ex10_1.htm


     

    Exhibit 10.1

     


    EMPLOYMENT AGREEMENT

     

    EMPLOYMENT
AGREEMENT (“Agreement”)
dated as of February 27, 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 James H. Morgan (the “Executive”).

     

    The
parties hereto agree as follows:

     

    ARTICLE
1

     

    DEFINITIONS

     

    SECTION
1.01. Definitions. For purposes of
this Agreement, the following terms have the meanings set forth
below:

     

    “Base Salary” has the meaning
set forth in Section 4.01.

     

    “Board” means the Board of
Directors of the Company.

     

    “Cause” shall mean (i) the
Executive’s failure or refusal to perform the Executive’s lawful and proper
duties hereunder (other than as a result of total or partial incapacity due to
physical or mental illness or a court or governmental order), (ii) the
Executive’s conviction of or plea of nolo contendere to any felony
(other than a traffic infraction), (iii) an act or acts on the Executive’s part
constituting fraud, theft or embezzlement or that otherwise constitutes a felony
under the laws of the United States or any state thereof which results or was
intended to result directly or indirectly in gain or personal enrichment by the
Executive at the expense of the Companies, or (iv) the Executive’s willful
violation of any material provision of the code of ethics of the Companies
applicable to the Executive. In the case of any item described in the previous
sentence, the Executive shall be given written notice of the alleged act or
omission constituting Cause, which notice shall set forth in reasonable detail
the reason or reasons that the Board believes the Executive is to be terminated
for Cause, including any act or omission that is the basis for the decision to
terminate the Executive. In the case of an act or omission described in clause
(i) or (iv) of the definition of Cause, (A) if reasonably capable of being
cured, the Executive shall be given 30 days from the date of such notice to
effect a cure of such alleged act or omission constituting “Cause” which, upon
such cure to the reasonable satisfaction of the Board, shall no longer
constitute a basis for Cause, and (B) the Executive shall be given an
opportunity to make a presentation to the Board (accompanied by counsel or other
representative, if the Executive so desires) at a meeting of the Board held
promptly following such 30-day cure period if the Board intends to determine
that no cure has occurred. At or following such meeting, the Board shall
determine whether or not to terminate the Executive for “Cause” and shall notify
the Executive in writing of its determination and the effective date of such
termination (which date may be no earlier than the date of the aforementioned
Board meeting).

     

    “Change in Control” means any
of the following events:

     


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


     

    (a) the
acquisition by any Person of “beneficial ownership” (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more of the
combined voting power of the Company’s then outstanding voting securities;
provided, however, that a Change in Control shall not be deemed to occur solely
because fifty percent (50%) or more of the combined voting power of the
Company’s then outstanding securities is acquired by (i) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
by the Company or any of its Subsidiaries, or (ii) any Person, which,
immediately prior to such acquisition, is owned directly or indirectly by the
shareholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition;

     

    (b) consummation
of (i) a merger or consolidation involving the Company if the shareholders of
the Company, immediately before such merger or consolidation do not, as a result
of such merger or consolidation, own, directly or indirectly, more than fifty
percent (50%) of the combined voting power of the then outstanding voting
securities of the corporation resulting from such merger or consolidation in
substantially the same proportion as their ownership of the combined voting
power of the voting securities of the Company outstanding immediately before
such merger or consolidation, or (ii) a sale or other disposition of all or
substantially all of the assets of the Company other than to a Person which is
owned directly or indirectly by the shareholders of the Company in the same
proportion as their ownership of stock in the Company;

     

    (c) a change
in the composition of the Board such that the individuals who, as of the
Effective Date, constitute the Board (such Board shall be hereinafter referred
to as the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, for purposes of this definition, that
any individual who becomes a member of the Board subsequent to the Effective
Date whose election, or nomination for election by the Company’s shareholders,
was approved by a vote of at least a majority of those individuals who are
members of the Board and who were also members of the Incumbent Board (or deemed
to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; provided further, however, that
any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, including any
successor to such Rule), or other actual or threatened solicitation or proxies
or consents by or on behalf of a Person other than the Board, shall not be so
considered as a member of the Incumbent Board; or

     

    (d) approval
by shareholders of the Company of a complete liquidation or dissolution of the
Company;

     


    
      
         


      

      
        2

        
          

        

      

      
         


      

    


    


     

    provided, however,
that an event will be treated as a “Change in Control” for purposes of this
Agreement only if it is also a “change in control event” (as defined in Treas.
Reg. Section 1.409A-3(i)(5)) with respect to the Company.

     

    “Code” means the Internal
Revenue Code of 1986, as amended.

     

    “Confidential Information”
means information that is not generally known to the public and that was or is
used, developed or obtained by the Company or its Subsidiaries in connection
with the business of the Company and its Subsidiaries and which constitutes
trade secrets or information which they have attempted to protect, which may
include, but is not limited to, trade “know-how”, customer information, supplier
information, cost and pricing information, marketing and sales techniques,
strategies and programs, computer programs and software and financial
information. It shall not include information (a) required to be disclosed by
court or administrative order; (b) lawfully obtainable from other sources or
which is in the public domain through no fault of the Executive; or (c) the
disclosure of which is consented to in writing by the Company.

     

    “Date of Termination” has the
meaning set forth in Section 5.07.

     

    “Effective Date” has the
meaning set forth in Section 2.01.

     

    “Employment Period” has the
meaning set forth in Section 2.01.

     

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended.

     

    “Good Reason” shall mean (i)
the failure of the Companies to pay any material amount of compensation to the
Executive when due hereunder, (ii) the Executive is no longer the most senior
executive officer of (A) the Company or (B) in the event of a merger,
consolidation or other business combination involving the Company, the successor
to the Company’s business or assets or (C) if all or substantially all of the
voting stock of the Company is held by another public company, such public
company (it being understood that it shall not be an event of Good Reason for
the applicable entity described in this clause (ii) to appoint an individual
other than the Executive as the non-executive chairman of its board of
directors), (iii) the assignment to the Executive of any duties or
responsibilities materially inconsistent with the Executive’s status under
clause (ii) of this sentence or his failure at any time to report directly to
the board of directors of the applicable company described in such clause (ii),
(iv) the failure of the Executive to be appointed or elected (or reelected) to
the Board, other than due to Executive’s decision not to stand for election or
reelection, or his removal from the Board not for Cause and not due to his
Permanent Disability or death, (v) any failure by the Companies to maintain the
Executive’s principal place of employment and the executive offices of the
Companies within 25 miles of the Winston-Salem, North Carolina area, (vi) any
material breach by the Companies of this Agreement, (vii) the term of the
Employment Period ending as a result of the Companies giving the Executive
notice of non-extension of the

     


    
      
         


      

      
        3

        
          

        

      

      
         


      

    


    term of
this Agreement in accordance with Section 5.01 solely at either the end of the
initial term or the end of the first, second or third one year extensions of the
term under Section 5.01 (but, for the avoidance of doubt, not at the end of any
further extension of the term) or (viii) a Change in Control; provided, however,
that for any of the foregoing to constitute Good Reason, the Executive must
provide written notification of his intention to resign within 60 days after the
Executive knows or has reason to know of the occurrence of any such event, and
the Companies shall have 30 days (10 days in the case of a material breach
related to payment of any amounts due hereunder) from the date of receipt of
such notice to effect a cure of the condition constituting Good Reason, and,
upon cure thereof by the Companies, such event shall no longer constitute Good
Reason.

     

    “Notice of Termination” has the
meaning set forth in Section 5.06.

     

    “Permanent Disability” means
the Executive becomes permanently disabled within the meaning of the long-term
disability plan of the Companies applicable to the Executive, and the Executive
commences to receive benefits under such plan.

     

    “Person” means an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, an estate, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.

     

    “Reimbursable Expenses” has the
meaning set forth in Section 4.04.

     

    “Securities Act” means the
Securities Act of 1933, as amended.

     

    “Subsidiary” or “Subsidiaries” means, with
respect to any Person, any corporation, partnership, limited liability company,
association or other business entity of which (a) if a corporation, 50 percent
or more of the total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or combination thereof; or (b) if a partnership, limited liability
company, association or other business entity, 50 percent or more of the
partnership or other similar ownership interests thereof are at the time owned
or controlled, directly or indirectly, by any Person or one or more Subsidiaries
of that Person or a combination thereof. For purposes of this definition, a
Person or Persons will be deemed to have a 50 percent or more ownership interest
in a partnership, limited liability company, association or other business
entity if such Person or Persons are allocated 50 percent or more of
partnership, limited liability company, association or other business entity
gains or losses or control the managing director or member or general partner of
such partnership, limited liability company, association or other business
entity.

     


    
      
         


      

      
        4

        
          

        

      

      
         


      

    


    


     

    ARTICLE
2

     

    EMPLOYMENT

     

    SECTION
2.01. Employment. The Companies
shall employ the Executive, and the Executive shall accept employment with the
Companies, upon the terms and conditions set forth in this Agreement for the
period beginning January 6, 2008 (the “Effective Date”) and ending as
provided in Section 5.01 (the “Employment
Period”).  It is acknowledged that the Executive began service
to the Companies prior to the date of this Agreement, with continued service
contingent upon the preparation of this Agreement in a form mutually acceptable
to both the Executive and the Companies.

     

    ARTICLE
3

     

    POSITION
AND DUTIES

     

    SECTION
3.01. Position and Duties. During
the Employment Period, the Executive shall serve as Chief Executive Officer and
President of the Company reporting directly to the Board and shall be the
Company’s most senior executive officer.  The Executive shall also
serve as Chairman of the Board of the Company for as long as the Board
desires.  During the Employment Period, the Executive also shall serve
as Chief Executive Officer, President and Chairman of the Board of KKDC and
shall be KKDC’s most senior executive officer. The Executive shall have such
responsibilities, powers and duties as may from time to time be prescribed by
the Board or the most senior executive officer of the Companies; provided that such
responsibilities, powers and duties are substantially consistent with those
customarily assigned to individuals serving in such position at comparable
companies or as may be reasonably required for the proper conduct of the
business of the Companies. During the Employment Period, the Executive shall
devote substantially all of his working time and efforts to the business and
affairs of the Company and its Subsidiaries. The Executive shall not directly or
indirectly render any services of a business, commercial or professional nature
to any other person or organization not related to the business of the Company
or its Subsidiaries, whether for compensation or otherwise, without the prior
approval of the Board; provided, however, the Executive may serve on the board
of directors of one for-profit corporation with the prior approval of the Board,
which will not be unreasonably withheld, and the Executive may serve as a
director of not-for-profit organizations or engage in other charitable, civic or
educational activities, so long as the activities described in this proviso do
not interfere with the Executive’s performance of his duties hereunder or result
in any conflict of interest with the Companies.

     


    
      
         


      

      
        5

        
          

        

      

      
         


      

    


    


     

    ARTICLE
4

     

    BASE
SALARY AND BENEFITS

     

    SECTION
4.01. Base Salary. During the
Employment Period, the Executive will receive base salary from the Companies
equal to $650,000 per annum (the “Base Salary”). The Base Salary
will be payable in accordance with the normal payroll practices of the
Companies. Annually during the Employment Period the Company shall review with
the Executive his job performance and compensation, and if deemed appropriate by
the Board or its Compensation Committee, in their discretion, the Executive’s
Base Salary may be increased but not decreased. After any such increase, the
term “Base Salary” as used in this Agreement will thereafter refer to the
increased amount.  The Executive’s Base Salary and other compensation
is in lieu of any compensation he would otherwise receive as a Director of the
Company’s Board.

     

    SECTION
4.02. Bonuses. In addition to Base
Salary, the Executive shall be eligible to be considered for an annual bonus,
and the Executive’s annual target bonus shall be equal to 70% of Base
Salary.  The Compensation Committee of the Board and the Board shall
set targets with respect to and otherwise determine Executive’s bonus in
accordance with the Company’s then current incentive plans.  The
Executive will not receive a bonus attributable to his service during the
Companies’ 2008 fiscal years.  The Executive may elect to receive
bonus amounts that may become payable for the upcoming fiscal year (commencing
with the bonus that may become payable for fiscal year 2009) in equity instead
of cash by delivering a written irrevocable election to such effect prior to the
end of the preceding fiscal year.  Should such an election be made,
the equity will be granted under the Krispy Kreme Doughnuts, Inc. 2000 Stock
Incentive Plan (the “Stock
Incentive Plan”).

     

    SECTION
4.03. Benefits. During the
Employment Period, the Executive shall be entitled to participate in all
employee benefit, perquisite and fringe benefit plans and arrangements made
available by the Companies to their executives and key management employees upon
the terms and subject to the conditions set forth in the applicable plan or
arrangement. Such benefits shall include medical, life and disability insurance
provided in accordance with the policies of the Companies.  The
Executive also shall be provided an executive allowance of $2,000 per month, and
the Executive shall be entitled to four weeks of paid vacation annually during
the Employment Period.

     

    SECTION
4.04. Expenses. The Companies shall
reimburse the Executive for all reasonable expenses incurred by him in the
course of performing his duties under this Agreement which are consistent with
the Companies’ policies in effect from time to time with respect to travel,
entertainment and other business expenses (“Reimbursable Expenses”),
subject to the Companies’ requirements with respect to reporting and
documentation of expenses. 

     


    
      
         


      

      
        6

        
          

        

      

      
         


      

    


    


     

    SECTION
4.05. Stock Options.  The
Company shall grant to the Executive options to purchase 500,000 shares of the
Company’s common stock (the “Option Shares”) at an exercise
price per share equal to the fair market value per share on the date of grant,
which shall be the same as the date of this Agreement. Twenty five percent (25%)
of the options (specifically, 125,000 Option Shares) will vest and become
exercisable on July 6, 2008, 2008 and 1/18th of the
balance (specifically, 20,833 Option Shares in each of the first 17 months and
20,839 shares in the 18th month) will vest on the 6th day of
each month thereafter commencing on August 6, 2008 and ending on January 6,
2010, so long as, except as otherwise set forth in the applicable stock option
plan, the Executive’s employment continues through such vesting
dates.  The term of the Option Shares will be ten years from the date
of grant, subject to earlier termination in the event the Executive’s employment
terminates.  The Option Shares shall be subject to the terms of the
Stock Incentive Plan, and the option grant agreement for Executive’s Option
Shares shall have terms similar to those of other executive officers of the
Companies.  The Option Shares shall also be subject to, and Executive
agrees to comply with, the ownership guidelines adopted by the Company as may be
applicable to Option Shares of the Company’s Chief Executive Officer and
President.  During the Executive’s service to the Company as a
director or employee, unvested Option Shares will continue to vest.

     

    SECTION
4.06. Relocation.  The
Companies shall reimburse the Executive for all reasonable expenses incurred by
him in relocating his and his immediate family’s household items to
Winston-Salem, North Carolina, subject to the Companies requirements with
respect to reporting and documentation of such expenses, such relocation
reimbursements to include all normal expenses of moving, packing and unpacking,
home hunting, buying and selling brokerage fees, transfer taxes, origination
fees (not to exceed 1% of the loan amount) and mortgage points (not to exceed 1%
of the loan amount) incurred within one year from the Effective
Date.  Furthermore, the Executive’s temporary housing expenses will be
paid by the Companies through the first to occur of (i) July 6, 2008 or (ii) the
closing date of the Executive’s acquisition of a home in the Winston-Salem area.
The Executive will also receive a gross up for income and payroll taxes payable
by him related to reimbursement by the Companies pursuant to this Section 4.06
and for the related gross up itself, such that the relocation and commuting
expenses and the related gross up will be effectively tax free to the
Executive.

     

    ARTICLE
5

     

    TERM AND
TERMINATION

     

    SECTION
5.01. Term. The Employment Period
will terminate on January 6, 2011, unless sooner terminated as hereinafter
provided; provided, however, that the Employment Period will be automatically
extended for successive one-year periods following the original term ending
January 6, 2011 until either the Companies, on the one hand, or the Executive,
on the other hand, at least 180 days prior to the expiration

     


    
      
         


      

      
        7

        
          

        

      

      
         


      

    


    of the
original term or any extended term, shall give written notice to the other of
their intention not to so extend the Employment Period.

     

    SECTION
5.02. Termination Due to Death or
Permanent Disability. If the Employment Period shall be terminated due to
death or Permanent Disability of the Executive, the Executive (or his estate or
legal representative) shall be entitled solely to the following: (i) Base Salary
through the Date of Termination (paid on the Companies’ normal payroll payment
date); (ii) any vested stock options will remain exercisable for two years after
the Date of Termination (subject to the Companies discretion to cash out these
awards in connection with a Change in Control), and (iii) medical benefits as
provided in Section 5.05 below. The Executive’s entitlements under any other
benefit plan or program shall be as determined thereunder. In addition, promptly
following any such termination, the Executive (or his estate or legal
representative) shall be reimbursed for all Reimbursable Expenses incurred by
the Executive prior to such termination.

     

    SECTION
5.03. Termination for Good Reason or
Without Cause. Except as otherwise set forth in Section 5.09 below, if
the Employment Period shall be terminated (a) by the Executive for Good Reason,
or (b) by the Companies not for Cause, provided the Executive has executed, on
or before the date that is fifty (50) days following the date of his termination
of employment, an irrevocable (except to the extent required by law to be
revocable) general release of claims in the form attached hereto as Exhibit A,
and does not revoke such release prior to the end of the seven day statutory
revocation period, the Executive shall be entitled solely to the following: (i)
Base Salary through the Date of Termination, paid on the Companies’ normal
payroll payment date; (ii) an amount equal to two times the sum of Base Salary
and the Executive’s target annual bonus amount for the year of termination (or
the Base Salary or target annual bonus for the prior year if reduction of the
Executive’s Base Salary or target annual bonus, or both, was the event giving
rise to Good Reason), provided that, the Executive shall be entitled to any
unpaid amounts only if the Executive has not breached and does not breach the
provisions of Sections 6.01, 7.01, 8.01 or 9 below; (iii) a bonus for the year
of termination of employment equal to the Executive’s target annual bonus for
such year pro rated for the number of full months during the bonus year prior to
such termination of employment, to be paid, subject to Section 13.14 below, 60
days following such termination of employment; (iv) all of the restricted shares
and stock options held by the Executive shall vest and/or become exercisable on
the Date of Termination, and (v) medical benefits as provided in Section 5.05
below. The Executive’s entitlements under any other benefit plan or program
shall be as determined thereunder, except that duplicative severance benefits
shall not be payable under any other plan or program. Amounts described in
clause (ii) above will be paid, subject to Section 13.14 below, in twelve (12)
equal installments, the first two (2) of which shall be paid on the date that is
two (2) months following the Date of Termination and the next ten (10) of which
will be paid in ten (10) equal monthly installments commencing on the date that
is three (3) months following the Date of Termination and continuing on each of
the next nine (9) monthly anniversaries of the Date of Termination. In addition,
promptly following any

     


    
      
         


      

      
        8

        
          

        

      

      
         


      

    


    such
termination, the Executive shall be reimbursed for all Reimbursable Expenses
incurred by the Executive prior to such termination.  

     

    SECTION
5.04. Termination for Cause or Other Than
Good Reason. If the Employment Period shall be terminated (a) by the
Companies for Cause, or (b) as a result of the Executive’s resignation or
leaving of his employment other than for Good Reason, the Executive shall be
entitled to receive solely Base Salary through the Date of Termination (paid on
the Companies’ normal payroll payment date) and reimbursement of all
Reimbursable Expenses incurred by the Executive prior to such
termination.  The Executive’s rights under the benefit plans and
programs shall be as determined thereunder. A voluntary resignation by the
Executive shall not be deemed to be a breach of this Agreement.

     

    SECTION
5.05. Benefits.  If the
Employment Period is terminated as a result of a termination of employment as
specified in Section 5.02, 5.03 or 5.09, the Executive and his covered
dependents shall continue to receive medical insurance coverage benefits from
the Companies, with the same contribution toward such coverage from the
Executive or his estate as was given during the Employment Period, for a period
equal to the lesser of (x) twelve months following the Date of Termination, or
(y) until the Executive is provided by another employer with benefits
substantially comparable to the benefits provided by the Companies’ medical
plan.  Furthermore, in the event of Executive’s Permanent Disability,
insurance benefits will continue under the Companies’ long term disability plan
in accordance with its terms.

     

    SECTION
5.06. Notice of Termination. Any
termination by the Companies for Permanent Disability or Cause or without Cause
or by the Executive with or without Good Reason shall be communicated by written
Notice of Termination to the other party hereto. For purposes of this Agreement,
a “Notice of
Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision indicated.

     

    SECTION
5.07. Date of Termination. “Date of Termination” shall
mean (a) if the Employment Period is terminated as a result of a Permanent
Disability, five days after a Notice of Termination is given, (b) if the
Employment Period is terminated as a result of his death, on the date of his
death, and (c) if the Employment Period terminates due to expiration of the term
of this Agreement, the date the term expires, and (d) if the Employment Period
is terminated for any other reason, the later of the date of the Notice of
Termination and the end of any applicable correction period.

     

    SECTION
5.08. No Duty to Mitigate. The
Executive shall have no duty to seek new employment or other duty to mitigate
following a termination of employment as described in this Article 5, and no
compensation or benefits described in this Article 5 shall be subject to
reduction or offset on account of any subsequent compensation, other than as
provided in Section 5.05.

     


    
      
         


      

      
        9

        
          

        

      

      
         


      

    


    


     

    SECTION
5.09. Change in
Control.  All stock options and restricted shares held by the
Executive will become vested in full upon a Change in Control; provided, however, that the
vesting of the restricted shares and stock options held by Executive shall not
be accelerated where the Executive continues as the chief executive officer of a
publicly traded parent corporation of the parent/subsidiary affiliated group
that included the Companies (the “Surviving Entity”) and either
the Company’s common stock remains outstanding or replacement equity awards are
granted by the Surviving Entity so long as the terms of this Agreement are
expressly assumed and continued by the Surviving Entity and the Executive has
not elected to properly terminate this Agreement for Good Reason.

     

    SECTION
5.10. Separation From
Service.  Notwithstanding any provision of this Agreement to
the contrary, for purposes of Section 5.03 and Section 5.09, the Executive will
be deemed to have terminated his employment on the date of his “separation from
service” (within the meaning of Treas. Reg. Section 1.409A-1(h)) with the
Companies, the Employment Period will be deemed to have ended on the date of his
“separation from service” with the Companies, and the Date of Termination will
be deemed to be the date of his “separation from service” with the
Companies.

     

    ARTICLE
6

     

    CONFIDENTIAL
INFORMATION

     

    SECTION
6.01. Nondisclosure and Nonuse of
Confidential Information. The Executive will not disclose or use at any
time during or after the Employment Period any Confidential Information of which
the Executive is or becomes aware, whether or not such information is developed
by him, except to the extent he reasonably believes that such disclosure or use
is directly related to and appropriate in connection with the Executive’s
performance of duties assigned to the Executive pursuant to this Agreement.
Under all circumstances and at all times, the Executive will take all
appropriate steps to safeguard Confidential Information in his possession and to
protect it against disclosure, misuse, espionage, loss and
theft.  Executive also agrees to execute and comply with such other
confidentiality agreements or provisions as required of executive officers of
the Company.

     

    ARTICLE
7

     

    INTELLECTUAL
PROPERTY

     

    SECTION
7.01. Ownership of Intellectual
Property. In the event that the Executive as part of his activities on
behalf of the Companies generates, authors or contributes to any invention,
design, new development, device, product, method of process (whether or not
patentable or reduced to practice or comprising Confidential Information), any
copyrightable work (whether or not comprising Confidential Information) or any
other form of Confidential Information relating directly or
indirectly

     


    
      
         


      

      
        10

        
          

        

      

      
         


      

    


    to the
business of the Company or its Subsidiaries as now or hereafter conducted
(collectively, “Intellectual
Property”), the Executive acknowledges that such Intellectual Property is
the sole and exclusive property of the Company and its Subsidiaries and hereby
assigns all right, title and interest in and to such Intellectual Property to
the Company or its designated Subsidiary. Any copyrightable work prepared in
whole or in part by the Executive during the Employment Period will be deemed “a
work made for hire” under Section 201(b) of the Copyright Act of 1976, as
amended, and the Company or its designated Subsidiary will own all of the rights
comprised in the copyright therein. The Executive will promptly and fully
disclose all Intellectual Property and will cooperate with the Companies to
protect their interests in and rights to such Intellectual Property (including
providing reasonable assistance in securing patent protection and copyright
registrations and executing all documents as reasonably requested by the
Companies, whether such requests occur prior to or after termination of
Executive’s employment hereunder).

     

    ARTICLE
8

     

    DELIVERY
OF MATERIALS UPON TERMINATION OF EMPLOYMENT

     

    SECTION
8.01. Delivery of Materials upon
Termination of Employment. As requested by the Companies from time to
time, and upon the termination of the Executive’s employment with the Companies
for any reason, the Executive will promptly deliver to the Companies all
property of the Company or its Subsidiaries, including, without limitation, all
copies and embodiments, in whatever form or medium, of all Confidential
Information 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 and, if requested by the Companies, will provide the
Companies with written confirmation that to the best of his knowledge all such
materials have been delivered to the Companies or destroyed.

     

    ARTICLE
9

     

    NON-COMPETITION
AND NONSOLICITATION

     

    SECTION
9.01. Noncompetition. The Executive
acknowledges that, during his employment with the Companies, he will become
familiar with trade secrets and other Confidential Information concerning the
Company and its Subsidiaries and his services will be of special, unique and
extraordinary value to the Companies. In addition, the Executive hereby agrees
that at any time during the Noncompetition Period (as defined below), he will
not directly or indirectly own, manage, control, participate in, consult with,
become employed by or otherwise render services to any business listed on
Exhibit B hereto in the Territory. During the Noncompetition Period, the Company
shall have the right to, in good faith, add other entities which are in
substantial competition

     


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    with the
Companies to the list of businesses on Exhibit B, subject to the consent of the
Executive which shall not be unreasonably withheld. Notwithstanding the
foregoing, if the Executive’s termination of employment occurs at the end of the
Employment Period due to the Companies giving written notice after the second
anniversary of the Effective Date pursuant to Section 5.01 of its intention not
to extend the Employment Period, this Section 9.01 will only apply if the
Companies elect and agree in writing to pay the Executive his Base Salary and
his annual target bonus in effect for the year during which his employment is
terminated for an additional one-year period following the termination of
employment, such amount to be paid, subject to Section 13.14 below, in twelve
(12) equal installments, the first two (2) of which shall be paid on the date
that is two (2) months following the date of the Executive’s “separation from
service” with the Companies (as defined in Section 5.10 above) and the next ten
(10) of which will be paid in ten (10) equal monthly installments commencing on
the date that is three (3) months following such date and continuing on each of
the next nine (9) monthly anniversaries of such date; provided, however,
that if such termination of employment is within two years after a Change in
Control, such amount shall instead be paid, subject to Section 13.14 below, 60
days following the Executive’s “separation from service” with the
Companies.  It shall not be considered a violation of this Section
9.01 for the Executive to be a passive owner of not more than 2% of the
outstanding stock of any class of any corporation which is publicly traded, so
long as the Executive has no active participation in the business of such
corporation.

     

    SECTION
9.02. Nonsolicitation. The
Executive hereby agrees that (a) during the Nonsolicitation Period (as defined
below), the Executive will not, directly or indirectly through another Person,
induce or attempt to induce any employee of the Company or its Subsidiaries to
leave the employ of the Company or its Subsidiaries, or in any way interfere
with the relationship between the Company or its Subsidiaries and any person
employed by them at any time during such Nonsolicitation Period, and (b) during
the Nonsolicitation Period, the Executive will not induce or attempt to induce
any customer, supplier, client or other business relation of the Company or its
Subsidiaries to cease doing business with the Company or its
Subsidiaries.

     

    SECTION
9.03. Definitions. It is agreed
that the “Territory,”
for purposes of this Article 9, shall mean:

     

    (i) The
entire United States and any other country where the Company or any of its
Subsidiaries, joint venturers, franchisees or affiliates has operated a retail
facility at which the Companies’ products have been sold at any time in the
one-year period ending on the last day of the Executive’s employment with the
Companies;

     

    (ii) In the
event that the preceding clause shall be determined by judicial action to define
too broad a territory to be enforceable, then “Territory” shall mean the entire
United States;

     


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    


     

    (iii) In the
event that the preceding clauses shall be determined by judicial action to
define too broad a territory to be enforceable, then “Territory” shall mean the
states in the United States where the Company or any of its Subsidiaries, joint
venturers, franchisees or affiliates has operated a retail facility at which the
Companies’ products have been sold at any time in the one-year period ending on
the last day of Executive’s employment with the Companies;

     

    (iv) In the
event that the preceding clauses shall be determined by judicial action to
define too broad a territory to be enforceable, then “Territory” shall mean the
area that includes all of the areas that are within a 50-mile radius of any
retail store location in the United States at which the Companies’ products have
been sold at any time in the one-year period ending on the last day of the
Executive’s employment with the Companies; and

     

    (v) In the
event that the preceding clauses shall be determined by judicial action to
define too broad a territory to be enforceable, then “Territory” shall mean the
entire state of North Carolina.

     

    It is
also agreed that “Noncompetition Period,” for
purposes hereof, shall mean:

     

    (i) the
Employment Period and a period ending one year after the Date of Termination;
and

     

    (ii) In the
event that the preceding clause shall be determined by judicial action to define
too long a period to be enforceable, “Noncompetition Period” shall mean the
Employment Period and a period ending six months after the Date of
Termination.

     

    It is
also agreed that “Nonsolicitation Period,” for
purposes hereof, shall mean:

     

    (i) the
Employment Period and a period ending two years after the Date of
Termination;

     

    (ii) In the
event that the preceding clause shall be determined by judicial action to define
too long a period to be enforceable, “Nonsolicitation Period” shall mean the
Employment Period and a period ending eighteen months after the Date of
Termination;

     

    (iii) In the
event that the preceding clauses shall be determined by judicial action to
define too long a period to be enforceable, “Nonsolicitation Period” shall mean
the Employment Period and a period ending one year after the Date of
Termination; and

     


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    


     

    (iv) In the
event that the preceding clauses shall be determined by judicial action to
define too long a period to be enforceable, “Nonsolicitation Period” shall mean
the Employment Period and a period ending six months after the Date of
Termination.

     

    ARTICLE
10

     

    EQUITABLE
RELIEF

     

    SECTION
10.01. Equitable Relief. The
Executive acknowledges that (a) the covenants contained herein are reasonable,
(b) the Executive’s services are unique, and (c) a breach or threatened breach
by him of any of his covenants and agreements with the Companies contained in
Sections 6.01, 7.01, 8.01 or Article 9 could cause irreparable harm to the
Companies for which they would have no adequate remedy at law. Accordingly, and
in addition to any remedies which the Companies may have at law, in the event of
an actual or threatened breach by the Executive of his covenants and agreements
contained in Sections 6.01, 7.01, 8.01 or Article 9, the Companies shall have
the absolute right to apply to any court of competent jurisdiction for such
injunctive or other equitable relief, without the necessity to post bond, as
such court may deem necessary or appropriate in the circumstances.

     

    ARTICLE
11

     

    EXECUTIVE
REPRESENTATION AND INDEMNIFICATION

     

    SECTION
11.01. Executive Representation. The
Executive hereby represents and warrants to the Companies that (a) the
execution, delivery and performance of this Agreement by the Executive does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which the
Executive is a party or by which he is bound, (b) the Executive is not a party
to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other Person, and (c) upon the execution and
delivery of this Agreement by the Companies, this Agreement will be the valid
and binding obligation of the Executive, enforceable in accordance with its
terms. Notwithstanding Section 11.02 below, in the event that any action is
brought against Executive involving any breach of any employment agreement,
noncompetition agreement or confidentiality agreement with any other Person, the
Executive shall bear his own costs incurred in defending such action, including
but not limited to court fees, arbitration costs, mediation costs, attorneys’
fees and disbursements.

     

    SECTION
11.02. General Indemnification. The
Companies, jointly and severally, agree that if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (each, a “Proceeding”), by reason of the
fact that he is or was a director, officer or employee of the Company or any of
its Subsidiaries or is or was serving at the

     


    
      
         


      

      
        14

        
          

        

      

      
         


      

    


    request
of the Company or any of its Subsidiaries as a director, officer, member,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive’s alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Companies to
the fullest extent permitted or authorized by applicable law and their bylaws,
against all cost, expense, liability and loss (including, without limitation,
advancement of attorneys’ and other fees and expenses) reasonably incurred or
suffered by the Executive in connection therewith. The Company agrees to use its
best efforts to maintain a directors’ and officers’ liability insurance policy
covering the Executive during the Employment Period and for at least four years
thereafter to the extent available on commercially reasonable
terms.

     

    ARTICLE
12

     

    CERTAIN
ADDITIONAL PAYMENTS

     

    SECTION
12.01. Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (including, without
limitation, the acceleration of any payment, award, distribution or benefit) by
the Company or its Subsidiaries to or for the benefit of the Executive (whether
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Article 12) (a “Payment”) would be subject to
the excise tax imposed by Section 4999 of the Code or any corresponding
provisions of state or local tax law, or any interest or penalties are incurred
by the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an
amount such that after payment by the Executive of all taxes (including any
Excise Tax, income tax or employment tax) imposed upon the Gross-Up Payment and
any interest or penalties imposed with respect to such taxes, the Executive
retains from the Gross-Up Payment an amount equal to the Excise Tax imposed upon
the Payments. The payment of a Gross-Up Payment under this Section 12.01 shall
not be conditioned upon the Executive’s termination of employment.
Notwithstanding the foregoing provisions of this Section 12.01, if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
portion of the Payments that would be treated as “parachute payments” under
Section 280G of the Code does not exceed the lesser of
110%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              of
the Safe Harbor Amount (as defined in the following sentence) or $200,000, then
no Gross-Up Payment shall be made to the Executive and the amounts payable under
this Agreement shall be reduced so that the Payments, in the aggregate, are
reduced to the Safe Harbor Amount.  The “Safe Harbor Amount” is the
greatest amount of payments in the nature of compensation that are contingent on
a Change in Control for purposes of Section 280G of the Code that could be paid
to the Executive without giving rise to any Excise Tax. The reduction of the
amounts payable hereunder, if applicable, shall be made

     


    
      
         


      

      
        15

        
          

        

      

      
         


      

    


     by
first reducing the cash payments under Article 5 hereof. For purposes of
reducing the payments to the Safe Harbor Amount, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amounts payable under this Agreement would not result in a reduction of the
Payments to the Safe Harbor Amount, no amounts payable under this Agreement
shall be reduced pursuant to this Section 12.01.

     

    SECTION
12.02. Subject
to the provisions of Section 12.03, all determinations required to be made under
this Article 12, including the determination of whether a Gross-Up Payment is
required and of the amount of any such Gross-up Payment, shall be made by the
Company’s independent auditors or such other accounting firm agreed by the
parties hereto (the “Accounting
Firm”), which shall provide detailed supporting calculations to the
Companies within 15 business days after the receipt of notice from the Companies
that the Executive has received a Payment, or such earlier time as is requested
by the Companies, provided that any determination that an Excise Tax is payable
by the Executive shall be made on the basis of substantial authority. The
Companies will promptly provide copies of such supporting calculations to the
Executive on which the Executive may rely. The initial Gross-Up Payment, if any,
as determined pursuant to this Section 12.02, shall be paid to the Executive (or
for the benefit of the Executive to the extent of the Companies’ withholding
obligation with respect to applicable taxes) no later than one day prior to the
due date for the payment of any Excise Tax. If the Accounting Firm determines
that no Excise Tax is payable by the Executive, it shall furnish the Companies
with a written opinion that substantial authority exists for the Executive not
to report any Excise Tax on his Federal income tax return and, as a result, the
Companies are not required to withhold Excise Tax from payments to the
Executive. The Companies will promptly provide a copy of any such opinion to the
Executive on which the Executive may rely. Any determination by the Accounting
Firm meeting the requirements of this Section 12.02 shall be binding upon the
Companies and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Companies should have been made (“Underpayment”), consistent
with the calculations required to be made hereunder. In the event that the
Companies exhaust their remedies pursuant to Section 12.03 and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred, and any such
Underpayment shall be promptly paid by the Companies to or for the benefit of
the Executive. The fees and disbursements of the Accounting Firm shall be paid
by the Companies.

     

    SECTION
12.03. The
Executive shall notify the Companies in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Companies
of a Gross-Up Payment. Such notification shall be given as soon as practicable
but not later than ten business days after the Executive receives written notice
of such claim and shall apprise the Companies of the nature of such
claim

     


    
      
         


      

      
        16

        
          

        

      

      
         


      

    


    and the
date on which such Claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
which it gives such notice to the Companies (or such shorter period ending on
the date that any payment of taxes with respect to such claim is due). If the
Companies notify the Executive in writing prior to the expiration of such period
that they desire to contest such claim, the Executive shall:

     

    (i) give the
Companies any information reasonably requested by the Companies relating to such
claim,

     

    (ii) take such
action in connection with contesting such claim as the Companies shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Companies,

     

    (iii) cooperate
with the Companies in good faith in order effectively to contest such claim,
and

     

    (iv) permit
the Companies to participate in any proceedings relating to such
claim;

     

    provided,
however, that the Companies shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax, income tax or employment tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 12.03, the Companies shall control all proceedings taken in
connection with such contest and, at their sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at their sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Companies shall
determine; provided, however, that if the Companies direct the Executive to pay
such claim and sue for a refund, the Companies shall advance the amount of such
payment to the Executive on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax, income tax
or employment tax, including interest or penalties with respect thereto, imposed
with respect to such advance (except that if such a loan would not be permitted
under applicable law, the Companies may not direct the Executive to pay the
claim and sue for a refund); and further provided that any extension of the
statute of limitations relating to the payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Companies’ control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the

     


    
      
         


      

      
        17

        
          

        

      

      
         


      

    


    Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.

     

    SECTION
12.04. If, after
the receipt by the Executive of an amount advanced by the Companies pursuant to
Section 12.03, the Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the compliance by the Companies
with the requirements of Section 12.03) promptly pay to the Companies the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Companies pursuant to Section 12.03, a determination is made
that the Executive shall not be entitled to any refund with respect to such
claim and the Companies do not notify the Executive in writing of their intent
to contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.

     

    SECTION
12.05. Anything
in this Agreement to the contrary notwithstanding, in no event shall any payment
by the Company pursuant to this Article 12 be made later than the end of the
Executive’s taxable year next following the Executive’s taxable year in which he
remits the related taxes.

     

    ARTICLE
13

     

    MISCELLANEOUS

     

    SECTION
13.01. Binding Arbitration. The
parties agree that, except as provided in Articles 9 and 10 above, any disputes
under this Agreement shall be settled exclusively by arbitration conducted in
Winston-Salem, North Carolina. Except to the extent inconsistent with this
Agreement, such arbitration shall be conducted in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association then in effect at the time of the arbitration and otherwise in
accordance with principles which would be applied by a court of law or equity.
The arbitrator shall be acceptable to both the Companies and the Executive. If
the parties cannot agree on an acceptable arbitrator, the dispute shall be
decided by a panel of three arbitrators, one appointed by each of the parties
and the third appointed by the other two arbitrators or if the two arbitrators
do not agree, appointed by the American Arbitration Association. The costs of
arbitration incurred by the Executive (or his beneficiaries) will be borne by
the Companies (including, without limitation, reasonable attorneys’ fees and
other reasonable charges of counsel) (i) if the arbitration occurs prior to a
Change in Control, if the Executive prevails on a majority of the material
issues in the dispute, and (ii) if the arbitration occurs after a Change in
Control, if the Executive prevails on at least one material issue in the
dispute. Judgment upon the final award rendered by such arbitrator(s) may be
entered in any court having jurisdiction thereof. Following the final
determination of the dispute in which, based on the outcome of the dispute, the
Executive is, in accordance with this Section 13.01, entitled to have his
costs

     


    
      
         


      

      
        18

        
          

        

      

      
         


      

    


    borne by
the Companies, the Companies shall pay all such reasonable costs within ten (10)
days following written demand therefor (supported by documentation of such
costs) by the Executive, and the Executive shall make such written demand within
sixty (60) days following the final determination of the dispute; provided, however,
that such payment shall be made no later than on or prior to the end of the
calendar year following the calendar year in which the costs are
incurred.  Notwithstanding the foregoing, in the event a final
determination of the dispute has not been made by December 20 of the year
following the calendar year in which the costs are incurred, the Companies
shall, within ten (10) days after such December 20, reimburse such
reasonable costs (supported by documentation of such costs) incurred in the
prior taxable year; provided, however,
that the Executive shall return such amounts to the Companies within ten (10)
business days following the final determination if (x) in the case of an
arbitration prior to a Change in Control, the Executive does not prevail on a
majority of the material issues in the dispute, or (y) in the case of an
arbitration after a Change in Control, the Executive does not prevail on at
least one material issue in the dispute.  The amount of any costs
eligible for payment under this Section 13.01 during a calendar year will
not affect the amount of any costs eligible for payment under this
Section 13.01 in any other taxable year.

     

    SECTION
13.02. Consent to Amendments; No
Waivers. The provisions of this Agreement may be amended or waived only
by a written agreement executed and delivered by the Companies and the
Executive. No other course of dealing between the parties to this Agreement or
any delay in exercising any rights hereunder will operate as a waiver of any
rights of any such parties.

     

    SECTION
13.03. Successors and Assigns. All
covenants and agreements contained in this Agreement by or on behalf of any of
the parties hereto will bind and inure to the benefit of the respective
successors, assigns, heirs, executors and estates of the parties hereto whether
so expressed or not, provided that the Executive may not assign his rights or
delegate his obligations under this Agreement without the written consent of the
Companies (other than to his estate or heirs) and the Company may assign this
Agreement only to a successor to all or substantially all of the assets of the
Company.

     

    SECTION
13.04. Severability. Whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.

     

    SECTION
13.05. Counterparts. This Agreement
may be executed simultaneously in two or more counterparts, any one of which
need not contain the signatures of more than one party, but all of which
counterparts taken together will constitute one and the same
agreement.

     


    
      
         


      

      
        19

        
          

        

      

      
         


      

    


    


     

    SECTION
13.06. Descriptive Headings. The
descriptive headings of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.

     

    SECTION
13.07. Notices. All notices, demands
or other communications to be given or delivered under or by reason of the
provisions of this Agreement will be in writing and will be deemed to have been
given when delivered personally to the recipient, two business days after the
date when sent to the recipient by reputable express courier service (charges
prepaid) or four business days after the date when mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid. Such
notices, demands and other communications will be sent to the Executive and to
the Companies at the addresses set forth below.

     

    


     

    
      	
              If
      to the Executive:

               

            	
              To
      the last address delivered to the Companies 

              by
      the Executive in the manner set forth herein.

               

            
	 
      	 
      
	
              If
      to the Companies:

               

            	
              Krispy
      Kreme Doughnuts, Inc.

              Krispy
      Kreme Doughnut Corporation

              Suite
      500

              370
      Knollwood Street

              Winston-Salem,
      NC 27103

               

              Attn:
      Senior Vice President-Human
Resources

            


    

    


     

    or to
such other address or to the attention of such other person as the recipient
party has specified by prior written notice to the sending party.

     

    SECTION
13.08. Withholding. 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 pursuant to any
applicable law or regulation.

     

    SECTION
13.09. No Third-Party Beneficiary.
This Agreement will not confer any rights or remedies upon any person other than
the Companies, the Executive and their respective heirs, executors, successors
and assigns.

     

    SECTION
13.10. Entire Agreement. This
Agreement (including any other documents referred to herein) constitutes the
entire agreement among the parties and supersedes any prior understandings,
agreements or representations by or among the parties, written or oral, that may
have related in any way to the subject matter hereof.

     


    
      
         


      

      
        20

        
          

        

      

      
         


      

    


    


     

    SECTION
13.11. Construction. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rule of strict construction will be
applied against any party. Any reference to any federal, state, local or foreign
statute or law will be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.

     

    SECTION
13.12. Survival. Sections 6.01,
7.01, 8.01 and Articles 5, 9, 11, 12 and 13 will survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period, and the Agreement shall otherwise remain in full force to the
extent necessary to enforce any rights and obligations arising hereunder during
the Employment Period.

     

    SECTION
13.13. GOVERNING LAW. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL
BE GOVERNED BY THE INTERNAL LAW OF NORTH CAROLINA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAWS.

     

    SECTION
13.14. Section 409A. It is intended
that this Agreement will comply with Section 409A of 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. If an amendment of the Agreement is necessary in order for it
to comply with Section 409A, the parties hereto will negotiate in good faith to
amend the Agreement in a manner that preserves the original intent of the
parties to the extent reasonably possible. Notwithstanding any provision to the
contrary in this Agreement, if the Executive is deemed on the date of his
“separation from service” (within the meaning of Treas. Reg. Section
1.409A-1(h)) to be a “specified employee” (within the meaning of Treas. Reg.
Section 1.409A-1(i)), then with regard to any payment that is required to be
delayed pursuant to Section 409A(a)(2)(B) of the Code, the portion, if any, of
such payment so required to be delayed shall not be made prior to the earlier of
(i) the expiration of the six (6)-month period measured from the date of his
“separation from service”, or (ii) the date of his death (the “Delay
Period”).  Upon the expiration of the Delay Period, all payments
delayed pursuant to this Section shall be paid to the Executive in a lump
sum.  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.

     

    SECTION
13.15. Representations of the
Companies. The Companies represent and warrant that (i) the execution,
delivery and performance of this Agreement by the Companies has been fully and
validly authorized by all necessary corporate action, (ii) the officer(s)
signing this Agreement on behalf of the Companies is duly authorized to do so,
(iii) the execution, delivery and performance of this Agreement does not violate
any applicable law, regulation, order, judgment or decree or any agreement, plan
or corporate governance document to which the Companies are a party or by which
they are bound, and (iv) upon execution and delivery of this Agreement by the
parties hereto, it

     


    
      
         


      

      
        21

        
          

        

      

      
         


      

    


    will be a
valid and binding obligation of the Companies enforceable against the Companies
and their successors and assigns in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors’ rights
generally.

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first above written.

     

    
      	
              KRISPY
      KREME DOUGHNUTS, INC.

            
	 
	
              By: 
      /s/ Kenneth J.
      Hudson

            
	       
      Kenneth J. Hudson
	
                     
      Senior Vice President Human Resources

                      and
      Organizational Development

            
	 
      
	
              KRISPY
      KREME DOUGHNUT CORPORATION

            
	 
	
              By: 
      /s/ Kenneth J.
      Hudson

            
	
                     
      Kenneth J. Hudson

                      Senior Vice
      President Human Resources

                      and
      Organizational Development

            
	 
      
	
              EXECUTIVE

              
                 

                /s/ James H.
      Morgan

              

              James H.
Morgan

            


    

    


     

     

     

     

    22