Document:

ex4-5.htm

Exhibit 4.5

 

DIVERSIFIED RESTAURANT HOLDINGS, INC.

EMPLOYEE STOCK DISCOUNT PURCHASE PLAN

1.           Purpose.  The purpose of this Diversified Restaurant Holdings, Inc. Employee Stock Discount Purchase Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions or by periodic lump sum contributions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended.  The provisions of the Plan shall be construed in a manner consistent with the requirements of Section 423 and related sections of the Code.

 

2.           Definitions.

 

(a)           "Administrator" shall mean the Board or a committee of the Board as designated pursuant to Section 14.

 

(b)           "Board" shall mean the Company's Board of Directors.

 

(c)           "Code" shall mean the Internal Revenue Code of 1986, as amended.

 

(d)           "Common Stock" shall mean the Common Stock, $.0001 par value, of the Company.

 

(e)           "Company" shall mean Diversified Restaurant Holdings, Inc., a Nevada corporation, and any Designated Subsidiary of the Company.

 

(f)           "Compensation" shall mean all cash compensation received by an Employee from the Company or a Designated Subsidiary and includable in the Employee's gross income for federal income tax purposes, other than any taxable reimbursements. By way of illustration, but not limitation, "Compensation" shall include regular compensation such as salary, wages, overtime, shift differentials, bonuses, commissions, and incentive compensation, but shall exclude relocation reimbursements, expense reimbursements, tuition or other reimbursements, and income realized as a result of participation in any stock option, stock purchase, or similar plan of the Company or any Designated Subsidiary.

 

(g)           "Designated Subsidiary" shall mean any Subsidiary of the Company designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.

 

(h)           "Employee" shall mean any individual who is an employee of the Company for tax purposes.  For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company, except that where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed by either statute or contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave.

 

  

  

  

 

(i)           "Fair Market Value" shall equal the closing price of Common Stock reported on Nasdaq on the relevant date, or if Nasdaq is closed on that date, the last preceding date on which Nasdaq was open for trading and on which shares of Common Stock were traded. If the Common Stock is not listed on Nasdaq, the Fair Market Value shall be determined by any means deemed fair and reasonable by the Administrator in a manner consistent with the valuation principles of Section 409A of the Code except when the Administrator expressly determines not to use Section 409A valuation principles, which determination shall be final and binding on all parties.

 

(j)           "Offering Commencement Date" shall mean the first day of each Offering Period.

 

(k)           "Offering Period" shall mean a period of approximately three months during which funds may be accumulated for the exercise of option, commencing and ending as follows. The quarterly periods shall be linked to the Company's fiscal quarters.  The first date of each quarterly Offering Period shall begin on the first day of the Company's fiscal quarter (for example, on March 28, 2011) and shall end on the last day of such fiscal quarter (for example, on June 26, 2011).  The duration of Offering Periods may be changed by the Board pursuant to Section 4 of this Plan.

 

(l)           "Parent" shall mean a corporation, domestic or foreign, that owns not less than 50% of the voting shares of the Company or of another Parent, whether or not such corporation now exists or is hereafter organized or acquires the Company or a Parent.

 

(m)           "Participant" shall mean an eligible Employee who has elected to participate in the Plan.

 

(n)           "Plan" shall mean this Diversified Restaurant Holdings, Inc. Employee Stock Discount Purchase Plan, as amended from time to time.

 

(o)           "Purchase Date" shall mean the last day of each Offering Period.

 

(p)           "Purchase Price" shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Offering Commencement Date or on the Purchase Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Board pursuant to Section 20 of this Plan.

 

(q)           "Reserves" shall mean the number of shares of Common Stock covered by each option under the Plan that have not yet been exercised and the number of shares of Common Stock that have been authorized for issuance under the Plan, but not yet placed under option.

 

(r)           "Subsidiary" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or another Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.

 

  

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(s)           "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.

 

3.           Eligibility.

 

(a)           Any Employee employed by the Company on a given Offering Commencement Date shall be eligible to participate in the Plan, except:

 

(1)           Any Employee employed by the Company for less than two (2) years before the applicable Offering Commencement Date;

 

(2)           Any Employee whose customary employment is less than 20 hours per week; and

 

(3)           Any Employee whose customary employment is not more than five (5) months in any calendar year.

 

(b)           Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (including by attribution under Code Section 424(d)) would own capital stock of the Company and/or held outstanding options to purchase stock of the Company constituting in the aggregate five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company, or (ii) to the extent that his or her option rights to purchase stock under this Plan and any other employee stock purchase plans of the Company and its subsidiaries exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) in the aggregate for each calendar year in which such option right is outstanding at any time.

 

4.           Offering Periods.  The Plan shall be implemented by consecutive Offering Periods of approximately three (3) months' duration, with the first Offering Period commencing on March 28, 2011, which is the first day of the Company's fiscal quarter beginning after the adoption of this Plan, and with subsequent Offering Periods to commence on the first day of each following fiscal quarter, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20.  If the last day of such fiscal quarter is not a Trading Day, then the last day of the Offering Period shall be the immediately succeeding Trading Day, and the first day of the next quarterly Offering Period shall be the day next following such Trading Day.  The Company will notify employees annually of the beginning and ending dates of the quarterly Offering Periods.  The Board shall have the power to change the duration and timing of Offering Periods with respect to future offerings without shareholder approval.

 

5.           Participation.

 

(a)           An eligible Employee may become a Participant in the Plan by completing an enrollment form authorizing regular payroll deductions in the form provided by the Administrator and filing it with the designated human resources representative of the Company before the applicable Offering Commencement Date, unless a later time for submission is set by the Board for all eligible Employees with respect to a given Offering Period.

 

  

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(b)           Regular payroll deductions for a Participant shall commence on the first payroll date occurring on or after the applicable Offering Commencement Date and shall end on the last payroll date occurring on or before the Purchase Date of the Offering Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 10.

 

(c)           Subject to the limitations of Section 3(b), an eligible Employee may also elect to become a Participant in the Plan by completing an enrollment form before the applicable Offering Commencement Date authorizing a one-time deduction of up to 100% of any bonus payment (net of taxes and required withholdings) made during an Offering Period (a "lump sum payroll deduction").  Regular payroll deductions and lump sum payroll deductions are referred to in this Plan as "payroll deductions."

 

6.           Payroll Deductions.

 

(a)           At the time a Participant files his or her enrollment form, the Participant shall elect to have regular payroll deductions made on each pay day during the Offering Period in an amount equal to a whole percentage (e.g., 1%, 2%, etc.), but not exceeding fifteen percent (15%), of the Compensation that he or she receives on each pay day during the Offering Period.  In addition, a Participant may authorize a one-time lump sum payroll deduction of up to 100% of a bonus payment (net of taxes and required withholdings) by completing an authorization form before the applicable Offering Commencement Date.  Such lump sum payroll deduction authorization shall not apply to any subsequent bonus payment.

 

(b)           All payroll deductions made for a Participant shall be credited to his or her account under the Plan.  A Participant may not make any additional payments into such account. A Participant's account shall be only a bookkeeping account maintained by the Company, and neither the Company nor any Subsidiary shall be obligated to segregate or hold in trust or escrow any funds in a Participant's account.  Except for amounts not expended because of the Plan rule that fractional shares shall not be purchased, no amount of accumulated payroll deductions shall be carried over with respect to any Participant from the end of one Offering Period to the beginning of another.

 

(c)           A Participant may discontinue his or her participation in the Plan as provided in Section 10.  A Participant may increase or decrease his or her payroll deductions during an Offering Period as of the first day of the first full payroll period following receipt of the required form by the designated human resources representative, in the time and manner prescribed by the Administrator.  A Participant's enrollment form shall remain in effect for successive Offering Periods unless terminated as provided in Section 10.

 

(d)           Notwithstanding the foregoing, to the extent necessary to comply with the limitations of Code Section 423(b)(8) and Section 3(b), a Participant's payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period.  In such event, payroll deductions shall recommence at the rate provided in such Participant's enrollment form at the beginning of the first Offering Period scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 10.

 

  

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(e)           At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the Participant must make adequate provision for federal, state, or other tax withholding obligations, if any, arising upon the exercise of the option or the disposition of the Common Stock.  The Company may, but shall not be obligated to, withhold from the Participant's compensation the amount necessary for the Company to meet applicable withholding obligations related to the Participant's tax obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee that may be available to it.

 

7.           Grant of Option.  Effective on the Offering Commencement Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Purchase Date of such Offering Period, at the applicable Purchase Price, a number of shares of the Company's Common Stock determined by dividing such Employee's total payroll deductions actually made before such Purchase Date and retained in the Participant's account as of the Purchase Date by the applicable Purchase Price without adjustment for changes in the Compensation of the Participant.

 

8.           Exercise of Option.  Unless a Participant withdraws from the Plan as provided in Section 10, or except to the extent that the limitation of Code Section 423(b)(8) would otherwise be violated, his or her option for the purchase of shares shall be exercised automatically on the Purchase Date, and the maximum number of full shares subject to the option shall be purchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in the Participant's account.  No fractional shares shall be purchased; any payroll deductions accumulated in a Participant's account that are insufficient to purchase a full share shall be retained in the Participant's account for the subsequent Offering Period, subject to earlier withdrawal by the Participant as provided in Section 10. Any other funds left over in a Participant's account after the Purchase Date shall be returned to the Participant. During a Participant's lifetime, a Participant's option to purchase shares under this Plan is exercisable only by him or her.

 

9.           Delivery.  As promptly as practicable after each Purchase Date on which a purchase of shares occurs, the Administrator shall arrange for the delivery to each Participant or his or her broker, or to a broker designated by the Administrator, of a stock certificate evidencing the shares purchased upon exercise of the option.

 

10.           Withdrawal.

 

(a)           A Participant may withdraw all, but not less than all, the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time on or before fifteen (15) calendar days before the Purchase Date by giving written notice to the designated human resources representative of the Company in the form provided by the Administrator. All of the Participant's payroll deductions credited to his or her account shall be paid to such Participant promptly after receipt of notice of withdrawal, such Participant's option for the Offering Period shall automatically be terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period.  If a Participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period or any Offering Period thereafter unless the Participant delivers to the Administrator a new enrollment form.

 

  

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(b)           A Participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any succeeding Offering Period commencing after the termination of the Offering Period from which the Participant withdraws.

 

11.           Termination of Employment.  Upon a Participant's ceasing to be an Employee for any reason at any time on or before an Purchase Date of an Offering Period, he or she shall be deemed to have elected to withdraw from the Plan, and the payroll deductions credited to such Participant's account during such Offering Period shall be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15, and such Participant's option shall be automatically terminated.

 

12.           No Interest.  No interest shall accrue or be payable on the payroll deductions of a Participant in the Plan.

 

13.           Stock.

 

(a)           The shares of Common Stock to be sold to Participants under the Plan may, at the election of the Company, be either treasury shares or shares originally issued by the Company.

 

(b)           Subject to adjustment upon changes in capitalization of the Company as provided in Section 19, the maximum number of shares of the Company's Common Stock available for sale under the Plan shall be 250,000 shares. If on a given Purchase Date the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Administrator shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.

 

(c)           A Participant shall have no interest or voting rights in shares covered by his or her option or in any dividends declared by the Company in respect of its outstanding Common Stock until such option has been exercised.

 

(d)           Shares to be delivered to a Participant under the Plan shall be registered in the name of the Participant or in the name of the Participant and his or her spouse, as designated by the Participant.

 

14.           Administration.  The Plan shall be administered by the Board or a designated committee of members of the Board appointed by the Board (the "Administrator"). Initially, the Board has designated the Compensation Committee of the Board of Directors as responsible for administering the Plan. The Administrator shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to adjudicate all disputed claims filed under the Plan and to delegate certain of its duties to an agent to facilitate the purchase and transfer of shares and to otherwise assist in the administration of the Plan.  Every finding, decision, and determination made by the Administrator shall, to the fullest extent permitted by law, be final and binding upon all parties.

 

  

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15.           Designation of Beneficiary.

 

(a)           A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant's account under the Plan in the event of such Participant's death subsequent to an Purchase Date on which the option is exercised, but before delivery to such Participant of such shares and cash.  In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant's account under the Plan in the event of such Participant's death before exercise of the option.

 

(b)           Such designation of beneficiary may be changed by the Participant at any time by written notice.  In the event of the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the Participant or, if to the best of the Company's knowledge no such executor or administrator has been appointed, the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent, or relative is known to the Company, then to such other person as the Company may designate.

 

16.           Transferability.  Neither payroll deductions credited to a Participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 15) by the Participant.  Any such attempt at assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10.

 

17.           Use of Funds.  All payroll deductions received or held by the Company under the Plan shall be general corporate funds and as such may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions or pay interest thereon.

 

18.           Reports.  Individual accounts shall be maintained for each Participant in the Plan. Statements of account shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased, and the remaining cash balance, if any.

 

19.           Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger, or Asset Sale.

 

(a)           Changes in Capitalization.  Subject to any required action by the shareholders of the Company, the Reserves, the maximum number of shares each Participant may purchase per Offering Period, as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration."  Such adjustment shall be made by the Board, whose determination in that respect shall be final and binding on all parties.  Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or of securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.

 

  

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(b)           Dissolution or Liquidation.  In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Purchase Date (the "New Purchase Date"), and shall terminate immediately before the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board.  The New Purchase Date shall be before the date of the Company's proposed dissolution or liquidation.  The Board shall notify each Participant in writing, at least ten (10) business days before the New Purchase Date, that the Purchase Date for the Participant's option has been changed to the New Purchase Date and that the Participant's option shall be exercised automatically on the New Purchase Date, unless before such date the Participant has withdrawn from the Offering Period as provided in Section 10.

 

(c)           Merger or Asset Sale.  In the event of a sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding option shall be assumed, or an equivalent option substituted, by the successor corporation or a Parent or Subsidiary of the successor corporation.  In the event that the successor corporation refuses to assume the option or substitute equivalent options, the Offering Period then in progress shall be shortened by setting a new Purchase Date (the "New Purchase Date").  The New Purchase Date shall be before the date of the Company's proposed sale or merger.  The Board shall notify each Participant in writing, at least ten (10) business days before the New Purchase Date, that the Purchase Date for the Participant's option has been changed to the New Purchase Date and that the Participant's option shall be exercised automatically on the New Purchase Date, unless before such date the Participant has withdrawn from the Offering Period as provided in Section 10.

 

20.           Amendment and Termination.

 

(a)           The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Purchase Date if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its shareholders.  Except as provided in Section 19 and this Section 20, no amendment may make any change in any option theretofore granted that adversely affects the rights of any Participant.  To the extent necessary to comply with Code Section 423 (or any other applicable law, regulation, or stock exchange rule), the Company shall obtain shareholder approval in such manner and to such degree as required.

 

  

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(b)           Without shareholder consent and without regard to whether any Participant's rights may be considered to have been "adversely affected," the Board shall be entitled to: change the Offering Periods, the maximum amount of permitted payroll deductions, and the frequency and/or number of permitted changes in the amount withheld during an Offering Period; permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections; establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant's Compensation; and establish such other limitations and procedures as the Board determines in its sole discretion are advisable.

 

(c)           In the event that the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequences including, but not limited to:

 

(1)           altering the Purchase Price for any Offering Period, including an Offering Period underway at the time of the change in Purchase Price; or

 

(2)           shortening any Offering Period so that the Offering Period ends on a new Purchase Date, including an Offering Period underway at the time of the Board action.

 

Such modifications or amendments shall not require stockholder approval or the consent of any Participants.

 

21.           Notices.  All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

22.           Conditions Upon Issuance of Shares.

 

(a)           Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange on which the shares may then be listed.

 

(b)           As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

 

23.           Term of Plan.  The Plan shall become effective on January 27, 2011, which is the date that it was adopted by the Board.  The Plan was subsequently approved by the shareholders on May 26, 2011.   The Plan shall continue in effect for a term of ten (10) years unless sooner terminated by the Board pursuant to Section 20.

 

  

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24.           Additional Restrictions of Rule 16b-3.  The terms and conditions of options granted hereunder to, and the purchase of shares by, persons subject to Section 16 of the Exchange Act shall comply with the applicable provisions of Rule 16b-3.  In the cases of any such persons, this Plan and opftions issued to such persons shall be deemed to contain, and the shares issued upon exercise of such options shall be subject to, such additional conditions and restrictions as may be required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions on behalf of such persons.

 

 

10ex4-6.htm

Exhibit 4.6

 

DIVERSIFIED RESTAURANT HOLDINGS, INC.

STOCK INCENTIVE PLAN OF 2011

RESTRICTED STOCK AWARD AGREEMENT

NOTIFICATION OF AWARD AND TERMS AND CONDITIONS OF AWARD

 

	Name of Grantee:  	                                   
	 	 
	Grant Date:    	_________, 20       
	 	 
	Number of Shares:	                                   
	 	 
	Restricted Period(s)  	See Paragraph 5
	 	 

 

This Restricted Stock Award Agreement (the “Agreement”) contains the terms and conditions of the restricted stock award granted to you by Diversified Restaurant Holdings, Inc., a Nevada corporation (the “Company”), under the Diversified Restaurant Holdings, Inc. Stock Incentive Plan of 2011, as amended from time to time (the "Plan").

1.           Grant of Restricted Stock.  Pursuant to the Plan, the Company has granted to you, effective on the Grant Date (shown above), the right to receive the number of shares shown above of the Common Stock of the Company (“Shares”) at the end of the applicable Restricted Period (as provided for in Paragraph 5 below).  The Shares, or any installment of the Shares respectively, while subject to risk of forfeiture or any restrictions imposed by the Plan or this Agreement, are referred to in this Agreement as “Restricted Stock.”

2.           Stock Incentive Plan Governs.  The award and this Agreement are subject to the terms and conditions of the Plan. The Plan is incorporated into this Agreement by reference and all capitalized terms used in this Agreement have the meaning set forth in the Plan, unless this Agreement specifies a different meaning.  By signing this Agreement, you accept this award, acknowledge receipt of a copy of the Plan and the prospectus covering the Plan and acknowledge that the award is subject to all the terms and provisions of the Plan and this Agreement.  You further agree to accept as binding, conclusive and final all decisions and interpretations by the Committee of the Plan and this Agreement.

3.           Payment. The Restricted Stock is granted without requirement of payment.

4.           Shareholder Rights. Your Restricted Stock shall be held for you by the Company, in book entry or certificated form, in your name, during the applicable Restricted Period.  You shall have all the rights of a shareholder for your Restricted Stock after the applicable Restricted Period.  With respect to your Restricted Stock during the applicable Restricted Period,

  

 

  

 

A.           You will have the right to vote such shares at any meeting of shareholders of the Company;

B.           You will have, and the right to receive, free of restrictions (but subject to applicable withholding taxes) all cash dividends and any liquidation amounts paid with respect to such shares; and

C.           Any non-cash dividends and other non-cash proceeds of such shares, including stock dividends and any other securities issued or distributed in respect of such shares, other than liquidation payments, will be subject to the same restrictions and risk of forfeiture as the shares of Restricted Stock to which they relate, and the term “Restricted Stock” when used in this Agreement shall also include any related stock dividends and other securities issued or distributed in respect of such shares, other than liquidation payments.

5.           Vesting of Restricted Stock.

A.           Vesting.  The Restricted Period for the Restricted Stock, or applicable installment of the Restricted Stock, will end, the risk of forfeiture and restrictions will lapse, and the Restricted Stock will vest as follows, provided you have not incurred a Forfeiture Event (as defined below):

	
Percentage of

Shares Vesting

	
Cumulative

Percentage Vested

	
Vesting Date (when Restricted

Period Ends)

	
 

33 1/3%

33 1/3%

33 1/3%

	
 

33 1/3%

66 2/3%

100%

	
 

___________ __, 20 ___

___________ __, 20 ___

___________ __, 20 ___

All or part of your Restricted Stock may vest earlier than described above in this Paragraph 5A under the circumstances provided for in Paragraphs 5C or 5D below.

B.           Forfeiture Event.  Subject to Paragraphs 5C, 5D, 5E and 5F below, the shares of your Restricted Stock that would otherwise vest on a Vesting Date will not vest and shall automatically be forfeited and returned to the Company, if after the Grant Date and prior to the Vesting Date for such Restricted Stock (i.e. during the applicable Restricted Period), you cease to be an Employee (a "Forfeiture Event").

  

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C.           Accelerated Vesting Upon Death, Disability, or Termination Other Than for Cause.  If (i) you cease to be an Employee because of death or Disability during the Restricted Period, or (ii) the Company terminates your employment as an Employee other than for Cause and you are no longer employed by the Company or any Subsidiary, then all restrictions remaining on your Restricted Stock shall terminate automatically with respect to the number of such shares (rounded to the nearest whole number) equal to the respective total number of such shares granted to you multiplied by the number of full months that have elapsed since the Grant Date divided by the total number of full months in the respective Restricted Period, calculated separately for Restricted Stock having different Restricted Periods.  All remaining shares of Restricted Stock shall be forfeited and returned to the Company.  The Committee may, in its sole discretion, waive the restrictions remaining on and forfeiture of any or all such remaining shares of Restricted Stock either before or after your death, Disability, or termination other than for Cause.  Any termination because of Disability shall be deemed a termination by you.

D.           Accelerated Vesting at the Committee's Discretion.  The Committee may, in its discretion, at any time accelerate the vesting of your Restricted Stock on such terms and conditions as it deems appropriate.

E.           Change in Control. If a Change in Control of the Company occurs, all of your Restricted Stock that is outstanding and has not previously been forfeited, shall become immediately fully vested and nonforfeitable as provided in Section VII of the Plan.

F.           Mandatory Deferral of Vesting. If the vesting of Restricted Stock in any year could, in the Committee’s opinion, when considered with your other compensation, result in the Company's inability to deduct the value of your Shares because of the limitation on deductible compensation under Internal Revenue Code Section 162(m), then the Committee, in its sole discretion, may defer the Vesting Date applicable to your Restricted Stock (but only to the extent that, in the Committee’s judgment, the value of your Restricted Stock would not be deductible) until the first business day of January in the year immediately following the date on which you cease to be an Employee.  This Paragraph 5F shall not apply to the vesting of your Restricted Stock upon a Change in Control.

6.           Forfeiture of Restricted Stock. If any of your Restricted Stock is forfeited as provided for in Paragraph 5, such forfeiture shall be immediate, and forfeited Restricted Stock (including any cash dividends or liquidation payments for which the record date occurs on or after the date of the forfeiture, and any noncash dividends or noncash distributions with respect to Restricted Stock that is forfeited), and all of your rights to and interest in the forfeited Restricted Stock shall terminate without payment of consideration.  Forfeited Restricted Stock shall be reconveyed to the Company, and you agree to promptly take such action and sign such documents as the Company may request to facilitate such reconveyance to the Company.

7.           Restricted Stock Not Transferable.  Unless the Committee otherwise consents or permits, neither the Restricted Stock, nor any interest in the Restricted Stock, may be sold, exchanged, transferred, pledged, assigned, or otherwise alienated or hypothecated during the Restricted Period except by will or the laws of descent and distribution, and all of your rights with respect to the Restricted Stock shall be exercisable during your lifetime only by you, or your guardian or legal representative.  Further, unless the Committee otherwise consents or permits, you may not sell, transfer, pledge or otherwise alienate or hypothecate shares of Common Stock acquired pursuant to an award of Restricted Stock for a period of two (2) years after the end of the Restricted Period.  Any attempted action in violation of this paragraph shall be null, void, and without effect.

  

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8.           Taxes and Tax Withholding

A.           The vesting of your Restricted Stock, or making an Internal Revenue Code Section 83(b) election with respect to this award of Restricted Stock, will cause you to have income with respect to the Restricted Stock, and will subject you to income tax on that income.

B.           You agree to consult with any tax consultants you think advisable in connection with your Restricted Stock and acknowledge that you are not relying, and will not rely, on the Company for any tax advice.

C.           Whenever any Restricted Stock becomes vested under the terms of this Agreement, or an Internal Revenue Code Section 83(b) election is made with respect to this award of Restricted Stock, you must remit, on or prior to the due date thereof, the minimum amount necessary to satisfy all of the federal, state and local withholding (including FICA) tax requirements imposed on the Company (or the Subsidiary that employs you) relating to your Shares.  This withholding tax obligation may be satisfied by any (or a combination) of the following means: (i) cash, check, or wire transfer; (ii) authorizing the Company (or Subsidiary that employs you) to withhold from other cash compensation payable to you by the Company or a Subsidiary; or (iii) unless the Committee determines otherwise, authorizing the Company to withhold Shares otherwise deliverable to you as a result of the vesting of the Restricted Stock, or delivering other unencumbered shares of the Common Stock of the Company which have been held for at least six months, equal to the amount of the withholding obligation.

D.           You may within the thirty day period after the Grant Date, in your sole discretion, make an election with the Internal Revenue Service under, and to the extent permitted by, Section 83(b) of the Internal Revenue Code.  If you make this election, you will promptly give the Company notice that you have made the election, and provide the Company a copy of the election with the notice.

9.           Value of Shares Not Included In Other Computations.  The value of the Shares under this Agreement will not be taken into account in computing the amount of your salary or other compensation for purposes of determining any incentive compensation, pension, retirement, death or other benefit under any employee benefit plan of the Company or any Subsidiary, except to the extent, if any, that such plan or another agreement between you, and Company or a Subsidiary, specifically provides otherwise.

10.           Legending Restricted Stock.  The Company may, without liability for its good faith actions, place legend restrictions upon the Restricted Stock or unrestricted Shares obtained upon vesting of the Restricted Stock and issue “stop transfer” instructions requiring compliance with applicable securities laws and the terms of the Restricted Stock.

  

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In addition to any other legend or notice that may be set forth on the certificate or book entry records relating to any Restricted Stock, any certificate or book entry records evidencing shares of Restricted Stock awarded pursuant to this Agreement may bear a legend or notice substantially as follows:

The shares represented by this certificate were issued subject to certain restrictions under the Diversified Restaurant Holdings, Inc. Stock Incentive Plan of 2011 (the “Plan”). This certificate is held subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented by this certificate except in compliance with that agreement and that provides for forfeiture upon certain events.  Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company.

11.           Committee Determinations Are Conclusive.  Determinations regarding this Agreement (including, but not limited to whether an event has occurred resulting in the forfeiture of or vesting of Restricted Stock) shall be made by the Committee in accordance with this Agreement and the Plan, and all determinations of the Committee shall be final and conclusive and binding on all persons.

12.           No Right of Continuing Employment.  Neither this Agreement nor the Plan creates any contract of employment, and nothing in this Agreement or the Plan shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate your employment or service at any time, nor confer upon you the right to continue in the employ of the Company or any Subsidiary. Nothing in this Agreement or the Plan creates any fiduciary or other duty to you owed by the Company, any Subsidiary, or any member of the Committee except as expressly stated in this Agreement or the Plan.

13.           Amendment of Plan and this Agreement.  The Company reserves the right to amend the Plan and this Agreement as provided for or not prohibited by the Plan.  Any amendment to this Agreement shall be in writing and signed by the Company, and to the extent required by the Plan, signed by you.

14.           Additional Information.  By signing this Agreement, you agree to provide any information relating to this Agreement or the Restricted Stock that is reasonably requested from time to time by the Company.

15.           Notices.  Any notice by you to the Company under this Agreement shall be in writing and shall be deemed duly given only upon receipt of the notice by the Company at its principal executive office addressed to its Secretary or Chief Financial Officer.  Any notice by the Company to you shall be in writing or by electronic transmission, and shall be deemed duly given if mailed or sent by electronic transmission to you at the address specified below by you, or to your email address at the Company, or to such other address as you may later designate by notice given to the Company.

  

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16.           Governing Law.  The validity, construction and effect of this Agreement shall be governed by the laws of the State of Nevada.

The Company has caused this Agreement to be executed by its duly authorized officer, and the Grantee has executed this Agreement, each as of the Grant Date set forth above.

 

	 	
DIVERSIFIED RESTAURANT HOLDINGS, INC.

	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
 

Its:

	 
	 	 	 	 
	 	GRANTEE	 
	 	 	 	 
	 	I acknowledge having received, read and understood the Plan and this Agreement, and agree to all of the terms and provisions of this Agreement.	 
	 	 	 	 
	 	 	 	 
	 	(Signature)	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	(Please print your residence address)	 

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