EXHIBIT 10.1
BUFFALO WILD WINGS, INC.
2003 EQUITY INCENTIVE PLAN
(As Amended and Restated May 15, 2008)
SECTION 1.
DEFINITIONS
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As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliates" shall mean a Parent or Subsidiary of the Company.
(b) "Award" shall mean a grant made under the Plan in the form of
Options, Restricted Stock or Restricted Stock Units.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and the regulations promulgated thereunder.
(e) "Committee" shall mean a Committee of two or more non-employee
directors who shall be appointed by and serve at the pleasure of the Board. Each
member of the Committee shall be (i) an independent director within the meaning
of Rule 4200(a)(15) of the NASDAQ Marketplace Rules, (ii) a non-employee
director within the meaning of Exchange Act Rule 16b-3, and (iii) an outside
director for purposes of Code Section 162(m).
(f) The "Company" shall mean Buffalo Wild Wings, Inc., a Minnesota
corporation.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time.
(h) "Fair Market Value" of a share of stock as of any date shall mean
(i) if the stock is listed on the NASDAQ Stock Market, or another established
stock exchange, the closing sale price of a share of the stock at the close of
the regular trading session of such market or exchange on such date, as reported
by The Wall Street Journal or a comparable reporting service, or, if no sale of
such stock shall have occurred on such date, on the next preceding day on which
there was a sale of stock; (ii) if such stock is not so listed on the NASDAQ
Stock Market, or another established stock exchange, the average of the closing
"bid" and "asked" prices quoted by the OTC Bulletin Board, the National
Quotation Bureau, or any comparable reporting service for a share of such stock
on such date or, if there are no quoted "bid" and "asked" prices on such date,
on the next preceding date for which there are such quotes; or (iii) if such
stock is not publicly traded as of such date, the per share value as determined
by the Board, or the Committee, in good faith and in a manner consistent with
Code Section 409A to be 100% of the fair market value of a share of such stock
on that date.
(i) "Option" means a right granted under the Plan to purchase a
specified number of shares of Stock at a specified price per share. An Option
may be either an "Incentive Stock Option" that is designated as such and granted
in accordance with the requirements of Code Section 422, or a "Nonqualified
Stock Option" that is any Option other than an Incentive Stock Option.
(j) The "Participant" means (i) an employee of the Company or any
Affiliate to whom an Incentive Stock Option has been granted pursuant to Section
9, or (ii) a consultant or advisor to or director, employee or officer of the
Company or any Affiliate to whom any other type of Award has been granted
pursuant to Section 10 or Section 17.
(k) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the total voting
power of the Company's outstanding stock.
(l) The "Plan" means the Buffalo Wild Wings, Inc. 2003 Equity Incentive
Plan, as amended from time to time, including the form of Award agreements as
they may be modified by the Board or Committee from time to time. This Plan
amends and restates the Buffalo Wild Wings, Inc. 1995 Stock Option Plan,
formerly known as the bw-3, Inc. 1995 Stock Option Plan, and, prior to that,
known as the JMS Associates, Inc. 1995 Stock Option Plan. For purposes of the
ten-year period described in Section 7, this amendment and restatement shall be
deemed a new stock option plan.
(m) "Restricted Stock" means shares of Stock issued to a Participant
that are subject to such restrictions on transfer, forfeiture conditions and
other restrictions or limitations as may be set forth in this Plan and the
applicable Award agreement.
(n) "Restricted Stock Unit" means a right to receive, in cash and/or
shares of Stock as determined by the Committee, the Fair Market Value of a share
of Stock, subject to such restrictions on transfer, forfeiture conditions and
other restrictions or limitations as may be set forth in this Plan and the
applicable Award agreement.
(o) "Stock" shall mean Common Stock of the Company (subject to
adjustment as described in Section 12).
(p) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned, directly
or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
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(a) The purpose of the Plan is to promote the success of the Company
and its Subsidiaries by facilitating the employment and retention of competent
personnel and by furnishing incentive to officers, directors, employees,
consultants, and advisors upon whose efforts the success of the Company and its
Subsidiaries will depend to a large degree.
(b) It is the intention of the Company to carry out the Plan through
the granting of Incentive Stock Options pursuant to Section 9 of this Plan,
through the granting of Nonqualified Stock Options pursuant to Section 10 of
this Plan, and through the granting of Restricted Stock and Restricted Stock
Unit Awards pursuant to Section 17 of this Plan. Adoption of this Plan shall be
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and is expressly subject to the condition of approval by the shareholders of the
Company within twelve (12) months after the adoption of the Plan by the Board.
SECTION 3.
EFFECTIVE DATE OF PLAN
----------------------
The Plan originally became effective as of its date of adoption by the
Board on April 18, 1995. The effective date of this amendment and restatement of
the Plan is the date such amendment and restatement is approved by the
shareholders of the Company as required in Section 2.
SECTION 4.
ADMINISTRATION
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(a) Except as otherwise provided in this Plan, the Plan shall be
administered by the Committee, referred to as the "Administrator". The
Administrator shall have all of the powers vested in it under the provisions of
the Plan, including but not limited to exclusive authority (where applicable and
subject to the limitations described herein) to (i) determine, in its sole
discretion, the type of Awards to be granted, the individuals to whom, and the
time or times at which, Awards shall be granted, the number of shares subject to
each Award, the exercise price, and the other terms and conditions of each
Award; (ii) cancel or suspend an Award; (iii) accelerate the vesting or
exercisability of an Award, but only in connection with a Change in Control (as
defined in Section 12(c)), a Participant's death or disability, or a
Participant's retirement (as may be defined under applicable Company policies);
or (iv) otherwise amend the terms and conditions of any outstanding Award. The
Administrator shall have full power and authority to administer and interpret
the Plan, to make and amend rules, regulations and guidelines for administering
the Plan, to prescribe the form and conditions of the respective Award
agreements (which may vary from Participant to Participant) evidencing each
Award and to make all other determinations necessary or advisable for the
administration of the Plan. The Administrator's interpretation of the Plan, and
all actions taken and determinations made by the Administrator pursuant to the
power vested in it hereunder, shall be conclusive and binding on all parties
concerned.
(b) No member of the Board or the Committee shall be liable for any
action taken or determination made in good faith in connection with the
administration of the Plan. Any action of the Committee with respect to the
administration of the Plan shall be taken pursuant to a majority vote of the
Committee members or pursuant to the written resolution of all Committee
members. To the extent not inconsistent with applicable law or stock exchange
rules, the Committee may delegate all or any portion of its authority under the
Plan to determine and administer Awards to Participants who are not subject to
Section 16 of the Exchange Act to one or more persons who are either
non-employee directors or executive officers of the Company.
SECTION 5.
PARTICIPANTS
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The Administrator shall from time to time, at its discretion and
without approval of the shareholders, designate those employees of the Company
or any Affiliate to whom Incentive Stock Options shall be granted pursuant to
Section 9 of the Plan, and those employees, officers, directors, consultants and
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advisors of the Company or of any Affiliate to whom other Awards shall be
granted pursuant to Sections 10 and 17 of the Plan; provided, however, that
consultants or advisors shall not be eligible to receive Awards hereunder unless
such consultant or advisor renders bona fide services to the Company or an
Affiliate and such services are not in connection with the offer or sale of
securities in a capital raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities. The Administrator may
grant additional Awards under this Plan to some or all Participants then holding
Awards or may grant Awards solely or partially to new Participants. In
designating Participants, the Administrator shall also determine the number of
shares to be subject to each Award made to each such Participant.
SECTION 6.
STOCK
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(a) Subject to adjustment as provided in Section 12 of the Plan, a
total of 3,900,000 shares of Stock shall be reserved and available for Awards
under the Plan, all of which may be granted as Incentive Stock Options. The
shares of Stock to be subject to Awards under this Plan shall consist of
authorized but unissued shares of Stock. In determining the number of shares to
be counted against the limit expressed above in connection with any Award made
after May 15, 2008, the following rules shall apply:
(1) Shares that are subject to Option Awards shall be counted
against the limit as one share for every one share granted.
(2) Shares that are subject to Restricted Stock or Restricted
Stock Unit Awards shall be counted against the limit as 1.5 shares for every one
share granted.
(3) Where the number of shares subject to the Award is
variable on the date of grant, the number of shares to be counted against the
limit prior to the settlement of the Award and consistent with paragraphs
6(a)(1) and (2) shall be the maximum number of shares that could be received
under that particular Award.
(b) In the event any portion of an outstanding Award under the Plan for
any reason expires (including as a result of less than the maximum number of
shares subject to a variable Award being issued), is terminated or forfeited
prior to vesting or exercise, or is settled for cash, the shares of Stock
allocable to such portion of the Award shall again be available for Awards under
the Plan, and the total number of shares of Stock available for grant under
Section 6(a) shall be correspondingly increased as provided in Section 6(c).
However, shares tendered by a Participant or withheld by the Company in payment
of the exercise price of an Option or in satisfaction of any tax withholding
obligation with respect to an Award will not again become available for Awards
or increase the number of shares available for grant under Section 6(a).
(c) Each share that again becomes available for Awards as provided in
Section 6(b) shall increase the total number of shares available for grant under
Section 6(a) by (i) one share if such share was subject to an Option Award under
the Plan, and (ii) [2.0] shares if such share was subject to a Restricted Stock
or Restricted Stock Unit Award.
(d) The aggregate number of shares of Stock subject to Options granted
during any fiscal year to any one Participant shall not exceed one hundred
thousand (100,000).
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SECTION 7.
DURATION OF PLAN
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Incentive Stock Options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date of the
amendment and restatement of this Plan as defined in Section 3. Other forms of
Awards may be granted pursuant to the Plan from time to time after the effective
date of the Plan and until all shares of Stock subject to the Plan have been
issued or until the earlier discontinuance or termination of the Plan by the
Board. Any Award granted within the time frames specified above shall remain in
full force and effect until the expiration of the Award as specified in the
written Award agreement and shall remain subject to the terms and conditions of
this Plan.
SECTION 8.
OPTION EXERCISE PAYMENTS
------------------------
(a) Participants may pay for shares of Stock upon exercise of Options
granted pursuant to this Plan with cash, personal check, certified check
(including, if permitted by the Administrator, payment under a broker-assisted
sale and remittance program) or, if approved by the Administrator in its sole
discretion, by delivery to the Company of previously-owned shares of Stock or by
withholding shares of Stock otherwise issuable upon exercise of the Option (in
either case, such shares having a Fair Market Value as of the date the Option is
exercised equal to the total exercise price of the shares being purchased), or
such other form of payment as may be authorized by the Administrator. The
Administrator may, in its sole discretion, limit the forms of payment available
to the Participant and may exercise such discretion any time prior to the
termination of the Option granted to the Participant or upon any exercise of the
Option by the Participant.
(b) With respect to payment in the form of shares of Stock, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3 under the Exchange Act, if
applicable.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
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Each Incentive Stock Option granted pursuant to this Section 9 shall be
evidenced by a written Award agreement (the "Option Agreement"). The Option
Agreement shall be in such form as may be approved from time to time by the
Administrator and may vary from Participant to Participant; provided, however,
that each Participant and each Option Agreement shall comply with and be subject
to the following terms and conditions:
(a) Number of Shares. The Option Agreement shall state the total number
of shares covered by the Incentive Stock Option. An Option will constitute an
Incentive Stock Option only to the extent that the aggregate Fair Market Value
(determined as of the date the Option is granted) of the shares of Stock with
respect to which Incentive Stock Options held by a Participant first become
exercisable in any calendar year (under the Plan and all other plans of the
Company and its Affiliates) does not exceed $100,000, or such revised limit as
may subsequently be established under Code Section 422. To the extent an Option
that would otherwise be an Incentive Stock Option exceeds this limit, the Option
shall be treated as a Nonqualified Stock Option.
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(b) Exercise Price. The exercise price at which each share of Stock
subject to an Incentive Stock Option may be purchased shall be determined by the
Administrator and set forth in the Option Agreement, but such exercise price
shall not be less than one hundred percent (100%) of the Fair Market Value of a
share of Stock on the date the Administrator grants the Option. However, if a
Participant owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any
Affiliate, the exercise price per share of an Incentive Stock Option granted to
such Participant shall not be less than one hundred ten percent (110%) of the
Fair Market Value of a share of Stock on the date of the grant of the Option.
The Administrator shall have full authority and discretion in establishing the
exercise price and shall be fully protected in so doing.
(c) Term and Exercisability of Incentive Stock Option. The term during
which any Incentive Stock Option granted under the Plan may be exercised shall
be established in each case by the Administrator. To the extent required to
qualify the Option as an incentive stock option under Section 422 of the Code,
or any successor provision, in no event shall any Incentive Stock Option be
exercisable during a term of more than ten (10) years from the date on which it
is granted. However, if a Participant owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any Affiliate, the Incentive Stock Option granted to such
Participant shall be exercisable during a term of not more than five (5) years
from the date on which it is granted. The Option Agreement shall state when the
Incentive Stock Option becomes exercisable and shall also state the maximum term
during which the Option may be exercised. In the event an Incentive Stock Option
is exercisable immediately, the manner of exercise of the Option in the event it
is not exercised in full immediately shall be specified in the Option Agreement.
(d) Other Provisions. An Option Agreement authorized under this Section
9 shall contain such other provisions as the Administrator shall deem advisable.
Any such Option Agreement shall contain such limitations and restrictions upon
the exercise of the Option as shall be necessary to ensure that such Option will
be considered an "incentive stock option" as defined in Section 422 of the Code
or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
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Each Nonqualified Stock Option granted pursuant to this Section 10
shall be evidenced by a written Option Agreement. The Option Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Participant to Participant; provided, however, that each Participant
and each Option Agreement shall comply with and be subject to the following
terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares of Stock covered by the Nonqualified Stock Option.
The exercise price at which each share of Stock subject to a Nonqualified Stock
Option may be purchased shall be determined by the Administrator and set forth
in the Option Agreement, but such exercise price shall not be less than one
hundred percent (100%) of the Fair Market Value of a share of Stock on the date
the Administrator grants the Option.
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(b) Term and Exercisability of Nonqualified Stock Option. The term
during which any Nonqualified Stock Option granted under the Plan may be
exercised shall be established in each case by the Administrator. The Option
Agreement shall state when the Nonqualified Stock Option becomes exercisable and
shall also state the maximum term during which the Option may be exercised; in
no event shall any Nonqualified Stock Option be exercisable during a term of
more than ten (10) years from the date on which it is granted. In the event a
Nonqualified Stock Option s exercisable immediately, the manner of exercise of
the Option in the event it is not exercised in full immediately shall be
specified in the Option Agreement.
(c) Other Provisions. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Administrator shall deem
advisable.
SECTION 11.
TRANSFER OF AWARDS
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Except as provided in this Section 11, (i) no Award may be sold,
assigned, transferred or encumbered, in whole or in part, by the Participant
other than by will or by the laws of descent and distribution, and (ii) during
the Participant's lifetime, only the Participant (or the Participant's guardian
or legal representative) may exercise an Option or receive payment with respect
to any other Award. If the Participant shall attempt any transfer of any Award
in violation of this Section 11, such transfer shall be void and the Award, to
the extent not fully exercised or vested, shall terminate. The Administrator
may, however, permit the Participant to transfer by gift any or all Nonqualified
Stock Options to any "family member" (as defined by the General Instructions to
Form S-8 under the Securities Act of 1933, as amended) of the Participant. Any
such transferred Nonqualified Stock Option shall continue to be subject to the
same terms and conditions as were applicable to such Option immediately prior to
its transfer. For purposes of any provision of the Plan relating to notice to a
Participant or to acceleration or termination of an Option upon the death or
termination of employment of a Participant, the references to "Participant"
shall mean the original grantee of an Option and not any transferee.
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE OR LIQUIDATION
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(a) In the event of any merger, reorganization, consolidation,
recapitalization, rights offering, dividend or distribution (whether in cash,
shares or other property, other than a regular cash dividend), stock split,
reverse stock split, subdivision or consolidation of shares, spin-off or similar
transaction or other change in corporate structure affecting the shares of Stock
or the value thereof, the Administrator shall cause equitable adjustments to be
made to (i) the number and kind of shares of Stock or other securities available
for future Awards under the Plan, (ii) outstanding Awards (including to the
number and kind of shares of Stock or other securities to which such Awards are
subject, the exercise or purchase price of such Awards and any share-based
Performance Objectives (as defined in Section 17(c)(1)) applicable to such
Awards), and (iii) the maximum number of shares of Stock or other securities
that may be the subject of Awards of a specific type (such as Incentive Stock
Options) or Awards to a single Participant. Adjustments contemplated by this
Section 12(a) shall be made taking into consideration the accounting and tax
consequences, and specifically in such a manner that will not cause Incentive
Stock Options to violate Section 422(b) of the Code or cause an Award to be
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subject to adverse tax consequences under Section 409A of the Code. The number
of Shares subject to an Award shall always be a whole number.
(b) Unless otherwise provided in an Award agreement, in the event of a
Change in Control (as defined in Section 12(c)) of the Company, the Board may
provide for one or more of the following:
(1) the equitable acceleration of (i) the exercisability of
any outstanding Options and (ii) the vesting and corresponding lapse of the
risks of forfeiture on any other Awards;
(2) the complete termination of this Plan, the cancellation
of outstanding Options not exercised prior to a date specified by the Board
(which date shall give Participants a reasonable period of time in which to
exercise the Options prior to the effectiveness of such Change in Control), and
the cancellation of any Restricted Stock or Restricted Stock Unit Awards for
which the risks of forfeiture have not lapsed;
(3) that Participants holding outstanding Options shall
receive, with respect to each share of Stock subject to such Options, as of the
effective date of any such Change in Control, cash in an amount equal to the
excess of the Fair Market Value of such shares on the date immediately preceding
the effective date of such Change in Control over the exercise price per share
of such Options; provided that the Board may, in lieu of such cash payment,
distribute to such Participants shares of Stock or shares of stock of any
corporation succeeding the Company (or of the parent of any such corporation) by
reason of such Change in Control, such shares having a Fair Market Value as of
the date immediately preceding the effective date of such Change in Control
equal to the amount of the cash payment provided for in this clause 12(b)(3);
(4) that Participants holding outstanding Restricted Stock or
Restricted Stock Unit Awards shall receive, with respect to each share of Stock
subject to such Awards, as of the effective date of any such Change in Control,
cash in an amount equal to the Fair Market Value of a share of Stock on the date
immediately preceding the effective date of such Change in Control; provided
that the Board may, in lieu of such cash payment, distribute to such
Participants shares of Stock or shares of stock of any corporation succeeding
the Company (or of the parent of any such corporation) by reason of such Change
in Control, such shares having a Fair Market Value as of the date immediately
preceding the effective date of such Change in Control equal to the amount of
the cash payment provided for in this clause 12(b)(4);
(5) the continuance by the Company, or the assumption or
replacement by the surviving or successor corporation (or its parent) in the
Change in Control, of Awards that were outstanding as of the date of the Change
in Control. For purposes of this clause 12(b)(5), an Award shall be considered
assumed or replaced if, following the Change in Control, the Participant has
received, in a manner that complies with Code Sections 424 and 409A, a
comparable equity-based award that preserves the existing compensatory value of
the Award at the time of the Change in Control and includes a vesting or
exercisability schedule that is the same as or more favorable to the
Participant.
The Board may restrict the rights of or the applicability of this Section 12 to
the extent necessary to comply with Section 16(b) of the Securities Exchange Act
of 1934, the Code or any other applicable law or regulation. The grant of an
Option or other form of Award pursuant to the Plan shall not limit in any way
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the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.
(c) Unless otherwise provided in an applicable Award agreement, a
"Change in Control" for purposes of this Section 12 means:
(1) a merger, consolidation, statutory exchange or
reorganization approved by the Company's stockholders, unless securities
representing more than fifty percent (50%) of the total combined voting power of
the outstanding voting securities of the successor corporation are immediately
thereafter beneficially owned, directly or indirectly and in substantially the
same proportion, by the persons who beneficially owned the Company's outstanding
voting securities immediately prior to such transaction;
(2) any stockholder-approved sale, transfer or other
disposition of all or substantially all of the Company's assets;
(3) any transaction or series of related transactions pursuant
to which any person or any group of persons comprising a "group" within the
meaning of Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as
amended (other than the Company or a person that, prior to such transaction or
series of related transactions, directly or indirectly controls, is controlled
by or is under common control with, the Company) becomes directly or indirectly
the beneficial owner (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of securities possessing (or convertible into
or exercisable for securities possessing) thirty percent (30%) or more of the
total combined voting power of the Company's securities (determined by the power
to vote with respect to the elections of Board members) outstanding immediately
after the consummation of such transaction or series of related transactions,
whether such transaction involves a direct issuance from the Company or the
acquisition of outstanding securities held by one or more of the Company's
stockholders;
(4) a change in the composition of the Board over a period of
eighteen (18) consecutive months or less such that a majority of the Board
members ceases to be comprised of individuals who have been Board members
continuously since the beginning of such period; or
(5) approval by the Company's stockholders of a complete
liquidation or dissolution of the Company.
Notwithstanding anything herein stated, if any Award is determined to provide
for the deferral of compensation within the meaning of Code Section 409A, a
Change in Control shall be deemed to occur only if it would be deemed to
constitute a change in ownership or effective control, or a change in the
ownership of a substantial portion of the assets, of the Company under Code
Section 409A.
SECTION 13.
SECURITIES LAW REQUIREMENTS
---------------------------
No shares of Stock shall be issued pursuant to the Plan unless and
until there has been compliance, in the opinion of the Company's counsel, with
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all applicable legal requirements, including without limitation, those relating
to federal and state securities laws and applicable stock exchange listing
requirements.
SECTION 14.
RIGHTS AS A SHAREHOLDER
-----------------------
A Participant (or the Participant's successor or successors) shall have
no rights as a shareholder with respect to any shares of Stock covered by an
Option or Restricted Stock Unit Award unless and until the date the Participant
becomes the holder of record of the shares of Stock to which the Award relates.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date the Participant becomes the holder of record of
such shares (except as otherwise provided in Section 12 of the Plan).
SECTION 15.
AMENDMENT OF THE PLAN
---------------------
(a) The Board may from time to time, insofar as permitted by law,
suspend or discontinue the Plan or revise or amend it in any respect; provided,
however, that no such revision or amendment, except as is authorized in Section
12, shall impair the terms and conditions of any Award which is outstanding on
the date of such revision or amendment to the material detriment of the
Participant without the consent of the Participant. It will be conclusively
presumed that any amendment to the Plan or any Award agreement necessary to
comply with applicable law or to avoid the imposition of any additional tax
under Section 409A would not operate to the material detriment of any
Participant. The Company shall submit any amendment of the Plan to its
shareholders for approval if the rules of the principal securities exchange on
which the shares of Stock are then listed or other applicable laws or
regulations require stockholder approval of such amendment. Furthermore, the
Plan may not, without the approval of the shareholders, be amended in any manner
that will cause Incentive Stock Options to fail to meet the requirements of
Section 422 of the Code.
(b) Except as provided in Section 12, no Option granted under the Plan
may be amended to decrease the exercise price thereof, or be cancelled in
conjunction with the grant of any new Option with a lower exercise price, or
otherwise be subject to any action that would be treated under accounting rules
or otherwise as a "repricing" of such Option, unless such action is approved by
the Company's shareholders.
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
--------------------------------
The granting of an Option shall impose no obligation upon the
Participant to exercise such Option. Further, the granting of an Award hereunder
shall not impose upon the Company or any Affiliate any obligation to retain the
Participant in its employ for any period.
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SECTION 17.
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
-------------------------------------------------
Each Restricted Stock/Restricted Stock Unit Award granted pursuant to
the Plan shall be evidenced by a written Award agreement (the "Restricted Stock
Agreement" or "Restricted Stock Unit Agreement," as the case may be). The
Restricted Stock Agreement or Restricted Stock Unit Agreement shall be in such
form as may be approved from time to time by the Administrator and may vary from
Participant to Participant; provided, however, that each Participant and each
Restricted Stock Agreement or Restricted Stock Unit Agreement shall comply with
and be subject to the following terms and conditions
(a) Number of Shares. The Restricted Stock Agreement or Restricted
Stock Unit Agreement shall state the total number of shares of Stock covered by
the applicable Award.
(b) Risks of Forfeiture. The Restricted Stock Agreement or Restricted
Stock Unit Agreement shall set forth the risks of forfeiture and other
restrictions, if any, which shall apply to the shares of Stock and units covered
by the applicable Award, and shall specify the timing and conditions under which
such Awards shall vest and the risks of forfeiture correspondingly lapse,
subject to the following limitations:
(1) An Award that is not subject to the satisfaction of
Performance Objectives (as defined in Section 17(c)) may not fully vest earlier
than three years from the date the Award was granted.
(2) The performance period of an Award that is subject to the
satisfaction of Performance Objectives may not be shorter than one year.
The limitations in clauses (1) and (2) above will not, however, apply in the
following situations: (i) an Award made to attract a key executive to join the
Company; (ii) upon a Change in Control; (iii) upon termination of employment due
to death or disability; (iv) Restricted Stock or Restricted Stock Units issued
in exchange for other compensation; and (v) Awards issued to non-employee
directors.
(c) Performance-Based Compensation. To the extent that the
Administrator determines it to be desirable to qualify Restricted Stock or
Restricted Stock Unit Awards granted hereunder as "performance-based
compensation" within the meaning of Code Section 162(m), the vesting of such
Awards and the corresponding lapse of risks of forfeiture shall be subject to
the achievement of one or more Performance Objectives established in writing by
the Administrator for a specified performance period.
(1) For purposes of this Section 17(c), "Performance
Objectives" shall be limited to any one, or a combination of, the following
performance criteria: (i) revenue, (ii) net income, (iii) stockholders' equity,
(iv) earnings per share, (v) return on equity, (vi) return on assets, (vii)
total shareholder return, (viii) net operating income, (ix) cost controls, (x)
cash flow, (xi) increase in revenue, (xii) increase in share price or earnings,
(xiii) return on investment, (xiv) department or business unit performance
goals, (xv) increase in market share, (xvi) same-store sale increases, (xvii)
increases in the number of store locations, (xviii) financial performance that
exceeds the financial performance of the Company's peers in the industry, (xix)
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individual performance goals, (xx) net sales, (xxi) net earnings, (xxii)
earnings before income taxes, (xxiii) earnings before interest and taxes, (xxiv)
earnings before interest, taxes, depreciation and amortization, (xxv) earnings
per share (basic or diluted), (xxvi) profitability as measured by return ratios
(including, but not limited to, return on assets, return on equity, return on
investment and return on net sales), (xxvii) or by the degree to which any of
the foregoing earnings measures exceed a percentage of net sales; cash flow;
market share; margins (including, but not limited to, one or more of gross,
operating and net earnings margins); stock price; total stockholder return;
asset quality; non-performing assets; revenue growth; operating income; pre- or
after-tax income; cash flow per share; operating assets; improvement in or
attainment of expense levels or cost savings; economic value added; and
improvement in or attainment of working capital levels, in all cases including,
if selected by the Committee, minimum threshold, mid-level and target levels.
Any Performance Objective utilized may be expressed in absolute amounts, on a
per share basis, as a growth rate or change from preceding periods, or as a
comparison to the performance of specified companies or other external measures,
may relate to one or any combination of corporate, group, unit, division,
Affiliate or individual performance, and may be expressed in terms of differing
levels of achievement, such as minimum threshold, target and maximum levels.
(2) When establishing Performance Objectives for a performance
period, the Administrator may exclude amounts or charges relating to an event or
occurrence that the Administrator determines, consistent with the requirements
of Code Section 162(m), should appropriately be excluded. The Administrator may
also adjust Performance Objectives for a performance period to the extent
permitted by Code Section 162(m) to prevent the dilution or enlargement of a
Participant's rights with respect to performance-based compensation. The
Administrator will determine any amount payable in connection with an Award
subject to this Section 17(c) consistent with the requirements of Code Section
162(m), and may adjust downward, but not upward, any amount determined to be
otherwise payable in connection with such an Award.
(d) Issuance of Shares; Rights as Shareholder.
(1) With respect to a Restricted Stock Award, the Company
shall cause to be issued a stock certificate representing such shares of Stock
in the Participant's name, and shall deliver such certificate to the
Participant; provided, however, that the Company shall place a legend on such
certificate describing the risks of forfeiture and other transfer restrictions
set forth in the Participant's Restricted Stock Agreement and providing for the
cancellation and return of such certificate if the shares of Stock subject to
the Restricted Stock Award are forfeited. Shares of Stock subject to a
Restricted Stock Award may alternatively be evidenced by a book-entry in the
name of the Participant with the Company's transfer agent, and any book entry
position shall be subject to the applicable risks of forfeiture and other
transfer restrictions and accompanied by a corresponding legend/instructions to
the transfer agent. Until the risks of forfeiture have lapsed or the shares
subject to such Restricted Stock Award have been forfeited, the Participant
shall be entitled to vote the shares of Stock represented by such stock
certificates and shall receive all dividends attributable to such shares, but
the Participant shall not have any other rights as a shareholder with respect to
such shares.
(2) With respect to a Restricted Stock Unit Award, as the
Restricted Stock Units vest and the risks of forfeiture lapse, the Administrator
shall cause to be issued to the Participant shares of Stock in satisfaction of
such Restricted Stock Units within such time period after vesting as will cause
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such payment to qualify for the "short-term deferral" exemption under Code
Section 409A.
(e) Other Provisions. The Restricted Stock Agreement or Restricted
Stock Unit Agreement authorized under this Section 17 shall contain such other
provisions as the Administrator shall deem advisable.
(f) Delay of Payment for Section 162(m). In the event the Administrator
reasonably anticipates that the Company's income tax deduction with respect to
any issuance of shares of Stock following the vesting of a Restricted Stock Unit
Award would not be permitted by the application of Code Section 162(m), and the
Administrator determines that as of the date the Restricted Stock Unit Award was
granted a reasonable person would not have anticipated the application of Code
Section 162(m) at the time of vesting and settlement of the Restricted Stock
Unit Award, the Administrator may, subject to such terms and conditions as
determined by the Administrator, delay the issuance of such shares of Stock
until the date at which the Administrator reasonably anticipates that the
corresponding income tax deduction will no longer be restricted due to the
application of Code Section 162(m).
(g) Limitation on Restricted Stock and Restricted Stock Units. In no
event shall any Participant receive during any one fiscal year Restricted Stock
and Restricted Stock Unit Awards for a number of shares of Stock that is greater
than (i) 175% of the Participant's base salary in effect on the date of the
grant of the Award, divided by (ii) the Fair Market Value of a share of Stock on
the date of the grant of the Award.
SECTION 18.
OTHER PROVISIONS
----------------
(a) Withholding Taxes. The Company or its Affiliate shall be entitled
to withhold and deduct from any compensation owed to a Participant all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the exercise, vesting or payment of an
Award to the Participant, and to require a Participant receiving shares of Stock
under the Plan to pay a cash amount sufficient to cover any required withholding
taxes before actual receipt of those shares. In the event the Participant is
required under the applicable Award agreement to pay the Company or Affiliate,
or make arrangements satisfactory to the Company or Affiliate respecting payment
of, such withholding and employment-related taxes, the Administrator may, in its
discretion and pursuant to such rules as it may adopt, permit such obligations
to be satisfied, in whole or in part, by the Participant's delivery of shares of
Stock (including shares received pursuant to a Restricted Stock Award on which
the risks of forfeiture have lapsed) or by the Company or Affiliate withholding
shares of Stock otherwise issuable to the Participant upon the vesting or
exercise of an Award. Such shares delivered or withheld shall have a Fair Market
Value equal to the minimum required tax withholding, based on the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are then applicable. In no event may the Participant deliver
or have withheld shares having a Fair Market Value in excess of such statutory
minimum required tax withholding. Any election by a Participant to deliver or
have withheld shares of Stock for this purpose shall be made on or before the
date that the amount of tax to be withheld is determined under applicable tax
law. Such election must be approved by the Administrator and otherwise comply
with such rules as the Administrator may adopt to assure compliance with Rule
16b-3 under the Exchange Act, if applicable.
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(b) Change in Status. Neither the transfer of employment of a
Participant between any of the Company or its Affiliates, nor a leave of absence
granted to such Participant and approved by the Committee, nor any change in
status among employee, consultant or non-employee director of the Company or its
Affiliates shall be deemed a termination of employment or services for purposes
of the Plan.
(c) Code Section 409A. It is intended that (i) all Awards of Options
and Restricted Stock under the Plan will not provide for the deferral of
compensation within the meaning of Code Section 409A and thereby be exempt from
such Section 409A, and (ii) all Restricted Stock Unit Awards under the Plan will
either not provide for the deferral of compensation within the meaning of such
Section 409A, or will comply with the requirements of such Section 409A, and
Awards shall be structured and the Plan administered in accordance with this
intent.
(d) Choice of Law. To the extent that federal laws do not otherwise
control, the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of the State of Minnesota without regard to
its conflicts-of-law principles and shall be construed accordingly.
(e) Severability of Provisions. If any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
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