Definitive Proxy Statement

DEF 14A 1 d879087ddef14a.htm DEFINITIVE PROXY STATEMENT Definitive Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant x Filed by a Party other than the Registrant ¨

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¨		Preliminary Proxy Statement

¨		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x		Definitive Proxy Statement

¨		Definitive Additional Materials

¨		Soliciting Material Pursuant to § 240.14a-12

Nutrisystem, Inc.

(Name of Registrant as Specified in its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

April 1, 2015

To our Stockholders:

You are cordially invited to attend our 2015 Annual Meeting of Stockholders on Tuesday, May 12, 2015 at 10:00 a.m. (ET). This year’s annual meeting will be a completely virtual meeting of stockholders. You will be able to attend our 2015 Annual Meeting of Stockholders, vote, and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/ntri2015. Be sure to have your 12-Digit Control Number to join the meeting.

During the meeting, we will discuss each item of business described in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement, update you on important developments in our business and respond to any questions that you may have about us.

Information about the matters to be acted on at the meeting is contained in the accompanying Notice of Annual Meeting of Stockholders and Proxy Statement. Also enclosed herewith is your proxy card, which includes instructions for voting, and our 2014 Annual Report.

Your vote is extremely important.

You may vote by telephone, the internet or mail, as described in the instructions printed on the enclosed proxy card; by using the enclosed proxy card; or by voting in person at the meeting. Whether or not you expect to attend the Annual Meeting, please vote your shares.

I hope you will find it possible to participate in the meeting.

Best regards,

/s/ Michael J. Hagan

Michael J. Hagan

Chairman of the Board

LOGO

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 12, 2015

To the Stockholders of Nutrisystem, Inc.:

Our Annual Meeting of Stockholders (the “Annual Meeting”) will be held via live webcast at www.virtualshareholdermeeting.com/ntri2015 on Tuesday, May 12, 2015 at 10:00 a.m. (ET). Be sure to have your 12-Digit Control Number to join the meeting. At the Annual Meeting, stockholders will be asked to:

Elect our Board of Directors;

Ratify KPMG LLP as our independent registered public accounting firm;

Approve our Named Executive Officers’ compensation; and

Transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

Our Board of Directors unanimously recommends that you vote “FOR” the election of the Board’s director nominees (Proposal 1), “FOR” the proposal to ratify KPMG LLP as Nutrisystem’s independent registered public accounting firm for the year ending December 31, 2015 (Proposal 2), and “FOR” the approval of the compensation of our Named Executive Officers (Proposal 3).

Our Board of Directors has fixed the close of business on March 16, 2015 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

Whether or not you expect to attend the Annual Meeting online, please complete, sign, date and return the enclosed proxy card in the envelope provided or grant your proxy by telephone, internet or mail by following the instructions printed on the enclosed proxy card.

By Order of the Board of Directors,

/s/ Ralph J. Mauro

Ralph J. Mauro

Secretary

Fort Washington, Pennsylvania

April 1, 2015

NUTRISYSTEM, INC.

PROXY STATEMENT

This Proxy Statement and the enclosed form of proxy card, the foregoing Notice of Annual Meeting of Stockholders, and our enclosed 2014 Annual Report (the “Annual Report”), which are first being mailed to stockholders on or about April 8, 2015, are furnished in connection with the solicitation by the Board of Directors (the “Board”) of Nutrisystem, Inc., a Delaware corporation (“Nutrisystem” or the “Company”), for use at our 2015 Annual Meeting of Stockholders (the “Annual Meeting”) to be held via live webcast at www.virtualshareholdermeeting.com/ntri2015 on Tuesday, May 12, 2015 at 10:00 a.m. (ET), and at any adjournment or postponement thereof. Only stockholders of record at the close of business on March 16, 2015 (the “Record Date”) shall be entitled to notice of, and to vote at, the Annual Meeting.

Our Board unanimously recommends that you vote “FOR” the election of the Board’s director nominees (Proposal 1), “FOR” the proposal to ratify KPMG LLP as Nutrisystem’s independent registered public accounting firm for the year ending December 31, 2015 (Proposal 2), and “FOR” the approval of the compensation of our Named Executive Officers (Proposal 3).

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON MAY 12, 2015:

This Proxy Statement and the enclosed form of proxy card, and the enclosed Annual Report, are available at: https://materials.proxyvote.com/67069D.

TABLE OF CONTENTS


	Page
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING		1

THE PROPOSALS		6

PROPOSAL 1—ELECTION OF DIRECTORS		6

PROPOSAL 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		7

PROPOSAL 3—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICERS’ COMPENSATION		8

OUR BOARD OF DIRECTORS		9

Our Directors		9

Corporate Governance—Board and Committees		12

Director Independence		12

Board Leadership Structure and Risk Oversight		12

Compensation of Directors		13

Stock Ownership Guidelines		14

Board Committees		14

Code of Conduct		16

COMPENSATION DISCUSSION AND ANALYSIS		17

Executive Summary		17

Consideration of the Most Recent Stockholder Advisory Votes on Executive Compensation		18

Objectives of our Compensation Program		19

Compensation Decision-Making Process		19

Compensation Components		21

Program Changes for 2015		24

Employment Agreements		25

Compensation Policies and Other Considerations		26

Compensation Risk Assessment		27

COMPENSATION COMMITTEE REPORT		27

EXECUTIVE COMPENSATION		28

Summary Compensation Table		28

Grants of Plan-Based Awards Table		29

Outstanding Equity Awards at Fiscal Year-End Table		29

Option Exercises and Stock Vested Table		31

Payments and Potential Payments Upon Termination or Change in Control		31

REPORT OF THE AUDIT COMMITTEE		36

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	Page
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS – DECEMBER 31, 2014		37

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		37

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		39

Audit Fees		39

Audit-Related Fees		39

Tax Fees		39

All Other Fees		39

Pre-approval Policies and Procedures		39

OTHER MATTERS		40

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		40

RELATED PARTY TRANSACTIONS		40

ANNUAL REPORT		40

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GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Why are you receiving these proxy materials?

We are providing these proxy materials to you because our Board is asking (technically called soliciting) holders of our common stock to provide proxies to be voted at the Annual Meeting. The Annual Meeting is scheduled for May 12, 2015, commencing at 10:00 a.m. (ET) via live webcast at www.virtualshareholdermeeting.com/ntri2015. Your proxy will be used at the Annual Meeting and at any adjournment or postponement of the Annual Meeting. The accompanying Notice of Annual Meeting of Stockholders, this Proxy Statement and the enclosed proxy card, and the accompanying Annual Report are being mailed to stockholders beginning on or about April 8, 2015.

What will stockholders be voting on?

To elect our Board;

To ratify KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015;

To approve the compensation of our Named Executive Officers identified herein; and

To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

Who is entitled to vote at the Annual Meeting?

Only stockholders of record at the close of business on the record date, March 16, 2015, may vote at the Annual Meeting. There were 28,964,647 shares of our common stock outstanding on March 16, 2015. During the ten days before the Annual Meeting, you may inspect a list of stockholders eligible to vote. If you would like to inspect the list, please call Ralph J. Mauro, our Secretary, at 215-706-5300 to arrange a visit to our offices.

What are the voting rights of the holders of our common stock?

Each outstanding share of our common stock will be entitled to one vote on each matter considered at the Annual Meeting.

How can you vote?

If you are a record holder, meaning your shares are registered in your name, you may vote or submit a proxy:

1. By Telephone—You can vote your shares by a toll-free telephone number by following the instructions provided on the enclosed proxy card. The telephone voting procedures are designed to authenticate a stockholder’s identity to allow a stockholder to vote its shares and confirm that its instructions have been properly recorded. Voting by telephone authorizes the named proxies to vote your shares in the same manner as if you had submitted a validly executed proxy card.

2. Over the Internet—You can simplify your voting by voting your shares via the Internet as instructed on the enclosed proxy card. The Internet procedures are designed to authenticate a stockholder’s identity to allow a stockholder to vote its shares and confirm that its instructions have been properly recorded. Voting via the Internet authorizes the named proxies to vote your shares in the same manner as if you had submitted a validly executed proxy card.

3. By Mail—Complete and sign the enclosed proxy card and mail it in the enclosed postage prepaid envelope. Your shares will be voted according to your instructions. If you sign your proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board. Unsigned proxy cards will not be voted.

4. In Person Vote at the Annual Meeting Online— Any stockholder can attend the Annual Meeting live via the internet at www.virtualshareholdermeeting.com/ntri2015. The live webcast starts at 10:00 a.m. (ET). Stockholders may vote and submit questions while attending the Annual Meeting on the Internet. Please have your 12-Digit Control Number to join the Annual Meeting. Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/ntri2015. Questions regarding how to attend and participate via the Internet will be answered by calling 1-855-449-0991 on the day before the Annual Meeting and the day of the Annual Meeting.

Beneficial Owners, Broker Non-Votes and Abstentions

Most of our stockholders hold their shares in “street name” through a broker, bank or other nominee, rather than directly in their own names. If you hold your shares in one of these ways, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares. If you hold your shares in street name, your broker, bank or other nominee has enclosed a voting instruction card for you to use in directing your broker, bank or other nominee in how to vote your shares. We encourage you to provide voting instructions to your broker, bank or other nominee.

Brokers, banks, or other nominees that are member firms of the New York Stock Exchange and who hold shares in street name for customers have the discretion to vote those shares with respect to certain matters if they have not received instructions from the beneficial owners. Brokers, banks, or other nominees will have this discretionary authority with respect to routine matters such as the ratification of the appointment of our independent registered public accounting firm; however, they will not have this discretionary authority with respect to non-routine matters, including each of the other Annual Meeting proposals. With respect to non-routine matters, if beneficial owners do not provide voting instructions, these are called “broker non-votes.” As a result, in the event of a broker non-vote, such beneficial owners’ shares will be included in determining whether a quorum is present, but otherwise will not be counted. In addition, abstentions will be included in determining whether a quorum is present but otherwise will not be counted. Thus, a broker non-vote or an abstention will make a quorum more readily obtainable, but a broker non-vote or an abstention will not otherwise affect the outcome of a vote on a proposal that requires a plurality or majority of the votes cast. We encourage you to provide voting instructions to the organization that holds your shares.

Can you change your vote or revoke your proxy?

You may revoke your proxy at any time before your shares are voted at the Annual Meeting by:

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notifying our Secretary, Ralph J. Mauro, in writing, at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, PA 19034, that you are revoking your proxy;

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submitting a later dated proxy card;

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voting again by telephone or over the Internet; or

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attending and voting at the Annual Meeting online.

If you are the beneficial owner of shares held in street name, you must submit new voting instructions to your stockbroker, bank, or other nominee pursuant to the instructions you have received from them.

What is a proxy?

A proxy is a person you appoint to vote on your behalf. By using any of the methods discussed above, you will be appointing as your proxies Dawn M. Zier, our President and Chief Executive Officer, and Ralph J. Mauro, our Senior Vice President, General Counsel and Secretary. They may act together or individually on your behalf, and will have the authority to appoint a substitute to act as proxy. If you are unable to attend the Annual Meeting online, please use the means available to you to vote by proxy so that your shares of common stock may be voted.

How will your proxy vote your shares?

Your proxy will vote according to your instructions. If you choose to vote by mail and complete, sign, and return the enclosed proxy card but do not indicate your vote, your proxy will vote “FOR” the election of the eight director nominees named in Proposal 1, “FOR” the ratification of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2015 as set forth in Proposal 2, and “FOR” the approval of our Named Executive Officers’ compensation as set forth in Proposal 3. We do not intend to bring any other matter for a vote at the Annual Meeting, and we do not know of anyone else who intends to do so. However, with respect to any other business that properly comes before the Annual Meeting, your proxies are authorized to vote on your behalf using their judgment.

What constitutes a quorum?

The holders of a majority of the 28,964,647 shares of common stock outstanding as of the record date, either present or represented by proxy, constitutes a quorum. A quorum is necessary in order to conduct the Annual Meeting. If you choose to have your shares represented by proxy at the Annual Meeting, you will be considered part of the quorum. Broker non-votes and abstentions will be counted as present for the purpose of establishing a quorum. If a quorum is not present by attendance at the Annual Meeting or represented by proxy, the stockholders present by attendance at the meeting or by proxy may adjourn the Annual Meeting to a date not more than 120 days after the record date, until a quorum is present. If an adjournment is for more than 30 days or a new record date is fixed for the adjourned meeting, we will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.

What vote is required to approve each matter and how are votes counted?

Proposal 1—Election of Directors—For Proposal 1, the nominees will be elected by a plurality of the votes of the shares present by attendance at the Annual Meeting or represented by proxy and voted. This means that the nominees with the most votes for election will be elected. You may choose to vote or withhold your vote for such nominees. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of a director will not be voted with respect to the director indicated, although it will be counted for the purposes of determining whether there is a quorum.

Proposals 2 and 3—Ratification of Independent Registered Public Accounting Firm and Advisory Vote to Approve Named Executive Officers’ Compensation—For Proposals 2 and 3, the affirmative vote of the holders of shares of our common stock having a majority of the votes cast by the holders of all of the shares of our common stock present in person or represented by proxy and voting on such matter. A properly executed proxy marked “ABSTAIN” with respect to these proposals will not be voted, although it will be counted for purposes of determining the number of shares of common stock present in person or represented by proxy and entitled to vote.

Are there other matters to be voted on at the Annual Meeting?

We do not know of any other matters that may come before the Annual Meeting other than Proposals 1 through 3 included herein. If any other matters are properly presented at the Annual Meeting, the persons named as proxies in the enclosed proxy card intend to vote or otherwise act in accordance with their judgment on the matter.

Where can you find the voting results?

Voting results will be reported in a Current Report on Form 8-K, which we will file with the United States Securities and Exchange Commission (the “SEC”) within four business days following the Annual Meeting.

Who is soliciting proxies, how are they being solicited, and who pays the cost?

The solicitation of proxies is being made on behalf of our Board and we will bear the costs of the solicitation. This solicitation is being made by mail and through the Internet, but also may be made by telephone or in person. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes.

Who is our Independent Registered Public Accounting Firm, and will they be represented at the Annual Meeting?

KPMG LLP served as our independent registered public accounting firm for the fiscal year ended December 31, 2014 and audited our consolidated financial statements for such fiscal year and our internal control over financial reporting as of December 31, 2014. KPMG LLP has been selected by the Audit Committee to serve in the same role and to provide the same services for the fiscal year ending December 31, 2015. We expect that one or more representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire, and will be available to answer appropriate questions at the end of the meeting.

Why are you being asked to ratify the selection of KPMG LLP?

Although stockholder approval of our Audit Committee’s selection of KPMG LLP as our independent registered public accounting firm is not required, we believe that it is advisable to give stockholders an opportunity to ratify this selection. If this proposal is not approved at the Annual Meeting, the Audit Committee has agreed to reconsider its selection of KPMG LLP, but will not be required to take any action.

What is “householding” and how does it affect me?

Some banks, brokers and other nominee record holders may participate in the practice of “householding” proxy statements, annual reports and notices of Internet availability of proxy materials. This means that only one copy of this Proxy Statement and our Annual Report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of any such documents to you if you write, e-mail or call our Investor Relations Department at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, PA 19034, ir@nutrisystem.com or 646-277-1254.

If you want to receive separate copies of our Proxy Statement and Annual Report in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact our Investor Relations Department, in writing, at the address listed above.

When are stockholder proposals and director nominations for our 2016 Annual Meeting of Stockholders due?

Stockholders interested in submitting a proposal for inclusion in our proxy materials for the 2016 Annual Meeting of Stockholders may do so by following the procedures prescribed in Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be eligible for inclusion in our proxy materials, stockholder proposals must be received by our Secretary at our offices at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034, not later than December 10, 2015. If, however, the date of our 2016 Annual Meeting of Stockholders will be on or before April 12, 2016 or on or after June 11, 2016, then the deadline will be a reasonable time before we begin to print and send out our proxy materials. The dates referenced below with respect to proposing an item of business at our 2016 Annual Meeting will not affect any rights of stockholders to request inclusion of proposals in our proxy statement pursuant to Rule 14a-8 of the Exchange Act.

In addition, under our bylaws, a stockholder must follow certain procedures to nominate persons for election as directors or to introduce an item of business at an Annual Meeting of Stockholders. These procedures provide that a nomination for director nominee(s) and/or an item of business to be introduced at an Annual Meeting of Stockholders must be submitted in writing to our Secretary at our offices at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034. We must receive written notice of your intention to introduce a nomination or to propose an item of business at our 2016 Annual Meeting:

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after January 13, 2016, but before February 12, 2016; or

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if the 2016 Annual Meeting will be held before April 17, 2016 or after June 6, 2016, then no later than the close of business on the tenth day following the date on which notice of the date of the 2016 Annual Meeting of Stockholders is mailed or public disclosure of the date of the 2016 Annual Meeting of Stockholders is made, whichever first occurs.

Any such notice must include all of the information required to be in such notice pursuant to our bylaws.

THE PROPOSALS

PROPOSAL 1—ELECTION OF DIRECTORS

Our bylaws provide that the number of members of our Board shall be as fixed by our Board from time to time. The number of members of our Board is currently fixed at eight. The first proposal before the stockholders at the Annual Meeting is the election of our Board. Our Board recommends to our stockholders the election of the following designated nominees for election at the Annual Meeting, to serve as directors until the Annual Meeting of Stockholders held in 2016 and the election and qualification of his or her respective successor or until his or her earlier death, removal or resignation: Robert F. Bernstock, Paul Guyardo, Michael J. Hagan, Jay Herratti, Brian P. Tierney, Andrea M. Weiss, Stephen T. Zarrilli and Dawn M. Zier.

All nominees are presently directors, who have consented to be named herein and agreed to serve if elected. If this should not be the case, however, the proxies may be voted for a substitute nominee to be designated by the Board, or, as an alternative, the Board may reduce the number of directors to be elected at the Annual Meeting or leave the position(s) vacant.

Biographical information concerning each nominee for election as a director is set forth in the section of this Proxy Statement entitled “Our Board of Directors—Our Directors.”

Our Board unanimously recommends a vote “FOR” each of the Board’s eight director nominees listed in Proposal 1 on the enclosed proxy card.

PROPOSAL 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has selected KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015. We are submitting our selection of an independent registered public accounting firm for ratification by our stockholders at the Annual Meeting. KPMG LLP has audited our historical consolidated financial statements for all annual periods since 2002. Representatives of KPMG LLP will be present at the Annual Meeting and will be available to respond to appropriate questions.

Our bylaws do not require that the stockholders ratify the selection of KPMG LLP as our independent registered public accounting firm. However, we are submitting the selection of KPMG LLP to our stockholders for ratification as a matter of good corporate practice. If our stockholders do not ratify the selection, our Board and the Audit Committee will reconsider whether or not to retain KPMG LLP. Even if the selection is ratified, our Board and the Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such a change would be in the best interests of Nutrisystem and our stockholders.

Our Board unanimously recommends a vote “FOR” Proposal 2.

PROPOSAL 3—ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICERS’

COMPENSATION

We are again providing our stockholders with the opportunity to cast a non-binding advisory vote regarding the compensation of the Named Executive Officers (“NEOs”) identified in this Proxy Statement. Because we value the input of our stockholders, we have decided to conduct these advisory votes on an annual basis.

Our compensation program is designed with a “pay-for-performance” philosophy, the primary objectives of which are to:

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Attract and retain highly skilled executives. Our compensation philosophy is to provide target total direct compensation (“TDC”) opportunities that approximate the market median for equivalent positions at similarly-situated companies. Actual compensation earned may be above or below the target level based on performance along the metrics of the incentive compensation programs.

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Link compensation earned to achievement of the Company’s short- and long-term financial and strategic goals. The majority of each NEO’s compensation opportunity is variable and tied to the achievement of pre-established performance objectives and/or the performance of our stock.

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Align the interests of management with those of our stockholders. A substantial portion of compensation to our NEOs is in the form of equity-based incentives, subject to multi-year vesting schedules. In addition, we have robust stock ownership guidelines that require executives to acquire and maintain a meaningful ownership position in our stock.

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Adhere to high standards of corporate governance. Our program has appropriate balances between fixed and variable, short-term and long-term, and cash and equity components to mitigate compensation-related risks. Our compensation-related policies such as stock ownership guidelines, clawback policy, anti-hedging policy and anti-pledging policy further support strong governance principles.

Stockholders are urged to review the “Executive Compensation” section of this Proxy Statement for more information.

We are asking our stockholders to indicate their support for our NEOs’ compensation by voting FOR the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s proxy statement for the 2015 Annual Meeting pursuant to the compensation disclosure rules of the United States Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure).”

This is a non-binding advisory vote and, therefore, its outcome does not mandate any particular action. However, our Board and our Compensation Committee will carefully consider the outcome of this vote when making future decisions regarding the compensation of our NEOs.

Our Board unanimously recommends a vote “FOR” Proposal 3.

OUR BOARD OF DIRECTORS

Our Directors

The current members of our Board are set forth below. Five of our current Board members (i.e., Messrs. Guyardo, Hagan and Herratti and Mses. Weiss and Zier) were elected to our Board in 2012 or 2013. Messrs. Bernstock, Tierney and Zarrilli have each been members of our Board since 2005, 2003 and 2003, respectively. Each of the directors set forth below is serving a term set to expire at the Annual Meeting, and each possesses particular experiences, qualifications, attributes and skills, summarized below, to provide meaningful input and guidance to our Board and our management.

Robert F. Bernstock, 64, has served on our Board since December 2005. Since July 2010, Mr. Bernstock has been self-employed as an independent consultant for consumer products companies. Mr. Bernstock previously served as President of the Mailing and Shipping Services division of the United States Postal Service from June 2008 to June 2010. Prior to that, Mr. Bernstock served as Chairman and Chief Executive Officer of SecureSheet Technologies, a private software company, from September 2006 to May 2008, President and Chief Operating Officer of The Scotts Miracle-Gro Company, a marketer of branded consumer lawn and garden products, from October 2005 through September 2006, and President of North America for The Scotts Miracle-Gro Company from May 2003 to September 2005. He was a Senior Vice President and General Manager of The Dial Corporation, a manufacturer of personal-care and household-cleaning products, during 2002 and 2003. Mr. Bernstock was President and Chief Executive Officer and a director of Vlasic Foods International, a manufacturer and marketer of convenience food products, from 1998 to 2001. Prior to that, he held various management positions with Campbell Soup Company from 1985 to 1998, including as Executive Vice President (1997-1998), President of the U.S. Grocery Division (1996-1997), and President of the International Grocery Division (1993-1996). Mr. Bernstock has served as a director of The Pantry, Inc. (NASDAQ: PTRY) from October 2005 until March 2014, and he also serves as a director of a number of private companies.

Our Board believes that Mr. Bernstock is qualified to serve on our Board based on the breadth and diversity of his executive leadership experience and marketing experience, as well as his extensive corporate experience in working with diverse boards of directors and overseeing management. This background has provided him with a collection of corporate best practices and strategies to help inform our Board’s general corporate decision-making.

Paul Guyardo, 53, has served on our Board since June 2012. Since April 2012, Mr. Guyardo has been the Executive Vice President, Chief Revenue and Marketing Officer for DIRECTV, the nation’s leading satellite television service. From 2005 to April 2012, Mr. Guyardo served as Executive Vice President and Chief Marketing Officer for DIRECTV. Prior to joining DIRECTV, Mr. Guyardo served in a range of positions in marketing, consumer services, and product management with Kmart Corporation (2004-2005), Home Shopping Network (1996-2004), AT&T (1994-1996), and Johnson & Johnson (1991-1994). He started his career in the advertising industry representing consumer brands such as Noxzema, Procter & Gamble, and Frito Lay.

Our Board believes that Mr. Guyardo is qualified to serve on our Board based on his experience serving in a diverse range of positions in marketing, consumer services, and product management with some of the most recognizable consumer brands.

Michael J. Hagan, 52, has served on our Board since February 2012 and has been Chairman of the Board since April 2012. Mr. Hagan previously served as the Company’s Chairman and Chief Executive Officer from December 2002 to April 2008, as our non-executive Chairman from May 2008 to November 2008, and as our Lead Independent Director from February 2012 to April 2012. Mr. Hagan is a co-founder and Managing Partner of Hawk Capital Partners, a private equity fund formed in December 2014 that focuses on lower middle market businesses. From May 2013 until May 2014, Mr. Hagan was the President of LifeShield, Inc., a national, wireless home security system provider, and a subsidiary of DIRECTV. LifeShield was acquired by DIRECTV in June 2013. Prior to that, from December 2009 to May 2013, Mr. Hagan served as Chief Executive Officer, President

and Chairman of LifeShield. Previously, Mr. Hagan was the co-founder of Verticalnet Inc., a technology firm that provided supply management software and also created industry marketplaces, and held a number of executive positions at Verticalnet since its founding in 1995, including Chairman of the Board (2002-2005), President and Chief Executive Officer (2001-2002), Executive Vice President and Chief Operating Officer (2000-2001) and Senior Vice President prior to that time. Mr. Hagan has served as a director of Actua Corporation (NASDAQ: ACTA), formerly Internet Capital Group, Inc., since June 2007 and Franklin Square Investment Corp. (NYSE: FSIC) since April 2011.

Our Board believes that Mr. Hagan is qualified to serve on our Board based on his extensive knowledge of the business of Nutrisystem, having previously served as Nutrisystem’s Chief Executive Officer, as well as his significant experience as an entrepreneur and senior executive at other public and private businesses.

Jay Herratti, 48, has served on our Board since April 2013. Since May 2014, Mr. Herratti has served as the Executive Director of TEDx, a global set of conferences owned by the private non-profit Sapling Foundation, formed to disseminate “ideas worth spreading.” Mr. Herratti has also been the Principal of Jay Herratti Ventures since June 2013 where he is an investor and advisor to early-stage ventures with disruptive business models. From September 2004 to May 2012, Mr. Herratti held various positions with IAC/InterActiveCorp., or IAC, a leading media and Internet company, including as the Chief Executive Officer of CityGrid Media, LLC, or CityGrid Media an online media company that connects web and mobile publishers with local advertisers, from April 2007 to April 2012. CityGrid Media owns and operates leading consumer websites Urbanspoon, Citysearch and InsiderPages, as well as CityGrid, a local content and advertising network. From September 2004 to April 2007, Mr. Herratti served in several positions while at IAC, including SVP Strategic Planning, Chief Executive Officer of Evite, Interim Chief Executive Officer of IAC Advertising Solutions, and SVP Strategy for Home Shopping Network. Prior to joining IAC, Mr. Herratti held the position of SVP e-Business Strategy and Development for Federated Department Stores and, prior to that, he held senior positions with The Boston Consulting Group and GE Capital. He currently serves as a member of the Board of Directors of Constant Contact, Inc. (NASDAQ: CTCT).

Our Board believes Mr. Herratti is qualified to serve on our Board based on his extensive experience in digital and Internet-based businesses.

Brian P. Tierney, 58, has served on our Board since February 2003. Since November 2010, Mr. Tierney has served as the Chief Executive Officer of Realtime Media LLC, a digital marketing services firm. Since November 2010, Mr. Tierney has also served as the Chief Executive Officer of Brian Communications, a strategic communications firm. Prior to that, Mr. Tierney was the Publisher of the Philadelphia Inquirer and Daily News and Chief Executive Officer of its parent company, Philadelphia Media Holdings LLC, from June 2006 and August 2006, respectively, until October 2010. In February 2009, Philadelphia Newspapers LLC, a subsidiary of Philadelphia Media Holdings LLC, filed voluntary petitions for reorganization relief pursuant to Chapter 11 of the United States Bankruptcy Code. Mr. Tierney previously served as Chairman and Chief Executive Officer of Tierney Holdings LLC, a private investment firm from 2005 to 2006. From 2004 to 2005, he served as Vice Chairman of Advanta Corp., a financial services company that served the small business market. Prior to that, he was the founding partner of T2 Group, a public relations firm, from 2003 until it was sold to Advanta Corp. in 2004. Mr. Tierney currently serves on the board of directors of Republic First Bancorp. Inc. (NASDAQ: FRBK). Mr. Tierney also serves on a variety of civic, educational and charitable boards of directors.

Our Board believes that Mr. Tierney is qualified to serve on our Board based on his extensive corporate leadership background, having served as chief executive officer of several businesses, as well as his significant marketing experience.

Andrea M. Weiss, 59, has served on our Board since March 2013. She is the founder and current President and Chief Executive Officer of Retail Consulting, Inc., a boutique consulting firm specializing in retail and consumer brands, and has served as its President and Chief Executive Officer since its formation in October 2002. In January 2014, Ms. Weiss also co-founded and is currently the Managing Member of The O Alliance

LLC, a new branch of Retail Consulting, Inc., which provides consulting services with respect to omni-channel retailing. She has extensive specialty retail experience having served in several senior executive positions with dELiA*s Inc., The Limited, Inc., Intimate Brands, Inc., Guess, Inc., and Ann Taylor Stores, Inc. Ms. Weiss currently serves on the boards of directors of The Pep Boys – Manny, Moe & Jack (NYSE: PBY), Cracker Barrel Old Country Store, Inc. (NASDAQ: CBRL) and Chico’s FAS, Inc. (NYSE: CHS). Previously, Ms. Weiss served on the boards of directors of Grupo Cortefiel (2006-2007), GSI Commerce, Inc. (2006-2011), eDiets.com, Inc. (2004-2009) and Brookstone, Inc. from (2002-2005). In July 2014, Ms. Weiss joined the board of directors of Newgistics, a private logistics firm. Ms. Weiss serves on several private advisory boards.

Our Board believes that Ms. Weiss is qualified to serve on our Board based on her extensive corporate background in marketing and brand development, specifically in the diet industry, and her public company board experience.

Stephen T. Zarrilli, 53, has served on our Board since December 2003. Since November 2012, Mr. Zarrilli has been President and Chief Executive Officer and a member of the board of directors of Safeguard Scientifics, Inc. (NYSE: SFE), a public company that provides growth capital for entrepreneurial and innovative health care and technology companies. Prior to his promotion to Chief Executive Officer, Mr. Zarrilli served as the Senior Vice President and Chief Financial Officer of Safeguard Scientifics, Inc. since June 2008. From January 2005 until June 2008, Mr. Zarrilli served as co-founder and Managing Partner of Penn Valley Management Group, LLC, a private-equity investment and consulting firm. From December 2006 to June 2007, Mr. Zarrilli also served on an interim basis as the Acting Chief Financial Officer of Safeguard Scientifics, Inc. Previously, Mr. Zarrilli was the Chief Financial Officer of Fiberlink Communications Corp., a software and services enterprise, from August 2001 to December 2004. Within the past five years, Mr. Zarrilli served as a director of Clarient, Inc., a publicly- traded company (which was sold to General Electric in December 2010). Mr. Zarrilli also serves as a director and member of the audit committee of Virtus Investment Partners, Inc. (NASDAQ: VRTS).

Our Board believes that Mr. Zarrilli is qualified to serve on our Board based on his extensive management leadership experience and public and private company board experience, as well as his extensive financial and accounting expertise in connection with his current and past services as the chief financial officer of public companies.

Dawn M. Zier, 50, has served as our President and Chief Executive Officer and as a member of our Board since November 2012. Before joining us, Ms. Zier served as the President of International at RDA Holding Co., the holding company and parent of The Reader’s Digest Association, Inc., a global media and direct marketing company (the “Reader’s Digest Association”), since April 2011 and as an Executive Vice President of the Reader’s Digest Association since February 2011. From October 2009 to February 2011, Ms. Zier served as President, Europe of the Reader’s Digest Association. Prior to serving in these roles, Ms. Zier served as the President of Global Consumer Marketing for the Reader’s Digest Association from June 2008 to October 2009 and as the President and Chief Executive Officer of Direct Holdings U.S. Corp., a marketer of audio and video products and at such time a subsidiary of the Reader’s Digest Association, from June 2009 to October 2009. From August 2005 to June 2008, Ms. Zier served as the President of North American Consumer Marketing for the Reader’s Digest Association. Ms. Zier also served on the Direct Marketing Education Foundation’s Board of Trustees from 2010 to 2012 and on the Direct Marketing Association’s Board of Directors since 2008, and also as its Secretary from October 2012 to October 2014. From 2005 to 2009 she chaired the Magazine’s Director’s Advisory Committee for the Audit Bureau of Circulations.

Our Board believes that Ms. Zier is qualified to serve on our Board based on her extensive management leadership experience, which has provided Ms. Zier with significant knowledge of sound corporate governance practices, as well as her intimate knowledge of the business and affairs of Nutrisystem, as its Chief Executive Officer.

Corporate Governance—Board and Committees

Our Board is responsible for the supervision of our overall affairs. Our Board met on five occasions during the year ended December 31, 2014. Regularly scheduled executive sessions of the Board’s independent directors were held as well. Each then current director attended at least 75% of all Board and applicable committee meetings during 2014. Directors are encouraged to attend the annual stockholders meeting. Directors Robert F. Bernstock, Paul Guyardo, Michael J. Hagan, Brian P. Tierney, Andrea M. Weiss, Stephen T. Zarrilli, and Dawn M. Zier attended our 2014 Annual Meeting.

Our Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Information regarding the members of each committee and their responsibilities is set forth below under “Board Committees.”

Stockholders and other interested parties may write to the Board, any director, any of the committee chairs or the independent directors as a group at: c/o Secretary, Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034. In addition, stockholders may also communicate by e-mail with our independent directors as a group by sending their correspondence to: nonmanagementdirectors@nutrisystem.com.

Director Independence

Our Board currently consists of eight members, seven of whom our Board has determined are independent directors. The standards relied upon by the Board in affirmatively determining whether a director is “independent,” in compliance with the rules of the NASDAQ Stock Market LLC, are comprised, in part, of those objective standards set forth in the NASDAQ rules. The Board is responsible for ensuring that independent directors do not have a material relationship with us or any of our affiliates or any of our executive officers or his or her affiliates. These guidelines are consistent with the independence requirements of the NASDAQ listing standards and are set forth in our Corporate Governance Guidelines, which are available on our website, www.nutrisystem.com.

The Board, in applying the above-referenced standards, has affirmatively determined that the Company’s current independent directors are: Robert F. Bernstock, Paul Guyardo, Michael J. Hagan, Jay Herratti, Brian P. Tierney, Andrea M. Weiss and Stephen T. Zarrilli.

Board Leadership Structure and Risk Oversight

The Company seeks to maintain an appropriate balance between management and the Board. Our Board does not have a policy regarding the separation of the offices of Chairman of the Board and Chief Executive Officer. Our Board believes that it is important to retain the flexibility to combine or separate the responsibilities of the offices of Chairman of the Board and Chief Executive Officer, as from time to time it may be in the best interests of the Company.

In April 2012, the Board named Mr. Hagan as Chairman. The Board believes that presently it is in the best interests of the Company that the positions of Chairman of the Board and Chief Executive Officer are separate. This policy allows the Chief Executive Officer to focus primarily on leading the day-to-day operations of the Company while the Chairman can focus on leading the Board in the performance of its duties. The Board acknowledges that there may be circumstances in the future when it is in the best interests of the Company to combine the positions of Chairman of the Board and Chief Executive Officer.

The Board is obligated to conduct periodic executive sessions of the directors without those directors who are also executive officers of the Company. These directors shall designate one director to preside at each session, although it need not be the same director at each session. The Chairman of the Board, as long as he or she is not a member of management, will chair these meetings.

Management regularly reports on any potential material risks to the Company at each quarterly Board meeting. Our Chief Executive Officer and Chief Financial Officer provide these routine reports. In addition, we had an outside advisor provide a summary risk assessment to management in 2012. Management shared the results of this assessment with the Audit Committee, which in turn shared the results with the Board. Management reports regularly to the full Board, which also considers the Company’s risk factors. While the Board oversees the Company’s risk management, Company management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our Company and that our Board leadership structure supports this approach.

Compensation of Directors

The following table provides information regarding compensation for our non-employee directors for the fiscal year ended December 31, 2014, which reflects the directors’ fees and stock awards described below. The table does not include compensation for reimbursement of travel expenses related to attending Board and Board committee meetings.

DIRECTOR COMPENSATION


Name	Fees Earned or Paid in Cash ($)		Stock Awards ($) (1) (2)		Total ($)
Robert F. Bernstock		49,087		64,996		114,083
Paul Guyardo		40,000		64,996		104,996
Michael J. Hagan		65,000		64,996		129,996
Jay Herratti		45,000		64,996		109,996
Brian P. Tierney		46,587		64,996		111,583
Andrea M. Weiss		45,000		64,996		109,996
Stephen T. Zarrilli		63,125		64,996		128,121

(1)

The values reported in the Stock Awards column reflect grants to each of our non-employee directors of 3,885 shares of fully vested common stock on May 13, 2014. These values were calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718 (formerly Statement of Financial Accounting Standards No. 123(R)) (“FASB ASC 718”).

(2)	As of December 31, 2014, the number of shares of unvested restricted stock held by each director was as follows: Paul Guyardo—3,142 shares, Michael J. Hagan—2,929, Jay Herratti—8,948 shares, and Andrea M. Weiss—8,130.

Employee directors do not receive any additional compensation for their service as directors. The compensation earned by Ms. Zier, as President and Chief Executive Officer, for 2014 is included in Executive Compensation below under the heading “Summary Compensation Table,” and her outstanding equity awards are included below under the heading “Outstanding Equity Awards at Fiscal Year-End Table.”

Non-employee directors are compensated pursuant to our Compensation Policy for Non-Employee Directors. That policy provides that, upon initial appointment or election to the Board of Directors, a new non-employee director receives shares of restricted stock with a value of $100,000. These shares vest in three equal installments on the first three anniversaries of the date of grant, subject in each case to the director’s continued service to us through the applicable vesting date. The number of restricted shares subject to each such award is determined by dividing $100,000 by the closing price per share of our common stock on the date of grant, rounded to the nearest whole number.

Non-employee directors also receive an annual retainer grant of common stock with a value of $65,000. These shares are fully vested on the date of grant, but may not be transferred until the first anniversary of the date

of grant. The number of shares subject to each such grant is determined by dividing $65,000 by the closing price per share of our common stock on the date of grant, rounded to the nearest whole number. For 2015, non-employee directors will receive this grant on the date of the 2015 Annual Meeting of Stockholders.

Each non-employee director also receives an annual cash retainer of $35,000. Our Non-Executive Chairman receives an additional retainer of $30,000 per year. The chairs of the Audit, Compensation and Nominating and Corporate Governance Committees receive additional annual retainers of $20,000, $10,000 and $7,500, respectively. Non-chair members of the Audit Committee receive an additional annual cash retainer of $10,000. Non-chair members of committees other than the Audit Committee receive additional annual cash retainers of $5,000.

Stock Ownership Guidelines

Our Board adopted stock ownership guidelines in March 2012 that prohibit sales of our stock by our non-employee directors if those sales would cause such director’s stock holdings to fall below three times the director’s annual cash retainer. Similar guidelines apply to our NEOs (but with ownership thresholds adapted to their positions) and are discussed further below in the Compensation Discussion and Analysis, under the heading “Stock Ownership Guidelines.”

Board Committees

Audit Committee. The Audit Committee was established by the Board for the purpose of overseeing the accounting and financial reporting processes of the Company and audits of the Company’s consolidated financial statements and the Company’s internal control over financial reporting.

The members of the Audit Committee are Stephen T. Zarrilli (Chairman), Jay Herratti and Andrea M. Weiss. In the opinion of the Board, all of the members of the Committee meet the NASDAQ and SEC independence requirements. The Board has determined that the Audit Committee Chairman, Mr. Zarrilli, qualifies as an Audit Committee Financial Expert as defined by the rules of the SEC in Item 407(d)(5) of Regulation S-K. For the relevant experience of Mr. Zarrilli that qualifies him as an audit committee financial expert, please see his biographical information in “Our Board of Directors—Our Directors.”

The Audit Committee operates under a charter adopted by the Board that governs its responsibilities. Copies of the Audit Committee charter can be obtained free of charge from the Company’s website, www.nutrisystem.com, or by contacting the Company to the attention of the Secretary at our offices at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034. The Audit Committee appoints the Company’s independent registered public accounting firm, oversees its independence and monitors the integrity of the Company’s financial reporting process and system of internal controls. The Audit Committee meets quarterly with the Company’s principal financial and accounting officers and independent registered public accounting firm to review the scope of auditing procedures, the Company’s policies relating to generally accepted accounting principles, and to discuss results of the quarterly reviews and the annual audit of the Company’s consolidated financial statements and internal control over financial reporting.

The Audit Committee met five times in 2014.

For information on audit fees, see “Independent Registered Public Accounting Firm.”

Compensation Committee. The members of the Compensation Committee are Robert F. Bernstock (Chairman), Brian P. Tierney and Stephen T. Zarrilli. On May 13, 2014, Mr. Tierney stepped down as Chairman of the Compensation Committee and was succeeded by Mr. Bernstock on that date.

The Compensation Committee has responsibility for administering and approving annually all elements of compensation for the Company’s NEOs. It also reviews and approves the Company’s incentive compensation plans and equity-based plans. The Compensation Committee also advises and makes recommendations to the

Board on non-employee director compensation. The Compensation Committee has the authority to delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as the Compensation Committee may deem appropriate in its sole discretion. In addition, the Compensation Committee may, on occasion, approve a pool of equity grants and delegate the authority to the Chief Executive Officer to issue such awards to employees and consultants. The Compensation Committee reports to stockholders on executive compensation items as required by the SEC. In the opinion of the Board, all the members of the Compensation Committee meet the NASDAQ independence requirements. See “Executive Compensation” for additional information with respect to the role of our Compensation Committee.

The Compensation Committee operates under a formal charter adopted by the Board that governs its responsibilities. Copies of the Compensation Committee charter can be obtained free of charge from the Company’s website, www.nutrisystem.com, or by contacting the Company to the attention of the Secretary at our offices at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034.

The Compensation Committee met six times in 2014.

Compensation Committee Interlocks and Insider Participation. During 2014 and as of the date of this Proxy Statement, none of the members of the Compensation Committee was or is an officer or employee of the Company, and no executive officer of the Company served or serves on the compensation committee or board of any company that employed or employs any member of the Company’s Compensation Committee or Board of Directors.

Nominating and Corporate Governance Committee. The members of the Nominating and Corporate Governance Committee are Brian P. Tierney (Chairman), Paul Guyardo and Robert F. Bernstock. On May 13, 2014, Mr. Bernstock stepped down as Chairman of the Nominating and Corporate Governance Committee and was succeeded by Mr. Tierney on that date.

The Nominating and Corporate Governance Committee is responsible for recommending to the Board the structure and operations of the Board and the responsibilities, structure and operation of each Board committee. Additionally, the Nominating and Corporate Governance Committee recommends qualified candidates to the Board for election as directors, including the slate of directors that the Board proposes for election by stockholders at annual meetings. While the Nominating and Corporate Governance Committee does not have a formal diversity “policy,” the Nominating and Corporate Governance Committee recommends candidates based upon many factors, including the diversity of their business or professional experience, the diversity of their background and their array of talents and perspectives. We believe that the Nominating and Corporate Governance Committee’s existing nominations process is designed to identify the best possible nominees for the Board, regardless of the nominee’s gender, racial background, religion, or ethnicity. The Nominating and Corporate Governance Committee identifies candidates through a variety of means, including recommendations from members of the Board and suggestions from our management including our Chief Executive Officer. In addition, the Nominating and Corporate Governance Committee considers candidates recommended by third parties, including stockholders. The Nominating and Corporate Governance Committee gives the same consideration to candidates recommended by stockholders as those candidates recommended by members of our Board. Stockholders wishing to recommend director candidates for consideration by the Nominating and Corporate Governance Committee may do so by writing to our Secretary and giving the recommended candidate’s name, biographical data and qualifications.

The Nominating and Corporate Governance Committee operates under a formal charter adopted by the Board that governs its responsibilities. Copies of the Nominating and Corporate Governance Committee charter can be obtained free of charge from the Company’s website, www.nutrisystem.com, or by contacting the Company to the attention of the Secretary at our offices at Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034.

The Nominating and Corporate Governance Committee met four times in 2014.

Code of Conduct

The Board has adopted a Code of Conduct which outlines the principles, policies and laws that govern our activities and establishes guidelines for conduct in the workplace. The Code of Conduct applies to our directors as well as our employees, including senior financial officers. Every officer and other managerial employee is required to read the Code of Conduct annually. A copy of the Code of Conduct will be supplied free of charge by submitting a request to our Secretary, Nutrisystem, Inc., Fort Washington Executive Center, 600 Office Center Drive, Fort Washington, Pennsylvania 19034. A copy of the Code of Conduct is also available on the investor relations section of our website, www.nutrisystem.com.

In the event that we make any amendment to, or grant any waiver including an implicit waiver from, a provision of the Code of Conduct that applies to our principal executive officer, principal financial officer or principal accounting officer or controller, or persons performing similar functions, and that requires disclosure under applicable SEC rules, we intend to disclose the amendment or waiver and the reasons therefor on our website, www.nutrisystem.com, within four business days of the date of the amendment or waiver.

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, the compensation decisions the Compensation Committee has made under those programs and the factors considered in making those decisions. This Compensation Discussion and Analysis focuses on the compensation of NEOs for 2014, who were:

•

Our President and Chief Executive Officer, Dawn M. Zier

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Our Executive Vice President and Chief Marketing Officer, Keira Krausz

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Our Executive Vice President and Chief Financial Officer, Michael P. Monahan

Executive Summary

Performance Highlights

In 2014, we continued to execute on our four-point turnaround plan, which focuses on new product innovation, maximization of our direct-to-consumer business, channel expansion to capture greater market share, and operational excellence. Our 2014 financial performance was strong; highlights included:

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Revenue grew to $403.1 million in 2014 from $358.1 million in 2013, an increase of 13%. This represented the Company’s first year of year-over-year revenue growth in six years.

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Adjusted earnings before interest, taxes, depreciation, amortization and non-cash employee compensation (“Adjusted EBITDA”) grew to $42.7 million in 2014 from $31.6 million in 2013, an increase of 35%.

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Adjusted earnings per share (“Adjusted EPS”) grew to $0.66 in 2014 from $0.40 in 2013, an increase of 65%.

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Our revenue growth in the fourth quarter of 2014 represented the sixth consecutive quarter of year-over-year revenue growth.

With respect to 2013, “Adjusted EBITDA” and “Adjusted EPS” are presented as adjusted to remove the impact of severance costs and a legal settlement.

Executive Compensation Highlights

Our compensation program is designed with a “pay-for-performance” philosophy. Our executive compensation program includes the following elements: base salary, annual cash bonus opportunity, and equity-based long-term incentives. The majority of each executive’s TDC opportunity is in the form of variable elements, a significant portion of which is equity-based, long-term incentive compensation, as illustrated in the following charts:

LOGO

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Annual Bonus Achievements: Based on our Adjusted EBITDA performance (weighted 80%) and Revenue performance (weighted 20%), as described below, the NEOs earned bonuses equal to 124% of target for 2014 performance.

•

Long-Term Equity Incentives: In March 2014, the Compensation Committee granted long-term equity incentives to the NEOs through a combination of performance-based restricted stock units (“PRSUs”) (weighted 50%), stock options (weighted 25%), and restricted stock awards (weighted 25%).

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2014-2015 PRSUs: PRSUs granted in 2014 may be earned from 0 to 150% of the target number of units, based on our Adjusted EPS for the two-year period ending December 31, 2015.

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2013-2014 PRSUs: The two-year performance period for the PRSUs granted in 2013 ended December 31, 2014. During that period our Adjusted EPS was $0.96 (as adjusted to remove the impact of 2013 severance costs), and these awards were paid out at 150% of the target number of units. Each earned PRSU was converted to a common share on February 27, 2015.

Governance Highlights

Our executive compensation practices are intended to be straightforward, transparent and reflective of modern notions of strong corporate governance. Our commitment to strong corporate governance can be understood by reviewing the following list of what we do and do not do:

WhatWe Do:

WhatWe Do Not Do:

ü The majority of our executive pay is tied to performance.

ü Fifty percent of our long-term incentive compensation is in PRSUs, which vest based on the achievement of pre-established, multi-year performance goals.

ü Our Compensation Committee retains a nationally recognized, independent compensation consultant who provides no other services to the Company.

ü We require executive officers and directors to acquire and maintain meaningful ownership of our stock to ensure their interests are closely aligned with the long-term financial interests of our stockholders.

ü We have a compensation recovery (“clawback”) policy.

ü We require our NEOs to enter into reasonable non-competition and non-solicitation covenants.

× We do not provide golden parachute excise tax or other tax gross-ups.

× We do not provide “single-trigger” cash severance upon a change in control.

× We do not provide “single-trigger” vesting acceleration in annual equity awards upon a change in control.

× We do not pay dividends on unearned PRSUs.

× We do not provide significant perquisites or supplemental executive retirement plans.

× Our equity plans expressly forbid option repricing, and exchange of underwater options for other awards or cash, without stockholder approval.

× We prohibit executives and directors from hedging and pledging Company stock.

Consideration of the Most Recent Stockholder Advisory Votes on Executive Compensation

At the 2014 Annual Meeting, more than 96% of all votes cast were in favor of our executive compensation program. The Compensation Committee interprets the overwhelmingly favorable 2014 vote as an endorsement of the changes the Compensation Committee made over the last few years, and no changes were made to our programs directly because of the 2014 vote outcome. However, the Compensation Committee regularly reviews and refines our compensation practices to seek to ensure that they remain prudent and effective. After the last such review, some minor changes to the program, effective for 2015, were made to strengthen the alignment between pay and performance (see “Program Changes for 2015” below).

Objectives of our Compensation Program

The primary objectives of our compensation programs are to:

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Attract and retain highly skilled executives. Our compensation philosophy is to provide target TDC opportunities that approximate the market median for equivalent positions at similarly-situated companies. Actual compensation earned may be above or below the target level based on performance along the metrics of the incentive compensation programs.

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Align the interests of management with those of our stockholders. A substantial portion of NEO compensation is in the form of equity-based incentives, subject to multi-year vesting schedules. In addition, we have robust stock ownership guidelines that require executives to acquire and maintain a meaningful ownership position in our stock.

•

Compensation Decision-Making Process

Role of Compensation Committee and Management

Management provides input into the design of incentive compensation programs, to ensure these programs support the Company’s business objectives and strategic priorities. With respect to performance measures and goals, the annual operating plan initially established by management, but approved by the Board, is an important input into the Compensation Committee’s decision making process. In addition, our Chief Executive Officer works with the Compensation Committee and its independent consultant to develop recommendations for pay levels for executives other than herself, based on competitive market data, internal fairness between executives, past performance and future potential. Members of the management team attend Compensation Committee meetings, but are not present for executive sessions. The Compensation Committee makes all final decisions with respect to compensation of our executive officers.

Role of Consultants

At the beginning of 2014, Mercer was engaged as the Compensation Committee’s independent consultant. The scope of Mercer’s engagement by the Compensation Committee in 2014 was to update the Company’s peer group, provide a competitive assessment of executive compensation, and review recommendations with and decisions made by the Compensation Committee. Mercer performed these services solely on behalf of the Compensation Committee.

Mercer was paid $18,475 for executive compensation consulting services to the Compensation Committee in 2014. Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”). Marsh Inc., a separate and independent operating subsidy of MMC, was also engaged in 2014 by management to perform various insurance brokerage and related services for us, unrelated to executive compensation. For these services, we paid Marsh Inc. $170,000 in 2014. The Compensation Committee did not specifically approve or otherwise

participate in the selection of Marsh Inc. as our insurance broker. The Compensation Committee assessed the independence of Mercer pursuant to SEC rules and Nasdaq listing standards and concluded that no conflicts of interest existed.

In July 2014, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“Cook & Co.”) as its independent executive compensation advisor. Cook & Co. reports directly to the Compensation Committee and does no work for management that is not under the Compensation Committee’s purview. During 2014, Cook & Co. performed the following services:

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reviewed the comparative peer group used in competitive pay comparisons and made recommendations for changes;

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conducted a competitive analysis of all elements of target TDC for our executive officers and made recommendations for changes, as appropriate;

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conducted a competitive analysis of our aggregate long-term incentive grant practices, including annual share usage, annual fair value transfer, and potential dilution;

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reviewed the design and structure of our annual and long-term incentive programs and recommended certain changes; and

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reviewed our severance and change in control benefits and other compensation policies.

A representative of Cook & Co. attends meetings of the Compensation Committee, as requested, and communicates with the Compensation Committee Chair between meetings. The Compensation Committee assessed the independence of Cook & Co. pursuant to SEC rules and Nasdaq listing standards and concluded that no conflicts of interest exist.

Peer Group and Benchmarking in 2013 to Establish 2014 Pay Opportunities

The Compensation Committee engaged in formal benchmarking in 2013 with respect to setting target TDC opportunities for 2014. The benchmarking used two reference points to assess competitive compensation levels: peer group data and data from broad-based market surveys of companies with revenues between $200 and $800 million and averaging $550 million, as of the most recent fiscal year end occurring prior to October 2013 (when the reference points were developed). With advice from Mercer, the Compensation Committee selected the companies set forth in the table below as our peer group for the 2013 competitive analysis:


1-800-FLOWERS.COM	Nature’s Sunshine Products, Inc.	Shutterfly, Inc.
Blue Nile, Inc.	Orbitz Worldwide Inc.	United Online, Inc.
Medifast, Inc.	Rosetta Stone Inc.	Weight Watchers International Inc.

Each of these peer group companies has a business orientation that is similar to ours, in that it is either a provider of weight management services, nutrition products or online or direct marketing services. The annual revenues for these peer group companies were less than $1.825 billion ($871 million excluding Weight Watchers), with a median of $649 million, as of November 2013 (when the analysis was conducted). Weight Watchers was included in the peer group, despite its much larger size, because it is our closest, publicly-traded, direct competitor.

Competitive compensation comparisons were made against corresponding positions at the peer group companies and within the third-party surveys. Our Chief Executive Officer’s and Chief Financial Officer’s compensation were benchmarked against publicly disclosed chief executive officer and chief financial officer compensation within our benchmarked data set. Given the fact that not every company within the benchmark data set discloses the compensation of its most senior marketing professional, our Chief Marketing Officer’s compensation was benchmarked against the average of the second and third most senior named executive officers’ compensation within the benchmarked data set. For benchmarking purposes, the peer group and market

survey data were weighted evenly. The resulting data source is referred to in this discussion as “benchmark data.” This benchmark data was used in 2013 when we evaluated each compensation component (in particular, with respect to the size and mix of equity awards) and total compensation levels.

For 2014, the Compensation Committee set target TDC opportunities for the Chief Executive Officer that approximated the 50^th percentile of the benchmark data, and set target TDC opportunities for the other NEOs between the 50^th and 75^th percentiles of the benchmark data. With respect to the mix between compensation elements, the Compensation Committee reaffirmed the principle that variable pay elements (i.e., PRSUs, stock options and target annual bonuses) should constitute at least 50% of each NEO’s target TDC.

Peer Group and Benchmarking in 2014 to Establish 2015 Pay Opportunities

During 2014, Cook & Co. reviewed our peer group and recommended several changes, in particular to use a larger number of companies to mitigate the volatility and influence of potential outliers on the peer group data. Based on this advice, the Compensation Committee selected the companies set forth in the table below as our peer group for the 2014 competitive analysis:


1-800-FLOWERS.COM	Nature’s Sunshine Products, Inc.	United Online, Inc.
Blue Nile, Inc.	Orbitz Worldwide Inc.	Vitacost.com, Inc.
Boulder Brands, Inc.	Rosetta Stone Inc.	Vitamin Shoppe, Inc.
FTD Companies, Inc.	Shutterfly, Inc.	Weight Watchers International Inc.
Medifast, Inc.

The peer group companies were selected based on their reasonably similar size to us (as defined by annual revenues and market capitalization), their similar customer and/or product profile, and/or their online or direct marketing focus. The annual revenues for these peer group companies ranged from approximately $213 million to $1.6 billion ($1.1 billion excluding Weight Watchers), with a median of $477 million, as of August 31, 2014 (when the analysis was conducted). Despite its larger size, Weight Watchers was included in the peer group because it is our closest, publicly-traded, direct competitor.

This group was used to establish TDC opportunities for 2015, which the Compensation Committee set to approximate the market 50^th percentile for each NEO.

Compensation Components

The principal elements of target TDC for our NEOs are base salary, annual cash bonus opportunities, and equity-based, long-term incentive awards. Each of the components is discussed below.

Base Salary

Base salaries provide a minimum level of pay that reflects each NEO’s position and scope of responsibility, individual performance, and future potential, as demonstrated over time. The initial base salary of each NEO is stated in his or her respective employment agreements. Base salaries are re-evaluated annually to determine whether adjustments are appropriate given changes in the benchmark data or in executive responsibilities. Our Chief Executive Officer makes recommendations to the Compensation Committee with respect to changes to the base salary of our NEOs, other than herself. Our Compensation Committee determines and approves any changes to the base salaries of our Chief Executive Officer and our other NEOs.

For 2014, the Compensation Committee increased Ms. Zier’s annual base salary from $600,000 to $630,000 and increased the salaries of both Ms. Krausz and Mr. Monahan from $300,000 to $325,000. These salaries approximated the 50^th percentile of then-current benchmark data for their respective positions. All such increases were approved at the Compensation Committee’s meeting in February 2014 and were retroactively effective to January 6, 2014.

Performance-Based Annual Cash Bonus for 2014

Our annual cash bonus program is designed to reward annual accomplishments against pre-established financial goals.

For 2014, each NEO has a target bonus opportunity specified in his or her respective employment agreements. Actual bonuses may be $0 or may range from a threshold of 50% to a maximum of 150% of the target amount, based on achievement of the financial performance goals. Performance below threshold for a particular measure results in no bonus for that component. The 2014 threshold, target and maximum cash bonus opportunities for the NEOs are set forth in the table below:


Named Executive Officer	Threshold (50% of Target) ($)		Target ($)		Maximum (150% of Target) ($)
Dawn M. Zier		250,000		500,000		750,000

Keira Krausz		113,750		227,500		341,250

Michael P. Monahan		113,750		227,500		341,250

The financial measures for 2014 bonuses for our NEOs were Adjusted EBITDA (weighted 80%) and Revenue (weighted 20%). The Compensation Committee chose to emphasize Adjusted EBITDA because it represents one of the clearest measures of our operational performance. The Compensation Committee uses Revenue, albeit with a lower weighting, to focus our executives on top line growth. The threshold, target, and maximum goals for each measure, along with our actual performance in 2014, are outlined in the following table:

Measure

Threshold
($)

Target
($)

Maximum
($)

Actual
($)

Weighted % of
Target Bonus
Earned

Adjusted EBITDA (weighted 80%)

33.7 mil.

39.6 mil.

45.5 mil.

42.7 mil.

101

Revenue (weighted 20%)

378 mil.

398 mil.

418 mil.

403 mil.

Total Bonus (% of Target)

124

Based on our 2014 performance, Ms. Zier earned a bonus of $620,000 and both Ms. Krausz and Mr. Monahan earned $281,265 in bonus with respect to performance in fiscal 2014. These amounts are disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

We have disclosed Adjusted EBITDA in previous filings and define it as net income excluding depreciation, amortization, income tax, interest, non-cash compensation and other items. We have used the same definition of Adjusted EBITDA for bonus calculation purposes for the year ended December 31, 2014, which can be derived from the net income reported in our consolidated financial statements as follows:


Adjusted EBITDA Component	Year Ended December 31, 2014 ($000s)
Net income		19,311

Depreciation and amortization		7,849

Income tax expense		9,791

Interest expense, net		142

Non-cash employee compensation		5,621


Adjusted EBITDA		42,714

Long-Term Equity Incentives

Equity incentives have historically represented the largest component of our NEOs’ compensation, in order to closely align the interests of our NEOs with the interests of our stockholders. In recent years, the Compensation Committee has used a “portfolio approach” to the grant of equity incentives and has therefore issued a combination of stock options, restricted stock and PRSUs to achieve a balance between the retention and incentive effects of these awards.

In 2014, the Compensation Committee granted our NEOs target long-term equity incentives in the following approximate mix by grant-date fair value: 50% PRSUs, 25% stock options and 25% restricted stock. The Compensation Committee believes that tying one-half of the annual equity grants to the achievement of performance targets emphasizes the linkage between multi-year corporate performance and executive compensation. The same mix was used in 2013.

Performance-Based Restricted Stock Units

2013-2014 PRSUs. The PRSUs granted in 2013 were able to be earned based on the achievement by the Company of the following goals for Adjusted EPS for the two-year period ended December 31, 2014:


2013-2014 Adjusted EPS	Payout as % of Target Number of PRSUs
<$0.42		0	%
$0.42		50	%
$0.70		100	%
>=$0.95		150	%

Our Adjusted EPS for the two-year period ended December 31, 2014 was $0.96, which resulted in payout of 150% of the target number of PRSUs granted in 2013.

The Compensation Committee chose Adjusted EPS for the two-year period as the performance goal because it strongly supports the Company’s turnaround mission. The use of Adjusted EPS focuses management’s attention inward on absolute Company performance during the two-year performance periods of these awards. In selecting Adjusted EPS as the relevant performance measure, the Company focused again on earnings as a critical measure of operational success, but distinguished the PRSU performance measure from the annual cash bonus performance measure (Adjusted EBITDA). By including interest, taxes, depreciation and amortization, and non-cash employee compensation in the measure of Adjusted EPS for the PRSUs, the Compensation Committee intends to link executive pay to profitability as well as capital decisions, and ultimately longer-term growth in stockholder value.

2014-2015 PRSUs. The PRSUs granted in 2014 had the same general design as the PRSUs granted in 2013 and vesting will be based on Adjusted EPS for the two-year period ending December 31, 2015. The performance scale for the 2014 PRSUs is as follows:


Performance Achieved	Payout as % of Target Number of PRSUs
Less than 60% of Target		0	%
60% of Target		50	%
Target		100	%
135% of Target or More		150	%

Linear interpolation will be used for performance between the listed breakpoints.

Stock Options and Restricted Stock

The Compensation Committee believes that stock options help to retain and motivate our NEOs to build stockholder value over the term of the stock option because stock options only have value if our stock price

appreciates following the grant date. In the view of the Compensation Committee, stock options represent performance-based compensation. For balance, the Compensation Committee continues to believe that awarding a limited amount of time-vested restricted stock remains appropriate as a retention tool.

Annual awards of stock options and restricted stock granted in 2014 vest in equal installments of 25% on each of the first four anniversaries of the respective grant dates, provided the NEO is employed by us on each vesting date. Each stock option grant has a term of seven years, rather than the standard ten years, in order to encourage the more rapid creation of stockholder value.

Benefits

We maintain a 401(k) defined contribution program for all eligible employees. We have no other pension or other deferred compensation program for senior executive officers or any other employees. We also provide supplemental long-term disability benefits to our senior executives because caps under our group long-term disability program restrict benefits under that program to a lower percentage of pay than was generally applicable to our other employees.

Program Changes for 2015

During 2014, at the direction of the Compensation Committee, Cook & Co. conducted a comprehensive review of the design and structure of our executive compensation programs. As a result of this review, the Compensation Committee made certain changes to our executive compensation program to better align with competitive practices and strengthen the alignment between pay and performance. The changes fell into two categories: 1) Change of Timing of Annual Long-Term Incentive Grants and 2) Minor Structural Modifications, each of which is described in more detail below.

Change of Timing of Annual Long-Term Incentive Grants

Historically, the Compensation Committee approved the size of annual equity awards at its February meeting and made such grants effective after the release of the prior year’s fourth quarter earnings, based on the Company’s then-prevailing stock price. Cook & Co. recommended that the Compensation Committee determine the annual equity awards earlier, at a time when management and the Board do not yet have knowledge of preliminary results of the Company’s upcoming diet season. In an effort to improve the transparency of its grant process, the Compensation Committee accepted this recommendation for 2015 annual awards and intends to follow this approach in future years.

Minor Structural Modifications

•

The PRSUs granted in 2015 are similar to those granted in 2014 in that they also constitute 50% of the Company’s annual long-term incentive grants to NEOs, and the number of shares earned will be based on a two-year Adjusted EPS. However, the service-vesting schedule associated with the 2015 awards has been extended from two-year cliff vesting to three-year graded vesting, thus extending the period of stockholder alignment to a three-year total performance/vesting period. If an NEO terminates employment prior to the expiration of the three-year total performance/vesting period (other than by the Company for cause or by the NEO in anticipation of a termination for cause), the NEO may still be entitled to a pro-rata number of shares based on the two-year Adjusted EPS based on the date of grantee’s separation from the Company.

•

In addition, to align the Company’s equity grant practices with market norms and provide a consistent three-year vesting period for all long-term incentives, the service-vesting schedule associated with the Company’s stock option and restricted stock awards was reduced from four years to three years.

•

While the Company’s target TDC opportunities were generally competitive with market median, Cook & Co.’s competitive review found that the maximum earning opportunity as a percentage of target in the annual and long-term incentive programs were below market. Based on competitive practice and to further support the Company’s pay-for-performance philosophy, Cook & Co. recommended and the Compensation Committee approved that the maximum payout under the Company’s 2015 annual cash incentive program and the 2015 PRSU awards be increased from 150% to 200% of target, with a commensurate increase in the difficulty of the goals required for maximum payout under each program.

•

Cook & Co.’s competitive analysis indicated that the target TDC opportunity for the Company’s CEO position was below market median, due to a target annual bonus opportunity that was low relative to market practice. As a result, the Compensation Committee increased Ms. Zier’s 2015 target annual performance bonus opportunity from the greater of 75% of base salary or $500,000, to 100% of base salary. The Compensation Committee also increased Ms. Zier’s base salary from $630,000 to $650,000.

Employment Agreements

We enter into employment agreements with our NEOs to attract the individuals we deem most qualified in a highly competitive environment. These employment agreements specify the NEO’s base salary and bonus opportunities and provide that the NEO is eligible to receive certain payments and benefits if his or her employment is involuntarily terminated. The severance arrangements protect the NEOs from financial loss associated with an involuntary termination without cause. In particular, these severance arrangements enable NEOs to remain neutral in the face of a transaction that is in the best interests of shareholders, but may result in loss of employment. These severance arrangements also serve as consideration for the post-termination non-competition and non-solicitation covenants we require from each of our NEOs.

Each employment agreement generally specifies the executive’s starting salary, target annual bonus opportunity, inducement awards (if any) and customary indemnification rights. The agreements also generally provide for certain payments and/or benefits if the executive’s employment ceases due to a termination by us without cause, by the executive with good reason or due to the executive’s death or disability. The rights are described in detail below for each of our currently employed NEOs under the heading “Payments and Potential Payments Upon Termination or Change in Control.”

Each employment agreement or other agreement entered into concurrently with the employment agreement generally also includes customary restrictive covenants. In the cases of Ms. Krausz and Mr. Monahan, each is subject to a one-year post-termination non-competition covenant and a two-year post-termination non-solicitation covenant. In Ms. Zier’s case, she is subject to two-year post-termination non-competition and non-solicitation covenants.

In addition to these items, Ms. Zier’s employment agreement provides that she will be nominated for re-election as a member of the Board during her tenure as Chief Executive Officer and that, during the first two years of Ms. Zier’s tenure, she received a temporary housing and transportation allowance of $4,167 per month.

Compensation Policies and Other Considerations

Stock Ownership Guidelines

Our Board adopted stock ownership guidelines in March 2012 that prohibit sales of our stock by our executive officers and our non-employee directors if those sales would cause such individual’s stock holdings to fall below a certain threshold. For our non-employee directors the ownership requirement is three times the annual cash retainer, which would currently equal $105,000. The ownership requirement, based on the current 2015 base salary compensation for each of our current NEOs, is indicated in the table below:


Position	Ownership Requirement (as multiple of salary)		Ownership Requirement ($)
Chief Executive Officer		5 x base salary		3,250,000
Chief Marketing Officer		2 x base salary		670,000
Chief Financial Officer		2 x base salary		670,000

For purposes of these guidelines, an officer’s holdings include vested shares held directly by the officer or his/her immediate family members, the intrinsic value of vested stock options and vested but unsettled restricted stock units. These guidelines do not restrict the sale or withholding of shares in connection with the cashless exercise of options or the satisfaction of tax obligations arising in connection with the vesting or settlement of equity awards. Our Board may waive these restrictions on a case by case basis, but it is anticipated that waivers will be rare.

These guidelines, together with our continued use of equity-based compensation, are intended to emphasize the alignment of interests between management and our stockholders in a demonstrable and firm manner, with the objective of encouraging high performance and discouraging inappropriate risk taking.

Anti-Hedging Policy

Our Board also adopted an anti-hedging policy that provides that our directors and executive officers may not directly or indirectly engage in transactions that would have the effect of reducing the economic risk of holding our securities.

Anti-Pledging Policy

In July 2014, our Board amended the Company’s Insider Trading Policy Statement to provide that our directors, executive officers or employees, and any of their respective spouses, other persons living in such person’s household and minor children and entities over which such person exercises control, are prohibited from entering into pledging transactions or similar arrangements with respect to Company securities.

Clawback Policy

Pursuant to a clawback policy adopted in 2012, if we are required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement, we will recalculate all incentive compensation, whether cash- or equity-based, paid or credited to a person covered by the policy for the restated period. In addition, if any person covered by the policy engages in intentional misconduct that contributes to an erroneous measure of our financial results, then all incentive compensation paid or credited to him or her for the affected period will be recalculated (whether or not a restatement is then required). To the extent the recalculated compensation exceeds the amount previously paid or credited based on the erroneous results, the excess amount must be returned to us (if previously paid) or will be forfeited (if previously credited, but not yet paid). Our Chief Executive Officer, executive vice presidents and senior vice presidents are covered by this policy, as well as anyone else that our Chief Executive Officer or Chief Financial Officer designates.

Tax Considerations

Section 162(m) of the Internal Revenue Code (Section 162(m)) generally disallows a publicly held corporation’s tax deduction for compensation paid to its chief executive officer and certain of its other executive officers in excess of $1,000,000 in any year. Compensation that qualifies as performance-based compensation is exempt from the $1,000,000 deductibility cap.

The Compensation Committee considers the deductibility of compensation when designing our programs and authorizing individual awards and seeks to achieve full deductibility when feasible. For example, our PRSUs and our stock option awards are intended to qualify for exemption from the deductibility limit of Section 162(m). However, the Compensation Committee’s ability to exercise discretion and to retain flexibility in the payment of compensation may, in certain circumstances, outweigh the advantages of qualifying all compensation as exempt from the limit of Section 162(m).

Compensation Risk Assessment

Our Compensation Committee considers risks related to our compensation programs (especially with respect to our executive compensation programs) when determining how to structure our employees’ compensation. Based on our assessments of our compensation programs, we have concluded that risks arising from our compensation policies and practices are not reasonably likely to have a material adverse effect on our Company. In reaching this conclusion, the Compensation Committee considered the following aspects of our compensation programs that discourage excessive risk-taking:

•

Incentive awards incorporate multiple measures of performance, which diversifies the risks associated with any single indicator of performance. Cash and equity incentives each have distinct goals, which further diversifies risk. Payouts under our incentive plans are subject to caps.

•

All of our equity grants vest over a multi-year period, which encourages grantees to take a long-term view.

•

We have implemented policies specifically intended to mitigate risk, such as our stock ownership guidelines and clawback, anti-hedging and anti-pledging policies.

COMPENSATION COMMITTEE REPORT

Our Committee reviewed and discussed the foregoing “Compensation Discussion and Analysis” with management, and based on such review and discussions, the Committee recommended to the Board of Directors that the “Compensation Discussion and Analysis” be included in this Proxy Statement.

Robert F. Bernstock, Chairman

Brian P. Tierney

Stephen T. Zarrilli

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth certain information regarding compensation earned for 2012, 2013 and 2014 by our NEOs:


Name and Principal Position	Year		Salary ($)		Bonus ($)			Stock Awards ($) (1)			Option Awards ($) (1)		Non-Equity Incentive Plan Compensation ($)		All Other Compensation ($)			Total ($)
Dawn M. Zier,		2014		630,000		70,894	(2)		933,750	(3)		311,250		620,000		63,738	(4)		2,629,632
Chief Executive Officer		2013		600,000		284,500			638,000			272,817		284,500		67,927			2,147,744
		2012		62,308		500,000			1,100,000			245,081		—		6,088			1,913,477

Keira Krausz,		2014		325,000		—			258,750	(3)		86,250		281,265		2,859	(5)		954,124
Chief Marketing Officer		2013		259,616		144,490			630,000			210,000		119,490		204			1,363,800

Michael P. Monahan,		2014		325,000		—			258,750	(3)		86,250		281,265		12,417	(6)		963,682
Chief Financial Officer		2013		176,539		119,490			480,000			160,000		119,490		7,097			1,062,616

(1)

The amounts reported in the Stock Awards and Option Awards columns represent the aggregate grant date fair value calculated in accordance with FASB ASC 718. Information concerning these amounts and the assumptions used to calculate these amounts may be found in Item 8, Financial Statements and Supplementary Data and Notes 2 and 10 to the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2015.

(2)	Amount represents previously-disclosed retention bonus of $70,894 approved by the Compensation Committee.

(3)

In accordance with SEC rules, the amounts reported in the Stock Awards column for 2014 include the grant date fair value of PRSUs granted during 2014. The grant date fair value for this purpose is required to be shown even where the PRSUs were not ultimately earned. The following table provides information regarding the grant date fair value of the 2014 PRSUs based on the expected and maximum performance outcomes:


Named Executive Officer	Grant Date Fair Value (i.e., Based on Expected Performance) ($)		Value at Grant Date Assuming Maximum Performance ($)		Actual Realizable Value at Grant Date ($)
Dawn M. Zier		622,500		933,750		—
Keira Krausz		172,500		258,750		—
Michael P. Monahan		172,500		258,750		—

(4)	Amount represents the Company’s payment of temporary housing expenses of $44,234, the Company’s matching contributions under the 401(k) plan of $10,400 and the Company’s payment of premiums for supplemental long-term disability coverage of $9,104.

(5)	Amount represents the Company’s matching contributions under the 401(k) plan of $500 and the Company’s payment of premiums for supplemental long-term disability coverage of $2,359.

(6)	Amount represents the Company’s matching contributions under the 401(k) plan of $10,400 and the Company’s payment of premiums for supplemental long-term disability coverage of $2,017.

Grants of Plan-Based Awards Table

The following table summarizes information regarding grants of plan-based awards for the NEOs during the fiscal year ended December 31, 2014:


Name	Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)						Estimated Future Payouts Under Equity Incentive Plan Awards (2)						All Other Stock Awards: Number of Shares of Stock or Units (#) (3)		All Other Option Awards: Number of Securities Underlying Options (#) (4)		Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($) (5)
Name	Grant Date		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)		Target (#)		Maximum (#)						Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($) (5)
Dawn M. Zier		—		250,000		500,000		750,000		—		—		—		—		—		—		—
		3/20/2014		—		—		—		—		—		—		—		80,169		14.95		311,250
		3/20/2014		—		—		—		—		—		—		20,819		—		—		311,250
		3/20/2014		—		—		—		20,820		41,639		62,459		—		—		—		622,500

Keira Krausz		—		113,750		227,500		341,250		—		—		—		—		—		—		—
		3/20/2014		—		—		—		—		—		—		—		22,216		14.95		86,250
		3/20/2014		—		—		—		—		—		—		5,769		—		—		86,250
		3/20/2014		—		—		—		5,769		11,538		17,307		—		—		—		172,500

Michael P. Monahan		—		113,750		227,500		341,250		—		—		—		—		—		—		—
		3/20/2014		—		—		—		—		—		—		—		22,216		14.95		86,250
		3/20/2014		—		—		—		—		—		—		5,769		—		—		86,250
		3/20/2014		—		—		—		5,769		11,538		17,307		—		—		—		172,500

(1)

Amounts represent the annual cash bonus opportunities each such NEO was eligible to receive in fiscal 2014. The criteria used to determine the amount of the annual bonus payable to each executive is described above under “Performance-Based Annual Cash Bonus for 2014.” These bonuses were ultimately earned at 124% of target; earned amounts are disclosed in the Non-Equity Incentive Plan Compensation column of the “Summary Compensation Table” above.

(2)	Amounts represent PRSUs granted to NEOs during the 2014 fiscal year. The criteria used to determine the number of PRSUs earned by each NEO is described above under “Performance-Based Restricted Stock Units”.

(3)	These shares of restricted stock vest in four equal tranches on the first four anniversaries of the date of grant.

(4)	These option awards vest in four equal tranches on the first four anniversaries of the date of grant.

(5)	Amounts represent the grant date fair value calculated in accordance with FASB ASC 718.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth outstanding equity awards for the NEOs at December 31, 2014:


	Option Awards										Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)			Market Value of Shares or Units of Stock That Have Not Vested ($) (1)		Equity Incentive Plan Awards: Number of Unearned Units That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Units That Have Not Vested ($) (1)
Dawn M. Zier		144,168	(2)		292,639	(2)		(2)		(2)		39,569	(3)		773,574		198,088	(4)		3,872,620
Keira Krausz		31,611	(5)		117,051	(5)		(5)		(5)		35,627	(6)		696,508		69,244	(7)		1,353,720
Michael P. Monahan		24,736	(8)		96,428	(8)		(8)		(8)		25,617	(9)		500,812		58,692	(10)		1,147,429

(1)	The market value is based on the closing stock price of $19.55 on the last day of trading in 2014.

(2)	Amount includes:


Grant Date	Number of Options Exercisable		Number of Options Unexercisable		Option Exercise Price ($)		Option Expiration Date
11/15/12		89,878		89,879		7.31		11/15/19
3/21/13		34,150		102,450		8.52		3/21/20
5/21/13		20,140		20,141		9.07		11/15/19
3/20/14		—		80,169		14.95		3/20/21

These option awards generally vest in four equal tranches on the first four anniversaries of the date of grant; however, the May 21, 2013 award vests in four equal tranches on each November 15^th following the date of grant.

(3)	Time-vested restricted stock awards that vest as set forth in the table below:


Number of Restricted Shares		Vesting Date
6,250		3/21/15
6,250		3/21/16
6,250		3/21/17
5,204		3/20/15
5,205		3/20/16
5,205		3/20/17
5,205		3/20/18

(4)

The amount in the PRSU column includes (i) 60,804 PRSUs that may be earned based on relative total shareholder return (“TSR”) performance for the three-year period ending December 31, 2015 and that will vest on that date, to the extent earned, (ii) 74,825 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ended December 31, 2014 and that vested on February 27, 2015, and (iii) 62,459 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ending December 31, 2015. Amount shown assumes performance at maximum level with respect to such awards, in accordance with SEC rules, and equals (i) $1,188,718 for the TSR Award and (ii) $1,462,829 and $1,221,073 for the Adjusted EPS Awards, respectively. The 74,825 PRSUs referred to in clause (ii) vested on February 27, 2015 in connection with the Compensation Committee’s certification of the Adjusted EPS performance metric of $0.96, which resulted in payout of 150% of the target number of PRSUs granted in 2013.

(5)	Amount includes:


Grant Date	Number of Options Exercisable		Number of Options Unexercisable		Option Exercise Price ($)		Option Expiration Date
2/11/13		17,983		53,951		8.38	2/11/20
3/21/13		13,628		40,884		8.52	3/21/20
3/20/14		—		22,216		14.95	3/20/21

The options become exercisable in four equal tranches on the first four anniversaries of the applicable date of grant.

(6)	Time-vested restricted stock awards that vest as set forth in the table below:


Number of Restricted Shares		Vesting Date
7,458		2/11/15
7,458		2/11/16
7,459		2/11/17
2,494		3/21/15
2,494		3/21/16
2,495		3/21/17
1,442		3/20/15
1,442		3/20/16
1,442		3/20/17
1,443		3/20/18

(7)

The amount in the PRSU column includes (i) 51,937 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ended December 31, 2014 and that vested on February 27, 2015, and (ii) 17,307 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ending December 31, 2015. Amount shown assumes performance at maximum level with respect to both awards, in accordance with SEC rules, and equals $1,015,368 and

$338,352, respectively. The 51,937 PRSUs referred to in clause (i) vested on February 27, 2015 in connection with the Compensation Committee’s certification of the Adjusted EPS performance metric of $0.96, which resulted in payout of 150% of the target number of PRSUs granted in 2013.

(8)	Amount includes:


Grant Date	Number of Options Exercisable		Number of Options Unexercisable		Option Exercise Price ($)		Option Expiration Date
5/22/13		24,736		74,212		8.88	5/22/20
3/20/14		—		22,216		14.95	3/20/21

The options become exercisable in four equal tranches on the first four anniversaries of the applicable date of grant.

(9)	Time-vested restricted stock awards that vest as set forth in the table below:


Number of Restricted Shares		Vesting Date
5/22/15		6,616
5/22/16		6,616
5/22/17		6,616
3/20/15		1,442
3/20/16		1,442
3/20/17		1,442
3/20/18		1,443

(10)

The amount in the PRSU column includes (i) 41,385 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ended December 31, 2014 and that vested on February 27, 2015, and (ii) 17,307 PRSUs that may be earned based on Adjusted EPS performance for the two-year period ending December 31, 2015. Amount shown assumes performance at maximum level with respect to both awards, in accordance with SEC rules and equals $809,077 and $338,352, respectively. The 41,385 PRSUs referred to in clause (i) vested on February 27, 2015 in connection with the Compensation Committee’s certification of the Adjusted EPS performance metric of $0.96, which resulted in payout of 150% of the target number of PRSUs granted in 2013.

Option Exercises and Stock Vested Table

The following table sets forth information regarding stock vesting for the NEOs for the fiscal year ended December 31, 2014:


	Stock Awards
Name	Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($) (1)
Dawn M. Zier		60,970		1,031,213
Keira Krausz		9,952		146,122
Michael P. Monahan		6,616		110,421

(1)	The value realized on vesting of stock awards is based on the closing stock price on the date of vesting.

There were no option exercises by the NEOs for the fiscal year ended December 31, 2014.

Payments and Potential Payments Upon Termination or Change in Control

Ms. Zier, Ms. Krausz and Mr. Monahan each have agreements with us that provide for payments and benefits in connection with a cessation of employment with us under certain circumstances, as described in more detail below.

Dawn M. Zier

If Ms. Zier’s employment is terminated by us without cause or by her for good reason, she is entitled to: (i) continuation of her base salary for two years, (ii) continuation of group health coverage for 18 months at the active employee rate, (iii) a pro-rata portion of any annual bonus otherwise earned for the year of termination,

(iv) full acceleration of the stock option award that was made to Ms. Zier as an inducement to accept the Company’s offer of employment, (v) accelerated vesting of the next tranche of her annual restricted stock awards and her annual stock option awards, (vi) a pro-rata portion of the PRSUs that were granted to Ms. Zier as an inducement to accept the Company’s offer of employment, based on actual corporate performance through the end of the performance period, and (vii) payment for 12 months of outplacement services, up to a maximum cost of $50,000.

If Ms. Zier’s employment ceases due to her death or disability, she is entitled to: (i) a pro-rata portion of any annual bonus otherwise earned for the year of termination, (ii) a pro-rata portion of her inducement PRSUs, based on actual corporate performance through the end of the performance period, and (iii) full vesting of her inducement stock option award.

The payments described above in connection with a termination without cause, resignation for good reason and disability are all conditioned on Ms. Zier’s execution of a general release of claims against us.

Under the terms of our standard annual stock option and restricted stock awards, if Ms. Zier’s employment is terminated by us without cause, by her for good reason, or due to her death or disability, any such award held by her will become vested with respect to the next otherwise unvested tranche. However, if such termination occurs within 12 months following a change in control, then in lieu of the treatment described in the preceding sentence, the vesting of any such award will accelerate in full.

Under the terms of our standard annual PRSU awards, if Ms. Zier’s employment is terminated by us without cause or by her for good reason, she will remain eligible to earn a pro-rata portion of any such award held by her based on the portion of the performance period worked by her and based on actual corporate performance through the end of the applicable performance period. If her employment ceases due to her death or disability, she will earn a pro-rata portion of any such award based on the portion of the performance period actually worked by her and assuming target performance. The post-termination vesting for PRSU awards granted to Ms. Zier in 2015 and thereafter are described above in the Compensation Discussion and Analysis under the heading “Program Changes for 2015.”

The following table summarizes information regarding potential payments upon a hypothetical termination or a change of control as of December 31, 2014 for Ms. Zier:


Event	Cash Severance ($) (1)		Accelerated Equity Vesting ($)			Other Benefits ($) (2)		Total ($)
Termination without cause or for good reason		1,260,000		4,869,831	(3)		52,534		6,182,365
Termination due to death or disability		—		3,914,551	(4)		—		3,914,551
Termination without cause, for good reason or due to death or disability, within 12 months following a Change in Control		1,260,000		6,449,411	(5)		52,534		7,761,945

(1)	Payable in periodic installments over two years.

(2)	Estimated cost of $2,534 to continue group health benefits for 18 months plus 12 months of outplacement assistance, calculated based on the maximum of $50,000 to which Ms. Zier is entitled under her agreement.

(3)

Ms. Zier’s 11,454 unvested restricted shares that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of her inducement stock option award and one year of acceleration on her annual stock option awards of 54,192 shares. Ms. Zier is entitled to retain a pro-rata portion of her PRSU grants based on the portion of the performance period worked by her. Accordingly, 146,590 PRSUs would be eligible to be delivered to Ms. Zier at the end of the performance period, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 74,825 PRSUs that were delivered to Ms. Zier on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

(4)

Ms. Zier’s 11,454 restricted shares that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of her inducement stock option award and one year of acceleration on her annual stock option awards of 54,192 shares. Ms. Zier is entitled to retain a pro-rata portion of her PRSU grants based on the portion of the performance period worked by her, and the PRSUs would be delivered at target regardless of the outcome of the performance goals; thus, 97,727 PRSUs would be delivered.

(5)

Ms. Zier’s 39,569 unvested restricted shares that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of her inducement stock option award and her annual stock option awards. Ms. Zier would receive a pro-rata portion of her PRSU grants based on the portion of the performance period worked by her. Accordingly, 146,590 PRSUs would be eligible to be delivered to Ms. Zier at the end of the performance period, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 74,825 PRSUs that were delivered to Ms. Zier on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

Keira Krausz

If Ms. Krausz’s employment is terminated by us without cause or by her for good reason, she is entitled to: (i) continuation of her base salary for one year, (ii) continuation of group health coverage for 12 months at the active employee rate, (iii) a pro-rata portion of any annual bonus otherwise earned for the year of termination, and (iv) if such termination occurs after the second anniversary of her hire, we will vest the remainder of her inducement stock option and restricted stock awards.

The treatment of our standard annual stock option, restricted stock and PRSU awards upon a cessation of employment, as described above for Ms. Zier, will also apply to any such awards held by Ms. Krausz.

The payments and benefits described above are all conditioned on Ms. Krausz’s execution of a general release of claims against us.

The following table summarizes information regarding potential payments upon a hypothetical termination or a change of control as of December 31, 2014 for Ms. Krausz:


Event	Cash Severance ($) (1)		Accelerated Equity Vesting ($)			Other Benefits ($) (2)		Total ($)
Termination without cause or for good reason		325,000		1,784,040	(3)		13,404		2,122,444
Termination due to death or disability		—		1,389,179	(4)		—		1,389,179
Termination without cause, for good reason or due to death or disability, within 12 months following a Change in Control		325,000		3,036,829	(5)		13,404		3,375,233

(1)	Payable in periodic installments over one year.

(2)	Estimated cost of $13,404 to continue group health benefits for 12 months.

(3)

Ms. Krausz’s 11,394 unvested restricted shares (one year of acceleration on her restricted stock awards) that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of one year of acceleration on her stock option awards of 37,166 shares. Ms. Krausz is entitled to retain a pro-rata portion of her PRSU grants based on the portion of the performance period worked by her. Accordingly, 60,591 PRSUs would be eligible to be delivered to Ms. Krausz at the end of the performance period, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 51,937 PRSUs that were delivered to Ms. Krausz on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

(4)

(5)

Ms. Krausz’s 35,627 unvested restricted shares that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of her stock option awards. Ms. Krausz would receive a pro-rata portion of her PRSU grants based on the portion of the performance period worked by her, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 51,937 PRSUs that were delivered to Ms. Krausz on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

Michael P. Monahan

If Mr. Monahan’s employment is terminated by us without cause or by him for good reason, he is entitled to: (i) continuation of his base salary for one year, (ii) continuation of group health coverage for 12 months at the active employee rate, (iii) a pro-rata portion of any annual bonus otherwise earned for the year of termination, and (iv) if such termination occurs after the second anniversary of his hire, we will vest the remainder of his inducement stock option and restricted stock awards.

The payments and benefits described above are all conditioned on Mr. Monahan’s execution of a general release of claims against us.

The following table summarizes information regarding potential payments upon a hypothetical termination or a change of control as of December 31, 2014 for Mr. Monahan:


Event	Cash Severance ($) (1)		Accelerated Equity Vesting ($)			Other Benefits ($) (2)		Total ($)
Termination without cause or for good reason		325,000		1,425,289	(3)		13,404		1,763,693
Termination due to death or disability		—		1,099,205	(4)		—		1,099,205
Termination without cause, for good reason or due to death or disability, within 12 months following a Change in Control		325,000		2,373,101	(5)		13,404		2,711,505

(1)	Payable in periodic installments over one year.

(2)	Estimated cost of $13,404 to continue group health benefits for 12 months.

(3)

Mr. Monahan’s 8,058 restricted shares (one year of acceleration on his restricted stock awards) that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of one year of acceleration on his stock option awards of 30,292 shares. Mr. Monahan is entitled to retain a pro-rata portion of his PRSU grants based on the portion of the performance period worked by him. Accordingly, 50,039 PRSUs would be eligible to be delivered to him at the end of the performance period, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 41,385 PRSUs that were delivered to Mr. Monahan on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

(4)

(5)

Mr. Monahan’s 25,617 unvested restricted shares that would accelerate upon such event are valued using the closing stock price of $19.55 on December 31, 2014. Amounts also include the “in the money” value of his stock option awards. Mr. Monahan would receive a pro-rata portion of his PRSU grants based on the portion of the performance period worked by him, if the targets associated with such award were attained based on the performance level as of December 31, 2014, which was trending above the level of 100% attainment for all outstanding PRSUs (this includes the 41,385 PRSUs that were delivered to Mr. Monahan on February 27, 2015 based on attainment of the maximum performance goals for the performance period ended December 31, 2014).

REPORT OF THE AUDIT COMMITTEE

The Audit Committee reviews the Company’s financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal financial controls, for preparing the consolidated financial statements and for the public reporting process. KPMG LLP, the Company’s independent registered public accounting firm for 2014, is responsible for expressing opinions on the conformity of the Company’s audited consolidated financial statements with generally accepted accounting principles and on the Company’s internal control over financial reporting.

In this context, the Audit Committee has reviewed and discussed with management and KPMG LLP the audited consolidated financial statements as of and for the year ended December 31, 2014 and KPMG LLP’s evaluation of the Company’s internal control over financial reporting at December 31, 2014. The Audit Committee has discussed with KPMG LLP the matters that are required to be discussed under Public Company Accounting Oversight Board Auditing Standard No. 16, Communications with Audit Committees. KPMG LLP has provided to the committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has discussed with KPMG LLP that firm’s independence.

Based on the review and discussions referred to above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 2014 be included in our Annual Report on Form 10-K for 2014 for filing with the SEC. This report is provided by the following independent directors, who comprise the Audit Committee:

Stephen T. Zarrilli, Chairman

Jay Herratti

Andrea M. Weiss

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS—DECEMBER 31, 2014


Plan category	(a) Number of Securities to be issued upon exercise of outstanding options, warrants and rights (#)			(b) Weighted-average exercise price of outstanding options, warrants and rights ($)			(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (#)
Equity compensation plans approved by security holders		1,257,399	(1)		9.97	(2)		1,775,691
Equity compensation plans not approved by security holders		—			—			—

(1)	Consists of 891,681 shares of our common stock issuable upon the exercise of outstanding stock options and 365,718 shares of our common stock subject to outstanding restricted stock unit awards under our equity incentive plans.

(2)	Excludes 365,718 shares of our common stock subject to outstanding restricted stock unit awards which do not have an exercise price.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows as of March 16, 2015, the amount and percentage of our issued common stock beneficially owned by each person who is known by us to beneficially own more than 5% of our issued common stock:


Name and Address of 5% Beneficial Owner	Shares Beneficially Owned (1)			Percent of Outstanding Common Stock
BlackRock, Inc. 55 East 52nd Street New York, NY 10022		2,625,812	(2)		9.07	%

The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355		2,367,740	(3)		8.17	%

Renaissance Technologies LLC 800 Third Avenue New York, NY 10022		1,725,700	(4)		5.96	%

The following table shows as of March 16, 2015, the amount and percentage of our issued common stock beneficially owned (unless otherwise indicated) by each of our (i) directors and nominees for director, (ii) NEOs and (iii) our directors, nominees for director and current executive officers, as a group:


Name of Beneficial Owner	Shares Beneficially Owned (1) (5)			Shares Acquirable Within 60 Days (6)		Percent of Outstanding Common Stock
Robert F. Bernstock		35,659			—		*
Paul Guyardo		26,666			—		*
Michael J. Hagan		36,028			—		*
Jay Herratti		24,538			—		*
Keira Krausz		149,513			68,777		*
Michael P. Monahan		90,028			30,290		*
Brian P. Tierney		73,088	(7)		—		*
Andrea M. Weiss		23,310			—		*
Stephen T. Zarrilli		11,115			—		*
Dawn M. Zier		373,517			198,360		1.3	%
All directors, nominees for directors and current executive officers, as a group (10 persons)		843,462			297,427		2.9	%

*	less than 1%.

(1)

Beneficial ownership is determined in accordance with the rules of the SEC. Under those rules and for purposes of the table above (a) if a person has decision making power over either the voting or the disposition of any shares, that person is generally deemed to be a beneficial owner of those shares; (b) if two or more persons have decision making power over either the voting or the disposition of any shares, they will be deemed to share beneficial ownership of those shares, in which case the same shares will be included in share ownership totals for each of those persons; and (c) if a person held options to purchase shares that were exercisable on, or became exercisable within 60 days of, March 16, 2015, that person will be deemed to be the beneficial owner of those shares and those shares (but not shares that are subject to options held by any other stockholder) will be deemed to be outstanding for purposes of computing the percentage of the outstanding shares that are beneficially owned by that person.

(2)

This information is provided in reliance upon information included in a Schedule 13G/A filed with the SEC on January 15, 2015. Includes shares that are held or may be deemed to be beneficially owned by the following entities: BlackRock Advisors (UK) Limited, BlackRock Advisors, LLC, BlackRock Asset Management Canada Limited, BlackRock Asset Management Ireland Limited, BlackRock Fund Advisors, BlackRock Institutional Trust Company, N.A., BlackRock International Limited, BlackRock Investment Management (Australia) Limited, BlackRock Investment Management (UK) Ltd, or BlackRock Investment Management, LLC. BlackRock, Inc. holds (a) sole voting power over 2,546,318 shares of common stock and (b) sole investment power over 2,625,812.

(3)

This information is provided in reliance upon information included in a Schedule 13G filed with the SEC on February 10, 2015. Consists of: (a) 2,367,740 shares of common stock beneficially owned by The Vanguard Group, Inc., (b) 41,280 shares of common stock beneficially owned by Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., and (c) 1,300 shares of common stock beneficially owned by Vanguard Investments Australia, Ltd. , a wholly-owned subsidiary of The Vanguard Group, Inc. The Vanguard Group, Inc. holds (x) sole voting power over 42,580 shares of common stock, (y) sole investment power over 2,326,460 shares of common stock, and (z) shared investment power over 41,280 shares of common stock.

(4)

This information is provided in reliance upon information included in a Schedule 13G/A filed with the SEC on February 12, 2015. Consists of 1,725,700 shares of common stock beneficially owned by Renaissance Technologies LLC, a majority-owned subsidiary of Renaissance Technologies Holdings Corporation, and by Renaissance Technologies Holdings Corporation. Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation each hold (x) sole voting power over 1,502,953 shares of common stock, (y) sole investment power over 1,569,940 shares of common stock, and (z) shared investment power over 155,760 shares of common stock.

(5)	Information supplied by officers and directors.

(6)	Unless otherwise noted, reflects the number of shares that could be purchased by exercise of options available at March 16, 2015, or within 60 days thereafter under our stock option plans.

(7)	The shares set forth as beneficially owned by Mr. Tierney include 2,147 shares that are owned by the Tierney Family Foundation, of which Mr. Tierney is trustee.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We engaged KPMG LLP, an independent registered public accounting firm, to perform an integrated audit of our consolidated financial statements as of and for the year ended December 31, 2014 and internal controls over financial reporting as of December 31, 2014. The Audit Committee of the Board has selected KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2015. We are submitting our selection of independent registered public accounting firm for ratification by the stockholders at the Annual Meeting. Our bylaws do not require that the stockholders ratify the selection of KPMG LLP as our independent registered public accounting firm. However, we are submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the selection, the Board and the Audit Committee will reconsider whether or not to retain KPMG LLP. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they desire to do so. They are expected to be available to respond to appropriate questions from our stockholders.

The aggregate fees billed to the Company for professional services rendered for the years 2014 and 2013 were as follows:

Audit Fees

The aggregate fees billed by KPMG LLP for professional services for the audit of our annual consolidated financial statements for 2014, the audit of internal control over financial reporting as of December 31, 2014 and the review of the consolidated financial statements included in our Forms 10-Q for the first, second and third quarters of 2014 were $465,000.

The aggregate fees billed by KPMG LLP for professional services for the audit of our annual consolidated financial statements for 2013, the audit of internal control over financial reporting as of December 31, 2013 and the review of the consolidated financial statements included in our Forms 10-Q for the first, second and third quarters of 2013 were $445,000.

Audit-Related Fees

There were no audit-related fees in 2014 or 2013.

Tax Fees

There were no fees for tax services, including tax consulting, in 2014 or 2013.

All Other Fees

Other than the services described above, KPMG LLP did not provide any other services to the Company in 2014 or 2013.

Pre-approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, as amended, the Audit Committee is responsible for the appointment, compensation and oversight of the work of the independent registered public accounting firm. As part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit services performed by the independent registered public accounting firm in order to assure that the provision of such services does not impair the firm’s independence. To implement these provisions of the Sarbanes-Oxley Act of 2002, as amended, the SEC has issued rules specifying the types of services that an independent registered public accounting firm may not provide to its audit client, as well as the Audit Committee’s administration of the engagement of the independent registered public accounting firm. Hence, the Audit Committee pre-approves all audit and permissible non-audit services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services.

OTHER MATTERS

The Board does not know of any other matter that may be brought before the Annual Meeting. However, if any such other matters are properly brought before the meeting, it is the intention of the proxy agents to vote the shares represented thereby in accordance with the recommendation of the Board on such matters.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires that our officers and directors and persons who own more than 10% of our common stock file reports of their ownership with the SEC. Based solely on our review of our records and other publicly available information, during the year ended December 31, 2014, all of the Company’s directors, executive officers, and greater than ten percent stockholders complied with all Section 16(a) filing requirements.

RELATED PARTY TRANSACTIONS

We are not aware of any transaction since January 1, 2014 required to be reported as a related party transaction.

The Company has adopted a Code of Conduct, which is intended to promote legal compliance and ethical behavior of all of the Company’s employees, executive officers and directors. Article XII of the Nutrisystem, Inc. Code of Conduct requires that our Audit Committee, which is composed of independent directors, review and approve all proposed transactions between the Company and any of the Company’s officers or directors, or relatives or affiliates of any such officers or directors, before such transaction is consummated.

Pursuant to Section III.D. of the Company’s Audit Committee Charter, and in accordance with NASDAQ Rule 5630(a), our Audit Committee is responsible for reviewing and approving all proposed transactions between the Company and any of the Company’s officers or directors, or relatives or affiliates of any such officers or directors, brought to the Audit Committee’s attention by management before such transaction is consummated.

The Audit Committee has not adopted any specific written procedures for conducting the review of related party transactions. Rather, each transaction is considered in light of the specific facts and circumstances presented. In the course of its review and approval of a transaction, the Audit Committee considers, among other factors it deems appropriate:

•

whether the transaction is in, or is not inconsistent with, the best interests of the Company and its stockholders;

•

the business reasons for the transaction;

•

whether the transaction would impair the independence of one or more of the Company’s officers or directors; and

•

whether the transaction is material, taking into account the significance of the transaction.

ANNUAL REPORT

A copy of our Annual Report is being mailed to our stockholders with this Proxy Statement.

LOGO

NUTRISYSTEM, INC.

PROXY CARD

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 12, 2015

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Dawn M. Zier and Ralph J. Mauro, and each or either of them, proxies of the undersigned, with full power of substitution, to vote all of the shares of our common stock, which the undersigned may be entitled to vote at the Annual Meeting of our Stockholders to be held via live webcast at www.virtualshareholdermeeting.com/ntri2015 on Tuesday, May 12, 2015 at 10:00 a.m. (ET) and at any adjournment or postponement thereof, as follows:

PLEASE REVIEW THE PROXY STATEMENT

AND VOTE TODAY IN ONE OF THREE WAYS:

1. Vote by Internet – Please access www.proxyvote.com, and follow the instructions. You will be required to provide the unique control number printed below.

CONTROL NUMBER:

2. Vote by Telephone – Please call 1-800-690-6903 on a touch-tone phone (toll-free in the U.S. and Canada; standard rates will apply elsewhere). Please follow the instructions. You will be required to provide the unique control number printed above.

You may vote by telephone or Internet 24 hours a day, 7 days a week. Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.

3. Vote by Mail – If you do not wish to vote over the Internet, please sign, date and return this proxy card in the envelope provided.

1.	ELECTION OF DIRECTORS.


¨	FOR all nominees listed below	¨	WITHHOLD AUTHORITY
			to vote for the nominees listed below

INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee’s name on the following list:

Robert F. Bernstock, Paul Guyardo, Michael J. Hagan, Jay Herratti, Brian P. Tierney, Andrea M. Weiss, Stephen T. Zarrilli and Dawn M. Zier.

2.	RATIFY KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.


¨ FOR		¨ AGAINST		¨ ABSTAIN

3.	APPROVE NAMED EXECUTIVE OFFICERS COMPENSATION.


¨ FOR		¨ AGAINST		¨ ABSTAIN

In their discretion, the proxy holders, on behalf of and at the discretion of our Board of the Directors, are authorized to vote with respect to matters incident to the conduct of the Annual Meeting and upon such other business as may properly come before the Annual Meeting, pursuant to the United States Securities and Exchange Commission rules, and any adjournment or postponement thereof.

This proxy will be voted as specified. If a choice is not specified, the shares represented by this proxy will be voted “FOR” each director nominee, “FOR” Proposal 2, and “FOR” Proposal 3.

This proxy should be dated, signed by the stockholder(s), and returned promptly to us in the enclosed envelope. Persons signing in a fiduciary capacity should so indicate.

, 2015

Date

Signature