MRS. FIELDS' HOLDING COMPANY, INC.
EMPLOYEE STOCK OPTION PLAN
1 Purpose.
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The purpose of the MRS. FIELDS' HOLDING COMPANY, INC. Employee Stock
Option Plan (the "Plan") is to align the interests of officers and other
employees of MRS. FIELDS' HOLDING COMPANY, INC., a Delaware corporation (the
"Company"), and its subsidiaries, with those of the stockholders of the Company;
to attract, motivate and retain the best available executive personnel and key
employees of the Company and its subsidiaries by permitting them to acquire or
increase their proprietary interest in the Company; and to reward the
performance of individual officers and other employees in fulfilling their
personal responsibilities for long-range achievements.
2 Definitions.
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The following terms, as used herein, shall have the following
meanings:
(a) "Adjusted EBITDA" shall mean, for any fiscal year of MFOC, MFOC's
consolidated earnings before depreciation, amortization, interest,
income taxes and other income (expense) for such fiscal year after
making pro forma adjustment from the beginning of such fiscal year for
any acquisitions, divestitures or discontinued operations during such
fiscal year.
(b) "Award" shall mean any Option granted pursuant to the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document between the Company and a Participant
evidencing an Award.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Capricorn" shall mean Capricorn Investors II, L.P. together with any
affiliated persons.
(f) "Change of Control" shall mean the earliest to occur of (i) a
transaction in which Capricorn's equity investment in the Company is
reduced (including through the operation of a merger in which the
Company is not the surviving corporation and the Common Stock is
converted into the right to receive cash or other property) such that
Capricorn is no longer the single largest equity investor in the
Company or (ii) a sale by the Company or MFOC of all or substantially
all of its assets.
(g) "Common Stock" shall mean the Common Stock, par value $.01 per share,
of the Company.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(i) "Committee" shall mean a committee of the Board which administers the
Plan as provided herein.
(j) "Company" shall mean MRS. FIELDS' HOLDING COMPANY, INC.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
(l) "Implied Valuation" shall mean, for any fiscal year or other period of
four consecutive fiscal quarters of MFOC, the excess of 5.5x Adjusted
EBITDA for such fiscal year or other period over the Net Debt as of
the end of such fiscal year or other period; provided, that the
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Implied Valuation for fiscal year 1997 shall be deemed to be
$41,354,000.
(m) "Initial Public Offering" shall mean a public offering of Common Stock
pursuant to a registration statement under the Securities Act.
(n) "IRR" shall mean, as of any date, the internal rate of return,
determined in accordance with generally accepted practice, on one
share of Common Stock calculated from September 18, 1996 through the
date as of which the determination is being made, using (i)$10.00 as
the value of one share at September 18, 1996 (subject to equitable
adjustment in the event of a transaction of the nature contemplated by
Section 5(b)), (ii) if the relevant date of determination is a Change
of
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Control, the value per share of Common Stock paid pursuant to or
implicit in such Change of Control as determined in good faith by the
Committee, and (iii) if the relevant date of determination is the
expiration of such Option, the value per share of Common Stock as
determined in good faith based on the Implied Valuation determined by
using the four most recently completed fiscal quarters of MFOC for
which financial statements are vaailable as of the date of
determination as the relevant fiscal period.
(o) "MFOC" shall mean Mrs. Fields' Original Cookies, Inc., the Company's
subsidiary.
(p) "Net Debt" shall mean, for any fiscal year or other fiscal period of
MFOC, MFOC's consolidated debt net of cash and short term investments
at the end of such fiscal year.
(q) "Option" shall mean the right, granted pursuant to the Plan, of a
holder to purchase shares of Common Stock. Options granted hereunder
shall not qualify as "incentive stock options" within the meaning of
Section 422 of the Code.
(r) "Participant" shall mean an officer or other employee of the Company
or a subsidiary who is, pursuant to Section 4 of the Plan, selected to
participate in the Plan.
(s) "Performance-Vested Option" shall mean an Option that will be deemed
to be vested 20% for fiscal year 1997 and shall vest an additional 20%
per year for each fiscal year during the term of such Option beginning
with fiscal year 1998 in which the Implied Valuation for such fiscal
year shall equal or exceed 110% of the Implied Valuation for the
previous fiscal year.
(t) "Plan" shall have the meaning set forth in Section 1 hereof.
(u) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time, and as now or hereafter construed, interpreted and
applied by regulations, rulings and cases.
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(v) "Time Vested Option" shall mean an Option that will vest 25% per year
on the anniversaries of the date as of which it was awarded and will
vest in full upon the occurrence of a Change of Control.
(w) "Upside Option" shall mean an Option that will vest upon the earlier
to occur of the expiration of such Option and a Change of Control in
accordance with the following: (i) IRR through such date less than
20%, no vesting; (ii) IRR through such date in the range of 20%-
24.99%, 1/3 vesting; (iii) IRR through such date in the range of 25%-
29.99%, 2/3 vesting; and (iii) IRR through such date of 30% or more,
full vesting.
3 Administration.
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The Plan shall be administered by the Committee. The Committee shall
have the authority, in its sole discretion, subject to and not inconsistent with
the express provisions of the Plan, to administer the Plan and to exercise all
the powers and authorities either specifically granted to it under the Plan or
necessary or advisable in connection with the administration of the Plan,
including, without limitation, the authority to take the following actions: to
grant Awards; to determine the persons to whom and the time or times at which
Awards shall be granted; to determine the type and number of Awards to be
granted, the number of shares of Common Stock to which an Award may relate and
the terms, conditions, restrictions and performance criteria relating to any
Award; to determine whether, to what extent, and under what circumstances an
Award may be settled, cancelled, adjusted, forfeited, exchanged, or surrendered
or accelerated or an Option or Options may be repriced to a lower exercise
price; to make adjustments to performance goals in recognition of unusual or
non-recurring events affecting the Company or its financial statements, or in
response to changes in applicable laws, regulations or accounting principles; to
construe and interpret the Plan and any Award; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the terms and
provisions of Award Agreements, consistent with the terms and provisions of the
Plan; and to make all other determinations deemed necessary or advisable for the
administration of the Plan, consistent with the terms and provisions of the
Plan. From and after the Initial Public Offering, the Committee shall consist
of two or more persons who are intended to be "disinterested persons" within the
meaning of Rule 16b-3 under the Exchange Act.
4 Eligibility.
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Awards may be granted to officers or other employees of the Company
and its subsidiaries in the sole discretion of the Committee. In determining
the persons to whom Awards shall be granted and the type of Award, the Committee
shall take into account such factors as the Committee shall deem relevant in
connection with accomplishing the purposes of the Plan.
5 Stock Subject to the Plan.
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(a) Number of Shares. The maximum number of shares of Common Stock
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reserved for issuance pursuant to the Plan shall be 492,840 allocated evenly
among Time-Vested Options, Performance-Vested Options and Upside Options. All
such shares of Common Stock shall be subject to equitable adjustment as provided
herein. Such shares may, in whole or in part, be authorized but unissued shares
or shares that shall have been or may be reacquired by the Company in the open
market, in private transactions or otherwise. If any shares subject to an Award
are forfeited, cancelled, exchanged or surrendered or if an Award otherwise
terminates or expires without a distribution of shares to the Participant, the
shares of Common Stock with respect to such Award shall, to the extent of any
such forfeiture, cancellation, exchange, surrender, termination or expiration,
again be available for Awards under the Plan.
(b) Equitable Adjustment. In the event that an extraordinary
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transaction or other event or circumstance affecting the Common Stock shall
occur, including, but not limited to, any dividend or other distribution
(whether in the form of cash, stock or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, sale of assets or other similar
transaction or event, and the Committee determines that a change or adjustment
in the terms of any Award is appropriate, then the Committee may, in its sole
discretion, make such equitable changes or adjustments or take any other actions
that it deems necessary or appropriate (which shall be effective at such time as
the Committee in its sole discretion determines), including, but not limited to
causing changes or adjustments to any or all of (i) the number and kind of
shares of stock or other securities or property which may thereafter be issued
in connection with Awards, (ii) the number and kind of shares of stock or other
securities or property issued or issuable in respect of outstanding Awards,
(iii) the exercise price relating to any Award, and (iv) any performance
criteria relating to any Award.
6 Stock Options.
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Each Option granted pursuant to this Section 6 shall be evidenced by
an Award Agreement, in such form and containing such terms and conditions as the
Committee shall from time to time approve, which Award Agreement shall comply
with and be subject to the following terms and conditions, as applicable. Each
Option shall be a Performance-Vested Option, a Time-Vested Option or an Upside-
Vested Option as determined by the Committee at the time of the grant of the
Award and specified in the related Award Agreement.
(a) Stock Options
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(1) Number of Shares. Each Award Agreement shall state the
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type or types of Options covered by such Award and the number of shares of
Common Stock to which the Option relates.
(2) Option Exercise Price. Each Award Agreement shall state the
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Option exercise price. The Option exercise price shall be subject to adjustment
as provided in Section 5 hereof. Unless otherwise expressly stated in the
Committee resolution expressly granting an Option, the date as of which the
Committee adopts the resolution expressly granting an Option shall be considered
the day on which such Option is granted.
(3) Method and Time of Payment. The Option exercise price
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shall be paid in full, at the time of exercise, in cash, in shares of Common
Stock having a fair market value (determined by the Committee) equal to such
Option exercise price, in a combination of cash and Common Stock (or other
consideration deemed acceptable by the Committee) or, in the sole discretion of
the Committee, through a cashless exercise procedure.
(4) Term and Exercisability of Options. Each Award Agreement
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shall provide that each Option shall become exercisable in accordance with its
characterization as a Performance-Vested Option, a Time-Vested Option or an
Upside Option; provided, that the Committee shall have the authority to
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accelerate the exercisability of any outstanding Option at such time and under
such circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be not more than ten (10) years from the date of the grant
of the Option, or such shorter period as is determined by the Committee. The
exercise period shall be subject to earlier termination as provided in Section
6(a)(5) hereof. An Option may be exercised, as to any or all full shares of
Common Stock as to which the Option has become exercisable, by written notice
delivered in person or by mail to the Secretary of the Company, specifying the
number of shares of Common Stock with respect to
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which the Option is being exercised, together with payment in full of the Option
exercise price. For purposes of the preceding sentence, the date of exercise
will be deemed to be the date upon which the Secretary of the Company receives
both the notification and such payment.
(5) Termination. If a Participant's employment by the Company
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or a subsidiary terminates, the Committee will have the exclusive authority to
determine if and for how long, and under what conditions, such Option may be
exercised after such termination; provided, however, that the Committee may not
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shorten any exercise period set forth in an Award Agreement, and provided,
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further, that in no event will an Option continue to be exercisable beyond the
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expiration date of such Option.
(6) Nontransferability of Common Stock. Each Award Agreement
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shall provide that prior to an Initial Public Offering, the Participant shall
execute a stockholders agreement prior to being granted any Option hereunder
with respect to the shares of Common Stock to which such Option relates, in such
form and containing such terms and conditions as the Committee shall from time
to time approve, including without limitation, any restrictions on the
transferability of such shares.
7 General Provisions.
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(a) Compliance with Legal Requirements. The Plan and the granting and
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exercising of Awards, and the other obligations of the Company under the Plan
and any Award Agreement or other agreement shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
regulatory or governmental authority or agency as may be required. The Company,
in its discretion, may postpone the issuance or delivery of Common Stock under
any Award as the Company may consider appropriate and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Common Stock
in compliance with applicable laws, rules and regulations.
(b) Nontransferability. Awards shall not be transferable by a
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Participant other than by will or the laws of descent and distribution or, if
then permitted by Rule 16b-3 under the Exchange Act, pursuant to a qualified
domestic relations order as defined under the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
shall be exer
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cisable during the lifetime of a Participant only by such Participant or his
guardian or legal representative.
(c) No Right To Continued Employment. Nothing in the Plan or in any
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Award granted or any Award Agreement or other agreement entered into pursuant
hereto shall confer upon any Participant the right to continue in the employ of
the Company or a subsidiary or to be entitled to any remuneration or benefits
not set forth in the Plan or such Award Agreement or other agreement or to
interfere with or limit in any way the right of the Company to terminate such
Participant's employment.
(d) Withholding Taxes. Where a Participant or other person is
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entitled to receive shares of Common Stock pursuant to the exercise of an
Option, the Company shall have the right to require the Participant or such
other person to pay to the Company the amount of any taxes which the Company may
be required to withhold before delivery to such Participant or other person of a
certificate or certificates representing such shares.
Unless otherwise prohibited by the Committee or by applicable law, a
Participant may satisfy any such withholding tax obligation by any of the
following methods, or by a combination of such methods: (a) tendering a cash
payment or (b) delivering to the Company previously acquired shares of Common
Stock (none of which shares may be subject to any claim, lien, security
interest, community property right or other right of spouses or present or
former family members, pledge, option, voting agreement or other restriction or
encumbrance of any nature whatsoever) having an aggregate fair market value,
determined by the Committee as of the date the withholding tax obligation
arises, equal to the amount of the total withholding tax obligation.
(e) Amendment and Termination of the Plan. The Board or the
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Committee may at any time and from time to time alter, amend, suspend, or
terminate the Plan in whole or in part; provided that, no amendment which
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requires stockholder approval under applicable law or in order for the Plan to
continue to comply with Rule 16b-3 under the Exchange Act shall be effective
unless the same shall be approved by the requisite vote of the stockholders of
the Company. Notwithstanding the foregoing, subject to the other provisions of
the Plan, no amendment shall affect adversely any of the rights of any
Participant, without such Participant's consent, under any Award theretofore
granted under the Plan. The power to grant Options under the Plan will
automatically terminate on September 18, 2006. If the Plan is terminated,
any unexercised Option shall continue to be exer
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cisable in accordance with its terms and the terms of the Plan in effect
immediately prior to such termination.
(f) Participant Rights. No Participant shall have any claim to be
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granted any Award under the Plan, and there is no obligation for uniformity of
treatment for Participants. Except as provided specifically herein, a
Participant or a transferee of an Award shall have no rights as a stockholder
with respect to any shares of stock covered by any Award until the date of the
issuance of a certificate to him for such shares.
(g) Unfunded Status of Awards. The Plan is intended to constitute an
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"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(h) Fractional Shares. Fractional shares of Common Stock may be
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issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards or other property shall be issued or paid
in lieu of such fractional shares.
(i) Governing Law. The Plan and all determinations made and actions
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taken pursuant hereto shall be governed by the laws of the State of New York
without giving effect to the conflict of laws principles thereof.
(j) Effective Date. The Plan shall become effective on September 18,
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1996.
(k) Beneficiary. A Participant may file with the Committee a written
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designation of a beneficiary on such form as may be prescribed by the Committee
and may, from time to time, amend or revoke such designation. If no designated
beneficiary survives the Participant, the executor or administrator of the
Participant's estate shall be deemed to be the grantee's beneficiary.
(l) Interpretation. The Plan is designed and intended to comply with
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Rule 16b-3 promulgated under the Exchange Act.
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