UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14A

(RULE 14a-101)

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. )

 

Filed by the Registrant  X

Filed by a Party other than the Registrant 

 

Check the appropriate box:

 

 

 

 

 

 

 

WEIS MARKETS, INC.

(Name of Registrant as Specified In Its Charter)

 

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

 

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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TO OUR SHAREHOLDERS:

 

NOTICE IS HEREBY GIVEN that the 2014 Annual Meeting of the Shareholders (the “Annual Meeting”) of Weis Markets, Inc. (the "Company"), will be held on Thursday,  April 24, 2014 , at 10:00 a.m., Eastern Daylight Time, at the principal executive offices of the Company, 1000 South Second Street, Sunbury, Pennsylvania 17801, for the following purposes:

 

The Board of Directors has fixed the close of business on March 7, 2014 , as the record date for the Annual Meeting.  Only holders of shares of Common Stock of record at that time will be entitled to receive notice and vote at the Annual Meeting, and may vote by proxy (i) on the Internet, (ii) by telephone or (iii) by signing and dating a proxy card and returning it to the Company.

This summary is qualified in its entirety by the detailed information contained within the Proxy Statement.

Important Notice Regarding Availability of Proxy Materials for Weis Markets, Inc.

Annual Meeting of Shareholders to be Held on April 24 , 2014

 

This Proxy Statement, the form of proxy card, the Notice and the Company’s Annual Report on Form 10-K are available at http://www.weismarkets.com/financial .html.

 

 

By Order of the Board of Directors,

 

 

Harold G. Graber

Secretary

 

March 13 , 2014

Sunbury, Pennsylvania

 

 

 

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WEIS MARKETS, INC.

PROXY STATEMENT

 

ANNUAL MEETING OF SHAREHOLDERS

This Proxy Statement is being furnished to all shareholders of record as of March 7, 2014, the record date of the Company, in connection with the solicitation of proxies by the Board of Directors (the “Board”) for use at the 2014 Annual Meeting.   The Annual Meeting will be held on Thursday, April 24, 2014, at 10:00 a.m. Eastern Daylight Time, at the principal executive offices of the Company, 1000 South Second Street, Sunbury, Pennsylvania 17801.

 

INFORMATION CONCERNING THE SOLICITATION

The Company is sending an “Important Notice of Availability of Proxy Materials for the Annual Meeting of Shareholders of Weis Markets, Inc.” (the “Notice”) to its shareholders on or about March 13, 2014.  The Company is providing access to its proxy materials over the Internet under rules adopted by the Securities and Exchange Commission (the “SEC”).  All shareholders have the ability to access the proxy materials on the website identified in the Notice or to request a printed copy of proxy materials.  The Notice provides instructions on how to access the proxy materials over the Internet, and how to request a printed copy of the proxy materials.  This Proxy Statement, the form of proxy card, the Notice and the Company’s Annual Report on Form 10-K are available at http://www.weismarkets.com/financial .html.

 

Subject to the conditions hereinafter set forth, the shares represented by each proxy executed will be voted at the Annual Meeting, or any adjournments or postponements thereof, in accordance with the specifications therein made.  Where there is no contrary choice specified, the proxy will be voted "FOR" each of the proposals as therein specified. 

 

An executed proxy may be revoked by the person signing the same at any time before the authority thereby granted is exercised.  The revocation may be exercised at any time before the Annual Meeting by indicating the revocation in writing.  This revocation should be directed to the Judge of Elections, Weis Markets, Inc., 1000 South Second Street, Sunbury, Pennsylvania 17801.  The proxy may also be revoked by voting in person at the Annual Meeting or by submitting a new proxy with a later date including a proxy given over the Internet or by telephone.

 

The Company has adopted a procedure called “householding,” which the SEC has approved. Under this procedure, the Company is delivering a single copy of the Notice and, if applicable, this Proxy Statement and the Annual Report on Form 10-K to multiple shareholders who share the same address unless the Company has received contrary instructions from one or more of the shareholders.  This procedure reduces the Company’s printing costs, mailing costs and fees.  Shareholders who participate in householding will continue to be able to access and receive separate proxy cards.  Upon written or oral request, the Company will deliver promptly a separate copy of the Notice and, if applicable, this Proxy Statement and the Annual Report on Form 10-K to any shareholder at a shared address to which the Company delivered a single copy of any of these documents.  To receive a separate copy of the Notice and, if applicable, this Proxy Statement or the Annual Report on Form 10-K, shareholders may write the Company at its address set forth on page 1, by telephoning 1-866-999-WEIS (9347), or via email at financial_reports@weismarkets.com.

 

VOTING SECURITIES,  RECORD DATE AND VOTING RIGHTS

As of March 7, 2014, the record date for the Annual Meeting, the number of outstanding shares of Common Stock was  26,898,443.  The presence, in person or by proxy, of at least 13,449,222 shares will constitute a quorum.

 

Only holders of Common Stock of the Company of record at the close of business on March 7, 2014 will be entitled to notice of and to vote on all matters at the Annual Meeting and at any adjournment thereof.  Each holder of Common Stock will be entitled to one vote for each share of stock so held and to cumulative voting rights in the election of directors.  Under cumulative voting, a shareholder, or the shareholder’s proxies, may vote the number of shares of stock owned by the shareholder multiplied by the number of directors to be elected, and the shareholder may cast all of such votes for a single director nominee or distribute them among two or more director nominees.  If you wish to cumulate your votes, you must vote by using a proxy card rather than voting by telephone or the Internet.

 

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Directors are elected by a plurality vote of all votes cast at the Annual Meeting.  The ratification of the appointment of the independent registered public accounting firm (“independent auditors”) requires the affirmative vote of a majority of all votes cast at the Annual Meeting.  Abstentions and broker “non-votes” will be treated as present for purposes of determining a quorum, but will not affect the election of directors or other matters submitted to the vote of shareholders.  A broker “non-vote” occurs when a shareholder has not provided voting instructions to its broker for a non-routine item because the New York Stock Exchange (“NYSE”) precludes brokers from giving a proxy to vote on a non-routine item.  The election of directors (Proposal No. 1) and the advisory (non-binding) vote on executive compensation (Proposal No. 3) are non-routine items under the NYSE rules.  The ratification of the independent auditors (Proposal No. 2) is a routine matter.

 

The Company’s by-laws specify that notice of any matter to be brought before an annual meeting by a shareholder must be received at the principal executive offices of the Company no later than the notice deadline described under the caption “Shareholders’ Proposals for Next Annual Meeting.”  Management does not intend to bring any other matters before the Annual Meeting, and does not know of any other matter that is eligible for action at the Annual Meeting.

 

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company believes that the proposed nominees for election as directors are willing to be elected as such, and it is intended that the persons named in the accompanying form of proxy or their substitutes will vote for the election of these nominees, unless specifically instructed to the contrary on the form of proxy.  However, if any nominee, at the time of the election, is unable or unwilling to serve, or is otherwise unavailable for election, and in consequence other nominees are designated, the persons named in the proxy or their substitutes shall have discretion or authority to vote or refrain from voting in accordance with their judgment on the other nominees.

 

The Company requires its directors to possess the experience and skills necessary to oversee the management of the Company in the interest of the Company and its shareholders. The Board will consider for nomination a candidate who:

 

When considering a person to be recommended for re-nomination as a director, the Board will consider, among other factors, the attendance, preparedness, participation and candor of the individual as well as the individual’s satisfaction of the above-mentioned criteria.  The Board believes the current Board members meet these criteria to effectively serve the Company.  The description of each nominee set forth below includes biographical information, on a director by director basis, which highlights the specific experience, background and education of each nominee that led the Board to conclude each director should serve on the Board.

 

The Board recommends a vote “FOR” the election of the nominees named below, each of whom has consented to be named as a nominee and to serve if elected.  All of the nominees were elected to the Board at the 2013 Annual Meeting.  The following table and accompanying footnotes set forth information about each Board nominee as of March 7, 2014:

 

 

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Mr. Weis’ extensive food retailing career with the Company provides the Board with a unique insight into the Company and its business, and adds a critical perspective to all aspects of the Board’s responsibilities, including strategy, operations, financial considerations, risk management and corporate governance that defines the Company.

 

Mr. Weis has been employed by the Company for more than 20 years.  Throughout his employment, he has diverse and extensive experience with the Company in the areas of real estate, property management, procurement, merchandising and store operations.  This experience provides him with a vision for the Company’s future as well as in-depth knowledge of the operational risks facing the Company.  His position as CEO also allows him to provide essential insight and guidance to the Board from an inside perspective of the day-to-day operations.

 

Mr. Graber currently oversees the Company’s real estate, property management and maintenance, and lease administration.  Mr. Graber is also in charge of store planning, engineering, architecture, construction, “Not For Resale” procurement and utilities.  The Company’s legal activities and sustainability initiatives are also part of Mr. Graber’s management responsibilities.  Mr. Graber’s intimate experience with the Company’s store development and planning objectives provides important information to the Board.

 

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Mr. Lauth has had an extensive career in sales, marketing and real estate development.  This combined experience along with Mr. Lauth’s entrepreneurial skills provides the Board with a valuable perspective.

 

Mr. Silverman is a highly experienced leader in the North American Jewish community and longtime corporate executive, with over 25 years of experience.  Mr. Silverman’s extensive executive level management background within other retail industries is a valuable resource for the Board.

 

Dr. Steele’s extensive background in the health care industry provides the Company with pharmaceutical and healthcare related expertise.  Dr. Steele’s experience as a director on other boards and his overall business and financial leadership perspective is a valuable asset to the Board.

 

On March 1, 2009, the Company hired Kurt A. Schertle as its Vice President of Sales and Merchandising.  Mr. Schertle was promoted to Senior Vice President of Sales and Merchandising on February 15, 2010 and was again promoted to Executive Vice President of Sales and Merchandising on July 1, 2012.  In September 2013, Mr. Schertle assumed the additional responsibility of overseeing Store Operations and was promoted to Chief Operating Officer on March 3, 2014.  Prior to being hired by the Company, Mr. Schertle was President and Chief Operating Officer of Tree Top Kids, Inc., a specialty toy retailer.  One year and four months after Mr. Schertle left that company, on March 11, 2010, an involuntary petition of bankruptcy was filed against Tree Top Kids, Inc. 

 

Independence of Directors

The Board has determined that Directors Lauth, Silverman and Steele are independent within the meaning of the listing standards of the NYSE.  An independent director is defined as a director who has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company.

 

 

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Companies listed on the NYSE must comply with certain standards regarding corporate governance, as codified in Section 303A of the Listed Company Manual of the NYSE, with some exceptions.  A company of which more than 50% of the voting power is held by an individual, a group or another company is not required by the NYSE to comply with the requirements of Sections 303A.01 Independent Directors, 303A.04 Nominating/Corporate Governance Committee or 303A.05 Compensation Committee.  Robert F. Weis, Chairman, and Ellen W. P. Wasserman, his sister, control approximately 53.4% of the voting power.  They have agreed to act together for the purpose of voting their shares of Common Stock and thus constitute a group within the meaning of these rules. 

 

As permitted by the NYSE rules, the Company does not have a majority of independent directors.  As of March 13, 2014, the Company’s Audit Committee and Compensation Committee are comprised of all independent directors.  

 

Board Committees and Meeting Attendance

Board of Directors.  The Company's Board held four regular meetings and one special meeting during fiscal 2013.  No director attended fewer than 75% of the aggregate meetings of the Board and all Board committees on which the director served, other than Dr. Steele.  All directors  attended the 2013 Annual Meeting.  

 

Under the policies of the Board, directors are expected to attend regular Board meetings, Board committee meetings, the Annual Meeting and any special meetings of the shareholders.  Participation is permissible by means of conference telephone or similar communications equipment.

 

Audit Committee.  The Audit Committee is  comprised of three independent non-employee directors, as required by the NYSE listing standards.  The Audit Committee acts independently to review the scope and engagement results of the independent auditors and the adequacy of the Company's internal and financial controls.  Information regarding the functions performed by the Audit Committee is set forth in the “Audit Committee Report ” included in this P roxy S tatement.  The Audit Committee is governed by a written charter approved by the Board.  A copy of this charter  is available on the Company’s corporate governance website at  http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

The 2013 Audit Committee was comprised of Directors Silverman, Steele and Lauth.  Mr. Silverman served as Chairman of the Audit Committee through April 25, 2013, at which point Mr. Lauth became Chairman of the Audit Committee.  The Audit Committee held four regular meetings and four special meetings during fiscal 2013.

 

The Board has determined that all Audit Committee members are financially literate under the listing standards of the NYSE.  The Board also determined that all Audit Committee members were “audit committee financial experts” in fiscal 2013 and all Audit Committee members are “audit committee financial experts” in fiscal 2014, as defined in Item 401(h) of Regulation S-K, and all members of the Audit Committee are “independent” for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934 and the listing standards of the NYSE.

 

Compensation Committee.  The Compensation Committee is  currently comprised of three independent non-employee directors.  The Compensation Committee is responsible for developing policies and programs, and making recommendations about compensation arrangements for senior management to the Board.  The Compensation Committee is governed by a written charter approved by the Board, which is available on the Company’s corporate governance website at http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

The 2013 Compensation Committee was comprised of Directors Lauth, Silverman, Steele and Jonathan H. Weis.  Mr. Weis served as Chairman of the Compensation Committee through April 25, 2013, at which point he ceased to serve on the Compensation Committee and Mr. Lauth was appointed to the Compensation Committee.  Mr. Silverman served as Chairman of the Compensation Committee for the remainder of the year.  The Compensation Committee held two regular meetings during fiscal 2013.   The Company’s Chairman and the CEO are not members of the Compensation Committee; however, the Compensation Committee seeks input from them regarding the performance of the other executive officers.  The Compensation Committee has in the past sought assistance from consulting firms specializing in compensation and benefits and may do so in the future.  Any such consulting firm that is hired will be independent under applicable NYSE rules.

 

 

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Corporate Governance Matters

The Company has adopted Corporate Governance Guidelines which are available on the Company’s corporate governance website at http://www.weismarkets.com/about-weis/c orporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

Board Leadership Structure.    The Company separates the roles of Chairman and CEO in recognition of the differences between the two roles.  Article V Section 5.5 of the Company’s by-laws states that the Chairman shall preside at all meetings of the shareholders and the Board.  The by-laws also state that the CEO shall have the general charge and supervision of the business of the Company and shall exercise or perform all the powers and duties usually incident to the office of CEO.  The CEO is responsible for the day-to-day leadership and performance of the Company.  In the absence of the Chairman, the Vice Chairman shall preside at all meetings of the shareholders and of the Board.  The Company believes the current leadership structure is the most appropriate structure at the time of filing. 

 

The Board’s Role in Risk Oversight.    The Board oversees the management of risks inherent in the operation of the Company’s business.  It is management’s responsibility to manage risk and bring to the Board’s attention the most material risks to the Company.  The Board has oversight responsibility of the processes established to monitor systems for material risks applicable to the Company.  Each of the Board’s Committees also oversees the management of Company risks that fall within the Committees’ areas of responsibility.  In performing this function, each Committee has full access to management, as well as the ability to engage advisors.  As part of its responsibilities as set forth in its charter, the Audit Committee is responsible for discussing with management the Company’s major financial risk exposures and the steps management has taken to monitor and control those exposures.  The Audit Committee gives updates to the Board at its regular meetings, includ ing financial and information technology risks.  In connection with its risk management role, the Audit Committee also meets privately with the Company’s independent auditors, the Chief Internal Auditor and the Chief Financial Officer quarterly.  As part of its responsibilities as set forth in its charter, the Compensation Committee reviews the impact of the Company’s executive compensation program and the associated incentives to determine whether they present a significant risk to the Company.  Based on this review, the Compensation Committee concluded its compensation policies and procedures are not reasonably likely to have a material adverse effect on the Company.

 

Code of Business Conduct and Ethics.    The Company has adopted a “Code of Business Conduct and Ethics” that applies to all of its directors, officers and employees.  Separately, the Company also adopted a “Code of Ethics for CEO and CFO” specific to its chief executive officer, chief financial officer, corporate controller and any person performing similar functions.  The Company has made both documents available on its corporate governance website at http://www.weismarkets.com/about-weis/corporate-information/governance or by request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications .”

 

Non-Management Independent Directors.    To empower non-management independent directors to serve as a more effective check on management, the non-management independent directors of the Company have met at regularly scheduled executive sessions without management.    The 2013 non-management independent directors were Directors Lauth, Silverman and Steele.   Dr.  Steele presided over the first two meetings held du ring fiscal 2013 and Mr. Silverman presided over the remaining two meetings.  Shareholders or interested parties wishing to communicate directly with the non-management independent directors as a group may do so as set forth in “Shareholder or Interested Parties Communications.”

 

Board Nominations.    Based upon the stock ownership of the principal shareholders, the Company determined it would be better served by having the full Board review nominating and corporate governance issues rather than establishing separate committees.  Therefore, there is no nominating committee charter.

If the Board determines there is a need to add or replace a director, the following criteria are considered for each recommended candidate.  The candidate (a) has the highest personal and professional ethics, integrity and values; (b) consistently exercises sound and objective business judgment; (c) has significant appropriate senior management and leadership experience; (d) is able and willing to devote the required amount of time to the Company’s affairs, including attendance at Board meetings, Board committee meetings and annual shareholder meetings and (e) will be committed to building sound, long-term Company growth. 

 

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T he Company does not have a formal policy with respect to considering diversity.  However, its Corporate Govern ance Guidelines state that the Board seeks members from diverse professional and personal backgrounds who combine a broad spectrum of experience and expertise.  This assessment will include an individual’s qualification as independent, as well as consideration of diversity, age, skills and experience in the context of the needs of the Board.  Chosen candidates are extended invitations to join the Board.  If a candidate accepts, he or she is form ally nominated.

 

The Board will consider nominees brought to the attention of the Board by an eligible shareholder, a non-management independent director, the CEO , any other executive officer or other appropriate sources.  The Company’s by-laws require that any shareholder intending to nominate a candidate for election as a director must give written notice, containing specified information, to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications, ” not later than the notice deadline specified in the by-laws, which is 120 calendar days before the anniversary of the date that the Company’s P roxy S tatement was released to shareholders in connection with the previous year’s Annual Meeting.  The notice should include the name and address of both the eligible shareholder and the candidate and the qualifications of the candidate being recommended.  A copy of the by-law provision concerning shareholder nominations will be furnished to any shareholder upon written request to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications. ”

 

The Board does not have a formal process for identifying and evaluating candidates for director.  It is not anticipated that the process for evaluating a nominee would differ based on whether the nominee is recommended by an eligible shareholder.

 

Board Recommendation and Vote Required

As stated in each nominee’s biography above, the six candidates possess all of the experience, qualifications, attributes and skills appropriate for functioning as a board.  No notices from shareholders intending to nominate a candidate for election as a director were received with respect to the 2014 Annual Meeting.  Therefore, only the six nominees named above, or a substitute nominee of the Board, will be eligible for election at the Annual Meeting.  The six candidates receiving the highest numbers of votes cast by the holders of Common Stock voting in person or by proxy will be elected as directors.  The Board of Directors recommends a vote “FOR” the election of the six nominees named above.

 

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Throughout this Proxy Statement, the individuals who served as the Company’s CEO and CFO at the end of fiscal 2013 , as well as the other individuals included in the “Summary Compensation Table,” are referred to as the “Named Officers. ”    

 

Compensation Philosophy and Objectives

The primary objective of the Company’s executive compensation program is to attract and retain qualified executives, which is critical to the ongoing success of the Company.  This primary objective is achieved by providing a combination of base salary, annual cash incentives, health and welfare benefits, retirement benefits and perquisites that overall provide a complete compensation package that is competitive with executives at companies of comparable size and position in the retail business, while keeping compensation in line with the financial objectives of the Company. 

 

Compensation Committee Discretion

The Compensation Committee has broad discretion to set the compensation paid to the Company’s Named Officers, subject to Board approval, as it may determine is in the best interest of the Company and its shareholders.  The exercise of discretion is an important feature of the Compensation Committee’s philosophy and provides the Compensation Committee with sufficient flexibility to respond to specific circumstances facing the Company.

 

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Use of Comparable Data in Setting Executive Compensation Levels

The Company is engaged in a highly competitive industry.  As a result, the Compensation Committee annually examines compensation levels and trends in the labor market as part of its process in establishing compensation for the Company’s Named Officers.    In 2013, the Compensation Committee made the decision to provide a  salary merit increase, ranging from 2% to 4%, to the Named Executive Officers.

 

The Company competes with many larger companies for top executive-level talent, it generally sets compensation for Named Officers at the 75th percentile of compensation paid to similarly situated executives.  Variations to the base salary component may occur because of the individual’s experience level, job responsibilities and market factors.  The Compensation Committee also realizes that a primary difference between the Company’s executive compensation program and some of its peers’ compensation programs is the absence of an equity-based incentive plan.  This fact is strongly considered when evaluating discretionary contributions to the Supplemental Executive Retirement Plan (“SERP”) for the Named Officers. 

 

2013 Executive Compensation Components

The Compensation Committee annually evaluates the performance of executive officers with the Chairman and CEO.  In performing its evaluations, the Compensation Committee relies upon written and verbal evaluations of each officer’s performance for the most recent fiscal year.  The CEO meets with the executive officers to discuss their efforts and accomplishments throughout the period from information deemed relevant both internally and in light of the competitive position of the Company in the industry.  These evaluations include qualitative factors such as the individual’s decision-making responsibilities, the professional experience required to perform given tasks, and their leadership and team-building skills.  Although executive compensation is not specifically related to corporate performance, the overall performance of the Company is a consideration in determining executive compensation.

 

Compensation for Named Officers is comprised of the following: 

 

Base Salary:    The base salary component of the executive compensation program provides the foundation for a fair and competitive compensation package.  Although the Compensation Committee generally intends to set compensation for Named Officers at the 75th percentile of compensation paid to similarly situated executives, the Compensation Committee has the discretion to deviate from the 75th percentile of the compensation surveys as it may determine in its discretion. The determination of base salaries is generally independent of the decisions regarding other elements of compensation, but some of the other elements of the compensation program are dependent on base salary, to the extent they are expressed as percentages of base salary.  In setting base salaries, the Compensation Committee considers each Named Officers' job responsibilities, value-added contributions to the Company and tenure.

 

Based on consideration of the criteria discussed above and the overall financial and operational success of the Company,  t he Compensation Committee approved a 4.0% increase in base salary for both the Chairman, Mr. Robert F. Weis, and the Vice Chairman, Mr. Jonathan H. Weis, in fiscal 2013.  The Chairman and Vice Chairman base salaries were at 95.9% and 106.7%, respectively, of the 75% base salary quartile for similarly situated executives.  The Compensation Committee approved a 4.0% increase in base salary for the former CEO, Mr. David J. Hepfinger, in fiscal 2013.  The base salary for Mr. Hepfinger was 89.6 % of the 75% base salary quartile for similarly situated executives.  The Compensation Committee approved a 2.0% increase in base salary for the Executive Vice President, Mr. Kurt A. Schertle, as of February 2013 and a  12.6% increase in base salary in October 2013 after he assumed the additional responsibility of overseeing Store Operations.  Mr. Schertle now earns 87.2% of the 75% quartile for similarly situated executives.  The Compensation Committee approved a 4.0% increase in base salary for both the CFO, Mr. Scott F. Frost, and the Senior Vice President, Mr. Harold G. Graber, in fiscal 2013.  The base salaries of Messrs. Frost and Graber were at 59.9% and 74.2%, respectively, of the 75% quartile for similarly situated executives.

 

 

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Non-Equity Incentive Plan:    Since 2002, the Company's executive compensation program includes an annual non-equity incentive plan designed to reward certain key employees, including the Named Officers, for meeting specific financial objectives.    The Compensation Committee administers the non-equity incentive plan for management to provide the short-term incentive compensation element of the executive compensation program.  This short-term incentive is a cash-based performance incentive program designed to motivate and reward key employees for their contributions to factors and business goals that the Company believes drive its earnings and create shareholder value.  Incentive payout targets are established by job level within the Company as a percentage of base salary, and actual payouts are based on achievement of budgeted sales and operating profit targets as approved by the Board annually.  Prior to implementation of this non-equity incentive plan in 2002, the Compensation Committee hired an independent compensation consulting firm to provide guidance on the basic plan structure.  In 2009, consultants were utilized to evaluate the competiveness of the current non-equity incentive plan as compared to the market place and recommended changes, of which the Board approved.  Actual non-equity incentive plan compensation amounts earned by the Named Officers are reflected in the “Summary Compensation Table” for the year earned.  The amounts which each Named Officer could have earned for fiscal 2013 based on performance at the threshold, target and maximum levels are shown in the “Grants of Plan-Based Awards” table below.

 

Mr. Robert F. Weis,  Mr. Jonathan H. Weis,  the former CEO Mr. Hepfinger, Mr. Schertle,  Mr. Frost and Mr. Graber can earn up to 130%, 104%, 156% , 65%, 52% and 52%, respectively, of their base salary in the non-equity incentive plan.  The incentive targets for Mr. Robert F. Weis, Mr. Jonathan H. Weis, the former CEO Mr. Hepfinger, Mr. Schertle, Mr. Frost and Mr. Graber are 100%, 80%, 120%, 50%, 40% and 40%, respectively, of their base salary.  For fiscal 2013, 40% of the incentive award was based upon achievement of the bu dgeted total Company sales and 60% of the incentive award was based upon achievement of the budgeted total Company operating profit for the Named Officers.  Company operating profit was defined as U.S. GAAP “Operating Income. ”    Threshold and target hurdles were established for the budgeted sales category, which allowed each Named Officer to earn 25% and 100%, respectively, of his total incentive award for achieving the specified results within the sales category.  Threshold, target and maximum hurdles were established for the operating profit category, which allowed each Named Officer to earn 25%, 100% and 150%, respectively, of his total incentive award for achieving the specified results within the operating profit category.  The operating profit category target hurdle must be met before the sales category incentive award is earned under the plan.  For achieving 97% through 100% of the budgeted sales target, the Named Officers can earn 25% to 100% of the sales incentive award.  For achieving 97% through 118% of the budgeted operating profit, the Named Officers can earn 25% to 150% of the operating profit incentive award.  The threshold and target hurdles for sales in fiscal 2013 were equal to a sales result of $2.7 billion and $2.8 billion, respectively.  The threshold, target and maximum hurdles for the operating profit in fiscal 2013 were equal to an operating profit result of $130.1 million, $134.1 million and $158.3 million, respectively.  None of the minimum targets under the plan were met for 2013.

 

Retirement Plans:    The Company has a contributory retirement savings plan, the Weis Markets, Inc. Retirement Savings Plan, covering substantially all full-time associates.  The Company had a noncontributory profit-sharing plan, the Weis Markets, Inc. Profit Sharing Plan, covering eligible associates which included certain salaried associates, store management and administrative support personnel.  Effective December 1, 2009, the Weis Markets, Inc. Profit Sharing Plan was merged into the Weis Markets, Inc. Retirement Savings Plan (“the Plan”).  Both plans are qualified defined contribution plans.  The Named Officers along with other highly compensated employees have limited participation in the 401(k) portion of the Plan and are excluded from receiving contributions in the profit sharing portion of the Plan once their annual earnings exceed the limitations imposed by the Internal Revenue Code and the Regulations implemented by the Internal Revenue Service for highly compensated employees.  A few of the Named Officers continue to possess an investment account in the profit sharing portion of the Plan, resulting from their tenure with the Company prior to becoming a  highly compensated employee. 

 

 

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Supplemental Executive Retirement Plan: Company contributions normally made to the qualified plans for the Named Officers are credited instead to the SERP, an unfunded, nonqualified deferred compensation plan.  The SERP account for each Named Officer is credited annually with the amount, if any, that would have been allocated to the participant’s qualified plans if he had not been excluded from participation in these qualified plans.  Although the SERP is primarily a replacement retirement plan, the Compensation Committee may at any time recommend to the Board discretionary amounts to be credited to the account(s) of one or more SERP participants.  Substantial risk of benefit forfeiture does exist for participants in the SERP.  The SERP provides the participant with the ability to direct his or her investments into one or more of the investment options made available through the plan.

 

Contributions to the SERP are determined in the same manner as contributions to participants in the Company’s qualified plans except for discretionary contributions.  Contribution allocations and earnings for the three components of the SERP are computed as follows:

 

 

 

 

The investment funds made available to the participants are managed by independent investment advisors.  For more information regarding the Company’s retirement plans, please refer to the “Pension Benefits” and “Nonqualified Deferred Compensation” tables below and Note 6 to the Consolidated Financial Statements in the 2013 Annual Report on Form 10-K.

 

Deferred Compensation Agreement: The Company maintains an unfunded, nonqualified deferred compensation agreement with Robert F. Weis for the payment of specific amounts of annual retirement benefits to him or his spouse over their lifetime, with a guaranteed payment for their actuarially computed life expectancies.  The benefits are determined through actuarial calculations dependent on the age of the recipient, as specified in the plan document, using the 1971 Group Annuity Mortality Table (Plus 5 for Males) and an assumed discount rate of 7.5%.  The benefit payable on an annual basis to Robert F. Weis would be $1,706,580 if he had retired as of the date of this Proxy Statement.  For more information regarding this deferred compensation agreement, refer to the  “Pension Benefits” table below and Note 6 to the Consolidated Financial Statements in the Company’s 2013 Annual Report on Form 10-K.

 

 

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Vice Chairman Incentive Award Plan:    On November 3, 2011, the Compensation Committee adopted the Company’s Vice Chairman Incentive Award Plan, with retroactive effect to July 1, 2011.  The Vice Chairman Incentive Award Plan was implemented in connection with the new Employment Agreement the Company entered into with Jonathan H. Weis, Vice Chairman of the Company, on November 3, 2011, with retroactive effect to July 1, 2011.  The purposes of the Vice Chairman Incentive Award Plan are to provide a strong financial incentive each year for performance of the Company’s Vice Chairman by making a significant percentage of the Vice Chairman’s total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage Vice Chairman retention.  Mr. Weis may earn a supplemental cash incentive under the Company’s Vice Chairman Incentive Award Plan.  The Vice Chairman Incentive Award consists of a retention award equal to Mr. Weis’s base salary for the fiscal year (although in 2011 (and only 2011), the amount of the retention award was $334,750) and a profit performance award equal to the base salary for the fiscal year if the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year (although in 2011 (and only 2011) the amount of the profit performance award was $334,750).  “Net Inc ome” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determinable manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, the Committee did not make any adjustments to the Company’s reported net income.  The maximum amount of the Vice Chairman Incentive Award payable under the Plan in any fiscal year is limited to $1,339,000 (although in 2011 (and only 2011) the maximum amount of the Incentive Award was limited to $669,500).  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon Mr. Weis’s continued employment with the Company and no plan award will be paid until after December 31, 2016, except in the case of a termination without cause or death. 

 

CEO Incentive Award Plan:    On October 26, 2010, the Compensation Committee adopted the Company’s CEO Incentive Award Plan, with retroactive effect to January 1, 2010.  The CEO Incentive Award Plan was implemented in connection with the new Employment Agreement the Company entered into with David J. Hepfinger, CEO, on October 26, 2010, with retroactive effect to March 1, 2010.  The purposes of the CEO Incentive Award Plan are to provide a strong financial incentive each year for performance of the Company’s CEO by making a significant percentage of the CEO’s total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage CEO retention.  Mr. Hepfinger may earn a supplemental cash incentive under the Company’s CEO Incentive Award Plan.  The CEO Incentive Award consists of a retention award equal to Mr. Hepfinger’s base salary for the fiscal year and a profit performance award equal to the base salary for the fiscal year if the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year.  “Net Income” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determina ble manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, the Committee did not make any adjustments to the Company’s reported net income.  The maximum amount of the CEO Incentive Award payable under the plan in any fiscal year is limited to $1,500,000.  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon Mr. Hepfinger’s continued employment with the Company.  While the plan states that no plan award will be paid until after December 31, 2014, except in the case of a termination without cause or death, the Board of Directors made the decision to issue a payment of $2,250,000 (based upon a portion of the amounts previously earned under the plan) to Mr. Hepfinger in March 2013 to incentivize him to enter into the new Employment Agreement signed on March 8, 2013. 

 

The former CEO Mr. Hepfinger did not earn any amounts for 2013 under the CEO Incentive Award Plan, which was superseded by the Separation Agreement entered into between the Company and Mr. Hepfinger.  The amounts paid to Mr. Hepfinger under the Separation Agreement are detailed in the “All Other Compensation” column to the Summary Compensation Table, and the Separation Agreement is described under “Potential Payments upon Termination of Employment or Change in Control.”

 

 

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Recoupment Policy:    On November 3, 2011, with retroactive effect to July 1, 2011, the Company entered into an Employment Agreement with the Company’s Vice Chairman, Jonathan H. Weis.  On October 26, 2010, with retroactive effect to March 1, 2010, the Company entered into an Employment Agreement with the Company’s former CEO, David J. Hepfinger.  The Employment Agreements contain a recoupment policy (commonly referred to as a clawback policy), which provides that if the Board determines that  Mr. Weis or Mr. Hepfinger has been incompetent or negligent in the performance of his duties or has engaged in fraud or willful misconduct in a manner that caused or contributed to the need for a material restatement of the Company’s financial results, the Board will review all performance-based compensation awarded to or earned by Mr. W eis or Mr. Hepfinger on the basis of performance during fiscal periods affected by the restatement.  If the performance-based compensation would have been lower if it had been based on the restated results, the Board and the Company will, to the extent permitted by law, seek recoupment from Mr. Weis or Mr. Hepfinger of any portion of such performance-based compensation deemed appropriate.  The recoupment provisions of the Employment Agreement of former CEO Mr. Hepfinger were superseded by the Separation Agreement entered into between the Company and Mr. Hepfinger.

 

Long Term Incentive Plan:    In 2012, the Compensation Committee adopted the Company’s Long Term Incentive Plan, which was effective July 1, 2012 and continues until June 30, 2017.  The purposes of the Long Term Incentive Plan are to provide a strong financial incentive each year for performance of the participants by making a significant percentage of their total cash compensation dependent upon the level of corporate performance attained yearly, and to encourage their retention.  Messrs. Schertle, Frost and Graber may earn a supplemental cash incentive under the Company’s Long Term Incentive Plan.  The Long Term Incentive Plan provides an incentive equal to 50% of the participant’s base salary (effective at the end of the fiscal year) if, and only if, the “Net Income” of the Company increases by 5% or more from the “Net Income” of the previous fiscal year.  “Net Income” is the net income as set forth in the Company’s Consolidated Statements of Income, as contained in the audited financial statements of the Company in the Forms 10-K filed by the Company, but in comparing the Net Income for a particular fiscal year (the “Current Year”) to the Net Income of the prior fiscal year (the “Prior Year”), the Compensation Committee may take into account, in an objectively determinable manner, certain changes that occur between years, including in particular, changes that are due to the addition or disposition of stores.  For the past fiscal year, th e Committee did not make any adjustments to the Company’s reported net income.  Although the right to receive awards under the plan are measured and determined on an annual basis, the payment of the award is contingent upon the participant’s continued employment with the Company in an employment position eligible under the Plan for the entire term of the plan, except in the case of a termination without cause or due to a long term disability, in which case the participant is entitled to any earned, but unpaid incentive.  No plan award will be paid until after June 30, 2017. 

 

Perquisites:    The Company provides the Named Officers with perquisites that the Compensation Committee believes are reasonable and consistent with its overall executive compensation program.  The Named Officers are provided use of Company automobiles.  For security purposes, Mr. Robert F. Weis, Mr. Jonathan H. Weis and Mr. Schertle may use the Company aircraft for business, and for limited personal travel.  In addition, the Company pays for tax filing assistance for Mr. Robert F. Weis.  Mr. Hepfinger, the former CEO, was provided use of a Company automobile, use of the Company aircraft for business and for limited personal travel and with tax and investment advisory services.  The cost to the Company of the u se of Company automobiles and the Company aircraft is calculated as prescribed by the Internal Revenue Service and is treated as taxable income to the Named Officers. Please refer to Footnote 3 of the “Summary Compensation Table” for perquisite details. 

 

Matters Relating to Mr. Hepfinger

Mr. Hepfinger resigned as President and Chief Executive Officer and as a director of the Company effective September 21, 2013.  As discussed in “Potential Payments Upon Termination of Employment or Change in Control,” a Confidential Separation Agreement and General Release (the "Separation Agreement") was entered into by Mr. Hepfinger and the Company on September 21, 2013.  The Separation Agreement replaced and superseded the March 1, 2013 Employment Agreement between the Company and Mr. Hepfinger, and any rights of Mr. Hepfinger under the CEO Incentive Award Plan effective January 1, 2010.  Under the Separation Agreement, Mr. Hepfinger will be paid salary,  amounts due related to the non-equity incentive plan, lump-sum payments and the cost of an annual physical examination (up to $1,000) throug h the end of December 31, 2014, and for health and welfare benefits through the end of December 31, 2016, as well as his retirement benefits.    

 

 

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Management of Compensation – Related Risk

The Company’s Board of Directors has considered and determined that risks arising from the Company’s compensation policies and practices for its employees are not reasonably likely to have a material adverse effect on the Company.

 

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed the “Compensation Discussion and Analysis” and has discussed it with the executive management team.  Based upon its review and those discussions, the Compensation Committee recommended to the Board that the “Compensation Discussion and Analysis” be included in this Proxy Statement, which will be incorporated by reference in the Company’s 2013 Annual Report on Form 10-K.

Gerrald B. Silverman, Chairman

Edward J. Lauth III

Glenn D. Steele Jr.

 

COMPENSATION TABLES

Summary Compensation Table

The following table shows the compensation of the Company’s principal executive officer, the principal financial officer and three other officers with the highest total compensation paid or earned for fiscal 2013,  2012 and 2011 (the “Named Officers”).    The following table also shows the compensation of Mr. Hepfinger, the Company’s former Chief Executive Officer who resigned as the Chief Executive Officer on September 21, 2013.    The Company has employment agreements with the Chairman and Vice Chairman and a separation agreement with the former CEO. The material terms of these agreements are discussed under “Potential Payments upon Termination of Employment or Change in Control” below.

 

 

 

 

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Grants of Plan-Based Awards

The following table shows the grants of plan-based awards made to the Named Officers for fiscal 2013.

 

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Pension Benefits

The following table provides information concerning the value of Robert F. Weis’ accumulated benefits under the Company’s  nonqualified deferred compensation agreement.

 

Nonqualified Deferred Compensation

The Company maintains a SERP for certain of its associates.  The SERP is designed to provide retirement benefits and salary deferral opportunities because of limitations imposed by the Internal Revenue Code and the Regulations implemented by the Internal Revenue Service for highly compensated employees.  The plan is unfunded and accounted for on an accrual basis.  Participants in the plan have limited participation in the 401(k) portion of the Retirement Savings Plan and are excluded from receiving contributions in the qualified profit sharing portion of the Retirement Savings Plan once their annual earnings exceed the IRS limitations.    Based upon recommendation from the Compensation Committee, the Board annually determines the amount of the allocation to the SERP. 

 

The allocation among the various plan participants is made in both flat dollar amounts and in relationship to their compensation.  Plan participants are 100% vested in their accounts after six years of service with the Company.  In accordance with the lump-sum or installment election made by the Named Officer prior to the deferral of compensation, benefits are distributed to the participant during the calendar year following the calendar year in which the participant’s termination of service occurs.  Substantial risk of benefit forfeiture does exist for participants in the plan.  The present value of accumulated benefits is included under “Postretirement benefit obligations” in the Consolidated Balance Sheets within the 2013 Annual Report on Form 10-K.

 

Qualified Retirement Plans

Please refer to the “Retirement Plans” section of the “ Compensation Discussion and Analysis.”

 

The following table provides information concerning deferrals by the Named Officers of their earned compensation under the Company’s SERP and qualified retirement plans.  

 

Potential Payments upon Termination of Employment or Change in Control

The Company has entered into employment agreements with the Chairman, Vice Chairman and former CEO.  These agreements provide for certain benefits for involuntary termination of employment other than for cause, but do not contain a change in control provision.    

 

Chairman of the Board.    The Company has an agreement with its Chairman, Robert F. Weis, which provides that in the event his employment terminates for any reason, including but not limited to retirement, disability or death, the Company will continue to provide him and his spouse through December 31, 2023 with medical, dental, accident, disability and life insurance benefits substantially equivalent to those provided to employees.  If Mr. Weis had terminated his employment as of December 31,  2013, the estimated cost to the Company of providing these benefits through the date specified in the agreement would have been $121,487.

 

Vice Chairman.  On November 3, 2011, with retroactive effect to July 1, 2011, the Company entered into an Employment Agreement with Jonathan H. Weis, Vice Chairman.  The Employment Agreement continues through December 31, 2016. 

 

Mr. Weis’ Employment Agreement provides that if prior to the end of the term, the officer’s employment is terminated without cause or the officer terminates his employment for good reason, the officer will be entitled to receive (1) continuation of base salary payments through the end of the term at the rate then in effect and (2) an incentive bonus for the year of termination and any subsequent remaining year of the term equal to the highest incentive bonus received by the officer for any of the two years preceding termination.  If prior to the end of the term the officer’s employment terminates due to death or disability, the officer (or his spouse or estate) is entitled to receive (1) continuation of base salary payments through the end of the term at 50% of the rate then in effect and (2) a prorated bonus for the year of termination only in the amount the Company in good faith determines the officer would have received had his employment continued.  All salary continuation and incentive bonus payments would be made at the same time as if employment had continued.

 

Mr. Weis ’ Vice Chairman Incentive Award Plan provides that if prior to the end of the term, the officer’s employment is terminated without cause, the officer will be entitled to receive a payment based upon the date of the termination, as follows:

 

 

 

The amount will be paid in a lump sum cash payment within 2 ½ months from the end of the calendar year in which the termination occurs; provided, however, in the event an amount is conditioned upon a separation from service and not compensation the officer could receive without separating from service, then payment shall be made to the officer who is a “specified employee” under Section 409A of the Code on the first day following the six-month anniversary of the officer’s separation from service.  Furthermore, the Vice Chairman Incentive Award Plan provides that if prior to the end of the term, the officer’s employment terminates due to death, the officer’s spouse or estate is entitled to receive $1,000,000, payable within sixty days of the date of death of the officer. 

According to the terms of Mr. Weis’ Employment Agreement, the officer agrees (1) to at all times maintain the confidentiality of information pertaining to the Company’s business, and (2) until four years after termination of employment, not to (A) hire any Company employee or solicit or induce any employee, consultant, vendor or

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supplier of the Company to terminate or reduce its relationship with the Company or (B) except in the case of a termination by the Company without cause or by the officer for good reason, engage in any business which competes with the Company in the retail grocery business (or in any other business which accounted for more than 2% of the Company’s consolidated revenues) in any county in which the Company operates or any contiguous county.  The Company’s obligations to make payments or provide benefits to the officer under the Employment Agreement would cease upon any violation of these covenants.

 

The following table shows the benefits Mr. Weis would have received under the Employment Agreement if his employment had terminated for the reasons specified as of December 31, 2013.

 

 

Former President and Chief Executive Officer.  David J. Hepfinger, former CEO, had entered into a three year Employment Agreement which had an expiration date of February 28, 2013.  On March 8, 2013, with retroactive effect to March 1, 2013, the Company entered into a new Employment Agreement with Mr. Hepfinger for a five year term, expiring on February 28, 2018.

 

Mr. Hepfinger’s Employment Agreement provides that if prior to the end of the term, the officer’s employment is terminated without cause or the officer terminates his employment for good reason, the officer will be entitled to receive (1) continuation of base salary payments through the end of the term at the rate then in effect and (2) an incentive bonus for the year of termination and any subsequent remaining year of the term equal to the highest incentive bonus received by the officer for any of the two years preceding termination.  If prior to the end of the term the officer’s employment terminates due to death or disability, the officer (or his spouse or estate) is entitled to receive (1) continuation of base salary payments through the end of the term at 50% of the rate then in effect and (2) a prorated bonus for the year of termination only in the amount the Company in good faith determines the officer would have received had his employment continued.  All salary continuation and incentive bonus payments would be made at the same time as if employment had continued.

 

Mr. Hepfinger’s CEO Incentive Award Plan provides that if prior to the end of the term, the officer’s employment is terminated without cause, the officer will be entitled to receive a  payment based upon the date of the termination, as follows:

 

 

The amount will be paid in a lump sum cash payment within 2 ½ months from the end of the calendar year in which the termination occurs; provided, however, in the event an amount is conditioned upon a separation from service and not compensation the officer could receive without separating from service, then payment shall be made to the officer who is a “specified employee” under Section 409A of the Code on the first day following the six-month anniversary of the officer’s separation from service.  Furthermore, the CEO Incentive Award Plan provides that if

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prior to the end of the term, the officer’s employment terminates due to death, the officer’s spouse or estate is entitled to receive $1,000,000, payable within sixty days of the date of death of the officer. 

 

According to the terms of Mr. Hepfinger’s Employment Agreement, the officer agrees (1) to at all times maintain the confidentiality of information pertaining to the Company’s business, and (2) until four years after termination of employment, not to (A) hire any Company employee or solicit or induce any employee, consultant, vendor or supplier of the Company to terminate or reduce its relationship with the Company or (B) except in the case of a termination by the Company without cause or by the officer for good reason, engage in any business which competes with the Company in the retail grocery business (or in any other business which accounted for more than 2% of the Company’s consolidated revenues) in any county in which the Company operates or any contiguous county.  The Company’s obligations to make payments or provide benefits to the officer under the Employment Agreement would cease upon any violation of these covenants.

 

The following table shows the benefits Mr. Hepfinger would have received under the Employment Agreement if his employment had terminated for the reasons specified as of December 31,  2013.

 

 

 

The Company entered into a Confidential Separation Agreement and General Release with the former CEO Mr. Hepfinger, effective September 21, 2013.  The Separation Agreement replaced and superseded the March 1, 2013 Employment Agreement between the Company and Mr. Hepfinger, and any rights of Mr. Hepfinger under the CEO Incentive Award Plan effective January 1, 2010.  Under the Separation Agreement, the Company agreed to

Mr. Hepfinger also received his accrued and unpaid salary for September, less applicable deductions.  Mr. Hepfinger's accrual of all other benefits and all other participation in the Company's 401(k) salary and all other benefit plans terminated as of the Termination Date.  Under the Agreement, Mr. Hepfinger provided a customary release to the Company and also agreed to be bound by the non-compete, non-solicitation and confidentiality provisions contained in his employment agreement. 

 

OTHER INFORMATION CONCERNING THE BOARD OF DIRECTORS

Compensation of Directors

The following table shows the compensation earned by the Company’s non-management independent directors for services during fiscal 2013.

Directors who are not officers of the Company or any of its subsidiaries receive an annual retainer of $40,000 paid in quarterly installments during the year.  The Chairman of the Audit Committee receives an additional $6,000 annual retainer fee paid in quarterly installments during the year.    

 

In addition, each non-management independent director is entitled to reimbursement for out-of-pocket expenses to attend meetings.  There is no additional remuneration for services rendered by directors serving on committees or for participation in the non-management independent director meetings.

 

Compensation Committee Interlocks and Insider Participation

Directors  Lauth, Silverman and Steele were not officers or employees of the Company, nor have they had any relationship with the Company requiring disclosure under the SEC regulations .  Jonathan H. Weis, who was a member of the Compensation Committee in 2013 but left the committee on April 25, 2013, is a director, employee and officer of the Company and is not considered independent by NYSE listing standards.  None of the Company’s Named Officers have served on the board of directors or compensation committee of any other entity, which has or had one or more executive officers who served as a member of the Company’s Board or Compensation Committee during fiscal 2013.

 

Review and Approval of Related Party Transactions

The Company has adopted written “Conflicts of Interest” policies in its Code of Business Conduct and Ethics and in its Code of Ethics for CEO and CFO.  According to these policies, a conflict of interest occurs when an individual’s private interest interferes, or appears to interfere, in any way with the interests of the Company.  In other words, a conflict situation can arise when an employee takes actions or has interests that may make it difficult to perform his work effectively.  Conflicts of interest also arise when an employee, officer or director, or a member of his family, receives improper personal benefits as a result of his position in the Company.  Loans to or guarantees of obligations of such persons are likely to pose conflicts of interest, as are transactions of any kind between the Company and any other organization in which such person or any member of their family have an interest.

 

Under these policies, activities that could give rise to conflicts of interest are prohibited unless specifically approved in advance by the Audit Committee.  Because it is not always easy to determine whether a conflict of interest exists, any potential conflicts of interest must be reported immediately to the Executive Committee of the Board.  If a member of the Executive Committee of the Board is informed of any potential conflict of interest he must report it immediately to the Audit Committee.  The Audit Committee Charter specifically grants the Audit Committee the authority to review and approve all related party transactions.  These policies cover all Company officers, directors (or nominee), 5%-or-greater shareholders and immediate family members of these persons. 

 

 

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The Company’s Related Party Transaction policy includes the standards included in Section 404(b) of Regulation S-K as well as any other applicable standards under the NYSE rules and regulations.  The Related Party Transaction policy provides for pre-approval of certain transactions involving the Company’s directors, executives , nominees, beneficial owners of more than 5% of the Company’s voting securities and their family members, or an entity in which any of the foregoing persons has more than a 5% beneficial ownership.  The policies define “family member” to mean a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, or any other person living with the individual (except tenants and employees).

 

The policy defines “Related Person Transactions” as a transaction, arrangement or relationship (or series of transactions, arrangements or relationships) since the beginning of the Company’s last fiscal year in which the Company (including its subsidiaries) was, or is a participant and the amount exceeded $120,000, and in which any Related Person had, has or will have a direct or indirect material interest (other than solely as the result of being a director or a less than 10% beneficial owner of another entity).

 

Certain transactions are deemed to be pre-approved even if the amount exceeds $120,000:

 

 

Transactions that are not pre-approved must be presented to the Audit Committee for approval.  If the related person transaction is on-going, the Committee may establish guidelines for management for the relationship which must be reassessed on an annual basis.  Transactions will be approved if they are in the best interest of the Company and its shareholders.

 

No Director will participate in the discussion or approval of a transaction for which he or a family member is a related party, other than to provide material information.

 

All related person transactions will be disclosed in the Company’s applicable filings as required by applicable laws. 

 

Currently, the Company does not have any related party transactions to report under “Review and Approval of Related Party Transactions.”  If the Company encounters related party transactions, they will be reviewed and approved by the Audit Committee in accordance with the Company’s Code of Business Conduct and Ethics, the Code of Ethics for CEO and CFO, the Audit Committee Charter and the Company’s Related Party Transaction policy.

 

Shareholder or Interested Parties Communications

Weis Markets, Inc. shareholders or interested parties may communicate with the Board by sending a letter to: Weis Markets, Inc. Board of Directors, c/o Corporate Secretary, 1000 South Second Street, Sunbury, PA 17801-0471.  The Board has instructed the Secretary to review all communications received, and to exercise his discretion not to forward to the Board correspondence that is inappropriate such as business solicitations, frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints or suggestions) and personal grievances.  However, any director may at any time request the Secretary to forward any and all communications received by the Secretary but not forwarded to the directors.

 

 

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Shareholders or interested parties wishing to communicate directly with the non-management independent directors as a group may do so by sending a letter to Weis Markets, Inc., c/o Non-Management Independent Directors, 1000 South Second Street, Sunbury, PA 17801-0471 or via their email address at nonmanagement@weismarkets.com .

 

Shareholders or interested parties who have concerns regarding accounting, improper use of Company assets, or ethical improprieties may report these concerns to the Audit Committee by sending a letter to Weis Markets, Inc., c/o Audit Committee Chairman, 1000 South Second Street, Sunbury, PA 17801-0471 or via its email address at audit@weismarkets.com .    

 

Submissions to the non-management independent directors or the Audit Committee will remain confidential and can be made anonymously without fear of reprisal.

 

AUDIT COMMITTEE REPORT

The Audit Committee oversees the Company’s financial reporting process on behalf of the Board.  Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls.  Management represented to the Audit Committee that the Company’s consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States and the SEC disclosure requirements.  In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the 2013 Annual Report on Form 10-K with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.

 

The Audit Committee reviewed with Grant Thornton LLP, its independent auditors for fiscal 2013, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Committee in accordance with the standards of the Public Company Accounting Oversight Board (United States).  The Audit Committee has received from the independent auditors written disclosures pursuant to Statement on Auditing Standards No. 16, Communication with Audit Committees, and has discussed those matters with the independent auditors.  The Audit Committee has also received the written disclosure and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditors’ communications with the Audit Committee concerning independence, and has discussed with the independent auditors their independence.

 

The Audit Committee discussed with the Company’s Chief Internal Auditor and the independent auditors the overall scope and plans for their respective audits.  The Audit Committee meets with the Chief Internal Auditor and the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.  In performance of its oversight function, the Audit Committee also monitored Company management’s compliance with the Sarbanes-Oxley Act of 2002 by discussing with management, the Chief Internal Auditor and the independent auditors management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 28,  2013.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board has approved) that the audited financial statements be included in the 2013 Annual Report on Form 10-K for filing with the SEC.  The Audit Committee recommended to the Board, the appointment of Ernst & Young LLP as the Company’s independent auditors for fiscal 2014, subject to shareholder ratification.    

 

Edward J. Lauth III, Committee Chairman

Gerrald B. Silverman

Glenn D. Steele Jr.

 

STOCK OWNERSHIP

Under regulations of the SEC, a person is considered the “beneficial owner” of a security if the person has or shares with others the power to vote the security (voting power), the power to dispose of the security (investment power) or the ability to acquire the security within 60 days.  In the tables below, “beneficial ownership” of the Company’s Common Stock is determined in accordance with these regulations and does not necessarily indicate that the person listed as a “beneficial owner” has an economic interest in the shares indicated as “beneficially owned.”

 

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Beneficial Ownership of Directors and Management 

The following table sets forth information regarding the amount and nature of beneficial ownership of the Company’s Common Stock as of March 7, 2014 by each director,  each nominee, each Named Officer listed in the “Summary Compensation Table,” and for all executive officers and directors as a group.  Except as otherwise indicated in the footnotes to the table, each person named or a member of the group has sole voting and investment power with respect to the shares listed.  No shares have been pledged as security by the directors or Named Officers.

 

 

   *  Owns less than 1% of class.

 

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5% Beneficial Owners

The following table sets forth information about shareholders who are known by the Company to be the beneficial owners of more than 5% of its Common Stock, which is its only class of voting securities, on March 7, 2014.  Information contained in the table and footnotes below was derived from filings made with the SEC by the beneficial owners.

 

 

 

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Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that directors and officers of the Company and beneficial owners of more than 10% of its Common Stock file reports with the SEC with respect to changes in their beneficial ownership of equity securities of the Company.  Based solely upon a review of the copies of such reports furnished to the Company and written representations by certain persons that reports on Form 5 were not required, the Company believes that its directors, officers and greater-than-10% beneficial owners complied with all applicable 2013 Section 16(a) filing requirements.

 

PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee conducted a competitive process to select a firm to serve as the Company's independent registered public accounting firm for the fiscal year ending December 27, 2014.  The Audit Committee invited several firms to participate in this process.  As a result of this process, on February 3, 2014, the Audit Committee approved the dismissal of Grant Thornton LLP and the engagement of Ernst & Young LLP as the Company's independent registered public accounting firm with respect to its operations for fiscal 2014, subject to ratification by the holders of Common Stock of the Company.  In deciding to engage Ernst & Young LLP, the Audit Committee reviewed auditor independence and existing commercial relationships and concluded that Ernst & Young LLP has no commercial relationships with the Company that would impair its independence.    The Board and its Audit Committee recommend that shareholders approve the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm by voting “ FOR” proposal number two.    If the shareholders do not approve the ratification of Ernst & Young LLP, the selection of such firm as independent auditors for the Company will be reconsidered by the Audit Committee.  Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent auditor at any time during the year if it determines that such a change would be in the best interest of the Company and its shareholders.

 

During fiscal years 2012 and 2013 the Company did not consult with Ernst & Young LLP regarding either:

 

 

 

Grant Thornton LLP continued to serve as the Company’s independent registered public accounting firm until the completion of their audit of the Company’s consolidated financial statements as of and for the fiscal year ending December 28, 2013 and the effectiveness of internal control over financial reporting as of December 28, 2013, and the issuance of their reports thereon. Grant Thornton LLP issued such reports on March 13, 2014.  

 

Grant Thornton LLP’s audit reports on the Company’s consolidated financial statements as of and for the fiscal years ended December 28, 2013 and December 29, 2012 did not contain any adverse opinions or disclaimers of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports of Grant Thornton LLP on the effectiveness of internal control over financial reporting as of December 28, 2013 and December 29, 2012 did not contain any adverse opinions or disclaimers of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

 

During the fiscal years ended December 28, 2013 and December 29, 2012, and the subsequent interim period through March 13, 2014, there were (i) no disagreements between the Company and Grant Thornton LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Grant Thornton LLP, would have caused Grant Thornton LLP to make reference to the subject matter of the disagreement in their reports on the Company’s consolidated financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

 

The Company provided Grant Thornton LLP with a copy of its Current Report on Form 8-K and its Current Report on 8-K/A (the “Reports”), in which the Company disclosed the above information prior to the time the

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Reports were filed with the Securities and Exchange Commission (the “SEC”) and requested that Grant Thornton LLP furnish letters addressed to the SEC stating whether or not it agrees with the statements made therein. These letters, dated February 7, 2014 and March 13, 2014, are filed as Exhibit 16.1 to the Reports filed on February 7, 2014 and March 13, 2014, respectively, and are incorporated herein by reference.

 

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Representatives of Ernst & Young LLP and Grant Thornton LLP are expected to be present at the Annual Meeting with the opportunity to make a statement, if they so desire, and to be available to respond to appropriate questions.

 

According to its Charter, the Audit Committee, comprised of independent members of the Board, is responsible for approving all audit engagement fees, terms and non-audit engagements with the independent auditors on behalf of the Company.  The Audit Committee considered the possible effect of non-audit services on the auditors’ independence and approved the type of non-audit services that were rendered.  The Company has not adopted a written policy for Audit Committee pre-approval of audit services and non-audit services performed by the independent auditors.  In fiscal 2013, all audit and tax fees associated with the independent auditors’ services were approved by the Audit Committee. 

 

The following table sets forth Grant Thornton LLP fees billed to the Company for professional services related to fiscal 2013 and 2012:

 

 

 

 

PROPOSAL NO. 3

ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION

As described in the “Compensation Discussion and Analysis”, the Compensation Committee has an executive compensation program designed to pay for performance and to align the long-term interests of the Company’s Named Officers with the long-term interests of its shareholders.  The Company is presenting the following proposal, which gives you as a shareholder the opportunity to endorse or not endorse the Company’s pay program for Named Officers by voting for or against the following resolution.  This resolution is required pursuant to Section 14A of the Securities Exchange Act.  Because the vote is advisory, it will not be binding on the Board.  However, the Board and the Compensation Committee will review the voting results and take into account the outcome when considering future executive compensation arrangements.  The Board and management are committed to the Company’s shareholders and understand that it is useful and appropriate to obtain the views of its shareholders when considering the design and initiation of executive compensation programs.

 

RESOLVED :  The shareholders approve the compensation of the Company’s Named Officers, pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, including as disclosed in the Compensation Discussion and Analysis, the compensation tables, and the related disclosure contained in the Proxy Statement set forth under the caption “Executive Compensation.”

 

The Board recommends that you vote FOR approval of the compensation of the Company’s Named Officers as disclosed in the “Compensation Discussion and Analysis”, the compensation tables, and the related disclosure contained in the Proxy Statement set forth under the caption “Executive Compensation” of this Proxy Statement.  Proxies will be voted FOR approval of the proposal unless otherwise specified.

 

 

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OTHER MATTERS

As of the date of this Proxy Statement, the Board is not informed of any matters, other than those stated above, that may be brought before the meeting.  The persons named in the enclosed form of proxy or their substitutes will vote with respect to any other matters brought before the Annual Meeting in accordance with their best judgment.

 

ANNUAL REPORT ON FORM 10-K

The Company will provide, without charge, on written request from security holders, copies of the Company’s Annual Report on Form 10-K.    Written requests should be sent to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications ,” by telephoning 1-866-999-WEIS (9347), or via email at financial_reports@weismarkets.com.  The 20 13  Annual Report on Form 10-K is also available for viewing or printing from the Company’s website at http://www.weismarkets.com/financial.html .

 

SHAREHOLDERS’ PROPOSALS FOR NEXT ANNUAL MEETING

The Company’s by-laws require that any shareholder intending to present a proposal for action at an Annual Meeting must give written notice of the proposal, containing specified information, so that it is received by the Company not later than the notice deadline under the by-laws.  This notice deadline will not be less than 120 calendar days before the date of the Company’s Proxy Statement released to shareholders in connection with the previous year’s Annual Meeting, or November 13,  2014 for the Company’s Annual Meeting in 2015.

 

The by- law described above does not affect the right of a shareholder to request inclusion of a shareholder proposal in the Company’s Proxy Statement pursuant to SEC Rule 14a-8 or to present for action at an Annual Meeting any proposal so included.  Rule 14a-8 requires that written notice of a shareholder proposal requested to be included in the Company’s proxy materials pursuant to the Rule must also be received by the Company not less than 120 calendar days before the date of the Company’s Proxy Statement released to shareholders in connection with the previous year’s Annual Meeting.   For the Company’s Annual Meeting in 2015, this deadline would also be November 13,  2014.

 

The notices of shareholder proposals described under this caption must be given to the Corporate Secretary at the Company’s address set forth in “Shareholder or Interested Parties Communications.”  A copy of the by‑law provision described above will be furnished to any shareholder upon written request to the Secretary at the same address.

 

EXPENSES OF SOLICITATION

All expenses related to the solicitation of the proxies by the Board will be paid by the Company.  If proxies are not promptly received, officers, directors and regular employees of the Company may solicit proxies personally by telephone or otherwise, for which they will not receive additional compensation.  The Company may reimburse charges of banks, brokers, other custodians, nominees and fiduciaries to send proxy material to the beneficial owners and to secure their voting instructions, if necessary.  It is estimated that such costs will be nominal.

 

 

 

By Order of the Board of Directors,

 

 

Harold G. Graber

Secretary

Dated: March 13, 2014