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.    )

 

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Soliciting Material Pursuant to §240.14a-12

  

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to §240.14a-12

Build-A-Bear Workshop, Inc.

(Name of Registrant as Specified In Its Charter)

 

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

 

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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,

 

  

 

 

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

 

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

 

  

 

 

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

 

  

Page

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

1011

Board Member Independence and Committee Member Qualifications

13

Related Party Transactions

13

Section 16(a) Beneficial Ownership Reporting Compliance

14

Board of Directors Compensation

1514

Executive Compensation

1615

Compensation Discussion and Analysis

1615

Compensation and Development Committee Report

2925

Compensation Committee Interlocks and Insider Participation

2925

20152017 Summary Compensation Table

2926

20152017 Grants of Plan-Based Awards

3127

Outstanding Equity Awards at 20152017 Fiscal Year-End

3428

20152017 Option Exercises and Stock Vested

3529

2017 Non-Qualified Deferred Compensation

29

Executive Employment and Severance Agreements

3630

CEO Pay Ratio

33

Proposal No. 2. Ratification of Appointment of Independent Accountants

4033

Proposal No. 3. Advisory (Non-binding) Vote Approving Executive Compensation

4134

Report of the Audit Committee

4235

Stockholder Communications with the Board

4235

Selection of Nominees for the Board of Directors

4336

Stockholder Proposals

4437

Other Matters

4437

Appendix AA. Directions to the Company’s World Bearquarters

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 2016;2018; and

(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 botheach of the two nominees as Directors;Director nominees;

 

(b)

FOR ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal 2016;2018; and

 

(c)

FOR the non-binding approvalapproval of executive compensation.

 

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)

 

 

Percentage

of Class

 

Point72 Asset Management, L.P.(1) 

 

 

2,983,825

 

 

 

19.9

%

Dimensional Fund Advisors LP(2)

 

 

1,347,709

 

 

 

9.0

%

J. Carlo Cannell(3) 

 

 

967,257

 

 

 

6.4

%

BlackRock, Inc. (4)

 

 

876,475

 

 

 

5.8

%

Sharon John(5) 

 

 

586,191

 

 

 

3.8

%

Eric Fencl(6) 

 

 

222,080

 

 

 

1.5

%

Coleman Peterson(7) 

 

 

116,751

 

 

 

*

 

Maxine Clark(8) 

 

 

110,693

 

 

 

*

 

Jennifer Kretchmar(9) 

 

 

78,734

 

 

 

*

 

Voin Todorovic (10)

 

 

75,275

 

 

 

*

 

J. Christopher Hurt (11)

 

 

63,162

 

 

 

*

 

Michael Shaffer(12) 

 

 

23,224

 

 

 

*

 

Sarah Personette (13)

 

 

14,545

 

 

 

*

 

Anne Parducci (14)

  

5,918

 

 

 

*

 

Craig Leavitt (15)

 

 

3,479

 

 

 

*

 

Robert Dixon (16)

  

2,310

 

 

 

*

 

All Directors and executive officers as a group (12 persons)(17) 

 

 

1,302,362

 

 

 

8.4

%

 

*

Less than 1.0%.

 

(1)

Represents 1,458,0002,983,825 shares heldbeneficially owned by BML Investment Partners,Point72 Asset Management, L.P. (“BML”Point72 Asset Management”), Point72 Capital Advisors, Inc. (“Point72 Capital Advisors”) and Steven A. Cohen with respect to which BML and Braden M. Leonardthey share voting and dispositive power, 131,791 shares of common stock held bypower.  Point72 Asset Management, Point72 Capital Advisors, and Mr. LeonardCohen own directly no shares. Point72 Asset Management maintains investment and voting power with respect to which he has sole votingthe shares held by certain investment funds it manages. Point72 Capital Advisors is the general partner of Point72 Asset Management. Mr. Cohen controls each of Point72 Asset Management and dispositive power,Point72 Capital Advisors. Each of Point72 Asset Management, Point72 Capital Advisors, and 4,378 sharesMr. Cohen disclaims beneficial ownership of restricted stock.any of such shares. The principal address of BMLPoint72 Asset Management, Point72 Capital Advisors, and Mr. LeonardCohen is 65 E. Cedar—Suite 2, Zionsville, Indiana 46077. Mr. Leonard controls the voting and/or dispositive power for the shares held72 Cummings Point Road, Stamford, Connecticut 06902. All information regarding ownership by BML as the managing member of BML’s sole general partner.Point72 Asset Management, Point72 Capital Advisors and Steven A. Cohen is based solely on a Form13G/A filed by Point72 Asset Management, Point72 Capital Advisors and Steven A. Cohen on February 14, 2018 and a Form 4 filed by such reporting persons on January 16, 2018 and a Form 13D filed by such reporting persons on March 20, 2018.

(2)

Represents an aggregate of 1,340,1751,347,709 shares held by the Cuttyhunk Master Portfolio (“Cuttyhunk”), Tristan Partners, L.P. (“Tristan”), the Tristan Offshore Fund Ltd. (“Tristan Offshore”), Tonga Partners, L.P. (“Tonga”), and sundry separately managed accounts, overfunds to which J. Carlo Cannell has investment discretion (the “Cannell SMAs” and collectively with Cuttyhunk, Tonga, Tristan and Tristan Offshore, the “Investment Vehicles”). Cannell Capital LLC acts as the investment adviser to Tonga, Tristan, Tristan Offshore, the Cannell SMAs, and the investor sub-advisor for Cuttyhunk. Mr. Cannell, the sole managing member of Cannell Capital LLC, possesses the sole power to vote and to direct the disposition of the shares held by the Investment Vehicles. The principal address of Mr. Cannell is 245 Meriwether Circle, Alta, WY 83414. All of the foregoing ownership information is based solely on a Form 13D/A filed on February 17, 2016.

(3)

Represents 1,285,044 shares held by Dimensional Fund Advisors LP (“Dimensional”), with respect to which serves as investment advisor. Dimensional has sole dispositive power and includes 1,240,241over the shares to which Dimensional hasreported and sole voting power.power over 1,284,427 shares. The principal address of Dimensional is Building One, 6300 Bee Cave Road, Austin, Texas 78746. All information regarding ownership by Dimensional is based solely on a Form13G/A filed by Dimensional on February 9, 2016.2018. Dimensional disclaims beneficial ownership of any such shares.

(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 48,227876,475 shares held by BlackRock, Inc. (“BlackRock”), with respect to which BlackRock has sole dispositive power and includes 858,451 shares over which BlackRock has sole voting power. The principal address of BlackRock is 55 East 52nd Street, New York, New York 10055. All information regarding ownership by BlackRock is based solely on a Form13G/A filed by BlackRock on January 29, 2018.

(5)

Represents 116,973 shares of common stock, 120,439162,464 restricted shares, and vested options to purchase 123,249306,754 shares with exercise prices ranging from $6.56 to $20.80.

(5)

(6)

Represents 118,555 125,840 shares of common stock, 13,77428,771 restricted shares, and vested options to purchase 53,31667,469 shares with exercise prices ranging from $5.11 to $20.80.

(6)(7)

Represents 100107,872 shares of common stock and 3,6118,879 restricted shares.

(8)

Represents 9,585 shares of common stock and 7,477 restricted shares owned directly by Ms. Clark, 37,402 shares owned indirectly through her husband (over which Ms. Clark has no voting or dispositive power), and 140,44693,631 shares held by Smart Stuff, Inc. Ms. Clark controls the voting and/or dispositive power for the shares held by Smart Stuff, Inc. as its president and sole stockholder. Smart Stuff, Inc. was issued membership interests in the predecessor entity to the Company in 1997 in conjunction with the original founding of the business by Ms. Clark. 


(7)

Represents 115,396 shares of common stock and 4,962 restricted shares.

(8)

Represents 97,620 shares of common stockand 4,378 restricted shares.

(9)

Represents 36,067 12,626 shares of common stock, (including 300 shares held in a custodial account for Mr. Gould’s son) and 4,378 restricted shares.

(10)

Represents 2,901 shares of common stock, 18,87841,434 restricted shares, and vested options to purchase 3,26626,674 shares with exercise prices ranging from $11.43 to $20.80.

(11)(10)

Represents 1,839 10,499 shares of common stock, 16,78441,434 restricted shares, and vested options to purchase 2,82223,342 shares with exercise prices ranging from $12.64$11.43 to $20.80.

(12)(11)

Represents 1,198 6,796 shares of common stock, 11,40040,278 restricted shares, and vested options to purchase 1,97416,088 shares with an exercise price ofprices ranging from $13.69 to $20.47.

(13)

(12)

Represents 5,49515,747 shares of common stock and 4,3787,477 restricted shares.

(13)

Represents 7,068 shares of common stock and 7,477 restricted shares.

(14)

Represents 1,1945,918 restricted shares.

(15)

Represents 3,479 restricted shares.

(16)

Represents 2,310 restricted shares.

(17)

Includes all Directors and executive officers who own a total of 220,532357,398 shares of restricted stock and vested options to purchase a total of 191,073438,327 shares of common stock.stock held by all Directors and executive officers in the aggregate. Shares owned by Mr.Ebsworth,Mr. Ebsworth, a Director Emeritus, are not included.

(16)(18)

No Director or Named Executive Officer beneficially owns shares that are pledged as security.

(17)(19)

Share numbers include restricted stock granted to Named Executive Officers on March 7, 2016 15, 2018 at a closing price of $13.69.$8.60 per share. 

 

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 IIIII Directors — Terms Expiring in 20162018and Standing for Re-Election

Robert L. Dixon, Jr., 62,was appointed to our Board of Directors on February 12, 2018.  Mr. Dixon has been the owner of The RD Factor, Inc., a digital and information technology consulting business, since December 2016. Mr. Dixon served as Global Chief Information Officer and Senior Vice President of PepsiCo, Inc., a publicly traded global food and beverage company, from November 2007 until April 2016 and as Senior Vice President until December 2016. Prior to joining PepsiCo, Mr. Dixon held various positions with The Procter & Gamble Company, a publicly traded consumer household products company, since 1977, including Vice President of Global Business Services from 2005 until 2007. Mr. Dixon serves on the Board of Directors of Anthem, Inc., a publicly traded health benefits company, the Georgia Institute of Technology College of Engineering Advisory Board, and the President’s Advisory Board of the Georgia Institute of Technology. He previously served on the CIO Advisory Board for International Business Machines Corporation. Mr. Dixon holds a Bachelor of Science Degree in Electrical Engineering from The Georgia Institute of Technology. He and his wife reside in McKinney, Texas. 

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.


Mary Lou Fiala,Michael Shaffer, 64,55, was appointed to the Board of Directors in 2014. Since 2012, Mr. Shaffer has been Executive Vice President and Chief Operating & Financial Officer for PVH Corp., a publicly traded branded lifestyle apparel company, where he oversees the retail division, treasury, corporate finance, information technology, and logistics services. Mr. Shaffer joined PVH Corp. in 1990 as a Financial Budget Manager and has held numerous positions in the wholesale and retail divisions of PVH Corp. including, Director of Accounting Operations, Division Controller, Vice President and Controller, Senior Vice President of Retail Operations, and Executive Vice President of Finance. In 2006, Mr. Shaffer was named Executive Vice President, Chief Financial Officer before being promoted to his current role. Prior to joining PVH Corp., Mr. Shaffer served as a Senior Auditor at Deloitte & Touche LLP. He has more than 25 years of diverse financial management and executive leadership experience in the apparel and financial industries. He serves on the Advisory Board of FM Global and is a member of the Board of Directors of HealthCare Chaplaincy Network and Beat The Streets. Mr. Shaffer holds a Bachelor of Arts in Accounting from George Washington University, and he is a Certified Public Accountant. Mr. Shaffer resides in New Jersey with his wife.

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. SheMr. Peterson is President and Chief Executive Officer of Hollis Enterprises LLC, a human resources consulting firm, which he founded in 2004 following his retirement from Wal-Mart Stores, Inc. (“Walmart”). Mr. Peterson served as the Executive Vice-President of People at Walmart from 1994 to 2004. Prior to joining Walmart in 1994, Mr. Peterson spent 16 years with Venture Stores, with his last role being the Senior Vice-President of Human Resources. Mr. Peterson holds an undergraduate degree in English literature and a master’s degree in Industrial Relations from Loyola University of Chicago. Mr. Peterson serves on the Board of Directors of J.B. Hunt Transportation, Inc., a publicly traded trucking and transportation company, and Cracker Barrel Old Country Store, Inc., a publicly traded owner of stores and restaurants. He served as the Chairman of the Board of Trustees of Northwest Arkansas Community College. He formerly served on the Executive Committee of the National Association for the Advancement of Colored People (“NAACP”) and also served as Treasurer of the NAACP Special Contributions Fund. Mr. Peterson resides in Hilton Head, South Carolina with his wife. They have a daughter and a son.

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 Chairman in November 2011. Ms. Fiala is the Co-Chairman of LOFT Unlimited, a personal financial and business consulting firm in Jacksonville, Florida. Ms. FialaChairman.  He served as PresidentChief Executive Officer and Director of Kate Spade & Company, a formerly publicly traded operator of global, multichannel lifestyle brands, from February 2014 until August 2017 when the company was acquired by Coach, Inc.  From October 2010 until February 2014, he was Chief Executive Officer of Kate Spade New York, a division of Fifth & Pacific Companies, Inc.  Mr. Leavitt also served as Co-President and Chief Operating Officer of Regency Centers Corporation (“Regency”), a publicly tradedKate Spade, LLC from April 2008 through October 2010. Prior to joining Kate Spade, LLC, Mr. Leavitt was President of Global Retail at Link Theory Holdings, where he had total responsibility for merchandising, operations, planning, allocation and real estate investment trust (a “REIT”) specializing in the ownership and operation of grocery anchored shopping centers, from 1999 to 2008. She was named Vice Chairman and Chief Operating Officer in January 2009, a position she served in until December 2009. In her role as Vice Chairman and Chief Operating Officer, Ms. Fiala was responsible for the operational managementTheory and Helmut Lang retail businesses. Previously, Mr. Leavitt spent several years at Diesel, S.p.A., an Italian retail clothing company, having most recently served as Executive Vice President of Regency’s retail centers nationwide. She is a current memberSales and Retail. Mr. Leavitt also spent 16 years at Polo Ralph Lauren, where he held positions of increasing responsibility, the last being Executive Vice President of Retail Concepts. Mr. Leavitt serves on the Board of Directors of RegencyEuromarket Designs, Inc., doing business as Crate and General Growth Properties, Inc.,Barrel, a company that owns and operates housewares, furniture and home accessories stores in North America and through franchisees internationally. He also serves on the Board of Directors of The Roundabout Theater Company, a nonprofit theatre company.   Mr. Leavitt holds a Bachelor of Arts from Franklin & Marshall College. Mr. Leavitt resides in New York.

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 shopping mall real estate investment trust. She served ascompany, allows him to provide to our Board of Directors insights and perspectives regarding strategic planning, leadership, stockholder relations, business operations, brand management, marketing, and business development.

Anne Parducci, 56, was appointed to the 2008-2009 ChairmanBoard of Directors on September 12, 2017. Since 2016, Ms. Parducci is the International CouncilPrincipal and Founder of Shopping Centers and wasCaribouKids, LLC, an independent directorproduction company focused on acquisitions and content development of CNL Growth Properties,family targeted brands across direct-to-video, broadcast, streaming and social platforms. Prior to founding CaribouKids, Ms. Parducci served from 2004 to 2016 as Executive Vice President, Marketing of Lions Gate Entertainment Corporation, a publicly traded entertainment and media company, where she led brand management, consumer marketing, creative services, public relations and licensing across digital and physical home media distribution platforms. From 1989 to 2003, Ms. Parducci held several positions of increased responsibility at Mattel, Inc. (f/k/a Global Growth Trust, Inc.), an international non-traded SEC reporting real estate investment trust, until August 2014. Ms. Fiala earnedincluding Senior Vice President, Business Development from 2002 to 2003, Senior Vice President of Worldwide Marketing, Girls Division from 2000 to 2002, and Senior Vice President of Marketing, Barbie from 1998 to 2000. She holds a Bachelor of Science degreeBusiness Administration from University of Miami University.and a Master of Business Administration from University of Southern California, Marshall School of Management. Ms. Fiala andParducci resides in California with her husband reside in Colorado. They haveand three children and two grandchildren.children.

Throughout her career, Ms. FialaParducci has gained extensive operational experience in business operations, content development, marketing and business development in the retail industry. Prior to working with Regency, Ms. Fiala served in senior management positions at Security Capital Global Strategic Group Incorporated, Macy’s East/Federated Department Stores,entertainment and Henri Bendel.toy industries. Her prior leadership roles, including those in the retail industry,entertainment and toy industries, allow her to provide to our Board of Directors insight on management and operational initiatives.

Timothy Kilpin, 55, was appointed to our Board of Directors on February 23, 2016. He most recently served as President/Chief Commercial Officer for Mattel, Inc., where he directed all aspects of the company’s global Sales and Marketing operations. Prior to his most recent Commercial role, Mr. Kilpin served as Executive Vice President of the Boys & Girls Global Brands for Mattel, leading Marketing, Product Design & Development, Consumer Products, Content Development and Packaging. Before rejoining Mattel in 2003, Mr. Kilpin served as Executive Vice President at The Walt Disney Company, overseeing the creation and development of global cross-category franchise plans for Disney’s stable of content and characters, including Mickey Mouse, Winnie the Pooh, and Disney Princesses. He has served as Board Member of the Toy Industry Association, Licensing Industry Merchandisers’ Association, the Make-A-Wish International Foundation, and the Children Affected by AIDS Foundation. Mr. Kilpin is a graduate of the University of Wisconsin-Whitewater.

Mr. Kilpin has extensive operational, sales and marketing experience in the entertainment and toy industries. With this experience, he brings to our Board of Directors highly relevant and valuable insights and perspectives regarding strategic planning,business operations, brand building,management, licensing, marketing, licensing,business development and operations.public relations.

 


 

Class III Directors — Term Expiring in 2016and Not Standing for Re-Election

James M. Gould, 67, has served on the Board of Directors since our conversion to a corporation in 2000, and he served on an advisory board to our predecessor entity prior to that time. Mr. Gould is a Managing General Partner of The Walnut Group, a group of affiliated private equity funds, and he has held that position since 1994. He is also the Managing Member of Gould Venture Group V, LLC, a diversified financial concern, and is the owner of Management One, LLC, a firm he founded that represents professional athletes. He serves on several private company boards, including Wild Things, Inc., a designer of high-end outdoor apparel, The O’Gara Group, Inc. a global products and services company, and Adspace Networks, a mall digital media network. He has served on numerous charitable boards, including the Korey Stringer Institute, where he serves as co-founder and Chairman, Blue Legacy International, Prevent Child Abuse America, Camp BrightLight in partnership with the YMCA and the Cincinnati Ballet Company. Mr. Gould has a bachelor’s degree in history from the University of Wisconsin. He resides in Cincinnati, Ohio.

As Managing General Partner of a group of private equity funds, Mr. Gould has extensive financial, merchandising, corporate governance and traditional and multi-channel marketing experience. As an executive producer of motion pictures and as a sports agent, he also has extensive entertainment experience and brand expertise. With this background, Mr. Gould brings to Build-A-Bear Workshop highly relevant and valuable insights in the areas of financing, merchandising, marketing, and development of our entertainment properties and strategic opportunities.

Class I Directors — Terms Expiring in 20172020

Maxine Clark, 67,69, founded the Company in 1997 and served as our Chief Executive Bear until June 2013. She was our President from our inception in 1997 to April 2004, and served as Chairman of our Board of Directors from April 2000 until November 2011. She currently serves as Chief Executive Officer of the Clark-Fox Family Foundation. Prior to founding Build-A-Bear Workshop, Ms. Clark was the President of Payless ShoeSource, Inc. (“Payless”) from 1992 until 1996. Before joining Payless, Ms. Clark spent over 19 years in various divisions of The May Department Stores Company in areas including merchandise development, merchandise planning, merchandise research, marketing and product development. Ms. Clark serves on the Board of Directors of Foot Locker, Inc., and formerly served on the Board of Directors of J. C. Penney Company, Inc., both publicly traded retail companies. She servesformerly served on the Board of Directors of The Gymboree Corporation, a formerly publicly reporting retail company, and she currently serves on the Board of Advisors of Lewis & Clark Ventures, a St. Louis-based private equity firm. Ms. Clark is a member of the Board of Trustees and the Executive Committee of Washington University in St. Louis, serves on the national Board of Directors of the Public Broadcasting Service, and serves on the BoardBoards of Directors of Barnes-Jewish Hospital in St. Louis, the Goldfarb School of Nursing at Barnes-Jewish College, the St. Louis Regional Educational and Public Television Commission (KETC/Channel 9 Public Television), and is a member of KIPP St. Louis Public Charter School Advisory Board of Trustees.. She is also a Managing Partner of Prosper Women’s Capital, a fund created to invest in women ownedwomen-owned businesses in the St. Louis area. Ms. Clark is Past Chair of Teach for America-St. Louis and a past member of its national Board of Trustees. She is a past trustee of the International Council of Shopping Centers and a member of the Committee of 200, an organization for women entrepreneurs around the world. Ms. Clark has a bachelor’s degree from the University of Georgia, an Honorary Doctor of Laws from Saint Louis University and an honorary Doctor of Humane Letters—Education from the University of Missouri, St. Louis.

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, 52,54, was appointed to the Board of Directors on June 3, 2013 in connection with her employment as Chief Executive Officer and Chief President Bear of the Company. From January 2010 through May 2013, Ms. John served as President of Stride Rite Children’s Group LLC, a division of Wolverine World Wide, Inc., which designs and markets footwear for children. From 2002 through 2009, she held positions of broadened portfolio and increased responsibility at Hasbro, Inc., a multinational toy and board game company, including as General Manager & Senior Vice President of its U.S. Toy Division from 2006 to 2008 and General Manager & Senior Vice President of its Global Preschool unit from June 2008 through 2009. Ms. John also founded and served as Chief Executive Officer of Checkerboard Toys, served as Vice President, U.S. Toy Division with VTech Industries, Inc., and served in a range of roles at Mattel, Inc. She started her career in advertising, overseeing accounts such as Hershey’s and the Snickers/M&M Mars business. Ms. John serves on the Board of Directors of Jack in the Box Inc., a publicly traded restaurant company. Ms. John holds a Bachelor of Science Degree in Communications from the University of Tennessee at Knoxville and a Master of Business Administration from Columbia University. She resides in St. Louis, Missouri with her husband and three children.

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,, 37, 39, was appointed to our Board of Directors on February 23, 2016. AsSince January 2018, Ms. Personette has been Chief Operations Officer of Refinery29, a digital-media and entertainment company for young women. From 2014 through 2017, she served as the Vice President of Facebook’sFacebook, Inc.’s Global Business Marketing team, Ms. Personette is responsible for providing clients with innovative and effective marketing solutions for their businesses. Prior to rejoining Facebook in 2014, she led Universal McCann’sMcCann Worldwide, Inc.’s agency operations in the United States where, as President of the creative media agency, she oversaw strategy, analytics, custom content, cross-channel buying and planning, and business development. Before joining Universal McCann in 2013, Ms. Personette built and led Facebook’s Global Agency team where from 2011 to 2013 she led the combination of creative and strategic thinking behind turning cross‐cross‐channel campaigns into those fueled by digital insights. She previously served as senior vice presidentSenior Vice President at Starcom Mediavest Group, leading the Mars Wrigley agency of record. Ms. Personette was recently inducted into the American Advertising Federation’s Advertising Hall of Achievement and, in 2014, she was named one of Advertising Age magazine’s top “40 Under 40” marketing stars. In addition to being a Rotary International Paul Harris Fellow, she serves on the Boards of Advertising Women of New York, Northwestern University’s Regional Board, the Reisenbach Foundation, the Angelight Foundation, and the Social Impact for the Ad Council. She is basedresides in Facebook’s New York office,Jersey, holds a degree from Northwestern University, and is a proud wife and mother of two.

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.

   


    

Class II Directors — Terms Expiring in 2018Director Emeritus

Braden Leonard, 45, has served on the Board of Directors since 2011. Since 2004, Mr. Leonard has been the Managing Member and founder of BML Capital Management, LLC (“BML”), which is the General Partner of BML Investment Partners, L.P., a concentrated value oriented investment fund. At BML, he is responsible for research, capital allocation, and all investment decisions. Prior to founding BML, Mr. Leonard was an equity trader for a proprietary trading firm, ETG, LLC from 1995 to 2003. Mr. Leonard has a bachelor’s degree in accounting from Purdue University. He resides in Zionsville, Indiana with his wife and three daughters.

As an equity trader and later as Managing Member of the General Partner of an investment fund, Mr. Leonard obtained extensive expertise in financial analysis and investments. He brings to the Build-A-Bear Workshop Board of Directors insights on financing issues and capital allocation. As a representative of the Company’s largest stockholder, he also provides insights from an institutional shareholder perspective.

Coleman Peterson, 66, has served on the Board of Directors since 2005. Mr. Peterson is President and Chief Executive Officer of Hollis Enterprises LLC, a human resources consulting firm, which he founded in 2004 following his retirement from Wal-Mart Stores, Inc. (“Walmart”). Mr. Peterson served as the Executive Vice-President of People at Walmart from 1994 to 2004. Prior to joining Walmart in 1994, Mr. Peterson spent 16 years with Venture Stores, with his last role being the Senior Vice-President of Human Resources. Mr. Peterson holds an undergraduate degree in English literature and a master’s degree in Industrial Relations from Loyola University of Chicago. Mr. Peterson serves on the Board of Directors of J.B. Hunt Transportation, Inc., a publicly traded trucking and transportation company, and Cracker Barrel Old Country Store, Inc., a publicly traded owner of stores and restaurants. He served as the Chairman of the Board of Trustees of Northwest Arkansas Community College. He formerly served on the Executive Committee of the National Association for the Advancement of Colored People (“NAACP”) and also served as Treasurer of the NAACP Special Contributions Fund. Mr. Peterson resides in Hilton Head, South Carolina with his wife. They have a daughter and a son.

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.

Michael Shaffer, 53, was appointed to the Board of Directors at the regular Board meeting on May 8, 2014. Since 2012, Mr. Shaffer has been Executive Vice President and Chief Operating & Financial Officer for PVH Corp., a publicly traded branded lifestyle apparel company, where he oversees the retail division, treasury, corporate finance, information technology, and logistics services. Mr. Shaffer joined PVH Corp. in 1990 as a Financial Budget Manager and has held numerous positions in the wholesale and retail divisions of PVH Corp. including, Director of Accounting Operations, Division Controller, Vice President and Controller, Senior Vice President of Retail Operations, and Executive Vice President of Finance. In 2006 Mike was named Executive Vice President, Chief Financial Officer before being promoted to his current role. Prior to joining PVH Corp., Mr. Shaffer served as a Senior Auditor at Deloitte & Touche LLP. He has more than 25 years of diverse financial management and executive leadership experience in the apparel and financial industries. He serves on the Advisory Board of FM Global and is a member of the Board of Directors of HealthCare Chaplaincy Network and Beat The Streets. Mr. Shaffer holds a Bachelor of Arts in Accounting from George Washington University and he is a Certified Public Accountant in the State of New Jersey. Mr. Shaffer resides in metropolitan New York with his wife.

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 also 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.


Director Emeritus

Barney Ebsworth, 81,83, has served on the Board of Directors from 2000 until he became a Director Emeritus after our 2006 annual meeting of stockholders, and he served on an advisory board to our predecessor entity prior to that time. Mr. Ebsworth is the founder and Chief Executive Officer of Windsor, Inc., formed in 1979 for the purpose of providing financing for venture capital, real estate and other investments. Mr. Ebsworth was the founder and Chief Executive Officer of INTRAV, a general agency formed in 1959 for the purpose of selling travel to individuals and businesses, until the company was sold in 1999. Mr. Ebsworth also founded Royal Cruise Line and Clipper Cruise Line in 1972 and 1981, respectively. He was the Chairman of those companies from inception to the time they were sold in 1986 and 1997, respectively. Mr. Ebsworth is also a Trustee of the Seattle Art Museum and a member of the Trustees Council and Co-Chairman of the Collectors Committee of the National Gallery of Art, Washington D.C. Mr. Ebsworth has a bachelor’s degree from Washington University in St. Louis. He has one daughter, one granddaughter and one grandson.

 

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 cash compensation paid in calendar 2015. Cash retainers are paid quarterly in arrears on the Tuesday following the completion of a fiscal quarter.annual Board, committee Chair and Non-Executive Chairman annual retainers. See the “Director“Director Compensation Policies” Sectionsection below for an explanation of the annual cash retainer.retainers.

(2)

In May 2015, Ms.FialaSeptember 2017, Ms. Parducci received a grant of 4,9625,918 shares of the Company’s common stock with a grant date fair value of $84,304 and Messrs. Gould, Leonard,$52,374 in connection with her appointment to the Board. In May 2017, Mr. Peterson and Shaffer each received a grant of 4,3788,879 shares of the Company’s common stock with a grant date fair value of $74,382. In July 2015, Ms.$95,005 and Mses. Clark and Personette and Messrs. Kilpin, Leonard and Shaffer each received a grant of 3,6117,477 shares of the Company’s common stock with a grant date fair value of $64,492.$80,004. These amounts represent the aggregate number of restricted shares outstanding for each Director as of the end of fiscal 2015, January 2, 2016.December 30, 2017, except for Mr. Leonard whose shares were forfeited upon his resignation from the Board in September 2017. See Note 11 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended January 2, 2016December 30, 2017 for a discussion of the assumptions used in the valuation of awards.

(3)

Under the terms of her retirement agreement, Maxine Clark, the Company’s Chief Executive Bear through June 3, 2013, did not receive separate compensation for her services as a Director of the Company during the two-year period that she received separation pay from the Company. Under the retirement agreement, during the 24-month period following her retirement, Ms. Clark received an aggregate of $1,318,400 salary continuation, plus the amount the Company had been paying toward her coverage under the Company’s welfare benefit plans. The amount shown as All Other Compensation for Ms. Clark represents payments made to her during 2015 of $354,954 for salary continuation and $3,289 related to welfare benefits. The amounts shown as Fees Earned or Paid in Cash and Stock Awards represent separation for services as a Director of the Company during 2015 for the period after separation payments ceased.

(4)(3)

Mr. Kilpin and resigned from the Board of Directors effective January 4, 2018 at which time he forfeited the stock award he received in 2017.

(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. Personette were appointed asParducci was appointed to the Board of Directors in February 2016.effective September 17, 2017.

(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 2013-2015.2013 through 2017.

(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 PlanPlan plus a $53,250 discretionary bonus awarded by the Committee to offset the impact of unbudgeted international expansion and litigation reserve costs.

    


 

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 2013-2015.2013 through 2017.

(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 Long-Term Performance Based Cash Incentive Programlong-term performance-based cash incentive program plus a $32,809 discretionary bonus awarded by the Committee to offset the impact of unbudgeted management transition costs.

(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 performance:performance: Compensation should correlate in large part with our overall financial performance.

•

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:

 

bebe stores, inc.

dELiA*s,Duluth Holdings Inc.

Leapfrog Enterprises Inc.Trans World Entertainment Corporation

Body Central Corp.

Destination MaternityChristopher & Banks Corporation

Shoe Carnival Inc.

Books-A-Million, Inc.

Five Below, Inc.

Vera Bradley Inc.

CacheCiti Trends Inc.

Francesca’s Holdings Corp.

Wet Seal Inc.Vince Holding Corp.

ChristopherDave & Banks Corporation

Hancock Fabrics, Inc.

Zumiez Inc.

Citi TrendsBuster’s Entertainment, Inc.

Kirkland’s, Inc.

Weyco Group, Inc.

Destination Maternity Corporation

Shoe Carnival Inc.

 Zumiez Inc. 

Destination XL Group, Inc.

Tilly’s, Inc.

 

CEC EntertainmentLeapfrog Enterprises Inc., Coldwater Creek, and Pacific Sunwear California, Inc., and Sport Chalet, Inc. were eliminated from the Company’s peer group for the 20152017 analysis. Francesca’sLeapfrog was acquired in 2016, and Pacific Sunwear filed for bankruptcy in 2016. Duluth Holdings Corp. wasInc. and Weyco Group, Inc. were added to the 20152017 peer group.group because they met the Committee’s selection criteria described above. The Company still competes with much larger companies for executive talent, but the Committee believes that the 20152017 peer group is more appropriate in most instances for compensation benchmarking purposes. In addition to the peer group information, Meridian also provided size-adjusted, retail industry survey market data provided by Equilar, Inc.


In January 2015,2017, the Committee reviewed a report from Meridian comparing each element of total direct compensation for the Company’s NEOs against market data. The Committee observed that total target direct compensation levels for 20142016 were within a reasonable range of the market 50th percentile for our executive team.

While market data is an important measuring tool, it is only one of four principal considerations under the Company’sCompany’s compensation philosophy.

 

20157 Base Salary

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 eachthe NEO’s are established in their employment agreements. These salaries or minimum salaries and the amount of any increase over minimums are determined by the Committee based on its subjective evaluation of a variety of factors, including:

the nature and responsibility of the position;

the impact, contribution, expertise and experience of the individual executive;

competitive market information regarding salaries to the extent available and relevant;

the importance of retaining the individual along with the competitiveness of the market for the individual executive’s talent and services; and

•

the nature and responsibility of the position;

•

the impact, contribution, expertise and experience of the individual executive;

•

competitive market information regarding salaries to the extent available and relevant;

•

the importance of retaining the individual along with the competitiveness of the market for the individual executive’s talent and services; and

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 2015,2017, the Committee considered base salary increases for the NEOs other than Mr. Hurt who was hired in April 2015.NEOs. The Committee undertook an annual performance review of each of the other NEOs. Those NEOs each prepared a self-evaluation. The Chief Executive Officer completed evaluations of the NEOs other than herself and discussed those evaluations with, and received input from, the Committee. The Chief Executive Officer was primarily responsible for providing feedback to the other NEOs regarding their performance. In the case of the Chief Executive Officer, the Non-Executive Chairman presented the CommitteeCommittee’s and the Board’s feedback to the Chief Executive Officer on her self-evaluation.

Following completion of these reviews of each individual’s 2014individual’s 2016 performance, and with particular weighting on the Company’s 20142016 financial results that reflected a late year decline in retail traffic, the Committee approved no base salary adjustmentsincreases for the NEOs in 2014 as shown in the table below.from 2016 to 2017.   

 

Name

 

2014 Base

Salary

  

2015 Base

Salary

  

Percent

Increase

 

Sharon John

 $634,375  $675,000   6.4

%

Voin Todorovic

  300,000   321,000   7.0

%

Jennifer Kretchmar

  375,000   386,300   3.0

%

Eric Fencl

  306,000   315,200   3.0

%

Upon joining the Company, based on peer data provided by Meridian, base salary for Mr. Hurt was set at an annual rate of $380,000 for 2015.

20157 Bonus Plan

The Committee continued the use of a cash bonus plan in 20152017 for the NEOs, granting potential cash bonuses pursuant to the Build-A-Bear Workshop, Inc. 20152017 Bonus Plan (the “2015“2017 Bonus Plan”) for the NEOs only if the Company achieved certain financial performance levels. Thus, consistent with all four elements of its compensation philosophy, the Committee aligned the NEOs’ 20152017 cash bonuses completely with the interests of our stockholders.

The 2017 Bonus Plan was developed in accordance with the terms of the 2004 Incentive Plan.

On March 17, 2015, based on peer data provided by Meridian, 14, 2017, the Committee established the 20152017 performance objectives for the range of bonuses to be paid to the Company’s NEOs and the target bonus awards expressed as a percentage of eligible base salary (“Base Bonus Payout”). The 20152017 base bonus calculation for each NEO was determined by multiplying the Base Bonus Payout by the officer’s eligible base salary as defined above, according to the following schedule (“Base Bonus Calculation”):, which was unchanged from 2016:

 


 

Name

 

Base Bonus

Payout

 

Sharon John

  100

%

Voin Todorovic

  50

%

Jennifer Kretchmar

  50

%

J. Christopher Hurt

50

%

Eric Fencl

  50

%

 

Upon joining the Company in April 2015, based on peer data provided by Meridian, Mr. Hurt’s Base Bonus Payout was set at 50% for 2015.

For the 20152017 Bonus Plan, the Committee focused the performance goals on a single performance metric—pre-tax income. The cash bonus, if any, to be paid to each respective NEO was to be calculated based on the pre-tax income goals described in the table below.

 

Achievement Level

 

Pre-tax

Income

  

Percentage of

Base Bonus

Calculation

  

Consolidated

Pre-Tax

Income

  

Percentage of

Base Bonus

Calculation

 

Threshold

 $17,700,000   50

%

 $13,000,000   25

%

Target

  20,200,000   100

%

  16,000,000   100

%

Maximum

  24,000,000   200

%

  20,000,000   200

%

 

The 20152017 Bonus Plan provided for bonus payouts only if the Company’s 20152017 consolidated pre-tax income (after providing for any bonus expense) exceeded the threshold amount. Under the 20152017 Bonus Plan, consolidated pre-tax income results that fell between any of the achievement levels set forth in the table above would be interpolated in accordance with the methodology set forth in the 20152017 Bonus Plan, in the sole discretion of the Committee. This discretion included the ability to reduce the otherwise applicable percentage of Base Bonus Calculation for each achievement level, but the Committee did not have the discretion to increase the amount of compensation payable above the maximum percentage of Base Bonus Calculation for each achievement level.

In March 2016,2018, the Committee determined that the Company exceededmet the threshold 20152017 consolidated pre-tax income level for a bonus payout under the 20152017 Bonus Plan andbut did not attain the Committee elected to approve bonuses for 2015 performance. Despitetarget level. In accordance with the fact that fiscal 2015 was only 52 weeks compared to fiscal 2014 which was 53 weeks, the Company’s pre-tax income of $17.9 million was an improvement over the Company’s consolidated pre-tax income of $16 million in 2014. However, the Company planned even a more substantial pre-tax income improvement so the results were between the threshold and target levels of the 2015 Bonus Plan. Based on the interpolation between those levels as defined in the 20152017 Bonus Plan, the Committee interpolated between the two payout amounts and approved bonus payouts of 45% of target for NEOs equal to 62% of each executive’s 2015 Base Bonus Calculation in the amounts set forth below: 

Name

 

2015Bonus Plan

Payout

 

Sharon John

 $412,688 

Voin Todorovic

  98,008 

Jennifer Kretchmar

  118,945 

J. Christopher Hurt

  117,800 

Eric Fencl

  97,054 

Additionally, the Company also paid Mr. Hurt a signing bonus of $35,000 which he would have had to repay2017 performance. Please refer to the Company if he had voluntarily terminated his employment without good reason or if he were terminatedSummary Compensation Table for bonuses earned by the Company for cause inNEOs under the first year of his employment.2017 Bonus Plan.

 

In March 2016, the Committee took note of the fact that the Company had incurred approximately $800,000 of unbudgeted costs in 2015 related to international expansion and a reserve that was established with respect to pending litigation. While these actions are in the long-term best interests of the Company, the unbudgeted expenses had the effect of decreasing 2015 Bonus Plan payouts by approximately 8% of each plan participant’s 2015 Base Bonus Calculation. As a result, the Committee awarded discretionary bonus payouts to all participants in the 2015 Bonus Plan in the amount of the difference between each participant’s 2015 Bonus Plan Payout and the amount that the payout would have been had these unbudgeted costs not been incurred. The Committee awarded such discretionary bonuses to each NEO in the following amounts:

Name

 

2015

Discretionary

Bonus Payout

 

Sharon John

 $53,250 

Voin Todorovic

  12,646 

Jennifer Kretchmar

  15,348 

J. Christopher Hurt

  15,200 

Eric Fencl

  12,523 


20157 Long-Term Incentive Program

The objective of the Company’sCompany’s long-term incentive program is to provide a long-term retention incentive for the NEOs and to align their interests directly with those of our stockholders by way of stock ownership.

Long-term incentive compensation awards made in fiscal 2017 were made under the terms of the 2004 Incentive Plan. Under the Stock2004 Incentive Plan, the Committee has the discretion to determine whether equity awards will be granted to NEOs and if so, the number of shares subject to each award. The Stock2004 Incentive Plan allows the Committee to grant the following types of awards, in its discretion: options, stock appreciation rights, cash-based awards or other stock-based awards, such as common stock, restricted stock and other awards valued in whole or in part by reference to the fair market value of the Company’s common stock. In most instances, these long-term grants vest over a multi-year basis.

The CommitteeCommittee meets in March of every year to determine the recipients of annual long-term incentive awards and to grant such awards by formal action. The practice of granting long-term incentive awards in March by Committee action applies uniformly to the NEOs and other employees of the Company and, with rare exceptions, is the only practice employed by the Company in connection with the granting of equity awards. The Committee does, however, have the discretion to make grants whenever it deems it appropriate in the best interests of the Company. Additionally, pursuant to the Stock Incentive Plan, employees other than executive officers who are hired or promoted by the Company after the March Committee meeting may receive grants from the Chief Executive Officer or Chief OperatingHuman Resources Officer at the levels previously approved by the Committee, at the date of such hire or promotion.

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 releaserelease such information for the purpose of affecting the value of executive compensation. The exercise price of stock subject to options awarded under the Stock2004 Incentive Plan is the fair market value of the Company’s common stock on the date of grant. Under the terms of the Stock2004 Incentive Plan, the fair market value of the stock is the closing salessale price of the Company’s common stock on the date of grant as reported by the NYSE.

Historically, the Company has granted stock-based compensation in the form of eithereither (1) time-based restricted stock; (2) stock options; (3) performance-based restricted stock; or (4) a combination of these vehicles.


 

In January, February and March 2015,2017, the Committee reviewed a report of updated market data and industry compensation trends developed by Meridian. The Committee also reviewed the Company’s recent financial and share price performance and the availability of shares to grant under our Stock2004 Incentive Plan. For 2015,In March 2017, the Committee approved a grant ofallocated the annual long-term incentive compensation to the NEOs as follows: time-based restricted stock (40%(60% of grant value), non-qualified stock options (10% of grant value), and three-year performance-based restricted stock (30% of grant value), and non-qualified. The performance-based restricted stock options (30% of grant value) for NEOs.awards will be earned if pre-established three-year pre-tax income growth goals are attained. The design and mix were structured to maintain a strong emphasis on performance.

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 from market data provided in the Meridian study; (2) grant levels required to bring the executives’NEOs’ total target direct compensation at or near the median of total compensation of market data;similarly situated executives within our peer group; and (3) grant levels required to retain key individual employee contributors. In establishing the size of the 20152017 award pool, the Committee considered the amount of stock and options outstanding, the expense associated with the grants and the potentially dilutive effect on stockholders, in addition to the overall compensation policy of the Company to place emphasis on incentive compensation over base salaries. After reviewing these considerations, the Committee determined to increase NEOs’the target annual grant levels over 2016 levels for certain NEOs. The target grant levels over 2014for 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 to 2017.

On March 17, 2015, 14, 2017, the Committee approved the following 20152017 long-term incentive awards to the NEOs under the Stock2004 Incentive Plan:

 

Name

 

Number of

Sharesof Time-

Based

Restricted Stock

  

Number of Time-

Based Non-

Qualified Stock

Options

  

Target Number

of Performance-

Based

Restricted Stock

 

Sharon John

  14,904   22,029   11,178 

Voin Todorovic

  3,942   5,826   2,958 

Jennifer Kretchmar

  3,942   5,826   2,958 

Eric Fencl

  3,366   4,974   2,523 

Long-term incentive grants to Mr. Hurt were made in conjunction with his appointment as an executive officer and are described in further detail in the Section below entitled “Compensation Arrangements with Certain Executive Officers.”

Name

 

Number of

Shares of Time-

Based

Restricted Stock

  

Number of Time-

Based Non-

Qualified Stock

Options

  

Target Number of Shares

of Performance-

Based

Restricted Stock

 

Sharon John

  84,747   29,673   42,373 

Voin Todorovic

  20,340   7,122   10,169 

Jennifer Kretchmar

  20,340   7,122   10,169 

J. Christopher Hurt

  20,340   7,122   10,169 

Eric Fencl

  13,560   4,749   6,780 

 

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 the first anniversary of the date of grant. The performance-based restricted stock was subject to the achievement of the Company’s fiscal 2015 pre-tax income goals. The performance-based restricted stock was structured so that any awards earned from the achievement of the established pre-tax income goals would vest at the rate of one-third per year over three years from the date of grant, beginning on the first anniversary of the date of grant. This vesting schedule was established to align with the current vesting schedules of our stock options and time-based restricted stock.

March 31, 2018.

The number of shares of 20152017 three-year performance-based restricted stock if any,shares that could have beenwill be earned by each NEO, wasif any, will be calculated by multiplying the target number of shares awarded to such executive officer set forth above by the average of the applicable Percentage of Target ValueNumber of Three-Year Performance-Based Restricted Stock Earned Calculation set forth below for fiscal 2015 pre-tax income.

Fiscal 2015 Performance-BasedRestricted Stock Payout

Achievement Level

 

Pre-tax

Income

  

Percentage of

Target Number

of Performance-

Based

Restricted Stock

Earned

Calculation

 

Threshold

 $17,700,000   50

%

Target

  20,200,000   100

%

Maximum

  24,000,000   200

%

In March 2016, the Committee determined that the Company exceeded the threshold 2015 pre-tax income level for a payout of the 2015 performance-based restricted stock. Despite the fact that fiscal 2015 was only 52 weeks compared to fiscal 2014 which was 53 weeks,based on the Company’s pre-tax incomeachievement of $17.9 million was an improvement over the Company’s consolidated pre-tax income of $16.0 million in 2014. However, the Company planned an even more substantialgoals for fiscal 2017, fiscal 2018 and fiscal 2019. The pre-tax income improvement soachievement level amounts were set for fiscal 2017. For fiscal 2018 and fiscal 2019, the pre-tax income achievement level amounts will be based upon a pre-established percentage of growth over actual pre-tax income results were betweenfor the threshold and target levels of the 2015 performance-based restricted stock. Basedprior fiscal year. Any shares that are earned will vest on the interpolation between those levels as defined in the performance-based restricted stock grant agreements, the Committee determined that the NEOs earned 62% of each executive’s 2015 Target Number ofApril 30, 2020.

Fiscal 2017-2019 Performance-Based Restricted Stock as set forth below: 

Payout

Consolidated Pre-Tax IncomeName Achievement Level

 

Percentage of

Target Number

of Shares ofThree-Year 2015 Performance-Performance-

Based

Restricted Stock

Earned

Calculation

 

Sharon JohnBelow Threshold

  6,9300

%

Voin TodorovicThreshold

  1,83325

%

Jennifer KretchmarTarget

  1,833100

%

J. Christopher HurtMaximum

  1,863200

Eric Fencl%

1,563

The earned 2015 performance-based restricted stock payouts will vest and be paid at the rate of one-third per year over three years from the date of grant, beginning on the first anniversary of the date of grant. In the event the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under securities laws, the Committee may require reimbursement or forfeiture of share of performance-based restricted stock which was earned during the three-year period preceding the date on which the Company is required to prepare an accounting restatement.


      

Pursuant to the terms of the Stock2004 Incentive Plan, the Committee may, in its sole discretion, provide for the following upon a change in control: (1) accelerated vesting of any outstanding award; (2) termination of an award in exchange for the payment of cash; and/or (3) issuance of substitute awards. The 20152017 equity award agreements for the NEOs and other participants each containedcontain a clause subjecting the grants to accelerated vesting upon a change in control. The Committee believes that this change in control protection is prevalent among other companies in the peer group, and the value of the stock grants as a retention tool would be diminished if this protection were not included in the grant terms.

 

In addition to the awards described above, on March 17, 2015, the Committee granted Ms. John a three-year performance-based restricted stock award under the Plan. Utilizing market data compiled by the Committee’s compensation consultant, the Committee awarded Ms. John 50,000 target shares of three-year performance-based restricted stock. The number of three-year performance-based restricted stock shares, if any, that will be earned by Ms. John will be calculated by multiplying the 50,000 target shares awarded by the applicable Percentage of Target Value of Three-Year Performance-Based Restricted Stock Earned Calculation set forth below for cumulative consolidated pre-tax income for fiscal 2015 through fiscal 2017.

Fiscal 2015-2017 Performance-BasedRestricted Stock Payout for CEO

Achievement Level

 

Cumulative

Consolidated

Pre-tax

Income for

Fiscal 2015,

2016, and 2017

  

Percentage of

Target Value of

Performance-

Based

Restricted Stock

Earned

Calculation

 

Threshold

 $81,000,000   50

%

Target

  90,000,000   100

%

Maximum

  107,000,000   200

%

In determining the size and structure of the award, the Committee considered the Company’s strong performance in 2014, the CEO’s performance in 2014, a review of the CEO’s current stock holdings, and the CEO’s current equity award grant values versus the Company’s peer group. The Committee determined to structure the special award as a cumulative three-year performance equity award to reinforce the CEO’s focus on the long-term growth of the Company and the share price.

Upon receipt of her three-year performance-based restricted stock award, Ms. John entered into a Build-A-Bear Workshop, Inc. Restricted Stock Agreement (the “Three-Year Agreement”) with the Company. The Three-Year Agreement provides that the three-year performance-based restricted stock that is earned, if any, will vest on March 31, 2018. Vesting is accelerated upon a change of control or, in certain circumstances, upon the holder’s death or termination of employment with the Company due to disability. In the event the Company is required to prepare an accounting restatement due to the Company’s material noncompliance with any financial reporting requirement under securities laws, the Committee may require reimbursement or forfeiture of share of three-year performance-based restricted stock which was earned during the three-year period preceding the date on which the Company is required to prepare an accounting restatement.


 

Further information regarding the 20152017 grants of long-term incentive awards made to NEOs can be found in the 20152017 Grants of Plan-Based Awards Table.

 

20120168 Long-Term Incentive Program 

To furtherAt our 2017 Annual Meeting of Stockholders, our stockholders approved the 2017 Incentive Plan to replace the 2004 Incentive Plan. Incentive compensation awards made by the Company in fiscal 2018, including long-term incentive compensation awards, were granted under the 2017 Incentive Plan.

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 thetheir interests of executive officersdirectly with those of our stockholders,stockholders. The Committee continued to apply these objectives in March 2016 the Committee redesigned themaking its annual long-term incentive program for allgrants to the NEOs to include three-year performance-based restricted stock awards which will be earned if pre-established three-year revenue goals are attained. The Committee selected revenue as the performance metric for these three-year performance-based restricted stock awards in support the Company’s stated strategy to evolve to sustained profitable growth. The value of these awards are 50% of each NEO’s base salary, as adjusted by the Committee in March 2016, for NEOs other than the Chief Executive Officer, whose grant was 85,000 shares. For 2016, the remainder of the value of long-term incentive awards is allocated 50% to time-based restricted stock and 50% to nonqualified stock options. As a result, the overall mix of long-term incentive awards in 2016 is more heavily weighted to performance-based restricted stock than it was in 2015.


Compensation Arrangements with Certain Named Executive Officers

Employment, Confidentiality and Noncompete Agreement with Mr. Hurt

The Company and Mr. Hurt entered into an Employment, Confidentiality and Noncompete Agreement effective as of April 15, 2015 in connection with his appointment as Chief Operations Officer. The agreement has an initial term of three years from April 15, 2015 and renews from year-to-year thereafter. We may terminate the agreement prior to the end of the term upon death, disability, for cause (as defined in the agreement) or without cause. Mr. Hurt may terminate the agreement for good reason (as defined in the agreement). If we terminate Mr. Hurt’s employment without cause or if Mr. Hurt terminates his employment for good reason, the Company would be obligated to continue his base salary for a period of 12 months after his termination (18 months if such termination occurs within 12 months after a change of control (as defined in the agreement)), and for the period that welfare benefits are continued under COBRA, we will continue to pay the Company’s portion of the medical, dental, and vision plan premiums. As compensation for his services, Mr. Hurt will receive an annual base salary at a rate not less than $380,000 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. If the Company meets or exceeds certain performance objectives determined annually by the Committee, Mr. Hurt will receive a target annual bonus of not less than 50% of his earned annual base salary, payable in either cash, stock, stock options or a combination thereof. Mr. Hurt’s bonus for 2015 performance was based on his annual salary of $380,000. The agreement also provides that for the term of the agreement and for one year thereafter, subject to specified limited exceptions, Mr. Hurt may not become employed by or interested directly or indirectly in or associated with the Company’s competitors who are located within the United States or within any country where the Company has established a retail presence. In the event of his termination due to death, disability, or by the Company without cause, or if Mr. Hurt terminates his employment for good reason, Mr. Hurt or his beneficiaries or estate, will still be entitled to a bonus for such year prorated based on the number of full weeks he was employed during the year, subject to achievement of the bonus criteria. If any payments under the Agreement or another arrangement would become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the payments will be reduced to the greatest amount payable that would not trigger such excise tax.

We also agreed to pay Mr. Hurt a signing bonus of $35,000 which Mr. Hurt has agreed to repay if he voluntarily terminates his employment without good reason or if he is terminated by the Company for cause (as defined in the agreement) during the first year of employment. In addition, we agreed to issue long-term equity incentive compensation with a value of $205,000, 40%2018 in the form of time-based vested restricted stock, 30%both time- and performance-based compensation. In addition to these annual grants, on March 15, 2018, the Committee granted the NEOs an additional business transformation incentive grant under the Plan to further align the Company’s compensation program with its initiatives to return to long-term profitable growth. This additional long-term incentive award was designed to increase management focus on total revenue growth in the face of continuing traditional mall traffic challenges and encourage share price appreciation, profit growth, and retention. The Committee allocated the total 2018 long-term incentive compensation to the Chief Executive Officer in the form of performance-based restricted stock at target,equity (50% of total grant value) and 30%time-based equity (50% of total grant value). The details of our 2018 long-term incentive program for NEOs will be disclosed fully in the form of non-qualified stock options to acquire shares of Company common stock at an exercise price equal to the closing price of the Company’s common stock on April 15, 2015.our 2019 proxy statement.

 

Employment, Confidentiality and Noncompete Agreement with Mr.Fencl

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 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. The Amended and Restated Agreement has an initial term of three years from April 14, 2015 and renews from year-to-year thereafter. We may terminate the agreement prior to the end of the term upon death, disability, for cause (as defined in the agreement) or without cause. Mr. Fencl may terminate the agreement for good reason (as defined in the agreement). If we terminate Mr. Fencl’s employment without cause or if Mr. Fencl terminates his employment for good reason, the Company would be obligated to continue his base salary for a period of 12 months after his termination (18 months if such termination occurs within 12 months after a change of control (as defined in the agreement)), and for the period that welfare benefits are continued under COBRA, the Company will continue to pay the Company’s portion of the medical, dental, and vision plan premiums. As compensation for his services, Mr. Fencl will receive an annual base salary at a rate not less than $315,200 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. If the Company meets or exceeds certain performance objectives determined annually by the Committee, Mr. Fencl will receive a target annual bonus of not less than 50% of his earned annual base salary, payable in either cash, stock, stock options or a combination thereof. The agreement also provides that for the term of the agreement and for one year thereafter, subject to specified limited exceptions, Mr. Fencl may not become employed by or interested directly or indirectly in or associated with the Company’s competitors who are located within the United States or within any country where the Company has established a retail presence. In the event of his termination due to death, disability, or by the Company without cause, or if Mr. Fencl terminates his employment for good reason, Mr. Fencl or his beneficiaries or estate, will still be entitled to a bonus for such year prorated based on the number of full weeks he was employed during the year, subject to achievement of the bonus criteria. If any payments under the agreement or another arrangement would become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the payments will be reduced to the greatest amount payable that would not trigger such excise tax.


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.

 

PoliPolicycy for Adjustment or Recovery of Awards in the Event of Accounting Restatement

The 20152017 Bonus Plan provides that in the event of a restatement impacting consolidated pre-tax income, the Company would recover from the NEO the applicable amount which should not have been paid based on the restatement, plus interest. In addition, the 2017 award agreements for performance-based restricted stock also provide that in the event of a restatement impacting pre-tax income, the NEO would reimburse the Company or forfeit any shares that should not have been earned or vested based on the restatement.

 

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.

 

Position

 

Position

Multiple of 

Base Salary

 

Chief Executive Officer

 

 

Five times (5X)

 

All Other NEOs

 

 

One time (1X)

 

 

The executives have three years to reach the applicable minimum holding requirement and, thereafter, may not sell shares if such sale would cause the executive’sexecutive’s holdings to fall below the minimum holding requirement. The withholding of shares to satisfy income tax withholding associated with a stock option exercise or restricted stock vesting or to pay the exercise price in connection with a stock option exercise is not considered a sale of Company stock for the purposes of these guidelines. Each of the NEOs complied with these guidelines in 2015.2017. The Committee will continue to monitor stock ownership guidelines and levels for the NEOs on an annual basis.

 

RetiremRetirementent and Other Post-Termination Benefits

We have entered into employment agreementsEmployment Agreements with our NEOs that provide for a continuation of certain post-employment benefits, to the extent permitted under the applicable employment benefit plan(s). Such benefits plans are the same for all employees (except for the long-term disability insurance offor which the Company pays 100% of the premiums for senior level employees, including the NEOs, as discussed below). The employment agreementsEmployment Agreements for the NEOs also provide for certain payments to be made to themthe NEOs if their employment is terminated under certain circumstances.circumstances, including a change in control of the Company. See “Executive Employment and Severance Agreements” for a discussion of such terms of our NEOs’ employment agreements.

Change in Control Severance Policy

We do not currently maintain any change in control severance plans or policies. Therefore, none of our NEOs will receive any severance payments solely as a result of a change in control of the Company. See the section titled “Executive Employment and Severance Agreements” for a complete description of the circumstances under which our NEOs would be paid severance.

 


 

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 diningdining or other facilities, nor does the Company have programs for providing personal-benefit perquisites to executives, such as permanent lodging or defraying the cost of personal entertainment or family travel. With the exception of disability insurance (as noted below), the Company’s health care and other insurance programs are the same for all eligible employees, including the NEOs.

 

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 opportunityopportunity to make salary reduction contributions to the plan on a pre-tax basis. The Company has the ability to make discretionary matching contributions and discretionary profit sharing contributions to such plan. In 2015,2017, the Company matched 35%50% of the participants’ 20142016 contributions of up to 6% of the participant’s salary. The Company matching contribution is not fully vested until the participant has been employed by the Company for five years.

 

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 2015,2017, the Company matched 35%50% of the participants’ 20142016 contributions of up to 6% of the participant’s salary, divided between the 401(k) plan and the 401(k) mirror plan. The Company matching contribution is not fully vested until the participant has been employed by the Company for five years. None ofOf the NEOs, only Mr. Hurt participated in this plan during 2015.2017. Because Mr. Hurt did not make contributions in 2016, however, he did not receive a Company matching contribution in 2017.

  

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) provides thatas in effect prior to and during 2017, certain performance-based compensation is not subject to this deductibilitydeductibility limit. TheHistorically, the Company attemptshas attempted to structure its compensation arrangements to permit deductibility under Code Section 162(m), unless the benefit of such deductibility iswas outweighed by the need for flexibility or the attainment of other corporate objectives. Since corporate objectives may not always be consistent with the requirements for full deductibility, the Committee, is prepared, if it deemsdeemed appropriate, to enterentered into compensation arrangements under which payments may not be deductible under Code Section 162(m). Thus,

The applicable performance-based deductibility isexception to Code Section 162(m) has been repealed for tax years beginning in 2018 under the Tax Cuts and Jobs Act. As a result, compensation paid to our NEOs in excess of $1 million will not the sole factor used by the Committee in ascertaining appropriate levels or modes of compensation. In any event, there is no guarantee that be deductible unless it qualifies for transition relief applicable to performance-based compensation paid pursuant to a written binding contract that was in effect as of November 2, 2017. Despite the NEOs will qualify forCommittee originally structuring certain performance-based compensation in a manner that would have made it exempt from the deductibility exception provided by Code Section 162(m).  deduction limit, no assurance can be given that such compensation will, in fact, be fully deductible because of the ambiguities and uncertainties as to the interpretation and scope of the tax reform transition rules. Furthermore, the Committee expects in the future to approve additional compensation that will not be deductible for income tax purposes.

  


Accounting Considerations

The Committee has taken certain accountingaccounting rules and consequences into consideration when determining the type of equity awards that executive officers should receive as part of the Company’s long-term incentive plan component of compensation packages. The vesting of time-based restricted stock and stock option grants made to the Company’s executive officers and employees and the associated Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”) expense recognition is tied to the passage of time rather than conditioned upon fulfillment of certain performance targets. Performance-based restricted stock is earned and FASB ASC Topic 718 expense recognition is based on the fulfillment of specified performance targets and upon the passage of time.

    


 

COMPENSATION AND DEVELOPMENT COMMITTEE REPORT

The Company’sCompany’s Compensation and Development Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by the Compensation and Development Committee of the BoardBoard of Directors:

 

 

Coleman Peterson, Chairman

Mary Lou FialaCraig Leavitt

 

James M. Gould

Timothy KilpinAnne Parducci

 

Sarah Personette

Michael Shaffer

 

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 2015,all of fiscal 2017, the Compensation and Development Committee was comprised of Coleman Peterson (Chair), Timothy Kilpin and Sarah Personette. Mary Lou Fiala also served on the Committee until her resignation from the Board in May 2017, and James M. Gould, noneAnne Parducci joined the Committee in September 2017 when she was appointed to the Board. None of whomthe members of the Compensation and Development Committee during fiscal 2017 were employees or current or former officers of the Company, nor had any relationship with the Company required to be disclosed as transactions with related persons pursuant to Item 404(a) of Regulation S-K. No executive of the Company served on the compensation committee or board of any company that employed any member of the Company’s Compensation and Development Committee or Board of Directors.


 

20157 SUMMARY COMPENSATION TABLE

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, 2016, January 3, 2015, and December 28, 2013.The2016.The Company cautions that the amounts reported in the Stock Awards and Option Awards columns may not represent the amounts that the Named Executive Officers will actually realize from the awards. Whether, and to what extent, a Named Executive Officer realizes value will depend on the Company’s stock price when restricted stock vests or the stock option is exercised and on continued employment.

 

Name and Principal Position

Year 

Salary

($)

  

Bonus

($)(1)

  

Stock

Awards

($)(2)

  

Option

Awards

($)(3)

  

Non-Equity

Incentive Plan

Compensation

($)(4)

  

All Other

Compensation

($)(5)

  

Total

($)

 
                             

Sharon John (6)

2015

 $665,625  $53,250  $454,154  $250,846  $412,688  $3,443  $1,840,006 

Chief Executive Officer and Chief President Bear

2014

  656,250   -   288,756   153,549   1,168,913   166,311   2,433,779 

2013

  336,538   168,867   656,289   770,317   628,086   117,744   2,677,841                   

Non-Equity

         
                                       

Stock

  

Option

  

Incentive Plan

  

All Other

     

Voin Todorovic(7)

2015

  316,154   12,646   120,140   66,341   98,008   105,384   718,673 
  

Salary

  

Bonus

  

Awards

  

Awards

  

Compensation

  

Compensation

  

Total

 
Name and Principal PositionYear 

($)

  

($)

  

($)(1)

  

($)(2)

  

($)(3)

  

($)(4)

  

($)

 

Sharon John

2017

  700,000   -   750,011   124,057   315,000   5,367   1,894,435 

President and

2016

  694,231   -   625,003   663,492   -   5,362   1,988,088 
Chief Executive Officer

2015

  665,625   53,250   454,154   250,846   412,688   3,443   1,840,006 

Voin Todorovic

2017

  350,000   -   180,009   29,776   78,750   4,953   643,488 

Chief Financial Officer

2014

  86,538   20,000   37,503   20,011   77,913   23,015   264,980 

2016

  343,308   -   149,988   159,226   -   4,926   657,448 
                             

2015

  316,154   12,646   120,140   66,341   98,008   105,384   718,673 

Jennifer Kretchmar(8)

2017

  409,500   -   180,009   29,776   92,138   5,003   716,426 

Chief Merchandising Officer

2016

  404,146   -   149,988   159,226   -   1,003   714,363 
                             

2015

  383,692   15,348   120,140   66,341   118,945   817   705,283 

Jennifer Kretchmar(8)

2015

  383,692   15,348   120,140   66,341   118,945   817   705,283 

Chief Product and

2014

  142,788   25,000   76,067   27,129   120,649   16,864   408,497 

Innovation Bear

                             
                             

J. Christopher Hurt(9)

2015

  267,461   50,200   120,709   64,002   117,800   110,720   730,892 

J. Christopher Hurt (5)

2017

  400,000   -   180,009   29,776   90,000   4,995   704,780 

Chief Operations Officer

                             

2016

  395,385   -   102,511   108,812   -   995   607,703 
                             
                             

2015

  267,461   50,200   120,709   64,002   117,800   110,720   730,892 

Eric Fencl

2015

  313,077   12,523   102,550   56,639   97,054   3,510   585,353 

2017

  327,800   -   120,006   19,855   73,755   4,911   546,326 

Chief Administrative Officer,

2014

  316,154   -   68,688   36,530   234,785   2,278   658,435 

2016

  324,892   -   87,520   92,885   -   4,894   510,191 

General Counsel

2013

  300,000   15,614   34,340   -   173,979   1,871   525,804 

2015

  313,077   12,523   102,550   56,639   97,054   3,510   585,353 

and Secretary

                                                          

 

(1)

Bonus amounts for 2015 represent discretionary bonuses paid to each Named Executive Officer plus a signing bonus of $35,000 paid to Mr. Hurt.


(2)(1)

The amounts appearing in the Stock Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for restricted stock awards granted in fiscal 2015,2017, fiscal 2014,2016, and fiscal 2013.2015. In fiscal 2017, fiscal 2016 and fiscal 2015, the grants consisted of both performance-basedtime-based restricted stock and time-basedperformance-based restricted stock. In fiscal 2014 and 2013, all of the stock awards were in the formRecipients of time-based restricted stock. Because the Company’s pre-tax income results were between threshold and target for fiscal 2015, 62% of the target performance-based restricted shares were earned and the remainder were forfeited in March 2016. The recipientsstock have the right to vote and receive dividends as to all unvested shares ofshares. All time-based restricted stock but did not have such rights with respect to performance-based restricted stock that was not earned. The time-based restricted stock grants in 2015 and 2014 vestreported vests at the rate of one-third per year over three years, from the date of grant, beginning on the first anniversaryMarch 31 of the dateyear following the year of grant. The time-based restricted stock grants in 2013 vest at the rateRecipients of 25% per year over four years from the date of grant, beginning on the first anniversary of the date of grant. The performance-based restricted stock grantsdo not have dividend and voting rights unless and until applicable performance criteria is satisfied and the awards vest. Performance-based restricted stock awarded in 2015 that werefiscal 2017 will be earned based on pre-established pre-tax income growth objectives for fiscal 2017, 2018 and 2019 and if earned, will vest on April 30, 2020. The reported grant date fair value of all performance-based awards is based on assumed results at the ratetarget achievement level per the instructions to Item 402(c) of one-third per year over three years fromRegulation S-K. See the date of grant, beginning on the first anniversary of the date of grant. See 20152017 Grants of Plan-Based Awards Table. See also Note 11 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended January 2, 2016December 30, 2017 for a discussion of the assumptions used in the valuation of awards. The grant date fair value of the performance-based restricted stock presented is based on the achievement of 62% of the target shares per the instructions to Item 402(c) of Regulation S-K. The grant date fair value of the performance-based restricted stock awards granted in 2017 for each Named Executive Officer assuming that the maximum level of performance conditions wasis achieved is as follows: Ms. John—$465,005; Mr.Todorovic—750,002; Mr. Todorovic—$123,053;179,991; Ms. Kretchmar—$123,053;179,991; Mr. Hurt—$124,925;179,991; and Mr. Fencl—$75,005.120,006.

(3)(2)

The amounts appearing in the Option Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for options granted in fiscal 2015, 20142017, 2016 and 2013.2015. See Note 11 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended January 2, 2016December 31, 2017 for a discussion of the assumptions used in the valuation of the awards. The exercise price of the options granted to Mses. John and Kretchmar and Messrs. Fencl and Todorovic in fiscal 20152017 is equal to the closing price of the Company’s common stock on March 17, 2015,14, 2017, the date of grant, and the option vestsoptions vest at the rate of one-third per year over three years from the grant date. The exercise price of the option granted to Mr. Hurt in fiscal 2015 is equal to the closing price of the Company’s common stockdate beginning on April 15, 2015, the date of grant, and the option vests at the rate of one-third per year over three years from the grant date.March 31, 2018.

(4)(3)

The amounts appearing in the Non-Equity Incentive Plan Compensation column for 20152017 represent the 20152017 Bonus Plan Payoutpayout for each of the NEOs.

(5)(4)

“All Other Compensation” includes relocation reimbursement, the Company’s contribution to the 401(k) plan, and payment by the Company of long-term disability and life insurance premiums for the benefit of the Named Executive Officers. For fiscal 2015, relocation reimbursements were as follows: Mr. Todorovic—$104,603; and Mr. Hurt—$110,165. For fiscal 2015,2017, Company contributions to our 401(k) plan were as follows: Ms. John—$2,477;3,975; Mr. Todorovic—$3,975; Ms. Kretchmar—$3,975; Mr. Hurt—$3,975; and Mr. Fencl—$2,730.3,975. For fiscal 2015,2017, Company-paid premiums for long-term disability insurance were as follows: Ms. John—$662;804; Mr. Todorovic—$612;684; Ms. Kretchmar—$612;684; Mr. Hurt—$407;684; and Mr. Fencl—$612.660. For fiscal 2015,2017, Company-paid premiums for life insurance were as follows: Ms. John—$304;588; Mr. Todorovic—$169;294; Ms. Kretchmar—$205;344; Mr. Hurt—$148;336; and Mr. Fencl—$168.276.

(6)

Ms. John’s employment with the Company commenced June 3, 2013.

(7)(5)

Mr. Todorovic’s employment with the Company commenced September 15, 2014.

(8)

Ms. Kretchmar’s employment with the Company commenced August 12, 2014.

(9)

Mr. Hurt’sHurt’s employment with the Company commenced April 15, 2015.

 


 

20157 GRANTS OF PLAN-BASED AWARDS

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 January 2, 2016.December 30, 2017. All awards were granted pursuant to the StockCompany’s 2004 Incentive Plan.

 

   

Estimated Future Payouts Under Non-

Equity Incentive Plan Awards

  

Estimated Future Payouts Under

Equity Incentive Plan Awards 

  

All Other

Stock Awards: Number of Shares ofStock or

  

All Other Option Awards: Number of Securities Underlying

  

Exercise

or Base

Price of Option

  

Grant Date Fair Value

of Stock and

 
 

Grant Date

 

Threshold
($)

  

Target

($)

  Maximum($)  Threshold
(#)		  

Target

(#)

  Maximum
(#)		  

 Units
(#)

  

Options

(#)

  

Awards

($/Sh)

  Option Awards 
                                          

Sharon John

3/17/15(1)

 $332,813  $665,625  $1,331,250                             
 

3/17/15(2)

              5,589   11,178   22,356                 
 

3/17/15(3)

              25,000   50,000   100,000                 
 

3/17/15(4)

                          14,904           310,003 
 

3/17/15(5)

                              22,029  $20.80   250,846 
                                          
                                          

Voin Todorovic

3/17/15(1)

  79,038   158,077   316,154                             
 

3/17/15(2)

              1,479   2,958   5,916                 
 

3/17/15(4)

                          3,942           81,994 
 

3/17/15(5)

                              5,826   20.80   66,341 
                                          
                                          

Jennifer Kretchmar

3/17/15(1)

  95,923   191,846   383,692                             
 

3/17/15(2)

              1,479   2,958   5,916                 
 

3/17/15(4)

                          3,942           81,994 
 

3/17/15(5)

                              5,826   20.80   66,341 
                                          
                                          

J. Christopher Hurt

4/15/15(1)

  95,000   190,000   380,000                             
 

4/15/15(6)

              1,502   3,003   6,006                 
 

4/15/15(7)

                          4,005           81,982 
 

4/15/15(5)

                              5,922   20.47   64,002 
                                          
                                          

Eric Fencl

3/17/15(1)

  78,269   156,538   313,077                             
 

3/17/15(2)

              1,262   2,523   5,046                 
 

3/17/15(4)

                          3,366           70,013 
 

3/17/15(5)

                              4,974   20.80   56,639 
                                          


   

Estimated Possible Payouts Under

Non-Equity Incentive Plan Awards

 

Estimated Future Payouts Under

Equity Incentive Plan Awards

 

All Other

Stock Awards:

Number of

Shares of

Stock

 

All Other

Option

 Awards:

Number of

Securities

Underlying

 

Exercise

or Base

Price of

Option

 

Grant Date

Fair Value of

Stock and

 
   

Threshold

 

Target

 

Maximum

 

Threshold

 

Target

 

Maximum

 or Units Options Awards Option 
Name

Grant Date

 

($)

 

($)

 

($)

 

(#)

 

(#)

 

(#)

 

(#)

 

(#)

 

($/Sh)

 Awards 
                                 

Sharon John

03/14/17 (1)

 $175,000  700,000  1,400,000                      
 

03/14/17 (2)

           10,593  42,373  84,746           375,001 
 

03/14/17 (3)

                    84,747        750,011 
 

03/14/17 (4)

                       29,673 $8.85  124,057 
                                 

Voin Todorovic

03/14/17 (1)

  87,500  350,000  700,000                      
 

03/14/17 (2)

           2,542  10,169  20,338           89,996 
 

03/14/17 (3)

                    20,340        180,009 
 

03/14/17 (4)

                       7,122  8.85  29,776 
                                 

Jennifer Kretchmar

03/14/17 (1)

  102,375  409,500  819,000                      
 

03/14/17 (2)

           2,542  10,169  20,338           89,996 
 

03/14/17 (3)

                    20,340        180,009 
 

03/14/17 (4)

                       7,122  8.85  29,776 
                                 

J. Christopher Hurt

03/14/17 (1)

  100,000  400,000  800,000                      
 

03/14/17 (2)

           2,542  10,169  20,338           89,996 
 

03/14/17 (3)

                    20,340        180,009 
 

03/14/17 (4)

                       7,122  8.85  29,776 
                                 

Eric Fencl

03/14/17 (1)

  81,950  327,800  655,600                      
 

03/14/17 (2)

           1,695  6,780  13,560           60,003 
 

03/14/17 (3)

                    13,560        120,006 
 

03/14/17 (4)

                       4,749  8.85  19,855 

 

(1)

AmountsThe amounts disclosed represent the range of possible cash payouts for fiscal 20152017 awards under the 20152017 Bonus Plan. This chart reflects the threshold, target and maximum bonus amounts payable under the 20152017 Bonus Plan performance year if pre-established financial targets would have been met. The amounts listed above were calculated based on the threshold, target, and maximum percentages as a percentage of the executive’s 2017 base salary paid in 2015.salary. As noted in the Sectionsection entitled “Compensation Discussion and Analysis”, the Company’s pre-tax income for fiscal 20152017 was above the threshold level and below the target level and, therefore, the payout was interpolated between the two payout amounts.

(2)

These restricted stock awards wereare performance-based, and shares earnedearned will vest in equal installments over three years beginning on the first anniversary of the grant dateApril 30, 2020 to the extent the Company achieved certain 2015achieves pre-established pre-tax income resultsgrowth objectives for 2017, 2018 and 2019, as discussed in the “Compensation Discussion and Analysis”. Because the Company’s threshold pre-tax income for fiscal 2015 exceeded the threshold but was less than target, 62% of the target shares were earned and the remaining shares were forfeited in March 2016. Prior to the date the shares were earned or forfeited, the Named Executive Officers did section. The NEOs do not have the right to vote or receive dividends onwith respect to any of shares of performance-based restricted stock.stock unless and until the shares are earned and vest. The fair market value of the restricted stock on the date of grant was $20.80$8.85 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(3)

This restricted stock award was performance-based718 and shares earned vest tois based on the extent the Company achieves certain cumulative pre-tax income results for 2015, 2016 and 2017 as discussed in the “Compensation Discussion and Analysis”. Prior to the date the shares are earned or forfeited, Ms. John does not have the right to vote or receive dividends on anytarget number of shares of performance-based restricted stock. The fair market value of the restricted stock on the date of grant was $12.24 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(4)(3)

These restricted stock awards are subject to time-based vesting only and will vest in equal installments over three years beginning on the first anniversary of the grant date. ExecutivesMarch 31, 2018. The NEOs have the right to vote and receive dividends as to all unvested shares of time-based restricted stock. The fair market value of the restricted stock on the date of grant was $20.80$8.85 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(5)(4)

These non-qualified stock options are subject to time-based vesting only and will vest in equal annual installments over three years beginning on the first anniversary of the grant date.March 31, 2018. The stock option exercise price is the closing price of the Company’s stock on the date of grant. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(6)

These restricted stock awards were performance-based and shares earned vest in equal installments over three years beginning on the first anniversary of the grant date to the extent the Company achieved certain 2015 pre-tax income results as discussed in the “Compensation Discussion and Analysis”. Because the Company’s threshold pre-tax income for fiscal 2015 exceeded the threshold but was less than target, 62% of the target shares were earned and the remaining shares were forfeited in March 2016. Prior to the date the shares were earned or forfeited, Mr. Hurt did not have the right to vote or receive dividends on any of shares of performance-based restricted stock. The fair market value of the restricted stock on the date of grant was $20.47 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.


(7)

These restricted stock awards are subject to time-based vesting only and will vest in equal installments over three years beginning on the first anniversary of the grant date. Mr. Hurt has the right to vote and receive dividends as to all unvested shares of time-based restricted stock. The fair market value of the restricted stock on the date of grant was $20.47 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(8)

These stock options are subject to time-based vesting only and will vest in equal installments over three years beginning on the first anniversary of the grant date. The stock option exercise price is the closing price of the Company’s stock on the date of grant. The grant date fair value is computed in accordance with FASB ASC Topic 718.

 


OUTSTANDING EQUITY AWARDS AT 20157 FISCAL YEAR-END

The following table discloses information regarding outstanding awards issued under the Company’s Stock2004 Incentive Plan, as amended, as of the fiscal year end of January 2, 2016.December 30, 2017.

 

 

Option Awards

  

Stock Awards

  

Option Awards

 

Stock Awards

 
 

Number of Securities Underlying Unexercised Options

  

Number of Securities Underlying Unexercised Options

  

Option Exercise

  

Option

  

Number of Shares of Stock That Have Not

  

Market Value of Shares of Stock That Have Not

  

Equity Incentive Plan Awards: Number of Unearned Shares That Have Not

  

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares of Stock That Have Not

  

Number of

Securities

Underlying

Unexercised

Options

  

Number of

Securities

Underlying

Unexercised

Options

  

Option

Exercise

 Option 

Number of

Shares of

Stock That

Have Not

  

Market Value

of Shares of

Stock That

Have Not

  

Equity

Incentive

Plan Awards:

Number of

Unearned

Shares That

Have Not

  

Equity

Incentive

Plan Awards:

Market or

Payout Value

of Unearned

Shares of

Stock That

Have Not

 
 

(#)

  

(#)

  Price  Expiration  Vested  Vested  Vested  Vested  

(#)

  

(#)

  Price Expiration Vested  Vested  Vested  Vested 
Name 

Exercisable

  

Unexercisable(1)

  

($)

  Date  

(#)(2)

  

($)(3)

  

(#)

  

($)

  

Exercisable

  

Unexercisable(1)

  ($) Date 

(#)(2)

  

($)(3)

  

(#)

  

($)

 

Sharon John

  195,512   - (4) $6.56 

6/3/2023

                
                                  27,225   - (5)  9.43 

3/18/2024

                

Sharon John

  97,756   97,756(6) $6.56  

6/3/2023

                 
  14,686   7,343 (5)  20.80 

3/17/2025

                
  9,075   18,150(7)  9.43  

3/18/2024

                   30,994   61,988 (5)  13.69 

3/7/2026

                
  -   22,029(7)  20.80  

3/17/2025

            11,178(4) $  136,819(4)  -   29,673 (6)  8.85 

3/14/2027

                
                  85,340  $1,044,561   50,000(5)  612,000(5)                       85,000 (7)  782,000 (7)
                                               122,461  $1,147,893   42,373 (8)  389,832 (8)

Voin Todorovic

  880   1,760(7)  12.64  

9/15/2024

                   2,640   - (5)  12.64 

9/15/2024

                
  -   5,826(7)  20.80  

3/17/2025

                   3,884   1,942 (5)  20.80 

3/17/2025

                
                  5,920   72,460   2,958(4)  36,206(4)  7,438   14,876 (5)  13.69 

3/7/2026

                
                                  -   7,122 (6)  8.85 

3/14/2027

                
                       12,783 (7)  117,604 (7)
               29,569   277,656   10,169 (8)  93,555 (8)

Jennifer Kretchmar

  1,324   2,648(7)  11.43  

8/12/2024

                   3,972   - (5)  11.43 

8/12/2024

                
  -   5,826(7)  20.80  

3/17/2025

                   3,884   1,942 (5)  20.80 

3/17/2025

                
                  8,014   98,091   2,958(4)  36,206(4)  7,438   14,876 (5)  13.69 

3/7/2026

                
                                      7,122 (6)  8.85 

3/14/2027

                
                       14,956 (7)  137,595 (7)
               29,569   277,656   10,169 (8)  93,555 (8)

J. Christopher Hurt

  -   5,922(7)  20.47  

3/15/2025

                   3,948   1,974 (5)  20.47 

3/15/2025

                
  5,083   10,166 (5)  13.69 

3/7/2026

                
  -   7,122 (6)  8.85 

3/14/2027

                
                  4,005   49,021   3,003(4)  36,757(4)                       14,609 (7)  134,403 (7)
                                               27,288   256,579   10,169 (8)  93,555 (8)

Eric Fencl

  19,596   -   5.11  

3/17/2019

                   19,596   - (4)  5.11 

3/17/2019

                
  17,176   -   6.59  

3/23/2020

                   17,176   - (4)  6.59 

3/23/2020

                
  10,568   -   6.21  

3/22/2021

                   10,568   - (4)  6.21 

3/22/2021

                
  2,159   4,318(7)  9.43  

3/18/2024

                   6,477   - (5)  9.43 

3/18/2024

                
  -   4,974(7)  20.80  

3/15/2025

                   3,316   1,658 (5)  20.80 

3/17/2025

                
                  15,019   183,833   2,523(4)  30,882(4)  4,339   8,678 (5)  13.69 

3/7/2026

                
  -   4,749 (6)  8.85 

3/14/2027

                
                       11,972   110,142 
               19,465   183,871   6,780   62,376 

 

(1)

The amounts appearing in this column represent the total number of time-based non-qualified stock options that have not vested as of January 2, 2016.December 30, 2017.

(2)

The amounts appearing in this column represent the total number of time-based restricted shares that have not vested as of January 2, 2016. Restricted stock granted on March 20, 2012 vests at the rate of 25% per year over four years from the date of grant beginning on the first anniversary of the grant date. The amount of unvestedDecember 30, 2017 and performance-based restricted stock held under the March 2012 award by our Named Executive Officers at January 2, 2016 isthat has been earned but has not vested as follows: Mr. Fencl —3,463. Restricted stock granted on March 19, 2013 vests at the rate of 25% per year over four years from the date of grant beginning on the first anniversary of the grant date. The amounts of unvestedDecember 30, 2017. Time-based restricted stock held under the March 2013 award by our Named Executive Officers at January 2, 2016 is as follows: Mr. Fencl —3,334. Restricted stock granted to Ms. John on June 3, 2013 vests at the rate of 25% per year over four years from the date of grant beginning on the first anniversary of the grant date and the amount of unvested restricted stock under this grant at January 2, 2016 was 50,022 shares. Restricted stock granted on March 18, 2014 vests at the rate of one-third per year over three years from the date of grant beginning on the first anniversary of the grant date. The amounts of unvested restricted stock held under the March 2014 award by our Named Executive Officers at January 2, 2016 are as follows: Ms. John—20,414; and Mr. Fencl—4,856. One award of restricted stock granted to Ms. Kretchmar on August 12, 2014 vests at the rate of 50% per year over two years from the date of grant beginning on the first anniversary of the grant date and the amount of unvested restricted stock under this grant at January 2, 2016 was 1,094 shares. An additional award of restricted stock granted to Ms. Kretchmar on August 12, 2014 vests at the rate of one-third per year over three years from the date of grant beginning on the first anniversary of the grant date and the amount of unvested restricted stock under this grant at January 2, 2016 was 2,978 shares. Restricted stock granted to Mr. Todorovic on September 15, 2014 vests at the rate of one-third per year over three years from the date of grant beginning on the first anniversary of the grant date and the amount of unvested restricted stock under this grant at January 2, 2016 was 1,978 shares. Restricted stock granted on March 17, 2015 vests at the rate of one-third per year over three years from the date of grant beginning on the first anniversary of the grant date.March 15, 2016. The amounts of unvested restricted stock held under the March 2015 time-based restricted stock award by our Named Executive Officers at January 2, 2016December 30, 2017 are as follows: Ms. John—14,904;4,968; Mr. Todorovic—3,942;1,314; Ms. Kretchmar—3,942;1,314; and Mr. Fencl—3,366. Restricted1,122. Performance-based restricted stock granted on March 17, 2015 that was earned vests at the rate of one-third per year over three years from March 15, 2016. The amounts of unvested restricted stock held under the portion of the March 2015 performance-based restricted stock award that was earned by our Named Executive Officers at December 30, 2017 are as follows: Ms. John—2,310; Mr. Todorovic—611; Ms. Kretchmar—611; and Mr. Fencl—521. Time-based restricted stock granted to Mr. Hurt on April 15, 2015 vests at the rate of one-third per year over three years from the date of grant beginning on the first anniversary of the grant dateMarch 15, 2016, and the amount of unvested restricted stock under this grant at January 2,December 30, 2017 was 1,335 shares. Performance-based restricted stock granted to Mr. Hurt on April 15, 2015 that was earned vests at the rate of one-third per year over three years beginning on March 15, 2016, and the amount of unvested restricted stock under this grant at December 30, 2017 was 4,005621 shares. Time-based restricted stock granted on March 7, 2016 vests at the rate of one-third per year over three years from the date of grant beginning on March 15, 2017. The amounts of unvested time-based restricted stock held under the March 2016 award by our Named Executive Officers at December 30, 2017 are as follows: Ms. John—30,436; Mr. Todorovic—7,304; Ms. Kretchmar—7,304; Mr. Hurt—4,992; and Mr. Fencl—4,262. Time-based restricted stock granted on March 14, 2017 vests at the rate of one-third per year over three years from the date of grant beginning on March 31, 2018. The amounts of unvested time-based restricted stock held under the March 2017 award by our Named Executive Officers at December 30, 2017 are as follows: Ms. John—84,747; Mr. Todorovic—20,340; Ms. Kretchmar—20,340; Mr. Hurt—20,340; and Mr. Fencl—13,560.


(3)

The amounts appearing in this column represent the aggregate market value of time-based restricted shares that have not vested and performance-based restricted shares that have been earned but have not vested as of January 2, 2016 andDecember 30, 2017. The amounts reported are based on the closing price of $12.24$9.20 for the shares of common stock on January 2, 2016.December 29, 2017.

(4)

The amounts reflect the number and payout value of unearned performance-based restricted shares based on the assumed achievement of target performance goals. The payout value is based on the closing price of $12.24 for the shares of common stock on January 2, 2016. However, because the Company’s threshold pre-tax income for fiscal 2015 exceeded the threshold but was less than target, 62% of the target shares were earned and the remaining shares were forfeited in March 2016.

(5)

The amounts reflect the number and payout value of unearned performance-based restricted shares based on the assumed achievement of target performance goals. The payout value is based on the closing price of $12.24 for the shares of common stock on January 2, 2016. This restricted stock award is performance-based and shares earned vest to the extent the Company achieves certain cumulative pre-tax income results for 2015, 2016 and 2017 as discussed in the “Compensation Discussion and Analysis”.


(6)(4)

These stock options vest at the rate of 25% per year over four years from the date of grant beginning on the first anniversary of the grant date.

(7)(5)

These stock options vest at the rate of one-third per year over three years from March 15 of the dateyear following the grant year.

(6)

These stock options vest at the rate of one-third per year over three years from March 31 of the year following the grant beginningyear.

(7)

The amounts reflect the number and payout value of unearned performance-based restricted shares based on the first anniversaryassumed achievement of target consolidated total revenue performance goals for 2016, 2017 and 2018. The payout value is based on the grant date.closing price of $9.20 for the shares of common stock on December 29, 2017. If earned, the performance-based shares will vest on April 30, 2019.

(8)

The amounts reflect the number and payout value of unearned performance-based restricted shares based on the assumed achievement of target pre-tax income growth objectives for 2017, 2018 and 2019 as discussed in the “Compensation Discussion and Analysis” section. The payout value is based on the closing price of $9.20 for the shares of common stock on December 29, 2017. If earned, the performance-based shares will vest on April 30, 2020.

 

 

20157 OPTION EXERCISES AND STOCK VESTED

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 January 2, 2016.December 30, 2017.

 

 

Option Awards

  

Stock Awards

 
 

Number of Shares

      

Number of Shares

      

Option Awards

  

Stock Awards

 
 

Acquired on

  

Value Realized on

  

Acquired on

  

Value Realized

  

Number of Shares

      

Number of Shares

     
Name 

Exercise (#)

  

Exercise ($)

  

Vesting (#)

  

on Vesting ($)

  

Acquired on

  

Value Realized on

  

Acquired on

  

Value Realized

 
 

Exercise (#)

  

Exercise ($)

  

Vesting (#)

  

on Vesting ($)(1)

 

Sharon John

  —  $—   35,218  $615,595   —  $—   57,714  $561,635 

Voin Todorovic

  —   —   989   19,078   —   —   6,566   58,487 

Jennifer Kretchmar

  —   —   2,583   51,324   —   —   7,066   63,185 

J. Christopher Hurt

  —   —   —   —   —   —   4,452   39,623 

Eric Fencl

  —   —   28,336   581,380   —   —   7,869   69,215 

(1)

Amounts reported were determined by multiplying the number of shares that vested by the per share closing price of the Company’s common stock on the vesting date.

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.

  

Executive

  

Registrant

  

Aggregate Earnings

  

Aggregate Balance

 
Name 

Contributions in

  

Contributions in

  

in Last FY($)

  

at Last FYE($)(2)

 
  

Last FY($)

  

Last FY($)(1)

         

Sharon John

 $-  $-  $-  $- 

Voin Todorovic

  -   -   -   - 

Jennifer Kretchmar

  -   -   -   - 

J. Christopher Hurt(3)

  20,615   3,975   7,031   53,323 

Eric Fencl

  -   -   -   - 

(1)

The amounts included in these columns are reported as compensation in the Summary Compensation Table included in this proxy statement.

(2)

For prior years, all amounts contributed by a Named Executive Officer and by the Company in such years have been reported in the Summary Compensation Table in our previously filed proxy statements in the year earned to the extent the executive was named in such proxy statements and the amounts were so required to be reported in such tables.

(3)

Mr. Hurt was the only Named Executive Officer who contributed to the Non-Qualified Deferred Compensation Plan during 2017. In March of each year, contributions to the plan during the preceding fiscal year are matched by the Company. Amounts shown for Registrant Contributions were made in March 2017 as the Company’s matching contribution for the 2016 contributions, which was 50% of Mr. Hurt’s contributions up to 6% of his salary, divided between the Company’s qualified 401(k) plan and its Non-Qualified and Deferred Compensation Plan. The Company’s matching contribution does not fully vest until the participant has been employed by the Company for five years. 

 


 

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 as amended, are described below.

The material terms of employment agreements entered into during 2015 with Messrs. Fencl and Hurt are discussed in the Section “Compensation Discussion and Analysis.”

Ms. John’sJohn’s agreement has an initial term of three years from June 3, 2013March 7, 2016 and renews from year-to-year thereafter. The agreement may be terminated by the Company prior to the end of the term upon death, disability, for cause (as defined in the agreement) or without cause. Ms. John may terminate the agreement forwith or without good reason (as defined in the agreement). If we terminate Ms. John’s employment without cause or if Ms. John terminates her employment for good reason, we are obligated to (i) in the case of termination prior to a change in control or following a date which is 24 months after a change in control, continue her base salary for a period of 12 months after her termination; or (ii) in the case of termination (24 months if such termination occurs within 12 months afterduring the 24-month period following a change in control, continue her base salary for a period of control (as defined in the agreement)), such payments to be reduced by any amounts received from a subsequent employer during such period,24 months and pay her target bonus amount for the period that welfare benefitsfiscal year in which the termination occurs. In any case, we are continued under COBRA, we will continueobligated to pay a lump sum equivalent to 18 months of the Company’sCompany-paid portion of the medical plan premium.health, dental and vision coverage. As compensation for her services, Ms. John will receive an annual base salary at a rate not less than $625,000$700,000 which rate will be reviewed annually and be commensurate with similarly-situatedsimilarly situated executives in similarly-situatedsimilarly situated firms. If the Company meets or exceeds certain performance objectives determined annually by the Compensation and Development Committee, Ms. John will receive an annual bonus of not less than 100% of her annual base salary, payable in either cash, stock, stock options or a combination thereof. The employment agreement also provides that for the term of the employment agreement and for one year thereafter, subject to specified limited exceptions, Ms. John may not become employed by or interested directly or indirectly in or associated with the Company’s competitors who are located within the United States or within any country where the Company has established a retail presence. In the event of her termination due to death, disability, or by the Company without cause, or if Ms. John terminates her employment for good reason, Ms. John or her beneficiaries or estate, will still be entitled to a bonus for such year prorated based on the number of full weeks she was employed during the year, subject to achievement of the bonus criteria.criteria (if such termination occurs within 24 months after a change of control, Ms. John will be entitled to receive her target bonus for the fiscal year in which the termination occurs prorated based on the number of full weeks she was employed during the year and paid within 30 days of such termination). If any payments under the employment agreement or another arrangement would become subject to the excise tax imposed by Section 4999 of the Code, the payments will be reduced(i) paid in full, or (ii) paid to a lesser extent such that the excise tax would no longer be applicable, whichever amount would result in the greatest amount payable that would not trigger such excise tax.of payments to Ms. John on an after-tax basis. 

Mr. Todorovic’s agreement hasThe employment agreements with Ms. Kretchmar and Messrs. Fencl, Hurt and Todorovic (the “non-CEO NEOs”) have an initial term of three years from September 15, 2014March 7, 2016 and renewsrenew from year-to-year thereafter. WeThe agreements may terminatebe terminated by the agreementCompany prior to the end of the term upon death, disability, for cause (as defined in the agreement)agreements) or without cause. Mr. TodorovicEach of the non-CEO NEOs may terminate thehis or her agreement forwith or without good reason (as defined in the agreement)agreements). If we terminate Mr. Todorovic’sa non-CEO NEO’s employment without cause, or if Mr. Todorovicthe non-CEO NEO terminates his or her employment for good reason, the Company would bewe are obligated to (i) in the case of termination prior to a change in control or following a date which is 24 months after a change in control, continue his or her base salary for a period of 12 months after his or her termination, (18 months if suchor (ii) in the case of termination occurs within 12 months afterduring the 24-month period following a change in control, continue his or her base salary for a period of control (as defined in18 months and pay such NEO an amount equal to the agreement)), andNEO’s target bonus prorated for the period that welfare benefitsyear of termination. In any case, we are continued under COBRA, we will continueobligated to pay a lump sum equivalent to 18 months of the Company’sCompany-paid portion of the medical,health, dental and vision plan premiums.coverage. As compensation for histheir services, Mr. Todorovicthe non-CEO NEOs will receive an annual base salary at a rate not less than $300,000$350,000 in the case of Mr. Todorovic, $409,500 in the case of Ms. Kretchmar, $400,000 in the case of Mr. Hurt, and $327,800 in the case of Mr. Fencl, in each case which rate will be reviewed annually and be commensurate with similarly-situatedsimilarly situated executives in similarly-situatedsimilarly situated firms. If the Company meets or exceeds certain performance objectives determined annually by the Compensation and Development Committee, Mr. Todoroviceach of the non-CEO NEOs will receive an annual bonus of not less than 40%50% of his earnedor her annual base salary, payable in either cash, stock, stock options or a combination thereof. Mr. Todorovic’s bonus for 2014 performance was prorated based on the number of full calendar weeks during the fiscal 2014 for which he was employed by the Company. The agreementemployment agreements also providesprovide that for the termterms of the agreementemployment agreements and for one year thereafter, subject to specified limited exceptions, Mr. Todorovicthe non-CEO NEOs may not become employed by or interested directly or indirectly in or associated with the Company’s competitors who are located within the United States or within any country where we havethe Company has established a retail presence. In the event of his termination due to death, disability, or by the Company without cause, or if Mr. Todorovic terminates his employment for good reason, Mr. Todorovic or his beneficiaries or estate, will still be entitled to a bonus for such year prorated based on the number of full weeks he was employed during the year, subject to achievement of the bonus criteria. If any payments under the Agreement or another arrangement would become subject to the excise tax imposed by Section 4999 of the Code, the payments will be reduced to the greatest amount payable that would not trigger such excise tax. We also agreed to pay Mr. Todorovic a signing bonus of $20,000 which Mr. Todorovic has agreed to repay if, during the first year of employment, he voluntarily terminates his employment without good reason or he is terminated by the Company for cause. In addition, we agreed to issue long-term equity incentive compensation with a value of $150,000, 50% in the form of time-based vested restricted stock, 25% in the form of non-qualified stock options to acquire shares of Company common stock at an exercise price equal to the closing price of the Company’s common stock on September 15, 2014, and 25% in the form of a long-term performance based cash incentive target award.


Ms. Kretchmar’s agreement has an initial term of three years from August 12, 2014 and renews from year-to-year thereafter. We may terminate the agreement prior to the end of the term upon death, disability, for cause (as defined in the agreement) or without cause. Ms. Kretchmar may terminate the agreement for good reason (as defined in the agreement). If we terminate Ms. Kretchmar’s employment without cause or if Ms. Kretchmar terminates her employment for good reason, the Company would be obligated to continue her base salary for a period of 12 months after her termination (18 months if such termination occurs within 12 months after a change of control (as defined in the agreement)), and for the period that welfare benefits are continued under COBRA, we will continue to pay the Company’s portion of the medical, dental, and vision plan premiums. As compensation for her services, Ms. Kretchmar will receive an annual base salary at a rate not less than $375,000 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. If the Company meets or exceeds certain performance objectives determined annually by the Committee, Ms. Kretchmar will receive an annual bonus of not less than 40% of her earned annual base salary, payable in either cash, stock, stock options or a combination thereof. Ms. Kretchmar’s bonus for 2014 performance was prorated based on the number of full calendar weeks during the fiscal 2014 for which she was employed by the Company and was guaranteed to be no less than 40% of her 2014 eligible earnings. The Agreement also provides that for the term of the Agreement and for one year thereafter, subject to specified limited exceptions, Ms. Kretchmar may not become employed by or interested directly or indirectly in or associated with the Company’s competitors who are located within the United States or within any country where we have established a retail presence. In the event of her termination due to death, disability, or by the Company without cause, or if Ms. Kretchmara non-CEO NEO terminates his or her employment for good reason, Ms. Kretchmarthe non-CEO NEO or his or her beneficiaries or estate, will still be entitled to a bonus for such year prorated based on the number of full weeks he or she was employed during the year, subject to achievement of the bonus criteria.criteria (if such termination occurs within 24 months after a change of control, the non-CEO NEO will be entitled to receive his or her target bonus for the fiscal year in which the termination occurs prorated based on the number of full weeks he or she was employed during the year and paid within 30 days of such termination). If any payments under the Agreementemployment agreement or another arrangement would become subject to the excise tax imposed by Section 4999 of the Code, the payments will be reduced(i) paid in full, or (ii) paid to a lesser extent such that the excise tax would no longer be applicable, whichever amount would result in the greatest amount payable that would not trigger such excise tax. We also agreed to pay Ms. Kretchmar signing bonuses of $25,000 in August 2014 and $10,000 in February 2015, provided she remained employed with the Company on that date. In addition, we agreed to issue long-term equity incentive compensation with a value of $102,084, 50% in the form of time-based vested restricted stock with three year pro-rata vesting, 25% in the form of performance-based long-term cash, and 25% in the form of non-qualified stock options to acquire shares of Company common stock at an exercise price equalpayments to the closing price of the Company’s common stocknon-CEO NEO on August 12, 2014. The Company also agreed to issue time-based vested restricted stock with two year pro-rata vesting with a value of $25,000.an after-tax basis.

  

In February 2016, the Compensation Committee requested its independent compensation consultant to perform a review of the Company’s employment agreements with its Named Executive Officers compared to employment agreements of the Company’s compensation peer group and other market survey data. At the conclusion of the review, in March 2016, the Compensation Committee made several revisions to the employment agreement of each Named Executive Officer, including:

●

lengthening the time period from 12 months to 24 months following a change-in-control during which increased severance would be paid;

●

changing the bonus an executive would be paid if terminated within 24 months of a change-in-control from pro-rata based on actual results of the Company to pro-rata based on target;

●

providing that the executive would have good reason to terminate the agreement if his or her total annual compensation was materially reduced versus the existing agreements under which only a material reduction of the executive’s base compensation was grounds to invoke good reason;

●

providing that if an executive was entitled to severance, he or she would receive a lump sum payment equivalent to 18 months of the Company-paid portion of health, dental and vision coverage, rather than paying the Company-paid portion of such coverage during the 18-month continuation period; and

●

providing that should any payment under the agreement or otherwise be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, such payments either would be (i) paid in full, or (ii) paid to a lesser extent such that the exercise tax would no longer be applicable, whichever amount would result in the greatest amount of payments to the executive on an after-tax basis. The prior agreement required the reduction of payments to an amount upon which no excise tax would apply. Importantly, neither the prior agreements nor the revised agreements provide for a gross-up payment.

The Compensation Committee also made additional revisions to the Chief Executive Officer’s agreement, including:

●

increasing the severance payment if the Chief Executive Officer is terminated within 24 months after a change-in-control from 24 months of base salary to 24 months of base salary plus her target bonus amount for the fiscal year in which the termination occurs;

●

removing a provision that reduced the amount of severance paid to the Chief Executive Officer by any amount received by a subsequent employer during the severance period, consistent with the existing severance provisions in the employment agreements of the other Named Executive Officers; and

●

adding to severance the Company-paid portion of dental and vision coverage premiums that would be paid over an 18-month period, consistent with the existing severance provisions in the employment agreements of the other Named Executive Officers.


 

 

Potential Payments Upon Termination or Change-In-Control

Our Named Executive Officers are eligibleeligible to receive certain benefits in the event of termination of such officer’s employment, including following a change-in-control. The following table presents potential payments to Mses. John and Kretchmar and Messrs. Todorovic, Hurt and Fencl as if his or her employment had been terminated as of January 2, 2016,December 30, 2017, the last day of fiscal 2015.2017.

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 20152017 Fiscal Year-End”, and “2015“2017 Option Exercises and Stock Vested” and “2017 Non-Qualified Deferred Compensation” tables located elsewhere in this proxy statement.

 


 

              

Continued

     
          Equity With  

Perquisites

     
  Salary      Accelerated  

and

     
Name/Circumstance Continuation(1)  Bonus(2)  Vesting(3)  

Benefits(4)

  Total 

Sharon John

                    

Death

 $-  $412,688  $2,347,645  $-  $2,760,333 

Disability

  -   412,688   2,347,645   -   2,760,333 

Severance Termination(5)

  675,000   412,688   -   13,272   1,100,960 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control

  1,350,000   412,688   2,347,645   13,272   4,123,605 

Change-in-Control (no termination)

  -   -   2,347,645   -   2,347,645 

Voin Todorovic

                    

Death

  -   98,008   94,908   -   192,916 

Disability

  -   98,008   94,908   -   192,916 

Severance Termination(5)

  321,000   98,008   -   13,546   432,554 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control

  481,500   98,008   94,908   13,546   687,962 

Change-in-Control (no termination)

  -   -   94,908   -   94,908 

Jennifer Kretchmar

                    

Death

  -   118,945   122,684   -   241,629 

Disability

  -   118,945   122,684   -   241,629 

Severance Termination(5)

  386,300   118,945   -   13,546   518,791 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control

  579,450   118,945   122,684   13,546   834,625 

Change-in-Control (no termination)

  -   -   122,684   -   122,684 

J. Christopher Hurt

                    

Death

  -   117,800   71,810   -   189,610 

Disability

  -   117,800   71,810   -   189,610 

Severance Termination(5)

  380,000   117,800   -   11,879   509,679 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control

  570,000   117,800   71,810   11,879   771,489 

Change-in-Control (no termination)

  -   -   71,810   -   71,810 

Eric Fencl

                    

Death

  -   97,054   215,113   -   312,167 

Disability

  -   97,054   215,113   -   312,167 

Severance Termination(5)

  315,200   97,054   -   9,357   421,611 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control

  472,800   97,054   215,113   9,357   794,324 

Change-in-Control (no termination)

  -   -   215,113   -   215,113 

 Name/Circumstance Salary Continuation  Bonus(1)  Equity With Accelerated Vesting(2)  

Continued Perquisites and Benefits(3)

  Total 

Sharon John

                    

Death

 $-  $315,000  $2,308,858  $-  $2,623,858 

Disability

  -   315,000   2,308,858   -   2,623,858 

Severance Termination(4)

  700,000   315,000   -   15,784   1,030,784 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control (5)

  1,400,000   700,000   2,308,858   15,784   4,424,642 

Change-in-Control (no termination)

  -   -   2,308,858   -   2,308,858 

Voin Todorovic

                    

Death

  -   78,750   485,686   -   564,436 

Disability

  -   78,750   485,686   -   564,436 

Severance Termination(4)

  350,000   78,750   -   15,784   444,534 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control (5)

  525,000   175,000   485,686   15,784   1,201,470 

Change-in-Control (no termination)

  -   -   485,686   -   485,686 

Jennifer Kretchmar

                    

Death

  -   92,138   505,678   -   597,816 

Disability

  -   92,138   505,678   -   597,816 

Severance Termination(4)

  409,500   92,138   -   15,784   517,422 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control (5)

  614,250   204,750   505,678   15,784   1,340,462 

Change-in-Control (no termination)

  -   -   505,678   -   505,678 

J. Christopher Hurt

                    

Death

  -   90,000   481,500   -   571,500 

Disability

  -   90,000   481,500   -   571,500 

Severance Termination(4)

  400,000   90,000   -   14,392   504,392 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control (5)

  600,000   200,000   481,500   14,392   1,295,892 

Change-in-Control (no termination)

  -   -   481,500   -   481,500 

Eric Fencl

                    

Death

  -   73,755   353,259   -   427,014 

Disability

  -   73,755   353,259   -   427,014 

Severance Termination(4)

  327,800   73,755   -   10,891   412,446 

Termination for Cause

  -   -   -   -   - 

Involuntary Termination if Change-in Control (5)

  491,700   163,900   353,259   10,891   1,019,750 

Change-in-Control (no termination)

  -   -   353,259   -   353,259 

 

(1)

Severance pay is salary continuation of base salary 12 months for the NEOs above, (24 months for Ms. John if she is terminated without cause within 12 months after a change-in-control and 18 months for Ms. Kretchmar and Messrs. Todorovic, Hurt and Fencl if they are terminated without cause within 12 months after a change-in-control). For Ms. John, severance pay would be reduced by the amount of any cash compensation from a subsequent employer during such period.

(2)(1)

Where indicated, the Named ExecutiveExecutive Officer is entitled to pro-rateda prorated bonus based on the number of full calendar weeks during the applicable fiscal year during which the executive was employed. Amount shown is the actual bonus approved in March 20162018 based on the Company’s 20152017 performance. See footnote 5 for an explanation of the bonus amount reported for Involuntary Termination if Change-in-Control.

(3)(2)

The amounts appearing in this column represent the aggregate market value of time-based restricted shares and performance-based restricted shares and the value of stock options, the vesting of which would have been accelerated, each based on the closing price of $12.24$9.20 for the shares of common stock on December 31, 2015.29, 2017.


(4)(3)

For the period that welfare benefits are continued under COBRA, theThe Company will continuepay each Named Executive Officer a lump sum payment equivalent to pay18 months of the Company’sCompany-paid portion of the medical plan premium for Ms. John and the Company’s portion of the medical,health, dental and vision plan premiums for Ms. Kretchmar and Messrs. Todorovic, Hurt and Fencl.coverage.

(5)(4)

Severance Termination would occur if the Company terminated the executive without cause or if the executive terminated his or her employment for good reason (asprior to a change in control or following a date which is 24 months after a change in control, as each term is defined in the applicable employment agreement).agreement. Upon a termination in this case, each Named Executive Officer is entitled to salary continuation for 12 months.

(5)

If a Named Executive Officer’s employment is terminated during the 24-month period following a change in control, we are obligated to (i) in the case of Ms. John, continue her base salary for 24 months and pay her target bonus amount for the fiscal year in which the termination occurs, and (ii) in the case of the non-CEO Named Executive Officers, continue his or her base salary for 18 months and pay an amount equal to the Named Executive Officer’s target bonus prorated for the year of termination.

  


 

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

ErnstErnst & Young LLP served as the Company’s independent registered public accounting firm for the year ended January 2, 2016.December 30, 2017. The Audit Committee of the Board of Directors has appointed Ernst & Young LLP to act in that capacity for fiscal 2016,2018, which ends on December 31, 2016.February 2, 2019. A representative of Ernst & Young LLP is expected to be present at the annual meeting with the opportunity to make a statement if he or she desires to do so and to be available to respond to appropriate questions from stockholders.

Although the Company is not required to submit this appointment to a vote of the stockholders, the Audit CommitteeCommittee of the Board of Directors continues to believe it appropriate as a matter of policy to request that the stockholders ratify the appointment of Ernst & Young LLP as principal independent registered public accounting firm. If the stockholders do not ratify the appointment, the Audit Committee will investigate the reasons for stockholder rejection and consider whether to retain Ernst & Young LLP or appoint another independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.

 

THTHEE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDINGDECEMBER 31FEBRUARY 2, 2016.2019.

 


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 January 2,December 30, 2017 and December 31, 2016, and January 3, 2015, as well as fees billed for other services rendered by Ernst & Young LLP during those periods:

 

 

Fiscal 2015

  

Fiscal 2014

  

Fiscal 2017

  

Fiscal 2016

 

Audit Fees(1)

 $819,100  $712,900  $828,031  $786,400 

Audit-Related Fees

  2,000   —   7,000   2,000 

Tax Fees(2)

  656,600   187,600   218,548   394,600 

All Other Fees

  —   —   —   — 

Total Fees

 $1,477,700  $900,500  $1,053,579  $1,183,000 

 

(1)

Audit Fees are fees paid for professional services rendered for the audit of the Company’sCompany’s annual consolidated financial statements, reviews of the Company’s interim consolidated financial statements and statutory audit requirements at certain non-U.S. locations.

(2)

Tax Fees are fees paid for an international expansion review, transfer pricing studies, compliance services and tax consultation. 

 

Policy Regarding Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm

TheThe Audit Committee Charter requires the Audit Committee’s pre-approval of all audit and permitted non-audit services to be performed for the Company by the independent registered public accounting firm. In determining whether proposed services are permissible, the Audit Committee considers whether the provision of such services is compatible with maintaining auditor independence. As part of its consideration of proposed services, the Audit Committee may consult with management, as part of the decision making process, but may not delegate this authority to management. Pursuant to a delegation of authority from the Audit Committee, the Chair of the Audit Committee may pre-approve such audit or permitted non-audit services. If the Chair approves any such services, any such approvals are presented to the full Audit Committee at the next scheduled Audit Committee meeting. All of the services performed by Ernst & Young LLP during the 20152017 and 20142016 fiscal years were pre-approved by the Audit Committee.

 


PROPOSALPROPOSAL NO. 3. ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION

We are asking our stockholders to provide advisory approval of the compensation of our Named Executive Officers. As described in the “Compensation“Compensation Discussion and Analysis” Sectionsection of this proxy statement, the Compensation and Development Committee has designed and implemented executive compensation programs that are intended to align with our stockholders’ interests. 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 based on targets established by the Compensation and Development Committee. Accordingly, a significant portion of our Named Executive Officers’ compensation is based on individual and corporate financial performance, while avoiding the encouragement of unnecessary or excessive risk-taking. Their total target direct compensation for 2015 consisted of a mix of base salary, annual cash bonuses based on the achievement of pre-established targets, and long-term incentive awards with target award values allocated among, time-based restricted stock, non-qualified stock options, and performance-based restricted stock.

In March 2015, annual bonus plan targets were pre-established based on pre-tax income goals. The mix of long-term incentive compensation awards was adjusted to increase the alignment of the Named Executive Officers’ interests with those of our stockholders through grants with target award values allocated among time-based restricted stock (40% of grant value), non-qualified stock options (30% of grant value), and performance-based restricted stock (30% of grant value) which was earned only upon achievement of pre-established pre-tax income targets. The Company is in the midst of a multi-year turnaround initiative that includes expanding into more places, developing more products, attracting more people, and driving more profitability. In 2015, we saw continued profitability improvement. Although our total revenues of $377.7 million in fiscal 2015 declined from $392.4 million in fiscal 2014 (fiscal 2015 included 52 weeks compared to 53 weeks in fiscal 2014), we achieved pre-tax income of $17.9 million in fiscal 2015 compared to a pre-tax income of $16.0 million in fiscal 2014 and our net income in fiscal 2015 was $27.3 million, or $1.59 per diluted share, an improvement from net income of $14.4 million, or $0.81 per diluted share, in fiscal 2014.

With this progress, we exceeded our threshold pre-tax income objective but fell short of our target. As a result, the payouts under our 2015 Bonus Plan and performance-based restricted stock were 62% of target. Our Compensation and Development Committee took note of the factWe believe that the Company had incurred approximately $800,000 of unbudgeted costs in 2015 related to international expansion and a reserve that was established with respect to pending litigation. While these actions are in the long-term best interests of the Company, the unbudgeted expenses had the effect of decreasing 2015 Bonus Plan and performance-based restricted stock payouts by approximately 8% of each plan participant’s target value. As a result, the Committee awarded discretionary bonus payouts to all participants in the 2015 Bonus Plan in the amount of the difference between each participant’s 2015 Bonus Plan Payout and the amount that the payout would have been had these unbudgeted costs not been incurred. The performance-based restricted stock payouts were not adjusted. We believe these payouts are the result of successful alignment of the interests of our executive officers and stockholders through the establishment of incentive plans which reward our executives for individual and corporate performance-based on targets established by the Committee.

Additional information about the compensation of our Named Executive Officers is provided in the “Executive Compensation” Sectionsection of this proxy statement, which includesand in particular the information discussed in the “Compensation Discussion and Analysis”, portion, demonstrates that our executive compensation program was designed appropriately to meet these objectives. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the annual meeting:

“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 discussion.discussion, and other related disclosure.”

While this vote is advisory, and not binding on our Company, it will provide information to our Compensation and DevelopmentDevelopment Committee regarding investor sentiment about our executive compensation philosophy, policies and practices, which the Committee will be able to consider when determining executive compensation for the remainder of fiscal 20162018 and beyond.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING BASIS, OF THE COMPENSATION OF THE COMPANY’SOUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT PURSUANT TO THE COMPENSATION DISCLOSURE RULES OF THE SEC.OFFICER COMPENSATION.

 


 

REPORT OF THE AUDIT COMMITTEE

The primary function of the Audit Committee is to assist the Board of Directors inin its oversight of the Company’s financial reporting processes. Management is responsible for the Company’s financial statements and overall reporting process, including the system of internal controls. The independent auditors are responsible for conducting annual audits and quarterly reviews of the Company’s financial statements and expressing an opinion as to the conformity of the annual financial statements with generally accepted accounting principles.

 

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 and consolidated financial statements of the Company for the year ended January 2, 2016December 30, 2017 (the “2015“2017 Financial Statements”).

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. 16, which include among other items, matters related to the conduct of the audit of the 2015 Financial Statements.1301, “Communications with Audit Committees.” 

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 20152017 Financial Statements, the Audit Committee recommended to the Board of Directors that the 20152017 Financial Statements be included in the Company’s Annual Report on Form 10-K for the 20152017 fiscal year and that Ernst & Young LLP be selected as the independent registered public accounting firm for the Company for fiscal 2016.2018.

 

Submitted by the Audit Committee of the Board of Directors:

 

 

Michael Shaffer, Chairman

Mary Lou Fiala

Maxine Clark

Braden Leonard

Robert L. Dixon, Jr.

Timothy Kilpin

Craig Leavitt

 

 

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:

 

stockholder’sstockholder’s name, number and type of securities owned, length of period held, and proof of ownership;

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 Committee Chaircommittee Chair or individual Director. The Corporate Secretary may refuse to forward material which he or she determines in good faith to be scandalous, threatening or otherwise inappropriate for delivery. The Corporate Secretary will also maintain copies of such materials.

 


 

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 board’sBoard’s deliberations and decisions. Candidates should have substantial experience with one or more publicly traded national or multinational companies or shall have achieved a high level of distinction in their chosen fields. The Nominating and Corporate Governance Committee has not adopted a formal policy with respect to diversity; however, the Board and the Nominating and Corporate Governance Committee believe that Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, and ethnicity. The Nominating and Corporate Governance Committee will consider candidates submitted by a variety of sources including, without limitation, incumbent Directors, stockholders and our management. Periodically, the Company has engaged independent third party search firms to assist the Company in identifying and evaluating qualified Board candidates.

In all cases, members of the Nominating and Corporate Governance Committee discuss and evaluate each potential candidate’scandidate’s educational background, employment history, outside commitments and other relevant factors in detail, and suggest individuals qualified to serve on the Board to explore in more depth. Once a candidate is identified whom the Nominating and Corporate Governance Committee wants to seriously consider and move toward nomination, the Chairman of the Nominating and Corporate Governance Committee, or his or her designee, meets with that nominee to evaluate his or her potential interest in serving on the Board and sets up interviews with the full Nominating and Corporate Governance Committee.

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:

 

stockholder’sstockholder’s name, number of shares owned, length of period held, and proof of ownership;

name, age and address of candidate;

a detailed resume describing, among other things, the candidate’scandidate’s educational background, occupation, employment history, and material outside commitments (for example, memberships on other boards and committees, charitable foundations and the like);

a supporting statement which describes the candidate’scandidate’s reasons for seeking election to the Board and documents his or her ability to serve on the Board;

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 12, 201710, 2019 and February 11, 2017,9, 2019, in the case of the 20172019 annual meeting. However, in the event that no annual meeting was held in the previous year or the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder, in order to be timely, must be received no later than the close of business on the 10th day following the date on which notice of the date of the annual meeting was mailed to stockholders or made public, whichever first occurs. Our amended and restated bylaws also specify requirements as to the form and content of a stockholder’s notice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for Directors at an annual meeting of stockholders.

Stockholder proposals intended to be presented at the 20172019 annual meeting must be received by the Company at its principal executive office no later than December 2, 2016November 29, 2018 in order to be eligible for inclusion in the Company’s proxy statement and proxy relating to that meeting. Upon receipt of any proposal, the Company will determine whether to include such proposal in accordance with regulations governing the solicitation of proxies.

 

 

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.

 

 

By Order of the Board of Directors

Eric Fencl

Chief Administrative Officer,

General Counsel and Secretary

 

APRIL 1, 2016MARCH 29, 2018

 


 

APPENDIX A   

DIRECTIONS TO THE COMPANY’SCOMPANY’S WORLD BEARQUARTERS

1954 INNERBELT BUSINESS CENTER DRIVE

ST. LOUIS,MISSOURI 63114

Build-A-Bear Workshop’sWorkshop’s World Bearquarters is located at 1954 Innerbelt Business Center Drive. Signs will be posted in the parking lot to direct you to the appropriate entrance.

 

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 southsouth to the Page Avenue exit, Exit 4. Turn right onto Page Avenue and right onto Innerbelt Business Center Drive.

 

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.