Document:

EX-10.4

 

Exhibit 10.4

KRISPY KREME DOUGHNUT CORPORATION

INTERNATIONAL FRANCHISE AGREEMENT

     THIS AGREEMENT is made and entered into on this ___day of 20___, by and between Krispy
Kreme Doughnut Corporation, a North Carolina corporation, with its principal business address at
P.O. Box 83, Winston-Salem, North Carolina 27102 (“Company”) and _____, a
_____, whose principal business address is _____
(“Franchisee”).

BACKGROUND FACTS

Company has developed a unique system for the operation of store facilities called “Krispy Kreme
Stores” that offer and serve a variety of fresh doughnuts and certain other quality food products
under the trademark and service mark “KRISPY KREME.”

Company operates, and licenses others to operate, Krispy Kreme Stores using the Krispy Kreme
System. Company grants to persons who meet its qualifications and are willing to undertake the
investment and effort a franchise to own and operate a Krispy Kreme Store offering the Products and
other products and services Company authorizes and utilizing the Krispy Kreme System subject to the
terms and conditions of this Agreement.

Pursuant to the terms of the Development Agreement, Franchisee has applied for a franchise to own
and operate a Krispy Kreme Store.

THE PARTIES AGREE:

	1.	 	DEFINITIONS

Affiliate means any person that directly or indirectly owns or controls, that is directly or
indirectly owned or controlled by, or that is under common ownership or control with, Company or
Franchisee.

Competitive Business means a business or enterprise, other than a Krispy Kreme Store, that: (i)
sells yeast raised doughnuts, cake doughnuts, or any other types of doughnuts, miniature doughnuts
or doughnut holes in any distribution channels to any customer for consumption or resale and such
sales constitute ten percent (10%) or more in total or at or from any single location; (ii) sells
coffee in any distribution channels to any customer for consumption or resale and such sales
constitute twenty percent (20%) or more in total or at or from any single location; or (iii) grants
or has granted franchises or licenses, or establishes or has established joint ventures, for the
development and/or operation of a business that offers the food products referred to in (i) or (ii)
in any such channel of distribution.

Copyrighted Works means the contents of the Manuals and all other know-how, information,
specifications, systems and data used by Company in or in respect to the Krispy Kreme System,

 

 

including, without limitation, trade secrets, copyrights, designs, patents, and other intellectual
property.

Development Agreement means the development agreement pursuant to which Franchisee has applied for
a franchise to own and operate a Krispy Kreme Store.

Dollar or $ means the legal currency of the United States.

Franchise means the rights granted and the obligations imposed pursuant to this Agreement that
relate to the operation of the STORE at the Site and to the use of the Krispy Kreme System in the
operation thereof.

General Manager means the general manager of the STORE that Franchisee designates concurrently with
the execution of this Agreement and identifies in Exhibit A attached hereto.

Grand Opening Marketing Program means the grand opening public relations and marketing program that
Franchisee is required to conduct for the STORE in accordance with Subsection 6.2 of this
Agreement.

Gross Sales means all revenue Franchisee derives from sales of Products and operation of the STORE,
whether from cash, check, credit card or credit transactions, but excluding all federal, state or
municipal sales, value added, use or service taxes collected from customers and paid or payable to
the appropriate taxing authority.

HDN means HDN Development Corporation.

Initial Franchise Fee means the non-recurring and non-refundable initial franchise fee that
Franchisee agrees to pay Company per STORE prior to the opening of such STORE. The amount of the
Initial Franchise Fee is specified in Schedule A.

Krispy Kreme System means the distinctive business formats, methods, procedures, designs, lay-outs,
equipment, mixes, standards and specifications designated by Company for use in Krispy Kreme
Stores, all of which Company may modify from time to time, along with the Marks.

Managing Director means the managing director of Franchisee’s business. The initial Managing
Director will be identified in Exhibit A of this Agreement.

Manuals means such materials (including, without limitation, if applicable, audiotapes, videotapes,
magnetic media, computer software and written materials) that Company generally furnishes to
franchisees from time to time for use in operating Krispy Kreme Stores.

Marks means the trademarks, service marks, trade dress and other commercial symbols used in the
operation of Krispy Kreme Stores, including, without limitation, the trade and service marks
“KRISPY KREME” and associated logos, as same may be changed, enhanced or supplemented from time to
time.

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Non-Core Products means any product identified by the Marks other than the Products, such as, for
example, ice cream, clothing, hats, cups and other logoed items, etc.

Owner means each person other than Company and its Affiliates holding a direct or indirect legal or
beneficial Ownership Interests or voting rights in Franchisee, including, without limitation, any
person who has a direct or indirect interest in Franchisee, this Agreement, the Franchise or the
STORE (and any person who owns, directly or indirectly, a five percent (5%) or greater Ownership
Interest in any such person (other than Company or its Affiliates), including without limitation
any person who has any legal or equitable interest, or the power to vest in himself or herself any
legal or equitable interest, in the revenue, profits, rights or assets thereof.

Ownership Interest means in relation to any of the following: (a) a corporation, the ownership of
shares in the corporation; (b) an unlimited or limited liability company, the memberships or other
ownership interest of such company; or (c) a partnership, the general and limited partnership
interests in such partnership.

Payment Day means the day of the week specified in Schedule A on which the Royalty is due.

Principal Owner means the Principal Owners specified in Exhibit A.

Products means a variety of fresh doughnuts (including among others, yeast raised doughnuts, cake
doughnuts, miniature doughnuts and doughnut holes, some of which have various types and flavors of
fillings, glazes or other coatings) as well as certain other food products and beverages
(specifically including, but not limited to, coffee) and food services as identified by Company
from time to time and which are customarily sold in Krispy Kreme Stores.

Royalty means the payment made by Franchisee to Company on the Payment Day each week based on the
Gross Sales of the STORE for the preceding week. The amount of Royalty to be paid is specified in
Schedule A.

Site means a physical location that Company has approved as meeting its minimum criteria for the
development and operation of the STORE.

STORE means the Krispy Kreme Store owned and operated by Franchisee pursuant to this Agreement.

System Standards means the mandatory and suggested specifications, standards, operating procedures
and rules that Company prescribes from time to time for the operation of Krispy Kreme Stores
including, without limitation, the standards, specifications and other requirements related to the
purchase, preparation, marketing and sale of the Products and Non-Core Products; customer service;
the design, décor and appearance of the STORE; the maintenance and remodeling of the STORE and the
equipment, fixtures and furnishings therein; the use and display of the Marks; the insurance
coverage required to be carried for the STORE; the hiring and training of STORE employees; the
days and hours of STORE operation; and the content, quality and use of advertising and promotional
materials.

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Transfer means with respect to a Franchise, the STORE, this Agreement or an Ownership Interest in
Franchisee, any of the following, without limitation, whether voluntary or involuntary, direct or
indirect: (i) an assignment, sale, gift or pledge; (ii) the grant of a mortgage, lien, security
interest, charge, or any encumbrance whatsoever including, without limitation, the grant of a
collateral assignment; and (iii) a transfer that occurs as a result of Franchisee’s insolvency or
dissolution or other transfer by operation of law. The term “Transfer” will not be deemed to
include (i) the grant of a lien or security interest to secure financing for the acquisition of
equipment, fixtures and supplies for the STORE; (ii) an assignment of a leasehold interest in a
Site in accordance with the terms of this Agreement; or (iii) the relocation of the STORE from one
Site to another Site.

Website means an interactive electronic document contained in a network of computers linked by
communications software.

	2.	 	GRANT OF FRANCHISE
	 
	2.1	 	Company grants to Franchisee the right to use the Krispy Kreme System for a term of fifteen
(15) years (the “Term”) solely in connection with the conduct and operation of the STORE and
subject to the terms and conditions of this Agreement.
	 
	2.2	 	During the Term, Franchisee will strictly and diligently perform its obligations under this
Agreement and will continuously exert its best efforts to promote and enhance the development,
operation and success of the STORE.
	 
	2.3	 	In addition to selling the Products, Franchisee will sell such other goods as Company may
require from time to time in its sole discretion.
	 
	2.4	 	No exclusive territory, protection or other right in the contiguous space, area or market of
the STORE is expressly or impliedly granted to Franchisee. Company reserves the right to
operate or to grant others the right to operate Krispy Kreme Stores at any location other than
the location of the STORE; to acquire and operate, or be acquired by, a business operating one
or more businesses located at any location other than the location of the STORE; to develop,
manufacture, distribute and/or sell, and license others to develop, market, distribute and/or
sell, Products to customers located anywhere in the world through any channel of distribution;
and to develop, manufacture, distribute and/or sell, and license others to develop, market,
distribute and/or sell, Non-Core Products to customers located anywhere in the world through
any channel of distribution.
	 
	3.	 	INITIAL FRANCHISE FEE AND ROYALTY
	 
	3.1	 	Concurrently with the execution of this Agreement and prior to the opening of the STORE,
Franchisee agrees to pay to Company the Initial Franchise Fee specified in Schedule A.
	 
	3.2	 	On or before the Payment Day each week, Franchisee will (a) pay to Company the Royalty on the
Gross Sales of the STORE for the preceding week and (b) report to

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	 	 	Company, in the form Company requires from time to time, the true and correct Gross Sales of
the STORE for the immediately preceding week ending on Sunday.
	 
	4.	 	MANUALS AND SYSTEM STANDARDS
	 
	4.1	 	Solely for use in operating the STORE during the Term, Company will loan Franchisee one (1)
copy of its Manuals. The copy of the Manuals that Company loans to Franchisee will be in
English, however, Franchisee will, at its own expense, translate the Manuals into the language
of the geographic area within which the STORE is located. Franchisee will keep its copy of
the Manuals current and in a secure location at the STORE. If Franchisee’s copy of the
Manuals is lost, destroyed or significantly damaged, Franchisee will obtain a replacement copy
at Company’s then applicable charge. Franchisee may not at any time copy, duplicate, record
or otherwise reproduce any part of the Manuals. Franchisee may not distribute any part of the
Manuals and may not disclose any part of the Manuals to any person other than its employees
who have a need to know the contents of the Manuals in order to perform their jobs.
	 
	4.2	 	During the Term, Franchisee will comply with all of the Manuals and the System Standards they
contain in addition to all applicable laws, regulations, rules, by-laws, orders and ordinances
in connection with its operation of the STORE. The Manuals are incorporated by reference into
this Agreement. In the event of a dispute relating to the contents of the Manuals, the master
copy of the Manuals maintained by Company at its principal office, is controlling. Company
may at any time and from time to time change the Manuals to reflect changes in System
Standards.
	 
	4.3	 	To determine whether Franchisee is in compliance with this Agreement and all System
Standards, Company and/or its agents have the right at any time during regular business hours,
and without prior notice to Franchisee, to: (a) inspect the STORE; (b) observe, photograph and
videotape the operations of the STORE; (c) remove samples of any Products, materials or
supplies for testing and analysis; (d) interview personnel of the STORE; (e) interview
customers of the STORE and to require Franchisee to present to its customers any such
evaluation forms periodically prescribed by Company and to participate in and/or request its
customers to participate in any surveys performed by or on behalf of Company; and (f) inspect
and copy any books, records and documents relating to the operation of the STORE.
	 
	5.	 	APPROVED PRODUCTS AND SUPPLIERS
	 
	5.1	 	Pursuant to a supply program established by Company, Company is the sole supplier to
Franchisee of certain mixes, products, equipment and fixtures which consist of, but are not
limited to, the items described in Exhibit B attached hereto. In the event Franchisee is in
breach of this Agreement pursuant to Subsection 14.2 then, in addition to other remedies
hereunder or under applicable law, Company may withhold delivery of such items to Franchisee
until Franchisee cures such breach in accordance with Subsection 14.2.

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	5.2	 	Franchisee may purchase Non-Core Products only from Company and/or suppliers designated or
approved by Company from time to time.
	 
	5.3	 	Franchisee will purchase supplies for the STORE only from Company or from local suppliers
that Company from time to time designates or approves. Company will periodically provide
Franchisee with a list of approved products and supplies and designated and approved
suppliers. If Franchisee wishes to use any type or brand of product or supply item or wishes
to purchase products or supplies from a supplier that is not currently designated or approved
by Company, Franchisee will submit to Company specifications, photographs, samples and/or
other information Company may request. Company has the right to inspect a proposed supplier’s
facilities. Company will, within a reasonable time, determine whether such products, supplies
or such supplier meets its specifications and standards and notify Franchisee whether it is
authorized to use such product or supply item or purchase from such supplier. Company reserves
the right to periodically re-inspect the facilities and products of any supplier it has
accepted and to revoke its acceptance if the supplier does not continue to meet Company’s
criteria.
	 
	6.	 	ADVERTISING AND PUBLIC RELATIONS
	 
	6.1	 	Company has established a Brand Fund (the “Brand
Fund”) for the advertising, promotional,
marketing and public relations programs and materials Company deems appropriate. Franchisee
agrees to contribute to the Brand Fund an amount equal to one-quarter percent (.25%) of the
STORE’s Gross Sales, payable in the same manner as the Royalty.
	 
	6.2	 	Company will direct all programs that the Brand Fund finances. The Brand Fund periodically
will give Franchisee samples of advertising, marketing, and promotional formats and materials
at no cost. At Franchisee’s request, Company will sell Franchisee multiple copies of these
materials.
	 
	6.3	 	Company will account for the Brand Fund separately from its other funds and will not use the
Brand Fund for any of its general operating expenses. However, Company may use the Brand Fund
to pay the reasonable salaries and benefits of personnel who manage and administer the Brand
Fund, and to pay other expenses that Company incurs in activities reasonably related to the
management and administration of the Brand Fund.
	 
	6.4	 	The Brand Fund will not be Company’s asset. Although the Brand Fund is not a trust, Company
will hold all Brand Fund contributions for the benefit of the contributors and use
contributions only for the purposes described in Subsections 6.1 through 6.8. Company does
not have any fiduciary obligation for administering the Brand Fund or for any other reason.
The Brand Fund may spend in any fiscal year more or less than the total Brand Fund
contributions in that year, borrow from Company or others (paying reasonable interest) to
cover deficits, or invest any surplus for future use. Company will use all interest earned on
Brand Fund contributions to pay costs before using the Brand Fund’s other assets.

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	6.5	 	Company will prepare an annual, unaudited statement of Brand Fund collections and expenses
and give Franchisee the statement upon written request. Company may have the Brand Fund
audited annually, at the Brand Fund’s expense, by an independent certified public accountant.
Company may incorporate the Brand Fund or operate it through a separate entity whenever
Company deems appropriate. The successor entity will have all of the rights and duties
specified in Subsections 6.1 through 6.8.
	 
	6.6	 	Company cannot ensure that Brand Fund expenditures in or affecting any geographic area are
proportionate or equivalent to Brand Fund contributions by contributors operating in that
geographic area or that any contributor benefits directly or in proportion to its Brand Fund
contribution.
	 
	6.7	 	Company has the right, but no obligation, to use collection agents and institute legal
proceedings to collect Brand Fund contributions at the Brand Fund’s expense. Company may also
forgive, waive, settle and compromise any and all claims by or against the Brand Fund. Except
as expressly provided in Subsections 6.1 through 6.8, Company assumes no direct or indirect
liability or obligation to Franchisee for collecting amounts due to, maintaining, directing or
administering the Brand Fund.
	 
	6.8	 	Company may at any time defer or reduce the Brand Fund contributions of one or more
franchisees and, upon thirty (30) days’ prior written notice to Franchisee, reduce or suspend
Brand Fund contributions and operations for one or more periods of any length and terminate
(and, if terminated, reinstate) the Brand Fund. If Company terminates the Brand Fund, it will
distribute all unspent monies to its franchisees, and to Company and its affiliates, in
proportion to their, and its, respective Brand Fund contributions during the preceding twelve
(12) month period.
	 
	6.9	 	Franchisee will not execute or conduct any advertising or promotional activity in relation to
the STORE or the Krispy Kreme System without Company’s prior written approval.
	 
	6.9	 	Franchisee will be responsible for conducting, with Company’s guidance, the Grand Opening
Marketing Program during the period commencing thirty (30) days before and ending ninety (90)
days after the opening of the STORE. The Grand Opening Marketing Program will utilize the
public relations and advertising programs and media and advertising and promotional materials
that Company has developed or approved.
	 
	6.9	 	During each twelve (12) month period of the Term, Franchisee will spend for advertising and
promotion of the STORE not less than three percent (3%) of the STORE’s Gross Sales. Company
will have the right to review Franchisee’s books and records from time to time to determine
Franchisee’s expenditures for such advertising and promotion.
	 
	6.10	 	Before Franchisee uses any advertising, promotional or marketing materials which Company has
not prepared or previously approved, Franchisee must send samples of all such materials to
Company for approval. If Franchisee does not receive Company’s

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	 	 	written approval within thirty (30) days after Company receives the materials, they are
deemed approved. Franchisee may not use any advertising, promotional, or marketing
materials that Company has disapproved.
	 
	6.11	 	Franchisee agrees that any advertising, promotion and marketing it conducts will be
completely clear and factual and not misleading and conform to the highest standards of
ethical marketing and the promotion policies that Company prescribes from time to time.
	 
	6.12	 	Company may modify or add to its Website to include information relating to the STORE.
Company will control Website traffic and registration of additional domain names.
	 
	7.	 	TRAINING AND GUIDANCE
	 
	7.1	 	Before the STORE begins operating, Company will furnish, at no additional cost to Franchisee,
a training program covering the operation of a Krispy Kreme Store for up to two (2) managers.
Such training program will be conducted at Company’s designated training facility and/or at an
operating Krispy Kreme Store. The STORE manager(s) must complete the training to Company’s
satisfaction. Company will furnish, again at no additional cost to Franchisee, and subject to
the schedules of the training program in effect from time to time, the same training program
to one (1) additional manager of the STORE per year that Franchisee hires after the STORE
opens for business. Company may charge reasonable fees for the training of any managers
thereafter. Franchisee will be responsible for the wages, salaries, travel and living
expenses that any STORE manager(s) incur in connection with the training.
	 
	7.2	 	A management training program and/or modified training programs will be available at no
charge to such members of Franchisee’s senior management as are selected by Company, which
members will be required to complete Company’s management training program and/or modified
training programs to Company’s satisfaction. Franchisee will be responsible for all travel
and living expenses and compensation of its personnel who attend a training program. If any
such member is unable to satisfactorily complete the training program, Franchisee will
promptly designate a replacement for such member, who will satisfactorily complete the
training program. Any subsequent training performed by Company will be at times and places
designated by Company and at per diem charges established by Company from time to time.
	 
	7.3	 	Company may require previously trained and experienced STORE managers to attend up to one (1)
refresher training course per year at such times and locations that Company designates.
	 
	7.4	 	Company will provide guidance and assistance to Franchisee from time to time and in the
manner Company deems appropriate, regarding the operation of the STORE. Furthermore, if
Franchisee requests or Company requires additional or special training for Franchisee’s
employees, all of the expenses incurred by Company in connection with

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	 	 	such training, including, without limitation, per diem charges for travel and living
expenses for Company’s personnel, will be Franchisee’s responsibility.
	 
	8.	 	MARKS AND COPYRIGHTED WORKS
	 
	8.1	 	Franchisee acknowledges and agrees that the Marks and Copyrighted Works are owned by and are
the valuable property of Company and/or HDN. Franchisee will acquire no right, interest or
benefit in or to the Marks or Copyrighted Works other than the limited rights of use granted
under this Agreement. If Company authorizes Franchisee to prepare any new works, translations
or derivative works from the Copyrighted Works, Franchisee hereby agrees that such new works,
translations or derivative works will be the property of Company, and Franchisee hereby
assigns, throughout the world, and will cause all authors or owners thereof likewise to
assign, throughout the world, all right, title and interest in and to such new works,
translations and derivative works to Company. Franchisee further covenants that any such new
materials, new works, translations or derivative works created by Franchisee or by any third
party engaged by Franchisee are original to Franchisee or to such third party and do not
violate the rights of any other person or entity; this covenant regarding originality shall
not extend to any materials supplied by Company to Franchisee, but does apply to all materials
Franchisee or its third party contractors may add thereto. Franchisee hereby waives all
“moral rights” it may have in such new materials, new works, translations or derivative works,
and shall cause its third party contractors to waive all “moral rights” they may have in such
new materials, new works, translations or derivative works. Franchisee will submit all such
materials, reproduction or other new works, translations or derivative works to Company for
approval prior to use. All usage of the Marks and Copyrighted Works by Franchisee and any
goodwill established thereby will inure to the exclusive benefit of Company and/or HDN.
Franchisee agrees that it will in no way represent that it is the owner of, or has any right,
title or interest in the Marks or Copyrighted Works other than the rights granted under this
Agreement. Any unauthorized use of the Marks or Copyrighted Works by Franchisee will be a
breach of this Agreement and will constitute an infringement of the rights of Company and HDN
in and to the Marks and/or in the Copyrighted Works. Upon the expiration or termination of
this Agreement for any reason, Franchisee will have no claim whatsoever against Company or HDN
for compensation for any goodwill associated with the Marks and Copyrighted Works.
	 
	8.2	 	Franchisee will use the Marks and Copyrighted Works only in such form and manner as is
expressly authorized by Company or HDN from time to time, and Franchisee will follow Company
or HDN’s instructions regarding proper usage of the Marks in all respects. Franchisee will
ensure that all Copyrighted Works used hereunder bear an appropriate copyright notice under
the Universal Copyright Convention or other copyright laws as prescribed by Company or HDN.
Company or HDN may, by notice to Franchisee, at any time change or withdraw any of the Marks
and Copyrighted Works or designate new Marks or works in which copyright subsists, and
Franchisee will implement such changes, withdrawals and additions within the period specified
in the notice and at Franchisee’s expense.

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	8.3	 	Franchisee will not apply for or assist any third party in applying for, or seek to apply
for, registration of any of the Marks, or any mark which is substantially identical or
confusingly similar to the Marks or any of the Copyrighted Works, or Copyrighted Works or any
portion thereof or Company’s or HDN’s proprietary rights in the Confidential Information
anywhere in the world.
	 
	8.4	 	Franchisee will do nothing to prejudice, damage or contest the validity of the Marks (and
registration thereof), the Copyrighted Works, the goodwill associated with the Marks and the
Copyrighted Works, and Company and HDN’s proprietary rights in the Confidential Information.
Franchisee will cooperate fully with Company in the protection and defense of the Marks and
the Copyrighted Works. Franchisee will immediately notify Company of any apparent
infringement of or challenge to Franchisee’s use of any Mark or Copyrighted Work, or claim by
any person of any rights in any Mark or a confusingly or deceptively similar trademark,
service mark or other item of intellectual property or Copyrighted Work. Franchisee will not
communicate with any person other than its counsel and local governmental authorities (if
required), Company and/or its counsel with respect to any such infringement, challenge or
claim. Company has sole discretion to take such action as it deems appropriate in connection
with any such infringement, challenge or claim of rights, and the right to control exclusively
any settlement or legal processing arising out of any such infringement, challenge or claim or
otherwise relating to any Mark or Copyrighted Work. Any award, or portion of an award,
recovered by Company and/or HDN in any such action or proceeding shall belong solely to
Company and/or HDN.
	 
	9.	 	CONFIDENTIALITY AND EXCLUSIVE RELATIONSHIP
	 
	9.1	 	Franchisee will at all times during and after the Term keep confidential and not disclose to
any person, other than with Company’s prior written approval, the terms of this Agreement and
any related agreements, the System Standards, the Manuals, all other materials containing or
referring to the Marks or Copyrighted Works and all other information concerning the Krispy
Kreme System, the Marks or Copyrighted Works, the Products or Non-Core Products, or Company’s
business and affairs which may come to Franchisee by any means during the Term. Company may
disclose the Manuals to Franchisee by any means during the Term. Franchisee may disclose the
Manuals to Franchisee’s employees, on a need-to-know basis, only for the purposes of operating
the STORE and provided that Franchisee at all times uses best endeavors to ensure that
Franchisee’s employees retain in confidence the Manuals and any other materials or information
disclosed to them with Company’s approval. This obligation of confidentiality does not apply
in respect of information in the public domain or previously known to Franchisee otherwise
than by breach of any obligation of confidentiality, or disclosure required by law or an order
of any court or tribunal. Franchisee acknowledges that any breach of this obligation of
confidentiality may cause substantial irreparable damage to Company and that, in addition to
damages or other monetary compensation, injunctive or other equitable or immediate relief may
be appropriate.

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	9.2	 	Franchisee acknowledges that Company has granted Franchises to Franchisee in consideration of
and reliance upon Franchisee’s agreement that it and its Owners will deal exclusively with
Company. Franchisee therefore agrees that, during the Term, neither Franchisee nor any of its
Owners will, anywhere in the world: (a) have any direct or indirect Ownership Interest in any
Competitive Business (this restriction is not applicable to the ownership of shares of a class
of securities listed on a stock exchange or traded on a public stock market that represent
less than three percent (3%) of the number of shares of that class of securities issued and
outstanding); (b) perform services as a director, officer, manager, employee, consultant,
representative, agent or otherwise for any Competitive Business; or (c) recruit or hire any
person who is Company’s employee or the employee of any Krispy Kreme Store or who has been
Company’s employee or the employee of any Krispy Kreme Store within the past six (6) months
without obtaining prior written permission from Company or that person’s employer. Franchisee
acknowledges and agrees that the failure of any person or entity restricted by this Section to
comply with this Section will constitute a breach of this Agreement by Franchisee.
	 
	10.	 	ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS
	 
	10.1	 	Franchisee will, at its expense, retain all records relating to the development and operation
of the STORE. Franchisee will furnish to Company via the medium Company prescribes from time
to time, in a form consistent with its then-current accounting practices and procedures: (a)
weekly reports of the STORE’s sales, cost of goods sold, labor expense and number of
transactions by 12:00 noon (Eastern Standard Time) on Tuesday of each week for the preceding
week; (b) within thirty (30) days after the end of each month, an operating income statement
of Franchisee for such month and fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied in the geographic area within which the
STORE is located; (c) within forty-five (45) days after the end of each fiscal quarter, a
balance sheet and income statement of Franchisee for such quarter and fiscal year to date,
prepared in accordance with generally accepted accounting principles consistently applied in
the geographic area within which the STORE is located; (d) within one hundred twenty days
(120) days after the end of Franchisee’s fiscal year, an income statement for the STORE for
such fiscal year (reflecting all year-end adjustments), and a statement of cash flow of the
STORE, prepared in accordance with generally accepted accounting principles consistently
applied in the geographic area within which the STORE is located; and (e) upon request by
Company, such other data, reports, information and supporting records as Company may from time
to time prescribe.
	 
	10.2	 	Franchisee agrees to maintain and to furnish to Company, upon request, complete copies of all
withholding, income, sales, value added, use and service tax returns filed by Franchisee
reflecting activities of the STORE. Company has the right to (a) disclose data derived from
such reports without identifying Franchisee or the location of the STORE; (b) require
Franchisee to have audited financial statements prepared on an annual basis; and (c) to access
all cash registers/computer terminals and Franchisee’s computer system and retrieve all
information relating to the STORE, as often as it deems appropriate.

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	 	 	Franchisee will take such action as may be necessary to provide such access to Company.
Furthermore, Franchisee will immediately report to Company any events or developments which
may have a significant or material adverse impact on the operation of the STORE,
Franchisee’s performance under this Agreement, or the goodwill associated with the Marks and
Krispy Kreme Stores. Franchisee will sign and verify as correct each report and financial
statement submitted by Franchisee in the manner prescribed by Company.
	 
	10.3	 	Company will comply with all applicable consumer privacy and data protection laws and
regulations and with any consumer privacy and data protection policies of Company in effect
from time to time, including without limitation all laws, regulations and policies relating to
any transfer of personal information by Franchisee to Company. Franchisee acknowledges and
agrees that it is solely responsible for determining whether its data processing policies
relating to international transfers of personal information are in compliance with all
applicable laws and regulations. Franchisee will immediately notify Company if Franchisee
discovers that its or Company’s consumer privacy and data protection policies applicable to
Franchisee are not in conformity with applicable laws and regulations, including without
limitation all laws and regulations relating to any transfer of personal information by
Franchisee to Company.
	 
	10.4	 	Company has the right to audit at any time during regular business hours, and without prior
notice to Franchisee, to inspect and audit, or cause to be inspected and audited, the
business, financial and tax records of the STORE and Franchisee. Franchisee will fully
cooperate and cause its employees and agents to fully cooperate with representatives of
Company and independent accountants hired by Company to conduct any such inspection or audit.
Company’s right to audit includes, without limitation, the right to access Franchisee’s
computer system. In the event any such inspection or audit reveals an understatement of the
Gross Sales of the STORE, Franchisee will pay to Company, within fifteen (15) days after
receipt of the inspection or audit report, the Royalty payments due on the amount of such
understatement, plus interest (at the rate and on the terms provided in this Agreement) from
the date originally due until the date of payment. Further, in the event such inspection or
audit is made necessary by the failure of Franchisee to timely furnish any reports or
supporting records required to be submitted under this Agreement or if an understatement of
Gross Sales for the period of any audit is determined by any such audit or inspection to be
greater than two percent (2%), Franchisee will reimburse Company for the cost of such
inspection or audit, including, without limitation, legal fees, accountants’ fees and the
travel expenses, room and board and per diem charges for employees of Company. The foregoing
remedies are in addition to all other remedies and rights of Company hereunder or under
applicable law.
	 
	11.	 	FRANCHISEE’S OBLIGATIONS
	 
	11.1	 	Franchisee will disclose to Company all ideas, concepts, methods, techniques and products,
including without limitation any developments or improvements to existing ideas, concepts,
methods, techniques and products, conceived or developed by Franchisee, its Owners, employees
and agents relating to the development and operation

12

 

	 	 	of Krispy Kreme Stores. Franchisee hereby grants to Company and agrees to procure from its
Owners, employees and agents who have access to know-how relating to the development and
operation of Krispy Kreme Stores, a perpetual, exclusive, royalty-free and worldwide right
to use such ideas, concepts, methods, techniques and products in all food service businesses
operated by Company, its Affiliates, developers and franchisees. Company has no obligation
to pay Franchisee or any other person with respect to any such ideas, concept, method,
technique or product. Franchisee will not use or allow any other person to use any such
concept, method, technique or product without obtaining Company’s prior written approval.
	 
	11.2	 	Franchisee agrees that the STORE will be under direct, on-premises management by a trained
Managing Director or General Manager (as designated in the Development Agreement) or one of
Franchisee’s store managers, all of whom have completed training to Company’s satisfaction.
	 
	12.	 	PAYMENTS BY FRANCHISEE
	 
	12.1	 	Franchisee will pay all amounts due to Company on each Payment Day pursuant to this
Agreement:

	 	(a)	 	in Dollars or such other currency as Company notifies Franchisee from time to
time using, when applicable, the exchange rate for conversion to the specific currency
which is posted on the day before Payment Day by such bank as is specified by Company
from time to time;
	 
	 	(b)	 	by electronic funds transfer to the bank account specified in Schedule A or in
such other manner as Company notifies Franchisee from time to time; and
	 
	 	(c)	 	without any deduction or set-off and free of any taxes payable in respect of
such payments, other than as required by law.

	12.2	 	Without limiting Company’s right to terminate this Agreement pursuant to Section 14, all
amounts which Franchisee owes to Company or its Affiliates under this Agreement or any related
agreement will bear interest after due date at a rate specified in Schedule A.
	 
	12.3	 	Company reserves the right to apply any of Franchisee’s payments to any of its past due
indebtedness to Company and its Affiliates. Company has the right to set off any amounts
Franchisee or its Owners owe Company against any amounts Company might owe Franchisee or its
Owners, with the exception of any amounts that are the subject of a pending arbitration
proceeding between Company and Franchisee. Franchisee will not withhold payment of any
amounts owed to Company on the grounds of Company’s alleged non-performance of any of its
obligations hereunder. All such claims will, if not otherwise resolved by Company, be
submitted to mediation and arbitration as provided in Section 18 herein.

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	12.4	 	Franchisee will pay promptly when due all taxes, duties, charges and levies payable in
respect of the STORE and all debts and other financial obligations incurred in the operation
of the STORE, including, without limitation, all obligations to suppliers.
	 
	12.5	 	If at any time, legal restriction will be imposed upon the purchase of Dollars of the
transfer to or credit of a non-resident entity with payments in Dollars, Franchisee will
notify Company immediately. Franchisee will use its best efforts to obtain any consents or
authorizations which may be necessary in order to permit timely payments in Dollars of all
amounts payable hereunder. While such restrictions are in effect, Company may require
Franchisee to deposit all amounts due but unpaid as a result of such a restriction in any type
of account, in any bank or institution designated by Company and in any currency designated by
Company. Company will be entitled to all interest earned on such deposits. In the event such
restrictions prevent payment by Franchisee of amounts due hereunder in Dollars for a period of
twelve (12) consecutive months or more, Company may, at its sole and exclusive option,
terminate this Agreement effective upon delivery of notice thereof to Franchisee.
	 
	12.6	 	In the event that any amounts payable by Franchisee to Company hereunder are subject to
withholding or other taxes that Franchisee is required to deduct from such payments,
Franchisee is entitled to deduct such taxes and remit the same to the appropriate governmental
authorities. Within the time required by law, Franchisee will complete all forms prescribed
by governmental authorities with regard to taxes withheld or paid and provide copies thereof
to Company. Furthermore, Franchisee will promptly deliver to Company receipts of applicable
governmental authorities for all such taxes withheld or paid. Franchisee will be responsible
for and will indemnify and hold Company and its Affiliates harmless against any penalties,
interest and expenses incurred by or assessed against Company or its Affiliates as a result of
Franchisee’s failure to withhold such taxes or to remit them to the appropriate taxing
authority. Franchisee will fully and promptly cooperate with Company to provide such
information and records as Company may request in connection with any application by Company
to any taxing authority for tax credits, exemptions or refunds available for any withholding
or other taxes paid or payable by Franchisee. In the event Company is required to refund to
Franchisee any amounts paid hereunder pursuant to the terms and conditions of this Agreement,
Company will not be required to refund that portion of those amounts which were withheld by
Franchisee in order to comply with any applicable tax law unless and until Company receives a
refund of such amounts from the applicable government and/or agency thereof or utilizes a
foreign tax credit which is directly attributable to such amounts on its United States federal
income tax return which is accepted by the United States Treasury or with respect to which the
period within which such credit may be reduced or is allowed has expired.
	 
	12.7	 	All amounts which Franchisee owes to Company or its Affiliates under this Agreement or any
related agreement will bear interest after due date at a rate specified in Schedule B. Such
interest will be payable in the same currency as the principal debt on which interest accrues.
This Subsection does not constitute Company’s agreement to accept such

14

 

	 	 	payments after same are due or a commitment by Company to extend credit to, or otherwise
finance Franchisee’s operation of, the STORE. Franchisee acknowledges that its failure to
pay all such amounts when due will constitute grounds for termination of this Agreement and
the Franchise granted hereunder, as provided in Section 15 hereof, notwithstanding the
provisions of this Subsection.
	 
	13.	 	TRANSFER
	 
	13.1	 	This Agreement is fully transferable by Company and will inure to the benefit of any assignee
or other legal successors to Company’s interest. Franchisee agrees that Company has the
right, from time to time, to delegate the performance of any portion or all of Company’s
obligations and duties under this Agreement to designees, whether the same are Company’s
agents or independent contractors with which Company has contracted to provide these services.
	 
	13.2	 	Neither an Ownership Interest in Franchisee nor Franchisee’s obligations under this
Agreement, the Franchise, the STORE, or the lease for or ownership of the Site, will be
transferred without Company’s prior written approval (which approval will not be unreasonably
withheld).
	 
	13.3	 	Subject to the other provisions of this Section: (a) a Transfer of ownership, possession
control or any other interest in the STORE will be made only in conjunction with a Transfer of
the Franchise. This rule will also apply where the Transfer is one of a series of Transfers
which in the aggregate constitute the Transfer of the STORE; (b) a Transfer of the Franchise
will be made only in conjunction with a Transfer, approved by Company, of this Agreement and
all other franchise agreements between the parties. This rule will also apply where the
Transfer is one of a series of Transfers which in the aggregate constitute the Transfer of the
Franchise; and (c) a Transfer of this Agreement will be made only in conjunction with a
Transfer, approved by Company, of all franchises for Krispy Kreme Stores operated by
Franchisee or its Affiliate.
	 
	13.4	 	If Franchisee determines to sell, assign or transfer an interest in this Agreement, the
Franchise or the STORE, Franchisee will obtain (a) a bona fide, arms length, executed written
offer, (b) an earnest money deposit (in the amount of five percent (5%) or more of the
offering price) from a qualified, responsible, bona fide and fully disclosed purchaser.
Franchisee will immediately submit to Company a true and complete copy of such offer
(conditioned on Company’s first refusal rights) and any proposed ancillary agreements, which
includes details of the payment terms of the proposed sale and the sources and terms of any
financing for the proposed purchase price. The offer must apply only to an interest in this
Agreement, the Franchise and the STORE although the offer may include any other Krispy Kreme
Stores in which Franchisee or any of its Owners have a beneficial interest and any rights
Franchisee or any of its Owners have in any development agreement with Franchisee, and may not
include an offer to purchase any of Franchisee’s (or its Owners’) property or rights other
than incidental to the operation of Krispy Kreme Stores. However, if the offeror proposes to
buy any other property or rights from Franchisee (or its Owners) under a separate,
contemporaneous offer, such

15

 

	 	 	separate, contemporaneous offer must be disclosed to Company, and the price and terms of
purchase offered to Franchisee in the offer for the interest, this Agreement, the Franchise
and the STORE will reflect the bona fide price offered therefor and not reflect any value
for any other property or rights.

        13.4.1 Company has the right, exercisable by written notice delivered to Franchisee
within thirty (30) days from the date of delivery to Company of an exact copy of such offer
(and any ancillary agreements), a complete executed application for Company’s approval of
the Transfer and all other information Company requests, to purchase such interest for the
price and on the terms and conditions contained in such offer, provided that Company may
substitute cash for any form of payment proposed in such offer; Company’s credit will be
deemed equal to the credit of any proposed purchaser and Company will have not less than
ninety (90) days after giving notice to prepare for closing.

        13.4.2 Company will be entitled to purchase such interest subject to all
representations and warranties given by the seller of a business including, without
limitation, representations and warranties as to (a) ownership, condition and title to stock
and/or assets, (b) liens and encumbrances relating to the stock and/or assets, and (c)
validity of contracts and liabilities, contingent or otherwise, of the business being
purchased.

        13.4.3 If Company exercises its right of first refusal, Franchisee and its Owners will,
for a period of two (2) years commencing on the date of closing be bound by the
non-competition covenant contained respectively in this Section and in the form provided in
Exhibit D.

        13.4.4 If Company does not exercise its right of first refusal, Franchisee may complete
the sale to such purchaser pursuant to and on the exact terms of such offer, subject to
Subsections 13.2 and 13.3 of this Agreement, provided that if the sale to such purchaser is
not completed within one hundred twenty (120) days after delivery of such offer to Company,
or if there is any change in the terms of the sale (which Franchisee agrees promptly to
communicate to Company), Company will again have an additional right of first refusal for
thirty (30) days on the same terms and conditions as are applicable to the initial right of
first refusal.

	14.	 	DEFAULT AND TERMINATION
	 
	14.1	 	Company has the right to terminate the Franchise, effective immediately upon delivery of
written notice to Franchisee, if any of the following events occur:

	 	(a)	 	Franchisee or any of its Owners has made any material
misrepresentation or omission in connection with its application for and
purchase of the Franchise;

16

 

	 	(b)	 	Franchisee abandons or fails actively to operate the STORE for
five (5) or more consecutive business days, unless such STORE has been closed
for a purpose Company has approved or because of casualty or government order;
	 
	 	(c)	 	Franchisee (or any of its Owners) makes an unauthorized
Transfer of the Franchise or of an Ownership Interest in Franchisee or the
STORE;
	 
	 	(d)	 	Franchisee (or any of its Owners) is or has been convicted by a
trial court of, or pleads guilty or has pleaded no contest to, a felony or any
other crime or offense that may adversely affect the reputation of Krispy Kreme
Stores, or the goodwill associated with the Marks, or engages in any misconduct
that may adversely affect the reputation of the STORE or other Krispy Kreme
Stores or the goodwill associated with the Marks;
	 
	 	(e)	 	Franchisee violates any health, safety or sanitation law,
ordinance or regulation and does not completely correct such non-compliance or
violation within seventy-two (72) hours, after delivery of written notice
thereof;
	 
	 	(f)	 	Franchisee makes an assignment for the benefit of creditors or
admits in writing its insolvency or inability to pay its debts generally as
they become due; Franchisee consents to the appointment of a receiver, trustee
or liquidator of all or the substantial part of its property; the STORE is
attached, seized, subjected to a writ or distress warrant or levied upon,
unless such attachment, seizure, writ, warrant or levy is vacated within thirty
(30) days; or any order appointing a receiver, trustee or liquidator of
Franchisee or the STORE is not vacated within thirty (30) days following the
entry of such order;
	 
	 	(g)	 	Franchisee (or any of its Owners) engages in any dishonest or
unethical conduct which may adversely affect the reputation of the STORE or
other Krispy Kreme Stores or the goodwill associated with the Marks;
	 
	 	(h)	 	Franchisee knowingly or negligently maintains false records in
respect of the STORE or submits any false report to Company;
	 
	 	(i)	 	Company has terminated any of Franchisee’s development rights
under the Development Agreement or any other Franchise granted to Franchisee
under this Agreement;
	 
	 	(j)	 	Franchisee fails to make payments of amounts due to Company and
does not correct such failure within ten (10) days after delivery of written
notice of such failure; or

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	 	(k)	 	Franchisee (or any of its Owners) fails on three (3) or more
separate occasions within any period of twelve (12) consecutive months to
submit when due reports or other data, information or supporting records, to
pay when due amounts owed to Company or otherwise to comply with the Franchise,
whether or not such failures to comply were corrected after written notice of
such failure was delivered to Franchisee.

	14.2	 	Except as otherwise expressly provided herein, Company has the right to terminate the
Franchise if Franchisee fails to comply with its obligations hereunder and does not correct
such failure within thirty (30) days after written notice of such failure is delivered to
Franchisee, in particular if:

	 	(a)	 	In the event of the dissolution or insolvency, if a legal
entity, of Franchisee or of an Owner of a controlling interest in Franchisee
is not assigned as herein required;
	 
	 	(b)	 	Franchisee surrenders or transfers its control of the operation
of the STORE without Company’s prior written consent;
	 
	 	(c)	 	Franchisee loses the right to possession of the Site and has
not relocated to another site approved by Company within a reasonable period of
time;
	 
	 	(d)	 	Franchisee (or any of its Owners) makes any unauthorized use or
disclosure of any Confidential Information or uses, duplicates (other than for
use in the STORE) or discloses any portion of the Manuals in violation of this
Agreement;
	 
	 	(e)	 	Franchisee (or any of its Owners) makes any unauthorized use of
the Marks, or Copyrighted Works (including, but not limited to, unauthorized
use of the Marks as part of a Website domain name or electronic address or as
part of information available on such Website) or challenges or seeks to
challenge the validity of the Marks;
	 
	 	(f)	 	The guarantor(s) of this Agreement breach the Guaranty and
Assumption of Obligations executed concurrently with this Agreement;
	 
	 	(g)	 	Franchisee fails to pay when due any foreign, federal, state or
local income, service, sales or other taxes due on the operations of the STORE,
unless Franchisee is in good faith contesting its liability for such taxes;
	 
	 	(h)	 	Franchisee sells any food or beverage item that has not been
approved by Company; or
	 
	 	(i)	 	Franchisee (or any of its Owners) fails to comply with any
other obligation of the Franchise or any System Standard.

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	14.3	 	Company has the option, but not the obligation, to cure Franchisee’s default under Subsection
14.2. If Company chooses to exercise such option, then within five (5) days of the date
Franchisee receives notice from Company of the expenses Company incurred in curing
Franchisee’s default, Franchisee shall reimburse Company for all such expenses.
	 
	15.	 	CONSEQUENCES OF TERMINATION OR EXPIRATION
	 
	15.1	 	Immediately upon the expiration or termination of this Agreement, Franchisee will:

	 	(a)	 	pay all amounts owing to Company;
	 
	 	(b)	 	discontinue all use of the Marks and the Copyrighted Works and otherwise cease
holding out any affiliation or association with Company or the Krispy Kreme System
unless authorized pursuant to any other written agreement with Company;
	 
	 	(c)	 	cease using and dispose of all materials bearing the Marks and all proprietary
supplies and confidential information (as described in Section 9 of this Agreement) in
accordance with Company’s instructions unless authorized pursuant to any other written
agreement with Company; and
	 
	 	(d)	 	if Company so requires, de-identify the STORE in accordance with Company’s
instructions.

	15.2	 	Upon termination of this Agreement, neither Franchisee nor any of its Owners will directly or
indirectly, through any entity in which an Owner holds a direct or indirect Ownership
Interest, for a period of two (2) years commencing on the effective date of such termination
or expiration or the date on which Franchisee ceases to conduct its activities under this
Agreement, whichever is later, have any direct or indirect interest as a disclosed or
beneficial owner, investor, partner, director, officer, manager, employee, consultant,
representative, agent, or in any other capacity in any Competitive Business located within
forty (40) kilometers of the Site; or within eight (8) kilometers of any other Krispy Kreme
Store in operation or under construction. The restrictions of this Subsection should not be
construed to prohibit Franchisee, any of its Owners, or any entity in which Owner holds a
direct or indirect Ownership Interest, from (a) having a direct or indirect Ownership Interest
in Krispy Kreme Stores, development agreement or franchise for the development or operation of
Krispy Kreme Stores or from providing services to Krispy Kreme Stores or to Franchisee
pursuant to other agreements with Company or with Franchisee or (b) owning publicly traded
Ownership Interests of a Competitive Business that constitute less than three percent (3%) of
a class of Ownership Interests issued and outstanding.
	 
	15.3	 	Upon termination or expiration (without the grant of a successor franchise) of this
Agreement, Company will have the option, exercisable by giving written notice thereof to
Franchisee within sixty (60) days from the date of such expiration or termination, to purchase
from Franchisee any or all the assets used in the STORE. Company’s right to purchase under
this Subsection includes the leasehold rights (subject to any rights of

19

 

	 	 	approval retained by the owner of the leasehold) to or ownership of the Site. Company or
its assignee will be entitled to all warranties and representations requested by Company
including, without limitation, representations and warranties as to: (a) ownership,
condition and title to assets; (b) liens and encumbrances on the assets, validity of
contracts and agreements; (c) liabilities inuring to Company or affecting the assets,
contingent or otherwise; and (d) a general release referred to below.

	 	15.3.1	 	As a condition of Company’s purchase of the STORE, Franchisee and its Owners further
agree to execute a general release, in form satisfactory to Company, of any and all
claims against Franchisee and its Affiliates, shareholders, officers, directors,
employees, agents, successors and assigns relating to the performance of Company or any
of its Affiliates under this Agreement.
	 
	 	15.3.2	 	Franchisee agrees at Company’s election (a) to sell and assign its leasehold interest
in the Site to Company at fair market value, if any; or (b) if Franchisee is unable to
assign its leasehold interest, to enter into subleases at a fair market rental for the
remainder of the lease term on the same terms (including, without limitation, renewal
options) as the prime leases; or (c) if Franchisee owns the Site, to lease the Site to
Company at a reasonable commercial rent and according to terms comparable with rental
terms for similar leased properties in the marketplace where the Site is located.
	 
	 	15.3.3	 	The purchase price for the assets of the STORE will be their fair market value,
determined as of the date of termination or expiration in a manner consistent with the
reasonable depreciation of leasehold improvements owned by Franchisee and the
equipment, furniture, fixtures, signs, delivery vehicles, materials and supplies. The
STORE’s market value includes, without limitation, the goodwill Franchisee has
developed in the market of the STORE that is independent of the goodwill of the Marks
and the Krispy Kreme System; the length of the remaining term of the lease or sublease
for the Site, if any; and the age and condition of the improvements, equipment,
fixtures, furnishings, décor, signs and delivery vehicles of the STORE. Company may
exclude from the assets purchased hereunder cash or its equivalent and any leasehold
improvements, equipment, furnishings, fixtures, signs, delivery vehicles, materials and
supplies and other assets that are not necessary or appropriate (in function or
quality) to the STORE’s operation or that Company has not approved as a meeting
standards for Krispy Kreme Stores, and the purchase price will reflect such exclusions.
	 
	 	15.3.4	 	If Company and Franchisee are unable to agree on the fair market value of the assets
of the STORE which Company has elected to purchase, the fair market value will be
determined by three (3) independent appraisers who collectively will conduct one (1)
appraisal. Company will appoint one (1) appraiser, Franchisee will appoint one (1)
appraiser, and then those appraisers will appoint the third appraiser. Franchisee and
Company will select their respective appraisers within fifteen (15) days after the
Notification Date, and the two (2) appraisers so chosen will appoint the third
appraiser within fifteen (15) days after the date on which the

20

 

	 	 	 	last of the appointed appraisers is appointed. Company and Franchisee will each
bear the cost of their own appraiser and share equally the fees and expenses of the
third appraiser. Company and Franchisee will instruct the three (3) appraises to
complete their appraisal within thirty (30) days after the third appraiser’s
appointment. The purchase price for the assets of the STORE will be paid at the
closing of the purchase, which will take place no later than ninety (90) days after
determination of the purchase price. At the closing Franchisee will deliver
instruments transferring to Company or its assignee: (a) good and merchantable
title to the assets purchased, free and clear of all liens and charges (other than
liens and charges acceptable to Company or its assignee), with all applicable sales,
value added, and other transfer taxes paid by Franchisee; (b) all licenses and
permits of such STORE which may be assigned or transferred; and (c) the leasehold
interest in (or unencumbered title to) the Site and improvements thereon. If
Franchisee cannot deliver clear title to all of the purchased assets, or if there
are other unresolved issues, the closing of the sale will be accomplished through an
escrow of trust, at the sole discretion of Company.

	15.4	 	In lieu of exercising its option to buy the STORE as provided herein, Company will have the
option to buy from Franchisee any or all of the items of equipment and fixtures that
Franchisee originally purchased from Company, its Affiliates, or its designated suppliers with
respect to the STORE. Franchisee may not sell any of these items without waiver of Company’s
option to purchase the same. The purchase price for such equipment and fixtures will be their
fair market value, determined in the same manner as set forth in Subsection 15.3.3. The
closing purchase of such equipment and fixtures will be accomplished in the same manner
provided in Subsection 15.3.4.
	 
	15.9	 	All obligations of Company and Franchisee, its Owners or their immediate family under this
Agreement, which expressly or by their nature survive or are intended to survive the
termination or expiration of this Agreement, will continue in full force and effect subsequent
to and notwithstanding the termination or expiration until they are satisfied in full or by
their nature expire.
	 
	16.	 	SUCCESSOR FRANCHISE
	 
	16.1	 	Upon expiration of the Term, Company will grant Franchisee a successor franchise if
Franchisee and each of its Owners are in full compliance with the provisions of this Agreement
and provided that the following conditions are met:

	 	(a)	 	Franchisee maintains possession of the Site and agrees to upgrade the STORE to
Company’s then-current standards for Krispy Kreme Stores;
	 
	 	(b)	 	If Franchisee is unable to maintain possession of the Site, or if in Company’s
judgment the STORE should be relocated, and Franchisee secures a substitute site
approved by Company, develops such site in compliance with Company’s then-current
standards for Krispy Kreme Stores, and continues to operate the STORE at the Site until
operations are transferred to the substitute site;

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	 	(c)	 	Franchisee gives Company written notice of its election to acquire a successor
franchise at least six (6) months but not more than twelve (12) months prior to the
expiration of the term of the Franchise;
	 
	 	(d)	 	Franchisee has been in compliance with all of the terms and conditions of the
Franchise through the date of its expiration;
	 
	 	(e)	 	Franchisee and its Owners will execute the terms and conditions of the
agreements Company is then customarily using in connection with the grant of successor
franchises for Krispy Kreme Stores; and
	 
	 	(g)	 	Franchisee and its Owners will execute general releases and deliver them to
Company for acceptance and execution within sixty (60) days after their delivery to
Franchisee, in form satisfactory to Company, of any and all claims against Company and
its Affiliates, shareholders, officers, directors, employees, agents, successors and
assigns.

	16.2	 	Once Company receives notice from Franchisee in accordance with paragraph (c) above, Company
will give Franchisee notice, within ninety (90) days after Company’s receipt of Franchisee’s
notice, of its decision: (a) to grant Franchisee a successor franchise; (b) to grant
Franchisee a successor franchise on the condition that deficiencies of the STORE, and/or in
its operation of the STORE, are corrected; or (c) not to grant Franchisee a successor
Franchise. If Company’s notice states that Franchisee must cure certain deficiencies of the
STORE or its operation as a condition to the grant of a successor franchise, Franchisee will
have thirty (30) days from the receipt of such notice to cure such deficiencies. If
Franchisee does not cure such deficiencies, Company will give Franchisee written notice of a
decision not to grant a successor franchise, based upon Franchisee’s failure to cure such
deficiencies, within thirty (30) days after the expiration of the cure period, provided,
however, that Company will not be required to give Franchisee such notice if Company decides
not to grant Franchisee a successor franchise due to its breach of the Franchise during the
cure period or the thirty (30) day period thereafter. If Company fails to give Franchisee:
(a) notice of deficiencies in the STORE, or in its operation of the STORE, within ninety (90)
days after Company receives Franchisee’s timely election to acquire a successor franchise; or
(b) notice of its decision not to grant a successor franchise within thirty (30) days after
the expiration of the cure period (if such notice is required), Company may extend the term of
the Franchise for such period of time as is necessary in order to provide Franchisee with
either reasonable time to correct deficiencies or the thirty (30) day notice of its refusal to
grant a successor franchise required hereunder.
	 
	17.	 	INDEPENDENT CONTRACTORS/INDEMNIFICATION
	 
	17.1	 	Company and Franchisee understand and agree that this Agreement does not create a fiduciary
relationship between them, that Company and Franchisee are and will be

22

 

	 	 	independent contractors, and that nothing in this Agreement is intended to make either party
a general or special agent, joint venturer, partner, or employee of the other for any
purpose. Franchisee agrees to conspicuously identify itself in all dealings with others as
the owner of the STORE under a franchise Company has granted and will conspicuously and
prominently place such other notices of independent ownership on such forms, business cards,
stationery, advertising and other materials as Company may require from time to time.
	 
	17.2	 	Franchisee will not employ any of the Marks in signing any contract, application for any
license or permit, or in a manner that may result in liability of Company or its Affiliates
for any indebtedness or obligation of Franchisee, nor will Franchisee use the Marks in any way
not expressly authorized herein. Except as expressly authorized in writing, neither Company
nor Franchisee will make any express or implied agreements, warranties, guarantees or
representations, or incur any debt in the name of or on behalf of the other, or represent that
their relationship is other than manufacturer/developer and franchisor/franchisee and neither
Company nor Franchisee will be obligated by or have any liability under any agreements or
representations made by the other that are not expressly authorized in writing, nor will
Company be obligated for any damages to any person or property directly or indirectly arising
out of the development or operation of STORE or Franchisee’s business authorized by or
conducted pursuant to this Agreement.
	 
	17.3	 	During the Term, Franchisee is required to seek approval from Company for certain acts and
activities. Company and Franchisee agree that such approvals by Company do not constitute any
assurance, guarantee, representation or warranty that such acts and activities are sound and
appropriate, and Company (and its Affiliate) decline any responsibility in relation with such
acts and activities which remain Franchisee’s sole responsibility.
	 
	17.4	 	Company will have no liability for any sales, value added, use, service, occupation, excise,
gross receipts, income, property, payroll or other taxes, whether levied upon Franchisee or
the STORE in connection with the sales made or business conducted by Franchisee (except any
taxes Company is required by law to collect from Franchisee). Payment of all such taxes will
be the responsibility of Franchisee.
	 
	17.5	 	Franchisee agrees to indemnify, defend and hold Company, its Affiliates, and their respective
shareholders, directors, officers, employees, agents, successors and assignees (each, an
“Indemnified Party”) harmless against and to reimburse them for: all claims, losses,
obligations and damages described in Subsection 17.6, any and all claims and liabilities of
its customers and other third parties with whom Franchisee deals, directly or indirectly
arising out of this Agreement, any and all taxes described in Subsection 17.4, the development
or operation of the STORE pursuant to this Agreement (including, without limitation, its
breach or violation of any representation, warranty, agreement, contract or commitment
resulting from its signing of this Agreement or performance of any of its obligations under
this Agreement), unauthorized activities conducted in association with the Marks, or the
Transfer of any interest in this Agreement, the

23

 

	 	 	Franchise, or the STORE, to the extent that such claims, obligations, damages, losses or
liabilities do not arise solely from Company’s gross negligence or wrongful conduct.
	 
	17.6	 	For purposes of this Section, “claims” means and includes all obligations, damages
(including, without limitation actual, consequential, special, loss of profits and punitive)
and costs reasonably incurred in the defense of any such claim against the Indemnified Party,
including without limitation reasonable accountants’, attorneys’, attorney assistants’,
arbitrators’ and expert witness fees, costs of investigation and proof of facts, court costs,
other litigation expenses, and travel and living expenses. The Indemnified Party will have
the right to defend any such claim against it or its Affiliates in such manner as Company
deems appropriate or desirable in its sole discretion. This indemnity will continue in full
force and effect subsequent to and notwithstanding the expiration or termination of this
Agreement.
	 
	17.7	 	Under no circumstances will the Indemnified Party be obligated to seek recovery from any
insurer or other third party, or otherwise to mitigate its losses and expenses, in order to
maintain and recover fully a claim against the party against which indemnification is sought
(the “Indemnifying Party”). A failure to pursue such recovery or mitigate a loss, will in no
way reduce or alter the amounts the Indemnified Party may recover from the Indemnifying Party.
	 
	18.	 	DISPUTE RESOLUTION
	 
	18.1	 	If any part of this Agreement is held to be void, invalid or otherwise unenforceable, Company
may elect either to modify the void, invalid or unenforceable part to the extent necessary to
render it legal, valid and enforceable or to sever the void, invalid or unenforceable part, in
which event the remainder of this Agreement will continue in full force and effect.
	 
	18.2	 	If any applicable and binding law or rule of any jurisdiction requires greater prior notice
than is required hereunder for the termination of any rights under this Agreement or the
taking of some other action not required hereunder, the prior notice and/or other action
required by such law or rule will be substituted for the comparable provisions hereof.
	 
	18.3	 	Company and Franchisee acknowledge that certain disputes may arise that they are unable to
resolve, but may be resolved through mediation. To facilitate such resolution, Company and
Franchisee agree that either of them has the right, prior to commencement of an arbitration
proceeding by a party as provided herein, to require that a dispute first be submitted for
non-binding mediation at a mutually agreeable location (if the parties cannot agree on a
location, the mediation will be conducted in New York, New York). Such mediation will be
conducted pursuant to the rules of the American Arbitration Association (“AAA”). The parties
agree that statements made by any party in such mediation proceeding will not be admissible
for any purpose in a subsequent arbitration or other legal proceeding.

24

 

	18.4	 	Subject to Subsection 18.3, and except for controversies, disputes or claims related to or
based on Franchisee’s use of the Marks after the expiration or termination of the Franchise or
Franchisee’s development rights under the Development Agreement, all controversies, disputes
or claims arising between Company, its Affiliates and their respective shareholders, officers,
directors, employees and agents (in their representative capacity) and Franchisee (and its
owners and the guarantors of this Agreement) arising out of or related to the relationship of
the parties hereto, this Agreement or any other agreement between the parties or any provision
of such agreement and the validity thereof, will be submitted for binding arbitration to the
AAA on demand of either party.
	 
	18.5	 	Such arbitration proceedings will be conducted in New York, New York, and, except as
otherwise provided herein, will be heard before a panel of three (3) arbitrators and conducted
in accordance with the then current commercial arbitration rules of the AAA for international
arbitrations. All matters relating to arbitration will be governed by the United States
Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state or foreign
arbitration law.
	 
	18.6	 	Company and Franchisee will each appoint one (1) arbitrator and the two (2) arbitrators so
appointed will appoint a third arbitrator to act as chairman of the tribunal. If a party
fails to nominate an arbitrator within thirty (30) days from the date when a party’s request
for arbitration has been communicated to the other party, such appointment will be made by the
AAA. The two (2) arbitrators thus appointed will attempt to agree upon the third arbitrator
to act as chairman. If said two (2) arbitrators fail to nominate the chairman within thirty
(30) days from the date of appointment of the second arbitrator to be appointed, the chairman
will be appointed by the AAA.
	 
	18.7	 	The arbitrators will have the right to award or include in their award any relief which they
deem proper in the circumstances, including, without limitation, money damages (with interest
on unpaid amounts from date due), specific performance, injunctive relief and attorneys’ fees
and costs, provided that the arbitrators will not have the right to declare any Mark generic
or otherwise invalid or, except as otherwise provided herein, to award exemplary,
consequential, special or punitive damages. The award and decision of the arbitrators will be
conclusive and binding upon all parties hereto and judgment upon the award may be entered in
any court of competent jurisdiction, and Franchisee and Company waive any right to contest the
validity or enforceability of such award.
	 
	18.8	 	The parties further agree to be bound by the provisions of any applicable limitation on the
period of time in which claims must be brought under applicable law or this Agreement,
whichever is less. The parties further agree that in connection with any such arbitration
proceeding each will submit or file all claims which it has against the other party within the
same proceeding as the claim to which it relates. Any such claim which is not submitted or
filed as described above will forever be barred. The parties further agree that arbitration
will be conducted on an individual, not a class-wide basis, and that any arbitration
proceeding between Company and Franchisee will not be consolidated with any other arbitration
proceeding involving Company and any other person.

25

 

	18.9	 	Notwithstanding anything to the contrary contained in this Section 18, each party has the
right, in a proper case, to obtain temporary restraining orders and temporary or preliminary
injunctive relief from a court of competent jurisdiction, provided, however, that the parties
to the dispute agree to submit their dispute for contemporaneous, non-binding mediation as
provided in Subsection 18.3 and, if such dispute cannot be resolved through such mediation and
is subject to arbitration pursuant to the terms of this Section, for arbitration as provided
in this Section. The arbitration provision contained herein will continue in full force and
effect subsequent to and notwithstanding expiration or termination of this Agreement.
	 
	19.	 	NOTICES
	 
	19.1	 	All written notices and reports permitted or required to be delivered by the provisions of
this Agreement or of the Manuals will be deemed so delivered: (a) at the time delivered by
hand, (b) one (1) business day after transmission by telegraph, facsimile or other electronic
system (evidenced by machine generated receipt), (c) one (1) business day after being placed
in the hands of an international commercial courier service for next business day delivery,
(d) or three (3) business days after placement in the United States Mail by registered or
certified mail, return receipt requested, postage prepaid and addressed to the party to be
notified at its most current principal business address of which the party sending the notice
has been notified. All payments and reports required by this Agreement will be directed to
Company at such address, or to such other persons and places, as Company may direct in writing
from time to time. Any required payment or report not actually received by Company during
regular business hours on the date due (or postmarked by postal authorities at least two (2)
days prior thereto) will be deemed delinquent.
	 
	20.	 	MISCELLANEOUS
	 
	20.1	 	This Agreement (including, without limitation, the preambles and Exhibits hereto) together
with the Manuals and Company’s other written policies, constitutes the entire agreement of the
parties, except as provided below, and there are no other oral or written understandings,
representations, warranties or agreements between the parties relating to the subject matter
of this Agreement. If two (2) or more persons are at any time an Owner hereunder, whether as
partners or joint venturers, their obligations and liabilities to Company will be joint and
several. This Agreement may be executed in counterparts, each of which will be deemed an
original.
	 
	20.2	 	This Agreement is binding upon the parties hereto and their respective executors,
administrators, heirs, beneficiaries, assigns and successors in interest, and will not be
modified except by written agreement signed by both Company and Franchisee. The Agreement
will be deemed to be made when accepted on Company’s and Franchisee’s behalf.
	 
	20.3	 	Company and Franchisee may by written instrument unilaterally waive or reduce any obligation
of or restriction upon the other under this Agreement, effective upon delivery

26

 

	 	 	of written notice to the other or such other effective date stated in the notice of waiver.
Any waiver Company or Franchisee grant will be without prejudice to any other rights the
waiving party may have, will be subject to its continuing review and may be revoked, in its
sole discretion, at any time for any reason, effective upon delivery to the other party of
ten (10) days’ prior written notice. The delay or failure of any party to exercise any
right or remedy pursuant to this Agreement will not operate as a waiver of the right or
remedy and a waiver of any particular breach will not be a waiver of any other breach. All
rights and remedies under this Agreement are cumulative and the exercise of one right or
remedy will not limit the exercise of any other right or remedy.
	 
	20.4	 	Company and Franchisee agree that, except to the extent governed by the United States Federal
Arbitration Act (9 U.S.C. §1 et seq.), the United States Trademark Act of 1946
(Lanham Act, 15 U.S.C. § 1051 et seq.), or other United States federal law,
this Agreement and all claims arising from the relationship between the parties will be
governed by the internal laws of the State of New York, exclusive of its choice of law and
conflict of law rules, except that any New York law regulating the sale of franchises or
business opportunities or governing the relationship of a franchisor and its franchisee will
not apply unless such state’s jurisdictional requirements are met independently without
reference to this Subsection. Company and Franchisee agree that any action against Franchisee
arising out of or relating to this Agreement or the enforcement of an arbitration award must
be brought in the United States District Court for the Southern District of New York; and
Franchisee will irrevocably submit to the jurisdiction of such courts and waive any objection
Franchisee may have to either the jurisdiction of or venue in such courts. Notwithstanding
the foregoing, any party may bring an action to obtain a restraining order or temporary or
preliminary injunction, or to enforce an arbitration award, in any court of general
jurisdiction in the state or country in which Franchisee resides or the geographic area in
which the STORE is located.
	 
	20.5	 	If Company incurs expenses in connection with Franchisee’s failure to pay when due amounts
owed to Company, to submit when due any reports, information or supporting records or
otherwise to comply with this Agreement, Franchisee will reimburse Company for costs and
expenses Company incurs, including, without limitation, reasonable accounting, attorneys’,
arbitrators’ and related fees.
	 
	20.6	 	Company and Franchisee have required that this Agreement and all deeds, documents and notices
relating to this Agreement be drawn up in the English language, and any translation of any of
the foregoing into any other language will not be an official version thereof. In the event
of any conflict in interpretation between the English version of this Agreement or any deed,
document or notice relating to this Agreement and a translation thereof, the English version
will control.
	 
	20.7	 	Neither Company nor Franchisee will be liable for loss or damage or deemed to be in breach of
this Agreement if its failure to perform its obligations results from: (1) transportation
shortages, inadequate supply or equipment, products, supplies, labor, material or energy or
the voluntary foregoing of the right to acquire or use any of the foregoing in order to
accommodate or comply with any law, ruling, order, regulation,

27

 

	 	 	requirement, or instruction of any government or any department or agency thereof; (2) acts
of God; or (3) fires, strikes, embargoes, war or riot. Any delay resulting from any of said
causes will extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable, except that said causes will not excuse payment of amounts owed to
Company or designated suppliers at the time of such occurrence or payment of Royalty amounts
due on gross sales of the STORE thereafter. In the event that such causes or occurrences
continue for a period of twelve (12) months or more, Company, at its sole and exclusive
option, may terminate this Agreement, effective upon delivery of notice thereof to
Franchisee.
	 
	20.8	 	Except with respect to (a) each party’s obligation to indemnify the other in accordance with
provisions herein and (b) claims Company brings against Franchisee for its unauthorized use of
the Marks or Copyrighted Works or unauthorized use or disclosure of any Confidential
Information, Company and Franchisee hereby waive to the fullest extent permitted by law, any
right to or claim for any punitive or exemplary damages against the other and agree that in
the event of a dispute between them, each will be limited to the recovery of equitable relief
and to recovery of any actual damages it sustains. Company and Franchisee irrevocably waive
trial by jury in any action, proceeding or counterclaim, whether at law or in equity, brought
by either of them.
	 
	20.9	 	Except for claims (a) bought by Company with regard to Franchisee’s obligations to indemnify
Company in accordance with provisions herein, or (b) arising from Franchisee’s non-payment or
underpayment of amounts Franchisee owes Company pursuant to this Agreement, any and all claims
arising out of or relating to this Agreement or the relationship of Company and Franchisee are
barred unless a judicial proceeding, or a mediation or arbitration proceeding in accordance
with this Agreement, is commenced within one (1) year from the date Company or Franchisee knew
or, exercising reasonable diligence should have known, of the facts giving rise to such
claims, whichever occurs first.
	 
	20.10	 	If any covenant herein which restricts competitive activity is deemed unenforceable by
virtue of its scope in terms of area, business activity prohibited and/or length of time, but
would be enforceable by reducing any part or all thereof, Franchisee and Company (and its
Affiliate) agree that such covenant will be enforced to the fullest extent permissible under
the laws and public policies applied in the jurisdiction the law of which is applicable to the
validity of such covenant.
	 
	20.11	 	The rights of Company and Franchisee hereunder are cumulative and no exercise or enforcement
by either party of any right or remedy hereunder will preclude the exercise or enforcement by
either party is entitled by law to enforce.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement in multiple
originals on the day and year first above written.

	 	 	 	 	 	 	 	 	 	 	 
	KRISPY KREME DOUGHNUT CORPORATION	 	[FRANCHISEE]
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	Name:	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	 	 	 	 	Title:	 	 
	 	 	 	 	 	 	 	 	 	 	 

28

 

EXHIBIT A

LISTING OF OWNERSHIP INTERESTS AND MANAGING DIRECTOR

Ex. A-1

 

EXHIBIT B

ITEMS REQUIRED TO BE PURCHASED FROM COMPANY

Ex. B-1

 

EXHIBIT C

MARKS

Ex. C-1

 

EXHIBIT D

CONFIDENTIALITY AND NON-COMPETITION COVENANTS

Ex. D-1

 

SCHEDULE A

BUSINESS TERMS

	 	 	 
	Company:
	 	Krispy Kreme Doughnut Corporation
	 
	 	 
	Company’s Address:
	 	P.O. Box 83
	 
	 	 
	 
	 	Winston-Salem, North Carolina 27102
	 
	 	 
	Franchisee:
	 	 
	 
	 	 
	Franchisee Address:
	 	 
	 
	 	 
	STORE Address:
	 	 
	 
	 	 
	Currency:
	 	Dollar
	 
	 	 
	Date of Agreement:
	 	_________, 20______
	 
	 	 
	Advertising and
	 	Per year, not less than 3% of STORE’s Gross Sales
	Promotion Contribution:
	 	 
	(Subsection 6.3)
	 	 
	 
	 	 
	Royalty:
	 	6% of Gross Sales
	(Subsection 3.2)
	 	 
	 
	 	 
	Payment Day:
	 	 
	(Subsection 3.2)
	 	 
	 
	 	 
	Bank Account
	 	 
	(Subsection 12.1)
	 	 
	 
	 	 
	Governing Law:
	 	New York
	(Subsection 20.4)
	 	 
	 
	 	 
	Guarantors:
	 	 
	 
	 	 
	In-Term Restraint Area:
	 	Anywhere in the world

	(Subsection 9.2)
	 	 
	 
	 	 
	Initial Franchise Fee:
	 	$25,000
	(Subsection 3.1)
	 	 
	 
	 	 
	Interest Rate:
	 	The lesser of (i) eighteen percent (18%) per
	(Subsection 12.2)
	 	annum or (ii) the highest legal rate permitted by
	 
	 	applicable law.

 

 

	 	 	 
	Post-Term Restraint Area:

	 	A 40 kilometer radius of the Site or within 8
	(Subsection 15.2)

	 	kilometers of any other Krispy Kreme Store in
	 

	 	operation or under construction.
	 
	 	 
	Post-Term Covenant not

	 	2 years
	to Compete Restraint Period:
	 	 
	(Subsection 15.2)
	 	 
	 
	 	 
	Term:

	 	15 years commencing on the date STORE opens for
	(Subsection 2.1)

	 	business.
	 
	 	 
	Transfer Fee:

	 	$25,000 (increased from time to time to reflect
	 

	 	increases in the Consumer Index)

2EX-10.5

 

Exhibit 10.5

KRISPY KREME DOUGHNUT CORPORATION

DEVELOPMENT AGREEMENT

     THIS AGREEMENT is made and entered into on this ___day of ___, 20___, by and
between Krispy Kreme Doughnut Corporation, a North Carolina corporation, with its principal
business address at P.O. Box 83, Winston-Salem, North Carolina 27102 (“Company”) and
_____, a _____, whose
principal business address is _____(“Franchisee”).

BACKGROUND FACTS

Company has developed a system for the operation of store facilities called “Krispy Kreme Stores”
that offer and serve a variety of fresh doughnuts and certain other quality food products under the
trademark and service mark “KRISPY KREME.”

Company grants to certain persons who meet its qualifications and who are willing to undertake the
investment and effort, the right to develop and operate Krispy Kreme Stores within a defined
geographic area offering the Products and other approved products and services and utilizing the
Krispy Kreme System.

Pursuant to the terms of this Agreement, Company grants Franchisee the right to develop and operate
Krispy Kreme Stores within the Development Area. The operation of each Krispy Kreme Store
developed hereunder will be governed by separate Franchise Agreements.

THE PARTIES AGREE:

	1.	 	DEFINITIONS

Affiliate means any person that directly or indirectly owns or controls, that is directly or
indirectly owned or controlled by, or that is under common ownership or control with, Company or
Franchisee.

Agreement Term means the period commencing upon the execution of this Agreement and ending upon the
later of the expiration of the last Development Period or the expiration of any extension granted
pursuant to Section 12, unless terminated earlier in accordance with the provisions of Section 10
hereof.

Approvals means all approvals, authorizations, consents, permits, exemptions, licenses and any
other actions required by law or by any person, company or governmental authority in order for
Franchisee to be able to develop and operate Krispy Kreme Stores within the Development Area.

Competitive Business means a business or enterprise, other than a Krispy Kreme Store, that: (i)
sells yeast raised doughnuts, cake doughnuts, or any other types of doughnuts, miniature doughnuts
or doughnut holes in any distribution channels to any customer for consumption or resale and such
sales constitute ten percent (10%) or more of such business’ revenues; (ii) sells coffee in any
distribution channels to any customer for consumption or resale and such sales

 

 

constitute twenty percent (20%) or more of such business’ revenues; or (iii) grants or has granted
franchises or licenses, or establishes or has established joint ventures, for the development
and/or operation of a business that offers the food products referred to in (i) and (ii) in any
such channel of distribution.

Development Area means the geographic area described in Exhibit A attached hereto.

Development Fee means the non-refundable development fee that Franchisee agrees to pay Company as
set forth in Subsection 2.4 of this Agreement. The aggregate amount of such Development Fee is set
forth in Schedule A.

Development Period means each period of time defined as a Development Period in Exhibit B attached
hereto.

Development Quota means the minimum number of Krispy Kreme Stores Franchisee agrees to have open
and in operation at the end of each Development Period. The Development Quota with respect to each
Development Period is set forth in Exhibit B attached hereto.

Development Rights means the rights granted to Franchisee pursuant to this Agreement with regard to
Franchisee’s rights to develop Krispy Kreme Stores within the Development Area specified in Exhibit
A attached hereto.

Expansion Criteria means Company’s expansion criteria as described in Section 4 of this Agreement
and set forth in Schedule B.

Franchise means the right to operate a Krispy Kreme Store at a specific location within the
Development Area and the right to use the Krispy Kreme System in the operation thereof.

Franchise Agreement means an agreement used by Company in the offer and sale of Franchises for the
operation of a Krispy Kreme Store at a specific location, the current form of which (including all
exhibits, schedules, riders and other agreements used in connection therewith) is attached hereto
as Exhibit C.

Franchise Documents means the Franchise Agreement together with any other documents required by
Company to be executed in connection with the development of Krispy Kreme Stores by Franchisee
pursuant to this Agreement.

Franchise Term means the period during which Franchisee is authorized to operate a Krispy Kreme
Store pursuant to a Franchise unless terminated earlier in accordance with Section 10 of this
Agreement.

Good Standing means that Franchisee is current with all payments due to Company, its Affiliates and
suppliers; has met its obligations under the Development Quota and is not in default of any of its
obligations under this Agreement or any other agreement between the parties.

Krispy Kreme System means the distinctive business formats, methods, procedures, designs, lay-outs,
equipment, mixes, standards and specifications designated by Company for use in

2

 

Krispy Kreme Stores, all of which Company may modify from time to time, along with the Marks.

Managing Director means the managing director of Franchisee’s business designated pursuant to
Subsection 3.3 of this Agreement. The initial Managing Director will be identified in Exhibit D of
this Agreement.

Manuals means such materials (including, without limitation, if applicable, audiotapes, videotapes,
magnetic media, computer software and written materials) that Company generally furnishes to
developers and franchisees from time to time for use in operating Krispy Kreme Stores.

Marks means the trademarks, service marks and other commercial symbols used in the operation of
Krispy Kreme Stores, including, without limitation, the trade and service marks “KRISPY KREME” and
associated logos, as same may be changed, enhanced or supplemented from time to time.

New Concept means concepts, products or stores not contemplated by this Agreement that Company may,
from time to time, notify Franchisee of its intention to promote. New Concepts may include,
without limitation, non-producing stores that only sell the Products, Non-Core Products, and such
other items as Company may approve in advance in writing and that are produced by Franchisee at the
STORES.

Non-Core Products means any product identified by the Marks other than the Products, such as, for
example, ice cream, clothing, hats, cups and other logoed items, etc.

Plans means the final plans, drawings and specifications for the Site and building in respect of a
proposed STORE, including signage, fixtures, furniture, equipment and décor, all to the standards
specified by Company.

Products means a variety of fresh doughnuts (including among others, yeast raised doughnuts, cake
doughnuts, miniature doughnuts and doughnut holes, some of which have various types and flavors of
fillings, glazes or other coatings) as well as certain other food products and beverages
(specifically including, but not limited to, coffee) and food services as identified by Company
from time to time and which are customarily sold in Krispy Kreme Stores.

Site means a physical location that Company has approved as meeting its minimum criteria for the
development and operation of a STORE.

STORE means a Krispy Kreme Store developed and operating within the Development Area pursuant to
this Agreement.

Transfer means with respect to a Franchise, a STORE, this Agreement or the ownership of Franchisee,
any of the following, without limitation, whether voluntary or involuntary, direct or indirect:
(i) an assignment, sale, gift or pledge; (ii) the grant of a mortgage, lien, security interest,
charge, or any encumbrance whatsoever including, without limitation, the grant of a collateral
assignment; and (iii) a transfer that occurs as a result of Franchisee’s insolvency or dissolution
or other transfer by operation of law. The term “Transfer” will not be deemed to

3

 

include (i) the grant of a lien or security interest to secure financing for the acquisition of
equipment, fixtures and supplies for a STORE; (ii) an assignment of a leasehold interest in a Site
in accordance with the terms of this Agreement; or (iii) the relocation of a STORE from one Site to
another Site.

	2.	 	TERM/ FEES /DEVELOPMENT QUOTA
	 
	2.1	 	Company grants Franchisee the right to develop (as long as Franchisee remains in Good
Standing and meets the Expansion Criteria), and Franchisee accepts the obligation to develop,
Krispy Kreme Stores in the Development Area during the Agreement Term and in compliance with
the Development Quota attached as Exhibit B hereto.
	 
	2.2	 	Subject to the right to extend the Agreement Term contained in Section 12 and the Development
Rights granted herein, Company’s obligation to grant Franchises to Franchisee to operate
Krispy Kreme Stores in the Development Area, will expire upon the expiration of the Agreement
Term.
	 
	2.3	 	Franchisee agrees that during the Agreement Term, it will strictly and diligently perform its
obligations hereunder and will continuously exert its best efforts to promote and enhance the
development and operation of Krispy Kreme Stores within the Development Area. Without
limiting the foregoing obligations, Franchisee agrees to meet the Development Quota with
respect to each Development Period, as set forth in Exhibit B attached hereto.
	 
	2.4	 	Franchisee will pay to Company the Development Fee as set forth in Schedule A. The
Development Fee will be fully earned by Company upon execution of this Agreement.
	 
	2.5	 	For each Franchise granted to Franchisee pursuant to this Agreement during the Agreement
Term: (1) the Initial Franchise Fee (defined in the Franchise Agreement) will be as set forth
in Schedule A; and (2) royalties (defined in the Franchise Agreement) and other fees will be
as set forth in the Franchise Agreement.
	 
	3.	 	BUSINESS PLAN/ APPROVALS/ HUMAN RESOURCES/ NEW CONCEPTS
	 
	3.1	 	Prior to execution of this Agreement, and on an annual basis thereafter, Franchisee will
submit for review and approval by Company, a written business plan for the development and
financing of Krispy Kreme Stores in the Development Area in accordance with the Development
Quota.
	 
	3.2	 	Franchisee will secure and maintain in force in its name all required licenses, permits and
certificates relating to the conduct of its business pursuant to this Agreement. Franchisee
will at all times remain in Good Standing. Franchisee will comply with all applicable laws,
ordinances and regulations. Franchisee will refrain from any business or advertising practice
that may be injurious to the business or reputation of Company or Franchisee and the goodwill
associated with the Marks and Krispy Kreme Stores.
	 
	3.3	 	Concurrently with the execution of this Agreement, Franchisee will designate a Managing
Director of its business pursuant to this Agreement. The initial Managing

4

 

	 	 	Director is identified in Exhibit D attached hereto. Franchisee and the Managing Director
will use their full-time efforts to fulfill Franchisee’s obligations under this Agreement
and will not directly or indirectly engage in any other business or activity that requires
any significant management responsibility or time commitments, or that otherwise conflict
with Franchisee’s obligations under this Agreement. If the Managing Director is terminated
in that role, or if the Managing Director does not carry out his or her responsibilities or
otherwise perform in accordance with this Agreement, Franchisee will promptly designate a
replacement.
	 
	4.	 	EXPANSION CRITERIA
	 
	4.1	 	Franchisee must comply with the Expansion Criteria each year during the Agreement Term.
Company will review Franchisee’s compliance with the Expansion Criteria on an annual basis.
	 
	4.2	 	If Company determines after its annual review that Franchisee is not in compliance with the
Expansion Criteria, Company will notify Franchisee of its non-compliance and Franchisee will
have forty-five (45) days from the receipt of such notice to remedy such non-compliance.
	 
	4.3	 	At the end of the forty-five (45) day period, Company will undertake a further review, at
Franchisee’s cost, to determine whether Franchisee has remedied its non-compliance to
Company’s satisfaction.
	 
	4.4	 	Franchisee’s ongoing development rights under this Agreement will be suspended and Franchisee
will not be entitled to enter into any new commitments in respect of any proposed sites until
Company has undertaken the further review pursuant to Section 4.3 and has notified Franchisee
in writing that Company is satisfied that Franchisee is in compliance with the Expansion
Criteria.
	 
	4.5	 	Franchisee acknowledges that the forty-five (45) day cure period provided for under this
Section applies only for the purposes of determining Franchisee’s compliance with the
Expansion Criteria and will not limit Company’s rights or ability to act in respect of any
breach of any other provision of this Agreement or of any provision of any Franchise Agreement
between the parties.
	 
	5.	 	STORE DEVELOPMENT PROCEDURE
	 
	5.1	 	Provided that Franchisee (a) is then in full compliance with all of the terms and conditions
of this Agreement and is otherwise in Good Standing with Company and (b) has obtained written
confirmation of Company’s approval of sites for the STORES, Company agrees to offer Franchisee
one (1) or more Franchises to develop and operate one (1) or more STORES subject to the
obligations set forth in this Agreement, and Company agrees to offer to Franchisee the right
to use the Krispy Kreme System in the operation thereof. Franchisee will not take any steps
toward developing a STORE without first obtaining Company’s written approval of the site for
the proposed STORE. The following approval procedure will apply:

5

 

	 	(a)	 	Franchisee will submit a written site evaluation to Company, including the site
location, dimensions, building type and placement, proposed layout and other relevant
documents and information relating to the site as may be required by Company.
	 
	 	(b)	 	Within thirty (30) days of receipt of the site evaluation, Company will
complete its evaluation of the proposed site and notify Franchisee of its approval or
rejection of the proposed site and, if approved, any conditions applying to the
approval.
	 
	 	(c)	 	Within thirty (30) days of receipt of Company’s notice of approval of any
proposed site, Franchisee will:

	 	(i)	 	confirm to Company that it has the necessary rights to the site
to enable it to develop and operate the STORE, and in the case of a leasehold
interest, on terms and conditions approved by Company; and
	 
	 	(ii)	 	submit to Company two (2) copies of the proposed Plans.

	 	(d)	 	Within fourteen (14) days of receipt of the proposed Plans, Company will notify
Franchisee of any modifications to the Plans required by Company. Franchisee must
resubmit the modified Plans to Company within ten (10) days of receipt of Company’s
notice of the modifications. Within ten (10) days of receipt of the modified Plans,
Company will notify Franchisee whether or not the Plans have been given final approval.
	 
	 	(e)	 	Franchisee will be responsible for ensuring that all necessary Approvals have
been obtained in respect of the Plans.

	5.2	 	Prior to the commencement of construction of the relevant STORE, Franchisee will execute and
deliver to Company the Franchise Documents.
	 
	5.3	 	Within six (6) months of receipt of Company’s notice and approval of a Site, Franchisee will
complete the construction of the STORE so that it is ready for opening and will notify Company
of its intention to open the STORE for business. Franchisee will not open any STORE for
business without first obtaining Company’s written approval to open.
	 
	5.4	 	If Company fails to notify Franchisee of any approval, disapproval or required modifications
within the time periods applying to Company in this Section 5, Company’s approval will be
deemed to have been given.
	 
	5.5	 	All costs associated with the development by Franchisee of any STORE pursuant to this
Agreement will be borne by Franchisee.
	 
	5.6	 	Company may withdraw, without liability, its offer to grant a Franchise for a STORE and may
withdraw its approval of a Site if Franchisee is in default under this Agreement or any other
agreement between the parties.

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	6.	 	TRANSFER
	 
	6.1	 	This Agreement is fully transferable by Company and will inure to the benefit of any assignee
or other legal successor to Company’s interests. Franchisee agrees that Company will have the
right, from time to time, to delegate the performance of any portion of or all of its
obligations and duties under this Agreement to designees, whether the same are Company’s
agents or independent contractors with which Company has contracted to provide these services.
	 
	6.2	 	Franchisee understands and acknowledges (and hereby represents and warrants that its owners
understand and acknowledge) that the rights and duties created by this Agreement are personal
to Franchisee and its owners and that Company has entered into this Agreement in reliance upon
the character, skill, attitude, business ability, and financial capacity of Franchisee and its
owners. Therefore, neither this Agreement, a Franchise, a STORE, any ownership interest in
Franchisee, nor the lease for or ownership of a Site of a STORE, will be transferred without
Company’s prior written approval. Subject to the other provisions of this Section:

	 	(a)	 	a Transfer of ownership, possession or control of a STORE will be made only in
conjunction with a Transfer of the Franchise related to that STORE. This rule also
applies where the Transfer is one of a series of Transfers which in the aggregate
constitute the Transfer of a STORE;
	 
	 	(b)	 	a Transfer of a Franchise will be made only in conjunction with a Transfer,
approved by Company, of this Agreement and all Franchises granted under this Agreement.
This rule also applies where the Transfer is one of a series of Transfers which in the
aggregate constitute the Transfer of a Franchise; and
	 
	 	(c)	 	a Transfer of this Agreement will be made only in conjunction with a Transfer
of all Franchises for STORES located in the Development Area. This rule also applies
where the Transfer is one of a series of Transfers which in the aggregate constitute
the Transfer of this Agreement.

	7.	 	RIGHT OF FIRST REFUSAL
	 
	7.1	 	If Franchisee determines to sell, assign or transfer an interest in this Agreement or the
Development Rights granted hereunder or a controlling ownership interest in Franchisee, in
accordance with Section 6 of this Agreement, Franchisee will obtain (a) a bona fide, arms
length, executed written offer and (b) an earnest money deposit (in the amount of five percent
(5%) or more of the offering price) from a qualified, responsible, bona fide and fully
disclosed purchaser. Franchisee will immediately submit to Company a true and complete copy
of such offer (conditioned on Company’s first refusal rights) and any proposed ancillary
agreements, which include details of the payment terms of the proposed sale and the sources
and terms of any financing for the proposed purchase price.
	 
	7.2	 	Company will have the right, exercisable by written notice delivered to Franchisee within
thirty (30) days from the date of delivery to Company of an exact copy of such offer (and any
ancillary agreements), a complete executed application for Company’s approval of

7

 

	 	 	the Transfer and all other information Company requests, to purchase such interest for the
price and on the terms and conditions contained in such offer, provided that Company may
substitute cash for any form of payment proposed in such offer; Company’s credit will be
deemed equal to the credit of any proposed purchaser and Company will have at least ninety
(90) days after giving notice to prepare for closing.
	 
	7.3	 	Whether or not contained in the offer documents, Company will be entitled to purchase such
interest in reliance on, and Franchisee shall give, in writing, all representations and
warranties customarily given by the seller of a business including, without limitation,
representations and warranties as to (a) ownership, condition and title to stock and/or
assets, (b) liens and encumbrances relating to the stock and/or assets, and (c) validity of
contracts and liabilities, contingent or otherwise, of the business being purchased.
	 
	7.4	 	If Company does not exercise its right of first refusal, Franchisee may complete the sale to
such purchaser pursuant to and on the exact terms of such offer, subject to Subsection 6.2 of
this Agreement, provided that if the sale to such purchaser is not completed within one
hundred twenty (120) days after delivery of such offer to Company, or if there is any change
in the terms of the sale (which Franchisee agrees promptly to communicate to Company), Company
will again have an additional right of first refusal for thirty (30) days on the same terms
and conditions as are applicable to the initial right of first refusal.
	 
	8.	 	COMPANY’S RIGHTS AND LIMITATIONS/EXCLUSIVITY
	 
	8.1	 	Except as hereinafter provided, and provided that Franchisee is in Good Standing, neither
Company nor its Affiliates will, during the Agreement Term, own or operate, or grant
franchises for the ownership or operation of Krispy Kreme Stores in the Development Area.
Upon the termination or expiration of the Agreement Term and subject, in the case of
expiration, to Company’s right of first refusal, Company and its Affiliates will have the
right to own and operate, and to grant others development rights and franchises to own and
operate, Krispy Kreme Stores within the Development Area. Except as specifically provided
herein, Company grants no other territorial or other rights to Franchisee.
	 
	8.2	 	Except as expressly limited by Subsection 8.1 above, Company (on behalf of itself and its
Affiliates) retains all rights with respect to Krispy Kreme Stores, the Marks and the sale of
Products and services, anywhere in the world, including, without limitation the right to:

	 	(a)	 	operate or grant others the right to operate Krispy Kreme Stores at any
location and on such terms and conditions Company deems appropriate;
	 
	 	(b)	 	acquire and operate, or be acquired by, a business operating one or more
businesses located or operating within the Development Area which compete with the
STORES;
	 
	 	(c)	 	develop, manufacture, distribute and/or sell, and license others to develop,
market, distribute and/or sell, Products to customers located within the

8

 

	 	 	Development Area through any channel of distribution other than through retail
stores physically located within the Development Area; and
	 
	(d)	 	develop, manufacture, distribute and/or sell, and license others to develop,
market, distribute and/or sell Non-Core Products to customers located within the
Development Area through any channel of distribution including through any retail
stores physically located within the Development Area.

	8.3	 	Franchisee acknowledges that Company has granted Development Rights to Franchisee in
consideration of and reliance upon Franchisee’s agreement that it and its owners will deal
exclusively with Company. Franchisee therefore agrees that, during the Agreement Term,
neither Franchisee, nor any of its owners will, anywhere in the world: (a) have any direct or
indirect ownership interest in any Competitive Business (this restriction is not applicable to
the ownership of shares of a class of securities listed on a stock exchange or traded on a
public stock market that represent less than three percent (3%) of the number of shares of
that class of securities issued and outstanding); (b) perform services as a director, officer,
manager, employee, consultant, representative, agent or otherwise for any Competitive
Business; or (c) recruit or hire any person who is Company’s employee or the employee of any
Krispy Kreme franchisee or who has been Company’s employee or the employee of any Krispy Kreme
franchisee within the past six (6) months without obtaining prior written permission from
Company or that person’s employer. Franchisee acknowledges and agrees that the failure of any
person or entity restricted by this Section to comply with this Section will constitute a
breach of this Agreement by Franchisee.
	 
	9.	 	MARKS / COPYRIGHTED WORKS / CONFIDENTIAL INFORMATION
	 
	9.1	 	Notwithstanding any provision to the contrary contained herein, it is understood and agreed
that this Agreement does not grant Franchisee any right to use the Marks or any of Company’s
confidential information (as further defined in the Franchise Agreement). Further, it is
understood and agreed that this Agreement does not grant Franchisee and Franchisee does not
have any right to any copyrighted work (as further defined in the Franchise Agreement) or
patent which Company now own or may hereinafter own. Rights to the Marks, confidential
information or copyrighted works are granted only under the Franchise Agreements to be
executed by Company and Franchisee.
	 
	10.	 	TERMINATION AND EXPIRATION OF DEVELOPMENT RIGHTS
	 
	10.1	 	Company will have the right to terminate the Development Rights, effective upon delivery of
notice of termination to Franchisee, if:

	 	(a)	 	Franchisee or any of its owners are convicted by a court, plead guilty to or do
not contest any charge, of any crime or offense that may adversely affect the
reputation of Krispy Kreme Stores or the goodwill associated with the Marks;
	 
	 	(b)	 	any person makes an unauthorized Transfer of this Agreement, a Franchise or an
ownership interest in Franchisee or the STORE;

9

 

	(c)	 	Franchisee (or any of its owners) fails on two (2) or more separate occasions
within any period of twelve (12) consecutive months to comply with this Agreement,
whether or not such failures to comply are corrected after written notice thereof is
delivered to Franchisee;
	 
	(d)	 	Franchisee is unable to pay its debts as and when they become due or makes an
assignment for the benefit of creditors or admits in writing its insolvency or
inability to pay its debts generally as they become due; Franchisee consents to the
appointment of a receiver, trustee or liquidator of all or the substantial part of its
property; a STORE is attached, seized, subjected to a writ or distress warrant or
levied upon, unless such attachment, seizure, writ, warrant or levy is vacated within
thirty (30) days; or any order appointing a receiver, trustee or liquidator of
Franchisee or a STORE is not vacated within thirty (30) days following the entry of
such order; or
	 
	(e)	 	Company notifies Franchisee that Franchisee has breached any term or condition
of this Agreement and Franchisee does not fully cure the breach within the cure period
which is specified by Company in the notice.

	10.2	 	Company will have the right to terminate the Development Rights if Franchisee fails to comply
with its obligations hereunder and does not correct such failure within thirty (30) days after
written notice of such failure is delivered to Franchisee, in particular if:

	 	(a)	 	Franchisee or any of its owners, violate the restrictions on holding interests
in or performing services for Competitive Businesses, or owners who have access to
Company’s confidential information violate the covenants concerning competition and
confidentiality contained in a form of confidentiality and non-competition agreement
prescribed by Company from time to time;
	 
	 	(b)	 	Franchisee fails to satisfy its cumulative development obligations as set forth
in Exhibit B attached hereto, unless such failure is (i) the direct result of Company’s
non-performance under this Agreement or (ii) force majeure;
	 
	 	(c)	 	Company determines that Franchisee is not in compliance with the Expansion
Criteria as set forth in Schedule B; or
	 
	 	(d)	 	Company has delivered a notice of termination of any Franchise in accordance
with the terms and conditions of any Franchise Agreement; provided, however, that, upon
the request of Franchisee, the period for correcting such failure may be extended, in
Company’s sole discretion, for one or more thirty (30) day periods, provided that
Franchisee is at the time of such request making good faith efforts to correct such
failure.

	10.3	 	Company’s exercise of any of its rights under this Section 10 will be in addition to and not
in limitation of any other rights and remedies it may have in the event of any breach or
default by Franchisee.

10

 

	11.	 	CONSEQUENCES OF TERMINATION OR EXPIRATION
	 
	11.1	 	Upon the termination of the Development Rights or the last Franchise, whichever is later:

	 	(a)	 	Franchisee will not directly or indirectly at any time or in any manner (except
with respect to other Krispy Kreme Stores Franchisee lawfully owns and operates)
identify itself or its business as a current or former Krispy Kreme Store; use any
Mark, any colorable imitation thereof or other indicia of a Krispy Kreme Store in any
manner or for any purpose, or utilize for any purpose any trade name, trade or service
mark, other commercial symbol or trade dress that suggests or indicates a connection or
association with Company including, but not limited to, by use of a website; and
	 
	 	(b)	 	Franchisee will take such action as may be required to cancel or, at Company’s
request, transfer to Company or its designee all fictitious, assumed name or equivalent
registrations relating to its use of any Mark.

	11.2	 	Upon termination or expiration of the Development Rights or the last Franchise, whichever is
later, Franchisee, its owners and its employees will immediately cease to use and will
maintain the absolute confidentiality of any confidential information disclosed to or
otherwise learned or acquired by Franchisee or its owners or employees, will refrain from
using such confidential information in any business or otherwise and will return to Company
all copies of the Manuals and any other confidential materials which have been loaned or made
available to Franchisee by Company pursuant to this Agreement or any Franchise.
	 
	11.3	 	Upon expiration of the Agreement Term or upon Company’s termination of the Development Rights
in accordance with the terms and conditions of this Agreement or Franchisee’s termination of
the Development Rights without cause, neither Franchisee nor any of its owners will for a
period of two (2) years commencing on the effective date of such termination or expiration, or
the date on which Franchisee ceases to conduct its activities hereunder, whichever is later,
directly or indirectly:

	 	(a)	 	have any direct or indirect interest as a legal or beneficial owner of, or
perform services as a director, officer, manager, employee, consultant, representative,
agent, or otherwise for any Competitive Business located or operating within the Site
of any STORE, the Development Area, or eight (8) kilometers of any other Krispy Kreme
Store in operation or under construction on the effective date of the termination or
expiration of this Agreement;
	 
	 	(b)	 	own or hold the right to vote any record or beneficial ownership interest of a
Competitive Business located or operating within the Site of any STORE, the Development
Area, or eight (8) kilometers of any other Krispy Kreme Store in operation or under
construction on the effective date of the termination or expiration of this Agreement;
or
	 
	 	(c)	 	employ or seek to employ, any person who is employed (as an employee or
independent contractor) by Company, its Affiliates or by any other developer or

11

 

	 	 	franchisee of Krispy Kreme Stores, nor induce nor attempt to induce any such person
to leave said employment without the prior written consent of such person’s
employer.

	12.	 	EXTENSION OF AGREEMENT TERM
	 
	12.1	 	If Franchisee is in Good Standing and meets the Expansion Criteria as set forth in Schedule
B, then, no earlier than twelve (12) months before the expiration of the Agreement Term,
Company will forward to Franchisee a written proposal for the grant to Franchisee of rights to
develop additional Krispy Kreme Stores in the Development Area. Such written proposal, which
will be consistent with Company’s then current fees and operating practices, will indicate the
number and general location of the additional Krispy Kreme Stores to be opened and the order
and time frame in which they are to be opened. Franchisee will be given a right of first
refusal to execute Company’s written proposal. Franchisee must exercise its right of first
refusal by providing written notice to Company within sixty (60) days of the date of receipt
of Company’s written proposal. If Franchisee accepts Company’s written proposal, the parties
will enter into good faith negotiations to finalize the remaining details of the successor
development agreement. If Franchisee fails to accept Company’s written proposal as required
herein, Company will have the right to develop, or grant rights to another to develop,
additional Krispy Kreme Stores in the Development Area.
	 
	13.	 	ENFORCEMENT
	 
	13.1	 	If any part of this Agreement is held to be void, invalid or otherwise unenforceable, Company
may elect either to modify the void, invalid or unenforceable part to the extent necessary to
render it legal, valid and enforceable or to sever the void, invalid or unenforceable part, in
which event the remainder of this Agreement will continue in full force and effect.
	 
	13.2	 	If any applicable and binding law or rule of any jurisdiction requires greater prior notice
than is required hereunder for the termination of any rights under this Agreement or the
taking of some other action not required hereunder, the prior notice and/or other action
required by such law or rule will be substituted for the comparable provisions hereof.
	 
	13.3	 	Company and Franchisee acknowledge that certain disputes may arise that they are unable to
resolve, but may be resolved through mediation. To facilitate such resolution, Company and
Franchisee agree that either of them has the right, prior to commencement of an arbitration
proceeding by a party as provided herein, to require that a dispute first be submitted for
non-binding mediation at a mutually agreeable location (if the parties cannot agree on a
location, the mediation will be conducted in Winston-Salem, North Carolina). Such mediation
will be conducted pursuant to the rules of the American Arbitration Association (“AAA”). The
parties agree that statements made by any party in such mediation proceeding will not be
admissible for any purpose in a subsequent arbitration or other legal proceeding.

12

 

	13.4	 	Subject to Subsection 13.3, and except for controversies, disputes or claims related to or
based on Franchisee’s use of the Marks after the expiration or termination of the Development
Rights or any Franchise, all controversies, disputes or claims arising between Company, its
Affiliates and their respective shareholders, officers, directors, employees and agents (in
their representative capacity) and Franchisee (and its owners and the guarantors of this
Agreement) arising out of or related to the relationship of the parties hereto, this Agreement
or any other agreement between the parties or any provision of such agreement and the validity
thereof, will be submitted for binding arbitration to the AAA on demand of either party.
	 
	13.5	 	Such arbitration proceedings will be conducted in New York, New York, and, except as
otherwise provided herein, will be heard before a panel of three (3) arbitrators and conducted
in accordance with the then current commercial arbitration rules of the AAA for international
arbitrations. All matters relating to arbitration will be governed by the United States
Federal Arbitration Act (9 U.S.C. § 1 et seq.) and not by any state or foreign
arbitration law.
	 
	13.6	 	Company and Franchisee will each appoint one (1) arbitrator and the two (2) arbitrators so
appointed will appoint a third arbitrator to act as chairman of the tribunal. If a party
fails to nominate an arbitrator within thirty (30) days from the date when a party’s request
for arbitration has been communicated to the other party, such appointment will be made by the
AAA. The two (2) arbitrators thus appointed will attempt to agree upon the third arbitrator
to act as chairman. If said two (2) arbitrators fail to nominate the chairman within thirty
(30) days from the date of appointment of the second arbitrator to be appointed, the chairman
will be appointed by the AAA.
	 
	13.7	 	The arbitrators will have the right to award or include in their award any relief which they
deem proper in the circumstances, including, without limitation, money damages (with interest
on unpaid amounts from date due), specific performance, injunctive relief and attorneys’ fees
and costs, provided that the arbitrators will not have the right to declare any Mark generic
or otherwise invalid or, except as otherwise provided herein, to award exemplary,
consequential, special or punitive damages. The award and decision of the arbitrators will be
conclusive and binding upon all parties hereto and judgment upon the award may be entered in
any court of competent jurisdiction, and Franchisee and Company waive any right to contest the
validity or enforceability of such award.
	 
	13.8	 	The parties further agree to be bound by the provisions of any applicable limitation on the
period of time in which claims must be brought under applicable law or this Agreement,
whichever is less. The parties further agree that in connection with any such arbitration
proceeding each will submit or file all claims which it has against the other party within the
same proceeding as the claim to which it relates. Any such claim which is not submitted or
filed as described above will forever be barred. The parties further agree that arbitration
will be conducted on an individual, not a class-wide basis, and that any arbitration
proceeding between Company and Franchisee will not be consolidated with any other arbitration
proceeding involving Company and any other person.

13

 

	13.9	 	Notwithstanding anything to the contrary contained in this Section 13, each party has the
right, in a proper case, to obtain temporary restraining orders and temporary or preliminary
injunctive relief from a court of competent jurisdiction, provided, however, that the parties
to the dispute agree to submit their dispute for contemporaneous, non-binding mediation as
provided in Subsection 13.3 and, if such dispute cannot be resolved through such mediation and
is subject to arbitration pursuant to the terms of this Section, for arbitration as provided
in this Section. The arbitration provision contained herein will continue in full force and
effect subsequent to and notwithstanding expiration or termination of this Agreement.
	 
	14.	 	MISCELLANEOUS
	 
	14.1	 	Company will not be deemed, by any delay, action or inaction, to have waived or impaired any
right, power or option reserved by this Agreement.
	 
	14.2	 	Neither Company nor Franchisee will be liable for loss or damage or deemed to be in breach of
this Agreement if its failure to perform its obligations results from: (a) transportation
shortages, inadequate supply or equipment, products, supplies, labor, material or energy or
the voluntary foregoing of the right to acquire or use any of the foregoing in order to
accommodate or comply with any law, ruling, order, regulation, requirement, or instruction of
any government or any department or agency thereof; (b) acts of God; or (c) fires, strikes,
embargoes, war or riot. Any delay resulting from any of said causes will extend performance
accordingly or excuse performance, in whole or in part, as may be reasonable, except that said
causes will not excuse payment of amounts owed to Company or designated suppliers. In the
event that such causes or occurrences continue for a period of twelve (12) months or more,
Company, at its sole and exclusive option, may terminate this Agreement, effective upon
delivery of notice thereof to Franchisee.
	 
	14.3	 	Except with respect to (a) each party’s obligation to indemnify the other in accordance with
provisions herein and (b) claims Company brings against Franchisee for its unauthorized use of
the Marks or unauthorized use or disclosure of Company’s confidential information, Company and
Franchisee hereby waive to the fullest extent permitted by law, any right to or claim for any
punitive or exemplary damages against the other and agree that in the event of a dispute
between them, each will be limited to the recovery of equitable relief and to recovery of any
actual damages it sustains. Company and Franchisee irrevocably waive trial by jury in any
action, proceeding or counterclaim, whether at law or in equity, brought by either of them.
	 
	14.4	 	Any and all claims arising out of or relating to this Agreement or the relationship of
Franchisee and Company will be barred unless a judicial proceeding, or a mediation or
arbitration proceeding in accordance with this Agreement, is commenced within one (1) year
from the date Company or Franchisee knew or should have known of the facts giving rise to such
claims, whichever occurs first.
	 
	14.5	 	If Company incurs expenses in connection with Franchisee’s failure to pay when due amounts
owed to Company, to submit when due any reports, information or supporting

14

 

	 	 	records or otherwise to comply with this Agreement, Franchisee will reimburse Company for
costs and expenses Company incurs, including, without limitation, reasonable accounting,
attorneys’, arbitrators’ and related fees.
	 
	14.6	 	Franchisee and Company agree that, except to the extent governed by the United States Federal
Arbitration Act (9 U.S.C. §1 et seq.), the United States Trademark Act of 1946
(Lanham Act, 15 U.S.C. § 1051 et seq.), or other United States federal law,
this Agreement and all claims arising from the relationship between the parties will be
governed by the internal laws of the State of New York and the parties agree to submit to the
jurisdiction of the U.S. District Court for the Southern District of New York. Notwithstanding
the foregoing, any party may bring an action to obtain a restraining order or temporary or
preliminary injunction, or to enforce an arbitration award, in any court of general
jurisdiction in the state or country in which Franchisee resides or in which the Development
Area is located.
	 
	14.7	 	This Agreement is binding upon the parties hereto and their respective executors,
administrators, heirs, beneficiaries, assigns and successors in interest, and will not be
modified except by written agreement signed by both parties.
	 
	14.8	 	This Agreement (including, without limitation, the preambles and Exhibits hereto) together
with the Manuals and Company’s other written policies, constitutes the entire agreement of the
parties, except as provided below, and there are no other oral or written understandings,
representations, warranties or agreements between the parties relating to the subject matter
of this Agreement.
	 
	14.9	 	This Agreement is executed in English, and any translation of any of the foregoing into any
other language will not be an official version thereof. In the event of any conflict in
interpretation between the English version of this Agreement or any deed, document or notice
relating to this Agreement and a translation thereof, the English version will control.
	 
	15.	 	GUARANTEE / NOTICES
	 
	15.1	 	Upon Company’s request, Franchisee will procure the execution by guarantors approved by
Company of a guarantee of Franchisee’s obligations and liabilities under this Agreement and
all Franchise Agreements entered into pursuant to this Agreement, in the form required by
Company.
	 
	15.2	 	All written notices and reports permitted or required to be delivered by the provisions of
this Agreement or the Manuals will be deemed so delivered: (a) at the time delivered by hand;
(b) one (1) business day after transmission by telegraph, facsimile or other electronic system
(evidenced by machine generated receipt); or (c) one (1) business day after being placed in
the hands of an international commercial courier service for next business day delivery.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement in multiple
originals on the day and year first above written.

15

 

	 	 	 	 	 	 	 	 	 	 	 
	KRISPY KREME DOUGHNUT CORPORATION	 	[FRANCHISEE]	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	Name:	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	 	 	 	 	Title:	 	 
	 	 	 	 	 	 	 	 	 	 	 

16

 

EXHIBIT A

DEVELOPMENT AREA

Ex. A-1

 

EXHIBIT B

DEVELOPMENT QUOTA

Ex. B-1

 

EXHIBIT C

FORM FRANCHISE AGREEMENT

Ex. C-1

 

EXHIBIT E

BUSINESS ORGANIZATION, OWNERS,

 AND MANAGING DIRECTOR

Ex. E-1

 

SCHEDULE A

INFORMATION SCHEDULE

CONCEPT:

DEEMED POSTAL RECEIPT DATE:

DEVELOPMENT AREA:

INITIAL FRANCHISE FEE: $________

DEVELOPMENT FEE: $_________

AGREEMENT TERM: Commencing upon the execution of this Agreement and ending on the later of the
expiration of the last Development Period or the expiration of any Extension Period granted
pursuant to Section 12 , unless terminated sooner in accordance with the provisions of Section 10
hereof.

Sch. A-1

 

SCHEDULE B

EXPANSION CRITERIA

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