Exhibit 10.1


     

    Exhibit
      10.1

    

       

      UNITED
        STATES DISTRICT COURT

       

      MIDDLE
        DISTRICT OF NORTH CAROLINA

       

      


      
        	
                In
                  re KRISPY
                  KREME DOUGHNUTS, INC. SECURITIES LITIGATION

                 

                 

                This
                  Document Relates To:

                 

                ALL
                  ACTIONS.

                 

                WILLIAM
                  DOUGLAS WRIGHT and JUDY WOODALL,

                 

                Plaintiffs,

                 

                vs.

                 

                KRISPY
                  KREME DOUGHNUTS, INC, et al.,

                 

                Defendants.

                 

                 

              	
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                No.
                  1:04-CV-00416

                 

                No.
                  1:04-CV-00832

              


      

      


      


       

      STIPULATION
        AND AGREEMENT OF CLASS AND DERIVATIVE SETTLEMENT

       

      


      


      


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      



      This
        Stipulation and Agreement of Class and Derivative Settlement (the
“Stipulation”), dated as of October 30, 2006, is made and entered into pursuant
        to Rules 23 and 23.1 of the Federal Rules of Civil Procedure and contains
        the
        terms of a settlement (the “Settlement”) (a) between the Class Settling
        Defendants and the Class Lead Plaintiffs, on behalf of themselves and Members
        of
        the Settlement Class in In
        re
        Krispy Kreme Doughnuts, Inc. Securities Litigation,
        No.
        1:04-CV-00416, pending in the United States District Court, for the Middle
        District of North Carolina (the “Court”); and (b) among the Derivative Settling
        Defendants and the Derivative Lead Plaintiffs and Krispy Kreme, acting with
        approval of its Special Committee, in connection with Wright
        v. Krispy Kreme Doughnuts, Inc. Derivative
        Litigation,
        Case
        No. 04CV00832, also pending in the Court.

       

      The
        Stipulation is intended by the Class Lead Plaintiffs and Derivative Lead
        Plaintiffs, on the one hand, and the Class Settling Defendants and Derivative
        Settling Defendants, on the other hand, to fully, finally and forever resolve,
        discharge and settle the Released Class Claims against the Class Settling
        Defendants and Released Derivative Claims against the Derivative Settling
        Defendants, upon and subject to the terms and conditions hereof and subject
        to
        the approval of the Court.

       

      	I.  	
              THE
                CLASS ACTION AND THE DERIVATIVE
                ACTION

            


       

      On
        and
        after May 12, 2004, sixteen class actions were filed in the Court alleging
        violations of the federal securities laws on behalf of purchasers of Krispy
        Kreme securities during a defined period of time. On November 8, 2004, all
        of
        these class actions were consolidated into the Class Action.

       

      On
        October
        6, 2004, the Court appointed the Class Lead Plaintiffs and approved their
        selection of Class Lead Counsel and McDaniel & Anderson LLP as liaison
        counsel.

       

      The
        operative complaint in the Class Action is the Second Amended Class Action
        Complaint for Violation of the Federal Securities Laws filed May 23,
        2005.

       


      
        
          
          

        

        
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      On
        May 27,
        2004 and on June 21, 2004, pursuant to N.C. Gen. Stat. §55-7-42, Derivative
        Plaintiffs Woodall and Wright made a demand on the Board of Directors of
        Krispy
        Kreme to commence an action against certain current and former directors
        and
        officers of Krispy Kreme for breaching their fiduciary duties in connection
        with
        the approval of and accounting for certain transactions between Krispy Kreme
        and
        certain of its franchisees, including former Krispy Kreme directors (“Wright and
        Woodall Demand”). On July 30, 2004, Derivative Plaintiff Andrews made a similar
        demand on the Board of Directors.

       

      On
        September 1, 2004, Krispy Kreme responded to the Wright and Woodall Demand
        by
        authorizing the “creation of a framework for the independent investigation of
        the matters raised” in the Wright and Woodall Demand.

       

      On
        and
        after September 14, 2004, three derivative actions, including an action by
        Derivative Plaintiffs Wright and Woodall, were filed in the Court alleging
        breach of fiduciary duty to Krispy Kreme shareholders, actual and/or
        constructive fraud, negligence and/or gross negligence, and unfair and deceptive
        trade practices by the Derivative Defendants.

       

      On
        October
        27, 2004, Krispy Kreme filed a motion to stay the Wright and Woodall Demand
        pursuant to North Carolina Business Corporation Act §55-7-43. According to the
        papers filed in support of the motion, on October 4, 2004, the Board of
        Directors of Krispy Kreme had created a Special Committee consisting of
        independent outside and non-management directors to investigate the matters
        raised in the Wright and Woodall Demand.

       

      On
        July
        12, 2005, all of the three derivative actions were consolidated into the
        Derivative Action.

       

      On
        October
        28, 2005, the Court appointed Derivative Lead Plaintiffs and their choice
        of
        counsel.

       


      
        
          
          

        

        
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      	II.  	
              SETTLING
                DEFENDANTS’ DENIALS OF WRONGDOING AND
                LIABILITY

            


       

      The
        Settling Defendants have denied and continue to deny each and all of the
        claims
        and contentions alleged by the Class Lead Plaintiffs and the Derivative Lead
        Plaintiffs in the Class Action and Derivative Action. The Settling Defendants
        expressly have denied and continue to deny all charges of wrongdoing or
        liability against them or any of them arising out of any of the conduct,
        statements, acts or omissions alleged, or that could have been alleged, in
        the
        Actions. The Settling Defendants also have denied and continue to deny,
inter
        alia,
        the
        allegations that the Class Lead Plaintiffs, Settlement Class Members or Krispy
        Kreme have suffered damage, that the prices of Krispy Kreme securities were
        artificially inflated by reason of alleged misrepresentations, non-disclosures
        or otherwise, or that the Class Lead Plaintiffs, the Settlement Class Members
        or
        Krispy Kreme were harmed by any of the conduct alleged in the
        Actions.

       

      Nonetheless,
        the Settling Defendants have concluded that further conduct of the Actions
        would
        be protracted, expensive, and distracting and that it is desirable that the
        Actions be fully and finally settled in the manner and upon the terms and
        conditions set forth in this Stipulation. The Settling Defendants also have
        taken into account the uncertainty and risks inherent in any litigation,
        especially in complex cases like the Actions. The Settling Defendants have,
        therefore, determined that it is desirable that the Actions be settled in
        the
        manner and upon the terms and conditions set forth in this
        Stipulation.

       

      Neither
        this Stipulation nor any document referred to herein nor any action taken
        to
        carry out this Stipulation is, may be construed as or may be used as an
        admission by or against the Settling Defendants, or any of them, of any fault,
        wrongdoing or liability whatsoever. Entering into or carrying out this
        Stipulation (or the Exhibits hereto) and any negotiations or proceedings
        related
        thereto shall not in any event be construed as, or be deemed to be evidence
        of,
        an admission or 

       


      
        
          
          

        

        
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      concession
        with regard to plaintiffs’ claims or contrary to the Settling Defendants’
denials and defenses, and shall not be offered by any of the Settling Parties
        or
        Settlement Class Members or received in evidence in any action or proceeding
        in
        any court, administrative agency or other tribunal for any purpose whatsoever
        other than to enforce the provisions of this Stipulation (and the Exhibits
        hereto) or the provisions of any related agreement or release, or in any
        subsequent action against or by the Settling Defendants to support a defense
        of
res
        judicata,
        collateral estoppel, release or other theory of claim or issue preclusion
        or
        similar defense.

       

      	III.  	
              CLAIMS
                OF THE CLASS LEAD PLAINTIFFS AND THE DERIVATIVE LEAD PLAINTIFFS AND
                BENEFITS OF SETTLEMENT

            


       

      The
        Class
        Lead Plaintiffs and the Derivative Lead Plaintiffs believe that the claims
        asserted in the Actions have merit. However, counsel for the Class Lead
        Plaintiffs and the Derivative Lead Plaintiffs recognize and acknowledge the
        expense and length of continued proceedings necessary to prosecute the Actions
        against the Defendants through trial and appeal. Counsel for the Class Lead
        Plaintiffs and the Derivative Lead Plaintiffs also have taken into account
        the
        uncertain outcome and the risk of any litigation, especially in complex actions
        such as the Actions, as well as the difficulties and delays inherent in such
        litigation. Counsel for the Class Lead Plaintiffs and the Derivative Lead
        Plaintiffs also are mindful of the inherent problems of proof of, and possible
        defenses to, the violations asserted in the Actions. Counsel for the Class
        Lead
        Plaintiffs believe that the Settlement set forth in this Stipulation confers
        substantial benefits upon and is in the best interests of the Settlement
        Class.
        Counsel for the Derivative Lead Plaintiffs and the Special Committee believe
        that the Settlement set forth in this Stipulation confers substantial benefits
        upon and is in the best interest of Krispy Kreme.

       


      
        
          
          

        

        
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      	IV.  	
              TERMS
                OF STIPULATION AND AGREEMENT OF
                SETTLEMENT

            


       

      NOW,
        THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Class Lead
        Plaintiffs (for themselves and the Settlement Class Members), the Derivative
        Lead Plaintiffs and Krispy Kreme acting through the Special Committee, and
        the
        Settling Defendants, by and through their respective counsel or attorneys
        of
        record, that, subject to the approval of the Court, the Actions, and the
        Released Claims, shall be finally and fully compromised, settled and released,
        and the Actions shall be dismissed with prejudice, upon and subject to the
        terms
        and conditions of the Stipulation, as follows.

       

      	1.  	
              Definitions

            


       

      As
        used in
        the Stipulation the following terms have the meanings specified
        below:

       

      1.1  “Actions”
        means collectively the Class Action and the Derivative Action.

       

      1.2  “AISLIC”
        means American International Specialty Lines Insurance Company.

       

      1.3  “Authorized
        Claimant” means any Settlement Class Member whose claim for recovery has been
        allowed pursuant to the terms of the Stipulation.

       

      1.4  “Bar
        Order” means the language in the Judgments that shall permanently and forever
        bar claims as provided for in 15 U.S.C. §78u-4(f)(7) and under state and federal
        law and as set forth in ¶¶4.7 and 4.8.

       

      1.5  “Barred
        Persons” means and includes the Settling Parties, Livengood, any individual who
        is, may be, or claims to be an insured under any of the Excess Insurance
        Policies or who otherwise claims to have an interest in any of the Excess
        Insurance Policies, including any interest alleged to arise by reason of
        a claim
        against an insured under such policies.

       

      1.6  “Claimant”
        means any Class Member who submits a Proof of Claim and Release in such form
        and
        manner, and within such time, as the Court shall prescribe.

       


      
        
          
          

        

        
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      1.7  “Claims
        Administrator” means the firm of Gilardi & Co. LLC, P.O. Box 5100, Larkspur,
        CA 94977-5100, Telephone: 1-800-654-5763, www.gilardi.com.

       

      1.8  “Class
        Action” means In
        re
        Krispy Kreme Doughnuts, Inc. Securities Litigation,
        Case No.
        1:04-CV-00416, pending in the United States District Court for the Middle
        District of North Carolina, which consolidated sixteen class actions by order
        dated November 8, 2004: .
        In re
        Krispy Kreme Doughnuts, Inc. Securities Litigation (originally
        Eastside
        Investors v. Krispy Kreme Doughnuts, Inc.),
        Case
        No. 1:04-CV-00416; Alan
        Platek v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00427; Jones
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00458; Pompano
        Beach Police & Firefighters Retirement System v. Krispy Kreme Doughnuts,
        Inc.,
        Case No.
        1:04-CV-00476; Rickard
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00465; Rogers
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00493; Melloment
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00510; Trowbridge
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00515; Wade
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00516; Tam
        v.
        Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00519; Felgoise
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00526; Lindenbaum
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00527; Millwood
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00528; Orlov
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00553; Steele
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:04-CV-00569; and Nichols
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        1:05-CV-00042.

       

      1.9  “Class
        Defendants” means Krispy Kreme, the Class Individual Defendants and
        PwC.

       

      1.10  “Class
        Escrow Agent” means Lerach Coughlin Stoia Geller Rudman & Robbins LLP, or
        its successor in interest.

       


      
        
          
          

        

        
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      1.11  “Class
        Individual Defendants” means Scott A. Livengood (“Livengood”), John Tate
        (“Tate”), Randy Casstevens (“Casstevens”), Michael Phalen (“Phalen”), and John
        N. McAleer (“McAleer”).

       

      1.12  “Class
        Lead Counsel” means Joy Ann Bull, Lerach Coughlin Stoia Geller Rudman &
Robbins LLP, 401 B Street, Suite 1700, San Diego, CA 92101 and Patrick J.
        Coughlin, Shawn A. Williams, Lerach Coughlin Stoia Geller Rudman & Robbins
        LLP, 100 Pine Street, Suite 2600, San Francisco, CA 94111.

       

      1.13  “Class
        Lead Plaintiffs” means Pompano Beach Police & Fire Fighters Retirement
        System, Alaska Electrical Pension Fund, City of St. Clair Shores Police and
        Fire
        Retirement System, City of Sterling Heights General Employee Retirement System
        and Jason Hennessy.

       

      1.14  “Class
        Settlement Fund” means the total settlement consideration of $75 million and
        includes the following components: principal amount of $39,167,000 in cash,
        plus
        any interest earned thereon; the Krispy Kreme Settlement Stock; and the Krispy
        Kreme Settlement Warrants. The Class Settlement Fund will be paid pursuant
        to
¶¶2.1 to 2.7 below.

       

      1.15  “Class
        Settling Defendants” means Krispy Kreme, Tate, Casstevens, Phalen, McAleer, PwC,
        and Livengood.

       

      1.16  “Defendants”
        means the Class Defendants and Derivative Defendants.

       

      1.17  “Derivative
        Action” means Wright
        v. Krispy Kreme Doughnuts, Inc.,
        Case No.
        04CV00832, pending the United States District Court for the Middle District
        of
        North Carolina, which consolidated three derivative actions by Order dated
        July
        12, 2005: Wright
        v. Krispy Kreme Doughnuts, Inc., et al.,
        Case No.
        04CV00832; Blackwell
        v. Krispy Kreme Doughnuts, Inc., et al.,
        Case
        No. 05CV00450; and Andrews
        v. Krispy Kreme Doughnuts, Inc., et al.,
        Case No.
        05CV00461.

       


      
        
          
          

        

        
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      1.18  “Derivative
        Counsel” means Lawrence D. McCabe, Murray, Frank & Sailer, LLP, 275 Madison
        Avenue, Suite 801, New York, New York 10016; Eric L. Zagar, Schiffrin &
Barroway, LLP, 280 King of Prussia Road, Radnor, Pennsylvania 19087; S. Ranchor
        Harris, Wilson & Iseman, LLP, 110 Oakwood Drive, Suite 400, Winston-Salem,
        North Carolina 27103; and Bruce G. Murphy, The Law Offices of Bruce G. Murphy,
        265 Llwyd’s Lane, Vero Beach, Florida 32963.

       

      1.19  “Derivative
        Defendants” means Tate, Casstevens, the Non-Contributing Derivative Defendants,
        and Livengood.

       

      1.20  “Derivative
        Settling Defendants” means Tate, Casstevens, and the Non-Contributing Derivative
        Defendants. It is the express intent of the Parties that Livengood is not
        a
        Derivative Settling Defendant for purposes of this Stipulation.

       

      1.21  “Derivative
        Lead Plaintiffs” means William Douglas Wright and Judy Woodall.

       

      1.22  “Effective
        Date” means the first date by which all of the events and conditions specified
        in ¶7.1 of the Stipulation have been met and have occurred.

       

      1.23  “Excess
        Insurers” means the insurance companies that issued the directors and officers
        excess insurance policies to Krispy Kreme as set forth in Exhibit D hereto
        (Excess Insurance Policies”). Excess Insurers are: RLI Insurance Company, Ace
        American Insurance Company, St. Paul Mercury Insurance Company, Allied World
        Assurance Company (US) Inc., Philadelphia Indemnity Insurance Company, and
        Landmark American Insurance Company. Liberty Mutual Insurance Company is
        not a
        party to the Settlement and is not an Excess Insurer for purpose of this
        Stipulation.

       

      1.24  “Final”
        means when the last of the following has occurred with respect to the Judgments:
        (a) the date of final affirmance on an appeal of the Judgments, the expiration
        of the time for a petition for or a denial of a writ of certiorari to review
        the
        Judgments and, if certiorari is 

       


      
        
          
          

        

        
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      granted,
        the date of final affirmance of the Judgments following review pursuant to
        that
        grant; or (b) the date of final dismissal of any appeal from the Judgments
        or
        the final dismissal of any proceeding on certiorari to review the Judgments;
        or
        (c) if no appeal is filed, the expiration date of the applicable time for
        the
        filing or noticing of any appeal from the Judgments. Any proceeding or order,
        or
        any appeal or petition for a writ of certiorari, pertaining solely to any
        Plan
        of Allocation and/or application for or award of attorneys’ fees or expenses,
        shall not in any way delay or preclude the Judgments from becoming
        Final.

       

      1.25  “Judgments”
        means the final judgments to be rendered by the Court in the Actions,
        substantially in the forms attached hereto as Exhibits B and C.

       

      1.26  “Krispy
        Kreme” means Krispy Kreme Doughnuts Inc.

       

      1.27  “Krispy
        Kreme Settlement Stock” means the freely tradable shares of Krispy Kreme common
        stock that will be issued and delivered in accordance with ¶2.6
        hereof.

       

      1.28  “Krispy
        Kreme Settlement Warrants” means the freely tradable warrants for shares of
        Krispy Kreme common stock that will be issued, registered and delivered in
        accordance with ¶2.7 and Exhibit E hereof.

       

      1.29  “Measurement
        Price” means the average of the daily Closing Prices for each trading day of
        Krispy Kreme common stock for the ten-trading day period commencing on the
        fifth
        trading day next preceding the date Krispy Kreme files its Form 10-K for
        Fiscal
        Year 2006. The Closing Price for each day (“Closing Price”) shall be the last
        reported sales price for Krispy Kreme common stock on the New York Stock
        Exchange.

       

      1.30  “Non-Contributing
        Derivative Defendants” means, collectively, Erskine Bowles, Mary Davis Holt,
        William T. Lynch, Jr., John N. McAleer, Robert L. McCoy, Robert S. McCoy,
        Jr.,
        James H. Morgan, R. Frank Murphy, Dr. Su Hua Newton, Michael C. Phalen, Robert
        L. Strickland, 

       


      
        
          
          

        

        
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      Togo
        D.
        West, Jr., Frank E. Guthrie, Joseph A. McAleer, Jr., Steven D. Smith, John
        McAleer Orrell, Arlington Doughnut Company, L.L.C., Euless Doughnut Company,
        L.L.C., Frisco Doughnut Company, L.L.C., Grapevine Doughnut Company, LLC.,
        Greater DFW Doughnuts, Inc., Greater DFW Doughnuts, L.L.P., Hulen St. Doughnut
        Company L.L.P., North Texas Doughnuts, L.P., Old Towne Doughnut Company,
        LLP.,
        Phillips R.S. Waugh, Jr., and Dough-Re-Mi Company, Ltd.

       

      1.31  “Person”
        means an individual, corporation, limited liability corporation, professional
        corporation, limited liability partnership, partnership, limited partnership,
        association, joint stock company, estate, legal representative, trust,
        unincorporated association, government or any political subdivision or agency
        thereof, and any business or legal entity and their spouses, heirs,
        predecessors, successors, representatives, or assignees.

       

      1.32  “Plan
        of
        Allocation” means a plan or formula of allocation (to be described in the notice
        to be sent to Class Members) of the Settlement Fund whereby the Settlement
        Fund
        shall be distributed to Authorized Claimants after payment of expenses of
        notice
        and administration of the Settlement, Taxes and Tax Expenses and such attorneys’
fees, expenses and interest and amounts to the Class Lead Plaintiffs as may
        be
        awarded by the Court. Any Plan of Allocation is not part of the Stipulation
        and
        Defendants shall have no responsibility or liability with respect
        thereto.

       

      1.33  “PwC”
        means PricewaterhouseCoopers LLP, and its predecessors, successors, and related
        entities, and each of their past, present or future partners, principals,
        members, directors, officers, employees, contractors, attorneys, successors,
        agents, or insurers, and the heirs, executors, administrators, assigns and
        successors of each of them, whether now known or unknown.

       

      1.34  “Released
        Claims” means, collectively, the Released Class Claims and the Released
        Derivative Claims, as defined below.

       


      
        
          
          

        

        
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      1.35  “Released
        Class Claims” means all claims, including Unknown Claims, demands, rights,
        liabilities and causes of action, arising out of, relating to, or in connection
        with, the purchase or acquisition of Krispy Kreme securities during the
        Settlement Class Period, that have been or could have been asserted by any
        Class
        Lead Plaintiff or Member of the Settlement Class in the Class Action against
        the
        Class Settling Defendants, the Excess Insurers, AISLIC or their past or present
        subsidiaries, parents, successors and predecessors, officers, directors,
        shareholders, agents, employees, attorneys, advisors, and investment advisors,
        auditors, accountants and any person, firm, trust, corporation, officer,
        director or other individual or entity in which any Class Settling Defendant
        has
        a controlling interest or which is related to or affiliated with any Class
        Settling Defendant, and the legal representatives, heirs, successors-in-interest
        or assigns of such Class Settling Defendant (“Released Class Parties”), as well
        as any claims in connection with the institution, prosecution or settlement
        of
        the Class Action.

       

      1.36  “Released
        Derivative Claims” means all claims, including Unknown Claims, demands, rights,
        liabilities and causes of action, arising out of, relating to, or in connection
        with, the demands made by Krispy Kreme shareholders to the board of directors
        of
        Krispy Kreme and the matters alleged or that could have been alleged in the
        Derivative Action against the Derivative Settling Defendants and nominal
        defendant Krispy Kreme, the Excess Insurers, AISLIC, their past or present
        subsidiaries, parents, successors, predecessors, officers, directors, agents,
        employees, attorneys, advisors and investment advisors, auditors, accountants,
        and any person, firm, trust, corporation, officer, director or other individual
        or entity in which they have a controlling interest or which is related to
        or
        affiliated with them, and their legal representatives, heirs, successors
        in
        interest or assigns as well as any claims in connection with the institution,
        prosecution or settlement of the 

       


      
        
          
          

        

        
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      Derivative
        Action. It is the express intent of the Parties that derivative claims of
        Krispy
        Kreme against Livengood are not being released by this Stipulation.

       

      1.37  “Released
        Derivative Parties” means the Derivative Settling Defendants and nominal
        defendant Krispy Kreme, the Excess Insurers, their past or present subsidiaries,
        parents, successors, predecessors, officers, directors, agents, employees,
        attorneys, advisors and investment advisors, auditors, accountants, and any
        person, firm, trust, corporation, officer, director or other individual or
        entity in which they have a controlling interest or which is related to or
        affiliated with them, and their legal representatives, heirs, successors
        in
        interest or assigns. It is the express intent of the Parties that Livengood
        is
        not a Released Derivative Party.

       

      1.38  “Reserve
        Fund Agreement” means the separately negotiated Reserve Fund Escrow Agreement
        among Tate, Casstevens, Krispy Kreme, and the Excess Insurers, establishing
        a
        reserve fund for the payment of defense fees and costs (“Reserve
        Fund”).

       

      1.39  “SEC
        Investigation” means the formal investigation being conducted by the U. S.
        Securities and Exchange Commission (“SEC”), SEC File No. A-02860, including any
        civil case filed by the SEC as a result of that investigation.

       

      1.40  “Settlement
        Class” means all Persons who purchased or otherwise acquired publicly traded
        securities of Krispy Kreme between March 8, 2001 and April 18, 2005. Excluded
        from the Settlement Class are Class Defendants, officers and directors of
        Krispy
        Kreme, their immediate families, legal representatives, heirs and assigns,
        and
        any entity in which any excluded Person has or had a controlling interest.
        Also
        excluded from the Settlement Class are those Persons who timely and validly
        request exclusion from the Settlement Class pursuant to the Notice of Pendency
        and Settlement of Class Action to be sent to Settlement Class
        Members.

       


      
        
          
          

        

        
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      1.41  “Settlement
        Class Member” or “Member of the Settlement Class” means a Person who falls
        within the definition of the Settlement Class set forth above.

       

      1.42  “Settlement
        Class Period” means the period from March 8, 2001 to and including April 18,
        2005, inclusive.

       

      1.43  “Settling
        Defendants” means collectively the Class Settling Defendants and the Derivative
        Settling Defendants.

       

      1.44  “Settling
        Parties” means, collectively, each of the Settling Defendants, and the Class
        Lead Plaintiffs, on behalf of themselves and the Members of the Settlement
        Class, and the Derivative Lead Plaintiffs and Krispy Kreme, acting through
        the
        Special Committee.

       

      1.45  “Special
        Committee” means the Special Committee of Krispy Kreme’s Board of Directors
        formed on October 4, 2004 to conduct an independent review of any and all
        issues
        raised by (i) regulatory investigations, such as those raised by the SEC
        and the
        United States Attorney’s Office (“USAO”), (ii) the Company’s independent
        auditors, (iii) shareholder demands and shareholder derivative actions, and
        (iv)
        whistleblowers, and other issues the Special Committee deems necessary and
        appropriate for its investigation.

       

      1.46  “Unknown
        Claims” means any Released Class Claims or Released Derivative Claims which the
        Class Lead Plaintiffs and each Settlement Class Member (as to Released Class
        Claims), and/or which the Derivative Plaintiffs, each current holder of Krispy
        Kreme securities, or Krispy Kreme (as to Released Derivative Claims),
        respectively, does not know or suspect to exist in his, her or its favor
        at the
        time of the release of the Released Class Parties or Released Derivative
        Parties, which, if known by him, her or it, might have affected his, her
        or its
        settlement with, and release of, the Released Class Parties or Released
        Derivative Parties , or might have affected his, her or its decision not
        to
        object to this Settlement. With respect to any and all Released Class Claims
        and


       


      
        
          
          

        

        
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      Released
        Derivative Claims, the Settling Parties stipulate and agree that, upon the
        Effective Date, the Class Lead Plaintiffs, the Derivative Plaintiffs and
        Krispy
        Kreme (as a nominal defendant in the Derivative Action), and each of the
        Settlement Class Members, shall be deemed to have, and by operation of the
        Judgments shall have, waived the provisions, rights and benefits of California
        Civil Code §1542, which provides:

       

      A
        GENERAL
        RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
        TO
        EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
        HIM
        MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

       

      The
        Class
        Lead Plaintiffs, the Derivative Plaintiffs and Krispy Kreme (as a nominal
        defendant in the Derivative Action), and each of the Settlement Class Members,
        shall be deemed to have, and by operation of the Judgments shall have, waived
        any and all provisions, rights and benefits conferred by any law of any state
        or
        territory of the United States, or principle of common law, which is similar,
        comparable or equivalent to California Civil Code §1542. Each of the Class Lead
        Plaintiffs, the Derivative Plaintiffs, the Settlement Class Members, Krispy
        Kreme (as a nominal defendant in the Derivative Action), may hereafter discover
        facts in addition to or different from those which he, she or it now knows
        or
        believes to be true with respect to the Released Class Claims or Released
        Derivative Claims, but each Class Lead Plaintiff, Derivative Plaintiff and
        Krispy Kreme (as a nominal defendant in the Derivative Action), and each
        of the
        Settlement Class Members, upon the Effective Date, shall be deemed to have,
        and
        by operation of the Judgments shall have, fully, finally, and forever settled
        and released any and all Released Class Claims and Released Derivative Claims,
        respectively, known or unknown, suspected or unsuspected, contingent or
        non-contingent, accrued or unaccrued, whether or not concealed or hidden,
        which
        now exist, or heretofore have existed upon any theory of law or equity now
        existing or coming into existence in the future, including, but not


       


      
        
          
          

        

        
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      limited
        to, conduct which is negligent, intentional, with or without malice, or a
        breach
        of any duty, law or rule, without regard to the subsequent discovery or
        existence of such different or additional facts. The Class Lead Plaintiffs,
        the
        Lead Derivative Plaintiffs, Krispy Kreme, and the Class Members and all current
        Krispy Kreme shareholders, shall be deemed by operation of the Judgments
        to have
        acknowledged that the foregoing waivers were separately bargained for and
        are
        key elements of the Settlement of which this release is a part.

       

      1.47  “USAO
        Investigation” means the current investigation by the United States Attorney’s
        Office for the Southern District of New York relating to Krispy Kreme, or
        any
        similar subsequent investigation by any other U.S. Attorney’s Office, or any
        related criminal proceedings following the return of an indictment, if
        any.

       

      	2.  	
              The
                Settlement

            


       

      	a.  	
              The
                Class Settlement Fund

            


       

      2.1  The
        principal amount of Thirty-Four Million Nine Hundred Sixty Seven Thousand
        Dollars ($34,967,000) in cash will be paid by the Excess Insurers into an
        interest bearing account designated by Class Lead Counsel within ten (10)
        business days of the entry of an order by the Court granting preliminary
        approval of the settlement of the Class Action. The Settling Parties and
        the
        Excess Insurers agree that the financial institution designated by Class
        Lead
        Counsel is acceptable to them. In the event the Excess Insurers fail to timely
        make this payment, this Stipulation shall terminate as a result of the failure
        to meet the condition in ¶7.1(a).

       

      2.2  PricewaterhouseCoopers
        LLP will pay or cause to be paid the principal amount of Four Million Dollars
        ($4,000,000) in cash into an interest bearing account designated by Class
        Lead
        Counsel within ten (10) business days of the entry of an order by the Court
        granting preliminary approval of the settlement of the Class
        Action.

       


      
        
          
          

        

        
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      2.3  Defendant
        Tate will pay the sum of $100,000 in cash into an interest bearing account
        designated by Class Lead Counsel within ten (10) business days of the entry
        of
        an order by the Court granting final approval of the Settlement of the Class
        Action.

       

      2.4  Defendant
        Casstevens will pay the sum of $100,000 in cash into an interest bearing
        account
        designated by Class Lead Counsel within ten (10) business days of the entry
        of
        an order by the Court granting final approval of the settlement of the Class
        Action.

       

      2.5  Defendants
        Phalen and McAleer will not be required to make a cash payment to the Settlement
        Class.

       

      2.6  Krispy
        Kreme Settlement Stock:

       

      (a)  The
        Krispy
        Kreme Settlement Stock will consist of freely tradeable shares of Krispy
        Kreme
        common stock equal to $17,916,500 divided by the Measurement Price. Krispy
        Kreme
        will not provide any price protection for the Krispy Kreme Settlement Stock;
        after the number of shares has been determined, the number of shares will
        not be
        adjusted regardless of whether the value of each share later increases or
        decreases before distribution to the Settlement Class Members. However, the
        number of shares constituting the Krispy Kreme Settlement Stock will be adjusted
        to account for stock splits, reverse stock splits and other similar actions
        taken by Krispy Kreme. If Krispy Kreme is sold, acquired or merges prior
        to
        distribution of the Krispy Kreme Settlement Stock to the Settlement Class,
        the
        shares will be treated for purposes of any corporate transaction as if they
        had
        been issued, distributed, and outstanding, and will receive the same
        proportionate treatment as other shares of Krispy Kreme common
        stock.

       

      (b)  Krispy
        Kreme will issue and distribute the Krispy Kreme Settlement Stock to Class
        Lead
        Counsel pursuant to instructions provided by Class Lead Counsel within ten
        (10)
        business days after the Court enters a Judgment substantially in the form
        of
        Exhibit B. There will be 

       


      
        
          
          

        

        
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      two
        distribution dates: (1) the date of the distribution of attorneys’ fees awarded
        to Class Lead Counsel by the Court and (2) the date of distribution to
        Authorized Claimants following claims administration. Until distribution
        to
        Settlement Class Members, Class Lead Counsel agrees to vote the shares according
        to the recommendations of Krispy Kreme’s Board of Directors and, if requested by
        Krispy Kreme to enter into a voting trust agreement so providing. Class Lead
        Counsel and Krispy Kreme shall use best efforts to enable the Krispy Kreme
        Settlement Stock to be issued by electronic distribution.

       

      (c)  All
        costs
        associated with the delivery or distribution of the Krispy Kreme Settlement
        Stock shall be borne by Krispy Kreme.

       

      (d)  No
        fractional shares of Krispy Kreme Settlement Stock will be issued. The
        calculation of the number of shares to be distributed will be rounded up
        or down
        to the nearest whole share.

       

      (e)  The
        Krispy
        Kreme Settlement Stock shall be registered or exempt from the registration
        requirements of the Securities Act of 1933 under §3(a)(10) of the Securities Act
        of 1933. The Krispy Kreme Settlement Stock shall be freely tradable, shall
        not
        constitute “restricted securities” under the Securities Act of 1933 and may be
        sold or transferred by recipients thereof who are not affiliates of Krispy
        Kreme
        (as that term is defined in Rule 144 of the Securities Act of 1933) or
        recipients deemed to be underwriters under the Securities Act of 1933 without
        registration under §5 of the Securities Act of 1933 or compliance with Rule
        144.

       

      (f)  Upon
        receipt of the Krispy Kreme Settlement Stock, Class Lead Counsel will have
        the
        right to take any measures they deem appropriate to protect the overall value
        of
        the Krispy Kreme Settlement Stock prior to distribution to Authorized Claimants.
        Class Lead Counsel shall have no liability for any sale, liquidation, transfer
        or other disposition of the Krispy Kreme 

       


      
        
          
          

        

        
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      Settlement
        Stock absent gross negligence or willful misconduct. Class Lead Counsel shall
        also have the right to use the cash component of the Class Settlement Fund
        to
        protect the overall value of the Class Settlement Fund.

       

      2.7  Krispy
        Kreme Settlement Warrants

       

      (a)  The
        Krispy
        Kreme Settlement Warrants will have a total value (determined as of the last
        day
        of the ten-trading day period referred to in the definition of “Measurement
        Price”) equal to $17,916,500 determined by the independent valuation analysis
        commissioned by Krispy Kreme and provided to PwC, which will be based on
        the
        Black-Scholes-Merton model and assumptions consistent with those used by
        Krispy
        Kreme historically in valuing warrants, including: (i) the volatility of
        Krispy
        Kreme common stock will be based on the historical and implied volatilities
        of
        Krispy Kreme’s common stock and the common stock of companies similar to Krispy
        Kreme; (ii) the risk free rate of interest will be based on the Treasury
        bill
        rate most closely corresponding to the 5-year term of the warrants; and (iii)
        the dividend yield will be 0%. The price per share of Krispy Kreme common
        stock
        utilized in the Black-Scholes-Merton model will be equal to the Measurement
        Price. The exercise price of each share of Krispy Kreme common stock issuable
        upon exercise of each Krispy Kreme Settlement Warrant will be equal to 125
        percent of the Measurement Price. The aggregate number of shares of Krispy
        Kreme
        Settlement Stock issuable upon exercise of the Krispy Kreme Settlement Warrants
        will be based upon a total value for the Krispy Kreme Settlement Warrants
        of
        $17,916,500 determined as aforesaid. The Warrant Agreement is set forth at
        Exhibit E and includes all terms and conditions applicable to the Krispy
        Kreme
        Settlement Warrants.

       

      (b)  Krispy
        Kreme will issue and distribute the Krispy Kreme Settlement Warrants to Class
        Lead Counsel pursuant to instructions provided by Class Lead Counsel within
        ten
        (10) 

       


      
        
          
          

        

        
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      business
        days after the Court enters a Judgment substantially in the form of Exhibit
        B.
        There will be two distribution dates: (1) the date of the distribution of
        attorneys’ fees awarded to Class Lead Counsel by the Court and (2) the date of
        distribution to Authorized Claimants following claims administration. Class
        Lead
        Counsel and Krispy Kreme shall use best efforts to enable the Krispy Kreme
        Settlement Warrants to be issued by electronic distribution. 

       

      (c)  No
        fractional Krispy Kreme Settlement Warrants will be issued. The calculation
        of
        the number of warrants to be distributed will be rounded up or down to the
        nearest whole warrant.

       

      (d)  The
        Krispy
        Kreme Settlement Warrants shall be exempt from the registration requirements
        of
        the Securities Act of 1933 under §3(a)(10) of the Securities Act of 1933. Within
        ten (10) business days of delivery to Class Lead Counsel, Krispy Kreme will
        cause the Krispy Kreme Settlement Warrants to be listed upon the New York
        Stock
        Exchange and shall pay all fees required to maintain their listing for their
        term as long as a sufficient number of Krispy Kreme Settlement Warrants remain
        outstanding and the Company otherwise is entitled to list the Krispy Kreme
        Settlement Warrants upon the New York Stock Exchange. The Krispy Kreme
        Settlement Warrants shall be freely tradable and shall not constitute
“restricted securities” under the Securities Act of 1933 and may be sold or
        transferred by recipients thereof who are not affiliates of Krispy Kreme
        (as
        that term is defined in Rule 144 of the Securities Act of 1933) or recipients
        deemed to be underwriters under the Securities Act of 1933 without registration
        under §5 of the Securities Act of 1933 or compliance with Rule 144.

       

      	b.  	
              The
                Escrow Agent

            


       

      2.8  Upon
        receipt, the Escrow Agent shall invest the cash portion of the Class Settlement
        Fund deposited pursuant to ¶¶2.1 to 2.4 above in instruments backed by the full
        faith and credit of 

       


      
        
          
          

        

        
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      the
        United
        States Government or insured by the United States Government or an agency
        thereof and shall reinvest the proceeds of those instruments as they mature
        in
        similar instruments at their then current market rates.

       

      2.9  The
        Escrow
        Agent shall not disburse the Class Settlement Fund except as provided in
        the
        Stipulation, by an order of the Court, or with the written agreement of counsel
        for Krispy Kreme, Tate, Casstevens, PwC and Class Lead Counsel.

       

      2.10  Subject
        to
        further order and/or direction as may be made by the Court, the Escrow Agent
        is
        authorized to execute such transactions as are consistent with the terms
        of the
        Stipulation.

       

      2.11  All
        funds
        held by the Escrow Agent shall be deemed and considered to be in custodia
        legis
        of the
        Court, and shall remain subject to the jurisdiction of the Court.

       

      2.12  The
        Escrow
        Agent shall establish a “Class Notice and Administration Fund,” and deposit
        $100,000 from the cash portion of the Class Settlement Fund in it. The Class
        Notice and Administration Fund shall be used by Class Lead Counsel to pay
        costs
        and expenses reasonably and actually incurred in connection with providing
        notice to the Settlement Class, identifying and locating Settlement Class
        Members, assisting with the filing of claims, administering and distributing
        the
        Net Settlement Fund (defined below) to Authorized Claimants, processing Proof
        of
        Claim and Release forms and paying escrow fees and costs, if any. The Class
        Notice and Administration Fund shall also be invested and earn interest as
        provided for in ¶2.8 of this Stipulation. Any portion of the Class Notice and
        Administration Fund remaining after the payment of the aforesaid costs and
        expenses shall revert to the Class Settlement Fund and become part of the
        Net
        Settlement Fund.

       


      
        
          
          

        

        
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      	c.  	
              Taxes,
                Tax Expenses and Related Matters

            


       

      2.13  The
        Settling Parties and the Escrow Agent agree to treat the cash portion of
        the
        Class Settlement Fund as being at all times a “qualified settlement fund” within
        the meaning of Treas. Reg. §§1.468B-1 through 1.468B-5. In addition, the Escrow
        Agent shall timely make such elections as are necessary or advisable to carry
        out the provisions of this ¶2.13, including the “relation-back election” (as
        defined in Treas. Reg. §1.468B-1) back to the earliest permitted date. Such
        elections shall be made in compliance with the procedures and requirements
        contained in such regulations. It shall be the responsibility of the Escrow
        Agent to timely and properly prepare and deliver the necessary documentation
        for
        signature by all necessary parties, and thereafter to cause the appropriate
        filings to occur.

       

      2.14  For
        the
        purpose of §468B of the Internal Revenue Code of 1986, as amended, and the
        regulations promulgated thereunder, the “administrator” shall be the Escrow
        Agent. The Escrow Agent shall timely and properly file all informational
        and
        other tax returns necessary or advisable with respect to the cash portion
        of the
        Class Settlement Fund (including without limitation the returns described
        in
        Treas. Reg. §1.468B-2(k)(l)). Such returns (as well as the election described in
¶2.13) shall be consistent with this ¶2.14 and in all events shall reflect that
        all Taxes (including any estimated Taxes, interest or penalties) on the income
        earned by the cash portion of the Class Settlement Fund shall be paid out
        of the
        cash portion of the Class Settlement Fund as provided in ¶2.14(a)
        hereof.

       

      (a)  All
        (i)
        Taxes (including any estimated Taxes, interest or penalties) arising with
        respect to the income earned by the cash portion of the Class Settlement
        Fund,
        including any Taxes or tax detriments that may be imposed upon the Defendants,
        the Excess Insurers or their respective counsel with respect to any income
        earned by the cash portion of the Class Settlement 

       


      
        
          
          

        

        
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      Fund
        for
        any period during which the cash portion of the Class Settlement Fund does
        not
        qualify as a “qualified settlement fund” for federal or state income tax
        purposes (“Taxes”), and (ii) expenses and costs incurred in connection with the
        operation and implementation of this ¶2.14 (including, without limitation,
        expenses of tax attorneys and/or accountants and mailing and distribution
        costs
        and expenses relating to filing, or failing to file, the returns described
        in
        this ¶2.14) (“Tax Expenses”) shall be paid out of the cash portion of the Class
        Settlement Fund; in all events the Defendants, the Excess Insurers and their
        respective counsel shall not have any liability or responsibility for any
        Taxes
        or any Tax Expenses or the filing of any tax returns or other documents with
        the
        Internal Revenue Service or any other state or local taxing authority. The
        Escrow Agent shall indemnify and hold harmless the Defendants, the Excess
        Insurers and their respective counsel for Taxes and Tax Expenses (including,
        without limitation, Taxes payable by reason of any such indemnification).
        Further, Taxes and Tax Expenses shall be treated as, and considered to be,
        a
        cost of administration of the Class Settlement Fund and shall be timely paid
        by
        the Escrow Agent out of the Class Settlement Fund without prior order from
        the
        Court. The Escrow Agent shall be obligated (notwithstanding anything herein
        to
        the contrary) to withhold from distribution to Authorized Claimants any funds
        necessary to pay such Taxes and Tax Expenses including the establishment
        of
        adequate reserves for any Taxes and Tax Expenses (as well as any amounts
        that
        may be required to be withheld under Treas. Reg. §1.468B-2(1)(2)); neither the
        Defendants, the Excess Insurers, nor their respective counsel are responsible
        to
        pay such Taxes and Tax Expenses, nor shall they have any liability or
        responsibility therefor. The Settling Parties hereto agree to cooperate with
        the
        Escrow Agent, each other, and their tax attorneys and accountants to the
        extent
        reasonably necessary to carry out the provisions of this ¶2.14.

       


      
        
          
          

        

        
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      (b)  For
        the
        purpose of this ¶2.14, references to the Class Settlement Fund shall include
        both the cash portion of the Class Settlement Fund and the Class Notice and
        Administration Fund and shall also include any interest thereon.

       

      	d.  	
              Derivative
                Settlement Provisions

            


       

      2.15  Krispy
        Kreme, acting through the Special Committee and consistent with the Special
        Committee’s prior findings and recommendations, takes the following actions in
        connection with the Derivative Case, to which Tate and Casstevens agree.
        Derivative Lead Plaintiffs support the resolution (except as to Livengood)
        of
        the Derivative Action as agreed to by Tate, Casstevens, and the Special
        Committee provided for herein.

       

      (a)  As
        provided in ¶2.3, Tate agrees to pay the sum of $100,000, which is the same
        $100,000 consideration referenced in ¶2.3 to be used as part of the Class
        Settlement Fund. Tate agrees that Krispy Kreme may cancel his interest in
        6,000
        shares of restricted stock granted to him by Krispy Kreme pursuant to a
        Restricted Stock Agreement dated October 16, 2000. Tate agrees that, pursuant
        to
        the Reserve Fund Agreement: (i) he will seek no more than $1.0 million in
        covered defense fees and costs in connection with the USAO Investigation
        following the return of an indictment against him, if any; (ii) he will seek
        no
        more than $500,000 in covered defense fees and costs in connection with the
        SEC
        Investigation concerning himself; and (iii) he will release and waive any
        further right to indemnity or advancement of defense fees and costs from
        Krispy
        Kreme and its subsidiaries, except as set forth in ¶4.6. Tate will provide
        policy releases to the Excess Insurers and AISLIC in a mutually acceptable
        form.

       

      (b)  As
        provided in ¶2.4 above, Casstevens agrees to pay the sum of $100,000, which is
        the same $100,000 consideration referenced in ¶2.4 to be used as part of the
        Class Settlement Fund. Casstevens agrees that, pursuant to the Reserve Fund
        Agreement: (i) he will seek 

       


      
        
          
          

        

        
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      no
        more
        than $350,000 in covered defense fees and costs in connection with further
        proceedings in the SEC Investigation and USAO Investigation concerning himself;
        and, (ii) he will release and waive any further right to indemnity or
        advancement of defense fees from Krispy Kreme and its subsidiaries, except
        as
        set forth in ¶4.6. Casstevens will provide policy releases to the Excess
        Insurers and AISLIC in a mutually acceptable form.

       

      (c)  Krispy
        Kreme will dismiss with prejudice the claims made against the Non-Contributing
        Derivative Defendants. The Non-Contributing Derivative Defendants who are
        Insureds under the Excess Insurance Policies will provide policy releases
        to the
        Excess Insurers and AISLIC in a mutually acceptable form.

       

      (d)  In
        exchange for the consideration to be paid pursuant to ¶2.15, the Derivative
        Action against Tate and Casstevens will be dismissed with
        prejudice.

       

      (e)  Krispy
        Kreme will authorize and/or prosecute the pending Derivative Action against
        Livengood, including any claims Krispy Kreme has against Livengood for
        contribution, based upon 15 U.S.C. §78u-4(f)(7)(A)(ii) or as otherwise provided
        by applicable law, for breach of fiduciary duty, for cancellation of stock
        options pursuant to the terms of any stock option plan or agreement, for
        reimbursement of any bonus or other incentive-based or equity-based compensation
        or any profits realized from the sale of Krispy Kreme securities as provided
        for
        under Section 304 of the Sarbanes-Oxley Act, as well as any other claims,
        known
        or unknown, that have been or could be asserted by Krispy Kreme against
        Livengood in the Derivative Action or arising out of or relating to his
        employment as Chief Executive Officer or President of Krispy Kreme or his
        service as Chairman of Krispy Kreme’s board of directors. Krispy Kreme has
        entered into a separate agreement with the Excess Insurers by which Krispy
        Kreme
        has agreed to hold the Excess Insurers harmless with respect to any claims
        for
        coverage that Livengood may assert under the Excess Insurance
        Policies.

       


      
        
          
          

        

        
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      	e.  	
              Termination
                of Settlement

            


       

      2.16  In
        the
        event that the Effective Date does not occur or the Settlement is not approved
        or is terminated for any reason, the Settlement Fund shall be refunded as
        described in ¶7.3 below.

       

      	3.  	
              Preliminary
                Approval, Notice Orders and Settlement
                Hearing

            


       

      3.1  Promptly
        after execution of this Stipulation by all parties hereto, the Settling Parties
        shall submit the Stipulation together with its Exhibits to the Court and
        shall
        apply for entry of an order (the “Notice Order”), substantially in the form of
        Exhibit A attached hereto, requesting, inter
        alia,
        the
        preliminary approval of the Settlement set forth in the Stipulation, and
        approval for the mailing and publication of the settlement notices (the
“Notices”), substantially in the forms of Exhibits A-1 and A-3 attached hereto,
        which shall include the general terms of the Settlement set forth in the
        Stipulation, and, as applicable, the Plan of Allocation, the general terms
        of
        the Class Fee and Expense Application as defined in ¶6.1 below, and the date of
        the Settlement Hearing as defined below. Class Lead Counsel shall be responsible
        for overseeing the notice provided to the Settlement Class. The Notice Order
        will also approve notice to current Krispy Kreme Shareholders substantially
        in
        the form of Ex. A-4 hereto. Such notice will include the general terms of
        the
        Derivative Action and the date of the Settlement Hearing. Krispy Kreme shall
        be
        responsible for providing notice to current Krispy Kreme shareholders in
        a
        manner approved by the Court as complying with Fed. R. Civ. P.
        23.1.

       

      3.2  The
        Settling Parties shall request that after the Notices are mailed and published,
        the Court hold a hearing (the “Settlement Hearing”) to consider and determine
        whether an order approving the Settlement as fair, reasonable and adequate
        and
        Final Judgments should be entered thereon dismissing the Class Action and
        the
        Derivative Action with prejudice, and that the Court thereafter approve the
        Settlement and dismiss the Class Action and the Derivative Action with


       


      
        
          
          

        

        
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      prejudice.
        At or after the Settlement Hearing, Class Lead Counsel also will request
        that
        the Court approve the Plan of Allocation and the Class Fee and Expense
        Application. Upon final resolution of the Derivative Action against Livengood,
        Lead Derivative Counsel will request that the Court approve their proposed
        application for an award of attorneys’ fees and expenses.

       

      	4.  	
              Releases
                and Bar Orders

            


       

      4.1  Upon
        the
        Effective Date, the Class Lead Plaintiffs and each of the Settlement Class
        Members shall be deemed to have, and by operation of the Judgment entered
        in the
        Class Action shall have, fully, finally, and forever released, relinquished
        and
        discharged all Released Class Claims against the Released Class Parties,
        whether
        or not such Settlement Class Member executes and delivers a proof of claim
        and
        release. 

       

      4.2  Upon
        the
        Effective Date, each of the Released Class Parties shall be deemed to have,
        and
        by operation of the Judgment entered in the Class Action, shall have, fully,
        finally, and forever released, relinquished and discharged each and all of
        the
        Settlement Class Members and Class Lead Plaintiffs and their counsel from
        all
        claims, including Unknown Claims, arising out of, relating to, or in connection
        with the institution, prosecution, assertion, settlement or resolution of
        the
        Class Action or the Released Class Claims.

       

      4.3  Upon
        the
        Effective Date, Krispy Kreme, Tate, Casstevens, Phalen and McAleer, and their
        respective Released Class Parties, shall be deemed to have, and by the operation
        of the Judgment entered in the Class Action shall have, fully, finally, and
        forever released, relinquished and discharged PwC, and its respective Released
        Class Parties to the extent not otherwise included within the definition
        of PwC,
        and its counsel, from any claims arising out of, relating
        to, or in connection with, the
        purchase
        or acquisition of Krispy Kreme securities during the Class Period, the
        institution, prosecution or settlement of the Class Action, any professional
        services provided or 

       


      
        
          
          

        

        
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      opinion
        rendered by PwC during the Settlement Class Period with respect to Krispy
        Kreme,
        or any of the facts and circumstances alleged in the Class Action.

       

      4.4  Upon
        the
        Effective Date, PwC, and its respective Released Class Parties to the extent
        not
        otherwise included within the definition of PwC, shall be deemed to have,
        and by
        the operation of the Judgment entered in the Class Action shall have, fully,
        finally, and forever released, relinquished and discharged Krispy Kreme,
        Tate,
        Casstevens, Phalen & McAleer, and their respective Released Class Parties,
        and their counsel from any claims (other than fees and expenses for the
        provision of professional services), arising out of, relating
        to, or in connection with, the
        purchase
        or acquisition of Krispy Kreme securities during the Class Period, the
        institution, prosecution or settlement of the Class Action, any professional
        services provided or opinion rendered by PwC during the Class Period with
        respect to Krispy Kreme, or any of the facts and circumstances alleged in
        the
        Class Action.

       

      4.5  Upon
        the
        Effective Date, Krispy Kreme and all current Krispy Kreme shareholders shall
        be
        deemed to have, and by operation of the Judgment entered in the Derivative
        Action, shall have, fully, finally and forever released, relinquished and
        discharged all Released Derivative Claims against the Released Derivative
        Parties. This release will not include claims by Krispy Kreme arising out
        of,
relating
        to, or in connection with the
        indemnity and advancement of legal fees and costs to the Released Derivative
        Parties pursuant to any undertaking or the Company’s Articles of Incorporation,
        Bylaws, and North Carolina law if it is ultimately determined that a Released
        Derivative Party is not entitled to indemnification; this release also will
        not
        preclude Krispy Kreme from accepting reimbursement pursuant to Section 304
        of
        the Sarbanes-Oxley Act, 15 U.S.C. §7243. Krispy Kreme agrees to release,
        and by operation of the Judgment in the Derivative Action 

       


      
        
          
          

        

        
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      shall
        have
        released, all insurance claims under the Excess Insurance Policies and AISLIC
        Excess Policy Nos. 362-31-40 and 362-31-41 against the Excess Insurers and
        AISLIC, respectively.

       

      4.6  Upon
        the
        Effective Date, each of the Released Derivative Parties shall be deemed to
        have,
        and by operation of the Judgment entered, in the Derivative Action,
        shall
        have, fully, finally and forever released, relinquished and discharged Krispy
        Kreme, the Derivative Lead Plaintiffs, Derivative Counsel, and any plaintiffs
        who brought related derivative cases and their counsel from all claims arising
        out of, relating to, or in connection with the institution, prosecution,
        assertion, settlement or resolution of the Derivative Action or the Released
        Derivative Claims. This release will not include claims for indemnity and
        advancement of legal fees and costs pursuant to the Company’s Articles of
        Incorporation, Bylaws, and North Carolina law in connection with: (i)
Smith
        v. Krispy Kreme Doughnuts, Corp.,
        Case No.
        1:05-CV-00187 (M.D.N.C.) (“ERISA Case”), provided,
        that if
        the proposed settlement of the ERISA Case is approved by the court, this
        release
        will include the ERISA Case at such time as that settlement becomes effective;
        (ii) certain actions filed by franchisees against Krispy Kreme and certain
        of
        its current and former officers and directors, as set forth on Exhibit F
        hereto;
        (iii) any action filed by a person or entity who opts out of the Class Action
        settlement; (iv) any proceedings in connection with the Class Action and/or
        the
        Derivative Action; (v) for all Released Derivative Parties other than Tate
        and
        Casstevens, the SEC Investigation and/or the USAO Investigation; (vi) for
        Tate
        and Casstevens, SEC civil cases and criminal indictments that do not name
        Tate
        or Casstevens, respectively, as a defendant (all other claims by Tate and
        Casstevens as to the SEC Investigation or USAO Investigation shall be governed
        by the Reserve Fund Escrow Agreement); and/or (vii) any other action filed
        by
        any person or entity after the date of this Agreement. Each of the Released
        Derivative Parties agrees to release, and by operation of the Judgment in
        the
        Derivative Action shall have released, all insurance claims under 

       


      
        
          
          

        

        
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      the
        Excess
        Insurance Policies and AISLIC Excess Policy Nos. 362-31-40 and 362-31-41
        against
        the Excess Insurers and AISLIC, respectively.

       

      4.7  The
        Judgment in the Class Action will contain a Bar Order as required by section
        21D(f)(7) of the Securities Exchange Act of 1934, 15 U.S.C. §78u-4(f)(7) and
        shall be as broad as permitted by state or federal law, and shall permanently
        and forever bar from filing, instituting, prosecuting, or maintaining, directly
        or indirectly, in any capacity, any claims for contribution, indemnification,
        or
        any other claim asserted against any Class Settling Defendant, whether based
        in
        tort, contract, or any other theory, arising from, based upon, or related
        to any
        fact or circumstance involved in the Class Action or in any pleading or any
        other paper filed therein, or the subject matters of the Class Action, whether
        such claim be legal or equitable, known or unknown, foreseen or unforeseen,
        matured or unmatured, accrued or unaccrued, or asserted under state, federal,
        or
        common law; provided,
        however,
        that
        Krispy Kreme will not release and the bar order will not bar any claims Krispy
        Kreme may have against Livengood for contribution based upon 15 U.S.C.
§78u-4(f)(7)(A)(ii) or as otherwise provided by applicable law for breach
        of
        fiduciary duty, for cancellation of stock options pursuant to the terms of
        any
        stock option plan or agreement, for reimbursement of any bonus or other
        incentive-based or equity-based compensation or any profits realized from
        the
        sale of Krispy Kreme securities as provided for under Section 304 of the
        Sarbanes-Oxley Act, 15 U.S.C. §7243, or any other claims, known or unknown, that
        have been or could be asserted by Krispy Kreme against Livengood in the pending
        Derivative Action or arising out of or relating to his employment as Chairman,
        Chief Executive Officer, or President of Krispy Kreme. The Judgment in the
        Class
        Action shall permanently bar and enjoin the institution and/or prosecution
        of
        any actions or claims by any Barred Person against the Excess Insurers or
        AISLIC, arising out of or related to any of the Excess Insurance Policies
        or
        AISLIC Excess Policy Nos. 362-31-40 and 362-

       


      
        
          
          

        

        
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      31-41,
        or
        the obligations of any Excess Insurer or AISLIC under any of the Excess
        Insurance Policies or AISLIC Excess Policy Nos. 362-31-40 and 362-31-41,
        except
        as expressly provided for in the Reserve Fund Agreement.

       

      4.8  The
        Judgment in the Derivative Action will also contain a Bar Order and will
        be as
        broad as permitted by state or federal law, and shall permanently and forever
        bar from filing, instituting, prosecuting, or maintaining, directly or
        indirectly, in any capacity, any claims for contribution, indemnification,
        or
        any other claim against any of the Non-Contributing Derivative Defendants,
        Tate
        or Casstevens, whether based in tort, contract, or any other theory, arising
        from, based upon, or related to any fact or circumstance at issue in the
        Derivative Action or any other paper filed therein, or the subject matters
        of
        the Derivative Action, or the Released Derivative Claims, or their employment
        by
        Krispy Kreme, or service on its board of directors, whether such claim be
        legal
        or equitable, known or unknown, foreseen or unforeseen, matured or unmatured,
        accrued or unaccrued, or asserted under state, federal, or common law, except
        as
        otherwise provided in ¶4.5, provided,
        however,
        that
        this Bar Order is not intended, and shall not be interpreted as, as release
        or
        bar order of any claims Krispy Kreme may have against Livengood for contribution
        based upon 15 U.S.C. § 78u-4(f)(7)(A)(ii) or as otherwise provided by
        applicable law for breach of fiduciary duty, for cancellation of stock options
        pursuant to the terms of any stock option plan or agreement, for reimbursement
        of any bonus or other incentive-based or equity-based compensation or any
        profits realized from the sale of Krispy Kreme securities as provided for
        under
        Section 304 of the Sarbanes-Oxley Act, 15 U.S.C. § 7243, or any other
        claims, known or unknown, that have been or could be asserted by Krispy Kreme
        against Livengood in the pending Derivative Action or arising out of or relating
        to his employment as Chairman, Chief Executive Officer, or President of Krispy
        Kreme. The Judgment in the Derivative Action shall permanently bar and enjoin
        the institution 

       


      
        
          
          

        

        
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      and/or
        prosecution of any actions or claims by any Barred Person against the Excess
        Insurers or AISLIC, arising out of or related to any of the Excess Insurance
        Policies or AISLIC Excess Policy Nos. 362-31-40 and 362-31-41, or the
        obligations of any Excess Insurer or AISLIC under any of the Excess Insurance
        Policies or AISLIC Excess Policy Nos. 362-31-40 and 362-31-41, except as
        expressly provided for in the Reserve Fund Agreement.

       

      4.9  Pending
        the Court’s determination of whether the Settlement should be approved and
        applied in the Actions, all proceedings and all further activity between
        the
        Settling Parties regarding or directed towards the Actions, and save for
        those
        activities and proceedings relating to this Stipulation and the Settlement
        and
        the continued prosecution of Livengood in the Derivative Action, shall be
        stayed.

       

      4.10  Pending
        the Court’s determination of whether the Settlement should be approved, neither
        the Class Lead Plaintiffs, the Derivative Lead Plaintiffs, nor any of the
        Settling Class Members and current Krispy Kreme shareholders, shall commence,
        maintain or prosecute against the Settling Defendants, any action or proceeding
        in any court or tribunal asserting any of the Released Class Claims or Released
        Derivative Claims.

       

      	5.  	
              Administration
                and Calculation of Claims, Final Awards and Supervision and Distribution
                of the Class Settlement Fund

            


       

      5.1  The
        Claims
        Administrator, subject to such supervision and direction of the Court and/or
        Class Lead Counsel as may be necessary or as circumstances may require, shall
        administer and calculate the claims submitted by Settlement Class Members
        and
        shall oversee distribution of the Net Settlement Fund (defined below) to
        Authorized Claimants. The Class Settlement Fund shall be applied as
        follows:

       

      (a)  to
        pay all
        the costs and expenses reasonably and actually incurred in connection with
        providing notice, identifying and locating Settlement Class Members, assisting
        with 

       


      
        
          
          

        

        
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      the
        filing
        of claims, administering and distributing the Class Settlement Fund to
        Authorized Claimants, processing Proof of Claim and Release forms and paying
        escrow fees and costs, if any;

       

      (b)  to
        pay the
        Taxes and Tax Expenses described in ¶¶2.13 and 2.14 above;

       

      (c)  to
        pay to
        Class Lead Counsel attorneys’ fees and expenses with interest thereon (the
“Class Fee and Expense Award”), if and to the extent allowed by the
        Court;

       

      (d)  to
        reimburse the time and expenses of the Class Lead Plaintiffs in the Class
        Action, if and to the extent allowed by the Court; and

       

      (e)  subject
        to
        the provisions of ¶5.2(c) below, to distribute the balance of the Class
        Settlement Fund (the “Net Settlement Fund”) to Authorized Claimants as allowed
        by the Stipulation, the Plan of Allocation, or the Court.

       

      5.2  Upon
        the
        Effective Date and thereafter, and in accordance with the terms of the
        Stipulation, the Plan of Allocation, or such further approval and further
        order(s) of the Court as may be necessary or as circumstances may require,
        the
        Net Settlement Fund shall be distributed to Authorized Claimants, subject
        to and
        in accordance with the following:

       

      (a)  Within
        ninety (90) days after the mailing of the Notices or such other time as may
        be
        set by the Court, each Person claiming to be an Authorized Claimant shall
        be
        required to submit to the Claims Administrator a completed Proof of Claim
        and
        Release, substantially in the form of Exhibit A-2 attached hereto, signed
        under
        penalty of perjury and supported by such documents as specified in the Proof
        of
        Claim and Release and as are reasonably available to the Authorized
        Claimant.

       

      (b)  Except
        as
        otherwise ordered by the Court, all Settlement Class Members who fail to
        timely
        submit a Proof of Claim and Release within such period, or such other period
        as
        may be ordered by the Court, or otherwise allowed, and all Settlement Class
        Members whose claims are 

       


      
        
          
          

        

        
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      not
        approved by the Court (in the event the same are rejected in whole or in
        part by
        the Claims Administrator and the Court resolves the dispute involved) shall
        be
        forever barred from receiving any payment pursuant to this Stipulation and
        the
        Settlement set forth herein, but will in all other respects be subject to
        and
        bound by the provisions of this Stipulation, the releases contained herein,
        and
        the Judgments and be enjoined and barred from bringing any action against
        any of
        the Class Settling Defendants asserting any of the Released Class
        Claims.

       

      (c)  The
        Net
        Settlement Fund shall be distributed to the Authorized Claimants substantially
        in accordance with a Plan of Allocation to be described in the Class Notice
        and
        approved by the Court. However, if there is any balance remaining in the
        Net
        Settlement Fund after six (6) months from the date of distribution of such
        Net
        Settlement Fund (whether by reason of tax refunds, uncashed checks or
        otherwise), such balance shall be reallocated among and distributed to
        Authorized Claimants in an equitable and economic fashion. Thereafter, any
        remaining balance should be donated to an appropriate 501(c)(3) non-profit
        organization(s) to be selected by Class Lead Counsel.

       

      5.3  The
        Plan
        of Allocation shall be proposed by Class Lead Counsel and the Class Settling
        Defendants shall take no position with respect to the proposed Plan of
        Allocation or such plan as may be approved by the Court.

       

      5.4  No
        Person
        shall have any claim against Class Lead Plaintiffs, Class Lead Counsel,
        Derivative Lead Plaintiffs, Derivative Counsel, any claims administrator,
        any
        agent designated by Class Lead Counsel, Class Settling Defendants, AISLIC,
        or
        the Excess Insurers or their respective counsel, based on the investment
        or
        distributions made substantially in accordance with this Stipulation and
        the
        Settlement contained herein, the Plan of Allocation, or further orders of
        the
        Court.

       


      
        
          
          

        

        
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      5.5  It
        is
        understood and agreed by the Settling Parties that the proposed Plan of
        Allocation including, but not limited to, any adjustments to an Authorized
        Claimant’s claim set forth therein, is not a part of the Stipulation and is to
        be considered by the Court separately from the Court’s consideration of the
        fairness, reasonableness and adequacy of the Settlement set forth in the
        Stipulation, and any order or proceeding relating to the Plan of Allocation
        shall not operate to terminate or cancel the Stipulation or affect the finality
        of the Court’s Judgments approving the Stipulation and the Settlement set forth
        therein, or any other orders entered pursuant to the Stipulation.

       

      	6.  	
              Plaintiffs’
                Counsel’s Attorneys’ Fees and Reimbursement of Expenses and Reimbursement
                of the Lead Plaintiffs

            


       

      6.1  Class
        Lead
        Counsel may submit an application or applications (the “Class Fee and Expense
        Application”) for distributions from the Class Settlement Fund for: (a) an award
        of attorneys’ fees; (b) plus reimbursement of expenses incurred in connection
        with prosecuting the Class Action; (c) plus any interest on such attorneys’ fees
        and expenses at the same rate and for the same periods as earned by the
        Settlement Fund (until paid) as may be awarded by the Court; and (d)
        reimbursement of the time and expenses of the Class Lead Plaintiffs in
        prosecuting the Class Action. Class Lead Counsel reserve the right to make
        additional applications for fees and expenses incurred. Class Settling
        Defendants will take no position with respect to the Class Fee and Expense
        Application and such matters are not the subject of any agreement between
        the
        Settling Parties other than the terms set forth in the Stipulation.

       

      6.2  The
        Class
        Fee and Expense Award shall be transferred to Class Lead Counsel from the
        Class
        Settlement Fund as ordered, immediately after the Court executes a written
        order
        awarding such fees and expenses, notwithstanding the existence of any timely
        filed objections thereto, or potential appeal therefrom, subject to the
        obligation of each counsel to make appropriate repayments 

       


      
        
          
          

        

        
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      to
        the
        Class Settlement Fund as more particularly set forth below in ¶6.3. Class Lead
        Counsel shall allocate the attorneys’ fees amongst plaintiffs’ counsel in the
        Class Action in a manner in which Class Lead Counsel in good faith believe
        reflects the contributions of such counsel to the prosecution and settlement
        of
        the Class Action.

       

      6.3  In
        the
        event that the Effective Date does not occur, or the order making the Class
        Fee
        and Expense Award is reversed or modified, or the Stipulation is terminated
        for
        any reason, and in the event that the Class Fee and Expense Award has been
        paid
        to any extent, then any of the plaintiffs’ counsel who have received a payment
        shall, within five (5) business days from Class Lead Counsel receiving notice
        from Class Settling Defendants’ Counsel or from a court of appropriate
        jurisdiction, refund to the Class Settlement Fund, the fees and expenses
        previously paid to them from the Class Settlement Fund, plus interest thereon
        at
        the same rate as earned by the Class Settlement Fund, in an amount consistent
        with such reversal or modification. The return obligation set forth in this
        paragraph is the obligation of all plaintiffs’ counsel who receive a payment in
        the Class Action. Each such plaintiffs’ counsel’s law firm, as a condition of
        receiving such fees and expenses, on behalf of itself and each partner and/or
        shareholder of it, agrees that the law firm and its partners and/or shareholders
        are subject to the jurisdiction of the Court for the purpose of enforcing
        the
        provisions of this subparagraph. Without limitation, each such law firm and
        its
        partners and/or shareholders agree that the Court may, upon application of
        Class
        Settling Defendants or the Excess Insurers on notice to Class Lead Counsel,
        summarily issue orders, including, but not limited to, judgments and attachment
        orders, and may make appropriate findings of or sanctions for contempt, against
        them or any of them should such law firm fail timely to repay fees, expenses
        and
        interest pursuant to this ¶6.3 of this Stipulation.

       


      
        
          
          

        

        
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      6.4  Krispy
        Kreme will pay attorneys’ fees and expenses to Derivative Counsel in
        consideration of the benefits conferred upon Krispy Kreme in an amount to
        be
        negotiated with the Special Committee (“Derivative Fees and Expenses”) and
        subject to Court approval.

       

      6.5  The
        procedure for and the allowance or disallowance by the Court of any applications
        by any plaintiffs’ counsel for attorneys’ fees and expenses to be paid out of
        the Class Settlement Fund or by Krispy Kreme are not part of the Settlement
        set
        forth in the Stipulation, and are to be considered by the Court separately
        from
        the Court’s consideration of the fairness, reasonableness and adequacy of the
        Settlement set forth in the Stipulation, and any order or proceeding relating
        either to the Class Fee and Expense Application or the Derivative Fee and
        Expenses, or any appeal from any order relating thereto or reversal or
        modification thereof, shall not operate to terminate or cancel the Stipulation,
        or affect or delay the finality of the Judgment in the Class Action or the
        Judgment in the Derivative Action.

       

      6.6  The
        Settling Defendants, the Excess Insurers and AISLIC shall have no responsibility
        for, and no liability whatsoever with respect to, the allocation among counsel
        for any plaintiff in the Actions, and/or any other Person who may assert
        some
        claim thereto, of any fee and expense award that the Court may make in the
        Actions.

       

      	7.  	
              Conditions
                of Settlement, Effect of Disapproval, Cancellation or
                Termination

            


       

      7.1  This
        Stipulation, the Settlement and the Effective Date shall be conditioned on
        the
        occurrence of all of the following events:

       

      (a)  Krispy
        Kreme, the Excess Insurers, PricewaterhouseCoopers LLP, Tate and Casstevens
        each
        shall have paid or caused to be paid the consideration making up the Class
        Settlement Fund as required by ¶¶2.1 to 2.7 above;

       

      (b)  Krispy
        Kreme will take all actions required by ¶2.15 above;

       


      
        
          
          

        

        
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      (c)  The
        Board
        of Directors of Krispy Kreme will have reviewed and approved the Stipulation;
        the Excess Insurers will have reviewed and approved the Stipulation, which
        approval will not be unreasonably withheld;

       

      (d)  Krispy
        Kreme will have filed its Form 10-K with the SEC within 48 hours of the
        execution of this Stipulation;

       

      (e)  the
        Court
        has entered the Notice Order, as required by ¶3.1, above;

       

      (f)  Krispy
        Kreme has not exercised its option to terminate the Stipulation pursuant
        to ¶7.2
        hereof;

       

      (g)  the
        Court
        has entered the Judgments in the Class Action and in the Derivative Action
        in
        substantially in the forms of Exhibits B and C attached hereto, respectively;
        and

       

      (h)  each
        of
        the Judgments has become Final, as defined in ¶1.24, above.

       

      7.2  Krispy
        Kreme shall have the option to terminate the Settlement in the event that
        Settlement Class Members who purchased or otherwise acquired more than a
        certain
        number of Krispy Kreme shares during the Settlement Class Period choose to
        exclude themselves from the Settlement Class, as set forth in a separate
        agreement (the “Supplemental Agreement”) executed between Class Lead Counsel and
        counsel for the Class Settling Defendants. The Supplemental Agreement will
        not
        be filed with the Court unless and until a dispute arises between the Class
        Lead
        Plaintiffs and Class Settling Defendants concerning its interpretation or
        application.

       

      7.3  In
        the
        event the Settlement is not approved or the Stipulation shall terminate or
        shall
        not become effective for any reason, within ten (10) business days after
        written
        notification of such event is sent by counsel for the Class Settling Defendants
        or Class Lead Counsel to the Escrow Agent, the cash component of the Class
        Settlement Fund (including accrued interest), plus any amount then remaining
        in
        the Class Notice and Administration Fund (including accrued interest),


       


      
        
          
          

        

        
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      less
        expenses and any costs which have either been disbursed pursuant to ¶¶2.12 to
        2.14 hereto, or are chargeable to the Class Notice and Administration Fund,
        shall be refunded by the Escrow Agent to PwC, the Excess Insurers, Tate,
        and
        Casstevens in proportion to their contribution to the Class Settlement Fund
        and
        the Krispy Kreme Settlement Stock and the Krispy Kreme Settlement Warrants,
        together with any proceeds from the sale or other disposition of Krispy Kreme
        Settlement Stock pursuant to ¶2.6(f), shall be returned to Krispy Kreme. At the
        request of counsel for Class Settling Defendants, the Escrow Agent or its
        designee shall apply for any tax refund owed to the Class Settlement Fund
        and
        pay the proceeds, after deduction of any reasonable fees or expenses incurred
        in
        connection with such application(s) for refund to PwC, the Excess Insurers
        and
        any other contributors in proportion to their contribution to the Class
        Settlement Fund.

       

      7.4  In
        the
        event that the Stipulation or Settlement is not approved by the Court or
        the
        Settlement set forth in the Stipulation is terminated for any reason, the
        Settling Parties shall be restored to their respective positions in the Actions
        as the date of this Stipulation, and all negotiations, proceedings, documents
        prepared and statements made in connection herewith shall be without prejudice
        to the Settling Parties, shall not be deemed or construed to be an admission
        by
        any Settling Party of any act, matter or proposition and shall not be used
        in
        any manner or for any purpose in any subsequent proceeding in the Actions
        or in
        any other action or proceeding. In such event, the terms and provisions of
        the
        Stipulation, with the exception of ¶¶1.1-1.47, 2.8-2.14, 7.2-7.5 and 8.4 herein,
        shall have no further force and effect with respect to the Settling Parties
        and
        shall not be used in the Actions or in any other proceeding for any purpose,
        and
        any Judgments or orders entered by the Court in accordance with the terms
        of the
        Stipulation shall be treated as vacated, nunc pro tunc.

       


      
        
          
          

        

        
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      7.5  If
        the
        Effective Date does not occur, or if the Stipulation is terminated for any
        reason, neither the Class Lead Plaintiffs nor any of their counsel shall
        have
        any obligation to repay any amounts actually and properly disbursed from
        or
        chargeable to the Class Notice and Administration Fund. In addition, any
        expenses already incurred and properly chargeable to the Class Notice and
        Administration Fund pursuant to ¶2.12 hereof at the time of such termination or
        cancellation but which have not been paid, shall be paid by the Escrow Agent
        in
        accordance with the terms of the Stipulation prior to the balance being
        refunded.

       

      7.6  The
        Settling Parties agree that, with respect to any Class Settling Defendant,
        in
        the event of a final order of a court of competent jurisdiction, not subject
        to
        any further proceedings determining the transfer of the Class Settlement
        Fund,
        or any portion thereof, by or on behalf of such Class Settling Defendant
        to be a
        preference, voidable transfer, fraudulent transfer or similar transaction
        under
        Title 11 of the United States Code (Bankruptcy) or applicable state law and
        any
        portion thereof is required to be refunded and such amount is not promptly
        deposited in the 

       

      Class
        Settlement Fund by any other Defendant, then, at the election of Class Lead
        Counsel, as to such Class Settling Defendant, the releases given and the
        Judgments entered in favor of such Class Settling Defendant pursuant to the
        Stipulation shall be null and void. The releases given and the Judgments
        entered
        in favor of other Class Settling Defendants shall remain in full force and
        effect.

       

      	8.  	
              Miscellaneous
                Provisions

            


       

      8.1  The
        Settling Parties (a) acknowledge that it is their intent to consummate the
        terms
        and conditions of this Stipulation; and (b) agree to cooperate to the extent
        reasonably necessary to effectuate and implement all terms and conditions
        of the
        Stipulation and to exercise their best efforts to accomplish the foregoing
        terms
        and conditions of the Stipulation.

       


      
        
          
          

        

        
          -39-

          
            

          

        

        
          
          

        

      


      


       

      8.2  Each
        Class
        Settling Defendant warrants as to himself, herself or itself that, at the
        time
        any of the payments provided for herein are made by or on behalf of himself,
        herself or itself, the payment will not render him, her or it insolvent.
        This
        representation is made by each Class Settling Defendant as to himself, herself
        or itself and is not made by any counsel for the Class Settling
        Defendants.

       

      8.3  The
        Settling Parties intend this Settlement to be a final and complete resolution
        of
        all disputes among them with respect to the Actions, provided,
        however, that
        it is
        the express intent of the Parties to this Stipulation that Livengood is not
        a
        Derivative Settling Defendant for purposes of this Stipulation and that
        derivative claims of Krispy Kreme against Livengood are not being released
        by
        this Stipulation. The Settlement compromises claims that are contested and
        shall
        not be deemed an admission by any Settling Party as to the merits of any
        claim
        or defense. While the Settling Defendants deny that the claims advanced in
        the
        Actions were meritorious, the Settling Parties agree and the Judgments in
        the
        Actions will state, that the Actions were filed, prosecuted and defended
        in good
        faith and in accordance with the applicable law and Federal Rules of Civil
        Procedure, including Rule 11 of the Federal Rules of Civil Procedure, and
        are
        being settled voluntarily after consultation with competent legal counsel.
        Krispy Kreme may issue a press release announcing the Settlement, but may
        not
        contradict the above language.

       

      8.4  Neither
        the Stipulation nor the Settlement, nor any act performed or document executed
        pursuant to or in furtherance of the Stipulation or the Settlement: (a) is
        or
        may be deemed to be or may be used as an admission of, or evidence of, the
        validity of any Released Class Claims or Released Derivative Claims, or of
        any
        wrongdoing or liability of the Settling Defendants; or (b) is or may be deemed
        to be or may be used as an admission of, or evidence of, any fault or omission
        of any of the Settling Defendants in any civil, criminal or administrative
        proceeding in any court, 

       


      
        
          
          

        

        
          -40-

          
            

          

        

        
          
          

        

      


      administrative
        agency or other tribunal. The Settling Defendants may file the Stipulation
        and/or the Judgments in related litigation as evidence of the Settlement,
        or in
        any action that may be brought against them in order to support a defense
        or
        counterclaim based on principles of res judicata, collateral estoppel, release,
        good faith settlement, judgment bar or reduction or any other theory of claim
        preclusion or issue preclusion or similar defense or counterclaim.

       

      8.5  All
        agreements made and orders entered during the course of the Actions relating
        to
        the confidentiality of information shall survive this Stipulation.

       

      8.6  All
        of the
        Exhibits to this Stipulation are material and integral parts hereof and are
        fully incorporated herein by this reference.

       

      8.7  This
        Stipulation may be amended or modified only by a written instrument signed
        by or
        on behalf of all Settling Parties or their respective
        successors-in-interest.

       

      8.8  This
        Stipulation and the Exhibits attached hereto, and the Supplemental Agreement
        constitute the entire agreement among the Settling Parties and no
        representations, warranties or inducements have been made to any party
        concerning the Stipulation, its Exhibits, or the Supplemental Agreement other
        than the representations, warranties and covenants contained and memorialized
        in
        such documents. The Stipulation supersedes and replaces any prior or
        contemporaneous writing, statement or understanding, including the draft
        Memorandum of Understanding pertaining to the Actions. Except as otherwise
        provided herein, all parties shall bear their own costs.

       

      8.9  Counsel
        for the Settling Parties are expressly authorized by their respective clients
        to
        take all appropriate actions required or permitted to be taken pursuant to
        the
        Stipulation to effectuate its terms and conditions.

       


      
        
          
          

        

        
          -41-

          
            

          

        

        
          
          

        

      


      


       

      8.10  Each
        counsel or other Person executing this Stipulation or any of its Exhibits
        on
        behalf of any party hereto hereby warrants that such Person has the full
        authority to do so.

       

      8.11  The
        Stipulation may be executed in one or more counterparts. All executed
        counterparts including facsimile counterparts and each of them shall be deemed
        to be one and the same instrument. A complete set of original executed
        counterparts shall be filed with the Court by Class Lead Counsel.

       

      8.12  This
        Stipulation shall be binding upon, and inure to the benefit of, the Settling
        Parties and their respective successors, assigns, heirs, spouses, marital
        communities, executors, administrators and legal representatives.

       

      8.13  Without
        affecting the finality of the Judgments entered in accordance with this
        Stipulation, the Court shall retain jurisdiction with respect to implementation
        and enforcement of the terms of the Stipulation and Judgments, and the Settling
        Parties hereto submit to the jurisdiction of the Court for purposes of
        implementing and enforcing the Settlement embodied in the Stipulation and
        Judgments.

       

      8.14  This
        Stipulation and the Exhibits hereto shall be considered to have been negotiated,
        executed and delivered, entered into, and to be wholly performed, in the
        State
        of North Carolina, and the rights and obligations of the Settling Parties
        to the
        Stipulation shall be construed and enforced in accordance with, and governed
        by,
        the internal, substantive laws of the State of North Carolina without giving
        effect to that State’s choice of law principles.

       


      
        
          
          

        

        
          -42-

          
            

          

        

        
          
          

        

      


      


       


      
        
          
          

        

        
          -43-

          
            

          

        

        
          
          

        

      


      IN
        WITNESS
        WHEREOF, the parties hereto have caused the Stipulation to be executed, by
        their
        duly authorized attorneys, dated as of October 30, 2006.

       

      Liaison
        Counsel:

      


      L.
        BRUCE
        McDANIEL
        (N.C. State
        Bar
        #5025)

      WILLIAM
        E.
        ANDERSON (N.C. State
        Bar
        #098)

      Attorneys
        for Plaintiff

      McDANIEL
        & ANDERSON, L.L.P.

      Lafayette
        Square

      4942
        Windy
        Hill Drive

      P.O.
        Box
        58186

      Raleigh,
        NC 27658

      Telephone:
        919/872-3000

      919/790-9273
        (fax)

      


      Class
        Lead Counsel:

       

      LERACH
        COUGHLIN STOIA GELLER

      RUDMAN
        & ROBBINS LLP

      SHAWN
        A.
        WILLIAMS

      SYLVIA
        WAHBA-KELLER

      100
        Pine
        Street, Suite 2600

      San
        Francisco, CA 94111

      Telephone:
        415/288-4545

      415/288-4534
        (fax)

       

      LERACH
        COUGHLIN STOIA GELLER

      RUDMAN
        & ROBBINS LLP

      JOY
        ANN
        BULL

       

      /s/
        Joy
        Ann Bull

      JOY
        ANN
        BULL


       

      655
        West
        Broadway, Suite 1900

      San
        Diego,
        CA 92101-3301

      Telephone:
        619/231-1058

      619/231-7423
        (fax)

       


      
        
          
          

        

        
          -44-

          
            

          

        

        
          
          

        

      

       

      LERACH
        COUGHLIN STOIA GELLER

      RUDMAN
        & ROBBINS LLP

      PAUL
        J.
        GELLER

      DAVID
        J.
        GEORGE

      ROBERT
        J.
        ROBBINS

      120
        East
        Palmetto Park Road, Suite 500

      Boca
        Raton, FL 33432

      Telephone:
        561/750-3000

      561/750-3364
        (fax)

      


      LERACH
        COUGHLIN STOIA GELLER

          
RUDMAN
        & ROBBINS LLP

      SANDRA
        STEIN

      1845
        Walnut Street, Suite 945

      Philadelphia,
        PA 19103

      Telephone:
        215/988-9546

      215/988-9885
        (fax)

       

      Derivative
        Lead Counsel:

       

      MURRAY,
        FRANK & SAILER, LLP

       

      /s/
        Lawrence D. McCabe

      LAWRENCE
        D. McCABE

       

      275
        Madison Avenue, Suite 801

      New
        York,
        NY 10016

      Telephone:
        212/682-1818

      212/682-1892
        (fax)


       

      SCHIFFRIN
        & BARROWAY, LLP

       

      /s/
        Eric L. Zagar

                     
        ERIC L. ZAGAR

       

      280
        King
        of Prussia Road

      Radnor,
        PA
        19087

      Telephone:
        610/66-7706

      610/667-7056
        (fax)


      
        
          
          

        

        
          -45-

          
            

          

        

        
          
          

        

      


       

      


      
        	
                WILSON
                  SONSINI GOODRICH &

                 
                  ROSATI, P.C.

                BRUCE
                  G. VANYO

                JEROME
                  F. BIRN, JR.

              
	 
	 
	
                /s/
                  Jerome F. Birn, Jr.

              
	
                JEROME
                  F. BIRN, JR.

              
	
                 

                650
                  Page Mill Road

                Palo
                  Alto, CA 94304-1050

                Telephone:
                  650/493-9300

                650/493-6811
                  (fax)

                 

              
	
                 

                WILSON
                  SONSINI GOODRICH &

                 
                  ROSATI, P.C.

                NICHOLAS
                  I. PORRITT

                11921
                  Freedom Drive, Suite 600

                Reston,
                  VA 20190-5634

                Telephone:
                  703/734-3100

                703/734-3199
                  (fax)

                 

              
	
                 

                KILPATRICK
                  STOKTON LLP

                JAMES
                  A. KELLY, JR. (NC State Bar No. 2499)

                W.
                  MARK CONGER (NC State Bar No. 18141)

                1001
                  West Fourth Street

                Winston-Salem,
                  NC 27101-2400

                Telephone:
                  336/607-7300

                336/607-7500
                  (fax)

                 

              
	
                Attorneys
                  for Krispy Kreme Doughnuts, Inc., John N. McAleer, Michael C.
                  Phalen, Erskine
                  Bowles, Mary Davis Holt, William T. Lynch, Jr, Robert L. McCoy,
                  Robert S.
                  McCoy, Jr, James H. Morgan, R.
                  Frank
                  Murphy, Dr. Su Hua Newton, Robert L.
                  Strickland,
                  Togo D. West, Jr., and North Texas Doughnuts,
                  L.P.

              


      


      
        
          
          

        

        
          -46-

          
            

          

        

        
          
          

        

      


      


      
        	
                 

                WEIL
                  GOTSCHAL & MANGES LLP

                ROBERT
                  F. CARANGELO

                JOSEPH
                  S. ALLERHAND

                STEPHEN
                  A. RADIN

                CAITLYN
                  M. CAMPBELL

              
	 
	 
	
                /s/
                  Robert F. Carangelo

              
	
                ROBERT
                  F. CARANGELO

              
	
                 

                767
                  Fifth Avenue

                New
                  York, NY 10153

                Telephone:
                  212/310-8000

                212/310-8007
                  (fax)

              
	
                 

                Attorneys
                  for Special Litigation Committee of Krispy Kreme Doughnuts,
                  Inc.

              
	
                 

                DAVIS
                  POLK & WARDWELL

                MICHAEL
                  P. CARROLL

                MICHAEL
                  S. FLYNN

                GINA
                  CARUSO

              
	 
	 
	
                /s/
                  Michael S. Flynn

              
	
                MICHAEL
                  S. FLYNN

              
	
                 

                450
                  Lexington Avenue

                New
                  York, NY 10017

                Telephone:
                  212/450-4000

                212/450-4800
                  (fax)

                 

              
	
                Attorneys
                  for Defendant PricewaterhouseCoopers
                  LLP

              


      


      
        
          
          

        

        
          -47-

          
            

          

        

        
          
          

        

      


      


      
        	
                 

                IRELL
                  & MANELLA LLP

                DAVID
                  A. SIEGEL

                MARTIN
                  N. GELFAND

              
	 
	 
	
                /s/
                  Martin G. Gelfand 

              
	
                DAVID
                  A. SIEGEL

              
	
                 

                1800
                  Avenue of the Stars, Suite 900

                Los
                  Angeles, CA 90067-4276

                Telephone:
                  310/277-1010

                310/203-7199
                  (fax)

                 

              
	
                Attorneys
                  for Defendant John Tate

              
	
                 

                WOMBLE
                  CARLYLE SANDRIDGE

                &
                  RICE, PLLC

                RONALD
                  R. DAVIS

              
	 
	 
	
                /s/
                  Ronald R. Davis

              
	
                RONALD
                  R. DAVIS

              
	
                 

                One
                  West Fourth Street

                P.O.
                  Box 84

                Winston-Salem,
                  NC 27102

                Telephone:
                  336/721-3600

                336/721-3660
                  (fax)

              
	
                 

                Attorneys
                  for Defendant Randy Casstevens

              
	
                 

                FRIED,
                  FRANK, HARRIS, SHRIVER & JACOBSON LLP

                DANIEL
                  E. LOEB

              
	 
	 
	
                /s/
                  Daniel E. Loeb

              
	
                DANIEL
                  E. LOEB

              
	
                 

                1001
                  Pennsylvania Avenue, N.W.

                Washington,
                  DC 20004

                Telephone:
                  202/639-7000

                202/639-7003
                  (fax)

              
	
                 

                Attorneys
                  for Defendant Philip
                  Waugh, Jr.

              


      


      
        
          
          

        

        
          -48-

          
            

          

        

        
          
          

        

      


      


      
        	
                 

                BELL
                  DAVIS & PITT

                WILLIAM
                  K. DAVIS

                KEVIN
                  G. WILLIAMS

              
	 
	 
	
                /s/
                  Kevin G. Williams

              
	
                KEVIN
                  G. WILLIAMS

              
	
                 

                Century
                  Plaza

                Suite
                  600

                100
                  North Cherry Street

                Winston-Salem,
                  NC 27101

                Telephone:
                  316/722-3700

              
	
                 

                Attorneys
                  for Joseph A. McAleer, Jr., Steven D. Smith, John McAleer Orell,
                  Arlington
                  Doughnut Company. L.L.C., Euless Doughnut Company, L.L.C., Frisco
                  Doughnut
                  Company, L.L.C., Grapevine Doughnut Company, L.L.C., Greater DFW
                  Doughnuts, Inc., Greater DFW Doughnuts, L.L.P., Hulen St. Doughnut
                  Company, L.L.P., and Old Towne Doughnut Company,
                  L.L.P.

              
	
                 

                EASTMAN
                  & SMITH, LTD.

                MATTHEW
                  D. HARPER

              
	 
	 
	
                /s/
                  Matthew D. Harper

              
	
                MATTHEW
                  D. HARPER

              
	
                 

                P.O.
                  Box 10032

                Toledo,
                  OH 43699

                Telephone:
                  419/241-6000

                419/247-1777
                  (fax)

              
	
                 

                Attorneys
                  for Dough-Re-Mi Company,
                  Ltd.

              


      

      
 

       

      -49-