BJ's Wholesale Club (BJ) DEF 14ADefinitive proxy

This proxy statement (this "Proxy Statement") and our annual report for the fiscal year ended February 1, 2020 (the "Annual Report" and, together with this Proxy Statement, the "proxy materials") are being furnished to you by and on behalf of the board of directors (the "Board" or the "Board of Directors") of BJ’s Wholesale Club Holdings, Inc. in connection with our 2020 annual meeting of stockholders (the "Annual Meeting").  References herein to "fiscal year 2019" and "fiscal year 2020" refer to the 52 weeks ending February 1, 2020 and January 30, 2021, respectively.  As used herein, the terms "Company," "BJ’s," "we," "us," or "our" refer to BJ’s Wholesale Club Holdings, Inc. and its consolidated subsidiaries unless otherwise stated or the context otherwise requires.

This Proxy Statement and Annual Report are first being distributed or made available on or about May 6, 2020.

Stockholders who choose to attend the Annual Meeting will do so by accessing a live audio webcast of the Annual Meeting via the Internet at the link provided above. At this website, stockholders will be able to listen to the Annual Meeting live, submit questions and submit their vote while the Annual Meeting is being held. We are hosting the Annual Meeting virtually due to health concerns about the coronavirus, or COVID-19, and to support the health and well-being of our stockholders, employees and partners. Please see "How do I attend and vote at the Annual Meeting?" below for more information.

As of the date this Proxy Statement went to press, we did not know of any matters to be properly presented at the Annual Meeting other than those referred to in this Proxy Statement. If other matters are properly presented at the Annual Meeting or any continuation, postponement or adjournment thereof for consideration, and you are a stockholder of record and have submitted a proxy card, the persons named in your proxy card will have the discretion to vote on those matters for you.

The rules of the Securities and Exchange Commission (the "SEC") permit us to furnish proxy materials, including this Proxy Statement and the Annual Report, to our stockholders by providing access to such documents on the Internet instead of mailing printed copies. Stockholders will not receive paper copies of the proxy materials unless they request them. On or about May 6, 2020, we began mailing to our stockholders a Notice of Internet Availability of Proxy Materials (the "Notice and Access Card"), which provides instructions on how to access and review the proxy materials online, as well as how to vote. If you received a Notice and Access Card by mail, you will not receive a printed copy of the proxy materials unless you request a copy. If you would like to receive a paper or email copy of the proxy materials, you should follow the instructions for requesting such materials described in the Notice and Access Card. The Annual Report is not part of the proxy solicitation material.

It means that your shares are held in more than one account at the transfer agent and/or with banks or brokers. Please vote all of your shares. To ensure that all of your shares are voted, for each set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope.

No. The Notice and Access Card identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and Access Card and returning it. If you would like a paper proxy card, you should follow the instructions in the Notice and Access Card. The paper proxy card you receive will also provide instructions as to how to authorize via the Internet or telephone your proxy to vote your shares according to your voting instructions. Alternatively, you can mark the paper proxy card with how you would like your shares voted, sign and date the proxy card and return it in the envelope provided.

A record holder (also called a "registered holder") holds shares in his or her name. Shares held in "street name" means that shares are held in the name of a broker, bank, or other nominee on the holder’s behalf.

If your shares are held in a brokerage account or by a bank or other holder of record, you are considered the "beneficial owner" of shares held in "street name." The proxy materials have been 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 holder of record on how to vote your shares by following their instructions for voting. Please refer to information from your broker, bank or other nominee on how to submit your voting instructions.

If a quorum is not present or represented at the scheduled time of the Annual Meeting, then either (i) the chairperson of the Annual Meeting or (ii) a majority in voting power of the stockholders entitled to vote at the Annual Meeting, present in person, or by remote communication, or represented by proxy, may adjourn the Annual Meeting until a quorum is present or represented.

The Board appointed Ms. Clark and Mr. Kingsbury as Class II directors on September 19, 2019 and December 19, 2019, respectively, with Mr. Kingsbury’s appointment effective February 2, 2020. Ms. Clark and Mr. Kingsbury, Class II directors and nominees who have not previously stood for election, were both identified as potential candidates for election to the Board by members of our management. Based on an evaluation in accordance with our standard review process for director candidates and the recommendation of the nominating and corporate governance committee, the Board has nominated each of our current Class II directors to stand for election at the Annual Meeting, except for Mr. Seiffer, who informed us on April 14, 2020 of his intention not to stand for re-election as a member of the Board and to resign upon the expiration of his current term. Accordingly, Mr. Seiffer will not be standing for re-election as a member of the Board. Upon the expiration of Mr. Seiffer’s term as a Class II director at the Annual Meeting, the number of directors that will constitute our Board will be decreased from ten to nine. If elected by the stockholders at the Annual Meeting, Ms. Clark and Mr. Kingsbury will each serve for a term expiring at the annual meeting of stockholders to be held in 2023 (the "2023 Annual Meeting") and until the election and qualification of his or her successor or until his or her earlier death, resignation or removal. See the section entitled "Corporate Governance-Director Nominations Process" below for more information regarding our standard review process for director candidates.

Each Class II director nominee is currently serving as a director of the Company. We have no reason to believe that any Class II director nominee will be unable or unwilling to serve, if elected. If, however, prior to the Annual Meeting, the Board of Directors should learn that any Class II director nominee is unable or unwilling to serve as a director for any reason, and if the Board shall designate a substitute nominee, the persons named as proxies will vote for the election of the substitute nominee designated by the Board. Alternatively, the persons named as proxies, at the Board’s discretion, may vote for that fewer number of nominees as results from the inability of any nominee to serve.

Our Certificate of Incorporation currently provides that the Board be divided into three classes, designated as Class I, Class II and Class III. Each class must consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board. Each class of directors must stand for re-election no later than the third annual meeting of stockholders subsequent to their initial appointment or election to the Board, provided that the term of each director will continue until the election and qualification of his or her successor and is subject to his or her earlier death, resignation or removal. Generally, vacancies or newly created directorships on the Board will be filled only by vote of a majority of the directors then in office and will not be filled by the stockholders, unless the Board determines by resolution otherwise. A director appointed by the Board to fill a vacancy will hold office until the next election of the class for which such director was chosen, subject to the election and qualification of his or her successor and his or her earlier death, resignation or removal.

As discussed in greater detail in Proposal 4, the Board of Directors recently approved, subject to stockholder approval, an amendment to our Certificate of Incorporation to provide for the phased declassification of the Board. If Proposal 4 is approved by the requisite vote of stockholders at the Annual Meeting, directors will be elected to one-year terms of office beginning at our 2021 annual meeting of stockholders, and, following our 2022 annual meeting of stockholders, the Board of Directors will be completely declassified and all directors will be subject to annual election to one-year terms beginning with the 2023 Annual Meeting.

The following pages contain certain biographical information as of May 6, 2020 for each Class II director nominee and each director whose term as a director will continue after the Annual Meeting, including all positions he or she holds, his or her principal occupation and business experience for the past five years, and the names of other publicly-held companies of which the director or nominee currently serves as a director or has served as a director during the past five years.

We believe that all of our directors and nominees: display personal and professional integrity; satisfactory levels of education and/or business experience; broad-based business acumen; an appropriate level of understanding of our business and its industry and other industries relevant to our business; the ability and willingness to devote adequate time to the work of the Board of Directors and its committees; skills and personality that complement those of our other directors that helps build a Board that is effective, collegial and responsive to the needs of our Company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise and background; and the ability to represent the interests of all of our stockholders. The information presented below regarding each Class II director nominee and continuing director also sets forth specific experience, qualifications, attributes and skills, in addition to those set forth above that led the Board of Directors to the conclusion that such individual should serve as a director in light of our business and structure.

Representatives of PricewaterhouseCoopers LLP are expected to attend the Annual Meeting and to have an opportunity to make a statement if they so desire and be available to respond to appropriate questions from stockholders.

The services provided to us by PricewaterhouseCoopers LLP in fiscal year 2019 and fiscal year 2018 were provided in accordance with our pre-approval policies and procedures, as applicable.

The audit committee operates pursuant to a charter which is reviewed periodically by the audit committee. Additionally, a brief description of the primary responsibilities of the audit committee is included in this Proxy Statement under the discussion of "Corporate Governance-Audit Committee." Under the audit committee charter, management is responsible for the preparation, presentation and integrity of the Company’s financial statements, the application of accounting and financial reporting principles and our internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing our financial statements and expressing an opinion as to their conformity with accounting principles generally accepted in the United States.

Based on this assessment, effective as of February 2020, the Board of Directors separated the roles of Chief Executive Officer and Chairman of the Board and, as described in more detail below, also has a lead director. Currently, Mr. Baldwin serves as our Executive Chairman of the Board, Mr. Delaney serves as our Chief Executive Officer and Mr. Steele serves as our lead director. Mr. Steele was appointed lead director in May 2019 by the independent members then serving on the Board. The Board of Directors believes that this leadership structure best serves us and is appropriate given the needs of a company our size and the wide spectrum of issues we face because it (i) provides us with the continued benefits of the experience, knowledge and vision of Mr. Baldwin, who served as our Chief Executive Officer from February 2016 to February 2020 and as our Chairman of the Board from February 2018 to February 2020, as he transitions Chief Executive Officer responsibilities to Mr. Delaney and (ii) allows the Chief Executive Officer to focus his efforts on setting the strategic direction of the Company and providing day-to-day leadership of the Company while the Chairman of the Board focuses on presiding at meetings of the Board and overall planning and relations with directors. In addition, the Board of Directors expects the lead director role to continue to enhance and provide further assurances to our stockholders regarding the strong independent oversight exercised by the Board of Directors. As lead director, Mr. Steele presides over all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of independent directors; approves Board meeting schedules and agendas; and acts as the liaison between the independent directors and the Chief Executive Officer and the Chairman of the Board.

In arriving at the foregoing independence determinations, the Board of Directors reviewed and discussed information provided by the directors with regard to each director’s business and personal activities and any relationships they have with us and our management. In making the director independence determinations regarding Mr. Peterson, the Board considered that he serves as an executive officer of Newell Brands, Inc., one of the Company’s vendors and from whom we purchase products in the ordinary course of business, on arm’s-length terms, in amounts and under other circumstances that the Board determined did not affect Mr. Peterson's independence. In 2019, the Company’s payments to Newell Brands, Inc. were less than 1.0% of Newell Brands Inc.'s net sales, and Mr. Peterson had no direct or indirect material interest in the sales Newell Brands, Inc. makes to the Company.

Our audit committee currently consists of Messrs. Parent, Peterson and Steele, with Mr. Peterson serving as chair. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the NYSE. The Board of Directors has affirmatively determined that each of Messrs. Parent, Peterson and Steele qualifies as "independent" under the NYSE’s standards and Rule 10A-3 of the Exchange Act of 1934, as amended (the "Exchange Act") applicable to audit committee members. In addition, the Board of Directors has determined that Mr. Peterson qualifies as an "audit committee financial expert," as such term is defined in Item 407(d)(5) of Regulation S-K.

The compensation committee evaluated whether any work provided by Exequity raised any conflict of interest under applicable SEC or NYSE rules for services performed during fiscal year 2019 and determined that it did not.

Our nominating and corporate governance committee currently consists of Mses. Gloeckler and Werthauser, with Ms. Werthauser serving as chair. The Board has determined that each of Mses. Gloeckler and Werthauser qualifies as "independent" under applicable NYSE rules for purposes of serving on the nominating and corporate governance committee.

During fiscal year 2019, the Board of Directors met four (4) times, the audit committee met five (5) times, the compensation committee met one (1) time and the nominating and corporate governance committee met four (4) times. During fiscal year 2019, each of our directors attended at least 75% of the aggregate of (1) the total number of meetings of the Board of Directors held during the period for which he or she was a director and (2) the total number of meetings for all committees of the Board of Directors on which he or she served during the periods that he or she served.

We do not have a formal policy regarding the attendance of our Board members at our annual meetings of stockholders, but we expect all directors to make every effort to attend any meeting of stockholders. Eight of the nine members of our Board of Directors then serving attended the 2019 annual meeting of stockholders.

The nominating and corporate governance committee will consider director candidates recommended by stockholders, and such candidates will be considered and evaluated under the same criteria described above. Any recommendation submitted to the Company should be in writing and should include any supporting material the stockholder considers appropriate in support of that recommendation, but must include information that would be required under the rules of the SEC to be included in a proxy statement soliciting proxies for the election of such candidate and a written consent of the candidate to serve as one of our directors if elected and must otherwise comply with the requirements under our Bylaws for stockholders to recommend director nominees. Stockholders wishing to propose a candidate for consideration may do so by submitting the above information to the attention of the Secretary, BJ’s Wholesale Club Holdings, Inc., 25 Research Drive, Westborough, Massachusetts 01581. All recommendations for nominations received by the Secretary that satisfy our Bylaws' requirements relating to such director nominations will be presented to the nominating and corporate governance committee for its consideration. Stockholders also must satisfy the notification, timeliness, consent and information requirements set forth in our Bylaws. These timing requirements are also described under the heading "Stockholder Proposals and Director Nominations."

The audit committee assists the Board in fulfilling its risk oversight responsibilities by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls, our compliance with legal and regulatory requirements and our enterprise risk management program. Through its regular meetings with management, including the finance, legal, internal audit, tax, compliance, and information technology functions, the audit committee reviews and discusses significant areas of our business and summarizes the key areas of risk and the appropriate mitigating factors for the Board. The compensation committee assists the Board by overseeing and evaluating risks related to the Company’s compensation structure and compensation programs, including the formulation, administration and regulatory compliance with respect to compensation matters, and coordinating, along with the Executive Chairman of the Board, succession planning discussions. The compensation committee periodically reviews the Company’s compensation policies and practices and assesses whether such policies and practices are reasonably likely to have a material adverse effect on the Company by encouraging excessive risk taking. The nominating and corporate governance committee assists the Board by overseeing and evaluating programs and risks associated with Board organization, membership and structure, and corporate governance. In addition, the Board receives periodic detailed operating performance reviews from management.

Given its role in the risk oversight, the Board of Directors believes that any leadership structure that it adopts must allow it to effectively oversee the executives' management of the risks relating to our operations. Although there are different leadership structures that could allow the Board to effectively oversee the management of such risks, and while the Board believes its current leadership structure enables it to effectively manage such risks, it was not the primary reason the Board selected its current leadership structure over other potential alternatives. See the discussion under the heading "Board Leadership Structure" above for a discussion of why the Board has determined that its current leadership structure is appropriate.

The Board of Directors has adopted an insider trading compliance policy, which applies to all of our directors, officers and certain designated employees. The policy prohibits our directors, officers and certain designated employees from engaging in hedging or monetization transactions, such as zero-cost collars and forward sale contracts, short sales, and transactions in publicly traded options, such as puts, calls and other derivatives involving our equity securities and also prohibits the pledging of the Company’s securities as collateral to secure loans. None of our NEOs has engaged in any hedging transactions with respect to our common stock or pledged any of his or her shares of common stock in the Company.

Any stockholder or any other interested party who desires to communicate with the Board of Directors, our non-management directors or any specified individual director, may do so by directing such correspondence to the attention of the Secretary at our offices at 25 Research Drive, Westborough, Massachusetts 01581. The Secretary will forward the communication to the appropriate director or directors.

The compensation committee has discussed and reviewed the following Compensation Discussion and Analysis with management. Based upon this review and discussion, the compensation committee recommended to the Board that the Compensation Discussion and Analysis be included in the Annual Report on Form 10-K for fiscal year 2019.

This section discusses the principles underlying the material components of our executive compensation program for our executive officers who are named in the "Summary Compensation Table" and the factors relevant to an analysis of these policies and decisions. Our named executive officers ("NEOs") for fiscal year 2019 are:

On January 30, 2020, the compensation committee approved amendments to Mr. Delaney’s and Mr. Baldwin’s employment agreements in connection with their appointments as Chief Executive Officer and Executive Chairman of the Company, respectfully, each effective as of February 2, 2020. See "-Fiscal Year 2020 Compensation for Chief Executive Officer and Executive Chairman" below for more information regarding these appointments and the impact on each NEO’s compensation and benefits.

At our 2019 annual meeting of stockholders, our stockholders voted on a non-binding, advisory resolution to approve the compensation that we paid to our named executive officers, as disclosed in our proxy statement for our 2019 annual meeting of stockholders, which we refer to as the "say-on-pay" proposal, and the say-on-pay proposal was approved with approximately 65% of the votes cast voting in favor. Although the say-on-pay proposal was approved with more than majority support, we subsequently engaged in extensive outreach efforts to our stockholders to better understand the views of our larger stockholders and the concerns of those of our stockholders who did not support our say-on-pay proposal. Following our 2019 annual meeting of stockholders, at the Board’s direction, we reached out by email and phone calls to our top 30 stockholders unaffiliated with our directors and executive officers representing more than 77% of our outstanding shares, to request meetings to discuss any issues or concerns they may have with our executive compensation program. Stockholders representing nearly 42% of our outstanding shares agreed to engage with us. For those that did not respond or agree to engage with us, we reached out to them again to request meetings. We also reviewed proxy advisory firm reports that discussed our say-on-pay proposal and made voting recommendations and consulted the publicly-available policies of our major stockholders to better understand their views on executive compensation.

In October and November 2019, Judy Werthauser, an independent director and Chair of the compensation committee, Graham Luce, General Counsel and Secretary, and Faten Freiha, Vice President of Investor Relations, collectively met by phone with stockholders representing nearly 42% of our outstanding shares. We provided an open forum to each shareholder to discuss and comment on any aspects of the Company’s executive compensation program. Overall, we received constructive feedback from the stockholders who engaged with us regarding the Company’s executive compensation program. The Company after this engagement with its stockholders, agreed to keep in contact with them, as well as the other stockholders who chose not to engage with the Company, in order to continue to receive whatever feedback they may have on the Company’s executive compensation program.

In addition, management and our investor relations team held many meetings and discussions with stockholders between the 2019 annual meeting of stockholders and the end of 2019. This effort supplemented the ongoing communications between our management and stockholders regarding the say-on-pay proposal, as well as the outreach to stockholders prior to and in connection with our 2019 annual meeting of stockholders, through various engagement channels, including direct meetings, analyst conferences and road shows. These meetings provided the compensation committee and the Board with valuable insights into our stockholders' perspectives on our executive compensation program and potential improvements to the program, as described below.

In addition, the compensation committee undertook a fresh review of our executive compensation program, with particular emphasis on our short-term and long-term incentive plans. Over the course of October 2019 to March 2020, with input from Exequity, its independent compensation consultant and management, the compensation committee conducted a comprehensive review of our compensation programs. The principle components of the 2019 executive compensation program for our named executive officers consisted of base salary, annual performance bonus based on EBITDA performance, and long-term incentives, comprising restricted stock and stock options granted in April 2019, prior to the stockholder vote. More detail on these compensation components is provided further herein.

The compensation committee refined the executive compensation program consistent with its ongoing efforts to ensure that our programs are optimally designed to reflect stockholder values, enhance the link between executive pay and company performance, respond to changing market practices and retain effective leaders who have a significant understanding of our business.

In response to investor feedback during 2019, the compensation committee made the following changes to the executive compensation program:

During our conversations with stockholders, we also heard feedback regarding corporate governance issues. In response to our stockholders, the Board agreed to submit a proposal to declassify the Board at the Annual Meeting. Please see the section entitled "Proposal No. 4 Approval of an Amendment to our Second Amended and Restated Certificate of Incorporation to Declassify the Board of Directors of the Company" for more information.

The following table highlights key features of our executive compensation program that demonstrate the Company’s ongoing commitment to promoting stockholder interests through sound compensation governance practices.

The compensation committee oversees key aspects of the Company’s executive compensation programs, including, base salaries, annual incentive and long-term incentive awards, and perquisites or other benefits for the Company’s executive officers, including our NEOs. The compensation committee approves performance goals for awards granted under our incentive compensation programs. In making its decisions the compensation committee considers a variety of factors, including, but not limited to:

>> Role of the Chief Executive Officer and Management

The Chief Executive Officer and management manage the compensation programs based on the compensation committee’s decisions and directives. The Chief Executive Officer makes recommendations to the compensation committee regarding compensation of executive officers other than himself.

Our executive compensation program is designed to (i) attract, engage and retain the best executives, (ii) align compensation with our corporate strategies, business and financial objectives and the long-term interests of our stockholders, (iii) motivate and reward executives whose knowledge, skills and performance ensure our continued success; and (iv) ensure that our total compensation is fair, reasonable and competitive.

We offer cash compensation, in the form of base salaries, annual Company performance-based bonuses and, as circumstances warrant, discretionary individual performance-based bonuses, that we believe appropriately rewards our executive officers for their contributions to our business. When making awards, the compensation committee considers the Company’s financial and operational performance. A key component of our executive compensation program, however, is long-term equity incentive awards. We emphasize the use of long-term equity awards to incentivize our executive officers to focus on the growth of our overall enterprise value and, correspondingly, the creation of value for our stockholders.

The compensation committee generally approves annual compensation levels for NEOs in the first quarter of each fiscal year, though from time to time it may make adjustments to compensation at other times of the year. When determining base salaries, annual bonuses, long-term incentive awards, and other forms of compensation, the compensation committee takes into consideration a variety of information, including, but not limited to, data generated from the compensation practices of its peer group companies internal equity, an executive’s experience, knowledge of our business and the retail industry, scope of responsibility, corporate performance and individual performance. In particular, the compensation committee made the following key compensation decisions for fiscal year 2019:

To gain a general understanding of our current compensation practices, the compensation committee reviews the compensation of executives serving in similar positions at peer group companies. The external market data reviewed for fiscal year 2019 was provided by Exequity.

In reviewing and developing the peer group companies for fiscal year 2019, the compensation committee considered, at the recommendation of Exequity, industry, annual revenue, market capitalization, enterprise value, EBITDA and gross margin, among other factors for each company. With respect to its executive compensation program, the Company is positioned near the median of the peer group companies based on annual revenue and market capitalization. The peer group companies, along with other market data, used for benchmarking our executive compensation program for fiscal year 2019 was the same as the peer group companies for fiscal year 2018. The compensation committee reviews and develops the peer group companies annually with input from Exequity.

In fiscal year 2019, the compensation committee considered the pay practices and compensation levels of executives serving in similar positions at the peer group companies when it determined the base salary adjustments, the change in the target payout levels under our annual incentive plan and the size and mix of equity awards granted to our NEOs, each as described below.

We believe it is important to provide a competitive fixed level of pay to attract and retain experienced and successful executives. Annual base salaries compensate our executive officers for fulfilling the requirements of their respective positions and provide them with a level of cash income predictability and stability with respect to a portion of their total compensation.

The base salaries of our executive officers, including our NEOs, are reviewed periodically by the compensation committee and our Chief Executive Officer (except with respect to his own base salary), and adjustments are made as deemed appropriate. In determining the amount of base salary that each NEO receives, we consider the executive’s current compensation, tenure, any change in the executive’s position or responsibilities and the complexity and scope of the executive’s position and responsibilities as compared to those of other executives within the Company and in similar positions at the peer group companies.

Our annual incentive plan, which became effective on January 29, 2017 (the "Annual Incentive Plan") is designed to reward participants, including our NEOs, for their contributions to the Company based on the achievement of a pre-established company financial metric, Adjusted EBITDA. We use Adjusted EBITDA, which we define as income from continuing operations before interest expense, net, provision (benefit) for income taxes and depreciation and amortization, adjusted for the impact of certain other items, including: compensatory payments related to options; stock-based compensation expense; pre-opening expenses; management fees; non-cash rent; strategic consulting; costs related to our IPO and the registered offerings by selling stockholders; club closing and impairment charges; reduction in force severance; gas profit outside of a specific collar and other adjustments as determined by the compensation committee, to set our performance target under the Annual Incentive Plan because we believe it is a key financial metric measuring the progress of our operational strategy. As each NEO’s performance contributes to this metric, we believe it provides a fair and objective basis on which to evaluate each NEO’s performance and to determine each NEO’s annual cash incentive award under the Annual Incentive Plan.

The compensation committee established minimum, target and maximum levels of performance for the Adjusted EBITDA goal shortly after the beginning of fiscal year 2019, based on an assessment of the operating landscape for fiscal year 2019, which may result in variations in these established levels from year to year. Overall the goals for Adjusted EBITDA for fiscal year 2019 were largely consistent with the prior year. Pursuant to these levels of performance, each NEO could earn 0%, 100% or 200%, respectively, of his target annual cash incentive award.

Additionally, the compensation committee established an aggregate target amount of the bonus pool for fiscal year 2019 for purposes of determining the impact on each NEO’s cash incentive award of Adjusted EBITDA for fiscal year 2019 being greater than or less than the target performance level (the "Target Bonus Pool"). To the extent Adjusted EBITDA for fiscal year 2019 exceeded the target performance level, then the amount of the actual bonus pool would equal the sum of (i) the Target Bonus Pool and (ii) one-third of the amount by which Adjusted EBITDA for fiscal year 2019 (without taking into account the reduction to Adjusted EBITDA resulting from cash incentive awards above the target awards amounts) exceeded the target performance level. If Adjusted EBITDA for fiscal year 2019 was less than the target performance level, then the amount of the actual bonus pool would be calculated by subtracting (i) an amount equal to one-half of the amount by which the target performance level exceeded Adjusted EBITDA for fiscal year 2019 (without taking into account the impact to Adjusted EBITDA resulting from cash incentive awards below the target awards amounts) from (ii) the Target Bonus Pool. The amount of each NEO’s annual cash incentive award, as a percentage of the target set for each NEO, is equal to the size of such actual bonus pool as a percentage of the Target Bonus Pool (up to a maximum of 200%).

The table below illustrates the relationship between Adjusted EBITDA for fiscal year 2019, cash incentive awards as a percentage of target performance and the size of the bonus pool, with interpolation applying for amounts between levels, as well as actual performance for fiscal year 2019, the percentage of target earned and the actual bonus pool.

The compensation committee determined that Adjusted EBITDA for fiscal year 2019 was less than the target performance level. Accordingly, the total bonus pool was correspondingly decreased by 1/2 the amount by which the target performance exceeded actual Adjusted EBITDA for fiscal year 2019, which resulted in an achievement level of 76.5%.

Each NEO's target annual cash incentive award opportunity is expressed as a percentage of his or her base salary in effect at fiscal year-end and is based on peer group benchmark data and the scope of responsibility and impact the executive has on the Company's overall results. In fiscal year 2019, the compensation committee maintained each NEO's target payout percentage for his fiscal year 2019 award, other than the percentage for Mr. Delaney, which was increased in connection with his promotion as the Company’s President on September 1, 2019. Mr. Eddy’s target payout percentage was also increased in September 2019 to 110% of his base salary, effective for fiscal year 2020, in connection with other management promotions and our desire to continue to incentivize and retain Mr. Eddy.

Given the base salary increases, however, each NEO's target annual cash incentive award opportunity increased. These increases were intended to more closely align each NEO's potential annual total cash compensation with the median of the annual total cash compensation paid to executives with similar roles and responsibilities at the peer group companies.

The following table sets forth fiscal year 2019 target bonuses for each of our NEOs as a percentage of base salary, the percentage of target bonus earned for each NEO as a percentage of base salary and the cash incentive award amounts that were paid to each NEO for fiscal year 2019 based on the achievement of the Adjusted EBITDA goal described above.

For 2019, we used non-qualified stock options and restricted stock awards to motivate, reward and retain our executive officers in a manner that best aligned their interests with the interests of our stockholders. Our executive officers are only able to benefit from non-qualified stock options if the market price of our common stock increases relative to the option’s exercise price and changes in the value of restricted stock, both positive and negative, directly correspond to those experienced by our stockholders. Therefore, we believe that non-qualified stock options and restricted stock awards provide meaningful incentives to our executive officers to achieve increases in the value of our stock over time and are an effective tool for meeting our compensation goals of increasing long-term stockholder value by tying the value of the awards to our future performance and by aligning executive officer compensation with the interests of our stockholders.

Historically, when determining the amount and terms of equity compensation awards we considered, among other things, market information provided by Exequity, individual performance history, job scope, function, title, outstanding and unvested equity awards and comparable awards granted to other executives at similar levels at the peer group companies. The compensation committee has also drawn upon the experience of its members in making such determinations.

Based on these considerations, the compensation committee determined not to increase the long-term incentive award amounts for the NEOs for fiscal year 2019. The compensation committee did, however, adjust the equity mix of the awards to increase the relative weighting of the restricted stock component of our long-term incentive awards to more closely align the incentives provided by these awards with the interest of our stockholders. Restricted stock awards provide the most direct alignment with our stockholders as changes in value of restricted stock awards, both positive and negative, directly correspond to those experienced by our stockholders. As a result, the compensation committee determined that it was appropriate for a significant majority of the value of the long-term incentive awards granted to the NEOs for fiscal year 2019 to consist of restricted stock. The following table sets forth the types of awards we granted, weighting (based on target value) allocated to each type of award for each of our NEOs and vesting terms of our long-term incentive compensation for fiscal year 2019:

(1) The number of options granted is based on the quotient of the dollar amount of the awards divided by the closing price of the Company’s common stock on the NYSE on the date of grant, divided by three. The grant date fair value of the award may differ from the dollar amount of the award.

(2) Mr. Eddy received an additional grant of 55,782 shares of restricted stock, with a grant date fair value of $1.5 million on September 16, 2019 in connection with other management promotions and our desire to continue to incentivize and retain Mr. Eddy. These shares are subject to vesting in equal installments on each of September 16, 2021 and 2022, subject to continued employment with, or service to, the Company or its subsidiaries through such dates.

Based on stockholder feedback received during 2019, we made significant changes to our executive compensation program, including adjusting our mix of long-term incentive awards to NEOs to be 50% performance shares and 50% restricted stock awards. For performance share grants, the compensation committee approved a three-year cumulative adjusted EPS goal, with the target performance level based on, and aligned with, our long-range plan and growth model, which the compensation committee believes is challenging. See "-Compensation Discussion and Analysis-Changes for 2020-Responding to Investor Feedback" for more information regarding changes to our 2020 executive compensation program.

We have established a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Under the 401(k) plan, eligible employees may elect to reduce their current compensation by up to the prescribed annual limit, and contribute these amounts to the 401(k) plan. This plan provides for Company matching contributions of 50% of the first 6% of an employee’s covered compensation.

We maintain an executive retirement plan (the “Executive Retirement Plan”) in which a select group of our management and highly compensated employees are eligible to participate. Participants are selected by the compensation committee and are entitled to company contributions within 60 days of fiscal year end under the plan (the "Annual Retirement Contribution") if they are actively employed by the Company on the last day of a plan year or if they are terminated prior to the end of the plan year due to (i) retirement on or after the attainment of age 55 or (ii) disability. Each year the Company makes an Annual Retirement Contribution to each participant under this plan with at least four years of credited service in an amount equal to at least 3% of the participant’s after-tax base salary earned for such year. For fiscal year 2019, we made a contribution of 5% of each NEO’s base salary, consistent with prior years. Annual Retirement Contributions to participants with at least four years of service are considered taxable income to the participants, and we make an additional tax gross-up contribution to each of these participants each year. For participants with less than four years of service by the end of the applicable plan year, the participant will accrue the right to an Annual Retirement Contribution each year, and, subject to continued employment, in the plan year in which the participant is first credited with four years of service, the Company will make an aggregate retirement contribution on behalf of the participant equal to the amount of the Annual Retirement Contribution for the applicable plan year and the previous three plan years (along with a tax gross-up contribution). Notwithstanding the foregoing, we have elected to make Annual Retirement Contributions on behalf of

Messrs. Delaney and Kessler, though they have not yet achieved four years of credited service. If the employment of Messrs. Delaney or Kessler is terminated prior to achieving four years of credited service, such officer will forfeit any Company contributions made under the plan. Tax gross up payments will be made to each of Messrs. Delaney and Kessler when each achieves four years of credited service. Upon a change of control, each participant with less than four years of credited service will become fully vested in any benefit accrued under the plan, and each participant will receive an Annual Retirement Contribution for the year in which the change of control occurs.

We have entered into employment agreements with each of our NEOs. The material elements of these employment agreements are summarized below under "-Fiscal Year 2020 Compensation for Chief Executive Officer and Executive Chairman" and "-Employment Agreements and Potential Payments Upon Termination or Change in Control."

>> Compensation of the New Chief Executive Officer

On January 30, 2020, the Company entered into an employment agreement with Mr. Delaney, in connection with his promotion to the office of President and Chief Executive Officer of the Company, effective February 2, 2020. Mr. Delaney also began serving as a Class I director of the Company on February 2, 2020. This employment agreement supersedes the previous employment agreement between Mr. Delaney and the Company. Pursuant to the terms of Mr. Delaney’s current employment agreement, he is entitled to an annual base salary of $1.2 million. Additionally, the compensation committee approved a fiscal year 2020 target annual cash incentive award opportunity equal to 150% of his annual base salary, and annual long-term incentive awards in the amount of $6.0 million, consisting of 50% performance-based restricted stock units and 50% restricted stock, for a target total direct compensation for fiscal year 2020 equal to $9.0 million.

In connection with Mr. Delaney’s promotion, the compensation committee also approved an award of performance-based restricted stock units to Mr. Delaney (the "Promotion Award") pursuant to the 2018 Plan. The Promotion Award is subject to certain performance-based vesting hurdles based on the aggregate earnings per share of the Company, as adjusted, during the fiscal years ending in 2021, 2022 and 2023 and is also subject to vesting based on continued employment, with one-third of the number of restricted stock units earned based on the achievement of the performance-based vesting hurdles vesting at the end of the fiscal years ending in 2023, 2024 and 2025, subject to continued employment through such dates. The Promotion Award is for a number of restricted stock units, at target, equal to $5,000,000 divided by the fair market value of the Company’s common stock on the grant date, with the number of restricted stock units that may be earned pursuant to the Promotion Award ranging from 50%-200% of the target amount. None of the restricted stock units will be earned if the minimum performance-based vesting hurdle is not achieved.

>> Compensation of the Executive Chairman

On January 30, 2020, the Company entered into an amendment to the employment agreement with Mr. Baldwin in connection with his transition to Executive Chairman of the Company, effective as of February 2, 2020. Pursuant to this amended employment agreement, Mr. Baldwin is entitled to an annual base salary of $1.35 million per year and a target annual cash incentive award opportunity equal to 150% of his annual base salary, which bonus will be prorated if Mr. Baldwin remains employed for less than a full fiscal year. At Mr. Baldwin's request he will not receive an equity award for fiscal year 2020. Mr. Baldwin also will be required to comply with the Company’s stock ownership and trading policies as such policies apply to the Company’s Chief Executive Officer while he is serving as Executive Chairman of the Company. Mr. Baldwin’s full-time employment with the Company will end on August 2, 2020, at which time the Board of Directors and Mr. Baldwin expect to determine the nature of Mr, Baldwin's future relationship with the Company.

Section 280G of the Internal Revenue Code disallows a tax deduction with respect to excess parachute payments to certain executives of companies which undergo a change in control. In addition, Section 4999 of the Internal Revenue Code imposes a 20% penalty on the individual receiving the excess payment. Parachute payments are compensation that is linked to or triggered by a change in control and may include, but are not limited to, bonus payments, severance payments, certain fringe benefits, and payments and acceleration of vesting from long-term incentive plans including stock options and other equity-based compensation. Excess parachute payments are parachute payments that exceed a threshold determined under Section 280G based on the executive’s prior compensation. In approving the compensation arrangements for our NEOs in the future, the compensation committee will consider all elements of the cost to the Company of providing such compensation, including the potential impact of Section 280G. However, the compensation committee may, in its judgment, authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent.

The following table sets forth information with respect to all compensation paid or earned for services rendered to the Company by our NEOs for fiscal year 2019, fiscal year 2018 and fiscal year 2017 presented in accordance with SEC rules:

Our executive compensation policies and practices, pursuant to which the compensation set forth in the Summary Compensation Table and Fiscal Year 2019 Grants of Plan-Based Awards table was paid or awarded, are described above under "-Compensation Discussion and Analysis."

In fiscal year 2019, we granted restricted stock awards and non-qualified stock option awards to each of our NEOs pursuant to the 2018 Plan, as described in the Fiscal Year 2019 Grants of Plan-Based Awards table. The vesting of each award is subject to acceleration and post-termination exercisability in connection with certain termination triggering events as described below under "-Employment Agreements and Potential Payments Upon Termination or Change in Control." To the extent we pay dividends in the future, dividends otherwise payable with respect to unvested shares of restricted stock will be retained by us and will only be paid if and when the underlying shares of restricted stock vest.

The terms of the employment agreements that we have entered into with our NEOs are described above under "Compensation Discuss and Analysis-Fiscal Year 2020 Compensation for Chief Executive Officer and Executive Chairman" and below under "-Employment Agreements and Potential Payments Upon Termination or Change in Control."

The following table sets forth the aggregate number of options to purchase shares of our common stock exercised by our NEOs in fiscal year 2019 and the aggregate number of shares of restricted stock that vested in fiscal year 2019. The value realized on exercise is the product of (1) fair market value of a share of our common stock on the date of exercise minus the exercise price, multiplied by (2) the number of shares of common stock underlying the exercised options. The value realized on vesting is the product of (i) the closing price of our common stock on the NYSE on the vesting date (or, if there were no reported sales on such date, the most recent previous date on which sales were reported), multiplied by (ii) the number of shares vesting.

On September 1, 2015, BJ’s Wholesale Club, Inc. and Beacon Holding Inc. entered into an employment agreement with Mr. Baldwin, which was amended on February 1, 2016 (the "Baldwin Employment Agreement"). Pursuant to the Baldwin Employment Agreement, prior to fiscal year 2020, Mr. Baldwin was entitled to a base salary of $1,000,000 per year, subject to periodic increase (but no decrease) from time to time as determined by the Board of Directors in its sole discretion, and an annual performance-based cash bonus with a target bonus opportunity equal to 100% of his annual base salary, payable based on goals established by the Board of Directors in its sole discretion. Pursuant to the Baldwin Employment Agreement, Mr. Baldwin is also subject to 12-month post-termination non-competition and non-solicitation covenants, as well as a perpetual confidentiality covenant.

Upon a termination due to death or disability, in addition to the accrued amounts, Mr. Baldwin is eligible to receive, subject to the execution of a release of claims, (i) the annual cash bonus he would have been entitled to receive had he remained employed until the end of the fiscal year (prorated for the period of active employment during the fiscal year), and (ii) any other payments or benefits arising from Mr. Baldwin’s participation in other Company plans to the extent such plans provide for post-termination employment benefits.

On January 30, 2020, the Company entered into an amendment to the Baldwin Employment Agreement with Mr. Baldwin in connection with his transition to Executive Chairman of the Company, effective as of February 2, 2020. Pursuant to this amendment, for fiscal year 2020, Mr. Baldwin is entitled to an annual base salary of $1.35 million per year and a target annual cash incentive award opportunity equal to 150% of his annual base salary, which bonus will be prorated if Mr. Baldwin remains employed for less than a full fiscal year. Mr. Baldwin is not entitled to an equity award for fiscal year 2020. The Baldwin Employment Agreement, as amended, terminates on August 2, 2020, unless otherwise agreed. The amendment to the Baldwin Employment Agreement also eliminates the severance benefits that had previously been provided in the Baldwin Employment Agreement in the event of a termination of Mr. Baldwin’s employment by us without cause or by Mr. Baldwin for good reason on or subsequent to February 2, 2020.

BJ’s Wholesale Club, Inc. has entered into employment agreements with each of Mr. Eddy, dated as of January 30, 2011; Mr. Delaney, dated as of December 6, 2018; Mr. Kessler, dated as of May 30, 2017; and Mr. Poulliot, dated as of December 6, 2018. The initial term of Mr. Eddy’s employment agreement was for a period of five years, ending on January 30, 2016, after which he was to remain employed by the Company subject to the termination provisions of his agreement; none of Messrs. Delaney’s, Kessler’s, or Poulliot’s employment agreements specified a term of employment. The annual base salaries initially established in the respective employment agreements for Messrs. Eddy, Delaney, Kessler and Poulliot were $560,000, $600,000, $450,000 and $375,000, respectively. Each of the executives is also subject to 24-month post-termination non-competition and non-solicitation covenants, as well as a perpetual confidentiality covenant.

Pursuant to each employment agreement, the Company has certain obligations that become due in the event of termination. If any of the executives are terminated by the Company without cause (as defined in the applicable employment agreement), then in addition to any accrued amounts, subject to the executive entering into a binding and irrevocable release of claims and the executive’s continued compliance with the applicable post-termination non-competition, non-solicitation and confidentiality provisions, each executive is entitled to receive (i) a continuation of his base salary for a period of 24 months after termination, (ii) an amount equal to the difference between the executive’s actual COBRA premium costs and the amount the executive would have paid had he continued coverage as an employee under the Company’s applicable health plans for up to 24 months, subject to earlier termination in specified instances, (iii) a pro rata portion of any amounts the executive would have been entitled to receive under the Company’s annual incentive plan had he remained employed by the Company until the end of the fiscal year during which termination occurred and (iv) any other payments or benefits arising from the executive’s participation in other Company plans to the extent such plans provide for post-termination employment benefits.

Upon a termination due to death or disability, in addition to the accrued amounts, subject to the execution of a release of claims, each of the executives is eligible to receive (i) the annual cash bonus the executive would have been entitled to receive had he remained employed until the end of the fiscal year (prorated for the period of active employment during the fiscal year), and (ii) any other payments or benefits arising from the executive’s participation in other Company plans to the extent such plans provide for post-termination employment benefits.

On January 30, 2020, the Company entered into an employment agreement with Mr. Delaney, in connection with his promotion to the office of President and Chief Executive Officer of the Company, effective February 2, 2020, which superseded his previous employment agreement described above. Pursuant to the terms of Mr. Delaney’s current employment agreement, he is entitled to an annual base salary of $1.2 million. Additionally, the compensation committee approved a fiscal year 2020 target annual cash incentive award opportunity equal to 150% of his annual base salary, and annual long-term incentive awards in the amount of $6.0 million, consisting of 50% performance-based restricted stock units and 50% restricted stock, for a target total direct compensation for fiscal year 2020 equal to $9.0 million. In connection with Mr. Delaney’s promotion, the compensation committee also approved an award of performance-based restricted stock units to Mr. Delaney pursuant to the 2018 Plan for a number of restricted stock units, at target, equal to $5,000,000 divided by the fair market value of the Company’s common stock on the grant date. See "-Compensation Discussion and Analysis-Fiscal Year 2020 Compensation for Chief Executive Officer and Executive Chairman-Compensation of the New Chief Executive Officer" for a description of this award. The current employment agreement also provides that on or after February 2, 2020, to the extent Mr. Delaney’s employment is terminated without cause (as defined in such employment agreement), he is entitled to receive, in addition to any accrued amounts, subject to his entering into a binding and irrevocable release of claims and his continue compliance with the applicable post-termination non-competition, non-solicitation and confidentiality provisions, (i) an amount equal to the sum of (a) his base salary for a period of 12 months after termination and (b) his target annual cash bonus, payable in substantially equal installments in such manner and at such times as Mr. Delaney’s base salary was being paid immediately prior to such termination (or if such termination occurs upon or following the occurrence of a change in control, such amount will be paid in a single lump sum); (ii) an amount equal to the difference between Mr. Delaney’s actual COBRA premium costs and the amount he would have paid had he continued coverage as an employee under the Company’s applicable health plans for up to 12 months, subject to earlier termination in specified instances, (iii) if such termination had occurred on or after July 1st of a fiscal year, a pro rata portion of the annual cash bonus to which Mr. Delaney would have been entitled had he remained employed by the Company until the end of the fiscal year, and (iv) any other payments or benefits arising from Mr. Delaney’s participation in other Company plans to the extent such plans provide for post-termination employment benefits. The current employment agreement also includes provisions regarding termination due to death or disability that are the same as those contained in Mr. Delaney’s prior employment agreement.

Generally, the terms of our 2018 Plan and the applicable award agreements entered into with our NEOs provide that, as of the date of an NEO’s termination of employment, unvested options and shares of restricted stock will automatically be forfeited, cancelled or repurchased, as applicable. In the event of a change in control, as defined in the 2018 Plan, any outstanding awards granted under the 2018 Plan (other than those subject to performance-based vesting) will continue in effect or be assumed or substituted by the successor of the Company or the Company, if the surviving entity, unless the compensation committee elects to (i) terminate such awards in exchange for cash, rights or property, or (ii) cause such awards to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a change in control. Any awards subject to performance-based vesting terms will be treated as provided in the applicable award agreement or as determined by the compensation committee (or its successor) within its sole discretion. However, if the applicable NEO’s employment is terminated without cause (as such term is defined in the sole discretion of the compensation committee or set forth in the applicable award agreement) upon or within the 24 month period following a change in control, then the vesting of any awards that were continued, assumed or substituted will accelerate and the NEO will become fully vested in such awards. In the event of termination of employment with us, vested stock options granted under our 2018 Plan that would otherwise remain exercisable generally cease to be exercisable three months or 90 days after termination of employment. In the event of termination of employment with us, vested stock options under the 2011 Plan that would otherwise remain exercisable generally cease to be exercisable 90 days after termination of employment or, in the event of a termination due to death or disability, one year after termination of employment. All unexercised stock options are immediately forfeited in the event of a termination of employment for cause.

The following table summarizes the payments that would be made to our NEOs upon the occurrence of a qualifying termination of employment or change in control, assuming that each NEO’s termination of employment with the Company or a change in control occurred on February 1, 2020. Amounts shown do not include (i) accrued but unpaid salary through the date of termination, and (ii) other benefits earned or accrued by the NEO during his or her employment that are available to all salaried employees.

Each of the payments below are subject to the NEOs compliance with certain restrictive covenants including, but not limited, to non-solicits and non-competes as provided in their respective employment agreements.

Our non-employee directors and our executive officers are expected to attain compliance with these ownership guidelines by the fifth anniversary of our IPO, if serving as a non-employee director or executive officer at the time of our IPO, or by the fifth anniversary of their appointment or election, in the case of a non-employee director, or their hire or promotion date, in the case of an executive officer. Thereafter, non-employee directors and executive officers are required to certify as to his or her compliance with these ownership guidelines at least once each year.

We identified the median employee for our fiscal year 2019 pay ratio using the methodology and the following material assumptions. To identify the median of the total annual compensation of our active employees as of February 1, 2020, we used total wages from our payroll records for the period from February 3, 2019 (the first day of our 2019 fiscal year) through February 1, 2020 (the last day of our 2019 fiscal year). We included any full-time, part-time, temporary or seasonal employees but excluded our CEO. We did not annualize compensation for any full-time or part-time permanent employees who were employed on February 1, 2020 but did not work for us the entire year or make any full-time equivalent adjustments for part-time employees. We consistently applied this compensation measure and methodology to all of our employees included in the calculation.

Our non-employee director compensation is intended to attract, retain and appropriately compensate highly qualified individuals to serve on the Board of Directors. The Board of Directors and/or the compensation committee review our non-employee director compensation policy annually. The Board of Directors is responsible for approving the compensation of our non-employee directors, provided that the compensation committee may make recommendations to the Board of Directors with respect to non-employee director compensation. For fiscal year 2019, no changes were made to our non-employee director compensation policy.

The following table sets forth information concerning the compensation of our non-employee directors during fiscal year 2019. Mr. Baldwin was an employee of the Company during fiscal year 2019 and, therefore, did not receive compensation for his service as a director. His compensation is fully reflected in the Summary Compensation Table. Mr. Kingsbury was appointed to the Board of Directors effective as of February 2, 2020 and, therefore, did not receive any compensation during fiscal year 2019.

Pursuant to our Non-Employee Director Compensation Policy, each non-employee director will receive a cash retainer for service on the Board of Directors and for service on each committee on which the director is a member in the following amounts:

The annual retainers are earned on a quarterly basis based on a calendar quarter and are paid by the Company in arrears not later than the fifteenth day following the end of each calendar quarter. In the event a non-employee director does not serve as a director or in the applicable committee or board positions for an entire calendar quarter, such director will receive a prorated portion of the applicable retainers otherwise payable to such director for such calendar quarter. We also reimburse our non-employee directors for any travel or other business expenses related to their service as a director.

In addition to the annual cash retainers, each non-employee director receives an annual restricted stock unit grant with a fair market value on the date of grant of $140,000 per year, which is made pursuant to the 2018 Plan. The annual equity award will be granted on the date of the annual meeting of stockholders or on the date of such director’s election or appointment to the Board of Directors, which awards will also be prorated if a director is elected or appointed as of a date other than the date of the annual meeting of stockholders. Each director may elect to defer the annual restricted stock unit grant, subject to compliance with Section 409A of the Code, and the Board of Directors may determine, in its sole discretion, that such annual equity grant be in the form of deferred stock or in shares of common stock with equivalent value on the date of grant. Each equity award will vest and become exercisable on the earlier of (i) the day immediately preceding the date annual meeting of stockholders following the date of grant and (ii) the first anniversary of the date of grant, subject to the director continuing in service on the Board of Directors through the applicable vesting date. No portion of an annual equity award that is unvested or unexerciseable at the time of a director’s termination of service on the Board of Directors will become vested and exercisable thereafter. In the event a director is terminated upon or within 12 months following a change in control, as defined in the 2018 Plan, such director’s outstanding equity awards will accelerate and vest in full.

On June 20, 2019, each non-employee director elected at, or serving on the Board of Directors as of, the 2019 annual meeting of stockholders received a restricted stock unit award of 5,447 units valued at a price of $25.70 per share, which was the closing price of our common stock on the NYSE on June 20, 2019. Each restricted stock unit represents a contingent right to one share of our common stock. These awards are all subject to the vesting described above.

The Board adopted the Director Stock Ownership Guidelines, pursuant to which non-employee directors are required to own equity in the Company at least equal to five times their retainer within five years of their election or appointment. Please see the disclosure under "Executive Compensation-Director and Executive Stock Ownership Guidelines" for more information.

During fiscal year 2019, the members of the compensation committee (or other committee performing equivalent functions) were Judith Werthauser, Robert Steele, Jonathan Seiffer, Christopher J. Baldwin and Cameron Breitner.

Currently, the Board of Directors is divided into three classes, with directors elected to staggered three-year terms. Approximately one-third of our directors stand for election each year. The Board of Directors has adopted and declared advisable, and recommends for your approval, an amendment to Article V of our Certificate of Incorporation to phase out the present three-year, staggered terms of our directors and instead provide for the annual election of directors.

The Board of Directors regularly reviews our corporate governance practices and current corporate governance trends and, in connection with this review, has discussed the potential declassification of the Board of Directors. The Board of Directors took into consideration arguments in favor and against continuation of a classified board and determined that it is in the Company’s and its stockholders’ best interests to propose to declassify the Board of Directors.

In its review, the Board of Directors considered the advantages of maintaining the classified board structure, including, among other reasons, that classified boards provide increased protection in the context of certain abusive takeover tactics because it is more difficult to change a majority of directors on a board in a single year. While the Board of Directors continues to believe that this remains an important consideration, the Board of Directors also considered the potential advantages of declassification, including the ability of stockholders to evaluate directors annually, which is generally viewed by many institutional stockholders as increasing the accountability of directors to such stockholders, and the fact that many publicly traded companies have declassified their boards in favor of annual elections. After carefully weighing these considerations, the Board of Directors determined that it would be in the best interests of the Company and its stockholders to declassify the Board of Directors and, accordingly, approved the proposed amendment to our Certificate of Incorporation and recommends that the stockholders adopt this amendment by voting in favor of this proposal.

If the proposed amendment to our Certificate of Incorporation is approved by stockholders, directors will be elected to one-year terms of office beginning at our 2021 annual meeting of stockholders. Directors who have been elected to three-year terms prior to the effectiveness of the amendment, including directors elected at the Annual Meeting, would complete those three-year terms, and thereafter would be eligible for annual re-election after completion of their current terms. Accordingly, directors who were elected at the 2019 annual meeting of stockholders, whose terms will expire in 2022, and the directors who are elected at the Annual Meeting, whose terms will expire in 2023, will hold office until the end of their terms. If this proposal is approved, following our 2022 annual meeting of stockholders, the Board of Directors will be completely declassified and all directors will be subject to annual election to one-year terms beginning with our 2023 annual meeting of stockholders.

In addition, until the Board of Directors is completely declassified, any director elected or appointed to the Board of Directors to fill a vacancy on the Board of Directors as a result of an increase in the size of the Board of Directors or due to the death, resignation, retirement, disqualification or removal of a director who was elected for a three-year term will continue to hold office until the next election of the class for which such director is chosen; thereafter, any director so appointed will hold office until our next annual meeting of stockholders following such appointment. In all cases, each director will hold office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal.

Delaware law provides that members of a board that is classified may be removed only for cause and that members of a board that is not classified may be removed by stockholders with or without cause. At present, because the Board of Directors is classified, our Certificate of Incorporation provides that our directors are removable only for cause. If the proposed amendment to our Certificate of Incorporation is approved, following our 2022 annual meeting of stockholders directors may be removed with or without cause.

The text of the amendment to our Certificate of Incorporation is attached as Annex A to this Proxy Statement and incorporated herein by reference.

If approved by the requisite number of stockholders, the amendment to our Certificate of Incorporation will be effective when the Company files a Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware.

If the amendment to our Certificate of Incorporation is not approved by stockholders, the Board of Directors will remain classified, and directors elected at our future annual meetings of stockholders will serve three-year terms and will hold office until their respective successors are duly elected and qualified or until their earlier resignation or removal.