)

Stock Incentive Plans

2003,

the Company adopted the Build-A-Bear Workshop, Inc.

2002

Stock Incentive Plan

(the

2002

Plan). In

2004,

the Company adopted the Build-A-Bear Workshop, Inc.

2004

Stock Incentive Plan (the

2004

Plan) which the Company amended and restated in

2009

and

2014

(collectively, the Plans).

Under the Plans, as amended

and approved by the Company’s stockholders in

2014,

up to

1,475,000

shares of common stock, in addition to shares of stock subject to awards outstanding under the

2002

Plan and the

2004

Plan that

may

lapse, terminate, be forfeited or otherwise expire were reserved and

may

be granted to employees and nonemployees of the Company. The Plans allow for the grant of awards including incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and other stock-based and cash-based awards. Options granted under the Plans expire no later than

years from the date of the grant. The exercise price of all options, including each incentive stock option, shall not be less than

100%

of the fair value of the stock subject to the option on the date the option is granted. The vesting provision of individual awards is at the discretion of the Compensation and Development Committee of the Company’s Board of Directors and generally ranges from

one

four

years.

(a)

Stock Options

The following table is a summary of the balance and activity for the Plans related to stock options for the periods presented:

					Weighted		Aggregate
			Weighted		Average		Intrinsic
	Number of		Average		Remaining		Value
	Shares		Exercise Price		Contractual Term		(in thousands)
Outstanding, December 28, 2013		1,065,012	$	8.72
Granted		104,064		9.59
Exercised		351,856		6.64
Forfeited		96,019		21.54
Canceled or expired		6,750		8.78
Outstanding, January 3, 2015		714,451		8.14
Granted		71,517		20.58
Exercised		150,409		6.07
Forfeited		19,003		12.15
Canceled or expired		41,705		32.95
Outstanding, January 2, 2016		574,851		8.30
Granted		213,156		13.68
Exercised		30,223		5.91
Forfeited		—		—
Canceled or expired		—		—
Outstanding, December 31, 2016		757,784	$	9.91		6.5	$	3,369

Options Exercisable As Of:
December 31, 2016		427,527	$	7.32		5.0	$	2,902

The expense recorded related to options granted during fiscal

2016,

2015

and

2014

was determined using the Black-Scholes option pricing model and the provisions of Staff Accounting Bulletin

107

and

110,

which allow the use of a simplified method to estimate the expected term of “plain vanilla” options. The assumptions used in the option pricing model during fiscal

2016,

2015

and

2014

were:

	2016				2015				2014

Dividend yield			0%				0%				0%
Historical volatility		52%	-	55%		51%	-	58%			65%
Risk-free rate		1.4%	-	1.6%		1.5%	-	1.8%		1.7	-	2.1%
Expected life (years)			6				6			6	-	6.25
Weighted average grant date fair value			$7.13				$11.20				$5.80

The total grant date fair value of options exercised in fiscal

2016,

2015

and

2014

was approximately

$0.1

million,

$0.6

million and

$0.6

million, respectively. The total intrinsic value of options exercised in fiscal

2016,

2015

and

2014

was approximately

$0.2

million,

$2.1

million and

$1.6

million, respectively. The Company generally issues new shares to satisfy option exercises.

Shares available for future option, non-vested stock and restricted stock grants were

545,799

and

1,271,884

at the end of

2016

and

2015,

respectively.

(b)

Restricted Stock

Recipients of time-based restricted stock awards have the right to vote and receive dividends as to all unvested shares.

The following table is a summary of the balance and activity for the Plans related to unvested time-based restricted stock granted as compensation to employees and directors for the periods presented:

	Restricted Stock				Performance Shares
			Weighted				Weighted
			Average				Average
	Number of		Grant Date		Number of		Grant Date
	Shares		Fair Value		Shares		Fair Value
Outstanding, December 28, 2013		720,198	$	5.91		—	$	-
Granted		202,274		10.31		—		—
Vested		345,577		6.25		—		—
Forfeited		157,221		6.21		—		—
Outstanding, January 3, 2015		419,674		7.64		—		—
Granted		107,004		19.59		86,222		20.71
Vested		205,137		7.84		—		—
Forfeited		44,988		8.89		2,160		20.80
Canceled		—		—		—		—
Outstanding, January 2, 2016		276,553		11.93		84,062		20.70
Granted		203,613		13.58		176,611		13.68
Vested		152,548		11.22		7,039		20.56
Forfeited		11,502		13.45		—		—
Canceled		—		—		12,493		20.56
Outstanding, December 31, 2016		316,116	$	13.30		241,141	$	15.39

2016,

the Company awarded performance-based restricted stock subject to the achievement of pre-established pre-tax income objectives for fiscal

2016.

These shares of performance-based restricted stock had a payout opportunity ranging from

50%

200%

of the target number of shares. The target number of shares awarded was

15,366

with a weighted average grant date fair value of

$13.57

per share. Based on the Company’s pre-tax income results for fiscal

2016,

none of these shares were earned. Additionally, the Company awarded

three

-year performance-based restricted stock subject to the achievement of pre-established cumulative total revenue goals for fiscal

2016,

2017

and

2018.

These shares of

three

-year performance-based restricted stock also had a payout opportunity ranging from

50%

200%

of the target number of shares. The target number of shares awarded was

161,245

with a weighted average grant date fair value of

$13.69

per share. The Company is currently unable to estimate the number of these shares expected to be earned.

2015,

the Company awarded performance-based restricted stock subject to the achievement of pre-established pre-tax inc

ome objectives for fiscal

2015.

These shares of performance-based restricted stock had a payout opportunity ranging from

50%

200%

of the target number of shares. The target number of shares awarded was

36,222

with a weighted average grant date fair value of

$20.58

per share. Based on the Company’s pre-tax income results for fiscal

2015,

the number of shares earned was

22,458.

Additionally, the Company awarded

three

-year performance-based restricted stock subject to the achievement of pre-established cumulative pre-tax income goals for fiscal

2015,

2016

and

2017.

These shares of

three

-year performance-based restricted stock also had a payout opportunity ranging from

50%

200%

of the target number of shares. The target number of shares awarded was

50,000

with a weighted average grant date fair value of

$20.80

per share. The Company is currently unable to estimate the number of these shares expected to be earned.

The vesting date fair value of shares that vested in

fiscal

2016,

2015

and

2014

was

$1.9

million,

$4.0

million and

$3.7

million, respectively. The aggregate unearned compensation expense related to options and restricted stock was

$4.4

million as of

December

31,

2016

and is expected to be recognized over a weighted average period of

1.2

years.