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EXHIBIT 4.3
Amended and Restated
February 24, 1997
SCHLOTZSKY'S, INC.
THIRD AMENDED AND RESTATED
1993 STOCK OPTION PLAN
The Schlotzsky's, Inc. 1993 Stock Option Plan (the "Plan") is hereby
amended and restated in its entirety to read as follows:
1. Purpose. This 1993 Stock Option Plan (the "Plan") is intended
to provide incentives to the officers, other employees, directors and
consultants of Schlotzsky's, Inc., a Texas corporation (the "Company") and any
present or future subsidiaries by providing them with opportunities to purchase
stock in the Company pursuant to options granted hereunder ("Options"). As
used herein the term "subsidiary" has the meaning assigned to it in Section 424
of the Internal Revenue Code of 1986, as amended (the "Code"), "Incentive Stock
Option" has the meaning assigned to it in Section 422 of the Code and
"Non-Qualified Option" means an Option which is not intended to qualify as an
Incentive Stock Option.
2. Approval of Grants. Each grant of Options ("Grant") must be
approved in one of the following ways:
(a) Board/Committee Approval. The entire Board of
Directors of the Company (the "Board") or the Committee (as defined
below) may vote in advance to approve such Grant.
(b) Shareholder Approval/Ratification. In compliance
with Section 14 of the Securities Exchange Act of 1934, as amended
("1934 Act"), a majority of the shareholders of the Company duly
entitled to vote on such matters at meetings held in accordance with
the laws of the State of Texas may, either in advance of the Grant or
no later than the next annual meeting of shareholders, affirmatively
vote to approve such Grant.
3. Administration of the Plan. The Plan shall be administered by
the Board, except to the extent the Board delegates its authority to a
committee of the Board (the "Committee") which, must consist solely of
none-employee directors, and with respect to grants to directors or officers,
must consist solely of two or more Non-Employee Directors, as defined in Rule
16b-3, promulgated pursuant to Section 16 of the 1934 Act ("Rule 16b-3") and
must consist only of "Outside Directors" in compliance with Section
162(m)(4)(C) of the Code for purposes of grants to the chief executive officer
and other executive officers whose compensation limit may otherwise exceed the
deduction limit of Section 162(m) of the Code. The Compensation
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Committee may create a subcommittee for purposes of Grants to officers and
directors if the Committee would otherwise not qualify. References herein to
the "Committee" shall include any such subcommittee. All references in this
Plan to the Administrator shall mean the Board, unless it has delegated its
authority to the Committee, in which event Administrator shall mean the
Committee. With respect to the Grants of Options to directors, officers and
beneficial owners of more than 10% of a class of equity security registered
pursuant to the 1934 Act, the Plan shall be administered in such manner as will
enable compliance with Rule 16b-3. Grants made to executive officers subject
to Section 162(m) of the Code shall be contingent on shareholder approval of
the material terms of the Plan to the extent required under Section 162(m).
Subject to the terms of the Plan, the Board, the Committee or the
shareholders, as the case may be, shall have concurrent authority to determine
the persons to whom Options shall be granted, the number of shares covered by
each Option, the price per share specified in each Option, the time or times at
which Options shall be granted and the terms and provisions of the instruments
by which Options shall be evidenced. The Administrator is authorized to
interpret the provisions of the Plan or of any Option or Option agreement and
to make all rules and determinations which it deems necessary or advisable for
the administration of the Plan, provided, however, that all such
interpretations, rules and determinations shall be made and prescribed in the
context of preserving the tax status under Code Section 422 of those Options
which are designated as Incentive Stock Options. Subject to the foregoing, the
interpretation and construction by the Administrator of any provisions of the
Plan or of any Option granted under it shall be final. No member of the Board
or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option granted under it.
4. Eligible Employees and Consultants. Subject to the
limitations contained in paragraphs 2 and 3, Non- Qualified Options may be
granted to any officer, other employee, director or consultant of the Company
or any subsidiary. Incentive Stock Options may only be granted to employees.
Granting of any Option to an employee, director or consultant shall neither
entitle him to, nor disqualify him from, participation in any other grant of
options.
5. Stock. The stock subject to the Options shall be authorized
but unissued shares of Common Stock of the Company, no par value (the "Common
Stock"), or shares of Common Stock reacquired by the Company, including shares
purchased in the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 800,000, subject to adjustment as provided in
paragraph 15; provided however, that the number of shares with respect to which
Options may be granted to any single executive officer of the Company during
any fiscal year shall not exceed 250,000 shares of Common Stock. In the event
any Option granted under the Plan shall expire or terminate for any reason
without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, the unpurchased shares subject thereto, shall
again be available for Grants of Options under the Plan, provided that an
Option that expires or terminates for any reason or ceases to be exerciseable
in the fiscal year in which it is granted will continue to be counted against
the individual limit on Options granted to a single executive officer in any
fiscal year. The shares issued upon exercise of Options granted under the Plan
may be authorized and unissued shares or shares held by the Company in its
treasury, or both.
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6. Granting of Options. Options may be granted under the Plan at
any time within ten years from the date of approval of the Plan by the Board,
the Committee or the shareholders, as the case may be. The Administrator shall
specify at the time of each Grant of an Option under the Plan whether such
Option is an Incentive Stock Option. The date of Grant of an Option under the
Plan will be the date specified by the Administrator at the time it awards the
Option, provided, however, that such date shall not be prior to the date of
award. Notwithstanding any other provisions of this Plan, the Administrator
may authorize the Grant of an Option to a person not then an employee or
consultant of the Company or of a subsidiary. The actual Grant of such Option,
however, shall be conditioned upon such person becoming an employee or
consultant, as the case may be, at or prior to the time of the execution of the
Option agreement evidencing such Option.
7. Minimum Option Price. The price per share specified in each
Option granted under the Plan shall be as follows:
(a) The price per share specified in each Non-Qualified
Stock Option granted under the Plan shall in no event be less than 50%
of the fair market value per share of Common Stock on the date of such
Grant; provided that, as to Options awarded to executive officers, the
price per share shall be not less than the fair market value per share
of the Common Stock on the date of such Grant.
(b) The price per share specified in each Incentive Stock
Option granted under the Plan shall not be less than the fair market
value per share of the Common Stock on the date of such Grant. In the
case of an Incentive Stock Option to be granted to an employee owning,
directly or by reason of the applicable attribution rules in Section
424(d) of the Code, more than 10% of the total combined voting power
of all classes of share capital of the Company or a subsidiary, the
Option price per share of the shares covered by each Option shall be
not less than 110% of the said fair market value on the date of Grant.
(c) In no event shall the aggregate fair market value
(determined as of the time of Grant) of the Common Stock with respect
to which Incentive Stock Options are exercisable (under all plans of
the Company and any subsidiaries) for the first time by an employee in
any calendar year exceed $100,000, provided that this subparagraph (c)
shall have no force or effect if its inclusion in the Plan is not
necessary for Options issued as Incentive Stock Options to qualify as
Incentive Stock Options pursuant to Section 422 of the Code.
For purposes of this Plan, "fair market value" with respect to a share
of Common Stock, shall mean the average of the daily market prices for the
period of 10 consecutive trading days ending immediately prior to the
applicable date. The market price for each such trading day shall be the last
sale price on such day on the New York Stock Exchange, or, if the Common Stock
is not then listed or admitted to trading on the New York Stock Exchange, on
such other principal stock exchange on which such stock is then listed or
admitted to trading, or, if no sale takes place
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on such day on any such exchange, the average of the closing bid and asked
prices on such day as officially quoted on any such exchange, or, if the Common
Stock is not then listed or admitted to trading on any stock exchange, the
market price for each such trading day shall be the last sale reported on the
NASDAQ National Market System as published in The Wall Street Journal or, if no
such sale is so reported, the average of the reported closing bid and asked
prices on such day in the over-the-counter market, as furnished by the National
Association of Securities Dealers Automated Quotation system, or, if such price
at the time is not available from such system, as furnished by any similar
system then engaged in the business of reporting such prices and selected by
the Administrator or, if there is no such system, as furnished by any member of
the National Association of Securities Dealers, selected by the Administrator.
If the Company's stock is not then publicly traded, the fair market value shall
be deemed to be the fair value of the Common Stock as determined by the
Administrator after taking into consideration all factors which it deems
appropriate, including, without limitation, recent sale and offer prices of the
Common Stock in private transactions negotiated at arm's length.
8. Option Duration. Subject to earlier termination as provided
in paragraphs 10, 11, 12, 13 and 19, each Option shall expire on the date
specified by the Administrator, consistent with the terms of the specific
Grant, but not more than ten years from the date of grant, provided, however,
that for optionees who own more than 10% of the total combined voting power of
all classes of share capital of the Company or a subsidiary, each Option shall
terminate not more than five years from the date of the Grant. Subject to
paragraph 18, the Administrator may extend the term of any previously granted
Option provided that such Option, as extended, expires within ten years of its
original date of grant.
9. Exercise of Option. Subject to the provisions of paragraphs
10, 11, 12, 13, 14, 15 and 19, each Option granted under the Plan shall be
exercisable ("vest") as follow:
(a) The Option shall either be fully exercisable upon
grant or shall become exercisable thereafter in such installments as
the Administrator may specify.
(b) Once an installment becomes exercisable it shall
remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Administrator, consistent with the
terms of the specific Grant.
(c) Each Option may be exercised from time to time, in
whole or in part, for up to the total number of shares with respect to
which it is then exercisable.
(d) Consistent with the terms of the specific Grant, the
Administrator shall have the right to accelerate the date of exercise
of any installment, provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted
to an optionee as an Incentive Stock Option (and not previously
converted into a Non-Qualified Option pursuant to paragraph 24) if
such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(c).
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10. Voluntary Termination of Employment or Consulting. Except as
the Administrator may otherwise determine, if an optionee ceases to be employed
or retained by the Company or any subsidiary other than by reason of death or
Disability (as defined in paragraph 12 below) or a termination "for cause," no
further installments of his Options shall become exercisable, and his Options
shall terminate upon the expiration of three (3) months following the date of
termination of his employment, but in no event later than on their specified
expiration dates. In no event may an Option agreement provide, if the Option
is intended to be an Incentive Stock Option, that the time for exercise be
later than three (3) months after the optionee's termination of employment
except as otherwise provided in this paragraph 10 and in paragraphs 11 and 12.
Whether leave of absence by approval of the Company or by reason of military or
governmental service constitutes employment for purposes of the Plan shall be
conclusively determined by the Administrator.
The provisions of this paragraph 10, and not the provisions of
paragraph 11 or 12, shall apply to an optionee who subsequently becomes
disabled or dies after the termination of employment or consultancy, provided,
however, in the case of an optionee's death within 45 days after the
termination of employment or consulting, the Optionee's Survivors (as defined
below) may exercise the Option within one year after the date of the optionee's
death, but in no event after the date of expiration of the term of the Option.
Notwithstanding anything herein to the contrary, if subsequent to an
optionee's termination of employment or consultancy, but prior to the exercise
of an Option, the Administrator determines that, either prior or subsequent to
the optionee's termination, the optionee engaged in conduct which would
constitute "cause," then such optionee shall immediately cease to have any
right to exercise any Option.
Options granted under the Plan shall not be affected by any change of
employment or other service within or among the Company and any subsidiaries,
so long as the optionee continues to be an employee or consultant of the
Company or any subsidiary, provided, however, if an optionee's employment by
either the Company or a subsidiary should cease (other than to become an
employee of a subsidiary or the Company), such termination shall affect the
optionee's rights under any Option granted to such optionee in accordance with
the terms of the Plan and the pertinent Option agreement.
11. Death. Except as otherwise provided in the applicable Option
agreement, in the event of the death of an optionee to whom an Option has been
granted hereunder, while the optionee is an employee or consultant of the
Company or of a subsidiary, such Option may be exercised by any person or
persons who acquired the optionee's rights to the Option by will or by the laws
of descent and distribution (the "Optionee's Survivors") to the extent
exercisable but not exercised on the date of death.
If the Optionee's Survivors wish to exercise the Option, they must
take all necessary steps to exercise the Option within two years after the date
of death of such Optionee, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the shares on a
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later date if he had not died and had continued to be an employee or consultant
or, if earlier, within the originally prescribed term of the Option.
12. Disability. Except as otherwise provided in the applicable
Option agreement, an optionee who ceases to be an employee of or consultant to
the Company or of a subsidiary by reason of Disability may exercise any Option
granted to such optionee to the extent exercisable but not exercised on the
date of his Disability.
"Disability" or "Disabled" means permanent and total disability as
defined in Section 22(e)(3) of the Code.
A Disabled optionee or his or her representative (except in the case
of Incentive Stock Options, only as permitted by Section 422(b)(5) of the Code)
may exercise such rights only within a period of not more than one year after
the date that the optionee became Disabled or, if earlier, within the
originally prescribed term of the Option.
The Administrator shall make the determination both of whether
Disability has occurred and the date of its occurrence (unless a procedure for
such determination is set forth in another agreement between the Company and
such optionee, in which case such procedure shall be used for such
determination). If requested, the optionee shall be examined by a physician
selected or approved by the Administrator, the cost of which examination shall
be paid for by the Company.
13. Termination for Cause. Except as otherwise provided in the
applicable Option agreement, the following rules apply if the optionee's
service (whether as an employee or consultant) is terminated "for cause" prior
to the time that all of his outstanding Options have been exercised:
(a) All outstanding and unexercised Options as of the
date the optionee is notified his service is terminated "for cause"
will immediately be forfeited.
(b) For purposes of this Plan, "cause" shall include (but
is not limited to) dishonesty with respect to the employer or entity
retaining the employee or consultant, insubordination, substantial
malfeasance or nonfeasance of duty, unauthorized disclosure of
confidential information, and conduct substantially prejudicial to the
business of the Company or any subsidiary. The determination of the
Administrator as to the existence of cause will be conclusive on the
optionee and the Company.
(c) "Cause" is not limited to events which have occurred
prior to a optionee's termination of service, nor is it necessary that
the Administrator's finding of "cause" occur prior to termination. If
the Administrator determines, subsequent to an optionee's termination
of service but prior to the exercise of an Option, that either prior
or subsequent to the optionee's termination the optionee engaged in
conduct which would constitute "cause," then the right to exercise any
Option is forfeited.
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14. Assignability. No Option shall be assignable or transferable
by the optionee except by will or by the laws of descent and distribution or if
such Option is not an Incentive Stock Option, pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and during the lifetime of the
optionee each Option shall be exercisable only by him or his legal
representative, except in the case of Incentive Stock Options, only as
permitted by Section 422(b)(5) of the Code. Such Option shall not be assigned,
pledged or hypothecated in any way (whether by operation of law or otherwise,
except as provided above) and shall not be subject to execution, attachment or
similar process. Any attempted transfer, assignment, pledge, hypothecation or
other disposition of any Option or of any rights granted thereunder contrary to
the provisions of this Plan, or the levy of any attachment or similar process
upon an Option, shall be null and void.
15. Terms and Conditions of Options. Options shall be evidenced
by agreements (which need not be identical) in such forms as the Administrator
may from time to time approve. Such agreements shall conform to the terms and
conditions set forth in paragraphs 7 through 14 hereof and may contain such
other provisions, as the Administrator deems advisable, which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options.
16. Adjustments. Upon the happening of any of the following
described events, an optionee's rights with respect to Options granted
hereunder shall be adjusted as hereinafter provided:
(a) In the event shares of Common Stock shall be
subdivided or combined into a greater or smaller number of shares or
if, upon a merger, consolidation, reorganization, split-up,
liquidation, combination, recapitalization or the like of the Company
the shares of Common Stock shall be exchanged for other securities of
the Company or of another corporation, each optionee shall be
entitled, subject to the conditions herein stated, to purchase such
number of shares of common stock or amount of other securities of the
Company or such other corporation as were exchangeable for the number
of shares of Common Stock which such optionee would have been entitled
to purchase except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination, or exchange; and
(b) In the event the Company shall issue any of its
shares as a stock dividend upon or with respect to the shares of stock
of the class which shall at the time be subject to option hereunder,
each optionee upon exercising an Option shall be entitled to receive
(for the purchase price paid upon such exercise) the shares as to
which he is exercising his Option and, in addition thereto (at no
additional cost), such number of shares of the class or classes in
which such stock dividend or dividends were declared or paid, as he
would have received if he had been the holder of the shares as to
which he is exercising his Option at all times between the date of
grant of such Option and the date of its exercise and cash in lieu of
fractional shares.
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Upon the happening of any of the foregoing events, the class and
aggregate number of shares set forth in paragraph 5 hereof which are subject to
Options which have heretofore been or may hereafter be granted under the Plan
shall also be appropriately adjusted to reflect the events specified in
subparagraphs (a) and (b) above. Consistent with the terms of the specific
Grant, the Administrator shall determine the adjustments to be made under this
paragraph 16, and its determination shall be conclusive.
17. Mergers and Consolidations. Unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option, if the Company is to be consolidated with or acquired by
another entity in a merger, sale of all or substantially all of the Company's
assets or otherwise (an "Acquisition"), the Administrator or the board of
directors of any entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on
an equitable basis for the shares then subject to such Options the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition; or (ii) upon written notice to the optionees,
provide that all Options must be exercised, to the extent then exercisable,
within a specified number of days of the date of such notice, at the end of
which period the Options shall terminate; or (iii) terminate all Options in
exchange for a cash payment equal to the excess of the fair market value of the
shares subject to such Options (to the extent then exercisable) over the
exercise price thereof.
18. Modification of Incentive Stock Options. Notwithstanding any
other provision of this Plan, any adjustments or changes made with respect to
Incentive Stock Options shall be made only after the Administrator, after
consulting with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such Incentive Stock Options (as that term
is defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such Incentive Stock Options. If the
Administrator determines that such adjustments made with respect to Incentive
Stock Options would constitute a modification of such Incentive Stock Options,
it may refrain from making such adjustments notwithstanding any other provision
of this Plan, unless the holder of an Incentive Stock Option specifically
requests in writing that such adjustment be made and such writing indicates
that the holder has full knowledge of the consequences of such "modification"
on his income tax treatment with respect to the Incentive Stock Option. No
"modification" may be made without the affirmative votes of the holders of a
majority of shares of Common Stock then issued and outstanding.
19. Dissolution or Liquidation of the Company. Upon the
dissolution or liquidation of the Company, all Options granted under this Plan
which as of such date shall not have been exercised will terminate and become
null and void; provided, however, that if the rights of an optionee or an
Optionee's Survivors have not otherwise terminated and expired, the optionee or
the Optionee's Survivors will have the right immediately prior to such
dissolution or liquidation to exercise any Option to the extent that the right
to purchase shares has accrued under the Plan as of the date immediately prior
to such dissolution or liquidation.
20. Exercise of Options. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, together with
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the tender of the full purchase price for the shares as to which such Option is
being exercised, and upon compliance with any other condition set forth in the
Option agreement. Such written notice shall be signed by the person exercising
the Option, shall state the number of shares with respect to which the Option
is being exercised and shall contain any representation required by the Plan or
the Option agreement. Full payment of the purchase price for the shares as to
which such Option is being exercised shall be made (a) in United States dollars
in cash or by check, or (b) at the discretion of the Administrator, through
delivery of shares of Common Stock having a fair market value equal as of the
date of the exercise to the cash exercise price of the Option, determined in
good faith by the Board, or (c) at the discretion of the Administrator, in such
other manner as constitutes valid consideration in accordance with applicable
law, or (d) at the discretion of the Administrator, by any combination of (a),
(b) and (c) above. Notwithstanding the foregoing, the Administrator shall
accept only such payment on exercise of an Incentive Stock Option as is
permitted by Section 422 of the Code.
The Company shall then deliver the shares as to which such Option was
exercised to the optionee (or to the Optionee's Survivors, as the case may be)
reasonably promptly. In determining what constitutes "reasonably promptly," it
is expressly understood that the delivery of the shares may be delayed by the
Company in order to comply with any law or regulation which requires the
Company to take any action with respect to the shares prior to their issuance.
The shares shall, upon delivery, be evidenced by an appropriate certificate or
certificates for fully-paid non-assessable shares.
The holder of an Option shall not have the rights of a shareholder
with respect to the shares covered by his Option until the date of issuance of
a stock certificate to him for such shares. No adjustment shall be made for
dividends or similar rights for which the record date is after the exercise of
the Option but before the date such stock certificate is issued. In no event
shall a fraction of a share be purchased or issued under the Plan.
21. Purchase for Investment. Unless the offering and sale of the
shares to be issued upon the particular exercise of an Option shall have been
effectively registered under the Securities Act of 1933, as now in force or
hereafter amended (the "Act"), the Company shall be under no obligation to
issue the shares covered by such exercise unless and until the following
conditions have been fulfilled:
(a) The person(s) who exercise such Option shall warrant
to the Company, at the time of such exercise or receipt, as the case
may be, that such person(s) are acquiring such shares for their own
respective accounts, for investment, and not with a view to, or for
sale in connection with, the distribution of any such shares, in which
event the person(s) acquiring such shares shall be bound by the
provisions of the following legend which shall be endorsed upon the
certificate(s) evidencing their shares issued pursuant to such
exercise or such Grant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
FEDERAL SECURITIES ACT OF
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1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT
SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE
COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION
TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO
THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN
VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED
THEREUNDER."
(b) The Company shall have received an opinion of its
counsel that the shares may be issued upon such particular exercise in
compliance with the Act without registration thereunder.
The Company may delay issuance of the shares until completion of any
action or obtaining of any consent which the Company deems necessary under any
applicable law (including, without limitation, state securities or "blue sky"
laws).
22. Issuance of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to Options. Except as expressly provided herein, no adjustments shall
be made for dividends paid in cash or in property (including, without
limitation, securities) of the Company.
23. Fractional Shares. No fractional share shall be issued under
the Plan and the person exercising such right shall receive from the Company
cash in lieu of such fractional share equal to the fair market value thereof
determined in good faith by the Board.
24. Conversion of Incentive Stock Options into Non-Qualified
Options: Termination of Incentive Stock Options. The Administrator, at the
written request of any optionee, may in its discretion take such actions as may
be necessary to convert such optionee's Incentive Stock Options (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such Incentive Stock Options, regardless of whether the optionee
is an employee of the Company or a subsidiary at the time of such conversion.
Such actions may include, but not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such Options.
At the time of such conversion, the Administrator (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Options as the Administrator in its discretion may determine,
provided that such conditions shall not be inconsistent with this Plan.
Nothing in the Plan shall be deemed to give any optionee the right to have such
optionee's Incentive Stock Options converted into Non-Qualified Options, and no
such
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conversion shall occur until and unless the Administrator takes appropriate
action. The Administrator, with the consent of the optionee, may also
terminate any portion of any Incentive Stock Option that has not been exercised
at the time of such termination.
25. Term and Amendment of Plan. The Plan was initially adopted by
the Board on December 23, 1993, subject to its becoming effective upon approval
by the holders of a majority of the outstanding shares of Common Stock of the
Company. The Plan shall expire on December 23, 2003 (except as to Options
outstanding on that date). The Plan may be amended by the Administrator or the
shareholders in accordance with paragraph 3 hereof, including, without
limitation, to the extent necessary to qualify any or all outstanding options
granted under the Plan or options to be granted under the Plan for favorable
federal income tax treatment (including deferral of taxation upon exercise) as
may be afforded incentive stock options under Section 422 of the Code, to the
extent necessary to ensure the qualification of the Plan under Rule 16b-3, and
to the extent necessary to qualify the shares issuable upon exercise of any
outstanding options granted, or options to be granted, under the Plan for
listing on any national securities exchange or quotation in any national
automated quotation system of securities dealers. Any amendment approved by
the Administrator which is of a scope that requires shareholder approval in
order to ensure favorable federal income tax treatment for any Incentive Stock
Options or requires shareholder approval in order to ensure the qualification
of the Plan under Rule 16b-3 shall be subject to obtaining such shareholder
approval. Any modification or amendment of the Plan shall not, without the
consent of an optionee, affect his rights under an option previously granted to
him. With the consent of the optionee affected, the Board, the Committee or
the shareholders may amend outstanding Option agreements in a manner not
inconsistent with the Plan.
26. Application of Funds. The proceeds received by the Company
from the sale of shares pursuant to Options granted under the Plan shall be
used for general corporate purposes.
27. Governmental Regulation. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval
of any governmental authority required in connection with the authorization,
issuance or sale of such shares.
28. Withholding. Upon the exercise of a Non-Qualified Option for
less than its fair market value, the making of a Disqualifying Disposition (as
defined in paragraph 29) or the vesting of restricted Common Stock acquired on
the exercise of an Option hereunder, the Company may withhold from the
optionee's wages, or other remuneration, if any, or may require the optionee to
pay additional federal, state, and local income tax withholding and employee
contributions to employment taxes in respect of the amount that is considered
compensation includable in such person's gross income. The Administrator in
its discretion may condition the exercise of an Option for less than its fair
market value or the vesting of restricted Common Stock acquired by exercising
an Option on the grantee's payment of such additional income tax withholding
and employee contributions to employment taxes.
29. Notice to Company of Disqualifying Disposition. Each employee
who receives an Incentive Stock Option must agree to notify the Company in
writing immediately after the
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employee makes a Disqualifying Disposition of any shares acquired pursuant to
the exercise of an Incentive Stock Option. A Disqualifying Disposition is
defined in Section 424(c) of the Code and includes any disposition (including
any sale) of such shares before the later of (a) two years after the date the
employee was granted the Incentive Stock Option, or (b) one year after the date
the employee acquired shares by exercising the Incentive Stock Option, except
as otherwise provided in Section 424(c) of the Code. If the employee has died
before such stock is sold, these holding period requirements do not apply and
no Disqualifying Disposition can occur thereafter.
30. Governing Law. The validity and construction of the Plan and
the instruments evidencing Options shall be governed by the law of the State of
Texas.
31. Gender. Wherever reference is made herein to the male, female
or neuter genders, such reference shall be deemed to include any of the other
genders as the context may require.
32. Employment At Will. Nothing in the Plan shall be deemed to
give any optionee the right to be retained in employment by or as a consultant
or director to the Company or its subsidiaries for any period of time.
IN WITNESS WHEREOF, the Board of Directors of Schlotzsky's, Inc.
approved the 1993 Stock Option Plan as of the 23rd day of December, 1993, the
Shareholders approved the Plan as of December 31, 1993 and approved amendments
to the Plan as of November 30, 1995. The Compensation Committee has approved
the Second Amended and Restated 1993 Stock Option Plan as of the 28th day of
October, 1996 and the Third Amended and Restated Stock Option Plan, as of the
24th day of February, 1997. The Shareholders approved the Third Amended and
Restated Stock Option Plan as of the 30th day of May, 1997.
/s/ JEFFREY J. WOOLEY
---------------------------------
Jeffrey J. Wooley, Secretary
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