Exhibit 10.23

 

DATALINK CORPORATION

RESTRICTED STOCK AWARD AGREEMENT

 

                THIS RESTRICTED STOCK AWARD AGREEMENT (the “Award Agreement”) is
made as of the        day of               , 2004 (the “Grant Date”), by and
between Datalink Corporation, a Minnesota corporation (the “Company”), and
                                    (the “Grantee”).

 

                The Company and the Grantee agree as follows:

 

1.             Grant of Restricted Stock.  Effective as of the Grant Date, the
Company hereby awards to the Grantee a total of              shares of common
stock, par value $.001 per share, of the Company (the “Common Stock”), subject
to the conditions and restrictions set forth in this Award Agreement (the
“Restricted Stock”).

 

2.             Additional Definitions.  For purposes of this Award Agreement,
the following additional definitions shall apply:

 

                (a)           “Beneficial Ownership” is computed by reference to
Rule 13d-3 under the Exchange Act.

 

                (b)           “Board” means the Board of Directors of the
Company.

 

                (c)           “Change of Control” means the happening of any of
the following events:

 

                                (i)            An acquisition of outstanding or
newly issued Company securities that results in any Person having Beneficial
Ownership of more than 50% (other than any Person who, as of the Grant Date,
already has Beneficial Ownership of at least 25%) of either (x) the then
Outstanding Company Common Stock or (y) the combined voting power of the then
Outstanding Company Voting Securities;  or

 

                                (ii)           A change in the composition of
the Board in connection with a tender or exchange offer, a Corporate Transaction
or a direct purchase of securities from the Company such that (i) the
individuals who, as of the Grant Date, constitute the Incumbent Board cease to
constitute at least a majority of the Board or (ii) a majority of the
individuals who, as of the Grant Date, constitute the Incumbent Board resign or
are removed from the Board;  or

 

                                (iii)          The approval by the shareholders
of the Company of a Corporate Transaction or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders, to the
consent of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation);  excluding, however, such a
Corporate Transaction pursuant to which (1) all or substantially all of the
Beneficial Owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction will
Beneficially Own, directly or indirectly, more than 50% of the outstanding
shares of common stock, or more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, of the company resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (2) no Person (other than the Company, any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or such corporation resulting from such Corporate Transaction) will
Beneficially Own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed with respect to the
Company prior to the Corporate Transaction and (3) individuals who were members
of the Incumbent Board will constitute at least a majority of the board of
directors of the corporation resulting from such Corporate Transaction;  or

 

                                (iv)          The approval by the shareholders
of the Company of a complete liquidation or dissolution of the Company.

 

                (d)           “Change of Control Price” means the higher of (i)
the highest reported closing price of a share of Common Stock in any transaction
reported on the Nasdaq Stock Market during the 30-day period prior to and
including the date of a Change of Control or (ii) if the Change of Control is
the result of a tender or exchange offer, a Corporate Transaction or a direct
purchase of securities from the Company, the highest price per share of Common
Stock paid in such tender or exchange offer, Corporate Transaction or direct
purchase of securities.

 

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                If the Change of Control is the result of a direct purchase of
securities from the Company for a consideration consisting in whole or in part
other than cash, then:

 

                                (i)            insofar as the purchase
consideration consists of securities and the value of such securities is not
determinable by reference to a separate agreement, (A) if the securities are
then traded on a national securities exchange or the Nasdaq Stock Market (or a
similar national quotation system), then the value shall be computed based on
the average of the closing prices of the securities on such exchange or system
over the thirty (30)-day period ending on the date of receipt by the Company,
(B) if the securities are actively traded over-the-counter, then the value shall
be computed based on the average of the closing bid prices over the thirty (30)
day ending on the date of receipt by the Company and (C) if there is no active
public market, then the value shall be computed based on the fair market value
thereof on the date of receipt by the Company, as determined in good faith by
the Board and

 

                                (ii)           insofar as the purchase
consideration consists of property other than cash and securities, then the
value shall be computed at the fair market value thereof at the time of such
issuance, as determined in good faith by the Board.

 

                (e)           “Committee” means (i) the Board, during any period
in which there shall be no Compensation Committee of the Board comprised of two
or more non-employee directors or during any other period during which the Board
elects to exercise the authority of the Committee, or (ii) the Compensation
Committee of the Board, during all other periods.

 

                (f)            “Corporate Transaction” means a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets of another
corporation.

 

                (g)           “Determination Date” means the last day of any two
consecutive fiscal quarters after the Grant Date.

 

                (h)           “Exchange Act” means the Securities Exchange Act
of 1934, as amended.

 

                (i)            “Incumbent Board” means the members of the
Company’s Board of Directors on the Grant Date.

 

                (j)            “Outstanding Company Common Stock” means, as of a
particular date, the number of shares of the Company’s Common Stock then
outstanding.

 

                (k)           “Outstanding Company Voting Securities” means, as
of a particular date, those voting securities of the Company entitled to vote
generally in the election of directors then outstanding.

 

                (l)            “Person” means an individual, entity or group
within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

 

                (m)          “Publicly Announces” means that the Company has
issued a press release and/or filed information on a periodic, quarterly or
annual report with the U.S. Securities and Exchange Commission.

 

                (n)           “Return on Invested Capital” means, as of any
particular Determination Date, a fraction (expressed as a percentage), the
numerator of which is the two times the amount of positive net income of the
Company (as adjusted in accordance with the following sentence) for the two
consecutive fiscal quarters ended on the Determination Date, and the denominator
of which is the sum of (x) the Company’s total stockholders’ equity as of the
Determination Date (as adjusted in accordance with the second sentence below)
and (y) the Company’s long-term debt as of the Determination Date, in each case,
as such financial metrics (except as to the adjustments in the next two
sentences) are Publicly Announced by the Company.  For purposes of the prior
sentence, the Publicly Announced net income amount for the applicable two
consecutive fiscal quarters shall be increased by (i) any stock option expense
or amortization amount charged during such quarters that relates to option or
other equity grants made prior to the Grant Date and (ii) any restricted stock
expense or amortization amount charged during such quarters on account of
vesting of any Restricted Stock pursuant to Sections 5(b) or 5(c) of this
Agreement or the similar provisions of any other similar restricted stock grant
agreement.  Further, for purposes of the first sentence, the Publicly Announced
total stockholders’ equity as of the Determination Date shall be increased by an
amount equal to the positive net income of the Company (as adjusted in
accordance with the preceding sentence) for the two consecutive fiscal quarters
ended on the Determination Date.

 

                (o)           “Securities Act” means the Securities Act of 1933,
as amended.

 

                (p)           “Service” means employment with the Company or any
of its subsidiaries.

 

                (q)           “Restricted Period” means the period commencing on
the Grant Date and ending the fifth anniversary of the Grant Date.

 

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3.             Rights Regarding Restricted Stock.  The Restricted Stock issued
to Grantee shall constitute issued and outstanding shares of the Company’s
Common Stock for all corporate purposes.  Except as provided by Section 4 below,
the Grantee will have the right to (a) vote the Restricted Stock, (b) receive
and retain dividends and distributions, if any, that the Company designates,
pays and distributes generally with respect to its Common Stock and (c) exercise
all other rights, powers and privileges of a holder of Common Stock with respect
to such Restricted Stock.

 

4.             Restrictions on Restricted Stock.  Despite the above, the
Grantee’s rights to fully enjoy the ownership of the Restricted Stock is subject
to Grantee’s vesting in the Restricted Stock as provided by Section 5 below. 
Pending such vesting, the Grantee’s ownership of the Restricted Stock is subject
to the following:

 

                (a)           Company Retention of Unvested Restricted Stock. 
When issuing the Restricted Stock, the Company shall register the Restricted
Stock in the name of the Grantee, but shall hold the stock certificate, together
with a stock power endorsed by the Grantee in blank, pending vesting by Grantee
in all or a portion of the Restricted Stock.  If at the end or during the
Restricted Period, the Grantee vests in all or a portion of the Restricted
Stock, the Company will promptly reissue a certificate representing the vested
portion of the Restricted Stock and deliver such certificate to Grantee.  Any
such reissued certificate shall contain a legend prohibiting sale or other
transfer of the shares of Common Stock without registration under the Securities
Act or an exemption therefrom.

 

                (b)           Company Retention of Dividends and Distributions
on Unvested Restricted Stock.  In the event that the Company declares and pays a
dividend or other distribution on its Common Stock, the Company shall retain
custody of all such dividends and distributions (the “Retained Distributions”)
made or declared with respect to the unvested portion of the Restricted Stock. 
The Company is not required to segregate the Retained Distributions in a
separate or interest-bearing account, but payment thereof by the Company upon
vesting of the Restricted Stock shall be a general, unsecured obligation of the
Company.  If at the end or during the Restricted Period, the Grantee vests in
all or a portion of the Restricted Stock, the Company shall promptly pay or
distribute to Grantee (without any interest) the portion of the Retained
Distributions held by the Company that relate to the vested portion of the
Restricted Stock.

 

                (c)           Restriction on Transfer of Restricted Stock. 
Except for a transfer without consideration to a trust for the benefit of the
Grantee and/or the Grantee’s spouse and children (and then only if the trust
agrees to be bound by the restrictions of this Agreement on the Restricted Stock
so transferred), the Grantee may not sell, assign, transfer, pledge, exchange,
encumber or dispose of the Restricted Stock or any Retained Distributions or the
Grantee’s interest in any of them until vested therein.

 

5.             Vesting of Restricted Stock.  The Grantee will vest in all or a
portion of the Restricted Stock (and the Retained Distributions, if any, related
thereto), as follows:

 

                (a)           Service-Based Vesting.  The Grantee will vest in
all of the Restricted Stock (and the Retained Distributions, if any, related
thereto) on the last date of the Restricted Period if the Grantee has been in
continuous Service with the Company from the Grant Date to such date.

 

                (b)           Vesting Upon Financial Milestone Achievements. 
All or a portion of the Restricted Stock (and the Retained Distributions, if
any, related thereto) will vest earlier upon the Company’s achievement of
certain financial milestones during the Restricted Period, as follows:

 

                                (i)            One-third of the Restricted Stock
(and the Retained Distributions, if any, related thereto) will vest on the date
that the Company Publicly Announces it has positive income from operations (as
adjusted in accordance with the following sentence) for two consecutive fiscal
quarters ending after the Grant Date.  For purposes of the prior sentence, the
Publicly Announced income from operations amount for the applicable two
consecutive fiscal quarters shall be increased by (i) any stock option expense
or amortization amount charged during such quarters that relates to option or
other equity grants made prior to the Grant Date and (ii) any restricted stock
expense or amortization amount charged during such quarters on account of
vesting of any Restricted Stock pursuant to Sections 5(b) or 5(c) of this
Agreement or the similar provisions of any other similar restricted stock grant
agreement;

 

                                (ii)           One-third of the Restricted Stock
(and the Retained Distributions, if any, related thereto) will vest on the date
the Company Publicly Announces financial results that, as of any particular
Determination Date, represent an achievement of (x) at least a 5% Return on
Invested Capital as of the Determination Date and (y) positive income from
operations (as adjusted in accordance with the last sentence of subsection (i)
above) for each of the two consecutive fiscal quarters ended on the
Determination Date;  and

 

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                                (iii)          One-third of the Restricted Stock
(and the Retained Distributions, if any, related thereto) will vest on the date
the Company Publicly Announces financial results that, as of any particular
Determination Date, represent an achievement of (x) at least a 10% Return on
Invested Capital as of the Determination Date and (y) positive income from
operations (as adjusted in accordance with the last sentence of subsection (i)
above) for each of the two consecutive fiscal quarters ended on the
Determination Date.

 

                As a further condition of vesting, the Grantee must be in
continuous Service with the Company from the Grant Date to the date of Public
Announcement as described above.  The Company may achieve one or more of the
above financial milestones simultaneously.  For example, if the Company achieved
a 10% Return on Invested Capital as of December 31, 2005, and this milestone was
based on positive income from operations (adjusted in the manner described
above) during each of the third and fourth quarters of 2005, the Grantee would
vest in 100% of the Restricted Stock (and all Retained Distributions, if any) on
the date that the Company Publicly Announces these operating results.

 

                (c)           Vesting Upon Change of Control.  All of the
Restricted Stock (and all Retained Distributions, if any) will vest upon a
Change of Control event that occurs during the Restricted Period, but only if
(i) the Grantee has been in continuous Service with the Company since the Grant
Date to the date of the Change of Control and (ii) the Change of Control Price
exceeds $______ (the closing price of the Company’s Common Stock on the Grant
Date).  However, if the Change of Control event is an event described in Section
2(c)(ii) above, then vesting under this subsection (c) will occur if the Grantee
is in continuous Service to the date of the Change of Control, regardless of the
Change of Control Price.

 

                (d)           Effect of Termination of Service.  In the event
Grantee’s Service with the Company ceases for any reason whatsoever (except a
Change of Control), this Award Agreement shall immediately terminate and be of
no force and effect and all Restricted Stock awarded to the Grantee (and the
related Retained Distributions, if any) that has not previously vested shall be
forfeited as of the date of such termination.

 

6.             Cancellation of Unvested Restricted Stock and Retained
Distributions.  The Company will cancel any Restricted Stock and Retained
Distributions that Grantee has not vested in by the earlier of (i) the last day
of the Restricted Period, (ii) the Grantee’s termination of Service with the
Company for any reason or (iii) a Change of Control.  In addition, if the
Committee determines that Grantee has breached any of the restrictions, terms or
conditions provided in this Award Agreement or established by the Committee with
respect to any Restricted Stock or Retained Distributions, the Grantee will
forfeit such Restricted Stock and Retained Distributions.

 

7.             No Code Section 83(b) Election.  The Grantee shall not make an
election, under Section 83(b) of the Internal Revenue Code of 1986, as amended,
to include an amount in income in respect of the Restricted Stock.

 

8.             Non-Alienation of Benefits.  Other than pursuant to a qualified
domestic relations order, no right or benefit under this Award Agreement shall
be subject to transfer, anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, whether voluntary, involuntary or by operation of law,
and any attempt to transfer, anticipate, alienate, sell, assign, pledge,
encumber or charge the same shall be void.

 

9.             No Guarantee of Continued Service.  Nothing contained in this
Award Agreement, and no action of the Company or the Committee with respect
hereto, shall confer or be construed to confer on the Grantee any right to
continue in the Service of the Company.

 

10.           Binding Effect.  This Award Agreement shall bind and inure to the
benefit of and be enforceable by the Grantee, the Company and their respective
permitted successors and assigns (including personal representatives, heirs and
legatees), except that the Grantee may not assign any rights or obligations
under this Award Agreement except to the extent and in a manner expressly
provided herein.

 

11.           Governing Law.  This Award Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Minnesota,
exclusive of its conflict of laws rules.

 

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12.           Entire Agreement.  This Award Agreement contains the entire
agreement between the parties hereto with respect to the Restricted Stock
granted herein and replaces and makes null and void any prior agreements, oral
or written, between the Grantee and the Company regarding the Restricted Stock
awarded herein.

 

                IN WITNESS WHEREOF, the undersigned have hereunto affixed their
signatures.

 

Datalink Corporation

Grantee:

 

 

 

 

By

 

 

 

 

 

 

 

Its

 

 

 

 

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