Document:

Exhibit

Exhibit 10.2

BEST BUY CO., INC.
LONG-TERM INCENTIVE PROGRAM AWARD AGREEMENT
FOR NON-U.S. DIRECTORS
Award Date: 

This Long-Term Incentive Program Agreement (the “Agreement”), dated the date set forth above (the “Award Date”), is between Best Buy Co., Inc., a Minnesota corporation, (“Best Buy” or the “Company”), and the individual (“you” or the “Participant”) whose name is set forth in the Award Notification letter accompanying this Agreement (the “Award Notification”).  The Award Notification is included in and made a part of this Agreement.

		
	1.
	Grant of Award.  In consideration of your service on the Board of Directors of the Company (“Board”), the Company hereby grants to you the award set forth in the Award Notification (the “Award”) subject to the terms and conditions of this Agreement and the Best Buy Co., Inc. 2014 Omnibus Incentive Plan (the “Plan”).  In the event of any conflict between this Agreement and the Plan, the Plan will govern.  By your acceptance of this Award, you acknowledge receipt of a copy of the Prospectus for the Plan and your agreement to the terms and conditions of the Plan and this Agreement.

		
	2.
	Restricted Stock Units.  A “Restricted Stock Unit” is a right to receive a share of the Company’s common stock (“Share”) upon the lapse of the restrictions set forth in this Agreement.

		
	(a)
	Restrictions.  During the time you serve on the Board (the “Holding Period”), the Restricted Stock Units are subject to the restrictions described in this Agreement and the Plan (the “Restrictions”). During the Holding Period, the Restricted Stock Units may not be assigned, transferred (other than by will or the laws of descent and distribution), pledged or hypothecated (whether by operation of law or otherwise) or otherwise conveyed or encumbered, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition contrary to the provisions this Agreement or the Plan, or the levy of any execution, attachment or similar process upon the Restricted Stock Units, shall be void and unenforceable against the Company.  The Restricted Stock Units are subject to forfeiture to Best Buy as provided in this Agreement and the Plan.

		
	(b)
	Vesting.  Except as otherwise set forth herein, so long as your service on the Board continues, the Restricted Stock Units shall vest in accordance with the schedule stated in the Award Notification.  If your service on the Board is terminated prior to the date your Restricted Stock Units have vested for any reason other than Cause, a pro rata portion (based on your length of service during the vesting period) of the Restricted Stock Units will vest as of such termination date.  If your service on the Board is terminated prior to the Vesting Date for Cause, all Restricted Stock Units will be forfeited as of the date of termination.

		
	(c)
	Issuance of Shares; Holding Period.  Within 30 days after the end of the Holding Period, the Shares underlying the Restricted Stock Units that have vested will be delivered to you

		
	3.
	Restrictive Covenants and Remedies.  By accepting the Award, you specifically agree to the restrictive covenants contained in this Section 3 (the “Restrictive Covenants”) and you agree that the Restrictive Covenants and the remedies described herein are reasonable and necessary to protect the legitimate interests of the Company Group.

1

		
	(a)
	Confidentiality.  In consideration of the Award, you acknowledge that the Company Group operates in a competitive environment and has a substantial interest in protecting its Confidential Information, and you agree, during your service to the Company and thereafter, to maintain the confidentiality of the Company Group’s Confidential Information and to use such Confidential Information for the exclusive benefit of the Company Group.

		
	(b)
	Non-Solicitation.  During the Holding Period and for one year following the termination of your service on the Board, you shall not:

		
	(i)
	induce or attempt to induce any employee of the Company Group to leave the employ of Company Group, or in any way interfere adversely with the relationship between any such employee and Company Group;

		
	(ii)
	induce or attempt to induce any employee of Company Group to work for, render services to, provide advice to, or supply Confidential Information of Company Group to any third Person;

		
	(iii)
	employ, or otherwise pay for services rendered by, any employee of Company Group in any business enterprise with which you may be associated, connected or affiliated;

		
	(iv)
	induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of Company Group to cease doing business with Company Group, or in any way interfere with the then existing business relationship between any such customer, supplier, licensee, licensor or other business relation and Company Group; or

		
	(v)
	assist, solicit, or encourage any other Person, directly or indirectly, in carrying out any activity set forth above that would be prohibited by any of the provisions of this Agreement if such activity were carried out by you.  In particular, you will not, directly or indirectly, induce any employee of Company Group to carry out any such activity.

		
	(c)
	Partial Invalidity.  If any portion of this Section 3 is determined by any court of competent jurisdiction to be unenforceable in any respect, it shall be interpreted to be valid to the maximum extent for which it reasonably may be enforced, and enforced as so interpreted, all as determined by such court in such action.  You acknowledge the uncertainty of the law in this respect and expressly stipulate that this Agreement is to be given the construction that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible under applicable law.

		
	(d)
	Remedy for Breach.  You agree that a breach of any of the Restrictive Covenants would cause material and irreparable harm to the Company Group that would be difficult or impossible to measure, and that monetary damages for any such harm would, therefore, be an inadequate remedy.  Accordingly, you agree that if you breach any Restrictive Covenant, the Company Group shall be entitled, in addition to and without limitation upon all other remedies the Company Group may have under this Agreement, at law or otherwise, to obtain injunctive or other appropriate equitable relief, without bond or other security, to restrain any such breach.  Such equitable relief in any court shall be available to the Company Group in lieu of, or prior to or pending determination in any arbitration proceeding.  You further agree that the duration of the Restrictive Covenant shall be extended by the same amount of time that you are in breach of any Restrictive Covenant.

		
	(e)
	Claw Back & Recovery.  

		
	(i)
	In the event (i) you breach any of the Restrictive Covenants, (ii) you engage in conduct materially adverse to the interests of the Company, including any material violations of any Company policy, (iii) you engage in intentional misconduct that caused or contributed to the restatement of any financial statements of the Company, (iv) you materially violate the terms of any agreement to which you and a member of the Company Group is a party or (v) you engage in a criminal act, fraud, or violation of any securities laws, then notwithstanding any other provision of this Agreement to the contrary, the Company, in its sole discretion, may take one or more of the following actions with respect to your Award (and shall, in any event, take all action required by applicable law):

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	(A)
	cause the immediate forfeiture of any of your then unvested Restricted Stock Units;

		
	(B)
	require you to immediately return to the Company any Shares that were previously Restricted Stock Units that are still under your control; and 

		
	(C)
	require you to promptly pay to the Company an amount equal to the fair market value of all Shares included in your Award that are no longer under your control (as measured on the date of issuance of any Shares issued under any Restricted Stock Units).

		
	(ii)
	The Committee shall have sole discretion to determine what constitutes the conduct described in Section 3(e)(i) above.

		
	(iii)
	In addition to the Company’s rights set forth above, you agree your Award and the value of any portion of your Award no longer under your control, shall be subject to recovery by the Company in accordance with and to the maximum extent required under the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

		
	(f)
	Right of Set Off.  By accepting the Award, you agree that any member of the Company Group may set off any amount owed to you (including fees or other compensation, fringe benefits or vacation pay) against any amounts you owe under this Section 3. You also agree that if the Company does not recover by means of set-off the full amount you owe, calculated as set forth above, you agree to immediately pay the unpaid balance to the Company.

		
	4.
	General Terms and Conditions.

		
	(a)
	Rights as a Stockholder.  You will have no rights as a shareholder with respect to any Shares issuable under the Restricted Stock Units until you have actually received such Shares in accordance with the terms of this Agreement and the Plan.  This means that you will not have the right to vote as a shareholder nor the right to receive dividend payments.  Upon issuance of Shares, you will have all of the rights of a shareholder with respect to the Shares unless Shares are forfeited or recovered under this Agreement or the Plan.

		
	(b)
	Nature of Grant.  In accepting the Award, you acknowledge, understand and agree that:

		
	(i)
	the Plan is established voluntarily by Best Buy, it is discretionary in nature and it may be modified, amended, suspended or terminated by Best Buy at any time; 

		
	(ii)
	the grant of the Units is voluntary and occasional and does not create any contractual or other right to receive future grants of restricted stock units, or benefits in lieu of restricted stock units, even if restricted stock units have been granted in the past; 

		
	(iii)
	all decisions with respect to future grants of restricted stock units, if any, will be at the sole discretion of Best Buy; 

		
	(iv)
	you are voluntarily participating in the Plan; 

		
	(v)
	the Award and your participation in the Plan will not create a right to continued service on the Board or derogate from any right of Best Buy’s shareholders to remove you from the Board at any time in accordance with Best Buy’s bylaws and any applicable law;

		
	(vi)
	 the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty; 

		
	(vii)
	no claim or entitlement to compensation or damages shall arise from forfeiture of the Units resulting from your ceasing to provide service to Best Buy (for any reason whatsoever) and, in consideration of the grant of Units to which you are otherwise not entitled, you irrevocably agree never to institute any claim against Best Buy, waive your ability, if any, to bring any such claim and release Best Buy from any such claim; if, notwithstanding the foregoing, any such claim is allowed 

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by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claims; 
		
	(viii)
	unless otherwise provided in the Plan or by Best Buy in its discretion, the Award and the benefits evidenced by this Agreement do not create any entitlement to have the Award or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; 

		
	(ix)
	and Best Buy shall not be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Units or any amounts due to you pursuant to the settlement of the Units or the subsequent sale of any Shares acquired upon settlement.

		
	(c)
	Participant’s Acknowledgements.  

		
	(i)
	Committee’s Sole Discretion.  The Committee has sole discretion to make decisions regarding your Award, and to interpret all terms of this Agreement.  You agree that all decisions regarding and interpretations of this Agreement by the Committee are binding, conclusive, final and non-appealable.

		
	(ii)
	Taxes.  

		
	(A)
	Regardless of any action the Company takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related items related to your participation in the Plan (“Tax-Related Items”), you acknowledge that the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount, if any, actually withheld by the Company.  You further acknowledge that the Company (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Restricted Stock Units, including, but not limited to, the grant or vesting of the Restricted Stock Units, the issuance of Shares upon settlement of the Units, the subsequent sale of such Shares and the receipt of any dividends or dividend equivalents; and (b) does not commit to and is under no obligation to structure the terms of the Award or any aspect of the Restricted Stock Units to reduce or eliminate your liability for Tax-Related Items or achieve any particular tax result.  Further, if you have become subject to Tax-Related Items in more than one jurisdiction between the Award Date and the date of any relevant taxable event, as applicable, you acknowledge that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction. 

		
	(B)
	To the extent the Company has a withholding obligation with respect to Tax-Related Items, you authorize the Company or its agent, at the Company’s discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:  

		
	(1)
	withholding from any cash compensation paid to you by the Company; 

		
	(2)
	withholding from proceeds of the sale of Shares acquired upon settlement of the Restricted Stock Units either through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization); or

		
	(3)
	withholding in Shares to be issued upon settlement of the Restricted Stock Units.  

The Committee shall establish the method of withholding from alternatives (1) - (3) above and, if the Committee does not exercise its discretion prior to the applicable withholding event, then you shall be entitled to elect the method of withholding from the alternatives above.  

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In the event there is a relevant taxable event for which the Company does not withhold amounts needed to satisfy obligations with respect to Tax-Related Items, you agree to pay or make adequate arrangements satisfactory to the Company to satisfy such obligations.  

		
	(C)
	To avoid negative accounting treatment, the Company may withhold or account for Tax-Related Items by considering applicable minimum statutory withholding amounts or other applicable withholding rates.  If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, you are deemed to have been issued the full number of Shares subject to the vested Restricted Stock Units, notwithstanding that a number of the Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of your participation in the Plan. 

		
	(D)
	You shall pay to the Company any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means described in this Section 4(c)(iii).  The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if you fail to comply with your obligations in connection with the Tax-Related Items.

		
	(E)
	You further acknowledge that you are relying solely on your own professional tax and investment advisors with respect to any and all such matters (and are not relying, in any manner, on the Company or any of its employees or representatives).  

		
	(a)
	Severability.  In the event that any provision in the Plan or this Agreement is held to be invalid, illegal or unenforceable or would disqualify the Plan or this Agreement under any law, the invalid, illegal or unenforceable provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or this Agreement, such provision shall be stricken as to the applicable jurisdiction or Shares, and the remainder of the Plan or this Agreement shall remain in full force and effect.

		
	(b)
	Governing Law, Jurisdiction and Venue.  The laws of Minnesota, without regard to the conflict of law provisions, shall apply to all questions concerning this Agreement.  You and the Company agree that the state and federal courts located in the State of Minnesota shall have personal jurisdiction over the parties to this Agreement, and that the sole venues to adjudicate any dispute arising under this Agreement shall be the District Courts of Hennepin County, State of Minnesota and the United States District Court for the District of Minnesota; and each party waives any argument that any other forum would be more convenient or proper. 

		
	(c)
	Costs of Enforcement.  In addition to any other remedy to which any member of the Company Group is entitled under this Agreement, you agree that the Company Group shall be entitled to recover from you any costs, expenses (including reasonable legal fees) or disbursements reasonably incurred by the Company Group to enforce any provision of this Agreement, or to otherwise defend itself from any claim brought by you or any of your beneficiaries against any member of the Company Group under any provision of this Agreement.

		
	(d)
	Appendix. Notwithstanding any provisions in this Agreement, the grant of Units shall be subject to any special terms and conditions set forth in the attached country-specific appendix to this Agreement (the “Appendix”).  If you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan.  The Appendix constitutes part of this Agreement.

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	(e)
	Imposition of Other Requirements.  The Company reserves the right to impose other requirements on your participation in the Plan, on the Units and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

		
	(f)
	Compliance with Law.  Notwithstanding any other provision of the Plan or this Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any Shares issuable upon settlement of the Units prior to the completion of any registration or qualification of the Shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable.  You understand that the Company is under no obligation to register or qualify the Shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares.  Further, you agree that Best Buy shall have unilateral authority to amend the Plan and the Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of the Shares.  

		
	(g)
	Insider Trading Restrictions/Market Abuse Laws.  You acknowledge that, depending on your country, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell Shares or rights to Shares under the Plan during such times as you are considered to have “inside information” regarding Best Buy (as defined by applicable laws in your country).  Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Best Buy insider trading policy.  You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal advisor on this matter.

		
	(h)
	Waiver. You acknowledge that a waiver by Best Buy of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other award recipient.

		
	(i)
	Data Privacy.  You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement and any other award materials by Best Buy for the exclusive purpose of implementing, administering and managing your participation in the Plan.

You understand that Best Buy may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in Best Buy, details of all Units or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.  

You understand that Data will be transferred to Fidelity or such other stock plan service provider as may be selected by Best Buy in the future, which is assisting Best Buy with the implementation, administration and management of the Plan.  You understand that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than your country.  You understand that you may request a list with the names and addresses of any potential recipients of the Data by contacting the Best Buy Legal Department.  You authorize Best Buy, Fidelity (or other broker designated by Best Buy) and any other possible recipients which may assist 

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Best Buy (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan.  You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan.  You understand that you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Best Buy Legal Department, 7601 Penn Avenue South, Richfield, MN 55423.  You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan.  For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact the Best Buy Legal Department.

		
	(j)
	Electronic Delivery and Participation.  Best Buy may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by Best Buy or a third party designated by Best Buy.  Further, the parties hereto shall be entitled to rely on delivery of a facsimile or other electronic copy of this Agreement, and delivery by either party of such facsimile or electronic copy shall be legally effective to create a valid and binding agreement between the parties in accordance with the terms hereof.

		
	5.
	Definitions.  Capitalized terms used but not defined in this Agreement are defined in the Plan or, if not defined therein, will have the following meanings:

		
	(a)
	“Cause” for termination of your service with the Company Group shall, solely for purposes of this Agreement, is deemed to exist if you:

		
	(i)
	are charged with, convicted of or enter a plea of guilty or nolo contendere to: (a) a felony (or a crime of comparable magnitude under applicable law), (b) any crime involving moral turpitude, dishonesty, breach of trust or unethical business conduct, or (c) any crime involving the business of the Company Group;

		
	(ii)
	in the performance of your duties for the Company Group or otherwise to the detriment of the Company Group, engage in: (a) dishonesty that is harmful to the Company Group, monetarily or otherwise, (b) willful or gross misconduct, (c) willful or gross neglect, (d) fraud, (e) misappropriation, (f) embezzlement, or (g) theft;

		
	(iii)
	disobey the directions of the Board, or any individual or individuals the Board authorizes to act on its or their behalf, acting within the scope of its or their authority;

		
	(iv)
	fail to comply with the policies or practices of the Company Group;

		
	(v)
	are adjudicated in any civil suit, or acknowledge in writing in any agreement or stipulation, to have committed any theft, embezzlement, fraud, or other act of dishonesty involving any other Person;

		
	(vi)
	are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have engaged in a pattern of poor performance;

		
	(vii)
	are determined, in the sole judgment of the Board or any individual or individuals the Board authorizes to act on its or their behalf, to have willfully engaged in conduct that is harmful to the Company Group, monetarily or otherwise;

		
	(viii)
	breach any provision of this Agreement or any other agreement between you and any member of the Company Group; or

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	(ix)
	engage in any activity intended to benefit any entity at the expense of the Company Group or intended to benefit any competitor of the Company Group.

All determinations and other decisions relating to Cause (as defined above) for termination of your service shall be within the sole discretion of the Board or any individual or individuals the Board authorizes to act on its behalf; and shall be final, conclusive and binding upon you.  In the event that there exists Cause (as defined above), the Company may terminate this Agreement immediately, upon written notification of such termination for Cause, given to you by the Board or any individual or individuals the Board authorizes to act on its behalf. 

		
	(b)
	“Company Group” means, collectively, Best Buy Co., Inc. and its subsidiaries.

		
	(c)
	“Committee” means the Compensation and Human Resources Committee of the Board of Directors of Best Buy Co., Inc.

		
	(d)
	“Confidential Information” means all “Confidential Information” as that term is defined in Best Buy’s Confidentiality Policy, and includes, without limitation, any and all information in whatever form, whether written, electronically stored, orally transmitted or memorized relating to trade secrets, customer lists, records and other information regarding customers, price lists and pricing policies, financial information, records, ledgers and information, purchase orders, agreements and related data, business development and strategic plans, products and technologies, product tests, manufacturing costs, product or service pricing, sales and marketing plans, research and development plans, personnel and employment records, files, data and policies (regardless of whether the information pertains to you or  employees of the Company Group), tax information, business and sales methods and operations, business correspondence, memoranda and other records, inventions, improvements and discoveries, processes and methods, business operations and related data formulae, computer records and related data, know-how, research and development, trademark, technology, technical information, copyrighted material, and any other confidential or proprietary data and information which you encounter during your service, all of which are held, possessed and/or owned by the Company Group and all of which are used in the operations and business of the Company Group.  Confidential Information does not include information which is or becomes generally known within the Company Group’s industry through no act or omission by you. 

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COUNTRY-SPECIFIC APPENDIX
TO
DIRECTOR RESTRICTED STOCK UNIT AWARD AGREEMENT
FOR NON-U.S. DIRECTORS

TERMS AND CONDITIONS

This Appendix includes additional terms and conditions that govern the Restricted Stock Units granted to you under the Plan if you reside in one of the countries listed below at the time of award or move to one of these countries during the term of the Award.  Capitalized terms not defined in this Appendix are defined in Section 5 of the Agreement.

If you are a citizen or resident of a country other than the one in which you are currently residing and/or working, transfer residency after the Units were granted to you, or are considered a resident of another country for local law purposes, the terms and conditions contained herein may not be applicable to you, and Best Buy shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply to your Restricted Stock Units.

NOTIFICATIONS

This Appendix also includes information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan.  The information is based on the securities, exchange control, and other laws in effect in the respective countries as of June 2015.  Such laws are often complex and change frequently.  As a result, it is strongly recommended that you not rely on the information in this Appendix as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the Restricted Stock Units.  This Appendix does not address any general reporting requirements that may apply to you with respect to currency transfers into your country of residence (unless there are reporting requirements that apply specifically to the Shares that may be acquired under the Plan).  

In addition, the information contained herein is general in nature and may not apply to your particular situation, and Best Buy is not in a position to assure you of a particular result.  Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.

UNITED KINGDOM
TERMS AND CONDITIONS
Vesting; Holding Period. This provision supplements Section 2(c) of the Agreement:
Notwithstanding any discretion in the Plan, Restricted Stock Units are payable in Shares only, and shall not be paid in cash.

9ex10-1.htm

Exhibit 10.1

 

HANCOCK FABRICS, INC.
2001 STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED EFFECTIVE
AS OF MAY 1, 2015)

 

	
1.
	
Purpose.

 

The purpose of the HANCOCK FABRICS, INC. 2001 STOCK INCENTIVE PLAN (the “Plan”) is to further the earnings of HANCOCK FABRICS, INC., a Delaware corporation, and its subsidiaries (collectively, the “Company”) by assisting the Company in attracting, retaining and motivating key employees and directors of high caliber and potential. The Plan provides for the award of long-term incentives to those key employees and directors who make substantial contributions to the Company by their loyalty, industry and invention.

 

	
2.
	
Administration.

 

The Plan shall be administered by the Stock Plan Committee (the “Committee”) selected by the Board of Directors of the Company (the “Board of Directors”) consisting solely of two or more members who are “outside directors” as described in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Except to the extent permitted under Section 6(c) hereof or Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “1934 Act”) (or any successor rule of similar import), each Committee member shall be ineligible to receive, and shall not have been, during the one-year period prior to appointment thereto, granted or awarded awards pursuant to this Plan or any other similar plan of the Company or any affiliate of the Company. Without limiting the foregoing, the Committee shall have full and final authority in its discretion to interpret the provisions of the Plan and to decide all questions of fact arising in its application. Subject to the provisions hereof, the Committee shall have full and final authority in its discretion to determine the employees and directors to whom awards shall be made under the Plan; to determine the type of awards to be made and the amount, size and terms and conditions of each such award; to determine the time when awards shall be granted; to determine the provisions of each agreement evidencing an award; and to make all other determinations necessary or advisable for the administration of the Plan.

 

	
3.
	
Stock Subject to the Plan.

 

The Company may grant awards under the Plan with respect to not more than a total of 8,800,000 shares of $.01 par value common stock of the Company (the “Shares”), (subject to adjustment as provided in Section 17, below). Such Shares may be authorized and unissued Shares or treasury Shares. Except as otherwise provided herein, if, for any reason, any Shares awarded or subject to purchase under the Plan are not delivered or purchased, or are reacquired by the Company, for reasons including, but not limited to, a forfeiture of Restricted Stock or termination, expiration or cancellation of an Option, Stock Appreciation Right, or Restricted Stock Units (“Returned Shares”), such Returned Shares shall not be charged against the aggregate number of Shares available for issuance pursuant to awards under the Plan and shall again be available for issuance pursuant to an award under the Plan.

 

 

1

 

 

	
4.
	
Eligibility to Receive Awards.

 

Persons eligible to receive awards under the Plan shall be limited to those officers, other key employees and directors of the Company who are in positions in which their decisions, actions and counsel have a significant impact upon the profitability and success of the Company (but excluding members of the Committee, except as provided in Section 6(c)).

 

	
5.
	
Form of Awards.

 

Awards may be made from time to time by the Committee in the form of stock options (“Options”) to purchase Shares, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”) or any combination of the above. Options shall be limited to Options which do not qualify (“Nonqualified Stock Options”) as incentive stock options within the meaning of Section 422(b) of the Code.

 

	
6.
	
Options and SARs.

 

	 	
(a)
	
Options for the purchase of Shares shall be evidenced by written agreements in such form not inconsistent with the Plan as the Committee shall approve from time to time; provided that the maximum number of Options and SARs in the aggregate which may be granted to any one grantee during any twelve-month period is 100,000 (except that (i) the Committee in its discretion may exceed such limitation as to executive officers of the Company and (ii) such limitation shall be adjusted pursuant to Section 17 below). Such agreement shall contain the terms and conditions applicable to the Options, including in substance the following terms and conditions:

 

	 	
(i)
	
Number of Shares. Each Option agreement shall identify the Options represented as Nonqualified Stock Options, and shall set forth the number of Shares subject to the Option (as adjusted pursuant to Section 17, below).

 

	 	
(ii)
	
Option Price. The Option exercise price to be paid by the optionee to the Company for each Share purchased upon the exercise of an Option shall be determined in good faith by the Committee, but shall in no event be less than 100 percent of the fair market value per Share on the date the Option is granted, as determined in good faith by the Committee. Notwithstanding anything herein to the contrary, the Committee shall not reprice any Options to a lower exercise price at any time during the term of any Option granted under this Plan (except as provided in Section 17).

 

	 	
(iii)
	
Vesting and Exercise Term. Each Option agreement shall state the period or periods of time within which the Option may be exercised, in whole or in part, as determined by the Committee and subject to such terms and conditions as are prescribed for such purpose by the Committee, provided that no Option shall be exercisable, except as provided in Section 15 or in the event of Retirement (as defined below), death or Disability (as defined below), any more rapidly than from (A) the first anniversary of the date of grant thereof, to the extent of 25% of the Shares covered thereby, (B) the thirteenth month from the date of grant thereof, and each additional month thereafter, to the extent of an additional 1/36th of the Shares covered thereby, provided that, effective for grants of Options made on or after April 16, 2009 each Option agreement shall state the period or periods of time within which the Option may be exercised, in whole or in part, as determined by the Committee and subject to such terms and conditions as are prescribed for such purpose by the Committee. The Committee, in its discretion, may provide in the Option agreement (or at the time of the Optionee’s termination of employment) that the Option shall become vested and immediately exercisable, in whole or in part, in the event of the grantee’s Retirement, death or Disability (or in one or more of such events). Notwithstanding the foregoing, no Option shall be exercisable after seven years from the date of grant.

 

 

2

 

 

	 	
(iv)
	
Payment for Shares. The purchase price of the Shares with respect to which an Option is exercised shall be payable in full at the time of exercise in cash, or Shares at fair market value (i.e., in either a “net” exercise, a “cashless” exercise or attestation of ownership of Shares), or a combination thereof, as the Committee may determine and all subject to such terms and conditions as may be prescribed by the Committee for such purpose. If the purchase price is paid by tendering Shares, the Committee in its discretion may grant the optionee a new Option for the number of Shares used to pay the purchase price.

 

	 	
(v)
	
Exercise Rights Upon Termination. In the event of Termination (as defined below) of an optionee’s status as an employee or director of the Company for any cause other than Retirement, death or Disability, all unexercised Options shall terminate immediately unless otherwise specified in the Option agreement or unless the Committee shall determine otherwise. As used herein, “Termination” means, (i) in the case of an employee, the cessation of the grantee’s employment by the Company for any reason, and (ii) in the case of a director, the cessation of the grantee’s service as a director of the Company; and “Terminates” has the corresponding meaning. As used herein, “Retirement” means (in the case of an employee) (A) for grants made prior to January 30, 2011, termination of employment under circumstances entitling the participant to elect immediate payment of retirement benefits under the Hancock Fabrics, Inc. Consolidated Retirement Plan (“Retirement Plan”) or any successor plan (or if the grantee was not a participant in the Retirement Plan, the grantee had satisfied the same age, service and other conditions as would be required to receive immediate payment of benefits under the Retirement Plan) and (B) for grants made on or after January 30, 2011, Retirement shall be defined as set forth on Appendix A attached hereto. In the case of a director, Retirement shall have the same meaning as Termination or Terminates. As used herein, “Disability” means the grantee’s failure to return to full-time employment duties immediately after the grantee has exhausted the short term disability benefits under the then applicable short term disability policy or procedures of the Company, and “Disabled” has the corresponding meaning. In the event that an optionee Retires, dies or becomes Disabled prior to the expiration of his Option and without having fully exercised his Option, the optionee or his Beneficiary (as defined below) shall have the right to exercise the part of the Option that is vested at Termination during its term within a period of (i) one year after Termination due to Retirement, death or Disability, or (ii) one year after death if death occurs either within one year after Termination due to Retirement or Disability to the extent that the Option was exercisable at the time of death or Termination, or within such other period, and subject to such terms and conditions, as may be specified by the Committee. As used herein, “Beneficiary” means the person or persons designated in writing by the grantee as his Beneficiary with respect to an award under the Plan; or, in the absence of an effective designation or if the designated person or persons predecease the grantee, the grantee’s Beneficiary shall be the person or persons who acquire by bequest or inheritance the grantee’s rights in respect of an award. In order to be effective, a grantee’s designation of a Beneficiary must be on file with the Committee before the grantee’s death, but any such designation may be revoked and a new designation substituted therefor at any time before the grantee’s death.

 

 

3

 

 

	 	
(vi)
	
Nontransferability. Except as provided in Section 13(b), Options granted under the Plan shall not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or by the laws of descent and distribution. Except as provided in Section 13(b), during the lifetime of the optionee the Option is exercisable only by the optionee.

 

(b)     Stock Appreciation Rights (SARs) may be granted to an eligible employee or director in the discretion of the Committee. A SAR shall entitle the holder, within the specified period (which may not exceed 7 years), to exercise the SAR and receive in exchange therefor a payment having an aggregate value equal to the amount by which the fair market value of a Share exceeds the exercise price, times the number of Shares with respect to which the SAR is exercised. The exercise price for a SAR shall not be less than 100% of the fair market value of a Share on the date the SAR is granted. SARs granted under the Plan shall be exercisable at such times and shall be subject to such restrictions and conditions as the Committee shall in each instance approve, including conditions related to continuing employment, which need not be the same for each grant or each grantee. The Committee may provide in the SAR agreement for exercise rights upon termination that are the same as those provided for Options in Section 6(a)(v) above. SARs shall not be transferable and shall be subject to the same transferability restrictions as Options. The Committee shall have sole discretion to determine in each Agreement whether the payment with respect to the exercise of a SAR will be in the form of all cash, all Shares, or any combination thereof. If payment is to be made in Shares, the number of Shares shall be determined based on the fair market value of a Share on the date of exercise. If the Committee elects to make full payment in Shares, no fractional Shares shall be issued and cash payments shall be made in lieu of fractional shares. The Committee shall have sole discretion as to the timing of any payment made in cash or Shares, or a combination thereof, upon exercise of SARs. Payment may be made in a lump sum, or in annual installments in accordance with such rules as the Committee may establish.

 

 

4

 

 

	 	
(c)
	
Grants to Nonemployee Directors. Notwithstanding any other provision of the Plan, the grant of Options, SARs, RSUs and/or restricted stock hereunder to directors who are not also employees of the Company (“Nonemployee Directors”) shall be subject to the following terms and conditions:

 

	 	
(i)
	
The Nonemployee Directors of the Company installed pursuant to the Company’s Plan of Reorganization approved on August 1, 2008, shall receive an initial grant of 50,000 Shares of restricted stock (granted at August 4, 2008), vesting to the extent of 50% of the shares so granted on the first anniversary of the date of grant, and 25% and 25% on the successive second and third such anniversary dates. Subsequent grants of awards to Nonemployee Directors may be made at the discretion of the Compensation Committee, subject to any limitations under Section 16 of the Securities Exchange Act of 1934.

 

	 	
(ii)
	
Each Nonemployee Director of the Company may elect annually (at the time of his initial election and subsequently prior to the annual meeting of stockholders for the election of directors), in advance at such time as may be designated by the Committee, to receive all or a portion of his compensation for services rendered as a Nonemployee Director in Shares of restricted stock issued under this Plan in lieu of cash, which Shares shall be granted at the time of such annual election, vesting to the extent of 1/12th of the shares so awarded on the same date of each subsequent month.

 

	 	
(iii)
	
The exercise price of Shares subject to an Option or SAR granted to Nonemployee Directors and the price used to calculate the number of Shares of restricted stock to be issued in lieu of cash consideration under this paragraph 6(c) shall be equal to 100 percent of the fair market value of such Shares on the date the Option or SAR is granted or the compensation would otherwise have been paid in cash, all as determined by the Committee.

 

	 	
(iv)
	
Except as provided in Section 15, each Option or SAR granted to Nonemployee Directors under this paragraph 6(c) shall not be exercisable until one year after the date of grant;

 

	 	
(v)
	
Unless otherwise provided in the Plan, all provisions with respect to the terms of Nonqualified Stock Options and SARs hereunder shall be applicable to Options or SARs granted to Nonemployee Directors under this Section 6(c).

 

 

5

 

 

	 	
(vi)
	
The grants described in this Section 6(c) shall constitute the only awards under the Plan permitted to be made to Nonemployee Directors.

 

	
7.
	
Restricted Stock Awards; Restricted Stock Units.

 

	 	
(a)
	
Restricted stock awards under the Plan shall consist of Shares free of any purchase price, or for such purchase price as may be established by the Committee, restricted against transfer, subject to forfeiture, and subject to such other terms and conditions (including attainment of performance objectives) as may be determined by the Committee. Shares of restricted stock issued to Nonemployee Directors shall be governed by Section 6(c) above if that section is inconsistent with this Section 7(a). Restricted stock shall be evidenced by written restricted stock agreements in such form not inconsistent with the Plan as the Committee shall approve from time to time, which agreement shall contain the terms and conditions applicable to such awards, including in substance the following terms and conditions:

 

	 	
(i)
	
Restriction Period. Restrictions shall be imposed for such period or periods as may be determined by the Committee. The Committee, in its discretion, may provide in the agreement circumstances under which the restricted stock shall become immediately transferable and nonforfeitable, or under which the restricted stock shall be forfeited, provided that no restricted stock award shall become immediately transferable and nonforfeitable, except as provided in Section 15 or unless provided in the agreement in the event of Retirement, death or Disability, any more rapidly than from (i) the first anniversary of the date of grant thereof, to the extent of 50% of the Shares covered thereby, (ii) the second anniversary of the date of grant thereof, to the extent of an additional 25% of the Shares covered thereby, and (iii) the third anniversary of the date of grant thereof, to the extent of an additional 25% of the Shares covered thereby.

 

	 	
(ii)
	
Restrictions Upon Transfer. Restricted stock and the right to vote such Shares and to receive dividends thereon, may not be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered, except as herein provided, during the restriction period applicable to such Shares. Notwithstanding the foregoing, and except as otherwise provided in the Plan, the grantee shall have all of the other rights of a stockholder, including, but not limited to, the right to receive dividends and the right to vote such Shares. Any right to receive dividends shall be limited to a right to receive such dividends at the same time and in the same amount as dividends which are paid to holders of unrestricted shares of capital stock of the Company.

 

 

6

 

 

	 	
(iii)
	
Certificates. A certificate or certificates representing the number of restricted Shares granted shall be registered in the name of the grantee. The Committee, in its sole discretion, shall determine when the certificate or certificates shall be delivered to the grantee (or, in the event of the grantee’s death, to his Beneficiary), may provide for the holding of such certificate or certificates in escrow or in custody by the Company or its designee pending their delivery to the grantee or Beneficiary, and may provide for any appropriate legend to be borne by the certificate or certificates.

 

	 	
(iv)
	
Lapse of Restrictions. The restricted stock agreement shall specify the terms and conditions upon which any restriction upon restricted stock awarded under the Plan shall expire, lapse, or be removed, as determined by the Committee. Upon the expiration, lapse, or removal of such restrictions, Shares free of the restrictive legend shall be issued to the grantee or his legal representative.

 

(b)           Awards of Restricted Stock Units (RSUs) may be made to eligible employees in accordance with the following terms and conditions: 

 

	 	
(i)
	
The Committee, in its discretion, shall determine the number of RSUs to grant to a grantee, the restriction period and other terms and conditions of the award, including whether the award will be paid in cash, Shares or a combination of the two and the time when the award will be payable (i.e., at vesting, termination of employment or another date).

 

	 	
(ii)
	
RSUs shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated.

 

	 	
(iii)
	
Awards of RSUs shall be subject to the same terms as are applicable to awards of restricted stock under Section 7(a); provided, however, a grantee to whom RSUs are awarded has no rights as a shareholder with respect to the Shares represented by the RSUs unless and until the Shares are actually delivered to the grantee; provided further, however, RSUs may have dividend equivalent rights if provided for by the Committee which may be subject to the same terms and conditions governing dividends and distributions applicable to restricted stock awards under Section 7(a)with the exception that in no event shall RSUs possess voting rights.

 

	 	
(iv)
	
The RSU agreement shall set forth the terms and conditions that shall apply upon the termination of the grantee’s employment with the Company (including a forfeiture of RSUs for which the restrictions have not lapsed upon Participant’s ceasing to be employed) as the Committee may, in its discretion, determine at the time the award is granted.

 

 

7

 

 

	
8.
	
General Restrictions.

 

Each award under the Plan shall be subject to the requirement that if at any time the Company shall determine that (i) the listing, registration or qualification of the Shares subject or related thereto upon any securities exchange or under any state or federal law, or (ii) the consent or approval of any regulatory body, or (iii) an agreement by the recipient of an award with respect to the disposition of Shares, or (iv) the satisfaction of withholding tax or other withholding liabilities is necessary or desirable as a condition of or in connection with the granting of such award or the issuance or purchase of Shares thereunder, such award shall be consummated in whole or in part only if such listing, registration, qualification, consent, approval, agreement, or withholding shall have been effected or obtained on terms acceptable to the Company. Any such restriction affecting an award shall not extend the time within which the award may be exercised; and neither the Company nor its directors or officers nor the Committee shall have any obligation or liability to the grantee or to a Beneficiary with respect to any Shares with respect to which an award shall lapse or with respect to which the grant, issuance or purchase of Shares shall not be effected, because of any such restriction.

 

	
9.
	
Single or Multiple Agreements.

 

Multiple awards, multiple forms of awards, or combinations thereof may be evidenced by a single agreement or multiple agreements, as determined by the Committee.

 

	
10.
	
Rights of the Shareholder.

 

The recipient of any award under the Plan shall have no rights as a stockholder, except as provided in Section 7(a), with respect thereto unless and until certificates for Shares are issued to him, and the issuance of Shares shall confer no retroactive right to dividends.

 

	
11.
	
Rights to Terminate Employment.

 

Nothing in the Plan or in any agreement entered into pursuant to the Plan shall confer upon any person the right to continue in the employment of the Company or to serve as a director, or affect any right which the Company may have to terminate the employment or directorship of such person.

 

	
12.
	
Withholding.

 

Prior to the issuance or transfer of Shares under the Plan, the recipient shall remit to the Company an amount sufficient to satisfy any federal, state or local withholding tax requirements. The amount to be withheld shall be determined by the Company and shall be the based on the statutory requirements. The recipient may satisfy the withholding requirement in whole or in part by electing to have the Company withhold Shares having a value equal to the amount required to be withheld. The value of the Shares to be withheld shall be the fair market value, as determined by the Committee, of the stock on the date that the amount of tax to be withheld is determined (the “Tax Date”). Such election must be made prior to the Tax Date, must comply with all applicable securities law and other legal requirements, as interpreted by the Committee, and may not be made unless approved by the Committee, in its discretion.

 

 

8

 

 

	
13.
	
Non-Assignability.

 

	 	
(a)
	
Except as provided in Section 13(b), no award under the Plan shall be sold, assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered, other than by will or by the laws of descent and distribution, or by such other means as the Committee may approve. Except as provided in Section 13(b), or as otherwise provided herein, during the life of the recipient, such award shall be exercisable only by such person or by such person’s guardian or legal representative.

 

	 	
(b)
	
The Committee may, in its sole discretion from time to time, permit the assignment of any Nonqualified Stock Option to one or more of an optionee’s “Immediate Family” (as defined herein). As used herein, members of an optionee’s “Immediate Family” shall include only (i) persons who, at the time of transfer, are the optionee’s spouse or natural or adoptive lineal ancestors or descendants, and (ii) trusts established for the exclusive benefit of the optionee and/or one or more of the persons described in clause (i) of this Section 13(b).

 

	
14.
	
Non-Uniform Determinations.

 

The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and timing of such awards, the terms and provisions of such awards and the agreements evidencing same, and the establishment of values and performance targets) need not be uniform and may be made selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.

 

	
15.
	
Change In Control Provisions.

 

	 	
(a)
	
In the event of a Change in Control (as defined below), the Committee in its sole discretion may cause any Options or SARs awarded under the Plan to vest and the restrictions on restricted stock and RSUs granted under the Plan to lapse, all in accordance with terms determined by the Committee in such event, even though such determination is made after the date of award or grant (so long as such terms are not more restrictive than those contained in any prior agreement with the grantees relating to the affected awards). In addition, the Committee may provide in the award agreements issued pursuant to this Plan that some or all of the following acceleration and valuation provisions (provided that more restrictive provisions may be applicable in the discretion of the Committee) shall apply in the event of a Change in Control to the grantee, or to the grantee but only if such grantee is (i) involuntarily terminated upon a Change in Control as a direct result of the Change in Control or (ii) terminates his own employment for good reason (as defined in the agreement) upon a Change in Control (which determination of causation in (i) and (ii) is to be made by the Committee):

 

	 	(A)	Any Options or SARs awarded under the Plan not previously exercisable and vested shall become fully exercisable and vested.

 

 

9

 

 

	 	(B) 	Any restrictions and deferral limitations applicable to any restricted stock or RSUs to the extent not already vested under the Plan, shall lapse and such shares shall be deemed fully vested.
	 	 	 
	 	(C)  	The value of all outstanding Options, SARs or RSUs, and restricted stock, in each case to the extent vested, shall, unless otherwise determined by the Committee in its sole discretion at or after grant but prior to any Change in Control, be cashed out on the basis of the Change in Control Price (as defined) as of the date such Change in Control is determined to have occurred or such other date as the Committee may determine prior to the Change in Control.

  

	 	
(b)
	
As used herein, the term “Change in Control” means the occurrence of any of the following events, provided that, to the extent Section 409A is applicable, such event also constitutes a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company, each as defined for purposes of Section 409A of the Code:

 

	 	
(i)
	
Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”), is or becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of 50% or more of the total voting power of the then outstanding Voting Stock; provided, however, that the following events shall not constitute or result in a Change in Control: (A) any acquisition of Voting Stock directly from Company, (B) any acquisition of Voting Stock by Company, (C) any acquisition of Voting Stock by any employee benefit plan (or related trust, or any trustee or other fiduciary thereof in such capacity) sponsored or maintained by Company or any Subsidiary or (D) any acquisition of Voting Stock by any Person pursuant to a Business Combination that complies with clauses (A), (B) and (C) of subsection (iii) below;

 

	 	
(ii)
	
During any two-year period, individuals who, as of the beginning of such period, constitute the Board (the “Incumbent Board”) cease for any reason (other than death or disability) to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Company’s stockholders, was approved by a vote of at least a majority of the then Incumbent Directors (either by a specific vote or by approval of the proxy statement of Company in which such person is named as a nominee for director, without objection of Company, to such nomination) shall be considered as though such individual were an Incumbent Director, but excluding for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (as described in Rule 14a-12(c) of the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;

 

 

10

 

 

	 	
(iii)
	
Consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets, of Company (a “Business Combination”), unless, in each case, immediately following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Stock of Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns Company or all or substantially all of Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions relative to each other as their ownership, immediately prior to such Business Combination, of the Voting Stock of Company (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust, of any trustee or other fiduciary thereof in such capacity) sponsored or maintained by Company, any Subsidiary or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, voting securities representing 15% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the entity resulting from such Business Combination except to the extent such ownership existed prior to the Business Combination and (C) at least a majority of the members of the Board of the entity resulting from such Business Combination were Incumbent Directors at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

	 	
(iv)
	
Consummation by the Company of a plan of complete liquidation or dissolution of Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C) of subsection (iii) above;

 

	 	
(v)
	
For purposes of this section, “Voting Stock” means securities of the Company entitled to vote generally in the election of directors and “Subsidiary” means an entity in which the Company directly or indirectly beneficially owns 50% or more of the outstanding Voting Stock.

 

	 	
(c)
	
As used herein, the term “Change in Control Price” means, as to (b)(i) above, the average closing price per share as reported on the exchange on which the Shares are then traded during the 60 day period immediately preceding the occurrence of the Change in Control, or as to (b)(ii) above, the actual price paid in any transaction (or the weighted average price paid in the case of a combination of transactions) related to the Change in Control, in each case as determined by the Committee.

 

 

11

 

 

	
16.
	
Non-Competition Provision.

 

Unless the award agreement relating to an Option, SAR or RSU or restricted stock specifies otherwise, a grantee shall forfeit all unexercised, unearned and/or unpaid awards, including, but not by way of limitation, awards earned but not yet paid, all unpaid dividends and dividend equivalents, and all interest, if any, accrued on the foregoing, if the grantee, without the written consent of the Company, engages directly or indirectly in any manner or capacity as principal, agent, partner, officer, director, employee or otherwise, in any business or activity which is, in the opinion of the Committee, (i) competitive with the business conducted by the Company or any of its subsidiaries, or (ii) inimical to the best interests of the Company or any of its subsidiaries.

 

	
17.
	
Adjustments.

 

In the event of any change in the outstanding common stock of the Company, by reason of a stock dividend or distribution, recapitalization, merger, consolidation, reorganization, split-up, combination, exchange of Shares or the like, then equitable adjustments shall be made by the Committee, as it determines are necessary and appropriate, in the number of Shares which may be issued under the Plan, the number of Shares subject to outstanding awards, and the Option or SAR exercise price of each outstanding Option or SAR, in order to prevent dilution or enlargement of the rights of grantees, provided that any fractional Shares resulting from such adjustments shall be eliminated. Provided, however, that no change in the terms may provide the holder of Options or SARs with a direct or indirect reduction in the ratio of the Option or SAR exercise price to the fair market value of the Shares.

 

	
18.
	
Amendment.

 

The Board of Directors may terminate, amend, modify or suspend the Plan at any time, except that the Board shall not, without the authorization of the holders of a majority of Company’s voting securities, modify existing awards respecting the number of Shares, exercise price or extension of terms, issue new awards in exchange for the cancellation of outstanding awards, increase the maximum number of Shares which may be issued under the Plan (other than pursuant to Section 17 hereof), extend the last date on which awards may be granted under the Plan, extend the date on which the Plan expires, change the class of persons eligible to receive awards, or change the minimum Option or SAR price. In no event, however, shall the provisions of Section 6(c) be amended more often than once every six months, other than to comport with changes in the Code, the Employment Retirement Income Security Act of 1974, as amended, or the rules thereunder. No termination, modification, amendment or suspension of the Plan shall adversely affect the rights of any grantee or Beneficiary under an award previously granted, unless the grantee or Beneficiary shall consent; but it shall be conclusively presumed that any adjustment pursuant to Section 18 hereof does not adversely affect any such right.

 

	
19.
	
Effect on Other Plans.

 

Participation in this Plan shall not affect a grantee’s eligibility to participate in any other benefit or incentive plan of the Company. Any awards made pursuant to this Plan shall not be used in determining the benefits provided under any other plan of the Company unless specifically provided therein.

 

 

12

 

 

	
20.
	
Effective Date and Duration of the Plan.

 

The Plan was initially effective March 4, 2001 when adopted by the Board of Directors, and was subsequently approved by the holders of a majority of the Company’s voting securities. The Plan was amended in April 7, 2010 and approved by stockholders on June 8, 2010, to extend the term of the Plan until March 4, 2021. Unless it is sooner terminated in accordance with Section 18 hereof, the Plan shall remain in effect until all awards under the Plan have been satisfied by the issuance of Shares or payment of cash or have expired or otherwise terminated, but no awards shall be granted after March 4, 2021, provided that awards outstanding on March 4, 2021 shall remain outstanding in accordance with their terms.

 

	
21.
	
Unfunded Plan.

 

The Plan shall be unfunded, except to the extent otherwise provided in accordance with Section 7 hereof. Neither the Company nor any affiliate shall be required to segregate any assets that may be represented by Options and neither the Company nor any affiliate shall be deemed to be a trustee of any amounts to be paid under any stock option. Any liability of the Company or any affiliate to pay any grantee or Beneficiary with respect to an option shall be based solely upon any contractual obligations created pursuant to the provisions of the Plan; no such obligations will be deemed to be secured by a pledge or encumbrance on any property of the Company or an affiliate.

 

	
22.
	
Governing Law.

 

The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the State of Delaware except to the extent that such laws may be superseded by any federal law.

 

 

13

 

 

	
23.
	
Section 409A Compliance. 

	 	
	 	The Plan shall at all times be interpreted and operated in good faith compliance in accordance with the requirements of Section 409A. Any action that may be taken (and, to the extent possible, any action actually taken) by the Company or the Committee shall not be taken (or shall be void and without effect), if such action violates the requirements of Section 409A. Any provision in the Plan that is determined to violate the requirements of Section 409A shall be void and without effect. In addition, any provision that is required to appear in the Plan in accordance with Section 409A that is not expressly set forth herein shall be deemed to be set forth herein, and the Plan shall be administered in all respects as if such provision were expressly set forth. The Company and the Committee shall have the authority to delay the commencement of all or a part of the payments to a grantee under the Plan  if the grantee is a “key employee” of the Company (as determined by the Company in accordance with procedures established by the Company that are consistent with Section 409A) to a date which is six months after the date of grantee’s termination of employment (and on such date the payments that would otherwise have been made during such six-month period shall be made), but only to the extent such delay is required under the provisions of Section 409A to avoid imposition of additional income and other taxes, provided that the Company and the Committee will take into account any transitional rules and exemption rules available under Section 409A.

 

ADOPTED BY THE BOARD OF DIRECTORS OF HANCOCK FABRICS, INC., ON THE 14th DAY OF JUNE 2001.

 

By:                                                                                           

 

As amended June 9, 2005, June 7, 2006, August 4, 2008, April 26, 2009, April 7, 2010, March 22, 2011, and May 1, 2015

 

 

14

 

 

APPENDIX A

 

DEFINITION OF RETIREMENT

 

 

 

 

 

For grants made under the Plan on or after January 30, 2011, a grantee is eligible for Retirement if he or she has satisfied the following age and service conditions at the date of Termination:

 

	 	
 
	
    Years

	 	
 
	
      Of

	 	
Age  
	
 Service*

	 	
55  
	
15 or more

	 	
56   
	
14 or more

	 	
57  
	
13 or more

	 	
58   
	
11 or more

	 	
59  
	
  9 or more

	 	
60     
	
  7 or more

	 	
61 
	
  7 or more

	 	
62 
	
  7 or more

	 	
63    
	
  7 or more

	 	
64
	
  7 or more

	 	
65 or older    
	
  7 or more

 

                                              

* A grantee’s Years of Service will be determined by the Committee, but will generally reflect the grantee’s Years of Service under the Company’s tax-qualified retirement plan.

 

 

15

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