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                                                                    EXHIBIT 10.3

                           BUILD-A-BEAR WORKSHOP, INC.
                            2004 STOCK INCENTIVE PLAN







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                           BUILD-A-BEAR WORKSHOP, INC.
                            2004 STOCK INCENTIVE PLAN

                                TABLE OF CONTENTS


<Table>
<Caption>
                                                                                                               PAGE
<S>     <C>                                                                                                   <C>
1.       Purpose of the Plan......................................................................................1

2.       Definitions..............................................................................................1
         A.       "Act"...........................................................................................1
         B.       "Award".........................................................................................1
         C.       "Award Agreement"...............................................................................1
         D.       "Board".........................................................................................1
         E.       "Cash-Based Award"..............................................................................1
         F.       "Change in Control".............................................................................1
         G.       "Code"..........................................................................................2
         H.       "Committee".....................................................................................2
         I.       "Company".......................................................................................2
         J.       "Employer"......................................................................................2
         K.       "Fair Market Value".............................................................................2
         L.       "Incentive Stock Option"........................................................................3
         M.       "Non-qualified Stock Option"....................................................................3
         N.       "Option"........................................................................................3
         O.       "Other Stock-Based Award".......................................................................3
         P.       "Parent"........................................................................................3
         Q.       "Participant"...................................................................................3
         R.       "Performance Based Award".......................................................................3
         S.       "Plan"..........................................................................................3
         T.       "Public Offering"...............................................................................3
         U.       "Statutory Option Stock"........................................................................3
         V.       "Stock".........................................................................................3
         W.       "Stock Appreciation Right"......................................................................3
         X.       "Subsidiary"....................................................................................3

3.       Stock Subject to the Plan................................................................................4

4.       Administration...........................................................................................4

5.       Committee................................................................................................5
</Table>




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<Table>
<S>     <C>                                                                                                   <C>
6.       Options..................................................................................................5

         A.       Type of Option..................................................................................5
         B.       Option Prices...................................................................................5
         C.       Exercise - Elections and Restrictions...........................................................5
         D.       Option Terms....................................................................................6
         E.       Successive Option Grants........................................................................6
         F.       Additional Incentive Stock Option Requirements..................................................7
         G.       Deferral of Gain on a Non-qualified Stock Option................................................8

7.       Stock Appreciation Rights................................................................................8
         A.       Grant Terms.....................................................................................8
         B.       Exercise Terms..................................................................................8
         C.       Limitations.....................................................................................8

8.       Other Stock-Based Awards and Cash-Based Awards...........................................................8

9.       Performance-Based Awards.................................................................................9

10.      Nontransferability of Awards.............................................................................9

11.      Investment Purpose.......................................................................................9
         A.       Right of First Refusal.........................................................................10
         B.       Take-Along Rights..............................................................................11
         C.       Effect of Prohibited Transfer..................................................................11
         D.       Buy-Back Rights................................................................................11
         E.       Exceptions to Transfer Restrictions............................................................12
         F.       Termination of Transfer Restrictions...........................................................12

12.      Adjustments Upon Changes in Capitalization or Corporation Acquisitions..................................12

13.      Amendment and Termination...............................................................................13

14.      Effectiveness of the Plan...............................................................................13

15.      Time of Granting of an Award............................................................................13

16.      Term of Plan............................................................................................13
</Table>


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<Table>
<S>     <C>                                                                                                   <C>
17.      Severability............................................................................................13

18.      Non-Waiver of Rights....................................................................................14

19.      Assignment..............................................................................................14

20.      No Right To Continued Employment........................................................................14

21.      Choice of Law...........................................................................................14
</Table>



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                           BUILD-A-BEAR WORKSHOP, INC.
                            2004 STOCK INCENTIVE PLAN

1.       Purpose of the Plan.

         The purpose of the Plan is to provide the Company with a means to
assist in recruiting, retaining and rewarding certain employees, directors and
consultants and to motivate such individuals to exert their best efforts on
behalf of the Employer by providing incentives through the granting of Awards.
By granting Awards to such individuals, the Company expects that the interests
of the recipients will be better aligned with those of the Employer.

2.       Definitions.

         Unless the context clearly indicates otherwise, the following
capitalized terms shall have the meanings set forth below:

         A.       "Act" means the Securities Exchange Act of 1934, as amended,
                  or any successor thereto.

         B.       "Award" means a grant under the Plan of an Option, Stock
                  Appreciation Right, Cash-Based Award or Other Stock-Based
                  Award.

         C.       "Award Agreement" means an agreement entered into between the
                  Employer and a Participant, or a certificate issued by the
                  Employer as determined by the Committee, as such agreement or
                  certificate may be amended from time to time, setting forth
                  the terms and provisions applicable to Awards granted under
                  the Plan.

         D.       "Board" means the Board of Directors of the Company or any
                  duly appointed Committee thereof.

         E.       "Cash-Based Award" means an Award described in Section 8 as a
                  Cash-Based Award.

         F.       "Change in Control" means (i) the purchase or other
                  acquisition (other than from the Company) by any person,
                  entity or group of persons, within the meaning of Section
                  13(d) or 14(d) of the Act (excluding, for this purpose, the
                  Company or its subsidiaries or any employee benefit plan of
                  the Company or its subsidiaries), of beneficial ownership
                  (within the meaning of Rule 13d-3 promulgated under the Act)
                  of 20% or more of either the then-outstanding shares of common
                  stock of the Company or the combined voting power of the
                  Company's then-outstanding voting securities entitled to vote
                  generally in the election of directors; or (ii) individuals
                  who, as of the date hereof, constitute the Board (and, as of
                  the date hereof, the "Incumbent Board") cease for any reason
                  to constitute at least a majority of the Board, provided that
                  any person who becomes a director subsequent to the date
                  hereof whose election, or nomination for election by the
                  Company's stockholders, was approved by a vote of at least a
                  majority of the




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                  directors then comprising the Incumbent Board (other than an
                  individual whose initial assumption of office is in connection
                  with an actual or threatened election contest relating to the
                  election of directors of the Company, as such terms are used
                  in Rule 14a-11 of Regulation 14A promulgated under the Act)
                  shall be, for purposes of this section, considered as though
                  such person were a member of the Incumbent Board; or (iii)
                  approval by the stockholders of the Company of a
                  reorganization, merger or consolidation, in each case with
                  respect to which persons who were the stockholders of the
                  Company immediately prior to such reorganization, merger or
                  consolidation do not, immediately thereafter, own more than
                  50% of, respectively, the common stock and the combined voting
                  power entitled to vote generally in the election of directors
                  of the reorganized, merged or consolidated corporation's
                  then-outstanding voting securities, or of a liquidation or
                  dissolution of the Company or of the sale of all or
                  substantially all of the assets of the Company.

         G.       "Code" means the Internal Revenue Code of 1986, as amended, or
                  any successor thereto.

         H.       "Committee" means the committee described in Section 5 or, in
                  the absence of any such Committee, the Board.

         I.       "Company" means Build-A-Bear Workshop, Inc., a Delaware
                  corporation.

         J.       "Employer" means the Company and any other entity directly or
                  indirectly controlling, controlled by, or under common control
                  with, the Company or any other entity designated by the Board
                  in which the Company has an interest.

         K.       "Fair Market Value" means (i) if there should be a public
                  market for the relevant Stock on the determination date, the
                  arithmetic mean between the high and lows of prices of such
                  Stock as reported on such date on the Composite Tape of the
                  principal national securities exchange or, if applicable, the
                  NASDAQ National Market on which such Stock is listed or
                  admitted to trading, or, if such Stock is not listed or
                  admitted on any national securities exchange or the NASDAQ
                  National Market, the arithmetic mean of the per share closing
                  bid price and per share closing asked price on such date as
                  quoted on the National Association of Securities Dealers
                  Automated Quotation System (or such market in which such
                  prices are regularly quoted) ("NASDAQ"), or if no sale of such
                  shares shall have been reported on the Composite Tape of any
                  national securities exchange or the NASDAQ National Market or
                  quoted on the NASDAQ on such date, then the immediately
                  preceding date on which sales of such shares have been so
                  reported or quoted shall be used, and (ii) if there should not
                  be a public market for the Stock on such date, the value
                  established by the Committee in good faith.


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         L.       "Incentive Stock Option" means a stock option which is an
                  incentive stock option within the meaning of Code Section 422.

         M.       "Non-qualified Stock Option" means a stock option which is not
                  an Incentive Stock Option.

         N.       "Option" means both an Incentive Stock Option and a
                  Non-Qualified Stock Option.

         O.       "Other Stock-Based Award" means an Award granted pursuant to
                  Section 8 and described as an Other Stock-Based Award.

         P.       "Parent" means any corporation (other than the Company) in an
                  unbroken chain of corporations ending with the Company if, at
                  the time of the granting of the Option, each of the
                  corporations other than the Company owns stock possessing 50%
                  or more of the total combined voting power of all classes of
                  stock in one of the other corporations in such chain, or such
                  other meaning as may be hereafter ascribed to it in Code
                  Section 424.

         Q.       "Participant" means an employee, director or consultant of the
                  Employer who is selected by the Committee to receive an Award.

         R.       "Performance Based Award"means an Award issued pursuant to the
                  terms of Section 9.

         S.       "Plan" means the Build-A-Bear Workshop, Inc. 2004 Stock
                  Incentive Plan.

         T.       "Public Offering" means the creation of an active trading
                  market in Common Stock by the sale of Common Stock to the
                  public pursuant to a registration statement under the
                  Securities Act of 1933.

         U.       "Statutory Option Stock" means any stock acquired through the
                  exercise of an Incentive Stock Option or an option granted
                  under an employee stock purchase plan as defined in Code
                  Section 423.

         V.       "Stock" means the common stock, par value of $0.01 per share,
                  of the Company.

         W.       "Stock Appreciation Right" means a stock appreciation right
                  described in Section 7.

         X.       "Subsidiary" means any corporation or other legal entity
                  (other than the Company) in an unbroken chain of corporations
                  or other legal entities beginning with the Company if, at the
                  time of granting an Award, each of the corporations or other
                  legal entities other than the last corporation or other legal
                  entity in the unbroken chain owns stock possessing 50% or more
                  of the total combined voting power of all classes of stock or
                  other equity in one of the other corporations

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                  or other legal entities in such chain, or such other meaning
                  as may be hereafter ascribed to it in Code Section 424.

3.       Stock Subject to the Plan.

         The number of shares of Stock allocated to the Plan and reserved to
satisfy Awards under the Plan shall be the remainder of (i) three million seven
hundred thousand (3,700,000) shares of Stock less (ii) the sum of (a) and (b)
where (a) is the sum of the number of shares of Stock with respect to which
options have been awarded under the Build-A-Bear Workshop, Inc. 2000 Stock
Option Plan and the number of shares of Stock with respect to which options have
been awarded under the Build-A-Bear Workshop, Inc. 2002 Stock Option Plan,
reduced by the number of shares of such Stock awarded pursuant to options which
have expired, lapsed or been forfeited, and (b) is the number of shares of Stock
awarded pursuant to a restricted stock agreement reduced by the number of shares
of such Stock granted pursuant to awards which have expired, lapsed or been
forfeited. The maximum number of shares of Stock subject to Awards which are
Options and Stock Appreciation Rights which may be granted during a calendar
year to a Participant shall be Three Hundred Thousand (300,000). Notwithstanding
the preceding, in no event shall the number of shares of Stock awarded to
Participants under the Plan, when taken in combination with the number of
outstanding shares of Stock previously issued by the Company, a Parent or
Subsidiary to employees of the Company, a Parent or Subsidiary, exceed the limit
specified in the Company Charter. The Company may, in its discretion, use shares
held in the treasury or shares acquired on the public market, if applicable, in
lieu of authorized but unissued shares. If any Award shall expire or terminate
for any reason, the shares subject to the Award shall again be available for the
purposes of the Plan. Any shares of Stock which are used by a Participant as
full or partial payment to the Company to satisfy a purchase price related to an
Award shall again be available for the purposes of the Plan. To the extent any
shares subject to an Award are not delivered to a Participant because such
shares are used to satisfy an applicable tax-withholding obligation, such
withheld shares shall again be available for the purposes of the Plan.

4.       Administration.

         The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have plenary authority, in its
discretion, to determine the individuals to whom, and the time or times at
which, Awards shall be granted and the number of shares, if applicable, to be
subject to each Award. In making such determinations, the Committee may take
into account the nature of services rendered by the respective individuals,
their present and potential contributions to the Employer's success and such
other factors as the Committee, in its discretion, shall deem relevant. Subject
to the express provisions of the Plan, the Committee shall also have plenary
discretionary authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the respective Award Agreements (which need not be identical), to waive or amend
any provision hereof in any manner not adversely affecting the rights granted to
the Participant by the express terms hereof and to make all other determinations
necessary or advisable for the administration of the Plan. The Committee's
determinations on the matters referred to in this Section 4 shall be conclusive.



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5.       Committee.

         The Committee shall be comprised of directors appointed by the Board,
which may from time to time appoint members of the Committee in substitution for
members previously appointed and may fill vacancies, however caused, in the
Committee. The Board shall select one of the Committee members as its Chairman,
and shall hold its meetings at such times and places as it may determine. A
majority of its members shall constitute a quorum. All determinations of the
Committee shall be made by a majority of its members present at any meeting at
which there is a quorum. Any decision or determination reduced to writing and
signed by all of the members shall be fully as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee may appoint
a secretary, shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable. The
Committee may, to the extent permitted by law, delegate its responsibilities and
authority hereunder to an officer of the Company.

6.       Options.

         The Committee, in its discretion, may grant Options which are Incentive
Stock Options or Non-qualified Stock Options, as evidenced by the Award
Agreement, and shall be subject to the foregoing and the following terms and
conditions and to such other terms and conditions, not inconsistent therewith,
as the Committee shall determine:

         A.       Type of Option. Incentive Stock Options may be granted to any
                  individual classified by the Committee as an employee of the
                  Company, a Parent or a Subsidiary. A Non-Qualified Stock
                  Option may be granted to any individual selected by the
                  Committee.

         B.       Option Prices. The purchase price of the Stock under each
                  Incentive Stock Option shall not be less than 100% of the Fair
                  Market Value of the Stock at the time of the granting of the
                  Option; provided that, in the case of a Participant who owns
                  more than 10% of the total combined voting power of all
                  classes of stock of the Company, a Parent or a Subsidiary, the
                  purchase price of the Stock under each Incentive Stock Option
                  shall not be less than 110% of the Fair Market Value of the
                  Stock on the date such Option is granted. The purchase price
                  of the Stock under each Non-qualified Stock Option shall be
                  determined from time to time by the Committee, which need not
                  be uniform for all Participants.

         C.       Exercise - Elections and Restrictions. The purchase price for
                  an Option is to be paid in full upon the exercise of the
                  Option, either (i) in cash, (ii) in the discretion of the
                  Committee, by the tender to the Company (either actual or by
                  attestation) of shares of Stock already owned by the
                  Participant for a period of at least six months as of the date
                  of tender and registered in his or her name, having a Fair
                  Market Value equal to the cash exercise price of the Option
                  being exercised, or (iii) in the discretion of the Committee,
                  by any combination of the payment methods specified in clauses
                  (i) and (ii) hereof; provided that, no shares of Statutory
                  Option Stock may be tendered in exercise of an Incentive Stock
                  Option



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                  unless (a) such shares have been held by the Participant for
                  at least one year and (b) at least two years have elapsed
                  since such Statutory Option Stock was granted; and provided
                  further that, unless otherwise specifically provided in an
                  Award Agreement, until such time as a Public Offering shall
                  occur, the only method of payment of the purchase price for an
                  Option shall be cash. The Committee may, after consideration
                  of any potential accounting consequences, cause the Company to
                  loan the option price to the Participant or to guaranty that
                  any shares to be issued will be delivered to a broker or
                  lender in order to allow the Participant to borrow the option
                  price. Unless otherwise provided in the Award Agreement, at
                  the request of a Participant, the Committee may, to the extent
                  permissible under applicable state law, in its sole
                  discretion, allow the Participant to defer payment in full of
                  the option price at the time the Participant provides written
                  notice of exercise provided that the notice of exercise
                  directs that the certificate or certificates for the shares of
                  Stock for which the Option is exercised be delivered to a
                  licensed broker acceptable to the Company as the agent for the
                  individual exercising the Option and, at the time such
                  certificate or certificates are delivered, the broker tenders
                  to the Company cash (or cash equivalents acceptable to the
                  Company) equal to the option price for the shares of Stock
                  purchased pursuant to the exercise of the Option plus the
                  amount (if any) of any withholding obligations on the part of
                  the Company. The proceeds of sale of Stock subject to the
                  Option are to be added to the general funds of the Company or
                  to the shares of the Stock held in its Treasury, and used for
                  its corporate purposes as the Board shall determine.

         D.       Option Terms. The term of each Option shall not be more than
                  ten (10) years from the date of granting thereof or such
                  shorter period as is prescribed in the Award Agreement;
                  provided that, in the case of a Participant who owns more than
                  ten percent (10%) of the total combined voting power of all
                  classes of stock of the Company, a Parent or a Subsidiary, the
                  term of any Incentive Stock Option shall not be more than five
                  (5) years from the date of granting thereof or such shorter
                  period as prescribed in the Award Agreement. Within such
                  limit, Options will be exercisable at such time or times, and
                  subject to such terms, restrictions and conditions, as the
                  Committee shall, in each instance, approve, which need not be
                  uniform for all Participants. The holder of an Option shall
                  have none of the rights of a stockholder with respect to the
                  shares subject to Option until such shares shall be issued to
                  him or her upon the exercise of his or her Option. Upon
                  exercise of an Option, the Committee shall withhold a
                  sufficient number of shares to satisfy the Company's minimum
                  required statutory withholding obligations for any taxes
                  incurred as a result of such exercise (based on the minimum
                  statutory withholding rates for federal and state tax
                  purposes, including payroll taxes); provided that, in lieu of
                  all or part of such withholding, the Participant may pay an
                  equivalent amount of cash to the Company.

         E.       Successive Option Grants. As determined by the Committee,
                  successive option grants may be made to any Participant under
                  the Plan.



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         F.       Additional Incentive Stock Option Requirements.

                  (1)      Grant Limits. The maximum aggregate Fair Market Value
                           (determined at the time an Option is granted) of the
                           Stock with respect to which Incentive Stock Options
                           are exercisable for the first time by a Participant
                           during any calendar year (under all plans of the
                           Company, a Parent and a Subsidiary) shall not exceed
                           $100,000.

                  (2)      Notice of Disposal. A Participant who disposes of
                           Stock acquired upon the exercise of an Incentive
                           Stock Option either (i) within two years after the
                           date of grant of such Incentive Stock Option or (ii)
                           within one year after the transfer of such shares to
                           the Participant upon exercise, shall notify the
                           Company of such disposition and of the amount
                           realized upon such disposition.

                  (3)      Termination of Participant's Employment. The holder
                           of any Option issued hereunder must exercise the
                           Option prior to his or her termination of employment,
                           except that if the employment of a Participant
                           terminates with the consent and approval of his or
                           her Employer, the Committee may, in its absolute
                           discretion, permit the Participant to exercise his or
                           her Option, to the extent that he or she was entitled
                           to exercise it at the date of such termination of
                           employment, at any time within three (3) months or
                           such longer period as approved by the Committee after
                           such termination, but not after ten (10) years (or
                           five (5) years, if applicable) from the date of the
                           granting thereof. Notwithstanding the preceding, the
                           Committee may, in a Participant's Award Agreement,
                           afford a Participant who terminates employment other
                           than for cause, the right to exercise his or her
                           Option, to the extent that he or she was entitled to
                           exercise it at such date of termination of
                           employment, at any time within three (3) months or
                           such longer period as approved by the Committee after
                           such termination, but not after ten (10) years (or
                           five (5) years, if applicable) from the date of
                           granting thereof.

                  (4)      Death of Participant. In the event of the death of a
                           Participant during the term of an Award Agreement and
                           while he or she is employed by the Company (or its
                           Parent or a Subsidiary), any outstanding option shall
                           become fully vested (if not already fully vested) and
                           may be exercised by a legatee or legatees of the
                           Participant under his or her last will, or by his or
                           her personal representatives or distributees, at any
                           time within a period of one year after his or her
                           death, but not after ten (10) years from the date of
                           grant as specified in the Award Agreement, and only
                           if he or she was entitled to exercise the option at
                           the date of his or her death. The Committee may, in
                           any Award Agreement, provide additional provisions
                           for the exercise of an Option after the death of a
                           Participant.


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         G. Deferral of Gain on a Non-qualified Stock Option. In accordance with
the terms of the applicable non-qualified deferred compensation plan, if any, in
which a Participant is eligible to participate, a Participant may elect to defer
any gain realized upon the exercise of a Non-qualified Stock Option. The
election to defer the gain must be made in accordance with the applicable
non-qualified deferred compensation plan.

7.       Stock Appreciation Rights.

         A. Grant Terms. The Committee may grant a Stock Appreciation Right
independent of an Option or in connection with an Option or a portion thereof. A
Stock Appreciation Right granted in connection with an Option or a portion
thereof shall cover the same shares of Stock covered by the Option, or a lesser
number as the Committee may determine. A Stock Appreciation Right shall be
subject to the same terms and conditions as an Option, and any additional
limitations, terms or conditions set forth in this Section 7 or the Award
Agreement.

         B. Exercise Terms. The exercise price per share of Stock of a Stock
Appreciation Right shall be an amount determined by the Committee. A Stock
Appreciation Right granted independent of an Option shall entitle the
Participant upon exercise to a payment from the Company in an amount equal to
the excess of the Fair Market Value on the exercise date of a share of Stock
over the exercise price per share, times the number of Stock Appreciation Rights
exercised. A Stock Appreciation Right granted in connection with an Option shall
entitle the Participant to surrender an unexercised Option (or portion thereof)
and to receive in exchange an amount equal to the excess of the Fair Market
Value on the exercise date of a share of Stock over the exercise price per share
for the Option, times the number of shares covered by the Option (or portion
thereof) which is surrendered. Payment may be made, in the discretion of the
Committee, in (i) Stock, (ii) cash or (iii) any combination of Stock and cash.
Cash shall be paid for fractional shares of Stock upon the exercise of a Stock
Appreciation Right.

         C. Limitations. The Committee may impose such conditions upon the
exercisability or transferability of Stock Appreciation Rights as it determines
in its sole discretion.

8.       Other Stock-Based Awards and Cash-Based Awards.

         The Committee may, in its sole discretion, grant Awards of Stock,
restricted Stock and other Awards that are valued in whole or in part by
reference to the Fair Market Value of Stock. These Awards shall collectively be
referred to herein as Other Stock-Based Awards. The Committee may also, in its
sole discretion, grant Cash-Based Awards, which shall have a value as may be
determined by the Committee. Other Stock-Based Awards shall be in such form, and
dependent on such conditions, as the Committee shall determine, including, but
not limited to, the right to receive one or more shares of Stock (or the
cash-equivalent thereof) upon the completion of a specified period of service,
the occurrence of an event or the attainment of performance objectives. Other
Stock-Based Awards and Cash-Based Awards may be granted with or in addition to
other Awards. Subject to the other terms of the Plan, Other Stock-Based Awards
and Cash-Based Awards may be granted to such Participants in such amounts and
upon such terms, restrictions and conditions, and at any time and from time to
time, as shall be determined by the Committee and set forth in an Award
Agreement.



                                       8
<PAGE>

9.       Performance-Based Awards.

         To the extent applicable, the Committee may, in its sole and absolute
discretion, determine that certain Awards, including Other Stock-Based Awards
and/or Cash-Based Awards, should be subject to such requirements so that they
are deductible by the Employer under Code Section 162(m), or any successor
thereto. If the Committee so determines, such Awards shall be considered
Performance-Based Awards subject to the terms of this Section 9, as provided in
the Award Agreement. A Performance-Based Award shall be granted by the Committee
in a manner to satisfy the requirements of Code Section 162(m) and the
regulations thereunder. The performance measures to be used for purposes of a
Performance-Based Award shall be chosen by the Committee, in its sole and
absolute discretion, from among the following: earnings per share of Stock; book
value per share of Stock; net income (before or after taxes); operating income;
return on invested capital, assets or equity; cash flow return on investments
which equals net cash flows divided by owners' equity; earnings before interest
or taxes; gross revenues or revenue growth; market share; expense management;
improvements in capital structure; profit margins; Stock price; total
stockholder return; free cash flow; or working capital. The performance measures
may relate to the Company, a Parent, a Subsidiary, an Employer or one or more
units of such an entity.

         The Committee shall determine whether, with respect to a performance
period, the applicable performance goals have been met with respect to an Award
and, if they have, to so certify and ascertain the amount of the applicable
Performance-Based Award. The Committee shall have the discretion to adjust
Performance-Based Awards downward.

         For calendar years beginning after the "reliance period" defined in
Treas. Reg. Section 1.162-27(f)(2) or any successor thereto with respect to the
Company, an Award shall be a Performance-Based Award only if the Committee
described in Section 5 consists solely of two or more Outside Directors within
the meaning of Treas. Reg. Section 1.162-27(e)(3) or any successor thereto.

10.      Nontransferability of Awards.

         Unless otherwise determined by the Committee and expressly set forth in
an Award Agreement, an Award granted under the Plan and all rights thereunder
shall, by its terms, be non-transferable, nonassignable and not subject to
encumbrance in any manner otherwise than by will or the laws or descent and
distribution and an Award may be exercised, if applicable, during the lifetime
of the Participant thereof, only by the Participant or his or her guardian or
legal representative. Notwithstanding the above, the Committee may not provide
in an Award Agreement that an Incentive Stock Option is transferable. Any
attempted assignment, transfer, mortgage, pledge or encumbrance except as herein
authorized, shall be void and of no effect.

11.      Investment Purpose.

         If deemed advisable by the Committee, each Award under the Plan shall
be awarded only on the condition that all purchases of Stock thereunder shall be
for investment purposes, and not with a view to resale or distribution, except
that the Committee may make such provision with


                                       9
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respect to Awards granted under this Plan as it deems necessary or advisable for
the release of such condition upon the registration with the Securities and
Exchange Commission of Stock subject to the Award, or upon the happening of any
other contingency warranting the release of such condition.

         If deemed advisable by the Committee, the certificates evidencing the
shares acquired by the Participant pursuant to this Plan may bear a restrictive
legend, if appropriate, indicating that the shares have not been registered
under said Act and are subject to restrictions on the transfer thereof, which
legend may be in the following form (or such other form as the Company shall
determine to be proper), to-wit:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, but have been
                  issued or transferred to the registered owner pursuant to the
                  exemption afforded by Section 4(2) of said Act. No transfer or
                  assignment of these shares by the registered owner shall be
                  valid or effective, and the issuer of these shares shall not
                  be required to give any effect to any transfer or attempted
                  transfer of these shares, including without limitation, a
                  transfer by operation of law, unless (a) the issuer shall have
                  received an opinion of its counsel that the shares may be
                  transferred without requirement of registration under said
                  Act, or (b) there shall have been delivered to the issuer a
                  'no-action' letter from the staff of the Securities and
                  Exchange Commission, or (c) the shares are registered under
                  said Act."

         In addition to the restrictions described above, the Participant may
not sell, pledge, transfer, donate, assign or otherwise dispose of
(collectively, "transfer"), whether voluntarily or by operation of law, any
shares of Stock acquired pursuant to the Plan except as provided in this Section
11.

         A.       Right of First Refusal.

                  (1)      If the Participant intends to transfer any shares of
                           Stock pursuant to a bona fide purchase offer of an
                           offeror who has agreed to be bound by transfer and
                           buy/sell restrictions identical to those to which the
                           Participant is subject ("Offeror"), the Participant
                           shall deliver to the Company a written notice
                           ("Notice") of such intention to transfer such shares,
                           setting forth in reasonable detail: (i) the proposed
                           price, (ii) the number of shares proposed to be
                           transferred, (iii) the other terms and conditions of
                           the proposed transfer of such shares, (iv) an offer
                           to sell the shares to the Company as provided herein
                           and (v) the identity of the Offeror. The shares
                           proposed to be transferred are hereinafter referred
                           to as the "Offered Shares."

                  (2)      The Company may elect to purchase all (but not less
                           than all) of the Offered Shares at any time during
                           the thirty (30) day period following its receipt of
                           the Notice. The Company shall be entitled to purchase
                           the



                                       10
<PAGE>

                           Offered Shares from the Participant at the same price
                           and on the same terms and conditions as those
                           pursuant to which the Participant proposes to
                           transfer the Offered Shares, as described in the
                           Notice. If the Company fails to respond to such offer
                           within the 30-day period, it shall be deemed to have
                           rejected the offer.

                  (3)      Unless the Participant and the Company otherwise
                           agree, the closing of the purchase of the Offered
                           Shares shall take place at the principal offices of
                           the Company at 10:00 a.m. on the tenth day (or if
                           such day is not a business day on the next business
                           day) after the expiration of the 30-day period. At
                           the closing, the Participant shall tender the Offered
                           Shares, together with appropriate instruments of
                           transfer endorsed to the Company, and the Company
                           shall tender a certified check, cashier's check or a
                           wire transfer of immediately available funds in the
                           amount of the purchase price therefore.

                  (4)      If the Offered Shares are not purchased by the
                           Company pursuant to this Section 11, the Participant
                           shall be entitled to sell all of the Offered Shares
                           to the Offeror at the price and on the terms and
                           conditions specified in the Notice, provided that
                           such sale is consummated within one-hundred twenty
                           (120) days from the date the Notice is delivered to
                           the Company. For any sale of shares after such
                           one-hundred twenty (120) day period, the Participant
                           shall give a new notice which shall reinstate the
                           rights of the Company set forth in this Section 11 to
                           purchase the Offered Shares.

         B.       Take-Along Rights. If an offeror desires to purchase all of
                  the outstanding shares of Stock and if the owners of at least
                  50% of the outstanding shares desire to make such sale, the
                  Participant agrees to sell all of his or her shares to such
                  offeror on the terms and conditions approved by the owners of
                  at least 50% of the outstanding shares.

         C.       Effect of Prohibited Transfer. If any transfer of shares is
                  made or attempted by a Participant other than in accordance
                  with the terms of this Plan and the Award Agreement, the
                  Company may refuse for any purpose to recognize any transferee
                  who receives shares and any such transferee shall have no
                  right to claim or retain any dividends on such shares which
                  were paid or become payable subsequent to the date on which
                  the prohibited transfer was made or attempted. In addition to
                  any other legal or equitable rights that it may have, the
                  Company may enforce its rights by specific performance to the
                  extent permitted by law.

         D.       Buy-Back Rights. If the Participant terminates employment for
                  any reason, the Participant must, upon request by the
                  Committee, sell his or her shares of Stock to the Company at a
                  price equal to the Fair Market Value, as defined in the Plan,
                  of such shares of Stock on the date of such sale. The Company
                  shall exercise the buy-back right with respect to a
                  Participant no later than twelve (12) months after the date
                  the Participant terminates employment.



                                       11
<PAGE>

         E.       Exceptions to Transfer Restrictions. Notwithstanding anything
                  to the contrary in this Plan and Award Agreement, the
                  restrictions upon transfer set forth in this Section 11 shall
                  not apply to a transfer of shares of Stock by a Participant to
                  any of (i) the Participant's heirs, executors, administrators
                  or other personal representative upon death of the Participant
                  or (ii) the Participant's spouse, children or grandchildren,
                  or a trust for their or the Participant's benefit; provided
                  that, the restrictions on transfer in this Section 11 shall
                  continue to apply to the shares received by any such permitted
                  transferee, including without limitation that such permitted
                  transferee shall not again transfer such shares except in
                  accordance with this Section 11.

         F.       Termination of Transfer Restrictions. The restrictions
                  described in Sections 11(A) through 11(E) shall apply except
                  as provided otherwise in the Award Agreement and shall
                  terminate on the earlier of a Public Offering of shares of
                  Stock or mutual agreement of the parties to an Award
                  Agreement.

12.      Adjustments Upon Changes in Capitalization or Corporation Acquisitions.

         Notwithstanding any other provisions of the Plan, unless otherwise
provided in the Award Agreement, the number and class of shares subject to each
outstanding Award and the exercise prices, if applicable, shall be adjusted, to
the same pro rata number of shares and price as in the original Award Agreement,
in the event of changes in the outstanding Stock by reason of stock dividends,
stock splits, reverse stock splits, recapitalization, mergers, consolidations,
statutory share exchange, sale of all or substantially all assets, split-ups,
combinations or exchanges of shares and the like, and, in the event of any such
change in the outstanding Stock, the aggregate number and class of shares
available under the Plan and the maximum number of shares as to which Awards may
be granted to an individual shall be appropriately adjusted by the Committee,
whose determination shall be conclusive. In the event the Company, a Parent or a
Subsidiary enters into a transaction described in Section 424(a) of the Code
with any other corporation, the Committee shall, unless otherwise provided in
the Award Agreement, grant options to employees or former employees of such
corporation in substitution of options previously granted to them upon such
terms and conditions as shall be necessary to qualify such grant as a
substitution described in Section 424(a) of the Code.

         In the event of a Change in Control, notwithstanding any other
provisions of the Plan or Award Agreement to the contrary, the Committee may, in
its sole discretion, provide for:

         (1)      Accelerated vesting of any outstanding Awards that are
                  otherwise unexercisable or unvested as of a date selected by
                  the Committee;

         (2)      Termination of an Award upon the consummation of the Change in
                  Control in exchange for the payment of a cash amount
                  determined at the discretion of the Committee but intended to
                  provide the Participant with the difference between the Stock
                  subject to the vested portion of the Award and the exercise
                  price; and/or



                                       12
<PAGE>

         (3)      Issuance of substitute Awards to substantially preserve the
                  terms of any Awards previously granted under the Plan, which
                  may be with respect to securities of a successor issuer.

13.      Amendment and Termination.

         The Board may at any time terminate the Plan, or make such amendments
or modifications to the Plan as it shall deem advisable; provided, however, that
if and solely if such approval is required by applicable law, then to the extent
such approval is so required, such amendment or modification shall be made
subject to approval by the holders of Stock. No termination or amendment of the
Plan may, without the consent of the Participant to whom any Award shall
theretofore have been granted, adversely affect the rights of such Participant
under such Award.

14.      Effectiveness of the Plan.

         The Plan shall become effective upon adoption by the Board, subject,
however, to its further approval by the stockholders of the Company given within
twelve (12) months of the date the Plan is adopted by the Board at a regular
meeting of the stockholders or at a special meeting duly called and held for
such purpose. Grants of Awards may be made prior to such stockholder approval
but all Award grants made prior to stockholder approval shall be subject to the
obtaining of such approval and if such approval is not obtained, such Awards
shall not be effective for any purpose.

15.      Time of Granting of an Award.

         An Award grant under the Plan shall be deemed to be made on the date on
which the Committee, by formal action of its members duly recorded in the
records thereof, makes an Award to a Participant (but in no event prior to the
adoption of the Plan by the Board); provided that, such Award is evidenced by a
written Award Agreement duly executed on behalf of the Company and on behalf of
the Participant, if applicable, within a reasonable time after the date of the
Committee action.

16.      Term of Plan.

         This Plan shall terminate ten (10) years after the date on which it is
approved and adopted by the Board and no Award shall be granted hereunder after
the expiration of such ten-year period. Awards outstanding at the termination of
the Plan shall continue in accordance with their terms and shall not be affected
by such termination.

17.      Severability.

         Any word, phrase, clause, sentence or other provision herein which
violates or is prohibited by any applicable law, court decree or public policy
shall be modified as necessary to avoid the violation or prohibition and so as
to make this Plan and any Award Agreement enforceable as fully as possible under
applicable law, and if such cannot be so modified, the same



                                       13
<PAGE>

shall be ineffective to the extent of such violation or prohibition without
invalidating or affecting the remaining provisions herein.

18.      Non-Waiver of Rights.

         The Company's failure to enforce at any time any of the provisions of
this Plan or any Award Agreement or to require at any time performance by the
Participant of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect either the validity of this Plan, any
Award Agreement, or any part hereof, or the right of the Company thereafter to
enforce each and every provision in accordance with the terms of this Plan and
any Award Agreement.

19.      Assignment.

         Any Award Agreement shall be freely assignable by the Company and shall
inure to the benefit of, and be binding upon, the Company, its successors and
assigns and/or any other entity which shall succeed to the business presently
being conducted by the Company.

20.      No Right To Continued Employment.

         Nothing in the Plan or in any Award granted pursuant to the Plan shall
be considered or construed as creating a contract of employment for any
specified period of time or shall confer on any individual any right to continue
in the employ of the Employer or interfere in any way with the right of the
Employer to terminate his or her employment at any time.

21.      Choice of Law.

         The Plan shall be governed by and construed in accordance with the laws
of the State of Delaware without regard to conflicts of law.

         The foregoing Plan was approved and adopted by the Board on
______________, ________.

                                            BUILD-A-BEAR WORKSHOP, INC.



                                            By
                                              ---------------------------------





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