Document:

exv4w5

Exhibit 4.5

HUNTINGTON INGALLS INDUSTRIES, INC.

NEWPORT NEWS OPERATIONS

SAVINGS (401(k)) PLAN FOR UNION ELIGIBLE EMPLOYEES

March 31, 2011 Restatement

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE 1 DEFINITIONS	 	 	2	 
	Section 1.01
	 	“Account”	 	 	2	 
	Section 1.02
	 	“Administrative Committee”	 	 	2	 
	Section 1.03
	 	“Basic Labor Agreement”	 	 	2	 
	Section 1.04
	 	“Before-Tax Contributions”	 	 	2	 
	Section 1.05
	 	“Beneficiary”	 	 	2	 
	Section 1.06
	 	“Benefits Office”	 	 	2	 
	Section 1.07
	 	“Board”	 	 	2	 
	Section 1.08
	 	“Catch-up Contributions”	 	 	2	 
	Section 1.09
	 	“Catch-up Eligible Participant”	 	 	2	 
	Section 1.10
	 	“Code”	 	 	2	 
	Section 1.11
	 	“Company	 	 	2	 
	Section 1.12
	 	“Compensation”	 	 	2	 
	Section 1.13
	 	“Controlled Group”	 	 	3	 
	Section 1.14
	 	“Controlled Group Member”	 	 	4	 
	Section 1.15
	 	“Disqualified Person”	 	 	4	 
	Section 1.16
	 	“Dividends”	 	 	4	 
	Section 1.17
	 	“Effective Date”	 	 	4	 
	Section 1.18
	 	“Employee”	 	 	4	 
	Section 1.19
	 	“Employer”	 	 	4	 
	Section 1.20
	 	“Employer Matching Contributions”	 	 	4	 
	Section 1.21
	 	“ERISA”	 	 	4	 
	Section 1.22
	 	“ESOP”	 	 	4	 
	Section 1.23
	 	“ESOP Account”	 	 	4	 
	Section 1.24
	 	“Highly Compensated Employee”	 	 	4	 
	Section 1.25
	 	“Hour of Service”	 	 	5	 
	Section 1.26
	 	“Huntington Ingalls Industries Fund”	 	 	5	 
	Section 1.27
	 	“Investment Committee”	 	 	5	 
	Section 1.28
	 	“Investment Funds”	 	 	5	 
	Section 1.29
	 	“Leased Employee”	 	 	5	 
	Section 1.30
	 	“Northrop Grumman Fund”	 	 	5	 
	Section 1.31
	 	“Normal Retirement Age”	 	 	5	 
	Section 1.32
	 	“Parent”	 	 	5	 
	Section 1.33
	 	“Participant”	 	 	5	 
	Section 1.34
	 	“Period of Severance”	 	 	6	 
	Section 1.35
	 	“Plan”	 	 	6	 
	Section 1.36
	 	“Plan Year”	 	 	6	 
	Section 1.37
	 	“Qualified Plan”	 	 	6	 
	Section 1.38
	 	“Qualifying Securities”	 	 	6	 
	Section 1.39
	 	“Retirement Account Contribution”	 	 	6	 
	Section 1.40
	 	“Service”	 	 	6	 
	Section 1.41
	 	“Special Contribution”	 	 	6	 
	Section 1.42
	 	“Spin-Off”	 	 	6	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 1.43
	 	“Total Disability”	 	 	6	 
	Section 1.44
	 	“Trust Agreement”	 	 	6	 
	Section 1.45
	 	“Trust Fund”	 	 	6	 
	Section 1.46
	 	“Trustee”	 	 	6	 
	Section 1.47
	 	“Union”	 	 	6	 
	Section 1.48
	 	“Valuation Date”	 	 	7	 
	Section 1.49
	 	“Vested”	 	 	7	 
	Section 1.50
	 	“Wage Reduction Agreement”	 	 	7	 
	Section 1.51
	 	“Year of Service”	 	 	7	 
	 
	 	 	 	 	 	 
	ARTICLE 2 PARTICIPATION	 	 	9	 
	Section 2.01
	 	Eligibility to Participate	 	 	9	 
	Section 2.02
	 	Commencement of Participation	 	 	9	 
	Section 2.03
	 	Exclusions from Participation	 	 	9	 
	Section 2.04
	 	Reemployment Provisions	 	 	9	 
	Section 2.05
	 	Veterans’ Rights	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE 3 BEFORE-TAX CONTRIBUTIONS AND CATCH-UP CONTRIBUTIONS	 	 	11	 
	Section 3.01
	 	Amount of Before-Tax Contributions	 	 	11	 
	Section 3.02
	 	Catch-Up Contributions	 	 	11	 
	Section 3.03
	 	Payments to Trustee	 	 	11	 
	Section 3.04
	 	Changes in Contributions	 	 	11	 
	Section 3.05
	 	Suspension and Resumption of Contributions	 	 	11	 
	Section 3.06
	 	Excess Deferrals	 	 	12	 
	Section 3.07
	 	Excess Before-Tax Contribution	 	 	13	 
	Section 3.08
	 	Monitoring Procedures	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 4 EMPLOYER CONTRIBUTIONS	 	 	15	 
	Section 4.01
	 	Employer Matching Contributions	 	 	15	 
	Section 4.02
	 	Special Contributions	 	 	16	 
	Section 4.03
	 	Retirement Account Contributions	 	 	17	 
	Section 4.04
	 	Vesting	 	 	18	 
	Section 4.05
	 	Contributions for Certain Periods of Qualified Military Service	 	 	18	 
	 
	 	 	 	 	 	 
	ARTICLE 5 LOANS	 	 	20	 
	Section 5.01
	 	Availability of Loans	 	 	20	 
	Section 5.02
	 	Amount of Loan	 	 	20	 
	Section 5.03
	 	Funding the Loan	 	 	20	 
	Section 5.04
	 	Nondiscrimination	 	 	20	 
	Section 5.05
	 	Security	 	 	21	 
	Section 5.06
	 	Source and Application of Funds	 	 	21	 
	Section 5.07
	 	Plan Loans for Owner-Employees and Shareholder Employees	 	 	22	 
	 
	 	 	 	 	 	 
	ARTICLE 6 INVESTMENTS	 	 	23	 
	Section 6.01
	 	In General	 	 	23	 
	Section 6.02
	 	Investment Fiduciary	 	 	23	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 6.03
	 	The Investment Committee	 	 	23	 
	Section 6.04
	 	Alternate Members	 	 	23	 
	Section 6.05
	 	Actions by the Investment Committee	 	 	24	 
	Section 6.06
	 	Investment Powers and Responsibilities	 	 	24	 
	Section 6.07
	 	Liability and Indemnity	 	 	25	 
	Section 6.08
	 	Investment Funds	 	 	25	 
	Section 6.09
	 	Account	 	 	25	 
	Section 6.10
	 	Reports	 	 	26	 
	Section 6.11
	 	Valuation of Investment Funds	 	 	26	 
	Section 6.12
	 	Selection of Investment Funds	 	 	26	 
	Section 6.13
	 	Change of Investment Funds	 	 	27	 
	Section 6.14
	 	Directions to Trustee	 	 	27	 
	Section 6.15
	 	No Guarantee	 	 	27	 
	Section 6.16
	 	Huntington Ingalls Industries Stock	 	 	27	 
	Section 6.17
	 	Northrop Grumman Fund	 	 	27	 
	 
	 	 	 	 	 	 
	ARTICLE 7 DISTRIBUTIONS TO PARTICIPANTS	 	 	29	 
	Section 7.01
	 	Distributions Upon Termination	 	 	29	 
	Section 7.02
	 	In-service Withdrawal of Contributions	 	 	30	 
	Section 7.03
	 	Reemployment of Participant	 	 	30	 
	Section 7.04
	 	Valuation of Accounts	 	 	30	 
	Section 7.05
	 	Restrictions on Distributions	 	 	30	 
	Section 7.06
	 	Rollover Distributions	 	 	30	 
	Section 7.07
	 	Military Service Distributions	 	 	31	 
	Section 7.08
	 	Annuity Form of Distribution	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE 8 DISTRIBUTIONS TO BENEFICIARIES	 	 	33	 
	Section 8.01
	 	Designation of Beneficiary	 	 	33	 
	Section 8.02
	 	Consent of Spouse Required	 	 	33	 
	Section 8.03
	 	Failure to Designate Beneficiary	 	 	33	 
	Section 8.04
	 	Distributions to Beneficiaries	 	 	33	 
	Section 8.05
	 	Survivor Benefits Related to Military Service	 	 	33	 
	 
	 	 	 	 	 	 
	ARTICLE 9 ADMINISTRATION OF THE PLAN AND TRUST AGREEMENT	 	 	34	 
	Section 9.01
	 	In General	 	 	34	 
	Section 9.02
	 	Plan Administrator	 	 	34	 
	Section 9.03
	 	The Administrative Committee	 	 	34	 
	Section 9.04
	 	Resignation of Administrative Committee Members	 	 	34	 
	Section 9.05
	 	Conduct of Business	 	 	34	 
	Section 9.06
	 	Quorum	 	 	34	 
	Section 9.07
	 	Voting	 	 	34	 
	Section 9.08
	 	Records and Reports of the Administrative Committee	 	 	35	 
	Section 9.09
	 	Powers of the Administrative Committee	 	 	35	 
	Section 9.10
	 	Allocation or Delegation of Duties and Responsibilities	 	 	36	 
	Section 9.11
	 	Procedure for the Allocation or Delegation of Fiduciary Duties	 	 	36	 
	Section 9.12
	 	Expenses of the Plan	 	 	36	 
	Section 9.13
	 	Indemnification	 	 	37	 

iii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 9.14
	 	Extensions of Time Periods	 	 	37	 
	Section 9.15
	 	Claims and Appeals; Time Limitations; Exhaustion of Remedies	 	 	37	 
	Section 9.16
	 	Qualified Domestic Relations Orders	 	 	37	 
	Section 9.17
	 	Amendments	 	 	37	 
	Section 9.18
	 	Payment to Minors or Persons Under Legal Disability	 	 	38	 
	Section 9.19
	 	Trust Fund	 	 	38	 
	Section 9.20
	 	Electronic Media	 	 	38	 
	 
	 	 	 	 	 	 
	ARTICLE 10 LIMITATIONS ON ALLOCATIONS TO PARTICIPANTS’ ACCOUNTS	 	 	39	 
	Section 10.01
	 	Maximum Allocation	 	 	39	 
	Section 10.02
	 	Elective Deferrals — Contribution Limitation	 	 	40	 
	 
	 	 	 	 	 	 
	ARTICLE 11 RESTRICTIONS ON DISTRIBUTIONS TO PARTICIPANTS AND BENEFICIARIES	 	 	41	 
	Section 11.01
	 	Priority over Other Distribution Provisions	 	 	41	 
	Section 11.02
	 	Restrictions on Commencement of Distributions	 	 	41	 
	Section 11.03
	 	Minimum Distribution Requirements	 	 	41	 
	Section 11.04
	 	Delayed Payments	 	 	45	 
	 
	 	 	 	 	 	 
	ARTICLE 12 ADOPTION OF PLAN BY CONTROLLED GROUP MEMBERS	 	 	47	 
	Section 12.01
	 	Adoption Procedure	 	 	47	 
	Section 12.02
	 	Effect of Adoption by Controlled Group Member	 	 	47	 
	 
	 	 	 	 	 	 
	ARTICLE 13 AMENDMENT OF THE PLAN	 	 	48	 
	Section 13.01
	 	Right to Amend Plan	 	 	48	 
	Section 13.02
	 	Amendment Procedure	 	 	48	 
	Section 13.03
	 	Effect on Employers	 	 	48	 
	 
	 	 	 	 	 	 
	ARTICLE 14 TERMINATION, PARTIAL TERMINATION AND COMPLETE DISCONTINUANCE OF CONTRIBUTIONS	 	 	49	 
	Section 14.01
	 	Continuance of Plan	 	 	49	 
	Section 14.02
	 	Disposition of the Trust Fund	 	 	49	 
	Section 14.03
	 	Withdrawal by An Employer	 	 	49	 
	 
	 	 	 	 	 	 
	ARTICLE 15 MISCELLANEOUS	 	 	51	 
	Section 15.01
	 	Reversion Prohibited	 	 	51	 
	Section 15.02
	 	Bonding Insurance and Indemnity	 	 	51	 
	Section 15.03
	 	Merger, Consolidation or Transfer of Assets	 	 	52	 
	Section 15.04
	 	Spendthrift Clause	 	 	52	 
	Section 15.05
	 	Rights of Participants	 	 	52	 
	Section 15.06
	 	Gender, Tense and Headings	 	 	52	 
	Section 15.07
	 	Governing Law	 	 	53	 
	 
	 	 	 	 	 	 
	APPENDIX A ACQUISITION OF NEWPORT NEWS SHIPBUILDING INC.	 	 	54	 
	Section A.01
	 	Historical Reference	 	 	54	 

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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section A.02
	 	In General	 	 	54	 
	Section A.03
	 	Acquisition of Newport News Shipbuilding, Inc.	 	 	54	 
	Section A.04
	 	Coverage	 	 	55	 
	Section A.05
	 	Service With the Northrop Grumman Group	 	 	55	 
	Section A.06
	 	Compensation	 	 	55	 
	Section A.07
	 	Nonduplication	 	 	55	 
	Section A.08
	 	Termination of Employment	 	 	55	 
	 
	 	 	 	 	 	 
	APPENDIX B HUNTINGTON INGALLS INDUSTRIES, INC. NEWPORT NEWS OPERATIONS EMPLOYEE STOCK OWNERSHIP PLAN	 	 	57	 
	 
	 	 	 	 	 	 
	ARTICLE B1 GENERAL PROVISIONS	 	 	57	 
	Section B1.01
	 	Single Plan	 	 	57	 
	Section B1.02
	 	Plan Year	 	 	57	 
	Section B1.03
	 	Application of Plan Provisions	 	 	57	 
	Section B1.04
	 	Form of Contributions	 	 	57	 
	Section B1.05
	 	Vesting	 	 	57	 
	Section B1.06
	 	Forfeitures	 	 	57	 
	Section B1.07
	 	Section 415 Limitations	 	 	57	 
	Section B1.08
	 	Non-Allocation Rules	 	 	57	 
	 
	 	 	 	 	 	 
	ARTICLE B2 COMPANY CONTRIBUTIONS	 	 	58	 
	Section B2.01
	 	Company Contributions	 	 	58	 
	 
	 	 	 	 	 	 
	ARTICLE B3 DIVIDENDS	 	 	59	 
	Section B3.01
	 	In General	 	 	59	 
	Section B3.02
	 	Allocation of Dividends	 	 	59	 
	Section B3.03
	 	Excess Dividends	 	 	59	 
	Section B3.04
	 	Conditioned on Deductibility	 	 	59	 
	Section B3.05
	 	Direct Distribution of Dividends	 	 	59	 
	Section B3.06
	 	Meaning of “Participant”	 	 	59	 
	 
	 	 	 	 	 	 
	ARTICLE B4 VOTING RIGHTS AND TENDER OFFERS	 	 	60	 
	Section B4.01
	 	In General	 	 	60	 
	Section B4.02
	 	Voting of Qualifying Securities	 	 	60	 
	Section B4.03
	 	Tender Offers, etc	 	 	61	 
	 
	 	 	 	 	 	 
	ARTICLE B5 INVESTMENTS	 	 	65	 
	Section B5.01
	 	Huntington Ingalls Industries Fund	 	 	65	 
	Section B5.02
	 	Primary Investment	 	 	65	 
	 
	 	 	 	 	 	 
	ARTICLE B6 DIVERSIFICATION	 	 	66	 
	Section B6.01
	 	In General	 	 	66	 
	Section B6.02
	 	Eligibility	 	 	66	 
	Section B6.03
	 	Diversification Election	 	 	66	 
	Section B6.04
	 	Timing of Election	 	 	66	 

v

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE B7 DISTRIBUTIONS	 	 	67	 
	Section B7.01
	 	Application	 	 	67	 
	Section B7.02
	 	Timing of Distributions	 	 	67	 
	Section B7.03
	 	Form of Distributions	 	 	67	 
	Section B7.04
	 	Condition of Distributions	 	 	67	 
	 
	 	 	 	 	 	 
	ARTICLE B8 TERMINATION	 	 	68	 
	Section B8.01
	 	Termination	 	 	68	 

vi

 

PREAMBLE

     Prior to March 31, 2011, Northrop Grumman Shipbuilding, Inc. (known prior to December 2, 2008
as Newport News Shipbuilding and Dry Dock Company) maintained the Plan, which was initially adopted
effective as of July 1, 1992. The Plan has been amended several times since then and is intended to
constitute a profit-sharing plan within the meaning of 26 C.F.R. Section 1.401-1(b)(1)(ii)
(notwithstanding the fact that contributions are made without regard to current or accumulated
profits) with both an employee stock ownership plan within the meaning of Code Section 4975(e)(7)
and a cash or deferred arrangement that meets the requirements of Code Section 401(k) and to
qualify under Code Section 401(a).

     The Plan was restated effective as of July 26, 1999, as of January 1, 2007, and again as of
January 1, 2010.

The Plan is hereby amended and restated effective as of March 31, 2011, and, as of such date, the
Plan is maintained by Huntington Ingalls Industries, Inc. under the EIN 90-0607005.

Background of Corporate Spin-Off

     In connection with Northrop Grumman Corporation’s (“Northrop”) spin-off of its shipbuilding
business, Northrop underwent an internal reorganization and incorporated Huntington Ingalls
Industries, Inc. (“HII, Inc.”) on August 4, 2010 as an indirect subsidiary of Northrop. HII, Inc.
is the parent of Huntington Ingalls Industries Company (the “Company”). HII, Inc. was spun-off
effective March 31, 2011 (the “Spin-Off”) pursuant to a Separation and Distribution Agreement,
dated March 31, 2011. Effective as of the Spin-Off, HII, Inc. is an independent, publicly traded
corporation which owns and operates the shipbuilding business previously owned and operated by
Northrop (through its direct and indirect subsidiaries). The Company is a wholly-owned subsidiary
of HII, Inc. Prior to the Spin-Off, Northrop’s EIN was 95-4840775. After the Spin-Off, Northrop’s
EIN will be 80-0640649.

     Words and phrases with initial capital letters used throughout the Plan are defined in Article
1.

1

 

Article 1

Definitions

     Section 1.01 “Account” means the records maintained by the Administrative Committee in
the manner provided in Article 6 to determine the interest of each Participant in the assets of the
Plan.

     Section 1.02 “Administrative Committee” means the committee described in Section 9.03.

     Section 1.03 “Basic Labor Agreement” means a collective bargaining agreement relating
to wages, hours, and working conditions between an Employer and a Union pursuant to which the Plan
is maintained.

     Section 1.04 “Before-Tax Contributions” means the contributions described in Section
3.01.

     Section 1.05 “Beneficiary” means the one or more persons or entities entitled to
receive distribution of a Participant’s interest in the Plan in the event of his death as provided
in Article 8.

     Section 1.06 “Benefits Office” means the Employee Benefits Office located at 4101
Washington Avenue, Newport News, Virginia 23607.

     Section 1.07 “Board” means the Board of Directors of the Parent.

     Section 1.08 “Catch-up Contributions” means the contributions made pursuant to Section
3.02 of the Plan and Section 414(v) of the Code.

     Section 1.09 “Catch-up Eligible Participant” means, with respect to a given calendar
year, each Participant who has attained age 50 or who will attain age 50 during such calendar year.

     Section 1.10 “Code” means the Internal Revenue Code of 1986, as amended.

     Section 1.11 “Company” Huntington Ingalls Industries Company and, with respect to a
duty allocated to the Company under the Plan, any entity or entities to which the Company has
delegated that duty. For historical reference, the term “Company” as used prior to the Spin-Off
means Northrop Grumman Shipbuilding, Inc. and its predecessors.

     Section 1.12 “Compensation” means the applicable straight time hourly rate of pay paid
to an Employee by the Employers, determined without regard to Sections 125 or 402(e)(3) of the
Code. Notwithstanding the foregoing, Compensation for any Plan Year in excess of $200,000, as
adjusted pursuant to Code Section 401(a)(17), shall not be taken into account.

     Effective January 1, 2005, the Compensation of Participants who are covered under the terms of
the Basic Labor Agreement between the Company and the United Steelworkers of America and its Local
8888, effective July 26, 2005 for Participants who are covered under the

2

 

International Union, Security, Police, and Fire Professionals of America and its Amalgamated
Local No. 451, and effective December 18, 2006 for the International Association of Fire Fighters
and its Local I-45, shall include, in addition to straight time earnings: overtime pay, vacation
pay (not including vacation pay-off), holiday pay, funeral pay, jury duty pay, military leave pay,
shift differential on straight time earnings, special wage additives, and awards and bonuses (e.g.,
Radcon, Master Shipbuilder, and OFI [“Opportunity for Improvement”] awards and bonuses). Effective
April 27, 2005, Compensation shall no longer include Master Shipbuilder or any similar awards or
bonuses that are grossed up.

     Prior to January 1, 2005, for participants who are covered under United Steelworkers of
America and its Local 8888, prior to July 25, 2005 for Participants who are covered under the
International Union, Security, Police, and Fire Professionals of America and its Amalgamated Local
No. 451, and prior to December 18, 2006 for Participants who are covered under the terms of the
International Association of Fire Fighters and its Local I-45, for purposes of determining
Before-Tax Contributions under Section 3.01, the elected Before-Tax Contributions of such
Participants shall be deducted from their actual payroll on a weekly basis. Such deduction shall be
determined using Compensation equal to the applicable hourly straight time earnings rate times a 40
hour workweek, whether or not the Participant actually works 40 hours per week, less than 40 hours
per week or greater than 40 hours per week. If the Participant’s actual payroll is not sufficient
to permit the deduction of the Before-Tax Contributions as so determined based on Compensation as
so determined, elected Before-Tax Contributions will be deducted from actual payroll to the maximum
extent possible in each such weekly period. Any elected Before-Tax Contributions that cannot be
deducted during any week based on such methodology shall not be deducted from such Participant’s
Compensation or contributed to the Plan during such week or any subsequent week.

     For Plan Years and limitation years beginning on and after January 1, 2001, for purposes of
Section 1.20 and Section 10.01 of the Plan, Compensation shall include elective amounts that are
not includible in the gross income of the Employee by reason of Code Section 132(f)(4). Such
amounts, however, will not be included in Compensation for purposes of determining the amount of a
Participant’s Before-Tax Contributions under Section 3.01 or Catch-up Contributions under Section
3.02 of the Plan.

     Effective as of January 1, 2008, Compensation shall not include any otherwise includible
amounts paid after the Participant’s termination of employment unless such amounts are described in
Section 1.415(c)-(2)(e)(3)(ii) of the Treasury Regulations or constitute unused accrued vacation or
sick leave described in Section 1.415(c)-2(e)(3)(iii)(A) of the Treasury Regulations, are
reportable as wages for income tax purposes on Internal Revenue Service Form W-2 and are paid by
the later of 21/2 months after termination of employment or the end of the Plan Year in which such
termination occurred.

     Section 1.13 “Controlled Group” means the Company and any and all other corporations,
trades, and businesses, the employees of which, together with employees of the Company, are
required by Code Section 414 to be treated as if they were employed by a single employer, but only
to the extent of the applicable requirements.

3

 

     Section 1.14 “Controlled Group Member” means each corporation or other trade or
business that is or was a member of the Controlled Group, but only during such period as it is or
was such a member.

     Section 1.15 “Disqualified Person” means a person who is a “disqualified person”
within the meaning of Code Section 4975(e)(2).

     Section 1.16 “Dividends” means those dividends on Qualifying Securities.

     Section 1.17 “Effective Date” means the first day of July, 1992, or such later date as
may be provided for certain Employees pursuant to a Basic Labor Agreement.

     Section 1.18 “Employee” means an individual who is reported on the payroll records of
a Controlled Group Member as a common law employee. This term does not include any other common law
employee or any Leased Employee. In particular, it is expressly intended that an individual not
treated as a common law employee by the Controlled Group Members on their payroll records be
excluded from Plan participation even if a court or administrative agency determines that the
individual is a common law employee.

     Section 1.19 “Employer” means the Company and any Controlled Group Member that adopts
the Plan pursuant to Article 12.

     Section 1.20 “Employer Matching Contributions” means the contributions described in
Section 4.01.

     Section 1.21 “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

     Section 1.22 “ESOP” means the Huntington Ingalls Industries, Inc. Newport News
Operations Employee Stock Ownership Plan, an employee stock ownership plan described in Section
4975(e)(7) of the Code, as set forth herein as Appendix B.

     Section 1.23 “ESOP Account” means the subaccount of a Participant’s Account under the
Plan to account for allocations, earnings and distributions with respect to the Participant under
the ESOP.

     Section 1.24 “Highly Compensated Employee” means, with respect to a Plan Year, any
Employee who during the preceding Plan Year:

     (a) was at any time a 5% owner (as defined in Code Section 416(i)(1)) of a Controlled
Group Member; or

     (b) received compensation (as defined in Code Section 414(q)(7)) from a Controlled
Group Member in excess of $80,000 (as adjusted under the Code).

     With respect to a Plan Year, the term “Highly Compensated Employee” also means (i) any
Employee who meets the requirements of paragraph (a) above during such Plan Year, and (ii) a former
Employee whose employment with the Controlled Group terminated prior to the

4

 

Plan Year and who was a Highly Compensated Employee for the Plan Year in which his employment
terminated or for any Plan Year ending on or after his 55th birthday.

     For the purposes of this Section, the term “compensation” shall mean the Employee’s
compensation for purposes of applying the Code Section 415 limitations, plus, if and to the extent
otherwise excluded, the Employee’s Before-Tax Contributions, Catch-up Contributions, elective or
salary reduction contributions pursuant to a cafeteria plan under Code Section 125, and elective
amounts that are not includible in the gross income of the Employee by reason of Code Section
132(f)(4), but subject to the limitation of Code Section 401(a)(17).

     The identification of Highly Compensated Employees under this Section shall be made in
accordance with the provisions of Section 414(q) of the Code and the regulations thereunder.

     Section 1.25 “Hour of Service” means each hour an Employee is directly or indirectly
paid or entitled to be paid for performing services for a Controlled Group Member, plus each hour
for which back pay has been either awarded or agreed to by the Controlled Group Member, credited in
accordance with the requirements of Labor Regulation Section 2530.200b-2.

     Section 1.26 “Huntington Ingalls Industries Fund” has the meaning set forth under the
ESOP.

     Section 1.27 “Investment Committee” means the committee described in Section 6.03.

     Section 1.28 “Investment Funds” means the Huntington Ingalls Industries Fund, the
Northrop Grumman Fund and the additional investment options designated by the Investment Committee
and described in Article 6.

     Section 1.29 “Leased Employee” means any individual who is not an Employee but
provides services to a Controlled Group Member (or a Controlled Group Member and “related persons”
under Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least
one (1) year, under an agreement between a Controlled Group Member and any other person and
performed under the primary direction or control of a Controlled Group Member.

     Section 1.30 “Northrop Grumman Fund” means an Investment Fund the purpose of which is
to invest in stock of Northrop Grumman Corporation.

     Section 1.31
“Normal Retirement Age” means age 62.

     Section 1.32
“Parent” means Huntington Ingalls Industries, Inc.

     Section 1.33 “Participant” means an Employee or former Employee who has met the
applicable eligibility requirements of Article 2, who has entered into a Wage Reduction Agreement,
received a Special Contribution or is eligible to receive a Retirement Account Contribution, and
who has not yet received a distribution of the entire amount of his or her interest in the Plan.

5

 

     Section 1.34 “Period of Severance” means the period beginning on a Participant’s
Severance Date and ending on the date the Employee returns to the service of an Employer and
completes an Hour of Service for the performance of duties.

     Section 1.35 “Plan” means the Huntington Ingalls Industries, Inc. Newport News
Operations Savings (401(k)) Plan for Union Eligible Employees, including the Huntington Ingalls
Industries, Inc. Newport News Operations Employee Stock Ownership Plan, the terms of which are set
forth herein as Appendix B as amended or restated from time to time.

     Section 1.36 “Plan Year” means the period with respect to which the records of the
Plan are maintained, which shall be the calendar year.

     Section 1.37 “Qualified Plan” means an employee benefit plan that is qualified under
Code Section 401(a).

     Section 1.38 “Qualifying Securities” means common stock issued by the Company (or a
Controlled Group Member) which is readily tradable on an established securities market.

     Section 1.39 “Retirement Account Contribution” means the contributions described in
Section 4.03.

     Section 1.40 “Service” means employment as an Employee of an Employer.

     Section 1.41 “Special Contribution” means a discretionary contribution described in
Section 4.02 made by a Controlled Group Member.

     Section 1.42 “Spin-Off” has the meaning set forth in the Preamble.

     Section 1.43 “Total Disability” means a determination by the Social Security
Administration that the Participant has a mental or physical condition that results in a total and
permanent disability and that, as a consequence, the Participant is entitled to receive disability
benefits under Title II of the federal Social Security Act, provided that such total and permanent
disability has continued for a period of at least six consecutive months and is expected, based
upon competent medical evidence, to be permanent.

     Section 1.44 “Trust Agreement” means the agreement or agreements with the Trustee
which establishes a Trust Fund to provide for the investment, reinvestment, administration, and
distribution of contributions made under the Plan and the earnings thereon, as amended from time to
time.

     Section 1.45 “Trust Fund” means the assets of the Plan held by the Trustee pursuant to
the Trust Agreement.

     Section 1.46 “Trustee” means the one or more individuals or organizations who have
entered into the Trust Agreement as trustee(s), and any duly appointed successor.

     Section 1.47 “Union” means the United Steelworkers of America and its Local No. 8888,
the International Association of Firefighters Local I-45, the International Union Security,

6

 

Police, and Fire Professionals of America (SPFPA) and Local Union 451, and any other unit of
Employees employed by an Employer and covered by a Basic Labor Agreement.

     Section 1.48 “Valuation Date” means each date with respect to which the Trustee
determines the fair market value of the assets comprising the Trust Fund or any portion thereof.
The Valuation Dates shall be each business day of the calendar year, and such other dates as may be
established from time to time by the Company. Without limitation, the Company may establish
different Valuation Dates for different purposes.

     Section 1.49 “Vested” means the nonforfeitable right of a Participant to receive some
portion or all of his or her Account attributable to Employer Matching Contributions, Special
Contributions and Retirement Account Contributions in accordance with the terms of Article 4 of the
Plan.

     Section 1.50 “Wage Reduction Agreement” means an arrangement made under the Plan
pursuant to which an Employee agrees to a reduction in his Compensation and his Employer agrees to
contribute to the Trust the amount so reduced as a Before-Tax Contribution or Catch-up
Contribution.

     Section 1.51 “Year of Service” means the period commencing on the Employee’s
Employment Commencement Date or, if applicable, Reemployment Commencement Date, and ending on the
Employee’s Severance Date. Notwithstanding the foregoing, any Years of Service ending prior to the
Employee’s 18th birthday shall be disregarded. In aggregating fractions of a month, 30
days shall be considered to be a period of one month, and in aggregating fractions of a year, 12
months shall equal a period of one (1) year. In determining an Employee’s Years of Service the
following definitions shall apply:

     (a) “Employment Commencement Date” is the first date on which an Employee performs an
Hour of Service for the Company.

     (b) “Reemployment Commencement Date” means the first date following an Employee’s
Severance Date on which an Employee again performs an Hour of Service for the Company.

     (c) “Severance Date” means the earlier of:

     (1) the date on which an Employee resigns, retires, dies or is released or
discharged; or

     (2) the later of (a) the first anniversary of the first day of the periods
described below or (b) the last day of the period described below during which an
Employee remains absent from service:

     (A) a period of layoff up to 18 months;

     (B) absence due to total (but not permanent) disability for the period
(up to 24 months) that the Employee is carried on the Employee roll as
determined by active or inactive status;

7

 

     (C) absence due to sickness and accident as long as the Employee is
eligible to receive sickness and accident benefits;

     (D) absence due to Company or Union leave; and

     (E) any period for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Company; or

     (3) The second anniversary of the first day of an Employee’s absence for
maternity or paternity leave, except that any period between the first and second
anniversaries of the first date of absence for a maternity or paternity leave is
not counted toward a Year of Service or a Period of Severance. A “maternity or
paternity leave” is an absence from work:

     (A) by reason of the pregnancy of the Employee;

     (B) by reason of the birth of the child of the Employee;

     (C) by reason of the placement of the child with the Employee in
connection with the adoption of such child by such Employee; or

     (D) for purposes of caring for such child for a period beginning
immediately following such birth or placement.

     Employment with any Controlled Group Member shall be considered as if it were employment with
the Company for purposes of this Section. Employment by an employer which maintained a predecessor
plan maintained by the Controlled Group Member shall be considered as if it were employment with
the Company for purposes of this Section.

8

 

Article 2

Participation

     Section 2.01 Eligibility to Participate. Each Employee who was a Participant on March
31, 2011, will continue as a Participant. Each other Employee shall become eligible on the first
date following the date he has completed either (A) 90 days of continuous Service or (B) 1,000
Hours of Service during a one-year period that begins on his first day of Service, and succeeding
anniversaries thereof, if he is then employed by an Employer pursuant to a Basic Labor Agreement.

     Section 2.02 Commencement of Participation. An Employee who becomes eligible to
participate under Section 2.01 will be notified of his eligibility by the Administrative Committee.
Any Employee so notified may enroll as a Participant in the Plan on any date that follows the date
of his initial eligibility by following the procedures established by the Administrative Committee
for this purpose and then in effect. Notwithstanding the preceding sentence, an Employee shall be
automatically enrolled in the Plan for purposes of receiving Retirement Account Contributions in
accordance with the terms of Section 4.03 as of the first payroll period after he or she becomes
eligible to participate under Section 2.01. An Employee who is eligible to share in a Special
Contribution made to the Plan will be automatically enrolled for purposes of receiving such Special
Contribution.

     Section 2.03 Exclusions from Participation. No Employee shall be eligible to have
contributions made to the Trust Fund on his behalf if he or she ceases to be in Service pursuant to
a Basic Labor Agreement.

     Section 2.04 Reemployment Provisions.

     (a) Participation after Exclusion or Leave of Absence. An Employee who becomes
ineligible to participate in the Plan solely on account of (A) Section 2.03 or (B) an
authorized leave of absence shall again be eligible to participate on the first day he or
she is credited with one Hour of Service after he or she is again covered by a Basic Labor
Agreement or he or she returns from the leave of absence, provided that he or she otherwise
meets the requirements of Section 2.01. Such an Employee may commence or resume
participation in the Plan as of the first day of any payroll period following the date he or
she becomes eligible to participate by enrolling pursuant to the procedures in effect under
Section 2.02. Such an Employee shall be eligible to receive allocations of Retirement
Account Contributions in accordance with the terms of Section 4.03 as of the first day of
the payroll period after he or she satisfies the requirements of Section 2.01.

     (b) Participation after Termination. Any Employee not described in subsection
(a) who was previously eligible to participate in the Plan and (A) who is reemployed by an
Employer within 12 months of the date he or she last performed an Hour of Service, (B) who
previously made Before-Tax and/or Catch-up Contributions, received Retirement Account
Contributions under the Plan or otherwise had a vested interest in the Plan, or (C) who is
entitled by law to be re-credited with prior Service and who had previously satisfied the
requirements to participate in the Plan may commence or resume participation in the Plan as
of the first day of any payroll period following his

9

 

or her reemployment, provided that he or she is employed pursuant to the Basic Labor
Agreement on that date and enrolls (or is deemed enrolled) as provided in Section 2.02. Such
Employee shall be eligible to receive allocations of Retirement Account Contributions in
accordance with the terms of Section 4.03 as of the first day of any payroll period
following his or her reemployment, provided that he or she is employed pursuant to a Basic
Labor Agreement on that date. Any reemployed Employee not otherwise described in this
subsection (b) must satisfy the requirements of Section 2.01.

     Section 2.05 Veterans’ Rights. Notwithstanding any provision of this Plan to the
contrary, contributions, benefits, and service credit with respect to qualified military service
will be provided in accordance with Code Section 414(u). Loan repayments will be suspended under
this Plan as permitted under Code Section 414(u)(4).

10

 

Article 3

Before-Tax Contributions and Catch-up Contributions

     Section 3.01 Amount of Before-Tax Contributions. Any Participant who enrolls in the
Plan shall agree to a Wage Reduction Agreement to have his Employer make Before-Tax Contributions
for him to the Trust of from 1% to 30% of his Compensation (in 1% increments) through equal pay
period reductions. The requirement that each contribution be made in whole percentage increments of
Compensation shall not apply to a Participant whose Before-Tax Contributions must be reduced to
comply with the requirements of Section 3.06 or Section 3.07, or the requirements of any other
applicable law. The Before-Tax Contributions of such a Participant may be the maximum percentage of
his unreduced Compensation permitted by such Section or law. See Section 1.12 for the methodology
of determining Before-Tax Contributions of Participants who are covered under the terms of: (a)
United Steelworkers of America and its Local 8888, (b) the International Association of Fire
Fighters and its Local I-45, or (c) the International Union, Security, Police, and Fire
Professionals of America and its Amalgamated Local No. 451.

     Section 3.02 Catch-Up Contributions. A Catch-up Eligible Participant may elect to make
Catch-Up Contributions in accordance with, and subject to the limitations of, Section 414(v) of the
Code. Such Catch-Up Contributions shall not be taken into account for purposes of the provisions of
the Plan implementing the required limitations of Sections 402(g) and 415 of the Code. The Plan
will not be treated as failing to satisfy Code Sections 401(k)(3), 410(b), or 416, as applicable,
by reason of the making of such Catch-Up Contributions. If a Catch-up Eligible Participant’s
Before-Tax Contributions exceed the otherwise applicable limits on elective deferrals or annual
additions of Code Sections 401(a)(30) or 415(c), or of Section 3.01, those deferrals shall be
treated as Catch-up Contributions.

     Section 3.03 Payments to Trustee. Before-Tax Contributions and Catch-up Contributions
made for a Participant during a pay period pursuant to a Wage Reduction Agreement will be
transmitted to the Trustee as soon as practicable, but in no event later than 15 days after the end
of the calendar month in which the pay period for which such Contributions are made ends.

     Section 3.04 Changes in Contributions. The percentage designated by a Participant
pursuant to Section 3.01 and Section 3.02 shall continue in effect, notwithstanding any changes in
the Participant’s Compensation. A Participant may, however, in accordance with the percentages
permitted by Section 3.01 and any Catch-up Contributions permitted under Section 3.02, change the
percentage of his Before-Tax Contributions and Catch-up Contributions at any time by notifying the
Administrative Committee. The change will be effective as soon as practicable thereafter.

     Section 3.05 Suspension and Resumption of Contributions. A Participant may suspend his
Before-Tax Contributions and Catch-up Contributions by filing a written notice with the
Administrative Committee stating a subsequent pay period as of which the suspension is to be
effective. The suspension will begin as of the specified pay period, or as soon thereafter as is
administratively practicable. The Participant may resume contributions as of any subsequent pay

11

 

period pursuant to Section 2.02, 3.01 and Section 3.02, provided he is then employed by an
Employer pursuant to a Basic Labor Agreement.

     Section 3.06 Excess Deferrals.

     (a) Limit on Before-Tax Contributions. Notwithstanding the foregoing provisions
of this Article 3, a Participant’s Before-Tax Contributions for any taxable year of such
Participant shall not exceed the amount in effect for such taxable year under Code Section
402(g)(1), which amount is established each year by the Secretary of the Treasury and is,
for 2010, $16,500. A Participant’s Before-Tax Contributions for purposes of this Section
shall include (A) any employer contribution made under any qualified cash or deferred
arrangement as defined in Code Section 401(k) to the extent not includible in gross income
for the taxable year under Code Section 402(e)(3) (determined without regard to Code Section
402(g)), (B) any employer contribution to the extent not includible in gross income for the
taxable year under Code Section 402(h)(1)(B) (determined without regard to Code Section
402(g)) and (C) any employer contribution to purchase an annuity contract under Code Section
403(b) under a salary reduction agreement within the meaning of Code Section 3121(a)(5)(D).
A Participant’s Catch-up Contributions shall not count towards the limit set forth in this
paragraph, provided that any amount contributed as a Catch-up Contribution and discovered to
be in excess of the limits of Code Section 414(v) shall be re-designated as a Before-Tax
Contribution subject to this paragraph and corrected (to the extent of any excess) in
accordance with subsection (b) below.

     (b) Distribution of Excess Deferrals. In the event that a Participant’s
Before-Tax Contributions exceed the amount described in subsection (a) (hereinafter called
the “excess deferrals”) during a taxable year of the Participant, such excess deferrals (and
any income allocable thereto) shall be distributed to the Participant during the same year
if (A) the Participant designates the distribution as an excess deferral under the Plan in
writing on a form provided by, and filed with, the Administrative Committee, and (B) the
distribution is made after the date on which the Plan received the excess deferral.
Effective solely for the Plan Year beginning on January 1, 2007, if any excess deferrals of
a Participant for a taxable year are not distributed within the same taxable year, such
excess deferrals (and any income allocable to such amount through the end of the Plan Year
to which such excess deferral is attributable and for the period between the end of the Plan
Year and the date of distribution) shall be distributed to the Participant by April 15
following the close of the taxable year in which such excess deferrals occurred if (and only
if), by March 1 following the close of such taxable year, the Participant (A) allocates the
amount of such excess deferrals among the plans under which the excess deferrals were made
and (B) notifies the Company of the portion allocated to this Plan. Effective for Plan Years
beginning on and after January 1, 2008, if any excess deferrals of a Participant for a
taxable year are not distributed within the same taxable year, such excess deferrals (and
any income allocable to such amount through the end of the Plan Year to which such excess
deferral is attributable) shall be distributed to the Participant by April 15 following the
close of the taxable year in which such excess deferrals occurred if (and only if), by March
1 following the close of such taxable year, the Participant (A) allocates the amount of such
excess deferrals among the plans under

12

 

which the excess deferrals were made and (B) notifies the Administrative Committee of the portion allocated to
this Plan. Notwithstanding the normal notice requirements, if the Participant’s deferrals to
this Plan and all other plans maintained by the Employer or an Affiliate exceed the limits
of Code Sections 402(g) and 401(a)(30) (except as permitted by Code Section 414(v)), the
Plan may distribute the excess amount if so directed by the Administrative Committee without
regard to whether the Participant has filed a notice.

     If a catch-up eligible Participant’s Before-Tax Contributions exceed the otherwise applicable
limits on elective deferrals of Section 401(a)(30) of the Code, those deferrals shall be treated as
Catch-Up Contributions to the extent permissible.

     Section 3.07 Excess Before-Tax Contribution.

     (a) Actual Deferral Percentage Test. Notwithstanding the foregoing provisions
of this Plan, no Participant shall make a Before-Tax Contribution in an amount that would
cause a violation of the limits imposed on such contributions by Section 401(k)(3) of the
Code and the Treasury Regulations thereunder (utilizing the prior year testing method), the
provisions of which are incorporated into the Plan by reference. For this purpose, the
Participant’s “compensation” shall mean total compensation reportable by the Employer for
the calendar year on the Participant’s Wage and Tax statement (Form W-2) as remuneration for
the personal service of the Participant, plus amounts not currently includible by reason of
Code Sections 125, 132(f)(4) or 402(g) but subject to the dollar limitation provided in
Section 1.12.

     (b) Treatment of Excess Contributions. In the event that excess contributions
(as such term is hereinafter defined) are made to the Trust Fund for any Plan Year, then
such excess contributions (and any income allocable to such contributions through the end of
such Plan Year) shall be distributed to the eligible Highly Compensated Employees, prior to
March 15 of the following Plan Year, on the basis of the respective portions of the excess
contributions attributable to each such eligible Employee. For purposes of this subsection,
the term “excess contributions” shall mean, for any Plan Year, the excess of (A) the
aggregate amount of Before-Tax Contributions actually paid to the Trust Fund on behalf of
eligible Highly Compensated Employees for such Plan year over (B) the maximum amount of such
Before-Tax Contributions permitted for such Plan Year under subsection (a) (determined by
hypothetically reducing contributions made on behalf of Highly Compensated Employees in
order of their actual deferral percentages, beginning with the highest of such percentages).
The Before-Tax Contributions of the Highly Compensated Employee(s) with the highest dollar
amount of Before-Tax Contributions will be reduced by the lesser of (i) the amount required
to cause the Before-Tax Contributions of such Highly Compensated Employee(s) to equal the
dollar amount of the Before-Tax Contributions of the Highly Compensated Employee(s) with the
next highest dollar amount, or (ii) the total amount of excess contributions. This process
will be repeated until the total amount of excess contributions has been distributed.

     To the extent Before-Tax Contributions on behalf of any Participant are reduced under this
subsection, such Before-Tax Contributions shall first be recharacterized as Catch-up

13

 

Contributions to the extent an affected Participant is eligible to make Catch-up Contributions
and has not reached his or her catch-up contribution limit.

     Section 3.08 Monitoring Procedures.

     (a) Monitoring Actual Deferral Percentages. In order to ensure that at least
one of the actual deferral percentages specified by Section 401(k)(3) of the Code is
satisfied for each Plan Year, the Administrative Committee may monitor the amount of
Before-Tax Contributions being made to the Plan by or for each eligible Employee during each
Plan Year. In the event that the Administrative Committee determines that such actual
deferral percentages may not be satisfied for a Plan Year, and if the Administrative
Committee in its sole discretion determines that it is necessary or desirable, the
Before-Tax Contributions made thereafter by or for eligible Highly Compensated Employees may
be limited pursuant to non-discriminatory rules adopted by the Administrative Committee.

     (b) Preventing Excess Deferrals. In order to ensure that excess deferrals (as
such term is defined in Section 3.06(b) will not be made to the Plan for any taxable year
for any Participant, the Administrative Committee may monitor the amount of Before-Tax
Contributions being made to the Plan for each Participant during each taxable year and may
take such action (pursuant to non-discriminatory rules adopted by the Administrative
Committee) to prevent Before-Tax Contributions made for any Participant under the Plan for
any taxable year from exceeding the maximum amount allowable under Section 3.06(a).

     (c) No Implied Limitation. The actions permitted by this Section are in
addition to, and not in lieu of, any other actions that may be taken pursuant to Sections
3.06 and 3.07 or that may be permitted by applicable law or regulation in order to ensure
that the limitations described in such Sections are met.

14

 

Article 4

Employer Contributions

     Section 4.01 Employer Matching Contributions.

     (a) With respect to Employer Matching Contributions, this Article is effective as of:

     (1) with respect to Participants who are covered under the terms of the Basic
Labor Agreement between the Company and the United Steelworkers of America and its
Local 8888, the first day of the first payroll period beginning on or after June
7, 2004; and

     (2) with respect to Participants who are covered under the terms of the Basic
Labor Agreement between the Company and the International Union, Security, Police,
and Fire Professionals of America and its Amalgamated Local No. 451, the first day
of the first payroll period beginning on or after July 25, 2005; and

     (3) with respect to Participants who are covered under the terms of the Basic
Labor Agreement between the Company and the International Association of Fire
Fighters and its Local I-45, the first day of the first payroll period beginning
on or after December 18, 2006.

     (b) Amount of Employer Matching Contributions. The Company will make Employer Matching
Contributions based on an eligible Participant’s Before-Tax Contributions and/or Catch-up
Contributions as follows:

     (1) an Employer Matching Contribution will be made that is equal to 100% of
the first two percentage points of the Participant’s Before-Tax Contributions
and/or Catch-up Contributions for payroll periods beginning on or after:

     (A) June 7, 2004, with respect to Participants who are covered under
the terms of the Basic Labor Agreement between the Company and the United
Steelworkers of America and its Local 8888; and

     (B) July 25, 2005, with respect to Participants who are covered under
the terms of the Basic Labor Agreement between the Company and the
International Union, Security, Police, and Fire Professionals of America and
its Amalgamated Local No. 451; and

     (C) December 18, 2006, with respect to Participants who are covered
under the terms of the Basic Labor Agreement between the Company and the
International Association of Fire Fighters and its Local I-45.

15

 

     (2) in addition to the contribution in (1), an Employer Matching Contribution
will be made that is equal to 50% of the next two percentage points of the
Participant’s Before-Tax Contributions and/or Catch-up Contributions for payroll
periods beginning on or after:

     (A) July 11, 2005, with respect to Participants who are covered under
the terms of the Basic Labor Agreement between the Company and the United
Steelworkers of America and its Local 8888; and

     (B) August 28, 2006, with respect to Participants who are covered under
the terms of the Basic Labor Agreement between the Company and the
International Union, Security, Police, and Fire Professionals of America and
its Amalgamated Local No. 451; and

     (C) December 17, 2007, with respect to Participants who are covered
under the terms of the Basic Labor Agreement between the Company and the
International Association of Fire Fighters and its Local I-45.

     (3) in addition to the contributions in (1) and (2), an Employer Matching
Contribution will be made that is equal to 25% of the next four percentage points
of the Participant’s Before-Tax Contributions and/or Catch-up Contributions for
payroll periods beginning on or after:

     (A) September 24, 2007, with respect to Participants who are covered
under the terms of the Basic Labor Agreement between the Company and the
United Steelworkers of America and its Local 8888; and

     (B) November 3, 2008, with respect to Participants who are covered
under the terms of the Basic Labor Agreement between the Company and the
International Union, Security, Police, and Fire Professionals of America and
its Amalgamated Local No. 451; and

     (C) December 22, 2008, with respect to Participants who are covered
under the terms of the Basic Labor Agreement between the Company and the
International Association of Fire Fighters and its Local I-45.

     (c) Allocating the Employer Matching Contributions. The Employer Matching Contributions
will be calculated for each payroll date rather than annually and will be credited for the
period for which the corresponding Before-Tax Contributions and/or Catch-up Contributions
are credited to the Plan.

     Section 4.02 Special Contributions. For any Plan Year, the Company may make special
additional contributions that are not linked to a Participant’s Before-Tax Contributions and/or
Catch-up Contributions. The decision whether to make such Special Contributions and the amount of
any such contributions will be in the sole discretion of the Board. Such

16

 

contributions shall be allocated in the non-discriminatory manner directed by the Board at the time of
contribution.

     Section 4.03 Retirement Account Contributions.

     (a) Eligibility for Retirement Account Contributions. This Section 4.03 is effective:

     (1) (A) as of March 1, 2010, with respect to Employees hired or rehired by an
Employer on or after January 1, 2010 who (i) satisfy the eligibility requirements
contained in Section 2.01, (ii) are employed by an Employer pursuant to a Basic
Labor Agreement with the International Union of Security, Police, Fire
Professionals of America and its Amalgamated Local No. 451, and (iii) are not
eligible to participate in any defined benefit plan maintained by the Company or
any Controlled Group Member; and

          (B) as of April 5, 2010, with respect to Employees hired or rehired by an
Employer on or after April 5, 2010 who (i) satisfy the eligibility requirements
contained in Section 2.01, (ii) are employed by an Employer pursuant to a Basic
Labor Agreement with the International Association of Fire Fighters and its Local
I-45, and (iii) are not eligible to participate in any defined benefit plan
maintained by the Company or any Controlled Group Member; and

     (2) (A) as of March 1, 2010, with respect to Employees hired or rehired on or
after January 1, 2010 by a Controlled Group Member that is not an Employer who (i)
subsequently transfer to employment covered by a Basic Labor Agreement between the
Employer and the International Union of Security, Police, Fire Professionals of
America and its Amalgamated Local No. 451, (ii) satisfy the eligibility
requirements contained in Section 2.01 after such transfer, and (iii) are not
eligible to participate in any defined benefit plan maintained by the Company or
any Controlled Group Member; and

          (B) as of April 5, 2010, with respect to Employees hired or rehired on or
after April 5, 2010 by a Controlled Group Member that is not an Employer who (i)
subsequently transfer to employment covered by a Basic Labor Agreement between the
Employer and the International Association of Fire Fighters and its Local I-45,
(ii) satisfy the eligibility requirements contained in Section 2.01 after such
transfer, and (iii) are not eligible to participate in any defined benefit plan
maintained by the Company or any Controlled Group Member.

     (b) Amount of Contribution. The Company will make Retirement Account Contributions each
pay period for Participants who satisfy the eligibility in Section 4.03(a) above in an
amount determined as a percentage of Compensation for such pay period in accordance with the
following table:

17

 

	 	 	 	 	 
	 	 	Percentage of
	Participant’s Age	 	Compensation
	Less than 35
	 	 	3	%
	35-49
	 	 	4	%
	50 or older
	 	 	5	%

A Participant’s age shall be determined as of December 31 of the applicable Plan Year.

     (c) Allocating the Retirement Account Contributions. Retirement Account Contributions
will be calculated and credited for each payroll date rather than annually, and are paid to
the Trust for each Plan Year within the time prescribed by law, including extensions of
time, for filing the Company’s federal income tax return for the Plan Year. Notwithstanding
the preceding sentence, the rules of Article 10 may prevent the Company from making any
contribution or from making the full contribution under this Section.

     Section 4.04 Vesting.

     (a) Vesting of Employer Matching and Special Contributions. Upon being credited with
two Years of Service, attaining Normal Retirement Age while employed by a Controlled Group
Member, or terminating employment with the Employer on account of death or Total Disability
or terminating employment due to a “reduction in force,” as defined in the Basic Labor
Agreement, a Participant will be 100% Vested.

     (b) Vesting of Retirement Account Contributions. Upon being credited with three Years
of Service, attaining Normal Retirement Age while employed by a Controlled Group Member, or
terminating employment on account of death or Total Disability, a Participant will be 100%
Vested.

     To the extent required by law, affected Participants shall also become fully vested in the
event of a Plan termination, a partial termination of the Plan, or the complete discontinuance of
contributions to the Plan.

     Section 4.05 Contributions for Certain Periods of Qualified Military Service. This
Section 4.05 shall apply with respect to a Participant who becomes disabled or dies during a period
of qualified military service, as determined under Code Section 414(u). The Company shall make an
Employer Matching Contribution, a Special Contribution and a Retirement Account Contribution, as
applicable, on behalf of the Participant to the extent that such contributions would have been made
under the terms of the Plan, as modified by this Section 4.05, if the Participant had been
reemployed by an Employer on the date immediately preceding his or her disability or death, as
applicable, and then terminated employment on the date of his or her disability or death.

18

 

     The Employer Matching Contributions shall be determined based on the Participant’s average
Before-Tax Contributions and/or Catch-up Contributions for the 12 months immediately preceding the
period of qualified military service, or if shorter his or her actual period of continuous Service
with an Employer. The Special Contributions and Retirement Account Contributions shall be
determined based on either: (a) the Compensation that the Participant would have received during
the period of qualified military service if the Participant had continued to be employed by the
Employer, determined by the Administrative Committee in accordance with the Code and applicable
regulations; or (b) if the amount in clause (a) is not reasonably certain, the Participant’s
Compensation from the Employer during the 12-month period (or, if shorter, his or her actual period
of continuous Service with the Employer) immediately preceding the start of such qualified military
service. Notwithstanding the foregoing, the amounts contributed under this Section 4.05 shall be
reduced by any Employer Matching Contributions, Special Contributions and Retirement Account
Contributions actually made on behalf of the Participant during such period of qualified military
service.

19

 

Article 5

Loans

     Section 5.01 Availability of Loans. A Participant who is an Employee may apply for a
loan from his Account by following procedures established by the Administrative Committee for this
purpose and then in effect. A Participant shall have only one loan outstanding at any time.

     Section 5.02 Amount of Loan. Each loan shall be in an amount which is not less than
$500 and shall be in multiples of $100. The maximum loan to any Participant (when added to the
outstanding balance of all other loans to the Participant from all qualified employer plans (as
defined in Section 72(p)(4) of the Code) of the Controlled Group) shall be an amount which does not
exceed the lesser of (A) $50,000, reduced by the excess (if any) of (i) the highest outstanding
balance of such other loans during the one-year period ending on the day before the date on which
such loan is made, over (ii) the outstanding balance of such other loans on the date on which such
loan is made, or (B) 50% of the value of such Participant’s interest in his Account on the date on
which such loan is made. Notwithstanding the preceding sentences, the balance in the Participant’s
Retirement Account Contribution subaccount shall not be considered in determining the value of such
Participant’s interest in his Account for purposes of determining his maximum loan amount.

     Section 5.03 Funding the Loan. For each Participant for whom a loan is authorized
pursuant to this Section, (A) the Trustee shall liquidate the Participant’s interests in the
Investment Funds as directed by the Participant or, in the absence of such direction, on a pro rata
basis, to the extent necessary to provide funds for the loan, (B) the Trustee shall disburse such
funds to the Participant upon the Participant’s execution of the Note referred to in Section 5.04,
and (C) the Trustee shall establish and maintain, or cause to be established and maintained, a
separate recordkeeping account within the Participant’s Account (the “Loan Account”) (i) which
initially shall be in the amount of the loan, (ii) to which the funds for the loan shall be deemed
to have been allocated and then disbursed to the Participant, (iii) to which the Note shall be
allocated, and (iv) which shall show the unpaid principal of and interest on the Note from time to
time. All payments of principal and interest by a Participant shall be credited initially to his
Loan Account and applied against the Participant’s Note, and then invested in the Investment Funds
pursuant to the Participant’s direction under Section 6.12. The Participant’s Loan Account shall be
valued as of each Valuation Date. Notwithstanding any other provisions of the Plan, a Participant’s
Loan Account shall constitute a part of his Account under the Plan.

     Section 5.04 Nondiscrimination.

     (a) Availability. Loans made pursuant to this Section: (A) shall be made
available on a reasonably equivalent basis to all Participants who are Employees; (B) shall
not be made available to Highly Compensated Employees in a percentage amount greater than
the percentage amount made available to other Participants; (C) shall be secured by the
Participant’s Loan Account; (D) shall not be made unless the Participant consents to the
reduction of his Account under the circumstances described in Section 5.05; (E) shall be
evidenced by a promissory note and security agreement (the “Note”), executed by the
Participant which provides for: (i) the security referred to in clause (C) of this sentence;
(ii) a rate of interest equal to the “prime” rate, as reported in that day’s

20

 

edition of the Wall Street Journal, plus one additional percentage point, or such other
rate that the Administrative Committee determines would provide the Plan with a return
commensurate with the prevailing interest rate charged by persons in the business of lending
money for loans which would be made under similar circumstances; (iii) repayment within a
specified period of time, which may be any number of months up to 54 months from the date
the loan is made; (iv) repayment in equal payments over the term of the loan; with payments
not less frequently than quarterly and (v) for such other terms and conditions as the
Administrative Committee shall determine including, without limitation, charges for fees
incurred in connection with originating and maintaining the loan.

     (b) Additional Terms. The terms of the loan shall include provision that: (A)
the loan will be repaid pursuant to an irrevocable authorization by the Participant of equal
payroll deductions over the repayment period sufficient to amortize fully the loan within
the repayment period, provided, however, that, if an Employee ceases to be employed pursuant
to a Basic Labor Agreement, the Administrative Committee may direct the Trustee to
re-determine the repayment amounts to reflect the Employee’s new payroll schedule; (B) the
loan shall be prepayable in whole at any time without penalty; and (C) the loan shall be in
default and become immediately due and payable upon the first to occur of the following
events: (i) the Participant’s failure to make required payments on the promissory note; (ii)
the Participant’s death; or (iii) termination of the Participant’s employment with the
Controlled Group. An Employee who is laid off, disabled due to an on-the-job or off-the-job
injury or illness, on leave of absence of any nature or on strike shall continue to be
eligible to make loan repayments by certified check or postal money order in lieu of payroll
deductions.

     Section 5.05 Security. Notwithstanding any other provision of the Plan, a loan made
pursuant to this Article shall be a first lien against the Participant’s Loan Account. Any amount
of principal or interest due and unpaid on the loan at the time of any default on the loan, and any
interest accruing thereafter, shall be satisfied by deduction from the Participant’s Loan Account,
and shall be deemed to have been distributed to the Participant, as follows: (A) in the case of a
Participant who, at the time of the default, is an Employee and is not eligible (without regard to
the required filing of an application) to receive distribution of his Account, at such time as he
first becomes eligible (without regard to the required filing of an application) to receive
distribution of his Account; or (B) in the case of any other Participant, immediately upon such
default.

     Section 5.06 Source and Application of Funds.

     (a) Loan amounts will be taken from the Participant’s Accounts in the following order
(depleting amounts available for loan by Account before proceeding to the next level of
priority):

     (1) Before-Tax Contributions and Catch-up Contributions, pro rata;

     (2) Employer Matching Contributions; and

21

 

     (3) Special Contributions.

Loan amounts may not be taken from a Participant’s Retirement Account Contribution
subaccount.

     (b) Loan amounts for each separate Account balance as described in (a) above will be
taken pro rata from the Investment Funds based on each separate Account’s Investment Fund
balances as of the valuation date on which the loan was processed.

     (c) Repayments of principal will be credited to the Participant’s separate Accounts
from which the funds were taken in reverse order of the amounts originally taken from each
Account for the loan.

     (d) Interest payments will be prorated to the Participant’s separate Accounts based on
the outstanding principal balance in each account as of the prior month end.

     Section 5.07 Plan Loans for Owner-Employees and Shareholder Employees. Effective for
plan loans made after December 31, 2001, a Participant shall not be prohibited from receiving a
loan solely on the basis of his or her status as an owner-employee or shareholder-employee.

22

 

Article 6

Investments

     Section 6.01 In General. This Article 6 gives responsibility for investment and trust
matters (other than trustee duties) in connection with the Plan to an Investment Committee, as
described below. The provisions of this Article 6 override any contrary provision elsewhere in the
documents governing the Plan, except to the extent prohibited by change-in-control provisions or
collective bargaining agreements. However, the Investment Committee is not empowered to eliminate
the Huntington Ingalls Industries Fund or to change the nature of the Huntington Ingalls Industries
Fund as a fund designed to invest in Qualifying Securities as set forth in Article B5. Although no
Participant or Beneficiary is required to invest in the Huntington Ingalls Industries Fund, it is
the intention of the settlor and sponsor of the Plan that the Plan include an ESOP component and
permit investment in the Huntington Ingalls Industries Fund.

     Section 6.02 Investment Fiduciary. The named fiduciary for investment and trust
matters (other than trustee duties) is the Investment Committee.

     Section 6.03 The Investment Committee. The Investment Committee will consist of not
less than three persons appointed from time to time by the Board or its delegate.

     (a) The members of the Investment Committee will elect one of their members as Chairman
and will appoint a Secretary and any other officers as the Investment Committee may deem
necessary.

     (b) The Investment Committee may employ any advisors (including investment advisors),
consultants, counsel, and administrative service providers as it may require in carrying out
the provisions of this Article 6.

     (c) Except as otherwise provided in these resolutions, each member of the Investment
Committee will continue in office until the expiration of three (3) years from the date of
his or her latest appointment or reappointment to the Investment Committee. A member may be
reappointed annually.

     (d) If at the end of his or her latest three (3) year term, a member is not
reappointed, he or she will continue to serve until the date his or her successor is
appointed.

     (e) A member may resign at any time by delivering a written resignation to the
Corporate Secretary of the Parent and to the Secretary of the Investment Committee.

     (f) A member may be removed by the Board at any time for any reason.

     Section 6.04 Alternate Members. The Board may from time to time appoint one or more
persons as alternate members of the Investment Committee to serve in the absence of members of the
Investment Committee, in the manner stated below, with the same effect as if they were members.

23

 

     (a) The Chairman of the Investment Committee, in his or her discretion, will designate
which of the alternate members will attend any particular meeting of the Investment
Committee for the purpose of obtaining a quorum or full attendance as the Chairman may
elect.

     (b) Each alternate member will have all the rights, powers and obligations of a member
in respect to the business meetings that he or she so attends.

     Section 6.05 Actions by the Investment Committee. A majority in number of the members
of the Investment Committee at the time in office, represented at a meeting by members or alternate
members or both, will constitute a quorum for the transaction of business. Any determination or
action of the Investment Committee, including allocations and delegations of responsibilities, may
be made or taken by a majority of a quorum present at any meeting thereof, or without a meeting, by
resolution or written memorandum signed by a majority of the members then in office.

     Section 6.06 Investment Powers and Responsibilities.

     (a) The Investment Committee, in its capacity as named fiduciary for investment
matters, may, in its discretion, contract with one or more investment managers who will
have, until terminated by the Investment Committee, the power to manage, acquire and dispose
of all or any part of the assets of the Plan allocated to an investment manager by the
Investment Committee.

     (b) The Investment Committee will have the power to hire and terminate Trustees and
custodians.

     (c) The Investment Committee will have the power to implement directed brokerage for
Trustees, custodians and investment managers.

     (d) The Investment Committee may authorize the payment from Plan assets of investment
and trust expenses including the fees of Trustees, custodians, advisors, investment
managers, consultants, counsel, and administrative service providers and internal costs of
the Plan sponsor and its affiliates that are properly chargeable to the Plan.

     (e) The Investment Committee will periodically review and evaluate the investment
performance of each Trustee and investment manager and will advise the Board of the review
and evaluation.

     (f) If investment powers are divided among two or more Trustees or investment managers,
the Investment Committee will formulate investment policies for the Trustees and investment
managers to diversify the investments of the Plan so as to minimize the risk of large
losses, unless under the circumstances it is prudent not to do so.

     (g) The Investment Committee will establish a funding policy and method to carry out
the Plan’s objectives. This procedure is to enable the Plan’s fiduciaries to

24

 

determine the Plan’s short- and long-term financial needs and to communicate these
requirements to the appropriate persons.

     Section 6.07 Liability and Indemnity.

     (a) No Investment Committee member who has a fiduciary responsibility, or to whom the
responsibility is allocated, as provided in this Article 6, by appointment or otherwise,
will be liable for any act or omission or investment policy of any other fiduciary except as
provided in Section 405 of ERISA.

     (b) To the extent permitted by law, Parent will indemnify and hold harmless members of
the Board, the Investment Committee and employees of Parent or its subsidiaries who act for
the Investment Committee, as well as former members and former employees, with respect to
their investment responsibilities.

     Section 6.08 Investment Funds. The Trust Fund will be divided into Investment Funds,
which shall consist of the Huntington Ingalls Industries Fund, the Northrop Grumman Fund and other
Investment Funds selected by the Investment Committee or its appointed Trustee or investment
manager. The array of Investment Funds shall be adequate to enable Participants and Beneficiaries
to diversify their holdings in accordance with Section 401(a)(35) of the Code, should they choose
to do so. All Accounts will be invested in the Investment Funds as provided in Sections 6.12 and
6.13. Subject to the provisions of the Plan and Trust Agreement, the Trustee will hold, manage,
administer, value, invest, reinvest, account for, and otherwise deal with each Investment Fund
separately. The Trustee will invest and reinvest the principal and income of each such Fund and
will keep each such Fund invested, without distinction between principal and income, as required
under the terms of the Plan and Trust Agreement. Dividends, interest and other distributions
received by the Trustee in respect of each Investment Fund will be reinvested in the same Fund. The
Trustee in its sole discretion may keep such portion of each Investment Fund in cash or cash
equivalents as the Trustee may from time to time deem to be advisable to maintain sufficient
liquidity to meet the obligations of the Plan or for other reasons, provided that the cash
available in the Huntington Ingalls Industries Fund shall be governed by Article B5.

     Section 6.09 Account. The Plan shall establish and maintain an Account for each
Participant that will reflect the amount of the Participant’s Before-Tax Contributions, Catch-up
Contributions, Employer Matching Contributions, Special Contributions, Retirement Account
Contributions and any other contribution under the Plan, and that will reflect the respective
portions of the Participant’s benefit held under the ESOP and non-ESOP components of the Plan. The
subaccount created to reflect amounts held under the ESOP is the ‘ESOP Account’ as described in the
ESOP. The Plan will also maintain separate records which will show (A) the portion of such Account
invested in each non-ESOP Investment Fund, (B) the amount of contributions thereto, payments and
withdrawals therefrom and the amount of income, expenses, gains and losses attributable thereto,
and (C) the value of a Participant’s Loan Account if any. The interest of each Participant in the
Trust Fund at any time shall consist of his Account balance (as determined pursuant to Section
6.11) as of the last preceding Valuation Date, plus credits and minus debits to such Account since
that Date, and plus the Participant’s Loan Account, if any, valued pursuant to Section 5.03.

25

 

     Section 6.10 Reports. The Plan shall cause reports to be made quarterly to each
Participant and to the Beneficiary of each deceased Participant as to the value of his Account and
the amount of his interest therein.

     Section 6.11 Valuation of Investment Funds.

     (a) Time and Manner of Valuation. The Trustee will, as of the close of business
on each Valuation Date, determine the value of each Investment Fund. Each such valuation
will be made on the basis of the market value (as determined by the Trustee) of the assets
of each Fund, except that property which the Trustee determines does not have a readily
determinable market value will be valued at fair market value as determined by the Trustee
in such manner as it deems appropriate, and the Trustee’s determination of such value will
be conclusive on all interested persons for all purposes of the Plan. A similar valuation
will be made at any other time upon the written direction of the Company to the Trustee or
when the Trustee deems it appropriate to make such a valuation.

     (b) Determining Net Gain or Loss. The Trustee will determine, from the change
in value of each Investment Fund between the current Valuation Date and the then last
preceding Valuation Date, the net gain or loss of each such Fund during such period
resulting from expenses and realized and unrealized earnings, profits and losses of the Fund
during such period. For this purpose, investment management and similar fees (including
brokerage commissions) directly related to the return to Participants on amounts invested in
the various Investment Funds shall be regarded as an expense and charged against the Trust
Fund before the calculation and allocation of income. The transfer of funds to or from an
Investment Fund pursuant to Sections 6.12 and 6.13, contributions allocated to an Investment
Fund, and payments, distributions and withdrawals from an Investment Fund to provide
benefits under the Plan for Participants or Beneficiaries will not be deemed to be earnings,
profits, expenses or losses of the Investment Fund.

     (c) Allocating Net Gain or Loss. After each Valuation Date, the net gain or
loss of each Investment Fund determined pursuant to subsections (a) and (b) shall be
allocated as of such Valuation Date to the Accounts of Participants and Beneficiaries of
deceased Participants, in proportion to the amounts of such Accounts invested in each Fund
on such Valuation Date.

     Section 6.12 Selection of Investment Funds. Each Participant will, by providing
appropriate direction to the Plan’s authorized representative, direct that all contributions made
by or for him be invested in one or more of the Investment Funds in multiples of 1%. The selection
will be applicable to all subsequent contributions made by or for him unless and until an
investment change is made by him and becomes effective pursuant to Section 6.13. In the absence of
an effective investment direction, contributions made to the Trust by or for a Participant will be
invested in the Investment Fund chosen by the Investment Committee that is a “qualified default
investment alternative” as defined under Department of Labor Regulation Section 2550.404c-5(c). By
providing investment direction, or by failing to file an election and acquiescing to the use of the
qualified default investment alternative, each Participant will be

26

 

deemed to have affirmatively accepted fiduciary responsibility for the investment of his
Account balances and, therefore, shall be a named fiduciary for management of such Plan assets. No
other Plan fiduciary will be responsible for any losses resulting from a Participant’s selection of
an Investment Fund.

     Section 6.13 Change of Investment Funds. A Participant may again select Investment
Funds pursuant to Section 6.12 at any time by contacting the Plan’s authorized representative. The
new selection shall be effective as soon as practicable thereafter and shall apply to all
subsequent contributions. A Participant may reallocate that part of his existing Account balance
which is allocated to Investment Funds among the Investment Funds then available. However,
notwithstanding any provision of the Plan to the contrary, during any conversion period, in
accordance with procedures established by the Investment Committee, the Investment Committee may
temporarily suspend, in whole or in part, certain provisions of the Plan, which may include, but
are not limited to, a Participant’s right to change his contribution election, to change his
investment election, to borrow or withdraw from his Account, or to obtain a distribution from his
Account.

     Participants shall not be permitted to invest any contributions to the Plan in, or to transfer
existing Account balances to, the Northrop Grumman Fund; provided, however, that any cash dividends
paid with respect to a Participant’s interest in the Northrop Grumman Fund shall be reinvested in
the Northrop Grumman Fund. Participants shall be permitted to divest their interest in the Northrop
Grumman Fund subject to this Section 6.13 and the discretion of the Investment Committee as set
forth in Section 6.06. Investment elections relating to the Northrop Grumman Fund shall be deemed
to apply to the qualified default investment alternative as determined under Section 6.12 unless
otherwise specified by the Investment Committee.

     Section 6.14 Directions to Trustee. The Participant shall give appropriate and timely
directions to the Trustee in order to permit the Trustee to give effect to the investment choice
and investment change elections made under Sections 6.12 and 6.13 and to provide funds for
distributions pursuant to Articles 7 and 8.

     Section 6.15 No Guarantee. Neither the Employers nor the Investment Committee nor the
Trustee, nor any other person, guarantees the Participants or their Beneficiaries against loss or
depreciation or fluctuation of the value of the assets of the Trust Fund.

     Section 6.16 Huntington Ingalls Industries Stock. Parent common stock held in the
Huntington Ingalls Industries Fund for the Plan will be voted in accordance with the terms of the
ESOP and may be tendered for sale in accordance with the ESOP.

     Section 6.17 Northrop Grumman Fund.

     (a) General. In order to permit Participants a reasonable opportunity to decide
when they wish to liquidate, in an orderly fashion, their investment in the Northrop Grumman
Fund, the Plan will maintain the Northrop Grumman Fund in accordance with the provisions of
this Section 6.17. However, no new investment in the Northrop Grumman Fund shall be
permitted. Any cash dividends paid with respect to a

27

 

Participant’s interest in the Northrop Grumman Fund shall be reinvested in the Northrop
Grumman Fund.

The Northrop Grumman Fund shall be maintained until such date as determined by the
Investment Committee for the purpose of permitting Participants the opportunity to divest
their interests in the Northrop Grumman Fund. Prior to such date selected by the Investment
Committee, Participants may direct the transfer of investments out of the Northrop Grumman
Fund, subject to Section 6.13, but may not direct any transfers, contributions or other
investments to the Northrop Grumman Fund. Commencing on the date selected by the Investment
Committee, there shall be implemented reasonable and prudent measures to liquidate in an
orderly manner the common stock of Northrop Grumman Corporation held in the Northrop Grumman
Fund. At the conclusion of such liquidation, the proceeds from the liquidation shall be
deposited in Plan participant Accounts in an investment fund to be determined by the
Investment Committee.

     (b) Voting a Participant’s Investment in Common Stock. Each Participant shall
be entitled to direct the manner in which the shares (including fractional shares) of
Northrop Grumman Corporation common stock in his or her Account in the Northrop Grumman Fund
are to be voted. The Trustee shall vote such shares in accordance with the directions of the
Participants. This requirement will be met if the Trustee votes the combined fractional shares to the extent possible to reflect the direction of the voting Participants. All shares credited to Participants’ Accounts as to which the Trustee does not receive voting
directions, and all unallocated shares held by the Trustee, shall be voted by the Trustee
proportionately in the same manner as the Trustee votes shares as to which the Trustee has
received voting instructions. The Parent will cause proxy materials to be distributed to all
Participants who have an Account balance in the Northrop Grumman Fund prior to each
stockholders’ meeting at the same time it distributes such materials to all other
stockholders.

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Article 7

Distributions To Participants

     Section 7.01 Distributions Upon Termination.

     (a) Timing of Distributions. Distribution of a Participant’s Account balance
shall generally be made or commence as soon as practicable after the Valuation Date
coinciding with or immediately following the Participant’s termination of employment
(including layoff) with any and all Controlled Group Members. However, a Participant whose
Vested Account balance exceeds $1,000 on the date of distribution must consent to the
distribution of his Account balance prior to the date he attains age 62, which is this
Plan’s Normal Retirement Age. Distribution to a Participant who exercises this deferral
right shall be made as soon as practicable following the Valuation Date that coincides with
or next follows his attainment of age 62, or his death, unless the Participant requests an
earlier distribution. That request must be submitted within 180 days of the Valuation Date
as of which the distribution is made. No more than 180 or less than 30 days prior to such
Valuation Date the Participant must be advised of his right to defer the distribution. The
request shall be made pursuant to uniform and nondiscriminatory procedures established by
the Administrative Committee. Such distribution may commence less than 30 days after the
Participant receives the notice of his right to defer, provided the Participant is clearly
informed of the right to a period of at least 30 days to consider the decision of whether or
not to elect a distribution, and the Participant, after receiving the notice, affirmatively
elects a distribution.

     A Participant’s Before-Tax Contributions, Catch-up Contributions and earnings
attributable to these contributions may be distributed on account of the Participant’s
severance from employment. However, such a distribution shall be subject to the other
provisions of the Plan regarding distributions, other than provisions that require a
separation from service before such amounts may be distributed.

     (b) Form of Distributions. Generally, distributions will be made in a single
lump sum. However, interests in the Huntington Ingalls Industries Fund are distributed in
accordance with the ESOP. In addition, the Administrative Committee shall maintain, within
the Plan, provisions for the systematic payment of distributions of a Participant’s total
Vested Account, including Employee and Employer contributions, after retirement in a form
which is paid or payable for the life of the Participant at the option of the Participant.

     A Participant may elect to receive a distribution with respect to that portion of his
Account then invested in the Northrop Grumman Fund in whole shares of common stock of
Northrop Grumman Corporation, with any fractional shares paid in cash. If no such election
is made, that portion of a Participant’s Account invested in the Northrop Grumman Fund shall
be distributed in cash.

     (c) Forfeitures. The non-Vested portion, if any, of such Account balance shall
be forfeited upon the earlier of: (i) the date upon which the actual payment of the Vested
portion of such Account balance commences; or (ii) sixty months after separation from

29

 

service. Any amount so forfeited shall be applied to reduce future Employer Matching
Contributions; provided, however, that if such Participant is reemployed as an Employee of
an Employer prior to the date he has incurred five consecutive one year Periods of
Severance, his Account balance will be reinstated (exclusive of any earnings thereon).

     (d) Deemed Distributions. For purposes of this Section, if the value of the
Participant’s Vested Account is zero, the Participant shall be deemed to have received a
distribution of such Vested Account. Before-Tax Contributions and Catch-up Contributions, if
any, shall be included when determining the value of the Participant’s Vested Account.

     Section 7.02 In-service Withdrawal of Contributions.

     (a) Upon not less than 30 days’ prior written notice to the Administrative Committee,
and effective as of the immediately following Valuation Date, a Participant who has attained
age 591/2 or who suffers from a Total Disability may withdraw in cash all or a part of his
Vested Account balance. A Participant may make only one withdrawal per Plan Year under this
Section.

     (b) Unless the Participant otherwise directs in writing on a form provided by the
Administrative Committee, withdrawals will be made from the Investment Funds on a pro rata
basis.

     Section 7.03 Reemployment of Participant. Except as provided in Section 7.02, if a
Participant who terminated employment again becomes an Employee before receiving a distribution of
his Account balance, no distribution from the Trust Fund will be made while he is an Employee, and
amounts distributable to him on account of his termination will be held in the Trust Fund until he
is again entitled to a distribution under the Plan.

     Section 7.04 Valuation of Accounts. A Participant’s distributable Account balance will
be valued as of the Valuation Date immediately preceding the date the Account is to be distributed.

     Section 7.05 Restrictions on Distributions. Article 11 sets forth certain rules under
various provisions of the Code relating to restrictions on distributions to Participants, which
supersede any conflicting provisions of this Article or Article 8.

     Section 7.06 Rollover Distributions. Notwithstanding any provision of the Plan to the
contrary, a distributee may elect, at the time and in the manner prescribed by the Administrative
Committee to have any portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover. The following definitions apply
for purposes of this Section:

     (a) Eligible Rollover Distribution. An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the distributee, except
that an eligible rollover distribution does not include: any hardship distribution, any
distribution that is one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the distributee or the

30

 

joint lives (or joint life expectancies) of the distributee and the distributee’s
designated beneficiary, or for a specified period of ten years or more; or any distribution
to the extent such distribution is required under Code Section 401(a)(9). The portion of any
distribution that is not includible in gross income (determined without regard to the
exclusion for net unrealized appreciation with respect to employer securities) can qualify
as an eligible rollover distribution, if the distributee adheres to the rules governing
rollovers of after-tax funds.

     (b) Eligible Retirement Plan. An eligible retirement plan is an individual
retirement account described in Code Section 408(a) (including a Roth individual retirement
account described in Code Section 408A); an individual retirement annuity described in Code
Section 408(b); an annuity plan described in Code Section 403(a); a qualified trust
described in Code Section 401(a) that accepts the distributee’s eligible rollover
distribution; an eligible deferred compensation plan described in Code Section 457(b) that
is maintained by a state, political subdivision of a state, or any agency or instrumentality
of a state or political subdivision of a state; or an annuity contract described in Code
Section 403(b) that accepts the distributee’s eligible rollover distribution. However, in
the case of an eligible rollover distribution to a Beneficiary who is a designated
beneficiary as defined in Code Section 401(a)(9)(E), but is not a surviving spouse, an
eligible retirement plan is only an individual retirement account or individual retirement
annuity that is treated as an inherited account under Code Section 402(c)(11). In the case
of a rollover of after-tax money, an eligible retirement plan must be permitted to receive
such a rollover and must account for it separately.

     (c) Distributee. A distributee includes an employee or former employee. In
addition, the employee’s or former employee’s surviving spouse and the employee’s or former
employee’s spouse or former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are distributees with regard to
the interest of the spouse or former spouse. In addition, a Beneficiary who is a designated
beneficiary as defined in Code Section 401(a)(9)(E) is a distributee with regard to the
Beneficiary’s interest in the Plan.

     (d) Direct Rollover. A direct rollover is a payment by the Plan to the eligible
retirement plan specified by the distributee.

     Section 7.07 Military Service Distributions. A Participant may request a distribution
of his Before-Tax and Catch-up Contributions during a period of qualified military service, as
determined under Code Section 414(u), of more than 30 days by notifying the Administrative
Committee. No Before-Tax Contributions or Catch-up Contributions shall be made on behalf of a
Participant who takes a distribution pursuant to this Section 7.07 for a period of six months
following such distribution. The Administrative Committee may establish such other rules, impose
such requirements and require the completion of such forms and documents (in electronic or paper
formats), in its sole discretion, and applied in a nondiscriminatory and objective basis, in order
to administer this Section 7.07.

     Section 7.08 Annuity Form of Distribution. To the extent required under Code Sections
401(a)(11) and 417, a married Participant who elects payment of his or her benefits in the form

31

 

of a life annuity (if available under the Plan) must receive his or her benefits in the form
of a qualified joint and 50% survivor annuity (“QJSA”) unless the Participant elects another form
of distribution permitted under the Plan, which shall include a single life annuity and a qualified
optional 75% survivor annuity (“QOSA”), with the written consent of his or her spouse that
satisfies the provisions of Code Section 417(a)(2). The required consent must be signed by the
spouse, contain an acknowledgment by the spouse of the effect of the consent, and be witnessed by a
Plan representative (other than the Participant) or by a notary public. Notwithstanding the
foregoing, spousal consent need not be required if the Administrative Committee determines that
there is no spouse because the spouse cannot be located or under other circumstances permitted by
regulations under the Code. The provision for the distribution of any annuity form of distribution
may be satisfied by the application of the Participant’s vested Account balance to purchase an
annuity contract from an authorized annuity provider.

     No less than 30 days and no more than 180 days before distribution commences, the
Administrative Committee shall provide a Participant who elects to receive a distribution in the
form of an annuity subject to Section 401(a)(11) of the Code with a written notice explaining the
terms and conditions of the QJSA and QOSA forms of benefit, the Participant’s right to make (and
the effect of) an election to waive the QJSA, the right of the Participant’s spouse to consent or
withhold her consent to the election, the Participant’s right to make (and the effect of) a
revocation of the election, and the financial effect of his choice of benefit. The notice shall
contain individualized information about the QJSA, including an explanation of the terms and
conditions of the QJSA. The notice and explanation shall be written in a nontechnical manner
calculated to be understood by Participants generally. Notwithstanding the above, a Participant may
elect (with any applicable spousal consent) to waive any requirement that the written explanation
be provided at least 30 days before payment of benefits commences if the distribution commences
more than 7 days after such explanation is provided.

     Notwithstanding the immediately preceding paragraph, no spousal consent shall be required to
waive the QJSA (where such rules are applicable) if it is established to the satisfaction of the
Administrative Committee that spousal consent may not be obtained or is not required because there
is no spouse or the spouse cannot be located, or because of such other circumstances as the
Secretary of the Treasury may prescribe by regulations.

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Article 8

Distributions To Beneficiaries

     Section 8.01 Designation of Beneficiary. Each Participant will have the right to
designate a Beneficiary or Beneficiaries to receive his Account balance upon his death. The
designation will be made on forms prescribed by the Administrative Committee and will be effective
upon receipt by the Administrative Committee. A Participant will have the right to change or revoke
any designation by filing a new designation or notice of revocation with the Administrative
Committee but the revised designation or revocation will be effective only upon receipt by the
Administrative Committee.

     Section 8.02 Consent of Spouse Required. A Participant who is married may not
designate a Beneficiary other than, or in addition to, his spouse unless his spouse consents to the
designation in writing. The required consent must be signed by the spouse, contain an
acknowledgment by the spouse of the effect of the consent, and be witnessed by a Plan
representative designated by the Administrative Committee (other than the Participant) or by a
notary public. If it is established to the satisfaction of the Administrative Committee that the
Participant has no spouse or that the spouse’s consent cannot be obtained or is not required
because the spouse cannot be located, or because of such other circumstances as may be prescribed
in regulations issued pursuant to Section 417 of the Code, such written consent shall not be
required. The designation will be effective only with respect to the consenting spouse, whose
consent will be irrevocable. A Beneficiary designation to which a spouse has consented may not be
changed by the Participant without spousal consent, unless the spouse’s consent expressly permits
Beneficiary designations by the Participant without any further consent of the spouse.

     Section 8.03 Failure to Designate Beneficiary. In the event a Participant has not
designated a Beneficiary, or in the event no Beneficiary survives a Participant, distribution of
the Participant’s Account balance upon his death will be made to the Participant’s spouse, if
living, and otherwise to his estate.

     Section 8.04 Distributions to Beneficiaries. Distribution of a Participant’s Account
balance to the Participant’s Beneficiary will be made or will commence as soon as practicable after
the Valuation Date coinciding with or immediately following the Participant’s death. In general,
the Participant’s Account balance will be distributed to the Beneficiary in a single lump sum
payment. The ESOP, however, governs the distribution form of a Participant’s interest in the
Huntington Ingalls Industries Fund. The Participant’s Account balance will be valued as of the
Valuation Date immediately preceding the date the Account is to be distributed to his Beneficiary.
If a Beneficiary entitled to a payment dies, any remaining balance of the Participant’s Account
payable to the Beneficiary shall become payable to the Beneficiary’s estate in a single lump sum
payment as soon as administratively practicable.

     Section 8.05 Survivor Benefits Related to Military Service. If a Participant dies
during a period of qualified military service, as determined under Code Section 414(u), his
Beneficiary shall be entitled to any additional benefits, other than benefit accruals, as if the
Participant was reemployed by an Employer on the date immediately preceding his death and
terminated employment on the date of his death.

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Article 9

Administration Of The Plan And Trust Agreement

     Section 9.01 In General. This Article 9 gives responsibility for plan administration
(other than investment and trust matters) to an Administrative Committee, as described below. The
provisions of this Article 9 override any contrary provision elsewhere in the documents governing
the Plan, except to the extent prohibited by change-in-control provisions or collective bargaining
agreements.

     Section 9.02 Plan Administrator. The general administration of the Plan is the
responsibility of the Administrative Committee. The Administrative Committee is the plan
administrator, and the Administrative Committee and each of its members are named fiduciaries.
Administrative Committee members and all other Plan fiduciaries may serve in more than one
fiduciary capacity with respect to the Plan.

     Section 9.03 The Administrative Committee. The Administrative Committee consists of at
least three members appointed by the Board or its delegate. The members of the Administrative
Committee shall serve without compensation for such service, unless otherwise determined by the
Board.

     (a) Except as otherwise provided in this Article 9, each member of the Administrative
Committee shall continue in office until the expiration of 3 years from the date of his or
her latest appointment or reappointment to the Administrative Committee. A member may be
reappointed.

     (b) If at the end of his or her latest term as a member of the Administrative
Committee, a member is not reappointed, he or she will continue to serve on the
Administrative Committee until the date his or her successor is appointed.

     (c) A member may be removed by the Board at any time and for any reason.

     Section 9.04 Resignation of Administrative Committee Members. A member of the
Administrative Committee may resign at any time by delivering a written resignation to the
Secretary of the corporation and to the Secretary of the Administrative Committee. The member’s
resignation will be effective as of the date of delivery or, if later, the date specified in the
notice of resignation.

     Section 9.05 Conduct of Business. The Administrative Committee shall elect a Chairman
from among its members and a Secretary who may or may not be a member. The Administrative Committee
shall conduct its business according to the provisions of this Article 9 and shall hold meetings
from time to time in any convenient location.

     Section 9.06 Quorum. A majority of all of the members of the Administrative Committee
constitutes a quorum and has power to act for the entire Administrative Committee.

     Section 9.07 Voting. All actions taken by the Administrative Committee shall be by
majority vote of the members attending a meeting, whether physically present or through remote
communications. In addition, actions may be taken by written consent of a majority of the

34

 

Administrative Committee members without a meeting. The agreement or disagreement of any
member may be by means of any form of written or oral communications.

     Section 9.08 Records and Reports of the Administrative Committee. The Administrative
Committee shall keep such written records as it shall deem necessary or proper, which records shall
be open to inspection by the Board and the Company.

     Section 9.09 Powers of the Administrative Committee. The Administrative Committee
shall have all powers necessary or incident to its office as plan administrator, and its
determinations and actions shall be binding to the maximum extent permitted by law. Such powers
include, but are not limited to, full discretionary authority to:

     (a) prescribe rules for the operation of the Plan;

     (b) determine eligibility;

     (c) comply with the requirements of reporting and disclosure under ERISA and any other
applicable law, and to prepare and distribute other communications to Participants (and, if
applicable, Beneficiaries) as a part of Plan operations;

     (d) prescribe forms to facilitate the operation of the Plan;

     (e) secure government approvals for the Plan (if applicable);

     (f) construe and interpret the terms of the Plan, including the power to remedy
possible ambiguities, inconsistencies or omissions, and to determine the facts underlying
any claim for benefits;

     (g) determine the amount of benefits, and authorize payments from the trust;

     (h) maintain records;

     (i) litigate, settle claims, and respond to and comply with court proceedings and
orders on the Plan’s behalf;

     (j) enter into contracts on the Plan’s behalf;

     (k) employ counsel and others to render advice about any responsibility that the
Administrative Committee has under the Plan;

     (l) exercise all other powers given to the plan administrator under other provisions of
the Plan.

     From time to time, claims or issues may arise that involve the Plan, including, among others,
claims and issues raised by Participants, those addressed under any of the Internal Revenue
Service’s Employee Plans Compliance Resolution System programs, United States Department of Labor
Voluntary Fiduciary Correction Program, or similar programs, or those permitted under the terms of
a qualified domestic relations order that complies with Code section

35

 

414(p). The resolution, settlement, or adjudication of these claims or issues may result in an
action that is not expressly permitted under some other section of the Plan document (including,
without limitation, additional contributions (which may be subject to such allocation, vesting and
distribution rules as appropriate to undertake the correction without regard to the Plan’s usual
rules as to such matters) or distributions). Such a procedure, agreement, or order will be
respected to the extent that, as determined in the sole discretion of the Administrative Committee,
it does not result in disqualification of the Plan or violate (or cause the Plan to violate) any
applicable statute, government regulation, or ruling.

     If the Plan makes an overpayment of the amount of any benefits due any payee under the Plan,
the Plan may recover the amounts either by requiring the payee to return the excess to the Plan, by
reducing any future Plan payments to the payee, or by any other method that the Administrative
Committee deems reasonable.

     Section 9.10 Allocation or Delegation of Duties and Responsibilities. The
Administrative Committee, Board or the Company may:

     (a) Employ agents to carry out nonfiduciary responsibilities;

     (b) Employ agents to carry out fiduciary responsibilities (other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA) under the rules of Section 9.11;

     (c) Consult with counsel, who may be counsel to the Company or the Parent;

     (d) Provide for the allocation of fiduciary responsibilities (other than trustee
responsibilities as defined in Section 405(c)(3) of ERISA) among their members under the
rules of Section 9.11; and

     (e) In particular, designate one or more officers as having responsibility for
designing and implementing administrative procedures for the Plan.

     Section 9.11 Procedure for the Allocation or Delegation of Fiduciary Duties. The
following rules apply to the allocation or delegation of fiduciary duties:

     (a) Any allocation or delegation of fiduciary responsibilities must be approved by
majority vote of the members of the Administrative Committee, in a resolution approved by
the majority.

     (b) The vote cast by each member of the Administrative Committee for or against the
adoption of such resolution must be recorded and made a part of the written record of the
proceedings.

     (c) Any delegation or allocation of fiduciary responsibilities may be changed or ended
only under the rules of (a) and (b) of this Section 9.11.

     Section 9.12 Expenses of the Plan. All reasonable and proper expenses of
administration of the Plan including counsel fees will be paid out of Plan assets to the extent

36

 

permitted by any applicable collective bargaining agreement, and otherwise shall be paid by
the Employers participating in the Plan (subject to subsection (b)).

     (a) No expenses may be withdrawn from Plan assets without the consent of the
Administrative Committee. The Administrative Committee may authorize the Trustee to withdraw
particular expenses or kinds of expenses on a standing basis.

     (b) The Employers may initially pay any expense that normally would be a charge on Plan
assets and later obtain reimbursement from Plan assets.

     (1) This even applies in cases where, at the time of the Employers’ initial
payment of the expense, it is not clear that the Employers may lawfully seek
reimbursement from Plan assets but the Employers’ legal right to reimbursement is
later clarified.

     (2) It is specifically anticipated that there may be situations, such as
litigation, where the Employers might choose to bear costs initially, but later
obtain reimbursement many years after the costs were incurred. Such delayed
reimbursements shall be permissible.

     Section 9.13 Indemnification. The Parent agrees to indemnify and reimburse, to the
fullest extent permitted by law, members and former members of the Board; members and former
members of the Administrative Committee; employees and former employees of the Parent or its
subsidiaries who act (or acted) for the Administrative Committee, the Parent or an employer
participating in the Plan for any and all expenses, liabilities, or losses arising out of any act
or omission relating to the rendition of services for or the management and administration of the
Plan, except in instances of gross misconduct.

     Section 9.14 Extensions of Time Periods. For good cause shown, the Administrative
Committee may extend any period set forth in the Plan for taking any action required of any
Participant or Beneficiary to the extent permitted by law.

     Section 9.15 Claims and Appeals; Time Limitations; Exhaustion of Remedies. All claims
and appeals related to benefits under the Plan shall be governed by the terms of Article 6 in the
Standard Definitions and Procedures for Certain Huntington Ingalls Industries, Inc. Retirement
Plans.

     Section 9.16 Qualified Domestic Relations Orders. The Administrative Committee shall
establish procedures for handling domestic relations orders.

     Section 9.17 Amendments. The Administrative Committee may amend the Plan through
written resolution to make the changes identified in subsection (a).

     (a) The Administrative Committee may amend the Plan:

     (1) to the extent necessary to keep the Plan in compliance with law;

     (2) to make clarifying changes;

37

 

     (3) to correct drafting errors;

     (4) to otherwise conform the Plan documents to the company’s intent;

     (5) to change the participation and eligibility provisions;

     (6) to change plan definitions, formulas or employee transfer rules;

     (7) with respect to administrative, procedural and technical matters
including benefit calculation procedures, distribution elections and timing, other
elections, waivers, notices, and other ministerial matters; and

     (8) with respect to management of funds, provided that this clause shall not
be construed to authorize the Administrative Committee to alter the availability
of the Huntington Ingalls Industries Fund as an investment option under the Plan.

     (b) Nothing in this Section 9.17 is intended to modify the amendment authority of any
company, board of directors, officer or other committee.

     Section 9.18 Payment to Minors or Persons Under Legal Disability. If any benefit
becomes payable to a minor or a person for whom a legal guardian has been appointed, payment of
such benefit will be made only to the conservator or the guardian of the estate of such person
appointed by a court of competent jurisdiction or such other person or in such other manner as the
Administrative Committee determines is necessary to ensure that the payment will legally discharge
the Plan’s obligation to such person.

     Section 9.19 Trust Fund. The Trust Fund will be held by the Trustee for the exclusive
benefit of Participants and Beneficiaries. The assets held in the Trust Fund will be invested and
reinvested in accordance with the terms of the Trust Agreement, which is hereby incorporated into
and made a part of the Plan. All benefits will be paid solely out of the Trust Fund, and no
Employer will be otherwise liable for benefits payable under the Plan.

     Section 9.20 Electronic Media. Notwithstanding any provision of the Plan to the
contrary, including any provision which requires the use of a written instrument, to the extent
permitted by applicable law, the Administrative Committee may establish procedures for the use of
electronic media in communications and transactions between and among the Plan, the Company, a
Committee, the Trustee, Participants and Beneficiaries and any other person. Electronic media may
include, but are not limited to, e-mail, the Internet, Intranet systems and the telephone response
system.

38

 

Article 10

Limitations On Allocations To Participants’ Accounts

     Section 10.01 Maximum Allocation.

     (a) Incorporation by Reference. Notwithstanding any other provisions of the
Plan to the contrary, the total amount allocated to the Participant’s Account shall not
exceed the limitations imposed under Code Section 415, the provisions of which are
incorporated into the Plan by reference. For this purpose compensation shall mean total
compensation to the Participant reportable by the Controlled Group Members for the
limitation year on a Wage and Tax Statement (Form W-2) as remuneration for the personal
service of the Participant, and shall include any elective deferral (as defined in Code
Section 402(g)(3)), and any amount which is contributed or deferred by the Employer at the
election of the Participant and which is not includible in gross income by reason of Code
Sections 125, 132(f)(4), or 457.

     (b) Reductions Among Defined Contribution Plans. If the limitations of this
Section would be exceeded for any person for any limitation year because of the combined
annual addition under this Plan and one or more other plans of the Employer and/or a
Controlled Group Member (without regard to this subsection), adjustments shall be made to
reduce such annual addition so as to eliminate such excess as follows, but only to the
extent necessary to eliminate such excess annual addition:

     (1) First, to the extent such person is eligible to make catch-up
contributions, by recharacterizing elective deferrals and/or Roth contributions
under this Plan and/or the other plan as catch-up contributions and/or Roth
catch-up contributions to the extent permitted by the relevant plan, and subject
to the person’s limitation on catch-up contributions and Roth catch-up
contributions for the relevant year, with recharacterization occurring first in a
manner that will minimize the impact on the Participant’s eligibility for matching
contributions and thereafter on a last-in, first-out basis, except that if the
other plan includes an ordering rule that is different than the ordering rule set
forth in this subsection, the other plan’s ordering rule shall prevail if
expressly required by such other plan.

     (2) Second, by using the procedures set forth in the Employee Plans
Compliance Resolution System (or any successor guidance thereto), treating all
defined contribution plans as a single plan for purposes of applying the ordering
rules set forth therein; and

     (3) Third, on a last-in, first-out basis with respect to this Plan and/or the
other plan, provided, however, to the extent that the other plan includes an
ordering rule that is different than the ordering rule set forth in this
subsection, the other plan’s ordering rule shall prevail, if expressly required by
such other plan.

39

 

     Section 10.02 Elective Deferrals — Contribution Limitation. No Participant shall be
permitted to have elective deferrals made under this Plan, or any other qualified plan maintained
by the Controlled Group Members during any taxable year, in excess of the dollar limitation
contained in Section 402(g) of the Code in effect for such taxable year, except to the extent
permitted under Section 3.02 of the Plan and Section 414(v) of the Code, if applicable.

40

 

Article 11

Restrictions On Distributions To

Participants And Beneficiaries

     Section 11.01 Priority over Other Distribution Provisions. The provisions set forth in
this Article will supersede any conflicting provisions of Article 7 or Article 8.

     Section 11.02 Restrictions on Commencement of Distributions. The provisions of this
Section will apply to restrict the ability to delay the commencement of distributions. Distribution
of the Participant’s interest in his Account will begin no later than the 60th day after the close
of the Plan Year in which occurs the latest of (A) the date on which the Participant attains age
65, (B) the tenth anniversary of the Plan Year in which the Participant began participation in the
Plan, or (C) the Participant’s termination of employment.

     Section 11.03 Minimum Distribution Requirements.

     (a) General Rules.

     (1) Effective Date. The provisions of this Section 11.03 shall apply
for determining required minimum distributions for calendar years beginning on or
after January 1, 2003.

     (2) Precedence. The provisions of this Section 11.03 will take
precedence over any inconsistent provisions of the Plan.

     (3) Treasury Regulations Incorporated. All distributions required
under this Section 11.03 will be determined and made in accordance with the
Treasury Regulations under Section 401(a)(9) of the Code.

     (4) TEFRA Section 242(b)(2) Elections. Notwithstanding the other
provisions of the Plan, distributions may be made under a designation made before
January 1, 1984, in accordance with Section 242(b)(2) of the Tax Equity and Fiscal
Responsibility Act (“TEFRA”).

     (b) Time and Manner of Distribution.

     (1) Mandatory Commencement Date. The Participant’s entire interest
will be distributed, or begin to be distributed, to the Participant no later than
the Participant’s Mandatory Commencement Date.

     (2) Death of Participant Before Distributions Begin. If the
Participant dies before distributions begin, the Participant’s entire interest
will be distributed, or begin to be distributed, no later than as follows:

     (A) If the Participant’s surviving spouse is the Participant’s sole
designated beneficiary, then distributions to the surviving spouse will
begin by December 31 of the calendar year immediately following the calendar
year in which the Participant died, or by December 31 of the

41

 

calendar year in which the Participant would have attained age 701/2, if
later.

     (B) If the Participant’s surviving spouse is not the Participant’s sole
designated beneficiary, then distributions to the designated beneficiary
will begin by December 31 of the calendar year immediately following the
calendar year in which the Participant died.

     (C) If there is no designated beneficiary as of September 30 of the
year following the year of the Participant’s death, the Participant’s entire
interest will be distributed by December 31 of the calendar year containing
the fifth anniversary of the Participant’s death.

     (D) If the Participant’s surviving spouse is the Participant’s sole
designated beneficiary and the surviving spouse dies after the Participant
but before distributions to the surviving spouse begin, this Section
11.03(b)(2), other than Section 11.03(b)(2)(A), will apply as if the
surviving spouse were the Participant.

     For purposes of this Section 11.03(b) and Section 11.03(d), unless Section
11.03(b)(2)(D) applies, distributions are considered to begin on the Participant’s Mandatory
Commencement Date. If Section 11.03(b)(2)(D) applies, distributions are considered to begin
on the date distributions are required to begin to the surviving spouse under Section
11.03(b)(2)(A). If distributions under an annuity purchased from an authorized annuity
provider irrevocably commence to the Participant before the Participant’s Mandatory
Commencement Date (or to the Participant’s surviving spouse before the date distributions
are required to begin to the surviving spouse under Section 11.03(b)(2)(A)), the date
distributions are considered to begin is the date distributions actually commence.

     (3) Forms of Distribution. Unless the Participant’s interest is
distributed in the form of an annuity purchased from an authorized annuity
provider or in a single sum on or before the Mandatory Commencement Date, as of
the first distribution calendar year distributions will be made in accordance with
subsections (c) and (d). If the Participant’s interest is distributed in the form
of an annuity purchased from an authorized annuity provider, distributions under
that annuity will be made in accordance with the requirements of Section 401(a)(9)
of the Code and the Treasury Regulations.

     (c) Required Minimum Distributions During Participant’s Lifetime.

     (1) Amount of Required Minimum Distribution For Each Distribution
Calendar Year. During the Participant’s lifetime, the minimum amount that will
be distributed for each distribution calendar year is the lesser of:

     (A) the quotient obtained by dividing the Participant’s Account balance
by the distribution period in the Uniform Lifetime Table set forth in
Section 1.401(a)(9)-9 of the Treasury Regulations, using the

42

 

Participant’s age as of the Participant’s birthday in the distribution
calendar year; or

     (B) if the Participant’s sole designated beneficiary for the
distribution calendar year is the Participant’s spouse, the quotient
obtained by dividing the Participant’s Account balance by the number in the
Joint and Last Survivor Table provided in Section 1.401(a)(9)-9 of the
Treasury Regulations, using the Participant’s and spouse’s attained ages as
of the Participant’s and spouse’s birthdays in the distribution calendar
year.

     (2) Lifetime Required Minimum Distributions Continue Through Year of
Participant’s Death. Required minimum distributions will be determined under
this Section 11.03(c) beginning with the first distribution calendar year and up
to and including the distribution calendar year that includes the Participant’s
date of death.

     (d) Required Minimum Distributions After Participant’s Death.

     (1) Death On or After Date Distributions Begin.

     (A) Participant Survived by Designated Beneficiary. If the Participant
dies on or after the date distributions begin and there is a designated
beneficiary, the minimum amount that will be distributed for each
distribution calendar year after the year of the Participant’s death is the
quotient obtained by dividing the Participant’s Account balance by the
longer of the remaining life expectancy of the Participant or the remaining
life expectancy of the Participant’s designated beneficiary, determined as
follows:

     (i) The Participant’s remaining life expectancy is calculated
using the age of the Participant in the year of death, reduced by one
for each subsequent year.

     (ii) If the Participant’s surviving spouse is the Participant’s
sole designated beneficiary, the remaining life expectancy of the
surviving spouse is calculated for each distribution calendar year
after the year of the Participant’s death using the surviving
spouse’s age as of the spouse’s birthday in that year. For
distribution calendar years after the year of the surviving spouse’s
death, the remaining life expectancy of the surviving spouse is
calculated using the age of the surviving spouse as of the spouse’s
birthday in the calendar year of the spouse’s death, reduced by one
for each subsequent calendar year.

     (iii) If the Participant’s surviving spouse is not the
Participant’s sole designated beneficiary, the designated
beneficiary’s remaining life expectancy is calculated using the age

43

 

     of the beneficiary in the year following the year of the
Participant’s death, reduced by one for each subsequent year.

     (B) No Designated Beneficiary. If the Participant dies on or after the
date distributions begin and there is no designated beneficiary as of
September 30 of the year after the year of the Participant’s death, the
minimum amount that will be distributed for each distribution calendar year
after the year of the Participant’s death is the quotient obtained by
dividing the Participant’s Account balance by the Participant’s remaining
life expectancy calculated using the age of the Participant in the year of
death, reduced by one for each subsequent year.

     (2) Death Before Date Distributions Begin.

     (A) Participant Survived by Designated Beneficiary. If the Participant
dies before the date distributions begin and there is a designated
beneficiary, the minimum amount that will be distributed for each
distribution calendar year after the year of the Participant’s death is the
quotient obtained by dividing the Participant’s Account balance by the
remaining life expectancy of the Participant’s designated beneficiary,
determined as provided in Section 11.03(d)(1).

     (B) No Designated Beneficiary. If the Participant dies before the date
distributions begin and there is no designated beneficiary as of September
30 of the year following the year of the Participant’s death, distribution
of the participant’s entire interest will be completed by December 31 of the
calendar year containing the fifth anniversary of the Participant’s death.

     (C) Death of Surviving Spouse Before Distributions to Surviving Spouse
Are Required to Begin. If the Participant dies before the date distributions
begin, the Participant’s surviving spouse is the Participant’s sole
designated beneficiary, and the surviving spouse dies before distributions
are required to begin to the surviving spouse under Section 11.03(b)(2)(A),
this Section 11.03(d)(2) will apply as if the surviving spouse were the
Participant.

     (e) Definitions.

     (1) Designated Beneficiary. The individual who is designated as the
beneficiary under the Plan and is the designated beneficiary under Section
401(a)(9) of the Code and Section 1.401(a)(9)-4, Q&A-4, of the Treasury
Regulations.

     (2) Distribution Calendar Year. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant’s
death, the first distribution calendar year is the calendar year immediately
preceding the calendar year containing the Participant’s Mandatory

44

 

Commencement Date. For distributions beginning after the Participant’s death,
the first distribution calendar year is the calendar year in which distributions
are required to begin under Section 11.03(b)(2). The required minimum distribution
for the Participant’s first distribution calendar year will be made on or before
the Participant’s Mandatory Commencement Date. The required minimum distribution
for other distribution calendar years, including the required minimum distribution
for the distribution calendar year in which the Participant’s Mandatory
Commencement Date occurs, will be made on or before December 31 of that
distribution calendar year.

     (3) Life Expectancy. Life expectancy as computed under the Single
Life Table in Section 1.401(a)(9)-9 of the Treasury Regulations.

     (4) Mandatory Commencement Date. April 1 of the calendar year
following the later of (a) the calendar year in which the Participant attains age
seventy and one-half (701/2) or (b) the calendar year in which the Participant
retires, except that (b) shall not apply in the case of a Participant who is a
five percent (5%) owner (as defined in Section 416 of the Code) with respect to
the Plan Year ending in the calendar year in which the Participant attains age
seventy and one-half (701/2).

     (5) Participant’s Account Balance. The Account balance as of the last
valuation date in the calendar year immediately preceding the distribution
calendar year (valuation calendar year) increased by the amount of any
contributions made and allocated or forfeitures allocated to the Account balance
as of dates in the valuation calendar year after the valuation date and decreased
by distributions made in the valuation calendar year after the valuation date. The
Account balance for the valuation calendar year includes any amounts rolled over
or transferred to the Plan either in the valuation calendar year or in the
distribution calendar year if distributed or transferred in the valuation calendar
year.

     (f) Waiver of 2009 Required Minimum Distribution. Notwithstanding the preceding
provisions of this Article, Participants and Beneficiaries who would have been required to
receive required minimum distributions for calendar year 2009 but for the enactment of Code
Section 401(a)(9)(H) (“2009 RMDs”), and who would have satisfied that requirement by
receiving distributions that are (1) equal to the 2009 RMDs or (2) one or more payments in a
series of substantially equal distributions (that include the 2009 RMDs) made at least
annually and expected to last for the life (or life expectancy) of such Participants, the
joint lives (or joint life expectancy) of such Participants and the Participants’ designated
Beneficiaries, or for a period of at least 10 years, will not receive those distributions
for calendar year 2009. A direct rollover will be offered only for distributions that would
be eligible rollover distributions without regard to Code Section 401(a)(9)(H).

     Section 11.04 Delayed Payments. If the amount of a distribution required to begin on a
date determined under the applicable provisions of the Plan cannot be ascertained by such date,

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or if it is not possible to make such payment on such date because the Administrative
Committee has been unable to locate a Participant or Beneficiary after making reasonable efforts to
do so, a payment retroactive to such date may be made no later than 60 days after the earliest date
on which the amount of such payment can be ascertained or the date on which the Participant or
Beneficiary is located (whichever is applicable).

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Article 12

Adoption Of Plan By Controlled Group Members

     Section 12.01 Adoption Procedure. Any Controlled Group Member may become an Employer
under the Plan provided that (A) the Board approves the adoption of the Plan by the Controlled
Group Member and designates the Controlled Group Member as an Employer; (B) the Controlled Group
Member adopts the Plan and Trust Agreement together with all amendments then in effect by
appropriate resolutions of the board of directors of the Controlled Group Member; and (C) the
Controlled Group Member by appropriate resolutions of its board of directors agrees to be bound by
any other terms and conditions which may be required by the Board, provided that such terms and
conditions are not inconsistent with the purposes of the Plan.

     Section 12.02 Effect of Adoption by Controlled Group Member. A Controlled Group Member
that adopts the Plan pursuant to this Article will be deemed to be an Employer for all purposes
hereunder, unless otherwise specified in the resolutions of the Board designating the Controlled
Group Member as an Employer. In addition, the Board may provide, in its discretion and by
appropriate resolutions, that the Employees of the Controlled Group Member will receive credit for
their employment with the Controlled Group Member prior to the date it became a Controlled Group
Member for purposes of determining the eligibility of such Employees to participate in the Plan,
provided that such credit will be applied in a uniform and nondiscriminatory manner with respect to
all such Employees.

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Article 13

Amendment Of The Plan

     Section 13.01 Right to Amend Plan. Parent reserves the right to amend the Plan at any
time and from time to time to the extent it may deem advisable or appropriate, subject to the
following conditions: (A) no amendment shall increase the duties or liabilities of the Trustee
without its written consent; (B) no amendment shall cause a reversion of Plan assets to the
Employers not otherwise permitted under the Plan; (C) no amendment shall have the effect of
reducing the percentage of the vested and nonforfeitable interest of any Participant in his
Account, nor shall the vesting provisions of the Plan be amended with respect to contributions then
permitted; and (D) no amendment shall be effective to the extent that it has the effect of
decreasing a Participant’s Account balance or eliminating an optional form of distribution as it
applies to an existing Account balance.

     If the vesting schedule of the Plan is amended in such a way that a Participant might in any
Plan Year have less vesting credit under the new schedule than under the schedule prior to the
amendment, each Participant with at least three Years of Service may elect to have his
nonforfeitable percentage computed without regard to such amendment. The period during which such
election may be made shall commence with the date the amendment is adopted and shall end on the
latest of (i) sixty days after the amendment is adopted, (ii) sixty days after the amendment
becomes effective, or (iii) sixty days after the Participant is provided with written notice of the
amendment. Furthermore, to the extent required by law, a Participant’s vested interest in his
pre-amendment benefits shall never be less than it would have been in the absence of the amendment,
regardless of his Years of Service.

     Section 13.02 Amendment Procedure. Any amendment to the Plan will be evidenced by an
appropriate written instrument executed by an authorized officer or officers of the Parent.

     Section 13.03 Effect on Employers. All Employers will be bound by any amendment
permitted under Section 13.01 and adopted pursuant to Section 13.02.

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Article 14

Termination, Partial Termination And

Complete Discontinuance Of Contributions

     Section 14.01 Continuance of Plan. The Employers expect to continue the Plan
indefinitely. However, subject to the Basic Labor Agreement, they do not assume an individual or
collective contractual obligation to do so, and the right is reserved to the Company, by action of
the Board, to terminate the Plan or to completely discontinue contributions thereto at any time. In
addition, subject to a Basic Labor Agreement and to the remaining provisions of this Article, any
Employer at any time may discontinue its participation in the Plan with respect to its Employees.

     Section 14.02 Disposition of the Trust Fund. If the Plan is terminated, or if there is
a complete discontinuance of contributions to the Plan, the Company will instruct the Trustee to
follow one of the following alternative:

     (a) To continue to administer the Plan and pay benefits in accordance with the Plan
until the Trust Fund has been depleted;

     (b) Unless a Controlled Group Member maintains an alternative defined contribution plan
(other than an ESOP as defined in Sections 409(a) or 4975(e)(7) of the Code, a SEP as
defined in Section 408(k) of the Code, a SIMPLE IRA plan as defined in Section 408(p) of the
Code, a plan or contract described in Section 403(b) of the Code or a plan described in
Sections 457(b) or (f) of the Code) at any time during the period beginning on the date of
termination and ending 12 months after all assets have been distributed from the Plan, to
distribute the assets remaining in the Trust Fund. The Trustee will distribute to each
Participant in a lump sum, in cash or in kind, as the Company may direct, the amount
credited to his Account as of the date of completion of the Trust Fund termination; or

     (c) To transfer all assets and liabilities of the trust to another continuing employee
benefit trust described in Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code, provided that the distribution limitations imposed by Section 401(k) of
the Code and the Treasury Regulations thereunder on Before-Tax Contributions and Catch-up
Contributions must continue to apply after transfer as required by law.

     Under alternatives (b) and (c), above, the Company shall direct the Trustee to value the Trust
Fund as of a date just prior to the payment of benefits or the transfer of assets, respectively,
and the Company shall allocate the net value of the Trust Fund among the Accounts of Participants
and beneficiaries as if the Plan Year had ended on such date.

     Section 14.03 Withdrawal by An Employer. An Employer may withdraw from participation
in the Plan or completely discontinue contributions to the Plan only with the approval of the
Board, and only to the extent permitted under the Basic Labor Agreement. If any Employer withdraws
from the Plan or completely discontinues contributions to the Plan, a copy of the resolutions of
the board of directors of the Employer adopting such action, certified by the

49

 

secretary of such board of directors and reflecting approval by the Board, will be delivered
to the Company as soon as it is administratively feasible to do so, and the Company will
communicate such action to the Trustee and to the Employees of the Employers.

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Article 15

Miscellaneous

     Section 15.01 Reversion Prohibited.

     (a) General Rule. Except as provided in subsections (b) and (c), it will be
impossible for any part of the Trust Fund either (A) to be used for or diverted to purposes
other than those which are for the exclusive benefit of Participants and their Beneficiaries
(except for the payment of taxes and those administrative expenses provided for under
Section 6.11), or (B) to revert to a Controlled Group Member.

     (b) Disallowed Contributions. Each contribution of the Employers under the Plan
is expressly conditioned upon the current deductibility of the contribution under Code
Section 404. If all or part of an Employer’s contribution is disallowed as a deduction under
Code Section 404, such disallowed amount (reduced by any Trust Fund losses attributable
thereto) may be returned by the Trustee to the Employer with respect to which the deduction
was disallowed (upon the direction of the Company) within one year after the disallowance.

     (c) Mistaken Contributions. If a contribution is made by an Employer by reason
of a mistake of fact, then so much of the contribution as was made as a result of the
mistake (reduced by any Trust Fund losses attributable thereto) may be returned by the
Trustee to the Employer (upon direction of the Company) within one year after the mistaken
contribution was made.

     Section 15.02 Bonding Insurance and Indemnity.

     (a) Bonding. To the extent required under ERISA, the Employers will obtain, pay
for and keep current a bond or bonds with respect to each Committee member and each Employee
who receives, handles, disburses, or otherwise exercises custody or control of, any of the
assets of the Plan.

     (b) Insurance. The Employers, in their discretion, may obtain, pay for and keep
current a policy or policies of insurance, insuring the Committee members, the members of
the board of directors of each Employer and other Employees to whom any fiduciary
responsibility with respect to the administration of the Plan has been delegated against any
and all costs, expenses and liabilities (including attorneys, fees) incurred by such persons
as a result of any act, or omission to act, in connection with the performance of their
duties, responsibilities and obligations under the Plan and any applicable law.

     (c) Indemnity. If the Employers do not obtain, pay for and keep current the
type of insurance policy or policies referred to in Subsection (b), or if such insurance is
provided but any of the parties referred to in Subsection (b) incur any costs or expenses
which are not covered under such policies, then the Employers will indemnify and hold
harmless, to the extent permitted by law, such parties against any and all costs, expenses
and liabilities (including attorneys’ fees) incurred by such parties in performing their
duties and responsibilities under this Plan, provided that such party or parties were acting
in good faith within what was reasonably believed to have been the best interests of the

51

 

Plan and its Participants. However, this Subsection shall not apply to any costs,
expenses, or liabilities incurred by a party referred to in (b) above with respect to a
matter as to which such a party is judged liable for gross negligence or willful misconduct
in the performance of his duties.

     Section 15.03 Merger, Consolidation or Transfer of Assets. There will be no merger or
consolidation of all or any part of the Plan with, or transfer of the assets or liabilities of all
or any part of the Plan to, any other Qualified Plan unless each Participant who remains a
Participant hereunder and each Participant who becomes a participant in the other Qualified Plan
would receive a benefit immediately after the merger, consolidation or transfer (determined as if
the other Qualified Plan and the Plan were then terminated) which is equal to or greater than the
benefit they would have been entitled to receive under the Plan immediately before the merger,
consolidation or transfer if the Plan had then terminated. The terms and conditions of any such
transaction must satisfy all applicable legal requirements.

     Section 15.04 Spendthrift Clause.

     (a) Nonalienation. Except with respect to federal income tax withholding and
federal tax levies or with respect to liens or judgments applicable to the Plan under the
Mandatory Victims Restitution Act or other federal law determined to override the
anti-alienation provisions of ERISA and the Code with respect to the Plan, the rights of any
Participant or Beneficiary to and in any benefits under the Plan will not be subject to
assignment or alienation, and no Participant or Beneficiary will have the power to assign,
transfer or dispose of such rights, nor will any such rights to benefits be subject to
attachment, execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or equitable process. Notwithstanding the foregoing, the Administrative Committee and
Trustee shall honor a “qualified domestic relations order,” as defined under Section 414(p)
of the Code (a “QDRO”), and may distribute amounts from the Plan to an alternate payee
described in any such order in accordance with the terms of the order. The Administrative
Committee shall establish procedures to determine the qualified status of domestic relations
orders and to administer the provisions of, and distributions under, such orders in
accordance with Section 414(p) of the Code.

     (b) Distributions pursuant to QDROs. If a QDRO so provides, the portion of a
Participant’s Account payable to the alternate payee(s) shall be distributed to the
alternate payee(s) at the time specified in the QDRO, regardless of whether the Participant
is entitled to a distribution from the Plan at such time.

     Section 15.05 Rights of Participants. Participation in the Plan will not give any
Participant the right to be retained in the employ of a Controlled Group Member or any right or
interest in the Plan or the Trust Fund except as expressly provided herein.

     Section 15.06 Gender, Tense and Headings. Whenever any words are used herein in the
masculine gender, they will be construed as though they were also used in the feminine gender in
all cases where they would so apply. Whenever any words used herein are in the singular form, they
will be construed as though they were also used in the plural form in all cases where they

52

 

would so apply. Headings of Articles, Sections and subsections as used herein are inserted
solely for convenience and reference and constitute no part of the Plan.

     Section 15.07 Governing Law. The Plan will be construed and governed in all respects
in accordance with applicable federal law and, to the extent not preempted by such federal law, in
accordance with the laws of the Commonwealth of Virginia. References to a “spouse” or “surviving
spouse” herein shall be interpreted in accordance with the requirements of the federal Defense of
Marriage Act as including only a person of the opposite gender from the Participant, unless
otherwise expressly stated herein.

     IN WITNESS WHEREOF, Huntington Ingalls Industries, Inc. has caused this amended and restated
Plan to be executed by its duly authorized representative on this 30th day of March, 2011.

	 	 	 	 	 
	 	HUNTINGTON INGALLS INDUSTRIES, INC.

 	 
	 	By  	/s/ William Ermatinger
 	 
	 	 	William Ermatinger 	 
	 	 	Vice President and Chief Human Resources
Officer 	 
	 

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APPENDIX A

Acquisition of Newport News Shipbuilding Inc.

     Section A.01 Historical Reference. This Appendix is for historical reference only.

     Section A.02 In General. This Appendix provides special rules concerning the
acquisition by Northrop Grumman Corporation of Newport News Shipbuilding Inc. (the “Newport News
Shipbuilding Acquisition”).

     (a) Purpose. This Appendix prevents employees of the Northrop Grumman Group
from receiving coverage or any credit for service or compensation under this Plan with
respect to periods before the Newport News Shipbuilding Acquisition unless mandated by the
minimum statutory requirements of the Code or ERISA or until the Plan and this Appendix are
explicitly amended to provide otherwise. (For this purpose, “minimum statutory requirements”
refers only to statutory provisions concerning coverage, compensation, and service. This
Appendix overrides any Plan language that might otherwise give further rights than what the
statutes alone require.)

     (b) General Override. The provisions of this Appendix override any contrary
provisions elsewhere in the documents governing the Plan.

     (c) Definitions. For purposes of this Appendix:

     (1) Subject to (A) and (B), the term “Northrop Grumman Group” generally
means Northrop Grumman Corporation (EIN 95 4840775) and any entity affiliated with
it under Sections 414(b), (c), (m) or (o) of the Code.

     (A) With reference to periods before the Closing Date, the term
“Northrop Grumman Group” means the entire affiliated group.

     (B) With reference to periods on and after the Closing Date, the term
“Northrop Grumman Group” means the entire affiliated group, but not
including Newport News Shipbuilding Inc. (and any successor entity) and its
subsidiaries.

     (2) The term “Closing Date” means the date on which Northrop Grumman
Corporation purchases a majority interest in the shares of Newport News
Shipbuilding, Inc. pursuant to the exchange offer by Northrop Grumman Corporation
filed with the Securities and Exchange Commission on Form S-4.

     (3) The term “Newport News Shipbuilding Affiliation Date” means the
date as of which Newport News Shipbuilding, Inc. (or any successor entity) becomes
affiliated with Northrop Grumman Corporation under the rules of Sections 414(b),
(c), (m) or (o) of the Code.

     Section A.03 Acquisition of Newport News Shipbuilding, Inc. Effective as of the
Closing Date, Newport News Shipbuilding, Inc. became a subsidiary of Northrop Grumman Corporation.

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     Section A.04 Coverage. No individuals who were employees of the Northrop Grumman Group
immediately before the Closing Date may participate in this Plan. No individuals who became
employees of the Northrop Grumman Group after the Closing Date may participate in this Plan.

     Section A.05 Service With the Northrop Grumman Group.

     (a) Service with the Northrop Grumman Group is counted under this Plan only if required
by the provisions in the Code and ERISA governing service counting. No language in this Plan
will be interpreted to give further rights than these statutes require.

     (b) Service with the Northrop Grumman Group prior to the Newport News Shipbuilding
Affiliation Date will not be counted as service for any purpose.

     (c) Service performed with the Northrop Grumman Group after the Newport News
Shipbuilding Affiliation Date is credited for participation and vesting purposes under this
Plan only to the extent required by Code Sections 410(a) and 411(a) and ERISA Sections 202
and 203.

     (d) No service with the Northrop Grumman Group shall be counted in calculating benefits
or determining entitlement to optional forms of payment or early retirement, disability,
layoff, or plant shutdown benefits, even if otherwise determined by reference to vesting
service.

     Section A.06 Compensation. No compensation for services performed for the Northrop
Grumman Group shall be treated as compensation under this Plan, except to the extent required by
ERISA or the Code.

     Section A.07 Nonduplication. Employees are not covered by this Plan for any Plan Year
or portion of a Plan Year before March 31, 2011 if they were actively participating under any plan
of the Northrop Grumman Group qualified under Section 401(a) of the Code.

     (a) Solely for purposes of this Section, employees were active participants in another
plan if they were generally eligible to make or receive contributions or accrue benefits
under the plan, or would be, but for limits in the plan.

     (b) If an employee could have been covered by two plans, both of which include this
provision (or a similar provision), the plan administrators resolved the discrepancy to
allow eligibility for one plan or another but not both.

     Section A.08 Termination of Employment. No termination of employment will be deemed to
occur as a result of the Newport News Shipbuilding Acquisition, any corporate reorganization
incident to the Newport News Shipbuilding Acquisition, any later liquidation of Newport News
Shipbuilding, Inc. (or any successor entity) or its subsidiaries, any transfer of assets or
liabilities between members of the group consisting of Northrop Grumman Corporation and its
subsidiaries or the spin-off of Northrop Grumman Shipbuilding, Inc. as of March 31, 2011.

55

 

     (a) Similarly, there will be no “separation from service” or “severance from service”
or event described by a similar term.

     (b) The provisions of this Section A.08 are not intended to modify any service-counting
provisions in the Plan, to extend service credits when they would not otherwise be given,
nor to override Section A.05 above.

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APPENDIX B

Huntington Ingalls Industries, Inc. Newport News Operations

Employee Stock Ownership Plan

ARTICLE B1

General Provisions

     Section B1.01 Single Plan. The ESOP is a part of the Plan. The ESOP and the Plan
constitute a single plan. References to “the Plan” mean the entire Huntington Ingalls Industries,
Inc. Newport News Operations Savings (401(k)) Plan for Union Eligible Employees, including the ESOP
as set forth in this Appendix B.

     Section B1.02 Plan Year. The Plan Year for the ESOP is the same as for the rest of the
Plan, the calendar year.

     Section B1.03 Application of Plan Provisions. The provisions of the Plan apply to the
ESOP except as modified by the ESOP provisions. The only investment available under the ESOP is the
Huntington Ingalls Industries Fund (without prejudice to the rights of Participants and
Beneficiaries to diversify out of the ESOP pursuant to Article B6).

     Section B1.04 Form of Contributions. Any contributions made to the ESOP may be made in
the form of cash or Qualifying Securities at the discretion of the Company.

     Section B1.05 Vesting. Amounts allocated to ESOP Accounts vest on the same schedules
(based on contribution type) as under the non-ESOP component of the Plan.

     Section B1.06 Forfeitures. Non-vested amounts under the ESOP are forfeited, restored
and applied in the same manner as non-vested amounts under the non-ESOP component of the Plan.

     Section B1.07 Section 415 Limitations. In the event the ESOP obtains a loan, the
limitations of Code Section 415 will be based on contributions made to repay the loan which are
allocated to a Participant’s ESOP Account rather than with respect to amounts released from the
Suspense Account and allocated to a Participant’s Account.

     Section B1.08 Non-Allocation Rules. The ESOP is not expected to purchase Qualifying
Securities in a transaction subject to Section 1042 of the Code, but if the Plan does purchase
Qualifying Securities in such a transaction, it will restrict allocations in accordance with
Section 409(n) of the Code. Furthermore, at present none of the Controlled Group Members are S
Corporations, but the ESOP will adhere to the non-allocation requirements of Section 409(p) if it
ever holds Qualifying Securities of an S Corporation.

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ARTICLE B2

Company Contributions

     Section B2.01 Company Contributions. It is not intended that the Employer will
designate contributions for investment in the ESOP. Contributions made to the Plan will be invested
in the ESOP or in the non-ESOP component of the Plan in accordance with Participant investment
elections for new contributions (or, in the absence of such an election, will be invested in the
Plan’s qualifying default investment alternative).

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ARTICLE B3

Dividends

     Section B3.01 In General. This Article provides for the treatment of Dividends. These
rules apply to all Dividends under the ESOP.

     Section B3.02 Allocation of Dividends. Dividends on Qualifying Securities allocated to
a Participant’s ESOP Account will be allocated to that ESOP Account.

     Section B3.03 Excess Dividends.

     (a) Cash Dividends. Cash Dividends are subject to the election provided under
Code Section 404(k)(2)(A)(iii). Each Participant will be provided, on a quarterly basis,
with an option to have cash Dividends:

     (1) Distributed to the Participant no later than 90 days after the close of the
Plan Year in which the cash Dividends are paid to the Plan; or

     (2) Paid to the Plan and reinvested in Qualifying Securities in the
Participant’s Account.

If a Participant fails to make an election, the cash Dividends will be paid to the Plan and
reinvested in Qualifying Securities in the Participant’s Account. Participants will be fully
vested in cash Dividends with respect to which an election under this Section is offered.

     (b) Stock Dividends. Stock Dividends on Qualifying Securities already allocated
to a Participant’s ESOP Account will be allocated to that ESOP Account as Qualifying
Securities.

     Section B3.04 Conditioned on Deductibility. Distribution of Dividends under the
preceding Section will be made only if the Administrative Committee can reasonably determine that
the distributed Dividends will be deductible for federal income tax purposes by the Company or the
Parent under the provisions of the Code, including Code Section 404(k) or any successor provision.

     Section B3.05 Direct Distribution of Dividends. The Company or the Parent may, in its
discretion, distribute Dividends directly to Participants rather than paying them to the Plan for
distribution to Participants.

     Section B3.06 Meaning of “Participant”. For purposes of this Article, the term
“Participant” includes a Beneficiary who retains credit under an ESOP Account following a
Participant’s death.

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ARTICLE B4

Voting Rights and Tender Offers

     Section B4.01 In General. Qualifying Securities may be subject to an offer to purchase
or otherwise acquire from time to time (an “Offer”). In addition, Qualifying Securities may carry
the right to vote on particular (or all) issues subject to a vote by shareholders of the Company or
Parent or its delegate, as applicable, and such votes may be subject to proxy solicitations. This
Article sets forth provisions governing responses to such Offers for and such voting of Qualifying
Securities held under the Trust Agreement and for responses to proxy solicitations. The provisions
of this Article, and the corresponding provisions in the Trust Agreement are to be construed
identically.

     Section B4.02 Voting of Qualifying Securities. Shares of Qualifying Securities shall
be voted by the Trustee only in accordance with directions from Participants as provided below:

     (a) Participants Entitled to Vote: Participants entitled to instruct the
Trustee with regard to voting shall be those Participants, including Beneficiaries, (the
“Eligible Participants”) who retain credit under an ESOP Account. The list of Eligible
Participants will be fixed by the Administrative Committee as of the Determination Date for
purposes of this Section, which shall be the last day of the month next preceding the record
date established by the Board for the matter or matters to be voted on. However, if such
Determination Date is less than twenty-five days prior to such record date, the applicable
Determination Date shall be the last day of the second preceding month. Eligible
Participants shall be named fiduciaries (under ERISA Section 403(a)(1)) for purposes of
directing the Trustee under this Section.

     (b) Allocation of Shares: The number of shares initially allocated to an
Eligible Participant for purposes of voting will be the number (calculated to 5 decimal
places) obtained by (1) dividing the number of shares of Qualifying Securities held in the
Huntington Ingalls Industries Fund (as defined in the Trust Agreement) of the Plan as of the
close of business on the applicable Determination Date by the number of units in the
Huntington Ingalls Industries Fund credited to the accounts of all Eligible Participants as
of such Determination Date, and (2) multiplying the quotient so obtained by the number of
units in the Huntington Ingalls Industries Fund credited to the account of such Eligible
Participant as of the close of business on such Determination Date.

     (c) Notification of Participants: In connection with the solicitation of
proxies, the Parent or its delegate, on behalf of the Trustee, shall notify all Eligible
Participants of their rights with respect to voting and:

     (1) shall furnish to the Eligible Participants all soliciting and other
materials furnished to the shareholders generally concerning the matter or matters
to be voted on;

     (2) shall solicit for the Trustee voting instructions from the Eligible
Participants concerning such matter or matters;

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     (3) shall state in the notice the date as of which instructions must be
received by the Parent or its delegate from Eligible Participants in order to be
considered timely;

     (4) shall notify each Eligible Participant in writing of the number of shares
of Qualifying Securities as to which such Eligible Participant is entitled to give
voting instructions to the Trustee under Section B4.02(b) and

     (5) shall state in such notice that the Eligible Participant’s instructions
shall also apply to his or her portion of the undirected shares (described below).

     (d) Voting of Shares: Each Eligible Participant is entitled to direct the
Trustee with respect to the voting of the shares allocated to such Eligible Participant
under Section B4.02(b) as well as the Eligible Participant’s portion of undirected shares.
The Trustee shall follow timely and proper instructions received from Eligible Participants.

     (1) The portion of undirected shares allocable to each Eligible Participant
from whom timely and proper directions are received shall be equal to the total
number of undirected shares multiplied by a fraction. The numerator of the fraction
shall be the number of shares allocated to the Eligible Participant under Section
B4.02(b) and the denominator of the fraction will be the total number of shares
allocated under Section B4.02(b) to Eligible Participants from whom timely and
proper instructions are received.

     (2) The total number of undirected shares shall be the sum of all shares for
which timely and proper instructions are not received, shares credited to the
Huntington Ingalls Industries Fund after the applicable Determination Date but on or
before the record date for the vote in question, less undirected shares sold or
otherwise disposed of by the Huntington Ingalls Industries Fund after the applicable
Determination Date but on or before such record date, and shares held in a suspense
account and not allocated to Participants’ accounts as of the Determination Date.

     (e) Action by Trustee: As soon as practicable prior to the Annual Meeting or
other meeting or voting deadline for which proxies have been solicited, the Trustee shall
execute and deliver to the Parent or its delegate a proxy or proxies which accord with the
rules of Section B4.02(d).

     Section B4.03 Tender Offers, etc. In the event any offer is made to shareholders
generally by any person, corporation or other entity (the “Offeror”) to purchase or otherwise
acquire any or all of the Qualifying Securities, including Qualifying Securities then held in the
Huntington Ingalls Industries Fund (an “Offer”), such Qualifying Securities shall be tendered for
sale or exchange by the Trustee only in accordance with directions from Participants as provided
below:

     (a) Participants Entitled to Direct Trustee: Participants entitled to instruct
the Trustee with regard to an Offer shall be those Participants, including Beneficiaries,
(the “Eligible Participants”) who retain credit under an ESOP Account. The list of Eligible

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Participants will be fixed as of the Determination Date for purposes of this Section,
which shall be the last day of the month next preceding the date on which copies of the
offer or invitation for tenders are first published or sent or given to the Parent’s
shareholders. However, if such Determination Date is less than twenty-five days prior to
such date on which copies of the offer or invitation for tenders are first so published or
sent or given, the applicable Determination Date shall be the last day of the second
preceding month. Eligible Participants shall be named fiduciaries (under ERISA Section
403(a)(1)) for purposes of directing the Trustee under this Section.

     (b) Allocation of Shares: The number of shares initially allocated to an
Eligible Participant for purposes of directing a response to an Offer will be the number
(calculated to 5 decimal places) obtained by (1) dividing the number of shares of Qualifying
Securities held in the Huntington Ingalls Industries Fund as of the close of business on the
applicable Determination Date by the number of units in the Huntington Ingalls Industries
Fund credited to the accounts of all Eligible Participants as of such Determination Date,
and (2) multiplying the quotient so obtained by the number of units in the Huntington
Ingalls Industries Fund credited to the account of such Eligible Participant as of the close
of business on such Determination Date.

     (c) Notification of Participants: In connection with the solicitation of
instructions, the Parent or its delegate, on behalf of the Trustee, shall notify all
Eligible Participants of their rights with respect to directing the disposition of shares
under this Section B4.03 and:

     (1) shall furnish to the Eligible Participants all materials and written
information furnished to the shareholders generally by the Offeror and by the Parent
in connection with the Offer;

     (2) shall solicit for the Trustee instructions from the Eligible Participants
concerning the Offer;

     (3) shall state in the notice the date as of which instructions must be
received by the Parent or its delegate from Eligible Participants in order to be
considered timely;

     (4) shall notify each Eligible Participant in writing of the number of shares
of Qualifying Securities as to which such Eligible Participant is entitled to give
instructions to the Trustee under Section B4.03(b); and

     (5) shall state in such notice that the Eligible Participant’s instructions
shall also apply to his or her portion of the undirected shares (described below).

     (d) Direction of Shares: Each Eligible Participant is entitled to give the
Trustee instructions which are consistent as to all (but not less than all) of the shares
allocated to such Eligible Participant under Section B4.03(b) as well as the Eligible
Participant’s portion of undirected shares. For instance, the Eligible Participant may
direct the Trustee to tender all such shares, or not to tender all such shares. The Trustee
shall follow timely and proper instructions received from Eligible Participants.

62

 

     (1) The portion of undirected shares allocable to each Eligible Participant
from whom timely and proper directions are received shall be equal to the total
number of undirected shares multiplied by a fraction. The numerator of the fraction
shall be the number of shares allocated to the Eligible Participant under Section
B4.03(b) and the denominator of the fraction will be the total number of shares
allocated under Section B4.03(b) to Eligible Participants from whom timely and
proper instructions are received.

     (2) The total number of undirected shares shall be the sum of all shares for
which timely and proper instructions are not received, shares credited to the
Huntington Ingalls Industries Fund after the applicable Determination Date but on or
before the record date for the vote in question, less shares sold or otherwise
disposed of by the Huntington Ingalls Industries Fund after the applicable
Determination Date but on or before such record date, and shares held in a suspense
account and not allocated to Participants’ accounts as of the Determination Date.

     (3) The Trustee will tender undirected shares proportionately from all
Participant accounts (as well as any suspense account) which contain undirected shares. For example, if the Trustee receives directions which are, in the aggregate,
25% in favor of tendering and 75% against tendering, it will tender one share from
an account with four undirected shares.

     (e) Withdrawals of Shares: In the event, under the terms of an Offer or
otherwise, any shares of Qualifying Securities tendered for sale or exchange pursuant to
such Offer may be withdrawn from such Offer, the Trustee will follow timely and proper
instructions from Eligible Participants respecting the withdrawal of shares from the Offer
in the same manner as instructions under Section B4.03(b).

     (f) Multiple Offers: If more than one Offer is made covering overlapping time
periods for Qualifying Securities in the Huntington Ingalls Industries Fund, the Trustee
will follow the rules of this Section B4.03(f) with respect to all such Offers. This may
require (1) more than one notification to Eligible Participants under Section B4.03(c); (2)
soliciting instructions from Eligible Participants as to whether they wish to withdraw shares from one Offer and tender them for sale or exchange under another Offer, and (3)
soliciting instructions from Eligible Participants who have rejected one Offer to see
whether they wish to direct the tender of shares for sale or exchange under another Offer.

     (g) Allocation of Shares Accepted by Offeror: In the event that the Offeror
takes up and pays for fewer than all of the shares tendered for sale or exchange by the
Trustee on behalf of Eligible Participants, then the Trustee shall, to the extent necessary,
reduce the number of shares proffered from each account proportionately. The Trustee shall
use a random method to the extent necessary to allocate any residual fractional shares
between accounts.

     (h) Treatment of Proceeds: In the event that shares are tendered for sale or
exchange on behalf of an Eligible Participant pursuant to this Section, the proceeds (cash

63

 

or otherwise) received upon the acceptance of such tender or exchange by the Offeror
shall be credited to the appropriate subaccount of such Eligible Participant as of the
Valuation Date for this purpose which shall be the last day of the month immediately
preceding the receipt of such proceeds. The cash proceeds so credited shall, as of the close
of business on such Valuation Date, be allocated among the Plan’s investment options
(excluding the Huntington Ingalls Industries Fund) in accordance with the Participant’s
then-current investment election or, if no investment election (other than an election to
invest in the Huntington Ingalls Industries Fund) is in effect, to the Plan’s default
option. The non-cash proceeds (if any) so credited shall be held by the Trustee pending
further instructions from the Parent, or from the Participant if such assets are subject to
Participant direction.

64

 

ARTICLE B5

Investments

     Section B5.01 Huntington Ingalls Industries Fund. Except as otherwise provided in the
Trust Agreement, all amounts held under the ESOP and not diversified under Article B6 shall be held
in the Huntington Ingalls Industries Fund under the Trust Agreement and shall be used to purchase
Qualifying Securities.

     (a) Cash set aside to meet ongoing liquidity needs and amounts temporarily liquid
pending investment in Qualifying Securities may be invested in obligations of the federal
government (including any agency or instrumentality thereof), certificates of deposit, any
common or group trust funds maintained by the Trustee or other bank or trust company, and in
commercial paper other than obligations of the Parent.

     (b) Purchases of Qualifying Securities may be made from or through any source including
the Company or a Participant.

     (c) Rights, options, or warrants offered to purchase Parent stock shall be exercised by
the Trustee to the extent that there is cash available for investment. To the extent cash is
not available, the same shall be sold on the open market.

     (d) Conversion of convertible preferred stock shall be accomplished at the discretion
of the Trustee. Stock distributions shall be made only in Parent common stock which is
publicly traded and is not subject to a trading limitation. For these purposes, a “trading
limitation” on a security is a restriction under any federal or state securities law, any
regulation under a federal or state securities law, or any agreement affecting the security
which would make the security not as freely tradable as one not subject to such restriction.
The preceding sentence is to be construed in accordance with 26 C.F.R. Section
54.4975-7(b)(10).

     Section B5.02 Primary Investment. Funds held under the ESOP are to be primarily
invested in Qualifying Securities as required by ERISA and the Code, except to the extent
diversified under Article B6.

65

 

ARTICLE B6

Diversification

     Section B6.01 In General. This Article provides for the diversification of investments
under the ESOP in certain circumstances for Participants meeting certain conditions.

     Section B6.02 Eligibility. Each Participant is immediately eligible for the
diversification election below, notwithstanding his or her Years of Service.

     Section B6.03 Diversification Election. A Participant eligible to make the
diversification election may elect to diversify up to 100% of his or her ESOP Account.

     (a) Diversification consists of transferring amounts among the ESOP Account and one or
more of the other Investment Funds under the Plan.

     (b) The general rules under the Plan applicable to transfers between Investment Funds
will apply.

     Section B6.04 Timing of Election. An eligible Participant may elect to diversify at
any time. Elections must be made according to the rules and procedures of the Administrative
Committee.

66

 

ARTICLE B7

Distributions

     Section B7.01 Application. The distributions rules of this Article are in addition to
the regular distribution rules of the Plan and are not intended to supplant those rules.

     Section B7.02 Timing of Distributions. The distribution of the vested portion of a
Participant’s ESOP Account will be made at the same time as his or her distribution under the Plan,
as soon as possible after the election of distribution.

     Section B7.03 Form of Distributions. A Participant may elect to receive 0-100%, in
whole percentages, of his or her ESOP Account (excluding any amounts which have been diversified
under Article B6) in the form of Qualifying Securities. Any amount not distributed in the form of
Qualifying Securities will be distributed in cash.

     Section B7.04 Condition of Distributions. The rules for distributions under the ESOP
are all conditioned on the present requirement that stock distributions shall be made only in
Parent common stock that is publicly traded and is not subject to a trading limitation (see Section
B5.01(d)) and the absence of any investments in Qualifying Securities other than such common stock.
Should these conditions change in the future, the ESOP may be amended to provide for other
distribution rules.

67

 

ARTICLE B8

Termination

     Section B8.01 Termination. In addition to the general termination provisions of the
Plan, the ESOP shall terminate if the Parent does not receive an initial determination from the IRS
that the ESOP qualifies as an ESOP under Code Section 4975(e)(7) or if changes in the law prevent a
deduction under Code Section 404(k).

68Exhibit 10.1

Exhibit 10.1

	 	 	 
	 

	 	AMC SARASOTA, INC.
	 

	 	MICHAEL ANSLEY
	 

	 	SARASOTA (UNIVERSITY PARK), FL
	 

	 	3/25/11

Buffalo Wild Wings®
Franchise Agreement

Between

Buffalo Wild Wings International, Inc.

5500 Wayzata Blvd., Suite 1600

Minneapolis, MN 55416

And

AMC Sarasota, Inc.

27680 Franklin Road

Southfield, MI 48034

248-894-0434

Authorized Location:

Effective Date:

March 25, 2011

(To be completed by us)

 

 

 

—TABLE OF CONTENTS—

BUFFALO WILD WINGS® FRANCHISE AGREEMENT

	 	 	 	 	 
	SECTION	 	PAGE	 
	 
	 	 	 	 
	DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	GRANT OF LICENSE
	 	 	2	 
	 
	 	 	 	 
	TRADEMARK STANDARDS AND REQUIREMENTS
	 	 	4	 
	 
	 	 	 	 
	TERM AND RENEWAL
	 	 	6	 
	 
	 	 	 	 
	FACILITY STANDARDS AND MAINTENANCE
	 	 	6	 
	 
	 	 	 	 
	PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
	 	 	10	 
	 
	 	 	 	 
	PERSONNEL AND SUPERVISION STANDARDS
	 	 	14	 
	 
	 	 	 	 
	ADVERTISING
	 	 	15	 
	 
	 	 	 	 
	FEES, REPORTING AND AUDIT RIGHTS
	 	 	17	 
	 
	 	 	 	 
	YOUR OTHER OBLIGATIONS; NONCOMPETE COVENANTS
	 	 	20	 
	 
	 	 	 	 
	TRANSFER OF FRANCHISE
	 	 	22	 
	 
	 	 	 	 
	DISPUTE RESOLUTION
	 	 	25	 
	 
	 	 	 	 
	DEFAULT AND TERMINATION
	 	 	26	 
	 
	 	 	 	 
	POST-TERM OBLIGATIONS
	 	 	28	 
	 
	 	 	 	 
	GENERAL PROVISIONS
	 	 	30	 
	 
	 	 	 	 
	APPENDICES
	 	 	 	 

	 
	A. Trademarks

	B. Designated Area

	C. Addendum to Lease

	D. Electronic Transfer of Funds Authorization

	E. Gift Cards Affiliated Seller Agreement

 

 

 

BUFFALO WILD WINGS® FRANCHISE AGREEMENT

This Franchise Agreement is made this 25th day of March, 2011 between BUFFALO WILD WINGS
INTERNATIONAL, INC., an Ohio corporation with its principal business located at 5500 Wayzata Blvd.,
Suite 1600, Minneapolis, Minnesota 55416 (“we” or “us”), and AMC SARASOTA, INC., a Michigan
corporation whose principal business address is 27680 Franklin Road, Southfield, Michigan 48034
(“franchisee” or “you”). If the franchisee is a corporation, partnership, limited liability
company or other legal entity, certain provisions to this Agreement also apply to its owners.

RECITALS

A. Our parent company has developed a unique system for video entertainment-oriented,
casual/fast casual restaurants that feature chicken wings, sandwiches, unique food service and
other products, beverages and services using certain standards and specifications;

B. Many of the food and beverage products are prepared according to specified recipes and
procedures, some of which include proprietary sauces and mixes;

C. Our parent company owns the
 Buffalo Wild Wings® Trademark and other
trademarks used in connection with the operation of a Buffalo Wild Wings®
restaurant;

D. Our parent company has granted to us the right to sublicense the right to develop and
operate Buffalo Wild Wings® restaurants; and

E. You desire to develop and operate a Buffalo Wild Wings® restaurant and
we, in reliance on your representations, have approved your franchise application.

In consideration of the foregoing and the mutual covenants and consideration below, you and we
agree as follows:

DEFINITIONS

1. For purposes of this Agreement, the terms below have the following definitions:

A. “Control Person” means the individual who has the authority to, and does in fact,
actively direct your business affairs in regard to the Restaurant, is responsible for
overseeing the general management of the day-to-day operations of the Restaurant and has
authority to sign on your behalf on all contracts and commercial documents. The Control
Person is identified on the Ownership and Management Addendum attached to this Agreement.

B. “Gross Sales” includes the total revenues and receipts from the sale of all
products, services and merchandise sold in your Restaurant whether under any of the
Trademarks or otherwise, including any cover charges or fees, vending or similar activities
in your Restaurant or on its premises as well as all license and use fees. Gross Sales
excludes sales taxes.

C. “Menu Items” means the chicken wings, sandwiches and other products and beverages
prepared according to our specified recipes and procedures, as we may modify and change them
from time to time.

 

1

 

D. “Principal Owner” means any person or entity who, now or hereafter, directly or
indirectly owns a 10% or greater interest in the franchisee when the franchisee is a
corporation, limited liability company, partnership, or a similar entity. However, if we
are entering into this Agreement
totally or partially based on the financial qualifications, experience, skills or
managerial qualifications of any person or entity who directly or indirectly owns less than
a 10% interest in the franchisee, we have the right to designate that person or entity as a
Principal Owner for all purposes under this Agreement. In addition, if the franchisee is a
partnership entity, then each person or entity who, now or hereafter is or becomes a general
partner is a Principal Owner, regardless of the percentage ownership interest. If the
franchisee is one or more individuals, each individual is a Principal Owner of the
franchisee. Each franchisee must have at least one Principal Owner. Your Principal
Owner(s) are identified on the Ownership and Management Addendum attached to this Agreement.
Every time there is a change in the persons who are your Principal Owners, you must, within
10 days from the date of each such change, update the Ownership and Management Addendum. As
used in this Agreement, any reference to Principal Owner includes all Principal Owners.

E. “Restaurant” means the Buffalo Wild Wings® Restaurant you
develop and operate pursuant to this Agreement.

F. “System” means the Buffalo Wild Wings® System, which consists of
distinctive food and beverage products prepared according to special and confidential
recipes and formulas with unique storage, preparation, service and delivery procedures and
techniques, offered in a setting of distinctive exterior and interior layout, design and
color scheme, signage, furnishings and materials and using certain distinctive types of
facilities, equipment, supplies, ingredients, business techniques, methods and procedures
together with sales promotion programs, all of which we may modify and change from time to
time.

G. “Trademarks” means the Buffalo Wild Wings® Trademark
and Service Mark that have been registered in the United States and elsewhere and the
trademarks, service marks and trade names set forth on Appendix A, as we may modify and
change from time to time, and the trade dress and other commercial symbols used in the
Restaurant. Trade dress includes the designs, color schemes and image we authorize you to
use in the operation of the Restaurant from time to time.

H. “Unit General Manager” means the individual who (i) personally invests his or her
full time and attention and devotes his or her best efforts to the on-premises general
management of the day-to-day operations of the Restaurant and (ii) meets our training
requirements. The Unit General Manager must be appointed at least 60 days prior to the
Restaurant opening and fully trained 20 days prior to the Restaurant opening.

GRANT OF LICENSE

2. The following provisions control with respect to the license granted hereunder:

A. Authorized Location. We grant to you the right and license to establish and
operate a retail Restaurant identified by the Buffalo Wild Wings®
Trademarks or such other marks as we may direct, to be located at a location to be
determined in accordance with this subparagraph or a location to be designated within 90
days from the date of this Agreement (the “Authorized Location”). When a location has been
designated by you and approved by us, it will become part of this subparagraph 2.A as if
originally stated. You acknowledge and agree that our approval of a site does not
constitute a warranty of any kind, express or implied, as to the suitability of the site for
your Restaurant. You acknowledge and agree that your acceptance of a franchise for the
operation of a Restaurant at this Authorized Location is based on your own independent
investigation. If an Authorized Location is not designated by you and approved by us within
90 days from the date of this Agreement, we have the right to declare this Agreement null
and void without the return of any Initial Franchise Fee or other amounts paid to us. You
accept the license and undertake the obligation to operate the Restaurant at the
Authorized Location using the Trademarks and the System in compliance with the terms
and conditions of this Agreement.

 

2

 

B. Designated Area. You must locate and operate the Restaurant at an
Authorized Location within the area described in Appendix B (the “Designated Area”). We and
our affiliates will not locate and operate or grant to anyone else a franchise to locate and
operate a Buffalo Wild Wings® restaurant within the Designated Area so
long as this Agreement is in effect, except as provided in subparagraph 2.D. You do not
have any right to sublicense or subfranchise within or outside of the Designated Area and do
not have the right to operate more than one Restaurant within the Designated Area.

C. Opening. You agree that the Restaurant will be open and operating by the
required open date (“Required Open Date”). If you are entering this Agreement pursuant to
an Area Development Agreement executed between you and us, the Required Open Date is defined
in the Development Schedule. If you are not entering this Agreement pursuant to an Area
Development Agreement, you and we agree that the Required Open Date is NA . If you
fail to have your Restaurant open and in operation according to the provisions of this
subparagraph 2.C, we will have the right to terminate this Agreement without opportunity to
cure pursuant to subparagraph 13.B.2.

D. Nonexclusivity; Our Reservation of Rights. The license is limited to the
right to develop and operate one Restaurant at the Authorized Location located in the
Designated Area, and does not include (i) any right to sell products and Menu Items
identified by the Trademarks at any location other than the Authorized Location, except for
authorized catering and delivery services as noted in subparagraph 2.E, or through any other
channels or methods of distribution, including the internet (or any other existing or future
form of electronic commerce), (ii) any right to sell products and Menu Items identified by
the Trademarks to any person or entity for resale or further distribution, or (iii) any
right to exclude, control or impose conditions on our development of future franchised,
company or affiliate owned restaurants at any time outside of the Designated Area. You
acknowledge that the consumer service area or trade area of another Buffalo Wild
Wings®
restaurant may overlap with your Designated Area.

You also acknowledge and agree that we and our affiliates have the right to operate and
franchise others the right to operate restaurants or any other business within and outside
the Designated Area under trademarks other than the Buffalo Wild Wings®
Trademarks, without compensation to any franchisee, except that our operation of, or
association or affiliation with, restaurants (through franchising or otherwise) in the
Designated Area that compete with Buffalo Wild Wings® restaurants in the
video entertainment-oriented, fast casual restaurant segment will only occur through some
form of merger or acquisition with an existing restaurant chain (except as otherwise
provided for in this subparagraph). Outside of the Designated Area, we and our affiliates
have the right to grant other franchises or develop and operate company or affiliate owned
Buffalo Wild Wings® restaurants and offer, sell or distribute any
products or services associated with the System (now or in the future) under the Trademarks
or any other trademarks, service marks or trade names, all without compensation to any
franchisee.

We and our affiliates further have the right to offer, sell or distribute, within and
outside the Designated Area, through any distribution channel or method, any frozen,
pre-packaged items or other products or services associated with the System (now or in the
future) or identified by the Trademarks, or any other trademarks, service marks or trade
names, except for Prohibited Items (as defined below), through any distribution channels or
methods, without compensation to any franchisee. The distribution channels or methods
include, without limitation, grocery stores, club stores, convenience stores, wholesale,
hospitals, clinics, health care facilities, business or industry locations (e.g.
manufacturing site, office building), military installations, military commissaries or the
internet (or any other existing or
future form of electronic commerce). The Prohibited Items are the following items that
we will not sell in the Designated Area through other distribution channels or methods: any
retail food service Menu Items that are cooked or prepared to be served to the end user or
customer for consumption at the retail location (unless sold at the limited seating
facilities referenced in subparagraph (i) of the paragraph above). For example, chicken
wings cooked and served to customers at a grocery store or convenience store would be a
Prohibited Item, but the sale of frozen or pre-packaged chicken wings at a grocery store or
convenience store would be a permitted form of distribution in the Designated Area.

 

3

 

You acknowledge and agree that certain locations within and outside the Designated Area
are by their nature unique and separate in character from sites generally developed as
Buffalo Wild Wings® restaurants. As a result, you agree that the
following locations (“Special Sites”) are excluded from the Designated Area and we have the
right to develop, license or franchise such locations: (1) military bases; (2) public
transportation facilities, including, without limitation, airports and other transportation
terminals; (3) sports facilities, including race tracks; (4) student unions or other similar
buildings on college or university campuses; (5) amusement and theme parks; and (6)
community and special events.

In addition, you acknowledge and agree that, subject to your right of first refusal as
set forth below, we and our affiliates have the right to operate or franchise within and
outside the Designated Area one or more facilities selling, for dine in or take out, all or
some of the Menu Items, using the Trademarks or any other trademarks, service marks or trade
names, without compensation to any franchisee, provided, however, that such facilities shall
not have an interior area larger than 2,400 square feet and shall not have seating capacity
for more than 48 people (“Limited Seating Facilities”). If we develop a model for a Limited
Seating Facility and determine that your Designated Territory is an appropriate market for
such a facility, we will provide to you a written offer (“Offer”) specifying the terms and
conditions for your development of the Limited Seating Facility. You will have 90 days
following your receipt of the Offer to accept the Offer by delivering written notice to us
of your acceptance, provided that you are not in default under this Agreement or any other
Agreement with us or our affiliates. If you do not provide written notice to us within the
time period or if you are in default under this Agreement or any other agreement with us or
our affiliates, you will lose the right to develop the Limited Seating Facility and we may
develop or franchise others to develop the Limited Seating Facility within your Designated
Area. You acknowledge and agree that if you accept the Offer, we may require you to submit
a full application, pay an initial fee and sign a new form of franchise agreement.

E. Catering and Delivery. You may not engage in catering and delivery services
and activities within or outside of the Designated Area, unless we authorize you in writing,
as further described in subparagraph 6.L. We and our affiliate companies will not engage in
catering and delivery services and activities in the Designated Area; however, we have no
obligation to enforce similar covenants against any other franchisee.

TRADEMARK STANDARDS AND REQUIREMENTS

3. You acknowledge and agree that the Trademarks are our parent company’s property and it has
licensed the use of the Trademarks to us with the right to sublicense to others. You further
acknowledge that your right to use the Trademarks is specifically conditioned upon the following:

A. Trademark Ownership. The Trademarks are our parent company’s valuable
property, and it is the owner of all right, title and interest in and to the Trademarks and
all past, present or future goodwill of the Restaurant and of the business conducted at the
Authorized Location that is associated with or attributable to the Trademarks. Your use of
the Trademarks will inure to our parent company’s
benefit. You may not, during or after the term of this Agreement, engage in any
conduct directly or indirectly that would infringe upon, harm or contest our parent
company’s rights in any of the Trademarks or the goodwill associated with the Trademarks,
including any use of the Trademarks in a derogatory, negative, or other inappropriate manner
in any media, including but not limited to print or electronic media.

 

4

 

B. Trademark Use. You may not use, or permit the use of, any trademarks, trade
names or service marks in connection with the Restaurant except those set forth in Appendix
A or except as we otherwise direct in writing. You may use the Trademarks only in
connection with such products and services as we specify and only in the form and manner we
prescribe in writing. You must comply with all trademark, trade name and service mark
notice marking requirements. You may use the Trademarks only in association with products
and services approved by us and that meet our standards or requirements with respect to
quality, mode and condition of storage, production, preparation and sale, and portion and
packaging.

C. Restaurant Identification. You must use the name Buffalo Wild Wings
Grill & Bar® as the trade name of the Restaurant and you may not use any
other mark or words to identify the Restaurant without our prior written consent. You may
not use the phrase “Buffalo Wild Wings” or any of the other Trademarks as part of
the name of your corporation, partnership, limited liability company or other similar
entity. You may use the Trademarks on various materials, such as business cards, stationery
and checks, provided you (i) accurately depict the Trademarks on the materials as we
prescribe, (ii) include a statement on the materials indicating that the business is
independently owned and operated by you, (iii) do not use the Trademarks in connection with
any other trademarks, trade names or service marks unless we specifically approve in writing
prior to such use, and (iv) make available to us, upon our request, a copy of any materials
depicting the Trademarks. You must post a prominent sign in the Restaurant identifying you
as a Buffalo Wild Wings® franchisee in a format we deem reasonably
acceptable, including an acknowledgment that you independently own and operate the
Restaurant and that the Buffalo Wild Wings® Trademark is owned by our
parent company and your use is under a license we have issued to you. All your internal and
external signs must comply at all times with our outdoor/indoor guidelines and practices, as
they are modified from time to time.

D. Litigation. In the event any person or entity improperly uses or infringes
the Trademarks or challenges your use or our use or ownership of the Trademarks, we will
control all litigation and we have the right to determine whether suit will be instituted,
prosecuted or settled, the terms of settlement and whether any other action will be taken.
You must promptly notify us of any such use or infringement of which you are aware or any
challenge or claim arising out of your use of any Trademark. You must take reasonable
steps, without compensation, to assist us with any action we undertake. We will be
responsible for our fees and expenses with any such action, unless the challenge or claim
results from your misuse of the Trademarks in violation of this Agreement, in which case you
must reimburse us for our fees and expenses.

E. Changes. You may not make any changes or substitutions to the Trademarks
unless we direct in writing. We reserve the right to change the Trademarks at any time.
Upon receipt of our notice to change the Trademarks, you must cease using the former
Trademarks and commence using the changed Trademarks, at your expense. If the changes to
the Trademarks result in a required change to outdoor signage, such changes will be subject
to the provisions in 5.F.

 

5

 

TERM AND RENEWAL

4. The following provisions control with respect to the term and renewal of this Agreement:

A. Term. The initial term of this Agreement commences on the Effective Date
(as defined in Section 15.R) and expires 20 years after the Restaurant opens for business or
the Required Open Date, which ever happens first, unless this Agreement is sooner terminated
in accordance with Paragraph 13.

B. Renewal Term and Conditions of Renewal. You may renew your license for two
renewal terms, (the first renewal term is 10 years; the second renewal term is 5 years),
provided that with respect to each renewal: (i) you have given us written notice of your
decision to renew at least 6 months but not more than 12 months prior to the end of the
expiring term; (ii) you sign our then-current form of franchise agreement (modified to
reflect no additional renewal term upon expiration and other modifications to reflect that
the agreement relates to the grant of a renewal), the terms of which may differ from this
Agreement, including higher fees and a modification to the Designated Area (although in no
event will the revised Designated Area have a residential population of the lesser of
approximately 30,000 to 40,000 or the residential population that existed as of the
Effective Date); (iii) you have complied with the provisions of subparagraph 5.E regarding
modernization and you perform any further items of modernization and/or replacement of the
building, premises, trade dress, equipment and grounds as may be necessary for your
Restaurant to conform to the standards then applicable to new Buffalo Wild Wings
restaurants, regardless of the cost of such modernizations and/or replacements, unless we
determine that you should relocate your Restaurant because your Authorized Location no
longer meets our then-current site criteria, in which case you must comply with the 90 and
270 day relocation requirements of subparagraph 5.D; (iv) you are not in default of this
Agreement or any other agreement pertaining to the franchise granted, have satisfied all
monetary and material obligations on a timely basis during the term and are in good
standing; (v) if leasing the Restaurant premises (and not subject to relocation under (iii)
above), you have renewed the lease and have provided written proof of your ability to remain
in possession of the premises throughout the renewal period; (vi) you comply with our
then-current training requirements; (vii) you pay us, at least 30 days prior to the end of
the expiring term, a renewal fee in the amount of $20,000; and (viii) you and your Principal
Owners and guarantors execute a general release of claims in a form we prescribe.

C. Relocation Upon Renewal. If, as a condition of renewal, we require you to
relocate your Restaurant pursuant to subparagraph 4.B(iii) above, you may renew your license
for 20 years, provided that with respect to the renewal, you meet all conditions stated in
subparagraph 4.B.

FACILITY STANDARDS AND MAINTENANCE

5. You acknowledge and agree that we have the right to establish, from time to time, quality
standards regarding the business operations of Buffalo Wild Wings® restaurants
and stores to protect the distinction, goodwill and uniformity symbolized by the Trademarks and the
System. Accordingly, you agree to maintain and comply with our quality standards and agree to the
following terms and conditions:

A. Restaurant Facility; Site Under Control. You are responsible for purchasing
or leasing a site that meets our site selection criteria. You must obtain our written
consent to the site. Prior to granting our consent to a site, you must obtain and submit
third-party demographic information and such other analysis and information related to the
site and market as we may require. You may not use the Restaurant premises or Authorized
Location for any purpose other than the operation of a Buffalo Wild
Wings® Restaurant during the term of this Agreement. We make no guarantees
concerning the success of the Restaurant located on any site to which we consent.

You may not open your Restaurant for business until we have notified you in writing
that you have satisfied your pre-opening obligations as set forth in subparagraphs 5.A and
5.B and we have approved your opening date. We are not responsible or liable for any of
your pre-opening obligations, losses or expenses you might incur for your failure to comply
with these obligations or your failure to
open by a particular date. We also are entitled to injunctive relief or specific
performance under subparagraph 12.C for your failure to comply with your obligations.

 

6

 

In the event that you plan to enter into any type of lease for the Restaurant premises,
you and your landlord must sign the Lease Addendum attached as Appendix C. We recommend you
submit the Lease Addendum to the landlord at the beginning of your lease review and
negotiation, although the terms of the Lease Addendum may not be negotiated without our
prior approval. If the landlord requires us to negotiate the Lease Addendum, we reserve the
right to charge you a fee, which will not exceed our actual costs associated with the
negotiation. You must provide us a copy of the executed lease and Lease Addendum within 5
days of its execution. We have no responsibility for the lease; it is your sole
responsibility to evaluate, negotiate and enter into the lease for the Restaurant premises.

You must execute, and provide us an executed copy of your lease (including an executed
copy of the Lease Addendum) or the purchase agreement for the selected and approved site for
your Restaurant within 120 days from the date of execution of this Agreement. If you fail
to have your “site under control” (execute the lease or the purchase agreement within the
periods set forth in this subparagraph), we will have the right to terminate this Agreement
without opportunity to cure pursuant to subparagraph 13.B.2.

B. Construction; Future Alteration. You must construct and equip the
Restaurant in strict accordance with our current approved specifications and standards
pertaining to equipment, inventory, signage, fixtures, furnishings, accessory features
(including sports memorabilia) and design and layout of the building. You may not commence
construction of the Restaurant until you have received our written consent to your building
plans. If your Restaurant is not constructed strictly according to the previously consented
building plans, we will not approve your Restaurant for opening. You will have 30 days from
the date we deny our approval for opening your Restaurant to correct all the construction
problems so that your Restaurant is strictly constructed according to the consented building
plans. If you fail to correct the problems within the 30-day period we may immediately
terminate this Agreement pursuant to subparagraph 13.B.2. If the Restaurant opening is
delayed for the foregoing reasons, you will be responsible for any losses and costs related
to such delay.

Without limiting the generality of the prior paragraph, you must promptly after
obtaining possession of the site for the Restaurant: (i) retain the services of an
architect; (ii) retain the services of a general contractor and audio/visual equipment
providers and installers,; (iii) have prepared and submitted for our approval a site survey
and basic architectural plans and specifications (not for construction) consistent with our
general atmosphere, image, color scheme and ambience requirements as set forth from time to
time in the manuals for a Buffalo Wild Wings® restaurant (including
requirements for dimensions, exterior design, materials, interior design and layout,
equipment, fixtures, furniture, signs and decorating); (iv) purchase or lease and then, in
the construction of the Restaurant, use only the approved building materials, equipment,
fixtures, audio visual equipment, furniture and signs; (v) complete the construction and/or
remodeling, equipment, fixtures, furniture and sign installation and decorating of the
Restaurant in full and strict compliance with plans and specifications we approve and all
applicable ordinances, building codes and permit requirements without any unauthorized
alterations; (vi) obtain all customary contractors’ sworn statements and partial and final
waiver; (vii) obtain all necessary permits, licenses and architectural seals and comply with
applicable legal requirements relating to the building, signs, equipment and premises,
including, but not limited to, the Americans With Disabilities Act; and (viii) obtain and
maintain all required zoning changes, building, utility, health, sanitation, liquor and sign
permits and licenses and any other required permits and licenses (if this Agreement is for
your first Buffalo Wild Wings® restaurant or if in any previous
franchise agreement executed between you or any of your affiliates and us, you or any of
your affiliates have not met your obligations regarding the build out of any previous
Buffalo Wild Wings® restaurant, we reserve the right to require you to
retain
the services of a company specialized in assisting restaurant operators during the
construction process to assist you in submitting, processing, monitoring and obtaining in a
timely manner all necessary construction documents, licenses and permits and to advise you
throughout the construction of your Restaurant). It is your responsibility to comply with
the foregoing conditions.

 

7

 

You must use the prototype architectural drawings made available to you by us when
working with your architect and general contractor. You, your affiliates or your Principal
Owners, or any person related to, or any entity controlled by your Principal Owners may not
be your general contractor unless you have requested our approval and we have approved your
request.

Your general contractor may not be your audio/visual equipment provider and installer,
unless your general contractor shows expertise in this field to our satisfaction and is
approved by us prior to performing any work.

Any change to the building plans or any replacement, reconstruction, addition or
modification in the building, interior or exterior decor or image, equipment or signage of
the Restaurant to be made after our consent is granted for initial plans, whether at the
request of you or of us, must be made in accordance with specifications that have received
our prior written consent. You may not commence such replacement, reconstruction, addition
or modification until you have received our written consent to your revised plans.

You must begin substantial construction (site work, utility infrastructure and building
erection) of the Restaurant at least 150 days before the deadline to open the Restaurant if
the Restaurant will be in a free standing location or at least 120 days before the deadline
to open the Restaurant if the Restaurant will be in a non-free standing location. We may
require you to provide us weekly development and construction progress reports in the form
we designate from the date you begin development until the date you open the Restaurant.
For instance, you may be required to contact the designated project manager and provide
construction manual checklists and digital photos during construction on a weekly basis. In
addition, on or before the deadlines to start construction you must submit to us executed
copies of any loan documents and any other document that proves that you have secured
adequate financing to complete the construction of the Restaurant by the date you are
obligated to have the Restaurant open and in operation. In the event that you fail to begin
construction or to secure financing pursuant to this paragraph, we will have the right to
terminate this Agreement without opportunity to cure pursuant to subparagraph 13.B.2.

C. Maintenance. The building, equipment, fixtures, furnishings, signage and
trade dress (including the interior and exterior appearance) employed in the operation of
your Restaurant must be maintained and refreshed in accordance with our requirements
established periodically and any of our reasonable schedules prepared based upon periodic
evaluations of the premises by our representatives. Within a period of 30-45 days (as we
determine depending on the work needed) after the receipt of any particular report prepared
following such an evaluation, you must effect the items of maintenance we designate,
including the repair of defective items and/or the replacement of irreparable or obsolete
items of equipment and interior signage. If, however, any condition presents a threat to
customers or public health or safety, you must effect the items of maintenance immediately,
as further described in subparagraph 6.G. The items of maintenance generally result from
common wear and tear over a period of time, accidents or lack of care. Examples include,
but are not limited to, repairing or replacing HVAC equipment, plumbing and electrical
systems that are not functioning properly; repairing a leaking roof; repairing or replacing
broken operational and audio-visual equipment; refreshing general appearance items such as
paint (interior and exterior) and landscaping; replacing worn carpet, furniture and other
furnishings; and conducting routine maintenance of areas that affect the appearance of the
Restaurant and goodwill of the Trademarks such as the appearance of the outdoor signage, the
parking lot and dumpster area.

 

8

 

D. Relocation. If you need to relocate because of condemnation, destruction,
or expiration or cancellation of your lease for reasons other than your breach, we will
grant you authority to do so at a site acceptable to us that is within your Designated Area;
provided that (i) you have submitted third-party demographic information and such other
analysis and information related to the site and market as we may require; (ii) we have
consented in writing to the new site; (iii) the new Restaurant is under construction within
90 days after you discontinue operation of the Restaurant at the Authorized Location; and
(iv) the new Restaurant is open and operating within 270 days after construction commences,
all in accordance with our then-current standards. If you voluntarily decide to relocate
the Restaurant, your right to relocate the Restaurant will be void and your interest in this
Agreement will be voluntarily abandoned, unless you have given us notice of your intent to
relocate not less than 60 days prior to closing the Restaurant, have procured a site that we
have consented to in writing within 60 days after closing the prior Restaurant, have opened
the new Restaurant for business within 180 days of such closure and complied with any other
conditions that we reasonably require. You must pay the costs of any relocation, and we
reserve the right to charge you for any reasonable costs that we incur.

In the event your Restaurant is destroyed or damaged and you repair the Restaurant at
the Authorized Location (rather than relocate the Restaurant), you must repair and reopen
the Restaurant at the Authorized Location in accordance with our then-current standards for
the destroyed or damaged area within 270 days of the date of occurrence of the destruction
or damage.

You do not have the right to relocate in the event you lose the right to occupy the
Restaurant premises because of the cancellation of your lease due to your breach. The
termination or cancellation of your lease due to your breach is grounds for immediate
termination under subparagraph 13.B.2.

E. Modernization or Remodel. You agree that you will make such capital
improvement or modifications necessary to modernize, redecorate and upgrade your Restaurant,
including an upgrade of your audio/visual equipment to reflect the current image of new
Buffalo Wild Wings® restaurants as reasonably requested by Franchisor
during the term of this Agreement (taking into consideration the cost of the modernization,
the life expectancy of the equipment and the then-remaining term of this Agreement). We
will not impose any new standards or specifications requiring structural changes or
remodeling of your Restaurant more frequently than once every seven (7) years.

You must complete to our satisfaction any changes we require within a reasonable time,
not to exceed 12 months from the date you are notified of any required changes, except for
outdoor signage as set forth in subparagraph 5.F.

You acknowledge and agree that the requirements of this subparagraph 5.E are both
reasonable and necessary to ensure continued public acceptance and patronage of Buffalo
Wild Wings® restaurants and to avoid deterioration or obsolescence in
connection with the operation of the Restaurant. If you fail to make any improvement as
required by this subparagraph or perform the maintenance described in subparagraph 5.C, we
may, in addition to our other rights in this Agreement, effect such improvement or
maintenance and you must reimburse us for the costs we incur.

Except for transfers under Subparagraph 11.G, every other transfer of any interest in
this Agreement or your business governed by Paragraph 11 or any renewal covered by Paragraph
4 is expressly conditioned upon your compliance with these requirements at the time of
transfer or renewal.

F. Signage. The outdoor signage at your Restaurant must comply with our
then-current specifications, which we may modify and change from time to time due to
modifications to the System, including changes to the Trademarks. You must make such
changes to the outdoor signage as we require. We will pay for 1/3 of the cost to replace
your outdoor signage if: (i) your Restaurant’s sign is less than 2 years old and (ii) we
require that you replace the sign within one year from the date of
notification. In any case, your failure to replace the signage within 15 months from
the date of notification will constitute a default of this Agreement under Paragraph 13.
Any upgrades to the type or size of your outdoor signage will be at your expense.

 

9

 

PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS

6. You must implement and abide by our requirements and recommendations directed to enhancing
substantial System uniformity. The following provisions control with respect to products and
operations:

A. Authorized Menu. Your business must be confined to the preparation and sale
of only such Menu Items and other food and beverage products as we designate and approve in
writing from time to time for sale by your Restaurant. You must offer for sale from the
Restaurant all items and only those items listed as Menu Items and other approved food and
beverage products. You must offer the full Authorized Menu during all hours of operation.
We have the right to make modifications to these items from time to time, and you agree to
comply with any modifications. You may not offer or sell any other product or service at
the Authorized Location without our prior written consent.

B. Authorized Products and Ingredients. You must use in the operation of the
Restaurant and in the preparation of Menu Items and other food and beverage products only
the proprietary sauces and mixes and other proprietary and non-proprietary ingredients,
recipes, formulas, cooking techniques and processes and supplies, and must prepare and serve
Menu Items and products in such portions, sizes, appearance, taste and packaging, all as we
specify in our most current product preparation materials or otherwise in writing. We will
supply to you a copy of the current product preparation materials prior to opening the
Restaurant. You acknowledge and agree that we may change these periodically and that you
are obligated to conform to the requirements. All supplies, including containers, cups,
plates, wrapping, eating utensils, and napkins, and all other customer service materials of
all descriptions and types must meet our standards of uniformity and quality. You
acknowledge that the Restaurant must at all times maintain an inventory of ingredients, food
and beverage products and other products, material and supplies that will permit operation
of the Restaurant at maximum capacity.

C. Approved Supplies and Suppliers. We will furnish to you from time to time
lists of approved supplies or approved suppliers. You must only use approved products,
services, inventory, equipment, fixtures, furnishings, signs, advertising materials,
trademarked items and novelties, and other items or services (collectively, “approved
supplies”) in connection with the design, construction and operation of the Restaurant as
set forth in the approved supplies and approved suppliers lists, as we may amend from time
to time. Although we do not do so for every item, we have the right to approve the
manufacturer, distributor and/or supplier of approved supplies and in some instances,
require that you use designated sources or suppliers. Along with a number of other approval
criteria, to be an approved supplier, the supplier must have the ability to provide the
product and/or service, on a national basis, to at least 80% of the then existing
Restaurants. You acknowledge and agree that certain approved supplies may only be available
from one source, and we or our affiliates may be that source. You will pay the then-current
price in effect for all products and supplies that you purchase from us or our affiliates.
All inventory, products, materials and other items and supplies used in the operation of the
Restaurant that are not included in the approved supplies or approved suppliers lists must
conform to the specifications and standards we establish from time to time. ALTHOUGH
APPROVED OR DESIGNATED BY US, WE AND OUR AFFILIATES MAKE NO WARRANTY AND EXPRESSLY DISCLAIM
ALL WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE, WITH RESPECT TO SERVICES, PRODUCTS, EQUIPMENT (INCLUDING, WITHOUT LIMITATION, ANY
REQUIRED COMPUTER SYSTEMS), SUPPLIES, FIXTURES, FURNISHINGS OR OTHER APPROVED ITEMS. IN
ADDITION, WE DISCLAIM ANY LIABILITY ARISING OUT OF OR IN CONNECTION WITH
THE SERVICES RENDERED OR PRODUCTS FURNISHED BY ANY SUPPLIER APPROVED OR DESIGNATED BY
US. OUR APPROVAL OR CONSENT TO ANY SERVICES, GOODS, SUPPLIERS, OR ANY OTHER INDIVIDUAL,
ENTITY OR ANY ITEM SHALL NOT CREATE ANY LIABILITY TO US.

 

10

 

D. Computer System. You must purchase and use any computer system that we
develop or select for the Restaurant, including all future updates, supplements and
modifications (the “Computer System”). The Computer System may include all hardware and
software used in the operation of the Restaurant, including electronic point-of-sale cash
registers and back office programs used to record, analyze and report sales, labor,
inventory and tax information. The computer software package developed for use in the
Restaurant may include proprietary software. You may be required to license the proprietary
software from us, an affiliate or a third party and you also may be required to pay a
software licensing or user fee in connection with your use of the proprietary software. All
right, title and interest in the software will remain with the licensor of the software.
The computer hardware component of the Computer System must conform to specifications we
develop. We reserve the right to designate a single source from whom you must purchase the
Computer System. You acknowledge and agree that we will have full and complete access to
information and data entered and produced by the Computer System. You must, at all times,
have at the Authorized Location internet access with a form of high speed connection as we
require and you must maintain: (i) an email account for our direct correspondence with the
Control Person; and (ii) a separate email account for the Restaurant.

E. Serving and Promotional Items. All sales promotion material, customer
goodwill items, cartons, containers, wrappers and paper goods, eating and serving utensils
and other items, and customer convenience items used in the sales promotion, sale and
distribution of products covered by this Agreement are subject to our approval and must,
where practicable, contain one or more of the Trademarks. We may require you to carry and
offer for sale in the Restaurant a representative supply of approved trademarked clothing
and other novelty items, including special promotional items that we develop and market from
time to time.

F. Health and Sanitation. Your Restaurant must be operated and maintained at
all times in compliance with any and all applicable health and sanitary standards prescribed
by governmental authority. You also must comply with any standards that we prescribe. In
addition to complying with such standards, if the Restaurant is subject to any sanitary or
health inspection by any governmental authorities under which it may be rated in one or more
than one classification, it must be maintained and operated so as to be rated in the highest
available health and sanitary classification with respect to each governmental agency
inspecting the same. In the event you fail to be rated in the highest classification or
receive any notice that you are not in compliance with all applicable health and sanitary
standards, you must immediately notify us of such failure or noncompliance.

G. Evaluations. We or our authorized representative have the right to enter
your Restaurant at all reasonable times during the business day for the purpose of making
periodic evaluations and to ascertain if the provisions of this Agreement are being observed
by you, to inspect and evaluate your building, land and equipment, and to test, sample,
inspect and evaluate your supplies, ingredients and products, as well as the storage,
preparation and formulation and the conditions of sanitation and cleanliness in the storage,
production, handling and serving. If we determine that any condition in the Restaurant
presents a threat to customers or public health or safety, we may take whatever measures we
deem necessary, including requiring you to immediately close the Restaurant until the
situation is remedied to our satisfaction. Our inspections and evaluations may include a
“mystery shopper” program from time to time throughout the term of this Agreement. We hire
various vendors who send the “mystery shoppers” into the Buffalo Wild
Wings® restaurants. If you fail an evaluation by us or by a mystery shopper
or if we receive a specific customer complaint, you must pay for the mystery shopper(s) we
send to your Restaurant (until the issue is resolved to our satisfaction).
The current fee charged by the vendors is approximately $100 fee per visit, which you
must pay directly to the vendor. The fee per visit includes the reimbursement of the tab
paid by the mystery shopper for the items consumed at your Restaurant and, therefore, the
actual fee for each visit will vary.

 

11

 

H. Period of Operation. Subject to any contrary requirements of local law,
your Restaurant must be opened to the public and operated with the full Authorized Menu at
least 12 hours each day of the year, although you have the option to close your Restaurant,
with prior notification to us, 5 days per year, although never 2 consecutive days (with the
exception of Christmas Eve and Christmas Day). Any variance from this provision must be
authorized by us in writing. You acknowledge and agree that if your Restaurant is closed
for a period of 2 consecutive days or 5 or more days in any 12-month period without our
prior written consent, such closure constitutes your voluntary abandonment of the franchise
and business and we have the right, in addition to other remedies provided for herein, to
terminate this Agreement. Acts of force majeure, as defined in subparagraph 16.M,
preventing you temporarily from complying with the foregoing, will suspend compliance for
the duration of such interference.

I. Operating Procedures. You must adopt and use as your continuing operational
routine the required standards, service style, procedures, techniques and management systems
described in our manuals or other written materials relating to product preparation, menu,
storage, uniforms, financial management, equipment, facility and sanitation. We will revise
the manuals and these standards, procedures, techniques and management systems periodically
to meet changing conditions of retail operation in the best interest of restaurants
operating under the Trademarks. Any required standards exist to protect our interests in
the System and the Trademarks and not for the purpose of establishing any control or duty to
take control over those matters that are reserved to you. You must use your best efforts to
promote and increase the sales and service of Menu Items and to effect the widest and best
possible distribution throughout the Designated Area.

You acknowledge having received one copy of the manuals on loan from us for the term of
this Agreement. You acknowledge and agree that the manuals and other system communications
may only be available on the internet or other online or computer communications. The
manuals at all times are our sole property. You must at all times treat the manuals, and
the information they contain, as secret and confidential, and must use all reasonable
efforts to maintain such information as secret and confidential. We may from time to time
revise the contents of the manuals and you expressly agree to comply with each new or
changed requirement. You must at all times ensure that your copy of the manuals are kept
current and up to date, and in the event of any dispute as to the contents of said manuals,
the terms of the master copy of the manuals that we maintain are controlling.

J. Confidential Information. You, the Principal Owners, the Unit General
Manager, your guarantors, officers, directors, members, managers, partners, employees or
agents, or any other individual or entity related to, or controlled by, you may not, during
the term of this Agreement or thereafter, disclose, copy, reproduce, sell or use any such
information in any other business or in any manner not specifically authorized or approved
in advance in writing by us any Confidential Information. For purposes of this Agreement,
“Confidential Information” means the whole or any portion of know-how, knowledge, methods,
specifications, processes, procedures and/or improvements regarding the business that is
valuable and secret in the sense that it is not generally known to our competitors and any
proprietary information contained in the manuals or otherwise communicated to you in
writing, verbally or through the internet or other online or computer communications, and
any other knowledge or know-how concerning the methods of operation of the Restaurant, as
well as the content of this Agreement and any other document executed in connection with
this Agreement. Any and all Confidential Information, including, without limitation,
proprietary ingredients, sauces and mixes, secret formulas and recipes, methods, procedures,
suggested pricing, specifications, processes, materials, techniques and other data, may not
be used for any purpose other
than operating the Restaurant. We may require that you obtain nondisclosure and
confidentiality agreements in a form satisfactory to us from any persons owning a minority
interest in the franchisee, the Principal Owners, the Unit General Manager and other key
employees. You must provide executed copies of these agreements to us upon our request.
Notwithstanding the foregoing, you are authorized to disclose the terms of this Agreement to
any lender providing you financing for the Restaurant as well as to your landlord.

 

12

 

K. Vending Services. If you install or maintain on the premises any newspaper
racks, video games, jukeboxes, gum machines, games, rides, vending machines, or other
similar devices that do not meet with our approval, you must remove them within three days
from receiving written notice from us. Pool tables, cigarette vending machines, gambling
and gaming machines or games of chance are not allowed unless you receive our prior written
approval. Any income from vending services in the Restaurant or on its premises, regardless
of which person or entity collects the money, and regardless of whether we authorized you to
install them, must be included in Gross Sales for purposes of your Royalty Fee and
Advertising Fee. Upon our written approval, the money derived from services provided by
charitable organizations or services that are for customer convenience, such as pay phones
or cash machines, will not be included in Gross Sales.

L. Catering and Delivery Services. If you want to offer catering or delivery
service to customers, you must obtain our prior written approval, which we will not withhold
unreasonably, although we reserve the right to require you to offer catering service to
customers located within the Designated Area. Any catering or delivery services must meet
our written standards. You also must charge the same price for products offered by the
Restaurant whether delivered or catered by or sold in the Restaurant. Any income from
catering or delivery services must be included in Gross Sales for purposes of your Royalty
Fee and Advertising Fee.

M. Compliance with Law; Licenses and Permits. You must at all times maintain
your premises and conduct your Restaurant operations in compliance with all applicable laws,
regulations, codes and ordinances. You must secure and maintain in force all required
licenses, including a liquor license that permits alcohol sales 7 days a week (full liquor
Monday through Saturday and either full liquor or at least beer only on Sundays), permits
and certificates relating to your Restaurant. If your Restaurant is open and operating and
a change occurs in applicable state or local law that does not permit liquor sales on
Sundays, it will not be deemed a breach of this Agreement. In the event your liquor license
is suspended or revoked, in addition to our right to terminate this Agreement pursuant to
subparagraph 13.B, we reserve the right to charge you the Royalty Fee on the Gross Sales you
would have received on the lost liquor sales during the license suspension. We will
estimate the Gross Sales based on the prior year’s Gross Sales for the suspension period.

You acknowledge that you are an independent business and responsible for control and
management of your Restaurant, including, but not limited to, the hiring and discharging of
your employees and setting and paying wages and benefits of your employees. You acknowledge
that we have no power, responsibility or liability in respect to the hiring, discharging,
setting and paying of wages or related matters.

You must immediately notify us in writing of any claim, litigation or proceeding that
arises from or affects the operation or financial condition of your Buffalo Wild
Wings® business or Restaurant, including any notices of health code
violations or liquor license violations.

 

13

 

N. Participation in Internet Web Sites or Other Online Communications. You
must, at your expense, participate in our Buffalo Wild Wings® web site
on the internet, our intranet system or other online communications as we may require. For
instance, you must submit to us daily reports via our intranet system, as further described
in subparagraph 9.H. We have the right to determine the
content and use of our web site and intranet system and will establish the rules under
which franchisees may or must participate. You may not separately register any domain name
containing any of the Trademarks nor participate in any web site that markets goods and
services similar to a Buffalo Wild Wings® restaurant. You may not use
or reference the Marks in any online communication or web site (including, without
limitation, all current and future social media platforms) absent our prior approval. We
retain all rights relating to our web site and intranet system and may alter or terminate
our web site or intranet system. Your general conduct on our web site and intranet system
or other online communications and specifically your use of the Trademarks or any
advertising is subject to the provisions of this Agreement. You acknowledge that certain
information related to your participation in our web site or intranet system may be
considered Confidential Information, including access codes and identification codes. Your
right to participate in our web site and intranet system, or otherwise use the Trademarks or
System on the internet or other online communications, will terminate when this Agreement
expires or terminates.

O. System Modifications. You acknowledge and agree that we have the right to
modify, add to or rescind any requirement, standard or specification that we prescribe under
this Agreement to adapt the System to changing conditions, competitive circumstances,
business strategies, business practices and technological innovations and other changes as
we deem appropriate. You must comply with these modifications, additions or rescissions at
your expense, subject to the requirements of subparagraph 5.E and any other express
limitations set forth in this Agreement.

P. Suggested Pricing Policies. We may, from time to time, make suggestions to
you with regard to your pricing policies. Notwithstanding any suggestions, you have the
sole and exclusive right as to the minimum prices you charge for the services offered at the
Restaurant. We retain the right to establish maximum prices to be charged by you for sales
promotions, subject to subparagraph 8.F, or otherwise. Any list or schedule of prices we
furnish to you may, unless otherwise specifically stated as to the maximum price, be treated
as a recommendation only and failure to accept or implement any such suggestion will not in
any way affect the relationship between you and us.

PERSONNEL AND SUPERVISION STANDARDS

7. The following provisions and conditions control with respect to personnel, training and
supervision:

A. Supervision. You must have a Control Person and a Unit General Manager that
meet our standards and qualifications at all times during the term of this Agreement. Your
Control Person and Unit General Manager must attend and successfully complete all required
training, as set forth in subparagraphs 7.B — E. Should any actions (or inactions) of your
Control Person or Unit General Manager cause the individual to fail to meet our standards
and qualifications or should the action (or inaction) bring or tend to bring any of the
Trademarks into disrepute or impair or tend to impair your or your Restaurant’s reputation
or the goodwill of the Trademarks, your Restaurant or the Buffalo Wild
Wings® system, we have the right to require that you replace the Control
Person or Unit General Manager with an individual who meets our standards and qualifications
within 30 days. Any new Control Person or Unit General Manager must attend and successfully
complete our training requirements immediately after being appointed by you. The Control
Person and Unit General Manager must ensure that the Restaurant is operated in accordance
with the terms and conditions of this Agreement, although this in no way relieves you of
your responsibilities to do so. Your Control Person also must be readily and continuously
available to us. In addition to the Control Person and your Unit General Manager, you must
have at least two assistant managers at all times during the term of this Agreement.

 

14

 

B. Training. You must, at your expense, comply with all of the training
requirements we prescribe for the Restaurant to be developed under this Agreement. The
Control Person, the Unit General Manager and at least two of your assistant managers must
attend training and complete training to our satisfaction (such that at all times you have 3
trained managers for your Restaurant). All replacement managers must complete training to
our satisfaction, and must begin training within 6 weeks of the time of hire. The training
requirements may vary depending on our assessment of the experience of the Control Person,
the Unit General Manager and the assistant managers or other factors specific to the
Restaurant. In the event you are given notice of default as set forth in subparagraphs 13.A
and B and the default relates, in whole or in part, to your failure to meet any operational
standards, we have the right to require as a condition of curing the default that you, the
Control Person, the Unit General Manager and the assistant managers, at your expense, comply
with the additional training requirements we prescribe. Any new Control Person or Unit
General Manager must comply with our training requirements. Under no circumstances may you
permit management of the Restaurant’s operations by a person who has not successfully
completed to our reasonable satisfaction all applicable training we require.

C. Ongoing Training. We may require the Control Person, the Unit General
Manager, the assistant managers and other key employees of the Restaurant to attend, at your
expense, ongoing training at our training facility, the Authorized Location or other
location we designate. In addition, we may develop and require you to purchase an
in-restaurant training program.

D. Staffing. You will employ a sufficient number of competent and trained
employees to ensure efficient service to your customers. You must require all your
employees to work in clean uniforms approved by us, but furnished at your cost or the
employees’ cost as you may determine. No employee of yours will be deemed to be an employee
of ours for any purpose whatsoever.

E. Attendance at Meetings. You and the Control Person must attend, at your
expense, all annual franchise conventions we may hold or sponsor and all meetings relating
to new products or product preparation procedures, new operational procedures or programs,
training, restaurant management, sales or sales promotion, or similar topics. If you or the
Control Person are not able to attend a meeting or convention, you must notify us prior to
the meeting and must have a substitute person acceptable to us attend the meeting. In
addition, your Unit General Manager(s) must attend the annual training meeting for Unit
General Managers that we may hold or sponsor, at your own expense. We reserve the right to
require that you and/or your Control Person attend any additional meetings that we deem
appropriate under special circumstances, provided however, that we will not require more
than one additional meeting every year and we will give you written notice of any such
meeting at least 10 days prior to the meeting.

ADVERTISING

8. You agree to actively promote your Restaurant, to abide by all of our advertising
requirements and to comply with the following provisions:

A. Advertising Fund. You must pay to us an Advertising Fee as set forth in
subparagraph 9.C. All Advertising Fees will be placed in an Advertising Fund that we own
and manage. On behalf of our company and affiliate owned restaurants (except for “Special
Sites”), we will pay the same Advertising Fee as similarly situated franchised restaurants
(based on age and type of location) in the same local marketing area. The Advertising Fund
is not a trust or escrow account, and we have no fiduciary obligation to franchisees with
respect to the Advertising Fund; provided, however, we will make a good faith effort to
expend such fees in a manner that we determine is in the general best interests of the
System. We have the right to determine the expenditures of the amounts collected
and the methods of marketing, advertising, media employed and contents, terms and conditions
of
marketing campaigns and promotional programs. Because of the methods used, we are not
required to spend a prorated amount on each restaurant or in each advertising market. We
have the right to make disbursements from the Advertising Fund for expenses incurred in
connection with the cost of formulating, developing and implementing marketing, advertising
and promotional campaigns. The disbursements may include payments to us for the expense of
administering the Advertising Fund, including accounting expenses and salaries and benefits
paid to our employees engaged in the advertising functions. If requested, we will provide
you an annual unaudited statement of the financial condition of the Advertising Fund.

 

15

 

B. Required Local Expenditures. You must use your best efforts to promote and
advertise the Restaurant and participate in any local marketing and promotional programs we
establish from time to time. In addition to the Advertising Fee, you are required to spend
1/2% of your Gross Sales on approved local marketing and promotion. Upon our request, you
must provide us with itemization and proof of marketing and an accounting of the monies that
you have spent for approved local marketing. If you fail to make the required expenditure,
we have the right to collect and contribute the deficiency to the Advertising Fund.

C. Approved Materials. You must use only such advertising materials (including
any print, radio, television, electronic, or other media forms that may become available in
the future) as we furnish, approve or make available, and the materials must be used only in
a manner that we prescribe. Furthermore, any promotional activities you conduct in the
Restaurant or on its premises are subject to our approval. We will not unreasonably
withhold approval of any sales promotion materials or media and activities; provided that
they are current, in good condition, in good taste and accurately depict the Trademarks.
Any point-of-sale posters or other promotional materials used by you must be current and in
good condition. We may make available at a reasonable cost to you annually or at other
reasonable intervals, a sales promotion kit containing new (or replacement) point-of-sale
and other promotional materials.

D. Advertising Cooperatives. We have the right to designate local advertising
markets and if designated, you must participate in and contribute to the cooperative
advertising and marketing programs in your designated local advertising market. If
established, you must contribute a minimum of 1/2% of Gross Sales to the local cooperative,
which satisfies the local marketing requirement described in subparagraph 8.B. If, however,
the cooperative votes to spend a percentage greater than 1/2% per location, you must
contribute such amount. Each Buffalo Wild Wings®
 restaurant,
including those operated by us, our parent company or our affiliates (except Special Sites)
within a designated local advertising area is a member of the local advertising cooperative
and each restaurant has one vote on all matters requiring a vote. Each advertising
cooperative will be required to adopt governing bylaws that meet our approval. We will
provide each advertising cooperative with a sample form of bylaws, containing certain terms
and conditions that we require, although the bylaws can not modify the voting structure set
forth in this paragraph. You will be required to contribute to the cooperative the
percentage as designated by a majority vote of the cooperative members. We reserve the
right to administer the advertising cooperatives’ funds and require payment from its members
via electronic funds transfer. The contribution amount designated by the cooperative must
be on a percentage of Gross Sales basis and per Restaurant, and must be at least 1/2%. The
members of each cooperative and their elected officers will be responsible for the
administration of the advertising cooperative. Each advertising cooperative must engage the
services of a professional advertising agency or media buyer that meets with our approval
and has expertise in the industry and in the particular market. Further, you must obtain
our written approval of all promotional and advertising materials, creative execution and
media schedules prior to their implementation. Each advertising cooperative will be
required to prepare annual financial statements, which must be made available to all members
of the cooperative and to us upon request.
Also, each advertising cooperative must submit to us its meeting minutes upon our
request. We have the right to require advertising cooperatives to be formed, changed,
dissolved or merged.

 

16

 

E. Telephone Directory Listing. You must place a separate listing, or
participate in a joint listing, in the primary yellow page directory serving the geographic
area in which your Restaurant is located. The listing must contain such copy and proper use
of the Trademarks as we specify. The cost of the listing must be paid by you or, in the
case of a joint listing, by you and other participating Buffalo Wild
Wings®
restaurants. Your cost to advertise in the yellow pages as
we direct will be included as part of your local advertising requirements under subparagraph
8.B. We will not specify an unreasonably expensive listing; we may, however, require you to
advertise in more than one local telephone directory.

F. Participation in Certain Programs and Promotions. You must participate in
all required advertising and promotional programs we establish. If the promotional program
involves alcohol, or any Menu Item that is listed on the then-current Buffalo Wild
Wings® printed menu (including any limited time offers), we may suggest, but
will not require, that you offer the item at a price lower than the every day menu price.
You must use and honor only system-wide gift cards, certificates and checks that we
designate and you must obtain all certificates, cards or checks from an approved supplier.
We have developed a gift card program and require that you sign the Affiliated Seller
Agreement attached as Appendix E. At the time of termination or expiration, or the transfer
of your rights under this Agreement, you must pay all amounts owed by you under the
Affiliated Seller Agreement.

G. New Restaurant Opening Promotion. You must conduct certain advertising and
public relations activities in connection with the opening of your Restaurant. We require
you to spend, in addition to the required local advertising contribution described above,
$12,500 for such opening activities, which must be spent some time within 45 days prior and
45 days following the opening of your Restaurant, unless otherwise approved by us. In
addition, you must perform opening advertising and promotions as required by this paragraph
every time that you (i) relocate the Restaurant or (ii) reopen the Restaurant after having
it closed for 30 days or more. Upon our request, you must provide to us proof of these
expenditures. We have the right, but not the obligation, to collect and administer these
funds on your behalf.

FEES, REPORTING AND AUDIT RIGHTS

9. You must pay the fees described below and comply with the following provisions:

A. Initial Franchise Fee. You must pay to us a nonrefundable Initial Franchise
Fee of $10,000. The Initial Franchise Fee, payable in full on the date you sign this
Agreement, is earned upon receipt and is in consideration for our expenses incurred and
services rendered in granting you the franchise rights.

B. Royalty Fee. In addition to the Initial Franchise Fee, during the full term
of this Agreement and in consideration of the rights granted to you, you must pay to us a
weekly Royalty Fee. The Royalty Fee for the first half of the initial term of this
Agreement shall be an amount equal to 5% of Gross Sales. The Royalty Fee for the second
half of the initial term of this Agreement shall be an amount equal to the greater of (i) 5%
of Gross Sales or (ii) the Royalty Fee being charged by us under our form of franchise
agreement being used by us at any time during the second half of the initial term of the
Agreement (or, if no form of franchise agreement is being used by us on such date, the
Royalty Fee being charged by us under our latest form of franchise agreement), provided that
the Royalty Fee may not be increased by more than 1/2% at any time during the initial term of
the Agreement. The amount of the Royalty Fee for any renewal term shall be that provided in
the franchise agreement executed for such renewal term.

 

17

 

C. Advertising Fee. You must pay to us a weekly Advertising Fee in an amount
equal to 3% of Gross Sales. We reserve the right to increase this percentage upon 60 days
written notice to you, provided, however, that we may not increase the Advertising Fee by
more than 1/2% per year and that the Advertising Fee will not exceed 4% for the initial term
of this Agreement. These fees are not held by us in trust and become our property to be
spent in accordance with Paragraph 8 of this Agreement.

D. Computations and Remittances. Except for the Initial Franchise Fee, you
must compute all amounts due and owing at the end of each week’s operation and remittance
for the amounts must be made to us on or before Friday of the following week, accompanied by
any reports we may require under subparagraph 9.H of this Agreement. We reserve the right
to change the reporting day of the week for any or all amounts. You must certify the
computation of the amounts in the manner and form we specify, and you must supply to us any
supporting or supplementary materials as we reasonably require to verify the accuracy of
remittances. You waive any and all existing and future claims and offsets against any
amounts due under this Agreement, which amounts you must pay when due. We have the right to
apply or cause to be applied against amounts due to us or any of our affiliates any amounts
that we or our affiliates may hold from time to time on your behalf or that we or our
affiliates owe to you. Further, if you are delinquent in the payment of any amounts owed to
us, we have the right to require you to prepay estimated Royalty Fees and Advertising Fees.

E. Electronic Transfer of Funds. You must sign an electronic transfer of funds
authorization, attached as Appendix D, to authorize and direct your bank or financial
institution to transfer electronically, on a weekly basis, directly to our account or our
affiliates’ and to charge to your account all amounts due to us or our affiliates. You must
maintain a balance in your account sufficient to allow us and our affiliates to collect the
amounts owed when due. You are responsible for any penalties, fines or other similar
expenses associated with the transfer of funds described in this subparagraph.

F. Interest Charges; Late Fees. Any and all amounts that you owe to us or to
our affiliates will bear interest at the rate of 18% per annum or the maximum contract rate
of interest permitted by governing law, whichever is less, from and after the date of
accrual. In addition to interest charges on late Royalty Fee and Advertising Fee payments,
you must pay to us a service charge of $150 for each delinquent report or payment that you
owe to us under this Agreement. A payment is delinquent for any of the following reasons:
(i) we do not receive the payment on or before the date due; or (ii) there are insufficient
funds in your bank account to collect the total payment by a transfer of funds on or after
the date due. The service charge is not interest or a penalty, it is only to compensate us
for increased administrative and management costs due to late payment.

G. Financial Planning and Management. You must record daily all sales on a
cash register tape or similar device. You must keep books and records and submit reports as
we periodically require, including but not limited to a monthly profit plan, monthly balance
sheet and monthly statement of profit and loss, records of prices and special sales, check
registers, purchase records, invoices, sales summaries and inventories, sales tax records
and returns, payroll records, cash disbursement journals and general ledger, all of which
accurately reflect the operations and condition of your Restaurant operations. You must
compile, keep and submit to us the books, records and reports on the forms and using the
methods of bookkeeping and accounting as we periodically may prescribe. The records that
you are required to keep for your Restaurant must include detailed daily sales, cost of
sales, and other relevant records or information maintained in an electronic media format
and methodology we approve. You must provide this information to us according to reporting
formats, methodologies and time schedules that we establish from time to time. You also
must preserve and retain the books, records and reports for not less than 36 months. You
must allow us electronic and manual access to any and all records relating to your
Restaurant.

 

18

 

H. Reports and Audit. You must submit your Gross Sales daily via our intranet
system. You must verify the accuracy of the Gross Sales figure by Tuesday at midnight of
each week for the preceding week. You must submit to us all reports with respect to the
preceding month by the dates and in the form and content as we periodically prescribe. The
reports we may require include, but are not limited to, the following information for the
preceding month: (i) amount of Gross Sales and gross receipts of the Restaurant, amount of
sales tax and the computation of the Royalty Fee and the Advertising Fee; (ii) quantities of
products purchased and the sources from which each were obtained; (iii) if we request,
copies of your most recent sales tax return, monthly cash register sales summary or details
and monthly balance sheet and statement of profit and loss, including a summary of your
costs for utilities, labor, rent and other material cost items; and (iv) if requested by us
to verify your Gross Sales, all such books and records as we may require under our audit
policies published from time to time. You also must, at your expense, submit to us within
90 days after the end of each fiscal year a detailed balance sheet, profit and loss
statement and statement of cash flows for such fiscal year, prepared on an accrual basis
including all adjustments necessary for fair presentation of the financial statements,
including a supplemental schedule of revenue and expenses prepared in the format we may
periodically prescribe. We may require that the annual financial statements be reviewed or
audited by a certified public accountant. You must certify all reports to be true and
correct. You acknowledge and agree that we have the right to impose these requirements on
you regardless of whether we impose the same requirement on our other franchisees.

We or our authorized representative have the right at all times during the business day
to enter the premises where your books and records relative to the Restaurant are kept and
to evaluate, copy and audit such books and records. We also have the right to request
information from your suppliers and vendors. In the event that any evaluation or audit
reveals any understatement of your Gross Sales, Royalty Fees or Advertising Fees in any
month by an individual or combined total of 1.25% or more from data reported to us, then, in
addition to any other rights we may have (including collection of amounts owed with respect
to any understatement), you must reimburse us for all audit costs including, but not limited
to, related professional fees, travel, and room and board expenses. Furthermore, we may
conduct additional periodic audits and/or evaluations of your books and records, at your
sole expense, as we reasonably deem necessary for up to 3 years thereafter. You acknowledge
and agree that if you intentionally understate or underreport Gross Sales, Royalty Fees or
Advertising Fees, or if a subsequent audit or evaluation conducted within the 3-year period
reveals any understatement or a variance of these fees by an individual or combined total of
1.25% or more, in addition to any other remedies provided in this Agreement, at law or in
equity, we have the right to terminate this Agreement in accordance with Subparagraph
13.B.2. To verify the information you supply, we have the right to reconstruct your sales
through the inventory extension method or any other reasonable method of analyzing and
reconstructing sales. You agree to accept any such reconstruction of sales unless you
provide evidence in a form satisfactory to us of your sales within a period of 14 days from
the date of notice of understatement or variance. You must fully cooperate with us or our
representative in performing these activities and any expenses incurred by us from your lack
of cooperation shall be reimbursed by you.

We will keep your financial books, records and reports confidential, unless the
information is requested by tax authorities or used as part of a legal proceeding or in a
manner as set forth in subparagraph 11.D.8 or where your information is grouped with similar
information from other restaurants to produce shared results like high-low ranges or average
gross sales or expenses on a system-wide or regional basis.

 

19

 

YOUR OTHER OBLIGATIONS; NONCOMPETE COVENANTS

10. You agree to comply with the following terms and conditions:

A. Payment of Debts. You agree to pay promptly when due: (i) all payments,
obligations, assessments and taxes due and payable to us and our affiliates, vendors,
suppliers, lessors, federal, state or local governments, or creditors in connection with
your business; (ii) all liens and encumbrances of every kind and character created or placed
upon or against any of the property used in connection with the Restaurant or business; and
(iii) all accounts and other indebtedness of every kind incurred by you in the conduct of
the Restaurant or business. In the event you default in making any such payment, we are
authorized, but not required, to pay the same on your behalf and you agree promptly to
reimburse us on demand for any such payment.

B. Indemnification. You hereby waive all claims against us for damages to
property or injuries to persons arising out of the operation of your Restaurant. You must
fully protect, indemnify and hold us and our owners, directors, officers, insurers,
successors and assigns and our affiliates harmless from and against any and all claims,
demands, damages and liabilities of any nature whatsoever arising in any manner, directly or
indirectly, out of or in connection with or incidental to the operation of your Restaurant
(regardless of cause or any concurrent or contributing fault or negligence of us or our
affiliates) or any breach by you or your failure to comply with the terms and conditions of
this Agreement. We also reserve the right to select our own legal counsel to represent our
interests, and you must reimburse us for all our costs and all attorneys’ fees immediately
upon our request as they are incurred.

We hereby waive all claims against you for damages to property or injuries to persons
arising out of the operation of our company or affiliate owned restaurants. We must fully
protect, indemnify and defend you and your affiliates and hold you and them harmless from
and against any and all claims, demands, damages and liabilities of any nature whatsoever
arising in any manner, directly or indirectly, out of or in connection with or incidental to
the operation of our company or affiliate owned restaurants (regardless of cause or any
concurrent or contributing fault or negligence of you) or any breach by us or our failure to
comply with the terms and conditions of this Agreement.

C. Insurance. You must purchase and maintain in full force and effect, at your
expense and from a company we accept, insurance that insures both you and us, our affiliates
and any other persons we designate by name. The insurance policy or policies shall be
written in accordance with the standards and specifications (including minimum coverage
amounts) set forth in writing by us from time to time, and, at a minimum, shall include the
following (except as different coverages and policy limits may be specified for all
franchisees from time to time in writing): (i) property insurance on the Restaurant,
restaurant improvements and all fixtures, equipment, supplies and other property used in the
operation of the Restaurant; (ii) business interruption insurance that covers your loss of
income and our Royalty Fees; (iii) comprehensive general liability insurance (which may
include umbrella liability); (iv) liquor liability insurance; (v) automobile liability
insurance on all owned, hired, rented and non-owned vehicles; and (vi) workers’ compensation
and employer’s liability insurance covering all of your employees. In addition, the
required liability insurance must (i) name Buffalo Wild Wings, Inc., Buffalo Wild Wings
International, Inc. and affiliates (collectively, “BWW Entities”) as additional insureds;
(ii) provide severability of interests and/or separation of insureds coverage; and (iii) be
primary and non-contributory with any insurance policy carried by the BWW Entities.

You must deliver to us at commencement and thereafter annually or at our request a
proper certificate evidencing the existence of such insurance coverage and your compliance
with the provisions of this subparagraph. The insurance certificate must show compliance
with all required insurance specifications. We also may request copies of all policies.
We may from time to time modify the required minimum limits and require additional insurance
coverage, by providing written notice to you, as conditions require, to reflect changes in
relevant circumstances, industry standards, experiences in the Buffalo Wild Wings
system, standards of liability and higher damage awards.
If you do not procure and maintain the insurance coverage required by this Agreement,
we have the right, but not the obligation, to procure insurance coverage and to charge the
costs to you, together with a reasonable fee for the expenses we incur in doing so. You
must pay these amounts to us immediately upon written notice.

 

20

 

D. Noncompete Covenants. You agree that you will receive valuable training and
Confidential Information that you otherwise would not receive or have access to but for the
rights licensed to you under this Agreement. You therefore agree to the following
noncompetition covenants:

1. Unless otherwise specified, the term “you” as used in this subparagraph 10.D
includes, collectively and individually, your Control Person, all Principal Owners,
guarantors, officers, directors, members, managers, partners, as the case may be, and
holders of any ownership interest in you. We may require you to obtain from your
Control Person and other individuals identified in the preceding sentence a signed
non-compete agreement in a form satisfactory to us that contains the non-compete
provisions of this subparagraph 10.D.

2. You covenant that during the term of this Agreement you will not, either
directly or indirectly, for yourself, or through, on behalf of, or in conjunction
with any person or entity, own, manage, operate, maintain, engage in, consult with or
have any interest in any restaurant or food business other than one authorized by
this Agreement or any other agreement between us and you, except any interest you may
have, at the Effective Date of this Agreement, in a restaurant or food business other
than a casual or fast casual restaurant. Under no circumstances may you be a member
of a franchisee advisory council, committee, board or other similar group for a
restaurant or food business, unless you receive our prior written approval.

3. You covenant that you will not, for a period of 2 years after the expiration
or termination of this Agreement, regardless of the cause of termination, or within 2
years of the sale of the Restaurant or any interest in you, either directly or
indirectly, for yourself, or through, on behalf of, or in conjunction with any person
or entity, own, manage, operate, maintain, engage in, consult with or have any
interest in (i) a casual or fast casual restaurant that sells or offers to dispense
prepared food products the same as or similar to the type sold in Buffalo Wild
Wings® restaurants; (ii) a video entertainment-oriented,
casual or fast casual restaurant or bar business; or (iii) any business establishment
that sells or offers to dispense prepared chicken wings or legs:

a. At the premises of the former Restaurant;

b. Within a 5-mile radius of the former Restaurant; or

c. Within a 5-mile radius of the location of any other business or
restaurant using the Buffalo Wild Wings® System, whether
franchised or owned by us or our affiliates.

For purposes of this subparagraph, a video entertainment-oriented, casual or fast
casual restaurant or bar is one with more than two screens, or any screen larger than
21 inches, available for the viewing of different events.

4. You agree that the length of time in subpart (3) will be tolled for any
period during which you are in breach of the covenants or any other period during
which we seek to
enforce this Agreement. The parties agree that each of the foregoing covenants
will be construed as independent of any other covenant or provision of this
Agreement.

 

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TRANSFER OF FRANCHISE

11. You agree that the following provisions govern any transfer or proposed transfer:

A. Transfers. We have entered into this Agreement with specific reliance upon
your financial qualifications, experience, skills and managerial qualifications as being
essential to the satisfactory operation of the Restaurant. Consequently, neither your
interest in this Agreement or you nor in the Restaurant may be transferred or assigned to or
assumed by any other person or entity (the “assignee”), in whole or in part, unless you have
first tendered to us the right of first refusal to acquire this Agreement in accordance with
subparagraph 11.F, and, if we do not exercise such right, unless our prior written consent
is obtained, the transfer fee provided for in subparagraph 11.C is paid, and the transfer
conditions described in subparagraph 11.D are satisfied. Any sale (including installment
sale), lease, pledge, management agreement, contract for deed, option agreement, assignment,
bequest, gift or otherwise, or any arrangement pursuant to which you turn over all or part
of the daily operation of the business to a person or entity who shares in the losses or
profits of the business in a manner other than as an employee will be considered a transfer
for purposes of this Agreement. Specifically, but without limiting the generality of the
foregoing, the following events constitute a transfer and you must comply with the right of
first refusal, consent, transfer fee, and other transfer conditions in this Paragraph 11:

1. Any change or any series of changes in the percentage of the
franchisee entity owned, directly or indirectly, by any Principal Owner which
results in any addition or deletion of any person or entity who qualifies as
a Principal Owner;

2. Any change in the general partner of a franchisee that is a general,
limited or other partnership entity; or

3. For purposes of this subparagraph 11.A, a pledge or seizure of any
ownership interests in you or in any Principal Owner that affects the
ownership of 25% or more of you or any Principal Owner, which we have not
approved in advance in writing.

In the event of your insolvency or the filing of any petition by or against you under
any provisions of any bankruptcy or insolvency law, if your legal representative, successor,
receiver or trustee desires to succeed to your interest in this Agreement or the business
conducted hereunder, such person first must notify us, tender the right of first refusal
provided for in subparagraph 11.F, and if we do not exercise such right, must apply for and
obtain our consent to the transfer, pay the transfer fee provided for in subparagraph 11.C,
and satisfy the transfer conditions described in subparagraph 11.D. In addition, you or the
assignee must pay the attorneys’ fees and costs that we incur in any bankruptcy or
insolvency proceeding pertaining to you.

You may not place in, on or upon the location of the Restaurant, or in any
communication media or any form of advertising, any information relating to the sale of the
Restaurant or the rights under this Agreement, without our prior written consent.

 

22

 

B. Consent to Transfer. We will not unreasonably withhold our consent to
transfer, provided that all of the conditions described in this Paragraph 11 have been
satisfied. Application for our consent to a transfer and tender of the right of first
refusal provided for in subparagraph 11.F must be made by submission of our form of
application for consent to transfer. You also agree to submit other information and
documents (including a copy of the proposed purchase or other transfer agreement) we
require under our then-current transfer procedures. The application must indicate
whether you or a Principal Owner proposes to retain a security interest in the property to
be transferred. No security interest may be retained or created, however, without our prior
written consent and except upon conditions acceptable to us. Any agreement used in
connection with a transfer shall be subject to our prior written approval, which approval
will not be withheld unreasonably. You immediately must notify us of any proposed transfer
and must submit promptly to us the application for consent to transfer. Any attempted
transfer by you without our prior written consent or otherwise not in compliance with the
terms of this Agreement will be void, your interest in this Agreement will be voluntarily
abandoned, and it will provide us with the right to elect either to deem you in default and
terminate this Agreement or to collect from you and the guarantors a transfer fee equal to
two times the transfer fee provided for in subparagraph 11.C.

C. Transfer Fee. The transfer fee is $12,500. You must submit to us a $5,000
deposit at the time you submit an application for consent to transfer. We have the right to
increase the deposit above $5,000 and up to $12,500 if we believe our costs and expenses
will exceed $5,000. We will refund the $5,000 (or any increased deposit amount) less our
costs and expenses (including our time) if the transfer is not completed. If the transfer
proceeds, the $7,500 balance (or any adjusted balance amount) on the transfer fee is due to
us prior to the closing of the transfer and the entire $12,500 transfer fee becomes
nonrefundable at that time. Payment of the transfer fee is a condition of transfer under
subparagraph 11.D. If the transfer is part of a simultaneous, multiple restaurant transfer,
the transfer fee will be modified as follows: the transfer fee for the first restaurant is
$12,500, the transfer fee for the second through tenth restaurants is $2,500 per restaurant,
with no additional transfer fee beyond the tenth restaurant. If, however, our costs and
expenses in reviewing and processing the transfer, including attorneys’ fees, exceed the
applicable transfer fee, then in addition to the transfer fee you agree to cover those
additional costs and expenses (including our time).

D. Conditions of Transfer. We condition our consent to any proposed transfer,
whether to an individual, a corporation, a partnership or any other entity upon the
following:

1. Assignee Requirements. The assignee must meet all of our
then-current requirements for any potential new franchisee at the time of the
proposed transfer.

2. Payment of Amounts Owed. All amounts owed by you to us or any of our
affiliates, your suppliers or any landlord for the Restaurant premises and Authorized
Location, or upon which we or any of our affiliates have any contingent liability
must be paid in full.

3. Reports. You must have provided all required reports to us in
accordance with subparagraphs 9.G and H.

4. Modernization. You must have complied with the provisions of
subparagraph 5.E.

5. Guarantee. In the case of an installment sale for which we have
consented to you or any Principal Owner retaining a security interest or other
financial interest in this Agreement or the business operated thereunder, you or such
Principal Owner, and the guarantors, are obligated to guarantee the performance under
this Agreement until the final close of the installment sale or the termination of
such interest, as the case may be.

6. General Release. You, each Principal Owner and each guarantor must
sign a general release of all claims arising out of or relating to this Agreement,
your Restaurant or the parties’ business relationship, in the form we designate,
releasing us and our affiliates.

 

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7. Execution of Then-Current Franchise Agreement. The assignee executes
our then-current form of franchise agreement (modified to reflect that the term is
only the remainder of the term under this Agreement and other modifications to
reflect that the agreement relates to a transfer), the terms of which may differ from
this Agreement, including higher fees and modifications to the Designated Area
(although in no event will the revised Designated Area have a residential population
of the lesser of approximately 30,000 to 40,000 or the residential population that
existed as of the Effective Date).

8. Training. The assignee must, at your or assignee’s expense, comply
with the training requirements of subparagraph 7.B.

9. Financial Reports and Data. We have the right to require you to
prepare and furnish to assignee and/or us such financial reports and other data
relating to the Restaurant and its operations reasonably necessary or appropriate for
assignee and/or us to evaluate the Restaurant and the proposed transfer. You agree
that we have the right to confer with proposed assignees and furnish them with
information concerning the Restaurant and proposed transfer without being held liable
to you, except for intentional misstatements made to an assignee. Any information
furnished by us to proposed assignees is for the sole purpose of permitting the
assignees to evaluate the Restaurant and proposed transfer and must not be construed
in any manner or form whatsoever as earnings claims or claims of success or failure.

10. Other Franchise Agreements. You must be in full compliance with all
your obligations under any and all Franchise Agreements and Area Development
Agreements executed between you and us.

11. Other Conditions. You must have complied with any other conditions
that we reasonably require from time to time as part of our transfer policies,
provided that such conditions will not be more stringent than any conditions
otherwise imposed on new franchisees signing the then-current franchise agreement.

E. Death, Disability or Incapacity. If any individual who is a Principal Owner
dies or becomes disabled or incapacitated and the decedent’s or disabled or incapacitated
person’s heir or successor-in-interest wishes to continue as a Principal Owner, such person
or entity must apply for our consent under subparagraph 11.B, comply with the training
requirements of subparagraph 7.B if the Principal Owner also was the Control Person (unless
the heir or successor-in-interest finds another Principal Owner to qualify as the Control
Person), pay the applicable transfer fee under subparagraph 11.C, and satisfy the transfer
conditions under subparagraph 11.D, as in any other case of a proposed transfer, all within
180 days of the death or event of disability or incapacity. During any transition period to
an heir or successor-in-interest, the Restaurant still must be operated in accordance with
the terms and conditions of this Agreement. If the assignee of the decedent or disabled or
incapacitated person is the spouse or child of such person, no transfer fee will be payable
to us and we will not have a right of first refusal as set forth in subparagraph 11.F.

F. Right of First Refusal. If you propose to transfer or assign this Agreement
or your interest herein or in you or the business, in whole or in part, to any third party,
including, without limitation, any transfer contemplated by subparagraph 11.E or any
transfer described in subparagraph 11.A, you first must offer to sell to us your interest
under the same terms. In the event of a bona fide offer from such third party, you must
obtain from the third-party offeror and deliver to us a statement in writing, signed by the
offeror and by you, of the terms of the offer. In the event the proposed transfer results
from a transfer under subparagraphs 11.A.1 through 11.A.3, or your insolvency or the filing
of any petition by or against you under any provisions of any bankruptcy or insolvency law,
you first must offer to sell to us your interest in this Agreement and the land, building,

 

24

 

equipment, furniture and fixtures, and any leasehold interest used in the operation of your Restaurant. Unless
otherwise agreed to in writing by us and you, the purchase price for our purchase of assets
in the event of a transfer that occurs by a transfer under subparagraphs 11.A.1 through
11.A.3, insolvency or bankruptcy filing will be established by a qualified appraiser
selected by the parties and in accordance with the price determination formula established
in subparagraph 14.B (the formula that includes the value of any goodwill of the business)
in connection with an asset purchase upon expiration. In addition, unless otherwise agreed
to in writing by us and you, the transaction documents, which we will prepare, will be those
customary for this type of transaction and will include representations and warranties then
customary for this type of transaction. If the parties cannot agree upon the selection of
such an appraiser, a Judge of the United States District Court for the District in which the
Authorized Location is located will appoint one upon petition of either party.

You or your legal representative must deliver to us a statement in writing
incorporating the appraiser’s report and all other information we have requested.

We then have 45 days from our receipt of the statement setting forth the third-party
offer or the appraiser’s report and other requested information to accept the offer by
delivering written notice of acceptance to you. Our acceptance of any right of first
refusal will be on the same price and terms set forth in the statement delivered to us;
provided, however, we have the right to substitute equivalent cash for any noncash
consideration included in the offer. If we fail to accept the offer within the 45-day
period, you will be free for 60 days after such period to effect the disposition described
in the statement delivered to us provided such transfer is in accordance with this Paragraph
11. You may effect no other sale or assignment of you, this Agreement or the business
without first offering the same to us in accordance with this subparagraph 11.F.

G. Transfer to Immediate Family Members and among Principal Owners. If the
transfer is between an original Principal Owner or an individual who has been a Principal
Owner for at least five years and an immediate family member of that owner, or if the
transfer is among individuals who have each been Principal Owners for at least five years,
then the following apply: (i) no transfer fee will be payable to us, although you must
reimburse us for our reasonable costs and expenses in an amount not to exceed $12,500; (ii)
we will waive our right of first refusal described in subparagraph 11.F; and (iii) we will
not require the execution of the then-current franchise agreement, as required by
subparagraph 11.D.7. All other provisions of this Paragraph 11 apply in full force and
effect to the type of transfer described in this subparagraph.

H. Transfer by Us. We have the right to sell or assign, in whole or in part,
our interest in this Agreement.

DISPUTE RESOLUTION

12. The following provisions apply with respect to dispute resolution:

A. Arbitration; Mediation. Except as qualified below, any dispute between you
and us or any of our or your affiliates arising under, out of, in connection with or in
relation to this Agreement, any lease or sublease for the Restaurant or Authorized Location,
the parties’ relationship, or the business must be submitted to binding arbitration under
the authority of the Federal Arbitration Act and must be arbitrated in accordance with the
then-current rules and procedures and under the auspices of the American Arbitration
Association. The arbitration must take place in Minneapolis, Minnesota, or at such other
place as may be mutually agreeable to the parties. Any arbitration must be resolved on an
individual basis and not joined as part of a class action or the claims of other parties.
The arbitrators must follow the law and not disregard the terms of this Agreement. The
decision of the arbitrators will be final and binding on all parties to the dispute;
however, the arbitrators may not under any
circumstances: (i) stay the effectiveness of any pending termination of this
Agreement; (ii) assess punitive or exemplary damages; or (iii) make any award which extends,
modifies or suspends any lawful term of this Agreement or any reasonable standard of
business performance that we set. A judgment may be entered upon the arbitration award by
any state or federal court in Minnesota or the state of the Authorized Location.

 

25

 

Before the filing of any arbitration, the parties agree to mediate any dispute that
does not include injunctive relief or specific performance actions covered under
subparagraph 12.B, provided that the party seeking mediation must notify the other party of
its intent to mediate prior to the termination of this Agreement. Mediation will be
conducted by a mediator or mediation program agreed to by the parties. Persons authorized
to settle the dispute must attend any mediation session. The parties agree to participate
in the mediation proceedings in good faith with the intention of resolving the dispute if at
all possible within 30 days of the notice from the party seeking to initiate the mediation
procedures. If not resolved within 30 days, or if one party refuses to participate in
mediation as outlined herein, the parties are free to pursue arbitration. Mediation is a
compromise negotiation for purposes of the federal and state rules of evidence, and the
entire process is confidential.

B. Injunctive Relief. Notwithstanding subparagraph 12.A above, you recognize
that the Restaurant is one of a large number of restaurants and stores identified by the
Trademarks and similarly situated and selling to the public similar products, and the
failure on the part of a single franchisee to comply with the terms of its agreement could
cause irreparable damage to us and/or to some or all of our other franchisees. Therefore,
it is mutually agreed that in the event of a breach or threatened breach of any of the terms
of this Agreement by you, we will forthwith be entitled to an injunction restraining such
breach or to a decree of specific performance, without showing or proving any actual damage,
together with recovery of reasonable attorneys’ fees and other costs incurred in obtaining
said equitable relief, until such time as a final and binding determination is made by the
arbitrators. Similarly, it is mutually agreed that in the event of our breach or threatened
breach of any of the terms of this Agreement, you will forthwith be entitled to an
injunction restraining such breach or to a decree of specific performance, without showing
or proving any actual damage, together with recovery of reasonable attorneys’ fees and other
costs incurred in obtaining said equitable relief, until such time as a final and binding
determination is made by the arbitrators. The foregoing equitable remedies are in addition
to, and not in lieu of, all other remedies or rights that the parties might otherwise have
by virtue of any breach of this Agreement by the other party. Finally, we and our
affiliates have the right to commence a civil action against you or take other appropriate
action for the following reasons: to collect sums of money due to us; to compel your
compliance with trademark standards and requirements to protect the goodwill of the
Trademarks; to compel you to compile and submit required reports to us; or to permit
evaluations or audits authorized by this Agreement.

C. Attorneys’ Fees. The prevailing party in any action or proceeding arising
under, out of, in connection with, or in relation to this Agreement, any lease or sublease
for the Restaurant or Authorized Location, or the business will be entitled to recover its
reasonable attorneys’ fees and costs.

DEFAULT AND TERMINATION

13. The following provisions apply with respect to default and termination:

A. Defaults. You are in default if we determine that you or any Principal
Owner or guarantor has breached any of the terms of this Agreement or any other agreement
between you and us or our affiliates, which without limiting the generality of the foregoing
includes making any false report to us, intentionally understating or underreporting or
failure to pay when due any amounts required to be paid to us or any of our affiliates,
actions by you, a Principal Owner, or a guarantor that infringe upon,
harm or contest our parent company’s rights in any of the Trademarks or the goodwill
associated with the Trademarks or impair or tend to impair your reputation, any felony,
filing of tax or other liens that may affect this Agreement, voluntary or involuntary
bankruptcy by or against you or any Principal Owner or guarantor, insolvency, making an
assignment for the benefit of creditors or any similar voluntary or involuntary arrangement
for the disposition of assets for the benefit of creditors.

 

26

 

B. Termination by Us. We have the right to terminate this Agreement in
accordance with the following provisions:

1. Termination After Opportunity to Cure. Except as otherwise expressly
provided in this subparagraph 13.B or elsewhere in the Agreement: (i) you will have
30 days from the date of our issuance of a written notice of default to cure any
default under this Agreement, other than a failure to pay amounts due or submit
required reports, in which case you will have 10 days to cure those defaults; (ii)
your failure to cure a default within the 30-day or 10-day period will provide us
with good cause to terminate this Agreement; (iii) the termination will be
accomplished by mailing or delivering to you written notice of termination that will
identify the grounds for the termination; and (iv) the termination will be effective
immediately upon our issuance of the written notice of termination.

2. Immediate Termination With No Opportunity to Cure. In the event any
of the following defaults occurs, you will have no right or opportunity to cure the
default and this Agreement will terminate effective immediately on our issuance of
written notice of termination: any material misrepresentation or omission in your
franchise application, your voluntary abandonment of this Agreement or the Authorized
Location, the loss or revocation of your liquor license or suspensions totaling 90
days over any 5 year period, the loss of your lease, the failure to timely cure a
default under the lease, the loss of your right of possession or failure to reopen or
relocate under subparagraph 5.D, the closing of the Restaurant by any state or local
authorities for health or public safety reasons, any unauthorized use of the
Confidential Information, insolvency of you, a Principal Owner, the Control Person or
guarantor, you, a Principal Owner, the Control Person or guarantor making an
assignment or entering into any similar arrangement for the benefit of creditors, any
default under this Agreement that materially impairs the goodwill associated with any
of the Trademarks, conviction of you, any Principal Owners, the Control Person, or
guarantors of (or pleading no contest to) any felony regardless of the nature of the
charges, or any actions that infringe upon, harm or contest or parent company’s
rights in any of the Trademarks or the goodwill associated with the Trademarks or
impair or tend to impair your reputation, intentionally understating or
underreporting Gross Sales, Royalty Fees or Advertising Fees or any understatement or
1.25% variance on a subsequent audit within a 3 year period under subparagraph 9.H,
failure to open the Restaurant by the Required Open Date, failure to execute the
lease (including the Lease Addendum) or the Purchase Agreement for the Restaurant by
the date stated subparagraph 5.A, failure to start substantial construction of the
Restaurant by the date established in subparagraph 5.B, failure to secure financing
for the construction of the Restaurant by the date set forth in subparagraph 5.B,
violation by you of the provisions of subparagraph 15.P, any unauthorized transfer or
assignment in violation of Paragraph 11 or any default by you that is the second same
or similar default within any 12-month consecutive period or the fourth default of
any type within any 24-month consecutive period.

3. Immediate Termination After No More than 24 Hours to Cure. In the
event that a default under this Agreement occurs that violates any health safety or
sanitation law or regulation, violates any system standard as to food handling,
cleanliness, health and sanitation, or if the operation of the Restaurant presents a
health or safety hazard to your customers or to the public (for example, improper
cooking or storage procedures used for
chicken wings): (i) you will have no more than 24 hours after we provide
written notice of the default to cure the default; and (ii) if you fail to cure the
default within the 24 hour period, this Agreement will terminate effective
immediately on our issuance of written notice of termination.

 

27

 

4. Effect of Other Laws. The provisions of any valid, applicable law or
regulation prescribing permissible grounds, cure rights or minimum periods of notice
for termination of this franchise supersede any provision of this Agreement that is
less favorable to you.

C. Termination by You. You may terminate this Agreement as a result of a
breach by us of a material provision of this Agreement provided that: (i) you provide us
with written notice of the breach that identifies the grounds for the breach; and (ii) we
fail to cure the breach within 30 days after our receipt of the written notice. If we fail
to cure the breach, the termination will be effective 60 days after our receipt of your
written notice of breach. Your termination of this Agreement under this Paragraph will not
release or modify your Post-Term obligations under Paragraph 14 of this Agreement.

POST-TERM OBLIGATIONS

14. Upon the expiration or termination of this Agreement:

A. Reversion of Rights; Discontinuation of Trademark Use. All of your rights
to the use of the Trademarks and all other rights and licenses granted herein and the right
and license to conduct business under the Trademarks at the Authorized Location will revert
to us without further act or deed of any party. All of your right, title and interest in,
to and under this Agreement will become our property. Upon our demand, you must assign to
us or our assignee your remaining interest in any lease then in effect for the Restaurant
(although we will not assume any past due obligations). You must immediately comply with
the post-term noncompete obligations under subparagraph 10.D, cease all use and display of
the Trademarks and of any proprietary material (including the manual and the product
preparation materials) and of all or any portion of point-of-sale materials furnished or
approved by us, assign all right, title and interest in the telephone numbers for the
Restaurant and cancel or assign, at our option, any assumed name rights or equivalent
registrations filed with authorities. You must pay all sums due to us, our affiliates or
designees and all sums you owe to third parties that have been guaranteed by us or any of
our affiliates. You must immediately return to us, at your expense, all copies of the
manuals and product preparation materials then in your possession or control or previously
disseminated to your employees and continue to comply with the confidentiality provisions of
subparagraph 6.J. You must promptly at your expense and subject to subparagraph 14.B,
remove or obliterate all Restaurant signage, displays or other materials (electronic or
tangible) in your possession at the Authorized Location or elsewhere that bear any of the
Trademarks or names or material confusingly similar to the Trademarks and so alter the
appearance of the Restaurant as to differentiate the Restaurant unmistakably from duly
licensed restaurants identified by the Trademarks. If, however, you refuse to comply with
the provisions of the preceding sentence within 30 days, we have the right to enter the
Authorized Location and remove all Restaurant signage, displays or other materials in your
possession at the Authorized Location or elsewhere that bear any of the Trademarks or names
or material confusingly similar to the Trademarks, and you must reimburse us for our costs
incurred. Notwithstanding the foregoing, in the event of expiration or termination of this
Agreement, you will remain liable for your obligations pursuant to this Agreement or any
other agreement between you and us or our affiliates that expressly or by their nature
survive the expiration or termination of this Agreement.

 

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B. Purchase Option. We have the right to purchase or designate a third party
that will purchase all or any portion of the assets of your Restaurant that are owned by you
or any of your affiliates including, without limitation, the land, building, equipment,
fixtures, signage, furnishings,
supplies, leasehold improvements, liquor license and inventory of the Restaurant at a
price determined by a qualified appraiser (or qualified appraisers if one party believes it
is better to have a real estate appraiser appraise the value of the land and building and a
business appraiser appraise the Restaurant’s other assets) selected with the consent of
both parties, provided we give you written notice of our preliminary intent to exercise our
purchase rights under this Paragraph within 30 days after the date of the expiration or
termination of this Agreement. If the parties cannot agree upon the selection of an
appraiser(s), one or both will be appointed by a Judge of the United States District Court
for the District in which the Authorized Location is located upon petition of either party.

In the event the Agreement is terminated (rather than if it expires), the price
determined by the appraiser(s) will be the reasonable fair market value of the assets based
on their continuing use in, as, and for the operation of a Buffalo Wild
Wings® Restaurant and the appraiser will designate a price for each category
of asset (e.g., land, building, equipment, fixtures, etc.), but shall not include the value
of any goodwill of the business, as the goodwill of the business is attributable to the
Trademarks and the System. In the event that the Agreement expires (rather than if it is
terminated), the price determined by the appraiser(s) will be the reasonable fair market
value of the assets, as stated in the prior sentence, plus the value of any goodwill of the
business, attributable to your operation of the Restaurant. In the event of expiration,
however, the parties agree that you may elect not to include the land in the appraisal and
option to purchase process. In this instance, you may elect to lease the land to us or our
designee for a lease term of at least 10 years with two 5-year options to renew and for a
primary rate equal to fair market value according to the applicable Building Office
Management Association Guidelines, unless otherwise agreed to by the parties.

Within 45 days after our receipt of the appraisal report, we or our designated
purchaser will identify the assets, if any, that we intend to purchase at the price
designated for those assets in the appraisal report. We or our designated purchaser and you
will then proceed to complete and close the purchase of the identified assets, and to
prepare and execute purchase and sale documents customary for the assets being purchased, in
a commercially reasonable time and manner. We and you will each pay one-half of the
appraiser’s fees and expenses. Our interest in the assets of the Restaurant that are owned
by you or your affiliates will constitute a lien thereon and may not be impaired or
terminated by the sale or other transfer of any of those assets to a third party. Upon our
or our designated purchaser’s exercise of the purchase option and tender of payment, you
agree to sell and deliver, and cause your affiliates to sell and deliver, the purchased
assets to us or our designated purchaser, free and clear of all encumbrances, and to execute
and deliver, and cause your affiliates to execute and deliver, to us or our designated
purchaser a bill of sale therefore and such other documents as may be commercially
reasonable and customary to effectuate the sale and transfer of the assets being purchased.

If we do not exercise our option to purchase under this subparagraph, you may sell or
lease the Restaurant premises to a third party purchaser, provided that your agreement with
the purchaser includes a covenant by the purchaser, which is expressly enforceable by us as
a third party beneficiary, pursuant to which the purchaser agrees, for a period of 2 years
after the expiration or termination of this Agreement, not to use the premises for the
operation of a restaurant business that has a menu or method of operation similar to that
employed by our company-owned or franchised restaurants.

C. Claims. You and your Principal Owners and guarantors may not assert any
claim or cause of action against us or our affiliates relating to this Agreement or the
Buffalo Wild Wings® business after the shorter period of the applicable
statute of limitations or one year following the effective date of termination of this
Agreement; provided that where the one-year limitation of time is prohibited or invalid by
or under any applicable law, then and in that event no suit or action may be commenced or
maintained unless commenced within the applicable statute of limitations.

 

29

 

GENERAL PROVISIONS

15. The parties agree to the following provisions:

A. Severability. Should one or more clauses of this Agreement be held void or
unenforceable for any reason by any court of competent jurisdiction, such clause or clauses
will be deemed to be separable in such jurisdiction and the remainder of this Agreement is
valid and in full force and effect and the terms of this Agreement must be equitably
adjusted so as to compensate the appropriate party for any consideration lost because of the
elimination of such clause or clauses. It is the intent and expectation of each of the
parties that each provision of this Agreement will be honored, carried out and enforced as
written. Consequently, each of the parties agrees that any provision of this Agreement
sought to be enforced in any proceeding must, at the election of the party seeking
enforcement and notwithstanding the availability of an adequate remedy at law, be enforced
by specific performance or any other equitable remedy.

B. Waiver/Integration. No waiver by us of any breach by you, nor any delay or
failure by us to enforce any provision of this Agreement, may be deemed to be a waiver of
any other or subsequent breach or be deemed an estoppel to enforce our rights with respect
to that or any other or subsequent breach. Subject to our rights to modify Appendices
and/or standards and as otherwise provided herein, this Agreement may not be waived, altered
or rescinded, in whole or in part, except by a writing signed by you and us. This Agreement
together with the addenda and appendices hereto and the application form executed by you
requesting us to enter into this Agreement constitute the sole agreement between the parties
with respect to the entire subject matter of this Agreement and embody all prior agreements
and negotiations with respect to the business. You acknowledge and agree that you have not
received any warranty or guarantee, express or implied, as to the potential volume, profits
or success of your business. There are no representations or warranties of any kind,
express or implied, except as contained herein and in the aforesaid application. Nothing in
the Agreement or in any related agreement is intended to disclaim the representations we
made in the franchise disclosure document that we furnished to you.

C. Notices. Except as otherwise provided in this Agreement, any notice, demand
or communication provided for herein must be in writing and signed by the party serving the
same and either delivered personally or by a reputable overnight service or deposited in the
United States mail, service or postage prepaid and addressed as follows:

1. If intended for us, addressed to General Counsel, Buffalo Wild Wings
International, Inc., 5500 Wayzata Blvd., Suite 1600, Minneapolis, Minnesota
55416;

2. If intended for you, addressed to you at 27680 Franklin Road,
Southfield, Michigan 48034 or at the Authorized Location; or,

in either case, as the intended party may change such address by written notice to the other
party. Notices for purposes of this Agreement will be deemed to have been received if
mailed or delivered as provided in this subparagraph.

D. Authority. Any modification, consent, approval, authorization or waiver
granted hereunder required to be effective by signature will be valid only if in writing
executed by the Control Person or, if on behalf of us, in writing executed by our President
or one of our authorized Vice Presidents.

E. References. If the franchisee is 2 or more individuals, the individuals are
jointly and severally liable, and references to you in this Agreement include all of the
individuals. Headings and
captions contained herein are for convenience of reference and may not be taken into
account in construing or interpreting this Agreement.

 

30

 

F. Guarantee. All Principal Owners of a franchisee that is a corporation,
limited liability company, partnership or other legal entity must execute the form of
undertaking and guarantee at the end of this Agreement. Any person or entity that at any
time after the date of this Agreement becomes a Principal Owner pursuant to the provisions
of Paragraph 11 or otherwise must execute the form of undertaking and guarantee at the end
of this Agreement within 10 days from the date such person or entity becomes a Principal
Owner; provided, however, that any person or entity who becomes a Principal Owner shall
automatically acquire all the obligations of a Principal Owner under this Agreement at the
time such person or entity becomes a Principal Owner. Before approving and entering into
any transaction that would make any person or entity a Principal Owner, you must notify such
person about the content of this subparagraph.

G. Successors/Assigns. Subject to the terms of Paragraph 11 hereof, this
Agreement is binding upon and inures to the benefit of the administrators, executors, heirs,
successors and assigns of the parties.

H. Interpretation of Rights and Obligations. The following provisions apply to
and govern the interpretation of this Agreement, the parties’ rights under this Agreement,
and the relationship between the parties:

1. Applicable Law and Waiver. Subject to our rights under federal
trademark laws and the parties’ rights under the Federal Arbitration Act in
accordance with Paragraph 12 of this Agreement, the parties’ rights under this
Agreement, and the relationship between the parties is governed by, and will be
interpreted in accordance with, the laws (statutory and otherwise) of the state in
which the Authorized Location is located. You waive, to the fullest extent permitted
by law, the rights and protections that might be provided through the laws of any
state relating to franchises or business opportunities, other than those of the state
in which the Authorized Location is located.

2. Our Rights. Whenever this Agreement provides that we have a certain
right, that right is absolute and the parties intend that our exercise of that right
will not be subject to any limitation or review. We have the right to operate,
administrate, develop, and change the System in any manner that is not specifically
precluded by the provisions of this Agreement, although this right does not modify
the requirements of subparagraph 5.E and other express limitations set forth in this
Agreement.

3. Our Reasonable Business Judgment. Whenever we reserve discretion in
a particular area or where we agree to exercise our rights reasonably or in good
faith, we will satisfy our obligations whenever we exercise Reasonable Business
Judgment in making our decision or exercising our rights. Our decisions or actions
will be deemed to be the result of Reasonable Business Judgment, even if other
reasonable or even arguably preferable alternatives are available, if our decision or
action is intended, in whole or significant part, to promote or benefit the System
generally even if the decision or action also promotes our financial or other
individual interest. Examples of items that will promote or benefit the System
include, without limitation, enhancing the value of the Trademarks, improving
customer service and satisfaction, improving product quality, improving uniformity,
enhancing or encouraging modernization and improving the competitive position of the
System.

 

31

 

I. Venue. Any cause of action, claim, suit or demand allegedly arising from or
related to the terms of this Agreement or the relationship of the parties that is not
subject to arbitration under Paragraph 12, must be brought in the Federal District Court for
the District of Minnesota or in Hennepin County District Court, Fourth Judicial District,
Minneapolis, Minnesota. Both parties hereto irrevocably submit themselves to, and consent
to, the jurisdiction of said courts. The provisions of this subparagraph will survive the
termination of this Agreement. You are aware of the business purposes and needs underlying
the language of this subparagraph and, with a complete understanding thereof, agree to be
bound in the manner set forth.

J. Jury Waiver. All parties hereby waive any and all rights to a trial by jury
in connection with the enforcement or interpretation by judicial process of any provision of
this Agreement, and in connection with allegations of state or federal statutory violations,
fraud, misrepresentation or similar causes of action or any legal action initiated for the
recovery of damages for breach of this Agreement.

K. Waiver of Punitive Damages. You and your affiliates and we and our
affiliates agree to waive, to the fullest extent permitted by law, the right to or claim for
any punitive or exemplary damages against the other and agree that in the event of any
dispute between them, each will be limited to the recovery of actual damages sustained.

L Relationship of the Parties. You and we are independent contractors.
Neither party is the agent, legal representative, partner, subsidiary, joint venturer or
employee of the other. Neither party may obligate the other or represent any right to do
so. This Agreement does not reflect or create a fiduciary relationship or a relationship of
special trust or confidence. Without limiting the generality of the foregoing, we shall
have no liability in connection with or related to the products or services rendered to you
by any third party, even if we required, approved or consented to the product or service or
designated or approved the supplier.

M. Force Majeure. In the event of any failure of performance of this Agreement
according to its terms by any party due to force majeure will not be deemed a breach of this
Agreement. For purposes of this Agreement, “force majeure” shall mean acts of God, State or
governmental action, riots, disturbance, war, strikes, lockouts, slowdowns, prolonged
shortage of energy supplies or any raw material, epidemics, fire, flood, hurricane, typhoon,
earthquake, lightning and explosion or other similar event or condition, not existing as of
the date of signature of this Agreement, not reasonably foreseeable as of such date and not
reasonably within the control of any party hereto, which prevents in whole or in material
part the performance by one of the parties hereto of its obligations hereunder.

N. Adaptations and Variances. Complete and detailed uniformity under many
varying conditions may not always be possible, practical, or in the best interest of the
System. Accordingly, we have the right to vary the Menu Items and other standards,
specifications, and requirements for any franchised restaurant or franchisee based upon the
customs or circumstances of a particular franchise or operating agreement, site or location,
population density, business potential, trade area population, existing business practice,
competitive circumstance or any other condition that we deem to be of importance to the
operation of such restaurant or store, franchisee’s business or the System. We are not
required to grant to you a like or other variation as a result of any variation from
standard menus, specifications or requirements granted to any other franchisee. You
acknowledge that you are aware that our other franchisees operate under a number of
different forms of agreement that were entered into at different times and that,
consequently, the obligations and rights of the parties to other agreements may differ
materially in certain instances from your rights and obligations under this Agreement.

O. Notice of Potential Profit. We and/or our affiliates may from time to time
make available to you or require you to purchase goods, products and/or services for use in
your Restaurant on
the sale of which we and/or our affiliates may make a profit. Further, we and/or our
affiliates may from time to time receive consideration from suppliers and/or manufacturers
in respect to sales of goods, products or services to you or in consideration of services
rendered or rights licensed to such persons. You agree that we and/or our affiliates are
entitled to said profits and/or consideration.

 

32

 

P. Interference with Employment Relations. During the term of this Agreement,
neither we nor you may employ or seek to employ, directly or indirectly, any person who is
at the time or was at any time during the prior 6 months employed in any type of managerial
position by the other party or any of its affiliates, or by any franchisee in the system.
In the event that you violate this provision, we will have the right to terminate this
Agreement without opportunity to cure pursuant to subparagraph 13.B.2. In addition, any
party who violates this provision agrees to pay as fair and reasonable liquidated damages
(but not as a penalty) an amount equal to 2 times the annual compensation that the person
being hired away was receiving at the time the violating party offers her/him employment.
You agree that this amount is for the damages that the non-violating party will suffer for
the loss of the person hired away by the other party, including the costs of finding, hiring
and training a new employee and for the loss of the services and experience of the employee
hired away, and that it would be difficult to calculate with certainty the amount of damage
that the non-violating party will incur. Notwithstanding the foregoing, if a court
determines that this liquidated damages payment is unenforceable, then the non-violating
party may pursue all other available remedies, including consequential damages. This
subparagraph will not be violated if (i) at the time we or you employ or seek to employ the
person, the former employer has given its written consent or (ii) we employ or seek to
employ the person in connection with the transfer of the Restaurant to us or any of our
affiliates. The parties acknowledge and agree that any franchisee from whom an employee was
hired by you in violation of this subparagraph shall be a third-party beneficiary of this
provision, but only to the extent they may seek compensation from you.

Q. Updating Your Franchise Agreement. If at any time during the term of this
Agreement you and us enter into a subsequent franchise agreement (the “Subsequent
Agreement”) granting you the right to operate another Buffalo Wild
Wings® restaurant and the terms of the Subsequent Agreement are
different from the terms of this Agreement, you will have the right to request that this
Agreement be replaced by a franchise agreement containing terms and conditions similar to
the Subsequent Agreement (the “New Agreement”), but such right shall be conditioned upon you
meeting all the conditions stipulated in subparagraph 4.B of this Agreement, except that you
shall pay a fee of only $2,500; provided, however, that the term under the New Agreement
shall be equal to the term left under this Agreement at the time of the execution of the New
Agreement. You must exercise the rights granted under this subparagraph within 30 days
after the date you execute the Subsequent Agreement.

R. Effective Date. We will designate the “Effective Date” of this Agreement in
the space provided on the cover page. If no Effective Date is designated on the cover page,
the Effective Date is the date when we sign this Agreement. However, as described in
subparagraph 5.A, you do not have the right to, and may not, open and commence operation of
a Restaurant at the Authorized Location until we notify you that you have satisfied all of
the pre-opening conditions set forth in this Agreement.

S. Acknowledgment of Prohibition on Insider Trading. Federal law and our
parent company’s policy prohibit purchasing or selling stock in Buffalo Wild Wings, Inc.
(“BWW”) by anyone in possession of material, non-public information concerning BWW. While
it is not possible to define “material information” to cover every set of circumstances that
might arise, a general guide is that information is considered “material” if there is a
substantial likelihood that a reasonable investor would consider it important in determining
whether to buy, sell or hold stock. Violations of insider trading laws may be punishable by
fines and/or imprisonment. During the terms of this Agreement, you may be provided with
material, non-public information regarding BWW. You
hereby acknowledge that you are familiar with insider trading laws and will not
purchase or sell BWW stock while in possession of material, non-public information.

 

33

 

IN WITNESS WHEREOF, the parties have executed this Franchise Agreement on the dates written
below.

	 	 	 	 	 	 	 	 	 
	FRANCHISEE:	 	US:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	AMC SARASOTA, INC.	 	BUFFALO WILD WINGS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Date: 3-23-2011	 	Date: 3/25/11	 	 
	 
	 	 	 	 	 	 	 	 
	By:	 	AMC Wings, Inc.	 	/s/ Sally J. Smith	 	 
	 	 	 	 	 	 	 
	Its: Sole Shareholder of AMC Sarasota, Inc.	 	By:	 	Sally J. Smith
 	 	 
	 

	 	 	 	Its: President & CEO	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ T. Michael Ansley	 	 	 	 	 	 
	 	 	 	 	 	 	 
	By:

	 	Diversified Restaurant Holdings, Inc.	 	 	 	 	 	 
	 

	 	As Sole Shareholder of AMC Wings, Inc.	 	 	 	 	 	 
	Its: President & CEO, T. Michael Ansley	 	 	 	 	 	 

 

34

 

PERSONAL GUARANTY AND AGREEMENT TO BE BOUND

PERSONALLY BY THE TERMS AND CONDITIONS

OF THE FRANCHISE AGREEMENT

  In consideration of the execution of the Franchise Agreement (the “Agreement”)
between BUFFALO WILD WINGS INTERNATIONAL, INC. (“we” or “us”) and AMC SARASOTA, INC. (the
“Franchisee”), dated March 25th, 2011 and for other good and valuable consideration, the
undersigned, for themselves, their heirs, successors, and assigns, do jointly, individually and
severally hereby become surety and guarantor for the payment of all amounts and the performance of
the covenants, terms and conditions in the Agreement, to be paid, kept and performed by the
Franchisee, including without limitation the arbitration and other dispute resolution provisions of
the Agreement.

Further, the undersigned, individually and jointly, hereby agree to be personally bound by
each and every condition and term contained in the Agreement, including but not limited to the
non-compete provisions in subparagraph 10.D, and agree that this Personal Guaranty will be
construed as though the undersigned and each of them executed an agreement containing the identical
terms and conditions of the Agreement.

The undersigned waive: (1) notice of demand for payment of any indebtedness or nonperformance
of any obligations hereby guaranteed; (2) protest and notice of default to any party respecting the
indebtedness or nonperformance of any obligations hereby guaranteed; (3) any right he/she may have
to require that an action be brought against the Franchisee or any other person as a condition of
liability; and (4) notice of any changes permitted by the terms of the Agreement or agreed to by
the Franchisee.

In addition, the undersigned consents and agrees that: (1) the undersigned’s liability will
not be contingent or conditioned upon our pursuit of any remedies against the Franchisee or any
other person; (2) such liability will not be diminished, relieved or otherwise affected by the
Franchisee’s insolvency, bankruptcy or reorganization, the invalidity, illegality or
unenforceability of all or any part of the Agreement, or the amendment or extension of the
Agreement with or without notice to the undersigned; and (3) this Personal Guaranty shall apply in
all modifications to the Agreement of any nature agreed to by Franchisee with or without the
undersigned receiving notice thereof.

It is further understood and agreed by the undersigned that the provisions, covenants and
conditions of this Personal Guaranty will inure to the benefit of our successors and assigns.

FRANCHISEE: AMC SARASOTA, INC.

PERSONAL GUARANTORS:

	 	 	 
	/s/ T. Michael Ansley
	 	Diversified Restaurant Holdings, Inc.
	 
	 	 
	Individually
	 	Sole Shareholder of AMC Wings, Inc.
	 	 	 
	T. Michael Ansley
	 	/s/ T. Michael Ansley
	 
	 	 
	Print Name
	 	By: T. Michael Ansley, Its President & CEO
	 	 	 
	27680 Franklin Road
	 	27680 Franklin Road
	 
	 	 
	Address
	 	Address
	 	 	 
	Southfield, Michigan 48034
	 	Southfield, Michigan 48034
	 
	 	 
	City  State  Zip Code
	 	City  State Zip Code
	 	 	 
	248-894-0434
	 	248-894-0434
	 
	 	 
	Telephone
	 	Telephone

 

1

 

OWNERSHIP AND MANAGEMENT ADDENDUM TO

BUFFALO WILD WINGS® FRANCHISE AGREEMENT

1. Control Person. You represent and warrant to us that the following person, and
only the following person, is the Control Person:

	 	 	 	 	 	 	 	 	 
	NAME	 	TITLE	 	 	ADDRESS	 
	 
	 	 	 	 	 	 	 	 
	T. Michael Ansley
	 	Control Person	 	27680 Franklin Road, Southfield, MI 48034	 

2. Ownership. You represent and warrant to us that the following person(s) and
entities, and only the following person(s) and entities, have ownership interests in the franchisee
entity:

	 	 	 	 	 	 	 
	 	 	 	 	PERCENTAGE	 
	NAME	 	HOME ADDRESS	 	OF INTEREST	 
	 
	 	 	 	 	 	 
	AMC Wings, Inc.
	 	27680 Franklin Road, Southfield, MI 48034	 	 	100	%
	as Sole Shareholder of AMC Sarasota, Inc.
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Diversified Restaurant Holdings, Inc.
	 	27680 Franklin Road, Southfield, MI 48034	 	 	100	%
	as Sole Shareholder of AMC Wings, Inc.
	 	 	 	 	 	 

3. Change. You must immediately notify us in writing of any change in the information
contained in this Addendum and, at our request, prepare and sign a new Addendum containing the
correct information.

4. Effective Date. This Addendum is effective as of this 25th day of March, 2011.

	 	 	 	 	 
	/s/ TMA
 

	 	/s/ SJS
 

	 	 
	 
	 	 	 	 
	 

Your Initials

	 	 

Our Initials
	 	 

 

 

 

Appendix A to the Franchise Agreement

Trademarks

You have the right to use the following Trademarks in accordance with the terms of the
Franchise Agreement:

	 	 	 
	Service Mark:
	 	BUFFALO WILD WINGS
	Registration No.:
	 	2,239,550
	Registration Date:
	 	April 13, 1999
	 
	 	 
	Service Mark:
	 	BUFFALO WILD WINGS GRILL & BAR (Design Mark)
	Registration No.:
	 	2,187,765
	Registration Date:
	 	September 8, 1998
	 
	 	 
	 
	 	
	 
	 	 
	Service Mark:
	 	BLAZIN’
	Registration No.:
	 	2,966,286
	Registration Date:
	 	July 7, 2005
	 
	 	 
	Service Mark:
	 	BONELESS THURSDAYS
	Registration No.:
	 	3,241,656
	Registration Date:
	 	May 15, 2007
	 
	 	 
	Service Mark:
	 	BUFFALITO
	Registration No.:
	 	2,914,520
	Registration Date:
	 	December 28, 2004
	 
	 	 
	Service Mark:
	 	WING TUESDAYS
	Registration No.:
	 	3,241,654
	Registration Date:
	 	May 15, 2007
	 
	 	 
	Service Mark:
	 	WINGS. BEER. SPORTS. ALL THE ESSENTIALS
	Registration No.:
	 	2,905,689
	Registration Date:
	 	November 30, 2004
	 
	 	 
	Service Mark:
	 	YOU HAVE TO BE HERE
	Registration No.:
	 	3,386,873
	Registration Date:
	 	February 19, 2008

We may amend this Appendix A from time to time in order to make available additional
Trademarks or to delete those Trademarks that become unavailable. You agree to use only those
Trademarks that are then-currently authorized.

The Trademarks must be used only in the manner that we specify. No deviations will be
permitted.

 

 

 

Appendix B to the Franchise Agreement

The Designated Area

As stated in Subparagraph 2.B. of the Franchise Agreement, subject to the terms and conditions of
the Franchise Agreement, the Designated Area in which you will locate and operate the Restaurant is
defined as follows:

The Designated Area shall be located in Sarasota, Florida within a four mile radius from the
intersection of Honore Avenue and University Parkway, more precisely described as Latitude 27.3881/

Longitude -82.4637.

The Designated Area is considered fixed as of the date of the Franchise Agreement.

	 	 	 	 	 	 	 	 	 
	FRANCHISEE:	 	US:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	AMC SARASOTA, INC.	 	BUFFALO WILD WINGS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Date: 3/23/2011	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:	 	AMC Wings, Inc.	 	/s/ Sally J. Smith	 	 
	 	 	 	 	 	 	 
	Its: Sole Shareholder of AMC Sarasota, Inc.	 	By:	 	Sally J. Smith
 	 	 
	 

	 	 	 	Its: President & CEO	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ T. Michael Ansley	 	 	 	 	 	 
	 	 	 	 	 	 	 
	By:

	 	Diversified Restaurant Holdings, Inc.	 	 	 	 	 	 
	 

	 	As Sole Shareholder of AMC Wings, Inc.	 	 	 	 	 	 
	Its: President & CEO, T. Michael Ansley	 	 	 	 	 	 

 

 

 

 

 

 

Appendix C to the Franchise Agreement

Addendum to Lease

This Addendum to Lease (“Addendum”), dated
 _____, 20_____, is entered into between

 _____ (“Landlord”), and
 _____ (“Tenant”).

RECITALS

	A.	 	The parties have entered into a Lease Agreement, dated
 _____, 20_____, (the “Lease”)
pertaining to the premises located at
 _____ (the “Premises”).

	B.	 	Landlord acknowledges that Tenant has agreed to operate a Restaurant at the Premises pursuant
to Tenant’s Franchise Agreement (the “Franchise Agreement”) with Buffalo Wild Wings
International, Inc. (“BWW”) under the name “Buffalo Wild Wings Grill & Bar” or other name
designated by BWW (the “Restaurant”).

	C.	 	The parties desire to amend the Lease in accordance with the terms and conditions contained
in this Addendum to provide BWW the opportunity to preserve the Premises as a BWW branded
restaurant as provided herein.

AGREEMENT

Landlord and Tenant agree to amend the Lease as follows:

	1.	 	Remodeling and Decor. Landlord agrees that Tenant has the right to remodel, equip,
paint and decorate the interior of the Premises and to display such proprietary marks and
signs on the interior and exterior of the Premises as Tenant is reasonably required to do
pursuant to the Franchise Agreement and any successor Franchise Agreement under which Tenant
may operate a Restaurant on the Premises. Any remodel of the building and/or its signs shall
be subject to Landlord’s prior and reasonable approval.

	 
	2.	 	Assignment by Tenant.

	 	(a)	 	Tenant does not have the right to sublease or assign the Lease to any third
party without BWW’s and Landlord’s written approval.

	 	(b)	 	So long as Tenant is in good standing under the Lease, Tenant has the right to
assign all of its right, title and interest in the Lease to BWW, its affiliates or its
parent company, during the term of the Lease, including any extensions or renewals,
without first obtaining Landlord’s consent. No assignment will be effective, however,
until BWW or its designated affiliate (the “BWW Entity”) gives Landlord written notice
of its acceptance of the assignment. BWW will be responsible for the lease obligations
incurred after the effective date of the assignment.

	 	(c)	 	If BWW elects to assume the Lease, under this subparagraph or unilaterally
assumes the lease as provided for in subparagraph 3(a) or 4(a), Landlord and Tenant
agree that (i) Tenant will remain liable for the responsibilities and obligations,
including amounts owed to Landlord, prior to the date of assignment and assumption, and
(ii) BWW will have the right to sublease the Premises to another franchisee with
Landlord’s prior reasonable approval, provided the franchisee meets BWW’s then-current
standards and requirements for franchisees and agrees to operate the Restaurant as a
Buffalo Wild Wings restaurant pursuant to a Franchise Agreement with BWW. Upon receipt
by Landlord of an assumption agreement pursuant to which the assignee agrees to assume
the Lease and to
observe the terms, conditions and agreements on the part of Tenant to be performed
under the Lease, BWW shall thereupon be released from all liability as tenant under
the Lease from and after the date of assignment, without any need of a written
acknowledgment of such release by Landlord.

 

 

 

	3.	 	Default and Notice.

	 	(a)	 	Landlord shall send BWW copies of all notices of default it gives to Tenant
concurrently with giving such notices to Tenant. If Tenant fails to cure any defaults
within the period specified in the Lease, Landlord shall promptly give BWW written
notice thereof, specifying the defaults Tenant failed to cure. BWW has the right, but
not the obligation, to unilaterally assume the Lease if Tenant fails to cure. BWW
shall have 15 days from the date BWW receives such notice to exercise, by written
notice to Landlord and Tenant, its right for BWW or a BWW Entity to assume the Lease.
BWW shall have an additional 15 days from the expiration of Tenant’s cure period in
which to cure the default or violation.

	 	(b)	 	All notices to BWW must be sent by registered or certified mail, postage
prepaid, to the following address:

	 
	 	 	 	Buffalo Wild Wings International, Inc.

5500 Wayzata Boulevard, Suite 1600

Minneapolis, MN 55416

Attention: General Counsel

BWW may change its address for receiving notices by giving Landlord written notice of the new
address. Landlord agrees that it will notify both Tenant and BWW of any change in Landlord’s
mailing address to which notices should be sent.

	4.	 	Termination, Non-Renewal, Expiration. If the Franchise Agreement is
terminated for any reason during the term of the Lease or any extension thereof, BWW
has the right, but not the obligation, to unilaterally assume the Lease by giving
Landlord written notice. Within 30 days after receipt of such notice, Landlord shall
give BWW written notice specifying any defaults of Tenant under the Lease.

	5.	 	Access to Premises Following Expiration or Termination of Lease. Upon the expiration
or termination of the Lease, Landlord will cooperate with and assist BWW in gaining possession
of the Premises and if a BWW Entity does not elect to enter into a new lease for the Premises
with Landlord on terms reasonably acceptable to the BWW Entity, Landlord will allow BWW to
enter the Premises, without being guilty of trespass and without incurring any liability to
Landlord, except for any damages caused by BWW’s willful misconduct or gross negligence, to
remove all signs, awnings, and all other items identifying the Premises as a Buffalo Wild
Wings® Restaurant and to make such other modifications (such as repainting) as
are reasonably necessary to protect the Buffalo Wild Wings® marks and
system. In the event BWW exercises its option to purchase assets of Tenant, Landlord must
permit BWW to remove all such assets being purchased by BWW.

	 
	6.	 	Additional Provisions.

	 	(a)	 	Landlord hereby acknowledges that the provisions of this Addendum are required
pursuant to the Franchise Agreement under which Tenant plans to operate its business
and the Tenant would not lease the Premises without this Addendum.

	 	(b)	 	Landlord further acknowledges that Tenant is not an agent or employee of BWW
and the Tenant has no authority or power to act for, or to create any liability on
behalf of, or to in
any way bind BWW or any affiliate of BWW, and that Landlord has entered into this
Addendum with full understanding that it creates no duties, obligations or
liabilities of or against BWW or any affiliate of BWW, unless and until the Lease is
assigned to, and accepted in writing by, BWW or its parent company.

 

 

 

	 	(c)	 	BWW Entity may elect not to assume or be bound by the terms of any amendment to
the Lease executed by Tenant without obtaining BWW’s prior written approval, which
shall not be unreasonably withheld or delayed.

	8.	 	Modification. No amendment or variation of the terms of this Addendum is valid
unless made in writing and signed by the parties and the parties have obtained the written
consent of BWW.

	9.	 	Reaffirmation of Lease. Except as amended or modified in this Addendum, all of the
terms, conditions and covenants of the Lease remain in full force and effect and are
incorporated by reference and made a part of this Addendum as though copied herein in full.
In the event of any conflict between the terms of this Addendum and those in the Lease, the
terms of this Addendum shall control.

	10.	 	Beneficiary. Landlord and Tenant expressly agree that BWW is a third party
beneficiary of this Addendum.

	 
	IN WITNESS WHEREOF, the parties have executed this Addendum as of the dates written below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	TENANT:	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	By

	 	 	 	 	 	By	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Its
	 	 	 	 	 	Its	 	 	 	 
	 

	 	 	 	 

	 	 	 	 	 	 

	 	 

 

 

 

Appendix D to the Franchise Agreement

Electronic Transfer of Funds Authorization

	 	 	 	 	 
	 

	 	Franchisee:
	 	AMC Sarasota, Inc.
	 

	 	Location:
	 	Sarasota, FL (University Park)
	 

	 	Date:
	 	3/25/11

	 	 	 	 	 	 
	 

	 	NEW
	 	CHANGE	 
	 

	 	 
	 	 	 

Attention: Bookkeeping Department

The undersigned hereby authorizes Buffalo Wild Wings International, Inc., its parent company or any
affiliated entity (collectively, “BWW”), to initiate weekly ACH debit entries against the account
of the undersigned with you in payment of amounts for Royalty Fees, Advertising Fees or other
amounts that become payable by the undersigned to BWW. The dollar amount to be debited per payment
will vary.

Subject to the provisions of this letter of authorization, you are hereby directed to honor any
such ACH debit entry initiated by BWW.

This authorization is binding and will remain in full force and effect until 90 days prior written
notice has been given to you by the undersigned. The undersigned is responsible for, and must pay
on demand, all costs or charges relating to the handling of ACH debit entries pursuant to this
letter of authorization.

Please honor ACH debit entries initiated in accordance with the terms of this letter of
authorization, subject to there being sufficient funds in the undersigned’s account to cover such
ACH debit entries.

	 	 	 	 	 	 	 
	 	 	Sincerely yours,	 	 
	*** We also need a VOIDED Check ***
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Account Name	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Bank Name	 	Street Address	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Branch	 	City State Zip Code	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	Street Address	 	Telephone Number	 	 
	 
	 	 	 	 	 	 
	 

City State Zip Code

	 	By
	 	 

	 	 
	 
	 	 	 	 	 	 
	
 
Bank Telephone Number

	 	Its
	 	 

	 	 
	 
	 	 	 	 	 	 
	 

Bank’s Account Number

	 	Date
	 	 

	 	 
	 
	 	 	 	 	 	 
	 

Customer’s Account Number

	 	 	 	 	 	 

 

 

 

Appendix E to the Franchise Agreement

AFFILIATED SELLER AGREEMENT

This Affiliated Seller Agreement (“ASA”) dated March 25th, 2011 is among ValueLink, LLC, d/b/a
First Data Prepaid Services (“FDPS”), AMC SARASOTA, INC. (“Affiliated Seller”) and Blazin Wings
Inc. (“Client”). Client and FDPS entered into a Stored Value Card Processing Agreement dated March
20, 2009, as amended and supplemented from time to time (the “Client Agreement”). The undersigned
Affiliated Seller desires to receive and FDPS desires to provide Services in accordance with the
Client Agreement terms and the terms of this ASA.

	1.	 	Representations and Warranties of Affiliated Seller. Affiliated Seller represents and
warrants that Affiliated Seller: (i) has received and reviewed a true and correct copy of the
Client Agreement from Client; and (ii) subject to the limitations provided in this ASA, agrees
to be bound by the Client Agreement to the same extent as if it were “Client” whenever the
context requires Client performance (and irrespective of whether or not the term “Client” is
expressly mentioned.) Affiliated Seller hereby appoints Client as its representative with
FDPS for all matters arising out of or relating to the Client Agreement including all matters
that involve Client Agreement negotiation, modification and/or dispute resolution. Affiliated
Seller agrees that Affiliated Seller will be solely responsible for communicating with Client
concerning the status of such matters and the Client Agreement. Affiliated Seller represents
and warrants that FDPS will be entitled to communicate information concerning Affiliated
Seller, including its Confidential Information, its Program, Program Procedures, Cardholders
and Card Data to Client and to rely upon any statements made by Client related thereto to the
same extent as if FDPS were dealing directly with a duly authorized Affiliated Seller
representative.

	2.	 	Client Agreement. Client agrees to be jointly and severally liable for Affiliated
Seller obligations arising out of the Client Agreement. Each Affiliated Seller shall not be
responsible for the obligations of the Client or another Affiliated Seller, arising out of the
Client Agreement. Affiliated Seller agrees that Affiliated Seller’s rights under this ASA
will terminate immediately without need of notification from FDPS on termination or expiration
of this ASA.

	3.	 	Issuance of Cards. Notwithstanding anything to the contrary in this ASA, (i) Client
will be the sole issuer of all Cards issued under the Program, including with respect to all
Cards sold at locations operated by Affiliated Sellers, and (ii) Client will be solely
responsible for the responsibilities set forth in Section 3(b) of the Client Agreement.

	4.	 	Indemnification. The Client agrees to indemnify the Affiliated Seller for
escheatment claims by any State as follows:

	 	A.	 	For escheatment claims related to Cards sold at any time period prior
to September 15, 2007, the Client provides no indemnification.

	 	B.	 	For escheatment claims related to Cards sold during the time between
September 15, 2007 and September 15, 2008, the Client will indemnify the Affiliated
Seller up to the amount remitted by the Affiliated Seller to the Client for this
period of time.

	 	C.	 	For escheatment claims related to Cards sold after September 16, 2008,
the Client will indemnify the Affiliated Seller up to the amount remitted by the
Affiliated Seller to the Client for this period of time.

 

- 1 -

 

	5.	 	Limitation of Liability. Anything to the contrary notwithstanding, Affiliated Seller
agrees that FDPS’ cumulative aggregate liability under Client Agreement to Client and all
Affiliated Sellers will be subject to the limitations set forth in Section 14 of the Client
Agreement. For example, if Client and one additional Affiliated Seller participate under the
Client Agreement, FDPS’ cumulative aggregate liability to Client and such Affiliated Seller
for direct damages will not exceed two hundred fifty thousand dollars ($250,000.00) and will
not include any liability for claims arising out of or relating to services and/or items
supplied by the Card Company.

	6.	 	Conflict. Should a conflict exist between the provisions of the Client Agreement and
this ASA, this ASA will control. Terms in initial capital letters or all capital letters used
as a defined term but not defined in this ASA will have the meaning set forth in the Client
Agreement. References to this ASA in any document now or hereafter attached to or referenced
to this ASA will mean this ASA as amended or supplemented from time to time.

IN WITNESS WHEREOF, the Parties have caused this ASA to be executed by their authorized
representatives as of the date first set forth above.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	AFFILIATED SELLER	 	ValueLink, LLC	 	 
	Address:	 	6200 South Quebec Street	 	 
	 	 	 	 	 	 	Greenwood Village, Colorado 80111	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ T. Michael Ansley	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Name:	 	T. Michael Ansley
	 	 	 	Name:	 	 	 	 
	 

	 	Title:
	 	President	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	BLAZIN WINGS INC.	 	 	 	 	 	 	 	 
	5500 Wayzata Blvd.	 	 	 	 	 	 	 	 
	Minneapolis, MN 55416	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Sally J. Smith	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Sally J. Smith	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	President & CEO	 	 	 	 	 	 	 	 

 

- 2 -

 

ACKNOWLEDGMENT ADDENDUM TO

BUFFALO WILD WINGS® FRANCHISE AGREEMENT

As you know, you and we are entering into a Franchise Agreement for the operation of a Buffalo
Wild Wings® franchise. The purpose of this Acknowledgment Addendum is to determine
whether any statements or promises were made to you that we have not authorized or that may be
untrue, inaccurate or misleading, and to be certain that you understand the limitations on claims
that may be made by you by reason of the offer and sale of the franchise and operation of your
business. Please review each of the following questions carefully and provide honest responses to
each question.

Acknowledgments and Representations*.

	1.	 	Did you receive a copy of our Disclosure Document (and all exhibits and attachments) at least
(a) 14 calendar days prior to signing the Franchise Agreement; or (b) if you are a
resident of Maryland, New York, or Rhode Island, at the earlier of the first personal meeting
or 10 business days before the execution of the Franchise Agreement (or other agreement) or
payment of any consideration; or (c) if you are a resident of Michigan, Oregon,
Washington or Wisconsin, at the earlier of 10 business days before the execution of any
binding agreement or payment of any consideration? Check one: þ Yes o
No. If no, please comment:

 

 

	2.	 	Have you studied and reviewed carefully our Disclosure Document and Franchise Agreement?
Check one: þ Yes o No. If no, please comment:

 

 

	3.	 	If the Franchisor made any unilateral changes to the Franchise Agreement or Area Development
Agreement, did you receive a copy of the complete revised agreement at least 7 calendar days
prior to the date on which the Franchise Agreement or Area Development Agreement was executed?
Check one: þ Yes o No. If no, please comment:

 

 

	4.	 	Did you understand all the information contained in both the Disclosure Document and
Franchise Agreement? Check one: þ Yes o No. If no, please comment:

 

 

	5.	 	Was any oral, written or visual claim or representation made to you that contradicted the
disclosures in the Disclosure Document? Check one: o Yes þ No. If
yes, please state in detail the oral, written or visual claim or representation:

 

 

	6.	 	Did any employee or other person speaking on behalf of Buffalo Wild Wings International, Inc.
make any oral, written or visual claim, statement, promise or representation to you that
stated, suggested, predicted or projected sales, revenues, expenses, earnings, income or
profit levels at any Buffalo Wild Wings® location or business, or the
likelihood of success at your Franchised Business? Check one: o Yes þ
No. If yes, please state in detail the oral, written or visual claim or representation:

 

 

	7.	 	Did any employee or other person speaking on behalf of Buffalo Wild Wings International, Inc.
make any statement or promise regarding the costs involved in operating a franchise that is
not contained in the Disclosure Document or that is contrary to, or different from, the
information contained in the Disclosure Document. Check one: o Yes þ No. If
yes, please comment:

 

 

 

 

 

	8.	 	Do you understand that the franchise granted is for the right to develop and operate the
Restaurants in the Designated Territory, as stated in Subparagraph 2.B, and that, according to
Subparagraph 2.D, we and our affiliates have the right to distribute products through
alternative methods of distribution and to issue franchises or operate competing businesses
for or at locations, as we determine, (i) outside of your Designated Area using any
trademarks; (ii) inside your Designated Territory using any trademarks other than the
Buffalo Wild Wings® Trademark; and (iii) inside the Designated Territory
using the Buffalo Wild Wings® Trademark, for facilities at Special Sites
and Limited Seating Facilities (subject to your right of first refusal with respect to Limited
Seating Facilities, as detailed in the Franchise Agreement)? Check one: þ Yes
o No. If no, please comment:

 

 

	9.	 	Do you understand that the Franchise Agreement contains the entire agreement between you and
us concerning the franchise for the Restaurant, meaning that any prior oral or written
statements not set out in the Franchise Agreement or Disclosure Document will not be binding?
Check one: þ Yes o No. If no, please comment:

 

 

	10.	 	Do you understand that the success or failure of your Restaurant will depend in large part
upon your skills and experience, your business acumen, your location, the local market for
products under the Buffalo Wild Wings® trademarks, interest rates, the
economy, inflation, the number of employees you hire and their compensation, competition and
other economic and business factors? Further, do you understand that the economic and
business factors that exist at the time you open your Business may change?
Check one þ Yes o No. If no, please comment:

 

 

	11.	 	Do you understand that the current economic crisis and financial situation in the U.S. and
abroad could have a negative impact on the restaurant industry, the Buffalo Wild
Wings® franchise system and your business? Check one þ Yes o No. If no,
please comment:

 

 

	12.	 	Do you understand that you are bound by the non-compete covenants (both in-term and
post-term) listed in Subparagraph 10.D and that an injunction is an appropriate remedy to
protect the interests of the Buffalo Wild Wings® system if you violate the
covenant(s)? Further, do you understand that the term “you” for purposes of the non-compete
covenants is defined broadly in subparagraph 10.D, such that any actions in violation of the
covenants by those holding any interest in the franchisee entity may result in an injunction,
default and termination of the Franchise Agreement? Check one þ Yes o No. If
no, please comment:

 

 

YOU UNDERSTAND THAT YOUR ANSWERS ARE IMPORTANT TO US AND THAT WE WILL RELY ON THEM. BY SIGNING
THIS ADDENDUM, YOU ARE REPRESENTING THAT YOU HAVE CONSIDERED EACH QUESTION CAREFULLY AND RESPONDED
TRUTHFULLY TO THE ABOVE QUESTIONS. IF MORE SPACE IS NEEDED FOR ANY ANSWER, CONTINUE ON A SEPARATE
SHEET AND ATTACH.

	NOTE:	 	 IF THE RECIPIENT IS A CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY OR OTHER
ENTITY, EACH OF ITS PRINCIPAL OWNERS MUST EXECUTE THIS ACKNOWLEDGMENT.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	APPROVED ON BEHALF OF BUFFALO WILD
 WINGS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Signed:	 	/s/ T. Michael Ansley	 	By:	 	/s/ Sally J. Smith	 	 
	 	 	 	 	 	 	 	 	 
	Print Name:	 	T. Michael Ansley
	 	Title:
	 	Sally J. Smith, President & CEO	 	 
	Date:
	 	3/23/11
	 	Date:
	 	3/25/11	 	 

	 	 	 
	*	 	Such representations are not intended to nor shall they act as a release, estoppel or waiver of
any liability incurred under the Illinois Franchise Disclosure Act or under the Maryland Franchise
Registration and Disclosure Law.

 

 

 

ASSIGNMENT OF OPTION

This Assignment of Option is made and entered into by AMC Wings, Inc., a corporation
(“Developer”) and AMC SARASOTA, Inc., a corporation (“Franchisee”) as of this
25th day of March, 2011.

RECITALS

A. Developer and Buffalo Wild Wings International, Inc. (“Franchisor”) are parties to that
certain Area Development Agreement executed as of July 18, 2003, as amended December 27, 2003,
March 20, 2007, November 5, 2007, and December 10, 2008 (the “Area Development Agreement”),
pursuant to which Franchisor granted to Developer options to obtain franchises to establish and
operate twenty-three (23) Buffalo Wild Wings restaurants (the “Restaurants”).

B. Developer desires to assign to Franchisee its next option under the Area Development
Agreement to establish and operate one Restaurant in the Development Territory, which Development
Territory is delimited in Appendix A to the Area Development Agreement (the “Option”).

NOW THEREFORE, the parties agree as follows:

1. Except as otherwise provided herein, capitalized terms used herein shall have the same
meaning as set for the in the Area Development Agreement.

2. Developer hereby assigns to Franchisee the Option. Franchisee hereby accepts the
assignment of the Option to it and agrees to exercise the Option by executing and delivering as of
the same date hereof a Buffalo Wild Wings Franchise Agreement (the “Franchise Agreement”).

3. Developer acknowledges and agrees that Franchisor’s consent to this Assignment shall not
release Developer from any of its obligations under the Area Development Agreement, including, but
not limited to, its obligations to comply with the Development Schedule and to continuously
maintain and operate the Restaurants established under the Area Development Agreement. Any failure
of Franchisee to comply with the terms and conditions of its Franchise Agreement shall constitute a
default by Developer under the Area Development Agreement.

4. Developer agrees that Franchisor and Franchisee shall have the right to select a Designated
Area for the Restaurant to be established under the Franchise Agreement in accordance with the
terms thereof; said Designated Area to be located within the Developer’s Development Territory, as
delimited in Appendix A to the Area Development Agreement.

 

 

 

IN WITNESS WHEREOF, the foregoing Assignment of Option has been executed by the parties as of
the date first set forth above.

	 	 	 	 	 	 	 	 	 
	AMC WINGS, INC.	 	AMC SARASOTA, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	/s/ T. Michael Ansley
	 	By:
	 	AMC Wings, Inc.	 	 
	By:
	 	 

Diversified Restaurant Holdings, Inc.
	 	Its:
	 	 

Sole Shareholder of AMC Sarasota, Inc.
	 	 
	 

	 	As Sole Shareholder of AMC Wings, Inc.	 	 	 	 	 	 
	Its:

	 	President & CEO, T. Michael Ansley	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ T. Michael Ansley	 	 
	 

	 	 	 	By:	 	 

Diversified Restaurant Holdings, Inc.
	 	 
	 

	 	 	 	 	 	As Sole Shareholder of AMC Wings, Inc.	 	 
	 

	 	 	 	Its:
	 	President & CEO, T. Michael Ansley	 	 

Franchisor hereby consents to the above Assignment of Option subject to the terms and
conditions set forth therein.

	 	 	 	 	 	 	 
	 	 	BUFFALO WILD WINGS INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Sally J. Smith	 	 
	 

	 	By:	 	 

Sally J. Smith
	 	 
	 

	 	Its:
	 	President & CEO	 	 

 

 

 

Addendum to Franchise Agreement

This Addendum is appended to, and made a part of, the Buffalo Wild Wings® Franchise
Agreement dated March 25th, 2011 (the “Agreement”) between Buffalo Wild Wings International, Inc.,
an Ohio corporation (“we” or “us”) and AMC Sarasota, Inc., a Michigan corporation (“you”) for the
franchised restaurant to be located in Sarasota, Florida (the “Authorized Location”). Capitalized
terms not defined in this Addendum have the meanings given to them in the Agreement. In the event
of any conflict between the terms of this Addendum and those in the Agreement, the terms of this
Addendum shall control.

The parties hereby agree as follows:

2. Section 10.D.2. of the Franchise Agreement is amended to read, in its entirety, as follows:

You covenant that during the term of this Agreement you will not either directly or
indirectly, for yourself, or through, on behalf of, or in conjunction with any person or
entity, own, manage, operate, maintain, engage in, consult with or have any interest in
(i) a casual or fast casual restaurant that sells or offers to dispense prepared food
products the same as or similar to the type sold in Buffalo Wild Wings restaurants; (ii)
a sports-themed restaurant or bar business; or (iii) any business establishment that
sells or offers to dispense prepared chicken wings or legs. For purposes of this
subparagraph, a sports-themed restaurant of bar is one with more than two screens, or
any screen larger than 25 inches, available for the viewing of sporting events.

IN WITNESS WHEREOF, the parties have duly executed this Addendum to the Franchise Agreement as
of the date and year first above written.

	 	 	 	 	 	 	 	 	 
	FRANCHISEE:	 	US	 	 
	 
	 	 	 	 	 	 	 	 
	AMC FT. MYERS, INC.
 	 	BUFFALO WILD WINGS
INTERNATIONAL, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	AMC Wings, Inc.
	 	 	 	/s/ Sally J. Smith	 	 
	 

	 	 

	 	 	 	 

	 	 
	Its:

	 	Sole Shareholder of AMC Sarasota, Inc.
	 	By:	 	Sally J. Smith	 	 
	 

	 	 	 	Its:
	 	President & CEO	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 	/s/ T. Michael Ansley	 	 	 	 	 	 
	By:
	 	 

Diversified Restaurant Holdings, Inc.
	 	 	 	 	 	 
	 

	 	As Sole Shareholder of AMC Wings, Inc.	 	 	 	 	 	 
	Its:

	 	President & CEO, T. Michael Ansley

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