EXHIBIT 10.2

 

2001 LONG TERM INCENTIVE
AND
STOCK OPTION PLAN

 

Table of Contents

 

Page

 

1.

Purpose of Plan

13

     

2.

Stock Subject to Plan

13

     

3.

Administration of Plan

13

     

4.

Eligibility

14

     

5.

Price

14

     

6.

Term

15

     

7.

Exercise of Option or Award

15

     

8.

Additional Restrictions

15

     

9.

Alternative Stock Appreciation Rights

15

     

10.

Ten Percent Shareholder Rule

16

     

11.

Non-Transferability

16

     

12.

Restricted Stock Awards

16

     

13.

Performance Awards

17

     

14.

Dilution or Other Adjustments

17

     

15.

Amendment or Discontinuance of Plan

17

     

16.

Time of Granting

18

     

17.

Income Tax Withholding and Tax Bonuses

18

     

18.

Effective Date and Termination of Plan

18

 

 
 

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2001 LONG-TERM INCENTIVE
AND
STOCK OPTION PLAN

 

Purpose of Plan

This Plan shall be known as the "BAB, INC. 2001 LONG-TERM INCENTIVE AND STOCK
OPTION PLAN" and is hereinafter referred to as the "Plan". The purpose of the
Plan is to aid in maintaining and developing personnel capable of assuring the
future success of BAB, Inc., a Delaware corporation (the "Company"), to offer
such personnel additional incentives to put forth maximum efforts for the
success of the business, and to afford them an opportunity to acquire a
proprietary interest in the Company through stock options and other long-term
incentive awards as provided herein. Options granted under this Plan may be
either incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Internal Revenue Code of 1986 (the "Code"), or options, which
do not qualify as Incentive Stock Options. Awards granted under this Plan shall
be stock appreciation rights ("SARs"), restricted stock or performance awards as
hereinafter described.

 

Stock Subject to Plan

Subject to the provisions of Section 14 hereof, the stock to be subject to
options or other awards under the Plan shall be the Company's authorized Common
Stock, no par value (the "Common Shares"). Such shares may be either authorized
but unissued shares, or issued shares, which have been reacquired by the
Company. Subject to adjustment as provided in Section 14 hereof, the maximum
number of shares on which options may be exercised or other award issued under
this Plan shall be 275,000 Common Shares. If an option or award under the Plan
expires, or for any reason is terminated or unexercised with respect to any
shares, such shares shall again be available for options or awards thereafter
granted during the term of the Plan.

 

Administration of Plan

Except as provided in Section 3(b) hereof, the Plan shall be administered by the
Board of Directors of the Company or a committee thereof. The members of any
such committee shall be appointed by and serve at the pleasure of the Board of
Directors. If no committee is appointed by the Board, the committee shall be
comprised of all of the members of the Board of Directors. (The group
administering the Plan shall hereinafter be referred to as the "Committee".)

 

Notwithstanding, Section 3(a) hereof, all option grants and awards under this
Plan to officers, directors and others who are subject to Section 16 under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
regulations of the Securities and Exchange Commission promulgated there under
(the "Section 16 Regulations"), shall be made exclusively by a committee (the
"Disinterested Committee") comprised of at least two members of the Board of
Directors who qualify as "disinterested" plan administrators under the Section
16 Regulations, or whose administration otherwise qualifies transactions under
the Plan as exempt from Section 16(b) of the 1934 Act. All references
hereinafter to the "Committee" shall mean the "Disinterested Committee" if the
action to be taken in administration of the Plan must be taken by the
Disinterested Committee.

 

The Committee shall have plenary authority in its discretion, but subject to the
express provisions of the Plan: (i) to determine the purchase price of the
Common Stock covered by each option or award, (ii) to determine the persons to
whom and the time or times at which such options and awards shall be granted and
the number of shares to be subject to each, (iii) to determine the form of
payment to be made upon the exercise of an SAR or in connection with performance
awards, either cash, Common Shares of the Company or a combination thereof, (iv)
to determine the terms of exercise of each option and award, (v) to accelerate
the time at which all or any part of an option or award may be exercised, (vi)
to amend or modify the terms of any option or award with the consent of the
optionee, (vii) to interpret the Plan, (viii) to prescribe, amend and rescind
rules and regulations relating to the Plan, (ix) to determine the terms and
provisions of each option and award agreement under the Plan (which agreements
need not be identical), including the designation of those options intended to
be Incentive Stock Options, and (x) to make all other determinations necessary
or advisable for the administration of the Plan, subject to the exclusive
authority of the Board of Directors under Section 15 herein to amend or
terminate the Plan. The Committee's determinations on the foregoing matters,
unless otherwise disapproved by the Board of Directors of the Company, shall be
final and conclusive.

 

 
 

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The Committee may select one of its members as its Chairman and shall hold its
meetings at such times and places as it may determine. A majority of its members
shall constitute a quorum. All determinations of the Committee shall be made by
not less than a majority of its members. Any decision or determination reduces
to writing and signed by all of the members of the Committee shall be fully
effective as if it had been made by a majority vote at a meeting duly called and
held. The grant of an option or award shall be effective only if a written
agreement shall have been duly executed and delivered by and on behalf of the
Company following such grant. The Committee may appoint a Secretary and may make
such rules and regulations for the conduct of its business, as it shall deem
advisable.

 

Eligibility

Incentive Stock Options may only be granted under this Plan to any full or
part-time employee (which term as used herein includes, but is not limited to,
officers and directors who are also employees) of the Company and of its present
and future subsidiary corporations (herein called "subsidiaries"). Full or
part-time employees, non-employee members of the Board of Directors, and
non-employee consultants, agents or independent contractors to the Company or
one of its subsidiaries shall be eligible to receive options which do not
qualify as Incentive Stock Options and awards; provided, however, that members
of the Disinterested Committee shall not be eligible for any option grant or
award under the Plan while serving on said Disinterested Committee. In
determining the persons to whom options and awards shall be granted and the
number of shares subject to each, the Committee may take into account the nature
of services rendered by the respective employees or consultants, their present
and potential contributions to the success of the Company and such other factors
as the Committee in its discretion shall deem relevant. A person who has been
granted an option or award under this Plan may be granted additional options or
awards under the Plan if the Committee shall so determine; provided, however,
that for Incentive Stock Options, to the extent the aggregate fair market value
(determined at the time the Incentive Stock Option is granted) of the Common
Shares with respect to which all Incentive Stock Options are exercisable for the
first time by an employee during any calendar year (under all plans described in
subsection (d) of Section 422 of the Code of his employer corporation and its
parent and subsidiary corporations) exceeds $100,000, such options shall be
treated as options which do not qualify as Incentive Stock Options. Nothing in
the Plan or in any agreement there under shall confer on any employee any right
to continue in the employ of the Company or any of its subsidiaries or affect,
in any way, the right of the Company or any of its subsidiaries to terminate his
or her employment at the time.

 

Price

The option price for all Incentive Stock Options granted under the Plan shall be
determined by the Committee but shall not be less than 100% of the fair market
value of the Common Shares at the date of grant of such option. The option price
for options granted under the Plan, which does not qualify as Incentive Stock
Options, and, if applicable, the price for all awards shall also be determined
by the Committee and may be other than 100% of the fair market value of the
Common Shares. For purposes of the preceding sentence and for all other
valuation purposes under the Plan, the fair market value of the Common Shares
shall be as reasonably determined by the Committee. If on the date of grant of
any option or award hereunder the Common Shares are not traded on an established
securities market, the Committee shall make a good faith attempt to satisfy the
requirements of this Section 5 and in connection therewith shall take such
action as it deems necessary or advisable.

 

 
 

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Term

Each option and award and all rights and obligations there under shall expire on
the date determined by the Committee and specified in the option or award
agreement. The Committee shall be under no duty to provide terms of like
duration for options or awards granted under the Plan, but the term of an
Incentive Stock Option may not extend more than ten (10) years from the date of
grant of such option and the term of options granted under the Plan which do not
qualify as Incentive Stock Options may not extend more than fifteen (15) years
from the date of granting of such option.

 

Exercise of Option or Award

The Committee shall have full and complete authority to determine whether an
option or award will be exercisable in full at any time or from time to time
during the term thereof, or to provide for the exercise thereof in such
installments, upon the occurrence of such events (such as termination of
employment for any reason) and at such times during the term of the option as
the Committee may determine and specify in the option or award agreement.

 

The exercise of any option or award granted hereunder shall only be effective at
such time that the sale of Common Shares pursuant to such exercise will not
violate any state or federal securities or other laws.

 

An optionee or grantee electing to exercise an option or award shall give
written notice to the Company of such election and of the number of shares
subject to such exercise. The full purchase price of such shares shall be
tendered with such notice of exercise. Payment shall be made to the Company in
cash (including bank check, certified check, personal check, or money order),
or, at the discretion of the Committee and as specified by the Committee, (i) by
delivering certificates for the Company's Common Shares already owned by the
optionee or grantee having a fair market value as of the date of grant equal to
the full purchase price of the shares or (ii) a combination of cash and such
shares. The fair market value of such tendered shares shall be determined as
provided in Section 5 herein. Until such person has been issued the shares
subject to such exercise, he or she shall possess no rights as a shareholder
with respect to such shares.

 

Additional Restrictions

The Committee shall have full and complete authority to determine whether all or
any part of the Common Shares of the Company acquired upon exercise of any of
the options or awards granted under the Plan shall be subject to restrictions on
the transferability thereof or any other restrictions affecting in any manner
the optionee's or grantee's rights with respect thereto, but any such
restriction shall be contained in the agreement relating to such options or
awards.

 

Alternative Stock Appreciation Rights

Grant. At the time of grant of an option or award under the Plan (or at any
other time), the Committee, in its discretion, may grant a Stock Appreciation
Right ("SAR") evidenced by an agreement in such form as the Committee shall from
time to time approve. Any such SAR may be subject to restrictions on the
exercise thereof as may be set forth in the agreement representing such SAR
which agreement shall comply with and be subject to the following terms and
conditions and any additional terms and conditions established by the Committee
that are consistent with the terms of the Plan.

 

 
 

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Exercise. An SAR shall be exercised by the delivery to the Company of a written
notice which shall state that the holder thereof elects to exercise his or her
SAR as to the number of shares specified in the notice and which shall further
state what portion, if any, of the SAR exercise amount (hereinafter defined) the
holder thereof requests be paid to in cash and what portion, if any, is to be
paid in Common Shares of the Company. The Committee promptly shall cause to be
paid to such holder the SAR exercise amount either in cash, in Common Shares of
the Company, or any combination of cash and shares as the Committee may
determine. Such determination may be either in accordance with the request made
by the holder of the SAR or in the sole and absolute discretion of the
Committee. The SAR exercise amount is the excess of the fair market value of one
share of the Company's Common Shares on the date of exercise over the per share
exercise price in respect of which the SAR was granted, multiplied by the number
of shares as to which the SAR is exercised. For the purposes hereof, the fair
market value of the Company's shares shall be determined as provided in Section
5 herein.

 

Ten Percent Shareholder Rule

Notwithstanding any other provision in the Plan, if at the time an option is
granted pursuant to the Plan the optionee owns directly or indirectly (within
the meaning of Section 425(d) of the Code) Common Shares of the Company
possessing more than ten percent (10%) of the total combined voting, power of
all classes of stock of the Company or its parent or subsidiary corporations, if
any (within the meaning, of Section 422(b)(6) of the Code), then any Incentive
Stock Option to be granted to such optionee pursuant to the Plan shall satisfy
the requirements of Section 422(c)(6) of the Code, and the option price shall be
not less than 110% of the fair market value of the Common Shares of the Company
determined as described herein, and such option by its terms shall not be
exercisable after the expiration of five (5) years from the date such option is
granted.

 

Non-Transferability

Except as otherwise provided in an option or award agreement, no option or award
granted under the Plan shall be transferable by an optionee or grantee,
otherwise than by will or the laws of descent or distribution, and during the
lifetime of an optionee or grantee, the option shall be exercisable only by such
optionee or grantee.

 

Restricted Stock Awards

The Committee may grant awards of Common Shares subject to forfeiture and
transfer restrictions. Any restricted stock award shall be evidenced by an
agreement in such form as the Committee shall from time to time approve, which
agreement shall comply with and be subject to the following terms and conditions
and any additional terms and conditions established by the Committee that are
consistent with the terms of the Plan:

 

Grant of Restricted Stock Awards. Each restricted stock award made under the
Plan shall be for such number of Common Shares as shall be determined by the
Committee and set forth in the agreement containing the terms of such restricted
stock award. Such agreement shall set forth a period of time during which the
grantee must remain in the continuous employment of the Company in order for the
forfeiture and transfer restrictions to lapse. If the Committee so determines,
the restrictions may lapse during such restricted period in installments with
respect to specified portions of the shares covered by the restricted stock
award. The agreement may also, in the discretion of the Committee, set forth
performance or other conditions that will subject the Common Shares to
forfeiture and transfer restrictions. The Committee may, at its discretion,
waive all or any part of the restrictions applicable to any or all outstanding
restricted stock awards.

 

 
 

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Delivery of Common Shares and Restrictions. At the time of a restricted stock
award, a certificate representing the number of Common Shares awarded there
under shall be registered in the name of the grantee. Such certificate shall be
held by the Company or any custodian appointed by the Company for the account of
the grantee subject to the terms and conditions of the Plan, and shall bear such
a legend setting forth the restrictions imposed thereon as the Committee, in its
discretion, may determine. The grantee shall have all rights of a shareholder
with respect to the Common Shares, including the right to receive dividends and
the right to vote such shares, subject to the following restrictions: (i) the
grantee shall not be entitled to delivery of the stock certificate until the
expiration of the restricted period and the fulfillment of any other restrictive
conditions set forth in the restricted stock agreement with respect to such
Common Shares; (ii) none of the Common Shares may be sold, assigned,
transferred, pledged, hypothecated or otherwise encumbered or disposed of during
such restricted period or until after the fulfillment of any such other
restrictive conditions; and (iii) except as otherwise determined by the
Committee, all of the Common Shares shall be forfeited and all rights of the
grantee to such Common Shares shall terminate, without further obligation on the
part of the Company, unless the grantee remains in the continuous employment of
the Company for the entire restricted period in relation to which such Common
Shares were granted and unless any other restrictive conditions relating to the
restricted stock award are met. Any Common Shares, any other securities of the
Company and any other property (except for cash dividends) distributed with
respect to the Common Shares subject to restricted stock awards shall be subject
to the same restrictions, terms and conditions as such restricted Common Shares.

 

Termination of Restrictions. At the end of the restricted period and provided
that any other restrictive conditions of the restricted stock award are met, or
at such earlier time as otherwise determined by the Committee, all restrictions
set forth in the agreement relating, to the restricted stock award or in the
Plan shall lapse as to the restricted Common Shares subject thereto, and a stock
certificate for the appropriate number of Common Shares, free of the
restrictions and the restricted stock legend, shall be delivered to the grantee
or his beneficiary or estate, as the case may be.

 

Performance Awards

The Committee is further authorized to grant Performance awards. Subject to the
terms of this Plan and any applicable award agreement, a Performance award
granted under the Plan (i) may be denominated or payable in cash, Common Shares
of the Company (including, without limitation. restricted stock), other
securities, other awards, or other property and (ii) shall confer on the holder
thereof rights valued as determined by the Committee, in its discretion, and
payable to, or exercisable by, the holder of the Performance awards, in whole or
in part, upon the achievement of such performance goals during such performance
periods as the Committee, in its discretion, shall establish. Subject to the
terms of this Plan and any applicable award agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
the amount of any Performance award granted, and the amount of any payment or
transfer to be made by the Company under any Performance award shall be
determined by the Committee.

 

Dilution or Other Adjustments

If there shall be any change in the Common Shares through merger, consolidation,
reorganization, recapitalization, dividend in the form of stock (of whatever
amount), stock split or other change in the corporate structure, appropriate
adjustments in the Plan and outstanding options and awards shall be made by the
Committee. In the event of any such changes, adjustments shall include, where
appropriate, changes in the aggregate number of shares subject to the Plan, the
number of shares and the price per share subject to outstanding options and
awards and the amount payable upon exercise of outstanding awards, in order to
prevent dilution or enlargement of option or award rights.

 

Amendment or Discontinuance of Plan

The Board of Directors may amend or discontinue at any time. Subject to the
provisions of Section 14 no amendment of the Plan, however, shall without
shareholder approval: (i) increase the maximum number of shares under the Plan
as provided in Section 2 herein, (ii) decrease the minimum price provided in
Section 5 herein, (iii) extend the maximum term under Section 6, or (iv) modify
the eligibility requirements for participation in the Plan. The Board of
Directors shall not alter or impair any option or award theretofore granted
under the Plan without the consent of the holder of the option or award.

 

 
 

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Time of Granting

Nothing contained in the Plan or in any resolution adopted or to be adopted by
the Board of Directors or by the shareholders of the Company, and no action
taken by the Committee or the Board of Directors (other than the execution and
delivery of an option or award agreement), shall constitute the granting of an
option or award hereunder.

 

Income Tax Withholding and Tax Bonuses

In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes, which are the sole and absolute responsibility of an optionee or grantee
under the Plan, are withheld or collected from such optionee or grantee. In
order to assist an optionee or grantee in paying all federal and state taxes to
be withheld or collected upon exercise of an option or award which does not
qualify as an Incentive Stock Option hereunder, the Committee, in its absolute
discretion and subject to such additional terms and conditions as it may adopt,
shall permit the optionee or grantee to satisfy such tax obligation by (i)
electing to have the Company withhold a portion of the shares otherwise to be
delivered upon exercise of such option or award with a fair market value,
determined in accordance with Section 5 herein, equal to such taxes or (ii)
delivering to the Company Common Shares other than the shares issuable upon
exercise of such option or award with a fair market value, determined in
accordance with Section 5, equal to such taxes.

 

The Committee shall have the authority, at the time of grant of an option under
the Plan or at any time thereafter, to approve tax bonuses to designated
optionee or grantees to be paid upon their exercise of options or awards granted
hereunder. The Committee shall determine the amount of any such payment. The
Committee shall have full authority in its absolute discretion to determine the
amount of any such tax bonus and the terms and conditions affecting the vesting
and payment thereafter.

 

Effective Date and Termination of Plan

The Board of Directors approved the Plan by unanimous action in writing,
effective March 19, 2001 and by the shareholders of the Company by unanimous
action in writing, effective May 25, 2001.

 

Unless the Plan shall have been discontinued as provided in Section 14 hereof,
the Plan shall terminate May 25, 2011. No option or award may be granted after
such termination, but termination of the Plan shall not, without the consent of
the optionee or grantee, alter or impair any rights or obligations under any
option or award theretofore granted.