1998 Stock Option Plan - Krispy Kreme Doughnut Corp.
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KRISPY KREME DOUGHNUT CORPORATION
1998 STOCK OPTION PLAN
EFFECTIVE AS OF AUGUST 6, 1998
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TABLE OF CONTENTS
ARTICLE 1 - GENERAL PROVISIONS.................................................1
1.1 Purpose......................................................1
1.2 Types of Awards..............................................1
1.3 Effective Date...............................................1
ARTICLE 2 - DEFINITIONS........................................................1
2.1 Act..........................................................1
2.2 Agreement....................................................1
2.3 Board........................................................1
2.4 Code.........................................................2
2.5 Committee....................................................2
2.6 Corporation..................................................2
2.7 Disability...................................................2
2.8 Effective Date...............................................2
2.9 Eligible Participant.........................................2
2.10 Fair Market Value............................................2
2.11 Incentive Stock Option.......................................2
2.12 Non-Employee Director........................................2
2.13 Nonqualified Stock Option....................................2
2.14 Option Grant Date............................................2
2.15 Parent Corporation...........................................3
2.16 Participant..................................................3
2.17 Plan.........................................................3
2.18 Retirement...................................................3
2.19 Stock........................................................3
2.20 Stock Option.................................................3
2.21 Subsidiary Corporation.......................................3
2.22 Termination of Employment....................................3
ARTICLE 3 - ADMINISTRATION.....................................................4
3.1 Committee....................................................4
3.2 Action by Committee..........................................4
3.3 Authority of Committee.......................................4
3.4 Decisions Binding............................................5
3.5 Written Agreement............................................5
3.6 Securities Law Restrictions..................................5
3.7 Rights as Shareholder........................................6
3.8 Change in Capital Structure..................................6
3.9 Indemnification of Committee.................................7
3.10 Adjustment to Stock Option Terms.............................7
3.11 Cancellation of Stock Options................................7
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ARTICLE 4 - SHARES SUBJECT TO THE PLAN.........................................8
4.1 Number of Shares.............................................8
4.2 Lapsed Awards................................................8
4.3 Stock Distributed............................................8
ARTICLE 5 - INCENTIVE STOCK OPTIONS............................................8
5.1 Compliance With Code.........................................8
5.2 Available Shares.............................................8
5.3 Incentive Stock Option Terms.................................8
5.4 Repurchase of Incentive Stock Options........................9
5.5 Individual Dollar Limitation.................................9
ARTICLE 6 - NONQUALIFIED STOCK OPTIONS.........................................9
6.1 Grants.......................................................9
6.2 Available Shares.............................................9
6.3 Exercise Price..............................................10
6.4 Nonqualified Stock Option Terms.............................10
ARTICLE 7 - INCIDENTS OF STOCK OPTIONS........................................10
7.1 Terms and Conditions........................................10
7.2 Restrictions on Transfer....................................10
7.3 Form of Payment.............................................11
7.4 Stock Purchase Agreement....................................11
7.5 Dividends...................................................12
7.6 Death or Disability.........................................12
7.7 Retirement..................................................12
7.8 Replacement Stock Option Grants.............................12
ARTICLE 8 - AMENDMENT AND TERMINATION.........................................12
8.1 Amendment or Termination of Plan............................12
8.2 Effect of Amendment or Termination of Plan..................13
ARTICLE 9 - MISCELLANEOUS PROVISIONS..........................................13
9.1 No Right to Employment......................................13
9.2 Tax Withholding.............................................14
9.3 Subject to Federal and State Laws...........................14
9.4 Successors and Assigns......................................15
9.5 Governing Law...............................................15
9.6 Unfunded Status of Plan.....................................15
9.7 Notice of Section 83(b) Election............................15
9.8 Severability of Plan........................................15
9.9 Additional Provisions.......................................15
9.10 Resolution of Controversy...................................15
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KRISPY KREME DOUGHNUT CORPORATION
1998 STOCK OPTION PLAN
ARTICLE 1 - GENERAL PROVISIONS
1.1 PURPOSE. The Plan is designed, for the benefit of the Corporation, to
attract and retain for the Corporation employees and directors of
exceptional ability; to motivate such individuals through added
incentives to make a maximum contribution to greater profitability; to
develop and maintain a highly competent management team; and to be
competitive with other companies with respect to equity compensation.
1.2 TYPES OF AWARDS. Awards under the Plan may be made to Participants in
the form of (i) Incentive Stock Options; and/or (ii) Nonqualified Stock
Options.
1.3 EFFECTIVE DATE. The Plan shall be effective as of August 6, 1998.
(a) Notwithstanding any other provision of this Plan, any Stock
Option granted to a Participant prior to the date on which the
shareholders of the Corporation approve the Plan (which
approval must be obtained within the 12-month period before
the Effective Date or the 12-month period after the Effective
Date in order for Incentive Stock Options to be granted under
the Plan) shall be conditioned upon and subject to such
shareholder approval to the extent required by Section 16(b)
of the Act or Section 422 of the Code.
(b) If an Incentive Stock Option is granted prior to the date on
which such shareholder approval is obtained, and such approval
is obtained after the end of the 12-month period beginning on
the Effective Date, such Incentive Stock Option shall be
deemed a Nonqualified Stock Option granted pursuant to Article
5.
ARTICLE 2 - DEFINITIONS
Except where the context otherwise indicates, the following definitions apply:
2.1 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time
be amended or renumbered.
2.2 "Agreement" means the written agreement evidencing a Stock Option
granted to a Participant under the Plan.
2.3 "Board" means the Board of Directors of Krispy Kreme Doughnut
Corporation.
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2.4 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.
2.5 "Committee" means the committee consisting of two or more members
appointed by the Board to administer this Plan pursuant to Article 3 or
for such limited purposes as may be provided by the Board. To the
extent required by Rule 16b-3 under the Act, the Committee shall
consist of individuals who are Non-Employee Directors. The Board shall
function as the Committee at any time the Committee is not otherwise
constituted.
2.6 "Corporation" means Krispy Kreme Doughnut Corporation, a North Carolina
corporation, and its successors and assigns. The term "Corporation"
shall include any Parent Corporation and any Subsidiary Corporation.
With respect to all purposes of the Plan, including, but not limited
to, the establishment, amendment, termination, operation and
administration of the Plan, Krispy Kreme Doughnut Corporation shall be
authorized to act on behalf of all other entities included within the
definition of Corporation.
2.7 "Disability" means a condition resulting in the Participant commencing
full disability benefits under the Employer's program of long-term
disability insurance.
2.8 "Effective Date" shall mean August 6, 1998.
2.9 "Eligible Participant" means any employee of the Corporation, as shall
be determined by the Committee, as well as any other person, including
directors and consultants whose participation in the Plan the Committee
determines is in the best interest of the Corporation, subject to
limitations as may be provided by the Code, the Act or the Committee.
2.10 "Fair Market Value" shall be the value of a share of stock, as
determined by the Committee in its sole discretion from time to time.
The determination of Fair Market Value in connection with an Incentive
Stock Option shall be made by the Committee in accordance with Section
422 of the Code and the rules and regulations thereunder.
2.11 "Incentive Stock Option" means a Stock Option granted under Article 4
of the Plan, and as defined in Section 422 of the Code.
2.12 "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
under the Act.
2.13 "Nonqualified Stock Option" means a Stock Option granted under Article
5 of the Plan.
2.14 "Option Grant Date" means, as to any Stock Option, the latest of:
(a) the date on which the Committee grants the Stock Option by
authorizing the officers of the Corporation to enter into an
Agreement with the Participant for a specified number of
options at a specified exercise price;
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(b) the date the Participant receiving the Stock Option becomes an
employee of the Corporation, to the extent employment status
is a condition of the grant or a requirement of the Code or
the Act; or
(c) such other date (later than the dates described in (i) and
(ii) above) as the Committee may designate.
2.15 "Parent Corporation" means any corporation (other than Krispy Kreme
Doughnut Corporation) in an unbroken chain of corporations ending with
Krispy Kreme Doughnut Corporation if, at the time of the granting of
the option, each of the corporations other than Krispy Kreme Doughnut
Corporation owns stock possessing 50 percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
2.16 "Participant" means an Eligible Participant to whom a Stock Option has
been granted and who has entered into an Agreement evidencing the Stock
Option.
2.17 "Plan" means the Krispy Kreme Doughnut Corporation 1998 Stock Option
Plan, as amended from time to time.
2.18 "Retirement" shall mean the Participant's Termination of Employment at
a time when (i) for an employee, the sum of the Participant's age and
years of employment with the Corporation equals or exceeds 65, and (ii)
for a Participant who is a Non-Employee Director, the Non-Employee
Director is deemed to be in good standing, as determined by the
Committee in its sole discretion.
2.19 "Stock" means shares of common stock of Krispy Kreme Doughnut
Corporation, as may be adjusted pursuant to the provisions of Section
3.9.
2.20 "Stock Option" means an Incentive Stock Option granted under Article 4
or a Nonqualified Stock Option granted under Article 5 herein.
2.21 "Subsidiary Corporation" means any corporation (other than Krispy Kreme
Doughnut Corporation) in an unbroken chain of corporations beginning
with the employer corporation if, at the time of the granting of the
option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2.22 "Termination of Employment" with respect to an employee means the
discontinuance of employment of a Participant with the Corporation for
any reason. The determination of whether a Participant has discontinued
employment shall be made by the Committee in its discretion.
"Termination of Employment" with respect to a Non-Employee Director
means the discontinuance of the Non-Employee Director's service as a
member of the Board. In
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determining whether a Termination of Employment has occurred, the
Committee may provide that service as a consultant or service with a
business enterprise in which the Corporation has a significant
ownership interest or which is a franchisee of the Corporation shall be
treated as employment with the Corporation. The Committee shall have
the discretion, exercisable either at the time the Stock Option is
granted or at the time the Participant terminates employment, to
establish as a provision applicable to the exercise of one or more
Stock Options that during the limited period of exercisability
following Termination of Employment, the Stock Option may be exercised
not only with respect to the number of shares of Stock for which it is
exercisable at the time of the Termination of Employment but also with
respect to one or more subsequent installments for which the Stock
Option would have become exercisable had the Termination of Employment
not occurred.
ARTICLE 3 - ADMINISTRATION
3.1 COMMITTEE. This Plan shall be administered by the Committee. At any
time that the officers and directors of the Corporation are subject to
Section 16 of the Act, a Committee member who is not a Non-Employee
Director shall not be able to participate in any decision made by the
Committee to the extent proscribed by Rule 16b-3 under the Act. The
Committee, in its discretion, may delegate to one or more of its
members such of its powers as it deems appropriate. The Committee also
may limit the power of any member to the extent necessary to comply
with Rule 16b-3 under the Act or any other law. Members of the
Committee shall be appointed originally, and as vacancies occur, by the
Board, to serve at the pleasure of the Board. The Board may serve as
the Committee if by the terms of the Plan all Board members are
otherwise eligible to serve on the Committee.
3.2 ACTION BY COMMITTEE. The Committee shall meet at such times and places
as it determines. A majority of its members shall constitute a quorum,
and the decision of a majority of those present at any meeting at which
a quorum is present shall constitute the decision of the Committee. A
memorandum signed by all of its members shall constitute the decision
of the Committee without necessity, in such event, for holding an
actual meeting.
3.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) designate Participants;
(b) determine the type or types of Stock Options to be granted to
each Participant;
(c) determine the number of Stock Options to be granted and the
number of shares of Stock to which a Stock Option will relate;
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(d) determine the terms and conditions of any Stock Option granted
under the Plan, including, but not limited to, the exercise
price, grant price, or purchase price, any restrictions or
limitations on the Stock Option, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability
of a Stock, and accelerations or waivers thereof, based in
each case on such considerations as the Committee in its sole
discretion determines;
(e) accelerate the vesting or lapse of restrictions of any
outstanding Stock Option, based in each case on such
considerations as the Committee in its sole discretion
determines;
(f) determine whether, to what extent, and under what
circumstances a Stock Option may be settled in, or the
exercise price of a Stock Option may be paid in, cash, Stock,
other Stock Options, or other property, or a Stock Option may
be cancelled, forfeited, or surrendered;
(g) prescribe the form of each Stock Option Agreement, which need
not be identical for each Participant;
(h) decide all other matters that must be determined in connection
with a Stock Option;
(i) establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) amend the Plan or any Stock Option Agreement as provided in
Article 8.
3.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
Stock Options granted under the Plan, any Stock Option Agreement and
all decisions and determinations by the Committee with respect to the
Plan are final, binding, and conclusive on all parties.
3.5 WRITTEN AGREEMENT. Each Stock Option granted under the Plan shall be
evidenced by a written Agreement. Each Agreement shall be subject to
and incorporate, by reference or otherwise, the applicable terms and
conditions of the Plan, and any other terms and conditions, not
inconsistent with the Plan, required by the Committee.
3.6 SECURITIES LAW RESTRICTIONS. All certificates for shares of Stock
delivered under the Plan shall also be subject to such stop-transfer
orders and other restrictions as the Committee may deem advisable under
the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange or national quotation system
upon which the Stock is then listed and any applicable federal or state
laws, and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate
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reference to such restrictions. In making such determination, the
Committee may rely upon an opinion of counsel for the Corporation.
The Committee may require each person purchasing shares of Stock
pursuant to a Stock Option granted under the Plan to represent to and
agree with the Corporation in writing that he is acquiring the shares
of Stock without a view to distribution thereof. The certificates for
such shares of Stock may include any legend which the Committee deems
appropriate to reflect any restrictions on transfer.
3.7 RIGHTS AS SHAREHOLDER. Except as provided otherwise in the Plan or in
an Agreement, no Participant awarded a Stock Option shall have any
right as a shareholder with respect to any shares of Stock covered by
his or her Stock Option prior to the date of issuance to him or her of
a certificate or certificates for such shares of Stock.
3.8 CHANGE IN CAPITAL STRUCTURE. If any reorganization, recapitalization,
reclassification, stock split-up, stock dividend, or consolidation of
shares of Stock, merger or consolidation of the Corporation or sale or
other disposition by the Corporation of all or a portion of its assets,
any other change in the Corporation's corporate structure, or any
distribution to shareholders other than a cash dividend results in the
outstanding shares of Stock, or any securities exchanged therefor or
received in their place, being exchanged for a different number or
class of shares of Stock or other securities of the Corporation, or for
shares of Stock or other securities of any other corporation; or new,
different or additional shares or other securities of the Corporation
or of any other corporation being received by the holders of
outstanding shares of Stock, then equitable adjustments shall be made
by the Committee in:
(a) the limitation of the aggregate number of shares of Stock that
may be awarded as set forth in Section 3.5 of the Plan;
(b) the number and class of Stock that may be subject to a Stock
Option, and which have not been issued or transferred under an
outstanding Stock Option;
(c) the purchase price to be paid per share of Stock under
outstanding Stock Options; and
(d) the terms, conditions or restrictions of any Stock Option and
Agreement, including the price payable for the acquisition of
Stock;
provided, however, that all adjustments made as the result of the
foregoing in respect of each Incentive Stock Option shall be made so
that such Stock Option shall continue to be an Incentive Stock Option,
as defined in Section 422 of the Code, unless the Committee has stated
its intent in writing to treat such Stock Option instead as a
Nonqualified Stock Option.
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3.9 INDEMNIFICATION OF COMMITTEE. In addition to such other rights of
indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the
Corporation against reasonable expenses, including attorney's fees,
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein,
to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any
Stock Option granted hereunder, and against all amounts paid by them in
settlement thereof, provided such settlement is approved by independent
legal counsel selected by the Corporation, or paid by them in
satisfaction of a judgment or settlement in any such action, suit or
proceeding, except as to matters as to which the Committee member has
been negligent or engaged in misconduct in the performance of his
duties; provided, that within 60 days after institution of any such
action, suit or proceeding, a Committee member shall in writing offer
the Corporation the opportunity, at its own expense, to handle and
defend the same.
3.10 ADJUSTMENT TO STOCK OPTION TERMS. The Committee shall be authorized to
make adjustments in performance based criteria or in the other terms
and conditions of Stock Options in recognition of unusual or
nonrecurring events affecting the Corporation or its financial
statements or changes in applicable laws, regulations or accounting
principles. Unless otherwise required by applicable law, rule or
regulation, such adjustments will not be considered to result in the
grant of a new Stock Option. The Committee may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or any
Agreement in the manner and to the extent it shall deem desirable to
carry it into effect. In the event the Corporation shall assume
outstanding employee benefit awards or the right or obligation to make
future such awards in connection with the acquisition of another
corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Stock Options under the Plan as
it shall deem appropriate to assume the outstanding awards, rights and
obligations.
3.11 CANCELLATION OF STOCK OPTIONS. If the Committee determines that
egregious circumstances exist which have been caused by the
Participant, the Committee shall have the full power and authority to
cancel or suspend any Stock Option granted to such Participant. In
particular, but without limitation, all outstanding Stock Options
granted to any Participant may be canceled if (a) the Participant,
without the consent of the Committee, while employed by the Corporation
or after termination of such employment, becomes associated with,
employed by, renders services to, or owns any interest in, other than
any insubstantial interest, as determined by the Committee, any
business that is in competition with the Corporation or with any
business in which the Corporation has a substantial interest as
determined by the Committee; (b) the Participant is terminated for
cause as determined by the Committee in its discretion; or (c) the
Corporation voluntarily or involuntarily files for and obtains relief
under the United States Bankruptcy Code or any similar state law for
the protection of creditors.
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ARTICLE 4 - SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. The aggregate number of shares of Stock which are
available for Stock Options under the Plan shall be Ninety-Five
Thousand Six Hundred Fifty (95,650) shares, subject to adjustment as
provided in Section 3.8.
4.2 LAPSED AWARDS. To the extent that a Stock Option is cancelled,
terminates, expires or lapses for any reason, any shares of Stock
subject to the Stock Option will again be available for the grant of a
Stock Option under the Plan.
4.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to a Stock Option may
consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
ARTICLE 5 - INCENTIVE STOCK OPTIONS
5.1 COMPLIANCE WITH CODE Each provision of this Article 5 and of each
Incentive Stock Option granted hereunder shall be construed in
accordance with the provisions of Section 422 of the Code, and any
provision hereof that cannot be so construed shall be disregarded.
5.2 AVAILABLE SHARES All or any portion of the shares of Stock authorized
for issuance pursuant to Section 4.1 herein shall be available for
issuance pursuant to Incentive Stock Options granted hereunder.
5.3 INCENTIVE STOCK OPTION TERMS. Incentive Stock Options shall be granted
only to Eligible Participants who are in the active employment of the
Corporation, each of whom may be granted one or more such Incentive
Stock Options for a reason related to his employment at such time or
times determined by the Committee following the Effective Date until
August 5, 2008, subject to the following conditions:
(a) The Incentive Stock Option price per share of Stock shall be
set in the corresponding Agreement, but shall not be less than
100% of the Fair Market Value of the Stock on the Option Grant
Date. However, if the Optionee owns more than 10% of the
outstanding Stock (as determined pursuant to Section 424(d) of
the Code) on the Option Grant Date, the Incentive Stock Option
price per share shall not be less than 110% of the Fair Market
Value of the Stock on the Option Grant Date.
(b) Subject to any conditions upon exercise that the Committee may
specify in the corresponding Agreement, the Incentive Stock
Option may be exercised in whole or in part within ten years
from the Option Grant Date (within five years if the Optionee
owns more than 10% of the Stock on the Option Grant Date), or
such shorter period as may be specified by the Committee in
the Agreement; provided, that, in any event, the Incentive
Stock Option shall lapse and cease to be exercisable
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upon a Termination of Employment or within such period
following a Termination of Employment as shall have been
specified in the Agreement, which period shall not exceed 90
days unless:
(i) employment shall have terminated as a result of death
or Disability, in which event such period shall not
exceed one year after the date of death or
Disability; or
(ii) death shall have occurred following a Termination of
Employment and while the Incentive Stock Option was
still exercisable, in which event such period shall
not exceed one year after the date of death;
provided, further, that such period following a Termination of
Employment shall in no event extend the original exercise
period of the Incentive Stock Option.
(c) The Committee may adopt any other terms and conditions which
it determines should be imposed for the Incentive Stock Option
to qualify under Section 422 of the Code, as well as any other
terms and conditions not inconsistent with this Article 5 as
determined by the Committee.
5.4 REPURCHASE OF INCENTIVE STOCK OPTIONS. The Committee may at any time
offer to buy out for a payment in cash, Stock or other consideration an
Incentive Stock Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the
Participant at the time that such offer is made.
5.5 INDIVIDUAL DOLLAR LIMITATION. To the extent the aggregate Fair Market
Value, determined as of the Option Grant Date, of the shares of Stock
with respect to which Incentive Stock Options (determined without
regard to this subsection) are first exercisable during any calendar
year by any Eligible Participant exceeds $100,000, or any Incentive
Stock Options fail to qualify under Section 422 of the Code, such
Incentive Stock Options shall be treated as Nonqualified Stock Options
granted under Article 5.
ARTICLE 6 - NONQUALIFIED STOCK OPTIONS
6.1 GRANTS. One or more Stock Options may be granted as Nonqualified Stock
Options to Eligible Participants to purchase shares of Stock at such
time or times determined by the Committee, subject to the terms and
conditions set forth in this Article 6.
6.2 AVAILABLE SHARES. All or any portion of the shares of Stock authorized
for issuance pursuant to Section 4.1 herein shall be available for
issuance pursuant to Nonqualified Stock Options granted hereunder.
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6.3 EXERCISE PRICE. The Nonqualified Stock Option price per share of Stock
shall be established in the Agreement and may be less than 100% of the
Fair Market Value at the time of the grant, or at such later date as
the Committee shall determine.
6.4 NONQUALIFIED STOCK OPTION TERMS. The Nonqualified Stock Option may be
exercised within such period, and subject to such restrictions as may
be specified by the Committee in the corresponding Agreement or
otherwise; provided, that, in any event, the Nonqualified Stock Option
shall lapse and cease to be exercisable upon a Termination of
Employment or within such period following a Termination of Employment
as shall have been specified in the Agreement, which period shall not
exceed 90 days unless:
(a) employment shall have terminated as a result of death or
Disability, in which event such period shall not exceed one
year after the date of death or Disability; or
(b) death shall have occurred following a Termination of
Employment and while the Nonqualified Stock Option was still
exercisable, in which event such period shall not exceed one
year after the date of death;
(c) employment shall have terminated as a result of Retirement; or
(d) such provision is adjusted by the Committee;
provided, further, that such period following a Termination of
Employment shall in no event extend the original exercise period of the
Nonqualified Stock Option.
The Nonqualified Stock Option Agreement may include any other terms and
conditions not inconsistent with this Article 6 or in Article 7, as
determined by the Committee.
ARTICLE 7 - INCIDENTS OF STOCK OPTIONS
7.1 TERMS AND CONDITIONS. Each Stock Option shall be granted subject to
such terms and conditions, if any, not inconsistent with this Plan, as
shall be determined by the Committee, including any provisions as to
continued employment as consideration for the grant or exercise of such
Stock Option and any provisions which may be advisable to comply with
applicable laws, regulations or rulings of any governmental authority.
7.2 RESTRICTIONS ON TRANSFER A Stock Option shall not be transferable by
the Participant other than by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the
Participant only by him or, in the event of his death or Disability, by
his guardian, legal representative, executor, legatee, heir or
distributee of the estate of the Participant. For so long as the Stock
Purchase Agreement remains in effect, a Participant may bequest a Stock
Option only to, or in trust for the benefit of, his spouse, children,
or grandchildren. Notwithstanding any language herein or in any
Agreement to the contrary, the Committee may (but need not) permit
other transfers
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where the Committee concludes that such transferability (i) does not
result in accelerated taxation, (ii) does not cause any Option intended
to be an incentive stock option to fail to be described in Code ss.
422(b), and (iii) is otherwise appropriate and desirable, taking into
account any state or federal securities laws applicable to transferable
Stock Options.
Except as provided herein, in any Agreement, or otherwise provided by
the Committee, no Stock Option shall be transferable. If any
Participant makes such a transfer in violation hereof, any obligation
of the Corporation with respect to such Stock Option shall forthwith
terminate.
7.3 FORM OF PAYMENT. Subject to limitations set forth in the corresponding
Agreement, the Participant may exercise a Stock Option and purchase
Stock by:
(a) personal check;
(b) surrender of shares of Stock that either (i) are being
purchased pursuant to the exercise of a Stock Option such that
the Participant pays the Stock Option price by directing the
Corporation to withhold from the shares of Stock that would
otherwise be issued upon exercise of the Stock Option the
number of shares having a Fair Market Value on the exercise
date equal to the Option price; (ii) have been owned by
Participant for more than 180 days (unless the Committee
permits a Participant to exercise an Option by pyramiding, in
which event the 180 days holding period shall not apply) and
have been "paid for" within the meaning of SEC Rule 144 (and,
if such shares were purchased from the Corporation by use of a
promissory note, such note has been fully paid with respect to
such shares); or (iii) were obtained by Participant in the
public market;
(c) with the consent of the Committee, by tender of a full
recourse promissory note having such terms as may be approved
by the Committee, bearing interest at a rate sufficient to
avoid imputation of income under Sections 483 and 1274 of the
Code, and being secured by such collateral as the Committee
deems appropriate; provided, further, that the portion of the
purchase price equal to the par value of the Stock, if any,
must be paid in cash if required by state law; or
(d) with the consent of the Committee, by waiver of compensation
due or accrued to Participant for services rendered and/or for
goods delivered.
Any such payment terms must comply with any applicable requirements
under Rule 16b-3 of the Act.
7.4 STOCK PURCHASE AGREEMENT A Participant who exercises a Stock Option
shall be deemed to be a party to the Stock Purchase Agreement, as
amended, among the Corporation and its shareholders, originally
effective July 1, 1984, and shall be subject to all provisions of such
Stock Purchase Agreement. The Committee may place additional
restrictions on the transfer of Stock purchased by a Participant under
a Stock Option.
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Similarly, the Committee may require a Participant to enter into the
Voting Agreement originally dated August 26, 1998 as a condition for
the Participant's exercise of a Stock Option.
7.5 DIVIDENDS. No cash dividends shall be paid on shares of Stock subject
to unexercised Stock Options.
7.6 DEATH OR DISABILITY. In the event of Disability or death, the
Committee, with the consent of the Participant or his legal
representative, may authorize payment, in cash or in Stock, or partly
in cash and partly in Stock, as the Committee may direct, of an amount
equal to the difference at the time between the Fair Market Value of
the Stock subject to a Stock Option and the option price in
consideration of the surrender of the Stock Option.
7.7 RETIREMENT. If a Participant's Termination of Employment is on account
of Retirement, the Participant shall retain any Stock Option previously
granted to him until the expiration of the term of the Stock Option,
determined without regard to the Termination of Employment, so long as
the Participant does not engage in competition with the Corporation, as
determined by the Committee, in its sole discretion.
7.8 REPLACEMENT STOCK OPTION GRANTS. The Committee may permit the voluntary
surrender of all or a portion of any Stock Option granted under the
Plan to be conditioned upon the granting to the Participant of a new
Stock Option for the same or a different number of shares of Stock as
the Stock Option surrendered, or may require such surrender as a
condition precedent to a grant of a new Stock Option to such
Participant. Subject to the provisions of the Plan, and except as
otherwise agreed by the Participant, such new Stock Option shall be
exercisable at the same price as the surrendered Stock Option and
during such period and on such other terms and conditions as are
specified by the Committee at the time the new Stock Option is granted.
Upon surrender, the Stock Options surrendered shall be canceled and the
shares of Stock previously subject to them shall be available for the
grant of other Stock Options. For purposes of determining the number of
Stock Options issued pursuant to the Plan, new Stock Options offered in
consideration for Stock Options to be surrendered shall not be
considered as issued until such Stock Options are surrendered unless
otherwise required by law.
ARTICLE 8 - AMENDMENT AND TERMINATION
8.1 AMENDMENT OR TERMINATION OF PLAN. Upon recommendation of the Committee
or otherwise, the Board may amend or terminate the Plan at any time and
from time to time. To the extent required by Rule 16b-3 under the Act
(if the officers and directors of the Corporation are subject to
Section 16 of the Act) and/or to the extent required by Code section
422, no amendment, without approval by the Corporation's shareholders,
shall:
(a) alter the group of persons eligible to participate in the
Plan;
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(b) increase the maximum number of shares of Stock available for
issuance pursuant to Stock Options granted under the Plan;
(c) limit or restrict the powers of the Committee with respect to
the administration of this Plan;
(d) change the definition of an Eligible Participant for the
purpose of an Incentive Stock Option or increase the limit or
the value of shares of Stock for which an Eligible Participant
may be granted an Incentive Stock Option;
(e) materially increase the benefits accruing to Participants
under this Plan;
(f) materially modify the requirements as to eligibility for
participation in this Plan; or
(g) change any of the provisions of this Article 8.
The Committee shall be entitled to create, amend or delete appendices
to this Plan as specified herein.
8.2 EFFECT OF AMENDMENT OR TERMINATION OF PLAN. No amendment to or
discontinuance of this Plan or any provision thereof by the Board or
the shareholders of the Corporation shall, without the written consent
of the Participant, adversely affect, as shall be determined by the
Committee, any Stock Option theretofore granted to such Participant
under this Plan; provided, however, the Committee retains the right and
power to:
(a) annul any Stock Option if the Participant is terminated for
cause as determined by the Committee in its discretion;
(b) provide for the forfeiture of shares of Stock or other gain
under an Stock Option as determined by the Committee for
competing against the Corporation;
(c) convert any outstanding Incentive Stock Option to a
Nonqualified Stock Option; and
(d) cancel or terminate any and all Stock Options in connection
with any proceeding under the United States Bankruptcy Code or
any similar proceeding under state law for the protection of
creditors.
ARTICLE 9 - MISCELLANEOUS PROVISIONS
9.1 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or any Stock Option granted
hereunder shall confer upon any Participant any right to continue in
the employ of the Corporation, or to serve as a director or consultant
thereof, or interfere in any way with the right of the Corporation to
terminate his or her employment or relationship at any time. Unless
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specifically provided otherwise, no Stock Option granted under the Plan
shall be deemed salary or compensation for the purpose of computing
benefits under any employee benefit plan or other arrangement of the
Corporation for the benefit of its employees unless the Corporation
shall determine otherwise. No Participant shall have any claim to a
Stock Option until it is actually granted under the Plan. To the extent
that any person acquires a right to receive payments from the
Corporation under the Plan, such right shall, except as otherwise
provided by the Committee, be no greater than the right of an unsecured
general creditor of the Corporation. All payments to be made hereunder
shall be paid from the general funds of the Corporation, and no special
or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts, except as provided
otherwise by the Committee.
9.2 TAX WITHHOLDING. The Corporation may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding of
any taxes which the Corporation is required by any law or regulation of
any governmental authority, whether federal, state or local, domestic
or foreign, to withhold in connection with any Stock Option or the
exercise thereof, including, but not limited to, the withholding of
payment of all or any portion of such Stock Option or another Stock
Option under this Plan until the Participant reimburses the Corporation
for the amount the Corporation is required to withhold with respect to
such taxes, or canceling any portion of such Stock Option or another
Stock Option under this Plan in an amount sufficient to reimburse
itself for the amount it is required to so withhold, or selling any
property contingently credited by the Corporation for the purpose of
paying such Stock Option or another Stock Option under this Plan, in
order to withhold or reimburse itself for the amount it is required to
so withhold.
If the Corporation is required to pay, or desires to pay, an amount
with respect to income and employment tax withholding obligations in
connection with exercise of a Nonqualified Stock Option, and/or with
respect to certain dispositions of Stock acquired upon the exercise of
an Incentive Stock Option, the Committee, subject to such rules as it
may adopt, shall permit the Participant to satisfy the obligation, in
whole or in part, by making an irrevocable election that a portion of
the total Fair Market Value of the shares of Stock subject to the
Nonqualified Stock Option and/or the Incentive Stock Option, be paid in
the form of cash in lieu of the issuance of Stock and that such cash
payment be applied to the satisfaction of the withholding obligations.
The amount to be withheld shall not exceed the statutory minimum
federal and state income and employment tax liability arising from the
Stock Option exercise transaction. Notwithstanding any other provision
of the Plan, any election under this Section 9.2 is required to satisfy
any applicable requirements under Rule 16b-3 of the Act.
9.3 SUBJECT TO FEDERAL AND STATE LAWS. The Plan and the grant of Stock
Options shall be subject to all applicable federal and state laws,
rules, and regulations and to such approvals by any United States
government or regulatory agency as may be required. Any provision
herein relating to compliance with Rule 16b-3 under the Act shall not
be applicable with respect to participation in the Plan by Participants
who are not subject to Section 16(b) of the Act.
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9.4 SUCCESSORS AND ASSIGNS. The terms of the Plan shall be binding upon the
Participant, the Corporation, and their successors and assigns.
9.5 GOVERNING LAW. This Plan and all actions taken hereunder shall be
governed by the laws of the State of North Carolina, without respect to
the principles of the choice of law or the conflicts of laws.
9.6 UNFUNDED STATUS OF PLAN The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect
to any payments not yet made to a Participant by the Corporation,
nothing contained herein shall give any such Participant any rights
that are greater than those of a general unsecured creditor of the
Corporation. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver shares of Stock or payments in lieu
of or with respect to Stock Options hereunder; provided, however, that,
unless the Committee otherwise determines with the consent of the
affected Participant, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
9.7 NOTICE OF SECTION 83(b) ELECTION. Each Participant exercising a Stock
Option hereunder agrees to give the Committee prompt written notice of
any election made by such Participant under Section 83(b) of the Code,
or any similar provision thereof.
9.8 SEVERABILITY OF PLAN. If any provision of this Plan or an Agreement is
or becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any Agreement under any
law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to applicable laws or if it
cannot be construed or deemed amended without, in the determination of
the Committee, materially altering the intent of the Plan or the
Agreement, it shall be stricken and the remainder of the Plan or the
Agreement shall remain in full force and effect.
9.9 ADDITIONAL PROVISIONS The Committee may incorporate additional or
alternative provisions for this Plan with respect to residents of one
or more individual states to the extent necessary or desirable under
state securities laws. Such provisions shall be set out in one or more
appendices hereto which may be amended or deleted by the Committee from
time to time.
9.10 RESOLUTION OF CONTROVERSY Any controversy between the Corporation and
the Participant (including any person claiming any interest in the Plan
through the Participant) arising out of or under the Plan, the Options
and/or any Agreement, including the construction or application of any
term, provision or condition of the Plan and/or an Agreement (a
"Controversy"), shall, on the written request of either party delivered
to the other, be submitted to non-binding mediation by an independent
mediator selected by the mutual consent of the parties to such
Controversy or, if the parties cannot agree, as selected by the Plan
Administrator in its discretion. Following the determination of the
mediator with regard to such Controversy, a party to such Controversy
who intends to appeal such
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determination may do so, on the written request of such party delivered
to the other, but only by submitting such Controversy to binding
arbitration. Mediation shall comply with and be governed by the rules
prescribed by the independent mediator. Arbitration shall comply with
and be governed by the provisions of the American Arbitration
Association.
The cost of mediation and arbitration (defined to include only (i) the
cost of the mediator(s) and arbitrator(s), (ii) the parties' reasonable
attorney fees and (iii) the parties' reasonable direct, out-of-pocket
expenses incurred in connection with such proceedings) shall be borne
by the losing party or, if the mediator(s) or arbitrator(s) determines
otherwise, in such proportions as the mediator(s) or arbitrator(s) so
determines.
Such mediation and arbitration proceeding(s) shall take place in the
county of the Corporation's principal business office.
IN WITNESS WHEREOF, this document is executed effective as of August 6,
1998.
KRISPY KREME DOUGHNUT CORPORATION
By: /s/ Scott A. Livengood
President
ATTEST:
(Corporate Seal)
/s/ Randy Casstevens
Secretary