Exhibit 10.1
 

AGREEMENT AND RELEASE
 
This Agreement and Release (“Agreement”) dated as of January 6, 2008
among  Krispy Kreme Doughnut Corporation, a North Carolina corporation (“KKDC”),
Krispy Kreme Doughnuts, Inc., a North Carolina corporation (the “Company” and,
together with KKDC, the “Companies”), and Daryl G. Brewster (the “Executive”).
 
The parties hereto agree as follows:
 
1. The employment relationship between the Executive and the Companies will
terminate on January 31, 2008 (the “Termination Date”).  Effective as of the
date hereof (the “Agreement Date”), the Executive hereby resigns all officer and
member positions with the Companies and their Affiliates (as defined below) as
well as his membership on all Boards of Directors and Committees of the
Companies and their Affiliates and shall, in furtherance thereof, on the
Agreement Date, execute and deliver a letter of resignation in the form attached
as Exhibit A hereto.
 
2. In consideration for the covenants of the Executive and the release of claims
by the Executive contained herein and, together with the obligations of the
Companies under Section 7 below, in full payment of all obligations of any
nature or kind whatsoever owed or owing to the Executive by the Companies and
any of their Affiliates, the Companies will pay, or provide benefits to, the
Executive as follows:
 
(a) the Companies will pay the Executive’s base salary (less applicable
reductions for benefit contributions), at the rate in effect on the date hereof,
through the Termination Date, payable on the regular payroll date of the
Companies;
 
(b) the Company will grant to the Executive on the Agreement Date restricted
share units under the Company’s 2000 Stock Incentive Plan with respect to a
number of shares of common stock of the Company having an aggregate fair market
value (based on the closing share price on January 4, 2008) equal to $1,190,000,
and the shares subject to the restricted share units will be distributed to the
Executive on the third trading day following the Company’s release of earnings
for the 2008 fiscal year but no later than April 15, 2008, so long as the
Executive has not revoked this Agreement as provided in Section 18 below and has
not breached and does not breach the provisions referred to in Section 10 below;
 
(c) the Companies will pay to the Executive an aggregate of $700,000 in cash,
payable in 12 equal monthly installments on the regular monthly payroll dates of
KKDC commencing on the regular payroll date for February 2008, provided that the
Executive will be entitled to any unpaid amounts only if the Executive has not
breached and does not breach the provisions referred to in Section 10 below;
 

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(d) the Companies will reimburse the Executive for all reasonable expenses
incurred by him prior to the Agreement Date in the course of performing his
duties under the Employment Agreement dated as of March 6, 2006 among the
Companies and the Executive (the “Employment Agreement”) which are consistent
with the Companies’ policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Companies’
requirements with respect to reporting and documentation of expenses;
 
(e) options to purchase 201,399 shares of Company common stock previously
granted to the Executive under the Company’s 2000 Stock Incentive Plan with an
exercise price of $3.41 per share will vest and become fully exercisable on the
Termination Date, and they will remain exercisable until the third anniversary
of the Termination Date at which time any unexercised options will terminate,
and the options to purchase 500,000 shares of Company common stock previously
granted to the Executive under the Company’s 2000 Stock Incentive Plan with an
exercise price of $6.39 per share will terminate and be forfeited on the
Termination Date;
 
(f) 120,573 unvested restricted shares of Company common stock previously
granted to the Executive under the Company’s 2000 Stock Incentive Plan will vest
on the Termination Date, and the remaining 120,572 unvested restricted shares of
Company common stock held by the Executive will be forfeited on the Termination
Date;
 
(g) the Executive and his covered dependents will continue to receive medical
insurance coverage benefits from the Companies, with the same contribution
toward such coverage from the Executive, for a period equal to the lesser of
(x) eighteen months following the Termination Date, or (y) until the Executive
is provided by another employer with benefits substantially comparable to the
benefits provided by the Companies’ medical plan;
 
(h) an amount of cash equal to $628,398 will be paid to the Executive on August
1, 2008 in full payment of the Executive’s benefit under the account required to
be established under the Krispy Kreme Doughnut Corporation NonQualified Deferred
Compensation Plan pursuant to Section 4.08 of the Employment Agreement; and
 
(i) the Executive's vested accrued benefits under the Companies’ 401(k) plan
will be paid to the Executive in accordance with the terms of such plan.
 
3. In the event members of the executive management team of the Company (other
than those entitled to an annual bonus by contract) receive annual bonuses with
respect to fiscal year 2008 under the Company’s Annual Incentive Performance
Award Plan for the Chief Executive Officer and Executive Staff, the Executive
will be paid a bonus under
 

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such plan equal to the product of (i) $490,000 multiplied by (ii) a fraction,
the numerator of which is the aggregate annual bonus paid to such senior
executives of the Company (other than those entitled to an annual bonus by
contract) under such plan for fiscal year 2008, and the denominator of which is
the aggregate target bonus for such senior executives (other than those entitled
to an annual bonus by contract) for fiscal year 2008.  Any amount payable under
this Section 3 will be paid when such annual bonuses are paid to the other
senior executives of the Company, but by no later than April 15, 2008.
 
4. The Executive acknowledges and agrees that he is not entitled to any salary,
bonuses, long-term or short-term incentive compensation or other compensation,
payments, rights or benefits of any kind in respect of his employment with the
Companies and/or positions with their Affiliates, in respect of the termination
of such employment and/or other positions, or under any of the compensation or
benefit plans of the Companies or their Affiliates, except as provided by this
Agreement.
 
5. The Executive, for himself, his wife, heirs, executors, administrators,
successors and assigns, hereby releases and discharges the Companies and their
respective direct and indirect parents and subsidiaries, and other affiliated
companies, and each of their respective past and present officers, directors,
agents and employees, from any and all actions, causes of action, claims,
demands, grievances and complaints, known and unknown, which the Executive or
his wife, heirs, executors, administrators, successors or assigns ever had or
may have at any time through the Agreement Date.  The Executive acknowledges and
agrees that this release is intended to and does cover, but is not limited to,
(i) any claim of employment discrimination of any kind whether based on a
federal, state or local statute or court decision, including the Age
Discrimination in Employment Act with appropriate notice and rescission periods
observed; (ii) any claim, whether statutory, common law or otherwise, arising
out of the terms or conditions of the Executive’s employment at the Companies
and/or the Executive’s separation from the Companies; enumeration of specific
rights, claims and causes of action being released shall not be construed to
limit the general scope of this release.  It is the intent of the parties that
by this release the Executive is giving up all rights, claims and causes of
action occurring on or prior to the Agreement Date, whether or not any damage or
injury therefrom has yet occurred.  The Executive accepts the risk of loss with
respect to both undiscovered claims and with respect to claims for any harm
hereafter suffered arising out of conduct, statements, performance or decisions
occurring on or before the Agreement Date.
 
6. The Companies hereby release and discharge the Executive, his wife, heirs,
executors, administrators, successors and assigns, from any and all actions,
causes of actions, claims, demands, grievances and complaints, known and
unknown, which the Companies ever had or may have at any time through the
Agreement Date.  The Companies acknowledge and agree that this release is
intended to and does cover, but is not limited to, (i) any claim, whether
statutory, common law or otherwise, arising out of the terms or conditions of
the Executive’s employment at the Companies and/or the Executive’s separation
from the
 

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Companies, and (ii) any claim for attorneys’ fees, costs, disbursements or other
like expenses.  The enumeration of specific rights, claims and causes of action
being released shall not be construed to limit the general scope of this
release.  It is the intent of the parties that by this release the Companies are
giving up all of their respective rights, claims and causes of action occurring
on or prior to the Agreement Date, whether or not any damage or injury therefrom
has yet occurred.  The Companies accept the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring on or
before the Agreement Date.
 
7. The releases provided for in Sections 5 and 6 above shall in no event (i)
apply to any claim by either the Executive or the Companies arising from any
breach by the other party of his or its obligations under this Agreement, (ii)
waive the Executive’s claim with respect to compensation or benefits earned or
accrued prior to the Agreement Date to the extent such claim survives
termination of the Executive’s employment under the terms of this Agreement,
(iii) waive the Executive’s right to indemnification under the charters and
by-laws of the Companies and Section 11.02 of the Employment Agreement, or
(iv) waive the Executive’s rights as a shareholder.
 
8. The Executive understands and agrees that the consideration provided for
herein is more than the Executive would otherwise be entitled to if he did not
agree to the provisions of Section 5 above.
 
9. The Executive agrees not to make any disparaging statements about the
Companies, their Affiliates or their current or former officers, directors,
managers and/or employees, to anyone, including but not limited to the
Companies’ franchisees, customers, competitors, suppliers, employees, former
employees or the press or other media, unless placed under legal compulsion to
do so by a court or other governmental authority.  Similarly, the Companies will
not make (and will instruct their executive officers that they not make and will
request their directors that they not make) disparaging statements about the
Executive to the Companies’ franchisees, customers, competitors, suppliers,
employees, or former employees, his prospective employers or the press or other
media, unless placed under legal compulsion to do so by a court or other
governmental authority.  For purposes of this Agreement, an “Affiliate” of the
Companies includes any person, directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control with either
of the Companies, and such term shall specifically include, without limitation,
each of the Companies’ subsidiaries.  The Company’s press release and Form 8-K
describing this Agreement and the Executive’s termination of employment will be
substantially in the forms previously delivered by the Companies to the
Executive.
 
10. The provisions of Sections 6.01 (Confidential Information), 7.01
(Intellectual Property), 9.01 (Noncompetition, except that George Weston Limited
and Interstate Bakeries Corporation shall be removed from Exhibit B), 9.02
(Nonsolicitation), 9.03 (Defini-
 

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tions), 10.01 (Equitable Relief) and 11.02 (Indemnification) of the Employment
Agreement will survive the termination of the Employment Agreement and continue
in effect in accordance with their terms.
 
11. On or before the Termination Date, the Executive will deliver to the
Companies all property of the Companies or their Affiliates, including, without
limitation, all copies and embodiments, in whatever form or medium, of all
Confidential Information (as defined in the Employment Agreement), in the
Executive’s possession or within his control (including written records, notes,
photographs, manuals, notebooks, documentation, program listings, flow charts,
magnetic media, disks, diskettes, tapes and all other materials containing any
Confidential Information) irrespective of the location or form of such material.
 
12. The Executive will, at the request of the Companies, cooperate with the
Companies in the defense and/or investigation of any third party claim, dispute
or any investigation or proceeding, whether actual or threatened, including,
without limitation, meeting with attorneys and/or other representatives of the
Companies, at a time and place reasonably convenient to the Executive, to
provide reasonably requested information regarding same and/or participating as
a witness in any litigation, arbitration, hearing or other proceeding between
the Companies or their Affiliates and a third party or any government body.  The
Companies will reimburse the Executive for all reasonable expenses incurred by
him in connection with such assistance including, without limitation, reasonable
travel expenses.
 
13. The Companies will reimburse the Executive for reasonable attorney’s fees
and expenses incurred by him in connection with negotiating and entering into
this Agreement (not to exceed $15,000), subject to the Companies’ requirements
with respect to recording and documentation of expenses.
 
14. This Agreement shall be governed by and construed in accordance with the
laws of North Carolina, without reference to the principles of conflict of laws
thereof.
 
15. The Executive will pay to the Company, in cash, an amount sufficient to fund
the Companies’ tax withholding obligations with respect to compensation paid to
the Executive hereunder in the form of common stock of the Company, and such
payments will be made to the Companies on or before the date such amounts are
required to be deposited with the applicable tax authorities.  In addition, the
Companies may withhold from any amounts payable under this Agreement such
federal, state, local or foreign taxes as shall be required to be withheld
therefrom pursuant to any applicable law or regulation.
 
16. This Agreement represents the complete agreement between the Executive and
the Companies concerning the subject matter in this Agreement and supersedes all
prior agreements or understandings, written or oral, including (except as
provided in Section 10 above) the Employment Agreement.  This Agreement may not
be amended or modified
 

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other than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
 
17. Each of the sections contained in this Agreement shall be enforceable
independently of every other section in this Agreement, and the invalidity or
nonenforceability of any section shall not invalidate or render unenforceable
any other section contained in this Agreement.
 
18. For a period of seven (7) days following the execution of this Agreement,
the Executive may revoke this Agreement, and this Agreement shall not become
effective or enforceable until the revocation period has expired.  Any such
revocation must be effected by delivery of a written notification of revocation
of the Agreement to the Secretary of the Company prior to the end of such seven
(7) day revocation period.  In the event that the Agreement is revoked by the
Executive, the Companies shall have no obligations under the Agreement, no
amounts will be payable under this Agreement, and this Agreement shall be deemed
to be void ab initio and of no further force or effect.
 
19. This Agreement has been entered into voluntarily and not as a result of
coercion, duress or undue influence.  The Executive acknowledges that he has
read and fully understands the terms of this Agreement and has been advised to
consult with, and has consulted with, an attorney before executing this
Agreement.  Additionally, the Executive acknowledges that he has been afforded
the opportunity of at least 21 days to consider this Agreement, which has been
waived by the Executive.
 
20. This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal and legal representatives, executors, administrators,
heirs, distributees, devisees and legatees.  If the Executive dies while any
amounts are still payable to him hereunder, all such amounts, unless otherwise
provided herein, will be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or, if there be no such
designee, to the Executive's estate.
 
21. It is intended that this Agreement will comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), and any regulations and
guidelines issued thereunder, to the extent the Agreement is subject thereto,
and the Agreement shall be interpreted on a basis consistent with such
intent.  The Companies shall not have any obligation to indemnify or otherwise
protect the Executive from any obligation to pay any taxes pursuant to Section
409A of the Code.  With respect to all reimbursement arrangements of the
Companies provided for herein that constitute deferred compensation for purposes
of Section 409A of the Code, the following conditions shall be
applicable:  (i) the amount eligible for reimbursement under any such
arrangement in one calendar year may not affect the amount eligible for
reimbursement under such arrangement in any other calendar year, and (ii) any
reimbursement must be made on or before the last day of the calendar year
following the calendar year in which the expense was incurred.  The parties
agree that in no event has
 

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the Executive, directly or indirectly, designated the calendar year of any
payment to be made under this Agreement.
 
22. This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
 

 
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The parties to this Agreement have executed this Agreement as of the day and
year first written above.
 
 
KRISPY KREME DOUGHNUTS, INC.
 
 

 
 
By:    /s/ James H. Morgan
Name: James H. Morgan
Title: Chairman of the Board
 

 
 
KRISPY KREME DOUGHNUT CORPORATION
 
 

 
 
By:    /s/ James H. Morgan
Name: James H. Morgan
Title: Chairman of the Board
 
 

 
 
/s/ Daryl G. Brewster
DARYL G. BREWSTER
 

 

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Exhibit A

January 6, 2008

Board of Directors
Krispy Kreme Doughnuts, Inc.
Krispy Kreme Doughnut Corporation
370 Knollwood Street, Suite 500
Winston-Salem, NC  27103

Re:     Resignation

Ladies and Gentlemen:

Effective immediately, I hereby resign as a member of the Board of Directors
of  Krispy Kreme Doughnuts, Inc. (“KKDI”) and Krispy Kreme Doughnut Corporation
(“KKDC”) and all committees thereof, as President and Chief Executive Officer of
KKDI and KKDC and, as applicable, as officer, director or manager of Affiliates
of each of KKDI and KKDC of which I am an officer, director or manager, and as a
member of any committee of the board of directors of any such entity of which I
am a member.   For purposes hereof, an “Affiliate” of KKDI or KKDC includes any
person, directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with KKDI or KKDC, and such term shall
specifically include, without limitation, each of the subsidiaries of KKDI and
KKDC.

Very truly yours,
     
Daryl G. Brewster