BUILD-A-BEAR WORKSHOP INC

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 and payouts based on the Company’s financial performance.

In February and March 2023, 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 2020 Plan.

In April 2023, utilizing this market data, the Committee determined the market value of the total long-term incentive program awards (“LTI Market Value”) for each NEO and approved a grant of annual long-term incentive awards consisting of three-year performance-based awards and time-based restricted stock for NEOs. The awards for the Chief Executive Officer were split between performance-based restricted stock (70% weighting) and time-based restricted stock (30% weighting). The awards for the other NEOs were split evenly between performance-based restricted stock and time-based restricted stock. Prior to 2022, the Committee had structured some portion of NEOs’ long-term incentive awards to be based in cash. For 2022 and 2023, long-term incentive awards for all NEOs were granted in the form of equity in order to further align interests of our NEOs with interests of our stockholders and to reinforce NEO stock ownership. The performance-based restricted stock awards will be earned if pre-established profitability and revenue goals are attained in fiscal 2023-2025. The design and mix were structured to maintain a strong emphasis on performance and to align with peer practices.

In April 2023, the Committee approved the following 2023 long-term incentive awards to the NEOs:

The target number of shares of three-year performance-based restricted stock awarded to the Chief Executive Officer was derived by dividing 70% of the Chief Executive Officer’s LTI Market Value by the closing sale price of the Company’s common stock on the NYSE on April 11, 2023 and rounding the resulting number to the closest whole number. The target number of shares of three-year performance-based restricted stock awarded to the other NEOs was derived by dividing 50% of his or her LTI Market Value by the closing sale price of the Company’s common stock on the NYSE on April 11, 2023 and rounding the resulting number to the closest whole number. The number of three-year performance-based restricted stock shares, if any, that will be earned by the NEOs will be calculated by multiplying the Target Number of Shares of Three-Year Performance-Based Restricted Stock noted in the table above by the Total Earned Percentage (defined below) based on the Company’s achievement of profitability and revenue goals for fiscal 2023, fiscal 2024 and fiscal 2025. The three-year performance-based restricted stock that is earned, if any, will vest on April 30, 2026 (except for Ms. Kretchmar’s awards, which were forfeited upon the termination of her employment at the end of fiscal 2023).

The Committee established specific profitability and revenue growth objectives for fiscal 2023, 2024 and 2025 and assigned a weighting to each objective. Profitability will be measured by the Company’s achievement of established consolidated Pre-Tax Income growth rate goals, by meeting established compound annual growth rate targets (the “Profitability Growth Objective”). Revenue will be measured by the Company’s achievement of revenue growth, by meeting established compound annual growth rate targets, but only if a minimum established profitability growth rate is also attained (the “Revenue Growth Objective”). The Total Earned Percentage (“Total Earned Percentage”) of the performance-based stock awards will be determined by adding the percent of target number of shares for each performance objective based on the Company’s achievement level of each performance objective over the three-year period multiplied by the weighting assigned to each objective.

For the three-year performance period, the Profitability Growth Objective will be weighted 65% and the Revenue Growth Objective will be weighted 35%. Consolidated financial results that fall between any of the established achievement levels will be interpolated between the applicable achievement levels.