Amendment No. 3 to the First Lien Credit Agreement


    EXHIBIT
      10.1

     

    Execution
      Counterpart


    


     

    AMENDMENT
      NO. 3 TO FIRST LIEN CREDIT AGREEMENT dated as of December 12, 2005 (this
“Amendment
      Agreement”)
      among
      KRISPY KREME DOUGHNUT CORPORATION, a North Carolina corporation (the
“Borrower”),
      the
      GUARANTORS (as defined in the Credit Agreement referred to below) signatory
      hereto and the LENDERS (as defined in the Credit Agreement referred to below)
      signatory hereto.

     

    The
      Borrower is party to a First Lien Credit Agreement dated as of April 1,
      2005 (as amended, amended and restated, supplemented or otherwise modified
      up to
      the date hereof, the “Credit
      Agreement”)
      among
      the Borrower, the Parent Guarantor, the Subsidiary Guarantors, the Lenders,
      Credit Suisse (formerly known as Credit Suisse First Boston), as Administrative
      Agent and Issuing Lender, and Wells Fargo Foothill, Inc., as Collateral Agent,
      Issuing Lender and Swingline Lender.

     

    The
      Borrower has requested that the Required Lenders agree to amend certain
      provisions of the Credit Agreement, and the Required Lenders have agreed,
      subject to the terms and conditions hereinafter set forth to such
      amendments.

     

    Accordingly,
      in consideration of the premises and for other good and valuable consideration,
      the sufficiency and receipt of all of which are hereby acknowledged, the parties
      hereto hereby agree as follows:

     

    SECTION 1.
      Defined
      Terms.
      Capitalized terms used but not herein shall be used herein as defined in the
      Credit Agreement.

     

    SECTION 2.
      Amendments.
      As of
      the Amendment Effective Date (as defined below):

     

    (a) Section
      1.01 of the Credit Agreement is hereby amended by inserting the following new
      defined term therein in the appropriate alphabetical location:

     

    “Amendment
      No. 3 Effective Date”
means
      the date that the amendments to this Agreement effected by Amendment No. 3
      hereto become effective.

     

    (b) The
      definition of “Applicable Margin” in Section 1.01 of the Credit Agreement is
      hereby amended to read as follows:

     

    “Applicable
      Margin”
means:
      (a) with respect to any ABR Loan, (i) 2.25% per annum on or prior to
      the last day of the 2007 Fiscal Year and (ii) 1.75% per annum thereafter; and
      (b) with respect to any Eurodollar Loan, (i) 3.25% per annum on or prior to
      the last day of the 2007 Fiscal Year and (ii) 2.75% per annum thereafter;
provided
      that,
      with respect to any date on or prior to the last day of the 2007 Fiscal Year,
      the Applicable Margin for each Type of Loan shall be reduced by 0.50% per annum
      if, on the last day of each of any two consecutive Fiscal Quarters falling
      in
      the 2007 Fiscal Year (each such day being referred to as a “Test
      Date”)
      (w)
      Consolidated EBITDA for the period for four consecutive Fiscal Quarters ending
      on such Test Date shall be at least $55,000,000, (x) the Consolidated Leverage
      Ratio on such Test Date shall not exceed the ratio required to have been
      maintained on such Test Date by Section 7.09(a) of this Agreement as in effect
      before the Amendment No. 3 Effective Date, (y) the Consolidated Interest
      Coverage Ratio on such Test Date shall not be less than the ratio required
      to
      have been maintained 

     


    
      
        
        

      

      
        
        

        
          

        

      

       

    


     

    on
      such
      Test Date by Section 7.09(b) of this Agreement as in effect before the Amendment
      No. 3 Effective Date and (z) the Borrower shall have furnished to the
      Administrative Agent its financial statements as at and for the periods ending
      on the Test Dates as required by Section 6.01(a) or 6.01(b), together with
      a
      certificate of a Financial Officer of the Parent Guarantor certifying that
      the
      conditions set forth in the preceding clauses (w), (x) and (y) have been
      satisfied and setting forth reasonably detailed calculations demonstrating
      such
      satisfaction. The reduction of the Applicable Margin pursuant to the proviso
      in
      the preceding sentence shall take effect from and after the second Business
      Day
      following receipt by the Administrative Agent of the financial statements and
      certificate referred to in clause (z) of said sentence for the second Test
      Date
      (such second Business Day being referred to herein as the “Rate
      Reduction Date”).

     

    (c) The
      definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement is
      hereby amended to add the following sentence at the end thereof:

     

    “Notwithstanding
      anything contained herein to the contrary, the amount of Consolidated EBITDA
      attributable to the third Fiscal Quarter of Fiscal Year 2006 shall not be deemed
      to exceed $6,800,000, and, if the amount of Consolidated EBITDA attributable
      to
      such Fiscal Quarter would otherwise exceed $6,800,000, such amount shall be
      reduced to $6,800,000 for purposes of this Agreement.”

     

    (d) The
      definition of “Investment” in Section 1.01 of the Credit Agreement is hereby
      amended by adding the following sentence at the end thereof:

     

    “For
      the
      avoidance of doubt, the forgiveness by the Borrower of receivables owing from
      New England Dough, LLC not to exceed $3,000,000 in connection with the
      contemplated restructuring of New England Dough, LLC shall not be deemed to
      be
      an Investment for purposes of this Agreement.”

     

    (e) Clause
      (f) of the definition of “Net Liquidity” in Section 1.01 of the Credit Agreement
      is hereby amended to read as follows:

     

    “(f) the
      lesser of (A) $15,000,000 and (B) the aggregate cash balances of the
      Concentration Accounts and the Depositary Account (i) determined at 1:30 p.m.,
      New York City time, on such date or if such date is not a Business Day, at
      1:30
      p.m., New York City time, on the Business Day next occurring (in each case,
      after giving effect to any prepayments that the Borrower is required to make
      pursuant to Section 2.10(b)(iii)) and (ii) not subject to any Lien other than
      (x) the Liens created by the Loan Documents and the Second Lien Loan Documents
      and (y) set-off rights”

     

    (f) The
      first
      sentence of Section 2.11(a) of the Credit Agreement is hereby amended to read
      as
      follows:

     

    “The
      Borrower agrees to pay to the Administrative Agent for the account of each
      Lender a commitment fee, which shall accrue at a rate per annum equal to 3/4
      of
      1% on the average daily unused amount of the Commitment of such Lender during
      the period from and including the date hereof to but excluding the earlier
      of
      the date such Commitment terminates and the Commitment Termination Date;
provided
      that
      such rate shall be reduced by 1⁄4 of 1% per annum from and after the earlier of
      (x) the first day of the 2008 

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    Fiscal
      Year and (y) the Rate Reduction Date (as defined in the definition of
“Applicable Margin” in Section 1.01 hereof).”

     

    (g) Section
      2.08(d) of the Credit Agreement is hereby amended by substituting “August 1,
      2006” for “the first anniversary of the “Effective Date”.

     

    (h) Section
      5.02 of the Credit Agreement is hereby amended by deleting “and” at the end of
      paragraph (d) thereof, substituting “; and” for the period at the end of
      paragraph (e) thereof and adding a new paragraph (f) thereto reading as
      follows:

     

    “(f)
      In
      connection with any requested Loan, the aggregate cash balances in all deposit
      accounts (including, without limitation, the Concentration Accounts and the
      Depository Account) of the Obligors, determined at 1:30 p.m., New York City
      time, on the date of such Loan (including, without duplication, the proceeds
      of
      such Loan) shall not exceed $15,000,000 after giving effect to all cash
      disbursements (including the use of the proceeds of such Loan) permitted
      hereunder to be made on such date.”

     

    (i) The
      table
      in Section 7.09(a) of the Credit Agreement is amended to read as
      follows:

    


     

    
      	
              Period

            	 	
              Ratio

            
	
              Second,
                Third and Fourth Fiscal Quarters of 2006 Fiscal Year 

               

            	 	
              4.50
                to 1.00

               

            
	
              First
                Fiscal Quarter of 2007 Fiscal Year 

               

            	 	
              5.40
                to 1.00

               

            
	
              Second
                Fiscal Quarter of 2007 Fiscal Year 

               

            	 	
              5.00
                to 1.00

               

            
	
              Third
                Fiscal Quarter of 2007 Fiscal Year

               

            	 	
              4.80
                to 1.00

               

            
	
              Fourth
                Fiscal Quarter of 2007 Fiscal Year

               

            	 	
              4.70
                to 1.00

               

            
	
              First
                Fiscal Quarter of 2008 Fiscal Year and Thereafter

               

            	 	
              3.70
                to 1.00

               

            


    

    


     

    (j) The
      table
      in Section 7.09(b) of the Credit Agreement is amended to read as
      follows:

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    
      	
               

              Period

            	 	
               

              Ratio

            
	
              Second
                and Third Fiscal Quarters of 2006 Fiscal Year 

               

            	 	
              3.15
                to 1.00

               

            
	
              Fourth
                Fiscal Quarter of 2006 Fiscal Year

               

            	 	
              2.50
                to 1.00

               

            
	
              First
                Fiscal Quarter of 2007 Fiscal Year 

               

            	 	
              2.10
                to 1.00

               

            
	
              Second
                Fiscal Quarter of 2007 Fiscal Year 

               

            	 	
              2.05
                to 1.00

               

            
	
              Third
                Fiscal Quarter of 2007 Fiscal Year

               

            	 	
              2.05
                to 1.00

               

            
	
              Fourth
                Fiscal Quarter of 2007 Fiscal Year

               

            	 	
              2.05
                to 1.00

               

            
	
              First
                Fiscal Quarter of 2008 Fiscal Year and Thereafter

               

            	 	
              3.40
                to 1.00

               

            


    

    


     

    (k) Paragraph
      (t) of Article VIII of the Credit Agreement is hereby amended to read as
      follows:

     

    “(t)
      the
      Restatement Date shall not have occurred on or before April 30, 2006;
      or”

     

    (l) The
      paragraph of Section D of Exhibit B of the Credit Agreement that refers to
      the
      aggregate cash balances of the Concentration Accounts and the Depositary Account
      is hereby amended to read as follows:

     

    “The
      lesser of $15,000,000 and the aggregate cash balances of the Concentration
      Accounts and the Depositary Account determined at 1:30 pm NYC time (after giving
      effect to any prepayment on such date).”

     

    (m) Exhibit
      H
      of the Credit Agreement is hereby amended by deleting “and” at the end of
      paragraph 3(c) thereof, substituting “; and” for the period at the end of
      paragraph (d) thereof and adding a new paragraph (e) thereto reading as
      follows:

     

    “(e)
      The
      aggregate cash balances in all deposit accounts (including, without limitation,
      the Concentration Accounts and the Depository Account) of the Obligors,
      determined at 1:30 p.m., New York City time, on the above-referenced requested
      date for such Loan (including, without duplication, the proceeds of such Loan),
      shall not exceed $15,000,000 after giving effect to all cash disbursements
      (including the use of the proceeds of such Loan) permitted by the Credit
      Agreement to be made on such date.”

     

    (n) Amendment
      and Waiver No. 2 to the First Lien Credit Agreement dated as of October 25,
      2005
      among the Borrower, the Guarantors signatory thereto and the Lenders signatory
      thereto is hereby amended as follows:

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    (A) The
      ninth
“Whereas” clause thereof is hereby amended to read as follows:

     

    “WHEREAS,
      Krispy Kreme International Ltd. (“KKI”),
      one
      of the Borrower’s Included Subsidiaries, desires to sell to KKA Holdings Pty Ltd
      (as trustee for the KKA Holdings Unit Trust) (the “Australia
      Sale”) all
      of
      its equity interests in Krispy Kreme Australia Pty Limited (“KKA”)
      for
      approximately AUD 3,500,000 in cash and KKI and the Borrower desire to sell
      to
      said trustee loans made to KKA for approximately AUD 5,075,000 in cash, but
      the
      Borrower’s existing Guarantee of Indebtedness of KKA will not be reduced or
      cancelled concurrently with such sale;” 

     

    
      	(B)  	
              Clause
                (ii) of Section 1(c) thereof is hereby amended to read as
                follows:

            


    

     

    “(ii) agree
      that the sale by KKI and the Borrower of their loans made to KKA as part of
      the
      Australia Sale shall be deemed to be a sale by KKI of equity interests in KKA
      for purposes of said Section 7.03(f) and that said Section 7.03(f) shall not
      be
      deemed to prohibit the sale of such loans in a separate transaction from, and
      on
      a different date than, the sale of the equity interests in KKA”

     

    SECTION 3.
      Conditions
      to Effectiveness.
      The
      amendments set forth in Section 2 hereof shall become effective when, and only
      when, and as of the date (the “Amendment
      Effective Date”)
      on
      which (a) the Administrative Agent shall have received counterparts of this
      Amendment Agreement executed by the Borrower, each of the Guarantors (other
      than
      Freedom Rings, LLC) and the Required Lenders (b) all the conditions to the
      effectiveness of the Amendment No. 3 to the Second Lien Credit Agreement of
      even date herewith, substantially in the form heretofore delivered to the
      Lenders, shall have occurred other than the effectiveness of this Amendment
      Agreement, (c) the Administrative Agent shall have received payment of all
      accrued fees and expenses of the Administrative Agent (including the reasonable
      and accrued fees of counsel to the Administrative Agent invoiced on or prior
      to
      the date hereof) and (d) the Borrower shall have paid to the Administrative
      Agent for the account of each Lender that shall have executed and delivered
      to
      the Administrative Agent a counterpart of this Amendment Agreement on or before
      the Amendment Effective Date the amendment fee payable to such Lender under
      Section 4 hereof.

     

    SECTION
      4. Fees.
      The
      Borrower shall pay to the Administrative Agent for the account of each Lender
      that executes and delivers to the Administrative Agent a counterpart of this
      Amendment Agreement on or before December 15, 2005 (New York time) an amendment
      fee equal to 0.25% of the Commitment of such Lender, such fee to be payable
      (i)
      in the case of Lenders that execute and deliver this Amendment Agreement on
      or
      before the Amendment Effective Date, on the Amendment Effective Date and (ii)
      in
      the case of all other Lenders entitled to receive such fee, not later than
      December 19, 2005.

     

    SECTION 5.
      Reference
      to and Effect on the Financing Documents.

     

    (a)
       On
      and
      after the Amendment Effective Date, each reference in the Credit Agreement
      to
“this Agreement”, “hereunder”, “hereof” or words of like import referring to the
      Credit Agreement, and each reference in the other Loan Documents to “the Credit
      Agreement”, “thereunder”, “thereof”, or words of like import referring to the
      Credit Agreement shall mean and be a reference to the Credit Agreement as
      modified hereby.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    (b) The
      Credit Agreement and each of the other Loan Documents, as specifically modified
      by this Amendment Agreement, are and shall continue to be in full force and
      effect and are hereby in all respects ratified and confirmed.

     

    (c) The
      execution, delivery and effectiveness of this Amendment Agreement shall not,
      except as expressly provided herein, operate as a waiver of any right, power
      or
      remedy of the Credit Agreement or the other Loan Documents, nor constitute
      a
      waiver of any provision of the Credit Agreement or the other Loan
      Documents.

     

    SECTION 6.
      Affirmation
      of Guarantors.
      Each
      Guarantor signatory hereto hereby consents to the amendments to the Credit
      Agreement effected hereby, and hereby confirms and agrees that, notwithstanding
      the effectiveness of the amendments set forth in Section 2 hereof (and
      notwithstanding the failure of Freedom Rings, LLC to be a party hereto), the
      obligations of such Guarantor contained in Article III of the Credit
      Agreement or in any other Loan Documents to which it is a party are, and shall
      remain, in full force and effect and are hereby ratified and confirmed in all
      respects, except that, on and after the effectiveness of such amendments, each
      reference in Article III of the Credit Agreement and in each of the other
      Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of
      like import shall mean and be a reference to the Credit Agreement as modified
      by
      this Amendment Agreement.

     

    SECTION 7.
      GOVERNING
      LAW.
      THIS
      AMENDMENT AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
      LAWS OF THE STATE OF NEW YORK.

     

    SECTION 8.
      Execution
      in Counterparts.
      This
      Amendment Agreement may be executed by one or more of the parties to this
      Amendment Agreement on any number of separate counterparts, and all of said
      counterparts taken together shall be deemed to constitute one and the same
      instrument. Delivery of an executed counterpart of a signature page to this
      Amendment Agreement by telecopier shall be effective as delivery of a manually
      executed counterpart of this Amendment Agreement.

     

    


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    



    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to
      be
      duly executed and delivered by their respective proper and duly authorized
      officers as of the day and year first above written.

     

    KRISPY
      KREME DOUGHNUT CORPORATION

     

    By:
      /s/
      Michael C. Phalen

    Name:
      Michael C. Phalen

    Title: CFO

     

    GUARANTORS:

     

    KRISPY
      KREME DOUGHNUTS, INC.

     

    KRISPY
      KREME DISTRIBUTING COMPANY, INCORPORATED

     

    KRISPY
      KREME MOBILE STORE COMPANY

     

    KRISPY
      KREME CANADA, INC.

     

    HD
      CAPITAL CORPORATION

     

    HDN
      DEVELOPMENT CORPORATION

     

    KRISPY
      KREME COFFEE COMPANY, LLC

     

    
      	 	 	
              By:

            	
              KRISPY
                KREME DOUGHNUT CORPORATION, an authorized
                Member

            


    

     

    GOLDEN
      GATE DOUGHNUTS, LLC

     

    
      	 	 	
              By:

            	
              KRISPY
                KREME DOUGHNUT CORPORATION, an authorized
                Member

            


    

     

    PANHANDLE
      DOUGHNUTS, LLC

     

    
      	 	 	
              By:

            	
              KRISPY
                KREME DOUGHNUT CORPORATION, an authorized
                Member

            


    

     

    NORTH
      TEXAS DOUGHNUTS, L.P.

     

    
      	 	 	
              By:

            	
              KRISPY
                KREME DOUGHNUT CORPORATION, its General
                Partner

            


    

     

    


     

    By:
      /s/
      Michael C. Phalen

    Name:
      Michael C. Phalen

    Title:
      Authorized Officer

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    LENDER

     

    Consent
      of Required Lenders Received