¨	Preliminary Proxy Statement

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

x	Definitive Proxy Statement

x	No fee required.

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

¨	Fee paid previously with preliminary materials.

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1.	To elect our two nominees for director to hold office until the 2018 Annual Meeting of Stockholders;

2.	To ratify the selection by the audit committee of the board of directors of Deloitte & Touche LLP as independent registered public accounting firm for Blue Nile for fiscal year ending January 3, 2016;

3.	To approve an advisory resolution approving executive compensation; and

4.	To conduct any other business properly brought before the Annual Meeting.

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1.	To elect our two nominees for director to hold office until the 2018 Annual Meeting of Stockholders (Proposal 1);

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2.	To ratify the selection by the audit committee of the board of directors of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year ending January 3, 2016 (Proposal 2); and

3.	To approve an advisory resolution approving executive compensation (Proposal 3).

¨	To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.

¨	To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.

¨	To vote over the telephone, dial toll-free 1-800-776-9437, or, if you are calling outside the U.S., dial 1-718-921-8500, using a touch-tone phone and follow the recorded instructions. Please have your Notice in hand when you call. Your vote must be received by 8:59 p.m. Pacific Time (11:59 p.m. Eastern Time) on Wednesday, June 3, 2015 to be counted.

¨	To vote on the Internet, go to http://www.voteproxy.com to complete an electronic proxy card. Your vote must be received by 8:59 p.m. Pacific Time (11:59 p.m. Eastern Time) on Wednesday, June 3, 2015 to be counted.

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¨	You may submit another properly completed proxy card with a later date.

¨	You may grant a subsequent proxy by telephone or through the Internet.

¨	You may send a timely written notice that you are revoking your proxy to Blue Nile's Corporate Secretary at 411 First Avenue South, Suite 700, Seattle, Washington 98104.

¨	You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy.

¨	Proposal 1 - Election of Directors. For the election of directors, the two nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome.

¨

Proposal 2 - Ratification of Deloitte & Touche LLP as independent registered public accounting firm. To be approved, the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year ending January 3, 2016 must receive “For” votes from the holders of a majority of shares present and entitled to vote either in person or by proxy. You may vote “For,” “Against,” or “Abstain” from the proposal to approve the ratification of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year ending January 3, 2016. If you “Abstain” from voting, it will have the same effect as an “Against” vote.

¨	Proposal 3 - Advisory Vote Approving Executive Compensation. To be approved, the compensation of our named executive officers must receive “For” votes from the holders of a majority of our shares present and entitled to vote either in person or by proxy.

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1.	“FOR” the election of the two nominees for director (Proposal 1);

2.	“FOR” the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year ending January 3, 2016 (Proposal 2); and

3.	“FOR” approval of the advisory resolution approving executive compensation (Proposal 3).

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(1)	Mr. Scheid’s term expires on June 4, 2015, and he has decided not to stand for re-election at the Annual Meeting. Following the end of Mr. Scheid’s term on the board of directors, the board of directors will appoint another compensation committee chairman.

(2)	Mr. van Schoonenberg was appointed to the board of directors and to the compensation committee effective February 23, 2015.

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•	evaluating the performance of and assessing the qualifications of the independent registered public accounting firm;

•	determining and approving the engagement of the independent registered public accounting firm;

•	reviewing all relationships between the prospective auditors, or their affiliates and us, or persons in financial oversight roles with us, that may reasonably be thought to bear on independence, and to discuss with the prospective auditors the potential effects of such relationships on the independence of the prospective auditors;

•	determining whether to retain or terminate the existing independent registered public accounting firm or to appoint and engage a new independent registered public accounting firm;

•	evaluating the systems of internal control over financial reports;

•	reviewing and approving the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;

•	monitoring the rotation of partners of the independent registered public accounting firm on our audit engagement team as required by law;

•	reviewing and approving or rejecting transactions between us and any related parties;

•	conferring with management and the independent registered public accounting firm regarding the effectiveness of our internal controls over financial reporting;

•	establishing procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and

•	reviewing our annual audited financial statements and quarterly financial statements with management and the independent registered public accounting firm, including reviewing our disclosures under “Management's Discussion and Analysis of Financial Condition and Results of Operations.”

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(1)

The material in this report is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission, and is not to be incorporated by reference into any filing of Blue Nile under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

•	reviewing and approving corporate performance goals and objectives relevant to the compensation of our executive officers and other senior management and evaluation of performance in light of these objectives;

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•	reviewing and approving of the compensation and other terms of employment of our executive officers and other senior management; and

•	administering our equity compensation plans, incentive compensation plans, and other similar plans.

•	identifying, reviewing and evaluating candidates to serve as directors;

•	recommending candidates to the board of directors for election to the board of directors;

•	reviewing and evaluating incumbent directors;

•	considering recommended director nominees and proposals submitted by stockholders;

•	establishing policies and procedures to facilitate stockholder communications with the board of directors;

•	evaluating the performance, authority, operations, charter, and composition of each standing committee and the performance of each committee member and recommending changes, as it deems appropriate;

•	developing and periodically reviewing a management succession plan;

•	establishing and carrying-out a process for the periodic review of the performance of the board of directors and its committees and management;

•	assessing the independence of directors;

•	evaluating the need for a plan or program for the continuing education of directors;

•	reviewing significant regulatory, legal or other initiatives and matters that may materially impact us;

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•	developing and reviewing our corporate governance principles;

•	evaluating our directors and officers liability insurance; and

•	overseeing our policies and practices regarding philanthropic and political activities.

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(1)

Audit fees consist of fees billed by Deloitte & Touche LLP for (a) the audit of our annual financial statements included in our 2014 Annual Report on Form 10-K and review of financial statements included in our Quarterly Reports on Form 10-Q; (b) the audit of our internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material aspects; (c) services that are normally provided by Deloitte & Touche LLP in connection with statutory and regulatory filings or engagements.

(2)	Tax fees in fiscal 2014 relate to 2013 federal, state, and foreign tax return preparation. Tax fees in fiscal 2013 relate to 2012 federal, state and foreign tax return preparation as well as consultation regarding certain tax matters.

(3)	Other fees billed consist of a subscription to an online technical accounting research tool.

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(1)	Includes 160 shares of common stock issuable under the 1999 Equity Incentive Plan, 840,447 shares of common stock issuable under the 2004 Plan, 127,500 shares of common stock issuable under the 2004 Non-Employee Director Plan, 0 shares of common stock under the 2004 Employee Stock Purchase Plan, and 161,900 shares of common stock under the 2013 Equity Incentive Plan.

(2)

On May 21, 2013, our stockholders approved the 2013 Equity Incentive Plan effective as of such date. Any equity compensation that would have been granted under the 2004 Non-Employee Director Plan or under the 2004 Equity Incentive Plan is now granted under the 2013 Equity Incentive Plan. As of January 4, 2015, there were 1,329,750 shares of common stock reserved for future grants under the 2013 Equity Incentive Plan and 1,000,000 shares were available for grant under the 2004 Employee Stock Purchase Plan.

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(3)	Calculation excludes shares subject to restricted stock unit awards.

(4)

Our 2013 Equity Incentive Plan was approved by our stockholders at the 2013 annual meeting. Additionally, our prior equity compensation plans were approved by our stockholders prior to our initial public offering in May 2004 and the 2004 Equity Incentive Plan was approved again by stockholders at the 2008 annual meeting to meet the requirements of Internal Revenue Code Section 162(m) (“Section 162(m)”).

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*	Less than one percent.

(1)	Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

(2)

Applicable percentages are based on 11,876,677 shares outstanding on March 21, 2015, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after March 21, 2015 are deemed to be outstanding for the purpose of calculating that stockholder’s beneficial ownership percentage, but are not deemed outstanding for computing the ownership percentage of any other person other than the executive officers and directors as a group.

(3)

This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 10, 2015 on behalf of T. Rowe Price Associates, Inc. and T. Rowe Price New Horizons Fund, Inc. According to the report, T. Rowe Price Associates, Inc. beneficially owns an aggregate of 1,690,759 shares and T. Rowe Price New Horizons Fund, Inc. beneficially owns an aggregate of 1,461,488 shares. T. Rowe Price Associates, Inc. has sole voting power with respect to 220,171 shares and sole dispositive power with respect to 1,690,759 shares. T. Rowe Price New Horizons Fund, Inc. has sole voting power with respect to 1,461,488 shares and sole dispositive power with respect to 0 shares.

(4)	This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 17, 2015 on behalf of Wasatch Advisors, Inc. According to the report, Wasatch Advisors, Inc. beneficially owns an aggregate of 1,661,381 shares. Wasatch Advisors, Inc. has sole voting and dispositive power with respect 1,661,381 shares.

(5)

This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 12, 2015 on behalf of Morgan Stanley and Morgan Stanley Investment Management Inc. Morgan Stanley Investment Management, Inc. is a wholly-owned subsidiary of Morgan Stanley. According to the report, Morgan Stanley beneficially owns an aggregate of 1,380,424 shares and has sole voting and shared dispositive power with respect to 1,380,424 shares. Morgan Stanley Investment Management, Inc. beneficially owns an aggregate of 1,380,424 shares and has sole voting and shared dispositive power with respect to 1,380,424 shares.

(6)	This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on January 15, 2015 on behalf of BlackRock, Inc. According to the report, BlackRock, Inc. beneficially owns an aggregate of 1,102,558 shares. BlackRock, Inc. has sole voting power with respect to 1,063,891 shares and sole dispositive power with respect to 1,102,558 shares.

(7)

This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 11, 2015 on behalf of The Vanguard Group. According to the report, The Vanguard Group beneficially owns an aggregate of 845,986 shares. The Vanguard Group has sole voting power with respect to 16,571 shares, sole dispositive power with respect to 830,015 shares and shared dispositive power with respect to 15,971 shares.

(8)

This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 13, 2015 on behalf of Rutabaga Capital Management. According to the report, Rutabaga Capital Management beneficially owns an aggregate of 809,979 shares. Rutabaga Capital Management has sole voting power with respect to 696,429 shares, shared voting power with respect to 113,550 shares and sole dispositive power with respect to 809,979 shares.

(9)

This information is as of December 31, 2014 and is based solely on information reported on a Schedule 13G filed on February 12, 2015 on behalf of State Street Corporation. According to the report, State Street Corporation beneficially owns an aggregate of 606,454 shares. State Street Corporation has sole voting power with respect to 0 shares, sole dispositive power with respect to 0 shares and shared dispositive power with respect to 606,454 shares.

(10)	Includes 144,506 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 5,919 RSUs subject to release within 60 days of March 21, 2015.

(11)	Includes 49,566 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 3,308 RSUs subject to release within 60 days of March 21, 2015.

(12)	Includes 38,620 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 569 RSUs subject to release within 60 days of March 21, 2015.

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(13)	Includes 68,909 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 555 RSUs subject to release within 60 days of March 21, 2015.

(14)	Includes 92,978 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 402 RSUs subject to release within 60 days of March 21, 2015.

(15)	Includes 33,452 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(16)	Includes 22,937 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(17)	Includes 4,051 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 198 RSUs subject to release within 60 days of March 21, 2015.

(18)	Includes 27,750 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(19)	Includes 27,750 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(20)	Includes 24,472 shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(21)	Includes no shares of common stock issuable upon the exercise of options that are exercisable within 60 days of March 21, 2015 and 133 RSUs subject to release within 60 days of March 21, 2015.

(22)	Mr. van Schoonenberg joined us in February 2015, and he did not own any shares as of March 21, 2015. He did not have any shares of stock issuable upon the exercise of options within 60 days of March 21, 2015 and no RSUs subject to release within 60 days of March 21, 2015.

(23)	Includes shares held by our current executive officers and our board of directors, including the shares described in notes (10) through (22) above.

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•	Harvey Kanter, our chairman, chief executive officer, and president;

•	David Binder, our executive vice president, chief administrative officer, and chief financial officer;

•	Julie Yoakum, our chief merchandising officer;

•	Jon Sainsbury, our president of international; and

•	Lauren Neiswender, our general counsel and corporate secretary.

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•	Net sales of $473.5 million compared to $450.0 million for fiscal year 2013, an increase of 5.2%.

•	Net income for the fiscal year 2014 was $9.7 million compared to $10.9 million in fiscal year 2013 and earnings per diluted share for fiscal year 2014 totaled $0.80 compared to $0.85 in fiscal year 2013. Net income for the fiscal year 2013 included an income tax benefit of $1.1 million or $0.08 per diluted share resulting from certain discrete tax items for the third quarter of 2013.

•	Non-GAAP adjusted EBITDA(1) for the fiscal year 2014 was $22.1 million, compared to $22.4 million for 2013.

•	Net cash provided by operating activities totaled $17.2 million for the fiscal year 2014 compared to $23.4 million for the fiscal year ended 2013.

•	Non-GAAP free cash flow(2) for the fiscal year 2014 was $13.4 million compared to $17.9 million for the fiscal year 2013.

•

In 2014, we repurchased approximately 1.2 million shares of our common stock for a total cost of $40.3 million. Since the inception of our stock repurchase program in the first quarter of 2005 through January 4, 2015, we have used our cash to repurchase approximately 9 million shares or 76% of our outstanding shares. We continue to believe that our share repurchase program is an effective way to create long-term value for our shareholders.

•

Blue Nile’s fiscal year ends on the Sunday nearest to December 31. The fiscal year ended on January 4, 2015 which included 53 weeks with the 53rd week falling in our fourth quarter. Fiscal years ended on December 29, 2013, December 30, 2012, January 1, 2012 and January 2, 2011 each included 52 weeks. Net sales for the additional week were estimated at $5.9 million, which contributed 4.1% of growth for the fourth quarter 2014 and 1.3% for the fiscal year ended January 4, 2015. Net income for the additional week was estimated at $0.2 million or $0.02 in earnings per diluted share.

•	Net sales growth of 7.9% over 2013 fourth quarter;

•	US engagement net sales of $85 million grew by 7.9% over 2013 fourth quarter;

•	US non-engagement net sales of $48.8 million grew by 6.3% over 2013 fourth quarter; and

•	International net sales of $23.6 million grew by 10.9% over 2013 fourth quarter.

•	In advance of the 2014 executive compensation adjustments, the compensation committee engaged Milliman, as its independent outside compensation consultant, to evaluate our executive compensation relative to market data.

•

In 2014, we made several organizational changes to streamline the executive team and improve performance. In particular, we decided not to replace our former senior vice president with responsibility over operations, customer service, and fraud. Mr. Kanter and Mr. Binder took direct responsibility over these functions, which leverage their expertise and skills, stream-line our executive team, and result in a cost savings to the business. The savings from our executive changes exceed corresponding increases in Mr. Kanter and Mr. Binder’s 2014 compensation adjustments.

•	In February 2014, our compensation committee reviewed executive compensation and made adjustments to reflect changes in the role and responsibilities of some executives and made market adjustments, as appropriate.

•	Mr. Kanter’s 2014 base salary and equity grant value were increased to reflect his increased direct oversight of our customer service function and his additional responsibilities as our chairman of the board of directors, a position he assumed in January 2014.

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•	In February 2014, the compensation committee awarded equity grants, as further detailed below, to each of our NEOs, reflecting the compensation committee’s continued belief that equity should be a substantial portion of each NEO’s compensation package. The compensation committee awarded the value of the equity in the form of restricted stock units and stock options.

•

Approximately 65% of Mr. Kanter’s 2014 target total direct compensation ("TDC") was at-risk, performance-based compensation. Over half of the 2014 TDC for the other named executive officers was at-risk, performance-based compensation. Equity was a significant component of each NEO’s compensation reflecting the compensation committee’s belief that equity incents our executives to drive towards long-term value creation.

•	We did not pay our NEOs a cash bonus under our 2014 incentive cash bonus plan. While the our results exceeded the minimum threshold to pay bonuses under the plan, given the general slowdown in the jewelry industry, the results were below target, and we did not believe performance was sufficient to justify any payment.

•	In advance of the 2015 executive compensation adjustments, the compensation committee engaged Towers Watson, as its independent outside compensation consultant, to provide market data on the chief executive officer and chief financial officer roles, retention awards, and executive change of control and severance benefits.

•	In the first quarter of 2015, the compensation committee reviewed the compensation paid to each of our NEOs, and it made the following adjustments to their 2015 compensation:

-	2% merit increase in Mr. Kanter’s base salary and no change to his bonus target as a percent of base salary;

-	2% merit increase in Ms. Yoakum, Mr. Sainsbury, or Ms. Neiswender’s base salaries and no changes to their bonus target as a percent of base salary;

-	following consultation with Towers Watson, 21% increase in Mr. Binder’s base salary (from to $310,000 to $375,000), an increase that reflects Mr. Binder’s personal performance and additional responsibilities and more closely aligns Mr. Binder’s cash compensation with the market median;

-	equity grant to each of the NEOs in the form of restricted stock units; these 2015 equity grants vest over four years and the value of the equity granted to the NEOs in 2015 is materially similar to the value of the equity issued to the NEOs in 2014; and

-	issued special retention grants to Mr. Kanter and Mr. Binder, valued at $2.5 million and $1.5 million, respectively; these retention grants have a five year vesting schedule and were issued to retain and further motivate these key executives over the next five years to continue to implement our growth strategy and to create long-term shareholder value.

•

In the first quarter of 2015, in light of the expiration of our amended and restated change of control agreement, the compensation committee, in consultation with Towers Watson, reviewed the change of control benefits offered to our executives and reviewed Mr. Kanter’s severance benefits. It reviewed and adjusted these benefits, in light of market data, the desire to retain key executives in a competitive market for executive talent, and the desire to continue to keep these executives motivated and focused on implementing our growth strategy. The specific modifications to the change of control benefits are more fully described below.

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•	Emphasis on Pay for Performance.  Our executive compensation is weighted toward at-risk, performance-based compensation in the form of a short-term cash incentive opportunity that is based on the achievement of specified near-term financial results and personal objectives, and a long-term incentive opportunity in the form of equity awards.

•	No Stock-Option Repricing.  Since going public in 2004, we have not repriced any underwater stock options.

•

Change of Control Benefits.    Following a change of control, none of our named executive officers is entitled to change of control benefits, unless there is: (1) a change of control and (2) the executive is terminated without cause or resigns for good reason following a change in control (commonly referred to as double-trigger change in control benefits). The cash benefits payable to our named executive officers upon a double-trigger change of control event do not exceed two times base salary and annual bonus.

•	Severance Benefits. Our chief executive officer is only entitled to severance benefits if he is terminated without cause and his benefits do not exceed two times his salary and bonus. None of the other executives are entitled to severance benefits outside of a change of control.

•	Offer Letters. We typically issue standard letters to our executive officers at the time of hire, and these letters do not provide for guaranteed annual equity grants, guaranteed increases to salaries, or guaranteed annual incentive bonuses. All of our executives are “at will” employees.

•	No Tax Gross-Ups.  We do not offer tax gross-up to any of our named executive officers.

•

Perquisites.    We do not typically provide any special executive perquisites. As our compensation committee deems appropriate, we occasionally pay the relocation expenses and tuition reimbursements expenses for key employees. We also provide some minimal perquisites that we broadly provide to all of our full-time regular employees, such as an annual $720 transportation allowance and a merchandise discount.

•	Policy Against Speculative Trading.  We maintain a “no-hedging” policy in our insider trading policy that prohibits all of our directors, officers and employees from hedging their economic interest in the shares of our stock they hold.

•	Independent Compensation Consultant.  Our compensation committee engages its own independent compensation consultant from time to time as it determines appropriate, and this consultant does not provide any services to management.

•	Risk Analysis.  We believe the structure of our executive compensation program minimizes the risk of inappropriate risk-taking by our executives.

•	Attract and Retain. Attract and retain top talent whose knowledge, skills, experience, and performance help us to achieve our business goals;

•	Motivate and Reward. Motivate executives to perform with excellence and reward them when they achieve key short- and long-term goals that create stockholder value and position us for sustainable long-term success; and

•	Align Interests with Stockholders. Align executive interests with those of our stockholders.

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•	Competitive market for executive talent in high growth consumer related organizations with a focus on specialty retail and ecommerce;

•	Annual revenue at a multiple of approximately 0.4-2.0 to that of Blue Nile’s;

•	Positive revenue growth;

•	Positive profit margin; and

•	Market capitalization of approximately $400 million to $2.0 billion.

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(1)	Mr. Kanter’s base salary was increased primarily in connection with his increased direct oversight over customer service following the resignation of our senior executive officer over customer service, and his additional responsibilities as the chairman of the board of directors.

(2)

Mr. Binder’s adjustment was based primarily on three factors: (1) in February 2014, Mr. Binder was promoted from chief financial officer to executive vice president, chief administrative officer, and chief financial officer; (2) following the resignation of our senior vice president of operations last year, Mr. Binder took over responsibility of our fulfillment center and fraud department; and (3) market adjustments because Mr. Binder’s base salary was almost 20% below the median base salary in the Milliman Report. This median referenced by the compensation committee was based on a combination of proxy data from our peer group and survey data.

(3)	In February 2014, Mr. Sainsbury’s base salary was increased by 3%. In April 2014, Mr. Sainsbury transitioned from our vice president of marketing to our president of international and his base salary was increased by an additional 12%.

(4)	The compensation committee made a market adjustment to Ms. Neiswender’s base salary to move her salary closer to the median because her 2013 base salary was more than 20% below the median reflected in the Milliman Report using survey data. The base salaries of the other named executive officers are within a range of being 20% above or below the market median.

(5)	Mr. Binder’s 2015 adjustment is further discussed below in the section, “2015 Compensation Adjustments.”

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(1)

Mr. Kanter’s base salary was increased as discussed above so his total cash compensation increased in 2014 by approximately 7%. Following a review of his total target cash compensation, the compensation committee believed that his total cash compensation was competitive and that 70% of his base salary was a meaningful amount of his cash compensation to appropriately incent Mr. Kanter to drive the achievement of annual objectives. Also, as further discussed below, the compensation committee increased the value of Mr. Kanter’s 2014 equity grant, consistent with the compensation committee’s philosophy of having the most significant portion of Mr. Kanter’s total compensation package in the form of long-term incentives.

(2)

Given the changes in Mr. Binder’s role and responsibilities as discussed above in “Base Salary,” the compensation committee wanted to ensure that a meaningful portion of Mr. Binder’s cash compensation is at-risk cash compensation. This further reflects the compensation committee’s belief that Mr. Binder’s target bonus compensation should reflect his direct ability to influence our results. A target bonus of 50% of his base salary is also consistent with the market median as reflected in the Milliman Report.

(3)	Mr. Sainsbury’s target bonus as a percent of base salary was increased to reflect Mr. Sainsbury’s role and responsibilities and reflects his ability to directly influence the achievement of our annual goals.

(4)	The compensation committee adjusted Ms. Neiswender’s bonus target as a percent of base salary primarily based on the market data provided in the Milliman Report. The market median reflected in the Milliman Report for similarly situated executives is 30% of base salary.

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(1)	Equity issued as part of the 2013 and 2014 compensation package was issued in the form of restricted stock units and stock options. The value reflects aggregate grant date fair value of the award calculated in accordance with FASB ASC Topic 718.

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•	a person or group becomes the owner of greater than 50% of the combined voting power of our outstanding stock;

•	a corporate transaction, such as a merger or consolidation, results in the stockholders immediately prior to the transaction no longer owning more than 50% of the outstanding stock;

•	all or substantially all of the assets of the Company are sold or disposed of to an unrelated party;

•	a majority of the board is, for any reason, not made up of individuals who were either on the board as of March 4, 2009 (the date in the 2015 Severance Plan is January 19, 2015), or, if they became members after that date, were approved by the directors.

•	indictment or conviction of any felony or any crime involving dishonesty or moral turpitude;

•	dishonesty which is not the result of an inadvertent or innocent mistake by employee with respect to us;

•	employee's continued willful violation of his or her obligations to us after there has been delivered to employee a written demand for performance from the board of directors which describes the basis for the board of directors' belief that employee has not substantially satisfied his or her obligations to us;

•	employee's violation or breach of any material written policy, agreement with us, or any statutory or fiduciary duty to us; or

•	damaging or misappropriating or attempting to damage or misappropriate any of our property, including any confidential or proprietary information.

•	because one of the following actions has been taken without his or her express written consent:

-	there is a material reduction (where material is considered greater than 10%) of the eligible employee's annual base salary;

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there is a material change in the eligible employee's position or responsibilities (including the person or persons to whom the eligible employee has reporting responsibilities) (the 2015 Severance Plan clarifies that becoming the chief executive officer or chief financial officer of a privately held company does not by itself result in a material change in such employee’s position or responsibilities);

-	the eligible employee is required to relocate his or her principal place of employment to a location that would increase his or her one way commute distance by more than twenty-five (25) miles; or

-	we materially breach our obligations under the severance plan or any then-existing employment agreement with the eligible employee; and

•	the eligible employee provides written notice to the board of directors within the 30-day period immediately following such action;

•	such action is not remedied by us within thirty (30) days following our receipt of such written notice; and

•	the eligible employee's resignation is effective not later than sixty (60) days after the expiration of such thirty (30) day cure period.

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•	a balance of fixed versus variable compensation and cash-based versus equity-based compensation;

•	variable compensation is based on a variety of performance goals, including company and individual;

•	the compensation committee has the discretion to lower annual incentive award amounts;

•	stock ownership requirements; and

•	a prohibition on hedging our stock that applies to all employees.

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(1)	Awards paid under our annual cash incentive bonus plan are included in the “Non-Equity Incentive Plan Compensation” column. See footnote 3 below.

(2)

The amounts included in the “Stock Awards” and “Option Awards” columns reflect the aggregate grant date fair value of awards during each fiscal year calculated in accordance with Topic 718 of the FASB Accounting Standards Codification. Generally, the grant date fair value is the amount we expect to expense in our financial statements over the award's vesting schedule. The amount does not reflect the actual economic value realized by the executive officer. No stock awards were granted in 2012. For additional information on the valuation assumptions, refer to Note 6 of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 4, 2015, as filed with the Securities and Exchange Commission on March 2, 2015 (File No. 000-50763). See the Grants of Plan-Based Awards in Fiscal 2014 Table included herein for additional information on equity awards granted in 2014.

(3)	Non-Equity Incentive Plan Compensation includes awards earned under our annual cash incentive bonus plan. See the Grants of Plan-Based Awards in Fiscal 2014 Table included herein and the Compensation Discussion and Analysis above for additional information.

(4)

For 2014, amounts represent for each NEO a 401(k) matching contribution of $5,200 and a transportation allowance of $720, both of which are available on the same terms to all of our salaried employees.  For 2013 and 2012, amounts for each NEO represents 401(k) matching contribution and a transportation allowance, and in addition, include for Mr. Kanter, relocation assistance in 2013 and 2012, respectively, of $58,589 and $106,455, and for Mr. Sainsbury in 2013, tuition assistance of $27,200.

(5)	The dollar value in this column for each named executive officer represents the sum of all compensation reflected in the preceding columns.

(6)	Pursuant to the terms of Mr. Kanter's offer letter dated March 2, 2012, his 2012 base salary was $650,000 on an annualized basis.

(7)	Pursuant to the terms of Mr. Kanter's offer letter dated March 2, 2012, he received a signing bonus of $100,000.

(8)	Pursuant to the terms of Mr. Kanter's offer letter dated March 2, 2012, he received an option grant in March 2012 with a grant date fair value of $2,489,953.

(9)	Pursuant to the terms of Ms. Yoakum's offer letter dated June 7, 2012, her 2012 base salary was $270,000 on an annualized basis.

(10)	Pursuant to the terms of Ms. Yoakum's offer letter dated June 7, 2012, she received a signing bonus of $15,000.

(11)	Pursuant to the terms of Ms. Yoakum's offer letter dated June 7, 2012, she received an option grant in June 2012 with a grant date fair value of $556,775.

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(1)	In determining the 2014 bonus awards for each of the named executive officers, the compensation committee reviewed our actual 2014 performance against our pre-established financial and personal objectives. See the “Compensation Discussion & Analysis” section for additional information and analysis. There is no threshold or minimum incentive bonus payment.

(2)	Stock options granted vest as to 1/4 of the shares of common stock underlying the options on the first anniversary of the grant date and as to 1/16 of the underlying shares quarterly thereafter. Equity units granted to our current executive officers are subject to acceleration under our severance plan and in certain other circumstances as provided in the 2013 Equity Incentive Plan.

(3)	This column sets forth the target bonus for each NEO, which is established by the compensation committee as a percent of the actual base salary paid to the NEO during the fiscal year 2014.

(4)	Each named executive officer was eligible to receive up to a maximum of 200 percent of his or her target bonus opportunity, depending upon the achievement of certain financial and individual performance objectives.

(5)	Option awards and restricted stock units granted to the named executive officers in fiscal year 2014 were issued under the 2013 Equity Incentive Plan.

(6)	Mr. Sainsbury was granted an annual equity grant on February 15, 2014, along with the other executives, and was granted additional equity on May 15, 2014 in connection with his transition to the role of president of international.

(7)

The amounts represent the aggregate grant date fair value of the option awards granted during the fiscal year calculated in accordance with Topic 718 of the FASB Accounting Standards Codification. For a discussion of valuation assumptions, see Note 6 to our consolidated financial statements included in our annual report on Form 10-K for the year ended January 4, 2015, as filed with the Securities and Exchange Commission on March 2, 2015 (File No. 000-50763).

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(1)

Each of the options expiring in 2020, 2021, and 2022 vest as to 1/4 of the shares of common stock underlying the options on the first anniversary of the grant date and as to 1/48 of the underlying shares monthly thereafter. Each of the options expiring in 2023 and 2024 vest 1/4 of the shares of common stock underlying the options on the first anniversary of the grant date and as to 1/16 of the underlying shares quarterly thereafter. Each of the options expiring in 2015 through 2020 is fully vested as of January 4, 2015.

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(2)	Represents the closing price of a share of our common stock on the NASDAQ Global Securities market on the grant date of the option.

(3)	One-fourth of the restricted stock units vest on the first anniversary of the grant date and 1/16 of the units vest quarterly thereafter.

(4)	Value is calculated by multiplying the number of restricted stock units that have not vested by the closing price of one share of our common stock ($35.04) on January 2, 2015 (the last trading day prior to our January 4, 2015 fiscal year end).

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(1)	Cash severance and bonus payments were determined by multiplying the executive's base salary and target annual incentive bonus by the multiple as defined in each of their severance agreements. For all named executive officers other than Mr. Sainsbury, that multiple is one. Mr. Sainsbury's multiple is 0.5.

(2)	Value is calculated by multiplying the number of restricted stock units that have not vested by the closing price of our stock ($35.04) on January 2, 2015 (the last trading day prior to our January 4, 2015 fiscal year end). 1/4 of the restricted stock units vest on the first anniversary of the grant date and 1/16 vest quarterly thereafter.

(3)

The value of early vesting of option awards is based on the difference between the aggregate exercise price of all accelerated options and the aggregate market value of the underlying shares as of January 4, 2015, calculated using the closing market price of our stock ($35.04) on January 2, 2015 (the last trading day prior to our fiscal year end). Options that were out-of-the-money have been excluded from the calculation.

(4)	The amounts shown in this column represent health and dental coverage determined on the basis of our COBRA rates for post-employment continuation coverage for a period of twelve months. Such rates were determined on the basis of the coverage elections made by the named executive officer.

(5)	None of the other named executive officers is eligible to receive severance benefits outside of a Change in Control.

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(1)

The annual retainer is paid in quarterly installments. At the discretion of the board of directors, directors may be permitted to forego all or a portion of their annual retainer for service on the board of directors in exchange for a grant or grants of common stock under the 2013 Equity Incentive Plan having a fair market value equal to the amount of foregone cash compensation. The number of shares granted is determined by dividing the amount of the foregone quarterly installment by the closing price of our common stock on the second business day following our quarterly public announcement of our financial earnings for the quarter in which the installment is to be paid. Our policy for the timing of such determination is to provide for a price that reflects the dissemination of material information and a fair representation of the market's collective view of our financial results and performance.

(2)	The annual fee for serving on any committee is paid in quarterly installments. Each director that serves on a committee receives $750 quarterly ($3,000 annually) regardless of the number of committees he/she serves on.

(3)	Paid in quarterly installments.

(1)	Equity granted to non-employee directors is subject to acceleration upon a change of control as described below.

(2)	Each new director receives an initial restricted stock unit grant on the date of his or her election or appointment. The initial grant vests every three (3) months from the date of grant for four years. These option grants cease vesting as of the date a non-employee director no longer serves on the board of directors.

(3)

Each non-employee director receives an annual equity grant on the date following each annual meeting of stockholders. The annual grant vests every three (3) months from the date of the grant for one year. Each non-employee director must elect, prior to the start of the fiscal year in which the annual meeting is to take place, or such later date as may be determined by the compensation committee in its sole discretion, to receive the annual equity grant in the form of either (i) 100% as restricted stock units; or (ii) 100% as options. In the absence of a timely election, the entire annual equity grant will be granted in the form of

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(4)	Each non-employee director elected to the board of directors prior to July 31, 2012 receives a refresher grant upon full vesting of the initial stock option grant. These refresher grants vest monthly in equal amounts from the date of the grant for four years. These options cease vesting as of the date a non-employee director no longer serves on the board of directors.

(1)	Includes the annual cash retainer, fees for serving on a committee of the board of directors, fees for serving as chairman of the board, fees as applicable for chairing a committee and fees for serving as the lead independent director. Directors may elect to receive their annual retainer in cash or stock.

(2)

Messrs. Bruzzo and Howe each elected to receive a portion of their annual retainer (paid quarterly) in shares of common stock plus cash in lieu of any fractional share. The number of shares granted is determined by dividing the amount of the foregone quarterly installment by the closing price of our common stock on the second business day following our quarterly public announcement of our financial earnings for the quarter in which the installment is to be paid. Mr. Bruzzo received stock valued at $39,965 and cash in the amount of $3,035, which includes $3,000 for service on committees. Mr. Howe received stock valued at $39,965 and cash in the amount of $3,035, which includes $3,000 for service on committees.

(3)

The amounts included in the “Stock Awards” and “Option Awards” columns represent the aggregate grant date fair value of awards granted during the fiscal year calculated in accordance with Topic 718 of the FASB Accounting Standards Codification. Generally, the grant date fair value is the amount the Company expects to expense in its financial statements over the award's vesting schedule. The amount does not reflect the actual economic value realized by the director. For additional information on the valuation assumptions, refer to Note 6 of our consolidated financial statements included in our annual report on Form 10-K for the year ended January 4, 2015, as filed with the Securities and Exchange Commission on March 2, 2015 (File No. 000-50763).

(4)	Mr. Bruzzo was granted an option to purchase 6,792 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,991. As of January 4, 2015, Mr. Bruzzo held 3,312 shares of common stock and options to purchase 26,545 shares of common stock.

(5)	Mr. Lane received his annual equity grant in the form of a stock award for 2,729 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4,

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(6)

Ms. Meads received her annual equity grant in the form of an option for 2,729 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4, 2015, Ms. Meads held 2,553 shares of common stock, options to purchase 4,051 shares of common stock and unvested stock awards of 3,349 shares of common stock.

(7)

Mr. Potter received his annual equity grant in the form of a stock award for 2,729 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4, 2015, Mr. Potter held 8,136 shares of common stock, options to purchase 28,875 shares of common stock and unvested stock awards of 1,365 shares of common stock.

(8)	Mr. Scheid received his annual equity grant in the form of a stock award for 2,729 shares, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4, 2015, Mr. Scheid held 9,312 shares of common stock, options to purchase 28,875 shares of common stock and unvested stock awards of 1,365 shares of common stock.

(9)

Ms. Taylor received her annual equity grant in the form of a stock award for 2,729 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4, 2015, Ms. Taylor held 14,085 shares of common stock, options to purchase 33,452 shares of common stock and unvested stock awards of 1,365 shares of common stock.

(10)

Mr. Howe was granted an initial stock award for 2,123 shares of common stock in 2014 with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $99,972. Mr. Howe received his annual equity grant in the form of an option for 2,729 shares of common stock, with a grant date fair value, computed in accordance with Topic 718 of the FASB Accounting Standards Codification, of $84,981. As of January 4, 2015, Mr. Howe held 3,174 shares of common stock and unvested stock awards of 2,958 shares of common stock.

(11)	Mr. van Schoonenberg was appointed to the board of directors in February 2015 and did not receive any compensation for serving on the board of directors in fiscal year 2014.

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