EXHIBIT 10.34

 

WINMARK CORPORATION

2020 STOCK OPTION PLAN

 

SECTION 1.

DEFINITIONS

 

As used herein, the following terms shall have the meanings indicated below:

 

(a)         “Affiliate” shall mean a Parent or Subsidiary of the Company.

 

(b)         “Committee” shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board.  In the event the
Company’s securities are registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, each of the members of the Committee shall be
a “non-employee director” within the meaning of Rule 16b-3, or any successor
provision, as then in effect, of the General Rules and Regulations under the
Securities Exchange Act of 1934 as amended and shall be independent under the
listing rules of any stock exchange upon which the Company’s common stock is
listed for trading.

 

(c)         The “Company” shall mean Winmark Corporation, a Minnesota
corporation.

 

(d)         “Fair Market Value” as of any date shall mean (i) if such stock is
listed on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital
Market, or an established stock exchange, the price of such 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 National Market, Nasdaq Small Cap Market, or an established stock
exchange, the average of the closing “bid” and “asked” prices quoted by the OTC
Bulletin Board, the Pink OTC Markets, or any comparable reporting service 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 its sole discretion by any fair and reasonable
determination made in good faith that complies with Internal Revenue Code
Sections 422 and 409A, as applicable.

 

(e)         The “Internal Revenue Code” is the Internal Revenue Code of 1986, as
amended from time to time.

 

(f)         “Option Stock” shall mean Common Stock of the Company (subject to
adjustment as described in Section 12) reserved for options pursuant to this
Plan.

 

(g)         The “Optionee” means an employee of the Company or any Affiliate to
whom an incentive stock option has been granted pursuant to Section 9; and a
consultant or advisor, to or director, employee or officer, of the Company or
any Affiliate to whom a nonqualified stock option has been granted pursuant to
Section 10.

 

(h)         “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.

 

(i)          The “Plan” means the Winmark Corporation 2020 Stock Option Plan, as
amended hereafter from time to time, including the form of Option Agreements as
they may be modified by the Administrator from time to time.

 

(j)          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

 

The purpose of the Plan is to promote the success of the Company and its
Affiliates 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 Affiliates will
depend to a large degree.

 

It is the intention of the Company to carry out the Plan through the granting of
stock options which will qualify as “incentive stock options” under the
provisions of Section 422 of the Internal Revenue Code, or any successor
provision, and through the granting of “non-qualified stock options.”  Adoption
of this Plan shall be and is expressly subject to the condition of approval by
the shareholders of the Company within twelve (12) months before or after the
adoption of the Plan by the Board of Directors.  In the event shareholder
approval is not obtained within such twelve-month period, any incentive stock
options granted under the Plan shall automatically become nonqualified stock
options.

 

SECTION 3.

EFFECTIVE DATE OF PLAN

 

The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.

 

SECTION 4.

ADMINISTRATION

 

The Plan shall be administered by the Committee which shall be appointed by the
Board of Directors of the Company (the “Board”) (hereinafter the Committee shall
be 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 within the limitations described
herein) to determine, in its sole discretion, whether an incentive stock option
or nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option and the option price and terms and conditions of each
option.  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
stock option agreements (which may vary from Optionee to Optionee) evidencing
each option 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.

 

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.

 

 

SECTION 5.

PARTICIPANTS

 

The Administrator shall from time to time, at its discretion and without
approval of the shareholders, designate those employees, officers, directors,
consultants, and advisors of the Company or of any Affiliate to whom
nonqualified stock options shall be granted under this Plan; provided, however,
that consultants or advisors shall not be eligible to receive stock options
hereunder unless such consultant or advisor renders bona fide services

 

to the Company or 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 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 under this Plan.  The
Administrator may grant additional incentive stock options or nonqualified stock
options under this Plan to some or all participants then holding options or may
grant options solely or partially to new participants.  In designating
participants, the Administrator shall also determine the number of shares to be
optioned to each such participant.  The Administrator may from time to time
designate individuals as being ineligible to participate in the Plan.

 

SECTION 6.

STOCK

 

The Stock to be optioned under this Plan shall consist of authorized but
unissued shares of Option Stock.  One Hundred Thousand (100,000) shares of
Option Stock, together with any authorized but unissued shares reserved under
the Company’s 2010 Stock Option Plan (the 2010 Plan) and the Stock Option Plan
for Nonemployee Directors (the Nonemployee Director Plan), shall be reserved and
available for Options under the Plan. No Optionee may be granted more than One
Hundred Thousand (100,000) shares of Option Stock in the aggregate in any
calendar year. In the event that any outstanding option under either the Plan,
 the 2010 Plan or the Nonemployee Director Plan for any reason expires or is
terminated prior to the exercise thereof, the shares of Option Stock allocable
to the unexercised portion of such option shall continue to be reserved for
options under the Plan and may be optioned hereunder. Immediately upon the
approval of the Plan by the Company’s shareholders, no further grants will be
permitted under the Company’s 2010 Plan and the Nonemployee Director Plan. The
total number of shares of Option Stock reserved for options under this Plan
(including those added from the 2010 Plan and the Nonemployee Director Plan) and
the limit on annual grants shall be subject to adjustment as provided in Section
12 of the Plan.

 

SECTION 7.

DURATION OF PLAN

 

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 as defined in Section
3.  Nonqualified stock options may be granted pursuant to the Plan from time to
time after the effective date of the Plan and until the Plan is discontinued or
terminated by the Board.

 

SECTION 8.

PAYMENT

 

Optionees may pay for shares upon exercise of options granted pursuant to this
Plan with cash, personal check, certified check or, if approved by the
Administrator in its sole discretion, previously-owned shares of Option Stock
valued at such stock’s then Fair Market Value, or any other form of payment, or
any combination of the foregoing; provided that, with respect to an incentive
stock option, the discretion to permit previously owned shares or other forms is
set forth in the Option at the time of grant. The Administrator may, in its sole
discretion, limit the forms of payment available to the Optionee and may
exercise such discretion any time prior to the termination of the Option granted
to the Optionee or upon any exercise of the Option by the
Optionee.           With respect to payment in the form of previously owned
shares of Option Stock, the Administrator may require advance approval or adopt
such rules as it deems necessary to assure compliance with Rule 16b-3, or any
successor provision, as then in effect, of the General Rules and Regulations
under the Securities Exchange Act of 1934, if applicable.

 

 

SECTION 9.

TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS

 

Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written stock option 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 Optionee to Optionee; provided, however,
that each Optionee 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 covered by the incentive stock option.  To the extent
required to qualify the Option as an incentive stock option under Section 422 of
the Internal Revenue Code, or any successor provision, the option price per
share shall not be less than one hundred percent (100%) of the per share Fair
Market Value of the Option Stock on the date the Administrator grants the
option; provided, however, that if an Optionee owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of its parent or any Subsidiary, the option price per share of an
incentive stock option granted to such Optionee shall not be less than one
hundred ten percent (110%) of the per share Fair Market Value of the Option
Stock on the date of the grant of the option.  The Administrator shall have full
authority and discretion in establishing the option price and shall be fully
protected in so doing.

 

(b)         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
Internal Revenue Code, or any successor provision, in no event shall any
incentive stock option be exercisable during a term of more than ten (10) years
after the date on which it is granted; provided, however, that if an Optionee
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of its parent or any Subsidiary,
the incentive stock option granted to such Optionee shall be exercisable during
a term of not more than five (5) years after 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.  The
Administrator may accelerate the exercise date of any incentive stock option
granted hereunder which is not immediately exercisable as of the date of grant.

 

(c)         Other Provisions.  The 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 Internal Revenue Code or to conform to any change therein.

 

SECTION 10.

TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS

 

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
Optionee to Optionee; provided, however, that each Optionee 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 covered by the nonqualified stock option.  Unless
otherwise determined by the Administrator, the option price per share shall be
one hundred percent (100%) of the per share Fair Market Value of the Option
Stock on the date the Administrator grants the option.

 

 

(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
the event a nonqualified 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 stock option agreement.  The Administrator may
accelerate the exercise date of any nonqualified stock option granted hereunder
which is not immediately exercisable as of the date of grant.

 

(c)         Withholding.  The Company or its Affiliate shall be entitled to
withhold and deduct from future wages of the Optionee all legally required
amounts necessary to satisfy any and all withholding and employment-related
taxes attributable to the Optionee’s exercise of a nonqualified stock option;
provided, however, that the Optionee may pay by cash or check, or make
arrangements satisfactory to the Company respecting payment of such withholding
and employment-related taxes.

 

(d)         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 OPTION

 

No incentive stock option shall be transferable, in whole or in part, by the
Optionee other than by will or by the laws of descent and distribution and,
during the Optionee’s lifetime, the option may be exercised only by the
Optionee.  If the Optionee shall attempt any transfer of any incentive stock
option granted under the Plan during the Optionee’s lifetime, such transfer
shall be void and the incentive stock option, to the extent not fully exercised,
shall terminate.

 

No nonqualified stock option shall be transferred, except that the Administrator
may, in its sole discretion, permit the Optionee to transfer any or all
nonqualified stock options to any member of the Optionee’s “immediate family” as
such term is defined in Rule 16a-1(e) promulgated under the Securities Exchange
Act of 1934, or any successor provision, or to one or more trusts whose
beneficiaries are members of such Optionee’s “immediate family” or partnerships
in which such family members are the only partners; provided, however, that the
Optionee receives no consideration for the transfer and such transferred
nonqualified stock option shall continue to be subject to the same terms and
conditions as were applicable to such nonqualified stock option immediately
prior to its transfer.

 

SECTION 12.

RECAPITALIZATION, SALE, MERGER, EXCHANGE

OR LIQUIDATION

 

If, following adoption of this Plan, the Company effects an increase or decrease
in the number of shares of Common Stock in the form of a subdivision or
consolidation of shares, or the payment of a stock dividend, effects any other
increase or decrease in the number of shares of Common Stock without receipt of
consideration by the Company, or in the event of any transaction described in
Section 424(a) of the Code, the number of shares of Option Stock reserved under
Section 6 hereof, the limit set forth in Section 6 and the number of shares of
Option Stock covered by each outstanding option and the price per share thereof
shall be equitably adjusted by the Administrator to reflect such change in a
manner that precludes the enlargement of rights and benefits under the Option. 
If any adjustment under this Section 12 creates a fractional share under a Stock
Option, such fractional share shall be disregarded, and the number of shares
reserved under Section 6 and the number subject to any Stock Option granted
under this Plan shall be the next lower number of shares, rounding all fractions
downward. An adjustment made under this Section by the Committee shall be
conclusive and binding on all affected persons.  Additional shares which may be
credited pursuant to such adjustment shall be subject to the same restrictions
as are applicable to the shares with respect to which the adjustment relates.

 

 

Unless otherwise provided in the Option Agreement, in the event of an
acquisition of the Company through the sale of substantially all of the
Company’s assets and the consequent discontinuance of its business or through a
merger, consolidation, exchange, reorganization, reclassification, extraordinary
dividend divestiture or liquidation of the Company (collectively referred to as
a “transaction”), all outstanding stock options shall become immediately
exercisable, whether or not such options had become exercisable prior to the
transaction.  In addition to the foregoing, the Board may provide for one or
more of the following:

 

(a)         the complete termination of this Plan and the cancellation of
outstanding options not exercised prior to a date specified by the Board (which
date shall give Optionees a reasonable period of time in which to exercise the
options prior to the effectiveness of such transaction);

 

(b)         that Optionees holding outstanding stock options shall receive, with
respect to each share of Stock subject to such options, as of the effective date
of any such transaction, cash in an amount equal to the excess of the Fair
Market Value of such Stock on the date immediately preceding the effective date
of such transaction over the option price per share of such options; provided
that the Board may, in lieu of such cash payment, distribute to such Optionees
shares of stock of the Company or shares of stock of any corporation succeeding
the Company by reason of such transaction, such shares having a value equal to
the cash payment herein;

 

(c)         the continuance of the Plan with respect to the exercise of options
which were outstanding as of the date of adoption by the Board of such plan for
such transaction and provide to Optionees holding such options the right to
exercise their respective options as to an equivalent number of shares of stock
of the corporation succeeding the Company by reason of such transaction.

 

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 Internal Revenue Code or any other applicable law or
regulation.  The grant of an option pursuant to the Plan shall not limit in any
way 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.

 

 

SECTION 13.

INVESTMENT PURPOSE

 

No shares of Option Stock shall be issued pursuant to the Plan unless and until
there has been compliance, in the opinion of Company’s counsel, with all
applicable legal requirements, including without limitation, those relating to
securities laws and stock exchange listing requirements.  As a condition to the
issuance of Option Stock to Optionee, the Administrator may require Optionee to
(a) represent that the shares of Option Stock are being acquired for investment
and not resale and to make such other representations as the Administrator shall
deem necessary or appropriate to qualify the issuance of the shares as exempt
from the Securities Act of 1933 and any other applicable securities laws, and
(b) represent that Optionee shall not dispose of the shares of Option Stock in
violation of the Securities Act of 1933 or any other applicable securities laws.

 

As a further condition to the grant of any stock option or the issuance of
Option Stock to Optionee, Optionee agrees to the following:

 

(a)         In the event the Company advises Optionee that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to impose
restrictions under which certain shareholders may not sell or contract to sell
or grant any option to buy or otherwise dispose of part or all of their stock
purchase rights of the underlying Common Stock, Optionee will not, for a period
not to exceed 180 days from the prospectus, sell or contract to sell or grant an
option to buy or otherwise dispose of any stock option granted to Optionee
pursuant to the Plan

 

or any of the underlying shares of Option Stock without the prior written
consent of the underwriter(s) or its representative(s).

 

(b)         In the event the Company makes any public offering of its securities
and determines in its sole discretion that it is necessary to reduce the number
of issued but unexercised stock purchase rights so as to comply with any states
securities or Blue Sky law limitations with respect thereto, the Administrator
shall have the right (i) to accelerate the exercisability of any stock option
and the date on which such option must be exercised, provided that the Company
gives Optionee prior written notice of such acceleration and a reasonable period
of time to exercise, and (ii) to cancel any options or portions thereof which
Optionee does not exercise prior to or contemporaneously with such public
offering.

 

The Company reserves the right to place a legend on any stock certificate issued
upon exercise of an option granted pursuant to the Plan to assure compliance
with this Section 13.

 

SECTION 14.

RIGHTS AS A SHAREHOLDER

 

An Optionee (or the Optionee’s successor or successors) shall have no rights as
a shareholder with respect to any shares covered by an option until the date of
the issuance of a stock certificate evidencing such shares.  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 such stock certificate is actually issued (except as otherwise
provided in Section 12 of the Plan).

 

SECTION 15.

AMENDMENT OF THE PLAN

 

The Administrator 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
option which is outstanding on the date of such revision or amendment to the
material detriment of the Optionee without the consent of the
Optionee.  Notwithstanding the foregoing, no such revision or amendment shall
(i) increase the number of shares subject to the Plan except as provided in
Section 12 hereof, (ii) change the designation of the class of employees
eligible to receive options, (iii) decrease the price at which options may be
granted, (iv) materially increase the benefits accruing to Optionees under the
Plan, or otherwise make any material amendment of the Plan as defined under any
listing regulations of the stock exchange in which the Company’s common stock is
listed without the approval of the shareholders of the Company if such approval
is required for compliance with the requirements of any applicable law or
regulation.  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 Internal Revenue Code.

 

SECTION 16.

NO OBLIGATION TO EXERCISE OPTION

 

The granting of an option shall impose no obligation upon the Optionee to
exercise such option.  Further, the granting of an option hereunder shall not
impose upon the Company or any Affiliate any obligation to retain the Optionee
in its employ for any period.

 

 

 

STOCK OPTION AGREEMENT

 

WINMARK CORPORATION

2020 STOCK OPTION PLAN

 

THIS AGREEMENT, made effective as of this ______ day of ___________, _____, by
and between Winmark Corporation, a Minnesota corporation (the “Company”), and
________________ ("Optionee").

 

W I T N E S S E T H:

 

WHEREAS, Optionee on the date hereof is an employee, officer, director or
consultant of the Company or an Affiliate; and

 

WHEREAS, the Company may grant incentive stock options to employees and
nonqualified stock options to employees, officers, non-employee directors and
consultant to purchase shares of the Company's Common Stock pursuant to the
Company's 2020 Stock Option Plan (the "Plan"); and

 

WHEREAS, the Administrator has authorized the grant of a stock option to
Optionee under the terms of the Plan and this Agreement and has determined the
fair market value of the Company's Common Stock as of the Date of Grant as set
forth below;

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:

 

1.          Grant of Option.  The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate of _______ (________________) shares of
Common Stock (the "Stock") at a per share price of $______ (the “Option Price”)
on the terms and conditions set forth herein, and subject to adjustment pursuant
to Section 12 of the Plan.  This Option is [intended to be an incentive stock
option as defined in Section 9 of the Plan and Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder]
[a nonqualified stock option under Section 10 of the Plan].

 

2.          Duration and Exercisability.

 

a.           General.  The term during which this Option may be exercised shall
terminate on _______________, ______, except as otherwise provided in Paragraphs
2(b) through 2(d) below.  This Option shall become exercisable according to the
following schedule:

 

 

 

 

 

 

 

Vesting Date

    

Cumulative Percentage
of Shares

 

 

 

 

 

 

 

 

 

 

 

Once the Option becomes fully (100%) exercisable, Optionee may continue to
exercise this Option under the terms and conditions of this Agreement until the
termination of the Option as provided herein.  If Optionee does not purchase
upon an exercise of this Option the full number of shares which Optionee is then
entitled to purchase, Optionee may purchase upon any subsequent exercise prior
to this Option's termination such previously un-purchased shares in addition to
those Optionee is otherwise entitled to purchase.

 

 

b.          Cessation of Services (Other Than Disability or Death).  If
Optionee's employment with the Company and its Affiliates, or in the case of a
non-employee director or consultant, services performed for the Company and its
Affiliates (in either case, the “Services”) ceases for any reason other than
disability or death, this Option shall completely terminate on the earlier of
(i) the close of business on the three-month anniversary date of the date such
Services ceased, and (ii) the expiration date of this Option stated in Paragraph
2(a) above.  During such period, this Option shall be exercisable only to the
extent the Option was exercisable immediately preceding the date on which
Optionee's Services with the Company and its Affiliates ceased, but had not
previously been exercised.  To the extent this Option was not exercisable on the
date such Services ceased, or if Optionee fails to exercise the Option within
the time specified in this Paragraph 2(b), all rights of Optionee under this
Option shall be forfeited.

 

c.           Disability.  If Optionee ceases to provide Services to the Company
and its Affiliates because of disability (as defined in Code Section 22(e), or
any successor provision), this Option shall completely terminate on the earlier
of (i) the close of business on the twelve-month anniversary date such Services
ceased, and (ii) the expiration date of this Option stated in Paragraph 2(a)
above.  During such period, this Option shall be exercisable only to the extent
the Option was exercisable immediately preceding the date on which Optionee's
Services with the Company and its Affiliates ceased, but had not previously been
exercised.  To the extent this Option was not exercisable on the date such
Services ceased, or if Optionee fails to exercise the Option within the time
specified in this Paragraph 2(c), all rights of Optionee under this Option shall
be forfeited.

 

d.          Death.  In the event of Optionee's death, this Option shall
terminate on the earlier of (i) the close of business on the twelve-month
anniversary date of the date of Optionee's death, and (ii) the expiration date
of this Option stated in Paragraph 2(a) above.  In such period following
Optionee's death, this Option may be exercised by the person or persons to whom
Optionee's rights under this Option shall have passed by Optionee's will or by
the laws of descent and distribution but only to the extent the Option was
exercisable immediately preceding the date of Optionee's death, but had not
previously been exercised.  To the extent this Option was not exercisable on the
date of Optionee's death, or if such person or persons fail to exercise this
Option within the time specified in this Paragraph 2(d), all rights under this
Option shall be forfeited.

 

3.          Manner of Exercise.

 

a.           General.  The Option may be exercised only by Optionee (or other
proper party in the event of death or incapacity), subject to the conditions of
the Plan and subject to such other administrative rules as the Administrator may
deem advisable, by delivering within the period specified in Paragraph 2 written
notice of exercise to the Company at its principal office.  The notice shall
state the number of shares as to which the Option is being exercised and shall
be accompanied by payment in full of the Option Price for all shares of Stock
designated in the notice.  The exercise of the Option shall be deemed effective
upon receipt of such notice by the Company and upon payment that complies with
the terms of the Plan and this Agreement.  The Option may be exercised with
respect to any number or all of the shares of Stock as to which it can then be
exercised and, if partially exercised, may be exercised as to the unexercised
shares any number of times during the period specified in Paragraph 2.

 

b.          Form of Payment.  Payment of the Option Price by Optionee shall be
in the form of cash, personal check, certified check or, subject to the approval
of the Administrator, previously owned shares of Stock of the Company, or any
combination thereof.  Any Stock so tendered as part of such payment shall be
valued at its Fair Market Value as provided in the Plan.

 

c.           Stock Transfer Records.  As soon as practicable after the effective
exercise of all or any part of the Option, Optionee shall be recorded on in book
entry form on the stock transfer books of the Company as the owner of the Stock
purchased, and upon the request of the Optionee, the Company

shall deliver to Optionee one or more duly issued stock certificates evidencing
such ownership.  All requisite original issue or transfer documentary stamp
taxes shall be paid by the Company.

 

 

4.          Miscellaneous.

 

a.           Rights as Shareholder.  This Agreement shall not confer on Optionee
any right with respect to the continuance of Services with the Company or any of
its Affiliates, nor will it interfere in any way with the right of the Company
to terminate any such Services.  Optionee shall have no rights as a shareholder
with respect to the Stock subject to this Option until such Stock have been
issued to Optionee upon exercise of this Option.  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 such Stock are issued, except as provided in Section 12 of the Plan.

 

b.          Securities Law Compliance.  The exercise of all or any parts of this
Option shall only be effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Stock pursuant to such exercise
will not violate any state or federal securities or other laws.  Optionee may be
required by the Company, as a condition of the effectiveness of any exercise of
this Option, to agree in writing that all Stock to be acquired pursuant to such
exercise shall be held, until such time that such Stock is registered and freely
tradable under applicable state and federal securities laws, for Optionee's own
account without a view to any further distribution thereof and that such Stock
will be not transferred or disposed of except in compliance with applicable
state and federal securities laws.

 

c.           Mergers, Recapitalizations, Stock Splits, Etc.  Pursuant and
subject to Section 12 of the Plan, certain changes in the number or character of
the Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee's rights with
respect to any unexercised portion of the Option (i.e., Optionee shall have such
"anti-dilution" rights under the Option with respect to such events, but shall
not have "preemptive" rights).

 

d.          Shares Reserved.  The Company shall at all times during the option
period reserve and keep available such number of shares as will be sufficient to
satisfy the requirements of this Agreement.

 

e.           Notice, Withholding Taxes.  If this Option is an incentive stock
option, in the event the Optionee disposes of the shares of Stock issued under
this Option within two years of the Date of Grant, or one year after the receipt
of the Stock upon exercise (a “disqualifying disposition”), the Optionee agrees
to inform the Company of such disqualifying disposition.  In the event that, in
connection with the exercise of this Option, the Company is required to withhold
and pay any applicable taxes on behalf of the Optionee, the Company or its
Affiliate shall be entitled to take such action as it deems appropriate to
insure that all applicable federal or state payroll, income or other taxes are
withheld from any amounts payable by the Company to Optionee up to the maximum
statutory withholding rates.  If the Company is unable to withhold such federal
and state taxes, for whatever reason, Optionee hereby agrees to pay to the
Company by cash or check, or make other arrangements satisfactory to the Company
an amount equal to the amount the Company is required to withhold under
applicable tax laws.

 

f.           Nontransferability.  During the lifetime of Optionee, the accrued
Option shall be exercisable only by Optionee or by the Optionee's guardian or
other legal representative, and shall not be assignable or transferable by
Optionee, in whole or in part, other than by will or by the laws of descent and
distribution.

 

g.          2020 Stock Option Plan.  The Option evidenced by this Agreement is
granted pursuant to the Plan, a copy of which Plan has been made available to
Optionee and is hereby incorporated into this Agreement.  This Agreement is
subject to and in all respects limited and conditioned as provided

in the Plan.  All defined terms of the Plan shall have the same meaning when
used in this Agreement.  The Plan governs this Option and, in the event of any
questions as to the construction of this Agreement or in the event of a conflict
between the Plan and this Agreement, the Plan shall govern, except as the Plan
otherwise provides.

 

 

h.          Lockup Period Limitation.  Optionee agrees that in the event the
Company advises Optionee that it plans an underwritten public offering of its
Common Stock in compliance with the Securities Act of 1933, as amended, and that
the underwriter(s) seek to impose restrictions under which certain shareholders
may not sell or contract to sell or grant any option to buy or otherwise dispose
of part or all of their stock purchase rights of the underlying Common Stock,
Optionee hereby agrees that for a period not to exceed 180 days from the
prospectus, Optionee will not sell or contract to sell or grant an option to buy
or otherwise dispose of this option or any of the underlying shares of Stock
without the prior written consent of the underwriter(s) or its
representative(s).

 

i.           Blue Sky Limitation.  Notwithstanding anything in this Agreement to
the contrary, in the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary to reduce
the number of issued but unexercised stock purchase rights so as to comply with
any state securities or Blue Sky law limitations with respect thereto, the
Administrator shall have the right (i) to accelerate the exercisability of this
Option and the date on which this Option must be exercised, provided that the
Company gives Optionee 15 days' prior written notice of such acceleration, and
(ii) to cancel any portion of this Option or any other option granted to
Optionee pursuant to the Plan which is not exercised prior to or
contemporaneously with such public offering.  Notice shall be deemed given when
delivered personally or when deposited in the United States mail, first class
postage prepaid and addressed to Optionee at the address of Optionee on file
with the Company.

 

j.           Stock Legend.  The Administrator may require that the certificates
for any shares of Stock purchased by Optionee (or, in the case of death,
Optionee's successors) shall bear an appropriate legend to reflect the
restrictions of Paragraph 4(b), 4(h) and 4(i) of this Agreement.

 

k.          Scope of Agreement.  This Agreement shall bind and inure to the
benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee permitted by Paragraph 2 or Paragraph 4(f)
above.

 

l.           Arbitration.  Any dispute arising out of or relating to this
Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy.  If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration.  Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof.  The arbitrator shall be a retired state or federal judge or an
attorney who has practiced securities or business litigation for at least 10
years.  If the parties cannot agree on an arbitrator within 20 days, any party
may request that the chief judge of the District Court for Hennepin County,
Minnesota, select an arbitrator.  Arbitration will be conducted pursuant to the
provisions of this Agreement, and the commercial arbitration rules of the
American Arbitration Association, unless such rules are inconsistent with the
provisions of this Agreement.  Limited civil discovery shall be permitted for
the production of documents and taking of depositions.  Unresolved discovery
disputes may be brought to the attention of the arbitrator who may dispose of
such dispute.  The arbitrator shall have the authority to award any remedy or
relief that a court of this state could order or grant; provided, however, that
punitive or exemplary damages shall not be awarded. The arbitrator may award to
the prevailing party, if any, as determined by the arbitrator, all of its costs
and fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of-pocket expenses and reasonable attorneys' fees. Unless otherwise agreed
by the parties, the place of any arbitration proceedings shall be Hennepin
County, Minnesota.

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first above written.

 

 

 

 

 

WINMARK CORPORATION

 

 

 

 

 

By:

 

 

 

 

Its:

 

 

Optionee