EMPLOYMENT AGREEMENT 

     EMPLOYMENT AGREEMENT (“Agreement”) dated as of September 14,
2009 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 Cynthia A. Bay (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 insubordination to the Companies’ most senior executive officer
or 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. 

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

2 




     “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 at least the second most senior officer in charge of Company Store
operations 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, (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
her failure at any time to report directly to the most senior executive officer
of the applicable company described in such clause (ii), (iv) 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, (v) any material breach by the Companies of this Agreement, or
(vi) the term of the Employment Period ending as a result of the Companies
giving the Executive notice of nonextension of the 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); provided, however, that for any of the foregoing to constitute
Good Reason, the Executive must provide written notification of her 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. 

3 




     “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. 

ARTICLE 2 

EMPLOYMENT 

     SECTION
2.01. Employment. The Executive is a current
employee of KKDC and a current officer of the Companies. However, under this
Agreement, and beginning the Effective Date, both 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 new period
beginning September 14, 2009 (the “Effective
Date”) and ending as provided in Section 5.01
(the “Employment Period”). 

4 




ARTICLE 3 

POSITION AND DUTIES 

     SECTION
3.01. Position
and Duties. During the Employment Period, the
Executive shall serve as Senior Vice President – Company Store Operations of the
Company reporting directly to the most senior officer in charge of Company Store
operations. During the Employment Period, the Executive also shall serve as
Senior Vice President – Company Store Operations of KKDC. 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 or
the most senior officer in charge of Company Store operations; 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 her 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 her duties hereunder or result
in any conflict of interest with the Companies.


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 $230,000 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 her 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. 

     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 50% 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. 

5 




     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. 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 her in the
course of performing her 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.

ARTICLE 5 

TERM AND TERMINATION 

     SECTION
5.01. Term. The Employment Period will
terminate on September 14, 2012, 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
September 14, 2012 until either the Companies, on the one hand, or the
Executive, on the other hand, at least 180 days prior to the expiration 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 her estate or legal representative) shall be
entitled solely to the following: (i) Base Salary through the Date of
Termination; and (ii) 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 her 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 an irrevocable (except to the extent
required by law, and to the extent required by law to be revocable, has not
revoked) general release of claims, in the form attached hereto as Exhibit A,
the Executive shall be entitled solely to the following: (i) Base Salary through
the Date of Termination; (ii) an amount equal to one times the Base Salary,
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, payable as soon as practicable following such termination of
employment; and (iv) 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 payable in equal monthly installments for a period of 12 months
commencing on the first month anniversary of the Date of Termination, except, to
the extent required by Section 409A of the Code, amounts otherwise payable under
clause (ii) within six months after the Executive’s termination of employment
shall be deferred to and paid on the day following the six month anniversary of
such termination of employment. In addition, promptly following any such
termination, the Executive shall be reimbursed for all Reimbursable Expenses
incurred by the Executive prior to such termination.

6 




     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 her employment other than
for Good Reason, the Executive shall be entitled to receive solely Base Salary
through the Date of Termination 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 her covered dependents shall continue to receive medical
insurance coverage benefits from the Companies, with the same contribution
toward such coverage from the Executive or her estate, for a period equal to the
lesser of (x) eighteen 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 her death, on the date of her death, and (c) 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.

7 




     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.

     SECTION
5.09. Termination
for Good Reason or Without Cause Following a Change in Control. If the Employment Period shall be terminated within two years
after a Change in Control (a) by the Executive for Good Reason, or (b) by the
Companies not for Cause, then Executive’s compensation and benefits upon
termination shall be governed by this Section 5.09 instead of the provisions of
Section 5.03 above, and, provided the Executive has executed an irrevocable
(except to the extent required by law, and to the extent required by law to be
revocable, has not revoked) general release of claims, in the form attached
hereto as Exhibit A, the Executive shall be entitled solely to the following:
(i) Base Salary through the Date of Termination; (ii) an amount equal to 1.25
times the sum of her Base Salary and her target annual bonus for the year of
termination, 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; and (iv) medical benefits as provided in Section
5.05. 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. In addition, promptly following
any such termination, the Executive shall be reimbursed for all Reimbursable
Expenses incurred by the Executive prior to such termination. The amounts due
under clauses (i), (ii) and (iii) of this Section 5.09 shall be paid in a lump
sum upon termination of employment. 

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 her, except
to the extent she 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 her 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. 

8 




ARTICLE 7 

INTELLECTUAL PROPERTY 

     SECTION
7.01. Ownership
of Intellectual Property. In the event that
the Executive as part of her 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 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 her 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 her knowledge all such materials have been
delivered to the Companies or destroyed. 

9 




ARTICLE 9 

NON-COMPETITION AND NONSOLICITATION


     SECTION
9.01. Noncompetition. The Executive
acknowledges that, during her employment with the Companies, she will become
familiar with trade secrets and other Confidential Information concerning the
Company and its Subsidiaries and her 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), she 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 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 fifth 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 her Base Salary and her annual target bonus in effect for the year
during which her employment is terminated for an additional one-year period
following the termination of employment, such amount to be payable in monthly
installments over the additional one-year period, except that, to the extent
required by Section 409A of the Code, amounts otherwise payable under this
sentence within six months after the Executive’s termination of employment shall
be deferred to and paid on the day following the six month anniversary of such
termination of employment. 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 Company’s 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;

10 




          (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;

          (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 Company’s 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 Company’s 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; 

11 




          (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 

          (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 her of any of her 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 her 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 she 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 her
own costs incurred in defending such action, including but not limited to court
fees, arbitration costs, mediation costs, attorneys’ fees and disbursements.


12 




     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 she is or was a director, officer or employee of the Company or any of its
Subsidiaries or is or was serving at the 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 Companies agree to use their 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 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.

13 




     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
her 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. 

14 




     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 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 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.

15 




     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.

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 her 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.

     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 her rights or delegate her
obligations under this Agreement without the written consent of the Companies
(other than to her 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.


16 




     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. 

     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. 

17 




     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. 

     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. 

18





     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. 

     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 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. 

[remainder of page left intentionally
blank] 

19 




     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/ James H.
      Morgan  	 	 
			     James H.
      Morgan  
	 		     Chief
      Executive Officer  
		 
		 
		KRISPY
      KREME DOUGHNUT CORPORATION  
		 
		 
		By:  	 /s/ Douglas R. Muir  	 	 
		 	     Douglas R.
      Muir  
			     Chief
      Financial Officer  
		 
		  
		EXECUTIVE  
		 
		 	 /s/ Cynthia A. Bay 
      	 
			     Cynthia A.
      Bay  





20 




Exhibit A

MUTUAL RELEASE 

This mutual release (this “Release”) is
entered into as of this ____ day of ______, ____ (the “Release Date”) 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 Cynthia A. Bay (the “Executive”).

1. Reference is hereby made to the
employment agreement dated as of September 14, 2009 (the “Employment Agreement”) by the parties hereto setting forth the
agreements among the parties regarding the termination of the employment
relationship between the Executive and the Companies. Capitalized terms used but
not defined herein have the meanings ascribed to them in the Employment
Agreement.

2. The Executive, for herself, her
spouse, heirs, executors, administrators, successors and assigns, hereby
releases and discharges the Companies and its respective direct and indirect
parents and subsidiaries, and other affiliated companies, and each of their
respective past and present officers, directors, agents and employees, from any
and all actions, causes of action, claims, demands, grievances and complaints,
known and unknown, which the Executive or her spouse, heirs, executors,
administrators, successors or assigns ever had or may have at any time through
the Release Date. The Executive acknowledges and agrees that this Release is
intended to and does cover, but is not limited to, (i) any claim of employment
discrimination of any kind whether based on a federal, state or local statute or
court decision, including the Age Discrimination in Employment Act with
appropriate notice and rescission periods observed; (ii) any claim, whether
statutory, common law or otherwise, arising out of the terms or conditions of
the Executive’s employment at the Companies and/or the Executive’s separation
from the Companies; enumeration of specific rights, claims and causes of action
being released shall not be construed to limit the general scope of this
Release. It is the intent of the parties that by this Release the Executive is
giving up all rights, claims and causes of action occurring prior to the Release
Date, whether or not any damage or injury therefrom has yet occurred. The
Executive accepts the risk of loss with respect to both undiscovered claims and
with respect to claims for any harm hereafter suffered arising out of conduct,
statements, performance or decisions occurring before the Release
Date. 

21 




3. The Companies hereby release and
discharge the Executive, her spouse, heirs, executors, administrators,
successors and assigns, from any and all actions, causes of actions, claims,
demands, grievances and complaints, known and unknown, which the Companies ever
had or may have at any time through the Release Date. The Companies acknowledge
and agree that this Release is intended to and does cover, but is not limited
to, (i) any claim, whether statutory, common law or otherwise, arising out of
the terms or conditions of the Executive’s employment at the Companies and/or
the Executive’s separation from the Companies, and (ii) any claim for attorneys’
fees, costs, disbursements or other like expenses. The enumeration of specific
rights, claims and causes of action being
released shall not be construed to limit the general scope of this Release. It
is the intent of the parties that by this Release the Companies are giving up
all of their respective rights, claims and causes of action occurring prior to
the Release Date, whether or not any damage or injury therefrom has yet
occurred. The Companies accept the risk of loss with respect to both
undiscovered claims and with respect to claims for any harm hereafter suffered
arising out of conduct, statements, performance or decisions occurring before
the Release Date.

4. This Release shall in no event (i)
apply to any claim by either the Executive or the Companies arising from any breach by the other party of its obligations
under the Employment Agreement occurring on or after the Release Date, (ii)
waive the Executive’s claim with respect to compensation or benefits earned or
accrued prior to the Release Date to the extent such claim survives termination
of the Executive’s employment under the terms of the Employment Agreement, (iii)
waive the Executive’s right to indemnification under the charters and by-laws of
the Companies, or (iv) waive the Executive’s rights as a shareholder.

5. This Mutual Release shall be
effective as of the Release Date and only if executed by both
parties.

6. All questions concerning the
construction, validity and interpretation of this Mutual Release will be governed by the internal law of North Carolina,
without regard to principles of conflict of laws.

IN WITNESS WHEREOF, each party hereto,
intending to be legally bound, has executed this Mutual Release on the date
indicated below.

		KRISPY
      KREME DOUGHNUTS, INC.  
			  
			  
		By: 	  	 	 
			  
			  
	 	KRISPY
      KREME DOUGHNUT CORPORATION 
			 
			 
		By: 	  	 
			  
			  
		EXECUTIVE  
			  
			  	 
			     Cynthia A.
      Bay  



22 




Exhibit B 

The following businesses, together with
their Subsidiaries, are the businesses for purposes of Section 9.01
hereof:

Dunkin Brands Inc. 
Tim Hortons,
Inc. 
George Weston Limited 
Interstate Bakeries Corporation 
Flowers
Foods, Inc.
McKee Foods Inc.

Starbucks

23