Buffalo Wild Wings DEF 14A 2016
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Statement Pursuant to Section 14(a) of
BUFFALO WILD WINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF BUFFALO WILD WINGS, INC.:
You are cordially invited to attend our 2016 Annual Meeting of Shareholders, to be held at the Sheraton Minneapolis West, 12201 Ridgedale Drive, Minneapolis, MN 55305, at 9:00 a.m. Central Daylight Time on Thursday, May 12, 2016, for the following purposes:
Accompanying this Notice of Annual Meeting is a Proxy Statement, form of Proxy, and our Annual Report on Form 10-K for the year ended December 27, 2015.
Only shareholders of record as shown on our books at the close of business on March 14, 2016 will be entitled to vote at our 2016 Annual Meeting or any adjournment thereof. Each shareholder is entitled to one vote per share on all matters to be voted on at the meeting.
We encourage you to attend the meeting, but whether or not you plan to attend the 2016 Annual Meeting, please submit your completed proxy via phone, mail or internet as soon as possible. Proxies are revocable and will not affect your right to vote in person in the event you revoke the proxy and attend the meeting. The prompt return of proxies will help us avoid the unnecessary expense of further requests for proxies.
Important Notice Regarding the Availability of Proxy Materials for the Meeting of Shareholders
BUFFALO WILD WINGS, INC.
PROXY STATEMENT FOR
Our Board of Directors is soliciting proxies from our shareholders to vote their shares of Common Stock at the Buffalo Wild Wings, Inc. 2016 Annual Meeting of Shareholders to be held on Thursday, May 12, 2016, at the location and for the purposes set forth in the Notice of Annual Meeting, and at any adjournment thereof. Buffalo Wild Wings, Inc. is referred to in this document as "we," "us," "our," and the "company."
The cost of soliciting proxies, including the preparation, assembly, and mailing of the proxies and soliciting material, as well as the cost of forwarding such material to the beneficial owners of stock, will be borne by us. Our directors, officers, and other Team Members may, without compensation other than their regular remuneration, solicit proxies in person or by telephone.
Any shareholder giving a proxy may revoke it any time prior to its use at the 2016 Annual Meeting by giving written notice of such revocation to the Secretary or any one of our other officers or by filing a later dated written proxy with one of our officers. Personal attendance at the 2016 Annual Meeting is not, by itself, sufficient to revoke a proxy unless written notice of the revocation or a later dated proxy is delivered to an officer before the revoked or superseded proxy is used at the 2016 Annual Meeting. Proxies will be voted as directed therein. Proxies which are signed by shareholders, but which lack specific instruction with respect to any proposal, will be voted in favor of the number and slate of directors proposed by the Board of Directors and listed herein, for the say-on-pay approval, and for the ratification of our independent registered accounting firm.
The presence at the Annual Meeting in person or by proxy of the holders of a majority of our outstanding shares of Common Stock entitled to vote shall constitute a quorum for the transaction of business. If a broker returns a "non-vote" proxy, indicating a lack of voting instructions by the beneficial holder of the shares and a lack of discretionary authority on the part of the broker to vote on a particular matter, then the shares covered by such non-vote proxy shall be deemed present at the meeting for purposes of determining a quorum but shall not be deemed to be represented at the meeting for purposes of calculating the vote required for approval of such matter. If a shareholder abstains from voting as to any matter, then the shares held by such shareholder shall be deemed present at the meeting for purposes of determining a quorum and for purposes of calculating the vote with respect to such matter, but shall otherwise not be deemed to have been voted on such matter. As a result, an abstention on any proposal will have no effect on the outcome of any proposal, except it will have the same effect as a vote against the ratification of our independent registered accounting firm.
The mailing address of the principal executive office of Buffalo Wild Wings is 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416. We expect that this Proxy Statement, the related Form of Proxy, and Notice of Annual Meeting will first be mailed to shareholders on or about April 1, 2016.
Important Notice Regarding the Availability of Proxy Materials
Our Board of Directors has fixed March 14, 2016 as the record date for determining shareholders entitled to vote at the 2016 Annual Meeting. Persons who were not shareholders on such date will not be allowed to vote. At the close of business on the record date, there were 18,750,276 shares of our Common Stock issued and outstanding. The Common Stock is our only outstanding class of capital stock. Each share of Common Stock is entitled to one vote on each matter to be voted upon at the 2016 Annual Meeting. Holders of Common Stock are not entitled to cumulative voting rights.
Under applicable Minnesota law, the voting requirement for each proposal included in this proxy statement is as follows:
If a shareholder indicates on their proxy that they wish to abstain from voting, including brokers holding their customers' shares who cause abstentions to be recorded, these shares are considered present and entitled to vote at the annual meeting and those shares will count toward determining whether or not a quorum is present at the meeting. However, these shares will not be taken into account in determining the outcome of any of the proposals. A shareholder (including a broker) who does not give authority to vote, or withholds authority to vote, on a certain proposal will not be considered present and entitled to vote on that proposal.
If a shareholder who holds their shares through a broker does not give instructions to the broker as to how to vote the shares, the broker has authority under New York Stock Exchange rules to vote those shares for or against "routine" proposals, such as the ratification of the auditors. Brokers cannot vote on their customers' behalf on "non-routine" proposals such as the election of directors or approval of the compensation of our named executive officers. These rules apply to brokers holding our shares even though our common stock is traded on the NASDAQ Global Market. If a broker votes shares that are unvoted by its customers for or against a "routine" proposal, these shares are counted for the purpose of establishing a quorum and also will be counted for the purpose of determining the outcome of "routine" proposals. If a broker does not receive voting instructions as to a non-routine proposal, or chooses to leave shares unvoted on a routine proposal, a "broker non-vote" occurs and those shares will be counted for the purpose of establishing a quorum, but not for determining the outcome of those proposals. Shares that are subject to broker non-votes are considered not entitled to vote on the particular proposal, and effectively reduce the number of shares needed to approve that proposal.
The following table provides information as of the record date concerning the beneficial ownership of our Common Stock by (i) the named executive officers in the Summary Compensation Table, (ii) each of our directors, (iii) all current directors and executive officers as a group, and (iv) each shareholder who we know beneficially owns more than 5% of our outstanding Common Stock. Except as otherwise indicated, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock owned by them.
Our business affairs are conducted under the direction of the Board of Directors in accordance with the Minnesota Business Corporation Act and our Articles of Incorporation and Bylaws. Members of the Board are informed of our business by discussing matters with management, reviewing materials provided to them, and participating in meetings of the Board and its committees. The corporate governance practices that we follow are summarized below.
The Board of Directors has determined that a majority of its members are "independent directors" as defined by the listing standards of The Nasdaq Stock Market, LLC ("NASDAQ"). The independent directors serving on the Board during fiscal year 2015 were Dale M. Applequist, James M. Damian, Cynthia L. Davis, Michael P. Johnson, Warren E. Mack, J. Oliver Maggard and Jerry R. Rose. In determining independence, the Board considered that Mr. Mack is an attorney with Fredrikson & Byron, P.A., which provides legal services to us. It was determined that this relationship does not interfere with Mr. Mack's ability to exercise independent judgment in carrying out the responsibilities of a director.
The Board of Directors has approved a Code of Ethics & Business Conduct, which applies to all of our Team Members, directors, and officers, and also a Code of Ethics ("Executive Code of Ethics" and together with our Code of Ethics & Business Conduct, the "Codes"), which applies to our principal executive officer, principal financial officer, principal accounting officer, controller, executive and senior vice presidents, and vice presidents. The Codes address such topics as protection and proper use of our assets, compliance with applicable laws and regulations, accuracy and preservation of records, accounting and financial reporting, conflicts of interest, and insider trading. The Codes are available free of charge on our website at www.buffalowildwings.com and are available in print to any shareholder who sends a request for a paper copy to Buffalo Wild Wings, Inc., Attn. Investor Relations, 5500 Wayzata Boulevard, Suite 1600, Minneapolis, Minnesota 55416. We intend to include on our website any amendment to, or waiver from, a provision of our Executive Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer, or controller and relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.
Board and Committee Meetings. During fiscal 2015, the Board of Directors held four meetings. Each director attended at least 75% of the meetings of the Board and the committees on which such director served.
Annual Meeting of Shareholders. Our policy is that all directors are expected to attend our annual meeting of shareholders. If a director is unable to attend an annual meeting, the director must send a written notice to our Secretary at least one week prior to the meeting. All of our directors attended our 2015 annual meeting of shareholders.
An executive session of independent directors is generally held at the time of each regular Board of Directors meeting.
Our principles of corporate governance give the Board of Directors the authority to choose whether the roles of Chairman of the Board and Chief Executive Officer are held by one person or two people. The principles also give the Board the authority to change this policy if it deems it best for the company at any time. Currently, two separate people serve in the positions of Chief Executive Officer and Chairman of the Board of our company. We believe that our current leadership structure is appropriate for our company at this time.
Our Chief Executive Officer and Chairman have an excellent relationship that has given the Chief Executive Officer the freedom to successfully manage the company under the strong and insightful guidance of the Board of Directors. Our Board has seven independent members and one non-independent member, who is also our Chief Executive Officer. We believe that the number of independent, experienced directors that make up our Board, along with the independent oversight of the Board by the non-executive chairman, benefits our company and our shareholders. All our independent directors have demonstrated leadership in other organizations and are familiar with Board processes.
While each of the committees of the Board of Directors evaluate risk in their respective areas of responsibility, our Governance Committee is primarily responsible for overseeing the company's risk management processes on behalf of the full Board. We believe that designating a committee to be specifically focused on our company's risk profile is beneficial, given the increased importance of monitoring risks in the current economic and business climate. The company employs a risk management team that oversees day-to-day company risks as well as enterprise and strategic risk management. The Governance Committee meets with a member of the risk management team at every regular meeting to discuss the company's risk profile and hear a report on specific issues as well as an enterprise risk assessment, and the member of the risk management team is given the opportunity for an executive session with the Governance Committee. The Governance Committee reports to the full Board on the most significant risk issues.
In addition to the Governance Committee's role in enterprise risk management oversight, other committees also play a role in risk oversight. Our Compensation Committee is responsible for the oversight of our talent and compensation risk. With respect to compensation-related risk, the Compensation Committee completes an annual review of the Team Member compensation plans in order to determine whether any of the plans or policies are reasonably likely to have a material adverse effect on the company. To complete this review, we first considered all compensation policies and practices for our Team Members, including the base salaries, annual/quarterly cash incentive and long-term equity incentive award plans of our executive officers, as well as the compensation plans of our management-level Home Office Team Members, Field Leadership Team and Restaurant General Managers. In 2015, this review was assisted by our outside compensation consultant. As part of our review, we considered whether any of our compensation policies and practices varied significantly from the overall risk and reward structure of our company and whether any of our compensation policies and practices incent individuals to take short-term risks that are inconsistent with our long-term goals. Upon completion of this review, our Compensation Committee determined there are no risks arising from our company's compensation policies and practices that are reasonably likely to have a material adverse effect on our company.
Our Audit Committee is responsible for the oversight of our internal control and financial reporting risk. Internal control and financial reporting risk relates to the reliability of our financial reporting and compliance. Our Audit Committee receives regular updates from our legal department, internal audit department and representatives of our independent registered public accounting firm, which include updates on any risks arising from changes in government regulation to which we are subject. Our Audit Committee and, when appropriate, the full Board of Directors provides input on data risk as the processes, procedures and internal controls we have established concerning our data privacy and protection are integrally related to the internal controls we have established for financial reporting and compliance.
Our Board of Directors is also responsible for the oversight of our competitive environment, brand damage and cyber security risk. Competitive environment risk is monitored by the full Board through the periodic review of our operating performance and strategic plan. Brand damage risk is the risk to our company's brand and reputation that may arise from a major incident or negative comments in the media, including social media. The Board receives periodic reports from management on potential incidents or media exposure that may cause damage to our brand and the risks relating to such damage. The full Board, and the Governance Committee in particular, regularly hears reports on management's work upgrading and maintaining its information technology and systems to protect the company, to the greatest extent possible, against cyber risks and security breaches.
While the Board of Directors and the Governance Committee provide oversight to the company's risk management team, company management is ultimately responsible for day-to-day risk management activities. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company, and our Board leadership structure supports this approach.
Our Board of Directors has established the following committees: Audit Committee, Compensation Committee, Governance Committee, Executive Committee, and Compliance Committee.
Audit Committee. The Audit Committee reviews, in consultation with our independent registered public accounting firm, our financial statements, accounting and other policies, accounting systems, internal audit reports, and the adequacy of internal controls for compliance with corporate policies and directives. The Audit Committee is responsible for the engagement of our independent registered public accounting firm and reviews other matters relating to our relationship with our independent registered public accounting firm. The Audit Committee also oversees the administration of our related party transactions policy, which is described in "Certain Relationships and Related Transactions" on page 40. The "Report of Audit Committee" is included on page 42. The Audit Committee held eleven meetings during fiscal 2015.
The current members of the Audit Committee are J. Oliver Maggard, Chair, James M. Damian, Cynthia L. Davis, and Jerry R. Rose. All members of the Audit Committee are "independent directors" as defined by the listing standards of The Nasdaq Stock Market and meet the additional independence criteria for audit committee members set forth in the listing standards and SEC Rule 10A-3. The Board of Directors has determined that J. Oliver Maggard and Jerry R. Rose are "audit committee financial experts" as defined by Item 407(d)(5) of Regulation S-K under the Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We acknowledge that the designation of Mr. Maggard and Mr. Rose as audit committee financial experts does not impose on Mr. Maggard or Mr. Rose any duties, obligations, or liability greater than the duties, obligations, and liability imposed on Mr. Maggard or Mr. Rose as a member of the Audit Committee and the Board in the absence of such designation or identification.
Compensation Committee. The Compensation Committee develops and administers compensation policies and plans and is responsible for producing the "Compensation Committee Report," which is on page 33 of this Proxy Statement. The Compensation Committee designs and oversees our compensation programs for our Chief Executive Officer, Chief Operating Officer, Executive Vice Presidents, and Senior Vice Presidents. Our independent directors are responsible for final approval of the Chief Executive Officer's compensation. The Compensation Committee is vested with the same authority as the Board of Directors with respect to the granting of awards and the administration of our equity and non-equity plans. As part of its annual performance review of the Chief Executive Officer, which is conducted in connection with recommending the Chief Executive Officer's compensation, the Compensation Committee may interview other executive officers. In approving compensation for other executive officers, the Compensation Committee takes into account recommendations from the Chief Executive Officer, among other factors. The Compensation Committee held six meetings during fiscal 2015.
The current members of the Compensation Committee are Michael P. Johnson, Chair, Dale M. Applequist, J. Oliver Maggard, and James M. Damian. All members of the Compensation Committee are "independent directors" as defined by the listing standards of NASDAQ; "non-employee directors" as defined by Rule 16b-3 of the Exchange Act; and "outside directors" as defined in Section 162(m) of the Internal Revenue Code. All of the committee members also meet the additional
independence criteria for compensation committee members set forth in the listing standards and SEC Rule 10C-1 promulgated under the Exchange Act.
In setting 2015 compensation, the Compensation Committee retained Frederic W. FW Cook, Inc. ("FW Cook") as its compensation consultant. FW Cook was retained by and reported directly to the Compensation Committee. The Compensation Committee consulted with FW Cook regarding the company's compensation plans, policies, and annual programs, with FW Cook attending most of the Committee's meetings. FW Cook did not provide any other consulting services to the company. We have concluded that the work of the compensation consultant in fiscal 2015 did not raise any conflict of interest.
Governance Committee. The Governance Committee, acting as a nominating committee, screens and recommends to the Board of Directors candidates for nomination. The Committee also recommends to the Board the members of various committees, addresses corporate governance matters and oversees enterprise risk management. The current members of the Governance Committee are Dale M. Applequist, Chair, Cynthia L. Davis, Michael P. Johnson and Jerry R. Rose. All members of the Governance Committee are independent directors. The policies of the Governance Committee are described more fully in the "Governance Committee Report" on page 9. The Governance Committee held seven meetings during fiscal 2015.
In recommending the non-employee director compensation to the Board of Directors, the Governance Committee retained FW Cook as its consultant. Also during 2015, the Governance Committee engaged a professional search firm to assist in identifying and evaluating potential candidates to serve as directors.
Executive Committee. During the intervals between meetings of the Board of Directors, the Executive Committee has all the powers of the Board in the management of our business, properties and affairs, including any authority to take action provided in our Bylaws to be taken by the Board, subject to applicable laws. The Executive Committee, however, is not authorized to fill vacancies of the Board or its committees, declare any dividend or distribution or take any action which, pursuant to the Bylaws, is required to be taken by a vote of a specified portion of the whole Board. The members of the Executive Committee are Warren E. Mack, Chair, Sally J. Smith, J. Oliver Maggard, and James M. Damian. The Executive Committee held three meetings during fiscal 2015.
Compliance Committee. On December 4, 2008, to comply with Nevada gaming laws, the Board of Directors formed a Compliance Committee, which is empowered to exercise its best efforts to identify and evaluate situations arising in the course of our business that may adversely affect the objectives of gaming control. The Compliance Committee must have at least three members and must include a director of the company and at least one person who is familiar with gaming regulatory laws and procedures and is independent of the company. The three members of the Compliance Committee are Warren E. Mack, our Chief Operating Officer, James M. Schmidt, and an outside independent member. Our Compliance Committee reports to the Board and advises the Board if any activities are inappropriate, after investigation. It may use any of our resources and use whatever means it deems appropriate in conducting any such investigation. The Compliance Committee held four meetings during fiscal 2015.
Shareholders may communicate directly with the Board of Directors. All communications should be directed to our Secretary at the address below and should prominently indicate on the outside of the envelope that it is intended for the Board of Directors or for non-management directors. If no specific director is named, the communication will be forwarded to the entire Board. The communication will not be opened before being forwarded to the intended recipient, but it will go through normal security procedures. Shareholder communications to the Board should be sent to:
C. Decker SVP, General Counsel and Secretary
Cash Compensation. In addition to being reimbursed for out-of-pocket expenses incurred while attending Board of Directors or committee meetings, the non-employee directors received the following cash compensation in 2015. The director compensation is determined by the full Board, upon recommendation from the Governance Committee, and is effective at the May meeting each year. The fees are paid at the quarterly Board meetings.
Equity Compensation. The non-employee directors are entitled to an annual grant of fully-vested stock units for the number of shares with a grant date fair value equal to approximately $95,000. To determine the number of stock units to grant, we divide $95,000 by the average of the twenty data points that represent the daily high and low stock price of the ten preceding trading days. Because of this methodology, the value of the stock awards will not likely be exactly $95,000. In 2015, each of our outside directors received a grant of 576 stock units, which were credited to the directors on May 8, 2015. In 2016, the annual grants will be made May 13, 2016, which is the second day of the May Board of Directors Meeting.
Stock Ownership Guidelines. We require our non-employee directors to maintain a minimum level of stock ownership to strengthen alignment with our shareholders. Our current guidelines require non-employee directors to own stock (including stock units) equal to five times the annual cash retainer within six years of joining the Board of Directors. Additional details regarding our stock ownership guidelines for non-employee directors and executives can be found on page 31 of this proxy statement.
Deferred Compensation. Our Deferred Compensation Plan permits the directors to defer up to 100% of compensation, including fees and stock unit grants. Currently, no director has elected to defer any portion of compensation.
Compensation Consultant. In recommending the non-employee director compensation to the Board of Directors, the Governance Committee retained FW Cook as its consultant.
Director Compensation Table. The table below summarizes the compensation paid by us to our non-employee directors during fiscal year 2015.
2016 Director Compensation Actions. The Board of Directors approved the following compensation increases for 2016: the annual cash compensation for the Audit Committee chair will increase from $16,000 to $20,000 effective in May, 2016.
The Governance Committee is comprised of independent directors. In accordance with its written charter, as well as the principles of corporate governance adopted by the Board of Directors and the nominating policies, the Governance Committee assists the Board with fulfilling its responsibilities regarding any matters relating to corporate governance, including selection of candidates for our Board. Its duties include oversight of: the principles of corporate governance by which Buffalo Wild Wings and the Board are governed; the codes of ethical conduct and legal compliance by which Buffalo Wild Wings and its directors, executive officers, Team Members, and agents are governed; policies for evaluation of the Board and the chairperson; policies for election and reelection of directors; and policies for succession planning for the Chief Executive Officer, Board chairperson, and other Board leaders. In addition, the Committee is responsible for annually reviewing the composition of the Board, focusing on the governance and business needs and requirements of the company, screening of director candidates and recommending nominees to the Board, evaluating the performance of directors, recommending director compensation to the Board and recommending the reelection of directors who are performing effectively and who continue to provide a competency needed on the Board. Our principles of corporate governance provide that there should be at least seven directors on the Board, with a majority being independent.
Each year, the Governance Committee oversees the evaluation process for the Board of Directors and its committees. Each director completes a written evaluation of the Board and their respective Committees, and the Secretary also conducts a follow-up evaluation phone call, accompanied by the Board Chair and Governance Committee Chair.
The Governance Committee will consider candidates for nomination as a director recommended by shareholders, directors, third-party search firms, and other sources. In evaluating director nominees, a candidate should have certain minimum qualifications, including being able to read and understand basic financial statements, being familiar with our business and industry, having high standards of personal ethics and mature judgment, being able to work collegially with others, having commitment to shareholder value and being willing to devote the necessary time and energy to fulfilling the responsibilities of the Board of Directors. Independent directors are not permitted to serve on more than three other boards of public companies,
and management personnel are not permitted to serve on more than one other board of a public company without approval from the Board. In addition, factors such as the following may be considered:
During its annual review, the Governance Committee evaluates the overall composition of the Board, the skills and experiences represented by incumbent directors and the need for new directors to replace retiring directors or expand the Board. In seeking new director candidates, the Governance Committee considers the skills, expertise and qualities that will be required to effectively oversee the strategic plans of the company. The Governance Committee, in conjunction with these needs, also considers the diversity of the Board in terms of geographic representation, gender and ethnic makeup of its members. The Board evaluates the makeup in the context of the Board as a whole with the objective of recommending a group that can work together using its diversity of experience and perspective to ensure that the company is well managed, performance is optimized and that decisions represent the best interests of the company and its Shareholders.
Shareholders who wish to recommend one or more persons as a director candidate must provide a written recommendation to our Secretary. Notice of a recommendation must include the shareholder's name, address, and the number of Buffalo Wild Wings shares owned, along with information with respect to the person being recommended, i.e. name, age, business address, residence address, current principal occupation, five-year employment history with employer names and a description of each employer's business, the number of shares beneficially owned by the prospective nominee, whether such person can read and understand basic financial statements, and other board memberships, if any. The recommendation must be accompanied by a written consent of the prospective nominee to stand for election if nominated by the Board of Directors and to serve if elected by the shareholders. We may require a nominee to furnish additional information that may be needed to determine the eligibility of the nominee.
Shareholders who wish to present a proposal at an annual meeting of shareholders must provide a written notice to our Secretary at the address below. For each proposal, the notice must include a brief description of the matter to be brought before the meeting, the reasons to bring the matter before the meeting, the shareholder's name, address, and number of shares owned, and any material interest that the shareholder may have in the proposal. The Secretary will forward the proposals and recommendations to the Governance Committee. See "Shareholder Proposals" on page 42.
C. Decker, SVP, General Counsel and Secretary
A copy of the current Governance Committee Charter can be found on the Buffalo Wild Wings website at www.buffalowildwings.com.
Our Bylaws provide that the number of directors shall be the number set by the shareholders at each regular meeting (though the Board of Directors or shareholders may increase or decrease the number between regular meeting). The Bylaws require that we have at least one director. In accordance with our principles of corporate governance, which require at least seven directors, and the recommendations of the Governance Committee, the Board of Directors set the number of directors at eight and selected the persons listed below as nominees to be elected at the 2016 Annual Meeting of Shareholders. Unless otherwise instructed, the proxies will be voted to elect the eight nominees listed above, thereby setting the number of members of the Board at eight. The election of the nominees to the Board requires the affirmative vote of a plurality of the shares represented in person or by proxy at the Annual Meeting with authority to vote on such matter. However, if an individual director does not receive enough votes to meet this plurality standard, our Principles of Corporate Governance require that the director submit their resignation.
If elected, the individuals listed above shall serve until the next annual meeting of shareholders and until their successors are duly elected and qualified. All of the nominees are members of the current Board of Directors. If, prior to the 2016 Annual Meeting of Shareholders, it should become known that any one of the following individuals will be unwilling or unable to serve as a director after the 2016 Annual Meeting by reason of resignation, death, incapacity, or other unexpected occurrence, the proxies will be voted for such substitute nominee(s) as may be selected by the Board. Alternatively, the proxies may, at the Board's discretion, be voted for such fewer number of nominees that may result from such resignation, death, incapacity, or other unexpected occurrence. The Board has no reason to believe that any of the nominees listed above will withdraw or be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE DIRECTORS
The Compensation Discussion and Analysis ("CD&A") describes our executive compensation program, including the objectives and elements of compensation as well as determinations made by the Compensation Committee (referred to in this CD&A as the "Committee") regarding our named executive officers ("NEOs"):
The objective of our executive compensation program is to enable the company to recruit, retain and motivate a highly qualified management and leadership team by providing market-based levels of compensation in a way that builds a strong leadership team as a model for the entire organization. Our overall executive compensation design philosophy reflects the Committee's desire to align management's actions with the interests of our shareholders. Accordingly, a substantial percentage of the compensation for our named executive officers is at-risk and based primarily on company performance. Our executives, as a team and individually, will benefit from larger rewards when performance objectives are exceeded and conversely will receive lower or no rewards when performance falls below targeted levels.
Buffalo Wild Wings is focused on profitable growth that builds shareholder value. To accomplish this goal, we attract, motivate, retain, and fairly reward executive talent with a competitive compensation plan composed of three main elements, which we collectively refer to as "total direct compensation": (1) base salaries; (2) annual cash incentive compensation; and (3) equity incentive compensation in the form of performance-based restricted stock units ("PRSUs") and stock options. The Committee makes its compensation design decisions based on the following principles: holding executives accountable for the company's goals, ensuring alignment with shareholder interests, encouraging Team Member engagement and optimizing results.
We continued to deliver on our strategy to remain a category-leading and high-growth restaurant concept while investing in the future. In, 2015, we opened 51 new company-owned Buffalo Wild Wings. We purchased 54 Buffalo Wild Wings restaurants from our franchisees in 2015, which will contribute to revenue and earnings growth in 2016 and beyond. Our franchisees in the United States opened 40 Buffalo Wild Wings locations. Same-store sales at company-owned Buffalo Wild Wings increased 4.2%, ahead of the casual dining industry's rate. Our revenue increased nearly 20% but net earnings growth of 1% was tempered by one-time acquisition costs, higher costs for traditional chicken wings, and rising wage rates and benefit costs.
At Buffalo Wild Wings, there are three main components to the total direct compensation opportunity for our executive officers: base salary, annual cash incentive and long-term equity incentive compensation. A large proportion of total direct compensation is performance-based, not guaranteed, and fully at risk. This results in a close alignment between executive rewards and the creation of long-term shareholder value. Our incentive plans are also focused on rewarding our executive team for driving sales and earnings growth. The chart below provides a view of each of the three main components of total direct compensation for our CEO and the average of our other named executive officers. Each of these components is described in more detail in the section "2015 Executive Compensation".
The following is a summary of the pay actions for 2015 approved by the Committee for our named executive officers. Refer to the "2105 Executive Compensation" section later in this Compensation Discussion & Analysis for a more detailed explanation of how the payouts were determined under these cash and equity incentive programs for 2015.
The Committee approved base salary adjustments of our named executive officers effective March 23, 2015. For the CEO, the salary adjustment was 16.7% and represented a combination of a merit increase and a market adjustment to align her salary more closely with the market median of our peers. For the other named executive officers, the average adjustment was 2.9% and considered market position, performance and time since last increase.
Refer to the "2015 Executive Compensation" section on page 24 of this CD&A for a more detailed explanation of how the payouts were determined under these cash and equity programs for 2015.
At Buffalo Wild Wings, our executive compensation program operates within a corporate governance framework that is designed to ensure independent oversight, objective advice and analysis, appropriate risk management, and transparency. Our executive compensation program is designed with our shareholder long-term interests in mind. The following are some of the key elements of our governance framework and the key executive compensation practices that demonstrate our commitment to pay for performance and our total rewards philosophy.
The Committee met six times during 2015. In these meetings, the Committee reviewed and discussed the regular agenda items that are part of its annual planning calendar. Our CEO, COO and Senior Vice President of Talent Management attend the meetings on behalf of management, except when their own compensation is being discussed.
The Committee's responsibilities are described in the Committee Charter and include the following:
To assist in reviewing and setting 2015 compensation, the Committee again retained FW Cook as its independent compensation consultant. FW Cook reports directly to the Committee, independent of management. The Committee assessed the independence of FW Cook and took into account related factors in accordance with SEC and NASDAQ rules and concluded that the work of FW Cook did not raise any conflict of interest that would prevent them from independently advising the Committee. In addition:
After the end of each fiscal year, the CEO completes a performance evaluation for each executive officer, which includes an evaluation of performance against individual objectives. Based on these evaluations, the CEO makes a recommendation on the portion of the cash incentive tied to individual performance that each executive officer should receive as well as a
recommendation for each executive officer's base salary and target payout opportunities for the upcoming year under the CIP and EIP. The evaluations and recommendations are then provided to and discussed with the Committee, which makes the final compensation determinations for each executive officer. The CEO does not make any recommendations in relation to CEO compensation.
We conduct an annual shareholder advisory vote on the compensation of the company's named executive officers. This vote is not binding on the company; however, the Committee does take into account the outcome of the vote when making future compensation decisions.
Our 2015 Say-on-Pay proposal was supported by over 99.4% of our shareholders who voted on the proposal. Although the Committee always considers changes to the compensation programs to enhance effectiveness and alignment, it did not make any significant changes to the executive compensation program for 2015 because it felt that the compensation program fairly motivated and compensated executive officers, and because it believed the say-on-pay vote demonstrated the strong support of our shareholders for continuing the program in its existing form. For more information, see Proposal #2, ADVISORY VOTE ON EXECUTIVE OFFICER COMPENSATION on page 32.
The Committee uses information gathered from our peer group as one of multiple factors in analyzing executive compensation. FW Cook assists the Committee in determining which companies belong in our peer group. The Committee annually evaluates the composition of the peer group and makes appropriate changes to the peer group to ensure that we maintain a group of restaurant and retail companies whose operations and size are similar to ours. Data from these peer group companies was used to inform decisions regarding executive compensation for 2015. One company, Einstein Noah Restaurant Group, was acquired in the last year and has been eliminated from our peer group. The peer group as approved by the Committee in August 2015 now consists of the following 17 companies:
As a long-term growth company, our total rewards philosophy strives to maximize the principles of accountability, alignment, engagement and optimization among our Team Members. Our philosophy is to "pay for performance" by designing our compensation programs to reward Team Members for company and individual success.
Our philosophy is supported by four specific Total Rewards Principles, which serve as the guiding framework to our specific compensation programs and approaches we use to drive performance. The following chart outlines the key objectives and purpose of our rewards programs for each of these four principles.
Our executive compensation program is structured so that our base salaries are positioned around the median of the competitive market. We set aggressive annual and long-term goals in order to drive behaviors and results that will provide shareholder value that meets or exceeds expectations. Our annual cash incentive and long-term equity incentive programs are designed so that we provide total rewards that are commensurate with actual results. We believe that a substantial portion of the compensation for our executives should be at risk and received only to the extent Buffalo Wild Wings and the executive accomplish goals approved by the Committee and the Board of Directors. At-risk compensation comprises a greater percentage of target total direct compensation for our executives than other Team Members.
We set base salaries for our executive officers to be competitive with the market median of our peers and to allow us to attract and retain executive talent. In our target pay mix for 2015, base salaries are the smallest component, comprising 22% of the target total direct compensation opportunity for our CEO and 33% on average for our other named executive officers. Our committee reviews base salaries annually, and considers competitive market data provided by its independent consultant and performance of the executive officer when making base pay decisions. The Committee at its meeting on February 12, 2015 approved the base salary adjustments shown in the following tables. For the CEO, the salary adjustment represented a combination of a merit increase and a market adjustment to align her salary more closely with the market median of our peers. For the other named executive officers, their adjustments were merit increases that considered market position, performance and time since last increase. These base salary adjustments were effective beginning March 23, 2015.
Our CIP provides our executive officers with an annual incentive opportunity that is tied to company performance and individual performance. The CIP metrics for company performance are focused on driving sales and earnings growth. Company performance is weighted at 80% of the CIP opportunity. The other 20% weighting is on individual performance, which are specific goals for each executive officer. They generally include the key initiatives or results that are needed to support business growth and success. The individual objectives for our CEO are agreed upon at the beginning of each year between our CEO and the Committee when the Committee reviews CEO performance for the previous year. The individual performance for the remaining executive officers are agreed upon by the CEO and the respective executive officers and are reviewed by the Committee.
The Committee approved the following target annual CIP opportunities for the named executive officers for 2015. Each CIP opportunity is entirely at risk, meaning that if threshold performance is not met on any of the metrics including individual performance, then no CIP award would be earned. The Committee considered competitive market data provided by its Consultant in establishing these target CIP levels for 2015.
The following table shows the performance metrics and their weighting for the 2015 annual CIP award opportunity. This table also shows the range of payout opportunity from threshold to maximum on each metric, and the performance goals equal to the 2015 Plan for a target payout on each company performance metric. For performance between any of the levels specified in the table, there is an interpolation of the payout that is in proportion to the performance actually achieved.
The CIP metrics for company performance are focused on driving sales and earnings growth, as well as our continued expansion of restaurant locations.
Company performance is weighted at 80% of the CIP opportunity. The other 20% weighting is on individual performance.
Company Performance. The following table shows the company performance results achieved on each metric for 2015, and the resulting payout that was earned under the CIP. On an overall basis, a CIP payout of 76.2% of target was earned for the company performance metrics for 2015.
The following is the company performance achieved for 2015 and the resulting CIP payout that was earned on each metric.
Individual Performance. In addition to the company performance metrics identified above, our named executive officers also have an opportunity to earn a portion of their CIP award based on their individual performance against objectives. This portion of CIP allows us to reward executives for their contributions to key initiatives or results that are needed to support business growth and success. The following table shows the % of target payout earned for 2015 on individual performance for 2015 (range in potential payout is 0% to 200% of target).
The Committee and the Board of Directors conduct a CEO evaluation at the end of the year to assess the extent to which the CEO's individual performance was achieved. This evaluation begins first with the CEO providing a self-assessment of her results on each objective. Each Board member then does an evaluation of the CEO's performance using a third party service to combine and report on the results. The Committee and Board then discuss the evaluation results and agree upon an overall performance rating and payout on the CEO's individual performance. A payout of 110% of target was approved for the CEO considering her results for 2015 with driving growth of emerging brands and international, accomplishing several key initiatives on talent development and engagement, and leading organizational change to support the strategic direction and future vision of the company. This is down from a payout for 2014 on individual performance for the CEO of 166.7% of target.
The Committee approved the payout earned on individual performance for the other named executive officers after reviewing and discussing the results that were achieved toward individual objectives of each executive for 2015. The average payout for the named executive officers other than CEO was 107.5% of target, down from an average payout for 2014 of 147.4% of target
Total CIP Award Earned. The 2015 total CIP award earned by each named executive officer is determined by adding together the payout earned for company performance and the payout earned for individual objectives, as shown below:
The table below shows the final total CIP payout earned for 2015 by each named executive officer, with a comparison to actual total CIP payouts earned for 2014. This shows that the total CIP payouts for all of the named executive officers were down significantly over last year as a result of the company missing its 2015 Plan targets on several metrics.
The Committee believes that equity incentives are a critical component of the total compensation mix for our executive officers and other key leaders. They provide a reward opportunity for our executive team that is directly aligned with the long-term interests of shareholders. As an incentive, there is only payout value if certain long term company performance goals are achieved or shareholder value is created.
The Committee establishes a target EIP award value for each named executive officer, as shown in the table below. These percentages, when multiplied by base salary, determined the total value of EIP annual awards that our named executive officers were eligible to receive during 2015. The Committee considered competitive market data provided by its Consultant in establishing these target EIP levels for 2015, which were unchanged from 2014.
The EIP target award opportunity is used to determine the total grant date fair value of equity awards for our named executive officers, which is then split between grants of Performance-Based Restricted Stock Units (PRSUs) and stock options: 75% in PRSUs and 25% in stock options. We believe that this combination appropriately rewards management for achieving long-term profitable growth and the creation of shareholder value. It is important to note that PRSUs and stock options are performance-based awards, meaning that they only have value if performance conditions are met or shareholder value is created. Further, the Committee believes equity incentives with their vesting requirements assist in the retention of our executive team, which is critical to the success of our long-term growth strategy.
Annual Grant of PRSUs. Under the EIP, the company makes annual grants of PRSUs subject to certain vesting and performance conditions. During 2015, our named executive officers received a new annual grant of PRSUs representing the three year performance period ending with fiscal 2017 ("2015-2017 PRSUs"). The performance condition for the 2015-2017 PRSUs is three-year cumulative net income. Cumulative net income is defined as the sum of reported net income for a three year performance period, which for the 2015-2017 PRSUs is 2015, 2016 and 2017. This measurement was chosen because it is a long-term reflection of shareholder value. The Committee approved cumulative net income goals that determine the percentage of share units earned at threshold, target and maximum for the 2015-2017 PRSUs. No share units are earned if threshold performance is not achieved.
The target number of 2015-2017 PRSUs that can be earned for each named executive officer is determined according to the following formula: the executive's target total EIP award opportunity times 75%, divided by the grant date fair value per share, equals the target number of PRSUs.
The number of PRSUs actually granted is equal to the maximum number of PRSUs that can be earned, which is twice the target number of PRSUs. The company grants the maximum number of PRSUs that can be earned at the start of the performance period in order to lock in the share price that is used in expensing the PRSUs. Under the EIP, the grant date fair value per share for PRSUs is the average of the twenty data points representing the high and low stock price on the ten trading days prior to the date of grant. Grants are made on the first day of the second quarter. For the 2015-2017 PRSUs this was a grant date of March 30, 2015. The grant date fair value per share for this grant was $186.58.
Annual Grant of Stock Options. Under the EIP, the company makes annual grants of stock options to named executive officers subject to certain vesting conditions. During 2015, our named executive officers received an annual grant of stock options at the same time that the PRSUs were granted. The stock options vest in four equal annual installments at the end of each fiscal year starting with the year of grant. The stock options have a term that expiries at the seventh fiscal year end following the date of grant. The company grants Incentive Stock Options (ISOs) up to the maximum allowable limit for each executive, with the balance of the option value in Non-Qualified Stock Options (NQSOs). By granting ISOs, which can have favorable tax treatment, executives are encouraged to retain and hold for a longer period of time any stock acquired from an option exercise.
The number of stock options granted for each named executive officer is determined according to the following formula: the executive's target total EIP award opportunity times 25%, divided by the grant date fair value per option share, equals the number of stock options granted (which are then either ISOs or NQSOs as described above).
Under the EIP, the grant date fair value per option is the estimated Black-Scholes Value ("BSV") for each option granted. The BSV is based on the updated valuation assumptions used for estimating the company's option expense under generally accepted accounting principles. Annual grants of stock options are made on the first day of the second fiscal quarter each year. For the stock options granted during 2015, the grant date was March 30, 2015. This grant had a BSV of $59.22 per option and an exercise price of $182.97, which was the closing share price on the date of grant.
Payout Earned on 2013-2015 PRSUs. Our named executive officers received a grant in 2013 of PRSUs ("2013-2015 PRSUs") that vested at the end of 2015 based on the degree to which the performance condition was satisfied. The performance condition for the 2013-2015 PRSUs was three-year cumulative net income. The Committee approved in February 2013 the following cumulative net income goals that determined the percentage of PRSUs earned at threshold, target and maximum for the 2013-2015 PRSUs. For performance between the specified levels, there is an interpolation of the payout that is in proportion to the performance actually achieved. No share units are earned if threshold is not achieved.
For the three year performance period of 2013-2015, the company achieved cumulative net income of $260.717 million, which exceeded the goal for maximum payout of $241.439 million. As a result, the Committee approved a maximum payout for the 2013-2015 PRSUs100% of the share units granted were vested, earned, and paid out in February 2016. This payout is included in the "Option Exercises and Stock Vested in Fiscal 2015" table on page 37.
Deferred Compensation Plan. Our named executive officers are eligible to participate in a nonqualified deferred compensation plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is an unfunded plan that allows executives to defer up to 100% of their salary, CIP award, and/or PRSU payout. The company makes a monthly contribution to the plan on behalf of our named executive officers to provide additional retirement benefits and assist with retention. This contribution for our named executive officers is 12.5% of base salary and vests ratably over five years from date of hire. The Deferred Compensation Plan is described in more detail in the "Non-Qualified Deferred Compensation" section on page 37.
Perquisites and Benefits. Consistent with our commitment to emphasize pay for performance, our executive officers receive very few perquisites. We believe the perquisites we provide are reasonable and comparable to other companies we compete with for executive talent. The Committee periodically reviews the levels of perquisites and other personal benefits provided to our executive officers, and has recently approved reductions in these benefits as noted below.
In addition to benefits available to all Team Members under company-wide health, dental, life, and disability insurance plans, the company provides executive officers the perquisites and benefits described below, which are quantified in the column "All Other Compensation" of the "Summary Compensation Table" on page 34.
the Committee approved in February 2016 the elimination of both of these supplemental benefits for all executive officers effective at the end of 2016.
We believe the executive officers and directors should have an appropriate level of equity ownership in order to align their interests with those of our shareholders. We encourage executive officers to own stock by providing opportunities for stock ownership through the exercise of stock options, payout of earned PRSUs, and purchase of stock through the Employee Stock Purchase Plan. For non-employee directors, a significant portion of their total remuneration is made out in fully-vested stock units annually. In May 2015, the value of their stock unit payout was increased to $95,000. In May 2011, the company instituted the following stock ownership guidelines to encourage ownership among its executives and non-employee directors:
Executives and non-employee directors have six years from the implementation date of the guidelines (or date of hire, promotion or appointment) to reach their stock ownership guidelines. Under the guidelines, share ownership includes: shares held outright by the individual, shares acquired from the payout of PRSUs, vested "in the money" stock options, shares purchased through the Employee Stock Purchase Plan, and share equivalents held in deferred compensation accounts. Each of the named executive officers have met the ownership guidelines and all our non-employee directors have either met the guideline or are approaching the guideline in compliance with our phase-in period.
Executive officers and non-employee directors are prohibited from using Buffalo Wild Wings stock as collateral for margin loans, whether for the purchase of Buffalo Wild Wings stock or any other securities. Executive officers and directors also must not "sell short" or otherwise hedge their holdings of Buffalo Wild Wings stock.
The named executive officers, in accordance with the terms of their respective employment agreements and award agreements under equity compensation plans, are eligible for benefits and payments upon terminations of employment by the company without cause or by an executive for good reason as described under "Potential Payments Upon Termination or Change in Control" on page 38. We believe that severance arrangements generally are appropriate given the service provided, the additional time that may be required for senior executives to secure other employment, and the benefit to the company of obtaining non-compete and non-solicitation commitments and a general release of liability from each executive. In the context of a change in control, the Committee believes the use of a "double trigger" arrangement, requiring both a change in control and a termination of employment not for cause before accelerating vesting and exercisability of equity awards, appropriately addresses several goals. It reflects the value to the company of avoiding the distraction and loss of key executives that may occur in connection with any potential or actual change in control, without providing accelerated benefits to executives who continue to enjoy employment after such a transaction. At the same time, the arrangement is believed to be more attractive to acquiring companies, who may place significant value on retaining members of the company's executive team. Consistent with
best practices, no excise tax or income tax gross-ups are provided to offset any tax liability as a result of any Change in Control separation or compensation plan payments.
The company has an Incentive Compensation Recovery Policy for all executive officers ("Covered Executives"). Under this Policy, the company will seek to recover or cancel cash or equity-based incentive compensation previously provided to a Covered Executive if within three years from the date such incentive compensation was provided, the company is required to prepare an accounting restatement due to material noncompliance with any then applicable financial reporting requirement under the securities laws and misconduct by the Covered Executive caused or contributed to the noncompliance. The Committee believes that the officers who certify the company's financial reporting should not be unjustly enriched for prior reporting periods in the event of such a restatement.
Section 162(m) of the Internal Revenue Code can potentially limit or disallow a federal income tax deduction to the company for compensation paid to our CEO and certain of our executive officers. One exception to Section 162(m)'s disallowance of a federal tax deduction applies to "performance-based compensation" paid pursuant to shareholder-approved plans.
To ensure that 2015 annual cash incentive awards for executive officers are considered "performance-based compensation", the Committee approved a maximum annual incentive opportunity under the CIP for 2015 for each of the named executive officers expressed as a percentage of the individual's annual salary (Ms. Smith, 190%; Mr. Schmidt, 161.5%; Ms. Twinem, Ms. Shoulak and Ms. Benning, each 152%). The maximum incentive opportunity would become payable for each executive officer if the company achieved positive operating earnings for 2015, but the Committee retained and expected to exercise discretion to reduce the amount payable based on the company and individual performance factors described earlier in this section. After certifying that the company had achieved positive earnings for 2015 and that maximum payouts could be made for each executive officer, the Committee exercised its discretion to reduce the amounts payable and approved the 2015 actual CIP payouts as set forth in the table on page 28.
At the Annual Shareholders' Meeting held on May 4, 2011, shareholders supported the recommendation to perform an annual say-on-pay vote. Therefore, the company will hold an advisory vote on named executive officer compensation each year. The company expects to hold the next vote to determine the frequency of the compensation advisory vote at our 2017 Annual Shareholders' Meeting.
The company seeks a non-binding advisory vote from its shareholders to approve the compensation of the named executive officers as described in this proxy statement under "Executive Compensation" and "Compensation Discussion and Analysis."
This proposal gives our shareholders the opportunity to express their views on the company's named executive officer compensation. Because the vote is advisory, it will not be binding upon the Board of Directors. However, the Committee will take into account the outcome of the vote when making future compensation decisions. Our 2014 compensation was supported by over 99% of our shareholders voting at the meeting, and the Committee did not make any significant changes to the compensation for 2015 because it felt that the compensation program fairly motivated and compensated our named executive officers, which was demonstrated by the strong support of the shareholders.
The executive compensation program has been designed so that our targeted total direct compensation opportunity is competitive with the median of our peer group, with the opportunity through cash and equity incentives to earn above this level when the company's performance warrants it. The Committee looks to implement a compensation program that promotes
consistent strong long-term growth in shareholder value and provides balanced incentives to executives and managers that reward a mix of annual and long-term financial performance.
As discussed under "Compensation Discussion and Analysis," the company believes that under our compensation policies and decisions, the named executive officers have an opportunity to be rewarded for achievement of performance goals and long-term sustained growth in company value. The key drivers of named executive officer compensation were our fiscal 2015 company performance, our performance for the previous three years and the individual performance of our named executive officers.
We are presenting this proposal, which gives you as a shareholder the opportunity to approve our named executive officer compensation as disclosed in this proxy statement by voting for or against the following resolution:
RESOLVED, that the shareholders approve the compensation of the company's named executive officers, as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the company's proxy statement for the annual meeting of shareholders to be held May 12, 2016.
THE BOARD OF DIRECTORS BELIEVES THAT THE COMPENSATION OF OUR NAMED
No member of the Committee was an officer or employee of the company during fiscal year 2015 or in any prior year, and no member of the Committee had a relationship which would require disclosure under Item 404(a) of Regulation S-K. There were no compensation committee interlocks as described in Item 407(e)(4) of Regulation S-K.
The Committee evaluates and establishes compensation for executive officers and oversees the deferred compensation plan, the equity plan, and other management incentive, benefit, and perquisite programs. Management has the primary responsibility for the company's financial statements and reporting process, including the disclosure of executive compensation. With this in mind, the Committee has reviewed and discussed with management the "Compensation Discussion and Analysis" found on pages 16-32 of this Proxy Statement. Based on the review and discussions with management, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement for filing with the Securities and Exchange Commission.
A copy of the current Compensation Committee Charter can be found on the Buffalo Wild Wings website at www.buffalowildwings.com.
The following table contains compensation information for the last three fiscal years relating to the Chief Executive Officer, Chief Financial Officer and the three other executive officers who were the most highly compensated for fiscal year 2015. Note that the CIP awards earned for each fiscal year are reported under the heading "Non-Equity Incentive Plan Compensation". The values shown under the headings of "Stock Awards" and "Option Awards" are the grant date fair values of the awards received in each fiscal year. Refer to the footnotes below for further explanation of all the items included in the Summary Compensation Table.
The following table summarizes the non-equity incentive plan awards and the long-term equity incentive awards made to our named executive officers in fiscal year 2015. The awards reflected in the equity incentive plan awards columns are PRSUs which are only earned if the company achieves a threshold level of performance over a three-year period. The stock option awards reflected in the table will not provide value unless there is an increase in share price above the option exercise price during the term of the option.
The following table contains information on outstanding equity awards by the named executive officers as of December 27, 2015:
The following table summarizes the stock option exercises and the stock awards (PRSUs) that vested for all named executive officers during fiscal 2015.
Named executive officers are eligible to participate in a nonqualified deferred compensation plan (the "Deferred Compensation Plan"). The Deferred Compensation Plan is an unfunded plan that allows executives to defer up to 100% of their salary, CIP award, and/or PRSU payout. The company makes a monthly contribution to the plan on behalf of our named executive officers to provide additional retirement benefits and assist with retention. The company contribution for named executive officers is 12.5% of base salary and vests ratably over five years from date of hire. Vesting may be accelerated for such events as death, disability, retirement, or change in control, as those terms are defined under the plan.
The Deferred Compensation Plan has investment fund choices that are very similar to our 401(k) Plan and the notional earnings credited on deferred amounts will fluctuate with an investment fund's actual market return. Company contributions and any earnings are paid out in five annual installments following termination of employment, except in the case of death where it is a lump sum payment. For the executive's deferrals and any earnings, the executive can elect to have deferred amounts paid at termination of employment or commencing at a specified date in the future. Payment form that can be elected is either lump sum or five annual installments.
The following table contains information about the contributions and balance for the Deferred Compensation Plan for the fiscal year ending December 27, 2015.
This section describes the potential termination payments for the named executive officers under various termination of employment scenarios as if they occurred at the end of fiscal 2015 (as of December 27, 2015). The values shown in the table are calculated as of this date based on certain estimates or assumptions as described in the footnotes. The actual amounts received may differ materially from those shown in the table. The table does not include amounts already vested that the executive would receive if he or she left the company for any reason. Examples would be the fully vested balance of their deferred compensation account (in table above) or gain from outstanding options that are exercisable (page 36).
Employment Agreements. On September 16, 2008, the company entered into amended and restated employment agreements with each of our then current executive officers, including the named executive officers. The initial term of the agreements ended on December 27, 2009, the last day of our 2009 fiscal year. All of these agreements provide for an automatic extension for successive one-year periods, each ending on the last day of the fiscal year, unless the agreement is terminated earlier or either party gives the other a non-renewal notice, and the agreements have thus been extended. The agreements set forth the position and duties of the executive officer, and describe the compensation and benefits programs provided by the company.
As provided in the agreements, the executives agree to restrictive provisions on the use of confidential information and intellectual property, and also agree to not compete with us and not hire or solicit our Team Members or customers, as those terms are defined, for one year following termination of employment. The agreements also provide for certain payments and benefits for certain termination of employment events. Upon an involuntary termination not for cause, the company's failure to renew an employment agreement, or resignation for "good reason" (collectively referred to as "qualified terminations"), an executive is entitled to receive the following provided that the executive agrees to sign a release of claims against the company and honors the restrictive covenants of the agreement:
Upon termination for "cause" (generally involving criminal conduct, gross misconduct, material violation of company policies or material breach of the employment agreements) or resignation without "good reason", the executive would not be entitled to any additional payments or benefits, other than those earned or accrued but not yet paid at the date of termination.
achieved. For termination due to death and disability, the outstanding PRSUs that are scheduled to vest at the end of the fiscal year in which termination of employment occurred will become vested. Payout will occur at the same time as other participants, and will be based on actual results for the performance period.
The following table summarizes our equity compensation plan information as of December 27, 2015, our fiscal year end.
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished the company and written representations that no reports on Form 5 were required, to the best of our knowledge, during fiscal year 2015, all officers, directors, and greater than ten-percent beneficial owners complied with the applicable filing requirements on a timely basis, except Kathleen Benning, Andrew Block, Lee Patterson, James Schmidt, Judith Shoulak, Sally Smith and Mary Twinem each filed two late reports on Form 4 relating to stock option awards received, Emily Decker filed one late report relating to a stock option award received and Warren Mack and Lee Patterson each filed one late report on Form 4 reporting sales.
Our Board of Directors has adopted a written policy with respect to related party transactions, which policy sets out procedures pursuant to which related party transactions are reviewed and approved. The policy covers all transactions between us and any related party (including any transactions requiring disclosure under Item 404 of Regulation S-K), other than transactions generally available to all Team Members and transactions involving less than $5,000 when aggregated with all similar transactions. The Audit Committee is generally responsible for reviewing and assessing the adequacy of the policy and recommends to the Board revisions to such policy. The Audit Committee oversees administration of the policy. A related party transaction may be consummated if it is either (a) ratified or approved by the Audit Committee and is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party or (b) it is approved by the disinterested members of the Board.
Since the beginning of