensation consultant's annual total compensation survey using external market data for comparable positions at our peer companies and in the market. Earned incentives are paid in cash at the end of




the performance period. The executive must be employed by usthe Company at the time the awards are paid to earn an award.

        Under the fiscal 20182019 Annual Cash Incentive Plan, participants had the opportunity to earn a target bonus payout as a percentage of incentive-eligible base salary. For fiscal 2018,2019, the Compensation Committee determined that each NEO's annual cash incentive payments would be based on achievement of adjusted operating income goals (80% of total) and achievement of certain strategic and personal objectives importantcomparable sales percent growth (20% of total). Comparable sales growth was defined as the Company's percent increase in same store sales over last fiscal year for the Companyperiod beginning July 1, 2018 and ending June 30, 2019. An operating income hurdle of ($20.9M) was required to achieve its business planearn a payout under the comparable sales metric (20% of total). Actual earned awards could range from 0% to a maximum of 200% of their target award opportunity. The Committee also established that all annual cash incentive payments would be subject toactual payout percentage is interpolated on a minimum operating income performance hurdle. Executive payments are based onstraight line basis for points in between threshold target, and maximum operating income targets as well as strategic and personal objective performance levels and are subject to reduction at the discretion of the Compensation Committee.performance.

Weighting		Metric
80%		Operating Income, as adjusted
20%		Strategic and Individual ObjectivesComparable Sales Percent

 


		Threshold Performance Level (in millions)			Target Performance Level (in millions)			Maximum Performance Level (in millions)
Operating Income, as adjusted		$	(17,100,000	)	$	(10,800,000	)	$	(7,300,000	)

		Threshold Performance Level (in millions)			Target Performance Level (in millions)			Maximum Performance Level (in millions)			Actual Results
Operating Income, as adjusted		$	(19,100,000	)	$	(12,700,000	)	$	(9,500,000	)	$	(10,525,000	)
Comparable Sales Percent			2.4	%		4.4	%		6.4	%		0.4	%

        In addition to the Operating Income metric, the fiscal 2018 Annual Cash Incentive Plan included three strategic financial and operational goals that required support from all leadership team members in order to achieve the business plan. Specifically, the three strategic metrics were related to strategic real estate activities, managing supply chain costs such as distribution expense and domestic freight in/freight out and SG&A expense control. One to three individual metrics, specific to each executive, were also established to measure contributions on an individual level. Threshold and target levels of performance were created for each strategic and individual goal. The strategic and individual goals sum




to 20% of the total cash incentive opportunity; however, such amounts were payable only if the minimum Operating Income threshold was satisfied.

        The individual annual cash incentive level as a percent of annual base salary for the current NEOs for fiscal 20182019 was:

		Fiscal 2019 Individual Annual Cash Incentive Level as a Percent of Base Salary
Named Executive Officer		Threshold Performance Level			Target Performance Level			Maximum Performance Level
Steven R. Becker			25	%		100	%		200	%
Stacie R. Shirley			15	%		60	%		120	%
Phillip D. Hixon			15	%		60	%		120	%
Trent E. Taylor			15	%		60	%		120	%
Bridgett C. Zeterberg*			13	%		53	%		107	%

---

		Fiscal 2018 Individual Annual Cash Incentive Level as a Percent of Base Salary
Named Executive Officer		Threshold Performance Level			Target Performance Level			Maximum Performance Level
Steven R. Becker			25	%		100	%		200	%
Stacie R. Shirley			15	%		60	%		120	%
Phillip D. Hixon			15	%		60	%		120	%
Trent E. Taylor			11.25	%		45	%		90	%
Belinda J. Byrd-Rohleder			11.25	%		45	%		90	%

        In connection with his

*

Ms. Zeterberg's promotion to Chief Information Officer and Executive Vice President Supply Chain and Inventory Management in March 2018, Mr. Taylor'sFebruary 2019 will result in a proration of her target level bonus opportunity was increased to 60% of his base salary and his maximum level bonus opportunity was increased to 120% of his base salary.

award percent based on her promotion date.

Performance under Fiscal 20182019 Plan

        The Company's operating loss for fiscal 20182019 was $20,950,000. As$10,525,000 which resulted in a payout at 170% of target for that metric. The comparable sales percent metric did not reach threshold performance,




thus no payout was awarded for that objective. The overall weighted payout performance for the plan year was 136% of target.

		Fiscal 2019 Individual Annual Cash Incentive Level as a Percent of Base Salary
Named Executive Officer		Threshold Performance Level			Target Performance Level			Maximum Performance Level			Actual Payout %			Actual Payout $
Steven R. Becker			25	%		100	%		200	%		136	%	$	1,000,280
Stacie R. Shirley			15	%		60	%		120	%		81.6	%	$	338,640
Phillip D. Hixon			15	%		60	%		120	%		81.6	%	$	256,224
Trent E. Taylor			15	%		60	%		120	%		81.6	%	$	293,760
Bridgett C. Zeterberg*			13	%		53	%		107	%		73	%	$	257,833

---

*

Ms. Zeterberg's promotion in February 2019 will result bonus dollarsin a proration of her target award percent based on the company financial and strategic individual objectives were not funded and no short-term incentives were paid to NEOs for fiscal 2018 because threshold performance was not achieved.

		Fiscal 2018 Individual Annual Cash Incentive Level as a Percent of Base Salary
Named Executive Officer		Threshold Performance Level			Target Performance Level			Maximum Performance Level			Actual Payout
Steven R. Becker			25	%		100	%		200	%		0	%
Stacie R. Shirley			15	%		60	%		120	%		0	%
Phillip D. Hixon			15	%		60	%		120	%		0	%
Trent E. Taylor			11.25	%		45	%		90	%		0	%
Belinda J. Byrd-Rohleder			11.25	%		45	%		90	%		0	%

her promotion date.

Long-Term Equity Incentives

        Our long-term equity incentive program ("LTI") is intended to align NEO interests with stockholders, drive decisions that result in sustained long-term financial and operational performance, and retain key executive talent. Our LTI Plan for fiscal 20182019 included the following:

•

September annual grants, consistent with our total compensation philosophy which allows the timing of the annual base salary review for merit adjustments, results from the annual incentive plan, and equity grants for the upcoming year to be communicated after the completion of our fiscal year.



•

Beginning in fiscal 2017, the LTI equity program for senior leadership was enhancedupdated to include performance-based restricted stock awards. The Compensation Committee remains committed to having a portion of the annual LTI equity grant for senior leadership tied to performance in addition to time-based awards. Therefore, the fiscal 20182019 cycle of the LTI program for executives again included a 36-month performance cycle and is measured on total 3-yearthree-year EBITDA results




at the end of the performance cycle. In addition, there is a +3% Comp Salescomparable sales modifier which may be applied at the end of the cycle. If overall Comp Salescomparable sales results are less than 3%, there will be a 25% reduction in earned performance-based RSAs.

•

Under the fiscal 20182019 LTI Program, the flat shares awarded were the same as the FY2017 mix of time-based to performance-based restricted awards were:

Annual Cash Incentive Plan

        Under the annual cash incentive plan for fiscal 2019 Annual Cash Incentive Plan,2020, participants will continue to have the opportunity to earn a target bonusannual incentive payout as a percentage of incentive-eligible base salary. For fiscal 2019,2020, the Compensation Committee determined that each NEO's annual cash incentive payments will continue to be based on achievement of adjusted operating income goals (80% of total) and achievement of overall comparable sales growth (20% of total). Actual earned awards can range from 0% to a maximum of 200% of their target award opportunity. Executive payments will be based on threshold, target and maximum Operating Income and Comparable Sales Growth Percentage, and are subject to reduction at the discretion of the Compensation Committee.Percentage.

        The individual annual cash incentive level as a percent of annual base salary for the NEOs for fiscal 2020, has not changed from fiscal 2019 and will be as follows:

Annual LTI Program Equity Award Grants

        For fiscal 2019,2020, in an attempt to return to a more regular grant, the Compensation Committee granted the same number of sharesapproved equity grants for the CEO as the previous year. While these awards have a lesser grant date value, the Compensation Committee took this approach because it believed the current market valueNEOs at 65% of the regular grant value, but still below the market-based dollar value LTI target award opportunity. In addition, for the fiscal 2020 grant, for executives other than the CEO, the Committee approved a performance cash component to the long-term incentive program which will be tied to 36-month EBITDA performance, as adjusted. The objective of adding a cash component to the long-term incentive program, in addition to time-based restricted stock did not reflectawards, is to provide competitive pay opportunities for executives while adhering to our long-term value creation strategy while minimizing dilution. Replacing performance-based awards with the valueperformance cash component continues to require the achievement of pre-established adjusted EBITDA results over a cumulative three-year period through the Company and that theend of fiscal 2022.

        Non-CEO NEOs long-term incentive awards will provide the potential for a substantial increasecontain 50% time-based restricted stock awards vesting over four years in future value based on the Company's performance. The Committee expects25% increments per year and 50% performance cash awards tied to return to making grants with a higher grant date value in the near future.

        In order to continue to align executive rewards with stockholder value the Compensation Committee maintained performance-based equity awards for the CFO, EVPs and SVPs. The performance-based equity award program better aligns each NEO's equity portfolio with that of the stockholders. For fiscal 2019, all NEOs have a performance-based LTI equity award opportunity measuredEBITDA over a 36-month performance period (with a stretch opportunity for performance above target level), tied to overall Company EBITDA as adjusted, subject to reduction of payouts by the Compensation Committee in its discretion.measurement period.

        The CEO was granted 50% performance-based restricted stock awards at target performance and 50% time-based non-qualifiedrestricted stock options. The other NEOs were granted a mix of performance shares, time-based non-qualified stock options and time-based stock grants. Each of the performance-based awards includes an additional stretch opportunity for performance above target level.awards. The Compensation Committee approved the following equity grant guidelines for fiscal year 2019:2020:

Supplemental CEO Equity Award

        In September 2018, the Compensation Committee approved a one-time supplemental long term incentive award to the CEO. The award was valued at $1.5 million on the date of grant and is comprised of a 50% one-time cash award rewarding significant stock price appreciation over a 36-month performance period and 50% time-based Restricted Stock Units (230,770 units) vesting over

4 years at 25% per year beginning on the first anniversary of the grant. The ultimate value of both components of this award to our CEO is directly connected to our stock price and provides further incentive to drive performance that directly impacts shareholder value creation. After carefully considering alternatives, and with the advice of its independent executive compensation consultant, the Compensation Committee selected this specific blend of long-term award because it properly reflected the Company's philosophy to ensure continuity of its leadership team and direct the talents of that team towards long-term shareholder value creation.

Additional Compensation Governance Policy and Practices

Compensation Program Risk

        As part of its oversight of our executive pay programs, the Compensation Committee considers the impact of our compensation programs and the incentives created by the potential compensation rewards that it administers on our risk profile. In addition, we review all of our existing compensation policies and plans to determine whether they present a significant risk. Some of the factors included in this review are:

•

Board and Committee oversight;



•

Mix of fixed and variable compensation pay components.components;

•

Use of performance-based metrics in short-term and long-term equity incentive plans.plans;



•

Use of relatively smooth performance ranges around target without steep payout cliffs that might encourage inappropriate short-term business decisions in order to achieve a payout;



•

Rewards tied to our total results.formulaic results;



•

Caps on potential compensation earnings.earnings;



•

Stock vesting schedules.schedules;



•

Adoption of stock ownership requirements.requirements;



•

Use of independent compensation consultant; and



•

Adherence to company policies, internal controls, and risk management guideline.

Based on this review, we have concluded that our compensation policies and plans are not reasonably likely to have a material adverse effect on us.effect.

Compensation Committee Interlocks and Insider Participation

        None of the persons who served on our Compensation Committee during the last completed fiscal year (Sherry M. Smith, Frank M. Hamlin and Barry S. Gluck and Jimmie L. Wade)Gluck): (i) was formerly an officer of the Company; (ii) during the last fiscal year, was an officer or employee of the Company; or (iii) had any relationship requiring disclosure under Item 404 of Regulation S-K. None of our executive officers served as a member of the compensation committee or similar committee or as a member of the board of directors of any other entity one of whose executive officers served on the Compensation Committee or as a member of the Board of Directors of the Company.

Stock Ownership Guidelines and Retention/Holding Requirements for Executives and Non-Employee Directors

        The Compensation Committee adopted stock ownership requirements for our NEOs and non-employee directors in 2014. The2014 which have been updated in 2015 and 2019. These guidelines are intended to encourage the investment by our directors and NEOs in the Company and to promote a long-term perspective in managing the company.

        A NEO's or non-employee director's minimum stock ownership value is calculated using his or her then current retainer or base salary. In order to reduce the impact of stock price fluctuation on a participant's ongoing obligation to achieve and maintain compliance with the guidelines, which are aligned with typical market practice by level, are shown below and generally mustthe value of the participant's holdings, as of any assessment date, will be achieved within five yearsbased on the greater of becoming subjectthe closing price of the Company's stock on the last trading day prior to the policy.assessment, or the following:

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with respect to shares of Company stock purchased on the open market, the cost of such shares,



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with respect to restricted shares acquired under any Company stock incentive plan, the fair market value (as defined under the applicable stock incentive plan) on the date of grant, and



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with respect to shares acquired under stock options, the fair market value at the time of exercise of the option.

        Once a participant has met the applicable ownership guideline, the number of shares a participant is expected to hold to meet the guideline remains fixed, and fluctuations in market value of the Company's shares do not increase or decrease the number of shares needed.

        For purposes of calculating stock ownership, the following sources may be included:

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shares of common stock owned outright by the non-employee director or officer, as well as stock owned by his or her immediate family members residing in the same household;



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shares of common stock held in trust for the benefit of the non-employee director or officer, as well as his or her family;



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unvested restricted stock or restricted stock units;



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if applicable, shares of common stock held pursuant to deferred compensation arrangements; and



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if applicable, shares purchased with amounts invested in the Company's retirement plans, including, without limitation, the 401(k) plan and any employee stock purchase plan.

Unexercised options and unearned performance shares are not counted toward stock ownership requirements.

Stock Retention/Holding Requirements

        If an NEO or non-employee director has not met the stock ownership requirement, such NEO or non-employee director must retain 50% of the net shares (after cashless exercises of options and the payment of any applicable tax liability related to equity grants by the Company) of the vested long-term incentive plan shares or annual equity retainer awarded to the NEO or non-employee director. The NEO or non-employee director may sell Company stock acquired by exercising stock options to payfor the limited purpose of paying the exercise price of the stock option and may sell shares to pay any applicable tax liability related to equity grants by the Company.

        Each of our directors and executive officers is in compliance with these requirements. Certain directors and executive officers have satisfied the minimum ownership levels and all other directors and executive officers are in compliance with the retention and holding requirements.

Clawback Policy

        The Company may recoup all or any portion of any shares or cash paid to a participant in connection with an award, in the event of a restatement of the Company's financial statements as set forth in the Company's clawback policy, approved by the Board.

Anti-Hedging and Anti-Pledging Policies

        We have an anti-hedging policy that prohibits the NEOs, the Company's Board of Directors and other Company employees from hedging against a decrease in the value of the Company's stock. Under the policy, the NEOs are prohibited from purchasing any financial instruments designed to offset decreases in the market value of the Company's stock. During fiscal 2018,2019, all NEOs were in compliance with this policy.

        The Company has also adopted an anti-pledging policy that prohibits the NEOs, the Company's Board of Directors and other Company employees from holding the Company's stock in a margin account or otherwise pledging the Company's stock as collateral for a loan. None of the NEOs pledged any Company stock in fiscal 2018.2019.

SUMMARY COMPENSATION TABLE

        The table below summarizes the total compensation of each of the NEOs for the fiscal year ended June, 30, 2018,2019, June 30, 20172018 and June 30, 2016.2017.