Exhibit 10.1
 
 
KRISPY KREME DOUGHNUTS, INC.
[FORM OF] NONQUALIFIED STOCK OPTION AGREEMENT
 
THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is made as of
_______________ (the “Grant Date”), by and between Krispy Kreme Doughnuts, Inc.,
a North Carolina corporation (the “Corporation”), and _______________ (the
“Optionee”).
 
WHEREAS, the Committee appointed under the Krispy Kreme Doughnuts, Inc. 2000
Stock Incentive Plan (the “Committee”) has granted Optionee an option to
purchase shares of the Corporation’s Common Stock, no par value per share (the
“Common Stock” or the “Stock”), pursuant to the Krispy Kreme Doughnuts, Inc.
2000 Stock Incentive Plan (the “Plan”) (capitalized terms used herein shall have
the meanings set out in the Plan unless otherwise specified in this Agreement),
as set forth below; and
 
WHEREAS, this Agreement evidences the grant of such option.
 
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises set
forth below and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
 
1.  Summary of Grant
 
Optionee:
Number of Shares:
Option Exercise Price:
Date of Grant:
 
2.  Grant of Option
 
The Committee has granted Optionee a nonqualified option to purchase from the
Corporation, during the period specified in Sections 3 and 4 of this Agreement,
a total of _________ shares of Common Stock, at the purchase price of $______
per share (the “Exercise Price”), in accordance with the terms and conditions
stated in this Agreement. The shares of Common Stock subject to the option
granted hereby are referred to below as the “Shares,” and the option to purchase
such Shares is referred to below as the “Option.”
 
3.  Vesting and Exercise of Option
 
The Option shall vest and become exercisable in accordance with the schedule set
forth below, provided that the Option shall vest and become exercisable with
respect to an increment as specified only if the Optionee has not incurred a
Termination of Employment prior to the vesting date:
 
(a)  the Option shall vest and become exercisable with respect to 50% of the
Shares subject to the Option if and when the following conditions are met
(i) the second
 

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anniversary of the Grant Date has occurred, and (ii) following the Grant Date,
the closing price per Share on the principal securities exchange on which the
Shares are then traded has exceeded 120% of the Exercise Price for at least ten
(10) consecutive trading days; and
 
(b)  the Option shall vest and become exercisable with respect to the remaining
50% of the Shares subject to the Option if and when the following conditions are
met (i) the second anniversary of the Grant Date has occurred, and
(ii) following the Grant Date, the closing price per Share on the principal
securities exchange on which the Shares are then traded has exceeded 140% of the
Exercise Price for at least ten (10) consecutive trading days.
 
Notwithstanding the vesting provisions described above, the Option shall vest
and become exercisable with respect to 100% of the Shares upon the Optionee’s
Termination of Employment if the Optionee’s Termination of Employment is due to
his or her Retirement, death or Disability.
 
The schedule set forth above is cumulative, so that Shares as to which the
Option has become vested and exercisable pursuant to (a) or (b) above may be
purchased pursuant to exercise of the Option at any subsequent date prior to
termination of the Option. The Option may be exercised at any time and from time
to time to purchase up to the number of Shares as to which it is then vested and
exercisable.
 
The Option will become vested and exercisable in full upon a Change in Control,
provided that Optionee has not incurred a Termination of Employment prior to the
date of such Change in Control. In the event of a Change in Control, the Board,
in its sole discretion, may send Optionee prior written notice of the
effectiveness of such event and the last day on which Optionee may exercise the
Option. In such event, Optionee may, upon compliance with all of the terms of
this Agreement and the Plan, purchase any or all of the Shares with respect to
which the Option is vested and exercisable on or prior to the last day specified
in such notice, and, to the extent the Option is not exercised, it shall
terminate at 5:00 P.M., Eastern Standard Time, on the last day specified in such
notice. For purposes hereof, Change in Control shall have the meaning set forth
in the Plan, except in the case of a transaction described in clauses (1) or (3)
of paragraph (b) of such definition, the consummation of such a transaction,
rather than the approval by shareholders of the Corporation of such transaction
or agreement to effect such a transaction, shall constitute a Change in Control.
 
4.  Termination of Option
 
Unless adjusted by the Committee in its sole discretion, the Option shall remain
exercisable as specified in Section 3 above until 5:00 p.m., Eastern Standard
Time, on the earliest to occur of the dates specified below, upon which date the
Option shall terminate:
 
(a)  the date all of the Shares are purchased pursuant to the terms of this
Agreement;
 

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(b)  upon the expiration of 60 days following the Optionee’s Termination of
Employment for any reason other than his or her Retirement, death, Disability,
or for Cause;
 
(c)  upon the expiration of 180 days following Optionee’s Termination of
Employment on account of his or her Disability;
 
(d)  upon the expiration of 360 days following Optionee’s Termination of
Employment on account of his or her death;
 
(e)  immediately upon Optionee’s Termination of Employment for Cause, as defined
below in Section 21(a);
 
(f)  on the last date specified in the notice described in Section 3 above in
the event of a Change in Control; or
 
(g)  on the ten year anniversary of the Grant Date (the “Expiration Date”).
 
Upon its termination, the Option shall have no further force or effect and
Optionee shall have no further rights under the Option or to any Shares which
have not been purchased pursuant to prior exercise of the Option.
 
5.  Manner of Exercise of Option
 
(a)  Exercise.  The Option may be exercised only by (i) Optionee’s completion,
execution and delivery to the Corporation of a notice of exercise and (ii) the
payment to the Corporation, pursuant to the terms of this Agreement, of an
amount equal to the Exercise Price multiplied by the number of Shares being
purchased as specified in Optionee’s notice of exercise (the “Purchase Price”).
Optionee’s notice of exercise shall be given in the manner specified in Section
11 but any exercise of the Option shall be effective only when the items
required by the preceding sentence are actually received by the Corporation. The
notice of exercise may be in the form attached to this Agreement.
Notwithstanding anything to the contrary in this Agreement, the Option may be
exercised only if compliance with all applicable federal and state securities
laws can be effected, as determined by the Committee in its discretion.
 
(b)  Form of Payment. Payment of the Purchase Price may be made (i) by check
payable to the order of the Corporation for an amount in U.S. dollars equal to
the Purchase Price of such Shares; (ii) by delivery or attestation of shares of
Stock held by the Optionee for the requisite period necessary to avoid a charge
to the Corporation’s earnings for financial reporting purposes, as determined by
the Committee in its discretion, and having an aggregate Fair Market Value equal
to the amount of cash that would otherwise be required to pay the full Purchase
Price; (iii) by authorizing a third party to sell a portion of the Shares
acquired upon exercise of the Option and remit to the Corporation a sufficient
portion of the sales proceeds to pay the full Purchase Price; or (iv) by
combining the above methods.
 
To the extent that shares of Stock are used in making full or partial payment of
the Purchase Price, each such share will be valued at the Fair Market Value
thereof as of the date of ex-
 

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ercise. Any overpayment will be promptly refunded, and any underpayment will be
deemed an exercise of such lesser whole number of shares as the amount paid is
sufficient to purchase.
 
(c)  Issuance and Delivery of Shares.  As soon as practicable following receipt
of such notice and payment, the Corporation shall notify the Optionee of any
payment or other allocation required under subsection (d) below. The Corporation
shall deliver a certificate or certificates for the Shares to the Optionee as
soon as practicable after the Optionee has made any payment and/or allocation
required under subsection (d) below. Shares of Stock issued pursuant to the
exercise of this option will be issued only in the name of Optionee and may not
be transferred into the name of any agent of or nominee for Optionee until such
time as Optionee has complied with the terms of this Agreement.
 
(d)  Withholding Obligation.  Issuance of Shares upon exercise of the Option
shall be subject to the condition that the Optionee shall pay to the
Corporation, in addition to the Purchase Price, the minimum amount the
Corporation is required by law or regulation of any governmental authority,
whether federal, state or local, domestic or foreign, to withhold in connection
with such exercise of the Option, if any, as determined by the Committee in its
discretion. In lieu of the payment specified in this paragraph, the Committee
may in its sole discretion permit the Optionee to satisfy the obligation, in
whole or in part, by the methods specified in subsection (b) above, or by the
Corporation retaining sufficient Shares to satisfy its withholding obligations.
 
(e)  Deferral of Issuance of Shares.  Anything in this Agreement to the contrary
notwithstanding, if, at any time specified herein for the issuance of Shares to
Optionee, any law, or any regulation or requirement of the Securities and
Exchange Commission or other governmental authority having jurisdiction in the
premises shall require either the Corporation or Optionee to take any action in
connection with the Shares then to be issued, the issuance of such Shares shall
be deferred until such action shall have been taken; the Corporation shall be
under no obligation to take such action; and the Corporation shall have no
liability whatsoever as a result of the non-issuance of such shares, except to
refund to Optionee any consideration tendered in respect of the Purchase Price.
 
(f)  Stop Transfer Instructions.  The Corporation may impose stop-transfer
instructions with respect to any Shares (or other securities) subject to any
restriction set forth in this Agreement until the restriction has been satisfied
or terminates.
 
6.  Restrictions on Transfer of Option
 
(a)  Except as otherwise provided in subsections (b), (c) and (d) below, the
Option may not be sold, exchanged, delivered, assigned, bequeathed or gifted,
pledged, mortgaged, hypothecated or otherwise encumbered, transferred or
permitted to be transferred, or otherwise disposed of, whether voluntarily,
involuntarily or by operation of law (including, without limitation, the laws of
bankruptcy, intestacy, descent and distribution or succession) or on an absolute
or contingent basis. For purposes of this Section, any reference to Optionee
shall (when applicable) be deemed to be and include references to Optionee’s
estate, executors or administrators, personal or legal representatives and
transferees (direct or indirect).
 

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(b)  If permitted by the Committee, Optionee may transfer this Option to members
of his or her Immediate Family (as defined below), to one or more trusts for the
benefit of such Immediate Family members, to one or more partnerships where such
Immediate Family members are the only partners, or to one or more limited
liability companies (or similar entities) where such Immediate Family members
are the only members or beneficial owners of the entity, if (i) the Optionee
does not receive any consideration in any form whatsoever for such transfer,
(ii) such transfer is permitted under applicable tax laws, and (iii) if the
Optionee is an “Insider,” such transfer is permitted under Rule 16b-3 of the
Exchange Act as in effect from time to time. For purposes hereof, “Immediate
Family” means the Optionee and the Optionee’s spouse, children and
grandchildren.
 
(c)  In the event of Optionee’s death, the Option may be transferred to any
executor, administrator, personal or legal representative, legatee, heir or
distributee of the estate of Optionee.
 
(d)  In the event of Optionee’s divorce, Optionee may transfer some or all of
the Option to his former spouse incident to Optionee’s divorce from the former
spouse.
 
(e)  As a condition precedent to the transfer of the Option, each and every
prospective transferee shall (i) provide or cause to be provided to the
Corporation, at its request, sufficient evidence of the legal right and
authority of such prospective transferee to have the Option so transferred and
(ii) comply with the provisions of this Agreement. Any Option so transferred
pursuant to this Section shall continue to be subject to the same terms and
conditions in the hands of the transferee as were applicable to said Option
immediately prior to the transfer thereof, and any reference in this Agreement
to the performance of services for the Corporation by the Optionee shall
continue to refer to the performance by the transferring Optionee.
 
7.  Share Ownership Policy
 
Optionee agrees that he or she will comply with the Company’s share ownership
policy, as in effect from time to time.
 
8.  Rights Prior to Exercise
 
Optionee shall not be deemed for any purpose to be a shareholder of the
Corporation with respect to any Shares as to which this Option shall not have
been exercised and payment made as hereby provided and a stock certificate for
such Shares actually issued to Optionee. No adjustment will be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
 
9.  Employment of Optionee
 
Nothing in this Agreement shall be construed as constituting a commitment,
guarantee, agreement or understanding of any kind or nature that the Corporation
shall continue to employ Optionee, nor shall this Agreement affect in any way
the right of the Corporation to terminate the employment or other service of
Optionee at any time and for any reason. By Optionee’s execution of this
Agreement, Optionee acknowledges and agrees that Optionee’s employment or other

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service to the Corporation is “at will.” No change of Optionee’s duties with
respect to the Corporation shall result in, or be deemed to be, a modification
of any of the terms of this Agreement.

10.  Burden and Benefit
 
This Agreement shall be binding upon, and shall inure to the benefit of, the
Corporation and Optionee, and their respective heirs, personal and legal
representatives, successors and permitted assigns.
 
11.  Notices
 
Any and all notices under this Agreement shall be in writing, and sent by hand
delivery or by certified or registered mail (return receipt requested and
first-class postage prepaid), in the case of the Corporation, to its principal
executive offices to the attention of the Chief Financial Officer, and, in the
case of Optionee, to Optionee’s address as shown on the Corporation’s records.
 
12.  Specific Performance
 
Strict compliance by Optionee shall be required with each and every provision of
this Agreement. The parties hereto agree that the Shares are unique, that
Optionee’s failure to perform the obligations provided by this Agreement will
result in irreparable damage to the Corporation and that specific performance of
Optionee’s obligations may be obtained by suit in equity.
 
13.  Entire Agreement
 
The parties hereto agree that this Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties, and representations between
the parties with respect to the Option and Shares and that there are no
promises, agreements, conditions, understandings, warranties, or
representations, oral or written, express or implied between the parties with
respect to the Option and Shares other than as set forth in this Agreement. Any
modifications or any waiver of any provision contained in this Agreement shall
not be valid unless made in writing and signed by the person or persons sought
to be bound by such waiver or modifications.
 
14.  Severability
 
The provisions of the Agreement are severable and if any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions, and any partially unenforceable provision to the
extent enforceable in any jurisdiction, shall nevertheless be binding and
enforceable.
 
15.  Waiver
 
The waiver by the Corporation of a breach of any provision of this Agreement by
the Optionee shall not operate or be construed as a waiver of any subsequent
breach by the Optionee.
 

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16.  Terms and Conditions of Plan
 
The terms and conditions included in the Plan, the receipt of a copy of which
Optionee hereby acknowledges by execution of this Agreement, are incorporated by
reference herein, and to the extent that any conflict may exist between any term
or provision of this Agreement and any term or provision of the Plan, such term
or provision of the Plan shall control.
 
17.  Authority of Committee
 
All determinations made by the Committee with respect to the interpretation,
construction and application of any provision of this Agreement shall be final,
conclusive and binding on the parties.
 
18.  Covenants and Representations of Optionee
 
Optionee represents, warrants, covenants and agrees with the Corporation as
follows:
 
(a)  Optionee has not relied upon the Corporation with respect to any tax
consequences related to the grant or exercise of this Option, or the disposition
of Shares purchased pursuant to its exercise. Optionee acknowledges that, as a
result of the grant and/or exercise of the Option, Optionee may incur a
substantial tax liability. Optionee assumes full responsibility for all such
consequences and the filing of all tax returns and elections Optionee may be
required or find desirable to file in connection therewith. In the event the
Corporation is required by applicable law to collect any withholding, payroll or
similar taxes by reason of the grant or any exercise of the Option, Optionee
agrees that the Corporation may withhold such taxes from any monetary amounts
otherwise payable by the Corporation to Optionee and that, if such amounts are
insufficient to cover the taxes required to be collected by the Corporation,
Optionee will pay to the Corporation such additional amounts as are required.
 
(b)  Optionee will not distribute or resell any Shares (or other securities)
issuable upon exercise of the Option granted hereby in violation of the Act.
Optionee shall comply with all provisions of the Corporation’s Securities
Trading Policy.
 
(c)  The agreements, representations, warranties and covenants made by Optionee
herein with respect to the Option shall also extend to and apply to all of the
Shares issued to Optionee from time to time pursuant to exercise of the Option.
Acceptance by Optionee of any certificate representing Shares shall constitute a
confirmation by Optionee that all such agreements, representations, warranties
and covenants made herein shall be true and correct at that time.
 
19.  Limitation of Liability
 
The liability of the Corporation, the Committee, and their officers, employees
and agents, under this Agreement and in the award of the Shares hereunder is
limited to the obligations set forth with respect to such award, and nothing
herein contained shall be interpreted as imposing any liability in favor of the
Optionee with respect to any loss, cost or expense which such recipi-
 

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ent may incur in connection with or arising out of any transaction involving the
Shares that is subject to the provisions of this Agreement.
 
20.  Governing Law
 
This Agreement shall be construed and enforced in accordance with the laws of
the State of North Carolina, without giving effect to the conflict of laws
provisions thereof.
 
21.  Definitions
 
(a)  “Cause” shall be limited to the following events: (i) drug abuse by
Optionee; (ii) alcohol abuse by Optionee if it interferes with the efficient
conduct of business by Optionee; (iii) theft, embezzlement or other similar act
by Optionee of any tangible or intangible asset of the Corporation or any
customer or supplier of the Corporation; (iv) commission of any other criminal
act by Optionee (whether or not Optionee is prosecuted and convicted) if such
act causes or is likely to cause damage to the business of the Corporation; (v)
a material breach by Optionee of any written agreement between the Corporation
and Optionee, or any written policy of the Corporation known by and applicable
to all its employees, but a mere mistake in business judgment shall not
constitute “Cause” unless it is a part of a continuing pattern of bad judgment
that has caused actual damage to the Corporation or its business, and (vi)
willful failure by Optionee to follow the instructions of the Board or an
officer or other supervisory employee of the Corporation duly authorized by the
Board, the Bylaws of the Corporation or an officer of the Corporation authorized
to give instructions to Optionee, to the extent such instructions are reasonably
related to the business of the Corporation, are given in good faith to promote
the interest of the Corporation, would not require Optionee to commit any
illegal act and are not given to provide the Corporation with cause for
terminating Optionee.
 
(b)  “Retirement” shall mean the Optionee’s Termination of Employment at a time
when for an employee, the sum of the Optionee’s age and years of employment with
the Corporation equals or exceeds 65.
 
(c)  “Termination of Employment” means the discontinuance of the Optionee’s
service relationship with the Corporation, including but not limited to service
as an employee of the Corporation, as a non-employee member of the board of
directors of the Corporation, or as a consultant or advisor to the Corporation.
Except to the extent provided otherwise in an Agreement or determined otherwise
by the Committee, a Termination of Employment shall not be deemed to have
occurred if the capacity in which the Optionee provides service to the
Corporation changes (for example, a change from consultant status to Employee
status) or if the Optionee transfers among the various entities constituting the
Corporation, so long as there is no interruption in the provision of service by
the Optionee to the Corporation. The determination of whether a Optionee has
incurred a Termination of Employment shall be made by the Committee in its
discretion. A Optionee shall not be deemed to have incurred a Termination of
Employment if the Optionee is on military leave, sick leave, or other bona fide
leave of absence approved by the Corporation of 90 days or fewer (or any longer
period during which the Optionee is guaranteed reemployment by statute or
contract.) In the event a Optionee ’s leave of absence exceeds this period, he
will be deemed to have incurred a Termination of Employment on the day following
the expiration date of such period.
 

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IN WITNESS WHEREOF, the Corporation and Optionee have executed this Agreement
hereto as of the day and year first above written.
 
 
KRISPY KREME DOUGHNUTS, INC.
 
 
By: ______________________________________
Print Name: _______________________________
Title:
 
_______________________________ 
Optionee
 

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STOCK OPTION EXERCISE FORM
 
This form must be completed and returned to Krispy Kreme’s Chief Financial
Officer on or before 1:00 p.m. Eastern Standard Time on date of exercise.
 
NAME (please print)
 
SOCIAL SECURITY NO.
 

SECTION I
 
HOME ADDRESS:
WORK ADDRESS:
   
HOME TELEPHONE:
WORK TELEPHONE:

 
 
SECTION II: I wish to exercise the following options:
 
A
GRANT DATE
 
B
NUMBER OF OPTIONS
 
C
EXERCISE PRICE
D
TOTAL PURCHASE PRICE:
(COLUMN B x COLUMN C)
                       
TOTAL
 

 

SECTION III
 
 
SECTION IV
 
I elect to pay for my shares (check one):
 
___ 
I elect to pay my taxes on this transaction (check one):
 
____
 
Broker assisted Cashless Exercise for Cash
 
____
 
Sell shares to cover taxes (Cashless Exercise for Cash/Stock)
 
___
Broker assisted Cashless Exercise for Stock
 
____
 
Check (payable to Krispy Kreme Doughnuts, Inc.) (required for Cash Purchases)
 
___
Cash Purchase by Check (payable to
Krispy Kreme Doughnuts, Inc.)
 
____
 
Deduction from shares I receive from this transaction (Stock Swap)
 
____
 
Stock Swap using value of previously
owned shares
 
   

 

___________________________________________
____________________________________________
Signature
Date of Exercise

 
 

Return form to:
KRISPY KREME DOUGHNUT CORPORATION
 
ATTN: Chief Financial Officer
 
P.O. Box 83
 
Winston-Salem, NC 27102
 
Phone: 336-725-2981