Edgar Filing: BUILD A BEAR WORKSHOP INC

bbw20140328_def14a.htm

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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☒	Definitive Proxy Statement

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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. Louis, Missouri 63114

April 4, 2014

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 8, 2014, at 10:00 a.m. Central Time. For your reference, directions for our annual meeting site are provided at Appendix B 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; amend and restate our stock incentive plan; and transact such other business as may properly come before the meeting.

The formal Notice of Annual Meeting 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
	Chief Executive Officer

Build-A-Bear Workshop, Inc.

1954 Innerbelt Business Center Drive

St. Louis, Missouri 63114

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

May 8, 2014

The 2014 Annual Meeting of Stockholders of BUILD-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 8, 2014, 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;

3. to approve, by non-binding vote, executive compensation;

4. to approve the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan; and

5. to transact such other business as may properly come before the meeting or any adjournments thereof.

Only stockholders of record at the close of business on March 25, 2014 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 Bearrister—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.

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	6
Directors	7
The Board of Directors and its Committees	10
Committee Charters, Corporate Governance Guidelines, Business Conduct Policy and Code of Ethics	10
Board Member Independence and Committee Member Qualifications	13
Related Party Transactions	13
Section 16(a) Beneficial Ownership Reporting Compliance	14
Board of Directors Compensation	15
Executive Compensation	16
Compensation Discussion and Analysis	16
Compensation and Development Committee Report	29
Compensation Committee Interlocks and Insider Participation	29
2013 Summary Compensation Table	30
2013 Grants of Plan-Based Awards	32
Outstanding Equity Awards at 2013 Fiscal Year-End	33
2013 Option Exercises and Stock Vested	34
2013 Non-Qualified Deferred Compensation	35
Executive Employment and Severance Agreements	35
Proposal No. 2. Ratification of Appointment of Independent Accountants	39
Proposal No. 3. Advisory (Non-binding) Vote Approving Executive Compensation	40
Proposal No. 4. Approval of the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan	41
Report of the Audit Committee	49
Stockholder Communications with the Board	49
Selection of Nominees for the Board of Directors	50
Stockholder Proposals	51
Other Matters	51
Appendix A	A-1
Appendix B	B-1

BUILD-A-BEAR WORKSHOP, INC.

1954 Innerbelt Business Center Drive

St. Louis, Missouri 63114

2014 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 2014 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 8, 2014, 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 B to this proxy statement.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 8, 2014

The Company’s proxy statement, Annual Report on Form 10-K for the 2013 fiscal year and summary Annual Report to Stockholders are available at https://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 25, 2014 (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 4, 2014.

What Am I Voting On?

You are voting on four 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 2014;

(d) the approval of the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan.

How Do I Vote?

Stockholders of Record: If you are a stockholder of record, there are four ways to vote:

	•	by toll-free telephone at 1-800-652-8683;
	•	by Internet at www.investorvote.com/BBW;
	•	by completing and returning your proxy card in the postage-paid envelope provided; or
	•	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 election of Directors, on executive compensation matters or on any material revisions to the terms of existing equity compensation plans 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 7, 2014 (the day before the annual meeting).

What Are the Voting Recommendations of the Board of Directors?

The Board recommends the following votes:

(a) FOR election of both of the two nominees as Directors;

(b) FOR ratification of the appointment of Ernst & Young LLP as independent registered public accounting firm for fiscal 2014;

(d) FOR approval of the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan.

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 authority to Sharon John, Tina Klocke 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?

17,515,838, 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 8,757,920 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 broker 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 a plurality of the votes present in person or by proxy and entitled to vote at the meeting is required. 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 counted for the purposes of determining whether there is a quorum. Abstentions have no effect on the election of Directors.

For the proposals to (i) ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm (Proposal 2), (ii) approve, by non-binding vote, executive compensation (Proposal 3), and (iii) approve the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan (Proposal 4), 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 for the purposes of determining the number of shares entitled to vote that are present in person or by proxy. Accordingly, an abstention will have the effect of a “no” vote.

Please vote your proxy so your vote can be counted. This is particularly important since brokers may no longer use discretionary authority to vote shares on the election of Directors, on executive compensation matters, or on any material revisions to the terms of existing equity compensation plans 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. Just 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 date 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 2013 Annual Report are available at https://materials.proxyvote.com/120076.

Who Can Attend the Annual Meeting?

Any Build-A-Bear Workshop stockholder 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 2014 (Proposal 2); (iii) FOR approval, by non-binding resolution, of executive compensation (Proposal 3); (iv) FOR approval of the Build-A-Bear Workshop, Inc. Third Amended and Restated 2004 Stock Incentive Plan (Proposal 4), and (v) 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” 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.

Who Pays for the Solicitation of Proxies?

The Company will bear the cost of the solicitation 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 17,515,838 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’s shares as of March 25, 2014 (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”), 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 25, 2014 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 investment 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^(17)(18)		Percentage of Class

Braden Leonard⁽¹⁾		2,646,797		15.1	%
Maxine Clark and affiliates⁽²⁾		1,615,833		9.2	%
Dimensional Fund Advisors LP⁽³⁾		1,418,715		8.1	%
Cannell Capital LLC⁽⁴⁾		1,224,770		7.0	%
Tina Klocke⁽⁵⁾		250,631		1.4	%
Eric Fencl⁽⁶⁾		170,705		1.0	%
Sharon John⁽⁷⁾		130,665		*
Mary Lou Fiala⁽⁸⁾		109,169		*
David Finnegan⁽⁹⁾		92,642		*
Coleman Peterson⁽¹⁰⁾		92,125		*
Thomas Pinnau⁽¹¹⁾		77,801		*
James M. Gould⁽¹²⁾		68,572		*
Louis Mucci⁽¹³⁾		60,160		*
Virginia H. Kent⁽¹⁴⁾		27,662		*
Kenneth Wine⁽¹⁵⁾		18,156		*
All Directors and executive officers as a group (14 persons)⁽¹⁶⁾		5,366,834		30.2	%

*	Less than 1.0%.

(1)	Represents 2,520,501 shares held by BML Investment Partners, L.P. (“BML”), with respect to which BML and Braden M. Leonard share voting and dispositive power, and 126,296 shares of common stock held by Mr. Leonard with respect to which he has sole voting and dispositive power. The principal address of BML and Mr. Leonard is 65 E. Cedar—Suite 2, Zionsville, Indiana 46077. Mr. Leonard controls the voting and/or investment power for the shares held by BML as the managing member of BML’s sole general partner.
(2)	Represents 132,406 shares owned directly by Ms. Clark, 37,402 shares owned indirectly through her husband, 63,842 shares of restricted stock, and 1,343,783 shares held by Smart Stuff, Inc. Ms. Clark controls the voting and/or investment 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. Also includes vested options to purchase 38,400 shares with exercise prices ranging from $6.59 to $34.65.
(3)	Represents 1,418,715 shares held by Dimensional Fund Advisors LP (“Dimensional”), with respect to which Dimensional has sole dispositive power, and includes 1,386,929 shares to which Dimensional has sole voting power. The principal address of Dimensional is Palisades West, Building One, 6300 Bee Cave Road, Austin, Texas 78746. All information regarding ownership by Dimensional is based solely on a Form 13G/A filed by Dimensional on February 10, 2014.
(4)	Represents 1,224,770 shares held by Cannell Capital LLC (“Cannell”), with respect to which Cannell has sole voting and dispositive power. The principal address of Cannell is 310 E. Pearl St., Unit A, P.O. Box 3459, Jackson, Wyoming 83001. All information regarding ownership by Cannell is based solely on a Schedule 13G/A filed on February 14, 2014.
(5)	Represents 128,000 shares of common stock (including 300 shares owned by Ms. Klocke’s spouse and 200 shares held in trust for the benefit of Ms. Klocke’s children), 38,016 restricted shares, and vested options to purchase 84,615 shares with exercise prices ranging from $5.11 to $34.65.

(6)	Represents 103,535 shares of common stock, 22,472 restricted shares, and vested options to purchase 44,698 shares with exercise prices ranging from $5.11 to $6.59.
(7)	Represents 130,665 shares of common stock, all of which is restricted.
(8)	Represents 109,169 shares of common stock, 19,260 of which are restricted.
(9)	Represents 35,232 shares of common stock, 18,813 restricted shares, and vested options to purchase 38,597 shares with exercise prices ranging from $5.11 to $34.65.
(10)	Represents 92,125 shares of common stock, 11,556 of which are restricted.
(11)	Represents 77,801 shares of common stock, 11,556 of which are restricted.
(12)	Represents 68,572 shares of common stock, of which (i) 1,000 shares held in a custodial account for Mr. Gould’s son and (ii) 11,556 are restricted.
	Mr. Gould has pledged 27,283 shares to U.S. Bank, N.A. as security for a loan.
(13)	Represents 60,160 shares of common stock, 11,556 of which are restricted.
(14)	Represents 27,662 shares of common stock, of which (i) 11,556 shares are restricted and (ii) 5,000 are owned by Ms. Kent’s spouse.
(15)	Represents 18,156 shares of common stock, 16,026 of which are restricted.
(16)	Includes all Directors and executive officers who own a total of 372,790 shares of restricted stock and vested options to purchase a total of 206,310 shares of common stock. Shares owned by Mr. Ebsworth, a Director Emeritus, are not included.
(17)	Other than as indicated, no Director or Named Executive Officer beneficially owns shares that are pledged as security.
(18)	Share numbers include restricted stock granted to Named Executive Officers on March 18, 2014 at a closing price of $9.43.

PROPOSAL NO. 1. ELECTION OF DIRECTORS

The Company’s Board of Directors presently has nine members, divided into three classes 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. Maxine Clark, Virginia Kent and Louis Mucci are Class I Directors, and their terms will expire at the 2014 annual meeting. Braden Leonard, Sharon John and Coleman Peterson are Class II Directors, and their terms will expire at the 2015 annual meeting. Mary Lou Fiala, James M. Gould and Thomas Pinnau are Class III Directors, and their terms will expire at the 2016 annual meeting. Currently, all of our 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.

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 Emeritus is not compensated for his or her services.

Neither Ms. Kent nor Mr. Mucci, both of whom have served on the Company’s Board for several years, are standing for re-election upon the expiration of their terms at the 2014 annual meeting. The Nominating and Corporate Governance Committee of the Board of Directors has commenced a search for a nominee with the background and experience who would qualify as an “audit committee financial expert” as such term is defined under applicable SEC rules and who would complement the strengths of the existing Directors as well as those characteristics described in the Section entitled “Selection of Nominees for the Board of Directors”. Pending nomination of a new Director, the number of Directors on the Board of Directors will be seven. The Company’s Certificate of Incorporation requires that each class of Directors consist, as nearly as may be possible, of one-third of the total number of Directors constituting the entire Board of Directors. In order to comply with this requirement, Sharon John has agreed to resign as a Class II Director, contingent upon her election as a Class I Director at the 2014 annual meeting. Accordingly, the Nominating and Corporate Governance Committee nominated Sharon John to be elected as a Class I Director and Maxine Clark to be re-elected as Class I Director, each to serve until the 2017 annual meeting of stockholders or until their successors are duly elected and qualified. As noted below, Ms. Clark has served on our Board of Directors for several years. Ms. John was appointed to the Board of Directors when she was hired as the Company’s Chief Executive Officer and Chief President Bear in June 2013.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “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 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 25, 2014. 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-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 I Director — Term Expiring in 2014 and Standing for Re-Election

Maxine Clark, 65, after founding the Company in 1997 she 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. 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. Ms. Clark is a member of the Board of Trustees of Washington University in St. Louis and serves on the Board 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 Chair of KIPP St. Louis Public Charter School. Ms. Clark is Past Chair of Teach for America-St. Louis and a member of its national Board. 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 and an Honorary Doctor of Laws from Saint Louis University.

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.

Class II Director — Term Expiring in 2015 and Standing for Election as a Class I Director

Sharon John, 50, 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 after being recommended to our Board by a third-party search firm. 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 Hersey and the Snickers/M&M Mars business. 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 brings to Build-A-Bear Workshop highly relevant and valuable insights and perspectives in leading businesses, strategic planning, brand building, marketing, licensing, merchandising, and retail operations.

Class II Directors — Terms Expiring in 2015

Braden Leonard, 43, 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, 65, has served on the Board of Directors since 2005. He served as our Lead Independent Director from May 2009 until November 2011. 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 previously served as a Director of The Service Master Company and Knockout Holdings, Inc., formerly a publicly traded company. 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.

Class III Directors — Terms Expiring in 2016

Mary Lou Fiala, 62, has served on the Board of Directors since 2005. She was appointed as our Non-Executive Chairman in November 2011. From January 2009 until her retirement in December 2009, Ms. Fiala served as Vice Chairman and Chief Operating Officer of Regency Centers Corporation (“Regency”), a publicly traded real estate investment trust specializing in the ownership and operation of grocery anchored shopping centers. From 1998 until January 2009, she served as President and Chief Operating Officer of Regency. At Regency, Ms. Fiala was responsible for human resources, marketing, and operational management of Regency’s retail centers nationwide. Prior to working with Regency, Ms. Fiala served as Managing Director of Security Capital Global Strategic Group Incorporated, where she was responsible for the development of operating systems for the firm’s retail-related initiatives. Previously, she served as Senior Vice President and Director of Stores for Macy’s East (“Macy’s”)/Federated Department Stores, Inc. (“Federated”), where she was responsible for 19 Macy’s stores in five states, generating more than $1 billion in sales. Before her tenure at Macy’s, Ms. Fiala was Senior Vice President of Henri Bendel and Senior Vice President and Regional Director of stores for Federated’s Burdine’s Division. Ms. Fiala earned a bachelor’s of science degree from Miami University. She is a current member of the Board of Directors of Regency and General Growth Properties, Inc., a publicly traded shopping mall real estate investment trust. She is also a trustee for the International Council of Shopping Centers where she also served as Chairman during 2008-2009. In addition, she is an independent director of CNL Macquarie Global Growth Trust, Inc., an international non-traded SEC reporting real estate investment trust. Ms. Fiala and her husband reside in Colorado. They have three children and two grandchildren.

Over the course of her career and especially while serving at various times as Vice Chairman, President, and Chief Operating Officer of a company that owns and operates shopping centers, Ms. Fiala gained extensive experience in the areas of real estate, store operations, human resources, strategic planning, marketing, and corporate governance. These skills and talents enhance the ability of the Build-A-Bear Workshop Board to effectively develop strategies to operate its retail stores and efficiently manage its associates.

James M. Gould, 65, 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 Ltd., 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 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.

Thomas Pinnau, 49, has served on the Board of Directors since 2012. Since 2011, Mr. Pinnau has been the Chief Executive Officer of Knowledge Universe Work-Life Solutions, a provider of corporately sponsored employee work-life support product services. From 2009 to 2011, Mr. Pinnau was Executive Vice President / Executive Managing Director of the International Health and Beauty retail and consumer products business at The Alliance Boots Company. In this role he was leading a business of $2.5 billion in sales with presence in 25 countries including the US and over 500 company-owned stores. From 2007 to 2009, Mr. Pinnau was Senior Vice President / General Manager of the North American Premium Snackfood business with the Mars Company. Prior to that Mr. Pinnau held various managerial positions for over 14 years with The Procter & Gamble Company in Europe, the US and Latin America, last as the Managing Director for the Personal Beauty Care Division in Latin America. Mr. Pinnau completed a master level business administration and engineering academic degree program at the Hamburg University, Germany. He resides in Los Angeles, California with his wife and their son.

In his various executive management positions, Mr. Pinnau gained extensive experience in building international brands, leading diverse multi-cultural organizations, driving product and business model innovation, and heading multi-channel businesses in the US as well as internationally. With these experiences, Mr. Pinnau brings to Build-A-Bear Workshop highly valuable insights in the area of strategic planning, international retail, franchise partnerships, marketing, brand building, innovation and operations management.

Director Emeritus

Barney Ebsworth, 79, 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’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, 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, 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 Policy and Code of Ethics Applicable to Senior Executives 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 sign 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

Prior to November 2011, the Board combined the role of Chairman of the Board with the role of Chief Executive Bear and had a Lead Independent Director position to strengthen the governance structure. In November 2011, to further strengthen the governance structure, the Board separated the role of Chairman from the role of Chief Executive Bear, elected Mary Lou Fiala as Non-Executive Chairman, and eliminated the role of Lead Independent Director. The Board chose to separate the roles of Chairman and Chief Executive Bear in recognition of the current demands of the two roles. In June 2013, the Chief Executive Bear was succeeded by a Chief Executive Officer. 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 her 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
	•	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-management Directors, including strategy updates; (iv) serving as principal liaison between the independent Directors, the Chief Executive Bear, 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 interested parties can contact the Non-Executive Chairman 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 11 times in 2013 for regular and special meetings. All Directors 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 2013 was approximately 98%. 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 attended our 2013 annual meeting and all Directors except Ms. Kent, whose term will expire at the 2014 annual meeting, plan to attend the 2014 annual 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 Louis Mucci (Chair), Mary Lou Fiala, Virginia Kent, Braden Leonard and Thomas Pinnau.

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 discusses 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, 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 regarding 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 nine meetings in 2013.

Compensation and Development Committee

The members of the Compensation and Development Committee are Coleman Peterson (Chair), Mary Lou Fiala, James M. Gould, Virginia Kent and Thomas Pinnau.

The Compensation and Development Committee is responsible for evaluating and approving the Company’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-evaluation of Committee performance. The Compensation and Development Committee held 11 meetings in 2013.

Nominating and Corporate Governance Committee

The members of the Nominating and Corporate Governance Committee are James M. Gould (Chair), Braden Leonard, Louis Mucci and Coleman Peterson.

The Nominating and Corporate Governance Committee establishes criteria for membership of the Company’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 five meetings in 2013.

Risk Oversight by the Board

It is management’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’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 2013, 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 Corporate Governance Guidelines require any Director 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) 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, Virginia Kent, Braden Leonard, Louis Mucci, Coleman Peterson and Thomas Pinnau 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, Virginia Kent, Braden Leonard, Louis Mucci, and Thomas Pinnau) 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 (Louis Mucci) has accounting or related financial management expertise as required in Section 303A of the NYSE Listed Company Manual. Furthermore, the Board determined that Louis Mucci 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, Virginia Kent, Coleman Peterson, and Thomas Pinnau) 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 ensuring 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-approval of all transactions between us and any related parties, including our Directors, executive officers, nominees for Director or executive officer, 5% 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.

Store Fixtures and Furniture

We purchase 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 $1,300,000 in fiscal 2013.

In 2006, 2010 and 2013 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 the 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 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 2013.

BOARD OF DIRECTORS COMPENSATION

The table below discloses compensation information of members of the Company’s Board of Directors for serving as members of the Company’s Board in 2013. As a member of management, Maxine Clark, the Company’s Chief Executive Bear through June 3, 2013, did not receive compensation for her services as Director in 2013. Under the terms of her retirement agreement discussed in the Section “Compensation Discussion and Analysis,” Ms. Clark will not receive separate compensation for her services as a Director of the Company during the two-year period that she is receiving separation pay from the Company. The compensation received by Ms. Clark as an employee of the Company and pursuant to her retirement and consulting agreements is shown in the Summary Compensation Table. As a member of management, Sharon John, the Company’s Chief Executive Officer and Chief President Bear effective June 3, 2013, did not receive compensation for her services as Director in 2013. As discussed below, Mr. Ebsworth was not paid any compensation for serving as Director Emeritus in 2013.

Name:	Fees Earned or Paid in Cash($)⁽¹⁾		Stock Awards ($)⁽²⁾		Total ($)
Mary Lou Fiala		143,750		124,997		268,747
James M. Gould		58,500		74,998		133,498
Virginia Kent		46,000		74,998		120,998
Braden Leonard⁽³⁾		10,000		-		10,000
Louis Mucci		69,125		74,998		144,123
Coleman Peterson		60,063		74,998		135,061
Thomas Pinnau		46,000		74,998		120,998

(1)	Amount shown reflects cash compensation paid in calendar 2013. Because the Company’s fiscal 2013 ended December 28, 2013 and cash retainers are paid quarterly in arrears on the Tuesday following the completion of a fiscal quarter, directors received five quarterly payments in calendar 2013. See the “Director Compensation Policies” Section below for an explanation of the annual cash retainer.
(2)	In May 2013, Ms. Fiala received a grant of 19,260 shares of the Company’s common stock with grant date fair values totaling $124,997 and Ms. Kent and Messrs. Gould, Leonard, Mucci, Peterson, and Pinnau each received a grant of 11,556 shares of the Company’s common stock with a grant date fair value of $74,998. These amounts represent the aggregate number of restricted shares outstanding for each Director as of December 28, 2013. See Note 12 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended December 28, 2013 for a discussion of the assumptions used in the valuation of awards.
(3)	As discussed below, Mr. Leonard agreed to forgo all Director compensation in 2013 in connection with the Company’s cost cutting initiatives. The cash amount reported for Mr. Leonard represents compensation that he earned in the fourth quarter of fiscal 2012 that he did not receive until the first quarter of fiscal 2013.

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, and 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 for Board membership is $40,000, an amount 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 during the year. Prior to November 2012, the annual restricted stock grants vested each year on the anniversary date of our initial public offering (October 28, 2004). In November 2012, the Board adjusted the program so that grants are made on the date of each annual meeting of stockholders and vest one year later. As a one-time transition grant for service from October 29, 2012 through the date of the 2013 annual meeting, directors received a pro-rated grant with a value of $39,658. On the date of the 2013 annual meeting, non-management directors (other than Mr. Leonard as discussed below) 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 whom 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. The Board has created the role of Non-Executive Chairman and established an additional annual retainer for such role in the amount of $85,000 plus an additional annual restricted stock award with a value of $50,000. In conjunction with the transition to making annual grants of restricted stock on the date of each annual meeting of stockholders discussed above, the Non-Executive Chairman received an additional pro-rated grant with a value of $26,438 in November 2012 and on the date of the 2013 annual meeting, received a restricted stock award with a value of $50,000 which will vest one year thereafter, subject to continued service on the Board.

Effective January 2013, in support of the Company’s cost cutting initiatives, the Board decided to reduce the annual cash retainer that each Director received in 2013 for Board membership by 10% from $40,000 to $36,000 and the additional annual cash retainer that the Non-Executive Chairman received by 10% from $85,000 to $76,500. Furthermore, Braden Leonard agreed to forgo all Director compensation in 2013.

Effective January 2014, the Board decided to extend the 10% annual retainer reduction so that the annual cash retainer paid to each independent Director, including Mr. Leonard, will be $36,000. Furthermore, the additional annual retainer for the Non-Executive Chairman was reduced to $20,000 cash plus an additional annual restricted stock award with a value of $10,000.

Our Corporate Governance Guidelines provide that non-management Directors are required to own shares of the Company’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 Company 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 attendance 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 2013 compensation for the following Named Executive Officers (“NEOs”):

	•	Sharon John – Chief Executive Officer and Chief President Bear
	•	Tina Klocke – Chief Operations and Financial Bear and Treasurer
	•	Eric Fencl – Chief Bearrister, General Counsel, International Franchising and Secretary
	•	David Finnegan – Chief Information Bear
	•	Kenneth Wine – Chief Merchandise Bear
	•	Maxine Clark – Former Chief Executive Bear

Executive Summary

Summary of Fiscal 2012 and 2013 Financial Results

While disappointed with our overall results in 2012, the Company was in the midst of a multi-year turnaround initiative that includes optimizing our real estate by strategically closing, refreshing and reducing the size of select stores, rationalizing our expense structure, and resetting our consumer value equation by reducing discounts and emphasizing our brand experience. During 2012, we began to see our initiatives gain traction. A summary of key results in 2012 includes the following:

	•	Consolidated net retail sales of $374.6 million;
	•	Consolidated comparable store sales declined 3.3% and included a 2.0% decline in North America and a 8.4% decline in Europe;
	•	Net loss per share of $3.02 which included a $33.7 million, or $2.06 per share, non-cash charge to impair goodwill associated with the Company’s U.K. business; and
	•	Achieved cost savings of $7.5 million.

During 2013, we saw improved results as a result of these turnaround initiatives, including:

	•	Total revenues of $379.1 million while operating 28 fewer stores at year’s end compared to $380.9 million in fiscal 2012;
	•	Consolidated comparable store sales increased 5.1% and included a 5.7% increase in North America and a 2.9% increase in Europe;
	•	Pre-tax loss improved to $2.1 million from a pre-tax loss of $48.4 million in fiscal 2012; and
	•	Net loss was $2.1 million, or $0.13 per share, an improvement from a net loss of $49.3 million, or $3.02 per share, in fiscal 2012.

Management Changes in 2013

On January 31, 2013, Maxine Clark announced her intent to retire from her position as Chief Executive Bear after the Company had hired her successor. In connection with the announcement of Ms. Clark’s planned retirement, on January 28, 2013 the Company and Ms. Clark entered into a Retirement, Separation Agreement and General Release (the “Retirement Agreement”) which provides that her employment with the Company would terminate following a six-week transition period following the date that a successor chief executive is employed by the Company. On June 3, 2013, the Company hired Sharon John as Chief Executive Officer and Chief President Bear. In accordance with her Retirement Agreement, Ms. Clark retired from the Company on July 12, 2013.

2013 Say on Pay Vote

In 2013, we received a favorable advisory vote on our executive compensation program. Over 97% of shares voted at our 2013 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 the 2013 year 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 2013 Compensation Decisions

We seek to design and implement executive compensation programs that align with our 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 2013, 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 performance-based cash awards and time based restricted stock.

In March 2013, the Committee approved adjustments to our NEOs’ compensation programs (excluding Ms. John, who was not employed with us at the time) as highlighted below:

	•	Based on the Company’s financial results for 2012, the Committee approved no salary increases for NEOs for 2013. In lieu of salary increases, and in consideration of their individual performance and competitive position against market data, the Committee approved lump sum cash payments of $10,000 and $7,500 for Messrs. Fencl and Finnegan, respectively.
	•	After reviewing the Company’s strategic business plan for 2013, the Committee modified the Company’s bonus plan goals to focus exclusively on returning the Company to profitability by establishing performance goals for consolidated pretax income (loss) (“pretax income”).
	•	For 2013, the Committee approved a grant of performance-based cash awards (75% of grant value) and time-based restricted stock (25% of grant value) for NEOs. Our target grant levels remained unchanged in 2013 from 2012 levels.
	•	As referenced earlier, the Committee also entered into special compensation arrangements for Ms. Clark in contemplation of her retirement from the Company in 2013 and for Ms. John upon her joining the Company in June 2013 as our new Chief Executive Officer. Compensation arrangements entered into with Mses. Clark and John are described in detail in this CD&A in the “Compensation Arrangements with the Chief Executive Officer” Section.
	•	Based on the Company’s actual pretax performance in 2013, NEOs received 78% of target under the annual bonus plan for 2013 performance.
	•	Consistent with the annual bonus plan, our performance-based long-term cash awards paid out at 78% of target for 2013 performance.

In addition to the key decisions approved by the Committee for 2013, 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-hedging provisions for executive and Directors;
	•	No tax gross-up provisions on any compensation or severance events; and
	•	No executive perquisite benefits, beyond limited supplemental disability and life insurance.

Alignment of 2013 Chief Executive Bear Pay and Historical Performance (Ms. Clark)

As discussed throughout this CD&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 2013 for our Chief Executive Bear, more heavily weighted on performance-based compensation, with 61% of total direct compensation weighted on target annual bonus (40%) and performance-based cash (21%) and the remainder comprised of salary (32%) and time-based restricted stock (7%).

Based on this emphasis on performance-based compensation, our Chief Executive Bear’s historical compensation has had a strong relationship with our Company performance. As discussed earlier in the “Executive Summary” section, the Company has generated lower financial results than was targeted in our financial plan, and as a result, our Chief Executive Bear received significantly less performance-based compensation awards than targeted by the Committee at the grant date, as she received no bonus payouts and no performance-based restricted shares or long-term cash earned in either 2011 or 2012. For 2013, as a result of improved Company performance and pursuant to the terms of her Retirement Agreement, Ms. Clark received a bonus payout of 78% of target, prorated for the number of weeks she was employed by the Company in fiscal 2013 prior to her retirement. In accordance with the Retirement Agreement, however, no payout was earned under the performance-based long-term cash program.

Below is a comparison of performance-based compensation granted to our Chief Executive Bear compared to the amount of such compensation that was actually paid or vested based on the Company’s performance:

Summary of Chief Executive Bear Annual Bonuses Paid as a Percent of Target (Ms. Clark)

Year	Target		Actual Payout		Actual Payout Percent of Target
2011	$	659,200	$	0		0	%
2012	$	824,000	$	0		0	%
2013⁽¹⁾	$	443,692	$	377,138		85	%⁽²⁾
3-Year Total	$	1,926,892	$	377,138		20	%

(1)	Amounts prorated for the number of weeks Ms. Clark was employed by the Company in fiscal 2013 prior to her retirement.

(2)	The actual payout includes a $31,058 discretionary bonus payout discussed in the Section below entitled “2013 Bonus Plan”.

Summary of Performance-Based Restricted Shares/Long-Term Cash Earned as a Percent of Target (Ms. Clark)

Year	Target Shares		Target Cash		Shares Vested from Performance		Cash Earned from Performance		Actual Shares/ Cash Earned as a Percent of Target			Notes
2011		27,416		—		0		—		0	%	25% of total LTI weighting
2012		58,220		—		0		—		0	%	50% of total LTI weighting
2013⁽¹⁾		—	$	433,125		—	$	0		0	%	75% of total LTI weighting
3-Year Total		85,636	$	433,125		0	$	0		0	%

(1)	Amounts prorated for the number of weeks Ms. Clark was employed by the Company in fiscal 2013 prior to her retirement. In accordance with Ms. Clark’s Retirement Agreement, no payout was earned under the performance-based long-term cash program.

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-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:* 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 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.

2013 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 Charter provides the Committee with the option of either determining the Chief Executive’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 Bear, on the Chief Executive Bear’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 Charter 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’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 Second Amended and Restated 2004 Stock Incentive Plan (“Stock Incentive Plan”) provides that the Chief Executive Officer and Chief Operations Bear have the limited authority to grant equity awards to Company employees other than executive officers. 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 2013, 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’ 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 November 2012, Meridian reviewed the Company’s compensation peer group and developed recommendations for changes for the January 2013 market study. The peer group review considered the following characteristics:

	•	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 20 peer companies for the January 2013 market study:


bebe stores, inc.	CPI Corp.	Shoe Carnival Inc.
Books A Million Inc.	dELiA*s, Inc.	Sport Chalet, Inc.
Cache Inc.	Destination Maternity Corporation	Steven Madden, Ltd.
CEC Entertainment Inc.	Five Below, Inc.	Vera Bradley Inc.
Christopher & Banks Corporation	Hot Topic, Inc.	Wet Seal Inc.
Citi Trends Inc.	Kirkland’s, Inc.	Zumiez Inc.
Coldwater Creek, Inc.	Leapfrog Enterprises Inc.

A.C., Moore Arts & Crafts, Inc., Benihana Inc. Great Wolf Resources, Inc., Kenneth Cole Productions Inc., McCormick & Schmicks Seafood Restaurants were eliminated from the Company’s peer group for the 2013 analysis. bebe stores, inc., Coldwater Creek, Inc., dELiA*s, Inc., Five Below, Inc., Hot Topic, Inc., and Sport Chalet, Inc. were added to the 2013 peer group. The Company still competes with much larger companies for executive talent, but the Committee believes that the 2013 peer group is more appropriate in most instances for benchmarking purposes. In addition to the peer group information, Meridian also provided size-adjusted, retail industry survey market data.

In January 2013, 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 2012 were within a reasonable range of the market 50^th percentile for our executive team.

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

2013 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 each NEO 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 recommendations of the Chief Executive Bear (except in the case of her own compensation).

Typically, the Committee considers these factors during an annual review in March. In March 2013, the Committee considered salary increases for the NEOs. The Committee undertook an annual performance review of each of the NEOs. The NEOs each prepared a self-evaluation. The Chief Executive Bear completed evaluations of the NEOs other than herself and discussed those evaluations with, and received input from, the Committee. The Chief Executive Bear was primarily responsible for providing feedback to the other NEOs regarding their performance. In the case of the Chief Executive Bear, the Non-Executive Chairman presented the Committee and the Board’s feedback to the Chief Executive Bear on her self-evaluation.

Following completion of these reviews of each individual’s 2012 performance, and with particular weighting on the Company’s 2012 financial results, the Committee approved no salary adjustments for the NEOs in 2013. In lieu of a salary adjustment, based on its subjective evaluation of their 2012 performance, the Committee awarded discretionary lump sum cash payments of $10,000 to Mr. Fencl and $7,500 to Mr. Finnegan.

Upon her joining the Company in June 2013, based on peer data provided by Meridian, Ms. John’s base salary was set at annual rate of $625,000 for 2013.

2013 Bonus Plan

The Committee continued the use of a cash bonus plan in 2013 for the NEOs, granting potential cash bonuses pursuant to the Build-A-Bear Workshop, Inc. 2013 Bonus Plan (the “2013 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’ 2013 cash bonuses completely with the interests of our stockholders.

On March 19, 2013, based on peer data provided by Meridian, the Committee established the 2013 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 2013 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”):

Name	Base Bonus Payout
Maxine Clark		125	%
Tina Klocke		70	%
Eric Fencl		40	%
Kenneth Wine		40	%
David Finnegan		40	%

Upon her joining the Company in June 2013, based on peer data provided by Meridian, Ms. John’s Base Bonus Payout was set at 100% for 2013 and her bonus payout for 2013 was guaranteed to be no less than 50% of her annual base pay prorated based on the number of weeks during fiscal 2013 that she was employed by the Company.

For the 2013 Bonus Plan, the Committee focused the performance goals around returning the Company to profitability through the use of a single performance metric—consolidated pretax income. The cash bonus, if any, to be paid to each respective NEO was to be calculated based on the consolidated pretax income goals described in the table below.

Achievement Level	Consolidated Pretax Income (Loss)			Percentage of Base Bonus Calculation
Threshold	$	(7,743,000	)		25	%
Plan	$	(4,042,000	)		50	%
Target	$	1			100	%
Maximum	$	3,360,000			150	%

The 2013 Bonus Plan provided for mandatory bonus payouts only if the Company’s 2013 consolidated pretax income (after providing for any bonus expense) exceeded the threshold amount. Under the 2013 Bonus Plan, consolidated pretax 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 2013 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 2014, the Committee determined that the Company exceeded the threshold 2013 consolidated pretax loss level for a bonus payout under the 2013 Bonus Plan, and the Committee elected to approve bonuses for 2013 performance. The Company’s consolidated pretax loss of $2,118,000 was a significant improvement over the Company’s consolidated pretax loss of $48,429,000 in 2012 and fell between the plan and target levels of the 2013 Bonus Plan. Based on the interpolation between those levels as defined in the plan, the Committee approved bonus payouts for NEOs equal to 78% of each executive’s 2013 Base Bonus Calculation in the amounts set forth below:

Name	2013 Bonus Plan Payout
Sharon John	$	262,500
Tina Klocke		194,922
Eric Fencl		93,600
Kenneth Wine		93,600
David Finnegan		92,664
Maxine Clark		346,080

In March 2014, the Committee took note of the fact that the Company had incurred approximately $878,000 of unbudgeted management transition costs in 2013 related to the retirement of the Chief Executive Bear, the hiring of a Chief Executive Officer, and severance for the Chief Marketing Bear. While these actions are in the long-term best interests of the Company, the unbudgeted expenses had the effect of decreasing 2013 Bonus Plan payouts by approximately 7% of each plan participant’s 2013 Base Bonus Calculation. As a result, the Committee awarded discretionary bonus payouts to all participants in the 2013 Bonus Plan in the amount of the difference between each participant’s 2013 Bonus Plan Payout and the amount that the payout would have been had these unbudgeted management transition costs not been incurred. The Committee awarded such discretionary bonuses to each NEO in the following amounts:

Name	2013 Discretionary Bonus Payout
Sharon John	$	23,558
Tina Klocke		17,493
Eric Fencl		8,400
Kenneth Wine		8,400
David Finnegan		8,316
Maxine Clark		31,058

2013 Long-Term Incentive Program

The objective of the Company’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.

Under the Stock 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 Stock Incentive Plan allows the Committee to grant the following types of awards, in its discretion: options, stock appreciation rights (“SARs”), 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 stock. In most instances, these long-term grants vest over a multi-year basis.

The Committee 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 who are hired or promoted by the Company after the March Committee meeting may receive grants from the Chief Executive Officer or Chief Operating Bear 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 release such information for the purpose of affecting the value of executive compensation. The exercise price of stock subject to options awarded under the Stock Incentive Plan is the fair market value of the stock on the date of grant. Under the terms of the Stock Incentive Plan, the fair market value of the stock is the closing sales price of the stock on the date of grant as reported by the NYSE.

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

In January and March 2013, 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 Stock Incentive Plan. Primarily due to the Company’s historical share dilution and share availability constraints, the Committee approved a change to the approach for granting long-term incentives to our NEOs. For 2013, the Committee approved a grant of performance-based cash awards (75% of grant value) and time-based restricted stock (25% of grant value) for NEOs. The design and mix were structured to maintain a strong emphasis on performance while preserving shares authorized to be issued under the Stock Incentive Plan. For 2014 awards and beyond, the Committee will review alternatives for returning to a more equity-based approach when our share availability situation improves. The performance-based long-term cash awards are based on the same fiscal year 2013 pretax income goals as the 2013 Bonus Plan. However, if awards are earned under this program for performance, they are subject to four years of ratable vesting.

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’ total target direct compensation at or near the median of total compensation of market data; and (3) grant levels required to retain key individual employee contributors. In establishing the size of the 2013 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 keep NEOs’ target grant levels at 2012 levels.

On March 19, 2013, the Committee approved the following 2013 long-term incentive awards to the NEOs under the Stock Incentive Plan:

Name	Number of Shares of Time-Based Restricted Stock		Target Value of Long-Term Cash Awards
Maxine Clark		28,032	$	433,125
Tina Klocke		9,708	$	150,000
Eric Fencl		6,668	$	103,050
Kenneth Wine		5,584	$	86,250
David Finnegan		5,584	$	86,250

Long-term incentive grants to Ms. John were made in conjunction with her joining the Company as Chief Executive Officer in June 2013 and are described in further detail in the Section below entitled “Compensation Arrangements with the Chief Executive Officer—Employment, Confidentiality and Noncompete Agreement with Ms. John.”

The time-based restricted stock vests at the rate 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 long-term cash program (“2013 Performance Cash LTIP”) was subject to the achievement of the Company’s fiscal 2013 consolidated pretax income (loss). The program was structured so that any awards earned from the achievement of the established consolidated pretax income (loss) goals would vest at the rate of 25% per year over four 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 time-based restricted stock.

The value of 2013 Performance Cash LTIP awards, if any, that could have been earned by each NEO was calculated by multiplying the target value awarded to such executive officer set forth above by the applicable percentage of target value of performance-based long-term cash earned calculation set forth in column (3) below for fiscal 2013 consolidated pretax income.

Fiscal 2013 Performance-Based Long-Term Cash Payout

(1) Achievement Level	(2) Consolidated Pretax Income (Loss)			(3) Percentage of Target Value of Performance-Based Long-Term Cash Earned Calculation
Threshold	$	(7,743,000	)		25	%
Plan	$	(4,042,000	)		50	%
Target	$	1			100	%
Maximum	$	3,360,000			150	%

In March 2014, the Committee determined that the Company exceeded the threshold 2013 consolidated pretax loss level for a payout under the 2013 Performance Cash LTIP. The Company’s consolidated pretax loss of $2,118,000 was a significant improvement over the Company’s consolidated pretax loss of $48,429,000 in 2012 and fell between the plan and target levels of the 2013 Performance Cash LTIP. Based on the interpolation between those levels as defined in the program, the Committee approved 2013 Performance Cash LTIP payouts for NEOs equal to 78% of each executive’s Target Value of Long-Term Cash Award in the amounts set forth below:

Name	2013 Performance Cash LTIP Payout
Sharon John	$	365,586
Tina Klocke		117,000
Eric Fencl		80,379
Kenneth Wine		67,275
David Finnegan		67,275
Maxine Clark		0

These payout amounts will vest and be paid at the rate of 25% per year over four years from the date of grant, beginning on the first anniversary of the date of grant.

In March 2014, the Committee took note of the fact that the Company had incurred approximately $878,000 of unbudgeted management transition costs in 2013 as discussed above. While these actions are in the long-term best interests of the Company, the unbudgeted expenses had the effect of decreasing 2013 Performance Cash LTIP payout by approximately 7% of each plan participant’s target value. As a result, the Committee awarded discretionary LTIP payouts to all participants in the 2013 Performance Cash LTIP in the amount of the difference between each participant’s 2013 Performance Cash Payout and the amount that the payout would have been had these unbudgeted management transition costs not been incurred. These discretionary LTIP payouts will vest and be paid at the rate of 25% per year over four years from the date of grant, beginning on the first anniversary of the date of grant.

The Committee awarded such discretionary LTIP payouts to each NEO in the following amounts:

Name	2013 Discretionary LTIP Payout
Sharon John	$	32,809
Tina Klocke		10,500
Eric Fencl		7,214
Kenneth Wine		6,038
David Finnegan		6,038
Maxine Clark		0

Pursuant to the terms of the Stock 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 2013 equity award agreements for the NEOs and other participants each contained 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.

Further information regarding the 2013 grants of long-term incentive awards made to NEOs can be found in the 2013 Grants of Plan-Based Awards Table.

Compensation Arrangements with the Chief Executive Bear and Chief Executive Officer

Retirement, Separation Agreement and General Release with Ms. Clark

In connection with the announcement of Ms. Clark’s planned retirement, on January 28, 2013 the Company and Ms. Clark entered into the Retirement Agreement which provides that her employment with the Company would terminate following a six-week transition period following the date that a successor Chief Executive Officer was employed by the Company. Ms. Clark will receive an aggregate of $1,318,400, less any applicable withholding, payable in equal installments in accordance with the Company’s regular payroll dates for a period of 24 months following her retirement, reduced by any cash compensation from a subsequent employer during that period. During this 24-month period, Ms. Clark will also receive the amount that the Company has been paying toward her coverage under the Company’s welfare benefit plans, also payable in equal installments in accordance with the Company’s regular payroll dates. In addition, Ms. Clark remained eligible to receive a bonus under the Company’s 2012 bonus plan for its chief executives, though no bonuses were earned based on fiscal 2012 performance, and remained eligible to receive a bonus under the Company’s 2013 Bonus Plan for chief executives to the extent performance and other criteria were met under the 2013 Bonus Plan. Ms. Clark’s bonus for 2013 was pro-rated based on the number of full calendar weeks Ms. Clark was employed by the Company. All shares of Ms. Clark’s restricted shares and stock options which had not vested on the date of her retirement continued to vest through March 31, 2014, and all vested unexercised stock options will remain exercisable until the earlier of their original expiration date or April 30, 2014. The Company paid up to $25,000 of Ms. Clark’s legal expenses incurred in connection with drafting and negotiation of the Retirement Agreement. Ms. Clark also agreed to (1) a general release of claims, (2) keep Company information secret and confidential, (3) certain non-compete restrictions for 24 months following retirement, and (4) certain non-solicitation restrictions for 36 months following retirement.

On January 28, 2013, the Company and Ms. Clark also entered into a six-month Consulting Agreement (the “Consulting Agreement”) which began upon her retirement. During such six-month period, Ms. Clark was paid consulting fees of $29,166 per month.

Employment, Confidentiality and Noncompete Agreement with Ms. John

The Company and Ms. John entered into an Employment, Confidentiality and Noncompete Agreement (“Employment Agreement”) effective as of June 3, 2013 in connection with her appointment as Chief Executive Officer and Chief President Bear. The Employment Agreement has an initial term of three years from June 3, 2013 and renews from year-to-year thereafter. The Employment Agreement may be terminated by the Company prior to the end of the term upon death, disability, for cause (as defined in the Employment Agreement) or without cause. Ms. John may terminate the Employment Agreement for good reason (as defined in the Employment Agreement). If the Company terminates Ms. John’s employment without cause or if Ms. John 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 (24 months if such termination occurs within 12 months after a change of control (as defined in the Employment Agreement)), such payments to be reduced by any amounts received from a subsequent employer during such period, and for the period that welfare benefits are continued under COBRA, the Company will continue to pay the Company’s portion of the medical plan premium. As compensation for her services, Ms. John will receive an annual base salary at a rate not less than $625,000 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. 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. Ms. John’s bonus for 2013 performance would not have been less than 50% of her base salary, prorated based on the number of full calendar weeks during the fiscal 2013 for which she was employed by the Company. 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. 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 to the greatest amount payable that would not trigger such excise tax.

The Company also agreed to pay Ms. John a signing bonus of $112,500 which Ms. John agreed to repay if she voluntarily terminates her employment without good reason or if she is terminated by the Company for cause (as defined in the Employment Agreement) during the first year of employment. In addition, the Company agreed to issue a grant of time-based vested restricted stock with a value of $656,300, non-qualified stock options to acquire 195,512 shares of Company common stock at an exercise price equal to the closing price of the Company’s common stock on June 3, 2013, and a long-term performance-based cash incentive target award of $468,700. The time-based restricted stock and the non-qualified 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 date of grant. The long-term performance-based cash incentive target award was structured so that any award earned from the achievement of the established consolidated pretax income (loss) goals would vest at the rate of 25% per year over four years, beginning on March 31, 2014.

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) on the assumption that the Company’s share price will decrease. The Company’s insider trading policy also prohibits Directors, NEOs and other employees from 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.

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

The 2013 Bonus Plan provides that in the event of a restatement impacting consolidated pretax income (loss), the Company would recover from the NEO the applicable amount which should not have been paid based on the restatement, plus interest.

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	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’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 2013.

Prior to the Chief Executive transition in June 2013, the ownership guideline for the Chief Executive position was six times base salary. In November 2013, the Committee reviewed the stock ownership guideline for the Chief Executive position compared to the Company’s peer group and determined that a guideline of five times salary was more appropriate for Ms. John. The Committee will continue to monitor stock ownership guidelines and levels for the NEOs on an annual basis.

Retirement and Other Post-Termination Benefits

We have entered into employment 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 of which the Company pays 100% of the premiums for senior level employees, including the NEOs, as discussed below). The employment agreements for the NEOs provide for certain payments to be made to them if their employment is terminated under certain circumstances. 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 severance 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 dining 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 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 opportunity 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 2013, the Company matched 15% of the participants’ 2012 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 2013, the Company matched 15% of the participants’ 2012 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. Of the NEOs, only Ms. Klocke and Mr. Finnegan participated in this plan during 2013.

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. Code Section 162(m) provides that performance-based compensation is not subject to this deductibility limit. The Company attempts to structure its compensation arrangements to permit deductibility under Code Section 162(m), unless the benefit of such deductibility is 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 deems appropriate, to enter into compensation arrangements under which payments may not be deductible under Code Section 162(m). Thus, deductibility is not the sole factor used by the Committee in ascertaining appropriate levels or modes of compensation. In any event, there is no guarantee that performance-based compensation paid to the NEOs will qualify for the deductibility exception provided by Code Section 162(m).

Accounting Considerations

The Committee has taken certain accounting 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 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.

COMPENSATION AND DEVELOPMENT COMMITTEE REPORT

The Company’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 Board of Directors:

Coleman Peterson, Chairman

Mary Lou Fiala

James M. Gould

Virginia Kent

Thomas Pinnau

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 2013 the Compensation and Development Committee was comprised of Coleman Peterson (Chair), Mary Lou Fiala, James M. Gould, Virginia Kent, and Thomas Pinnau, none of whom are 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.

2013 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 28, 2013, December 29, 2012, and December 31, 2011. 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⁾	2013	$	336,538	$	168,867	$	656,289	$	770,317	$	628,086	$	117,744	$	2,677,841
Chief Executive Officer
and Chief President Bear
Tina Klocke	2013		357,000		27,993		49,996		-		311,922		3,020		749,931
Chief Operations	2012		355,116		-		164,841		-		-		4,146		524,103
and Financial Bear	2011		339,231		-		176,886		58,752		-		7,954		582,823
and Treasurer
Eric Fencl	2013		300,000		15,614		34,340		-		173,979		1,871		525,804
Chief Bearrister	2012		298,277		10,000		113,240		-		-		2,266		423,783
— General Counsel,	2011		291,285		-		121,517		40,370		-		3,538		456,710
International Franchising and Secretary
Kenneth Wine	2013		300,000		14,438		28,758		-		160,875		746		504,817
Chief	2012		11,538		25,000		27,471		-		-		11		64,020
Merchandise Bear
David Finnegan	2013		297,000		14,354		28,758		-		159,939		2,994		503,045
Chief	2012		295,358		7,500		94,764		-		-		3,580		401,202
Information	2011		288,773		-		101,720		33,784		-		3,482		427,759
Bear
Maxine Clark⁽⁷⁾	2013		659,200		31,058		144,365		-		346,080		189,560		1,370,263
Former Chief	2012		659,200		-		475,949		-		-		3,568		1,138,717
Executive Bear	2011		654,031		-		510,760		169,954		-		4,273		1,339,018

(1)	As discussed in the “Compensation Discussion and Analysis,” the amounts appearing in the Bonus column for 2013 include discretionary bonus payouts and discretionary LTIP payouts awarded by the Compensation and Development Committee for (i) the difference between each Named Executive Officer’s 2013 Bonus Plan Payout and the amount that the payout would have been had certain unbudgeted management transition costs not been incurred (“2013 Discretionary Bonus Payout”), and (ii) the difference between each participant’s 2013 Performance Cash Payout and the amount that the payout would have been had those unbudgeted management transition costs not been incurred (“2013 Discretionary LTIP Payout”). The 2013 Discretionary Bonus Payouts were approved for each Named Executive Officer in March 2014 in the following amounts: Sharon John— $23,558; Tina Klocke — $17,493; Eric Fencl — $8,400; Kenneth Wine — $8,400; David Finnegan — $8,316; and Maxine Clark — $31,058. The 2013 Discretionary LTIP Payouts for each Named Executive Officer were: Sharon John— $32,809; Tina Klocke — $10,500; Eric Fencl — $7,214; Kenneth Wine — $6,038; and David Finnegan — $6,038. Provided the Named Executive Officer is still employed by the Company, the 2013 Discretionary LTIP Payouts will be paid at the rate of 25% per year over four years no later than April 15^th beginning in 2014. Bonus amounts reported for Ms. John also include her signing bonus and for Messrs. Fencl and Finnegan, discretionary bonuses awarded for 2012 performance by the Committee in lieu of salary increases.

(2)	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 2013, fiscal 2012, and fiscal 2011. In fiscal 2013, all of the stock awards were in the form of time-based restricted stock. In fiscal 2012 and 2011, the grants consisted of both performance-based restricted stock and time-based restricted stock. Because the Company did not achieve the threshold earnings per share target for fiscal 2012 or 2011, all of the performance-based restricted shares were forfeited the following March. The recipients have the right to vote and receive dividends as to all unvested shares of 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 2013, 2012 and 2011 vest at the rate of 25% per year over four years from the date of grant, beginning on the first anniversary of the date of grant. If any of the performance-based restricted stock grants in 2012 and 2011 had been earned, they would have also vested at the rate of 25% per year over four years from the date of grant, beginning on the first anniversary of the date of grant. See 2013 Grants of Plan-Based Awards Table. See also Note 12 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended December 28, 2013 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 threshold performance levels per the instructions to Item 402(c) of Regulation S-K.

(3)	The amounts appearing the Option Awards column represent the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 for options granted in fiscal 2013 and 2011. See Note 12 to the Company’s Consolidated Financial Statements filed as part of our Annual Report on Form 10-K for the year ended December 28, 2013 for a discussion of the assumptions used in the valuation of the awards. The exercise price of the option granted to Ms. John in fiscal 2013 is equal to the closing price of the Company’s common stock on June 3, 2013, the date of grant, and the option vests at the rate of 25% per year over four years from the grant date.

(4)	The amounts appearing in Non-Equity Incentive Plan Compensation column represent the total of the (i) 2013 Bonus Plan Payout and (ii) 2013 Performance Cash LTIP Payout. The 2013 Bonus Plan Payouts which were approved in March 2014 were as follows: Sharon John— $262,500; Tina Klocke — $194,922; Eric Fencl — $93,600; Kenneth Wine — $93,600; David Finnegan — $92,664; and Maxine Clark — $346,080. The 2013 Performance Cash LTIP Payouts are as follows: Sharon John— $365,586; Tina Klocke — $117,000; Eric Fencl — $80,379; Kenneth Wine — $67,275; and David Finnegan — $67,275. The 2013 Performance Cash LTIP Payouts will vest and be paid at the rate of 25% per year over four years no later than April 15^th beginning in 2014, provided the Named Executive Officer remains employed by the Company on the applicable payout date.

(5)	“All Other Compensation” includes the Company’s contribution to the 401(k) plan and to the non-qualified deferred compensation plan, payment by the Company of long-term disability, and life insurance premiums for the benefit of the Named Executive Officers. Sharon John received $117,328 in relocation reimbursement. For fiscal 2013, Company contributions to our 401(k) plan were as follows: Tina Klocke — $1,125; Eric Fencl — $1,125; Kenneth Wine — $1,125; David Finnegan — $1,125; and Maxine Clark — $1,125. For fiscal 2013, Company contributions to our non-qualified deferred compensation plan were as follows: Tina Klocke — $ 1,125; and David Finnegan — $1,125. For fiscal 2013, Company-paid premiums for long-term disability insurance were as follows: Sharon John— $308; Tina Klocke — $616; Eric Fencl — $616; Kenneth Wine — $616; David Finnegan — $616; and Maxine Clark — $328. For fiscal 2013, Company-paid premiums for life insurance were as follows: Sharon John— $108; Tina Klocke — $154; Eric Fencl — $130; Kenneth Wine — $130; David Finnegan — $128; and Maxine Clark — $108. Amounts reported for Ms. Clark also include $160,415 in consulting fees paid pursuant to her Consulting Agreement, $25,000 for the reimbursement of legal fees relating to her Retirement Agreement and $2,584 reimbursement for certain welfare benefit costs as required under her Retirement Agreement.

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

(7)	Amounts reported as salary for Ms. Clark in 2013 represent salary received as Chief Executive Bear through her retirement on July 13, 2013. Payments received pursuant to the Retirement Agreement and Consulting Agreement between Ms. Clark and the Company are included in “All Other Compensation.”

2013 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 December 28, 2013. All awards were granted pursuant to the Stock Incentive Plan.

Name	Grant Date	Estimated Possible Payouts Under Non-Equity Incentive Plan Awards Threshold ($)		Target ($)		Maximum ($)		All Other Stock Awards: Number of Shares of Stock or Units (#)		All Other Option Awards: Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards

Sharon John	6/03/13 ⁽¹⁾	$	180,288	$	360,577	$	540,865
	6/03/13 ⁽²⁾		117,175		468,700		703,050
	6/03/13 ⁽⁴⁾								100,044					$	656,289
	6/03/13 ⁽⁵⁾										195,512	$	6.56		770,317


Tina Klocke	3/19/13 ⁽¹⁾		62,475		249,900		374,850
	3/19/13 ⁽²⁾		37,500		150,000		225,000
	3/19/13 ⁽³⁾								9,708						49,996


Eric Fencl	3/19/13 ⁽¹⁾		30,000		120,000		180,000
	3/19/13 ⁽²⁾		25,763		103,050		154,757
	3/19/13 ⁽³⁾								6,668						34,340


Kenneth Wine	3/19/13 ⁽¹⁾		30,000		120,000		180,000
	3/19/13 ⁽²⁾		21,563		86,250		129,375
	3/19/13 ⁽³⁾								5,584						28,758


David Finnegan	3/19/13 ⁽¹⁾		29,700		118,800		178,200
	3/19/13 ⁽²⁾		21,563		86,250		129,375
	3/19/13 ⁽³⁾								5,584						28,758


Maxine Clark	3/19/13 ⁽¹⁾		206,000		824,000		1,236,000
	3/19/13 ⁽²⁾		108,281		433,125		649,688
	3/19/13 ⁽³⁾								28,032						144,365

(1)	Amounts represent the range of possible cash payouts for fiscal 2013 awards under the 2013 Bonus Plan. This chart reflects the threshold, target and maximum bonus amounts payable under the 2013 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 base salary paid in 2013. The amounts for Ms. John are prorated to reflect the number of weeks she was employed during fiscal 2013. As noted in the Section entitled “Compensation Discussion and Analysis”, the Company’s consolidated pretax loss for fiscal 2013 was above the threshold target and below the target level and, therefore, the payout was interpolated between the two payout amounts.

(2)	Amounts represent the range of possible cash payouts for fiscal 2013 awards under the 2013 Performance Cash LTIP. This chart reflects the threshold, target and maximum bonus amounts payable under the 2013 Performance Cash LTIP if pre-established financial targets would have been met. The amounts for Ms. John are prorated to reflect the number of weeks she was employed during fiscal 2013. As noted in the Section entitled “Compensation Discussion and Analysis”, the Company’s consolidated pretax loss for fiscal 2013 was above the threshold target and below the target level and, therefore, the payout was interpolated between the two payout amounts.

(3)	These restricted stock awards are subject to time-based vesting only and will vest in equal installments over four years beginning on the first anniversary of the grant date. Executives 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 $5.15 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(4)	These restricted stock awards are subject to time-based vesting only and will vest in equal installments over four years beginning on the first anniversary of the grant date. Executives 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 $6.56 per share. The grant date fair value is computed in accordance with FASB ASC Topic 718.

(5)	These stock options are subject to time-based vesting only and will vest in equal installments over four 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 2013 FISCAL YEAR-END

The following table discloses information regarding outstanding awards under the Company’s Stock Incentive Plan, as amended, as of the fiscal year end of December 28, 2013.

	Option Awards							Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable⁽¹⁾		Option Exercise Price ($)		Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)⁽²⁾		Market Value of Shares or Units of Stock That Have Not Vested ($)⁽³⁾

Sharon John		-		195,512	$	6.56	6/3/2023
									100,044		774,341

Tina Klocke		25,000				8.78	3/16/2014
		6,500				34.65	3/8/2015
		36,708				5.11	3/17/2019
		22,404		7,468		6.59	3/23/2020
		7,690		7,690		6.21	3/22/2021
									38,799		300,304

Eric Fencl		19,596				5.11	3/17/2019
		12,882		4,294		6.59	3/23/2020
		5,284		5,284		6.21	3/22/2021
									26,151		202,409

Kenneth Wine									11,323		87,640

David Finnegan		2,000				34.65	3/8/2015
		14,280				5.11	3/17/2019
		11,763		3,921		6.59	3/23/2020
		4,422		4,422		6.21	3/22/2021
									22,087		170,953

Maxine Clark⁽⁴⁾		36,234				8.78	3/16/2014
		35,000				34.65	3/8/2015
		61,608		20,536		6.59	3/23/2020
		22,206		22,206		6.21	3/22/2021
									111,415		862,352

(1)	The amounts appearing in this column represent the total number of time-based stock options that have not vested as of December 28, 2013. 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.

(2)	The amounts appearing in this column represent the total number of time-based restricted shares that have not vested as of December 28, 2013. All restricted stock awards 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. Restricted stock granted on March 23, 2010 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 unvested restricted stock held under the March 2010 award by our Named Executive Officers at December 28, 2013 are as follows: Tina Klocke — 4,474; Eric Fencl — 2,572; David Finnegan — 2,349; and Maxine Clark — 12,302. Restricted stock granted on March 22, 2011 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 unvested restricted stock held under the March 2011 award by our Named Executive Officers at December 28, 2013 are as follows: Tina Klocke — 9,494; Eric Fencl — 6,522; David Finnegan — 5,460; and Maxine Clark — 27,416. 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 amounts of unvested restricted stock held under the March 2012 award by our Named Executive Officers at December 28, 2013 are as follows: Tina Klocke — 15,123; Eric Fencl — 10,389; David Finnegan — 8,694; and Maxine Clark — 43,665. Restricted stock granted to Mr. Wine on December 3, 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 and the amount of unvested restricted stock under this grant at December 28, 2013 was 5,739 shares. 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 unvested restricted stock held under the March 2013 award by our Named Executive Officers at December 28, 2013 are as follows: Tina Klocke — 9,708; Eric Fencl — 6,668; Kenneth Wine — 5,584; David Finnegan — 5,584; and Maxine Clark — 28,032. 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 December 28, 2013 was 100,044 shares.

(3)	The amounts appearing in this column represent the aggregate market value of time-based restricted shares that have not vested as of December 28, 2013 and are based on the closing price of $7.74 for the shares of common stock on December 27, 2013.

(4)	As discussed in the “Compensation Discussion and Analysis”, the Company entered into a Retirement Agreement with Ms. Clark in January 2013, the terms of which provide that following her retirement all vested unexercised stock options will expire on the earlier of their original expiration dates or April 30, 2014. Pursuant to the terms of her Retirement Agreement, following her retirement all of Ms. Clark’s restricted stock and stock options that had not vested as of the date of her retirement continued to vest through March 31, 2014.

2013 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 December 28, 2013.

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($)
Sharon John		—	$	—		—	$	—
Tina Klocke		—		—		19,034		100,342
Eric Fencl		—		—		11,843		62,545
Kenneth Wine		—		—		1,913		16,930
David Finnegan		—		—		9,833		52,034
Maxine Clark		105,016		190,340		54,217		285,753

2013 NON-QUALIFIED DEFERRED COMPENSATION

The following table provides information regarding our Named Executive Officers’ non-qualified deferred compensation during the fiscal year ended December 28, 2013.

Name	Executive Contributions in Last FY($)		Registrant Contributions in Last FY($)⁽¹⁾		Aggregate Earnings in Last FY($)⁽¹⁾		Aggregate Balance at Last FYE($)⁽²⁾
Sharon John	$	-	$	-	$	-	$	-
Tina Klocke⁽³⁾		10,710		1,125		5,154		141,458
Eric Fencl		-		-		-		-
Kenneth Wine		-		-		-		-
David Finnegan⁽³⁾		21,318		1,125		8,351		156,654
Maxine Clark		-		-		-		-

(1)	Registrant Contributions in the Last Fiscal Year during the last fiscal year 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)	Ms. Klocke and Mr. Finnegan were the only Named Executive Officers who contributed to the Non-Qualified Deferred Compensation Plan during 2013. 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 2014 as the Company’s matching contribution for 2013 contributions, which was 20% up to the maximum of 6% of contributions made to the plan combined with the contributions made to the Company’s qualified 401(k) 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 Sharon John, our Chief Executive Officer and Chief President Bear; Tina Klocke, our Chief Operations and Financial Bear and Treasurer; Eric Fencl, our Chief Bearrister—General Counsel, International Franchising and Secretary; Kenneth Wine, our Chief Merchandise Bear; David Finnegan, our Chief Information Bear; and certain other executives. Prior to her retirement in July 2013, the Company had an employment agreement with Maxine Clark, our Chief Executive Bear. The material terms of the agreements, as amended, are described below.

The material terms of Ms. John’s employment agreement are discussed in the Section “Compensation Discussion and Analysis.”

Ms. Klocke’s agreement had an initial term of three years from March 7, 2004 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. Klocke may terminate the agreement in the event the Company materially breaches the agreement or the Company relocates Ms. Klocke to a location more than 100 miles from St. Louis and fails to cure such breach after notice. If we terminate Ms. Klocke’s employment without cause or if Ms. Klocke terminates her employment for good reason (as defined in the agreement), we are obligated to continue her base salary for a period of 12 months after her termination, such payments to be reduced by any amounts received from a subsequent employer during such period. As compensation for her services, Ms. Klocke will receive an annual base salary at a rate not less than $190,000 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. During the time since her employment agreement was entered into in March 2004, Ms. Klocke has periodically received salary increases. Effective March 2012, Ms. Klocke’s annual base salary was increased to $357,000 following such review. If Ms. Klocke’s performance targets are achieved, her salary must be increased annually by no less than the average percentage increase given to all of our other executive employees during that fiscal year. If the Company exceeds certain performance objectives determined annually by our Board of Directors, Ms. Klocke will receive an annual bonus of not less than 35% of her annual base salary, payable in cash, stock, stock options or a combination thereof. For 2013, her bonus target was 70% of her annual base salary.

Mr. Fencl’s agreement had an initial term of three years from July 1, 2008 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. Mr. Fencl may terminate the agreement in the event the Company materially breaches the agreement and fails to cure such breach after notice or the Company issues a notice of non-renewal which results in the expiration of the agreement. If we terminate Mr. Fencl’s employment without cause or if Mr. Fencl terminates his employment for good reason (as defined in the agreement), we are obligated to continue his base salary for a period of 12 months after his termination, such payments to be reduced by any amounts received from a subsequent employer during such period. For the period that welfare benefits are continued under COBRA, the Company will continue to pay the Company’s portion of the medical plan premium. As compensation for his services, Mr. Fencl will receive an annual base salary at a rate not less than $264,000 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. During the time since his employment agreement was entered into in July 2008, Mr. Fencl has periodically received salary increases. Effective March 2012, Mr. Fencl’s annual base salary was $300,000 following such review. If Mr. Fencl’s performance targets are achieved, his salary must be increased annually by no less than the average percentage increase given to all of our other executive employees during that fiscal year. If the Company exceeds certain performance objectives determined annually by our Board of Directors, Mr. Fencl will receive an annual bonus of not less than 35% of his annual base salary, payable in cash, stock, stock options or a combination thereof. For 2013, his bonus target was 40% of his annual base salary.

Mr. Wine’s agreement had an initial term of three years from December 3, 2012 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. Mr. Wine may terminate the agreement in the event the Company materially breaches the agreement and fails to cure such breach after notice or the Company issues a notice of non-renewal which results in the expiration of the agreement. If we terminate Mr. Wine’s employment without cause or if Mr. Wine terminates his employment for good reason (as defined in the agreement), we are obligated to continue his base salary for a period of 12 months after his termination, such payments to be reduced by any amounts received from a subsequent employer during such period. For the period that welfare benefits are continued under COBRA, the Company will continue to pay the Company’s portion of the medical plan premium. As compensation for his services, Mr. Wine will receive an annual base salary at a rate not less than $300,000 which rate will be reviewed annually and be commensurate with similarly-situated executives in similarly-situated firms. If Mr. Wine’s performance targets are achieved, his salary must be increased annually by no less than the average percentage increase given to all of our other executive employees during that fiscal year. If the Company exceeds certain performance objectives determined annually by our Board of Directors, Mr. Wine will receive an annual bonus of not less than 40% of his annual base salary, payable in cash, stock, stock options or a combination thereof. For 2013, his bonus target was 40% of his pro-rated annual base salary.