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                                                                  EXHIBIT 10.21

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (THE "AGREEMENT") is made effective this 1st
day of December, 2000, by and between KRISPY KREME DOUGHNUTS, INC. a North
Carolina corporation (the "Company"), and RANDY S. CASSTEVENS (the
"Executive").

                                    RECITAL

         The Executive is currently serving as Senior Vice President of
Corporate Finance and Secretary of the Company and the parties have negotiated
this Agreement in consideration of the Executive's valuable services and
leadership.

         NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties do hereby agree as follow:

         1.       EFFECTIVE DATE. This Agreement shall be effective upon, and
from and after, the date set forth above.

         2.       DEFINITIONS. As used herein, the following terms shall have
the following meanings:

                  (a)      "Disability" shall mean the Executive becoming
                  disabled and unable to continue his employment with the
                  Company as defined in the Company's then applicable
                  disability policy for the Senior Management of the Company.

                  (b)      "Discharge" shall mean the termination by the
                  Company of the Executive's employment during the Period of
                  Employment for any reason other than (i) Good Cause, (ii)
                  death of the Executive, (iii) Disability of the Executive, or
                  (iv) Retirement of the Executive.

                  (c)      "Expiration Date" means the date that the Period of
                  Employment (as it may have been extended) expires.

                  (d)      "Good Cause" has its meaning as defined in Section 6
                  hereof.

                  (e)      "Period of Employment" shall be for a term of two
                  years beginning December 1, 2000 and ending December 1,
                  2002; provided, however, that commencing December 1, 2001,
                  the Executive's Period of Employment shall automatically be
                  extended for successive one-year periods each year as of
                  December 1 of each year unless the Company gives Executive
                  written notice of nonextension on or before that date.

                  (f)      "Retirement" shall mean a time when the sum of the
                  Executive's age and employment with the Company equals or
                  exceeds 65.
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                  (g)      "Senior Management" shall mean the senior executive
                  management of the Company currently consisting of the chief
                  executive officer, the president, the executive vice
                  presidents, and certain senior vice presidents.

                  (h)      "Stock Option Plan" shall mean the Krispy Kreme
                  Doughnut Corporation 1998 Stock Option Plan and/or the Krispy
                  Kreme Doughnuts, Inc. 2000 Stock Incentive Plan.

                  (i)      "Termination Date" shall mean:

                           (i)      If the Executive's employment is terminated
                           by reason of death, the Executive's date of death;

                           (ii)     If the Executive's employment is terminated
                           by reason of Retirement, the date of his Retirement;

                           (iii)    If the Executive's employment is terminated
                           by reason of Disability, the date of his Disability;

                           (iv)     If the Executive's employment is terminated
                           for Good Cause, the date specified in the written
                           notice of termination given by the Company pursuant
                           to Section 6(a);

                           (v)      If the Executive's employment is terminated
                           by reason of a Discharge, the effective date of
                           Discharge;

                           (vi)     If the Executive's employment is terminated
                           by reason of non-extension of the Period of
                           Employment, the Expiration Date; and

                           (vii)    If the Executive voluntarily terminates his
                           employment as permitted by Section 6(b), the
                           effective date of his termination of employment.

         3.       EMPLOYMENT; PERIOD OF EMPLOYMENT.

                  The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, for the Period of Employment, in the
position and with the duties and responsibilities set forth in Section 4, upon
the terms and subject to the conditions of this Agreement.


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<PAGE>

         4.       POSITION, DUTIES AND RESPONSIBILITIES. During the Period of
Employment, the executive shall

                  (a)      serve as Senior Vice President of Corporate Finance
                  and Secretary of the Company and its subsidiaries or in such
                  other senior management position as may be assigned to him.
                  The Executive shall be employed hereunder in Forsyth County,
                  North Carolina, and he shall not be required to relocate his
                  residence or principal office to any place outside Forsyth
                  County, North Carolina, without his consent; and

                  (b)      devote his best efforts to the furtherance of the
                  interest of the Company and the performance of his duties
                  hereunder and agrees not to engage in any competition
                  whatsoever, either directly or indirectly, with the Company
                  or any of its subsidiaries or affiliates. The Executive shall
                  be allowed holiday and vacation periods, leaves for periods
                  of illness or incapacity and personal leaves in accordance
                  with the Company's regular practices for members of Senior
                  Management.

         5.       COMPENSATION, COMPENSATION PLANS AND BENEFITS. During the
Period of Employment, the Executive shall be compensated as follows:

                  (a)      He shall receive an annual base salary equal to his
                  current annual base salary, with annual increases in
                  accordance with the Company's regular practices for members
                  of Senior Management. In addition, he shall receive
                  non-incentive compensation (including automobile allowance)
                  at his current monthly rate. Such compensation shall be paid
                  in accordance with the Company's regular schedule for payment
                  of salaried employees.

                  (b)      He shall receive such other bonuses as are afforded
                  the Company's Senior Management and be eligible to
                  participate in all of the Company's executive compensation
                  plans provided to members of Senior Management of the Company
                  from time to time.

                  (c)      He shall be entitled to participate in and receive
                  other employee benefits, which may include, but are not
                  limited to, benefits under any life health, accident,
                  disability, medical, dental and hospitalization insurance
                  plans, use of a Company automobile or an automobile
                  allowance, and other perquisites and benefits, as are
                  provided to members of Senior Management of the Company from
                  time to time.

                  (d)      He shall be entitled to be reimbursed for the
                  reasonable and necessary out-of-pocket expenses, including
                  entertainment, travel and similar items, incurred by him in
                  performing his duties hereunder upon presentation of such
                  documentation thereof as the Company may normally and
                  customarily require of the members of Senior Management. The
                  Company agrees to pay the Executive's dues and assessments
                  for membership in the Old Town Country Club.


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         6.       TERMINATION OF EMPLOYMENT. During the Period of Employment,
Executive's employment may be terminated in the following manner:

                  (a)      Termination for Good Cause.

                           (i)      The Company may terminate the Executive's
                  employment for Good Cause. Termination of employment shall be
                  deemed to have been for Good Cause if (i) the Executive
                  habitually neglects or refuses to do his duties and fails to
                  cure such neglect within ten (10) days after having received
                  written notice of same from the Company or (ii) the Executive
                  commits (a) acts constituting a felony or (b) acts of gross
                  negligence or willful misconduct to the material detriment of
                  the Company.

                  (b)      Voluntary Termination.

                           The Executive may voluntarily terminate his
                  employment with the Company upon 30 days prior written
                  notice.

                  (c)      Termination by Reason of Death, Disability, or
                  Retirement.

                           The employment of the Executive shall be terminated
                  by death, Disability or Retirement of the Executive.

         7.       EFFECT OF TERMINATION.

                  (a)      If the Executive's employment is terminated by
                  reason of death, Retirement or voluntary termination of
                  employment, the Company shall pay the Executive (or his
                  estate in the case of his death) his base salary,
                  non-incentive compensation (including automobile allowance),
                  bonuses and benefits as provided in Section 5 through the
                  Termination Date and (in the case of his death) a death
                  benefit of $5,000. Any payments and benefits due to the
                  Executive under employee benefit plans and programs of the
                  Company, including the Stock Option Plan, shall be determined
                  in accordance with the terms of such benefit plans and
                  programs; provided, however, that all options held by the
                  Executive under the Stock Option Plan shall become 100%
                  vested if the Executive's employment is terminated by reason
                  of death or Retirement.

                  (b)      If the Executive's employment is terminated by
                  reason of Disability, the Company shall pay the Executive his
                  base salary, non-incentive compensation, bonuses and benefits
                  for a period of six months following the date of Disability.
                  Thereafter, this Agreement terminates and the Executive shall
                  receive those benefits payable to him under the applicable
                  disability insurance plan provided by the Company. Any
                  payments and benefits due to the Executive under employee
                  benefit plans and programs of the Company, including the
                  Stock Option Plan,


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                  shall be determined in accordance with the terms of such
                  benefit plans and programs; provided, however, that all
                  options held by the Executive under the Stock Option Plan
                  shall become 100% vested as of the Executive's termination of
                  employment by reason of Disability.

                  (c)      In the event of the Executive's Discharge by the
                  Company,

                           (i)      the Company shall pay the Executive

                                    A.       his then current annual base
                                    salary and non-incentive compensation
                                    (including automobile allowance) and
                                    provide the Executive with his then current
                                    benefits (as provided in Section 5) through
                                    the Expiration Date pursuant to Section
                                    2(e) to the extent permitted by law and
                                    unless Executive elects a lump sum payment
                                    pursuant to subparagraph (f); and

                                    B.       within thirty (30) days from the
                                    Termination Date (1) a lump sum equal to
                                    Executive's then current monthly base
                                    salary amount multiplied by the number of
                                    months that have elapsed between the month
                                    of Discharge and the preceding, and (2) a
                                    lump sum amount equal to the sum of adding
                                    two times the Executive's bonus calculated
                                    at 37.5% of his base salary for the then
                                    current fiscal year, discounted at the rate
                                    of six percent (6%) per annum. The latter
                                    payment is full and final satisfaction of
                                    all the Company's obligations for bonus
                                    and/or other incentive payments.

                           (ii)     Any payments and benefits due to executive
                           under the employee benefit plans and programs of the
                           Company, including the Stock Option Plan, shall be
                           determined in accordance with the terms of such
                           benefit plans and programs; provided, however, that
                           all options held by the Executive under the Stock
                           Option Plan shall become 100% vested as of the
                           Termination Date.

                  (d)      In the event of the Company's nonextension of the
                  Employment Period, Executive shall continue to be employed by
                  the Company pursuant to this Agreement through the Expiration
                  Date, and his employment shall be terminated as of the
                  Expiration Date. Then, the following provisions shall apply:

                           (i)      Within thirty (30) days from the
                           Termination Date the Company shall pay the
                           Executive, (1) a lump sum equal to Executive's then
                           current annual base salary, and (2) a lump sum
                           amount equal to two times the Executive's bonus
                           calculated at 50% of her base salary for the then
                           current fiscal year, discounted at the rate of six
                           percent (6%) per annum. The latter payment is full
                           and final satisfaction of all the Company's
                           obligations for bonus and/or other incentive
                           payments.


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                           (ii)     Any payments and benefits due to Executive
                           under employee benefit plans and programs of the
                           Company, including the Stock Option Plan, shall be
                           determined in accordance with the terms of such
                           benefit plans and programs; provided, however, that
                           all options held by the Executive under the Stock
                           Option Plan shall become 100% vested as of the
                           Expiration Date.

                  Provided, however, that within sixty (60) days of the date of
                  notification by the Company to the Executive of its intention
                  not to extend the Period of Employment, the Executive may, at
                  his option, elect to have the non-extension treated as a
                  Discharge with an effective date thirty (30) days after the
                  Executive's notification to the Company of his election.

                  (e)      In the event of the Executive's Termination For
                  Cause by the Company, the Company shall pay the Executive his
                  then current base salary and non-incentive compensation
                  (including automobile allowance) and provide the Executive
                  with his then current benefits (as provided in Section 5)
                  through the Termination Date. Any payments and benefits due
                  the Executive under employee benefit plans and programs of
                  the Company, including the Stock Option Plan, shall be
                  determined in accordance with the terms of such benefit plans
                  and programs.

                  (f)      In the event the Executive's employment is
                  terminated by reason of Discharge or nonextension of the
                  Employment Period, the Executive may, at his option, elect to
                  receive a lump sum amount equal to the base salary and
                  non-incentive compensation due, discounted at a rate of six
                  percent (6%) per annum.

                  (g)      In the event the Executive's employment is
                  terminated by reason of Discharge, the Company shall furnish
                  the Executive, for a period of six (6) months subsequent to
                  the Termination Date, outplacement services, reasonable
                  office space, and secretarial assistance.

                  (h)      If any of the payments provided for in this
                  Agreement, together with any other payments which the
                  Executive has the right to receive from the Company or any
                  corporation which is a member of an "affiliated group" as
                  defined in Section 1504(a) of the Code (without regard to
                  Section 1504(b) of the Code) of which the Company is a
                  member, would constitute an "excess parachute payment" as
                  defined in Section 280G(b)(1) of the Code as it presently
                  exists, such that any portion of such payments are subject to
                  the excise tax imposed by Section 4999 of the Code, or any
                  interest or penalty with respect to such excise tax (such
                  excise tax, together with any such interest or penalty, are
                  collectively referred to as the "Excise Tax"), then the
                  Executive shall be entitled to receive an additional payment
                  (an "Excise Tax Restoration Payment"). The amount of the
                  Excise Tax Restoration Payment shall be the amount necessary
                  to fund the payment by the


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                  Executive of any Excise Tax on the total payments, as well as
                  all income taxes imposed on the Excise Tax Restoration
                  Payment, any excise tax imposed on the Excise Tax Restoration
                  Payment, and any interest or penalties imposed with respect
                  to taxes on the Excise Tax Restoration Payment or any Excise
                  Tax.

         8.       Termination For Good Reason. In the event of a "Change in
Control" of the Company (as hereinafter defined), the Executive may terminate
his employment for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence of any of the following events during the twelve (12)
months immediately preceding or following the effective date of a Change in
Control of the Company:

                  (a)      a reduction by the Company in the Executive's base
salary or incentive compensation as in effect on the date of a Change in
Control;

                  (b)      the Company's requirement that the Executive be
based anywhere other than the Company's office in Forsyth County, North
Carolina, at which he was based prior to the Change in Control of the Company;
or

                  (c)      the failure by the Company to continue to provide
the Executive with benefits substantially similar to those specified in Section
5 of this Agreement.

         For purposes of Section 8(b) above, the Company shall be deemed to
have required the Executive to be based somewhere other than the Company's
office at which he was based prior to the Change in Control if the Executive is
required to spend more than two days per week on a regular basis at a business
location not within 50 miles of the Executive's primary business location as of
the effective date of a Change in Control.

         If the Executive terminates his employment for Good Reason, this shall
be treated as the Discharge of the Executive by the Company. Accordingly, the
Company shall pay the amounts and provide the benefits to the Executive
specified in Section 7 above, applicable in the event of Discharge. The
Executive shall not be obligated in any way to mitigate the Company's
obligations to him under this Section 8 and any amounts earned by the Executive
subsequent to his termination of employment shall not serve as an offset to the
payments due him by the Company under this Section.

         For purposes of this Agreement, a "Change in Control" means the date
on which the earlier of the following events occur:

                  (a)      the acquisition by any entity, person or group of
beneficial ownership, as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 30% of the outstanding capital
stock of the Company entitled to vote for the election of directors ("Voting
Stock");

                  (b)      the merger or consolidation of the Company with one
or more corporations as a result of which the holders of outstanding Voting
Stock of the Company immediately prior


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to such a merger or consolidation hold less than 60% of the Voting Stock of the
surviving or resulting corporation;

                  (c)      the transfer of substantially all of the property of
the Company other than to an entity of which the Company owns at least 80% of
the Voting Stock; or

                  (d)      the election to the Board of Directors of the
Company of three or more directors during any twelve (12) month period without
the recommendation or approval of the incumbent Board of Directors of the
Company.

         Upon a Change in Control, as defined above in this Section 8, all
outstanding stock options shall become 100% vested and immediately exercisable,
regardless of whether the Executive terminates employment or not.

         If the Executive terminates employment with Good Reason within twelve
(12) months of a Change in Control, to the extent permitted by law, the Company
shall continue the medical, disability and life insurance benefits which
Executive was receiving at the time of termination for a period of 12 months
after termination of employment or, if earlier, until Executive has commenced
employment elsewhere and becomes eligible for participation in the medical,
disability and life insurance programs, if any, of his successor employer.
Coverage under Employer's medical, disability and life insurance programs shall
cease with respect to each such program as Executive becomes eligible for the
medical, disability and life insurance programs, if any, of his successor
employer.

         9.       CONFIDENTIALITY. During the Period of Employment and
following termination for any reason, the Executive covenants and agrees that
he will not divulge any trade secrets or other confidential information
pertaining to the business of the Company. It is understood that the term
"trade secrets" as used in this Agreement is deemed to include any information
which gives the Company a material and substantial advantage over its
competitors but that such term does not include knowledge, skills or
information which is otherwise publicly disclosed.

         10.      NON-COMPETITION. In the event of termination for any reason,
including Voluntary Termination of the Executive, the Executive agrees that for
a period of two years following the Termination Date, Executive shall not
directly or indirectly, personally or with other employees, agents or
otherwise, or on behalf of any other person, firm, or corporation, engage in
the business of making and selling doughnuts and complementary products

                  (a)      within a 100 mile radius of any place of business of
                  the Company (including franchised operations) or of any place
                  where the Company (or one of its franchised operations) has
                  done business since the Effective Date of this Agreement,

                  (b)      in any county where the Company is doing business or
                  has done business since the Effective Date, or


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                  (c)      in any state where the Company is doing business or
                  has done business since the Effective Date.

         Notwithstanding the above, ownership by Executive of an interest in
any licensed franchisee of the Company shall not be deemed to be in violation
of this Section 10. In the event of an actual or threatened breach of this
provision, the Company shall be entitled to an injunction restraining Executive
from such action and the Company shall not be prohibited in obtaining such
equitable relief or from pursuing any other available remedies for such breach
or threatened breach, including recovery of damages from Executive.

         11.      SUCCESSORS; BINDING AGREEMENT.

                  (a)      This Agreement shall be binding upon, and inure to
                  the benefit of, the parties hereto, their heirs, personal
                  representatives, successors and assigns.

                  (b)      The Company shall require any successor (whether
                  direct or indirect and whether by purchase, merger,
                  consolidation or otherwise) to all or substantially all of
                  the business or assets of the Company expressly to assume and
                  agree to perform this Agreement in the same manner and to the
                  same extent that the Company would be required to perform if
                  no such succession had taken place. As used herein, "Company"
                  shall mean the Company as defined in the preamble to this
                  Agreement and any successor to its business or assets which
                  executes and delivers (or is required to execute and deliver)
                  the agreement provided for in this Section 11(b), or which
                  otherwise becomes bound by the terms and provisions of this
                  Agreement or by operation of law.

         12.      ARBITRATION. Except as hereinafter provided, any controversy
or claim arising out of or relating to this Agreement of any alleged breach
thereof shall be settled by arbitration in the City of Winston-Salem, North
Carolina in accordance with the rules then obtaining of the American
Arbitration Association and any judgment upon any award, which may include an
award of damages, may be entered in the highest State or Federal court having
jurisdiction. Nothing contained herein shall in any way deprive the Company of
its claim to obtain an injunction or other equitable relief arising out of the
Executive's breach of the provisions of Paragraphs 9 and 10 of this Agreement.
In the event of the termination of Executive's employment, Executive's sole
remedy shall be arbitration as herein provided and any award of damages shall
be limited to recovery of lost compensation and benefits provided for in this
Agreement.

         13.      NOTICES. For the purposes of this Agreement, notices and all
other communications provided for herein shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:

         IF TO THE EXECUTIVE:               Randy S. Casstevens
                                            251 Halcyon Avenue


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                                            Winston-Salem, NC  27104

         IF TO THE COMPANY:                 Krispy Kreme Doughnuts, Inc.
                                            P.O. Box 83
                                            Winston-Salem, NC  27102-0083
                                            (for mail)

                                            370 Knollwood
                                            Suite 500
                                            Winston-Salem, NC  27103
                                            (for delivery)

                                            Attn:  Scott Livengood

         14.      GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
North Carolina.

         15.      MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and the Company. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of other provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.

         16.      SEPARABILITY. The invalidity or lack of enforceability of a
provision of this Agreement shall not affect the validity of any other
provision hereof, which shall remain in full force and effect.

         17.      WITHHOLDING OF TAXES. The Company may withhold from any
benefits payable under this Agreement all federal, state and other taxes as
shall be required pursuant to any law or governmental regulation or ruling.

         18.      SURVIVAL. The provisions of Sections 9 and 10 of the
Agreement shall survive the termination of this Agreement and shall continue
for the terms set forth in Sections 9 and 10.

         19.      CAPTIONS. Captions to the sections of this Agreement are
inserted solely for the convenience of the parties, are not a part of this
Agreement, and in no way define, limit, extend or describe the scope hereof or
the intent of any of the provisions.

         20.      NON-ASSIGNABILITY. This Agreement is personal in nature and
neither and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations
hereunder. Without limiting the foregoing, the Executive's right to receive
payments hereunder shall not be assignable or transferable, whether by pledge,
creation


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of a security interest or otherwise, other than a transfer by will or by the
laws of descent or distribution. In the event of any attempted assignment or
transfer contrary to this section, the Company shall have no liability to pay
any amount so attempted to be assigned or transferred.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and delivered under its seal pursuant to the specific authorization of
its board of directors and the Executive has hereunto set his hand and seal
effective the day and year first above written.

                                    KRISPY KREME DOUGHNUTS, INC.



                                    By: /s/ Scott A. Livengood
                                       ------------------------------
                                         Scott A. Livengood, President

[CORPORATE SEAL]

                                    EXECUTIVE


                                    /s/ Randy S. Casstevens       (Seal)
                                    --------------------------
                                    Randy S. Casstevens


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