UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to §240.14a-12 |
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Build-A-Bear Workshop, Inc. |
(Name of Registrant as Specified In Its Charter) |
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) |
Payment of Filing Fee (Check the appropriate box):
☒ | No fee required. |
☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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☐ | Fee paid previously with preliminary materials. |
☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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(4) | Date Filed: | |
Build-A-Bear Workshop, Inc.
1954 Innerbelt Business Center Drive
St.St. Louis, Missouri 63114
April 1, 2016March 29, 2018
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of Build-A-Bear Workshop, Inc. to be held at our World Bearquarters, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114 on Thursday, May 12, 2016,10, 2018, at 10:00 a.m. Central Time. For your reference, directions for our annual meeting site are provided at Appendix A to this proxy statement.
At the meeting, you will be asked to elect two Directors; ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for our current fiscal year; approve, by non-binding vote, executive compensation; and transact such other business as may properly come before the meeting.
The formal Notice of Annual MeetingMeeting of Stockholders and proxy statement accompanying this letter provide detailed information concerning matters to be considered and acted upon at the meeting. Your vote is important. I urge you to vote as soon as possible, whether or not you plan to attend the annual meeting. You may vote via the Internet, as well as by telephone or by mailing the proxy card. Please review the instructions with the proxy card regarding each of these voting options.
Thank you for your continued support of, and interest in, Build-A-Bear Workshop. I look forward to seeing you at the annual meeting.
| Sincerely, |
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| Sharon John |
| President and Chief Executive Officer |
Build-A-Bear Workshop, Inc.
1954 Innerbelt Business Center Drive
St.St. Louis, Missouri 63114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 1May 120, 20168
The 20162018 Annual Meeting of Stockholders ofBUILD-A-BEAR WORKSHOP, INC., a Delaware corporation (the “Company”), will be held at our World Bearquarters, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114, on Thursday, May 12, 2016,10, 2018, at 10:00 a.m. Central Time, to consider and act upon the following matters:
1. to elect two Directors;
2. to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the Company’s current fiscal year;2018;
3. to approve, by non-binding vote, executive compensation; and
4.4. to transact such other business as may properly come before the meeting or any adjournments thereof.
Only stockholdersstockholders of record at the close of business on March 22, 201620, 2018 are entitled to notice of and to vote at the annual meeting. At least ten days prior to the meeting, a complete list of stockholders entitled to vote will be available for inspection by any stockholder for any purpose germane to the meeting, during ordinary business hours, at the office of the Secretary of the Company at 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114. As a stockholder of record, you are cordially invited to attend the meeting in person. Regardless of whether you expect to be present at the meeting, please either (i) complete, sign and date the enclosed proxy and mail it promptly in the enclosed envelope, or (ii) vote electronically via the Internet or telephone as described in greater detail in the proxy statement. Returning the enclosed proxy, voting electronically, or voting telephonically will not affect your right to vote in person if you attend the meeting.
| By Order of the Board of Directors |
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| Eric Fencl |
| Chief Administrative Officer, General Counsel and Secretary |
EVEN THOUGH YOU MAY PLAN TO ATTEND THE MEETING IN PERSON, PLEASE VOTE BY TELEPHONE OR THE INTERNET, OR EXECUTE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY. A RETURN ENVELOPE (WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES) IS ENCLOSED FOR YOUR CONVENIENCE. TELEPHONE AND INTERNET VOTING INFORMATION IS PROVIDED ON YOUR PROXY CARD. SHOULD YOU ATTEND THE MEETING IN PERSON, YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 10, 2018
The Company’s proxy statement and Annual Report on Form 10-K for the 2017 fiscal year are available at https://materials.proxyvote.com/120076.
TABLE OF CONTENTS
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Proxy Statement | 1 |
About the Meeting | 1 |
Voting Securities | 4 |
Security Ownership of Certain Beneficial Owners and Management | 4 |
Proposal No. 1. Election of Directors | 5 |
Directors | 6 |
The Board of Directors and its Committees | 10 |
Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics |
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Board Member Independence and Committee Member Qualifications | 13 |
Related Party Transactions | 13 |
Section 16(a) Beneficial Ownership Reporting Compliance | 14 |
Board of Directors Compensation |
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Executive Compensation |
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Compensation Discussion and Analysis |
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Compensation and Development Committee Report |
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Compensation Committee Interlocks and Insider Participation |
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Outstanding Equity Awards at |
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2017 Non-Qualified Deferred Compensation | 29 |
Executive Employment and Severance Agreements |
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CEO Pay Ratio | 33 |
Proposal No. 2. Ratification of Appointment of Independent Accountants |
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Proposal No. 3. Advisory (Non-binding) Vote Approving Executive Compensation |
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Report of the Audit Committee |
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Stockholder Communications with the Board |
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Selection of Nominees for the Board of Directors |
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Stockholder Proposals |
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Other Matters |
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Appendix | A-1 |
BUILD-A-BEAR WORKSHOP, INC.
1954 Innerbelt Business Center Drive
St. Louis, Missouri 63114
20168 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies by the Board of Directors of Build-A-Bear Workshop, Inc., a Delaware corporation (the “Company” or “Build-A-Bear Workshop”), to be voted at the 20162018 Annual Meeting of Stockholders of the Company and any adjournment or postponement of the meeting. The meeting will be held at our World Bearquarters, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114, on Thursday, May 12, 2016,10, 2018, at 10:00 a.m. Central Time, for the purposes contained in the accompanying Notice of Annual Meeting of Stockholders and in this proxy statement. For your reference, directions to our annual meeting site are provided at Appendix A to this proxy statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 12, 2016
The Company’s proxy statement, Annual Report on Form 10-K for the 2015 fiscal year and summary Annual Report to Stockholders are available athttps://materials.proxyvote.com/120076.
ABOUT THE MEETING
Why Did I Receive This Proxy Statement?
Because you were a stockholder of the Company as of March 22, 2016 20, 2018 (the “Record Date”) and are entitled to vote at the annual meeting, the Board of Directors is soliciting your proxy to vote at the meeting.
This proxy statement summarizes the information you need to know to vote at the meeting. This proxy statement and form of proxy were first mailed to stockholders on or about April 1, 2016.March 29, 2018.
What Am I Voting On?
You are voting on three items:
(a) | the election of two Directors; |
(b) | the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal |
(c) | the approval, by non-binding vote, of executive compensation. |
How Do I Vote?
Stockholders of Record: If you are a stockholder of record, there are four ways to vote:
(a) | by toll-free telephone at 1-800-652-8683; |
(b) | by Internet at www.investorvote.com/BBW; |
(c) | by completing and returning your proxy card in the postage-paid envelope provided;or |
(d) | by written ballot at the meeting. |
Street Name Holders: Shares which are held in a brokerage account in the name of the broker are said to be held in “street name.” If your shares are held in street name you should follow the voting instructions provided by your broker. You may complete and return a voting instruction card to your broker, or, in many cases, your broker may also allow you to vote via the telephone or Internet. Check your proxy card for more information. If you hold your shares in street name and wish to vote at the meeting, you must obtain a legal proxy from your broker and bring that proxy to the meeting.
Please note that brokers may no longer use discretionary authority to vote shares on the electionelection of Directors or on executive compensation matters if they have not received instructions from their clients. Please vote your proxy so your vote can be counted.
Regardless of how your shares are registered, if you complete and properly sign the accompanying proxy card and return it to the address indicated, it will be voted as you direct.
What is the Deadline for Voting via Internet or Telephone?
Internet and telephone voting for stockholders of record is available through 11:59 p.m. Eastern Time on Wednesday, May 11, 20169, 2018 (the day before the annual meeting).
What Are the Voting RecommendationsRecommendations of the Board of Directors?
The Board recommends the following votes:
(a) | FOR the election of |
(b) | FOR ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal |
(c) | FOR the non-binding |
Unless you give contrary instructions on your proxy card, the persons named as proxy holders will vote your shares in accordance with the recommendations of the Board of Directors.
Will Any Other Matters Be Voted On?
We do not know of any other matters that will be brought before the stockholders for a vote at the annual meeting. If any other matter is properly brought before the meeting, your signed proxy card gives authorityauthority to Sharon John, Voin Todorovic and Eric Fencl to vote on such matters in their discretion.
Who Is Entitled to Vote at the Meeting?
Only stockholders of record at the close of business on the Record Date are entitled to receive notice of and to participate in the annual meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting.
How Many Votes Do I Have?
You will have one vote for every share of Build-A-Bear Workshop common stock you owned on the Record Date.
How Many Votes Can Be Cast by All Stockholders?
15,808,449,15,018,987, consisting of one vote for each share of Build-A-Bear Workshop common stock outstanding on the Record Date. There is no cumulative voting.
How Many Votes Must Be Present to Hold the Meeting?
The holders of a majority of the aggregate voting power of Build-A-Bear Workshop common stock outstanding on the Record Date, or 7,904,2257,509,494 votes, must be present in person, or by proxy, at the meeting in order to constitute a quorum necessary to conduct the meeting.
If you vote, your shares will be part of the quorum. Abstentions and broker non-votes will be counted in determining the quorum. A brokerbroker non-vote occurs when a bank or broker holding shares in street name submits a proxy that states that the broker does not vote for some or all of the proposals because the broker has not received instructions from the beneficial owners on how to vote on the proposals and does not have discretionary authority to vote in the absence of instructions.
We urge you to vote by proxy even if you plan to attend the meeting so that we will know as soon as possible that a quorum has been achieved.
What Vote Is Required to Approve Each Proposal?
In the election of Directors (Proposal 1), the affirmative vote of the holders of a majority of the shares representedvotes cast in person or by proxy and entitledwith respect to vote on the proposala Director nominee’s election will be required for approval of each Director who is up for election, provided, however, that, in accordance with the Company’s Bylaws, ifmeaning the number of nominees exceedsshares voted “for” a nominee must exceed the number of Directorsshares voted “against” such nominee. If any nominee for Director receives a greater number of votes “against” his or her election than votes “for” such election, our Director Resignation Policy requires that such person must promptly tender his or her resignation to be elected at the meeting then Directors shall be elected by the affirmative vote of a pluralityBoard following certification of the vote. Abstentions and broker non-votes are not considered votes present in person or by proxy and entitled to vote at the meeting. A proxy that has properly withheld authority with respect to the election of one or more Directors will not be voted with respect to the Director or Directors indicated, although it will be countedcast for the purposes of determining whether there is a quorum. Abstentionsforegoing purpose, and will have no effect on the election of Directors.nominees.
For the proposals to (i) ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2018 (Proposal 2), and (ii) approve, by non-binding vote, executive compensation (Proposal 3), the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote on the proposal will be required for approval. An abstention with respect to these proposals will be counted forapproval, meaning that of the purposes of determiningshares represented at the number of sharesmeeting and entitled to vote, that are present in person or by proxy. Accordingly, an abstentiona majority of them must be voted “for” the proposal for it to be approved. Abstentions will have the same effect ofas a “no” vote.
vote “against” these proposals, and broker non-votes will have no effect on the vote for these proposals.
Please vote youryour proxy so your vote can be counted. This is particularly important since brokers may no longer use discretionary authority to vote shares onin the election of Directors or on executive compensation matters if they have not received instructions from their clients. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to the matter and will therefore have no effect on the outcome of that matter.
Can I Change My Vote?
Yes. JustTo change your vote, send in a new proxy card with a later date, cast a new vote by telephone or Internet, or send a written notice of revocation bearing a date later than the datedate of the proxy to the Company’s Corporate Secretary at the address on the cover of this proxy statement. Also, if you attend the meeting and wish to vote in person, you may request that your previously submitted proxy not be used.
How Can I Access the Company’s Proxy Materials and Annual Report Electronically Online?
This proxy statement and the 20152017 Annual Report on Form 10-K are available at https://materials.proxyvote.com/120076.
Who Can Attend the Annual Meeting?
Any Build-A-Bear Workshop stockholderstockholder as of the Record Date may attend the meeting. If you own shares in street name, you should ask your broker or bank for a legal proxy to bring with you to the meeting. If you do not receive the legal proxy in time, bring your most recent brokerage statement so that we can verify your ownership of our stock and admit you to the meeting. However, you will not be able to vote your shares at the meeting without a legal proxy.
If you return a proxy card without indicating your vote, your shares will be voted as follows: (i) FOR the two nominees for Director named in this proxy statement (Proposal 1); (ii) FOR ratification of the appointment of Ernst & Young LLP as the independent registered public accounting firm for the Company for fiscal 20162018 (Proposal 2); (iii) FOR approval, by non-binding resolution, of executive compensation (Proposal 3); and (iv) in accordance with the recommendation of management on any other matter that may properly be brought before the meeting and any adjournment of the meeting.
Proof of ownership of Build-A-Bear Workshop stock, as well as a valid form of personal identification (with picture), must be presented in order to attend the annual meeting.
What is “Householding”“Householding” of Proxy Materials?
The Securities and Exchange Commission (“SEC”) has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from one or more of the affected stockholders. The Company will deliver, promptly upon request, a separate copy of the proxy statement to any stockholder who is subject to householding. You can request a separate proxy statement by writing to the Company at Build-A-Bear Workshop, Inc., Attention: Corporate Secretary, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114 or by calling the Company at (314) 423-8000. Once you have received notice from your broker or the Company that they are or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement in the future, or if you currently receive multiple proxy statements and would prefer to participate in householding, please notify your broker if your shares are held in a brokerage account or the Company if you hold registered shares. You can notify the Company by sending a written request to Build-A-Bear Workshop, Inc., Attention: Corporate Secretary, 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114 or by calling the Company at (314) 423-8000.as noted above.
Who Pays for the Solicitation of Proxies?
The Company will bear the cost of the solicitationsolicitation of proxies for the meeting. Brokerage houses, banks, custodians, nominees and fiduciaries are being requested to forward the proxy material to beneficial owners and their reasonable expenses therefor will be reimbursed by the Company. Solicitation will be made by mail and also may be made personally or by telephone, facsimile or other means by the Company’s officers, Directors and employees, without special compensation for such activities.
VOTING SECURITIES
On the Record Date, there were 15,808,449 15,018,987 outstanding shares of the Company’s common stock (referred to herein as “shares”).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of the Company’sCompany’s shares as of March 22, 201620, 2018 (unless otherwise noted) by (i) each person known by the Company to own beneficially more than 5% of the outstanding shares, (ii) each Director and Director nominee of the Company, (iii) each executive officer of the Company named in the Summary Compensation Table (the “Named Executive Officers” or “NEOs”), and (iv) all executive officers and Directors of the Company as a group. The table includes shares that may be acquired within 60 days of March 22, 201620, 2018 upon the exercise of stock options by employees or outside Directors and shares of restricted stock. Unless otherwise indicated, each of the persons or entities listed below exercises sole voting and dispositive power over the shares that each of them beneficially owns. Except as indicated below, the address of each person or entity listed is c/o Build-A-Bear Workshop, Inc., 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114. For the beneficial ownership of the stockholders owning 5% or more of the shares, the Company relied on publicly available filings and representations of the stockholders.
Name of Beneficial Owner | Amount and Nature of Shares of Common Stock Beneficially Owned(16)(17) | Percentage of Class | ||||||
Braden Leonard(1) | 1,594,169 | 10.1 | % | |||||
Cannell Capital LLC(2) | 1,340,175 | 8.5 | % | |||||
Dimensional Fund Advisors LP(3) | 1,285,044 | 8.1 | % | |||||
Sharon John(4) | 291,915 | 1.8 | % | |||||
Eric Fencl(5) | 185,645 | 1.2 | % | |||||
Maxine Clark(6) | 181,559 | 1.2 | % | |||||
Mary Lou Fiala(7) | 120,358 | * | ||||||
Coleman Peterson(8) | 101,998 | * | ||||||
James M. Gould (9) | 40,445 | * | ||||||
Jennifer Kretchmar(10) | 25,045 | * | ||||||
Voin Todorovic (11) | 21,445 | * | ||||||
J. Christopher Hurt (12) | 14,572 | * | ||||||
Michael Shaffer(13) | 9,873 | * | ||||||
Timothy Kilpin (14) | 1,194 | * | ||||||
Sarah Personette (14) | 1,194 | * | ||||||
All Directors and executive officers as a group (14 persons)(15) | 2,609,175 | 16.3 | % |
Name of Beneficial Owner |
| Amount and Nature of Shares of Common Stock Beneficially Owned(18)(19) |
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Point72 Asset Management, L.P.(1) |
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| 2,983,825 |
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| 19.9 | % |
Dimensional Fund Advisors LP(2) |
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| 1,347,709 |
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| 9.0 | % |
J. Carlo Cannell(3) |
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| 967,257 |
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| 6.4 | % |
BlackRock, Inc. (4) |
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| 876,475 |
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| 5.8 | % |
Sharon John(5) |
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| 586,191 |
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| 3.8 | % |
Eric Fencl(6) |
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| 222,080 |
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| 1.5 | % |
Coleman Peterson(7) |
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| 116,751 |
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| * | |
Maxine Clark(8) |
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| 110,693 |
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| * | |
Jennifer Kretchmar(9) |
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| 78,734 |
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| * |
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Voin Todorovic (10) |
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| 75,275 |
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| * |
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J. Christopher Hurt (11) |
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| 63,162 |
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| * |
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Michael Shaffer(12) |
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| 23,224 |
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| * |
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Sarah Personette (13) |
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| 14,545 |
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| * |
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Anne Parducci (14) | 5,918 |
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| * |
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Craig Leavitt (15) |
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| 3,479 |
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| * |
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Robert Dixon (16) | 2,310 |
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| * |
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All Directors and executive officers as a group (12 persons)(17) |
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| 1,302,362 |
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| 8.4 | % |
* | Less than 1.0%. |
(1) | Represents |
(2) | Represents |
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(3) | Represents an aggregate of 967,257 shares held by the Cuttyhunk Master Portfolio (“Cuttyhunk”), Tristan Partners, L.P. (“Tristan”), the Tristan Offshore Fund Ltd. (“Tristan Offshore”), and Tonga Partners, L.P. (collectively with Cuttyhunk, Tristan and Tristan Offshore, the “Investment Vehicles”). Cannell Capital LLC acts as the investment adviser or sub-advisor to the Investment Vehicles. Mr. J. Carlo Cannell is the sole managing member of Cannell Capital LLC and possesses sole voting and dispositive power with respect to the shares held by the Investment Vehicles. The principal address of the reporting person is 245 Meriwether Circle, Alta, Wyoming 83414. All of the foregoing ownership information is based solely on a Form 13D/A filed on February 22, 2018. |
(4) | Represents |
(5) | Represents 116,973 shares of common stock, |
(6) | Represents |
| Represents |
(8) | Represents 9,585 shares of common stock and 7,477 restricted shares owned directly by Ms. Clark, |
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(9) | Represents |
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| Represents |
| Represents |
(12) | Represents |
(13) | Represents 7,068 shares of common stock and 7,477 restricted shares. |
(14) | Represents |
(15) | Represents 3,479 restricted shares. |
(16) | Represents 2,310 restricted shares. |
(17) | Includes |
| No Director or Named Executive Officer beneficially owns shares that are pledged as security. |
| Share numbers include restricted stock granted to Named Executive Officers on March |
PROPOSAL NO. 1. ELECTION OF DIRECTORS
The Company’sCompany's Board of Directors presently has nineeight members, divided into three classes which as nearly as possible are equal in number. The classes have staggered three-year terms. As a result, only one class of Directors is elected at each annual meeting of our stockholders. Mary Lou Fiala, James M. GouldRobert L. Dixon, Jr., Coleman Peterson and Timothy KilpinMichael Shaffer are Class II Directors, and their terms will expire at the 2018 annual meeting. Craig Leavitt and Anne Parducci are Class III Directors, and their terms will expire at the 20162019 annual meeting. Maxine Clark, Sharon John, and Sarah Personette are Class I Directors, and their terms will expire at the 20172020 annual meeting. Braden Leonard, ColemanMr. Peterson and Michael Shaffer are Class II Directors, and their terms will expireannounced that, upon expiration of his term at the 2018 annual meeting. Mr. Gould announced thatmeeting, he will retire from his service as a member of the Board of Directors and will not stand for reelection and will resign immediately prior to the 2016 annual meeting at which timere-election. In connection with his retirement, the size of the Board of Directors will be reduced to eightseven members. Currently, all of our other Directors hold office until the annual meeting of stockholders at which their terms expire or until their successors are duly elected and qualified.
Under our Corporate Governance Guidelines, a Director may not stand for election or re-election after reaching the age of 73. Barney Ebsworth did not stand for re-election at the 2006 annual meeting and serves the Company as Director Emeritus.Emeritus.
A Director Emeritus is not permitted to vote on matters brought before the Board of Directors or any Board committee and is not counted for the purposes of determining whether a quorum of the Board or a Board committee is present. A Director EmeritusEmeritus is not compensated for his or her services.
The Nominating and Corporate Governance Committee nominated the Class IIIII Directors, Ms. FialaMessrs. Dixon and Mr. Kilpin,Shaffer, to be re-elected to serve until the 20192021 annual meeting of stockholders or until their successors are duly elected and qualified. As noted below, Ms. FialaMr. Shaffer has served on our Board of Directors for several years. Mr. KilpinDixon was recommended to us by an executive search consulting firm and was appointed to the Board of Directors in February 2016.2018.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”“FOR” THE NAMED NOMINEES
Proxies cannot be voted for a greater number of persons than the number of nominees named herein. Unless otherwise specified, all proxies will be voted in favor of the two nominees listed herein for election as Directors.
The Board has no reason to expect that any of the nominees will be unable to stand for election on the date of the meeting or for good cause will not serve. If a vacancy occurs among the original nominees prior to the meeting, the proxies will be voted for a substitute nominee named by the Board of Directors and for the remaining nominees. Directors are elected by the affirmative vote of the holders of a majority of the shares representedvotes cast in person or by proxy and entitledwith respect to vote on the proposal will be required for approval of eacha Director who is up fornominee’s election, provided, however, that, in accordance with the Company’s Bylaws,amended and restated bylaws, if the number of nominees exceeds the number of Directors to be elected at the meeting, then Directors shall be elected by the affirmative vote of a plurality of the votes present in person or by proxy and entitled to vote at the meeting.
DIRECTORS
Set forth below are the names, ages, positions and brief accounts of the business experience for each of our Directors as of March 1, 2016.20, 2018. The biographies of each of the nominees and continuing Directors below contains information each Director has given us about his or her age, 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-heldpublicly held companies of which he or she currently serves as a Director or has served as a Director during the past five years. In addition to the information presented below regarding each nominee’s specific experience, qualifications, attributes and skills that led our Board to the conclusion that he or she should serve as a Director, we also believe that all of our Director nominees and continuing Directors have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to the Company and our Board.
Class | |
As Global Chief Information Officer of a large public company and through his service on the CIO advisory board for another large public company, Mr. Dixon has extensive technology experience. He also has significant marketing experiences through his senior positions at two large public companies, both of which have global retail consumer product focus. As a member of the Board of Directors of another publicly traded company, he has gained highly relevant corporate governance experience. |
Throughout his career, Mr. Shaffer has obtained extensive financial and accounting expertise. During his tenure as Executive Vice President and Chief Operating & Financial Officer of PVH Corp., he has gained expertise in store operations, information technology, logistics, corporate administration, and strategic planning. Mr. Shaffer qualifies as an “audit committee financial expert” as such term is defined under applicable SEC rules. In addition, given his experience with other consumer-focused businesses, Mr. Shaffer provides valuable insights and perspectives regarding the financing and operation of the Company’s business. |
Class II Director — Term Expiring in 2018 and Not Standing for Re-Election | |
Coleman Peterson, 69, has served on the Board of Directors since 2005. As a human resources executive for retail companies and Chief Executive Officer of a human resources consulting firm, and through his service on the Board of Directors of other publicly traded companies, Mr. Peterson obtained extensive expertise in the areas of human resources, succession planning, retailing, store operations, strategic planning, and corporate governance. He brings to the Build-A-Bear Workshop Board of Directors skills and talents to help the Company develop its compensation programs, manage its human resources, oversee succession planning, and operate its retail business. Mr. Peterson intends to retire upon the expiration of his term at the 2018 annual meeting. |
Class III Directors — Terms Expiring in 2019 | |
Craig Leavitt, 57, was appointed to the Board of Directors on January 4, 2018 and serves as our Non-Executive During his career in the retail industry, Mr. Leavitt has gained extensive experience in the areas of strategic planning, product development and innovation, marketing, store operations, and real estate. His background, including his service as Chief Executive Officer and Director of a publicly traded | |
Anne Parducci, 56, was appointed to the Throughout her career, Ms. | |
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Class I Directors — Terms Expiring in | |
Maxine Clark, Ms. Clark has extensive leadership and executive experience in the retail industry, which includes founding and leading Build-A-Bear Workshop. She has nearly 40 years of experience in the areas of marketing, merchandising, store operations, digital technology, entertainment, strategic planning, and real estate. With this experience, along with her service on the Boards of Directors of other publicly traded retail companies, she brings to the Build-A-Bear Workshop Board of Directors highly relevant and valuable insights and perspectives on all aspects of the Company’s retail and entertainment business. |
Sharon John, In her various executive management positions, Ms. John gained extensive experience in all aspects of retail branding, including children's brands, marketing to moms and kids, and licensing, product development and innovation expertise. With this background, Ms. John provides Build-A-Bear Workshop with highly relevant and valuable insights and perspectives in leading businesses, strategic planning, brand building, marketing, licensing, merchandising, and retail operations. |
Sarah Personette, Ms. Personette has extensive sales and marketing experience, and she has helped numerous companies in a variety of industries formulate and implement innovative sales and marketing strategies. Ms. Personette brings to Build-A-Bear Workshop valuable and relevant insights regarding sales, marketing and other strategic and operational matters. |
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Barney Ebsworth, |
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company’sCompany’s Board of Directors is responsible for establishing broad corporate policies and for overseeing the overall management of the Company. In addition to considering various matters which require Board approval, the Board provides advice and counsel to, and ultimately monitors the performance of, the Company’s senior management. There are three standing committees of the Board of Directors: the Audit Committee, the Compensation and Development Committee, and the Nominating and Corporate Governance Committee.
COMMITTEE CHARTERS, CORPORATE GOVERNANCE GUIDELINES, BUSINESS CONDUCT POLICY AND CODE OF ETHICS
The Board of Directors has adopted charters for all three of its standing Committees. The Board has also adopted Corporate Governance Guidelines, which set forth the obligations and responsibilities of the Directors with respect to independence, meeting attendance,attendance, compensation, re-election, orientation, self-evaluation, and stock ownership. The Board of Directors has also adopted a Business Conduct Policy which applies to all of the Company’s Directors and employees, and a Code of Ethics Applicable to Senior Executives, which applies to the Company’s senior executives, including the principal executive and financial officer,officers, and the controller. Copies of the Committee charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics Applicable to Senior Executives can be found in the Corporate Governance section on the Company’s Investor Relations website at http://ir.buildabear.com (information on our website does not constitute part of this proxy statement). The Company intends to comply with the amendment and waiver disclosure requirements of applicable Form 8-K rules by posting such information on its website. The Company will post any amendments to the Committee charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics Applicable to Senior Executives in the same section of the Company’s website. The Committee charters, Corporate Governance Guidelines, Business Conduct Policywebsite and Code of Ethics Applicable to Senior Executivesthese documents are also available in print to stockholders and interested parties upon written request delivered to Build-A-Bear Workshop, Inc., 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114. Each of our Directors, executive officers, Bearquarters associates, and store management signsigns our Business Conduct Policy on an annual basis to ensure compliance. In addition, each of our executives signs our Code of Ethics Applicable to Senior Executives each year to ensure compliance.
Board Leadership Structure
The Board has separated the role of Chairman from the role of Chief Executive Officer. The Board chose to separate the roles of Chairman and Chief Executive Officer in recognition of the current demands of the two roles. While the Non-Executive Chairman organizes Board activities to enable the Board to effectively provide guidance to and oversight and accountability of management, the Chief Executive Officer is responsible for setting the strategic direction for the Company and the day to day leadership and performance of the Company. The Non-Executive Chairman creates and maintains an effective working relationship with the Chief Executive Officer and other members of management and with the other members of the Board; provides the Chief Executive Officer ongoing direction as to Board needs, interests and opinions; and assures that the Board agenda is appropriately directed to the matters of greatest importance to the Company. In carrying out herhis responsibilities, the Non-Executive Chairman preserves the distinction between management and Board oversight by (i) ensuring that management develop corporate strategy and risk management practices, and (ii) focusing the Board to review and express its judgments on such developments.
The Board believes this structure provides an efficient and effective leadership model for the Company. To assure effective independent oversight, the Board has adopted a number of governance practices, including:
A strong, independent, clearly-defined Non-Executive Chairman role;
Executive sessions of the non-management Directors before or after every regular Board meeting and of the independent Directors periodically but no less than annually; and
• | A strong, independent, clearly-defined Non-Executive Chairman role; | |
• | Executive sessions of the independent Directors before or after every regular Board meeting; and |
Annual performance evaluations of the Chief Executive Officer by the independent Directors.
The responsibilities of the Non-Executive Chairman include: (i) collaborating with the Chief Executive Officer to determine Board meeting agendas; (ii) presiding at all meetings of the Board, including executive sessions of the non-management Directors and of the independent Directors; (iii) facilitating communication with non-managementindependent Directors, including strategy updates; (iv) serving as principal liaison between the independent Directors, the Chief Executive Officer, and the Company’s management; (v) collaborating with the Board on Chief Executive Officer succession planning; (vi) collaborating with the Board regarding the retention of outside advisors and consultants who report directly to the Board when necessary; and (vii) if requested by stockholders, ensuring that he or she is available, when appropriate, for consultation and direct communication. The Non-Executive Chairman collaborates with the Board and the Chief Executive Officer to set strategic goals for the Company and develop plans to implement those goals.
Stockholders or interestedinterested parties can contact the Non-Executive Chairman, Mary Lou Fiala,Craig Leavitt, in writing c/o Build-A-Bear Workshop, Inc., 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114.
Meeting Attendance
The Board of Directors met eleventen times in 20152017 for regular and special meetings. All current Directors who were Directors during 2017 attended at least 75% of the aggregate number of meetings of the Board and committees on which they served. Overall attendance at meetings of the Board and Board committees in 20152017 by current Directors was approximately 99%95%. While the Company does not have a formal policy requiring members of the Board to attend the annual meeting, the Company encourages all Directors to attend. All of our current Directors who were members of the Board at the time of our 2017 annual meeting attended our 2015 annualthe meeting except for Mr. Kilpin and Ms. Personette who were not appointed to the Board until February 2016.had a scheduling conflict. All Directors plan to attend the 20162018 annual meeting except for Mr. Gould who will cease to be a director immediately prior to the annual meeting and Ms. Personette who had a pre-existing conflict when she was appointed to our Board in February 2016.meeting.
The members, primary functions and number of meetings held for each of the Committees are described below.
Audit Committee
The members of the Audit Committee are Michael Shaffer (Chair), Mary Lou Fiala, Braden LeonardMaxine Clark, Robert Dixon and Timothy Kilpin.Craig Leavitt.
The Audit Committee reviews the independence, qualifications and performance of our independent auditors, and is responsible for recommending the initial or continued retention of, or a change in, our independent auditors. The Committee reviews and discussesdiscusses with our management and independent auditors our financial statements and our annual and quarterly reports, as well as the quality and effectiveness of our internal control procedures, critical accounting policies and significant regulatory or accounting initiatives.
The Committee discusses with management earnings press releases and our major financial risk exposures. Furthermore, the Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting,accounting, internal control or auditing matters. The Committee approves the audit plan and staffing, duties and performance of the internal audit function. Periodically throughout each year, the Committee meets separately in executive session with management, the independent accountants, and the Company’s internal auditors to discuss any matters that the Committee or any of these groups believe should be discussed privately.
In fulfilling its responsibilities, the Committee reports regularly to the Board regardingregarding its activities, reviews and reassesses the adequacy of its charter on an annual basis, and performs an annual self-evaluation of Committee performance. The Audit Committee held teneight meetings in 2015.2017.
Compensation and Development Committee
The members of the Compensation and Development Committee are Coleman Peterson (Chair), Mary Lou Fiala, James M. Gould, Timothy KilpinCraig Leavitt, Anne Parducci, Sarah Personette and Sarah Personette.Michael Shaffer.
The Compensation and Development Committee is responsible for evaluating and approving the Company’sCompany’s overall compensation philosophy and policies, and consults with management regarding the Company’s executive compensation program. The Committee makes recommendations to the Board of Directors regarding compensation arrangements for our executive officers, including annual salary, bonus and long-term incentive awards, and is responsible for reviewing and making recommendations to the Board regarding the compensation of the Company’s Directors. As part of its duties, the Committee oversees and administrates the Company’s employee benefit and incentive compensation plans and programs, including the establishment of certain applicable performance criteria and assessment of risks associated with those plans and programs. The Committee also reviews and assesses the adequacy of the Company’s stock ownership and retention guidelines for senior executives. For additional information on the Committee’s processes, please see the “Compensation Discussion and Analysis” section of this proxy statement.
The Committee reports regularly to the Board regarding its activities, reviews and reassesses the adequacy of its charter on an annual basis and conducts an annual self-evaluationself-evaluation of Committee performance. The Compensation and Development Committee held sixseven meetings in 2015.2017.
Nominating and Corporate Governance Committee
The members of the Nominating and Corporate Governance Committee are James M. GouldColeman Peterson (Chair), Braden Leonard,Maxine Clark, Robert Dixon, Anne Parducci and Sarah Personette, Coleman Peterson, and Michael Shaffer.Personette.
The Nominating and Corporate Governance Committee establishes criteria for membership of the Company’sCompany’s Board of Directors and its committees and selects and nominates candidates for election or re-election as Directors at the Company’s annual meeting. Additionally, the Committee determines the composition, nature and duties of the Board committees and oversees the Board and committee self-evaluation processes.
The Committee is also responsible for reviewing and making recommendations to the Board regarding the Company’s Corporate Governance Guidelines, whistleblower policy and ethics codes.
The Committee reports regularly to the Board regarding its activities, reviews and reassesses the adequacy of its charter on an annual basis and conducts an annual self-evaluation of Committee performance. The Nominating and Corporate Governance Committee held four meetings in 2015.2017.
Risk Oversight by the Board
It is management’smanagement’s responsibility to assess and manage the various risks the Company faces. It is the Board’s responsibility to oversee management in this effort. In exercising its oversight, the Board has allocated some areas of focus to its committees and has retained areas of focus for itself, as more fully described below.
Management generally views the risks the Company faces as falling into the following categories: strategic, operational, financial, and compliance. The Board as a whole has oversight responsibility for the Company’sCompany’s strategic and operational risks. Throughout the year, the Chief Executive Officer and other members of senior management discuss these risks with the Board during reviews that focus on a particular function.
The Audit Committee has oversight responsibility for financial risk (such as accounting, finance, internal controls and tax strategy). Oversight responsibility for compliance risk is shared among the Board committees. For example, the Audit Committee oversees compliance with finance and accounting laws and policies; the Compensation and Development Committee oversees compliance with the Company’s executive compensation plans and related laws and policies; and the Nominating and Corporate Governance Committee oversees compliance with governance-related laws and policies, including the Company’s Corporate Governance Guidelines.
Compensation Risk Assessment
During fiscal 2015,2017, the Company undertook a comprehensive review of its material compensation plans and programs for all employees. In conducting this assessment, the Company inventoried its material plans and programs and presented a summary of its findings to the Compensation and Development Committee, which determined that none of its compensation plans and programs is reasonably likely to have a material adverse effect on the Company or promote undue risk taking.
BOARD MEMBER INDEPENDENCE AND COMMITTEE MEMBER QUALIFICATIONS
The Board of Directors annually determines the independence of Directors based upon a review conducted by the Nominating and Corporate Governance Committee and the Board of Directors. No Director is considered independent unless he or she has no material relationship with the Company, either directly or as a partner, stockholder, family member, or officer of an organization that has a material relationship with the Company. All Directors identified as independent in this proxy statement meet the categorical standards adopted by the Board of Directors to assist it in making determinations of Director independence. On an annual basis, each Director and Named Executive Officer is obligated to complete a Director and Officer Questionnaire. Additionally, our Directors are expected to disclose any matters that may arise during the course of the year which have the potential to impair independence.
The Board has determined that, in its judgment as of the date of this proxy statement, each of the non-management Board members other than Maxine Clark (including all members of the Audit, Nominating and Corporate Governance, and Compensation and Development Committees)Committees) are independent Directors, as defined by our Corporate Governance Guidelines and Section 303A of the New York Stock Exchange (“NYSE”) Listed Company Manual. Accordingly, Mary Lou Fiala, James M. Gould, Timothy Kilpin, Braden Leonard,Maxine Clark, Robert Dixon, Craig Leavitt, Anne Parducci, Sarah Personette, Coleman Peterson and Michael Shaffer are all independent Directors, as defined by our Corporate Governance Guidelines and Section 303A of the NYSE Listed Company Manual.
In addition, the Board also determined that each member of the Audit Committee (Mary Lou Fiala, Timothy Kilpin, Braden Leonard,(Maxine Clark, Robert Dixon, Craig Leavitt and Michael Shaffer) is independent under the heightened Audit Committee independence requirements included in Section 303A of the NYSE Listed Company Manual and the SEC rules. Moreover, each member of the Audit Committee is financially literate, and at least one such member (Michael Shaffer) has accounting or related financial management expertise as required in Section 303A of the NYSE Listed Company Manual. Furthermore, the Board determined that Michael Shaffer qualifies as an “audit committee financial expert” as such term is defined under applicable SEC rules. Finally, each member of the Compensation and Development Committee (Mary Lou Fiala, James Gould, Timothy Kilpin,(Craig Leavitt, Anne Parducci, Sarah Personette, Coleman Peterson and Coleman Peterson)Michael Shaffer) is independent under the heightened Compensation Committee independence requirements included in Section 303A of the NYSE Listed Company Manual, is a “non-employee director” pursuant to SEC Rule 16b-3 and is an “outside director” for purposes of Section 162(m) (“Code Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”).
RELATED PARTY TRANSACTIONS
In addition to annually reviewing the independence of our Directors, the Company also maintains strict policies and procedures for ensuringensuring that our Directors, executive officers and employees maintain high ethical standards and avoid conflicts of interest. Our Business Conduct Policy prohibits any direct or indirect conflicts of interest and requires any transactions which may constitute a potential conflict of interest to be reported to the Nominating and Corporate Governance Committee. Our Code of Ethics applicable to Senior Executives requires our leadership to act with honesty and integrity, and to disclose to the Nominating and Corporate Governance Committee any material transaction that reasonably could be expected to give rise to actual or apparent conflicts of interest.
Our Nominating and Corporate Governance Committee has established written procedures for the review and pre-approvalpre-approval of all transactions between us and any related parties, including our Directors, executive officers, nominees for Director or executive officer, 5%15% stockholders and immediate family members of any of the foregoing. Specifically, pursuant to our Business Conduct Policy and Code of Ethics, any Director or executive officer intending to enter into a transaction with the Company must provide the Nominating and Corporate Governance Committee with all relevant details of the transaction. The transaction will then be evaluated by the Nominating and Corporate Governance Committee to determine if the transaction is in our best interests and whether, in the Committee’s judgment, the terms of such transaction are at least as beneficial to us as the terms we could obtain in a similar transaction with an independent third party. In order to meet these standards, the Nominating and Corporate Governance Committee may conduct a competitive bidding process, secure independent consulting advice, engage in its own fact-finding, or pursue such other investigation and fact-finding initiatives as may be necessary and appropriate in the Committee’s judgment.
SECTIONStore Fixtures and Furniture
We purchase some of the fixtures for new stores and furniture for our corporate offices from NewSpace, Inc. (“NewSpace”). Robert Fox, the husband of Ms. Clark, a Director and, through June 3, 2013, our Chief Executive Bear, owns 100% of the capital stock of NewSpace. The total payments to NewSpace for these fixtures and furniture amounted to approximately $924,000 in fiscal 2015.
In 2006, 2010, 2013 and 2015, we conducted a competitive bid process for purchase of store fixtures and furniture. Taking into account all relevant factors, including price and quality, the Nominating and Corporate Governance Committee determined that engaging NewSpace as a vendor was in the best interests and, the terms of the transactions were at least as beneficial to the Company as the terms it could obtain in a similar transaction with an independent third party. In 2007, 2009, 2011 and 2012, the Nominating and Corporate Governance Committee reviewed the terms of the transactions with NewSpace and determined that they are at least as beneficial to us as the terms we could obtain in similar transactions with an independent third party. We expect to continue to purchase some of our store fixtures and furniture from NewSpace if NewSpace continues to offer competitive pricing through the bidding process and provide superior service levels.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s Directors and executive officers, persons who beneficially own more than 10% of a registered class of the Company’s equity securities, and certain other persons to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC, and to furnish the Company with copies of the forms. Based solely on its review of the forms it received, or written representations from reporting persons, the Company believes that all of its Directors, executive officers and greater than 10% beneficial owners complied with all such filing requirements during 2015, except Braden Leonard inadvertently filed a Form 4 to report the restricted shares he received as part of his annual board retainer one day late.2017.
BOARD OF DIRECTORS COMPENSATION
The table below discloses compensation information of members of the Company’sCompany’s Board of Directors for serving as members of the Company’s Board in 2015.2017. As a member of management, Sharon John, the Company’s President and Chief Executive Officer, and Chief President Bear, did not receive compensation for her services as Director in 2015.2017. Messrs. Leavitt and Dixon were appointed to the Company’s Board in 2018. As discussed below, Mr. Ebsworth was not paid any compensation for serving as Director Emeritus in 2015. 2017.
Name: | Fees Earned or Paid in Cash($) (1) | Stock Awards ($)(2) | All Other Compensation ($) | Total ($) | ||||||||||||
Maxine Clark(3) | $ | 9,231 | $ | 64,492 | $ | 358,243 | $ | 431,966 | ||||||||
Mary Lou Fiala | 59,000 | 84,304 | - | 143,304 | ||||||||||||
James M. Gould | 49,000 | 74,382 | - | 123,382 | ||||||||||||
Braden Leonard | 39,000 | 74,382 | - | 113,382 | ||||||||||||
Coleman Peterson | 50,250 | 74,382 | - | 124,632 | ||||||||||||
Michael Shaffer | 57,500 | 74,382 | - | 131,882 | ||||||||||||
Timothy Kilpin (4) | - | - | - | - | ||||||||||||
Sarah Personette(4) | - | - | - | - |
Fees | ||||||||||||||||
Earned or | Stock | All Other | ||||||||||||||
Paid in | Awards | Compensation | ||||||||||||||
Name: | Cash($)(1) | ($)(2) | ($) | Total ($) | ||||||||||||
Coleman Peterson | $ | 80,206 | $ | 95,005 | $ | - | $ | 175,211 | ||||||||
Michael Shaffer | 68,500 | 80,004 | - | 148,504 | ||||||||||||
Maxine Clark | 50,000 | 80,004 | - | 130,004 | ||||||||||||
Sarah Personette | 50,000 | 80,004 | - | 130,004 | ||||||||||||
Timothy Kilpin (3) | 50,000 | 80,004 | - | 130,004 | ||||||||||||
Braden Leonard (4) | 42,033 | 80,004 | - | 122,037 | ||||||||||||
Anne Parducci (5) | 15,110 | 52,374 | - | 67,484 | ||||||||||||
Mary Lou Fiala (6) | 27,198 | - | - | 27,198 |
(1) | Amount shown reflects |
(2) | In |
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| Mr. Kilpin |
(4) | Mr. Leonard resigned from the Board of Directors effective September 12, 2017 at which time he forfeited the stock award he received in 2017. |
(5) | Ms. |
(6) | Ms. Fiala resigned from the Board of Directors effective May 12, 2017. |
Director Compensation Policies
The Compensation and Development Committee reviews Board compensation annually, in conjunction with the November Board meeting. Currently, the Board compensation program provides for an annual retainer for Board membership, an annual restricted stock award and additional annual retainers for committee Chairs. The Non-Executive Chairman receives an additional annual retainer and restricted stock award for his service. Board members do not receive additional fees or compensation for attending meetings or for being a committee member or attending committee meetings. The annual retainer forserving on Board membership is $40,000, an amountcommittees. In connection with that has been in effect since 2005. Each Board member also receives a restricted stock award granted for annual service with a value of $75,000, as determined on the grant date, prorated in the case of a Director who joins the Board, or in the case of Ms. Clark became eligible to receive compensation for service as a Director, during the year. Grants are made on the date of each annual meeting of stockholders and vest one year later. On the date of the 2015 annual meeting, non-management directors received a restricted stock award with a value of $75,000 which will vest one year thereafter. The vesting of all restricted stock grants is subject to continued service on our Board.
In order for the Company to retain its qualified independent Board members who are fulfilling additional responsibilities, the Board pays additional annual retainer fees for the Chairman of our committees as follows: Audit Committee—$18,500; Compensation and Development Committee—$11,250; and Nominating and Corporate Governance Committee—$10,000.
Effective January 2014, in support of the Company’s cost cutting initiatives, the Board decided to extend a 10% annual retainer reduction so thatreview, the annual cashBoard retainer paid to each independent Director was $36,000. Furthermore, the additional annual retainer for the Non-Executive Chairman was $20,000 cash plus an additional annual restricted stock award with a value of $10,000.
Effective January 2015, in light of the Company’s improved financial results, the Board decided to allow the annual cash retainer to revert to $40,000, the amount that was originally established in 2005. The additional annual retainer for the Non-Executive Chairman, however, remained at $20,000 cash plus an additional annual restricted stock award with a value of $10,000.
In November 2015, the Board noted that it had not increased director compensation since 2005 and based on information provided by the Compensation and Development Committee’s independent compensation consultant, compensation had fallen below the median of the Company’s peer group. Accordingly, effective January 2016, the Board decided to increase the annual cash retainer to $50,000 and the value of the annual Board restricted stock award, was increased to $80,000. The additionalas well as the Non-Executive Chairman’s annual retainer for the Non-Executive Chairman, was increased to $25,000 cash plus an additional annualand restricted stock award, with a value of $15,000.were left unchanged for 2017. These amounts are reflected in the table below.
Compensation Element | Amount ($) | |||
Board Retainer | $ | 50,000 | ||
Restricted Stock Award Value(1) | 80,000 | |||
Audit Committee Chair Retainer | 18,500 | |||
Compensation and Development Committee Chair Retainer | 11,250 | |||
Nominating and Corporate Governance Committee Chair Retainer | 10,000 | |||
Additional Non-Executive Chairman Retainer | 25,000 | |||
Additional Non-Executive Chairman Restricted Stock Award Value(1) | 15,000 |
(1) | The number of shares of restricted stock awarded is determined on the grant date and is prorated in the case of a Director who joins the Board during the year. Grants are made on the date of each annual meeting of stockholders and vest one year later, subject to continued service on the Board. |
Our Corporate Governance Guidelines provide that non-management Directors are required to own shares of the Company’sCompany’s common stock having a value equal to three times the annual cash retainer for Board membership. This policy does not apply to Directors Emeritus.
Under our Corporate Governance Guidelines, no Director may stand for election or re-election after reaching the age of 73. However, a retiring Director may be asked by the Board to continue to serve the CompanyCompany in the status of Director Emeritus. A Director Emeritus does not receive an annual cash retainer or restricted stock grant.
We reimburse our Directors and Directors Emeritus for reasonable out-of-pocket expenses incurred in connection with attendanceattendance and participation in Board and committee meetings. We also reimburse our Directors for expenses incurred in the attendance of director continuing education conferences.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Compensation Program
The following Compensation Discussion and Analysis (“CD&A”) describes our overall compensation philosophy and the primary components of our executive compensation program. Furthermore, the CD&A explains the process by which the Compensation and Development Committee (the “Committee”) determined the fiscal 20152017 compensation for the following Named Executive Officers (“NEOs”):Officers:
Sharon John – President and Chief Executive Officer and Chief President Bear
Voin Todorovic – Chief Financial Officer
Jennifer Kretchmar– Chief Product Officer and Innovation Bear
• | Voin Todorovic – Chief Financial Officer | |
• | Jennifer Kretchmar– Chief Merchandising Officer |
J. Christopher Hurt – Chief Operations Officer
Eric Fencl – Chief Administrative Officer, General Counsel and Secretary
Executive Summary
Summary of Fiscal 20146and 20157 Financial Results
The Company is in the midst of a multi-year turnaround initiative that includes expanding into more places, developing more products, attracting more people,effort to rebuild its business and driving more profitability. During fiscal 2014, we sawreturn to long-term profitable growth by further leveraging the power of the Build-A-Bear brand while simultaneously improving the profitability of our retail channel. As discussed in the “Compensation Philosophy” section below, the Committee is focused on retaining and motivating the highly qualified executive officers who are leading the evolution and reinvention of the Company in a rapidly changing retail industry.
After three consecutive years of comparable sales increases and improved results asprofitability, in December 2016 the Company was significantly impacted by a sudden decline in retail traffic, particularly in North America. As a result, of these turnaround initiatives, including:revenues and profitability were significantly and adversely impacted. Fiscal 2016 results included:
Total revenues of $392.4 million compared to $379.1 million in fiscal 2013;
Pre-tax income improved to $16.0 million from a pre-tax loss of $2.1 million in fiscal 2013; and
• | Total revenues of $364.2 million; | |
• | Pre-tax income of $5.3 million; and |
Net income was $14.4of $1.4 million, or $0.81 per diluted share, an improvement from a net loss of $2.1 million, or $0.13 per diluted share, in fiscal 2013.
As a result of the continued execution of these strategies, profitability continued to improve during fiscal 2015 even though revenues declined, due in part to fiscal 2015 including only 52 weeks compared to 53 weeks in fiscal 2014. Fiscal 2015 results include:
Total revenues of $377.7 million;
Pre-tax income improved to $17.9 million; and
Net income improved to $27.3 million, or $1.59$0.09 per diluted share.
In fiscal 2017, the Company’s total revenues declined slightly in a challenging retail environment. Nevertheless, the Company improved its retail margin, managed its costs, and evolved its real estate portfolio to include more productive formats, resulting in improved pre-tax income. Fiscal 2017 results included:
• | Total revenues of $357.9 million; | |
• | Pre-tax income of $13.8 million; and |
Net income of $7.9 million, or $0.50 per diluted share.
Key Changes in 2015
On April 14, 2015, the Company and its Chief Administrative Officer, General Counsel and Secretary, Eric Fencl, entered into an amended and restated Employment, Confidentiality and Noncompete Agreement effective as of April 14, 2015 so that the terms and conditions of his agreement are generally consistent with employment agreements entered into with the other NEO’s other than the Chief Executive Officer.
On April 15, 2015, the Company appointed J. Christopher Hurt as Chief Operations Officer. The Company and Mr. Hurt have entered into an Employment, Confidentiality and Noncompete Agreement as of April 15, 2015.
For a description of these arrangements, see “Compensation Arrangements with Certain Executive Officers” below.
20157 Say on Pay Vote
In 2015,2017, we received a favorable advisory vote on our executive compensation program. Over 95%Approximately 90% of shares voted at our 20152017 Annual Meeting of Stockholders voted to approve our executive compensation program. The Committee believes this affirms our stockholders’ strong support of the Company’s executive compensation program and did not change its approach in 20152017 based on the results of the advisory vote. The Committee will continue to monitor and consider the outcomes of future advisory votes on the Company’s executive compensation program when making compensation decisions for the NEOs.
Key 20157 Compensation Decisions
We seek to design and implement executive compensation programs that align with our stockholders’stockholders’ interests. A significant portion of our NEOs’ compensation is based on individual, corporate financial, and company stock price performance, while avoiding the encouragement of unnecessary or excessive risk-taking. For 2015,2017, our NEOs’ total direct compensation consisted of a mix of base salary, annual cash bonuses based on the achievement of pre-established financial goals, and long-term incentive awards consisting of time-based restricted stock, performance-based restricted stock, and non-qualified stock options.
In March 2015,2017, the Committee approved adjustments to our NEOs’ compensation programs (excluding Mr. Hurt, whose employment commenced in April 2015) as highlighted below:
Based on the Company’sCompany’s financial results for 2014,2016, the market data provided by our compensation consultant, and individual considerations, the Committee approved no base salary increases for NEOs for 2015, ranging from 3% to 7% of NEOs’ 2014 salary levels.2017.
The Committee approved the Company’s 2015 bonus plan goals to continue its focus on profitability by establishing performance goals for consolidated pre-tax income (“pre-tax income”). For 2015, the Committee approved an increase to the plan payout maximum from 150% to 200% of target, corresponding to a stretch pre-tax income goal of approximately 46% above the stretch goal for the 2014 bonus plan.
For 2015, the Committee approved a grant of time-based restricted stock (40% of grant value), performance-based restricted stock awards (30% of grant value), and non-qualified stock options (30% of grant value) for NEOs. Our target grant levels were increased from 2014 levels to better align our NEOs’ compensation with peer market levels.
For 2015, the Committee approved a special grant of performance-based restricted stock for Ms. John based on cumulative pre-tax income goals for 2015-2017.
As referenced earlier, the Committee also entered into compensation arrangements with Mr. Fencl and Mr. Hurt upon his appointment in April 2015 as our new Chief Operations Officer. Compensation arrangements entered into with our NEOs are described in detail in this CD&A in the “Compensation Arrangements with Certain Named Executive Officers” section.
Based on the Company’s actual pre-tax income performance in 2015, NEOs received 62% of target under both the annual bonus plan and our performance-based restricted stock award program for 2015 performance.
• | The Committee approved the Company’s 2017 bonus plan goals to continue its focus on profitability. For 2016, the Company used consolidated net income as the profitability performance metric. Due to anticipated fluctuations in the Company’s 2017 tax rate due to discrete tax items, the Committee changed the profitability metric from consolidated net income to consolidated pre-tax income (“pre-tax income”). The target bonus levels for NEOs were unchanged from 2016. | |
• | For 2017, the Committee approved a grant of annual long-term incentive awards consisting of time-based restricted stock (60% of grant value), three-year performance-based restricted stock (30% of grant value) and non-qualified stock options (10% of grant value) for NEOs. The target grant levels for Messrs. Hurt and Fencl were increased from 2016 levels to better align their compensation with peer market levels. The target grant levels for other NEOs remained unchanged from 2016. |
• | Based on the Company’s actual pre-tax income results for 2017, NEOs received annual bonus plan payouts for 2017 performance of 45% of target. | |
• | In March 2015, our Chief Executive Officer was awarded a special grant of performance-based restricted stock that would be earned based on the Company’s achievement of cumulative consolidated pre-tax income goals for fiscal years 2015, 2016 and 2017. The number of shares that would have been earned upon the Company’s achievement of threshold, target or maximum performance goals was 25,000, 50,000 and 100,000, respectively. Because the threshold performance goal was not achieved, the entire award was forfeited. |
In addition to the key decisions approved by the Committee for 2015,2017, the Company’s executive compensation program continues to feature the following best practices:
Stock ownership guidelines for executives and Directors;
Incentive compensation recoupment, or “clawback”, provisions on incentive awards;
Insider trading policy, including anti-pledging and anti-hedging provisions for executives and Directors;
• | Incentive compensation recoupment, or “clawback”, provisions applicable to incentive awards; | |
• | Insider trading policy, including anti-pledging and anti-hedging provisions for executives and Directors; |
No tax gross-up provisions on any compensation or severance events; and
No executive perquisite benefits, beyond Company paid long termCompany-paid long-term disability insurance.
Change in Fiscal Year
Prior to 2018, the Company’s fiscal year has ended on the Saturday nearest to December 31 in each year. The Board of Directors adopted an amendment to the Company’s Amended and Restated Bylaws on January 4, 2018 that provides that the Company’s fiscal year now consists of the 52- or 53-week period that ends on the Saturday nearest January 31 each year.
In March 2016, our NEOs were granted three-year performance-based restricted stock that will be earned if pre-established cumulative consolidated total revenue targets are attained. The award agreements entered into in connection with the 2016 performance-based restricted stock awards provided that any shares earned at the end of the performance period would vest on March 31, 2019. Similarly, and as discussed in this CD&A, in March 2017, our NEOs were granted three-year performance-based restricted stock that will be earned if pre-established three-year pre-tax income growth goals are attained. Award agreements entered into in connection with these awards provided that at any shares earned at the end of the performance period would vest on March 31, 2020.
Because the audit of the Company’s consolidated financial statements will likely not be completed until mid-April of each following year as a result of the change in fiscal year, the Compensation and Development Committee modified the 2016 award agreements and 2017 award agreements to provide that any shares that are earned under these agreements will vest on April 30, 2019 and April 30, 2020, respectively.
Alignment of 20157 Chief Executive Officer Pay and Historical Performance
As discussed throughout this CD&A,&A, the Committee seeks to design executive compensation programs that are highly aligned with long-term shareholder value creation and provide rewards for the achievement of pre-established Company financial metrics. In keeping with this philosophy, the Committee approved a target mix of total direct compensation (base salary, annual bonus, and long-term incentives) for 20152017 for our Chief Executive Officer, heavily weighted on performance-based compensation, with approximately 69%45% of total direct compensation weighted onin the following forms of performance-based compensation: (1) target annual bonus (21%(26%), (2) three-year performance-based restricted stock (40%(14%), and (3) non-qualified stock options (7%(5%), and the remainder. The remaining 55% of our Chief Executive Officer’s total direct compensation was comprised of base salary (21%(26%) and time-based restricted stock (10%(29%).
Based on this emphasis on performance-based compensation, historically our Chief Executive’sExecutive Officer’s compensation has had a strong relationship withto our Company performance. As discussed earlier in the “Executive Summary” section, in 2015 the Company generated lower financial results than was targeted in our financial plan, and as a result, our Chief Executive Officer earned less performance-based compensation awards than targeted by the Committee at the grant date. The table below shows our historical pre-tax income (loss) and fiscal year endyear-end stock price per share from 2011-2015.fiscal 2011 through fiscal 2017.
Fiscal Year | Pre-tax Income (Loss) ($ in millions) | Fiscal Year End Stock Price Per Share ($) | Pre-tax Income (Loss) ($ in millions) | Fiscal Year-End Stock Price Per Share ($) | ||||||||||||
2011 | $ | (2.7 | ) | $ | 8.46 | $ | (2.7 | ) | $ | 8.46 | ||||||
2012 | (48.4 | ) | 3.91 | (48.4 | ) | 3.91 | ||||||||||
2013 | (2.1 | ) | 7.74 | (2.1 | ) | 7.74 | ||||||||||
2014 | 16.0 | 19.11 | 16.0 | 19.11 | ||||||||||||
2015 | 17.9 | 12.24 | 17.9 | 12.24 | ||||||||||||
2016 | 5.3 | 13.75 | ||||||||||||||
2017 | 13.8 | 9.20 |
The comparison below of performance-based compensation granted to our Chief Executive Officer to the amount of such compensation that was actually paid or vested based on the Company’s performance demonstrates the alignment of compensation to Company financial performance:
Summary of Chief Executive Officer Annual Bonuses Paid as a Percent of Target
Year(1) |
|
| Target |
|
| Actual Payout |
|
| Actual Payout Percent of Target |
| |||
2011 |
|
| $ | 659,200 |
|
| $ | 0 |
|
|
| 0 | % |
2012 |
|
|
| 824,000 |
|
|
| 0 |
|
|
| 0 | % |
2013(2) |
|
|
| 336,538 |
|
|
| 286,058 |
|
|
| 85 | % |
2014 |
|
|
| 656,250 |
|
|
| 958,125 |
|
|
| 146 | % |
2015(3) |
|
|
| 665,625 |
|
|
| 465,938 |
|
|
| 70 | % |
2016 |
|
|
| 694,231 |
|
|
| 0 |
|
|
| 0 | % |
2017 |
|
|
| 700,000 |
|
|
| 315,000 |
|
|
| 45 | % |
Year(1) | Target | Actual Payout | Actual Payout Percent of Target | ||||||||||
2011 | $ | 659,200 | $ | 0 | 0 | % | |||||||
2012 | 824,000 | 0 | 0 | % | |||||||||
2013(2) | 336,538 | 286,058 | 85 | % | |||||||||
2014 | 656,250 | 958,125 | 146 | % | |||||||||
2015(3) | 665,625 | 465,938 | 70 | % |
(1) | Ms. Clark in 2011 and 2012; Ms. John in |
(2) | Amounts prorated for the number of weeks Ms. John was employed by the Company in fiscal 2013. Includes $262,500 earned under the 2013 Bonus Plan plus a $23,558 discretionary bonus awarded by the Committee to offset the impact of unbudgeted management transition costs. |
(3) | Includes $412,688 earned under the 2015 Bonus |
Summary of Performance-Based Restricted Shares/Long-Term Cash Earned as a Percent of Target
Year(1) | Target Shares | Target Cash | SharesVested from Performance | CashEarned from Performance | Actual Shares/Cash Earned as a Percent of Target |
| Target Shares |
| Target Cash |
| Performance- Based Shares Vested |
| Performance- Based Cash Earned |
| Actual Performance- Based Shares/Cash Earned as a Percent of Target |
| ||||||||||||||||||||||||||
2011 | 27,416 | — | — | — | 0 | % |
| 27,416 |
| — |
| — |
|
| — |
| 0 | % | ||||||||||||||||||||||||
2012 | 58,220 | — | — | — | 0 | % |
| 58,220 |
| — |
| — |
|
| — |
| 0 | % | ||||||||||||||||||||||||
2013(2) | — | $ | 468,700 | — | $ | 398,395 | 85 | % |
| — |
| $ | 468,700 |
| — |
| $ | 398,395 |
| 85 | % | |||||||||||||||||||||
2014 | — | 144,375 | — | 210,788 | 146 | % |
| — |
| 144,375 |
| — |
|
| 210,788 |
| 146 | % | ||||||||||||||||||||||||
2015 | 11,178 | — | 6,930 | — | 62 | % |
| 11,178 |
| — |
| 6,930 |
|
| — |
| 62 | % | ||||||||||||||||||||||||
2016(3) |
| — |
| — |
| — |
|
| — |
| — |
| ||||||||||||||||||||||||||||||
2017(4) |
| 50,000(5) |
| — |
| — |
|
| — |
| 0 | % |
(1) | Ms. Clark in 2011 and 2012; Ms. John in |
(2) | Amounts prorated for the number of weeks Ms. John was employed by the Company in fiscal 2013. Includes $365,586 earned under the 2013 |
(3) | The performance-based restricted stock granted to Ms. John in 2016 has a three-year performance period that runs through fiscal 2018. As a result, none of the shares can be earned until completion of performance period. |
(4) | The performance-based restricted stock granted to Ms. John in 2017 has a three-year performance period runs through fiscal 2019. As a result, none of the shares can be earned until completion of performance period. |
(5) | Represents performance-based restricted stock granted in 2015 with a three-year performance period. Because the Company did not achieve the threshold cumulative consolidated pre-tax income target for fiscal years 2015, 2016 and 2017, the entire award was forfeited. |
Compensation Philosophy
The fundamental objectives of our executive compensation program are to attract and retain highly qualified executive officers, to motivate these executive officers to materially contribute to our long-term business success, and to align the interests of our executive officers and stockholders by rewarding our executives for individual and corporate performance-basedperformance based on targets established by the Committee.
We believe that achievement of these compensation program objectives enhances long-term stockholder value. When designing compensation packages to reflect these objectives, the Committee is guided by the following four principles:
• | Alignment with stockholder interests:Compensation should be tied, in part, to our stock performance through the granting of equity awards to align the interests of executive officers with those of our stockholders. |
• | Recognition for business |
• | Accountability for individual performance:Compensation should partially depend on the individual executive’s performance, in order to motivate and acknowledge the key contributors to our success. |
• | Competition: Compensation should generally reflect the competitive marketplace and be consistent with that of other well-managed companies in our peer group and the broader retail industry sector. |
In implementing this compensation philosophy, the Committee takes into account the compensation amounts from the previous years for each of the NEOs, and internal compensation equity among the NEOs. Historically, the Committee has strived to structure compensation packages so that total payout, taking into consideration performance-based compensation, will be near the median of the Company’s peer group if the Company meets its financial targets and above the median if the Company exceeds its financial targets and the individual NEOs perform well in their roles throughout the fiscal year. Over the past several years, however, immediately prior to and during the early stages of our turnaround efforts, Named Executive OfficerNEOs’ compensation packages have generally fallen below the median.
20157 Compensation Determination Process
Each year the Committee engages in a review of our executive compensation with the goal of ensuring the appropriate combination of fixed and variable compensation linked to individual and corporate performance.
Role of the Committee and Board of Directors
The Committee Chartercharter provides the Committee with the option of either determining the Chief Executive Officer’s compensation, or recommending such compensation to the Board for determination. The Committee has historically chosen to consult with the full Board of Directors, other than the Chief Executive Officer, on the Chief Executive Officer’s compensation, because the Committee believes that the Chief Executive’s performance and compensation are so critical to the success of the Company that Board involvement in such matters is appropriate. The Committee also determines the compensation and review process for all executive officers other than the Chief Executive. Because the Committee Chartercharter specifically delegates this responsibility to the Committee, it only involves the full Board in an advisory capacity with respect to the compensation decision-making process for the other NEOs.
Role of Management
Also in the course of its review, the Committee considered the advice and input of the Company’sCompany’s management. Specifically, the Committee leverages the Company’s management, human resources department and legal department to assist the Committee in the timely and cost-effective fulfillment of its duties. The Committee solicits input from the Chief Executive and human resources department regarding compensation policies and levels. The legal department assists the Committee in the documentation of compensation decisions. In addition, the Third Amended and Restated 2004 StockBuild-A-Bear Workshop, Inc. 2017 Omnibus Incentive Plan (“Stock(the “2017 Incentive Plan”) provides that the Chief Executive Officer and Chief OperationsHuman Resources Officer have the limited authority to grant equity awards to Company employees other than executive officers. The Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan (the “2004 Inventive Plan”), under which fiscal 2017 annual bonuses and long-term incentive compensation awards were made, includes the same limited authority provision. The Committee does not permit members of the Company’s management to materially participate in the determination of their particular compensation; nor does the Committee permit members of management, including the Chief Executive, to be physically present for those portions of Committee meetings during which the particular member of the management team’s performance and compensation are reviewed and determined.
Role of Committee Consultants
For 2015,2017, the Committee retained Meridian Compensation Partners, LLC (“Meridian”) as its independent consultant on executive and Director compensation. Meridian’s engagement is to act as the Committee’s independent advisor on executive and Director compensation and in this role, Meridian assisted the Committee in the determination of the peer group, the compensation benchmarking process, and the review and establishment of compensation policies and programs for NEOs.
The Committee did not direct Meridian to perform its services in any particular manner or under any particular method, and all decisions with respect to the NEOs’NEOs’ compensation are made by the Committee. The Committee has the final authority to retain and terminate the compensation consultant and evaluates the consultant annually. The Company has no relationship with Meridian (other than the relationship undertaken by the Committee), and, after consideration of NYSE listing standards pertaining to the independence of compensation consultants, the Committee determined that Meridian is independent. Meridian does not provide any additional services to the Company.
Compensation Market Data and Benchmarking
The Committee believes that external market data is an important tool by which to measure the fairness and competitiveness of the Company’s executive compensation. In September 2014,2016, Meridian reviewed the Company’s compensation peer group and developed recommendations for changes for the January 20152017 market study. The peer group review considered the following characteristics:
• | industry; | |
• | revenues; | |
• | net income; | |
• | market value; | |
• | number of employees; and | |
• | number of stores. |
Industry
Revenues
Net Income
Market Value
Number of Employees
Number of Stores
As a result of the review, the Committee approved the use of the following 17 peer companies for the January 20152017 market study:
In January While market data is an important measuring tool, it is only one of four principal considerations under the
201 Base salary provides fixed compensation to an individual that reflects his or her job responsibilities, experience, value to the Company, and demonstrated performance. Salaries or minimum salaries for
the recommendations of the Chief Executive Officer (except in the case of her own compensation).
Typically, the Committee considers these factors during an annual review in March. In March Following completion of these reviews of each
201 The Committee continued the use of a cash bonus plan in The 2017 Bonus Plan was developed in accordance with the terms of the 2004 Incentive Plan. On March
For the
The In March
201 The objective of the Long-term incentive compensation awards made in fiscal 2017 were made under the terms of the 2004 Incentive Plan. Under the The The Company does not have any program, plan or practice in place to time option or other award grants with the release of material, non-public information and does not Historically, the Company has granted stock-based compensation in the form of
In January, February and March performance and to align with peer practices. The Committee determined the amount of long-term incentive awards granted to each executive using three key considerations: (1) market data for grant levels The target grant levels for other NEOs remained unchanged from 2016 to 2017. On March
The stock options and time-based restricted stock vest at the rate of one-third per year over three years from the date of grant, beginning on March 31, 2018. The number of
Fiscal 2017-2019 Performance-Based Restricted Stock Payout
Pursuant to the terms of the
Further information regarding the
201
As noted above, the objectives of the Company’s long-term incentive program are to provide a long-term retention incentive for the NEOs and to align
Insider Trading Policy The Build-A-Bear Workshop, Inc. Insider Trading Policy prohibits the Directors, NEOs and other employees from selling the Company’s securities “short”— that is, selling securities that are borrowed (and not owned) so as to be able to profit from a decrease in the Company’s share price. The Company’s insider trading policy also prohibits Directors, NEOs and other employees from pledging Company securities or buying or selling puts (i.e., options to sell), calls (i.e., options to purchase), future contracts, or other forms of derivative securities relating to the Company’s securities.
Poli The
Executive Stock Ownership Guidelines The Committee maintains stock ownership guidelines for NEOs. The guidelines require executives to acquire and maintain a minimum level of stock ownership in Company stock.
The current ownership guidelines for our NEOs are set forth in the table below.
The executives have three years to reach the applicable minimum holding requirement and, thereafter, may not sell shares if such sale would cause the
Retirem We have entered into
Other Benefits The Company seeks to maintain an open and inclusive culture in its facilities and operations among executives and other Company employees. Thus, the Company does not provide executives with reserved parking spaces or separate
Insurance All full-time Company employees, including the NEOs, are eligible to participate in medical, dental, vision, long- and short-term disability and life insurance plans and flexible spending accounts. The terms of such benefits for the Company’s NEOs are the same as those for all Company employees, except that with respect to long-term disability insurance, the Company pays 100% of the premium for senior level employees, including the NEOs.
401(k) The Company sponsors the Build-A-Bear Workshop, Inc. Employee Savings Trust, which is a qualified retirement plan with a 401(k) feature. Participants are provided the
401(k) Mirror Plan The Company sponsors the Build-A-Bear Workshop, Inc. Non-Qualified Deferred Compensation Plan, a non-qualified plan which mirrors the substantive terms of the Build-A-Bear Workshop, Inc. Employee Savings Trust. The non-qualified plan permits certain highly compensated employees, including the NEOs, whose deferrals are otherwise limited to the qualified plan, to make additional pre-tax deferrals of compensation. The Company may make matching contributions to this non-qualified plan to replicate Company matching contributions that would have been made to the qualified plan, but for limitations in the Code. In
Federal Income Tax and Accounting Considerations Code Section 162(m) Code Section 162(m) limits deductions for certain executive compensation in excess of $1 million in any fiscal year. Under Code Section 162(m) The applicable performance-based deductibility
Accounting Considerations The Committee has taken certain
COMPENSATION AND DEVELOPMENT COMMITTEE REPORT The Submitted by the Compensation and Development Committee of the
The Compensation and Development Committee Report and the Report of the Audit Committee below will not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement or portions thereof into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and will not otherwise be deemed filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION During
201 The following table sets forth information concerning the annual and long-term compensation for all services rendered in all capacities to the Company for the fiscal years ended December 30, 2017, December 31, 2016, and January 2,
201 The following table sets forth certain information with respect to plan-based awards granted to each of our Named Executive Officers during the fiscal year ended
OUTSTANDING EQUITY AWARDS AT 201 The following table discloses information regarding outstanding awards issued under the Company’s
201 The following table provides information regarding stock options that were exercised by our Named Executive Officers and restricted stock that vested during the fiscal year ended
2017 NON-QUALIFIED DEFERRED COMPENSATION The following table provides information regarding our Named Executive Officers’ non-qualified deferred compensation during the fiscal year ended December 30, 2017.
A description of the Company’s Non-Qualified Deferred Compensation Plan is included in the “Compensation Discussion and Analysis” Section. EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS The Company currently has employment agreements with each of our Named Executive Officers and certain other executives. The material terms of the agreements
Ms.
Potential Payments Upon Termination or Change-In-Control Our Named Executive Officers are The termination benefits provided to our Named Executive Officers upon their voluntary termination of employment or retirement do not discriminate in scope, terms or operation in favor of our executive officers compared to the benefits offered to all salaried employees, so those benefits are not included in the table below. The amounts presented in the table are in addition to amounts each Named Executive Officer earned or accrued prior to termination, such as the officer’s balances, if any, in our Non-Qualified Deferred Compensation Plan, previously vested options and restricted stock, and accrued vacation. For information about these previously earned and accrued amounts, see the “Outstanding Equity Awards at
CEO PAY RATIO The Dodd–Frank Wall Street Reform and Consumer Protection Act requires companies to disclose the pay ratio of our Chief Executive Officer to our median employee. We identified our median employee taking into account all full-time, part-time, seasonal and temporary employees. As permitted by Item 402(u) of Regulation S-K, we excluded individuals employed in certain countries, as the total number of these excluded employees is less than 5% of our total worldwide workforce. We included employees in the United States (3,514) and the United Kingdom (941) and excluded employees in Canada (160), Ireland (35), Denmark (25) and China (11). To identify the median of annual total compensation of all included employees, we examined the total compensation, our consistently applied compensation measure, for all full pay periods from the beginning of fiscal 2017 through October 1, 2017 (the “Testing Date”) for all included individuals, excluding our Chief Executive Officer, who were employed by us on the Testing Date. We calculated annual total compensation using the same methodology we use for calculating the total compensation of our Named Executive Officers as disclosed in the Summary Compensation Table in this proxy statement. We applied a British pound to U.S. dollar exchange rate to the compensation elements paid in British currency, utilizing the exchange rate as of September 29, 2017, the last business date prior to the Testing Date. We did not make any assumptions, adjustments, or estimates with respect to total compensation, and we did not annualize the compensation for any employees. The 2017 annual total compensation of our Chief Executive Officer was $1,894,435, and the 2017 annual total compensation for the median employee was $6,198. The resulting ratio of our Chief Executive Officer’s pay to the pay of our median employee for fiscal year 2017 is 305.7 to 1. We believe it is noteworthy that given the nature of our business, a significant number of our employees are part-time, seasonal or temporary employees. Furthermore, the ratio of our Chief Executive Officer annual total compensation to that of the median employee was impacted by the fact that approximately 20% of our employees are located in the United Kingdom where applicable wage regulations for younger workers resulted in a higher pay ratio. PROPOSAL NO. 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS Ernst Although the Company is not required to submit this appointment to a vote of the stockholders, the Audit
TH
Principal Accountant Fees The following table presents fees for professional services rendered by Ernst & Young LLP for the audit of the Company’s annual financial statements for the fiscal years ended
Policy Regarding Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm
PROPOSAL We are asking our stockholders to provide advisory approval of the compensation of our Named Executive Officers. As described in the
“RESOLVED, that the stockholders approve, on an advisory basis, the compensation paid to the Named Executive Officers, as disclosed in the proxy statement for the 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and narrative While this vote is advisory, and not binding on our Company, it will provide information to our Compensation and THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING BASIS, OF
REPORT OF THE AUDIT COMMITTEE The primary function of the Audit Committee is to assist the Board of Directors
The Audit Committee submits the following report pursuant to the SEC rules:
The Audit Committee has reviewed and discussed with management and with Ernst & Young LLP, the Company’s independent registered public accounting firm, the audited Ernst& Young LLP has advised the management of the Company and the Audit Committee that it has discussed with them all the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. The Audit Committee has received from Ernst& Young LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding Ernst& Young LLP’s communications with the Audit Committee concerning independence and has discussed Ernst& Young LLP’s independence with them. Based upon the aforementioned review, discussions and representations of Ernst& Young LLP, and the unqualified audit opinion presented by Ernst& Young LLP on the
Submitted by the Audit Committee of the Board of Directors:
STOCKHOLDER COMMUNICATIONS WITH THE BOARD Our Board of Directors has adopted a policy to provide a process for holders of our securities to send written communications to our Board. Any stockholder wishing to send communications to our Board should send the written communication and the following information to our Corporate Secretary, Build-A-Bear Workshop, Inc., 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114:
name, age, business and residential address of stockholder; and any individual Director or committee to which the stockholder would like to have the written statement and other information sent.
The Corporate Secretary, or his or her designee, will collect and organize all of such stockholder communications as he or she deems appropriate and, at least once each fiscal quarter, forward these materials to the Non-Executive Chairman, any
SELECTION OF NOMINEES FOR THE BOARD OF DIRECTORS The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Board candidates to serve as members of the Board. The Nominating and Corporate Governance Committee has not adopted specific, minimum qualifications that nominees must meet in order for the Nominating and Corporate Governance Committee to recommend them to the Board, but rather, each nominee is individually evaluated based on his or her individual merits, taking into account our needs and the composition of the Board. The Nominating and Corporate Governance Committee seeks independent Directors who represent a mix of backgrounds and experiences that will enhance the quality of the In all cases, members of the Nominating and Corporate Governance Committee discuss and evaluate each potential Any stockholder or interested party wishing to submit a candidate for consideration should send the following information to the Corporate Secretary, Build-A-Bear Workshop, Inc., 1954 Innerbelt Business Center Drive, St. Louis, Missouri 63114:
name, age and address of candidate; a detailed resume describing, among other things, the a supporting statement which describes the any information relating to the candidate that is required to be disclosed in the solicitation of proxies for election of Directors; a description of any arrangements or understandings between the stockholder and the candidate; any other information that would be useful to the Committee in considering the candidate; and a signed statement from the candidate, confirming his or her willingness to serve on the Board.
The Corporate Secretary will promptly forward such materials to the Nominating and Corporate Governance Committee Chair and the Non-Executive Chairman. The Corporate Secretary will also maintain copies of such materials for future reference by the Nominating and Corporate Governance Committee when filling Board positions. The same criteria apply with respect to the Nominating and Corporate Governance Committee’s evaluation of all candidates for membership to the Board. However, separate procedures will apply, as provided in the bylaws, if a stockholder wishes to submit at an annual meeting a Director candidate who is not approved by the Nominating and Corporate Governance Committee or the full Board.
STOCKHOLDER PROPOSALS Our amended and restated bylaws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as Directors at an annual meeting of stockholders, must provide timely notice in writing. To be timely, a stockholder’s notice must be delivered to or mailed and received at our principal executive offices not more than 120 days or less than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders, or between January Stockholder proposals intended to be presented at the
OTHER MATTERS Management does not intend to bring before the meeting any matters other than those specifically described above and knows of no matters other than the foregoing to come before the meeting. If any other matters or motions properly come before the meeting, it is the intention of the persons named in the accompanying proxy to vote such proxy in accordance with the recommendation of management on such matters or motions, including any matters dealing with the conduct of the meeting.
APPENDIX A DIRECTIONS TO THE 1954 INNERBELT BUSINESS CENTER DRIVE ST. LOUIS,MISSOURI 63114 Build-A-Bear
FROM LAMBERT INTERNATIONAL AIRPORT Take I-70 east and merge onto I-170 south via Exit 238B. Take the Page Avenue exit, Exit 4. Turn right onto Page Avenue and right onto Innerbelt Business Center Drive.
FROM DOWNTOWN ST. LOUIS OR ILLINOIS Take I-70 west and merge onto I-170 south via Exit 238B. Take the Page Avenue exit, Exit 4. Turn right onto Page Avenue and right onto Innerbelt Business Center Drive.
FROM NORTH COUNTY LOCATIONS Take I-170
FROM SOUTH COUNTY LOCATIONS Take I-270 north to I-64/US-40 east via Exit 12. Merge onto I-170 north. Take the Page Avenue exit, Exit 4. Turn left onto Page Avenue and turn right onto Innerbelt Business Center Drive.
FROM WEST COUNTY LOCATIONS Take I-64/US-40 east and merge onto I-170 north. Take the Page Avenue exit, Exit 4. Turn left onto Page Avenue and turn right onto Innerbelt Business Center Drive.
|