EXHIBIT 10.31


 


HANCOCK FABRICS, INC. 


2001 STOCK INCENTIVE PLAN

(As Amended and Restated)


 


RESTRICTED STOCK AGREEMENT


 


THIS RESTRICTED STOCK
AGREEMENT, made and entered into as of this___day of _______, 201X, by and between Hancock Fabrics, Inc., a Delaware
corporation (the “Company”), and ________________ (“Grantee”).


 


 W•I•t•n•e•s•s•e•t•h:


  


WHEREAS, the Company
maintains the Hancock Fabrics, Inc. 2001 Stock Incentive Plan, as amended and restated (the “Plan”), and Grantee has
been selected by the Committee to receive a Restricted Stock Award under the Plan;


 


NOW, THEREFORE, IT
IS AGREED, by and between the Company and Grantee, as follows:


 


1.            Award
of Restricted Stock


 


The Company hereby
grants to Grantee an award of ________ Shares of restricted stock (“Restricted Stock”), subject to, and in
accordance with, the restrictions, terms, and conditions set forth in this Agreement. The grant date of this award of Restricted
Stock is ____________ (the “Grant Date”).


 


This Agreement shall
be construed in accordance with, and subject to, the provisions of the Plan (the provisions of which are incorporated herein by
reference) and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same
definitions as set forth in the Plan.


 


2.            Vesting
and Termination of Employment


 


2.1           Vesting.
Subject to Sections 2.2 through 2.4 below, if Grantee remains employed by the Company, the Restricted Stock shall vest as follows
(each date on which Shares of Restricted Stock vest is hereinafter referred to as a “Vesting Date”):


  


	Number of Shares	Vesting Date


 



    	 



    	 



    

 


 


Except as otherwise provided below, on
the Vesting Date, Grantee shall own the Vested Shares of Restricted Stock free and clear of all restrictions imposed by this Agreement
(except those imposed by Section 3.4 below). The Company shall transfer the Vested Shares of Restricted Stock to an unrestricted
account in the name of Grantee as soon as practical after the Vesting Date. For purposes of this Agreement, employment with a Subsidiary
of the Company or service as a member of the Board of Directors of the Company, or service as a consultant to the Company or a
Subsidiary shall be considered employment with the Company.


 


2.2           Termination
by Death or Disability. In the event Grantee dies while actively employed by the Company, or if Grantee’s employment
with the Company is terminated by reason of Disability, all outstanding unvested Restricted Stock granted to Grantee shall immediately
vest.


 


2.3           Other
Terminations. If Grantee’s employment with the Company is terminated by the Company other than as a result of death or
Disability, or if Grantee terminates employment (including if Grantee is eligible for Retirement) all outstanding unvested Restricted
Stock granted to Grantee shall be immediately forfeited upon the date that the Committee determines is Grantee’s date of
termination of employment.


 


2.4           Change
in Control. Upon a Change in Control, all outstanding unvested Restricted Stock shall become immediately and fully vested.


 


2.5           Nontransferability.
The Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered prior to the date Grantee becomes
vested in the Restricted Stock.


 


3.            Stock;
Dividends; Voting


 


3.1           The
Restricted Stock shall be registered on the Company’s books in the name of Grantee as of the Grant Date for such Shares of
Restricted Stock. The Company may issue stock certificates or evidence Grantee’s interest by using a book entry account.
Physical possession or custody of any stock certificates that are issued shall be retained by the Company until such time as the
Shares are vested in accordance with Section 2. The Company reserves the right to place a legend on such stock certificate(s) restricting
the transferability of such certificates and referring to the terms and conditions (including forfeiture) of this Agreement and
the Plan.


 


3.2           During
the period the Restricted Stock is not vested, Grantee shall be entitled to receive dividends or similar distributions declared
on such Restricted Stock and Grantee shall be entitled to vote such Restricted Stock.


 



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3.3           In
the event of a change in capitalization as provided in Section 17 of the Plan, the number and class of Shares or other securities
that Grantee shall be entitled to, and shall hold, pursuant to this Agreement shall be appropriately adjusted or changed by the
Committee pursuant to Section 17 of the Plan to reflect the change in capitalization, provided that any such additional Shares
or additional or different shares or securities shall remain subject to the restrictions in this Agreement.


 


3.4           Grantee
represents and warrants that he is acquiring the Restricted Stock for investment purposes only, and not with a view to distribution
thereof. Grantee is aware that the Restricted Stock may not be registered under the federal or any state securities laws and that
in that event, in addition to the other restrictions on the Shares, they will not be able to be transferred unless an exemption
from registration is available or the Shares are registered. By making this award of Restricted Stock, the Company is not undertaking
any obligation to register the Restricted Stock under any federal or state securities laws.


 


4.            No
Right to Continued Employment


 


Nothing in this Agreement
or the Plan shall be interpreted or construed to confer upon Grantee any right with respect to continuance of employment by the
Company or a Subsidiary, nor shall this Agreement or the Plan interfere in any way with the right of the Company or a Subsidiary
to terminate Grantee’s employment at any time.


 


5.            Employment
Covenants 


 


In
consideration of the receipt of the Restricted Stock granted pursuant to this Agreement and Grantee’s continued employment
with the Company, Grantee hereby agrees to the following covenants:


 


5.1           Covenant
Against Competition. While Grantee is employed with the Company or its affiliates, and for a period of two (2) years
after Grantee’s employment with the Company terminates for any reason, Grantee will not, directly or indirectly, provide
Services within the United States of America, whether as an owner, investor, lender, employee, director, officer, independent contractor,
or consultant to any Competitor. Each of the following entities shall be deemed to be a “Competitor” under this
Agreement: A.C. Moore Arts & Crafts, Inc., Jo-Ann Stores, Inc., Calico
Corners, Inc., Hobby Lobby Stores, Inc., and Michaels Stores, Inc. The Grantee acknowledges that the United States of America
comprises the geographic territory in which Grantee performs Services on behalf of the Company. “Services” means
the provision of management and strategic business advice, direction and guidance.


 



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5.2           Non-Disclosure.
During the course of Grantee’s employment with the Company, Grantee will have access to certain Confidential Information.
Grantee agrees to hold in strictest confidence and not to use, except for the benefit of the Company, the Company’s Confidential
Information. For purposes of this Agreement, “Confidential Information” means any information, without regard
to form, relating to the Company’s and its subsidiaries’ and affiliates’ customers, operations, finances, and
business that derives economic value, actual or potential, from not being generally known to other persons or entities, including
but not limited to technical or non-technical data, compilations (including compilations of customer, supplier, or vendor information),
programs, methods, devices, techniques, processes, inventions, improvements, writings, memoranda, reports, drawings, sketches,
financial data, pricing methodology, formulas, patterns, strategies, studies, business development, software systems, marketing
techniques and lists of actual or potential customers (including identifying information about customers), whether or not in writing.
Confidential Information includes information disclosed to the Company by third parties that the Company is obligated to maintain
as confidential. Confidential Information shall not include any information that: (i) at the time of the disclosure was generally
known to the public, (ii) becomes known to the public through no violation of this Agreement, or (iii) is disclosed to Grantee
by a third party that is not under an obligation to maintain the confidentiality of the information. In the event that Grantee
becomes legally compelled to disclose any Confidential Information, Grantee shall provide the Company with prompt written notice
of such requirement prior to any disclosure to allow the Company to seek a protective order or other remedy. Confidential Information
subject to this Agreement may include information that is not a trade secret under applicable law, but information not constituting
a trade secret under applicable law shall only be treated as Confidential Information under this Agreement for a two (2) year period
following Grantee’s termination of employment.


 


5.3           Nondisparagement.
Grantee agrees not to make any statements, written or verbal, or cause or encourage others to make any statements, written or verbal,
that defame, disparage or in any way criticize the personal or business reputation, practices, or conduct of the Company, its employees,
directors, and officers. Grantee acknowledges and agrees that this prohibition extends to statements, written or verbal, made to
anyone, including but not limited to, the news media, investors, potential investors, any board of directors or advisory board
or directors, industry analysts, competitors, strategic partners, vendors, employees (past and present), and customers. Grantee
understands that this nondisparagement provision does not apply on occasions when Grantee is subpoenaed or ordered by a court or
other governmental authority to testify or give evidence and must, of course, respond truthfully, or to conduct or testimony in
the context of enforcing this Agreement or other rights, powers, privileges, or claims. Grantee also understands that the foregoing
nondisparagement provision does not apply on occasions when Grantee provides truthful information in good faith to any federal,
state, or local governmental body, agency, or official investigating an alleged violation of any employment-related law or otherwise
gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding.


 


5.4           Cancellation
and Rescission. If, at any time, (i) during Grantee’ employment with the Company or a Subsidiary or (ii) during
the period after Grantee’s termination of employment with the Company or any Subsidiary for any reason, but not to exceed
24 months following Grantee’s termination of employment, Grantee engages in any “Detrimental Activity” (as defined
below), the Committee may, notwithstanding any other provision in this Agreement to the contrary, cancel, rescind, suspend, withhold
or otherwise restrict or limit this award of Restricted Stock as of the first date Grantee engaged in the Detrimental Activity,
as determined by the Committee.  Without limiting the generality of the foregoing, the Committee may also require Grantee
to pay to the Company any gain realized by Grantee from the Shares subject to this award of Restricted Stock during the period
beginning six months prior to the date on which Grantee engaged or began engaging in Detrimental Activity. As used in this Agreement,
“Detrimental Activity” means the breach or violation by the Grantee of any of the covenants of the Grantee in this
Section 5.


 



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6.            Taxes
and Withholding


 


Grantee shall be responsible
for all federal, state, and local income taxes payable with respect to this award of Restricted Stock and dividends paid on unvested
Restricted Stock. Grantee shall have the right to make such elections under the Internal Revenue Code of 1986, as amended, as are
available in connection with this award of Restricted Stock. The Company and Grantee agree to report the value of the Restricted
Stock in a consistent manner for federal income tax purposes. The Company shall have the right to retain and withhold from any
payment of Restricted Stock or cash the amount of taxes required by any government to be withheld or otherwise deducted and paid
with respect to such payment. At its discretion, the Company may require Grantee to reimburse the Company for any such taxes required
to be withheld and may withhold any distribution in whole or in part until the Company is so reimbursed. In lieu thereof, the Company
shall have the right to withhold from any other cash amounts due to Grantee an amount equal to such taxes required to be withheld
or withhold and cancel (in whole or in part) a number of Shares of Restricted Stock having a market value not less than the amount
of such taxes.


 


7.            Grantee
Bound By The Plan


 


Grantee hereby acknowledges
receipt of a copy of the Plan and the prospectus for the Plan, and agrees to be bound by all the terms and provisions thereof.


 


8.            Modification
of Agreement


 


This Agreement may
be modified, amended, suspended, or terminated, and any terms or conditions may be waived, but only by a written instrument executed
by the parties hereto.


 


9.            Severability


 


Should any provision
of this Agreement be held by a court of competent jurisdiction to be unenforceable or invalid for any reason, the remaining provisions
of this Agreement shall not be affected by such holding and shall continue in full force in accordance with their terms.


 


10.           Governing
Law


 


The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to
the conflicts of laws principles thereof.


 



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11.           Successors
in Interest


 


This Agreement shall
inure to the benefit of, and be binding upon, the Company and its successors and assigns, whether by merger, consolidation, reorganization,
sale of assets, or otherwise. This Agreement shall inure to the benefit of Grantee’s legal representatives. All obligations
imposed upon Grantee and all rights granted to the Company under this Agreement shall be final, binding, and conclusive upon Grantee’s
heirs, executors, administrators, and successors.


 


12.           Resolution
of Disputes


 


Any dispute or disagreement
which may arise under, or as a result of, or in any way relate to the interpretation, construction, or application of this Agreement
shall be determined by the Committee. Any determination made hereunder shall be final, binding, and conclusive on Grantee and the
Company for all purposes.


 


13.           Pronouns;
Including


 


Wherever appropriate
in this Agreement, personal pronouns shall be deemed to include the other genders and the singular to include the plural. Wherever
used in this Agreement, the term “including” means “including, without limitation.”


 



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IN WITNESS WHEREOF,
the parties have executed this Agreement as of the date first above written.


 


	 	HANCOCK FABRICS, INC.
	 	 
	 	By:	 
	 	 	Steven R. Morgan
	 	 	Chief Executive Officer


 


By signing below, Grantee
hereby accepts the Award subject to all its terms and provisions and agrees to be bound by the terms and provisions of the Plan.
Grantee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee responsible
for administration of the Plan, upon any questions arising under the Plan. Grantee authorizes the Company to withhold, in accordance
with applicable law, from any compensation payable to him or her, any taxes required to be withheld by federal, state or local
law as a result of the grant, existence or exercise of the Award.


 


	 	GRANTEE
	 	 
	 	Signature:	 
	 	Name:


 



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